Relevant and even prescient commentary on news, politics and the economy.

The End Of The Harris Candidacy

The End Of The Harris Candidacy

I should probably not waste time on this, but I was a fan of Kamala Harris. Her ending her candidacy while still in fifth  place in the polls and  if in a long slide, has me disappointed.  As it is, given her declining polls, lack of money, and reportedly internally divided campaign staff; her chances of actually getting the nomination had fallen to effectively zero.   It is actually an act of class on her part to get out of the overly crowded Dem field.

In light of  the recent sharp decline of Warren as well who is now running #4 among Dems, we now have three white males on top.  As it is I confess, I favored both Warren and Harris over all three of them and the rest as well.  How is it these problematic three whilte males are on top (I reocgnize that especially supporters of Sanders and Buttiegieg will dispute this and may well show up here to properly correct me and tell us of their virtues, and they as well as Biden do have virtues)?

I am going to put it out there: I think both Warren and Harris, especially the latter, have been held to a higher standard as women and Harris more so as a minority woman, than the white males. They are not allowed to make any errors or even appear to make an error.  The white males can bungle and have serious issues, but hey, not a problem, or at least not a fatal problem.  They can go on for the next day.

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Forecasting the 2020 election: the economic baseline (or, don’t count on a recession)

Forecasting the 2020 election: the economic baseline (or, don’t count on a recession)

Four years ago, I decided to use my set of “long leading indicators” to forecast the 2016 election. The indicators were very weakly positive, and pointed to a narrow popular vote win for the incumbent party one year out. This prompted Nate Silver to huff and puff that nobody knew anything about what the economy would look like so far off. One year later, the economy was very weak, the downward move in the unemployment rate had stalled, and the incumbent won the popular vote narrowly (but obviously not the Electoral College vote).

Well, the 2020 election is 11 months away. So it’s time to do the impossible again.

As I wrote four years ago, going back 160 years, roughly 3/4 of all US Presidential election results have correlated positively with whether or not at the time of the election campaign, the US was in a recession or not. More than 2/3 of the time, it accurately predicted the Electoral College winner, and 80% of the time, it accurately showed the winner of the populat vote.  In fact, if we simply go by the metric of whether or not the US was in recession during the 3rd Quarter of the election year, then 84% of the time the winner of the popular vote was from the incumbent party if the economy was expanding, and from the opposition party if the economy was in recession. (The list of all of the elections, the economic status, and the victor in each election, is available at the link above).

In only 3 of the 11 cases where there has been a recession in the 3rd or 4th Quarter of the election year has the incumbent party been successful maintaining control of the White House. Contrarily, of the 29 times the economy has been expanding during the 3rd and 4th Quarter of an election year, the incumbent party has retained control of the White House nearly 3/4 of the time. If we go by popular vote rather than electoral college result, that average increases to over 80% (Both the 2000 and 2016 elections fall into this category, where there was no recession, the incumbent party won the popular vote, but the electoral college resulted in the opposition candidate being declared the winner).

So, with the election one year off, let’s take a look at “Will there be a recession on  Election Day? The simple answer is, left to its own devices, almost certainly not.

Several months ago, analyzing the long leading indicators, I wrote that economic conditions would start to improve by about midyear 2020. Although there has been some deterioration in several long leading metrics since then, that result has remained the same. Below I go through all of the same indicators (7 in all) and their status now. Remember that they suggest how the economy will be 12+ months out.

1. Corporate bond yields fell to new expansion lows a few months ago:

 

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The Case for Carbon Taxes, Part II:  Political Sustainability

by Eric Kramer

The Case for Carbon Taxes, Part II:  Political Sustainability

In a prior post, I argued that carbon taxes are not vulnerable to political subversion by hostile courts and regulators, and that this is an important advantage of carbon taxes over traditional regulation based on mandates, and also an advantage over subsidies.  Once they are passed, carbon taxes can work more or less on auto-pilot to drive a clean energy transition, unless they are affirmatively repealed by Congress.  In this post I consider whether carbon taxes are likely to sustain the support they need to remain in place.  There is certainly no guarantee of this; any ambitious climate policy is likely to remain controversial.  However, there are reasons to be optimistic that a carbon tax will not provoke a self-defeating backlash, and mandates and subsidies will also encounter political headwinds.

When it comes to political viability, it is natural to think that subsidies are the best policy, mandates are second-best, and carbon taxes rate poorly.

Subsidies are politically popular – at least if they are funded through deficit spending – because the benefits to voters are clear and they seem to reward people for virtuous behavior (like buying an electric vehicle), but the costs of deficit spending are indirect and hidden from view.  Subsidies do not force anyone to do something that they would rather not do, like convert from natural gas to electric heat, or purchase an electric vehicle.  They are all carrot, no stick.  (This advantage of subsidies is entirely dependent on deficit financing.  Telling people that we will give them a $10,000 tax credit to use on the purchase of an electric vehicle at some point over the next ten years is not particularly appealing if we also tell them that their taxes will go up $1,000 per year to pay for it.)

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The New Pharmacy Price Transparency Rule Put Forth by President Trump

The New Hospital Price Disclosure Rule Is Important, But Only A First Step,” Health Affairs, James C. Capretta, August 26, 2019

The new proposed regulation on hospital price transparency is an important step toward consumer-friendly price information. The regulation introduces into federal price transparency, requirements such as the concepts: of service standardization, consumer-friendly organization and terminology, and bundling of which all of are crucial for a marketplace to become price competitive.

As the administration acknowledges, this regulation by itself will not fully address the opacity of today’s market. Additional disruptive changes will be necessary to give consumers usable pricing information. Among which, meaningful transparency requires stricter standardization of the services being priced and “all in” pricing matching how consumers think about the services they need.

Additionally, the reform of the nation’s insurance payment system must be integrated into the price transparency effort to ensure consumers are price sensitive across a wider range of services. Suppliers of services will only compete on price when significant numbers of consumers have strong incentives to seek out low-cost alternatives.

Me: To which I would add there is a big difference between price and cost and it is not being acknowledged.

The Trump administration on Friday put forth two long-anticipated rules that increase price transparency for both hospitals and insurers.

The CMS’ hospital price transparency requirements finalize changes that require health systems to make their standard fees available on-demand and online. The “transparency in coverage” proposed rule would require health plans, including employer-based plans, and group and individual plans, to inform participants, beneficiaries and enrollees about price and cost-sharing information ahead of time.

The agency hopes increased price transparency will boost competition among hospitals and insurers to drive down healthcare spending.

Under the new price transparency rule, hospitals must publish their standard charges online in a machine-readable format. They will need to create at least 300 “shoppable” services, including 70 selected by the CMS.

Under the rule, hospitals would have to disclose the rates they negotiate with third-party payers, which some experts say could be illegal.

Hospitals get ready to fight CMS in Court over Transparency,” FierceHealthcare, Robert King, November 15, 2019

More after the leap!

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If you are a conservative, you have no memory. Jonathan Turley

I learned a long time ago at much personal expense, that there is a personality type which function within reality, but only in the present moment of reality.  That is, what ever I say now has no bearing or relationship to what I just said or what I am about to say.  I will deny what you thought you heard.  If that is not enough, I will qualify it but…it has no bearing on what you believe I am saying.  You can just never know and ultimately have no conversation that resolves.

It’s as if they can time shift.  You can just never know and ultimately have no conversation that resolves.

That is what I believe we are witnessing today with the republican party.  They are not protecting Trump.  They are protecting an image they believe in at the moment fully dependent on what they believe is the reality which as I noted is only for the fleeting moment.

Being today was the day for debate club at the House Judiciary committee, and one Jonathan Turley is the republican witness as to what is or is not impeachment, I thought it is only proper preparation to have gone back and see what he has stated in the past.  Sadly, it is apparent that none of the Democratic members did this simple activity in preparation.

I give you Mr. Turley on with Keith Olbermann during the Bush years regarding torture and surveillance the constitution and presidential power.

This clip is most telling as to his sincerity testifying today.

 

But, here he is regarding the president’s ability to continue a war even if congress cuts off funds.  It’s a constitutional question in which he defends congress.  When asked, he responded: No.  It’s as simple as that.

Last and more relevant for today’s presentation, here is Mr Turley regarding Bush regarding the Constitution as just a piece of paper.  That is, Bush thumbing his nose at the law.   And note how Mr. Turley lists those in the administration that have run into legal conflicts.

“First of all, this president and his theory of power, is now I think so extreme, that its unprecedented.  He believes that he has the inherent authority to violate federal law.  He has said that…that he could in some circumstances order federal officials to violate federal law…Frankly I’m not to sure what he thought he was swearing to when he took the oath to uphold the constitution and our laws.  I’ve never seen a president who is so uncomfortable in his constitutional skin. ”

“Unfortunately, civil liberties don’t swing back like other issues.  Civil liberties is a very precious commodity.  When you lose them, it tends to run out of your hand like sand. Its hard to get it back, and that’s one of the dangers here.  That presidents, when they acquire power rarely return it to the people.   And so, we have to be very concerned.  This country is changing in a very significant way…We’re really at a point where the president is arguing about his own presidential power in ways that are the antithesis of that constitution and the values that it contains.”

Today he’s defending all that he protested against while on with Keith Olbermann.  No memory.  Only in the moment.  What I say now has no relation to what I said or what I’m about to say.

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What’s behind the subprime consumer loan implosion

Via Naked Capitalism  comes an explanation of what income inequality looks like in the US.  It stands in contrast to the Bloomberg article pointed to by Yves in her introduction.  I pulled the quotes with a non-economic person in mind.

THE WOLF STREET REPORT    transcript of podcast by Wolf Richter.

Subprime doesn’t mean poor or uneducated. Subprime means having a credit score below 620…
(Dan here) For example:
Aggressive subprime lending went into overdrive starting in 2014, and private equity firms piled into it, and smaller banks went after it, and it’s now coming home to roost  . . .
This includes healthcare costs, and it includes food costs, and apartment rentals, and cars have gotten a lot more expensive, and the like. But cars and apartments and cellphones have gotten a lot better too, and these quality improvements are added to the price. Think of the move over the years from a four-speed automatic transmission to an eight-speed automatic, or from two airbags to 10 airbags, or from a basic cellphone to a smartphone . . .
But for figuring the inflation measure of the Consumer Price Index, the costs of these quality improvements are removed from the index. This is the principle of hedonic quality adjustments . . .

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The Current State of the U.S. Dairy Industry

The Current State of the U.S. Dairy Industry

 I had to endure a discussion of the plight of American dairy farmers where Trump’s trade policies were somehow to blame. Stephanie Mercier confirmed some of the facts:

According to data reported by the National Farmers Union (NFU), the average dairy farm has shown a positive net income only once in the last decade, in 2014. In 2018, the average value of production exceeded the total cost of producing each hundredweight of milk in only one state, California, and nationwide, dairy farmers lost an average of $3.21 per hundredweight of milk produced. For 2019, total dairy production is expected to increase modestly over 2018, by less than 0.3 percent, and the average all-milk price is expected to increase as well, from $16.26/cwt in 2018 to $18.40/cwt. While the projected 13 percent increase in price for this year is welcome news for U.S. dairy farmers, that level still falls below the average total cost of production for farmers in most of the country.

But she had a very different take on the international issues involved:

This situation is largely a result of a persistent mismatch between the supply of dairy products and the demand for them, and is not isolated to the U.S. domestic market. Within the European Union, low dairy prices prompted some Italian, German, and Belgian producers to dump their product in protest during the summer of 2019. The combination of low prices and a severe drought in 2018 has pushed many Australian dairy operations to the brink of collapse. The farmer-owned Fonterra dairy cooperative, serving both Australia and New Zealand farmers, has seen its share values decline by about 50 percent since the beginning of 2018.

Look – we can criticize Trump’s stupid trade war for a lot of things but low milk prices are being driven by other factors:

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The Case for Carbon Taxes, Part I:  Political Subversion

 

by Eric Kramer

The Case for Carbon Taxes, Part I:  Political Subversion

Economists support carbon taxes on efficiency grounds.  By putting a price on carbon dioxide emissions, a carbon tax creates a strong incentive for people reduce their carbon footprint.  They can do this by switching to clean technologies or simply by reducing their use of fossil fuels – by driving less or turning down the air conditioning, for example.  Other policies can also be used to get people to reduce their use of fossil fuels, but carbon taxes allow people to reduce their carbon footprint in the least costly way.  Given that decarbonizing the economy will be a large and expensive undertaking, keeping costs as low as possible is clearly important.

Economists have made some headway persuading policymakers that carbon taxes should be a central part of any plan to limit global warming, but many people remain quite skeptical.  The most important doubts revolve around the political sustainability of carbon taxes.  Carbon taxes appear to be politically vulnerable because they directly and visibly lead to higher energy prices, and spending on energy is a major item in the budgets of most families.

I will discuss the politics of carbon taxes in two posts.  In this post I make a simple political argument for carbon taxes:  carbon taxes are clearly constitutional and can function effectively even if most Republicans remain opposed to action on climate change and gain control of the executive branch.  In contrast, the main alternatives to carbon taxes, mandates and subsidies, are highly vulnerable to political subversion by Congress and conservative courts and regulators.  This point alone is sufficient to justify including a carbon tax in any plan to avoid the worst effects of climate change.  In the next post I will argue that carbon taxes with per capita rebates will tend to generate their own support over time as people make investments that only pay off if the tax remains in place.  This does not ensure that a carbon tax will be politically sustainable – any ambitious climate policy will remain controversial for years – but it gives policymakers and activists another reason to support carbon taxation.

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