Trump Supporters See His Image in Their Mirrors

Vijay K. Mathur

Many in the media are appalled at the derogatory remarks GOP presidential presumptive nominee Donald Trump makes against Hillary Clinton, former President Clinton, women, and many ethnic and racial groups of Americans. However, I wonder if they have seriously examined the underlying views of Trump’s Republican supporters. It appears that Trump is reflecting the views of his electorate and political supporters about the rest of the American society. Perhaps we should not blame Trump for his foul, derogatory and unpresidential language against people and groups he does not like and who are critical of his views. Conceivably the blame lies with his cheering section.

During the 1950s, Senator Joseph McCarthy initiated a witch hunt for communists in the federal government and among Americans in all walks of life. It had gone unnoticed for some time by most responsible observers. But finally a courageous anchor newsman, Edward R. Murrow, in March 1954, exposed the Senator’s attempt to humiliate many honorable Americans and to damage freedom of expression and activity enjoyed by all Americans.

One of the most memorable statements Murrow made in support of his case against Senator McCarthy’s tactics and quoted by David Sheldon of Poynter, was, “He didn’t create his situation of fear, he merely exploited it—rather successfully. Cassius was right. ‘The fault, dear Brutus, is not in our stars, but in ourselves.’” The same situation is applicable in Trump’s presidential campaign. He is thriving on the fear, anger and suspicion of government of his supporters. Hence, it is time for them to look at themselves in the mirror, to consciously and cognitively examine who is exploiting whom. If they look carefully they may realize that Trump is not interested in their well-being but rather in his own lust for power and promotion of his brand.

Trump is also exploiting polarization of the electorate based on rumors he spreads in the news media. Experimental evidence reported by Cass R. Sunstein, in On Rumors, shows that internal group deliberations further strengthen members’ belief in rumors. Trump’s rumors, such as Muslims celebrated 9/11 attack on World Trade Center, Mexicans are rapists and murderers, Vince Foster may have been murdered during President Clinton’s administration, Senator Cruz’ father’s hand in JFK assassination, and Hillary Clinton desires to repeal Second Amendment are ignored by his supporters in his quest for the presidency.

Such rumors breed suspicion and even contempt against various ethnic and demographic groups and even against other presidential candidates who are supported by those groups. As psychologist Daniel Kahneman, former Nobel Laureate in Economics, states in Thinking Fast And Slow, “A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. Authoritarian institutions and marketers have always known this fact.” Mr. Trump takes pride in his skills in marketing and branding but not in policies. Policies are left for the experts.

What about the media’s role in Trump’s campaign? Jacob S. Hacker and Paul Pierson in Winner-Take-All Politics are of the view that news media are not helping voters by providing vital and reliable information on the candidates and their policies.

“The erosion of traditional interest organizations has meant that for many voters, the media are the only regular source of political information... Even hard news consists mostly of dueling sound bites. Efforts to analyze the veracity or relevance of these claims, or place them in context, are either left to the end or left out altogether.”

These remarks are especially applicable to most television news. The Internet has not filled that gap either. In fact, the Internet has contributed to the speed and durability of rumors.

Why have Trump supporters, and presumably responsible Republican politicians, forgotten their basic principles of Republicanism and are supporting Trump? Speaker of the House Paul Ryan emphasizes conservative principles such as “big tent,” smaller government, and entitlement reform every time he gets the opportunity before the media; but even he is wavering in his principles and hinting tacit support for Trump’s presidency. Is it conceivable that many of Trump’s supporters secretly believe in what Trump is overtly saying, zeroing in on his supporters’ inner thoughts, such as fear of immigrants, minorities, off-shoring of businesses, China’s unfair trade practices and loss of respect for America in the world?

According to Tax Foundation, October 2012, 60 percent of households now receive more federal transfer income than they pay in taxes. Obviously the Republican Congress has not been very faithful to its principle of small government. The Republican electorate in Southern states also does not practice its explicitly expressed concern about big government. Out of the top ten states receiving disability benefits under SSDI, seven are in the South.

Trump’s contemptible inflammatory language, and his vindictiveness against those who do not agree with his ever changing inconsistent policies and statements is a reflection of the cognitive dissonance of his supporters. It is time for his supporters and Republican politicians to look at themselves in the mirror and find their true self and not Trump’s image.

Mathur is former chair and professor of economics, and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio. He resides in Ogden, Utah.

Targeting Trade and Trade Pacts for Job Losses is Counter Productive in Presidential Campaigns

Vijay K. Mathur

Presidential candidates, particularly Donald Trump and Bernie Sanders, have started this myth among Americans that their economic hardships are due to trade pacts like NAFTA and recently negotiated with 11 countries, not yet implemented, Trans-Pacific Partnership (TPP).  TPP would reduce tariffs and other trade barriers within the block that controls 40 percent of world trade.  This rhetoric against trade and trade pacts sounds as if these candidates are adopting a more protectionist posture.

US exports during 2000-2015 grew at the average rate of 5 percent per year, more than the average import growth rate of 4 percent per year.  In 2015 the US exports of goods and services were $2.2 trillion and imports were $2.7 trillion, creating a trade imbalance of $0.5 trillion.  However, this trade deficit is only 3 percent of our GDP, hardly the sign of economic distress portrayed by these presidential candidates. 

In regard to international trade accounts, these candidates, especially businessman Donald Trump, should know that there are two major flows in the balance of payments that matter to a country.  Trade account lists trade in goods and services, and capital account lists financial flows.  If there is a deficit in trade account, it is balanced by surplus in capital account (financial flows).   According to National Bureau of Economic Research (www.nber.org), “Foreigners invest an average of over  $5 billion in the United States every day…", a significant share of the GDP.  The US is one of the top investment destinations in the world.  Investment provides capital, creates employment, and increases productivity and wages of labor.  Growth in export sector also benefits import-competing industries and intermediate goods industries in the supply chain.  

A White House report in October 2013 states that in 2011 US affiliates of foreign countries employed 5.9 million people in the private sector, about 4.1 percent of total employment.   Kevin Zhang’s research in Contemporary Economic Policy, October 2010, shows for a cross-section of 87 countries/regions that foreign direct investment and trade strengthens industrial competiveness. Creating fear of trade and trade pacts diverts attention from areas of policy that demand more attention to create more jobs in the future.  More attention should be paid to emerging skill-biased technologies, causing job losses for certain skills, especially in the manufacturing sector.

Research by MIT Professor David Autor for The Hamilton Project, April 2010, shows that skill-biased technical change is the major source of job polarization. It is increasingly replacing and off-shoring middle-skill labor performing routine tasks. The well-defined routine tasks can be performed either by computer programs and/or low skill labor with minimal guidance.  However, demand for non-routine jobs that require high-level skills, abstract thinking and creativity have been increasing.  Low skill level service jobs are also rising in the US. 

This job polarization is causing wage polarization where wages for high skill occupations are rising with contraction in middle- skilled and low-skilled occupations.  Research by Maarten Goos, Alan Manning and Anna Salomons, American Economic Review, August 2014, shows similar job polarization in 16 Western European countries. This age of globalization requires resources and deliberate actions to upgrade skills to complement new technologies.

It makes more sense for presidential candidates to come up with a comprehensive plan to meet the challenges posed by new technologies rather than blaming foreign low wage countries for selling goods and services in the US at lower prices.  As long as these countries’ markets are open, they do not engage in unfair trade practices and manipulation of exchange rates, American businesses and labor have to learn to compete in the world market.  Unfair trade practices and exchange rate manipulation require actions within the framework of the rules of World Trade Organization (WTO) and International Monetary Fund (IMF), not protectionist policies. In a free trade environment, US business and labor have to implement cooperative strategies to meet competitive trade and technological challenges.  Increasing business profits at the cost of reduction in wage share is a losing proposition in the long run for both parties and the nation.    

Policy makers in cooperation with businesses and labor have to implement education and training programs on a macro scale on an ongoing basis to generate skilled manpower that complements emerging technologies.  Protectionism will lead to a downward spiral of economic activity in the US and in the rest of the world, because it will be an excuse for other countries to engage in protectionist policies, thereby shrinking trade and growth in all economies.  As Paul Krugman notes in his book Pop Internationalism (1996) “…international trade, unlike competition among businesses for a limited market, is not a zero sum game…”

I hope our presidential candidates are aware of the lesson of the Great Depression when President Hoover signed the protectionist Smoot-Hawley Tariff Act in 1930. By 1932, sixty countries retaliated by increasing their tariffs. That led to the collapse of world trade and deepening of worldwide depression.

Mathur is former chair and professor of economics and professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio. He blogs for Huffington Post.  He resides in Ogden, Utah.          

Conservatives Must Realize That Redistribution Programs Help Poor

Published in The Huffington Post: Huffpost Politics 04/12/2016

Vijay K. Mathur
, Professor of Economics, Emeritus at Cleveland State University

Income inequality in the U.S. has increased since 1979. According to the Center on Budget and Policy Priorities, October 26, 2015, real after-tax income gains of the top 1 percent of households were 200 percent, while the bottom 20 percent and mid 60 percent gained only 48 percent from 1979 to 2010. Other measures of income inequality tell the same story.

It is also well known that inequality in the US is greater than in European countries. The question then is why are conservative Americans in general, and Republicans in particular averse to the issue of redistribution programs despite such inequalities in the U.S.? I am referring to all kinds of redistribution programs, such as Supplemental Nutrition Assistance Program (SNAP), Medicaid, healthcare under ACA, Earned Income Tax Credit (EIT). Even programs such as Medicare and Social Security are redistribution programs, since a significant number of people collect more benefits over their lifetime than they contribute to the programs.

Let me briefly enumerate the findings of some academic studies that provide useful information to most conservative Americans and politicians in Congress. They challenge their views on redistribution policies and economic opportunities available to the poor.

The central result of the paper “Preferences for Redistribution in the Land of Opportunity“, by Alberto Alesina and Eliana La Ferrara (Harvard Institute of Economic Research), November 2001, is that those who believe that opportunities are equally available to the poor as well as to the rich see social and income mobility as a substitute for redistribution. People who expect to be in the upper income brackets or are wealthy are afraid to lose with redistribution and hence are opposed to redistribution schemes. However, Blacks, women and those who suffered unemployment shocks support redistribution. High income and wealthier people in general vote for Republican and conservative politicians. Pew Research Center data, December 12, 2013 show, that whites were almost 13 times wealthier than Blacks in 2013.

The above findings are consistent with the results in another study by Alberto Alesina and George-Marios Angeletos, American Economic Review, September 2005. Most Americans, as opposed to Europeans, believe that poverty is due to bad choices or lack of effort. This view reflects cultural differences between U.S. and countries such as Denmark, Sweden and Norway, where people are willing to pay more taxes to help poor and low-income people, because they do not consider the poor lazy.

These findings on attitudes of richer Americans about the poor are at odds with studies that have investigated opportunity issue, work profile and income mobility of the poor, and the remedial effect of redistribution on poverty.

The paper, “Rags, Riches, And Race“, by Tom Herts, published in Unequal Chances (2005), editors Samuel Bowes et al., found that a rich child, born in the top decile (top 10 percent of the income distribution), has 26.7 percent chance of remaining in the same decile, while a child born in the bottom decile has only 0.5 percent chance of ending up in the top decile. In the paper, “Land of Opportunity“, for the Federal Reserve Bank of Richmond, 2002 Annual Report, Kartik Athreya and Jessie Romero report that 43 percent of taxpayers in the bottom quintile (20 percent of the income distribution) were still in the same quintile after 20 years. Similarly, 46 percent of taxpayers in the top quintile were still in the same quintile. Hence, poverty and low-income status persist in a large fraction of families throughout generations.

What about the claim that poor are lazy? A study by Deborah et al., “The Working Poor Families Project 2014-2015“, using Census data, found that 32 percent of working families were below 200 percent of the official poverty threshold in 2013. The percentages for Hispanic and Blacks are almost double (48 to 49 percent) the percentage for white working families.

Two recent studies by researchers Raj Chetty et al., and Hilary Haynes et al., in The American Economic Review, April 2016, tend to dispel the myth that redistribution programs do not help the poor. Chetty et al., found that the housing voucher program, enabling children before the age of 13 to move from high poverty areas to low poverty areas, increased their college attendance, earnings and reduced single parenthood.

Hilary Hoynes et al., focused on the effect of the food stamp program (FSP), now called SNAP, on the general well being of a sample of adults born between 1956 and 1981 and their mothers. The estimates show that FSP significantly reduced “metabolic syndrome” (conditions such as obesity, high blood pressure, heart disease and diabetes) and promoted good health among adults. The FSP also significantly increased economic self-sufficiency among mothers.

Evidence shows that programs promoting better neighborhoods, schools, sufficient food supply, health care and education in the lives of poor children, have the best chance to ameliorate poverty in the long run. By now conservatives must realize that trickle-down model is flawed and is not the solution for generational poverty. They must work with progressives to implement the most efficient redistribution programs that enable the poor to get out of the poverty trap, hence minimizing waste of human resources.

Mathur is former chair and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio. He resides in Ogden, Utah.

http://www.huffingtonpost.com/vijay-k-mathur/conservatives-aversion-to_b_9657314.html

Poverty Trap and Emerging Underclass in the Land of Opportunity

Published blog in Huffington Post: Politics, January, 13, 2016

Vijay K. Mathur

In August 29, 1977, Time published a cover story about impoverished urban Blacks, labeling them as The American Underclass.  Those were people who were stuck in an environment of  “psychological and material destitution despite 20 years of civil rights gains and 13 years of antipoverty programs” and robust job recovery after the end of 1973-75 recession.   Since 2001 the poverty problem has worsened, and the    severe recession of 2007-08 has accelerated the downward spiral in income opportunities for many Americans.  It is making it more difficult, especially for Blacks and Hispanics and a significant proportion of Whites, to extricate themselves from the lower end of the income scale.

There is greater propensity for an increasing proportion of families and their adult children to end up in the bottom of the income distribution.   American Community Survey, Bureau of Census, September 2013, found that the poverty rate increased from 12.2percent in 2000 to 15.9 percent in 2012.  In addition, the percentage of people with income below 50 percent of the poverty threshold increased from 5 percent in 2000 to 7 percent in 2012.   The rates vary across racial groups, where Blacks and Hispanic rates are more than twice the poverty rates for Asians and Whites.

The study by Elizabeth Kneebone (http://www.brookings.edu/research/interactives/2014/concentrated-poverty#/M10420) at the Brookings Institution, July 31, 2014, found that from 2000 to the peak period 2008-12 of the great recession poverty is becoming more concentrated.  The 100 largest metro areas have 70 percent of the distressed areas with poverty rates of 40 percent or more.  The share of poor people in cities increased from 18.2 percent in 2000 to 23 percent in 2008-12; Suburban share has increased from 4 percent in 2000 to 6.3 percent in 2008-12.  Hence, the poverty problem has worsened over time despite economic growth during 2003-2006 and 2010-2012, and it has affected all ethnic groups.     

The increased concentration of poverty is especially worrisome in light of a study’s finding by Harvard researchers Raj Chetty et al., August 2015 (http://www.equality-of-opportunity.org/images/mto_paper.p). They found that children below age 13 in families given housing subsidy vouchers have significantly higher college attendance rates and earnings in mid-twenties, when they moved to lower poverty neighborhoods, as opposed to the same age children in families in the control group (with no housing subsidy vouchers).

One could argue that high poverty rates may not be of much concern if poor people have more opportunities for intergenerational income mobility.   But the findings of studies that have rigorously examined the issue are not encouraging.   In a book Unequal Chances (2005), edited by Samuel Bowles et al., a study by Tom Hertz found that, adjusting for household size, a rich child born in a household in the top income decile (top 10 percent of the income distribution), has 26.7 percent chance of remaining in that decile.  However, a poor child born in a household in the bottom decile (10 percent) has only 0.5 percent chance of ending up in the top income decile.  Hence, a rich child, as opposed to a poor child, is 53 times more likely to remain rich as an adult.   Persistence of poverty is much more severe for Blacks and Hispanics than for Whites.

Therefore, the question arises: what can be done about it, given the fact that, to some extent, parental education, traits and income determine their children’s educational attainment and incomes.  Another study by Professor Raj Chetty et al., June 2014 (http://www.rajchetty.com/chettyfiles/mobility_geo.pdf) is instructive.  They found that children have a high probability of moving up the income ladder in cities that have less residential segregation, less income inequality, better primary schools, greater social capital and family stability.  Hence, intergenerational mobility is local.

 Although income inequality in the current period affects intergenerational inequality, families stuck in the poverty trap cannot change income inequality in the short run. But they can take the initiative to improve their own skills, better their public schools, demand pre-kindergarten education, provide family stability, and create an environment for disciplined growth of children to foster love for education.  There is increasing evidence in psychological and behavioral studies that the interaction of environmental experiences and personal traits, such as impulse control, determine educational and economic success of children in adulthood.  The Washington Post story of December 20, 2015, on Jennings School District, MO., points out the success in educating primarily Black children.  In addition to requiring high academic standards, the Superintendent Tiffany Anderson has recognized and is dealing with issues related to poverty and fostering a disciplined approach to academic excellence among poor children.

Changes in the labor markets due to globalization and emerging new technologies have created a skills gap.  The skills gap, and therefore poverty, will persist if policy makers and families at the lower end of the income distribution do not respond by taking deliberate actions to remedy the problem.  Families facing prospects of sliding down the income ladder must also recognize the limitations of government income support programs and poverty policies. Hence, their own initiatives in concert with public policy assistance will be the path for economic success for themselves, as well as for their children.

A nation with persistence poverty over a period of time suffers human capital loss in perpetuity and other adverse social and cultural consequences.  Former Prime Minister of India, Atal Behari Vajpayee, once remarked, “Poverty is multidimensional. It extends beyond money incomes to education, health care, political participation and advancement of one’s own culture and social organization.”

Mathur is former chair and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.  He resides in Ogden, Utah.

  http://www.huffingtonpost.com/vijay-k-mathur/poverty-trap-and-emerging_b_8958306.html

Archive:    http://www.huffingtonpost.com/vijay-k-mathur/       

Gun Laws to Reduce Mass Murders Require Political Courage

Vijay K. Mathur

Mass murders have become such a part of life in the United States that we all go through the routine of feeling sad, comforting the families, lighting candles, and bringing flowers to the murder site.  However, Americans are so entrenched in preserving the status quo, thanks to NRA, that many politicians refuse to support some realistic cost effective solutions, such as stricter regulations of firearms sales to reduce mass murders.  This apathy has reached a point that even researchers are shying away from the topic of gun violence research.

 FBI classifies killings as mass murders when there are 4 or more victims. William Krause and Daniel Richardson of Congressional Research Service (CRS) provide some evidence on mass murders in a paper, July 30, 2015.  From 1999 to 2013 there were 317 mass shooting incidents, where 1554 people were killed and 441 wounded.  In addition, since 1990, days between mass shootings have been decreasing.  

An investigation on mass murders by Mark Follman of Mother Jones (http://www.motherjones.com/politics/2012/07/mass-shootings-map), Updated December 3, 2015, found that during 1982-2012, of the 143 guns used 99 of them were semiautomatic and rifles, and more than three-fourths were obtained legally. According to CRS, a significant number of mass murderers have mental problems.  Hence, facts show that mass murders are rising with greater frequency, high-powered weapons are the favorite tools in most shootings and a significant number of shooters have mental problems. 

 We cannot restrict the constitutional right to bear arms affirmed by the Supreme Court in 2008.  However, the Second Amendment of the Constitution or the Supreme Court ruling in 2008 did not support that right to be unlimited (http://bigthink.com/risk-reason-and-reality/the-supreme-court-ruling-on-the-2nd-amendment-did-not-grant-an-unlimited-right-to-own-guns).  Writing for the majority conservative Justice Antonin Scalia stated, “Like most rights, the right secured by the Second Amendment is not unlimited…” It is “…not a right to keep and carry any weapon whatsoever in any manner whatsoever and whatever purpose.”   The majority report also supported prohibition of “dangerous and unusual weapons”, and even carrying of concealed weapons.

 A study of 27 developed countries including US, in The American Journal of Medicine, October 2013, found that gun ownership rate is an independent predictor of firearm-related deaths.  Mark Duggan obtained similar results in an academic paper, “ More Guns, More Crimes”, Journal of Political Economy, October 2001.

Hence, it makes sense to pass laws that regulate purchases of all types of guns and high capacity magazines (without any loopholes), supplemented by requiring universal nation-wide background checks (without any loopholes), high tax rates on all types of guns and magazines and personalized gun technology.  This would require political courage despite NRA’s lobbyists.

Since different types of guns are substitutes, Tomas Philipson and Richard Posner argued for restricting ammunition as an effective strategy to curb the use of guns in their research for The Journal of Law and Economics, October 1996.  However, in addition to ammunition regulation, a proportionate tax on all guns would avoid the substitution problem.  Increase in price due to the tax would decrease demand for guns.  For example, Douglas Bice and David Hamley, The Journal of Law and Economics, April 2002, found that a 10% increase in the price of handguns reduces demand 20% to 30%.

What about millions of guns that are already in circulation?  Since I am advocating for federal guns and ammunitions regulations, I propose that the federal government could provide incentive of income tax credits, with a 5 year window, to those who come forward to register their guns and ammunitions and go through background checks.

Fear-mongering statements, often made by NRA and other opponents of any firearms regulations, defy simple logic.  We all have heard the claim that guns do not kill people but people kill people.  Precisely due to this reason, I propose nation-wide universal firearms regulations and background checks.  These regulations are meant to discourage those people who are prone to violent behavior and are mentally incapacitated from owning guns and ammunitions.  The argument for guns for self-defense cannot justify possession of sophisticated weapons with high kill factor and range accuracy, and high capacity magazines.  Finally, the argument that gun regulations would deny guns to lawful people and not outlaws is patently illogical.  The purpose of national universal guns and ammunitions regulations (without loopholes) is exactly to deny guns and ammunition to outlaws.        

Law-abiding citizens have a vested interest to make the logical choice to support common sense firearms and bullet magazine regulations and to elect politicians who have the courage to defy lobbyists to support their cause.   Such laws and regulations would protect the right to bear arms while at the same time would tend to reduce murders, suicides, familicides (killing of family members) and mass murders, thus promoting freedom from fear in daily lives of Americans.

Mathur is former chairman and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio. He resides in Ogden , Utah.

A toxic GOP debate on illegal immigration

Published in Standard Examiner, Ogden, Utah, October 16, 2015

Vijay K. Mathur

In a blog in the Standard-Examiner in 2013 I expressed my hope that the bipartisan compromise on immigration reform would result. I also commented on the futility of the argument, advanced at that time by Sen. Mike Lee of Utah, for deporting 11 million undocumented immigrants. The deportation argument is now revived by GOP presidential candidates Donald Trump and Sen. Ted Cruz, and tacitly supported by other candidates.

Trump even blames Mexico for sending criminals and rapists to the U.S., thus making the immigration debate more toxic. He also wants to build a tall wall on the border, perhaps along over 1900 miles from the Gulf of Mexico to the Pacific Ocean. Besides the issue of how he intends to pay for such a wall, he does not realize that the economics of migration drives potential migrants to cross any hurdle. By any stretch of logic, deportation of slightly more than 11 million illegal immigrants and building a wall would be so resource-consuming that other productive programs would be starved, thus slowing economic growth.

Deportation would not contribute anything to productivity, because we might lose the most productive people, since migrants in general are risk-takers. Mr. Trump considers himself a smart businessman fit for the presidency. However, he may not be aware that being a smart businessman is no guaranty for a successful presidency. History, from Herbert Hoover to George W. Bush, shows that the most successful and admired presidents were not good businessmen. We had the Great Depression in 1929 under Hoover and the Great Recession in 2008 under Bush; both were successful businessmen.

According to the Pew Research Center, the unauthorized immigrant population has leveled off since 2010. These immigrants make up 5.1 percent of the labor force and have a higher labor force participation rate than the average, thus contributing to economic activity of this nation. Since a significant fraction of undocumented immigrants are low-skilled, they tend to work in low-skilled jobs with below-market wages, where native-born are not willing to work. The competition for low-skilled jobs does cause downward pressure on wages of native-born low-skilled workers. However, lower wages tend to benefit consumers who pay lower prices for products produced by undocumented workers. The wage effect of migration is similar to the wage effect of imports from low-wage countries, but we do not ban cheaper imports.

An orderly migration process is sorely needed, and Congress had the opportunity to accomplish this task in 2013-14. Pew Research Center reports that 72 percent of surveyed Americans would like to allow undocumented immigrants to stay legally and 76 percent think of deportation as unrealistic. Taxpayers will not be very happy if Trump allocates tax revenue for deportation at the cost of other programs that benefit legal residents. His policy to reduce taxes while increasing expenditure on building the wall and deportation is incongruous at best. A study by Doris Meissner and her co-authors at the Migration Policy Institute found the U.S. government already spends more on immigration enforcement than all principle federal criminal law enforcement agencies combined.

Researchers Peter Dixon, Martin Johnson and Maureen Rimmer, in their study in the journal Contemporary Economic Policy, January 2011, find tax and/or fines on employers is the most efficient policies to curb illegal immigration. Policies that attempt to reduce the supply by border enforcement and/or deportation are costly to the nation, as they result in increasing wages for the rest of the illegal residents with little benefit to legal residents. Either a reduction in income tax rates or increasing expenditures on desirable public programs could supplement such a tax policy.

Another issue that has not been discussed in the GOP presidential campaign is the increasing share of older people and reduction of birth rate in the U.S. In a paper in American Economic Review, May 2014, Professor James Poterba of MIT finds that between 1960 and 2010, the average growth rate of the population aged 20-64 was 1.27 percent and is projected to decline to 0.43 percent between 2010 and 2050. Therefore, less and less earning members of the population are expected to support more and more people over the age of 65. Most undocumented immigrants pay Social Security tax but do not collect benefits.

Also, Pew Research Center, April 14, 2009, found a growing share of children of undocumented parents in schools and an increasing share of college-going 18- to 24-year-old undocumented immigrants. These children and college-going young adults of illegal immigrants would provide a significant cushion to public financial support system for older and retired Americans.

I hope the GOP presidential race contenders have enough wisdom and knowledge to support an immigration policy that is devoid of emotions but grounded in sound economics.

Mathur is former chairman and professor of economics and professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.

Is the ACA reducing competition?

Published in Standard Examiner, August 26, 2015, Ogden, Utah

Vijay K. Mathur

The recent decision by the Supreme Court assures the future of the Affordable Care Act (ACA), enacted on March 23, 2010. However, former critics of the ACA in the Congress and elsewhere have not given up their dislike for the law. Some GOP congressmen are promising to put roadblocks in the ACA’s smooth operation. Other conservative critics of the ACA have now diverted their attention to another target. They claim the ACA would lessen competition among health-care providers and health-insurance markets due to merger activity.

Economists regard perfect competition in any industry as an ideal market structure, where there are a large number of sellers and easy entry into the industry (market). In reality we do not find any such ideal industry, but we do find less-than-ideal degrees of competition across industries. For example, retail grocery industry is more competitive than banking and airlines. Mergers in banking and airlines have resulted in increasing monopoly power in those industries. But we have not heard many complaints from conservative free marketers against those industries.

Mergers and acquisition in industries are guided by prospects of gaining market share that enhances monopoly power, and to benefit from cost reductions due to economies of scale. However, evidence of these gains in most mergers is mixed. Sometimes mergers are guided by self-interest of executives who stand to gain from mergers’ settlements.

The criticism of ACA is unwarranted because we expect different markets dealing with health care to respond by making changes in its structure, services, pricing strategies, consolidation, etc. Unlike other industries, the health care market has four major sectors besides government. They are hospitals, physicians’ services, insurance industry and consumers (including employers). The interaction between these sectors and the government will determine the degree of competition in the health-care market.

Herfindahl-Hirschman Index (HHI) measures the degree of concentration (monopoly power) in any market. An HHI of at least 2,500 shows high degree of concentration. The paper by Martin Gaynor, Kate Koo and Robert Town (GKT), Journal Of Economic Literature, June 2015, reports that hospital industry had a mean HHI of 3,261 in 2006, and more than 65 percent of metropolitan statistical areas were highly concentrated. This data shows high degree of monopoly power in hospital industry nationally even before the ACA.

Besides hospitals, physicians’ services represent the other major provider of health care. The GKT reports that, in general, physicians’ market is less concentrated than hospitals. However, studies show specialties like orthopedics, radiology, cardiology and oncology are more concentrated than primary care. High barriers to entry in medical schools, residencies in hospitals and length of training time increases concentration in specialties.

Reduction in barriers to entry in health providers’ market would provide incentive to new players to enter the market, thus reducing the monopoly power of incumbents. A case in point is the formation of Accountable Care Organizations (ACO) to serve Medicare patients, a large section of the health care market. ACOs are groups of doctors, hospitals and other health-care providers in the network who provide coordinated health care to Medicare patients. The ACA encourages ACOs using incentives to provide quality care. Also, telemedicine companies are now entering this market, thus threatening competition to traditional providers. Professors William Baumol, John Panzar and Robert Willig argue that even with few incumbents in the market, markets could be subject to competitive pressures if they remain contestable due to easy entry.

Anti-trust laws also restrain monopoly power. For example, in 2014 the Federal Trade Commission (FTC) denied merger of ProMedica, a dominant hospital services’ provider, and St. Luke Hospital. A petition by the company to review the FTC decision was denied by the U.S. Court of Appeals, 6th Circuit.

Merger activity in the health insurance industry is partly a response to consolidation in the hospital industry, thus providing a constraint on the pricing power of hospitals. Kaiser Family Foundation reports that, in 2013, HHI for the large-group insurance market was 4,038 for the U.S. and 3,114 for Utah.

In addition, increasing amounts of deductions and co-payments in insurance plans would make consumers more price-conscious, thus providing restraint on prices for health services. Therefore, the fear of lack of competition in health care at this time is unfounded and premature at best. GKT reports a bargaining model that shows that insurers that threaten to exclude hospitals from their networks have the ability to bargain for lower prices for consumers. Incorporating all sectors of health care market, Economist Incorporated reported in May 2006 that Utah’s health-care market is fairly competitive.

According to Peterson-Kaiser Health System Tracker, percentage change in per capita health care spending declined from 7.4 percent in 2001 to 2.9 percent in 2013. The ACA has lowered the trajectory of annual per capita spending growth rate in the future. Thus, it is too hasty to draw conclusions about market structure in health care post-ACA and its effect on cost, prices and quality of care.

Mathur is former chairman and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio. His articles also appear in Mathur’s Blogonomics. He resides in Ogden.