Monthly Archives: May 2016

Expect the Unexpected.

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Change and innovation lead to un-foreseen effects.  Caller ID allows people to tell whether they are being called by someone they know or by some unknown person.  If the call comes at the dinner-hour, it’s 99.9 percent sure to be somebody trying to raise money for the local fire department or somebody conducting a survey.  In either case, most people don’t want to talk to the caller.  In 1997, the response rate to telephone surveys was a measly 36 percent (unless you count “Go to Hell!” as a response).  By 2014 it had fallen to 9 percent.[1]  How exactly is anyone supposed to measure public opinion if the public won’t give it?  Hard for politicians to pander to the voters if they don’t know what the voters want to hear.  Maybe they’re stuck pandering to the donors?  We could end up back in the land of “Dewey Beats Truman!”

“Baby Boomers” are entering the “golden years.”  One natural response to having the kids out of the house is “downsizing” to a smaller home or an apartment.  Lots of older people with—comparatively—lots of money are entering the market for smaller homes and apartments.  This pushes up the price of what used to be “starter homes” (now to be re-labeled “finisher homes”?) and the rent for apartments.  Between 1995 and 2005, the average share of income devoted to rent was 24 percent.  By Summer 2015, it had risen to 30.2 percent.[2]  This is likely to make things more difficult for younger people with—comparatively—less money.[3]

The “fracking revolution” has brought down energy prices.  (By August 2015, they were at a six-year low.)  The fall in energy prices has damped down inflation.  Low inflation means that—for the third time since 2010—Social Security recipients will see no increase in their benefits.  On the other hand, Medicare premiums are not linked to the inflation rate.  So these will rise in 2016.[4]  The disposable income of retirees is likely to shrink.

When energy (if not yet the climate) became a grave concern back in the 1970s, a sustained drive got underway to make all sorts of things more energy efficient.  Today, American houses are 31 percent more energy efficient than they were forty years ago.  On the other hand, American homes are 57 percent larger than they were forty years ago.  In the 1970s the average American home was about 1,300 square feet.  In 2012 the average American home was 1,864 square feet.  The most recently built homes are averaging 2,657 square feet.  This cancels out the gains in efficiency.[5]  Several puzzles arise.  Where does the extra space go?  Garages?  Bigger bedrooms for the kids?  A bathroom every ten feet?  Why are homes larger when families are smaller?  What is it like to live in one of these homes?  Do family-members retreat into their own space and close the door?  Is the same thing true of the improved gas mileage of cars?  Is efficiency improved, but we drive more?

The current, much-discussed surge in opiod addiction has led to a surge in deaths from drug overdoses.  That, in turn, has led to a rise in the number of organ donors.  They now provide better than ten percent of all organ donations, up from about 3 percent in 2006.[6]  So, higher death rates for some mean longer lives for others.

After the San Bernardino terrorist attack liberals characterized the attack as a “mass shooting” and called for tighter gun controls. Unlicensed gun-dealers, a common “bete noire” of gun control advocates, came in for special presidential attention.  Gun sales zoomed upward.  In December 2015, Americans bought 3.3 million guns.  All of these sales have been from licensed gun-dealers because the government background check system has been swamped.  Attorney General Loretta Lynch has asked for the hiring of 430 additional people just to process the background checks of Americans complying with the existing gun laws.[7]

The Americans with Disabilities Act bars discrimination against people with disabilities.  Some of this is left open to interpretation by government officials.  As a result, the state of Iowa will issue gun permits to blind people.[8]

Should these random reports make people cautious in regarding business plans, campaign platforms (“The New” Anything), or succeeding at their New Year’s Resolutions?  Just asking.

[1] “The bottom line,” The Week, 5 September 2014, p. 32.

[2] “Noted,” The Week, 28 August, 2015, p. 14.

[3] “The bottom line,” The Week, 15 October 2015, p. 36.

[4] “The bottom line,” The Week, 30 October 2015, p. 36.

[5] “The bottom line,” The Week, 20 November 2015, p. 32; “Noted,” The Week, 27 November 2015, p. 16.  .

[6] “Noted,” The Week, 20 May 2016, p. 18.

[7] “Noted,” The Week, 5 February 2016, p.8.

[8] “Noted,” The Week, 20 September 2013, p. 16.

Single Payer.

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The great achievement of the Affordable Care Act (ACA) has been to extend medical insurance to a large share of the previously uninsured.  The great failing of the ACA has been to fail to address the comparatively high cost of medical care in the United States.

Many foreign countries have single-payer systems.  They also pay a much smaller share of GDP for medical care.  The real issue here is that single-payer countries pay doctors and other medical care or service providers a lot less than does the United States.[1]  American physicians, nurses, hospitals, and pharmaceutical companies all make more than do their European or Japanese equivalents.  For example, British general practitioners make between $81,000 and $122,000 a year, while the average GP in America makes $208,000 a year.  Similarly, the pay differentials between GPs and specialists are much greater in the United States than elsewhere.  Then, some kinds of care are less available or unavailable elsewhere.  (For example, apparently European doctors don’t believe in allergies or depression.  Or try getting a single-patient room in a European hospital.)  One recent estimate holds that a single-payer system in the United States could bargain-down prices for prescription drugs to about 25 percent below the level that Medicare currently pays, which is lower than what the private system pays.  That suggests the scale of pharmaceutical company profits in America compared to other countries.  To get the cost of American medicine down to Western European or Japanese levels, the incomes of these people would have to be compressed.

One economic argument against the Sanders plan is that he proposes to extend coverage beyond the core insurance provided by the Affordable Care Act to include dental care and long-term nursing care.  These would run-up the over-all cost of the program.  At the same time, Sanders would do away with premiums and out-of-pocket costs.  A huge cost increase.

However, the “real” economic argument against the Sanders plan is that it would require a massive tax increase to pay for government-provided universal health care.  This is a misleading argument.  Americans already pay for medical care through premiums, out-of-pocket costs, and lower wages in exchange for health insurance.  They already pay for dental care and for long-term nursing care.  They just do it as private individuals.  (Employer-provided insurance is just an employment benefit that should be taxed like other forms of income.)

The Sanders plan would eliminate private health insurance companies; it would force down the incomes of hospitals and drug manufacturers; it would compress the incomes of doctors and nurses.  None of these institutions or individuals is much inclined to give up the current income structure.  There would be enormous push-back.  Along these lines, Paul Krugman has argued that the U.S. should not try for a single-payer system.  A Medicare-for-all system would require tax increases on the middle class, rather than just on the wealthy.  People with employer-provided health-care would be forced into an inferior system, to their distress.  Republicans would never go for it.  So it is politically impossible.[2]  However, that’s a political argument against the Sanders plan.  It isn’t an economic argument.

There is a lot to be said for this argument from a political realist perspective. Real power doesn’t just reside on Wall Street.  It also resides in suits, white coats over scrubs, and in flowery smocks and Crocs.  Neither Democrats nor Republicans want to bell the cat.  Bernie Sanders’s pull with young people means that the issue isn’t going away when he does.

[1] Margot Sanger-Katz, “Why a Single-Payer Plan Would Still Be Really Costly,” NYT, 17 May 2016.

[2] “Single-payer health care is a pipe dream,” The Week, 29 January 2016, p. 12.

It ain’t necessarily so 3.

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Poverty-induced hunger used to be a grave problem in America.  Michael Harrington’s The Other America: Poverty in the United States (1962) documented hunger among America’s large population of poor people, as well as many other ills.  One response appeared in the Food Stamp Act (1964).  Over the last fifty year, this program has greatly reduced hunger among poor Americans.  Today, less than 1 percent of households worry about having enough to eat or go without adequate food on a daily basis.  It is a remarkable success story about government’s ability to solve problems.

However, bureaucracies and advocacy groups foster mission-creep.  Backed by advocacy groups created at an earlier time, the Department of Agriculture (USDA) has moved from reducing widespread real hunger to grappling with “food insecurity” and poor diet choices.

The USDA asserts that 14 percent of households are “food insecure” and another 5.6 percent had “very low food security.”  Not so fast, say critics.  It has been demonstrated for several decades now that average intakes of nutrients are similar for children living in poverty and children not living in poverty, and between black and white.[1]   The real problem is obesity, not “food insecurity.”  Currently, 38 percent of all Americans are obese, 42 percent of Hispanic-Americans, and 48 percent of African-Americans are obese.[2]

Similarly, “food desert” became a term much in vogue five years ago.[3]  According to the USDA, in urban areas it is a place where at least 33 percent of the population lives at least a mile from a supermarket and at least 20 percent live below the poverty line.  In rural areas, the distance to qualify is ten miles.  This isn’t just a convenience issue in the eyes of the Obama Administration.  It is also a health issue.  Lack of access to fresh foods drives people to rely on processed foods and fast foods.  A steady diet of Big Macs and soda leads to obesity, with a host of medical complications.

Not so fast, say critics.  First of all, 93 percent of the people who live in these supposed “food deserts” have access to a car.  In addition, in cities there is public transportation.  Saying a grocery store is a mile or more away is meaningless.

Second, there are five fast-food outlets for every supermarket for a reason.  That reason is market demand.  Many people prefer fast foods and processed foods to fresh foods even when they have a choice.  Fast foods cost less than do fresh foods.  Fast foods are full of fat, salt, and sugar, so they taste better than do fresh foods.  Fast foods and a lot of the stuff sold in convenience stores don’t require any higher-order cooking skills than the ability to work a microwave.

Well, is there a way to stop people from doing what they want, when what they want is bad for them?  It’s difficult.  In 2010, New York mayor Michael Bloomberg tried to have soda dropped from the “foods” eligible for purchase with food stamps.  Advocay groups and minority communities pushed back.  The USDA rejected Bloomberg’s idea.  Los Angeles gave it a try by using zoning laws to restrict the number of fast-food outlets in poorer parts of the city.  The question is whether the restrictions have just displaced fast-food consumers from their home “food desert” to some other area where no such restriction apply or if they have just led to longer lines at existing fast-food outlets.

Sometimes solving one problem can lead to other problems, even imaginary ones.

[1] Robert Paarlberg, “Obesity: The New Hunger,” WSJ, 11 May 2016.

[2] Paarlberg, “Obesity.”

[3] “America’s ‘food deserts’,” The Week, 19-26 August 2011, p. 11.

It ain’t necessarily so 2.

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The current presidential candidates are selling snake oil when it comes to the economy.[1]

“The economy is rigged”—Bernie Sanders, with Hillary Clinton yapping along behind.  The economy is “rigged” only in the sense that economic change has assigned a lot of value to skills and education, and virtually no value to just showing up.  In a period of economic transformation, a modern economy shifts resources from low-productivity sectors to higher-productivity sectors.  All those in the skilled and educated sectors profit, while those in the less-educated and less-skilled sectors lose.  That isn’t the same as saying—as Sanders and Clinton imply—that a cabal of Wall Street bankers are making all the decisions for the nation at large.

“We don’t make things anymore”—Donald Trump.  In fact, it depends on what the meaning of “we” is.  On the one hand, the total value of goods manufactured in the United States is at its highest level, almost 50 percent higher than in the late 1990s.[2]  On the other hand, employment in manufacturing has declined by 29 percent over the same period.  Under the pressure of foreign competition, productivity in manufacturing has increased through new technological innovations.  Indeed, in the many days ago, it was the competition from highly productive American manufacturing that forced adaptation on foreign countries.

“I do not believe in unfettered free trade”—Bernie Sanders.  The North American Free Trade Agreement (NAFTA) and the proposed Trans-Pacific Partnership (TPP) have been condemned for exporting jobs to developing countries.  In fact, most academic economists—highly astute people on the left—believe that the evidence shows that free trade has been good for the United States.  It has destroyed some jobs, but it has created many others.  Job loss at big, old-fashioned firms is easier for the media to document than is job-creation at many small firms.

“I want to make sure the wealthy pay their fair share, which they have not been doing”—Hillary Clinton.[3]  While exceptions exist, the Congressional Budget Office (CBO) reports that the fabled top “one percent” of earners pays at a rate of 33 percent, while the middle three-fifths of earners pay at an average rate of 13 percent.[4]

“The Laffer curve.  HA!”—me.  Republicans promise that big tax cuts will lead to robust economic growth.  The Mellon Plan of the 1920s and JFK’s tax cut of 1963 seem to bear out this claim.  However, the Reagan and Bush II tax cuts did not stimulate much economic growth.[5]  Still, tax cuts leading to growth has become a Republican mantra.  Actually, the amount of growth from tax cuts is very uncertain.  What is certain is the impact of further tax cuts on the deficit.  Tax cuts will produce bigger deficits.  According to one estimate, Donald Trump’s tax plan would reduce federal income by 29 percent.

What Bernie Sanders, Donald Trump, and Hillary Clinton are trying to say is that Americans have become uncomfortable with adapting to change and competition.  That is easy to understand.  From 1945 to the 1970s, the American economy led the world.  Americans got used to high incomes from less work.  Then, the rest of the world caught up.  Sometimes this came in the form of better quality goods; sometimes in the form of lower prices.  Now it’s up to us to learn how to compete again.

[1] Gregory Mankiw, “The Economy Is Rigged, And Other Campaign Myths,” NYT, 8 May 2016.

[2] That is, during the now longed-for “golden years” of the Clinton administration.

[3] Asked to define “fair” taxes on the upper 40 percent of earners, my beloved sister-in-law says, “well, more.”

[4] http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

[5] To be fair, the Reagan administration also had to wring-out a lot of inflation by slamming the brakes on money creation.  This led to high interest rates, slow growth, and high unemployment.

It ain’t necessarily so 1.

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In 2002, a campaign finance law outlawed political spending by either unions or corporations during the last sixty days before an election.[1]  In 2010, the Supreme Court overturned this law in its “Citizens United” decision.  This led to widespread outrage among Democrats, who portrayed the decision as allowing millionaires and billionaires to buy all the political power they wanted.  Certainly, it looked like the Koch Brothers wanted to buy the 2016 election if it was for sale: they announced plans to spend almost $900 million in support of favored candidates.   That is as much as either of the two major parties.

Recent presidential elections haven’t done much to support this theory.  In the 2012 election Mitt Romney got beat by Barack Obama.  So far in the 2016 presidential primaries, Jeb Bush piled up a war-chest of $100 million, then got run off the road.  Meanwhile, Bernie Sanders and Hillary Rodham Clinton have raised $362 million; the last six Republican candidates raised $286 million.  Sanders, with $182 million, and Clinton, with $180 million, far out stripped Ted Cruz, with $78.2 million.  As for Donald Trump, he has raised about $50 million.[2]  Current guestimations are that Clinton will win the Democratic nomination and the White House.

Democrats fume that the rich still control everything because of their influence behind the scenes and because their ads resonate with idiots.  Even if the Democrats do win the White House on occasion, they can’t get anything done because of the obstruction by the Congressional toadies of the rich.   Journalist Jane Mayer has done much to highlight the influence—real or imagined–of the Koch brothers.[3]  It’s difficult to know exactly how much influence the Kochs have had.  Much of their money has gone to shaping the intellectual debate on the role of government.  Thus, they have donated to libertarian-leaning think-tanks and universities.[4]  A lot of it has gone to support right-wing challengers to mainstream Republicans in primaries.  This, it is said, compels mainstream Republicans to veer right to fend off challengers.

This argument works on the unspoken assumption that Republican voters themselves have moved farther right even as mainstream Republican politicians remained more centrist until challenged in a primary election.  Why might Republican voters have come to believe in a smaller government?  At the risk of forcing square pegs into round holes, consider a couple of statistics.  First, 22.4 percent of workers now need a government license to get and keep their jobs.  Nearly 20 percent of those in non-medical fields needed such a license.[5]  Second, on average, people spend 35 hours a year filling out government forms of one kind or another.[6]  However, adults fill out forms for their children and often for their own elderly parents.  For these people—who are of voting age—the real amount of time spent filling out forms might be double or triple the average.  So, a work-week or two out of their lives each year.  Perhaps this is part of what has shifted some voters to the right?

[1] “Citizens United: Has big money lost its power?” The Week, 29 January 2016, p. 17.

[2] http://elections.uscommonsense.org/

[3] Jane Mayer, Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (New York: Doubleday, 2016).

[4] Recently, the editorial pages of the New York Times have witnessed much hand-wringing over the absence of conservative voices in academia.  This is attributed to an apparent liberal bias in hiring.  The effect, however, is to provide the Democratic Party with an army of spokesmen for the pro-government argument.  On the other hand, much of the funding for these spokesmen is traceable.  Much of it comes from taxes and tuition paid by people who are not on the left.

[5] “The bottom line,” The Week, 6 May 2016, p. 36.

[6] “Noted,” The Week, 6 May 2016, p. 16.

Arab Spring Board.

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For decades since gaining their independence from foreign rule (either Turkish or European), the Arab states have suffered under brutally oppressive, monumentally corrupt, and astonishingly incompetent governments.  For decades it seemed that the “Arab street” would do nothing but seethe.  In Spring 2011, popular uprisings took place in Tunisia, Egypt, Libya, and Syria.  Optimists began to talk of an “Arab Spring.”  Realists began to recall the Revolutions of 1848 in Europe.  Then large, but disparate coalitions of enemies of the old regime toppled their rulers in France, Germany, the Austrian Empire, and in Italy.  Equally quickly, the revolutionary tide ebbed when the victors could not agree what they wanted to put in place of the old regime.  Five years on, it seems to be widely accepted that the realists were right all along.[1]

That said, a great deal of diversity can be found within this universal model.  Tunisia has been struggling on manfully in an attempt to create some kind of non-autocracy and to revive its feeble economy.[2]  Egypt’s “deep state” tossed overboard Hosni Mubarrak, let the Muslim Brotherhood take office (if not power), and then staged a well-prepared coup.  Libya might have restored the old regime, but American intervention put an end to that chance and the country has virtually disintegrated.  Syria, worst of all, collapsed into a civil war that grinds on.

Kenneth Pollack offers a profound-sounding analysis of Worth’s book: “The Middle East [Worth] sketches…is a Hobbesian state of nature, a war of all against all.”  In these conditions, the absence of order, “Chaos bred fear, fear bred violence and violence bred revenge and more anger and more violence.”  That explanation seems to work well for Syria, but it hardly explains anywhere else in the Middle East.

Unrest did not occur everywhere to the degree that it occurred in Libya, Egypt, and Syria.  Much more limited unrest took place in some of the Gulf Arab states, in Jordan, in Morocco, and in Algeria.  Virtually nothing troubled the calm in Saudi Arabia.  The troubles in Iraq were both graver than in Egypt and arose from different traumas.  Yet all Arab governments are more or less oppressive and incompetent.  Why did the “Arab Spring” not take place all throughout the Arab world?  Why did the unrest have different outcomes in different places?

Part of the answer may be that the price of oil in 2011 stood at $100 a barrel, while the price of oil today is about $45 a barrel.  In 2011, Saudi Arabia was rolling in dough.  This wealth allowed the Saudi state to buy off any dissent among its subjects.  Having staved-off unrest at home, Saudi Arabia could also deploy its wealth in support of friends in other Arab countries.  On the one hand, when the United States reduced aid to Egypt after the coup against the democratically-elected government of the Muslim Brotherhood, Saudi Arabia whipped out its check-book to more than make good the loss of American aid.  Links between the two Arab countries seem to continue to tighten.  On the other hand, when opponents of Bashar al-Assad in Syria called for aid, Saudi Arabia and other Gulf States sent money and weapons.

The simple “they agreed on what they were against, but disagreed on what they were for” analysis of the Arab Spring misses yet another parallel to 1848.  The multi-national Austrian Empire lashed out against all enemies foreign and domestic.  The Czechs, the Italians, and the Hungarians all felt the force of Austrian arms.  The threat of Austrian intervention also contributed to the defeat of German nationalism.  Will the Saudi victories turn to ashes in ten years’ time, just as did those of Austria between 1859 and 1867?

[1] See Kenneth Pollack’s review of Robert F. Worth, A Rage for Order: The Middle East in Turmoil, From Tahrir Square to ISIS (New York: Farrar, Strauss, and Giroux, 2016), NYT Book Review, 1 May 2016.

[2] Now if Islamists would just stop shooting up the tourist resorts.