Someone who had no knowledge of trade deals like NAFTA and the TPP would be justified in thinking they must be really bad news since their supporters have to make up obviously absurd claims to push their position. George Will is on the job this morning in his Washington Post column.
“Mark Perry of the American Enterprise Institute says that in the past 20 years the inflation-adjusted value of U.S. manufacturing output has increased 40 percent even though — actually, partly because — U.S. factory employment decreased 5.1 million jobs (29 percent). Manufacturing’s share of gross domestic product is almost unchanged since 1960. ‘US manufacturing output was near a record high last year at $1.91 trillion, just slightly below the 2007 level of $1.92 trillion, and will likely reach a new record high later this year,’ Perry writes. That record will be reached with about the same level of factory workers (fewer than 12.5 million) as in the early 1940s, when the U.S. population was about 135 million. Increased productivity is the reason there can be quadrupled output from the same number of workers. According to one study, 88 percent of manufacturing job losses are the result of improved productivity, not ‘rapacious’ Chinese.”
Okay, this one is in “how stupid do you think we are?” department. Guess what, the tree in my backyard is taller than ever before. Imagine that?
Yes, economies grow through time and so does productivity. That means that, in general, we expect output in most areas, like cell phones, haircuts, and manufactured goods to increase through time. So telling us we are near record levels of manufacturing output is basically telling us absolutely nothing. It is the sort of thing that only a cheap demagogue or someone totally ignorant of economics would do.
The basic story is that we have seen productivity growth in manufacturing as in all areas. Since growth has been somewhat faster in manufacturing, it has meant that manufacturing jobs have declined as a share of total employment, but generally, the increase in demand has been enough to keep employment in the sector roughly constant. The big exception was the period when our trade deficit exploded at the start of the last decade, eventually reaching almost 6.0 percent of GDP.
Here’s the picture.
Manufacturing Jobs
Source: Bureau of Labor Statistics.
As can be seen, there is relatively little change, apart from cyclical ups or downs, in manufacturing jobs from 1970 until the late 1990s. Employment then plunges in the first half of the 2000s (before the Great Recession) due to the explosion of the trade deficit. This job loss was due to trade, but George Will and other supporters of U.S. trade policy think they have to lie to people and deny this fact.
While the trade deficit has declined somewhat in more recent years due to the drop in the value of the dollar, it is still near 3 percent of GDP (around $540 billion a year). The idea that it would not create more manufacturing jobs if we had more nearly balanced trade is absurd on its face (i.e. we could produce another $500 billion in manufactured goods every year without employing more workers), but apparently folks like George Will and the Washington Post editors want us to believe it.
Since we’re on the topic of lying to promote trade deals designed to redistribute upward let’s again note the famous 2007 Washington Post editorial touting NAFTA that told readers:
“Mexico’s gross domestic product, now more than $875 billion, has more than quadrupled since 1987.”
According to the IMF, Mexico’s GDP grew by 83 percent over this period, which is pretty far from quadrupling. Honest newspapers correct their mistakes, but as the slogan at the Washington Post says, “lies in the service of giving more money to rich people are no vice.”
Someone who had no knowledge of trade deals like NAFTA and the TPP would be justified in thinking they must be really bad news since their supporters have to make up obviously absurd claims to push their position. George Will is on the job this morning in his Washington Post column.
“Mark Perry of the American Enterprise Institute says that in the past 20 years the inflation-adjusted value of U.S. manufacturing output has increased 40 percent even though — actually, partly because — U.S. factory employment decreased 5.1 million jobs (29 percent). Manufacturing’s share of gross domestic product is almost unchanged since 1960. ‘US manufacturing output was near a record high last year at $1.91 trillion, just slightly below the 2007 level of $1.92 trillion, and will likely reach a new record high later this year,’ Perry writes. That record will be reached with about the same level of factory workers (fewer than 12.5 million) as in the early 1940s, when the U.S. population was about 135 million. Increased productivity is the reason there can be quadrupled output from the same number of workers. According to one study, 88 percent of manufacturing job losses are the result of improved productivity, not ‘rapacious’ Chinese.”
Okay, this one is in “how stupid do you think we are?” department. Guess what, the tree in my backyard is taller than ever before. Imagine that?
Yes, economies grow through time and so does productivity. That means that, in general, we expect output in most areas, like cell phones, haircuts, and manufactured goods to increase through time. So telling us we are near record levels of manufacturing output is basically telling us absolutely nothing. It is the sort of thing that only a cheap demagogue or someone totally ignorant of economics would do.
The basic story is that we have seen productivity growth in manufacturing as in all areas. Since growth has been somewhat faster in manufacturing, it has meant that manufacturing jobs have declined as a share of total employment, but generally, the increase in demand has been enough to keep employment in the sector roughly constant. The big exception was the period when our trade deficit exploded at the start of the last decade, eventually reaching almost 6.0 percent of GDP.
Here’s the picture.
Manufacturing Jobs
Source: Bureau of Labor Statistics.
As can be seen, there is relatively little change, apart from cyclical ups or downs, in manufacturing jobs from 1970 until the late 1990s. Employment then plunges in the first half of the 2000s (before the Great Recession) due to the explosion of the trade deficit. This job loss was due to trade, but George Will and other supporters of U.S. trade policy think they have to lie to people and deny this fact.
While the trade deficit has declined somewhat in more recent years due to the drop in the value of the dollar, it is still near 3 percent of GDP (around $540 billion a year). The idea that it would not create more manufacturing jobs if we had more nearly balanced trade is absurd on its face (i.e. we could produce another $500 billion in manufactured goods every year without employing more workers), but apparently folks like George Will and the Washington Post editors want us to believe it.
Since we’re on the topic of lying to promote trade deals designed to redistribute upward let’s again note the famous 2007 Washington Post editorial touting NAFTA that told readers:
“Mexico’s gross domestic product, now more than $875 billion, has more than quadrupled since 1987.”
According to the IMF, Mexico’s GDP grew by 83 percent over this period, which is pretty far from quadrupling. Honest newspapers correct their mistakes, but as the slogan at the Washington Post says, “lies in the service of giving more money to rich people are no vice.”
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This point is worth mentioning in the context of a comment by Esther L. George, president of the Federal Reserve Bank of Kansas City, to CNBC yesterday. Ms. George said:
“While we haven’t hit 2 percent, I’m reminded that 2 percent is a target over the long term, and in the context of a growing economy, of jobs being added, I don’t think it’s an issue that we should be particularly concerned about unless we see something change.”
Actually, the Fed’s stated policy is that 2 percent is a target as a long-term average. This means that the periods of below 2 percent inflation should be roughly offset by periods of above 2 percent inflation.
Most forecasts show the inflation rate remaining under 2 percent for at least the near term future. At some point, the economy will have another recession, during which the inflation rate is almost certain to fall. This means that if the inflation rate is just reaching 2.0 percent at the point the economy enters a recession, the Fed will have seriously undershot its stated target.
This point is worth mentioning in the context of a comment by Esther L. George, president of the Federal Reserve Bank of Kansas City, to CNBC yesterday. Ms. George said:
“While we haven’t hit 2 percent, I’m reminded that 2 percent is a target over the long term, and in the context of a growing economy, of jobs being added, I don’t think it’s an issue that we should be particularly concerned about unless we see something change.”
Actually, the Fed’s stated policy is that 2 percent is a target as a long-term average. This means that the periods of below 2 percent inflation should be roughly offset by periods of above 2 percent inflation.
Most forecasts show the inflation rate remaining under 2 percent for at least the near term future. At some point, the economy will have another recession, during which the inflation rate is almost certain to fall. This means that if the inflation rate is just reaching 2.0 percent at the point the economy enters a recession, the Fed will have seriously undershot its stated target.
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As history fans everywhere know, the owners of coal mines have not always been the best friends of the miners who work for them. This is why so many miners ended up dead when they tried to do things like form unions.
For this reason it was somewhat jarring to read in a Washington Post article reporting on the Trump administration’s decision to end funding for a study on the health effects of mountaintop mining:
“But Trump has declared himself a friend of coal miners and coal mining companies. In March, he issued an executive order that lifted a ban on leases for coal excavation on federal land, making good on a vow to revive the struggling industry and create thousands of jobs.”
Canceling the study is clearly a friendly gesture towards the coal mining companies. They do mountaintop mining, in which they blow the top off a mountain and throw the debris in the streams below, because it is cheaper than underground mining. The study may have been used in court cases by people who suffered from cancer or other diseases in part due to the effects of this dumping. It may also have led to fewer permits being issued in the future.
By contrast, coal miners are likely to be hurt by this outcome. This is in part due to the fact that many miners and their families face greater health risks from living in the vicinity of mountaintop mines.
However, it is also likely the case that more mountaintop mining will mean fewer jobs for miners. While lower cost production can have some impact on the demand for coal, the bigger impact in terms of employment for miners is likely to be the replacement of underground mining jobs with mountaintop mining. Since it takes many fewer workers to blow the top off a mountain than to dig the coal out by hand in an underground mine, actions to promote mountaintop mining are likely to destroy jobs in the coal industry, even if they increase the profits of the coal companies.
As history fans everywhere know, the owners of coal mines have not always been the best friends of the miners who work for them. This is why so many miners ended up dead when they tried to do things like form unions.
For this reason it was somewhat jarring to read in a Washington Post article reporting on the Trump administration’s decision to end funding for a study on the health effects of mountaintop mining:
“But Trump has declared himself a friend of coal miners and coal mining companies. In March, he issued an executive order that lifted a ban on leases for coal excavation on federal land, making good on a vow to revive the struggling industry and create thousands of jobs.”
Canceling the study is clearly a friendly gesture towards the coal mining companies. They do mountaintop mining, in which they blow the top off a mountain and throw the debris in the streams below, because it is cheaper than underground mining. The study may have been used in court cases by people who suffered from cancer or other diseases in part due to the effects of this dumping. It may also have led to fewer permits being issued in the future.
By contrast, coal miners are likely to be hurt by this outcome. This is in part due to the fact that many miners and their families face greater health risks from living in the vicinity of mountaintop mines.
However, it is also likely the case that more mountaintop mining will mean fewer jobs for miners. While lower cost production can have some impact on the demand for coal, the bigger impact in terms of employment for miners is likely to be the replacement of underground mining jobs with mountaintop mining. Since it takes many fewer workers to blow the top off a mountain than to dig the coal out by hand in an underground mine, actions to promote mountaintop mining are likely to destroy jobs in the coal industry, even if they increase the profits of the coal companies.
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In an article on the effort to renegotiate the terms of NAFTA, the NYT noted the Trump administration’s plan to put in language that would prohibit currency management. (The article uses the term “manipulation,” which implies an action being done in secret. In fact, large-scale efforts to affect the value of a country’s currency will almost always be open, since they are almost impossible to conceal.) The piece then notes that since both Canada and Mexico have freely floated their currencies for decades, this is a “symbolic gesture.”
This is not true. Many people in trade debates have claimed that it is impossible to have currency rules in a trade agreement. They have argued that it is impossible to identify steps to manage currency and distinguish them from the normal conduct of monetary policy. Having solid language on currency management in a revised NAFTA would show that it is possible. Also, since the original NAFTA served as a model for many future trade deals, a currency provision in a revised NAFTA could be the basis for similar provisions in other trade deals.
In an article on the effort to renegotiate the terms of NAFTA, the NYT noted the Trump administration’s plan to put in language that would prohibit currency management. (The article uses the term “manipulation,” which implies an action being done in secret. In fact, large-scale efforts to affect the value of a country’s currency will almost always be open, since they are almost impossible to conceal.) The piece then notes that since both Canada and Mexico have freely floated their currencies for decades, this is a “symbolic gesture.”
This is not true. Many people in trade debates have claimed that it is impossible to have currency rules in a trade agreement. They have argued that it is impossible to identify steps to manage currency and distinguish them from the normal conduct of monetary policy. Having solid language on currency management in a revised NAFTA would show that it is possible. Also, since the original NAFTA served as a model for many future trade deals, a currency provision in a revised NAFTA could be the basis for similar provisions in other trade deals.
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The NYT had a piece discussing Sinclair Broadcasting’s plans for expansion and the apparent green light coming from the Federal Communications Commission (FCC). As the piece explains, the FCC is now headed by Ajit V. Pai. Mr. Pai apparently met with David D. Smith, the chairman of Sinclair, just before he became chair. Shortly thereafter, the FCC weakened a rule that may have slowed Sinclair’s plans for expansion.
At one point the piece describes Mr. Pai as “an enthusiastic purveyor of free-market philosophy.”
This is not at all clear from the description of his views in the piece. In a true free market, the government would not be allocating air waves. The assignment of frequencies to specific companies by the government, with the threat of arrest for interfering, is not a free market. This is government intervention.
It is possible to argue that this government intervention is necessary to make the airwaves usable (if dozens of people tried to broadcast on the same frequency, no one would be able to hear or see anything), but people who support the assignment of frequencies are not in favor of a free market. Even if we accept the need to assign frequencies, there are an infinite number of ways this can be done.
A frequency can be parceled out by the hour, with individuals or companies only getting claims to short periods. To broadcast a longer show or movie it would then be necessary to buy up enough slots from others to allow for the necessary time. The slots can also be auctioned off rather than given away for free to private companies. This way, the government, rather than private companies, would benefit from the monopolization of the airwaves.
It is understandable that owners of television and radio stations would like to pretend that they support the free market when they want the government to just turn over exclusive use of frequencies, with no questions asked, but this is not true.
Note: Thanks to Keane Bhatt for calling this to my attention.
The NYT had a piece discussing Sinclair Broadcasting’s plans for expansion and the apparent green light coming from the Federal Communications Commission (FCC). As the piece explains, the FCC is now headed by Ajit V. Pai. Mr. Pai apparently met with David D. Smith, the chairman of Sinclair, just before he became chair. Shortly thereafter, the FCC weakened a rule that may have slowed Sinclair’s plans for expansion.
At one point the piece describes Mr. Pai as “an enthusiastic purveyor of free-market philosophy.”
This is not at all clear from the description of his views in the piece. In a true free market, the government would not be allocating air waves. The assignment of frequencies to specific companies by the government, with the threat of arrest for interfering, is not a free market. This is government intervention.
It is possible to argue that this government intervention is necessary to make the airwaves usable (if dozens of people tried to broadcast on the same frequency, no one would be able to hear or see anything), but people who support the assignment of frequencies are not in favor of a free market. Even if we accept the need to assign frequencies, there are an infinite number of ways this can be done.
A frequency can be parceled out by the hour, with individuals or companies only getting claims to short periods. To broadcast a longer show or movie it would then be necessary to buy up enough slots from others to allow for the necessary time. The slots can also be auctioned off rather than given away for free to private companies. This way, the government, rather than private companies, would benefit from the monopolization of the airwaves.
It is understandable that owners of television and radio stations would like to pretend that they support the free market when they want the government to just turn over exclusive use of frequencies, with no questions asked, but this is not true.
Note: Thanks to Keane Bhatt for calling this to my attention.
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