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The Wrongologist

Geopolitics, Power and Political Economy

It’s Past Time To Make Changes To Our Economic System

The Daily Escape:

2011 Art piece by Steven Lambert

Does capitalism work for you? Well, you certainly work for capitalists. The real question is whether capitalism still provides economic security to all of us.

Steve Lambert, the artist who designed the sign, engaged with people across America over a three-year period about whether capitalism was still working. He learned that people were split about 50/50 on the premise:

People usually first react to the piece by falling back on the comfort of abstractions and repeating popular myths. For example, the true/false dilemma is much easier to resolve when the only alternatives to capitalism are presumed to be failed communist dictatorships. It’s also much easier to pretend that the only “true” definition of capitalism is the kind of free-market extreme idolized by thinkers like Ayn Rand and Friedrich Hayek

Or thinkers like Paul Ryan, Mitch McConnell and Donald Trump. Lambert learned that people generally agreed with the concept, assuming “you are willing to work hard, or work smarter”:

I’ve always found the formulation “work hard, work smart” disturbing. When you invert the expression, it implies: if capitalism doesn’t work for you (that is, if you’re poor, out of work or have a demeaning job), it’s your fault. To put it more bluntly, you are lazy and stupid.

If we ignore the fact that until recently, wages have stagnated for decades, and that what most people earn in a lifetime is insufficient to cover a modestly comfortable retirement, maybe you can say that capitalism is working.

We have been told that federal budget deficits impair our ability to grow the economy, or to put food on our individual tables. In fact the opposite is true. This idea makes us believe that our ability to earn a living requires some degree of suffering by other Americans.

As Claire Connelly says: (emphasis by Wrongo)

“We can’t afford it” has been the proverbial comforter of opponents of the welfare state harking back to the Clinton / Blair days….This argument has been used as an emotional crutch for people who don’t want to admit that they’re comfortable with homelessness and unemployment….If their bottom line is stable.

This lie sets us against each other, implying that the well-being of everyone else is a direct threat to our own. And who wins? The beneficiaries of the newly lowered taxes, corporate America and its management teams. More from Connelly:

Do we really want to live in a world….Where most people will be lucky to earn minimum wage, or wait for months to get paid. If at all. A world where we are not entitled either to a job, or an education, or affordable health care or a social safety net?

We are likely to see a $1.3 Trillion budget pass both houses of Congress this week. It is deficit spending run wild. Wrongo knows that both parties believe that deficits don’t matter, and to a great extent, he agrees.

But these deficits are larger than they had to be, due to the massive corporate and wealthy individual tax cuts the Republican House and Senate just passed. And it’s not only the size of the deficits, it’s the mis-allocation of funds by our neo-con overlords.

This is what capitalism has delivered for America: More than 45 million of us (14.5%) live in poverty. In 2016, another 49.5 million Americans were age 65 and older, and half of them (24.75 million) had yearly income of less than $23,394.

That adds up to about 70 million (22%) of Americans.

One idea that is gaining attention is a Jobs Guarantee program. The Center on Budget and Policy Priorities (CBPP) recently released a paper arguing for a national jobs guarantee through a national infrastructure bank. The CBPP plan envisions an infrastructure bank that would fund vital projects and ensure that jobs are well-paid. The government would use this job-creating ability to expand jobs in sectors where the market won’t currently invest, like a national high-speed internet network.

Government guarantees of employment aren’t radical. They aren’t communism, or socialism. We did it before with the New Deal. It reinforces traditional American values around work, and it builds the tax base by taxation on the jobs created. Here’s a final quote from Steve Lambert:

My favorite response to the sign was from a 17-year-old high school student in Boston. She said: “Capitalism can’t work for everyone. If it did, it wouldn’t be capitalism.”

This is where the conversation needs to go: We have to change an economic system that fails so many.

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Places That Don’t Matter

The Daily Escape:

Maroon Bells, CO in winter – photo by Glenn Randall

America’s forgotten masses used the ballot box in 2016 to ram home a message to their betters. The message was that we shouldn’t ignore the places that don’t matter, those places that once had middle class jobs, and now have few options. The Trump election was one way to signal all was not well in the America’s decaying small towns.

We long ago retreated from the idea that the central government has a responsibility to look after the lagging places. It isn’t an invisible, unstoppable force that directs all the wealth generation to cities: It’s a system of deliberate centralization, by individuals who control capital, to concentrate productive efficiency and thus, wealth. The left-behinds are on their own.

The reality is that regional or town regeneration is very hard, once the original reason for the town’s existence is lost. Places that don’t matter have to find ways to build wealth locally, and then keep that money local. Locally produced goods and services keep regions alive.

Most solutions are based on the usual arm waving that says: “let them have training” or, “they really need to move where the jobs are”. These ideas have largely failed. Figuring out how to revive these communities requires better policies.

The revenge of the places that don’t matter is the rise of local populism, the increasing opioid use, and declining longevity. The stakes are high, but maximizing the development potential of each town has got to be the answer.

Here is one solution. The WaPo has a long read about how a liberal DC entrepreneur set out to help West Virginians. And for a very long time, Joe Kapp’s help was refused. He was the object of a vicious online campaign, targeted by homophobia, and maligned as a carpetbagger.

When Kapp, 47, an entrepreneur decamped to a West Virginia cabin in 2012 with his partner, he’d come to take a sabbatical. The town is Wardensville, pop. 256. From WaPo:

Those who do work locally gravitate toward poultry processing, furniture manufacturing and agriculture, but the numbers aren’t good. In 2015, the unemployment rate…was 7.5%, compared with 6.7% statewide and 5.3% nationally. The per capita income…was just under $28,000 a year, compared with about $37,000 for the state, and $48,000 nationwide.

The basics are lacking. The area doesn’t have Internet. Kapp says:

You’ve got kids doing their homework in McDonald’s parking lots. People in most of the country just have no idea.

And even community college enrollments suffer. Only 10% of West Virginia high school students enroll in community college, compared to 50% nationwide.

Kapp soon befriended the president at the local community college. From there, it wasn’t long before he was helping the college launch an innovative project, the Institute for Rural Entrepreneurship and Economic Development (IREED), aimed at helping to diversify the regional economy.

Kapp initially failed to gain traction, but things have gradually turned around. He thinks this demographic has more potential than the coastal elites give them credit for. He is certain that by harnessing local knowledge, like agriculture, they can start businesses, and put their own people back to work.

Every town wants its own Amazon, but in rural communities, that’s not an option. They need to create an ecosystem that promotes a small-business culture and entrepreneurship. So Kapp’s assistance in establishing the IREED with the community college got the idea off the ground. No community college in the state had anything of the kind.

The goal of the IREED is to help the local agricultural community think of itself as entrepreneurial.

He is developing a program that will allow community colleges to offer low- or no-interest micro-loans, around $5,000, to aspiring entrepreneurs. These individuals would then take entrepreneurship and business-development courses at the lending college. Kapp:

A bank might say, ‘This guy’s too risky,’ But a community college can say, ‘I know this guy. We work with him. I am vetting and validating his ability to be able to pay back the loan.’

In other words, it’s development banking on a community level. Today, most community banks mainly fund real estate, and they still follow the model where the borrower needs to pledge collateral to get the loan. In a world where services are the business’s primary asset, collateral has no meaning.

So the micro-loans by schools may be a perfect first step to bootstrapping these persistently poor towns.

This is a tentative step. It may not be scalable, but if we are looking for the greatest “social impact indicators”, it is the degree to which people feel secure economically, and safe in their community.

Always has been, always will be.

(The concept of this column, although not the solutions, is taken from “Revenge of the Places That Don’t Matter” by Andrés Rodríguez-Pose, Professor of Economic Geography, London School of Economics. Originally published at VoxEU)

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Saturday Soother – January 27, 2018

The Daily Escape:

Two Harbors, Lake Superior, MN – 2018 photo by Fhallopian

You may have missed the Op-Ed in the NYT by 2015 Nobel Laureate Angus Deaton, entitled “The U.S. Can No Longer Hide From Its Deep Poverty Problem”. In it, Deaton says this:

According to the World Bank, 769 million people lived on less than $1.90 a day in 2013; they are the world’s very poorest. Of these, 3.2 million live in the United States…

That’s $1.90 per DAY. Deaton asks:

Surely no one in the United States today is as poor as a poor person in Ethiopia or Nepal?

Well, only 3.2 million of us. That’s one percent of the American population. Deaton analyzes the World Bank’s study, and concludes that the minimum level per day should be higher in rich countries like the US. He quotes a study that says that the needs-based absolute poverty line should be more like $4/day in rich countries:

When we compare absolute poverty in the United States with absolute poverty in India, or other poor countries, we should be using $4 in the United States and $1.90 in India.

If we do that, there are 5.3 million Americans who are absolutely poor by global standards.

The time has come to ask a truly uncomfortable question: Will our society provide a role for people who for reasons of reduced mental or physical capacity, cannot contribute enough to earn their keep? There are millions of Americans who, by virtue of incapacity, or other challenges, are unemployable. They have no place in the workplace, and never will.

Most likely, you wouldn’t hire them, and neither will anybody else.

If the answer is we cannot provide them with a job to do, what is society’s responsibility to them? What is our individual responsibility?

Ponder that while you think about which beer you are going to buy for the Super Bowl party next Sunday.

Speaking of poverty (the intellectual kind), the State of the Union speech is next Tuesday. CNN tells us that Massachusetts Congressman Joe Kennedy will give Democrats’ response to Trump’s State of the Union:

Kennedy, 37, is seen as a rising star in a party that has many in the senior ranks well into their 70s.

So, prepare for your back to the future moment when another young Democrat named Kennedy spends a moment on the national stage. Americans trying to live on the same amount per day as Ethiopians, and Trump getting standing ovations from one side of the House on Tuesday; both can make you sick.

So, try to take your mind off of Davos, immigration, and poverty for a few minutes and prepare for a soother. Kick back and brew a hot steaming cup of Café Cubano by Don Pablo Coffee Growers and Roasters. Café Cubano isn’t from Cuba, it’s from Florida. But it is bold & complex, with a very smooth cocoa-toned finish, and says the brewer, never a bitter aftertaste. (2lbs/$13.99)

Now, click on the video below and watch a snowboarder glide peacefully through the woods and down a mountain of perfect powder near Steamboat, CO. He is accompanied by a rendition of “Clair de Lune” (Moonlight) by Claude Debussy. There is no moonlight in the video, but it is very relaxing:

Those who read the Wrongologist in email can view the video here.

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Do Democrats Have a Winning Political Strategy?

The Daily Escape:

Frozen branch in Lake Erie, Cleveland OH – 2018 photo by Igorius

The Democrats’ demand of passage of DACA legislation, or they would block a Continuing Resolution (CR) to keep the government open, lasted 72 hours. No DACA legislation was passed, but Dems are touting a Republican promise of debate about DACA over the next three weeks.

That promise comes from Mitch McConnell, the guy who stole Merrick Garland’s Supreme Court seat, and got away with it.

Wrongo believed that dying on DACA hill was a bad political choice for Democrats. After all, there are 700,000 Dreamers, but 320 million Americans would be affected by a government shutdown. Their negotiating position shows how weak the Dems are today.

Those Dems who say that capitulation on the CR was worth it to secure the Children’s Health Insurance Program (CHIP) funding for six years, should remember that the CR runs out in three weeks. Then it will be up for discussion again.

So from the Dems viewpoint, if by February 8th, the Republicans have not dealt with DACA, the Dems can shut the government down again, this time using the narrative that Mitch McConnell is a liar, and that they gave Republicans a chance to fix the problem. Unfortunately, McConnell has been called a liar before.

But if February 8 comes, and Democratic Senators back off on another confrontation to protect the Dreamers, that will not only be terrible for Dreamers, it’s terrible for Democrats. They have a few weeks to pressure Republicans to get this done.

OTOH, it is difficult to see why Republicans would do anything different. Paul Ryan and Mitch McConnell will use these three weeks to tighten the screws, and finish the job. That would start with McConnell taking the House’s already passed Securing America’s Future Act (SAF) to a vote.

Once Senate Dems say “no” to that, McConnell can say “Well, we put a DACA bill on the table, and the Dems rejected it. I lived up to my promise.” There will be some tinkering by middle-of-the-road Dems around the edges of the SAF bill. Then it will be attached to the CR. How long do you think it will be before 10+ Dems cave, and pass it?

Fault lines exist. A dozen Senate Democrats broke with party leaders to vote against the bill, including a number of potential presidential candidates, a sign they knew exactly where their base is, even if the leadership doesn’t.

Democrats need to use their time in the minority to remake the Party. They should pursue and deliver programs that offer real benefits for middle and working class voters. They need a plan to deal with income inequality. Fundamental questions about what being a Democrat means in the 21st Century must be addressed.

FDR provides a great example for today’s Democrats. In the 1930s, FDR responded to a financial crisis with bold, creative policies that delivered massive, tangible benefits to working people. Because of what FDR did, the Republicans were forced to go in his direction to stay politically competitive. Republicans began to promise that they could improve the programs they once opposed.

Here is what Roosevelt said in a speech about Republicans at the time:

Let me warn you, and let me warn the nation, against the smooth evasion that says ‘Of course we believe these things. We believe in social security. We believe in work for the unemployed. We believe in saving homes. Cross our hearts and hope to die. ‘We believe in all these things. But we do not like the way that the present administration is doing them. Just turn them over to us. We will do all of them, we will do more of them, we will do them better and, most important of all, the doing of them will not cost anybody anything’

In the post-war period, the Republican Party looked more like Dwight Eisenhower than like Ronald Reagan.

And today, Democrats must emulate FDR: Move Republicans to the left, not move the Dems further to the right. This isn’t about finding someone to create an Obama third term. Democrats shouldn’t prioritize getting rid of a bad president, they need to build a serious alternative to Republican ideology.

The Democratic Party has failed many times to produce a political strategy which would force the Republican Party to change direction. And they look like they may fail once again. The Democratic leadership believes that the party needs to unify at all costs to present the strongest possible electoral challenge to Trump in 2020.

It’s counter-intuitive, but to secure a future Democratic majority, Dems must first decide to be a party with a plan that addresses income inequality.

They can knock out Trump without moving to the right.

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Rising Interest Rates Will Add $233 to Monthly Household Expenses

The Daily Escape:

Snoqualmie Falls, WA

We are in the middle of the holiday shopping frenzy, so it may be a bad time for Wolf Richter to mention this:

Outstanding “revolving credit” owed by consumers – such as bank-issued and private-label credit cards – jumped 6.1% year-over-year to $977 billion in the third quarter, according to the Fed’s Board of Governors. When the holiday shopping season is over, it will exceed $1 trillion.

If that’s not bad enough, WalletHub points out that the Federal Reserve is planning on raising interest rates, and that will make credit card debt a lot more expensive, since credit card rates move with short-term interest rates:

The Fed’s four rate hikes since Dec. 2015 have cost credit card users an extra $6 billion in interest in 2017. That figure will swell by $1.46 billion in 2018 if the Fed raises its target rate again in December, as expected.

Everyone expects the Fed to raise rates today. This would bring the incremental costs of five rate hikes so far to $7.5 billion next year. So how do these rate hikes translate for households with credit card balances? Finance charges are concentrated in households that do not pay off their balances every month. Many of these households are among the least able to afford higher interest payments. More from Wolf: (emphasis by the Wrongologist)

195.9 million consumers had a revolving credit balance at the end of Q3, with total account balances of $1.35 trillion. This equals $6,892 per person with revolving credit balances. If there are two people with balances in a household, this would amount to nearly $14,000 of this high-cost debt. If the average interest rate on this debt is 20%, credit-card interest payments alone add $233 a month to their household expenditures.

Economists are assuming that the Fed will hike interest rates three times in 2018. The Fed thinks that the “neutral” rate (the target at which the federal funds rate is neither stimulating, nor slowing the economy) is between 2.5% to 2.75%. Since today’s rate is 1.25% to 1.50%, that is a long way up from the current target range. Again, from Wolf:

Interest rates on credit cards would follow in lockstep. These rate hikes to “neutral” would extract another $8 billion or so a year, on top of the additional $7.5 billion from the prior rate hikes.

But there is a double whammy, because credit card balances will also continue to rise. Rising credit card balances combined with rising interest rates on those balances will produce sharply higher interest costs to people who already can’t pay off their monthly credit card balances.

For many card holders with poor credit, this will eventually lead to default. Credit card delinquencies have started to tick up, from 2.16% in Q1 2016 to 2.53% in Q3. That is a low overall level of delinquency, but we need to look at to losses in the subprime segment (those with the lowest credit scores) and at the lenders that specialize in subprime lending. And there, delinquency rates are jumping.

Debt is not always a choice. A catastrophic medical debt, the death of the primary breadwinner, or loss of employment with no new job for an extended period of time can destroy a lifetime of savings in as little as a few months to a few years.

Since the crash of 2007, a great many people have be unable to find employment that is enough to support a family. And they have taken multiple jobs to try to make ends meet. Or any job that they can find.

And this is in what economists and politicians say are the best of times, with the lowest unemployment rate since 2000.

Increased costs for consumer credit coupled with increased delinquencies could become a third point reason for populist economic anger. Tax cuts for corporations and the wealthy, and the coming GOP attack on Medicare and Medicaid are also justifiable reasons for economic anger.

Where will voters turn for a solution?

After all, governance has ceased to be a part of the job description of our political parties.

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What Will Dems Do When The GOP Says: “The Deficit Matters”?

The Daily Escape:

Big Ben being cleaned. In order to clean the four clock faces, every 5-7 years, skilled climbers hang down from the belfry on ropes, and they clean the front of each clock face. There is one removable panel of glass on each face, which is removed during the cleaning so that the clock maintenance staff can talk to the cleaners while they’re working. (“you missed a spot?”) Hat tip to Wrongo’s friends at the Goodspeed Opera House!

Yesterday we pointed out that there is a very large program that the country needs to fund if we are to maintain our position in the global superpower competition. The issue at hand is the stunning thought that we might lose up to 75 million jobs to automation in the next 13 years, and that we need to train the out-of-work unfortunates for new jobs in a different economy.

It’s highly unlikely that we would need to train that many, but it could be 25 million Americans. And we have no idea where the money would come from to accomplish that. After all, the Republicans now plan to reduce tax receipts bigly, thus adding to the deficit and thereby, to the total debt of the country.

We know that as soon as the new tax cuts begin accruing to their patrons, the GOP will start talking about reducing the budget deficit by cutting non-military expenses. Ron Brownstein conceives the Republican tax plan correctly:

Gaius Publius observes: (brackets and editing by the Wrongologist)

As they did in the 1980s, Republicans are laying a “deficit trap” for Democrats. As they did before, they’re blowing up the budget, then using deficit [fear] to force Democrats to “be responsible” about cutting social programs — “because deficits matter.”

In the 1980s Republicans ran up the deficit, then insisted that Democrats work with them to raise taxes on the middle class to over-fund the Social Security (SS) Trust Fund. This converted SS from a pay-as-you-go system that increased revenues as needed via adjustments to the salary cap, to a pay-in-advance system. That allowed any excess SS money to be loaned back to the government, partially concealing the large deficits that Reagan was running up.

Today, Republicans are expanding the deficit again, and are already starting to talk about deficits to argue for cuts in what they call “entitlements” — Medicare, Medicaid, and eventually Social Security, even though Social Security can be self-funding.

Fear of deficits is the go-to Republican ploy to try to maim or kill the FDR and LBJ-created social safety net. To the extent that Democrats are willing to accept the GOP’s argument that both parties need to be responsible to decrease the deficits, they will support cuts in social services. Even Obama was willing to consider doing just that in the name of “bipartisanship”. More from Gaius:

The reality — Deficits aren’t dangerous at all until there’s a big spike in inflation, which is nowhere near happening and won’t be near happening for a generation…

Do we want the US government to shrink the money supply year after year after year, by running budget surpluses, or do we want to grow the amount of money in the private sector, making more available for use by the middle class?  The trillions spent on the current GOP giveaway to the already-rich could have been given to college students in debt, or people still underwater in their mortgages since the Wall Street-created crash of 2008. It could have been used to build better roads, airports, seaports or a national high speed internet backbone.

What would be the effect of that re-allocation of money?

Back to Gaius Publius for the final words. Which of these three options would you rather the government choose:

  • Spend money on the already-rich?
  • Spend money on you and the country’s needs, ignoring the pleas of the already-rich?
  • Hoard as much money as possible in a vault and spend the least possible?

The first is the GOP’s current tax plan. The second is a plan for the many, an FDR-style economic policy. The third is the GOP’s wet dream, one that they will ask Democrats to help them accomplish once the already-rich have banked their share of our tax money.

Wrongo’s fear is that at some point down the road, a compromise will be offered up: Cuts to social programs in exchange for a repeal of some of the more onerous tax cuts. The only issue will be the extent of the cuts to social programs.

It will be celebrated as bipartisan sanity returning to Washington.

Our system is revolting. Why aren’t we?

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Automation Will Cost 75 Million US Jobs By 2030

The Daily Escape:

Torres Del Paine National Park, Patagonia, Chile. Torres Del Paine is known for its mountains, glaciers and grasslands that shelter rare wildlife like Guanacos.

Wrongo has written many times about automation taking jobs that will not be replaced onshore. McKinsey & Co. has a new study that finds that job losses due to automation will take out anywhere from ten to twenty percent of the current global workforce by 2030:

As many as 800 million workers worldwide may lose their jobs to robots and automation by 2030, equivalent to more than a fifth of today’s global labor force.

The report covers 46 countries and more than 800 occupations. The McKinsey Global Institute study found that even if the rise of robots is less rapid than they expect, 400 million workers could still find themselves displaced by automation and would need to find new jobs over the next 13 years. McKinsey said that both developed and emerging countries will be impacted. Machine operators, fast-food workers and back-office employees are among those who will be most affected if automation spreads quickly through the workplace. Bloomberg made a chart summarizing the jobs lost by country:

Source: Bloomberg

This implies that some 75 million jobs are at risk in the US by 2030, to be replaced by…something.

The bottom line is that many of the unemployed will need considerable help to shift to new work, and as a result, starting salaries will continue to flat line. McKinsey paints a rosy picture about the future jobs market post-automation. They say that the economies of most countries will eventually replace the lost jobs, but are a little unclear on what the new jobs will be. They mention health care, infrastructure, construction, renewable energy and IT as likely job areas.

But the challenge is how the displaced workers learn the new skills necessary by 2030. Axios quotes Michael Chui, lead author of the report on the needs for retraining:

We’re all going to have to change and learn how to do new things over time…It’s a Marshall Plan size of a task…

How will America fund a Marshall Plan for retraining 75 million of us, particularly when we’ve just given the very corporations who are automating our jobs even more of a break on their tax bills? It’s unlikely that the Republican-controlled Congress will have any desire to fund the necessary comprehensive re-training effort. If Congress had any foresight, they could have made their new corporate tax cuts conditional on these same firms paying for the job retraining that their automation will cause for American workers.

But, it will be our job to figure out where these new training funds will come from, right along with the funds we have already given to the job creators Republican donors.

And what if you don’t have the money or learning aptitude to acquire these new skills? Well, you are likely to be both unemployed and poor. And that mean tens of millions more Americans will not have the resources to stay out of poverty.

Perhaps CEOs and Congresscritters ought to remember that there are enough guns for every man, woman and child in this country, and many are in the hands of the very people who would be hurt most by automation.

We can’t hold back the tide of automation, but we can be smart about how we, as a country make the transition to fewer very highly-skilled workers and many narrowly-skilled workers. There are questions to ask, and solutions to craft for the post-2030 world.

How will America’s forgotten workers survive in a society that is led by people who don’t care if they have a job?

How will America’s forgotten workers survive if the political establishment tries to unwind the social safety net while celebrating the progress of technologies that cost jobs?

That could lead to torches and pitchforks.

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Monday Wake Up Call – October 30, 2017

The Daily Escape:

Fall at the Statehouse in Augusta, Maine – photo by Robert F. Bukaty

Welcome to what we may start to call Robert Mueller Monday. Ray Dalio, the founder of the Bridgewater Associates, the world’s largest hedge fund has serious concerns about the uneven recovery of the US economy.

In a LinkedIn post, Dalio said that if politicians and business people look only at the economy’s average statistics about how Americans are doing, they could easily make “dangerous miscalculations” because the averages mask deep differences in how people in various income segments are doing.

Dalio divides the economy into two sections: the top 40%, and the bottom 60%. He then shows how the economy for the bottom 60% of the population, (that’s three in five Americans for you English majors), has been much less successful than for those in the top bracket.

For example, Dalio notes that since 1980, real incomes have been flat or down for the average household in the bottom 60%. Those in the top 40% now have 10 times as much wealth as households in the bottom 60%, up from six times as much in 1980.

Dalio says that only about one-third of people in the bottom 60% (20% overall) save any of their income. Only a similar number have any retirement savings. These three in five Americans are experiencing increasing rates of premature death. They spend about four times less on education than those in the top 40%. Those in the 60% without a college education have lower income levels, and higher divorce rates.

Dalio believes these problems will intensify in the next five to ten years. The inequality problem is caused by our politics and our fiscal policies, not by the Fed’s monetary policies.

OTOH, Dalio’s concerns aren’t a surprise to anyone who follows the political economy. In fact, it isn’t a surprise to anyone who has walked through any mid-sized American city, or driven through any small town in the heartland.

The problem is not low wage growth.

The problem is not long-term unemployment, as degrading and humiliating as that is.

The problem is that the US economy has been restructured over the past 30 years as an underemployment, low-wage economy in which most new jobs created are temporary jobs (whether you are a laborer, a technician, a service worker or a professional) with no job security, low wages and few benefits.

The real question is can we solve the problem? Many old lefties argue for a Universal Basic Income, (UBI), but Wrongo thinks that’s, er, wrong. If the UBI were high enough to provide even a subsistence living for every American, it would be massively inflationary. And it would merely allow businesses to pay lower wages, which is why some wealthy business people, like Peter Thiel, support a UBI.

Wrongo thinks we should support guaranteed work, not guaranteed income. Most people need and want to work in order to keep their place in our society. Getting a check just isn’t sufficient. If people matter at all, and if 95% of them lack the means to live without working, society must strive to employ all of those who have been deemed redundant by the private sector.

And there is plenty to do around America. Start with the 5,000+ bridges and dams that need replacing, or the 104 nuclear power plants that are falling apart.

We need real tax reform that can’t be loopholed. Corporations must pay more, not less. Stop the move to give corporations incentives to repatriate offshore earnings by lowering their effective tax rates. That only compromises our future tax stream. Corporations have to pay more in taxes, and agree to increase the wages of average workers.

Economically, we are in a pretty scary place. People across party lines and socio-economic levels are frightened for their financial security. We need a jobs guarantee, not a UBI.

So, wake up America! Letting corporations and the rich dictate our investment in human capital or infrastructure has us on the road to eclipse as a country. To help you wake up, here is Todd Snider performing “Conservative Christian, Right Wing, Republican, Straight, White American Male“, live at Farm Aid 2014 in Raleigh, North Carolina in September, 2014:

Why aren’t the Dixie Chicks singing harmony on this?

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – October 27, 2017

The Daily Escape:

Fall at Crested Butte – photo by mellowrapp

The economists at Indeed’s Hiring Lab say that the areas of the country that voted for Donald Trump in 2016 face the smallest job growth in the decade ahead.

Indeed uses new projections by the US Bureau of Labor Statistics (BLS) to project the winners and losers in the American job market for the period 2016-2026:

The occupational projections suggest faster growth in urban areas than in suburbs, and slowest in rural areas. The two sectors projected to have no or negative growth — production and agriculture — are more concentrated in small towns and rural areas. Many technical, scientific, legal, financial, and healthcare jobs are clustered in big, dense cities.

The fastest growing occupations are projected to be in clean energy: solar photo-voltaic installers and wind turbine service technician jobs are expected to double. Four of the 10 fastest growing occupations pay at least $100,000 a year, according to the BLS: physician assistants, nurse practitioners, software developers, and mathematicians.

Indeed combined the BLS projections with 2016 US Census Bureau’s American Community Survey data to show where the faster-growing occupations will be located. That suggests faster growth will be in coastal urban areas, and slowest growth will be in rural areas:

Indeed then overlaid voting patterns on the BLS job growth projections. It is clear that Blue America has a more favorable forecast for future jobs growth than Red America:

So what does this chart tell us? In places that voted for Trump by a 20-point margin, 16% of workers are in occupations projected to shrink, versus 13.2% of workers in places that voted for Hillary Clinton by a similar 20-point margin.

The next decade’s jobs growth could also increase inequality. The fastest growing jobs include several with the highest average wages, including healthcare, computer, and mathematics occupations. Occupations with the lowest average wages are also projected to grow fast, such as home health aides and personal care aides. Middle-wage job growth is projected to lag, at about half the rate of the highest- and lowest-wage jobs.

It seems that a big slice of Trump’s supporters will be losers when it comes to jobs and income growth over the next 10 years. Will they stick with the Republican Party when the job situation gets even worse for them? Of course!

Now, here comes the weekend!

This week we watched Jeff (I’m not a) Flake give a valedictory speech that excoriated the leader of his party. Catalonia succeeded from Spain, and the GOP pushed their tax cut agenda forward. The Trump administration tried to deny a young illegal immigrant woman an abortion, and Hillary Clinton was implicated in paying for the Steele Dossier.

But the worst was that Paul Newman’s Rolex wristwatch sold for $17.75 million. File this under: Idiots with too much money.

Plenty of hits to the system for a single week, so it’s time to take a break from the reality known as Trumpmerica.

Time to brew a very large mug of Celestial Seasons Bengal Spice tea, put your feet up, and put on the Bluetooth headphones. Now listen to Aaron Copland’s “Quiet City” from the 1989 album “Works by Husa, Copland, Vaughan Williams, and Hindemith”, performed by Wynton Marsalis with Phillip Koch on English Horn along with the Eastern Wind Ensemble.

Copland said the piece was an attempt to mirror the troubled main character of an Irwin Shaw play, who had abandoned his religion and his poetry in order to pursue material success. He Anglicized his name, married a rich socialite, and became president of a department store. But he continually returns to his guilty conscience whenever he hears the haunting sound of his brother’s trumpet.

See if Marsalis can take you inside your conscience:

Those who read the Wrongologist in email can view the video here.

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Silicon Valley Will Escape the Revolution

The Daily Escape:

Waterfall Jumping Competition (from 69 feet up), Bosnia, August 5th – photo by Amel Emric

Antonio Garcia Martinez:

Every time I meet someone from outside Silicon Valley – a normy – I can think of 10 companies that are working madly to put that person out of a job…

Well, that makes most of us “normies”. In context, we are the people who do not work in Silicon Valley. We are the people who use technology, rather than invent technology, and many of us ought to see technology as a threat to our jobs and our place in society.

We are not in the beautiful peoples’ club. Our names are not on the list. We’re not software engineers who work just to pay the taxes on their company stock.

And who is this Martinez guy? From Mashable:

He’d sold his online ad company to Twitter for a small fortune, and was working as a senior exec at Facebook (an experience he wrote up in his best-selling book, Chaos Monkeys). But at some point in 2015, he looked into the not-too-distant future and saw a very bleak world, one that was nothing like the polished utopia of connectivity and total information promised by his colleagues.

Martinez pointed out that there are enough guns for every man, woman and child in this country, and they’re in the hands of people who would be hurt most by automation:

You don’t realize it but we’re in a race between technology and politics, and technologists are winning…

Martinez worries about how the combination of automation and artificial intelligence will develop faster than we expect, and that the consequences are lost jobs.

Martinez’s response was to become a tech prepper, another rich guy who buys an escape pod somewhere off the grid, where he thinks he will be safe from the revolution that he helped bring about. More from Mashable: (brackets by the Wrongologist)

So, just passing [after turning] 40, Antonio decided he needed some form of getaway, a place to escape if things turn sour. He now lives most of his life on a small Island called Orcas off the coast of Washington State, on five Walt Whitman acres that are only accessible by 4×4 via a bumpy dirt path that…cuts through densely packed trees.

He’s not alone. Reid Hoffman, co-founder of LinkedIn told The New Yorker earlier this year that around half of Silicon Valley billionaires have some degree of “apocalypse insurance.” Pay-Pal co-founder and venture capitalist Peter Thiel recently bought a 477-acre escape hatch in New Zealand, and became a Kiwi. Other techies are getting together on secret Facebook groups to discuss survivalist tactics.

We’ve got to expect that with AI and automation, our economy will change dramatically. We will see both economic and social disruption until we achieve some form of new equilibrium in 30 years or so.

It will be a world where either you work for the machines, or the machines work for you.

Robert Shiller, of the famous Case-Shiller Index, wrote in the NYT about the changing meaning of the “American Dream” from the 1930s where it meant:

…ideals rather than material goods, [where]…life should be better and richer and fuller for every man, with opportunity for each according to his ability or achievement…It is not a dream of motor cars and high wages merely, but a dream of a social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable…

That dream has left the building, replaced by this:

Forbes Magazine started what it calls the “American Dream Index.” It is based on seven statistical measures of material prosperity: bankruptcies, building permits, entrepreneurship, goods-producing employment, labor participation rate, layoffs and unemployment claims. This kind of characterization is commonplace today, and very different from the original spirit of the American dream.

How will the “Normies” survive in a society that doesn’t care if you have a job? That refuses to provide a safety net precisely when it celebrates the progress of technology that costs jobs?

The Silicon Valley survivalists understand that, when this happens, people will look for scapegoats. And we just might decide that the techies are it.

Today’s music is “Guest List” by the Eels from the 1996 album “Beautiful Freak”:

 Takeaway Lyric:

Are you one of the beautiful people
Is my name on the list
Wanna be one of the beautiful people
Wanna feel like I’m missed

Are you one of the beautiful people
Am I on the wrong track
Sometimes it feels like I’m made of eggshell
And it feels like I’m gonna crack

Those who read the Wrongologist in email can view the video here.

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