Beat The Press

Republican Attacks on State and Local Government Are Yet Another Assault on Black People

Democrats in Congress have been pushing for a large amount of assistance for state and local governments in the next pandemic aid package. The finances of these governments have been devastated by the pandemic, with all of them seeing massive shortfalls in revenue due to the shutdowns and the weak economy that is projected for the months ahead. At the same time, they have had enormous demands for public services as a result of the pandemic, largely due to the need for additional health care spending. The demand for services has been further increased as a result of state and local government efforts to deal with the protests following the police killing of George Floyd.

The Republicans have thus far balked on providing aid to state and local governments. Senate Majority Leader Mitch McConnell has openly said that states should declare bankruptcy, which would allow them to default on their pension obligations.

Defaulting on the pensions of state and local employees would be a huge hit to African American workers and retirees. They are substantially over-represented among current and retired public sector employees. This is due to the fact that they faced less discrimination in employment opportunities in public sector employment than in private sector employment.

Currently, the African American share of the state and local workforce is almost 25 percent higher than its share of the private sector workforce. In the 1990s, the African American share of state and local employment was almost 40 percent higher than its share of private sector employment. State and local governments provided millions of African Americans middle class jobs that they were denied in the private sector.

Part of the compensation for a middle class job has historically been a pension. These pensions are not a gift from the government, workers sacrifice pay during their working years in exchange for this pension in retirement. Mitch McConnell’s plan to have states declare bankruptcy, and thereby renege on pensions promised to workers, is in effect an effort to take away pay that workers have already worked for. And, the victims of Senator McConnell’s scheme would disproportionately be African American workers.

And Republicans wonder why so many black people are angry.

The post Republican Attacks on State and Local Government Are Yet Another Assault on Black People appeared first on Center for Economic and Policy Research.

Trump Veto Student Loan Debt Relief Measure Will Save Government 0.02 Percent of Projected Spending

Yesterday Donald Trump vetoed a resolution passed by Congress, which would have left in place rules making it easier for students to default on debt owed to for-profit colleges that had engaged in deceptive marketing practices. The Washington Post told readers that this veto is expected to save the government $11 billion over the next decade.

Most readers may not have a good sense of how much money $11 billion over the next decade is. The government is projected to spend 60,700 billion over this period. That means the savings from this veto will be a bit less than 0.02 percent of projected spending.

The post Trump Veto Student Loan Debt Relief Measure Will Save Government 0.02 Percent of Projected Spending appeared first on Center for Economic and Policy Research.

Washington Post Tells Readers About Trump’s “Existential” Threat to China

Thankfully, it is not a nuclear war. Apparently the Washington Post thinks plans considered by Trump to delist Chinese companies from U.S. stock exchanges and to make it more difficult for the country to trade in dollars will pose an “existential” threat to the country.

While these plans, which put into practice, will almost certainly sink the stock market and further alienate the United States from its traditional allies, it is very hard to understand how this could be an existential threat to China. Chinese companies that are already listed on U.S. stock exchanges are not currently raising capital. If they are delisted, the price of their shares will fall sharply, but that does not directly affect their ongoing operations. Other Chinese companies will presumably be blocked from being listed on the U.S. exchanges, but this was not a major source of investment capital for these companies in any case.

The piece also implies that China’s trade will be seriously impaired if they are unable to conduct it in dollars. It tells readers:

“China’s years-long ambition of internationalizing the yuan has progressed slowly, with only 2 percent of all global transactions conducted in the Chinese currency.”

The piece implies that this amount is small. However, China’s trade is only a bit more than 12 percent of the world’s total. That means that close to 20 percent of China’s trade is already conducted in its own currency (assuming that the bulk of the trade conducted in yuan has China as a trading partner). That is a pretty good jumping-off point. Furthermore, it is unlikely that most of the rest of the world will go along with Trump’s schemes against China. This means that China would have little problem trading with the euro, the yen, or other major currencies.

As a sidebar, these moves should also mean that China should be able to get use of all U.S. patents and copyrights for free, since why on earth would they pay Pfizer and Microsoft for their intellectual property claims in this context. That should be a good boost to its economy and a major victory for free trade.

Anyhow, given the relative strength of China’s economy and the U.S. economy, and their relative standing in the world, this sounds like a great plan to do lots of damage to the U.S. economy and its standing in the world. The impact on China is likely to be relatively limited.


The post Washington Post Tells Readers About Trump’s “Existential” Threat to China appeared first on Center for Economic and Policy Research.

A Gilead-Remdesivir Fix: The Ten Percent Solution

The Washington Post had an excellent piece documenting how the government put up most of the money for developing remdesivir, a drug that now offers the hope of being the first effective treatment for the coronavirus. As the piece explains, in spite of the substantial contribution of public funds, Gilead Sciences holds a patent monopoly on remdesivir, which will allow it to charge whatever it wants without facing competition from other manufacturers.

There is a simple and obvious solution to this problem. The government should simply take possession of the patent, putting it in the public domain so that anyone can manufacture the drug and also conduct further research, subject to the requirement that any subsequent developments are also in the public domain. (This would be analogous to the rules for free software.)

To ensure that Gilead is fairly compensated, we can pay the company an amount that is 10 percent above any research costs it incurred that exceeded the government payments for development. Gilead would just have to submit its records, with the payment coming after they are fully audited. (There would be a return applied to past payments, of say 5 percent real, so that a payment made in 2015 would get a 25 percent real return [ignoring compounding], in addition to the ten percent markup.)

See, it’s simple, fun, and easy. We get the drug. Gilead gets a respectable profit, and remdesivir is cheap. Is everybody happy?

The post A Gilead-Remdesivir Fix: The Ten Percent Solution appeared first on Center for Economic and Policy Research.