Friday, March 31, 2017

The Value Of Entrepreneurship And Social Capital

See Two Michigan cities by Scott Sumner of EconLog.
"Tyler Cowen recently quoted from a paper by Ed Glaeser and Wentao Xiong:
"In 1961, Benjamin Chinitz argued that New York City was more resilient than Pittsburgh during the 1950s, because New York City had a culture of entrepreneurship that meant that its business leaders were good at adapting to industrial decline. In modern language, we might describe New York as having a healthy endowment of entrepreneurial capital because its dominant industry, garment production, had limited-scale economies and few barriers to entry. In contrast, Pittsburgh had U.S. Steel, and the steel industry had large-scale economies, which meant that Pittsburgh trained company men instead of entrepreneurs."
This reminded me of a very interesting study that compared two cities in Michigan, Flint and Grand Rapids:
In 1946, sociologist C. Wright Mills and economist Melville Ulmer concluded the fortunes of two of Michigan's largest cities, Flint and Grand Rapids, were headed in opposite directions. Seventy years later, their predictions are getting new notice from academics.
The researchers warned Flint was overly dependent on its big employers even though its workers made 37 percent more than the national average at the time.
The warning seemed out of place. By 1950, Flint was labeled "the happiest city in Michigan" and the "epicenter of the American Dream," thanks to its thriving auto industry.
Grand Rapids, whose economy was defined by its numerous small businesses, was less flashy. But it offered its citizens more mobility and opportunity for its middle class that would help it survive tough times, the researchers concluded.

Flint was still booming in the late 1960s, so it looked like this 1946 prediction was wrong. But then the prediction suddenly came true. Flint's metro population fell from 445,589 in 1970 to 410,849 in 2015. In contrast, Grand Rapids has been booming, with its metro population soaring from 539,225 in 1970 to 1,038,583 in 2015. And both of these places are in the rustbelt state of Michigan. A 2016 paper by Michael DeWilde has lots of interesting things to say about this study, and the subsequent evolution of these two Michigan cities. Here's one example, which reminded me of Tyler's recent discussion of Utah:
If the Weberians are right and social capital comes first, where does it come from specifically? We can report that 90% of the business leaders we interviewed in West Michigan spoke, unprompted (though occasionally apologetically), about religion as the source for much of what was "uniquely good" about living in and doing business in the region. There was an understanding that, as one person put it, "maybe West Michigan isn't for everybody and maybe that isn't a bad thing." What he meant was that it was alright with him that people self-selected to be here on the basis of shared values with roots in particular religious traditions. The cultural norms that expressed themselves in West Michigan because of those traditions were responsible, to some large degree, for our economic and civic success. This was a widely shared view, even if put more inclusively in other interviews. And there is a shared concern that as religion qua religion becomes less important to younger generations, much of what is uniquely good about the Grand Rapids area will ultimately be lost--work ethic, fair dealings without the added cost of legal oversight, stewardship, philanthropic spirit, and so on. Eighty percent of those same business leaders expressed this concern. As one CEO lamented, "The values that made West Michigan successful are in decline." Interestingly, in his new book, Our Kids, Robert Putnam echoes this observation, citing declining church attendance and the diminished community role of churches as a factor in our collective decreasing social capital (affecting us all, but disproportionally hitting poor communities). The evidence suggests conservatives and fair-minded liberals are right to point out that there is a connection between religion and social capital (i.e., religious traditions are one source of social capital, an important though sometimes ambiguous one given temptations to exclusivity), but as formal religious institutions become less important to Americans, the question for many becomes: what might take those institutions' places as it relates to the formation and extension of social capital?
Don't take this the wrong way; I'm not suggesting that "religion" is good for growth. It may be in some cases, but there are many types of religious culture. I'd guess that Pakistan is more religious than San Jose, California, but that doesn't make it more prosperous.

DeWilde's report is not too long, and well worth reading if you want to know more about what's going on in different parts of America."

Americans cannot afford to have government spending taxpayer dollars on higher-priced domestically produced products when lower-priced foreign products are available.

See Open Letter to Sen. Tammy Baldwin (D-WI) by Donald J. Boudreaux.
"Sen. Tammy Baldwin (D-WI)
Capitol Hill
Washington, DC

Sen. Baldwin:

Seeking to protect American steel corporations and workers from foreign competition, you introduced legislation to require that “100 percent American-made iron and steel is used in water infrastructure projects funded by the Drinking Water State Revolving Fund (DWSRF).”  In your statement meant to justify this legislation, you insist that “workers cannot afford to have government spending taxpayer dollars on foreign products.”

You get matters backwards: Americans – whether in their capacity as workers, consumers, entrepreneurs, students, retirees, or taxpayers – cannot afford to have government spending taxpayer dollars on higher-priced domestically produced products when lower-priced foreign products are available.

I realize that, being a politician, you see only that which is in your personal interest to see.  And so you see only two consequences of “buy American” policies: (1) more business and jobs for steel producers and workers in your state, and consequently (2) more votes for you.

Here, however, is some what you do not see; each, or some combination, of these consequences is unavoidable if you get your wish to oblige taxpayers to pay unnecessarily high prices for infrastructure materials:

– American households’ consumption and investment will fall as a result of rising current and future tax bills;
– government will cut back on its services;
– there will be fewer businesses, fewer goods and services, and fewer jobs in industries other than those that heavily supply inputs to infrastructure projects;
– with yet more special privileges doled out by officials in Washington, ever more resources will be wasted pleading for such privileges from politicians rather than used productively to improve the living standards of Americans and their families.

I’m aware that these negative unseen effects – spread out geographically and temporally as they are – will cause you to lose no votes.  And I’m aware also that the effects that you do see – concentrated heavily in states (such as yours) with steel producers, and occurring in time for the next election – will win you many votes.  So I send this letter not to persuade you to abandon your support for this harmful policy (I’d have better prospects trying to teach a hamster to recite “Hamlet”), but to instill in you at least some small, if passing, smidgen of guilt for the harm that you and your fellow protectionists inflict, for your own venal purposes, so cavalierly on millions of unsuspecting others.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030"

DER SPIEGEL spoke with Hans von Storch, one of Germany's leading researchers on climate change, about why fears of global warming are exaggerated

We Have to Take Away People's Fear of Climate Change."
"SPIEGEL: Is it even possible to prevent global warming at this point?

Storch: No. Because of the inherent time lag in the climate system, the greenhouse gases that have already been pumped into the atmosphere will undoubtedly lead to a certain increase in temperature in the coming decades. We can no longer completely avoid anthropogenic climate change. At best, limiting the temperature rise to two degrees is just about possible, according to optimistic estimates. That's why we should spend more time talking about adjusting to the inevitable and not about reducing CO2 emissions. We have to take away people's fear of climate change.

SPIEGEL: But many believe that the end of the world is upon us. Is the climate debate gradually becoming too hysterical?

Storch: Indeed. The fear of climatic catastrophes is an ancient one and not unlike our fear of strangers. In the past, people believed that the climate almost always changes for the worse, and only rarely for the better -- God's punishment for sinful behavior. And nowadays it's those hedonistic wastrels who pollute the air so that they can look at some pretty fish in the South Seas. It would be better if we only ever rode bikes. Oh, there's always someone wagging a finger in disapproval.
SPIEGEL: Are there only negative consequences when the temperature increases by two or three degrees on the planet?

Storch: Detailed forecasts are not possible, because we don't know how emissions will in fact develop. We climate researchers can only offer possible scenarios. In other words, things could end up being completely different. But there are undoubtedly parts of the world that will benefit on balance from climate change. Those areas tend to be in the north, where it has been cold and uncomfortable in the past. But it's considered practically heretical to even raise such issues.
SPIEGEL: What would be the consequences for Germany, for example?

Storch: Very mixed. We will probably see higher storm tides. As a result, we won't be able to avoid building higher dikes. But our hydraulic engineers have already done a good job controlling the higher storm tides in Hamburg, for example, which we brought on ourselves by narrowing the Elbe River. At the same time, increased precipitation in the winter will force us to improve drainage on fields and meadows. On the other hand, milder temperatures will certainly boost tourism, especially along the North Sea and the Baltic Sea.

SPIEGEL: And what about the monster storms that will supposedly be rushing in our direction in a greenhouse climate?

Storch: A false alarm, so far, even though it's become warmer by almost one degree since the beginning of industrialization. According to the computer models, we do expect high winds in northern Germany to increase by one percent per decade. But this is such a weak phenomenon that we won't even notice it at first.

SPIEGEL: And the thousands of heat-related deaths the Kiel Institute for World Economics predicted in a recent study?

Storch: Such claims are completely idiotic and dubious. What they did was to simply perform an extrapolation based on the mortality rate during the exceptionally hot 2003 summer, which took everyone by surprise and for which we were therefore completely unprepared. But if higher summer temperatures become the norm in the future, people will adjust. Perhaps they'll take naps more frequently in the afternoon and convert their houses accordingly. The good thing is that all of these changes will not happen overnight, but in the space of decades. We still have enough time to react."

Thursday, March 30, 2017

John Merrifield Has A New Site: "School SYSTEM Reform Studies"

Click here to go to it. Mission statement: "Aiming to foster insightful discussion of transformational change in schooling for children aged 5-18 (K-12)." John is a Professor of Economics at University of Texas At San Antonio. He is the author of several books including The School Choice Wars. He is also editor of editor of  School System Reform Journal.

Wednesday, March 29, 2017

Due to the cost of climate change, the world GDP will be $490 trillion 2100-without the cost of climate change, it will be $510 trillion

See The Trump-Climate Freakout by Oren Cass. He is a senior fellow at the Manhattan Institute and author of the forthcoming report “The Costs of Climate Change Are Real — ​and Manageable.”
"The Dynamic Integrated Climate-Economy (DICE) model, developed by William Nordhaus at Yale University, which has the highest climate costs of the Obama administration’s three models, estimates that global GDP in 2100 without climate change would be $510 trillion. That’s 575 percent higher than in 2015. The cost of climate change, the model estimates, will amount to almost 4 percent of GDP in that year. But the remaining GDP of $490 trillion is still 550 percent larger than today.
Without climate change, DICE assumes average annual growth of 2.27 percent. With climate change, that rate falls to 2.22 percent; at no point does climate change shave even one-tenth of one point off growth. Indeed, by 2103, the climate-change-afflicted world surpasses the prosperity of the not-warming 2100.
Zach (the DNC staffer who reportedly stormed out of a post-election meeting upset that “I am going to die from climate change) might take issue with DICE’s underlying scientific and economic assumptions, yet the model produces cost estimates much higher than those of the PAGE and FUND models, which are also considered by the Social Cost of Carbon analysis. And while not every potential effect of climate change lends itself to quantification in economic terms, remember: This is the approach chosen by the Obama administration — not a group often known for trying to minimize the climate threat."

"Further, Trump is not significantly altering the likelihood of incurring these costs, because the climate agenda he intends to unravel is a failure already. Domestically, even the EPA acknowledged that its Clean Power Plan will have no meaningful influence on future temperatures. The State Department said the same about blocking the Keystone XL pipeline. The purported value of these policies was to display international “leadership.” But the global picture is no better. Even with U.S. “leadership,” the commitments made by other countries under the Paris agreement look almost identical to the paths those countries were on already. Thus the agreement’s impact is at best a few tenths of a degree Celsius. MIT’s Joint Program on the Science and Policy of Global Change, for instance, projected 3.9°C of warming by 2100 without the Paris agreement and 3.7°C with it.
 Proponents of the agreement argue it will nonetheless spur clean-energy investment. “It is going to move the marketplace,” said Secretary of State John Kerry. It is “a break-away agreement which actually changes the paradigm.” It is “going to spur massive investment.” Instead, investment has plummeted. Over the first three quarters of 2016, global clean-energy investment is down 29 percent relative to 2015. Q3 investment saw a 43 percent drop from Q3 2015 — falling to its lowest level since the George W. Bush administration."

Are low- skilled foreigners overburdening our social-welfare system?

See Don’t Believe What You’ve Heard About Immigrants and Welfare: How immigrants expand the economy and benefit all Americans by Shikha Dalmia of Reason. Excerpt:
"For the most part, foreigners who want a green card need a company or blood relative to sponsor them and accept responsibility for them. Of course, green-card holders could lose their jobs or relatives and end up on welfare.

The dearth of proof for the view that people flock to the U.S. for welfare is long-standing. In fact, according to the Agriculture Department, which administers food stamps, Latinos in recent years have increasingly flocked to states such as Tennessee, Arkansas, Alabama, Texas and the Carolinas, which have stingy benefits and plentiful jobs, instead of to traditional gateways, such as New York and California, which have relatively generous programs.

The 10 states that experienced the largest percentage increase in their foreign-born population from 2000 to 2009 spent far less on public assistance per capita compared with the 10 states with the slowest-growing foreign-born populations.

Of course, even if immigrants don’t come to the U.S. to live off the welfare state doesn’t mean they don’t end up doing so. The best evidence for this claim came in the 2007 Heritage Foundation study, which found that even though immigrants have been barred since 1996 from receiving federal means-tested benefits, their households still obtain about $20,000 more in benefits and services (such as schools and emergency medical care) than they pay in taxes. The study estimated that these costs imposed in 2004 a net burden of about $90 billion annually and a whopping $1 trillion over a decade.
This would be cause for concern -- if those numbers were the whole story. The study was criticized for counting government spending on the (American-born) children of immigrants but then ignoring the taxes these offspring paid when they grew up. By that standard, most middle-income families in the U.S. with three or more children in public schools would be a net burden.

There were even bigger questions about the study. By its own admission, it considered only the tax contributions of low-skilled immigrants, not what they contribute to the economy as a whole. Heritage has said it will release new cost estimates, but these numbers should be met with skepticism.

Everyone Benefits

State-level studies that have taken both into account consistently find that the economic contributions of these immigrants dwarf their fiscal costs. A 2006 analysis by the Texas comptroller estimated that low-skilled unauthorized workers cost the state treasury $504 million more than they paid in taxes in 2005. Without them, however, the state’s economy would have shrunk by 2.1 percent, or $17.7 billion, as the competitive edge of Texas businesses diminished.

Likewise, a 2006 study by the Kenan Institute at the University of North Carolina found that although Hispanic immigrants imposed a net $61 million cost on the state budget, they contributed $9 billion to the gross state product.

The Heritage Foundation study also implied that a homegrown working class would be cheaper for the country because households headed by low-skilled immigrants consumed $10,000 more in government services than those headed by Americans. The trouble is that the study compared the welfare use of low- skilled immigrant households with average American households, rather than with low-skilled American households.

In comparing welfare use by immigrants with that of Americans in the same socioeconomic stratum, a different picture emerges, as a study by Leighton Ku and Brian Bruen of George Washington University for the Cato Institute found recently.

Low-skilled foreigners, including adults and their U.S.- born children, were generally less likely than Americans to receive public benefits, such as from Medicaid, the Supplemental Nutrition Assistance Program and Supplemental Security Income. This is partly because many adults are in the U.S. illegally or on temporary visas or haven’t held a green card long enough to qualify for most means-tested benefits besides emergency health care. But the value of benefits they receive is usually lower, too.

“The combination of lower average utilization and smaller average benefits indicates that the overall cost of public benefits is substantially less for low-income non-citizen immigrants than for comparable native-born adults and children,” the Cato study concluded."

Monday, March 27, 2017

A cut in India’s tariffs on Harleys is not remotely guaranteed to lead to a decrease the U.S. trade deficit

See Peter Navarro Knows Not About What He Writes by Don Boudreaux.

"Here’s a letter to the Wall Street Journal:
The headline is promising: “Peter Navarro Responds to His Trade Critics” (March 22).  So I eagerly anticipated reading Navarro’s substantive defense, against knowledgeable critics, of his reasons for fearing trade deficits.  Alas, disappointment.  Navarro offers not a single relevant argument.
Typical is his contemptuous treatment of Dan Ikenson.  To establish that Mr. Ikenson has an “Alice-in-Wonderland worldview,” Navarro merely lists some of Mr. Ikenson’s policy positions without offering as much as a syllable to inform us why these positions are untenable.  (Each of Mr. Ikenson’s positions strikes me as quite reasonable.)
The closest Navarro comes to making a relevant argument is when he writes, responding to Desmond Lachman, that “if India agrees to lower its tariffs on Harley Davidson motorcycles, Indian consumers will buy more Harleys and save less while Harley will sell more Harleys and invest more.”
Well, no one has ever denied that Indians would buy, and Harley would sell, more Harleys if India reduces its tariff on these bikes.  But it doesn’t follow that Indians would necessarily, as a result, save less.  (Does Navarro always save less when his cost of living falls?)  And while more resources would indeed likely be invested in Harley’s operations, these resources would have to come from foreigners if Americans don’t increase their savings.  Contrary, therefore, to the conclusion that Navarro wants us to draw from what he pretentiously (if inaccurately) calls “obvious general equilibrium effects,” a cut in India’s tariffs on Harleys is not remotely guaranteed to lead to a decrease the U.S. trade deficit.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030"

California's poor flock to Texas as West Coast homes and jobs fall out of reach

By Julieta Chiquillo of The Dallas Morning News. Excerpts:
"Skyrocketing home prices and fierce competition for jobs in the Golden State are prodding poor families to pack up and head to Texas. Our state was the top destination for low-income residents leaving California between 2005 and 2015, according to a recent data analysis by the Sacramento Bee.

In that time period, about 293,000 impoverished people left California for Texas and nearly half that figure moved into California from our state, for a net loss of 156,000 people, the Bee reported.

The fact that people are moving in large numbers to Texas is an indicator that the state has economic growth and opportunity, said state demographer Lloyd Potter."

"But Texas has become a more attractive choice for tens of thousands of poor Californians. Gaines points to jobs and housing as reasons.

"Texas is simply — overall, in any measure — a much lower cost-of-living state," the economist said.

Affordable homes are in short supply in both Texas and California, but we fare better than our friends on the West Coast, according to an analysis of 2015 data by the National Low Income Housing Coalition.

Texas has 51 affordable and available rental units for every 100 households that are making half of the area median income or less. That's four units below the U.S. number. Meanwhile, California has 30 units for every 100 households in that income range.

When it comes to housing availability for the extremely poor, we still do better than California. Texas has 29 affordable and available rentals for every 100 families making 30 percent or less of the area median income. California has 21."

California rents

Here are the median rents for a one-bedroom apartment in the state’s largest metro areas in January 2017.
Los Angeles
San Francisco
San Diego
SOURCE: Zillow

Texas rents

Here are the median rents for a one-bedroom apartment in the state’s largest metro areas in January 2017.
Dallas-Ft. Worth
San Antonio
El Paso
Data for McAllen-Mission, the state’s fifth largest metro area, wasn’t available.
SOURCE: Zillow
"The jobs with the biggest net loss of California workers to other states were cashiers, cooks, truck drivers, material movers, retail sales reps and customer service reps, according to the Bee's analysis.
Even San Francisco, the state's best employment market, is getting tens of applicants for cashier and restaurant jobs, the newspaper reported.

Those Californians could find many openings here, according to 2014-24 projections from the Texas Workforce Commission. All the occupations mentioned above are among a list of 25 predicted to add the most jobs over the decade."

Friday, March 24, 2017

The Problem With Climate Catastrophizing

By Oren Cass in Foreign Affairs. Oren Cass is a senior fellow at the Manhattan Institute, where he focuses on energy, the environment, and antipoverty policy. Excerpts:

"The well-established scientific consensus that human activity is causing the climate to change does not extend to judgments about severity. The most comprehensive and often-cited efforts to synthesize the disparate range of projections—for instance, the United Nations’ Intergovernmental Panel on Climate Change (IPCC) and the Obama administration’s estimate of the “Social Cost of Carbon”—consistently project real but manageable costs over the century to come. To be sure, more speculative worst-case scenarios abound." 

"Catastrophism can also lead to the trampling of democratic norms. It has produced calls for the investigation and prosecution of dissenters and disregard for constitutional limitations on government power. In The Atlantic, for example, Peter Beinart offered climate change as his first justification for an Electoral College override of the election of Donald Trump as U.S. president."

"Catastrophists typically condemn fracked natural gas because, although it results in much lower greenhouse-gas emissions than coal, it does not move the world toward the zero-emissions future necessary to avert climate change entirely. Yet fracking has done more in recent years to reduce carbon-dioxide emissions in the United States than all renewable energy investments combined. It has boosted U.S. economic growth as well."

"A strong scientific consensus holds that human activity is producing climate change. But from that starting point, scientists have produced a range of estimates in response to a variety of complicated questions: How quickly will greenhouse gases accumulate in the atmosphere? What amount of warming will any given accumulation cause? What effect will any given level of warming have on ecosystems and sea levels and storms? What effect will those changes in the environment have on human society? The answers to all of these questions are much debated, but broad-based efforts to synthesize the best research in the physical and social sciences do at least offer useful parameters within which to assess the nature of the climate threat.

On scientific questions, the gold-standard summary is the Assessment Report created every few years by thousands of scientists under the auspices of the United Nations’ Intergovernmental Panel on Climate Change (IPCC). By averaging widely varying projections and assuming no aggressive efforts to reduce greenhouse-gas emissions, they estimate an increase of three to four degrees Celcius (five to seven degrees Fahrenheit) by the year 2100. The associated rise in sea levels over the course of the twenty-first century, according to the IPCC, is 0.6 meters (two feet).

Most of the rise in sea levels results not from melting glaciers, but from the thermal expansion of ocean water as it becomes warmer. Melting ice from Greenland and Antarctica, which may eventually threaten a dramatic increase in sea levels, will barely begin in this century—in the IPCC analysis, the Antarctic ice sheet will have almost no effect and may even slow sea level rise as increased precipitation adds to its snowpack. Meanwhile, melting from Greenland’s ice sheet will contribute 0.09 meters (3.5 inches). In fact, “the near-complete loss of the Greenland ice sheet,” which could raise sea levels by seven meters, the IPCC reports, “would occur over a millennium or more.”

What about ecology? Predicting or quantifying damage to vulnerable ecosystems and specific species is notoriously difficult, but the IPCC offers a helpful heuristic for the likely magnitude of damage from climate change: “With 4°C warming, climate change is projected to become an increasingly important driver of impacts on ecosystems, becoming comparable with land-use change.” In other words, the impact should be similar to that which human civilization has imposed on the natural world already. Substantial and tragic, to be sure; but not something that modern society deems intolerable or a threat to human progress.

Economic tools called “integrated assessment models” attempt to convert the potential effects of climate change—on sea level and ecosystems, storms and droughts, agricultural productivity, and human health—into tangible cost estimates. This exercise is as much art as science, but it represents the best available exploration of how the impacts of climate change will likely stack up against society’s capacity to cope with them. Three of these models form the basis of the Obama administration’s analysis of the “Social Cost of Carbon”—the U.S. government’s official estimate of how much climate change will cost and thus what benefits come from combatting it. Economists and policymakers who want to place a price (that is, a tax) on carbon-dioxide emissions to force emitters to pay for potential damage resulting from climate change typically embrace the analysis as well.

According to the assessment models, a warming of three to four degrees Celcius by 2100 will cost the world between one and four percent of global GDP in that year. To put the high end of that range concretely, the Dynamic Integrated Climate-Economy (DICE) model developed by economics professor William Nordhaus at Yale University estimates that in a world without climate change, the global economy’s GDP would grow from $76 trillion in 2015 to $510 trillion in 2100 (an annual growth rate of 2.3 percent). A rise in temperatures of 3.8 degrees Celcius would cost 3.9 percent of GDP ($20 trillion) that year, effectively reducing GDP to $490 trillion.

Twenty trillion dollars is a very large number—representing a cost greater than the entire annual economic output of the United States in 2016. But from the perspective of 2100, such costs represent the difference between the world being 6.5 times wealthier than in 2015 or 6.7 times wealthier. In the DICE model, moreover, the climate-change-afflicted world of 2105 is already more prosperous than the climate-change-free world of 2100. And because the impacts and costs of climate change emerge gradually over the century—0.3 percent of GDP in 2020, 1.0 percent in 2050—in no year does the model foresee a reduction in economic growth of even one-tenth of a percentage point. Average annual growth over the 2015–2100 period declines from 2.27 percent to 2.22 percent."

"Among the three models the Obama administration picked for its analysis alone, the range of outputs is enormous: the DICE model’s four percent-of-GDP estimate is near the 95th percentile of the projections from the middle-case model, while the low-case model’s one percent-of-GDP estimate is below the middle-case’s 5th percentile. But nowhere is catastrophe to be found."

"the societal collapse that catastrophists envision—one that poses an “existential” threat beyond the scope of other human problems, one that makes procreation an ethically dubious proposition—is simply irreconcilable with the outlook the science and economics offers."

"what if, rather than not caring about their grandchildren, people have confidence that their grandchildren will enjoy a far higher standard of living and have a greater capacity to cope with whatever climate change might bring? In purely economic terms, both seem likely. Even after accounting for climate change, the DICE model forecasts a world 6.5 times richer than today’s for a population only 40 percent larger. Condemn mainstream economic estimates as hopelessly optimistic, increase the annual cost estimate for 2100 tenfold from $20 trillion to $200 trillion, and the world is still four times richer than today."

"Environmentalists, for example, have long worried about global population outstripping food supply. In 1970, the biologist Paul Ehrlich warned that, due to population growth, “at least 100-200 million people per year will be starving to death during the next ten years.” Instead, a technological revolution caused agricultural yields to surge. Today, even as concern grows about potential water crises around the world, the seeds of their resolution may be sprouting as well. Israel, suffering from the same drought often blamed for helping plunge Syria into civil war, is using desalination technology to make the desert bloom. Recently, it found itself with a water surplus. India is constructing more than one million irrigation ponds that will increase agricultural yields by as much as 300 percent and buffer against changes in the timing of the monsoon season."

"Richer countries experience significantly lower fatality rates from natural disasters and also significantly lower damages relative to the size of their economies. The World Health Organization reports that in the three cyclones of maximum severity striking Bangladesh in 1970, 1991, and 2007, total fatalities declined from 500,300 to 138,958 to 4,234. The diffusion of existing technologies worldwide, and the development of new ones—coupled with unprecedented resources for implementation—should ensure that these trends continue."

"Take, for instance, the EPA’s “Climate Change Risks and Analysis” project. Among its most prominent claims: Unmitigated climate change will cause more than 12,000 annual deaths from extreme heat in major U.S. cities by 2100. (The U.S. Centers for Disease Control and the EPA report fewer than 500 heat-related deaths in 2014, a figure that has been on a downward trajectory over the past 15 years). To reach 12,000 by 2100, the analysis took each city’s mortality rate from extreme heat in 2000 and applied it to the hotter temperatures forecast for 2100. It concluded that, by 2100, the heat in New York City would be killing at 50 times the rate in Phoenix in 2000 (even though the New York City of 2100 is not expected to be as hot as the Phoenix of 2000). If one believes that residents of New York City will be dropping like flies from heat in the future, climate change must seem terrifying indeed. But that is not a rational belief."

"even if fully half of global agricultural production must relocate over a century, the required shift each year is only 0.5 percent of total production. For comparison, annual additions to global food production have averaged more than two percent over the past 50 years."

"Even stipulating that adaptations will displace hundreds of millions of people, that displacement will not happen all at once. Spread over decades, such a disruption would look little different from the status quo. China alone currently supports a domestic migrant worker population of 278 million. According to estimates by the United Nations, there are currently 232 million international migrants. The organization projects that the figure will grow by several million each year. By 2050, the World Bank estimates that 2.5 billion people will migrate to cities for reasons unrelated to climate change."

"If people allocating capital—be they small-town farmers, resort designers, or mayors—have the information and incentives to incorporate climate adaptation into their planning, it need not impose sudden and unmanageable recovery costs."

"Although climate impacts may be permanent and on-going, costly adaptation—if done wisely—need occur only once. A Manhattan properly insulated from rising waters will not require new protection each time sea level climbs another foot. Conversely, that hypothetical $20 trillion represents the resources that society might commit to the problem in the single year 2100. In Nordhaus’ DICE model, the total allocated to climate costs between 2050 and 2150 is more than $2.5 quadrillion, all without ever slowing annual growth by more than one-tenth of one percentage point. The world’s productive capacity, bolstered by innovation and adaptation over time, is orders of magnitude larger than the demands climate change is expected to impose. Such adaptation may represent a tragic long-term drain on society’s resources, but that does not mean it will noticeably alter the trajectory of human civilization."

"Working with a catastrophic mindset and a century-long timeline, one can construct an apocalyptic scenario from almost any problem."

"the Global Priorities Project at Oxford observes that climate change could “render most of the tropics substantially less habitable than at present,” as compared to the hundreds of millions or billions of deaths associated with other challenges. Another Oxford study surveyed conference participants about the extinction-level risks of various catastrophes and neglected to even consider climate change; respondents gave molecular nanotechnology, superintelligent AI, and an engineered pandemic all at least a two percent chance of erasing humanity by 2100."

"arguments against catastrophism rarely reach the audience that might benefit most from hearing them."

"As Paul Romer, the chief economist of the World Bank, recently observed:

    During the 1970s, the Club of Rome famously argued that our economic system was on the verge of collapse because we were running out of fossil fuel. This analysis was flawed not simply because it got the magnitudes wrong. It got the signs wrong. The problem facing the world is not that the earth’s crust contains too little fossil fuel and that we won’t have enough innovation to solve this problem. The real problems are that the earth’s crust contains far too much fossil fuel and that too much [innovation] is making this problem much worse.

In other words, even though the Club of Rome was wrong in the 1970s, Romer believes its broader perspective should be embraced. Seemingly oblivious to the irony, he attributes the failure last time around to “an instance of motivated reasoning. Advocates seem to have been too eager to generate a sense of pessimistic urgency.”

Schrag, the Harvard geology professor, is even more blunt. Reflecting on Ehrlich’s predictions of eminent mass starvation in the 1970s, Schrag acknowledges that “none of his predictions came true.” Nevertheless, says Schrag, “It’s quite amazing that we’re actually able to feed the world at all. Ehrlich wasn’t wrong in ’68, he’s just wrong today.” In this view, the catastrophist is not accountable for considering how growth, innovation, and adaptation might avert catastrophe. But Ehrlich was indeed wrong in 1968, for the same reasons his intellectual heirs are likely wrong about climate change today."

Monday, March 20, 2017

Welfare programs reduce the supply of labor and, thus, push wages up

See If Economic Ignorance Were a Natural Resource, Our World Would Be Paradise by Don Boudreaux.

Here’s a letter to a new correspondent who writes that he is “impressed” by a recent letter in the Wall Street Journal by a Mr. Scot Phelps of New York.  (In contrast, I was not impressed by Mr. Phelps’s letter.)
"Mr. Chris Indovino
Mr. Indovino:
I did indeed read Scot Phelps’s Wall Street Journal letter in which he argues that government subsidization of low-skilled workers’ “housing, food, medical care, and transportation” enables employers of such workers to pay them less than their “true” value.  I didn’t respond to it because I had nothing to say about such an economically unmoored argument that I’ve not said in the past.  (See also this EconLog post by my colleague Bryan Caplan.)  The central economic point is this: the welfare programs to which Mr. Phelps alludes (with the possible exception of transportation subsidies) reduce the supply of labor and, thus, push wages up.  Far from employers being subsidized by such welfare programs, employers of workers who receive these government benefits are obliged, as a result, to pay wages that are made artificially high.
But to show just how deeply confused this Mr. Phelps is, let’s pretend that he’s correct to insist that welfare programs artificially reduce wages.  Mr. Phelps then asserts that “Failure to pay a living wage gives consumers artificially low prices and increases corporate profits.”  Because nearly all employers of low-skilled workers operate in intensely competitive industries such as retail and food service, workers’ artificially low wages would indeed result in artificially low prices for consumer goods, but not in increased corporate profits.  The ability to hire workers at artificially low wages would attract new entrants into these markets, as well as cause existing firms to expand their outputs, until the rate of profit earned by employers of these workers is no higher than it would be if wages were higher.  That Mr. Phelps is oblivious to this reality is sufficient reason to dismiss his economic analysis.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030"

Sunday, March 19, 2017

While the foreign stake in our economy continues to grow, the net worth of American households and businesses has grown by an even larger amount

See Inflow of foreign capital makes Americans richer, not poorer by Daniel Griswold of Mercatus. Excerpt:
"Since 2000, the U.S. has run a deficit on the current account that has averaged just above $500 billion a year. That means, in a typical year, foreign investors are acquiring about $500 billion more in U.S. assets than Americans acquire in foreign assets.

Have we been slouching, as Navarro and Buffett warn, toward a state where “we are likely to be owed by foreigners,” where “our net worth [is] being transferred abroad at an alarming rate,” where “we will have nothing left to trade,” and where we are “working long hours just to have food and service our debt”?

No, no, no, and no.

From 2000 through the third quarter of 2016, the value of U.S. assets owned by foreigners did indeed increase by $23.4 trillion, from $9.2 trillion to $32.6 trillion. But in that same time, the net worth of U.S. households and non-profits increased by $47.3 trillion, to $90.8 trillion. The net worth of U.S. businesses, corporate and non-corporate, increased by another $18.7 trillion. While the foreign stake in our economy continues to grow, the net worth of American households and businesses has grown by an even larger amount. Our net worth is not being transferred anywhere except to the bottom line of our own balance sheets.

Nothing left to trade? Americans exported $2.2 trillion in goods and services last year, more than double in dollar value what we exported in 2000. Since then, U.S. exports as a share of our GDP have climbed from 10.5 percent to 11.9 percent. Although export growth has stalled in recent years, that’s because of slowing growth abroad, not because we have less to offer for export.

And finally, if Americans are working longer hours, it’s not primarily to buy food and service foreign debt. Food continues to decline as a share of consumer spending, as it has done in every other advancing economy down through human history. Outward payments on foreign investment in the United States — profits, dividends, and interest — have been rising along with the stock of inward investment, but so too have inward payments to Americans who own assets abroad. In fact, in recent years Americans have earned about $200 billion more a year on the foreign assets they own than foreigners have earned on their U.S. assets. Millions of Americans may struggle to pay their bills each month, but their condition is not caused by any increase in what they pay for food or service on foreign investment."

For all the hoopla about the ACA exchanges, it appears that Medicaid accounts for the lion's share of coverage gains

See Be skeptical about coverage numbers in health-care debate by Doug Badger of the Galen Institute. Excerpts:
"The "20 million" figure appears to have originated in a March 2016 report by the U.S. Department of Health and Human Services (HHS). That report declared that "the provisions of the ACA have resulted in gains in health insurance coverage for 20.0 million adults through early 2016."
The precision of the figure - 20.0 million, not 20.1 or 19.9 - suggests a level of certitude that the report doesn't actually deliver. Its authors analyzed a blend of data from the government's National Health Interview Survey (NHIS), and the private Gallup Healthways survey. They concluded that 17.7 million nonelderly adults gained coverage between January 2014 and February 2016. The agency also estimated that 2.3 million young adults had gained private coverage between 2010 and 2013 because the ACA required employers to cover dependent "children" until their 26th birthdays.

Since the release of the HHS study, the government has published two additional surveys of health-insurance coverage - the Current Population Survey (CPS) and the American Community Survey (ACS). Both offer data through the end of 2015, allowing for comparison with the NHIS estimate.
The three surveys use different methodologies to produce estimates of the number of nonelderly adults who gained coverage. These estimates vary by 20 percent - ranging from the CPS estimate of 13.7 million to the NHIS estimate of 16.5 million.

Additional estimates by the Heritage Foundation's Edmund F. Haislmaier and Drew Gonshorowski fall near the lower end of that range. Their study found that 14 million people (including children) gained public or private coverage in 2014 and 2015. Unlike government surveys, Haislmaier and Gonshorowski examined data from insurance company regulatory filings and from the government's own headcount of Medicaid enrollment.

They found that 84 percent of the newly insured gained coverage through Medicaid and a related government program for low-income children. Another study attributed much of these gains to the ACA's expansion of Medicaid to nondisabled, non-pregnant adults. The authors also found that nearly half the new Medicaid enrollees met eligibility standards that were in place before the ACA.

For all the hoopla about the ACA exchanges, it appears that Medicaid accounts for the lion's share of coverage gains and that many new Medicaid enrollees would have been eligible for that program even if the ACA had never passed.

Then there's the HHS estimate that 2.3 million young adults gained coverage between 2010 and 2013 because the ACA requires employers to cover dependents age 19 to 25. HHS failed to mention that private coverage declined for every other age group over that period, falling to the lowest level in history. The biggest drop in private coverage occurred among children 18 and younger. By the end of 2013, 1.2 million fewer children were covered under their parents' policies than in 2010."

Saturday, March 18, 2017

A remedial lesson from Milton Friedman for Team Trump to address its ‘understanding deficit’ of international trade

By Mark Perry.
"Donald Trump has demonstrated his profound misunderstanding of the basic economic principles of international trade for several years now, and perhaps reached a pinnacle when he told the New York Daily News in an interview last August that “we’re getting hosed by the Chinese — and that we’ve done it with our eyes wide shut.” Here’s more of Trump from that interview, further demonstrating his clueless and child-like misunderstanding of international trade:
“What China has done to America?” he raged. “The money and the jobs they’ve taken from us? It is the greatest single theft in the history of the United States.” In other words, China is to the United States as Bernie Madoff is to investors. “And Japan is almost as bad,” he stormed. “Japan sells us millions of cars — and we sell them wheat!
MP: Alternatively, we might say “What the US has done to China? The manufactured goods we’ve taken from them? It is the greatest single theft in the history of China.” In other words, the United States is to China as Bernie Madoff is to investors. Here’s more from the interview:
“I’ve been saying for years that China would take us down. Why? Because our leaders are stupid and China’s leaders are smart. They sell to us, no taxes, no nothing. We sell them 10% of what they sell us. Ninety percent to 10%! It’s crazy. Our trade deficit with China is like having a business that continues to lose money every single year. Who would do business like that?”
Peter Navarro, in his Wall Street Journal opinion piece earlier this week (see related CD post here) demonstrated his fundamental misunderstanding of international trade when he opened his op-ed with the following question: “Do trade deficits matter?” Just to ask the question is to admit one’s ignorance of trade theory, which has been pretty settled on this topic since Adam Smith taught us in 1776 that “Nothing…can be more absurd than this whole doctrine of the balance of trade.”

To help Mr. Trump and Mr. Navarro with their “understanding deficit” about international trade theory and trade deficits, it’s a good time to invoke the timeless wisdom of Milton Friedman (featured on CD here), presented below as a remedial refresher on some of the most basic principles of international trade (updated for today):
In the international trade area, the political rhetoric is almost always about how we must export, and what’s really good for America is an industry that produces exports. And if we buy from abroad and import lots of goods from countries like China, Japan and Mexico, that’s supposed to be bad. In the words of Donald Trump, we are getting “hosed,” “ripped off,” “crushed,” and killed” by our trade partners who then laugh at us as they supposedly steal our jobs.
But clearly that is backwards and upside-down thinking. After all, the goods we send abroad to other countries we now can’t eat ourselves, we can’t wear, and we can’t use for our homes and households. Simply put, the goods and services we export and send abroad are goods and services not available to us. On the other hand, the goods and services we import from China, Japan, Germany and Mexico provide Americans with TV sets we can watch, automobiles we can drive, food we can eat, with all sorts of nice things for us to use.
Here are two important points about trade that Mr. Trump and Mr. Navarro need to understand: 1) the economic gain to Americans from foreign trade is what we import from countries like China, Japan and Mexico, and 2) what we export is the cost of getting those imports. And the proper objective for a nation as Adam Smith put it, is to arrange things, so we get as large a volume of imports as possible from China, Japan and Mexico, for as small a volume of our exports as possible.
This carries over to the terminology we hear Mr. Trump and Mr. Navarro use. When they talk about a favorable balance of trade, what is that term taken to mean? It’s taken to mean that we export more than we import. But from the point of view of our economic well-being and our standard of living, that’s an unfavorable balance. That means we’re sending out more goods and getting fewer in return. Each of you in your private household would know better than that. You don’t regard it as a favorable balance when you have to send out more goods to get less coming in. It’s favorable when you can get more by sending out less.

Why the Feds Should Legalize Interstate Commerce in Healthcare

By Richard D. Kocur. He is an assistant professor of business at Grove City College. He specializes in marketing and business strategy and has over 25 years of experience in the healthcare industry.
"In a recent television interview, Aetna CEO Mark Bertolini, head of one of America’s largest health insurers, commented that selling insurance across state lines is “an outdated concept” in these days of the Affordable Care Act (ACA). Bertolini went on to explain the rationale for his statement: “Insurance products are now tightly aligned with networks, so buying an insurance product from another state, that’s tied to a network in another state, really doesn’t work for people seeking care.”
The sale of health insurance as interstate commerce is often cited as a pillar of healthcare reform by proponents of market-based solutions. In fact, I offered up this idea in a previous article as one of the ways to return empowerment and control to Americans seeking quality, affordable healthcare in the aftermath of Obamacare. While there are a number of issues that would need to be resolved in order to make healthcare across state lines work, they are not insurmountable, nor is the concept outdated.

At one time, nearly all individual health insurance was regulated at the state level. Each set of state regulations established insurance mandates requiring plans within the state to cover a specific set of treatments. With the passage of the ACA, the federal government usurped health insurance regulatory control from the states making the individual mandate even more onerous. As the last year of Obamcare demonstrated, insurance mandates raise the cost of premiums. Younger, healthier individuals are forced to pay more for insurance due to mandated coverages they do not need or want. If individuals were able to purchase insurance across state lines and tailor their coverage, costs would decrease and, in time, create more competitive insurance markets. Some speculate that the interstate commerce of health insurance may even draw individuals currently enrolled in employer-sponsored plans — Aetna’s bread and butter — in favor of less expensive out-of-state individual plans. In order for any of this to occur, however, the repeal of Obamacare must return regulatory control of health insurance to the states.

Once regulatory control is returned to the states, insurers in those states could begin to craft offerings which reflect the desires of the marketplace. It’s here that Mr. Bertolini’s statement regarding provider networks comes into play. How could a woman in Oregon purchase health insurance, allowing her to see her local doctor, from an insurer in Ohio with ties to a network of Ohio doctors? The answer is: She couldn’t — for now.

Networks are established when health-insurance companies contract with healthcare providers in order to serve their policy holders. Building provider networks is a time-consuming process and will not happen overnight, but it will happen. While a nationwide solution would be ideal, it is likely that the health-insurance market would evolve slowly at first, focusing around large metropolitan areas near state lines. The proximity of eastern Pennsylvania, metro New York, and New Jersey, as well as eastern Maryland, Washington, D.C., and northern Virginia, serve as examples. The next evolution in across-state-lines health insurance would likely be the emergence of a handful of larger regional insurers offering a variety of plans across multiple states. As provider networks grow and risk pools and product offerings increase, more individual Americans will enjoy greater healthcare choice, access, and affordability.

Crossing the line with American’s healthcare is not for the impatient, but unlike the Edsel, disco, or rotary phones, the idea of pursuing greater market-based reforms in our healthcare system will never be outdated."

Friday, March 17, 2017

Ending Taxpayer Funding for Public Broadcasting

By David Boaz.
"Thank you for the opportunity to testify on taxpayer funding for the Corporation for Public Broadcasting and by extension for National Public Radio and the Public Broadcasting System. I shall argue that Americans should not be taxed to fund a national broadcast network and that Congress should therefore terminate the funding for CPB.

We wouldn’t want the federal government to publish a national newspaper. Neither should we have a government television network and a government radio network. If anything should be kept separate from government and politics, it’s the news and public affairs programming that informs Americans about government and its policies. When government brings us the news — with all the inevitable bias and spin — the government is putting its thumb on the scales of democracy. Journalists should not work for the government. Taxpayers should not be forced to subsidize news and public-affairs programming.

Much of the recent debate about tax-funded broadcasting has centered on whether there is a bias, specifically a liberal bias, at NPR and PBS. I would argue that bias is inevitable. Any reporter or editor has to choose what’s important. It’s impossible to make such decisions without a framework, a perspective, a view of how the world works.

As a libertarian, I have an outsider’s perspective on both liberal and conservative bias. And I’m sympathetic to some of public broadcasting’s biases, such as its tilt toward gay rights, freedom of expression, and social tolerance and its deep skepticism toward the religious right. And I share many of the cultural preferences of its programmers and audience, for theater, independent cinema, history, and the like. The problem is not so much a particular bias as the existence of any bias.

Many people have denied the existence of a liberal bias at NPR and PBS. Of course, the most effective bias is one that most listeners or viewers don’t perceive. That can be the subtle use of adjectives or frameworks — for instance, a report that “Congress has failed to pass a health care bill” clearly leaves the impression that a health care bill is a good thing, and Congress has “failed” a test. Compare that to language like “Congress turned back a Republican effort to cut taxes for the wealthy.” There the listener is clearly being told that something bad almost happened, but Congress “turned back” the threat.

A careful listener to NPR would notice a preponderance of reports on racism, sexism, and environmental destruction. David Fanning, executive producer of “Frontline,” PBS’s documentary series, responds to questions of bias by saying, “We ask hard questions to people in power. That’s anathema to some people in Washington these days.” But there has never been a “Frontline” documentary on the burden of taxes, or the number of people who have died because federal regulations keep drugs off the market, or the way that state governments have abused the law in their pursuit of tobacco companies, or the number of people who use guns to prevent crime. Those “hard questions” just don’t occur to liberal journalists.
Anyone who got all his news from NPR would never know that Americans of all races live longer, healthier, and in more comfort than ever before in history, or that the environment has been getting steadily cleaner.

In Washington, I have the luxury of choosing from two NPR stations. On Wednesday evening, June 29, a Robert Reich commentary came on. I switched to the other station, which was broadcasting a Daniel Schorr commentary. That’s not just liberal bias, it’s a liberal roadblock.

In the past few weeks, as this issue has been debated, I’ve noted other examples. A common practice is labeling conservatives but not liberals in news stories — that is, listeners are warned that the conservative guests have a political agenda but are not told that the other guests are liberals. Take a story on the Supreme Court that identified legal scholar Bruce Fein correctly as a conservative but did not label liberal scholars Pamela Karlan and Akhil Amar. Or take the long and glowing reviews of two leftist agitprop plays, one written by Robert Reich and performed on Cape Cod and another written by David Hare and performed in Los Angeles. I think we can be confident that if a Reagan Cabinet official wrote a play about how stupid and evil liberals are - the mirror image of Reich’s play - it would not be celebrated on NPR. And then there was the effusive report on Pete Seeger, the folksinger who was a member of the Communist Party, complete with a two-hour online concert, to launch the Fourth of July weekend.

And if there were any doubt about the political spin of NPR and PBS, it was surely ended when a congressional subcommittee voted to cut the funding for CPB. Who swung into action?, Common Cause, and various left-wing media pressure groups. They made “defending PBS” the top items on their websites, they sent out millions of emails, they appeared on radio and television shows in order to defend an effective delivery system for liberal ideas. Public broadcasters worked hand in glove with those groups, for instance linking from the NPR website to those groups’ sites.

There are many complaints today about political interference in CPB, PBS, and NPR. I am sympathetic to those complaints. No journalist wants political appointees looking over his shoulder. But political interference is entirely a consequence of political funding. As long as the taxpayers fund something, their representatives have the authority to investigate how the taxpayers’ money is being spent. Recall the criticism directed at PBS in 1994 for broadcasting Tales of the City, which has gay characters. Because of the political pressure, PBS decided not to produce the sequel, More Tales of the City. It appeared on Showtime and generated little political controversy because Showtime isn’t funded with tax dollars. Remove the tax funding, and NPR and PBS would be free from political interference, free to be as daring and innovative and provocative as they like.

One dirty little secret that NPR and PBS don’t like to acknowledge in public debate is the wealth of their listeners and viewers. But they’re happy to tell their advertisers about the affluent audience they’re reaching. In 1999 NPR commissioned Mediamark Research to study its listeners. NPR then enthusiastically told advertisers that its listeners are 66 percent wealthier than the average American, three times as likely to be college graduates, and 150 percent more likely to be professionals or managers.

But perhaps that was an unusual year? Mediamark’s 2003 study found the same pattern. As NPR explained, based on the 2003 study:
Public radio listeners are driven to learn more, to earn more, to spend more, and to be more involved in their communities. They are leaders and decision makers, both in the boardroom and in the town square. They are more likely to exert their influence on their communities in all types of ways - from voting to volunteering
Public radio listeners are dynamic - they do more. They are much more likely than the general public to travel to foreign nations, to attend concerts and arts events, and to exercise regularly. They are health conscious, and are less likely to have serious health problems. Their media usage patterns reflect their active lifestyles, they tend to favor portable media such as newspapers or radio.
As consumers, they are more likely to have a taste for products that deliver on the promise of quality. Naturally, they tend to spend more on products and services.
Specifically, the report found, compared with the general public, NPR listeners are
  • 55 percent less likely to have a household income below $30,000
  • 117 percent more likely to have a household income above $150,000
  • 152 percent more likely to have a home valued at $500,000 or more
  • 194 percent more likely to travel to France
  • 326 percent more likely to read the New Yorker
  • 125 percent more likely to own bonds
  • 125 percent more likely to own a Volvo.
PBS has similar demographics. PBS boasts that its viewers are
  • 60 percent more likely to have a household income above $75,000
  • 139 percent more likely to have a graduate degree
  • 98 percent more likely to be a CEO
  • 132 percent likely to have a home valued at $500,000 or more
  • 315 percent more likely to have stocks valued at $75,000 or more
  • 278 percent more likely to have spent at least $6000 on a foreign vacation in the past year.
Tax-funded broadcasting is a giant income transfer upward: the middle class is taxed to pay for news and entertainment for the upper middle class. It’s no accident that you hear ads for Remy Martin and “private banking services” on NPR, not for Budweiser and free checking accounts.

Defenders of the tax-funded broadcast networks often point out that only about 15 percent of their funding comes from the federal government. Indeed, NPR and PBS have been quite successful at raising money from foundations, members, and business enterprises. Given that, they could certainly absorb a 15 percent revenue loss. Businesses and nonprofit organizations often deal with larger revenue fluctuations than that. It isn’t fun, but it happens. In a time of $400 billion deficits, Congress should be looking for nonessential spending that could be cut. Tax-funded broadcasting is no longer an infant industry; it’s a healthy $2.5 billion enterprise that might well discover it liked being free of political control for a paltry 15 percent cut.

Finally, I would note that the Constitution provides no authority for a federal broadcasting system. Members of Congress once took seriously the constraints imposed on them by the Constitution. In 1794 James Madison, the father of the Constitution, rose on the floor of the House and declared that he could not “undertake to lay his finger on that article of the Federal Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” In 1887, exactly 100 years after the Constitution was drafted, President Grover Cleveland made a similar point when he vetoed a bill to buy seeds for Texas farmers suffering from a drought, saying he could “find no warrant for such an appropriation in the Constitution.” Things had changed by 1935, when President Roosevelt wrote to Congress, “I hope your committee will not permit doubts as to constitutionality, however reasonable, to block the suggested legislation.” I suggest that this committee take note of the fact that no article of the Constitution authorizes a national broadcast network.

Even if this committee comes to the conclusion that taxpayer funding for radio and television networks is imprudent and constitutionally unfounded, I recognize that you may hesitate to withdraw a funding stream that stations count on. In that regard, I would note again that federal funding is only about 15 percent of public broadcasting revenues. But you might also phase out the funding, perhaps on a five-year schedule. The total funding request for this year is about $500 million. Congress might decide to reduce it by $100 million a year, leaving the CPB entirely free of federal taxpayer funding at the end of five years.

But Congress’s resolve in such matters is not trusted. Recall the 1996 Freedom to Farm Act, which likewise promised to phase out farm subsidies. Barely two years had passed when Congress began providing “emergency relief payments” to make up for the scheduled reductions. This time, if Congress pledges to phase out broadcasting subsidies, it needs to make sure that its decision sticks.

A healthy democracy needs a free and diverse press. Americans today have access to more sources of news and opinion than ever before. Deregulation has produced unprecedented diversity-more broadcast networks than before, cable networks, satellite television and radio, the Internet. If there was at some point a diversity argument for NPR and PBS, it is no longer valid. We do not need a government news and opinion network. More importantly, we should not require taxpayers to pay for broadcasting that will inevitably reflect a particular perspective on politics and culture. The marketplace of democracy should be a free market, in which the voices of citizens are heard, with no unfair advantage granted by government to one participant."

Trump Should Cut Government-Funded Junk Science

By Angela Logomasini of CEI.
"The Trump administration’s plan to cut government should include considerable effort to eliminate numerous research programs that peddle junk science to serve environmental special interests. I have already pointed out a couple of programs at the Environmental Protection Agency that need to go, but there are many other junk science programs at EPA and other agencies that deserve to be on the chopping block, such as the National Institute for Environmental Health Sciences (NIEHS).env
Unlike medical research focused on finding cures for diseases and cancer, NIEHS studies phantom risks associated with trace chemical exposures, with a strong bias against private enterprise and chemical technologies.

A glaring example is NIEHS’s program related to the chemical Bisphenol A (BPA), which is used to make hard, clear plastics and resins that line food cans to prevent rust and the development of pathogens in food. Used safely for decades, BPA has been studied extensively by numerous research bodies around the world, which have deemed current uses safe. And it has enormous value in securing a safe food supply and improving public health thanks to its use in medical devices, among other things.

Yet during the past couple of decades, activist groups have targeted BPA, alleging a host of health risks based on small, often poorly designed and inconclusive studies that report weak associations between BPA and various health problems. Because activists were able to generate alarming headlines, Congress poured millions of dollars into research. The NIH doled out $172.7 million for BPA research grants between 2000 and 2014, according to a tally compiled by Citizens Against Government Waste.
NIESH funneled much of that money to support activist science. In fact, NIEHS helped orchestrate a campaign to direct research dollars to anti-BPA researchers by cosponsoring a conference in 2007 with other government agencies and the left-of-center group Commonweal. Researchers met in Chapel Hill, N.C., where they developed what became known as the “Chapel Hill Consensus Statement,” which called for more funding of BPA research because participants claimed BPA likely posed serious health risks. Among the attendees was then-EPA employee Linda Birnbaum, who was appointed as the NIESH director in 2009.

Although organized and attended by a self-selected group of mostly anti-BPA activists, the participants marketed the meeting as an independent scientific review that demonstrated the need for more BPA research. Birnbaum noted in a December 2012 article for Environmental Health Perspectives that the “impetus” for NIEHS’s extensive BPA research funding was this “workshop” involving 38 “experts” in BPA science. Notably, more than half of the Chapel Hill Consensus contributors have received NIEHS grants to study BPA.

Many NIEHS research BPA grants have produced more small-scale studies with generally weak findings that weigh little when considering the larger body of research. And many of the authors refuse to follow good laboratory practices to ensure quality controls and transparency. Not surprisingly, these studies have generated more needlessly alarming headlines about alleged BPA risks, causing manufacturers to look for BPA alternatives and prompting lawmakers to introduce legislation to ban the chemical. As a result, the valuable life-saving and life-enhancing applications of BPA could be at risk as a result of NIESH-funded junk science promoting heavy-handed BPA regulation and market deselection.

NIESH programs have proven to be a waste of taxpayer dollars, and the Institute’s anti-technology and anti-chemical approach threatens human well-being and public health. It is among many programs in Washington’s regulatory swamp that need to go."

Thursday, March 9, 2017

Falling corporate tax rates in UK led to revenues as a percentage of gross domestic product (GDP) trending upwards

See Corporate Tax Rates and Revenues in Britain By Chris Edwards of Cato.
"If Republicans succeed in slashing the federal corporate tax rate from 35 percent to 20 percent or less, the tax base will expand as investment increases and tax avoidance falls. There is no need for a legislated expansion in the tax base, as the GOP is proposing with its “border adjustment” scheme. The tax base will broaden automatically over time to offset the government’s revenue loss from the rate cut.

New evidence comes from Britain, which has enacted a series of corporate tax rate cuts. A study by the Centre for Policy Studies includes this chart. It shows the tax rate falling from 35 percent to 20 percent since the late 1980s and corporate tax revenues as a percentage of gross domestic product (GDP) trending upwards. As the rate has fallen, the tax base has grown more than enough to keep money pouring into the Treasury.

Does legislated base broadening explain the increase in U.K. tax revenues? Not for the most recent round of rate cuts. In 2010-11, the government collected £36.2 billion from a 28 percent corporate tax. The government expected its corporate tax package—including a rate cut to 20 percent—to lose £7.9 billion a year by 2015-16 on a static basis. That large expected loss indicated that the package had little legislated base broadening. Study author Daniel Mahoney sent me a table confirming that the package included only modest base-broadening measures that were mainly offset by base-narrowing measures.

The government’s dynamic analysis of the corporate tax package projected a revenue loss of about half of the static amount over the long run. But that analysis was apparently too pessimistic: actual revenues in 2015-16 had risen to £43.9 billion. So in five years, the statutory tax rate fell 29 percent (28 percent to 20 percent) but revenues increased 21 percent (£36.2 billion to £43.9 billion). That is dynamic!

Looking at the longer term, the CPS study says, “In 1982-83 when the rate was 52%, corporation tax receipts yielded revenues equivalent to 2% of GDP. Corporation tax now raises over 2.3% of GDP when the headline rate is at just 20%.” The Brits have scheduled a further rate cut to 17 percent.

Canada’s experience also shows that when you slash the corporate tax rate, substantially more profits appear on corporate returns over time. Canada cut its federal corporate tax rate from 28 percent and higher in the 1980s to just 15 percent today, but it collects about the same amount of corporate tax revenues as a share of GDP now as then.

The British and Canadian experiences show that large corporate tax rate cuts lose governments little if any money. There is no need for risky changes to the corporate tax base, as House Republicans are proposing with border adjustments. That approach would disrupt the economy and invite retaliation from our trading partners for no economic gain.

The CPS study suggests that British industry has responded strongly to tax rate cuts, with rising investment and higher wages for workers. That’s what we want here. So Republicans should put aside their complex base-broadening plan, and just slash the corporate tax rate to the British-Canadian range of 15 to 20 percent."

Mark as favorite Donald Trump and Peter Navarro – the ‘most dangerous men in global economics’ – suffer from ‘trade deficit disorder’

From Mark Perry.
"Peter Navarro, director of Trump’s White House National Trade Council, has been in the news recently for his speech on Monday to the National Association of Business Economists and his op-ed in Monday’s Wall Street JournalWhy the White House Worries About Trade Deficits.” In his speech and op-ed, Navarro laid out Team Trump’s trade agenda that involves expanding US exports, reducing imports, and thereby reducing America’s merchandise trade deficit and supposedly therefore increasing our nation’s economic growth. Unfortunately, that’s a pure mercantilist trade agenda, which is an approach to trade that has been discredited now for several hundred years. Navarro’s op-ed was a real bouillabaisse of economic errors, misunderstandings and false presumptions, and his “river of rubbish” (according to Don Boudreaux) invoked a swift round of responses and rebuttals, some of which are featured below.
The general consensus of the responses summarized below is that both Navarro and Trump suffer from a massive “understanding deficit” about  international trade issues (or “trade deficit disorder” as Stephen Roach describes it below), and deserve a failing grade for International Trade 101. Here’s a collection of responses to the “two most dangerous men in global economics” to paraphrase Linette Lopez’s description of Navarro.
1. Dan Griswold:Peter Navarro misfires again on the U.S. trade deficit“:
As Navarro should know, and as any economics undergraduate is taught, the size of the U.S. trade deficit is determined by the gap between our level of national investment and savings. If a trade or industrial policy does not affect total investment or savings, it will not change the overall size of the trade deficit.
Navarro’s theory about the U.S. trade deficit is contradicted by recent U.S. economic history. If Navarro is correct, how does he explain the performance of the U.S. economy in the 1990s, when rising trade deficits were accompanied by strong economic growth, a robust increase in industrial output, and full employment? That period was also a time of falling trade barriers abroad, with the implementation of NAFTA and the Uruguay Round Agreements.
2. Dan Ikenson: “Peter Navarro, Harvard Ph.D. Economist, Trade Warrior”
At the enterprise level, outsourcing and domestic production are not substitutes.  They are complements.  The BEA data reveal that when U.S. multinational corporations invest more in foreign operations (production, assembly, R&D, hospitality service provision, etc.), they invest more in the parent operations at home.  My research shows positive correlations between a U.S. parent companies’ and its foreign affiliates’ capital expenditures (i.e., when a U.S. MNC spends more/less on capital investment in its foreign affiliates, it spends more/less on capital investment in its parent operations), value-added, R&D expenditures, compensation, employment, and compensation per employee.
The data suggest that when companies shift particular operations abroad, resources are freed up to invest in other company operations stateside.  When U.S. multinationals expand their operations abroad, greater demand is placed on headquarters and other complementary operations in the United States, which results in new domestic investments as well.
3. Stephen Roach:Donald Trump is suffering from trade deficit disorder“:
The US has trade deficits with 101 nations. This is not a bilateral problem, as the Trump administration insists. It is a multilateral one. This profusion of deficits reflects a far deeper problem: the US’s saving deficit. … Lacking in saving and wanting to grow, the US must import saving from countries like China, Germany, and Japan, which have big surpluses. But it must run a massive balance of payments deficit in order to attract the foreign capital. … This underscores why tough talk aimed at one nation or another is nothing more than political bluster.
Without dealing with the root cause of the problem, eliminating a trade deficit with a few nations will simply be reflected in expanded deficits with others. …  The Chinese chunk of the US’s multilateral trade imbalances would have to be absorbed by other nations, most of which have cost structures and product prices that are well in excess of those currently available in China. The labor compensation rate in Chinese manufacturing runs at about 10 per cent of that of America’s top 10 non-Chinese foreign suppliers. Asking them to fill the void would be tantamount to a large tax on Walmart prices and US consumers.
4. Dalibor Rohac: “Trade chief’s policies could be disastrous for Eurozone”
In short, Mr. Navarro confuses the simple accounting relationship between GDP and net exports (the difference between the value of exports and imports) with a causal, economic link. That leads him to believe, wrongly, that the U.S. economy can be expanded simply by boosting net exports — by exporting more, by importing less, or both.
However, imports into the United States are part of a story much more complicated than Navarro’s accounting exercise would lead one to believe. For starters, imported goods often serve as inputs into production in the United States.
Then, the dollars paid by Americans for goods and services from overseas can be used to buy dollar-denominated assets, thereby boosting another component of GDP — investment.
For over four decades, the United States has recorded a trade deficit. Throughout much of that period, writes Dan Ikenson, the director of Cato Institute’s Center for Trade Policy Studies, “annual changes in the value of imports and the value of GDP moved in the same direction.” This is because importing more does not simply reduce net exports — it also provides inputs for domestic production and boosts investment.
5. Phil Levy: “White House Whiffs On Trade Deficit Defense
One core argument that Navarro puts forward is simply incorrect. In considering the repercussions of offshoring, he writes: “If such offshored production then generates products for export back in to the U.S. – say, an American consumer buys a Ford Focus imported from Mexico rather than assembled in Detroit – the trade deficit rises, further reducing growth.”
The error here is a basic one. Based on the formula [Y=C + I + G + (X-M)] he is saying that when M goes up (equivalently, when X-M goes down), then Y goes down. This demonstrates a fundamental misunderstanding of how the accounting works. The reason imports are subtracted is to avoid double counting.
Following Navarro’s example, consider the buyer of the Ford Focus. Purchasing a car is consumption, so this gets tallied in the “C” category as U.S. economic activity. If the car was made in Detroit, this is appropriate. If, instead, production took place abroad, then it wasn’t U.S. economic activity, and the import gets subtracted out. Navarro is right that a newly imported car raises M, but it raises C by the same amount, thereby having zero net effect on U.S. growth and GDP.
6. Don Boudreaux: “What an Embarrassing Performance by Peter Navarro”:
Peter Navarro’s attempted justification of policies to reduce America’s trade deficit is a river of rubbish. Our first hint of Mr. Navarro’s confusion comes when he writes that “growth in real GDP depends on only four factors: consumption, government spending, business investment and net exports (the difference between exports and imports).” The famous C+I+G+(X-M) equation – to which Mr. Navarro here refers – breaks down GDP, not according to how it is produced but, rather, according to how it is spent. So for Mr. Navarro to suggest that U.S. national income will rise as a matter of arithmetic if government forces us Americans to stop spending more on purchases of imports than we earn on goods that we export from our country makes no more sense than to suggest that Mr. Navarro’s household income will rise as a matter of arithmetic if government forces him to stop spending more on purchases of books and movies than he earns on the books and movies that he produces and exports from his household.
7. Linette Lopez: “The guy running Trump’s trade policy just wrote a seriously troubling op-ed in The Wall Street Journal
Navarro’s article opens with an incomplete premise, that US GDP growth comes from “only four factors: consumption, government spending, business investment and net exports (the difference between exports and imports).” This is the basis on which Navarro argues that having a trade deficit — buying more goods than you’re selling to your trading partners — hurts growth and that the best way to grow faster is by closing this deficit. That is to say, selling more goods than you buy.
In the most practical terms, for you that means fewer cheap South Korean flat-screen TVs until we can figure out a way to sell the South Koreans more stuff. Trump released a trade agenda that complained about that very thing last week, actually. Thing is, the trade deficit is far from the most important part of GDP. According to the Bureau of Economic Analysis, the 2016 trade deficit was about $500 billion. That’s a lot, but it’s a fraction of the other main components of GDP, like the $3 trillion of private investment and the $12.8 trillion in consumption last year.
Two main factors for GDP growth — the trade deficit not among them — are accepted by economists pretty much the world over: labor-force growth and labor-force productivity. You can hire more workers, who then spend their wages and buy stuff, growing the economy, or you can make the workers you have make more stuff.
As for the importance of a trade deficit as a measure of how healthy your economy is, note that during the Great Depression, the US had a trade surplus. It didn’t matter that we were selling to the rest of the world like crazy because no one here had any purchasing power. What we import and export takes a seat way in the back compared with whether American citizens can buy things, go places, and make our economy move."