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

Will confident conservatism end with a bang or a whimper?

I highly recommend David Hopkins blog.  Yesterday, he posted a piece on the end of confident conservatism.  It begins like this:

After Richard Nixon’s 1968 election, many conservatives came to believe that their movement naturally represented the political views of most Americans. This conservative faith in the wisdom of the average citizen was cemented by Ronald Reagan’s popularity in the 1980s, which was widely interpreted at the time (and not just by conservatives) as a decisive expression of the nation’s exhaustion with both outdated New Deal economic policies and decadent ’60s-era cultural practices.

Here are the final paragraphs:

Ezra Klein is mad at the Democrats over automatic stabilizers

The HEROES act passed by House Democrats did not include a formula that would keep expanded unemployment insurance benefits in place until the economy has recovered.  The always thoughtful Ezra Klein is very critical of this omission.  His argument can be boiled down to two points:

  1. If Biden wins the presidency, Republicans will predictably try to destroy Biden politically by refusing to extend economic supports needed to protect families and promote an economic recovery. Automatic stabilizers are critical to protect a possible Biden presidency from Republican sabotage.
  2. Republicans need an economic stimulus package in the run up to the November elections more than Democrats do. This gives Democrats the bargaining power they need to force Republicans to accept automatic stabilizers.

According to Klein, moderate and progressive Democrats all support automatic stabilizers, and the idea polls well, but House leadership backed off when the CBO said the stabilizers for unemployment would cost $1 to 2 trillion dollars.  At the same time, Pelosi emphasized that the money would be spent if needed, so there is no actual savings from refusing to include automatic stabilizers, it’s political posturing all the way down.

I agree with Klein on point 1 above.  Automatic stabilizers are critical to protect a Biden presidency from Republican sabotage.  (It would be foolish to count on winning a working majority in the Senate and repealing the filibuster.)

I am less sure that Klein’s analysis of bargaining power (point 2 above) is correct, although I am sympathetic to his position.

Suppose that July rolls around and states are laying off workers and expanded unemployment benefits are about to expire.  The Republicans can agree to aid state and local governments and to extend UI benefits for a few months.  Democrats can reject this and hold out for automatic stabilizers.  Republicans will paint them as obstructionist.  It is not entirely clear who wins this public relations war, and with the election approaching the Democrats may not be willing to gamble if Biden appears to be leading.

Even more important, failure to agree to a package will lead to immense suffering as UI benefits expire.  Faced with this human catastrophe, Democrats may not be willing to play hardball with Republicans.  It’s like a real mother and an imposter mother bargaining over a baby:  if the no agreement point is cutting the baby in half, and the real mother is unwilling to do this, the imposter mother gets the baby.

Should the Democrats be willing to play hardball against the Republicans?  Should they be willing to inflict tremendous economic damage on innocent people to protect a Biden presidency?  I understand why the Democrats are reluctant to do this.  It is tempting to think that Democrats should respond to Republican hostage taking and hardball politics in kind, but the short-run humanitarian costs are very real, ratcheting up the level of inter-party conflict is bad for our democracy, and there is a legitimate question about whether the Democrats should wait and hope that the political environment shifts in a way that moderates the Republican party (e.g., perhaps demographic replacement will force Republican elites to change tactics).  On the other hand, perhaps the Republican party is so authoritarian that hardball is inevitable and necessary, despite the short-run suffering it will cause and the potential damage to our democracy from further escalating partisan conflict.

Finally, it is not clear from Klein’s article exactly how the bargaining inside the Democratic party went down.  It is possible that members from swing districts opposed automatic stabilizers for narrow careerist reasons, even if the inclusion of automatic stabilizers would have had only a small effect on their re-election prospects.  In this case, the real problem here is not the democrats as a group, but the careerism of a small group coupled with the weakness of parties in the American political system (that is, the inability of parties to discipline wayward members).

Housing permits and starts plummet in April, but mortgage applications suggest big rebound in May

by New Deal democrat

Housing permits and starts plummet in April, but mortgage applications suggest big rebound in May

At some point it is going to be safe for the economy to be completely reopened. When that point comes it would be nice if the leading sectors of the economy have already been priming the pump for a consumer rebound.  As usual housing is the most important long leading sector in that analysis.

As expected, housing tanked in April. But it is likely setting the baseline for improvement in the coming months, as new record low mortgage rates have brought out new buyers, as shown by new mortgage applications which as of this morning are only -1.5% below where they were last year at this time.

This post is up at Seeking Alpha. As usual, clicking over and reading should be educational for you, and helps reward me a little bit for my efforts.

Four Days On, Ten Days Off

A very interesting paper (not peer-reviewed) by a team of Israeli scholars proposes that a more manageable exit from pandemic lockdown might be achieved by implementing a scheme in which employees go in to work for four days and then return to isolation for ten days before repeating the cycle. A variation on the proposal would have two staggered relays of workers cycling through the 14 day routine.

The research has been popularized in a New York Times op-ed and a Fast Company feature, so I would bother to discuss it here in detail. Not being an epidemiologist, I can’t vouch for the authors’ assumptions about average infectiousness. Obviously, implementing such a scheme out of the blue would present formidable challenges even assuming competent political leadership.

THE Important Graphic from April’s Unemployment Report

What happens when you downsize a large number of people? Well, it depends on the cohort downsized. In this case,

Figure 1

That’s correct; Average Hourly Earnings skyrocketed from $28.67 to $30.01: up $1.34.

For context, that one-month change matches the average hourly earnings growth from September/October of 2018 until March of this year–18 months of increases in a month. And all it took was eliminating the jobs of about 6% of the U.S. population (not just workers).

Will Labor and Capitalism Survive the Current Republican Party?

On April 20th Georgia Governor Kemp called for “reopening more of the state’s economy to minimize the ‘terrible impact of Covid-19 on public health and the pocketbook.’” It would apply to certain non-essential businesses. Kemp, who was later told by Trump it was too early to reopen Georgia’s economy, was following Trump’s lead to begin to open state economies.

Many states like Georgia do not have the funds available (by choice) to pay for long periods of unemployment benefits and the magnitude of them from the shutdown. Indeed and in the past, Georgia cut unemployment benefits to 14 weeks. Georgia’s constitution also restricts the government from raising taxes and prevents the state governor from borrowing money.

From March to April 2020, Georgia paid out $220 million in unemployment benefits and just shy of what was paid out all of 2019 ($297 million). Forty percent of the unemployment benefit paid went to non-essential businesses employees who worked in health clubs, hair salons, tattoo parlors, bowling alleys, and also eat-in restaurant employees. Most are low-wage jobs concentrated in the cities of Atlanta, Brunswick, Savannah and Statesboro. The make up of this segment of the labor force is mostly black citizens or citizens of color. In Georgia, 19% of African-American workers are employed in the service industry (2018 BLS Statistics). Governor Kemp calling back to work this segment of the labor force puts them at a greater risk to contract COVID 19. Many of them lack reliable access to healthcare (Georgia did not expand Medicaid). By allowing them to go back to work, the amount of unemployment being paid monthly decreases.

In a normal economy, an employee who’s been released or laidoff (automotive language) can not keep receiving unemployment benefits if they are offered their job back, a similar job, and they do not take it. Even with the threat of the COVID to their health and safety, Georgia can define a return to their old jobs as suitable work.

After the leap, Texas and Iowa  .  .  .

First Pass of Small Business Loans to States

This was the first pass (Ernie Tedeschi of Evercore prepared the data) and it is arranged by the percentage of loans completed in each state. As you can see Nebraska received ~81% of the loans applied for by the small businesses in Nebraska. One million, 35 thousand and 86 SBA PPP Loans (1,035, 086) were approved by April 13 totally $247, 543, 397, 521 by 4,664 lenders. Seventy percent of the funds were already allocated by April 13.

Some Applicant Complaints:

  • Applied at Bank 0f America on April 3. Got 3 calls on Friday Saturday and Tuesday asking if I uploaded my documents. They were already there!! Instead of approving my loan BOA is delaying and stalling to run out the clock.
  • In Michigan, one small company dealing with Comerica was told repeatedly Comerica had not received the code to apply for the loans yet. The small ten person  applied when the program first started.

Some detail from Bob Clough at “CloughNotes” which looks at the numbers in a different manner after the leap.

Epidemiologists, government failure, and COVID-19

Jason Brennan has a new post up doubling down on his earlier criticism of epidemiologists and government policy in response to the COVID crisis.  I responded to his earlier blog posts here.  I am still not convinced, but there are useful lessons to be learned from going through his argument.

Brennan continues to claim that epidemiologists produced bad statistical analysis, and that we should not take their advice seriously (all bolding is mine):

I’ve been criticizing epidemiologists–including the ones publishing in JAMA, the Lancet, NEJM, etc., and the famous ones who were making apocalyptic predictions on TV last month–for doing what is clearly bad work. My main complaint is, again, that their estimates about the danger of the virus are based on the wrong data (current infections) collected the wrong way (non-random testing of people who present themselves as sick). We all know better than that. You don’t sample on the dependent variable. You don’t sample in ways that suffer from severe selection bias. If you mostly test people who show up saying they are sick, and 3.4% of them die, it doesn’t tell you how many people have the infection, nor does it tell you what percent of people who have the infection will die.
Now, while many economists and others trained in stats have been saying the same thing, it’s surprising how many untrained people say we should instead defer to epidemiologists. You can see some of their arguments on Facebook and others in the comments to previous posts.

He does not repeat the suggestion in his earlier post that decisions based on analysis from epidemiologists “presumptively lack authority and legitimacy”, but he doesn’t withdraw it either.

Here is one way to think about the claims Brennan is making.  Suppose the following statements are true:

  • Epidemiologists overestimated the risk of COVID-19 by applying bad statistical methods to poor data
  • Politicians adopted costly lockdown policies based on flawed risk estimates produced by epidemiologists
  • Lockdown policies were unjustified at the time they were adopted, and this could have been known if better statistical analysis had been undertaken
  • Lockdown policies are unjustified now, given currently available information, and should be replaced by a different policy

Define Rich, part II: Rat Race and the American Dream

I have had this re-posted today because I believe it is as relevant today as when I wrote it in May, 2009.  My hope is that this event we are living moves enough new people to realize the society we built is not sustainable.  My hope is that one of the basic questions I was trying to answer in a more completely when I started blogging at AB is answered in a manner such that the nation and ultimately humanity becomes more inclusive: Why do we have an economy?  I will not accept the answer: To make money.

I believe today, people are discovering the rat race they have voted themselves into. I hope enough people will come to understand that just making money is not life sustaining.

My concern is that the use of the “war” analogy will lead us to policy which implies an end point…a win.  We are not at war.  You can not have a war with nature.  Nature has no ideology to fight against.  Nature just is.  It’s just doing.  It has no persona.  It has no intent.  It just reacts based on what has come in the past.  It’s not logical, it’s not irrational.  There is no end.  There is no win.  There will be another virus.  If we are lucky, only 1 virus at a time.  Yes, as we saw the past 2 days, weather events still exist.  Nature can do more than one thing at a time.

We are in the first nationwide crisis since the Depression.  WW2 was not a crisis in this nation.  The biggest difference between the Depression and now is that man created the Depression which had a natural event imposed on top of it (the Dust Bowl).   That natural event only effected a part of the nation.  Today we have a depression being imposed on us by nature.  The entire nation.  The Depression could and was undone by its creator.  This current developing one can not be undone by the creator: nature.  It can be argued that our policies pushed nature (pollution, climate change) and thus we created the disaster leading one to believe we can undo it.  Not really.  Not in the sense of simply undoing the policies that set up the environment such that nature has brought us to this point.  Nature only reacts.  It just does.  There is no simple solution as with the Depression.  It only required some policy changes addressing only the economy.

We can’t win.  We can only live.   Hopefully with a more inclusive thought process and thus society.

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Rat Race and the American Dream

There were some good responses to the first posting that I agreed with. They were, could we say, jumping the gun as to how I want to proceed, however. So, with this post I want to continue with looking at phrases/concepts/thoughts that are a part of, or were a part of any discussion regarding “rich”.

Have you missed the phrase: Rat Race?
Wonder why we ask: Is the American Dream dead?
Could it be that in an economy where “rich” is not or will not be defined, the race is won and the dream obtained? After all, we’re all rich now! Sodahead specifically asked the question.