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

To Do I, II, & III

The COVID-19 Pandemic, the inadequate response thereto, and the incompetency of the Trump Presidency in general, combined, have exposed our nation’s weaknesses and failings to an extent unknown since at least the Great Depression. This is likely a do or die moment for America. Recovery will be difficult. Improbable unless we are careful in our choice of goals and daring in our efforts to achieve them. The margins for error do not allow for dawdling. Attempting to just return to a time before Trump and The Pandemic would be disastrous. A time like this should also be seen as a time of opportunity.

First, we must rid ourselves of denominational economics such as Capitalism, Socialism, Hayekism, Free Marketism, … These, but ideologies, dogmas, that some would impose on economics, on the rest of us; have done the Nation great harm. They are, at their very best, reasonings of a time past. As likely to be the answer to today’s problems as Adam Smith is to rise from his grave.

As a first step toward becoming again competitive in today’s world; we must stop blindly paying twice as much for inferior healthcare, internet, and cellphone service,… as is being paid in other developed nations; and while we are at it, we need to solve our homeless problem. These are all essential services that should be provided to all. In the grand competition of things; we’re losing. Have been for a while. Were before the pandemic. Ideology is a luxury we can no longer afford.

Let’s pay for these things that need to be done, and help with our wealth distribution problem, too, by taxing the piss out of the too rich and too profitable. Apple, Google, Amazon, Facebook, Microsoft, Sheldon, Warren, …; fun and games are over guys, time for you to pay up.

Let’s pay for these things that need to be done by cutting the ‘Defense’ Budget in half. Halve the number of Generals, the number of Admirals, the number of Aircraft Carriers, the number of Missiles, …; and full-stop attacking other nations. Half of $720+Billion is $360+Billion; $360+Billion is aplenty for Defense, nothing for Attack, and about right for expanding Medicare to Medicare For All. Ike was right about that and Harry was right about health care.

I. Internet Access and Cellular Networks

All those fireman who died because of poor communication on 9/11/2001 should have taught us the need for an ubiquitous cellular network. Mobile radio networks separate cellular networks should have shown us the need for one network. A police car with a half dozen radio antennas on the roof is ridiculous.

So, too, the fact that our cell phone uses a cellular network, our computers use a cable based internet service, and that we need a WIFI router to use our laptops. What’s now the cellular network should be the WIFI router and these routers should be all over our homes, all over every floor in every building, everywhere on our streets, and all across and over rural America. Ubiquitous. Today, thousands and thousands of teachers across America are trying to remotely teach kids, many of whom have very limited internet access, over an internet system that is not reliable. When the fires struck Santa Rosa, the cell towers went down. The internet w/ phones must work at all times during normal times and during times of emergency; needs to be bullet proof. This new inclusive internet is too critical to be trusted to the ‘Market’. Cell phone and Internet should be one and that one should be regulated as a public utility; a service, as a service application, and, as always, the application dictates. Not the ‘Market’.

As a Post Office service, maybe?

In order to fully utilize our Nation’s productivity, better fulfill our personal lives, and assist in times of emergency, the Internet needs be ubiquitous and bulletproof. We should be able to access the internet from our backyards, on a hike, in the mountains, in transit, …; from anywhere we are or can be. It was a big mistake letting cable companies have the internet and the cell phone companies the phone towers. Let the cable companies have Cable TV. Internet and cell phone transmission should be one and the same; should be a Public Utility. It isn’t about ideology, it’s about how it should be; what should be. Half-arsed won’t get it. If we continue to stick with ideology and dogma, China, Japan, and the EU will continue to eat our lunch.

Au Revoir, Robert J. Samuelson

Au Revoir, Robert J. Samuelson

 For quite a few years not so long ago I was regularly posting here variations on “Today is Monday, so on the WaPo editorial page Robert J. (not related to Paul A.)* Samuelson is calling yet again for Social Security benefits to be cut,” and he did indeed do that very frequently over a long time.  However, today was his final column for the Washington Post, so we shall no longer have RJS to kick around, sob! It was titled, “Goodbye, readers, and good luck – you’ll need it.”  There is also a letter to the editor from former publisher, Donald Graham, praising RJS and reminiscing knowing him as a freshman in 1962 at Harvard.  Graham noted RJS eschewed a nominal non-partisan position and studied and thought hard about his columns, even as Graham himself disagrees with some of RJS’s long-held positions, noting in particular RJS’s longstanding support for privatizing Amtrak.  He also noted, as RJS himself stated in this final column, he is not an economist; he has merely reported on economics for a long time, starting at the Post in 1969 and columnizing on economics since as far back as 1977 in various venues.

I also disagree with RJS on privatizing Amtrak, although this is not a topic he has written much in recent years, although he did mention it in this final column.  I would argue that he has ignored that governments fund highways, which gives vehicles a competitive edge on trains, which governments do not provide or support.  So I certainly see a case for government aid to railroads, with Amtrak certainly one of the more heavily used lines in the nation.

I should note what RJS spent most of his last column writing about. He argues the biggest story of his career has been “the rise and fall of macroeconomics.”  But then he turned to economists. Much of it is on the money.  He says some nice things about us in general: “With some exceptions most are intelligent, informed, engaged and decent.” But then we have been wrong about a lot of things, such as deciding at various points that recessions will never happen again, although RJS admits that he did not recognize the housing bubble or foresee the Great Recession (some of us here or associated with us here did, but RJS largely ignored us). He also accurately notes that many economists take stronger positions than they might otherwise out of a desire for power and position in this or that administration, and also claim to have more influence on the economy than we do.  And then he notes the unwillingness of most to change their minds after a certain point, something he himself exhibited on some of his more strongly held views.

 

Consumer inflation continues to accelerate YoY, but so far no big problem

Consumer inflation continues to accelerate YoY, but so far no big problem

 

The consumer price index for August was reported up +0.4% this morning. This is the third straight big increase. Below I show this plus the more stable consumer prices minus gas (red):

Here’s what the monthly changes look like over the past 10 years:

 

Two links to ponder

The Revolutionary Post

Winifred Gallagher, author of How the Post Office Created America: A History, argues that the post office is not simply an inexpensive way to send a letter. The service was designed to unite a bunch of disparate towns and people under one flag, and in doing so, she believes the post office actually created the United States of America.

Digital Sight Management, and the Mystery of the Missing Amazon Receipts

 Amazon stopped including item details in order confirmation and shipping notification emails a few months ago. They just show the price and order date now. For all its faults, Amazon has pretty good customer service, which makes this user-hostile change baffling to understand. Sure, you can still see your orders on Amazon’s website and download a CSV, but it’s far more cumbersome than searching your email; …

What reason would be big enough for Amazon to annoy so many of their users? It’s simple: data.

Popular free email clients like Edison Mail and Cleanfox “scrape” their users’ emails and sell anonymised or pseudonymised data on to third parties. With enough users, they can detect trends and measure brand loyalty – valuable information for competitors. By stripping item details from its emails, Amazon tells us just how much this was hurting them.

 

 

Should We Fear A Reappearance Of Inflation?

Should We Fear A Reappearance Of Inflation?

 In today’s Washington Post Robert J. Samuelson has raised the possibility that the Federal Reserve may be setting the US up for a reappearance of inflation.  He invoked the 1960s and 1970s when supposedly the Fed allowed inflation to get out of control out of a supposedly misguided effort to bring down unemployment by allowing successive small increases in inflation. Supposedly the newly released report on changed Fed policies may be taking us back to those bad old days, even though for now RJS admits that inflation is low, with expectations of inflation only at 1.34%.  How worried should we be?

OK, I am not going to say that a resurgence of inflation is impossible.  I can imagine it possibly resurging, with such a development perhaps being associated with a sharp decline of the US dollar, perhaps associated with a turn from its use as a reserve currency.  I do not see that happening immediately, but there is theoretical literature that suggests that such an event could happen rather suddenly at some point.  If so, then maybe it could happen.  Is the new Fed policy likely to bring this on?

I suppose one reason to be concerned is that the supposedly new policy approach has been rather opaque.  I have had trouble getting a clear picture what the changes are in the policy. The main reports have been relatively undramatic, basically an idea that at least through the next year there will be no interest rate increases.  Probably a bigger deal is that the Fed might tolerate inflation higher than the 2% targeted rate.

There Will Be No Postponing Social Security Taxes

There Will Be No Postponing Social Security Taxes

 Among the items that President Trump issued an “executive action” about three weeks ago was that for people earning less than around $104.000 per year, their fica taxes were to be postponed until Jan. 1, not cut, merely postponed, although Trump made noises that if he is reelected he will simply eliminate the fica tax entirely, although unclear how he plans to fund Social Security without it.

Anyway, Allan Sloan in the Washington Post reports that this initiative is now just completely dead in the water.  It has too many problems, too many opponents, and action on implementing it in the Treasury Department has simply stalled out, almost certainly for good due to all this.  Quite aside from people facing potentially huge fica tax bills in January due to four months of postponement, it apparently is very complicated to set this up, and would take many months to do so, involving businesses and the Treasury Dept. having to put in place all kinds of mechanisms to figure out exactly which people would get their taxes postponed and which would not.  A real killer is that businesses pretty much across the board have objected to this proposal, with this now official as 30 different such groups have called for the cessation of this effort through the US Chamber of Commerce.  This is just going nowhere.

This should be contrasted with the temporary fica tax cut that Obama had in place during 2011-2012. There are two large differences between that and what Trump has so incompetently proposed. One is that Obama had it pass through Congress, not be the result of a presidential directive or memo.  The other is that it was completely simple: all Social Security taxes stopped being collected for the period in question, not a system based on treating people differently based on their incomes and also not a postponement.  It was a straight cut, if only a temporary one.

Jobless claims slowly continue to get “less worse,” while longer term deadweight loss builds

Jobless claims slowly continue to get “less worse,” while longer term deadweight loss builds

The good news in this morning’s jobless claims report is that the trend of “less worse” news continues. The bad news is that the improvement has slowed to a snail’s pace, at levels worse than the worst levels of the Great Recession.

On a non-seasonally adjusted basis, new jobless claims declined by 68,038 to 889,549, a new pandemic low. After seasonal adjustment (which is far less important than usual at this time), claims declined by 98,000 to 1,006,000, the second-“best” level of the pandemic after 2 weeks ago. The 4 week moving average also declined to a new pandemic low of 1,068,000.:

Continuing claims, on both an un-adjusted and seasonally adjusted basis also continued to decline to new pandemic lows, by 272,941 to 13,909,872, and by 223,000 to 14,535,000 respectively:

Coronavirus dashboard for August 19: a regional look at infections; the Deep South remains almost totally out of control

Coronavirus dashboard for August 19: a regional look at infections; the Deep South remains almost totally out of control

Total US cases: 5,457,824
Average last 7 days: 48,764

Total US deaths: 163,595
Average last 7 days: 1,048
Source: COVID Tracking Project

My overall thesis is that under the present leadership the US as a whole is politically and socially incapable of bringing the coronavirus under control, as almost every other industrialized country has been able to do. That is very likely to change beginning next January 20.  Before then, I expect there to be a yin and yang in the course of the pandemic, as areas in the US veer between “the pain threshold” at one extreme and complacency on the other. Together with a vaccine hopefully being available by next spring, at that time I am hopeful that the US will finally have beaten the virus.

Today let’s focus on infections, which lead hospitalizations by a couple of weeks, and deaths by a couple of weeks more.

Here is the overall regional picture:

As has been the case for several months, the South and to a lesser extent the West are the epicenters of the pandemic, while the Northeast has come close to containing the virus.

Initial and continuing claims: the most “less awful” so far

Initial and continuing claims: the most “less awful” so far

This Thursday morning’s initial and continued jobless claims continue the trend of “less awful” numbers that resumed last week.

New jobless claims, which fell to under 1,000,000 for the first time on an unadjusted basis last week, declined about 150,000 further to 831,856 (red in the graph below), and on an adjusted basis (blue) declined to 963,000, the first time since the pandemic that number was also under 1 million:

Continuing claims, on both an un-adjusted (red), and seasonally adjusted (blue) basis, also made new pandemic lows under 16 million, at roughly 15.2 million and 15.5 million respectively:

The End Of Special Fiscal Stimulus

The End Of Special Fiscal Stimulus

 A week ago a two week long negotiation between Dem Congress people, Nancy Pelosi from the House and Chuck Schumer from the Senate and Treasury Secretary Steve Mnuchin, who cut deals with Pelosi and Schumer three times earlier this year, but now Trump’s Chief of Staff, former Freedom Caucus leader in the House, Mark Meadows, notorious for only destroying deals and never making any. And in this case, all the reporting is that a week ago he “blew up” the negotiations, taking a hard line on orders from Trump. So, where are we at now?

For starters yesterday the Senate adjourned until after Labor Day. So, the market expectations that a deal will be cut soon are a joke. There will be no deal anytime soon, and maybe never. Many things have run out, whose impact has not fully arrived: end of extra unemployment, end of PPP assistance for small businesses, end of no evictions, and several other things.

Yes, there have been vague noises in the past week about restarting the negotiations, but they went nowhere.  Dems indicated that they were willing to compromise on many issues.  To pick a big symbolic one has to do with the total spending level.  Going into this the Dems were pushing $3+ trillion and the GOP was pushing $1 trillion. Gosh, looks like $ 2 trillion would be an obvious compromise, and the Dems have publicly indicated they would be willing to go to that, but, no, Meadows held the hard-line, and, along with some other issues, such as a roughly $800 billion difference over state and local aid, which is clearly the largest chunk of this stalemate. As it is, Meadows left town and the Senate has gone on leave until after Labor Day.  No deal.