3 June 2019   Leave a comment

Gary W. Yohe is the Huffington Foundation Professor of Economics and Environmental Studies at Wesleyan University and he has written essay on the possible economic costs of disasters caused by climate change. His analysis is dispiriting:

“Late last year, the media blared that these and other consequences of climate change could cut U.S. GDP by 10% by the end of the century – “more than double the losses of the Great Depression,” as The New York Times intoned. That figure was drawn from a single figure in the U.S. government’s Fourth National Climate Assessment. (Disclosure: I reviewed that report and was the vice chair on the third one, released in 2014.)

“If that sounds scary, I have good news and bad news. The good news is that that figure was drawn incorrectly from a significant misreading of the report – which actually offered a range of a loss of GDP from as low as 6% to as high as 14% by 2090.

“The bad news, however, is that a more meaningful assessment of the costs of climate change – using basic economic principles I teach to undergrads – is a hell of a lot scarier.”

The concern is that spending on disaster recovery crowds out investment that could possibly go for future productivity. Spending money to replace an investment is not the same as making a new investment for future growth. With this perspective, the costs of climate change disasters is also a cost to future economic growth.

One of the weirdest aspects of the US-China trade war is the insistence by the US Administration that China is paying the tariffs. It is true that the prices of Chinese exports to the US have gone up, but the importers of those products (usually corporations) can either increase their prices for the products (which means that consumers pay for the tariffs) or they can keep the prices of their products the same and reduce their profits by the amount of the tariffs. In neither of those circumstances does China pay the tariff.

But the US has increased payments to US farmers who have lost business because the Chinese have reduced their purchases of US agriculture because of the tariffs. Those payments have increased dramatically. The Council of Foreign Relations notes:

” After just ten months of a trade war with China, subsidies to farmers are set to drain over $25 billion from “U.S. coffers” for damage done to date. China tariffs, meanwhile, have so far brought in just over $19 billion in tax payments from U.S. importers—$6 billion less than authorized farmer payments.”

So not only are US consumers paying higher prices for Chinese products, their tax burden has also increased to support farmers hurt by the trade war. The trade war thus far has been a losing proposition for the US.

Posted June 3, 2019 by vferraro1971 in World Politics

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