Thursday, September 30, 2010
Slashdot Reports WH Putting Arm on ISPs
That is, while most folks have been focused on COICA, the White House's Intellectual Property Enforcement Coordinator (IP Czar) Victoria Espinel has apparently been holding meetings with ISPs, registrars, payment processors and others to get them to agree to voluntarily do what COICA would mandate. While the meeting is carefully focused on stopping websites that sell gray market pharmaceuticals, if registrars start agreeing to censoring websites at the behest of the government, it's as if we're halfway to a COICA-style censorship regime already. ICANN, who manages the internet domain name system was asked to attend the meeting, but felt that it "was not appropriate to attend" such a meeting.There has, IMO, been a pattern of overreach in the Bush administration, but the tide seems to be running much higher in the Obama administration. My doctor gave me the name of a pharmacy in Canada he uses for a lot of his patients who can't afford US drugs.
Regardless, it bothers me that they are doing this without law to support them.
PS: I think the reason why this type of thing bothers me so is the problem with the "Big Assumption". Start at Photon Courier and continue to his link:
...one particular assumption must be disproven. This assumption is so fundamental and widespread that I will call it The Big Assumption. I believe that it has been held by every person who has ever lived on the planet. Moreover, I am convinced that the Big Assumption has profound consequences for politics, economics, psychology, and sociology. This assumption is: The experiences that constitute my individual life are representative of the entire human condition.The peculiar strength of the seemingly inefficient system of representative government is that there is an inherent sampling and checking of regulatory assumptions. All these czars and all the end-runs around the legislative process (such as strong-arming representatives to vote on bills they and their staffers have never read) justly provokes the population. No matter how enlightened and idealistic a small group of government operatives may be, they are really just operating on the basis of their own experience, hopes and prejudices. They cannot govern effectively in this manner.
This cannot be the case for a variety of reasons. Our experiences are shaped by the time and place of our birth, our parents, our spouse, our education, our friends, our gender, our race, our religion, etc. To put it in statistical terms, our experiences are not a random sample of the experiences of all human beings who have ever lived. Nevertheless, the Big Assumption has been and continues to be held, knowingly or unknowingly, by almost everybody on the planet.
Tuesday, September 28, 2010
I Do Have Some Good News
This graph shows the one, two and three year rates of by month since January 08 (the first month of recession).
Right click on this thing and open it in a new tab or window. The blue (dark continuous) line is the one year (YoY) change. We broke the Zero Barrier in August.
Because HI tax is charged on all wages without a cap, it is a very accurate measure of changes in total wages. The orange (dashed) line is the two year rate of change. We have a while to go to get back there - it is improving only slowly. The third lighter (dotted) line is the three year change, and that has not yet quite made it home. You note that
The time of the recession according to NBER was peak 12/07 (end of growth cycle and beginning of recession cycle) to 06/09 (end of recession cycle and beginning of growth cycle). That's 17 or 18 months, so the two year line crosses the real YoY trough. You can make a stab at assessing this by seasonally adjusting the wage data, but I only do it by M_O_M quarter (yes, I have my own calendar).
I have a different, earlier start date for this recession. I have the recession beginning between the second and third quarter of 2007. If you look at the three year line on the graph above, you'll see that it comes back to zero this summer and then drops again. The three year will oscillate for a bit because in the second half of 2007 we were oscillating. Here's a long time series of wage changes since 2006:
It's very important to remember that this NOMINAL rather than real. Therefore the real YoY and multi-year drops are greater.
There's lots to look at in the first graph above. Note that in 08 (bonuses paid for 07) there is still a hefty hike for February, which represents mostly bonuses related to financial jobs. That's why you see two more spikes down in the beginning of 2009 and 2010. But barring those spikes, the one year rate of change described a slow fall and has been consistently climbing for months. This is all the more impressive because we have had the fall out of the Census jobs and the end to the housing tax credit. The housing tax credit does show up in this graph a bit due to sales commissions for brokers and realtors, but by this August that should have been gone too.
Here is a graph of the underlying data by year (using Medicare Hospital Insurance receipts for wages and self-employment). I worked very hard to get the colors so gloriously ugly and yet so clear. Note the yellow/orange sequence for 2006/2007 ties up with the red for 2010. In 2006 we dipped basically on industrials. Then we kind of powered out of that for about a year on a last desperate wave of credit bling, but the mortgages were already failing at the beginning of 2007. So our doom was clear.
It is so very strange to see a multi-year drop in wages. We have not seen this sort of thing in post-WWII recessions.
Because we never have had this before, it is very hard to use monetary policy to produce strong growth.
We have an income problem, a fiscal problem and a credit overhang. It rather seems as if the Fed has tended to produce asset speculation of late with loose monetary policies, because incomes for the general population are going to be mostly influenced by job growth, and since the general population is still over-stuffed with credit, it is difficult for creditors to lend and consumers to buy on credit. So instead of people buying stuff, investors use the extra money to buy stuff that they think eventually will be needed. But then the stuff gets too expensive for people to buy, and the investors have to go look for stuff abroad.
Without the ability to pump money through the population, you are left with Keynesian options which are basically direct income subsidies.
Worse yet, the further down the Fed pushes T-Bill yields, the further down the Fed pushes interest incomes. The wage/credit ratio of the general populace is such that the general populace can't invest in much for the higher incomes. But you can expect the threat of QE2 to support stock prices somewhat as T-bill yields drop.Here our older population comes into play. An increasingly large portion of the population derives a good chunk of its spendable incomes from interest income. Cutting interest income cuts their spending.
Since banks can't lend, throwing money into the marketplace doesn't produce the direct economic stimulus that it did, say, in the 80s. It does seem to induce waves of commodity speculation, but that just cuts real incomes for the majority of the population.
So my guess is that the Fed cannot avoid deflation. Only a shift in fiscal policy can avoid deflation, and there the options are very limited. Tax receipts will slowly rise on a nominal basis, but federal spending due to retirements alone will rise far faster. Borrowing (unless you intend to default on the debt) always cuts future spendable income. If you ratchet up our borrowing much more in the near term, you will wind up producing a staggeringly massive deflation just a few years down the road. By "a few years", I mean within a decade.
And you clearly can't raise taxes significantly next year on most of the population. It would cut money circulating in the economy enough to throw us back into contraction, and no, the Fed can't fix it with monetary policy. The only thing QE2 will probably accomplish will be to lower the dollar somewhat and help exports a little. But until domestic energy and taxation policies are fixed in such a way that domestic companies feel secure in future projections, they won't capitalize on that much. Instead, the lower dollar will increase prices on import goods enough to cut real incomes.
The other thing that just jumps right out at me is that the duration of this has placed a limit on the standard fixes. Because previous post-WWII recessions were of shorter duration, banks could really use the lower current interest rates to get a surge in incomes (their cost of funds fell much faster than their returns on loan portfolios). But with this effect gone, net interest margins for banks are additionally constrained. There is a fixed cost of funds on deposits, etc (there is a servicing cost on deposits, especially small deposits, which is not insignificant).
After a certain point, interest rates which return below inflation are deflationary, and very much more deflationary combined with high marginal tax rates on investment income, especially corporate/business income. That sends capital outside a country. And that is yet another countervailing force that QE2 will encounter. If the Fed dumps money into the pockets of investors, they probably will take some and bid up commodities and take some and invest it elsewhere, which will not drop the value of the dollar. Demand for carry-traded currencies tends to be pretty high.
The US could probably do very well in future growth if it were to adopt business-friendly energy, taxation and environmental policies. Yet we have no constituency pushing those policies, and even most our larger companies have switched to lobbying for business subsidies from the government.
Monday, September 27, 2010
In the meantime, please pray for Shtove's sister-in-law. When we last had heard from Shtove, the family (three young daughters and one anguished husband) had just been celebrating her recent clearance from breast cancer when his sister-in-law keeled over. The upshot was that she had a brain tumor. Shtove writes that the operation to remove the brain tumor was successful, but that he has gotten the impression that the doctors are not that hopeful about her long-term diagnosis.
I know just about everyone's hurting these days, but that sort of thing puts the individual anxieties and stresses in perspective, doesn't it?
Tuesday, September 21, 2010
That's Just Amazing
The “defect” in affidavits used to support evictions was “technical” and was discovered by the company, Gina Proia, an Ally spokeswoman, said in an e-mailed statement. Employees submitted affidavits containing information they didn’t personally know was true and sometimes signed without a notary present, according to the statement. Most cases will be resolved in the next few weeks and those that can’t be fixed will “require court intervention,” Proia said.No disrespect!
“The entire situation is unfortunate and regrettable and GMAC Mortgage is diligently working to resolve the situation,” Proia said. “There was never any intent on the part of GMAC Mortgage to bypass court rules or procedures. Nor do these failures reflect any disrespect for our courts or the judicial processes.”
Good Lord. Even assuming that the information was correct when it was submitted to the legal firm handling the foreclosure (aka an harassed, underpaid and overworked paralegal), certainly charges or payments could have been received on the account during the period it took the law firm to prepare the filing. If you don't check, how do you know? What if the law firm (aka, an harassed, underpaid and overworked paralegal) made a mistake?
Would you sign affidavits of facts of which you had no knowledge? If the affidavit is incorrect, that's "technically" a crime called perjury.
Imagine what the judges are thinking....
My jaw is hanging open. There will always be some errors even if a strict procedure is followed (suppose a payment were processed incorrectly), but failure even to follow the most basic procedures guarantees problems.
So this cannot be true:
Aside from signing the affidavits without knowledge or a notary, “the sum and substance of the affidavits and all content were factually accurate,” Proia wrote in the e-mail. “Our internal review has revealed no evidence of any factual misstatements or inaccuracies concerning the details typically contained in these affidavits such as the loan balance, its delinquency, and the accuracy of the note and mortgage on the underlying transaction.”
Monday, September 20, 2010
NBER Agrees With Me - June 2009 Trough
Middle age sucks.
Joking aside, the significance of this determination by NBER is that they do not believe that we are currently undergoing a second contraction. Neither do I, but I find it quite reassuring that they have made this statement.
I have been following the latest Chinese/Japanese kerfuffle with some attention. So far it does not see too serious, but that may not hold.
But back to the US economy:
In general, I try to track real incomes and necessary changes in expenditures that will affect real incomes. In doing so, I concentrate on edge populations, both geographically and by demographic/income slices. In other words, if I take the middle quarter of income recipients, I try to concentrate on the bottom fifteen percent of that slice. Doing so makes my analysis more sensitive. I track flexibility on expenses and incomes (can they shift and adapt?), rate of change, and five-year shifts.
This is becoming almost impossible because of the uncertainty in tax policy. Congress appears frozen, so I am guessing we will not find out until January or February what level of taxes most people will be paying next year.
This raises some extremely interesting problems in forecasting. Pretty much anything could happen, because the underlying structure is still very price-sensitive, and producers of all mass-market goods don't have much in the way of pricing power. That means that businesses are also extraordinarily sensitive to taxation changes. Every dollar of additional tax is one more dollar reduction of real income, so it is hard to improve the economy by raising taxes.
One of the oddest things about our current political-economic cycle is that the political discussion seems almost at right angles to the underlying structures of the problem. This does not encourage one to expect a solution.
Also, some of the laws currently on the books or currently not in much contention may be economic suicide pacts. It's difficult to explain this. Banking is currently a good example, but quite abstruse. Perhaps a more understandable example would be our energy policies.
The best quick way to get an understanding of how huge an impact energy regulations will have is to spend a few days reading through the EIA's energy outlook page. In particular, see the no sunset and extended policy cases. We are spending a tremendous amount of money on policy, and in some cases the funding is at cross-purposes. I quote:
Tax credits paid to consumers in the buildings sector in the Extended Policies case average $10.5 billion more per year than in the Reference case, reaching a cumulative total of $300 billion in revenue reductions to the Government over the period from 2010 to 2035. In comparison, cumulative revenue reductions as a result of tax credits in the buildings sector total $27 billion over the same period in the Reference case. The largest response to Federal PTC incentives for new central-station renewable generation is seen in the No Sunset case, with extension of the PTC resulting in cumulative reductions in Government tax revenues that total approximately $45 billion from 2010 to 2035, as compared with $24 billion in the Reference case. Additional reductions in Government tax revenue in the No Sunset case result from extension of the blenders tax credit, the biodiesel blenders tax credit, and the cellulosic biofuels PTC, with cumulative total tax revenue reductions from 2010 to 2035 of $156 billion, $32 billion, and $168 billion (all in 2008 dollars), respectively, compared to the Reference case.I'm not sure if it is clear that these are cumulative. Extension of current laws assumed in this case results in net federal costs of:
- 300 billion (paid to consumers)
- 45 billion (paid to power producers)
- 156 billion (ethanol)
- 32 billion (biodiesel)
- 168 billion (cellulosic biofuels)
There are tremendous additional costs involved in other energy regulation. To get an idea about these costs, I recommend reading through EEI testimonies and filings to the regulatory bodies involved. EEI is basically a utility companies association. Even if you won't do that, read at least this one comment about the proposed regs for industrial boilers. The approach the EPA is using is insane. It's as if they had gone through every type of motor vehicle available, and used the best "parts" of each, with the end result that no actual vehicle could meet the final standard.
No one understands the total impact, but such regulatory abuses are a very significant reason that investment in the US is limited, and jobs are continually exported. Until we reach the end of this secular trend, it is very hard to make projections about US economic potential.
To place these numbers in some perspective, we are justifiably worried about funding Social Security. But if we were to cancel our current energy subsidies for most of these "alternative" sources, we would more than recover the projected Social Security deficit for the period through 2025. See page 51 in the Trustees report (ignore interest income and look at taxes (contributions plus tax on benefits) in comparison to total cost.
This does not even address the state-level costs of energy innnovation, which are quite significant. At one point CA's ten year plan was slated to cost about 100 billion over the ten years. Because we are in a very tight spot over the next ten years, raising income taxes will tend to cut GDP, which will cut income taxes. But cutting some of our government transfer programs will directly reduce incomes which will also reduce GDP. Some attention to efficiency here is warranted.
The other reason why we should pay attention to energy costs and plans is that we appear to be backing into greatly extending the planned life of a lot of nuclear plants. I am not sure this is wise. The longer we extend their planned lives, the more potential risk we run. Hydropower projects will probably pay and produce very reliable power, but no big new hydropower plants can be built in the states because all are considered too environmentally disruptive. Solar power can be somewhat more reliable than wind, but it is extremely expensive in most areas. Trying to go renewable in large percentages of solar is therefore unbelievably expensive. Wind is netting out so far to be more expensive than thought, but the big problem there is integration into the power grid. The more wind you try to integrate the more backup and less net replacement of non-renewable you get. In the end, it may prove more expensive than solar power in many areas.
Efficiency/conservation measures generally provide the best long-term return. However there is an upfront cost (and still we need to replace aging power plants), and since conservation directly reduces current and near-term costs quite dramatically, the end result is that you have to increase subsidies for alternatives, which is a somewhat paradoxical result.
Any time you interfere with markets you run these risks! Interfering with energy markets (other than to stabilize them) is about the most economically risky thing you can do, because energy costs are inextricably linked to real living costs, which tend to affect real incomes for about 70% of the population very dramatically. Thus, large energy cost shifts move economies from cycles of contraction to expansion and back again through adjustment to incomes (both business and personal):
Thursday, September 16, 2010
But no, this genie is out of the bottle, and this is why. Read the comments on Ann's post.
The bottom line here is that it will be moderate Muslims who will be unable to speak out.
Update: Breyer recants. Oops, I mean "clarifies".
And just because I thought it was interesting, and because the whole Koran-burning flap is not really about Islam at all, but about our own laws and government, Bernstein posts about the "Repeal Amendment".
So far this summer tax receipts on wages have continued to climb, so from my perspective, it's all good. Not very good, but good. We are getting very close to turning in YoY gains. Even if the current trend of slowing growth continues, we should get there before the end of the year.
Next year there will be another round of state and local cuts, but if we have started to grow the private wage base again we'll be better able to survive it.
The extension of the eligibility dates for unemployment benefits has kind of saved the rest of this year. So no double dip until next year. Christmas should be okay based on bank deposits. Not great, but okay.
That's the good news. The bad news is that September's NFIB is flat, flat, flat. 88.8.
The recovery this time is going to come from larger businesses.
If you look at domestic nonfinancial commercial paper outstanding, there is some reason for possible concern (this is from St. Louis Fed Fred):
I THINK this is mostly due to the auto slowdown, but I am not sure. We'll find out in a few months. The reason why I think this is that rail traffic continues to hold strong, with significant rebound in metals. You always see it in rail first.
Tuesday, September 14, 2010
A Bit Cross About This Bloody Nuisance
Of course I am upset by the spectacle of the entire executive branch of our government, the UN and so forth cracking down on some cracker pastor in Florida for the horrible sin of threatening to burn a Koran. Mind you, I don't think that type of symbolic speech is worthy. It's not as if I approve of that step. I have never felt that the type of symbolic speech involved in burning a collective symbol is very communicative.
But even so, and even though I am sure that I am right on that point, I remain aware enough of my status as one person in a nation of over 300 million to realize that my preferences really should not control the actions of 307,000,000 other people.
But it is clear that the only reason that these pathetic examples of political driftwood can advance to justify the pressure they placed upon him (including sending the FBI down to "reason" with him) is their fear that it will inspire Muslims to violent action. And by making, quite literally, a federal case of it, they have all conveyed the global message that rioting, burning, stabbing and any other type of barbaric Islamic behavior justify the suspension of the US Constitution when it comes to Muslims. In short, very prominent members of our executive are attempting to, de facto, suspend the constitution in such a way that it must inevitably have given the greatest surge of joy to violent Islamic factions since 9/11.
And we must not forget the Supreme Court. Not only does the newest member, Kagan, stand as having advanced several justifications for curbing the First Amendment, we have old "Active Liberty" Breyer trying to assert that burning the Koran is not protected under the First Amendment, and our idiotically mushmouthed president announcing that it is a violation of religious tolerance.
Religious tolerance is what is demonstrated when the country elects a president who was attending a church in which the pastor addressed 9/11 with his ringing "God DAMN America" sermon. That's religious tolerance. Religious tolerance does not mean that the government should enforce what it considers civil speech.
So now we have the Supreme Court implicated.
It's clear that none of these people are speaking out of principle. If they were, they'd be having fits over chocolate Jesuses, Piss Christ, and all that sort of thing. No one - Eric Holder included - worries about the "incitement" of Hitler Youth Week at good old SDU. If they even cared about speech with the potential to cause violence, they'd be at least as worried about something like that. It is completely clear that there is one standard being applied to Islam and one standard being applied to everything else - and it is also completely clear that the only
And we should all be astounded and appalled at the theory that the actions of some podunk little church are going to provide more of a recruiting tool to violent Islamic terrorists than the bombings in Yemen, Pakistan and the actions in Afghanistan and Iraq. The fact that these witless examples of a tragic inability to reason could make that argument in public scares me almost as much as the rest of it. Let's get a grip. Anyone who believes this does so purely out of fear and the will to find an illusory safety.
Personally, I'd be willing to impeach Obama over this. If I were in the House, I would now vote for it.
I have thought for a long time that Breyer's judicial philosophy, which amounts to the claim that the Bill of Rights means nothing if Congress doesn't want it to mean anything, justifies his impeachment.
When Eric Holder was reported to have described the projected Koran burning as "dangerous", he was potentially laying a groundwork for a legal action against this. And Breyer goes on to make it more specific:
“Holmes said it doesn’t mean you can shout 'fire' in a crowded theater,” Breyer told me. “Well, what is it? Why? Because people will be trampled to death. And what is the crowded theater today? What is the being trampled to death?”This is not a fake issue. It is THE issue.
For Breyer, that right is not a foregone conclusion.
“It will be answered over time in a series of cases which force people to think carefully. That’s the virtue of cases,” Breyer told me. “And not just cases. Cases produce briefs, briefs produce thought. Arguments are made. The judges sit back and think. And most importantly, when they decide, they have to write an opinion, and that opinion has to be based on reason. It isn’t a fake.”
The damage that was done last week cannot be undone quickly or easily. The Ground Zero Mosque guy was cheerfully advancing the theory that the mosque had to be built to avert Islamic violence. It must be admitted that our president and attorney general laid the foundation for that claim and that Breyer also is rowing as hard as he can toward that goal - unilateral surrender.
It must be lived down and corrected as quickly and as decisively as possible by public action. Any citizen of the US who cares at all about the Constitution now should be thinking very intensely about requiring candidates for public office to go on record about these matters.
Certainly the events of last week have gone a long way toward justifying the belief of a surprisingly large minority of the US population that Obama is Muslim. If you look just as his actions, it would appear that he is not on our side.
There is another less obvious implication. The implied disrespect to the vast majority of American Muslims, who do support the Constitution, should not be blinked at. When the FBI warned the podunk pastor that his congregation could be subject to attack, it clearly was implying that Muslim attacks on our soil could not be stopped.
The failure of our executive to make the distinction between violent people who do not believe in the US rule of law and most American Muslims is quite troubling, and the apparent claim that they could not protect the citizenry against Islamic terrorism surely has to worry many American Muslims. It's hardly the way to make Muslims who deprecate violence feel secure in their criticisms, is it? All around the world, it is Muslims who argue against this sort of religious violence who are the most common victims of Islamic violence. And in the US, Muslims who have criticized Sharia and other forms of Islam have received death threats in plenty. Is our government abandoning its will to protect them?
The UN has already gone a long way toward adopting the principle that Islam must not be criticized in any way. Under Obama, the US government has slowly been shading toward acceptance of this principle. It is, of course, a direct threat to the US Constitution. This is why Obama's mention of "religious tolerance" is such a huge red flag. The sense in which he used it is the UN sense, which means that Islam may not be criticized. It does not mean that any Islamic country has to allow freedom of religion within their borders. It is strictly a one-way proposition.
I was silent over this because I wanted to brood over my shock and make sure that it was not an overreaction.
But I will not now change my mind. I think this president, probably thoughtlessly and unwittingly, has violated his oath to uphold the US Constitution. Either he changes course or he should be impeached.
PS: The Aussie professor who smoked pages of the Bible and Koran has been suspended for the blasphemy. If the US abandons ship, all others will also.
PPS: I link to a discussion on Volokh over the Breyer yipyap. Notably, although a number of commenters make the point that banning speech which is likely to cause violence will inevitably encourage violent reaction to speech, there seems to be almost no consideration that historically, the speech which led to the abolition of slavery and civil rights laws for minorities was often very controversial speech that did cause violent reactions. The worse a philosophy or creed objectively morally is, the more likely a violent reaction to criticism of that philosophy or creed will be.
The fact that there are strains of Islam that are the debased expression of backward and contemptible cultures means logically that we are in conflict with those forms of Islam. There's a reason that the Fort Hood shooter (you know, the one with the "God is love" bumpersticker) couldn't find a wife who was subservient enough to his tastes.
Final PS: If this guy was indeed fired from a government agency for burning the Koran, it sounds like the first US court case addressing constitutionality is upon us. There might be some relevant background info in the comments at the Volokh post.
Monday, September 13, 2010
I Sorrow For My Country
That an American administration could take a stance that fosters and justifies Islamic terrorism and essentially makes a dead letter of the Constitution is almost beyond belief. These thoughtless adolescents running the country are terrifying. They now have a lot of blood on their hands.
We have got to get the lawyers out of government. Apparently they believe in nothing.
It will be a long, long while until 2012. Everyone who is loyal to the Constitution should be actively seeking candidates from any party who will at least support the Constitution.
I think this came close to impeachment level. The most fundamental duty of a president is to support and uphold the Constitution. Our current president is at war with it.
I also think we should end the action in Afghanistan. It is far too dangerous with the current leadership. They are insane, literally insane. Or they are traitors. Logically, it must be one or the other.
Wednesday, September 08, 2010
Amazingly, The Truth In WaPo
He left out the drag on production involved in certain excesses in our environmental regulation scheme and the energy situation, but the rest is quite solid. It's the trade deficit, stupid. That's the structural problem.
Tuesday, September 07, 2010
When The Problem IS Unit Cohesion...
See Shrinkwrapped's recent post on Cynthia Tucker's column.
We have 24% unemployment among the young and 16% black unemployment. Needless to say, the average American wants to curb immigration until we have cut our unemployment rate. Needless to say, blacks and recent Hispanic immigrants are among the most desirous of such a policy. We have very strong hostility among the more educated portions of the populace (IT, engineering) to outsourcing and H1B immigration for the same reason.
And Cynthia Tucker writes a ridiculous column claiming that people are worried about skin color? Hah.
If you look at polling, the policy of bailing out bankers gets almost the same percentage of rejection among Democrats as Republicans. On many of the major issues of the day, there is little statistical difference among the adherents of different parties. And by nearly identical percentages, Democrats and Republicans want term limits in Congress. Democrats and Republicans are furious about the GM deal and the perception that the UAW was given special treatment. Most Americans perceive that government actions to deal with the recession did more to help those on top of the heap than those most affected. There is growing hostility to public sector unions which have negotiated themselves overwhelmingly sweet deals. When government employment becomes a way of shielding oneself from the common experience, you can expect most Americans to be angry at this All-American dacha class.
So what we are really seeing is a very strong social pushback against those groups and interests who seem to be trying to negotiate special deals, and a backlash against a government which is widely perceived to be corrupt and in the business of dealing out bennies to those who pay them the most. The reason why it is perceived to be corrupt is because it is corrupt.
This backlash began during the GOP-dominated Congress of 2005, and the impetus was the horribly bad behavior of Congress in the wake of Katrina. The average citizen was concerned THEN about the deficit and wanted takebacks in other government handouts to pay for the Katrina aid (which was widely supported). Congress made it clear then that it had no intention of behaving in a civilized manner.
Since the Dem-dominated Congress of 2006 and since is behaving just as badly, Americans are pissed.
It is no accident that Congress almost paid T. Boone Pickens to corner a huge percentage of Texas water rights. The AGW type stuff has turned into a corporate pinata. Americans have noticed this.
Americans have also noticed that governments from the bottom up have turned into a giant special-dealing scheme.
Here is the data for government compensation versus all private sector compensation, normalized:
The BEA data is here. The picture becomes increasingly grim when you learn that unfunded retirement benefits are going to cost at least 2 Trillion more, maybe over 3 Trillion, and that there is a widespread but quiet effort to have the federal government take over these obligations.
It should be obvious that this is not sustainable. It should also be obvious that there will be increasing efforts to rouse the wrath of citizens against private industry as a way of hiding the public sector's sweet deal.
The picture becomes even clearer when you look at wage and salary accruals. From 2000 to 2009 government wages and salaries increased slightly over 50%. Private sector wages and salaries increased 26%. This is obviously unsustainable. Government expenditures really have gotten to the point at which they are crushing the economy.
The issue becomes even more remarkable when you break it down by worker. According to BLS, in August of 2009 there were 20,665 thousand government workers and about 119,400 private sector workers. Now we go back to BEA's 2009 compensation figures for government/private:
Gov: 1,173,571 / 20,665 = 56.8K
Priv: 5,113,359 / 119,400 = 42.8K
We cannot fix our imbalances by just cutting Social Security again. We are going to have to take a broader approach.
Businesses have a lot to gain if our fiscal imbalances are corrected, but currently businesses from small to large doubt the willingness of government to correct those imbalances, so the willingness to pay more in taxes and keep investing in the US is lacking. This, of course, increases the public/private imbalance.
We have come to the end of being able to stagger along by giving groups special benefits, and the broad public has realized that. Whatever political group adopts a platform that stresses equalizing the needed cuts will win the political debate and the political reins. However, to date no such movement has occurred in either party, which I suppose accounts for the rise of the Independent faction among the citizenry.
Sunday, September 05, 2010
The Devil She Came Back From Georgia
I have been laughing my eyeballs out over the journalistic efforts to explain the the Democratic troubles. This has accounted for my silence, because it is difficult to be polite about their theories. Is it really a communication problem?
So, with a drawl, let's 'splain it to them. With a soundtrack, because they just don't seem to be able to handle verbal logic any more.
In 2008, the Democrats ran on an anti-devil (aka George Bush), Cheap Tricks/Personal Jesus (Obama) kind of deal. The voters kind of went for it. College professors fell hardest. They made ObamaGirl look like a frigid anti-social man-hater. So this was the thumping political vibe we had goin' on for the common folk while the professorial class was humpin' the walls over their Personal Jesus.
And all was well, except for one thing. The Democrats woke up the morning after to discover that they had won the national elections lock, stock and barrel, and most of the locals, so now they had to govern. Naturally, the college professors flocked to DC to show the hillbillies how it was supposed to be done in the reality-based party.
There was only one problem - they had forgotten the reality. Not that there weren't warning signs of that during the campaign. Weird Science! was clearly evident, as in Obama's suggestion that properly inflating tires would go a long way toward solving the fossil fuel problem. Weird Science! flourished in the early days of the administration, as was demonstrated when Steven Chu (Nobel science laureate!) suggested at a global warming conference that painting all the rooftops white would go a long way toward solving global warming. Even those most addicted to Weird Science! had to realize that this would address urban heat island effects more than anything else, which was puzzling. On the one hand, global warming was in. On the other hand, Chu seemed to be suggesting that dealing with the UHI effect would take care of a lot of it. Science was getting weirder.
Eventually, the popular credibility crisis in Weird Science! came to a head during the BP oil spill, when Eugene Robinson wrote his "please no more Nobel laureates, how 'bout some engineers?" column, and the population began to see Weird Science! as definitely weird, but not very effective in the real world.
Fortunately, the average American realized that Weird Science! looked an awful lot more convincing when you were stoned, so the medical marijuana movement (and up yours, Supreme Court) gained a lot of impetus.
And then came health care reform, and the only way you can get those numbers to add up is to be very, very stoned. Also it really helps to be wasted when you are trying to figure out how you are going to pay both your required medical premiums plus your required 30% match to actually get health care.
So the states started passing medical marijuana laws to get with the program. After all, medical marijuana should cut a lot of pharmaceutical costs, right? And since the basic idea is to make sure that most people get less medical care, they'll need to be stoned to get through it.
And that would have carried us through the Weird Science!-No-Health-Care-Reform crisis except for the fact that somehow, the DC solution to all these sorts of Weird Science! problems always seemed to add up to taxes and centralized solutions. Carbon taxes, gas taxes, fines if you don't have the money to buy insurance, much higher utility bills because the utilities were mandated to increase renewables.... But always more money, and always more government control. Plus, we don't seem to have the money any more, which presents a problem when all our reforms demand that individuals pay for more. This focus on centralization and more taxes especially clashed with the medical marijuana people, who have always thought and acted locally and tried to keep the feds out of it:
Ergo, the Tea Party, which basically follows the "Don't tread on my hemp patch" motto, and definitely, but definitely, doesn't want to pay any federal taxes on its tea.
Nor had the centralization problem simply been a DC/Infernal Peasants concept. The Congressional Dem leaders, especially Pelosi, were ruling their members with such strictness that it reminded one of the Nazi party's parliamentary innovations. The various Congress Critters were told when to vote and how to vote, and there wasn't even an attempt to cover their butts with the voters by making the bills available to the Critters to read before they were forced to vote "Yes".
This was a continuation of the professorial approach, but unfortunately when the Critters returned to their districts the voters did not respond well to the new theme no matter how professionally it was marketed:
Indeed, the popular reaction was such that many Critters fled their districts and returned to DC only to be told by their own Masters that they needed to get back out there and win one for the Gipper. Repeated attempts to do so over more than a year have only led to a widespread rebellion among voters who are, quite frankly, more than a bit scandalized at the kinkiness involved:
These voters don't mind if the professorial classes are humping the walls, but the voters are not interested in attending that type of party.
Inevitably (and confoundingly to most journalists) this has led both to a quiet rebellion among some Congress Critters and a less optimistic electoral outlook for Democrats:
A substantial number of Democrats in Congress appear to be hoping that Pelosi goes down, but they are too cowardly to attempt it themselves.
So to summarize for Trained-But-Confused-Journalists:
No, this has very little to do with Obama, although he is apparently Pelosi's bitch, and that is eroding his approval ratings and messing up Matthews' tingles. It has nothing to do with racial anxieties. It is not a sudden temper tantrum among the voters. Among the voters, it is pretty much business as usual. It is DC which suddenly decided to get into this Dominance/Submission game, and the average US citizen hasn't changed at all in his or her preference not to play such a game.
If a party suddenly dresses up in whips, chains and chaps and wanders around the streets being flagellated by a Dominatrix named Pelosi, the average voter is tolerant enough to let them all have all the fun they want. But the voteres draw the line at participating themselves.
PS: But don't worry, Obama fans. After the election Team Two, led by Chris Matthews himself, has an idea about how to restore Obama's mojo. They're gonna pull out the old Pizzaz (video you will never be able to scrape from your brain.)
Friday, September 03, 2010
A Very Good Employment Report
Basically all I have to say about this is purr-purr-PURRRRRR-PURRRRRRRRRRR. Don't bother me while I"m purring. It's been quite a while since I've had the chance. If this report had been bad it would pretty much have been toes up. I couldn't see how it could be that bad with the good indications on WIET tax receipts, but I was on tenterhooks anyway.
The official unemployment rate doesn't mean anything - it just reflects more people looking for work. See Table A-1 and Table A-15, Alternative Measures. Note that U-5 did not grow (that includes marginally attached and discouraged workers). U-1 (number of employed 15 weeks or more as a percentage of the labor force) dropped from 5.7% to 5.5%.
U-6 (U-5 plus involuntary part-time) rose from 16.5% to 16.7%. The number of part-time employed has shifted upwards, and that is because of some of the weakening in manufacturing. But it's not enough to overcome the underlying trend.
To understand how good this is (comparatively, employment is historically very weak), take a look at Table A-8. Since last August, any way you look (SA or NSA) we have dumped a lot of government workers and added a lot of private sector workers.
Non-seasonally adjusted:This is so important, because of the structural fixes that have to happen in order to achieve an economy which can grow sustainability, one of the most important is cutting government employment in relationship to private employment. There's a lot more of this that should be done, but at least we are getting a grip on it.
Private Emp: 107,828
Private Emp: 108,381
Private Emp: 107,094
Private Emp: 107,760
The second big issue is of course retirements, both public and private. A lot of government pensions and retirement medical benefits will have to be cut for current employees and some current retirees, and for that a legal basis will have to be developed. But otherwise, big swathes of the country will go the way of Camden, Detroit and Buffalo and ultimately the retirees will be defaulted on anyway. Almost all public sector unions are in complete and abject denial over this.
It would be pretty crazy to raise taxes significantly now. The states and locals are still raising taxes, so if Congress doesn't pretty much pass through an extension of most the Bush tax cuts, the overwhelming probability is that they'll screw this up big-time.
From here on out, stimulus shouldn't try to support state and local governments nor housing prices. Things just have to come back into balance. Stimulus would be better focused on tax cuts and a more even distribution of taxes.
And for heaven's sake, no new regressive taxes. That's the last thing we need. We are still in the "A job - any job" phase of recovery, and we've got two years to go before enough debt is slapped out of the system to really make a difference.
Thursday, September 02, 2010
The Current Base
Also, ADP employment yesterday was really bad. But still, ISM, factory orders, NACM and Chicago PMI all show an economy in which we have some underlying growth impetus left. NACM showed a minor improvement after three months of very solid declines. The ISM manufacturing report yesterday was solid, although there were some weaker factors there. Housing should have about bottomed, because rates are so low that it will gradually draw more buyers with home prices dropping and most importantly, home prices ARE dropping. There is no way to clear the market without substantial price declines. As long as we let it alone and the rest of the economy keeps struggling along, the housing problem will fix itself and be substantially improving by 2012. It takes five years.
Another and much more important indicator (so far, I am on tenterhooks as to August and September) are wage tax receipts. July showed the lowest YoY decline yet - the drop was only 1.1%. Judging by Daily Receipts, August looks excellent:
2009:So right now, the structural "floor" of recovery is still intact, as long as one acknowledges the obvious reality that this was unlike any other post WWII recession, i.e., it's some sort of a depression/recession hybrid. Unfortunately, even Dana Milbank just realized that DC did not take that into account. His article about Romer's talk is quite interesting.
July WIET: 131,417 (end date July 31st)
July CIT: 8.054
Aug WIET: 126,389
Aug CIT: 3,743
July WIET: 131,219 (end date 30th)
July CIT: 9,767
Aug WIET: 135,483 (has revenue from July 31st)
Aug CIT: 4,645
Unfortunately, the floor probably will not remain intact through the second half of next year if we raise taxes sharply. At any given time, the economy consists of a set of forces, some of which are highly ephemeral and some of which are deeply embedded. One of the structural forces here are real incomes among the majority of the population. It will take considerable time to get those incomes to grow enough to overcome the drag, and the worst of it is that state and local taxes are still rising as a percentage of incomes due to state and local liabilities. So raising federal taxes more than marginally will have a terrible impact.
At this stage of recoveries from busts (which is the best definition of this - not a recession, not a depression, but a bust) the economy becomes acutely sensitive to changes in incomes.
PS: For a bit of irate humor, see this blog post by Ann Althouse on Romer's speech. I am sure Romer is permanently off the White House Christmas card list over this. "Who'd 'a thunk" is rather a political liability at this point.
Wednesday, September 01, 2010
Earl, That Grumpy SOB
Earl is scheduled to take a turn north tonight, but if he doesn't make that hard right, even GA's in trouble. In the meantime, the coastal areas from SC on up had better be wary. So far only NC is supposed to get hurricane force winds.
What bothers me about this is that in our area, people are generally prepared. But the very high-density population areas further up the coast are probably not, and those people probably still aren't taking this seriously. If you get into the coastal areas, you may not be able to get out when you finally decide to do it.
PS: But Fiona wandered off into the Atlantic - lured off by some Chippendale dancers mustered for the occasion - and Gaston, who follows, has a French name. So you just have to get through Earl.