The Washington Post had an interesting piece reporting on how many young couples are putting off having children for economic reasons. At one point the piece told readers:
"Births have slowed so sharply that researchers note that future economic growth could be stunted by a smaller labor pool. Immigration is often seen as a fix. But the downturn crimped supply lines for both babies and new foreign faces. The change was so dramatic that the Census Bureau in 2012 was forced to revise the 2050 U.S. population projection it made just four years earlier, dropping it by 9 percent, to just under 400 million."
Contrary to the impression given by this paragraph, the prospect of slower population growth should be good news for most people. It is likely to mean a relatively smaller labor supply, and therefore higher wages for most workers. It will also mean less strain on the infrastructure and on natural resources. In other words, smaller traffic jams and less crowded beaches and parks. It also will be easier to contain greenhouse gas emissions with a smaller population.
The only people who are likely to be hurt by the prospects of a smaller population are the "it's hard to find good help" crowd, since they will likely have to pay more for people they hire to clean their houses, mow their lawns, and care for the kids. Since more people do such work than pay for such work, most people will end up as winners with slower population growth.
Neil Irwin argues the case that a rise in investment would provide a much needed boost to the economy. The point is well-taken, but there is little reason to expect a marked upturn any time soon.
The basic story is, while there is some room for investment to expand, it is not especially low by historical standards. Non-residential fixed investment was 12.2 percent of GDP in 2013. This compares to an average of 12.8 percent of GDP in the years from 1970 to 2007. Irwin reports a larger gap by just focusing on investment in equipment, citing Justin Lahart pointing to spending equal to 5.2 percent of GDP over the last five years compared to 6.5 percent of GDP over the prior 50 years.
There are a few reasons for questioning the significance of this comparison. First, the figure for 2013 was 5.6 percent of GDP, which is closer to the 50-year average. Second, there has been a huge increase in investment in intellectual property products. This spending was 3.8 percent of GDP in 2013 compared to an average of 2.6 percent from 1970 to 2007. To some extent investment in intellectual property products should be a substitute for investment in equipment.
Finally, much of the investment in equipment is occurring overseas as U.S. corporations continue to shift production to Mexico, China, and other sources of low-cost labor. Equipment investment in the last recovery (2002-2007) averaged just 6.0 percent of GDP.That would likely be a more appropriate comparison than the longer period since it was also a time when U.S. corporations were shifting production abroad on a large scale. This implies relatively little increase in investment spending from current levels.
Trade really is the underlying problem that economists do not want to discuss for some reason. The country has a trade deficit of more than $500 billion annually (3 percent of GDP). This translates into demand that is going overseas rather than the United States. There is no easy mechanism to replace this demand (other than verboten government budget deficits). This means that we will likely see an underemployed economy long into the future. Hopes for a surge in investment will prove to be in vain.
Steven Pearlstein has a good piece on a proposal in Illinois to have the state administer retirement accounts for workers who don't have access to one at their workplace, however he gets one part wrong. Under the proposal, 3.0 percent of a workers paycheck would be automatically deducted for a retirement account, but she would have the option to not have the deduction or to reduce (or increase) the amount. He tells readers:
"This concept goes by the name of “Automatic IRA.” It was first proposed in 2006 by two respected policy wonks, David John, then of the conservative Heritage Foundation (now at AARP), and Mark Iwry, then at the more liberal Brookings Institution (now at the Obama Treasury). It quickly won support from Democrats and Republican sponsors on Capitol Hill. In the 2008 presidential campaign, both John McCain and Barack Obama endorsed it."
Actually the idea goes much further back than this. There were many similar concepts being debated in the 1990s. My friends at the Economic Opportunity Institute in Washington State had been working on this concept in the form of Washington Voluntary Accounts since 1998. So, it's a good piece, but many more folks deserve credit on advancing this proposal.
Btw, he describes Illinois public employee pensions as "overgenerous." I'll let this one pass (workers did forgo pay for these pensions), since my mother gets one.
Last week the Congressional Budget Office issued its new long-term budget projections. They were little changed from prior projections, but Robert Samuelson still wants to use them as a warning of impending doom.
"Under favorable assumptions, the CBO projects deficits of $7.6 trillion from 2015 to 2024. Under less favorable (maybe more realistic) assumptions, the added debt would total $9.6 trillion. The big drivers are an aging population and rising health spending. ...
"The CBO pronounces present policies 'unsustainable,' but it does not know — no one does — when and how a breakdown might occur or what the consequences might be. It warns that large deficits will crowd out private investment, reducing future living standards. It speculates that excessive debt might someday so frighten investors that they would retreat from Treasury bonds and cause a financial crisis."
Okay, there is lots to have fun with here. First, we get the really big numbers, $7.6 trillion and $9.6 trillion. Are you scared?
Next to no one reading this column has any clue as to what these numbers mean, Samuelson has opted to present them without any context to make them understandable to readers. This must have been a conscious choice on Samuelson's part because CBO actually presents the numbers in context itself. Table 1-1 tells readers that the ratio of debt to GDP is projected to rise because of these deficits from 74 percent this year to 78 percent in 2024. Are you scared now?
If you are worried about the date when we see that "breakdown" or when frightened investors retreat from Treasury bonds and cause a financial crisis, you probably plan to live a very long life. The projections show the debt to GDP ratio rising to 106 percent in 2039. That's not as high as the debt to GDP ratio that we saw at the end of World War II and still far lower than the 134 percent debt to GDP ratio faced by Italy today and the 244 percent ratio in Japan. Due to the fearful investors, Italy now has to pay 2.81 percent interest on its long-term debt and Japan has to pay 0.55 percent.
The other aspect of Samuelson's piece that provides good Monday morning entertainment is that it is totally wrong about the origins of high debts and deficits. As recently as 2008 the debt to GDP was as low as 35 percent. It didn't rise to its current 74 percent because of the moral failings of our political process as Samuelson claims, or at least not the ones to which he points. (The failings have more to do with an over-sensitivity to the profits of the financial industry.) The debt to GDP ratio soared because we actually did have a financial crisis when the housing bubble collapsed and sank the economy. Samuelson seems to have missed this one even though the economy still has not recovered with millions unnecessarily unemployed or underemployed.
The other item worth noting about Samuelson's scare story and morality play is that he never mentions that the reason we face deficits is that our health care costs are hugely out of line with the rest of the world. If we paid the same amount per capita for our health care as people in other wealthy countries we would be looking at huge budget surpluses, not deficits. The reason that we pay more than everyone else is that we pay twice as much for our doctors, our drugs, our medical supplies and blow a fortune on an incredibly inefficient insurance system.
But Samuelson doesn't like to talk about this. It's more fun to complain about greedy seniors.
It would be nice if someone could force Thomas Friedman to learn a little bit about the topics of his columns. Today he ran another ad for Airbnb, touting its hyperconnectiveness. While Friedman is ecstatic over the company's hyperconnectiveness, he fails to answer the most basic questions.
Can Airbnb guarantee that its rooms are safe? If not, can we sue and imprison its executives if people who use the service die in fires? What about the nuisance of living next to a hotel room when you paid to buy a condo or rent an apartment? Can neighbors of popular guest rooms sue Airbnb for the diminution of the value of their homes?
These questions are probably too complex for someone like Thomas Friedman, but perhaps the NYT could hire someone to seriously deal with the issues that Thomas Friedman raises.
Note: An earlier version raised questions about local and state taxes, which Airbnb reports it tries to collect.
Suppose a mob boss has his thugs go around and shake down a bunch of small business people. Imagine he then gives a portion of the haul to poor children. When the business people complain, the mobster then tells them they are being greedy, after all don't they care about the poor children?
This is esentially the argument that Tyler Cowen gives us in the NYT this morning. There is little doubt that hundreds of millions of people in developing countries like China and India have benefited from the growth in the world economy over the last three decades. To some extent their gains have come from displacing workers in rich countries, especially the United States. However we did not have to structure the world economy this way.
People in developing countries could also have experienced enormous gains if their doctors and other highly educated professionals were allowed to compete on an even footing with their counterparts in the United States and other rich countries. Similarly, there would be enormous gains from allowing India's generic drug industry to sell low cost drugs like generic Sovaldi in the United States and elsewhere. And, we all would benefit from taxing the financial industry like other sectors of the economy and ending too big to fail subsidies for Wall Street banks. Furthermore, in a period of secular stagnation like the present, everyone could benefit from just handing large amounts of cash to the world's poor, since it would generate demand.
Just because the world's poor benefited at the expense of the middle class in rich countries does not mean it had to be this way. We could help poor children without having a mobster shake down small businesses to finance his charitable contributions.
Most economists agree that trade is one of the main reasons that less-educated workers have seen a decline in their relative wages over the last three decades. The story is pretty straightforward. Trade policy has been designed to put manufacturing workers in the United States in direct competition with workers in developing countries like Mexico or China, who sometimes earn less than $1 an hour. This causes many workers in the United States to lose their job and puts serious downward pressure on the wages of workers who manage to keep their jobs.
Given this fact, it is striking that trade, or more precisely allowing more foreign doctors to practice in the United States, does not even rate mention in a NYT editorial on a prospective doctor shortage. Doctors in other wealthy countries get paid on average about half of what they get in the United States. Doctors in developing countries get paid even less. This suggests the possibility of enormous gains from allowing more foreign doctors into the country to bring wages of physicians here in line with those in other wealthy countries. (We could easily compensate developing countries for losing doctors by providing them with the money to educate two or three doctors for every one that comes here -- please think about that one for a minute before writing a silly complaint about brain drain.)
Anyhow, it striking that the class bias in trade policy is so extreme that any policy that is designed to provide even limited protection for less-educated workers, such as the temporary tariffs on imported steel that President Bush imposed in 2002, are immediately denounced as protectionist by all right-thinking people. Yet trade can not even be discussed, even when there is potential for enormous gains, if the losers would be highly-educated professionals like doctors.
It is fraud when an issuer of a loan knowingly puts down false information in order for the loan to be approved. When a securitizer includes large numbers of these loans in securities, as Floyd Norris reports was the case with Citigroup during the housing bubble, this is fraud.
The Obama administration decided not to pursue criminal cases against executives at the major banks who likely committed fraud on a large scale. As a result, most of these bank executives are almost certainly better off as a result of their decision to commit fraud, even though the fraud has been exposed, than if they had obeyed the law.
When crime goes unpunished it naturally leads to more crime. Hence the NYT reported today that subprime auto lenders are doing many of the same scams that subprime mortgage lenders did in the housing bubble days. They are issuing loans, often for more than the value of the car, based on phony income numbers that the lenders themselves wrote in. In a time of generally low interest rates, these loans can be attractive to investors and Wall Street banks are therefore anxious to purchase them and securitize them.
The scale of the subprime auto loan sector is an order of magnitude smaller than the subprime mortgage sector during the bubble days, so it does not pose the same risks to the financial system. (Also, there is not a risk of a downward spiral in car prices as was the case with house prices during the bubble.) However these loans can lead to enormous hardship for the people affected, causing many to be pursued by creditors for years or forced into bankruptcy.
That might not be a surprise to regular readers of the paper, but there it was in black and white in a column talking about the budget deficit. The piece notes how the deficit has gotten much smaller in recent years and therefore people are paying much less attention to it. The last line in the piece told readers;
"Well, we don’t miss the deficit. But we sure miss that clock [a debt clock used as campaign prop by Governor Romney]."
Actually, people who care about jobs and wage growth do very much miss the deficit. The spending that was cut to reduce the deficit was creating jobs. There is no magical process by which this spending will be replaced by demand in the private sector, which means that the reduction in government spending means less demand and jobs in the economy. [If the deficit hawks at the Post think otherwise they could grab themselves a quick Nobel prize in economics by showing how.]
In addition, fewer jobs means that those at the middle and bottom of the labor force have less market power and therefore less ability to secure higher wages. This is good news for the small segment of the population that owns lots of stock and can benefit from higher corporate profits and cheap help, but it is bad news for the vast majority of people in the country. At least the Post has made clear which side they are on, just in case there was any confusion.
The Washington Post really has to discover the Commerce Department. It is less than a mile from the WaPo office. Furthermore, if they had access to the Internet, they could get economic data from the Commerce Department in seconds.
If the WaPo knew about the Commerce Department and the data it produces it would not have told readers told readers in a headline:
"Amercians' checking accounts are filling with cash, but they are afraid to spend it."
The Commerce Department's data would have told them that they actually are spending at a fairly rapid clip. The saving rate for the first quarter of 2014 was 4.4 percent. That's somewhat higher than when the wealth effects from the stock and housing bubbles were leading to consumption booms in the late 1990s and the middle of the last decade, but well below the 8-plus percent average for the pre-bubble decades. In other words, there is no doubt that people are spending a lot relative to their incomes.
The accumulation in checking accounts reflects how people opt to save their money. ("Save" just means not spend. From an economic perspective, burning your cash is also a form of saving, since you would not be spending it.) With interest rates on money market funds and other short-term assets very low, it is understandable that people would not bother to transfer their money out of their checking accounts. The same story applies to longer term bonds which also carry a risk of capital losses. And, with price-to-earnings ratios that are higher than normal levels, people can also anticipate lower than normal returns on stock.
In short, the decision to hold money in checking accounts is easily explained as an asset choice. It is not an alternative to spending, which we know is actually fairly strong.
The New York Times doesn't seem to use the term "vast" the way the rest of us would. It told readers that President Obama is:
"stymied by Republican lawmakers who refuse to go along with Mr. Obama’s call for vast new spending on the nation’s infrastructure."
The proposal in question would provide $300 billion in additional spending over the next four years. This is equal to roughly 0.4 percent of GDP over this period and less than 1.8 of projected federal spending.
Thanks to Robert Salzberg for calling this one to my attention.
Okay, this is really getting pathetic. Yet another piece on drug companies charging hundreds of thousands for drugs (wrongly described as their "cost") which never mentions government granted patent monopolies.
Does the NYT and other media outlets have a ban on discussing patents? Look, we have an incredibly stupid way of financing the research and development of prescription drugs. We don't have to do it this way. Anyone hear of the National Institutes of Health? Just think, if we paid for the research up front these drugs would cost hundreds of dollars instead of hundreds of thousands of dollars. All the information uncovered in their discovery would be immediately available for other researchers to benefit from. And, the drug companies would not have enormous incentive to lie about their safety and effectiveness.
And, we wouldn't have all this absurd handwringing about the tough ethical choices in paying for incredibly expensive drugs. Are reporters and columnists prohibited from raising this question or do they really have so little imagination that they can't even envision an alternative to patent financed research?
Regular readers of Beat the Press know that putting numbers in context is one of my main beefs with economic reporting. News stories, especially about government budget items, routinely throw out big numbers that are completely meaningless to almost everyone who reads or hears them. That is not serious reporting. Reporting is about informing your audience. (This is why I use the term "frat boy reporting" to refer to the use of big numbers without context. It conforms to a ritual among reporters, but it does not provide information.)
To his great credit, Glenn Kessler, who runs the Washington Post's Fact Checker section, does believe in putting numbers in context. He did so in a piece today that examined the claims that sanctions against Iran had cost the United States $175 billion in exports. (The original study is here.) Kessler pointed out that this number sums estimates of lost exports over 18 years, and therefore it is deceptively large. He points out that this sum amounts to just 0.5 percent of U.S. exports over this period.
This analysis is very helpful in giving readers a better sense of how much these lost exports mean to the economy. It is also possible to compare the lost exports to another item that has been in the news lately, the Export-Import Bank whose current authorization ends on September 30th. According to the Bank, its loans supported $37.4 billion in exports in 2013. By comparison, the study on the impact of the sanctions calculated that the United States would have exported $15.4 billion worth of goods and services to Iran in the absence of sanctions in 2012 (the last year covered), an amount that is equal to 41.2 percent of the exports supported by the Export-Import Bank.
This comparison should give readers an indication of the relative importance of the sanctions and Ex-Im Bank. Of course, the volume of exports supported by the Ex-Im Bank exaggerates its actual importance since many of these exports would take place even without the Bank's support. For example, if the Bank supports $15 billion in exports from Boeing, then perhaps $10-$12 billion of these exports would still occur even without the Bank's support. Boeing would simply earn a smaller profit on these exports since it would have to pay the market interest rate on its borrowing.
If we say that between 10 percent and 30 percent of the exports supported by the Bank would not occur without access to its loans or guarantees then it added between $3.7 billion and $11.1 billion to U.S. exports in 2013. This is between 24.0 percent and 72.0 percent of the amount of exports lost in the prior year due to the the sanctions against Iran, according to the study.
Floyd Norris has an interesting piece discussing Citigroup's $7 billion settlement for misrepresenting the quality of the mortgages in the mortgage backed securities it marketed in the housing bubble. Norris notes that the bank had consultants who warned that many of the mortgages did not meet its standards and therefore should not have been included the securities.
Towards the end of the piece Norris comments:
"And it may well be true that actions like Citigroup’s were necessary for any bank that wanted to stay in what then appeared to be a highly profitable business. Imagine for a minute what would have happened in 2006 if Citigroup had listened to its consultants and canceled the offerings. To the mortgage companies making the loans, that might have simply marked Citigroup as uncooperative. The business would have gone to less scrupulous competitors."
This raises the question of what purpose is served by this sort of settlement. Undoubtedly Norris' statement is true. However, the market dynamic might be different if this settlement were different.
Based on the information Norris presents here, Citigroup's top management essentially knew that the bank was engaging in large-scale fraud by passing along billions of dollars worth of bad mortgages. If these people were now facing years of prison as a result of criminal prosecution then it may well affect how bank executives think about these situations in the future. While it will always be true that they do not want to turn away business, they would probably rather sacrifice some of their yearly bonus than risk spending a decade of their life behind bars. The fear of prision may even deter less scrupulous competitors. In that case, securitizing fraudulent mortgages might have been a marginal activity of little consequence for the economy.
Citigroup's settlement will not change the tradeoffs from what Citigroup's top management saw in 2006. As a result, in the future bankers are likely to make the same decisions that they did in 2006.
David Kestenbaum of the Planet Money team had an interesting piece on whether patents are an impediment or spur to innovation. The immediate issue was the decision by Tesla Motors to put all its patents in the public domain with the hope of helping to create a mass market for electric cars. However the piece went further and asked the question of whether patents actually promote innovation.
The argument in the opposite direction is that they lock up technologies for the period of the patent's duration. They also create enormous legal uncertainties since the boundaries of a patent's applicability are rarely clear. This means that a deep-pocketed patent holder can often scare away potential innovators with the threat of a lawsuit.
The piece includes an interview with David Levine and Michele Boldrin, who have been warning of the economic harms of patents and copyrights for more than a decade. They also maintain the fascinating website AgainstMonopoly.org.
One area where I would disagree with their argument about experimenting with an alternative approach is the suggestion in the interview that the way to get from here to there is through a gradual shortening of patent duration. This may actually provide little benefit since all the legal structures around patents and the need for secrecy would still be in place. As a result there may be little, if any, perceptible benefit from reducing patent duration from 20 to 18 years, for example.
An alternative would be to carve out areas where research would be publicly funded with all findings and patents put in the public domain. For example, the government could set aside $5 billion a year to finance the research and development of new cancer drugs. We would then be able to compare progress in an area where the research is all openly available and the final products are all sold as generics compared to output in areas that rely on the current patent system. This would provide a quicker and simpler test of the relative merits of research supported by government granted patent monopolies as opposed to research supported by direct upfront funding.
(Publicly funded patents could be subject to a "copyleft" principle where anyone can freely use them as long as they themselves don't use the patent to develop a privately held patent. If they do go that route then they would have to negotiate a payment to the government just as they would a private patent holder.)
Note; Typos corrected.
For decades people have relied on Robert Samuelson to give a confused rendering of economic reality in the pages of the Washington Post. He came through again today in his warnings about an explosion of part-time work.
The centerpiece of Samuelson's concern is a reported, "whopping — 1,115,000 — increase in part-time jobs offset by the 708,000 loss in full-time jobs." Yes, that sounds pretty worrying. The number of full-time jobs is plunging.
The reason that you are hearing this concern raised by Robert Samuelson and not by any of the economists or analysts who commented on the June jobs report is that the latter group understands the volatility of the data in the household survey from which the numbers on part-time work is obtained. It is not uncommon to see sharp month-to-month movements in part-time or full-time work. This is why economists generally ignore the month to month changes in these numbers in the household survey and rely instead on longer period changes, like year over year comparisons.
If Robert Samuelson had written this piece last month, before the release of the June data, he could have been decrying the disappearance of part-time work, since the economy had lost 318,000 part-time jobs in the prior two months. No one can believe that we really saw a sharp drop in part-time in April and May, only to be reversed by a huge surge in June. These numbers are simply errors in the survey. This is why no one raised the monthly movements.
There is an interesting story if we look at the year over year numbers. These numbers do show an increase in the number of part-time work, but all on the voluntary side. Voluntary part-time employment increased by 840,000 from June of 2013 to June of 2014. At the same time involuntary part-time employment fell by 650,000, leaving a net gain of 190,000. Since this was accompanied by a year over year change in total employment of 2,146,000 jobs, it implies a gain in full-time employment of 1,956,000 jobs. Are you scared?
There is actually a story (a good one in my view) of increased part-time work. Many people would prefer to work part-time. They have young children or ill family members they would like to spend time with. Or, they may be older workers who would like to partially retire. Before the passage of the Affordable Care Act these people might have worked full-time because this was the only way they could get health care insurance. However now that they can get insurance on the exchanges, they have the option to work part-time. I don't see the problem with this.
Samuelson does raise the issue that employers are cutting workers hours to less than 30 to avoid the employer sanctions that apply to firms who have more than 50 full-time employees but don't provide health care insurance. The imposition of these sanctions has been delayed, but Helene Jorgensen and I looked at the evidence that such hours reductions were happening in the first half of 2013 when employers thought the sanctions would apply to them. (The Obama administration announced the delay of the sanctions in early July of 2013.) There was none.
Wonkblog let down its readers badly in a piece on Sovaldi, the hepatitis C drug that Gilead Sciences is marketing in the United States at the price of $84,000 per treatment. While the post is headlined with the question in the title, it never makes the obvious point that the drug really doesn't "cost" $84,000.
This is the price that Gilead Sciences charges. It is able to get away with charging the price because the government gave it a patent monopoly, which means that any competitors would be arrested. In India, where the government ruled that the drug did not deserve a patent (it is a combination drug, not a new chemical compound) the generic version is sold for less than $1,000. "How do you pay for a drug that costs $1,000?" is a much simpler question to answer.
Of course if we did not give drug companies patent monopolies we would need an alternative mechanism for financing research, but such alternatives do exist as people know who have heard of the National Institutes of Health, which get $30 billion a year from the government. (The Defense Department provides another example of how research and development can be paid for upfront, rather than recovered through patent monopolies.)
If the research was financed up front we would not have to deal with Wonkblog's $84,000 question. We also wouldn't be giving drug companies an incredible incentive to lie, cheat, and steal in order to maximize the sale of a product on which they have a mark-up in the neighborhood of 10,000 percent.
Note: Typos corrected, thanks to Robert Salzberg.
Feel informed? That's the information you would have gotten from reading the NYT article on the debate over a new transportation bill. In case you cared, this comes to about 1.8 percent of projected federal spending over the next four years or about $240 per person per year. But hey, everyone knows how much $302 billion over the next four years is.
The NYT had a piece on the release of new data showing China's economy was 7.5 percent larger in the second quarter of 2014 than a year ago. While the piece noted that this is a healthy pace, even for China, it told readers:
"Three of the four cylinders of the Chinese economy — exports, private sector construction and retail sales — are sputtering."
It then went on to explain that the government sector is filling the gap with large-scale lending. Readers were then warned that this pattern cannot continue because China would reach the limits of its borrowing capacity.
"Some economists inside and outside the government say China has a choice: slow down lending and accept steady declines in economic growth each year, or continue heavy lending and risk a sharp drop in economic growth someday when the financial system begins to teeter. But nobody knows when that might happen."
If that sounds very scary then it's worth reading through to the last paragraph:
"Retail sales are growing strongly, up 12.4 percent in June from a year earlier, according to the government figures released Wednesday, nearly matching a pace of 12.5 percent in May."
As the article explains, real wages for factory workers are rising at more than an 8.0 percent annual rate. If that pace of real wage growth continues, the country should not have to worry about a lack of demand in the years ahead.
We all know how hard it is to get by on a $5 million a year salary in New York City. Therefore readers should not feel bad about subsidizing the $5.6 million paycheck for Herbert Pardes, the former CEO of New York-Presbyterian Hospital and now the executive vice-chairman of its board of trustees.
The NYT had an interesting piece on Dr. Pardes salary as well as the pay of other top executives at large hospitals. However the piece erred in presenting the issue of these large paychecks as a question of social justice versus market outcomes. As a top executive of a tax exempt institution, Dr. Pardes is being subsidized by taxpayers. If we assume that most of the money that he is soliciting for the hospital is coming from people in the top tax bracket, then taxpayers are paying roughly 40 percent of the money that Dr. Pardes is able to collect. If taxpayers were not providing this subsidy it is likely that he would be raising considerably less money for the hospital, which would make his market value considerably lower.
There is an argument that the public may want to subsidize the provision of health care by New York-Presbyterian Hospital. It is not clear what the argument would be that school teachers and firefighters should be subsidizing the paycheck of a hospital executive earning more than $5 million (16,800 months worth of food stamp benefits) a year.
Economics just flies out the window when the business interests want to get a trade deal passed. The NYT gave us more evidence of this fact in an article on the state of negotiations on the Transatlantic Trade and Investment Partnership (TTIP).
The article tells us that the TTIP appears to be facing troubles because of the opposition of environmental and consumer groups and the recent spying scandal in Germany. This opposition is presented as sort of tragic given the need for a deal:
"From the European side, new impetus for freer trade came on Monday in the form of new industrial production data indicating that the eurozone’s incipient economic recovery might have taken a step backward."
You've got to love this one. Europe just got new data showing that industrial production was weak last month, therefore it needs to push ahead with a trade agreement, that in the most optimistic scenario will not be signed before the end of the year. It will then be phased in over the next decade. Yeah, that's a good way of addressing weak economic data from May.
What's more striking is the mix of a discussion of real trade issues with regulatory issues that business interests are using to obstruct progress on trade. The starting point of the piece is how current trade rules cause Mercedes-Benz and Freightliner to take apart cargo vans in Europe so that they can be shipped to the United States to be reassembled. Of course this is a pointless source of inefficiency and waste. The vans could be sold more cheaply to consumers if they could be shipped as is, without the needless dis-assembly and reassembly. Eliminating the rules that lead to this practice is a great story how an agreement can lead to economic gains.
But the piece goes on to tell us that the negotiators are interested in much more than eliminating trade barriers. According to the article, they want to take away Europeans' right to set their own health, safety, and pollution standards. The article tells readers that the working proposal is that if a product meets standards in either the U.S. or Europe then it can be sold in both places.
This means, for example, that Europeans would have to give up plans to impose energy efficiency requirements on cars or other products, if the U.S. Congress didn't agree to the same standards. Given that a large segment of the Congress claims not to believe in global warming, it is understandable that Europeans would not be inclined to accept this position. The same would apply to regulations of food, drugs, and other consumer products.
The article doesn't mention this fact, but much of the focus of the deal will be on increasing forms of protectionism, specifically copyright and patent protection. These policies will raise prices and slow growth. Also, if the concern was in reducing barriers that raise prices, items like the protectionism that makes doctors' pay twice as high in the United States as in Europe would be front and center. But of course reducing barriers that protect the earnings of highly paid professionals is never on the agenda in trade negotiations.
As a practical matter, if the agenda of TTIP were simply removing actual trade barriers, like the ones that provide the backdrop for this piece, the deal could probably be concluded and approved fairly quickly. However, these trade barriers are a small portion of the TTIP agenda. The weakening of consumer, safety, and enviromental regulations to make them more friendly to corporations is the main point of TTIP. Powerful business interests are happy to hold the real but modest economic gains from freer trade hostage in order to advance their regulatory agenda.