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Productivity Is the Key to Economic Growth

by LatishaTabor Posted on May 24, 2017

Mother Jones

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Mick Mulvaney says the haters don’t know what they’re talking about:

In his remarks Tuesday, Mulvaney mentioned that the economy had often grown in the past at rates of 3 percent and called people’s objections to the Trump administration’s expectation of growth rates that high “absurd.”

“It used to be normal. Ten years ago, it was normal. In fact, it’s been normal for the history of the country,” said Mulvaney.

Mulvaney is sort of right about this. But there’s more to it. The basic formula for economic growth is simple: Economic growth = Population growth + Productivity growth. Population growth has been slowing down for decades, and Mulvaney isn’t going to change that. We know exactly what the population of the country is going to be over the next few years.

So that leaves productivity growth, which the BLS estimates here. Here’s what all three factors have looked like since 1960:

In order to achieve 3 percent economic growth, we need productivity growth of about 2.3 percent. This is decidedly not normal for the history of the country—not in the past 50 years, anyway. With the brief exception of the unsustainable housing bubble era, we haven’t hit that since the end of 60s.

Productivity growth is a real problem, and it’s something of a mystery why it’s been so low lately. But it’s a mystery to Mulvaney too, and it’s certainly not due to punitive tax rates or heavy-handed regulations. Despite this, Mulvaney is suggesting that Trump can more than double the productivity growth rate of the past ten years, reaching a target we haven’t hit in a normal, healthy economy for the past half century. There’s simply no reason to believe this, and Mulvaney hasn’t even tried to explain how he thinks Trump can accomplish it. Not even hand waving. He’s literally said nothing about productivity growth at all.

Until he does, nobody should believe his growth estimates. It all comes down to productivity, and that’s what Mulvaney needs to talk about.

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Productivity Is the Key to Economic Growth

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Corporate America Is Doing Great

by FlorentDuckett Posted on May 24, 2017

Mother Jones

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If you’re wondering why the stock market is doing so well lately, here’s the answer:

Earnings at U.S. companies grew at the fastest pace in nearly six years in the first quarter, the latest boon to a bull market that has stretched into its ninth year.

With nearly all companies in the S&P 500 having reported results, aggregate earnings for the first quarter are on track to grow 13.6% from the year-earlier period….Beyond the jump in growth, many investors have been encouraged by signs that the quality of the results is improving. That contrasts with recent years, when investors worried that corporate share buybacks and ultralow interest rates were juicing stock gains in the absence of business improvement.

It’s not Trumpmania, it’s just old-fashioned earnings growth. More people are buying stuff and companies are making more money. It’s simple.

How long will this last? I don’t know any more than anyone else, but my guess is that the current expansion has another year to go. I’m starting to see signs of an economy that’s getting a little too exuberant, and I suspect that 2018 is going to be a mild recession year. Please note that this prediction is worth every cent you paid for it.

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Corporate America Is Doing Great

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Health Care Systems Are Expensive. Deal With It.

by AdrianaGivens Posted on May 24, 2017

Mother Jones

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How much would a single-payer universal health care system cost in the United States? You don’t need to do anything very complicated to get a ballpark figure. Here’s the arithmetic:

Total spending on health care in the US is $3.2 trillion
Of that, $1.5 trillion is already funded by federal and state programs. That leaves additional required spending of $1.7 trillion.
A universal system will still require some copays and other out-of pocket expenses. Figure $200 billion or so. That leaves $1.5 trillion

So that’s it. A universal health care system in the US would require about $1.5 trillion in additional government spending. If you want to make heroic assumptions about how much a single-payer would save, go ahead. But nobody serious is going to buy it. If we’re lucky, a good single-payer system would slow the growth of health care costs over the long term, but it’s vanishingly unlikely to actually cut current costs.

There was a lot of surprise today about an estimate that a single-payer plan for California would have a net additional cost of about $200 billion. But California has 12 percent of the nation’s population, and 12 percent of $1.5 trillion is $180 billion. So that estimate is right in the ballpark of what you should expect. Short of some kind of legislative miracle, there’s really no way around this. Health care is expensive.

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Health Care Systems Are Expensive. Deal With It.

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BREAKING: Trump Budget Numbers Make No Sense

by LannyFtflnztr Posted on May 23, 2017

Mother Jones

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Jon Chait says the Trump White House has made a $2 trillion mistake:

Trump has promised to enact “the biggest tax cut in history.” Trump’s administration has insisted, however, that the largest tax cut in history will not reduce revenue, because it will unleash growth….But then the budget assumes $2 trillion in higher revenue from growth in order to achieve balance after ten years. So the $2 trillion from higher growth is a double-count. It pays for the Trump cuts, and then it pays again for balancing the budget.

It’s true that the budget summary document includes a line item called “Effect of economic feedback” (in Table S-2) that comes to $2.062 trillion over ten years. Is that the same as the economic feedback that will pay for tax cuts? Who knows, really. It’s all just made-up nonsense anyway. But here’s an interesting thing. In the detailed projections, the Trump budget projects lower tax revenue than the final Obama budget:

What’s up with that? Does the Trump budget not include any economic feedback after all? But even if it doesn’t, why is their projection lower than Obama’s? Is it so they can use this lower number as a new baseline for comparison when they unveil their growth-exploding tax plan later in the year?

I know, I know: who cares? The Trump numbers are just random gibberish plucked from the sky. Still, you’d think they could at least make them agree from one spreadsheet to the next. Where’s the economic feedback in the tax revenue numbers?

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BREAKING: Trump Budget Numbers Make No Sense

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Trump Learns that Arabs Want a Palestinian Peace Deal

by DelphiaPridgen4 Posted on May 22, 2017

Mother Jones

In some ways, it’s sort of entertaining to have a president who’s literally learning the most basic facts of the world on the job:

President Trump began a two-day visit to Israel on Monday with a blunt assessment for Prime Minister Benjamin Netanyahu: If Israel really wants peace with its Arab neighbors, the cost will be resolving the generations-old standoff with the Palestinians….“I was deeply encouraged by my conversations with Muslim world leaders in Saudi Arabia, including King Salman, who I spoke to at great length. King Salman feels very strongly and, I can tell you, would love to see peace with Israel and the Palestinians.”

It’s an open question whether a Palestinian peace deal would really produce comity with the rest of the Arab world, but it’s certainly a prerequisite and has been for decades. But I guess Trump hadn’t really considered that a serious obstacle until he heard it face-to-face from the king.

Anyway, we all know where this is going, right? Benjamin Netanyahu wants to stay on good terms with Trump, and Trump wants a peace deal. Everyone on the planet knows perfectly well that Netanyahu has no interest in this, but he’ll string Trump along anyway. A “peace process” will be set up, Jared Kushner will preside over a meeting or two, and Netanyahu will settle back and wait for some kind of bombing or other terror attack to declare that he tried but the Palestinians just can’t be dealt with. Every neocon in America will immediately jump on the bandwagon and insist that this is the final straw. Things were so hopeful thanks to Trump’s goodwill, but they bombed innocent women and children while Israel was earnestly trying to make peace! They’re savages! Netanyahu will ask Trump for a statement of support, and of course Trump will provide it because terrorists are bad. And that will be that.

The whole thing will be a ridiculous charade, and everyone except Trump will know it.

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Trump Learns that Arabs Want a Palestinian Peace Deal

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Commerce Secretary Amazed At How Friendly Saudi Arabia Is

by CarleyFreehill Posted on May 22, 2017

Mother Jones

Commerce Secretary Wilbur Ross was in Saudi Arabia with President Trump this weekend, and today he appeared on CNBC to chat about it. This comes via TPM:

Ross: I think the other thing that was fascinating to me … there was not a single hint of a protestor anywhere there during the whole time we were there, not one guy with a bad placard, instead …

Host: But Secretary Ross, that may be but not necessarily because they don’t have those feelings there but because they control people and don’t allow them to to come and express their feelings quite the same as we do here.

Ross: In theory that could be true. But boy there was certainly no sign of it, there was not a single effort at any incursion. There wasn’t anything. The mood was a genuinely good mood. And at the end of the trip, as I was getting back on the plane the security guards from the Saudi side who’d been helping us over the weekend all wanted to pose for a big photo-op. And then they gave me two gigantic bushels of dates, as a present, as a thank you for the trip that we had had. That was a pretty from the heart, very genuine gesture. It really touched me.

Is everyone in the Trump administration a senile old man? The alternatives here are: (a) Ross is an idiot, (b) he’s just spinning but doing an epically bad job of it, or (c) he’s losing his mind. What the hell is it with this administration?

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Commerce Secretary Amazed At How Friendly Saudi Arabia Is

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Trump Confirms His Intel Blabbing Originated With Israel

by MuhammadHutcheon Posted on May 22, 2017

Mother Jones

Remember the top secret intel that President Trump shared with the Russians in the Oval Office? We all pretty much know that it came from Israel, but for some reason Trump decided to confirm this today:

As many people have pointed out, this was just a photo op. Trump didn’t have to say anything. But he’s Trump, so he had to have the last word. It continues to be remarkable how easy it is to bait the guy.

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Trump Confirms His Intel Blabbing Originated With Israel

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Road to Riyadh, Day Two

by dinahi9725047 Posted on May 21, 2017

Mother Jones

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When I first saw this picture, I figured it was just a dumb Photoshop and skipped on by. But no. This is real:

King Salman seems genuinely fascinated by this modern miracle. El-Sisi obviously doesn’t give a shit and is just being polite. Trump looks like he’s trying to commune with Sauron. Naturally this turned into a huge Twitter meme instantly, and I imagine we’re going to be seeing this picture around for years.

And contrary to what I reported earlier, it turns out that Trump didn’t quite manage to recite today’s speech off the teleprompter correctly. He was apparently so nervous about the whole radical Islamic terrorism vs. violent extremism vs. Islamist extremism thing that he blew it:

Trump had been in Saudi Arabia for about 36 hours at that point. Only 150 hours to go!

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Road to Riyadh, Day Two

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Road to Riyadh, Starring Donald Trump

by earleu072631331 Posted on May 20, 2017

Mother Jones

President Trump’s trip to Saudi Arabia is going great! Here’s the first family arriving in Riyadh:

At least Melania isn’t kowtowing to sexist Muslim custom by wearing a headscarf. Oh wait:

Fine. But Trump himself is standing up for masculine American values, right?

And here’s the official readout of Trump’s visit with the Saudi king:

What kind of pusillanimity is this? “Violent extremism” is an Obama-era euphemism used by people who refuse to look reality in the eye:

If Trump isn’t even willing to name the problem when he meets with the Saudi king, how can he possibly fight it?

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Road to Riyadh, Starring Donald Trump

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Drunk Driving Followup: The Mystery Solved!

by VedaReiter Posted on May 20, 2017

Mother Jones

Yesterday I wrote about the mystery of drunk driving: if stricter laws and harsher punishments really are responsible for a decline in drunk driving, why is it that alcohol-related fatalities have only declined at the same rate as every other kind of road fatality? Is it possible that all those laws have been useless?

I got several good responses, which confirmed that there’s a bit of a mystery here but pointed out that my data only went back to 1994. This misses the significant drop in drunk driving during the 80s and early 90s. Then I got an email from Darren Grant, an economics professor at Sam Houston State University, pointing me to a paper that decomposes exactly what happened and when. Grant’s paper, which relies on a microdata-based model of traffic fatalities, concludes that it’s legitimate to use the percentage of all road fatalities that involve alcohol—which has been flat for many years—as a proxy for the amount of drunk driving. It also breaks down the reason for the decline in drunk driving during the 80s and 90s. Without further ado, here is his chart:

There are several takeaways from this:

During the 80s and early 90s, drunk driving decreased significantly.
By the mid-90s, the level of drunk driving flattened out and has been flat ever since.
The effect of laws on drunk driving has been pretty modest. That’s the red band in the chart. Stricter laws are responsible for only a small fraction of the total decline.

There’s potentially some good news here. Grant concludes that the biggest effect by far has been from social forces, namely the increased stigma associated with drunk driving. If you discount demographics, which we have no control over, social stigma accounts for about half the drop in drunk driving. This suggests that what we need isn’t so much stricter laws, but a revitalized campaign to even further stigmatize drunk driving. I’m on board with that.

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Drunk Driving Followup: The Mystery Solved!

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