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The Wrongologist

Geopolitics, Power and Political Economy

Saturday Soother – February 17, 2018

The Daily Escape:

Sigiriya, Sri Lanka – photo by jcourtial for dronestagram. Sigiriya is an ancient rock fortress. The site was the palace for King Kasyapa (477 – 495 BC). It is a UNESCO World Heritage Site.

We live in a seemingly endless loop of outrage. Nothing ever changes, because we waste energy on the “what-about?” arguments from both sides, each attempting to reframe the issue to their side’s advantage. These discussions yield nothing, and solutions are never agreed. This adds to a generalized feeling of powerlessness: The view that everything that is important is out of our hands, and insoluble.

So it is with school shootings, with protecting the DACA kids. And with whatever Russiagate is.

At least the Mueller investigation will run its course. We have to hope that the results will be made public. But if they are released, it will only lead to more debate and disagreement. Until then, we’ll continue to gleefully argue our respective Russiagate viewpoints in a fact-free vacuum.

We have experienced hysterical political times before, but they tended to be single issue events. Has there ever been a time when so many people in both political parties have been so single-mindedly determined to whip up anger?

When we’re looking at just a single issue, one side or the other often simply runs out of steam. Then the issue can be resolved both in Washington and in the mind of the public.

When we experience multiple issues simultaneously, the available energy is expended across the entire spectrum of problems. Thus, there isn’t enough energy to direct successfully at a single issue. So nothing is resolved.

This is where we are in February 2018, in a kind of nervous exhaustion: Too many issues and too few resolutions.

Can something, or someone unite us? Will a big event allow a majority to coalesce around a point of view, or a leader?

History shows that when we are in the grip of anxiety, it can be a relief if something we fear actually happens. Think about when Japan bombed Pearl Harbor. It was widely reported that the response of the public, including anti-war activists, was relief. There was a feeling that at last a course had been set, a key decision made. FDR united the disparate groups behind a war.

While the same situation doesn’t quite apply today, we crave some sort of decisions, perhaps some sort of decisive act. What would that be? It isn’t possible to see from where we are today.

As John Edwards said, there are two Americas. The one that sends their children to private schools, and the second one that sends their children to public schools. The second group has the kids who get shot by the gunmen. And politicians get away with platitudes about their thoughts and prayers.

Unfortunately, they then decide that fixing the problem is not worth their time.

We may have reached a breaking point. Shitty jobs, shitty pay, shitty hours, and little hope of advancement. No easy access to medical care, an uneven social safety net. Wrongo lived through the chaotic 1960’s. He endured Reagan’s show-no-mercy 1980’s. Those were bad times.

But, in a lot of ways, 2018 is worse. Today, there is an immense lack of mutual respect. And there is a ubiquitous atmosphere of a powerless people.

Wow, who said all that??

We desperately need a weekend where we can unplug from the media and focus on other things. In other words, we need a Saturday soother. Start by brewing up a big cuppa Stumptown Coffee’s Holler Mountain Blend, ($16/12oz.) The Stumptown people promise flavors of blackberry, citrus and toffee in a creamy, full body. Your mileage may vary.

Now, get in your favorite chair and listen to some, or all of the musical score from the film “Dunkirk”. Both the score and the film are Oscar-nominated. The film’s director Christopher Nolan suggested to the musical director Hans Zimmer, that they use Elgar’s “Nimrod” from the 1898-99 “Enigma Variations” as part of the theme. They decided that the movie’s music should be about time, and how for the men on the beaches, time was running out. They picked the “Enigma Variations” because it’s part of English culture, less a national anthem than an emotional anthem for the nation. Along the way, consistent with using time, they slowed it down to 6 beats per minute. Listen to their version from the movie:

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

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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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GOP Asks “Hillbilly Elegy” Author To Run For Senate

The Daily Escape:

Snow in the Sahara Desert, Algeria. The snow lasted only a few hours on the ground, since the average low winter temperature is 54°F – 2018 photo by Zinnedine Hashas

With the speculation about Oprah as a candidate, we knew it wouldn’t be long before the Republicans dredged up a celebrity non-politician too. Politico is reporting that Mitch McConnell wants JD Vance to run for the Senate in Ohio against Dem incumbent Sherrod Brown:

Top Senate Republicans have quietly reached out to J.D. Vance — the star author of “Hillbilly Elegy” — about running for Senate in Ohio after the abrupt withdrawal of GOP candidate Josh Mandel last week… McConnell has told associates that he would prioritize the race if Vance jumps in.

McConnell has a good idea. If Vance runs, he is interesting enough to force Democrats to defend an otherwise safe Senate seat. People seem to think Vance is a white working class whisperer.

Wrongo and Ms. Right were persuaded by many Eastern Liberal Elite friends to read Mr. Vance’s book. The pitch was that Vance explains to liberals why white Trump voters from southeastern Ohio and West Virginia wouldn’t vote for Hillary, and don’t lean progressive in their politics.

Maybe. Wrongo thinks that by writing his book, JD Vance was just pushing propaganda that fits the policy preferences of leading Republicans. Try reading this:

We spend our way into the poorhouse. We buy giant TVs and iPads. Our children wear nice clothes thanks to high-interest credit cards and payday loans. We purchase homes we don’t need, refinance them for more spending money, and declare bankruptcy. . . . Thrift is inimical to our being.

Or, this:

We choose not to work when we should be looking for jobs…

Vance’s stereotypes are shark bait for conservative policymakers. They feed the mythology that the undeserving poor make bad choices and are to blame for their own poverty, so why waste taxpayer money on programs to help lift people out of poverty? After all, Vance got out of hillbilly Ohio without them.

People shouldn’t decide policy based on Vance’s anecdotes; they should care about the bigger picture. After all, are conversations with cab drivers a sound basis for economic and geopolitical policy?

It is depressing that Vance places so much blame on welfare rather than, say, neoliberalism and corporatism. They are the ideologies that moved jobs offshore. Their firms leveraged, and later bankrupted manufacturing firms in the heartland. They are the ones who precipitated the economic holocaust in Middle America.

And despite what Vance tells us, most poor people work. Of the families on Medicaid, 78% include a household member who is working. People work hard in jobs that often don’t pay them enough to live on.

After graduation from Yale, JD Vance became a venture capitalist. First, he worked in Silicon Valley for Peter Thiel, and now works for Revolution LLC, a Washington, DC-based venture capital firm, co-founded by AOL founders Steve Case and Ted Leonsis.

It is fair to say that Vance’s hillbilly days are way back in the rear-view mirror. Yet, he remains naïve. He was on “Face The Nation” on December 31st, talking about the Trump tax cut:

When the president talks about tax reform, he talks about the people who will benefit…He talks about American jobs. He talks about the fact that we’re going to be taking money that’s overseas and bringing it back to the US so that it will employ American workers. I think that focus again on the American working and middle class is- is-is to me the most thoughtful and, in some ways, the most genius part of Trump’s approach to politics.

Vance just revealed himself to be another reptilian conservative. We should remember this quote from economist J. K. Galbraith:

The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.

The grift goes on.

 

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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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Monday Wake Up Call – November 27, 2017

The Daily Escape:

Coyote, Housatonic River – Litchfield County, CT – photo by JH Clery

At the risk of sounding like the discredited Democrat John Edwards, we do live in two Americas. The top rungs of the ladder are living a good life, benefiting from the nine-year rebound from the Great Recession. The other 90% haven’t done well at all. Check out this chart of median household income:

Source

The chart shows median (not average) household income for the US, adjusted for inflation. Unlike average income, median income is not distorted by the enormous gains made by the one-percenters during the past decade.

The chart shows that for a household in the center of the US income distribution, 1999 was the best year ever. The housing bubble brought median household income almost back to its 1999 level in 2007, but not quite. Today, median household income (adjusted for inflation) is slightly lower than it was in 1989, in the first year of the George H.W. Bush administration.

How can this be? The economy is growing, and the US should have a squeaky-tight job market, since unemployment is at a 17-year low at 4.1%, a jobless figure that is near the definition of full employment. We’ve had seven straight years of job growth; job searches lasting 15 weeks or longer are now only 1.5% of the work force, down from 2% a year ago.

But wage growth is anemic. According to the law of supply and demand, employers should be sharply bidding up wages in order to capture increasingly scarce workers. But they aren’t. In October, they raised wages just a bit more than inflation, at an annual rate of 2.4%, down from September’s rate of 2.8%.

This is what imperial decay looks like to the middle class. Keep spending your seed corn tilting at windmills in the Middle East, and pretty soon some in the middle class are dumpster diving.

And consider this: Only a little more than half of America has a retirement account, such as a 401(k) or Individual Retirement Account, according to the Federal Reserve. And the typical household with a retirement account had a balance of $60,000 last year, but there are big variations. Among the top 10% of households by income, the typical amount of savings was $403,000. Middle-income households had a median of $25,000.

Everyone who isn’t in the top 10% knows just how bad things are, and those below the top 20% feel it every day.

But what can they do about it? They work, many working multiple jobs. They get home exhausted. They’re too poor to run for office in a rigged plutocracy. So they go to bed and get up and go to work again in the morning, either depressed and angry, or simply depressed.

That’s about all they can do, except to vote for politicians who have no intention of working to change their economic situation.

Each resulting government is worse than the last. Not to mention at this point in terms of power over people’s lives, even the government is dwarfed by the power of multinational corporations.

It’s long past time to wake up America! We’ve got to stop the hostile takeover of the middle class by plutocrats and corporations, but how to do it? We all have to get off the couch and work for local candidates who will be the bench strength of progressive politics down the road. We also must work to insure that our voting rights are not further eroded by polls that close early, or by efforts to prune the rolls of people who haven’t voted in a few years. This is particularly heinous when less than 55% of eligible people vote even in our presidential elections.

To help us wake up, here is the 1970’s British group XTC with their tune “Wake Up”:

Takeaway Lyric:

You put your cleanest dirty shirt on
Then you stagger down to meet the dawn
You take a ride upon a bus, it’s just a fuss
You know it keeps you born
You get to know a morning face
You get to join the human race
You get to know the world has passed you by

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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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Distressed Communities: Another Divide In America

The Daily Escape:

“Impressions of Lijiang” Show, Yunnan Province China. Lijiang Impressions is a cultural show about the traditions and lifestyles of the minorities in Lijiang. The open-air stage is at 10,000 ft. above sea level. The Dragon Snow Mountains behind the stage are higher than 16,000 ft.

The Economic Innovation Group (EIG) has an interesting report on Distressed Communities in the US. They have surveyed changes in counties in distress, from 2000-2015, using census data. The study notes:

America’s elite zip codes are home to a spectacular degree of growth and prosperity. However, millions of Americans are stuck in places where what little economic stability exists, is quickly eroding beneath their feet.

The study found that the majority of new jobs created as the recovery began came in the 20% of American ZIP codes that were already the most prosperous. The 20% of ZIP codes in the least prosperous areas generated just 1% of jobs created between 2011 and 2015.

This isn’t a Republican or Democratic problem. Both parties represent distressed areas. But the economic fortunes of the haves and have-nots have widened the political chasm between them, and it has yet to be addressed by substantial policy proposals on either side of the aisle.

The EIG study captured 99% of the US population. It covers 26,000+ US zip codes that have a population of at least 500 people, the more than 3,000 counties with at least 500 people, and the nearly 800 cities with at least 50,000 people.

Here is a map from the study showing areas of economic advance and retreat:

Our most significant modern recession and the subsequent deeply uneven recovery has exacerbated the gap between wealthy communities and poorer areas, creating a patchwork map of economic haves and have-nots around the country.

Here is another map from the study, showing the most disadvantaged small and mid-sized cities:

 

In Hartford, CT; Newark, NJ; Stockton, CA; and Trenton, NJ, more than one in five residents are now foreign-born. In general, cities with smaller foreign-born populations are more likely to be distressed: In the average distressed city, 15% of the population is foreign-born; in all other quintiles, the average is between 18 and 19%.

In the Northeast, more than two-thirds of the population living in distressed zip codes reside in high density neighborhoods, so distress in the Northeast is predominantly an urban phenomenon. In the South, nearly 60% of the distressed population resides in low density, mainly rural zip codes.  But, all types of distressed communities can be found in all regions.

A full two-thirds of distressed zip codes contained fewer jobs in 2015 than they did in 2000, while 72% saw more businesses close than open over that same time span. In total, 55% suffered net losses in both categories

Fifty-two million Americans live in the most distressed ZIP codes across the nation. Those people are more likely not to have graduated from high school. The poverty rate in those communities is 11 points higher than the national average. And adults in those communities are twice as likely to be out of work as in the wealthiest counties.

They are also far more likely to live near sites polluted or contaminated enough that the Environmental Protection Agency is working to clean them up. There are nearly 13,000 of these brownfield sites in distressed ZIP codes, compared to 3,700 in the most prosperous ZIP codes.

Those who live in distressed areas have a life expectancy almost five years shorter than those who live in prosperous areas. Rates of cancer, suicide and violence are all markedly higher in the poorest areas, and substance abuse disorders are 64% percent more likely, the report found.

The report concludes by saying:

It is fair to wonder whether a recovery that excludes tens of millions of Americans and thousands of communities deserves to be called a recovery at all.

The days of “pull yourself up by your bootstraps” are gone forever. You can’t use trickle-down economics arguments to fool all of the people all of the time, and you can’t even fool a majority of them for very long.

And now, time’s up.

Capitalism hasn’t worked for all of the people since well, never.

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Getting Past Charlottesville

The Daily Escape:

Upper Peninsula MI, 2017 – photo by Otto Heldring

There’s a depressing overtone to Charlottesville that suggests the arc of history is the energy behind the story. Is the nation’s soul about to be divided as it has been many times before? Americans get two chits: One for the ballot box, and another for the soap box. Many people feel compelled to use both. The existential question is how best to use them.

The Charlottesville incident left a woman dead, and many others badly injured from a car-ramming. It has the flavor of a “first shot” in a new civil war. And the president’s criticisms of counter-protesters in Charlottesville seem to be far outside the mainstream. Frank Bruni, NYT:

We’re stuck for now with a morally bankrupt plutocrat for president, someone so defensive and deluded that he’s urging more nuance in the appraisal of neo-Nazis.

Still, many Republicans have been reluctant to condemn Trump’s Charlottesville rhetoric. The right would do well to excise any association with the Hitlerites who chanted “blood and soil” in their torch-lit pseudo Nuremberg rally in Virginia. America remains the land of the free and the home of the brave, but Nazis? Nein, Danke.

We have two conflicts arising from Charlottesville:

  • Does every group still have the right to assemble (peacefully) and speak their minds?
  • What are we to do about the symbols from our divided past?

The 1st Amendment protects most speech, but not the sensibilities of those who are exposed to it. Some speech is guaranteed to be offensive. America has lived with neo-Nazis, the KKK, et al for Wrongo’s entire lifetime, and has survived it, no matter how odious. Even the ACLU assisted the neo-Nazis in Charlottesville.

But there are recognized limits. No one has a right to incite violence. Individuals have no right to defame someone. Some of the limits are easier to define than others: The concept of inciting a riot can lead to a subjective reading of the facts and the application of nebulous standards.

Today’s wrinkle are the armed demonstrators. They imply that a peaceful assembly could be placed at grave risk at any moment. It shouldn’t be difficult to foresee that local people will come out to confront neo-Nazis and white supremacists that are marching in their town. That creates even greater risk of physical violence, and requires that local police are well-trained and disciplined.

Second, there are Confederate statues all over America. The white supremacists who went to Charlottesville to “protect” Lee’s statue need to hear that we will not re-litigate the Civil War. The south’s and the nation’s history are what they are. The Civil War should be given due weight, learned from, pondered, and not shunted aside. Are Robert E. Lee’s existence, deeds, and historical relevance news to anyone?

A suggestion: In Bulgaria, the USSR monuments were removed and placed in a single museum park. The museum’s collection covers the period 1944 to 1989, from the introduction of communism in Bulgaria, to the end of the totalitarian regime. Herding those statues into one place makes a statement that speaks loudly about the era, and how the USSR deprived Bulgarians of their rights.

Maybe a few such statue parks could have a similar effect here.

Let’s not get sidetracked from the most important issue before us: How we remake the US economy so that it provides a decent standard of living and expanding opportunity to as many people as possible.

There are plenty of “deplorables” who would benefit from universal health care, inexpensive college tuition for their children, infrastructure that worked, and good-paying jobs. Uniting the US population around programs that achieve these goals would do much to subdue the angry ethnic divisions that these “political entrepreneurs” are trying to foment.

Moreover, this program is not of the right or the left.

It’s a path toward political stability and a better society – one that would allow people the opportunity to develop into contributing, thoughtful citizens, capable of fully participating in the Republic.

Ok, a tune to help you think about peaceful assembly and whether the statues should stay or go. Here is Depeche Mode with “Where’s The Revolution” from their 2017 album “Spirit”. Wrongo didn’t know they were still working, much less producing relevant tunes:

Takeaway Lyric:

You’ve been kept down
You’ve been pushed ’round
You’ve been lied to
You’ve been fed truths
Who’s making your decisions?
You or your religion
Your government, your countries
You patriotic junkies

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

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