Australia and Facebook

As reported in Bloomberg: “Australia’s parliament passed a world-first law to force digital giants such as Facebook Inc. and Google pay local publishers for news content…. The legislation was passed Thursday and will ensure “news media businesses are fairly remunerated for the content they generate,…  ‘We look forward to agreeing to new deals with publishers and enabling Australians to share news links once again,’ [Nick Clegg, Facebook’s vice president of global affairs] wrote in a blog post dated Feb. 24.”  Got that???  Does this apply to content that Facebook generates or collects and shares or does it apply to news links Australians share? Perhaps both. Actually, I think that newspapers and other news sources pay Facebook to post their links. It’s called advertising.

But what about the links I post on Facebook and Twitter to articles in the Washington Post, WSJ, and Bloomberg (all of which I subscribe to)?  Facebook is the platform on which I post them. Is Facebook being asked to pay the Post and WSJ for my posts? What I do with what I buy from these news services should be between me and these services and should have nothing to do with Facebook. Should Word Press have to pay the sources I link in my blogs? Should AOL have to pay sources I send or link in my email? OK, OK, I am an older gentlemen and got my AOL email address over thirty years ago and I don’t want to change. !!!  Should the U.S. Postal service have to peak into my regular mail and pay for any source content that I might be sending someone? This is ridiculous and it should be opposed.   

Posted in News and politics, regulation | Tagged , , , , | 2 Comments

More on Trump “acquittal”

Following the Senate’s failure to convict Donald Trump of inciting the January 6 attack on the U.S. Capital as part of his “Stop the Steal” campaign to overturn Biden’s election, Senator Mitch McConnell proclaimed that “There’s no question, none, that President Trump is practically and morally responsible for provoking the events of that day….” Nonetheless, he voted against conviction on the grounds that according to some legal scholars the impeachment provisions of the U.S. Constitution applied only to a President still in office.  Since Trump was no longer the President, impeachment did not apply.  However, if that were so he should have voted to convict Trump and left it to the Supreme Court to sort out this issue if Trump challenged the conviction on these constitutional grounds.

In retrospect (for those of us who were eager to get all of this behind us and move on), it would have been wiser and more convincing to the doubters to have delayed the Senate trial by several months of evidence gathering and to provide for each side to bring and cross exam witnesses. The 9/11 type commission suggested by Rep. Pelosi might correct that mistake. But as Sen. McConnell pointed out in his post Senate vote speech that Trump will now be tried, and no doubt convicted, of many crimes in the courts. I am confident that justice will ultimately prevail.

“Out of office and without the protections that the presidency afforded him, Trump is now facing multiple criminal investigations, civil state inquiries and defamation lawsuits by two women accusing him of sexual assault.”  “Trump legal problems post impeachment”   

Georgia has launched investigations into calls Trump made to election officials in an attempt to overturn that state’s election results. We all heard Trump’s threats to Georgia Secretary of State Brad Raffensperger if he could not find 11,780 votes for Trump in order to flip the election outcome.  I found the call truly shocking, even from Trump.

“In New York… the Manhattan District Attorney’s office is looking into whether the Trump Organization violated state laws, such as insurance fraud, tax fraud or other schemes to defraud….  Prosecutors are awaiting a decision from the US Supreme Court on whether it will continue to delay the enforcement of a subpoena for eight years of Trump’s personal and business tax returns and related records from his accounting firm.” Op. cit.

A potentially large number of people could charge Trump with various damages in connection with the January 6 attack of the Capitol.  For example, Mississippi Democratic congressman Bennie Thompson has accused Trump and others “of conspiring to disenfranchise millions of black voters by preventing Congress from certifying election results on January 6th.  A lawsuit, brought by the NAACP on behalf of Mr. Thompson, argues that they violated the Ku Klux Klan Act of 1871.” “NAACP Rep Bennie Thompson sue Trump Giuliani over capitol riot”

As more and more of his supporters encounter the fact that Trump was unable to produce any credible evidence of significant voter fraud, they will hopefully increasingly give up believing it.  The multi billion-dollar defamation suits by Smartmatic and Dominion Voting Systems against Fox News, former Trump lawyers Rudy Giuliani, and Sidney Powell, and others who claimed that their voting systems switched votes from Trump to Biden should also help change some minds. Most of those making such claims publicly retracted them and apologized for them “Fox Business host Lou Dobbs and Fox News hosts Maria Bartiromo and Jeanine Pirro aired [multiple segments debunking false election claims made on their shows for weeks] that Smartmatic was involved in schemes to switch votes from President Donald Trump to President-elect Joe Biden….” “Fox news suddenly worried about a defamation suit-forced to debunk its own false election claims”  and Fox News fired them. Most people who believe fake claims eventually give them up when confronted with credible counter evidence (I hope).

But what if they don’t? “Some of the senators may have little sympathy for the former president, yet made the partisan choice to appease an increasingly extremist Republican base. A recent poll conducted by the conservative American Enterprise Institute found that nearly 4 out of 10 Republicans believe that political violence is justifiable and could be necessary in a troubled domestic future. Another poll found that three-quarters of Republican voters want Trump to play a prominent role in the party’s future.”  “Trump acquittal questions multiparty system” Most of the rest, presumably, will not remain in a party that includes Trump.

Is the Republican Party thus doomed to minority status for many years to come?  My hope is that multiple court convictions of at least a few of Trump’s many (presumed) crimes will significantly shrink his support and eliminate his role in the party. His refusal to help Rep. Kevin McCarty on January 6 (much less Vice President Pence) was one of the more damning pieces of evidence of Trump’s complicity with the Capital attackers. Yet, “Wary of inflaming tensions within his own party, House Republican Leader Kevin McCarthy (Calif.) is staying silent about his frantic Jan. 6 call to then-President Trump as rioters raided the Capitol.” “Riot probe to likely focus on McCarthy-Trump call” In my opinion, Republican leadership should push Trump out of the party as quickly as possible. An internet poll on February 17 found 75% of the responding Republicans thought that Republicans who voted to convict Donald Trump should be censured. This is not promising. The country needs two strong political parties.

The Party should start by squeezing out its radical loony extremists like Rep Marjorie Taylor Greene.  https://wcoats.blog/2021/02/04/cancer-in-the-republican-party/  The reactions by Republican Party leaders in states whose Republican senators voted against Trump raise concerns that hard core Trump supporters would rather destroy the Republican Party than abandon their Stable Genius. “The Republican Representative Adam Kinzinger (R-IL) was sent a scathing letter from eleven members of his own family just two days after he called for former President Donald Trump to be removed from office.” “GOP rep Kinzinger is blasted by his own family after calling for trumps removal” The Central Committee of the North Carolina Republican Party unanimously censured Sen. Richard Burr for voting to convict Trump. They said that the party “agrees with the strong majority of Republicans in both the U.S. House of Representatives and Senate that the Democrat-led attempt to impeach a former President lies outside the United States Constitution.” Maybe, maybe not, but there was a proper way to find out while still confirming Trump’s guilt.

I do not wish to see the Republican Party destroyed. In my opinion, its survival and viability will depend on how quickly Trump fades from the picture and how successfully the Party marginalizes its lunatic fringe.  Reducing gerrymandering of congressional districts on the basis of the latest ten-year census would also help reduce the election of the most radical candidate from each party in primary elections.

Posted in Government | Tagged , , , , , , , , , , , | 2 Comments

The New Covid-19 Support Bill

The New Covid-19 assistance bill could add an additional 1.9 trillion dollars to support the fight against Covid-19.  In discussing the 2 trillion dollar CARES Act last April I wrote that: “The idea is that as the government has requested/mandated non-essential workers to stay home, and non-essential companies (restaurants, theaters, bars, hotels, etc.) have chosen to close temporarily or have been forced to by risk averse customers or government mandates, the government has an obligation to compensate them for their lost income. Above and beyond the requirements of fairness, such financial assistance should help prevent permanent damage to the economy from something that is meant to be a temporary interruption in its operation.”  “Econ 202-CARES Act-who pays for it?”  While I referred to the shutdowns as the result of “risk averse customers or government mandates”, it seems that the “blame” lies with sensibly risk-averse customers who stayed home and/or out of public gathering places by their own choice before the government required it. “Lockdowns-job losses”  A key point was that this was not a stimulus bill as output/income fell because its supply fell, not for lack of demand to buy it by consumers.

As total and partial shutdowns will continue for a few more months (or permanently for some unlucky firms) such support (properly targeted) should be continued for a while longer. But at what level and for how long? As I stressed in my April blog, the CARES Act payments to unemployed workers did not create income but rather transferred it out of a diminished pie from those who still had incomes (and could buy the government bonds that raised the money being transferred).  As I noted then and as is increasingly important now, the increased fiscal and monetary support that accompanied these government expenditures will need to be unwound carefully as the economy recovers. Equally important, the further increases in debt and money created by the currently proposed support should not exceed what is “truly” needed. U.S. national debt is already almost 28 trillion dollars, over 130% of GDP.

While CARES Act type support was needed and helpful, it was not always appropriately targeted. It is not the kind of emergency spending that is easy to get fully right.  As time goes on more and more evidence will be collected of abusive uses of these funds. Rather than choosing specific firms and classes of individuals to receive support, implementation of a Guaranteed Basic Income for everyone irrespective of income and situation would provide a better safety net for all situations. “Our social safety net”

In December President Trump signed a $900 billion Covid relief bill providing “a temporary $300 per week supplemental jobless benefit and a $600 direct stimulus payment to most Americans, along with a new round of subsidies for hard-hit businesses, restaurants and theaters and money for schools, health care providers and renters facing eviction.”

President Biden has proposed a new additional $1.9 trillion dollar package. Added to the $900 billion approved in December, this would be 13% of GDP, a VERY large amount.  Ten Republicans have proposed a narrower package of $618 trillion. They would exclude measure not directly relevant to the impact of the pandemic such as raising the minimum wage to $15 per hour (a measure that would be damaging to inexperienced, new job entrance). The Congressional Budget Office has just “estimated that raising the minimum wage to $15 an hour would cost 1.4 million jobs by 2025 and increase the deficit by $54 billion over ten years.” “Minimum wage hike to $15 an hour by 2025 would result 14 million unemployed”

The Democrats’ package would provide $1,400 per person direct cash payments across the board in addition to the $600 provided by the December bill. The Republican proposal would lower the thresholds for receiving assistance to individuals making $50,000 or $100,000 for couples and would provide checks of $1,000 per person.  They were expecting to negotiate a compromise package, which now, unfortunately, seems unlikely, though as this is written discussions continue. There are many individual provisions in the proposed bill. I have not reviewed them. My focus here is on the overall financial size of the proposal.

In an interesting oped in the Washington Post, Larry Summers, former Secretary of the Treasury during the Clinton administration, gently warned that the democrats’ package was excessive and risked rekindling inflation.  He wrote that:

“A comparison of the 2009 stimulus and what is now being proposed is instructive. In 2009, the gap between actual and estimated potential output was about $80 billion a month and increasing. The 2009 stimulus measures provided an incremental $30 billion to $40 billion a month during 2009 — an amount equal to about half the output shortfall.

“In contrast, recent Congressional Budget Office estimates suggest that with the already enacted $900 billion package — but without any new stimulus — the gap between actual and potential output will decline from about $50 billion a month at the beginning of the year to $20 billion a month at its end. The proposed stimulus will total in the neighborhood of $150 billion a month, even before consideration of any follow-on measures. That is at least three times the size of the output shortfall.

“In other words, whereas the Obama stimulus was about half as large as the output shortfall, the proposed Biden stimulus is three times as large as the projected shortfall. Relative to the size of the gap being addressed, it is six times as large….  [Given] the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply.” “Larry Summers-Biden-covid stimulus”

The U.S. national debt was $22.7 trillion at the end of 2019 and skyrocketed to $26.9 trillion at the end of 2020. On February 7 it stood at $27.88 trillion or $84,198 per person and $222,191 per taxpayer. This is 130.8% of GDP. This is a very big number. Much of this debt has been purchased by the Federal Reserve resulting in an explosion of its balance sheet and the public’s holdings of money. At the end of 2019 the Federal Reserve assets (the counterpart of which is largely base money–currency held by the public and bank deposits with the Federal Reserve) $4.17 trillion and grew to $7.36 trillion by the end of 2020. In other words, the Federal Reserve bought $3.19 trillion of the $4.2 trillion increase in the national debt. This is a bit of an overstatement because the Fed also bought a modest amount of other debt.  Much of the rest was purchased by foreigners as “the U.S. trade deficit rose 17.7% to $678.7 billion and hit the highest level since 2008.” “The US trade deficit rose in 2020 to a 12 year high”

Because the Federal Reserve now pays banks interest to keep large amounts of their deposits with the Fed in excess of required amounts (excess reserves), the money supply measured as currency in circulation and demand deposits with banks (M1) grew somewhat less than the Fed’s purchases of US debt. In 2020 M1 grew $2.5 trillion, a year in which GDP ended a bit lower than it started.` In part, the public is not spending this money at the rates they normally would because the theaters and restaurants, etc. are closed. A seriously inflated stock market and cryptocurrency values seem to be temporary beneficiaries.

According to Wells Fargo: “We estimate consumers are sitting on $1.5 trillion in excess savings compared to the saving rate’s pre-COVID trend….  After a year of limiting trips, eating at home and putting off doctor appointments, we expect consumers will be eager to engage in many of the in-person services forgone during the pandemic, and spend on gas to get there and clothes to look good doing it. The ample means and eagerness to spend could potentially set off a bout of demand-driven inflation that has not been experienced in decades.”  “Wells Fargo–Poking the Inflation Bear”

As I noted last April, unwinding these monetary and fiscal injections, as is necessary to avoid a significant increase in inflation, will be challenging. And now we are even deeper into debt. As inflation increases nominal interest rates will increase as well and the cost of our huge debt financing with it. While managing the short run impact of the pandemic, the government’s eyes should be on the longer run picture as well.

Posted in Debt, Money | Tagged , , , , , | 3 Comments

Cancer in the Republican party

Does Rep. Marjorie Taylor Greene really believe that “a plane did not hit the Pentagon on 9/11, the Clintons crashed JFK Jr’s plane and that the 2018 California wildfires were started by a space laser controlled by Jews”? “Karl Rove blasts GOP rep Marjorie Taylor Greene”  Senate minority leader Mitch McConnell, stated Monday (belatedly) that her “loony lies and conspiracy theories are cancer for the Republican Party.” “Has Mitch McConnell been struck by Jewish space laser”

An even more disturbing question is why do so many people believe her and other obviously (to most people) false claims? QAnon is sadly not the only group espousing claims that even my grandmother (or maybe especially my grandmother) would find transparently laughable. QAnon “followers believe that a cabal of Satan-worshipping Democrats, Hollywood celebrities and billionaires runs the world while engaging in pedophilia, human trafficking and the harvesting of a supposedly life-extending chemical from the blood of abused children.”  “QAnon conspiracy theory explained” 

We live in a time in which sorting fact from fiction has become more challenging than usual. As a young man I had Walter Cronkite, who I could check against Huntley and Brinkley. If they reported it, we believed it. If they got it wrong (rarely) they corrected it the next day. The pronouncements of QAnon are so ridiculous that most of us don’t need a fact checker to reject them. Common sense is enough. But when the previous President of the United States lied to us more or less every time he tweeted, and claims to this day that his reelection was stolen without producing any credible evidence, sorting fact from fiction becomes more challenging.

Sometimes we are lucky enough to encounter contrary evidence directly, in which case we discard the lie and downgrade our trust in its source. This seems to be happening to some QAnon supporters–but unfortunately not to Congresswoman Greene. But this also raises the question of why those inventing and perpetrating lies do so. The specific example of Rep. Greene’s claim that 9/11 was a hoax and that no plane crashed into the Pentagon presents an interesting case.

Of course, the conspiracy theorists do not claim that planes didn’t crash into the World Trade towers, too many of us saw it in real time on TV (I watched in horror from my hotel room in Bratislava, Slovakia). They claim that the U.S. Government was complicit and that the buildings were brought down by planted explosives, etc. In short, they developed clever, even plausible but highly improbable arguments for not believing what the press reported.  https://www.serendipity.li/wot/911_a_hoax.htm

Some years ago, probably sometime in 2002 or 3, one of my children sent me a video claiming that the 9/11 crash into the Pentagon was a hoax. I no longer remember the details of the lengthy arguments it made to convince us that American Airlines flight 77 never crashed into the Pentagon that day and did not kill the 184 people the press reported, but it was well done and convincing. If I had not had directly contradictory information, I might have wondered whether these claims of hoaxes might be true.

First of all, I knew from an acquaintance (Lawyer Ted Olson) that his wife Barbara had died in that crash. Secondly, at the time, I lived next to the Pentagon in Crystal City and could view firsthand the crash site after returning home from Slovakia (the hole in the west side of the building and the plane wreckage laid out in the Pentagon parking lot). The impressive and potentially convincing story in the video was totally made up. But why? The video was expensive to make. Perhaps psychologists can shed light on why gullible people fall for these lies, but what motivates those who put up the money to propagate what they know full well are lies?

Who has an incentive to undermine the American public’s confidence in its government and institutions? Who has an incentive to weaken the United States via a distrusting public turning on itself? The devil himself, of course, but who else? Q? Followers of QAnon “believe that “Q” is a high-ranking government insider, presumably with a military or intelligence background, committed to exposing the hidden truth of what they see as an international bureaucracy scheming against Mr. Trump and his supporters.” “What is QAnon-what we know about the conspiracy theory” Russia? Russia has been playing both sides against the middle in the U.S. for years.

And what about Rep Greene, herself? Is she one of the gullible followers or knowing perpetrators?  In a private meeting of Republicans in the Capital Wednesday evening she apparently expressed “contrition for some of her most outrageous comments made on social media — including questioning the 9/11 attacks, blaming a space ray directed by a Jewish cabal for a deadly wildfire and doubting school shootings. She also, according to Republicans in the room, apologized for putting her colleagues in a difficult spot.” But she has not repudiated any of her outrageous claims publicly.  “’I won’t back down. I’ll never apologize. And I’ll always keep fighting for the people,’ she tweeted Saturday.” “Amid GOP paralysis democrats vow to force vote on rep Greene’s extremism”

“While McCarthy on Wednesday condemned Greene’s comments questioning the veracity of school shootings, encouraging political violence and promulgating anti-Semitic falsehoods, he said he would not bow to demands that she be removed from her committees.” [op. cit.] I have sympathy for McCarthy’s position but a tent big enough to include people like Greene is not one I am willing to reenter. Vladimir Putin must be smiling.

We will never be able to prevent the devil in one guise or another from manufacturing lies in efforts to keep us divided and at each other’s throats. But we can and should better educate our public to critically assess wild claims and more carefully choose more reliable sources of information.

Posted in Government | Tagged , , , , , , | 1 Comment

My Travels to Jerusalem

Palestine: The Oslo Accords before and after, My travels to Jerusalem By Warren L Coats (2021) Kindle and paperback versions available at: Oslo Accords: Before and After

An intimate account of the establishment of the Palestine Monetary Authority and related adventures by one of the International Monetary Fund’s post-conflict, transition economy monetary experts. From being stranded in the desert without a cell phone, to hearing the sound at breakfast of a suicide bomber, to meeting with Yasser Arafat, and Stanley Fischer of the Bank of Israel, the author shares his adventures in the land of Canaan over a sixteen year period.

The establishment of the State of Israel in 1948 in Israel’s ancestral homeland required dealing with Palestine’s existing residents. In the Six-Day War in 1967, Israel’s occupation of the territories given to the Palestinians when the United Nations first recognized the State of Israel (the West Bank and Gaza Strip) increased pressure to resolve that issue. The Oslo Accords offered a path to its resolution, based on an agreement between Yasser Arafat, representing the Palestinian people, and the government of Israel, to swap land for peace (the return of Palestinian lands in exchange for Palestinian recognition of the State of Israel and its right to exist in peace).

One of the elements of the Oslo Accords was the establishment of a central bank in the Occupied Territories. Between 1995 and 2011 Warren Coats lead or participated in the missions of the International Monetary Fund to assist the Palestinian Authority in establishing and developing the capacities of the Palestine Monetary Authority. This book recounts the highlights of his visits, which included meetings with Arafat, as well as Bank of Israel officials.

Previous Books

One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina by Warren Coats (2007)   Hard cover: One Currency for Bosnia

FSU: Building Market Economy Monetary Systems–My Travels in the Former Soviet Union By Warren L Coats (2020)  Kindle and paperback versions available at: FSU-Building-Economy-Monetary-Systems

Afghanistan: Rebuilding the Central Bank after 9/11 — My Travels to Kabul By Warren Coats (2020)  Kindle and paperback versions available at:  “Afghanistan-Rebuilding the Central Bank after 9/11”

Iraq: An American Tragedy, My Travels to Baghdad By Warren Coats (2020) Kindle and paperback versions available at: Iraq-American-Tragedy-My-Travels-Baghdad

Zimbabwe: Challenges and Policy Options after Hyperinflation by Warren L. Coats (Author), Geneviève Verdier (Author)  Format: Kindle Edition Zimbabwe-Challenges and Policy Options after Hyperinflation-ebook

Money and Monetary Policy in Less Developed Countries: A Survey of Issues and Evidence by Warren L. Coats (Author, Editor), Deena R. Khatkhate (Author, Editor)  Format: Kindle Edition Money and Monetary Policy in LDCs-ebook

Posted in Banks, Foreign policy, Israel, Money, Palestine | Tagged , , , , , , , , , | Leave a comment

Access to COVID-19 vaccines

In less than one year from learning of this virus, we now have two approved safe and effective covid-19 vaccines with at least one more on the way. Millions of doses have already been produced. This is a near miracle. Thank you pharmaceutical industry and the governments (and their tax payers) that are paying for it.

Getting the vaccine into our bodies is quite another thing. This has several elements. The first is distributing the vaccines to each state/county and site of vaccinations. The second (or first and a half) is staffing these sites with professions able to administer the shots with the necessary equipment (refrigeration, syringes and needles, etc.). The third is determining who can receive the shot this week and getting them to the right place. The need for these three elements has been known for as long as the need for a vaccine has been known. And officials have known the likely vaccines for at least half a year. But planning for delivering the vaccine to your arm (or the lack of it) has been totally botched.

Focusing on the United States, the federal government promised to vaccinate 20 million people by the end of the year (last week). “Of the more than 12 million doses of vaccines from Moderna Inc. and Pfizer Inc. with BioNTech SE that have been shipped, only 2.8 million have been administered, according to federal figures….  The federal government is sending vaccines to states based on their populations, and it has provided guidelines, but no rules, about how they should be distributed…. On Friday [Jan 1, 2021], Sen. Mitt Romney (R., Utah) criticized the vaccine rollout, saying in a statement that the lack of a comprehensive federal plan to be shared with states “is as incomprehensible as it is inexcusable.”  WSJ: Covid-19-vaccines-slow-rollout-could-portend-more-problems”

Priority

Beyond the above fiasco, it is necessary to determine the priority for receiving the shots and communicating that information to you and me.  As we have already seen it will take a while–many months–to vaccinate everyone even without the above mess. So, who should get them the first month and the second month etc.? I discussed this issue last May. https://wcoats.blog/2020/05/18/the-vaccine-who-gets-it-first/

One criterion for establishing inoculation priorities is to allocate the vaccines so as to maximize the lives saved. I suggest that a better criterion is to maximize the life saved. The difference between the number of lives saved and the amount of life saved can be explained with a simple example. If there is only one dose and it is given to an 85 year old woman otherwise in good health, she might live another healthy year. If given to a 40 year old nurse, he might live another 46 healthy years. In both cases only one life has been saved but in the second case much more life has been saved (46 years of life rather than only one). But this potentially understates the case for giving the jab (as the British call it) to the nurse. One nurse that has been immunized against covid-19 can safely treat more patients that have covid-19 thus saving even more lives and more life. An argument in the other direction of inoculating the elderly first is to flatten the curve (i.e., reduce the inflow of covid-19 patients into overflowing hospitals).

In my view there is a strong case for maximizing the life saved rather than the number of lives saved. We older people should not crowed out younger people who as a result of the vaccination might enjoy much longer lives, something we have already enjoyed. The case, in my view, is overwhelming for critical workers (healthcare workers, grocery store workers, delivery people, etc.) of all ages to receive priority. “Many states are following CDC guidelines to start with front-line medical workers and people in long-term care facilities, but not all. Florida Gov. Ron DeSantis on Dec. 23 extended eligibility to people aged 65 and older.  Because each county and hospital in the state implemented its own approach, many people didn’t know whether to call, log on or show up in person to secure a spot.” [Same WSJ article] 

 A single dose of Moderna and Pfizer’s vaccines “appears to provide strong protection against the coronavirus…. With supplies of the vaccines limited — and hundreds of millions of people waiting for inoculation — this leaves epidemiologists grappling with a complicated question. Should the nation vaccinate fewer people with the best protection possible, or provide twice the number of people with a single shot, covering more of the population but with slightly weaker protection?”  “Coronavirus-vaccine-single-dose-debate”

But if the government can get itself organized (I know that that asks a lot) the existing and rapidly expanding supply of vaccines can be administered in a relatively modest number of months after which the priority issue vanishes.

Information

Whatever your priority turns out to be, how do you know where and when to show up? Do you need a prescription or approval and if so where do you get it? My insurance company is sending regular updates on what I should do. My Maryland county (Montgomery) website has information on the priority phase they are in (phase 1 at the moment) and that is about all (probably because every dispensary–hospitals, doctor’s offices, CVS–sets its own rules). I plan to contact my Primary Care Physician (PCP) for instructions next month when the situation might be a bit clearer.  What should people without medical insurance or a PCP do?  I have visited Kenya many times with the IMF and suspect that they are doing a better job with this than we are. How and why is this such a mess?

Posted in Healthcare, regulation | Tagged , , , , , | 4 Comments

Conflicts of interest in government

I want my government to be run as efficiently as possible for the benefit of all of us. Appointing people to run it with experience in what they oversee contributes to that objective. Conflicts of interest–serving the interests of friends and former associates rather than the interests of the general public –detract from that objective. Hiring bankers to supervise banks, for example, draws on those most knowledgeable about the banking risks needing supervision, but they are also the most vulnerable to conflicts of interest. What should we do about this dilemma?

President elect Joe Biden’s choice to run his Office of Management and Budget: “’Neera Tanden has spent the last decade raising money from the top companies and highest-net-worth individuals in the country, which is a bit at odds with what Biden pitched during the campaign,’ said Matt Bruenig, president of the People’s Policy Project, a left-wing think tank that accepts only small donations.”  On the other hand, “Tanden’s experience leading CAP, which publishes policy recommendations for many domestic and foreign issues, has given her the policy chops needed to lead OMB, Ettlinger said.” Michael Ettlinger, is director of the University of New Hampshire’s Carsey School of Public Policy and a former vice president for economic policy at CAP.  “Neera Tanden-Biden-OMB-CAP”

The authors of the above Washington Post article note with alarm that CAP (Center for American Progress) has received contributions from the likes of Facebook, Bain Capital, Blackstone, Evercore, Walmart, CareFirst BlueCross BlueShield, defense contractor Northrop Grumman and for-profit college operator DeVry Education Group. Though I have not checked, I would not be surprised to find the same author’s urging such companies to shift from seeking shareholder value to stakeholder value by making just such contributions.

How can we maximize the benefits while minimizing the risks of appointing experienced people to positions in government? Our constitution provides one element of a resolution of this conflict by dividing the legislative function from the administrative function between Congress and the White House.  The administration’s regulators are implementing the laws passed by Congress, which provides some checks and balances. Nonetheless, the programs and financing approved by Congress can potentially benefit the friends of congressmen and women. Boeing moved its headquarters from Seattle to Chicago and disbursed its manufacturing facilities from the Seattle area to as many congressional districts as possible to increase congressional votes for its projects not because of economic factors.

Another element of protection is the adherence to transparent bidding and contracting standards when awarding government business to private firms. When designing the taxes to finance government, economist push the principle of economic neutrality (not favoring one market activity over another). Though the tax reforms of 2017 (the so-called Tax Cuts and Jobs Act of 2017) made our income taxes more neutral, many special subsidies remain in our tax laws and the special interests that benefit lobby hard to keep them. “Next up-tax-reform”  “Tax reform and the press”

But regulation potentially offers the most corruptive powers of government to deliver favors to the private sector. We benefit from regulations that help keep products and working conditions safe. But it is easy for regulations to slide into protecting incumbents from competition from challengers. This is a pronounced feature of professional licensing. “Cato: Professional Licensure and Quality”

In short, keeping government activities in the service of the public interest is challenging and requires constant vigilance. By far the most effective approach is to tightly limit government involvement in the economy to the minimum truly necessary for a well-functioning free society. Hire people with the experience to know what they are doing and to do it efficiently but limit the government’s role in the economy to what only government can effectively do.  In establishing the legal and regulatory foundation for private economic activity, limit it to the essentials–the foundation–so that the superstructure can be competitively built by innovative private individuals.

Our national defense is clearly a necessary government responsibility. Thus the “military/industrial complex” is and will remain a problem. The incentives for this industry are particularly dangerous because these firms benefit from the wars we have been fighting all over the place.  It is rather like keeping off those extra pounds that those of us who enjoy good food must struggle with eternally. It is a never ending battle, but losing it would be the death of us.

Posted in Government, regulation | Tagged , , , | 1 Comment

Facebook and Immigration

December 3rs’s WSJ started an article on immigration as follows:

“The Trump administration has sued Facebook Inc., accusing the social-media company of illegally reserving high-paying jobs for immigrant workers it was sponsoring for permanent residence, rather than searching adequately for available U.S. workers who could fill the positions.

The lawsuit reflects a continuing Trump administration push to crack down on alleged displacement of American workers.”  “Trump administration claims Facebook improperly reserved jobs for H1-b workers”

Immigration policy is a complex issue with many aspects. The economic aspects, however, should be straight forward and simple. https://wcoats.blog/2018/03/03/econ-101-trade-in-very-simple-terms/  https://wcoats.blog/2018/03/24/econ-101-trade-deficits-another-bite/  https://wcoats.blog/2018/09/28/trade-protection-and-corruption/ A free market in goods and labor increases productivity and output making the world wealthier. The cost for this extraordinary benefit is that some firms may go out of business and some workers may lose their existing jobs when someone else does better what the firm or worker were doing. They will need to move on to other activities or jobs.  It is wise and appropriate social policy to help those displaced by competition find alternative uses of their resources and skills.

It might seem rather harmless to protect existing firms and jobs from competition (aside from its afront to our individual freedom) but overtime the cost in reduced income growth will become greater and greater. What if such policies had been imposed a hundred years ago? Where would we be now?

If there are American workers who can perform the same job for the same wage Facebook needs, it has every financial incentive to hire them over sponsoring foreign workers. They don’t need laws to push them to do so. The good old profit incentive works just fine. It is fortunate that the exercise of our individual freedom to invent, invest, and work where we please also produces the most efficient (i.e. productive, thus profitable) use of our talents and resources. Talk about win-win. Those displaced when I come up with a better idea (i.e., something the rest of you like better) should be discouraged from stopping such progress with an effective economic safety net. “Replacing Social Security with a Universal Basic Income”

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Hi Grandpa

The following story actually happened:

Around 10 am Wednesday morning the phone rang. I picked it up and said, “Hello”. “Hi Grandpa,” was the reply. There are few things that grandfathers like hearing more than that, though often with a bit of apprehension about the call’s purpose. I didn’t immediately recognize the caller and I didn’t want one of my grandchildren to think that I didn’t recognize their voice. I concluded that it must be my daughter’s oldest child.

“Is this you Bryce, you sound a bit different,” I said.

“Yes, sorry I have a cold,” he replied

Bryce proceeded to spell out, a bit hesitantly, the reason for his call. It was obvious that he was somewhat nervously working up to something.

“One of my coworkers caught COVID-19. On the way to get tested this morning I had an accident. I swerved into the car next to me. I had briefly taken my eyes off the road to check the GPS and hit another car. Unfortunately, when the police arrived, I told them that I had been on the phone, which, of course, is illegal. It was a mistake; I wasn’t on the phone, but now I am in jail. I want to transfer to you my lawyer to better explain things. Will you please talk to him?”

“Well, yes, of course,” I said anxiously.

The lawyer proceeded to explain that though the four people in the car Bryce struck (a man and his eight-month pregnant wife and three-year-old daughter) had been taken to the hospital, none were seriously injured. Bryce’s court date was set for the afternoon of December 15 and the lawyer was confident that Bryce would be cleared of any charges. However, as it was important to keep Bryce’s misstatement about being on the phone off the record, the lawyer had obtained a gag order prohibiting anyone from saying anything about the case. That included me.

The lawyer asked me if I was willing to put up the $16,000 bail required to get Bryce out of jail pending his court appearance. He then proceeded to ask me some “security” questions to verify my identity. For example, he asked if I could tell him Bryce’s address.

“Well, I am still in bed and I don’t have his address here, but it is off interstate 90 between Issaquah and Belview on the way to Seattle.” “So, you can confirm that he is in the state of Washington,” he asked. “Yes” I said.

The lawyer continued that Bryce was in the city jail in downtown Seattle. He explained that more local jails were full, and that the Seattle jail was the nearest one with room. He explained that while I could provide the bail money any way I wanted (and I would get all of the money back when Bryce appeared in court) anything other than cash would cause at least a two-day delay while the check or charge cleared. So obviously I would need to pay in cash if I wanted him released right away. After establishing that I was in Bethesda, MD (not Washington State) the lawyer said that he would need a bit of time to locate a bail bondsman in my area. During that time, he recommended that I take out the required cash from my bank. He stressed that because of the gag order I must not tell my bank the purpose of my cash withdrawal nor mention my Grandson’s name. He gave me the case number.  I asked him to email it to me with his name and phone number.

Before calling my bank for the appointment (currently required during the Covid-19 pandemic), I emailed my daughter: “Did you know that your son is in jail?”

The conversation with my bank was interesting. They said that they would not have that amount of cash to give me and would require several days to acquire it. I was shocked and distressed.

The lawyer called back an hour or so later to say that he had located three bail bondsmen in the Washington, DC area who could take the cash and forward the bond. When I explained that I couldn’t get that much cash for a few days he asked how much I thought I could get saying that he would go back to the judge and plead for a smaller deposit amount. I reminded him that I had not received his email yet. He said that he would check on it.

That was the last I heard from him. Moments later, my daughter emailed me to say that Bryce was at home in bed and would call me shortly, which he did. We had a fun conversation, and I was enormously relieved on several levels.

All of us have received fraudulent emails or phone calls. Of late I have had several from the “Social Security Administration” reporting fraudulent uses of my SS number. These scammers are pretty easy to spot and I never give any personal or financial information to them. I either hang up or waste as much of their time as possible. How was I tricked on this occasion? How did I so readily overlook obvious red flags?

Red flags:

When I received “Bryce’s” phone call at 10:00 am it was 7:00 am his time on the West Coast. I doubt that he has ever been out of bed that early much less to drive to a virus testing station. And I was told (and accepted without question) that he was already in jail by that time, that he had engaged a lawyer, that a judge had set the date for his court appearance, set bail, and imposed a gag order.

The gag order itself was strange.

Being jailed for talking on the phone while driving was even stranger.

The cash that must be paid to a bail bondsman is 10% of the bond and is nonrefundable (which I didn’t know at the time never having dealt with a bail bond).

How did I miss all of that? I feel like an idiot. That is what a voice saying “Hi Grandpa” will do to you.

By the way, the “lawyer’s” phone number in Banff, Alberta, Canada is +1 (403) 431-1517. Say hi for me.

Posted in Family | Tagged | 1 Comment

The Rule of Law: China and the U.S.

The rule of law has been an essential and critical foundation of successful free market economies. It provides the certainty of property rights and contracts needed for entrepreneurs to risk their capital in business undertakings. But as our business and other activities cross borders, whose laws apply?

“Among the earliest examples of legal codes concerning maritime affairs is the Byzantine Lex Rhodia, promulgated between 600 and 800 C.E. to govern trade and navigation in the Mediterranean.” https://en.wikipedia.org/wiki/Law_of_the_sea  Leaping forward, international air travel, satellite communications, spectrum allocation for radio, TV, internet, and other telephonic transmission would be impossible without firm agreements among countries–the international rule of law.

Laws facilitate commerce–buying and selling–by establishing rules for doing so (e.g. contract enforcement rules) that are stable and applicable to all. They lower the costs and reduce the risks of trading. The United States Constitution recognizes the importance of this in the commerce clause of Article I Section 8, which is used to prevent individual states from taxing or otherwise interfering with interstate commerce. Achieving the same law-based freedom to trade across national borders is more difficult, requiring the negotiation of agreements and treaties that establish common rules between sovereign nations.

The World Trade Organization (WTO) develops and enforces the rule of law in the area of cross border trade. The difficulty of achieving global agreement on the rules of various aspects of trade is reflected in the fact that no new agreements have been reached since the establishment of the WTO (taking over the General Agreement of Trade and Tariffs) on January 1, 1995. “The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes.” the WTO – what is it?

China was admitted to the WTO as a developing country on December 11, 2001. Chinese officials immediately expressed the desire to understand and conform to the international rules required by the WTO and requested technical assistant from the IMF for doing so. In July of 2002, the IMF sent me to Beijing to review their needs with them.  They were particularly keen to have an American banking supervisor to advise them. I had a perfect candidate who was just finishing a two-year posting to Hong Kong. Everyone I spoke to in Beijing, as well as my Chinese colleagues at the IMF, stated that virtually all Chinese officials agreed on where China wanted to go–full liberalization according to WTO rules. They only differed with regard to how fast they thought they should move to get there.

Our condition was that our resident banking supervision advisor had to have his office located with the other Chinese banking supervisors and that he would have an open door. This was enthusiastically accepted by the Deputy Governor who apparently had not informed the Governor of these details. Unfortunately, when the Governor was presented the contract of his signature, he killed the arrangement. I was, however, able to enjoy wonderful tours of the Great Wall, the Forbidden City, and dine on the best Peking Duck I have ever had.  

An economically rising China is lifting millions of people out of poverty. We rightly welcome its newly productive economy contributing to increasing world output and living standards. The challenge is to square China’s authoritarian political regime with an international free market trading system. The vehicle has been the WTO and other international rule setting bodies that exist to harmonize diverse economies in the direction of freer and more open trade. The rules were being set by the dominant, largely free market economies that China wanted to join.

Beyond an American led WTO itself, the multilateral trade agreement that established the highest standards yet for tariff reduction and the incorporation of more modern trade issues such as non-trade barriers, services, protection of intellectual property, minimum labor standards, and dispute resolution (the rule of law cannot meaningfully exist without credible dispute resolution procedures) was the Trans-Pacific Partnership (TPP) negotiated between 2006 and 2015. The TPP agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States was announced on October 5, 2015.

Three days later, on October 8, I spoke in New York City at a seminar hosted by the Chinese Chamber of Commerce of New York on the internationalization of China’s currency, the renminbi. All of the talk by the Chinese attending was about the TPP. Why was China excluded? Could they join? My reply was that China would be very welcomed to join when they were able to meet the treaty’s conditions. TPP was another powerful magnet pulling China into the liberal international trading order.  

A recent report from the Peterson Institute of International Economics (June 23, 2020) stated that: “The Trans-Pacific Partnership (TPP) was designed in 2016 to be almost China-proof, with stringent obligations requiring transparency and trade liberalization. As former US Trade Representative Michael Froman put it, Chinese participation would be welcomed only when China could meet TPP’s terms, which it was far from doing. The United States was not keeping China out; China was just not ready to come in.” “China and Trans Pacific Partnership-in or out”

Broadly speaking, the aim of the WTO is to increasingly move its member countries toward the freest trade possible with fair competition (a level playing field), thus promoting a more productive allocation of economic resources and lifting global incomes.  The organization is not without its problems. But rather than working to strengthen the WTO, President Trump turned to negotiating bilateral trade agreements and raising rather than lowering import tariffs. Clearly bilateral agreements are easier to conclude than are global or broad multilateral agreements. Trump focused on China and its large bilateral trade surplus with the U.S. out of the mistaken belief that its surplus (our deficit) was harmful to the U.S. and that reducing it would increase American jobs. “Who pays Uncle Sam’s deficits”

In one of his most short-sighted actions from a sadly long list, President Trump withdrew the U.S. from the TPP on January 23, 2017. In addition to tweaking a few existing trade agreements, such as the North American Free Trade Agreement (NAFTA) by incorporated many of the newer provisions of the TPP and the United States-Japan Trade Agreement and the United States-Japan Digital Trade Agreement, and imposing protective tariffs on solar panels, washing machines, steel and aluminum imports in the name of national security and “America First,” the Trump administration has focused its trade war bilaterally on China (with occasional pot shots at our friends in Europe and elsewhere).  “Trade Office fact-sheets and-annual-report”   A Brookings Institution study assessed the result of all of this for the American economy and workers as follows: “American firms and consumers paid the vast majority of the cost of Trump’s tariffs. While tariffs benefited some workers in import-competing industries, they hurt workers in sectors that rely on imported inputs and those in exporting industries facing retaliation from trade partners. Trump’s tariffs did not help the U.S. negotiate better trade agreements or significantly improve national security.”  “Did-Trump’s-tariffs-benefit-American-workers-and-national-security”

The remaining eleven countries that had signed the TPP agreed in January 2018 on a revised treaty they renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership” (CPTPP).  CPTPP is substantially the same as TPP, but omits 20 provisions that had been of particular interest to the U.S. These provisions can be relatively easily restored should the U.S. choose to rejoin. “Trade and Globalization”

With the increasing power of Xi Jinping, China’s President and the General Secretary/Chairman of the Central Committee of the Chinese Communist Party (now for life), China has played an increasingly active role in the IMF, WB, WTO and other international bodies. In addition, it has launched several regional organizations that it leads (the Asian Infrastructure Investment Bank, the New Development Bank–BRICS, and the Belt and Road Initiative) “The Asian Infrastructure Investment Bank and the SDR”  Xi Jinping claimed that the AIIB would adhere to the highest international standards. But as President Trump and others have noted, there are a number of important areas in which China does not abide by the WTO rules. The policy question is what should be done about it.

The Cato Institution began a recent review of China’s trade practices as follows: “There is a growing bipartisan sentiment in Washington that Chinese trade practices are a problem, since these practices are unfair to American companies in a number of ways. But there is disagreement about the appropriate response. Can multilateral institutions be of use here? Or is unilateralism the only way?” Their conclusion is that the WTO and other multilateral institutions would be the most effective way of continuing to pull China into compliance with the international rule-based system. “Disciplining China’s trade practices at the WTO-how -WTO complaints can help”

President Trump has unilaterally gone the other way. He has blocked Huawei, the world’s leading seller of 5G technology and smartphones, from U.S. 5G mobile phone systems and urged our European allies to do the same because of Huawei’s links with the Chinese government. He is attempting to block the sales of U.S. and other non-Chinese manufacturers of the semiconductor chips used in Huawei and other Chinese products to China.  “A-brewing-US-China-tech-cold-war-rattles-the-semiconductor-industry”  He is trying to ban TikTok, WeChat and other popular Chinese products from U.S. markets and raising tariffs on an increasing number of Chinese products imported into the U.S. Some of these measures might be justified on national security grounds but some seem more protectionist of U.S. companies that are not otherwise competitive.

We are basically forcing China to build its own alternative rules and approach to trade. It is even offering its own global tracking system in place of the GPS system the U.S. has given the world and they seem well along in dividing the World Wide Web and other Internet protocols into two worlds. https://www.voanews.com/east-asia-pacific/voa-news-china/chinas-rival-gps-navigation-carries-big-risks

A November 20, 2020 article by William Pesek highlights what Trump’s misguided trade war with China is producing: “On his presidential watch, Donald Trump did manage to make one thing great: economic cooperation within North Asia.

So chaotic and pernicious was the outgoing US president’s pivot away from Asia that China, Japan and South Korea are dropping the hatchet and joining hands. The unlikely union was formalized on November 15 with the signing of the 15-nation Regional Comprehensive Economic Partnership, or RCEP, free trade agreement.”  “US sidelined as China Korea and Japan unite”  The RCEP is a lighter more limited trade agreement than was the TPP (now the CPTPP) but it is led by China rather than the U.S.  Rather than converging to WTO standards it creates an alternative. 

“President Xi Jinping’s Friday [Nov 20, 2020] announcement of China’s intent to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a high-standard mega regional trade pact, has been seen as a bold move to reassure the world of the country’s continuing commitment to reform and opening-up.” “News analysis: an uphill task for China to negotiate CPTPP accession agreement”  While Xi Jinping’s strategy for China’s ascension is to take over the leadership in forging the rules for the international order more to the liking of his regime, China’s younger and upcoming managerial and entrepreneurial class, many of whom studied in the U.S. and Europe, have seen and liked the freer and more open capitalist societies. Their patriotism and commitment to a rising China is informed by the knowledge that freer and more open economies thrive more than centrally controlled ones.  We should not overlook their potential for returning China to a path of liberalization and integration with the liberal international order enjoyed by the rest of us.

Xi Jinping and his government’s goal is to retain power by delivering rapid economic growth, which allows and requires a vibrant private sector, while overseeing tight political control. One example is provided by its Social Credit System.  “China’s social credit system-mark of progress or threat to privacy?”  This requires a different set of rules for cross border trade than set out by the WTO. But many of China’s world traveling citizens see China’s successful rise in more closely embracing free market capitalism. We should incentivize the later view.

President Trump’s trade policies have damaged the world’s rule-based trading system and hurt the American economy while turning China in a different direction. President elect Biden has indicated his interest in rejoining the TPP. He should give it and the rebuilding of the WTO and other multilateral bodies high priority.

Posted in Foreign policy, trade | Tagged , , , , , , , , , | 1 Comment