James Pethokoukis has a pair of posts up today that reignite a longstanding question: What's the right way to measure inflation? And what does that mean about earnings and income mobility over time?

These are both complicated questions, but we can start with a very simple chart. If we want to compare, say, 30-year-old men to their fathers, and their fathers to their fathers, we can do it pretty easily. The Census Bureau collects data on median cash earnings (i.e., not counting health care, employment perks, or government benefits) and then all we have to do is adjust for inflation. But which measure of inflation?

The CPI story is grim: In the previous generation, young men earned about 8 percent more than their fathers. That's not great, but it's better than nothing. However, in this generation, millennial men earn 10 percent less than their fathers.

The PCE story is different. In the previous generation, young men earned 22 percent more than their fathers. That's pretty good. In the current generation, millennial men earn about the same amount as their fathers. Stagnation like that is bad news, but at least millennials aren't literally losing ground.

So which should we believe? There are arguments for both, and it's a political hot potato too since inflation measures show up in all sorts of benefit calculations. It would be nice if the economic community could thrash out agreement on an overall best measure, and then make it available as a standard series going back 70 years, but if it turns out that the new measure leads to (for example) lower cost-of-living adjustments for Social Security benefits, you can expect a massive pushback. Republicans have shown a particularly aggressive form of this kind of political hackery in the past, approving of new inflation measures that would decrease benefits, but opposing the same measures if they meant that people might pay higher taxes.

All that conceded, we really should be able to agree on a good, general-purpose inflation measure. We can still have lots of different measures for specialized purposes, but the headline inflation rate should be something that, say, 90 percent of economists can agree about. (There will always be a few outliers.)

In a way, though, this doesn't matter too much for the question of how millennial men are doing. On one measure, their market earnings have dropped from 124 percent of per-capita GDP to 72 percent. On the other measure they've dropped from 108 percent to 72 percent. That's pretty grim either way.

For more on this, Pethokoukis points us, first, to a new study by Bruce Sacerdote, which suggests that consumption has increased substantially over the past several decades, once you adjust for inflation bias and include the growth of government benefits. On a less happy note, he also points us to a study by Scott Winship about income mobility. Winship concludes that although there's still a fair amount of income mobility within the broad middle class, there's very little at either end. Poor kids stay poor, and rich kids stay rich.

Lunchtime Photo

Ever since I first took some pictures of our hummingbirds, I've been working diligently to get better ones. For the camera nerds out there, I quickly decided that the minimum settings I needed were f/8 at 1/1000th of second using ISO 800. That combination will only work on a very sunny day, so I had to wait for our string of overcast days to go away. They finally did, and then the tree trimmers came for their annual visit, which made the backyard even sunnier. I even bought a new feeder, but that turned out to be a disaster. The hummingbirds wouldn't come near it. So I put the old one back and this produced plenty of hungry hummingbirds.

I also got some spectacular pictures. The detail is excellent, and that means all the bird folks in comments should finally be able to tell me for sure which brand of hummingbird I have. I expect answers, people.

UPDATE: Now the bird folks are saying they need to see the back of the hummingbird to tell for sure what it is. Sadly, I don't have a picture of its back. But I do have a picture that shows a bit of the back. Does that help?

UPDATE 2: We are now 99.5 percent sure that this an immature male Allen's hummingbird, about a year old. So there you have it.

UPDATE 3: Then again, my mother thinks it's a female Allen's. I guess you have to decide who you trust more, the hive mind or my mother.

The Washington Post has a story on the front page today that's already become so common it's almost a cliche. It's about the small-town folks who voted for Donald Trump but somehow didn't realize he was going to do things that might harm them. Today's example features on-the-ground reporting from Durant, Oklahoma, and Exhibit A is Betty Harris:

She likes the president’s promises to crack down on illegal immigration, which she thinks has hurt the job market, and to bully manufacturers into staying in the country. She said both of her daughters were out of work for months because they worked for companies that moved overseas.

But Harris is upset by the president’s proposed budget, which would dramatically cut funding for the Robert T. Davis Senior Center, managed by the Bryan County Retired Senior Volunteer Program.

There seem to be an awful lot of people who heard only one thing from Trump during the campaign: He was going to build a wall and keep out all the Mexicans. Now, as best I can tell, the unauthorized population of Durant is at most 1 percent. But no matter. Illegal immigration still seemed like a scary thing, and Harris was all in favor of stopping it cold.

Over and over, I read stories where I hear this. Trump got the votes of people who liked his promise to stop illegal immigration. And that was about it. They didn't really hear the part about repealing Obamacare. They didn't hear the part about cutting the budget. They didn't hear the part about climate change being a hoax. They didn't hear the part about 86ing regulations that protect workers but are disliked by big corporations. They didn't hear the part about big tariffs, which would make the stuff they buy more expensive. They didn't hear the part—or didn't care—about gigantic tax cuts for the rich.

Over and over, it's illegal immigration. And now they're shocked that Trump wants to take away their health care and their senior center and their workplace safety rules and all the financial regulations that protect consumers. They didn't notice him talking about all of that. Or else they didn't think he was serious. Or they didn't realize that when they voted for Trump, they were voting for a White House full of true-believing conservatives who have never cared about the working class and still don't.

The saddest part, from their point of view, is that they're probably not even going to get their wall. They're just going to get all the stuff they didn't want.

The Wall Street Journal has a story today titled "The Rising Retirement Perils of 401(k) ‘Leakage.’" This refers to people taking out loans from their 401(k) plans or cashing them out when they leave a job. I have two comments.

First, it's not clear to me that the Journal's own evidence supports the idea of some kind of retirement "peril." Here are the three charts they present:

Chart #1 shows a steady increase in 401(k) assets over the past decade. That's good news.

Chart #2 shows a smallish increase (18 percent to 21 percent) in the number of people who took out loans from their 401(k) accounts in 2009-13. This was the depths of the Great Recession, and it's hardly surprising news. By 2014 the number was already going back down.

Chart #3 shows the average size of 401(k) loans. Median is what we care about, and it shows no change at all. It's been hovering around $4,000 for the past two decades.

None of this strikes me as especially nerve-wracking. I just don't see any big crisis here.

But that brings me to my second comment. One of the paradoxes of retirement is how much control people should have over their own accounts. On one end you have personal savings, which you can do anything with. On the other end you have Social Security, which you can't do anything with. You pay in via mandatory payroll taxes, and when you retire you get a guaranteed monthly payment. Period.

401(k) accounts are in the middle. You don't have to pay in, but everyone is encouraged to. And there are rules about how much you can withdraw during your working years, but those rules are flexible.

Should they be? We could do away with the flexibility, but liberals argue that this just makes 401(k)s into a clumsy version of Social Security. If that's the vision, why not just do away with the whole thing and increase Social Security instead?

Conservatives mostly take the opposite approach. But again, if you provide lots of flexibility, why bother with 401(k) accounts at all? Just let people save on their own. The tax deferment of 401(k) accounts isn't all that great anyway.

This explains my own sentiment toward 401(k) accounts. I happen to believe in two things. First, the federal government should guarantee a minimum safety-net retirement for everyone. I'd like it to be more generous for the bottom third, but roughly speaking I think Social Security fits the bill pretty well.

Second, although encouraging workers to save more for retirement is admirable—and human nature being what it is, a bit of benign paternalism is probably a good idea here—people ought to have some control over what happens to their money. They know their own situation best, after all. If they have medical bills or college tuition bills, they might very well conclude that spending money now is more important than a more comfortable retirement. Once they're retired, they might prefer a large lump sum—maybe to buy a house or an RV or something like that—rather than a monthly payout. A 401(k) account allows this kind of thing within limits, and I like that. True, some people will do foolish things, but that's life. That's why we have Social Security.

Our retirement system is fairly accidental and jury-rigged, but I think it's turned out pretty well. Social Security provides a basic safety net, while 401(k) accounts provide an incentive to save more but allow more flexibility than Social Security. It's a good combination, and it's getting better as new rules bring more and more people into the 401(k) universe. There are modest changes I'd make to both pieces of this retirement package, but on the whole I think it works pretty well.

The sequence of spin and dissimulation in the great Trump wiretapping affair has been a master class in...something. I'm not quite sure what yet. But it's worth setting out for future generations. To get the ball rolling and remind everyone how this got started, here is Trump's original tweet from a month ago:

There's nothing true about this. Trump got it from a Breitbart piece that summarized a Mark Levin rant that relied on a British story about a brief FBI investigation of a server at Trump Tower that was communicating with a Russian bank. He couldn't admit that, though, and thus began a long campaign that has sucked up the time of the White House, Republicans in Congress, and Fox News, all desperately trying to redefine this into a real story. Here's how it went:

  1. Obama became some part of the executive branch.
  2. Wiretap became surveillance of some kind.
  3. Trump Tower became Trump.
  4. Trump became anyone associated with Trump.
  5. Surveillance became criminal investigation of Trump campaign team. Oops. Wrong turn. Let's ditch that one.
  6. Second try: surveillance became routine monitoring of foreign officials that happened to include Trump officials on the other end.
  7. Routine monitoring became unmasking of Trump officials.

And now we have the latest version of this from Eli Lake:

White House lawyers last month discovered that the former national security adviser Susan Rice requested the identities of U.S. persons in raw intelligence reports on dozens of occasions that connect to the Donald Trump transition and campaign, according to U.S. officials familiar with the matter.

....Rice's requests to unmask the names of Trump transition officials does not vindicate Trump's own tweets from March 4 in which he accused Obama of illegally tapping Trump Tower. There remains no evidence to support that claim....The standard for senior officials to learn the names of U.S. persons incidentally collected is that it must have some foreign intelligence value, a standard that can apply to almost anything. This suggests Rice's unmasking requests were likely within the law.

Susan Rice, recall, was the National Security Advisor at the time, and most likely requested unmasking of names from intelligence reports all the time. Apparently some of those times included Trump transition officials. How many times? "Dozens." How does that compare to her usual number of requests? There's no telling. Does this have anything to do with Trump's original tweet? No. Was it illegal or wrong in any way? Probably not.

But! Susan Rice is also a Republican bête noir, the villainess of Benghazi who LIED ON TV repeatedly and tried to get everyone to believe that the attacks were due to an INTERNET VIDEO when we knew all along they were really the work of RADICAL ISLAMIC TERRORISTS, a phrase that OBAMA WAS UNWILLING TO UTTER.

So it's a big win to get Rice's name back in the news. So far, though, it doesn't advance the story in any way. Maybe it will eventually. As usual, we'll just have to wait.

Has anyone noticed that Trump's tweets lately seem to be largely random blasts from the past? It's like he can't really think of anything to say anymore, so he's just reliving his greatest triumphs of the campaign.

In the past few days we've been subjected to: Hillary gave away our uranium to the Russians; Ford is investing in American factories; the New York Times apologized after the election; Trump is treated unfairly by the media; the New York Times is failing; the House Freedom Caucus is bad; China is stealing our jobs; the whole Russia thing is a witch hunt; the Russia thing is fake; the Russia thing is a scam; Obamacare is a disaster; the real story is all the illegal leaks; Fox News reports that Trump was spied on during the transition; John Podesta's brother is a crook; and Hillary got the answers to debate questions.1

Trump has only been in office a few months and he's already living in the past. This is a bad sign, folks.

1This has always been one of my personal favorites. Aside from the triviality of what actually happened—and the fact that it happened during the primaries, not during the debates against Trump—we have Trump's assumption that Hillary Clinton received the "answers" to debate questions, as if they're tests that have right and wrong responses.

Oh man. Here's the lead editorial in the LA Times this morning:

This could go on forever. The online version suggests that it's only four parts, finishing up on Wednesday, but who knows what we'll find out between now and then? By 2020—or however long Trump lasts—this could end up being a thousand-part editorial.

And while we're on the subject, a federal judge has ruled that it's OK for a lawsuit to go forward accusing Trump of inciting violence at one of his campaign rallies last March. That's sure something you don't see every day. But Wikipedia tells me the judge is some notorious Obama appointee, so he's probably taking direction from the same folks who ordered Trump wiretapped. As the president puts it:

Yessir. Find the leakers, and we'll probably also find out who's pulling the strings of this so-called judge.

Brad DeLong is unhappy that his faction of economists had so little influence on public policy during the Great Recession. But I think he makes a fundamental error:

Alesina and Ardagna and Reinhart and Rogoff each had more influence on what policymakers and journalists thought about the effects of fiscal policy than did Paul Krugman and company, (including me). While the Federal Reserve went full-tilt into quantitative easing (but not stamped money or helicopter money), it did so in the face of considerable know-nothing opposition. And the ECB lagged far behind in terms of even understanding its mission. Why? Because economists Taylor, Boskin, Calomiris, Lucas, Fama, and company had almost as much or even more impact as did Paul Krugman and company.

....The most salient relatively-recent example was provided by Carmen Reinhart and Kenneth Rogoff [who argued that it was risky for a country to have a debt-to-GDP ratio greater than 90 percent]....I think we have by far the better of the argument. There is no tipping point. Indeed, there is barely a correlation, and it is very hard to argue that that correlation reflects causation from high initial debt to slower subsequent growth.

Yet it is very clear that even today Reinhart and Rogoff—and allied points by economists like Alberto Alesina, Francesco Giavazzi, et al., where I also think we have the better of the argument by far—have had a much greater impact on the public debate than my side has.

Brad's error is in thinking that any of these economists influenced public policy. They didn't. Politicians and central bankers wanted to do certain things, so they highlighted research from economists who happened to agree with them. Roughly speaking, when Congress wanted to spend more money, it asked for testimony from the Brad DeLongs of the world. When it wanted to cut spending, it asked for testimony from the Reinharts and Rogoffs. Likewise, central banks have their own models and their own political pressures, and they responded to them. They didn't really care what any academic economists happened to say about it.

This may sound depressing if you're an economist. Who wants to be nothing more than a handy mouthpiece for whichever politician happens to like the policy implications of your particular beliefs? But in fact, the news isn't so bad after all.

Brad's post is titled, "Why Were Economists as a Group as Useless Over 2010-2014 as Over 1929-1935?" But they weren't. If we had responded to the 2007-08 financial crisis the same way we did to the 1929-32 financial crisis, we'd still be waiting for a rerun of World War II to pull us back to normal. The reality was far less grim. We might not have responded ideally, but we responded a helluva lot better than we did in 1931. That's why it was a Great Recession, not a Great Depression.

And the reason for that is economists. Over the past 70 years they've had a tremendous impact on public policy. Compared to 1931, even the austerians are basically ultra-liberals who are just a few degrees less ultra-liberal than DeLong and Krugman. For better or worse, economists have enormous influence, but it's influence exercised over the course of decades. On that score, the Keynesians are overwhelming winners who have moved the center of gravity of the profession far to the left. It's only within the current center of gravity that conservatives seemed influential on public policy in 2009-10. But that's almost always the case. Wherever the Overton Window happens to be, the conservative end is usually ascendant. What really matters, though, is where the window is.

It's been previously reported that HHS Secretary Tom Price has made some questionable stock trades that appear to be based on inside information he had as a congressman. But Robert Faturechi reports that there's more:

On the same day the stockbroker for then-Georgia Congressman Tom Price bought him up to $90,000 of stock in six pharmaceutical companies last year, Price arranged to call a top U.S. health official, seeking to scuttle a controversial rule that could have hurt the firms' profits and driven down their share prices, records obtained by ProPublica show.

....On March 17, 2016, Price's broker purchased shares worth between $1,000 and $15,000 each in Eli Lilly, Amgen, Bristol-Meyers Squibb, McKesson, Pfizer and Biogen....The same day as the stock trade, Price's legislative aide, Carla DiBlasio, emailed health officials to follow up on a request she had made to set up a call with Patrick Conway, the agency's chief medical officer. In her earlier emails, DiBlasio said the call would focus on payments for joint replacement procedures. But that day, she mentioned a new issue.

"Chairman Price may briefly bring up ... his concerns about the new Part B drug demo, as well," she wrote. "Congressman Price really appreciates the opportunity to have an open conversation with Dr. Conway, so we really appreciate you keeping the lines of communication open."

The "Part B drug demo" refers to a proposed Obama rule that removed the incentive for doctors to prescribe expensive drugs that don't seem to improve patient outcomes. As it happens, there were plenty of folks in Congress from both parties who opposed this rule, so Price's opposition wasn't unusual. The difference is that all the others didn't buy lots of pharmaceutical stock at the same time they were lobbying to stop a rule that might have eaten into pharmaceutical profits.

So far, the Price affair hasn't attracted all that much attention. There are too many other Trump administration scandals to worry about. But this one has a decent chance of blowing up one of these days.

Germany is upset at new tariffs on carbon and alloy steel cut-to-length plate:

Germany's foreign minister on Friday morning said the Trump administration is taking a “dangerous step” after the Commerce Department announced a tariff on imports of foreign steel, indicating the tax could become a new source of conflict with the powerful U.S. ally and trading partner.

....“The U.S. Government is apparently prepared to provide American companies with unfair competitive advantages over European and other producers, even if such action violates international trade law,” Gabriel's statement read. “I very much fail to comprehend the decision.”

FWIW, none of this is really a Trump thing. The International Trade Commission began investigating dumping claims against Austria, Belgium, Brazil, China, France, Germany, Italy, Japan, Korea, South Africa, Taiwan, and Turkey in early 2016, and finished up its work before Trump took office. The vote determining that these countries were dumping product in the US below cost was unanimous.

I don't know what the Obama or Clinton administrations would have done if they'd had the final decision on this, but my guess is that they would have done the same thing as Trump, and the targets of the tariffs would have complained and threatened to take the case to the WTO. So there's nothing much new here. It's just another steel tariff. Because, you know, all the previous ones over the past four decades have been so successful.