"You're hired" Mulligan review

"You're Hired!" is Casey Mulligan's memoir of a year spent as Chief Economist of the Council of Economic Advisers. 

The book is pitched as an analysis of President Trump, "riveting first-hand accounts of President Trump’s engagement with policy and politics." I read it in part for that reason. Opinions on the current occupant generally reflect either kool-aid drinking, never-Trump disdain, or foaming-at-the-mouth derangement. Casey, one of the few remaining true-blue Chicago School economists, and an outstanding one who combines analysis and policy, is none of the above. I know him as a clear thinker and a straight talker.  With an election coming,  I wanted to see what he had to say. 

Casey delivers some important insights about this President. But the book is really not that much about Trump. It is much more about how the CEA works, how policy is formed in the Trump administration, which is much more like other administrations than you'd think, and a record of some great successes of the Trump-era CEA. (Kevin Hassett, the CEA chair, really deserves more pride of place in this story.) Trump shows up to make the big decisions, but usually on issues the CEA has spearheaded. 

For this story, and all the 90% that is not about Trump,  I strongly recommend the book to economists, of all political leanings. If you are an academic, interested in economic policy and in serving your country but without joining the permanent federal bureaucracy, the CEA is the most likely place you will land. If you want a voice for serious economic analysis in the government, the CEA is it. Casey also tells you how the CEA relies on academic research.  

That is of course how it must be. Chief Economist of the CEA is probably the top analytical position in the country, and you can see Casey shining in this role. But it is not a cabinet post, everyday in the trenches with the president and his entourage, privy to all the intrigue and salacious gossip. Casey's stories about Trump come from fairly large meetings. They do come from careful and detailed but somewhat distant observation. That rather than intimacy makes the Trump observations credible. 

This is not criticism. One of the things Casey admires about Trump is Trump's  marketing ability, his ability to find a good message and package a message.  Casey learned well! Were the book titled  "lessons about interagency policy process from my year at the CEA," it would have sold a copy to each of Casey's relatives, period.  But if you're reading this blog, you should read Casey's book. 

The book is also not really about policy details. If you want the economic analysis of just why the ACA mandate turned out not to matter, or why Casey and the CEA don't mind extreme price discrimination and secret rebates in drug prices, you won't see it here. (The rebates end up lowering premiums, but I long for a viable cash market.) Well, Casey knows how to stick to the point, and the point is how the policy process works, and sometimes does not work.

This book also helps you to understand Trump's appeal, and what a "populism" may mean once the outsized personality of Mr. Trump fades away. The elites really don't know what they are doing, the self-confirming Washington bubble really is out of touch with real people -- except, as Casey notes, many politicians who are forced to meet such real people -- and the deplorables are sick of it.  

"Policy analysis many times suffers from groupthink, a.k.a. the Washington bubbles. Only the elected officials, far outnumbered by the technocrats, must interact with people outside the bubble who are affected by federal policies. Experiences with the individual mandate, the opioid epidemic,... and host of Federal Regulations... supplied me with a profound new respect for our elected leaders. Their contact with, and accountability to, voters brings a valuable set of knowledge lacked by the technocrats, sometimes tragically. "

Frame that. For in much of the rhetoric about "science," and "experts," we are exhorted to ignore every day truths and the scattered information of actual people, and surrender to unaccountable technocrats, who chat and social climb with each other, but who have been wrong about so much lately. 

***

Trump and Twitter

The book starts with the mandate to buy health insurance, enforced by a tax penalty. This is an interesting economic as well as political issue, and well illustrates Trump's style.

Most economists felt, and many still do, that the mandate to buy insurance is an inextricable part of ACA  law. Under community rating  where everyone pays the same price (unlike health status insurance), why else would healthy people buy overpriced (to them) insurance? Yet the mandate was repealed early in the Trump era, and health insurance rates have stayed steady. (An excellent Marginal Revolution post, linking to several other sources, most notably the New York Times.)  This analysis was simply wrong. Casey gives some hints why it was wrong -- the relevant substitution was from cheaper non-ACA policies to ACA policies, not from no insurance to ACA, almost all people on ACA are subsidized anyway. Applying pathology-of-free-market parables to one part of a complex law is dangerous.  But Casey does not go deep into the economics. (Some his discussion involves Laffer curve arguments, but that was the point of the mandate -- raise no revenue with the tax because everyone complies.)  

His point is about Trump, and it is a good one. Trump is an "experimenter" and a "communicator" in the style of Franklin Roosevelt. 

During the Campaign, 

"Mr. Trump's political opponents complained that he was on both sides of the mandate issue in the span of a few days, and ultimately ignored the policy wonks. This constituted unmistakable evidence, they said, that he was dishonest, arrogant, and unscientific. But the pundits are now beginning to recognize their mistakes about the individual mandate.  The most interesting part of the episode is how Mr. Trump quickly detects such errors and in the process better appreciates the concerns of the general population than technical advisers typically do."

Later, (p. 35) 

"The President's rallies serve as 10,000 person focus groups."

After detailing just how difficult actual analysis of the mandate is in the context of a thousand page law that spawns tens of thousands of pages of experimentation, 

"Candidate Trump needed only a few days of experimentation to discover that repealing the individual mandate would be a political and economic success."  

A quibble: Trump's tweeting and rallies tell him very quickly what is politically viable. But as happens when Casey loses a few battles later, such as prescription drug pricing, that is not the same thing as quick feedback that the economics of the mandate analysis was all wrong. P. 10, "In 2019, the CEA released its quantitative analysis, three years after Mr. Trump had learned from his experiment that mandate repeal would be a winner."  Casey does not document that Trump figured out these economic points on the campaign trail, or via twitter.

And in other instances, we have observed Trump the "listener" and "experimenter" try a lot of things and quickly learn what works politically, though I still maintain, and Casey does not dispute, they are economic disasters. I would list the trade war, the Syria withdrawal, and the general approach to immigration, (in the absence of a legislated reform, which to his credit Trump has tried to achieve) especially limits on high skill immigrants and students. 

Casey notes many issues that seemed to the New York Times Magazine as "unabridged representation of a singular man's impulses" and "daily electroshocks of presidential id' as in fact part of a predictable long term strategy. For example, he explains how a series of apparently out-of-the-blue tweets about auto regulation in fact were part of a two-year plan to reconsider auto regulation, and Trump chose that moment and tweet to sound out opinion. (p. 7) 

Casey qualifies 

"'experiment' and 'results' are my terms; he refers to 'listening,' 'changing course,' and 'pivoting.'...Anyone not recognizing the method will find that Mr. Trump perpetually surprises them with actions that are in fact predictable. 

In Chapter 2, Casey tries to explain the President's use of Twitter. I thought early on that Trump should stay off Twitter too, and look more presidential. I recognize now how wrong I was. Faced with a media that detests him, he has a direct route to 70 million followers and many more retweeters. Franklin Roosevelt invented the fireside chat, using the new medium of radio. That's Twitter to Trump. 

Casey admits that keeping these followers' attention is not hurt by "a steady stream of bizarre, bombastic and sometimes hilarious messages" (p. 15) Moreover, Trump here understands the medium: "the messages are rebroadcast on Titter, on news programs and word of mouth." "A Gallup study found that three-quarters of U.S. adults see, ear or read bout @realdonaldtrumps' tweets 'a lot' or a 'fair amount'." 

"The president's gamble is that voters aware of his successes on substance will tolerate his eccentricities and imporpiretise [!] in form. " In the face of an implacably hostile media, "Twitter is essential for @realdonaldtrump to communicate the successes." 

Amazingly, Trump has no large social media staff. "It's just him and Dan Savino." 

p. 16ff give a good detailed example.  2019 growth of 3.1 percent was the highest since 2005. How to get the news out?  

"POTUS called for Dan who hustled into the Oval Office with his laptop... POTUS began with a now familiar strategy for getting the press to cover a new fact, which it to exaggerate it so that the press might enjoy correcting him and unwittingly disseminate the intended finding... what would be the sweet exaggeration spot that would get media attention?... POTUS quickly decided, as he did on many occasions, to initially report the result with 100 percent precision.... Later his communications team could gauge whether the coverage needed exaggeration. "

Read on, it's a crucial chapter. 

****

Economists: If you go to Washington, read the bills, do the hard work. 

Casey is, apparently, largely responsible for the world's discovery that "Medicare for all" includes the abolishment of all private insurance. There is a deeper lesson here for anyone wishing to do policy work. Step outside the gasbag bubble and read the bill. 

p. 29 

"Lots of smart people pretend to know what's in important bills in Congress and regulations in the executive branch, without reading them. The New York Times, Washington Post, and other news outlets publish interviews and statements from so-called experts, often economics professors, whose only knowledge of the bill or regulation comes from what they read in the New York Times, Washington Post, and other new outlets. "

One of Casey's virtues is that he reads a lot of detail. In his Redistribution Recession book, he stopped to figure out how regulations actually work. 

(I am often one of the lazy commenters he so rightly criticizes. In our defense, there is often value in analyzing logic (often missing) and implications (often ignored) of other bubble writers.)  

"I had read the 'Medicare for All' bills... the proposal was to end the existing Medicare program, [Technically, Medicare for nobody!] ban all private health insurance, and prohibit health providers (doctors, hospitals, et.) from earning a profit or charging any type of copayment... The latest version of the bill.. is succinct (emphasis added): 

'There is a moral imperative to correct the massive deficiencies in our current  health system and to eliminate profit from the provision of health care.'" 

Casey links this to the larger ethic within the Democratic Party that "profits are glorified theft by private business from workers and consumers." (In case you're not an economist, profit is what you pay investors in order to get capital to build factories and expand a business, just as you pay wages to get workers to show up and you pay the electric bill if you want to turn on the lights.) 

Casey tells the story of many people unwilling to believe this fact about Medicare for all, even in the White House. He found a useful answer:

Printing section 107 of the Senate bill, I kept it in my suit pocket, ready for presentation to the next doubter. ..having section 107 in  my pocket settled the matter... again, I pulled out section 107 from my breast pocket to convince the incredulous... 

Having won the internal battle, how to get the word out? (p. 35) 

President Trump began telling the American public that Medicare for All would be 'outlawing the ability of Americans to enroll in private and employer-based plans'... 

It didn't take long for journalists to declare that POTUS was lying.

Aside. As a watcher of media, I have been astounded at just how uncivil they have become. Even NPR and PBS regularly now introduce a clip by saying here the President "lied." They interrupted his speech about every 15 minutes to assure the audience they would follow up by fact checking every sentence, an interruption (and service) not accorded to Joe Biden.  

According to CNN's chief White House correspondent, the lie potentially surpassed all falsehoods in the history of the presidency....

POTUS knew how to overcome the communication barrier...He began by saying that 'the Democrat plan outlaws private health plans'-- a 100 percent accurate description of Section 107... Then he changed it to 'Democrats want to outlaw private health plans,' which is an accurate description of 141 members of the 115th Congress who sponsored or cosponsored Medicare for All bills... Finally he added 'the Democrats want to outlaw private health plans.'....Adding a definite article enraged Democratic Senate minority Lader Chuck Schumer (not a sponsor or cosponsor), who raised the debate volume. Years of frustrating attempts by me to convince experts to read they laws they touted appeared over. [my emphasis]

CNN never apologized... but by January 2019 was acknowledging that Medicare for All prohibits private health insurance. To its credit, CNN began asking [Congressional] sponsors about the prohibition.

And follows the torturous story of now Vice-Presidential candidate Kamala Harris on the issue. 

(The book is full of zingers, like this one, delivered in Casey's signature deadpan style. Casey delivers the knockout, then says something nice. 

"Paul Krugman's Twitter is a another social media that I followed as Chief economist. He is wrong about most economic subjects... Professor Krugman's Twitter proved helpful for predicting mistakes that would be made by the President's' opponents. To his credit, Professor Krugman has a good understanding of the essentials of international trade (the basis for his Nobel Prize Award) and explains them well." )

***

Opioids. We have seen the enemy and he is us. 

Chapter 4 tells the story of the Administration's efforts to stem the opioid epidemic. 

It starts with another reminder of bubble vs. people. (p. 43)

"President Obama understood broadly that his administration would sometimes fixate on topics of little interest to the general public... speaking to his adviser Ben Rhodes, Mr. Obama counseled, 'Ben, no one in Ohio cares about Burma.' 

..Between 2000 and 2016 over 300,000 American died from drug overdoses involving opioids. Mr. Rhodes' White House memoir mentions Burma 34 times and climate change 21 times (and Trump 95 times) but never comments on opioids, heroin, fentanyl or drug overdoses... a memoir by its communications director, Dan Pfeiffer, mentions climate change nine times but never refers to opioids, heroin, fentanyl or drug overdoses.  

To be clear I am not saying that climate change is unworthy of Federal attention. What I am saying is that the public views the opioid epidemic to be of comparable importance. ... The considerable divergence between the priorities of the public and ruling class is why populism is a major factor in national politics today." 

Later (p. 60) 

"...candidate Clinton received 19 times the political donations from Federal employees than candidate Trump did. ... the ruling class is a tiny fraction of the population and does not fully appreciate the concerns of the rest of the country and is rarely accountable to them. The ruling class does not understand the costs of forcing people to buy health insurance [Chapter 1 includes some facts about the high cost of ACA vs. off-exchange policies to people who don't get subsidies] ... The Congressional record includes 'climate change' 27 times as often as 'opioid' or 'opioids.' The annual Economic Report of the President dates to 1947 but never mentioned opioids or heroin until 2018." 

Much of the opioid policy failure is a classic Chicago case of unintended consequences and demand curves, that, thank you, do slope down, even for drugs and medical care. Short version:

"When you subsidize something, you get more of it."

(The "Samaritan's curse" that aid always leads to more of the misfortune that one wishes to aid shows up later and extensively.) Among others (p. 48-51), thanks to ACA, Medicare and Medicaid,  

"... The same real income can now purchase five or ten times more opioids than it could 20 years ago. .. Medicare part D .. reduced the annual cost of a ... 0.75-gram daily habit from $39,420 to $2,677. 

...Medicare-financed pills are sometimes given away, resold, or fraudulent obtained...Early Oxytocin's dealers... were seniors ... 'it's like hitting the Lotto if your doctor will put you on OyxContin... people didn't even twice about selling.'

...for a three-dollar Medicaid co-pay,... an addict got pills priced at a thousand dollars...

The interesting part of this chapter, though, as with the rest of the book, is the story of the policy process. p. 51,  

"Agencies desperately try to block. 

In February 2018, CEA informed Federal agencies about the role of opioid prices. [Casey describes an extensive study and quantitative analysis done by CEA.] According to protocol, their approval was requested before the White House released any findings to the public. [Yes, the Trump White House follows interagency protocol] At least two agencies refused to allow the findings to be released to the public or be shared with President Trump. [Agencies can stop the President from learning important discoveries by other agencies!] These agencies were the Department of Health and Human services... and allegedly the Department of Justice." 

After characteristically saying nice things about Alex Azar, head of HHS, 

"Medicare Part D...features prominently in Mr. Azar' earlier experience...he and his chief of staff who was also part of the team that created Medicare Part D, were understandably proud of the program. Indeed, it uses private insurance in clever ways to more cheaply supply prescription drugs to vulnerable senior citizens. 

Secretary Azar refuses [yes, present tense] to even to consider that introduction of Medicare Part D might have helped fuel the opioid epidemic."

However, (p. 53) 

"The truth narrowly escapes...Shortly after Azar and WHC [White House Counsel] decreed the eternal secrecy of the findings, I arrived at CEA... On this subject, [CEA staff] morale was low. Yet, honorably, they resisted the overwhelming urge to leak the findings. 

Don't leak. A lesson for another day if you go to DC. 

The intrigue goes on, to a very important lesson Casey and I learned from Azar's personal interest. 

A group in the White House was uncomfortable with the findings. ... Now it was their turn to veto the public release.. [But] I had worked with one of the women from the Office of Management and Budget, and remembered her to be sincere, reasonable, and highly proficient... Luckily, I had made a point of being versed in the Presidents' budget, a 400-page tome ... Trying to recall the part she wrote, I wanted to determine how CEA's report might appear to conflict with it. Guessing that she contributed to what I considered to be the budget's most important proposal, reversing the massive distortion in the 'catastrophic phase of Medicare Part D,' I suggested that the CEA's report be expanded to explain how implementing the budget proposal would help alleviate the opioid epidemic.... Correct in my hunch that the was not a Trojan horse for the heath secretary, a hurdle was cleared when her colleagues also deferred to her expertise. 

The story goes on, and the Chapter documents more HHS dysfunction on other issues. (A good reminder. Agencies are independent sources of power, and even their political appointees go their own way from the President's desires.) 

But I learned a  lesson: Do the background reading. Know the budget. Remember people, and recognize they love their babies. This is what politicians are great at, and economists (me) usually terrible at. Perhaps some of the same approach to secretary Azar might have helped him to see that fixing one problem with Medicare part D might bring more glory to the whole project. 

******

Chaos? 

Chapter 5 takes up the usual charge that the Trump White House is in Chaos. The chapter is really about a   productive CEA. A key insight

"CEA was often months ahead on request from POTUS and his staff." 

Anticipate what the boss is going to want, and be ready with the facts and analysis. That's bureaucracy 101, but good advice. 

"That CEA published... seventeen supply and demand analyses .. in its first three Economic Reports of the President, as compared to one by the Obama Asdministration and only eight for all other presidents combined. 

As another measurement of how little economics the Obama Administration was doing by comparison, consider the elementary economics concept of 'marginal.' That word is found dozens of times in a typical Economic Report of the President issued, by, say, the Reagan Administration. But the 2011 (Obama) Economic Report of the President does not use it once. 

Perhaps though this isn't about productivity, but about economic style. Marginal analysis and incentives -- economics, really -- are not much in vogue among many professional economists, especially on the left. They fill the ERP with other ideas.  

It was the first to include the neocleassical growth model or a supply and demand analysis of homelessness

Well, other economists think in Keynesian terms, in which incentives do not appear.  And the extent to which the CEA functions to provide lots of behind-the-scenes rigorous analysis in internal policy debates vs. cheering the President's policies on TV is an open question. 

******

My goodness, a whole day has gone by and I'm only half done. Sorry, Casey, we'll have to speed up.  There is much more in the book. 

Chapter 6 gives an interesting view to immigration. Trump figured out that we should simply charge for immigration, something Gary Becker suggested. It came not from economics analysis, but a transactional instinct, but Casey was impressed that he got there. 

p. 84 also documents how forecasts were almost always above growth in the Obama years, and below growth in the Trump years. "How many consecutive overpredictions have to occur... before were suspect political bias among the forecasters? With every single year during the Trump Administration so far being underpredicted, Republicans, especially President Trump, began to wonder whether something needs to be disrupted over at the Fed. ..." Interesting background for Fed vs. Powell. 

Chapter 7 gives an interesting background to the famous Ukraine call. Trump asks everyone "what are we getting in return?" (p. 91) 

"when I read that the president followed with, 'I would like you to do us a favor,' as a former White House staff I saw this as literally the hundredth time that POTUS would be insisting that the U.S. get something in return for our checks cashed by foreign countries." 

"Is there a deep state?" (p. 93) reminds us just what an uphill battle the Administration fights. 

"during the 2016 Campaign, 95 percent of the presidential-campagn donations make by civilian Federal employees went to the Democratic nominee. Among employees at the State Department ... the statistic was 99 percent."

An effect:

The Democratic leanings of the civilian employees of Federal agencies were obvious to me in their analysis of regulations. 

Regulatory reform is one of the successes of the Trump era. Casey has good insights. 

Three myths about federal regulation:

"The first myth is that most regulation is environmental. "

No, most regulation is economic, especially health care and insurance. (And most of it retards economic growth in order to tip the scales in favor of one group vs. another.)  

"The second myth ... is that Federal regulation is smart and evidence-based." 

Serious cost benefit analysis is basically absent.  

"The third regulatory myth is that the main burden of regulation is paperwork."  

Hilarious but, it is sadly true that so much discussion focuses on the paperwork costs of regulation, not the orders of magnitude larger economic costs. Which is worse, filling out your taxes or paying them?  

Chapter 8 takers up tariffs. This must be a hard topic for a free-market economist, but Casey as usual has novel insights. Tariffs are at least better than quotas, which Reagan used. Casey points out (p.113) that tariffs are just another tax, and overall not that distorting. And the subject brings up Peter Navarro, the President's Rasputin on trade, and the only person that Casey has nothing good to say about (p. 115). 

Even the President was annoyed with Mr. Navarro's boorishness and double dealing and barred him from running meetings. .. Mr. Navarro also flunked marketing in 2018 when he was promoting a "fair and reciprocal tariff act." So named, the "FART act" had no chance of passing. 

Whoops, no, Casey finds something nice to say even about Navarro: p. 116, "Mr. Navarro deserves credit for leading a real accomplishment..." on postal regulations. (Or is this damning by faint praise?) 

Chapter 8 also returns to deregulation (p. 117 following) [I prefer to call it regulatory reform. Simply erasing regulations is not the goal, doing them right is the goal.] Casey documents some of the important achievements.  This is, to my mind, a real success of the Administration. Contrary to Casey's theme it is largely achieved behind the scenes, with hard-working people like Casey doing the work, and the media not paying attention because Trump is not tweeting about it to get them all hysterical. More of this story needs to be told someday, but this is a memoir not a history. 

Chapter 9 takes up the Administration's battle with an implacably hostile media. Many good quotes here, and you're probably as tired as I am. But these are very important lessons should you wish to work in policy. 

Chapter 11 closes with the Jones act. This has almost nothing to do with Trump, but should sit there as a sore that will not heal in all our consciousness. The Jones act states that all shipping between US states must be carried on US-made ships manned by US crews. This now has led to ludicrous and environmentally harmful outcomes. Ships being too expensive, many goods go by truck. There are no liquid natiural gas ships that comply, so we export LNG from Louisiana to Europe, and buy back LNG from Russia (p. 168) to Massachusetts. The chapter details this Administration's efforts to combat the Jones Act. Which failed, with Transportation Secretary Elaine Chao playing the villain.  As aways Casey starts by saying she is  a "kind and gracious person" before detailing atrocious behavior just this side of corruption. 

So shall it be. In my own short time in Washington as a junior economist at the CEA in 1982, I saw the Jones act at work. The issue was, can we modify the oil export prohibition, to sell Alaskan oil to Japan, and use the money to buy Saudi Arabian oil for the East Coast, rather than send ships all the way around South America.  On Jones Act ships. Around the interagency room, everyone realized what a good idea it was, until the Congressional Liaison explained exactly the threats that the Merchant Marine had made, and that was the end of that. 

To figure out how to reform America, figure out how to get rid of the Jones act. 

*********

This review has gone on way too long. I learned a lot, about Casey whose incredible range and capacity for work, and detailed quantitative policy analysis I admire more than ever, about the workings of policy and the Trump Administration, and a bit about the current occupant. 

On Trump, I think Casey is a bit too soft. The experimenting and combat fake news explanations for tweets do not explain many outrages and own-goal touchdowns, such as the recent ones on a peaceful transition. The President's what's-in-it-for-us transactional attitude did, as Casey points out, free him from much completely wrong conventional wisdom, but it only accidentally leads to correct economics, as in the suggestion that we charge for immigration, and it leads often to poor policy, such as extorting donations from TikTok for merger permission. 

However, on documenting the enormous uphill climb this administration faces against an implacably hostile media and federal workforce, this book is very useful. To understand how strong the bubble is, how it fails,  and why populism might make some sense and outlive Trump, read on. On documenting how things work in economic policy, and how you might someday be an effective CEA chief economist, I recommend it most of all.