While I don’t agree with the entirety of this op-ed by Daniel Alpert in the New York Times I do have several points of agreement with it:

…many in Democratic policy and political circles have been queasy about addressing the connection between federally supplemented unemployment insurance benefits and the slowing pace of re-employment at this stage of the recovery from the pandemic. There is almost certainly a common sense connection: If you were a low-wage worker, why aggressively attempt to go back to work at a lousy, low-paying job, when you can make more money collecting unemployment benefits.

Still, Republican politicians are getting it wrong too. They are citing countless news reports that businesses are struggling to fill certain positions as both a reason to end federal unemployment benefits and as evidence that the extra benefits were too generous in the first place. They worry that the ability of some workers to stay on the sidelines of the labor market, unless employers offer wages that trump jobless benefits, could result in dangerous “wage inflation” — a potential increase in labor costs that, they believe, consumers will pay for in the form of higher priced goods and services.

That argument simply does not hold water either: Over the coming weeks and months as this aid for the jobless phases out, there will be a flood of anxious job seekers pouring into labor markets. Even if a significant share of workers are temporarily avoiding taking low-paying jobs while benefits remain generous, then there is no true “labor shortage,” as many economists and market commentators are calling it.

[…]

Now enhanced benefits are ending every day for the millions of Americans who have benefited from the Pandemic Emergency Unemployment Compensation, or PEUC, program, which extends unemployment insurance for 13 weeks to those who exhausted their conventional state and federal unemployment benefits. All extra federal supplements for the unemployed will end on Sept. 6, including the general $300 weekly benefit, as well as the Pandemic Unemployment Assistance, or PUA, program, which provides aid to those who were self-employed. (Some states are in the process of cutting them early.)

Republican-controlled states, as well as some more politically mixed states, are doing this because they presume there is a macroeconomic upside to millions of workers returning to lower-income jobs. They shouldn’t be so sure.

[…]

The majority of the jobs that aren’t back to prepandemic work force levels are very low-income jobs; they are what the U.S. Private Sector Job Quality Index, which I cocreated, calls low-quality jobs. Through March of this year, most of the private sector jobs eliminated during the pandemic that haven’t been restored are production and “nonsupervisory” jobs that offered weekly pay averaging less than $750 prepandemic. There are more than 45 million low-paying jobs like these, constituting roughly 43 percent of all production and nonsupervisory jobs in the country. This is not about a mere, unfortunate corner of the jobs market.

Twenty-three million of these jobs paid under $500 per week prepandemic: That’s $26,000 per year. Not only are the wages low: Many of these jobs offer well below 30 hours of work per week.

[…]

The chronic problem we face as we put Covid-19 in the rearview mirror is that the U.S. economy before the pandemic was incredibly dependent on an abundance of low-wage, low-hours jobs. It was a combo that yielded low prices for comfortably middle-class and wealthier customers and low labor costs for bosses, but spectacularly low incomes for tens of millions of others.

[…]

Some progressives may take me to task for admitting that emergency unemployment benefits, which served many so well, are now keeping some people from returning to their lousy, pre-crisis work. But why, as a former Obama administration economist pointed out, fight common sense or parse the data for more complex explanations? Instead, why not absorb the lesson being taught?

It’s pretty simple and one that, normally, progressives fight to have heard: businesses are paying tens of millions of workers too little money relative to the cost of living in this country.

There are any number of comments I might make but let’s leave it at two. For decades we’ve been using reducing unemployment as a policy goal and we’ve also steadfastly refused to control the number of immigrants without skills that are worth paying enough to sustain a middle class lifestyle. The possibly unintended consequence of those two policies in combination has been to maximize the number of low-paying jobs. But we’re in competition with every developing country in the world in producing cheap consumer goods and in particular it puts us into competition with China. Not only is that a contest we can’t win it’s a contest we don’t want to win. So that encourages job creation in the services sector which has been especially hard-hit during the pandemic.

We really need to do several things:

• Tighten the labor market until the wages for the remaining jobs that don’t require high levels of skills are high enough to live on.
• Stop the overemphasis on getting college educations. Not only does that produce the skills mismatch so apparent today it results in thousands of people incurring debts they will struggle to pay off.
• Encourage businesses to invest in producing goods in the U. S. Increasing productivity requires business investment by definition.

or we could impose tariffs on imported goods until it had the same effect.

To convince businesses to invest in the U. S. it’s got to be worth their while and we’ll never achieve that by raising their taxes or with an unstable, unpredictable economic climate.

William Galston, a supporter of the Biden Administration, has an interesting observation in his Wall Street Journal column (free link):

During the next two years, Mr. Biden’s spending surge would help return the economy to full employment faster than staying at the status quo. This is a good thing. But between the beginning of fiscal 2024 and the end of fiscal 2031, the administration’s projections show GDP rising by $8.9 trillion, barely distinguishable from the $8.8 trillion in CBO’s baseline.

The bottom line: The economy will stay stuck at 2% growth, extending the period of slow growth that began early in the 21st century. Even during the first three years of the Trump administration, large spending increases and an enormous tax cut yielded growth averaging 2.5%, well below the 3.5% level of the 1990s.

Does this mean that government is powerless to influence economic growth? Not exactly. But it does require an understanding of why the growth rate has been so disappointing during the past two decades, particularly compared with the last half of the 20th century.

According to a recent CBO report, the principal driver of slow growth since 2008 has been a sharp slowdown in the growth of the labor supply. As baby boomers joined the workforce, the annual increase in labor supply averaged more than 2%, peaking at 2.5% between 1974 and 1981. As late as the 1990s, annual labor-force expansion averaged 1.2%. But as the population aged and baby boomers began to retire, annual increases fell to 0.5% between 2008 and 2020, a figure that the CBO expects to fall to 0.4% in 2021-25 and 0.3% in 2026-31.

Additionally, output per work, another key determinant not only of GDP growth but of rising incomes, is stalled. The reason for that is obvious: productivity is dependent on business investment. If businesses aren’t investing at sufficient levels to increase productivity, it won’t just increase on its own. Why aren’t businesses investing?

IMO the Biden Administration would prefer growth at 2% per annum that it can control and benefits the sectors it picks over 4% growth in sectors it hasn’t picked and wouldn’t prefer. I would add that I think that deadweight loss is preventing growth that would otherwise be taking place.

In his latest Wall Street Journal column Jason L. Riley balks (free link) at the Biden Administration’s handling of the centenary of the Tulsa race riots of 1921:

The political left is much more interested in black suffering than in black accomplishment, but black history is about more than victimization at the hands of whites. It’s also about what blacks have achieved notwithstanding that victimization. And in the first half of the 20th century, long before an expanded welfare state supposedly came to the rescue, blacks accomplished quite a lot. Incomes rose, poverty fell dramatically, and education gaps narrowed. Blacks entered the skilled professions—medicine, law, accounting, engineering, social work—at faster rates in the years preceding the 1960s civil-rights legislation than they did in the years afterward. Among racial and ethnic groups rising from similar circumstances, historians have described the rapidity of these gains as unprecedented.

Black Tulsa residents of a century ago would also be shocked to learn that it is no longer racist white vigilantes but black criminals who pose the bigger threat to safety in black communities. Liberals blame today’s disproportionately high black criminality on the “legacy” of slavery and Jim Crow. But violent crime among blacks declined in the 1940s, then dropped even further in the 1950s, while remaining relatively stable among whites. In other words, blacks living during Jim Crow segregation, and much closer to the era of slavery, experienced significantly lower rates of violent crime and incarceration both in absolute terms and relative to whites.

More black people have been murdered year-to-date in Chicago than were killed in the Tulsa riots of a century ago.

He proposes that they’re embracing the notion of catharsis:

The left’s focus on the past behavior of whites, while ignoring the present behavior of blacks, might offer some people catharsis, and it might help groups like the NAACP or Black Lives Matter stay relevant. But where is the evidence that such an approach facilitates black upward mobility?

The theory was first enunciated by Aristotle (in relation to drama) and I don’t believe it’s psychologically sound or at best while catharsis may provide relief for some for others it’s a way of dwelling on real or imagined injuries. That is the nature of radicalization. Once you have been radicalized with respect to race it becomes a Theory of Everything.

I wanted to remark on the White House’s plan to “build black wealth and narrow the racial wealth gap”. The plan consists of two facets

• Address racial discrimination in the housing market
• Increase federal contracting with “small disadvantaged businesses” to the tune of about and additional $20 billion per year

I agree that the former continues to be an issue. The most recent study of which I’m aware found that black couples and white couples, on paper identical other their race, fared differently with lenders. I’m skeptical that the latter will do much. The track record of city racial set-asides has been quite mixed and in general has largely been a subsidy to people who didn’t actually need a subsidy.

The devil, of course, is in the details. Is “inequity” in home valuations a form of discrimination or is it just the working of the market?

And there’s also the caveat that there’s no telling what the final legislation will look like once it has been passed through the Congressional meatgrinder.

Finally, unmentioned in the White House’s “fact sheet” is another fact. At every income level American blacks consume a higher proportion of their income than corresponding whites, saving and investing less. There is a behavioral component in wealth that should not be ignored.

I am generally disinterested in the state politics of states other than my own. Howeer, I would like to ask a question about Texas’s pending election reform bill which has been much in the news lately. Who is correct? Is it President Biden who calls the bill an “assault on democracy” or is it the editors of the Wall Street Journal who say it’s imperfect but reasonable adjustment to a post-pandemic country?

I don’t have an opinion other than to suspect it’s a case of politics as usual with both sides exaggerating the bill’s flaws or benefits mutatis mutandis for political purposes.

After more than decade and a half of Memorial Day posts I don’t have a lot more to say about the occasion other than the best way to commemorate our honored dead is by not adding to their number. I have little problem with those who believe in a responsibility to protect or spreading democracy at the point of a gun taking up arms to pursue their goal but let’s reserve our military for actually defending the country.

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.

Jeffrey Tucker’s post at RealClearMarkets begins with the state of the rental car business:

In Bozeman, Montana, a rental car will zap you $350 a day plus gas, or $650 for something fancier than a compact. In Manchester, New Hampshire, $250 a day plus gas. In Dallas, Texas, and Denver, Colorado, it’s better at $80 but the wait times are very long. Many people find themselves without and instead take Uber. In Salt Lake City, Utah, and Savannah, Georgia, you will throw down $150 per day plus.

The only real deals out there – by which I mean not $14 per day like it was six months ago but $70 – require that you grant the agency choice over what car they give you: the answer is whatever they happen to have on the floor. Also watch for a change in terms of service. Some companies have dropped “unlimited mileage:: a woman in Denver found herself with a $28,000 bill from driving 200 miles.

and concludes with a lament about the lockdowns:

This is a tremendous illustration of the interconnected and delicate systems that make up the market economy. When it is allowed to work, it is reliable, plentiful, efficient, responsive, and wealth creating. It’s so much part of our lives that we take it for granted. The digital economy has made trade, exchange, and production easier than ever before even as the reason it works so well is less understood than ever – and ever more under attack.

When you break it by force – I’m still astounded that this actually happened – you create conditions for disaster both immediately and down the line. We are finding out now just how bad this can get.

You may or may not be aware of it but most rental car establishment are franchise operations. Franchise businesses are different from other retailers—more parties participate in the business model. There’s the franchisor, e.g. McDonalds, the franchisee, e.g. the individual or company who has a relationship with McDonalds to operate a restaurant with the McDonalds name and menu, and the customers. In addition to a substantial fee at the outset, franchisors charge the franchisees ongoing royalty fees. I haven’t been able to locate records of any franchisor suspending royalty payments during the lockdowns. Although there are force majeur clauses (“it was out of my control!”) in their franchising contracts, I don’t believe those clauses will be enough.

It will be years before the dust has settled from the COVID-19 pandemic but I suspect that once it has we will find that

• the relief put into place by federal and state governments did more to help franchisors than franchisees
• the relief put into place by federal and state governments did more to help those in the top 20% of income earners than of those in the bottom 20%
• that thousands of franchises from car rental to clothing stores to hot dog joints will end up closing permanently and they won’t come back for the foreseeable future
• that all of those businesses closing down will have run-on effects that are hard to predict including effects on banks, malls, and state and local governments

Can anyone give me a credible explanation for why the Federal Trade Commission moved to block the reconsolidation of Illumnina and Grail? This article by Joe Lonsdale at STAT provides a little background:

Illumina’s acquisition of Grail would be a vertical merger. Rather than removing a direct competitor, as in a horizontal merger — think GM buying Ford — a vertical merger brings together two firms at different stages in the same supply chain, allowing for greater financial and operational efficiency.

Illumina has an effective monopoly on genomic sequencing, a critical input for the liquid biopsy products offered by Grail and its competitors. The FTC argues that if this vertical merger is approved, Illumina could underprice Grail’s products, giving the company an unfair advantage over its competitors.

That argument is wrong. First, low prices are a healthy form of competition that would make Grail’s liquid biopsies cheaper for consumers. Second, decades of economic analysis have shown that most vertical mergers increase competition, especially in fields that rely heavily on R&D.

Vertical mergers such as Illumina’s acquisition of Grail accelerate the pace at which innovations reach the marketplace. The reason is simple: Startups need to focus on one big problem at a time. Research startups like Grail take on tremendous risk as they develop new biotechnologies. Most fail, and even fewer would succeed if they also had to bear the risk of bringing their innovations to market.

A “diverse array of American innovators” has put together a petition (PDF) protesting the FTC’s action:

We fear the FTC’s new challenge will not only slow the deployment of GRAIL’s screening tools, but also have repercussions undermining innovation broadly. Mergers and acquisitions are vital for innovation, providing many start-ups with investment needed to scale, market, or even fully develop their product—which, in turn, attracts investment in future products and companies. In the United States, mergers and acquisitions are a $1.6 trillion market, and if the FTC takes an overzealous approach to antitrust enforcement, it will have a chilling effect on the deployment of new technologies across the economy.

The FTC should drop its challenge to the Illumina-GRAIL merger and take a targeted approach to antitrust enforcement, intervening only where there is clear evidence a deal will harm consumers. If the FTC pursues that prudent course, it can help unleash innovations key to meeting the great challenges of our time.

I find it puzzling. Over the last decade or so the FTC has allowed quite a few much more threatening acquisitions than this. They’re giving me the impression that the only form of innovation the Biden Administration is interested in is government innovation.

I think that Andrew Latham is whistling past a graveyard in his piece at 1945 proposing what I think is a futile plan to reinvigorate the liberal “rules-based order”:

But while the original project foundered on the shoals of Soviet-American rivalry, a rump liberal order did emerge after the second world war in the form of a set of norms, rules, and institutions that created a space within which the world’s democracies could flourish. It was far from perfect – and it certainly had its dark side – but it was worth preserving. And it remains worth preserving today.

Now, however, even that vestigial liberal order is under threat – as are the democratic nations at its core. Around the world, democracies are falling prey to illiberalism and populism while a powerful and newly assertive China, assisted by a declining but truculent Russia, seeks to challenge the legitimacy of the existing order and the liberal-democratic ideas and institutions that give form, substance and meaning to it.

The question then becomes: assuming that this world order – and the democratic space at its core – is worth preserving, what sort of institutional steering mechanism or watchdog will be required to both manage and uphold it?

IMO the rules-based order he laments was moribund almost as quickly as it was instituted. To have a credible rules-based order you’ve got to be willing to operate under the rules and we manifestly are not. We’ve been violating the rules we instituted following World War II quite regularly over the period of the last 70 years. You can point to exigent circumstances or that the president has the authority to do this or that under the Constitution but the fact reamins we haven’t been operating by the rules.

Even then a sort of “rump” rules-based system could be maintained as long as we were by far the most power economic and military power on the planet but we’ve been merrily undermining that over the period of the last 30 years. Now the rules-based liberal order is a Humpty-Dumpty neither we nor a consortium of democracies can put together again.