Category Archives: American Economy

The ACA in September 2016.

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There seem to be several major challenges facing the Affordable Care Act (ACA).[1]

First of all, the ACA sought to provide health insurance to low-income people.  On the one hand, the problem the Obama administration did not want to address directly is that American doctors make about 50 percent more than European or Japanese doctors with comparable skills.  The same goes for hospitals.  Cutting the incomes of doctors and of hospitals to reduce health care costs to manageable levels would set off a storm of opposition from the American Medical Association and whoever fronts for the hospitals.  On the other hand, there are a bunch of insurance companies—notably Blue Cross plans–that are used to dealing with low-income populations.  However, these insurers keep prices down by offering a narrow range of service providers who agree to accept low payments in return for a steady stream of customers.  Most doctors would refuse to participate in such arrangements.  Assuming that poor consumers were like richer consumers, the authors of the ACA sought to provide a greater range of choice.  The government mandate on the health services provided cuts across the desires of some consumers.  Then, the government lured a bunch of major insurers into the market in the belief that that competition would hold down costs for a broader range of services.  However, the major insurers lost a lot of money and they have begun to bail.  Basically, markets are often more rational than any government “ukase.”  Perhaps 17 percent of people who use the insurance “marketplace” will find that there is only one seller.

Second, the ACA rests on the belief that healthy, young, poor people can be compelled to buy insurance to subsidize sick, old, richer people.  In fact, less than half the 24 million people who were expected to buy insurance through the marketplace have signed up.  A lot of younger people just don’t want to join.  A lot of sick people do want to join only for  long enough to get their illnesses treated,  As a result, the insurance premiums are already so much higher than the government subsides that many people are opting out.  One solution would be to follow the path of the low cost insurers by narrowing networks and forcing down remuneration to doctors and hospitals.  Democrats favor either raising taxes on Republicans to pay for more generous subsidies to health care providers or coercing the un-insured to get insurance.

Third, apparently believing that much of the high cost of American health care came from profiteering by the insurance companies, the ACA included limits on profits and inadequate guarantees against losses.  Faced with large and mounting losses, the major insurance companies have begun to abandon the market place.

So, what are the policy options?  First, President Obama and President-in-Waiting Clinton have floated the idea of going back to the “public option” that Obama once cavalierly abandoned.  The public option would—undoubtedly with the aid of subsidies from the tax payers—“compete” with the private companies in order to drive down prices.  (See: TVA.)  Second, Blue Cross plans—low cost insurers with a lot of experience—argue for further reforms like blocking customers from signing up for short-term coverage in order to deal with accumulated health problems, the drooping coverage; higher premiums for older patients who cost more; and enhancing government subsidies for th care of very sick patients.  “Experts” and “advocates” are in some disagreement about what course to pursue.  Apparently, the Obama Administration is reluctant to consult or listen to business people.

[1] Reed Abelson and Margot Sanger-Katz, “ObamaCare Obstacles, and Some Possible Solutions,” NYT, 30 August 2016.

The ACA in August 2016 2.

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One means to control costs included in the Affordable Care Act (ACA) took the form of a mechanism for publicly reviewing requests for rate increases by insurance companies.[1]  In Summer 2016, health insurance companies began requesting large increases in premiums.[2]

A witness for one Pennsylvania health insurer observed that his company had about 250 clients who had signed up for coverage under the ACA, then received treatment worth about $100,000 each, and then had cancelled their policies immediately after receiving treatment.[3]  The cost of the care then had to be passed on to other clients.  In Montana, ten individual customers consumed more than $4 million in care in the first six months of 2016, for an average of about $70,000 a month each.  In this case, 1 percent of customers accounted for 30 percent of pharmacy bills.  Making matters worse, in the first years of the ACA, a federal program helped insurers pay the cost of some of the most expensive claims.  Now, according to a Department of Health and Human Services economist, that program is winding down.

What has been happening in Pennsylvania is not unique to the Keystone State.  In Montana in 2015, one insurer reported that it had paid out $1.26 in claims for every $1.00 in premiums.  Unable to sustain such losses, major insurance companies have had to choose between seeking much higher premiums and abandoning the health-insurance market places.  In 20 states, insurers have asked to raise their premiums by at least 25 percent.  In some other states, insurers seem to be abandoning the market places to more efficient or competitive insurers.

 

Who are the uninsured?[4]

More than half of the uninsured live in the 20 states that refused to expand Medicaid, many of them populous Southern states like Texas and Florida.  As a result, 39 percent of the uninsured have incomes below the federal poverty level.

In 2013, 28 percent of people between 19 and 34 years old were uninsured; today 18 percent are such “Millennials.”  Still, that 18 percent accounts for almost half of the total uninsured.

In 2013, 50 percent of the uninsured were white; now 41 percent are white.

In 2013, 36 percent of the uninsured were American citizens of Hispanic descent; today 29 percent of the uninsured are American citizens of Hispanic descent.[5]

In 2013, 13 percent of the uninsured were black; now 12 percent are black.

More than half (57 percent) of the working Americans without insurance work for small companies that were exempted from the requirement to provide insurance.

[1] It speaks volumes to the intellectual world inhabited by Democratic legislators that the NYT reporter Robert Pear can describe the process as intended to “shame” companies that requested increases.  Apparently, Democrats believe that immense profits by health insurers and exorbitant pay for executives explain high health costs.

[2] Robert Pear, “Health Insurers Use Reviews, Intended to Constrain Rate Jumps, to Justify Them,” NYT, 15 August 2016.

[3] The chief executive of the federal insurance market-place optimistically portrayed the join-spend-quit pattern as a one-time “decline in pent-up demand for services.”  In all likelihood, uninsured people will continue to pen-up their use of services, then join-spend-quit again.  Robert Pear and Reed Abelson, “As Insurers Balk, U.S. Makes New Push for Health Care Law,” NYT, 18 August 2016.

[4] Abby Goodnough, “Still Uninsured, Even With the Health Law,” NYT, 18 August 2016.

[5] However, the ineligibility of illegal immigrants for coverage means that the total Hispanic share without insurance has risen from 29 percent to 40 percent.

The ACA in August 2016.

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Prior to passage of the Affordable Care Act (ACA), many Americans received their health insurance through their employers; many others bought individual insurance; and a relatively small percentage had no insurance at all.  As one part of the effort to extend health insurance to the uninsured, the ACA required everyone to have insurance, created a system of subsidies to make that insurance affordable for lower-income people, and encouraged the creation of market-places where individuals could purchase standard plans offered by insurance companies.[1]  (In essence, lots of younger, healthier, lower-income people would be constrained to buy insurance to pay for the care of older, sicker, and often higher-income people.)  Broad participation in the health-exchanges by the major insurance companies would create a competitive environment that would help hold down prices while providing a broad array of choices to customers.

In spite of the unfortunate early mishaps of the ACA (the botched roll-out of the web-site, the president’s terminological inexactitude about keeping one’s insurance, the Supreme Court’s invalidation of the portion of the ACA that tried to coerce states into expanding Medicaid), far more serious problems have begun to emerge.

In what seems to have come as a surprise to Democrats and the New York Times (“but I repeat myself” as Mark Twain once said), it turns out that people really are economic animals.  First, for many potential customers, the price of health insurance is too high for what it would buy.  While it had been projected that about 21 million people would be enrolled in health exchanges by 2016, only about 10 million have enrolled.  That’s a lot of premiums that never get paid to insurers.  In 2015, half of the people who did buy insurance in the market-places bought the cheapest possible plan.[2]  Those who buy the more expensive plans tend to be people with serious medical conditions.  Furthermore, many of these customers don’t care about choice of physician or the size of the network of providers. They have opted for plans offered by smaller insurance companies.  Some of these companies already had deep experience dealing with Medicaid payments.  They knew low income customers and they knew how to keep down costs.  Part of this involved limiting choice of care to doctors and hospitals that were willing to accept a low level of payment.

Second, private enterprise runs on a profit and loss basis.  Having run health insurance policies for employer-provided health insurance, the major insurance companies assumed that their new customers would want the same range of choice of physicians and hospitals.  They didn’t.  Anticipating large numbers of customers, many without serious health needs, the insurance companies priced many of their policies too low.  Getting half as many customers, many with serious health issues, the insurance companies suffered heavy early losses.  Facing continuing huge losses in this sector of their business, major insurers like United Health Group, Humana, and Aetna have either decided to pull out of the health-exchange market or limit their participation.  The insurers who remain in the health exchange market place plan to steeply raise premiums for 2017.  This may well drive even more price-sensitive customers out of the market place.  A health care expert at the Urban Institute rationalized that “you can’t lower costs without breaking some eggs.”  In this case, the “eggs” are companies owned by stock-holders as an investment of their assets.  The big insurers need to learn the market or to get out.

One solution would be to let the experienced low-cost providers take over this market.

[1] Reed Abelson, “Health Insurers Lose as Clients Focus on Costs,” NYT, 13 August 2016.

[2] “Bronze,” like coffin handles.

The current explanation.

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Back in 2000, the Clinton Administration held a conference to congratulate itself on its skillful economic management.[1]  The participants foresaw the opening of a new era of rapid economic growth.  Low inflation would run in tandem with stable growth in what some saw as a “Great Moderation.”  Markets behaved rationally most of the time.  Technological innovation increased labor productivity.  Increasing international trade through agreements like the North American Free Trade Agreement expanded high-end American exports while providing American consumers with low-cost imports and stimulating the shift of factors of production (capital, labor) out of low-end industries.  China, in particular, tantalized businessmen and economists alike.  More education and geographic mobility offered the best means for displaced workers to adapt.  Investors faced a host of “staggering high-quality investment opportunities.”  Central bankers could manage the economy with relatively small changes in interest rates.

Like many another rosy dawn, this one failed to arrive.   The host of “staggering high-quality investment opportunities” turned out to be the “tech bubble” that collapsed almost as soon as Bill Clinton handed the White House keys to George W. Bush.  “The China Market” turned out to be just as much of an illusion now as in the past.[2]  Indeed, China’s enormous labor force multiplied by rising productivity multiplied by low wages created an export giant unlike anything ever seen before.  (A 2016 paper by three economists calculated that between 1999 and 2011, Chinese competition ate up 2.4 million American jobs.)  The financial crisis at the end of the Bush administration showed that at least some markets were far from rational and self-correcting.  More education has not guaranteed a better adaptation to a changing economy, while fewer start-ups are creating new businesses and many displaced workers have been reluctant to relocate toward growth areas.  Technological innovation has destroyed far more jobs than it has created.  Indeed, one economist argues that there is a shortage of investment opportunities to provide either an outlet for savings or new jobs.

The rewards of economic change have flowed disproportionately to the upper levels of American society.  In 1990, the top 20 percent of families earned 44.3 percent of total income.  In 2014, the top 20 percent of families earned 48.9 percent of income.  In 2000, wages, salaries, and benefits accounted for 66 percent of Gross Domestic Product (GDP), while business profits accounted for 8 percent.  By 2010, wages, salaries, and benefits accounted for 61 percent of GDP, while business profits have now risen to 12 percent.  Between 2000 and 2015, median family income fell by 7 percent.  One recent poll reported that 91 percent of Bernie Sanders supporters and 61 percent of Donald Trump supporters think that the economy favors powerful interests.   (More likely it favors certain skills and behaviors, but no one is buying that line.)

Those job losses and income shifts now are having a political effect.  Of the 100 counties with industries worst hit by Chinese competition, 89 voted for Trump in the primaries.  Of the 100 counties with industries least hit by Chinese competition, only 28 went for Trump.   Faced with losing their own jobs, many Republican leaders are re-thinking their positions.  A former Treasury official in the Bush II administration reflected that “Washington and we in the establishment spent too much time celebrating the efficiency gains of trade and not enough time thinking about the people who were impacted.”

[1] John Hilsenrath and Bob Davis, “Unkept Economic Promises Drive Stormy Election,” WSJ, 8 July 2016.

[2] “If every Chinaman would add eight inches to the length of his shirt it would take all of the cotton cloth that we have in America, because they all wear them on the outside.”  Proceedings of the … Annual Convention of the Investment Bankers (1919), p. 71.

Good news and bad news on the economy.

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The American economy is huge (producing $18 trillion worth of goods and services every year) and growing (GDP is projected to double over the next fifteen years).[1]  Business analysts had projected that the American economy would grow at a rate of 2.5 percent in the second quarter of 2016.[2]

What’s the good news?  If you leave out business inventories, then in the second quarter of 2016, the rest of the economy grew at 2.4 percent.  Also, consumer spending (which makes up roughly two-thirds of the economy) grew at a rate of 4.2 percent.  This reflects the belated rise in wages (by 2.5 percent over last year) and the fall in gasoline prices.  The United States International Trade Commission projects that the Trans-Pacific Partnership (TPP) trade deal could add 128,000 full-time jobs and $42.7 billion to the GDP by its fifteenth year.

What’s the bad news?  First, companies have been meeting the rising demand in part by drawing down their inventories, rather than by making new stuff to keep their inventories stocked.  If you include inventories, then the economy grew at a rate of only 1.2 percent.  This is half the rate calculated if inventories are excluded.

Second, the fall in energy prices has caused energy companies to shut down a lot of production rather than investing; in other sectors, the strong dollar is choking off a lot of sales, so companies aren’t investing as much.

Third, the TPP’s projected job creation and GDP growth projections are pretty small compared to the over-all economy.  In addition, it is projected to increase wages by only 0.19 percent over where they will be otherwise.

Fourth, the growth of labor productivity holds the key to economic progress.  Labor productivity is the amount of output (stuff) per hour of work.  If labor productivity increases, the employers get more stuff to sell at the same labor cost as before.  That allows for higher profits, or lower prices to buyers, or higher wages to workers, or—the trifecta—all three.[3]  Between 1870 and 2013, the American economy averaged 2.3 percent growth in productivity each year.   This made for a gigantic rise in living standards.[4]  However, that average disguises differences in productivity growth during the sub-periods.  From 1948 to 1973, the annual growth in productivity averaged 2.8 percent.  From 1973 to 1995, it averaged 1.4 percent.  From 1995 to 2010, it averaged 2.6 percent.  From 2010 to 2013, it averaged 0.7 percent.[5]

Apparently no one knows what caused the shifts.  No one knows why it suddenly dropped in 1973 or why it dragged along at a low level for two decades; no one knows why it shot up in 1995 and stayed at a high level for fifteen years; no one knows why it fell again in 2010 (after the end of the financial crisis); and no one knows what the poor performance of the last few years portends or when it will end.  However, in the first quarter of 2016, it fell by 0.6 percent.

The future is uncertain.  Over the short-run, will companies begin investing to meet rising consumer demand or will the investment decline undermine the growth of consumer spending?  Over the longer-run, will productivity growth begin rising or will it continue to limp?  Will rejection of the TPP leave world trade as it is or will it begin a downward spiral in trade?

[1] Eduardo Porter, “Uneasy Alternative to an Imperfect Trade Deal,” NYT, 27 July 2016.

[2] Neil Irwin, “What’s Right and Wrong With the Economy,” NYT, 2 August 2016.

[3] See: Henry Ford.

[4] Alan Blinder calculates this as a 25-fold increase.

[5] Alan S. Blinder, “The Unsettling Mystery of Productivity,” WSJ, 25 November 2014.

NAFTA You.

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Most economists hold that “past major trade deals [NAFTA, Chinese entry to the WTO] have benefitted most Americans.”[1]  Now we’re facing the Trans-Pacific Partnership (TPP).  There is no doubt that this is true.  Still, lots of working people think that an open world economy has turned into a disaster.  Naturally, in an election year, all sorts of candidates—from Donald Trump to Hillary Clinton to Boris Johnson—are having road to Damascus experiences.  It’s how you get ahead in a competitive environment.

How is this possible?  On the one hand, there is a certain gap between quantitative-based reality and perception-based reality.  While economists calculate that “trade deals benefited most Americans,” most Americans (55 percent) calculate that they did not.[2]  Who is right?

On the other hand, Economics is the greatest of the “social sciences” that arose at the end of the 19th Century.  Those social sciences (Economics, Sociology, Psychology, Political Science, Marketing) all study the behavior of people in the aggregate to discover “laws” of human behavior.  The thing is, people don’t live their lives in the aggregate.  They live their lives individually and for themselves.  “Most” people can be doing really well, while a minority are doing badly.  The minority takes no consolation from the happy situation of the majority; apparently, the fortunate majority gives little thought to the hardships of the minority.

However, some research indicates that this is too simple an answer.  Lots of people who oppose free trade are not individually harmed by it, but they believe that the country as a whole is harmed by it.  It has been suggested that isolationism plays a role; that nationalist feelings of “cultural superiority” plays a role; and that racism (couched as “ethnocentrism”) plays a role.  People who have less education are more likely to be isolationist, nationalistic, and “ethnocentrist” than are the better educated.  Gregory Mankiw has a funny coda to this story: once people have more education, this nonsense will pass.[3]

There is another possible explanation.  Many people recognize that America is still a racially segregated society, but not many people recognize that America is still a class segregated society.  My father taught people to drive and eventually bought the business[4]; his brother had some experience in construction and some training as an engineer in the US Army, and then became a consulting engineer[5]; their brothers-in-law were a mill-hand at Weyerhauser, a ship-wright at Vic Foss Boatyard, and a salesman-turned-entrepreneur.  My beloved[6] in-laws graduated from Ivy League colleges, often went to grad school or law school, are “professionals,” and have lovely summer homes on the Eastern Shore, in New Jersey, and in Nova Scotia.  All the same, if the people losing from globalization mostly come from one social group, then maybe their extended families and friends intuitively or out of human sympathy push back.  Their own family and friends also suffer from economic change.  They recognize that they themselves may suffer in the future.  Class solidarity trumps [NPI] economic “rationality.”

Maybe, shock absorbers against the impact of trade deals are best?  Or maybe not.

[1] N. Gregory Mankiw, “Trade Is Good, But Voters Aren’t Buying It,” NYT, 31 July 2016.

[2] This may be an example of what Marxism terms “false consciousness.”  People think that they are something different from what people in authority tell them they are.  Alas.

[3] Arthur Koestler, Darkness at Noon, has a funny coda to Mankiw.  People always suffer from relative lack of development

[4] My Dad taught me how to tie a necktie and had a couple of suits, but he didn’t wear a jacket or tie to work.

[5] Basically a burr under the saddle of construction companies trying to cut corners on jobs that they had bid.

[6] I’m not being arch here.  They’re wonderful and incredibly generous human beings with a Hell of a lot more social conscience than I possess.

A Fork in the Road.

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“All I know is just what I read in the papers, and that’s an alibi for my ignorance.”—Will Rogers.

One sign of our political paralysis/polarization shows up in the reliance on special bi-partisan commissions to deal with troubling issues.  The 9/11 Commission did an excellent (if imperfect) job.  The Simpson-Bowles Commission[1] also did an excellent, if imperfect, job.  The work of the 9/11 Commission requires no explanation.

The Simpson-Bowles Commission sought to address the growing problems with federal spending, taxation, and deficits.  Basically, Social Security, Medicare/Medicaid, and Defense each consume about 22 percent on federal spending.  So, two-thirds of the budget goes to old people and to psychological Viagra.  Even though reforms in 1983 cut benefits by 25 percent, the dynamics remain unsupportable.  Simpson-Bowles made a series of recommendations to address the rising cost of entitlements.  The Commission recommended a combination of tax reforms to enhance revenue with spending cuts.[2]  These recommendations went nowhere, for reasons that are equally disgraceful to both parties.   President Obama returned to the need for cuts in his failed effort to strike a budget deal with the Republicans.

Currently, the trust fund for Social Security is projected to run dry in 2034.[3]  After that the system will have to rely on only withholding taxes from current workers.  That, in turn, will mean that payments will fall to 79 percent of the promised level.  One alternative would be to increase withholding taxes by something like 25 percent.  Another alternative would be to reduce benefits by limiting the cost-of-living adjustments.  A third would be to increase benefits.  Some argue for a 10 percent raise for recipients, others for 100 percent of their own benefit plus 75 percent of their deceased partner’s benefits.  A fourth alternative would be to give care-givers and widows who left the work force an equivalent pay for their loss of Social Security income (although they paid no withholding tax during that period).

The current presidential campaign has shifted the debate on this issue.  The white populist revolts led by Donald Trump and Bernie Sanders have racked the Republican and Democratic parties alike.  Established party positions have had to shift in response.  According to Nancy Altman, “the real question is whether you expand Social Security across the board, so middle-class workers get an increase,…Then you can argue about how big to make the increase.”

Democrats have endorsed expanding and “modernizing” Social Security.  Three years ago “Progressives” began looking for a new issue to galvanize the Democratic electorate after the end of Barack Obama’s presidency.  [NB: So, the Democratic agenda is driven by the search for new ways to extend the role of government?  Rather than,…?]  First, Bernie Sanders took up the cause; then Hillary Clinton joined in.  Characteristically, realizing that she would have to veer to the center after winning the nomination, she took the low road: expanded benefits for widows and widowers and for those who lost benefits because they served as caregivers.

Still, how to pay for the expanded benefits?  One answer would be to raise the cap on taxable income above the current $118,000.  Another answer advanced by Democrats would be to “privatize” Social Security funds by investing them in equities.  The Bush II administration tried this on without success.  Now it may become a Democratic policy.

What can we afford?

[1] See: https://en.wikipedia.org/wiki/National_Commission_on_Fiscal_Responsibility_and_Reform

[2] See: https://en.wikipedia.org/wiki/National_Commission_on_Fiscal_Responsibility_and_Reform#Final_plan

[3] Mark Miller, “Social Security Expansion Gains Support in Washington,” NYT, 16 July 2016.

The Least Generation.

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A BA may not guarantee you a job, but not having a BA will guarantee that you don’t get a job.  Since the 2008 recession, the American economy has created 11.6 million new jobs.  Of  those new jobs, 99 percent went to people with at least some college and predominantly to people with a BA.[1]  A lot of those jobs probably were as managers, supervisors, and support staff.  Between 1983 and 2014, those job titles increased in number by 90 percent, while other occupations grew by only 40 percent.[2]

Since 1981, more than half of all BAs have been earned by women, rather than men.  Thirty-odd years of that trend has shifted the balance in the population at large.  Now, 29.9 percent of all men hold BAs, while 30.2 percent of all women hold BAs.  Obviously, at this rate the gap will become ever more stark.[3]

Back in 2005, about 40 percent of the graduate students studying science and mathematics in the United States came from foreign countries; in 2015, about 50 percent of the graduate students studying engineering came from outside the United States.[4]

According to the bipartisan commentator Juan Williams, the public schools have failed minority children.[5]  In 2015, 18 percent of black and 21 percent of Hispanic fourth-graders scored as “proficient” readers.  Among those aged 25-29 years, only 15 percent of Hispanics and 20 percent of blacks had BAs.  The Dallas sniper, Micah Johnson, had a high school GPA of 1.98.[6]  In turn, 2.00 is a “C” grade or “Average.”  At the same time, the Micah Johnson, graduated 430th out of a class of 453 seniors, in the bottom 5 percent of his class.  So, 95 percent of students in his class had a GPA of 2.00 or higher.  His GPA is emblematic of things that have gone wrong with American education.  A lot of grade inflation has taken place.  It looks like grades are almost entirely meaningless as an evaluation of work-ethic, knowledge, or intelligence.  Problematic kids get passed along by teachers.

However, two-thirds (68 percent) of Americans do not have a college degree.[7]  When the “Great Recession” hit in 2008, employment slumped.  Kinfolk said “Jed, improve your skills!” So, college enrollments jumped by 25 percent, from 2.4 million in Fall 2007 to 3 million in Fall 2009.  By Fall 2015, 52.9 percent of these students had graduated with either an AS or a BS.[8]  But why didn’t the others graduate?   Over a third (38 percent) of people with college loan debt didn’t graduate.  Almost half (45 percent) of people with college loan debt think that college wasn’t worth the price.[9]  Better than three-quarters (78 percent) of those who think that the game wasn’t worth the candle earn less than $50,000 a year and better than two-thirds (68 percent) are having trouble paying their debt.

You need a BA for success.  Women do college better than men.  Whites do college better than blacks or Hispanics.  Americans don’t do math, science, or engineering.  Money shouldn’t be a barrier to talent, such as it is.  It would be easy to join the pack and throw all this on the schools and on the teachers.  However, there is a lot of parental malpractice evident.

[1] “Noted,” The Week, 15 July 2016, p. 16.

[2] “The bottom line,” The Week, 15 July 2016, p. 31.

[3] “Noted,” The Week, 30 October 2015, p. 16.

[4] “Noted,” The Week, 15 July 2015, p. 18.

[5] Juan Williams, “The scandal of our failing public schools,” The Week, 15 July 2016, p. 12.

[6] Dan Frosch and Josh Dawsey, “Dallas Shooter Bought Weapons Legally,” WSJ, 12 July 2016.

[7] “Noted,” The Week, 15 July 2016, p. 16.

[8] “The bottom line,” The Week, 4 December 2015, p. 36.

[9] “Poll Watch,” The Week, 15 July 2016, p. 17.

Common Sense 1.

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In 2014, 32,675 people died in traffic accidents.[1]  In 2014, 11,593 people died in homicides, mostly from fire-arms.[2]  Obviously, what we need are common-sense car control laws.

We have abundant mass transportation in many parts of the country.  Take SEPTA’s Regional Rail system as an example.  All this could be expanded to meet the needs of a greatly increased ridership.  The use of trains and buses would greatly reduce traffic jams on roads and highways.  This, in turn, would have many beneficial effects.  It would give Americans much more free time or work time that they would otherwise idle away stuck in some jam-up.  That, in turn, might reduce deaths from hypertension in addition to the many lives that are lost through traffic accidents.  Moreover, the walk home from the local train station would have other beneficial health effects.

It would reduce the amount of carbon burned, to the harm of the climate.  It would ease the congestion in parking places in cities.  Many parking garages could be converted to homeless shelters and many parking lots could become community gardens.  It would end the difficulties with getting snow-plows down city streets in winter.  It would end the quarrels over parking spots that one person had dug out and another had used in spite of the plastic lawn chair having been placed in the spot.  It would allow for much expanded bike-lanes in cities and suburbs (along with expanded sales of brightly-colored Spandex clothing).

Now, let me be clear, this would not mean an end to privately owned automobiles.  Legitimate motorists would still be able to obtain cars from Federally Licensed Car Dealers.  There would, of course, need to be a background check and a waiting period.  All this could be handled by an expanded Transportation Security Administration.  Automobiles are, after all, a form of transportation.

Moreover, very few people actually need an F-150 or a T-top Camaro with a scoop on the hood.  Yes, we live in a time of change that many people find disruptive.  Some people cling to their God and their gear-shifts.  However, both Smart cars and those little Italian thingees painted the color of urinals offer superb solutions to American driving needs.

In closing, I welcome a dialogue on these important issues.

[1] “Noted,” The Week, 15 July 2016, p. 16.

[2] See: http://www.statista.com/statistics/195331/number-of-murders-in-the-us-by-state/

The Crisis of 2008 and the Return of New Deal Economics.

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The “Great Recession” of the 2000s and since has inspired a certain interest in the “Great Depression” of the 1930s.[1]

The New Deal’s economic policies were grounded in historical precedents.  On the one hand, various forms of relief and public works projects put people to work, while the Agricultural Adjustment Act shored up the situation of farm-owners—at the expense of tenant farmers and share-croppers.  Like the Medieval three-field system, these policies put a floor under the economic collapse.  Thank God for that.

On the other hand, the New Deal tried to come to terms with the modern industrial corporation.[2]  This would be one engine of real recovery.  The Democrats along with some Republicans were divided on this subject.  For some, big business was inherently bad.  Businesses grew by swallowing up smaller firms; then they produced monopoly effects—higher prices, lower quality, a slowing of innovation.  This analysis was rooted in the “Populist” attack on railroads and other big corporations in the “Gilded Age.”  Subsequently, Democratic “Progressives” led by Woodrow Wilson had embraced a version of this policy.  They rejected big interest groups and wanted a strong national government to break-up or prevent their formation.  This strand of the New Deal pursued various anti-monopoly initiatives.

Others, however, accepted big interest groups (Big Labor as well as Big Business) and wanted a strong national government to hold the ring between them in the national interest.  This strand of thought pushed European-style “cartelization” to prevent the competitive price cutting that led to mass business failures, and downward pressure on both wages and demand; and promote efficiency through cooperation between big corporations and the government.  This strand sprang from the government directed economies of the First World War.  Allied with this strand of thought were intellectuals who had been deeply impressed by the Soviet “achievement” (although they sometimes shuddered at the human cost) and who favored “planning.”

The two strands struggled all through the New Deal.  Most often, anti-monopoly policy lost out because the efficiency and production advantages of big corporations far outweighed the gains from limiting the logical effects of competition.

Now the anti-trust arguments have reared their head again.[3]  Business concentration seems to be increasing.  Democrats focus on the real or imagined malign effects.  Bernie Sanders has called for the big banks to be broken up; Elizabeth Warren has called for an anti-trust assault on the big companies of Silicon Valley; and Hillary Clinton argues that big business uses its power “to raise prices, limit choices for consumers, lower wages for workers and hold-back competition from start-ups and small business.”

The New Deal analogy suggests that there is something to be said on the other side.  The New Deal’s first effort at “cartelization,” the National Recovery Administration (NRA) ended because the Supreme Court ruled against it in 1935, not because it had (yet) failed.  Later, with American entry into the Second World War, the New Deal abandoned its anti-business stance to get the massive increase in production needed for victory.  Both production and working-class incomes rose sharply.  That settled that question.  From then on, American liberalism rejected both government planning and attacks on monopoly.  Until now.

[1] See Amity Schlaes, The Forgotten Man, and Paul Krugman, The Return of Depression Economics and the Crisis of 2008, as examples.

[2] Ellis Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (1966).

[3] Eduardo Porter, “With Competition in Tatters, The Rip of Inequality Widens,” NYT, 13 July 2016.