Will 2019 Be Year U.S.Begins to Reunite?

Popular Economics Weekly

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Wonder of wonders, is New York Times conservative columnist David Brooks becoming a neo-Keynesian, New Deal economist? This is the term coined for those younger economists, such as Nobel economists Paul Krugman, Joe Stiglitz and George Akerlof, who have updated John Maynard Keynes’ New Deal theories that helped to bring us out of the Great Depression and created today’s developed economies.

Brooks isn’t a trained economist, but he has been looking for a new political center in his more recent columns—mostly in reaction to the Trump administrations betrayal of free trade and limited debt, mainstay ideas of the former Republican Party, but also its takeover by the Trump administration.

Brooks said in a recent NYTimes Op-ed, “The nations that have the freest markets also generally have the most generous welfare states. The two are not in opposition. In the real world they go together.”

“What generous welfare states?” Western national governments have stepped in wherever the private sector has proved unable or unwilling to support economic growth and general prosperity since World War II. And it was Roosevelt’s New Deal programs that created social security, unemployment insurance, enshrined workers’ rights, and the modern industrial economy that enabled us to win World War II.

So 2019 may be the year that the political parties and American electorate begin to come together, to show a willingness to compromise their ideals and their convictions in reaction to the “Make America First” doctrine of the Tea Party and white nationalist supporters of the Trump administration.

The newly elected Democratic House of Representatives may be the first concrete result of this trend towards more centrist policies in January 2019 with more than 200 women now in the 435 member House. Who better than women to make compromises in the name of getting things done, as they have done in their households since the beginning of time?

Another sign is the more centrist views of conservative writers that Brooks has cited, beginning with the Niskanen Center, an offshoot of the conservative Cato Institute, which released a comprehensive report called, “The Center Can Hold: Public Policy for an Age of Extremes,” written by Brink Lindsey, Steven Teles, Wilkinson and Hammond. The report is a manifesto for a new centrism based on what the authors call a “free-market welfare state model, says Brooks.

“They want government to protect citizens against the disruptions of global capitalism: “Without strong income supports that put a floor beneath displaced workers and systems that smooth the transition to new employment, political actors and the public tend to turn against the process of creative destruction itself.”

By creative destruction, Brooks means the tendency of capitalist economies to throw out the old to make room for new innovations and industries, regardless of the consequences to workers in the old industries—like manufacturing in the Midwestern rustbelt. The economic consequences have been devastating for those regions, needless to say.

What Brooks and his fellow conservative centrists don’t say, however, is that modern capitalists have become monopolists is almost every sense of the world. Just a few major corporations dominate the old manufacturing and energy sectors. And the new digital economy is dominated by the so-called Silicon Valley Big Five—Google, Microsoft, Facebook, Apple and Amazon—that have almost totally escaped oversight; until now.

This tendency towards ‘monopsony’ in under-regulated capitalist economies—the economic term for employers having excessive control over their labor market—is what led to “global capitalism” and too big to fail multinational corporations.

This is in fact earth shaking news emerging from the past of a Republican Party that created the U.S. Environmental Protection Agency and first proposed expanding government-subsidized health care in the 1970s. Let us hope America can return to the two-party system that enabled compromise, a more generous welfare state, and less destructive form of capitalism.

It would be a new beginning for the Re-United States of America.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What, Now A Trump Recession?

Popular Economics Weekly

Economists are already warning that if President-elect Trump’s policies are enacted, such as initiating trade wars, or the wrong tax cuts, or even cutting back on social security and Medicare benefits, we could see another recession, similar to the Great Recession that occurred during GW Bush’s term.

Whether his policies can be enacted depends on several things, including his unpredictable behavior, and perhaps the outcome of his November 28 RICO trial in San Diego for running Trump University as a criminal enterprise. Judge Gonzalo Curiel has just ruled that Trump’s inflammatory campaign statements can be admitted as evidence in his trial.

The Bush recession was caused by too lax regulations that caused the housing bubble (by allowing excessive bank leverage), tax cuts that increased the budget deficit while we were fighting two wars, and then Greenspan’s Federal Reserve decision to raise interest rates 16 consecutive times to bust the housing bubble.

It’s terrifying what President-elect Trump will be able to do when he controls all three branches of government (as soon as he appoints a ninth Supreme Court Justice) and carries out his campaign pledges.

Carrying out his pledge to deport all aliens when there is already an outflow of immigrants will devastate agriculture, construction, and any other industry that relies on low-cost labor, for instance.

His promise to ‘fix’ Obamacare (or abolish it outright) will endanger health benefits for the 20 million now covered by it. This makes healthcare much more expensive, since it puts the uncovered back in Emergency Room care for serious illnesses, which puts the cost of their care back on the hospitals.

And as the New York Times reports, “This is going to be a president who will be the biggest regulatory reformer since Ronald Reagan,” Stephen Moore, one of Mr. Trump’s economic advisers said in an interview on Wednesday. “There are just so many regulations that could be eased.”

It could be everything from repeal of Dodd-Frank, the successor to the Glass Steagall Act that protected federally insured depositors from risky investment banking, to repealing environmental regulations that combat global warming, and not only abolishing Obamacare, but the current Medicare system as House Speaker Paul Ryan is threatening to do.

Graph: Marketwatch

And we are reaching full employment levels, which will surely mean the Fed will begin to raise short term rates in December. This is happening already in the bond markets, as evidenced by rising longer term interest rates in anticipation of a soaring budget deficit, if Trump’s plan to increase both infrastructure and military spending while cutting taxes is implemented.

The central issue, though, maybe Trump’s misbehavior in dissing those elements that made American great. “Trump’s bigotry, dishonesty and promise-breaking will have to be denounced,” said David Brooks today. “We can’t go morally numb. But he needs to be replaced with a program that addresses the problems that fueled his ascent.
“After all, the guy will probably resign or be impeached within a year. The future is closer than you think.”

But President-elect Trump’s destruction of almost all decency in his grab for overwhelming power has let that Genie of discontent out of the bottle. We know what happened in the 1930s and even earlier when such ruthless tactics were used.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Trump Must Hate the Little Guy

Financial FAQs

The Republican Party may rue the day they didn’t vet their presumptive candidate for President. The vetting can no longer just be about his overt and premeditated racism, or even his xenophobic wall building. His business practices are finally coming under detailed scrutiny, and what we see is very ugly.

A USA TODAY article catalogues more than 3,500 lawsuits filed for or against Donald Trump over his business career. Many were filed by small business people and firms that Trump refused to pay for work done on his various real estate properties.

The result was that many were driven out of business. It looks like Trump’s main business model was and continues to be preying on those who are least able to defend themselves legally, in order to enrich himself. This smacks of more than predatory business practices.

David Brooks’ latest New York Times Oped this tries to put a handle on his narcissistic behavior. “By one theory, narcissism flows from a developmental disorder called Alexithymia, the inability to identify and describe emotions in the self. Sufferers have no inner voice to understand their own feelings and reflect honestly on their own actions.”

Could this also be defined as sociopathic behavior, since he seems to have no compunction in harming others financially, especially those least able to defend themselves in court?

Psychology Today defines sociopathy as follows; “A sociopath can be defined as a person who has Antisocial Personality Disorder. This disorder is characterized by a disregard for the feelings of others, a lack of remorse or shame, manipulative behavior, unchecked egocentricity, and the ability to lie in order to achieve one's goals.”

Donald Trump often portrays himself as a savior of the working class who will "protect your job." But a USA TODAY NETWORK analysis found he has been involved in more than 3,500 lawsuits over the past three decades — and a large number of those involve ordinary Americans, like the Friel family, who says Trump or his companies have refused to pay them.

The Friel’s family cabinetry business, founded in the 1940s by Edward’s father, finished its work in 1984 and submitted its final bill to the general contractor for the Trump Organization, the resort’s builder.

Edward’s son, Paul, who was the firm’s accountant, still remembers the amount of that bill more than 30 years later: $83,600. The reason: the money never came. “That began the demise of the Edward J. Friel Company… which has been around since my grandfather,” he said.

Graph: USA Today

This is not to speak of a Florida lawsuit against Trump and his Trump's Doral golf resort--also embroiled in recent non-payment claims by two different paint firms, with one case settled and the other pending, says USA TODAY. Last month, his company’s refusal to pay one Florida painter more than $30,000 for work at Doral led the Miami Dade Circuit Judge Jorge Cueto (whoops, another Hispanic Judge) to order foreclosure of the resort if the contractor isn’t paid.

Juan Carlos Enriquez, owner of The Paint Spot, in South Florida, has been waiting more than two years to get paid for his work at the Doral. The Paint Spot first filed a lien against Trump’s course, then filed a lawsuit asking a Florida judge to intervene.

“In courtroom testimony, the manager of the general contractor for the Doral renovation admitted that a decision was made not to pay The Paint Spot because Trump “already paid enough,” said USA TODAY. As the construction manager spoke, “Trump’s trial attorneys visibly winced, began breathing heavily, and attempted to make eye contact” with the witness, the judge noted in his ruling.”

It looks like Trump’s attorneys and supporters will continue to wince as more stories of his business practices come out—whatever his personality disorder. Republicans should have definitely vetted him, instead of listening to his hype.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Baltimore and the Lessons of Inequality

Financial FAQs

David Brook’s most recent New York Times Oped talks about the dissolution of social bonds in Baltimore neighborhoods. “Even in poorest Baltimore, there once were informal rules of behavior governing how cops interacted with citizens,” he says in quoting The Wire Producer David Simon, an awarding winning TV series of life in a Baltimore ghetto: “…that’s happened across many social spheres…in schools, families and among neighbors. Individuals are left without the norms that middle-class people take for granted.”

The problem is there is no longer a majority of the middle class, which has been decimated most recently by the busted housing bubble, but over a much longer period by the loss of those jobs dominating the post WWII economy that migrated overseas and blighted cities and even suburbs as a consequence.

And without a substantial middle class, those middle class norms will no longer regulate social behavior. The result of no accepted social norms is social chaos, as we have been seeing in the riots, hence the bullying tactics of police against those most affected by the loss of jobs and educational opportunities in trying to restore a semblance of order, the poorest among us.

In fact, the Baltimore riots are the result of an economic system that can only be described as broken, where the bullies win, everyone else loses. We are living the result of economic and political policies that have created the greatest income inequality since 1929 and the Great Depression. Yet no one, including David Brooks, wants to face that fact.

Thomas Piketty’s Capital in the Twenty-First Century, described the result of such inequality in earlier centuries, such as Europe’s pre-WWI Belle Epoque era, where inherited wealth was the main path to upward mobility, and Oligarchies ruled.

The U.S. path to such inequality was the concerted push of Big Business and Wall Street to weaken labor laws and trade treaties that allowed American businesses to both automate the workplace and move many jobs overseas, well documented by Jacob S. Hacker and Paul Pierson’s Winner Take All Politics, How Washington Made the Rich Richer—and Turned Its Back on the Middle Class. Those jobs, the core of middle class incomes of the 1960s and 70s, went to foreign lands where costs were cheaper and labor laws nonexistent. The result since then has been stagnant or shrinking household incomes for everyone but the top income brackets that rely on capital gains and stock options, or gaming the financial system.

The epidemic of police killings of African American males is just the result. It is plain for all to see, whether in Ferguson, where the best blue collar jobs now belong to law enforcement with the closing of several auto factories, and the police force is more than 80 percent white, wherever poverty has become endemic. "It's a shortage of everything," said Shermale Humphrey, a 21-year-old who joined the protests in a recent LA Times article. "It's a shortage of jobs. Of African Americans on the police force and in government. Of people not being able to get a good education."

It is a bully mentality that has permeated our government, as well, where education spending has been cut drastically, which hurt the Ferguson school system, in particular. One reason why many families moved to these suburbs in the first place was a decent school system, better than in downtown St. Louis. However, two north county districts — including the one where Michael Brown graduated from high school in May — have lost their state accreditation in recent years. The district Ferguson shares with a neighboring town remains accredited but scores low on state tests.

Since 2000, the median household income in Ferguson has fallen by 30 percent when adjusted for inflation, to about $36,000, said the LA Times. In the census tract where Michael Brown lived, median income is less than $27,000. Just half of the adults work, yet benefits such as food stamps have been cut drastically.

All of these cutbacks in government spending in particular, and not just due to the Great Recession, has weakened our own economy considerably and delayed a full recovery from the Great Recession. Measures such as TARP and ARRA that saved many banks and stimulated economic growth until 2010, were terminated when anti-government conservatives took over Congress and did everything they could to lower taxes on the wealthiest, starving government programs of funding necessary to revive economic growth.

Ferguson and now the Baltimore riots exemplify what has happened to the lower economic classes. For U.S. economic growth has gradually declined since the 1980s, in particular, when maximum income tax brackets first declined from 70 to 40 percent, and the policies of those who intone ‘Government is the Problem’ have eroded the rights and wealth of the majority of Americans.

Whether it is instituting right to work laws in those states that have lowered incomes by blocking collective bargaining and discouraging union organizing, or unlimited campaign financing that enhances the power of corporations, or restricting Obamacare in those states that won’t set up their own exchanges for the poorest, these policies have weakened our own economic system, so much so that social chaos has resulted.

That is why such middle class values that are based in large part on financial stability are no longer the norm. The huge transfer of wealth that began in the 1980s, and the wholesale deregulation of industries that accompanied the transfer, has allowed U.S. corporations to hire and fire as they please, generating record profits, without passing on some of the benefits to their employees. It has destroyed the middle class and all it stood for.

Harlan Green © 2015

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen