WSJ on TAA study

Jobs Study Is Too Late for Debate on Trade

By ELIZABETH WILLIAMSON

As a divided Congress moves closer to a decision on three big international trade pacts, the Labor Department is four years late in delivering a study that is supposed to measure the efficacy of a program to provide extra benefits to workers who lose their jobs through globalization.

The deals with Colombia, South Korea and Panama, which could add billions in exports, are on a knife-edge over disagreements between Republicans and Democrats over Trade Adjustment Assistance, taxpayer funds paid to workers who lose their jobs as a direct result of trade.

The lack of up-to-date government data on how effective the $1 billion-a-year program is at helping the unemployed find well-paying work has hobbled efforts to identify and make improvements.

With the House and Senate called back into session this week, debate will resume over TAA, which provides training, unemployment payments and health-care subsidies to displaced workers. The program came due for renewal at the end of 2010.

The White House, Democratic leaders and some Republicans say the 50-year-old program helps laid-off workers learn new skills and find jobs in more vibrant industries. Conservatives label it an outmoded giveaway with results that don't justify the annual price tag.

TAA has become a proxy for the wider budget war, in which entitlement programs such as Social Security and Medicare as well as less-prominent matters such as financing the U.S. Patent and Trademark Office have come under scrutiny from budget hawks.

Workers who qualify for TAA get up to 156 weeks of unemployment benefits, compared with a maximum of 99 weeks under standard unemployment benefits for workers in high-unemployment states in a program set to expire at the end of this year. TAA also offers assistance with retraining and health benefits that workers not judged to be idled by trade pacts don't get.

On Tuesday, the House Ways and Means committee said it would hold a hearing Thursday to discuss proposed changes to the trade deals.

But the panel, which has jurisdiction over trade in the House, won't discuss renewing the expired TAA program as part of that process, defying President Barack Obama. Mr. Obama says he won't send the trade agreements to Congress for ratification if lawmakers don't renew TAA.

The president has staked his credibility with U.S. businesses on passing the trade deals, placing them at the heart of his plan to double U.S. exports by the end of 2014.

Hiccups over the pacts' passage damage U.S. credibility with trading partners, at times leading them to seek deals elsewhere. Last week, while U.S. lawmakers bickered, a sweeping trade pact between South Korea and the European Union took effect; one between Colombia and Canada takes force in August.

Labor Department officials say their research on TAA, originally due in 2007, won't be ready until the end of the year. That's likely to be after the fate of the proposed U.S. trade deals has been decided, at least until after the 2012 election. Thus far, the TAA study has cost $8.9 million, the Labor Department estimated.

"The data used for the study is long-term data on individual participants, which was collected over several years; therefore completion of the study is a long process," said Department of Labor spokeswoman Gloria Della.

Howard Rosen, resident visiting fellow at the Peterson Institute for International Economics, helped write 2002 reforms to TAA while he was a congressional aide that also called for a comprehensive evaluation of the program, and he has complained about the Labor Department's failure to deliver it.

"We need to make reforms based on what will work, not what will fly" politically, Mr. Rosen said.

Reports from Labor and the Government Accountability Office have led to changes, for example, in improving worker access to the program. Last year, 235,000 workers—or less than 2% of the nation's 14 million unemployed—were receiving benefits under the TAA program at a cost of $975 million.

In 2009, the program was expanded to include service, not just manufacturing workers, who now make up less than one-fifth of TAA recipients.

More than two-thirds of TAA recipients are over age 40 and three-quarters of them hold at most a high-school diploma. Half of all unemployed workers fall into those two categories. TAA-eligible workers' mean annual wages are $34,000, compared with $28,000 for all unemployed people.

The Labor Department reports that two-thirds of TAA program participants find jobs within three months after leaving the program, and 90% stay in those jobs for at least a year. According to a Labor-sponsored study of TAA applicants in 2008-09, about one-third of eligible workers belong to a trade union; about half of those in the program are union members.

A deal brokered last week by Senate Finance Committee Chairman Sen. Max Baucus (D., Mont.) would make renewal of TAA hinge on cutting the program's cost.

The Congressional Budget Office has yet to fully determine TAA's new cost under the proposal, agreed to by Mr. Baucus, House Ways and Means Committee chairman Rep. Dave Camp (R., Mich.) and White House economic czar Gene Sperling. The biggest proposed changes are cutting TAA recipients' unemployment benefits, and increasing their contribution to health-care coverage.

The deal envisions a cap of 130 weeks of unemployment, down from the current 156. That compares with a maximum of 26 weeks of jobless benefits for non-TAA recipients, unless they live in a high-unemployment state.

Under the 2009 program, TAA enrollees could deduct 80% of their health-care costs; the deal would reduce that deduction to 72.5%. The deduction would end completely at the end of 2013, when TAA enrollees gain access to benefits under Mr. Obama's health-care overhaul.

A Republican House aide says GOP leaders aren't sure whether the agreement approved by Mr. Camp has the votes needed to pass.

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This is, almost certainly, the same study referred to in my earlier post, on which I have done a bit of consulting. It really is too bad that the results will not be available to guide debate.

This article was rescued from behind the WSJ's firewall by an anonymous benefactor.

Waiting at the border

A piece in the most recent Canadian Public Policy (the policy journal of the Canadian Economic Association) estimates the cost of border delays between the US and Canada.

When I fume about border delays, which is to say every time I go to Canada, I focus on the delays for people crossing the border, but the costs associated with delays on the movement of goods are likely to be much larger in the aggregate.

I would note, as I often do in conversation, that the Europeans have done much better than we have on this dimension. Crossing from Germany into France, two countries that have fought three majors wars in the last 150 years and, truth be told, still don't really like (or, what is not unrelated, understand) each other very much, one does not have to stop at all. I've done it. You just drive right by some rusting remains of a border crossing station.

In contrast, Canada and the US, probably the two most similar separate countries on earth, who have not fought a war in 199 years, with integrated telecommunications and energy systems, still subject their residents, and their goods, to long delays, inane border questioning and, in the case of goods, heaps of bureaucracy on top of it. We can and should do better.

As an aside, estimating the costs on individual travelers would make a fine paper, too.

Coffee liberation

Allen Sanderson at Chicago demands that we end our dangerous dependence on foreign stimulants.

One can only dream about the political career that Allen cast aside to work as an economist.

Hat tip: Ken Troske

Bernie Sanders, nationalist

Turns out that self-professed "socialist" Bernie Sanders is also a nationalist, as explained in this video about him bullying the Smithsonian into carrying fewer items made in China in their gift shops. Let's see ... socialism plus nationalism ... perhaps that's already been tried?

And didn't socialists used to be internationalists?

Green policy advances

Two Western Washington university economists take the (sadly, gated) natural next step after Buy Local!

Hat tip: Jason Winfree

Making omelettes at the US / Canada border

If the Germans and the French can figure out how to have a border where you don't have to stop when you cross, then really, really, the US and Canada should be able to figure it out as well.

In the meantime, that flushing sound you hear is your tax dollars being wasted on the War on Kinder Surprise Eggs. Don't you feel safer now?

Hat tip: Sonia Laszlo on FB

On trade with China

A nice rant on China-bashing.

The author is a bit less optimistic about China than I am - I think people almost always buy freedom and democracy as they get richer. I think he is particularly helpful in trying to think about the issue from the Chinese perspective.

It is really disappointing to see the first African-American president presiding over what is essentially a whole lot of racist China-bashing by people in his party and its enthusiasts in the media. At the same time, the Republicans are just as bad on China and worse on Mexico and Mexicans. In sum, our political class is a national embarrassment. But then what else is new?

Trade rap

I don't endorse all the views, but it is pretty clever and quite funny at times.

Too bad trade can't just be between individuals.

Hat tip: Andy Roth (and the free trade email list)

Ann Arbor: adventures in monetary policy

Should Ann Arbor have its own currency to promote local business?

The mind boggles at how one will define local for the purposes of access to the local currency. Is a locally-owned store selling national brands local? What about a national chain that sells local products? What about a Michigan-only chain like Kilwin's?

Decision costs will be lower for whose face gets on the $1 bill: can it be anyone but Bo? Of course, figuring that out will require another grant!

Methinks the DDA's $6000 could have been better spent.

Hat tip: Charlie Brown

Obama administration on trade

Some thoughts on trade policy from Scott Lincicome. The current administration could be doing much better in this area than the mushy mercantilism they have adopted, and the "doubling exports" bit in the State of the Union Address was just silly, even by the standards of that event.

And one should always note in these contexts that trade policy is anti-poverty policy as pretty much all really poor people in the world live in other countries, many of whose products we tax or otherwise exclude in order to protect politically influential American producers. Compassion is a bit more compelling when you do not receive votes in return.

Why Haiti is poor

There are surely many reasons why Haiti is so poor, even relative to other Caribbean nations. But US sugar import quotas are surely one of them.

It would be great if US politicians (and others) who purported to care about poor people would focus more of their attention and efforts on where the world's poor actually live, which is almost entirely in other countries. There are lots of things we can do, like getting rid of sugar price supports that would help people who are really, really badly off without having to spend more on problematic forms of foreign aid.

Wages and outsourcing

The write-up is a bit of a mess but this Danish study appears to conclude (with a sample size of four countries) that high wages do not lead to outsourcing. Or is it better management that seeks "out new markets, new production methods and new products."? Or are Danish workers more skilled and so more productive?

Correlation? Causation? Journalistic confusion? All of the above?

Sigh.

Hat tip (but you knew this already): Lars Skipper

Trade with China

I recently received this viral email from a friend:

"Are we Americans as dumb as we appear --- or --- is it that we just do not think? While the Chinese, knowingly and intentionally, export inferior and even toxic products and dangerous toys and goods to be sold in American markets, the media wrings its hands and criticizes the Bush Administration for perceived errors. Yet 70% of Americans believe that the trading privileges afforded to the Chinese should be suspended. Well, duh..why do you need the government to suspend trading privileges? SIMPLY DO IT YOURSELF, AMERICA!! Simply look on the bottom of ev ery product you buy, and if it says 'Made in China' or 'PRC' (and that now includes Ho ng Kong), simply choose another product, or none at all. You will be amazed at how dependent you are on Chinese products, and you will be equally amazed at what you can do without. Who needs plastic eggs to celebrate Easter? If you must have eggs, use real ones and benefit some American farmer. Easter is just an example, the point is.. do not wait for the government to act. Just go ahead and assume control on your own. THINK ABOUT THIS If 200 million Americans refuse to buy just $20 each of Chinese goods, that's a billion dollar trade imbalance resolved in our favor...fast!! The downside? Some American businesses will feel a temporary pinch from having foreign stockp iles of inventory. Wahhhhhhhhhhhh The solution ? Let's give them fair warning and send our own message. Most of the people who have been reading about this matter are planning on implementing this on June 4, and continue it until July 4. That is only one month of trading losses, but it will hit the Chinese for 1/12th of the total, or 8%, of their American exports. Then they will at least have to ask themselves if the benefits of their arrogance and lawlessness were worth it. Remember, June 4 to July 4. EVEN BETTER. . . START NOW.Send this to everybody you know.Show them we are Americans and NOBODY can take us for granted.If we can't live without cheap Chinese goods for one month out of our lives, WE DESERVE WHAT WE GET!Pass it on, America"

It is hard to know where to start with this. First, China is full of poor people. Buying things from China helps make them less poor. Poor people in China are much worse off, on average, than poor people in the US. Thus, buying goods from China is doing good.

Second, why should we care more about people who live outside some arbitrary political boundary called the US border than about people who live inside it? This seems to me, to be blunt, just morally wrong.

Third, it is certainly true that there is much to dislike in China's treatment of Tibet and in their domestic policy. At the same time, there is much to dislike in the way France behaves as well, and I suspect that the same author is not suggesting that we boycott the French, or the Russians, or basically every country in Africa or any other country whose policy leaves something to be desired. We should beware of glass houses here as well. Our own foreign policy is nothing to be particularly proud of.

Fourth, trade is good. Makes people better off. Comparative advantage, etc.

Sigh.