Maybe They’re Just Happy With the Status Quo

Robert Samuelson wonders if the slowdown in growth in the U. S. economy is permanent:

Economists’ pessimism emerges from their projections of “potential GDP.” GDP (gross domestic product) is the economy’s total output. Potential GDP is an estimate of what could be produced when everyone who wants a job has one and when businesses are operating at maximum capacity. Two factors govern the growth of potential GDP: changes in the number of workers (and time spent on the job) and changes in labor productivity. Productivity means “efficiency” and reflects many influences (technology, worker skills, management quality).

Potential GDP’s growth represents the economy’s speed limit when it’s near peak capacity. Trying to grow faster, it’s argued, will create shortages of workers, goods and services — and raise inflation. Even before the Great Recession, economists had lowered estimates of potential GDP, reflecting the anticipated exit of baby boomers from the labor force. But the recent revisions go beyond this widely predicted shift.

There are various explanations for why this may have occurred including demographic change, lack of “animal spirits”, reduced investment. Interestingly, he mentions a point I’ve made here frequently:

Another possibility is that the economy’s slowdown started before the crisis but was obscured by the artificial stimulus caused by the credit bubble.

I think the stage has been set for our economic problems for some time—twenty years or more—and a major factor is currency manipulation on the part of our trading partners. However, Mr. Samuelson also mentions a possible explanation that seems pretty likely to me:

Economist Robert Gordon of Northwestern University has argued that, since the early 1970s, technological advances have lagged and that the Internet boom of the 1990s was only a brief interruption. Naturally, productivity growth has suffered. Nobel Prize-winning economist Edmund Phelps of Columbia University, in his book “Mass Flourishing,” identifies a clash of values between what’s required for faster economic growth and what’s desired for personal security.

“Increasingly, the processes of a nation’s innovation — the topsy-turvy of creation, the frenzy of development, and painful closings,” he writes, are seen as something “that we are unwilling to endure any longer.”

This raises the question who is this “we”? As suggested earlier today some people are doing very, very well. My view is that they wouldn’t do nearly as well if we were following policies are than those we have and they’re fighting, successfully, to prevent us from adopting policies that would produce more robust growth. They’re just happy with the status quo.

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The Kerry Limbo

Recently I was asked why I have such a low opinion of John Kerry. Jackson Diehl gives an example:

Four months have passed, and, sadly for Kerry and U.S. interests, the verdict is in: delusional. Egypt is under the thumb of an authoritarian general. The Syrian peace talks imploded soon after they began. Kerry is now frantically trying to prevent the collapse of the Israeli-Palestinian negotiations, which are hanging by a thread — and all sides agree there will be no deal in April.

It might be argued that none of this is Kerry’s fault. It was Gen. Abdel Fatah al-Sissi who hijacked Egypt’s promised political transition. It was the Assad regime that refused to negotiate its departure . It was Benjamin Netanyahu who kept building Jewish settlements in the West Bank. It was Mahmoud Abbas who refused to recognize Israel as a Jewish state.

All true; and yet all along the way, Kerry — thanks to a profound misreading of the realities on the ground — was enabling the bad guys.

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The Rich Are Different From You and Me

Without further comment. An heir to the DuPont fortune has been put on probation for raping his 3 year old daughter because “he would not fare well in prison”:

A Superior Court judge who sentenced an heir to the du Pont fortune to probation for raping his 3-year-old daughter wrote in her order that he “will not fare well” in prison and suggested that he needed treatment instead of time behind bars, according to Delaware Online.

Court records show that in Judge Jan Jurden’s sentencing order for Robert H. Richards IV she considered unique circumstances when deciding his punishment for fourth-degree rape. Her observation that prison life would adversely affect Richards confused several criminal justice authorities in Delaware, who said that her view that treatment was a better idea than prison is typically used when sentencing drug addicts, not child rapists.

Jurden gave Richards, who had no previous criminal record, an eight-year prison term, but suspended all the prison time for probation.

“Defendant will not fare well in Level 5 [prison] setting,” she wrote in her order.

“It’s an extremely rare circumstance that prison serves the inmate well,” said Delaware Public Defender Brendan J. O’Neill, whose office represents defendants who normally cannot afford a lawyer. “Prison is to punish, to segregate the offender from society, and the notion that prison serves people well hasn’t proven to be true in most circumstances.”

O’Neill explained that he has previously argued that case if a defendant was too ill or frail for prison, but he had never seen a judge cite it as a “reason not to send someone to jail.”

He added that the public might come to see Richards sentence as the result of “how a person with great wealth may be treated by the system.”

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The Early Rushes on the PPACA

On the last day of the original open enrollment period Joe Gandelman points to an article in the LA Times that reckons the number of people newly-insured under the PPACA as around 9.5 million:

• At least 6 million people have signed up for health coverage on the new marketplaces, about one-third of whom were previously uninsured.

• A February survey by consulting firm McKinsey & Co. found 27% of new enrollees were previously uninsured, but newer survey data from the nonprofit Rand Corp. and reports from marketplace officials in several states suggest that share increased in March.

• At least 4.5 million previously uninsured adults have signed up for state Medicaid programs, according to Rand’s unpublished survey data, which were shared with The Times. That tracks with estimates from Avalere Health, a consulting firm that is closely following the law’s implementation.

• An additional 3 million young adults have gained coverage in recent years through a provision of the law that enables dependent children to remain on their parents’ health plans until they turn 26, according to national health insurance surveys from the federal Centers for Disease Control and Prevention.

• About 9 million people have bought health plans directly from insurers, instead of using the marketplaces, Rand found. The vast majority of these people were previously insured.

• Fewer than a million people who had health plans in 2013 are now uninsured because their plans were canceled for not meeting new standards set by the law, the Rand survey indicates.

It’s a bit too early to tell but it does not appear that the law has lead to a net increase in those without healthcare insurance, the claims of opponents of the PPACA notwithstanding.

I think the PPACA is a success on its own terms and that’s good. How you grade it depends largely on your political views. There are some who would give it an A and would give it an A regardless of its outcomes. They just like the idea of the PPACA. Some would give it a solid B. There are some who would give it an F regardless of its outcomes. They don’t like the idea of it and like it even less because it happened under Obama’s watch.

I think it deserves a gentleman’s C. As I see it the PPACA will be around for the foreseeable future and will remain largely unchanged but, sadly, is largely a distraction from the major problem which is the high cost of healthcare in the United States. Many, many challenges remain.

How the many court cases challenging various aspects of the PPACA will fare remains unknown. I think the PPACA will survive them but probably not unscathed. Whether the form in which it survives remains actuarially viable is anybody’s guess.

Only a fraction of the uninsured have gained insurance under the PPACA, at most 25%. We don’t know how many of those will remain insured, how many more will be insured, at what cost, or what effects the newly insured will have on costs, availability, or outcomes.

No one knows how many of those newly enrolled in Medicaid qualified under the old rules. The costs of those insureds will be borne completely by the states. The Medicaid expansion is presently funded completely by the federal government but that is scheduled to expire at which time the costs will revert to the states. States like Illinois are already teetering on the brink of insolvency. I don’t know whether Illinois can afford to continue to pay its Medicaid bills which account for the largest single bite out of the state’s budget even in the short term and nobody else does, either.

Whether the healthcare exchanges are actuarially sound is at present unknown. My guess is that some will be sound and some won’t. That’s accounted for in the PPACA for the next three years but what happens after that is anybody’s guess.

Congratulations to the Obama Administration for its completion of the important milestone of the original open enrollment period. It is the end of the beginning.

Update
Marc Thiessen retorts:

The stated goal of Obamacare was not to move millions of privately insured Americans into taxpayer-subsidized health coverage. The goal was to cover the uninsured. That was the justification for all the chaos and disruption Americans have experienced — and that is the standard by which the administration should be judged.

So how is it doing? We don’t know yet, but the signs are not good. A March survey by McKinsey & Co. found that only 27 percent of consumers who had purchased new coverage in the individual insurance market in February were previously uninsured — up from 11 percent in January. But McKinsey also found that the payment rate for the previously uninsured was just 53 percent, compared with 86 percent for the previously insured. We don’t know how many of those policies were purchased through Obamacare, but remember: Those who sign up and do not pay are not actually enrolled.

Goldman Sachs is projecting that only 1 million Obamacare sign-ups will come from previously uninsured Americans. Indeed, it estimates that the number of total signups will be just 4 million — not 6 million, as the administration claims — because “HHS figures . . . count all persons who selected an ACA exchange plan regardless of whether or not they have actually completed the enrollment process by paying their premium.” Goldman Sachs also anticipates that fully 75 percent of all the Obamacare sign-ups will be from people who already had insurance.

He goes on to question the reports of the increased enrollments in Medicaid.

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The Richest

James Joyner riffs off of a post by Derek Thompson at The Atlantic:

If the most extreme manifestation of inequality is this variable, it’s not obvious why we need to eliminate it. If we had a top 0.001 percent that was essentially an aristocracy, it would certainly be a problem. But if it’s fluid, with most people and families falling out of the class and being replaced by others, it’s not obviously problematic, so long as it’s truly earned. I don’t begrudge Bill Gates his billions; Paris Hilton, on the other hand, is a different story.

See especially the graph of the change in the concentration of wealth reproduced from the original post.

I see the problem slightly differently as I explained in the comment I left on that post:

I think it depends entirely on what you consider normal or desireable. When I was in college, the top 1% wealthiest accounted for about 25% of the wealth. Now they account for about 50%.

The second question, neither answered nor even asked, is whether policies have been jiggered to account for the change. I think they have. I think that only some of the .01% have been able to create their enormous wealth with any skill other than the ability to manipulate and exploit the system.

The policies in question cover a broad range: trade, immigration, economic, labor, financial, intellectual property, the list is practically endless. Walmart wasn’t just created with retail acumen. it depends on trade and zoning policies, just to name two.

The most recent example of what I’m talking about occurred during the financial crisis. We didn’t have to save the bankers along with the banks but we did. That’s ” this group, comprised mostly of bankers and CEOs”. Those aren’t the Michael Jordans. They’re the beneficiaries of government policy.

The political responses to that have been essentially two. Some have maintained that since the top .01% are so skilled and hardworking and are responsible for creating lots of jobs they’re entitled to retain their wealth. Others have argued that the richest should be taxed and the proceeds given to the next wealthiest 1%-.99%. They don’t articulate it that way but that’s the net effect of their argument.

My own view is different. I think we need to change the policies that are responsible for the concentration of wealth.

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The Council Has Spoken!

The Watcher’s Council has announced its winners for last week.

OK, here are this week’s full results.

Council Winners

Non-Council Winners

The announcement post at the Watcher’s site is here.

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You’re Batman

This is just a passing thought and I don’t have a great deal to say about it but I wanted to pass it along. When you don’t act strictly within the confines of international law and impose your own sense of justice using the means you see fit, you aren’t the “world’s policeman”. You’re Batman.

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Whom Should We Kill?

There’s an interesting post at The Moderate Voice, re-posted from The Economist, about the state of capital punishment, particularly in the United States:

AMERICA carried out 39 executions last year. This puts the country in some unsavoury international company; only China, Iraq, Iran and Saudi Arabia put more people to death (albeit by a fairly large margin in China and Iran). Our colleagues over at Graphic Detail have plotted these executions on a rather grim chart.

For all the public hand-wringing over the death penalty, the number of places that carry it out and the number of people killed is rising. Amnesty reckons that 23,392 people are living under death sentences worldwide for crimes including treason, embezzlement and adultery.

I wish the opinion piece went into the issue in a little more depth. In the countries of Europe that have abolished the death penalty, that generally has not been done through the democratic process. Public opinion frequently supports the death penalty even in countries that have abolished it. In those countries is has been abolished by elites rather than by the will of the people. When it was abolished 25 years ago two-thirds of the French continued to support the death penalty. In today’s France about 45% of the people support the death penalty, about 40% of Britons and Canadians do.

85% of the Japanese support the death penalty; more than 70% of Mexicans do. Public opinion in China and India supports the death penalty. My general impression is that people who live in large countries are more likely to support the death penalty than those who live in small ones.

I don’t know whether I’m out-of-step with my fellow Americans, three fifths of whom support the death penalty or not. I think we continue to administer the death penalty too frequently. As of this year we applied roughly one death penalty per 9 million residents. I think its application should be very rare, even rarer than that, imposed only in those cases in which there is no doubt of the guilt of the convicted, and only for the most heinous of crimes in which the rate of recidivism is 100%. That could, effectively, mean no death penalty at all.

When immigrants come here although they may leave their material possessions behind, they bring their values and political beliefs with them. Since the countries from which we should expect future immigration continue to impose the death penalty and public opinion typically favors the death penalty in those countries more than it does here, I suspect that we should expect support for the death penalty to rise here rather than decline.

A majority of the people in the world support the death penalty. That doesn’t make them right but it’s a reality we should acknowledge.

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A Story About Values

This story starts the way all good stories do. Once upon a time, I had a friend. He was one of the half dozen or so people most influential in my life.

One day this friend had a problem and he asked me to lie for him under oath in court. I refused, not because I was afraid of being found out, but because it violates my values. I will not lie under oath, whether in court or anywhere else. That ended our friendship.

Values are manifest in the things you do or refrain from doing. They give your life its meaning. If there is nothing you wouldn’t do (or you would do anything), under the proper circumstances, you may wish you had values but you don’t have them. You have wishes.

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Foreign Policy Blogging at OTB

I’ve just published a foreign policy-related post at Outside the Beltway:

WSJ Wonders About Transnistria, Too

The Wall Street Journal notices that Transnistria, a tiny territory about the size of Cook County, is a pretty darned good candidate for a Crimea-style annexation (just as I pointed out yesterday).

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