GDP Growth Helps Poor Countries More Than Those That Are Already Rich

Money can’t buy you love, says the song, but can GDP buy prosperity? The question is an important one given the emphasis that the White House and Congress have placed on pushing GDP growth to its limits.

What do the data say? My favorite measure of overall prosperity is the Social Progress Index (SPI), which has just been updated for 2018. The SPI is a comprehensive measure of human flourishing that draws on a broad set of indicators of public health, education, safety, human rights and personal freedoms. It purposely omits purely economic indicators such as GDP, inflation, or income distribution, which makes it especially well-suited to address the question of how GDP is related to noneconomic indicators of prosperity.

The following chart shows the relationship between the SPI and GDP for the 146 countries in the SPI database. The horizontal axis measures 2018 GDP per capita using estimates from the July 2018 update of the IMF’s WEO database, expressed I 2011 constant dollars at purchasing power parity.

Why Do So Many Teachers (and Others) Work Second Jobs? An Explainer

When the latest report on the employment situation arrived last week, most commentary focused either on job creation (a healthy 200,000) or the unemployment rate (unchanged at 3.9 percent). Beneath the surface, though, there were many other signs of growing strengths and remaining weaknesses in U.S. labor markets. One of these was a strong uptick in the number of people holding multiple jobs. Is that a good sign, or a bad one?

The idea that multiple job holders are a sign of crisis is fueled in part by stories like one in the New York Times about school teachers who work second jobs to make ends meet:

There are times when my lower back hurts, my feet hurt, my hands hurt. I have calluses on my hands that I shouldn’t have. You really don’t have much in the way of free time, and when you do, you’re consumed by housework, but you basically just sit on the couch like a big blob, and then I feel guilty about doing that. (Shauntel Highley, English teacher/window washer, Vinita, Okla.)

Some business analysts, too, are wary of the rise in multiple job holders. As Komal Sri-Kumar puts it in a piece for Business Insider,

In a robust economic recovery, the number of full-time workers should be rising, and the number of workers employed part-time or holding multiple jobs, should decline. The rise in the number of multiple job holders is troubling, and is yet another signal that there is still slack in the labor market.

Yet, if we look at the data, the rise in multiple jobholders looks less dire than these accounts suggest. The first thing we learn is that although multiple jobholders are not rare, they are not as common as the impression you might get the media. Currently, multiple jobholders account for just 4.8 percent of the labor force. These include 2.6 percent who hold a part-time job in addition to a full time job — a pattern called FT/PT — and another 1.1 percent who piece together two or more part time jobs, or PT/PT. Smaller numbers work two full-time jobs or hold multiple jobs that are unclassified because they vary in hours from week to week.

Administration Supports Elimination of Pre-existing Conditions Protections

Last week, a Texas judge heard oral arguments in a case brought by state attorneys general against the Affordable Care Act (ACA). The suit aims to overturn the ACA in its entirety on the dubious grounds that since Congress has eliminated the penalty for not having insurance, a key provision of the act, it thereby invalidated the act as a whole.

The Department of Justice, which supports the lawsuit in part, wants to keep the ACA on the books but does support elimination of one key provision — the guarantee that people will get full coverage for pre-existing conditions without paying higher premiums. But that is the scariest part of the lawsuit. As a recent tracking poll from the Kaiser Family Foundation confirms, an overwhelming majority of people support the pre-existing conditions proviso.

There is some cold economic rationality in tying pre-existing conditions protections to the penalty for not having insurance. The link between the two is a phenomenon known in insurance circles as adverse selection. Adverse selection occurs when people with high exposure to risk buy insurance. Since such people are likely to have large claims, insurance companies must charge high premiums. High premiums encourage more people to drop coverage, and the insurance market enters a death spiral.

No, Health Care for All Would Not Turn Us into a Venezuela

In a recent editorial for the Wall Street Journal, James Freeman plays the red scare card against Bernie Sanders’ Medicare for All (M4A) plan, which he compares to the policies of “Venezuela’s Nicolás Maduro, whose mania for wealth redistribution has brought a country to its knees.”

Freeman gets the causation backwards. Venezuela is not in crisis because Maduro has been too generous with socialist goodies like health care. Quite the opposite. The Lancet reports that from 2010 to 2014, Maduro slashed health care spending by a third — and then stopped the publication of official statistics. Since then things have only gotten worse. Collapse of the health care system is one of the major reasons Venezuelans are fleeing their country by the tens of thousands every day.

But enough of Venezuela. Freeman misses the point about Sanders’ health care plan in more important ways, as well.

It is true that M4A would be expensive. Freeman relies on a study by Charles Blahous for the Mercatus Center, which estimates that M4A would cost taxpayers $32.6 trillion over ten years, even after positing substantial savings in total national health care spending. A more detailed study by Jodi Liu for RAND (of which Blahous appears not to have been aware when he wrote his Mercatus paper) comes in a significantly lower. It estimates that a baseline version of M4A would add about $1.8 trillion a year to net federal healthcare spending without cost savings and $1.7 trillion a year with. (Those numbers assume that current revenue sources for health care remain in place but do not include any proposed new revenue sources.) A trillion here, a trillion there — either way, it’s real money.

The EPA's SAFE Vehicle Rule Poses a False Choice. We Can Have Safe Vehicles AND Clean Air.

The EPA has released a proposed rule that would freeze corporate average fuel economy (CAFE) standards at 37 miles per gallon, rather than allowing them to rise to the Obama administration’s target of 54 MPG, as currently scheduled. The administration’s  proposal has the cute name of Safer and Affordable Fuel-Efficient Vehicles Rule, or “SAFE Vehicle Rule,” for short.

The proposed rule has been widely panned by environmentalists, and rightly so. However, the critics of the rule are wrong simply to defend the existing CAFE standards. The EPA’s analysis of the flaws of those standards is justified. But neither the EPA nor its critics are reaching the right conclusion, which is that we should repeal CAFE standards and replace them with a carbon tax — one tough enough to reduce carbon emissions by as much, or more, without the unintended consequences.

Is That Government Best Which Regulates Least?

In a recent post, I questioned Henry David Thoreau’s aphorism, “That government is best which governs least.” The data, it seems, show something different. Countries with small governments, as measured by the share of expenditures and taxes in GDP, tend actually to be somewhat less free and prosperous than those with larger governments. The quality of government, as measured by things like rule of law, independent judges, and integrity of government officials turns out to matter much more than the size of government. I concluded that Thoreau’s aphorism should be revised to read, “That government is best which governs well.”

In response, several readers questioned whether the size of government, as measured by spending, was the right measure of “governs least.” Excessive regulation, they pointed out, may do more damage than spending and taxes. Maybe what we should say is, “That government is best which regulates least.”

Niskanen Center’s Will Wilkinson puts it this way:

Whether a country’s market economy is free — open, competitive, and relatively unmolested by government — is more a question of regulation than a question of taxation and redistribution. . .
If we want to encourage freedom and prosperity, we should pay more attention to easing the grip of the regulatory state.

The point is a good one — worth putting to the same kind of statistical test used in the previous post. Here we go:

More on Work Requirements: A Response to AEI

An op-ed by Angela Rachidi and Robert Doar in Real Clear Policy, reprinted on the American Enterprise Institute’s blog, challenges some points I made about the effects of work requirements in my commentary on the topic last week. Rachidi and Doar’s critique focuses on the interpretation of data from the National Evaluation of Welfare to Work Strategies (NEWWS), which analyzed the results of 11 controlled experiments conducted around the country in the 1990s. Each experiment compared the experience of a group of welfare recipients who were subject to work requirements with a control group who did not face work requirements.

Rachidi and Doar point out that some of the programs were “jobs-first” programs that placed a primary emphasis on job placement, while others were “education-first” programs that emphasized human capital development before job placement. They claim that only the jobs-first variants are relevant to today’s debate over work requirements for noncash welfare such as SNAP, Medicaid, and housing assistance. Linking specifically to my commentary, they maintain that critics:

incorrectly cite the results from the education-focused programs, which were found to be largely ineffective compared to jobs-first programs, to suggest that work requirements would not be effective today in SNAP or Medicaid. The education-first programs are largely irrelevant to today’s discussion of extending work requirements to other safety-net programs — no one proposes that recipients be required to go to college in order to receive SNAP or Medicaid.