Capitalism Reform – Page 2 – The Wrongologist

Saturday’s Kinda Soothing Links

The Daily Escape:

Surf, Shore Acres SP, OR – December 2023 photo by Alan Nyri Photography

Next week is the last before the Christmas and New Year’s festivities. The extended holiday time will reduce Wrongo’s output and most likely limit his posts to season-appropriate musical selections. But that’s next week. With what remains of this week, here are some snippets from longer articles.

First, from Kyle Tharp, “Inside the first-ever White House holiday party for internet celebs”:

“It’s the influencer party,” I overheard one Secret Service officer mumble to another….We were in line for one of the annual White House Holiday Receptions…where allies of the President, dignitaries, and the press are invited to gather for spiked eggnog and hors d’oeuvres while touring the newly unveiled holiday decorations. Unlike past parties, however, the guest list for the reception…was unprecedented: this event was organized by the White House’s Office of Digital Strategy….That meant the median age of attendees was probably decades younger than most holiday shindigs in DC, and the cumulative social media audience of those in attendance approached 100 million followers.”

Jill Biden gave a short toast:

“Welcome to the White House….You’re here because you all represent the changing way people receive news and information.”

Next, Politico reports that Bidenomics is a big hit outside the US:

“Bidenomics” is falling flat with American voters. But the rest of the world can’t get enough of it.

The Inflation Reduction Act’s (IRA) mix of support for clean energy technologies and efforts to box out foreign competitors is also promoting a kind of green patriotism — and even some politicians on the right outside the US say that’s a climate message they can sell:

“It’s probably the most impressive piece of legislation in my lifetime,” ex-diplomat Marc-André Blanchard, an executive at Canada’s biggest pension fund, told POLITICO at the…COP28 UN climate talks…”

Biden’s climate law has shown leaders around the world that winner-picking is back, something that has been out of fashion for the past 40 years. The IRA is having a real-world impact as investors shift their money to the US from abroad, hungry to take advantage of US tax breaks:

“In July, for example, Swiss solar manufacturer Meyer Burger canned plans to build a factory in Germany, choosing Arizona instead.”

Third, The Hill reports that buried in the just-passed defense bill was an anti-Trump nugget:

“Congress has approved legislation that would prevent any president from withdrawing the United States from NATO without approval from the Senate or an Act of Congress.”

The measure, spearheaded by Sens. Tim Kaine (D-VA) and Marco Rubio (R-FL), was included in the annual National Defense Authorization Act (NDAA) and is expected to be signed by Biden.

You have to give credit to Lil’ Marco, a shameless Trump supporter who publicly slams Biden, but who clearly understands that Trump back in office is a massive threat. It’s interesting that both Houses passed this, meaning that some House Republicans are acknowledging that Trump will abandon the US commitment to NATO if he gets the choice.

Finally, Drones. They are rapidly changing how soldiers fight, and as both sides in the Ukraine War grow more dependent on them, it’s becoming clear that the US doesn’t have the countermeasures that can defeat drone attacks. From Foreign Policy magazine:

“The advent of pervasive surveillance…has created a newly transparent battlefield. Ubiquitous drones and other technologies make it possible to track, in real time, any troop movements by either side, making it all but impossible to hide massing forces and concentrations of armored vehicles from the enemy.”

“That same surveillance…makes sure that forces, once detected, are immediately hit by barrages of artillery rounds, missiles, and suicide drones.”

As drones take an increasingly prominent role in modern warfare, it’s clear that the need to disable or kill them is critical. Back in the stone age, when Wrongo was an air defense officer, it was the domain of specialist units with very expensive equipment. Now, the proliferation of small, cheap drones is spreading the anti-drone role down to the infantry squad level. From the WSJ:

“Pentagon acquisition chief Bill LaPlante said…that the US needed a surge in production of counterdrone technology, and that a lack of such equipment was hampering operations in both Ukraine and Israel.”

While Ukraine has successfully used drones throughout the war, Russia has recently improved its capabilities. That’s causing Ukraine to lose 10,000 drones a month. Both sides are also expanding their capacity to make drones. More from the WSJ: (brackets by Wrongo)

“Russia has been very effective at bringing Ukrainian drones down by sending out more powerful signals to control the drone than [can] its actual operator….This ability to jam drone signals means that Ukrainian operators have to move closer to the front line to maintain a signal with their [drones]…”

State-of-the-art drone Electronic Counter Measures (ECM) are severely lagging in the West, reducing our ability to help Ukraine, and potentially endangering us here at home. Warfare has changed and America’s playing catch-up. You better believe China is going to school on drone warfare in Ukraine.

Enough of the scary stuff. It’s time for our Saturday Soother, where we decide to unplug from all news all the time and spend a few moments gathering ourselves before the rush of news and holiday shopping that will fill next week.

Start by arranging yourself in a comfy chair by a south-facing window. Now, watch and listen to Edvard Grieg’s Peer Gynt Suite No. 1, Op. 46 “Morning Mood”. It is performed here by the Berlin Philharmonic, conducted by Herbert von Karajan in 1983:

Practically every human being has heard this at least once in their life.

Why People Say The Economy Is Terrible

The Daily Escape:

First snow, Doubling Point Lighthouse, Kennebec River, ME – December 2023 photo by Rick Berk Photography

Wrongo may have stumbled upon the reason why people say the economy is bad when so many economists say it isn’t. From a LendingClub report from last May: (emphasis by Wrongo)

“For some Americans, earning a six-figure income doesn’t guarantee a comfortable lifestyle….many Americans are struggling to make ends meet — with 61% of those surveyed saying they feel stretched too thin, and 49% of those earning $100,000 or more saying they’re living paycheck to paycheck.”

This ties together with other information, some of which comes from the issue, who reported this from the Aspen Institute: (emphasis by Wrongo)

“Though routinely positive cash flow is the starting point for financial stability, it remains largely out of reach for many Americans. Even before the fallout of the COVID-19 pandemic, nearly half (46.5%) of households reported that their income did not exceed their spending over the course of a year. For households with annual income of less than $30,000, this number increases to three in five (61.5%).”

Now there may be many reasons why people spend beyond their means. Some seem to be unable to defer gratification until there’s money in the bank, so they buy on credit. There was a $48.5 billion jump in spending from September to October 2023. For others who make less than a living wage, the problem isn’t one of choice, it’s existential.

The searing takeaway from the above is that negative personal cashflow was a problem even before the post-Covid inflation drove prices through the roof in America. The Aspen Institute provides this handy chart showing how individuals build financial security:

Financial security starts with having a routinely positive cashflow. But, nearly 50% of Americans today aren’t cash flow positive (see quote above), while 49% of people earning more than $100k are living paycheck to paycheck.

This dovetails with Wrongo’s Monday column which showed that “Nearly 3 in 10 Americans say they have had to forgo seeing a doctor in the past year due to costs.” If you’re one of the 7.5% of uninsured Americans, and have money in your checking account that isn’t going to necessities, you can definitely go to the doctor.

Aspen has another chart that shows the breakdown of who lives paycheck to paycheck by income levels:

Seventy-four percent of those making less than $50k are living paycheck to paycheck, and while the percentage gets smaller as annual income rises, it’s still 48.7% for people making more than $100k, in an economy where the median income is around $54K! FYI, the percentage of Americans who make $50k or less is 37.8%.

More from LendingClub: (brackets and emphasis by Wrongo)

“The share of consumers in the US earning over $100,000 per year who live paycheck to paycheck increased 7 percentage points in April year over year. High-income consumers are particularly likely to live in urban areas, at 36%, and these tendencies toward higher incomes…[don’t] prevent almost 70% of urban dwellers from saying they live paycheck to paycheck.”

It’s hard not to conclude that the majority of Americans are currently experiencing dire financial conditions, including many who live with negative cashflow. When your cashflow is negative, you either cut back, borrow or sell assets. For most people selling assets isn’t a real choice. So while some cut back, the majority borrow to make ends meet. According to the issue, the:

“…highest risk, and most expensive forms of debt are now growing fastest. Payday loans, online insta-loans, and so forth. That means that people are exhausting the more mundane forms of debt—credit cards, bank loans, government loans, etcetera.”

This squares with a report by Achieve, a personal debt management firm, that shows:

“In the first nine months of 2023, the average monthly participation in debt resolution programs increased by 119% compared to 2020, even though the average earnings rose by approximately 37% during the same period.”

It gets worse:

“In 2023, the typical household income of individuals enrolled in debt resolution programs was $59,900, which is a notable increase from $43,598 three years prior.”

Americans are earning 37% more but are still struggling with debt. Not a pretty picture to take before the voters.

Meanwhile, Democrats still are touting how “strong” the economy is. The aggregate numbers hide terrible personal experiences that are happening out of sight of our politicians and surprisingly, our economists. However, it’s clear from the polls that few Americans are buying that message apart from the true believers, the media and pundits.

The disconnect between economic data and the lived experience of average people needs to be addressed by Biden and the Democrats. If nothing is done to at least acknowledge the actual problems of many Americans specifically, their negative personal cashflow, these angry folks will certainly tilt toward giving Trump another chance.

Let’s give the issue the last word:

“What is this? What do we call it when the majority of people can’t make ends meet, as in, they’re literally spending more than they make, because they don’t make enough to live a stable or secure life?

Today the averages are hiding a truth: that a near-majority of American citizens are financially underwater. These are big numbers. The Census Bureau says as of now, 258.3 million Americans are adults. And the Aspen Institute says that 46.5% of them can’t make ends meet. That’s 120 million of us that are going deeper in debt every month.

That can only happen when those at the very top are skimming off more than 100% of the growth in the economy. This suggests that Biden et al need to run on policy that will help the majority of voters, not simply the moneyed people who finance political campaigns.

Suicides Hit A Record

The Daily Escape:

San Juan river cuts through monocline ridge, UT – November 2023 drone photo by Hilary Bralove. It is believed by many that the Navajo people based their rug and basket weaving patterns on what they saw in these geologic formations.

The temporary truce in the Israel/Hamas war is over. Reprobate Congresscritter George Santos (R-NY) was ousted from the House, and former Supreme Court Justice Sandra Day O’Connor died. She was the swing vote in the Bush v. Gore case that stopped the Florida recount and handed the 2000 presidential election to GW Bush. This was the first time that Republicans realized that if they controlled the Court, they could fix elections.

But on a pretty Saturday in southern New England, let’s turn our attention to a news article that hasn’t gotten much interest. From the issue, we learn that:

“More people died from suicide in the United States last year than any other year on record, dating to at least 1941, according to provisional data from the US Centers for Disease Control and Prevention.”

They quote the Kaiser Family Foundation who measure the suicide deaths per 100,000 of population: (brackets by Wrongo)

“Suicide deaths are increasing fastest among people of color, younger individuals, and people who live in rural areas. Between 2011 and 2021, suicide death rates increased substantially among people of color, with the highest increase among AIAN people [American Indian and Alaska Native people] (70% increase, from 16.5 to 28.1 per 100,000), followed by Black (58% increase, from 5.5 to 8.7 per 100,000), and Hispanic (39% increase, 5.7 to 7.9 per 100,000) people….The suicide death rate also increased in adolescents (48% increase, from 4.4 to 6.5 per 100,000) and young adults (39% increase, from 13.0 to 18.1 per 100,000) between 2011 and 2021….”

Suicide rates are up by nearly 50% in adolescents over the last decade, while suicides among Black people are up by almost 60%. These aren’t trends, they’re explosive changes. What we’re seeing in the data is our world in chaos.

Wrongo often says that American life has fallen apart over the past 30 years. People struggle to pay their bills; many do that by accumulating debt. For some, that struggle turns them to embrace demagogues, people who scapegoat innocents, or promise to take their rights away, robbing them of their personhood.

When we see suicide rising particularly among groups who struggle the most for their existence, it says that something has gone terribly wrong with the American model. And in the suicide statistics, there is confirmation that our nearly Darwinian model is what’s wrong. Adolescents and minorities aren’t committing suicide at these rates because they can’t get therapy, but because they feel as if there’s little or no future for them. Sadly, they are told by many pundits and politicians that everything’s fine.

Perhaps this partially explains why Biden seems to be doing so badly in polls of young voters.

As one of the commenters at the issue says:

“It shouldn’t be ‘The pursuit of happiness’ it should be ‘The amelioration of misery’. Being free to pursue happiness when there isn’t enough…left to go around doesn’t do ‘We the people’ any good.”

So, it’s time to forget about Santos, Kissinger and Hamas for a few minutes. Tune in to your Saturday Soother, where we try to get distance from the news for long enough to be able to handle whatever’s coming next.

Here on the Fields of Wrong, we’ve completed our fall clean-up and now it’s on to putting up the deer fencing that protects the bushes around the Mansion. The tree is up and illuminated, and the first members of our family are coming to see it today.

While it’s a beautiful day in the northeast, it makes sense for you to stay indoors for now. Start by brewing up a mug of “The Antidote” coffee ($19.50/12oz.) from Apocalypse Coffee in Melbourne, FL. Now grab a comfy chair by a south facing window and watch and listen to Schubert’s “Serenade”. Written two years before his death, it’s a perfect example of the melancholic music Schubert was so well known for:

Democrats Need New Messaging

The Daily Escape:

Cholla Cactus at sunrise, Joshua Tree NP – November 2023 photo by Michelle Strong

Yesterday’s column described how confusing current polling data is with less than a year to go before the 2024 presidential election. We can easily overdose on polls, but in general, they seem to be pointing toward a very difficult re-election for Biden.

At the risk of contributing to the OD, here’s another example of terrible poll for Biden. It comes from Democratic stalwarts Democracy Corps, run by James Carville and Stanley Greenberg:

“President Biden trails Donald Trump by 5 points in the battleground states and loses at least another point when we include the independent candidates who get 17% of the vote. Biden is trying to win these states where three quarters believe the country is on the wrong track and 48% say, “I will never vote for Biden.”

What to make of all this? Wrongo thinks it’s time to take a different approach to the Democrat’s messaging. Let’s start with a quick look at the NYT’s David Leonhardt’s new book, “Ours Was the Shining Future”. Leonhardt’s most striking contention is based on a study of census and income tax data by the Harvard economist Raj Chetty: Where once the great majority of Americans could hope to earn more than their parents, now only half are likely to. From The Atlantic:

“Of Americans born in 1940, 92% went on to earn more than their parents; among those born in 1980, just 50% did. Over the course of a few decades, the chances of achieving the American dream went from a near-guarantee to a coin flip.”

As we said yesterday, the American Dream is fading. Leonhardt says that the Democrats have largely abandoned fighting for basic economic improvements for the working class. Some of the defining progressive triumphs of the 20th century, from labor victories by unions and Social Security under FDR to the Great Society programs of LBJ, were milestones in securing a voting majority. More from The Atlantic:

“Ronald Reagan took office promising to restore growth by paring back government, slashing taxes on the rich and corporations…gutting business regulations and antitrust enforcement. The idea…was that a rising tide would lift all boats. Instead, inequality soared while living standards stagnated and life expectancy fell behind…peer countries.”

Today, a child born in Norway or the UK has a far better chance of out-earning their parents than one born in the US. More context from The Atlantic: (emphasis by Wrongo)

“From the 1930s until the late ’60s, Democrats dominated national politics. They used their power to pass…progressive legislation that transformed the American economy. But their coalition, which included southern Dixiecrats as well as northern liberals, fractured after…Johnson signed the Civil Rights Act of 1964 and the Voting Rights Act of 1965. Richard Nixon’s “southern strategy” exploited that rift and changed the electoral map. Since then, no Democratic presidential candidate has won a majority of the white vote.”

The Atlantic makes another great point: (emphasis by Wrongo)

“The civil-rights revolution also changed white Americans’ economic attitudes. In 1956, 65% of white people said they believed the government ought to guarantee a job to anyone who wanted one and to provide a minimum standard of living. By 1964, that number had sunk to 35%.”

America’s mid-century economy could have created growth and equality, but racial suppression and racial progress led to where we remain today.

Leonhardt argues that what Thomas Piketty called the “Brahmin left” must stop demonizing working-class people who do not share its views on cultural issues such as abortion, immigration, affirmative action and patriotism. From Leonhardt:

“A less self-righteous and more tolerant left could build what successfully increased access to the American Dream in the past: a broad grass-roots movement focused on core economic issues such as strengthening unions, improving wages and working conditions, raising corporate taxes, and decreasing corporate concentration.”

Can the Dems adapt both their priorities and messaging to meet people where they are today?

The priorities must change first. What would it take to establish the right priorities for the future? Stripping away the wedge issues that confuse and divide us, America’s priorities should be Health, Education, Retirement and Environment (“HERE”). It’s an acronym that sells itself: “Vote Here”.

(hat tip to friend of the blog, Rene S. for the HERE concept.)

Wrongo hears from young family members and others that all of the HERE elements are causing very real concerns. Affordable health care coverage still falls short. Regarding education, college costs barely seem to be worth shouldering the huge debt burdens that come with it.

Most young people think that they have no real way to save for retirement early in their careers when there’s the most bang for the buck. They also feel that Social Security won’t be there for them. From the NYT:

“In a Nationwide Retirement Institute survey, 45% of adults younger than 27 said they didn’t believe they would receive any money from the program.”

Today, only about 10% of Americans working in the private sector participate in a defined-benefit pension plan, while roughly 50% contribute to 401(k)-type, defined-contribution plans.

Finally, people today feel that their elders have created an existential environmental threat that will be tossed into their laps. A problem for which there may not be a solution.

As Leonhardt argues, these HERE problems should have always been priorities for Democrats. But for decades, the Party hasn’t been willing to pay today’s political price for a long term gain in voter loyalty. That is, until Biden started working on them in 2020.

But every media outlet continues to harp on inflation and the national debt. Much of what would be helpful in creating a HERE focus as a priority for Democrats depends at least somewhat on government spending. No one can argue that our national debt is high. It is arguable whether it can safely go higher or if it must be reigned in at current levels.

To help you think about that, we collected $4.5 trillion in taxes in 2022, down half a $trillion vs. what we collected in 2021. Estimates are that the Trump tax cuts cost about $350 billion in lost revenue/year.

Looking at tax collections as a percentage of GDP, it’s less than 17% in the US, well below our historical average of 19.5%. There are arguments to keep taxes low, but if you compare the US percentage to other nations, Germany has a ratio of 24%, while the UK’s is 27% and Australia’s is 30%.

If we raised our tax revenue to 24% of GDP, which is where Germany is now, we would eliminate the US deficit.

There’s a great deal of tension in the electorate between perception and reality. And it’s not caused by partisanship: Democrats and independents are also exhibiting a disconnect, too.

Democrats have to return to being the party of FDR and LBJ. They need to adopt the HERE priorities and build programs around them.

America’s Confusing Opinion Polling

The Daily Escape:

Oak Creek, Sedona AZ – November 2023 photo by Jim Lupton

Over single malt and martinis, our Thanksgiving guests talked about what a confusing time we’re living in. Americans are angry and anxious, and the polls continue to show problems for Biden across the board, despite that overall, the economy is fine.

Inflation has slowed significantly. Wages are increasing. Unemployment is near a half-century low. Job satisfaction is up. Yet Americans don’t necessarily see it that way From the NYT:

“In the recent New York Times/Siena College poll of voters in six swing states, eight in 10 said the economy was fair or poor. Just 2% said it was excellent. Majorities of every group of Americans — across gender, race, age, education, geography, income and party — had an unfavorable view.

To make the disconnect even more confusing, people are not acting the way they do when they believe the economy is bad. They are spending, vacationing and job-switching the way they do when they believe it’s good.”

Continuing with the confusion, the new WSJ/NORC survey of the American dream—the proposition that anyone who works hard can get ahead regardless of their background, has moved out of reach for many Americans. Only 36% of voters in the survey (conducted between Oct. 19-23 with a margin of error of ± 4%) says that the American dream still holds true: (emphasis by Wrongo)

“The American dream seemed most remote to young adults and women in the survey…..46% of men but only 28% of women said the ideal of advancement for hard work still holds true, as did 48% of voters aged 65 or older but only about 28% of those under age 50 agreed.”

And people think the dream is growing more remote. When last year’s WSJ poll asked whether people who work hard were likely to get ahead, 68% said yes—nearly twice as many as in this year’s poll (36%). More from the NYT:

“Economic difficulties are greater for those without a college degree, who are the majority of Americans. They earn less, receive fewer benefits from employers and have more physically demanding jobs.”

Voters without a college degree are Trump’s strongest cohort.

Adding to the cloudy forecast, the Economist/YouGov weekly tracking poll of registered voters says most people are happy with their jobs:

Overall, how satisfied or dissatisfied are you with the way things are going in your life today? Satisfied 64%, Dissatisfied 35%
How happy would you say you are with your current job? Great deal/somewhat 80%, A little/not at all 19%.
Do you consider yourself paid fairly or underpaid in your job? Paid fairly 56%, Underpaid 38%.
Do you think your family income will increase or decrease in 2024? Increase 45%, stay the same 41%, decrease 15%.

But the same Economist/YouGov poll gives a different impression when you ask about the American economy more broadly:

Do you think the economy is shrinking or growing? Growing 22%, staying the same 25%, shrinking 37%. That’s 47% thinking its growing or staying the same. (The reality: The economy has grown at 3% on average under Biden, the highest for any President since Clinton.)
Are the number of jobs in the US increasing (42%), staying the same (36%) or decreasing (22%)? (The reality: 14 million new jobs have been created under Biden.)
How would you describe the current state of the American economy? Excellent/good 30%, fair/poor 64%. (The reality: We’ve had the fastest job growth perhaps ever, very strong GDP growth, inflation is way down, wage growth is very strong, and the annual deficit is way down from Trump’s presidency.)

What’s going on here? These data suggest something tragic – either the American people have no idea what is happening in the country, or what they do know is deeply wrong.

A final nail in this conundrum. Ed Kilgore in NY Magazine says that the youth vote is swinging against Biden:

“Until recently, Democrats’ biggest concern about the 2024 youth vote was that millennial and Gen-Z voters …might not turn out in great enough numbers to reelect Joe Biden. Young voters were…the largest and most rapidly growing segment of the Democratic base in the last election. But now public-opinion surveys are beginning to unveil a far more terrifying possibility: Trump could carry the youth vote next year.”

The latest national NBC News poll finds President Joe Biden trailing Trump among young voters ages 18 to 34 — with Trump getting support from 46% of these young voters and Biden getting 42%, while:

“CNN’s recent national poll had Trump ahead of Biden by 1 point among voters ages 18 to 34.

Quinnipiac University had Biden ahead by 9 points in that subgroup.

The national Fox News poll had Biden up 7 points among that age group.”

Hard to know what to believe from those surveys. More from Kilgore:

“According to Pew’s validated voters analysis (which is a lot more precise than exit polls), Biden won under-30 voters by a 59% to 35% margin in 2020. Biden actually won the next age cohort, voters 30 to 49 years old, by a 55% to 43% margin.”

So, what’s wrong? It’s important to note that yesterday’s younger voters aren’t today’s. From Nate Silver:

“Fully a third of voters in the age 18-29 bracket in the 2020 election (everyone aged 26 or older) will have aged out of it by 2024, as will two-thirds of the age 18-to-29 voters from the 2016 election and all of them from 2012.”

Silver says, So if you’re thinking “did all those young voters who backed Obama in 2012 really just turn on Biden?” Those voters have aged into the 30-to-41 age bracket.

We need to remember that today’s young voters share the national unhappiness with the performance of the economy, and many are particularly affected by high cost of living and higher interest rates that make buying a home or a car difficult. Some are angry at Biden for his inability (thanks to the Supreme Court) to cancel student-loan debts. And most notoriously, young voters don’t share Biden’s strong identification with Israel in its ongoing war with Hamas (a new NBC poll shows 70% of 18-to-34-year-old voters disapprove of Biden’s handling of the war).

And there’s this tidbit from the NYT:

“Younger people…had concerns specific to their phase of life. In the poll, 93% of them rated the economy unfavorably, more than any other age group.”

What exactly are kids in their 20’s supposed to be feeling at this stage of life? Unless you come from money, your 20’s are a financial struggle. Wrongo’s certainly were, and that’s decades ago when the economy was great. This isn’t to dismiss today’s very real economic uncertainties. Wrongo’s own grandchildren run the gamut of (relative) struggle financially.

The single most persuasive way to convince young people that Trump isn’t the right answer is to show them what he’ll do in his own words. Many of them are too young to know much about Trump. Some of today’s college freshmen were just 14 or 15 when he was in office.

It’s Monday, and it’s time to wake up America! People need to pay attention. Once again, it will come down to effective messaging for the Dems. They must help voters understand who will serve their interests and who will literally crush their interests.

To help you wake up watch and listen to William Devaughn’s “Be Thankful For What You’ve Got”. It sold nearly two million copies in 1974. It takes us back to a time when there was more optimism in America. If you lived or worked in NYC in the1970s, the video will also take you back to a difficult period in the city’s history. In its own way, it’s a great Thanksgiving song:

How Can America Handle The Costs Of Elder Care?

The Daily Escape:

The start of US Highway 6, outside of Bishop, CA – September 2023 photo by Steve Wolfe

(There will be no Saturday Soother this week. Wrongo is on the road.)

Millions of older Americans from the Silent Generation and the Baby Boomers are facing a dilemma as they “age in place.” They must figure out how to pay for increasingly complex medical care. The NYT quotes Richard W. Johnson, director of the program on retirement policy at the Urban Institute:

“People are exposed to the possibility of depleting almost all their wealth….”

The prospect of dying broke is an imminent threat for the Boomers. About 10,000 of them turn 65 every day between now and 2030. They’re expecting to live into their 80s and 90s at the same time as the price tag for long-term care (LTC) is exploding. Currently LTC expense is outpacing inflation and approaching a half-trillion dollars a year, according to federal researchers.

By 2050, the population of Americans 65 and older is projected to increase by more than 50% to 86 million. The number of people 85 or older will nearly triple to 19 million. The Times has a chart of how many of those who need long-term care will die broke:

Some older Americans have prepared for this possible future by purchasing LTC insurance back when it was still affordable. Since then they’ve paid the monthly premiums, even as those premiums continued to rise. But this isn’t the norm. Many adults have no plan at all or assume that Medicare, which kicks in at age 65, will cover their health costs. But Medicare doesn’t cover the kind of long-term daily care, whether in the home or in a full-time nursing facility, that millions of elderly Americans require.

For that, you either pay out-of-pocket or you spend down your assets until you have less than $2,000 in assets in order to qualify for Medicaid. Remember that Medicaid provides health care, including home health care, to more than 80 million low-income Americans.

And even if you qualify, the waiting list for home care assistance for those on Medicaid tops 800,000 people and has an average wait time of more than three years.

Here is a snapshot of how long-term care is paid for in the US:

Governments provide 71.4% of the total. The largest non-government source is people who pay out-of-pocket, and private insurance is becoming increasingly expensive. More from the NYT:

“The boomer generation is jogging and cycling into retirement, equipped with hip and knee replacements that have slowed their aging. And they are loath to enter the institutional setting of a nursing home. But they face major expenses for the in-between years: falling along a spectrum between good health and needing round-the-clock care in a nursing home.”

That has led them to enter assisted-living centers run by for-profit companies and private equity funds. The NYT says that about 850,000 people aged 65 or older now live in these facilities and when in them, they are largely ineligible for federal funds. Some facilities provide only basics like help getting dressed and taking medication while others offer luxury amenities like day trips, gourmet meals, and spas.

In either case, the bills can be staggering. More:

“Half of the nation’s assisted-living facilities cost at least $54,000 a year, according to Genworth, a long-term care insurer. That rises substantially in many metropolitan areas with lofty real estate prices. Specialized settings, like locked memory care units for those with dementia, can cost twice as much.”

Home care is costly, too. According to Genworth, agencies charge about $27 an hour for a home health aide. Hiring someone who spends six or seven hours a day cleaning and helping an older person get out of bed or take medications can add up to $60,000 a year.

It’s worse for people with dementia because they need more services. The number who are developing dementia has soared, as have their needs. Five million to seven million Americans over age 65 have dementia, and that’s expected to grow to nearly 12 million by 2040.

The financial threat posed by dementia also weighs heavily on adult children who in many cases become guardians of aged parents. The Times included this chart:

The reality is that families go broke either caring for, or finding care for their loved ones. The alternative: Women in the family give up their lives and jobs to care for their family members instead, which worsens the gender wage gap.

The NYT article makes it clear that older Americans receive far less government support than their peers in other countries. The “why” question is easily answered: It’s a combination of the concerted effort for any public support to be demonized as “welfare”. It’s also partly the result of our failed experiment with long term care insurance. The politicians’ idea was that “the market” would take care of it, so government help for retirees could be limited to Medicaid-paid nursing homes.

But, the LTC insurance industry has largely imploded. Insurers had little experience with the product and grossly overestimated the lapse rates. If a policyholder stops paying, the insurer gets to keep the money and use it to provide services to everyone remaining in the pool. The surprise was that very few people stopped paying. A second miscalculation was that people who held these policies were living longer than forecasted. Longer life equaled higher and larger payouts (insurers also benefit when customers die before they’ve used up all the policy benefits).

A final factor is the rising levels of dementia described above.

And since demand for support outside of family members exceeds the supply of beds, nursing homes and assisted living facilities that aren’t terrible want residents to join during the independent living phase (which requires very little care, so those fees subsidize intensive nursing home care). Many of these facilities require a $400,000-$500,000 buy-in, which may not be refundable at death, even if the resident is current on their monthly fees.

There’s got to be a better way. Medicaid can’t be the only option to pay for LTC. Congress needs to establish a better system for middle-class Americans to finance LTC.

How we handle the growing costs of long-term care is just another reminder that we get LITTLE for our tax dollars beyond a giant military. Americans are responsible for their own medical care, childcare, college tuition, retirement and nursing home care. Some or all of which are provided in other rich countries.

This is a loudly ticking time bomb, and the demographics of the problem won’t change for decades. And yet, the Republicans seem bent on making it worse. They’re actively trying to bring about their dream of privatizing Social Security and Medicare.

Wake up America! We have real problems to solve.

Why People Say The Economy Is Terrible When It Isn’t

The Daily Escape:

Sunset, Thumpertown Beach, Eastham, MA – November 2023 iPhone photo by friend of the blog, KO.

We keep looking for good news that will buoy Biden’s polling numbers, and on Tuesday we learned that the Consumer Price Index (CPI) was flat in October. From Axios:

“Overall prices rose 3.2% in the 12 months through October, slowing from the 3.7% in September and well-below the peak levels reached last year. Core CPI rose 4%, compared to 4.1% the prior month.”

Among the good news was that last month, prices for gasoline and used cars and trucks fell outright, helping cool over inflation. Meanwhile, shelter costs rose at a much slower pace last month, possibly signaling that inflation could be ending in the next few months.

That gave investors reason to pile back into the stock market, since it may be a sign that the Fed won’t continue to raise interest rates.

But as always, analysis of the economic news could show why Biden polls so badly on the economy, and in particular why he hasn’t consolidated support among younger voters. Let’s take a different look at how some important economic indicators have performed under Biden.

From the Bonddad Blog:

“Below is a graph in which I compare average hourly earnings (nominal, not real) for non-supervisory workers (in red) vs. house prices (dark blue) and mortgage payments (light blue).”

It is important to note that Bonddad has set all of the values to 100 as of January 2021 so that we’re looking only at what has happened during Biden’s Administration. Bonddad compares the changes in average hourly earnings to the rate of fixed price mortgages and the price of homes. These are nominal rates:

Average wages have increased 16% since Biden took office, but existing house prices have increased by 32%, and monthly mortgage payments for new buyers have increased 279% (!), from roughly 3% to roughly 8%. Housing is close to unaffordable for many in America.

Turning to cars, new car prices have increased by 20%, and used car prices by 23%, compared to that 16% for wages. And new car loan payments (dotted line below) have increased almost 70% (from about 5% to 8.3%):

Houses and cars are the two biggest purchases that most average people make. And sorry to say, affording them has gotten much harder since Biden took office.

Finally, let’s look at the cost of two things people see every day: groceries and gas. First, grocery prices are up 29% since Biden took office in January 2021 (again, vs. 16% for average wages):

And gas prices, although they have come back down recently, are still up 55% since January 2021:

Looking at the economic data this way, would you be more likely to vote for or against Biden? This is a big Biden problem with voters who live paycheck to paycheck.

It’s hard to overstate the importance of viewing the Biden economic performance like Bonddad does above. Much of the blame for these specific price increases belongs to corporations who took advantage of the breakdown in the global supply chain to raise their prices. Some belongs to the Biden administration’s pumping money into the economy.

Bonddad provides a ton of perspective regarding how the Democrats shouldn’t be talking to voters about how fantastic the economy has become under Biden. Dems can’t simply talk about the aggregate economic numbers, since many will not fully believe them.

At the risk of piling on, Wrongo recently saw this October Experian survey which asked:

“I suffer or have suffered from financial trauma”

A staggering 68% of US adults replied that they had. You can view the survey here. The stress was felt more strongly by younger generations, namely Gen Z adults and millennials, with 73% of Gen Z’ers and 77% of millennials experiencing negative thoughts and/or anxiety about money.

The idea of “financial trauma” goes beyond mere stress. America’s seeing multiple social crises afflict it. Friendships are cratering, loneliness is soaring, deaths of despair are skyrocketing. Half of American young people say they feel “persistently hopeless.”

Now tie this to how the majority of voters are saying that America is on the wrong track. The prevailing attitude in America is that our systems are rigged against working people. If you work hard, play by the rules, try to be an honest, decent and productive person, but the reward is that you get financially, socially, emotionally traumatized, well, maybe you’d be pessimistic, too.

The result is that most Americans feel they are living precarious lives. When asked, they say they need north of $230K to feel “comfortable” while the average yearly income for a full-time worker is about $75,000 today. That means feeling stable and secure is completely out of reach for the vast majority of Americans.

Most of this happened over time and surely wasn’t caused by Biden, or the Democrats. And little of it can be fixed by him.

There’s some good news in the fact that history shows us that voters generally focus on how the economy has performed during the last 6 to 9 months before the election. In 2012, the economy improved a lot, and when the unemployment rate finally fell below 8% one month before the election, it helped Obama to get reelected.

On the flip side, the economy was weakening as we closed in on the presidential election in 2016. GDP growth and wage and job gains were weak. Strong stock market gains were a positive. Adding the pluses and minuses suggested that the economy was weak, and the insurgent Trump won the election.

Better news on inflation in 2024, particularly for groceries and gas, will mean Biden’s polling on the economy will be much better.

Autoworkers Have A Deal

The Daily Escape:

Sunrise, Northern VT – October 2023 photo by Kristen Wilkinson Photography

The UAW announced Monday evening it had reached a tentative agreement with GM, the last of the Detroit car companies to complete negotiations with the Union. So all three have a tentative agreement which will now be voted on by UAW members. This is a big deal, even if nobody’s talking about it.

Some details from The Insider:

“The 25% pay increases by April 2028 agreed to in the new contracts raise top pay to about $42 an hour, according to the union. That starts with an 11% immediate boost upon ratification, three annual raises of 3% each, and a final increase of 5%. The UAW said restoration of cost-of-living increases, which were suspended in 2009, could boost the total increases to more than 30%.”

Some industry analysts have estimated that Ford’s contract, if ratified, would add $1.5 billion to the company’s annual labor costs. Ford estimated that this could add up to $900 in labor cost to each vehicle rolling off its assembly lines. Another analyst says the pact will reduce profitability by 1%. To put these numbers into perspective, keep in mind that a fully loaded Ford F150 can run over $80k. That means the car companies can afford this deal.

Labor accounts for 4-5% of the average cost of making a car for the Big Three. Also, the Big 3 have made $250 billion in profits over the past decade and have diverted a substantial amount of that money into stock buybacks to enrich wealthy shareholders and top executives instead of investing in their businesses or paying their workers.

So please spare us the tears about the workers’ hard-fought gains putting the Big 3 in peril. The NYT wrote:

“The terms will be costly for the automakers as they undertake a switch to electric vehicles, while setting the stage for labor strife and demands for higher pay at nonunion automakers like Tesla and Toyota.”

To paraphrase, the NYT says that those evil unions are ruining shareholder value and will cause strife at Tesla, a company renowned for its fantastic working conditions.

Be it ever thus in the media: Unions demand, management offers. Note how the media framing is always “the automakers” as the protagonists, with workers as a mob that’s making trouble. Why can’t those workers be happy and content with their lot in life, which is ordained for them by the Higher Power?

Back in the real world, the tentative UAW agreement rewards autoworkers who had sacrificed much during and since the Great Financial Crisis. They now get record raises, more paid leave, greater retirement security, and more rights at work.

The UAW win is a testament to the power of unions and collective bargaining to build strong middle-class jobs, while helping a few of our most iconic American companies to thrive. The UAW workers have not only seen many of their jobs automated and offshored, they also hadn’t received an inflation-adjusted raise since the early 2000’s.

That the UAW prevailed shows that unionizing on a large scale is a viable path to rebuilding America’s middle class. Fed up with continual economic hardship at the hands of the Big 3’s management, these strikers achieved something good for themselves and their families. Moreover, they did it legally. Despite the NYT’s protests, they didn’t steal anything from anyone. They didn’t ask for handouts. They demanded a good future for themselves and their families.

This should be a lesson to all people whose labor is undervalued. You can organize and negotiate better contracts for yourselves.

And don’t underestimate how important a low rate of unemployment is to low-wage and working-class Americans, and how that also gives unions leverage. Biden’s American Rescue Plan Act of 2021 provided an economic stimulus that boosted US consumer purchasing power to the point that we avoided the expected recession. And today’s scarcity value of labor helped close the deal with the Big 3.

For some context, these landmark gains by the UAW, along with what the Teamsters secured with their UPS contract, and what health care support staff got at Kaiser Permanente go far beyond the pay and benefits that workers receive at their non-union counterparts. Except for railroad workers, it’s been a very good year for unions.

Once again, Biden took a risk that he hadn’t before by explicitly siding with the UAW. It paid off for him and the Union as well.

Finally, kudos to Shawn Fain and the UAW negotiating team!

Wrongo appreciates that Fain seems to understand class consciousness by describing the workers as working class. And their strategy was pure divide and conquer.

The final word on these tentative agreements will ultimately come from UAW members themselves when they vote on the new contracts.

Two Writers Who Speak To What America Needs

The Daily Escape:

Wukoki, Wupatli National Monument, AZ – September 2023 photo by David Erickson

September is underway, and we’re about to have a negotiation about government spending. But that doesn’t mean that the news this month will be any less stupid than last month’s. Also, as the Republican presidential candidates demonstrate every day, we don’t actually know whether the GOP is a dying Party or, the rising single Party of an authoritarian state.

Unless and until the traditional press presents these as the stakes, it is very unclear which it’ll end up being. With this as an introduction, Wrongo wants to introduce two writers who are attempting to break through our chain of bad policies and the bad ideology that threatens our democracy.

First, from Wesley Lowery in the Columbia Journalism Review:

“We find ourselves in a perilous moment. Democracy is under withering assault. Technological advances have empowered propagandists to profit through discontent and disinformation. A coordinated, fifty-year campaign waged by one of our major political parties to denigrate the media and call objective reality into question has reached its logical conclusion: we occupy a nation in which a sizable portion of the public cannot reliably tell fact from fiction. The rise of a powerful nativist movement has provided a test not only of American multiracial democracy, but also of the institutions sworn to protect it.”

Lowery is a Pulitzer Prize-winning reporter. He goes on to say:

“In 2020, I argued that the press had often failed this test by engaging in performative neutrality, paint-by-the-numbers balance, and thoughtless deference to government officials. Too many news organizations were as concerned with projecting impartiality as they were with actually achieving it, prioritizing the perception of their virtue in the minds of a hopelessly polarized audience…”

Lowery also says that news organizations often rely on euphemisms instead of clarity in clear cases of racism (“racially charged,” “racially tinged”) and acts of government violence (“officer-involved shooting”). He says that these editorial decisions are not only journalistic failings, but also moral ones:

“…when the weight of the evidence is clear, it is wrong to conceal the truth. Justified as “objectivity,” they are in fact its distortion.”

Lowery concludes by saying:

“It’s time to set aside silly word games and to rise to the urgent test presented by this moment.”

Second, Bob Lord is a tax attorney and associate fellow at the Institute for Policy Studies. He also serves a senior advisor on tax policy for Patriotic Millionaires. At Inequality.org, he proposes a graduated wealth tax on the rich:

“The United States is experiencing a level of wealth inequality not seen since the original Gilded Age. This yawning gap between rich and poor has unfolded right out in the open, in full public view and with the support of both political parties.

A malignant class of modern robber barons has amassed unthinkably large fortunes. These wealthy have catastrophically impacted our politics. They have weaponized their wealth to co-opt, corrupt, and choke off representative democracy. They have purchased members of Congress and justices of the Supreme Court. They have manipulated their newfound political power to amass ever-larger fortunes.”

Biden’s Plan To Cut Drug Prices

The Daily Escape:

Mars on left, Earth on right – image by alofeed

The Biden administration released its list of 10 prescription medicines that will be subject to the first-ever price negotiations by Medicare. This is a big deal because Medicare covers 66 million older Americans, people who routinely take very expensive drugs.

Until recently it was illegal for Medicare to negotiate prices with drug companies. But the Inflation Reduction Act (IRA), passed last August, gives Medicare that power. It also forces companies to pay a rebate to Medicare if their drug prices rise faster than inflation. The Congressional Budget Office estimates that price-capping measures will reduce Medicare expenses (and the federal deficit) by $96 billion by 2031.

The list includes drugs for diabetes, arthritis, and Crohn’s disease, and could sharply lower medical costs for patients. Reuters says that the US Centers for Medicare & Medicaid Services (CMS) spent $50.5 billion between June 1, 2022 and May 31, 2023 on these 10 drugs. That was about 20% of the total cost of drugs in the Medicare prescription drug program known as Part D.

The WaPo had an opinion piece by David Goldhill, CEO of SesameCare.com, a digital marketplace for discounted health services: (brackets and emphasis by Wrongo)

“The pharmaceutical industry earns almost 50% of its worldwide revenue here [the US], as do medical information-technology firms. [Medical] Device makers earn 40% of their money in the US. And this understates things, because US revenue is generated from higher prices, so margins are greater. If the US accounts for half of a company’s revenue, it probably contributes at least 75% of its profits.”

This has always been the business plan for Big Pharma: Make your money in the US and take whatever scraps of profit you can get in other markets.

That market subsidy is paid by American taxpayers generally (through the funding of Medicare) and by US pill-takers specifically when they pay higher co-pay prices for the drugs that help with their chronic conditions. The Economist points out that prescription medicines in America cost two to three times more on average than in other wealthy countries:

The blue dots are the price paid in the US for brand name drugs. The grey dots are prices paid in the various countries for all US drugs sold in those countries. The comparison of brand name to generics shows how much greater the cost is to an American. It also follows that US patients’ out-of-pocket expenses, (the slice of drug costs not covered by insurance), are among the highest in the world.

It’s understandable why Biden’s move to start negotiations on some of the most expensive drugs has been fiercely opposed by the pharmaceutical industry. Essentially, high US drugs costs underwrite what amounts to a subsidy for buyers of the same drug sold when it’s outside the US.

Many of the Big Pharma have jumped on the legal bandwagon, challenging price-setting provisions in the IRA. More from the Economist:

“Since the law’s passage over 50 companies have blamed the IRA in earnings calls for clouding their prospects.”

A quick primer on drugs. Most medicines are either small-molecule drugs or large-molecule drugs. The former are the kind of pills that line our medicine cabinets. Large-molecule drugs, (also called biologics), are more complex and must be injected. The IRA grants biologics 13 years of pricing freedom after a drug is approved, while small-molecule drugs get only nine years post-approval before they must face Medicare’s bean counters. The industry estimates that small-molecule brands could lose between 25% and 40% in overall revenue due to the earlier cap on prices.

PhRMA, the pharma Industry’s lobbyist argues (and Republicans back them) that high US prices reflect the high cost of drug development. The pharmaceutical manufacturers are, of course, suing to stop the price negotiations. They say that allowing the government to negotiate lower bulk prices for drugs will stifle innovation, and will cut funds for research.

One thing that Big Pharma wants to avoid showing us is that they rely on smaller, more agile biotech firms for ideas. Between 2015 and 2021, 65% of the 138 new drugs launched by Big Pharma originated mostly from smaller firms. So, while innovation isn’t totally gone from the big firms, what they’re mostly doing is marketing the intellectual property of small pharmaceutical firms.

It didn’t take long for Republicans to jump on the decision to allow Medicare to negotiate drug prices. From Politico:

“Piggybacking on the pharmaceutical industry’s strategy, Republicans are working to persuade Americans that the Biden plan will stifle innovation and lead to price controls.”

Politico quotes Joel White, a Republican health care strategist:

“The price control is a huge departure from where we have been as a country….It gets politicians and bureaucrats right into your medicine cabinet.”

Politico says that the GOP effort to reframe the drug price debate may hurt them, since they plan largely to run on inflation, while the Biden plan will lower drug prices. Also they quote a new poll from the Kaiser Family Foundation (KFF) that shows 58% of independent voters trust Democrats to lower drug costs compared with 39% of Republicans.

Our politicians and pundits have bleated at us for years about being an “exceptional nation” – but what we really are is exceptionally gullible. As long as the large healthcare and pharmaceutical companies insist on standing between American consumers and their health needs, maximizing their profit will always come first.

We also continue to elect leaders who lobby for keeping corporations unleashed so that they can make as much profit as possible, while saying that the “market” will decide where the public good is prioritized. This keeps us hopelessly mired in a grossly expensive, and often ineffective healthcare system.

We continue to let ourselves be convinced by corporations and our politicians that reforming healthcare is impossible. That the solutions and methodologies used by other developed nations are substandard, and/or somehow immoral.

The Hill reported that the 14 leading US drug companies paid out more in stock buybacks and dividends from 2016 to 2020 than they spent on research and development. Those firms spent $577 billion from 2016 to 2020 on stock buybacks and dividends, $56 billion more than the $521 billion they spent on R&D. So, it’s oblivious how Big Pharma could easily fund their R&D with lower drugs prices.

It is also useful to remember that America has more healthcare billionaires AND healthcare bankruptcies than any other country. Those two things are inextricably linked.

As long as the pharmaceutical companies can maximize profits by buying politicians rather than by charging higher prices in other countries – the American people are the ones who will continue to get screwed.

The Wrongologist

Geopolitics, Power and Political Economy

Category: Capitalism Reform

Saturday’s Kinda Soothing Links

Why People Say The Economy Is Terrible When It Isn’t

Autoworkers Have A Deal

Two Writers Who Speak To What America Needs