The Regressive Austerity Arguments of the Washington Post

Austerity is where governments refuse to pursue policies that boost consumer demand. Austerity really has hurt a lot of people and there’s even evidence that the poverty it caused has ruined millions of lives.

Last week the Washington Post ran a column by Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, one of the many pro-austerity organizations that received generous funding from the late Peter Peterson. The immediate target of the column was the standoff over the debt ceiling, but the usual complaints about debt and deficits were right up front in the first two paragraphs.

“At the same time, the federal debt as a share of the economy is the highest it has ever been other than just after World War II. ….”

“So our plan is to borrow a jaw-dropping roughly $900 billion in each of those years — much of it from foreign countries — without a strategy or even an acknowledgment of the choices being made because no one wants to be held accountable.”

This passes for wisdom at the Washington Post, but it is actually dangerously wrong-headed thinking that rich people (like the owner of the Washington Post) use their power to endlessly barrage the public with.

The basic story of the twelve years since the collapse of the housing bubble is that the U.S. economy has suffered from a lack of demand. We need actors in the economy to spend more money. The lack of spending over this period has cost us trillions of dollars in lost output.

This should not just be an abstraction. Millions of people who wanted jobs in the decade from 2008 to 2018 did not have them because the Washington Post and its clique of “responsible” budget types joined in calls for austerity. This meant millions of families took a whack to their income, throwing some into poverty, leading many to lose houses, and some to become homeless.

At this point, the evidence from the harm from austerity in the United States (it’s worse in Europe) is overwhelming, but just like the Pravda in the days of the Soviet Union, we never see the Washington Post, or most other major news outlets, acknowledge the horrible cost of unnecessary austerity. We just get more of the same, as though the paper is hoping its readers will simply ignore the damage done by austerity.

And it is not just an occasion column from a Peter Peterson funded group, the Post’s regular economic columnist, Robert Samuelson, routinely complains about budget deficits, as do the Post editorial writers. We get the same story in the news section as well, for example, this piece last week telling us about the need to “fix” the budget. The Post is effectively implying that a lower budget deficit, which results in lower output and higher unemployment is “fixed.”

If the Post cared about the logic of its argument, instead of just repeating platitudes about the evils of budget deficits, it should quickly recognize that its push for austerity makes no economic sense. The argument of the evils of a budget deficit is that it is supposed to lead to high interest rates and crowd out investment.

That leaves the economy poorer in the future, since less investment leads to less productivity growth, so the economy will be able to produce fewer goods and services in future years. (The implicit assumption is that the economy is near its full employment level of output so that efforts by the Fed to keep interest rates down by printing money would lead to inflation.)

The nice part of this story is that there is a clear prediction which we can examine; high budget deficits lead to high interest rates. Or, if the Fed is asleep on the job, high budget deficits will lead to high inflation.

The interest rate on 10-year Treasury bonds at the end of last week was just over 2.0 percent. That is incredibly low by historic standards and far lower than the rates of over 5.0 percent that we saw when the government was running a surplus in the late 1990s. The inflation rate is hovering near 2.0 percent and has actually been trending slightly downward in recent months. So where is the bad story of the budget deficit?

In the classic deficit crowding out investment story, if we cut the budget deficit, investment rises to replace any lost demand associated with lower government spending or higher taxes. We can also see some increased consumption, mostly due to mortgage refinancing, and some increase in net exports due to a lower valued dollar.

But what area of spending does the Washington Post and its gang of deficit hawks think will fill the gap if it could find politicians willing to carry through the austerity it continually demands? It shouldn’t be too much to ask a newspaper that endlessly harps on the need for lower deficits to have a remotely coherent story on how lower deficits could help the economy.

There is also the burden on our children story that the Peter Peterson gang and the Post likes to harangue readers with. Our children will inherit this horrible $20 trillion debt that they will have to pay off over their lifetimes.

This story makes even less sense than the crowding out story. The burden of the debt is measured by the interest paid to bondholders, which is actually at a historically low level relative to GDP. It’s around 1.5 percent, after we subtract the interest rebated by the Fed to the Treasury. It had been over 3.0 percent of GDP in the early and mid-1990s.

And, even this is not a generational burden. It is a payment within generations from taxpayers as a whole to the people who own bonds, who are disproportionately wealthy. Much of this money is recaptured with progressive income taxes. More could be captured with more progressive taxes.

But this is actually the less important issue with this sort of accounting. Direct government spending is only one way the government pays for things. It also provides patent and copyright monopolies to provide incentives for innovation and creative work. These are alternatives to direct government payments.

To be specific, if the government wants Pfizer to do research developing new drugs, it can pay the company $5-$10 billion a year to do research developing new drugs. Alternatively, it can tell Pfizer that it will give it a patent monopoly on the drugs its develops and arrest anyone who tries to compete with it.

Generally, the government takes the latter route with innovation. This can lead to a situation where Pfizer is charging prices that are tens of billions of dollars above the free market price. This monopoly price is equivalent to a privately imposed tax that the government has authorized the company to collect.

Anyone seriously interested in calculating the future burdens created by the government would have to include the rents from patent and copyright monopolies, which run into the hundreds of billions of dollars annually, and possibly more than $1 trillion. (They are close to $400 billion with prescription drugs alone.) The fact that the deficit hawks never mention the cost of patent and copyright monopolies, shows their lack of seriousness. They are pushing propaganda, not serious analysis.

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Research: Junk TV Can Make People Less Intelligent

Perhaps it’s similar to junk food, where it can worsen people’s physical condition.

A raft of new research shows that watching junky cable and other lowbrow TV is actually making people dumber — literally lowering their IQs.

In research published in the American Economic Review this month, Italian researchers showed that people with greater access to former Italian prime minister Silvio Berlusconi’s trashy entertainment TV network, Mediaset, in the 1980s were much more likely to vote for Berlusconi later in later elections. Furthermore, people with greater exposure to Mediaset as children were “less cognitively sophisticated and civic-minded as adults, and ultimately more vulnerable to Berlusconi’s populist rhetoric.”

From the American Economic Association’s writeup of the research:

In 1980, Berlusconi was an up-and-coming media entrepreneur hoping to fill a void in the television market, which was dominated by a state-owned network driven by an educational mission. Catering to a growing middle class eager to spend on entertainment, Berlusconi spent the decade rolling out Mediaset to new markets throughout the country.

At the time, Mediaset’s programming did not suggest that he was using it as a propaganda tool for political gain. Nearly all the shows were shallow, critically poorly received, and purely for fun with no educational value. Mediaset did not have a news show component until 1990. Yet, the authors found very real effects of their influence on viewers’ political sympathies.

“The language codes that were popularized by TV also made people much more susceptible to the populist party because they used very simple language,” Ruben Durante, one of the paper’s coauthors, said. “They used accessible language. And that can potentially be very powerful.”

Andrea Tesei, another coauthor, spoke to The Washington Post’s Nikita Lalwani about some of the findings.

Lalwani: You show that exposure to entertainment TV most affected the voting behavior of the very young and the very old. Were they affected in the same way?

Tesei: For the elderly, the effect was happening through habit formation. They were hooked by the kind of television that Berlusconi showed — the salacious shows and sports. They were then much more likely to watch news shows on Mediaset when those shows were introduced universally in the ’90s. And we know that news on Mediaset was slanted toward Berlusconi.

Unlike the elderly, kids were not more likely to watch news on Mediaset later on — there was no habit formation. What was happening was that kids who were introduced to Mediaset in the 1980s were much more likely to grow up socially and civically disengaged, and even more, they appear to be more cognitively shallow compared to their peers, who grew up without this entertainment diet. We were able to show that kids who grew up in Mediaset-exposed areas performed significantly worse on standardized exams taken in adulthood.

The results also applied to another Italian populist politician, Beppe Grillo and his Five Star Movement, that was not as ideologically right-wing as Berlusconi. “The fact that our results apply not just to Berlusconi but also to the Five Star Movement suggests that there is perhaps a more general message,” Tesei said. “Less civically minded voters may be more vulnerable to populistic rhetoric.”

Prosecuting Assange for Publishing Classified Material Would Set a Dangerous Precedent

This prosecution of Assange under the Espionage Act would be a clear danger to press freedoms — the government could subsequently use the Assange case as a precedent to go after whistleblowers acting in the public interest by them disclosing classified material about corruption that should be known to the public. Assange has done some things that are quite wrong in my view — it’s another matter to debate what things those are — but he has also done some good things and regardless of his character, it’d be harmful to prosecute him in the way the U.S. government is now trying to do so.

Assange was indicted by a federal grand jury Thursday. The charges are seen by many proponents of press freedom on both the right and the left as part of an effort from the White House to criminalize dissent by journalism and to produce a chilling effect on reporters exposing classified documents that the government would prefer remain hidden.

Despite the unpopularity of the Trump administration among Democrats, however, at press time only three members of the party’s congressional delegation has spoken up: Wyden, of Oregon; Warren, of Massachusetts; and Independent Sanders of Vermont.

In a statement, Wyden said that he was “extremely concerned about the precedent this may set and potential dangers to the work of journalists and the First Amendment.”

“This is not about Julian Assange,” said Wyden. “This is about the use of the Espionage Act to charge a recipient and publisher of classified information.”

“Let me be clear: it is a disturbing attack on the First Amendment for the Trump administration to decide who is or is not a reporter for the purposes of a criminal prosecution,” Sanders said in a tweet Friday. “Donald Trump must obey the Constitution, which protects the publication of news about our government.”

[…]

Critics of Assange have claimed that the Wikileaks founder is not a journalist, so his “crimes” are not applicable to journalists and journalism as a whole. But, as Knight First Amendment Institute staff attorney Carrie DeCell pointed out in a twitter thread, that’s not the case.

“The government argues that Assange violated the Espionage Act by soliciting, obtaining, and then publishing classified information,” DeCell tweeted. “That’s exactly what good national security and investigative journalists do every day.”

[…]

In a column at The Intercept, journalist James Risen put the indictment into context.

“If the government gets to decide what constitutes journalism,” Risen wrote, “what’s to stop it from making similar rulings about any outlet whose coverage it doesn’t like?”

The Nation editor and publisher Katrina vanden Heuvel made the stakes clear in a tweet.

“Espionage charges against Assange are a threat to press freedom,” said vanden Heuvel.

Assange also got support from The Washington Post‘s executive editor, Marty Baron. In a statement, Baron said that the Trump administration was making a jump from hostility to the press to criminalizing journalism.

“With this new indictment of Julian Assange,” said Baron, “the government is advancing a legal argument that places such important work in jeopardy.”

Baron was joined in his denunciation of the indictment by the editors of The New York Times and The Wall Street Journal.

Times executive editor Dean Baquet said in a statement the government was threatening a “basic tenet of press freedom.”

“Obtaining and publishing information that the government would prefer to keep secret is vital to journalism and democracy,” said Baquet. “The new indictment is a deeply troubling step toward giving the government greater control over what Americans are allowed to know.”

Noam Chomsky Interview on Media and Climate Change

A good interview:

 I don’t know if you ever read the introduction to Animal Farm — probably not, because it was suppressed — but it came out after it was discovered in his papers about 30 years later, and it’s kind of an interesting introduction. The book is addressed to the people of England and he says this book is, of course, a satire about the totalitarian enemy, but he says we shouldn’t feel too self-righteous about it because — I’m quoting now — in free England, ideas can be be suppressed without the use of force.

Orwell gives some examples, and about two sentences of explanation. One is that the press is owned by wealthy men who have every interest in not wanting certain ideas to be expressed, but the other is just essentially a good education. You go on to the best schools, graduate from Oxford and Cambridge, and you just have instilled into you the understanding that there are certain things it wouldn’t do to say — and you don’t even think about it any more. It just becomes what Gramsci called “hegemonic common sense,” you just don’t talk about it. And that’s a big factor, how these things simply become internalized. People who bring them up sound like crazies.

What would be the alternative for journalism? How should it operate differently in addressing climate change?

Every single journal should have a shrieking headline every day saying we are heading to total catastrophe. In a couple of generations, organized human society may not survive. That has to be drilled into people’s heads constantly. After all, there’s been nothing like this in all of human history. The current generation has to make a decision as to whether organized human society will survive another couple of generations, and it has to be done quickly, there’s not a lot of time. So, there’s no time for dillydallying and beating around the bush.

But isn’t there a risk of disempowering people by just giving them bad news?

There is. Bad news should be combined with discussion of the things that can be and are being done. For example, a very good economist, Dean Baker, had a column a couple of weeks ago in which he discussed what China is doing. They are still a big huge polluter, but they are carrying out massive programs of switching to renewable energies way beyond anything else in the world. States are doing it.

[…]

Do you think that in the U.S. or other notionally democratic societies, is it possible to reform the media system in some ways that would better facilitate this kind of survival journalism?

One way would be for them to become democratic societies. They’re very far from it. Take elections — there’s very convincing work in mainstream political science which shows that elections in the United States are basically bought. You can predict the outcome of an election for Congress or Executive with remarkable precision just by looking at the single variable of campaign spending. That’s why when somebody’s elected to the House of Representatives, the first day in office, she or he has to start gaining donor support for the next election. Meanwhile, legislation is being written by the staff with the lobbyists from the corporations, who are actually often just writing the legislation. It’s a kind of democracy, but a very limited one.

[…]

The good side is that (social media is) the way organizing goes on. That’s the way you reach out to people, get together, and it’s a very effective tool. Practically all organizing works this way. I mean even teaching, teachers often communicate with the students through social media. That’s all anybody is doing. If you walk around campus, everybody’s (on a device). One university, I think Duke University, started putting on the pavements things that say, Look up!, because they’re all walking around looking down.

Definitely what the effects are is hard to say. You see teenage kids sitting in a McDonalds, let’s say, sitting around a table and there are two conversations going on — one in the group, and one that each person is having with whoever’s talking to them on their phone.

[…]

What conditions need to be met to enable an effective response to climate crisis?

I think there just has to be an energetic mass popular movement, which is going to compel the media to address the crises that we’re facing by constant pressure, or else simply create alternatives which will dominate the information market. And we don’t have a lot of time to waste. So, things like subsidizing independent media which is not a utopian idea, it was done in the United States in its early days; or the kinds of grassroots media movements that, say, Bob McChesney and others are pressing to develop.

And it’s an urgent requirement. I start my classes these last couple of years by simply pointing out to the students that they have to make a choice that no one in human history has ever made. They have to decide whether organized human society is going to survive. Even when the Nazis were on the rampage, you didn’t have to face that question. Now you do.

Two-Thirds of U.S. Bankruptcies Related to Medical Expenses

The dysfunctional U.S. healthcare system continues to impose serious costs on American families. One poll states that about half of U.S. doctors have considered quitting due to the ridiculous amount of paperwork that the profit-driven American healthcare system requires — they want to practice medicine, not paperwork. In the background, a strong majority of the U.S. public now supports Medicare for All.

For many Americans, putting one’s health first can mean putting one’s financial status at risk. A study of bankruptcy filings in the United States showed that 66.5% were due, at least in part, to medical expenses.

The study, led by Dr. David Himmelstein, Distinguished Professor at the City University of New York’s (CUNY) Hunter College and Lecturer at Harvard Medical School, indicates that about 530,000 families each year are financially ruined by medical bills and sicknesses. It’s the first research of its kind to link medical expenses and bankruptcy since the passage of the Affordable Care Act (ACA) in 2010.

“Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy,” Himmelstein says in a release by the Physicians for a National Health Program. “For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, copayments and deductibles that illness can put you in the poorhouse.”

Why Changing the Clocks With Daylight-Saving Time is Absurd

It’s an antiquated practice that has many people driving home from work (at around 5 o’clock) in relative darkness, likely leading to more traffic accidents and less quality time outside as well.

Daylight-saving time (not “daylight-savings” time) was created during World War I to decrease energy use. The practice was implemented year-round in 1942, during WWII. Not waking up in the dark, the thinking went, would decrease fuel use for lighting and heating. That would help conserve energy supplies to help the war effort.

[…]

According to advocacy groups like Standardtime.com, which are trying to abolish daylight-saving time, claims about saving energy are unproven. “If we are saving energy, let’s go year-round with daylight-saving time,” the group says. “If we are not saving energy, let’s drop daylight-saving time!”

In his book Spring Forward: The Annual Madness of Daylight-Saving Time, author Michael Downing says there isn’t much evidence that daylight-saving actually decreases energy use.

In fact, sometimes DST seems to increase energy use.

For example, in Indiana – where daylight-saving time was implemented statewide in 2006 – researchers saw that people used less electricity for light, but those gains were canceled out by people who used more air conditioning during the early evenings.

(That’s because 6pm felt more like 5pm, when the sun still shines brightly in the summer and homes haven’t had the chance to cool off.)

DST also increases gasoline consumption, something Downing says the petroleum industry has known since the 1930s. This is probably because evening activities – and the vehicle use they require – increase with that extra daylight.

Changing the clocks also causes air travel synchronisation headaches, which sometimes leads to travel delays and lost revenue, airlines have reportedly said.

There are also health issues associated with changing the clocks. Similar to the way jet-lag makes you feel all out of whack, daylight-saving time is like scooting one time zone over.

This can disrupt our sleep, metabolism, mood, stress levels, and other bodily rhythms. One study suggests recovery can take three weeks.

In the days after DST starts or ends, in fact, researchers have observed a spike in heart attacks, increased numbers of work injuries, more automobile accidents, and higher suicide rates.

[…]

The absence of major energy-saving benefits from DST – along with its death toll, health impacts, and economic ramifications – are reason enough to get rid of the ritual.

Good Immunotherapy is Amazing at Treating Cancer — And It’s Unnecessarily Expensive

Drugs are cheap to produce — it’s things like unjust government-granted patent monopolies that allow pharmaceutical companies to charge exorbitant prices that make drugs expensive.

To quote economist Dean Baker’s latest October 2018 paper:

“Many items that sell at high prices as a result of patent or copyright protection would be free or nearly free in the absence of these government granted monopolies. Perhaps the most notable example is prescription drugs where we will spend over $420 billion in 2018 in the United States for drugs that would almost certainly cost less than $105 billion in a free market. The difference is $315 billion annually or 1.6 percent of GDP. If we add in software, medical equipment, pesticides, fertilizer, and other areas where these protections account for a large percentage of the cost, the gap between protected prices and free market prices likely approaches $1 trillion annually, a sum that is more than 60 percent of after-tax corporate profits.”

On to the article though.

Last week, researchers James Allison and Tasuku Honjo were awarded this year’s Nobel Prize in medicine for their work on cancer immunotherapies, heralded by the Nobel committee as “seminal discoveries” that “constitute a landmark in our fight against cancer.”

Immunotherapies like those developed on the basis of Allison and Honjo’s work are indeed an important step towards a whole new way to treat cancer, as well as a host of other chronic diseases. However, this Nobel award should remind us that these innovative therapies are out of reach for so many patients in the United States due to the exorbitant prices drug companies charge for them.

Just weeks before the Nobel announcement, oncologist Ezekiel Emmanuel wrote in a Wall Street Journal essay, “We Can’t Afford the Drugs That Could Cure Cancer,” that “a cure for cancer has become possible, even probable” with immunotherapies, but that our health system cannot afford their price tag. Just after the Nobel announcement, Vox reporter Julia Belluz reminded us that “the average cost of cancer drugs today is four times the median household income” (emphasis added).

Immunotherapies constitute a part of the class of drugs called biologics (as opposed to chemical pharmaceuticals) that have shown very promising results in treating many previously intractable conditions, such as multiple sclerosis, asthma, chronic pain, and Crohn’s disease, due to their ability to more precisely target individual diseased cells. Therefore it’s no surprise that currently most of the top 10 best-selling drugs worldwide are biologics.

[…]

If biologics really are the future of medicine, we must change the way prescription drugs are priced in the United States, or millions of patients will be left behind. One way to do that is to invest in public pharmaceuticals that can assure an adequate supply of and equitable access to essential medications.