Im-Politic: Did Trump (and Trump-ism) Really Lose Big in the Healthcare Fight?


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The list of realities, considerations, factors – call them what you will – that President Trump either forgot or overlooked as he pushed for House passage of the Republican healthcare bill is long, impressive, and pretty obvious according to the Washington, D.C. conventional political wisdom. On the off chance you haven’t heard it or read it, it includes the difference between cutting deals among real estate tycoons and negotiating with ideological politicians; his own voters’ tendency to rely heavily on the kind of government healthcare aid that the GOP legislation either eliminated or sharply curbed; the powerful vested stake developed after years or working with it in the current healthcare system – however troubled it might be – by major participants in the system; and the dangers to Mr. Trump’s own credibility and political power of choosing to tackle first a highly contentious subject (like healthcare) instead of a priority that’s reasonably uncontroversial (like infrastructure spending).

All those points seem valid to me, but I would add two more that seem at least equally important. Then I’ll present an interpretation of the healthcare story that hasn’t appeared anywhere else yet but that shouldn’t be overlooked – if only because it ties the otherwise puzzling story together in ways that are admittedly byzantine, but that make eminent sense in a Machiavellian (and therefore quintessentially political) way. In fact, this analysis dovetails exceptionally well with the president’s clear (to me, certainly) determination to remake American politics by rejecting the doctrinaire conservatism embodied by the Republican party for decades, and thereby increasing its appeal to independents and moderates.

The first such consideration that should be added to the overlooked list: how much more difficult it is both politically and substantively to take away government assistance used by economically stressed Americans (like those who backed Trump in droves) than it is to enable them to thrive without the assistance via other major planks of the Trump platform – chiefly immigration and trade policy overhaul.

One of the secrets of Trump’s success, after all, was his recognition that vast numbers of working and middle class Americans no longer buy the mainstream Republican argument that they could greatly increase their economic self-reliance through the wealth that would trickle down to them through shrinking taxes and government. He understood that this promise would always ring false as long as so many good jobs and so much income were being sent to foreigners through offshoring-friendly trade policies and mass immigration.

So it’s easy to understand why the Republican healthcare legislation registered so little support from even Republican voters – no doubt including many Trump backers. He seemed to be putting the cart before the horse not when it came to the kinds of government programs touted by liberals that Trump-ites viewed as bupkis, but with a program that had become central to their lives. (For a terrific analysis of Main Street views of healthcare at the usually ignored gut level, see this column by The Wall Street Journal‘s Peggy Noonan.)

The second neglected consideration flows directly from the first: President Trump’s election shows that the Republican party has moved significantly in his more populist and particularly less ideological direction, if not at the interlocking think tank/donors/Congressional level, at the far more important voter level. As a result, there was no apparent reason for Mr. Trump to defer to the more ideological Congressional Republicans on the healthcare front.

More specifically, even though the national party’s leadership did indeed treat Obamacare repeal and replacement as a defining principle and promise to its grassroots, and even though candidate Trump expressed strong opposition to his predecessors’ signature achievement, healthcare was never the defining principle of the maverick movement he led. That’s why he so frequently spoke of achieving healthcare goals that have been so widely rejected in Republican and conservative and leadership circles, like ensuring universal coverage.

So why did the president lead off his legislative agenda with orthodox Republican-style healthcare reform? Here’s where the story gets Machiavellian to me – but in ways that should be entirely plausible to anyone familiar with how successful political strategists think. Further, it’s a narrative that fully takes into account the hyper-partisan nature of Washington and legislative politics with which Mr. Trump needs to deal. And it goes like this.

The president recognizes that even though he’s remade much of the Republican base in his own image on the issues level, he also must realize that the Washington Republicans – which include the party’s mainstream conservative Congressional leaders and its more ideological Tea Party wing – remain hostile on the highest profile matters on his own agenda. I imagine he also recognizes that they might be powerful enough to undermine his initiatives on trade, immigration, and/or infrastructure – especially if Democratic leaders remain in their adamant “resistance” mode.

For even if Democrats are ultimately winnable on trade and infrastructure, they have no interest even in these areas in giving the president the kind of quick victory that would greatly strengthen the odds of turning his first term of office into a success that would boost the odds of his reelection. They have even less interest in helping Mr. Trump further strengthen his appeal to many of big Democratic constituencies.

So the Washington Republicans needed to be at least neutralized – and sooner rather than later. And appearing to fight the good fight for their healthcare reform proposal was an ideal way to demonstrate his loyalty to their objectives and strengthen his case for demanding concessions from them in return in areas he valued much more highly. This calculation looks especially shrewd since the Republican bill was so draconian that even had it squeezed through the House, the Senate was bound to prevent its reaching his desk in anything like its current form.

As a result, now that the “RyanCare” legislation is dead, Mr. Trump can say to both the House Republican leaders and even to the hard-line Freedom Caucus something to the effect, “We tried it your way, I carried lots of your water, and I paid a noticeable price. Now we drop the healthcare effort, pivot to my priorities, and I expect your votes, even if you won’t pull front-line duty. And when we do address healthcare as Obamacare’s failures multiply, you’re going to do right by your own constituents and drop the free market extremism. P.S. Anyone remaining obstructionist comes into my social media cross-hairs with your reelection bids coming up.”

I have no inside information here, and my reasoning could certainly be too clever by half. Moreover, one of the most important lessons I’ve learned in my professional life is that just because an analysis seems logical or commonsensical, doesn’t mean that it’s true. But even though it’s only about a day since the healthcare bill was pulled from a scheduled floor vote for the second and final time, I derive some satisfaction in seeing the president is making nice with both House Speaker Paul Ryan and the Freedom Caucus members, and making clear that it’s tax reform time (which could bring a tariff-like border adjustment tax). Which could mean that Donald Trump’s presidency is highly conventional in at least one respect – temptations to dismiss it as a failure should be strongly resisted.  

Im-Politic: A Surprising Source (Unwittingly) Explains Need to Keep Tight Immigration Curbs


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I’ve long argued that one of the main reasons for Americans to oppose mass immigration policies (including sweeping forms of amnesty for the current illegal population) is the devastating impact such labor inflows are likely to have on productivity growth. (Just FYI, here’s my latest take.) One of my main reasons? The relative scarcity of labor throughout American history deserves considerable credit for the nation’s emergence as a global productivity and technology leader. And since robustly improving productivity is a major key to boosting national living standards on a sustainable basis, that’s always struck me as a pretty strong argument to keep labor in short supply by limiting immigration – which of course brings in more workers. 

As a result, imagine my surprise to see that this view has just been supported by a leading writer for the British magazine The Economist – which has long loudly advocated for wider Open Borders.

The case for immigration as a productivity growth killer is solidly grounded in conventional economics. In that 2006 Congressional testimony linked above, I noted “When businesses conclude that the price of scarce labor has become excessive, powerful incentives emerge for them to substitute capital and technology for labor. And that means innovation.”

I then pointed out that “Our country owes much of its longstanding world leadership in most technology areas to this genuinely chronic scarcity and thus relatively high price of labor. Preventing shortages with immigration policy could weaken this proven spur to technological progress and all the benefits it brings.”

If you’re skeptical, here’s a link to the leading scholarly work connecting outstanding U.S. productivity performance and a chronically inadequate American labor supply. In fairness, not everyone agrees. Here’s a link to the most prominent rebuttal.

But I was understandably heartened to see the importance of scarce labor to productivity growth supported in this post by Ryan Avent, a senior editor and economics columnist for The Economist. According to Avent:

Economic historians often explain divergences in patterns of industrialisation by pointing to differences in labour costs. British workers were expensive relative to workers on the continent and relative to British energy. British firms therefore had an incentive to develop and deploy new technologies that economised on labour and used a lot of energy: industrialisation! There’s more to the story than that, but that’s a pretty big component. Later something similar happened in America, where workers were even more expensive and resources even more abundant, and where the phenomenally productive ‘American system’ of manufacturing therefore emerged.”

Avent doesn’t explicitly make the immigration policy connection. But it’s glaringly obvious to all except the ideologically blinkered (or the hired guns of the American cheap labor lobby). Needless to say, I’ll be awaiting his next offering on the immigration policy debate with more than the usual interest. You should, too.

(What’s Left of) Our Economy: Why Trump Needs to Care About Growth’s Quality and its Rate


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President Trump promised on the campaign trail that his presidency would deliver annual four percent (adjusted for inflation) growth to the U.S. economy – a performance that would considerably improve upon the average of 3.5 percent America achieved between 1950 and 2000. Jason Furman, former President Obama’s chief White House economic adviser, says that’s probably bunk. (See the previous link.) He adds that “most economists” are skeptical – and that even the Trump administration seems to be dialing back that promise. 

I have no idea whether Furman and the rest of the skeptics are right. (If most of them had come close to predicting anything like the financial crisis, their judgments would deserve to be taken much more seriously.) What I do know is that both the growth pessimists and the growth optimists appear to be ignoring a far more important question – will whatever growth is experienced by the economy be high-quality or low-quality?

That subject matters – and matters decisively – because one of the biggest lessons the nation (and world) should have learned from the financial crisis is that low-quality growth tends to produce disastrous results if it’s low enough and lasts long enough. And the latest figures available from the U.S. government (which will be updated next week) make clear that the nation’s growth has continued to return to the patterns that prevailed during the run-up to the 2007-08 calamity.

The incriminating data, as I’ve written repeatedly, are those that specify the share of the nation’s gross domestic product (GDP) adjusted for inflation that’s made up by personal consumption and housing. Their bloat played a central role in triggering the crisis, and in tandem, their economic prominence peaked in the second quarter of 2005 at 73.27 percent of real GDP. Individually measured, consumption’s share of real GDP peaked in the first quarter of 2007 at 63.27 percent, and housing’s share peaked at 6.17 percent in the third quarter of 2005. (In other words, it’s clear that the housing market was showing signs of trouble way before its bubble actually burst.)

And where did those numbers stand as of the end of last year (our latest figures)? Personal consumption was actually higher than at that bubble decade top: 69.36 percent of real GDP. Housing was only at 3.55 percent – meaning that it’s still recovering from catastrophe. In toto, though, this toxic combination represented 72.91 percent of real GDP. That’s not too far off that bubble-era peak. And their combined role keeps rising.

Furman’s former White House boss deserves credit for recognizing the fundamental problem. Barack Obama spoke repeatedly of the urgent need to create “an economy that’s built to last.” Not to cast blame, but clearly, that didn’t happen on his watch. Indeed, when the current economic recovery began, in the middle of 2009, the toxic combination represented 70.99 percent of real GDP.

Once that recovery showed even the most meager signs of genuine life, Americans stopped hearing much from the previous administration about the quality of growth. And I can’t find any mentions of it from Mr. Trump or his aides. For their political sake, and the nation’s economic sake, that needs to start changing now.

Those Stubborn Facts: From the World’s New Champion of Free Trade


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Annual investment growth by Chinese state-owned companies,

2016: + c. 25%


Annual investment growth by Chinese “private” companies,

2016: + c. 3%


(Source: “Beijing Revs Up State Inc.,” by Ian Talley, The Wall Street Journal, March 20, 2017,

Im-Politic: Mainstream Media’s Pro-Open Borders Bias Remains Widespread


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The pro-Open Borders slant of the Mainstream Media has become so pervasive that the last few days alone have served up no less than two major instances by leading news organizations. One should be painfully obvious – at least to anyone familiar with the history of immigration in the United States and the nation’s (until unquestionably successful) approach towards assimilating newcomers. The other is more difficult to detect. Both also entail telling failures of professional judgment by writers and editors alike. You decide which (if either) is the most worrisome.

The obvious example of bias came from a Washington Post piece Sunday by National Public Radio correspondent Tom Gjelten. If you ignore the lessons Gjelten claims flow from that American immigration history, you can learn a lot from his article about (or be usefully reminded of) the various efforts made from the early 19th to the mid-20th century to address the various social and cultural issues large inflows from regions outside Britain (though still mainly from Europe) in particular posed. Of course, far too many were products of simple bigotry.

But Gjelten then ventures deeply into a dangerous fantasyland when he discusses those lessons and what they mean today. He all but explicitly states that, given the more recent waves of immigrants, now dominated by non-Europeans, Americans should not only reject race and ethnicity or religion the bases of their national identity. They should also reject using what’s long been called a “civil” or “political” religion – a group of political beliefs and values that can surely be argued over around the edges, but that surely closely approximates a formula developed by political scientist Seymour Martin Lipset. As Gjelten summarizes it: “liberty, egalitarianism, individualism, populism and a laissez-faire approach to governance and daily life.”

Since I’d add separation of church and state, another common definition of Americanism – advanced by another political scientist, Samuel P. Huntington – is more problematic. “Anglo-Protestant culture and political values.” But if you think about it, it’s not that much more problematic, especially since the overlap between Lipset and Huntington is so substantial.

Moreover, look at the matter from the opposite perspective. How many other peoples and contemporary regions have created political values in particular (“cultural values” is a concept that’s much too sweeping and much too prone to intolerant abuse for me) that most Americans today would want to live under? Latin America? East Asia? The Middle East? Please. So if you employ a little common sense, and substitute something like “European Enlightenment” for “Anglo-Protestant,” you arrive at a basis for American identity that not only should offend no one, but that, more important, has underlain much of the nation’s extraordinary success.

But Gjelten seems not to agree. In response to Huntington’s (poorly formulated) contention that successful assimilation has entailed “people who were not white Anglo-Saxon Protestants [becoming] Americans by adopting America’s Anglo-Protestant culture and political values,” he maintains:

Whether that had really happened or was even possible was debatable. ‘A nation of more than 130 cultural groups cannot hope to have all of them Anglo-Saxonized,’ argued Molefi Kete Asante in his book ‘The Painful Demise of Eurocentrism.’ Trying to do so, he argued, would only alienate minorities and deepen disunity.”

Yet having apparently dismissed civil religion as well as (rightly) race and ethnicity as the source of America’s national identity, does Gjelten come up with any viable alternatives? None that I can see. In fact, at this point, his article dissolves into an endorsement of concepts like “nondiscrimination,” “diversity,” and “multiculturalism” that are not only gauzy but lacking in any particular content.

The author maintains that what he terms “nondiscriminatory immigration” based on these empty principles has succeeded in America by making it “more resilient.” But his evidence can’t possibly impress: that “In comparison with Western European countries that have also received large numbers of immigrants, America has proved to be more capable of absorbing and successfully integrating a diverse population.” Of course, this observation practically defines “low bar.”

It’s Gjelten’s right to believe in a definition of national identity evidently distinguished only by what it isn’t – though he sure didn’t provide any examples of countries that have been held together adequately simply by ideals such as multiculturalism and diversity. It’s also his right to believe – as actually seems to be the case – that the idea of a national identity is either pointless or undesirable. But he should have the intellectual honesty to say so. Further, his editors should have had the competence to challenge his case more than they obviously did.

The other troubling instance of journalistic failure by a reporter and editors alike – this CNN post noting that a significant chunk of America’s illegal immigrant population is Irish. That’s unquestionably useful information. But neither author Donie O’Sullivan nor his editors had anything direct to say about the real significance of the article: It powerfully undercuts claims that President Trump’s immigration policies, and even his focus on illegal immigration, stem largely from racism.

Starting with its headline, the article does point out that the illegal Irish have a major advantage over much of the rest of the nation’s illegals – their ability to pass more easily for native-born since they’re white. So obviously, enforcement of immigration law nowadays will inevitably be affected to some extent by race and ethnicity. (At the same time, the article helpfully observes that there are many fewer Irish illegals than Mexican illegals in particular.)

O’Sullivan makes abundantly clear how much fear the administration’s policies have struck among the illegal Irish, and even presents some evidence that these fears have some basis in reality, their physical appearance edge notwithstanding. He quotes an official at an organization providing support services for all Irish newcomers as stating that “it seems that the ICE [immigration law enforcement] agents are using their discretion in a much greater capacity now than ever before.”

But it’s absolutely astonishing (or is it?) that the author says absolutely nothing about the screamingly obvious implication of this claim: It’s a sign that immigration law is being enforced in a race- and ethnicity-blind way. And even though the racism charge has deeply colored the national immigration debate especially since President Trump’s harsh description of some Mexican immigrants when he declared his candidacy for the White House, it’s equally astonishing (or is it?) that none of O’Sullivan’s editors at CNN apparently noted this fact’s omission or importance, either.

Bias-free journalism admittedly is difficult to produce, and the challenge is made all the more formidable by the numerous forms bias can take, and how difficult many can be to spot. All the same, these Washington Post and CNN offerings stand as vivid reminders of how far the Mainstream Media that still dominate news dissemination in our democracy remain from meeting it.

Following Up: Link to Today’s CNBC Interview


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I’m pleased to present the link to the video of my appearance today on CNBC discussing the Trump administration’s precedent-breaking performance at this past weekend’s big global economic summit.  Click here to see a great discussion of this possible landmark event, and its possible implications, among anchors Kelly Evans, Bill Griffith, James Pethokoukis of the American Enterprise Institute, and yours truly.

And keep checking back with RealityChek for notices of upcoming media appearances and other news.

Making News: CNBC Interview This Afternoon – & a Big Boo for a Washington Post Blog


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I’m pleased to announce that I am scheduled to return to CNBC this afternoon to talk about the Trump administration’s global trade policies. The segment is slated to begin at 3 PM EST, and its theme is the surprising, precedent-breaking performance of President Trump’s Treasury Secretary at a recent conference of the world’s leading economies.

I’m also pleased to announce that my recent op-ed article for The New York Times about the administration’s trade policy has been cited by the influential Economist’s View blog, and by the webzine

Less pleasing:  The Washington Post‘s Monkey Cage blog published a piece critiquing my article (which is of course fine).  But the powers that be on the blog refused to consider publishing a response by me (which isn’t so fine).  Monkey Cage says it was founded to enable “political scientists draw on their own expertise and the discipline’s research to illuminate the news, inform civic discussion, and make some sense of the circus that is politics.”

But editor John Sides informed me that “At this point…we’re not going to begin a more extended back-and-forth on this issue.”

That tells me that Monkey Cage actually isn’t so big on fostering civic discussion – and therefore can’t be much of a blog. That should be the message you take away, too.

(What’s Left of) Our Economy: Latest Trade Deficit Scuffles Still Missing Lessons of 2008


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Roughly ten years after it broke out, it’s still incredibly rare to see economists or pundits link U.S. and resulting global trade imbalances with the financial crisis. So I’m always thrilled – as I tweeted this past week – to see it ever happen. All the same, even this insightful column by Reuters’ Edward Hadas simply dances around the crucial link between these imbalances and American trade policies, and in particular, their offshoring-friendly nature.

In a March 15 essay, Hadas commented on the German (and other countries’) trade surpluses that have attracted such attention this past week for two main reasons: German Chancellor Angela Merkel’s first-ever meeting with President Trump, and a conclave taking place at the same time of the finance chiefs of the world’s 20 leading economies (the so-called G20). The author’s main contention is indisputable as far as it goes. According to Hadas, the real problem with these imbalances is financial:

The euros, pounds and dollars which Germany, Korea et al accumulate inevitably land in the global financial system. There would be no problem – only gains all round – if these monies funded valuable infrastructure, productive factories and other assets which can generate a reasonable economic return.

Too often, though, though, the extra currency winds up supporting counterproductive finance. It backs ultimately ruinous property speculation, lends support to chronically weak governments, encourages unsustainable consumer spending and destabilises developing economies, not to mention enriching banks and bankers and stimulating corruption. A typical example: the recycled dollars from the U.S. trade deficit helped fund the American housing bubble whose pop created the 2008 crisis.”

But what Hadas – and so many others – fail to do is explain adequately why deficit countries (like the United States) make such dangerously shortsighted choices with their windfalls. Three main (and not mutually exclusive) reasons have been served up. First, financial systems in the deficit countries (especially the United States, which runs the biggest deficits) have over-rewarded uses of capital that produce the fastest possible payoffs, and under-reward longer-term projects. The result is too much investment that encourages speculation, financial monkey business, and simple consumption, and too little investment that builds factories and laboratories and funds other activities that create wealth more slowly, but on a more sustainable basis.

Second, such irresponsible uses of capital have become practically inevitable if only because the deficits have been so enormous, and so much money has become available. When anything is in such abundance, and therefore costs so little, most economists would agree that there’s little reason to use it carefully. After all, it looks like a sure bet that more of that thing at very attractive prices will be readily available.

A somewhat different version of this argument has to do with what economists call “moral hazard.” It argues that the American financial system used over-abundant money so recklessly at least partly because investors felt certain that they’d get bailed out of most or all of their mistakes by government. So why not take maximum advantage of what seems to be a “heads, we win; tails, we lose” proposition?

The third explanation for the irresponsible use of resources focuses on the consumption-heavy nature of the economies of the deficit countries. (This argument also tends to note that the surplus countries frequently try to limit and even depress consumption.) The more capital they take in, in other words, the more such spending (as opposed to productive investment) is likeliest to result either because such behavior is encouraged by government, because a “live for today” has been produced by that country’s culture, or because of some combination of the two.

Whenever something as a big as a global financial crisis strikes, many culprits are responsible. And all of the above explanations should be taken very seriously (along with others, like lax financial regulation). But what Hadas and all the rest continue to miss is how the world trade system, national trade policies, and the trade flows they have fostered have actively fostered in deficit countries like the United States a neglect of productive activities like manufacturing (which is so heavily traded).

Specifically, as Washington in the 1990s and 2000s signed more and more trade agreements structured to encourage multinational companies from all over the world to supply U.S. consumers from locations in super low-cost and virtually unregulated developing countries like China and Mexico, American leaders and other elites (e.g., in the media) naturally sought to rationalize their decisions by spreading the message that sectors of the economy like manufacturing (and the income loss produced by the accelerated offshoring that rippled throughout so much of the Main Street economy) could be neglected with impunity. And the administration of George W. Bush (along with Congress of course) and the Federal Reserve chaired by Alan Greenspan underwrote America’s spendthrift ways with big budget deficits and ultra-low interest rates, respectively.

Even worse, these destructive trends fed on themselves. The more offshoring seemed to pay off, and the more domestic manufacturing operations looked like losing — or at least anachronistic — propositions, the less interested financiers became in investing in them. So the amount of productive activity on which to use incoming capital to start with began shriveling. And the less productive activity available to sustain Main Street living standards responsibly (i.e., mainly through earnings), the greater the political establishment needed to prop up those living standards by providing more easy money — at least if it wanted to stay in power while maintaining the offshoring status quo.

Ironically, even though Hadas emphasizes regulation as the answer to global imbalances, his particular focus has big trade implications:

Regulation can do more than strengthen bank capital ratios. It can reform the system, so trade surplus funds are not directed to economically counterproductive uses. That will be tough, both politically and practically. But it should be easier – and will be far more helpful – to solidify finance than to try to change the national characters of Germany or Korea.”

I’m all in favor of channeling the use of trade surplus funds by deficit countries into productive activity. In fact, I strongly support requiring such uses by U.S. multinational companies if much-discussed tax reform finally succeeds in persuading them to bring home the vast amounts of earnings they’re currently stashing abroad to avoid paying higher U.S. corporate rates. 

But this requirement needs to be accompanied by (at the very least) strong measures to keep out foreign-made goods that benefit from predatory trade practices like dumping, subsidization, and intellectual property theft. Otherwise, foreign competitors will be able to keep undercutting their domestic American competition in the U.S. market, and these new productive investments will fail. It’s also entirely likely, however, that more sweeping trade curbs will be needed – to offset the scale economy disadvantages created by U.S.-based firms’ inability to sell into so many important markets and their rivals’ ability to sell freely in their home countries and the United States.

And this is in fact where recognition is needed that the trade problem created by American policy concerns not simply inducements to offshore, but the coddling of protectionism in high income countries like Japan and Germany.

The bottom line: As indicated in a post last week, the United States may have to accept that even reasonably balanced foreign trade is not achievable with competitors holding radically different economic priorities (as I argued last week was precisely the case with Germany), and that reducing trade flows is a more than acceptable price to pay for preventing financial crises caused by imbalanced trade. When you add in America’s great capacity for much more self-sufficiency in a wide range of manufactured good, that seems like a more than acceptable trade-off to me. More important, it’s where the Trump administration, admittedly in fits and starts, could be leading us.

(What’s Left of) Our Economy: Wages Data Still Belie Amnesty Advocates’ Labor Shortage Claims


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The Pew Research Center is out with its latest estimates of the role played by both immigrants and illegal immigrants in the American job market. So that has enabled me to crunch some reasonably reliable numbers to find out whether illegals-friendly immigration policies like some form of amnesty are, as often claimed, desperately needed if the nation is to avoid a crippling labor shortage.

When I performed this exercise roughly a decade ago, I found that similar claims being made in that period were wildly overblown at best. Why? Because the data showed that real wages in the industries employing the most illegal immigrants were generally stagnant or going down. That’s exactly the opposite of what should happen if economists (and common sense) are right in contending that when anything – including workers – is scarce relative to demand, the price of that thing should go up.

And the verdict for 2014 – the year for which Pew’s latest statistics come? Labor shortage claims are still mainly hokum.

According to Pew, the sectors where illegal aliens make up the greatest share of workers are (in order of the total immigrant share of their workforces: private households; textile and apparel manufacturing; agriculture; accommodation; food manufacturing; computer and electronics manufacturing; personal and laundry services; administrative and support services; construction, and miscellaneous manufacturing.

Are there many signs of the kinds of labor market tightness that should be sending pay soaring out of sight? I couldn’t find data for domestic workers, but here are the current-dollar wage figures for the other sectors during the current recovery so far. That means from June, 2009 through February, 2016, except where noted. They cover non-supervisory workers, on the assumption that few illegal aliens are finding managerial jobs in these parts of the economy:

Private sector overall: +17.78 percent

Construction: +15.93 percent

Computer and electronic manufacturing: +12.55 percent

Miscellaneous manufacturing: +16.55 percent

Food manufacturing: +17.31 percent

Textile mill manufacturing: +14.93 percent

Textile products mill manufacturing: +24.76 percent

Apparel manufacturing: +18.05 percent

Administrative and support services (through January): +14.33 percent

Accommodation (through January): +7.56 percent

Personal and laundry services: +21.61 percent

Farm workers: +24.53 percent

I sure don’t see any broad-based wage explosion in these statistics. In only four of the eleven illegal alien-heavy sectors have wages even been rising faster than those in the overall private sector – which hasn’t been terribly fast given that the current recovery is more than seven years old. Two of them, moreover, are in labor-intensive manufacturing industries that have been so decimated by foreign competition for so long that what’s left of them might indeed be facing labor shortages. The reason? Who in his or her right mind would assume they have much of a future in this country?

But what about more recent developments? Can signs of widespread labor shortages be seen in the current stage of the recovery? You be the judge, based on these February (or January, where noted above) year-on-year developments:

Private sector overall: +2.48 percent

Construction: +3.38 percent

Computer and electronic manufacturing: +2.73 percent

Miscellaneous manufacturing: +3.13 percent

Food manufacturing: +3.70 percent

Textile mill manufacturing: -1.07 percent

Textile products mill manufacturing: +8.04 percent

Apparel manufacturing: -3.02 percent

Administrative and support services (through January): +4.13 percent

Accommodation (through January): +1.50 percent

Personal and laundry services: +3.88 percent

Farm workers: +3.00 percent

Bottom line: The illegal immigrant-heavy sectors have seen some wage acceleration since last year. But two of the manufacturing sectors where wages had separated themselves from the pack are now experiencing wage decline. And it’s important to keep two other considerations in mind for many of the rest: First, their wages have been boosted artificially during this period by numerous sizable minimum wage increases in major states and localities. That’s not to say that such hikes per se are undesirable in any way. Indeed, I personally don’t see any reason why they shouldn’t be much more tightly linked to inflation nationwide than they’ve been till now.

When it comes to the labor shortage claims, however, they greatly distort the picture – because they represent wage developments based not on the labor supply and demand situation in these parts of the economy, but on political decisions.

Second, if the relatively strong wage increases that have taken place continue much longer, expect the sectors in question to start automating fast — or faster. That’s been a major feature of American economic history. And if economists are right, the resulting technological progress will wind up simply being delayed (perhaps partly accounting for the economy’s recent sluggish productivity growth?), rather than stopped, by the continuing easy availability of illegal immigrant labor.

(What’s Left of) Our Economy: An Eight-Year (But Not All-Time) High for Real U.S. Manufacturing Output


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The Federal Reserve’s new industrial production report today showed that the strongest back to back real increases since February and March, 2014 drove domestic industry to its highest inflation-adjusted output level since June, 2008 – shortly after the official onset of the Great Recession. As a result of the broad-based improvement, manufacturing’s February constant-dollar year-on-year growth (1.39 percent) since April, 2015 (1.46 percent). Three of the last four monthly figures have now been revised positively. A new all-time high was recorded for inflation-adjusted durable goods production, leaving it 2.72 percent larger than at the last recession’s onset.

One big sign of domestic manufacturing’s continuing challenges: Real production is still 2.83 percent below the levels it hit when the Great Recession began – more than nine years ago. Moreover, the bigger manufacturing picture could be significantly altered by the Fed’s release at the end of this month of revisions going back to 2015. 

Here are the manufacturing highlights of the Federal Reserve’s new release on February industrial production: 

>In February, the first consecutive monthly U.S. real manufacturing output increases of 0.50 percent or better in three years helped industry reach its highest inflation-adjusted production levels since the early months of the Great Recession. 

>The 0.51 percent sequential gain in February – which is still preliminary – followed an upwardly revised 0.54 percent gain in January. The result was the first such growth since February and March, 2014 (0.70 percent and 1.07 percent, respectively). 

>Moreover, the new data look even better considering that these 2014 figures in part reflected a bounce-back from an unusually harsh winter. 

>In addition, February’s year-on-year after inflation manufacturing output improvement of 1.39 percent was the best recorded since April, 2015’s 1.46 percent. 

>The February manufacturing improvement was broad-based. Durable goods’ real output rose sequentially by 0.58 percent, and non-durables comparable production was up 0.42 percent. 

>Another sign of breadth – inflation-adjusted manufacturing production increased by 0.45 percent even after stripping out the automotive sector that has led industry’s rebound for much of the current economic recovery. 

>Generally positive revisions also buoyed manufacturing’s recent growth performance. November’s monthly advance was upgraded for a second time, from 0.04 percent to 0.06 percent. December’s initially upgraded sequential improvement of 0.26 percent was revised down a tick to 0.25 percent. But January’s initially reported 0.22 percent gain more than doubled – to 0.54 percent.

>Yet even after these new strides, price-adjusted U.S. manufacturing production still remains 2.83 percent below its level in December, 2007 – when the Great Recession officially began. Further, the Fed’s release on March 31 of revisions going back to 2015 could significantly change the manufacturing data. 

>February’s figures put real durable goods output at a new all-time high. The sector is now 2.72 percent bigger in constant-dollar terms than at the recession’s onset. 

>Further, it’s 1.86 percent year-on-year constant dollar growth was its fastest since November, 2013’s 2.67 percent. 

>In February, non-durable goods’ after-inflation output hit its highest level in more than eight years. The super-sector is now 0.91 percent bigger than it was in November, 2008. 

>But its 0.82 percent annual February growth was only its best since last March’s 0.77 percent. 

>Moreover, non-durable goods output after inflation is still 9.40 percent below its pre-recession peak, reached in July, 2007.