In an op-ed at the Wall Street Journal critical of the Democratic presidential aspirants in particular and the Democratic Party in general, staunch Democrat Alan Blinder points out three “economic truths” that Democrats “can’t handle”:

• Truth No. 1: You can improve and expand health-insurance coverage without going to a Medicare for All plan that bans private insurance.
• Truth No. 2: You can make great strides toward mitigating climate change without embracing the Green New Deal.
• Truth No. 3: International trade is good for the country, even when the U.S. has a large trade deficit.

In response to Dr. Blinder I would like to suggest some mathematical truths that he, apparently, can’t handle.

First, the reason, beyond the neatness of the slogan, for M4A and the abolition of private insurance is that its advocates can’t make their numbers add up without it. The only way they can envision lowering health care spending while increasing coverage is by legislating a single price for medical services—the Medicare reimbursement rate. Any other alternative within the power of the federal government would result in a substantial net increase in federal taxes. Since I don’t believe that the Congress will hold the line on reimbursement rates I am distrustful of Medicare for All.

More importantly increasing GDP or aggregate income is not necessarily “good for the country”. A simple example will prove that for you. Imagine that you increased the income of the Walton family by $1 trillion while holding all other incomes in the country constant. That would increase aggregate income and average income but I think it would manifestly not be good for the country. In the early Aughts the U. S. economy lost more than 2 million manufacturing jobs in very short order, while most job growth was in low-end service sector jobs. I would submit that was not good for the country. Loss of the manufacturing jobs might have been inevitable but losing them that quickly wasn’t.

As for his second point, I think that any carbon tax will inevitably be finessed as has been the case in Europe but that isn’t a mathematical truth, it’s a political one.

I’ve mentioned occasionally that I was once in the antiques business. Never as a full-time job—it was always a hobby but it was a hobby to which I devoted substantial energy. I derived maybe a quarter of my income from it. How good was I? I once asked a question of a highly knowledgeable full-time antiques dealer who scratched his head and said “If anyone other than you had asked me that question, I’d’ve sent them to you.”

Consequently, markets in which end users compete with reseller for inventory interest me. The largest of such markets is housing. At MarketWatch Keith Jurow muses over what is propping up housing prices:

In a recent column, I focused on five key factors which indicate that housing markets may be topping out. Yet one other important factor may be the main reason why housing prices have not already deflated.

Investors have always played an important role in housing markets. I have written extensively about the crazy bubble years of 2004-06. Rampant speculation was one of the primary causes of the buying mania and subsequent collapse. A May 2005 Fortune magazine article described how speculators were descending on city after city in search of making a killing in real estate.

In other words there are three distinct groups in the housing market: individual homebuyers, small investors (those owning between one and ten properties), and large, institutional investors. It is the second group that is keeping housing prices from falling through the floor.

As I have also mentioned before we have lived in those for around 30 years and over that period our real estate taxes have increased ten-fold while our house’s market value has increased three-fold. And I live in one of the best markets in the city. I don’t see how that trend can persist but, apparently, Gov. Pritzker and Mayor Lightfoot do.

It would be interesting to see a breakdown of housing ownership by metro area. The closest I’ve come is here which shows a significant difference between the patterns of owner occupancy and absentee landlords in Chicago by comparison with Los Angeles or New York. I would speculate that institutional investors are practically absent in Chicago.

Let me save you the trouble of reading Jude Blanchette’s piece in Foreign Policy on the likelihood of the Chinese authorities’ using force to quell the protesters in Hong Kong. Self-preservation will impel them to do so. They cannot survive if the protests continue and if they appear weak in face of them. They may bolster the police force or use the PLA but they will use force. What the world thinks of it matters little in their calculus.

At National Affairs Josh B. McGee combines solid analysis with wishful thinking in a piece on public pensions. Here’s an instance of the solid analysis:

In the background, as plans reaped the market gains of the 1980s and ’90s, the economy was shifting, changing the calculus of pension financing. Interest rates, which had reached new heights in the preceding decade, began to fall consistently through the 1990s and into the 2000s. Meanwhile, pension plans’ investment-return assumptions, which had followed interest rates up, did not follow them back down. As a result, plans were expecting the return on their investments to exceed the “risk-free” rate (the return on the relatively safe bet on United States government bonds) by a growing margin over time. To achieve the same return, plans needed to take on more risk or give up some liquidity — and they did both.

Researchers estimate that, to get the same 7.5% to 8% return, pension plans need to take three to four times more risk today than they did 20 to 30 years ago. As risk increases, pension assets become more volatile. As a partial solution to this problem, pension plans began shifting into less liquid, alternative investments like private equity, hedge funds, and real estate. In theory, giving up some liquidity and diversifying will somewhat reduce risk for any given return target. Since 2001, public pensions have tripled the share of their portfolios devoted to alternative investments from 9% to 27%. But based on the available evidence, it’s doubtful that this shift into alternatives has delivered on its promise: Returns have fallen well short of targets, fees are up, and volatility is still a problem.

and here’s one of wishful thinking:

Many governments face daunting amounts of pension debt that can make full funding appear out of reach. Fixing public-pension funding is not technically difficult, but in most jurisdictions, fully funding pensions at this point would require significantly higher contributions or reduced benefits (or both), making a solution politically challenging to achieve. However, failing to take meaningful action to close the funding gap will only make the problem more challenging and painful to fix in the future. No matter the scale of the problem, governments that work with their plans to craft workable solutions and begin down the path to full funding will be better positioned to weather the next downturn.

The recommendations of the Society of Actuaries Blue Ribbon Panel on Public Pension Plan Funding (SOA BRP) make a great starting point for policymakers who wish to tackle the challenge of pension reform. The SOA BRP’s most important recommendations involve investment-return assumptions and pension-debt amortization. The assumption plays a critical role in calculating the current value of promised benefit payments, and thus the adequacy of annual contributions to cover the cost of those benefits. The amortization schedule determines how quickly pension debt is paid off. Together with mortality estimates, the investment-return assumption and amortization policy are the most important elements of pension funding policy. Tightening rules around these three elements would dramatically improve the accuracy of public-pension cost estimates and help ensure the adequacy of annual contributions.

The sine qua non of public pensions is that they must, like private pension plans, be converted from defined benefit plans to defined contribution plans with the attendant political costs that will entail. In Illinois, at least, it is no longer possible to avert a crisis. As people flee Illinois’s taxes, corruption, and high homicide rates (at least on the South Side of Chicago), fewer people will be paying the pensions agreed upon 30 years ago when the assumptions were very, very different and the situation cannot be changed without amending Illinois’s constitution, something that Illinois’s politicians refuse to do. They are presently striving to amend the constitution to allow them to raise taxes but not to reduce expenses.

As Woody Allen quipped:

What’s a three syllable word beginning with “P” that means that you think everybody is against you?

“Perceptive”.

I think it’s too early to draw the conclusions that J. T. Young is reaching at The Hill:

Effectively, there is no establishment candidate but Biden, and his support is not growing. Were there a viable Democrat establishment, it would be logical any supporters he lost would go to another candidate: They are not. Biden’s loss is also the establishment’s loss.

Nor are other Democrats seeking to compete in this space — despite this side of the field being uncrowded. Instead of candidates on the left looking to come here and pick up Biden’s supporters, they are staying on the left — and the establishment’s supporters are coming to them. The undecideds are too.

If two debates have not changed the leftward dynamic of the Democrat contest — but instead, reinforced it — it begs the question: What will?

Despite saying that beating Trump was the top priority, and that Biden was best positioned to capture the moderates needed to do so, Democrats clearly want a nominee from their left.

As candidates on the left drop out, as they surely will, there is no reason to believe that their supporters will go to Biden — much less any of the other establishment nonentities. Biden is the only establishment alternative and he is weakening, not gaining.

Nor are undecideds likely to look in Biden’s direction, because they have not thus far. Their early ennui makes perfect sense. Biden is entirely “known;” he is the most known candidate in the field. Yet, even with a confusing crowd on the left and no other competition in the establishment, Biden is not gaining them. There is a stronger argument that the left’s crowd is the reason for undecideds’ indecision than for a lack of information on Biden.

Democrats may need an establishment candidate to maximize their chances of beating Trump, but they clearly do not want one. One look at 2016 shows how hard they are making things for themselves.

Other than among political junkies and the most committed the 2020 election is drawing relatively little attention and by the time it is the die will already have been cast.

As I have said before I think that black voter turnout will be dispositive for Democrats and, at this point at least, Biden is the only candidate that can produce that for them. Will black turnout alone be enough to secure victory for the Democratic candidate? Stay tuned.

I agree with the premise of the editors of the Washington Post’s remarks about Guatemala:

The rule of law, or lack thereof, is a major reason for the immediate crisis Guatemala faces, and which Mr. Giammattei will probably inherit when he takes office in January: a massive exodus to the United States. All the more reason to lament the Trump administration’s acquiescence in Mr. Morales’s de facto abolition of the U.N.-backed anticorruption effort, not to mention Ms. Aldana’s treatment.

Corrupt and abusive government is a fundamental problem, not just in Central America or throughout the developing world but in many, many countries. Heck, the government of the state in which I live is corrupt and abusive and Illinoisans are fleeing to other states, many of which no doubt have problems of corruption and lawlessness themselves.

However, I disagree with their conclusion:

If the Trump administration is smart — a big “if,” to be sure — it will not cut well-designed economic aid to Guatemala but increase it, to help the president-elect meet his legitimate development goals.

Regardless of how well-designed aid from the U. S. federal government might be it will inevitably be sidelined by Guatemala’s elites who have both the will and the power to do so. The only strategy I’ve been able to come up with is to channel the aid through NGOs dedicated to doling out aid in very small increments. That, at least, will reduce the ROI on corruption.

Expanding on what I wrote in my last post, I’d like to make two points. First, China is an enormous country. 30% of China = 100% of the U. S.

The second is the important of our having a diversified economy. Just as 100% of Chinese people are not capable of doing college-level work so 100% of Americans are not capable of doing college level work. At most 40-50% of Americans can do that. The only repeat only way to change that is to debase higher education in a China-like solution in which what a college education means depends on your “station in life”, something I believe that Americans would and should reject.

For three decades college preparation has been the objective of high school education. I believe that has been a grave error. Not only does it set the bar at a point that too many people just can’t clear, setting the stage for disappointment, it gives a free pass to business leaders and politicians to create a stratified economy, separated into the educated and the rest. What are we going to do, write off 40-50% of the population?

Either they’ll be left in poverty or they’ll be supported by the rest. Those who can prosper in that Brave New World will ultimately tire of that and idleness inevitably leads to mischief as the old proverb has it.

That’s why we need a diversified economy with agriculture, primary production, manufacturing, low end service jobs, white collar jobs, and professionals. And along with it we need a re-emphasis on the nobility of work.

At Bloomberg Michael Schuman points out something else I’ve commented on from time to time:

An examination of the population more broadly, especially in the country’s vast rural hinterland, reveals that China compares poorly with many of its peers when it comes to education.

The startling findings can be found in a recent paper by scholars from Stanford University and China’s Shaanxi Normal University. Analyzing Chinese 2015 census data, the authors determined that a mere 30% of the country’s workforce — defined as all adults aged 25 to 64 — had some high-school education. Researchers argue that is a sound measure of both those workers’ skills and their ability to learn new ones on the job.

That share compares unfavorably with developed economies, where the comparable average is 78%. The proportion in the most advanced countries, including the U.S., Germany and Japan, is even loftier — over 90%.

Of course, China is a poorer country and has been for some time, so that disparity may not come as a surprise. However, China also stands up badly against other emerging economies that managed the leap into the rich leagues in the past half century, such as South Korea and Singapore. Those countries enjoyed a much higher level of high-school education before they broke through to developed status –– on average about 72% in 1980.

Nor does China match up especially well with its middle-income competitors. For instance, 46% of the working-age population in Brazil attended high school, 36% in Turkey and 34% in Mexico. China’s share is similar to much poorer Indonesia’s, at 31%.

I think that will be a persistent problem as long as China remains China. Despite its claim that 95% of its population is literate that’s a pious fiction, finessed by using a slippery definition of “literacy” that changes based on “station in life”. I would not be a bit surprised if its actual literacy rate were closer to 50% than 95%.

In Singapore most schools teach in English. South Korean schools teach in Korean using the beautiful, elegant, and ingenious Hangul writing system. China faces major impediments in education not related to poverty and even after adopting the simplified writing system presently used on the mainland those will not easily be overcome.