Here’s What’s Going Right, and Wrong, in the U.S. Economy

New York Times: “Seven years into the economic recovery and three months before a presidential election, how is the United States economy doing?”

What’s going right?

“Overall G.D.P. was better than it looks… If we look at ‘final sales,’ G.D.P. excluding inventories, the economy grew at 2.4 percent, a nice rebound from the winter months and in line with forecasts. Final sales tends to be a better measure of the underlying rate of growth, while inventories swing around without reflecting any long-term trend.”

“Consumers are spending money. The largest component of the economy, personal consumption expenditures, grew at a whopping 4.2 percent rate in the second quarter.”

“Wages are rising more quickly… The wages and salary component of compensation is now up 2.5 percent over the last year; that same reading was only 2 percent in the second quarter… Worker pay is not just rising; it’s also starting to rise at a faster pace.”

What’s going wrong?

“Business investment is contracting… Things aren’t looking so great in the business sector. Investment in business structures, equipment and intellectual property fell for the third consecutive quarter.”

“Productivity growth is poor… This has been disappointing for several years for reasons economists don’t entirely understand. But the latest data suggest it will turn out to be even worse than that in the first half of 2016.”

 

Don’t Wait for Washington to Fix Health Care

Real Clear Policy: “Democratic and Republican governors know that rising health-care costs — for public employees and those with Medicaid — are, increasingly, restricting spending on other state priorities, from education to roads and bridges. They also know a bitterly divided Washington is unlikely to provide any help any time soon. Yet there are plenty of levers governors can pull to help bring costs in line, especially by increasing competition in health-care markets.”

“1. Incorporate reference pricing for common procedures and tests into state benefit designs… The Health Care Cost Institute estimates that as much as 43 percent of spending through employer-based coverage is attributable to potentially “shoppable” services that could benefit from tools like reference pricing.”

“2. Ban anti-tiering provisions. Large hospital systems can use their leverage to prevent insurers from offering patients lower co-pays at less expensive in-network hospitals (a strategy called tiered networks).”

“3. Drive price transparency by setting up an all-payer claims database (APCD). APCDs collect information on all health-care claims paid from all payers. Pricing information allows consumers, employers, and providers to shop for the best values.”

“4. Expand Access to Direct Primary Care, including for Medicaid patients.”

“5. Repeal regulations that hamstring competition. States should repeal certificate of need laws, which protect incumbent hospitals from competition, and prohibitions on the corporate practice of medicine, which prevent for-profit companies from buying and reorganizing health care firms.”

The Independence of the Fed Is Being Undermined

Hoover Institution: “A number of proposals have been put forward to reform the Fed. But I see disturbing trends in how Congress and others seem to envision the appropriate role for our central bank. In particular, Congress has been using the Fed to explicitly avoid tough fiscal choices. This undermines the independence of the Fed with potentially dangerous repercussions.”

“The most recent encroachment on Federal Reserve independence is perhaps the most serious. Last fall, Congress chose to fund a portion of a highway-transportation bill using the capital surplus account at the Fed and reducing the dividend payments to those large banks that have chosen to be member banks. This is poor policy from a number of perspectives. First, transportation infrastructure spending has typically, and correctly, been funded by taxes on users. This practice has now been abandoned. Worse, this action is further evidence that Congress increasingly seems to think of the Fed as a source of funding for fiscal initiatives. Central bank independence is incrementally being eroded.”

“Particularly troubling is the fact that the Fed has not put up much of a fight. Independence is a fundamental principle of sound central banking. The Fed should protest more vigorously and make clear to the American public the risks of such actions.”

For Democrats, Now May Be the Time for Tax Reform

Philly Inquirer: “Democrats would be wise to take a page from the Republican playbook by making serious tax reform a cornerstone of their political agenda. In fact, there’s no reason Democrats shouldn’t want to put their stamp on comprehensive tax reform. It not only aligns with their commitment to everyday families and businesses; it’s a powerful policy prescription for our still-ailing economy. It’s hard to think of an issue that will play better with voters and do right by them.”

“What does comprehensive tax reform look like?”

“To start, lower rates for businesses and families. The United States holds the unenviable title of highest corporate tax rate among nearly all economically developed countries across the world. That means honest businesses have less to invest back into the levers that grow the economy – equipment, human capital, and other resources.”

“Second, serious reform must uniformly eliminate loopholes and special-interest breaks and subsidies. This is a point Democrats have long championed (albeit with varying levels of sincerity).”

“Finally, comprehensive reform must succeed in simplifying the tax code. At close to 75,000 pages – nearly three times as long as when it was last reformed, 30 years ago – the sheer complexity of the tax system has become a barrier to economic growth. Compliance costs now top $234 billion, a recent analysis by the National Taxpayers Union Foundation found.”

5 Facts About Hillary Clinton’s Candidacy

Pew Research Center: “Here’s a roundup of key Pew Research Center findings on views of Hillary Clinton, her politics and the impact she would have on Washington.”

“1) More voters say they know a lot about where Clinton stands on important issues than say the same about Trump.”

“2) Few voters think gender will hurt Clinton this fall. Only about one-in-ten registered voters (12%) say the fact that Clinton is a woman will hurt her this fall. Most say it will either help her (40%) or not make a difference (45%).”

“3) Supporters and opponents see Clinton’s political views differently.”

“4) Many voters – including many of her supporters – doubt Clinton will change Washington much.”

“5) Democrats feel warmly toward Clinton, while Republican views of her are very cold. Hillary Clinton is a polarizing figure in U.S. politics.”

Obama Economy Left Behind the Backers That Clinton Needs to Win

Bloomberg Politics: “The young people and minorities who propelled President Barack Obama into office have lagged behind the economic recovery he’s shepherded, with blacks and Hispanics continuing to lose wealth even as whites gained after the recession.”

“That’s posing a special challenge for Hillary Clinton, who’s vowing to largely continue Obama’s fiscal policies even as she counts on his coalition to keep the White House in Democratic hands. Economic data suggest these voters could be ripe for the picking by Republicans — but for one thing… She’s running against Donald Trump.”

 

Republicans and Democrats in Congress Speak in Completely Different Languages

New York Times: “Republicans and Democrats aren’t just polarized on policy. To an unprecedented degree, they also speak different languages.”

“That is the conclusion of three economists who used computers to parse 136 years of transcripts of congressional speeches. They identified phrases used disproportionately by members of one party or the other, and tested the degree to which use of those ‘partisan phrases’ accurately predicted the affiliation of a member of Congress — in other words, the degree to which Republicans and Democrats effectively have a language of their own. They found that language polarization skyrocketed in the mid-1990s, when Newt Gingrich and Bob Dole led Republican majorities in both chambers of Congress.”

“What has changed? One possibility is that it’s less about political polarization per se, and more about parties that are becoming more disciplined in the art of using language to their advantage.”

American Views on Muslims Are Deeply Polarized, But Evolving

Brookings Institution: “When asked if they hold a favorable attitude towards Islam… there is a 40-point gap between Republicans and Democrats in general (24 percent of Republicans and 64 percent of Democrats). But the gap widens to 50 points between Clinton supporters (66 percent have a favorable view) and Trump supporters (16 percent), specifically.”

“Similar divides manifested on questions about the compatibility of the Islamic and Western religions and societies, with 13 percent of Clinton supporters believing in a so-called clash of civilizations and 62 percent of Trump supporters believing it. That is a 41-point gap.”

Despite this deep polarization, views on Muslims seem to be evolving.

“This finding seems perplexing on its face, since one might expect that prominent anti-Muslim rhetoric in the wake of the shooting might have swayed Americans towards more negative opinions. As Telhami has suggested, this poll may be an indication that Americans are pushing back against that rhetoric. “

U.S. Mass Shootings Have Gone Up, Particularly During the Summer

Quartz: “There was another mass shooting in Florida this week. It seems like this is happening more and more, that this is shaping up to be an awfully bloody summer in the US. What is it? Does the oppressive summer heat bring this on? Are things really worse or is everything just more heightened after a spate of bad news?”

“So how does this summer compare to the last few? As of July 25, 574 people in the US were killed or wounded during a mass shooting. This time last year, there were 432. Last summer in total: 639. No matter how you count, it’s not looking good.”

This Time, Post-War Iraq Needs a Real Plan With Real Money

Defense One: “Military triumphs are unlikely to lead to an enduring peace without an essential component that isn’t as impossible as it sounds: reconciliation.”

“The U.S., the counter-ISIS coalition and international civilian agencies supporting Iraq have an opportunity to bolster that element of the strategy when they meet in Washington, DC, starting Wednesday.”

“While it’s obviously critical to provide electricity and water, and to build health clinics and schools, it also is essential that the conflicts underlying the destruction be understood and addressed.”

“Yet, the reconciliation component of the U.N. stabilization fund has received only $1.55 million from donors. Given the significant U.S. military investment of roughly $11.2 million a day to fight ISIS, it seems only prudent as part of the overall strategy to invest in a low-cost approach that gives military action the greatest chance for a lasting success, so that American forces don’t have to engage in combat again later.”

What If Brexit Was Only the Beginning?

A must-read piece from the Boston Consulting Group:

“In polls, sizable majorities in the United States and key European countries now demand a reorientation around narrow national interests, proclaiming, ‘Let other countries deal with their own problems.’ As more people feel left behind by economic progress, this sentiment could grow and percolate into politics and then policy. And such policies could prove to be contagious across nations.”

“Firms could soon find themselves in an environment of escalating political risk in terms of trade, access to talent, regulatory rules and constraints, and restrictions on new technologies. Political uncertainty could become the major business risk, compromising firms’ ability to innovate, to access markets and talent, and to invest and create wealth.”

“In short, it appears that many are so dissatisfied with the current game that they are threatening to end it, even at significant cost to themselves, thereby jeopardizing two major drivers of global economic prosperity: globalization and technological progress.”