Recessions: a First Order Approximation

As I read this post by Manhattan Contrarian Francis Merton comparing and contrasting the German and U. S. economic situations, a thought occurred to me. Can oil prices be used as a very much simplified predictor of U. S. recessions? The kind of thing I’m thinking of is “as long as the price of oil stays below X per barrel, the U. S. economic will continue to expand”.

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Neither Snow Nor Rain Nor a Huge Operating Deficit

You might find this article by Kevin Kosar at RealClearPolicy on the financial woes of the United States Post Office informative:

About $8.8 billion — that is how much the U.S. Postal Service lost in the past year. That is an eye-popping number. The agency is also carrying $11 billion in debt and has more than $120 billion in funded pension and health liabilities.

To be sure, some of that deficit is due to actuarial factor. For example, USPS’s workers’ compensation charge was $3.5 billion last year — much higher than usual due to a change in the way this expense is computed. But even if one wipes away this expense and other “uncontrollable costs,” the U.S. Postal Service still lost $3.4 billion.

The USPS doesn’t just have one problem it has many. Its former business model is being eroded and, when you’re dealing with an employee list and retired employee list as vast as the USPS’s, even small changes in things you can’t control, like interest rates and health care expenses, can be enormously expensive.

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The U. S. Employment Model

At Forbes Steven Denning has an article on a subject I addressed a week or so ago—that so many of the jobs being produced today are bad:

When U.S. unemployment is at a 50-year low, why do so many people have trouble finding work with decent pay and adequate predictable hours? A new economic indicator—the US Private Sector Job Quality Index (JQI)—gives the answer: we have lots of jobs, but they are increasingly low-quality jobs.

“The problem is that the quality of the stock of jobs on offer has been deteriorating for the last 30 years,” says Dan Alpert, an investment banker and Cornell Law School professor. The JQI is built and maintained by Alpert and his fellow researchers at Cornell University Law School, the Coalition for a Prosperous America, the University of Missouri-Kansas City, and the Global Institute for Sustainable Prosperity. (As to how the JQI is constructed, see the technical note below.)

He asks five questions:

  1. If Unemployment Is So Low, Why Don’t Wages Go Up?
  2. Why Is Participation In The Workforce So Low?
  3. Weren’t Manufacturing Jobs Replaced By Other Jobs?
  4. Why Didn’t High Tech Save the U.S. Economy?
  5. Why Has U.S. Productivity Stalled?
  6. What Do The New Jobs Actually Look Like?

It’s an interesting article and I encourage you to read it.

The one point I would add is that what has happened has not been accidental but the consequence of policy. We have been maximizing the number of minimum wage jobs. The Germans call this “the American employment model”. Its success, such as it is, depends on a continuous flow of unskilled or semi-skilled workers.

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And Now We Hold Our Breath

Now we’re waiting to see what the House will do with their two articles of impeachment. I presume the House will vote to impeach but you never know. I then presume that the Senate will conduct a trial and then vote to acquit but you never know.

I am neither outraged nor heartened by Time’s naming Greta Thunberg as its Person of the Year. I’m just not that interested in POTY any more.

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It Ain’t the Boomers

Lately I’ve read a lot of kvetching about how the Baby Boom generation, those born from 1946 to 1964, have screwed things up so badly. While I agree that there’s plenty of room for criticism of how badly screwed up things are, whining about the Baby Boomers is misdirected fire. The House and Senate leadership are both mostly Silent Generation and have been for decades. There is no distinctively Baby Boomer foreign or domestic policy.

If it’s just the past they’re unhappy with, they had best get used to it. The democracy of the dead will be with them for the rest of their lives.

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Better Plans

I thought that Robert Shapiro’s Washington Monthly plan for financing a reduction in FICA by increasing capital gains and corporate income taxes was better than a lot of plans for redistribution I’ve seen. He concludes:

Whatever the details, payroll tax relief provides an unambiguous way to give working Americans meaningful support. At the same time, higher taxes on the capital gains and dividends banked predominantly by high-income investors, their stock market transactions, and the corporations that generate those capital gains and dividends can all provide equitable ways to pay for it. Any Democrat looking for a meaningful way to resonate with today’s voters might want to think about making such a proposal.

IMO an even better plan would be to increase FICA max to the threshold wage for being in the top 1% of income earners and reducing the FICA rates for both employers and employees commensurately. But I’m glad to see somebody thinking along these lines. If he added economic efficiency to his thinking it would be even better.

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The Cognitive Dissonance Olympics


To my recollection at no time in my life has reality been more different for partisan Republicans than for partisan Democrats. News that would cause them to question their views can’t even sneak in because they’re getting their news from different sources as the chart above suggests.

I tend to sample outlets that fall within the “Skews Liberal” to “Skews Conservative” portion of the spectrum. As I pointed out in one of my earliest posts here it is only from the center that you can see both the left and the right. Those on the far ends tend to see as far as the center which they interpret as the “far left” or “far right” depending on their own partisan or ideological outlooks. The opposite extremes are actually largely invisible to them.

Highly partisan Democrats think that the House Democrats have prepared an unassailable case against Trump. Highly partisan Republicans think the entire thing is an attempted coup against Trump. Highly partisan Republicans think that Democrats are deliberately trying to import enough voters to create a permanent majority. Highly partisan Democrats think that racism is the only possible motive for opposing mass immigration.

No meeting of minds or compromise is possible. I just don’t know what to make of it all.

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A Solution Searching for a Problem

I’m not even going to bother to link to it but in one of Robert Samuelson’s recent columns he argued in favor of apprenticeship programs. Although I’ve written favorably about such programs in the past, I can’t honestly figure out what problem he’s trying to solve.

With 3.5% unemployment it would have to be some apprenticeship program to attract “discouraged workers” back into the labor force. I think the net impact of such programs under present circumstances would be to provide a way for employers to pay employees less by calling them “apprentices”.

Germany has had apprenticeship programs for some time. Their unemployment rate is presently 3.1% with apprentices counting as employed. The main effect of Germany’s apprenticeship and job-sharing programs is to jigger the unemployment figures to make them look lower.

What we really need are more, better jobs. I don’t think that will happen without a tighter labor market than we presently have.

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What’s Next?

The House Democrats have produced their articles of impeachment. Rather than diving into analysis, let’s just ask some questions. Presumably, there will be a brief sojourn in the House Judiciary Committee and then they will go to the floor. What happens next?

  1. The articles of impeachment will be voted down in the House.
  2. The articles of impeachment will be approved in the House by a bipartisan majority.
  3. The articles of impeachment will be approved in the House in an essentially party line vote.

and then, assuming that the articles of impeachment will be approved in the House:

  1. They will just be dismissed without trial in the Senate.
  2. After a trial in the Senate, the Senate will vote to convict.
  3. After a brief trial in the Senate, Trump will be found not guilty by the Senate by a bipartisan vote.
  4. After a brief trial in the Senate, Trump will be found not guilty by an essentially party line vote.
  5. After a lengthy trial (going at least past Super Tuesday) in the Senate, Trump will be found not guilty by the Senate by a bipartisan vote.
  6. After a lengthy trial (going at least past Super Tuesday) in the Senate, Trump will be found not guilty by an essentially party line vote.

What will be the net outcome, assuming that the articles of impeachment are passed by the House and Trump is found not guilty by the Senate:

  1. Whoever the Democratic presidential candidate ultimately is, he or she will be elected in 2020, Democrats will hold the House and take the Senate.
  2. Whoever the Democratic presidential candidate ultimately is, he or she will be elected in 2020, Democrats will hold the House, Republicans will hold the Senate.
  3. Whoever the Democratic presidential candidate ultimately is, he or she will be elected in 2020, Democrats will lose the House, Republicans will hold the Senate.
  4. Whoever the Democratic presidential candidate ultimately is, he or she will be defeated in 2020, Democrats will hold the House, Republicans will hold the Senate.
  5. Whoever the Democratic presidential candidate ultimately is, he or she will be defeated in 2020, Democrats will lose the House, Republicans will hold the Senate.
  6. Other

I think the greatest likelihoods are C-F-E with the second greatest likelihood C-E-E (bipartisan defined as two or more Democratic votes to acquit). Nancy Pelosi will keep her caucus together but lose the majority.

If by some quirk of fate C is the net outcome, expect articles of impeachment within two weeks of inauguration.

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One Size Fits Progressives

Politico reports that a small group of vulnerable House Democrats is floating the idea of censure rather than impeachment:

A small group of vulnerable House Democrats is floating the longshot idea of censuring President Donald Trump instead of impeaching him, according to multiple lawmakers familiar with the conversations.

Those Democrats, all representing districts that Trump won in 2016, huddled on Monday afternoon in an 11th-hour bid to weigh additional — though unlikely — options to punish the president for his role in the Ukraine scandal as the House speeds toward an impeachment vote next week.

IMO that ship has sailed. If such a move were to garner anything resembling bipartisan support thereby giving those “vulnerable House Democrats” political cover, it would need to have happened within a week or so of the revelation of “Ukrainegate” while Republicans were still criticizing the president over it.

The House leadership has determined that forcing Democrats representing districts that went for Trump in 2016 to walk the plank is worth it.

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