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

Does the United States Have a Progressive Future?

Spoiler alert:  maybe.

The surprising success of Bernie Sanders’ 2016 presidential bid, widespread protests against Trump, and the election of a number of highly progressive candidates in the 2018 midterms all seem to suggest a progressive turning point in American politics.  At the very least, the intellectual stranglehold of right-wing economic ideas on our political discourse seems to have been broken.  Progressive proposals for Medicare for All, a higher minimum wage, higher taxes on the wealthy, free college, child support, and the Green New Deal are all generating enthusiasm among Democrats and getting a more respectful hearing in mainstream political circles than would have seemed possible even 5 years ago.

I agree that greater interest in progressive policy ideas among journalists, political leaders, and the policy elite is an important political development, but it is a common mistake to read too much into short-term swings in public opinion or the results of a single election.  So it is useful to step back and ask what we know about the path to a progressive future in the United States.

Comments (13) | |

News and Words that Caught My Eye this Week

Teacher of the Year‘ kneels during college football championship attended by Trump,”ABC News, January 16, 2020

During a ceremony honoring the 2019 “Teachers of the Year,” one in particular stood out.

The honoree from Minnesota, Kelly Holstine, chose to kneel during the national anthem at the NCAA football championship game on Monday, where the ceremony took place, “to stand up for marginalized and oppressed people,” according to a tweet she wrote, which included a photograph of her kneeling.

“Like many before, I respectfully kneeled during Nat’l Anthem because, ‘No one is free until we are all free,'” she wrote, referencing former San Francisco 49ers quarterback Colin Kaepernick and citing a quote from Dr. Martin Luther King, Jr.

Virginia school board refuses to ban Confederate flag” from the dress code, Today, Alyssa Newcomb, January 16, 2020

A Virginia school board is refusing a dress code ban on clothing showing the Confederate flag, despite the appeals of the board’s only black member.

The Franklin County School Board in Rocky Mount, Virginia, voted 7-1 on Monday against formally writing a ban on the Confederate flag into the dress code. The board cited Tinker vs. Des Moines, a 1969 case that ruled students were allowed to wear black armbands to protest the Vietnam War and did not lose their right to free expression, even while attending school.

“In Franklin County, we do not have any documented cases of a substantial disruption caused by the Confederate flag

The Miseducation of the American Boy,” The Atlantic, Peggy Orenstein, January 15, 2020

I knew nothing about Cole before meeting him; he was just a name on a list of boys at a private school outside Boston who had volunteered to talk with me (or perhaps had had their arm twisted a bit by a counselor). The afternoon of our first interview, I was running late. As I rushed down a hallway at the school, I noticed a boy sitting outside the library, waiting—it had to be him. He was staring impassively ahead, both feet planted on the floor, hands resting loosely on his thighs.

My first reaction was Oh no.

It was totally unfair, a scarlet letter of personal bias. Cole would later describe himself to me as a “typical tall white athlete” guy, and that is exactly what I saw. At 18, he stood more than 6 feet tall, with broad shoulders and short-clipped hair.

Additional after the Leap

Comments Off on News and Words that Caught My Eye this Week | |

Long Bond Yields vs The Long Wave

Different  bloggers  have been posting their favorite charts of 2019 this January.  So I decided to post my favorite chart of the past 20, or more, “years of the long bond yield versus the long run trend.”  Bond yields are now below their long run trend and may be at or near a secular bottom.  Of course no one rings a bell at the turning point so we probably will only identify the bottom long  after it actually occurs.

Comments (2) | |

Summing Up the Last Decade

To steal from Sandwichman’s excellent commentary on 2020 Hindsight and use a quotation from it which does give the magnitude of the last 10 years in financial terms;

“A fourth wave of debt began in 2010 and debt has reached $55 trillion in 2018, making it the largest, broadest and fastest growing of the four” (since 1970). There is a cost to this and one which can be seen in the US as this debt formation is not going to “meet urgent development needs such as basic infrastructure, as much of the current debt wave is taking riskier forms”

akin to what we began to see in 2000 and culminating in 2007/8 with a disastrous economic collapse.

The Atlantic’s Anne Lowry also writes about the last decade. Perhaps, she is the wrong author to pick upon and use to summarize the impact of the economy on the nation’s population. And again others may disagree with my choice; however in this case, I appreciate her summation on what she notes in passing; The Decade in Which Everything Was Great But Felt Terrible.

Picking the best story encapsulating the economy of the last decade she chose CamperForce: depicting elderly nomads living in vans and RVs and spending their twilight years temping at Amazon fulfillment centers, other places, setting up temp businesses, etc. after losing savings, homes, and belongings in the 2008 crash.

If there was a positive spin to this recital it would be of people wanting the structure and community work can provide well into retirement age, the freedom and mobility associated with a RV life, the flexibility of temp gigs, or not being nailed down to place, job, etc. The story is not of a newly realized freedom in retirement; CamperForce consisted of grandparents who had been evicted from their homes during the housing collapse and were struggling to stay out of poverty. It’s a modern-day, AARP twist on The Grapes of Wrath.

To use Anne’s words; perhaps the most representative story is that of the former graduate student who ended up as a warehouse janitor or the thousands of people who have gone online to beg for money to help them stay afloat through a life-threatening illness.

In finality these stories cast a reality in the names and faces depicting today’s economic impact; the real, urgent, and indelible marks of this past decade’s failings. The ten years without a single month of serious recession with the United States growing to its wealthiest point ever and still longevity fell, and it became clear that a whole generation was losing its place in the hierarchy.

The central economic message given to us from the 2010s? No matter how well the market was doing, how long the expansion lasted, and how much the economy grew; families still struggled and lost ground in the economic hierarchy. Because the decade did so little for so many, it strained America’s idea of what economic growth could and should do.

The rest of Anne Lowry’s story can be found here; “The Decade in Which Everything Was Great But Felt Terrible,” The Atlantic, December 31, 2019.

It is a good read.

Comments (6) | |

2020 Hindsight: Why the world is not zero-sum

According to a report, Global Waves of Debt, pre-published by the International Bank for Reconstruction and Development:

Waves of debt accumulation have been a recurrent feature of the global economy over the past fifty years. In emerging and developing countries, there have been four major debt waves since 1970. The first three waves ended in financial crises—the Latin American debt crisis of the 1980s, the Asia financial crisis of the late 1990s, and the global financial crisis of 2007-2009.

A fourth wave of debt began in 2010 and debt has reached $55 trillion in 2018, making it the largest, broadest and fastest growing of the four. While debt financing can help meet urgent development needs such as basic infrastructure, much of the current debt wave is taking riskier forms. Low-income countries are increasingly borrowing from creditors outside the traditional Paris Club lenders, notably from China. Some of these lenders impose non-disclosure clauses and collateral requirements that obscure the scale and nature of debt loads. There are concerns that governments are not as effective as they need to be in investing the loans in physical and human capital. In fact, in many developing countries, public investment has been falling even as debt burdens rise.

We hear from time to time that “the world is not zero sum.” Rarely is that dictum explained in other than mystical terms (e.g. “supply creates its own demand,” “human wants are insatiable,” etc.). The explanation, however, is simple: debt. Without debt there would be no “economic growth.”
Debt finances growth; growth services debt. And they all lived happily ever after. But some debt takes “riskier forms.” Hyman Minsky wrote about the first of those four debt waves in “The Bubble in the Price of Baseball Cards.” In that paper Minsky addressed the price of baseball cards, the Latin American debt crisis, the Japanese, Korean and Taiwanese real estate and equity booms of the ’80s, and “[o]ne of the puzzles of the 1980s… the rapid rise in the financial wealth of Donald Trump.”
What the rise in Trump’s wealth had in common with the Latin American debt crisis was that they both were predicated on a precarious differential between real interest rates and increases in asset values that could change very suddenly with an increase in the former or a decrease in the latter.
One of Minsky’s best shots was a drive-by — relating the regional increase in real estate prices to “rapid increase in incomes in banking and financial services — sort of a derived demand from the financial success of Drexel Burnham.” That Drexel Burnham “success” was, of course, transitory and involved fraud. The inference was that Trump’s financial success, too, was ultimately — at least indirectly — fraudulent.
John Kenneth Galbraith coined the term “bezzle” for the amount by which total wealth is inflated by embezzlement in the period before the embezzlement is discovered:

At any given time there exists an inventory of undiscovered embezzlement in—or more precisely not in—the country’s business and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars. It also varies in size with the business cycle.

Any large quantity of debt includes an inventory of embezzlement. A certain amount of it will never be paid back. Some was never intended to be repaid. As the debt increases relative to income, the proportion of prospective embezzlement also increases.

Happy New Year!

Comments (1) | |

The field was rigid and closed until Mark Thoma’s Economist’s View opened the debate to all comers

Noah Smith’s The End of Econ Blogging’s Golden Age, Bloomberg Opinion. December 17, 2019.

“If someone asked you to name the greatest economics blogger of all time, you might name Paul Krugman, or my Bloomberg Opinion colleague Tyler Cowen. But there’s a third name that deserves to be on that short list: Mark Thoma, an economics professor at the University of Oregon. On Friday, Thoma announced a well-deserved retirement. But the changes his blog made in the economics profession will endure.

Thoma’s blog, Economist’s View, began in 2005.”

The rest of the article can be found on the link provided above. As I was told, Angry Bear Blog linked to Economist’s View in the beginning.

Mark announced his retirement Friday, December 13, 2019. Best of luck going forward Mark.

Comments (5) | |

Something to keep in Mind when you enroll in Medicare Advantage Plans

It is not a dirty or hidden little secret. Insurance companies offering MA plans do not tell you that once you are in their plan, you are there potentially forever. Returning to traditional Medicare is ok but, getting a Medigap Plans to supplement the gap may lead to rejection or much higher premiums if you choose to come back and especially if their are pre-existing conditions.

The same as the Commercial MA companies, Medicare.gov websites are not always clear about the process of transferring out of MA to traditional Medicare and obtaining a Medigap plan. Being unconditionally accepted by a Medigap plan is guaranteed only within the first 12 months after enrolling in Medicare at age 65.

In 2019, one-third (34%) of all Medicare beneficiaries, 22 million seniors were enrolled in Medicare Advantage (MA) plans.

As most know, Medicare consists of Part A, B, C, and D plans. Part A has no premiums, Part B has a premium (paid to the Gov), and Part D (prescriptions) has a premium which is paid to commercial healthcare insurance. To cover the gaps in A & B and the gap, you buy supplemental insurance which is about the same as Part B in premium cost. Unless Medicare rules change, the most one can experience is changes in premiums.

In contrast, Part C or Medicare Advantage plans can cover a broad array of health services at a low cost. Unless one gets sick, the price for MA Plans can remain low. If one does gets sick, out-of-pocket costs can increase in later years. Once in an MA plan, getting out can result in less affordability. Medigap plans in all but four states can and do reject people or require higher premiums if you caome back to them after Medicare Advantage Plans. Diabetes, heart disease, or even a knee replacement can be criteria for exclusion.

“After Mills underwent a mitral valve repair and suffered a mild stroke with no lasting effects, the San Diego resident’s plan now charges him hundreds of dollars in monthly copays for drugs and other medical services. He had to pay $295 a night for his hospital stay.

But there was a much bigger shock. Mills, 71, learned that switching out of his MA plan he would incur exorbitantly higher costs the next time he needs a serious medical intervention. If he moves to traditional Medicare and a prescription plan, he will still need a supplemental Medigap plan to pick up his 20% copays and deductibles.”

Again, this is something most people do not know, an should know before they make any move to Medicare Advantage plans. Furthermore, there are many MA plans which have narrow networks to which you must go to. In comparison, traditional Medicare pays where ever you go in the United States.

Medicare Advantage Enrollees Discover Dirty Little Secret – Getting Out is a lot harder than Getting In, MedPageToday, Cheryl Clark, December 3, 2019.

A Dozen Facts About Medicare Advantage in 2019, Gretchen Jacobson, Meredith Freed, Anthony Damico, and Tricia Neuman, KFF, June 06, 2019

Comments (4) | |

SECURE Act Up for Consideration in the Senate – A Rehash

I covered the House SECURE Act and the Senate RESA version last July. The House RESA Act is up for consideration in the Senate now. It does not look like it is going to make it due to the impeachment process going on and a potential trial in the Senate. There is also a small matter of a budget needing to be passed. It was to be considered under an unanimous consent vote; however, three Republican Senators (Mike Lee of Utah [unidentified reason], Ted Cruz of Texas (529 Accounts), and Pat Toomey of Pennsylvania [Gold Star tax exemption]) put holds on the bill (reasons in parenthesis). Then there is McConnell, who will not bring it to the floor for a vote.

Congress has been working on a much-needed improvement for “Middle Class” savings and growth over the span of employment in order  to boost retirement resource for citizens who can afford to save. Both the Senate and the House versions have been sitting since July. Whata surprise, heh?

Dueling bills to restructure IRAs and 401ks appear to be redundant; but, there are differences.  Better known as the “Setting Every Community Up for Retirement Act” (SECURE Act) H.R.1994 and the Senate has the “Retirement Enhancements and Savings Act” S.792 (RESA) version. Both bills were passed with bipartisan support. Both bills for the Middle Class had pluses and rather big negatives also. It appears the House RESA Act is going forward for a vote.

The RESA Act is mostly for the masses who may be able to save some money for retirement in spite of stagnant wages. No worries for the for the rich in income (unless something has changed since I last looked at this).  A major outcome of the Trump tax bill were tax breaks for the wealthy and corporations. Besides much of the resulting income increases going to 1% of the household taxpayers, the same 1% were given the ability to shelter large amounts of income in gifts to their heirs. It is a great time to be rich in income and have the ability to shelter it by making gifts of it to your heirs’ tax free! Keep in mind, seven or so years out and those income tax cuts will disappear for the middle income brackets. Somebody has to pay for the overall breaks otherwise their tax relief will sunset as they were passed under reconciliation in the Senate.

A little history (past the leap) on why Congress did something which will help those who can afford to save presently, penalize those bequeathed whatever is left over after death, and pay for the IRA and 401k break.

Comments (4) | |

S&P 500 BY PRESIDENTIAL TERMS

With the presidential election still a year away, Wall Street is starting its normal analysis that if a democrat is elected it will cause a devastating stock market crash.  One would think that after all these years of such claims being proven dead wrong that the street would finally give up on it. In the post WWII era from Truman to Obama it is 70 years and each party has had bad candidates in office for half that time.  Truman was only President for seven years and five months so the Democrats only had 35.4 years in office while the Republicans had 36 years in office.  Over these years the average annual S&P 500 gains was 15.9% for Democrats and 6.6% for Republicans. If you look at the actual returns, you would think if anything; Wall Street analyst would be warning about the dangers of a Republican President for the stock market.

Because the chart is already so cluttered I left Truman and Ike off.  But it seem so obvious that the record shows that it is Republican Presidents that investors should fear.  Just to clearly show that stock market gains have been more that double under Democrats versus Republicans I’ve also presented the data in a table.

 

 

 

Comments (4) | |

DC Circuit grants Postal Watchdog’s challenge to PRC’s approval of rate hike on Forever stamps

An introduction to Save the Post Office and Steve Hutkins. I am not quite sure how I got to Steve; but, I do remember chatting with Mark Jamison who also wrote at Save the Post Office and posting his words up at Angry Bear (Asking the Wrong Questions: Reflections on Amazon, the Post Office, and the Greater Good earlier this year. Mark and I still exchange emails and I owe him a trip out to western North Carolina. Steve is the blog owner, a Prof. of Literature teaching “place studies” at the Gallatin School of New York University. Prof. Steve Hutkins has been writing about the Post Office for at least a decade and the attempts of government, UPS, Fedex, etc. to close it down or limit its operations.

“Save The Post Office” has been writing about the last 5 cent increase in First-Class mail earlier this year.

Back in January 2019, the Postal Service raised the price of a First-Class stamp from 50 to 55 cents. Postal watchdog Douglas Carlson filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit (aka the DC Circuit) challenging the Postal Regulatory Commission’s decision to approve this rate hike.

Carlson argued that in approving the rate hike on Forever stamps the Commission had failed to consider the statutory pricing factors and objectives in the Postal Accountability and Enhancement Act (PAEA) and the public comments questioning this increase. He also argued that the Commission did not reasonably explain its decision. Therefore, he claimed, the Commission’s decision was arbitrary and capricious.

Today the court issued a ruling granting Carlson’s petition and vacating the PRC’s approval of the rate increase on First Class postage. (The court’s opinion is here; the order vacating the PRC ruling is here.)

It’s not clear what will happen next. The PRC could file a petition for a hearing en banc, meaning that it will ask the entire DC Circuit to review the case, as opposed to the three-judge panel that issued today’s ruling. Apparently anticipating such a possibility, the DC Circuit today also issued an order “that the Clerk withhold issuance of the mandate herein until seven days after disposition of any timely petition for rehearing or petition for rehearing en banc.”

If such a petition is not granted, the PRC could even appeal to the Supreme Court. (After the DC Circuit ruled against UPS on an unrelated case involving postal rates, UPS took both of those steps, to no avail.)

In the meantime, we don’t know what impacts today’s ruling will have on the rate hike, which has been in effect since January.

Under the PAEA, the Postal Service has the right to request its next inflation-based rate increase this fall, with an effective date in January 2020. How the next increase will interact with today’s court decision is also unclear.

Past the leap is the section of a court determination that reviews the main issues in the case:

Tags: Comments Off on DC Circuit grants Postal Watchdog’s challenge to PRC’s approval of rate hike on Forever stamps | |