Category Archives: Economics

Thought for the Day: 18 March 2015

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What amazes me about economists is their lack of curiousity. They have an amazingly interesting subject, a wealth of material to unearth, digest, analyse, a range of fascinating research in relate fields to draw upon and integrate into their field, and yet they seem largely content to sit around and play with theoretical models, occasionally testing them against some very restricted set of numbers. Climate scientists climb glaciers, take tree cores and lake sediment samples, painstakingly check changes in gauge locations and surroundings [Ed.: and build and launch Earth-observing satellites and digest volumes of data they generate]; physicists build colliders and measure the rotation of distant galaxies; sociologists talk to slum dwellers. Economists mostly seem to find visting the local factory or labour exchange a bit hard. Why do they have so little fun?

– Peter T

The TPP is a really bad deal – Part 5, What part of getting kicked in the face do you not understand?

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Dean Baker, Getting It Wrong on Trade: TPP Is Not Good for Workers (emphasis mine):

The big money is sweating big time since it seems large segments of the American public have caught wind of the Obama administration’s plans for the Trans-Pacific Partnership. After several decades in which trade has been a major factor depressing the wages and living standards of the country’s workers, the Obama administration is going back to the well to push for more….

Many prominent economists, including many strongly pro-trade economists… have argued the TPP should include rules on currency manipulation… According to calculations by Bergsten and others, actions of foreign central banks to raise the value of the dollar have added several hundred billions of dollars to our trade deficit and cost us millions of manufacturing jobs.

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NAFTA was a bad deal for U.S. workers. That’s one of the reasons I expect bad things from the TPP.

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I’ve made multiple TPP-related posts of the past months – find them as well as older ones here.  (Just click the “TPP” tag over on the right.)  In terms of what we might expect if the TPP is enacted, it’s worth looking back at NAFTA and it’s consequences.   NAFTA was enacted in 1994 under Pres. Clinton.  From my perspective, Ross Perot got it right was accurate with his prediction.  It’s turned out to be an awful deal – an estimated 700,000 U.S. jobs lost.

Economic Policy Institute (EPI) economist Jeff Faux and UC-Berkeley economist Brad DeLong had a public exchange last summer re the merits of NAFTA – Faux taking the position that it’s turned out to be a bad deal and DeLong taking the position that it’s been a net benefit:

And Robert Scott of EPI adds his two cents on Faux vs DeLong:

If you’re an investor I can see why you might view NAFTA favorably.   If you live in the U.S. and work for a living I do not see how you could view it favorably.

(For what it’s worth, I’ve cited DeLong favorably dozens of times.  NAFTA and his inclination to support the TPP are rare – but predictable – instances where I believe he is badly wrong.)

The Trans-Pacific Partnership is a bad deal – Part 4

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Dean Baker with an assessment of the economics in “Fun With Brad DeLong on TPP“:

Brad thinks he has a winner policy with TPP, taking issue with Paul Krugman who says the deal is not worth doing. Brad argues that even if the deal is worth half of the 0.5 percent of GDP figure that is widely cited, we are still talking about 0.25 percent of GDP, or $75 billion a year for the region as a whole and $45 billion for the U.S.

He acknowledges that these gains may not be spread evenly, but wants to see evidence that the losses to workers would be larger than their share of this $75 billion. He also notes Krugman’s complaint about increased protection for intellectual property, especially drug patents, and wants to see evidence that these losses will be large enough to offset the $75 billion in annual gains. Okay, let’s take the DeLong challenge.

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Disgorge the Cash!

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From the Abstract of J.W. Mason’s “Disgorge the Cash:  The Disconnect Between Corporate Borrowing and Investment”:

This paper provides evidence that the strong empirical relationship of corporate cash flow and borrowing to productive corporate investment has disappeared in the last 30 years and has been replaced with corporate funds and shareholder payouts. Whereas firms once borrowed to invest and improve their long-term performance, they now borrow to enrich their investors in the short-run. This is the result of legal, managerial, and structural changes that resulted from the shareholder revolution of the 1980s. Under the older, managerial, model, more money coming into a firm – from sales or from borrowing – typically meant more money spent on fixed investment. In the new rentier-dominated model, more money coming in means more money flowing out to shareholders in the form of dividends and stock buybacks.

Thought for the Day: 14 February 2015

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The Democratic party has its own internal problems on [international trade issues], namely that Bill Clinton lined the party up behind NAFTA and CAFTA, and stood back while the country bled manufacturing jobs, all the while promising that the deals were opening “new markets” for our products in countries where most people earn four bucks a week and can’t buy whatever we still make in this country anywhere. I see closed steel mills and cluttered factories all over this country. I have yet to see footage of Vietnamese workers driving home in Volkswagens that were manufactured in Tennessee. Maybe I’m watching the wrong channel.

–  Charlie Pierce

Using the H-1B visa program to screw American workers

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Wikipedia:

The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, section 101(a)(15)(H). It allows U.S. employers to temporarily employ foreign workers in specialty occupations…. The regulations define a “specialty occupation” as requiring theoretical and practical application of a body of highly specialized knowledge in a field of human endeavor[1] including but not limited to biotechnology, chemistry, architecture, engineering, mathematics, physical sciences, social sciences, medicine and health, education, law, accounting, business specialties, theology, and the arts, and requiring the attainment of a bachelor’s degree or its equivalent as a minimum.

And from the Dept. of Labor’s website:

The Immigration and Nationality Act (INA) requires that the hiring of a foreign worker will not adversely affect the wages and working conditions of U.S. workers comparably employed. To comply with the statute, the Department’s regulations require that the wages offered to a foreign worker must be the prevailing wage rate for the occupational classification in the area of employment.

The purpose of the H-1B program is (nominally) to allow U.S. employers to hire foreign nationals when there are no U.S. citizens available to fill the advertised position.  In practice, the program is regularly used to screw American workers.  For example, see “Congress and President Obama Cannot Sit Idly By While Companies Use H-1B Guestworkers to Replace American Workers“:

A recent investigation by Computerworld revealed that hundreds of information technology (IT) workers were laid off by Southern California Edison (SCE) and replaced with temporary foreign workers through the H-1B guestworker visa program, which allows employers to hire temporary foreign workers for up to six years if they have at least a college degree (most work in IT). The replacement H-1B workers are employed by two India-based IT services firms that specialize in outsourcing and offshoring U.S. jobs: Infosys and Tata Consultancy Services. While U.S. Sen. Jeff Sessions (R-Ala.) and Rep. Darrell Issa (R-Calif.) have publicly criticized the move, it doesn’t look like any action will be taken to reverse it.

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