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

Update on Wells Fargo

Via Reuters Wells Fargo drags feet:

Wells Fargo last September settled with three regulators after revelations that branch staff set up as many as 2.1 million accounts without customer authorization in order to hit sales targets. Since then, the bank has replaced its CEO and other top executives have either resigned or been fired.

The bank has been hit with several regulatory inquiries and lawsuits.

“The extent of fraud at Wells Fargo was stunning,” Stringer said in a statement sent to Reuters on Thursday. “Executives have been held responsible — but now directors must answer for their part… This board needs to be refreshed — today.”


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Science and Technology advice

Via Science magazine, Trump’s White House science office still small and waiting for leadership:

…Trump has yet to nominate an OSTP director, who traditionally also serves as the president’s science adviser. Nor has he announced his choices for as many as four other senior OSTP officials who would need to be confirmed by the Senate.

Still pending is the status of the President’s Council of Advisors on Science and Technology, a body of eminent scientists and high-tech industry leaders that went out of business at the end of the Obama administration.

Via NYT, The Climate Lab That Sits Empty:

There are only a handful of labs in the United States and elsewhere with the equipment to reliably make these measurements at the high precision required for atmospheric research. None has the capacity the Boulder lab would have to run the necessary number of measurements — about 5,000 per year. And the Boulder lab, unlike others with similar equipment, would be fully dedicated to monitoring global greenhouse gas emissions.

The National Oceanic and Atmospheric Administration first sought funding for this program without success in 2012 and is trying yet again this year. But there seems to be little hope that lawmakers will finally provide the roughly $5 million for the machine and attendant research program. Worse, the whole national greenhouse-gas monitoring program may be at risk, if Congress approves President Trump’s proposed cuts to climate science.

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Wisconsin and Foxconn…

Via the New York Times Wisconsin and Foxconn:

Foxconn’s plan for a $10 billion factory in Wisconsin is certainly good news for President Trump and Republican politicians Gov. Scott Walker and Speaker Paul D. Ryan, whose district the plant would call home.

But the deal with Foxconn, the Taiwanese electronics supplier, comes with a heavy price tag for Wisconsin taxpayers: $3 billion in state tax credits that dwarf the typical incentive package companies receive from local governments.

Even as Mr. Walker celebrated the news with Foxconn executives at a rally at the Milwaukee Art Museum on Thursday, experts on the political left and right alike said the rewards were not justified by the cost of the tax breaks.

Over all, the subsidies for the Foxconn plant, which would produce flat-panel display screens for televisions and other consumer electronics, equal $15,000 to $19,000 per job annually.

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by Dale Coberly





I received an email a few days ago from Chris Dreibelbis,Fix the Debt, purporting to explain “why the Social Security Trustees urge action.”

“Fix the Debt” is a project of the Committee for a Responsible Federal Budget (CRFB) which is funded in part by Peter Peterson, a very rich person who has made something of a second career writing and saying misleading things about Social Security.  So have CRFB and “Fix the Debt.”

The present email from Dreibelibis looks reasonable enough,  but also misleading enough, that I thought it worth writing this short post.

Dreibelbis quotes the Trustees, “Both Social Security and Medicare face long term shortfalls under currently scheduled benefits and financing….The Trustees recommend that lawmakers take action sooner rather than later to address these shortfalls…”

Dreibelbis says, “The newest report forecasts that Social Security’s combined trust fund will run dry by 2034.  At that point, all recipients will see a 23% cut in benefits.  For example a typical person born in 1990 … will see a cut of over $160,000 dollars in scheduled lifetime benefits.”

To check this, I assumed that person would pay FICA taxes on income equal to 12.4% of the average income each year from 2020 through 2054.  I looked at Table V.C7 (Trustees Report p150} for a person who obtains age 65 in 2055 and retires at age 67 to find a scheduled yearly benefit of $33430.  Since the numbers in the table are given as constant 2017 dollars, I assumed the “real” value of the benefit would not change and multiplied it by the 20 years that person could expect to live in retirement, for a total of 668600 dollars.  Now, if the benefits are cut by 22% that person would lose $158,778 in total benefits over his lifetime. This is close enough to Dreibelbis figure, assuming he may have done the calculation slightly differently.


But what Dreibelbis did not do was calculate the cost of avoiding the benefit cut by raising the payroll tax 4%.  This turns out to be $93566 or about 60% of the value of the lost benefits.  Sounds to me like a better deal.  Moreover the tax would be paid out of an income of 2.339,153, leaving him an after the tax total income of $2,245,587, or an average of about $64,159 per year (2017 dollars).   Taking the benefit cut would leave him a total of $509,822 in benefits, or an average of about $25,491 per year to live on when he is old.

There are probably games you can play with “present value”  or “what you could have earned from interest,”   but that does introduce some “if’s.”  In any case, a first look at the numbers suggest that paying the extra tax makes more sense than taking the benefit cut.  It turns out that most workers would only see half the taxes (the other half being paid by the employer:  (i am quite aware of the “employers share is “really” the employees money” argument, but that is a metaphysical argument meant to distract from the payroll facts on the ground.)  Taking that employee’s share only, and phasing in his 2% tax increase one tenth of one percent (about a dollar per week at today’s average wage) per year would leave his total tax cost of avoiding the $153,778 benefit cut at about $35710.  This means every dollar he pays in “extra” taxes would get him $4.31 in saved benefits.

By the way, these numbers are in “real” dollars.  Accounting for inflation would make the benefit of paying the tax look much larger.  Or BE much larger, since any attempt to make up for the SS tax by “personal savings”  would have to first make up for what would be lost to inflation.

Dreibelbis does not address this. He strongly implies we need to cut SS now in order to “know what you can count on in the future.”   He never considers that we could just pay an invisibly larger tax now and keep (earn) the benefits we will will most definitely need in the future.

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Repeal ACA Rejected Again – Updated

July 25, 2017: There is a lot of bad dialogue going on in the news these days. In my last three posts, I have tried to point out what can be passed by Repubs with just 51 votes and what requires 60 votes. Much thought being given to defunding Planned Parenthood and the Mandate(s). If Repubs chose to follow Reconciliation and not nuke it and/or the supermajority vote, both of the defunding and the elimination of the Mandate(s) are not going to happen. The Parliamentarian decided on 60 votes for each to pass.

“The discussions came as the Senate rejected 45-55 a straight repeal of Obamacare with a two-year delay in implementation to allow Congress to work out a replacement. Seven Republicans opposed the measure.”

In the 2015 bill, Republicans had attempted to kill the mandate. The parliamentarian had ruled it could not be done in Reconciliation. “In 2015 the Senate revised the ACA repeal reconciliation bill passed by the House after the Parliamentarian ruled that it could not repeal the individual and employer mandates under the Byrd rule, amending the bill to repeal only the penalties imposed by the mandates.” This would require sixty votes to accomplish if not amended. The Senate could eliminate the monetary penalty.

July 26, 2017: Sens. Lamar Alexander, R-Tenn.; Shelley Moore Capito, R-W.Va.; Susan Collins, R-Maine; Dean Heller, R-Nev.; John McCain, R-Ariz.; Lisa Murkowski, R-Alaska; and Rob Portman, R-Ohio, joined all Democrats to defeat the amendment, which would have given Congress two years to devise a replacement to the 2010 Affordable Care Act.

July 27, 2017: Not going to raise the flag in honor of McCain voting “no” as he should have done this long ago. McCain’s reasoning for voting against the repeal and/or amend is false.

“McCain said that he’s repeated time and time again that one of the ‘major failures’ of Obamacare was that it was “rammed through Congress by Democrats on a strict-party line basis without a single Republican vote.’

‘We should not make the mistakes of the past that has led to Obamacare’s collapse, including in my home state of Arizona where premiums are skyrocketing and health care providers are fleeing the marketplace,’ McCain said.”

Republicans had every opportunity to participate in designing the ACA and refused to do so. That premiums are increasing have two reasons. The lack of control of the rising cost of the healthcare industrial complex and the blocking of the Risk Corridor Program by Sessions, Upton, and Kingston.

– People have been claiming McCain is a maverick and he bucks party lines. Not really as he goes with the flow 87% of the time. He just took an opportunity to stick it to Trump and some others. The real Maverick who voted “NO” was Susan Collins who votes the party line 60% of the time.

July 28, 2017: Now Trump again has threatened to kill the ACA by blocking the CSR subsidies to those between 100% and 250% FPL attacking the low income citizens.

– In passing the blame around for the Republican failure to repeal and amend the ACA; Congressional Idiot Louis Gohmert crawls out from under his rock. “I pray for Senator McCain, for his health, his full recovery from the cancer but it doesn’t give him the right to make people suffer more under the current ACA,”

– Always the positive aww shuck guy Paul Ryan: “‘We were sent to Washington to fulfill the pledges we made to our constituents. While the House delivered a bill to repeal and replace Obamacare, unfortunately the Senate was unable to reach a consensus,’ Ryan said in a statement Friday. ‘I am disappointed and frustrated, but we should not give up. I encourage the Senate to continue working toward a real solution that keeps our promise.'”

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Trilemmas and Financial Instability

by Joseph Joyce

Trilemmas and Financial Instability

Whether or not the international monetary trilemma (the choice facing policymakers among monetary autonomy, capital mobility and a fixed exchange rate) allows policymakers the scope for policy autonomy has been the subject of a number of recent analyses (see here for a summary). Hélène Rey of the London Business School has claimed that the global financial cycle constrains the ability of policymakers to affect domestic conditions regardless of the exchange rate regime. Michael Klein of the Fletcher School at Tufts and Jay Shambaugh of George Washington University, on the other hand, have found that exchange rate flexibility does provide a degree of monetary autonomy. But is monetary policy sufficient to avoid financial instability if accompanied by unregulated capital flows ?

A recent paper by Maurice Obstfeld, Jonathan D. Ostry and Mahvash S. Qureshi of the IMF’s Research Department examines the impact of the trilemma in 40 emerging market countries over the period of 1986-2013. They report that the choice of exchange rate regime does affect the sensitivity of domestic financial variables, such as domestic credit, house prices and bank leverage, to global conditions. Economies with fixed exchange rate regimes are more impacted by changes in global market volatility than those with flexible exchange rate regimes. They also find that capital inflows are sensitive to the choice of exchange rate regime.

However, the insulation properties of flexible exchange rates are not sufficient to protect a country from financial instability. Maurice Obstfeld of the IMF and Alan M. Taylor of UC-Davis in a new paper point out that while floating rates and capital mobility allow policy makers to focus on domestic objectives, “…monetary policy alone may be a relatively ineffective tool for addressing potential financial stability problems….exposure to global financial shocks and cycles, perhaps the result of monetary or other developments in industrial-country financial markets, may overwhelm countries even when their exchange rates are flexible.”

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Being Prepared and One Person’s Memories . . .

It has been a long time since I participated in Scouting events. Never been to a Jamboree; although, we did take a bunch into the Pubelos for a hike and rafting on the Arkansas. Hiking up the mountain in a cold rain certainly showed who was prepared to meet the elements of being outdoors with minimum shelter. Those of us who had fleece jackets, rain gear, and equipment stowed in water resistant packs were almost prepared for anything, which could happen weather-wise.

Preparedness has taken a new meaning today. The politics of the country have demanded such from we as adults as well as boys and young men who listened to a speech given by a President under fire. After listening to the President speech some such as “ James Oates, a 44-year-old assistant Scoutmaster on New York’s Long Island” believe Scouting is just about “growing strong, independent, entrepreneurial young men” and giving them experiences so they can make their own decisions.

There are always decisions to be made in life; but, Mr. Trumps complaints at a Scout event is neither the time and place for them. Besides, Trump’s complaints are false.

One always has to be prepared for the prospect of “fake news. Mark Twain had his fill when a competing newspaper reported of his ill health and loss of mental clarity. “ June 2, 1897, beneath the headline, ‘Mark Twain Amused,’ the Journal skewered the Herald’s story and offered Twain’s timeless denial: ‘The report of my death was an exaggeration.’” History has it a cousin J.R Clemmons was ill. There are always those times when the news has been skewed due to be the last person at the receiving end. In Trump’s case, everything is declared fake unless he says it and even then, what he says is mostly wrong or made up.

Trump ridicules former President Obama and the ACA to the crowd before him. There is no decision making to be made when it comes to helping and caring for other people. This is part of the Scout Law to help other people at all times and the Scout Oath. It does not become a political exception or a decision to be made as Mr. Oates would have us believe or as Trump falsely comments about. One has to wonder about who in Trump’s audience will lose the healthcare on his account and false information disseminated. Healthcare for all is a moral obligation for this industrialized and wealthy country.

Scouting is not just a “cocktail party with all the hottest people in New York” attending, it is supposed to incorporate everyone whether hot or not, etc. With that message to his audience, Trump is carving out what he believes the population of this country should be today. If you do not fit, you do not belong here.

“A Scout is trustworthy, loyal and we could use some more of that (loyalty) I could tell you that.” We could also use some Truthfulness, which is also a part of the Scout Law. I am not saying “more” truthfulness; I am saying we need truthfulness from Mr. Trump.

If you get a chance, go and listen to this speech. This is a speech for all times, a lesson in how to purposely not recognize your audience for who they are, ignore them, and give a speech meant for others to suit your political agenda.

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First Vote to Amend and Repeal Rejected

The first vote in the Senate to amend the PPACA was rejected.

“Senators voted 57-43 late Tuesday to reject the plan in the first vote on an amendment to the bill. Those voting “no” included nine defecting Republicans. The vote underscored problems Republicans will have in winning enough votes to recast Obama’s statute.

The rejected proposal included language by Senate Majority Leader Mitch McConnell erasing the Obama law’s tax penalties on people not buying insurance and cutting Medicaid.

Language by Texas Republican Sen. Ted Cruz would let insurers sell cut-rate policies with skimpy coverage. And there was an additional $100 billion to help states ease costs for people losing Medicaid sought by Midwestern.

By 57-43 — including nine GOP defectors — it blocked a wide-ranging proposal by McConnell to erase and replace much of the statute. It included language by Sen. Ted Cruz, R-Texas, letting insurers sell cut-rate policies with skimpy coverage, plus an additional $100 billion to help states ease out-of-pocket costs for people losing Medicaid sought by Midwestern moderates including Rob Portman, R-Ohio.”

Senate blocks proposal to repeal ‘Obamacare’

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