Category: Economics

Americans Serious about Climate Change? Tell Me Another Whopper

[WARNING: many readers may find the following a downer—but if you care about facts, you must be willing to look at all kinds of Inconvenient Truths.] 

U.S. public on climate change: a crisis in name only

The September 20th Global Climate Strike has been inspiring—for those seriously concerned about global warming and climate change.

It’s less inspiring to read of how not-serious most of the American public is. A week before the Climate Strike, the release of a Washington Post/Kaiser Family Foundation poll headlined “Americans increasingly see climate change as a crisis” appeared to portend a sea change (pun partially intended) in attitudes toward climate change.

Read on for what underlies appearances.

The takeaway from the poll is that the public says, big problem—let somebody else take care of it. Consider that 38% describe climate change as “a crisis,” and another 38% describe it as “a major problem but not a crisis.” However, to combat climate change only 37% say major sacrifices will be required, 48% say minor sacrifices, 14% “not requiring much sacrifice,” with 1% having no opinion.

Next we read that “nearly half of adults say they would be willing to pay a $2 monthly tax on electricity to help combat climate change.” If that sounds promising,  the report says just 27% would pay $10 extra a month. Meaning that at best 27/38 (71%) is the fraction of those saying the threat is “a crisis” would also pay $10 extra a month. $120 a year. Hmmm . . .  33¢/day = a bit more than 1/6th the price of a “tall” cup of Starbucks coffee.  Now that’s what I call a major sacrifice!

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Hollowing out of the Middle Class: a Second Look

Middle class hollowed out? Kind of. Unhappy? It depends . . .

Progressives like Bernie Sanders and Michael Moore are fond of excoriating the rich and powerful for the “hollowing-out of the middle class.”  What they fail to mention—either for lack of information or for political expediency—is that, money-wise, more families are leaving the middle class on the upside rather than the downside.  There’s plenty of evidence for this.  Check out the following, which is similar to other reports, but I especially like it because it is based on Pew research findings:

https://qz.com/1005068/the-upper-middle-class-is-the-new-middle-class/

A larger segment of the middle class, it seems, is rising into the highest  and upper-middle class than is falling into the lowest class (the lower middle has remained unchanged), and the net effect, dollar-wise, of “hollowing out” appears to be a positive.   Is this a Good Thing?  After all, can’t money buy happiness?

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Gambling with Other People’s Money: Trump Trade Wars

How easy to win are trade wars?

Vainglorious boaster President Trump, having declared trade war against much of the developed world,  assured us that trade wars are easy to win.

??  Maybe, and maybe not. I’m no economist, but I have noticed that the majority of mainstream economists and many business leaders have opined that trade wars are bad for everyone.  They are particularly bad when they slow down the global economy as a whole, in an age where the global economy is increasingly THE economy that really matters in the long run.

On the other hand, seasoned economist Irwin Stelzer proposed that Trump’s trade war “really might be easy to win.” Stelzer on trade war

The basis of Stelzer’s conjecture is that the U.S. economy dwarfs that of any one of its economic adversaries (euphemistically called “trading partners”), excepting China, and they need the U.S. market more than the U.S. needs theirs. Secondly, if foreign tariffs really were as relatively disadvantageous to us as Trump claims (and Stelzer seems to agree), greater parity could put those foreigners on the ropes.  As Stelzer points out, a German auto industry’s proposal to eliminate tariffs is a sign that some foreign businesses are seeing trouble ahead with the status quo.  The status quo is that EU tariffs on U.S. automobiles have been five times that of the America’s on theirs.

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Robots Coming for Our Jobs? – Not So Fast

Reassuring News on Automation and Employment?

A recent study led by Melanie Arntz, acting head of the labor markets research department at the Center for European Economic Research,*  addressed the specter of massive unemployment due to automation.  It concluded that the risks of robots taking our jobs has been exaggerated.  Looking forward 10-20 years, it revises downward the estimates of job losses in the U.S. from 38% to 9%.  As we know, doomsayers (such as I) have forecast job losses more like 50% by 2040.

Here’s a link to the study, where you can download a free .pdf: Revisiting the Risk of Automation

The paper, released in July 2017, is chock-full of jargon and hairy statistical equations, but the thrust of it is commonsensical: scary scenarios of massive job losses** fail to take into account what the authors call “the substantial heterogeneity of tasks within occupations” [emphasis mine] “as well as the adaptability of jobs in the digital transformation.” (I take this language from the abstract, which nicely encapsulates the study and findings in the nine pages that follow.)

These findings stem from an approach that distinguishes between occupation-level work and  job-level work.

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Will Work for Crumbs: Why Republicans May Hold the House

Pocketbooks will fatten just enough to get scammers on the congressional Right re-elected

It couldn’t be more transparent, that the middle class has been bought off with token tax relief in the Republican tax bill, while billionaires and corporations continue to top up their coffers with still bigger tax breaks.

But the transparency doesn’t mean much, since the cynical middle class has had to resign itself to getting Something rather than Nothing for the last few decades.  They’re inured to it. Now a few crumbs tossed to ordinary folks will suffice to keep Republican politicians in the House afloat for at least another year.  That’s because elections usually turn on pocketbook issues, and if by November the average taxpayer has received $1,500 worth of reductions  in withholding, then s/he will settle for the status quo. (Even a status quo with Trump at the helm, as long as he does not actually start a major war.) Put that together with gerrymandering, and seeing that the House Republicans would have to lose 46 seats to lose majority, I imagine they will hold it.  Especially because there are bound to be more rounds of attempting to repeal the ACA—even though McConnell is now loathe to touch it in the Senate—which will rally the conservative base.

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How to Cripple an Economy, Part 1: Inequality

Does inequality matter in the big economic picture?

I’m not going to discuss here why economic inequality is worsening.   That it’s getting worse is an unarguable fact. What drives the worsening is not yet perfectly clear—is it mainly the inevitable outcome of market forces, or is it a side-effect of “rent-seeking” by rich folks and rich corporations?  (I will treat rent-seeking issue in another post.)

Does increasing economic  inequality harm the economy as a whole? Does it suppress growth in total wealth? (Agreed that definition of “wealth” is slippery.  IMO the Gross Domestic Product does not exactly measure wealth, since it includes the production of a lot of Stuff no one really needs, some of it downright absurd, such as the more than two billion annually spent on Halloween costumes for pets. But the movement of the GDP is the best guide we have to economic growth, or the lack of it.)

I’m not addressing the somewhat different issue of fairness here.  It is obvious that huge inequalities are  unfair to those on the lower rungs. Enough people are talking about that, that I don’t need to chime in.

Aside from fairness, does the canard that the “Rising Tide Lifts All (or most)Boats” hold, when economic inequality is a main driver of the tide?

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How to Cripple an Economy, Part 2: Taxes

A Bad Joke in Search of a Punch Line

This post was prompted by an anecdote concerning a meeting top Trump  economic adviser Gary Cohn had with a number of high-flying corporate executives. He asked for a show of hands of those who would use benefits from the corporate tax cut to reinvest in their business, or some other business, in the U.S.  A few hands went up. Most did not.  The administration’s heavy hitter asked (I believe these were his literal words), “Why aren’t there more hands up?”

The answer from execs who failed to raise their hands was, they already had plenty of money, there just weren’t many opportunities to invest in.  And that’s because . . . (is this the punch line?) consumers weren’t spending!

Oops! Went a tiny voice in Gary Cohn’s shrinking brain.

Of course, what holds for corporations also goes for rich individuals who can only spend so much money until they are sated.  After a certain threshold, they buy things not for use, but for bragging rights.  Not avarice, but ego ego ego.  My yacht is bigger than your yacht, and everyone knows that Size Matters.

I first heard this anecdote on NPR but unfortunately cannot find the segment where their sharp correspondent identified it (sheesh! – forgot her name too—sorry, sharp reporter!).

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How to Cripple an Economy, Part 3: Wealth Gap Multipliers

[One note here at the outset:  the wealth gap multipliers are not really “hidden pieces” as my headline below implies, but they are pieces that most people don’t think about when they speak of income disparities and tax policy. But they are pieces you can’t separate from the whole picture of economic disparities, and are arguably just as important a topic of discussion as income taxes.  Bernie Sanders speaks about it, but unfortunately his bombast tends to cause independent voters—the ones who increasingly make the differences in elections—to tune out.]

Hidden Pieces of the Tax and Wealth Puzzle: Wealth and Wealth Gap Multipliers

Regardless of specific amounts, even at comparable incomes (say, within one order of magnitude, $75,000 to $150,000), those with wealth behind them are many times more secure than those with little wealth.  (Note that I plucked these numbers out of national averages; of course incomes and expenses are far greater in many major cities and upscale suburbs.  Incomes are far lower among the poor and much of the lower middle class, of whom to speak of their nonexistent “wealth” is a bitter irony.)

To state the obvious: the wealthy have something to fall back on in hard times and personal emergencies.

Moreover, their wealth expands through wealth multipliers.

I have not looked at exact disparities in wealth in the U.S. for 20 years, since it was bad then and has obviously been getting worse.  The Great Recession of 2007-2009 amplified the wealth disparity, and it  hasn’t improved since then. (For a good idea of where it’s all going, read Plutocrats by Chrystia Freeland. )

Multiplier Number One, Race: note that the hardest hit are people of color, where the wealth gap is worse than for whites, and widening: see CNN analysis at Racial wealth gap in 2016

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World Order 2.0 and National Debt

Richard Haass Stumps for a Reset of World Order, Targets National Debt

Centrist Big Thinker and President of the Council on Foreign Relations Richard Haass has a new book out, The World in Disarray: American Foreign Policy  and the Crisis of the Old Order. As I gleaned from an interview on NPR’s Morning Edition today, and from the summary offered on Amazon, he’s looking for a reset (my word) of our foreign policy that recognizes our limitations but still projects our strength—reflecting “the reality that power is widely distributed and that borders count for less.”

In case you were wondering, Haass was pretty satisfied with the world order from the Cold War up through September 11, 2001. It may have been a tense world order, but at least it was orderly. Sort of.

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