Category: Inequality

Our Thin-Skinned Blue Line

When we see each other as enemies, we are the Middle East, and we can no longer work together for the common good. Consider what happened last week at a Minnesota WNBA basketball game:

Four off-duty Minneapolis police officers working the Minnesota Lynx game at Target Center on Saturday night walked off the job after the players held a news conference denouncing racial profiling, then wore Black Lives Matter pregame warm-up jerseys.

Lt. Bob Kroll, president of the Minneapolis Police Federation, the union that represents rank-and-file officers, praised the officers walk out:

I commend them for it… If [the WNBA players] are going to keep their stance, all officers may refuse to work there.

What is lost in the police union grandstanding was that the Lynx jerseys in question read “Change starts with us, justice and accountability” and on the back had Philando Castile’s and Alton Sterling’s names along with “Black Lives Matter” and the Dallas Police Department shield. How is that seen as anti-cop? This highlights how thin-skinned police forces around the US are whenever criticism emerges about bad policing.

But what can be done?

The most recent report from the Bureau of Justice Statistics quadrennial “Census of State and Local Law Enforcement Agencies, 2008” shows that there are 17,985 state and local law enforcement agencies with at least one full-time officer or the part-time equivalent in the US. All of them are managed by local, county or state governments, and the majority of police are members of a local union. Wrongo is not anti-union, but the social identity of being in law enforcement cultivates a code of unduly protecting members, hiding evidence, and blindly supporting the position of other officers simply because of their collective identity. The “Blue Wall of Silence” around cops is the excuse to cover up bad behavior in the face of investigation.

Creating an equivalency between #BlackLivesMatter and #BlueLivesMatter is wrong. Consider this thought from Jonathan Russell, Professor and Chaplain at the USC Center for Religion and Civic Culture:  (emphasis by the Wrongologist)

A black life is a life under the threat of social death, a social life constituted by precarity and the potential of imminent death…Blue lives have no analogous history, no precarious location from which their collective lives need recovery…Blue lives are not…living under conditions similar to black life. It is the history of black lives not mattering that gives meaning to the hashtag. Blue lives have no such analogous history.

Russell goes on to say:

Blue lives have always mattered, present and past. Their experience of social space is (for the most part) one of…deferential treatment… It is profoundly misrepresentative and disrespectful to develop an analogous hashtag, as if blue lives have an analogous experience of social life in America as black lives have. This hashtag is wrong in so much as it connotes that the lives of law enforcement officers have failed to matter sufficiently in the broader public consciousness.

For the umbrage-takers out there, relax. Wrongo isn’t saying that cops don’t deserve respect, they do. He thinks that cops have a tough job, and that we must mourn any cop killed on the job. But, we can’t be blind to the power of this confrontation between #Blue and #Black to tear us apart.

Here is ginandtacos: (emphasis by the Wrongologist)

I keep holding out hope that we will learn something from this, that police can say to themselves “All those Dallas officers wanted was to do their job and go home alive at the end of the day” and have some moment of inspired transference wherein they realize that every black person they pull over in a traffic stop wants the same...

More from ginandtacos:

If most cops are good cops as we are repeatedly told – and statistically that’s true, as most departments have a few officers who account for the majority of complaints – then it is time for the Good Cops to stop participating silently in a broken system. It’s time for Good Cops to do something about Bad Cops.

Is this realistic, given the Blue Wall of Silence and the power of the police unions, who go ballistic at the merest hint of criticism? Politicians who criticize their PDs are seen as “weak on crime.” However, when police unions are part of any decision to fire a cop, what is the alternative? Two additional considerations:

  • An armed society makes for nervous and trigger-happy law enforcement officers.
  • Police have an expectation of immediate and absolute compliance with every command. Anything less is deemed justification for using force.

Fixing all of this will take action on multiple fronts. We have to soften the Blue Code. We need to see fewer guns on the street. We need to reform police protocols.

We need to talk to each other.

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July 4, 2016

Independence Day 2016. And 240 years later, where are we?

COW Our Sad Fourth

Our founders were willing to die for an idea. They wanted home rule, not a local dictatorship run by a representative of an English King. There were spirited debates around the ideas that founded our Republic, and there were those who worked hard to keep the rule of the King in place.

So are the contentious debates of today just more of the same? Here is a small taste of Sebastian Junger’s new book, “Tribe”: (pg. 124)

Today’s veterans often come home to find that, although they’re willing to die for their country, they’re not sure how to live in it.

He goes on:

It’s hard to know how to live for a country that regularly tears itself apart along every possible ethnic and demographic boundary.

On the front lines, GI’s know their buddies are different in all sorts of ways, but they set aside their differences and form units that transcend differences, often heroically. Yet, in 2016 America, on a different set of front lines, our politicians amplify differences, going so far as to regularly accuse rivals of deliberately trying to harm their country.

Our society is at war with itself. Depending on their ideology, people speak with complete contempt about the rich, the poor, the educated, or the foreign-born. They express the same contempt for the president, and again, depending on their ideology, the entire US government.

That’s a level of contempt we have usually reserved for enemies in a time of war. But now, we apply it to our fellow citizens. Contempt is particularly toxic because it implies that the attacker has a position of moral superiority, and through that, has the agency to attack another.

So, on our most patriotic day, put down that hot dog, and ask the question: How do we unify a secure, wealthy country that is now playing a zero-sum political game?

Time to wake up, America! And to help with that, let’s dance around the room with a little rockabilly by Elvis Presley. Elvis was treated with contempt by some in the 1950s, but it was mostly silent, and by the Silent Generation, who thought they were protecting their kids from rock & roll.

Take a listen to “Good Rockin Tonight”, and remember Scotty Moore, the original guitarist for Elvis, who died last Tuesday. He was not just our last living link to the King (assuming the King is really dead), he was the force behind Elvis’s early singles. Scotty is in the Rock & Roll Hall of Fame.

His reverb-drenched rockabilly guitar was the driver in the originally drummer-less trio of Elvis, Scotty and bassist Bill Black:

COW Elvis and Scotty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rolling Stone ranks Scotty Moore No. 29 on its list of the 100 greatest guitarists of all time, saying “The playing was so forceful that it’s easy to forget there was no drummer.”

Keith Richards has said:

Everyone else wanted to be Elvis. I wanted to be Scotty.

Here are Elvis, Scotty and Bill on “Good Rockin Tonight”:

 

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Hillary Should Grab Populism and Run With It

The biggest change in our politics in the past 20 years is the rise of populism on the left and right. The populists believe that we are led by a selfish elite that cannot—or will not—deal with the problems of ordinary working people, and there is ample evidence that they are correct.

Trump and Clinton say they will bring back jobs that corporations have shipped offshore. They make China the scapegoat for lost economic opportunity, while the real causes are automation and the triumph of the spreadsheet in corporate strategy.

Those jobs are never coming back, and a candidate who says they can negotiate with foreign governments to bring jobs back demonstrates either their naiveté about the true cause of job loss, or a simple desire to BS the American public.

Voters can see through that.

Economic and cultural insecurity are the bedrock causes for populists. Unemployment and stagnant wages hurts working-class whites, while cultural issues are a top issue for older white Americans. The first group sees their jobs threatened by automation and globalization. They join with older whites in seeing immigrants as scroungers who work for less, grab benefits and if you believe Trump, commit crimes.

Both groups also believe that American society is being undermined by diversity and foreign-born citizens.

This is the battle line of the 2016 presidential election. The mediocre economy that has been with us for nearly 20 years has caused real harm. We remain a wealthy country, but certain groups now see their opportunity slipping away. Slow growth, or no economic growth, means only a few elites will do well, and most voters see the self-serving political class as siding with the elites.

So can a candidate unify an electorate that now plays a zero-sum political game?

  • The Pant Load has the better position in this game, since he can exploit pre-existing fears that are based in fact.
  • The Pant Suit must carefully calibrate her message, but she cannot be a “maintain the status-quo” candidate and win.

Clinton would do well to consider what William Berkson said in the WaMo:

If there is one national goal that Americans can agree on, it is opportunity for all.

Berkson makes the point that since President Reagan, Republicans have advocated a simple theory of how to grow the economy: The more you reduce government involvement in the economy and the more efficient markets become, the more the economy grows.

Sorry, but the simplistic theory of free market economics has been drowned in a tsunami of fact in the past 35 years. Berkson says:

Both Democratic administrations since Reagan—that of Bill Clinton and Barack Obama—have raised taxes, and under them, the economy grew more rapidly than under the tax-cutters Reagan and George W. Bush.

This opens a path for the Pant Suit. In order to win, she must assure voters that she will deliver more and better jobs. Family income must go up. But how to achieve this?

By advocating a policy of economic opportunity through public investment in infrastructure. It fulfills the promise of opportunity for all, a populist message that has proven to work throughout America’s past. And it allows Clinton to hammer the GOP Congress and Paul Ryan about the lack of any track record for laissez-faire policies, since they have never worked, not even once, as a miracle cure for jobs and income inequality. This would be an open return to Keynesian economics. Here is Eduardo Porter in the NYT:

The Keynesian era ended when Thatcher and Reagan rode onto the scene with a version of capitalism based on tax cuts, privatization and deregulation that helped revive their engines of growth but led the workers of the world to the deeply frustrating, increasingly unequal economy of today.

And led to the low growth economy that drives today’s populist anger.

How to fund that infrastructure expense? More revenue. For the last 40 years, Democrats have been unwilling to counter the conservative argument that higher taxes are a redistribution of wealth between classes. Clinton should argue that current tax policy is really a transfer of resources from tomorrow’s generation to today’s. This is a strong populist message.

Younger Millennials understand this clearly. They already believe Social Security will not be there when they need it. She can win them over if she makes a case for new jobs and new revenues.

When conservatives say that it is unfair for people in their highest earning years to pay more taxes on that income, Clinton can point out that this is a past-due bill that they need to pay just as their elders paid higher taxes that supported the current earners when they were starting out. It was that investment in public resources such as public education and infrastructure, and in research, technology and industry that enabled today’s peak earners to get where they are.

While the strategy opens Clinton to criticism from Grover Norquist and the right about fiscal irresponsibility, it pits Trump against the Tea Party and the GOP. He would need to choose between being a populist or a doctrinaire fiscal conservative. Either way, it will bleed votes from some part of his base.

The strategy could work in down ballot races as well, particularly in the Rust Belt. Maybe working class conservatives will hear her, and not vote against their economic interests for once.

We’ll see if she will move from status quo, to “let’s go” as a campaign strategy.

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More Political Lessons From Brexit

There is a neoliberal aspect to Brexit that has many Brits in the 1% quietly (and tentatively) quite happy. Fraser Nelson, editor of the Spectator and a columnist for the Daily Telegraph, writing in the WSJ, said the Brexiteers:

…think the vote for Brexit was about liberty and free trade, and about trying to manage globalization better than the EU has been doing from Brussels.

Neoliberalism at its finest. You could substitute “No Obama” for “Brexit”, and “Washington” for “Brussels”, and think it was the GOP talking.

Mr. Nelson says that a major problem was that the EU’s centralized, command-type structure makes local issues difficult to manage. He says that regulations issued at the European level, rules promulgated by officials whose names Brits didn’t know, people they never elected and cannot remove from office, became law in the UK. More from Mr. Fraser: (emphasis and brackets by the Wrongologist)

Mr. Cameron has been trying to explain this to Angela Merkel…He once regaled the German chancellor with a pre-dinner PowerPoint presentation to explain his whole referendum idea. Public support for keeping Britain within the EU was collapsing, he warned, but a renegotiation of its terms would save Britain’s membership…Mr. Cameron was sent away with a renegotiation barely worthy of the name. It was a fatal mistake [by the EU] not nearly enough to help Mr. Cameron shift the terms of a debate he was already losing.

The EU took a gamble: That the Brits would not vote to leave. A better deal—perhaps aimed at allowing the UK more control over immigration, a top public concern in Britain—might have stopped Brexit. But the absence of a deal sent a clear message: The EU isn’t interested in reform.

The EU apparently needs fixing, but it won’t be the UK who does it. Cameron tried in a lukewarm way to fix Europe a little around the edges, and failed. A final point from Mr. Fraser:

The question is not whether to work with Europe but how to work with Europe. Alliances work best when they are coalitions of the willing. The EU has become a coalition of the unwilling, the place where the finest multilateral ambitions go to die.

Perhaps. It IS clear that not all regulations are created equal, some are inefficient, and some are just stupid. But, a business environment with fewer government regulations is the wet dream of most business owners, while it often harms consumers. It is also true that the Brexit supporters were able to conflate in the minds of voters all the discontent with UK austerity, benefit cuts, poor quality job creation and wage stagnation along with the EU’s hegemony, into a big ball of emotion.

And it worked.

The inside-the-bubble UK neoliberal view is that the EU was the problem, and the British voters solved that. America doesn’t have an analogue. We could leave NAFTA, but that has none of the earth-shaking possibilities. We could fail to pass the TPP. That would be a yuuge anti-neoliberal event.

There is an economic malaise in blue collar UK. Once an industrial powerhouse, it has become service driven, with finance and lawyering representing a significant portion of its economy. Sounds just like America in 2016.

Let’s link all of this up with our domestic political economy:

  • Income inequality has grown in the US since at least the 1980s.
  • Real median income is the same as in 1996.
  • Our Labor Participation Rate (the share of American civilians over the age of 16 who are working or looking for a job) is about where it was in the 1970s.
  • Despite a rosy headline unemployment rate of 4.7% (which counts only people without work seeking full-time employment), the U-6 rate (includes discouraged workers and all marginally attached workers, plus those workers who are part-time purely for economic reasons) is much higher at 9.7%. In human terms, that is 15.3 million souls who need a job.

Donald Trump and Hillary Clinton both see these things. The candidate who convinces voters that s/he will really address them will win.

Trump is correct when he says if there are millions out of work, how can we permit immigration? He wrongly focuses on Mexicans, but he’s right: We need fewer people pursuing the fewer jobs we will have until at least until 2025, when finally, all the Baby Boomers retire.

America is in a class war, but it’s the working class versus the middle class rather than workers versus billionaires, as Bernie talks about. Joe Six-pack doesn’t hate the billionaire class. Therefore, Trump is acceptable.

The Pandering Pant Load sees this, and has moved to exploit their anger.

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How Brexit Informs The Pant Suit’s Strategy

We are told that the Pant Suit is the candidate of the status quo, while the Pant Load is a wild card who will bring about change, possibly change that causes immediate remorse if he is elected. That’s just what the UK is experiencing. After a weekend facing the realities of Brexit, 3.5 million Brits have signed a petition for a do-over vote on “Remain vs. Leave”.

The pundits say Clinton can’t be the candidate of change because she supports President Obama, and the common view is that her first term would be Obama’s third term. But, if Brexit has relevance for the American election, she must avoid appearing to be the candidate of the status quo.

If the Pant Load can make the election about any kind of change vs. more of the same, Clinton will be vulnerable.

She should run against Trump’s fitness to govern, and the fitness of the Republicans in Congress to govern as well. After all, Republican Congressional leaders decided not to govern in January 2009, and so far, they have not paid a political price for their obstructionism. Of course, Mr. Obama tried to run against the do-nothing Congress in 2014, and the result was that the GOP took control of both houses.

Maybe it would be different this time for the Pant Suit.  As Steve Waldman said about this strategy at the WaMo:

But if it could ever work, it’s now.  The most recent Economist/YouGov poll reported a 9% approval for Congress among registered voters. It is literally the most unpopular Congress in the history of polling.  Clinton can make the attack more effectively than Obama, because it won’t sound as much like blame-shifting.

And she could make running against Congress sound like change. She needs to shift some of her focus away from declaring the Pant Load unfit for office. That is, unless he keeps making more mistakes like his inexplicable PR disaster in Scotland.  If he does that, her speeches will write themselves, and he will keep sliding in the polls.

She should run to enact specific things that Congress has blocked – infrastructure spending, ending tax breaks for corporate off-shoring, and universal background checks for gun ownership. But she needs to distance herself from more from Obama on global trade deals. Consider this from the Detroit Free Press:

CNN’s exit poll, which surveyed 1,601 Michigan Democratic voters as they left their precincts Tuesday, showed that 58% of them believed trade with other countries costs jobs, compared to 30% who believe they create them. And among those who believe trade costs jobs, Sanders won by a large margin, 58%-41%.

Michigan is a key state for Clinton, and she needs to build a firewall in a few other states that Obama won in 2012, but where she now has some trouble, if the June 21 Quinnipiac polls for Florida, Ohio, and Pennsylvania are correct. The polls show Clinton with a clear lead in Florida (47%-39%), but locked in ties in Ohio (40%-40%) and Pennsylvania (42%-41%).

She has to keep the Pant Load from winning both Ohio and Pennsylvania, which right now, look to be toss-ups, meaning Trump could win both. Pennsylvania also has a number of swing House districts and an important Senate race, so Clinton must work hard there, even if it were completely in the bag for her. OTOH, PA elected a Democratic governor in the 2014 Republican landslide, and hasn’t gone red in a presidential election since 1988. This, from Booman:

For starters, Obama won in 2012 with 332 Electoral College votes to Mitt Romney’s 206. If we keep everything the same and award Ohio and Pennsylvania to Trump, the result is 294-244.

So, winning Ohio and Pennsylvania would be a start for the Pant Load, but without Florida, it’s hard to get from 244 to the 270 votes needed to win. In fact, without Florida, Trump would have to win Ohio, Pennsylvania, Virginia, New Hampshire and Michigan, while losing Iowa in order to garner a 277-261 victory.

It’s a long way to November, and who knows who will win? It’s difficult to believe it will be close, but we lived through two Nixon wins, so electing someone you dislike and distrust is nothing new for America.

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The Pant Suit vs. the Pant Load – Jobs, Part Infinity

We are in a time when a presidential candidate’s personality counts for more than the candidate’s policies. Candidates obfuscate on most policy issues and the media lets them get away with absolutely outrageous declarations of near-facts or outright half-truths.

One policy we must make them nail down explicitly is their jobs policy.

The key to making America great again is adding more jobs. Wrongo is a pest on this subject, but without more jobs, growth in GDP is harder to achieve. Tax revenues are more difficult to grow. People who are idle get into trouble.

The Pant Suit and the Pant Load know this, so they will talk from here to November about adding manufacturing jobs back to cities that lost them starting in the 1970’s. Those jobs are never coming back, but both of them are working hard to convince you they can do it. Consider this, from Parallel Narratives:

We’re now being told by folks who know better that all we need to do to bring those jobs back, to resurrect a future we can believe in, or make America great again, is to elect the outsider politician who is not beholden to elite interests like banks, CEOs and politicians. Unfortunately, that horse has left the barn, those jobs are gone for good…

A great example of a politician braying the “I can bring jobs back” mantra was in Sunday’s NYT business section’s column, “Preoccupations.” In it, a young couple had the option to work from home, so they moved from Austin, TX, that hot-bed of tech, to South Portland ME, not so techie. They work for two different firms from two home offices. Then, they are invited to attend a funds-raiser for a gubernatorial candidate: (emphasis by the Wrongologist)

The candidate raising campaign funds was a hard-working lawyer who seemed genuinely well meaning, but no one had told him that his economic platform of protecting manufacturing jobs and Maine’s traditional industries wasn’t going to fly with an audience of health care professionals, programmers, web designers and researchers…We muttered to each other that this guy didn’t have a place in his platform for people like us, many of whom worked for employers in other states. Our checkbooks stayed in our pockets.

If you hear this kind of BS from the Pant Suit or the Pant Load, your checkbook should also remain hidden.

While the low-wage jobs problem has been around for more than 40 years, America’s politicians are still peddling the same solutions. In fact, a new analysis from the White House’s Council of Economic Advisers (CEA) released Monday shows that only 88% of men ages 25 to 54 are participating in the US workforce. The CEA reports that the US has the third-lowest labor-force participation rate for “prime-age men” among the world’s developed countries. We have done so well that, on a percentage basis, Greece, Slovenia and Turkey all have more men working than the US does. Greece! The decline is concentrated among less educated. Here is a chart:

Male Labor Force Part by Edu

More than 95% of men used to work in 1964, regardless of their educational attainment. Today, you better have at least a bachelor’s degree if you want to be sure you will get a job.  But it is worse than that. The CEA said:

In recent decades, less-educated Americans have suffered a reduction in their wages relative to other groups. From 1975 until 2014, relative wages for those with a high school degree fell from over 80% of the amount earned by workers with at least a college degree to less than 60%.

Clinton and Trump would have you believe that the problem is bad trade deals with China, the TPP, or immigration. Trump in particular, is saying that the political elites have knowingly caused this all at the expense of the American worker. There is a modicum of truth to that, but it is the American corporation and the American tax code that is closing out US jobs, and hammering the middle class. American corporations now pay about 11% of our total US taxes, down from about 30% of US taxes in 1960, as jobs (and markets) have moved abroad.

What are the Pant Suit and/or the Pant Load going to do in the face of advancing automation now facing us not just in manufacturing, but also in the service and knowledge industries?

It is time to make the candidates talk about this on the campaign trail.

The basic policy choice we have is to put people to work, or to continue to allow the profit motive to dominate. If the profit motive remains supreme, we will continue our relentless drive to reduce labor costs — by eliminating jobs, or by paying workers less for the same work.

To date, our leaders have chosen the latter path, and we have reaped the results. We have become a land of spreadsheets and flags.

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More Questions for The Pant Suit and the Pant Load

Yesterday, Wrongo broke the bad news about the May job report. Exactly one year ago, Wrongo wrote “Technology Isn’t Creating Enough Middle Class Jobs.” That article spoke about how deploying new technologies continues to cost more and more mid-skilled jobs.

With low interest rates, the cost of capital investments have fallen relative to the cost of labor, and businesses have rushed to replace workers with technology. Because of technology, since the mid-1970s capital and labor have become more substitutable, and it’s a major global trend. Some proof of this is in the article in the Quarterly Journal of Economics, where  Loukas Karabarbounis and Brent Neiman from the University of Chicago found that the share of income going to workers has been declining around the world.

As Brad Delong, economist at the University of California, Berkeley, wrote recently, throughout most of human history, every new machine that took the job once performed by a person’s hands and muscles increased the demand for complementary human skills — like those performed by eyes, ears or brains.

This is no longer true. From Wrongo’s June, 2015 column:

Facebook is touted as a prime player in the knowledge economy, but it only employs 5,800 to service 1 billion customers! Twitter has 400 million total users. It has 2,300 employees.

What is the value of Facebook and Twitter to the jobs economy? These are two of our very “best” success stories, and they only employ 8,100 workers.

These firms have had a huge impact on society, but the total jobs they have created are only a rounding error in our economy.

As the idea sinks in that human workers may be less necessary than in the past, what happens if the job market stops providing a living wage for millions of Americans?

How will people afford to pay the rent? What will happen if the bottom quartile of workers in the US simply can’t find a job at a wage that could cover the cost of basic staples?

What if smart machines took out the lawyers and bankers? Bloomberg is reporting that job loss is on the way for bankers. Banks are racing to remake themselves as digital companies to cut costs. In other words, they’re preparing for the day that machines take over more of what used to be the sole province of humans: knowledge work. From Bloomberg:

State Street had 32,356 people on the payroll last year. About one of every five will be automated out of a job by 2020, according to Rogers. What the bank is doing presages broader changes about to sweep across the industry. A report in March by Citigroup…said that more than 1.8 million US and European bank workers could lose their jobs within 10 years.

They close by saying that Wall Street will go on—but without as many suits.

Some estimates say that automation could cost half of all current jobs in the next 20 years. The OECD thinks the number is smaller. They argued last month that lots of tasks were hard to automate, like face-to-face interaction with customers. They concluded that only 9% of American workers faced a high risk of being replaced by an automaton.

9% of today’s American workforce equals 13.6 million jobs. It just took us seven years to gain 14.5 million jobs, most of which were contractors and temp jobs.

The prognosis for many medium and some higher-skilled workers appears grim.

The corporatists have seen these forecasts. It explains their unwillingness to do anything serious to create effective jobs programs here at home. They don’t need to do anything, because there is a (virtually) infinite supply of skilled and unskilled workers in the overpopulated third world.

So, these are today’s questions for the Pant Suit and the Pant Load, and their answers need to be specific:

  • Where will the household’s income come from when jobs alone can’t provide it?
  • How will we deal with large-scale inequality that requires large-scale redistribution?
  • Is it time to think about how to provide more income that isn’t directly tied to a job?

From Eduardo Porter:

For large categories of workers, wages are already inadequate. Many are withdrawing from the labor force altogether. In the 1960s, one in 20 men between 25 and 54 were not working. Today it’s three in 20. Although the population is generally healthier than it was in the 1960s; work is almost uniformly less demanding. Still, more workers are on disability.

The issue is not technology, or robots, or restoring our manufacturing base. It isn’t better skills, or technology or outsourcing. We have too many people chasing too few good jobs.

This is why we need the presidential candidates to speak the truth about job creation in America.

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Pant Suit vs. Pant Load, Part III

(Note: this week there will be no Sunday Cartoon Blogging, since Wrongo will be visiting MA and PA through Sunday, returning on Monday.)

Wrongo and long-time blog reader Terry engaged in a short email dialog on how to “fix” the US political system. We were concerned that there is no individual Congressperson accountability. A backbencher can follow an agenda that can imperil our nation (and a few have done just that) without consequence.

But in America, accountability is managed by election district. Your only alternative is to round up enough votes to replace poor representation. So, if you wanted to reform the impact that money has in our politics, or the way the filibuster works in the Senate, you have to reform Congress.

Yet, under our Constitution, only Congress can reform Congress. And today, there are three parties vying for control of it, and since they rarely are willing to work with each other, not much gets done. So you can completely forget about Reform.

And the parties have not been willing to deal with the not-so hidden desperation in America that shows up in statistics like increasing opioid addiction and suicide rates. The political class ignores how lethal the US economy is for the less fortunate: The New York Times reported this week that US death rates have risen for the first time in a decade.

The increase in death rates among less educated whites since 2001 is roughly the size of the AIDS epidemic. One reason is the use of opioids. And, despite Mr. Obama’s speech in Elkhart, IN where he said our economy is doing well, there has been a spike in suicides to levels higher than during the 2008 financial crisis.

The little people know that the economic policies followed by both parties have brought income inequality to Gilded Age levels. They know that all of the post-crisis income gains have accrued to the top 1%. Unlike in China which continues to grow, our economic expansion has brought with it high unemployment and underemployment, particularly among the young.

As a result, people feel powerless. In fact, a RAND survey in January found that 86.5% of GOP voters who strongly identified with the statement “people like me don’t have any say about what the government does” were Trump supporters.

And, since so much of politics is about corralling money into the bank accounts of our politicians, your Congresspersons have no intention of listening to you unless you have given at least $10,000 to their campaign fund, or are the CEO of a major employer in their district or state. In US politics, money=speech. But, there is little meaning to free speech without free access to influence the political process.

Many of us feel nihilistic about our politics and our government. So the Pant Load’s support seems a lot like a form of public political vandalism where The Donald is the can of spray paint.

Most people can see that a large portion of Americans are poorer with each new election cycle. After all, the reason Trump (and Sanders) are doing well is because many, many workers are seeing their job security, income security, and retirement security all go up in smoke. That’s no mystery, just the natural outcome when the government fails to represent the people in favor of the rich who fund their campaigns. It’s no wonder the Pant Load is easily corralling the frustrated.

But can the Pant Suit reverse the Democratic Party’s abandonment of the working class in America?

We know that she needs to focus on drawing more potential working class and young supporters, but so far, Democrats are content to run only in their municipal strongholds, following a strategy of stitching together interest groups, largely in states with big urban populations.

Energizing people around the fact of our corrupt political system is both a way to get higher turnout, and a way to elect members of Congress and state legislatures to fix the corrupt system. That is Bernie’s message, what he calls a “political revolution.” But Sanders is not the person to bring this about. Consider Sanders just the messenger.

Strategically, the Pant Suit needs to figure out how to get folks energized enough to vote for her and against Trump for reasons that don’t so paralyze them with fear that they stay home. If she is successful, it could be the start of re-establishing the New Deal coalition, and a re-installation of the principles of the civil rights movement.

That’s a huge job that will not be completed in one election cycle.

This threat is the GOP’s worst nightmare. They have worked for 40 years to eliminate these ideas, so expect the GOP to unanimously support the Pant Load:

COW Never Hillary

The Bernie Dems will rally behind Hillary for similar reasons.

Trump/Arpaio 2016: Because immigrants are the greatest threat to the nation.

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Will Take-Home Pay Grow?

One of the big questions that we must force Hillary Clinton and Donald Trump to address is: Where will growth in take-home income come from?

If we look at pay, despite recent improvements, real average hourly earnings have declined since the 1970s:

Real Hourly Earnings 2016

Source: Advisorperspectives.com

At the same time, the average hours per week have trended down from around 39 hours per week in the mid-1960s to a low of 33 hours at the end of the last recession. It is 33.7 hours today. After eight years of economic recovery, it is only up by 42 minutes.

So, take-home pay has stagnated (or worse) for the average American since the Nixon administration. People have coped by having both spouses work, by borrowing under a Bank of America heloc, and by refinancing mortgages when interest rates declined.

But, by 1995, spousal participation in the job market had peaked, at about 60%. Borrowing under home equity lines of credit peaked in 2005 at $364 billion. These loans that were used to pay for remodeling, education costs, or new Ford F-150s were less than half of that amount in 2015, at $150 billion.

After the Great Recession, The only remaining way to boost household cash was mortgage refinance. There were windows to refinance a mortgage in 2009, and again in 2013. The reason was that mortgage interest rates stayed very low. In fact, US 10 year treasuries were at a 60 year low in 2013 at 1.50%, and mortgage rates are tied to the treasury rate. Refinancing mortgages can happen to many people, this is where companies like Polar Mortgage come in to help homeowners out. Homeowners also have the ability to get financial help from the government through the use of federal credit union home loans in order to refinance their homes.

As an example, a 1.5% decline in a mortgage payment on a $250,000 house would save $3750 a year, or a little over $300 a month added to the pockets of the average hourly worker. Taking income tax into consideration, it would take an additional 17.5 hours of work at the $21.45 rate to equal that amount. But that’s not practical. It would require a 52% increase in hours, if you are working the national average number of hours, which isn’t going to happen.

So, if the Federal Reserve raises interest rates, as they seem set to do this month or next, mortgage refinance will no longer be helpful to the vast number of working people. CoreLogic tracks the interest rates on outstanding mortgages, collecting data from mortgage servicers. Their data track the volume of outstanding mortgages by interest rate level for both the number of mortgages, and the unpaid principal balance on those mortgages (UPB).

Their analysis says that few mortgages will be refinanced if rates go up: Most borrowers have mortgages with rates below 4.50%, with 62% of mortgages and 72% of UPB in this range. There are an additional 14% of borrowers and 13% of UPB with mortgage rates between 4.5 and 5.0%.

Since refinancing has costs (legal, title search and insurance, and points), a simple rule of thumb is to add 1% to the current mortgage rate to get a rate at which borrowers would have a financial incentive to refinance. The current Freddie Mac mortgage rate is 3.57%, so the point of indifference for a borrower would be ~4.5%. CoreLogic estimates that only about 28% of the UPB of America’s outstanding mortgage loans are worth refinancing today. And should the Fed live up to their plan, and increase rates by ½% in 2016, an additional 5.5 million borrowers will lose their incentive to refinance.

So, if mortgage rates rise in 2016 as predicted, refinancing won’t improve the financial situation for very many of us.

New Deal Democrat sees all of this and says:

So the bottom line is, we are already in a period…where real gains by average Americans won’t be available from financing gimmicks, but must come from real, actual wage growth. At the moment I see little economic or political impetus to make that happen, even though average Americans understand via their wallets the issue all too well.

We’ve killed our economy.

You’d think after 8 years where most US job growth was in part-time jobs, where hourly income is at the same level as in the Ford administration, where we have the most people ever in poverty, where student debt exceeds credit card debt and automobile debt, people would catch on.

Maybe, but not unless we demand real answers of Hillary Clinton and Donald Trump, and not let the candidates say the plan is to rearrange the deck chairs on the Titanic.

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The Revolution WILL Be Televised

There is a lot of talk that the 2016 election is the start of a political rebellion in the US. We see the large, enthusiastic Sanders/Trump crowds, and the candidates’ relative success with winning primary elections, and have to ask:

  • Will it remain a political rebellion, one that expresses itself through the electoral process?
  • Will it continue beyond the 2016 election, assuming an Establishment candidate wins?

It began with the failure of the US economy to add permanent jobs for the middle class, and the lower classes after the Great Recession. Our column outlining that all jobs created since 2005 were temporary or contractor jobs showed that people are living paycheck to paycheck, but fewer have benefits, and all are afraid that they could be out of work with any personal or economic hiccup.

And wages are not rising the way corporate profits are, as this chart shows:

Corp Profits to HH income

So, fewer jobs as an employee, and no change in household income. More risk, no more money. Life for the average person in the US is harder and more frightening for a large group of people. Maybe they are not yet a critical mass of voters, but there are enough angry people that the Establishment political machines may be disrupted.

Since many see the worsening of the life of the middle class to be permanent, there is little reason for hope if you are on the fringe of our society. So, we’re watching that play out in the 2016 electoral race.  People are finally getting tired of one or the other of these two campaign pitches:

  • We are the greatest nation on earth, but only if we elect candidate X, because candidate Y will ruin us
  • Or, you can’t have a good job with dignity, or good schools, or ask us to address any other of our serious problems, because we can’t afford it and people won’t pay more taxes

And as Gaius Publius says, there’s no other way to see the Sanders and Trump insurgencies except as a popular rebellion, a rebellion of the people against their “leaders.” On the Sanders side, the rebellion is clearer. Sanders has energized voters across the Democratic-Independent spectrum with his call for a “political revolution,” and that message is especially resonant with the young. From The Guardian:

Analyzing social survey data spanning 34 years reveals that only about a third of adults aged 18-35 think they are part of the US middle class. Meanwhile 56.5% of this age group describe themselves as working class.

Fewer Millennials (who number about 80 million in the US) are describing themselves as middle class. The number has fallen from 45.6% in 2002 to a record low of 34.8% in 2014. Ms. Clinton will need to rely on Sanders supporters falling in behind her – and faced with the prospect of a Trump presidency, many may do so. She also intends to try to win over “moderate” Republicans, assuming that the Bernie voters have nowhere to go.

That might work, since as Benjamin Studebaker says, Clinton is arguably closer to the Republican establishment than are Trump or Cruz. In fact, the Democratic and Republican establishments are both closer to each other than either is to its own anti-establishment wing.  Consider that Clinton and the Republican Establishment both:

  • Support the Trans-Pacific Trade Partnership (TPP)
  • Support immigration reform
  • Support foreign aid
  • Oppose Medicare for all
  • Oppose tuition free college
  • Oppose a $15 minimum wage

It would not be unreasonable for moderate Republicans to conclude that Clinton is closer to their ideological needs than are Trump or Cruz. Clinton may play for the other team, but at least she’s in their league.

The Establishments of both parties have no vision when it comes to solving income stagnation for the 99%, or solving our crippling health care cost increases, the trade treaty fiasco, and the military establishment’s continued sucking of more and more money from our budget.

These cumulative burdens will break people’s belief in a better, more secure future. Either policy changes are enacted by the next Establishment president and Congress, or things could start to come unglued.

Which means that for almost every one of us, this could be the most consequential electoral year of our lives.

So, the Establishment wings of both parties need a Monday wake-up call. Here to rouse them from slumber is Iris DeMent with “Livin’ in the Waste Land of the Free”:

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

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