30 December 2012

Why Avoiding the Fiscal Cliff Might Actually Hurt the Market (and the Economy)

The fiscal cliff agreement is likely to make the market fall.

The quality of the discussion in Washington will define the quality of the budget deal we get. As of now, it doesn't seem as though the quality is particularly high.

What could easily happen is that a deal gets through Washington that is good for the economy short term but is bad long term. That is to say, the cuts in spending and the hikes in taxes will be minimal, like cosmetics when it is cosmetic surgery that's needed instead. This is good short term because it means that a fragile economy is not hurt by a contraction in consumption. This is bad long term because it means that the deficit will remain unresolved.

If, by contrast, we get a real deal that phases in significant spending cuts and tax hikes, the market will surge. And eventually, so will hiring and salaries.

As of now, that dialogue doesn't seem to be happening. Instead, it is as if the two parties are speaking two different languages and so far, no one has stepped forward to translate.

25 December 2012

The Miracle of Christmas

There is about a 1/365 chance that Jesus was born on 25 December. The Catholics ask you not to forget the mass in Christmas and the Protestants ask that you not forget the Christ. But Christmas never has been a purely Christian holiday, its origins a mash up of various and sundry holidays from Romans, Vikings, cults, and the good people of Coca Cola (who commissioned an artist to create an image of Santa in a bright, Coca Cola-red suit).  The holiday is rooted as deeply in Saturnalia excess of sex and feasting as it is in gift giving and piety.

It’s easy to be dismissive of the emphasis on rampant consumption in the guise of gift giving. There’s always someone who points out that this misses the point of the day but in fact that is as much a part of the holiday as nativity scenes. The holiday would not be so popular if it weren’t malleable, something that most anyone can shape into a day of their own design, even if it is a day for Chinese food and a movie.

For me, the real magic of Christmas is similar to the magic of Las Vegas. Who would think that such a popular tourist destination would spring up in the middle of the desert, and yet there it is. Who would think that Christmas should be considered a time of warmth and light just days after the year’s shortest day, the period of time when winter begins its most bleak weather? How absurd and absurdly wonderful is that?

The miracle of Christmas is simply and wonderfully this: we manage to create a time so very different from the time we’re in. Cold becomes warm. Dark becomes light. A time when nature yields so little becomes a time when people give so much. And for that, it doesn’t really matter whether your celebration tends towards the prurient or the puritan. That alone is enough to make it a “most wonderful time of the year.”

22 December 2012

Texting and Recession Hit Japan First. Coincidence?

Japan's lost decade was from about 1991 to 2000, a period of high unemployment and slow or even negative growth. In this regards, they were ahead of us. Our lost decade was from 2000 to 2009, a period when job creation rates that had averaged nearly 2 million a year dipped into negative territory. In this, they were ahead of us. They were also ahead of us on some technology.

In 2001, I was in Japan riding the subway, I couldn't help but notice that so many Japanese seemed to be averting their eyes, looking into their lap as if it were bad form to make eye contact with other commuters or even to look at them. "Very polite people," I thought. Then I did look at them more closely. I realized that they were playing with something. My first thought was that they had worry beads or the equivalent of Japanese rosary beads. I didn't understand it.

"What are they doing?" I asked my contact at the client's, a man from Canada who'd been in Japan for years.

"They are texting," he said.

"What's that?"

"They type messages to each other," he said.

"On their phones?"


"Why wouldn't they just call each other? How could that make sense to type out a message on a tiny keyboard with your thumbs rather than talk to someone?"

"I don't know," he said. "It's just something Japanese do."

Ahead of us on texting, a form of communication that seems to represent the triumph of the need to connect over the drive for efficiency. And ahead of us on a decade of slow or no economic growth. Maybe productivity simply doesn't matter as much as connection. And once we've got access to the latter, we expend less energy pursuing the former.

20 December 2012

Mayan Apocalypse Nothing. We've Already Had the Battle of Armageddon. Seriously

Given all the attention the Mayan Apocalypse is getting, it’s likely that most people have forgotten about the actual Battle of Armageddon.

The Ottoman Empire was ruled by Turkish sultans for hundreds of years. These Turks claimed the Caliphate, which essentially made them protectors of the holy lands of Islam. It was a position roughly akin to that of the pope during the Dark Ages. But during the First World War, the Turks aligned with the Germans. It would prove to be a huge mistake for the Arab world.

In late September of 1918, the British General Allenby led an odd coalition of troops against the Turks at Megiddo. His troops included soldiers from around the world, as befits the last, decisive battle of this First World War.  The mix of Indians, Australians, American Jews and Brits would have itself been remarkable. Allenby had already conquered Jerusalem, the first head of a Christian army to take the city in 700 years. That, too, was notable in its own right.  Also, in a conflict between two great religions, it seemed curiously appropriate that Allenby was a descendant of Oliver Cromwell’s, the man who led a successful revolt against a king to return Britain to religious purity.  And as if all that was not epic enough, Lawrence of Arabia rode with him into battle.

Allenby may have been the last general to use a mix of cavalry and airplanes in battle. It worked. He routed the Turks and the consequences were sweeping.

The British had come to realize that the Middle East had oil and after the end of the war they divided the region with the French.  The British added Iraq and Palestine to their sphere of influence that already included Saudi Arabia and Egypt. They expressed their support for the Zionist movement, setting in motion the return of Jews to Israel. The caliphate collapsed, taking with it Islam’s dominant authority and leaving in its place conflict over the true definition of, and authority over, Islam ever since.

Thus, one of the last battles of World War One became one of its most defining. Contemporaries and historians refer to Allenby’s battle against the Turks as the Battle of Megiddo. We more often refer to Megiddo, however, by a name that had taken on apocalyptic tones even before Allenby’s time: we call it by its more ancient name of Armageddon.

So the Mayan Apocalypse will be no big deal. Apparently, we're already living in post-Apocalyptic times.

19 December 2012

Tim Minchin Rejects the Notion of Goals

“I personally believe in not setting goals. You don’t get opportunities if you think you know what you’re meant to be doing.”
“I’m incredibly squeamish about ‘I’ve always wanted this …’ ‘this is my dream!’ ‘I’ve always wanted X.’ and all that sort of stuff.  I hate that sort of non-specific language. It doesn’t mean anything to me. I don’t get what you’re saying. You have a dream that doesn’t seem to be influenced by any other factors but your fantasy of it. Probably more of us have the sort of life where happily, lots of opportunities come your way and you need to be ready to receive them by having your eyes not on the prize but on everything around you. I guess if I had to impart wisdom to my children – something I hope I never have to do -  I would just say to work incredibly hard at whatever you’re doing and then people will respect you and they’ll ask you to do something else.”
-         -  Tim Minchin

18 December 2012

Protection from an Oppressive Government

It takes little time before defenders of the 2nd amendment argue that they need arms to defend themselves from an oppressive government.  Our founding fathers, obviously, had to take up arms against the British. There are at least two points worth making about this. One, the revolution was an effort of a people, not a person. It was a well-regulated militia, not an unregulated, lone assassin who fought the British. Two, there was no mechanism for Americans to vote for the right to vote; overthrowing a distant empire is very different than taking up arms against your neighbors because you are unhappy with the most recent election.

There are more problems with the argument than this, of course. Obviously the definition of oppressive is left to the one with the arms. A man abusing his wife and children would of course find a policeman intervening on their behalf oppressive. So obviously he'd need to be equipped at least as well as the National Guard, much less the social worker or police who might show up at his door.

Besides, the US is a nuclear power. If one is intent on being armed well enough to resist this government, there would be dozens of Irans within our borders, groups intent on acquiring the technology to resist the greatest military power known to history. It's hard to imagine stronger refutation of an argument than realization that following its logic takes one to conditions ripe for a Mayan apocalypse.

We already regulate arms. We don't let individuals have sufficient firepower to threaten the Pentagon. There's no reason to let individuals have firepower enough to hold off a local SWAT team. 

17 December 2012

Inventing Santa Claus (who magically appears the week before year end inventory)

In the words of children everywhere, what did Santa brings us? Mass consumption and sales enough to empty shelves just before year end inventory.

One of the more curious social inventions was Santa Claus. Santa did not just make children happy. He made store owners happy. Santa as we know him - the gift-giving saint who holds court in department stores - did not exist before factories began to produce more products than could be sold via old habits of consumption. Like the display windows, Santa was part of an attempt to create a fairy tale land where consumers were convinced that shopping was a kind of magic. He also helped to clear out products just before it was time to perform year-end inventory. He did not just give gifts to children. He was a gift to the stores.

Santa began to appear in department stores in the late 19th century, just as American factories began to produce goods at a greater rate than anyone had dared to imagine even a generation earlier.

Christmas gift giving helped to stimulate sales after the American Civil War. In 1867, “Macy’s department store remain[ed] open until midnight Christmas Eve, set[ting] a one-day record of $6,000 in receipts."[1] Around 1870, Christmas made “December retail sales more than twice those of any other month.”[2] The fact that stores could sell so many products merely one week before year-end inventories was kind of magical.
In that same year, 1870, 
“The United States had the largest economy in the world, and its best years still lay ahead. … This American system of manufacture had created, for better or worse, a new world of insatiable consumerism, much decried by critics who feared for the souls and manners of common people. The world had long learned to live with the lavishness and indulgences of the rich and genteel; but now, for the first time in history, even ordinary folks could aspire to ownership of those hard goods—watches, clocks, bicycles, telephones, radios, domestic machines, above all the automobile—that were seen in traditional societies as the appropriate privilege of the few. All of this was facilitated in turn by innovations in marketing: installment buying, consumer credit, catalogue sales of big as well as small items; rights of return and exchange. These were not unknown in Europe, which pioneered in some of these areas. It was the synergy that made America so productive. Mass consumption made mass production feasible and profitable; and vice versa.”[3]

[1] Beniger, The Control Revolution, 260.
[2] Beniger, The Control Revolution,
[3] David S. Landes, The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (New York: Norton, 1999). 307.

13 December 2012

Bernanke Offers a Solution to the Fiscal Cliff (or, the real lesson from Spain and Greece)

Federal Reserve Chairman Ben Bernanke offered a simple solution to the deficit problem: wait until unemployment drops to 6.5% before enacting measures to raise taxes and cut spending.

Bernanke actually announced that his monetary policy would continue to stimulate recovery until unemployment drops to 6.5% or inflation rises to 2.5%. There is no reason that similar guidelines could not be used for fiscal policy as well, though.

Analysts are forecasting how many jobs will be lost if automatic tax hikes and spending cuts are triggered in January. It could cost as many jobs as we've gained since the bottom of the Great Recession. This is not because deficit reduction will always cost us jobs. This is because deficit reduction will cost us jobs when unemployment is still high. Using a guideline like Bernanke's for fiscal policy would change that.

The real lesson from Greece and Spain is simple: if you spend like drunken sailors on shore leave during good times and then sober up to begin cutting spending when times are hard, you'll first create a bubble and then a collapse. This is the worst possible combination.

Job losses from some combination of tax hikes and spending cuts are inevitable. What is not inevitable is that these job losses will matter terribly much. If unemployment is at 4.5% and we're creating 200,000 jobs a month, the job losses from deficit reduction will neither be hard to offset nor particularly hard on the economy. Timed properly, the tax hikes and spending cuts might actually shed jobs at about the rate that the economy is creating them. That's possible. Deficit reduction now when unemployment is at 7.7% and we're creating about 150,000 jobs a month could, by contrast, easily tip us into recession and cause unnecessary hardship.

We needn't force a trade off between deficit reduction and another recession if we simply wait. There is no reason that fiscal policy could not follow the same guidelines that Bernanke just laid out for monetary policy.

But there is a deeper problem. We live in a time of incredible potential and great risks and yet our epitaph will be that in face of all that we were re-hashing arguments from Economics 101 and second grade arithmetic. This fact is more worrisome than any short term deficit or recession. It's as if you still have to tell your teenager to brush his teeth. Ridiculous.

12 December 2012

Multitasking in Meetings a Century Before Laptops (Love Letters and Other Distractions)

I have this tendency to think that multitasking with emails and such during meetings only became rampant with the introduction of laptops. Before, I thought, one could at best daydream. I was wrong.  Reading a book of British history, I ran across this account of the British government during World War I – hardly an affair one could safely ignore. And yet they did, starting with the Prime Minister.

… as the cabinet talks went on, covering munitions, strategy in the Mediterranean and the possibility of prohibition, the prime minister was distracted, as he often was. He was writing to the twenty-eight-year-old woman with whom he had been deeply in love for three years. He wrote to her most days, and sometimes several times a day, letters crammed with gossip and, though from a sixty-three-year-old man, as wildly passionate as any from a brimming youth. Meanwhile, as [Prime Minister] Asquith was scribbling with only one ear on the cabinet debate, a few feet away another minister was also writing. Edwin Montagu had long been one of Asquith’s most trusted supporters and now, still in his mid-thirties, had recently been brought into the cabinet. …. He too was only half paying attention to the cabinet debate. In fact, he too was writing a love letter: “My very dear one, I have never received, I need not tell you, a letter so thrilling and delicious as yours this morning. God bless you for it!” And his letter was to the same woman as the prime minister’s letter.

Montagu did not just describe his affection. He described the cabinet meetings themselves, sharing details that confirmed suspicions of the time. He signed off another letter,

Yours very disjointedly and disturbedly (Winston [Churchill, at the time just another minister, not yet prime] is gassing all the time) …

It has only been a century. In light of that, perhaps it makes sense that little has changed.

 The book is Andrew Marr's The Making of Modern Britain.

08 December 2012

From Jobs Shortage to Labor Shortage - a Forecast of Good Times

Given we've yet to fully recover from a recession begun 4 years ago, it is easy to be pessimistic about the future.  But pessimists will miss a demographic trend that is likely to dramatically change the job market over the next few years. At the risk of sounding like a contrarian, I'd like to predict a worker shortage that will soon improve employment opportunities.

Baby boomers are retiring, leaving the job market in droves. The generation coming of age is the product of lower birth rates. This suggests a coming labor market crunch, a worker shortage. This can be seen in the small gap between the number of people retiring and the number entering the job market.

Each year, more than 3 million new graduates enter the job market to take the place of nearly 2.4 million retirees. If every retiree left behind a job for a new worker, that would leave nearly 700,000 new graduates without  a job. But the American economy has historically created close to 2 million jobs a year, just as it has in the last 12 months. 

Decade    Avg. Annual Job Creation
1960s                   1.7 million
1970s                   1.9 million
1980s                   1.8 million
1990s                   2.1 million
2000s                  -0.1 million
Last 12 months     1.9 million.

If you create jobs faster than people enter the job market, the unemployment rate drops. If the American economy adds 2 million jobs while only 700,000 new people enter the job market, the unemployment rate will drop about 1%, just as it did in the last 12 months. The lower the rate of job entrants, the low the rate of job creation necessary to lower unemployment. If the American economy continues to create roughly 2 million jobs a year with this lower rate of (net) new entrants, demand for labor will rise faster than its supply and wages will rise.

The history of recent decades suggests that the rate at which the American economy creates jobs changes less rapidly than does the rate at which children become adults and need jobs.

In the 70s, the American economy created 1.9 million jobs a year and yet unemployment was 2.5% higher at decade's end than it's beginning. By contrast, in the 80s and 90s, the economy created roughly the same number of jobs and yet unemployment steadily fell. The baby boomers born in the late 40s began hitting the labor market in the 70s. Birth rates roughly 21 years earlier explain unemployment rates as much as job creation rates. Whether 2 million new jobs lowers or raises unemployment depends on how many young adults are entering the job market.

In 1966, roughly 2.7 million young people turned 21 and unemployment was 3.8%; by 1972, 3.8 million turned 21 - rose a million - and the unemployment rate rose to 5.2%. By 1975, 4 million turned 21 and that year unemployment hit 8.2%. It seemed to take awhile for the economy to absorb these new adults as employees. As the rate of new job entrants increased, so did unemployment rates. From 1984 to 1988, the number turning 21 dropped from 4.1 million to 3.5 million, and unemployment dropped as well, from 7.3% to 5.3%. From 1991 to 1997, the number turning 21 dropped further, from 3.7 million to 3.2 million and unemployment also dropped further, from 7.3% to 4.7%.

Here's a table showing changes from the beginning to end of the decade:

Decade    Change in Number Turning 21       Change in Unemployment Rate
1970s                  +0.7 million                                     +2.5% (from 3.5 to 6)
1980s                  -0.7 million                                      -0.6%  (from 6 to 5.4)
1990s                  -0.3 million                                      -1.4% (5.4 to 4)
2000s                  +0.5 million                                     +5.9%  (4 to 9.9)
2010s*                    0 million                                      -2.2% (9.9 to 7.7)                                 
*so far

There is more going on here than demographics, but an increase in the rate of people turning 21 seemed to drive an increase in the unemployment rate. (The aughts were fraught with issues more complicated than demographics and every decade had its issues separate from birth rates of decades earlier.) A drop in the rate of new 21 year olds seems to cause a drop in unemployment; a rise in that rate of new 21 year olds seems to cause a rise in unemployment. These two rates tended to move together.

This bodes well for our decade. Not only is the rate of new 21 year olds dropping but the baby boomers are now retiring. Job creation rates don't have to be terribly high to bring down unemployment rates quite a bit.

Many critics have claimed that the American economy is not creating jobs fast enough. What critics miss is that this economy does not now need to create as many new jobs to lower the unemployment rate. In fact, we already have a strong recovery. Soon, the evidence of this will be seen in paychecks. 

The really good news is that this decade should reverse the terrible decade of the aughts, when we lost more jobs than we created. The even better news is that for the first time since the late 90s, workers will find themselves in a stronger position to negotiate for pay, benefits, schedules, and the design of jobs. In fact, the job boom of the 2010s may be even better than that of the 1990s. 

Happy holidays!

07 December 2012

Why the New Economy is Changing Us From Specialists to Systems Thinkers

The current issue of the Atlantic has a couple of fascinating and hopeful articles about how manufacturing is coming back to the US, creating jobs to replace some of the millions lost in the last few decades of outsourcing.

In the old model, jobs could be outsourced because specialists didn't depend a great deal on one another. Like plugging in different brands of monitors and mice to a computer, marketing, engineering, and manufacturing can all be plugged into one another, little dependent on one another for their tasks. Once manufacturing was independent of design, why not outsource it to the country where labor was cheapest?

Of course it took time to get these factories up to speed, but you would likely make the same model washer machine or refrigerator for about 7 years. If it took 6 months to even a couple of years to get all the problems resolved in manufacturing, one still had years to profit from smooth, predictable operations.

The old model was driven by specialists who worked independently. Now, a new model is emerging that requires a systems perspective rather than specialists.

As it turns out, when a product evolves it requires changes on every front. Manufacturing capability could drive a new consideration in engineering and design. Design breakthroughs may drive a change in how the product gets supported in the field, after sale. Marketing insights into trends may drive changes in all of this. Systems are defined at least as much by the interaction of parts as the parts that are interacting. These interactions suggest steady communication and adaptation between the specialists whose work increasingly is defined in coordination with one another rather than in such isolation that it can easily be performed on separate continents.

The impact of this shift is that manufacturing jobs are coming back from China to the US. The reason for this is that the coordination required to design and redesign rapidly evolving products requires specialists to spend more time coordinating than working heads down on their own piece of the puzzle. Products might be updated every 2 years now instead of every 7 and assuming that specialists can work through their issues in serial is to set in place a plan that works out the kinks in design and manufacturing about the time that the product is obsolete. Specialization is less profitable.

Systems thinking is to this new, entrepreneurial economy what pragmatism was to the information economy. In place of specialists we will increasingly need systems thinkers able to coordinate, design, and create whole  products instead of just focusing on manufacturing or design issues as if they could be worked separately from each other. It is not just that our modern world will be defined by the health of systems as varied as ecosystems, financial systems, or health systems. On this score it seems obvious that systems thinking will be important. But as it turns out, even systems considerations as seemingly prosaic as product creation will be important to this new economy. It may even be this door through which systems thinking enters the popular vernacular.

Anti-Immigrant Economic Drag

Since 9-11, it's been noticeably harder for immigrants to enter the US. James Fallows writes in the the Atlantic of Liam Casey, whose company is headquartered in Ireland and employs about 4,000 people, mostly in China. Casey named his company PCH, after the Pacific Coast Highway in California.

The PCH connects two of my favorite cities, San Diego and Santa Cruz, and runs through a host of other great communities like Monterey, Carmel, and Big Sur.

Unable to get a Green Card and stay in California, Casey named his thriving company after a place he dearly missed but was unable to live in.

Most Americans seem unaware of how few immigrants we allow into the country and how many jobs even an employed engineer helps to create, much less an entrepreneur.  

04 December 2012

Entrepreneurship not Capital: What Limits San Diego's Economy?

San Diego's new mayor Bob Filner has a thousand competing claims on his attention. Where he focuses will make all the difference in how effective he is. If he wants to be really effective, he’ll adapt his policies to new realities.

The most important new reality is that we’ve entered a new, entrepreneurial economy as different from the information economy as that was from the industrial economy before it. The limit to progress has shifted to entrepreneurship and adapting to that will drive sweeping change.

An industrial economy is limited by capital. As a community gets more financial and industrial capital and learns how to make them more productive, it becomes more prosperous. Funding for factories, invention, and infrastructure yields a huge return.

An information economy is limited by knowledge workers. As a community focuses on creating more knowledge workers and making them more productive, it becomes more prosperous. Funding for great public schools, universities, and R&D yield a huge return.

It’s not obvious that our limit to progress is still capital or knowledge workers. This can be illustrated right here in San Diego. Qualcomm alone holds $12 billion in cash. Last year SDSU, UCSD, and USD sent about 20,000 graduates into the world. 

Republicans argue for tax cuts on capital gains, suggesting that we simply need more capital to create more jobs. Democrats argue for more education, suggesting that we simply need more knowledge workers to create more jobs. The policies to support such arguments are increasingly expensive and seemingly less effective than they used to be.

I simply don't buy these arguments. Instead, it seems to me that 200 more great entrepreneurs would do more for job creation in San Diego than would another $10 billion in cash or another 10,000 great college graduates. The new limit is entrepreneurship.  The big question of the information economy was, “How do we create more knowledge workers and make them more productive?” The big question of this fourth, entrepreneurial economy is, “How do we make more people more entrepreneurial?”

There is, of course, a great deal to a transition into a new economy, but most of it follows from communities shifting their focus from the old question to the new. In our case, making more people more entrepreneurial will create demand for more capital and knowledge workers, raising returns and creating better jobs. We will still need more knowledge workers and more capital in the new economy, but these now follow rather than lead economic progress. There are implications for government policy, for education, and most of all, for corporations. For now, it's enough to ask a new question.

Big Question
1st, Agricultural
1300 – 1700
How do we get more land and make it more productive?
2nd, Industrial
1700 – 1900
How do we create more capital and make it more productive?
3rd, Information
1900 – 2000
How do we create more knowledge workers and make   them more productive?
4th, Entrepreneurial
2000 – 2050
How do we create more entrepreneurs
and make them more productive?
 What' s true in San Diego is true across the US. 

In 2009, American corporations held about $5 trillion in liquid assets. Since 2008, about $2 trillion in cash has been added to bank deposits. Think about how much the need for capital has changed in the last century. An iconic startup in the 1900s and 1910s was a car company. For that you needed a lot of capital – financial and industrial. Today's iconic startup is an Internet company and for that you need a group of smart knowledge workers armed with laptops. It’s hard to argue that such ventures are limited by capital.

It's more plausible that we're limited by knowledge workers, but this, too, is a difficult claim. In 1900, fewer than 5% of 14 to 17 year olds were formally enrolled in education. By 2000, fewer than 5% were not. It's hard to imagine ever again matching the dramatic gains in knowledge workers of the last century or the economic output that came with them. The gain from 5% of teenagers to 95% enrolled in formal education is huge. There is no way to match that dramatic gain with the remaining 5%.

Capital matters. So do knowledge workers. But they aren’t enough. And yet our policies - trillions in tax incentives for investments and trillions more in education - are all predicated on the notions that the limits to progress are capital or knowledge workers. Maybe if we didn't spend so much trying to educate the last 5%, or offering tax breaks to encourage the next billion in investment, we'd have money to spend to make entrepreneurship easier, to make it a more obvious career choice for our young people. As it is, we're facing new realities with dated strategies - like adventurers who insist on staying in the boat even after they've hit shore.

We’re living in one of the great transition points in history. Whether that’s painful or wonderful depends a great deal on whether we cling to old policies or embrace new ones. That might start with something as simple as communities everywhere in the developed world starting to ask the right question.

01 December 2012

Did All the Fuss About Xmas Start with a Pun?

Every year certain people are compelled to prove their religious righteousness by accusing pagans and secularists of taking Christ out of Christmas, turning Christian's most important holiday into Xmas.

It could be more innocent. Xmas might have begun as a romantic and goofy pun based on sound. X stands for Kiss in signatures and Kissmas does sound a little bit like some loopy romantic's intentional mis-pronunciation of Christmas.

Or it could be Satanic.

30 November 2012

Rumer - Thankful

It's Friday. The weather is getting cooler. You might just want a song that makes snuggling up inside seem all the more delightful. I've just discovered Rumer's voice and I love it.

28 November 2012

Are Family Values Obsolete?

There’s been a change in households that will obsolete the politics of family values. Adjusting to this new reality may prove conservative’s most challenging task because it goes against what they hold most dear.

It seems ridiculous to oppose family values. Who doesn’t love the idea of mothers, fathers, children and grandparents connected through love and respect? But this ideal as a basis for social policy doesn’t hold up to modern realities. Family values suggest simple answers to basic questions. How do we pay for grandma’s retirement and old-age healthcare? Her children do. How do we pay for the children’s education and healthcare? Their parents do.  Family values suggest self-reliant families.

The model of the self-reliant family misses the fact that so many individuals within these families are actually quite reliant. Families have a lot of deadbeats who don’t contribute. Grandparents no longer work and the children don’t yet. But the household is self-sufficient because dad and mom are are working to pay for these folks. At least that's the model in the minds of many. But it's worth teasing that model apart. While the family may look self-reliant, within the family there is rampant dependency, entitlement, and redistribution of income.This transfer of income is becoming more visible as family members form their own households.

Perhaps the least reported change to “normal” households is the percent that contain just one occupant.

“Today, more than 50 percent of American adults are single, and 31 million— roughly one out of every seven adults— live alone. People who live alone make up 28 percent of all U.S. households, which means that they are now tied with childless couples as the most prominent residential type— more common than the nuclear family, the multigenerational family, and the roommate or group home.”
Klinenberg, Eric (2012-02-02). Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone (Kindle Locations 126-131). Penguin Group. Kindle Edition.

The working poor are even more likely to live outside of traditional family groups. In his book Coming Apart, Charles Murray defines as problematic three groups: single males who are unemployed or only part-time employed, single females who are raising children, and any single adults who report no social affiliation, people he calls isolates (e.g., people who not only live alone but belong to no church group, volunteer group, civics club, sports club, etc., that would connect them to people outside of work). He then estimates that “the percentage of [working class whites] who are problematic in one way or another rose from 10 percent at its low throughout the 1960s to 33 percent in 2007, the last year before the recession.”  That is, a third of the working poor have no traditional family or social support network.
Murray, Charles (2012-01-31). Coming Apart: The State of White America, 1960-2010 (Kindle Locations 3809-3810). Random House, Inc.. Kindle Edition.

Further, knowledge work has scattered us across the country. The children no longer stay in town to work on farms or in the mine. Instead, they head off to college, get recruited to the big city or to another city and then never come back. They aren’t able to easily check in on mom and dad as their parents age and the hours they spend each week with parents – with visits, phone calls, and chat – are less than what they would be if they lived down the street or even across town.

Compounding the problem of support for old parents, the elderly are less likely to have many – or even any – children. Birth rates have steadily dropped for decades. Women with one or two children are less likely to have an adult child able to support them in their old age then women with five or six children; women with no children have a zero percent probability of such support.

It is not just that divorce rates have risen in the last half century. Marriage rates have dropped. All these new realities have contributed to the dramatic increase in the percentage of households with just one person.

What all this means is that the invisible deadbeats within the family have become the visible deadbeats within society. The quiet transfer of income and time that once took place within the family – mom tending to grandma, dad slipping his teenager $20 – has become something played out in the public arena, through government agencies. Family values have given way to public policy. When they lived within the family, they were invisible. Now that they live within the community, these deadbeats show up in government statistics. Curiously, this is reminiscent of the growing formalization of the economy when an increasing percent of transactions evolved from barter and informal trade into cash transactions that could be measured. Now something similar is happening with all social support.

Not everyone who finds themselves in these situations choose to be alone or childless but curiously, these new realities are not seen as tragic by many of the players in them. Everywhere, women with more education and affluence consistently choose to have fewer children.  Also, a surprising portion of people with the resources to do it choose to live along; growing affluence in areas as diverse as Sweden, New York, and China lead to growing percentages of people choosing to live alone.  (Albeit preferably in urban areas where they have lots of opportunities to connect with people they don’t live with but do live near). People seem to prefer enough distance from families so that they have the freedom to define their own lives. The comfort of family can also feel stifling and much of the change from traditional family arrangements seems chosen rather than imposed.

Still, many bemoan the loss of traditional families. Many  conservatives put even more emphasis on religion as a means to support and realize their family values. In light of all this, it is no wonder that Republicans chose a Mormon as their presidential candidate. Probably no American religion has put more emphasis on the family.
“In Mormon theology, humans are given mortal existence and bodies in a state of probation. Marriage and procreation are central to exaltation. ‘We were placed here on earth to progress toward our destiny of eternal life,’ Apostle Dallin Oaks told a 1993 General Conference. ‘To the first man and woman on earth, the Lord said, “Be fruitful and multiply.”…This commandment was first in sequence and first in importance. It was essential that God’s spirit children have mortal birth and an opportunity to progress toward eternal life.’ In Mormonism God is married. Like God, humans can progress to godhood, continuing their progression and procreation in the afterlife. The Mormon heaven is a very domestic concept, and celestial marriage is essential to exaltation.”
Ostling, Richard; Ostling, Joan K. (2009-10-13). Mormon America - Rev. Ed. (pp. 331-332). Harper Collins, Inc.. Kindle Edition.

Families are wonderful and still – for all their flaws – the place we’re most likely to find love and acceptance.  Family values in that sense are not obsolete and never will be. But it looks as though family values are less likely to be a guide for practical policy in the modern world and may instead have to be a guide for the ideal that folks aspire to in the next. Giving up on family values as a basis for public policy may seem defeatist, tragic, or foolish. Perhaps. It seems to me, though, that it would be the start of dealing with reality as it is rather than how we imagine it to be.

Special Holiday Heart Warming Service

27 November 2012

Population Density and "Reasonable Rules" (or why rural areas vote Republican)

Rural areas tend to vote Republican and urban areas tend to vote Democrat. I've often thought that this is for a simple reason. If you live two miles from your nearest neighbor, you're rightfully offended at the thought of your neighbor dictating how loudly you play your music, whether you smoke, and even if you wear pants. By contrast, if you live in an apartment complex with a dozen neighbors within yards of your place in every direction, they have every right to think that they can dictate how loudly you play your music, etc. Population density is a big determinant of what you think is reasonable when it comes to rules and regulations.

This graph seems to support that idea, making increased rates of urbanization one more trend that seems to be working against the GOP.

26 November 2012

No Nude Taxes - The Naked Truth About Deficit Reduction

Two quick points about current negotiations to avoid falling off the fiscal cliff. One has to do with simple math and the other with simple economics. Together they suggest that deficit reduction needs to come from a mix of tax hikes and spending cuts and that neither should be rushed.

Some still cling to the notion that we can erase the deficit through budget cuts alone. This the last gasp of a movement designed to radically shrink government, one that got this far in large part by arm-waving about how tax cuts stimulate the economy. Let's take them at their word and ask by how much the economy would have to grow to compensate for the tax cuts of the last decade.

In the decade from 2000 to 2009, taxes as a percentage of GDP fell from 20.6% to 15.1%. I'll just simplify that to say that taxes fell from 20% to 15% of GDP. 

Our GDP is nearly $15 trillion this year so it's simple enough to calculate how much more GDP should have grown to compensate for such a cut in tax rates.

A 20% tax rate on a $15 trillion economy would have given us $3 trillion in federal revenue.
To get that same $3 trillion in revenue with a 15% tax rate would require a $20 trillion GDP.

In two simple equations:
  $3 trillion in revenue = 20% of $15 trillion
  $3 trillion in revenue = 15% of $20 trillion

Tax cuts would have had to stimulate economic growth by another $5 trillion in the last decade in order for revenues to remain constant. Is that reasonable? Well, the second and third largest economies in the world - China's and Japan's - are $5-point something trillion dollar economies. Every other national economy in the world is considerably smaller than $5 trillion. (The economies of France and the UK combined are roughly $5 trillion.) 

In other words, had tax cuts stimulated our economy by an amount equal to the whole of China's economy, we'd have enough tax revenue to leave rates unchanged. If not, we might have to consider the fact that we'll simply have to raise tax rates back to what they've averaged for the last half century: roughly 18% of GDP - give or take a point or two.

Now what about the contention that raising taxes will be bad for the economy? 

On this, the GOP faithful are right. But so will cuts to government spending. Cut the money investors get in tax returns or that social security recipients or government contractors get in payments and you will contract spending and hence the economy. 

The real issue is that the deficit is not the real issue. Not yet. Like a kid in the kitchen excited about baking bread who keeps hollering, "We have to put it in the oven now!" the voices chirping about reducing the deficit are both right ("We have to cut the deficit!") and wrong about timing. Bread dough has to first be mixed and then let to rise before we can put it in the oven without ugly results. The same is true of the economy: we have to first stimulate it with spending and tax cuts (deficit spending) then let it rise (unemployment falls as the GDP rises) before we put it in the oven (begin to cut spending and raise taxes). To get this order wrong is to go the way of Greece and Spain. Austerity measures in a bad economy don't just make the economy worse; they make the deficit worse as well. As it is with something as simple as baking, so it is with something as complex as a modern economy: sequence is critical.

The right solution to deficit reduction won't just cut spending and raise taxes. It will time these budget changes with certain milestones (e.g., unemployment rate at 7% and 6% and 5% triggering different combinations of tax hikes and spending cuts, for instance). 

23 November 2012

The Ideal Thanksgiving - a Modern Conversation with Historical Figures

Yesterday we had a delightful Thanksgiving meal with a group of people who were politically aware but not politically boorish, both eager to share their own opinions and to hear others. Conversations define Thanksgiving at least as much as the food. (I wonder if somewhere people plan topics the way the rest of us plan courses.)  Anyway, yesterday's delightful dinner got me thinking about which historical characters it would be most fascinating to have for a long Thanksgiving dinner.

Here is my list. It would probably be different next week. And this six I include not just because I think that individually they'd be fascinating but because I think that one thing that made them all distinct was that they were social inventors, able to imagine a different kind of society, and it would be utterly fascinating to hear them observe our current world and then talk among themselves to imagine a new world yet again. We could use people who had the wisdom and talent to reinvent society but had actual experience with it.

Erasmus (1466 - 1536) - adviser to kings, popes, and the one who seemed to approach the Reformation with the most humor and wisdom. Martin Luther was far more critical of the Church but Erasmus seemed more interested in reform than revolution. For this reason alone he would probably be easier to talk to about those times and it would be fun to see how he made sense of today's religious and political world. It wouldn't surprise me that, of all the characters from the 16th century, he would be least surprised and most pleased to see how things had developed.

Ben Franklin (1706 - 1790) was the only founding father to sign all four founding documents (Declaration of Independence, Constitution, Treaty with France to help us win the war of independence and the Treaty with Britain to announce that war's conclusion), but inventor, publisher, and wit. Which of the fascinating founding fathers would be more fun to have? Plus, who better to have turkey with than the man who proposed it be our national bird?

Wilhelm Humboldt (1767 - 1835) Humboldt defined the modern university, a place where knowledge was created through research and shared through teaching. Again, it would be fascinating to have him apply that same genius to the modern world to hear what - if any - recommendations he'd have for University 2.0, an institution as different to us as the modern university would have seemed to his peers.

Nathan Rothschild (1777 - 1836) with his brothers helped to invent the international bond market and by extension international finance. If markets eclipsed the power of monarchs, presidents, and parliaments, the Rothschilds were a big part of that transition. Again, how fascinating would it be to get his opinion about how markets have evolved and how that compares with his own expectations.

William James (1842 - 1910) wrote the first generally accepted psychology text book and helped to invent the philosophy of pragmatism at the dawn of the century of the mind. It would be fascinating to compare what happened in the century with what he had expected.

John Maynard Keynes (1883 - 1946) The man who did the most to define the modern relationship between government and markets. It would be delightful to apply his genius to a more evolved time, to get his take on the current realities to see what he felt would require new thought and what situations he would think affirmed his theories.

This leaves a number of obvious choices off of the list. Jesus was the first person I thought of but at such a meal one really wouldn't want to share time with another five from history.  (Unless it were Paul, who never met Jesus. It would be fascinating to hear various Christians from Paul on down in history talk to Jesus and take personal instruction.) Einstein was wonderfully political and it would be fascinating to hear that dimension of him. Oscar Wilde would have to be a wonderful conversationalist. Jefferson, Kurt Vonnegut, Maria Montessori, systems thinking pioneer Ludwig von Bertalanffy, Thomas Edison, Henry Ford, Charlemagne, Pope Alexander (the Borgia pope), da Vinci, Martin Luther, Marilyn Monroe, Jane Austen, Picasso, Faulkner, Buddha, , Shakespeare  ... the list of other potential candidates goes on.

Given these guests are unavailable, perhaps the thing to do would be to host a costume party instead of Thanksgiving, It is the only hope one has of meeting any of these people.

Who would you have included?

18 November 2012

Robert Stein on How Groucho Marx Would Handle Modern Sex Scandals

Robert Stein, who shares his extensive wisdom and knowledge at Connecting the Dots, shares this story as he shakes his head at the outrage over General Petraeus's behavior.

It brings back a story Groucho relished telling Dick Cavettabout the aphrodesiac rewards and risks of fame in the Marx brothers’ vaudeville days.
Back then, Groucho and Chico were visited backstage in Iowa by a middle-aged Jewish couple, who relayed their admiration and said, “We know you boys are Jewish, and we thought you might like to come to our house Friday night for a traditional Jewish dinner.”
The brothers agreed but, walking around town the day before, Chico recognized the address and they decided to ring the doorbell. The couple’s two pretty daughters were home, greeted them happily and were eventually induced to act out their fandom physically.
When the parents appeared, there was some embarrassment.
“Chico was more accustomed to this sort of predicament than I was,” Groucho recalled, “so I followed his example, which was grabbing up our clothes and high-tailing it out the window. Fortunately, we were on the ground floor.
“In any case, the penultimate thing the parents saw were our two buck-naked rear ends disappearing over the window sill. The ultimate thing they saw was Chico’s head reappearing momentarily, saying, ‘I hope this doesn’t affect Friday night.’”

15 November 2012

The Miracle of Advertising: Or Why are Republicans Still Considered Fiscal Conservatives?

The Republicans have preserved their brand to include a reputation for fiscal conservatism. This is impressive.

Reagan took office promising tax cuts and less government. His was an important reminder that we can't turn to the government for solutions to every problem. He was a big advocate of free markets. 

What was the reality? Well, measuring taxes as a percentage of GDP, he did lower taxes from what they were under Jimmy Carter. In the four years under Carter, taxes averaged 18.4% of GDP. In the eight years under Reagan, they averaged 18.2%. So, not a particularly big cut in taxes, but what about spending?

Under Carter, spending as a percentage of GDP averaged 20.8%. Under Reagan it averaged 22.3%.

Hard to reconcile this with fiscal conservatism. Reagan dropped taxes .2% and raised spending 1.5% of GDP. Unsurprisingly, Reagan created big deficits, hardly the mark of a fiscal conservative.

George W. Bush actually reduced government spending as a percentage of GDP from his predecessor. Under Clinton, government spending averaged 19.8% of GDP. Bush got that down to 19.6%, a drop of .2%. That cut was small but the the cut in taxes was huge. Bush got those down 1.4% of GDP, from Clinton's 19% to 17.6%. Like Reagan, Bush drove up the deficit. Again, not a sign of fiscal conservatism. 

Fiscal conservative is not the right term. Tax cutter is. But as I've argued before: if you merely lower your monthly payment on your credit card but don't actually lower your spending, you hardly qualify as a fiscal conservative. The miracle is, voters still seem to think that it does.

11 November 2012

Amos Oz: Cruelty as a Failure of Imagination

Amos Oz was on Andrew Marr's Start the Week program last week. He told the most perfect story about cruelty as a failure of imagination.

Oz said that in Israel, the taxi drivers all know how to solve the Israeli-Palestinian problem and in a ten minute ride they will tell you. On one taxi ride, Oz was riding with a fellow novelist when the cab driver announced that they should kill all the Palestinians.

"How would you propose doing that," asked the novelist.

"We just kill them," said the cab driver.

"Get more specific," said the novelist. "Are you proposing that doctors kill them by injection, that soldiers shoot them .... What do you propose."

The cab driver was silent for a time, reports Oz, considering this question. Finally, he said, "We'll all have to kill a few."

"Okay," continued the novelist. "Let's say that you are assigned a block in Haifa," a mixed city with Jews and Arabs. "You go door-to-door, asking people whether they are Jews or Arabs. If they are Arab you kill them. Then, as you walking away from your assigned block, you hear a baby crying from the third floor. Do you go upstairs and kill the baby?"

The cab driver was silent for quite some time, pondering this question. Finally, he told the novelist, "You, sir, are a cruel man."

10 November 2012

Reagan's Lingering Shadow Over the GOP

Reagan has become to our time what FDR was to 1980, his example a substitute for confronting current reality. By 1980, Americans had stopped blindly trusting in government programs; Democrats, inspired by FDR's bold example, still did. By 2012, Americans had stopped blindly trusting in unfettered markets; Republicans, inspired by Reagan's bold example, still did.

It was 30-some years from FDR’s death to Reagan’s election. It has now been about 30-some years since Reagan was first elected and something similar has happened both times.

FDR led the country out of the Great Depression with a series of government programs. He proved that government programs could get the economy going and provide retirement and electricity. In the decades of and after his administration, government programs helped to rebuild a Europe devastated by war, eradicated polio, developed an atomic bomb, accelerated the development of computers, radar, and aircraft, and made universities affordable for the middle class. The careful intervention of government experts even took the sting out of recessions.

Generations followed his lead. It’s worth remembering that Nixon – a Republican – authorized the EPA, put in place price controls, and quipped, “We’re all Keynesians now.”

Smart people rarely asked about the wisdom of government programs but instead asked what kind of programs would work best. Government was the default answer to everything from crime to education to the economy. And to be fair, this approach largely worked. The period from about 1935 to 1980 was a time of incredible progress. Incomes went up. A lot. Unemployment went down. A lot. We had an array of new products and possibilities we’d never had before. Being born poor no longer meant a life sentence of poverty. Government welfare could provide you food and healthcare during childhood and government education could help prepare you for a good career.

But then a conservative backlash built up. “What if government programs are no substitute for strong families or markets,” people asked. “What if just leaving people to work out solutions through markets was better than pretending that you could centrally control things through Congress and reams of regulations?”

Reagan was not the first voice in this movement but he put a handsome, genial face on it. And the country was ready for it.  “Government is not the answer,” Reagan said, personal responsibility is. And we believed him. He was, after all, the head of the government.

Cut taxes. Cut government programs. De-regulate. Stop trying to save everyone. Get tough on crime. Make people accountable and stop pretending that bad circumstances are excuses for bad outcomes.

And like FDR before him, Reagan changed the direction of government. His political success emboldened a generation of leaders and policy makers. Even the Democrat Clinton announced, “The era of big government is over.”

And the results were impressive. Capital markets created a tsunami of new ventures, new technologies, and new billionaires. By the end of the 1990s, even ordinary people were making millions in the stock market.

After FDR, few questioned the efficacy of government programs. After Reagan, few questioned the efficacy of markets. The country looked to the market for solutions and accepted its answers the way past generations accepted answers from the church. Through the market, truth was revealed.

As it turns out, Reagan’s approach retained some measure of efficacy about as long as did FDR’s. For our love of great figures in history, our best bet is to trust in our own judgment. We love leaders because they don’t imitate and then we honor leaders by imitating them. Like FDR before him, Reagan’s powerful influence has made his party mindless rather than mindful.

After the 2008-2009 financial crash, Americans no longer mindlessly trust markets. The GOP still does. Most Americans want a balanced budget approach to deficit reduction. The GOP does not. It's tough to win elections when you go against majorities.

In 2000, Clinton left the country with a budget surplus - and taxes as a percentage of GDP were 20.6%. Bush cut taxes - as did Obama. By 2009, taxes were at 15.1% of GDP. GDP would have had to grow to $20 trillion instead of $15 trillion by 2009 in order for the lower tax rates to generate the same revenue as it had at 20.6%. As a percentage of GDP, tax rates had never been below 16.1% and had averaged 18.1% in the 48 years (Obama's lifetime) up to 2008. Even in the face of these facts, the GOP insists that budget negotiations not include discussion of tax hikes. Such an intractable position shows less connection to current reality than an idealization of Reagan's legacy. 

We now face a fiscal cliff that can be avoided only by negotiations between Republicans and Democrats and what the Republican Party needs now is a Clinton-figure. Clinton was not just hated by the Republicans: he unsettled many Democrats with his acceptance of Reagan's distrust of big government and welfare programs. Clinton accepted a correction on FDR’s model and made himself a new kind of Democrat. As yet, no Republican has stepped up to show a similar realization that the Reagan prescription has expired. The Republican who does will be distrusted from all sides but could become as popular as Clinton. And she could save her party from irrelevance.

There is one way that the GOP can imitate FDR or Reagan: they have to stop relying on past policies and develop new ones, policies more grounded in current reality than in past triumphs.

07 November 2012

The Race Gets Tighter

About a century ago, the gap between the two parties was closer to 20% in any given presidential election. Today it is closer to 2%.

Many folks (including this blogger) will opine about what the Republicans' loss means for them but in a time when the political analysts have seemingly sliced the polity so neatly in two, it might simply be that with elections this close one may as well flip a coin. Never has the gap between the parties been closer (in terms of popular vote) than it has in the last handful of elections.

Here's a graph from 1912 to 2012, showing the absolute value of the gap between votes for Democrats and Republicans as a percentage of voters.

The Republicans Only Hope is if Republicans are to Blame

If you are to blame, you have control over change and improvement. If someone else is to blame, you don't.

The Republicans' first reaction to last night's loss is probably best captured by Bill O'Reilly in this clip:

In this narrative, the Republicans are not to blame. This is not just consoling but it absolves Republicans of any need for self-reflection and change. This reaction doesn't bode well for them.

Romney lost by only 2 points in the popular vote. In a country where so many people have decided by April, two percent is not as close as it sounds but it is not an impossible lead to overcome. There are things that the Republicans could have done to close that gap, and those are things for which they should take responsibility.

With the economy in bad shape during the Republican primaries, it was almost as if Republicans felt that they should go for broke on their social agenda. Apparently feeling as though there was no way they could lose, they catered to every odd belief of the far-right. Republicans became extremists.

No country has more of its population in prison and yet GOP debate audiences cheered stiffer sentencing and death penalties.

Tax rates as a percentage of GDP has averaged 18.5% during the last half century until the last few years when it dropped to below 15%. Even so, Republicans refuse to consider raising taxes a single dime.

Unemployment is barely below 8% and yet Republicans talk about austerity measures, cutting government spending by $1 trillion. (The amount by which the budget would have to be cut to balance the budget without raising taxes.)  Excluding "mandatory" entitlement spending, there is only $700 billion in defense and $600 billion in non-defense (a category that includes the Supreme Court and FBI, Homeland Security and Immigration and Naturalization, EPA and NHS, etc, etc.). To cut one trillion out of this total of $1.3 trillion would devastate the government. And, of course, it would mean a massive contraction of the $15 trillion US economy, triggering a recession that would echo Spain's (where austerity economics has been enacted and unemployment is about 25%).

Even with a growing number of women voting, the GOP still refuses to fund contraceptives or support any meaningful maternity leave or legislation that would move towards equalizing pay for women.

With such extremists positions, it is a testament to their appeal that Republicans came within 2 percent of the presidency in spite of all this.

For now, the GOP shows a disconnect from demographic and policy realities as real as Dick Morris's disconnect from polling realities. (With no polls to support the notion of a Romney victory (Romney never lead in even a majority of the polls in any given time period, at best drawing close), Morris asserted his conviction that Romney would win.) Republican pundits showed no real appreciation for reality, relying instead on gut feelings and nostalgia. Until they abandon conviction for a commitment to responding to actual facts, it is hard to see how they could ever take responsibility for their loss. And until they're responsible for losing, they won't have to take responsibility for winning.

02 November 2012

Comparing Presidential Jobs Numbers Before Election Day

The bureau of labor statistics announced that 171,000 jobs were created in October. In addition, they revised numbers for the last two months upwards (August revised up from 142,000 to 192,000 and September up from 114,000 to 148,000.) So essentially, the BLS announced an additional quarter of a million new jobs today, a number much better for the economy than Romney's campaign.

[To play with the question of whether president's even matter to job growth, go to the end of the post.]

So we now have the final number before the election, giving us a basis for comparing Obama to president's dating back nearly half a century. If we just measure from the administration's first full month in office (February after being sworn in) until the October before the election, we get the following ranking of of the last 8 administrations in terms of job growth.

In millions:
Clinton       10.8
Carter         9.8
Johnson       9.1
Nixon         5.2
Reagan       4.6
HW Bush   1.9
Obama        .9
GW Bush   -.3

Here's a graph showing the cumulative numbers of jobs grown during their administrations.

Here Obama looks nearly as bad as Bush. But as Obama repeatedly reminds us, he inherited a very bad economy. Let's examine that, separating out the first year from the rest of their term. And, let's do that for every president.

Johnson   2945
Nixon      1738
Carter      3903
Reagan    -474 
Bush 1     2018
Clinton     2749
Bush 2    -1878
Obama   -4282

As you can see, the recession that Reagan inherited was only one-tenth as bad as Obama's. No president in the last 50 years was greeted with such dramatic job losses as was Obama, totaling 4 million lost jobs in his first year. Here you can see the cumulative job creation or loss during the first year of each administration - Obama's first year numbers dramatically lower than any other. That is a huge hole to dig out of.

So let us assume that Obama was right that a global recession that began the year he before he was sworn in had nothing to do with his policies, and discount the first year of his (and every) presidency. (And in fact, the budget of the first year is inherited from the previous administration.) Subtracting the first year from the job numbers, Obama's ranking changes dramatically.

In millions:
Clinton       8.1
Carter        5.9
Reagan      5.0
Obama     4.5
Nixon        3.5
GW Bush  1.5
HW Bush  -.1

Here is the graph of the cumulative jobs created / lost from years 2 through 4. In this ranking, Obama falls between Reagan and Nixon, two presidents who won re-election by a landslide.

Obama seems the probable winner, but by no landslide. One simple explanation is that nearly half of Americans hold him responsible for job growth during all four years, and slightly more than half hold him responsible for only the last three.

[Do these numbers matter?]

Now it is worth asking a very basic question: does the president really impact job numbers at all? Is this fixation on job growth as a measure of presidential efficacy a modern version of holding the medicine man responsible for rainfall? It is true that the economy is a product of many variables other than the president. For one thing, his policies affect the numbers only to the extent that Congress cooperates. And, of course, economies surge and stumble for more important reasons than presidential policies, reasons as varied but powerful as new technologies (Internet anyone?), global competition (rise of China and Brazil bringing another billion workers into competition with ours), demographics (baby boomers entering or leaving the job market), global financial crisis (the '08 financial crisis), domestic crisis (9-11) and so on.

Even so, it seems that presidential policies matter. There are a lot of men who love alcohol and love their families; the men who love alcohol more than their families have very different lives than the men who love their families more than alcohol. President's who value job growth more than, say, inflation or balanced budgets have very different economies than those who value balanced budgets more than GDP or job growth.

Austerity measures in Europe, their attempts to balance budgets in the midst of a global recession, have been disastrous. The UK went into a second recession; Spain's unemployment is near 25%. David Cameron in the UK and Spain's Rajoy tried to first balance the budget and then grow the economy, valuing fiscal responsibility more than job growth. That's a bad policy and their economies are still suffering because of it.  Neither tax hikes nor cuts in government spending help during a recession. The impact of presidential policies during a time of full employment are less obvious, but probably still greater than zero. I'll leave the reader to decide whether the influence of presidential policies is closer to 5% or 50%.

But the president's actual impact on job growth hardly matters for this simple reason: voters think it does.  For that reason alone, it is worth giving the numbers more than a cursory look.

28 October 2012

The Flat Tax for Equality & Justice

One learns the strangest things about friends' politics on Facebook. The other day, I had a friend post that we should have a flat tax for equality and justice.

So, a single mom making $20,000 would pay $4,000 in taxes and George Soros making $2 billion in income would pay $400 million. (And yes, Soros and other hedge funds managers have made as much as $2 billion in a year. This is not hyperbole.) That seems perfectly equal. And fair. I'm sure that they both can "afford" the 20% tax equally. And I guess a flat tax, to keep it simple, would make no allowances for medical expenses, home mortgage deductions, charity, dependent children, education expenses or other deductions.

Next, I think that we should be equal and justice for military service. We should no longer rely on a primarily male population of soldiers, able-bodied kids who -generally speaking - aren't as interested in or able for university and the careers that follow. We should simply draft randomly from the population, 16 to 60, male or female. And, of course, for equality we would not make any allowances for medical waivers, student deferments, pregnancy, or people who had better employment prospects elsewhere (whether to serve out a term as president, say, or work as CEO).

I like it. Equality for all makes policy so simple.