Wednesday, June 3, 2020

Has Trump Created A Praetorian Guard In Washington?

President Trump has already shown his Orwellian tendencies by giving a speech on Monday in the Rose Garden in which he dcclared his "respect" for peaceful protesters at the very moment that forces ultimately responding to an order by Trump violently attacked peaceful protesters in front of the White House to remove them from Lafayette Square, as well as priests and parishioners from the patio of their St. John's Church across from the White House.  This attack and removal of the protesters as well as church people allowed Trump to walk across the square fot photo op at the church, holding up a Bible backwards and upside down.  While it has been admitted that ultimately this attack reflected Trump wanting to have this photo op, it remains unclear precisely which federal forces were part of the attack and exactly who was immediately commanding them.  It seems at a minimum that this involved federal Park Police, but may have included DC National Guard, and maybe  Secret service personnel, as well as maybe others, although no DC police or officials, with Mayor Bowswe opposing this action.

Mosr seem to think that AG Barr gave the immediate order, but he does not seem to official authority over  several of these groups, notably the Secret Service.  SecDef Esper and Chief of Staff Gen. Milley were present during Trump's walk across the square, but are now apparently claiming not to have any responsibiliy for this.  Esper and Milley have since come under strong criticism by many people either in the GOP such as the Lincoln Project group as well as current and former high DOD officials, including James Miller who publicly resigned from the DOD Science Board in protest as well as a strong memo by former SecDef "Mad Dog" Mattis.

However, possibly the most disturbing development out of this has been the appearance of unidentified figures, some in uniforms of some sort, some not, who seem to be acting to control protestors and keep them out of various public areas.  These may have participated in the attack on Monday, but they would have been just part of groups that were identifiable, even if they were acting illegally and with unclear authority.  However, these people are much more mysterious, although when asked who they are, a few have said they are from the "Department of Justice," which is of course overseen by AG Barr.  Is he overseeing a new Praetorian Guard that is beyond the Secret Service to do Trump's will?

There are two clear actions these mysterious figures have been involved in.  One was to line up on the steps of the Lincoln Memorial to keep the public out.  Why were they doing this?  Nobody seems to know.  But they were in camouflage and armed.  At least they do not seem to be militsry from the DOD. 

The other place they have been seriously and obviously present, although they have been reported to be wandering around time harassing protesters, is around the White House itself, where they seem to have superseded the Secret Service more clearly.  They have been the agents expanding the perimeter around the WH within which even peaceful protesters are not allowed.  It is pretty clear they do not have the legal right to do this, but nobody is stopping them.  Here they are showing their potential Praetorian Guard role, personal protectors and agents of the president, operating anonymously without authority, but willing to do is direct bidding.  I am wondering if they will be disbanded when things quiet down, or will they still be around in November when the election comes.

There are various speculatons about who these are.  One theory is that they are federal prison guards.  Another is that they are from ICE, a specially trained force.  There is also a report today that Barr has just granted the DEA extraordinary authority to surveil protsters, although maybe these anonymous figures in the streets are not DEA.  A final even weirder theory is that they are a private group ultimately under EdSec De Vos or her brother, Eric Prince.  The idea that we might have private security group assuming law enforcement authority in Washington against the wishes of the mayor and hiding itss identity is most disturbing.

Barkley Rosser

Global Oil Demand Rises

Back on April 20 we saw briefly the bizarre appearance of negative oil prices in certain markets. Today for the first time in many months Brent crude briefly topped $40 per barrel, although it fell back below that level (WTI is tending to be about $3 behind it, despite a single day recently when for the first time in years it nearly matched Brent crude at only 18 cents lower). However, it looks like the recent trend of global oil prices rising will continue some more, with prices likely to go above $40 and stay there.  How far beyond that I shall not forecast.  But this is a price level where many oil exporting nations can get out of immediate financial crisis, with many of them actually making money, if not as much as they would with still higher prices.

One element of this price rise is on the supply side, especially with Saudi Arabia and Russia apparently maintaining a production cut agreement they have.  Rumors from OilPrice.com suggest there may be cheating on these agreements to come. But for now these two are holding the line on the supply side.

More important has been the increase on the demand side, which looks set to continue rising for at least the near future. I have posted previously on how global carbon emissions appear to have bottomed around April 7, with them rising since, if still well below pre-pandemic levels.  Burning fossil fuels is a major source of these emissions, so it is quite possible that oil demand has been rising since around then, even though it was 10 days after then that oil prices did their brief plunge into negative territory.

According  to OilPrice.com it is China that is leading this increase in oil demand.  It was the first economy to drop due to the pandemic, with its oil demand declining about 40% during February. However, it looks that China's demand has returned as of May to a level 92% of its peak prior to the pandemic. That is substantial, while leaving more room for further growth.

Another nation with a large economy making an even sharper turnaround is India. In early April at the beginning of its two month lockdown its demand declined by 60%, but now it is estiimated that in June its demand will return fully to its pre-pandemic level.

US demand has also made a turnaround, although it did not decline as much and is recovering more slowly. But its demand is rising and will almost certainly continue to do so, if not at a rate that would happen if there were a V-style economic recovery.

Barkley Rosser

Monday, June 1, 2020

Ironies Of Minneapolis

In 1944 the Minnesota Democratic Party united with the Farmer-Labor Party to form the Democratic-Farmer-Labor Party of Minnesota, one of the most progressive state branches of the US Democratic Party.  In 1948 its mayor of Minneapolis, Hubert H. Humphrey introduced at the national convention the resolution supporting civil rights for African-Americans whose acceptance led to a walkout by Strom Thurmond and other Dixiecrats, with Thurmond running for president against Truman.  Humphrey would later become a famously progressive US senator and eventually LBJ's vice president, which dragged him down due to the Vietnam War.

He was succeeded by equally progressive Arthur Naftalin as Minneapolis mayor, a political science professor at the University of Minnesota, who served until 1969.  However, for reasons that remain somewhat unclear, the attempted progressive policies of these majors did not result in excellent conditions for the city's then quite small African American population, who lived in highly segregated neighborhoods. Whatever progress did happen was substantially damaged by Naftalin's successor as mayor, Charles Stenvig, the city's police chief, who ran on a platform that demanded to "take the handcuffs off the police" and promised to crack down on "racial militants." He was reelected in 1971, and many see him being a major influence in the police department of Minneapolis becoming an exceptionally racist and vicious one.

All this is recounted in a 2008 paper that appeared in the journal American Studies by Jeffrey T. Manuel and Andrew Urban, "'You Can't Legislate the Heart': Minneapolis Mayor Charles Stenvig and the Politics of Law and Order." vol. 43, issue 3/4, pp. 195-219.

Furthermore, with African-Americans moving more into the city in more recent years, the gap between educational outcome as well income and employment outcomes between the races has increased to be among the highest in the nation, despite the liberal past and reputation of the city.  These facts contribute to the bad racial situation in the city, which combined with the racist police department have led to this awful current situation there.

A source on the educational gap is mprnews.or/story/2019/10/14/mn-among-worst-achievmentgap-states , and a source on the income and employment gas is politic.com/magazine/story/2016/07/minnesota-race-inequality-philando-castile-214053 , this latter also dealing with bad racial police behavior in Minneapolis.

I thank Tyler Cowen at Marginal Revolution for these sources, and this general account, which I did not know of.  This is indeed a sad tale, given the proud and generally admirable history of the Minnesota Democratic-Farmer-Labor Party.

Barkley Rosser

Friday, May 29, 2020

Meanwhile, As Minneapolis Burns

So now we are all focused on the recent horrific murder in Minneapolis and now the subsequent events that are happening in many parts of the nation, with Minneapolis the epicenter.  This is serious, and I have idea how it will end.  This has even distracted us from the usual pandemic and economic issues, which are historically serious.

But while all this has been going on, just in the past week or so our president has been engaging in a series of serious actions that will have long run serious consequences people are barely aware of if they are not undone.  It is almost as if he is just outright melting down his presidency and taking the nation with him, although we are too busy looking at the flames in Minneapolis to notice.

Here is a list without comment. The US will withdraw from the Open Skies  agreement, first proposed by President Eisenhower, that has 35 other signatories.  The administration claims the Russians are breaking the treaty, although the specific offenses publicized seem to have nothing to do with this treaty at all.  This follows Trump withdrawing us from the Intermediate Nuclear Forces Agreement, the Paris Climate Accord, the the TPP, and the Iran JCPOA nuclear deal that Iran was adhering to.  Today it was announced that the US will withdraw from the World HealthOrganization. The administration is proposing changing the status of Hong Kong in connection with the US as well as psosibly forcing Chinese corporations to leave the New York stock exchange, not to mention that the daughter of the CEO of Huawei is about to be extradited to the US to be prosecuted for fraud in connection with violating US sanctions against Iran. Another round of EPA regulations are to be ended. Trump refuses to provide aid to the US Postal Service, which might go bankrupt later this year, with Trump declaring that voting by mail is a rigged fraud. He has also issued an executive order to alllow the FTC to make social media subject to lawsuits by his conservative allies. And then also today it was announced that his official pandemic task force is now effectively not functional.

There  is more, but all that is more than quite enough.

Barkley Rosser

Thursday, May 28, 2020

Death And The Pandemic Economy

The relation between death and the pandemic economy is a fraught one that has become hotly debated, although with not much clear empirical evidence.  I note that recently over on Econbrowser Menzie Chinn has had a series of posts on this matter in various forms.  Obviously a big issue has been the claim by the anti-lockdown crowd that not reopening the economy quickly will lead to an increase in suicides by the increasingly large numbers of unemployed people out there.  There certainly have been many studies in the past showing a variety of bad social outcomes from high unemployment, including suicides, domestic abuse, drug abuse, depression, and more. There does seem to be some strong evidence of several of these notably higher domestic abuse and depression. 

When it comes to suicide and death more broadly, the empirical picture is very murky.  Menzie in one of his recent posts reported on a regression he ran covering monthly data from 1998 to very recently that used dummies for months and then unemployment rates and suicides (in the US) and found the an unexpected "wrong sign" with lower suicides correlated with higher unemployment, although this was not a statistically significant result. He provides no explanation for why this odd result seems to be there, but it does show that this is not a simple matter.

Regarding current data on the main question, so far there does not seem to be any data showing a noticeable rise in suicides in the US since the pandemic, with only reports of some increases among medical personnel, who have suffered from overwork, stress, and even guilt, along with fear.  That we might be seeing that out of them is completely understandable. 

So why might we not be seeing much increase in suicides so far despite all the things going on such as increased depression as well as unemployment and more that would suggest we might expect to see it?  Some have suggested a "wartime" effect: people are suffering, but they know others are as well and so rally around the flag to hang in there. This rally around the flag effect even worked for awhile to boost Trump's polls for a few weeks in late March and early April until people saw how we was botching things, and now his polls are lower than they were before, even as those of some generally unpopular leaders in other hardhit nations like Italy, France, and Spain have seen their poll numbers continue to be noticeably higher than they were previously.

Another element, suggested to me by my medically connected daughters, not all that different from the above, is that people who are depressed feel "validated" because now others appreciate their condition. This is especially relevant for veterans suffering from PTSD and so on. 

Before proceeding further, let me note that there are some factors that may lower the death rate during a recession that can offset to some degree, with the importance of these matters of ongoing debate.  Probably the most important is the reduction of pollution, which is estimated to kill 200,000 to 300,000 people per year in the US.  Obviously pollution reductions now in the US are not going to offset all of that or even most of that, but presumably it does some.  An estimate in more heavily polluted China has claimed that the reduction of pollution there due to the pandemic might have saved up to 50,000 to 100,000 lives.  That is clearly a large number, and way exceeds the number of people in China who died of the coronavirus.

I note on this my earlier post that apparently at the global level carbon emissions have been estimated to have declined by 17% to a bottom point near April 7, with them rising gradually since with a likely gradual recovery of the world economy (with the US lagging on both the virus and the economic recovery). Probably carbon emissions are highly correlated with other forms of pollution, so this looks like a pretty good indicator of timing on that one, at least globally.

Two other items that have been brought up as reducing deaths during a lockdown/recession are auto deaths and work-related deaths.  It is probably true that we have seen some reductions of those in the US in the last few months, but I have yet to see any sort of reliable data on them.  Both of those have been trending downwards in recent years gradually in the US, with auto deaths in 2019 a bit over 36,000 with work-related deaths at about 5,100 (construction is the largest with over 1000).  Suicides last year were at about 48,000 in the US, so larger than those two put together, but as of now we do not know how any of these have changed recently.

I would add that on this matter of auto versus suicide deaths, the US picture is quite different from the global picture, although there is reason to be skeptical about some of the international data on suicides, which get covered up in many natinos (but also in the US to some extent for insurance reasons). Anyway, as of last year global auto deaths were estimated to be about 1.35 million while suicides were at a much lower 800,000.  Almost certainly why we have more suicides than auto deaths in the US unlike the rest of the world is that we have way more guns per capita than any other nation, and it is well established in the US that across states there is a strong correlation between guns per capita and suicide rates.

On a speculative note, given that pretty much the entire US is now engaging in varying degrees of reopening despite very few states having actually met the CDC guidelines for doing so, that we may see a perverse effect of an increase in suicides in the near future, even as the economy expands, which it certainly has been now for some time, maybe even as long as a month.  For one thing, unemployment continues to rise, despite the economy growing (and the stock market rising especially strongly).  But another effect may be the ending of that "wartime" effect.  People who are depressed and unemployed may lose that feeling of solidarity and as they fail to get jobs and may become homeless due to failures to pay rent, and so on, they may become more seriously depressed and feeling isolated.  I can well imagine such an effect leading to more suicides, although I do not know.

I will make a completely anecdotal observation that somehow this week I have observed several people both that I am in close contact with as well as some more distant, who seem to have sort of been freaking out this week.  This is probably just an odd bad luck of the draw, but I am a bit worried that it may reflect my speculation in the previous paragraph, and that whether or not we see more suicides, we may see an increase in the near term of people getting less happy and more depressed.  if that is happening, let us  hope that it ends soon. This pandemic has been bad enough.

Barkley Rosser

More On "Obamagate!"

Just three items.

1) Today (or yesterday late?) AG William Barr appointed yet another Special Counsel to investigate "Obamagate!" John Bash of the Texas Western District of the DOJ. He has been assigned to investigate the various unmaskings of Michael Flynn that happened between the election of 2016 and Flynn's interrogation by the FBI after Trump became president in January, 2017. The full absurdity of this is that even Barr in making this assignment recognized that there is nothing illegal about unmasking, not even anything improper.  Nevertheless, he thinks this particular set of unmaskings needs further investigation by the Department of Justice.

2) This is really just an extension of the first.  Not only are unmaskings normal and legal, but for the particular telephone calls on Dec. 29 that Flynn lied to the FBI about on Jan. 24, he was not even masked. Those were wiretapped by the FBI itself and never masked him. This makes this whole huffing about unmasking of Flynn all the more ridiculous. But then, when all these people say Flynn was somehow pressured into a plea bargain by the FBI on Jan. 24, well, he could have avoided all of this if he had simply not lied to the FBI.  Again, for the umpteenth time, I do not get why a former DIA director did not realize his phone calls with the Russian ambassador would be tapped with the FBI and others finding out about them and listening to them. What on earth did he think he was doing when he engaged in that lying (as well as the lying to Pence that got him fired from the Trump admin).

3) I shall note that while it is no longer the top or dominating story, the Fox News propaganda machine continues to spend regular and considerable time on this matter, still calling it "Obamagate" and pushing on the idea that Obama is guilty of something awful, setting up Flynn to lie to the FBI or something.  Hannity has cut it back, but this stuff still consumes a good quarter or so of his time nightly without a hint that any of it, much less pretty much the whole thing aside from a couple of botched FISA applications, is just a giant nothingburger. It may be that the cutback represents a realization that this is not catching on more broadly, not to mention it is stupid to go after the most popular political figure in the nation, but it probably is still going as fodder for the Trump base who have been sold this bill of goods, and the sale needs to be kept from being returned to the store.

Barkley Rosser

Tuesday, May 26, 2020

A Compromise on Liability

So Mitch McConnell and the senate Republicans want blanket employer liability protection as the price of another round of economic support.  They have this leverage because Democrats kept postponing their agenda until they were the only ones with a list of things they wanted to spend money on.

(This illustrates classic bargaining theory to a T.  Bargaining power depends on how much you think you will lose if the agreement is delayed [Rubinstein] or fails completely.  Democrats feared economic damage to the public if bailout bills weren’t approved immediately.  Once the financial markets were backstopped Republicans considered the rest to be low stakes.  Hence the strong tilt to McConnell et al.)

So here is a possible Democratic counter:

OK, you want liability protection.  Let’s give it to any employer, large or small, that sets up a health and safety committee to oversee protections on the job, elected by the whole workforce, one person one vote.  If protections are consensual, liability is waived.  Otherwise proceed at your own risk.

This would be good policy, and it has the political advantage of placing liability within a larger, readily communicable frame about participation and consent.

Monday, May 25, 2020

Conspiracy Theories: How to Pick Out the Plausible Ones

This is an age of rampant conspiratorialism.  Bill Gates is behind the pandemic because he wants to shoot you full of vaccines.  No wait, it’s all those 5G cell towers.  Or maybe it’s bioterrorism from China.  Or just a hoax perpetrated by international capital to undermine Donald Trump, the people’s tribune.  The right wing disinformation machine cranks out this stuff constantly, but paranoid fantasies also emanate from the left/alternative world.

So to counter the conspiracy pandemic, mainstream experts have come forward to advise us on how to detect and puncture unfounded rumors.  The problem I see is that sometimes there really are conspiracies, and it isn’t immediately obvious how to separate the ones that might be true from the purely crazy.

In the public interest, I offer the following rule of thumb.  A conspiracy, of course, is an agreement by a group of insiders to keep something important secret from the public.  If the group is tightly organized, motivated and able to operate separately from those on the outside, it is capable of waging a conspiracy.  If you relax these assumptions, however, you need additional groups to hide the initial conspiracy—in other words, secondary conspiracies.  And if the secondary conspirators aren’t tight enough a third ring of conspiracies is required.  As soon as you find yourself imagining lots of interlocking conspiracies to keep the central one secret you’ve wandered over the line.

Let’s see how this works in a pair of examples.  For nearly six decades people have debated whether JFK’s assassination was the work of a conspiracy.  I don’t have any particular insight to add, but the kind of plot laid out in David Talbot’s The Devil's Chessboard: Allen Dulles, the CIA, and the Rise of America's Secret Government is at least plausible.  It’s reasonable to think a secret team of intelligence officials might have carried it out, and if new leads emerge they should be followed up on.  That’s because it would take just one fairly small secret action to execute the plot and prevent disclosure: the agents Talbot identifies were closely connected and in the habit of frequently walling themselves off from those outside the club.  If the assassination was a CIA hit, a single conspiracy is all it would take to bring it about.

Now consider the claim that anthropogenic climate change is a hoax, perpetrated by a cabal of scientists eager to increase their funding, impose a socialist world order or both.  What would it take for them to do this?  First, there are a lot of climate scientists out there, thousands.  They would all have to be in on it.  Second, scientific research is not a secretive activity, sequestered from the unwashed.  There would have to be ancillary conspiracies among all those who communicate or work in conjunction with the climate plotters: the lab techs, the university research administrators, the journal editors, the funding agencies.  You need all these conspiracies to keep the central one secret.  And then what about all the people the secondary conspirators come into contact with?  How can you prevent other university officials from finding out that some of their colleagues are in cahoots with a nefarious climate plot?  Now you’re talking about third-order conspiracies; hell, the whole damn school has to be in on it.  Any one conspiracy is a stretch, but if you need conspiracies to cover up the conspiracies that cover up—well, you see the problem.

This can be summarized in a simple test: does the proposed conspiracy entail a small enough number of tightly connected people that only one circle of silence can keep it a secret?  If so, maybe you are on to something.  If not, if it’s conspiracies all the way down, stay away.

UPDATE: The time lapse between the Kennedy assassination and now has been fixed.

Saturday, May 23, 2020

"Dr. Doom" At It Again: Predicts 10-Year Depression

That would be Nouriel Roubini of NYU who got his moniker back during the Great Recession, which he called pretty well in 2006.  He did this clearly yesterday in an interview in The Intelligencer, although he has been pushing something like this for some time now, bringing in all sorts of things like climate change and more pandemics to reinforce this long run forecasr, although he thinks in a decade there may be a sufficient restrucuting of the economy to improve the situation.  While he mostly does not talk about what should or could be done in the US, he seems to improve of a German type economy where the unemployment rate has risen only 1% in comparison to the massive increase towards 20%  we have sseen in the US.  Of course, Germany has managed the coronavirus much better than has the US, but they also have their Kurtzarbeit labor system that tends to preserve employment better during downturns, not to mention a broader social safety net as part of its social market economy.  He says things might have been better if we had Bernie Sanders as president, but then notes that compared to Merkel in Germany and even Boris Johnson in UK, Sanders is a right winger.

Roubini thinks that various policy stimuli put in place in the US will lead to a temporary period of growth, but that this will pan out fairly soon with growth turning negative, leading to something more like an L or U shaped pattern.  The key will be massive defaulting on debts as the impact of maassive unemployment works its way through via lots of non-payment on servicing those debts.  He also argues that a factor in the longer term depression will be a resurgence of inflation partly due to the negative supply-side aspects of the depression due to deglobalization and higher costs of new technology, exacerbated by an emerging US-China cold war that will have the US paying more for 5G systems. This will in turn lead to higher interest rates, and these will add to the tanking of the debt load, which he notes could not stand it when the Fed wanted to push the fed funds rate above 2.5% at end of 2018 when the economy was doing very well.

I do not know if he is right, and I  have seen a least one wisecracker argue that Roubini has predicted "the last 15 recessions out of 1," but I do see some serious dangers ahead if mor is not done to provide support for those out of work and small businesses.  Ending of enhance unemployment benefits in a situation of widespread unemployment in July would provide a negative shock, and another negative shock is beginning to come out of state and local governments as they deal with their mounting budget crises by massive layoffs.  Unlike the federal government they cannot run budget deficits, and tax revenues are and will be way down, which points to the need for some serious federal aid to them.  This was provided in the 2009 stimulus, of which about a third was such aid to state and local governments, although even that did not prevent those governments from continuing to be a drag on growth until as late as 2013. But as of now the Senate following Trump is refusing to move on this, invoking some sort of fantasy that it is only blue states having fiscal problems.  As it is, most analyses see the shock to state and local finances being much larger now than then.

Roubini may be overdoing his "Dr. Doom" routine, but he certainly points out to dangers to what so far is at best a barely there nascent recovery.

Barkley Rosser

For The Record About These Ads

Yet again I am upset that we are getting ads for Trump here.  I have made an inquiry to a knowledgeable person, and I have not been given a clear explanation for why all these ads are appearing here, with there seeeming to be more and more of them all the time.  I do wish to say that I do not believe any of us are getting  any money for any of this; I certainly am not.  And I wish they would go away.  But I do not know how to do it, and nobody else around here that I have communicated with seems to know either, although I suppose it is possible somebody has done something to let this happen and is getting money.  But if they are, they are covering it up.

So, I apologize to one and all who find the ads either annoying or, worse yet, downright offensive, which is how I view the Trump ones.  Sorry about this.

Barkley Rosser

Woke Is Reactionary: The Small Business Lending Edition

We live in a drastically unequal society.  Everywhere you look you will find injustice, constraint and exploitation.  Being a member of a racial or other minority increases the odds you will end up on the short end, so what should we do about it?  There’s a progressive solution, to change the system so injustice, constraint and exploitation are minimized.  And then there’s the woke solution, to demand benefits targeted to minorities (and women) that will more evenly distribute the injustice, constraint and exploitation that remains.

You can support the woke solution, but please don’t confuse it with progressive social change.

For a current example, look at this recent op-ed in the New York Times by Pamela Shifman and Salamishah Tillet, “How We Spend Tells Us Whose Lives Matter”.  They point out, “only 12 percent of the black and Latino [small business] owners in a survey who applied for aid reported receiving what they had asked for.”  I don’t know how that compares to white/Anglo owners, and no link is provided to the source they relied on.  But let’s assume with them this means minority SB owners have been disadvantaged in the expanded lending program to counter the effects of the coronavirus.  Knowing this country, I wouldn’t be surprised if this were true.

Two reasons are given for the disparity.  First, minority-owned businesses are less likely to have an existing loan relationship with a bank, and private banks are being used to funnel loans authorized by Congress.  Second, these businesses have slimmer reserves and are less able to survive the process of application, review and disbursement.  Again, let’s assume this analysis is correct.

The progressive solution would be to either impose greater obligations on the private banking system or bypass it altogether in administering the program.  If commercial banks are to be deputized to distribute public funds they should be required to do so not just for their existing clients but their share of the applicant pool, and streamlined procedures should be in place to get the money out the door as quickly as possible.  Or perhaps it would have been possible to forego using commercial banks altogether (or in part) and to quickly ramp up a dedicated lending facility operating in conjunction with the Fed or a specialized government agency.  (How much easier all of this would have been if we had a nationwide public banking system already in place.)

And then there’s the woke solution: “providing dedicated funding opportunities for minority and women-owned businesses, and within that funding pool, for women of color-owned businesses.”  So the inadequacies and unfairness of the lending arrangement are OK as long as they don’t disproportionately fall on these groups.  I suppose white business owners locked out of the deal can console themselves with their privilege.

Again, the woke program is a choice some may make; it’s goal is to take the racism and sexism out exploitation.  Just don’t confuse social justice with a more equally distributed injustice.

Friday, May 22, 2020

RIP Oliver Williamson

Oliver Williamson died yesterday at age 87, I do not know of what. He was famous as the main developer of New Institutional Economics, following the influence of Ronald Coase, which emphasizes the role of transactions costs in the formation and development of economic (and some other) institutions.  He received the Nobel Prize in 2009, along with Elinor Ostrom, but his influence was really quite vast for a man from a working class background, born in Superior, Wisconsin.

I checked, and although there may be another one ahead of him, as near as I can tell at his death only one other living economist had more Google Scholar citations. Andrei Shleifer has about 295,000 (h has a problem getting that trip to Stockholm because of his infamous corruption problem involving Russia), while Ollie had about 276,000.  The all time leader is Karl Marx at about 333,000.

A reason for this is that his work became enormously influential across other disciplines, especially management and law.  Indeed, he is one of the few individuals I know of (I know of only one other, Shyam Sunder at Yale) who was simultaneously in an economics department, a separate business school (I think the Management dept), and a law school, all of which he was at UC-Berkeley.  The only other person I know of who was in more departments was the late polymathic Nobel Prize winner, Herbert Simon, more on him below.

I got to know Ollie through my being editor of the Journal of Economic Behavior and Organization (JEBO), 2001-2010.  He was both an Honorary Editor and the person who wrote the very first paper ever published in the journal back in 1980, "The organization of work: a comparative institutional assessment."  It only got 545 citations and was eclipsed by the second paper to appear in the journal, the one by Richard Thaler in which he introduced the idea of "mental accounting," which was cited by the Nobel committee when he got his prize (He would tell my predecessor as editor, the founding editor, Richard Day, that Day was lucky that Thaler "gave" him that big hit paper).  After I stopped being JEBO editor I joined him on being an honorary one, with the others currently so being George Akerlof, Richard Easterlin, Alan Kirman, and Vernon Smith.  Anyway, while I was editor I had quite a few dealings with Ollie and would see him later, including having him in to speak at JMU a few years ago.

I will tell a rather odd story about him that has some historical intellectual significance, I think, one that is not public knowledge.  So he got a Masters from Stanford, where he studied with the late Kenneth Arrow among others and then got his PhD where he studied with the late Herbert Simon, the father of the idea of "bounded rationality" who also coined the term "behavioral economics," although as I have argued in several papers that approach long predated Simon (who had over 900 published papers and at his death was in four departments at Carnegie-Mellon: management, psychyology, cognitive science, and computer science, with the comp sci building there named for him, and he was also in the philosophy dept for awhile but never in an econ dept, and his PhD was in poli sci/public administration from U-Wis-Milwaukee).  Anyway, Simon, whom I also knew quite well, died shortly after I succeeded Dick Day as editor of JEBO.

Following that there was a special session at the ASSA meetings in Atlanta, I think Jan. 2002, honoring Simon, with his sociologist daughter in attendance. Various people spoke, several of them Nobelists themselves, including both Arrrow and Williamson, as well as Dick Day (not a Nobelist).  I was not a speaker, but got invited thanks to Dick Day to the luncheon afterwards, with Dick and Ken and Ollie there, along with several others.  I was aware that there was a bit of difference between Arrow and Simon over rationality in economics, with Arrow's general equilibrium theory assuming perfect rationality by economic agents, while Simon had pushed the idea of bounded rationality.  I then triggered a major blowup by asking Ollie which he tended to agree with, the late Simon being honored there, or the very present Arrow.  He just smiled and did not answer, but my question set off Dick Day who was very much a supporter of Simon on this and a critic of rationality in economics (with me tending to agree with that). Anyway, Dick launched into a perfervid attack on Arrow like I had never seen.  Ken was a very cool customer and largely fended Dick off quite capably (Arrow was somebody I never saw lose an argument), although it was clear Dick was scoring some points, and it became a bit embarrassing, especially given the presence of Herb's daughter. I actually felt a bit guilty about what I had done, but it was in fact quite a substantial debate unlike almost any I have seen (and I was the one who finally calmied it down by a careful intervention). But throughout it, Oliver Williamson, the man in the middle, held his peace and said nothing.

Anyway, he was a good guy, despite having given me some hard times when I was editor (he had strong views about many things).  But I liked him and very much respected him, and I regret his passing.  RIP, Oliver Williamson.

Barkley Rosser






How Large is the Income Shifting Problem?

I took up this invitation from Dan Shaviro:
tomorrow morning I'll be participating in a very interesting international tax policy conference with a number of outstanding participants. It's on Zoom … I'm actually the second speaker on Panel II (although we're listed above alphabetically), so I will be speaking from roughly 11:08 to 11:15. I'm planning to discuss the OECD's Pillar 1 and Pillar 2 initiatives, although what exactly I'll say remains somewhat flexible pending the keynote address, which may offer updates (at least to me) that are of interest
He gives the entire agenda, which can also be found here. This blog post focuses on Panel I, which noted the difficulties of measuring the extent of income shifting to tax havens as we have the papers that formed the basis of the presentations by Kimberly Clausing and Leslie Robinson. Before I proceed an appeal to anyone who has a transcript of what Dan Shaviro and Victoria Perry (IMF) said as both had intriguing remarks on the enforcement of transfer pricing, which I want to include in a follow-up post. Clausing noted:
This research note describes the plausible magnitude of US revenue loss due to profit shifting, building on recent developments in the literature as well as new country-by-country data on US multinational companies in 2017. In the past, the most complete data sources have all shown large magnitudes of profit shifting, suggesting substantial revenue losses in non-haven countries. Blouin and Robinson (2019) have challenged this consensus, noting that many data sources may be flawed due to the inadvertent inclusion of double-counted profits or through an inadvertent misallocation of profit. Nonetheless, their proposed adjustment to the data generates its own puzzles, and experts at both the BEA and the JCT believe that the proposed adjustment will omit some types of profit shifting. Beyond that, Blouin and Robinson’s conclusions regarding how their adjustments affect the scale of profit shifting set aside many nuances in method that affect bottom-line findings about the scale of profit shifting. This research note uses recently released country-by-country tax data to estimate plausible benchmarks regarding the scale of profit shifting, finding that profit shifting is likely to be costing the US government over $100 billion a year in 2017 (at 2017 tax rates). While much can be done to refine these estimates and learn more about the scale of the problem, the problem remains unambiguously very large.
Robinson writes:
Influential work in academic and policy circles suggests that the magnitude of BEPS problem is large. We show that these magnitudes are overstated due to researchers’ misunderstanding of the accounting treatment of indirectly-owned foreign affiliates in the U.S. international economic accounts data. Our work has far-reaching implications as all country-level MNE data must apply some accounting convention that can make international comparisons difficult. We explain how this accounting treatment leads to double counting of foreign income and to its misattribution to incorrect jurisdictions. We demonstrate a simple correction, and show that the correction significantly reduces the magnitude of the BEPS estimates. For instance, our correction reduces an estimate of the U.S. fiscal effects of BEPS from 30-45% to 4-8% of corporate tax revenues lost to BEPS activity of MNEs
Scott Dyreng’s contribution was to note what one can and cannot find on a U.S. based multinational by reviewing the income tax section of its 10-K filing. This section provides the breakdown of consolidated pretax income that is sourced in the U.S. versus among its various foreign affiliates as well as the amount of foreign income taxes paid. He aggregated these publicly traded company’s information noting that on average 54% of pretax income was foreign sourced and the ratio of foreign taxes paid to foreign sourced income was 20%. In other words, a lot of foreign sourced income ends up in places like the UK, France, Germany, and Japan. Now we know that certain technology companies as well as life science companies end up sourcing income in tax havens but automobile multinationals are simply sourcing their income where either production or distribution takes place ending up with little to no base erosion. He and others on this first panel noted that this limited 10-K data should be supplemented by the as new country-by-country data, but there were concerns about the reliability of the latter. In a word, measuring the extent of profits shifting is difficult. Of course, the more interesting question is how should tax authorities address this and other issues with respect to how the income of multinationals should be allocated between various nations. Again – I would love to see transcripts of the remarks of Dan Shaviro and Victoria Perry.

Wednesday, May 20, 2020

Maybe This Is Not (Technically) A Recession?

Here I am using what is the journalistic definition of a "recession," also used in many nations although not officially in the US, where these things are determined ex post by an NBER committee.  Anyway, that "journalistic" definition is that there be two consecutive quarters of negative GDP growth.  Today in the Washington Post I saw a story on global carbon emissions, which are very closedly correlated with GDP, if not perfectly. Anyway, it appears that global carbon emissions hit bottom on April 7 and have been slowly rising since then (not sure about US separately, although US somewhat behind most other nations on the covid curve and so on the economic impact as well). I note that April 7 is one week into the second quarter.

This means it is very likely that at the global level we shall see positive economic growth in the second quarter, basically rising since the end of the first week of the quarter, although due to reporting lags in many countries this will not show up as positive growth in the data until later, possibly by the end of the month. This growth is slow, but it is positive, definitely not a V. 

So, assuming this slow growth continues,the world will have seen a massive shock in the first quarter, with most of that in a single month, March, the largest such short term shock in recorded history by far. But it looks that it may have hit bottom quite quickly, then to turn into a slow recovery shortly after the end of the first quarter.  First quarter is certainly going to be negative, but second looks very well like it might be positive, at least at the global level, hence, not technically quite a "recession" according to this journalistic definition.

The US is a murkier story.  I have not seen the carbon emissions data for the US (will go check) but I am aware of one variable that may have bottomed out in mid-April, credit card orders.  That is not perfectly correlated with GDP, but strongly so.  The WH has made noises about it and some other less significant variables that look to have at least turned around and may be going up by now.  The big one that has, and that Trump in particular focuses on, is the stock market, which certainly has come back a lot from its bottom point in late March, although still some way to go to get back to its mid-February peaks.  But it is volatile and could easily go back down again, not also to forget Paul Samuelson's old wisecrack that "The stock market has predicted the last nine out of six recessions." 

The Trumpists are loudly proclaiming a V shaped recovery, which really does not look in the cards, although they might get some solid growth happening by election time in November. I suspect lots of variables and also official GDP will still be negative for April, but there are two months after April in the second quarter, and while it is almost certainly doing so slowly, US GDP is almost certainly growing along with most of the rest of the world's economy now. The US might also join most of the rest of the world in having a net positive growth figure for the second quarter, if small, but no "journalistic recession": as well.

Barkley Rosser

Sunday, May 17, 2020

"Obamagate!"

I know, I should probably not waste everybody's time commenting on this nonsense, but the push on it has been masssive, with it seeming to influence a lot of people it should not, so I have decided some pushback is called for, even if those who should see it do not.   I am partly triggered in this by getting defriended on Facebook yesterday by a generally intelligent libertarian academic economist I know who started massively linking to every crackpot pushing this nonsense, and when I pointed out some serious problems with all of it and declared the whole thing to be "insane," I was told that my "TDS was showing" and was defriended.  As far as I am concerned, TDS is people who believe lunatic lies by Trump, showing as a result their own derangement.

As part of all this the Trump media push on this is massive. I am not sure it held for the whole Sundy-Saturday week, but  reportedly for at least a substantial portion of last week Fox News was spending more time on this story than on the pandemic, no distraction with this, of course.  And  this was not as in there might be two sides to it, at least not on Hannity where I have kept an eye on it.  He has been for quite some time pushing for investigations of how the Russia investigation started with a demand that people go to jail for it for a long time.  So he has been all u-rah-rah to Trump coming on to Fox News on Thursday morning with his completely off the wall claim that "This is the greatest political scandal in US history," repeated several times, along with his demand that Senate committees drag lots of people in and that Obama, Biden (of course), Comey, and Brennan should all go to jail for 50 years, although he has not mentioned any actual crimes for which they should go to serve these long sentences that would effectively put them away for life. Both Sens. Grassley and Graham have jumped sort of to attention to promise hearings on all this, although the generally odious Graham did show some streak of sanity by saying he would not call Obama before his committee, perhaps aware that the guy is the most popular political figure in the country, warning "Be careful what you wish for," although I did not see him ruling out dragging Biden in.

So have there been any actual crimes in all this "Obamagate" as Trump has now repeatedly labeled it?  Not much.  Probably a majority of the talk in this past week and a half or so as this has ramped up has been about the unmasking of former General Michael Flynn.  Hannity has all bu frothed at the mouth over the supposedly awful "unmaskers," who seem to be as bad as Islamic terrorists, if not Commies in the 1950s.  Of course, unmasking is a completely trivial and ordinary thing that goes on all the time,  with the rate of it higher under Trump than under Obama.  Officials ask the NSA for the identity of an American identified in a phone call with some foreigner of interest.  This does not mean their identities become public, which rarely happens.  In 2017 there were over 8,000 such unmaskings, with the requests needing to be approved by NSA.  In 2018 this hit an all time record of over 16,000, approximately one per half hour, with that number falling back to something over 10,000 in 2019.

Apparently between his appointment as incoming National Security Adviser and Trump's inauguration, about three dozen officials requested him to be unmasked, some of them on multiple occasions.  Note that while they may have suspected it was him, they did not know this when they made these requests.  While there has been a big focus on Flynn's Dec. 29 phone conversations (two of them) with former Russian Ambassador Kislyak, the majority of these unamsking requests, which were granted as legitmate, came in mid-Deecember due to other phone calls he was in on, the contents of which remain unpublicized to this point. The Dec. 29 ones, which were later leaked to the Washington Post that published about them on Jan. 12, were especially important in that they made it clear that Flynn had lied to incoming VP Pence about making promises to the Russians about weakening sanctions just imposed by Obama to punish them for their interference in the US election, which lie Pence had publicly pronounced.  This would lead Trump to eventually fire Flynn, and it was this matter that Flynn lied to the FBI about on Jan. 24, although they did not coordinate with the DOJ when they spoke with him.  I note that two days after the election when Obama met with Trump, he specifically advised him not to appoint Flynn to anything due to his screaming incompetence, with Obama having fired Flynn from being director of the Defense Intelligence Agency (DIA, Pentagon junior cousin to the CIA).  There is an old Cold War era Wsahington joke that goes: "The CIA director testifies before the Senate Intelligence Committee, 'The Russians are coming!" Then the DIA director testifies and says, 'The Russians are coming tomorrow!" and then the Air Force Intelligence director testifies that, 'The Russians arrived yesterday!''"

I find it a sign of Flynn's screaming incompetence that as a former DIA director he did not realize  that when he started having phone conversations with the Russian ambassador and who knows who else we do not still know about that NSA would be listening so any lies he would tell later would be caught and that indeed he would get unmasked by a gazillion officials all over the security establishment.  And he has now committed perjury by withdrawing his confession of lying to the FBI, with all this pile of Trump media people pressing for Judge Sullivan to drop his case now that AG Barr has requested it, since AG Barr is clearly such an honest and straightforward player himself, given how he blatantly lied about the Mueller Report when it came out.

So, roughly coinciding with Barr's move was that of Acting Director of National Intelligence (DNI) Grenell declassifying and bringing to the Dept of Justice, with Fox News filming his arrival there with a briefcase containg them the roughly three dozen names of people who dared to unmask Flynn.  Barr promptly transmitted these names to various GOP senators, three of whom then made the list public so Hannity and others could staart denouncing these evil unmaskers, triggering them to start receiving death threat from lunatic Trump followers. I note that Grenell's sole experience in intelligence or foreign policy matters was his recent bout of serving as ambassador to Germany where that government requested he be removed, a request that was ignored by Trump.  Shortly after he arrived in Berlin, Trump withdrew the US from the Iran nuclear JCPOA, and Grenell then issued a demand that no German businesses have any dealings with Iran, a demand that was ignored aside from the German government's demanding he be removed.

Ah ha!  At least one possible crime has been identified!  (This has been "the scandal in search of a crime")In Friday's WaPo, Trump fan Mark Thiessen (who I grant has on rare occasions criticized Trump mildly for this or that) published a column in which he declared "Flynn isn't the one who committed a crime" (yes, he did).  According to Thiessen the crime is the leaking of the stories about Flynn's Dec. 29 phone calls to Kislyak, about which he lied to Pence and others in the incoming Trump admin, which led them to fire him. Thiessen proceeded to identify 8 out of this three dozen people who might have been the evil leaker (although he only listed 7 names), and thus possibly open to being prosecuted, if only DOJ can figure out which  one it was. This was the set of people who supposedly not only reuested unmasking of Flynn from NSA, but were actually given his name (allthough apparently in some cases these requests were made by staffers in their offices without even the main person even knowing about it, this being so routine). Obama's name was not among the 7 Thiessen listed, but Biden's, Clapper's, and Somantha Powers's were.

Obviously there is attention being paid to Biden in this regard, and no doubt we shall hear a lot about this from the Trump media mob, with him possibly even being demanded to testify before one of the Senate committees.  However, it is almost certainlhy not him or even one of his staffers.  Why not?  The one unmasking request that came out of his office did so on Jan. 12 (not mentioned by Thiessen but reported elsewhere in WaPo), the day the leaked story appeared in WaPo.  So quite likely somebody in his office sent the request after seeing the story in the paper.  Anyway, not the leaker.

Curiously another name is somebody I never heard of, one Stephanie L. O'Sullivan, identified by Thiessen as "a CIA official whose name is redacted." What?  He does not explain where her name was redacted.  If it was redacted in the report given by Grenell to Barr, how did it come to be unredacted and made public?  This looks like illegal leaking of its own, of a still hired person in the CIA whose identity is supposed to be kept secret.  But ah, obviously this shows how the evil Deep State was after Flynn and the whole Trump administration, blah blah blah.  The hypocrisy of this particular piece of this just stinks to high heaven.

Anyway, I realize that this is pretty complicated.  But that may be why I see a need to put it out there as there is no doubt the Trump people will be putting out distorted and wildly exaggerated versions of this big time.  So, here it is, for any of you who have made it this far.  And that is enough from me on this, at least for now.  Stay well, one and all.

Addenda: In today's Washington Post, Ruth Marcus noted something I had forgotten: it was Michael Flynn who led the chants to "Lock her up!" at the 2016 GOP convention.  Of course such a worthy cannot be locked up himself.

For the record, here are the 7 people listed by Thiessen in his column as being candiated leakers (or maybe somebody from one of their staffs, although he does not mention that possibility): former VP Joe Biden, former UN ambassador Samantha Power (Fox News commenters have made much of her, who supposedly made 7 unmasking requests, how dare her!), former DNI (not Acting) James R. Clapper, Jr. (why would somebody in his position have any authority to make such a request?), former Treasury Secretary Jack Lew, former White House Chief of Staff Denis McDonough, deputy nation intelligence director Michael Dempsey, ah, and the above-menioned Stephanie L. O'Sullivan, whose name was supposedly "redacted," but I missed that she also is a "former deputy national intelligence director."

Oh, and in Trump's diatribes on all this he  has called this "the greatest political crime" as well as "scandal" in US history.  Maybe a "political crime" is not quite the same thing as a "legal crime," although, wow, there is this case of leaking!

Barkley Rosser