Month: July 2013

Economists Agree: Immigration is Good for the Economy

Economists Agree: Immigration is Good for the Economy

Now we just need to get politicians on board.

A recent study indicates that most of the growth in the U.S. labor force over the next twenty years or so will be from immigration. The study also shows that immigration is good for the economy. This should not be a surprise since most economic studies show the positive effects of immigration. In fact the only people who disagree are conservative politicians.

This study also shows that most immigrants live in metropolitan areas. And for metropolitan areas to thrive they need to continue to be a magnet for immigration.

An article describing the study, with a link to the study itself, can be found on Quartz at Almost all Growth.

The Barr Report July 29

This week Rep. Barr talks about his work on the Financial Services Committee to reform the government supported mortgage system, stopping furloughs at the Blue Grass Army Depot, and funding for the NSA. One of the common themes in all three notes is his desire to get a good swift partisan kick in at every opportunity.

Lets start with his comments on the so called PATH Act, which is an attempt to reformulate government support for some mortgages, and to replace the Freddie Mac and Fannie Mae. Barr says that this committee “took decisive action to build a responsible housing finance system that will help ensure hardworking Kentucky taxpayers are never again asked to bail out corrupt government enterprises like Fannie Mae and Freddie Mac.” I do not doubt that there are problems with the Federal home mortgage system, but I have never heard either Fannie Mae or Freddie Mac described as corrupt.

Next he talks about the furloughs at the Blue Grass Army Depot that are part of the sequestration, which required across the board cuts to both domestic and military programs. The sequestration was purposefully designed to eliminate discretion in programming the cuts, but Barr insists on blaming Obama for not using his discretion in the cuts.

Finally, Barr notes that he voted against cutting funding for certain NSA programs that currently acquire phone records from all Americans. This program came to light with the leaks from former NSA contract analyst Edward Snowden, and shocked most people, even supporters. In response to these leaks Representative Justin Amash, Republican of Michigan, offered an amendment to the Defense Appropriations Bill that would prevent the NSA from obtaining these phone records, except when a person is a legitimate subject of an investigation. The problem is that the NSA needs to have data on all phone calls beforehand so that they can learn who a subject has called. It is a complex problem, and the main opponents of the program have been libertarian and Tea Party Republicans, like Rep. Amash. Barr opposed the cuts. (I should note that so do I, and I wrote about the issue a few days ago on the blog.). But here’s where Barr’s politicized nature comes in. Barr calls the amendment the Amash/Conyers Amendment. Conyers refers to Democratic Congressman John Conyers on Michigan, who is also a supporter of the Amash Amendment. But apparently Barr cannot miss the opportunity to note that a liberal Democrat also supports this bill, and imply that liberals are not patriotic and don’t want to protect America. It’s meaningless, but a nice bit of political theater.

Woman’s Work

I recently came across an interesting study from the Organization for Economic Cooperation and Development that said that countries where women have more economic and political power are richer than countries where women have less power. In other words, the more that women participate in the economy, and in the workforce, the better off the economy of the country.

The study can be found here: Gender Equality in Education, Employment and Entrepreneurship.

The United States ranks pretty high on the list. But it is interesting that some politicians want to limit the ability of women to participate in the economy. There are even some social conservatives, who are generally aligned with the business wing of the Republican Party, who openly call for a return to a world where women stay home.

If the economy improves when more women participate, then we should support policies that help women fully participate in the economy. What kinds of programs? How about programs that support better and cheaper day care? Or programs that ensure adequate maternity leave so that qualified women can easily re-enter the workforce after having a baby. Or laws that ensure equal pay for equal work, so that women are fully compensated when they fully participate. Or laws that ensure adequate access to contraception and reproductive health care services so that women can control their bodies.

The Cost of Discrimination

A recent book, Sharing the Prize: The Economics of the Civil Rights Revolution in the American South, by Gavin Wright, argues that the civil rights movement not only gave blacks basic civil rights, but also has a major beneficial economic impact on the economy of the south.

(Note: I have not yet read the book. I am basic my comments on excerpts and reviews.)

Wright notes that, as barriers to participation for blacks fell away, the overall economy of the south improved.

What we see, in other words, is not a redistribution in the name of historical justice, but an integration of black workers into the regional economy. When we consider that the civil- rights movement opened the South to inflows of capital, creativity and new enterprises from around the world, it becomes clear that most white Southerners were also long-term beneficiaries of this revolution. From: http://www.bloomberg.com/news/2013-02-13/the-stunning-economic-impact-of-the-civil-rights-movement.html

If the removal of discrimination improved the economy then it seems likely that the imposition of discrimination harmed the economy. That should be painfully obvious to anyone who spends time thinking about it. There were obvious costs to Jim Crow. It cost money to install additional drinking fountains and rest rooms. Clearly businesses lost money by not serving black customers. And clearly it cost money to have a police force that spent time enforcing racial restrictions rather than dealing with crime. It cost time and money for state legislatures to debate and enact racially discriminatory bills.

Discrimination not only cost the subject of discrimination, but it costs those who discriminate. They spend time and money discriminating when they could spend that time and money on more productive things.

If discrimination is bad for an economy then it seems likely that the corollary is true: non-discrimination – openness, acceptance, tolerance – are good for the economy.

Security, Surveillance, and Privacy

Edward Snowden’s recent leaks revealed that the NSA (the National Security Agency) has been collecting information on every telephone call made in the United States. The NSA doesn’t listen in on the calls, but it does record the caller’s telephone number, the recipient’s number, and the duration of the call. The Director of the NSA, James Clapper, has confirmed that the NSA is, in fact, collecting this phone information.

The scope and extent of NSA surveillance of American citizens is troubling to say the least, and down right scary to say the most.

Republican Representative Justin Amash of Michigan has filed an amendment to the pending Defense Appropriations Bill that would end “blanket collections” of this phone information, and only allow collection of this data when someone is the subject of an investigation. Amash and an interesting group of liberals and conservatives are concerned that the government is going too far in collecting information on all Americans.

This issue raises important questions about balancing security and privacy. Most people agree that one of the main purposes of government is to protect the security of the nation, but is it possible to go so far in protecting security that it infringes the rights of the people? Certainly so. Clearly it might be possible to maintain the maximum level of security in a militarized police state, but it would no longer the nation our founder’s created. Individual rights, political liberty, and personal freedoms are core components of this nation. We should be loath to trade away any of those in a misguided attempt to protect our security. But most people are certainly willing to accept certain reasonable restrictions in a balanced and thoughtful attempt to gain some added level of security. So is the NSA program the former of the later?

The NSA says that they need to have all of this information so they can sort through it to see who is calling certain places (say the lawless regions on the Afghanistan Pakistan border) or certain numbers. The NSA says that in order to find the needle in the haystack, they need to be able to sift through the hay. The NSA also says that they have used this process to stop a number of terrorist attacks.

Rep. Amash and others say that the NSA is violating our right to privacy, but the courts have long held that there is no right to privacy in our phone records. We have a right to privacy in those things that we keep private, and have far less right to privacy in those things that are essentially not private. The question is whether there is a reasonable expectation of privacy.

The courts note that when we make a phone call we rely on the phone company, and today we rely on numerous phone companies. Once upon a time when we made a phone call we would call an operator who would connect us to the person we were calling. Clearly the operator knew who we were calling, and we knew that the operator knew. While phone companies have long since abandoned operators to connect phone calls, they still need to know where the call is coming from, and where it is going to, in order to make the connection. We give this information to the phone company in a trade off in order to reach our desired party. We may not realize that we are doing this, but we are. And, once upon a time, we used to get a phone bill that showed every number we called, and the duration of the call. This was standard on the old long distance phone bill. So we were aware, whether we appreciated it or not, that the phone company had this information. And if we were sharing this information with the phone company, then it could not be private.

The same holds true for e-mail (since we rely on our ISP and the phone companies to transmit the data) and snail mail (since the address on an envelope is on the outside for anyone to see).

I am concerned about this level of scrutiny and surveillance of the American people. It does smack of big brother. But I also recognize the need for searching through this kind of information. I think the better solution is not to kill the program, but to create better oversight. Perhaps there should be a Congressional Committee that can periodically review the operation of the program. I also think the Foreign Intelligence Surveillance Court (the secret court created to review requests for subpoenas to conduct investigations based on the data obtained from these broad surveillance programs) should have clear, and public, criteria for authorizing a subpoena, and should periodically publish information about how many requests are made, and how many are granted. And if it turns out that government agencies are abusing the program, then perhaps we should consider restricting it, or eliminating it entirely.

The Barr Report July 21

The Uncertainty Edition

Representative Barr often says that uncertainly is one of the key problems stiffing economic recovery. This is a fairly standard conservative line, which says that businesses are unwilling to expand due to the uncertainty of future taxes or regulation. One of the key complaints by conservatives, like Rep. Barr, is that there is a great deal of uncertainly regarding Obamacare, or the Affordable Care Act. Businesses are afraid to hire, according to this theory, because they are uncertain about the impact of the new law on their health care costs for their employees.

What is Barr’s solution to this uncertainty? Create more. Barr has voted with the majority Republicans many times to repeal Obamacare. This week he voted with the majority to delay implementation of various aspects of Obamacare. In other words, delay and extend out the uncertainty.

Read Barr’s Press Release here.

The reality is that the only way to prevent uncertainty is to never allow anything to change. Change is the foundation of uncertainty. But change has been a constant in human history. (Perhaps some day I’ll address the irony of that statement, but not now.) The other way to deal with uncertainty is to get past it. Once you are past it you will no longer be uncertain. Once Obamacare is implemented there will no longer be uncertainty about its impact. All of the speculation, all of the dire warnings, will then have to be weighed against the actual impact.

The reality is that Obamacare will be implemented. Unless Obama is removed from office the law will move forward. Even if Republicans sweep out the Democrats in 2014, various aspects of the law will already be in effect.

The insurance exchanges (AKA the free market in action) will begin operating in October. By November there will no longer be any uncertainty about the impact of the exchanges. The individual mandate will go into effect next year. And so by the 2014 elections in November, we will know the impact of Obamacare, and there will no longer be any uncertainty.

So if you don’t like uncertainty it would seem that you would want to find out the reality. But it is possible that what conservatives really fear is that reality. We will find out in a few months.

 

Science and Government Support

The Federal government has supported scientific advancement since Vice President Thomas Jefferson got Congress to fund Eli Whitney’s attempts to manufacture muskets with interchangeable parts. Whitney failed but government support for other continued until Sam Colt perfected it in the 1850’s.

The government has supported both practical and speculative science. The “space race” created a need for increasingly small electronics, and researchers working under government contract created the transistor and later the micro-chip.  Fear of massive infrastructure disruption in the event of a nuclear attack led to government funded research into the development of a fragmented communication system called ARPANET, which was the earliest form of the internet.

But beginning in the late 1980’s the Federal government spent less and less on support for science. In the last 25 years government support has been cut by fully half. The results have been most obvious in publications in scientific literature. Research from the US used to dominate, but now researchers from the European Union are now producing nearly as many papers as US researchers. And while US funding has declined, government funding in other nations has climbed significantly. China’s R&D spending is growing at 20% a year.

The reality is that scientific research will continue, but the US will no longer dominate as it had in the past. The problem with this is that scientific research often (very often) leads to new technologies, new products, and new businesses. Most of the world seems to understand this, which is why other nations are increasing government supported research. But a few people don’t seem to get it. And unfortunately those people — conservative Republicans — have an outsized influence in the American government. They are clearly being penny wise (watching every penny) but pound foolish.

Government support for scientific research has been an important component of American economic growth and supremacy, and I find it frightening that Congressional Republicans are willing to turn their backs on that history.

 

Income Mobility and Economic Development

Income mobility, or the ability of people to move up the socio-economic ladder is an important component of a successful economy. Economic mobility means that the child of a dishwasher can go to college and become a lawyer, or a laborer with a good idea can open his own company to make or sell a new product.

A new report has found that cities in the Northeast, West Coast, and some in the Great Plains, have the highest levels of economic mobility, while cities in the South and Midwest have the lowest levels of economic mobility.

An article in Salon describing these findings can be found here: Upward Mobility

The full report can be found here: Equality of Opportunity

 

 

Spare Me The Sanctimony

After Lexington businessman Joe Palumbo announced his candidacy for Congress in the Sixth District, Representative Andy Barr’s office issued a statement saying that Rep. Barr was focusing on serving the interests of the people of the district. The implication was clearly that he was not interested, or involved, in petty politics.

This is clearly absurd. I receive Rep. Barr’s weekly e-mail report, and while much of it is devoted to describing his work on behalf of his constituents (as it should be) much of it involves politics. When he describes his votes on various issues he engages in political attacks on his opponents. And he has been actively involved in fundraising, which is clearly a political act. No one doubts that elected officials have to balance their official duties with political activity. That is the nature of the beast, and no one should be naïve that it happens. So no one needs a sanctimonious lecture on how Rep. Barr is some how above petty politics.

Can the Government Play Moneyball?

I just read an outstanding essay in this month’s Atlantic Magazine titled “Can Government Play Moneyball.” It asks whether the federal government can analyze the effectiveness of programs in the same way that baseball now analyzes the effectiveness of ballplayers. This means they are evaluated based on statistical data and verifiable criteria to judge effectiveness, and not hunches and wish full thinking. The authors, both former senior high level budgetary officials, one in the Bush administration and the other in the Obama administration (Orszag), describe their frustrations in trying to evaluate the actual effectiveness of programs, and disappointment that ineffective programs could not be killed because of political support.

The article is available on line here: Can Government Play Moneyball

The article notes that administrations since Clinton have tried to evaluate, on some level, the effectiveness of programs. Remember Clinton’s Reinventing Government? The Bush Administration established the Program Assessment Rating Tool, which the Obama Administration was continued. All of these efforts have identified government programs that simply don’t work, but in many cases, when the administration tries to defund the program, it runs into opposition for Congress. The article mentions two programs, one supporting individualized payments under Medicare, rather than bundling, and the other an after school education program, that were both shown, irrefutably, to be ineffective, but neither administration was able to kill the program due to opposition from Congress.

The article notes that the Bush program evaluated roughly 1000 programs, and 19% were rated effective, 32% were moderately effective, 29% adequate, 3% ineffective, and another 17% un-ratable due to insufficient data. I was surprised by these numbers. I would have thought that 10 to 15% of the programs would be ineffective, so I’m surprised that such a high percentage were at least somewhat effective.

The point is that government programs should be evaluated for effectiveness, and those that are not effective should be jettisoned. The problem is that there is never any provision in the bill creating a program to evaluate its effectiveness. The article suggests a number of proposals to address this defect. One proposal suggests that 1% of the budget of a program should be set aside for evaluation. The results of the evaluation can be used to improve the program if it needs it, or justify killing the program if it is proving ineffective. Another proposal, which New York Mayor Michael Bloomberg is using, is to make many new programs temporary, and they only become permanent if they prove their effectiveness.

I think that these are excellent ideas. Ineffective government programs should be eliminated, but their effectiveness should be evaluated based on valid criteria and good data, and not political beliefs and desires. I particularly like the idea of subjecting all new programs to a “probationary” period for them to prove their effectiveness. Government should not be wasting money (the taxpayers money) on programs that don’t work.