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

Tech Companies: Be your own town and government

I saw this bit of news on Steven Colbert’s show last night. Seems Nevada’s Democratic Governor thinks tech companies need to be their own town. The thinking is that this is a way to attract business development without spending money. What could go wrong?

From the AP news:

“Democratic Gov. Steve Sisolak announced a plan to launch so-called Innovation Zones in Nevada to jumpstart the state’s economy by attracting technology firms, Las Vegas Review-Journal reported Wednesday.

The zones would permit companies with large areas of land to form governments carrying the same authority as counties, including the ability to impose taxes, form school districts and courts and provide government services.”

I am surprised that a Democratic governor would think this is a good way to attract commercial development. Is he not familiar with history and the mill housing? The company stores? The lyrics of “Sixteen Tons”?

How much further are we going to push the idea that corporations are people as referred to in our Constitution. This appears to be the Republican “emergency manager” without the emergency. The layers of legalities is stunning. We would have a democracy national government on top of a democracy state government on top of a non-democracy corporation on top of a sort of democracy town government? Which state’s laws would oversee the corporation?

What is wrong with these people?

Here’s Steven.

Texas freeze; oil refining and distillate exports drop most since Harvey . . .

Commenter R.J.S.: Record drops in US oil output, US oil exports, distillates’ output on Texas freeze as US burns 15% of natural gas inventories in one week . .

US oil data from the US Energy Information Administration for the week ending February 19th indicated that because the big drops in our oil exports and our oil refining associated with last week’s freeze off were greater than the big drops in our oil production and oil imports. We had a small surplus of oil left to add to our stored commercial crude supplies for the third time in the past fourteen weeks and for the 13th time in the past thirty-seven weeks. Our imports of crude oil fell by an average of 1,299,000 barrels per day to an average of 4,599,000 barrels per day, the largest drop in 32 weeks, after rising by an average of 41,000 barrels per day during the prior week. Our exports of crude oil fell by a record average of 1,548,000 barrels per day to 2,314,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,285,000 barrels of per day during the week ending February 19th. Occurring were 249,000 more barrels per day than the net of our imports minus our exports during the prior week. Over the same period,  the production of crude oil from US wells decreased by a record 1,100,000 barrels per day to 9,700,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 11,985,000 barrels per day during this reporting week… 

Manufacturing and housing – turn even hotter

Two leading sectors of the economy – manufacturing, and housing – turn even hotter

Last month I wrote that both the manufacturing and housing sectors were “on fire.” If anything, this month they turned white hot, with both construction spending and ISM manufacturing data at levels not seen in years.


The overall ISM manufacturing reading rose from 58.7 to 60.8, tying the highest reading since the Great Recession, and indeed since 2004. The even more leading new orders subindex also rose from 61.1 to 64.8, not quite as high as readings earlier in autumn 2020:

Good decision, big institutional problem on minimum wage work-around

From WAPO:

Senior Democrats are abandoning a backup plan to increase the minimum wage through a corporate tax penalty, after encountering numerous practical and political challenges in drafting their proposal over the weekend, according to two people familiar with the internal deliberations. . . .

Economists and tax experts have said that the tax outlined by Sanders and Wyden could be easily avoided and difficult to implement, with large corporations able to reclassify workers as contractors to avoid potential penalties. “I would be extremely nervous about trying out a brand new idea like this with virtually no vetting,” Jason Furman, a former Obama administration economist, said on Twitter on Friday.

The good news here is that the Democrats care enough about policy – or perhaps political blowback – that they decided this idea wasn’t ready for prime time.

But there is another story here that is less visible but more important. The institutional capacity of Congress is so limited that Democrats didn’t have a well-vetted tax proposal waiting in the wings when, predictably, Senate Parliamentarian ruled that a straight-up minimum wage increase could not be passed in reconciliation.

How is a Congress that lacks the institutional capacity to vet a relatively simple tax proposal like this supposed to tackle an issue like climate change? My sense is that the Democrats know this is a big problem, but increasing spending on Congressional staff is a political liability, so . . .

Canceling Outstanding Student Loans in Default

Some State AGs Take Action

Seventeen State Attorney Generals signed and sent a letter to Congressional leadership (Schumer, Pelosi, McConnell, McCarthy) calling on Congress (Friday February 19) to pressure President Joe Biden to cancel up to $50,000 in federal student load debt for borrowers as a part of pandemic relief. The AGs write:

“As the Attorneys General of Massachusetts, New York, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maryland, Minnesota, Nevada, New Mexico, New Jersey, Oregon, Virginia, Washington and Wisconsin, we write to express our strongest support for Senate Resolution 46 and House Resolution 100 calling on President Biden to use executive authority under the Higher Education Act to cancel up to $50,000 in Federal student loan debt for all Federal student loan borrowers.

Because we are responsible for enforcing our consumer protection laws, we are keenly aware of the substantial burden Federal student loan debt places on the residents of our states.”

Broad cancellation of Federal student loan debt will provide immediate relief to millions who are struggling during this pandemic and recession, and give a much-needed boost to families and our economy.

The current options for borrowers have proved to be inadequate and illusionary. For example, 2% of the borrowers applying for loan discharges under the Public Service Loan Forgiveness program have been granted a discharge. In addition, efforts by our Offices to obtain student loan discharges for defrauded students – to which students are entitled under existing law – have been stymied by the U.S. Department of Education for years.”

Weekly Indicators for February 22 – 26

by New Deal democrat

Weekly Indicators for February 22 – 26 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

After months of virtually no changes in any of the time frames, suddenly there is activity in all of them. Some of it:

– is short term noise due to the disaster in Texas, some

– is related to the pace and effects of vaccination availability against COVID-19, and

– some of it is the resulting change in long term interest rates.

As usual, clicking over and reading will bring you up to the virtual moment about the economy, and will bring me a penny or so for my troubles.

January personal income and spending show how important government stimulus has been to keeping the economy afloat

January personal income and spending show how important government stimulus has been to keeping the economy afloat

This morning’s report on January personal income and spending shows just how important the stimulus packages enacted by the federal government both last spring and last month have been to sustaining the economy.
After adjusting for inflation both personal income and spending rose in January, by +9.7% and +2.0%, respectively:



The huge increase in income is not a mistake. It follows from the renewed Congressional stimulus package providing $600 checks to most households. And it’s pretty obvious that had an impact on spending, which rose to levels equivalent to 2019 and only about 2% off-peak.

The Postal Service wants to slow down the mail, Congress says not so fast

Steve Hutkins at Save The Post Office continues his dialogue on planned changes to USPS operations with one change amongst the others resulting in later deliveries of first class mail. The Washington Post was the first to report on this change as well as other changes. You may be able to catch portions of Louis DeJoy’s planned changes at other sources as well.

The Postal Service wants to slow down the mail, Congress says not so fast

Congressional Action:

The House Committee on Oversight and Reform has just posted a discussion draft of postal reform legislation in advance of Wednesday’s hearing with Postmaster General DeJoy and the Chairman of the Board of Governors, Ron Bloom. The draft has three main sections — one about creating a Postal Service health benefits program that includes Medicare, one on reforming the Retiree Health Benefit Fund obligation, and a third on service standards for on-time delivery.

The section on service standards comes first, and it is obviously a response to all the problems with poor service over the past seven months. It includes more stringent service performance reporting than currently shared with the Postal Regulatory Commission and the public, a tougher line on what happens when the Postal Service fails to meet the standards, and changes to the PRC’s advisory opinion process for reviewing a change in standards (including a report to Congress). The draft legislation concludes this section as follows:

“The United States Postal Service may not revise the service standards for market-dominant products in effect on the day before the date of enactment of this Act in a manner that lengthens delivery times before the date on which the report required by subsection (c) is submitted to Congress.”

The Committee’s meeting on Wednesday (24th) is clearly going to address the past problems with service performance and what to do about them moving forward. (There’s more about the delays here.) It’s also clear that the Committee is aware of the Postmaster General’s plans to change service standards, as was reported recently in a great scoop by the Washington Post, and the Committee wants to head the PMG off at the pass.

New home sales rise m/m, but signal caution for housing market going forward

New home sales rise m/m, but signal caution for housing market going forward

New home sales increased to a three month annualized high of 923,000 in January. This is of a piece with the positive news last week on housing permits. At the same time, the pace remains below the recent high of 979,000 annualized set six months ago in July. The below graph compares housing starts (blue) with the much less volatile single family permits (red) and the even more volatile, and heavily revised, new home sales (gold), normalized to 100 as of January 2020:



Initial jobless claims: it appears that the worst of the winter 2020-21 increase is behind us

Initial jobless claims: it appears that the worst of the winter 2020-21 increase is behind us

Let me start off this week’s review of initial jobless claims by pre-debunking something I am sure is going to be said elsewhere: a lack of reporting in Texas did *not* appreciably skew this week’s numbers. Applying the same workaround I did for Hurricanes Sandy and Harvey, I.e., subtracting the affected State’s data from the unadjusted number, to see how much it is at variance with all the other States, shows that Texas’s underreporting due to its electricity crisis was less than 20,000 at worst in a week with little seasonal adjustment. In other words, being very generous, the “real” seasonally adjusted number of initial claims at worst probably would have been only about 30,000 higher – I.e., 760,000 – but for Texas issues.

Additionally, last week’s nationwide numbers were actually revised *down* by 20,000, unlike the two prior weeks which saw very large upward revisions.

With those two introductory remarks out of the way, let’s look at the data. 

This week, on a unadjusted basis, new jobless claims declined by 131,734 to 710,313. Seasonally adjusted claims decreased by 111,000 to 730,000. The 4 week moving average declined by 20,500 to 807,250. 

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April):