The Custom-House

Why we need more foreign nurses

President Obama is opposed to liberalizing restrictions on entry of foreign nurses (White House Forum on Health Reform).

He made the comment in response to a question at a health reform event at the White House last March:

REPRESENTATIVE CAPPS:  ...we have a huge shortage of nurses today.  And estimates are that the U.S. will be lacking over 500,000 nurses in the next seven years.  Our nursing schools are only able to admit a tiny fraction of applicants.  The great -- greatest bottleneck for educating more nurses comes from the lack of nursing school faculty....

I'd love to hear your thoughts.... on how we can further advance nursing education and faculty training...

THE PRESIDENT:  ....The notion that we would have to import nurses makes absolutely no sense.  And for people who get fired up about the immigration debate and yet don't notice that we could be training nurses right here in the United States -- and there are a lot of people who would love to be in that helping profession and yet we just aren't providing the resources to get them trained -- that's something that we've got to fix....

Capps didn't ask about immigration or importing nurses, but the President must have been looking for an opportunity to make the point.

The shortage Rep Capps describes means that at current wages, the quantity of nursing services demanded is greater than the supply.  The demand for nurses will only increase as baby-boomers approach their endgame and as the numbers of persons qualifying for medical insurance increases.

Foreign-sourced nurses are a substitute for American nurses.  They are not a perfect substitute; there are differences in the cultural backgrounds of the nurses, in patient preferences, and in the costs of acquiring information about abilities of foreign and domestic nurses. 

Since they are substitutes, when the restrictions on the supply of foreign nurses drive up the wages received by those foreign nurses who actually can get jobs, the demand curve for domestic nurses will shift to the right.  As the domestic demand curve shifts, the equilibrium wage will move up along the domestic supply curve and domestic nurses will make more.

But that's not all:

• The nursing shortage will remain larger longer.
• Insurers and consumers will pay more for medical care.
• Insurance premiums will be higher.
• Insurance subsidies will be higher.
• People will purchase fewer medical services (because the price is higher).
• Doctors will be less productive (in the same way they'd be less productive if they had less capital to work with).
• The affluent, who will be able to pay more out-of-pocket, or who will be able to afford larger insurance premiums, will not be hurt as much as the less affluent.
• Working conditions for nurses will be poorer as employers try to stretch their nursing staffs (I assume that working conditions are easier the more nurses on a given shift).
• There will be an incentive to substitute technology for people to economize on human nursing services (substitute monitoring technology for nursing attention; exploit monitoring efficiencies associated with moving older people out of their homes and into wards or nursing homes).
• Consumers will have additional incentives to go abroad for medical attention.
• Family caregivers are a substitute for certain types of professional nursing care.  Expect greater use of family caregivers. 
• If we're having trouble training more domestic nurses because of a shortage of teaching faculty, maybe we should at least import teaching nurses.

Rep. Robert Wexler (D-Fla) has proposed legislation to modestly relax current restrictions: HR 2536.

But right now unemployment is over 10%, shouldn't we reserve these jobs for Americans?  Unemployment is high right now, but its not normally high.  It should begin coming down later this year.   Given the long lead-time for training and deploying new nurses, reserving jobs for nurses isn't likely to play much role in reducing unemployment during this crisis.  I assume, since there is big shortage of nurses, that there are relatively few unemployed nurses in the U.S. 

For related, somewhat broader, discussions of alternative health reform policy, see John Palmer's The Simple Economics of Health-Care Reform and Tyler Cowen's What should we do instead of the Obama health reform bill?

Edits: various during Nov 26.

Cross-posted from Ben Muse.

Eleven Reasons the Obama Administration's Chinese Tire Decision Was a Bad One

At least the administration was embarrassed, releasing its decision late on Friday to minimize publicity. 

The Obama administration has decided to impose import duties of 35% on imports of low cost Chinese passenger and light truck tires (U.S. to Impose Tariff on Chinese Tires, Wall Street Journal).  These are scheduled to drop to 30% in a year, and 25% in another year.

Here are eleven reasons this is a bad idea:

1. It limits competition in the U.S. tire market, and it will increase costs to U.S. consumers.  Tires will cost more.
   
2. It will increase the costs of making things in the U.S.  Things made with tires (cars and trucks) will cost more.
   
3. It will increase the costs of our exports.  Anything we make with these tires and then export will cost more.
4. The tax is imposed only on tires from China.  Foreign producers in other countries, who will not be subject to this tax, will benefit.  Actually, this will limit the damage done to U.S. consumers and producers, but then, what was the point?
   
5. It is counterproductive to impose a tax on consumers, increase the prices they face, and reduce their incomes and consumption, during a serious recession.
6. This is a regressive tax, it will fall proportionately harder on poor and middle-income people than on the rich.
   
7. The world has been struggling to avoid the reductions in demand associated with protectionism during this recession.  This action undercuts these efforts. 
   
8. The Chinese can retaliate with respect to other U.S. goods.
   
9. This may violate administration promises not to impose new taxes on persons with lower incomes ("Middle class families will see their taxes cut – and no family making less than $250,000 will see their taxes increase.").  This promise probably was only meant to apply to the income tax, and was itself a bad promise in any event.  But what is the value of the promise to taxpayers if the protection it offers only applies to one tax and not to others?  This new hidden and regressive tax on U.S. consumers wasn't the place to start breaking the commitment. 
   
10. We need Chinese help on a lot of issues, its not worth imperiling that for 5,000 jobs (see below).  As Jonathan Weisman noted in the Wall Street Journal story on this issue: "The United States needs China to help float a U.S. deficit expected to reach $1.56 trillion this year. Mr. Obama is also likely to seek new sanctions against Iran to combat its nuclear program, and China's vote on the United Nations Security Council is pivotal."
11. Holding workers in industries making low cost tires doesn't keep them in an industry in which we are likely to be able to compete internationally.  Even if you think industrial policy is a good idea, this is bad industrial policy.

The request for the tariffs (tax increase) was pressed by labor interests, but oddly, according to the Wall Street Journal story above, not by the tire industry: "Notably, the tire industry didn't join the case -- tacit recognition that it has long ago left the US market for the low-end tires at issue."

The number of jobs lost in recent years seems small: "Meanwhile, four U.S. tire plants closed in 2006 and 2007. Three more are planned for closure this year. There were 5,168 fewer workers in the U.S. tire industry in 2008 than there were in 2004."

Edit Sept 13 - editorial but not substantive change to point 9.

Miss Cordell Hull USA

 

Wikipedia

As a congressman and senator from Tennessee, Cordell Hull battled for lower tariffs. As Roosevelt's Secretary of State he fought hard, within Congress and within the administration, to enact and implement the Reciprocal Trade Agreements Act of 1934.

This act changed the balance of power in U.S. trade politics.  Congress delegated authority to the President to negotiate reciprocal tariff reductions with other countries.  The changes increased the influence of consumer and exporting interests in tariff policy and allowed them to compete effectively with protectionist interests.  Kenneth Dam explains the importance of the Act over the last 80 years: Cordell Hull, the Reciprocal Trade Agreement Act, and the WTO.  We are richer, and live in a more peaceful world today because Hull lived.

Oh yes, he won the Nobel Peace Prize for his work helping set up the United Nations.

We remember him in many ways.  There's the Cordell Hull Dam, the Cordell Hull Lake, the Cordell Hull Speaker's Forum at the Cumberland School of Law, the Cordell Hull Birthplace State Park, the Cordell Hull Highway, the Cordell Hull State Office Building, and the Cordell Hull Institute.

And don't forget Miss Cordell Hull USA:

Lillian Davis, Miss Cordell Hull USA

The swimsuit competition (Miss Cordell Hull is behind Miss City Lights):

credit: Greg Williamson, The Leaf-Chronicle

Ron Kirk talks sense to the American people

Trade isn't part of the problem, its part of the solution, says U.S. Trade Representative Ron Kirk: Remarks by Ambassador Ron Kirk United States Trade Representative. (remarks at Georgetown University Law Center, today).

Exports accounted for 13 percent of GDP last year and almost half of overall U.S. trade growth in the three years leading up to the recession.  As exports have fallen 16 percent, unemployment has risen, so:

"An aggressive effort to keep trade flowing and open more markets to American goods and services absolutely must be a big part of our economic recovery here at home...."

"To get our economy back on track, we need to increase exports. That means we need access to growing economies abroad...."

"...a strong case can be made for trade as a creator not just of jobs, but of the better-paying jobs that Americans want and need today."

Here's how the administration plans to proceed:

Obama to relax restrictions on travel and remittances to Cuba

Anonymous administration sources are reporting this weekend that the Obama Administration will lift restrictions on family travel and remittances to Cuba this month. 

Laura Meckler reported first in the Wall Street Journal: U.S to Lift Some Cuba Travel Curbs.. Here's another report from the New York Times: Obama to Loosen Restrictions on Policy With Cuba.

Yesterday's Draft Greenhouse Gas Bill

House Democrats have floated a draft greenhouse gas bill.  The draft bill, described as incomplete, is 648 pages long.  Environmental Capital pulls together a number of links (Green Ink: A ‘Starting Point’ on the Climate Debate). 

With respect to competitiveness and trade, the Reuters summary (FACTBOX: U.S. Democrats launch draft carbon legislation) notes:

INDUSTRY REBATES/TRADE

Authorizes U.S. companies in industries that use a lot of energy to receive "rebates" to compensate for additional costs of cap and trade. If rebates are not sufficient, the president would have the power to establish a "border adjustment" program, possibly tariffs on goods from countries that do not take action on cutting greenhouse gases.

Keith Johnson at Environmental Capital goes into more detail (Cushions and Crutches: How Would the Cap-and-Trade Bill Protect Vulnerable Industries?):

For instance, the bill identifies several sectors that are energy-intensive or heavily exposed to global trade, such as steel, cement, paper, chemicals, and the like. Those sectors would get a government handout in the form of rebates to cushion the higher energy bills brought about by climate legislation. This would help keep their products globally competitive.

The problem is figuring out just how much those rebates would be. The bill’s relationship with English breaks down a little here when it says the cash rebates will be “equal to the sum of the covered entity’s direct compliance factor and the covered entity’s indirect carbon factor.”

Trade "red flags" in the auto plan

I'm impressed with the Obama Administration's willingness to face up to the problems posed by GM and Chrysler.  I can see several trade "red flags" in these Wall Street Journal stories: U.S. Threatens Bankruptcy for GM, Chrysler; Detroit's Fate Sealed in West Wing.

Should U.S. taxpayers assist foreign companies:

All the same, the administration's new plan is sure to ignite a battle over the government's role in the economy, what sacrifices will be required of labor unions, and whether it makes sense for U.S. taxpayers to assist a foreign company, Fiat, in an alliance with a U.S. company, Chrysler.

Limits on foreign investment:

As part of their proposed pact, Fiat and Chrysler agreed over the weekend to scale down the Italian auto maker's initial stake in Chrysler to 20% as a condition of the Treasury Department's bailout. Fiat earlier this year struck an agreement to take a 35% stake in Chrysler initially, and up to an additional 20% at a later date.

Although another story (Chrysler Plan Trims Fiat's Stake, Cuts Out Cerberus) explains that this is only a limit on the initial investment:

If Fiat and Chrysler reach a definitive deal within 30 days, the Treasury would be willing to invest $6 billion in Chrysler. Fiat wouldn't be allowed to raise its stake beyond 49% until after the $6 billion is repaid, people with knowledge of the matter said. Originally, Fiat had the option to increase its stake to as much as 55%.

How will these proposed tax benefits treat foreign vehicles:

It also plans to... support a congressional bid to offer large tax incentives for new-car purchases, with money for the program coming out of the $787 billion stimulus package. Mr. Obama also said that the Internal Revenue Service was creating a new tax benefit for car buyers.

Domestic production requires for Fiat/Chrysler:

A much harder decision was what to do with Chrysler. A conclusion that the company wasn't viable could lead to 40,000 workers losing their jobs. To combat that threat, the government is negotiating with Chrysler and Italian car maker Fiat SpA for an agreement that Fiat will continue to make cars in the U.S. if it buys Chrysler, according to an official of the Obama administration.

The general issue of subsidies:

The auto plan came packaged with several new government initiatives whose price tags remain unclear. The government said it would guarantee the warranties for all new GM and Chrysler cars until the two companies return to health. It also plans to speed up government fleet purchases...

What does the future hold?

Former IMF chief economist Simon Johnson sees two plausible scenarios at this point.  This is one of them (The Quiet Coup):

The second scenario begins more bleakly... It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

How does the Geithner plan work?

Over the weekend: Mark Thoma explains the Paulson plan, the Geithner plan, and nationalization: Government Intervention in the Market for Toxic Cars.   Brad Delong is more focused: The Geithner Plan FAQ.  Nemo at Self-Evident works through some simple examples: The “Geithner Put”, part 1; The “Geithner Put”, part 2 (thanks to Tyler Cowen at Marginal Revolution for the tip - one of Cowen's readers explains how to game the system: Gaming the Geithner plan?).

Paul Krugman doesn't like the Geithner plan at all: Financial Policy Despair; More on the bank plan.  

For reporting, Delong recommends the Wall Street Journal's Deborah Solomon  Here are Solomon and Randall reporting this morning: Treasury Plan to Deal With Toxic Assets Banks on Private Cash . Timothy Geithner defends his plan: My Plan for Bad Bank Assets.

"Buy America" and the States

In a broader discussion of the "Buy America" provisions in the stimulus bill, Jay Eizenstadt points to state level consequences that may be worth following: A regrettable step to protectionism:

Less obvious but possibly important is the cost to the states, many of which have previously not seen any reason to prefer domestically produced goods or services in their procurements. The Buy America provision will obligate such states to establish new procurement procedures to comply with the discriminatory requirement, in a legal setting that otherwise bases procurement decisions on common criteria such as the highest quality for the lowest cost. They will do so in order to access the Act’s funds, but the waste associated with developing discrimination mechanisms (and possibly later defending them on appeal) could be substantial.