Open thread Sept. 3, 2019 Dan Crawford | September 3, 2019 8:16 am Tags: open thread Comments (15) | Digg Facebook Twitter |
The saddest part is that the white working class GOP voters are doing this to themselves, just like the farmers, and neither one of them will change their votes. Their personal economy means nothing in terms of their vote.
“Anyway, it’s Labor Day, and there are some real old-school J.H. Blair shenanigans going on down in Harlan County in Kentucky. Near Cumberland, some miners have blocked a rail line, freezing a train loaded with coal for over a month. The company they worked for, Blackjewel, is the very model of a modern major company, at least in this country. It shut down operations and dove into bankruptcy at the beginning of July. Because it is a modern American corporation and, therefore, doesn’t have the social conscience god gave a Gaboon viper, Blackjewel went out of business without “fulfilling its salary obligations,” as the term of art puts it. More simply, the miners saw their paychecks bounce. From the Washington Post:
“We had just bought a washer, and then the bank pulled the money back out, and it made our account negative,” said Stacy Rowe, Chris Rowe’s wife. The effect of those missed paychecks has rippled through the county’s economy. Many of the miners made $20 to $30 an hour, a middle-class salary in a county where the household median income is $24,000 a year, according to the U.S. Census Bureau.
Interestingly, there is a law in Kentucky that requires a company that shuts down suddenly to post a bond ensuring that its employees get paid. More interestingly, according to an investigation by the Lexington Herald-Leader, no coal company founded in Kentucky over the last five years ever has met that obligation upon shutting down—including, obviously, Blackjewel.
‘In the weeks after Blackjewel filed for Chapter 11 bankruptcy, the Herald-Leader reported the company appeared to be in violation of a law requiring it to post a performance bond to protect wages. The violation allowed the company to close its mines without paying employees for three weeks of work…KRS 337.200 requires “every employer engaged in construction work, or the severance, preparation, or transportation of minerals” that has continuously operated in Kentucky for less than five years to post a performance bond with the Labor Cabinet to cover its payroll for four weeks. If the company suddenly shuts down, the money could be used to pay employees.
Many Kentucky coal companies are exempt from the law because they’ve continuously operated in Kentucky longer than five years, but the Herald-Leader identified a handful that appear to meet the requirements for posting a bond. On Thursday afternoon, Kentucky Attorney General Andy Beshear released a report identifying 30 companies that may be in violation of the law. Altogether, the 30 companies employ 932 people.’
Moreover, the Republicans in state government, led by Matt Bevin, the most unpopular governor in the country, tried recently to eliminate the requirement entirely. The attempt failed in the Kentucky House, but more than a few people suspect that the attempt was made at least partly to bail out Blackjewel. This, of course, is the classic marriage of the corporate class and a thoroughly sublet state government of a kind that’s been mutating ever since organized labor lost its clout and there was nothing to stop the country’s economy from transforming itself into a casino, a mere vehicle for financial speculation in which the profits were privatized and the losses socialized. However, on this Labor Day, there is a passage in the Washington Post story that shows how hard won hope is these days.
‘Cumberland is located in Harlan County, where Trump won 85 percent of the vote. But these miners say their fight isn’t a political one. At the camp, there is an informal policy against speaking about Trump or partisan issues, underscoring the president’s continued popularity in areas where the local economy has continued to suffer. “That is the main reason we have gotten as far as we’ve got now; it’s because we have kept the nonsense down,” Rowe said, referring to the nation’s divisive political debate.’
Whether the miners want to be or not, in the strictest sense of the world, they are engaged in a political fight that eventually is going to have to have a political solution. Keeping “politics” out of this situation makes as much sense as refusing to discuss the role played in it by coal. Ultimately, the job requirements of being a citizen include a full immersion into the politics of your time. We all have been living with the consequences of avoiding these responsibilities for so long that we now pride ourselves on our independence from “government,” as though it were some sort of Andromeda Strain dropped from the sky instead of the constantly evolving act of political creation that it was designed to be.
It is going to take work to place that country back on the right track again, if it’s even possible, and I am in no way sure that it is. That is the work to begin on this Labor Day.”
This guy Rowe will vote GOP again and again. No matter how many checks he bounces.
David Rolf, president of SEIU 775, a local union representing home care workers in Washington and Montana:
In a sense, labor law experts and activists are proposing throwing everything at the wall to see what sticks [card check, sectoral bargaining, work councils, codetermination, Union-administered unemployment insurance]. The prevailing impression from talking to them is that the total demise of private sector unions in the US is too close at hand to do anything other than try absolutely everything.
“It’s so frustrating to hear all these single-bullet theories,” Rolf says. “Someone says we need card check, someone says striking needs to be a civil right. The reality is that the hour is too late for single-bullet theories. What if we’re wrong?”
Nobody seems to catch on to the SEIU’s Andrew Strom’s proposal:
Such an easy sell if anyone ever raised the issue. Transform the US the way desegregation did — but for everybody!
AND SUCH AND EASY SELL! SO EASY!!!
One day you will figure out who has to be sold. Hint: It is not the workers or the people.
There is a lot of posting about recession indicators lately. As a manufacturing/process engineer I am interested in causes and mechanisms. I note in the data that (during my career – the last three recessions) if the number of jobs gained (using a 6 to 12 month averaging) drops below that required to keep up with population growth, a recession will follow. In order to not have a recession within the next 12 months, our economy (# of jobs) must continue to grow at a rate that exceeds population growth. Once we stop growing at an unsustainable rate, we have a period of negative growth.
This tells me that the process of economic growth is broken. There is a failure in the underlying mechanisms that lead to economic growth in our economy.
I believe that in our economy the primary mechanism of growth is that firms conclude there will be demand and they invest in jobs. This is a self-fulfilling mechanism as long as new workers join the workforce. As firms see it succeed, they jump on the bandwagon. We end up with a bubble.
The recession can happen either because the firms conclusions about increasing demand fail or because firms simply change their analysis and stop concluding there will be rising demand. I suspect that recessions start with the former and accelerate with the latter.
Is my failure to find economists talking about mechanisms because I am looking in the wrong place, or because that is not how they think?
“The recession can happen either because the firms conclusions about increasing demand fail or because firms simply change their analysis and stop concluding there will be rising demand.”
Wouldn’t inventory growth or decrease conclude the same? Provided you need what your capacity was?
I am not sure what you are saying. People may include the state of inventory as a factor in their conclusions, but it is still people making decisions about how many workers to employ.
My business and resulting production plans look at capacity, demand, and inventory. If I need less capacity, I will make the necessary adjustment to lower it whether it is Labor or machinery. Since I get the forecast and measure inventory against it, I will decide how much will be made. Production is measured against my plan and adjusts accordingly. The reality of the forecast is measured in sales and inventory. 1982 sits in the back of my head when I offered the plant manager a chance to make stuff he would not normally make due to decreased demand on high runners and increased inventory. He said “no,” we want the usual. I canceled the orders in the que and work on the floor decreased. There were layoffs and fewer CNC and Automatics runs. 13 months later, the Division controller and General Manager asked me what I did to help the company break even 8 months, make a small profit 4 months, and lose in one a small amount in one month.
When my crew canceled orders, purchasing cut supplier orders, and our inventory went down. Huge reduction in purchasing and inventory costs which kept the company (Parker-Hannifin Fluid Power) from having to go through massive layoffs for another year. We kept them busy doing other stuff. My business and production plans and the master schedule set the numbers of people and machine capacity needs in the three manufacturing plants. You guys give me the data and I create the plan.
“This tells me that the process of economic growth is broken. There is a failure in the underlying mechanisms that lead to economic growth in our economy.”
The failure in the underlying mechanisms came about as US consumers/workers were betrayed in the US trade treaties. Those trade treaties allowed US corporations to move their production into foreign countries and export their output to the US with very low tariffs. Why should US corporations pay higher wages in the US when all it took to avoid them was to move their production out of the US?
The “process of economic growth is broken” in the US. About 70% of US GDP is from consumer spending.
BUT YOU CAN NOT SPEND WHAT YOU DO NOT HAVE.
Consumers have had more or less stagnant incomes and by December 2007 they were deeply mired in debt. (Total Household Debt had increased from $4.54Trillion in Q1 1999 to $12.372Trillion in Q4 2007) Since then consumers have continued some spending with small increases in incomes and small increases in their debt.
But consumer spending can not reach the levels between 1996 and 2007 when consumers’ incomes were supplemented by large increases in debt. That was a one-time process. (At least until that excessive debt is retired.)
The best that we can hope for, is that some production gets forced back into the US and wages begin to increase more rapidly. That would allow the total household debt to be slowly retired.
Or we will continue down our current path where statistics just don’t mean what they used to mean. (Some underlying assumptions are no longer being met.)
Another member of the “Apocalypse Now” crowd. You need to do all of the math, and that is not to say that our shrinking income levels are not of great concern. They are.
“Mortgage Debt Hits Record: So What?
File this one under more “denominator blindness:”
Every now and again, a data point comes along that seems to bother some people, when the precisely proper response should be: “So what?”
The mortgage chart above is a perfect example of a single data point out of context. Perhaps the headline — U.S. Mortgage Debt Hits Record, Eclipsing 2008 Peak — is what set some off, or the chart above. Regardless, if you just scan the headline and ignore the specifics it might lead you to draw a wrong conclusion.
Consider that headline and chart above, and then add the following context. The chart above:
-Does not reflect total number of homes or their prices;
-Does not reference debt per household;
-Does not describe lending standards or quality of loans;
-Makes no mention of how much less debt is delinquent today than the prior peak;
-Fails to reference ability of borrowers to service the debt;
-Is not inflation adjusted.
Note that $9.29 trillion in 2008 is equal on an inflation adjusted basis of about $11.07 trillion today; to eclipse 2008 peak mortgage debt in real (not nominal) dollars requires about 17% more mortgage debt than exists today.
You can create a similar “compare & contrast” with each of the other bullet points.
Let me add that the author recognized some of these issues in the column itself, which overall is accurate and balanced. The headline and chart is what gives fodder to the worst elements of the “apocalypse now” crowd, who tout that chart (and others) as a manifestation of the rerun of the 2006-09 mortgage crisis, an imminent economic demise that apparently awaits us all.
Context and nuance may not matter on social media, but it matters a great deal for investors.”
“The failure in the underlying mechanisms came about as US consumers/workers were betrayed in the US trade treaties. ”
Even before 1980 the economy would grow (measured by employment) faster than population grow and then when it slowed down (as it must) growth would turn negative. While I agree that workers have been betrayed, I disagree with your conclusion that it caused underlying mechanisms to fail. They were already broken.
I do not think firms know how to act successfully unless they are growing a bubble. They do not seem to understand that hiring workers is what makes their growth plans succeed. I note that this lack of understanding does lead them to think betraying workers is not another losing proposition.
I think we are talking different time frames. I worked on ink jet manufacturing. New manufacturing lines took 6 months to acquire and we acquired 3 to 6 per year. Inventory management is critical, but it is overwhelmed by the longer term changes.
Marketing forecasts were always too high, but the errors were mitigated by high growth – until it wasn’t.
I gave one example out of my 50 years. How long do you believe it takes to bring a car into production and when must supporting suppliers of solid state electronics or the associated wire harnesses be ready to support the production? within the ramp up again is Labor, Overhead, and Materials. This has not changed since the sixties. It will not change going forward whether there is Labor on the line or a series of robots performing multiple functions.
CEO pay incentivizes inflating the reports of growth, but I conclude it also incentivizes producing real but unsustainable growth.
I think it takes far shorter to build a car than to determine whether demand has changed,
The question: “How long do you believe it takes to bring a car into production and when must supporting suppliers of solid state electronics or the associated wire harnesses be ready to support the production?”
Your answer: “I think it takes far shorter to build a car than to determine whether demand has changed,”
Do you know what I asked you?