Democrats, Heartland Cities, and Monopoly Capitalism

The 2016 Presidential election still vexes Democrats. Few pundits thought that Trump could win. Most experts argued that not only would the electoral "blue wall" of upper Midwest states prevent a Trump victory but also buoyed by demographic change as well as gender solidarity, Clinton would win in states that had long been Republican leaning-i.e. Georgia, Texas, Arizona and North Carolina.

We know what happened. Clinton won the popular vote but lost the election. Trump became President. Some Democrats still blame Jill Stein and Bernie Sanders. Others blame Russians. And so on. Democrats blame a number of people or events besides Clinton for Trump's victory. But lately more people want to blame the country's political institutions and rules: the Senate, the Electoral college, the voting age, separate state elections, etc. As discussed before some people are furious that Wyoming and California have the same number of Senators. They're irked that running up the popular vote count in one state (as Clinton did in California and New York) is not helpful to winning the Presidential election. Some Democrats want to make the Senate representation proportional by population (if not jettison it entirely), and eliminate the Electoral College. 

Republican Tax Cut Doesn't Work: Republicans Threaten Social Security

The problem with voting is that there are a lot of stupid, gullible, or downright hateful people who vote. Their vote counts just as much as yours does or mine does. To be fair they may very well think of me or you in the same terms which I just used to describe them. That's politics. That's never going to change. If we accept that every citizen has a right to vote and pursue his or her own interests as he or she defines them then we also must accept that sometimes people will make objectively sub-optimal decisions.

This brings us to the impact of the Trump tax cuts. You may recall that the majority of economists across the political spectrum predicted that the tax cuts would not create enough growth to shrink the deficit. The tax cuts would increase the deficit. And just about every economist or political theorist on what's rather broadly defined as the left, argued that that once the increased deficit became obvious Republicans would smartly pivot and without missing a beat argue that programs such as Medicare, Medicaid and Social Security had to be cut in order to bring down the deficit. 

Republicans would weep copious crocodile tears as they congratulated themselves on their willingness to cut benefits to people who weren't invited to the tax cut party in the first place. It's classic bait and switch. It's one of the oldest cons in the book. With ever increasing frustration Nobel Prize winning economist Paul Krugman has been warning about the tax-cut/deficit con and predicting the Republican response since before the tax cut became law. This isn't new. It's what Republicans do-or at least what the upper class/business class Republicans do. The middle-class/lower-class Republicans aren't necessarily supporting the party for its dedication to cutting taxes and slashing social programs (at least those used by whites) so much as they are supporting the party for racial and cultural resentments. 

Worst Hack in History: Time to Get Rid of Equifax??

You probably heard that Equifax suffered the worst hack in its history. Hackers viewed or stole the private personally identifiable information of approximately 143 million adult Americans. I am talking about your name, your maiden name if applicable, your address, your date of birth, city and state of birth, your income, your previous addresses, and of course your social security number. Equifax not only failed to secure this critical information but also some Equifax big shots allegedly sold Equifax stock after they discovered the hack but before the news became public. And Equifax took its sweet time before informing the public. A few people have since lost their jobs but other than that Equifax or its principals haven't suffered any legal criminal or civil penalties. It's unclear as to exactly how much Equifax or its two other primary competitors, Experian and TransUnion CAN be regulated or fined. They theoretically fall under the bailiwick of the FTC and the Consumer Financial Protection Bureau but neither of those organizations have the power to impose harsh penalties. And the current Administration is not exactly known for its belief in keeping a short leash on corporate behavior.

In the online age some have become blase about sharing personal information but this incident could change that. Individual consumers never handed over their information to credit bureaus. It was their employers, insurance companies, banks and/or creditors who did that. This data could be a jackpot for criminals around the world. There is literally no end of mischief someone can get up to if they have all of your personal information. 

Book Reviews: Flat Broke In The Free Market

Flat Broke In The Free Market
by Jon Jeter

This book's subtitle is "How Globalization Fleeced Working People" so it's not as if the reader should be too surprised that the author, a former Washington Post bureau chief for southern Africa and South America, and Pulitzer Prize finalist, very clearly takes a stand against globalization, or to be more precise, globalization as it's been implemented. Broadly speaking globalization has meant that there have been ever greater capital flows in search of cheap labor and low regulation, less protection of native industry, deindustrialization and destruction of unions, massive privatization of key public sectors and monetary policy that is far more concerned with fighting inflation and protecting the value of investments than with fighting unemployment and ensuring that those people outside of the investor class at the very least have a job. However this book was written in 2009 so some of the specific economic information cited about certain countries is now out of date. Some of the countries Jeter cited as basket cases have slowly turned things around but on the other hand some of the countries which he didn't mention because they didn't support his arguments have since had experiences which fit well with Jeter's theme. However, specific data points aside, the larger trends remain more or less the same across the United States and especially what is called the Third World. Corporate profits are up. Banking, investment, finance, and real estate sectors are larger parts of the world economy. Wages are down. Inequality has risen. Worldwide, people struggle to pay or obtain basic services and goods such as food, clean water, electricity and housing. Theories that seem to make sense and have a certain elegance in academia or corporate board rooms somehow have devastating impact on the real lives of people across the world, especially the half of the world's population who struggles to live on less than $2.50 a day. Jeter struggles to make sense of all of this. He describes the genesis of this book as coming to him after interviews with right-wing libertarian Nobel Prize winning economist Milton Friedman and former Rhodesian white separatist leader Ian Smith. Although he had no truck with either man's point of view, Jeter found that each man was surprisingly hard to dislike even though they apparently lived in an alternate reality to that which most of the world's population inhabited. Friedman thought that everything was going well for the world's investor class and that everyone else would be helped further on down the line by what he called reduction in interference in trade. The polite and genteel Ian Smith thought that the blacks in "Rhodesia" were much better off under white rule and were the "happiest in the world". I guess that Smith didn't really think too much about why such "happy blacks" launched a war to end white rule.
Anyway.

It's after these conversations when the basic thesis of this book came to Jeter. His argument is that colonialism and globalization are basic riffs on the same theme, service to imperialism and the ownership class. This is not a dry book full of charts or mathematical models. But there are oodles (and I do mean oodles) of footnotes. Jeter explains over and over again that he's not an economist. Jeter was born in 1965 and grew up in the Midwest. He describes the difference it made in his lifestyle that his father was able to find a job at Chrysler plant. In later years when because in part of globalization and capital transfer, inner city (i.e. black) male residents suffered through wage drops and high unemployment, Jeter appreciated even more the value of a good paying job. Jeter doesn't believe that people are inherently damaged or less than because of their race or ethnic class. Nor, would I venture to say does he think that individual failings are the sole cause of poverty. This book is a strong corrective to the widely accepted view that poverty is always and only a personal moral problem. Many of the issues which are used to criticize the underclass are quite often a response to economic stresses.For example, in Argentina, probably South America's whitest nation, Jeter talks to lower and middle class women who've turned to prostitution to feed their families. He also gives a history of the country's economic policies to see what's worked and what hasn't. In this book Jeter examines communities and countries across the world and points out how they have been ill-served by so-called "free trade" and globalization. His points of exploration include Zambia, Chile, Argentina, South Africa, Brazil, Malawi, Mozambique, Mexico, Venezuela, and of course places closer to home such as Washington D.C., Chicago and the post-industrial Midwest. Jeter mixes economic history and personal stories together to put everything into context. For example, if we didn't have subsidies for corn and sugar, would we have our food supply overflowing with added sugar and high fructose corn syrup? And if that weren't the case would we have skyrocketing obesity and diabetes rates? If you take nothing away from this excellent book you should understand that globalization is neither inevitable nor is it a force of nature. It is a result of human decisions designed to benefit a very particular set of people. It could be changed to benefit a wider group of individuals. For example in South Africa, the whites took steps away from the free market to benefit themselves at the expense of the Africans. It was only after their economic dominance was complete that they were interested in a "free market". This book was just about 200 pages in hardcover. It's quick but rewarding and even dense reading. Jeter ties a LOT of disparate events and problems together. I found it generally convincing but then again I share some of his assumptions. Jeter is scorching in his dismissal of the black political class, a group he views as being largely unable or uninterested in helping the black masses they claim to represent. He does give some positive attention to street level activists across the world who are challenging the narrative, albeit with decidedly mixed success.

Oil Prices and You: Winners and Losers

Although I happen to know a few people working in the financial industry who are peeved about the fall in oil and gasoline prices, I am delighted about the drop. My weekly commuting costs have been cut in half. That's more money to pay down debts, build savings, increase emergency funds, invest, assist relatives or perform any number of other Shady approved initiatives which are of much higher utility to me than spending $15-25 on gasoline every day from Sunday through Thursday. The drop in gas prices has a similar impact to a tax cut or pay raise. For people who drive 200 miles/week or more it's a virtual godsend. I am amused that the conspiracy theorists who come out to blame the Trilateral commission, the oil companies or THEM when oil and gasoline prices are high are nowhere to be found when prices are low. But there is no such thing as a free lunch. These low prices hurt producers. There are some very real winners and losers. I don't much care about the losers but it is worth thinking about because low prices may have bad results down the road. The reason that prices are low is the interaction of supply and demand. Higher oil prices gave US and other producers greater incentive to seek oil through fracking and new drilling, thus increasing supply worldwide. Domestic oil production doubled over the past six to seven years. The US is currently producing about 9.1 million barrels of crude each day. There is a ban on US oil exports but the greater supply still indirectly reduced the global prices. It did this via the mechanism of US production crowding out foreign imports which had to seek new markets. The fact that much of the world is still mired in a slowdown or very weak expansion also caused demand to drop. 

So increasing supply combined with weak demand means that oil prices fell to levels not seen since 2009. Now usually under such circumstances the largest oil producing and exporting countries, many of whom are part of the OPEC cartel, would have a sitdown and arrange for everyone to cut production proportionately in order to boost prices to what they feel are reasonable levels. Don Corleone would give his protection in the east and there would be the peace. So far these reasonable steps haven't happened.

One of the reasons that production hasn't been cut is that Saudi Arabia, who holds the largest oil reserves and the most ability to withstand lower prices for long periods of time, is playing chicken with North American and Russian oil producers. Saudi Arabia would like nothing more than to take US energy independence and fracking off the table completely. And if they can harm their Iranian rivals while doing so and punish a few other OPEC members with reputations for cheating then so much the better. Many of the Gulf Arab states feel the same way. So Saudi Arabia and its supporters won't countenance cuts in production. In fact they have had the cheek to suggest that the US cut production. The US is not upset to see Russia have budget issues at a time when US sanctions are starting to bite. All of this means that countries like Russia, Iran, Nigeria, Venezuela among others are in deep trouble. Their budgets and internal income transfers are based on oil prices remaining within a certain range, say $70-100/barrel. Oil that remains at $47/barrel, which is the current price, could cripple their economies. There are some obvious political repercussions here. For example some of the funding from the Gulf states to ISIS could decline or dry up completely. Governments which purchase internal loyalty or stability via high oil prices could destabilize. Other losers could include North American oil producers who only expanded or entered their business because their forecasts predicted high oil prices for the foreseeable future. Obviously no one knows what the future holds. It may take more time for the ill effects to be felt. But if oil prices stay low we will see increasing and ongoing employment losses in such states as North Dakota, Texas, Louisiana and Oklahoma, throughout 2015 and perhaps even into 2016. At that point production will have dropped enough for prices to recover somewhat.

But it's not just people directly involved in the oil and gasoline business who may be facing economic or political problems from lower oil prices. When gas prices drop as much as they have done, consumers tend to lose interest in electric cars, hybrids or super efficient smaller vehicles and start to purchase more full size vehicles, particularly SUVs and pickups. The auto companies like this because they make thousands of dollars more profit per unit on the larger models. However the auto companies also have CAFE standards to meet. It is more difficult for them to do this selling larger vehicles. In general lower energy costs for fossil fuels don't align with decreased carbon production and pollution. There may well be more friction between certain government mandates and market realities. It's ironic that the end to fracking and drilling in pristine areas, something that is high on the agenda of many environmentalists may well occur because of market signals as opposed to social activism or new laws. And although by some lights, now would be the perfect time to increase the gas tax, there probably isn't much political support for that move.

So in any event, enjoy the lower prices while they last. I know I will. But keep in mind that lower prices are causing other people some hardships. We're all connected on some level. And there ain't no such thing as a free lunch.

How have the lower gasoline prices impacted you?

How much longer do you think these prices can last?

If you're saving money, what are you doing with it?

Pay your auto loan or don't drive!!!

I generally think that if you take out a loan you should adhere to the legally enforceable terms of the contact. So if you agree to pay X dollars back per month then you really should pay X dollars back per month. It irritates me when people borrow money from me and find all sorts of creative reasons why they should not pay it back. I think this is true regardless of financial status. Pay what you owe. A deal is a deal. That said, depending on what the loan or service was, the creditor can encounter difficulty getting repayment. The Federal government and to a lesser extent state governments have fewer problems getting money owed from you as they have the power to just TAKE money from your account, seize your assets, tell your employer or bank to stop giving you money and put you in prison. That will get your attention. Utility providers can shutoff service for non payment. Customers notice that. Loan officers operating outside the law can send unpleasant people to your home or workplace to threaten physical harm if they don't immediately receive payment. Getting your shins cracked with a baseball bat or having your hands broken can provide financial clarity. Some other creditors, say lenders on auto loans, don't have the ability to immediately and seamlessly compel payment. They loaned money on a quickly depreciating asset. Many people don't give car loans priority over housing or food costs. The debtor can easily move his car to another state. To repossess the asset, depending on state law, the creditor usually has to go to court to obtain a judgment before hiring some semi-reputable people to retrieve the vehicle. This could all be messy and costly. In some zip codes if someone hears or sees someone breaking into their car, they will shoot first and ask questions later. So what's a creditor to do?

Well imagine if instead of having to go through the hassle of sending out multiple dunning letters, taking people to court and spending money on repo men, a creditor could ensure that the debtor was interested in, even eager to pay the creditor on time and in full each and every month for the life of the loan? How would someone do that you ask? Well the creditor would just install a handy dandy gadget which prevents the auto from running if the creditor has not been paid.  

The thermometer showed a 103.5-degree fever, and her 10-year-old’s asthma was flaring up. Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start. The cause was not a mechanical problem — it was her lender. Ms. Bolender was three days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Ariz., remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March. 

“I felt absolutely helpless,” said Ms. Bolender, a single mother who stopped working to care for her daughter. It was not the only time this happened: Her car was shut down that March, once in April and again in June. This new technology is bringing auto loans — and Wall Street’s version of Big Brother — into the lives of people with credit scores battered by the financial downturn. Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year. 

Last year, Nevada’s Legislature heard testimony from T. Candice Smith, 31, who said she thought she was going to die when her car suddenly shut down, sending her careening across a three-lane Las Vegas highway. “It was horrifying,” she recalled.
Ms. Smith said that her lender, C.A.G. Acceptance, had remotely activated her ignition interruption device.
“It’s a safety hazard for the driver and for all others on the road,” said her lawyer, Sophia A. Medina, with the Legal Aid Center of Southern Nevada.

LINK

This is a good example of how poverty is quite profitable for certain segments of our population. Although these devices are currently only being used on those customers unfortunate enough to be entangled in sketchy subprime loans I would predict it's only a matter of time before usage is expanded to the entire consumer auto loan market. In short you might have a 800 FICO score and be willing to put down 80% of the car's value as a down payment. But a bank might still decide that it can reduce risk by insisting that all of its loans must include shutoff devices. I wouldn't like that. But it's not just enlightened self-interest that would make me oppose these devices. It might be funny from afar if, as described in the article, Joe Sixpack is embarrassed as a deadbeat in front of his lady. It's not so funny when a car shuts off while it's being driven. It's not funny when a car won't start when a police or fire vehicle needs to get in front of it. There's no humor in a a non-working car when someone needs to get to the hospital or there is some other emergency. When I am on the road I try to be as vigilant as possible to protect myself and the lives of others. Part of that protection is a societal interest in ensuring that other drivers are licensed and that their cars work. I don't want to be on the road with other cars that could suddenly shut off. That's an unnecessary risk for us all. The lenders are making unnecessary and dangerous intrusions into our privacy and our safety. I understand their interest in receiving timely payments. But there are other concerns against which those must be balanced. Electronic shutoff devices are a bad idea.

Should electronic shutoff devices be outlawed?

Would you buy a car if your loan included this device as a requirement?

Are these people just examples of poor financial acumen?

Should the Federal government get involved in regulating these devices?

Unintended Consequences: New York Lesbian Mothers and Kansas Conservatives

By the time I was a teen my father no longer practiced corporal punishment on me. He thought it was no longer effective on me and disrespectful to both of us. However one of his favorite sayings when he thought I (or anyone else regardless of age or relationship) was about to do something ill-advised was to throw up his hands and declare "You can do whatever you want to do. You're (almost) grown." Left unsaid was the sentence "But don't come crying to me when it doesn't work out, dummy!" I've adopted that saying and use it often. I was reminded of this advice while reading two stories concerning recent events in New York and Kansas. In each instance, policy changes that were implemented have proven to have some consequences which were either not fully anticipated (New York) or were the exact opposite of what was promised (Kansas). This doesn't necessarily prove that the policy changes were stupid ideas, though my bias would make me argue that's definitely the case in the Kansas situation. But it does show that before people make legal or policy changes they do need to think things through a little more carefully. Fewer people would get hurt and bloggers wouldn't have fodder for quick posts before devoting their undivided attention to their day job. Both stories showed that good intentions don't necessarily lead to good results.  Both stories also illuminated that liberals and conservatives can be equally dogmatic and/or have blind spots when it comes to certain base principles.

As we've discussed before when it comes to custody and child care disputes the only primary principle that the state generally adheres to is that the man is always wrong and must pay is that the best interests of the child are paramount and the biological parent(s) is (are) responsible for the well being of the child. There are a few exceptions to this insofar as biology but these exceptions are generally to the detriment of the man. In most states if you are a married man and your wife produces a child you are held responsible for the well being of that child even if you prove that your wife was cheating with the mailman. Too bad, so sad, you're the dad. On the other hand if you are a stepfather or boyfriend and your wife or girlfriend has children and you and she break up, generally speaking you won't have financial responsibility, custody or visitation to those children. You can seek it but it's not by any means guaranteed. You're not the biological father. You would have such responsibilities if you adopted the children. A lesbian couple in New York (or rather one half of a lesbian couple) discovered this the hard way when they broke up and the woman who was not the biological mother tried to obtain visitation/custody to the child which they had both parented.

The Marriage Equality Act, which New York State passed in June 2011, allowed Jann Paczkowski to marry her partner, Jamie, with the assurance that “the marriages of same-sex and different-sex couples” would “be treated equally in all respects under the law.” But when the couple separated and Ms. Paczkowski sought joint custody of the 2-year-old boy they were raising together, she discovered the limits of that assurance. On June 30, 2014, a judge in Nassau County family court ruled that Ms. Paczkowski did not have legal standing to seek access to the boy — because even under the Marriage Equality Act, she was not his parent. 

In his decision, Judge Edmund M. Dane acknowledged “inequity” and “imbalance” in the law, adding that if Ms. Paczkowski were a man in the same position, the law might point toward a different ruling. But in the end, he left Jann with no contact with the boy. The decision devastated Ms. Paczkowski, 36. “You can see how angry and upset I am,” she said on a recent afternoon, seated beside her court-appointed lawyer after a morning spent moving cars for an auction house. She had not seen the boy since a brief visit on Mother’s Day. Children born to a married couple are legally presumed to belong to both spouses; for those born before a marriage — like J. and numerous children born to gay parents before the Marriage Equality Act — only the biological parent is presumed to be the parent.

I am not sure that this is some bias against gay people. The law in New York did allow for non-biological parents to adopt the children of their partners. For whatever reason Jann Paczkowski did not do that. So since there was no adoption the state went with Jamie Lechner as the sole parent. Although gays can marry and have children biology only allows one of them to be the biological parent. Heterosexuals are much less likely to have this issue, by definition.  LINK
This can be "fixed" legally but the flip side is that the fix wouldn't just apply to gay couples, who are after all an overwhelming minority of all couples. If New York allows non-biological and non-adoptive "parents" standing in custody or visitation cases that would mean that every girlfriend, boyfriend or ex-spouse would also have standing to sue for custody or visitation in every single type of living arrangement. That might be less than ideal. Or maybe that is what people want. I can't call it. It would also allow biological parents to sue every single boyfriend, girlfriend or ex-spouse for child support. That is definitely a bad idea in my opinion. I mean if you live with someone for a year or so and then decide that it's not working out do you really want them coming after you for support for a child that is not yours? Or perhaps you discover that Mr. or Miss Right is really horribly wrong and a substance abuser to boot so you leave. Should they be able to assert co-parenting rights to your child when they are not the biological or adoptive parent?

Moving to the Midwest, the state of Kansas, under the leadership of Republican Governor Sam Brownback took a shift far to the right on both cultural and economic issues with results that so far, at least economically have been been just short of disastrous.
One of the basic ideas that animates supply side neo-conservative economics is that tax rates on the wealthy, capital and/or corporations are too high. What needs to occur is that the tax rates on these segments of society should be lowered. This will be good for everyone because the wealthy will be inspired to invest more and hire more, available jobs will increase and those nasty government busybodies will have less funding with which to harass decent God fearing Americans. Low taxes= high prosperity. Well Kansas tried that. It didn't work. Instead of budget surpluses, low unemployment and solid revenue streams Kansas finds its job growth lagging the nation's, a gaping hole in its budget that must be plugged and cuts in the state's bond rating which of course means that the cost to borrow money will increase. This is not exactly what Brownback promised when he and his supporters pushed through significant cuts in both income and sales taxes to the point where some people of lower means were paying more in sales taxes than higher income people were paying in income taxes. Prosperity was evidently not just around the corner. Trickle down economics once again failed to deliver the goods. Obviously though I suppose it might depend on what you thought the "goods" were. If your preferred response to gaping revenue cuts is to then cut public spending (i.e. education) even further than possibly everything is working according to plan. The thing is though is that even other Kansas Republicans are starting to admit that things haven't gone according to plan and are beginning to distance themselves from Brownback's agenda. Brownback and his ilk may have tacked too far to the right.

HUTCHINSON, Kan. — In his 40 years living in Kansas, Konrad Hastings cannot remember voting for a Democrat. He is the type who agonizes over big purchases, trying to save as much money as possible. He is against stricter gun laws, opposes abortion in most cases and prefers less government involvement in his life. 

But when he casts his ballot for governor in November, he plans to shun the leader of this state’s conservative movement, the Republican incumbent, Sam Brownback, and vote for the Democratic challenger. 

“He’s leading Kansas down,” said Mr. Hastings, 68, who said he voted for Mr. Brownback four years ago, when he easily won his first term. “We’re going to be bankrupt in two or three years if we keep going his way.” Voters like Mr. Hastings are at the heart of Mr. Brownback’s surprising fight for political survival. Most criticism of Mr. Brownback has centered on the tax cuts, which slashed individual income tax rates and eliminated taxes on nonwage earnings for nearly 200,000 small businesses. The most recent fiscal year ended with state revenues more than $300 million short of expectations. Based on decreased revenue from the tax cuts, the state’s nonpartisan legislative research department estimates that the budget will have to be adjusted by $1.3 billion, either through spending cuts or additional revenue, over the next five years in order to remain balanced.

Opponents of the governor have used this to stoke fears that he would cut vital services. Both Moody’s and Standard & Poor’s have downgraded Kansas’ credit rating.

LINK
People obviously have different ideas about abortion, gay marriage, gun control and so on but when you start messing with their money everyone tends to notice. States are generally required to have balanced budgets so if there is a shortfall either taxes must increase or spending must decline. Different political groups have different preferences for which choices should be made and that's fine. What's not fine is pretending that there is a free lunch. If you cut taxes, generally revenue is going to drop. There is a political class that is entirely invested in pretending that this isn't true but it is. Now the bill is coming due in Kansas.  Governor Brownback has a 7 point lead over his Democratic challenger, which is pretty close for a reliably Republican state like Kansas. Time will tell what political choice Kansans make but once again it should be obvious to people that trickle down economics is very good at cutting taxes on the wealthy, on capitalists or corporations. It is somewhat limited however when it comes to producing prosperity for everyone, all else equal.

What's your take on these two stories?

Do you think that a non-biological gay parent should be treated the same as a biological heterosexual parent?

Will Governor Brownback be re-elected? Are tax cuts the way to prosperity?

December Jobs Report and Unemployment

In December the U.S unemployment rate fell to 6.7%. This should have been good news. Being below 7% should be a good thing. It should have been something that was seized on by economists as a sign that the US economy was continuing to recover and move out of the doldrums. We should have seen Democratic partisans run to the nearest microphone to take credit for Presidential economic policies that have led us to this point. (BTW the ability of ANY President-- Republican or Democrat-- to take credit or blame for a single data point in the massive system that is the US economy is far overstated but that never stops supporters or detractors from trying to give him credit or blame in good times or bad).

But this time there was no Vice-President Biden braying and bragging about a "recovery summer" on the way. That's because the greatest nation on the earth, a place that put a man on the moon and defeated Hitler and Tojo in just four years, was only able to create a net 74,000 jobs. Even by the standards of the so-called recovery we've been having this was a horrible number. The average net increase for 2012 and 2013 was a net 182,000 jobs. Even those numbers were just barely short of what was needed to keep up with population growth. The unemployment rate is only below 7% because more people gave up and moved out of the workplace. It's not because companies are on hiring sprees. They're not. At least they're not hiring in the United States.


So this number is hopefully something of a statistical fluke. Maybe there was something that was going on in December that won't be repeated again. Maybe this was the initial impact of ObamaCare. The health care sector lost 6000 jobs. Maybe this had something to do with colder weather. Maybe someone didn't get a clean compile on a program and so the number will be adjusted upwards in the coming months. We shall see. For now all we have is this data. What's more troubling than the unemployment rate is the reason why it's fallen. The overall labor participation rate is hovering at 62.8 percent, which is the lowest level in some 35 years. This is weird. I've always wondered about this because for me, there's no choice but to either be working or looking for work. I'm not yet rich enough to retire. There's no one who would be willing to work in order that I could pursue a life of leisure. So if I lost my job I'd have to keep looking for another one and/or create my own business. And I don't think I'm alone. So what are these discouraged workers doing? That's a mystery. Clearly some of them are working off the books, going back to school, relying on family and friends for food, shelter and income, going on disability or retiring. 

If the low labor participation rate was being primarily driven by retirements, that is by an increasingly older population, well then it would be nothing to worry about. The problem is though is that it's not being driven by retirements. The labor participation rate for workers 65 and older has been on a near inexorable rise since 2000 or so. People are increasingly delaying retirement because they simply can't afford it. Those old people you see in grocery stores or big box stores working as clerks or greeters aren't there because they're bored. No, they need the money, thanks in no small part to the financial sector's destruction of their retirement wealth I would guess. And even among younger workers aged 45 to 54 the labor participation rate is 79.2%, which is the lowest since 1988. As I've wondered before, we may be in a situation where thanks to automation, weak unions, outsourcing and wholesale transfer of industries overseas, the US economy simply doesn't need as many workers as it did before. Period. The average duration of unemployment calculated for December was 37.1 weeks. It was 38 weeks a year ago. So it's not as if this economy has been doing well for a long time now.

The other interesting thing about the job numbers is that not only were most of the gains in low wage sectors (retailing, leisure, and hospitality) but for the first time since 2007 ALL of the net job growth went to one gender. Women. Men had a net loss in jobs. Again, this may all be "statistical noise" which will be corrected in coming months. But right now it looks to me like we have an economy that excels in creating low wage jobs and bailing out banks but doesn't seem to be able to create jobs which support a strong middle class. As usual the black unemployment rate was twice that of the white unemployment rate while the "did not graduate high school" unemployment rate was three times that of those with a college degree. And although both political parties will use this report in their battle over extending unemployment benefits again, I think this report and the mostly anemic jobs reports that came before it only support my belief that we need some radical changes in economic policies.
Growth in jobs slows sharply

What do you think of the jobs report?

If you lost your job how long could you last without a new job?

Should unemployment benefits be extended?

China-The New Frenemy

There is a long ugly history of Yellow Peril in American and Western literature and thought. This phenomenon generally looks at the much more numerous Chinese and/or East Asian peoples and sees in them not only unfathomable cultural and racial differences but also finds an insidious threat to the American way of life. This fear and hatred was once so great and well respected that authors like Jack London  (Call of The Wild) could write fiction calling for the complete and utter annihilation of Chinese-total genocide. Obviously no one is calling for such steps today but people from across the socio-political spectrum are starting to realize that while China may not quite be a threat but it's very much not a friend to the United States. China may be something a bit more dangerous than a competitor. Some have pointed out steps that the US must take to aggressively pursue its own desires vis-a-vis China.

These calls to action are not necessarily based in racist thought but in the very real fact that China's rise to economic prominence, its relentless demand for natural resources and its increasingly muscular foreign policy is not necessarily in the United States' or even the world's best interest. And when I say United States' best interest I am referring to the military-security state, the corporate superstructure, and the generally muted concerns of labor and environmentalists.

All of these groups' concerns are somewhat endangered by China's growth and behavior over the past few decades. Labor's concerns are obvious. Cheap Chinese labor reduces job and wage growth within the United States. The corporate sector was generally in favor of this of course but some corporations have belatedly realized that China simply does not believe in intellectual property protection in the same way that the US does, at least not for foreigners. And the military-security state may finally be reaching a point where it's not only concerned by China's rather pugnacious statements about several Pacific regions, including but not limited to Taiwan but also worried about the allegedly successful and ongoing penetration of corporate and government databases by Chinese hackers. When Vietnam, Japan, S. Korea and The Philippines are all trying to get closer to the US to get backup against Chinese bullying and over the top territorial claims, it may be that China is overplaying its hand. With rising inequality in China, the state may be deliberately fanning nationalist furies to take people's eyes away from internal problems. Imagine that.

Because President Obama is meeting with Xi Jinping this weekend, there have been a remarkable series of analysis pieces and op-ends detailing what's going on and what the nature of the US-China relationship will and should be going forward. I'm only going to link to two. If you can find it there is a great piece on China in the latest ISR (International Socialist Review). The ISR piece is longer than the two I've linked here but takes the view that China is now acting as a classic imperialist power just as the United States has. It details more of the history and interactions between the two countries.

Economics professor and gadfly Peter Morici's piece  has a list of steps that the US can and must take in a variety of places to, if you will, stop the Chinese batter from hogging the plate. There's nothing like a brushback pitch high and inside to get someone's attention.

Again, the Obama Administration turns to diplomacy, and China responds with denials. If not to change China then at least insulate the U.S. economy and national security from reckless and cynical behavior, the Obama Administration needs to act more aggressively. Moderate and progressive economists, such as Fred Bergsten and Paul Krugman, as well as this conservative voice, have advocated direct action on the currency issue: U.S. market intervention to raise the value of the yuan, slash the bilateral trade deficit, boost manufacturing and accelerate growth.

Limit Chinese investments to those sectors posing no security threats and to only minority stakes—no wholesale purchases of U.S. assets without reciprocity for U.S. businesses seeking to participate in the Chinese economy. If China wishes to engage in cyber warfare, after fair warning and without not much delay the United States should do more than harden defenses, but rather go after China's commercial secrets and security defenses as well. 

Be plain, demand transparency and engage in talks from a position of strength. Through fruitless diplomacy U.S. presidents have permitted China to become stronger and bolder—the lessons of history regarding appeasement are clear. Only stronger recognizable actions that impose costs on China may bring real change in its conduct and cultivate Beijing to act more responsibly and constructively.

The NYT piece points out that China's state financed economic model is in the short run defeating the US' market driven one. This is not a good thing as it will lead to misallocation of resources and an even more unpleasant changes in US worker expectations.

It is important to remember what is really behind China’s global economic expansion: the state. China may be moving in the right direction on a number of issues, but when Chinese state-owned companies go abroad and seek to play by rules that emanate from an authoritarian regime, there is grave danger that Western countries will, out of economic need, end up playing by Beijing’s rules. 

As China becomes a global player and a fierce competitor in American and European markets, its political system and state capitalist ideology pose a threat. It is therefore essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom and fair competition.

They must not think shortsightedly. Giving up on our commitment to human rights, or being compliant in the face of rapacious state capitalism, will hurt Western countries in the long term. It is China that needs to adapt to the world, not the other way around.

However it turns out I think from self-interest more and more people are thinking twice about the Chinese-US relationship. But the barn door is already open. We can't go back to the 1970's vis-a-vis China. And Chinese cheap labor will continue to be quite attractive to US and European corporations. The question is how do people outside of China deal with what has been described, fairly or not, as a devouring dragon. We have to find a way to ensure that continued interaction with China is beneficial to both countries and the entire planet, not just for one nation or for a small number of elites within each country. I like the idea of raising the value of the yuan and taking steps to make China pay for any hacking.

Thoughts?