Month: October 2021

The dollar store economy, for the most part, has very, very good for business. Globalization has opened up new markets and increased revenues, while the internet, the availability of cheap overseas labor, and capital-friendly GOP tax and regulatory policies have kept costs down. Profits and share prices have soared. Life is good.

And yet, as the saying goes, there are storm clouds on the horizon. Globalization is in reverse, as the result of tensions between the US and China. The poorly paid workers that business so prizes can’t afford to buy their products. Worse, they are angry and restless; the pandemic is causing them to quit their jobs, so wages are increasing. Finally, business is losing control of the political agenda. The left is in power, and wants to increase taxes and regulations; the Trumpist right, on the other hand, favors a less profitable Fortress America, with lots of arbitrary intrusions into business operations.

Business, like the EU, desperately wants to cling to the status quo, and to avoid having to choose between two less attractive alternatives. It wants the dollar store economy with higher domestic demand. It won’t happen. Something, in the end, will have to give. The good old days ended in 2020.

We’re deferring the debt ceiling war.

We’ve pushed it back seven weeks more.

We’re kicking the can,

Unlike Afghanistan.

It’s a practice we ought to deplore.

The lead story on the local TV news a few days ago was the Covid-related deaths of two police officers. The memorial service for one of them basically preceded a parade in his honor. There was no discussion of his vaccination status, but it is reasonable to assume he was an anti-vaxxer.

None of the other Covid-related deaths in the viewing area received any mention. In other pertinent news, the NYT reported that the vaccination rate for cops on a national level was relatively low, and that police unions were fighting vaccine mandates ferociously.

Here is what you should take from these facts:

1. Anyone who gets paid by the public to put on a blue uniform is apparently viewed as a hero, whether he actually does anything heroic or not. Blue lives don’t just matter; they matter more than yours and mine.
2. A frightening percentage of cops are reactionaries. They don’t care about the public health and welfare as much as enforcing their view of law and order on the rest of us. In their eyes, they have the right to spread the virus among us—our bodies, their choice, because they’re in charge.
3. If we ever get into a serious street battle between supporters of a duly-elected leftist government and right-wing insurgents, do you really think we can count on these people to enforce the law, as opposed to their own prejudices? Do you think it is a coincidence that so many of the January 6 rioters were military and law enforcement types?

If you’re an extremely talented and artistic young person with a flair for self-promotion, the dollar store economy is for you; the internet has made it possible for you to reach millions of people around the globe directly, and without serving any kind of apprenticeship. Everyone else in your cohort, however, is just screwed. The combination of low wages and high asset prices—especially for housing—that is so helpful to retirees is toxic for you.

To make matters even worse, many millennials are trained for fulfilling, creative jobs that do not exist. They would be better off as plumbers or electricians, but working with your hands is for old people and immigrants.

On balance, the dollar store economy is a nightmare for millennials, which is why so many of them are Sanders supporters. But cheer up, guys; you will inherit lots of money along with the damaged planet, so help is on the way.

Jake Sullivan has come to the Oval Office to talk about Pakistan. Harris is off trying to improve her image, which could use some help.

S: We need to discuss our relations with Pakistan, Mr. President.

B: What, the malarkey capital of the world?

S: What do you mean by that?

B: Probably the only thing you could get Bush, Barack, and Trump to agree on is how tired they were of dealing with those people and their lies. They lied to me, too. The best thing about being out of Afghanistan is that I don’t have to deal with them anymore.

S: But they’re still there, they still have nuclear weapons, and they’re still being threatened by Islamic terrorists. As much as we might want to ignore them, we can’t.

B: Watch me. Let the Chinese deal with them. If they want to run that part of the world, let them find out how easy it is.

S: But the terrorists, and the nuclear threat.

B: They don’t have any way to deliver their nukes to the United States. They’re less of a threat than North Korea. Anyway, the Pakistani government will lean so heavily in their direction, there won’t be any real difference between the government and the terrorists. That’s the way these things work in the end.

S: They want to make nice with us now that the war is over. They don’t want to be a Chinese client state.

B: So they want to sell themselves to the highest bidder. I don’t have any interest in playing that game. We’re all in with India. The Chinese can have them.

S: Aren’t you worried about the impact of a war over Kashmir?

B: Instead of taking all of the responsibility for preventing a war, we can do a deal with the Chinese. Xi doesn’t want a Kashmir war any more than we do.

S: What do you want me to tell the Pakistanis?

B: That liars never prosper, and that Americans have long memories. (Sullivan leaves.)

Here is where the factions stand on Social Security and Medicare:

1. CLs: Entitlement programs, regardless of the identity of their beneficiaries, are an assault on freedom and a drag on the economy. They lead to socialism and drive the lazy and unworthy into the hammock of dependency. They should be cut to the maximum extent possible.
2. CDs: There is no market mechanism which insures that the elderly will have a decent standard of living and adequate health care. Social Security and Medicare must be protected, and even expanded, if possible, because the value of human life is not dictates by economic productivity.
3. PBPs: Entitlement programs drive up our costs. Cut them if it is politically possible, which may not be the case. Don’t expand them under any circumstances.
4. Reactionaries: Get your government hands off my Medicare! As a hard working white Christian, I am entitled to that money. Don’t even think about cutting programs for which I paid all my working life and which primarily help real Americans!

When the PBPs drove the GOP bus, entitlement cuts were party orthodoxy. Trump and his Reactionary supporters changed all that. A day of reckoning is approaching; the trust funds are running out of money, and something—either tax increases or benefit cuts—will have to be done. Which faction will prevail? We’ll see in a few years.

Retirees, by definition, are not dependent on wages. Most of them (at least the ones who are politically influential) live on a combination of Social Security and investment income. The former is fixed by law; the latter is driven by the performance of the markets, which in turn reflects costs, including employee compensation and levels of corporate taxation. Retirees also fear inflation, as it erodes the value of their savings.

You can see from this analysis that retirees are among the chief beneficiaries of the dollar store economy, which offers them low inflation and high asset prices. The status quo isn’t just for business owners. Is it any wonder that the elderly are reliable voters for the GOP?

I often refer to the “dollar store economy” in my posts. What does that mean?

A dollar store economy is characterized by: low wages, inflation, and interest rates; high profits, asset prices, levels of foreign trade, and inequality; and sluggish growth. The low wages are the product of regulations favoring capital over labor and the availability of an enormous workforce overseas. The low inflation and interest rates result from the low wages and an aging population. The high profits and asset prices are caused by the low wages, low taxes on capital, greater access to foreign markets, and the lack of investment opportunities at home due to a shortfall in demand. The high levels of foreign trade are a driver of inequality and sluggish growth, because they reduce wages (and, therefore, demand) at home and provide additional markets abroad.

The poorly-paid workers can only afford to buy goods at dollar stores; as a result, the wealthy invest in them, but not businesses catering to the middle class.. Hence, my name for the economy.

Over the next week, I will be looking at this phenomenon from a variety of different angles, and exploring the plausibility of alternatives.

There is plenty of consternation about pandemic-related inflation. Should the Fed respond by increasing interest rates?

No. Inflation is caused by an excess of demand relative to supply. Raising interest rates will do nothing to increase the supply of anything; in fact, it could deter investment that would improve productivity and eliminate bottlenecks. As to demand, it is less driven by borrowed funds than by savings generated during the height of the pandemic and a diversion of spending from services to goods. How will increasing interest rates address those factors?

The bottom line is that we are dealing with a large number of temporary issues that will go away in time. It would be a mistake to overreact in the short run.

If you are a reactionary, your view of American history probably runs something like this: America was settled by white Christians; by their own grit and godliness, and without government assistance, they made America great; they therefore are the only true Americans, and are empowered by God to run the country; their predominance is threatened by haughty, over educated liberals, minorities begging for handouts, and uppity women; so real Americans have the right to do anything in their power to remain in charge.

Left wing Twitter activists tell a different story. To them, America is, was, and will always be an irredeemably racist and sexist country. The story of America is one of oppression. Liberals, on the other hand, see the central narrative of America as the struggle for the perfect union. This is an ongoing effort, and one with plenty of failures, but the end is a liberal democratic system in which the rights of everyone are respected, and even embraced. It is a happy ending.

All of these narratives encourage their adherents to disregard or distort inconvenient facts, but not to the same degree. The liberal narrative contains more humility (it acknowledges that backward steps are always possible), and it actually fits the facts better than its competitors. Life for women and minorities may not be perfect in today’s America, but do you really think nothing has changed since 1619, or even 1950? On the other side, do you really believe the band of religious skeptics who wrote the Declaration and the Constitution intended to give right-wing Christians a perpetual monopoly on power? Only in their fevered dreams.

At some point, the extremely left-leaning Kyrsten Sinema had an epiphany. Politics were less about ideology and more about finding common ground and getting things done. In addition, she had John McCain as a role model. She would be an independent voice working with both parties to make America a better place.

The vision sounds plausible, but it comes with three problems. First, McCain, in spite of a few notable deviations, mostly adhered to the GOP party line. Second, if your intention is to work with both parties, you need to explain what you want, and why. Sinema doesn’t do that; displaying independence seems to be the objective, not a means to an end. Finally, Sinema seems to delight in tweaking the left. How does that help her make deals with them?

Manchin, I get. He tells the world what he wants, and he is willing to make deals. He really should be viewed as a Republican with an economic populist streak that doesn’t fit in the current GOP. With Sinema, who knows?

The narrow Republican victory in the two special elections gave the GOP control of the Senate. This had two important results: first, the progressive wing of the Democratic Party lost any illusions about its ability to enact its agenda; and second, the GOP was forced into a partnership of sorts with Biden. Nihilism doesn’t work when you’re in charge, at least in part.

Confirming judges became a more contentious process. On the other hand, there were no issues with the debt ceiling or government shutdowns, and the bipartisan infrastructure bill passed without a whimper from the progressives. There was no talk about major changes to the welfare state, except, of course, on Twitter. The dollar store economy remained unchallenged.

The bottom line here is that we tend to forget that the voters didn’t give progressives any kind of a mandate for dramatic change in 2020; it was the surprise outcome of the Georgia elections that changed left-wing expectations. In a way, Manchin is right; if you want huge reforms, you need to elect more liberals.

Polls consistently show that the majority of Americans want abortion to be legal, but subject to significant restrictions—a common sense position that is at odds with the extremists in both parties. That being the case, is it not therefore likely that we will see most of the red states take moderate positions when the Supremes finally thrust the last dagger into the back of Roe?

Dream on! It could have happened prior to 2016; at that point, the PBPs still controlled the GOP, and they were worried about a backlash from women. Today, the Reactionaries dominate the party, and their solution to any electoral problem is to double down, gerrymander, and suppress votes. As a result, the only debates that will take place—and they will be muted—will revolve around rape and incest.

Ross Douthat thinks the left should be celebrating. After all, neoconservatism is dead, the culture wars have been won, and we are on the precipice of a massive expansion of the welfare state. Is he right?

Not really. The demise of neoconservatism was as welcome to the reactionary right as to the left, so you can hardly count it a liberal victory. On the culture war front, red states have started to use their political power to shut up the left, and the Supreme Court is poised to eliminate left-wing rights and further enshrine those appreciated by the right. The welfare state expansion may very well not pass. Finally, the likelihood of a soft coup by Trump and his acolytes is greater now than at any time in his presidency, because it will have the support of the mainstream of the GOP.

I don’t see any reasons for celebration here. There is no realistic prospect of getting out of the woods until the 2024 election.

The debt ceiling is a relic from the days when it was assumed that balanced budgets were the norm, and the sale of government securities to finance debt would be a rarity. Today, its only purpose is to give Mitch McConnell the ability to blackmail the Democrats. Period.

There is a decent, if not necessarily compelling, argument that the filibuster promotes moderation and a valuable degree of continuity in the Senate. Is that a reason to keep it in place for the debt ceiling? No, because, unlike any other issue that comes before the Senate, there is no case for a public default. Even McConnell acknowledges that; he only values it for tactical purposes.

Since the debt ceiling is just an idiotic blight on our political landscape, removing it from the filibuster should be a simple task; it doesn’t create a precedent for anything. Surely Manchin and Sinema can see that. Right?