DREAMING AND OUR LABOR MARKET

Where there is a worker, there lies a nation. ~ Evita Peron

Once again I have begun working with IB and AP Economics class students at my local high school. We offer them information about “resource (or factor) markets,” that includes the labor market. The economy’s factor markets encompass the three factors of production: land, labor and capital that provide businesses with needed inputs to produce final goods and services that are sold in the product markets. This is the simplistic, informative and distinctive Circular-Flow Diagram that you may remember from your Econ 101 days. Our white-board explanation describes the demand for and supply of labor is a straightforward function of the price of labor – the wages or income earned by employees.

This blog examines several aspects of the US labor market including one slender slice of it that has gained recent prominence, the roughly 800,000 Dreamers. I also examine the current status of the nation’s labor market and President Trump’s record on creating jobs.

A “Dreamer” refers to a child who was brought into the US (under the age of 16) usually by a parent or relative without legal permission, who has lived in the US continuously since June 2007, completed high-school and attended at least two years of post-high school education or served honorably in the military and is currently under the age of 35 years old. In August 2012 President Obama implemented a new immigration program, through executive action, that deferred deportation for these people. This program is called DACA, Deferred Action for Childhood Arrivals.

On September 5th Mr. Trump ended the DACA program, despite tweeting that he “loved” Dreamers. Go figure. In a specious attempt to justify his boss’ decision, Jefferson Beauregard Sessions, the Attorney General, perjured himself in wrongly stating that Dreamers are stealing jobs from Americans. An average of 30,000 Dreamers could lose their jobs every month if DACA were repealed or work permit renewals were held up, according to a report issued by an advocacy group.

The president called on Congress to pass legislation within six months to continue the DACA program. Last week he surprisingly announced that he had agreed with Senator Chuck Schumer and Representative Nancy Pelosi on legislation to extend DACA. Or did he? Characteristically, the President later contradicted himself regarding his discussions with the Democratic leaders about DACA. The unforeseen sunlight of a possible bipartisan agreement on legitimizing DACA proved temporary and has faded into all too usual leaden fog of this presidency.

Dreamers’ futures thus remain nightmarish and utterly uncertain due to the heartless action of the president. Their prospects are now completely dependent on our plagued, legislatively-barren Congress for speedy remedy.

Beyond Dreamers, how is the US labor market doing? Overall, it’s in reasonably decent shape, as shown in the table below. Our labor market reflects the accrued benefits of our now five year old expansion, longer than the post-WWII average of 4.8 years.

US Labor Market

Characteristic\Time Period	August 2017	August 2016
Size of labor force	160,571,000 (3.7%)	154,763,000
Unemployment rate - U - (Overall)	4.4%	4.9%
U (Youth, 16-24 years)	8.9%	10.2%
U (Not finished high school)	6.0%	7.3%
U (Completed high school)	5.1%	5.1%
U (With a BA or higher degree)	2.4%	2.7%
Average hourly earnings	$26.39/hr (2.5%)	$25.74/hr

Source: Bureau of Labor Statistics (BLS). Figures in parentheses indicate yearly increase.

The US labor force has grown by 3.7% during the past 12 months; already-low unemployment rates have dropped a bit in August for all the age and education-level categories, except for people who have completed high school and not gone to college. Youth unemployment has declined, but remains at a stubbornly elevated rate, as it has since the Great Recession. The 4.4% overall unemployment rate indicates the economy is in close proximity to full employment.

Illustrating the budding tightness of our labor market, hourly earnings have increased 2.5% during the past 12 months, equivalent to $54,891 per year. For the second year in a row, median household income increased in 2016 to $59,039 (3.2% from 2015), after adjusting for inflation. The August labor force participation rate, which measures the share of the work force (16 years and older) that is currently employed or seeking employment, was 62.9%, virtually unchanged over the last year.

Many economists expect that in the coming decade the US will be facing an entirely new challenge with respect to our workforce – a lack of workers – caused by two factors. The first factor centers on demographic changes in the labor force. Boomers are now retiring in droves and, due to ever-lower US birth rates, there are fewer younger working-age people who will be replacing them.

A statistic that illustrates this change is the Age Dependency Ratio (ADR). This ratio represents the percentage of non-working age population (people younger than 15 or older than 64) – to the working-age population (those between the ages 15 and 64). According to the UN’s Population Division, the US ADR in 2015 was 51.2%, meaning that the non-working age population in 2015 represented a slim majority of the working-age population; more people were of non-working age than working age. By 2040 the ADR will increase to 64.9%, which means relatively fewer workers will carry an increased and heavier burden to provide schooling and care for more non-working aged folks.

The second factor, Trumpian immigration, trade and fiscal policies, will exacerbate the labor force challenge of fewer workers and reduce potential macroeconomic growth. Closing our borders to immigrants – even skilled H-1B workers – as the president and conservative Republicans have done, means fewer potential workers will be available to US employers. Threatening to tear up trade agreements – like NAFTA and South Korea’s – will reduce US exports (that require US workers to produce them) after our trading partners retaliate. Republican fantasies about reducing corporate taxes to spur economic growth are just that. Empirical evidence that shows a strong, causal relationship between increases in GDP and lower tax rates is lacking. Mark Zandi, the chief economist at Moody’s Analytics, told a New York Times columnist, “Over the next 20 to 25 years, a labor shortage is going to put a binding constraint on growth,” unless appropriate policies are put in place.

Wherever he campaigned, Mr. Trump focused on jobs. He said “I am going to be the greatest jobs president that God ever created.” So far, he hasn’t met that absurd standard. During his first five months in office the economy added on average 172,600 jobs per month. That's good, but not quite as many as the average number of jobs added during President Barack Obama's last five months in office, 181,600. In fact, the president has emphasized increasing jobs in sectors that are very unlikely to produce many new workers – coal mining and manufacturing.

Mr. Trump has loudly emphasized his dedication to increasing jobs in coal mining, something that would require him and his administrators to reverse years of economically-driven decline in coal usage by electric utilities and other industries. The current number of workers in coal mining represents only 29% of its peak employment in January 1985. Except for the principal resident of 1600 Pennsylvania Avenue, coal’s declining market position is broadly understood to be based on advances in non-fossil energy technologies (solar and wind) and, more prominently, on the large declines in the price of natural gas, a cleaner substitute fuel. It hasn’t been a political war on coal as the president alleges; it’s been a market-based economic one that coal has been steadily losing.

Coal-related jobs have been declining since 2011. Scott Pruitt, the Voldemortian head of the EPA, erroneously stated that Mr. Trump’s efforts have increased coal sector jobs by 50,000 workers. That’s impossible. The BLS says there are 53,420 workers in the entire coal mining sector and that there have been only 700 coal mining jobs added since the president took office in January. It’s yet another example of the president and his senior cronies being deceitfully fact-free.

Perhaps unknown to our never-connect-the-dots, zero-sum president, there are three times as many people working in the solar and wind power industries as work in the coal industry according to a January Dept. of Energy report. If the president were truly interested in job development, he should be promoting renewable energy and take (undue) credit for the solar industry’s impressive 25% growth in jobs during the past year. That’s highly unlikely since Mr. Trump seems to be stuck in a coal seam where the sun doesn't shine.

In addition to coal miners, manufacturing jobs are near and dear to the president’s heart. He wants firms to hire more manufacturing workers, a fine but exigent goal. Just like coal jobs, US manufacturing employment has steadily declined over the past six decades. Since the 1950s manufacturers have substituted capital equipment – using advanced, additive automation and other technologies – for lower-skilled labor. As a consequence, today’s manufacturers use far fewer workers, who are more highly-skilled operators of computer-based machinery, than the assemblers, wrench-handlers and welders of yore. Despite hiring fewer workers, US manufacturers have increasingly produced higher-valued, greater output.

Diversified Engineering & Plastics (DEP), a small auto parts manufacturer located near Detroit, typifies the trials now facing smaller manufacturers. Diversified has 78 employees; more than a decade ago it had 300 workers. Hiring qualified personnel is a constant struggle for Anita-Maria Quillen, DEP’s president. According to her, “I’ve noticed their [Millennials’] sense of responsibility to come to work is nonexistent.” After two days of orientation, her new hires are sent for a drug test. Sixty percent never show up for the test.

Diversified’s clients are much larger “Tier One” firms that directly supply parts to auto/truck/motorcycle makers. As she put it, “Tier Ones are eating whole peanuts. We take the crumbs.” Ms. Quillen works in a mature market where lower costs are always a priority. Carmakers are “constantly pushing costs down, down, down,” she said. “But meanwhile people want $15 an hour for minimum wage.” A typical DEP machine operator makes $9.50 to $11.50 an hour. Smaller manufacturers like DEP in the auto sector and in other industries are caught in a tightening vise. They find it tough to boost their employment unless they further improve productivity and raise wages that their clients are loath to pay for. 

In these trying times, it’s valuable to remember John Locke’s words, “All wealth is the product of labor.”

MAINSTREAMING ELECTRIC CARS

Amping along the byways… 

Hark, electric vehicles (EVs) are hopefully travelling towards the broader car-buying public. Under very strong prodding by the California Air Resources Board (CARB) and the Obama administration, 32 different models of EVs are currently being sold in the US, principally in CA. To date, the 6-year old US market for EVs remains a very thin one; optimism about future growth far outweighs actual sales. As of last December, EV sales represent a slender 1.43% sliver of US new car sales, when you count both plug-in hybrid sales together with battery-only vehicles’ sales. If you consider only battery electric vehicle sales, the EV market share shrinks to 0.76% of new car sales. This negligible market share maps the rocky road EVs need to travel towards genuine public interest and acceptability. This road contains both opportunities and potholes that need filling.

The automotive press observantly genuflected last week as Tesla finally displayed a production version of its smaller, more affordable Model 3 EV. Much hope (and hype) accompanies Tesla’s Model 3 that it produces in Freemont, California, because its base price is said to be about $35,000, less than one-half as much as the two other EVs it makes. Last year Tesla raised much-needed cash by requiring Model 3 customers to provide a $1,000 down-payment/deposit for their car. At this point roughly 400,000 customers have provided a deposit. Very impressive. Some of these folks will be waiting for quite a while to get their car; and some of them might not receive the entire currently-available federal tax credit.

Tesla’s chief executive, Elon Musk, said he expects 100 Model 3s will be produced in August and 1,500 or more in September. He also said that he expects the company to be able to produce 20,000 a month starting in December. In the first quarter of 2017, Tesla lost $397 million, 40% more than a year earlier, but its revenue more than doubled, to $2.7 billion.

Flying far under the hood of the Model 3's media coverage is Chevrolet’s comparable Bolt EV, which with little fanfare has already been selling in CA for seven months. The Bolt has captured strong reviews and has an impressive 238 mile battery range. The Bolt’s MSRP is $36,600 before rebates. Sales of the Bolt have inched forward; in June 1,745 were sold, ranked second behind Tesla’s Model S, whose MSRP ranges from $68k to $138k. All EVs sales are measured in proverbial inches. Of the 32 EV models being sold in CA, only 6 had more than 1,000 sales in June. For perspective, the nation’s best-selling car, the Toyota RAV4 SUV, sold 34,120 vehicles in June. The top-selling vehicle in the US remains the Ford F-Series pickups that sold 77,895 trucks in June. The top-selling EV in June, Tesla's Model X (its crossover vehicle), is ranked 151st, with national sales of 1800 vehicles, down 10% from June 2015. The Chevy Volt has 1642 sales, ranked 162nd.   

Effective environmental policy necessitates mainstreaming electric vehicles that will appeal to and convince “regular people” like Jane and Joe Van (who have 2.4 mini-Vans) to buy an EV. The transportation sector now produces the most CO2 emissions of any industry in the US. The sooner they’re convinced, the better for the environment. People like the Vans represent far more typical car purchasers than rich folks who can afford to and choose to buy expensive Model S’s and X’s. 

Changing people’s automobile purchase habits so they actually consider buying an EV requires numerous changes and is a marathon rather than a sprint. To date federal and state EV oriented policies are sadly unidimensional, offering financial incentives. What’s needed? First, attractive, capable EVs must be available in the marketplace; and second, these vehicles must be comparable with non-EV vehicles, especially regarding cost, range performance and supporting infrastructure. Only a select few EVs are now available for mainstreamers like the Vans.

Electric vehicles have been available since the beginnings of automobiles. Gustave Trouvé, a French electrical engineer, invented perhaps the first EV in 1881. But they have never succeeded against internal-combustion engine technology. Al Jardine, who is a musician and co-founded the Beach Boys as the band's rhythm guitarist, has mentioned that his grandfather worked with Thomas Edison on the electric car and he sold electric cars at the 1900 World's Fair in Paris. Those were the days.

When I was growing up in Philadelphia during the 1950s, I remember being impressed by the big, lumbering trucks of the Saturday Evening Post Co. on downtown streets filled with giant, heavy rolls of paper used to publish the magazine. These trucks were all electrically powered by lead-acid batteries. The magazine was published weekly from 1897 to 1963. Its heavy-duty electric trucks disappeared some time before its fall from weekly readers’ grace.

As mentioned before, the federal government and the State of California have actively promoted electric vehicles with several mechanisms. The Obama administration boldly increased the required corporate average fuel economy (CAFE) standards. In 2011, President Obama announced an agreement with 13 large automakers to increase CAFE to 54.5 miles per gallon (mpg) by model year 2025. The administration was able to secure agreement with the manufacturers in no small part because of its increased leverage. The federal government had bailed out both General Motors and Chrysler, two of the three largest US automakers, from bankruptcy in 2009. This big increase the CAFE standard has provided strong incentive for auto makers to improve their cars’ fuel efficiency and to introduce more hybrids and EVs towards that end.

Adding to the EV charge, Volvo Cars (owned by the Chinese firm Geely Holding Group) announced will stop investing in internal combustion technologies for its cars starting in 2020 and will focus exclusively on plug-in hybrid and all-electric vehicles. In addition, France declared last week it would end sales of internal-combustion engine vehicles by 2040.

However, when gasoline prices started tumbling five years ago, the sales growth of hybrid and EV cars unsurprisingly plummeted. In January, sales of two different, popular Prius models fell over 30% on average from a year earlier. With gas prices down, consumers have bought more low-mpg SUVs and pickups rather than cars, which have made achieving the 54.5 mpg goal increasingly unrealistic. In fact, the major car producers have begun laying off workers in their car factories due to lower sales. Recently, car manufacturers have complained to the Trump administration that the 2025 CAFE standard needs to be relaxed, given the purchasing behavior of consumers. Who knows if they can gain the president’s ear let alone his brain?  

The California Air Resources Board (CARB), the state’s environmental agency, has formally adopted the 2025 CAFE standard for vehicles sold in the state and upped their mandate for zero-emission vehicles (ZEVs): battery, fuel-cell and hydrogen powered vehicles. California has optimistically estimated its regulations would result in ZEVs making up about 15% of all California auto sales by 2025, but the current share has been stuck in first gear, around 3% since 2014 with regulations in force. [EVs actually don’t have first gears, they use gearless, continuously variable transmissions, but you get the idea.]

The CARB’s ZEV mandate is a complex set of regulations that prioritizes the offering of ZEVs via a California cap-and-trade mechanism using the issuance of ZEV credits when a manufacturer sells a ZEV. This ZEV credit system has greatly benefited Tesla in particular, as well as other ZEV manufacturers like Nissan and Toyota. Because it’s a low-volume manufacturer that sells only EVs, Tesla has built up an impressive surplus of credits and has gladly sold them to other manufacturers who don’t sell enough ZEVs in California. These credit sales have significantly helped Tesla’s cash-flow challenges as it rapidly expands.

A Fortune article states that Tesla has received a total of $600 million from sales of these credits over time. Due to its surplus, Tesla has had no trouble meeting the CARB's ZEV mandate — because it can satisfy those obligations with state-awarded ZEV credits instead of actually producing zero-emission vehicles. Tesla has thus significantly benefited from some automakers' decisions to buy more credits instead of building more cars. Critics of the ZEV cap-and-trade program understandably argue that the CARB has issued far more credits than needed. Manufacturers have decried the ZEV credit program, saying the mandate covers only the supply-side production of such vehicles; there’s no mandate for (so far reluctant) customers to buy them. They have a point, but. With a substantial stretch, mandating customer purchases of ZEVs might work in China, given its new-found interest in the environment, but not California or the rest of the US where it’s a first-order political non-starter. That only works for health care insurance, another subsidy-loaded, heavily regulated industry. And that mandate won’t be around for much longer if the Republicans ever get their act together; perish the thought.

Nevertheless, the federal government and individual states like California have provided fiscal incentives-subsidies to customers for EV purchases. Rebates and tax credits are offered directly to buyers, to entice consumers – the demand-side of the vehicle market – like the Vans to purchase ZEVs and counter “the forces of carbonization,” as Governor Jerry Brown just categorized climate-change deniers.

The federal EV purchase subsidy is an income tax credit of up to $7,500. This credit has been in effect since 2010 and will begin to phase out once a manufacturer has reached 200,000 EVs sold. Given Tesla’s sales success, its customers may not enjoy the full federal credit within the next year or so. The California ZEV subsidy offers up to an additional $2,500 for the purchase or lease of battery EVs. In addition, several of the state’s electric utilities provide residential EV owners a lower off-peak hours’ rate when they can charge their vehicle.

These consumer subsidies seem to be effectively promoting EV sales to an extent. When the State of Georgia and Hong Kong eliminated their EV subsidies, sales crashed. After 2015 when the Georgia state legislature removed the state’s EV credit, the sales of the Nissan Leaf dropped from 15 times the national average to a small fraction of what they were. In Hong Kong, Tesla sales dropped to zero in April from nearly 3,000 the month before when the province’s EV tax break was eliminated. Thus a big question is raised about future EV sales as the president’s 6-shooter Dept. of Energy Secretary Rick Perry considers eliminating the federal EV tax credit. If all federal EV incentives and involvement are removed, Navigant, a consulting firm, expects overall demand for plug-in hybrids and EVs could be reduced as much as 20% by 2025. When it comes to energy, whatever the form, nary a BTU is produced, sold or used without some sort of subsidy.

Aside from public policy, what other potholes are in the EVs’ road to mainstreaming? There are three. First, is EV batteries. Producing lithium-ion EV battery packs that are cost-effective and enduring has been an ongoing challenge. Costs are coming down and battery efficiencies are incrementally increasing, but when compared to tried-and-true internal-combustion engines battery drive-trains are more expensive.

Experts believe if the price for one kilowatt-hour’s (kWh) worth of lithium-ion battery capacity can be reduced to $150, electric vehicles can become cost competitive with internal-combustion vehicles, without subsidies. Knowledgeable specialists guestimate that the Chevrolet Bolt’s 60-kWh pack costs about $215 per kWh. Tesla’s head of investor relations claims the Model S battery packs cost $190 per kWh, although that figure might be derived with Tesla (nontraditional) math—accounting that often ignores R&D and capital investment costs.

The final $50 or so per kWh are likely to be the most difficult to attain. No one now predicts significant leaps for today’s lithium-ion battery technology. Instead, cost reductions are more likely to be found over the near-term from economies of scale and manufacturing improvements. Tesla’s Gigafactory is a $5 billion battery-making building in Nevada may pare up to 30% of a pack’s cost, if it comes together as planned by 2020. Here’s hoping.

The second pothole is charging infrastructure (aka, EV “fuel” stations). Electric vehicle charging stations are necessary for anyone who owns an EV, especially those whose range is diminutive. Here's a nice visualization showing more than two dozen EVs' and plug-in hybrids' charging range along with their base prices. With several 200+ mile electric vehicles now available (the Chevy Bolt and Tesla Models S, X and 3) and longer-range EVs hopefully arriving in the next several years, today’s parallel to a pre-Interstate America is the utter lack of a consistent, standardized fast-charging infrastructure for EVs. If EVs are to replace gasoline-fueled vehicles, a national, automaker-independent network of direct-current fast charging stations will be required, that can restore up to 100 miles of range in just 30 minutes.

Unfortunately, standardized charging isn’t yet on the EV horizon. EV drivers from every automaker face a very different experience than gas-fueled vehicles. Electric charging is usually a-frustrating amalgam of chargers run by separate charging networks, using varied hardware. There’s little consistency among interfaces, with some of the chargers only accepting membership cards and fobs for proprietary networks. Is this any way to build popular demand for your EV product? No. But that’s what EV owners now confront and will be for the foreseeable future unless someone (say the IEEE, the Society of Automotive Engineers or much less likely given the present administration’s carbonization focus, the federal government) sets a uniform, national standard for “fueling” EVs.  

Third, the environmental benefits of switching from gasoline to electricity as the source of vehicle power are augmented only if electric utilities generate their power from low-carbon sources. Nationally, electric utilities now use fossil-fuels for 65.1% of electricity generation (including 30.4% from coal), according to the DOE/EIA. That’s not low-carbon.

I know, I know, we humans (especially we Americans) have to change the way we behave and live if we’re going to avoid more bad things from happening to our environment. And while I question the validity of really long-term environmental systems models’ predictions 50 or 100 years out, we still need to do something significant today. Forget the future, post-Industrial Revolution data to date show we’ve already caused key, detrimental changes in the world’s weather and environment.

But really, having the CARB exercise supernumerary control over what technologies California motor vehicles can use is concerning for me, an admitted car guy since I could barely walk. My concern centers on the CARB because it seems to not care one milliliter about what the price of gasoline is or at all about how customers actually make vehicle choice decisions. The CARB mandate only focuses on vehicle supply, not demand. No wonder their mandate keeps slipping.

But why should the CARB change; its goal is environmental greenness, not customer satisfaction. The ZEV mandate which specifies the number of vehicles that must be sold has been revised several times due to unexpected market conditions (e.g., the changing market price of gasoline that influences consumer vehicle-purchasing habits). The CARB first set its mandate for low-emission vehicles 27 years ago, when the nominal price of a gallon of gas was $1.12 ($2.03 in real terms).

 With all the challenges that remain, I don’t yet want to buy an EV by trading in my sports car. Do you? There is, however, the plug-in hybrid Porsche 918 Spyder. I’m not the only person who remains reluctant to hop on the EV bandwagon. I hope the potholes get fixed speedily. More than 98% of car buyers haven’t bought an EV. A smoother byway will help greatly. But hop on it we should; the sooner the better if we and the Vans are to go amping along the byways under bluer skies. 

BEES’ KNEES AND WAGES

To bee or not to bee, is that the question? 

Mea culpa. I’ve been in a rut (though not of the elk-ian sort); I spend too much time reading about and reacting to tweets from the child-like creature professing to be our national leader. So I’m taking a vacation by giving up reading news about our president’s tantrums for the summer starting today on our 241st birthday. 4 No Trump is now for me more than a bridge bid. I’m following Gideon Litchfield’s apt suggestion to ignore this man-child’s paroxysms. According to Litchfield, a normal US president is like a creature in the middle of a lake, his every move creating far-reaching ripples that people pay attention to. Our current leader is like a rock in a stream; he creates turbulence and is to be avoided, but everything flows on around him.

Instead, I’ll focus on something apart from the hugely disturbing, corrosive and sad politics of our president.

Say for example, how long have workers’ wages been the bee’s knees?

It’s not a question that’s occupied my or likely your forebrain that much. But it does have implications beyond the biological superfamily Apoidea, where bees reside. To be clear, bees indeed have segmented legs that include knee joints. Praise bee. The idiomatic phrase “the bee’s knees” became popular in the 1920s and refers to something being of high quality or excellence.

Not just the bee’s knees are excellent. There are close to 20,000 known species of bees that are found on every continent except Antarctica, in every habitat on our planet that contains insect-pollinated flowering plants. Many bee species are eusocial, living in cooperative, communal groups (e.g., hives) headed by a female queen bee. Bees pollinate more plant species than any other pollinating animal, including ants, butterflies, bats and hummingbirds.

It is estimated that about one-third of the human food supply depends on pollination, most of which is accomplished by bees. And unlike any other pollinator, bees (specifically the most well-known type, the European Honeybee) produce wondrous honey as well as beeswax and royal jelly. Royal jelly isn’t served on Prince Charles’ UK muffins in the morning; it’s a honeybee secretion used in the nutrition of larvae, as well as adult queens.

In 2013 more than 2.6 million bee hives produced about 149 million pounds of honey in the US according to the National Honey Board. What state produces the most honey? Although it’s unlikely, if you picked North Dakota you’d earn a B++. Bee statisticians estimate that in order to produce 1 pound of honey, 2 million flowers must be visited, which takes a hive 55,000 miles of flying. That’s a lot of flying without any frequent-flyer miles. An average worker bee makes only about 1/12 teaspoon of honey in its lifetime. Thanks guys.

Bees have been making honey for well over 100 million years. Humans have enjoyed a long, positive relationship with honeybees; except when we misbehave and get stung. Depictions of humans collecting honey from wild bees date to 15,000 years ago; efforts to domesticate them are shown in Egyptian art more than 4 millennia ago. Jars of honey were found in the tomb of Tutankhamun. The Greeks treasured honey; Virgil and Pliny wrote about beekeeping 2,000 years ago.  

Onward to wages. Economists generally define wages as the regular payment provided at a fixed rate to labor for services undertaken. For employers it is the cost of using labor, as opposed to using the other two factors of production, land and capital. Wages are determined by several factors, principally the demand and supply of labor as well as labor productivity - the output produced per person-hour worked. Sounds fairly simple, but it usually it isn’t.

One continuing issue regarding wages is how has the premium paid for higher-skilled, more-productive laborers compared with lower-skilled workers over time. This concern has risen in importance as uneasiness about technological displacement of middle-skilled workers has grown and the wages provided to lower-skilled workers and others have stagnated. I wrote about the controversy surrounding how the rise of artificial intelligence (AI) may affect workers’ jobs when I examined robots, blacksmiths and the future.

The seminal efforts of Professor Gregory Clark at UC/Davis offer an intriguing perspective on the premium paid to higher vs lower-skilled workers. I have found Prof. Clark’s deep excursions into quantitative economic history fascinating. His captivating book, A Farewell to Alms, offers insights based on the extensive empirical data he’s collected about the world’s economic history including why the great “divergence” of the Industrial Revolution happened first in England and not, for example, China.

Prof. Clark has recently assembled an impressive dataset of wages in England from the end of the 12th century through current time. With almost 800 years of English data (!), he compared skilled-worker craftsmen’s wages with that of common laborers from the middle ages through the Industrial Revolution and beyond. What his data show is that except for two periods of significant change, the recent rise in the wage premium for skilled and college-educated workers is historically unusual, as shown in the chart below from The Economist.

Sources: The Economist and Prof. Gregory Clark

The chart shows two large changes in the skilled-worker wage premium. The first dramatic decline happened in the 14th century, when average life expectancy at birth was about 31 years. [Interestingly, this short expected lifespan basically was unchanged since Classical Greece – the 4th and 5th centuries BC, when it was ~28 years – and that of 17th century England at 35 years.] With such a short lifespan and when interest rates were high a worker’s taking on an apprenticeship (often 7 years long) to become a skilled craftsman had a high opportunity cost. Fewer men became craftsmen and the craftsman-to-common-laborer wage premium grew until the early 1300s. Thus, from the mid-1200s through the beginning of the 14th century craftsmen’s wages were indeed the bees’ knees. It wasn’t to last.

The bubonic plague (Black Death) cast its very dark penumbra on England and the rest of Europe, starting in the mid-14th century and continuing sporadically through the mid-17th. After 1348-49 when the plague first struck England, its population dropped by one-third precipitating reductions in interest rates and significantly adding to the already outsized challenges of living. Apprenticeships became more alluring both financially and because there were far fewer skilled workers. From the chart, the increased supply of skilled labor relative to common laborers soon reduced the wage premium ratio and kept it around 1.50 until the late 1600s.

The second big change happened during the 18th and 19th centuries. The craftsman/laborer wage premium rose at the beginning of the 18th century and stayed high until the beginnings of the Industrial Revolution in the mid-1700s. Skilled workers’ wages were the bees’ knees then. However, the Industrial Revolution was a game-changer for virtually everyone in England, and soon thereafter the rest of Europe, America and the world. For the first time in history structural technological change created widespread job displacement and opportunities.

In a real sense the Industrial Revolution was realized by the coincident mechanization of agriculture. The Agricultural Revolution allowed land-owners to reduce their field labor and still increase output via improved labor productivity. The enormous increases in agricultural labor productivity were realized by adopting a series of new technologies that coincided with the Industrial Revolution including the cotton gin, iron/steel plows and mechanical reapers. By the 1990s, farm labor and land productivity had increased 100-fold in 150 years.

The decline in the craftsmen/laborer wage premium started in England as the newly-mechanized textile industry hired unskilled laborers – most often from farms – to replace artisan craftsmen in new factories. Industrial machines could be operated by workers with far less training than craftsmen. Average daily income in 1861 England was 14 pence for 10 hours of work or about $336 in today’s dollars. The modernization and automation of British industry steadily became more widespread in the 1800s. The skilled-worker wage premium dropped, as shown in the chart, and didn’t start to recover until the mid-20th century.

Most recently, wage premiums during the past 40-50 years have been directed to college graduates, as I’ve discussed before. As the number of college degree-holders continues to climb, it’s unclear how long this premium will last. The multi-century historical wage data discussed above show that wage premiums awarded to more skilled labor eventually subside. Even the bees’ knees ultimately crumple.

MORTARBOARDED BY THE COLLEGE EDUCATION MARKET

We should be brave with our talents. ~ Caroline North 

I have thought more about the market for college education now that graduation season has ended and the 2.92 million new college graduates have celebrated and tossed their mortarboards into the air this spring. We spend lot of money on college education. The latest data show that postsecondary institutions’ total expenses for the 2013-14 academic year were approximately $517 billion; public institutions accounted for 63% to the total, private nonprofit institutions spent 33%, and private for-profit institutions account for 4% of the total. This 3-year old total expenditure is within 10% what the federal and state governments now pay for Medicaid.

I’ll start by returning to basic microeconomics and examine the market for college (aka, tertiary) education. I’ve used the term “college” here to include every type of post high-school (post-secondary) education, including elite and non-elite 4-year private institutions (e.g., Harvard, Stanford, Cal Tech, Denison, Willamette and Shimer College in Chicago that has just 97 students), elite and non-elite 4-year public institutions (e.g., UC/Berkeley, Univ. of Arizona, Western Washington Univ., West Chester Univ.) and public and private 2-year institutions (e.g., Berkeley City College and for-profit schools like DeVry University). Broadly speaking, these are the 3 distinct types of colleges that comprise the “supply” side of the college market. California has the largest number of colleges of any state, 1,246, and is home to colleges in each of these 3 supply tiers. There are 3 major stakeholders in the market for college education; (1) the college suppliers of this education, (2) the students who “demand” education services of the colleges, and (3) federal and state governments who finance large parts of both the suppliers and demanders.

The demand side of the market is the students who apply to, enroll in, attend and hopefully graduate from the over 4,700 higher-education institutions (aka, colleges) in the US. The latest information indicates the total student enrollment in US colleges is more than 20.5 million in 2016. College enrollment has been steadily increasing since post WWII, when the federal government enacted the Servicemen's Readjustment Act of 1944 (aka, the G.I. Bill). In effect, the G.I. Bill helped create the 20th century version of the “American Dream” and augmented it to include not just a house but a college education. In 2015 the college graduation rate was 59% at public institutions, 66% at private nonprofit institutions, and a depressing 23% at private for-profit institutions (about one-third the rate for private nonprofit institutions).

From 1950 to 2016 student enrollment in US colleges has increased about 740% and represents an unqualified, first order achievement that has benefited not only the millions of college graduates themselves but our nation as a whole. These undeniable collective benefits are why Econ 101 teachers like me use college education as a prime example of an economic activity that provides positive externalities. This laudable, long-term increase in people having a B.A. or more is illustrated in the following chart.

Percent of US adults with a B.A. or higher degree

Source: NCES.ed.gov. Adults are defined as people between 25 and 64 years.

This market for college education is now and has been out of balance; we are nowhere near “market equilibrium” in any white-board classroom sense. Some of this imbalance is the result of public policies, as well as policies created by the colleges and finally consumer behavior. The economics of this market are, to no one’s surprise, largely demand driven.

I now examine how college supply and demand have changed during the past decades. Total enrollment in “Higher Education Institutions” (HEIs) is a National Center for Educational Statistics (NCES) term referring to what ordinary folks call colleges and universities) grew by 76.1% from 1980 through 2013. Currently, 2013 is the last year of info for HEIs – but not enrollment in HEIs – those data go through 2015.

The number of HEIs from 1980 through 2013 grew 49.9%. HEIs include both 2-year and 4-year schools. Using 2000 instead of 1980 as the “base” year for growth through 2013, HEIs grew 13.0%, enrollment grew 33.1%. The number of HEIs in 2013 was 4,724 about 2/3rds of which are 4-year schools; number of enrolled students in 2013 was 20,376,000.

Interestingly, these NCES data indicate the growth in the number of 4-year HEIs was about twice as fast as that of 2-year schools, 41.9% vs 19.5%. My expectation, based on information presented in the media, was that 2-year schools’ growth would be stronger. From 1980 through 2000 the growth in the number of 2-year colleges exceeded that of 4-year colleges. But starting after the Obama administration took office, the federal Education Dept. launched a fairly extensive “review” of degree-granting schools (especially private for-profits) to better regulate them and improve their woeful graduation rates. As a consequence of these reviews and regulations, the number of 2-year HEIs declined by 2.1% between 2000 and 2013. Nevertheless, some 2 million students are enrolled in for-profit colleges, up from 400,000 in 2000. The Trump administration is now weakening and removing such regulations. Remember Trump University, it may be back in business? In contrast, 4-year HEIs grew by over 22% since 2000.

What’s happened to college faculty salaries during this time of tremendous enrollment growth and increases in the number of HEIs and tuition? Not much. The table below shows average real salaries for full-time faculty between 1971 and 2010. Faculty salaries have increased, but only nominally and far less than one would expect given the market growth. Look at the drop in real salaries that happened after 1971.

College Faculty Salaries, 1971-2010

	Average Salary	Average Salary
Year	All Faculty	Professor
	(2008-09$)	(2008-09$)
1971	$68,677	$97,035
1976	$64,479	$87,667
1980	$59,029	$78,495
1990	$67,847	$89,277
2000	$70,865    (3.2% fr ’71)	$94,350            (-2.8% fr ’71)
2010	$73,910     (4.3% fr ’00)	$102,691 (8.8% fr ’00)

Source: NCES. Figures in parentheses indicate percent change from indicated year.

From these data, it took the all faculty average salary until 1997 (not shown in the table) to get back to what it was in 1971. For professors the 1971 average salary level didn’t return until 2002. There’s no pre-1971 data so I can’t tell if this year was atypical for hiring faculty; that newly-minted PhDs were in abnormally short supply pushing salaries up, but average faculty salaries dropped after 1971 through the ‘70s, ‘80s and much of the ‘90s as shown in the table, despite large increases in enrollment. Also note the percent change in the 2000 and 2010 salaries. The average professor’s real salary actually shrank by 2.8% from 1971 to 2000, and grew a very modest 8.8% over the ten years ending 2010.

The 2015 average salary for professors from another source is listed as $114,134. This source shows the minimum/maximum salary spread for professors in 2015 from $55k to $207k. NCES data show that the full-time instructional staff at HEIs has increased over 20% since 2015 to over 620,000 people.

For the San Francisco Bay Area, Glassdoor.com states the average professor salary is $155,077, with a spread from $94k to $244k. The 2015 median “postsecondary teacher” salary is listed by the Bureau of Labor Statistics as $72,470. The BLS says they expect a humble 13% projected 10-yr growth in this college faculty salary level.

These data provide solid evidence that despite significant growth in the demand for college attendance and growth in the number of HEIs, college faculty real salary growth has been bleak. Faculty salaries’ increases do not embody the continued strong demand for the services faculty members have provided. One trend that has contributed to this low growth of faculty salaries is the increased use of non-tenure track, adjunct instructors. Or perhaps the majority of that tuition and fee revenue growth has gone to administrators, as anecdotal data seems to indicate. This information suggests that, on average, college faculty members have picked the short straws in the college market for quite some time.

College-going has deepened and broadened in the US. This is a very good thing from several perspectives. The demand for college education has increased significantly, and will continue to. The NCES now projects that awarded B.A.’s will increase 14% between 2010 and 2021, up from the 7.1% previously forecast. But the growth of supply (or capacity) of colleges to accommodate ever-more students has increased but lagged demand’s huge growth.

The bottom line regarding our college education market is that the demand for college enrollment has grown almost 3 times as fast as the number (supply) of HEIs has (33.1% vs 13%). It’s mostly a sellers’ market. 

What happens in a market when the quantity demanded exceeds the quantity supplied? Prices rise, as indeed they have in the college market. Tuition and fees have followed an upward, ballistic trajectory for quite a while. In the 15 years from 2002 to 2017 college tuition, fees and room & board have increased 40.4% in real terms (after accounting for inflation) for private, nonprofit 4-year colleges and 63.9% for public 4-year colleges. This is principally demand-pull tuition inflation that colleges are happy to oblige.

Tuition and other costs have risen for colleges, especially public institutions, because federal tertiary education funding has steadily declined since 1965; state funding of colleges has contracted since the late 1970s. Tuition revenues surpassed federally-supplied funds after 1965. In 2011 tuition revenues surpassed state funding for the UC system in 2011. Between 1996 and 2016 both in-state and out-of-state tuition at UC/Berkeley practically tripled. According to the College Board, national yearly costs for private, nonprofit 4-year colleges currently average $45,370; for public 4-year colleges it’s $20,080.

Although colleges have been fiscally pressed to raise tuition and fees since other funding sources have declined, how can they keep raising tuition and fees so dramatically without suffering a loss of customers (aka, students)? They can because the demand for college education is very price inelastic (insensitive). The economic assessments I found of the price elasticity of demand[1] (PED) for college education range from -0.44 to -0.85. In non-econ speak this means that students don’t really reduce their demand for education much when tuition and fees increase, despite their protests. Enrollment demand decreases much less than tuition price increases. Why? Because there aren’t any real substitutes, other than going to another college or a lower-tier one that has lower tuition.

Colleges don’t really compete on price; they compete on reputation and expected benefits. This lack of substitutes differentiates college education from a host of other retail services and products, and strengthens the colleges’ ability to raise tuition, especially when federally-subsidized college loan funds have increased. Exactly how colleges determine what their tuition and fees will be is far beyond the scope of this analysis. Adam Davidson wrote an interesting, insightful article several years ago that examines the tuition-setting process and expressed his belief that the top elite private colleges are probably underpriced.

Students and their families know that the only thing more expensive than a college education is not getting a college education. As one woman put it that is supporting her 2 sons with a part-time manufacturing job, “If you don’t have a college degree, your job choices are fast food or factory.” So students begrudgingly take out larger loans and/or apply for greater financial support with all fingers crossed. Given such numerically low price elasticities, increases in tuition and fees provide increased revenue for colleges. The price elasticity of demand is likely even lower for elite public and private colleges, as ever-lower acceptance rates demonstrate.

College students and their professors have been mortarboarded by this market. Students are always paying more, faculty members aren’t gaining much financial benefit and educational institutions rule the academic roost.

Given these substantial increases in college tuition and fees and the rising demand for tertiary education it’s easy to see why promises by liberal politicians to make college “free” have such wide appeal among young people. The “free” part of no-tuition public college is a chimera, especially for taxpayers. Bernie Sanders’ 2016 free-tuition program for all could have cost well over the $75 billion per year that he suggested. He hoped it would be paid by a new financial transactions tax. This April, he renewed his utopian legislative efforts to create free public-college education in America. Good luck with that, Bernie.

Last week’s surprisingly strong results for the British Labour Party were in no small part due to Millennials voting for Jeremy Corbyn, who pledged to make British colleges tuition-free. Unlike America where only 17% of Bernie’s young followers actually cast a vote for their free-tuition man in the presidential primaries, 57% of British young adults voted for Mr. Corbyn last week and rejuvenated the Labour Party.

Will free tuition rule? As a taxpayer, I hope not. A good friend of mine says that one of the most expensive services that government can provide is “free” stuff. Expanding Stafford loans and Pell grants is a much better policy option, though far less poltically entrancing.

Increased college graduation has greatly benefited individual graduates and our nation. Within the market for college education the process of getting such an education has become more complex, more time-consuming and more costly. The suppliers of this education – colleges and universities – excluding their faculty, seem to have benefited the most.

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[1] Formally, the PED is the ratio of the percent change in quantity demanded of the product/service (here college education) to the percent change in price of the product/service (here tuition), ceteris paribus. The PED is usually negative because for normal (non Veblen or Giffin) goods Q_d  is inversely related to P. PED = dQ_d/Q_d  / dP/P. If PED<1, it’s called inelastic and the percent reduction in Q_d will be less than the percentage increase in price. 

ON THE SUNNY, WINDY BUT BLEEDING EDGE

If there is a future, it will be green. ~ Petra Kelly 

Yesterday it was reported that Santa Barbara, California (SB) is joining 29 other US cities by committing to using 100% renewable energy. SB’s aggressive, completely renewable goal is to be met by 2030, with a 50% renewable commitment by 2020 (that’s only 2 ½ years away). The article stated that SB currently uses about 30% renewable energy; its principle energy suppliers are Southern California Edison and Southern California Gas. Other California cities that have similar 100% renewable energy goals (but not necessarily the same attainment year) include San Francisco, Palo Alto and San Diego.

Santa Barbara doesn’t now have a specific plan for getting to 100% renewable energy; its work plan won’t be completed until December 2018. Not having any plan likely makes the SB City Council’s decision about getting to 100% renewables far more straightforward, not being burdened with knowledge about the potential costs and consequences. 

Nevertheless, by New Year’s Day 2019 the city and its citizens will presumably need to be especially focused on very short-term mechanisms for increasing their renewable usage by something close to 10% in just 12 months to meet the 30% goal by 2020. Unfortunately, there aren’t many of those procedures. They’ll also need to implement their plan to figure out how they’re getting to the remaining 70% (to reach 100% renewable) in just 10 more years.

Can other very green-oriented cities like Berkeley be far behind in similarly committing to 100% renewable energy by 2030 (or maybe even 2025 just to be more committed to being on the solidly green but bleeding edge)? Of course not. Such public pledges appear worthy, but involve a fair amount of fantasy. They’re feel-good, no apparent strings-attached political statements that are indeed in way too short supply these days.

As I mentioned in a recent blog, I’m all in for increasing green energy (GE) usage. I spent the majority of my professional career advocating for energy-efficiency and conservation programs. Solar thermal and photovoltaic (PV) panels occupy much of our roof using time-of-use (TOU) prices. But even though these imposed, absolute (100%) promises like SB’s may serve doctrinaire political and genuine environmental purposes, they are divorced from important attributes of real-world energy supply, demand and technology. They are easy to state, especially without delineating expenses, and will be very challenging and pricy to implement.

Such vows fail to recognize any cost consequences that can be substantial and often require public subsidies to entice people to change energy sources and switch to more expensive GE technologies. The vows also don’t acknowledge any need for widespread behavioral changes on the part of every one of the affected constituents. Santa Barbara is apparently thinking about establishing its own renewable energy sources to meet its 100% renewable goal. That’s a very expensive proposition that will take some time. Getting to completely green will not simply happen by public diktat. Total reliance on renewable energy would require a major expansion of electric storage and transmission capacity for those times when the wind dies down and the sun fades, as happens every night. This is illustrated with the Duck chart in my earlier blog.

Elon Musk will be very happy to sell Santa Barbara and its citizens PV panels and battery storage capacity, and it’s more expensive than SCE’s electricity or SCG’s natural gas. This is despite decades of erstwhile R&D efforts to improve performance and cost-effectiveness of solar, wind and battery storage technologies. One knowledgeable energy systems engineer stated that “Lithium batteries [that Musk’s Powerwall 2 system uses] offer good potential, but they’re still not there.” Offering good potential probably won’t help Santa Barbarans in 2020. How expensive is current battery storage? Quite costly. If one uses solar PV power with TOU rates for daytime battery charging, the payback period is 31 years for storage. Only 1% of US residential customers now use TOU rates. Without a TOU PV solar system, it’s 38 years until payback. Mr. Musk’s Powerwall 2 battery system comes with a 10 year limited warrantee.

The city’s 100% pledge also will require all its vehicles to stop using nasty nonrenewable gasoline or diesel fuel and switch to electric vehicles (that would have to be charged all renewable electricity). The electric vehicle “premium” can often be recouped after about 50,000 miles of driving (a little over 4 years). The city’s public works department trucks would likely need to be converted to biodiesel. Biodiesel is 21% more expensive than diesel. Biogas is about 3 times more expensive than natural gas.

Will renewable energy prices decline? Very likely, but how content will Santa Barbara’s 91,000 citizens be when they start have to pay higher taxes for getting to 100% green, especially if our brown-energy president somehow actually cuts or removes the federal subsidies associated with solar, wind, storage and other renewable energy systems. Getting to 100% green in just 13 years will cost a lot of (green) dollars. Is it worth it? Possibly, but allowing a longer time to get there and setting a more realistic goal of say 75% or 85% will be more attainable, less expensive and still greatly benefit the environment. 
The appropriate geographic scope for such policies isn't municipalities, it needs to be much broader given the nature of the energy system. Optimally, strong renewable energy policies should be national, but at this point  that's not going to happen until (hopefully) 2020. So realistic state-wide green energy policies are where it's at now. But as I've mentioned previously, setting a short-term state-wide 100% renewable goal can suffer the same problems on a grander scale that Santa Barbara will soon be facing. 

I guess I’ve become a stick-in-the-mud realist GE guy who remembers several things related to achieving renewable energy commitments. First, how difficult and time-consuming it is to attain 100% of any personal or collective goal, especially for intrinsically-complex systems like energy production and consumption. Second, how slowly government and people change habitual behaviors, like using energy in its myriad of forms. Third, how “concerned” many people can become when their taxes, energy bills or living expenses rise. This characterization of me doesn’t please me 100%; so it goes with realism. Onward towards a needed, but realistic greener future. 

DUMBBELL HEALTHCARE POLITICS: The HCA and AHCA

It is health that is real wealth and not pieces of gold and silver. ~ Mahatma Gandhi 

“Dumbbell” politics is roiling America. Dumbbell politics is now present as two widely dissimilar healthcare policies are being espoused by equally widely-separated parties who aren’t interested in reaching any sort of middle-ground that most people can literally live with. Like a dumbbell, this one has a weight on the left-side that’s opposite to the weight on the right, connected across the US by a thin rod.

The latest example of dumbbell politics involves healthcare. On the far left is Sacramento, California and on the far right Washington, D.C. that are separated by more than just 2,733 miles as the digital crow flies. Either one of these weighty policies will be a very heavy lift. Dumbbell politics in healthcare policy involves much more than a shocking misdemeanor assault in the Nebraska portion of the rod. It involves every breathing person who uses healthcare and wants to maintain or improve his or her health. It’s a matter of health and life for all 326 million of us.

First, the left-wing dumbbell weight in California. Last week California State Senators Ricardo Lara and Toni Atkins introduced SB-562, the Healthy California Act (HCA), to their Democratic colleagues, who hold a supermajority in the legislature and to their outnumbered Republicans. Sen. Lara’s Appropriations Committee easily passed this bill that would completely revamp California’s healthcare market into a “single-payer,” state-financed universal healthcare system for every documented and undocumented resident. Progressives and many liberals were joyously beside themselves. There are commendable aspects of this legislation, but totally re-doing our state’s healthcare system would be very expensive and very disruptive. Indeed, some of SB-562’s proponents’ happiness should have diminished after the committee estimated the costs of implementing such a fundamental restructuring, a fiscally injurious $400 billion per year. For perspective, the State of California’s total budget for everything it provides to us 39.5 million citizens will be $183.4 billion in coming fiscal year. SB-562 would compromise the fiscal health of California. Do you see a problem?

Sen. Lara apparently doesn’t. He wants to have his dumb-bill quickly passed – by tomorrow – before his fellow senators and assemblymen figure out how the state will actually pay for California’s version of Medicare for All. Few if any Sacramento Democrats can remove his or her very rose-tinted glasses about SB-562’s costs, disruption or consequential public pain. The political principle of single-payer healthcare seems more important than its costs and who they are imposed on. Sen. Lara’s perverse desire for haste in passing this giant change to California’s healthcare system strangely parallels the Congressional Republicans’ rush to pass their AHCA without any public hearings.

The California Appropriations Committee’s fiscal assessment assumed two illusions: first, a new 15% payroll tax would be implemented on every Californian’s wages, in addition to adding other new taxes as sources of required funding; second, the state would continue to receive the same transfer funding from Washington for Medicaid. Sen. Lara hasn’t apparently gotten the ubiquitous message that the president’s just-issued federal budget proposal will amputate Medicaid funding — the national umbrella for California’s Medi-Cal program — by $616 billion over 10 years plus $834 billion of Medicaid reductions in the Republican health care legislation (see below). Sen. Lara seems to have a serious case of real money illusion, something that isn’t cured by an optometrist.

Governor Jerry Brown hasn’t stated whether or not he’s in favor of SB-562. Being Jerry Brown, he offered a Latin phrase to describe his concerns, ignotum per ignotius, which translates to "the unknown by the more unknown." In less esoteric, more modern language, you have a problem (say, healthcare) and state, “I’m going to solve it with something that’s even a bigger problem.” Oops.

Now to the right-wing dumbbell weight in Washington that serves as a mirror-image of Sacramento’s left weight. Because Republican Congressional leaders’ primal goals for the past 7 years have been to void President Obama’s Affordable Care Act and reduce the tax burden of already rich/wealthy Americans, the Republican House of Representatives sprinted and passed their AHCA (American Healthcare Act) at near Olympic pace. The AHCA passed without public hearings or, for most Republicans, even reading the bill before their vote. This dumb-bill is now in the hands of people like Senator Mitch McConnell.

It is important to remember that the AHCA is legislation whose epidermis has something to do with healthcare, but its skeletal core provides several means for giving rich people a considerable tax cut. For Republicans, the most important number from the Congressional Budget Office’s (CBO’s) assessment of the AHCA is the expected reduction in the federal budget deficit, not the more publicized healthcare-related predictions. The CBO estimated that the Act would reduce the deficit by $119 billion over 10 years. This deficit reduction forecast will allow Sen. McConnell and Rep. Paul Ryan to offer tax “reform” legislation that’s heavily skewed to benefit the rich/wealthy. The AHCA’s prime purpose has much less to do with wounding our healthcare system; it has far more to do with ultimately reducing taxes for the 1%. These tax reductions have been estimated to be an unhealthy $1 trillion.

The AHCA’s healthcare consequences have been widely reported: 23 million people could lose healthcare coverage; it could destabilize individual insurance markets in some states; states would have to option to reduce the scope of coverage; people with pre-existing conditions will be paying much higher premiums, if insurance is available at all; and Medicaid enrollment would drop by 14 million principally due to increased premiums and lower funding.

Trumpcare’s potential winners would include people who are young, healthy and earn higher incomes. The far more numerous losers would include poorer Americans who use Medicaid, and older and/or lower-income people who buy their own insurance. Like folks who voted for the president.

The D.C. dominant Republicans have been obsessed with changing federal healthcare policy. The AHCA is a mutant tumor that will cast millions of people into slithery swamps of murky uncoverage to fend for themselves in the name of tried-but-untrue Republican fiscal policy. In sum, the AHCA would be a very unhygienic act of Congress. Republican Representatives and Senators don’t care about the health consequences; they’re in this solely for their other, misguided principles. No wonder I’m feeling ill.

These two dumb-bills comprise an injurious political dumbbell. With this West-East healthcare dumbbell, we’ll need to appeal to Asclepius and Ianuaria to see us through with our individual and collective health hopefully intact and somehow resist Washington’s growing kakistocracy.