"But I think the more likely candidate is full-service restaurants. That’s because restaurants with servers and bussers already compete fairly directly with fast-casual restaurants that serve food in a less labor-intensive manner. We know how to feed people with fewer workers, food service jobs are not particularly desirable, and even though full-service restaurants have a halo of quality around them, nothing about the table service aspect necessarily speaks to the quality of the meal. An America where a larger share of the population is working in the care economy is probably one where a smaller share is working in the foodservice economy. And that would plausibly be a change for the better."
I got out of restaurant management about 2.5 years ago after about 15 years in the trenches at your average casual dining chain, but my wife still works in them so I have a pretty good picture of what things are like both pre- and post-pandemic.
My take is that your average American chain restaurant is too damn big and closes too late. It was too big before COVID, and it's certainly too big now with so many sales dollars moving from dine-in to carry-out. Most casual dining chains could probably get away with being half as large as they currently are....chop off the parts of the restaurant that aren't the lounge/bar area, hire less servers and more to-go staff, and close an hour or two earlier. You'd still have space for folks wanting to dine-in, but you'd avoid those Mon-Thur nights when your restaurant is 2/3 empty at 6:30, but you don't want to send too many people home because you're still open for three and a half more hours.
The restaurant I managed was notoriously slow from 8-10 pm basically every night of the week....seldom was there a compelling reason to pay multiple employees to work for two extra hours, yet we were required to stay open until the posted time, because....duh. I was always told that closing that earlier (meaning, changing the posted hours, not doing it randomly) would scare customers off.
I think that COVID has challenged many assumptions about the sorts of tightly-held beliefs about the consumer that the people making decisions in certain sectors put forth as gospel, and it's a good time to re-evaluate some of those.
Possibly, I don't know enough about it from that side to speculate. Most of the stores for the chain I worked at were all the same size/capacity, though, even across different states and areas, if that helps. I don't see any reason why your typical TGIChiliBee's couldn't snag a space the size of your average Chipotle or Potbelly's or whatever and just configure that footprint to do what I'm advocating.
Yeah, the time seems ripe to rethink a large swath of the physical retail world. I wish we were seeing more of this kind of idea. I hope some people in the commercial real estate business read SB comments!
The thing I thought of is parking lot design. In the heyday of the shopping mall, parking lots were apparently sized to accommodate the busiest holiday shopping day of the year. At all other times, there’s a giant moat of unoccupied asphalt, producing a lot of dirty stormwater runoff and other undesirable byproducts.
I like that they hide the "edit" feature under a "..." so that we don't do it frivolously. (Or maybe it's the opposite of like, but it's some sort of response that I have to this placement.)
It's notable how out of touch the Democratic Party is with the reality Matt describes. The federal deficit is at 5% of GDP. Inflation is above target. The Fed is discussing raising rates. Job openings are at record levels.
Joe Manchin is refusing to increase federal spending by more than about 0.75% of GDP and this is presented as literally incomprehensible on Pod Save America. He might be wrong but it's not a crazy view that now is not the time for major increases in federal spending.
This congress has already passed more than $3t in new spending. Even with Manchin's "mini-BBB", it would get to $5t. Spending worth almost 25% of GDP enacted in a year. That's a lot even if you support the spending. In an economy experiencing supply chain and labour shortages, it is not true that if a bill is paid for then the volume of spending is of no concern.
In an ideal world, I'd fund spending on climate and child support with reduced spending on the military and prisons. Sadly that option is not available.
It is nonsensical to view spending outside of the window of time in which the spending occurs. Spending $1M if completed within one second, can be described as $31T/year. It is not. It is a one time payment of $1M.
Likewise, the spending this year is not 25% of GDP. Most of that money has not been spent at all. The spending is over 10 years and it is around 3% GDP. Any other description is grossly misleading.
It's not "nonsensical" and "grossly misleading" to literally reference what's in the bill/legislation. Especially when the previous commenter was effectively arguing Democrats have to spend as much as possible during their rare trifecta periods.
On an annual run-rate basis, I agree with 3% of GDP beyond 2021. In 2021, the number is about 10%. I believe this reflects ARP which mostly was spent up front.
I think it is _inappropriate_ (if you prefer) to describe it as you did. (Much as it is inappropriate to describe a 1 time $1M payment as $31T/year). And I think it is especially problematic in the context of, "the previous commenter was effectively arguing Democrats have to spend as much as possible during their rare trifecta periods."
The previous commenter was espousing a horrible policy. Thus your rebuttal was important(and valid) and ought to be backed up with legitimate well argued points and not hyperbole and misdirection.
I wasn't trying to say Congress is spending 25%/GDP a year. I was trying to write if BBB passes, they'll have enacted spending worth spending worth 25% of GDP in a year. Which is true! Clearly I didn't communicate that effectively, but I wasn't trying to mislead anyone
"The reality of American political institutions is that Democrats get a trifecta about once every ten years. It really is now or never."
Maybe that's because they act stupid every time they get it?
"The bill is paid for anyway, so inflation/deficit concern is mostly misguided."
This is factually untrue. Even as written it's not paid for. as if politics works as intended (the benefits are extended past their temporary dates) then it's REALLY not paid for.
People are circulating one of the core MMT 'economist''s monetary prescriptions from a few months ago..... Warren Mosler said that Turkey should 'cut the policy rate to zero to reduce inflation and firm the lira' back in August. In fact, Turkey is doing exactly that because their President is a whackadoodle- followed by one of the more dramatic explosions in inflation and loss of currency value in recent memory......
Warren Mosler proposed the idea that Turkey should cut its interest rate to zero, and Erdogan is actually carrying it out. A unique opportunity to test MMT in practice, basically. Of course its doing poorly, as expected
Deficits that are aligned with GDP growth are fine over the long-term, but our deficits are - and have been - typically 2-3 times GDP growth. That builds up debt and with debt comes the interest payments necessary to service that debt, which are both still growing. In FY 2021 we spent about $413 billion dollars on interest to service the national debt and that is with really low interest rates. That is a lot of money and it's going to keep increasing annually.
So it's a question of sustainability. We can probably keep a high deficit for a while yet, but it can't last forever.
“ On some level, you can either sell people on the idea that the transformation is good or you can’t.”
I think we might consider focusing on doing a few things well before we talk about transformation. I’ve gone from being quite in favor of at least German-style involvement in the economy to doubting the government can do it right at all in the span of 2-3 years.
If it proves able to tackle rent-seeking in healthcare, develop policy to lower construction costs, curtail professional regulations and protectionism, and break the university admin-eoisie, then we can talk about “transformation”.
Exactly, I think democrats/progressives biggest roadblock to their dreams is that everyone can so plainly see how poorly, inefficiently, and unfairly so many things are run and have reasonable hesitation to expanding or creating new programs.
Which, of course, gives Republicans politicians(not necessarily voters) a strong incentive to keep things operating "poorly, inefficiently and unfairly."
This is true, but not in the way progressives mean. I'll trust the government to take a significantly larger role in the economy (outside healthcare, which I want to nationalize yesterday) when it's crafted effective policy for a few years to reform/improve the economy as it stands.
It’s kind of hard to not think that America is fine and Americans are actually the problem. There’s plenty of work available, wages are rising, and people just don’t want to do it. Red state Americans don’t have any sort of ambition to move to opportunity, they stay where they are and blame immigrants and environmentalists for taking their jobs or closing the mine. Blue state Americans want jobs, but eww, not those jobs! It’s not all fast food openings btw, corporate America is desperate for employees too. Hopefully Biden ramps up immigration soon so the people who want to contribute can take care of the rest of us.
It's not just jobs. We have the lowest possible expectations of the public in every possible way. For example, if everyone voted we'd be much better off. "Well, it's harrrrddddd." Not really, not for most people. And even in states where we make it easy, turnout is atrocious. People just don't care. As the saying goes, we get the government we deserve.
I hate to think that this is true, but some days it seems like it is. Even people who purportedly care about things seem to think that liking/ tweeting/ whatever is “doing something.” Engaging as a citizen is time-consuming, annoying, and often dull. But that’s what democracy is!
As someone who “moved to opportunity”, it’s been a mixed bag. The opportunity is in places that have extremely expensive housing. Even though I personally make more than the *household* incomes of my siblings, I’m behind them on every other measure despite both having two children.
I’m known as a “rich uncle” (which is overstating it) and live in a quarter of the home. Which I rent. In a… merely okay part of the Bay Area.
Not to be too Slow Boring cliche, but it all comes back to zoning. If the Bay Area built housing at its 60s/70s growth rate, or if every part of NYC and the inner ring suburbs built like Jersey City and you could find yourself a good apartment in those places for $1500 rather than $3500+ a lot of this article/thread would have unfolded differently.
I think this is an interesting idea to develop. But I don't see any real evidence to support the caricatures. Immigrants aren't coming here to take dirty jobs despite better options back home. They come because the back home jobs are worse in some way. I don't see a lot of people complaining that there's not work now. And I don't blame someone if they have a better option than working for min wage at the moment, whatever that option is.
Despite all the job vacancies and attention they've received, the work force participation rate in MY's original post has only dipped 4% from the year 2000 peak, and just 2% from the other peaks. And it's still rising. So the short term deviations in trend don't seem very meaningful.
Seems more like the vacancies right now are a results of the covid disruptions to supply and demand in the labor force, a declining working age population, and the slowdown in immigration.
If it's a longer term problem then I'd blame incentives before I'd blame people for responding to incentives. If strawberry picking paid $10/hr more than working at Chipotle or $15 more than collecting some version of welfare, I'm sure a lot of people from LA would sign up for it. If it paid less than working in rural Guatemala, I'm sure immigration would slow down.
Another idea for a Milan chart (or maybe two charts): The US has a much higher GDP per capita than Mexico and Central America, so if a Mexican or Guatemalan makes into the US (by legal means or otherwise) they're likely to be better paid than back home. The result is they have an incentive to move to the US because there's a labor arbitrage. They'll be paid better, and with their better pay, though they'll live poorly while in the US, they can support family and buy a retirement house back home. Americans in the lower quartiles don't have this labor arbitrage opportunity. The two charts I'd like to see are percent of GDP in Mexico and Central America represented by remittances from the US, and percent of Mexicans and Central Americans in the US who have another home in their home country. You can include the Caribbean as well.
The migration gradient has actually reversed since about 1980... since we have had an industrial economy the typical migration trend was that poor people would leave smaller towns and rural areas in search of opportunities in big cities. Rich people would stay put in small towns because they were doing fine. Big cities would continue to grow because more and more people would move there for better job opportunities.
Since about 1980 (and accelerating since 2000) rich cities have been a relatively bad deal for poor and middle class migrants so people who aren't in incredibly highly compensated careers either stay put or move to sun-belt metros with lower wages but lower costs of living (like Phoenix or Atlanta). Most of the people moving to SF and NY are rich and most of the people leaving them are middle class... so I think it is fair to say there are some opportunities available for people who move but migration opportunities are not as good as they used to be when you were leaving 1930s Oklahoma for Los Angeles or something. The difference between even a "struggling" place like West Virginia and NYC is not that great for most people. And that's not even to mention places like Michigan or Ohio which people cast as "struggling" because they have suffered some relative decline but actually remain relatively well off in material terms.
I think it makes sense to divide cities into four categories - expensive and growing (paradigms: Austin and Seattle); expensive and shrinking (paradigms: New York and San Francisco); inexpensive and growing (paradigms: Phoenix and Atlanta); inexpensive and shrinking (paradigms: Memphis and Cleveland). Both growing and shrinking are happening much faster in the inexpensive cities.
yeah it's interesting how little discussion there is of the places that are actually adding people considering how big they are, Atlanta is basically the size of Seattle and Austin put together by metro population.
I don't think "red states" and "blue states" is a useful description here. People not moving to jobs occurs in states across the political spectrum (Illinois, Michigan, Missouri, West Virginia). Jobs growing too fast for population also occurs in states across the political spectrum (New York, California, Texas, North Dakota).
It's definitely shorthand and it's not perfect. Red parts of states and blue parts of states may be more accurate. But the point is that there are lots of Republican voters living in areas where a factory shut down, a mine shut down, etc. and expect their old job to be brought back to them instead of going to opportunity. Yes, maybe some people in Detroit should move to another area for a job too. I'm definitely generalizing, to a large degree for effect. Most working age Americans are employed so I'm really bitching at the margins anyway.
While I often point out that sub-state divisions are relevant for things, in this case I think that even focusing on relatively homogeneous regions shows that red and blue don’t line up with growing and shrinking, which is what the discussion seemed to be about.
I'm sensing a theme in Matt's commentary. With covid, people are stuck with policy preferences based on the circumstances of 2020 rather than today. With the economy, people are stuck with policy preferences based on the circumstances of 2008-2014 rather than today.
The vast preponderance of the evidence says that does no good and in some cases it’s actively damaging. Child care is important. Trying to force kids to learn things before they are cognitively ready is not.
I am interested in thoughts on the practical aspects of moving people into new fields. In Missouri, it is hard to get people to even participate in free training programs. Then when those few people do get trained, it continues to be hard to get them employed in jobs based on their new skills. This just generally seems to be the case with public training programs.
Beyond that, how does the practical expansion of healthcare work? Right now (again in Missouri), people who get health care job skills AND get employed in health care definitely go to cities where they make more money, leaving a huge gap of health care workers in rural areas. Also happening for lawyers and many other professions. But we need these people in rural areas too.
I don’t think there’s some kind of obligation to have parity between rural and urban services. Urbanization is the arc of history for good reasons; rural people who want better services can get on board. (Of course this requires enough housing in the cities for them to do so affordably).
"Move to a small town in the middle of nowhere and take care of dying Trumpists" is, however, totally the kind of economic opportunity that's going to unite and inspire young adults to vote Democrat.
Re what I take to be your big question: how do we keep ‘em down on the farm after they’ve seen KC? This is a tough one since bigger salaries are only part of the issue. People in the cities also have broader choices when it comes to finding work and lots of other stuff to do.
It’s my sense that rural employers need to do some serious navel gazing before they do anything else. People are complicated.
If you want to understand why we millennials are… like that, I think a good place to start is with the realization we have not seen a tight labor market until maybe 2018-2019.
(Also the internet, but the job market being soft for twenty years will change your outlook.)
Maybe it's time for Oregon to let people pump their own gas.
It might be better to structure the Civilian Conservation Corps as a job guarantee instead. Set it up so it's an employer of last resort, and thus not taking people out of the labor force.
I don't generally disagree. My hope is such a program would get maybe 20% of those kind of folks into a regular routine where they feel like they are making progress on a thing - anything really, so they can level up and become actually productive.
Would always expect such a program to have significant deadweight loss.
Isn't the current system of unemployment benefits where you have to show that you applied for jobs pretty similar to this? It's just the job of "attend job interviews" instead of "rake leaves in forests." I do agree that having people do a regular routine would be better for development of useful job skills, so your idea sounds like an improved version of the unemployment system we have.
Honestly the easiest setup, rather than sending people out into the forest with rakes, is to have a giant warehouse with boxes on one side. Every day people come in and move the boxes to the other side of the warehouse except Fridays, which is job interview day.
A key to reducing cost is having less costly forms of care actually cost less to the end consumer. But with insurance copays you often pay the same price to see a doctor as to see a nurse practitioner so care ends up being rationed by how long you are willing to wait rather than how much you are willing to pay. And if I want to see someone today, often the only person available is a physician's assistant. Same out-of-pocket cost in $, but not in wait time. Unfortunately, as a provider you can't cash people's wait times to pay to increase supply.
Copays, coinsurance, and deductibles are one of the worst ideas in healthcare - nothing but a stealth premium hike. If a treatment is unpredictable and expensive enough that it needs to be covered by insurance, it should be covered by insurance, period. It does nobody any good to gratuitously ding patients with a small fraction of a large bill that's mostly paid by the insurer for a necessary treatment, whether it's a drug or a hospital visit, whose rate has been directly negotiated between the insurer and the provider without any patient input, and where the insurer has independently satisfied itself that the treatment is medically necessary.
There might be some small category of predictable, low dollar healthcare purchases where it makes sense to give patients a prefilled account, funded out of their total premium, and makes them responsible for covering those items out of that account.
Yes for sure. Insurance is a component of health plans, but health plans are also used as a mechanism for consumers to buy routine care at a fixed, predictable price. That doesn't mean copays, coinsurance and deductibles are a good idea, though, especially on non-discretionary, nonmarginal items.
I dunno. For the last three years I was on a high-deductible plan and maxed out my HSA contributions. The math worked out so that if I needed to spend all of the HSA contribution on medical care I would have come out really close to even on what I saved on premium contributions. I think that's a good system.
Except deductibles are paid on the margin for consuming a service or good, so unlike a premium hike they reduce consumption of things that people value less than the deductible. If someone does not want something for even a fraction of the actual price making it free to them at point of use increases everyone's costs on the plan for little value to them. In the context of car insurance, this is obvious and uncontroversial. In the context of healthcare we obviously care more about people having access to a minimum standard of care, but you're not talking about a minimum standard of care for poor people, you're talking about everyone paying nothing on the margin.
I don't believe that this is true, because I haven't heard of any plan with a deductible in Europe, and our healthcare costs less per capita. (We do have copays for some things though, but I think it's mainly to convince people to choose the generic drug over the original.) If a service has little value, my provider doesn't offer it in the first place.
Of course people provide services of little value if they get paid a lot of money to do so. For example, pediatricians in a hospital get paid extra for performing a circumcision because it's a surgical procedure.
In Europe care is rationed by making people wait. You can fix a price, but if demand outstrips supply you still must ration care. Fixing a low price can decrease costs, but it also decreases supply.
That isn't true though. A coronary bypass is not marginal, insulin is not marginal, cancer drugs aren't marginal, etc, etc. All cost more than most patients afford out of pocket, hence the reason they are primarily paid for by insurance as a way to share risk between unlucky/unhealthy people and lucky/healthy people. Yet even though patients paid a premium that can and should be actuarially set to cover exactly those sorts of nonmarginal, non-discretionary costs, they are subject to copays, coinsurance, and deductibles. It doesn't make sense, except as a stealth premium increase.
You just named a bunch of things where most people would happily pay the deductible to get the good or service as they can be life saving. What you're leaving out are the things that are more elective. Even within the categories you highlighted though, different drugs can have vastly different prices and deductibles incentivize people for example to decide whether they really care about the difference between the brand name drug and a very similar but much less costly generic. Finally, deductibles are not a stealth premium increase. Deductibles are included in the insurance terms and are priced into the plan. Plans with a higher deductible actually have lower premiums because (a) healthier people pick them and (b) they control costs as I describe.
Biden has already turned around his rhetoric on this. Now he emphasizes the efficiency improvements in the infrastructure bill, and less rigorously, the cost of living improvements from BBB social spending.
Personally I would prefer that the reconciliation bill be a little less front loaded and with less sun setting.
It seems like the progressives have been slower to adjust. But that's because demand side management is just deep in the underlying programming of the movement.
Probably the biggest progressive efficiency move would be to do something to decrease zoning restrictions on housing creation. But, that's going to be a tough political sale. Unless you, perhaps, if you tied it to job creation.
In the late 1980s I lived in France for 6 months as an exchange student. I remember the mayor of Paris shelving every street sweeper (which takes on operator) and replacing it with five guys with brooms. The goal: increase employment.
Of course, the broom crews were slower with even 5x the manpower, did a worse job, and cost much more.
"In a story beloved by economists it’s said that Milton Friedman was once visiting China when he was shocked to see that, instead of modern tractors and earth movers, thousands of workers were toiling away building a canal with shovels. He asked his host, a government bureaucrat, why more machines weren’t being used. The bureaucrat replied, “You don’t understand. This is a jobs program.” To which Milton responded, “Oh, I thought you were trying to build a canal. If it’s jobs you want, you should give these workers spoons, not shovels!”
May be missing something, but I always thought the reason for talking up the job creating aspects of the Green New Deal wasn’t to address current unemployment, but to address the unemployment that would be created through rapid decarbonisation? Coal miners become solar installers etc.
"Jobs" has always been the wrong metric. If I have an employee making $40,000 and I fire him or her and hire two people at $20,000 each as replacements, I have doubled the number of jobs but the world is not a better place for it. Gene Sperling, in his book Economic Dignity, wrote that a worker should be able to put food on the table and be at the table with his or her family. That's about right.
MY's pretty clear point in this post is that increasing taxes on the rich has diminishing benefits because we are (pace higher immigration) labor-constrained. I get the analysis but it leaves me with disquiet on ethical and moral grounds: the rich have made out like bandits in part because they're undertaxed. If so, what should we do with higher taxes from the rich? Reduce the deficit and national debt? Cut the payroll tax in half? What else?
Matt has stated in the past that a wealth tax is a fine idea but we should be clear that it is punitive/intended to alter wealth distribution rather than something that can fund social programs in a real way.
Why would giving money to poor people be inflationary? If it was done with a work requirement, I would expect it to drive wages down by depressing wages (as people more people would be willing to take lower wage jobs).
I believe that its inflationary impact would depend both on the amount (of money) and on the method of distribution.
"But I think the more likely candidate is full-service restaurants. That’s because restaurants with servers and bussers already compete fairly directly with fast-casual restaurants that serve food in a less labor-intensive manner. We know how to feed people with fewer workers, food service jobs are not particularly desirable, and even though full-service restaurants have a halo of quality around them, nothing about the table service aspect necessarily speaks to the quality of the meal. An America where a larger share of the population is working in the care economy is probably one where a smaller share is working in the foodservice economy. And that would plausibly be a change for the better."
I got out of restaurant management about 2.5 years ago after about 15 years in the trenches at your average casual dining chain, but my wife still works in them so I have a pretty good picture of what things are like both pre- and post-pandemic.
My take is that your average American chain restaurant is too damn big and closes too late. It was too big before COVID, and it's certainly too big now with so many sales dollars moving from dine-in to carry-out. Most casual dining chains could probably get away with being half as large as they currently are....chop off the parts of the restaurant that aren't the lounge/bar area, hire less servers and more to-go staff, and close an hour or two earlier. You'd still have space for folks wanting to dine-in, but you'd avoid those Mon-Thur nights when your restaurant is 2/3 empty at 6:30, but you don't want to send too many people home because you're still open for three and a half more hours.
The restaurant I managed was notoriously slow from 8-10 pm basically every night of the week....seldom was there a compelling reason to pay multiple employees to work for two extra hours, yet we were required to stay open until the posted time, because....duh. I was always told that closing that earlier (meaning, changing the posted hours, not doing it randomly) would scare customers off.
I think that COVID has challenged many assumptions about the sorts of tightly-held beliefs about the consumer that the people making decisions in certain sectors put forth as gospel, and it's a good time to re-evaluate some of those.
Dead on description. I waited tables 35 years ago and spent those last 60 minutes of open time cleaning for $2.01 per hour and no additional tips.
You'll be (happy/horrified) to discover that has not changed much.
:-)
I figured that.
Sometimes we were still there after closing. No possible customers and still cleaning.
By the way, I like the changes you propose and think someone (maybe you!?) is going to implement them and make a lot of money.
It’s a bummer to think about all those hours wasted standing around when ppl could be doing something, anything!, more interesting or productive.
Like leaving internet comments!
Possibly, I don't know enough about it from that side to speculate. Most of the stores for the chain I worked at were all the same size/capacity, though, even across different states and areas, if that helps. I don't see any reason why your typical TGIChiliBee's couldn't snag a space the size of your average Chipotle or Potbelly's or whatever and just configure that footprint to do what I'm advocating.
Yeah, the time seems ripe to rethink a large swath of the physical retail world. I wish we were seeing more of this kind of idea. I hope some people in the commercial real estate business read SB comments!
The thing I thought of is parking lot design. In the heyday of the shopping mall, parking lots were apparently sized to accommodate the busiest holiday shopping day of the year. At all other times, there’s a giant moat of unoccupied asphalt, producing a lot of dirty stormwater runoff and other undesirable byproducts.
OMG guys we can edit comments now.
I like that they hide the "edit" feature under a "..." so that we don't do it frivolously. (Or maybe it's the opposite of like, but it's some sort of response that I have to this placement.)
Edit our own or, more usefully, other people’s?
It's notable how out of touch the Democratic Party is with the reality Matt describes. The federal deficit is at 5% of GDP. Inflation is above target. The Fed is discussing raising rates. Job openings are at record levels.
Joe Manchin is refusing to increase federal spending by more than about 0.75% of GDP and this is presented as literally incomprehensible on Pod Save America. He might be wrong but it's not a crazy view that now is not the time for major increases in federal spending.
Eh, I think there's a bit more context.
1. The reality of American political institutions is that Democrats get a trifecta about once every ten years. It really is now or never.
2. A big portion of the bill is about clean energy and climate change, which is very obviously time sensitive and needs to be done ASAP.
3. The other portion is about helping children, where there really is a substantial payoff for doing things now.
4. The bill is paid for anyway, so inflation/deficit concern is mostly misguided.
This congress has already passed more than $3t in new spending. Even with Manchin's "mini-BBB", it would get to $5t. Spending worth almost 25% of GDP enacted in a year. That's a lot even if you support the spending. In an economy experiencing supply chain and labour shortages, it is not true that if a bill is paid for then the volume of spending is of no concern.
In an ideal world, I'd fund spending on climate and child support with reduced spending on the military and prisons. Sadly that option is not available.
It is nonsensical to view spending outside of the window of time in which the spending occurs. Spending $1M if completed within one second, can be described as $31T/year. It is not. It is a one time payment of $1M.
Likewise, the spending this year is not 25% of GDP. Most of that money has not been spent at all. The spending is over 10 years and it is around 3% GDP. Any other description is grossly misleading.
It's not "nonsensical" and "grossly misleading" to literally reference what's in the bill/legislation. Especially when the previous commenter was effectively arguing Democrats have to spend as much as possible during their rare trifecta periods.
On an annual run-rate basis, I agree with 3% of GDP beyond 2021. In 2021, the number is about 10%. I believe this reflects ARP which mostly was spent up front.
https://www.cbo.gov/publication/57339
https://fred.stlouisfed.org/series/FYONGDA188S
I think it is _inappropriate_ (if you prefer) to describe it as you did. (Much as it is inappropriate to describe a 1 time $1M payment as $31T/year). And I think it is especially problematic in the context of, "the previous commenter was effectively arguing Democrats have to spend as much as possible during their rare trifecta periods."
The previous commenter was espousing a horrible policy. Thus your rebuttal was important(and valid) and ought to be backed up with legitimate well argued points and not hyperbole and misdirection.
I wasn't trying to say Congress is spending 25%/GDP a year. I was trying to write if BBB passes, they'll have enacted spending worth spending worth 25% of GDP in a year. Which is true! Clearly I didn't communicate that effectively, but I wasn't trying to mislead anyone
"The reality of American political institutions is that Democrats get a trifecta about once every ten years. It really is now or never."
Maybe that's because they act stupid every time they get it?
"The bill is paid for anyway, so inflation/deficit concern is mostly misguided."
This is factually untrue. Even as written it's not paid for. as if politics works as intended (the benefits are extended past their temporary dates) then it's REALLY not paid for.
Now that there is inflation have any of the MMT nutters come out for increasing taxes and/or reducing spending? I’m guessing not.
People are circulating one of the core MMT 'economist''s monetary prescriptions from a few months ago..... Warren Mosler said that Turkey should 'cut the policy rate to zero to reduce inflation and firm the lira' back in August. In fact, Turkey is doing exactly that because their President is a whackadoodle- followed by one of the more dramatic explosions in inflation and loss of currency value in recent memory......
https://twitter.com/sidprabhu/status/1471528806405918720
"...their President is a whackadoodle..."
Indeed.
Unfortunately, so it ours:
https://twitter.com/JoeBiden/status/1459981971946356741
Warren Mosler proposed the idea that Turkey should cut its interest rate to zero, and Erdogan is actually carrying it out. A unique opportunity to test MMT in practice, basically. Of course its doing poorly, as expected
He's an _experimental_ economist. In the sense that he is experimenting on his country's economy, that is.
All we have are anti-MMT nutters banging the anti-MMT drum.
Is the deficit being 5% of GDP bad?
In the short-term, no. In the long-term yes.
Deficits that are aligned with GDP growth are fine over the long-term, but our deficits are - and have been - typically 2-3 times GDP growth. That builds up debt and with debt comes the interest payments necessary to service that debt, which are both still growing. In FY 2021 we spent about $413 billion dollars on interest to service the national debt and that is with really low interest rates. That is a lot of money and it's going to keep increasing annually.
So it's a question of sustainability. We can probably keep a high deficit for a while yet, but it can't last forever.
Not saying that you are wrong but isn’t this position based on doing nothing with regard to cutting spending or raising taxes?
Things could always change, certainly. The point is the current path - one we've been on for decades, isn't sustainable.
It's not *great*.
“ On some level, you can either sell people on the idea that the transformation is good or you can’t.”
I think we might consider focusing on doing a few things well before we talk about transformation. I’ve gone from being quite in favor of at least German-style involvement in the economy to doubting the government can do it right at all in the span of 2-3 years.
If it proves able to tackle rent-seeking in healthcare, develop policy to lower construction costs, curtail professional regulations and protectionism, and break the university admin-eoisie, then we can talk about “transformation”.
Exactly, I think democrats/progressives biggest roadblock to their dreams is that everyone can so plainly see how poorly, inefficiently, and unfairly so many things are run and have reasonable hesitation to expanding or creating new programs.
Which, of course, gives Republicans politicians(not necessarily voters) a strong incentive to keep things operating "poorly, inefficiently and unfairly."
Totally.
And don't get me wrong, I'm a Democrat!
Progressives can't even do this in their blue urban strongholds of technocratic scientificism. Good luck.
Ok? Then demand it of the *right* and see if you get anywhere.
There are at least a few voices for it on the center-left, and growing.
MN also has the Democrat-Farmer-Labor (DFL) Party - the nation's best Democratic Party brand.
Let’s be fair and remove Pritzker from the company of the other two.
Those two *suck*.
Pritzker is decent without a curve and brilliant by IL standards.
Otherwise, I mostly agree. MN, CO, and VA all might be decent candidates because people expect results but they lean blue.
If you did any of the things in your last paragraph much less all of them, that would be transformation!
This is true, but not in the way progressives mean. I'll trust the government to take a significantly larger role in the economy (outside healthcare, which I want to nationalize yesterday) when it's crafted effective policy for a few years to reform/improve the economy as it stands.
It’s kind of hard to not think that America is fine and Americans are actually the problem. There’s plenty of work available, wages are rising, and people just don’t want to do it. Red state Americans don’t have any sort of ambition to move to opportunity, they stay where they are and blame immigrants and environmentalists for taking their jobs or closing the mine. Blue state Americans want jobs, but eww, not those jobs! It’s not all fast food openings btw, corporate America is desperate for employees too. Hopefully Biden ramps up immigration soon so the people who want to contribute can take care of the rest of us.
This is not going to win you any friends, but I don't think it's too far off the mark.
It's not just jobs. We have the lowest possible expectations of the public in every possible way. For example, if everyone voted we'd be much better off. "Well, it's harrrrddddd." Not really, not for most people. And even in states where we make it easy, turnout is atrocious. People just don't care. As the saying goes, we get the government we deserve.
I hate to think that this is true, but some days it seems like it is. Even people who purportedly care about things seem to think that liking/ tweeting/ whatever is “doing something.” Engaging as a citizen is time-consuming, annoying, and often dull. But that’s what democracy is!
As someone who “moved to opportunity”, it’s been a mixed bag. The opportunity is in places that have extremely expensive housing. Even though I personally make more than the *household* incomes of my siblings, I’m behind them on every other measure despite both having two children.
I’m known as a “rich uncle” (which is overstating it) and live in a quarter of the home. Which I rent. In a… merely okay part of the Bay Area.
Not to be too Slow Boring cliche, but it all comes back to zoning. If the Bay Area built housing at its 60s/70s growth rate, or if every part of NYC and the inner ring suburbs built like Jersey City and you could find yourself a good apartment in those places for $1500 rather than $3500+ a lot of this article/thread would have unfolded differently.
I think this is an interesting idea to develop. But I don't see any real evidence to support the caricatures. Immigrants aren't coming here to take dirty jobs despite better options back home. They come because the back home jobs are worse in some way. I don't see a lot of people complaining that there's not work now. And I don't blame someone if they have a better option than working for min wage at the moment, whatever that option is.
Despite all the job vacancies and attention they've received, the work force participation rate in MY's original post has only dipped 4% from the year 2000 peak, and just 2% from the other peaks. And it's still rising. So the short term deviations in trend don't seem very meaningful.
Seems more like the vacancies right now are a results of the covid disruptions to supply and demand in the labor force, a declining working age population, and the slowdown in immigration.
If it's a longer term problem then I'd blame incentives before I'd blame people for responding to incentives. If strawberry picking paid $10/hr more than working at Chipotle or $15 more than collecting some version of welfare, I'm sure a lot of people from LA would sign up for it. If it paid less than working in rural Guatemala, I'm sure immigration would slow down.
Another idea for a Milan chart (or maybe two charts): The US has a much higher GDP per capita than Mexico and Central America, so if a Mexican or Guatemalan makes into the US (by legal means or otherwise) they're likely to be better paid than back home. The result is they have an incentive to move to the US because there's a labor arbitrage. They'll be paid better, and with their better pay, though they'll live poorly while in the US, they can support family and buy a retirement house back home. Americans in the lower quartiles don't have this labor arbitrage opportunity. The two charts I'd like to see are percent of GDP in Mexico and Central America represented by remittances from the US, and percent of Mexicans and Central Americans in the US who have another home in their home country. You can include the Caribbean as well.
The migration gradient has actually reversed since about 1980... since we have had an industrial economy the typical migration trend was that poor people would leave smaller towns and rural areas in search of opportunities in big cities. Rich people would stay put in small towns because they were doing fine. Big cities would continue to grow because more and more people would move there for better job opportunities.
Since about 1980 (and accelerating since 2000) rich cities have been a relatively bad deal for poor and middle class migrants so people who aren't in incredibly highly compensated careers either stay put or move to sun-belt metros with lower wages but lower costs of living (like Phoenix or Atlanta). Most of the people moving to SF and NY are rich and most of the people leaving them are middle class... so I think it is fair to say there are some opportunities available for people who move but migration opportunities are not as good as they used to be when you were leaving 1930s Oklahoma for Los Angeles or something. The difference between even a "struggling" place like West Virginia and NYC is not that great for most people. And that's not even to mention places like Michigan or Ohio which people cast as "struggling" because they have suffered some relative decline but actually remain relatively well off in material terms.
I think it makes sense to divide cities into four categories - expensive and growing (paradigms: Austin and Seattle); expensive and shrinking (paradigms: New York and San Francisco); inexpensive and growing (paradigms: Phoenix and Atlanta); inexpensive and shrinking (paradigms: Memphis and Cleveland). Both growing and shrinking are happening much faster in the inexpensive cities.
yeah it's interesting how little discussion there is of the places that are actually adding people considering how big they are, Atlanta is basically the size of Seattle and Austin put together by metro population.
I don't think "red states" and "blue states" is a useful description here. People not moving to jobs occurs in states across the political spectrum (Illinois, Michigan, Missouri, West Virginia). Jobs growing too fast for population also occurs in states across the political spectrum (New York, California, Texas, North Dakota).
I think everyone here is aware of that but the shorthand is useful regardless.
I think "growing" and "stagnating" states is much more useful shorthand, because this cross-cuts the political divide so strongly.
It's definitely shorthand and it's not perfect. Red parts of states and blue parts of states may be more accurate. But the point is that there are lots of Republican voters living in areas where a factory shut down, a mine shut down, etc. and expect their old job to be brought back to them instead of going to opportunity. Yes, maybe some people in Detroit should move to another area for a job too. I'm definitely generalizing, to a large degree for effect. Most working age Americans are employed so I'm really bitching at the margins anyway.
Your point a moment ago was the RvB distinction missed a lot of substate divisions, though.
While I often point out that sub-state divisions are relevant for things, in this case I think that even focusing on relatively homogeneous regions shows that red and blue don’t line up with growing and shrinking, which is what the discussion seemed to be about.
I'm sensing a theme in Matt's commentary. With covid, people are stuck with policy preferences based on the circumstances of 2020 rather than today. With the economy, people are stuck with policy preferences based on the circumstances of 2008-2014 rather than today.
“ availability of early childhood education”
The vast preponderance of the evidence says that does no good and in some cases it’s actively damaging. Child care is important. Trying to force kids to learn things before they are cognitively ready is not.
I am interested in thoughts on the practical aspects of moving people into new fields. In Missouri, it is hard to get people to even participate in free training programs. Then when those few people do get trained, it continues to be hard to get them employed in jobs based on their new skills. This just generally seems to be the case with public training programs.
Beyond that, how does the practical expansion of healthcare work? Right now (again in Missouri), people who get health care job skills AND get employed in health care definitely go to cities where they make more money, leaving a huge gap of health care workers in rural areas. Also happening for lawyers and many other professions. But we need these people in rural areas too.
I don’t think there’s some kind of obligation to have parity between rural and urban services. Urbanization is the arc of history for good reasons; rural people who want better services can get on board. (Of course this requires enough housing in the cities for them to do so affordably).
"Move to the city or die" is definitely not gonna get us to 60 seats in the senate.
"Move to a small town in the middle of nowhere and take care of dying Trumpists" is, however, totally the kind of economic opportunity that's going to unite and inspire young adults to vote Democrat.
Depends on how well the “or die” part goes. Every state has a city.
Not Mississippi, West Virginia, Vermont, or Maine.
Couldn’t care less about fewer than 30 senators.
Re what I take to be your big question: how do we keep ‘em down on the farm after they’ve seen KC? This is a tough one since bigger salaries are only part of the issue. People in the cities also have broader choices when it comes to finding work and lots of other stuff to do.
It’s my sense that rural employers need to do some serious navel gazing before they do anything else. People are complicated.
If you want to understand why we millennials are… like that, I think a good place to start is with the realization we have not seen a tight labor market until maybe 2018-2019.
(Also the internet, but the job market being soft for twenty years will change your outlook.)
Maybe it's time for Oregon to let people pump their own gas.
It might be better to structure the Civilian Conservation Corps as a job guarantee instead. Set it up so it's an employer of last resort, and thus not taking people out of the labor force.
So a welfare program that accomplishes nothing of value?
Maybe have them rake leaves to solve the CA fire problems, as Trump was suggesting?
An employer of last resort is inevitably going to employ the unemployable.
I don't generally disagree. My hope is such a program would get maybe 20% of those kind of folks into a regular routine where they feel like they are making progress on a thing - anything really, so they can level up and become actually productive.
Would always expect such a program to have significant deadweight loss.
Isn't the current system of unemployment benefits where you have to show that you applied for jobs pretty similar to this? It's just the job of "attend job interviews" instead of "rake leaves in forests." I do agree that having people do a regular routine would be better for development of useful job skills, so your idea sounds like an improved version of the unemployment system we have.
Honestly the easiest setup, rather than sending people out into the forest with rakes, is to have a giant warehouse with boxes on one side. Every day people come in and move the boxes to the other side of the warehouse except Fridays, which is job interview day.
Are there any examples of federal programs with such successful results?
A key to reducing cost is having less costly forms of care actually cost less to the end consumer. But with insurance copays you often pay the same price to see a doctor as to see a nurse practitioner so care ends up being rationed by how long you are willing to wait rather than how much you are willing to pay. And if I want to see someone today, often the only person available is a physician's assistant. Same out-of-pocket cost in $, but not in wait time. Unfortunately, as a provider you can't cash people's wait times to pay to increase supply.
Copays, coinsurance, and deductibles are one of the worst ideas in healthcare - nothing but a stealth premium hike. If a treatment is unpredictable and expensive enough that it needs to be covered by insurance, it should be covered by insurance, period. It does nobody any good to gratuitously ding patients with a small fraction of a large bill that's mostly paid by the insurer for a necessary treatment, whether it's a drug or a hospital visit, whose rate has been directly negotiated between the insurer and the provider without any patient input, and where the insurer has independently satisfied itself that the treatment is medically necessary.
There might be some small category of predictable, low dollar healthcare purchases where it makes sense to give patients a prefilled account, funded out of their total premium, and makes them responsible for covering those items out of that account.
“If a treatment is unpredictable and expensive enough that it needs to be covered by insurance, it should be covered by insurance, period.”
We don’t have health insurance, we have health care plans. Insurance would not cover preexisting conditions.
Yes for sure. Insurance is a component of health plans, but health plans are also used as a mechanism for consumers to buy routine care at a fixed, predictable price. That doesn't mean copays, coinsurance and deductibles are a good idea, though, especially on non-discretionary, nonmarginal items.
I dunno. For the last three years I was on a high-deductible plan and maxed out my HSA contributions. The math worked out so that if I needed to spend all of the HSA contribution on medical care I would have come out really close to even on what I saved on premium contributions. I think that's a good system.
Except deductibles are paid on the margin for consuming a service or good, so unlike a premium hike they reduce consumption of things that people value less than the deductible. If someone does not want something for even a fraction of the actual price making it free to them at point of use increases everyone's costs on the plan for little value to them. In the context of car insurance, this is obvious and uncontroversial. In the context of healthcare we obviously care more about people having access to a minimum standard of care, but you're not talking about a minimum standard of care for poor people, you're talking about everyone paying nothing on the margin.
I don't believe that this is true, because I haven't heard of any plan with a deductible in Europe, and our healthcare costs less per capita. (We do have copays for some things though, but I think it's mainly to convince people to choose the generic drug over the original.) If a service has little value, my provider doesn't offer it in the first place.
Of course people provide services of little value if they get paid a lot of money to do so. For example, pediatricians in a hospital get paid extra for performing a circumcision because it's a surgical procedure.
In Europe care is rationed by making people wait. You can fix a price, but if demand outstrips supply you still must ration care. Fixing a low price can decrease costs, but it also decreases supply.
That isn't true though. A coronary bypass is not marginal, insulin is not marginal, cancer drugs aren't marginal, etc, etc. All cost more than most patients afford out of pocket, hence the reason they are primarily paid for by insurance as a way to share risk between unlucky/unhealthy people and lucky/healthy people. Yet even though patients paid a premium that can and should be actuarially set to cover exactly those sorts of nonmarginal, non-discretionary costs, they are subject to copays, coinsurance, and deductibles. It doesn't make sense, except as a stealth premium increase.
You just named a bunch of things where most people would happily pay the deductible to get the good or service as they can be life saving. What you're leaving out are the things that are more elective. Even within the categories you highlighted though, different drugs can have vastly different prices and deductibles incentivize people for example to decide whether they really care about the difference between the brand name drug and a very similar but much less costly generic. Finally, deductibles are not a stealth premium increase. Deductibles are included in the insurance terms and are priced into the plan. Plans with a higher deductible actually have lower premiums because (a) healthier people pick them and (b) they control costs as I describe.
It's mostly gatekeeping.
Biden has already turned around his rhetoric on this. Now he emphasizes the efficiency improvements in the infrastructure bill, and less rigorously, the cost of living improvements from BBB social spending.
Personally I would prefer that the reconciliation bill be a little less front loaded and with less sun setting.
It seems like the progressives have been slower to adjust. But that's because demand side management is just deep in the underlying programming of the movement.
Probably the biggest progressive efficiency move would be to do something to decrease zoning restrictions on housing creation. But, that's going to be a tough political sale. Unless you, perhaps, if you tied it to job creation.
It’s interesting that Manchin comes to the right answer (establishing fewer, permanent programs) from the wrong direction (deficit reduction).
Frankly in the medium term a permanent CTC would probably ease inflation just by increasing the population growth rate.
In the late 1980s I lived in France for 6 months as an exchange student. I remember the mayor of Paris shelving every street sweeper (which takes on operator) and replacing it with five guys with brooms. The goal: increase employment.
Of course, the broom crews were slower with even 5x the manpower, did a worse job, and cost much more.
"In a story beloved by economists it’s said that Milton Friedman was once visiting China when he was shocked to see that, instead of modern tractors and earth movers, thousands of workers were toiling away building a canal with shovels. He asked his host, a government bureaucrat, why more machines weren’t being used. The bureaucrat replied, “You don’t understand. This is a jobs program.” To which Milton responded, “Oh, I thought you were trying to build a canal. If it’s jobs you want, you should give these workers spoons, not shovels!”
May be missing something, but I always thought the reason for talking up the job creating aspects of the Green New Deal wasn’t to address current unemployment, but to address the unemployment that would be created through rapid decarbonisation? Coal miners become solar installers etc.
"Jobs" has always been the wrong metric. If I have an employee making $40,000 and I fire him or her and hire two people at $20,000 each as replacements, I have doubled the number of jobs but the world is not a better place for it. Gene Sperling, in his book Economic Dignity, wrote that a worker should be able to put food on the table and be at the table with his or her family. That's about right.
MY's pretty clear point in this post is that increasing taxes on the rich has diminishing benefits because we are (pace higher immigration) labor-constrained. I get the analysis but it leaves me with disquiet on ethical and moral grounds: the rich have made out like bandits in part because they're undertaxed. If so, what should we do with higher taxes from the rich? Reduce the deficit and national debt? Cut the payroll tax in half? What else?
Matt has stated in the past that a wealth tax is a fine idea but we should be clear that it is punitive/intended to alter wealth distribution rather than something that can fund social programs in a real way.
But what do you do with the money? "Alter wealth distribution" how?
You just take it and give it to poor people, but you have to recognize this will be inflationary.
Why would giving money to poor people be inflationary? If it was done with a work requirement, I would expect it to drive wages down by depressing wages (as people more people would be willing to take lower wage jobs).
I believe that its inflationary impact would depend both on the amount (of money) and on the method of distribution.