Must-Read: Kevin Drum: NAFTA and China Aren’t Responsible for Our Steel Woes

Must-Read: Kevin Drum: NAFTA and China Aren’t Responsible for Our Steel Woes: “Donald Trump stood in front of a pile of scrap metal yesterday in Pittsburgh and blasted both NAFTA and the accession of China into the World Trade Organization…

…He was positively poetic about how his trade policies would affect the steel industry…. There’s no question that the American steel industry has suffered over the past three decades, thanks to cheap steel imports from other countries. But this began in the 1980s and had almost nothing to do with either NAFTA or China…. Do you see a sudden slump in US steel production after NAFTA passed? Or after China entered the WTO? Nope…. It started with Japan and South Korea in the ’80s and later migrated to other countries not because of trade agreements, but because Japan and South Korea got too expensive. And it’s not as if no one noticed this was happening. Ronald Reagan tried tariffs on steel and they didn’t work. George H.W. Bush tried tariffs again. They didn’t work. George W. Bush tried tariffs a third time. No dice.

For all his bluster, when it came time for Trump to lay out his plan to ‘bring back our jobs,’ it was surprisingly lame. It was seven points long but basically amounted to withdrawing from the TPP and getting tough on trade cheaters. This would accomplish next to nothing…. The bottom line is simple: If we want access to markets overseas, we have to give them access to our markets. Donald Trump… [could be] promising to build a huge tariff wall around the entire country. He’s not willing to do that because even he knows it would trash the US economy. So instead he blusters and proposes a toothless plan. Sad.

ObamaCare Increases the Salience of Antitrust in Health Insurance Markets

From Last January: ObamaCare Increases the Salience of Antitrust in Health Insurance Markets from “Important” to “Essential”: As the extremely-sharp Aaron Edlin has taught me, apropos of the current wave of proposed health insurance mergers–Aetna-Humana, Anthem-Cigna, and Centene-HealthNet:

The coming of ObamaCare makes any willingness on the part of antitrust authority to allow these mergers to go through extremely dangerous and destructive policy indeed.

The imposition of the individual mandate to purchase health insurance makes maintaining competition in health insurance markets significantly more important. Usually, the exercise of market power and the ability to easily collude implicitly or explicitly made possible by large market shares are curved by the possibility of exit. The ‘exit the market and buy something else’ option for consumers is the one competitor that the firm cannot acquire and merge with. It is the one competitor with which the firm cannot collude, implicitly or explicitly.

Imposing an individual mandate to purchase is a wise policy in a market place where the major market failure is adverse selection. It threatens to be a catastrophic policy in the marketplace where the major market failure is the exercise of sellers market power.

We see this flashpoint–and it is a dangerous flashpoint–in health insurance right now. But the issues are actually much broader. Here is the wise Kevin Drum:

Kevin Drum: Our Four-Decade Antitrust Experiment Has Failed: “We have four airlines serving 80 percent of all passengers…

…We have four cable and Internet companies providing most of the nation’s cell-phone and television service. We have four big commercial banks, five big insurance companies (only three if two proposed mergers go through this year), and a handful of producers selling every major consumer product. Even when you think you have a choice, like in the array of online travel-booking sites, two companies (Expedia and Priceline) own all the subsidiaries…. Over the past few decades, America has undergone a sea change in antitrust law. It’s now all about ‘consumer welfare’—which means, in practice, that big mergers are fine as long as the mergees can make a credible case that the combined entity will be good for consumers. You will be unsurprised to learn that high-powered marketing departments are very good at collecting data to show exactly that, and that high-powered attorneys are extremely good at turning this data into bulletproof legal arguments. The result is that very few mergers are ever turned down.

But this siren call has led us down a long, blind alley. It turns out that in the short term, plenty of big mergers really can be good for consumers. In the longer term, though, very few are…. We’d be better off returning to an older, cruder rule: ensuring that there are plenty of competitors in every market and refusing to allow any single company to become too dominant. As near as I can tell, there’s a real tipping point around the number three or four. If a market is dominated by four companies or less, that’s when it starts to wither….

Needless to say, even a crude market share rule doesn’t make things simple. You’ll still have arguments over what counts as a single market (online advertising or the entire advertising industry?). You’ll have arguments over just how big a single company should be allowed to get (30 percent share or 50 percent share?). You’ll have industries where it’s not easy to have lots of competitors. And you’ll have some industries where the returns to scale to are so potent that small companies just flatly can’t compete. There’s no easy panacea. But ‘consumer welfare’ is an open invitation to thousand-page regulatory filings that dive deep down a rabbit hole and never come up for air…. Competition is the core engine of capitalism. If you have plenty of it, you can make do without a lot of other regulations. But once you allow competition to wither, there’s little choice left…. The federal government should do its best to ensure that markets have plenty of competition, and then it can afford to get out of the way and regulate fairly lightly. Other companies will do their work for them. What’s not to like?

Must-read: Kevin Drum: “Life at the Top Is Pretty Sweet”

Must-Read: Kevin Drum: Life at the Top Is Pretty Sweet: “My new favorite hedge fund manager…

…is the guy who ranked #15 on this year’s list:

Michael Platt, the founder of BlueCrest Capital Management, took home $260 million, according to Alpha. It was a difficult year for his firm, once one of the biggest hedge funds in Europe with $37 billion in investor money. He lost investors in his flagship fund 0.63 percent over the year and then told them he was throwing in the towel.

Platt’s fund lost 0.63 percent and he basically shut it down in disgrace, and for this he earned a quarter of a billion dollars. Pretty sweet gig, no?

Unemployment rate truthers department

The very sharp Kevin Drum gets it largely right:

Kevin Drum: U6 Is Now the Last Refuge of Scoundrels: “Tuesday Donald Trump repeated his fatuous nonsense about the real unemployment rate being 42 percent….

…Then Neil Irwin of the New York Times inexplicably decided to opine that ‘he’s not entirely wrong’ because there are lots of different unemployment rates. Et tu, Neil?

Bill O’Reilly picked up on this theme today, with guest Lou Dobbs casually declaring that unemployment is ‘actually’ 10 percent… [and] Bernie Sanders… ‘Who denies that real unemployment today, including those who have given up looking for work and are working part-time is close to 10 percent?’… The 10 percent number is colorably legitimate… U6… unemployment plus folks who have been forced to work part time plus workers who are ‘marginally attached’….

But you can’t just toss this out as a slippery way of making the economy seem like it’s in horrible shape…. What’s normal in an expanding economy is about 8.9 percent…. The US economy is not a house afire…. I’m getting pretty tired of the endlessly deceitful attempts to make it seem as if we’re all but on the edge of economic Armageddon, and the last thing we need is for liberals to sign up for this flimflam too. It’s good politics, I guess, but it’s also a lie.

There are two arguments you can make that are not lies but are, rather, coherent arguments that are more likely than not true:

  1. That the US labor market performs abysmally at the low-wage end essentially all the time, as evidenced by U6.
  2. that the unemployment rate is a misleading indicator today because of the long-run disruptions to the labor market occasioned by what we must soon start calling “The Longer Depression”, as evidenced by the divergence in the behavior of unemployment and the employment-to-population ratio. And, no, this divergence is not primarily due to population aging.

Thus I think the Sanders conclusion–that the U.S. labor market is not performing all that well right now–is more likely than not to be correct. I object to the road he claims to reach it by. And I join Kevin Drum in doubly objecting to Trump and Irwin.

Must-read: Kevin Drum: “Global Warming Went On a Rampage in 2015”

Must-Read: Let the record show that there was never any honest and honorable statistical or smoothing model-based way of extracting global-warming trends that would even hint that there was some kind of “pause” in global warming starting at the very end of the twentieth century:

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And let the record show that those I ran across who were claiming that there was such a “pause”–the Tobin Harshaws and the Clifford Assesses and the Tom Campbells and the Steve Levitts and the Steve Dubners and the Russ Robertses the Richard Mullers and the George Wills–ought to be profoundly ashamed of themselves, and would be if they were capable of shame:

Kevin Drum: Global Warming Went On a Rampage in 2015: “Remember that old chestnut, the climate chart that starts in 1998…

…and makes it look like climate change has been on a ‘pause’ ever since? It was always nonsense produced by cherry picking an unusually high starting point, but it was still effective propaganda. But those days are gone for good. Last year was already considerably warmer than 1998, and this year has now blown away everything…. George Will is now going to have to find some other way to lie about global warming. I don’t doubt that he’s up to it, but at least he’ll have to work a little harder.

Must-Read: Kevin Drum: Red States Spent $2 Billion in 2015 to S—- the Poor

Must-Read: Nobody is saying anymore that states’ rejecting Medicaid expansion is a way of raising the chances of repealing-and-replacing ObamaCare with something better. Only true dead-enders–cough, Michael F. Cannon–are claiming that Medicaid is ineffective. And more and more evidence piles up that Medicaid expansion lowers rather than raising state-level health spending even in the short run. The remarkable thing is that the anti-Medicaid expansion zombies just keep on going–and it’s not just the poor, it’s the disabled, it’s the elderly whom Medicare copays have made poor, and its the hospitals and doctors and nurses who treat the poor:

Kevin Drum: Red States Spent $2 Billion in 2015 to S—- the Poor: “In 2015… spending by states that refused to expand Medicaid…

…grew by 6.9 percent. That’s pretty close to the historical average. However, spending by states that accepted Medicaid expansion grew by only 3.4 percent. Obamacare may have increased total Medicaid enrollment and spending, but the feds picked up most of the tab. At the state level, it actually reined in the rate of growth…. The states that have refused the expansion are… willing to shell out money just to demonstrate their implacable hatred of Obamacare. How much money? Well, the expansion-refusing states spent $61 billion of their own money on Medicaid in 2014. If that had grown at 3.4 percent instead of 6.9 percent, they would have saved about $2 billion this year… denying health care to the needy and paying about $2 billion for the privilege. Try to comprehend the kind of people who do this….

The residents of every state pay taxes to fund Obamacare, whether they like it or not. Residents of the states that refuse to expand Medicaid are paying… Obamacare taxes… about $20 billion of that is for Medicaid expansion…. So they’re willing to let $20 billion go down a black hole and pay $2 billion extra [a year] in order to prevent Obamacare from helping the needy. It’s hard to fathom, isn’t it?