Month: November 2021

As Paul Krugman points out, the three principal components of the Biden bills, taken as a whole, are climate change mitigation, infrastructure, and funding for children. All three components involve investments that should pay off handsomely in terms of social health and economic well-being in the future. None of them, however, is focused primarily on the here and now.

You can certainly make a strong argument that investing money for the future is a welcome change from past practice. The problem with children, however, is that they do not have a vote. Coal miners, on the other hand, do. If you are looking for an explanation as to why the BBB may not pass, you could do a lot worse.

If you pay too much attention to the network news, you will conclude that the country is in decline, and is in desperate trouble. Prices are soaring; the virus still rages; there are no goods on the shelves; and no one is in charge, except the cultural left. Things could hardly be worse.

But seriously? If you’re a businessman, you’re probably generating excellent profits, and the value of your company has gone up in 2021. If you’re a retiree, your Social Security is about to go up by six percent, and your investment income is doing just fine, since the markets are doing perfectly well. If you’re a formerly unemployed worker, you either have a job that pays better, or the luxury of waiting for a new opportunity, courtesy of savings deriving from enhanced unemployment benefits. If you had a job the entire year, your income on its face may not have kept up with inflation, but the stimulus payment left you in an overall better position, even after inflation.

The answer to the question is everyone. The problem is that we have short memories, and the media only focus on today–not the bigger picture. What stimulus payment? What new job? What improvement with the virus? What additional savings? That’s so, well, June.

Biden’s decision was consistent with his bipartisan brand and with pre-Trump tradition. Furthermore, Powell hasn’t taken any actions that have been inconsistent with Biden’s economic plan, and he has the confidence of the markets. The reappointment consequently was the right thing to do.

Following “Empire of Cotton,” about which I posted two years ago, an essay in the 1619 Project apparently views slavery as a manifestation of capitalism, which has obvious implications for our socio-economic system today. Jamelle Bouie similarly argues that systemic racism has its roots in capitalism. Is this line of thinking correct?

No. Southern cotton plantations might have been part of a large, globalized industry, but they were no more “capitalist” than a Roman plantation similarly run with slave labor 2,000 years earlier. Notwithstanding the arguments about the pervasiveness of the cotton business in antebellum America, capitalism survived and thrived after slavery was abolished. Even today, the cultivation of cotton is an extremely labor-intensive business that involves practices which look a bit like slavery in foreign countries. In short, cotton production is an aberration within the capitalist system, not the norm.

The bottom line is that slaves are property, and workers in a capitalist system, regardless of whether the balance of power with capital operates in their favor or not at any given time, are free agents. Slavery is the antithesis of capitalism, not the product of it. As to racism, our money is green; it doesn’t see black and white–hence, the growth of “woke capitalism.”

The Democrats, as expected, lost control of both houses of Congress in 2022, but the result was a mixed bag for the GOP. The voters expected Republicans to behave responsibly in power, but where’s the fun in that? The 2021 welfare state legislation remained in place, and the outrageous, Trumpist antics of the GOP House and Senate gave Biden an easy target for the 2024 election.

In 2024, the GOP didn’t just have to deal with Trump’s baggage; they supported clawing back the benefits in the 2021 legislation, which was hideously unpopular among swing voters. All of the screaming about socialism and debt that resonated in 2022 had a completely different impact when it threatened the pocketbooks of swing voters. The Democrats consequently went into the election as huge favorites.

It was supposed to be Karl Rove’s masterstroke: the GOP would create a prescription drug benefit for seniors; seniors would be permanently grateful; and the GOP would enjoy a permanent majority as a result. It didn’t work. The voters knew the Democrats wanted a plan that was even more generous to seniors, and other, more pressing events intervened. The GOP was crushed in the 2008 elections.

On a similar note, Obamacare was a huge loser for the Democrats in 2010, as the media and the electorate focused on its flaws, not its benefits. But by 2018, the picture had changed. When the GOP presented a clear and present danger to Obamacare, the voters decided the program was well worth keeping, and the results of the midterms reflected their concerns.

What’s the message here? That the voters are initially skeptical of welfare state expansions, but resist any attempt to claw them back once they are in place. That has implications for the 2024 election. I will discuss that in my next post.

Inflation is typically (not always–think of the various oil price shocks created by a cartel) caused by an excess in aggregate demand for goods and services over supply. The Fed generally responds by increasing interest rates. This makes it more difficult to borrow money to purchase goods and services, which reduces demand, which consequently brings prices back into line.

But what about today’s conditions? There is no demonstrated excess in aggregate demand for goods and services–only a diversion of demand from services to goods as the result of the pandemic. And, with trillions of dollars sloshing around in savings, it is unnecessary for most people to borrow in order to buy goods. So, under the present circumstances, how can it help for the Fed to raise rates?

It can’t. We need to see more evidence of overheated aggregate demand and increased borrowing before there is any plausible justification for raising rates.

Nancy Pelosi has come to the White House for a victory lap after the passage of the safety net and climate bill. She is greeted warmly by President Biden.

B: Madam Speaker! Congratulations!

P: And to you, Mr. President.

B: I know how hard you had to work to win this one. It’s another big f@#$# deal! It’s even bigger than Obamacare!

P: Yes, it was a big one, and it was tough. It took everything I had.

B: You’re going to go down in history as one of our most consequential Speakers. Particularly compared to your recent GOP compatriots. They couldn’t get anything done, even with a party that was supposedly less fractious than ours.

P: Well, they can always do tax cuts. That’s about it, other than supporting insurrections and trying to own us.

B: So, where do we go from here? We’re under water in the polls. And there’s Manchin and Sinema, of course.

P. We need to sell this to the American public–HARD! No more talk about the price tag–it doesn’t matter that much, anyway. Let’s go on TV every day and talk about what it means for real Americans. At this point, given the media we’ve gotten, expectations are really low, so everything we deliver will be a bonus.

B: True.

P: Manchin and Sinema, I’m afraid, are your problem. Use that famous Irish charm. Talk about what it means if we can’t get anything done, and Trump comes back. Do whatever it takes. Our chances of surviving in 2022 and 2024 depend on it.

B: Understood. We just need to cut through the malarkey about socialism and talk about real help for real Americans. That’s what this bill is all about.

P: That’s right. So go for it, Mr. President. God bless you, and America. (She leaves)

Assume, for purposes of argument, that the human capital bill doesn’t pass. Assume further that, for reasons that are mostly unrelated to government spending, inflation subsides before the 2022 elections, and the virus is under much better control. All of these assumptions are perfectly reasonable. How does it play out?

The window to make fundamental changes to the dollar store economy will be closed, of course. But the markets will be very happy, and workers will be able to pocket the wage gains the Great Resignation made possible. The economic argument against the Biden economy from both the right and the left will be pretty weak. In short, conditions may be much better than we think today, and the election results should reflect that.

It isn’t inevitable, but based on current trends, it is more likely than not: the GOP is going to tighten its ties with right-wing militias. There are two ways this could happen. The first possibility is that some as yet unknown charismatic figure could succeed in expanding and merging the current ragtag groups and then become a prominent figure in the GOP. The second is that the existing GOP leadership could become more closely affiliated with the militias, and learn to call on them for action every time just owning the libs on Fox isn’t good enough.

As of today, the second option is more likely. The militias would become a universally recognized, but lightly denied, military wing of the GOP. The IRA to the GOP’s Sinn Fein, as it were.

Anyone who has studied revolutionary politics at any length is familiar with the concept of the J-curve. The name comes from a graphic depiction of an increase in national economic performance, followed by a decline. The gist of the concept is that rising, but then frustrated expectations lead to political instability and violence.

From what I have read and experienced, Gen Z is at the end of a vector of individualism and entitlement that began with the Baby Boomers. According to the NYT, they even shock millennials with their demands in the workplace. They believe that an emotionally, intellectually, and financially rewarding job is their birthright. They rebel against employers who refuse to provide it.

The problem is, we need more plumbers, electricians, and construction workers, not social media influencers. What is going to happen to the overeducated, highly indebted, and underemployed members of Gen Z when their expectations of the dollar store economy are unrealized? Are they simply going to agree to live with the constraints on the economy that are a key part of the McConnell Project, or are they going to lash out at the workings of the political system itself?

I would bet on (b). It isn’t going to be pretty.

I read an article a few days ago which projected that the Democrats could well have as few as 43 Senate seats by the end of the decade even if they enjoy majority support in the nation as a whole. With that in mind, does getting rid of the filibuster really sound like a good idea, even if it make a lot of conceptual sense?

Didn’t think so.

I have no doubt that Kyle Rittenhouse sincerely believed he was acting in self-defense. But do the facts bear that out? Consider the mind sets of the actors in the following three episodes:

1. Rittenhouse has an AR-15, which he may or may not be pointing at the protesters. An angry unarmed man approaches him. Based on his demeanor and previous behavior, Rittenhouse believes he is attempting to grab his gun and shoot him. In other words, he is making the worst case assumption about the intentions of an unarmed man. But what about the unarmed man’s state of mind? Why should he assume that Rittenhouse has no interest in using his gun aggressively–to kill protesters without provocation? Isn’t he also making a worst case assumption, in all likelihood? Why is his assumption that self-defense is required less rational than the shooter’s?
2. Rittenhouse shoots and kills the first man. A second man, armed only with a skateboard, approaches. Rittenhouse once again assumes that the man intends to kill him, and shoots him dead. But what about the man with the skateboard? In light of the fact that Rittenhouse has already killed one person, why wouldn’t he assume that he intends to kill many more, and that disarming him is the only solution?
3. A third man, this time armed with a pistol, approaches and is shot by Rittenhouse. Once again, why wouldn’t he assume that Rittenhouse is a serial killer, who has to be disarmed in the name of public safety, and not just a kid who wants to protect private property from rioters and looters and thinks his life is in danger?

The bottom line here is that, in order to acquit Rittenhouse, the jury has to accept the defendant’s view of the likely motives of the victims, while ignoring the victims’ more reasonable perceptions of Rittenhouse. The difference between the two is that Rittenhouse created the dangerous situation by showing up with, and actually using, an AR-15. Acquitting him will send the message to the community that a right-winger with a gun is always entitled to the benefit of the doubt, regardless of the circumstances, while their victims are not. It will encourage the creation and expansion of right-wing militias, to the ultimate detriment of our political system.

At any previous time in history, the pandemic, with the resulting lockdowns, would have resulted in a sharp decline in the demand for goods. Consumers would have been unable to visit stores to buy anything. Prices would have declined in response to the drop in demand. We would have experienced a sustained bout of deflation.

But enter Amazon, which made shopping from home a realistic possibility. Services were mostly out of reach, but goods could be purchased, and were. Consumers consequently diverted their purchases from services to goods. The result was inflation, not deflation.

And so, a company that made the buying process more efficient, and reduced price levels under normal conditions, was partly responsible for the ongoing, and largely unexpected, burst of inflation.

Unlike his colleague Jamelle Bouie, who writes crunchy columns based on rigorous historical research, Charles Blow typically just whines about the evils of white supremacy without providing any useful descriptions or original analysis. For that reason, I rarely bother to read him. His column in today’s NYT, however, actually contains some useful information that he should find embarrassing. It is worthy of my comment.

The gist of the column is that surveys show that light-skinned Hispanics are subject to less discrimination than dark-skinned Hispanics. Worse, from his perspective, light-skinned Hispanics identify with white people and discriminate against dark-skinned Hispanics themselves. So, it seems, a future America that is no longer majority Caucasian is not guaranteed to be sympathetic to black people.

True enough; the real demographic bomb for the GOP is young people, not Hispanics. But what does this mean for supporters of the 1619 Project? How do its authors make the case that America is exceptional–an evil empire, if you like–due to its undying racism, if Hispanics are no better? Where do they go from here?

Nowhere, if the NYT has any sense, which is questionable in this case.