Friday, April 8, 2022

Is the Missing ERP Revealing Bad News about Biden's Health?

15 USC 1022(a) requires

"The President shall annually transmit to the Congress not later than 10 days after the submission of the budget ... an economic report (hereinafter in this chapter referred to as the “Economic Report”) together with the annual report of the Council of Economic Advisers...."

Because the budget was submitted March 28, 2022, yesterday was the due date for submitting the 2022 Economic Report of the President.   No report has been released in 2022 and neither the White House nor news media have said anything about this year's report.

CEA, like many other government agencies, is funded with public money.  It should perform its duties as directed by the public through the statutes duly enacted by its representatives in Congress.

Moreover, CEA is unique from most of the rest of the Executive Office of the President in that it is explicitly created and directed by federal statutes.  As it should, this unique statutory basis has elevated CEA's influence within the White House.  But if CEA does not comply with the law, what stops the rest of the bureaucracy from treating CEA as just one of many White House Offices and Councils whose entire existence could be erased at the whim of the President or senior staff?

Why the lack of compliance with 15 USC 1022(a)?  Here are my guesses, beginning with those I assess to be most likely.

  • Biden, who must at least meet with CEA and sign the report, is too feeble to perform all of the duties required of him by law and politics.  Senior staff have made the tough decision as to which laws will not be followed in order to reserve Biden's energy for other duties.
    • I am not the only one to notice that it has been a month since Biden had anything on his public schedule later than mid-afternoon.
    • This theory predicts that no EOP employees get fired.

  • Biden's senior staff views statutes as mere suggestions, and therefore even a minor logistical challenge would be enough to ignore 15 USC 1022(a).
    • This is consistent with the fact that the FY 2023 budget (an OMB product) missed the statutory deadline too, which has occurred before when a President was just coming into office or when the deadline occurred during a government shutdown but (I think) is otherwise unprecedented.
    • Expected punishment is low, under the theory that a Democratic Congress would not hold a Democratic administration accountable.
    • This possibility is the worst for (among other things) the CEA as an institution because then CEA itself becomes a mere suggestion.

  • The draft ERP, which likely began in early 2021, contains something that in hindsight is terribly embarrassing to the Biden administration.  It either needs to be rewritten or released on a day when other news distracts all of the attention.  This is bit unlikely, because the embarrassment would have to be something that the ERP covers that the (much longer) President's Budget does not.  On the other hand, this explanation is complementary with the Biden-debilitation story because likely the President would be needed to adjudicate a serious dispute among senior staff.  [More generally it would be interesting to know how disputes are resolved when POTUS is debilitated.  Does VPOTUS help?]

  • The current CEA is unaware of 15 USC 1022(a) and what actions are required to comply with it.  I doubt this because the CEA chair, Cecilia Rouse, was a CEA member who had helped prepare two prior ERPs (2010 and 2011).

  • The current CEA is aware of 15 USC 1022(a) and the actions are required to comply with it, but proved incapable of doing its part.  I doubt this even more because that puts the President in jeopardy and an army of former CEA staff could have been called to help on a volunteer basis.  More time could have been obtained by going downstairs and asking OMB to delay its budget release, which itself was already past the statutory deadline.

  • Progressives in the administration have objected to even the mildest citation of unintended consequences and the law of demand (mild enough that even Jared Bernstein insists that they be mentioned).  Such objections could likely exist, but very unlikely stop the lawful ERP transmittal because
    • The CEA chair had much time to engage in earnest debate with the rest of the administration  (as CEA 45 often did, sometimes for more than a year).  In the end she could assert her statutory authority to issue the ERP as she and POTUS see fit.
    • Possibly the CEA chair would be willing to fudge the economics for the progressive cause, and therefore the dispute would not be reason to miss the statutory deadline.

Even if the 2022 ERP is transmitted to Congress next week, it will be more than 100 days into the calendar year, as compared to the previous "record" (lawfully) set in 2019 on the 78th day of the year.  96 percent of all previous ERPs (75 in total) had been transmitted by February 23, which is the 54th day of every year.

Update: ERP 2022 was electronically transmitted April 14, 2022, which was the 104th day of the year and 17 days after the budget submission.
  • The Joint Economic Committee is the statutory Congressional receiver of the annual ERP.  The hard copies, which is usually provided to JEC on the official "day of transmittal," was not delivered until April 25, 2022.  This observation adds support to the Biden-disability theory because POTUS at least signs the hard copies.
  • On the other hand, the excellent CEA45 production editor, Al Imhoff, also served in that role for ERP 2022 (see p. 345).  The fact that a second production editor was hired (Kellam worked on Obama-era ERPs) suggests that CEA46 was so late writing its chapters that there was no time for Imhoff to serially process them as he did for CEA45.  This hypothesis is also consistent with the fact that many more of CEA45's chapters were released as stand-alone public reports throughout the year (Imhoff was copy editing many of those too), some of which could be entered into ERP production 4-5 months ahead of the statutory deadline.

Tuesday, April 5, 2022

New Emissions Regulations are Coercive Paternalism, not Environmental Science, or even Benevolent Paternalism

Trump's CEA showed, based on credit transactions among manufacturers, that vehicle standards to abate a ton of CO2 cost about $163 on the margin, while even Obama said the abatement was worth only $50.  i.e., tightening emissions regulations fails a cost-benefit test by a wide margin.

Now Biden claims that new stricter standards pass a cost benefit test.  Although this will be cast as an environmental issue, the new conclusion is driven by assumptions unrelated to environmental economics or climate science:

(1) Consumer fuel savings get (mostly) double counted because "behavioral economics."  Specifically, 

"The agency’s analysis assumes that potential car and light truck buyers value only the savings in fuel costs from purchasing a higher-MPG model they expect to realize over the first 30 months they own it. Depending on the discount rate buyers are assumed to apply, this amounts to 25-30 percent of the expected savings in fuel costs over its entire lifetime." (p. 420 of DOT's final rule)

This double counting (100 - 27.5% = 72.5% of $98 billion in fuel savings) is more than quadruple the purported $16 billion net benefit shown in Table VI-11 of the final rule.

[I call it double counting because, by the principle of revealed prevalence, fuel savings is already built into the price and sales of fuel-efficient vehicles; many consumers do not purchase such vehicles because of the relative price and characteristics of competing vehicles.  Alternatively, you could say that DOT ignores benefit of low-MPG vehicles, but the revealed-preference result is the same. 

Following an Economics 301 homework solution from October 2019, in December 2020 Trump's CEA provided a vector proof -- that the market price for GHG credits (i) reflects fuel savings as consumers perceive them and (ii) fully quantifies the industry-level real GDP effects of changing GHG standards, without any additional term for fuel savings -- on the White House website.  See the appendix of this document.]

By comparison, the gross climate benefit is purportedly $27.5 billion.  i.e., they would have to more than double their already inflated "social cost of carbon" to push their thumb on the scale as vigorously as they did with "behavioral economics."  See below for more on paternalism.

(2) Biden says that some tightening comes for free because 5 manufacturers had already signed a pledge with California EPA to so tighten

But this ignores that California rules, when followed by just a subset of manufacturers, do not reduce the supply of federal credits, whereas changes in federal rules do even if the federal rules are not as strict as California's.  The equilibrium credit price is built into the prices paid by purchasers of new cars.

(3) When the above are enough to tilt the scale, all costs and benefits are discounted 3%/yr.  When an extra push is needed, Biden discounts environmental benefits at 2.5% per year while everything else is discounted 3%/yr.

"the use of the social rate of return on capital ... inappropriately underestimates the impacts of climate change for the purposes of estimating the SC-GHG. ... the consumption rate of interest is the theoretically appropriate discount rate in an intergenerational context." (p. 547 of the Technical Support Document.  See also p. 573 of the final rule.)

More on coercive paternalism

Trump's DOT and EPA spoke forcefully against paternalism as a justification for fuel standards.  If people lack knowledge, give them the knowledge rather than imposing a decision on them.  Here is how they said it

"the idea that regulating fuel economy and CO2 emissions can mitigate the consequences of inadequate access to information by placing decisions that depend on access to complete information in the hands of regulators rather than buyers has superficial appeal. Yet commenters do not establish that such a drastic step is necessary to overcome any inadequacy of information, or that requiring manufacturers to supply higher fuel economy will be more effective than less intrusive approaches such as expanding the range of information available to buyers." (85 FR 24608, italics added) 

In contrast, Biden's DOT and EPA say nothing like this, but instead extol the purported virtues of "behavioral economics."  They do not mention less intrusive approaches, let alone show why they would have fewer net benefits.

Saturday, April 2, 2022

White House Economic Analysis of Ukraine

The 2019 Economic Report of the President includes the most extensive economic analysis of Ukraine of any President going back at least to Truman.  It discussed:

  • Historical harms -- including murder -- imposed on Ukraine by Moscow (Chapter 8),
  • The extensive costs of the collective ownership imposed on Ukrainian agriculture, asking why would collective ownership of healthcare work out any better if the economic incentives were the same (Chapter 8),
  • How the New York Times covered up and lied about events in Ukraine because the events were incongruent with the leftist fantasies of many of its readers (Chapter 8).  Pulitzer Prizes were awarded for those lies!
  • Ukrainian energy trade (Chapter 5).
Below is one of the charts from the 2019 ERP.

Ukraine was never even mentioned in an ERP between 1947 and 1992.  Nor were any related keywords (see below).
  • The 1993 ERP noted that Ukraine was among former Soviet republics issuing its own currency in 1992 (pp. 304-5).
  • The 1994 ERP noted that "[CEA member] Stiglitz traveled to Russia and Ukraine and established an official relationship with the Russian Government's Working Center for Economic Reform." (p. 256)
  • The 1995 ERP noted that the U.S. engaged in several bilateral investment treaties, including "treaties with the former Soviet republics of Georgia, Ukraine, and Belarus." (p. 249).
  • The 1997 ERP cited Ukraine in a list of many countries allocated "U.S. non-military bilateral aid" and that in the case of Russia and Ukraine, this aid was for "public health programs" (pp. 264-5).  It also cited the "explosion at Chernobyl" as part of a paragraph about "how developing countries treat their environment."  [I wish the 2019 ERP had included a section on environmental stewardship by socialist countries, but the idea did not occur to me until much later.  The environmental rhetoric was much the same as modern-day socialists'].
  • On page 167 of the 1998 ERP, it was noted that Ukraine was one among several countries assigned "less stringent" emissions limits by the Kyoto protocol.  On page 259, a large list of countries receiving U.S. aid was listed, including Ukraine.
  • On page 290 of the 1999 ERP, it was noted that currency boards have been recommended for countries such as "Indonesia, Russia, and Ukraine."
  • Page 260 of the 2001 ERP reports that CEA "initiated a new dialogue with economic officials in Ukraine."
  • Page 131 of the 2005 ERP includes a box about "The Benefits of Land Titles."  Several countries are mentioned in the box, with Ukraine as one of those where "entrepreneurs believe their property rights are secure [and therefore] reinvest ... back in their business."
  • In a paragraph about the "disadvantages to nuclear power," p. 172 of the 2008 ERP cites the "Chernobyl nuclear power plant in Ukraine."
  • The 2010 ERP notes the rapid deprecation of "the currencies of Hungary, Poland, and Ukraine" (p. 86).
  • A footnote on p. 130 of the 2012 ERP explains which countries are included in its emerging markets index.  Ukraine is one of 21.
  • Figure 1-4 of the 2014 ERP has international comparisons of quarterly real GDP time series.  Ukraine is one of the countries included.  A similar chart is repeated on page 117.
This post was based on text searches for "Ukraine", "Ukrainian," "Holodomor," "Kyiv," "Kiev," or "Chernobyl" in the 1947-2021 ERPs.