New Maritime Report Marked by Factual Errors and Dubious Claims (Jones Act)

By Colin Grabow of Cato.

"The Center for Strategic and Budgetary Assessments recently released a report on the U.S. maritime sector that has garnered considerable praise from the Jones Act lobby. That’s no surprise. Entitled Strengthening the U.S. Defense Maritime Industrial Base, the report explicitly calls for the Jones Act’s retention. Overlooked amidst the plaudits, however, are factual errors and dubious assertions that call its endorsement of the law into question. This blog post will lay some of these out.

Factual errors

The report includes a number of factual errors. In this section, I note these incorrect claims and provide a fact check.

Claim: “Of these 40,000 vessels [in the Jones Act fleet], about 8,000 are unpowered barges.”
Fact check: The source cited for this claim, the Maritime Administration’s Consolidated Fleet Summary and Change List, does not mention the word “barges” nor features the number 8,000. In fact, the number of Jones Act vessels accounted for by barges is far higher. A 2017 Congressional Research Service (CRS) report notes that 22,000 barges operate on the Mississippi River alone while the industry group representing U.S. barge operators, the American Waterways Operators, places the number of barges at over 31,000 (with another 5,500 tugboats and towboats). This is important because it illustrates that barges, rather than comprising 20 percent of Jones Act vessels, are responsible for 77 percent of this number.

Claim: “Containers, dry cargoes, and petroleum products are often carried across the United States by ship because it is usually cheaper than the transportation and handling needed to move material by truck or train car.”

Fact check: Waterborne container transport is almost non‐​existent among the 48 contiguous states. Every Jones Act‐​eligible containership serves the noncontiguous states and territories where alternative forms of transport such as truck and rail are not available. This lack of competitiveness against alternative forms of transport belies the report’s claim that it is usually cheaper than truck or train car.

Claim: “Today, the U.S.-flagged international fleet comprises 87 ocean‐​going vessels.” 

Fact check: The source that is cited does not contain the number 87 and does not appear to break down the U.S. merchant fleet by ships operating in international versus domestic trades. According to the U.S. Maritime Administration, the number of ships exclusively operating in international trades as of January stood at 86.

Claim: “During Operation Desert Storm, in which the United States relied heavily on chartering foreign vessels, the crews of 13 foreign‐​flagged ships refused to go into a war zone and deliver their cargo.”

Fact check: As the U.S. Transportation Command’s history of that conflict points out, most of these 13 ships hesitated but ultimately did enter the war zone and delivered their cargo. Only four ships did not: two feeder vessels as well as the Qatari‐​flagged Trident Dusk (which ended its journey in Oman) and the Banglar Mamata, which saw its crew jump ship in Oakland before its voyage began (and, as a result, the Military Sealift Command canceled its contract with the ship’s operator).

Questionable assertions

In addition to factual errors, the report also makes a number of assertions that lack needed context or rest upon dubious logic. In this section, I present them along with a counterpoint.

Assertion: Around the time of the U.S. Civil War, “Great Britain strengthened its dominance of commercial shipping, aided by U.S. ships that joined its registry and the British government’s establishment of subsidies for the construction and operation of ships using new technologies such as steam propulsion.”

Counterpoint: This is, at best, incomplete. In 1849 Great Britain repealed protectionist laws knows as the Navigation Acts, which—like the Jones Act today—prohibited the use of foreign‐​built ships. Once these laws were removed the sector boomed. As a Library of Congress report points out, “In just over a decade [after the Navigation Acts’ repeal], there was a 52.5% increase in tonnage owned, and the yearly average of British tonnage which entered and cleared from British ports increased by 102.7%.” That the Navigation Acts’ repeal, arguably the most consequential change in British maritime policy of the 19th century, went unmentioned in explaining Britain’s rising fortunes at the time is a notable omission.

Assertion: “Due to improving efficiency and competitive pressures, the number of large ships in both [the Jones Act and international] fleets declined during past three decades.”

Counterpoint: Context here is important. It is true that ships have seen tremendous efficiency gains that enable more goods to be carried by fewer vessels. Yet the Jones Act fleet has not only been declining for decades in terms of ship numbers, but also deadweight tonnage (how much the ships can carry). Even as the U.S. economy and population have experienced considerable growth over the past 50 years, the Jones Act fleet’s deadweight tonnage is slightly less than what it was in 1970.

“Competitive pressures” perhaps offers more explanatory power here, with Jones Act ships operating in coastal waters of the U.S. mainland forced to compete with alternative forms of transport such as pipelines, trucks, and rail. Unmentioned by the report, however, is that the competitiveness of these ships is undermined by the Jones Act’s mandate that these vessels be U.S.-built—a provision that makes these ships up to five times more expensive than on the international market. In other words, this lack of competitiveness is at least partly due to the very law which the report advocates for.
Assertion: “The Jones Act’s requirements also apply to shipping between the contiguous United States and overseas territories and states, including Alaska, Hawaii, and Puerto Rico. Mandating that commercial ships moving between these areas be U.S.-flagged lessens the ability of adversaries to interfere with the integrity of states’ and territories’ commercial links to [the Continental United States (CONUS)]. It guards against the ability of China—with the world’s largest merchant marine and global port management system—to take over shipping to U.S. territories and gain local influence during peacetime, only to threaten or deny shipping to CONUS during a crisis or conflict.”
Counterpoint: It is unclear why concerns about China should be used to justify the Jones Act’s blanket ban on ships from all countries—including those the United States has defense treaties with—from transporting goods between the noncontiguous states and territories and the U.S. mainland. If China is the problem then the logical solution is to grant Jones Act exemptions for U.S. defense allies based on national security concerns. Furthermore, the idea that the Jones Act prevents foreign control of the shipping to the noncontiguous states and territories is wishful thinking. In fact, the truth is closer to the opposite. Faced with the high cost of Jones Act transport to and from the U.S. mainland, the noncontiguous states and territories often instead purchase products from other countries where Jones Act restrictions do not apply. As a CRS report points out:

Comparing waterborne shipping volumes between 1960 and today, one finds that shipments received from the contiguous United States have increased only slightly, while shipments received from foreign sources have increased tremendously. Hawaii and Puerto Rico now receive more cargo from foreign countries than they do from the U.S. mainland. Hawaii and Puerto Rico now receive more cargo from foreign countries than they do from the U.S. mainland.

In some cases, the Jones Act makes it outright impossible for these areas of the country to buy products from the U.S. mainland. For example, the complete lack of LNG carriers in the Jones Act fleet means that Puerto Rico cannot purchase natural gas from the U.S. mainland. Instead, it must be purchased from abroad. Rather than, in the Jones Act’s absence, foreign ships transporting U.S. LNG to Puerto Rico, foreign ships are currently transporting foreign LNG to Puerto Rico. This hardly seems to be a policy improvement for anyone concerned about foreign influence over outlying parts of the United States.

Assertion: “The requirement that ships in the domestic fleet be U.S.-flagged and operated by crews of U.S. citizens or permanent residents reduces the likelihood foreign ships and mariners will illegally gain access to America’s inland waterways and associated infrastructure. Although geography limits how far inland large foreign‐​flagged ships would be able to travel, without the Jones Act’s requirements, foreign companies could buy domestic carriers that operate smaller vessels and barges that ply U.S. rivers and intercoastal waterways.”

Counterpoint: As CSBA’s report itself notes, access to U.S. internal waters by foreign‐​flagged ships is limited not by the Jones Act, but rather geographic realities. No oceangoing, deep draft ship is going to steam up the Mississippi to St. Louis in the Jones Act’s absence. It’s not physically possible. So then the objection seems to be that foreign companies could purchase U.S. subsidiaries that own tugboats and barges operating on the country’s rivers (although why this should be regarded as a concern is never explicitly stated).

It worth noting that such investment would almost certainly be subject to the CFIUS (Committee on Foreign Investment in the United States) process designed to identify potential national security red flags. In addition, foreign ownership of important parts of the U.S. maritime industry is nothing new. A number of prominent U.S. shipyards have foreign ownership such as Philly Shipyard (Norway), VT Halter (Singapore), Keppel AmFELS (Singapore), Austal USA (Australia), and Fincantieri Bay (Italy). Why foreign companies should (correctly) be allowed to own U.S. shipyards yet prohibited from owning the vessels produced at these yards, particularly those that operate on the country’s internal waters, is unclear.

Assertion: “[U.S.] waterways are maintained by dredgers and salvage operators…that keep clear more than 400 ports and 25,000 miles of navigation channels throughout the United States. A domestic dredging industry prevents the United States from depending on foreign companies to dredge its dozens of naval facilities, potentially opening up opportunities for sabotage or the depositing of underwater surveillance equipment.”

Counterpoint: The United States, via both the Jones Act and Dredge Act of 1906, is one of the few countries in the world that bans foreign dredge operators from offering their services. As a result, U.S. ports and waterways in need of dredging must choose from U.S. dredging companies that are both small in number and limited in their capabilities. For example, the largest hopper dredger in the U.S. fleet is the Ellis Island, with a capacity of 11,315 cubic meters. Meanwhile, a single Belgian dredging firm, Jan de Nul, offers nine such dredges with larger capacities (and a tenth scheduled for delivery this year). The upshot of being beholden to a small, limited U.S. fleet is higher dredging costs. In other words, the Jones Act and Dredge Act make it more difficult to maintain critical maritime infrastructure.

This is seemingly justified by the possibility of foreign companies engaging in sabotage and surveillance of U.S. naval facilities without these laws. But no evidence is presented to document the scale and significance of this alleged threat. More importantly, if this truly is a threat, why should protectionist laws be viewed as the optimal means of counteracting them? Would it not simply be more efficient to assign dredging work in military installations to a U.S. government agency (such as the U.S. Army Corps of Engineers) while allowing foreign dredgers to bid on civilian projects? This unwillingness to wrestle with trade‐​offs and the costs involved in the adoption of certain policies is one of the report’s unfortunate recurring themes. Indeed, the costs of many policies the report endorses are not even acknowledged.

The Big Picture

In its conclusion the CSBA report states, quite accurately, that the U.S. maritime industry, “is on a path toward continued decline, promising deleterious impacts on U.S. economic prosperity and national security.” This would suggest that a marked departure from current policy is in order. Yet the report recommends that the Jones Act, a longstanding cornerstone of U.S. maritime policy, be retained. But the law has contributed to the very maritime downfall that the report bemoans. The Jones Act, and in particular its domestic build requirement which forces U.S. carriers to pay many multiples the world price for the ships they operate, has proven to be as failed in practice as it is in theory. U.S. commercial shipyards, rather than rising to new heights on the back of this subsidy, are mired in a long‐​term slump reflective of their technological inferiority and inefficiency.

What the maritime industry is crying out for is a rethink of old policies. What this report gives, at least so far as the Jones Act is concerned, is more of the same. So long as the choice is made to embrace protectionism instead of competition the U.S. maritime decline will continue."

An alternative analysis to Oren Cass’s flawed “Cost of [Not] Thriving Index” with a much different conclusion

By Mark J. Perry.

"February 28, 2020

Is the average American better off today compared to 1985? No according to a recent much-publicized analysis by Oren Cass, who paints a pretty pessimistic picture of wage stagnation, a middle class in decline, rising prices, and an ongoing deterioration in the standard of living for the average American over the last 35 years. Cass, the executive director of American Compass, claims that his findings support the popular perception that: “A generation ago, the [male] worker could be confident in his ability to provide his family not only with the basics of food, clothing, and shelter, but also with the middle-class essentials of a house, a car, health care, and education. Now he cannot.”

More specifically, at the core of Cass’s story of gloom and doom is his claim that “In 1985, the typical male worker could cover a family of four’s major expenditures (housing, health care, transportation, education) on 30 weeks of salary. By 2018 it took 53 weeks. Which is a problem, there being 52 weeks in a year (see the top table above and the second chart).” In his report, Cass creates what he calls the “Cost of Thriving Index” which measures the number of weeks of income required for a single male breadwinner to cover the four major expenditure categories mentioned above for a typical family of four: Housing, Health Care, Transportation, and Education (see top table above). Given Cass’s main pessimistic conclusions about an America in decline, it’s curious that the index wasn’t named the “Cost of Not-Thriving Index,” or the “Cost of Struggling to Survive Index” or some other name matching the negative picture Cass paints with his analysis for an average American.

Let me present a different analysis of economic well-being for the average American that significantly departs from Cass’s analysis in some important ways in both methodology and main conclusions.

The first methodological issue is that Cass creates his own manufactured measures of annual consumer expenditures on four major spending categories — housing, health care, transportation, and education — perhaps not knowing that the Bureau of Labor Statistics has been reporting those data since 1984 in its annual “Consumer Expenditure Surveys” reports (see here, here and here). The second table above (“Alternative Cost of Thriving Index”) shows BLS data on those four major consumer expenditures in each of the same years as in Cass’s report.

The BLS data on consumer spending for the four major spending categories identified by Cass are based on BLS consumer surveys of actual out-of-pocket expenditures and therefore depart dramatically from Cass’s theoretically contrived estimates as explained below.

Housing. To estimate national housing costs for the average American housing unit, Cass curiously uses the “annual fair market rent for a three-bedroom, 40th percentile housing unit in Raleigh, North Carolina,” which increased from $5,560 in 1985 to $15,924 in 2018. In contrast, the BLS estimates of annual housing costs (shelter) for the average American “consumer unit” (see details below on that measure) based on consumer survey data and actual out-of-pocket housing expenses increased from $3,833 to $11,747 over the 1985 to 2018 period. Compared to the BLS estimates of annual housing expenses for the average US housing unit Cass’s estimates are wildly inflated by about 37%. No surprise then that he claims that Americans are increasingly struggling to make ends meet and pay for their basic living expenses.

Transportation. For annual average transportation expenditures, Cass’s own calculations are based on the cost of owning and operating one (or two?) vehicles and driving 15,000 miles per year. According to Cass, transportation costs for a family increased from $3,484 to $8,849 between 1985 and 2018, which is very close to the BLS estimates for expenditures on transportation of $4,319 in 1985 and $8.943 in 2018. Nothing to argue about on this spending category since Cass’s estimates closely match the BLS figures.

Health Care. Here’s where Cass’s analysis gets really problematic. His estimates of annual health care expenditures are about 4 times higher than the BLS’s estimates of actual out-of-pocket expenditures for the average consumer unit because Cass curiously uses the total cost of the average employer-sponsored health care plan, including the portion paid by the employer. In 2018, the BLS estimated that the average consumer unit spent about $5,000 out-of-pocket on health care costs compared to Cass’s wildly inflated estimate of nearly $20,000 per 4-person family.

Many others have reported on Cass’s troublesome calculation of health care costs. My AEI colleague Stan Veuger pointed out that Cass’s health care figures are wildly inflated because he counts employer-paid contributions for health care as if they were out-of-pocket costs faced by workers. On the other hand, Cass doesn’t count those fringe benefits as part of a worker’s compensation? Matt Yglesias writing in Vox says that Cass’s incorrectly calculated health care costs are a “critically important flaw” that present a huge problem since “the growing cost of health care is the main driving force” of Cass’s analysis and conclusions of doom. In his National Review article “Oren Cass’s Chart of Doom” Robert Verbruggen correctly points out that the implication of Cass’s measure of health care costs is that these expenditures “like transportation or housing costs, come out of income, but employers are actually covering most of the bill.” And according to the most recent government data, out-of-pocket spending by Americans for total health consumption expenditures in 2018 was less than 11%, and the rest is paid for by employers, health insurance, Medicare, Medicaid, Departments of Defense and Veterans Affairs. Cass unrealistically seems to assume that Americans bear the full burden of their health care costs, when that’s not remotely true.

Education. Likewise, Cass’s estimates of consumer expenditures on Education are wildly inflated by a factor of about 7X because he considers the cost of college (including room and board) as spending on “Education” under the flawed assumption that the average American household or family faces those educational costs year after year when that’s not close to reality. Robert Verbruggen criticized Cass’s faulty calculation of education spending because it omits (and adds) many key factors including the financial aid most students receive including scholarships and loans, the fact that many students live off-campus at home with their parents, the fact that many students earn money of their own, and the fact that most young Americans don’t go to four-year colleges.

Regarding a second methodological issue that helps to create a pessimistic picture of middle-class decline, Cass’s measure of income is curiously the “median weekly earnings for men working full-time.” While Cass claims that there are some “sociological and statistical reasons” for using only male earnings, the earnings of only men don’t realistically measure the income of the households (or “consumer units”) that most Americans actually live in. The majority of Americans live in a household with more than one earner. The BLS income data used in my analysis measures the average income of the 130 million “consumer units” represented in the BLS’s annual Consumer Expenditure Surveys.

Note: According to the BLS, Consumer units” are either: 1) all members of a particular household who are related by blood, marriage, adoption, or other legal arrangements; 2) a person living alone or sharing a household with others or living as a roomer in a private home or lodging house or in permanent living quarters in a hotel or motel, but who is financially independent; or 3) two or more persons living together who use their income to make joint expenditure decisions. The Census Bureau’s estimate of the number of US households in 2017 (128 million) compares closely to the BLS’s estimate of 130 million consumer units in that year, suggesting that there are only minor differences in those two measures.

Comparing average annual out-of-pocket consumer expenditures on major expenses by consumer unit to average annual income by consumer unit is a more accurate and reasonable methodology to gauge the economic well-being of an average American than Cass’s fictional, contrived approach that compares the median earnings of men only to an improvised, manufactured measure of consumer spending on the four major categories.

The difference in data sources and methodologies described above explain the significant differences between my and Cass’s analysis and conclusions:

While Cass claims that the number of weeks of income needed to cover a year of household expenditures on the four major categories has increased over time by 77%, from 30 weeks in 1985 to 53 weeks in 2018, my analysis using BLS data suggests the opposite: The number of weeks of income to cover a year of major expenses for the average consumer unit has declined since 1985 by 9.6%, from nearly 20 weeks (19.8) to fewer than 18 weeks in 2018. That’s two-thirds less than the 53 weeks of income Cass claims is necessary to cover major family expenses (see tables above) and a whopping difference of 35 weeks! According to Cass, the average male worker would have to work until the first week of 2021 to cover major family expenses this year, while my analysis shows that the typical American household would only have to work until the first week of May this year to pay for annual major expenditures on housing, education, transportation, and health care.

The top chart above shows graphically Cass’s “chart of doom” based on his “table of doom” from above (although Christopher Ingraham glowingly called the chart the “best explanation of middle-class finances you will ever see” in the Washington Post) and the bottom chart shows graphically the stark difference using BLS data on actual out-of-pocket spending and income for US consumer units. Cass assumes the typical family faced major household expenditures of more than $54,000 in 2018 compared to BLS estimates of only about $27,000 in spending on housing, education, transportation, and health care, exactly half of Cass’s wildly inflated figures. And while Cass’s chart shows that covering major consumer expenditures is now out of reach for a fictional household with one male earner (53 weeks of income are required to major annual expenses), my chart (along with the data in the table above) shows that covering major household expenses based on BLS data is actually now more, not less, affordable than in past periods.

Bottom Line: Cass claims that his analysis using a fictional one-earner family and contrived, improvised expenditure data demonstrates that “The U.S. economy of recent decades has eroded, rather than reinforced, the American model of thriving, self-sufficient fami­lies. In the decades to come, we will need to do better.” My alternative conclusion using real-world BLS data on actual out-of-pocket consumer expenditures and income for the average, typical consumer unit that more realistically represents the experience of a typical American is much different. The average American household is flourishing and thriving today compared to 25 or 35 years ago and is actually able to cover a year of major expenses with two fewer weeks of income than in 1985. While Cass recommends that policymakers rely on his COTI to “interpret the nature and quality of economic progress,” I recommend that policymakers ignore the COTI because it’s contrived and flawed as I and many others have concluded. Instead, policymakers should rely on better and more realistic analyses and data to assess what I conclude is the ongoing economic progress of average Americans as they continue to enjoy an ongoing, upward trajectory in their rising standard of living."

No, Fidel Castro Didn't Improve Health Care or Education in Cuba

Cuba has made less educational and health care progress than most Latin American countries over the last 60 years, data show.

By Hans Bader. Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law.

"On CBS’s 60 Minutes, Senator Bernie Sanders recently praised the achievements of communist Cuba. An interviewer asked him about his 1985 comments that Cubans supported communist dictator Fidel Castro because he “educated their kids, gave their kids health care, totally transformed society.” In response, Sanders defended those comments, by stating that when “Fidel Castro came into office, you know what he did? He had a massive literacy program.”

But Castro did not give Cubans literacy. Cuba already had one of the highest literacy rates in Latin America by 1950, nearly a decade before Castro took power, according to United Nations data (statistics from UNESCO). In 2016, the Washington Post fact-checker Glenn Kessler debunked a politician’s claim that Castro’s rule significantly improved Cuban healthcare and education.

In today’s Cuba, children are taught by poorly paid teachers in dilapidated schools. Cuba has made less educational progress than most Latin American countries over the last 60 years.

According to UNESCO, Cuba had about the same literacy rate as Costa Rica and Chile in 1950 (close to 80 percent). And it has almost the same literacy rate as they do today (close to 100 percent).

Meanwhile, Latin American countries that were largely illiterate in 1950—such as Peru, Brazil, El Salvador, and the Dominican Republic—are largely literate today, closing much of the gap with Cuba. El Salvador had a less than 40 percent literacy rate in 1950, but has an 88 percent literacy rate today. Brazil and Peru had a less than 50 percent literacy rate in 1950, but today, Peru has a 94.5 percent literacy rate, and Brazil a 92.6 percent literacy rate. The Dominican Republic’s rate rose from a little over 40 percent to 91.8 percent. While Cuba made substantial progress in reducing illiteracy in Castro’s first years in power, its educational system has stagnated since, even as much of Latin America improved.

Contrary to Sanders’ claim that Castro “gave” Cubans healthcare, they already had access to healthcare before he seized power. Doctors frequently provided free healthcare to those who couldn’t afford it. As the Washington Post’s Glenn Kessler noted:

As for health care and education, Cuba was already near the top of the heap before the revolution. Cuba’s low infant mortality rate is often lauded, but it already led the region on this key measure in 1953-1958, according to data collected by Carmelo Mesa-Lago, a Cuba specialist and professor emeritus at the University of Pittsburgh.

Cuba led virtually all countries in Latin America in life expectancy in 1959, before Castro’s communists seized power. But by 2012, right after Castro stepped down as Communist Party leader, Chileans and Costa Ricans lived slightly longer than Cubans. Back in 1960, Chileans had a life span seven years shorter than Cubans, and Costa Ricans lived more than two years less than Cubans on average. In 1960, Mexicans lived seven years shorter than Cubans; by 2012, the gap had shrunk to just two years.

(Today, life spans are virtually the same in Cuba as more prosperous Chile and Costa Rica—if you accept the rosy official statistics put out by Cuba’s communist government, which many people do not. Cuba has been credibly accused of hiding infant deaths, and exaggerating the life spans of its citizens. If these accusations are true, Cubans die sooner than Chileans or Costa Ricans).

Cuba has made less progress in health care and life expectancy than most of Latin America in recent years, due to its decrepit health care system. “Hospitals in the island’s capital are literally falling apart.” Sometimes, patients ”have to bring everything with them, because the hospital provides nothing. Pillows, sheets, medicine: everything.”
As The Washington Post’s Kessler noted:

Reporters have also documented that Cuban hospitals are ill-equipped. A 2004 series on Cuba’s health-care system in Canada’s National Post said pharmacies stock very little and antibiotics are available only on the black market. “One of the myths Canadians harbor about Cuba is that its people may be poor and living under a repressive government, but they have access to quality health and education facilities,” the Post said. “It’s a portrait encouraged by the government, but the reality is sharply different.”

Under communism, Cuba has also fallen behind on more general measures of human development. As the progressive economist Brad DeLong pointed out:

Cuba in 1957—was a developed country. Cuba in 1957 had lower infant mortality than France, Belgium, West Germany, Israel, Japan, Austria, Italy, Spain, and Portugal. Cuba in 1957 had doctors and nurses: as many doctors and nurses per capita as the Netherlands, and more than Britain or Finland. Cuba in 1957 had as many vehicles per capita as Uruguay, Italy, or Portugal. Cuba in 1957 had 45 TVs per 1000 people—fifth highest in the world …Today? Today the UN puts Cuba’s HDI [Human Development indicators] in the range of … Mexico. (And Carmelo Mesa-Lago thinks the UN’s calculations are seriously flawed: that Cuba’s right HDI peers today are places like China, Tunisia, Iran, and South Africa.) Thus I don’t understand lefties who talk about the achievements of the Cuban Revolution: ‘…to have better health care, housing, education.’

As Michael Giere notes, Cuba was prosperous before Castro’s communists seized power:

A United Nations (UNESCO) report in 1957 noted that the Cuban economy included proportionally more workers who were unionized than in the U.S. The report also stated that average wages for an eight hour day were higher in Cuba than in “Belgium, Denmark, France, and Germany.”…PBS explained in a 2004 retrospective, that
“Havana [prior to Castro] was a glittering and dynamic city. Cuba ranked fifth in the hemisphere in per capita income, third in life expectancy, second in per capita ownership of automobiles and telephones, first in the number of television sets per inhabitant. The literacy rate, 76%, was the fourth highest in Latin America. Cuba ranked 11th in the world in the number of doctors per capita. Many private clinics and hospitals provided services for the poor. Cuba’s income distribution compared favorably with that of other Latin American societies. A thriving middle class held the promise of prosperity and social mobility.”

But after Castro took over, the prosperity came to an end:

Castro’s destruction of Cuba cannot be over dramatized. He looted, murdered, and destroyed the nation from the ground up. Just one factoid explains it all; Cubans once enjoyed one of the highest consumption of proteins in the Americas, yet in 1962 Castro had to introduce ration cards (meat, 2 ounces daily), as food consumption per person crashed to levels not seen since the 1800s.

Hunger became so widespread that a visiting Swedish doctor, Hans Rosling, had to warn Cuba’s dictator in 1992 about widespread protein deficiency among Cubans. Roughly 40,000 Cubans had been reported to have been experiencing “visual blurring and severe numbness in their legs.” Rosling investigated at the invitation of the Cuban embassy in Sweden, and with the approval of Castro himself. Rosling travelled to the heart of the outbreak, in the western province of Pinar del Río. It turned out that those stricken with the disorder all suffered from protein deficiency. The government was rationing meat, and adults had sacrificed their portion to nourish children, pregnant women and the elderly. Dr. Rosling told Fidel Castro about this.

During this period of widespread hunger, Bernie Sanders was peddling the myth that hunger was non-existent in Cuba. In 1989, he published a newspaper column claiming that Fidel Castro’s Cuba had “no hunger, is educating all of its children and is providing high quality, free health care.”"

How Mandatory Paid Leave Hurts Low-Income Workers

By Veronique de Rugy.

"Despite recent stock market jitters related to the coronavirus, the U.S. economy is doing well. Wages are growing, especially for lower-income workers, and unemployment is low. Yet calls are intensifying for the federal government to implement paid leave, which may unwittingly hurt those whom the program claims to help. Supporters often resort to the same misleading notions to make their case—misperceptions that must be continuously debunked, lest they lead to unnecessary harm to working families.

Among the most common claims used to make the case for government provision of paid leave is that not every working woman gets paid leave, which supposedly demonstrates a market failure. Still, data show that 63 percent of women today have access to such leave, a 280 percent increase since the 1960s. The women who don't receive this benefit are mostly lower-skilled workers with part-time and hourly jobs employed at small businesses.

Undoubtedly, these women would like to get paid to stay home after the birth of their children, yet that's no more evidence of a market failure than is my not driving a Tesla, even though I'd like to drive one if it were free. This isn't a reason for government to mandate paid leave (or Teslas) for all workers.

More to the point, such mandates will likely harm low-income workers.

Here's why: Because paid leave is costly, when firms provide this benefit, they change the composition of their employees' total compensation by reducing the value of workers' take-home pay to offset the cost of providing paid leave. While some workers prefer this mix in their pay packages, others don't. In particular, mandated leave would be a hard trade-off for many lower-paid women who would prefer as much of their income as possible in the form of take-home pay.

In fact, polls show that when women learn of the trade-offs inherent in any government-mandated paid-leave policy, their support for such a policy collapses.

Another weak argument that pro-paid leave advocates make is that the United States is the only industrialized country without a national paid leave program. While true, this doesn't mean what paid leave proponents would like you to believe. As we've already seen, absence of federal government action doesn't mean that U.S. women aren't getting any paid leave. Nor does it mean that women in countries that have such government-mandated programs are doing better than women in the United States.

In fact, while proponents of government-supported paid leave policies like to list the many benefits that women, their children, and the companies they work for get from paid leave, these proponents are silent on the costs—of which, unfortunately, there are many.

A National Bureau of Economic Research, or NBER, paper shows that while women in non-U.S. countries in the Organization for Economic Cooperation and Development often have higher labor force participation, the lack of a U.S. paid leave policy leads to women in America being more likely "to have full time jobs and to work as managers or professionals."

Moreover, government-supported paid leave policies don't improve women's labor market outcomes compared with men's. A well-cited NBER paper looks at Denmark's very generous paid leave policy and finds that before having children, women's hours, employment, and wages are equal to those of men, but that these metrics all worsen relative to men after having children. Another recent NBER paper expands on this research and shows that while this divergence also exists in the United States, it's significantly smaller here.

The last misleading claim in this debate is that the levels of benefits being proposed in America aren't anywhere near as high as those mandated in Europe, so the negative consequences of government-mandated benefits in the United States would be smaller than they are in Europe. That's only true if the benefits don't grow over time, which is unrealistic.

European programs didn't start off as big as they are now. The average length of family leave programs in the eurozone increased from 17 weeks in 1970 to 57 weeks in 2016. That's because what starts as a maternity leave program expands to parental leave and then becomes an even broader kind of leave, such as home care for sick family members.

There are many more poor arguments for mandated paid leave out there, many of which, unfortunately, demonstrate that facts and sound economics are, in this debate, too often optional."

When it comes to the trade deficit, policy wonks were right and the president was wrong

See Trump 0, Nerds 1 by Veronique de Rugy.

"President Donald Trump hates the trade deficit. On the campaign trail back in 2016, he argued that this gap—the imbalance between the value of America's imports and exports—was a sign that China, and others, were "stealing our businesses, stealing our jobs, stealing our money." If elected, he promised, he would "end our chronic trade deficits."

Many politicians make promises on the campaign trail but never really try to deliver on them. Unfortunately, Trump really did make the reduction of the trade deficit a top priority as soon as he got into the White House. His policies to achieve this: an erratic mix of angry tweets, unilateral tariffs hikes, and threats to tear up trade agreements if the original signatories refuse to renegotiate them on Trump's terms.

As these moves set off a global trade war, Trump's defenders formulated—or, more accurately, dusted off—protectionist arguments for forcing other nations to import more from, and to export less to, the U.S. This, they told us, would bring factories back to the U.S.

That was the plan, anyway. What happened instead followed the path that free traders predicted.
As they explained, a country's trade balance is determined overwhelmingly by factors such as the U.S dollar serving as a reserve currency, the ratio of savings to investment opportunities at home and abroad, and the relative attractiveness of that country's investment climate. As long as the United States is growing and remains an attractive place to invest, we Americans will continue to run trade deficits with the rest of the world.

What tariffs can do, they continued, is affect bilateral trade balances with the individual countries against which the tariffs are applied. But this mostly leads American buyers to shift their purchases of imports from one nation to another—say, from China to Vietnam—so U.S. manufacturing is not increased and America's overall trade deficit isn't affected. If there is a reduction in our trade deficits, that won't be because manufacturing is "returning." It'll be because both imports and exports are falling, with the former coming down more than the latter.

Underneath Trump's policies is a profound ignorance of the tight connection between imports and exports. Foreigners sell goods and services to U.S. buyers in order to acquire American dollars. They want these dollars, in part, to buy American exports. So when U.S. imports grow, so do U.S. exports. The reverse is also true: reducing American imports causes Americans to shrink.

More important, and often overlooked: Foreigners want dollars also to invest in America's powerful economy. That includes (but of course isn't limited to) buying U.S. Treasury bonds. In consequence, every dollar Americans spend on foreign goods and services comes back to us. As the U.S. trade deficit rises, investment flows into America increase by the same amount. As the nerds say, the current-account deficit is a mirror image of the capital-account surplus. This is why Mark Perry of the American Enterprise Institute describes imports as "job-generating foreign investment surpluses for a better America."

It is thus no surprise that as the American economy grew, the trade deficit also grew. This also explains why, as the U.S economy cooled in 2019—in part because of the Trump's trade wars and the rampant uncertainty they created—the trade deficit started to shrink. As this chart shows, higher U.S. trade deficits tend to be associated with faster, not slower, U.S. economic growth.

The bottom line: Absent any major changes in the aforementioned macro factors, over which this president has little control, any reduction in the trade deficit would likely be accompanied by weaker economic growth, as was true during the Great Recession or the Great Depression. 

Trump and his supporters have started to cheer the $10.9 billion reduction of the trade deficit in 2019 as a sign that his policies worked. Trump and his defenders also trot out anecdotes of manufacturing jobs returned to the U.S. as evidence that the newly renegotiated trade deals are succeeding. The reality is quite different. As tariffs increase prices for American buyers (particularly manufacturers), manufacturing activity slowed down and is now bordering on recession. And that trade deficit reduction, as recent Census data reveal, is the product of both imports and exports falling. 

Something else in those Census numbers: Tariffs on Chinese imports may be reducing our bilateral trade deficit with China, but that doesn't mean Americans are buying from U.S. producers instead. Instead, places like Vietnam, Mexico, and Malaysia are picking up the slack.

So the free traders were right. If you want to lower the trade deficit, your best bet is to reduce both imports and exports—or just to have an economic crisis. Who really wants that?"

The economic impact of the Bernie Sanders agenda

From Tyler Cowen.

"From Casey Mulligan:

If fully implemented, but otherwise implemented wisely, Senator Sanders’ agenda for the economy would reduce real GDP and consumption by 24 percent.  Real wages would fall more than 50 percent after taxes.  Employment and hours would fall 16 percent combined.  There would be less total healthcare, less childcare, less energy available to households, and less value added in the university sector.  Although it is more difficult to forecast, the stock market would likely fall more than 50 percent…
Even if without any productivity loss or increased utilization in healthcare, college, and daycare, this means that the Sanders agenda would be expanding the Federal budget by 13.25 percent of baseline consumption.  Including 19 percent additional utilization of these “free” goods and services, tax rates on labor income must increase by 23.5 percentage points (it would be more but the Sanders agenda does expand the tax base by eliminating the exclusion for employer-sponsored health insurance).  GDP falls by 16 percent (this does not yet consider productivity losses — that comes below).

You can quibble with some of the numbers on productivity decline, but that such estimates are even possible from fairly standard parameters should give a number of you some pause.  Here is my earlier post on the economic policy ideas of Bernie Sanders."

Why Bernie Sanders Is (Still) Morally Unfit to Be President

Lawrence J. McQuillan of The INDEPENDENT INSTITUTE.

"Bernie Sanders is proud to be a socialist. In July 2015, he told The Nation, “Do they think I’m afraid of the word? I’m not afraid of the word.” As far back as 1989, Sanders said, “I think there has been too much of a reluctance on the part of progressives and radicals to use the word socialism.” Sanders chooses to emphasize selective aspects he considers “positive,” while ignoring socialism’s brutal history.

In the 1960s, Sanders joined the Young People’s Socialist League, the youth wing of the Socialist Party USA. To Sanders, socialism means using government power to forcibly redistribute income and wealth from one group of people to another, which he thinks can be a good thing:

I think it means the government has got to play a very important role in making sure that as a right of citizenship, all of our people have healthcare; that as a right, all of our kids, regardless of income, have quality childcare, are able to go to college without going deeply into debt . . .

But as the old adage warns: A government powerful enough to give you everything you want is powerful enough to take away everything you have. That includes life itself. Sanders does not give his millennial followers, likely unaware of socialism’s record, a full picture of where concentrated government power inevitably leads.

In 2003, the University of Pennsylvania history professor Alan Charles Kors wrote “Can There Be an ‘After Socialism’?” which tells the story that Bernie Sanders won’t. Here is an extended excerpt:

The goal of socialism was to reap the cultural, scientific, creative, and communal rewards of abolishing private property and free markets, and to end human tyranny. Using the command of the state, Communism sought to create this socialist society. What in fact occurred was the achievement of power by a group of inhumane despots: Lenin, Stalin, Mao Tse-tung, Kim Il Sung, Ho Chi Minh, Pol Pot, Castro, Mengistu, Ceausescu, Hoxha, and so on, and so on . . .
No cause, ever, in the history of all mankind, has produced more cold-blooded tyrants, more slaughtered innocents, and more orphans than socialism with power. It surpassed, exponentially, all other systems of production in turning out the dead. The bodies are all around us. And here is the problem: No one talks about them. No one honors them. No one does penance for them. No one has committed suicide for having been an apologist for those who did this to them. No one pays for them. No one is hunted down to account for them. It is exactly what Solzhenitsyn foresaw in The Gulag Archipelago: “No, no one would have to answer. No one would be looked into.” Until that happens, there is no “after socialism.”
The West accepts an epochal, monstrous, unforgivable double standard. We rehearse the crimes of Nazism almost daily, we teach them to our children as ultimate historical and moral lessons, and we bear witness to every victim. We are, with so few exceptions, almost silent on the crimes of Communism. So the bodies lie among us, unnoticed, everywhere. We insisted upon “de-Nazification,” and we excoriate those who tempered it in the name of new or emerging political realities. There never has been and never will be a similar “de-Communization,” although the slaughter of innocents was exponentially greater, and although those who signed the orders and ran the camps remain. In the case of Nazism, we hunt down ninety-year-old men because “the bones cry out” for justice. In the case of Communism, we insisted on “no witch hunts”—let the dead bury the living. But the dead can bury no one.
Therefore the dead lie among us, ignored, and anyone with moral eyes sees them, by their absence from our moral consciousness, spilling naked out of the television and movie screens, frozen in pain in our classrooms, and sprawled, unburied, across our politics and our culture. They sit next to us at our conferences. There could not have been an “after Nazism” without the recognition, the accounting, the justice, and the remembrance. Until we deal with the Communist dead, there is no “after socialism.”
To be moral beings, we must acknowledge these awful things appropriately and bear witness to the responsibilities of these most murderous times. Until socialism—like Nazism or fascism confronted by the death camps and the slaughter of innocents—is confronted with its lived reality, the greatest atrocities of all recorded human life, we will not live “after socialism.”
It will not happen. The pathology of Western intellectuals has committed them to an adversarial relationship with the culture—free markets and individual rights—that has produced the greatest alleviation of suffering; the greatest liberation from want, ignorance, and superstition; and the greatest increase of bounty and opportunity in the history of all human life.
This pathology allows Western intellectuals to step around the Everest of bodies of the victims of Communism without a tear, a scruple, a regret, an act of contrition, or a reevaluation of self, soul, and mind. . . .
The bodies demand an accounting, an apology, and repentance. Without such things, there is no “after socialism.”

Bernie Sanders honeymooned in the USSR and praised the Soviet healthcare system. He traveled to communist Nicaragua in 1985 to celebrate the fifth anniversary of the Marxist Sandinista regime and established a sister-city partnership between Managua and Burlington, Vermont. He took a trip to Cuba in 1989, 30 years after the end of the Cuban Revolution, and also praised the Castro regime’s education system two decades earlier. By giving socialism intellectual cover and acceptability, Bernie Sanders helped to hide the bodies.

In a 1989 interview, Sanders said, “Socialism has a lot of different messages to different people. I think the issue of socialist ideology and what that meant or means is not terribly important.” Perhaps it’s not important to Sanders, but it was to the tens of millions of people who died at the hands of socialists or who currently toil and suffer under such regimes.

Sanders chooses to “step around the Everest of bodies . . . without a tear, a scruple, a regret, an act of contrition, or a reevaluation of self, soul, and mind.” He hides the truth from his young supporters. Bernie Sanders is morally unfit to be president."

Sanders Is Wrong on Cuban Education and Healthcare

By Marian L. Tupy & Chelsea Follett of Cato.

"The current frontrunner among the contenders vying to become the Democratic Party’s presidential candidate, Senator Bernie Sanders (D-VT), sang Cuba’s praises in a recent 60 Minutes interview on CBS. Senator Sanders applauded Cuba’s education and healthcare systems. Potential Sanders supporters should know that Cuba’s literacy rate and healthcare system are nothing to lionize.

First, consider literacy. According to Sanders, “When Fidel Castro came into office, you know what he did? He had a massive literacy program. Is that a bad thing?” Sanders is surely old enough to know that all communist dictatorships throughout history have ensured that their people were literate—in part so that the people might take in the disinformation printed by government propaganda ministries.

Furthermore, a look at the data reveals that all of the progress regarding literacy that happened under communism in Cuba would almost certainly have happened under a different political and economic system. While trustworthy data, defogged of Cuban propaganda, are difficult to come by, the U.S. Department of State tried to do just that by comparing improvements in human well‐​being in Cuba between the 1950s (the last decade of the hated Batista regime) and 2000.

Accordingly, Cuba’s literacy rate rose by 26 percent between 1950/53 and 2000. But literacy rose even more, by 37 percent, in Paraguay. Food consumption in Cuba actually declined by 12 percent between 1954/57 and 1995/97. It rose by 19 percent in Chile and by 28 percent in Mexico over the same time period. Between 1954/57 and 1995/97, the rate of change in car ownership per 1,000 people in Cuba declined at an annual rate of 0.1 percent. It increased at an annual rate of 16 percent in Brazil, 25 percent in Ecuador and 26 percent in Colombia.

Next, consider healthcare. Sanders has repeatedly extolled Cuba’s healthcare system, opining that in Cuba the communist revolutionary and dictator Fidel Castro “gave them [the Cuban people] health care, totally transformed the society, you know?” Yet a recent study has found that Cuba’s seemingly impressive health performance is partly due to data manipulation and coercion.

Life expectancy is the best proxy measure of health. According to Cuba’s official data, it rose by 25 percent between 1960 and 2017. Yet life expectancy increased even faster in comparable countries: in Mexico it improved by 35 percent, in the Dominican Republic by 43 percent, and in impoverished Haiti by 51 percent.

The data make clear that Cuba’s education and healthcare system are unremarkable. Cuban-Americans and others familiar with Castro’s record are rightly appalled by Sanders’s apparent affection for socialism on the island.

Castro committed numerous crimes against humanity. He enslaved thousands of Cubans in forced labor camps for being attracted to members of the same sex, harboring “counter‐​revolutionary” thoughts, practicing minority religions or even simply for looking unkempt (like a “hippie”).

The slave labor of those Castro called “social deviants” provided an important source of income for the young communist regime, and any accomplishments of the regime must be viewed with that system of forced labor in mind.

“We’re very opposed to the authoritarian nature of Cuba but you know, it’s unfair to simply say everything is bad,” Senator Sanders told CNN’s Anderson Cooper during the interview. We cannot help but wonder if the senator would offer a similarly nuanced portrayal of a right‐​wing dictator.

The 60 Minutes interview is only the most recent episode in Sanders’s lengthy history of acting as an apologist for socialism. From his infamous honeymoon in the Soviet Union that led him to extoll what he called “the strengths” of the communist system, to his 1980s praise for Castro’s Cuba and the Sandinista dictatorship in Nicaragua, Sanders has often had sympathetic words for left‐​wing dictatorships.

As recently as February 2019, Sanders even refused to describe Venezuela’s Nicolás Maduro as a “dictator” (in the September Democratic debate, when pressed, Sanders finally admitted Maduro was a “tyrant”).

Sanders, at age 78, should know better than to exalt the alleged accomplishments of communist dictatorships. Hopefully Americans will take a look at the data instead of taking Sanders’s claims about Cuba’s education and healthcare systems at face value."

5 Stats That Show American Workers Are More Prosperous Than Ever

By Jon Miltimore of FEE.

"Politicians are known for telling voters how bad things are. It’s a refrain that never seems to change regardless of the actual economic condition of a nation or community, and it’s practiced by those on both the political left and right.
"The average American is working longer hours for lower wages," Senator Bernie Sanders is fond of saying in stump speeches.
His congressional colleague, Rep. Alexandria Occassio-Cortez, has gone so far as to (falsely) claim that unemployment is low only “because everyone has two jobs. Unemployment is low because people are working 60, 70, 80 hours a week and can barely feed their family."
It’s not just Democrats and Democratic Socialists, however. Sure, President Trump is touting the US economy now, but he was singing a very different tune in 2016, depicting the US as a “rusting shell of a once great economy,” as one Bloomberg writer vividly put it. The US, Trump claimed, had “a lousy” economy and “Third World” infrastructure.
Despite these bleak claims, there is ample evidence that suggests America is more prosperous than ever and US workers are experiencing the benefits. The latest evidence comes from a recent report from George Mason University’s Mercatus Center, which shows that Americans have achieved significant gains in recent decades, the result of trade liberalization and advances in technology—from the internet and smartphones to AI and robotics.
“A more open, free, and technologically advanced US economy has been a blessing to the large majority of workers and households in the United States,” writes Daniel Griswold, a senior research fellow at the Mercatus Center and co-director of its Trade and Immigration Project. “Expanding competition from trade has delivered lower prices and more product variety to consumers while shifting productive resources to those sectors that can compete more effectively in global export markets.”
Below are five key takeaways from the report.

1. Household incomes have increased nearly 20% in the last four decades

Despite a lot of talk from politicians about “stagnant wages,” household incomes in the US, adjusted for inflation, increased about 20 percent since the 1970s, up from $53,251 in 1973 to $63,179 in 2018. The stagnant wage myth stems from a tendency of economists and politicians to measure inflation using the Consumer Price Index for All Urban Consumers (CPI-U)—an index that overstates inflation and underestimates gains in purchasing power. (Griswold notes that the CPI-U’s problems were outlined nearly a quarter-century ago by the Boskin Commission.)

2. Hourly compensation has increased by more than 50%

A 20 percent increase is swell, but a 50 percent increase is even better—and that’s what US workers experienced between 1973 and 2018. Using the PCE deflator, which measures inflation based on personal consumption, Dartmouth economist Bruce Sacerdote found that real wages for US workers grew by 24 percent from 1975 to 2015. When benefits are included, that figure climbs to 51 percent, according to data from the Federal Reserve Bank of St. Louis.

3. Workplace deaths and injuries have plummeted by 30% and 69%, respectively

We don’t hear a lot about workplace safety these days. There’s a reason for that: it’s less of a problem than ever. Between 1991 and 2017, workplace deaths fell by 30 percent, Griswold points out. Workplace injuries and illnesses fell by 69 percent during that same timeframe. This is good news. A healthier workforce is a more prosperous workforce, and the trend for US workers is a promising one.

4. 20 million new jobs in lucrative service sectors have been created

Media and politicians tend to focus on the disappearance of manufacturing jobs in the economy, which have declined precipitously (see chart below) in recent decades as a percentage of the US workforce. However, Griswold notes that for every job lost in manufacturing since 1990, nearly eight net new jobs were added in the private sector alone, including nearly 20 million jobs in lucrative service sectors—including technical and financial services (4.73 million net jobs), construction (2.02 million net jobs), and healthcare (4.66 million net jobs). The narrative that manufacturing positions are simply being replaced by fast-food and hospitality positions is simply not true.

5. Americans are now spending less than one-third of their money on stuff

A basic fact of economic development is that as people become more prosperous, they spend less on material goods and more on services. That’s precisely what US workers are increasingly doing. Between 1960 and 2018, spending on services grew from 47 percent to 69 percent. Meanwhile, spending on goods dropped from 53 percent to 31 percent. With many Americans meeting their primary material needs, they have more to spend on services, whether it’s a manicure, oil change, or dinner. This is one reason Americans have slowly drifted from manufacturing work to service work, Griswold explains.

Conclusion

Politicians and pundits, this election cycle and the next, will tell you the economy needs to be “fixed.” That US workers are falling behind. They’ll promise to help one group of people, and pretend it will not come at the expense of another (unless it’s a group of millionaires billionaires).
The truth is politicians, particularly those of a collectivist bent, often have all sorts of plans for spending wealth, but few have knowledge of or care for how wealth is created. The source of prosperity and progress, the famed economist Ludwig von Mises observed, is market capitalism.
“The characteristic mark of economic history under capitalism is unceasing economic progress, a steady increase in the quantity of capital goods available, and a continuous trend toward an improvement in the general standard of living,” wrote Mises.

Our free market system is working and has allowed us to achieve prosperity unprecedented in human history. For that, we should all be thankful."

Economic effects of wealth taxation

By Kyle Pomerleau of AEI.

"Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., have introduced plans to enact an annual wealth tax. Under these proposals, the net worth of wealthy households would be taxed at rates between 1 and 8 percent per year. The tax base would be as broad as possible to minimize tax avoidance. The stated goals of the proposals are to greatly increase the progressivity of the federal tax code, raise additional revenue to finance new government programs, and reduce the political influence of the wealthy.

A wealth tax, even levied at an apparently low annual rate, places a significant burden on saving. A wealth tax would reduce the after-tax return to saving and would leave to lower national saving. In general, a decline in saving reduces the future income of Americans, limits financing for productive investments, and reduces the U.S.capital stock and total output. However, the impact of a wealth tax on total output depends on the openness of the U.S. economy. If the U.S. economy is open to foreign lending, a wealth tax would have little effect on the U.S. capital stock and output.

On balance, the U.S. economy is open, but not completely. As a result, the wealth tax would have a small impact on GDP. But even if the effect of a wealth tax on output is mitigated by an inflow of foreign lending to the United States, it would have an impact on the U.S. economy through lower gross national product, or national income. A decline in national saving would increase foreign lending to the United States and worsen the United States’ net investment position, or the amount of foreign assets Americans own net of U.S. assets owned by foreigners. That would lead to an increase in payments abroad on those assets and lower payments Americans receive on foreign assets. The openness of the economy also has implications for how the wealth tax affects workers, federal revenue, and the trade balance.

Read the full article here (PDF)."

In the U.S.S.R. in 1986, as in China today, a public health disaster exposed the limits of dictatorial rule

See From Chernobyl to the Coronavirus by Yaroslav Trofimov of The WSJ. Excerpts:

"Fear of Chernobyl had overcome fear of the state, and nothing was the same ever again. A dictatorship built on coercion and lies faces existential risks when it’s confronted with something scarier than its machinery of repression. In the summer of 1986, Ukrainians started openly talking about ecology and nuclear safety, and those conversations rapidly morphed into an independence movement that rejected both Communism and Moscow’s rule.

The Soviet insistence on going through with Kyiv’s May Day parade after Chernobyl, forcing tens of thousands of children to march through radioactive dust, found echoes in last month’s decision by Chinese authorities to hold a mass Lunar New Year potluck banquet in Wuhan’s Baibuting district, with residents sharing dishes prepared by some 40,000 families.

Three weeks earlier, a handful of local doctors had informed colleagues online about the outbreak of unusual pneumonia cases. These whistleblowers were visited by the police and warned to stay silent or else. Such secrecy robbed ordinary residents of Wuhan of the opportunity to protect themselves, allowing the virus to spread unchecked across the country and beyond. Baibuting became one of the epicenters.

Parallels with Chernobyl can only go so far, of course. Unlike the stagnant U.S.S.R. of 1986, China is a robustly growing economy. President Xi Jinping, unlike the Soviet Union’s last leader, the reformist Mikhail Gorbachev, has intensified the Communist Party’s authority and repression of dissent since coming to power in 2012. On Thursday, Mr. Xi ousted the two top party officials in Wuhan and the surrounding region, replacing them with loyalists."

"“Two weeks have been squandered that could have allowed health authorities and the government to contain the spread of the virus,” said Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations and a specialist in Chinese affairs. “Now the Chinese people are demanding some real change, but whether it is going to be delivered, whether the government will draw some real lessons from this crisis, that remains to be seen.”"

"Back when information flows were more easily contained, the Soviet Union rarely acknowledged plane crashes, submarine disasters or train wrecks. Even today, few people know about the 1957 disaster near Kyshtym in the Urals, when a Soviet nuclear-weapons facility caught fire, scattering nearly half as much radiation as the Chernobyl reactor did three decades later. Nobody knows for sure how many people died from radiation exposure."

"Moscow didn’t officially acknowledge the Kyshtym explosion until after Chernobyl."

"China’s media were instructed not to cover the SARS outbreak, so as not to distract attention from the annual National People’s Congress. As a result, hundreds of infections spread to Beijing. The government didn’t swing into action until Jiang Yanyong, a surgeon at an army hospital in the Chinese capital, circulated a letter describing the true scope of the epidemic.

It took less time for Beijing to adopt drastic measures this time. But the Wuhan coronavirus has also proved much more contagious than SARS and has already claimed a higher death toll. Unlike the late Dr. Li in Wuhan, Dr. Jiang, the hero of 2003, wasn’t personally infected. But he hasn’t been heard from during the latest coronavirus outbreak. Deemed ideologically suspect in Mr. Xi’s China, he is currently reported to be under house arrest."

China’s Crisis Exposes a Badly Flawed Model

Central control and fear of reprisal have made it much more difficult to deal with the outbreak

By Gerard Baker of The WSJ.

"According to reports from Wuhan in this and other news outlets, one of the principal reasons that the virus spread so quickly and infected so many was because officials in Wuhan, bludgeoned by years of subservience to their masters in Beijing, were simply terrified of taking any initiative. Zhou Xianwang, Wuhan’s mayor, told reporters that he didn’t take measures to deal with the epidemic earlier because he needed authorization from his political bosses.

This culture of central control, which has tightened significantly in the six years of Xi Jinping’s presidency, is compounded by the elevation of political ideology and loyalty to the leader over technical or managerial skills as criteria for bureaucratic success. We also know that early warnings about the virulence of the disease were dismissed by public officials for fear that they might make the government look bad. The tragic case of Li Wenliang —the doctor who tried to raise the alarm, was slapped down and later died from the disease—shows how ossified the policy-making process is in a country that places loyalty to the leadership above free speech."

"A large tribe of China admirers in business and predictable parts of the media sees the central role played by the state as a model, a factor critical to the country’s rapid growth. They look at gleaming high-speed rail networks, high levels of digital connectivity, and new airports and roads constructed at a breakneck pace and wish we could have the kind of economy guided by the steady hand of those wise men in Beijing."

"But the primary reason for China’s economic success in the past few decades is the exact opposite. It was the introduction of market reforms under Deng Xiaoping in 1979, extended by his successors in the 1980s and 1990s, that led to the flowering of entrepreneurship, the discipline of the market and the price mechanism.

Indeed, China’s economic performance since the 1980s has been on a roughly similar trajectory to that of Japan in the 1950s and 1960s and South Korea in the 1960s and 1970s—developing economies that benefited from massive inputs of capital and an export-led economic structure. In the past five years, as Mr. Xi has tightened central controls and expanded the role of state-owned enterprises and state-directed lending, growth has slowed, and financial imbalances have grown rapidly."

The Underappreciated Trend in Mortality and Inequality

By Vincent Geloso. He is a professor of economics at King’s University College.

"Most economists, left or right, care about human development. By human development, they mean more than simply increases in income. They refer to a greater ability for individuals to choose the lives they deem most fulfilling under continually weakening constraints. Regardless of their political leanings, most economists will also be concerned with the inequalities in human development. 
This sort of inequality is hard to measure. Generally, we concentrate on income inequality to measure those inequalities. This tends to create false impressions about how equal the world has grown since the early 19^th century. In fact, numerous indicators suggest that the world is now more equal than it was in the past!

Concentrating solely on incomes is bound to have shortcomings. The issue with income is that the levels capture both the opportunities available to workers and the decisions of workers. For example, it is well-known that after a certain wage level, workers will use wage increases to substitute leisure for paid work time.

This is known as the backward bending labor supply curve. However, the curve is not the same for everyone. Some workers simply decide to work more than others (or have incentives to do so). This is why we observe rising inequality in working hours in richer countries. In a situation like this, how can we assess the inequality in human development (i.e. inequality in our ability to make choices)?
Measures such as the human development index (HDI) use a broader set of indicators to capture human development. One such indicator is life expectancy at birth. It is taken as a proxy for how healthy our lives are. The intuition is that the healthier we are, the more we are able to make choices. If life expectancy at birth can be taken as a reliable indicator of health outcomes broadly defined, inequalities in life expectancy will be relevant to inequality in human development.

What do such measures say? Using demographic data accessible to all, Sam Peltzman made the exercise of measuring inequality in life expectancy in a 2009 article in the Journal of Economic Perspectives. He calculated the Gini coefficient for that indicator since the late 19^th century for many countries and as far back as 1750 for a few countries such as Sweden and Germany. The Gini coefficient takes a value of zero if there is perfect equality and a value of one if there is perfect inequality.

What does his exercise yield? The Gini coefficient for Sweden, England, France, Germany and the United States stood between 0.4 and 0.5 for most of the 19^th century. However, there was a clear downward trend in mortality inequality so that by 1900, the level had fallen to a range between 0.3 and 0.4. By 1950, the drop had continued and stood instead between 0.1 and 0.2. Today it is closer to 0.1. Similar declines are observed in countries like India, Brazil and Japan over the course of the 20^th century.

In fact, Peltzman points out that in some countries like India and Brazil, “mortality is distributed more than income.” This is a momentous collapse in the inequality in life expectancy. Peltzman made a similar exercise using life expectancy for American states starting in 1910 and found a marked decline in life expectancy inequality within the United States.

What used to be a major source of inequality is now a minor source of inequality in human development. The unhealthy focus on income inequality makes us blind to these great developments in human well-being. This is not to say that analysis of income (or wealth) inequality should be abandoned. However, it ought to be complemented with other indicators of inequality. A great number of indicators would constitute a dashboard for sober analysis. At the very least, it would give us the capacity to appreciate how we are living in a more equal and richer world than we used to before."