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

Are capitalism and democracy compatible?

Dan Crawford | May 8, 2020 7:56 am

Law
Politics
US/Global Economics

by Ken Melvin

Are capitalism and democracy compatible?

 Both Capitalism and Democracy are complicated, complex concepts with varying interpretations.

Beginning with a working definition of democracy:

Democracy — A government formed of representatives popularly elected by the enfranchised citizenry of the governed entity.

    • Webster’s : a government in which the supreme power is vested in the people and exercised by them directly or indirectly through a system of representation usually involving periodically held free elections.

In a true democracy, with as few exceptions as possible, every citizen over a certain age would be eligible to vote, all eligible would vote, and all of their votes would be equal. In the 2016 election only 61.4% of adult U.S. citizens (137.5 million) cast ballots, Trump won the electoral college vote 304 (57%) to 227 (43%) even though he received slightly less than half (46% to 48% for Clinton) of the votes cast. So, by any measure, it wasn’t even close to being a democratic result. This wasn’t by accident.

Putting aside for a while: all the unscrupulous things done in the 2016 election to sway opinion, all efforts to make voting inordinately difficult for some, all the hacking into computers by Russia, all the involvement of the likes of Wikileaks and Cambridge Analytica, the nefarious role of Facebook and other social media, the tons of dark and not so dark money, … ; it was the extremely skewed electoral college vote that determined the winner. How can you have a democratic outcome when South Dakota with less than one-million citizens has 3 electoral votes and California with almost forty-million (40 times SD’s population) has 55 (only 18 times as many electoral votes)? SD residents have one electoral vote per 300,000 resident and CA one vote per 727,000; a 2.2 to 1 ratio of inequality. Essentially the same could be said of ND, ID, WY, MT, AK, NM, KS, NB, NV, AR, MS, NH, VT, ME, and WV; their votes for president are worth more than the votes of voters in populous states and twice as much as the votes of the voters in the more populous states. States electors are allotted per Article II, Section 1, Clause 2 of the US constitution.

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The Road to Calvary

Dan Crawford | May 6, 2020 7:41 am

Climate Change

by Ken Melvin

 

The Road to Calvary

From: What to Think

To: What to Believe

From 15 to 30mins of TV Evening News in 1970 to 24hr TV News in 1980; then on to Fox News in 1996. From the 1950s print journalists and radio news broadcasts, to TV Evening News, to 24hr TV telegenic news readers, to Fox News, to Donald Trump. From the trusted Cronkite, and Huntley – Brinkley nightly news, to cable 24hr CNN opining/news, to Fox News (the most-watched cable news) telling us what to think, to Donald Trump telling us what to believe. Were nearly half of Americans always so dumb, so lazy, as to want to be told what to think? What to believe? If not, what has changed? Is the first prologue the latter?

In the summer of 1970, Roger Ailes, then consultant to then President Nixon, in a memo entitled “A Plan for Putting the GOP on TV News,” wrote, “Today television news is watched more often than people read newspapers, than people listen to the radio, than people read or gather from any other form of communication. The reason: People are lazy. With television you just sit—watch—listen. The thinking is done for you.” Later, Ailes, as media consultant to both Reagan and Bush I, was there for continuing the ‘Southern Strategy’; coming up with, via a protege, the ‘Willie Horton’ ad; and the character assassination of Michael Dukakis; … He was, via TV News, doing the people’s thinking for them,.

CNN introduced 24hr Cable Network News in 1980, to be followed by Fox News and MSNBC in 1996 and CBSN in 2014. All are for-profit operations with ad revenues a function of ratings determined by their number of viewers. The News had become a commodity, an economic good, competitively marketed to cable TV audiences. But, given that news doesn’t happen on the hour, they were facing a lot of dead air time. Competing for viewers, a provider might: try to be the very best news source, spend time telling viewers what they want to hear, seek to make the news entertaining; or, more likely, provide some attractive combination of these.

In 1996, Rupert Murdoch launched Fox News with Roger Ailes as CEO — to appeal to a conservative audience, and, to offset the ‘liberal bias’ of the ‘other’ outlets — (nothing said about being the best or even good). For 45 years Roger Ailes was there for the republican party. Today, symbiotically, Fox News is Donald Trump’s biggest supporter, best source for info and advice, and he a most featured personage on Fox News.

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Is There a Future for FDI?

Dan Crawford | May 6, 2020 5:24 am

by Joseph Joyce

Is There a Future for FDI?

Among the economic consequences of the coronavirus pandemic will be a drop in foreign direct investment activity. The latest issue of the OECD’s FDI In Figures forecasts a decline of more than 30% in 2020 in FDI flows, even under an optimistic scenario of a recovery in the second half of this year. The falloff reflects not only the deterioration in global economic activity, but also the responses of firms to policies that governments may enact to protect their economies.

The OECD reported that global FDI flows of $1,426 billion, while higher in 2019 than in 2018, nonetheless were below the levels recorded between 2010 and 2017. The increase from the previous year reflected in part that year’s depressed investment expenditures following tax reform in the U.S. and a return to positive outflows from the U.S. FDI inflows to the G20 nations, on the other hand, decreased in 2019, largely due to a drop in inflows to China to the lowest level since 2010.

The decline in FDI flows to China reflects in part the deterioration in relations between the U.S. and China, which has intensified during the pandemic. President Trump blames China for the outbreak of the virus and has threatened to implement new tariffs. The Trump administration is preparing a plan to bring medical supply chains back to the U.S.  Even if Joe Biden is elected President next fall, U.S. and other multinational firms are reconsidering their reliance on Chinese manufacturers in global supply chains.

As the OECD data show, however, this consolidation began before the pandemic. Global supply relationships based solely on cost considerations left firms exposed to external shocks of all kinds, ranging from the Brexit vote to the Japanese tsunami in 2011. In addition, the growth in service exports has allowed firms to locate their operations closer to consumers.

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Weekly Indicators for April 27 – May 1 at Seeking Alpha

Dan Crawford | May 4, 2020 8:25 pm

by New Deal democrat

Weekly Indicators for April 27 – May 1 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

As with the Great Recession, once the economy has gone over a cliff, the next question is, where is the bottom of the cliff? At least on a weekly basis, the data didn’t get materially worse in a YoY sense this week.

Is that the bottom of the cliff? Or are there further, worse, second order effects to come? We’ll start to get those answers once we can begin to compare May data with April’s.

As usual, clicking over and reading rewards me a little bit for my efforts.

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Judges, Ideologues, Dogmatics, and Bad Decisions

Dan Crawford | May 3, 2020 12:29 am

Law
Politics

by Ken Melvin

Judges, Ideologues, Dogmatics, and Bad Decisions

A judge should be wise enough to look to the possible consequences of his or her decisions. A judge should be wise enough to change his or her mind.  A judge should generally accord these qualities to the decisions of his or her predecessors. And, given that judges pass judgment on others, a judge should be law-abiding, of good moral character, … above reproach.

At the present time we have three, maybe four or five, supreme court justices: Alito, Thomas, Gorsuch*, and perhaps Kavanaugh*, and Roberts, who feel that they, more than anyone before them or now on the court, know how the constitution should be interpreted; would impose their interpretation on the nation no matter the consequences.  Some consequences of this sort of thinking of late include:  District of Columbia v. Heller, McDonald v. City of Chicago, Shelby County v. Holder, Citizens United v. Federal Election Commission, and, most recently, Rucho v. Common Cause; all decisions with horrendous consequences.

Columbia v. Heller:

The Second Amendment to the Constitution:

A well regulated Militia, being necessary to the security of a free State,

the right of the people to keep and bear Arms, shall not be infringed.

In 2008, in the Heller decision, the Supreme Court, by a 5 to 4 margin, affirmed a Court of Appeals ruling that a citizen had the constitutional right to possess a firearm separate the militia clause.

The Supreme Court held:

(a) The Amendment’s prefatory clause announces a purpose, but does not limit or expand the scope of the second part, the operative clause. The operative clause’s text and history demonstrate that it connotes an individual right to keep and bear arms.  

(1) The Second Amendment protects an individual right to possess a firearm unconnected with service in a militia, and to use that arm for traditionally lawful purposes, such as self-defense within the home.

In writing the majority decision, Justice Scalia invoked his theory of original intent based on his review of colonial history and the early years of the republic and concluded that the Constitution’s Second Amendment meant, not what others before had said it meant, but whatever he said it meant some 230 years later. Scalia said that the second part, not the first part, was the operative clause. Scalia, not the second amendment, said, “ … to use that arm for traditionally lawful purposes, such as self-defense within the home.” Scalia was joined in the majority by Justices Roberts, Kennedy, Thomas and Alito.  Justice Stevens, who wrote the dissent, recently called Heller, “… the worst decision of my tenure.”

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WHAT THE TRUSTEES REPORT ACTUALLY SAYS

Dan Crawford | May 2, 2020 11:22 pm

Politics
Taxes/regulation

by Dale Coberly

        WHAT THE TRUSTEES REPORT ACTUALLY SAYS


WORST CASE:  we wait until 2035 and then have to raise the payroll tax 4.13% (2% for workers, 2% for employers) in order to pay for promised benefits. OR have to cut benefits by 25%.

The trade-off is about 20 dollars per week extra “tax” (really “savings”) for an average worker making 50k per year, versus a 500 dollar per month cut in benefits, from about 2000 dollars per month to about 1500 dollars per month, when he retires.

People won’t be able to live on 75% of promised benefits unless they have other sources of income.  About 50% of retired workers will not have enough other sources.  Please remember that those future retirees would be paying for ALL of the required tax raise.



NOT SO BAD CASE: an “immediate and permanent” increase in the payroll tax of 3.14% (1.6% for workers, 1.6% for employers), or about 16 dollars per week. OR a 20% cut in benefits.. from about $2000 per month to $1600.

This is really the whole story.  Everything else you hear is misdirection: arm waving and shouting “Fire! Fire! We Are All going To Die!”

There is an even BETTER OPTION:  raise the payroll tax a little more than one tenth of one percent per year (about a dollar per week per year). This must be done very soon;  delaying will require a larger gradual increase.  The ultimate increase needed will be about the same 4% that will be otherwise needed in 2035 if we wait.  But that 4% (2% for the worker) will be delayed about 30 years. And the per year increases will be reduced to much less than one tenth percent per year,  because the gradual increase will reduce the “actuarial deficit” each year while providing an Increase in income to the Trust Fund.  
The interest earned by the gradual increase will actually reduce the ultimate tax needed by about 1% of income.  AND it will eliminate the need for  Congress to repay the money it borrowed FROM Social Security over the past thirty eight years.
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Tip of the Iceberg

Dan Crawford | April 30, 2020 8:25 am

Climate Change

by Ken Melvin (reader Ken Melvin offers more on climate change)

Tip of the Iceberg

Around the world, the poorest live on marginal land. Land where, whether due the shortness of the growing season, frequent flooding, lack of moisture, poor quality of the soil, temperatures, altitude …, it is difficult for them, even in the good times, to eke out a living. (The history of how is it that they come to live on these lands is the stuff of anthropology.) These marginal areas may cover large portions of a nation, whole nations, parts of several nations, … Due to lack of rainfall, much of the land mass of Asia is marginal at best. The same is true of much of the North America’s west/southwestern and Africa’s northern regions. In these regions, the scant populace gathers around what water is to be found.

A marginal land area lacking normal rainfall might know years, years in a row, of above normal rainfall and see its inhabitants prosper. Such years would encourage them to hang on and keep trying in the dry years. With the advent of Climate Change, many of these areas have seen ever less rainfall. For them, it is no longer possible to eke out a living, to hang on. Cliven Bundy’s 160 acres next to a water source in Nevada wasn’t big enough to run cattle. For ranching, he rented tens of thousands of acres of nearby Bureau of Land Management (BLM) land; land where each cow might need graze as many as 35 acres in order to eke out a living. Disputing with the government agency; Bundy refused to pay the rent, didn’t even bother to remove his cattle.

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