Paul Krugman’s Ignorant Assessment Of TPP Shows What A Nefarious Proposal It Is
By Mike Masnick | Techdirt | December 13, 2013
… It appears that Krugman has decided to discuss the TPP agreement after many of his readers asked him to weigh in. And his response is basically to dismiss the entire agreement as not really being a big deal one way or the other. The entire crux of his analysis can be summed up as: trade between most of the countries in the negotiations are already quite liberalized, so removing a few more trade barriers is unlikely to have much of a consequence. Therefore, the agreement is no big deal and he doesn’t get why people are so up in arms over it.
On his basic reasoning, he’s correct. There’s little trade benefit to be gained here. In fact, some countries have already realized this. But that’s why the TPP is so nefarious. It’s being pitched as a sort of “free trade deal,” and Krugman analyzes it solely on that basis. That’s exactly what the USTR would like people to think, and it’s part of the reason why they’ve refused to be even the slightest bit transparent about what’s actually in the agreement.
Instead, the TPP has always been a trade liberalization agreement in name only. Sure, there’s some of that in there, but it’s always been about pushing for regulatory change in other countries around the globe, using trade as the club to get countries to pass laws that US companies like. That’s why there’s an “IP chapter” that is entirely about building up barriers to trade in a so-called “free trade” agreement. It’s why a key component of the bill is the corporate sovereignty provisions, frequently called “investor state dispute settlement” (in order to lull you to sleep, rather than get you angry), which allow companies to sue countries if they pass laws that those companies feel undermine their profits (e.g., if they improve patent laws to reject obvious patents — leading angry pharmaceutical companies to demand half a billion dollars in lost “expected profits.”)
Krugman judging the TPP solely on its net impact on trade is exactly what TPP supporters are hoping will happen, so it’s disappointing that he would fall into that trap. Thankfully, economist Dean Baker, who does understand what’s really in TPP, was quick to write up a powerful and detailed response to Krugman that is worth reading.
However it is a misunderstanding to see the TPP as being about trade. This is a deal that focuses on changes in regulatory structures to lock in pro-corporate rules. Using a “trade” agreement provides a mechanism to lock in rules that it would be difficult, if not impossible, to get through the normal political process.
To take a couple of examples, our drug patent policy (that’s patent protection, as in protectionism) is a seething cesspool of corruption. It increases the amount that we pay for drugs by an order of magnitude and leads to endless tales of corruption. Economic theory predicts that when you raise the price of a product 1000 percent or more above the free market price you will get all forms of illegal and unethical activity from companies pursuing patent rents.
Anyhow, the U.S. and European drug companies face a serious threat in the developing world. If these countries don’t enforce patents in the same way as we do, then the drugs that sell for hundreds or thousands of dollars per prescription in the U.S. may sell for $5 or $10 per prescription in the developing world. With drug prices going ever higher, it will be hard to maintain this sort of segmented market. Either people in the U.S. will go to the cheap drugs or the cheap drugs will come here.
For this reason, trade deals like the TPP, in which they hope to eventually incorporate India and other major suppliers of low cost generics, can be very important. The drug companies would like to bring these producers into line and impose high prices everywhere. (Yes, we need to pay for research. And yes, there are far more efficient mechanisms
for financing research than government granted patent monopolies.)
Don’t Call It ‘Raising the Retirement Age,’ Because That’s Not What They’re Doing
By Jim Naureckas | FAIR | September 7, 2012
As Dean Baker noted (Beat the Press, 9/7/12), corporate media mostly missed one of the major pieces of news in President Barack Obama’s speech to the Democratic National Convention.
Talking about the federal budget deficit, Obama said, “Now, I’m still eager to reach an agreement based on the principles of my bipartisan debt commission.” Then, as he talked about what he would and wouldn’t do to reduce the deficit, he included this line: “And we will keep the promise of Social Security by taking the responsible steps to strengthen it–not by turning it over to Wall Street.”
“Responsible steps to strengthen it”–what does that mean? Dean Baker helpfully paraphrases:
President Obama implicitly called for cutting Social Security by 3 percent and phasing in an increase in the normal retirement age to 69 when he again endorsed the deficit reduction plan put forward by Erskine Bowles and Alan Simpson, the co-chairs of his deficit commission.
This would be a good thing for voters to know about, wouldn’t it?
Baker’s blog post explains the 3 percent thing–the result of proposed games with the cost of living adjustment. As for raising the retirement age, that requires further discussion–because that’s one of the big lies of the Social Security discussion.
The thing is, nobody who proposes raising the retirement age is really proposing raising the retirement age. If you were just raising the retirement age, you’d have to wait until you were (say) 69 to stop working, but when you did, you get the same benefits that you would now if you retired at age 69.
But no one’s proposing that–because that would save hardly any money. The way Social Security works is that you can retire whenever you want starting at age 62–but the longer you wait, the more money you get. The government tries to calculate it based on life expectancy so that whatever date you pick, you end getting (on average) about the same amount of money.
So when they “raised the retirement age”–as they’ve been in the process of doing for decades now–they didn’t say that you couldn’t retire at 62 anymore. They said that if you retired at 62, you’d get less money. And you’d get less money if you retired at 63, or 64, or 65, or….
There’s a more accurate way than “raising the retirement age” to describe this policy of lowering the amount of money someone at any given age receives when they retire. It’s “cutting Social Security benefits.”
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NYT: How Can We Be No. 1 if Pentagon Budget Is Cut by 1/12th?
By Peter Hart – FAIR – 06/04/2012
Part of the 2011 Congressional debt reduction deal called for automatic cuts to social spending and military budgets over the next 10 years. The idea was that a deal to avoid these cuts would be struck, because Republicans wouldn’t want to cut the Pentagon, and Democrats would try to protect safety net programs.
That didn’t happen, so these so-called “sequestration” cuts are prompting some alarm bells in the corporate media–ringing loudly at the mere thought of cutting the military budget.
The New York Times (6/4/12) sounded the alarm today in a piece by Jonathan Weisman that framed things like this:
On January 2, national security is set to receive a heavy blow if Congress fails to intervene. That is when a 10-year, $600 billion, across-the-board spending cut is to hit the Pentagon, equal to roughly 8 percent of its current budget.
Wow, this isn’t even about the military budget–it’s the very security of our nation.
The piece is, as the headline suggests (“Some Lawmakers Look for Way Out as Defense Cuts Near”), written from the point of view of lawmakers who can’t stomach the idea of military cuts. The most important is Republican Sen. Lindsey Graham. But, the Times explains, he’s not the only one:
The dire warnings are not coming from Mr. Graham alone. They are coming at least as loudly from Leon E. Panetta, the secretary of defense.
So not only hawkish Republicans are worried about Pentagon cuts. So is, you know, the head of the Pentagon.
Weisman tries to give some sense of Graham’s strategy for putting off the military cuts:
Mr. Graham’s intention is to separate defense from the larger deficit issue by aiming his arguments high and low. The high argument is about American greatness.
“The debate on the debt is an opportunity to send the world a signal that we are going to remain the strongest military force in the world,” he said. “We’re saying, ‘We’re going to keep it, and we’re going to make it the No. 1 priority of a broke nation.'”
That might be the “high” argument, but it’s worth mentioning that, even with the cuts we’re talking about, the U.S. will be spending more on its military than anyone else. Enormously more. As in: more than the next 11 countries combined.
Pieces like this one often fail to include any budget context at all. This one actually does include such a perspective–but only so the reporter can try to rebut it himself:
On its face, the automatic cuts do not sound that bad. If they are put into effect, military spending would decline to its 2007 level, said Todd Harrison, a senior fellow for defense budget studies at the Center for Strategic and Budgetary Assessments. But really it is worse than that. The law exempts war costs and allows the administration to wall off personnel levels and military pay, about a third of the Pentagon budget. That means everything else–operations and maintenance, research and development, procurement, fuel, military construction–would face immediate cuts as deep as 13 percent, Mr. Harrison said.
Follow that: The cuts would actually bring the Pentagon to 2007 funding levels, but it’s worse than that… because the cuts would be distributed unevenly. What?
I wrote a piece about this for Extra!, and this part of it includes all the information one needs to rebut this sky-is-falling reporting:
The proposed “draconian” cuts would force the Pentagon to make do with a budget equivalent to what it spent in 2007 (Project on Defense Alternatives, 10/11/11). Military analyst Winslow Wheeler (Center for Defense Information, 8/24/11) points out an annual base budget of this size–$472 billion–is $70 billion more than was spent in 2000, and would still constitute “more than twice the defense spending of China, Russia, Iran, Syria, Somalia, Cuba and any other potential adversary–combined.”
And the proposed cuts are often reported as raw numbers–$800 billion or $1 trillion in total cuts over the next decade. As economist Dean Baker has noted (CEPR, 8/4/11), coverage should explain that over this period the military is scheduled to spend close to $8 trillion.
Claims of catastrophic consequences from military cuts might also have been tempered by reminders that the Pentagon budget declined by close to 25 percent from 1989 to 1994–a historical context missing from most reports.
In other words, the cuts are real, but should be appreciated in the context of massive increases in military spending over the previous decade.
The other point of that Extra! piece: Stories worrying about supposedly debilitating cuts to military spending are a dime a dozen, and usually consist of getting Leon Panetta to complain about them publicly. But good luck finding many stories about what’s going to happen thanks to $600 billion in social spending cuts. Reporters don’t seem all that interested in that.
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Robert Samuelson Shows that the Post Has no Fact Checkers on Its Opinion Pages
By Dean Baker | Beat the Press | April 8, 2012
Social Security and Medicare are hugely important for the security of the non-rich population of the United States. For this reason, Robert Samuelson and the Washington Post hate them.
As we know, this is a question of basic political philosophy. In the view of Samuelson and the Post, a dollar that it is in the pocket of low or middle class people is a dollar that could be in the pocket of the rich. And Medicare and Social Security are keeping many dollars in the pockets of low and middle class people.
Today’s column by Robert Samuelson tries to tell us that Franklin Roosevelt would be appalled by the current state of the Social Security program. Of course, he produces not a single iota of evidence to support this position, although it is very clear that Samuelson doesn’t like Social Security.
Samuelson begins by telling us that:
“It [Social Security] has become what was then called ‘the dole’ and is now known as ‘welfare.’ This forgotten history clarifies why America’s budget problems are so intractable.”
He later adds:
“Millions of Americans believe (falsely) that their payroll taxes have been segregated to pay for their benefits and that, therefore, they ‘earned’ these benefits. To reduce them would be to take something that is rightfully theirs.”
Of course Samuelson is 100 percent wrong here. Payroll taxes have been segregated. That is the point of the Social Security trust fund and the Social Security trustees report. These institutions would make no sense if the funds were not segregated.
Samuelson is welcome to not like the way in which the funds were segregated, in the same way that I don’t like the Yankees, but that doesn’t change the fact that the Yankees have a very good baseball team. Since its beginnings, the government has maintained a separate Social Security account. Under the law, no money can be paid out in Social Security benefits unless the Trust Fund has the money to pay for them.
In this sense, the funds are absolutely segregated. Samuelson doesn’t like this, but why should any of the rest of us care? The rest of the piece shows the same dishonesty and lack of respect for facts.
Samuelson later tells readers:
“But now, demographics are unfriendly. In 1960, there were five workers per recipient; today, there are three, and by 2025 the ratio will approach two. Roosevelt’s fear has materialized. Paying all benefits requires higher taxes, cuts in other programs or large deficits.”
Okay, let’s think about this for a minute. We went from five workers per retiree in the 1960s to roughly three workers for each retiree in the 90s. This ratio is projected to fall to roughly two workers per retiree by 2030 (not 2025, as readers of the Trustees report know).
On average we were much richer in the 90s than in the sixties, in spite of the fall in the ratio of workers to retirees. The same will be true in 2030, even assuming that we see the projected decline in the ratio of workers to retirees.
A small fact that Samuelson never mentions in this piece is that the Congressional Budget Office projects the program to be fully funded through 2038, with no changes whatsoever (i.e. no new taxes, contra Samuelson). If we want to make the program fully solvent for the rest of the century, a tax increase that is equal to 5 percent of projected wage growth over the next three decades should be roughly sufficient to do the trick. Are you scared yet?
There is an issue that most workers have not shared in the economy’s growth over the last three decades. This is indeed a problem. If recent trends in inequality persist then any increase in Social Security taxes will be a burden, but the problem here are the policies that have brought about this upward redistribution of income, not Social Security.
Then Samuelson gives us his coup de grace:
“Although new recipients have paid payroll taxes higher and longer than their predecessors, their benefits still exceed taxes paid even assuming (again, fictitiously) that they had been invested. A two-earner couple with average wages retiring in 2010 would receive lifetime Social Security and Medicare benefits worth $906,000 compared with taxes of $704,000, estimate Steuerle and Rennane.”
Okay, this is a really nice trick. Remember we were talking about Social Security? Note that Samuelson refers to “lifetime Social Security and Medicare benefits.” It wasn’t an accident that he brought Medicare into this discussion. That is because Steuerle and Rennane’s calculations show that this average earning couple would get back less in Social Security benefits than what they paid in taxes. That would not fit well with Samuelson’s story, so he brings in Medicare (remember this is the Washington Post).
And, the high cost of Medicare benefits is not due to their great generosity. The high cost is due to the fact that we pay our doctors, our drug companies, and our medical equipment suppliers way more than do people in any other country, and we have no better outcomes. If our per person costs for health care were comparable to costs in Germany, Canada, the UK or any other wealthy country, then workers would be paying far more for their Medicare benefits than the cost of what they are getting in care.
The story here is that Samuelson wants to punish ordinary workers for the fact that we pay doctors and the other big winners in this story too much. That may not make sense, but they don’t call this paper “Fox on 15th Street” for nothing.
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The lies about the 1967 war are still more powerful than the truth
By Alan Hart | June 4, 2012
In retrospect it can be seen that the 1967 war, the Six Days War, was the turning point in the relationship between the Zionist state of Israel and the Jews of the world (the majority of Jews who prefer to live not in Israel but as citizens of many other nations). Until the 1967 war, and with the exception of a minority of who were politically active, most non-Israeli Jews did not have – how can I put it? – a great empathy with Zionism’s child. Israel was there and, in the sub-consciousness, a refuge of last resort; but the Jewish nationalism it represented had not generated the overtly enthusiastic support of the Jews of the world. The Jews of Israel were in their chosen place and the Jews of the world were in their chosen places. There was not, so to speak, a great feeling of togetherness. At a point David Ben-Gurion, Israel’s founding father and first prime minister, was so disillusioned by the indifference of world Jewry that he went public with his criticism – not enough Jews were coming to live in Israel.
So how and why did the 1967 war transform the relationship between the Jews of the world and Israel? … continue
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