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NYT Headlines Piece on National Debt Crossing $31.1 Trillion for the First Time!

Okay, that’s not exactly right, the headline was “U.S. National Debt Top $31 Trillion for the First Time.” This was a bit weird for two reasons….

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1 year ago

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Okay, that’s not exactly right, the headline was “U.S. National Debt Top $31 Trillion for the First Time.” This was a bit weird for two reasons. First, $31 trillion, like $31.1 trillion, is not some nice round number that provides an obvious benchmark.

The other reason the headline was odd was the use of the expression “for the first time.” Our debt has been consistently rising for more than two decades. In fact, except for short period at the end of the last century and start of this century, it has been rising consistently for a half century.

This means that every debt number we hit will be “for the first time.” It’s sort of like the tree in my backyard being taller than it ever was before. That will always be true, not the sort of thing you would typically put in a headline.

In short, the New York Times took a non-event, and decided that it was a good occasion to get its readers to worry about the national debt. That’s the sort of thing that would ordinarily go in the opinion section. But let’s look at the substance.

The piece tells us:

“The breach of the threshold, which was revealed in a Treasury Department report, comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation. While record levels of government borrowing to fight the pandemic and finance tax cuts were once seen by some policymakers as affordable, those higher rates are making America’s debts more costly over time.”

It then gives the views of two deficit hawks, along with warnings from the Congressional Budget Office (CBO) that, “that investors could lose confidence in the government’s ability to repay what it owes.”

So, the big issue is that paying interest on the debt is going to become more costly over time. This is very plausible, but it might have been helpful if we had some context as to how large this cost will be, instead of just trying to scare readers with the really big numbers.

The most obvious starting point is the ratio of interest payments to GDP. This is actually still near historic lows, CBO projects interest to be equal to 1.7 percent of GDP in the current fiscal year. It does project the cost to rise, both because of an increase in the debt to GDP ratio and also due to higher interest rates. However, even with this rise, the ratio of interest payments to GDP only hits its 1990s peak of 3.2 percent of GDP in 2032.

Here’s the picture since 1962.

Source: Congressional Budget Office.

 

It’s also worth noting that the 1990s were actually a very good decade for the economy. We didn’t suffer in any obvious way from the high ratio of interest payments to GDP. This means that if the CBO projections prove accurate, and we actually see the ratio of interest to GDP rise to the 1990s levels, it hardly implies some sort of economic disaster.

What About Government-Granted Patent and Copyright Monopolies?

It is bizarre that people complaining about government budget deficits literally never express concern about the government’s granting of patent and copyright monopolies, which can raise the price of protected items by many thousand percent above their free-market level.

As should be obvious, direct spending and patent and copyright monopolies are alternative ways for the government to pay for things. We can either have direct public funding, or we can tell companies to innovate or do creative work, and we will give them a monopoly over what they produce. For some reason, the New York Times is very concerned about the costs of the former, but doesn’t seem to care at all about the latter mechanism the government uses to pay for services.

Since I get tired of writing the same thing all the time, I’m just going to lift what I wrote in a blogpost last year.

The more important part of this story is that the conventional calculations of the debt leave out the higher prices that we will pay for items like prescription drugs and computer software because of government-granted patent and copyright monopolies. This is a huge burden, which is many times larger than the debt burden, but policy types and reporters refuse to ever talk about it for some reason.  

This is a simple and logical point. The government can pay for things by writing checks. It typically does this with things like roads, bridges, and teachers’ salaries.  It can also pay for things by giving out patent or copyright monopolies.

When the government gives out these monopolies, it is telling innovators or creative workers to develop a new product or write a new book, and you will be given a monopoly for a period of time. This government-granted monopoly will allow you to charge a price that is far above the free market price.

This point has nothing to do with whether you think patents are a good way to support innovation or copyrights are the best way to support creative work, it is a logical point. If the government will threaten to arrest anyone who produces the Moderna vaccine, Moderna gets to charge a much higher price than if everyone in the world can produce the vaccine.[2]

This brings us back to my question: how can someone who claims to be concerned about the burden of the government debt on our children, ignore the burden, in the form of higher prices, created by government-granted patent and copyright monopolies? If the government were to put a tax on prescription drugs to help cover its debt service, we would all recognize this tax as a burden on households.

Yet somehow, we are supposed to believe that if the government gives out a patent monopoly that allows a drug company to charge a price that is far higher than the free market price, that is not a burden. That makes zero sense.

And this burden is very large. By my calculations, the higher cost due to patent monopolies and related protections comes to more than $400 billion (1.8 percent of GDP) in the case of prescription drugs alone. If we add in the higher costs that we pay for medical equipment, computers, software, and a variety of other items, the burden likely comes to more than $1 trillion a year, or 4.5 percent of GDP.

This is more than four times the burden of the debt, but the folks who complain about the debt burden on our kids never talk about it. This is simply not honest. If we are genuinely concerned about the burdens the government is imposing on our children, then we don’t get to selectively pick which burdens we will talk about.

The Deficit and Patent and Copyright Monopolies

There is a similar story with the deficit and these monopolies. And again, it is a matter of logic, not whether we think they are good mechanisms for supporting innovation and creative work. (I talk about alternatives in chapter 5 of Rigged [it’s free].)

Patent and copyright monopolies are intended to motivate people to innovate and do creative work. This means that they increase spending and GDP. The concern over large deficits is that the government is over-stimulating the economy, that it is demanding so many goods and services that the economy can’t meet both the demand from the private sector and the government.

If this is a concern, why should we not also be concerned about the increased demand created by government-granted patent and copyright monopolies? According to the National Income and Product Accounts (Table 5.6.5, Line 9), the pharmaceutical industry spent $105.7 billion on research in 2020. This has the same impact on demand in the economy as if the government spent another $105.7 billion on research.

How can we be concerned about the inflationary impact of government spending, but not the patent-induced spending by the industry? That makes zero sense.

Is an Honest Budget Debate Possible?

The point here is that we need to have honest discussions about debt and deficit concerns. The current discussions are not remotely honest because they refuse to take full accounting of the mechanisms the government uses to pay for goods and services. Others can debate whether this is due to laziness or deliberate dishonesty, but the media’s reporting on debt and deficits is not serving the public.

[1] The burden would be considerably lower if we adjusted for inflation, but we will leave that one alone for now.

[2] The government doesn’t directly threaten to arrest someone for infringing on a patent or copyright. Typically, the holder of the monopoly would go to court seeking damages and an injunction ordering the person to stop the infringement. If the person ignores the injunction and continues infringing, they could go to jail for ignoring an injunction.  

The post NYT Headlines Piece on National Debt Crossing $31.1 Trillion for the First Time! appeared first on Center for Economic and Policy Research.

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International

The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

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30 mins ago

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March 11, 2024

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I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…

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1 hour ago

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March 11, 2024

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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Spread & Containment

A major cruise line is testing a monthly subscription service

The Cruise Scarlet Summer Season Pass was designed with remote workers in mind.

Published

2 hours ago

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March 11, 2024

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While going on a cruise once meant disconnecting from the world when between ports because any WiFi available aboard was glitchy and expensive, advances in technology over the last decade have enabled millions to not only stay in touch with home but even work remotely.

With such remote workers and digital nomads in mind, Virgin Voyages has designed a monthly pass that gives those who want to work from the seas a WFH setup on its Scarlet Lady ship — while the latter acronym usually means "work from home," the cruise line is advertising as "work from the helm.”

Related: Royal Caribbean shares a warning with passengers

"Inspired by Richard Branson's belief and track record that brilliant work is best paired with a hearty dose of fun, we're welcoming Sailors on board Scarlet Lady for a full month to help them achieve that perfect work-life balance," Virgin Voyages said in announcing its new promotion. "Take a vacation away from your monotonous work-from-home set up (sorry, but…not sorry) and start taking calls from your private balcony overlooking the Mediterranean sea."

A man looks through his phone while sitting in a hot tub on a cruise ship.

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This is how much it'll cost you to work from a cruise ship for a month

While the single most important feature for successful work at sea — WiFi — is already available for free on Virgin cruises, the new Scarlet Summer Season Pass includes a faster connection, a $10 daily coffee credit, access to a private rooftop, and other member-only areas as well as wash and fold laundry service that Virgin advertises as a perk that will allow one to concentrate on work

More Travel:

The pass starts at $9,990 for a two-guest cabin and is available for four monthlong cruises departing in June, July, August, and September — each departs from ports such as Barcelona, Marseille, and Palma de Mallorca and spends four weeks touring around the Mediterranean.

Longer cruises are becoming more common, here's why

The new pass is essentially a version of an upgraded cruise package with additional perks but is specifically tailored to those who plan on working from the ship as an opportunity to market to them.

"Stay connected to your work with the fastest at-sea internet in the biz when you want and log-off to let the exquisite landscape of the Mediterranean inspire you when you need," reads the promotional material for the pass.

Amid the rise of remote work post-pandemic, cruise lines have been seeing growing interest in longer journeys in which many of the passengers not just vacation in the traditional sense but work from a mobile office.

In 2023, Turkish cruise line operator Miray even started selling cabins on a three-year tour around the world but the endeavor hit the rocks after one of the engineers declared the MV Gemini ship the company planned to use for the journey "unseaworthy" and the cruise ship line dealt with a PR scandal that ultimately sank the project before it could take off.

While three years at sea would have set a record as the longest cruise journey on the market, companies such as Royal Caribbean  (RCL) (both with its namesake brand and its Celebrity Cruises line) have been offering increasingly long cruises that serve as many people’s temporary homes and cross through multiple continents.

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