Tag Archives: economy

Lessons We’re Having to Learn The Hard Way

The news just keeps getting progressively worse.

It’s pretty clear that in addition to a global pandemic, we will experience a global economic meltdown. As state governments have stepped up to compensate for the lack of federal leadership, restaurants and bars, gyms and cultural venues have been ordered to close; many will be unable to weather weeks with no income, and will never re-open.

As one of my friends recently noted in a post to Facebook, Coronavirus would have battered the U.S. to some extent no matter who was in the White House. But an even minimally-competent President “would have listened to the public health experts and taken action, realizing that this was about the country and NOT about him (or her) self.”

And most likely, no other president would have rejected the WHO’s offer of test kits, or dismantled the global health emergency task force that was set up to deal with a pandemic. And no other president would likely brazenly lie on a daily basis even as his own administration’s experts contradicted his lies and imbecilic pronouncements. In short, Trump deserves “credit” for the extent of this catastrophe, the long and outrageous delay in taking action, and the economic meltdown that will result, along with many of the (probably unnecessary) deaths that we will see.

So–lesson number one: elections matter. Competent government matters. The character and intelligence of our elected officials matters.

Lesson number two: we’re connected to the rest of the world. Discussion of a “global pandemic” and “global economy” should give “America First” xenophobes pause. (It won’t, but it should.) We really are ALL in this together. Today’s world is far too connected for the walls, travel bans and reflexive hatred of darker “others” that characterize the Trumpublicans’ approach to the rest of the world. Not only are those measures useless and stupid, especially during a pandemic, they inevitably hurt America more than they hurt those “others.” Global cooperation is absolutely essential, not just to the management of health threats, but to efforts to mitigate economic damage.

Lesson number three is another take on the fact that we truly are all in this together–and by “this” I don’t just mean this particular health crisis or this specific economic threat. We humans are– in far more than the biblical sense–our brothers (and sisters) keepers. A government that is not structured on recognition of that fact will be unable to mitigate disasters.

What does that mean? It doesn’t mean abandonment of market economics, but it does mean provision of a far more robust and less haphazard social safety net.

In a recent analysis, the Brookings Institution acknowledged that reality.

In addition to the dire risk to individual health, side effects of the coronavirus pandemic are sure to include widespread economic hardship and uncertainty. If you experience these symptoms, you’re mostly on your own—as the virus reveals a grossly inadequate safety net and willfully ineffective political system that are poised to leave our most vulnerable workers bearing the brunt of the economic and social impact.

The self-quarantines and social distancing measures taken in response to COVID-19 are critical to keeping people safe by reducing exposure to the virus and slowing its spread. But we can already see the strains in our health care system that foreshadow even greater disruptions in the weeks and months to come. Similarly, we are witnessing the unavoidable side effects of social distancing: the reduced economic activity that ensues when masses of people stay home or avoid large gatherings. In turn, this translates into reduced demand for workers….

In the United States, 53 million people must get by on low wages, with median hourly earnings of $10.22. Some of the largest occupations employing these workers are also the most susceptible to the economic slowdown accompanying the virus’ spread: 5 million food service workers, 4.5 million retail clerks, and 2.5 million custodians and housekeepers. When college campuses empty out, when stadiums don’t host games, or when conferences are cancelled, it means that food servers, cooks, clerks, and housekeepers are out of work. And many low-wage workers and those in sales and service industries lack paid sick or vacation leave, which results in no earnings coming in at all.

The plutocrats who have been enriching themselves through public subsidies and tax cuts while disregarding the precarious state of low-wage workers are going to learn a very unpleasant lesson: when millions of people lose their ability to participate in the marketplace–when they no longer have the means to buy the widgets produced by the plutocrats’ factories or to shop for the services and products in which the wealthy have invested–  stock portfolios and tax havens won’t shelter them from that storm.

Ultimately, fortunate people are only secure when everyone is secure.

Toto: We Aren’t In Brownback’s Kansas Anymore

Remember Sam Brownback? When he was elected Governor of Kansas, he vowed that the GOP’s economic theology–aka “trickle down”– would create an economic paradise, and he immediately set about implementing that theology.

In 2012, with the help of Kansas’ overwhelmingly Republican legislature, Brownback completely eliminated income taxes for more than 100,000 businesses and significantly reduced taxes on the wealthy.

For years, Republicans have been telling us that such steps would boost economic growth, and that they would more than pay for themselves, and Brownback was evidently a True Believer. Ardent belief notwithstanding, Brownback’s policies not only failed to deliver the promised prosperity, they devastated the state’s economy.

State revenues fell dramatically. School years and school days were shortened, public construction projects came to a screeching halt, Medicaid benefits were reduced, and job creation simply stopped.

As Harold Myerson has reported (link unavailable),

By 2016, Kansas voters—including Republicans who objected to seeing their children’s educations shortchanged—revolted. As the Prospect’s Justin Miller reported at the time, Republican primary voters, joined by Democrats, ousted legislators who refused to repeal the tax cuts, and in 2017, the new legislature overrode Brownback’s veto of a bill repealing the cuts. In 2018, voters elected Democrat Laura Kelly as their new governor, and today, with adequate funding restored, Kansas has resumed its support for education, infrastructure, and the basics of civilization.

This month, CNBC came out with its annual list of America’s Top States for Business, a ranking on which states don’t move up or down very much from one year to the next. Which is why attention must be paid, as Americans for Tax Fairness has pointed out, to one massive exception to this rule. On this year’s list, Kansas placed 19th—which is a full 16 places higher than it placed last year.

There’s a lesson there, but some people–and political ideologues–refuse to learn.

Trump and Mitch McConnell repeated what I’ve come to call the “Brownback Argument” to justify what Myerson dubs “the Great Federal Tax Giveaway to Corporations and the Rich Act of 2017–18.”

In consequence, share buybacks have soared to new heights while wages and infrastructure investment have barely risen, when they’ve risen at all. The federal government, of course, can run deficits, while states are constitutionally prohibited from doing so—which is why the Trumpistas have chiefly engaged in targeted rather than across-the-board cutbacks in federal spending. (The targets, of course, have been the poor and minorities.)

Brownback was politically run out of town on a rail—resigning early in 2018 to become the Trump administration’s Ambassador at Large for International Religious Freedom. (Unlike Tsarist Russia, our government lacks a position like Procurator of the Holy Synod, a sort of directorship of pogroms, though Stephen Miller at times seems to have become that position’s functional equivalent.) Is it too much to hope that American voters relegate Trump to history’s dustbin as their Kansas compatriots did to Brownback?

We can hope–for reasons including but definitely not limited to idiotic economic policies.

If there is one thing that the cult that is today’s Republican Party has repeatedly demonstrated, it’s that both religion and political ideology rely on faith rather than evidence.

 

Not-So-Merry Christmas?

I keep remembering the line Yul Brynner used  whenever he was faced with a conundrum in The King and I?  “It’s a puzzlement.”

As Americans count down to the 2020 elections, those of us who view the Presidential contest as a critical referendum on the American Idea and the rule of law are torn. We want to stop this corrupt and incompetent administration from doing even more harm between now and then, but we also know that preventing the worst consequences of Trump’s madness will work in his favor.

Take the damage being done to the economy by his ham-handed imposition of tariffs.

As an article in the Washington Post recently put it,

There’s a case to be made that Trump has the upper hand in these trade disputes because the United States buys more from China and Mexico than those countries buy from the United States. To put it another way, China and Mexico need Trump economically more than he needs them.

But that’s just the raw economic calculation. Trump is also facing a campaign for reelection in 2020, and he’s banking on a strong economy to propel him to victory. There are already signs that Trump’s trade policies are making the markets and economy jittery, and the pain is likely to escalate if he doesn’t make some deals by September.

People who actually understand economics and trade policy (a category that clearly excludes Donald Trump) are warning that America’s economy is losing steam. Despite Trump’s fantasies, coal is dying, factories aren’t coming back and companies that are still here are pocketing their tax windfalls, not creating new jobs.

Tariffs are taxes on the American people. So far, those costs have been modest. As Trump and top White House officials frequently point out, inflation (a good gauge of price increases across the economy) has remained low, which helps explain why there hasn’t been widespread public revolt over the tariffs, except among farmers and some manufacturers who have been hit the hardest.

Experts who follow economic trends warn that the costs of Trump’s delusional “dealmaking” are likely to ramp up in August and September. That’s because he appears intent upon announcing new rounds of tariffs– thus dramatically increasing the costs Americans will have to pay for goods, and making it probable that people will notice that they, not China, are paying the tab for Trump’s version of trade policy.

August and September are when U.S. retailers import goods for the holiday shopping period. Retailers warn that If Trump’s tariffs are still in place then, “it will be nearly impossible not to pass some — if not all — costs on to consumers for holiday season 2019.”

Consider the numbers. At the start of the year Trump’s tariffs cost the typical family of four about $480 a year, according to calculations by the right leaning Tax Foundation and The Washington Post. Last month Trump increased tariffs on China, which lifted the cost for a typical family of four to $860 a year…If Trump moves forward with his other threat to put tariffs on all Chinese imports by the end of the summer, the cost would jump even higher — to more than $2,000 for a family of four.

And it’s not just higher costs. Retailing–and retail employment– is already on the ropes. As one columnist recently noted,

Last week, 661 firms — including major players such as Costco, Target and Hallmark — signed a letter pleading with the administration not to use tariffs as a cudgel in its efforts to address China’s trade abuses. The USTR has also received more than 1,600 written comments thus far, overwhelmingly negative.

These, like the USTR public hearings, echo what big retailers had already been warning investors and customers: Sweeping tariffs will stress already-thin profit margins and lead to layoffs. They will also raise prices for U.S. households by hundreds or thousands of dollars, wiping out the value of Trump’s tax cuts.

My only quibble with that letter is with the notion that the tax cuts had value…

So here’s the conundrum: Consumer spending is the backbone of the U.S. economy. If Trump continues with his “Tariff Man” antics, the economy will suffer, and the working poor, as usual, will bear the brunt of the pain.

On the other hand, other than appeals to racism, Obama’s economy is pretty much the only thing Trump has going for him.

Should good Americans root for a downturn that would be likely to ensure Trump’s defeat, even though it would cause pain for so many people? Or should we hope that sane policymakers can keep him from tanking the economy–  thereby improving his election prospects?

It’s a puzzlement.

Consider The Metric

One thing about living in tumultuous times….

Questions that are rarely asked when things are calm and going well– about the purpose of government, the proper operation of the economy, and the nature of citizens’ obligations to each other– get revisited.

Take the economy. Ever since Milton Friedman preached that the bottom line consists only of the bottom line–that success is measured by profit and shareholder return–businesses have adopted the measure as dogma. But as David Brooks has reminded readers, keeping shareholders happy at the expense of other stakeholders is a relatively recent phenomenon (not to mention shortsighted).

In a healthy society, people try to balance a whole bunch of different priorities: economic, social, moral, familial. Somehow over the past 40 years economic priorities took the top spot and obliterated everything else. As a matter of policy, we privileged economics and then eventually no longer could even see that there could be other priorities.

For example, there’s been a striking shift in how corporations see themselves. In normal times, corporations serve a lot of stakeholders — customers, employees, the towns in which they are located. But these days corporations see themselves as serving one purpose and one stakeholder — maximizing shareholder value. Activist investors demand that every company ruthlessly cut the cost of its employees and ruthlessly screw its hometown if it will raise the short-term stock price.

We turned off the moral lens.

I know that reaction to Brooks is mixed, but in this column, he makes some good points. The most important is his closing:

The crucial question is not: How can we have a good economy? It’s: How can we have a good society? How can we have a society in which it’s easier to be a good person?

America seems to have lost sight of the fact that economic systems should be judged on whether they enable what Aristotle called human flourishing. Citizens don’t exist for the economy; the economy exists to support a healthy society. The single-minded pursuit of shareholder profit elevates the wrong goals and creates perverse incentives.

And that brings me to another article.

Scientists and social scientists can confirm that what and how you measure something matters. We all know that school teachers spend more time on subjects that are tested, and that employers who reward employees on the basis of speed rather than quality will get more speed and less quality. When the metric for evaluating economic performance is GDP, which measures the dollar value of goods produced, the result tells us little or nothing about the well-being of citizens or the health of the society.

As the Sarasota Institute points out in the referenced article,

GDP growth says nothing about how the benefits of higher growth are distributed. We can imagine high GDP growth with the poor becoming poorer and the rich becoming richer. Only if GDP growth produces income growth for everyone could we say that the general welfare has been increased.

GDP growth does not say anything about the composition or quality of the output. GDP will grow with higher cigarette and alcohol consumption and more guns sold but this says little about well-being growth. In addition, GDP would grow even if the average quality of goods declined.

GDP growth ignores the costs that have been incurred in achieving that growth. Consider that more GDP probably increases air and water pollution and more traffic congestion. Consider that GDP growth could be the result of more people working longer hours and having less leisure time.

The article references Bhutan’s approach: the Gross Happiness Index.

My husband and I were intrigued by that metric when we visited that small country several years ago. (Evidently others were equally intrigued; several countries are experimenting with a similar approach.) The four pillars of GNH were:  sustainable development; preservation and promotion of cultural values; conservation of the natural environment; and establishment of good governance.

The index rests on the assumption that a person is likely to be happier if the economy grows, if cultural values are satisfying, if the natural environment is pleasurable, and if the government operates in the interests of the citizens.

There are other proposed indexes as well: the Human Development Indicator would shift the focus from national income to people centered policy. (This index started to gain momentum when– between 2002 and 2006–personal income in United States fell but GDP continued to increase); a Social Progress Index focused on social and environmental needs; and recently, a Happy Planet Index, measuring whether people are happier, if they live longer lives, if the income distribution is only moderately skewed, and if people have a low carbon footprint.

All of these proposed indexes recognize that you get what you measure.

Metrics matter.

It Depends And It’s More Complicated Than That

As I like to tell my students, I consider my Law and Policy class effective if, after taking it, they use two phrases more frequently than they did before they enrolled: “it depends” and “it’s more complicated than that.”

That measure of effectiveness would undoubtedly be incomprehensible to the voters who  installed as President of the United States a man who had neither experience with nor even a rudimentary understanding of government. Evidently, people who would agree that doctors need to attend medical school and serve a residency in order to treat the complexities of the human body think managing an organizational behemoth responsible for the common lives of over 350 million people can be handled by anyone able to fog a mirror and regurgitate talking points.

Brink Lindsey and Steven Teles disabuse readers of that idiocy in the book they recently co-authored: “The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality.” In it, they deconstruct the mindless mantra of “deregulation.”

When Republicans look at what they’ve gotten out of their current moment of unified government, they can point to cutting corporate taxes, some judicial appointments and … not much else. Beyond that, they claim that they’ve teed up the economy for explosive growth through the magic of “deregulation.” But deregulation is a term that should be banned from the nation’s policy lexicon, mixing as it does equal parts wholesome and foul — in this administration, almost exclusively foul.

As they proceed to explain, whether rolling back a given regulation will be helpful or damaging depends on the nature  and purpose of the regulation. It’s more complicated–much more complicated– than the one-size-fits-all “get government out of the way” zealotry that has increasingly characterized the GOP.

The wholesome justification for deregulation arises when government uses its power in ways that gum up the dynamic power of markets. In the long run, our nation’s wealth and the opportunity it provides for improving quality of life depend on the forces of creative destruction. In competitive, open markets, incumbent actors cannot prevent challenges from more nimble competitors, armed with new products or more efficient ways of organizing the production process.

The authors identify a number of regulations that do “gum up” markets, and agree that eliminating or relaxing them would be healthy for the economy and likely to reduce the growing gap between the rich and the rest.

They also note that those aren’t the regulations being eviscerated.

Unfortunately, this is not the kind of regulation that the Trump administration has been attacking. Instead, it has been sharpening its knives for precisely the kinds of regulation that, far from distorting markets, help to improve them. In particular, regulation is often necessary to a properly functioning market when, in its absence, businesses can make a profit by pushing costs onto others, in effect forcing others to subsidize their bottom line. In two areas, the environment and finance, these are exactly the sorts of market-improving regulation that the administration has put in its cross hairs, with the effect of increasing profits via freeloading.

In an article in the New York Times, Lindsey and Teles make the point that there is a critical difference between regulations that operate to protect dominant business interests and regulations that legitimately, if often imperfectly, address real problems of market failure.

Effective deregulation requires knowing the difference.

For that matter, effective government requires public managers who respect evidence, are committed to the common good, and understand how our complicated government works. The looters who are currently in control of all the levers of the state don’t come close to meeting those criteria.