The Wrongologist

For those who may have questioned yesterday’s statement that it will take 5 years to
get to a 6+% unemployment rate, try it yourself with the Federal Reserve Bank
in Atlanta’s handy calculator.

You enter
your target unemployment rate (say, 6.25%) and how many months until you expect
your target unemployment rate to be achieved (60) and the calculator tells you
the average monthly change in payroll employment needed to achieve that target
rate.

You can
also change the Labor force participation rate and average monthly population
growth rate. I used 6.25% target rate achieved in 60 months at a labor force
participation rate of 63.8%. The result was 143.5k jobs/month, very close to
the average of 150k jobs/month we have averaged for the past 24 months.

Try it at: http://www.frbatlanta.org/chcs/calculator/

 

What’s
Wrong Today:

Paul
Krugman says
that minting a trillion dollar coin is preferable to negotiating with Mitch
McConnell and John Boehner on increasing the National Debt Limit.

He suggests
putting an image of Mr. Boehner on the coin.

The
Wrongologist does not agree with any of this, but large coins have had success
in the past. Consider Batman and the Giant Penny:

The
Giant Penny was in the background of the Bat Cave in Batman: The Animated Series. It was
once used by the Batman’s enemy, Two-Face. Two-Face and the “Two-Ton
Gang” captured Batman and tied him to the Giant Penny. The Penny rested on
an over-sized coin-flipping machine. Two-Face boasted that was a “heads I win,
tails you lose” situation: If the coin landed on the side Batman was tied to,
then he would be crushed, but if it landed on its clean side, the impact would
break every bone in Batman’s body. Two-Face activated the flipping device and
the Penny sailed through the air. But, the Batman had managed to pilfer
Two-Face’s lucky coin and used its jagged edges to cut through his ropes.

The
Giant Penny landed on two of the villain’s henchmen.

Maybe
THIS is Mr. Obama’s big idea for his 2nd term: Crushing his
opposition!

What’s
Wrong Today:

December’s
BLS
unemployment report showed that we gained 155,000 total nonfarm payroll (NFP)
jobs. October was revised down by 1,000 to 137,000 jobs and November was
revised up by 15,000, from 146,000 to 161,000 jobs.

While some
in the press are saying that this is a good report because it exceeded
economist’s expectations, it represents more of the very weak job growth that
America has experienced for the past two years.

It is time
to bring more perspective to the problem of unemployment in the US: Our ongoing employment crisis just hit its
5 year anniversary:

Since
the start of the Great Recession in
December 2007, we are still down about 4 million
total jobs, of which 3.51 million are private sector jobs (shown above).

In 2012,
the US gained 1.84 million jobs. In 2011, the US also gained 1.84 million jobs.
So, job growth did not change this year. This tells us that we will need 2 more years of the same growth in jobs to
get back to our pre-recession jobs level.

But
even that won’t be enough:

• We
  have about 12.21
  million people currently out of work, of which 4.8 million are the long
  term unemployed. These are Americans who
  really need a job.

•  About
  2.7 million people
  are expected to graduate in 2013 with Associate’s or Bachelor’s degrees. Some
  of them already have jobs, but they all expect to move to a better position
  with more education. This means we
  need to add about 225,000 jobs/month just to employ these graduates.

To
meet these jobs requirements, we need to average a growth of much more than the
150k jobs per month we have seen for the past 24 months. Yet only 3.7 million jobs are available
in America, against the current need of 12.2 million.

So,
December’s 155k just doesn’t cut it as a good monthly jobs number. We need a massive
rethink of jobs creation.

Will
anything change? The status quo suits the Corporatos
just fine. Corporate profits are the highest in history, the Dow Jones average is
within a
few hundred points of the all time high that we hit in 2008.

But it could easily take 5 more years to return to the number of jobs we had in America in 2008.

And
that would probably still leave us with 6+% unemployment rate, since we will
continue adding new entrants to the workforce between here and 2018.

All this means we are
looking at another 5 years of low economic growth. That means lower tax receipts from
individuals, not simply because we made the middle class tax cuts permanent,
but because median income is stagnant and number of our citizens who are
working is also stagnant:

In
fact, the ratio of people working to total population hasn’t been this low
since October of 1983.

So,
low economic growth, high unemployment, stagnant wages and tax receipts, persistent
calls to weaken the social safety net: It seems very shortsighted to be talking about weakening the safety net when we have 12+ million out of work, another 5+ million working part-time who are seeking full-time work and 40+ million people below the poverty line.

Permanent gridlock in Washington brings nothing concrete to the discussion either.

All
this will lead to slower GDP growth than we have seen historically:

This
chart shows that real GDP growth has been less than 2% annually in the past 20+
years. Imagine what society will look like with growth that averages half that level.

Our
economy is highly dependent upon consumption. More than 70% of what the US GDP
is personal
consumption. Remember the formula for GDP:

C
+ I + G + (X – M) = GDP

C
is personal consumption, I is Private Investment, G is Government Expenditures,
and (X-M) is exports minus imports.

Personal Consumption is more than consumer purchases. It
includes health care expenses, financial services and much more. In 2011, Personal
Consumption was $10.73 trillion of the $15.10 trillion of GDP. Personal
Consumption is divided into goods and services.

Goods contributed
$3.6 trillion in 2011, nearly 25% of total GDP. This includes durable goods, such
as autos and furniture at 7% of GDP. It also includes non-durable goods, such
as food, clothing and fuel. This was 16% of GDP.

Services were $7
trillion of GDP 2011, 46% of GDP. This is much larger than in the 1960s,
when services contributed less than 30% to the economy. A large driver of this
growth has been the dramatic increase of the financial services and health care
industries.

It is starting to look like we have
to expect lower GDP growth and continued high unemployment.

Better
economic conditions are not going to happen spontaneously. Change isn’t going
to be given to us by those who enjoy
the benefits of the status quo. Their
methods have been operating for 40+ years and if measured against the gains made
by the average citizen, have failed. 

And there are consequences to their failure, stupidity and greed.

Can we get past the status quo to create a better world, a world
in which the vast majority are healthier and doing work they care about?

Do we want a society without broad participation
in prosperity? Where economic growth is measured at 1% per year?

 

Next, we will look at what a low
growth, high unemployment future means for America.

For those who fear the number 13: Remember that the 113th Congress convened on 1/3/13…

What could possibly go wrong?

As you know, the Wrongologist has been away from the PC. He was doing the bidding of Ms. Oh So Right, mostly by renovating her home office. This stuff happens when both members of a couple work from home.

Normal posting returns on Monday.

In the meantime, here is why we should be against relying on corporate investment as the sole answer to our economic doldrums:

What’s Wrong Today:

“A house divided against itself cannot stand”-Abraham Lincoln, June 17, 1858

Lincoln didn’t mean it in this context, but we are at a point where the Speaker of the House does not have the ability to bring his caucus along to make any compromises on the budget.

In his Washington Post column last Sunday, E.J. Dionne said:  

This is very similar to what Eric Hoffer wrote in his book, The True Believer, in 1951. Hoffer says:

To assess the lay of the land for the continuing fiscal negotiations in Washington, Ed Kilgore of the Washington Monthly thinks we need to understand what the Tea types really want.

In the summer of 2011, Speaker Boehner quashed efforts by Rep. Jim Jordan (R-OH) to rally support around the Tea Party’s preferred “Cut, Cap and Balance” proposal in the
debt ceiling debate. Instead, Boehner signed onto the deal that led to the present “fiscal cliff” impasse while the Tea Party bore the burden of blame.

What did the “Cut, Cap and Balance” proposal say?

1. Cut – Make discretionary and mandatory spending reductions that would cut the deficit in half next year.

2. Cap – Create statutory, enforceable caps to align federal spending with average revenues at 18% of Gross Domestic Product (GDP), with automatic spending reductions if the caps are breached.

3. Balance – Send the states a Balanced Budget Amendment (BBA) with strong protections against federal tax increases and a Spending Limitation Amendment (SLA) that aligns spending with average revenues as described above.

So, What’s Wrong?

The “Cut, Cap and Balance” Pledge was signed by 12 senators and endorsed by the viable GOP presidential candidates in 2012, including Mitt Romney. It made all three elements a condition precedent to support for any debt limit increase.

By the way, it requires constitutional amendments to pass both houses of Congress. A constitutional amendment isn’t happening unless and until a few more 2010-style GOP landslides occur.

So these guys are not simply for a temporary “hostage-taking” involving the debt limit, but the kind where the hostages are resettled in another country. In the context of hostage taking, consider the impact of another impasse about the debt ceiling increase: It probably leads to another downgrade in our credit rating. If it does, we should be questioning Republicans’ patriotism. This time, they know the damage they are doing to the country, so they could be branded economic terrorists.

The Political Reality of the Teas:

The Teas aren’t simply trying to push the country towards their policy priorities. The whole idea and rationale for the revolutionary trappings and rhetoric is the permanent repeal of much of the domestic policy legacy of the twentieth century.

For the most part, they have little to fear from voters back home. There is no price to be paid for intransigence, though in
most cases there is a big price paid for exhibiting reasonableness.

So that’s who and what we are dealing with. And there are enough of them in the House to keep Boehner from showing much reasonableness either. As Nate Silver at the 538 blog says, the next Congress will not make a fiscal cliff deal easy for Mr. Boehner:

Silver says in a more recent blog:

In this environment, Congressional Republicans have little need to build coalitions with colleagues with different political preferences or values. Twenty years ago, coalitions
mattered. Today, few members of Congress are conservative on fiscal issues but liberal on social issues, or vice versa.

 

Given the policy
of the Republicans to hang tough and refuse cooperation with Democrats or allow
any modification of its core ideology, there is no way out of paralysis in
Washington that doesn’t involve surrender by one party as a sort of
patriotic sacrifice. The alternative is that one side or the other, achieves enough power to make bipartisanship efforts largely unnecessary.

 

What “enough power” means depends heavily
on whether filibuster reform is undertaken and achieved in the Senate and if
the Hastert rule is suspended in the House.

 

Otherwise,
we are an ungovernable country. Only one thing fixes the polarization: A real
governing majority in 2014.

 

A
few final observations:

 

The number of seats
in the US House was increased in nearly every census until 1910 and has not
been increased since. Along the way, the average population per district has grown by
three times.

 

So,
we now have large geographic congressional districts with large populations. Large
districts require expensive campaigns, making Citizens United indispensable to congressional candidates.

 

We should consider making
the districts smaller by adding more seats in The House.

 

There
are no post postmortems of disasters where
the major cause of the disaster is a failure of imagination.

 

This
current crisis in our American democracy ends only if those with the ability to
do something about it (that means you, voters) have the imagination to recognize these Republicans and fellow-traveling
conservatives for what they are:

 

 

A marriage
of dominionist evangelical Christians, John Birch holdovers, Libertarians and Dead
Enders who have wrapped themselves up in a constitution they haven’t read,
mouthing economic theory they do not understand.

According
to preliminary data from the National Center for Health Statistics, the overall birth rate in 2011 was the lowest since 1920, the earliest
year for which there are reliable numbers. Births fell 4% from
2007 to 2009 (the largest drop in the US for any two-year period since the
1970s). Births have declined for three consecutive years, and are now 8% below
the peak in 2007.

The US birth
rate in 2011 was 63.2 per 1,000 women of childbearing age, according to
preliminary numbers. That’s down by almost half from a peak of 122.7 in 1957
during the postwar baby boom. The rate steadily fell before stabilizing at
65-70 births per 1,000 since the 1970s.

Wikipedia reports that researchers
attribute much of the drop in the US birth rate to the recession in 2007-2009. A
state-level look by the Pew Research Center in October 2011, showed a strong
correlation between lower birth rates and economic distress: In 2008, North
Dakota had the nation’s lowest unemployment rate (3.1%) and was the only state
to show an increase (0.7%) in its birth rate.

All other
states either remained the same or declined.

Gretchen Livingston, author of a November
2012 Pew Study about birth rates,
told
NPR:

The Pew
Study showed a correlation between economic difficulties and birth rate declines
by race and ethnicity. Hispanics (particularly affected by the recession) have
experienced the largest decline: In 2008–2009 the birth rate declined 5.9% for
Hispanic women, 2.4% for African American women and 1.6%for white women.

People
confuse the birth rate (number of births per 1,000 women) with the fertility
rate. The fertility rate is the
average number of children born to a woman during her lifetime. 
The fertility rate needed to maintain the current US population is 2.1 children
born to women of child-bearing age.

According
to multiple studies, the US fertility
rate among women is now only 1.9 children
and falling.

So, is
this a blip or an ominous trend?

Nobody
knows. The falling birthrate mirrors what has happened during other American recessions.
 

Charles
Blahous, one of two public trustees for Social Security and Medicare, told Business
Week that birth rates affect both Social Security and Medicare funding, though
he added: “it is fairly typical for birth rates to drop during a recession.” Blahous
said:

A
prolonged decline, particularly in Hispanic births could have far-reaching
implications for US economic and social policy. It would challenge long-held
assumptions that births to immigrants will help maintain the US population
and create the taxpaying workforce
needed to support the aging baby-boom generation.

Still,
foreign-born women continue to contribute a disproportionately high percentage
of American births, birthing 23% of the nation’s babies even though they make
up only about 17% of the country’s female population.

So,
is this a good or a bad thing?

Yesterday,
we discussed the increasing numbers of Singles in America. Today, we are
talking about the falling birth rate. These may be separate developments, but
they are part of the same story: As our largest generation moves toward full-on
retirement we are minting what looks to be our
smallest generation.

The
concern about population decline is dominated by politicians and pundits who
are always on the lookout for a good doom story. They say:

• How
  will we have economic growth without a growing population?
• How
  will we solve our debt crisis?
• How
  will we pay for all of those boomers to have knee replacements?  

How
will our smallest generation, from the start of its working years, face the task
of supporting millions of entitled old fogeys? Something may have to give!

They
are afraid that slower birth rates will cause future economic problems. They see
higher taxes, fewer public amenities, and lower economic growth.

Sorry,
but the first impact of a decline in the birthrate will be positive for the
economy. Society has fewer children to raise and educate. That frees up female
labor to join the economy.

A
declining population also creates a
labor shortage which can have positive as well as negative effects. Initially,
labor participation rates, which are poor today compared to 10 years ago, will increase
to reduce or delay the labor shortage.

Another positive,
a labor shortage increases demand for labor, which can potentially result in higher wages along with a reduced
unemployment rate. While some labor-intensive sectors of the economy
may be hurt if the shortage is severe enough, others may compensate by
increased automation.

We
need to see the bigger picture:

The
Baby Boom generation was not our past and is not our future. We are seeking a new demographic equilibrium,
one in which our society and culture finds a balance that is relevant to the next
100 years, one in which “American Exceptionalism” doesn’t require us to be the
world’s largest economy, but the world’s best society.

Today’s demographic
trends aren’t promising: In 1965, 81 million workers paid for benefits to 20
million people, a 4-1 ratio. The ratio has fallen to 2.8 workers per retiree
and is expected to drop to two workers for every beneficiary by 2035, with 186
million workers paying for 91 million retirees. Additional rationing of health
care will be a common reality.

But,
with declining birth rates and more Singles, this may start to reverse course
after 2035.

Oh,
and slower growth in energy needs, a better environment, more space, less
pollution, less congestion and less waste produced.

Everybody wants those gains from a decline in the global
population, we are just afraid of trying it at home.

It is often said that
demographics is destiny. One emerging demographic trend is that a growing
number of Americans are choosing to
remain single.

It turns out that this trend had a huge impact in the
2012 Presidential election. According to Hanna
Rosin at Slate, the most
significant division within the electorate happened around marriage:  As shown in this Washington Post interactive report about
2012 exit polls, (in the section labeled sex
by marital status), non married men and women were solidly for Mr. Obama
while married men and women were solidly for Mr. Romney.

Here are the numbers:

Singleness, the temporary or permanent postponement of marriage and parenting,
are factors that shrink the birth rate. Surprisingly, they are also the very best predictor of a person’s politics in the US, better
than income and education levels, so
says Ron Lesthaeghe, a Belgian demographer at University of Michigan. He
finds that larger family size correlates
with early marriage and childbirth, lower women’s employment, and
opposition to gay rights, all social factors that lead voters towards
conservative candidates. 

The
2011 US birth rate is at a record low. The marriage rate is tumbling and the
number of single Americans is now at a record high. The convergence of these
trends could have far-reaching implications not only for our politics but also
for the economy:  

• Singles
  account for 111 million eligible voters

• Overall, 40%
  of the people who voted in 2012 were single

• They
  are a part of the population have not been well studied demographically. We
  know how many men and women will be eligible to vote in 2030, but there is nothing to predict the number
  of singles we’ll have

A Nation of Singles – Implications
For the Future

The
Weekly Standard sponsored a post-election
demographic study. The ranks of unmarried women and men are now at historic
highs and continue to increase. This marriage gap and its implications for our
political and economic future are not well understood.  Here are some facts from that study:

• Between
  1910 and 1970, the percentage of people who marry at some point in their lives,
  was never below 92.8%. Beginning in 1970, that number began a
  gradual decline so that by 2000 it stood at only 88.6%. Today, 24% of men and 19% of women between the ages of 35 and 44 have
  never been married

• For
  people between 20 and 34, the prime-childbearing years, the numbers are 67% of
  men and 57% of women in this group have never been married

Geographically,
this group tends to live in cities. As urban density increases, marriage rates
(and childbearing rates) fall in nearly a straight line.

Of the 111 million eligible single
voters,
53 million are women and 58 million are men. Only 5.7 million of these women
are Hispanic and 9.7 million are African American. Nearly three-quarters of all
single women are white.

Returning
to the 2012 election results, Mr. Obama was +16% with single men and +36% with
single women. But the real news was
that their share of the total vote increased by a whopping 6 percentage points over 2008.

That
6 percentage point increase meant 7.6 million more single
voters than in 2008. They provided Obama with a margin of 2.9 million votes,
about two-thirds of his margin of victory. To put this in some perspective, the
wave of Hispanic voters we’ve heard so much about increased its share of the
total vote from 2008 to 2012 by only a single point to roughly 12.5 million
voters. 

Are
we creating a permanent class of singles?

We know
that women are increasingly are graduating from college and joining the
workforce, and postponing marriage. From
2000 to 2010, the number of unmarried women increased 18%, according to
census data.

In 1960, the average American woman married
at age 20. Now it’s 27. That is partly the cause of a boom in solo living, with nearly one-third of all US households
comprised of single people living alone, according to Eric Klinenberg, an
NYU sociologist and author of Going
Solo:The Extraordinary Rise and Surprising Appeal of Living Alone. In 1950,
it was 9%.

Single
men are largely younger than single women, who are more evenly spread across
all age groups. They are also more likely to be unemployed than are single
women.

What are the economic implications
of a larger and permanent singles class?

Currently,
singles make up 49% of the American population, and 28% of all households
consist of one person, the highest levels of singledom in American history.

Perhaps more
important, singletons are fueling the economy. The BLS estimates that consumption
by singles in the US contributes $1.9 trillion to the economy each year.

They spend
more discretionary dollars than their married counterparts. Their average per
capita annual expenditure was $34,471 in 2010, according to the federal
Consumer Expenditure survey, compared with $28,017 for married individuals
without kids and $23,179 per person in the highest-spending families with
children.

Singles
buy one-third of the homes in the US today. Unmarried men and women account for
10% and 21% of all buyers, respectively, according to the National Association
of Realtors.

But it isn’t
all wonderful to be a single person in America. A survey from Generation
Opportunity, a nonprofit dedicated to engaging young adults on economic
issues, shows that college graduates and 20-somethings are delaying important
life decisions like marriage and having children.

The post-great recession economy has brought a challenging job market, lower
earnings, and a greater chance of moving back home with parents for many recent
college graduates. As a result, many are consciously pushing off milestones
like marriage and family.

Generation
Opportunity executive vice president Amber Roseboom said in a statement that
young women’s “careers and dreams have been interrupted”.

So,
What’s Right, and What’s Wrong?

We
will see fewer children, smaller homes and apartments, fewer mini-vans, fewer
schools, fewer obstetricians, fewer toy manufacturers, fewer big box stores,
fewer Republicans.

And
more savings, more investing, more vacations, more self-actualization services,
more clothing manufacturers, more Democrats elected.

More soon about the other side of the
coin: Falling birthrates
and what they mean for our economy.

 

The
ultimate Xmas comment on Plan B:

And here is the Wrongologist’s
stocking stuffer of the year, from the knockknockstuff catalog. A WTF stamp for those useless items
that clutter your inbox, like the text of Wayne LaPierre’s
press conference:

We got a dusting of snow last night and it
was snowing lightly as we opened presents this morning. The Wrongologist had ordered
more snow, but was told that everyone wanted some, so it needed to be spread
around and that was all he could get.

Like most people, the Wrongologist is
seeing family and friends over the next few days. More likely than not, there
will be songs sung in the key of off; by a sib, a child or a grandchild.

Most years, he and his brother sing this song:

“Christmas time is here, by golly

Disapproval would be folly
Deck the halls with hunks of holly,
Fill the cup and don’t say “when.”
Kill the turkeys, ducks and chickens
Mix the punch, drag out the Dickens
Even though the prospect sickens,
Brother, here we go again.

On Christmas Day you can’t get sore
Your fellow man you must adore,
There’s time to rob him all the more
The other three hundred and sixty-four.

Relations, sparing no expense’ll

Send some useless old utensil,
Or a matching pen and pencil
“Just the thing I need, how nice.”
It doesn’t matter how sincere it
Is, nor how heartfelt the spirit.
Sentiment will not endear it
What’s important is the price.

Hark, the Herald Tribune sings,

Advertising wondrous things.
God rest ye merry merchants
May you make the Yuletide pay;
Angels we have heard on high,
Tell us to go out and buy.

So let the raucous sleigh bells jingle,
Hail our dear old friend Kris Kringle.
Driving his reindeer across the sky,
Don’t stand underneath when they fly by” 

Title: A Christmas Carol

Artist: Tom Lehrer

Merry
Christmas, Happy Festivus, Happy Chanukah & Happy New Year to All-Let’s
hope the division in our country is somehow healed.

And that peace on
earth, good will to humankind goes viral in 2013.