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New York Times’ Flawed Argument for Higher Wages

The New York Times ran a long editorial over the weekend arguing that higher wages can cause economic growth instead of its always having to be the other way around. The basic argument is succinct if conclusory: “Consumption drives the American economy, and workers who are paid more can spend more.”

The contrary view that wage growth will in the long run follow productivity growth is, the Times claims, mistaken: Since 1970, wages have increased much less than productivity. In saying that, it links to another Times story that, oddly, says nothing about productivity and includes no references to wage trends prior to 2000. That story does, however, make the related claim that workers’ share of national income dropped in the U.S. between 2000 and 2015. But these claims are misleading. Wages and productivity have not decoupled in recent decades, and the labor share of income has not been unusually low in recent years.

The editors of the Times further stack the deck for government-directed wage increases by misstating the argument against them. For decades, they say, the conventional wisdom has held that higher wage minima “would raise unemployment because there was only so much money in the wage pool, and if some people got more, others would get none.” This is not true. The reason a higher minimum wage is thought to cause higher unemployment is a straightforward matter of supply and demand: Raise the price of labor and its purchasers will buy less of it. It is certainly possible that this effect will be small, or that it will be considered worth it for the higher wages that some workers will receive; but the argument does not require there to be a fixed amount of money available for wages.

The Times itself used to editorialize against raising the minimum wage because it would cost some people their jobs — and when it did, it said nothing about there being “only so much money in the wage pool.” In 2019, the Congressional Budget Office found that raising the minimum wage to $15 an hour would increase workers’ earnings by a net $44 billion while still causing 1.3 million people who otherwise would have been employed to go jobless. The increase in unemployment just isn’t based on an assumption of flat payrolls.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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Coronavirus Relief: Bipartisan Senate Group Stimulus Compromise

(Jim Young/Reuters)

I have a running theory that government officials, and the policies they support, are often disconnected from reality. Politicians on both sides of the aisle tend to do what they always do, no matter the current state of the world. They use the same policy tools, whether appropriate or not. They use every opportunity and emergency to push the same old policies they always peddle. And even when they claim they are reforming a program or an agency, they continue to serve the same special-interest groups. This alleged $908 billion compromise deal that includes state, Amtrak, airlines bailouts, unemployment bonuses, childcare subsidies, and a renewal of the PPP is a good example of that.

A few weeks ago, I wrote about how the Democrats’ Heroes Act — its size, its design, and the programs it includes — is oblivious to the improved economic conditions. They have been pushing this package when the unemployment rate was 14 percent, when unemployment rate was 10 percent, and when, at the end of October, the unemployment rate had fallen to 6.8 percent. They will continue pushing the same package of large unemployment bonuses, individual checks, and state and airline bailouts even if unemployment falls to 5 percent or less. The White House at the time seemed willing to go along with a big chunk of that Democratic wishlist.

This new $908 billion compromise is “only” 40 percent of the size of the Heroes Act, but it is still disconnected from what is happening in the real world. It is renewing many problematic programs fueled by the belief, I am sure, that the economy can stay on ice for months as long as it is sustained by government spending. I am sure the restaurants that benefited from PPP but have closed permanently have a different perspective on this issue.

To their credit, with this latest act, politicians are not double dipping in the same way as was done with the CARES Act and the Heroes Act — each of which dispensed both individual checks and unemployment bonuses. Little good can come from having individual incomes rise above their usual levels while many people aren’t working and the economic activity is constrained by government lockdowns or consumers’ behaviors. Restricting supply and subsidizing demand may be what government often does but it isn’t a good idea, as Arnold Kling notes.

Sadly, though, of the two programs, they picked with this recent act the one that creates the most disincentives to work. What’s more, since 1975, the unemployment rate has averaged 6.3 percent — it is forecast to be 6.8 percent for November. I am sorry, but extending and expanding UI — at a scale that is out of whack with past expansions — when the unemployment rate is close to the historical average is simply wrong.

Our leaders on the Potomac want to bail out state governments to the tune of $160 billion. I have written here and here why I think such bailouts are a bad idea. Chris Edwards at Cato also points out that state revenues fell less than feared and are going up again. It is also a serious missed opportunity as my colleague Tracy Miller recently wrote:

 When revenue declines, this gives state and local governments, like businesses, an opportunity to become more efficient. There is no need to cut essential services like police, fire and sanitation, which account for just 7% of state and local government budgets. Most state and local governments have lower-value or nonessential programs, and can also consider tough emergency measures such as temporarily freezing salaries, furloughing workers and delaying highway spending and new initiatives.

State and local governments should also being using the pandemic to go after long-standing regulations that inhibit business formation and employment (e.g., occupational licensing).

But the cherry on top in this proposal is this: In addition to the fact that the economy is growing even as government spending is down and that business startups are soaring, the situation has entirely changed in the last three weeks. We now have three vaccines with what looks like high efficacy. Policymakers’ singular focus should be on getting them approved, manufactured, and distributed to health-care workers, the elderly, those with comorbidities, retail employees, teachers, Uber drivers, and others.

Yet, 1.7 percent of this bill — or $16 billion according to the COVID Framework document presented this morning — is specifically about manufacturing vaccines, distribution, and testing (and please spare me the argument that the airline bailout is about vaccine distribution because it is not).

I have seen reporting that $50 billion of the total bill is to manufacture and distribute vaccine. If that’s the case, the share of the bill going to answering the question, “How do we get the vaccine to people as fast as possible?” increases to 5.5 percent. By the way, funding for education, which includes money to schools that have been failing American children for months, is $82 billion.

If spending bills are a reflection of politicians’ priorities, Americans are getting a clear signal that these politicians have incredibly messed-up priorities with very little focus on what should matter the most right now. This compromise is about business as usual. It’s about spending money on the stuff politicians always want to spend money on. The fact that some Democrats are willing to spend less than they wanted and that Republicans are willing to spend more than they should is not noble. It’s politics.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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Coronavirus — CDC: A Few Americans Caught COVID-19 in December and Early January

Centers for Disease Control and Prevention headquarters in Atlanta, Ga. (Tami Chappell/Reuters)

When the pandemic really shut down U.S. daily life in March, lots of Americans described getting either a bad cold or what they thought was the flu the previous winter and speculated that they may have caught COVID-19 — in some cases, before the first confirmed U.S. case in January.

New data from the U.S. Centers for Disease Control and Prevention suggest that belief may not be so unlikely. “Scientists at the CDC found evidence of infection in 106 of 7,389 blood donations collected by the American Red Cross from residents in nine states across the U.S., according to the study published online in the journal Clinical Infectious Diseases.” These samples used in the study were collected between December 13, 2019 and January 17, 2020. While that’s only 1.4 percent of the Red Cross samples, it does indicate that some Americans had already caught SARS-CoV-2 before the first confirmed case, detected on January 19 in a returned traveler from China.

With that said . . . there’s still a really good chance that your bad cold or the flu last winter was just a bad cold or the flu.

A study published last month in the Journal of the American Medical Association did an extensive study of antibody tests and found . . . so far, only a small fraction of Americans have caught the virus and have the antibodies:

In this repeated, cross-sectional study of 177,919 residual clinical specimens, the estimated percentage of persons in a jurisdiction with detectable SARS-CoV-2 antibodies ranged from fewer than 1 percent to 23 percent. Over 4 sampling periods in 42 of 49 jurisdictions with calculated estimates, fewer than 10 percent of people had detectable SARS-CoV-2 antibodies.

The tests were conducted across all 50 states, the District of Columbia, and Puerto Rico  and selected from four periods: July 27 to August 13, August 10 to August 27, August 24 to September 10, and September 7 to September 24, 2020.

The highest prevalence of antibodies — 23.3 percent — came in New York State in the first period, but “in nearly all jurisdictions, fewer than 10 percent of people in the US had evidence of previous SARS-CoV-2 infection using currently available commercial IgG assays.”

For much of this past year, we’ve seen arguments about whether the U.S. official statistics were giving an accurate picture of just how many Americans had caught the virus. Up until testing became widely available, it was mostly self-selecting — Americans either sought out a test, or ended up sick in a hospital and were tested. The theory was that there were significant numbers of Americans who were either asymptomatic or minimally symptomatic who were not going to get tests — and that discussions of the positivity rate of coronavirus tests missed vast swaths of Americans who caught the virus, were asymptomatic, and probably never knew they caught it. Quite a few folks believed that this meant that either herd immunity had been reached or reaching herd immunity was imminent.

If we have about ten percent of the population testing positive for antibodies, as that JAMA study suggests, and we have had three weeks of 140,000 or more new infections per day, then no, we are not that close to herd immunity. At least, not yet.

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Trump to Georgia’s Governor: ‘Call Off Election. It Won’t Be Needed’

President Donald Trump speaks during the second presidential campaign debate in Nashville, Tenn., October 22, 2020. (Jonathan Ernst/Reuters)

The latest thoughts on the Georgia elections from President Trump:

Once again, every signature of every absentee voter in Georgia was checked twice. When a registered voter requests an absentee ballot, the signature on the ballot request is compared to the signature on the voter-registration card. Then, when the absentee ballot arrives to the county clerk, the signature on the absentee ballot oath envelope is compared a second time to the signature on the voter registration card and to the signature on the absentee-ballot request.

The consent decree signed earlier this year requires Georgia election officials to consult with their peers on mismatching signatures, to ensure one official isn’t making subjective assessments of a signature match. “A mail-in absentee ballot shall not be rejected unless a majority of the registrars, deputy registrars, or absentee ballot clerks reviewing the signature agree that the signature does not match any of the voter’s signatures on file in eNet or on the absentee ballot application.” If the absentee ballot is rejected, officials are required to notify the voter within three days with an “opportunity to cure” — that is, sort out whether they really are who they say they are, and work out whatever problem led to the rejection of the ballot.

The Georgia state constitution states, “Elections by the people shall be by secret ballot and shall be conducted in accordance with procedures provided by law.” Thus, once a ballot is determined to be valid, it is separated from the envelope with the signature: “Once an election worker counting votes opens your envelope and takes out your ballot, there is no way to re-connect them. Counties do keep the envelopes for records purposes, according to Gabriel Sterling in the Secretary of State’s Office, but again – there’s no way to connect an envelope with your signature back to your ballot.”

The Trump campaign has yet to prove that tens of thousands of signatures do not match and represent ballots cast illegally. And it would require more than ten thousand fraudulent votes to call the validity of the election results into question. According to the official results after a second recount, Trump lost the state of Georgia by 12,670 votes. Republican senator David Perdue fell 13,471 votes short of 50 percent, which would have avoided a runoff election.

Trump’s statement, “Then call off election. It won’t be needed. We will all WIN!” is nonsensical. The second Georgia Senate race was a “jungle primary,” where all candidates were listed and if no one reached 50 percent, the top two finishers went to a runoff. The top vote-getter in the November Senate race was Democrat Raphael Warnock, by a wide margin. Warnock won 343,821 more votes than Kelly Loeffler – in part because Republicans were split between two major candidates, Loeffler and Doug Collins.

Georgia law requires those runoffs. The secretary of state cannot willy-nilly decree that runoffs are not needed. Loeffler won 1,273,214 votes, or 25.9 percent of all votes cast. For that sum to represent 50 percent, the Republican Party would have to prove that 2.63 million votes cast in Georgia were fraudulent.

When you point out all of these facts and the law, a lot of people will call you a Trump hater or accuse you of having “Trump Derangement Syndrome.” But the facts and the law do not hate anyone, they are not deranged, and they are all posted online. You will notice a lot of links above, to primary sources, including the state’s legal code. The laws and regulations about Georgia’s elections and absentee ballots are not written in Sanskrit and hidden away in some vault.

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Georgia Senate Runoff — New Perdue Ad Says a GOP Win Will ‘Save America’

In a new television ad out this morning, Republican senator David Perdue outlines the stakes in his reelection bid against Democratic opponent Jon Ossoff. Perdue and Ossoff are competing in one of two runoff Senate races in Georgia, the outcome which will determine whether the GOP maintains its Senate majority.

The ad opens with clips of two Democrats stating that winning the Senate races in Georgia is key to accomplishing the party’s policy goals with a Democratic White House. “Now we take Georgia, then we change America,” says Senate minority leader Chuck Schumer (D., N.Y.).

“We win these races in Georgia so that we don’t have to negotiate,” Representative Alexandria Ocasio-Cortez (D., N.Y.) adds.

The beginning of the ad echoes the themes in a mid-November TV ad from the Perdue campaign, in which the sitting Republican senator insisted that “total Democratic control” is the Left’s goal. In this video, Perdue makes the same point: “Chuck Schumer, Nancy Pelosi, and Jon Ossoff want total control. They win Georgia, they’ll have it.”

The Republican senator and former businessman goes on to highlight a list of radical policy goals that a Democratic Senate likely would champion. “Police defunded. Taxes sky-high. Our proud military gutted,” Perdue says. “Your private health insurance taken away. Small businesses out of business. The Supreme Court packed. Is any of that really what you want?”

“We’re the only ones left who can stop them,” the ad concludes. “We win Georgia, we save America.”