Anarchy in Portland

Political leaders yawn as left and right battle with guns in the streets

WSJ editorial.

"Cities that tolerate political violence invite more of it. Portland, Ore., has failed to learn this lesson, and it’s a miracle no one was killed amid recent clashes. On Sunday Antifa adherents squared off against demonstrators affiliated with the far right Proud Boys. Bloody confrontations have become routine in Portland, but this one was even more harrowing than usual. Social-media video appears to show participants exchanging gunfire, and Police Chief Chuck Lovell said one person was apprehended for firing a weapon.

“We are trying our best,” Mr. Lovell added, describing how “our critical staffing shortage, as well as legal restrictions, impacts our response.” Daryl Turner, executive director of the Portland Police Association, says police funding has been slashed by more than $25 million since George Floyd’s murder, and some 150 officers have resigned or retired since June 2020. That includes 50 officers who served on a crowd-control unit.

Mr. Lovell said that on the day of the riot police responded to a fatal crash, a shooting that injured five people, and street racing that shut down the Fremont Bridge, among other crimes. Portland has seen 61 homicides this year, up from 32 in all of 2019.

Mayor Ted Wheeler, federal courts and Oregon lawmakers have severely restricted when police can use less-lethal force, even amid riots. Mr. Lovell said last week that the public “should not expect to see police officers standing in the middle of the crowd trying to keep people apart.”

The mayor still doesn’t get it. In a statement Monday he said the “Portland Police Bureau and I mitigated confrontation” and “minimized the impact of the weekend’s events to Portlanders.” He bragged that the “violence was contained to the groups of people who chose to engage in violence toward each other. The community at large was not harmed and the broader public was protected. Property damage was minimal.”

Message: Anarchy is tolerable as long as you’re merely shooting at each other. The chaos will continue until the city's political leaders muster the will to stop it."

Back to School With No Idea What to Expect

On masks and in-person learning, families are again at the mercy of bureaucrats and teachers unions

By Jason Riley. Excerpts:

"The officials in charge of running the nation’s public schools had all summer—and $122 billion in Covid relief funds from Congress—to plan for the first day of school, so naturally chaos has ensued as students begin heading back to the classroom.

San Francisco, Miami and Dallas haven’t decided on a quarantine policy or what infection-rate threshold will trigger school closures. In New York City, home to the nation’s largest school system, principals are wondering how every student can return to in-person learning full-time while still adhering to social-distancing requirements. Mayor Bill de Blasio announced a vaccine mandate for all school staff, but teachers unions have vowed to challenge its implementation."

"What these families need is detailed information on the criteria used to determine whether schools stay open. Instead, they’re being kept in the dark by bureaucrats and politicians. And they’re being toyed with by union honchos who don’t mind the uncertainty because it can be used as leverage to negotiate better pay and benefits as a condition of returning to the classroom."

"A New York magazine article last week reported on the findings of a “mostly ignored, large-scale study of COVID transmission in American schools” that was published in May by the Centers for Disease Control and Prevention. The study matter-of-factly called into question the efficacy of face coverings for children in schools. “These findings cast doubt on the impact of many of the most common mitigation measures in American schools,” the magazine reported. “Distancing, hybrid models, classroom barriers, HEPA filters, and, most notably, requiring student masking were each found to not have a statistically significant benefit. In other words, these measures could not be said to be effective.”

The article also noted that many European countries—including Britain, Italy, France, Switzerland and all of Scandinavia—“have exempted kids, with varying age cutoffs, from wearing masks in classrooms,” yet “there’s no evidence of more outbreaks in schools in those countries relative to schools in the U.S., where the solid majority of kids wore masks for an entire academic year and will continue to do so for the foreseeable future.”

The CDC study comports with the findings of Brown University economist Emily Oster and four co-authors, who analyzed student Covid rates in Florida, New York and Massachusetts during the 2020-21 school year with a focus on the effects of student density, ventilation upgrades and masking requirements. “We find higher student COVID-19 rates in schools and districts with lower in-person density but no correlations in staff rates,” they wrote in a paper published earlier this year. “Ventilation upgrades are correlated with lower rates in Florida but not in New York. We do not find any correlations with mask mandates.”"

The Covid-19 Pandemic and the ‘Tyranny of Tiny Risks’

Even the smallest potential benefit, regardless of cost, will be regarded as sufficient to justify masking

Letter to WSJ.

"In their Aug. 21 letter protesting Drs. Marty Makary and H. Cody Meissner’s “The Case Against Masks for Children” (op-ed, Aug. 9), Drs. Jonathan Popler, Satyanarayan Hegde et al., fail to put the risk posed by Covid to children into perspective. The authors write—and we needn’t doubt—that masking “has been shown to reduce transmission” and that “the student population isn’t currently eligible for vaccination.”

But reduce transmission by how much and to what effect? This the letter writers do not say—a curious omission for authors who praise cost-benefit analysis. Nor do they say what obviously ought to be said: Covid poses virtually no health risk to children. Therefore, children’s ineligibility for Covid vaccination is as irrelevant as is their ineligibility for treatment for Alzheimer’s.

Washington University economist Ian Fillmore expressed a worry that even the smallest potential benefit, regardless of cost, will be regarded as sufficient to justify masking. The pulmonologists’ letter proves that Prof. Fillmore is right to worry about what he calls “the tyranny of tiny risks.” 

Prof. Donald J. Boudreaux  

George Mason University

Fairfax, Va."

What’s the Science Behind Psychiatry and Mental Illness?

In medicine, illness can be objectively demonstrated. Visible findings can then be re-evaluated after treatment.

Letter to WSJ.

"Bravo to Stephen Eide for his penetrating review of the Allan Horwitz’s book “DSM: A History of Psychiatry’s Bible” (Aug. 16), which claims that the Diagnostic and Statistical Manual of Mental Disorders is a social creation. Mr. Eide’s review asks the provocative question: “What’s the science behind it?” In medicine, illness can be objectively demonstrated by physical examination and laboratory, radiology and biopsy findings. These visible findings can then be re-evaluated after treatment.

Despite psychiatry’s use of medical language, such as mental “illness,” no such biologic pathology is shown in a DSM “diagnosis,” and neither pretreatment nor posttreatment biologic pathologies are sought in patients, let alone demonstrated.

The results have been disastrous. While new treatments in medical and surgical fields based on scientifically validated data have resulted in declines in illness and improved outcomes, the opposite has occurred in psychiatry.

he number of people with mental distress correlates with the increasing use of mind-altering pharmaceuticals and other dubious treatments over the past several decades in psychiatry. That number is many orders of magnitude higher than before the DSM, and the distress is much more disabling in those affected. Maybe we will not be “stuck” with the manual, as the book argues, after all.

Daniel Zeidner, M.D.

Cheswick, Pa."

 

 

Climate Change Doesn’t Cause All Disasters

Warming annually causes about 120,000 heat deaths but prevents nearly 300,000 cold deaths

By Bjorn Lomborg. Excerpts:

"a new study of more than 10,000 rivers around the world shows that most rivers now flood less. What used to be a 50-year flood in the 1970s happens every 152 years today, likely due to urbanization, flood-control measures, and changes in climate.

Some rivers still flood, and reporters flock there, but more scare stories don’t mean more global flooding. The river Ahr, where most of the German flood deaths occurred, had a spectacular flow on July 14, 2021, but it was lower than deadly flows in 1804 and 1910. The real cause of increased fatalities from riverine flooding in Germany and many other places is more people building settlements on flood plains, leaving the water no place to go. Instead of more solar panels and wind turbines to combat climate change, riverside communities need better water management. And foremost, they need a well-functioning warning system so they can evacuate before disaster strikes.

Here, Germany has failed spectacularly. Following the deadly European floods in 2002, Germany built an extensive warning system, but during a test last September most warning measures, including sirens and text alerts, didn’t work. The European Flood Awareness System predicted the floods nine days in advance and formally warned the German government four days in advance, yet most people on the ground were left unaware. Hannah Cloke, the hydrologist who set up the system, called it “a monumental failure.”"

"Similarly, climate change is often blamed for wildfires in the U.S., but the reason for them is mostly poor forest management like failing to remove flammable undergrowth and allowing houses to be built in fire-prone areas. Despite breathless climate reporting, in 2021 the burned area to date is the fourth-lowest of the past 11 years. The area that burned in 2020 was only 11% of the area that did in the early 1900s. Contrary to climate clichés, annual global burned area has declined since 1900 and continues to fall.

We have data on global deaths from all climate-related weather disasters such as floods, droughts, storms and fire from the International Disaster Database. In the 1920s, these disasters killed almost half a million people on average each year. The current climate narrative would suggest that natural disasters are ever deadlier, but that isn’t true. Over the past century, climate-related deaths have dropped to fewer than 20,000 on average each year, even though the global population has quadrupled since 1920.

And look at 2021, which is now being branded the year of climate catastrophes. Add the deaths from the North American heat dome, from floods in Germany and Belgium, from Indian climate-related catastrophes that you may not have heard about, and from more than 200 other catastrophes. Adjusted to a full year, climate-related weather disasters could cause about 6,000 deaths in 2021. With greater wealth and technological development, we no longer see half a million or even 18,000 lives lost to climate-related weather disasters, but 6,000."

"global warming also reduces cold waves, which kill many more people globally than heat waves, according to a new study in the Lancet."

"temperature increases over the past two decades in the U.S. and Canada cause about 7,200 more heat deaths a year. But the study also shows that warming prevents about 21,000 cold deaths a year. Globally, the study shows that climate change annually causes almost 120,000 additional heat deaths but avoids nearly 300,000 cold deaths."

The Cost of the School Shutdowns

A new McKinsey study documents the severe student learning loss

WSJ editorial.

"Shutting down schools was among the most destructive policies of the pandemic, and a new report by McKinsey & Co. quantifies the harm.

The consulting firm examined spring 2021 test results for 1.6 million students in grades 1 through 6 across the U.S., then compared their performance with that of similar students pre-pandemic. They discovered that the pandemic-era children were, on average, about four months behind in reading and five months behind in math. 

However bleak, these numbers “likely represent an optimistic scenario,” McKinsey says. The results measure “outcomes for students who took interim assessments in the spring in a school building—and thus exclude students who remained remote throughout the entire school year, and who may have experienced the most disruption to their schooling.”

The McKinsey study doesn’t say it, but teachers unions were the main architects of this calamity by first refusing to return to the classroom, then insisting on watered-down schedules. The data company Burbio found that, by the end of the spring semester, most students could attend school at least part-time. But due to union demands, the return sometimes amounted to a few days or hours of in-person learning a week.

McKinsey found that children in majority black schools ended the school year a full six months behind in math and reading on average. Students in schools where the average household income was below $25,000 were seven months behind in math and six months in reading.

McKinsey notes that “students who move on to the next grade unprepared are missing key building blocks of knowledge that are necessary for success,” and “students who repeat a year are much less likely to complete high school” and attend college. Without “immediate and sustained interventions,” the report predicts the lost learning could slash lifetime earnings by $49,000 to $61,000 on average. This seems low to us, and the damage will be worse than average for millions.

Many affluent parents have paid for tutors or private school, but the most vulnerable children don’t have that option. The solution is more school choice nationwide."

The Excesses of Antiracist Education

By Ross Douthat.

"What’s really inflaming today’s fights, though, is that the structural-racist diagnosis isn’t being offered on its own. Instead it’s yoked to two sweeping theories about how to fight the problem it describes.

First, there is a novel theory of moral education, according to which the best way to deal with systemic inequality is to confront its white beneficiaries with their privileges and encourage them to wrestle with their sins.

Second, there is a Manichaean vision of public policy, in which all policymaking is either racist or antiracist, all racial disparities are the result of racism — and the measurement of any outcome short of perfect “equity” may be a form of structural racism itself.

The first idea is associated with Robin DiAngelo, the second with Ibram X. Kendi, and they converge in places like the work of Tema Okun, whose presentations train educators to see “white-supremacy culture” at work in traditional measures of academic attainment.

The impulses these ideas encourage take different forms in different institutions, but they usually circle around to similar goals. First, the attempt to use racial-education programs to construct a stronger sense of shared white identity, on the apparent theory that making Americans of European ancestry think of themselves as defined by a toxic “whiteness” will lead to its purgation. Second, the deconstruction of standards that manifest racial disparities, on the apparent theory that if we stop using gifted courses or standardized tests, the inequities they reveal will cease to matter.

These goals, it should be stressed, don’t follow necessarily from the theory of structural racism. The first idea arguably betrays the theory’s key insight, that you can have “racism without racists,” by deliberately trying to increase individual racial guilt. The second extends structural analysis beyond what it can reasonably bear, into territory where white supremacy supposedly explains Asian American success on the SAT.

But precisely because they don’t follow from modest and defensible conceptions of systemic racism, smart progressives in the media often retreat to those modest conceptions when challenged by conservatives — without acknowledging that the dubious conceptions are a big part of what’s been amplifying controversy, and conjuring up dubious Republican legislation in response."

In Britain, Young Children Don’t Wear Masks in School

During the Delta surge, British schools emphasized other safety measures: quarantining and regular testing for the virus.

By Dana Goldstein of The NY Times.

"From late spring into early summer, Britain’s elementary and secondary schools were open during an alarming wave of Delta infections.

And they handled the Delta spike in ways that might surprise American parents, educators and lawmakers: Masking was a limited part of the strategy. In fact, for the most part, elementary school students and their teachers did not wear them in classrooms at all.

Instead, the British government focused on other safety measures, widespread quarantining and rapid testing.

“The U.K. has always, from the beginning, emphasized they do not see a place for face coverings for children if it’s avoidable,” said Dr. Shamez Ladhani, a pediatric infectious-disease specialist at St. George’s Hospital in London and an author of several government studies on the virus and schools.

The potential harms exceed the potential benefits, he said, because seeing faces is “important for the social development and interaction between people.”

The British school system is different than the American one. But with school systems all over the United States debating whether to require masking, Britain’s experience during the Delta surge does show what happened in a country that relied on another safety measure — quarantining — rather than face coverings for young children.

Unlike the United States, all public and private schools in England are expected to follow the national government’s virus mandates, and there is a single set of guidelines. (Scotland, Wales and Northern Ireland are responsible for their own schools, but the rules have been similar.)

The Delta variant tested the guidelines. Starting in June, case numbers quickly increased before peaking in mid-July, which roughly mirrors the last few months of the school calendar. For the 13 million people in England under the age of 20, daily virus cases rose from about 600 in mid-May to 12,000 in mid-July, according to government data. Test positivity rates were highest among children and young adults — ages 5 to 24 — but they were also the least likely to be vaccinated.

It is difficult to pinpoint exactly how much spread occurred on campuses. But throughout the pandemic, government studies showed that infection rates in schools did not exceed those in the community at large, Dr. Ladhani said. In schools that experienced multiple virus cases, he added, there were often “multiple introductions” — meaning that infections were likely acquired outside the building.

There is debate about whether the end of the school year in mid-July contributed to the nation’s drop in virus cases, but some researchers point out that the decline began before schools closed.

To counter the Delta variant during the last academic year, the government provided free rapid tests to families and asked them to test their children at home twice per week, though compliance was spotty. Students were kept in groups within the school building and sent home for 10-day quarantines if a virus case was confirmed within the bubble. More than 90 percent of school staff members had received at least one vaccine dose by the end of June, according to a government sample survey of English schools, a similar vaccination rate to American teachers in the Northeast and West, but higher than in the South.

Under the government guidelines, masks in classrooms were required only for discrete periods in secondary schools, the equivalent of middle and high school, and were never required for elementary-age children."

" In a study conducted as the Delta variant spread, secondary schools and colleges in England were randomly assigned to quarantine or test.

"One set of schools quarantined students and staff members who came into contact with positive Covid-19 cases. The other allowed those contacts to continue coming into the building, but with the requirement that they take a rapid virus test each day for one week; only those who tested positive would be sent home.

Though the daily testing regimen was challenging for some schools to carry out, the results were reassuring: In both the quarantine and test groups, less than 2 percent of the contacts tested positive for Covid-19."

"Further reassuring evidence comes from testing antibodies of school staff members; positivity rates were the same or lower than adults in the community, suggesting that schools were not “hubs of infection,” according to Public Health England, a government agency."

Mask Mandates Didn’t See Statistically Significant Different Rates of COVID Transmission From Schools With Optional Policies

The CDC did not include its finding that “required mask use among students was not statistically significant compared with schools where mask use was optional” in the summary of its report. 

By Jon Miltimore of FEE. Excerpts:

"A recent New York magazine article states that the science on masks "remains uncertain," but noted the Centers for Disease Control and Prevention (CDC) in May published a large-scale study of COVID transmission in US schools.

The study, which analyzed some 90,000 elementary students in 169 Georgia schools from November 16 to December 11, found that there was no statistically significant difference in schools that required students to wear masks compared to schools where masks were optional.

“The 21% lower incidence in schools that required mask use among students was not statistically significant compared with schools where mask use was optional,” the CDC said. "This finding might be attributed to higher effectiveness of masks among adults, who are at higher risk for SARS-CoV-2 infection but might also result from differences in mask-wearing behavior among students in schools with optional requirements."

As New York magazine’s David Zweig noted, these findings, as well as other statistically insignificant preventive measures, “cast doubt on the impact of many of the most common mitigation measures in American schools.”

The CDC’s findings on masks and other preventive measures would not be particularly noteworthy or controversial outside the US. As New York magazine noted, many European nations have exempted students from mask mandates—including the UK, all of Scandinavia, the Netherlands, Switzerland, and even France and Italy—though with varying age cutoffs. The results have not been dire. 

“Conspicuously, there’s no evidence of more outbreaks in schools in those countries relative to schools in the U.S., where the solid majority of kids wore masks for an entire academic year and will continue to do so for the foreseeable future,” wrote Zweig. “These countries, along with the World Health Organization, whose child-masking guidance differs substantially from the CDC’s recommendations, have explicitly recognized that the decision to mask students carries with it potential academic and social harms for children and may lack a clear benefit.”"

"children face a low risk of falling sick or being hospitalized with COVID—with or without a face mask. Small children are far more likely to die of the flu, a car accident, a swimming pool, cancer or some other ailment than COVID-19, CDC data show."

"many Europeans without mask mandates have far lower COVID mortality rates than the US."

Why Doesn’t the United States Have (Covid) Test Abundance?!

By Alex Tabarrok.

"We have vaccine abundance in the United States but not test abundance. Germany has test abundance. Tests are easily available at the supermarket or the corner store and they are cheap, five tests for 3.75 euro or less than a dollar each. Billiger! In Great Britain you can get a 14 pack for free. The Canadians are also distributing packs of tests to small businesses for free to test their employees.

In the United States, the FDA has approved less than a handful of true at-home tests and, partially as a result, they are expensive at $10 to $20 per test, i.e. more than ten times as expensive as in Germany. Germany has approved over 50 of these tests including tests from American firms not approved in the United States. The rapid tests are excellent for identifying infectiousness and they are an important weapon, alongside vaccines, for controlling viral spread and making gatherings safe but you can’t expect people to use them more than a handful of times at $10 per use.

We ought to have testing abundance in the US and not lag behind Germany, the UK and Canada. As usual, I say if it’s good enough for the Germans it’s good enough for me."

Infant Industries and the Dubious Benefits of Barriers

By Bryan Caplan. 

"While I was teaching at the John Locke Institute, our Summer School sponsored a debate on free trade between Daniel Hannon and Terence Kealey.  Kealey rested his case for protectionism squarely on the classic infant-industry argument.  Kealey’s version: While free trade does indeed improve efficiency at the moment, the long-run effect is to suppress economic growth in poorer countries.  Why?  Because you don’t improve at doing things that you don’t do.

Suppose a rich country can produce cell phones for $200 each, while a poor country can only do the same for $1000 each.  Under free trade, Kealey’s argument goes, the poor country will produce zero phones – and its cost of production will forever remain $1000 a pop.  If 400% tariffs raise the price of foreign phones to $1000, however, domestic phone production will launch.  And once it does, domestic phone factories’ costs will start to fall.

If you replicate this policy across a vast range of industries, the low-productivity – hence poor – country transforms into a high-productivity – hence rich – country.  Yes, tariffs temporarily made the poor country even poorer.  In the long-run, however, the tariffs had the opposite effect.

Kealey also combined this argument with vague claims that every rich country got rich via protectionism, but the theoretical argument was clearly the heart of his argument.  After all, it wasn’t like he had a big multiple regression showing that all else equal, protectionism works wonders.  Instead, he looked at history, saw tariffs, and attributed nations’ success to these tariffs.  Why did he credit tariffs, instead of the thousand other factors at play in economic development in the past quarter millennium?  Because the theory made so much sense to him.

But does Kealey’s theory really make sense?  Not really.  Yes, high-cost businesses could respond to tariffs by improving their efficiency.  But they could just as easily respond in the opposite way.

Why?  Ponder this analogy.  You ban all players over 7 feet tall from the NBA.  How will the remaining players react?

The optimistic scenario is that previously demoralized shorter players suddenly see a fantastic opportunity for stardom.  They start practicing like crazy – and improvement naturally follows.

The pessimistic scenario, however, is that shorter players realize that they no longer need to practice like crazy to stay in the NBA.  So instead of redoubling their efforts, they slack off.  Their skills stagnate – or even get worse.

Notice: Even in the optimistic scenario, it is wishful thinking to assume that the shorter players will eventually improve so much that they actually become better players than the 7-foot-plus players who were summarily banned from the sport.   If you’re lucky, the shorter players will improve for a while, then hit a plateau well below the standards of the players they replaced.  If you’re unlucky, they’ll see the weak competition, breathe a sigh of relief, and relax.

The same goes for protectionism.  If you’re lucky, protected industries will start improving, then hit a subpar plateau.  And if you’re unlucky, protected industries will rest on their laurels, secure in the knowledge that domestic consumers have no choice but to “buy local.”

In wonkish terms, innovation is subject to both the substitution and income effects.  Giving firms a protected market raises the incentive to improve (the substitution effect), but also gives firms the breathing room they need to take it easy (the income effect).  Contra Kealey, the theoretical effect of protectionism on innovation is quite unclear.

Is there any way to gain greater clarity?  You could try running bona fide experiments, but that’s ultra-unlikely to happen.  In the world of trade policy, “experimentation” is an fig leaf for more protectionism, not a sincere attempt to figure out if protectionism works.

The alternate path to clarity, however, is to remember that the large majority of trade is domestic, anyway.  Why?  Because of (a) physical transportation costs, and (b) poorly-connected social networks.  The upshot is that every country has powerful natural trade barriers.  If Kealey is right, these natural trade barriers should have exactly the same effects as man-made trade barriers.  Yet so far, these natural trade barriers have plainly failed to make the vast majority of poor countries rich.  Indeed, a standard result in development economics is that being landlocked is very bad for growth.

I wouldn’t be shocked if a carefully-crafted experiment showed that under special circumstances, Kealey isn’t entirely wrong.  Once in a while, the substitution effect for innovation might overpower the income effect.  But once you acknowledge the ubiquity of natural trade barriers, it’s hard to believe that Kealey is right often enough to matter.  And that’s ignoring another substitution effect so prevalent in actually-existing protectionism: When your firm’s fate rests on government favoritism, you have a strong incentive to focus on pleasing the government rather than your customers.

And yes, learning by doing works here, too.  If the main thing you do is lobby the government, expect to become a master lobbyist."

We hear a lot about US jobs being outsourced overseas (‘stolen’). But what about the 8M insourced jobs we ‘stole’ from overseas in 2019?

Mark J. Perry.

"During Donald Trump’s time in office, we heard a lot of criticism from him, his economic advisers, and supporters about US firms outsourcing factory jobs overseas, along with accusations that countries like Mexico, China, and Japan were “stealing US jobs” (see approximately 20,000 Google search results for “Trump” and “stealing jobs”).

What we never heard about from Team Trump and other economic nationalists and protectionists are the thousands of jobs that are “insourced” into every US state by foreign companies. Those insourced “stolen” jobs totaled nearly 8 million American workers and represented 6.2% of all private-sector US jobs in 2019 based on new data released this week by the Bureau of Economic Analysis on “Activities of U.S. Affiliates of Foreign Multinational Enterprises.” The dynamic map above shows the thousands (and in more than half of US states hundreds of thousands) of insourced jobs in each US state in 2019. You can move your mouse over individual states to see each state’s insourced job figures, which range from 7,700 in Wyoming to 843,900 in California and average more than 154,000 insourced (“stolen”) jobs per US state.

Here are some key statistics on foreign business activities in the U.S. that highlight the significant economic benefits to the American economy from the more than 8,000 foreign-based firms that outsourced jobs and production into the US in 2019:

• The 8,328 US affiliates of foreign multinational enterprises (MNEs) employed 7.95 million American workers in 2019, a 1.9% increase from 7.8 million workers in 2018, adding roughly 150,000 insourced (“stolen”) jobs to the US economy in 2019
• Employment by US affiliates of foreign companies of 7.95 million American employees represented 6.2% of the total U.S. private industry employment in 2019 (128.2 million workers)
• The current-dollar value added of majority-owned US affiliates, a measure of their direct contribution to America’s gross domestic product, totaled $1.13 trillion in 2019 and accounted for 6.0% of total US private industry value added in 2019 of $18.8 trillion
• US affiliates of foreign companies supported nearly 3 million US factory jobs in 2019, accounting for more than 22% of America’s 12.8 million US factory workers
• US affiliates of foreign MNEs paid $665 billion in compensation for their US workers in 2019—with an average compensation of $83,700 per worker
• Foreign companies paid an average annual compensation of more than $94,000 to their employees in America’s manufacturing sector
• US affiliates of foreign companies employed more than 500,000 US auto industry manufacturing workers in 2019, with average compensation per worker of $84,000
• In addition to more than 500,000 US auto factory workers, foreign companies employed 79,000 Americans in the wholesale trade category “Motor vehicles and motor vehicle parts and supplies”
• US affiliates exported $409 billion in goods in 2019 (24.4% of all US exports)
• US affiliates imported $775 billion in goods in 2019 (nearly 30% of all US imports)
• US affiliates spent more than $78.4 billion on R&D in 2019 (15.8% of all US business-funded R&D of $495 billion)
• US affiliates spent $285 billion on new property, plant, and equipment in 2019
• US affiliates paid $54.0 billion in US income taxes in 2019, which is more than the bottom 50% of US taxpayers paid in federal income taxes in 2018 (most recent year available, $45 billion)
• As a separate state, the 7.95 million Americans employed by foreign-based companies would have been the fifth-largest US “state” ranked by the number of nonfarm payroll employees in 2019 behind only California, Texas, New York, and Florida
• As a separate state, the $665 billion paid to Americans working for foreign insourcing companies in the US would have ranked that group of American employees in 2019 as the seventh-largest US “state” for Personal Income, just behind No. 6 Pennsylvania at $743 billion but ahead of No. 8 New Jersey at $626 billion

In other words, the insourcing of production and jobs to the US has a significant and positive impact on our economy, and yet this huge economic stimulus to the US economy gets almost no attention. All we heard from Team Trump and still hear today from other politicians, protectionists, and trade/labor unions are the jobs that are allegedly being “stolen” from the US by China, Japan, Europe, and Mexico.

Bottom Line: In today’s highly globalized economy, multinational firms (both US-based and foreign-based) operate in a competitive global marketplace that increasingly makes national borders meaningless and irrelevant, as firms capitalize on hyper-efficient global supply chains/webs that add enormous value, and ultimately result in lower costs and higher quality for the goods that consumers buy here and around the world. In the Trump-era discussions on US manufacturing, the outsourcing of production and jobs overseas, and the supposed “theft” of our jobs by Mexico, China, and Japan, what got lost is another big part of the global economy: the insourcing of nearly 8 million jobs into America by the 8,000+ US-based affiliates of foreign multinational companies that operate here and employ millions of our workers.

Q: How could it possibly make sense to accuse Mexico, China, and Japan of “stealing” our jobs unless they also admit that the US is also “stealing” jobs from other countries, nearly eight million in 2019? A more enlightened and up-to-date view of international trade would recognize the economic reality that modern businesses today operate in an increasingly globalized marketplace for their inputs, parts, materials, supplies along complex, cross-border supply and value chains that include multiple dozens of countries. In addition, those global companies serve retail markets in hundreds of countries around the globe.

Just like it makes economic and business sense for thousands of foreign companies to outsource jobs and production from their countries to every US state (perhaps because the US is one of their major retail markets), it also makes economic and business sense for thousands of US companies to outsource jobs and production from the US to foreign countries, perhaps also because overseas markets now represent more than 50% of retail sales for many US-based companies like Apple (60.2% of 2020 sales were in foreign markets, see data here), Procter and Gamble (56% of its sales were overseas), GE (56% foreign sales), Intel (78.7% overseas sales) and IBM (53.7%). Hopefully, in the post-Trump era, we can move beyond a simplistic, nationalistic (“America First”) and outdated view of the global economy based on a fixed number of jobs where countries have to fight to “steal” jobs from each other in a zero-sum, win-lose world, to a more advanced and sensible view of a dynamic world of interconnected, cross-border transactions where production and employment decisions are grounded in the reality of economics, and not politics."

Charting the Latest CBO Data on Incomes, Taxes, and Inequality

By Scott Lincicome and Ilana Blumsack of Cato.

"The Congressional Budget Office (CBO) has just released its annual report on trends in U.S. household incomes, government transfers, and federal taxes between 1979 and 2018 (the last year for which data are available). As discussed last year when the CBO data came out, the office’s report is one of the more comprehensive assessments of Americans’ actual financial position – as opposed to, say, just the topline of their paychecks – because it accounts for most of the taxes and subsidies that add to or subtract from our “market incomes.” And, just like last year, these data tend to puncture several persistent myths regarding taxes, middle class incomes, wealth redistribution and transfers, and income inequality in the United States. This post will provide some of the highlights.

The Rich Are Paying Their “Fair Share”

For starters, the CBO data again show that the rich in the United States are paying a lot of taxes – even in 2018 after the Tax Cuts and Jobs Act took effect. In particular, the total amounts of annual federal taxes paid by the top quintile and the top 1 percent have basically doubled and tripled, respectively, since 1979 (adjusting for inflation). By contrast, the tax burdens of middle-income Americans (the second through fourth quintiles) have largely remained steady, and the federal taxes on the poorest Americans (the lowest quintile) have basically disappeared:

(Click on an income group to highlight or exclude it.)

Government Transfers Remain Historically Elevated

Next, the CBO data again show that, while the average amount of means-tested transfers has increased for every income group since 1979, it has exploded for low-income Americans and driven their gains in total transfer receipts:

On the other hand, low-income Americans’ share of total means-tested transfers actually declined between 1979 and 2018 because of a significant increase in such subsidies – especially Medicaid benefits – going to the middle class.

Incomes Are Increasing, But Probably Not How You Think

Third, the 2021 CBO report finds that 2018 continued the streak of increasing median household incomes and average household incomes by quintile – before and after taxes and transfers:

Figure 6 shows that taxes and transfers have substantially increased both incomes and income growth for the poorest Americans and the middle class.

Also noteworthy is the fact that, as economist Donald Schneider first pointed out on Twitter, pre-tax/transfer incomes haven’t increased for many of the richest U.S. households in recent years. In particular, Figure 7 shows that market incomes of households with children have increased for each income group in the bottom 99% percentile but actually declined a bit for the top 1 percent, while Figure 8 shows that this latter group’s significant income gains since the late 1970s came during the 1980s and 1990s.

These data again buck oft-repeated claims of the “rich getting richer” in recent years at other Americans’ expense.

And speaking of inequality…

About that “Inequality Crisis”

The CBO report also shows, as noted in a recent column, how dire claims of skyrocketing inequality are overblown and how the current U.S. tax and transfer system affects these trends. When accounting for taxes and transfers, for example, the gap between rich and poor narrows significantly and was actually smaller in 2018 than it was several other times in the 1980s, 1990s, and 2000s:

And the share of post-tax/transfer income held by the top 1% in recent years (a little more than 13 percent) is only slightly higher than it was in 1986 (12.9%) and much lower than it was right before the Great Recession:

Furthermore, even the one percent's share of market incomes has been essentially flat since 1999 (at around 18 percent, with plenty of ups and downs in between). These data thus refute current demands for new and expansive government programs to fix a supposedly recent and troubling rise in inequality (regardless of whether one thinks rising income inequality is even a problem to be fixed).

* * *

As discussed last year and elsewhere, one could (and probably should) question a system in which government payments represent a large and increasing share of Americans’ income, as well as how these payments affect Americans’ life and work decisions. And certainly, there are many tax, trade, and regulatory policies that the federal and state/local governments should adopt to improve American living standards. Still, the new CBO data are - just like last year - an important counter to prevalent calls for an even more progressive distribution of taxes and transfers to combat an “unfair” tax code, “stagnant” incomes, and “skyrocketing” inequality.

It's just not reality."