Category: Political economy

A Dozen Ways to Slay Inflation

tomkapostasy2 Comments

1. Blue Ribbon Panel

Imitate the 1983 Greenspan Social Security committee.

https://www.washingtonpost.com/archive/business/1988/03/27/a-blue-ribbon-challenge-to-nations-red-ink/fe86db9f-2abf-49bb-8a1f-1e4c96c285ae/

6-month time limit. A dozen or less bipartisan dignitaries. Retired ambassadors, investors, CEO’s, federal reserve presidents, etc. Make Mitch Daniels the chair.

https://www.theatlantic.com/magazine/archive/2020/04/mitch-daniels-purdue/606772/

Assign 2 projects. One to cut government waste. The other anti-inflation policies. No more than a dozen recommendations in each half. Presented to congress for simple yes/no vote, without major amendments allowed.

2. Spend Less Government Money

Fiscal spending is too expansionary for the current situation. Back off. Reduce infrastructure spending for now, spend it in the next recession. Reduce marginal defense programs that only have political reasons. Cut state government spending by 3%, which is budgeted to increased by 9%.

https://www.nasbo.org/reports-data/fiscal-survey-of-states

https://rollcall.com/2021/10/18/congress-blocks-cuts-to-top-contractors-weapon-budgets/

3. Incentivize Consumers to Save More

Less aggregate demand will lower prices in many markets.

Increase 401(k) limit by $10,000 for 3 years.

Provide federal government match on first 5% of savings for all employees.

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2022-irs-401k-contribution-limits.aspx

https://www.tsp.gov/making-contributions/maximize-your-savings/

4. Encourage Corporate Pricing Restraint

Offer corporate income tax incentives for firms to hold prices fixed for 2 years.

Wage and price “controls” are widely criticized. Perhaps a voluntary nudge would work.

5. Add Older Workers to the Labor Supply

Stop all social security fund contributions (taxes) by workers aged 62 and older.

https://www.investopedia.com/articles/personal-finance/060515/when-do-i-stop-paying-social-security-tax.asp

Eliminate the “clawback” of social security benefits to retirees who do choose to work.

https://money.usnews.com/money/retirement/social-security/articles/what-happens-if-you-work-while-receiving-social-security

Tweak labor laws to fight age discrimination.

Increasing employment for older workers with effective protections against employment discrimination

6. Increase Supply of Legal Immigrants

https://www.cnn.com/2022/01/11/economy/chamber-of-commerce-inflation/index.html

https://www.businessinsider.com/immigration-inflation-labor-shortage-chamber-commerce-suzanne-clark-jobs-work-2022-1

7. Eliminate Hidden Tax of Tariffs and Trade Regulation

Unilaterally eliminate all tariffs with Europe, Central America, South America, Japan, South Korea, New Zealand, India. Negotiate with China.

https://finance.yahoo.com/news/one-way-biden-could-cut-inflation-131832592.html

https://www.cnbc.com/2021/11/30/removing-us-china-trade-tariffs-would-ease-inflation-jacob-lew.html

To tame inflation, Biden should cut tariffs

8. Windfall Profits Taxes

https://www.cbsnews.com/news/biden-tax-how-billionaire-minimum-income-tax-works-cbs-news-explains/

https://rollcall.com/2022/03/24/windfall-profits-tax-consumer-rebate-options-under-discussion/

NEWS: Sanders Introduces Legislation to Reinstate the WWII Windfall Profit Tax to Combat Rising Inequality, Inflation, and Corporate Profiteering

https://www.bloombergquint.com/gadfly/to-fight-inflation-biden-should-tax-the-rich-shrink-the-deficit

9. Cut Transportation Costs

Tax incentive for more truck drivers.

https://www.truckinginfo.com/10166531/new-bill-aims-to-reduce-truck-driver-tax-liabilities

Open ocean shipping to competition.

What is the Jones Act?

Open trucking to Mexico based carriers.

Mexico-based carriers can still operate in United States under USMCA

10. Negotiate Drug Prices, Allow Interstate Health Insurer Competition

https://hbr.org/2021/10/the-u-s-can-lower-drug-prices-without-sacrificing-innovation

https://www.sidley.com/en/insights/newsupdates/2021/11/us-looks-to-introduce-europeanstyle-drug-price-controls

https://www.freep.com/story/news/nation/2014/09/05/dems-try-gop-idea-on-health-care-put-states-in-charge-of-cost-control/15106115/

https://www.marketwatch.com/story/six-ways-republicans-can-reduce-health-care-costs-in-their-new-plan-2017-03-11

https://www.manhattan-institute.org/reforming-health-insurance-across-states

https://www.commonwealthfund.org/blog/2017/selling-health-insurance-across-state-lines-unlikely-lower-costs-or-improve-choice

11. Increase the Supply of Housing

Increase immigration to improve labor supply. Cut tariffs to reduce supplies costs. Lean on local regulators to reduce zoning restraints and one size fits all building codes. Strategically require a higher share of affordable housing and multifamily permits annually in each metropolitan region. Phase-out the mortgage interest tax deduction for second homes.

https://www.bloomberg.com/news/articles/2022-02-04/in-sizzling-u-s-housing-market-normal-is-a-long-way-off

https://www.whitehouse.gov/cea/written-materials/2021/09/01/alleviating-supply-constraints-in-the-housing-market/

Dysfunctional policies have broken America’s housing supply chain

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2022-irs-401k-contribution-limits.aspx

12. Cut Energy Prices

Loosen regulations for 5 years to encourage increased “all of the above supplies” energy through drilling, coal, oil and nuclear. Suspend federal gas tax for 3 years. Negotiate oil price minimums/maximums between US/Europe/Japan and OPEC.

https://www.reuters.com/world/us/bidens-menu-options-high-gasoline-prices-is-not-appetizing-2022-03-23/

https://www.cbsnews.com/news/gas-prices-inflation-us-president-cbs-news-explains/

https://nymag.com/intelligencer/2022/03/heres-how-biden-can-lower-gas-prices.html

Summary

Reducing inflation is a complicated policy area. The solutions proposed by “experts” are rarely politically appealing. Competing political parties hesitate to provide “wins” to the other. However, 8% inflation after a 2-year pandemic while the US faces Russian war actions is a “national emergency”, worthy of an FDR like approach to “try a few things”. It is an opportunity to overcome individual industry opposition to things that make sense for the country. It is an opportunity to try some left and right solutions.

Good News: Record Voter Turnout in 2018 and 2020 Elections

tomkapostasy4 Comments

https://www.fairvote.org/voter_turnout#measuring_voter_turnout

Setting aside turnout ratios, the growth in actual voters has been strong for a century. 40-48M voted in FDR’s elections. Kennedy and Nixon fought over 69M voters. Clinton and Bush, Sr. attracted 105M voters in 1992. But, Biden vs. Trump shattered records with 158M casting ballots.

Midterm Elections: 2018

https://www.fairvote.org/voter_turnout#voter_turnout_101

https://www.census.gov/library/stories/2019/04/behind-2018-united-states-midterm-election-turnout.html

Midterm voting rates (as % of eligible voters) soared at 65% in the 19th century. They dropped to 50% at the start of the 20th century and then down to 45% for most of the 30’s to 60’s. They settled down to 40% thereafter. The 2018 election reached 50%, a full 13% points above the all-time low in 2014.

The slightly different measure, percentage of voting age population, shows the same pattern. 49% voting from 1978-94. Just 46% from 1998-2010. Record low of 42% in 2014, followed by an 11%-point climb to 53% in 2018.

Historic highs in 2018 voter turnout extended across racial and ethnic groups

https://www.census.gov/library/stories/2019/04/behind-2018-united-states-midterm-election-turnout.html

Younger voters increased their turnout by 14 points (18-44), while older voters increased by a solid 8%. High school or less educated voters increased turnout by 7 points, while college educated voters added 12 points.

Presidential Elections: 2020

https://www.fairvote.org/voter_turnout#measuring_voter_turnout

Turnout in 2020 election spiked among both Democratic and Republican voting groups, new census data shows

Long-term presidential and midterm voting (% of eligible voters) follows the same pattern. 80% turnout in the 19th century, dropping to 59% by 1912, then averaging 60% in the 30’s to 60’s. Further decline to just 55% for the 70’s-90’s. Minor increase to 60% in the oughts and teens, followed by 67% in 2020.

The more recent percent of voting age population shows 64% from 80-88, a one-time spike to 68% in 1992, decline to 59% from 96-200, slight increase to 61% for 04-16, and then a big jump to 67% in 2020.

Turnout was up in all categories, but especially among Asian, 18-29 year olds and white non-college educated populations.

Voting by all racial groups of 18-24 year-olds was up significantly.

Other Sources Show The Same Results

http://www.electproject.org/national-1789-present

https://www.nationalaffairs.com/publications/detail/does-high-voter-turnout-help-one-party

The two measures (% of eligible voters and % of population) track closely. The “election project” numbers show VEP at 63% from 1952-68, declining to 58% for 72-00, increasing a little to 61% for 04-16, before spiking to 66% in 2020.

More Details

It’s Time to Rethink What Counts as a Voter Turnout Strategy

Income really matters for voter turnout, with rates ranging from one-third to one-half to two-thirds. With increased lower income support for the Republican party, this is less of a partisan issue today.

https://www.theatlantic.com/ideas/archive/2019/08/emerging-republican-majority/595504/

Since 1969, Democrats have argued that demographic trends will overturn Kevin Phillip’s description of the Emerging Republican Majority. This remains a hotly debated topic.

https://www.census.gov/library/stories/2019/04/behind-2018-united-states-midterm-election-turnout.html

Election day voting decreased in 2018 and 2020 as mail and early, in-person voting increased. Many commentators claim that this change is a large driver of the increased turnout levels.

Good News: US Housing Market

tomkapostasy2 Comments

Real Interest Rates Remain at Record Lows

Click to access Real%20Mortgage%20interest%20rates%20blog%202016%20June.pdf

Real, inflation-adjusted, interest rates have declined greatly since 1980. At that time, with the risks of variable inflation and surging oil prices, the real mortgage interest rate was 8%. It declined to 5% in the 1990’s and 4% in the 2000’s before falling to 2% in the 2010’s. The financial cost of owning property has rarely been lower.

House Values are Up, Way Up

House prices grew relatively consistently from 1970 through 2000, with a spike in 2005-9 and a return to trend values in 2010-12. In the last 10 years, house prices have increased by 6% annually in nominal terms, or 4% annually in real terms.

Home Ownership Rate is Rebounding, Up 2%

The US homeownership rate averaged 47% from 1900-40. It increased smartly in post WWII times to 60% by 1955 and 64% by 1965. Homeownership averaged 64%+ for the decade of 1969-78. It increased by 1% during 1979-81. In the midst of a difficult depression, homeownership rates dropped back to 64% by 1985, about the same for the last 20 years, setting a “normal” level. Homeownership rates stayed at 64% for the next decade. Ownership rates increased from 64% to 69% in the next decade before declining right back to 63% by 2015. In the last 7 years, despite many headwinds, the home ownership rate has increased by 2%.

Number of Homeowners has Jumped by 7 Million

In 2000, there were 69M owner-occupied homes in the US. This increased by a solid 7M to 76M by 2005. The housing market hit a lull and the number of owner-occupied homes essentially stayed flat for a dozen years, through 2017. The supply of owner-occupied homes then rose by a strong 7M in the next 4 years to 83M!

International Comparisons

https://en.wikipedia.org/wiki/Home-ownership_in_the_United_States

https://www.urban.org/urban-wire/us-homeownership-rate-has-lost-ground-compared-other-developed-countries

US homeownership rates are similar to other developed economies.

Housing Supply

https://www.mercatus.org/bridge/commentary/what-are-homeownership-rates-telling-us


The housing market is inherently volatile, typically rising by 2 times the trend and then falling to one-half of the trend. Annual housing starts averaged 1.6M from 1960-2008. They declined by a severe 75% to just 0.5M in 2009. Housing starts have subsequently grown 3-fold to 1.6M annual housing starts, but the accumulated lack of new supply is impacting housing markets today.

Housing Market by Segments

By Age Group

https://www.mercatus.org/bridge/commentary/what-are-homeownership-rates-telling-us

A generational perspective on recent U.S. homeownership divergence by income and race

The period from 1982-2000 showed homeownership rates by the 5 age segments remaining relatively constant; 65+ 78%, 55-64 80%, 45-54 76%, 35-44 67% and <35 40%. The 65+ group increased homeownership from 75% to 80%. During this time, the overall US homeownership rate increased from 65% to 69%, mostly due to the aging of the population, now more heavily weighted towards the groups with 76-80% homeownership versus the 40-67% younger groups.

Homeownership rates grew from 2000 to peak rates in 2004, before declining significantly for all groups except for the 65+ cohort which essentially held it’s own. The adjacent 55-64 class fell 4%. The middle 45-54 group dropped 7%. The typically homeownership growing 35-44 group cratered by 9%. The young <35 group fell by 5%. Hence, the overall rate fell dramatically during this time.

https://www.bloomberg.com/opinion/articles/2021-04-15/home-ownership-for-millennials-may-finally-be-within-reach

This difference in home ownership experience is reflected in generational wealth summaries.

By Marital Status

https://en.wikipedia.org/wiki/Home-ownership_in_the_United_States

There is a 30 point gap between married couples and other groups, with 84% of married couples owning homes versus about 55% for other family structures.

By Location Type

https://www.census.gov/library/stories/2017/09/rural-home-ownership.html#:~:text=Rural%20areas%20have%20higher%20homeownership,holds%20in%20all%20four%20regions.

https://www.census.gov/newsroom/blogs/random-samplings/2016/12/homes_on_the_range.html

https://www.freddiemac.com/research/insight/20210602-rural-home-purchases

81% of rural households own their homes versus just 60% for urban households.

By Income Group

A generational perspective on recent U.S. homeownership divergence by income and race

Historically, 80% of the top half of household incomes have been homeowners, while in the bottom half, just 50-60% have owned their homes.

By Racial Group

A generational perspective on recent U.S. homeownership divergence by income and race

The US shows dramatically different homeownership rates by racial category. The differences between the 1995 non-Hispanic White rate (70%) and Others/Asians (50%), Hispanics (42%) and Blacks (42%) remain large in 2021 where we see White (74%), Other (57%), Hispanic (48%) and Black (44%). The groups homeownership share gain from 1995 to 2005 were similar, ranging from 6-10%, but the decline from 2005-2015 was only 3-4% for Whites and Hispanics, but 7% for Blacks and Others. The improvement from 2015 to 2021 has been 2% for 3 groups and 4% for the Other/Asian group.

Summary

The Great Recession flattened the housing market. The number of owner-occupied homes in the US remained level at 76 million from 2006 – 2017. The number of housing starts plummeted from 2.0M to 0.5M per year, compared with an historic average of 1.6M. New home construction first exceeded 1.2M units (75% of historic average) again only in 2020, a dozen years later. New home-owning households have increased by 7M units in the last 4 years! The homeownership rate is up 2 points, from 63.5% to 65.5%. Supply is responding to increased demand and higher home prices. Homeownership rates will increase with the economic recovery, but be constrained by higher home prices.

Amid a pandemic and a recession, Americans go on a near-record homebuying spree

25 Years of Inflation by Category

tomkapostasy1 Comment

https://fred.stlouisfed.org/series/CWUR0000SA0#0

https://fred.stlouisfed.org/series/CWUR0000SAF#0
https://fred.stlouisfed.org/series/CWUR0000SAT#0
https://fred.stlouisfed.org/series/CWSR0000SAH
https://fred.stlouisfed.org/series/CWUR0000SAA#0
https://fred.stlouisfed.org/series/CWUR0000SAR#0
https://fred.stlouisfed.org/series/CWUR0000SAE#0
https://fred.stlouisfed.org/series/CWSR0000SAE2
https://fred.stlouisfed.org/series/CWSR0000SEEB#0
https://data.bls.gov/pdq/SurveyOutputServlet
https://fred.stlouisfed.org/series/CWUR0000SAG#0
https://fred.stlouisfed.org/series/CWUR0000SEGA#0
https://fred.stlouisfed.org/series/CPIMEDSL#0
Category97-20%97-22%%Share
All5975100.0
Food/Beverage648215.1
Transportation454521.9
Housing728539.9
Apparel-5-52.6
Recreation17224.4
Educn/Communicn27316.2
>Communication-25-23
>Tuition, Fees, Child Care165171
>>College Tuition191196
Other Goods/Services1221392.8
>Tobacco/Smoking362424
Medical Care1161257.1

Analysis

Inflation is back in the news after several quiet decades. The components of the All Urban Wage Earners and Clerical Workers are listed above, comparing Feb 2020 with a 1997 base of 100, and then Jan 2022 with the same base. The most recent weighting of categories is in the rightmost column.

Overall, consumer prices have risen by a modest 2-2.5% annually, just 59% through Feb 2020 and 75% through Jan 2022. Yes, that is a 10% price increase in the last 2 years: 175/159.

The 3 largest components have shown price rises close to the overall average. The biggest sector, Housing (39%), displays slightly higher inflation, at 72% and 85%, closer to 3% annually, with a possibility of higher rises for the next few years. Transportation (22%) reveals lower than 2% annual inflation with a 45% increase across the full period. Food and Beverage (15%) is close to the average with 64% and 82% growth.

Some smaller areas have seen slow price growth. Apparel (3%) has declined in actual prices during this period. Recreation prices (4%) have grown by less than 1% annually.

Education and Information (6%) prices have grown by 1% annually, but this category includes 3 very different subsectors. Information Technology prices have declined throughout the period. No simple 25- year summary is available. Communications prices have dropped by an average of 1% annually. Education prices have grown much faster, more than offsetting the decline in IT and communications prices. The Tuition, Fees and Child Care measure of prices increased by 165% and 171%, more than twice as fast as overall inflation, roughly 4% annually. College tuition (data not in Fred database) increased by 191% and 196%, about 4.5% per year.

The Other Goods and Services (3%) category mostly contains miscellaneous items that don’t fit cleanly in Housing or Food/Beverage. The category displays faster price increases (3.5%) on average due to the very sharp increase in Tobacco prices (taxes) which have grown 4-fold in 25 years (7%/year). Note that alcoholic beverage prices increased by a little more than 2% annually

Finally, Medical Care (7%) has grown by 116% – 125% during these 25 years, about 3.5% annually.

Overall goods prices have grown slowly and service prices more rapidly. Medical care and college prices stand out for their increases, while the price of housing/rentals is flashing warning signs.

Why is Inflation 7%?

tomkapostasy1 Comment

https://fred.stlouisfed.org/series/CPIAUCSL

Easy Monetary Policy

https://fred.stlouisfed.org/series/FII10

The “real” interest rate is the nominal interest rate minus the inflation rate. It reflects the “real” cost of borrowing. Prior to the “Great Recession”, 2% was a typical “real cost” of borrowing money. To entice lenders to lend, borrowers had to pay some “real” amount extra per year, 2%.

The Federal Reserve did what it could to “ease” monetary conditions and lower interest rates to offset the negative impact of the Great Recession in 2008-9.

By the end of 2011, real rates were ZERO or negative. In other words, the Fed went too far. By June, 2013, rates returned to positive territory, but only reached 0.5%, where they remained through the end of 2017, despite president Trump’s complaints that the Fed was constraining the Trump economy. Monetary policies were “easy” for a very long 7-year period.

By May, 2019, real interest rates were back to just 0.5%, having reached a peak of just 1% for 3 months at the end of 2018. With further “easy” money policy, real rates dropped back to ZERO percent by August, 2019. The economy was now 9 years into recovery. Interest rates should have been higher.

The Fed found new ways to “ease” monetary policy as the pandemic struck in 2020. Real interest rates dropped to -1% and stayed there. Monetary policy has been “easy” for more than a decade. Time for inflation. “Too much money chasing too few goods”. “Inflation is always and everywhere a monetary phenomenon”.

Supply Chain Disruption

The recovery has been faster than anyone expected, but most critically, with consumers less eager to buy “in-person” services, they have greatly increased their purchases of goods. The modern US economy relies on imports and modern manufacturers and retailers hold lower inventories to buffer changes.

https://fred.stlouisfed.org/series/ISRATIO

https://fred.stlouisfed.org/series/PCEDGC96

Yes, durable goods purchases jumped by 20% in 1 year, from $1.8T to $2.2T. Businesses have simply been unable to adapt to that scale of change.

Easy Fiscal Policy / Large Budget Deficits

https://fred.stlouisfed.org/series/FYFSGDA188S

Standard macroeconomic theory focuses on aggregate demand versus aggregate supply as the key driver of output, unemployment and inflation. When total demand grows faster than remaining excess capacity of total supply, inflation results. The biggest driver of changes in aggregate demand is the level of government spending (demand) minus government taxation (reduces demand).

Historically, various pressures have kept the federal budget deficit between -3% and +3% of GDP, allowing the government to buffer change in private demand through the business cycle. The large drop from -2.5% to -5% in 1979-82 was a factor that contributed to the last major round of US inflation. A similar decline from -2.5% to -4% in 1989-91 increased inflation, but not on such a large scale. It also served to convince President Clinton and congress to reduce the deficit to ZERO by 1997 and run a surplus for a few years.

The 2001 recession caused a 2.5% decrease in this ratio, from a surplus to a deficit. Bush tax cuts, foreign wars and congressional agreement lead to deeper deficits at 3.3% in 2003-4, before some recovery to -1% in 2007, prior to the Great Recession.

Bush, Obama and congress agreed to spend more to fight the Great Recession, pushing the deficit to a worryingly low -9.8% in 2009. There was no agreement on a second major round of spending, so the deficit improved a bit to -6.6% by 2012 and then to a more reasonable -2.5% in 2014-15. Instead of continuing to improve with the economic recovery, it fell a little, to 3.1% in the last year of the Obama economy.

President Trump’s first order of business was to enact “job creating” tax cuts. Unfortunately, the desired boost to economic growth to fund these tax cuts did not occur. The budget deficit increased from 3.1% to 4.6% of GDP, as the economy reached a record long recovery period of a full decade.

To address the pandemic, congress and Trump agreed to spend money to protect the economy and workers, leading to very large budget deficits of 15% and 12% in 2020 and 2021, respectively. Too much aggregate demand for the level of aggregate supply, so we have major inflation.

Summary

Easy money, easy fiscal policy and a 20% increase in demand for goods leads to major inflation. Like a frog getting boiled as a pot slowly warms up, we became complacent based on the apparently “just right” conditions of the late teens (2012-19). The federal budget deficit needs to get back above -5%, real interest rates need to become positive and consumers need to rebalance to consume more services and less goods. I don’t think we’ll see 7% inflation for 2022, but it looks like 4-5% is a good bet. Hold on.

Politics

Biden deserves a good share of responsibility for the government spending budget deficit, as he was seeking to make it even larger. I give him a “pass” on consumer demand for durable goods since it mostly occurred before he started. I also give him a “pass” for the loose Fed monetary policy which has been going on for a decade or so. He was wise to reappoint the Fed chairman, who I believe will raise interest rates as needed to get the real interest rate back to a proper level. In the meantime, Biden will pay politically for higher inflation, which has a “real” impact on the wallets of voters.

https://apnews.com/article/coronavirus-pandemic-business-health-prices-inflation-bd71ae9e491907a51956c1d4eb07fb90

Good Economic News

tomkapostasyLeave a comment

Better off, job seekers/job openings.

Good News: Are You Better Off? (2)

US GDP/Capita versus Other Countries

Good News: US Remains the Gold Standard for $GDP/Capita

Long-term Real US GDP Growth

Good News: US Economy is 29 Times as Large as in 1900!

6 million jobs added in 2021

Good News: US Economy Added 6 Million Jobs in 2021

Great Labor Market

Good News: A Great Labor Market

Higher Effective Minimum Wage

Good News: Minimum Wage Continues to Increase

Very Low Unemployment

Good News: Very Low Unemployment

Are You Better Off Economically? Yes!

Are You Better Off? Yes, Today, November, 2021.

Labor Productivity

Good News: Labor Productivity from 1970 to 2020, A Personal Perspective

Labor Force Participation

Labor Force Participation Rates

Good News: Are You Better Off? (2)

tomkapostasy1 Comment

Ronald Reagan taunted Jimmy Carter with this question to voters in the 1980 debates. It helped him win.

Twelve years later, James Carville helped Democrats return from the political wilderness in 1992 with his advice to Bill Clinton that “it’s the economy, stupid”.

https://en.wikipedia.org/wiki/It%27s_the_economy,_stupid

Politicians have used various measures, from unemployment to inflation to the “misery index” to jobs created to productivity to the stock market, to promote their success and detract from their opponents.

I want to focus on one measure, the ratio of the number unemployed to the number of job openings, to highlight the strength of the American economy in the last dozen years.

https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm

https://fred.stlouisfed.org/graph/?g=p9aA

George W. Bush: Jobless Recovery in the “aughts”

The Bush economy was widely criticized for its “jobless recovery” following the economically healthier Reagan and Clinton presidencies. The presidency started at close to 1 unemployed person per job opening. The recession pushed this up to 2.5x and then 3.0x. In labor market terms, this is a huge difference. At 1:1 or 1.5:1, unemployed workers expect to be re-employed quickly. At 3:1, some may enter the dark days of the “long-term unemployed”. After 3 years, the economy DID recover to 1.5:1, but it was unable to improve further. The “Great Recession” was a brutal job killer, pushing this measure of labor market tightness up four-fold, from 1.5X to more than 6X before its peak in the first half of 2010, as Obama and congress and the federal reserve bank wrestled with the situation.

Obama: Recovery and “New Territory”

Between April, 2010 and April, 2012, the economy cut this ratio in half, from 6x to 3x, a very solid performance. It took 3 years, until April, 2015, to complete the next 50% reduction, from 3x to the historically “very solid” 1.5X. The economy continued its growth for the next 2 years, but at a slower pace, reducing this ratio to 1.3X.

Trump: Even Better

The Trump economy continued to improve for the first 18 months of his term, reducing this ratio from 1.3X to 0.8X by September, 2018. This was a time of record low unemployment and economists recalculating their standard of “full employment”. While the economy continued to grow, the unemployment rate continued to decline and the stock market continued to climb, THIS measure had reached its minimum before the 2018 mid-term elections. It remained steady at the very positive level of 4 job seekers for every 5 jobs (0.8) for the next 17 months, until the pandemic disrupted everything. The ratio quickly shot up to 5X, not as high as the 6X that Obama faced, but very high. It quickly recovered to 1.4X by the end of Trump’s term. This was partly job recovery and partly fewer job seekers, but it was an amazing recovery in historic terms. Recall that 1.5X was “a good as it got” during George W. Bush’s presidency.

Biden: Even Better, Again !

In the first 6 months of the Biden presidency, this ratio dropped from 1.4X back down to the prior record level of 0.8X. Yes, by July, 2021, there were 5 jobs available for every 4 job seekers. This was as low as the ratio had previously fallen, even as the Trump economy piggybacked on the Obama economy and continued its extraordinary run. The ratio continued to fall in the next 6 months to 0.6X, an unheard-of level. 5 jobs for every 3 job seekers. It’s “no wonder” that voluntary job quits are at unprecedented levels. For, perhaps, the first time in American history, “everyone who wants to work, can find a job”. Whether you are right or left, Dem or Rep, this is “good news”. This is “great news”. Wages for the “bottom 20%” are rising in real terms. Income inequality is declining, a bit. The economy seems to be able to digest this new condition. And, the economy is not done growing, innovating, creating businesses, creating jobs, exporting, etc. About 2% of Americans are likely to be attracted back into the workforce in the next year or two, keeping the headline unemployment rate from going much below 4%, but pushing US real GDP growth to 4% in 2022 and close to 4% in 2023.

Summary

The “Great Recession” and the “once in a century pandemic” have been unable to disrupt the ongoing progress of the American economy and labor market. As a nation, IMHO, we have cultural and political challenges, but we “aught” to appreciate the power of the American economy to move forward.

Results of State Covid Strategies

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Many states have legislatures and governors from the same party and voted for this party in both the 2016 and 2020 presidential elections. These states have adopted quite different Covid management strategies. There are 14 solidly Democratic states and 21 solidly Republican states, leaving 15 states with some level of “mixed” political control and influence.

https://ballotpedia.org/Partisan_composition_of_state_legislatures

https://www.ncsl.org/research/about-state-legislatures/partisan-composition.aspx#

https://www.cnn.com/election/2020/results/president

https://www.politico.com/2016-election/results/map/president/

https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population

Fully Vaccinated, Age 18+

Democratic states average 80%, Republican states 66% and Mixed states 73%. The national average is 72%. Nevada (69%) is the only Blue state below 75%. Alabama, Wyoming and Mississippi have the lowest scores for the GOP at 59-60%. Florida has the highest rate at 75%. The split in world views is confirmed by this measure. The mixed group ranges from Louisiana and Georgia at 63% to Massachusetts (85%) and Vermont (86%).

https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-total-admin-rate-pop18

Cumulative Death Rate / 100,000 Population

The overall death rate for the country is 256. The mixed states are similar at 265. The Democratic states average 221 deaths per 100K people. The Republican states average 282 deaths per 100K people. If the Republican states had the same rate as the Democratic states, they would have 59 fewer deaths per 100K people, for a cumulative total of 70,000. Economists use $10M as the value of a life in many cost-benefit calculations, so one measure of the difference is $700B.

California (196) and New York (227) drive the lower D result, but the Dems include higher fatality states such as Rhode Island (305) and New Jersey (344). The mixed states include some relatively high death rates in Michigan (315), Louisiana (329) and Arizona (350). The Republican group includes 3 states below the D average in Utah, Alaska and Nebraska, but 7 states at 300 or higher: Oklahoma, Indiana, West Virginia, Arkansas, Tennessee, Alabama and Mississippi.

https://covid.cdc.gov/covid-data-tracker/#cases_deathsper100k

As the median age for Covid deaths is 75, an argument could be made that the $10M economic value of a human life is too high in this analysis.

https://www.cdc.gov/nchs/nvss/vsrr/covid_weekly/index.htm#SexAndAge

Population density and the percentage of population aged 65+ did not have statistically material impacts on the pattern by political party control.

Which U.S. States Have the Oldest Populations?

https://www.census.gov/data/tables/time-series/dec/density-data-text.html

Nonfarm Employment Recovery: Nov 2021 vs. Feb 2020

Overall employment is within 2% of the February, 2020 peak for the country as a whole. The “mixed” states have recovered to within 2.3% of the peak. The Democratic states are only at 96.4% of the peak, while the Republican states, on average, are just below breakeven at 99.9%. If the D states had the same level of recovery, there would be 1.8M jobs added in the recovery to date. At the recent median $1,000 per week wage, this would generate $94 billion of income annually.

https://www.bls.gov/news.release/laus.t03.htm#

Click to access laus_03272020.pdf

Click to access tabled1_201502.pdf

https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.bls.gov%2Fsae%2Ftables%2Fannual-average%2Ftable-1-employees-on-nonfarm-payrolls-in-states-and-selected-areas-by-major-industry.xlsx&wdOrigin=BROWSELINK

I used the Feb 2015 to Feb 2020 period to generate a pre-Covid trend growth rate. This was 6.4% for the country, 5.4% for the mixed states, 7.0% for the D states and 6.7% for the R states. This indicates that the Republican faster recovery is not due to prior momentum. I used the 2020/2015 growth rate to create a solid estimate of the 2021/2020 recovery rate for each state (r = 0.63). It confirmed the 3%+ gap between the 2 parties was not due to prior trends. I also checked the percentage of 2019 employment in the leisure and hospitality sector, to see if this was driving the difference, but it did not have a material effect.

Mixed Political Control States

State% Vaccinated 18+Deaths/100KJob Recovery
AZ69350103
GA63304100
KS7025198
KY6628398
LA6332993
MD8221597
MA8531097
MI6731596
MN7720097
NH7715797
NC68192100
PA7530796
VT867893
VA8018698
WI7320597

Democratic Party States

State% Vaccinated 18+Deaths/100KJob Recovery
CA7919697
CO78187100
CT8627496
DE7625297
HA867988
IL7526396
ME8612696
NV6928397
NJ8334497
NM7929896
NY8422793
OR7714098
RI8730596
WA80136101

Republican States

State% Vaccinated 18+Deaths/100KJob Recovery
AL5934399
AK7013994
AR62314100
FL75296101
ID63241105
IN6430898
IA7126397
MS6036099
MO6427799
MT64278101
NE73184100
ND6527196
OH6627396
OK6630097
SC6529399
SD7129499
TN63322100
TX70264102
UT74125106
WV6531296
WY6027695

Good News: US Economy is 29 Times as Large as in 1900!

tomkapostasy2 Comments

Real (inflation adjusted) Gross Domestic Product (GDP), the value of all goods and services produced in the US reached $20.8 trillion in 2020, compared with only $0.7 trillion in 1900. This is a nearly 30-fold growth across 120 years.

YearReal $GDP (T)Added $GDPPercent
19000.7
19101.00.346%
19201.30.321%
19301.50.322%
19401.80.320%
19502.70.845%
19603.71.141%
19705.61.950%
19807.82.138%
199010.62.937%
200014.94.340%
201017.62.718%
202020.83.218%

It’s difficult to “digest” 20.8 trillion dollars. But, it is true that the US economy in 2020 was ten (10) times as large as it was in 1952, well into the post-war economic boom period. The population had more than doubled and the productivity of the economy had increased more than three-fold across this period.

The economy is 3 times as large as it was in 1975, when it was entering a challenging period of stagflation, foreign competition, high interest rates, energy shortages, environmental concerns and divided politics.

The economy is twice as large (in real terms) as it was in 1990.

The economy grew by an average of 42% per decade from 1940 through 2000. The last two decades have grown by 18% each, similar to the growth from 1910 through 1940.

However, the amount of growth, measured in real dollars, has continued at a very strong pace. The economy averaged growth of $2.8 trillion per decade from 1970 through 2020. That is roughly the size of the whole economy in 1950! The latest decade recorded a $3.2 trillion increase, larger than the output of the whole economy in 1950, and the second largest growth ever.

US Population

YearPopulation (M)Added (M)Percent
190076
1910921621%
19201061415%
19301231716%
194013297%
19501511914%
19601792819%
19702032413%
19802272312%
19902492210%
20002813313%
20103092710%
2020331237%

The US population has increased by 4.3 times since 1900, from 76 to 331 million people.

The population doubled from 1900 to 1950 and then doubled again since 1955.

The US added an average of 25 million new residents per decade from 1940 to 2020 (12%).

In the last 30 years, the US has added 85 million residents; the same number as its total population in 1905!

Despite many challenges in the last century, the US population has grown consistently and significantly.

Real $GDP Per Capita

YearReal $GDP/Capita$ AddedPercent
19009,300
191011,2001,90020%
192011,8006005%
193012,4006005%
194013,9001,50012%
195017,6003,70027%
196020,9003,30019%
197027,7006,80033%
198034,3006,60024%
199042,8008,50025%
200053,10010,30024%
201057,1004,0008%
202062,7005,60010%

Real (inflation-adjusted) output per person has grown 6.7 times since 1900!

It has doubled since 1975, tripled since 1960 and quadrupled since 1945. Yes, today’s economy produces four times as much, per person, as the supercharged Word War II winning “arsenal of democracy”. It produces twice as much per person as the 1975 economy which then appeared to plateau in the face of Japanese import competition.

From 1960 through 2020, the economy has added an average of $7,000 more output per American for each decade.

While improved output/productivity in the last 2 decades has not matched that of 1960-2000, it still added $9,600 of output per resident, more than the total output per resident in 1900. In the last 3 decades combined, the economy has added nearly $20,000 of output/income per person, an amount equal to the total output/income per person in the late 1950’s.

Sources

https://fred.stlouisfed.org/series/A939RX0Q048SBEA

https://ourworldindata.org/grapher/gdp-per-capita-maddison-2020

Click to access ECONI-2021-09-Pg2.pdf

https://en.wikipedia.org/wiki/Demographic_history_of_the_United_States

Moral Foundations Theory of Politics

tomkapostasy14 Comments

The Righteous Mind-Jonathan Haidt 2014

Political views are rationalizations of moral intuitions. They are demonstrably not the result of dispassionate analysis by individuals.

A small number of moral intuitions are broadly held across time and cultures and can be “explained” on the basis of evolutionary pressures on mankind.

The prevalence of the six logically defined and statistically confirmed dimensions differ markedly between liberal and conservative minded people in various cultures.

1. Care/Harm

Desire to protect children and weaker others from harm. Caring, kindness, gentleness, nurturance, compassion, feelings, empathy. Liberals and conservatives both show an interest in this dimension of morality. Liberals value this dimension most highly. Conservative men and libertarians, on average, show much less interest in this dimension.

2. Fairness/Reciprocity/Cheating

In a social setting, there is a need to rely upon others keeping their word, being honest, doing their share of work, etc. Justice, rights, cooperation, deception, trust. Liberals tend to interpret this in terms of equality. Equal rights, equal opportunity and equal results. Conservatives are closer to the evolutionary basis as seen in game theory / the prisoners dilemma / “tit for tat” winning strategy. They highly value proportionality, closely linking results to inputs or effort.

3. Liberty/Oppression

No one wants the “alpha dog” to take advantage of their position. Individual and group opposition to domination, tyranny, restrictions, bullies and cruelty. Liberals and conservatives both value this dimension in modern, western, secular, commercial societies. They define the oppressor differently, with liberals focusing on business and institutional sources of power and conservatives focusing on government and regulators. Libertarians value this dimension most highly. These first 3 sources of morality are more individual oriented, mediating the tensions between individuals and groups.

4. Group Loyalty

Clear commitment to the group. More than “limited liability”. Betrayal, in-group attachment, patriotism, nationalism, betrayal, self-sacrifice, us vs. them, tribe, religion, party, flag, clan, neighbors, family. Conservatives value this dimension very highly, with felt loyalties to several groups. Liberals value this dimension, but not nearly as highly; with a tendency to value the largest groups: nation, humanity, nature. The liberal focus on “diversity” and valuing others, outgroups and the “oppressed” is very different from the conservative worldview. Western, secular, commercial societies value this dimension less.

5. Authority/Respect

Larger groups require some degree of hierarchy. Leader and follower. This is a complement to the liberty/oppressor value. Respect for authority, leader, institution, rules, history. Safety, order, predictability. Obedience, deference, submission. Against subversion, revolution. This is the classic conservative value, supporting the known value/benefits of a given system against the potential value/risks of change. Modern, individualistic liberals tend to not value this dimension highly, instead choosing to “challenge authority”.

6. Purity/Sanctity

The sixth dimension differs from the first 5. It is not so clearly about managing the “individual to group” challenges. It focuses on the disgust/gag reflex to things or situations that are so threatening as to be beyond consideration. This takes place at both the practical and the abstract levels. Degradation, disgust, disease, infection, dirt, germs, contamination, carnality, body, sex. Piety, chastity, temperance, compliance, burning, cleanliness, food rules. Everyone has some sensitivity to this dimension, but conservatives have much higher concern. Research says that conservatives, on average, have a lower interest in new (unsafe, novel) activities or experiences. Moral values 4-6 retain higher priority outside of western, commercial, secular societies. Liberal references to purity may focus on things like the environment.

Basic References

Home
https://peterlevine.ws/?p=14220

https://www.online-psychology-degrees.org/study/jonathan-haidt-morality/

https://en.wikipedia.org/wiki/Moral_foundations_theory

https://www.wired.com/2012/10/the-psychology-of-liberals-and-conservatives/?gclid=Cj0KCQiAoY-PBhCNARIsABcz773DJzBnc5VoJf5iUksyynjWCWM-bcXuNVXNGat-dSIuvliFr7UOl9EaAh9zEALw_wcB

Applications

Haidt is a self-professed “liberal” who intuitively/instinctively rejected the “rational” morality theories he learned in graduate school in the 1980’s. During his early research on alternate approaches, he had the “aha” insights that 1) other cultures have very different moral values and that 2) moral/political views are intuitive and rationalized. He hoped/hopes that liberals can see that their more limited moral palate (3 items) is not the only one and that this difference between including or not including the other 3 bases is a huge insight, even if liberals choose to not value the other 3 dimensions. He analyzed national politics in each election cycle from 2000, highlighting the large advantage that Republican politicians have in monopolizing the 3 other dimensions. In 2016, he advised the Dems to fight against Trump on the “conservative” moral dimensions of loyalty (Putin?), authority/order (Trump chaos/revolution/policy changes), and purity (sex allegations) instead of policy positions or personal character.

How the Democrats Can Use Moral Foundations Theory Against Trump

Haidt collaborated with a CATO scholar to analyze the 2016 Democratic and Republican candidates for the presidency, analyzing their supporters in terms of the Moral Foundations Theory.

https://www.vox.com/2016/2/5/10918164/donald-trump-morality

https://www.cato.org/commentary/donald-trump-supporters-think-about-morality-differently-other-voters-heres-how

Research and Critics

The Wiki post has some references.

https://en.wikipedia.org/wiki/Moral_foundations_theory

The basic conclusions are supported, but all details are not. The 1 Care / 2 Fairness versus other dimensions emphasis between liberals and conservatives is supported. But, statistically, there may just be individual versus group moral foundations (2 dimensions versus 5-6).

https://digest.bps.org.uk/2021/03/15/do-liberals-and-conservatives-really-have-different-moral-foundations-differences-may-be-less-clear-cut-than-often-claimed/

Group? Which group? Small or large? In-group or out-group? Research is now focused on defining questions that clarify in-group versus out-group attraction and then, the difference between liberals versus conservatives, if any.

https://www.frontiersin.org/articles/10.3389/fpsyg.2021.579908/full

Academics have been busy working on the details. One criticism is that the 5 or 6 dimensions were defined in an ad hoc manner, rather than part of an overall theory of how man evolved. One group has stepped up to propose a theory that is solely based upon the various forms of cooperation, resulting in 7 dimensions.

What’s Wrong with Moral Foundations Theory, and How to get Moral Psychology Right

On the academic left, Haidt’s “moral equivalence” approach to the 3 modern, secular, liberal values and the 3 historic, religious, conservative values has been sharply criticized. An alternate view that highlights bias/bigotry, social dominance, right-wing authoritarianism, Schwartz Value Theory and Evolutionary/Coalitional Theory (ECT) has been proposed.

https://www.salon.com/2018/09/02/are-trump-supporters-evil-or-just-wrong-political-scientists-struggle-with-morality/

Summary

Haidt and his colleagues have defined 6 dimensions of moral thinking which underly modern political views that make sense based on evolution. The “west” could clearly learn something about the moral/political views of other societies that did not have the same historical evolution into a commercial/largely secular situation. Politicians could seek to more effectively target their messages to trigger all of these 6 values in their target audiences. Civic minded individuals could promote greater understanding of these insights to lessen the Manichaean “good versus evil” polarization we see in politics today.