Kevin Drum

Crime is going down in California:

Through May 20, L.A. experienced a drop of more than 10% in violent crime this year compared with the same period in 2022. Property crime fell by slightly more than 1%, and arrests were up 4.4%, according to Police Department data....The Police Department posted additional positive numbers in a tweet Tuesday: Hate crimes dropped nearly 6%, homicides declined more than 27%, and the number of shooting victims decreased 17%.

....Los Angeles is not the only California city to report a drop in crime. San Francisco...has experienced an overall drop of nearly 7% in crime in the first five months of the year, according to police statistics. San Jose reported a drop of about 8% in violent and property crimes in the first three months of 2023.

Nobody knows for sure why crime—especially homicide—surged so strongly in 2020. Was it the pandemic? The George Floyd protests? Some coincidental outbreak of drug gang violence? Record-setting summer temperatures in places like Chicago, New York, and Washington DC?

We don't know. But whatever the reason, it's clear that crime is now settling back to its pre-2020 normal. It's happening slowly and haltingly, but it's happening.

Not much good news today. Labor productivity fell 2.1% in the first quarter, marking the fifth decline in a row going back to October of 2021:

Hourly compensation is a key component of productivity, so BLS also calculates hourly pay as part of its overall measurements. Thanks to a raft of revisions, BLS now estimates that hourly pay has plummeted since the pandemic:

Adjusted for inflation, pay is down 6% since the middle of 2020. And it's down everywhere:

We are all getting paid less and we are producing less for each hour we work. This doesn't bode well for the economy down the road.

A newly published study in Behavior Genetics describes the genetic heritability of a vast number of traits based on measurements of 772 pairs of twins (half identical, half not). The basic concept here is that if a trait is largely genetic, it will be more closely shared by twins who have identical physical and cognitive characteristics. Conversely, non-identical twins will inherit only smallish and random bits of each trait.

The study incorporates thousands of traits, most of them related to brain volume and structure based on imaging studies. However, it also includes quite a few of more general interest. Here's a selection:

Overall cognition, which is basically intelligence, is about 70% inherited. The other 30% is influenced by shared and non-shared environment. The same is true for oral reading. The subcomponents of intelligence, fluid and crystallized cognition, are a bit less inheritable.

Hyperactivity is almost entirely inherited. Anxiety, by contrast, is only weakly inherited. It's apparently caused mostly by environmental factors.

Reading for pleasure is almost entirely influenced by genes. Oddly, though, listening to music isn't.

Thanks to the size and breadth of this study, it's basically state-of-the-art among classical twin studies. More modern GWAS studies will likely supplant it in years to come, but so far they've surveyed only 15-20% of the human genome. For now, this is about as good as it gets.

This comes a little out of the blue, but this morning I happened to come across a paper on innovation policy that struck me as sensible and well-argued. It's an important thing to get right since innovation is the single most important key to both productivity growth—and thus rising living standards—as well as overall economic growth.

The authors look at a basket of potential growth policies and rank them by how well they're supported in the literature and how well they're likely to work. Here's the short list of alternatives, with the top three marked:

Greater levels of skilled immigration ranks #1, with an added advantage that it reduces income inequality.

R&D tax credits, a popular option, ranks #2.

Finally, increased trade and competition, which presumably includes greater antitrust enforcement, ranks #3.

None of this is terribly surprising, but sometimes it's useful to see even the obvious if you haven't seen it in a while.

This is just a cranky aside, but I keep seeing liberals mocking Republicans as "hostage takers who didn't even know what to do with the hostage." In this telling, the debt ceiling deal was an ongoing fiasco of dealing with terrorists willing to blow up the economy for reasons they themselves didn't even fathom.

Give me a break. Republicans may have been disorganized and often chaotic in their demands, but they knew what they wanted: deep cuts in domestic spending programs combined with no cuts in defense programs.

And that's exactly what they got. Defense programs were preserved while domestic programs were slashed 5-10%. Maybe some of the radicals are unhappy at not getting even deeper cuts, but the fact is that they got 90% of what they wanted in the first place. They were not just an ignorant mob wanting to burn the world down. They were a disciplined team that fought tirelessly for big spending cuts and they won.

Airplanes lined up at their gates at John Wayne Airport.

Today is JOLTS day, which provides a snapshot of the employment market. Here's what it looks like through April:

Job openings were actually up a bit in April but were down by 30% from their peak a year ago. Quits are steadily down, an indication that workers are afraid they can't leave for a better job. And actual hires, though flat in April, are down considerably since last year.

This isn't the only bad news on the employment front. A couple of years ago employment was at record levels and anyone who wanted a job could get one. But those days are long gone:

A year ago the economy was gaining about 7 million jobs per year no matter how you measured it. We're still gaining jobs today but the rate has plummeted. By one measure we've added about 4 million jobs; by a different measure it's only 3 million.

These aren't horrific numbers, but they are down substantially. No matter what our shiny 3.4% unemployment rate tells us, the job market is sputtering. A recession is coming.

What a bizarre story we have today. The House Rules Committee has 13 members, which means rules can be passed with seven votes. There are nine Republicans and four Democrats on the committee.

All simple enough, except that back when Kevin McCarthy was desperately making deals to win the speakership he made a deal with three Freedom Caucus members to place them on the committee. The idea was that the three firebrands could ensure that the six mushballs didn't give away the store to wily Democrats or Republican pressure to compromise.

But then a funny thing happened: nobody wrote the deal down and everyone promptly forgot the terms. The Washington Post picks up the story from here:

As the committee was about to take up the debt ceiling deal, one of its Freedom Caucus members lodged a remarkable claim about the January agreement: that GOP votes to advance bills on the committee effectively needed to be unanimous.

“A reminder that during Speaker negotiations to build the coalition, that it was explicit both that nothing would pass Rules Committee without AT LEAST 7 GOP votes — AND that the Committee would not allow reporting out rules without unanimous Republican votes,” Rep. Chip Roy (R-Tex.) claimed Monday on Twitter.

....As Roy’s claim was being chewed over, McCarthy allies acknowledged that they didn’t really know what McCarthy had given up.

“I have not heard that before,” Rep. Dusty Johnson (R-S.D.) told CNN. “If those conversations took place, the rest of the conference was unaware of them.”

Rep. Stephanie I. Bice (R-Okla.) added: “I don’t know what Speaker McCarthy agreed to, but that has not been something that any of us were familiar with.”

Another member who was apparently unfamiliar with what Roy was talking about: Massie, the most crucial vote on the Rules Committee when it came to getting to those required GOP seven.

In the end, Rep. Thomas Massie, one of The Three, voted in favor of the debt ceiling rule, giving it seven votes for passage. Roy squawked some more about betrayal on Tuesday morning but said nothing later when the vote was held and the rule passed. Maybe he changed his mind about what his handshake agreement with McCarthy was really about.

In any case, it looks like the House is being at least partly run via secret codicils that few people know about and even fewer agree on. Behold the people's business.

Earlier today we were on the subject of corporations raising their prices and profits far beyond anything justified by inflation. So I thought you might be interested in a different way of looking at this for the economy as a whole.

Roughly speaking, this chart shows how much profit corporations make for each dollar of value they add to their products:

This measure bounces up and down over time, but as you can see there's a dramatic increase right around the start of the pandemic. For several years profits had hovered around 16¢ per dollar, but by 2021 profits were around 21¢—an increase of 30% in only a year. And this was well before inflation started to kick in.

So yes, corporate profits are up thanks to widespread price markups. The pandemic may have been bad for you and me, but all those shortages and supply chain problems were a godsend for C-suite managers trying to hit their bonus targets.

The Congressional Budget Office has scored the debt ceiling deal and it's worse than I thought. A big part of the issue is assumptions about inflation:

CBO’s baseline projections for discretionary appropriations are assumed to grow each year with inflation from the amounts provided for the most recent year, whereas CBO’s projections under the [debt ceiling] bill reflect the assumption that funding would be constrained by the caps with authorized adjustments through 2025 and keep pace with inflation thereafter.

In other words, the debt ceiling caps don't account for inflation. Also, I previously looked at the cuts in all discretionary spending, but that's misleading since there's essentially no change in defense spending. The cuts come solely from domestic programs. Here's approximately what that looks like:¹

If you account only for domestic programs, CBO estimates a reduction of about 8% next year and as much as 13% the year after. Unless I've done my sums wrong, this is truly a gargantuan cut, and far bigger than I originally estimated.

However, note that there are various side deals that might ameliorate this. Democrats plan to backfill some of the cuts with recissions, and if they're successful the overall cuts in domestic spending will be smaller than CBO estimates.

¹It's approximate because for some reason CBO shows baseline spending in terms of budget authority but it shows cuts in terms of actual outlays. I don't know why, but in any case the difference is small.