Abortion is such a divisive issue I fear it presents the gravest threat to our democracy this country has faced since slavery. Now many Conservative states are passing laws to try to eliminate abortion.
I don't believe Donald Trump, or most wealthy Republicans, really care much about abortion, or Gay rights, or even immigration one way or another. When you are wealthy it's not a part of your world. But opposition to these issues provide a tool the wealthy can use to get elected to pursue the personal and commercial interests they do care about. Gay rights is no longer an viable issue so President Trump leaned heavily on abortion and immigration to get elected.
To a much greater extent than earlier Presidents in my lifetime, President Trump is oblivious, even disdainful, of the institutions that have allowed our democracy to thrive for 250 years, and serve as an example for the rest of the world that the rule of law and democracy can thrive. It seems to me we moving toward becoming a dysfunctional and unstable democracy if we do not come to terms with this divisive issue.
I grew up a Christian and considered the ministry when I was around 14. Although I left institutional Christianity in my late teens I continued to use the teachings of Jesus as my moral compass. When I arrived in Law School in 1976 I did not even think about whether Government should ban abortion - that it was wrong was ingrained in my emotional view of the world. It was unquestionable, so government could prohibit it.
Many people in my class in law school were not of the same view. No problem for me, they were just wrong. But Constitutional law class required I read the Roe v. Wade opinion and think about the issues. It opened my mind to the fact the problem was far more complex than my simple notions from childhood Sunday School. It didn't change my view immediately but life experience and the more nuanced view of the world that goes with life experience has caused my thinking to evolve in the 33 years since law school.
This series of blogs will lay out where I am now in my thinking through a series of questions. My perception is the current media world buries quiet contemplation in an avalanche of gut instinct twitter messages and stories seeking your attention by outraging your emotions rather than inspiring your intellect. I hope to provide a framework for personal contemplation.
The following blog topics will be:
Part 2 - Since the anti-abortion movement is largely driven by Christians Part 2 will address what the Bible says, or doesn't say that seems to me to be relevant to abortion.
Part 3 will look at the justifications offered by the pro-life movement to allow the government of a country that cherishes freedom to take control of a woman's body and life away from her, and then address the pivotal religious issue of whether a fetus has a soul, a concept from biblical teaching that abortion opponents rely on to justify removing control of the woman's future from her.
Part 4 will address the broader ethics of abortion outside the ethical views of a particular religion.
Part 5 will address some curious correlations relating to abortion and the politics and economics of abortion.
I hope you will read and consider, and comment if so inspired.
Tuesday, May 21, 2019
Monday, April 22, 2019
Trump Has a Point About Free Trade, But Not Good Policy
Economists talk a lot about innovation. But the tend to attribute the impressive growth in worldwide wealth mostly to global free trade. The economics of being an economist, I believe, warps their view of reality. Economics is a profession that thrives in the world of multinational corporations, and influential economists tend to go back and forth from Government to multinational corporations or Wall street. Few main street companies are hiring economists. So the view of the economics profession is skewed toward the welfare of big enterprise.
The key to a healthier and happier world, I believe, has more to do with innovation than with huge corporations having the freedom to do what they want around the world. What really jump started the recent large reduction in world poverty wasn't globalization, it was the invention of the cellphone.
Economists skewed view towards big enterprise has led us to pursue unfettered free trade all over the world as a goal not to be questioned. This produced the economic malaise among many voters that led to President Trump's election, Brexit and the election of nationalists/populists around the world.
Regular folks here in the US have seen incomes stagnate for 30+ years as the folks at the top end of the spectrum have become vastly more wealthy, and in the process driven up asset prices. Many folks can no longer afford a house or often even an apartment. It would not be a surprise to discover our national homeless population now exceeds the population of some small states.
It's a pattern we've seen before. During the Industrial Revolution innovation and globalization produced years of breakneck growth where rich folks got very rich and working folks were losers. In the US between the Civil War and 1900 conditions were so bad working men actually, as the years rolled by, became physically smaller and died younger. Eventually exploited working folk started unionizing in the United States. In Europe many become communists or fascists. Ambitious politicians cultivated political power by setting groups of disgruntled people against other groups of people, leading to 40 years with two world wars that killed tens of millions of people.
It is perfectly legitimate for regular folks to be unhappy with the current situation - they are net losers, while folks in countries far away where jobs have been moved are net winners along with the rich folks who own assets and businesses that produce those jobs overseas. It is also understandable that regular folk resent immigrants coming in and adding to the labor pool that keeps wages low. (Banning slavery never really became a political possibility in the U.S. before the Civil War until it became a labor issue - that slavery depressed wages for free working men).
But Trump is pursuing rear view mirror solutions. His tariffs and immigration policy might have made some sense a decades ago when manufacturing required big pools of labor. Increasingly manufacturing can be done by robots, or in many cases by folks with some computer savvy and a digital printer. The need for manufacturing workers is shrinking and that shrinkage will accelerate as the technology of robots and artificial intelligence becomes more sophisticated. Reimposing tariffs to protect manufacturing in the United States is an empty political gesture that ignores the real problem - income inequality that hollows out the demand that supports local main street economies.
Equally nonsensical is building a wall on our southern border and cracking down on immigration, Ever since the Great recession low skill immigrants motivated by economics have been leaving the country, not sneaking in. Most of the recent wave of immigrants aren't coming for jobs, they are fleeing violence and corruption in their home countries where US meddling over the last 50 years has destabilized elected governments.
The Trump immigration policy is following the road Japan took decades ago, discouraging immigration even as the resident population got old. Japan's policy has resulted in three decades of economic stagnation and a huge national debt.
How do we keep the country (and planet) politically stable in the future when most folks may be, if working at all, stuck at the bottom watching the wealthy get richer and richer, pushing them to the geographical and economic margins? One thing is certain - politicians will milk those disparities to set different groups against one another to gain personal power.
Trade policy should focus on finding a way to allow developed countries to provide a mechanism for controlling big corporations that export jobs overseas where wages are low, and using their power to depress wages and increase profits. A corporation doesn't exist in a vacuum however, so efforts to spread the wealth we as a country generate must also provide protection from other countries where business can exploit the workforce.
To be successful trade policy would have to be coordinated with an immigration policy that recognizes the value of ambitious immigrants. Add a tax policy that discourages exporting jobs and provides incentives to push corporations to share wealth more broadly across the corporate employee spectrum.
Trying to save manufacturing jobs that are declining through technology by imposing tariffs, and imposing restrictions on immigration because "our country is full", are not a recipe for long term economic health.
The key to a healthier and happier world, I believe, has more to do with innovation than with huge corporations having the freedom to do what they want around the world. What really jump started the recent large reduction in world poverty wasn't globalization, it was the invention of the cellphone.
Economists skewed view towards big enterprise has led us to pursue unfettered free trade all over the world as a goal not to be questioned. This produced the economic malaise among many voters that led to President Trump's election, Brexit and the election of nationalists/populists around the world.
Regular folks here in the US have seen incomes stagnate for 30+ years as the folks at the top end of the spectrum have become vastly more wealthy, and in the process driven up asset prices. Many folks can no longer afford a house or often even an apartment. It would not be a surprise to discover our national homeless population now exceeds the population of some small states.
It's a pattern we've seen before. During the Industrial Revolution innovation and globalization produced years of breakneck growth where rich folks got very rich and working folks were losers. In the US between the Civil War and 1900 conditions were so bad working men actually, as the years rolled by, became physically smaller and died younger. Eventually exploited working folk started unionizing in the United States. In Europe many become communists or fascists. Ambitious politicians cultivated political power by setting groups of disgruntled people against other groups of people, leading to 40 years with two world wars that killed tens of millions of people.
It is perfectly legitimate for regular folks to be unhappy with the current situation - they are net losers, while folks in countries far away where jobs have been moved are net winners along with the rich folks who own assets and businesses that produce those jobs overseas. It is also understandable that regular folk resent immigrants coming in and adding to the labor pool that keeps wages low. (Banning slavery never really became a political possibility in the U.S. before the Civil War until it became a labor issue - that slavery depressed wages for free working men).
But Trump is pursuing rear view mirror solutions. His tariffs and immigration policy might have made some sense a decades ago when manufacturing required big pools of labor. Increasingly manufacturing can be done by robots, or in many cases by folks with some computer savvy and a digital printer. The need for manufacturing workers is shrinking and that shrinkage will accelerate as the technology of robots and artificial intelligence becomes more sophisticated. Reimposing tariffs to protect manufacturing in the United States is an empty political gesture that ignores the real problem - income inequality that hollows out the demand that supports local main street economies.
Equally nonsensical is building a wall on our southern border and cracking down on immigration, Ever since the Great recession low skill immigrants motivated by economics have been leaving the country, not sneaking in. Most of the recent wave of immigrants aren't coming for jobs, they are fleeing violence and corruption in their home countries where US meddling over the last 50 years has destabilized elected governments.
The Trump immigration policy is following the road Japan took decades ago, discouraging immigration even as the resident population got old. Japan's policy has resulted in three decades of economic stagnation and a huge national debt.
How do we keep the country (and planet) politically stable in the future when most folks may be, if working at all, stuck at the bottom watching the wealthy get richer and richer, pushing them to the geographical and economic margins? One thing is certain - politicians will milk those disparities to set different groups against one another to gain personal power.
Trade policy should focus on finding a way to allow developed countries to provide a mechanism for controlling big corporations that export jobs overseas where wages are low, and using their power to depress wages and increase profits. A corporation doesn't exist in a vacuum however, so efforts to spread the wealth we as a country generate must also provide protection from other countries where business can exploit the workforce.
To be successful trade policy would have to be coordinated with an immigration policy that recognizes the value of ambitious immigrants. Add a tax policy that discourages exporting jobs and provides incentives to push corporations to share wealth more broadly across the corporate employee spectrum.
Trying to save manufacturing jobs that are declining through technology by imposing tariffs, and imposing restrictions on immigration because "our country is full", are not a recipe for long term economic health.
Thursday, April 4, 2019
Thoughts on our low unemployment rate
Economists have been baffled by economic circumstances since the Great Recession. The statistical tools they use to understand what is happening in the economy have lost their predictive value. In classic economics the fact that current unemployment is near historical lows should mean our economy is robust and wages are rising. But the economy is mediocre, artificially supported by deficit spending by the government, and the evidence suggests the only real increases in wages are not market driven, they are a result of many local and state governments enacting substantial increases in the minimum wage beginning in 2013.
It makes be think of the old story about the 12 blind men each hanging onto a bit of the elephant and arguing about the nature of the elephant by extrapolating from the little bit of the elephant they can touch. Each one experiences a different elephant but they all assume what they extrapolate is all they need to know to understand the elephant.
Economist are self selected. In my experience generally people who become economists place a high value on wealth as a primary goal in life, and are more inclined to see logic as the reality rather than as a tool to understand reality. They bury us in the data they develop to the point it is incomprehensible to folks who don't want to take the time to sort it all out. So we, and in particular, politicians, defer to their apparent expertise.
But they sometimes seem to be incapable of putting all the pieces of their own data together if it contradicts their own ideological view of how people should think and behave.
Sure we have an unemployment rate down pretty low, around 4%. But 4% of what? According to the Bureau of Labor Statistics (see the link below) in late 2006 about 63.5% of the population was working. Today that figure is below 60%. That amounts to something like 10,000,000 fewer folks working today than were working in late 2006. In fact since the bottom of the great Recession when unemployment was at 10% the number of folks working has only risen about 1%.
The unemployment rate isn't low because we have been engaging in wise economic policies, its low because a lot of people left the job market. Probably part of the reason the Great Recession did not turn into a Great Depression is because many of those people were old enough to turn to retirement accounts or Social Security so the consumer base of the economy did not collapse.
Wages have stagnated for nearly 40 years. Economists have hailed modest rises in wages in the last couple years as a sign the free market is working and we are on our way back. But they ignore the fact that much of the rise in wage growth is probably related to governments in the biggest commercial States and cities nearly doubling the minimum wage in their jurisdictions.
The media are not helpful, they parrot the Wall Street views, although Wall Street cares about little other than keeping the markets churning so they can make money.
https://www.bls.gov/opub/ted/2016/mobile/employment-population-ratio-59-point-7-percent-unemployment-rate-4-point-7-percent-in-may.htm
It makes be think of the old story about the 12 blind men each hanging onto a bit of the elephant and arguing about the nature of the elephant by extrapolating from the little bit of the elephant they can touch. Each one experiences a different elephant but they all assume what they extrapolate is all they need to know to understand the elephant.
Economist are self selected. In my experience generally people who become economists place a high value on wealth as a primary goal in life, and are more inclined to see logic as the reality rather than as a tool to understand reality. They bury us in the data they develop to the point it is incomprehensible to folks who don't want to take the time to sort it all out. So we, and in particular, politicians, defer to their apparent expertise.
But they sometimes seem to be incapable of putting all the pieces of their own data together if it contradicts their own ideological view of how people should think and behave.
Sure we have an unemployment rate down pretty low, around 4%. But 4% of what? According to the Bureau of Labor Statistics (see the link below) in late 2006 about 63.5% of the population was working. Today that figure is below 60%. That amounts to something like 10,000,000 fewer folks working today than were working in late 2006. In fact since the bottom of the great Recession when unemployment was at 10% the number of folks working has only risen about 1%.
The unemployment rate isn't low because we have been engaging in wise economic policies, its low because a lot of people left the job market. Probably part of the reason the Great Recession did not turn into a Great Depression is because many of those people were old enough to turn to retirement accounts or Social Security so the consumer base of the economy did not collapse.
Wages have stagnated for nearly 40 years. Economists have hailed modest rises in wages in the last couple years as a sign the free market is working and we are on our way back. But they ignore the fact that much of the rise in wage growth is probably related to governments in the biggest commercial States and cities nearly doubling the minimum wage in their jurisdictions.
The media are not helpful, they parrot the Wall Street views, although Wall Street cares about little other than keeping the markets churning so they can make money.
https://www.bls.gov/opub/ted/2016/mobile/employment-population-ratio-59-point-7-percent-unemployment-rate-4-point-7-percent-in-may.htm
Tuesday, March 26, 2019
Reality Check on the Mueller Report
Donald Trump is not a wise man, but he is a clever man with years of experience in no holds barred legal battles.
He regards the law as an obstacle to be ignored or worked around to get what he wants. He surrounds himself with people like him, so he doesn't have to explicitly suggest breaking the law. He just needs to let them know the goal.
Which explains why many in the Trump campaign or administration are on their way to jail, but the Mueller report could not conclude Trump conspired with Russia or obstructed justice.
Did he welcome Russian interference? Of course, he did so publicly. Did he threaten or fire people he thought posed a legal threat? Again he did so publicly. But for conspiracy or obstruction of justice prosecution rests on proving his intent. He had, in the term from the Nixon era, plausible deny-ability.
The concerns that sparked the Mueller report had to be investigated, and the investigation will be good for the country in the long term. Some folks went to jail - sending a message to future campaigns and administrations.
But Trump's fundamental lack of character won't be what brings him down. It will be his unwise decision making. He is being played by North Korea and Russia, but mostly he has undermined our economy with sanctions and blown up our national debt with tax cuts.
I have been researching and writing a book on how political party ideologies impact the economy over the last 100 years. The single fact that leaps out from the research is the Republican economic notions that Trump is doubling down on have consistently undermined our economic health. In the roughly 50 years Republicans have controlled policy our National debt grew faster than GDP, at an average of -.5% of GDP per year.
In the immortal words of James Carville "it's the economy, stupid!"
He regards the law as an obstacle to be ignored or worked around to get what he wants. He surrounds himself with people like him, so he doesn't have to explicitly suggest breaking the law. He just needs to let them know the goal.
Which explains why many in the Trump campaign or administration are on their way to jail, but the Mueller report could not conclude Trump conspired with Russia or obstructed justice.
Did he welcome Russian interference? Of course, he did so publicly. Did he threaten or fire people he thought posed a legal threat? Again he did so publicly. But for conspiracy or obstruction of justice prosecution rests on proving his intent. He had, in the term from the Nixon era, plausible deny-ability.
The concerns that sparked the Mueller report had to be investigated, and the investigation will be good for the country in the long term. Some folks went to jail - sending a message to future campaigns and administrations.
But Trump's fundamental lack of character won't be what brings him down. It will be his unwise decision making. He is being played by North Korea and Russia, but mostly he has undermined our economy with sanctions and blown up our national debt with tax cuts.
I have been researching and writing a book on how political party ideologies impact the economy over the last 100 years. The single fact that leaps out from the research is the Republican economic notions that Trump is doubling down on have consistently undermined our economic health. In the roughly 50 years Republicans have controlled policy our National debt grew faster than GDP, at an average of -.5% of GDP per year.
In the immortal words of James Carville "it's the economy, stupid!"
Sunday, January 13, 2019
Facts to decide if a Border Wall is a Good Idea
We are currently going through a government shutdown that has gone on for some weeks because the President and his supporters believe we need to have a wall on our southern border, and the problem demands immediate attention. Lets review some facts.
The two key arguments for building a wall on our southern border are to stop drug smuggling and catch terrorists attempting to enter the US.
The drug smuggling argument is getting undermined as I write this blog by news reports coming from a wide variety of sources that few drug smugglers bring drugs in across expanses of open borders that a wall would in theory protect. They bring drugs in through legal ports of entry at border crossings, into US ports in fishing or other boats or by air flying over the border. A statistical analysis shows our border drug enforcement is already highly effective at stopping drug smuggling across the open expanses of land that a wall would cover. https://drugabuse.com/featured/drug-trafficking-across-borders/
Terrorists coming across the border is a second argument in the current push for a border wall. In the last 24 years every domestic terror event has been perpetrated by legal citizens or legal immigrants, which would suggest what we have been doing is working pretty well. Oddly the only events involving terrorists with actual plans in place involved cases of entry through our open Canadian border. For a description of what we have been doing link to this study from the Center for Immigration Studies. https://cis.org/Report/Have-Terrorists-Crossed-Our-Border
Are walls a cost effective deterrent? In 2006 a Republican Congress (with democratic support) sent a bill to Republican President Bush that created a stretch of wall along the southern border in a part of Arizona. Since then there have been two government reports on the impact of the wall, a report in 2008 from the Congressional Research Office, and a report in 2017 from the Government Accountability Office (GAO). A fair summary is that both reports find that wall was routinely breached and that the cost effectiveness of a wall was dubious. Here is an article that summarizes the findings of both reports:
https://en.wikipedia.org/wiki/Secure_Fence_Act_of_2006#Impact_and_effects
Immigration has been a political football for a quarter of a century, largely pushed by Republicans seeking election by campaigning on the dangers of immigration. In the last 24 years Republicans have controlled both the Congress and the Presidency for 8 years, and Republicans have controlled Congress for another 6 years, for a total of 14 years of Republican dominance (including the last two years). Contrast that with Democrats who have controlled Congress for exactly two years (2009-2010 - with a Democratic President).
Immigration has clearly been a productive campaign issue for Republicans as they have controlled both houses of Congress in 14 of the last 24 years compared to 2 for the Democrats. Now it's a crisis?
The two key arguments for building a wall on our southern border are to stop drug smuggling and catch terrorists attempting to enter the US.
The drug smuggling argument is getting undermined as I write this blog by news reports coming from a wide variety of sources that few drug smugglers bring drugs in across expanses of open borders that a wall would in theory protect. They bring drugs in through legal ports of entry at border crossings, into US ports in fishing or other boats or by air flying over the border. A statistical analysis shows our border drug enforcement is already highly effective at stopping drug smuggling across the open expanses of land that a wall would cover. https://drugabuse.com/featured/drug-trafficking-across-borders/
Terrorists coming across the border is a second argument in the current push for a border wall. In the last 24 years every domestic terror event has been perpetrated by legal citizens or legal immigrants, which would suggest what we have been doing is working pretty well. Oddly the only events involving terrorists with actual plans in place involved cases of entry through our open Canadian border. For a description of what we have been doing link to this study from the Center for Immigration Studies. https://cis.org/Report/Have-Terrorists-Crossed-Our-Border
Are walls a cost effective deterrent? In 2006 a Republican Congress (with democratic support) sent a bill to Republican President Bush that created a stretch of wall along the southern border in a part of Arizona. Since then there have been two government reports on the impact of the wall, a report in 2008 from the Congressional Research Office, and a report in 2017 from the Government Accountability Office (GAO). A fair summary is that both reports find that wall was routinely breached and that the cost effectiveness of a wall was dubious. Here is an article that summarizes the findings of both reports:
https://en.wikipedia.org/wiki/Secure_Fence_Act_of_2006#Impact_and_effects
Immigration has been a political football for a quarter of a century, largely pushed by Republicans seeking election by campaigning on the dangers of immigration. In the last 24 years Republicans have controlled both the Congress and the Presidency for 8 years, and Republicans have controlled Congress for another 6 years, for a total of 14 years of Republican dominance (including the last two years). Contrast that with Democrats who have controlled Congress for exactly two years (2009-2010 - with a Democratic President).
Immigration has clearly been a productive campaign issue for Republicans as they have controlled both houses of Congress in 14 of the last 24 years compared to 2 for the Democrats. Now it's a crisis?
Tuesday, November 27, 2018
Baby Boomers Gift to Their Children - Bleak Economic Future?
Economic meltdowns are difficult to predict as they seldom follow the path of previous meltdowns. But the policies the US has pursued the last 30+ years has created conditions that suggest an economic meltdown, triggered by Corporate debt, that will have crippling long term consequences may be hard to avoid.
It will start with the stock market. Historically you paid an average of $16 for each $1 of corporate earnings when you buy stock (called the price earnings ratio, or P/E ratio). For much of the last 100 years analysts developed a P/E ratio by averaging up to 10 years of earnings to avoid relying too heavily on unusual events. Today financial analysts look only at the earnings from the prior year. Looking at just the prior year the average P/E ratio for stocks currently is about $24 - you pay $24 for each $1 worth of earnings the corporation generates. This is 1/3 higher than historical average so only makes sense if earnings continue to grow relatively rapidly.
If you use the old measure of P/E ratio by looking back at average profits of stocks over the last decade you get a P/E ratio somewhere between $30 and $40 to a $1 of earnings. By this measure current stock prices are probably 50 to 75% overpriced. That will be a long fall if the market starts sinking.
The peculiar characteristics of our current economy suggest that long fall is not unlikely. For the last decade corporations have loaded up on debt. Corporate debt has gone from $49 trillion a decade ago to $89 trillion today. Currently the vast majority of corporations have only about $12 of available cash to pay back every $100 of debt. It's not just the US. Global debt is nearing $250 trillion, over 300% higher than global GDP.
How did this explosion in corporate debt happen? Historically low interest rates put in place to keep the Great Recession from becoming a Great Depression allowed corporations to pump up earnings with debt for a decade. They borrowed money and used the money to do things that otherwise would have had to be paid out of earnings, and thereby boosted earnings reported to shareholders. Works great as long as you can keep rolling over the debt and just pay cheap interest. On top of that last year corporate tax cuts gave corporations another short term boost unrelated to operating profitability. For a decade stock prices have been on the equivalent of a sugar high.
Now interest rates are going up. The lid is going on the sugar jar. As Corporations refinance debt at higher rates it will undermine the supports propping up stock prices. Some Corporations will not be able to pay or refinance their debts, those that do will not be able to generate the profits investors expect as they pay higher interest or try to pay off the debt. So the stock market will sink (as it has already started to do).
A sinking stock market isn't necessarily a huge problem for the rest of the economy, but this one may be. Remember in the Great Recession all the hand wringing about both public and private pension funds being underfunded? As the debt fueled bull market took off in the last decade all that hand wringing went away as the higher stock prices made the pension funds balance sheets look a lot better so everybody ignored the basic underfunding. But as stock prices sink more and more pension funds will face obligations that exceed their assets.
10 years ago it was a potential future problem. But now with a big chunk of the population moving into retirement and starting to draw on their pensions it is no longer a future funding problem. Either less money is going to be available for paying pensions, or taxpayers are going to have to put up a lot of money to cover the shortfalls. Neither course of action will produce a good result.
If a lot of pensioners find they have less money in retirement than they thought they would, they will spend less dragging the economy down.
A Government bailout is equally bad. Decades ago Congress created a Pension Benefit insurance fund to step in to rescue workers whose pension fund went bankrupt. But a decade ago the hand-wringers had realized that it was clear the Pension Benefit Fund would not be capable of dealing with all of underfunded Pensions. The 10 year debt funded stock market rise made pension fund balance sheets less scary, so we allowed the problem to stagnate instead of dealing with it.
With the National debt over 100% of GDP the government is not in a position to step in to bail out the pension funds without massive problems with the US credit rating. We could be heading down a path similar to the path Japan has been bogged down in since 1990, an economic wilderness of enormous government debt, deflation and stagnant growth. Nearly 30 years later they are still struggling to restore fiscal sanity.
So the conundrum - either you raise taxes on consumers to cover pension fund shortfalls and thereby further undermine the consumer spending that underpins the economy, or government borrows more money, undermining our credit rating and making paying off our National debt almost impossible. Without even considering President Trump's ill-advised trade wars, the future we leave for our children has more pitfalls than promise.
While it is easy to be a pessimist and see all the things that could go wrong, and hard to predict the good things that could keep us on an even keel, the nature of our current problems makes a path to safety difficult to imagine.
It will start with the stock market. Historically you paid an average of $16 for each $1 of corporate earnings when you buy stock (called the price earnings ratio, or P/E ratio). For much of the last 100 years analysts developed a P/E ratio by averaging up to 10 years of earnings to avoid relying too heavily on unusual events. Today financial analysts look only at the earnings from the prior year. Looking at just the prior year the average P/E ratio for stocks currently is about $24 - you pay $24 for each $1 worth of earnings the corporation generates. This is 1/3 higher than historical average so only makes sense if earnings continue to grow relatively rapidly.
If you use the old measure of P/E ratio by looking back at average profits of stocks over the last decade you get a P/E ratio somewhere between $30 and $40 to a $1 of earnings. By this measure current stock prices are probably 50 to 75% overpriced. That will be a long fall if the market starts sinking.
The peculiar characteristics of our current economy suggest that long fall is not unlikely. For the last decade corporations have loaded up on debt. Corporate debt has gone from $49 trillion a decade ago to $89 trillion today. Currently the vast majority of corporations have only about $12 of available cash to pay back every $100 of debt. It's not just the US. Global debt is nearing $250 trillion, over 300% higher than global GDP.
How did this explosion in corporate debt happen? Historically low interest rates put in place to keep the Great Recession from becoming a Great Depression allowed corporations to pump up earnings with debt for a decade. They borrowed money and used the money to do things that otherwise would have had to be paid out of earnings, and thereby boosted earnings reported to shareholders. Works great as long as you can keep rolling over the debt and just pay cheap interest. On top of that last year corporate tax cuts gave corporations another short term boost unrelated to operating profitability. For a decade stock prices have been on the equivalent of a sugar high.
Now interest rates are going up. The lid is going on the sugar jar. As Corporations refinance debt at higher rates it will undermine the supports propping up stock prices. Some Corporations will not be able to pay or refinance their debts, those that do will not be able to generate the profits investors expect as they pay higher interest or try to pay off the debt. So the stock market will sink (as it has already started to do).
A sinking stock market isn't necessarily a huge problem for the rest of the economy, but this one may be. Remember in the Great Recession all the hand wringing about both public and private pension funds being underfunded? As the debt fueled bull market took off in the last decade all that hand wringing went away as the higher stock prices made the pension funds balance sheets look a lot better so everybody ignored the basic underfunding. But as stock prices sink more and more pension funds will face obligations that exceed their assets.
10 years ago it was a potential future problem. But now with a big chunk of the population moving into retirement and starting to draw on their pensions it is no longer a future funding problem. Either less money is going to be available for paying pensions, or taxpayers are going to have to put up a lot of money to cover the shortfalls. Neither course of action will produce a good result.
If a lot of pensioners find they have less money in retirement than they thought they would, they will spend less dragging the economy down.
A Government bailout is equally bad. Decades ago Congress created a Pension Benefit insurance fund to step in to rescue workers whose pension fund went bankrupt. But a decade ago the hand-wringers had realized that it was clear the Pension Benefit Fund would not be capable of dealing with all of underfunded Pensions. The 10 year debt funded stock market rise made pension fund balance sheets less scary, so we allowed the problem to stagnate instead of dealing with it.
With the National debt over 100% of GDP the government is not in a position to step in to bail out the pension funds without massive problems with the US credit rating. We could be heading down a path similar to the path Japan has been bogged down in since 1990, an economic wilderness of enormous government debt, deflation and stagnant growth. Nearly 30 years later they are still struggling to restore fiscal sanity.
So the conundrum - either you raise taxes on consumers to cover pension fund shortfalls and thereby further undermine the consumer spending that underpins the economy, or government borrows more money, undermining our credit rating and making paying off our National debt almost impossible. Without even considering President Trump's ill-advised trade wars, the future we leave for our children has more pitfalls than promise.
While it is easy to be a pessimist and see all the things that could go wrong, and hard to predict the good things that could keep us on an even keel, the nature of our current problems makes a path to safety difficult to imagine.
Sunday, May 27, 2018
How the Second Amendment Could Read
Gun possession is a uniquely local concern. I have a legitimate interest in whether angry, careless or mentally unstable people in the geographic area where my family and I spend my life have access to firearms and ammunition. Or whether my neighbor keeps a loaded handgun in his bedside table that could be accessible to a thief or a curious child.
On the other hand as a resident of the San Francisco bay area I have very little stake in whether people in Colorado walk around with a handgun strapped to their belt, or possess assault rifles. Or if people in Wyoming drive around with loaded rifles in a rack in their pick up.
That the second amendment is obscure in its meaning has been clear since the founding fathers drafted it. But the most fundamental problem with the second amendment isn't ambiguity. It is that it converts a distinctly local concern into a Federal issue.
The Second Amendment of the United States Constitution reads: "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed."
Maybe that made sense as a Federal issue when we were 13 small colonies on the eastern seaboard with much of the country, and the State Militias, still engaged in periodic conflict with the native populations on the northern, western and southern borders of the country.
It does not make sense today.
A revised second amendment should strike the first two clauses - "A well regulated Militia, being necessary to the security of a free State..." State Militias in the sense they existed when our Constitution was written, citizens keeping weapons in their home so they could respond to danger to the community, no longer exist. Every state has a National Guard who supplies weapons members need. We also have a multitude of law enforcement agencies, many with SWAT teams.
The first clause should be replaced by language stating "Control of deadly weapons being a uniquely local concern...." With that preface the rest of the second amendment would work just fine if you add four words at the end - "...by the Federal Government."
Maybe to avoid overly clever twisted legal logic making an end run around a State's choices in controlling deadly weapons you might have to add an exception providing that the right of the States to control deadly weapons supersedes the commerce clause.
This should be an eminently politically feasible amendment. Instead of a Red State / Blue State battle to impose nationwide rules, each state could insure they have the right to determine the status of firearms in their state, or could let each county or city within the state decide for themselves how they wanted to treat deadly weapons.
The resolution of our national disagreement over the second amendment should not be driven by all or nothing partisans on the two opposing sides. The sensible middle should take the lead.
On the other hand as a resident of the San Francisco bay area I have very little stake in whether people in Colorado walk around with a handgun strapped to their belt, or possess assault rifles. Or if people in Wyoming drive around with loaded rifles in a rack in their pick up.
That the second amendment is obscure in its meaning has been clear since the founding fathers drafted it. But the most fundamental problem with the second amendment isn't ambiguity. It is that it converts a distinctly local concern into a Federal issue.
The Second Amendment of the United States Constitution reads: "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed."
Maybe that made sense as a Federal issue when we were 13 small colonies on the eastern seaboard with much of the country, and the State Militias, still engaged in periodic conflict with the native populations on the northern, western and southern borders of the country.
It does not make sense today.
A revised second amendment should strike the first two clauses - "A well regulated Militia, being necessary to the security of a free State..." State Militias in the sense they existed when our Constitution was written, citizens keeping weapons in their home so they could respond to danger to the community, no longer exist. Every state has a National Guard who supplies weapons members need. We also have a multitude of law enforcement agencies, many with SWAT teams.
The first clause should be replaced by language stating "Control of deadly weapons being a uniquely local concern...." With that preface the rest of the second amendment would work just fine if you add four words at the end - "...by the Federal Government."
Maybe to avoid overly clever twisted legal logic making an end run around a State's choices in controlling deadly weapons you might have to add an exception providing that the right of the States to control deadly weapons supersedes the commerce clause.
This should be an eminently politically feasible amendment. Instead of a Red State / Blue State battle to impose nationwide rules, each state could insure they have the right to determine the status of firearms in their state, or could let each county or city within the state decide for themselves how they wanted to treat deadly weapons.
The resolution of our national disagreement over the second amendment should not be driven by all or nothing partisans on the two opposing sides. The sensible middle should take the lead.
Subscribe to:
Posts (Atom)