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

Housing and Young People

We’ve lost the plot on the classic life arc of yesteryear. Places where real estate is cheap don’t have many good jobs. Places with lots of jobs, primarily coastal cities, have seen their real-estate markets go absolutely haywire. The most recent evidence of this remarkable change comes in a new report by the real-estate firm Unison. The company, which provides financing to homebuyers by “co-investing” with them, calculated how long it would take to save up a 20 percent down payment on the median home in a given city by squirreling away 5 percent of the city’s gross median income per year.

Nationally, the gap between income and home value has been rising. Using “Unison’s methodology“, it took nine years to save up a down payment in 1975. Now it takes 14.

• The typical Los Angeles resident will spend 43 years saving for a 20% down payment and can look forward to moving into a new home in 2061.
• In 2018, the monthly mortgage payment on a median home grew twice as fast as incomes.
• When adjusting for inflation, today’s average real wages have the same purchasing power as 40 years ago.
• Only half of today’s 30-year-olds earn more than their parents did.

Clearly, the old rules of buying a home don’t apply anymore.

This is the new rule: home co-investment.

Unison connects aspiring homebuyers and existing homeowners with institutional investors who offer debt-free access to cash for the chance to share in a home’s appreciation. Our HomeBuyer program provides cash to our partners – you – to supplement a down payment on a new home. Our HomeOwner program allows homeowners to unlock equity in their home to pay off debt, remodel or fund a major purchase.

This isn’t a loan, which means there are no monthly payments and no interest. If the home depreciates, then Unison shares in the loss.

The aggregate numbers make the decrease in access to the real-estate market seem gradual, albeit troubling, and underplay the spikiness of the country. In Los Angeles, it would take 43 years to save up for a down payment. In San Francisco, 40. In San Jose and San Diego, 31. In Seattle and Portland, 27 and 23, respectively. In the east, New York and Miami topped the list, requiring 36 years to save up that down payment. Only Detroit, at seven years, was under the national average from 1975.

Generationally, this has huge consequences. Imagine you’re a 30-year-old in Los Angeles with the median income. By Unison’s math, you can imagine buying a home at 73. For young people in high-opportunity metro areas, the route to home ownership is basically blocked without the help of a wealthy family member or some stock options. Meanwhile, older people who bought under much more favorable circumstances have seen their equity stakes grow and grow and grow.

Many of these policies served to restrict the number of affordable homes. So, now, decades later, in many cities with good economies that have drawn new residents, increased demand has not been met with commensurate supply. Young people of all races are experiencing the consequences of these policies, but given the compounding nature of wealth, the relative inaccessibility of home prices is an ongoing disaster for the racial wealth gap.

This is a well written C&P which can be found at The Atlantic, Technology “Why Housing Policy Feels Like Generational Warfare (To Millennials, at least), ” Alexis C. Madrigal

The excuse I have heard as a township planner for not building affordable housing is: “it is only cheap once!” In 2009 many of us saw our housing drop by up to 50% in value.

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Wage Growth

Based on my wage equation, last January I warned to expect a sharp acceleration in wage growth in 2018.  Now that wage growth has risen       from 2.4% in 2017 to 3.4% in 2018, the same economic variables imply that wage growth may be flattening out.  If wage growth remains near    current levels it will be one less factor pressurizing the Fed to tighten.

One of the key variables driving wages higher a year ago was inflation expectations.  Because there  are no good long run measures of inflation expectations  I use the three year trailing growth in the CPI as a proxy for  inflation expectations.  A year ago that measure was starting to     accelerate, but now it appears to be flattening out and should be an   important  factor limiting wage gains.

 

The first sign of slower wage growth was the 3 month growth rate of average hourly earnings slipping below the year over year change in this months employment report.

 

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A couple of nuggets of good economic news

A couple of nuggets of good economic news

Sometimes there is almost no economic news at all. This isn’t one of those times.

Because there have been increasingly ominous signs among the long leading indicators, that have been spilling over into the short leading indicators, suddenly there are a lot of signs and portents to look at. A lot less about jobs and wages that I keep exclusively here.

So, once again I got waylaid preparing a long piece for Seeking Alpha, on how the Fed may need to *cut* rates quickly in order to avoid a recession, that may not get posted until tomorrow.

In the meantime, here are a couple of graphs to give you something to chew on.

First, I’ve noted in the last few months how wages for ordinary workers have started to take off. A few people have pointed out that it may be less due to overall tightness in the labor market and more due to statutory minimum wage increases.

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MMT II

Don’t blame me. Blame Noah Smith who asked me to write more about MMT. I don’t know much about MMT, but I am going to write about it anyway.

First, there seems to be an extremely important disagreement between MMTers. There are definitely some that argue that MMT implies the US Federal Government can (and should) spend more without taxing more.

In contast Stephanie Kelton who seems to be a rather prominent MMTer clearly asserts that a major increase in Federal Government spending should be accompanied by increased taxes here
“MMT would set public spending always to the level required to achieve full employment, and then accept whatever deficit may result.”

Now she might consider 4% to be higher than the current US non accelerating inflation rate of unemployment, but I don’t think she thinks it is much higher. Basically, her position is that the current amount of spending is about right. Low unemployment and stable inflation. As far as I know, MMTer’s accept that as a sign of good macro policy. So they should consider a big increase in spending inconsistent with MMT.

I think I understand what is happening here. There was a decade of high unemployment. People advocated policy based (at least in part) on the need for stimulus. Now the US has low unemployment. Serious policy analysts change their proposals given changing conditions. Many other people stick to a proposal when it makes no sense. I don’t want to be rude but consider the W Bush tax cuts which were proposed because the economy was booming, there was a surplus, and then justified as an anti-recession measure. They claimed that the same policy was perfect to solve different problems. He started with a decision to cut taxes on the upper tail (his words) and then looked for justification. Spend till we reach full employment, no spend a lot more on say a green new deal now that we have reached full employment may be “leftist,” but it has nothing to do with any economic theory (because the two statements are contradictory).

I think it is very very slightly unfortunate that MMT has been equated with “deficits are never a problem”. MMTers might say this from time to time, but they definitely also say that deficits can be a problem (when inflation is accelerating).

Given what I wrote above, the implication of MMT I have noted so far is that one should not impose austerity during a recession. Sadly, policymakers disagree. But conventional new Keynesians and conventional Paleo Keynesians agree. There is no daylight between MMTers and conventional Keynesians on what fiscal policy should have been in the recent past and should be now (although there is a huge range of views among MMTers — I mean differering by hundreds of billions a year).

OK what else. MMTers seem to argue that monetary policy is ineffective even when the safe nominal interest rate is positive. I think this is nuts. I think the evidence that it matters is overwhelming. US data from January 1 1980 throught December 31 1982 are enough to prove them wrong.

One of them wrote that monetary policy works by making people borrow. Notice that it is just assumed that macro policy is stimulus. The possibility that an economy might overheat and the policy aim to reduce demand has not come to the mind of the person whom I am quoting (whose name doesn’t come to my mind). Assuming that macro policy must or should always aim to stimulate demand is an embarrassing mental slip.

MMTers note that deficits can be monetized. They note that this implies that countries which borrow in their own currency are not anywhere close to risking default. I agree (the anywhere close is because I think a US debt of $ 1 quintillion in the form of 1 day notes would cause default — I am very reluctant to use the word “impossible”). Here again the position is completely conventional. Not only Keynesians but also Austerians think this. It is just that to Austerians fiscal dominance of monetary policy is a nightmare. I don’t think any macroeconomist thinks it is impossible.

So far we have conventional views and claims about monetary policy which might be accepted by fresh water fanatics but which are inconsistent with the historical evidence.

What’s left.

I think there is a lot of insisting on using words and phrases with unusual definitions. To most macroeconomics “deficit spending” means bond financed deficit spending. Monetized deficits are described as bond financed deficit spending combined with open market operations. In MMT deficit spending means monetized deficit spending and bond financed deficit spending is described as monetized deficit spending combined with bond auctions.

This is a distinction without a difference. It is purely semantic dispute about the definition of deficit spending. The disagreement does not imply different forecasts about observables. I think the fact that MMTers consider this a vitally important distinction implies that they won’t be able to make a useful contribution to the discussion.

Also I read things about the purpose of a bond auction and the natural gravitational effect of deficit spending. I think these are not meaningful statements in social science. I think there is no way to test if they are true. I think there is no way to get testable hypotheses using this kind of reasoning (I use the term “reasoning” in the broad sense of something that someone seems to think has something to do with useful thought).

I guess there is also a discussion of what comes first the bond sales or the government spending. Here I think I recall the word “first” but I know it isn’t about which happened at an earlier time (bond sales happen every week, government spending every minute). It isn’t a statement about causation either. I don’t think it is a meaninful statement.

So I see conventional views, confusing jargon, and meaningless distinctions. Also extreme rudeness. I don’t think that this is (or should be) typical academic debate

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The Black Bill and the Green New Deal

“When we first came to Washington in 1933,” FDR Labor Secretary Francis Perkins wrote in her memoir, The Roosevelt I Knew, “the Black bill was already before the Congress. Introduced by Senator Hugo L. Black, it had received support from many parts of the country and from many representatives and senators.”

The Black Bill was the Senate version of the Black-Connery Thirty-Hour Bill. On April 6, 1933, the Senate approved the measure by a vote of 53 to 30. Perkins was scheduled to appear before the House committee holding hearings on the Connery Bill:

Roosevelt had a problem. He was in favor of limiting the hours of labor for humanitarian and possibly for economic reasons and therefore did not want to oppose the bill. At the same time, he did not feel that it was sound to support it vigorously. But the agitation for the bill was strong. Its proponent insisted that it was a vital step toward licking the depression. I said, “Mr. President, we have to take a position. I’ll take the position, but I want to be sure that it is in harmony with your principles and policy.”

Roosevelt had another problem. The National Association of Manufacturers and the Chamber of Commerce were adamantly opposed to the Thirty-Hour Bill. Perkins offered amendments to the Connery Bill, the American Federation of Labor offered other amendments and business representatives “proposed crippling amendments that would have destroyed the purpose of the measure.”

On May 1, the administration withdrew its support for the Connery Bill. Roosevelt had concluded that organized business would not support the recovery program if the Black-Connery Bill were to become law. In its place, the collective bargaining provisions of Section 7(a) and wage, hour and labor standard provisions were added to the National Industrial Recovery Act through, in Leon Keyserling’s account, “a series of haphazard accidents reflecting the desire to get rid of  the Black bill and to put something in to satisfy labor.”

The Supreme Court ruled the Recovery Act unconstitutional on May 27, 1935. In its place, the “Second New Deal” consisted of a variety of policies, including, most notably, the National Labor Relations Act, the Works Progress Administration and Social Security.

The moral to the story is that “the” New Deal was improvised, it evolved, was not unitary and its original impetus came from a fundamentally different policy proposal that was anathema to the business lobby. The Thirty-Hour Bill was conceived as a solution to a problem that is no longer polite in policy circles to consider as a problem — “over-production.”

I am sympathetic to the intentions and ambition of the Green New Deal resolution proposed by U.S. Representative Alexandria Ocasio-Cortez and Senator Ed Markey. What I find especially compelling is the inclusion of social and economic justice and equality in the program goals. The vision isn’t just a proposal for “sustainable” business-as-usual, powered by wind and solar.

The day before Ocasio-Cortez and Markey announced their resolution, Kate Aronoff and co-authors presented a “Five Freedoms” statement of principles for a Green New Deal, modeled on Franklin Roosevelt’s Four Freedoms.from 1941. My favorite, of course, is number two: Freedom From Toil:

We can’t escape work altogether, and there’s a lot of work we need to do, immediately and in the long term. But work doesn’t need to rule our lives.

The great nineteenth-century English socialist William Morris made a distinction between useful work and useless toil: we need the former but should free ourselves from the latter. We can escape the crushing toll of working long hours for low wages to make something that someone else owns.

At present, there’s a lot of work that’s worse than useless — it’s toil that’s harmful to the people doing it and to the world in which we live. But even useful work should be distributed more widely so that we can all do less of it — and spend more time enjoying its fruits.

I suppose there always has been work that is “worse than useless” — bullshit jobs and all that. But there is cruel irony in the fact that the ultimate solution to the 1930s problem of over-production was perpetual creation of useless toil through credit, fashion, advertising, and government stimulus and subsidies. The original proposal had been… shorter working time!

Which brings me back to the peregrinations of the FDR New Deal. The 12-year deadline posited by the I.P.C.C. for keeping within the 1.5 degree centigrade limit brings us to the 100th anniversary of Keynes’s “Economic Possibilities For Our Grandchildren.” Time has run out on his caveat:

But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.

We have been pretending long enough now for foul to become worse than useless and to convince ourselves that fair really would be foul. It is past time to stop pretending.

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Hey Rustbelt and beyond, Losing factories is not new

(There’s a movie at the end!)

For decades we have been hearing about the loss of industrial production through out what is called the “Rust Belt”.  It’s presented, even as recent as the prior presidential election as a relative regional problem that only began post Reagan.  What gets me though is that the reporting and ultimately the politics are as if the rust belt is/was unique in their experience with the west and east coast experiencing nothing of the sort.  The presentation is of the west coast Hollywood economy and now the “tech” economy, the east coast (namely New York/Boston) being the money economy.  The south east is not considered other than Disney and orange production.  The north west?  Microsoft and Starbucks.  Well I think it used to be lumber.

Wiki notes that the rust belt is not geographic but is a term that “pertains to a set of economic and social conditions“.     It includes the northeast which is proper in that industry started there but I have had the feeling for a few decades now that such history is forgotten and thus no longer considered when we look to understand what the hell happened to the middle class.

Let me start with this fun fact.  Rhode Island was the most industrialized state per capita in the nation at one point.  Wiki notes that:

…Aldrich, as US Senator, became known as the “General Manager of the United States,” for his ability to set high tariffs to protect Rhode Island — and American — goods from foreign competition.

We were where the super rich came to escape the heat and play.  And then it started to die.  Not just here though.  Neighboring Massachusetts was hit as was Connecticut.  If you ever get a chance, come visit the New Bedford  Whaling museum and read about the massive industry that was there.  Example, the worlds largest mill of weaving looms.  Some 4000+!  Whaling from that city in the later 1800’s generated some $71 million per year!  Not impressed? Well, using the GDP deflator it’s $1.480 billion per year!

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Newsy Stuff

2018 – The Year of the Complicated Suburb, Amanda Kolson Hurley, CityLab

In the past several years, a much more complex picture has emerged—one of Asian and Latino “ethnoburbs,” rising suburban poverty, and Baby Boomers stuck in their split-levels. 2018 really drove home the lesson of when Americans say they live in the suburbs (as most do), the suburbia they describe are vastly different kinds of places where people of every stripe live, work, pray, vote, and vie to control their communities’ future.

A century and a half after Frederick Law Olmsted laid out one of the first planned American suburbs in Riverside, Illinois, and seven decades after the builders Levitt & Sons broke ground on the ur-tract ’burb of Levittown, New York, we haven’t fully mapped the contours of modern suburbia—not just who lives there and why, but the role that suburbs play in politics and society.

“A continuum of densities” correlates closely to suburban politics. Rural-suburban areas are strongly Republican; urban-suburban places are overwhelmingly Democratic. But sparse and dense suburbs are more divided—and these were the battleground of the 2018 election. On November 6, Democrats picked up at least 22 seats in sparse- and dense-suburban districts. A suburbanite is now twice as likely to be represented in Congress by a Democrat as by a Republican.

Deciding who we throw away, Cassady Fendlay, Medium

“When millions of us showed up to march, there was a prevailing feeling among women of color, especially black women, that the white women who were showing up to march were not really ready to be allies in this fight. They brought signs with fiery quotes from black feminists and reminded us that the suffragettes didn’t want to march with Black women, didn’t care about their right to vote. The image of activist Angela Peeples, looking cynical with a lollipop and a sign about the 53% of white women who voted for Trump, went viral for its perfect encapsulation of this uneasy suspicion of the “well-meaning” white women.

This moment, with Alyssa Milano, is exactly the type of thing black women were expecting. Alyssa is acting in accordance with the tradition of white women who use the labor of women of color when it’s convenient for them, and then use their power to trash those women when it becomes more expedient. Without being invited to speak at all, Alyssa brought up a 7-month-old controversy in an attempt to force women of color to do exactly what she wants them to do. Yet these things weren’t a problem for her last month, when she was posting pictures of herself in D.C. protesting Kavanaugh at demonstrations organized in large part by Women’s March.”

The Year of the YIMBY, Kriston Capps, CityLab

A few weeks ago, Minneapolis made zoning history when its city council endorsed a comprehensive plan that would enable denser housing development across the city. Elements of the Minneapolis 2040 plan still need to be passed into law, so it falls short of an outright ban on single-family housing, as both supporters and critics have described it. But it’s still the most progressive legislative push by any city yet to face up to the affordable housing crisis, and it’s turning heads in Philadelphia, Dallas, Seattle, and other cities.

“Such an ambitious, large-scale overhaul of zoning rules is practically unheard of in U.S. cities, where single-family neighborhoods with their rows of houses set behind landscaped front yards have typically been off the table during discussions of citywide ‘Smart Growth’ and affordable housing,” reads the Los Angeles Times editorial board’s green-with-envy endorsement.

Differences Bernie Sanders versus Elizabeth Warren, David Dayen

I happen to like Elizabeth Warren more so than I do Bernie Sanders. So, if this comes off in a manner favoring Warren, I apologize. As Dayen notes, “Warren and Sanders are hardly identical progressives. They have different approaches to empowering the working class. In the simple terms, Warren wants to organize markets to benefit workers and consumers. Sanders wants to overhaul those markets and take the private sector out of it. This divide, and where Warren or Sanders’s putative rivals position themselves on it, will determine the future of the Democratic Party for the next decade or more.”

The differences I think you can pick up in the New Republic article I linked to so I will not try to detail them here. Again, as Dayen notes the two progressives are on a collision course and could conceivably split the Democratic vote. In Michigan alone during the 2016 election, it accounted for the state voting for a Repub candidate (first time since 1990), low voter turnout, and a historical high vote for Communist and Libertarian candidates. The same occurred in Wisconsin. Pennsylvania is another state which goes Dem in national elections even though pundits cast doubt upon how it will go.

Watch ‘House Hunters’ to Understand Segregation Natalie Y. Moore, CityLab

House Hunters is on in my home as it is a source of entertainment. Other than the Flip or Flop now divorced couple (she remarried [to keep you up to date]), you can expect to see this at night. I kid my wife about both as it is more like watching the soaps and the dialogues sounds too contrived. Who knew, you could redo a complete bathroom for $5,000 and it always takes 7-weeks to remodel the most ancient of homes? Then too the economics of these shows has given rise to a series of other taunting couples searching for homes or flipping houses just as quick as they can. I guess there is money in those shows.

As the author points out in one episode, “a couple, both in their 20s, paid $1 million for a home in a tony (stylish) North Shore suburb with no backyard . . . insane.) Naturally, we viewers are not privy to the Hunters’ bank statements or financial portfolios, although a few Twitter parody accounts take note.”

I guess if you are born halfway up the ladder, you have a much bigger head start in life than many others of which minorities make up a substantial part. The chances of you slipping backwards on the ladder lessen dependent upon where you are on it. The Center for American Progress in “Understanding Mobility in America” discusses the impact of intergenerational mobility and the degree to which the economic success of children is independent of the economic status of their parents. There is a vast racial wealth and income gap which finds that a U.S. family earning the median black household income of $39,466 would be able to afford fewer than half of all homes listed for sale last year in 17 of the country’s 50 largest markets. The show is a reminder of the impact of US policy towards minorities.

SCOTUS Takes up Electoral Map Disputes, Lawrence Hurley, US News

Partisan gerrymandering is becoming more extreme with the use of precision computer modeling to the point that it has begun to warp democracy in certain states by subverting the will of voters.

June 2018 and SCOTUS failed to issue definitive rulings in cases from Wisconsin and Maryland which election reformers hoped would prompt the high court to crack down on partisan gerrymandering.

In the case in North Carolina, Democratic voters accused the state’s Republican-led legislature of drawing U.S. House of Representatives districts in 2016 in a way that disadvantaged Democratic candidates in violation of the constitutional guarantee of equal protection under the law. A lower court sided with the Democratic voters.

In order to assure reasonable Congressional Districts to eliminate packing and the deliberate construing of boundaries to give one party an advantage over the other, the Congressional Districts will still have to be gerrymandered as they are too large.

Dollar Stores Tanvi Misra, CityLab

“While dollar stores sometimes fill a need in cash-strapped communities, growing evidence suggests these stores are not merely a byproduct of economic distress,” the authors of the brief write. “They’re a cause of it.”

Like Walmart before them, these retailers present themselves as creators of jobs and sources of low-cost goods and food in “left-behind “areas—both urban and rural. The 2008 recession bolstered their numbers, simultaneously restricting the resurgence of traditional grocery stores and swelling the potential customer base. Middle-class shoppers started frequenting these stores. In 2009, the New York Times picked up on the trend: “Those once-dowdy chains that lured shoppers by selling some or all of their merchandise for $1 are suddenly hot.”

Restaurants are Scrambling for Cheap Labor, Leslie Patton, Bloomberg

In 2019, it is expected fewer teens will be in the workforce reducing the number of job seekers for low-wage work. Due to the shortage they are helping raise the pay rates needed to woo those who are. Minimum wage increases for lower-skilled workers at companies such as Amazon.com, Walmart, and Target have made it more difficult for restaurants to compete for talent and forcing them to try everything from social media campaigns to quarterly bonuses to entice applicants. “The last 18 to 24 months, it’s been very competitive, no matter what time of year.”

Bjorn Erland, vice president for people and experience at Yum Brands Inc.’s Taco Bell chain. “I don’t think it’s going to ease up much just because the holidays are over.”

Why Not Hold Regular Union Representation Elections? , Andrew Strom, On Labor

Citing polls (NLRB) showing many non-union workers would like to have a union at their workplace, each year only a tiny fraction of workers get a chance to choose whether or not they want union representation.

When the Obama NLRB modernized the Board’s election rules and eliminated some unnecessary delays, employers characterized the result as “ambush elections.” The companies insisted they would no longer have enough time to wage their anti-union campaigns.

The NLRB found substantial evidence that employers are generally aware of union organizing drives long before an election petition is filed. A solution as Samuel Estreicher and Michael Oswalt have previously suggested and to give even more notice is to hold regularly schedule representation elections the same way we regularly schedule elections for political office. There is no magic number to how often the elections should take place, but every three years might be optimal. The elections would occur both at unionized and non-union facilities.

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Is the “Green New Deal” a Marxist Plot?

At the CEPR blog, Beat the Press, Dean Baker and Jason Hickel are debating degrowth. Dean makes the excellent point that “claims about growth” from oil companies and politicians who oppose policies to restrict greenhouse gas emissions, “are just window dressing.” I also agree, however, with the first comment in response to Dean’s post that his point about window dressing could be taken much further.

I would add that economic growth is window dressing for what used to be referred to much more aggressively as “man’s triumph over nature” or the “control of nature.” Climate change deniers are more forthright about this connection between aggression and so-called growth: “Is “Strive on — the control of nature is won, not given” a controversial statement? What does it mean for science if it is?” asks Linnea Lueken at the Heartland Institute website.

Scattered throughout his writings, Donald Winnicott made fleeting but intense criticisms of “sentimentality.” “Sentimentality is useless for parents,” he remarked in a 1949 article on the analysis of psychotic patients, “as it contains a denial of hate, and sentimentality in a mother is no good at all from the infant’s point of view.” The inference he drew from this observation was that “a psychotic patient in analysis cannot be expected to tolerate his hate of the analyst unless the analyst can hate him.”
In a 1946 article on the treatment of juvenile delinquents, he warned against “one of the biggest threats” to the use of psychological methods in the management of young offenders was “the adoption of a sentimental attitude towards crime:

If advances seem to come but are based on sentimentality, they are valueless; reaction must surely set in, and the advances had better never have been made. In sentimentality there is repressed or unconscious hate, and this repression is unhealthy. Sooner or later the hate turns up.

The most thorough discussion by Winnicott of his aversion to sentimentality is probably his 1939 article, “Aggression and its roots.” As it is only three paragraphs, I quote it in its entirety:

Finally, all aggression that is not denied, and for which personal responsibility can be accepted, is available to give strength to the work of reparation and restitution. At the back of all play, work, and art, is unconscious remorse about harm done in unconscious fantasy, and an unconscious desire to start putting things right.

Sentimentality contains an unconscious denial of the destructiveness underlying construction. It is withering to the developing child, and eventually it can make him need to show in direct form destructiveness which, in a less sentimental milieu, he could have conveyed indirectly by showing a desire to construct.

It is partly false to state that we ‘should provide opportunity for creative expression if we are to counter children’s destructive urges’. What is needed is an unsentimental attitude towards all productions, which means the appreciation not so much of talent as of the struggle behind all achievement, however small. For, apart from sensual love, no human manifestation of love is felt to be valuable that does not imply aggression acknowledged and harnessed.

He might well have added, “And I’m not so sure about sensual love.”
This all may sound somewhat arbitrary and speculative but actually it is a very compressed and jargon-free application of Melanie Klein’s developmental theory of the self. What Klein referred to as the depressive position involves an infant’s feeling of “guilt” — or in Winnicott’s less extravagant terminology, “concern” — about its aggressive fantasies toward its mother. In Klein’s rather lurid account of the infant’s aggressive fantasy:

The phantasied attacks on the mother follow two main lines: one is the predominantly oral impulse to suck dry, bite up, scoop out, and rob the mother’s body of its good contents.… The other line of attack derives from the anal and urethral impulses and implies expelling dangerous substances (excrements) out of the self and into the mother.… These excrements and bad parts of the self are meant not only to injure the object but also to control it and take possession of it.

Whether or not the infant has such unconscious aggressive fantasies about the mother’s body, Rex Tillerson, when he was CEO of Exxon, expressed similar, fully-conscious ones, “My philosophy is to make money. If I can drill and make money, then that’s what I want to do…” Robert White-Stevens, the corporate-designated nemesis of Rachel Carson following the publication of Silent Spring, exemplified the “control of nature” faction of science:

Miss Carson maintains that the balance of nature is a major force in the survival of man, whereas the modern chemist, the modern biologist and scientist, believes that man is steadily controlling nature.

White-Stevens’s vision of a “feeble creature” penetrating “every corner of the planet,”  and “contest[ing] the very laws and powers of Nature, herself,” could have been written as a Kleinian parody of the of the infantile arrogance of scientistic triumphalism:

Within the past 100 years, man has emerged from a feeble creature, virtually at the mercy of Nature and his environment, to become the only being which can penetrate every corner of the planet, communicate instantly to anywhere on earth, produce all the food, fiber, and shelter he needs, wherever he may need it, change the topography of his lands, the sea and the universe and prepare his voyage through the very arch of heaven into space itself.

This is the stuff that science is made of, and man has learned to use it. He cannot now go back; he has crossed his Rubicon and must advance into the future armed with the reason and the tools of his sciences, and in so doing will doubtless have to contest the very laws and powers of Nature herself. He has done this already by expanding his numbers far beyond her tolerance and by interrupting her laws of inheritance and survival. Now, he must go all the way, for he cannot but partially contest Nature. He has chosen to lead the way; he must take the responsibility upon himself.

But I digress. What does all this have to do with economic growth? Again, as Winnicott explained, “aggression that is not denied, and for which personal responsibility can be accepted, is available to give strength to the work of reparation and restitution.” However, “[i]n sentimentality there is repressed or unconscious hate, and this repression is unhealthy. Sooner or later the hate turns up.” Indeed, the hate does turn up at the Heartland Institute, where the “Green New Deal” is exposed as the “Old Socialist Despotism.”If it fails to acknowledge the primitive aggression of “man’s triumph over nature” that lies beneath the reparation of adopting environmentally-friendly policies, the debate between degrowth and green growth risks descending into sentimental bickering about the window dressing in the hotel on the edge of the abyss.

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CSX Slowly being Disassembled by Mantle Ridge Hedge Fund

CSX connects most major U.S. cities east of the Mississippi River. Since 2017, the railroad has laid off 6,000 employees, cut back on capital spending, and slashed the number of trains it runs and discontinued hundreds of the routes it serves.

Together CSX and Union Pacific serve major U.S. cities west of the Mississippi River and together they discontinued service on 197 out of 301 cross-country routes that the two rail giants partnered on in September 2017.

The results of these actions leaves shippers who want to send goods across the country no “direct” means to send a container by rail from Houston to Baltimore. Instead, CSX will take the container as far as Chambersburg, Penn. And the rest of the way will be by a container trucker going the remaining 77 miles to Baltimore. The same exists if the shipper uses Norfolk Southern. Norfolk will take the container only as far as Harrisburg, Penn. And the container will be transferred to a container trucker for the balance of the 76 miles to Baltimore.

Why would CSX owners do this when the need still exists? The cost cutting brings short-term profits and a soaring stock price. Between the beginning of 2017 and the end of this year’s third quarter, CSX labor expenses declined by 18% and the value of its stock rose by 106 percent. Rather than increase the price on its route, CSX can maximize profits and minimize capital and maintenance costs by cutting service in the aggregate. The cut in Labor cost is just an add on when compared to the cuts in Overhead costs.

Side Note: So much for common carrier and public utility laws. “The term utilities can refer to the set of services provided by these organizations consumed by the public: Coal, electricity, natural gas, water, sewage, telephone, and transportation. Broadband internet services (both fixed-line and mobile) are increasingly being included within the definition” while a “common carrier offers its services to the general public under license or authority provided by a regulatory body. The regulatory body has usually been granted ‘ministerial authority’ by the legislation that created it. The regulatory body may create, interpret, and enforce its regulations upon the common carrier (subject to judicial review) with independence and finality, as long as it acts within the bounds of the enabling legislation.”

E. Hunter Harrison is the man who figured out how-to pump-up profits by cutting service. Over the course of his career at the Illinois Central, Canadian National, and Canadian Pacific Railways; Harrison implemented his trademark program: “precision scheduled railroading.” Besides cutting capital (engines, cars, etc.) Overhead (maintenance of equipment, facilities rail beds, costs associated with Labor, etc.) and Labor costs; precision scheduled railroading means less service, fewer and longer trains, fewer routes, and ignoring some major cities.

Side Note: This is the same type of cuts in service many politicians and competitors of the USPS are pushing for today. Railways like the postal service are utilities and are vital to the community. The purpose of both mail and railroads was to provide a service as a public utility. Railroads being granted exclusivity for certain routes and governed by common carrier law. Someone is purposely asleep at the switch and abating the destruction of infrastructure.

Why would CSX cut service drastically? Hedge fund Mantle Ridge and founder and CEO Paul Hilal. Mantle Ridge had and still has only one investment, an initial $1.2 billion stake in CSX stock purchased in late 2016. The $1.2 billion is now worth nearly $3 billion as of the last quarter. In January 2017 with Mantle Ridge’s investment, Hilal pushed CSX to hire his partner Harrison and implement precision schedule railroading (nothing to do with schedules and more to do with providing service).

CSX agreed to Hilal’s demands. Shareholders salivated at the thought of Harrison boosting CSX’s profits right into their pockets and showed large support for Harrison’s leadership at CSX. Harrison saying that “shareholders took a much more active role than I’ve ever seen before. They wanted change.”

Of course, they wanted change at CSX for short term profits or rent taking. They will leave CSX a shadow of its formal self. The loss of the necessary infrastructure promoting the transportation of goods in the US will be born by its citizens in increased costs and impinge upon national security.

On a similar note and action . . . October 15, 2018 Sears faced a deadline for payment of $134 million on its debt. It didn’t have the money, so it filed for protection from its creditors. Eddie Lampert — the largest shareholder in the company, with nearly half its shares — stepped down as CEO. Another corporate pirate who will strip the assets of the company and leave Sears a shell of its former self.

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Solow on Friedman’s 1968 Presidential Address and the Medium Run

Mark Thoma had this up on Facebook. and pulled this from Tim Taylor’s Conversable Economist. It is an interesting read.

“Fifty years ago in 1968, Milton Friedman’s Presidential Address to the American Economic Association set the stage for battles in macroeconomics that have continued ever since. The legacy of the talk has been important enough that in the Winter 2018 issue of the Journal of Economic Perspectives, where I work as Managing Editor (Tim Taylor), we published a three-paper symposium on ‘Friedman’s Natural Rate Hypothesis After 50 Years.'”

What was the key insight or argument in Friedman’s 1968 address? Friedman offers a reminder that interest rates and unemployment rates are set by economic forces. Friedman uses this idea to build a distinction between the long-run and the short-run. In the short run, it is possible for a central bank like the Federal Reserve to influence interest rates and the unemployment rate. In the long run, there is a “natural” rate of interest and a “natural” rate of unemployment which is trying to emerge, gradually, over time from all the various forces in the economy.

The rest you can read for yourself at Tim’s site.

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