When Barack Obama became president in 2009, all of his nominations for cabinet positions were approved by the Senate but one. That one was Tom Daschle who had been nominated to be President Obama’s Secretary of Health and Human Services. Sen. Daschle withdrew his nomination after a flap about conflict of interest.

In general I believe that incoming presidents deserve a certain amount of deference in their picks for cabinet officers on the grounds that they should be allowed to pick their own team. I said that about President Obama’s nominations and I believe the same thing about President-Elect Trump’s. “Deference” does not mean blind acquiescence. It does mean benefit of the doubt.

The members of the Senate should do their due diligence and question the nominees. Expect all of Trump’s nominees for cabinet positions to be confirmed. Democrats would be prudent to pick their battles.

His appointments to judgeships, particularly Supreme Court justices and filling the vacancies in the 9th Circuit, are another story.

We listened to President Obama’s valedictory speech last night. I thought the best, most effective part was when he spoke of his wife.

The Fiscal Times has produced an analysis of the fiscal condition of large American cities. As will be surprising to practically no one, at least no one who reads this blog regularly, Chicago’s finances are in the worst shape of any American city. However, as may be surprising to some as it was to me, New York City is right behind Chicago:

While Chicago’s place at the bottom of the list is unsurprising, New York City’s position — just one step above — was unexpected. An extended bull market and soaring real estate prices have pumped money into the Big Apple’s coffers. Total municipal revenues rose from $60 billion in 2009 to $81 billion in 2015. But the city has been spending the money almost as quickly as it has been coming in.

At the end of its 2015 fiscal year, the city’s general fund reserves amounted to just 0.67 percent of expenditures — well below the Government Finance Officers Association recommendation of 16.67 percent (equivalent to two months of spending). A city’s general fund is roughly analogous to an individual’s checking account.

New York City also carries a very heavy debt burden. According to a report issued by City Comptroller Scott Stringer, New York’s per capita debt greatly exceeds that of all other large U.S. cities, and is even 50 percent higher than that of Chicago. But the comptroller’s report only focuses on bonded debt. Government financial accounting standards require cities to report other long-term obligations such as pensions, compensated absences for municipal employees (accrued sick and vacation leave payable at retirement) and “other post-employment benefits” (or OPEB).

It is New York’s OPEB obligation that really sets the Big Apple apart. In 2015, the city’s OPEB liability was $85 billion — roughly equivalent to its bonded debt.

The large OPEB liability is driven by the size of the city’s workforce and the relatively high cost of health care in New York. According to its most recent OPEB Actuarial Report, the city is providing retiree health benefits to 222,000 retirees, while another 315,000 current and separated employees are potentially eligible for future benefits. In 2015, benefits per retiree ranged as high as $17,000 a year (for workers who were not yet Medicare-eligible and who had eligible dependents).

When a city has prospered as much as New York has over the last 10-15 years and it still has fiscal problems, it’s doing something wrong. I’m in no position to prescribe a remedy for New York’s problems but Chicago’s situation is much worse. It is a city in dire financial straits in a state in dire financial straits. The city and the state are losing population. Chicago already has the highest sales tax of any major city, is nearing the limit of its ability to increase property taxes, and doesn’t have the power to enact a city earnings tax. That’s why the mayor is pushing increases in fees for city services.

Every measure that’s within the city’s power is terribly regressive. Sales tax depends on the volume of retail sales which is indirectly related to population. Property values vary with the market but ceteris paribus when the population increases they rise and when it falls they decline. Fees vary with use but that’s dependent on population, too. In other words all of the underlying factors in Chicago’s revenues are declining, too.

The city can’t borrow its way out of its problems, either. Its credit rating is too low which means it pays too much to borrow. The state and federal governments are our only hope for relief. The state has been supine for nearly two years. We’re losing what little leverage we had at the federal level.

Magic 8 Ball says, we’re behind the 8 ball.

War on the Rocks has a primer on the military reforms being undertaken in 2017 in the People’s Republic of China you might want to take a look at. Here’s a snippet:

Contrary to the muscular musings of many Chinese military media pundits, the PLA’s senior leadership is much more realistic and moderate in its assessments of China’s military capabilities relative to advanced foreign forces. Within the Chinese-language military literature official, authoritative commentary and writings and interviews of senior national-level leaders as well as operational commanding officers frequently point to major shortcomings in the force and problems discovered in training that must be corrected.

Something else the PRC’s military can’t do: its coordinated land-sea operational capabilities are very limited.

China isn’t a military threat to the United States and won’t be for the foreseeable future if ever. Saber-rattling about China is just part of the longing in some circles for a major power high technology war and the “give war a chance” crowd.

While we’re being anxious, have I mentioned lately that I expect that we’ll enter a recession during Donald Trump’s term of office? I believe that would have happened regardless of who was elected president.

Officially, the economy has been in recovery since June 2009. In the 200 some-odd years of its existence the U. S. has never experienced ten years of economic expansion. We’re due.

Many, many people think of a house as an investment. I think that’s a mistake. I think it’s only an investment under very specific conditions that can change at any time. Those conditions include a population that’s increasing and getting wealthier. If you don’t believe me, sit down with pencil and paper and work out the costs (purchase price plus mortgage interest, taxes, and maintenance costs) and market value of your house if you assume that the pool of potential purchasers is smaller and have a lot less money than the pool of purchasers was when you bought your house. Market value is determined by willingness to pay not intrinsic value.

Houses could be status symbols.

They could be tools, shoehorns that get you into the school districts where you want your kids to attend school.

They could be consumables, like autos or pairs of shoes.

What is a house?

At Project Syndicate economist Joseph Stiglitz wonders what the heck is coming next:

Why did the backlash in the US come just when the economy seemed to be on the mend, rather than earlier? And why did it manifest itself in a lurch to the right? After all, it was the Republicans who had blocked assistance to those losing their jobs as a result of the globalization they pushed assiduously. It was the Republicans who, in 26 states, refused to allow the expansion of Medicaid, thereby denying health insurance to those at the bottom. And why was the victor somebody who made his living from taking advantage of others, openly admitted not paying his fair share of taxes, and made tax avoidance a point of pride?
Donald Trump grasped the spirit of the time: things weren’t going well, and many voters wanted change. Now they will get it: there will be no business as usual. But seldom has there been more uncertainty. Which policies Trump will pursue remains unknown, to say nothing of which will succeed or what the consequences will be.

He goes on to observe that Donald Trump cannot repeal the laws of economics. Those laws are rooted in human nature, consequently whether they may be repealed or not depends on how malleable you think that is. If, as I do, you think that human nature is not easily changed, you will tend to believe that economics can’t, either.

To Dr. Stiglitz’s observations I would add that an explanation he might consider is that there is presently no sense of shared sacrifice. If regardless of what happens to other Americans Warren Buffett and Mark Zuckerberg don’t suffer, we should forgive those other Americans for thinking the fix is in. That doesn’t help the political party of Warren Buffett and Mark Zuckerberg.

Today’s theme may be uncertainty. at Five Thirty Eight Ben Casselman notes that the best predictor of whether one is or is not a Trump voter is not poverty, racism, or sexism but anxiety:

Correctly assessing the forces that led to Trump’s victory is more than an academic exercise. It’s central to figuring out what happens next — what Trump’s supporters expect him to do, what Democratic counter-measures would be effective, what metrics we should use to gauge his success. But the recent debate has missed an important distinction: Economic anxiety is not the same thing as economic hardship. And the evidence suggests that anxiety did play a key role in Trump’s victory, though it was by no means the only factor.

What’s the difference between hardship and anxiety? Hardship, as I’m using it here, refers to a person’s present-day economic struggles: poverty, joblessness, falling wages, foreclosure, bankruptcy. Anxiety is all about what lies ahead — concerns about saving for retirement or college, worry of a potential layoff, fears that your children’s prospects aren’t as bright as your own were.

Economic hardship doesn’t explain Trump’s support. In fact, quite the opposite: Clinton easily won most low-income areas. But anxiety is a different story. Trump, as FiveThirtyEight contributor Jed Kolko noted immediately after the election, won most counties — and improved on Romney’s performance — where a large share of jobs are vulnerable to outsourcing or automation. And while there is no standard measure of economic anxiety, a wide range of other plausible proxies shows the same pattern. According to my own analysis of voting data, for example, the slower a county’s job growth has been since 2007, the more it shifted toward Trump.1 (The same is true looking back to 2000.) And of course Trump performed especially strongly among voters without a college degree — an important indicator of social status but also of economic prospects, given the shrinking share of jobs (and especially well-paying jobs) available to workers without a bachelor’s degree.

The role of economic anxiety becomes even clearer in the data once you control for race. Black and Hispanic Americans tend both to be poorer and to face worse economic prospects than non-Hispanic whites, but they also had strong non-economic reasons to vote against Trump, who had a history of making racist comments. Factoring in the strong opposition to Trump among most racial and ethnic minorities, Trump significantly outperformed Romney in counties where residents had lower credit scores and in counties where more men have stopped working.2

Read the whole thing.

Dismissing concerns about the economy or society aggravates that anxiety. So does every cri de coeur, sincere or not, about the horrible, deplorable people who voted for Trump who didn’t even win the popular vote, darn it.

I was a bit surprised to see that in his column a day or so ago he had become skeptical of federal deficits where he had been proposing a debt-financed infrastructure spending program last October. What accounts for the change in his views?

It could be that Fed actions since October have convinced him that additional debt is no longer economically justificable. It could be that he believes the distributional effects of debt-financed tax cuts are different from debt-financed infrastructure spending. If he’d produce evidence for that, he’d be performing a real public service.

It might be that in his column rather than giving bad economic advice he’s giving bad political advice. In that case I’d really like to know when he stopped being an economist and starting being a political pundit? Last week? October? When he started writing his column in the New York Times?

Just for the record I don’t believe the protestations over the American Recovery and Reinvestment Act (the “stimulus”) for a second. IMO the hoocoodanode defense is balderdash. I think that Larry Summers and the other administration economists knew precisely what they were doing when they lent their degrees to support the White House’s political judgment that an $800 billion stimulus was all that the Democratic Congress would tolerate.