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

The mayors report in on Income Inequality (and miss the conclusion).

(lightly edited for ease of reading)

Yesterday the Conference of Mayors and the Council on Metro Economies and the New American City released a report prepared by IHS Global Insight that is a repeat and thus update of a similar study performed after the 2001 – 2002 recession.  Income and Wage Gaps Across the US.

I caught wind of it today reading our state news paper, it was on page 1 no less. I suggest reading it and then using it to judge your favorite candidate in the coming elections. See if they mention this report. There are 357 metro areas reported on in the index pages. Even Providence RI is noted. So look yours up.

The report looks at the jobs being created and the wages they are generating.  The trend since the 2001/02 recession is that jobs lost in the recession are replaced by jobs producing lessor wages. No surprise as we have been hearing such for a while. However, this study documents that the difference in the wages is even greater this time. After the 01/02 recession it was a 12% difference or $23 billion in annual wage loss. After this current recession it is a 23% difference! $93 billion! Yes, it is because manufacturing and construction jobs are being replaced by hospitality, health care and administration jobs.

“Extensive job losses in high-wage manufacturing ($63K) and construction ($58K) sectors were replaced by jobs in the lower wage sectors of hospitality ($21K), health care ($47K), and administrative support ($37K).”

Some more general findings:

The 2012 household median income of $51,017 was, in real terms, the lowest since 1995. It had peaked at over $56,000 in 1999, and measured $55,627 in 2007 before the recession. It has fallen in each subsequent year.…the 20% of households with the highest incomes, which rose from 43.6% in 1975 to 51.0% in 2012. Moreover, most of this gain was among those in the highest 5% of income, which rose from 16.5% in 1975 to 22.3% in 2012, a gain of $490 billion in 2012. Each of the lower quintiles experienced a declining share of income.

Nothing too new there as with some other facts noted early in the report. However they do something I have not seen and I believe does a better job of presenting income distribution change in this nation. The cry we are hearing regards the decline of the middle class. But then the numbers are presented as blocks of 20%. In this report they divide the income distribution into thirds. Thus, you have a middle third…the middle class?

…we can also consider a broader group of middle income households, the middle third of the income distribution. In 2012, among US households, 34.8% earned less than $35,000, 31.8% earned between $35,000 and $75,000, while 33.5% earned more than $75,000.

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The Lone Star Strategy or The House that Conservatives built

Having heard Senator Sander’s discussion on the floor, I thought the outing of the republican vision for this nation in total should be preserved on the net in writing.  People hear bits and piece but never put the entire picture together.   Maybe reading the list will help people picture the finished house the conservative mind is working overtime to build.

It’s like the HGTV show Property Brothers.  I am always amazed at the inability of the people to see the potential results when they are shown a property that has the foundation needed to realize their desire of what a home should have and be. The new home owners have presented a list of wants.  They are unable to see how their wants fit with the properties shown.  Then the brothers show them the CAD visuals and the people get it.  Yet even during the building out of the project, the new owners struggle with accepting the completion will be what they envisioned and saw in the plans.

We’ll, here is the version of what the conservatives (not just republicans, but the libertarians and New Democrats) have in their minds for an ideal America. As you read it, keep in mind what you would like to see in the house, what you would like to have it feel like :

1. An orderly transition to individual private retirement accounts and the elimination of Social Security.

2. Privatization of Veterans health care.

3. Abolish all federal agencies who’s activities are not enumerated in the constitution including the department of education and the department of energy.

4. Oppose mandatory kindergarten

5. Abolish the EPA

6. Abolish the 16th amendment and thus get rid of the IRS to be replaced with a national, state collected sales tax.

7. Abolish the capital gains tax and estate tax.

8. Repeal the minimum wage.

If you are struggling with what this list means regarding the way your house will look, the way your house will flow as you walk in it you best start talking to people who might be able to help you imagine it.  You might want to ask these planners/builders exactly what the results will be and do not let them speak in generalities.

If this plan is not what you are envisioning, then you best inform the designers and builders.   There will not be a CAD plan presented so that you can have an idea of what this list results in, there will only be the reality of the list as the door is opened to this new home.

To help you imagine the experience of living in a home based on the above list of requirements I present Bill Moyers essay of 9/27/2013:  Joblessness is killing us

Bill Moyers Essay: Joblessness is Killing Us | Moyers & Company | BillMoyers.com.

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The Scariest Graphic I Made All Week, or, Still More on Excess Reserves and "Money"

One of the nice things about the Kauffman Foundation’s Blogger Conference is the time to let the mind wander and look at data after having your brain scoured.

One of the worst things is realizing too late that you’ve got a Really Ugly Graphic, and most of the people who could help with it are gone.

Four hours ago at dinner, I was sitting between Brad DeLong and Tim Duy (who pointed out some good contemporary performers of Real Country Music), but I didn’t have this graphic with me. Now Tim is on a plane and Brad is teaching students, and my best option is to ask the AB commentariat if the following graphic scares them as much as it does me.

Even given my hobby-horse attitude toward Excess Reserve (i.e., the Sheer Unmitigated Contempt with which I treat the idea that reserves in general—let alone Excess Reserves—should “earn” interest), the dropping-off-a-cliff impression (and the overall downward trend, even keeping in mind that we do not Seasonally Adjust Excess Reserves, and therefore Seasonal Effects are clear) almost seems to explain why the 32nd month of the “recovery” feels as if it’s just possibly starting something.

To be fair—and a hearty “thank you” to Jeff Miller of A Dash of Insight for reminding me that most people believe the Fed concentrates on M2, not M1—the broader index shows an upward trend (again, discounting the recent decline as a Seasonal Effect):

Otoh, an overall ca. 5% increase in “Net M2,” as it were, over a year in which the dollar has increasingly appeared to be the only reasonable “Safe Haven” doesn’t seem all that large either.

I’ve yet to play with the data beyond this, so I leave it to the AB comentariat:

  1. Do you believe there is something here?
  2. If so, any guesses what it is? Or anything you want to know about it?
  3. If not, what else should we be looking at where Excess Reserves may/should/will (depending upon your degree of certainty) affect the value of the data and/or Real Economic Growth?

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The Flaw in the Reasoning…

Brad DeLong (pulled from an otherwise-spot-on post):

Two years ago, after all, the recession was over.

The Recovery:

I started these from the first month after NBER’s recession end date. Note that there is one true, consistent growth line—sadly, that’s the mean (average) duration of Unemployment.

If this is victory, Pyrrhus of Epirus had nothing to complain about.

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Hiroshima, Nagasaki, and the Largest Absolute Drop in Private Employment Since the US Started Keeping Records

A commenter at Steve Benen’s Washington Monthly blog was grousing (correctly, as spencer notes in comments) that Benen had allocated all of the 2009 change (read:drop) in private-sector jobs to Obama, while GWB was in office for the first 19.5 daysduring the time the employment data for January was gathered.

Turns out that there were 841,000 private-sector jobs lost in January of 2009—the most in any month in the 2000s—so it might have made a difference.*

I assumed that, since the population continually increases, that was probably the largest monthly job loss since the data was first recorded in January of 1939.

I was wrong. By a wide margin. The Top 30 single-month drops in U.S. Private Sector employment history since February of 1939:

The highlighted months are since the beginning of NBER’s declaration of the Great Recession. But it appears that V-J Day also signalled an end to employment for more than 1.75 million people.

*Note, by the way, that November and December of 2008 are also in the Top Ten, so calling the January, 2009, layoffs part of the normal post-Xmas letdown appears dubious.

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When I Steal A Blog Post, I Leave A Link

I wanted to look at the WSJ job database, suspecting what I might find, but currently lack the bandwidth in a major way.

Fortunately, Noah took some (more) time from his thesis (“distraction from productive activity”) and did the dirty work. Apparently, being a STEM undergraduate isn’t the path to Nirvana:*

I went through the Wall Street Journal database that Phil cites, and found the following unemployment rates:

  • Genetics: 7.4% unemployed
  • Biochemical Sciences: 7.1% unemployed
  • Neuroscience: 7.2% unemployed
  • Materials Engineering and Materials Science: 7.5% unemployed
  • Computer Engineering: 7.0% unemployed
  • Biomedical Engineering: 5.9% unemployed
  • General Engineering: 5.9% unemployed
  • Engineering Mechanics Physics and Science: 6.5% unemployed
  • Chemistry: 5.1% unemployed
  • Electrical Engineering: 5.0% unemployed
  • Molecular Biology: 5.3% unemployed
  • Mechanical Engineering and Related Technologies: 6.6% unemployed

    Compare these with a 5.0% unemployment rate for all bachelor’s degree holders in 2010.

  • And why do those Astronomy and Astrophysics people** have jobs?

    Earth to [Phil Plait of] Bad Astronomy: your short-list of fully-employed science majors is totally cherry-picked….And all those astronomers who have plenty of jobs? Guess what: they’re employed because they work for the government. Yep, that’s right, the same government whose ability to provide employment Phil laughs at.

    *Raise your hand if you’re surprised by this. Mine is not up.

    **Full disclosure: I speak as someone whose wife’s cousin, with a Ph.D. in Astronomy & Astrophysics, currently has a Fellowship in the Astronomy department at DeLongville.

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    Obama’s First Fifteen Months, Composite Edition

    Brad DeLong has two posts, one from Ezra “I’m a liberal who is safe for the Washington Post” Klein and one from Mike “I actually looked at the data” Konczal.

    Brad deals with Ezra’s folly:

    I think a B+ is too high a grade–largely because one big task of 2009 was to set up the situation so that you could still make policy in 2010 and 2011 if it turned out that you needed to.

    And that’s without mentioning that the Administration violated the first law of Presidencies; the one George Effing W. Bush knew well: give your base something early, so they know you didn’t just come to them for their votes. Bush gave his “faith-based initiatives.” Obama—who campaigned on card check, principal reduction, and his father being Jor-El—only went for big-ticket items.

    Mike goes in detail over the ground I discussed here: the idiocy that is the 2010 State of the Union Address, delivered 27 January 2010. With contemporaneous detail. Go Read the Whole Thing.

    It’s not just bad economics, it’s bad politics. Which brings me back to Matt’s lazy first graphic, which means I’m going to beat the dead horse again. Below the fold.

    I called it “lazy” because it is; it’s raw data, and you don’t just look at raw data in isolation, at least if you’re sane. You don’t do it if you’re an economist, and you don’t do it if you’re a politician.

    As an economist, you don’t just look at unemployment; you look at unemployment in relation to other things—causes, effects. GDP gaps, demographics, transitions from one sector to another, you name it. It’s nice to see data, and flows, but they have to mean something.

    Political analysts—if they’re any good—don’t look at data in isolation either, especially when they have Austan Goolsbee, Alan Kreuger, Christina Romer, and even Lawrence H. Summers working with them. Any one of those four—let alone all of them, often in the same room, if not always the same discussion—could tell David Axelrod that the U.S. needs to create between 110,000 and 150,000 jobs a month just to tread water on unemployment. Maybe they ballpark it at 125,000. So instead of Matt’s original graphic, David Axelrod would have seen something like this one:

    And if he’s still talking about how his boss will have nothing to worry about in two years, well, I’m certain that Goolsbee, Krueger, Romer, or Summers—all of whom were still at the White House during that time—would have set him straight.

    And there would have been another policy, a change of course. Or a really bad Unforced Error.

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    Reid’s Plan for Job Creation

    by Linda Beale

    Reid’s Plan for Job Creation

    Harry Reid announced on Wednesday (Oct. 5) that the Senate would take up Jobs Act legislation (S. 1549) soon, but that the offsets in the president’s proposals would be replaced by a 5% surtax on those making more than a million that would raise about $445 million.  See Bolen & Lorenzo, Senate to Debate Jobs Bill Paid For with 5% Millionaire Surtax, BNA Daily Tax Report 194 DTR G-7 (Oct 5, 2011).

    Note that this means that, once again, Congress will punt on the question of taxing fund managers fairly on their compensation, since the carried interest provision would be one of the offsets replaced by this provision.  The carried interest provision should be passed no matter what other offsets are used.  It is an unfair provision that treats fund managers as a specially protected category of worker with preferential rates on their compensation income.  Time to end it, once and for all.

    Not surprisingly, GOP senator Hatch complained that this small surcharge on millionaires would be a “massive” tax increase on “small businesses”.  Id. How many times do we have to remind Congress that most small businesses don’t make millions in profits, that those who have millions can pay a 5% tax without undue distress (compared to those with a ten dollar bill being able to support their family with food and shelter), and that 5% of $1 million is not a “massive” tax increase.  50% of $1 million might be, but 5% is simply not.

    Also posted at ataxingmatter

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    Why Are You Out There?

    When someone attempts to impede democracy actions are good things:

    Writer and naturalist Henry David Thoreau was once locked up for refusing to pay a poll tax. He opposed the tax on moral grounds – in a democracy, he argued, a man shouldn’t have to pay to vote….

    That night, so the story goes, Thoreau looked up from his jail cell to see Ralph Waldo Emerson…standing outside. Emerson looked at him and asked, “Henry, why are you in there?” Thoreau fired right back: “Ralph, why are you out there?”…

    The man outside the bars may be every bit as much a prisoner as the one inside. Or even more so, if his so-called freedom is built on a foundation of denial and lies.

    Now, Thoreau was anything but a Christian. That particular idea, though, was downright Biblical. It’s more or less what Jesus is getting at [in John 8:31-47]. Jesus is comparing two kinds of freedom: the outward kind, built on a foundation of happy lies and outright denial, which in the end turns out to be just another kind of slavery; and the inward kind, which comes from a clean conscience before God, and can never be taken away.

    Far be it for me to cite The Sequel; I’ll take Bentleyville’s current Presbyterian minister* at his word. And tell anyone who happens to be in the area of One Liberty Plaza this afternoon to say “hello.”

    *Full disclosure: one of the previous Ministers is an ex-roommate of mine. That said, the above was found from a Google search, purely a fortuitous coincidence. At least as far as I know.

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