Here’s the nub of Edward C. Prescott and Lee E. Ohanian’s op-ed in the Wall Street Journal on the economy:

It’s clear the recovery ended in 2014 because the two hallmarks of recovery—investment’s share of gross domestic product and labor input relative to the adult population—stopped increasing. This left a large gap between actual output and the output level that would have occurred had the economy recovered to its prerecession growth path. According to our calculations, the U.S. cumulatively lost about $18 trillion in income and output between 2007 and 2016. Everything suggested this shortfall would persist or even grow.

Yet economic performance began to improve beginning in the first quarter of 2017. Real GDP growth accelerated to about 2.7% between the end of 2016 and the second quarter of 2018, up from about 2% between 2014 and the end of 2016. The share of GDP devoted to nonresidential business investment rose to a historic high.

The best measure of labor input—the total number of market hours worked divided by the 16-and-older population—is growing faster than in 2014-16, and is now close to its all-time high. This is all the more impressive since the growth rate of the working-age population is slowing. Perhaps the most exciting aspect of the current economy: The emergence of better job opportunities has reduced the number of people on disability. This has led the Social Security Administration to reverse its previous warning that the disability system would become insolvent as soon as 2023.

U.S. economic performance is the strongest in years. One policy driving this turnaround is the substantially lower corporate-tax rate, which has made the U.S. more competitive with other countries. Regulatory changes—such as the partial rollback of Dodd-Frank and new leadership within the Consumer Financial Protection Bureau—also have proved helpful, particularly for small businesses, which are benefiting from lower record-keeping and compliance costs. Meanwhile, the number of regulatory pages in the Federal Register has been cut by a third since President Obama’s last year in office. That’s a major reason the National Federation of Independent Business reports that more small-business owners are hiring than ever. They’re also increasingly optimistic about the future of the U.S. economy.

As the two hallmarks of recovery are still rising, the economy likely has not reached its new, higher growth path. This means that the U.S. can expect above-normal growth in the coming months, possibly even years.

I’m pretty Keynesian in my views but I was also skeptical about the utility of Keynesian pump-priming in 2009 under the circumstances that prevailed then. The 2000s were not like the 1920s. It was a bubble economy. A Keynesian strategy presupposes a difference between aggregate product and potential product. A bubble economy meant a lot less potential product. The reduced aggregate product was just gone. What we needed was a major course correction in our policies. We didn’t get it.

We still need a lot more course correction. Regulations must be much more pragmatic. If Canada can require that regulations be cost-effective so can we. When regulations or policy changes cause a loss of jobs, particularly highly localized job loss, they should be accompanied by measures to remediate their negative effects or not implemented.

We also need more domestic business investment. When more personal consumption results in more investment in China, India, or the Philippines, it does us little good. How do we accomplish that? I have no idea.

We need to revive our manufacturing sector and basic production. We will still remain much more a service economy than we were in 1950 but a service economy in which the service jobs require the government to pay for them has a basic problem.

• I did not vote for Trump
• I do not like Trump
• I do not support Trump but, then, I don’t support any president. I support or oppose policies.
• I do my level best to be as fair-minded as I possibly can be, up to and possibly beyond a fault. That doesn’t depend on the letter behind the president’s name. I do not suspend my critical faculties depending on political party.

Appointing weak subordinates is a sign of a weak manager but that was to be expected from a political tyro without much support from within the Republican establishment.

Trump became president spending less money in real terms than any victorious candidate in recent history. I don’t interpret that as Trump didn’t really want to be president (as some do) because I think he doesn’t feint. I think it points to just how poor a candidate Hillary Clinton was.

Calls for impeachment now would have a lot more force if they weren’t coming from people who were calling for Trump’s impeachment before he had been inaugurated. Or from people who never met a war they didn’t like.

I like Jared Bernstein and Ro Khanna’s op-ed in the Washington Post today very much. In it they address two questions. First, what impact is Trump’s economic policy having?

Last week, one of President Trump’s top economic advisers, Larry Kudlow, argued that the U.S. economy is “crushing it,” posting boom-like numbers in key areas, all thanks to the leadership of the president.

Evaluating such claims usually begins with assessing whether the president should get credit for an economy he inherited in year eight of a solid expansion. But the fact that Trump is claiming credit for trends that were largely ongoing before he took office is one of the few ways in which he’s not much different from former presidents.

Instead, we’d like to drill down on the evidence for this “crushing it” claim. Who’s actually getting ahead in the Trump economy?

He then examines a variety of the things that have happened and then grudgingly comes to the right conclusion—that it’s too early to tell:

t takes time to plan investments, so it’s too soon to conclude the tax cuts haven’t made a difference. But none of the surveys of companies’ investment plans show any plans to ratchet up capital spending, including the Commerce Department’s monthly data on orders for capital equipment, the National Federation of Independent Businesses’ survey on plans for capital expenditures, and investment surveys by regional Federal Reserve Banks.

He neglects to mention the historic declines in unemployment for blacks and Hispanics. I notice, too, that he neglects to mention trade policy.

He then proposes a series of alternate policies about which I am skeptical. The only one of which I approve is his rural Internet proposal. I don’t think it would have a great deal of economic impact but I think it’s the effective equivalent of rural electrification or telephone service. In an Internet age lack of access to highspeed Internet connectivity is isolating and we need to be more connected with each other not less. The balance of his proposals are the same sort of crony capitalist ones the Obama Administration tried with predictable results. Political donors got rich while the programs underperformed.

IMO the Trump economic policies have been a mixed bag. We need more business investment. We haven’t had enough business investment other than in real estate for decades now. We don’t need more personal consumption, particularly when that personal consumption results in more imports from China, bought through retail channels that don’t need to expand in response to more sales because of Internet-driven advances in the fulfillment process.

I think we need more policies that are much more narrowly focused on domestic business investment. I’m agnostic on what those should be.

Something to keep in mind when reading this. Everything is correlated, either positively or negatively.

The “Sound Advice Risk Indicator”, an index derived from the ratio of the median price of a house and stock prices, is shouting a warning, according to this piece at MarketWatch:

This indicator, the brainchild of Gray Cardiff, editor of the Sound Advice newsletter, is derived from the ratio of the S&P 500 SPX, +0.21% to the median price of a new U.S. house. For the first time since the late 1990s, and for only the sixth time since 1895, this indicator has risen above the 2.0 level that represents a major sell signal for equities. (See accompanying chart.)

The five times are 1907, 1929, 1938, 2000, and today, each of them marking a recession.

Does it mean anything? Beats me. Things change. I do know that the values of the stocks that have been pushing the various indices up can’t be justified on the basis of their earning.

In an op-ed in the Wall Street Journal economist David Neumark has a better idea for increasing the minimum wage:

Minimum wages reduce employment of low-skilled workers, yet political support for minimum-wage increases is so strong that they seem inevitable. What to do? I have developed a proposal for a high-wage tax credit. The HWTC preserves the direct benefits of higher minimum wages—namely, higher wages for low-wage workers—while mitigating the harm.

When the government increases the minimum wage, the HWTC would provide a tax credit of 50% of the difference between the prior minimum wage and the new minimum wage for each hour of labor employed. It would phase out at wages above the new minimum wage and, as wage inflation erodes, the value of the new minimum wage.

The HWTC would accomplish three main goals. First, by offsetting part of the cost of higher minimum wages, it would reduce employers’ incentives to substitute away from low-skilled workers in favor of higher-skilled ones and machines. It would also moderate price increases that would otherwise lower product demand.

Second, it would transform the minimum wage into a more sensible redistributive policy. Most redistributive policies transfer money from high-income households to low-income ones via the tax system. The minimum wage, by contrast, takes money from business owners, who may not have high incomes themselves. By operating through the tax system, the HWTC would transfer some of the cost of higher minimum wages away from owners of businesses like child-care centers and restaurants, and toward high-income taxpayers.

Third, the HWTC would encourage better decision making about alternative policies to combat inequality. Voters think income inequality is too high, and politicians who want to keep their jobs must respond. Raising the minimum wage sounds like a good way to reduce income inequality, even if other policies, such as the Earned Income Tax Credit, do more to help the poor. By shifting some of the cost of higher minimum wages to taxpayers, the HWTC would put the minimum wage on a more equal footing with other redistributive policies. Policy makers and voters could then choose among alternative policies based on their actual benefits, rather than their misperceived costs.

I have an even better idea. Why not pay for the increased minimum wage through a tax surcharge? Put a question on the 1040: do you believe the minimum wage should be increase to $15/hour? For each person answering “yes” to that question add a surcharge to their gross taxes, i.e. after all deductions, etc. have been taken and tax calculated, in the amount of the estimated number of people eligible for the minimum wage increase times the difference between the present minimum wage and $15 per hour divided by the estimated number of people who answer “yes”. Rather than having “taxpayers” pay the tax, have those who support the change pay the tax. It would not only be direct democracy it would be be evolution in action.

I’m still waiting to hear how ostracizing, firing, expelling, or beating up people we disagree with while wearing black masks is going to make us a better country.

People who commit crimes should be arrested, tried, and punished. People with whom we disagree should be tolerated. I can see how that will make us a better country.

As I said yesterday, President Trump has surrounded himself with creeps, slimeballs, and, now it can reasonably be said, criminals. The Mueller investigation does and should go on.

In Hawaii there is no rabies. The animals who were brought to the islands originally didn’t carry it, it is too far from the mainland or other islands for animals who carry it to travel naturally, and live animals brought into the state by humans are carefully screened and quarantined before being allowed in. In all 49 other states rabies is endemic.

When I was a kid my siblings and I contracted just about everything, all of what used to be called “ordinary childhood diseases”. Chicken pox, measles, mumps, German measles, the list goes on. We didn’t get it but I had classmates members of whose families contracted polio. We were vaccinated against smallpox and inoculated against tetanus and whopping cough. Today’s children and young people have multiple immunizations available to them and these diseases are largely as fantastical and historical to them as smallpox or black plague was to us. Their life experience is enormously different from ours. They have vastly less personal experience with disease.

There is presently an outbreak of measles in Europe. The editors of the Washington Post remark:

Measles was eliminated in the United States by 2000 with widespread use of the vaccine. Extensive research has disproved the fears of a link between vaccination and autism, but ignorance and unfounded suspicions persist. In recent years, outbreaks have been caused by unvaccinated Americans and by foreigners bringing the virus to the United States after becoming infected abroad. This year, according to the Centers for Disease Control and Prevention, there have been 107 cases in 21 states and the District, fewer than the big outbreak of 2014 with 667 cases, but still worrisome.

Meanwhile, vaccination fears are driving Italy toward folly. An amendment approved by the Italian Senate this month, supported by the populist government, suspends a requirement that parents provide proof of 10 routine vaccinations when enrolling their children in nurseries or preschools. The lower house is expected to vote next month. If approved, more people will go without immunization. Some will die. It should not be allowed to happen.

The reasons for the outbreak in Europe are the many unimmunized immigrants who have come into the countries of Europe over the last few years and loss of “herd immunity”, diminished spreadability, through failure to immunize due to unwarranted and irrational fears of immunizations.

Expect more of this. When experience of disease is reduced it blunts prudent reaction and increased exposure means increased disease. Island life was nice but we’ve been voted off the island.

Speaking of the Mueller investigation, what do you think of it so far? I think that what we’re learning is something I’ve believed all along—that Trump has surrounded himself with creeps, jerks, snake oil salesman, sycophants, slimeballs, and swindlers. The meat of the investigation—whether Donald Trump and/or his campaign knowingly colluded with the Russian government to steal the 2016 presidential election from Hillary Clinton—has been pretty weak tea so far.

What say you?