Economist's View

How Market Power Leads to Corporate Political Influence

 From ProMarket:

How Market Power Leads to Corporate Political Influence, by Asher Schechter: Neoclassical economic theory assumes that firms have no power to influence the rules of the game. A new paper by Luigi Zingales argues: This is true only in competitive product markets. When firms have market power, they will seek and obtain political influence and vice versa.

In 2016, the advocacy group Global Justice Now published a report showing that 69 of the world’s largest 100 economic entities are now corporations, not governments. With annual revenues of $485.9 billion, Walmart topped all but nine countries. As the world’s corporations continue to grow bigger and more profitable, so does the power and influence they wield: multinational corporations employ vast armies of lobbyists, lawyers, and PR people across borders and continents, and they have more than enough resources to capture regulators and elected representatives the world over.

Yet, the prevailing economic definition views firms as merely “a nexus of contracts” with “no power of fiat, no authority, no disciplinary action any different in the slightest degree from ordinary market contracting between two people.” How is it possible to reconcile these two views? A new paper by Luigi Zingales (Faculty Director of the Stigler Center and one of the editors of this blog) tries to bridge this gap.

The Medici vicious circle

The neoclassical model of the firm, notes Zingales, is a reasonable description of firms operating in highly competitive markets, where firms have little incentives and fewer resources to distort the rules of the game. Little incentives because in a neoclassical framework firms are relatively small, and thus the costs of these activities tend to exceed their share of the benefits. Fewer resources, because a competitive market does not provide firms with abnormal profits to spend in lobbying activities. 

The opposite is true in concentrated markets, where firms enjoy sufficiently high profits to spend in lobbying activity. Some market power is particularly important to gain political influence when cash bribes are relatively rare, writes Zingales. In such an environment, firms gain political power through promises of future benefits. Only if firms have significant market power do they have rents to allocate. At the same time, firms’ promises of future rents are credible only to the extent that firms are expected to be around in the future, a prospect greatly enhanced by the existence of some barrier to entry in the markets in which they operate. Thus, firms can gain political power only when they have significant market power. ...

Paul Krugman: Attack of the Republican Decepticons

Conservatives "keep scaling new heights of dishonesty in their attempt to sell their reverse-Robin Hood agenda":

Attack of the Republican Decepticons, by Paul Krugman, NY Times: Does anyone remember the “reformicons”? A couple of years back there was much talk about a new generation of Republicans who would ... move their party off its cruel and mindless agenda of tax cuts for the rich and pain for the poor, bringing back the intellectual seriousness that supposedly used to characterize the conservative movement.

But the rise of the reformicons never happened. What we got instead was the (further) rise of the decepticons..., conservatives who keep scaling new heights of dishonesty in their attempt to sell their reverse-Robin Hood agenda.

Consider ... Republican leaders’ strategy on health care..., here are a few low points. ...

Despite encountering some significant problems, the Affordable Care Act has ... extended health insurance to millions of Americans... And these numbers translate into dramatic positive impacts on real lives. ...

How do Republicans argue against this success? You can get a good overview by looking at the Twitter feed of Tom Price,... secretary of health and human services...

First, he points to the fact that fewer people than expected have signed up on the exchanges ... and portrays this as a sign of dire failure. But a lot of this shortfall is the result of good news: Fewer employers than predicted chose to drop coverage and shift their workers onto exchange plans. ...

Second, he points to the 28 million U.S. residents who remain uninsured... But nobody expected Obamacare to cover everyone... And you have to wonder how Price can look himself in the mirror ... when his own party’s plans would vastly increase the number of uninsured.

Which brings us to Republicans’ efforts to obscure the nature of their own plans. ...

On one side, they claim that a cut is not a cut, because dollar spending on Medicaid would still rise over time. ...

On the other side ... senior Republicans ... dismiss declines in the number of people with coverage as no big deal, because they would represent voluntary choices not to buy insurance.

How is this supposed to apply to the 15 million people the C.B.O. predicts would lose Medicaid? ...

Political spin used to have its limits: Politicians who wanted to be taken seriously wouldn’t go around claiming that up is down and black is white.

Yet today’s Republicans hardly ever do anything else. It’s not just Donald Trump: The whole G.O.P. has become a post-truth party. And I see no sign that it will ever improve.

Paul Krugman: Understanding Republican Cruelty

What's the driving force behind the Republican's "ugly health plan":

Understanding Republican Cruelty, by Paul Krugman, NY Times: The basics of Republican health legislation ... are easy to describe: Take health insurance away from tens of millions, make it much worse and far more expensive for millions more, and use the money thus saved to cut taxes on the wealthy. ...

The puzzle ... is why the party is pushing this harsh, morally indefensible agenda.

Think about it. Losing health coverage is a nightmare, especially if you’re older, have health problems and/or lack the financial resources to cope if illness strikes. ...

Meanwhile, taxes that fall mainly on a tiny, wealthy minority would be reduced or eliminated. These cuts would be big in dollar terms, but because the rich are already so rich, the savings would make very little difference to their lives. ...

Which brings me back to my question: Why would anyone want to do this?

I won’t pretend to have a full answer, but I think there are two big drivers — actually, two big lies — behind Republican cruelty on health care and beyond.

First..., Republicans spent almost the entire Obama administration railing against the imaginary horrors of the Affordable Care Act — death panels! — repealing Obamacare was bound to be their first priority.

Once the prospect of repeal became real, however, Republicans had to face the fact that Obamacare, far from being the failure they portrayed, has done what it was supposed to do...

So one way to understand this ugly health plan is that Republicans, through their political opportunism and dishonesty, boxed themselves into a position that makes them seem cruel and immoral — because they are.

Yet that’s surely not the whole story, because Obamacare isn’t the only social insurance program that does great good yet faces incessant right-wing attack. Food stamps, unemployment insurance, disability benefits all get the same treatment. Why?

As with Obamacare, this story began with a politically convenient lie — the pretense ... that social safety net programs just reward lazy people who don’t want to work. And we all know which people in particular were supposed to be on the take.

Now, this was never true..., some of the biggest beneficiaries of these safety net programs are members of the Trump-supporting white working class. ...

So what will happen to this monstrous bill? I have no idea. Whether it passes or not, however, remember this moment. For this is what modern Republicans do; this is who they are.

Will Macron’s Marchers take power?

Thomas Piketty:

Will Macron’s Marchers take power?: With over 350 seats, the MPs elected on the « La république en marche » (LREM) ticket will have an overwhelming majority in the Assemblée Nationale (Parliament). Will they use it to be in the forefront of reform and renewal of French politics? Or will they simply play a passive role, rubber stamping and obediently voting the texts that the government sends them?

It happens that they will shortly be faced with their first real-life test with the question of deduction of income tax at source. The government wishes to postpone the implementation until 2019, perhaps forever, for reasons which are totally opportunist and unjustified. This big step backwards is bad news for the alleged intention to reform and modernise the French fiscal and social system proclaimed by the new government (a general intention that is unfortunately rather vague once we enter into the details: see What reforms for France), and leads us to fear the worst for what is to come. Now, contrary to what has been stated, the government cannot take this sort of decision without a vote in Parliament which should therefore take place in the coming days or weeks.

There are two possibilities. Either the LREM MP’s force the government to maintain this crucial reform and its application as from January 2018, as was already voted by the outgoing Parliament in the autumn of 2016 in the context of the 2017 Finance Act. It will then be clear that the new MP’s are ready to play their role fully in future reforms and oppose the executive when necessary. The other option is to follow in the steps of the conservatism of the government, which, unfortunately, seems to be the most likely outcome. This would alert us to the fact that with this new majority and this new authority we are dealing with reformers who are mere paper tigers. ...

Pure Class Warfare, With Extra Contempt

Paul Krugman:

Pure Class Warfare, With Extra Contempt: The Senate version of Trumpcare – the Better Care Reconciliation Act – is out. The substance is terrible: tens of millions of people will experience financial distress if this passes, and tens if not hundreds of thousands will die premature deaths, all for the sake of tax cuts for a handful of wealthy people. What’s even more amazing is that Republicans are making almost no effort to justify this massive upward redistribution of income. They’re doing it because they can, because they believe that the tribalism of their voters is strong enough that they will continue to support politicians who are ruining their lives.

In this sense – and in only this sense – what we’re seeing now is a departure from previous Republican practice.

In the past, laws that would take from the poor and working class while giving to the rich came with excuses. Tax cuts, their sponsors declared, would unleash market dynamism and make everyone more prosperous. Deregulation would increase efficiency and lower prices. It was all voodoo; the promises never came true. But at least there was some pretense of working for the common good.

Now we have none of this. This bill does nothing to reduce health care costs. It does nothing to improve the functioning of health insurance markets – in fact, it will send them into death spirals by reducing subsidies and eliminating the individual mandate. There is nothing at all in the bill that will make health care more affordable for those currently having trouble paying for it. And it will gradually squeeze Medicaid, eventually destroying any possibility of insurance for millions. ...

But Republican leaders believe that their voters are tribal enough, sufficiently walled off from information, that they’ll ignore the attack on their lives and keep voting R – indeed, that as they lose health care, get hit with crushing out-of-pocket bills, see their friends and neighbors face ruin, they’ll blame it on Democrats.

I wish I were sure that this belief was false.

Paul Krugman: Zombies, Vampires and Republicans

"The one obvious payoff to taking health care away from millions: a big tax cut for the wealthy":

Zombies, Vampires and Republicans, by Paul Krugman, NY Times: Zombies have long ruled the Republican Party. ... What are these zombies of which I speak? Among wonks, the term refers to policy ideas that should have been abandoned long ago in the face of evidence and experience, but just keep shambling along.

The right’s zombie-in-chief is the insistence that low taxes on the rich are the key to prosperity. This doctrine should have died...

Despite the consistent wrongness of their predictions, however, tax-cut fanatics just kept gaining influence in the G.O.P. — until the disaster in Kansas...

Will this banish the tax-cut zombie? Maybe — although the economists behind the Kansas debacle, who have of course learned nothing, appear to be the principal movers behind the Trump tax plan, such as it is.

But even as the zombies move offstage, vampire policies — so-called not so much because of their bloodsucking nature, although that too, as because they can’t survive daylight — have taken their place.

Consider what’s happening right now on health care.

Last month House Republicans rammed through one of the worst, cruelest pieces of legislation in history. ...

This bill is, as it should be, wildly unpopular. Nonetheless, Republican Senate leaders are now trying to ram through their own version of the A.H.C.A., one that, all reports suggest, will differ only in minor, cosmetic ways. And they’re trying to do it in total secrecy. ...

Clearly, the goal is to pass legislation that will have devastating effects on tens of millions of Americans without giving those expected to pass it, let alone the general public, any real chance to understand what they’re voting for. ...

This is unprecedented...

Of course..., the one obvious payoff to taking health care away from millions: a big tax cut for the wealthy. As I said, while bloodsucking isn’t the main reason to call this a vampire policy, it’s part of the picture....

You can blame Donald Trump for many things, including the fact that he will surely sign whatever bad bill is put in front of him. But as far as health care is concerned, he’s just an ignorant bystander...

So this isn’t a Trump story; it’s about the cynicism and corruption of the whole congressional G.O.P. Remember, it would take just a few conservatives with conscience — specifically, three Republican senators — to stop this outrage in its tracks. But right now, it looks as if those principled Republicans don’t exist.

Janet Yellen Is Her Own Best Successor

Narayana Kocherlakota:

Janet Yellen Is Her Own Best Successor: President Donald Trump has reportedly begun the process of deciding who will lead the U.S. Federal Reserve after Janet Yellen's term ends early next year. If he wants the best outcome for the economy, he can't do better than Janet Yellen. ...

Yellen's policies have contributed to a surprisingly strong labor market recovery, yet also been sufficiently cautious to keep inflation below target. Some would see this as an all-around success, though the Fed's caution does have a downside: Markets appear to believe that the central bank is unwilling or unable to hit its inflation target with consistency. ... If it persists, this loss of credibility means that the Fed will have less ammunition to fight the next recession.  

So could any of the other potential appointees do better? ...

Warsh, Taylor, and Hubbard all reportedly see Yellen’s Fed as having been too dovish, suggesting that that they would have done less to support the economic recovery. This approach would have led to higher unemployment and lower inflation -- an inferior fulfilment of the Fed's dual mandate that marks them as worse candidates than Yellen.  It's also important to remember that Taylor and Warsh argued publicly against additional monetary stimulus in November 2010, when the unemployment rate was almost 10 percent and the inflation rate had fallen nearly to 1 percent. Their concerns about excessive inflation proved to be completely unjustified. Yellen, by contrast, supported stimulus.

Yellen has a proven track record that's hard to beat. ... The president should reappoint her to the position of Fed chair.

The Silence of the Hacks

Paul Krugman:

The Silence of the Hacks: The actual text of the Senate version of Trumpcare is still a secret, even from almost all the Senators who are expected to vote for it. But that’s actually a secondary issue: never mind the precise details, what’s the organizing idea? What is the bill supposed to do, and how is it supposed to do it?

The answer — which I’ve been suggesting for a while — is that they have no idea, and more broadly, no ideas in general. Now Vox confirms this...

Time was when even the worst legislation came with some kind of justification, when you could count on the hacks at Heritage to explain why eating children will encourage entrepreneurship, or something. ...

But now we have legislation that will change the lives of millions, and they haven’t even summoned the usual suspects to explain what a great idea it is. If hypocrisy is the tribute vice pays to virtue, Republicans have decided that even that’s too much; they’re going to try to pass legislation that takes from the poor and gives to the rich without even trying to offer a justification.

And they’ll try to do it by dead of night, of course.

This has nothing to do with Trump, who is, as I’ve been saying, an ignorant bystander — yes, he’s betraying every promise he made, but what else is new? It’s about Congressional Republicans.

Which Congressional Republicans? All of them. Remember, three senators who cared even a bit about substance, legislative process, and just plain honesty with the public, could stop this. So far, it doesn’t look as if there are those three senators.

This is a level of corruption that’s hard to fathom. Yet it’s the reality of one of our two parties.

I’ve Covered Obamacare Since Day One. I’ve Never Seen Lying and Obstruction Like This.

Sarah Kliff:

I’ve covered Obamacare since day one. I’ve never seen lying and obstruction like this, Vox.com: Republicans do not want the country to know what is in their health care bill.

This has become more evident each day, as the Senate plots out a secretive path toward Obamacare repeal — and top White House officials (including the president) consistently lie about what the House bill actually does. ...

My biggest concern isn’t the hypocrisy; there is plenty of that in Washington. It’s that the process will lead to devastating results for millions of Americans who won’t know to speak up until the damage is done. So far, the few details that have leaked out paint a picture of a bill sure to cover millions fewer people and raise costs on those with preexisting conditions.

The plan is expected to be far-reaching, potentially bringing lifetime limits back to employer-sponsored coverage, which could mean a death sentence for some chronically ill patients who exhaust their insurance benefits. ...

The More Trump Fails, the Better Off We’ll Be

I have a new column:

The More Trump Fails, the Better Off We’ll Be: The Trump administration has gone to war against independent sources of information that pose a challenge to its policy goals and the narratives it tells to support them. One of the most recent targets is the Congressional Budget Office. ...

Paul Krugman: Making Ignorance Great Again

The truth is out there, but it's buried under a large pile of nonsense, lies, misleading statements, and deception:

Making Ignorance Great Again, by Paul Krugman, NY Times: Donald Trump just took us out of the Paris climate accord for no good reason. I don’t mean that his decision was wrong. I mean, literally, that he didn’t offer any substantive justification... It was just what he felt like doing.

And here’s the thing: What just happened on climate isn’t an unusual case — and Trump isn’t especially unusual for a modern Republican. ... Facts and hard thinking aren’t wanted, and anyone who tries to bring such things into the discussion is the enemy.

Consider ... health care. ... Did the administration and its allies consult with experts, study previous experience with health reform, and try to devise a plan that made sense? Of course not. In fact, House leaders made a point of ramming a bill through before the Congressional Budget Office ... could assess its likely impact.

When the budget office did weigh in, its conclusions were what you might expect:... a lot of people are going to lose coverage. Is 23 million a good estimate...? Yes — it might be 18 million, or it might be 28 million, but surely it would be in that range.

So how did the administration respond? By trying to shoot the messenger. Mick Mulvaney, the White House budget director, attacked the C.B.O...

So, Mr. Mulvaney, where’s your assessment of Trumpcare? You had plenty of resources to do your own study before trying to pass a bill. ...

But Mulvaney and his party don’t study issues, they just decide, and attack the motives of anyone who questions their decisions. ... Truth, as something that exists apart from and in possible opposition to political convenience, is no longer part of their philosophical universe. ...

And as health care and climate go, so goes everything else. Can you think of any major policy area where the G.O.P. hasn’t gone post-truth? ...

But does any of it matter? The president, backed by his party, is talking nonsense, destroying American credibility day by day. But hey, stocks are up, so what’s the problem?

Well, bear in mind that so far Trump hasn’t faced a single crisis not of his own making. As George Orwell noted ... in his essay “In Front of Your Nose,” people can indeed talk nonsense for a very long time, without paying an obvious price. But “sooner or later a false belief bumps up against solid reality, usually on a battlefield.” Now there’s a happy thought.

Paul Krugman: Trump Gratuitously Rejects the Paris Climate Accord

If liberals are for it, they’re against it:

Trump Gratuitously Rejects the Paris Climate Accord, by Paul Krugman, NY Times: As Donald Trump does his best to destroy the world’s hopes of reining in climate change, let’s be clear about one thing: This has nothing to do with serving America’s national interest. The U.S. economy, in particular, would do just fine under the Paris accord. This isn’t about nationalism; mainly, it’s about sheer spite.

About the economics:... Clearly, it would be an economy running on electricity...

What would life in an economy that made such an energy transition be like? Almost indistinguishable from life in the economy we have now. ...

Wouldn’t energy be more expensive in this alternative economy? Probably, but not by much: Technological progress in solar and wind has drastically reduced their cost, and it looks as if the same thing is starting to happen with energy storage.

Meanwhile, there would be compensating benefits. Notably, the adverse health effects of air pollution would be greatly reduced, and it’s quite possible that lower health care costs would all by themselves make up for the costs of energy transition, even ignoring the whole saving-civilization-from-catastrophic-climate-change thing. ...

Why, then, are so many people on the right determined to block climate action, and even trying to sabotage the progress we’ve been making on new energy sources?

Don’t tell me that they’re honestly worried about the inherent uncertainty of climate projections. ...

Don’t tell me that it’s about coal miners. ...

While it isn’t about coal jobs, right-wing anti-environmentalism is in part about protecting the profits of the coal industry, which in 2016 gave 97 percent of its political contributions to Republicans. ...

Pay any attention to modern right-wing discourse — including op-ed articles by top Trump officials — and you find deep hostility to any notion that some problems require collective action beyond shooting people and blowing things up.

Beyond this, much of today’s right seems driven above all by animus toward liberals rather than specific issues. If liberals are for it, they’re against it. If liberals hate it, it’s good. Add to this the anti-intellectualism of the G.O.P. base, for whom scientific consensus on an issue is a minus, not a plus, with extra bonus points for undermining anything associated with President Barack Obama.

And if all this sounds too petty and vindictive to be the basis for momentous policy decisions, consider the character of the man in the White House. Need I say more?

The Working Class’s Role in Trump’s Election

Caroline Freund:

The working class’s role in Trump’s election: President Donald Trump’s election victory last year was driven in part by support he got in the traditionally Democratic parts of the industrial Northeast and Midwest of the US. Many analysts have argued that Trump’s promises to bring back US manufacturing hollowed out by trade and technology changes paved the way for his achievement.

Recent empirical evidence shows that trade shocks can influence voting patterns. Autor et al. (2016) find that import competition from China is associated with increased political polarisation in US congressional elections, as measured by the number of moderate incumbents who lost their seats. Using data on voting patterns in six presidential elections, Jensen et al. (2016) extend this analysis to include trade in services and exports, and find that while rising imports are associated with more polarisation, rising exports are associated with more support for the incumbent. Che et al. (2016) find that greater import competition from China is correlated with increases in election turnout and the share of votes for a Democrat in congressional elections. 

Evidence that the decline in manufacturing was not the real reason for Trump’s success

The data show that this bit of conventional wisdom might be misplaced. Education and race were far bigger factors in determining the change in voting results from the 2012 election.  These two factors alone explain more than 70% of the variation in the Republican vote share across counties, as compared with the last election, and more than 80% in the swing states.

And within manufacturing, race mattered greatly: only the predominantly white manufacturing counties were drawn to Trump’s message.  Racially diverse manufacturing counties rejected it.  These twin factors roughly cancelled each other out. In the end, whether or not manufacturing was part of a county’s economic base did not have much of an effect on its change in voting behaviour.

In a new paper, Dario Sidhu and I examine electoral data from the 2016 compared with previous presidential elections (Freund and Sidhu 2017). The county-by-county breakdown in the data shows that on aggregate, manufacturing jobs did not play a significant role in the election results.

When economics, identity, and demographic variables were considered together, the share of employees in manufacturing was not significantly associated with increased support for Donald Trump, versus Mitt Romney in 2012. Even more striking, counties where manufacturing declined since 2000 – many of which received special attention during the campaign – also did not have an increase in their vote share for Trump from four years before.

None of this is to say manufacturing as an economic foundation for a county did not matter at all in the election. But it boosted Trump only in counties that were predominately white.

In mostly white manufacturing counties, there was a significant increase in the Republican vote share since 2012. In more racially and ethnically diverse manufacturing counties (above average share of black and Hispanic residents), there was a significant decline in the share of votes going to the Republican candidate. On aggregate, these effects roughly offset each other, with the net result that the presence of manufacturing in a county (or the extent of job loss) was not associated with the result. To the extent manufacturing played a role, it was through the ethnic makeup of counties. The impact of this effect was magnified in crucial swing states, where counties are on average less diverse than the nation as a whole.

Figure 1 Republican vote share change from 2012 to 2016 and manufacturing employment

Notes: Standardized coefficients.  Additional controls, median wage, unemployment, labour force participation, age, religion, county size. 
Source: Freund and Sidhu (2017).

Why are counties polarised within manufacturing by race?

There are two potential explanations for why predominantly white manufacturing counties became more Republican and diverse manufacturing counties voted more Democratic in this election. 

The first is that economic shocks were different across white and diverse counties.  Perhaps white manufacturing towns specialise in products more prone to technological change or facing pronounced import competition; alternatively, white manufacturing towns may have been largely one company towns with few alternative employment opportunities.

The second is that the two groups reacted differently to economic changes that have occurred over time.  It is possible that white manufacturing towns rejected existing policies, such as openness to trade and increased income redistribution (for example, through the Affordable Care Act); while diverse manufacturing towns rejected the message that economic conditions in the US were deteriorating.

The analysis shows that the second explanation – different reactions to economic change – is more consistent with the data. Perhaps most telling, comparing the 2016 election results with the county’s share of employment in manufacturing from 1986 – when manufacturing employment was near its peak and one in four manufacturing workers was in a union – the same polarisation is evident.  Historical manufacturing counties that are mostly white voted more Republican, but historical manufacturing towns that are relatively diverse voted more Democratic, as compared with 2012. 

Does this mean the population is becoming more polarised?

Morris Fiorina, a political scientist at Stanford University, has shown that polarisation can be driven by the electorate or the candidates (Fiorina 2004). While a polarised population – with a large group on the right and a large group on the left – produces a split electorate, polarising candidates can yield a similar outcome, even if most of the population has centrist political views. The difference is that with an increasingly polarised electorate, voter participation should logically increase, as each group is tied to its candidate and opposed to the alternate. In contrast, with polarising candidates, the middle of the distribution is unsatisfied, so voter participation should in theory decrease.

When other factors are eliminated, the data show that the rise in the Republican share of votes in white manufacturing counties was largely due to a drop in Democratic votes; while the rise in the Democratic share in non-white manufacturing counties was driven by a relatively higher drop in Republican votes.  In addition, on average across counties, as compared with 2012, relatively low voting rates among Democratic voters was a bigger contributor to the results than high voting rates among Republicans. Put differently, Trump did not win the white working class, Clinton lost it.

The 2016 election outcome is thus more consistent with Fiorina’s example of polarising candidates than a polarised electorate.  The good news is that Americans are probably far less divided then they appear. The bad news is that the US desperately needs a more centrist and less partisan government to unify and lead, but that seems unlikely anytime soon.

References

Autor, D, D Dorn, G Hanson, and K Majlesi (2016), “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure”, NBER Working Paper No. 22637.

Che, Y, Y Lu, J R Pierce, P K Schott and Z Tao (2016), “Does Trade Liberalization with China Influence US Elections?”, NBER Working Paper No. 22178.

Fiorina, M (2004), Culture War? The Myth of a Polarized America, Stanford University Press.

Freund, C and D Sidhu (2017), “Manufacturing and the 2016 Election: An Analysis of US Presidential Election Data”, PIIE Working Paper No. 17-7. 

Jensen, J B, D P Quinn and Ss Weymouth (2016): “Winners and Losers in International Trade: The Effects on US Presidential Voting,” NBER Working Paper No. 21899.

Paul Krugman: Trump’s Energy, Low and Dirty

King Coal has a scary soul:

Trump’s Energy, Low and Dirty, by Paul Krugman, NY Times: Donald Trump has two false beliefs about energy, one personal, one political. ...

On the personal side, Trump reportedly disdains exercise of any kind except golf. He believes that raising a sweat depletes the finite reserves of precious bodily fluids, I mean energy, that a person is born with, and should therefore be avoided.

Many years of acting on this belief may or may not explain the weird and embarrassing scene at the G-7 summit in Taormina, in which six of the advanced world’s leaders strolled together a few hundred yards through the historic city, but Trump followed behind, driven in an electric golf cart.

More consequential, however, is Trump’s false belief that lifting environmental restrictions ... will bring back the days when the coal-mining industry employed hundreds of thousands of blue-collar Americans. ...

These days..., those who take energy policy seriously see a future that belongs largely to renewables... But that’s not what voters from what used to be coal country want to hear. They enthusiastically backed Trump, who promised to bring those coal jobs back, even though his real agenda would punish those voters with savage cuts in programs they depend on. And Trump cares a lot more about public adulation than he does about serious policy advice.

Which brings me ... to Trump’s European trip...

First, in Brussels, he declined to endorse NATO’s Article 5, which says that an attack on any NATO member is an attack on all. In effect, he repudiated the central plank of America’s most important alliance. Why, it was almost as if he’s more interested in appeasing Vladimir Putin than he is in defending democracy.

Then, in Taormina, he was the only leader who refused to endorse the Paris climate accord ... that may be our last good chance to avoid catastrophic climate change. ... But Trump isn’t offering coal country real help, just a fantasy about turning back the clock. ...

So am I suggesting that the world’s most powerful leader might put the whole planet’s future at risk so that he can keep telling politically convenient lies...? Yes. ...

Now, maybe Trump won’t really pull the plug on Paris; or maybe he’ll be gone from the scene before the damage is irreversible. But there’s a real possibility that last week was a pivotal moment in human history, the moment when an irresponsible leader sent the whole world careening off to hell in a golf cart.

Paul Krugman: It’s All About Trump’s Contempt

"The mother of all sucker punches":

It’s All About Trump’s Contempt, by Paul Krugman, NY Times: For journalists covering domestic policy, this past week poses some hard choices. Should we focus on the Trump budget’s fraudulence — not only does it invoke $2 trillion in phony savings, it counts them twice — or on its cruelty? Or should we talk instead about the Congressional Budget Office assessment of Trumpcare, which would be devastating for older, poorer and sicker Americans?

There is, however, a unifying theme to all these developments. And that theme is contempt — Donald Trump’s contempt for the voters who put him in office. ... He is ... betting that he can break every promise he made to the working-class voters who put him over the top, and still keep their support. Can he win that bet?

When it comes to phony budget math — remember his claims that he would pay off the national debt? — he probably can. ...

The bigger question is whether someone who ran as a populist, who promised not to cut Social Security or Medicaid, who assured voters that everyone would have health insurance, can keep his working-class support while pursuing an agenda so anti-populist it takes your breath away. ...

So what did [Trump voters] think they were voting for? Partly,... they ... believed that he was a different kind of Republican. Maybe he would take benefits away from Those People, but he would protect the programs white working-class voters ... depend on.

What they got instead was the mother of all sucker punches.

Trumpcare, the budget office tells us, would cause 23 million people to lose health insurance, largely through cuts to Medicaid... It would also lead to soaring premiums — we’re talking increases on the order of 800 percent — for older Americans whose incomes are low but not low enough to qualify for Medicaid. That describes a lot of Trump voters. Then we need to add in the Trump budget, which calls for further drastic cuts in Medicaid, plus large cuts in food stamps and in disability payments. ...

So many of the people who voted for Donald Trump were the victims of an epic scam by a man who has built his life around scamming. ...

Will they ever realize this, and admit it to themselves? More important, will they be prepared to punish him the only way they can — by voting for Democrats?

Blinder: Why, After 200 Years, Can’t Economists Sell Free Trade? (Video)

Trump’s “China Deal” is Only a Good Deal for China

Larry Summers:

Trump’s “China deal” is only a good deal for China: The events of the last week have crowded out reflection on economic policy.  But things have been happening. Commerce Secretary Wilbur Ross described the trade deal reached with China earlier this month as “pretty much a herculean accomplishment….This is more than has been done in the history of U.S.-China relations on trade.”

Past a certain point, exaggeration and hype become dishonesty and deception. In economic policy, as in almost everything else, the Trump Administration is way past that point.

The trade deal is a “nothing burger” that a serious Administration committed to helping American workers would likely not have accepted, and surely would not have hyped. ... [gives details of the agreement] ...

Now it is true that a ludicrously hyped squib of a deal is much better than a trade war. So perhaps we should be pleased that the President and his commerce secretary are so easily manipulated. Perhaps our officials know how bad a deal they got and are just hyping for political reasons.

It is an irony of our times that those who most frequently denounce “fake news” seem to most frequently purvey it.

It’s Time to Worry about Health Care in the Senate

David Leonhardt

It’s Time to Worry about Health Care in the Senate, NY Times: While the rest of the country has been transfixed by Trumpian chaos, members of the Senate have spent the last two weeks talking about taking health insurance from millions of Americans.

There is an alarmingly large chance that they’ll decide to do so. But if they do, they will almost certainly rely on a political sleight of hand to disguise their bill’s damage. Understanding that sleight of hand — and calling attention to it — offers the best hope for defeating the bill.

The effort to take health insurance from the middle class and poor and funnel the savings into tax cuts for the rich is a little like mold. It grows best in the dark. ...

If secrecy is the first part of the strategy, distraction is the second. ...

The final part of the strategy will be arm-twisting. If victory is in sight, McConnell will invoke party loyalty to cajole his colleagues... Being the Republican who brought down Trumpcare wouldn’t be fun.

So the current period is important. It’s a time for all those groups that oppose the bill, and for the engaged progressive base, to put senators on notice. ...

A small group of Senate Republicans has shown signs of being persuadable, and only three are likely needed to stop a bill. The group includes Lamar Alexander, Shelley Moore Capito, Bill Cassidy, Susan Collins, Dean Heller, Lisa Murkowski and Rob Portman.

They should hear a loud message that Americans aren’t in favor of taking health insurance from their fellow citizens. The senators work for those citizens, not for Mitch McConnell, Paul Ryan and Donald Trump.

Trump’s Budget is Simply Ludicrous

Larry Summers:

Trump’s budget is simply ludicrous: Details of President Trump’s first budget have now been released. Much can and will be said about the dire social consequences about what is in it and the ludicrously optimistic economic assumptions it embodies. My observation is that there appears to be a logical error of the kind that would justify failing a student in an introductory economics course.

Apparently, the budget forecasts that US growth will rise to 3.0 percent because of the Administration’s policies—largely its tax cuts and perhaps also its regulatory policies. Fair enough if you believe in tooth-fairies and ludicrous supply-side economics.

Then the Administration asserts that it will propose revenue neutral tax cuts with the revenue neutrality coming in part because the tax cuts stimulate growth! This is an elementary double count. You can’t use the growth benefits of tax cuts once to justify an optimistic baseline and then again to claim that the tax cuts do not cost revenue. At least you cannot do so in a world of logic. ...

This is a mistake no serious business person would make. It appears to be the most egregious accounting error in a Presidential budget in the nearly 40 years I have been tracking them. ...

I have no doubt that there are civil servants in OMB, Treasury and CEA who do know better than this mistake. Were they cowed, ignored or shut out? How could the Secretary of Treasury, Director of OMB and Director of the NEC allow such an elementary error? I hope the press will ferret all this out.

The President’s personal failings are now not just center stage but whole stage. They should not blind us to the manifest failures of his economic team. Whether it is Secretary Mnuchin’s absurd claims about tax cuts not favoring the rich, Secretary Ross’s claim that the small squib of a deal negotiated last week with China was the greatest trade result with China in history, NEC Director Cohn’s ludicrous estimate of the costs of Dodd Frank, or today’s budget, the Trump administration has not yet made a significant economic pronouncement that meets a minimal standard of competence and honesty.

Paul Krugman: The Unfreeing of American Workers

Freedom's just another word for nothing left to lose:

The Unfreeing of American Workers, by Paul Krugman, NY Times: American conservatives love to talk about freedom. ... Well, why not? After all, America is an open society, in which everyone is free to make his or her own choices about where to work and how to live.

Everyone, that is, except the 30 million workers now covered by noncompete agreements, who may find themselves all but unemployable if they quit their current jobs; the 52 million Americans with pre-existing conditions who will be effectively unable to buy individual health insurance, and hence stuck with their current employers, if the Freedom Caucus gets its way; and the millions of Americans burdened down by heavy student and other debt. ...

And you can make a strong case that we’re getting less free as time goes by.

Let’s talk first about those noncompete agreements... Noncompete agreements were originally supposed to be about protecting trade secrets... And that’s perfectly reasonable.

At this point, however, almost one in five American employees is subject to some kind of noncompete clause..., noncompete clauses are in many cases less about protecting trade secrets than they are about tying workers to their current employers, unable to bargain for better wages or quit to take better jobs.

This shouldn’t be happening in America... But there’s another aspect of declining worker freedom...: health care.

Until 2014, there was basically only one way Americans under 65 with pre-existing conditions could get health insurance: by finding an employer willing to offer coverage. ...

But what if you wanted to change jobs, or start your own business? Too bad: you were basically stuck...

Then Obamacare went into effect, guaranteeing affordable care even to those with pre-existing medical conditions. This was a hugely liberating change for millions. ...

But maybe not for much longer. Trumpcare ... would drastically reduce protections for Americans with pre-existing conditions. And even if that bill never becomes law, the Trump administration is effectively sabotaging individual insurance markets, so that in many cases Americans who lose employer coverage will have no place to turn...

You might say, with only a bit of hyperbole, that workers in America, supposedly the land of the free, are actually creeping along the road to serfdom, yoked to corporate employers the way Russian peasants were once tied to their masters’ land. And the people pushing them down that road are the very people who cry “freedom” the loudest.

The Heartless Tradeoffs in the Trump Budget

I have a new column:

The Heartless Tradeoffs in the Trump Budget: As the bombshells continue to drop on the Trump administration, behind the scenes Trump’s first detailed budget proposal is being developed, and it has a few bombshells of its own, particularly for the poor. The budget proposal is not yet finalized, so the details could change, but according to what has leaked so far, the budget is a combination of tax cuts for the wealthy, reduced spending on social programs that serve the needy, and wishful thinking about tax cuts and economic growth. ...

Paul Krugman: The Priming of Mr. Donald Trump

"a delusion of truly Trumpian proportions":

The Priming of Mr. Donald Trump, by Paul Krugman, NY Times: Donald Trump has said many strange things in recent interviews. ... Over here in Econoland, however, the buzz was all about Trump’s expressed willingness, in an interview with the Economist magazine, to pursue tax cuts even if they increase deficits, because “we have to prime the pump” — an expression he claimed to have invented. “I came up with it a couple of days ago and I thought it was good.”

Actually, the expression goes back generations...

But why should anyone besides pedants care?

First, a mind is a terrible thing to lose..., that Economist interview was basically one long senior moment...

Second, we’re talking about some really bad economics here. ...

America may not be all the way back to full employment — there’s a lively debate among economists over that issue. But the economic engine no longer needs a fiscal jump-start. This is exactly the wrong time to be talking about the desirability of bigger budget deficits. ...

Which brings me to my third point: Trump’s fiscal delusions are arguably no worse than those of many, perhaps most professional observers of the Washington political scene.

If you’re a heavy news consumer, think about how many articles you’ve seen in the past few weeks with headlines along the lines of “Trump’s budget may create conflict with G.O.P. fiscal conservatives.” The premise ... is that there is a powerful faction among Republican members of Congress who worry deeply about budget deficits...

But there is no such faction, and never was.

There were and are poseurs like Paul Ryan, who claim to be big deficit hawks. But there’s a simple way to test such people’s sincerity:... when you see a politician claim that deficit concerns require that we slash Medicaid, privatize Medicare, and/or raise the retirement age — but somehow never require raising taxes on the wealthy, which in fact they propose to cut — you know that it’s just an act.

Yet somehow much of the news media keeps believing, or pretending to believe, that those imaginary deficit hawks are real, which is a delusion of truly Trumpian proportions.

So I’m worried. Trump may be not just ignorant but deeply out of it, and his economic proposals are terrible and irresponsible, but they may get implemented all the same.

But maybe I worry too much; maybe the only thing to fear is fear itself. Do you like that line? I just came up with it the other day.

Paul Krugman: Judas, Tax Cuts and the Great Betrayal

"almost an entire party appears to have decided that potential treason in the cause of tax cuts for the wealthy is no vice":

Judas, Tax Cuts and the Great Betrayal, by Paul Krugman, NY Times: The denarius, ancient Rome’s silver coin, was supposedly the daily wage of a manual worker. If so, the tax cuts that the richest 1 percent of Americans will receive if the Affordable Care Act is repealed — tax cuts that are, obviously, the real reason for repeal — would amount to the equivalent of around 500 pieces of silver each year.

What inspired this calculation? The spectacle of Mitch McConnell, the Senate majority leader, and Paul Ryan, the speaker of the House, defending Donald Trump’s firing of James Comey.

Everyone understands that Mr. Comey was fired ... because his probe of Russian connections with the Trump campaign was accelerating and, presumably, getting too close to home. So this looks very much like the use of presidential power to cover up possible foreign subversion of the U.S. government.

And the two leading Republicans in Congress are apparently O.K. with that cover-up, because the Trump ascendancy is giving them the chance to do what they always wanted, namely, take health insurance away from millions of Americans while slashing taxes on the wealthy.

So you can see why I find myself thinking of Judas.

For generations, Republicans have impugned their opponents’ patriotism. ...

But now we have what may be the real thing: circumstantial evidence that a hostile foreign power may have colluded with a U.S. presidential campaign, and may retain undue influence at the highest levels of our government. And all those self-proclaimed patriots have gone silent, or worse. ...

And we know how to resolve the remaining uncertainty: independent investigations...

At this point ... almost an entire party appears to have decided that potential treason in the cause of tax cuts for the wealthy is no vice. And that’s barely hyperbole. ...

So it’s naïve to expect Republicans to join forces with Democrats to get to the bottom of the Russia scandal — even if that scandal may strike at the very roots of our national security. Today’s Republicans just don’t cooperate with Democrats, period. They’d rather work with Vladimir Putin.

In fact, some of them probably did.

Now, maybe I’m being too pessimistic. Maybe there are enough Republicans with a conscience — or, failing that, sufficiently frightened of an electoral backlash — that the attempt to kill the Russia probe will fail. One can only hope so.

But it’s time to face up to the scary reality here. Most people now realize, I think, that Donald Trump holds basic American political values in contempt. What we need to realize is that much of his party shares that contempt.

The Great Risk Shift is Back

I have a new column:

Killing Banking Rules Will Invite a Whopper of a Recession: The vote in the House of Representatives to dismantle Obamacare was not the only attempt to undo key legislation from the Obama years that occurred last Thursday. Though it mostly went unnoticed, the House Financial Services Committee voted in favor of the Financial Choice Act. This legislation would substantially weaken the Dodd-Frank financial reforms.

If the Republicans are successful, and that is not assured at this point for either piece of legislation, it will increase economic insecurity for most households. ...

Paul Krugman: Republicans Party Like It’s 1984

"This is an act of deliberate betrayal":

Republicans Party Like It’s 1984, by Paul Krugman, NY Times: There have been many bad laws in U.S. history. ... But has there ever been anything like Trumpcare...? It’s a miserably designed law, full of unintended consequences. It’s a moral disaster, snatching health care from tens of millions mainly to give the very wealthy a near-trillion-dollar tax cut.

What really stands out, however, is the Orwell-level dishonesty of the whole effort. As far as I can tell, every word Republicans, from Trump on down, have said about their bill — about why they want to replace Obamacare, about what their replacement would do, and about how it would work — is a lie, including “a,” “and” and “the.”

And what does it say about the state of American politics that a majority of the representatives of one of our major political parties have gone along with this nightmarish process? ... Trumpcare breaks every promise Republicans ever made about health ... and ... they are doing so with intent. ... This is an act of deliberate betrayal.

...Why are they doing this, and why do they think they can get away with it?

Part of the answer to the first question is, presumably, simple greed. Tens of millions would lose access to health coverage, but ... people with incomes over $1 million would save an average of more than $50,000 a year.

And there is a powerful faction within the G.O.P. for whom cutting taxes on the rich is more or less the only thing that matters. ...

As for why they think they can get away with it: Well, isn’t recent history on their side? The general shape of what the G.O.P. would do to health care, for the white working class in particular, has long been obvious, yet many people who were sure to lose, bigly, voted Trump anyway.Why shouldn’t Republicans believe they can convince those same voters that the terrible things that will happen if Trumpcare becomes law are somehow liberals’ fault?

And for that matter, how confident are you that mainstream media will resist the temptation of both-sides-ism, the urge to produce “balanced” reporting that blurs the awful reality of what Trumpcare will do if enacted?

In any case, let’s be clear: What just happened on health care shouldn’t be treated as just another case of cynical political deal making. This was a Freedom is Slavery, Ignorance is Strength moment. And it may be the shape of things to come.

Paul Krugman: What’s the Matter With Europe?

If Macron wins, will the European elite learn the wrong lesson?:

What’s the Matter With Europe?, by Paul Krugman, NY Times: On Sunday France will hold its presidential runoff. Most observers expect Emmanuel Macron, a centrist, to defeat Marine Le Pen, the white nationalist — please, let’s stop dignifying this stuff by calling it “populism.” ... A Le Pen victory would be a disaster for Europe and the world.

Yet I also think it’s fair to ask a couple of questions... First, how did things get to this point? Second, would a Le Pen defeat be anything more than a temporary reprieve from the ongoing European crisis? ...

To begin, while France gets an amazing amount of bad press — much of it coming from ideologues who insist that generous welfare states must have disastrous effects — it’s actually a fairly successful economy. ...

Meanwhile..., France offers a social safety net beyond the wildest dreams of U.S. progressives... So why are so many willing to vote for — again, let’s not use euphemisms — a racist extremist?

There are, no doubt, multiple reasons, especially cultural anxiety over Islamic immigrants. But it seems clear that votes for Le Pen will in part be votes of protest against what are perceived as the highhanded, out-of-touch officials running the European Union. And that perception unfortunately has an element of truth.

Those of us who watched European institutions deal with the debt crisis ... were shocked at the ... callousness and arrogance that prevailed throughout. ...

Politically, Eurocrats got away with this behavior because small nations were easy to bully... But Europe’s elite will be making a terrible mistake if it believes it can behave the same way to bigger players.

Indeed, there are already intimations of disaster in the negotiations now taking place between the European Union and Britain. ... E.U. officials are sounding more and more like a jilted spouse determined to extract maximum damages in a divorce settlement. ...Greece-style bullying just isn’t going to work on a nation as big, rich and proud as the U.K.

Which brings me back to the French election. We should be terrified at the possibility of a Le Pen victory. But we should also be worried that a Macron victory will be taken by Brussels and Berlin to mean that Brexit was an aberration, that European voters can always be intimidated into going along with what their betters say is necessary.

So let’s be clear: Even if the worst is avoided this Sunday, all the European elite will get is a time-limited chance to mend its ways.

Paul Krugman: Living in the Trump Zone

"Don’t pretend that this is normal":

Living in the Trump Zone, by Paul Krugman, NY Times: Fans of old TV series may remember a classic “Twilight Zone” episode titled “It’s a Good Life.” It featured a small town terrorized by a 6-year-old who for some reason had monstrous superpowers, coupled with complete emotional immaturity. Everyone lived in constant fear, made worse by the need to pretend that everything was fine. After all, any hint of discontent could bring terrible retribution.

And now you know what it must be like working in the Trump administration. ...

What set me off on this chain of association? The answer may surprise you; it was the tax “plan” the administration released on Wednesday..., the single-page document ... bore no resemblance to what people normally mean when they talk about a tax plan. ...

So why would the White House release such an embarrassing document? Why would the Treasury Department go along with this clown show?...

Every report from inside the White House conveys the impression that Trump is like a temperamental child, bored by details and easily frustrated when things don’t go his way... If he says he wants something, no matter how ridiculous, you say, “Yes, Mr. President!”; at most, you try to minimize the damage.

Right now, by all accounts, the child-man in chief is in a snit over the prospect of news stories that review his first 100 days and conclude that he hasn’t achieved much if anything (because he hasn’t). So last week he announced the imminent release of something he could call a tax plan. ... But nobody dared tell him it couldn’t be done. Instead, they released … something, with nobody sure what it means.

And the absence of a real tax plan isn’t the only thing the inner circle apparently doesn’t dare tell him. ...

...I’d like to make a plea to my colleagues in the news media: Don’t pretend that this is normal. Let’s not act as if that thing released on Wednesday, whatever it was, was something like, say, the 2001 Bush tax cut; I strongly disapproved of that cut, but at least it was comprehensible. Let’s not pretend that we’re having a real discussion of, say, the growth effects of changes in business tax rates.

No, what we’re looking at here isn’t policy; it’s pieces of paper whose goal is to soothe the big man’s temper tantrums. Unfortunately, we may all pay the price of his therapy.

Paul Krugman: Zombies of Voodoo Economics

 "Because it offers a rationale for lower taxes on the wealthy":

Zombies of Voodoo Economics, by Paul Krugman, NY Times: According to many reports, Donald Trump is getting frantic as his administration nears the 100-day mark. It’s an arbitrary line in the sand, but one he himself touted in many pre-inauguration boasts. And it will be an occasion for numerous articles detailing how little of substance he has actually accomplished. ...

Mr. Trump sold himself to voters as unorthodox as well as effective. He was going to be a different kind of president, a consummate deal-maker who would transcend the usual ideological divide. His supporters should therefore be dismayed, not just by his failure to actually close any deals, but by the fact that he evidently has no new ideas to offer, just the same old snake oil the right has been peddling for decades.

We saw that on Trumpcare... And now we’re seeing it on taxes. ... Whatever the details, Trumptax will be a big exercise in fantasy economics.

How do we know this? Last week Stephen Mnuchin, the Treasury secretary, told a financial industry audience that “the plan will pay for itself with growth.” And we all know what that means..., history offers not a shred of support for faith in the pro-growth effects of tax cuts..., supply-side economics is a classic example of a zombie doctrine: a view that should have been killed by the evidence long ago... Why, then, does it persist? Because it offers a rationale for lower taxes on the wealthy...

Still, Donald Trump was supposed to be different. Guess what: he isn’t.

To be fair, it’s not clear whether Mr. Trump really believes in right-wing economic orthodoxy. He may just be looking for something, anything, he can call a win — and it’s a lot easier to come up with a tax reform plan if you don’t try to make things add up, if you just assume that extra growth and the revenue it brings will materialize out of thin air.

We might also note that a man who insists that he won the popular vote he lost, who insists that crime is at a record high when it’s at a record low, doesn’t need a fancy doctrine to claim that his budget adds up when it doesn’t.

Still, the fact is that the Trump agenda so far is absolutely indistinguishable from what one might have expected from, say, Ted Cruz. It’s just voodoo with extra bad math. Was that what his supporters expected?

Paul Krugman: The Balloon, the Box and Health Care

If they persist in trying to fit the balloon in the box, eventually it will pop:

The Balloon, the Box and Health Care, by Paul Krugman, NY Times: Imagine a man who for some reason is determined to stuff a balloon into a box — a box that, aside from being the wrong shape, just isn’t big enough. He starts working at one corner, pushing the balloon into position. But then he realizes that the air he’s squeezed out at one end has caused the balloon to expand elsewhere. So he tries at the opposite corner, but this undoes his original work.

If he’s stupid or obsessive enough, he can spend a long time at this exercise, trying it from various different angles, and maybe even briefly convince himself that he’s making progress. But he’s kidding himself: No matter what he does, the balloon isn’t going to fit in that box.

Now you understand what’s happening to G.O.P. efforts to repeal and replace the Affordable Care Act.

Republicans have spent many years denouncing Obamacare as a terrible, horrible, no good law and insisting that they can do much better. They successfully convinced many voters that they could preserve the good stuff — the dramatic expansion of coverage that has brought the percentage of Americans without health insurance to a record low — while reducing premiums, shrinking deductibles and, of course, doing away with the taxes on high incomes that pay for the program.

Those promises basically define the box into which they’re trying to stuff health care. ...

Again and again, we read news reports to the effect that Republicans are closing in on a plan that will break the political deadlock..., the latest idea being floated, they’ll let insurance companies raise premiums on people with pre-existing conditions and compensate by creating special high-risk pools! ...

And because the task Republicans have set for themselves is basically impossible, their ongoing debacle over health care isn’t about political tactics or leadership..., this thing just can’t work. ...

All of this raises the obvious question: If Republicans never had a plausible alternative to Obamacare, if this debacle was so inevitable, what was the constant refrain of “repeal and replace” all about?

The answer, surely, is that it began as a cynical ploy; at first, the Republicans hoped to kill health reform before it really got started. And now they’ve trapped themselves: They can’t admit that they have no ideas without, in effect, admitting that they were lying all along.

And the result is that they just keep trying to stuff the balloon into that box.

GE2017: Why Economic Facts will be Ignored Once Again

Simon Wren-Lewis:

GE2017: Why economic facts will be ignored once again: In 2015, the Conservatives spun the line that Labour profligacy had messed up the economy, and they had no choice but to clear up the mess. In short, austerity was Labour’s fault. As Labour chose not to challenge this narrative, almost all the media and half the voters assumed it must be true. The reality was the complete opposite. The rising deficit was a consequence of the global financial crisis, not Labour profligacy. Doing something about it should and could have been delayed until the recovery was underway. By acting prematurely, Osborne delayed the recovery and lost the average UK household resources worth thousands of pounds. The story that we had to cut now because of the markets was completely false. ...

The 2015 General Election was the first recent occasion that the economic facts were ignored. The second was of course the EU referendum. ...

A critical issue during the referendum was a belief that immigration had reduced the access of UK natives to public services. Economists know that is simply wrong for the economy as a whole, and if it happens locally it is because the government has pocketed the taxes immigrants pay. But the media did little to inform voters of why it is wrong, and I suspect this is why most of those voting Leave believed they would be no worse off in the long run outside the EU. ...

Brexit may not have led to the immediate economic downturn that some expected, but the Brexit depreciation has brought to a halt the short period during of rising real wages. The economic pain that economists said would follow any vote to leave is starting to happen. ...

As far as economics is concerned GE2017 is likely to be nothing more than a combination of GE2015 and the EU referendum. The economy has not got any better than in 2015, and is about to get worse, but mediamacro will let Conservatives insist that the economy is strong. ... The exchange rate has fallen and real wages have stopped rising, but we will still be told this is just Project Fear and the consensus among economists will get ignored once again. So, for the third time, we will have a vote where economics is critical but economic facts will be largely ignored. ...

As inflation rises and real wages fall the facts may be changing, but the narrative survives.

Narratives are a way people can try to understand things they know little about, and most people know little about economics or politics. Mediamacro is a set of narratives. Project fear is a narrative. The right and the ideologues are very good at selling narratives, and they have a media machine to invent them, road test them and spread them. The left and the realists have none of those things, and are hopeless at it anyway because they know reality is more complex than most narratives. That is why they have lost two elections, and look like losing a third big time.

Krugman: Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting

Paul Krugman reviews This is Our Fight: The Battle to Save America’s Middle Class, By Elizabeth Warren, Metropolitan Books/Henry Holt & Company:

Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting: ...Elizabeth Warren ... brings an edge to her advocacy that many Democrats have shied away from... Even the Obama administration, while doing much more to fight inequality than many realize, balked at making inequality reduction an explicit goal.

Furthermore, Warren comes down forcefully on the left side of an ongoing debate over both the causes of inequality and the ways it can be reduced.

One view, which was dominant even among Democratic-leaning economists in the 1990s, saw rising inequality mainly as a result of ineluctable market forces. Technology, in particular... Given this view, even liberals generally favored free-market policies. ...

The alternative view, which Warren clearly endorses, is all for taxing the rich and strengthening the safety net, but it also argues that public policy can do a lot to increase workers’ bargaining power — and that inequality has soared in large part because policy has, in fact, gone the other way.

This view has gained much more prominence over the past couple of decades, mainly because it’s now backed by a lot of evidence...

But why has actual policy gone the other way? ...

Consider ... West Virginia, where Obamacare cut the number of uninsured by about 60 percent, where minimum wage hikes and revived unions could do wonders for workers in health care and social services, the state’s largest industry. That is, it’s a perfect example of a state that would benefit hugely from an enlightened-populist agenda.

But last November West Virginia went almost three-to-one for a very unenlightened populist...

But maybe it’s a matter of time, and what Democrats need right now is a reason to keep fighting. And that’s something Warren’s muscular, unapologetic book definitely offers. It’s an important contribution, even if it isn’t the last word.

Paul Krugman: Can Trump Take Health Care Hostage?

With the extent to which Trump is cashing in on his presidency, I suppose we could say the buck stops at the White House. Trump doesn't seem to understand that's true more broadly:

Can Trump Take Health Care Hostage?, by Paul Krugman, NY Times: Three weeks have passed since the Trumpcare debacle. After eight years spent denouncing the Affordable Care Act, the G.O.P. finally found itself in a position to do what it had promised, and deliver something better. But it couldn’t.

And Republicans, President Trump very much included, had nobody but themselves to blame. ...

But Mr. Trump, as you may have noticed, isn’t big on accepting responsibility for his failures. Instead, he has decided to blame Democrats for not cooperating in the destruction of their proudest achievement in decades. And on Wednesday, in an interview with The Wall Street Journal, he openly threatened to sabotage health care for millions if the opposition party doesn’t give him what he wants. ...

It’s a nasty political tactic. It’s also remarkably stupid.

The nastiness should be obvious, but let’s spell it out. Mr. Trump is trying to bully Democrats by threatening to hurt millions of innocent bystanders — ordinary American families who have gained coverage thanks to health reform. ...

Why does Mr. Trump even imagine that this threat might work? Implicitly, he’s saying that hurting innocent people doesn’t bother him as much as it bothers his opponents. Actually, this is probably true...

What makes Mr. Trump’s tactic stupid as well as nasty is the reality that Democrats have no incentive whatsoever to give in. ...

Maybe Mr. Trump believes that he could somehow shift the blame for the devastation he has threatened to wreak onto Democrats. “See, there’s the death spiral I predicted!” But that probably wouldn’t work even if he hadn’t effectively proclaimed his own guilt in advance. Voters tend to blame whoever holds the White House for bad things, and in this case they’d be right: ...

So the Trump health care threat is, as I said, stupid as well as nasty. And it’s hard to believe that it will be carried out.

But here’s the thing: Even if Mr. Trump wimps out, as he is doing on so many other issues, he may already have done much of the threatened damage. Insurers are deciding right now whether to participate in the 2018 Obamacare exchanges. Mr. Trump’s tough talk is creating a lot of uncertainty, which in itself may undermine coverage for many Americans.

There is, of course, a good chance that Mr. Trump doesn’t understand any of this. Unfortunately, when you’re in the White House, what you don’t know can hurt a lot of people.

Paul Krugman: Publicity Stunts Aren’t Policy

All hat and no cattle:

Publicity Stunts Aren’t Policy, by Paul Krugman, NY Times: Does anyone still remember the Carrier deal? Back in December President-elect Donald Trump announced, triumphantly, that he had reached a deal ... to keep 1,100 jobs in America rather than moving them to Mexico. And the media spent days celebrating the achievement. ...

Around 75,000 U.S. workers are laid off or fired every working day, so a few hundred here or there hardly matter.... Whatever Mr. Trump did or didn’t achieve with Carrier, the real question was whether he would take steps to make a lasting difference.

So far..., there isn’t even the vague outline of a real Trumpist jobs policy. And corporations and investors seem to have decided that ... Mr. Trump is a paper tiger in practice. ...

In other words, showy actions that win a news cycle or two are no substitute for actual, coherent policies. Indeed, their main lasting effect can be to squander a government’s credibility. Which brings us to last week’s missile strike on Syria.

The attack instantly transformed news coverage of the Trump administration. Suddenly stories about infighting and dysfunction were replaced with screaming headlines about the president’s toughness...

But outside ... the news cycle, how much did the strike actually accomplish? A few hours after the attack, Syrian warplanes were taking off from the same airfield, and airstrikes resumed on the town where use of poison gas provoked Mr. Trump into action. ...

In fact, if last week’s action was the end of the story, the eventual effect may well be to strengthen the Assad regime — Look, they stood up to a superpower! — and weaken American credibility. ...

The media reaction ... showed that many pundits and news organizations have learned nothing from past failures. ...

The U.S. fired off some missiles, and ... Mr. Trump “became president.” Aside from everything else, think about the incentives this creates. The Trump administration now knows that it can always crowd out reporting about its scandals and failures by bombing someone. ...

Real leadership means devising and carrying out sustained policies that make the world a better place. Publicity stunts may generate a few days of favorable media coverage, but they end up making America weaker, not stronger, because they show the world that we have a government that can’t follow through.

And has anyone seen a sign, any sign, that Mr. Trump is ready to provide real leadership in that sense? I haven’t.

The Fed, the Reality of Tax Cuts Reality, and Donald Trump

I have a new column:

The Fed, the Reality of Tax Cuts Reality, and Donald Trump: For many years, Republicans argued that tax cuts for the wealthy pay for themselves. Cutting taxes on the wealthy, according to Republicans, allows them to keep a larger share of anything new they create and this leads to new economic activity and new innovation – so much that the resulting increase in economic growth and tax revenue fully offsets the budgetary effects of the tax cuts. Everyone is better off as income “trickled down” from the top.

What actually happened is that the tax cuts had very little, if any, impact on economic growth. Deficits went up, and somehow income never trickled down – if anything, it trickled up. Today, Republicans are less likely to argue that tax cuts pay for themselves, though you still hear it, but they still insist tax cuts for the wealthy magically increase economic growth and offset much of the revenue loss.

But even in the very unlikely case that Trump’s proposed tax cuts are successful (beyond increasing the income of the wealthy which many argue is the true goal), the economic growth rates Trump has promised are unlikely to be attained. ...

Paul Krugman: The Bad, the Worse and the Ugly

Donald Trump is ugly:

The Bad, the Worse and the Ugly, by Paul Krugman, NY Times: This week’s New York Times interview with Donald Trump was horrifying, yet curiously unsurprising. Yes, the world’s most powerful man is lazy, ignorant, dishonest and vindictive. But we knew that already.

In fact, the most revealing thing in the interview may be Mr. Trump’s defense of Bill O’Reilly, accused of sexual predation and abuse of power: “He’s a good person.” This, I’d argue, tells us more about both the man from Mar-a-Lago and the motivations of his base than his ramblings about infrastructure and trade.

First, however, here’s a question: How much difference has it made, really, that Donald Trump rather than a conventional Republican sits in the White House?

The Trump administration is, by all accounts, a mess. ... Yet Mr. Trump’s first great policy and political debacle — the ignominious collapse of the effort to kill Obamacare — owed almost nothing to executive dysfunction. Repeal-and-replace ... failed because Republicans have been lying about health care for eight years. ...

Similar considerations apply on other fronts. Tax reform looks like a bust ...

What about areas where Mr. Trump sometimes sounds very different from ordinary Republicans, like infrastructure? ... [G]iven what we heard in the interview ... it’s clear that the administration has no actual infrastructure plan...

True, there are some places where Mr. Trump does seem likely to have a big impact — most notably, in crippling environmental policy. But that’s what any Republican would have done...

So Trumpist governance in practice so far is turning out to be just Republican governance with (much) worse management. Which brings me back to the original question: Does the appalling character of the man on top matter?

I think it does. The substance of Trump policy may not be that distinctive in practice. But style matters, too, because it shapes the broader political climate. And what Trumpism has brought is a new sense of empowerment to the ugliest aspects of American politics. ...

One way to think about Fox News in general, and Mr. O’Reilly in particular, is that they provide a safe space for people who want an affirmation that their uglier impulses are, in fact, justified and perfectly O.K. And one way to think about the Trump White House is that it’s attempting to expand that safe space to include the nation as a whole.

And the big question about Trumpism — bigger, arguably, than the legislative agenda — is whether unapologetic ugliness is a winning political strategy.

The Myth That the Estate Tax Threatens Small Farms

This is from Chloe Cho of the CBPP:

The Myth That the Estate Tax Threatens Small Farms: Ahead of tomorrow’s House Agriculture Committee hearing on tax reform, a group of agricultural trade associations have called for repealing the estate tax on inherited wealth, arguing that “all too often at the time of death, farming and ranching families are forced to sell off land, farm equipment, parts of the operation or take out loans” due to the tax. Their arguments miss the mark.  Only 50 small farm and small business estates in the entire country will pay any estate tax in 2017 (see chart), and they’ll owe less than 6 percent of their value in tax, on average, the Tax Policy Center estimates. 

...Moreover, most farmers and business owners with estates large enough to owe the tax have sufficient liquid assets ... to pay the tax without having to touch other assets or liquidate their farm and business, a 2005 Congressional Budget Office (CBO) study found. Today’s estate tax rules are even more generous than those CBO assumed. ...

While doing next to nothing for family farms, repeal would provide a windfall to the wealthiest 0.2 percent of estates — the only ones large enough to pay the tax.  A repeal proposal recently reintroduced in the Senate would provide the 0.2 percent of wealthiest estates with an average tax cut of more than $3 million in 2017.  Roughly 330 estates worth more than $50 million would get more than $20 million apiece in tax cuts, the Joint Committee on Taxation estimates.  The proposal would also cost $269 billion over the decade, expanding deficits and adding to pressure for cuts in federal programs.

Do Election Outcomes Matter?

Lane Kenworthy:

Do election outcomes matter?: Most Americans identify as either a Democrat or a Republican. As figure 1 shows, the Democrats currently enjoy an advantage of about ten percentage points. Vote totals in elections for the presidency, the Senate, and the House of Representatives are often closer than this, and in recent elections American voters have been fairly evenly split between the two parties.

Figure 1. Party identification
Share of US adults. Question: “Generally speaking, do you usually think of yourself as a …?” ANES has seven response options: strong Democrat, weak Democrat, independent leaning Democrat, independent, independent leaning Republican, weak Republican, strong Republican. GSS has eight response options: strong Democrat, not strong Democrat, independent leaning Democrat, independent, independent leaning Republican, not strong Republican, strong Republican, other party. “Democrat” here is the three Democrat groups. “Republican” is the three Republican groups. Those choosing “other party” in the GSS, usually just 1% or 2%, are excluded. Data sources: American National Election Studies, electionstudies.org, series party identification; General Social Survey, sda.berkeley.edu, series partyid.

The political left and right tend to differ along three main axes. One is economic, with the left preferring more government support for security and fairness and the right prioritizing freedom for individuals and firms. A second is social-cultural, with the left here emphasizing individual liberty and the right privileging order, tradition, and community. A third is foreign policy. Here the left has tended to be more isolationist, the right more favorably disposed to intervention abroad. In the United States, the Democrats and the Republicans have differed on the economic axis since the early 1930s and on the social-cultural and foreign policy axes since the late 1960s.

Given these differing aims and priorities, election results should produce differences in economic and social outcomes. Do they? ...

Paul Krugman: Trump Is Wimping Out on Trade

“Talk loudly and carry a small stick”:

Trump Is Wimping Out on Trade, by Paul Krugman, NY Times: During the campaign, Donald Trump talked loudly and often about how he was going to renegotiate America’s “horrible trade deals,” bringing back millions of good jobs. So far, however, nothing has happened...

So on Friday the White House scheduled a ceremony in which Mr. Trump would sign two new executive orders on trade. The goal, presumably, was to counteract the growing impression that his bombast on trade was sound and fury signifying nothing.

Unfortunately, the executive orders in question were, to use the technical term, nothingburgers. One called for a report on the causes of the trade deficit; wait, they’re just starting to study the issue? The other addressed some minor issues of tariff collection, and its content apparently duplicated an act President Obama already signed last year. ...

Oh, and last week a draft proposal for revising the North American Free Trade Agreement circulated around Congress; instead of sweeping changes in what candidate Trump called the “worst trade deal” ever signed, the administration appears to be seeking only modest tweaks.

This surely isn’t what working-class Trump supporters thought they were voting for. So why can Trumpist trade policy be summarized — to quote The Times’s Binyamin Appelbaum — as “talk loudly and carry a small stick”? Let me give two reasons.

First, back when Mr. Trump was railing against trade deals, he had no idea what he was talking about. (I know, you’re shocked to hear that.) ...

Which brings me to Trumptrade’s second big obstacle: Whatever you think of past trade agreements, trade is now deeply embedded in the economy. ...

Economists talk, with considerable justification, about the “China shock”: the disruptive effect on jobs and communities of the rapid growth of Chinese exports from the 1990s through 2007. But reversing globalization now would produce an equally painful “Trump shock,” disrupting jobs and communities all over again — and would also be painful for some of the big corporate interests that, strange to say, have a lot of influence in this supposedly populist regime. ...

Mr. Trump came into office talking big, sure that his predecessors had messed everything up and he — he alone — could do far better. And millions of voters believed him.

But governing America isn’t like reality TV. A few weeks ago Mr. Trump whined, “Nobody knew that health care could be so complicated.” Now, one suspects, he’s saying the same thing about trade policy.

Paul Krugman: How to Build on Obamacare

"If Mr. Trump really wanted to honor his campaign promises about improving health coverage..., there’s a lot he could do":

How to Build on Obamacare, by Paul Krugman, NY Times: “Nobody knew that health care could be so complicated.” So declared Donald Trump three weeks before wimping out on his promise to repeal Obamacare. ...

Actually, though, health care isn’t all that complicated. Basically, you need to induce people who don’t currently need medical treatment to pay the bills for those who do, with the promise that the favor will be returned if necessary.

Unfortunately, Republicans have spent eight years angrily denying that simple proposition. ... But put politics aside..., what could be done to make health care work better...?

The Affordable Care Act deals with the fundamental issue of health care provision in two ways. More than half of the gains in coverage have come from expanding Medicaid... And that part of the program is working fine, except in Republican-controlled states that won’t let the federal government aid their residents.

But Medicaid only covers the lowest-income families. Above that level, the A.C.A. relies on private insurance companies, using a combination of regulations and subsidies to keep policies affordable. This has worked well in some places. ...

Overall, however, too few healthy people have purchased insurance, despite the penalty for failing to sign up... As a result, some companies have pulled out of the market. And this has left some areas, especially rural counties in small states, with few or no insurers.

No, it’s not a “death spiral”... But the system could and should be improved. ...

What about the problem of inadequate insurance industry competition? ... At the very least, there ought to be public plans available in areas no private insurer wants to serve. There are other more technical things we should do too...

So if Mr. Trump really wanted to honor his campaign promises about improving health coverage..., there’s a lot he could do... And he would get plenty of cooperation from Democrats along the way.

Needless to say, I don’t expect to see that happen. ...

And the tweeter-in-chief’s initial reaction to health care humiliation was, predictably, vindictive. He blamed Democrats, whom he never consulted, for Trumpcare’s political failure, predicted that “ObamaCare will explode,” and that when it does Democrats will “own it.” Since his own administration is responsible for administering the law, that sounds a lot like a promise to sabotage Americans’ health care and blame other people for the disaster.

The point, however, is that building on Obamacare wouldn’t be hard, and wouldn’t even be all that complicated.

Tax Cuts Can’t be Financed by Reducing Government Waste

I have a new column (my title was "Some of These Markets are Not Like the Others"):

It’s a Ruse: Tax Cuts Can’t be Financed by Reducing Government Waste: The Republicans suffered a humiliating defeat on their proposal to cut taxes for the wealthy disguised as healthcare reform. But as the Trump administration has made clear, they are not about to give up on their tax cut plans.

But how will those tax cuts be financed? The Republican’s health care reform plan would have delivered $600 billion in tax cuts, but with that option gone where will the money come from? ...

Paul Krugman: The Scammers, the Scammed and America’s Fate

"The destructive effects of false symmetry in reporting":

The Scammers, the Scammed and America’s Fate, by Paul Krugman, NY Times: ...Mr. Ryan’s proposed Obamacare replacement ... is one of the worst bills ever presented to Congress.

It would deprive tens of millions of health insurance — the decline in the number of insured Americans would be larger than ... simple repeal of Obamacare! — while sharply raising expenses for many of those who remain. It would be especially punitive for lower-income, older, rural voters.

In return, we would get a small reduction in the budget deficit. Oh, and a tax cut, perhaps as much as $1 trillion, for the wealthy.

This is terrible stuff. It’s made worse by the lies Mr. Ryan has been telling about his plan. ...

Some people seem startled both by the awfulness of Mr. Ryan’s plan and by the raw dishonesty of his sales pitch. But why..., he’s still the same guy I wrote about back in 2010, in a column titled “The Flimflam Man.”

I wrote that column in response to what turned out to be the first of a series of high-profile Ryan budget proposals. ... It was a con job all the way.

So how did Mr. Ryan reach a position where his actions may reshape the lives of so many ... for the worse? The answer lies in the ... news media, who made him what he is.

You see, until very recently both news coverage and political punditry were dominated by the convention of “balance.” ... And this ... meant that it was necessary to point to serious, honest, knowledgeable proponents of conservative positions.

Enter Mr. Ryan, who isn’t actually a serious, honest policy expert, but plays one on TV. He rolls up his sleeves! He uses PowerPoint! He must be the real deal! So that became the media’s narrative. And media adulation, more than anything else, propelled him to his current position.

Now, however, the flimflam has hit a wall. ... The C.B.O. told the devastating truth about his plan, and his evasions and lies were too obvious to ignore.

There’s an important lesson here, and it’s not just about health care or Mr. Ryan; it’s about the destructive effects of false symmetry in reporting at a time of vast asymmetry in reality.

This false symmetry — downplaying the awfulness of some candidates, vastly exaggerating the flaws of their opponents — isn’t the only reason America is in the mess it’s in. But it’s an important part of the story. And now we’re all about to pay the price.

Paul Krugman: America’s Epidemic of Infallibility

"...inability to engage in reflection and self-criticism is the mark of a tiny, shriveled soul...":

America’s Epidemic of Infallibility, by Paul Krugman, NY Times: ...American politics — at least on one side of the aisle — is suffering from an epidemic of infallibility, of powerful people who never, ever admit to making a mistake.

More than a decade ago I wrote that the Bush administration was suffering from a “mensch gap.” ... Nobody ... ever seemed willing to accept responsibility for policy failures...

Later, in the aftermath of the financial crisis, a similar inability to admit error was on display among many economic commentators.

Take, for example, the open letter a who’s who of conservatives sent to Ben Bernanke in 2010, warning that his policies could lead to “currency debasement and inflation.” They didn’t. But four years later, when ... contacted..., not one was willing to admit having been wrong.

By the way, press reports say that one of those signatories, Kevin Hassett — co-author of the 1999 book “Dow 36,000” — will be nominated as chairman of Mr. Trump’s Council of Economic Advisers. Another, David Malpass — the former chief economist at Bear Stearns, who declared on the eve of the financial crisis that “the economy is sturdy” — has been nominated as undersecretary of the Treasury for international affairs. They should fit right in. ...

What happened to us? Some of it surely has to do with ideology: When you’re committed to a fundamentally false narrative about government and the economy, as almost the whole Republican Party now is, facing up to facts becomes an act of political disloyalty. ...

But what’s going on with Mr. Trump and his inner circle seems to have less to do with ideology than with fragile egos. To admit having been wrong about anything, they seem to imagine, would brand them as losers and make them look small.

In reality, of course, inability to engage in reflection and self-criticism is the mark of a tiny, shriveled soul — but they’re not big enough to see that. ...

Many Americans no longer seem to understand what a leader is supposed to sound like, mistaking bombast and belligerence for real toughness.

Why? Is it celebrity culture? Is it working-class despair, channeled into a desire for people who spout easy slogans?

The truth is that I don’t know. But we can at least hope that watching Mr. Trump in action will be a learning experience — not for him, because he never learns anything, but for the body politic. And maybe, just maybe, we’ll eventually put a responsible adult back in the White House.

Paul Krugman: Conservative Fantasies, Colliding With Reality

Talk is cheap:

Conservative Fantasies, Colliding With Reality, by Paul Krugman, NY Times: This week the Trump administration put out a budget blueprint — or more accurately, a “budget” blueprint. After all, real budgets detail where the money comes from and where it goes; this proclamation covers only around a third of federal spending, while saying nothing about revenues or projected deficits. ...

So what’s the point of the document? The administration presumably hopes that it will distract the public and the press from the ongoing debacle over health care. But it probably won’t. And in any case, this pseudo-budget embodies the same combination of meanspiritedness and fiscal fantasy that has turned the Republican effort to replace Obamacare into a train wreck.

Think ... about the vision of government ... that the right has been peddling for decades.

In this vision, much if not most government spending is a complete waste, doing nobody any good. The same is true of government regulations. And to the extent ... spending does help anyone, it’s Those People — lazy, undeserving types who just so happen to be a bit, well, darker than Real Americans.

This was the kind of thinking — or, perhaps, “thinking” — that underlay President Trump’s promise to replace Obamacare with something “far less expensive and far better.” After all, it’s a government program, so he assumed that it must be full of waste that a tough leader like him could eliminate.

Strange to say, however, Republicans turn out to have no ideas about how to make the program cheaper other than eliminating health insurance for 24 million people (and making coverage worse, with higher out-of-pocket spending, for those who remain).

And basically the same story applies at a broader level. Consider federal spending...: Outside defense it’s dominated by Social Security, Medicare and Medicaid — all programs that are crucial to tens of millions of Americans, many of them the white working-class voters who are the core of Trump support. Furthermore, most other government spending also serves purposes that are popular, important or (usually) both.

Given this reality..., what will happen if anti-big-government politicians ... put their agenda into practice? Voters will quickly get a lesson in what slashing spending really means — and they won’t be happy.

That’s basically the wall Obamacare repeal has just smashed into. ...

Republicans’ budget promises, like their health care promises, have been based on an essentially fraudulent picture of what’s really going on. And now the bill for these lies is coming due.

Populism and the Politics of Health

Paul Krugman:

Populism and the Politics of Health: What’s next on health care? Truly, I have no idea. The AHCA is a real stinker... But ... starting off the Trump legislative era with the crashing and burning of Obamacare repeal would deeply damage Trump... So they will pull out all the stops.

But why are Republicans having so much trouble? Health reform is hard... But there’s a more fundamental issue: who is being served?

Obamacare helped a large number of people at the expense of a small, affluent minority: basically, taxes on 2% of the population to cover a lot of people and assure coverage to many more. Trumpcare would reverse that, hurting a lot of people (many of whom voted Trump) so as to cut taxes for a handful of wealthy people. That’s a difference that goes beyond political strategy. ...

And yet, and yet: Trump did in fact win over white working-class voters, who thought they were voting for a populist...

This ties in with an important recent piece by Zack Beauchamp on the striking degree to which left-wing economics fails, in practice, to counter right-wing populism... Why?

The answer, presumably, is that what we call populism is really in large degree white identity politics, which can’t be addressed by promising universal benefits. Among other things, these “populist” voters now live in a media bubble, getting their news from sources that play to their identity-politics desires, which means that even if you offer them a better deal, they won’t hear about it or believe it if told. For sure many if not most of those who gained health coverage thanks to Obamacare have no idea that’s what happened.

That said, taking the benefits away would probably get their attention, and maybe even open their eyes to the extent to which they are suffering to provide tax cuts to the rich. ...

... Trumpism is faux populism that appeals to white identity but actually serves plutocrats. That fundamental contradiction is now out in the open.

Paul Krugman: Facts Are Enemies of the People

The "Trumphony" of falsehoods is harmful:

Facts Are Enemies of the People, by Paul Krugman, NY Times: The U.S. economy added 10.3 million jobs during President Obama’s second term, or 214,000 a month. This brought the official unemployment rate below 5 percent... But Donald Trump insisted that the good news on jobs was “phony,” that America was actually suffering from mass unemployment.

Then came the first employment report of the Trump administration, which at 235,000 jobs added looked very much like a continuation of the previous trend. And the administration claimed credit: Job numbers, Mr. Trump’s press secretary declared, “may have been phony in the past, but it’s very real now.”

Reporters laughed — and should be ashamed of themselves... For it really wasn’t a joke. America is now governed by a president and party that ... want everyone to accept that reality is whatever they say it is.

So we’re just supposed to believe the president if he says, falsely, that his inauguration crowd was the biggest ever; if he claims, ludicrously, that millions of votes were cast illegally for his opponent; if he insists, with no evidence, that his predecessor tapped his phones.

And it’s not just about serving one man’s vanity..., this attitude can hurt millions of people, consider ... health care reform.

Obamacare has led to a sharp decline in the number of Americans without health insurance. ... Republicans, however, are in denial about recent gains. ...

And as for the likely impacts of Trumpcare — well, they literally don’t want to know. ...Republicans rammed Trumpcare through key committees, literally in the dead of night, without waiting for the C.B.O. score — and they have been pre-emptively denouncing the budget office, which is likely to find that the bill would cause millions to lose health coverage. ...

The C.B.O., in other words, is in the same position as the news media, which Mr. Trump has declared “enemies of the people” — not, whatever he may say, because they get things wrong, but because they dare to challenge him on anything. ...

And much, perhaps most, of his party is happy to go along, accepting even the most bizarre conspiracy theories. For example, a huge majority of Republicans believe Mr. Trump’s basically insane charges about being wiretapped by President Obama.

So don’t make the mistake of dismissing the assault on the Congressional Budget Office as some kind of technical dispute. It’s part of a much bigger struggle, in which what’s really at stake is whether ignorance is strength, whether the man in the White House is the sole arbiter of truth.

Paul Krugman: A Party Not Ready to Govern

"They have no idea how to turn their slogans into actual legislation

A Party Not Ready to Govern, by Paul Krugman, NY Times: According to Politico, a Trump confidante says that the man in the Oval Office — or more often at Mar-a-Lago — is “tired of everyone thinking his presidency is screwed up.” Pro tip: The best way to combat perceptions that you’re screwing up is, you know, to stop screwing up.

But he can’t, of course. And it’s not just a personal problem.

It goes without saying that Donald Trump is the least qualified individual, temperamentally or intellectually, ever installed in the White House. ... Thanks, Comey.

But the broader Republican quagmire — the party’s failure so far to make significant progress toward any of its policy promises — isn’t just about Mr. Trump’s inadequacies. The whole party, it turns out, has been faking it for years. Its leaders’ rhetoric was empty; they have no idea how to turn their slogans into actual legislation, because they’ve never bothered to understand how anything important works.

Take the two lead items in the congressional G.O.P.’s agenda: undoing the Affordable Care Act and reforming corporate taxes. In each case Republicans seem utterly shocked to find themselves facing reality.

The story of Obamacare repeal would be funny if the health care — and, in many cases, the lives — of millions of Americans weren’t at stake. ...

Then there’s corporate tax reform — an issue where the plan being advanced by Paul Ryan ... is actually not too bad, at least in principle. ...

But Mr. Ryan has failed spectacularly to make his case either to colleagues or to powerful interest groups. Why? As best I can tell, it’s because he himself doesn’t understand the point of the reform. ...

At this point, then, major Republican initiatives are bogged down for reasons that have nothing to do with the personality flaws of the tweeter in chief, and everything to do with the broader, more fundamental fecklessness of his party.

Does this mean that nothing substantive will happen on the policy front? Not necessarily. Republicans may decide to ram through a health plan that causes mass suffering, and hope to blame it on Mr. Obama. They may give up on anything resembling a principled tax reform, and just throw a few trillion dollars at rich people instead.

But whatever the eventual outcome, what we’re witnessing is what happens when a party that gave up hard thinking in favor of empty sloganeering ends up in charge of actual policy. And it’s not a pretty sight.

Paul Krugman: Goodbye Spin, Hello Raw Dishonesty

Who'll stop the rain?:

Goodbye Spin, Hello Raw Dishonesty, by Paul Krugman, Commentary, NY Times: The latest big buzz is about Jeff Sessions, the attorney general. It turns out that he lied during his confirmation hearings, denying that he had met with Russian officials during the 2016 campaign. In fact, he met twice with the Russian ambassador, who is widely reported to also be a key spymaster. ...

At this point it’s easier to list the Trump officials who haven’t been caught lying under oath than those who have. This is not an accident.

Critics ... used to complain, with justification, about politicians’ addiction to spin —...presenting their actions in a much better light than they deserved. But all indications are that the age of spin is over. It has been replaced by an era of raw, shameless dishonesty.

In part, of course, the pervasiveness of lies reflects the character of the man at the top: No president, or for that matter major U.S. political figure of any kind, has ever lied as freely and frequently as Donald Trump. ...

And the question is, who’s going to stop him?

The moral vacuity of Republicans in Congress, and the unlikelihood that they’ll act as any check on the president, becomes clearer with each passing day. Even the real possibility that we’re facing subversion by agents of a foreign power, and that top officials are part of the story, doesn’t seem to faze them as long as they can get tax cuts for the rich and benefit cuts for the poor.

Meanwhile, Republican ... voters, who are the real arbiters when polarized and/or gerrymandered districts make the general election irrelevant for many politicians, live in a Fox News bubble...

And what about the Fourth Estate? Will it let us down, too?

To be fair, the first weeks of the Trump administration have in important ways been glory days for journalism; one must honor the ... reporters who have been ferreting out the secrets this authoritarian-minded clique is so determined to keep.

But then you watch something like the way much of the news media responded to Mr. Trump’s congressional address, and you feel despair. It was a speech filled with falsehoods and vile policy proposals, but read calmly off the teleprompter — and suddenly everyone was declaring the liar in chief “presidential.”

The point is that if that’s all it takes to exonerate the most dishonest man ever to hold high office in America, we’re doomed. Let’s hope it doesn’t happen again.

Paul Krugman: The Uses of Outrage

"...an outraged populace can and must push back...":

The Uses of Outrage, by Paul Krugman, NY Times: ...Mr. Trump is clearly a would-be autocrat, and other Republicans are his willing enablers. Does anyone doubt it? And given this reality, it’s completely reasonable to worry that America will go the route of other nations, like Hungary, which remain democracies on paper but have become authoritarian states in practice.

How does this happen? A crucial part of the story is that the emerging autocracy uses the power of the state to intimidate and co-opt civil society — institutions outside the government proper. The media are bullied and bribed into becoming de facto propaganda organs of the ruling clique. Businesses are pressured to reward the clique’s friends and punish its enemies. Independent public figures are pushed into collaboration or silence. Sound familiar?

But an outraged populace can and must push back, using the power of disapproval to counter the influence of a corrupted government.

This means supporting news organizations that do their job and shunning those that act as agents of the regime. It means patronizing businesses that defend our values and not those willing to go along with undermining them. It means letting public figures, however nonpolitical their professions, know that people care about the stands they take, or don’t. For these are not normal times, and many things that would be acceptable in a less fraught situation aren’t O.K. now.

For example, it is not O.K. for newspapers to publish he-said-she-said pieces that paper over administration lies, let alone beat-sweetening puff pieces about Trump allies. It’s not O.K. for businesses to supply Mr. Trump with photo ops claiming undeserved credit for job creation — or for business leaders to serve on “advisory” panels that are really just another kind of photo op.

It’s not even O.K. to go golfing with the president, saying that it’s about showing respect for the office, not the man. Sorry, but when the office is held by someone trying to undermine the Constitution, doing anything that normalizes him and lends him respectability is a political act.

I’m sure many readers would rather live in a nation in which more of life could be separated from politics. So would I! But civil society is under assault from political forces, so that defending it is, necessarily, political. And justified outrage must fuel that defense. When neither the president nor his allies in Congress show any sign of respecting basic American values, an aroused public that’s willing to take names is all we have.

 

The Real Test for the Republican Health Care Plan

I have a new column:

The Real Test for the Republican Health Care Plan: The Republicans’ rallying cry on health care reform is that the marketplace – relying on the forces of supply and demand – is the best way to run our healthcare system. Government involvement in health care interferes with the magic of markets and makes us all worse off.

The problem with this argument is that markets for health insurance are subject to significant market failures. Without regulatory intervention to fix these problems the market system will not provide what the market systems promises, widely available health care at the lowest possible price. ...

Interestingly, despite their public rhetoric Republicans seem to recognize that these features will be needed in whatever health care reform package they put forward, assuming they can eventually agree on a plan. ... So far, however, although there has been evolution, the proposal is still bad news for those with low incomes and – surprise! – it is very beneficial to those with considerable means. ...

Paul Krugman: Death and Tax Cuts

"So why do Republicans hate Obamacare so much?":

Death and Tax Cuts, by Paul Krugman, NY Times: Across the country, Republicans have been facing crowds demanding to know how they will protect the 20 million Americans who gained health insurance thanks to the Affordable Care Act... And after all that inveighing against the evils of Obamacare, it turns out that they’ve got nothing. ...

After years to prepare, Mr. Ryan finally unveiled what was supposedly the outline of a health care plan. It was basically a sick joke: flat tax credits, unrelated to income, that could be applied to the purchase of insurance.

These credits would be obviously inadequate for the lower- and even middle-income families..., so it would cause a huge surge in the number of uninsured. Meanwhile, the affluent would receive a nice windfall. Funny how that seems to happen in every plan Mr. Ryan proposes.

That was last week. This week, perhaps realizing how flat his effort fell, he began tweeting about freedom, which he defined as “the ability to buy what you want to fit what you need.” Give me consumer sovereignty or give me death! And Obamacare, he declared, is bad because it deprives Americans of that freedom by doing things like establishing minimum standards for insurance policies.

I very much doubt that this is going to fly, now that ordinary Americans are starting to realize just how devastating loss of coverage would be. But for the record, let me remind everyone what we’ve been saying for years: Any plan that makes essential care available to everyone has to involve some restriction of choice. ...

So yes, Obamacare somewhat restricts choice — not because meddling bureaucrats want to run your life, but because some restrictions are necessary as part of a package that in many ways sets Americans free.

For health reform has been a hugely liberating experience for millions. ...

So why do Republicans hate Obamacare so much? It’s not because they have better ideas; as we’ve seen..., they’re coming up empty-handed on the “replace” part of “repeal and replace.” It’s not, I’m sorry to say, because they are deeply committed to Americans’ right to buy the insurance policy of their choice.

No, mainly they hate Obamacare for two reasons: It demonstrates that the government can make people’s lives better, and it’s paid for in large part with taxes on the wealthy. Their overriding goal is to make those taxes go away. And if getting those taxes cut means that quite a few people end up dying, remember: freedom!