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The Wrongologist

Geopolitics, Power and Political Economy

Fed Study Shows Rising Financial Desperation in Poorer Zip Codes

The Daily Escape:

Aliso Creek State Beach, near Laguna Beach, CA – 2019 photo via

Simon Johnson observes at Project Syndicate: (emphasis by Wrongo)

“To defeat populism requires coming to grips with a fundamental reality: bad economic policies no longer necessarily result in a government losing power. In fact, it is now entirely possible that irresponsible populists may actually strengthen their chances of being re-elected by making wilder and more impossible promises – and by causing more economic damage.”

Johnson, former chief economist for the IMF, believes that structural economic factors, including automation, trade, and the financial crisis have left many people feeling neglected by those who control economic policy.

When politicians back policies that add economic uncertainty, or that discourage investment, we see lower economic growth, and fewer good jobs. Ordinarily, dissatisfaction shows up at the ballot box, holding that government accountable at election time.

But this is no longer reliable, because politicians wiggle out of the trap by saying that the media are biased, that the experts are wrong, and that the facts are not the facts. And the angrier people become, the easier it is to persuade them to accept that no one is to blame, and vote again for those who helped to cause their economic distress in the first place.

A new study by the St. Louis Federal Reserve Bank examined American financial distress by Zip Codes. It sheds light on a topic we regularly debate: Why are there so many signs of distress in a supposedly robust economy? And this time, will politicians be held to account?

Since 2015, the lowest income households have been taking on more debt. Their wealth has become even more concentrated in home ownership. The level of distress in lower-income households has also increased, despite the official story of increasing prosperity.

The study drills into Zip-Code level data to show that even adjacent Zips show striking divergence in wealth accumulation (or erosion). For instance, they looked at the percentage of people within a Zip Code that have reached at least 80%t of their credit limit on their bank-issued credit cards.

That is believed to be a good proxy for financial distress.

Before the 2008 crisis, analysts missed the rising levels of household debt. That debt was often funded by borrowing against home equity. Rapidly falling home prices after 2008 showed how fragile many of those borrowers were.

The contrast between national averages and Zip Code households is stark. Looking at averages, the recovery appears to be quite broad.  But zooming in by Zip Code showed a bifurcated economy still suffering from the 2008 crisis. The researchers found that looking at the value of assets and reliance on debt shows a clearer picture: (emphasis by Wrongo)

“…the poor and high-leverage ZIP codes that are more affected by wealth shocks may still be vulnerable. What’s more, trends in less affluent groups are masked in nationally aggregated statistics by groups with more wealth.”

May be vulnerable”? They will certainly be vulnerable when the next downturn begins.

Since 2015, debt and financial distress have been rising the fastest in these low-wealth areas, while it rose the slowest since 2015 for the wealthiest households. We already see softness in economic indicators like retail sales, home sales and housing construction. It’s reasonable to expect that the next recession isn’t far away.

We’ve had a long economic recovery, but its gains were not distributed as broadly as they had been in previous downturns. What we got was an uneven economic recovery, with most gains going to an increasingly narrow group.

More people are left out of this supposedly robust economy than the politicians and most economists think. The Fed study shows that the averages conceal plenty of pain. Maybe this isn’t an earthshaking idea. We all see income and wealth disparities in our communities, it’s not that unusual. But the fact that the differences are now extreme enough to show up in ZIP Code level data seem significant, and worrying.

So, will politicians pay any price in 2020 for the continuing maldistribution of gains since the 2008 recession? Or, will politicians tell the people that no one’s to blame, that the Laffer curve will surely work this time?

The miracle of modern Republican economic theory allows for both the Laffer curve, and “pulling oneself up by the bootstraps” not only to be truths, but to be the desired outcome.

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Monday Wake Up Call – June 3, 2019

The Daily Escape:

Mont Rotui, Moorea, French Polynesia – 2019 iPhone photo by mystackhasoverflowed

Time to wake up America! Donald Trump has proven once again that he has no understanding of economics. From the Wall Street Journal:

“President Trump will award the Presidential Medal of Freedom to economist Arthur Laffer, one of the pioneers of the idea that tax cuts can boost government revenue, the White House said Friday.

Mr. Laffer is one of the founding theorists of supply-side economics, a school of public economics that rose to prominence during the Reagan administration and returned to the fore in the run-up to the 2017 package of tax cuts that Mr. Trump signed into law.

The White House described Mr. Laffer as “one of the most influential economists in American history,” and said his “public service and contributions to economic policy have helped spur prosperity for our Nation.”

Laffer is famous for his drawing his Laffer curve on a napkin, illustrating his idea to Dick Cheney and Donald Rumsfeld at a dinner in 1974. His curve showed that increases in tax rates will eventually cause government tax revenue to decrease, because people will begin to work and earn less. This was then taken to its theoretical limit, saying that tax cuts could pay for themselves by spurring economic growth.

The WSJ calls Laffer “one of the pioneers of the idea that tax cuts can boost government revenue”. Isn’t it weird that the fact that his “idea” has been completely disproven in the real world, doesn’t seem to matter?

Conservative economics is not a branch of economics, it’s a branch of Conservatism.

The Laffer curve was successful at its real purpose, providing a basis to funnel more money to corporations and the rich. Republicans traffic in propaganda, not knowledge.

Last year, Laffer co-wrote a book titled “Trumponomics: Inside the America First Plan to Revive Our Economy.” Laffer’s co-author was Stephen Moore, another conservative who styles himself as an economist. Earlier this year Trump nominated Moore to serve on the Federal Reserve Board of Governors. Moore had to withdraw, amid bipartisan opposition from Senators.

Laffer was the advisor behind the notorious Kansas state income tax plan that ruined the state’s finances. In 2012, Then-Kansas Gov. Sam Brownback passed a package of tax cuts based on Laffer’s ideas. The result was that Kansas lagged behind neighboring states with similar economies in nearly every major category: job creation, unemployment, gross domestic product, and taxes collected.

In 2017, the Kansas legislature repealed the Laffer/Brownback tax cuts. After the repeal, state taxes were boosted by $1.2 billion.

Laffer has spent years preaching his idea that almost any tax cut for businesses and the rich could potentially pay for itself. That idea has become the bankrupt conceptual backbone of the Republican Party’s entire economic theology.

For the 2017 Trump tax cuts, his administration also borrowed Laffer’s idea. Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow, have repeatedly claimed that the Trump tax cuts will pay for themselves. But, a new report finds that the tax cuts were responsible for less than five percent of the growth that is needed to offset the revenue loss from the Trump tax cuts.

We must point out here that Larry Kudlow does not hold a degree in economics. He was once fired from an investment bank for doing cocaine. Imagine just how much cocaine you’d have to do to get fired on Wall Street in the 1980s.

Trump’s now added the Presidential Medal of Freedom to the American traditions he’s debasing. Other economists awarded the Medal of Freedom include Gary Becker, Milton Friedman, John Kenneth Galbraith and Robert Solow. Laffer can’t carry their briefcases.

There may be no man alive who has done more damage to America’s understanding of taxes and their effect on economic growth than Art Laffer.

Evidently, Trump is grading him on a curve.

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The Long Battle to Reform Capitalism

The Daily Escape:

Poppies in bloom, Southern California – March 2019 photo by Leslie Simis. This annual explosion of color is enhanced this year by extraordinary rainfall

You can call the period in US history from FDR to Nixon “America’s social democratic era”.  A collection of politicians had hammered out the policies and regulations that became FDR’s New Deal in America. It became a period of post-war prosperity during which inequality narrowed, economic growth boomed, and optimism reigned.

The characteristics these policies shared were reciprocity and generosity. For the citizen, there was some form of social support that grew from Social Security in 1935 through the 1960’s with Medicare and Medicaid. In 1970, Nixon implemented the Environmental Protection Agency. There was also a willingness to care for the disadvantaged. Our Marshall Plan and our commitment to foreign aid are both great examples. The success of social democracy in the postwar era weakened the market’s power to act independently within our society.

But then things changed. Our government’s role became a helpmate for corporations, financial institutions, and their lobbyists. The result has been growing inequality between suppliers of capital and the suppliers of labor, even of highly educated labor, like teachers and professors. Economic growth slowed, and we have developed a permanent underclass that seems impervious to repair.

Yesterday, we talked about Economic Dignity, and how focusing on it might help solve inequality. Today’s market economics is partly based on the ideas of Jeremy Bentham and John Stuart Mill, economists who viewed human beings as supreme over the state. As individuals who would make rational decisions to maximize utility. It turned out to be incomplete, since it left out key dimensions of human psychology, like the individual’s need for social esteem or respect. In other words, they ignored economic dignity.

Couple that with Milton Friedman’s idea, that the mission of the firm is to solely maximize profits, that any responsibilities to its employees, consumers, or society should be ignored. Profit maximization at all costs has done great damage to American society. And conservatives and free marketers have married the ideas of these three economists, making the removal of government from markets their primary mission.

But what they call “the market” is really a bundle of regulatory (and non-regulatory) rules by which market activities operate. The mix of free and regulated market activities can be changed, even though capitalists say we shouldn’t change the rules, because it adds uncertainty to markets.

Just because in baseball, three strikes and the batter is out, or with four balls, there is a free pass to first base, doesn’t mean it has to be that way. It could be five strikes and you’re out, or three balls is a walk.

As an example, we tend to fight unemployment with “trickle-down” solutions. That means we bribe the rich and corporations to hire more. But, the bribe is always bigger than the payrolls that are generated.

We could fight unemployment with fiscal policy, such as infrastructure spending by the government. It would employ many, possibly hundreds of thousands, and there would be no need to pay any entity more than was warranted by the tasks at hand.

America needs a return to what economist Paul Collier calls the “cornerstones of belonging”— family, workplace, and nation, all of which are threatened by today’s market driven capitalism. That means capitalism has to return to the ethics of the New Deal. Joseph Stiglitz, Nobel laureate in economics, says: (parenthesis and emphasis by Wrongo)

Over the past half-century, Chicago School economists, (including Milton Friedman) acting on the assumption that markets are generally competitive, narrowed the focus of competition policy solely to economic efficiency, rather than broader concerns about power and inequality. The irony is that this assumption became dominant in policymaking circles just when economists were beginning to reveal its flaws.

Stiglitz says we need the same resolve fighting for an increase in corporate competition that the corporations have demonstrated in their fight against it. We’ll need new policies to manage capitalism.

It means higher taxes on profits.

It means paying workers more.

It means rebuilding public assets like roads.

It means teaching students to be both technically capable, and grounded in their values.

Speaking of needing to teach our students, if you think we’re not in a rigged game, think about one “USC student” who is part of the admissions fraud scandal, Olivia Jade Giannulli. She was on the yacht of the Chairman of USC’s Board of Trustees when she heard about it.

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Sunday Cartoon Blogging – December 10, 2017

(There will not be a Monday Wake Up Call this week. Blogging will resume on Tuesday 12/12)

Jerusalem, Roy Moore, Franken, Bears Ears. Quite the week, but let’s start with this: Walmart pulls controversial t-shirt that encourages violence toward journalists:

The t-shirt’s message is: “Rope. Tree. Journalist. SOME ASSEMBLY REQUIRED”. Walmart has now pulled it from its website. The shirt was also sold in the online store of a company called Teespring, who was the third-party seller for Walmart. The shirt was circulating well before that, though, as Jezebel found a tweet referencing the shirt from April of 2009.

Teespring allows users to design their own t-shirts and other merchandise. They sold a shirt with the words “Black women are trash”, and one that said “Eat Sleep Rape Repeat”. Wrongo fears that there will be no recovery from our slide to the lower reaches of hell.

Trump gave the Middle East a sign. Now he wrongly expects peace will break out:

Trump has success getting the world to change the subject:

Franken’s out. In with the new (giant) asshole:

The logical outcome of the religious freedom argument:

Waiting for the trickle down is like waiting for Godot:

 

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Monday Wake Up Call – November 20, 2017

The Daily Escape:

El Ateneo Grand Splendid bookstore in Buenos Aires, which has more bookstores per person than any other city in the world – photo by Alamy

One of the arguments that Republicans use to support their tax bill is that it will unleash investment, but the data say otherwise. Currently, most US economic sectors are operating far below maximum capacity utilization. Here is a Federal Reserve chart showing current industrial utilization/capacity:

The left axis shows the percentage of utilization across both durable and non-durable goods. The US is currently tracking at about 75% utilization, which is about as low as it gets in non-recession times. What that implies is corporations have no need to invest in additional capacity in the US. They have plenty of spare capacity to meet any spike in demand, should it arise. So, today, it makes far more sense for companies to bring unused capacity back online rather than to buy new equipment.

So, what would corporations do with a windfall tax cut that they didn’t need to invest in the US? Won’t they just invest it outside the US in order to keep expanding their global markets? There would be no increased revenues or jobs from investment at home, so why would they keep the windfall at home? That wouldn’t be smart, and those guys and their tax lawyers are pretty smart.

What corporations might do with increased after-tax income:

  • Buy back more of their own stock
  • Update their factories in Mexico, China or elsewhere around the world
  • Invest in companies working on artificial intelligence or robots with human-like dexterity. You know, something on the bleeding edge!

The corporates will ask the question: What do Americans need that they do not have? More self-driving cars?

American consumers simply do not earn enough money to purchase the products that are already available. Total household debt now exceeds the previous peak in the 3rd quarter of 2008. You know, the peak driven by the housing bubble and the accompanying refinancing of debt.

So if a corporation does come up with some product for which there is a genuine need, who will have the money to buy it? What products (or services) would Americans stop purchasing so that they could use their borrowed money to buy this new product?

And given that the tax cuts will not accrue to anyone who makes under $75k the way the GOP has designed their tax cuts, there won’t be any more money in the pockets of the middle class to add jobs and GDP growth here at home. Here is a chart from David Leonhardt in the Sunday NYT, showing what everyone who will gain from their discredited trickle down tax plan, once it is fully implemented:

Notice that it doesn’t go to the people who really need it.

The Republican’s belief in tax cuts and supply side economics is a cult religion. They just don’t care about evidence.

So, time to wake up! We have broken subways, broken bridges, and stagnant wages. Why not spend the money on infrastructure instead of giving it away in tax cuts to be used offshore?

That might actually do some good. This could be the final opportunity for the Senate (the House is a lost cause) to do the right thing and actually represent the interests of the middle class in the US. It is way past time for this 100-member body to set aside the petty complaints of their corporate benefactors and the rich, and offer something real to the ordinary tax-paying citizens who try to pay their bills and put a little aside for retirement.

Time to wake up Senators! We need you to escape your cognitive dissonance, and think about what you are doing. To help you wake up, here is U2 with “Stuck in a Moment” from their 2000 album, “All That You Can’t Leave Behind”:

Takeaway Lyric:

You’ve got to get yourself together

You’ve got stuck in a moment

And now you can’t get out of it

Don’t say that later will be better

Now you’re stuck in a moment

And you can’t get out of it

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

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Saturday Soother – November 18, 2017

The Daily Escape:

Sunrise at Mesa Arch, Canyonlands National Park, Utah

It’s Saturday, and the dominant issue should be the Republicans’ efforts to enact a tax cut, now that the House has passed its version of the legislation. The plan distills Republican economic philosophy perfectly: Take lots of money and give it to the people at the top, while pretending that doing so will help everyone else.

Speaker Paul Ryan said it’s a middle-class tax cut:

This plan is for the middle-class families in this country who deserve a break. It is for the families who are out there living paycheck to paycheck, who just keep getting squeezed… The Tax Cut and Jobs Act will deliver real relief for people in the middle, people who are also striving to get there.

David Leonhardt offered this view:

Amazingly, the bill…would increase taxes, on net, for families that have at least one child and make less than $100,000. That conclusion comes from a rigorous independent analysis of the bill, released yesterday afternoon by the Tax Policy Center.

The elevator version of the Republican plan is to add $1.5 trillion to the deficit in order to give permanent tax cuts to corporations. Since that sounds terrible, the GOP proposes holding down the bill’s total cost by raising taxes on middle-class and poor families. More from Leonhardt:

A big reason is that personal exemptions — the $4,000 in income, per person, that families can write off — would disappear. The bill would increase standard deductions that all taxpayers can take, but the increase isn’t large enough for many families to make up for the disappearance of per-person exemptions…

OTOH, households making at least $5 million would receive an ANNUAL tax cut of almost $300,000 once the bill is fully phased in.

The cynicism is spectacular: Congressional leaders want to raise taxes on most of the middle and lower classes, while claiming that the bill does just the opposite. Senate Leader Mitch McConnell, said:

At the end of the day, nobody in the middle class is going to get a tax increase.

Worse, if the GOP tax bill becomes law, and we look a few moves ahead, we know that Republicans will once again pose as deficit hawks and look to gut Medicare and Medicaid.

On our backs. Happy Thanksgiving!

Our Republican friends plan to fund a permanent tax cut for their beloved constituents, American corporations. For decades Americans have been against increased taxes. We bought the idea that cutting taxes would give people an incentive to work harder and thus make the American economy flourish. The GOP tells us this as they try to roll back corporate taxes, as they plan to eliminate the estate tax, and as they continually work to prevent the government from taking action against offshore tax havens.

We endure potholes, we live in fear of collapsing highway bridges because our leaders want their special constituents to have more. Our kids sit in underfunded schools so that a handful of wealthy individuals can sit in gated communities or on their own private beaches.

Think of what we might do with the sums we will lose to this GOP “tax reform” over our lifetimes. Think about the crumbling infrastructure that could be fixed. Think of all the young people saddled with student-loan debt: We could make that unnecessary, rather than give more to corporations by denying students the deductibility of the interest on their loans. Think of the drug-addicted people all over America: With these tax cuts, we will never help them.

Until the words “discredited trickle down tax plan” come out of the mouth of every single Democratic politician, we won’t have a great chance of killing the Republican’s tax plan.

Enough! It’s Saturday, and time to let the mind wander. So grab a Vente cup of Union’s Hand-Roasted Coffee, Brewer’s El Topacio Microlot, El Salvador (just £8 for 200g). Now sit near a big window and watch the last days of fall, while listening to Beethoven’s “Violin Concerto in D major Op, 61” here performed in 1959 by violinist David Oistrakh with the French National Radio Orchestra, directed by Andre Cluytens.

Listen to the sound of a Stradivarius played by one of the giants on 20th Century violin:

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Can We Have an Honest Discussion About The GOP Tax Plan?

The Daily Escape:

When the dog lies about his previous sheep-herding experience

A new set of tax policies have been proposed by the White House and the GOP. They involve both tax cuts, and some tax reforms. Here are the bullet points of the GOP’s sales pitch:

  • The tax cut won’t help the rich, and won’t help Donald Trump personally
  • The tax cut will generate enough growth to pay for itself
  • Most of the benefits of the tax cut will go to the middle class

Here are the NYT’s calculations on Trump not gaining anything:

Trump could save more than $1 billion under his new tax plan

And here is the Tax Policy Center’s take on the benefits to the wealthy:

  • The top 1 percent of households (those with incomes above $730,000) would get about 53% of the framework’s net tax cuts, or roughly $130,000 a year on average.
  • The top 0.1 percent of households (those with incomes above $3.4 million) would get roughly 30% of the framework’s net tax cuts, or about $720,000 a year, on average.

Turning to the statement that “tax cuts will pay for themselves”, Trump claimed in a talk with House Ways and Means Committee a few days ago, that his tax plan will produce more than 6% growth.

An economist once said that you don’t need to look at the details of a Republican tax plan. The higher the Republican growth forecast, the worse the actual deficit in their plan. That’s because they need greater revenue growth to cover the deficit hole they are creating. Given Trump’s 6% growth forecast, you just know the tax plan is going to be a budget buster.

We have learned from past GOP tax cuts that they won’t reduce deficits or balance budgets. Want proof?

  • The George W. Bush tax cuts made the deficit larger, while doing little or nothing to stimulate the economy
  • The income-tax cuts in Kansas caused the state’s deficit to accelerate significantly, while economic growth lagged the contiguous states
  • Even Ronald Reagan’s tax analysts, David Stockman and Bruce Bartlett, have acknowledged that unfunded tax cuts don’t create growth, they make for bigger deficits.

Regarding the point that most of the cuts will go to the middle class, it won’t happen. Since 83% of the plan’s cuts are going to the top brackets, there’s not much left for the middle class.

What they don’t talk about is their plan to get rid of personal exemptions, which is a key deduction for middle class families, especially those who itemize deductions. To determine whether middle-class families get a cut or an increase under the new plan, you need to calculate if the higher standard deduction, plus the proposed expansion in the child tax credit, (no details about that yet), is greater than the loss of personal exemptions.

Josh Barro at Business Insider crunched the numbers, and his conclusion is: (emphasis by the Wrongologist)

While there are still a lot of details to be filled in, the information we have available suggests the new Republican tax proposal would raise income taxes on many families who make just a bit more than the national average.

They are promising to eliminate the “alternative minimum tax”, (AMT) a tax provision designed to ensure that wealthy taxpayers (who can have accountants find deductions) would pay some modicum of taxes rather than get off scott-free. In fact, the GOP has it backwards: People who owe the AMT should be paying more tax than they would pay with the AMT. It serves its intended purpose. Elimination of the AMT is another tax break for the wealthy:  For example, Trump has had to pay the AMT, as have most real estate developers.

Now, ask yourself why should personal tax rates be less progressive in 2017 than they were in 1963? Shouldn’t progress towards a more equal society mean our rates would be MORE progressive, not less? It’s not as if we have less inequality, we have more.

The reason we should want to tax the rich (till it hurts) is to reduce their power and overwhelming choke hold on policy.

When will the GOP engage in an honest discussion about their tax plan?

Not soon. Maybe not ever.

Here’s First Aid Kit doing a cover of Simon & Garfunkel’s “America”, from 2014:

We all need to look for America, its getting very hard to find.

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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Saturday Soother – May 13, 2017

The Daily Escape:

Bluebells, Brussels Belgium April 2017 photo by Francois Lenoir

In many ways, it is too easy to criticize Donald Trump. While we can have differing opinions on matters of policy, they only account for a few of the issues Wrongo has with Trump. Most are his unfathomable attempts to avoid telling the truth. Consider his interview with The Economist which posted the entire transcript on Thursday. Let’s focus on this excerpt:

The Economist: Another part of your overall plan, the tax reform plan. Is it OK if that tax plan increases the deficit? Ronald Reagan’s tax reform didn’t.
Trump: Well, it actually did. But, but it’s called priming the pump. You know, if you don’t do that, you’re never going to bring your taxes down.

[Snip]

Economist: But beyond that it’s OK if the tax plan increases the deficit?
Trump: It is OK, because it won’t increase it for long. You may have two years where you’ll…you understand the expression “prime the pump”?

Yes.
We have to prime the pump.

It’s very Keynesian.
We’re the highest-taxed nation in the world. Have you heard that expression before, for this particular type of an event?

Priming the pump?
Yeah, have you heard it?

Yes.
Have you heard that expression used before? Because I haven’t heard it. I mean, I just…I came up with it a couple of days ago and I thought it was good. It’s what you have to do.

Ok, so how did the guy from the Economist keep a straight face? The reporter is thinking John Maynard Keynes, the great British Economist, who came up with the idea of “priming the pump” in the 1930’s. By the way, Keynesian pump-priming is temporary government spending to boost temporarily weak demand. It is designed to boost growth, (and jobs) during a downturn, but we can’t assume that it will boost the economy’s growth rate.

Trump’s idea for pump-priming is more tax cuts. He’s following classic trickle-down economics, and claims that his tax cuts will boost investment, productivity growth, and labor supply, and thus raise the long-term growth rate of the economy. In this regard, Trump conflates Keynes, who’s been proven right, with Arthur Laffer, who wasn’t.

But, didn’t Trump graduate from Wharton with a business degree? Nobody gets out of Wharton without knowing that Keynes was the “pump primer”. And his saying that he coined the phrase ‘prime the pump’ a few days ago? Unfortunately, there are only two explanations: first, Trump is 70 years old and his cognitive skills are starting to desert him. Or second, he is a pathological liar.

Wrongo wants to go with #2.

He just wants to sell America something with his name stamped on it. But since America isn’t buying a hotel, he’s trying to sell Trumponomics, Trumpcare, etc. He does not really care about the details, he just wants to pass it, and to claim it is a success. That’s America’s tragedy.

So with Comeygate, Trumpcare and pump-priming, we all need to unplug and try, just try to relax on Saturday. We had a full moon and clear skies over the fields of Wrong on Thursday, so today we listen to “Claire du Lune” by Claude Debussy. It is the third movement of “Suite bergamasque”. Its name comes from Verlaine’s poem Clair de Lune, “moonlight” in French. Here it is played by Dame Moura Lympany, British pianist, who died in 2005:

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

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