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

Kevin Hassett In Lie Lie Land

Kevin Hassett In Lie Lie Land

I feel sorry for Kevin Hassett.  Of course he made a complete fool of himself two decades ago with his book on Dow 36,000 (still some ways away) with James Glassman, but he has had a good amount of time to get over that embarrassment.  When he was appointed CEA Chair for Trump, he was of the few appointments Trump made that received praise, especially in the  area of economics.  Pretty much everybody else appointed was some combination of corrupt (a bunch of those), incompetent (see abysmal forecasting record of Lawrence Kudlow, NEC Chair), or just plain insane (see warmongering Peter Navarro).  A longtime economist at the AEI and a former adviser of earlier GOP presidential candidates, Hassett had a conservative but mostly pretty respectable record, as well as being known as a nice guy.  Even many people on the left said nice things about him at the time of his appointment.  Indeed, he was not obviously corrupt, incompetent, or insane, despite some mistakes here and there (see Dow 36,000in particular).

Anyway, after getting appointed and Trump becoming president, Hassett has largely disappeared.  Near  as I can tell, the main time he surfaces  was when the CEA put out the Economic Report of the President, the main ongoing official function of the CEA.  For decades the CEA was viewed as the main body providing economic policy advice to presidents, and often the CEA Chair  actually was the top individual economic adviser to the president, although who that is at any point in time has always ultimately been a matter of personalities.  But then for reasons that remain mysterious to me, Bill Clinton created this new body when he came in, the NEC. It  (and especially its Chair) was supposed to communicate to the media and Congress, it apparently being viewed that CEA Chairs were too abstract or in the clouds or whatever to engage in such communications.  But the question became which of these  would have the presidential ear, and more often than not these NEC Chairs have been closer to presidents than CEA Chairs, even though more often than not the case has been that the CEA Chairs have known more about economics than the NEC Chairs.  This is ceetainly the case now, with the incompetent Kudlow regularly identified as being Trump’s “top economic adviser,” while the much more competent Hassett has been largely invisible.

Before getting into more recent events, let me note that the Economic Report of the President Hassett and his CEA staff put out avoided making actually incorrect statements, at least that I am aware of. Of course data favorable to the administration was emphasized and arguably overly optimistic projections were made regarding the future impacts of policies, especially the tax cut.  But then this is normal CEA behavior in most administrations, putting as positive  spin on actual data and making optimistic, but not off-the-wall projections of policies.  So far so good, or at least not too bad.

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Gimme Shelter: the rental affordability crisis has worsened  

Gimme Shelter: the rental affordability crisis has worsened

Four years ago HUD warned of “the worst rental affordability crisis ever,” citing statistics that

About half of renters spend more than 30 percent of their income on rent, up from 18 percent a decade ago, according to newly released research by Harvard’s Joint Center for Housing Studies. Twenty-seven  percent of renters are paying more than half of their income on rent.

This is a serious real-world issue. I have been tracking rental vacancies, construction, and rents ever since.  The Q2 2018 report on vacancies and rents was released a few weeks ago, so let’s take an updated look. In this post I will look at four measures:

  • real median asking rent, as calculated quarterly using the Census Bureau’s American Community Survey
  • two rental measures from the monthly CPI reports
  • HUD’s quarterly rental affordability index
  • Rent Cafe’s monthly rental index

As we will see, regardless of which measure used, rent increases continue to outpace worker’s wage growth, meaning the situation is getting worse. Most likely this is a result of increased unaffordability in the housing market, driving potential home buyers to become or remain renters instead.

Real median asking rent

In the second quarter of last year, median asking rents zoomed up over 5% from $864 to $910. In the two quarters since, they have remained at that level:

Here is an updated look at real, inflation adjusted median asking rents. The entires prior to 2009 show the interim high and low values from the previous 20 years. Since 2009, real rents have almost continuously soared — and reached yet another record high in the quarter just ended:

 

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Cuomo: America ‘was never that great’

Cuomo at an event, where he signed anti sex-trafficking bills into law. “We’re not gonna make America great again. It was never that great. We have not reached greatness and we will reach greatness when every American is fully engaged.

We will reach greatness when discrimination and stereotyping against women, 51 percent of our population, is gone and every woman’s full potential is realized and unleashed. When every woman is making her full contribution . . . when that happens, this nation is going to be taken even higher.”

A Republican response? “America, with its imperfections, has always been great, our people, our principles, and our promises have been a beacon light to the world for 242 years and counting.”

Wow, reflections of Ronald Reagan.

Governor Cuomo (father) challenged President Reagan’s shining city metaphor and offered one of his own. He asserted that America is more a “‘Tale of Two Cities’ than it is just a ‘Shining City on a Hill,’” that Republican policies such as trickle down economics “divide the nation into the lucky and the left-out.”

The Hill, America Was Never that Great

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Ten Years Have Got Behind You

It has been almost ten years since:

  1. Bear Stearns folded
  2. Lehmann collapsed of its own free will
  3. I posted on this blog
  4. All of the above

Those who guessed “c” or “d” are optimists. Those who are expecting a long series of posts dwelling on the correct answer of “b” (with some references to “a” and AIGFP) will not be disappointed.

But this is an introduction. I have been trying to think of how to simplify ten years of lessons as if there were one root cause. And I think I finally have it.

Two friends were claiming that Democratic politicians have to be nice, noting that otherwise Republicans will obstruct anything they try to do if there is ever a free election in the United States again. My response of “So what?” (a more direct version of my usual “Ma nishta ha’lailah hazim?“) was met with reminiscence from them of the Good Old Days when the Democrats had a fighter in the mix: James Carville.

So I have been thinking about Carville today, and especially his most famous quote:

I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.*

And therein lies the problem. He said this in the early 1990s. By the time fifteen years had passed and the world economy went over a securitization cliff abetted by “Weapons of Mass Destruction” that are used in ways so obviously non-economic that an economist looking at the market for the first time called them out ten years ago—and virtually nothing (on net) has been done to ameliorate the situation since.

But back to the bond market. If there is one lesson from basically Hallowe’en of 2006 to September of 2008 should have taught everyone, that should have been that the problem isn’t that the bond market is feared; the problem is “What if the bond market is correct?”

Select for full-size view

To be continued…

*His most accurate quote may well be “What I’m suggesting is, stand for yourself, be for something and the hell with it. Because the hand-wringers and the editorialists and the sigh-and-pontificate crowd will be against you, whatever you do.”

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Weekly Indicators for August 6 – 10 at Seeking Alpha

Weekly Indicators for August 6 – 10 at Seeking Alpha

– by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Two long leading indicators are within 1% of turning negative. And two short leading indicators are also weakening considerably.

A friendly reminder that not only is the post informative, but I get compensated the more people read it, so by all means please read it!

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States Fight non-ObamaCare Health Plans

The Trump administration’s new policy of expanding the sale of “short-term” insurance plans as a cheaper alternative to ObamaCare is quickly running into opposition from state regulators.

The Department of Health and Human Services is urging states to cooperate with the federal government, but instead, insurance commissioners are panning the new plans as “junk” insurance and state legislatures are putting restrictions on their sales.

State insurance officials argue that, despite being less expensive than ObamaCare plans, the short-term plans are bad for consumers and aren’t an adequate substitute for comprehensive insurance.

“These policies are substandard, don’t cover essential health benefits, and consumers at a minimum don’t understand [what they’re buying], and at worse are misled,” California Insurance Commissioner Dave Jones (D) said.

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In Defence of Comrade D’Souza

David Frum does not have a favorable view of Dinesh D’Souza and his latest movie, “Death of a Nation.” He argues sthat D’Souza’s alleged history is fiction, and that D’Souza is governed almost entirely by resentment of all of the experts in all of the fields in which he dabbles, who note that he is dishonest, partisan, and unoriginal.

It is alarming that D’Souza has become prominent again and is praised by the President.
However, I do agree with D’Souza and disagree with Frum on one critical point. D’Souza claims to have remained loyal to the movement he had joined by the the time he went to college. Frum argues that D’Souza has changed ( I admit he ends with a question). Frum can’t claim that D’Souza changed because he decided to hitch his wagon to Trump or Trumpism — D’Souza is the guy who wrote that the left is responsible for 9-11 because we provoked Islamic terrorists with our liberalism (see the quote in Frum’s essay). He hasn’t declined since then, there is no place lower to go.

Frum argues that conservatism used to be about something other than D’Souza’s mixture of racism and resentment. He notes that the old debates are forgotten. He gives one (1) example

Many of the disputes of the 1980s that excited me as a young conservative have subsided into forgetfulness. Who recalls now that it was once controversial that telephone services should be competitive rather than a regulated monopoly?

I am old enough to remember the breakup of ATT and I do not remember any such debate. ATT argued against the career prosecutors at the Justice Department, but I never read anyone else who agreed with them. The decision was made by a judge applying the Sherman antitrust act. It was an example of strict regulation, a state intervention n the economy. There were people who argued that the Sherman Antitrust Act should be reinterpreted so that it was toothless. Tney won the argument. They were and are Republicans. Frum’s one example of good policy by Reagan was a decision to not interfere with an ongoing case, but rather to allow career prosecutors (bureacrats) to continue as if there weren’t a new President.

Frum is not ignorant. He knows that the ATT breakup is conflated with deregulation (even though it was regulation not deregulation) because if followed soon after the deregulation of airlines, interstate trucking and beer brewing. He knows he can’t ascribe that actual deregulation to conservatives, Republicans or Reagan because the bills were passed by congresses with huge Democratic majorities and signed into law by Jimmy Carter. Those werenì’t the “disputes of the 80s” because they were resolved by 1980 at the latest.

In contrast Republicans brought us “voluntary” import quotas on Japanese made cars and steel tariffs (not just Trump — Bush imposed them too). Somehow Frum managed not to notice that the pro-market party’s symbol was and is a donkey not an elephant.

Yes the ATT breakup was caused by the political struggle of a Republican politician — named John Sherman. Critiquing D’Souza, Kevin Kruse wrote that if one has to go back to the 1860s to argue that the GOP is the party of civil rights, one has a weak case. Similarly, if one goes back to 1890 to argue that the GOP is the pro-competition party, one has a weak case.

Aside from the fact that the alleged controversy with anti-capitalist supporters of ATT is not just forgotten, but was udetectable at the time, Frum does not mention foreign policy. There the key debate was about the alleged clear and present danger. Conservatives were sure that the CIA under-estimated the power of the USSR and the world communist movement. They (Kissinger, Kilpatrick not minor figures) argued that we had to work with right wing dictators to face the terrrible threat. Then the USSR collapsed. Frum doesn’t discuss the debate over the need to overlook human rights violations in El Salvador, because it was vitally necessary to keep the FMLN out of power (remind me which party nominated the current president of El Salvador ?). It is necessary to Frum that the military and foreign policy debates of the 1980s be forgotten, because he was totally wrong.

He also doesn’t mention voodoo economics.

I’d say D’Souza is at least consistent. He is a racist just as he was in 1981. He is consistent in his single minded hatred of liberals and Democrats. Frum, in constrast, has changed completely since he was fired by the AEI.

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Sunday Morning News Clips

Manual Transmission Foils Car Theft

“A press release from the Nashville police department said they arrested two teenagers last Wednesday aftr they attempted to carjack two women that day and failed. The teens ultimately failed both times, with the second being because the car had a manual transmission. They had to run away on foot.”

We Reserve the Right to Refuse Service . . .

A British woman tried to place an order at her local McDonald’s while on horseback, but was turned away.

Louise Carter, who lives in Powick, England, made the three-and-a-half-mile journey to nearby Malvern last month, but was rejected by staff citing a strict drive-thru policy.

According to McDonald’s UK, drive-thru lanes are reserved solely for motor vehicles, meaning that horses are out. Bicycles are also prohibited.

The Impact of Higher Temperatures on Economic Growth

“What happens to the economy when it gets hot outside? Despite long-standing assumptions that economic damage from rising global temperatures would be limited to the agricultural sector or developing economies, this Economic Brief presents evidence that higher summer temperatures hurt a variety of business sectors in the United States.”

Congressman Chris Collins arrested

Rep. Chris Collins, R-N.Y. was arrested Wednesday morning on federal insider trading charges, law enforcement officials said.

Why You Should Care About Unions

The average person in the United States has essentially zero power in society. That’s why millions have organized into unions over the years. But the slow decline of unionism in the United States should concern you even if you’re not in one.

Busting the Myth of Immigrant Crime

“My national analysis last year detailed the startling fact that Whites living in suburban, small-town, and rural areas surrounded by other Whites are in much more danger of violent and premature death, including suicide, homicide, gun fatality, drug overdose, and related “deaths of despair” than Whites living in or around multiracial cities. Whites show worse social trends than non-Whites, and Whites in remote exurban and rural areas show by far the worst trends and highest violent death rates of all. Despite Trump’s and Attorney General Jeff Sessions’ baseless condemnations, “sanctuary cities” that adopt pro-immigrant protections are especially safe for Whites.”

The Nastiest Feud in Science

“According to the fossil record, creatures were dying en masse. Mystery solved: An asteroid had crashed into the Earth, spewing iridium and pulverized rock dust around the globe and wiping out most life forms.

Gerta Keller argues that the mass extinction was caused not by a wrong-place-wrong-time asteroid collision but by a series of colossal volcanic eruptions in a part of western India known as the Deccan Traps—a theory that was first proposed in 1978 and then abandoned by all but a small number of scientists. Her research, undertaken with specialists around the world and featured in leading scientific journals, has forced other scientists to take a second look at their data. “Gerta uncovered many things through the years that just don’t sit with the nice, simple impact story that Alvarez put together,’ Andrew Kerr, a geochemist at Cardiff University, told me. ‘She’s made people think about a previously near-uniformly accepted model.’”

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Four measures of wages all show renewed stagnation

Four measures of wages all show renewed stagnation

This is something I haven’t looked at in awhile. Since 2013, I have documented the stagnation vs. growth in average and median wages, for example here and here. I last did this in 2017. So let’s take an updated look.

We have a variety of economic data series to track both average and median wages:

Let’s start with nominal wages.  The first graph below shows the YoY% growth in each of the four measures:

While each is noisy, the overall trends are clear:

  • First, in this cycle as in the last, wage growth declined coming out of recessions, then rose as the expansion continued.
  • Second, by most measures nominal growth has picked up somewhat in the last year.
  • Third, secularly there has been an undeniable slowdown in wage growth, which (while not shown) was 4-6% in the late 1990s peak and 3-4% at the 2000s peak. So far in this expansion it is no better than 2.5%-3%.  I believe this is in part due to how weak the employment situation was for so long into this expansion, but also secularly due to shifts in bargaining power, as employers learn over time that employees can be retained with lower and lower annual increases in compensation.

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