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

Protesting Donald Trump

When Barack Obama became President, Republicans in Congress pledged to oppose him tooth and nail. That was a bad idea. It implied that they were hoping the President would fail. This implies one of two things: either they wished ill for the country, or they were completely convinced that Obama was wrong and they were right on every important issue. Giving them the benefit of the doubt, we can assume hubris rather than dislike of country (or worse).

But hubris brings with it its own set of issues as anyone who has read Greek Mythology can attest. If Obama had achieved success, the Republicans would have looked very, very bad, particularly after 8 years of GW Bush. It could have set back the Republican Party for a generation.

Fortunately for Republicans, Obama has come across as inept. The best defense his supporters can conjure up is, in fact, the fact that Republicans didn’t cooperate with him. But even without the help of Congress, there were many things a President can accomplish. As head of the Executive Branch, Obama could have reduced unnecessary spending, graft and corruption, to name initiatives that are always popular and which have been ignored by American Presidents during my lifetime. Even many of the worst run third world countries have managed to produce a leader who does tries that approach for a few years. We are long overdue.

Obama could also have achieved success by placing himself in opposition to the policies of his predecessor which had generated such disastrous outcomes, and which, not incidentally, were supported by the Congressional opposition to Barack Obama. That would have been a no-brainer. But Obama’s approach toward dealing with the Great Recession was to keep doing what GW had been doing, and above all, holding nobody accountable. Mimicking GW and doing nothing to restore faith in the system had predictable results – a lackluster recovery to an economic meltdown.

So Obama saved the Republicans from themselves with his ineptitude. And now we have the spectacle of millions of Americans on the left behaving the same way the Republican Congress did eight years ago. The protesters are counting on Trump to fail as badly as Barack Obama (and GW) did before. And perhaps he will. Trump’s policies aren’t entirely thought out, and shooting from the hip often generates poor outcomes. But luck matters. And so does the ability to communicate, and to bring the crowds to your side. If Trump fails, it will probably be in a very different way than Obama (and GW) did before him. His failures may not look as bad as their failures. Similarly, if Trump’s policies are sufficiently unorthodox, in those areas where he does succeed, the appearance of success may well be magnified. Chewing out Boeing over the bill for the next generation of Air Force one or cowing Ford into keeping a few jobs in the US may be little more than good optics, but good optics create positive morale, and positive morale feeds back on itself. There is also no reason to believe he will stop with Boeing or Ford.

If I were to advise the protesters, it would be like this: wait until Trump has had a chance to fail before you protest. If he does fail, after all, it will come fast and it will come soon. But if he connects with the public, and you oppose him from the beginning, a lot of voters won’t be taking you seriously by the time the next election rolls around.

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Equality in Retirement

Sarah Anderson and Scott Klinger of the Institute of Policy Studies released “Tale of Two Retirements”, a study discussing how well CEOs will retire in comparison to the low and middle income citizens who only have 401ks and Social Security to retire on in the US and what President-Elect Trump’s actions will do to CEO retirement.

invisible hand

One hundred CEOs have company retirement funds worth approximately $4.7 billion or a sum equal to the entire retirement savings of 41 percent of U.S. families with the smallest nest eggs.

The $4.7 billion total is equal to the entire retirement savings of:

59 percent of African-American families
75 percent of Latino families
55 percent of female-headed households
44 percent of white working class households

The average of the top 100 executives is enough to generate an ~$253,000/month life time check.

In comparison:

• Ordinary workers have ~$18,000 of 401K savings or enough for ~$100 in a monthly payout.
• 39% of workers 51 to 61 years of age have no employer sponsored retirement plan and will be mostly dependent upon an ~$1200/month Social Security check.

Many CEOs have tax-deferred accounts totally with ~$3 billion in deferred payout. If President-Elect Trump cuts the marginal tax rate, they will also gain in retirement funding.

• Cutting the top marginal tax rate to 33 percent, Fortune 500 CEOs would save $196 million on their income taxes.
• These deferred payout accounts are also exempt from 401k contribution limitations

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Mirroring the same racial and gender gap exiting today in business, white male CEOs have done better than their minority male and their female counterparts.

• The top 10 white male CEOs have a combined $1.4 billion in the tax deferred compensation accounts
• Eight times more than the top ten minority male counterparts and five times more than the top ten female counterparts.

Top 10 White Male CEOs

I want to take a moment and dwell on this topic a bit more. While some readers are distracted by immigration and its impact on the economy, they ignore the crop-picking, laboring, and housekeeping jobs where many of these immigrants end up. We are losing sight of some real issues plaguing the middle income bracket making less than $100,000 annually which comprises most of the population.

“Just” 50% of the American Labor Force are offered a 401K in which to set aside money in for retirement. The maximum contribution to date for most who have a 401k is $18,000 annually with an exception for older workers who get bumps up to $24,000 annually, if . . . if you are making enough to be able to set aside the initial amount and more if older. It is a tease from the beginning and worse now with stagnant incomes. If I do not set a minimum aside, I am in deeper trouble when I am older. If I do set this aside now and I have a college loan, can I have a life, married life, and a family? Which would you choose if the potential was there to set this aside now? The choices are not easy and we are seeing the results as more people go on SS with college loans still outstanding and have their SS garnished to pay them off.

Top Ten CEO (Clink on the chart to make it larger and for clarity.)

As the report details, CEOs have few if any limits to set aside taxable retirement income and more have the income to set aside. As a perk, many CEOs are given tax deferred accounts in which companies do not pay taxes until the funds are withdrawn. In the mean time the executives benefit from tax free compounding investment returns. As proposed if President Trump decides to do so, a reduction in the maximum income tax bracket from 39% to 33% because it might (laughing) create jobs, the very same executives stand to make an unearned jump in income. “At a 39.6 percent income tax rate, they would owe $1.2 billion to the IRS and at a 33 percent rate, they would owe $979 million, for a combined savings of $196 million.”

Whether $1.2 billion or 979 million, $millions in taxes are lost yearly to states and the federal government due to Tax-Deferred accounts.

• In 2007, the Senate passed a minimum wage bill that would have limited annual executive pay deferrals to $1 million, but the provision was dropped in the conference committee. According to the Joint Tax Committee, the measure would’ve saved taxpayers $806 million over 10 years.

• In 2015 alone, 215 Fortune 500 CEOs invested a combined $227 million more of their pre-tax income in these plans than they would have been able to invest if they’d been subject to the maximum $24,000 cap that applies to ordinary workers. If they had been subject to this limit, they would’ve owed the U.S. Treasury $90 million more in income taxes last year.

What is surprising is how many are willing to defend this type of compensation calling it theft if taxed. Yet this type of compensation is limited to 1% of the population and numbering less than 1 million people. At the same time, the same people defending huge salaries will decry the loss of jobs in the US going overseas or automated which many executives are handsomely compensated for in the name of cutting cost and increased profits. We also have a president today who is promoting a populist agenda and telling people he will bring back the jobs whether automated out of existence or resourced out of the country by the executives of companies. While there may be a few jobs saved over the next 4 years, most will still be quietly moved or automated.

I am sure you have noticed the all star team for promoting the well being of the nation beyond what Sarah Anderson and Scott Klinger of the Institute of Policy Studies has reported on is being assembled in Washington DC by President D. Trump. Beyond the scapegoating and misdirection promulgated by President Trump in his inaugural speech, this team is just another example of chutzpah beyond Trump’s absolutely, awesome, and amazing (it will be great) standards expressed during the runup to a momentous inaugural day. As identified, there is a group of people who have been sucking up the economic gains that should be going to the middle class and President Trump has surrounded himself with them . . . the billionaires and multi-millionaires in his cabinet. No other populist administration has gone to this extreme in selecting a group so dedicated to their own well being.

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Fuck You’s Inaugural Address

Dave Moss: What’s your name? 

Blake: Fuck you. That’s my name. You know why, mister? ‘Cause you drove a Hyundai to get here tonight. I drove an $80,000 BMW. THAT’s my name.

Long before Alec Baldwin did his Saturday Night Live impression of Donald J. Trump, Trump appropriated Baldwin’s sadistic “motivational” character, Blake, from Glengarry Glen Ross. Blake is a caricature of the salesman-as-sociopath. Baldwin refers to him as “an asshole.” Trump dialed the “you’re fired” performance down a notch with a wink of tongue-in-cheekiness.

Watch the “always be closing” scene and judge for yourself which impersonation came first:

The tenth anniversary DVD of Glengarry Glen Ross includes a special feature in which the documentary film maker, Albert Maysles recounted the story of a sales manager who,  as he approached the prospect’s door, started swaying his body and shuffling his feet. After the sale, the manager asked Maysles if he had noticed the odd movement and then explained,”when you’re moving your body this way it’s very hard for somebody listening to turn you down.”

This calls attention to the erotic dimension of the sales transaction. Sometimes the commodity isn’t the most auspicious thing being exchanged. Cue the traveling salesman jokes… did you hear the one about Amway Dream Night?

Where pathos rules, where pathos is finally derived, a character has fought a battle he could not possibly have won. The pathetic is achieved when the protagonist is, by virtue of his witlessness, his insensitivity, or the very air he gives off, incapable of grappling with a much superior force. — Arthur Miller, Tragedy and the Common Man

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European Pooled Panel Phillips Curve

This continues joint research with Marco Fioramanti. Our aim is to understand something about European natural rates of unemployment and whether the European Commissions estimated levels which they call NAWRU (for non accelerating wage inflation rate of unemployment) are useful approximations.

Here is a brief summary of work to date (prior to this note). Various subsets of us wrote at length here, here, here, here , and here.

In this note I look at a panel of the 15 countries which were in the European Union in 1997 (that is those for which long series of data are available) and ask if the Commission’s estimates of the NAWRU are useful if one wishes to forecast the acceleration of wage inflation. They don’t seem to be very useful at all.

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The Economist on Diversity and Development

I was looking for information on how cultures affect growth and stumbled on this 12.5 year old article in The Economist:

Diversity and development might seem to sit oddly together. But they are intimately linked, and the report seeks to show that they are not related in the way many people assume. The UNDP’s press release says unambiguously that “there is no evidence that cultural diversity slows development”, and dismisses the idea that there has to be a trade-off between respecting diversity and sustaining peace. Some of the world’s richest and most peaceful countries are historically multi-ethnic, such as Switzerland, Canada and Belgium. And most of the world’s richest countries are now the destination of immigrants from around the world, making America, Britain and other wealthy nations hugely diverse.

I imagine if you make a movie whose cast is perfectly representative of the population of diverse Switzerland or Belgium of a decade ago when this article was written, and the movie was a masterpiece, it would run afoul of #oscarssowhite.

But there is some evidence that diversity has costs. In a recent book, “The Size of Nations” (see article), two economists show that managing ethnic diversity is expensive, as governments must deal with the demands of groups competing for scarce resources. In the United States, a study has shown that people are willing to pay more for services like education if they can live with people more like them in ethnicity and class. In other words, people place a value on being with others like them. Multi-ethnic nations have been breaking apart recently (the Soviet Union, Yugoslavia); few countries have merged during the same period, and those that have were ethnic mates (East and West Germany, North and South Yemen).

A quick look at the Human Development Index (HDI), released each year in the report, seems to support the idea that diversity has its costs. In the bottom 35 countries ranked as having “low human development”, all but three are in vastly diverse Africa, where borders drawn by colonialists showed no respect for tribal, linguistic or religious identities. Meanwhile, while single-ethnicity states are rare (just 30 countries in the world do not have a religious or ethnic minority that constitutes at least 10% of the population), they are strongly represented at the top of the HDI: places like Norway, Sweden, the Netherlands, Japan, Ireland and Austria.

The article continues:

The report recommends several political strategies for coupling diversity and development. One is “asymmetrical federalism”—the type of constitutional arrangement seen in Spain and Canada, where regions dominated by a cohesive minority (like Québec or the Basque country) get special local-government powers that others do not. This both recognises the region’s distinct identity and binds it to the central state. After all, the authors point out, most people in Spain’s minority regions see themselves as both Spanish and Basque (or Catalan or Galician)—not just one or the other. Giving those overlapping identities constitutional form can be one way to stabilise a diverse country. However, it can also give rise to resentment among the majority—be they anglophone Canadians or Castilian Spaniards—over the privileges of minorities.

My guess is this works only as long as the Quebecois mostly continue to live in a geographic distinct area. In other words – where diversity however it is measured exists at a macro but is minimized at a micro level. I imagine living and working together in a way that forms elite teams requires an approach that does more to smooth out whatever differences are perceived to exist and treat everyone as the same. (Warning – Youtube & profanity.)

 

The authors of the report argue for several other policies to protect and promote what they call “cultural liberty”, with certain caveats. For example, they support affirmative action, which, they say, has led to an increase in the number of black professionals in America, and has helped ethnic Malays in Malaysia and various minorities in India as well. But they lightly question the wisdom of letting such policies become entrenched, asking for example whether the children of affirmative action’s beneficiaries should themselves be eligible for a helping hand.

I suspect that such programs are very, very hard to dismantle. Differing cultural traits (which necessarily exist as long as people are assisted in keeping apart) will result in different outcomes, and different outcomes are a justification for keeping these programs intact.

The authors also propose treating “cultural goods” differently from other kinds when discussing trade. They give some of the oft-cited statistics about the cultural dominance of a few countries—for example, that America accounts for 85% of films screened worldwide. Their assumption is that, left to raw market forces, products from smaller cultures would be drowned out of the market. But rather than proposing restrictions on, say, importing American films, the authors propose allowing governments to take positive action to boost the production of their local fare. (Some trade agreements treat such support as an illegal subsidy.)

This must work because movies hav a discernible effect on the culture in different countries. Typical goods like the Honda Civic, Sony Walkmen, SAP ERP, AK-47, Google’s search engine and Coca-Cola must be very unlike movies and have no discernible effect on any country’s culture.

While the report is full of feel-good language and social-science jargon, like “participation exclusion” and “living mode exclusion”, it is an interesting first stab at marrying diversity and development, two subjects not often found side-by-side. The report is, by its own admission, short on data about just how bad the problem of cultural exclusion is around the world. But it estimates, probably not too wildly, that one in seven people in the world is a member of some kind of disadvantaged minority. When engineering a new constitution, founding fathers in Iraq, Afghanistan and other nations under construction, as well as those who would advise them, would do well to take the suggestions of this report to heart.

And I predict that as long as society encourages people to think of themselves as distinct from their neighbors, and their neighbors as distinct from themselves, we will only increase the number of people who are members of what the Economist calls “some kind of disadvantaged minority.”

Updated to include comments on Swiss and Belgian diversity. Also, second blockquote was not originally shown as quote. Also minor changes in one sentence for clarity.

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Education – Close to Home Edition

This email just arrived from the Long Beach Unified School District (LBUSD), where my son is currently enrolled in one of the elementary schools:

Long Beach Unified is conducting a survey of all students, staff and parents on the culture and climate of our schools. The surveys, all of which are available for review on our website, are an important part of our accountability plan. Your input is very valuable so please watch your in-box tomorrow for an email titled “Long Beach Unified School District Parent Survey”. If you do not receive an email, log into your ParentVUE account and click on the tab, Core Parent Survey, in order to complete the survey. The survey is available in English, Spanish, Khmer, Chinese, Tagalog, Korean and Arabic and takes 5-10 minutes to complete. Thank you.

On the LBUSD home page, though, Parent Guidelines are only available in English, Spanish and Khmer. Apparently the district is changing rapidly or they’d have the Parent Guidelines in Chinese, Tagalog, Korean and Arabic.

Just for reference, Ed-Data, run by the California Department of Education, provided data on the “Languages of English Learners” at the school my son attends:

Number of Students by language from ed-data dot org

 

For reference, in 2015-16 there were 3 under Arabic, 3 under Filipino, and 6 under Vietnamese.  Nine are “all other”, which is just under the 11 figure for Khmer.  Also for reference, there are about 1,000 students in total at the school.

Anyway, I have no conclusions, or anything else to add.  I just found the data to be interesting.

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Barack Obama: a noble failure

(Dan here…NDd takes a shot at evaluating the President Obama legacy.)

by New Deal Democrat

Barack Obama: a noble failure

Let me preface this essay by saying that I voted for Barack Obama twice, in both 2008 and 2012. In fact in 2008 I supported him in the primary against Hillary Clinton, who I believed had a ceiling of support at about 52% or 53% even under even under the most favorable of circumstances (which certainly seems correct now!). I believed Obama was simply more capable of winning the Presidency, and I believed he could overcome his weaknesses and grow into the job.  By and large he did, but it took 5 full years before he finally gave up on his central, failed approached to governance.  I believe that failure is going to cause him to be ranked, over time, in the bottom half of all Presidents.

“There is no red or blue America,” Barack Obama declared in the 2004 convention speech that first brought him fame.  His presidency was largely based on that premise.  I think very few people would agree with that statement now.  This worldview was epitomised in his 2009 Inaugural Address:

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas, that for far too long have strangled our politics.

….[E]verywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act ….
….
What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply.
For we know that our patchwork heritage is a strength, not a weakness…. [W]e cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve ….

But on that very same day in 2009, Mitch McConnell and other GOP leaders also met, and resolved a strategy of total intransigence, to deny Barack Obama any bipartisan victories whatsoever.

Asked about that strategy early on, Obama replied that if Republicans would not come to the table with him, then they would miss the chance to have their imprint of the solutions to big problems. Rather than be shut out, they would negotiate with him for bipartisan Great Solutions.

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Aurora, Colorado; Republican Congressional Representatives in Action

In Colorado, on Saturday, Republican Rep. Mike Coffman held an event for his constituents at a
Coffman a public library in Aurora, Colorado. At least 150 constituents showed up, most of them hoping to ask Coffman about his recent vote to repeal the Affordable Care Act and his plans for a replacement. But only about 70 people got to meet with Coffman: Despite booking a large room with ample space, Coffman allowed in only four constituents at once for five minutes at a time. When the crowd grew restless, police put up crime scene tape and Coffman snuck out the back door—six minutes before the event was scheduled to end.

Coffman co-authored a Denver Post op-ed on Friday urging the full and immediate repeal of the ACA. About 419,000 Coloradans have gained health care coverage since the enactment of the law, and many of them stand to lose their insurance if it is repealed. Yet Coffman has not proposed a clear replacement for the law, an issue constituents hoped to ask him about on Saturday. “I am potentially going to lose my health insurance,” Berthie Ruoff told NBC 9 while she waited to meet with her representative. “I’ve had a preexisting condition. I’ve had breast cancer. What’s going to happen to me? My spouse who had health insurance passed away. What do I do? You know, what am I supposed to do?”

But neither Ruoff nor many other constituents who stand to lose coverage had an opportunity meet with Coffman. When it grew clear that Coffman would refuse to meet with a majority of those at the event, the crowd channeled its agitation into patriotic songs:
This show of unity, however, did not impress Coffman. Indeed, it appears to have scared him: Rather than address the crowd, Coffman had police officers secretly escort him out of the back door before the event was set to conclude.

A few people noticed Coffman sneaking out and attempted to address him. “Next time,” one woman pleaded, “please be sure you hear all your constituents!” Coffman ignored them, hopped into a waiting car, and drove away.

“Have a good afternoon!” yelled another exasperated woman.

GOP Rep. Sneaks Out of Townhall Meeting, Mark Joseph Stern, Slate, January 15, 2016

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