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

Hey, Alison Grimes, why not mention THIS? Ah … because it would require a sentence or two of substantive explanation.

Given the exceedingly favorable atmosphere for Republicans this fall, McConnell’s direction on Obamacare has been closely watched as he both battles for reelection against Democrat Alison Lundergan Grimes and as the GOP prepares for Senate control for the first time since 2006.

McConnell’s office said there are multiple avenues that a GOP Senate would have to attack Obamacare — particularly through budget reconciliation, a parliamentary maneuver that would require only 51 votes but would not be equivalent to the standalone repeal votes that have frequented the House.

Reconciliation was omitted during the Tuesday Fox News hit, but has not been dropped from McConnell’s game plan, particularly given that individual mandate was ruled by the Supreme Court to be a tax and could be reversed by a majority vote.

McConnell reassures GOP on Obamacare opposition, Burgess Everett, Politico, today

Awesome!  Out of the mouths of babes.  (One babe, anyway, albeit not a very cute one.)

Might Bill or Hillary Clinton be willing to cut an ad or web video pointing out what this means?  As in: Hey, all you Kentuckians who now have healthcare insurance through Kynect or the Medicaid expansion won’t, come 2016, if McConnell succeeds in his plan?

And, all you folks in, say, Iowa, Colorado, Arkansas and Alaska: How do you think that that shutting-down-the-government thing will work out for ya next year?

Grimes has absolutely nothing to lose by making these points herself this weekend.  And the DSCC doesn’t, either; it’s committed money for the last few days of the campaign—something it probably now regrets.  But Kentucky apparently doesn’t have early voting, so it’s still theoretically possible for these last few days to make a difference in the election’s outcome.

The silver lining in a Grimes loss will be the end of the idea, finally, that if you’re a Democrat running in a red state, you shouldn’t run as, y’know, a Democrat.  But of course a surprise win for Grimes as a result of a very late campaign posture as a Democrat would not undermine that lesson.

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Neither John Kasich nor, certainly, Simon Peter will be nominated by the Republicans

Republicans remain almost united in their utter rejection of the communist doctrines of one Simon Peter fisherman and trouble maker.

Elizabeth Stoker Bruenig explains in Salon

I comment

I don’t want to exaggerate. It is certainly not true that Kasich’s proposed policy is from “each according to his ability” and “to each as anyone had need”

However, that was the policy of his post mortum interlocutor. Marx did not coing the phrase in “The Critique of the Gotha Program” nor is it found in Gotha program. Marx was quoting from The Acts of the Apostles accusing his ex-followers of being eccessively egalitarian just as St Peter had been.

The Bible, New King James Version
Acts Chapter 4 Verse 35
“…; and they distributed to each as anyone had need.”
Acts Chapter 11 verse 29
“Then the apostles, each according to his ability, determined to send relief to the brethren dwelling in Judea.”

It is interesting how few Christians are familiar with the contents of the New Testament (I’m an atheist by the way). But then again the fact that self declared Constitutional Conservatives tend to mix up The Declaration of Independence and The Constitution should be a tip off.

By the way, I am not a Christian and I frankly disagree with Simon Peter’s approach to policy, or at least I don’t consider it a good model for US policy. It is possible that, if one has the reliable assistance of the holy Spirit, one may ignore incentive problems. But we don’t and had better pay attention to them.

Of course Simon Peter won’t be the Democratic nominee either, partly because he was way too far left for the party and also because he was never a natural born citizen of the United States.

In contrast, I agree with Kasich about the ethics of Medicaid expansion.

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PART TIME EMPLOYMENT

The opponents of Obama-care just will not give up. Just because all of their claims of disaster over the last few years have been proven wrong they continue to repeat every claims that they think does not make them look foolish.

The latest example is John R. Graham of the Independent Institute who claims that Obama-care is hurting employment because of rising part time employment.

But I would suggest he really ought to look at the data.  Part time employment has a very strong cyclical pattern.

It’s share of employment rises sharply in recession and declines in recoveries.

A major part of this cyclical swing is driven by changes in employment in different sectors.  For example, the average workweek in retail is 30.1 hours, almost exactly where it has been for decades. In leisure and hospitality it is 25.2 hours and in education it is 32.0 hours, where they have been for decades.  But in manufacturing the average workweek  is 42.1 versus 39.7 at the recession bottom. In construction it is now 39.6 hours as compared to 38.8 hours at the recession bottom. So when the cyclical downturn causes employment in the strongly cyclical like manufacturing and construction while employment in the industries that traditionally use a lot of part time employes remains relatively stable the share of part time employees in total employment rises sharply.  This is why the chart shows that part time employment’s share of total employment rose sharply in the Reagan and Bush recessions.  It is also why part time employment share of total employment has fallen under Obama — it is a perfectly normal cyclical economic pattern.

(chart below the fold)

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How to deal with the growing incentives competition

This article was originally published in the Columbia FDI Perspectives series of the Columbia Center for Sustainable Investment, #131, September 29. I have left it largely unchanged, except for adding a link and a comment, and correcting a grammatical error.

 

As I discussed in an earlier Perspective,[1] the use of investment incentives is pervasive and growing. The most recent example [this was completed prior to the Tesla auction] of a big bidding war was when Boeing threatened to move production of its 777-X aircraft out of Washington state, prompting some 20 states to offer incentive packages to the company (including $1.7 billion from Missouri). In the end, Washington gave Boeing a package of tax incentives worth a record-breaking $8.7 billion over the 2025 – 2040 period to stay, and the unions made substantial concessions regarding pensions.

What can be done to control such auctions, which are often international in scope? The most robust control method, regional in scope, is embodied in the European Union (EU) Guidelines on Regional Aid. These rules guarantee transparency, set variable limits (in terms of “aid intensity,” which equals subsidy/investment) for aid levels based on each region’s per capita income, and reduce the value of aid to large investment projects over €50 million. They require projects to stay at least five years and mandate the use of clawbacks for firms that fail to meet their commitments in investment contracts. Moreover, the guidelines provide demerits for firms in a dominant position in their industry, although they do not mandate a particular reduction in aid.

The other international control measure comes under the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures. While these rules are more tailored to production subsidies than to investment incentives, the latter certainly come under the purview of the Agreement as well, as illustrated by the EU’s successful complaint against subsidies for Boeing in the states of Washington, Illinois and Kansas.

However, this case also illustrates the limits of WTO subsidy control. The EU has already filed a compliance complaint,[2] and there is little likelihood the United States (US) will comply anytime soon (the US Trade Representative’s office claims that the US has complied, but as long as the state and local tax credits continue in Washington state, that is not correct). Indeed, as mentioned, Washington state has approved a new round of subsidies for Boeing that is likely to initiate a new WTO dispute.

While the WTO rules require frequent notification of subsidies, there is no penalty for failure to notify, with the result that subsidy notifications are of very uneven quality. Federal states outside the EU frequently make poor quality notifications regarding subnational subsidies. Finally, the TRIMs and GATS agreements regulate performance requirements, but not investment incentives.

What, then, can be done against incentives competition? First, there must be continuing efforts to improve the transparency of location subsidies. This is necessary for jurisdictions to make effective investment promotion policy (especially in a region such as the European Union and the United States, where there are many competing governments) as well as for international policy discussion.

Second, the EU’s example shows that incorporating subsidies rules into regional agreements can be a fruitful way to bring bidding wars under control. For many products, such as automobile assembly and steel, corporate location decisions still focus on a single region, meaning that such rules would be geographically comprehensive enough for a variety of industries. Consequently, major stakeholders—including the Columbia Center on Sustainable Investment, the International Institute for Sustainable Development, the United Nations Conference on Trade and Development, the World Association of Investment Promotion Agencies, the International Monetary Fund, the World Bank, and the Organisation for Economic Co-operation and Development—should unite in promoting location subsidy guidelines within regional trade areas. There are no doubt numerous other non-governmental organizations that would endorse such a move.

Third, WTO notifications should be strengthened. Incomplete notifications should be flagged and countries involved should be pressured to give cost estimates for subsidies at all levels of government. Still, it is difficult to envision that sanctions for non-compliance will be introduced.

Fourth, no-raiding zones could be a first step for countries to negotiate controls over investment subsidies. A no-raiding agreement simply commits a state to not give a subsidy to relocate an existing facility from another state; it would not apply to new investments. Their track record is mixed—several agreements among US states failed quickly, but Australia (2003-2011) and Canada (1994-present) have been more successful.[3] Despite these mixed results, it is easier to demonstrate to policymakers the futility of relocation subsidies, since they create no new jobs, than it is to do for incentives for new investment, which could make this a more feasible first step.

Though national and subnational jurisdictions have incentives to offer location subsidies, these proposed measures would help keep their value to more reasonable levels with a lower likelihood of distorting competition and international investment flows.

 

[1] Kenneth P. Thomas, “Investment incentives and the global competition for capital,” Columbia FDI Perspectives, No. 54, December 30, 2011.

[2] Emelie Rutherford, “EU wants $12 billion in U.S. sanctions over Boeing subsidy spat,” Defense Daily, September 27, 2012.

[3] Kenneth P. Thomas,  “Regulating investment attraction: Canada’s Code of Conduct on Incentives in a comparative context,” 37 Canadian Public Policy, 3 (2011), pp. 343-357; Kenneth P. Thomas, “EU control of state aid to mobile investment in comparative perspective,” 34 Journal of European Integration 6 (2012), pp. 567-584.

From: Kenneth P. Thomas, “How to deal with the growing incentives competition,” Columbia FDI Perspectives, No. 131, September 29, 2014. Reprinted with permission from the Columbia Center on Sustainable Investment (ccsi.columbia.edu).

Cross-posted from Middle Class Political Economist.

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Cleveland Plain Dullards

You’d think that, by now, people would understand that, once it is on the web, there is no point locking the barn door after the cat has gotten out of the bag.

This is today’s hot meme

The Cleveland Plain Dealer filmed (and posted) a joint interview with current (and likely re-elected) governor John Kasich and challenger Ed Fitzgerald. Kasick pretended Fitzgerald didn’t exist, repeatedly refused to answer a question and generally acted like a Republican.

The Plain Dealer endorsed him anyway. Then they removed the video from there web site. I guess they stand for the principle that it’s not news if it makes the candidate they prefer look bad (that’s journamalism 101).

Then a site of which I have never heard posted the video and, evidently determined to make sure it got maximum exposure “The Northeastern Ohio Media Group, a business partner with the Plain Dealer newspaper in Cleveland, has demanded that an Ohio liberal political blog pull a video of Gov. John Kasich’s awkward interview with the newspaper’s editorial board.”

As a result, the video is, as I type this not available only at the obscure* Plunderbund**

But also at
Eschatonblog
Talking Points Memo (same link as above)
Balloon Juice
Wonkette

and, well you get the picture.

All those sites link to a YouTube video which will be taken down. However, YouTuber John Manyjars (whom you really really want to follow) can e-mail it to others who can post it (for example to robert.waldmann@gmail.com).

Kasich is way ahead in the polls and will probably win in spite of the efforts of the Northeastern Ohio Media Group to suppress a video which is embarrassing to him. However, someone at the Northeaster Ohio Media Group has demonstrated not only complete contempt for journalism but also utter total incapacity to understand current media.

If it’s on the web, it can’t be suppressed and trying to suppress it is not only an attempted assault on the public’s right to know but also utter total idiocy.

Update: Better late to the pile on than never, The Daily Kos shows it’s huge number of readers the link

THU OCT 30, 2014 AT 10:35 AM PDT
John Kasich dodges question on his rape crisis counselor gag rule, bratty kid style

I wondered where they were. Now I’ll check
Media Matters (still nothing)
and
Crooks and liars.(still nothing)

*to me, but I’m not from Cleveland, although my mother is.

** update 2. Typo corrected. Thanks to Jason in comments

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Boehner Making a Point on Bush Foreign Policy as Compared to Obama’s

Click on the Post

Boehner is talking about a man who put the minimum amount of time in at his National Guard air base of duty, failed to qualify as a pilot in 1972, and was subsequently grounded. Guess flying missions in Vietnam was out of the question?

But according to Boehner in a “my dad would whip your dad moment,” Bush would have punched Putin.

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Scott Brown Solves the Mystery of What All Those Mega-Corporations Are Doing With Their Record Profits

They’re spending it on lawyers!

I’m not kidding.  Brown told a 27-year-old Fidelity Investments retirement specialist that big corporations can’t afford to hire people because they’re spending so much money on lawyers.  Which they have to do because of all those regulations.  Which is why he wants to “loosen regulations on big companies”: “So they could spend more money on hiring instead of on lawyers.”

And to think that I thought he wants to loosen regulations on big companies because the owners of one of the biggest companies of all—Koch Industries, which can afford to hire as many people as it wants, despite its big attorneys’ fees—wants loosened regulations and is spending huge sums of money to buy his election.  Silly me.

Obviously, I’m wrong about that, because the 27-year-old Fidelity Investments retirement specialist—her name is Erin Henson—accepted this and now plans to vote for Brown.

Although there also is another reason she’s decided to vote for him.  His opponent, Sen. Jeanne Shaheen, has been highlighting her support for small businesses.  “Her ads show her walking around Main Street, America — that means nothing to me,” Henson told Associated Press reporter Holly Ramer, who’s in New Hampshire covering the race.  “I don’t think small businesses are going to be the wave of the future for people of my generation. I think she’s a little too focused on the little guy, and I’m not the little guy.”

No, she’s not the little guy. But her clients will be if they don’t change financial advisers, since their current one doesn’t keep up with corporate-profits news.  And if her supervisors at Fidelity read the AP article and realize that she’s clueless about current corporate profits and about what big corporations do with those profits, she might soon become a little guy herself.

Unless, of course, Paul Krugman’s been pulling my leg.

Shaheen should point this out.  If Brown isn’t aware that U.S. corporations are seeing record profits, and if he actually believes that the reason that companies aren’t hiring more than they are is that their regulatory lawyers’ fees are so high, he’s probably not someone most people would want in the U.S. Senate.  I mean, what if he becomes chairman of the Banking Committee or the Finance Committee?

Then again, Ms. Henson’s a Fidelity Investments retirement specialist, and she thinks Brown is onto something.  Although on second thought, I’m guessing that if Brown wins, Henson plans to recommend that her clients invest in those derivatives that bet against the stock market.

____

ADDENDUM: Does anyone know how to reach someone high up in Shaheen’s campaign or in the DSCC?  I saw Ramer’s report on Yahoo News yesterday; it’s my opening page on Chrome.  But it certainly wasn’t a big political story–I just happened to catch it—and neither the Shaheen campaign nor the DSCC may be aware of Brown’s comments.  But this is exactly the kind of thing that the voting public should be told of, because it really does get into the essence of public policy.

So, please, if anyone knows how to reach someone high up at the Shaheen campaign or at the DSCC, and cares about the outcome of the Senate elections: Can you contact whoever and pass along the link to my post here?  Even reaching someone important in Harry Reid’s office might work.

Political pundits, our-side economists … anyone who can reach someone, directly, who matters ….

I mean it.

Thanks!

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How Do Households Build Wealth? Probably Not the Way You Think. Three Graphs

Work hard. Save your money. Spend less than you earn. That’s how you become wealthy, right?

That’s not totally wrong, but if you think that’s the whole story — or even a large part of the story — you may be surprised by this graph:

Screen shot 2014-10-28 at 8.45.12 AM

(Note: these are not realized capital gains, which really only matter for tax purposes. If the value of your stock portfolio or house goes up for twenty or thirty years, you’ve made cap gains even if you haven’t “realized” them by selling.)

Household “saving” — households spending less than they “earn” — contributes a remarkably small amount to increasing household net worth. And that contribution has shrunk a lot since the 90s.

Screen shot 2014-10-28 at 9.00.09 AM

The accounting explanation is simple: “Income” doesn’t include capital gains; it comprises all household income except capital gains. So capital gains are also absent from “Saving” — Income minus (Consumption) Expenditures. (This is why HouseholdSavings1 + HouseholdSaving ≠ HouseholdSavings2 — not even vaguely close.)

The capital gains mechanism appears to dominate the ultimate, net delivery of rewards to household economic actors. Earning more and spending less is weak beer by comparison.

What does this say about our understandings of how the economy works? Does economists’ fixation with “saving” provide a useful picture of macro flows in the economy? Since asset ownership is hugely concentrated among the wealthy (even real estate), can we think about the economy’s workings at all without looking at distribution? Does this dominant mechanism allocate resources “efficiently,” or deliver the kind of incentives that make us all better off? And etc.

There’s much more I’d like to say about this reality, but I’ll just provide one more graph for the time being and let my gentle readers ponder the bare facts.

Screen shot 2014-10-28 at 9.10.30 AM

The spreadsheet’s here. Have your way with it. (It’s kind of messy; drop a line with questions).

Cross-posted at Asymptosis.

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