The editors of the Wall Street Journal react to the Bureau of Labor Statistics’s bad labor report released yesterday:

An economy doesn’t live by demand alone. There is no clearer evidence of that dictum than Friday’s surprising jobs report for April, which undershot the expectations of economists by more than 700,000. Welcome to the supply-side jobs slowdown.

Employers added a net 266,000 jobs in April, while the unemployment rate ticked up 0.1 percentage point to 6.1%. Payrolls for March and February were revised down a combined 78,000, and 48,000 of the new jobs in April were in government, mostly local education as schools reopened.

The report wasn’t a total washout, as private payrolls grew 218,000, mostly from leisure and hospitality jobs (331,000) as the lockdowns continued to ease. But there were large losses in temporary positions (-111,400), couriers (-77,400), food and beverage stores (-49,400), and nursing homes (-19,500). Some of this reflects a reallocation of jobs as businesses reopen and consumption shifts.

The Keynesians who now run U.S. policy, at the Treasury and Federal Reserve, have been using their usual demand-side playbook. Bathe the country in government cash, keep interest rates at zero, and the resulting rise in consumer demand will drive everything.

They’ve underestimated the supply-chain constraints that have been screaming across the economy for months—from too few workers to the computer chip shortage and soaring lumber and freight prices. The economy can’t produce enough goods and services fast enough to meet the soaring demand from the easing pandemic and government policies that have shoveled cash to consumers and rewarded Americans for not working.

As I’ve said before I think that characterizing the president’s economic advisors and the president himself as “Keynesian” is a stretch. They’re folk Keynesians. I don’t believe that John Maynard Keynes ever envisioned an economy that imported $4 trillion of goods per year, ran a persistent trade deficit, and in which the trade deficit actually increased during a recession and in the presence of substantial fiscal stimulus:

My offhand guess is that the Biden Administration will consider the BLS’s report confirming evidence for the need for their stimulus policies.

I think we’re in unknown territory. I don’t think you can make confident projections about the relation among unemployment, aggregate demand, and aggregate product under the present circumstances.

And in his Washington Post column David Ignatius sounds nervous about China’s decision to double the size of its nuclear arsenal:

Why is China moving so quickly to jettison its old doctrine of a “limited deterrent” and double its nuclear forces? U.S. analysts aren’t sure, but some judge that the Chinese may want to make any U.S. effort to defend Taiwan militarily exceptionally costly. Beijing wants a low-cost walkover in Taipei, not a bloody assault.

“The last thing on China’s mind is a D-Day style invasion” of Taiwan, contends Christopher Johnson in an interview. He’s a former top CIA China analyst who’s now the chief executive of China Strategies Group, a political risk consulting firm. He notes that China has halved its number of short-range missiles opposite Taiwan but boosted deployments of missiles for striking U.S. bases in Guam and Japan.

China’s accelerating nuclear program vexes American analysts. During the Cold War, the United States and Russia developed a language for thinking about nuclear weapons and deterrence. Leaders of both countries understood the horrors of nuclear war and sought predictability and stability in nuclear policy. China lacks such a vocabulary for thinking about the unthinkable.

I can offer a host of reasons China is changing its policy including status and its understanding that an armed conflict with many of its prospective adversaries including the U. S., Russia, and India would likely involve a nuclear exchange.

Keep in mind that David Ignatius is above all else a purveyor of the prevailing wisdom in Washington, DC. Is Mr. Ignatius experiencing buyer’s remorse?

In her latest Washington Post column Catherine Rampell expresses her concern about a declining U. S. birth rate:

The U.S. economy needs more kids.

Parents say they want more kids.

Yet the baby bust has gotten worse.

The general fertility rate — that is, the number of births per thousand women ages 15 to 44 — declined to 55.8 in 2020, according to new provisional data from the Centers for Disease Control and Prevention. That’s a record low for the United States. Birthrates declined for every racial and ethnic group, and nearly every age group.

and proposes her remedy:

First would be a suite of changes that make it easier for Americans to have more kids. They include providing greater income security, so parents can afford to have the number of children they want. Also, adapting workplaces and other parts of the safety net so parents or would-be parents who want to stay in the labor force can do so more easily.

President Biden’s families-related proposal would make progress on these fronts, by extending the temporary “child allowance” he recently signed into law, guaranteeing free or low-cost child care, and implementing paid family leave, among other programs. Changing the culture around work and making “greedy” workplaces friendlier to parents will be greater challenges, though the normalization of remote work arrangements over the past year may help.

But while these changes would make some parents’ lives less stressful, and perhaps induce some people on the margin to pop out more babies, they may not have much impact on overall fertility trends. Many countries with low birthrates have implemented explicitly pro-natal policies, such as greater access to child care or cash bonuses for having babies. They’ve generally been unsuccessful at lifting birthrates.

The other policy in the toolkit is immigration.

If the United States wants more working-age people to contribute to our economy, there are millions of strivers around the world ready and eager to pitch in. Indeed, immigrants and their children have been a key driver of population, economic and productivity growth in the not-so-distant past, but dwindling immigration is another reason population growth slowed so much in the 2010s.

I wish she would show me the evidence that either of those two strategies would address the problems she calls out at the beginning of her column. I’ll save you the trouble of looking it up. The countries with the most generous family policies are Sweden, Norway, Iceland, Estonia, and Portugal. If there is any correlation between those policies and having more children it is an inverse correlation. What those countries have in common are low birth rates and very high levels of ethnic homogeneity.

Let me offer a contrarian view. What we’re seeing now is the completely logical foreseeable consequence of

• Children are less valuable economic assets than they used to be when by age 5 they could help out around the farm.
• Raising children is increasingly expensive.
• The social value of children isn’t what it used to be for women and having a job has a higher social value than it used to have.
• It takes two incomes today to provide the standard of living that was provided by one 50 years ago.
• The acceptability of abortion.
• Millions of years of evolution have seen to it that people particularly women actually enjoy having children in their families.

Since I don’t see our doing anything about any of those factors let alone about all of them, I think it would be better for people to get used to the idea of fewer children.

And immigration as a solution? I learned something valuable many years ago that is apparently lost on Ms. Rampell. Many years ago I attended the birthday party of the child of some of our upper middle class friends. Unlike such parties when I was a kid each child in attendance was accompanied by his or her nanny—all women and mostly immigrants. As the party wore on I noticed the women becoming increasingly impatient. They wanted to go home to take care of their own children. That’s the point. Immigrants have children and needs, too. Being able to solve whatever problems a low birthrate produces through immigration is like the company that loses money on every sale trying to make it up in volume. My conclusion from that is that our immigration should be tailored more to people whose incomes will be able to pay for the care and education of their children. That means among other things that we need to abandon family reunification as a primary objective of our system of immigration.

I wanted to pass along this interesting report from James Freeman in the Wall Street Journal:

Hiring surged again in April, but a record number of U.S. small firms were unable to find workers to fill their available positions. That’s according to the latest monthly employment report from the National Federation of Independent Business, due out later today.

“Strong job growth continued for small businesses in April. Firms increased employment by 0.31 workers per firm on average over the past few months,” says NFIB Chief Economist William Dunkelberg.

That’s the good news. The bad news for small companies is that between the competition from larger firms, supplemental unemployment benefits that discourage work, remote schooling that keeps parents at home and the lingering impact of the virus itself, it’s become nearly impossible for many employers to attract enough workers. Mr. Dunkelberg reports:

Forty-four percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, up 2 points from March. Unfilled job openings continue to mount as April is the third consecutive month setting a record high reading of unfilled job openings. April’s reading is 22 points higher than the 48-year historical average of 22 percent.
Overall, 59 percent reported hiring or trying to hire in April, up 3 points from March. Owners have plans to fill open positions, with a seasonally adjusted net 21 percent planning to create new jobs in the next three months, down 1 point from March. Many will be unsuccessful in this tight labor market, having to delay hiring or raising wage offers.

Speaking of rising wages, here’s the best news for workers in this NFIB reading on the tightest of labor markets:

Seasonally adjusted, a net 31 percent reported raising compensation (up 3 points), the highest level in the past 12 months. A net 20 percent plan to raise compensation in the next three months, up 3 points. More will be compelled by market forces to raise compensation… For some, this includes paying “show up” bonuses for workers who agree to take a job and actually show up for work.

I wanted to call out a number of interesting aspects of that report. Let’s just accept the report as factual. It actually says several distinct things:

• Employers are unable to fill positions.

  There are multiple possible reasons for that including that prospective workers are just unwilling to work, they’re unwilling to work at the pay offered, federal benefits play a role in that, skills mismatch, or just plain not enough workers.

• They’re offering higher wages.
• That in turn is evidence of inflation.
• The pace of new positions being offered is slowing.

  That suggests the recovery is cresting.

I would genuinely like to know what the Biden Administration’s model of the economy is, how they see the economy? I will refrain from speculating but will only offer the observation that which of those things you believe is happening should have some impact on the solutions you’re providing.

I know what my model of the economy is. I think we should be making much, much more of the things we’re buying than we do at present, that immigration should be limited to people who bring a net benefit to the society and economy rather than just more bodies, and that we should be encouraging capital investment and discouraging speculation on financial instruments. I don’t think the Biden Administration agrees with me and I’d like to know what they think.

In my researches this morning I came across a passage in which the writer characterized Thailand as a “poor country”. I looed into it. With a median household income of around $7,000/year, I would characterize Thailand as a “middle income” country. I think that countries with median household income below about $7,000 are low income (India, Egypt), countries with median incomes from $7,000-$15,000 (Russia, China, Brazil, Argentina) are middle income and countries with median household incomes greater than $15,000/year are rich countries.

An additional complication in such assessments are middle income or rich countries that have a lot of poor people in them (Russia, South Africa).

What’s a “low income” country?

The editors of the Wall Street Journal express the reaction to President Biden’s remarks about waiving patent protections on COVID-19 vaccines that I would have expected from them:

President Biden genuflected again to progressives on Wednesday by endorsing an intellectual property waiver at the World Trade Organization for Covid vaccines and therapies. This patent heist won’t end well for the U.S. or the world.

South Africa and India have been pushing a resolution at the WTO that would force pharmaceutical companies to hand over their Covid vaccine and therapy IP to manufacturers in low-income countries. The waiver is backed by some 100 other low-income countries, progressive groups and more than 100 Democratic Congress Members.

Waiver proponents say breaking patent protections is necessary to expand global access to vaccines. This is false. WTO rules already allow low-income countries to force drug makers to license their patents during emergencies, though they must negotiate some agreements with developers. Liberals says this is slowing vaccine production.

Yet U.S. and European drug companies have already voluntarily entered into dozens of licensing agreements with other manufacturers, many in low-income countries, as they work to scale up production. Merck last week announced licensing agreements with several Indian manufacturers to produce its investigational antiviral drug.

concluding:

The Administration’s WTO waiver will break patents and legal protections for vaccine makers. Investors will be less likely to fund new drug research if they think their own government will betray them under political pressure. Chalk up another damaging victory for the Congressional left.

I have mixed feelings. Unmentioned in the editorial is that U. S. companies don’t trust many companies in other countries with their intellectual property for good reason. Rampant intellectual property piracy. These things bear risks.

But then again I think that U. S. intellectual property protections are too robust. Patents are not part of the natural order of things. They are government-granted monopolies. There’s a reason that so many developments are patented in the U. S. and it’s not just that we do so much R&D.

However, the editors are right—it will have consequences.

I have questions. Doesn’t a waivure of Pfizer and Moderna’s IP rights by executive order constitute a taking under U. S. law? Does President Biden even have the authority to do it?

I learned a new word today. Objurgate:

to express public or formal disapproval of

I mean I could figure it out from its Latin roots but I’d never seen it used before. Christopher DeMuth uses it in his op-ed castigating the Biden Administration’s use of mostly unfunded benefits:

Has anyone noticed that the president has proposed increasing federal spending by nearly $1 trillion a year, while promising that 98% of Americans will pay nothing for it? The very idea would have seemed mad to every previous generation of Americans. Today it is considered conventional.

President Biden’s plans have been rightly criticized for the incontinence of the spending and the perversity of the taxes. Much of the spending is designed to exploit the pandemic crisis by transforming emergency income support into permanent middle-class entitlements for toddler care, higher education, medical services and much else. Other spending is called “infrastructure” but includes a list of progressive wants having nothing to do with capital investment. The tax increases—supposedly confined to the 2% with household incomes of $400,000 or more, but heavily weighted against capital investment—would seriously damage the economy and raise radically less revenue than claimed.

But set aside these problems and take the Biden plans as advertised, as a tremendous expansion of government paid for by a select few taxpayers plus lots of new borrowing. This is the apotheosis of a political transformation that began insensibly in the 1970s and has triumphed with barely a quiver of recognition, much less debate. It may be called the borrowed-benefits syndrome.

He concludes (and this is where my new word comes in):

I have no solution for borrowed-benefits syndrome, which has dissolved the consensus that the welfare state is something citizens should be willing to pay for. I can, however, objurgate the politicians who have built their careers on propagating the syndrome far and wide, now with unprecedented aggressiveness in the Biden administration and Congress.

I would state the issues somewhat different than he. The Biden Administration faces a number of problems:

• It believes that a lot of spending is desperately needed.
• There are serious limits to how much it can raise by increasing marginal tax rates.
• Joe Biden made a campaign promise not to increase the taxes of individuals with incomes less than $400,000.

therefore it wants to borrow. My answer: borrowing to pay operating expenses is a very, very bad practice. There is, indeed, no such thing as a free lunch. When you borrow you are borrowing from the future to spend in the present. Doing so assumes you will be in a better position to pay in the future and that may well not be the case. It’s one of the reasons for our present slow economic growth.

And another of the alternatives, monetizing it, is even worse. It risks a disastrous loss of confidence in the dollar. If that transpires, it’s game over for borrowed benefits.

Megan McArdle asks a question which, frankly, puzzled me in its lack of perception in her latest Washington Post column. What if Facebook’s banning of Trump is a bad call?

I wish I were surer that the answer is yes. In the short term, I’m sure it will be restful for those who were appalled and exhausted by Trump’s endless social media outrages. This might even make it impossible for him to reassemble his 2016 coalition, which could make for a more normal politics in the next few years. But what about the longer term?

Trump’s professional-class enemies probably have the power to send him into electronic Coventry, out of sight and out of mind. But they can’t banish his supporters or the very real divides in American politics that Trump exacerbated. What happens to those divides if Trump is anathematized by the mainstream but still lingers just outside it, forgotten by many but not actually gone?

The question practically answers itself. It you have fully embraced the views of the German philosopher Herbert Marcuse and I believe that today’s progressives have, you believe that, contrary to the Enlightenment view and contrary to ethicists like, say, John Rawls, you believe that tolerating intolerance is wrong. When you add to that an a priori conviction that Trump and his supporters are bigots, not only was banning his access to social media the right thing to do it was a moral obligation.

I think I see things a bit differently (as usual). I think that social media in essence created Trump—his mastery of them enabled him to dispatch his Republican opponents with ease. Live by the tweet; die by the tweet.

I think that in his latest Washington Post column Josh Rogin has correctly pinpointed the Biden Administration’s policy with respect to North Korea—it’s a return to the Obama Administration’s policy of “strategic patience”:

The Biden administration has just rolled out the results of its North Korea strategy review, which is meant to chart a path forward to solve one of the thorniest and most dangerous national security problems in the world. But now that the review is complete, the administration’s plan is essentially to wait for North Korean leader Kim Jong Un to make the next positive move, which doesn’t seem likely to happen anytime soon. To some, that sounds like a return to the Obama-era policy of “strategic patience” — just without saying as much.

I don’t see that as such a bad thing. I think that “strategic patience” is the right strategy with respect to North Korea, particularly when coupled with a redoubling of efforts to strengthen the relationship between South Korea and the United States. An admitted defect of the approach is that it cedes the initiative to North Korea and that may well prove a tactical blunder. Mr. Rogin remarks:

Regardless of what you call it, the problem with the wait-and-see approach is that the status quo is unsustainable. North Korea continues to move ahead with its nuclear weapons and ballistic missile programs. That means the threat is rising. It also means the terms of any negotiation or deal are getting worse for Washington, as Kim accumulates more and more leverage.

But credit where credit is due: President Trump really did try to break the logjam in our relations with North Korea. In the end he was unsuccessful but he did try. Mr. Rogin noticed that as well:

It’s clear that the Biden administration has several foreign policy priorities, and that spending time, resources and political capital on the North Korea issue isn’t one of them. Trump failed on North Korea, but at least he tried. The Biden team is going to have to try harder, and they would be better off doing that sooner rather than later.

Do you see that as happening? Me, neither. I think they’ll wait for a crisis and, presumably, Mr. Kim will provide one in due course.