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The Wrongologist

Geopolitics, Power and Political Economy

Saturday Soother – October 5, 2019

The Daily Escape:

Fall colors, Adirondacks, NY – October, 2019 photo by nikhilnagane

You can be forgiven for not focusing this week on the UAW’s strike against GM, which is now in its 19th day. Shares of GM have plunged by double digits since the strike began, mostly because the automobile sector has reported weak sales figures. Wolf Richter reports that:

“New-vehicle deliveries in the US…were…flat, at 4.32 million vehicles in the third quarter. For the nine months, deliveries were down 1.6%. This puts new vehicle sales on track for about 17 million…in 2019, the worst level since 2014, and below 2000….”

So, automobile unit sales are at the same level that they were 20 years ago in 1999-2000. With the strike, GM vehicle production has ceased at nearly all of its North American plants. This hasn’t really hurt GM yet, because they had around 90 days’ sales worth of vehicles in inventory as the strike started. They typically have more like 60 days on hand. So shutting the plants helps work down their inventory bulge.

Back to the strike: Julianne Malveaux reports in the WaPo about how GM betrayed the UAW after the union made sacrifices when GM nearly folded in 2008:  

“General Motors was on its knees in 2008. Amid a global financial crisis, the company was so financially challenged that it had no choice but to accept a federal government bailout. In 2009, the United Auto Workers joined the feds in saving GM, making concessions on wages and benefits to rescue the beleaguered company.”

The partnership paid off for GM. The company has earned $35 billion in profits in the last three years, partly as a result of the concessions the workers made over a decade ago.

But, does GM owe the UAW anything in return? The protracted strike shows that GM feels it doesn’t owe them much. Darrell Kennedy, a UAW striking worker said in a video:

“We gave up a cost-of-living increase, a dollar-an-hour wage increase we were due, tuition assistance and more…”

The union wants to include non-union workers who are part of GM’s three-tiered wage system. Those hired before 2007 (the union members) are Tier One workers who earn roughly $31 per hour, plus guaranteed pensions. Those hired after 2007 are Tier Two workers, earning about $17 an hour and have the opportunity for 401 (k) participation. The third tier are temporary workers who earn less than Tier Two workers and have no benefits.

The union wants better pay for Tier Two workers, and a path to job security for Tier Three employees. But since GM plans to move toward electric vehicles which use less labor that gas-powered cars, they are uninterested in commitments that reduce their flexibility in the future.

In business, Wrongo learned the hard way that making concessions, and expecting it to create good will that helps a future negotiating position, is usually a bad idea.

But, in this case, it’s difficult to work up enthusiasm for either side.

For example, GM spent $10.6 billion since 2015 buying back its own shares, some of which went to the UAW, who originally owned about 17.5% of GM after the bailout. The UAW has now sold over half its GM stock. Since the 1960s, GM has consistently demonstrated poor management. Their share of the automobile market has decreased from about 50% to about 17%. If it wasn’t for the government bailout, GM wouldn’t be here.

The UAW is rightly trying to grow its membership by advocating for GM’s Tier Two and Three employees. OTOH, in 2009, the union didn’t agree to cooperate with GM out of any sense of benevolence. They were saving their jobs. Finally, since the bailout, GM’s UAW workers have a profit-sharing deal. In 2018, the 46,500 UAW hourly employees earned up to $10,750 each.

Wrongo is very pro-labor, and often pro-union. In this case, it’s difficult to get behind the UAW’s strike.

Time to move past which State Dept. official in the Ukraine texted what about the Bidens, or how much more blatant Trump’s overtures to foreign governments will get. Let’s enjoy a Saturday Soother!

Start by thinking about the leaves piling up outside. Friday night brought frost to Mansion of Wrong, so our fall clean-up is in full swing. If it’s warmer where you live, enjoy the last of the warm weather.

No coffee today, get outside and do something physical. But before you go out, let’s remember the great Jessye Norman who died last Monday. She was a gifted singer with one of the greatest and most beautiful voices ever. She had all the qualities to make a performance both convincing, and memorable. Here she is singing “Ave Maria” by Schubert:

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

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Saturday Soother – September 21, 2019

The Daily Escape:

Badlands Storm, South Dakota – September 2019 photo by Bill Frazier

It’s officially the end of summer. We now move towards shorter days, sweater weather, and at least in the Northeast, raking leaves. But, in politics, few things change with the seasons.

Consider this factoid from Bloomberg about what the Trump administration has done to support farmers hurt by his China trade war:

“At $28 billion so far, the farm rescue is more than twice as expensive as the 2009 bailout of Detroit’s Big Three automakers, which cost taxpayers $12 billion.”

Remember the auto bailout? Republicans were largely against it. The government shouldn’t pick winners and losers, let Mr. Market do it. While the auto industry was bleeding jobs, the bailout saved GM and Chrysler. It also helped restore jobs. Marketplace reports that in the Great Recession, auto-manufacturing lost 334,000 jobs, and membership in the United Autoworkers Union (UAW) fell by 150,000.

Since then, as vehicle sales rebounded, those job losses were gradually reversed. In July 2016, US auto-manufacturing employment surpassed its December 2007 pre-recession level of 957,000 jobs. The UAW however, remains more than 50,000 members short of its pre-recession high.

Back to the farmers. Because of the tariff war with China, farmers will receive $19.5 billion in direct government bailout money in 2019, the most since 2005. That doesn’t include an extra $10.5 billion in federally subsidized crop insurance payments, the main vehicle of the farm subsidy program.

This is a move to protect Trump’s political advantage with his Midwest base for the coming election in 2020. But, who is benefiting? It’s mostly the corporate farms, and the largest individually-owned farms. From Modern Farmer:

“The idea is fairly clear: the larger a farm is, the more it has to lose, and thus the more money it takes to make whole.”

The Environmental Working Group (EWG) analyzed USDA data and found that 82 farmers collected over $500,000 each in 2018-2019. In comparison, the EWG found that the bottom 80% of farmers received less than $5,000 each.

This latest tranche of government money comes after the USDA changed the rules regarding who qualified. Previously, each farmer applying for assistance had to have an average adjusted gross income of less than $900,000 per year. Now, there’s no limit on the size of an applicant’s income, as long as 75% “is derived from farming, ranching, or forestry related activities.”

That opens the trough to the biggest corporate farms, to super-rich investors, and the biggest family farms. Not surprisingly, since the Trump administration’s efforts are aimed at protecting those who are among his large donors, rather than the most vulnerable farmers, there are no cries that this is “socialism” by the GOP.

Apparently, this is capitalism at its best, but what we did to save the auto industry was socialism.

On to our Saturday Soother, that interlude in the week when we try to forget what Trump may have promised to a foreign leader, or what Cory Lewandowsky did to Jerry Nadler. We focus instead on what excuses we can use to avoid the coming fall clean-up. Here, on the fields of Wrong, we are taking in our bluebird houses, the fledglings left a week ago. A few hummingbirds are still around, but will certainly be gone next week. The apple trees have lost most of their leaves, and the deer are eating the fruit that falls to the ground. We’re trying to wait until early October to turn the heat on, but the last two nights have been in the high-30s.

Let’s warm up today by brewing up a hot, steaming cup of Ethiopia Sidamo Gora Kone ($19/12 oz.) from Sacramento, CA’s Temple Coffee Roasters. The roaster says it has a sweet-savory structure with a crisp, lightly satiny mouthfeel. You be the judge.

Now settle back and listen to a musical selection for the change of season. Here is “Autumn” a petit adagio from Alexander Glazunov’s “The Seasons”. The music was written as an allegorical ballet, but we’re going to listen to a symphonic treatment. It was composed in 1899, and first performed as a ballet by the Imperial Ballet in 1900 in St. Petersburg, Russia. Here, it is played by the Czech Radio Symphony Orchestra of Bratislava conducted by Ondrej Lenard:

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

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The Ethics of Responsibility

The Daily Escape:

John Muir Wilderness, CA -August 2019 photo by petey-pablo

Nobody in America should be rooting for a recession, and no political party should root for one either. Shame on those who are.

US economic policy is often driven by ideology, and those operating policies can change whenever the party in power changes. That seems to be more likely to occur in 2020 than it has at any time since Reagan. Like it or not, Bush I, Clinton, Bush II, and Obama all followed similar economic policies.

Trump has disrupted much of them, returning to a vigorous trickle-down policy, aggressive deregulation and the imposition of unilateral tariffs.

Max Weber, in his 1919 essay on “Politics as a Vocation”, made a distinction between politicians who live by the “ethics of responsibility” and those who follow the “ethics of conviction”. The ethic of responsibility is all about pragmatism; doing the right thing in order to keep the show on the road. But the ethic of conviction is all about moral (ideological) purity, about following the playbook despite the impacts.

An example is the Kansas Experiment, where Sam Brownback, following right-wing convictions, cut taxes to produce a “shot of adrenaline into the heart of the Kansas economy.” Economic growth was below average, state revenues crashed, and debt blew up. But, still a believer, Brownback vetoed the effort to repeal of his laws.

You don’t need more from Wrongo to paint the picture. We’re in a time of the ethics of conviction.

Let’s take a look at two recent articles about the economy. First, from the Economist, which is telegraphing the possibility of a US recession:

“Residential investment has been shrinking since the beginning of 2018. Employment in the housing sector has fallen since March….The Fed reduced its main interest rate in July and could cut again in September. If buyers respond quickly it could give builders and the economy a lift.”

But housing is not the only warning sign. The Economist points to this chart, showing the change in payrolls in the 2nd Quarter of 2019:

It’s clear that much of America is doing quite well. It is also clear that most of the 2020 battle ground states are not. Indiana lost over 100,000 manufacturing jobs in the last downturn, almost 4% of statewide employment. It is among a growing number of states experiencing falling employment: a list which also includes Ohio, Pennsylvania and Michigan.

In 2016, those last three states all delivered their electoral-college votes to Trump, and were decisive in his electoral victory. Trump’s trade war may still play well in these states, but if the decline in payrolls continues, it suggests a real opening for Democrats, assuming they are willing to hammer on pocketbook issues.

Second, the Wall Street Journal had an article about winners and losers in the 10 years since the Great Recession. It isn’t a secret that those left behind are in the bottom half of the economic strata, and there is little being done to help them:

“The bottom half of all U.S. households, as measured by wealth, have only recently regained the wealth lost in the 2007-2009 recession and still have 32% less wealth, adjusted for inflation, than in 2003, according to recent Federal Reserve figures. The top 1% of households have more than twice as much as they did in 2003.”

We also call wealth “net worth”. It is the value of assets such as houses, savings and stocks minus debt like mortgages and credit-card balances. In the US, wealth inequality has grown faster than income inequality in the past decade, making the current wealth gap the widest in the postwar period. Here is a devastating chart from the WSJ showing the net worth of the bottom 50% of Americans:

There’s a big difference between the 1% and the bottom 50%: More than 85% of the assets of the wealthiest 1% are in financial assets such as stocks and bonds. By contrast, more than half of all assets owned by the bottom 50% comes from real estate, such as the family home.

Economic and regulatory trends over the past decade have not only favored stock investments over housing, but they have also made it harder for the less affluent to even buy a home. The share of families in the bottom 50% who own a home has fallen to 37% in 2016, (the latest year for which data are available), from 43% in 2007. OTOH, homeownership among the overall American population is higher since 2016.

Weber’s ethics of conviction have driven our politics since well before the 2008 recession. We know what it caused: inequality, demonstrated by lower wages for the 90%, and a devastating decline in net worth for the bottom 50%.

Can we turn the car around? Can we elect politicians who will follow Weber’s ethics of responsibility at the local, state, federal and presidential levels in 2020?

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Tuesday Wake Up Call – September 3, 2019

The Daily Escape:

Clouds and light, Zion NP, Utah – 2019 photo by walkingaswind

It’s fair to ask, “What happened to the Wrongologist?” He’s taken a long break from posting, in part due to fatigue brought on by our toxic political environment. But beyond that, Wrongo has (at least temporarily) despaired of seeing a path forward to meaningful political change.

Here’s a few relatively connected changes to ponder on Labor Day.

We’re in the midst of a big demographic change. Demo Memo reports that Non-Hispanic Whites (that’s white people to us non-demographers) will account for just 47% percent of the nation’s 2019 public school students, according to the National Center for Education Statistics. That means the majority of students (53%) in grades K through 12 will be Hispanic, Black, Asian, or another minority.

That’s a big drop since 2000, when 61% of public school students were non-Hispanic White. Their share fell below 50% in 2014. The non-Hispanic White share of public school students will continue to fall. In 2027, non-Hispanic Whites will account for 45% of students, according to projections by the National Center for Education Statistics.

It’s not a coincidence that nearly 32% of Americans aged 18 or older can speak a language other than English. According to the 2018 General Social Survey, this figure is up from 28% a decade ago. Asians and Hispanics are most likely to say they can speak a language other than English, 83% and 69%, respectively. By generation, the youngest Americans are most likely to be able to speak a language other than English, with the iGeneration at 43%, Millennials at 39%, and GenX’ers at 33%.

Times they are a-changing.

Changes on the jobs front have already occured. Here is chart from Visual Capitalist showing the largest non-government employer in all 50 states. Sadly, even in this time of economic progress, Walmart is the largest employer in 21 states:

In many states, either the state or federal government is the top employer. California employs 250,000 federal workers. New York State is unique, since NYC’s municipal workforce is the state’s top employer. And then, there is the US Department of Defense: Eight states have more active military personnel than any single private employer.

Universities and hospitals are top employers in nearly half of the states.

But Walmart is the biggest private employer, with 1.5 million workers. They employ about 1% of private sector workforce in the US. Amazon is a distant second with more than 500,000 employees.

How are the facts about majority/minority schools and Walmart as  our largest employer linked? According to Walmart’s 2019 diversity report, 44% of Walmart employees are people of color. This means that after graduation, Walmart is a likely workplace for many of them. People of color account for 61% of Amazon employees.

And the average wage for a full-time Walmart employee in the US is $14.26. Recent full-time pay in a New Jersey Amazon warehouse was $13.85. Both sound fine until you realize that these are average pay rates for full-time workers. Many earn far less. And few actually are full-time workers, most are part-time.

Are these good jobs at good wages? They are not.

Our schools are getting more diverse, and the jobs we hold now are increasingly fragile. What’s more, for many Americans, one job doesn’t provide a living wage. As the NYT reported in a Labor Day opinion piece by Binyamin Appelbaum and Damon Winter:

“More than eight million people — roughly 5 percent of all workers — held more than one job at a time in July, according to the most recent federal data.”

Dignity. Shouldn’t America strive to make working at one job pay enough to provide for a person’s family? We tout the low unemployment rate, and the statistics that show millions of available and unfilled jobs. But, except for a few jobs involving high barriers to entry, “worker shortage” is a euphemism for “this job doesn’t pay well enough, or have good enough conditions to attract enough workers.”

There’s no worker shortage in America, there’s a pay and good working conditions shortage. Work doesn’t have to be absorbing, but it should be free of fear, and it should be worthy of one’s talents.

It’s baffling to Wrongo that supposedly smart politicians have facilitated a system that has robbed wealth from the bottom 90% of Americans and funneled it to the top 1%, largely through holding down workers’ wages, when our economy is driven by consumer spending.

All of us are wage slaves to a degree, we all sell our time and talent for money. Our schools are the basis for building talent. That, plus job experience, is what the average American offers to sell to employers.

So this is mostly a post about future Labor Days.

Time to wake up America! Without profound changes to how we educate our kids, and how we reward capitalists and capitalism, our country of tomorrow will bear little resemblance to the nation of today.

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Current and Future Job Growth Will Be In Cities

The Daily Escape:

Breezewood, PA – 2008 photo by Edward Burtynsky. Each year, 3.5 million passenger vehicles and 1.5 million trucks drive the half-mile Breezewood strip on Route 30. That’s because a law in the 1950s prohibited spending federal funds to connect a free road to a toll road. So, highway planners designed an interchange that routes drivers onto Route 30 for a half-mile.

An interesting article from Market Watch shows how nearly all job growth is in big cities, while rural America is being left behind:

“Since the economy began adding jobs after the Great Recession nine years ago, about 21.5 million jobs have been created in the United States, the second-best stretch of hiring in the nation’s history, second only to the 1990s. But….Most of the new jobs have been located in a just a few dozen large and dynamic cities, leaving slower-growing cities, small towns and rural areas — where about half of Americans live — far behind.”

MarketWatch cites a July 2019 study by McKinsey forecasting that 25 cities that are home to about 30% of Americans will capture about 60% of the job growth between 2017 and 2030, just as they did between 2007 and 2017. In typical McKinsey fashion, they break cities and towns into many categories. Please read the report for full details. Here are their top-line findings about where the largest growth is happening:

  • Twelve mega-cities (and their extended suburbs) top the list: Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Philadelphia, Phoenix, San Francisco and Washington.
  • Another 13 are high-growth hubs in or around smaller cities: Austin, Charlotte, Denver, Las Vegas, Minneapolis, Nashville, Orlando, Portland (Ore.), Raleigh, San Antonio, San Jose, Seattle, and Tampa.
  • Smaller, fast-growing cities and a few privileged rural counties will also add jobs, while vast swaths of the South, Midwest and Plains will lose jobs.
  • The New York metro area, home to 20 million people, added more jobs over the past year than did all of America’s small towns and rural areas, with a population of 46 million people, combined.

McKinsey’s forecast reinforces concerns about persistent economic inequality in America. Inclusive growth is a must, or it is likely that our society will fall apart. The problem: No one, and certainly not Republicans, have a magic wand that will bring back jobs to rural and small-town America.

Anyone who’s been paying attention knows that job growth is mostly occurring in places that vote for Democrats, while the stagnation is mostly in places that vote for Republicans. In 2016, Trump was smart to tailor a pitch to those parts of America, but their situations haven’t improved since his election.

And the divide is getting larger. Over the past year, only 12% of 389 metro areas had any significant job growth, according to an analysis of Bureau of Labor Statistics data by Aaron Sojourner, a former White House economist, now an associate professor at the University of Minnesota:

So, after 17 years of significant and broadly-spread growth, fewer towns and cities are now doing so well. And, of the 47 metros that gained significant numbers of jobs over the past year, 21 were on McKinsey’s top 25 list.

Meanwhile, the regional jobs data from the BLS shows that non-metropolitan areas, which account for 18% of jobs, had just 5% of job growth over the past year.

OTOH, income inequality is greatest in those cities with the highest jobs growth. But, we can’t write off one quarter of the US population simply because they live in low-growth areas. And politically, it’s essential. Rural America is overrepresented politically — we can’t ignore them.

But, what to do? Sanders and Warren have addressed this by trying to raise tax revenues from corporations, and funding free college. They along with others, believe in some form of Medicare-for-all, which could help address the fact that rural America is older, sicker, and poorer than ever before.

Yang proposes a universal basic income of $1,000/month for everyone.

Trump proposes tax cuts for the wealthy, tariffs and weakened environmental regulations, but despite all three, the situation has gotten worse since his election.

McKinsey suggests that communities that are being left behind ought to try almost everything: improved transportation to get residents to jobs, rural broadband, and lifelong job training.

Building consensus about how to address job growth and income inequality is the key to America’s future. This is what the 2020 presidential election should be about.

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Sunday Cartoon Blogging – May 26, 2019

In another “elections have consequences” story, The Economic Policy Institute (EPI), has a new report about how states can blunt the 2018 Supreme Court decision in Epic Systems v. Lewis. In that case, the court ruled that employers can use forced arbitration clauses to strip workers of their right to join together in court to fight wage theft, discrimination, or harassment. The EPI forecasts that by 2024, more than 80% of private-sector, nonunion workers will be covered by forced arbitration clauses.

They argue that, given the current very conservative Supreme Court, it will be up to individual states to pass “whistleblower enforcement” laws like those introduced in Massachusetts, Maine, New York, Oregon, Vermont, and Washington, to empower workers who need to sue law-breaking employers, including those covered by arbitration clauses.

On to cartoons. Here’s a look at abortion from the GOP white male perspective:

Trump won’t (can’t?) deal:

GOP’s accomplishments are transparent, even if they are not:

The Parties see things differently:

Summer replacement series doesn’t get raves:

Graduation speakers aren’t created equal:

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Monday Wake Up Call – January 28, 2019

The Daily Escape:

Bell Island, Franz Josef Land with Eira Lodge in foreground. The lodge is a remnant of Benjamin Leigh-Smith’s expedition in 1880 – 2017 photo by Ilya TiminCC BY-SA 4.0.

The largest gathering of billionaires in the world took place last week at the World Economic Forum’s annual conference in Davos. Vanity Fair reports that they:

“…consume $55 Caesar salads and shark canapés, rub shoulders with Matt Damon, and attend parties that involve “endless streams of the finest champagne, vodka, and Russian caviar, dancing Cossacks, and beautiful Russian models…”

Bloomberg added: (emphasis by Wrongo)

“UBS and PwC Billionaires Insights reports show that global billionaire wealth has grown from $3.4 trillion in 2009 to $8.9 trillion in 2017…The fortunes of a dozen 2009 Davos attendees have soared by a combined $175 billion, even as median US household wealth has stagnated…”

And there was this report from Davos in the NYT by Kevin Roose: (emphasis by Wrongo)

“They’ll never admit it in public, but many of your bosses want machines to replace you as soon as possible. I know this because, for the past week, I’ve been mingling with corporate executives at the World Economic Forum’s annual meeting in Davos. And I’ve noticed that their answers to questions about automation depend very much on who is listening.”

Roose goes on to say: (emphasis by Wrongo)

“In public, many executives wring their hands over the negative consequences that artificial intelligence and automation could have for workers. They…talk about the need to provide a safety net for people who lose their jobs as a result of automation.

But in private settings, including meetings with the leaders of the many consulting and technology firms…these executives tell a different story: They are racing to automate their own work forces to stay ahead of the competition, with little regard for the impact on workers.”

Roose quotes Mohit Joshi, president of Infosys, an Indian technology and consulting firm: (emphasis and brackets by Wrongo)

“Earlier they [large businesses] had incremental, 5 to 10% goals in reducing their work force. Now they’re saying, ‘Why can’t we do it with 1% percent of the people we have?’”

And American executives have come up with new buzzwords and euphemisms to disguise their intent. Workers aren’t being replaced by machines, they’re being “released” from onerous, repetitive tasks.

Companies aren’t laying off workers, they’re “undergoing digital transformation.” They’re being “reskilled”.

A 2017 survey by Deloitte found that 53% of companies had already started to use machines to perform tasks previously done by humans. That figure is expected to climb to 72% by next year. As an example, Terry Gou, the chairman of Foxconn, the Taiwanese electronics manufacturer, who makes iPhones, has said his company plans to replace 80% of its workers with robots in the next five to 10 years.

And Wisconsin just gave Foxconn $4.5 Billion to build a plant and employ 13, 000 workers. Can Wisconsin’s soon-to-be laid-off workers be “re-skilled”, and find employment?

A January 2019 report by the very same World Economic Forum estimates that the 1.37 million workers who are projected to be displaced fully out of their roles in the next decade according to the US BLS, may be reskilled to new viable (similar skill set) and desirable (higher wages) jobs:

“The report shows that, in the US alone, with an overall investment of US$4.7 billion, the private sector could reskill 25% of all workers in disrupted jobs with a positive cost-benefit balance. This means that, even without taking into account any further qualitative factors or the significant indirect societal benefits of reskilling, for 25% of at-risk employees, it would be in the financial interest of a company to take on their reskilling.”

The rest presumably will need to fend for themselves. They will likely rely on your taxpayer dollars to be “reskilled”, or go on government assistance.

The real question isn’t how to stem the tide of automation, it’s inevitable. The question for capitalists and our government is how the financial gains from automation and AI will be distributed, and whether the excess profits corporations reap as a result of layoffs will go in part, to workers, or solely to bigwigs and their shareholders.

Will we create a shared prosperity, or just a greater concentration of wealth?

Time to wake up America! This Fourth Industrial Revolution is underway, and estimates are that it will impact as many as 40% of American workers.

It’s time to understand that the 21st Century American corporation isn’t our friend, as constituted and rewarded. It is the enemy of our society, as they quietly work to eliminate your jobs.

We constantly reduce their taxes. We look the other way when they pollute our environment. We allow them to disproportionately finance our elections.

It’s time for a new Capitalism.

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We’re Too Short to be on This Ride

The Daily Escape:

Lion’s Head, Capetown South Africa, viewed from Tabletop Mountain – 2012 photo by Wrongo

A WaPo report said that Donald Trump discussed giving Janet Yellen another term as head of the Federal Reserve, but was concerned that she was too short. He thought that at 5 feet, 3 inches, she just wasn’t tall enough to get the job done.

Wrongo thinks Yellen’s performance was about the same as her predecessor, Ben Bernanke, and her successor, Jerome Powell. Shouldn’t the real question be: Do we know what’s wrong with our economy, and do we have people in place with enough strength and/or courage to fix it? They can also be short, as long as they have ability and vision.

And it isn’t only in the US: (brackets by Wrongo)

Income inequality has increased in nearly all regions of the world over the past four decades, according to the World Inequality Report 2018. Since 1980, the global top 1% of earners have…[garnered] twice as much of the global growth as have the poorest 50%.

More from the World Inequality Report: (emphasis by Wrongo)

Such acute economic imbalances can lead to political, economic, and social catastrophes if they are not properly monitored and addressed….Governments need to do more to keep society fair…Public services, taxation, social safety nets – all of these have a role to play.

We’re seeing a slow-rolling social catastrophe in the US. We’re seeing alienation across class, race, age and gender. We’re divided as never before, with the possible exception of the pre-Civil War period.

Aren’t we all too short to be on this ride?

Central banks play an integral part in the global economy, and their performance (including the Fed’s) during the 2008 Great Recession was for the most part, admirable.

But central banks can only use monetary policy to partially solve issues of economic inequality. The most robust solutions lie in fiscal policy. Fiscal policy is how Congress and other elected officials influence the economy using spending, taxation and regulation.

Take student loans. Many of our university students are simply being led to the debt gallows. Currently, 44.5 million student loan borrowers in the US owe a total of $1.5 trillion. Student loans are the fastest growing segment of US household debt, seeing almost 157% growth since the Great Recession.

From Bloomberg:

Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. (Some 85% of current students now work paid jobs while enrolled.)

Student loan debt has the highest “over 90 days” delinquency rate of all household debt. More than 10% of student borrowers are at least 90 days delinquent. Mortgages and auto loans have a 1.1% and 4% 90-day delinquency rate, respectively,

And if the student loan can’t be repaid, it isn’t expunged by bankruptcy. In fact, students can’t outlive their debt. The feds can garnish social security payments to repay a student’s outstanding debt.

As young adults struggle to pay back their loans, they’re forced to make financial choices that create a drag on the economy. Student debt has delayed marriages. It has led to a decline in home ownership. Sixteen percent of young workers aged 25 to 35 lived with their parents in 2017, up 4% from 10 years earlier.

We are only beginning to understand the social costs of our politics. We are in the midst of a brewing social disaster. And these are self-inflicted wounds, fixable with different government policies. But, most of today’s politicians are too short to get on that ride.

So, how to solve the simultaneous equations of high poverty rates, income inequality and an impending social disaster?

It won’t be easy, and it starts with politicians admitting that our economy doesn’t work for everyone, and that it must be reformed. Then, we can move beyond the tired rallying cries of “more tax cuts” to a capitalism which incorporates a social consciousness that can get people on the track to better paying, and more secure jobs.

An April 2018 study of survey data from 16 European countries found that economic deprivation increased right-wing populist tendencies. Sam van Noort, a co-author of the report said:

Individuals who “feel economically less well-off” were more likely to be attracted by the far right…and radical right respondents are more likely to be male, subjectively poorer, less educated [and] younger.

This will also happen here, unless the voters have determination, and even the short politicians have courage.

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Monday Wake Up Call – December 3, 2018

The Daily Escape:

Boston Public Library – photo by joethommas

The NYT’s David Brooks:

We’re enjoying one of the best economies of our lifetime. The GDP is growing at about 3.5% a year, which is about a point faster than many experts thought possible. We’re in the middle of the second-longest recovery in American history, and if it lasts for another eight months it will be the longest ever.

So everything’s good, no? Not really. More from Brooks: (emphasis by Wrongo)

Researchers with the Gallup-Sharecare Well-Being Index interviewed 160,000 adults in 2017 to ask about their financial security, social relationships, sense of purpose and connectedness to community. Last year turned out to be the worst year for well-being of any since the study began 10 years ago.

And people’s faith in capitalism has declined, especially among the young. Only 45% of those between 18 and 29 see capitalism positively, a lower rate than in 2010.

Brooks’ conclusion? It’s not the economy, we all just need more community connections.

His is another attempt to dress up the now-failing neoliberal economics. Things look good today from some perspectives, but our economy is crushingly cruel from others. Brooks seems to think that millions of Americans are struggling to pay their rent or mortgage, education loans, health care insurance or buy groceries because they have failed to master the art of networking in their neighborhoods.

Alienation is behind the rise of Trumpism, and the rise of populism across the world. In that sense, Brooks is correct, but the leading cause of people’s alienation is economic inequality.

And the leading cause of economic inequality is corporate America’s free rein, supported by their helpmates in Washington. Last week, Wrongo wrote about the exceptional market concentration that has taken place in the US in the past few years. He suggested America needs a revitalized anti-trust initiative. In The Myth of Capitalism, authors Jonathan Tepper and Denise Hearns write:

Capitalism without competition is not capitalism.

For decades, most economists dismissed antitrust actions as superfluous, so long as consumers were not the victims of price-gouging. Monopoly capitalism is back, and it’s harmful, even if a company’s core product (like Google’s and Facebook’s) is free to consumers. As we wrote last week, there’s excessive corporate concentration in most industries, including air travel, banking, beer, health insurance, cell service, and even in the funeral industry.

All of this has led to a huge and growing inequality gap. That means there is little or no economic security for a large and growing section of the American population. People see their communities stagnating, or dying. They feel hopeless, angry, and yes, alienated.

One consequence is that we’ve seen three years of declining life expectancy, linked to growing drug use and suicides. We seem to be on the edge of a social catastrophe.

But our real worry has to be political. People could become so desperate for change that they are willing to do anything to get it. The worry then, is that few vote and a minority elects a strong man populist leader, simply because he/she tells them what they want to hear. That leader can then go out and wreak havoc on our Constitutional Republic.

After that, anything could happen.

Despite what Brooks thinks, we don’t have a crisis of connections. It’s a crisis of poorly paying jobs, job insecurity, and poverty. When people look at their economic prospects, they despair for their children. Doesn’t it matter that in America, health care, education, and transportation all lag behind other developed countries?

The unbridled ideology of free markets is the enemy. Our problem isn’t that individual entrepreneurs went out and took all the gains for themselves, leaving the rest of us holding the bag. It’s more about how neoliberal economics is used both by government and corporations to justify an anti-tax and anti-trust approach that has led to extreme wealth and income concentration in the top 1% of Americans.

The reality is that the nation’s wealth has become the exclusive property of the already prosperous.

We need to wake up America! We have to stop for a second, and think about how we can dig out of this mess. When America bought in to FDR’s New Deal programs 75 years ago, we entered an era we now think back on nostalgically as “great”.

And it isn’t enough to talk about how we can look to Sweden or Norway as economic models. Both have populations of under 10 million, and our society is far less homogeneous than theirs.

We need a uniquely American solution to this problem. It will involve reforming capitalism, starting with tax reform, and enforcing anti-trust legislation.

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America’s Divided by Illegal Immigration

The Daily Escape:

Fall at Mount Assiniboine, Mount Assiniboine Provincial Park, BC, Canada – photo by Daniel Kodan

Happy Halloween! The spooky caravan of migrants heading northward to the US-Mexico border has sparked much debate. We’ve always heard that the US is “a nation of immigrants,” and that we’re a better country because of migrants who came here to chase the American Dream. But now, the country is divided about letting immigrants into the country.

On October 18th, the Kaiser Family Foundation published a survey that focused on the most important issues to voters. They found a significant difference between the parties on immigration:

Republicans rated immigration as their most important issue at 25% vs. 9% for Democrats, and Independents ranked it third at 15%. The sample included 396 Democrats, 309 Republicans and 399 Independents for a total of 91.8% of the overall respondents.

The differences were more pronounced in battleground states. Republicans in battleground states ranked immigration highest at 29% while Democrats rated it at 16% and fourth overall:

We say we are a nation of immigrants, but what that means is no longer clear. Trump and many Republicans running this fall have made the caravan seem like a powerful enemy army that we are at war with, albeit one that is unarmed, without funds and leaderless.

The Kaiser survey shows that this is working with Republicans in battleground districts/states. Whether it will prove helpful across the country will be determined on November 6th.

This anti-immigrant viewpoint has been with us for a very long time. After the Civil War, Congress realized that Blacks were going to be able to obtain citizenship just by being here, and then having children who would become citizens by birth. That ended when the 14th Amendment legitimized those children.

In the late 19th Century, there was another strong push to restrict immigration in order to maintain the whiteness of the country. It started with the restrictions against the Chinese and Japanese. Then it was extended even to those Europeans who were not considered to be white enough. People like the Irish, the Italians, the Greeks, the Poles, had their immigration quotas drastically cut back from 1917 through the 1920s.

We have always expressed our anti-immigrant bias explicitly in racial terms, even making up races, like the Irish and Poles. And today, it’s the Mexicans and Central Americans.

Even the term “illegal alien”, or “illegal immigrant” that we apply to those crossing the southern border has almost replaced race. It’s no longer legitimate to openly discriminate on the basis of race, but we’ve allowed one political Party to replace race with legal status.

So now it is legitimate again to discriminate against people. They are illegals, not a racial category, like they were in the 1800’s and 1900’s.

Today’s Republicans play to our fears: These less-than-worthy illegals want in, so that they can take a shot at the American Dream. If they get in, they may take jobs away from poorly educated, low skilled Americans. Therefore, we must be vigilant, and insure we protect our economy and the citizens who are already here.

There is some truth to that view.

America’s economy is predominantly service-based, and immigrants are over-represented in low skill, low-paying service occupations. They are in elder care, food services, in fact, they are hugely involved in the farming, harvesting and processing of most of our food as well.

These low-end jobs are going to grow, and it is highly questionable if low-skilled Americans will be lining up to take them.

And nobody’s talking about population growth as a reason to implement more restrictive immigration policies. By 2050, the US is projected to have 400 million people. Now it’s about 320 million. That’s a 25% increase in 32 years.

We need to ask: where will the jobs come from for all these people?

The division needs to stop. It’s a toxic stew of nativist, xenophobic ideas that must be sent back underground, and we have to end the rhetoric about “birthright citizenship” once and for all.

Let’s start by granting the DACA people citizenship. Second, those who came into our country illegally, and have not committed serious criminal offenses, should be offered a rigorous path to citizenship, one that does not give them an advantage over those who have complied with the law and are waiting their turn. Third, employers who have knowingly hired and exploited undocumented immigrants should be prosecuted, and not simply fined.

Fourth, we need clearer immigration rules, and better methods of processing of asylum requests. And we need more border security.

And if Trump’s wall is included, (as repugnant as that may seem), so be it.

 

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