Posts tagged ‘Economy’

Friday’s Things

You could start your morning with one of the best summaries of the collapse of the Republican Party and Paul Ryan with Will Wilkerson’s NYT article. His description of how establishment politics, and Ryan’s economic politics in general, were totally ineffectual for the heartland, and that led to the rise of Trump.

Mr. Trump spotted opportunity in the injured dignity of the Republican base and the feckless irrelevance of the establishment’s agenda. He told Republicans shaken by the reality and risk of downward mobility that they were the only Americans who counted, and that they had been cheated and betrayed.

He promised never to cut their Social Security or Medicare, and expressed admiration for single-payer health care. He took their side against immigrant rapists, murderous jihadis, plundering trade deals, dangerous city people and disloyal, condescending elites of all parties and persuasions. He promised to use his billionaire superpowers to rig the economy to their advantage. It didn’t matter that he is a transparently corrupt, bigoted, sexually abusive, compulsive liar. He offered the dignity of recognition, promised to fight, and won.

Or you could flick over to Paul Krugman, who described the reality of who and what Paul Ryan represented (flimflam man) and how we got there, as with so many disasters we have encountered in recent times, false equivalency:

Even now, in this age of Trump, there are a substantial number of opinion leaders — especially, but not only, in the news media — whose careers, whose professional brands, rest on the notion that they stand above the political fray. For such people, asserting that both sides have a point, that there are serious, honest people on both left and right, practically defines their identity.

…And let me say that the same bothsidesism that turned Ryan into a fiscal hero played a crucial role in the election of Donald Trump. How did the most corrupt presidential candidate in American history eke out an Electoral College victory? There were many factors, any one of which could have turned the tide in a close election. But it wouldn’t have been close if much of the news media hadn’t engaged in an orgy of false equivalence.

Or you could read about Jim Comey’s new book about what a lying sack of sh*t President DFF is, but we already knew that especially from his comeback, “untruthful slime ball.” Or you could look at his attack and new panel to investigate the Post Office. Or you could ponder Syria the the non-attack to teach them a lesson. Or you could ponder our new foray into the TPP when the reality of a trade war dawns on President DFF. Or you could read about the investigation of Cohen’s office and what and where the investigation might go. Timothy Egan has a great fun piece on the wasted money our taxes are paying for under the drain the swampy DFF’s administration. Roger Cohen gives another great piece about the parallels of Hitler and President DFF (I wrote the other day of Madeleine Albright’s article on the same topic).

But in all this noise and cacophony, what is getting done? Where is the great discussion about the real problems that face us and rational approaches to our future? It is all getting lost in the chaos of Trump and the nation has slid to a stop. That is the real damage as we wait on the debate for the way forward. Take Syria. So we strike, after that what? Withdraw? What is the end game and what is the strategy? Take economic inequality. How do we create better jobs and more equitably share the profits so we all prosper? Bring back coal jobs that aren’t coming back? Take the TPP, again what is our strategy? The TPP did many fine things, but also lowered environmental standards and made economic inequality grow. Think President DFF has a plan? Think he cares about those things? Take global warming. Oh, why do I bother.

We are now living in a global economy and there is no going back. Our problems are large and looming and we are lost in the chaos of the china broken in the china shop by the bull called Trump. Republicans are in disarray because their ideology has failed and the guy who promised win-lose and white nationalism is just making things worse. Democrats under Hillary (the establishment), while better, did not really face the problems we have realistically with the same old patches to a failing economic system (if you live in fly over country). Move to the coast and code was not realistic. So where is out discussion of the way forward?

No we are chasing smoke and mirrors right now thrown up by the chaos that is President DFF and his defenders, but sooner or later, we really do have to face our problems like burgeoning debt. Oh, dare I say it, we need smart programs and pay for them. No more party of free rides from flow down. Where is the discussion of that? I have offered my vision, but we have to transition and that begins when we actually debate these things with real facts and data, not ideological objections. That is what we are missing and as much as I enjoy watching the noose tighten around President DFF and the Republican’s necks, just putting Democrats back in power, while reinstating the rule of law, does not answer the big questions that we need to debate. Until then I will be waiting.

*Just a note. I will not be waiting. I will be discussing them here and all three readers can get a glimpse of what we must face. There is a new book out there that I think is an important read if you want to get ahead of me, Can Democracy Survive Global Capitalism by Robert Kuttner. Really the question is how do we change capitalism so democracy can survive and flourish not just for a few, but for all of us.

It’s the Economy Stupid

Basically much of America is brain-dead. No, they are not like zombies, but definitely mesmerized by conservative propaganda. One writer gave us this yesterday about their favorite source of news:

Fox News continues to market itself as a legitimate news operation, but legitimate news operations don’t spew conspiracy theories, attack African American athletes, mimic President Trump’s fake facts and malicious attacks, ignore actual news when it is not favorable to Trump or fan the flames of xenophobia. It is increasingly difficult to understand why advertisers want their products associated with an outlet that does more to polarize Americans and wage war on objective reality than Fox.

But it makes no difference to point out all this, their eyes glaze over and we get the disruption defense. “President DFF is a different kind of leader and he leads with disruption. Change, ain’t it great?” But as I have opined here before, conservative ideas are failed ideas and once it hits them in their pocketbook, there will be a wake up call. Sadly with a brain-dead Middle America (See Roseanne for the classic example), all that talks, and maybe all that has ever talked is money. Well the money is about to talk.

In an op-ed by Robert Leonard about what is happening in Iowa, he pointed out how pocketbooks in Middle America are starting to feel the pinch from the Disruptor in Chief.

Donald Trump won over 60 percent of the 2016 vote in rural Iowa, where I live, and I haven’t heard much concern from Republicans over the president’s alleged infidelities with a porn actress, his ties to Russia or Jared Kushner’s real estate shenanigans.

Or, for that matter, much concern about the administration scandals about wife beaters, Saudi princes, Ben Carson’s table or Scott Pruitt’s soundproof room. Many people don’t even know these scandals exist — they generally don’t lead in Sean Hannity’s or Tucker Carlson’s world.

Sure, there is a little rumbling about the increased deficit, but not much. Besides, it’s the fault of Congress, in particular the Democrats.

But then it gets interesting:

But people here — Republicans and Democrats alike — are paying great attention to what President Trump is doing economically, especially since he started in on tariffs. We have a strong manufacturing base in our county; when tariffs on aluminum and steel were announced, local manufacturing leaders tried to be diplomatic, praising the Trump tax cuts but saying the steel and aluminum tariffs would hurt their businesses by driving costs up.

One smaller manufacturer — a Trump voter — told me that his costs to produce his product nearly doubled overnight, and that his business has already been hurt by the tariffs. Prices didn’t rise only after the tariffs were announced; they started rising when Mr. Trump floated the idea.

But it’s the farm economy that rural Iowans are paying particular attention to. When the president first proposed a 20 percent import tax on Mexico to pay for his wall, Iowans objected: Mexico is our second-largest export partner after Canada.

Mr. Trump has waffled on the renewable fuel standard before — ethanol is big around here — and Iowa’s entire congressional delegation and the governor’s office pressured him to renew it. We know he will waffle again, and potentially end it.

Most recently, when Mr. Trump imposed $60 billion in tariffs and sanctions against China, the Iowa Soybean Association said his action “poses an immediate and grave threat to their industry and Iowa agriculture.”

And guess what, the Chinese are now raising tariffs on pigs! Iowa is the largest pig raising state in the nation. They are so screwed. The author goes on to opine that this could just be the impetus to turn some Republican heads toward impeachment. I think there is a much larger lesson here.

First and foremost, how do you ignore all that was President DFF when he was a candidate and he said he was going to do exactly what he is doing? My answer here is that the devil is in the details and most Middle America conservatives don’t want to look in the details for fear of what they will find, hence the need for Fox News to either change the subject, or create whole new “facts” so reality can be ignored (in the short-term).

Second is to understand how empathy, or lack thereof, plays a major role in how Republicans are Republicans. They easily shut out the rest of the world, and even their fellow citizens if they are doing fine. Then they define the rest as part of the problem so they do not have to examine those pesky details. I find it interesting, as Mr. Leonard pointed out, they still blame Democrats when they hold everything in government. It is classic denial.

I think empathy or the lack thereof is innate. We are born that way. I think if you really want to understand the real politics behind Republicans and Democrats, it is about empathy. Democrats say, “There but for the grace of God go I.” Republicans say, “I deserved what I have, and look at all those lazy slugs around me that want something for free.” There was an interesting piece the other day about the fact that maybe gratitude may be a virtue highly underrated. Well, in Republican land, grateful hell! I earned it! Or God chose me. If you are suffering either you deserve it or God did not anoint you. Explains a lot about Evangelical support of Trump and rejection of real Christian virtues

Maybe that explains the fearfulness studies that show that conservatives tend to be more fearful. There is them and there is us. Lack of empathy is critical to the them part, and a belief that you are in a state of grace and have earned everything you have, allows you to see everyone us as them. I have been struggling to understand my conservative friends fo years and this is what I have witnessed. The most interesting part of all this is that they can have empathy if they experience some of the injustice they deny first hand. But it is very selective and focused on their experience.

So are we lost because they are all born this way*, helped along by Fox and all the right wing noise that  fills their 24/7? Nope. Back to the start of this blog. It is about the money. And President DFF is on his way to wrecking the economy. And changing him out with Mike Pence won’t change much. So sooner or later they are going to vote their pocketbooks. Democrats have to give them a reason to select the other team. That means directly addressing some of Middle America’s economic woes with something better than zones of entrepreneurship. It means Democrats have to throw off the clothes they were robed in by Right Wing noise. We have to make them understand that we understand that if we are going to prosper, they have to prosper to.

No, we are not probably ever going to cure their lack of empathy for their fellowman. Some people are just selfish to the core. But if we can make them start to realize that we are all in this together, and cutting out winners and losers results in losers for all of us, then it really will be a new day. Hope on a Monday.

*There have been some studies that show that if we were a more integrated society and had more first hand experience with “others”, some of our prejudices evaporate. See conservatives who have gay children. It is that personal experience I described above. Liberals don’t seem to need this as much as conservatives do. In many ways we got this experience when we lived in a more egalitarian society rubbing elbows with “others”, and read widely (getting the experiences of a world we could only imagine). But our trends today are away from reading, and growing economic inequality, segregating and isolating us as a society. Then the inmate tendencies run wild.

Root Causes

I heard two things yesterday that made me stop and think and react viscerally.  Now I will tell you that that is not a good way to understand things because it involves feelings and how you want to feel, not what is.  But both have me thinking which is a good thing.  Your basic precepts should get challenged once in a while and the act of defending them sometimes broadens your understanding.

The first was watching Fareed Zakaria on CNN’s GPS.  Fareed always starts his show with his weekly insights and he gave us this:

This period, from the 1970s to today, also coincided with a slowdown in economic growth across the Western world. And in the past two decades, there has been an increasing sense that economic policy cannot do much to fundamentally reverse this slowdown. Voters have noticed that, whether it’s tax cuts, reforms or stimulus plans, public policy seems less powerful in the face of larger forces. As economics declined as the central force defining politics, its place was taken by a grab bag of issues that could be described as “culture.” It began, as Inglehart and Norris note, with young people in the 1960s embracing a post-materialist politics — self-expression, gender, race, environmentalism. This trend then generated a backlash from older voters, particularly men, seeking to reaffirm the values they grew up with. The key to Trump’s success in the Republican primaries was to realize that while the conservative establishment preached the gospel of free trade, low taxes, deregulation and entitlement reform, conservative voters were moved by very different appeals — on immigration, security and identity.

This is the new landscape of politics, and it explains why partisanship is so high, rhetoric so shrill and compromise seemingly impossible. You could split the difference on economics — money, after all, can always be divided. But how do you compromise on the core issue of identity? Each side today holds deeply to a vision of America and believes genuinely that what its opponents want is not just misguided but, well, deplorable.”

He is arguing that this election is about identity and culture, not economics.  I think he is fundamentally wrong.  It is not the “you could split the difference on economics”, but that we have pursued an economic policy that has totally failed in the modern world.  Everyone seems to be forgetting Thomas Pikerty, the French Economist who argued that as capital flows to the wealthy, a natural outcome of capitalism as we know it, economic inequality grows until the economy no longer functions for most of us (and revolution happens).  Culture becomes, in my mind, a real issue when you are trying to explain away economic inequality without really looking at the economic system we have created that creates all the unhappiness and insecurity.

The system we have created is fundamentally unfair.  When you really think about it, Republicans are right about accountability and self-discipline.  What they get fundamentally wrong is that it is not a level playing field so neither accountability or self-discipline will help you if you can’t get to the first rung on the ladder.  One of the false arguments created about Democrats is that they blame everything on the system, not the individual.  Modern Progressives see cultural flaws just like Republicans do, but they also see where the system is rigged against many of those who are in this system, and want to fix that.  Republicans resist any change to that system.  What has really happened is that the flow down of Republicans never created a world where if you chose, you could move up in the system.

The other thing I heard was a friend discussing reading the book that explains the Trump support in the hinterlands, Hillbilly Elegy by J.D. Vance.  He describes his upbringing in a poor rural environment, the dysfunction there, but his view is clouded by his own success.  He focuses on the culture that he attributes to a welfare system that allows a culture of dependency.  It is now all the rage to understand how people could see Donald Trump as their savior.  I would argue that while there are great insights into that culture, there is no rational way to explain someone supporting Donald Trump.  But as Fareed did, you shift to the culture thing, the feeling thing, and then you get a Donald Trump supporter.

“Now, along comes Mr. Vance, offering a compassionate, discerning sociological analysis of the white underclass that has helped drive the politics of rebellion, particularly the ascent of Donald J. Trump. Combining thoughtful inquiry with firsthand experience, Mr. Vance has inadvertently provided a civilized reference guide for an uncivilized election, and he’s done so in a vocabulary intelligible to both Democrats and Republicans…In Mr. Vance’s estimation, the answer is: a lot. Economic insecurity, he’s convinced, accounts for only a small part of his community’s problems; the much larger issue is hillbilly culture itself. Though proud of it in many ways, he’s also convinced that it “increasingly encourages social decay instead of counteracting it.”

And then comes the assumed narrative from the NYT: 

The difference is that President Obama believes poverty, though it may have a cultural component, is largely a structural problem, one the government can play a large role in fixing. Mr. Vance, a conservative, takes a far dimmer view.

Whether you agree with Mr. Vance or not, you must admire him for his head-on confrontation with a taboo subject. And he frames his critique generously, stipulating that it isn’t laziness that’s destroying hillbilly culture but what the psychologist Martin Seligman calls “learned helplessness” — the fatalistic belief, born of too much adversity, that nothing can be done to change your lot.

Of course both are true and the narrative is a false one about Democrats who do not believe in accountability and self-discipline. But what is driving Democrats is the fact that in order to give people a ladder where the first step isn’t 10′ up in the air, we have to have an economy that provides good jobs for those willing to take them, and a government system that invests in people who want to be invested in so they can climb that ladder.  Today we have Republicans living in fantasy believing it exists, and the reality we see all around us that it is really rigged for those who have.

Finally, on the Donald thing, there is no understanding it.  If as Mr. Vance argues, “There was something almost spiritual,” he writes, “about the cynicism of the community at large.” His friends and relations are convinced that the media lies. That politicians lie. That the military, an institution they revere, is fighting two fruitless wars. Universities feel “rigged” and inaccessible; job prospects are slim. For what purpose do you live under such circumstances? When the stanchions of your life have sunk into the muck? Fine, wallow in your ignorance, but thinking a man who pathologically lies, has not plans to fix anything, and basically is  proposing the same economic themes that Republicans have pushed for years is going to fix anything is madness.

Understanding their ignorance may help to more successfully deal with it in the future, but to excuse it in selecting Donald Trump is a trip to enabling land.  Hillary is not the best candidate, but who said the best candidate (in the true political sense of the word) could be a successful leader?  We have problems and she has detailed plans to address them.  Donald is a snake oil salesman with no realistic plans to do anything.  Culture or economy, either does not present a rational explanation of why you would pick this man to pick up your garbage.  All I got out of these arguments is that the human animal is a lot less civilized and rational than I had ever believed.  Thinking success and leadership is exemplified by how much money you can bilk out of the system really does represent a culture of ignorance we should want nothing to do with.

Focus!

You know in one way the Republicans are winning.  When was the last time we talked about anything substantive?  Trump has us all focused on the border and the non-existent Mexican hoards.  We do have an immigration crisis but quite frankly it has nothing to do with the border and everything to do with a process to bring all the illegals in from the cold.  And the only reason it is a crisis is because Republicans created a world where meaningful reform and a path to citizenship is off the table.

And here is how mindless it is:  Let’s say Trump is right and we need to build the wall and deport every illegal alien in the country.  How exactly are you going to pay for that?  And more importantly, even if you could afford the trillions it will cost, what don’t we pay for to build a wall?  Healthcare? More affordable education,?  Infrastructure improvements? Food stamps, K through 12 education investments?  Government is about setting priorities and Trump and the Trumpets want to go broke building a wall that will keep nobody out.  Heck, Mexicans are not even the majority illegal aliens.  What can I tell you.

But it is all a very convenient side-show to distract us from how Republican ideas about the economy have failed.  That is really what this election is about.  People are angry, but their anger stems from their economic stagnation.  The Trumpets have gone into the blame game, which is okay if you are blaming the right party, but of course most of those nut jobs have not.  It’s blacks or hoards of mexicans at the door or total government incompetence that can only be remedied by a business man.  What a joke.  The real problems are an economy that has systematically been built up over the last 60 years to favor the wealthy and the metric to prove that is how economic inequality has grown over that time.

But we are not talking about that.  Today on MSNBC they were focusing in like a laser beam on how Bill Clinton may have abused federal money.  Really, is that what is going to fix tomorrow or are we going to just jump from one “scandal” to another, with the press seeing what they can dig up over say the last fifty years and pretend that is relevant to jour choices for the future.  Emails!  Benghazi! More emails! Mexicans at the gate! Muslims everywhere!  Well you get the drift.

Hillary is more than happy to go with the argument that Trump is incompetent to be president so elect me.  But there is a fatal flaw in that strategy.  If you want to change America you are going to have to get a mandate to do it.  Until you address the real problem and get Americans to really think about how Republican policies have been tried and tried and failed and failed.  So let’s hope Hillary is more strategic than tactically and pivots in the debates to the real issues and a way forward or we will get Obama 3.0, and a new Trump in 2020 and we live through another gridlocked four years.

What Do I Think They Are All Missing?

Two things, really:  Global Warming is a national emergency on a global scale; and the economy doesn’t work the way the majority of people assume it works any more (economic inequality is the result).  That is it in a nutshell.

On the first one, to say that is described by many as “alarmist,” but it isn’t.  We are facing a climate and ecological disaster that will have far-reaching impacts both on our economy and on foreign relations.  The models that are predicting it keep having to be updated as the trends accelerate faster than the models predicted.  The data is now overwhelming, but its threat is not at “the gate” (Barbarians at the gate) yet so we have a whole segment of our society that denies it.  They have to because they don’t think government should do big stuff, and this threat requires really big stuff.

Second, and what most partisanship is about, is how the economy works.  We have had this model that says if businesses thrive, all of us do.  So far so good.  Now we get into the great divide.  Basically the majority of Americans are fiscally conservative, that governments should do little (little spending) and with less regulation and low taxes businesses will in fact thrive.  There were environments where that worked, but it depends on one other important factor, demand.  After WWII, we had pent-up demand, income and savings to support it, and an economy ready to transition from a war machine to a domestic machine.  We invested (G.I. Bill) in education and we took off.

The trouble is we don’t live in that world anymore. We don’t have pent-up demand in the form of disposable cash to support spending.  We live in a world where jobs are being offshored that decreases domestic income and spending power.  And finally, more and more of what we do earn stays with the very rich (economic inequality).  Is that the fault of the world economy?  Maybe partially, but it is reality and you can’t shut it out.

So as domestic consumption, especially in the middle class, stagnates, investment moves overseas to wherever markets exist, and competition for competing goods drives labor markets also overseas to find the lowest labor costs.  Couple all that with the failure of government to invest in our own infrastructure and people (cutting government spending), has created an economy that doesn’t operate any longer by normal rules.

We have built an economic system through rules, regulations, trade agreements, copy rights and intellectual property laws, lack of support for unions, and a stagnating minimum wage that favor wealth accumulation for the few assuming it will flow down, and it does not.  So domestic demand has shriveled.  Now come our economic assumptions:  If we just lower the interest rate, business will borrow and invest, jobs will be created, and we will all thrive.

Except it hasn’t worked.  Interest rates are at record lows and businesses are not making the projected investments.  They are already cash rich, but they don’t see the demand, at least domestically, to support expanding.  It isn’t about confidence, government regulation, or low taxes, it is about whether there is sufficient pent-up demand (and spending to support it) to expand.  Their answer: No.

So the next thing the Fed did was “print” money.  They created additional money supply to buy back some of their loans.  Conservatives told us the interest rate would go out of sight.  It did not.  So we have very low interest rates, more money put into the system, no inflation, no soaring interest rates, and the economy remains sluggish.  Say what?  The Fed wants to raise interest rates because they feel the unemployment rate now supports it and they want to head off inflation.  What inflation?

Inflation happens when too many people are trying to buy not enough things and prices rise. Or there is not enough labor for jobs and wages rise. Neither has happened. In fact a little inflation would help us because it would force businesses to quit hanging on to cash and invest it.  Bottom line, the economy is not working they way we assume anymore but we keep doing the same counter productive things assuming it is.

The good news is that both of our critical issues , global warming and the economy (economic inequality), can be solved by the one thing we absolutely refuse to do:  Spend to create demand.  Long story short, we invest massively in infrastructure upgrades including necessary mitigation measures for global warming effects, and in R&D to transfer us off of carbon based fuels.  Combined with that we revise tax codes, regulations and all the stuff listed above to make sure that there is a fair sharing of GDP increases.

We incentivize investments in production and new facilities and de-incentivize investments in financial instruments.  This then provides good jobs that increases domestic demand and the multiplication factor throughout the economy has been estimated at about 1.5.  For every dollar the government spends you get about $1.5 in economic activity. Note that it works in reverse.  For every $1 cut from federal spending, you lose about $1.5 in economic activity.

Where does the money come from? We borrow it because interest rates are so low that when you factor in what inflation there is, it is free money.  Won’t that balloon our debt and then we are in big trouble right?  Define trouble.  We have been scared shitless by debt rhetoric that has no basis in reality.  Debt becomes a problem when no one will loan to us and interest rates rise.  But we can print money to pay it off or invest it directly.  Then inflation might occur and our dollar would be worth less, right?  Well a little inflation would also be good for exports and they make our goods cheaper while making foreign ones more expensive.  So buy domestic.  The reality is we have seen neither effect in this new economy and until we do, we are shooting ourselves in the foot heading off a phantom problem.

If our economy takes off as many of us think it will, this will increase tax revenues and decrease the impact of deficit spending.  And it not just spending, it is spending for stuff we need for the future.  In good times, the return on investment could just help pay down that debt.

Now the Conventional Wisdom from most corporations and Wall Street is all this is bad because their whole structure is based upon the world economy that makes them rich while making the rest of us poorer.  That is where the money comes from that flows into Washington.  That is what drives conservatism and moderate Democrats to hang on to that fiscally conservative thing.  But in the new world order, it is a losing game for most of us and that is what our current crop of politicians don’t get or don’t care to get.

If we don’t get a handle of economic inequality and we don’t invest in fighting global warming, our deteriorating infrastructure, and our people, it will soon become the world of corporations and the workers.  But that won’t work either because sooner or later they have to realize that if people are working at slave wages, who has the income to buy their stuff?  And while all that is going on, global warming will impact rain, available water, coastal regions, and start whole new international competition (read wars and conflicts) for the “high ground”.

It is just a no duh moment and right now we have one candidate who denies that whole reality, and another who thinks she can inspire with incremental fights at the margins.  That is what they don’t get. In this case, Chicken Little is right.  The sky is falling.

It’s Thursday and We Are Not Mentioning Donald

I see where Kim Jong Un (North Korean Nut Case) has announced that North Korea now has the hydrogen bomb.  He must have felt left out from all the hoopla over terrorism and wanted to get back in the news.  I guess the gun nuts will start pressing for legalizing the carrying of your own personal nuke because you never know when you might be at the movies and run into a North Korean carrying a hydrogen bomb.  The one good thing you can say about this, if you believe in god, see Steve, religion doesn’t cause all the problems of the world, just most of them.  Of course Kim Jong Un considers himself a god so there is that argument.

Here in California, things to come may be playing out in the California State Government.  With Republicans basically banished to Never Never Land, we are seeing what a real two-party system looks like without crazy Republicans.  What we have are progressive Democrats and moderate Democrats.  Unless you have been asleep, moderate Democrats are really Republicans without all the insanity.  They are economically conservative, but don’t want to destroy government.  Republicans with their craziness and insanity of no compromise positions have basically become some wacko splinter group.

But there is a problem here.  The Assembly boys and girls met at Torrey Pines (San Diego) and elected two moderate Demos to lead the Assembly.  As the article described these folks, “…the moderate caucus has made its mark by diluting or blocking legislation opposed by business groups.”  I used to have a neighbor, and old retired Italian gentleman who was one of the first motorcycle cops on the Golden Gate bridge.  He would always say, find out how business wants to vote on something and then vote the other way.

We like to think we need business friendly government to make sure we don’t stifle our economic system with unnecessary laws.  But business is also the staunch defender of the status quo.  They are the last ones to see that the system needs to change, because they benefit from the system as it is.  Think of it this way.  If blacksmiths controlled the legislature back in the early part of the 20th century, the automobile would have been banned.  Change is turbulent and upsets many apple carts so moderate Democrats can become part of the problem in a world where economic inequality is becoming the number one threat along with global warming. But at least they aren’t crazy.

Finally, in things not Donald, Alaska, dependent on oil from their state income is proposing a statewide income tax to plug a hole in their budget as oil revenues decrease.  The governor is also proposing to take some of the money that is paid directly from oil revenue to citizens to fund the government.  Now he is dealing with reality here.  Oil income is falling and if we are going to really go green, it will continue to fall.  But how citizens of his cold state react could be entertaining.  While they are seeing first hand the effects of global warming, we will see if the short-term pay check is more important than future disaster.  Kind of an experiment in whether we really can govern ourselves responsibly.  Can’t wait.

Three Things

The first is the market is totally irrational.  Now we are up because China has dropped its interest rate to try to stem the bleeding in China.  It should be apparent that share prices are a figment of most investor’s imagination.  You are willing to pay a certain price on your perception of how you think that stock and the economy will do.  So there are moves in China and the herd stampedes.  Is that rational?  Maybe, maybe not.  Consider how the false fear of debt effects many people’s perception of the economy and then ask yourself if moves in the market place are rational at all.

We certainly are a global economy and if things are slowing down in Europe, China, and emerging markets, they could certainly affect our economy here.  But most of the stampede was due to perceived China markets falling (all the other stuff thrown in like the Fed and interest rates are simply political pile ons).  So here is what should really worry you.  Based upon the moves China has made so far to control their economy and move it to a more domestic consumer based economy, you should be very frightened about their ability to control it in the future.

The second thing is fairly simple.  With the market crashing and uncrashing and political (and endless) speculation about whether Joe Bidden will enter the race, heard anything about Hillary’s emails?  Right now the Republican clown show is arguing among themselves about “anchor” babies after making amazingly stupid remarks about China and the market fluctuations.  This a deep and experienced field? For clowns I guess.

The third thing connected to the second is that you have noticed that the name of the game in the Republican clown show is to get attention by saying something outrageous.  Have you noticed that the more untrue it is, the more attention they get?  And the press seems paralyzed to include a fact check with their coverage of these clowns.

Moderate Republicans and What is Wrong With That (Cont. Part 3)

In my continuing saga of looking at the problem with the 7 things all Moderate Republicans and some Democrats (economic conservatives) believe almost religiously. I listed them as follows:

  1. Our economy is driven by the market place and restrictions put on the market place simply drag down the economy
  2. Jobs are created by the 1% investing their profits in the market place (Job creators). This is trickle down or flow down.
  3. Regulations and taxes simply hinder the market place and take money out of the hands of job creators to create jobs
  4. The system is fair and those who work hard get rewarded. Spending on social programs like Social Security, Food Stamps, and Medicaid simply take money out of the job creators and create programs that let workers opt out of the system (the 47%) or the lazy fail to perform
  5. Government should not have any debt and balance it’s books (Debt is bad and makes us dependent on foreign countries)
  6. Government is very inefficient and its role in our economy and life should be minimized
  7. A Strong dollar

Today I want to look at 4, 5, and 7 so bear with me.  #4 is really an attitude some say we are born with.  Said in a really simplistic way do you think people are basically good, bad, or somewhere in between?  And do you think the world is a fair place?  Many economic conservatives justify their basic Darwinistic view of winners and losers in our economy through a view that the playing field is level.  That then bears on their view of Food Stamps and other social welfare programs.  They worked hard and succeeded, so that is what is required.  All the rest who might need help through these programs did not show the same discipline and this is money wasted on the lazy.

The problem with that view is that it is belied by the facts.  If you come from a wealthy family you are much more likely to succeed than from a poor one.  The correlations are stark.  The pulling yourself up by the bootstraps stories are becoming fewer and fewer, and international data shows that the United States lags in social mobility (the ability to rise above your station) behind most countries that have more substantial social programs.  The take away from this is most people want to work and cutting governments role in helping them along the way hurts us all.  But this is anathema to their ideology.

Now the debt thing is almost a spin-off here.  From the above, if one bought into the level playing field and if only you work hard you are rewarded, you get a philosophy (ideology) that a disciplined life is the key.  Here is where the home budget (or small business budget) analogy comes in.  If we have the self-discipline to borrow frugally and make ends meet in our home or small business budget, so should government.  And not only that, but we must always be working to reduce our debts to zero.  Now you know where Jeb Bush gets his balance budget amendment.  Oh, and if our debts are small as a government, our dollar should be strong meaning we can buy more stuff with our money than with a weak dollar from our foreign competitors.

Now what is wrong with all of that?  Certainly hard work and dedication are a virtue and a just society should reward them.  And they are and as we have seen some get a lot more rewarded than others.  But the debt thing based upon the home or small business analogy is not only wrong for government, it can be disastrous*.  The home budget analogy assumes an end point where your income will be reduced so you want your debts zeroed out or quite small.  It is called retirement.  In between you want your debts to not overcome your income.

Here are the major differences in a country’s budget versus a home budget:  It doesn’t end and there are new children to invest in every day; and generally in a home, spending does not create income, but in a government it does.  If the spending a government does provides improvements to the infrastructure and workforce, then they become more productive and increases tax revenue.  Think of it in the home budget analogy of making investments for future income.  Certainly debt can get to be too big, but the question is when can you handle a larger debt and when should we be scaling back.  Since in a home budget, the issue is debt as a percentage of income, why should it be any different for a government?  So we look at what is our debt not in absolute dollars, but in percent of GDP (Gross Domestic Product), our income.

And what we do know is that when debt is perceived as a problem, we become a risky borrower and the indicator of that is rising interest rates to cover the risk.  What exactly is our borrowing interest rate today (some of the lowest in history)?  In our home budget we need to borrow to buy a house, buy a car, send our kids to school.  It allows us to live, get to work, and plan for our future and those of our children.  With government it is no different except there is no end point.  So the only real issue is to borrow and spend enough to continue to invest in our country and people, while keeping debt levels at a reasonable percentage of GDP.  But if your ideology is that debt is bad, then the reasonableness test goes out the window and you have what we have today, starve the beast because all debt is bad.

One last thought here.  If we learned anything from our history, when the economy is roaring, we need to be paying down debt so that when we are struggling, the government can pick up the slack as it did to end the depression.  This means deficit spending.  Yet because we have invented a new boggy man and it is debt, any debt, we are throwing away these lessons in calls for a balanced budget amendment.

Finally, the strong dollar.  This one is easy and has to do with the Fed.  We have a fiat currency.  That means the value is not some fixed amount like a silver certificate or redeemable in gold (gold standard).  It floats in value dependent on its perceived value.  This terrifies economic conservatives.  Rand Paul wants to go back on the gold standard.  But we got off that when we saw the harmful effects of just such a system and the Greeks are suffering that fate right now because they can’t devalue the Euro.  So we can just print money when we need to and the money supply is how the Fed controls interest rates and inflation.

Oh, there is that other boggy man, inflation.  But the Fed can use the money supply to try to stimulate or slow down the economy.  With a lower (not so strong) dollar our imports are competitive in other countries. With a little more inflation (2% is the usual goal), people are less likely to hang on to dollars and invest (spend).  It is a powerful tool to try to even out the business cycle and yet ideology wants to take it away.  They want something that doesn’t change, but that immobility can be a chain around our necks.

You should be getting the drift now.  While there is an element of truth in economic conservatism, it has gone of the rails and become an ideology that prevents us from using our knowledge and experience to deal with changing circumstances.  Okay only one more of these to go tomorrow:  Is government the problem or the solution?

*From Paul Krugman this morning amazingly enough on debt (Great minds think ….)

One answer is that issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.

How Conservatives Think

Well I am always trying to figure out how conservatives think and I am stuck with my general population for examples here in El Dorado County.  But here is a conversation I had that might give some insight into many of them, expecially seeing that the Donald is holding strong in Republican support in the polls after the debate.

A friend of mine was explaining to me that he was an economic conservative but wished the party would ignore that social stuff.  Now, I could have a field day with that one, but it would be wasted breath.  But what was important was that his belief system came from his life experiences, not an intellectual examination of his assumptions.  This is important and I will get to it in a minute.  He views the economy and what are prudent decisions based upon the decisions he must make to run his business.  That would be microeconomics.  Trying to explain that macroeconomics does not work that way would be wasted breath.

Let me give you an example.  He is worried about the debt.  So how big is our debt (I did not confront him on this because he is my friend)?  The answer I would have got was xx trillion dollars.  I would say what does that mean.  He would say really big and out of control.  I would tell him the number is meaningless unless we know what percent of our income it represents.  Take most of us and figure in your home mortgage, car mortgage, and maybe student loans and that number is probably 2-4 times our yearly income (or more).  So let’s say 300% of our income. Our national debt is less than 100% of GDP so what is the issue? Interest rates are at all time lows and inflation is almost nonexistant.

He would probably say, well wait a minute, most of those debts are secured on the value of property so it really isn’t 300% of income.  And I would say, does not the United States have assets?  Oh, and I could say we can increase the money supply anytime we want but that would blow his mind so I just would leave that out.  I would also point out that for him to retire, he has to be on a schedule to reduce these debts because his income is going to decrease, but a country goes on forever and our income (so far) continues to grow. Okay he would change the subject.  I would also bet that he has no idea that our deficit (as distinct from our debt) has been coming down at a record pace.  That is not focused on in his favored news source (if you are worried about the debt) because it does not stir up paranoia.

But he is an economic conservative and he is mad at his party because of all that social stuff.  He said he doesn’t care about it.  Now that is an interesting point of view.  I care about a woman’s right to choose, equal rights for all our citizens, and general fairness in government.  My guess is that none of these things touch his life so he doesn’t care.  Are you getting a trend here.  A conservative is part and parcel of his experiences and nothing else.  Some of us call that a lack of empathy.  If he experienced an injustice he would be concerned, but since the injustice he perceives is government interference with his business, well government is the problem.

Okay finally I said, we can solve the immigration problem, you and I, on a napkin.  His concern there is his workforce.  I finally pointed out that the problem was the radical right in his party, what I heard was the both sides do it bull shit.  So I pointed out that “both sides” in the Senate had in fact come up with a bill he could live with (stringent path to citizenship, and border security) and although it would pass in the House if voted on, it was not brought to the floor because the radical right objected to a path to citizenship, any path.  I don’t think he knew that.  And that is the really scary part.  If you get you news from Fox News and you take it on face value because they are reporting what you want to believe, well…  And tomorrow the whole conversation will have been forgotten.

So another day in conservative land where you are not sure whether to get out a blackboard, or just drink your wine and shut up because they are going to go back to their echo chamber and not have to really examine what their beliefs have wrought.

Sad State of Affairs

I happen to think the Republican field for president and their policies, or lack thereof, shows a sad state of affairs in America if these people really have a chance to govern, which of course, they do.  There is a level of anti-intellectualism, religious fever, and denial that is almost primative.  At least that is what goes on in my mind when I think about them and their mindless supporters.  But here in the NYT is a headline and article description that kind of nails it:

AS GOP COURTS IOWA, PARTY DEBATES REVELENCE OF IOWA
Seven Presidential hopefuls joined Senator Joni Earnst for her inaugural pig roast and motorcycle ride, heaping praise on the freshman Senator.

I don’t know, but does a vision of the Lord of the Flies come to mind?  Fearful children led by an opportunistic superstitious leader?  Let’s go to a state whose economy and national outlook don’t reflect our nation or the future and run for office.  Iowa’s economy is rated 27 in the country* and quite small.  Though those independent farmers won’t admit it, they are dependent on corn subsidies and the government’s program to turn corn into alcohol.  But it is an evangelical heaven with an echo chamber bar none.  What these people think is what we are reporting on?  Never mind, mount up on your Harely and off to beast feast.

*By comparison, California has the 8th largest economy IN THE WORLD.  Iowa’s economy is roughly rated around 80th in the world right in there with Vietnam.  But it is where Republicans and Democrats meet with meaningless caucuses to claim name recognition.  Long live God Bless America and ethynol!