What Kind of Country?


A question I frequently ask, only rarely receiving an answer is what kind of a country do we want to be? The graphic at the top of this page from an article by Juliana Kaplan and Madison Hoff at Business Insider on the American middle class illustrates why.

A good place to start the discussion is with the definition used by Pew Research for “middle income”:

Broadly, Pew Research Center defines middle-class households as making two-thirds to double America’s median income. That adds up to an income range of about $30,000 to $90,000 for single Americans in 2020 dollars. But there are other ways out there that the middle class could be defined, as seen in a Brookings analysis of 12 definitions — including Pew’s.

Here’s how the middle class has been faring in America.

A single American making $30,000 to roughly $90,000 every year is middle-income, according to Pew. A household of two would have to earn around $42,000 to $127,000 to qualify.

Now let’s return to the graphic at the top of the page. Here’s the story it tells as I see it. 50 years ago the United States was mostly middle income with a relatively small percentage upper income and a quarter of the people lower income. Over that fifty years the number of those in the upper income tier has grown substantially as has the number of people in the lower income tier while the middle income tier has shrunk considerably.

The way I sometimes describe it is that we’re becoming more like Mexico.

What kind of a country would I like it to be? I would like for the lower income tier to have shrunk, the middle income tier to have grown, and the upper income tier to have grown a little or even stayed the same. I’ve also expressed my belief on how to get there: reindustrialization and less immigration by individuals with few skills and little or no English.

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“Investment” Means Something Different Than It Did 40 Years Ago (Update)

In an op-ed in the Wall Street Journal Steven E. Rhoads returns to an argument that I do not think will ever be over. He argues in favor of what is called “trickle-down economics”:

President Biden in his State of the Union address encouraged Americans to imagine a future in which “the days of trickle-down economics are over” and the economy is built “from the middle out and the bottom up.” That expression, “middle-out” economics, has bounced around Democratic politics for at least a decade. But how would it work? No one says.

Politicians may scorn the trickle-down effect, but it is responsible for Americans’ economic well-being. Even some prominent 20th-century liberal economists, including Paul Samuelson and Alfred Kahn, agreed that the innovation and investment that lead to capital formation are crucial to economic growth. Kahn once wrote: “The most powerful engine of productivity advance is technological progress, generated in large measure by expenditures on research and development and embodied in improved capital goods and managerial techniques.” That process confers benefits on everyone, he added, “precisely by trickling down.”

When employees use better equipment and have better managers, they become more productive. This makes them more valuable to their companies and stirs competition in the labor market, causing their real incomes to rise.

I dearly want investment in facilities, better equipment, and better managers but it will take some convincing, which Mr. Rhoads does not even attempt to do, to persuade me that increased investment in facilities, equipment, or personnel is what has actually gone on during the past 40 years. As evidence I will submit the DJIA and GDP. In 1980 the DJIA closed just under 1,000. A few days ago it closed over 40,000 for the first time. That’s a 40 fold increase. In 1980 U. S. GDP was just under $3 trillion. Now it’s just over $25 trillion. That’s a slightly more than 8 fold increase. Over that same period CEO pay has increased 10 fold (relative to rank and file workers). Nominal private fixed investment has gone up about 10 fold as well:


Why the discrepancy? I would submit that it can all be explained by considering that the meaning of “investment” has changed over the years. It used to mean building new facilities, buying equipment, and hiring more and better employees. Now it means “speculating on financial instruments”.

Any “trickle-down” from that is limited to the relatively small amount that dribbles into the real economy.

Update

In the original post I included a graph of residential fixed private investment rather than non-residential fixed private investment. It was an error which I have corrected.

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A Theory of Victory

At Foreign Affairs Andriy Zagorodnyuk and Eliot A. Cohen outline a theory of victory for Ukraine in its war against Russia:

Moscow is no invincible juggernaut. Russia’s small gains were made possible only by its overwhelming advantage in firepower—which occurred only as a result of the disruption of Western aid. The country’s artillery systems are based on old models and lack precision and long-range capabilities, and its multiple-launch rocket systems, tanks, and aviation equipment are no match for Western models. If Ukraine can increase precision strikes by long-range artillery, it can turn the war’s arithmetic against Russia and impose an unacceptable rate of attrition on Moscow. Eventually, Russia will be unable to replace its manpower and materiel fast enough. The country’s economy simply will not be able to sustain this war in the face of constant losses.

If Ukraine has enough supplies, it will be able to keep Russian artillery at bay. Enhanced air defenses, including F-16 fighter jets equipped with long-range air-to-air missiles, would reduce Russian attacks on critical infrastructure inside Ukraine as well as on units stationed near the front. With Russia’s forces increasingly paralyzed, Ukraine would soon be able to use its Western long-range systems—such as its Army Tactical Missile Systems (better known as ATACMS)—to take down Russian command-and-control centers and air-defense assets.

Kyiv must also use drones in much larger numbers to fulfill all these tasks. Ukraine has already demonstrated that it can wield unmanned vehicles with devastating effects; it is thanks to drone attacks, for instance, that Russia’s Black Sea Fleet has been disabled. Drones have also helped prevent large-scale Russian maneuvers on the ground. And they are making it possible for Ukraine to strike deep into Russia, hitting Russian oil facilities, military bases, and weapons factories. To counter that threat, Moscow may need to station most of its air defense systems at home. Russia is simply too large for its defenses to simultaneously shield the homeland and the battlefront. It will become even more vulnerable if the United States allows Ukraine to strike legitimate targets within Russia using U.S.-donated weapons.

The process of softening Russian positions and weakening Russian resolve will likely take about a year, after which Ukraine should reclaim the initiative. Kyiv should again launch limited counteroffensives, which will allow it to retake key terrain. If this assault is successful, Putin’s regime could face a crisis bred of heavy losses and battlefield failures. The Russian political system, after all, is already showing cracks. The mercenary leader Yevgeny Prigozhin’s failed 2023 mutiny, the demotion or arrest of senior military officials including General Sergei Surovikin, and the shocking success of Islamic State (ISIS) terrorists at striking inside Moscow in March all reflect the regime’s mounting vulnerability. If Ukraine advances to a point where Russia can no longer hold on to gains, Putin will find himself in deep trouble. His 2014 seizure of Crimea is critical to his domestic popularity; to see Russia’s control of the peninsula threatened would be a major symbolic defeat.

How realistic is this plan? It seems to me that Ukraine has problems in addition to late deliveries of munitions that the United States and its NATO allies are hard pressed to deliver at the pace they are being used by the Ukrainians. Ukraine just lowered its draft age from 27 to 25. And Al Jazeera is reporting that Ukrainian President Zelensky is calling for NATO members to take action against incoming Russian missiles directly:

Zelenskyy proposed that the armed forces of neighbouring NATO countries could intercept incoming Russian missiles over Ukrainian territory to help Ukraine protect itself.

Russia has fired thousands of missiles and drones at Ukraine since the start of its invasion in 2022 and launched an assault in the northeastern border region of Kharkiv on May 10 that resulted in their biggest territorial gains in a year and a half.

Meanwhile, Russia is conducting tactical nuclear weapons drills on the Ukrainian border.

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Events That Could Change the Election

Inspired somewhat by Josh Barro’s recent observation at The Hill that the present state of the U. S. economy is likely to persist through November, I thought I’d list some events that might have a considerable effect on the presidential election other than the economy.

Ukraine, facing defeat, sues for peace

This is actually not unlikely. Disheartening as it would be for the Ukrainians I suspect this scenario would actually improve President Biden’s political prospects. Democrats would certainly blame Republicans and Donald Trump in particular for the loss.

Russia sues for peace

Let’s consider the flip side of that coin. IMO this, too, would improve President Biden’s political prospects. He should be able to claim that his strategy in supporting Ukraine had been successful.

Israel defeats Hamas

Would this have any effect on our election one way or the other? I don’t think I see it. Since I also believe that the surviving members of Hamas (and there will be surviving members of Hamas if only in other countries) will claim victory regardless of the outcome, I don’t this affecting the outcome of our election one way or the other.

In honesty I don’t think that any of the events above would be likely to have a material effect on the presidential election. Although there are a few who would say otherwise I don’t believe that most Americans care that much about what happens in other countries.

President Biden withdraws from the campaign

Perversely, I think this eventuality is the most likely to deliver a victory to the Democrats in the fall whoever would become their presidential standard-bearer. Frankly, I doubt that this would happen. See the alternative events below.

President Trump withdraws from the campaign

I doubt this will happen, either. Indeed, I think that even if President Trump is convicted of everything he’s been indicted for in all jurisdictions, he’ll be running for president from his prison cell.

President Biden dies or is incapacitated

I think that what happens in the event of President Biden’s death or disability prior to the election depends on timing. If he’s already been named the party’s candidate, his running mate, who will inevitably be Kamala Harris, does not automatically become the nominee or even the frontrunner. The party leadership would decide who would become the candidate.

President Trump dies or is incapacitated

I would be remiss in not considering the possibility of an elderly, overweight, out-of-shape man experiencing some sort of debilitating health issue, even death, over the next several months. I honestly have no idea who the Republican nominee would be if Donald Trump were unable to run.

Major terrorist attack on the U. S.

IMO a terrorist attack would be politically disastrous for President Biden unless it were perceived that President Trump had encouraged the attack in which case it would be disastrous for him.

I would be interested in hearing the views of other on the eventualities above or anything else you think might swing the election one way or the other.

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Going, Going, …

NBC 5 Chicago reports that Chicago lost population last year:

New data released by the U.S. Census Bureau this week showed Chicago losing approximately 8,200 residents in the span of a calendar year, which could not only drop the Windy City behind Houston in terms of America’s largest cities, but could also have big consequences in a variety of other ways.

According to the U.S. Census Bureau, Chicago lost approximately 0.3% of its population between July 1, 2022 and July 1, 2023. The city’s population is still the third-highest in the U.S., but Houston is rapidly gaining, growing by 0.5% to 2,314,157.

According to an analysis by the Illinois Policy Institute, Chicago could be overtaken by Houston by the year 2035 as America’s third-largest city.

A shrinking population (and fewer kids in school) will not persuade the CTU to reduce its demands. That’s one of Chicago’s biggest problems today. A population of 2.75 million is struggling to honor the commitments made by a population of 3.5 million.

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Is Dialogue Even Possible?

In a piece at The Hill Jessica Carpenter expresses conviction that young people want dialogue about Israel and Palestine:

We’re seeing a vocal minority on campus take control of the conversation — or lack thereof — around Israel and Palestine. These voices are being aided by “outside agitators” taking advantage of student anger. While universities grapple with how to navigate these protests, they’re missing the fact that students want spaces to talk and be heard.

In fact, these students are the majority. Understanding this will help us navigate this conversation, and other contentious issues, going forward and pave a better path for finding solutions.

I wonder if dialogue is even possible. For dialogue to take place you need a common language and a common basis of understanding. I don’t believe either of those exist. What we have today are little cliques of people, many formed online, who develop their own meanings for words that used to have common meanings and everyone has their own facts. I was shocked today when I did a search for something and received a torrent of propaganda, things I knew not to be true.

To the best of my knowledge the first mention of “Palestine” was by Herodotus in his Histories roughly 450 BC, an area between Egypt and Phoenicia. He makes no mention of either Jews or Arabs there but does write of Syrians. He mentions Arabs as inhabiting the Arab Peninsula and Bedouins in the Sinai. The archaeological and genetic evidence seems to suggest that the Maronites of Lebanon are most closely related to the early inhabitants of Palestine.

The Israelites had a clear presence in Judea (which is what the Romans called it) from about Herodotus’s time and maintained a continuous presence right down to the present day. Today’s Jewish population of Israel has three main components: Mizrahi (Jews from the Middle East and North Africa), Sephardic (Jews from Southern Europe, mostly the Iberian Peninsula), and Ashkenazi (Jews from Central and Eastern Europe). Arabs first show up in numbers in Palestine about the time of the Arab expansion.

In other words it is not true of either the Jews or Arabs that “they have always lived there”. Neither the Old Testament nor the Qur’an says that.

When you can’t agree on that even, possibly, rejecting discussion of it, how can dialogue be possible?

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Remember Ukraine?

Now that the Congress has passed a supplementary aid package for Ukraine and its significance as a political football has diminished, Ukraine isn’t nearly as much in the news. I have no idea what’s actually going on there. Some sources tell me that Russia’s offensive is on the verge of collapse. Other sources tell me that Ukraine’s defense is on the verge of collapse. One source will say that the Ukrainians have halted Russia’s advance on Kharkiv. Another source tells me that Russia has already accomplished its objective in Kharkiv.

It does seem to be the case that Ukrainian drone attacks are wreaking havoc on Russian facilities in Crimea and nearby Krasnodar.

I found this analysis by Benjamin Jensen and Elizabeth Hoffman at the Center for Strategic and International Studies somewhat depressing, calling as it does for Ukraine’s maximalist objectives which I believe to be out of reach. Even more depressing has been Robin Brooks’s analysis of how our European allies are keeping Russia’s war effort humming, redirecting what were formerly exports to Russia to Kyrgyzstan where they are, predictably, shipped to Russia. Looks like they’re working both sides of the street to me.

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Wooing the Working Class

Meanwhile, Ruy Teixeira sees President Biden’s bad polling numbers and interprets them quite differently. Rather than focusing on independent voters he advises President Biden that without working class voters his re-election is doomed and that to woo back the working class the president needs to stop emphasizing character, biography, or background in favor of this strategy from Blueprint:

Blueprint’s latest survey, conducted in partnership with The Liberal Patriot, showed that many of the policies that are most popular with voters can be used to make the case that Biden is the candidate for average Americans while Trump is the candidate who advocates for the interests of the very rich. Among the 40 policies we tested, the most popular ones are those that crack down on corporations, lower the prices of health care and other things, and protect Medicare and Social Security.

Just as the most effective tax and economic policy messages in the poll centered on those topics, none of these stances are particularly sexy or novel; instead, they are positions that are easy to imagine any Democrat supporting over the last decade. Trump has many qualities and vulnerabilities that make him distinct from run-of-the-mill Republicans of the past and present, which are tempting to focus on in paid and earned media. But our polling shows that ahead of November, Biden would be wise to highlight boring-but-popular policy distinctions that he supports in order to drive home the overall contrast between himself and Trump on tax policy and economic fairness.

Will President Biden and his campaign heed that advice? I’m skeptical. I think that for the next six months we’ll see a flood of negative advertising, emphasizing how terrible Trump is.

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Never Tell Me the Odds!

I have encountered quite a number of posts, editorials, etc. fretting, lamenting, or chortling (depending on viewpoint) over President Biden’s approval rating. There are claims that his campaign team are panicking over it. Personally, the approval rating doesn’t particularly concern me—as some, particularly the president’s supporters, take care to point out, the election is more than six months away. What I think should concern them is the trend or lack thereof. The president approval rating despite some noise has been remarkably stable for well over six months with a floor of about 40% approving and 55% disapproving. Whether that can actually be changed is an open question. However, plenty of people are offering advice.

For example, in his Wall Street Journal op-ed Karl Rove offers advice to both Joe Biden and Donald Trump. For President Biden:

Mr. Biden can turn things around only if he figures out how to take down Mr. Trump with undecided voters, especially those who don’t like either candidate—and soon. The president is running out of time to convince these voters that Donald Trump is worse than he is. Other incumbents were successfully attacking their challengers long before this point in their re-election race.

Biden strategists also have to get it through their heads that swing voters aren’t left-wing Democrats. They don’t want a “transformational” Democratic president but the reassuring, transitional figure they believed they were backing in 2020.

Mr. Biden does, however, have a financial advantage that he’s using to build an aggressive get-out-the vote effort. While this won’t give him 8 or 10 more points, it could boost him enough to win some states that are close today.

He needs it. If you consider the 2016 and 2020 campaigns, the Clinton campaign outspent the Trump campaign nearly 2:1 and lost while the Biden campaign outspent the Trump campaign by a little less than 2:1 and won. The constant is that Democratic campaigns cost more. Why that might be is material for another post.

Here’s his advice for President Trump:

To stay ahead he too needs a message correction. Mr. Trump should spend much less time talking about his legal troubles and more offering a compelling second-term vision. As he entered the courtroom Tuesday, he devoted a minute and a half to issues voters care about, such as electric vehicles and tariffs on China, but spent seven minutes complaining about his courtroom treatment. By failing to realize this election is about America’s future and not his present, Mr. Trump is providing Mr. Biden an opening. We’ll see if the president takes advantage of it.

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Restart German Conscription?

I also wanted to pass along this piece by Tim Martin at Breaking Defense:

BELFAST — German Defense Minister Boris Pistorius used a Thursday speech in Washington to call for both Berlin and Washington to hit 3 percent GDP spending on defense, while also stating his support for reintroducing conscription to the German armed forces.

Both statements may raise hackles back in Berlin, as Germany continues to debate how it should rearm itself following Russia’s February 2022 invasion of Ukraine.

“I’m convinced that Germany needs some kind of military conscription,” Pistorius told a crowd at the American-German Institute. “We need to ensure our military staying power in a state of national or collective defense.” (He did not specify what that would look like, but elsewhere emphasized “some kind” of conscription is needed.)

I must admit my skepticism that Germany will do anything of the sort. Getting Germany to spend 2% of GDP on defense has been a heavy lift. I also wish that there were some attempt to estimate the requirements for achieving force readiness. As I’ve said before, it might be 2% of GDP; it might be 10% of GDP. They’ve enjoyed a long period of underinvestment.

As for the United States, mission accomplished. Some estimates place U. S. military spending at 3.4% of GDP.

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