Tag Archives: Krugman

Trump Tax Cut – Wrong!

Published / by Stephen

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You want to know how wrong the Trump tax cut is? Read this, written by someone with the economic chops to know.

NYTimes.com: The Trump Tax Cut: Even Worse Than You’ve Heard

Financing Universal Healthcare

Published / by Stephen

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If you accept the premise that everyone should have basic healthcare, providing that boils down to how to finance the entitlement. I am surprised that I have not seen the financing point made by policy experts or by the media (maybe I am not looking hard enough).

However the argument between Republicans and Democrats was not about financing healthcare. The two parties have different objectives: provide for universal healthcare versus reducing taxes and giving tax breaks to higher income groups.

The Trump / Republican’s repeal and replace is a smokescreen to create something federal-budget cheap that looks like universal healthcare. The problem is all of the plans to date would leave millions uninsured. If the debate had been framed as contrasting objectives, healthcare versus tax breaks, the reason for the gridlock would have been obvious and the debate would have been, at least, honest.

In any case Krugman has nice piece on alternatives for providing universal coverage, single payer versus alternatives to single payer: What’s Next for Progressives? In this article, Krugman also discusses the need to “focus on other holes in the U.S. safety net.”

Republican’s Obamacare

Published / by Stephen

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My favorite Keynesian nailed it again. The Republicans have no plan. Universal coverage can only be achieved in one of two ways:

  1. a one payer system – not politically feasible
  2. a three part strategy of regulation, mandates, and subsidies.

Assuming that the powers that be believe that everyone should have health insurance, even if they have preexisting conditions, then:

  • Mandates: Everyone has to be in the insurance pool (like it or not).
  • Subsidies: There have to be subsidies for those than cannot afford the insurance.
  • Regulation: The system must be regulated. For universal healthcare insurance the federal government sets the rules and the states implement the rules.

Without this three part structure the system will not work and millions of people will be pushed out of the healthcare system. The required structure is simple and to quote David Leonhardt, New York Times Op-Ed Columnist:

The debate over health care, and Obamacare, is less complicated than it often seems. …At root, it’s a debate over whether affluent people and healthy people should help pay for the medical care of the middle class, the poor and the sick

In another New York Times editorial healthcare experts identify 7 questions that policy makers must address –  Seven Questions About Healthcare Reform.

It is going to be very interesting to see how the Republican’s wiggle out of this one

Trump and Manufacturing Employment

Published / by Stephen

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If you think that Trump’s actions, to keep manufacturing in the US, are going to have a significant impact on manufacturing employment, don’t hold your breath. If you think these actions will help the economy you are wrong.

The reasons are twofold:  structural change in manufacturing processes worldwide and the negative impacts of tariffs and the resulting trade wars.

Structural Change

Manufacturing employment is falling worldwide. This is due to robotics and automation. See Bloomberg: Why Factory Jobs Are Shrinking Everywhere. Also see Slate : Nothing Will Bring Back Manufacturing Employment.

So Trump keeps a few plants from moving offshore and saves a few domestic jobs. But, because these plants are mostly automated, employment is not affected very much. Further it is likely that their production is no more efficient and perhaps less efficient than than if the plants were moved overseas:

Costs are one of the main reason for moving a factory offshore. But if it is cheaper here owners keep it here. This is born-out by the Bloomberg article which reports that “the U.S. has become the second-most-competitive manufacturing location among the 25 largest manufacturing exporters worldwide.” This is good news but there is bad news. Since 1970 employees working in manufacturing have fallen from more than a quarter to one in 10 and these jobs are not coming back. Automation is not going away.

Tariffs & Trade Wars

In addition to structural change in manufacturing, imposing tariffs on foreign production in order to protect domestic industries and motivate companies to produce in the US has serious short and long run consequence: The tariffs potentially result in trade wars that according to Krugman disrupt the existing economic structure, which is built on elaborate international supply chains.

…In the long run, a new structure with shorter chains would be built. But in the meantime, some industries, some factories, would end up becoming sudden losers — in the US as well as in developing countries.

The Bottom Line

The Trump policies will have minimal effects on employment and will surely reduce economic growth. They are in fact Fake Policy. It would be far more productive to focus on how to retrain and reemploy the workers who have been moved out of manufacturing because of the automation that is occurring here and worldwide.

Trump’s Fake Employment Policy

Published / by Stephen

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My favorite Keynesian has another good piece on Trump and the media. In speaking to the Carrier deal and more broadly to employment in general  Krugman argues that these interventions are in fact fake policy that have little effect and are getting far too much attention in the news media:

…it may have sounded as if Mr. Trump was doing something substantive by intervening with Carrier, but he wasn’t. This was fake policy — a show intended to impress the rubes, not to achieve real results.

Trump and The Coming Trade Wars

Published / by Stephen

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A blog post by Paul Krugman suggests to me that Trump may know a lot about commercial real estate but not much about manufacturing.

What happens if the protectionist-in-chief goes ahead and does it, as I suspect he will? …But what would happen would be a global trade war, which would disrupt the existing economic structure, which is built on elaborate international supply chains.  …In the long run, a new structure with shorter chains would be built. But in the meantime, some industries, some factories, would end up becoming sudden losers — in the US as well as in developing countries.

The China Shock and the Trump Shock

“Reality TV Populism”

Published / by Stephen

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Paul Krugman, one of my favorite Keynesian economists just wrote a piece titled “Reality TV Populism.” Krugman’s post is all about Trump:

…in what sense is Trump a populist? Basically, he plays one on TV — he claims to stand for the common man, disparages elites, trashes political correctness; but it’s all for show. When it comes to substance, he’s pro-elite all the way.

This is worth a read. Paul Krugmen – Reality TV Populism