Niskanen Notes
Can Trump and Kim Muddle Through in Singapore?
President Donald Trump will meet with North Korean leader Kim Jong-Un later today in Singapore for bilateral talks on the latter’s nuclear weapons programs. There is a great deal of risk involved with this summit. But if the talks with Kim do not produce North Korean disarmament, does it necessarily mean disaster?
The fundamental issue in the study of international relations is how difficult it is for states to credibly commit to an agreement. In the absence of an international sovereign to enforce agreements, a certain amount of trust is required. That need for trust is why remarks by National Security Advisor John Bolton, and others, referring to a “Libya Model” for North Korean nuclear disarmament are so unhelpful. While President Trump has walked back rhetoric about a Libya model with regards to North Korea, there are other problems with his ability to credibly commit to an agreement. Two stand out in particular. For one, Trump has already suggested by walking away from the Iran nuclear deal that agreements by one administration—unless ratified as treaties by the Senate—are only good for the tenure of the administration that made them. Two, the President is mercurial to the point that it is unclear whether he will stand by any deal he might make himself.
And these problems are only on the American side of the table. North Korea does not exactly have a stellar history of honoring its commitments either.
Does this inability to credibly commit mean the Trump-Kim summit will end in disaster? Not necessarily. In a post today at the Washington Post’s Monkey Cage blog, Elizabeth Saunders of George Washington University argues that major changes—either good or bad—are unlikely to result from the summit. According to Saunders, there are structural issues that will make it difficult to change the status quo for good or ill. If change does occur it is not likely to be evident until well after the summit.
There are very big risks that could materialize from the summit given the individuals involved. So there are good reasons to be concerned about the outcome. However, Saunders is most likely correct that the likelihood of such a result—while not zero—is low. Instead, both the United States and North Korea will continue to muddle through in their frequently confrontational relationship—with the odds favoring neither lasting détente nor disastrous war. Given the price of a devastating war on the Korean Peninsula, that might be the best anyone could hope for.
Trump Administration’s Attack on Pre-existing Conditions Proviso Hits the Most Popular Feature of the ACA
In an attempt to invalidate the proviso of the ACA that prevents insurance companies from charging higher premiums to people with pre-existing conditions, the Department of Justice has joined a lawsuit against the Affordable Care Act brought by several conservative states. Critcs say that the legal basis for the suit is weak, but the political reasoning behind the DoJ action seems even weaker. The ACA as a whole has been gaining steadily in popularity. According to a Huffington Post poll of polls, a majority opposed the law until late 2017, but support now exceeds opposition by 50.4 to 39.5 percent.
Stranger still, the pre-existing condition proviso, targeted by the DoJ, is the most popular single feature of the ACA. Even back when a majority still opposed the ACA as a whole, a Kaiser poll found that strong majorities across parties supported protections for people with pre-existing conditions.
The lawsuit highlights a key problem in health care policy: Many chronic conditions are inherently uninsurable. Conventional standards require that an insurable risk must be fortuitous and that an actuarially fair premium must be affordable. Conditions like Type 1 diabetes meet neither criterion. For someone with diabetes, a lifetime need for insulin (and other care) is no longer a matter of chance – it is a certainty, and an actuarially fair premium would often exceed the income of the insured person. Overturning the proviso would not just mean raising premiums for those affected. Rather, many would lose access to health care altogether. As many as 50 million Americans could be affected.
Congress needs to come up with a fix. Any such fix – universal catastrophic coverage would be my first choice – should be implemented in an orderly fashion while ACA protections continue. A quick fix implemented under the emergency conditions that would prevail if the courts suddenly declared the ACA unconstitutional would be unlikely to result in a fair and lasting solution.
Climate Nuisance Litigation and “Uniformity”
One of the defendants’ primary arguments in the pending climate nuisance cases is that courts should not apply state law to their conduct because of an alleged need for “uniformity.” According to the oil industry, applying different states’ tort law would upset the need for “uniformity” in addressing climate change.
Last week, the Niskanen Center submitted an amicus brief in New York City’s climate nuisance case on this issue. The brief pointed out that the oil industry relies on cases that do not support its argument, because these cases deal only with defendants being sued for emissions of pollution.
For emitters, applying more than one state’s laws could, in fact, result in multiple and potentially conflicting emissions standards governing which pollutants, and in what quantities and concentrations, may be emitted. In contrast, the oil industry defendants in the nuisance cases are producers, and it does not matter how many states’ laws apply to them: they face only the simple choice of whether, when producing their products, to internalize the costs of climate injuries or to foist them onto the public. There is no matrix of emission standards applicable to selling a gallon of gasoline that could possibly result from subjecting oil companies to common law damages from multiple states. As a result, there is no basis for their argument that federal law must apply in order to avoid being forced to comply with a multiplicity of state standards.
The oral argument on the defendants’ pending motions to dismiss is June 13, and we look forward to seeing how the Judge Keenan resolves this issue.
Real Wages Gain in May, but Inflation is Rising, Too
According to the latest Employment Situation Summary from the Bureau of Labor Statistics, average nominal hourly earnings for all employees on private nonfarm payrolls rose at a compound annual rate of 3.6 percent in May, 2016. That rate is well above the 2.6 percent average for the preceding 12 months, and also above the average CPI inflation rate of 2.5 percent for the same period. Monthly observations are shown by the dotted lines in the following chart, while the solid lines show 12-month moving averages.
Monthly data include a lot of statistical noise and are subject to revisions, so policymakers will be paying more attention to trends than to individual data points. The trend lines show that over the past three years, CPI inflation has accelerated more rapidly than has the rate of nominal wage gains. CPI data for May will not be released until June 12, but by April, the last month for which full data are available, the 12-month moving average for wages exceeded that for inflation by just 0.1 percent (2.6 percent vs. 2.5 percent).
The trends of the moving averages contain both not-so-good news and better news. For workers, the news is not so good, inasmuch as the wage gains for May, which are hopeful taken in isolation, may turn out to be a statistical fluke. From a macroeconomic point of view, however, the news is better. With CPI and wage trends still holding at or close to 2.5 percent, there is little sign of overheating yet.
How Framing Affects Attitudes Toward the Social Safety Net
An article by Caitlin Dewey in the Washington Post led me to an interesting new piece of research by Rachel Wetts of U.C. Berkeley and Rob Willer of Stanford (unrestricted draft version here). The research, which is relevant for anyone in the area of public policy advocacy, shows how strongly framing—and the framing of charts, in particular—can affect attitudes toward pubic policies.
The specific issue that the authors investigate is the influence of information related to race on attitudes toward pubic assistance. As they put it in their abstract,
We argue that when whites perceive threats to their relative advantage in the racial status hierarchy, their resentment of minorities increases. This increased resentment in turn leads whites to withdraw support for welfare programs when they perceive these programs to primarily benefit minorities.
In one of several experiments, Wetts and Willer presented a questionnaire to a sample of participants recruited from Amazon Mechanical Turk. Before answering questions about welfare policy, participants were shown one of two variants of a chart depicting U.S population trends by race and ethnicity. Both charts were based on the same data from the Census Bureau, but Chart A shows a short time period, over which the trends appear relatively weak, while Chart B shows a longer time period, over which the trends appear stronger. Chart B also adds a line for “all nonwhite” which more dramatically shows that the white population is trending toward minority status.
After viewing the information, participants were presented with scenarios designed to reveal attitudes toward welfare. In one scenario,
participants were told to imagine that they were on a Congressional committee charged with cutting $500 million from the federal budget. They were given a list of nine spending areas including “Temporary Assistance for Needy Families (Welfare)” and asked to indicate how much they would cut from each area.
White participants said they would cut TANF by 28 percent if they had viewed Chart A and cut by 51 percent if they had viewed Chart B—a statistically significant difference.
Although there were too few minority participants to produce a statistically significant results, their answers provide some food for thought. The nonwhites who had viewed Chart A said they would cut TANF by 53 percent, while those who had viewed Chart B said they would cut by 57 percent. About three-quarters of the recipients of cash assistance programs are nonwhite. Does TANF look better from a distance than from up close, or is this a statistical fluke?