Archives: 03/2018

How the World Trade Organization Can Curb China’s Intellectual Property Transgressions

Quite rightly, President Donald Trump and his Administration are targeting the transgressions of China against US intellectual property rights in their unfolding trade strategy. But why not use the WTO rules that offer a real remedy for the United States without resorting to illegal unilateral action outside the WTO?

Seventeen years after China joined the WTO, China still falls considerably short of fulfilling its WTO obligations to protect intellectual property. About 70 percent of the software in use in China, valued at nearly $8.7 billion, is pirated. The annual cost to the US economy worldwide from pirated software, counterfeit goods, and the theft of trade secrets could be as high as $600 billion, with China at the top of the IP infringement list. China is the source of 87 percent of the counterfeit goods seized upon entry into the United States.

One possible response by the United States is the one the Trump Administration seems to be taking: slapping billions of dollars of tariffs on imports of more than 100 Chinese products through unilateral trade action. Given its protectionist predilections, taking this approach is surely tempting to the Trump Administration. Doing so will, however, harm American workers, businesses, and consumers, and contribute to further turmoil in the global economy.

Study: Medical Expenses Cause Close to 4% of Personal Bankruptcies—not 60%

A new study by economists Carlos Dobkin, Amy Finkelstein, Raymond Kluender, and Matthew J. Notowidigdo – “Myth and Measurement — The Case of Medical Bankruptcies” [subscription required] – challenges the conventional wisdom on the effect of medical bills on the rate of personal bankruptcy. From the study:

Policymakers’ beliefs about the frequency of medical bankruptcies are based primarily on two high-profile articles that claim that medical events cause approximately 60 percent of all bankruptcies in the United States. In these studies, people who had gone bankrupt were asked whether they’d experienced health-related financial stress such as substantial medical bills or income loss due to illness. People were also asked whether they went bankrupt because of medical bills. People who reported any of these events were described as having experienced a medical bankruptcy…

[But] the existing, widely cited evidence on medical bankruptcy is built on the fallacy that when two things occur together there is necessarily a causal relationship between them.

The study’s authors looked instead at people who had a hospitalization to see whether that expensive episode of care increased the probability of filing for bankruptcy. They write, “we estimate that hospitalizations cause only 4 percent of personal bankruptcies among nonelderly U.S. adults.” Even among uninsured adults, “hospitalizations are responsible for only 6 percent of personal bankruptcies.” While medical bills can still drive someone to bankruptcy even if they don’t experience a hospitalization, the authors conclude, “focusing on hospitalized people probably does not lead to vast underestimation of the effect of all illness and injury on bankruptcy rates.”

Takeaways:

  1. Always be skeptical of everything you read. (Up to and including this blog!)
  2. Keep in mind this study does not show the overall personal bankruptcy rate is lower than believed. It shows only that the share attributable to medical expenses is lower than believed. It therefore follows that, to the extent your support for single-payer springs from a desire to reduce bankruptcies, you should shift your energies toward combating whatever is actually causing the 56 percent of bankruptcies you incorrectly believed to be attributable to medical expenses.
  3. Health care reform should be able to get the medical-bankruptcy rate down even more.

States & HHS Can Provide Relief from ObamaCare while Congress Dithers

Congress appears unwilling to provide any sort of ObamaCare relief. 

But did you know states can exempt their residents from ObamaCare’s costliest regulations simply by letting them purchase insurance licensed by U.S. territories—i.e., across state lines? 

Or that the Trump administration has the authority to provide even more relief from ObamaCare than last year’s Cruz Compromise would have, just by reversing HHS’ administrative ban on renewal guarantees in short-term plans? 

Well, now you do. From my latest oped in The Hill:

States and the Trump administration each have the power to deliver relief from ObamaCare while Congress dithers.

In 2014, the Obama administration reversed its interpretation of ObamaCare and found the law’s costliest regulations do not apply in U.S. territories. As a result, states can provide relief from ObamaCare by freeing individuals and employers to purchase health insurance licensed by American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands.

The Obama administration’s reversal also provides a model for the Trump administration. HHS has the authority to and should reverse its administrative ban on short-term health plans offering “renewal guarantees.” Ending that ban would dramatically reduce premiums for the vast majority of consumers in the individual market, even as ObamaCare premiums continue to skyrocket. Conservative states and states with vulnerable GOP members like Florida, Illinois, and Pennsylvania would see the largest premium reductions. 

Read the whole thing.

Trump to Impose Restrictions on Imports and Investment from China

This afternoon, for the second time in the space of a month, President Trump is expected to invoke his authority under a rarely used statute to levy restrictions on a vast swath of imports and investment from China. The cause for today’s measures is behavior that the U.S. Trade Representative has characterized as rampant, sustained theft of U.S. intellectual property by Chinese entities and the Chinese government.

Although allegations—and the evidence supporting those allegations—that China routinely transgresses in the realm of intellectual property have been accumulating for many years, it does not follow that the appropriate response is to restrict trade and investment. In fact, the collateral damage inflicted by those restrictions will be widespread.

President Trump’s “remedies” are likely to raise production costs for U.S. businesses, diminish U.S. productivity, squeeze real household incomes, reduce the revenues of U.S. farmers and other export-dependent industries targeted by Chinese retaliation, exacerbate tensions with China and other countries adversely affected by the restrictions, and hasten the demise of the rules-based trading system.

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Disciplining China at the WTO

The scope of the Trump administration’s Section 232 “national security” tariffs is filled with uncertainty – exemptions are being negotiated this week – but we are already on to the next set of aggressive trade moves: reports suggest that the administration will announce tariffs on imports of Chinese products today, as punishment for China’s alleged unfair trade practices. This would be a unilateral response to China’s practices, with the U.S. Trade Representative acting as the judge, jury, and executioner. This approach may not be all that effective in getting China to change, and risks retaliation by China.

But there is another way: Bring complaints against China to the WTO, and get rulings from a neutral arbiter on these practices.

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Maryland School Shooting Complicates the School Safety Movement

This week, a seventeen-year-old student at Great Mills High School in Maryland brought a Glock 17 handgun to the school and wounded two students before being stopped by Blaine Gaskill, the school resource officer. The event came weeks after the Valentine’s Day massacre in Parkland, Florida, which set off a deluge of public outcry for “school safety” reform. The problem, though, is that nobody can agree on what “school safety” reform is. Before this week, activists have been pushing for stricter gun control, while others pushed various measures to enhance school security.

School shootings are a very unique and complicated problem, further frustrating the likelihood of any coherence coming out of this outcry. They are, in fact, very rare, and generally planned far ahead of time. This makes it difficult for any gun-control law to affect a school shooter. In general, gun-control laws tend to dissuade criminals on the margins–the guy who is vacillating about whether to kill his wife but who may decide to do it if given a gun. School shooters are not that type of criminal. Moreover, Maryland has some of the strictest gun-control laws in the nation. In addition to existing federal law—including the federal prohibition on handgun transfers to persons under 21—Maryland’s gun laws include:

  • A comprehensive “assault weapon” and “large capacity magazine” ban.
  • A universal 10-round magazine limit.
  • Background check requirement for all handgun transfers.
  • An exhaustive application process as a prerequisite to being permitted to purchase a handgun.
  • Mandatory registration of all handguns, and mandatory licensing of all handgun owners.
  • Prohibition on purchasing more than one firearm per month.
  • A seven-day waiting period for all handgun and “assault weapon” transfers.

In spite of all those laws, the shooter, who could not legally own the handgun under Maryland law (it was his father’s), still shot two innocent students. When laws are being demanded to ensure school shootings never happen again, we must always ask whether a new law would have actually prevented the harm. The paradigm school shooting in the United States, Columbine, happened during the federal assault weapon ban, using compliant weapons.

Three Bad Arguments for Government Paid Leave

Government-provided paid leave is back in the headlines, and Ivanka and company are in the process of building a Republican coalition for it. The coalition includes Republican senators Mike Lee, Joni Ernst, and Marco Rubio.

As a result, bad arguments for government paid leave are increasingly pervasive on both sides of the aisle. Last week, Caleb O. Brown and I discussed three of the usual suspects, outlined below. 

1) All other industrialized countries have paid leave, so Americans should too.

This argument is used by almost every public proponent of government paid leave. It represents a logical fallacy, colloquially the “bandwagon fallacy.” After all, it doesn’t matter so much whether other countries have government paid leave, but how the policy worked out for them.

Unfortunately, there are many examples of unexpected and costly consequences of government paid leave. For example, in the Nordic countries, government paid leave has contributed to a glass ceiling for professional women. This issue was outlined in a recent Cato policy analysis paper, The Nordic Glass Ceiling

A paper circulated by the National Bureau of Economic Research finds women in the United States are more likely to have full-time jobs and work as managers as compared to other OECD countries because the United States lacks a paid family leave policy and other mother’s work entitlements. Throughout Western Europe, about 30 percent of legislators, senior officials, and managers are women. But in the United States, 43 percent of legislators, senior officials, and managers are female. Economists Francine Blau and Lawrence Kahn note than in other OECD countries, women are about half as likely as men to be managers, whereas women are approximately equally likely to be managers as men in the United States. 

The workplace is also less segregated in the United States than other OECD countries, and women are more likely to be professionals. Gender equal characteristics of the U.S. labor market would likely suffer if government paid leave is introduced.

2) Only 15% of workers have access to paid leave.

Advocates use a thoroughly misleading BLS statistic in order to create alarm. Rather than using a clear, straightforward figure, activists use a BLS statistic that does not count benefits that can be used as paid family leave. 

A majority of workers have access to functional paid family leave benefits, according to other federal data sources and national surveys. For example, the National Survey of Working Mothers found 63 percent of employed mothers said their employer provided paid maternity leave benefits. That is in line with Pew research which found that 63 percent of “Americans who took time off from work in the past two years for parental, family or medical reasons report that they received at least some pay during this time.”

These surveys estimate the number of workers recieving paid leave is almost 50 percentage points larger than the BLS figure. The BLS statistic is an extreme outlier, even among federal data sets like Census Bureau’s Survey of Income and Program Participation (SIPP), the Current Population Survey (CPS), and the Federal Medical Leave Act (FMLA) worksite survey. The BLS figure should be treated as an outlier, rather than relied upon to make a case for government paid leave.

3) Government paid leave is popular.

Polling on paid leave is used disingenuously. Americans often agree that working mothers and fathers should receive paid leave following birth or adoption of a child, but they disagree sharply about how it should be provided. And Americans do not think that paid family leave is a policy priority.

On a Pew list of 20 different policy topics, Americans ranked paid leave as last priority. A recent Pew poll found that only 12 percent of Americans thought the federal government should provide paid leave.

Of Americans that said employers should provide paid leave, about half said employers should not be required [by government] to provide it.

Of course, if pollsters reminded respondents that under a national program taxpayers would pay for paid leave, under a government mandate employees would pay for paid leave, and under either regime women would pay for paid leave in one way or another, Americans would look even less supportive.

With these government paid leave myths dispelled, the debate should be more honest and productive.

You can find the related Cato Daily Podcast on bad arguments for government paid leave below.