Kash Mansouri Is Very Unhappy with the Economist on Bush on Trade

Kash Mansouri writes:

The Street Light: The Economist on Bush on Trade - Yahoo! News: Economy News : The Economist takes a massive dive today, as they continue to bizarrely and irresponsibly assume the best (or maybe "the least bad" would be more accurate) of the Bush administration. The last two paragraphs of the story contain the offending bits:

Despite a dispiriting start that saw the imposition of steel tariffs, the Bush administration has made great efforts on trade, pushing forward with both multilateral and bilateral deals. Its biggest goal, a substantive deal from the Doha round of World Trade Organisation negotiations, is currently on life support. But the administration has managed to secure a variety of smaller deals, while letting steel tariffs die a death at the hands of the WTO. Now even progress of that sort may end.

Already, the Democratic influence is showing on the administration's trade team. On Friday March 30th it announced that it was imposing countervailing tariffs on Chinese manufacturers of high-gloss paper to offset indirect subsidies they get from the state. America has usually steered clear of this sort of action against state-run economies, saying it is prohibitively difficult to calculate excess subsidies. But the gaping trade deficit with China, and growing protectionist forces, have altered the political calculus. New tariffs of up to 20% will be imposed immediately. The American economy will survive without cheap Chinese paper products. But this could open the way to tariffs on a wide variety of critical products and signals an unwelcome shift in American trade policy.

The Bush administration has made great efforts on trade?!? The Bush administration's imposition of tariffs on China are due to "Democratic influence"?!?

Please. With the imposition of tariffs on China last Friday, the Bush administration acted in exactly the same way that they've acted for their entire 6+ years in office: being in favor of free trade whenever and wherever it helps important friends industries, and being more than happy to impose trade protection whenever and wherever it helps important friends industries. The Bush administration enacted a host of tariffs, quotas, and subsidies during the six years when it had a compliant Congress, and last week's action was just more of the same.

Furthermore, the Doha Round (the round of multilateral trade negotiations that is intended to finally take serious steps toward helping the developing world) is "on life support" in no small measure because the Bush administration has never seriously tried to make it work, instead focusing on small bilateral agreements that make no difference to anyone in the US except for a few individual corporations. And there are good theoretical reasons to think that a bunch of small bilateral trade deals may actually make it harder to conduct multilateral trade negotiations, putting a world-wide level playing field further out of reach than ever before.

The Bush administration's record on trade policy is a hodge-podge of opportunism and indifference, and owes nothing to Democratic pressures or desires. For the Economist to pretend otherwise is a sad continuation of their baffling tolerance of Bush's long record of incompetence and misplaced priorities.

Comments

[Slocum]

"The Bush administration's record on trade policy is a hodge-podge of opportunism and indifference, and owes nothing to Democratic pressures or desires."

I'd say that is largely true (though the anticipated difficulty of getting trade deals approved by Congress surely played some role). But at the same time, current Democratic pressures and desires are pretty clear (the position of the Clinton administration and Brad DeLong notwithstanding). I fear 'opportunism and indifference' may come to look pretty good -- not in comparison to the Clinton administration's principled commitment to free trade -- but in comparison to what we may be in for starting in '08.

[Matt]

Does anyone still think that The Economist has pricipled positions on things as opposed to just being one more hack-tacular rag? They support Bush as much as they can since he's been good to the pocketbooks of those who work for and those who read the magazine. They try to maintain some respect but if it was ever a magazine of principle those days are long past.

[save_the_rustbelt]

Stunning' news hits Hoover's employees

Owner cutting jobs, closing operations

Tuesday, April 03, 2007Teresa Dixon Murray and Henry J. GomezPlain Dealer Reporters

Exactly 100 years after a Canton man invented the vacuum cleaner and started the Hoover legacy, the new owner of the Hoover plants in Stark County said Monday that the company is closing most of the local vacuum manufacturing operations and eliminating about 750 jobs.

TTI Floor Care North America, which bought Hoover in January, said it is moving most of the Stark County jobs to existing plants in Texas and Mexico.......

Please let me know what high value replacement jobs will be forthcoming to replace these jobs, you know, comparative advantage and all that.

Increased trade is increasing income inequality - get used to it.

[jm]

Because export subsidy through vendor financing fraud* is so profitable to the power elites of Asia, and has gone on so long that the collapse of their export manufacturing sectors that would result from balancing of trade would be fatal to them, they won't allow it voluntarily. But the harm from endless, endlessly growing trade and current account deficits will eventually reach intolerable levels in the U.S., so the imbalances must someday end.

I conclude from this that the way they will end will be by the re-imposition of high tariffs in the US.

*Governments buying up the dollars their exporters' dollar revenues at artificially elevated exchange rates and then loaning them back to us at low interest rates, though there is no possibility we can ever repay the loans.

[anne]

Ah, I understand, we will return to the days of Herbert Hoover rather than Franklin Roosevelt; we will save the middle class economy by destroying the middle class economy. How? Tariffs.

[anne]

Remember, just when we are being told the Americans are looking back longingly to policies of a New Deal legacy, we have turned to a physically and psychologically and materially crippling $2 trillion war and occupation and turned away from a $2 trillion bolstering of America's middle class. There is irony and irony.

[bakho]

Bush has a trade policy?

[Mike]

Once a year, for some mysterious reason, the Bureau of Economic Analysis releases what amounts to an annual 'report card' on the cumulative ravages of more that a quarter century of mismanaged and misguided US monentary/fiscal/trade policy. They call it "International Investment Position".

If you're interested, you'll find their version of that data here:

http://www.bea.gov/International/Index.htm

How we got into this titanic mess is a long story I won't go into here, but have recently gone into in some detail here:

http://delong.typepad.com/sdj/2007/04/brad_delong_the.html

If you're an economic policy maker/overseer (and/or just the wonkish type) you might want too, to check out what Wynne Godley had to say about the economic iceberg currently dead ahead of us several years ago, now.

You'll find that here:

http://ideas.repec.org/p/lev/levysa/00-01.html

[kumbaya]

As if Democrats did not tailor their "principles" to suit their friends. It just so happens that out of all industries their friends are in financial services, entertainment and partially high-tech - all favoring unlimited globalization.

[Gerard MacDonell]

I think Slocum raises a very good point. Neither party is good on this issue these days, but the Democrats seem worse. And I have not seen even you, Dr. Delong, take Alan Blinder to the woodshed yet for his apostasy. Are bad ideas expressed by Democrats somehow ok?

[save_the_rustbelt]

Bakho: the best money can buy!

Gerard: do you have a guest room? Thousands of former manufacturing workers who lost their homes might need to bunk in for a while.

[Ponzi Q. Globalization]

"And I have not seen even you, Dr. Delong, take Alan Blinder to the woodshed yet for his apostasy. Are bad ideas expressed by Democrats somehow ok?"

"Apostasy". Interesting word choice.

"Bad ideas". A more accurate and consistant term whould be 'heresies'.

[spencer]

Apostasy -- Come on point out to me where Alan Blinder said a word of opposition to free trade. All he said was that given that free trade has significant impacts on the course of the economy people should take this into consideration when planning the future nature of employment. Maybe you should actually read what he says rather then depending on "talking points" for your facts.

We should have known the Bush administration had something like this in mind because they had already started accusing democrats of not being for free trade. This administration has a great record of accusing democrats of doing exactly what they are getting ready to do so that they
have their propaganda in place when they
change policy.

But wasn't this classic case of announcing a policy change on Friday afternoon so that the mainstream press completely ignores it.

[Gerard MacDonell]

Ponzi, at least I spelled it right. I had to check before posting that one. But I think the word fits the context. I see you don't support free trade, not reflexively anyway. You view support for trade as some sort of ideological thing, rather than the result of reasoning. In this regard, you are as Delong accuses Bush of being, which was my point.

Rusty, the aggregate level of employment in the United Stats is not determined or even adversely influenced by globalization. Globalization may affect income distribution, but the solution to that is a more progressive tax schedule and maybe a broader social safety net. It is not protection.

Maybe this conventional view is wrong, but it is pretty widely held. Perhaps you like Bush for his protectionism. That would be your call.

I do have a spare bedroom, though, as I work in one of the many many sectors that have benefited from international trade. Ok, that is not the main reason, but I sure have not been hurt by trade. If you resent this, then go for a steeper marginal tax schedule. Get what you want rather than shooting yourself and your fellow Americans in the face.

I would be willing to be much money that Alan Blinder's apostasy boils down to the following. Free trade raises national income. But it has distributional effects that are adverse. If people knew their own economic interest, they would support both free trade and redistributive policies. Unfortunately, the past 7 years have pretty much proven that people are too stupid and distracted by sideshows (like stem cells, abortion, and gay marriage) to recognize their own economic interest.However, they can still be manipulated into resenting foreigners, putting up tariffs and thereby achieving at great damage to the economy some minor improvement on income distribution. This is an extremely bassackward way of going about it, but given where the public is, sadly we cannot do any better. To reiterate, this is Blinder's new view, I bet.

Rusty, don't let Blinder insult your intelligence like that.

[Gerard MacDonell]

Spencer: I spoke with Blinder directly.

[theCoach]

"I see you don't support free trade, not reflexively anyway. You view support for trade as some sort of ideological thing, rather than the result of reasoning."

there is a contradiction here.

[theCoach]

"If you resent this, then go for a steeper marginal tax schedule."

I think the point is that a package deal has never been on the table. If it were I would take it -- as it is, the reflexively free traders bundle IP protection than abandon the part that makes it worthwhile to those that do not benefit from free trade. Let's try it the other way for a while -- once we get the safety net in place -- universal health, real job training, and subsidized education, wage insurance or something similar, then we can expand free trade -- sound like a deal?

[save_the_rustbelt]

Gerard:

Glad you are doing well.

Blinder only pointed out the obvious, freer trade is not nirvana for everyone. Now he is Public Enemy #1. For telling the truth....

Progressive taxes may offer some relief in the long run, but to the former manufacturing workers who are losing their homes the relief is too indirect and way too late.

No one I know wants a handout, they would prefer a half decent job, even half would be an improvement.

[Yike]

They say the third time's charmed....

-----------------------

Why oh why can't we dispose of the canards in this tired old pseudobate?

The real political/economic problem here isn't about 'free traders' versus 'protectionists'...

--------

It's [About] the [Global] Medium of Exchange [Markets], Stupid

Given our huge trade AND federal budget deficits, AND for so long as world currency markets are rigged by central governments and central banks (as they demonstrably are), an American economist (ANY American economist) pimping for 'free trade' is MY nominee for "Stupidest (and/or Most Mendacious) Man Alive"....

--------

America's Truth Deficit

by William Greider
July 18, 2005
(NY Times)

http://www.commondreams.org/views05/0718-26.htm

----

US dollar hegemony has got to go

By Henry C K Liu
April 11, 2002
(Asia Times)

http://www.atimes.com/global-econ/DD11Dj01.html

----

Power to the people

Kevin Danaher
April 29, 2001
(The Observer)

http://observer.guardian.co.uk/global/story/0,10786,524245,00.html

----

James K. Galbraith
on Global Keynesianism
(ca. 1995)

http://www.jobsletter.org.nz/art/artg0002.htm
--------

Posted by: Mike | November 07, 2006 at 02:56 PM

Posted by: Mike | November 10, 2006 at 03:01 AM

[Ponzi Q. Globalization]

"Blinder only pointed out the obvious, freer trade is not nirvana for everyone. Now he is Public Enemy #1. For telling the truth...."

You're absolutely right, save_the_rustbelt. Blinder now (only now?!) realizes that the good jobs are going away and is sounding the alarm bell. And even though he insists he is a true believer and can always be counted on to fight the good fight against economic heresy, you can see how he is still pilloried by even more rabid believers. I expect a nice schism in the Econochurch soon.

"No one I know wants a handout, they would prefer a half decent job, even half would be an improvement."

Sadly, there will not be enough good jobs available to Americans under the neoliberal globalization plan. In the place of good jobs place we are to have the dole. A dole that is sure to decrease in value as the power is drained from formerly productive citizens.

The ideal should be a nation of self-sufficient people who work in a vibrant economy that provides craploads of good jobs that people can be proud of having. Not some permadole for the masses. The dole should be for hard times and for the *small* group of people who, for whatever reason, can't be self-sufficient.

It would be nice if our elites got off as much on trying to raise their compatriots up as they do on creating a global neolib or neocon paradise that they can dominate.

[JonF]

Re: Progressive taxes may offer some relief in the long run, but to the former manufacturing workers who are losing their homes the relief is too indirect and way too late.

Progressive taxation alone won't help much, agreed. But if those tax dollars are spent providing people with a sound safety net (not the pathetic jury-rigged thing we have now) then that will help. Not only because people who lose their jobs permanently will not be plunged into poverty as they are now, but because if money is kept flowing through hard-hit areas, those areas will not turn into economic wastelands but rather will have enough consummers around to support new job growth in other sorts of businesses. For an example, see the aftermath of Hurricane Andrew in S Florida where a flood of federal (plus state and insurance) dollars afterwards transformed a region that was well on it way to going to seed into one that now supports a solid middle class.

[Justin Rietz]

As a supporter of free trade, I am frustrated with each side of the aisle. But what else can be expected from politicians? The best is that they bumble along, slowly moving in the right direction in reaction to different special interest groups and economic problems. Not that I am cycnical or anything ;-)

When I say I am a supporter of free trade, I include unilateral free trade. I believe the U.S. should drop all import tarrifs, quotas, and subsidies regardless of what other countries do.

If someone outside of the U.S. can provide something cheaper than someone inside the U.S., U.S. consumers benefit. If a foreign government is willing to subsidize businesses (think Airbus), U.S. consumers gain at the expensive of foreign tax payers.

Of course, we would need to provide assistance to U.S. workers who are currently employed in protected industries and therefore would face layoffs. But over time, these workers would be repositioned into new jobs, creating new products and services that we don't currently have.

[China Hand]

NewPage (the paper company that filed the complaint against China) was recently created and is still controlled by Cerberus Capital. The chairman of Cerberus is one of Mr. DeLong's favorite pinatas, ex Treaury Sect'y John Snow. I'm not sue how coherent the administration strategy is, but it appears that, instead of a full-court press on the matter of yuan valuation, it's sliding into a "managed trade" process similar to what we tried with the Japanese last century. I blog about it on my site, China Matters.

[Ponzi Q. Globalization]

"But over time, these workers would be repositioned into new jobs, creating new products and services that we don't currently have."

Why won't these 'new products and services' be done more cheaply overseas too? Unless the time elapsed for the repositioning is long enough for American wages to descend to the level of an India or China, it's better for the American consumer to have the new work also not be done by Americans.

[anne]

Again, confronted with changing conditions of international trade in which American workers need to be properly protected, even as European or Australian workers are being protected, we are not turning to New Deal resolutions but are in the midst of a tragic $2 trillion war in and occupation of Iraq.

[anne]

Imagine what could be done for American workers simply with health care provision and free tuition at public colleges-universities. But, that would take thinking past the insane tragic squandering of lives and material resources in Iraq.

[DRR]

I think a real healthcare system in this country would go a long way toward solving many of our problems, both directly & indirectly.

Free tuition I dunno about. There are a lot of argument's that it's basically a subsidy for the middle class but it is pretty popular and most advanced countries have free or heavily subsidized tuition so why not.

[anne]

Interesting and sensible that minimal cost public education should be considered a subsidy for the middle income household, which it surely is, but the point is to offer fine public education as a subsidy through lower income households and to emphasize just this.

[anne]

African public schools are gradually becoming free for boys and girls, and there is elation at the advent. Mexico however as sorely needs free public education through university, and subsidies.

[anne]

http://www.nytimes.com/2005/04/09/international/americas/09mexico.html?ex=1270699200&en=002dab476b252724&ei=5090&partner=rssuserland

April 9, 2005

At 15, Dreaming Big Dreams: Oh, to Be a Scholar
By TIM WEINER

MEXICALI, Mexico

ALICIA ÁLVAREZ lives two miles from the American border and light-years from the American dream.

Growing up in Mexicali has made her a realist at 15. She has no taste for romances and soap operas. Harry Potter stories and a horror movie at the mall are as far away as fictions take her from her city's heat and dust.

Alicia has a fierce intelligence, and it fires her only soaring ambition: to get a decent education, schooling that could lift her up and out of her surroundings into a better life. It looks to her as likely as a trip to Mars.

"It seems impossible," Alicia said with a shy, distant gaze. She has started high school, having proved herself one of the brightest girls in her city, a straight-A student with an exceptional aptitude for math.

"My family has no money for college," she said. "I probably will never get to a university, though I would love to.

"My education has been hard. My teachers are trained in teaching, not in math and science. It's a struggle for them to teach me what I need to be taught. To learn what I want to know. And I want to know so much."

She finds herself, like her country, poised with one foot in the door of opportunity and one stuck in the poverty and powerlessness of the past. But with her fine mind, the idea of having a better life than one's parents, while distant, is still a shimmering possibility.

Her father, David Osuna, 46, works part time selling used cars. He has good weeks and bad weeks. Her mother, Alicia Álvarez, 48, keeps house. They have provided their children with the basics of life: food, clothes, shelter. Their slender, dutiful, deep-thinking daughter is a bit of a mystery to them.

Alicia's brothers, David, 21, and Luis, 16, are in awe of her intelligence, respectful, sometimes distant. David is the one in whom she sometimes confides her dreams.

ALICIA'S uncle and godfather, Abel Álvarez, 56, knows her aspirations. He grew up behind a plow, and then crossed over the border when he was her age to work the fields of the Imperial Valley in California. He now earns a good living in construction, a self-made man who builds malls in El Centro, Calif., 15 minutes north of Mexicali.

He has watched Alicia grow up with a mixture of pride and worry.

"It's not a lot easier growing up in Mexicali now than it was 40 years ago," he said. "The pie's a little bigger, but a lot more people want a slice. Growing up here, you go up against all that, and with the United States and all its riches just over the line."

Mexico's economy has been flat for almost five years. Poverty is ever-present. The middle class is small; it has been shrinking for a generation. Stealing into the United States is often the only way out....

[anne]

Generalized health care and minimal cost or even subsidized public education are essential for America and everywhere found through developed economies, but need to be continually extended through developing economies.

[Emma Anne]

"Free tuition I dunno about. There are a lot of argument's that it's basically a subsidy for the middle class but it is pretty popular and most advanced countries have free or heavily subsidized tuition so why not."

The fact that it is a subsidy for the middle class - as well as for those below the middle class - seems like a feature, not a bug. The middle class is being hurt by good jobs being outsourced. Do we have to wait until people have fallen into poverty before helping alleviate the harm?

[anne]

http://www.feri.org/common/news/details.cfm?QID=2088&clientid=11005

January 11, 1944

Message on the State of the Union
By Franklin Roosevelt

This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights — among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

As our Nation has grown in size and stature, however — as our industrial economy expanded — these political rights proved inadequate to assure us equality in the pursuit of happiness.

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. "Necessitous men are not free men." People who are hungry and out of a job are the stuff of which dictatorships are made.

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all — regardless of station, race, or creed.

Among these are:

The right to a useful and remunerative job in the industries or shops or farms or mines of the Nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

All of these rights spell security....

[anne]

http://chinamatters.blogspot.com/

A fine refence source on Chinese-American legal-economic relations.

[anne]

Emma Anne:

"The middle class is being hurt by good jobs being outsourced. Do we have to wait until people have fallen into poverty before helping alleviate the harm?"

Perfectly expressed and profoundly troublesome. We are losing what the New Deal and legacy brought us in the way of an economic bill of rights and this is a profound problem.

[anne]

Why should we not have a federal-state revenue sharing plan that would allow for minimal or free tuition at public colleges-universities? Brad DeLong has written of the revolution in American public education from the turn of the 20th century; I would add the dramatic turn to college in the veterans bill after the last World War. Why not another turn to education, remembering there was a time when college was free of tuition in New York and California, and nearly so in Texas and North Carolina?

[anne]

Good grief; we are in so much trouble, so darn much trouble. Now, we are to find out the directors of student aid at selected colleges, expensive as heck colleges, have steered students to loan companies in which they had financial interests. There have been rumors of this for a while, but I completely dismissed the notion.

[Justin Rietz]

RE: Ponzi:

I believe your line of logic suggests that all jobs in the U.S. being outsourced - if these new products/services can be done more cheaply overseas, surely most jobs in the U.S. must face the same problem? (rhetorical question).

Second, why are U.S. citizens more worthy of jobs than citizens of other countries?

[Justin Rietz]

Sorry, the first sentence of my post should have read "I believe your line of logic suggests that all jobs in the U.S. could be outsourced"

[anne]

Well, the question is rather foolish unless the point is that people should have no self-interests and there should be no self-interests reflected in society. Since there are self-interests, we should be and will be concerned about losses of work here and more concerned than with losses of work elsewhere. So, we will be self-protective.

[Ponzi Q. Globalization]

"I believe your line of logic suggests that all jobs in the U.S. could be outsourced - if these new products/services can be done more cheaply overseas, surely most jobs in the U.S. must face the same problem?"

Not all jobs, just those that are not dependent on location. This number is growing.

"Second, why are U.S. citizens more worthy of jobs than citizens of other countries?"

They are not. U.S. citizens are not more worthy of the fertile land we have here in the U.S. either.

We Americans are not better or more deserving of many nice things we have that others do not. I'd imagine that we have pretty much the same distribution of wonderful people and a-holes as anywhere else.

[Ponzi Q. Globalization]

"Since there are self-interests, we should be and will be [more] concerned about losses of work here [] than about losses of work elsewhere."

Couldn't agree with you more, anne.

Not that Justin Rietz implied this but it's weird that so many others think this is racist (really weird since America has a multi-racial society) or xenophobic.

[anne]

Again, having been reading of the cost and competition of colleges-universities, I am much disturbed that we are not focused on a dramatic lowering of costs for and resulting expansion of public universities. We speak of education as an answer to competitiveness, which I argue it can and should be, but we are not focused on what can be done to make public universities continually more accessible.

[Justin Rietz]

I like the self-interest angle. But we could take it a step further: why not argue for protections (tarriffs, quotas)to prevent job losses in your state? Or your city? Surely this has as much impact on a person as employment in the U.S. as a whole?

Second, cheaper products are also beneficial to consumers, especially lower income consumers.

We spend billions in foreign aid. If poor countries had more jobs, and hence greater economic growth, there wouldn't be as much need for such aid, thus allowing the U.S. to lower taxes.

[Antoni Jaume]

Justin Rietz says "We spend billions in foreign aid. If poor countries had more jobs, and hence greater economic growth, there wouldn't be as much need for such aid, thus allowing the U.S. to lower taxes."

ROTFLAO

DSW

[anne]

"Second, cheaper products are also beneficial to consumers, especially lower income consumers."

Second, cheaper products are not nearly cheap enough for lower income consumers with no health care or facing college costs for children.

More expensive products are just fine with better jobs; better jobs are much to be preferred to cheaper products.

[anne]

As for the billions for foreign aid, such billions are quite negligable. Iraq however is by no means negligable but that is another problem entirely.

As for state by state competition, oh my is there ever such competition. Even wonder why Vermont, yes, Vermont has so many insurance companies? What does it take for Toyota to open truck production in Mississippi? How precisely does New York City subsidize Merrill Lynch, say?

[Justin Rietz]

First, we have been working off of the assumption that the U.S. would have a net loss of jobs. An argument was made that new jobs wouldn't be created in the U.S. because these jobs would also be outsourced. Given the loosening of trade restrictions with NAFTA and the recent outsourcing trend over the last few years, then, we would expect an increase in unemployment in the U.S. However, the U.S.'s has had a stable and low unemployment rate since NAFTA was enacted, except for an increase after the 2001 recession which peaked at 6.3% (http://www.economagic.com/em-cgi/data.exe/feddal/ru)

To Anne's point: Yes, states do have subsidies. The point is more about how we define the "territory" to protect. Country, state, county, city, neighborhood? Who do we decide is in our "circle of protection", and who isn't? To define this at a national level (or a state level) is more or less arbitrary from an economic standpoint, albeit not from a political standpoint.

(For the record, I am against any subsidies / quotas / tariffs at any level)

I wouldn't say billions of $$$ are negligible. While I don't want to go off topic onto healthcare or education costs, we can use these costs to put foreign aid in perspective:

Bush signed a $20.9 billion dollar foreign aid spending measure in 2006. From what I can tell, about $5 billion was for military aid, leaving us with $16B. If we assume an average year of college is $20,000, this aid amount would put 200,000 kids through four years of college.

Another approach: assume health care insurance costs $1,000 / month for a family of three (based upon my experience for my family of three without business or government contributions). $16B would cover over 1.3M families, or 3.9 million people, annually.

And yes, the U.S. government does spend significant amounts on Iraq, the military, and other programs. This doesn't negate the numbers above. Nor do I necessarily favor this spending.

[anne]

Nicely done, Justin.

[Justin Rietz]

Thanks, Anne. But you aren't supposed to let me off the hook so easily! :-)

[anne]

No; the concern I have is with looking to a New Deal legacy in health care, in education, in infrastructure development, in easing constraints on unions, and fair labor friendly and environment friendly trade, rather than any trade limitation.

A national health care plan, free public college-university tuition and infrastructure development and we have a vastly different level of competitiveness and well-being.

[anne]

John Edwards, as Paul Krugman wrote, has a complete and fine health care plan, however what puzzles me is why Barack Obama still has no health care plan. Obama who is wonderfully inspirational on a general level, came to a forum for candidates in Las Vegas with nothing to say on health care though that was the subject. Now, not days but weeks later, Obama is still not able to present a plan or answer a specific question from a cancer research and treatment advocate in Iowa. How can this be?

[anne]

Hillary Clinton by the way also has not set out a health care plan, which amazes me, but her position on forever occupying Iraq makes her an impossible candidate for me in any case. There is a special irony to having a plan to occupy Iraq but not for health care support, but that is the sort of lunacy we now confront.

[anne]

Obama would not or worse could not answer a question on health care from a cancer cure advocate yesterday, saying he was listening and interested in building a consensus of policy, but what policy? When pushed again in a different setting in Iowa, Obama blathered on about saving money for health care by reducing obesity. What the heck is wrong with such a hopeful guy or the advisers?

[anne]

http://economistsview.typepad.com/economistsview/2007/04/paul_krugman_ch.html

April 6, 2007

Paul Krugman: Children Versus Insurers
Edited by Mark Thoma

Since resources are limited and choices must be made, what types of health care programs should the government support?:

NY Times: Consider the choice between two government programs.

Program A would provide essential health care to the eight million uninsured children in this country.

Program B would subsidize insurance companies, who would in turn spend much of the money on marketing and paperwork, and also siphon off a substantial fraction ... as profits. With what's left, the insurers would provide additional benefits, over and above basic Medicare coverage, to some older Americans.

Which program would you choose? If money is no object, you might go for both. But if you can only have one, it's hard to see how anyone could, in good conscience, fail to choose Program A. I mean, even conservatives claim to believe in equal opportunity — and it's hard to say that our society offers equal opportunity to children whose ... families can't afford proper medical care.

And here's the thing: The question isn't hypothetical..., but the choice between A and B is playing out right now.

Program A is the proposal by Senator Hillary Clinton and Representative John Dingell to cover all children by expanding the highly successful State Children's Health Insurance Program. To pay for that expansion, Democrats are talking about ... shutting down Program B, the huge subsidy to private insurance plans ... so-called Medicare Advantage plans — created by the 2003 Medicare Modernization Act. The numbers for that trade-off add up, with a little room to spare. ...

Now, nobody is proposing that Medicare ban private plans — all that's on the table is requiring that they compete with traditional Medicare ... on a fair basis. And that's not what's happening now. ...Medicare Advantage plans now cost taxpayers an average of 12 percent more per enrollee than traditional Medicare. Private fee-for-service plans, the fastest-growing type, cost 19 percent extra.

[T]he Bush administration ... is adamantly opposed both to any attempt to expand the children's health insurance program — in fact, the administration wants to cut its reach — and to any attempt to reduce Medicare Advantage payments.

The official reasons given for this position are evasive and dishonest.

Explaining the administration's opposition to expanding the children's program, Michael Leavitt, the secretary of health and human services, said the program "should not be the vehicle by which we insure every adult and every child in America." But that isn't what the Democrats are proposing.

As for why the administration wants to keep subsidizing insurance companies, Mr. Leavitt says, "The president and I are for competition." But nobody is against competition — it's subsidized competition that's the problem. Mr. Leavitt added that "the marketplace beats the government at controlling costs and delivering value" — but he's not willing to put that assertion to the test by requiring that private insurers compete on a level playing field.

Lately, both the insurance lobby and the administration have also started playing the race card, claiming that Medicare Advantage offers special benefits to the poor and to minority groups. ... But a new report from the Center on Budget and Policy Priorities thoroughly debunks these claims...

Clearly, the real reasons for the administration's position ... are ... political, having to do with the long-term battle over the future of the welfare state.

But that's a subject for another day. For now, the choice is between A and B — health care for children, or subsidies for insurance companies. Which will it be?

[anne]

"Since resources are limited and choices must be made, what types of health care programs should the government support?"

Well, we must always remember that resources are being artificially and insanely limited to the direct extent of $14 billion a month by the tragic occupation of Iraq. Why is it that economists can simply repeatedly refuse to notice or if noticing mention that we have chosen guns over butter, destruction over our very health, destruction over even the health of our children?

[Jason Allen]

"First, we have been working off of the assumption that the U.S. would have a net loss of jobs."

No. We are under the assumption that any industries with significant labor inputs, significant externalities, and possessing a no dependence w/r/t location will experience a loss. Basically, this means the tradables prodution sector, which has seen dramatic downward shifts in employment. In the future, services (as per Blinder) will be affected more directly, as it becomes easier/cheaper to do tasks remotely.

"An argument was made that new jobs wouldn't be created in the U.S. because these jobs would also be outsourced."

See above concerning "services". New service jobs are being shifted or designed for implementation overseas, if feasible. Certain fields, such as industrial reasearch, are moving toward the overseas manufacturing centers with great rapidity.

"Given the loosening of trade restrictions with NAFTA and the recent outsourcing trend over the last few years, then, we would expect an increase in unemployment in the U.S."

Not necessarily. As the US shifted economically toward services, a great many jobs were created that, up until very recently, were not affected by outsourcing: servcies was considered a largely "non-tradable" sector. Technology is splitting services into "tradable" (IT, telecom, etc.) and "non-tradable" (mechanics, nursing, etc.). Tradable services will eventually flow out if things continue as they have. At that point consumer buying power will collapse.

"However, the U.S.'s has had a stable and low unemployment rate since NAFTA was enacted, except for an increase after the 2001 recession which peaked at 6.3%."

I am highly skeptical of the figures, as the gov't routinely under-reports unemployment in official reports; this trend has only gotten worse since 2000. If we actually tracked *long-term unemployment*, and factored in *marginal employment*, the numbers would probably be nearer to Western European numbers. We probably average about 3-4% higher unemployment than is advertised. Ancedotally, many unemployed persons refuse to be counted in surveys, or to acknowledge their status, as being jobless is (socially) as bad as being a criminal.

[anne]

Well, to be fair, Clinton is at least looking to secure health care coverage for children, who are increasingly threatened with limits on Medicaid, and Clinton is looking to limit insurance company discrimination against perceived-at-risk adults.

[Jason Allen]

Hillary's solution is not much of a solution, unfortunately. Any plan that covers (all/most) underserved children must have a funding mechanism. Unless the mechanism is "untouchable", it will simply be defunded by Republicans. Many poorer children should be covered *right now* in states such as MO and TN, yet the state gov'ts find ways to simply pole-axe the programs. Of course, it doesn't help that the federal funding doesn't come anywhere close to being adequate.

I can't comment on the insurance discrimination issue, other than to say that the insurance industry lobby will probably push for having ANY regulation quietly killed off. If private insurers weren't allowed to discriminate, they wouldn't be able to make much money.

[anne]

Jason Allen -

Interesting comment that I partially agree with; there must be at least a federal-state revenue sharing flow to sustain child health care programs.

As for insurance company profits, the margins are significant beyond discrimination among applicants or a significant push to improve administrative productivity. But, I do not doubt the industry political strength.

I am thinking....

[Justin Rietz]

Jason -

I would disagree that consumer buying power will collapse. Again, as jobs move out of the United States, I would expect a temporary increase in unemployment. However, U.S. consumers would also have access to cheaper products and services. New industries will be created, and hence new jobs.

A similar concept is seen with immigration. There is always concern that immigrants to the U.S. will "steal" jobs and cause unemployment. Looking at the numbers:

Population in the U.S. in 1900: 76,094,000.

Population 1998: 270,298,524,

Immigration during this time period: Approximately 45 million, or about 25% of the increase, excluding the U.S. born offspring of immigrants.

Even if we accept the proposition that the unemployment statistics are flawed (though we are looking at time relative statistics), unemployment in the U.S. should be an order of magnitude greater than it is if immigration causes unemployment. However, the U.S. economy is dynamic. New jobs are created and immigrants purchase goods and services, helping the economy grow. I concede that this is different from outsourcing as immigrants are located in the U.S., but with global trade, I think the difference is narrow.

From a more theoretical perspective, I like Frederic Bastiat's 19th century satire "Candlemaker's Petition." The idea: Candlemakers in the 19th century petition the French government to take all actions to stop people from benefiting from the sun, as it is a cheap "foreign" good that adversely affects the candlemaking business, and all the suppliers of candlemakers, thus causing great harm to the French economy. Regardless of your position, it's a fun read. http://bastiat.org/en/petition.html