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

Kapernick

It was September 2017, and bad boy Trump spouts off; “Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, ‘Get that son of a bitch off the field right now, out,’” He’s fired. He’s fired!’” The crowd of supporters erupted in cheers.

With just a few words and by the close of that weekend, Trump had managed to get hundreds of NFL players taking a knee like Kaepernick or staying in the locker room during the playing of the National Anthem. Kaepernick was on his way out the door and Trump managed to slam the door shut and turn it around for him. In one weekend and a few stupid words by Trump and Kapernick, as Atlantic’s David Graham pointed out, became an icon of protest.

And now? After the NFL’s plea to dismiss the case was rejected by an arbitrator last August, the NFL folded and agreed to settle before the next hearing in a month. Too much at stake and too much to be exposed in depositions by owners and coaches. And as Jemele Hill said in yesterdays Atlantic; “Technically, Colin Kaepernick withdrew his collusion case. Technically, the NFL did not admit that it conspired to blackball Kaepernick from the league after he began taking a knee during the national anthem to protest racial injustice. But nontechnically speaking, the NFL lost. Massively.”

Kapernick may never play NFL football again; but, he did win a much bigger game for all of us.

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It’s Presidents Day, and we’re still basically flying blind on the eoncomy

It’s Presidents Day, and we’re still basically flying blind on the eoncomy

Not only are the markets closed today for President’s Day, but this entire week is about the emptiest I can ever recall for economic data. Literally the only data of note is going to be released on Thursday, and except for weekly jobless claims, even that is not what I would generally consider first-order metrics.

Even worse, we are still basically flying blind due to the government shutdown. The only data of note that had been on hiatus, and has been updated since it ended was last week’s retail sales for December. And that report was jarring enough to justify worrying that not only did the shutdown make us economically blind, but it itself may have further weakened an already weakening economy. So we may be in for some more jarring surprises when December housing starts and permits, December income and spending, and Q4 GDP finally get released next week.

There are a couple of series I’ve been meaning to update, so maybe I’ll get around to them. But, don’t be surprised if I don’t post any material for a day or two, or post a brief note on a political topic.

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More signs of a slowdown: initial claims and real retail sales

More signs of a slowdown: initial claims and real retail sales

We got two negative data points. One is cause for concern; the other – not quite yet.

Let me start with the “not yet” first. Initial jobless claims rose 4,000 to 239,000. That means that the 4 week moving average rose to 231,750:

This means that the number is both higher YoY, and 12.5% above its 206,000 low in September.

Ordinarily that would be cause for concern. BUT, the biggest factor in the increase is the week of 253,000 claims two weeks ago, which was almost certainly due to the government shutdown. That week, in turn, was immediately preceded by the week of 200,000 claims, which was the lowest in nearly 50 years.

The bottom line is, although the trend is clearly higher since September, I would prefer to wait two more weeks for both of those outliers to pass out of the 4 week moving average before hoisting a yellow flag on jobless claims.

Now let me turn to the number that *is* a cause for concern now: real retail sales, which cratered by -1.2% in December. That is the worst monthly reading since just after the Great Recession, and consistent with readings in the year before both of the last two recessions, so unless this reading is revised away, it is a definite sign of a slowdown. On the other hand, in the longer view monthly readings of -1% or more aren’t that uncommon during expansions:

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The Wrongness of the Green Lanthern Theory of the Presidency

Just one of the many mixes of comments and publications I see at AB in the comments sections. Not sure where EMichael got the Goldwater comment.

“What’s wrong with the Green Lantern Theory of the Presidency?

Basically, it denies the very real (and very important) limits on the power of the American presidency, as well as reduces Congress to a coquettish collection of passive actors who are mostly just playing hard to get.

The Founding Fathers were rebelling against an out-of-control monarch. So, they constructed a political system with a powerful legislature and a relatively weak executive. The result is that the US President has little formal power to make Congress do anything. He can’t force Congress to vote on a bill. He can’t force Congress to pass a bill. And even if he vetoes a bill Congress can simply overturn his veto. So in direct confrontations with Congress — and that describes much of American politics these days — the president has few options.

Green Lantern theorists don’t deny any of this. They just believe that there’s some vague combination of public speeches and private wheedling that the president can employ to bend Congress to his will.”

The Green Lantern Theory of The President Explained

We’ve certainly seen this theory pushed in here many times over the last decade (and we’ll see it down the road), but I bring it up here now as it explains another mental issue trump has.

He believes in the green lantern theory. You can see it many, many times over his first two years. And it now appears in Andrew McCabe’s book:

“After we agreed on a time to meet, the president began to talk about how upset he was that Comey had flown home on his government plane from Los Angeles—Comey had been giving a speech there when he learned he was fired. The president wanted to know how that had happened.

I told him that bureau lawyers had assured me there was no legal issue with Comey coming home on the plane. I decided that he should do so. The existing threat assessment indicated he was still at risk, so he needed a protection detail. Since the members of the protection detail would all be coming home, it made sense to bring everybody back on the same plane they had used to fly out there. It was coming back anyway. The president flew off the handle: That’s not right! I don’t approve of that! That’s wrong! He reiterated his point five or seven times.

I said, I’m sorry that you disagree, sir. But it was my decision, and that’s how I decided. The president said, I want you to look into that! I thought to myself: What am I going to look into? I just told you I made that decision.”

Every Day Is a New Low in Trump’s White House

Then again, there is also just plain mean:

“Toward the end of the conversation, the president brought up the subject of my wife. Jill had run unsuccessfully for the Virginia state Senate back in 2015, and the president had said false and malicious things about her during his campaign in order to tarnish the FBI. He said, How is your wife? I said, She’s fine. He said, When she lost her election, that must have been very tough to lose. How did she handle losing? Is it tough to lose?

I replied, I guess it’s tough to lose anything. But she’s rededicated herself to her career and her job and taking care of kids in the emergency room. That’s what she does.

He replied in a tone that sounded like a sneer. He said, “Yeah, that must’ve been really tough. To lose. To be a loser.”

In the 1964 elections we saw the Dems employ this against Barry Goldwater:

“In your guts, you know he’s nuts.”

A Johnson campaign barb.

It needs to be brought back for 2020. But 1964 and Goldwater was the beginning of the modern GOP, and that is easily shown by:

“In 1960, Goldwater’s book, The Conscience of a Conservative, publicizes his views—including strong opposition to creeping Communism. His message taps into post-war anxieties about the communist revolution in China, expansion of the Soviet Union, and a growing club of nations armed with nuclear bombs.

At the ’64 Republican convention, Goldwater wins the presidential nomination over objections from centrists. Many are worried he could start a nuclear war-and worried with good reason, given Goldwater’s record of comments such as, “Let’s lob one into the men’s room at the Kremlin.” The Johnson campaign uses groundbreaking TV ads to zero-in on voter anxieties.

On election night, Johnson wins by a landslide. Goldwater picks up Arizona and five Southern states, where white Democrats like his opposition of the Civil Rights Act of ’64 (a position consistent with Goldwater’s view of states rights). The election is a political watershed. After ’64, the South becomes a dependable Republican stronghold, contributing to the election of seven Republican Presidents during the next 10 elections.”

The Sixties, The Years That Shaped a Generation.

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The 2017 GOP tax scam may hurt the economy this spring

 by New Deal democrat

The 2017 GOP tax scam may hurt the economy this spring

It turns out that part of the GOP tax scam of 2017 might hurt the economy this year. That’s because the total decline in the amount of tax refunds going to tax filers this looks like it is going to be enough to affect consumer spending significantly this spring.

This post is up at Seeking Alpha.

Special bonus: a few RW commenters there really don’t seem to like it!

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Amazon defeated in New York UPDATED

Amazon defeated in New York UPDATED

In the biggest ever defeat for a subsidized project in history, Amazon announcedFebruary 14th that it was canceling its planned half of HQ2 for New York City, which was to receive subsidies worth at least $3.133 billion. After facing months of public opposition, the company provided a Valentine’s Day present in the form of capitulation. Amazon showed that, like Electrolux, its efforts to extract maximum subsidies from 238 cities constituted corporate rent-seeking on a grand scale. Not only did Amazon conduct an exploitative public auction for the supposedly single HQ2 facility, it furthered the impression that it was engaging in rent-seeking by its refusal to discuss alternatives with New York officials, by its absolute insistence on opposing a union for its workers, and by its sudden though not unexpected cancellation announcement. Activists scorched the firm, too, for the fact that for the second year running, Amazon will pay 0 in federal income tax despite earning $11.2 billion in profits in 2018 and $5.6 billion in 2017.

This is not to be confused with Foxconn, which is looking more and more like an economic development failure. There, it appears that the company will not be able to provide the investment and benefits it promised in Wisconsin. With Amazon, what we have is a case of the company being unwilling to continue the political battle to obtain its $3+ billion in incentives. While Amazon is by far the largest project ever defeated, such defeats are not unprecedented. I participated in two successful campaigns in the late 1990s and early 2000s against abusive tax increment financing (TIF) projects in the St. Louis suburbs of Olivette and O’Fallon, but these were on the order of $40 or $50 million, not $3 billion. Alas, I was also on the losing side of an exceptionally bitter battle against a TIF-funded mall in Hazelwood, Missouri, which still hurts to think about. The residents lost their homes to eminent domain, the city administration was high-handed and manipulative, and the new mall contributed substantially to the death of at least two nearby malls, part of the $2 billion retail subsidy merry-go-round during 1990-2007 documented by the East-West Gateway Council of Governments.

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Who Is Really A Socialist?

Who Is Really A Socialist?

Here are some varieties of “socialism:” command socialism, market socialism, socialist market economy, social democracy, democratic socialism, right wing socialism, utopian socialism, corporate socialism, just plain vanilla socialism. Here are some people who have claimed to be socialist, some of them selecting one or another of these types, but some just keeping it plain vanilla generic: Kim Jong-Un, Xi Jinping, Stefan Lofven, Nicolas Maduro, Bernie Sanders, Alexandria Ocasio-Cortez (AOC). Who is really a socialist and can we make any sense of all this?

Among the strictly economic issues involved here, aside from the political ones, there are three that stick out prominently: ownership, allocation, and distribution. The first may be the most important, or at least the most fundamentally traditionally classical: who owns the means of production? This is bottom line Marx and Engels, and they were unequivocal: socialism is state ownership of the means of production, even though in the “higher stage of socialism” generally labeled “pure communism,” the state is supposed to “wither away.” Capitalism is private ownership of the means of production, although there are debates over some intermediate collective forms such as worker-owned collectives, something favored by anarchistic and utopian socialism and its offshoots and relatives.

Regarding allocation the issue is command versus market, with command in its socialist form coming from the state, although clearly a monopoly capitalist system may involve command coming from the large corporations, with this reaching an extreme form in corporatism and classical fascism, sometimes called corporate socialism. Needless to say, it is possible to have state ownership of the means of production, classical socialism, but some degree of markets dominating allocative decisions.

Then we have distribution. In the Critique of the Gotha Program, Marx said the goal of communism was “from each according to his ability, to each according to his need.” Emphasizing if not precisely that at least a focus on minimizing poverty and supporting those in need as well as increasing the overall level of income and wealth equality is another element of many forms of socialism. This focus has been especially strongly emphasized by social democracy and its relatives, although most forms of socialism have at least officially supported this, if not always in practice.

Regarding our list of socialisms, where do they stand on these three, adding in the big political issue of democracy and free rights versus dictatorship, well: command socialism involves as its name suggests both command in terms of allocation combined with state ownership of the means of production, with no clear outcome on distributional view. Historically permanent command as a system has coincided fully with dictatorship, including when this occurs with capitalism as in fascism, especially in its German Nazi form, a nearly pure form of command capitalism. The classic model of this form was the USSR under Stalin, with its leading current example being the Democratic Peoples’ Republic of Korea (DPRK), aka North Korea, which pretty much tells us what kind of socialist Kim Jong-Un is.

Market socialism combines state (or collective) ownership of the means of production with market forces driving allocation decisions. The old example of this that also had that holdover from utopian socialism of workers’ management, was Tito’s not-so democratic Yugoslavia, which blew up, although its former province of Slovenia eventually was the highest real per capita income of all the former officially socialist nations. According to Janos Kornai, market socialism, including his home of Hungary, suffered from the problem of the soft budget constraint, although we have seen that in many mostly market capitalist economies with rent seeking powerful corporations.

There is no clear difference between market socialism and the “socialist market economy,” but the Peoples’ Republic of China (PRC) has gone out of its way to officially label itself this latter term, perhaps due to the collapse of Yugoslavia. Many, including the late Ronald Coase, claim China is really capitalist, but in fact while there is now much private ownership, state ownership remains very strong, and while there is no longer organized central planning, command elements remain important, and the ownership situation is very complicated, with many firms having substantial while partial state ownership. In principle this form could be democratic, but it is not at all that in Xi’s current PRC, which has had a largely successful economic system for the last four decades, despite high inequality and other problems. In any case, this is the system Xi Jinping is identified with.

Social democracy now is the form that emphasizes distributional equality and support for the poor over the ownership and allocation elements. This is now, most dramatically in the Nordic nations, although it has had a weaker version in Germany in the form of the social market economy. The name “social democracy” comes from the now century and a half old German Social Democratic Party, within which at the end of the 19th century several of these forms debated with each other, although in the end what came out, inspired by the original “revisionist” Eduard Bernstein, was what we now call social democracy, which is indeed politically democratic and supporting an expansive welfare state, while not pushing either state ownership or command. Stefan Lofven is the current prime minister of Sweden and also leader of the Social Democratic Party of Sweden. A welder and union leader, Lofven just managed to get reelected and form another government last month, although his new government is “moving to the center,” and while he is certainly a social democrat, he has also described himself as being a “right wing socialist,” and Sweden has pulled back somewhat from its strongly social democratic model over the last quarter of a century.

Which brings us to democratic socialism, currently highly faddish in the US given that both Bernie Sanders and AOC have identified themselves as followers of this ideology. The problem is that of all the others mentioned, this one is the least well defined, and Bernie and AOC themselves seem to disagree. Thus, when pushed Bernie posed Denmark as his model, which is a leading example of social democracy, arguably more so even than Sweden now, although its current prime minister is not a Social Democrat (party) and argues that Denmark is “not socialist” (noting its lack of command state ownership). But AOC has at times said that democratic socialism is not social democracy, while exactly what it is remains not well defined.

One source might be the platform of the Democratic Socialists of America (DSA), which AOC officially belongs to. This supports a democratic and decentralized form that emphasizes worker control, if not clearly ownership, with this harking to utopian socialism, with an ultimate goal of state or some other form of collective ownership, but not in this document command. AOC herself has now pushed forward the Green New Deal, (GND) which should perhaps be labeled “Green Socialism,” yet another form. I do not wish to get into a discussion in this post of the details of the GND, regarding which there has been some confusion (retracted FAQ versus 14-page Resolution) about which there remain some uncertainties. DSA has at times nodded to the British Labour Party, which after 1945 under Clement Atlee, both nationalized many industries while expanding the social safety net, while avoiding command central planning. However, the GND seems to avoid nationalizations, while emphasizing a major expansion of r
the social safety net, along with some fairly strong command elements largely tied to its Green environmental part, arguing that mere market forces will be insufficient to move the US economy off its current fossil fuel base soon enough.

Which brings us to generic socialism and the still not described Nicolas Maduro, President of Venezuela. He is loudly describing himself a socialist, but what form, if any, is unclear. But his economy is the biggest current economic disaster on the planet, so his ongoing claims of being a socialist are damaging the label, as seen in the eagerness of conservatives to identify socialism with him and denounce people like Bernie and AOC and all the Dem prez candidates signing onto the GND even before they knew what was in it, with this exemplified by Trump ranting loudly on this theme during his SOTU.

Looking closely it seems that indeed Maduro and Chavez before him, who preferred labeling the system “Bolivarianismo” rather than “socialism,” did carry out portions of various of the forms of socialism. Many firms were nationalized, with currently the number of privately-owned firms about half of what there were 20 years ago (when Chavez was elected), although many of those original firms have simply disappeared. About 20% of farmland was nationalized, mostly large-scale latifundia, supposedly to be turned over to landless peasants. But much of it has simply come to be uncultivated by anybody. In any case, there remain large portions of the economy privately owned, with still wealthy owners living in gated communities and not suffering.

Perhaps the most damaging of the socialist policies have been scattered efforts at command, not based on any central plan, especially using price control. In agriculture this has been a complete disaster, especially once hyperinflation hit. Food production has collapsed, and lack of food has driven 3 million out of the country, with many still behind having lost much weight. OTOH, the regime is supposedly being green by emphasizing traditional local crops. But this is not even a joke. Bolivarianismo’s main positive was its popular redistribution policy, which increased real incomes in poor areas, especially while Chavez was in power, borrowing from the social democracy model.

The problem here is that all of these things, even many of them together, have been recently tried in neighboring nations, such as Bolivia, without similarly disastrous results. Somehow Venezuela has just completely blown apart, with reportedly 86% of the population now opposed to Maduro and people in the poor neighborhoods of Caracas who were the Chavismo base now out demonstrating in large numbers (and being violently suppressed) after Maduro got reelected in a clearly fraudulent election, with most of his neighbors calling for his removal.

I think two things not related specifically to socialism have played crucial roles here: corruption and hyperinflation. The most important agent in the Venezuelan economy is the state-owned oil company, which was nationalized long before Chavez came to power. But he, with Maduro made this worse later, firing the competent technocratic managers of that company and replacing them with political cronies, with the outcome being a serious decline in oil production, this in the nation with the world’s largest oil reserves. Which leads to the other problem, massive corruption, with the incompetent cronies at the top of the state-owned oil company the worst. The other killer item has been the hyperinflation, whose source I do not really know, although Venezuelan tax rates are lower than those in the US. Certainly, part of it is massive budget deficits, and as the MMT people note, they were borrowing from abroad. I do not fully understand all involved in the hyperinflation, although that is not a standard phenomenon in a full-blown command socialist economy, but the hyperinflation has clearly been the final killer of the economy, collapsing support for Maduro. Apparently about a third of the population still supports “socialism,” while many of those people reject Maduro, claiming he has blown what Chavez implemented, which Maduro certainly has.

So, for a summary. Command socialism a la the DPRK is an awful disaster, famine plus dictatorship. Market socialism/socialist market economy a la China has been good at rapid economic growth and much else, although suffering many ills on the environment and income distribution, not to mention also being dictatorial. Social democracy a la Sweden and Denmark has done as well as any economic system on the planet and is democratic and free, but has also suffered from various problems. The “democratic socialism” of certain American politicians remains poorly defined and is in danger of being tied to the disastrous and vaguer form of “socialism” happening in Venezuela, with the danger for US politics being that conservatives may actually succeed in tying this poorly defined democratic socialism with the barely socialist disaster in Venezuela.

Personally, I wish that Maduro would stop calling himself a socialist. Then he should also resign and get lost for the good of his people ASAP, although I do not support overdone US efforts by sanctions or possible invasion to bring this about. Let it be the Venezuelan people who remove him, however.

Barkley Rosser

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Test Tube Politics: llhan Omar, Anti-Semitism and AIPAC

Test Tube Politics: llhan Omar, Anti-Semitism and AIPAC

I don’t think I’ve ever seen a political statement triggering evidence (mixed) about its own truth as dramatically as Ilhan Omar’s quip that pro-Israeli bias in congress is “about the Benjamins, baby”.  It’s as if you wrote a letter criticizing the Post Office and had it returned to you with a USPS message stamped on it.

But let’s dig down one level.  The criticism, partly fair, of Omar is that she bought into (so to speak) the anti-semitic slur that Jewish money constitutes a secret conspiracy against “the people”.  This is the old socialism-of-fools stuff, endlessly recycled by bigots right up until this morning; see the demonization of George Soros, for instance.  Because it exists, people who want to combat bigotry—and this includes progressive politicians—should build a giant moat around it and not go there.  By suggesting that hidden Jewish money had bribed Congress into blind support for Israel, Omar crossed a line.  It’s the same line that George Bush senior crossed with the Willie Horton ad, and that Trump crosses a dozen times every Twitter-soaked evening.  Invoking a bigoted stereotype is a bad thing to do, especially for politicians with giant megaphones.

Yet the very response to Omar’s tweet demonstrated the truth she was stumbling for.  A chorus of political and media honchos of every denomination, religious and political, rose up to denounce her.  They didn’t make fine distinctions and they didn’t welcome a correction; their goal was to punish and silence.  Sweeping accusations were made against Omar’s character, leaving the impression that any criticism of AIPAC, the powerful pro-Israel lobby, was proof of antisemitism.  And this attempt to isolate and politically crush Omar was itself the embodiment of her protest.  This is the power of AIPAC in action, the lobby that can’t be named, the doctrine—the transcendental importance of Israel and the rightness of its religious self-definition—that can’t be questioned.

So the truth content of the original Omar tweet depends on how we explain this onslaught.  If it’s really just about the Benjamins (the hundred dollar bills with Ben Franklin looking back at us), that means she was being trashed, directly or indirectly, for pay.  Politicians joined the mob either to protect their campaign revenue or shield themselves from other politicians defending their own campaign revenue.  How likely is that?  The answer depends on two prior questions: how important is campaign finance in setting the basic contours of US policy, and what proportion of this finance is controlled or strongly influenced by AIPAC?

These are questions for specialists in these areas, not me.  I will go out on a limb, however, and say that the truth lies between the endpoints: some but not all of the bias in the US political system is attributable to the influence of big donors, and AIPAC has a substantial but far less than a complete lock on the flow of political money.  You could compare it to other lobbies, like the NRA (National Rifle Association) and AARP (American Association of Retired Persons), both of which are feared for their ability to alter the balance of funding in competitive political contests.  But neither of these two outfits is immune from attack, while AIPAC is.  Gun control advocates go after the NRA all the time, and, while AARP is not exactly a political lightening rod, the complaint that greedy seniors are stealing money from our children is a popular meme on the Right.  So AIPAC is different.  This difference does not seem to be about money, at least not solely, as important as money is to the system and the groups that try to dominate it.  AIPAC appears to possess a complementary form of power, perhaps rooted in the infrastructure of synagogues and other religious organizations as well as the allegiance of many socially prominent Jews active in secular organizations.  When it marshals this network, you get the sort of response we saw to Omar.

This was a ferocious rebuke of a politician, clearly intended to be career-ending.  It will be interesting to see if she can recover without abandoning her advocacy of Palestinians; I certainly hope so.  The attack on Omar, however, is itself the embodiment of the fear all of her colleagues have to feel, that if they step out of line on Israel they will be crushed.  Catering, intentionally or otherwise, to antisemitic tropes is completely unnecessary: the proof of the pudding is in the attack on it.

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Amazon defeated in New York; more to come

Amazon defeated in New York; more to come

In the biggest ever defeat for a subsidized project in history, Amazon announcedyesterday that it was canceling its planned half of HQ2 for New York City, which was to receive subsidies worth at least $3.133 billion. After facing months of public opposition, the company provided a Valentine’s Day present in the form of capitulation. Amazon showed that, like Electrolux, its efforts to extract maximum subsidies from 238 cities constituted corporate rent-seeking on a grand scale.

Moreover, as Richard Florida reports at Citylab, the victory has also energized reformers around the country searching for a solution to the problem of corporate bidding wars. I myself have received inquiries from multiple elected officials’ offices about the European Union’s systematic control of investment incentives.

I’m playing at a chess tournament in Texas right now, so I will have more to say about this when I next have time to post.

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Trump’s Emergency and the Wall

I presume that Trumps Emergency is strictly political theater as it will be tied up in the courts for the next couple of years.

Trump has no problem with this as he can tell his base that it is working and they will accept his story.

Now I’lljust wait and see the response to this idea.

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