February 5, 2018--How Sick Is This?

The Dow Jones Average Friday plunged 666 points. (Note the number.)

Searching for reasons, I found a few--

Since the Devin Nunes memo turned out to be what Bret Stephens in the New York Times called a nothing-burger it is thought that this means it wasn't going to be the get-out-of-jail card Donald Trump's enablers were hoping for. (Talk about a nothing-burger.) If Trump continues to be in peril, it's by definition bad for business.

Then, Alan Greenspan (remember him?) warned that there are currently two bubbles in the financial market--a bond bubble and a stock bubble. That about covers it.

When chairman of the Fed, except when he wasn't, he was considered to be infallible. Partly because of his job but also because, perhaps more important, his words were often intentionally incoherent and thus considered to be as if they were coming directly from the Oracle. As to why incoherent riddles might be considered to be wisdom, it is because the original Oracle's words were in Classic Greek, not Greenspan's metaphoric Greek, as in "It's all Greek to me."

Finally, most put forth as the explanation for the slide in stock values, was the clear evidence that after decades of frustrated waiting, workers are finally seeing an increase in their wages. Up 2.9 percent in January as compared to a year ago.

How sad, how sick is it that what's good for the struggling middle class is bad for business. That's not a nothing-burger. It's a whopper. 

November 13, 2105--Uber

In Aftershock: The Next Economy & America's Future I think it was Robert Reich who wrote about how the middle class has struggled to adapt to the new service economy by a variety of responsive strategies.

In the old economy, with well-paying manufacturing jobs economically anchoring millions of families, it was men primarily who worked in factories and offices while women stayed at home and worked there to maintain the household and assume primary responsibility for raising the children.

At that time, for most the jobs available to middle-class men were enough to sustain their families and provided enough so the next generation could do better than their parents.

But then the compounding affect of inflation and the decline in the number of these good jobs made it impossible to maintain families' life style with only one job and only one person working outside the home.

So men added part time jobs to help them keep even. And more and more women began to work outside the home and struggled both to do that and continue to take primary responsibility for childcare.

But 10-15 years ago this also began not to work.

To compensate families next turned to debt financing.

The one appreciated asset many families had was the rising value of their homes. Those who owned one. And so to maintain their financial status millions refinanced their dwellings. The loose lending environment was such that it was easy to get financing for more than real estate was worth, and families used that extra money--extra debt--to finance their lives and life styles.

Then everything collapsed and millions found themselves under water.

Looking around, they couldn't figure out what to do. Some decided to defer or even not have children. Others turned to the underground economy. More depended on various forms of government subsidies.

And yet others found ways to turn their only two remaining assets into income--

They earned extra money by renting their homes, apartments, and spare bedrooms via Web-based operations such as airbnb and turned their cars into taxis via Uber.

When this no longer works to keep families afloat, what will be next?

December 16, 2014--Ready for Elizabeth Warren?

Elizabeth Warren has the perfect job for her. Senior senator from Massachusetts.

But like another senator, this one from Illinois, though she has served in the Senate for just two years, already there is a groundswell of interest in her running for President in 2016.

We know how the former junior senator from Illinois who in 2008 did manage to be elected President worked out.

So this is just what we don't need--another Harvard Law School professor as a potential President.

But support for her is growing exponentially since she took the lead in opposing the recent appropriation bill to fund the federal government. As an academic specialist in bankruptcy law and a progressive she was the ideal person to take the lead. Her objection to the bill was because buried in it was a provision to gut that part of Dodd-Frank that is designed to rein in big banks' ability to invest in risky derivatives, the loses from which would be covered again by the taxpayers, just as they were six years ago when these very sort of practices nearly bankrupted the country and cost us many billions to bail them out.

But President Warren?

She is adamantly denying that she is running or has any interest in running. And as long as Hillary Clinton is healthy enough to run, Warren undoubtedly will be true to her word. But if Hillary is seen to falter or falls down again and hits her head on the bathtub, Elizabeth Warren will be first in line to announce her candidacy.

In my work I have known hundreds of professors and the one thing they love more than anything is professing. Professing before as large an audience as possible.

Considering that whoever runs and ultimately gets elected will face so much resistance from Congress to any legislative agenda that nothing but the minimum will have any change of becoming law. There is that much rancorous partisanship on both sides plus a powerful antigovernment movement within the Republican congressional caucus. Thus, what we should be looking for in a potential president is someone who knows how to lead and, especially, run things.

Run things such as the Pentagon, the veterans administration, the IRS, the C.I.A., the federal health care system, federal involvement in education policy, whatever environmental protection programs that will manage to survive, border security and immigration policy, and of course our various global diplomatic and military involvements.

Is Elizabeth Warren ready for all this and more? Has she demonstrated any capacity to take on any of this? I think not.

But among progressives who want an ideologue in the race there is a growing ReadyForWarren movement that parallels ReadyForHillary. And money is flowing in, mainly from the West and East Coasts. Again, just what we don't need.

Above all, if we want an effective president, not just one who makes us feel warm and fuzzy and affirms our pieties, we should be looking for someone who has a demonstrated track record of actually having run something big, run it effectively, and one  who, like Warren to her considerable credit, knows that this time around, "It's the middle class, stupid."

November 12, 2104--It's the Middle Class, Stupid

I promise--these will be my final comments about last week's midterm election.

My conclusion--It wasn't the economy, stupid, but the middle class.

The two are entwined, of course, but to understand what happened last Tuesday it's important to think about the economy from a middle-class perspective. This is especially true for Democrats if they, in our lifetimes, are to do better at the congressional and gubernatorial levels.

This time around, tactically, in campaigning, Democrat candidates avoided talking about the economy. This was part of their strategy to run as far away as possible from the unpopular president. The little Barack Obama said during the campaign season--again at Democrats' urging--was about how the economy was improving: unemployment was way down, the annual deficit during his first six years was more than cut in half, and the national debt was growing at a significantly reduced rate.

But if you have a job or are working two or three just to stand still, it doesn't excite or motivate you to learn that someone else, who had been unemployed, now has a job. And that person who now has a job might not be that enthusiastic either. He could be working just 20-30 hours a week, receiving no benefits, and earning only a little more than he would receive from various forms of public assistance.

So, very few in real-life situations are impressed economically, emotionally, or politically that the unemployment rate is down a percent or two. In fact, many don't even believe the numbers since they come from the government and are thus suspect. Because it has been a wageless recovery, what they are experiencing is their own precarious, deteriorating financial situation.

If you were in similar circumstances, what would you care about--the unemployment rate or your household's's bottom line?

Even more, who really cares other than theoretically about the deficit and the debt? This may sound cynical but, again, to people struggling with their own debt what's more real--what the government owes or their mortgage?

Those in the middle who are being squeezed hard--with everyone in the family working--may not know the statistics but they do know their earnings for more than a decade have not even kept pace with rising prices. They feel themselves working harder but slipping further and further behind.

And they are right.

The numbers support that perception. Since Barack Obama assumed the presidency, median inflation-adjusted middle-class income has declined. Last year it was $2,100 lower than it was in 2009. And lower still by $3,600 since 2001 when George W. Bush took office.

Blaming the government, especially those seemingly in charge (Obama and the Democrats, not Bush), is one way to deal with what has been happening to the middle class. They thought they were playing by the rules and that the miracle that has been the American economy would reward them or, more likely, their children. That trust has been betrayed.

Not to talk compassionately about this, as the Democrats didn't, not to focus all their progressive energy on the plight of the shrinking middle class, which they also didn't do, is not just politically ruinous but morally questionable.

It is hard to think what to suggest about this sad situation. What policies, what programs beyond empty promises would make a difference for the middle class? What evidence is there that any realistically realizable government policy might make a positive difference? Perhaps a middle-class tax cut? Anything else?

If true, then at least Democrats should take yet another lesson from Bill Clinton--figure out how to notice and feel people's pain and stop telling people what's good for them.

February 6, 2014--The Middle Class

Finally the 1 percent or the 5 percent or the 20 percent are noticing that the middle class, what's left of it, is struggling and that is bad for them--"them" being the 1, 5, 20 percenters.

It's one thing when the economy is in almost total collapse (as it was in 2008) and how that makes it awkward for those hardly touched to live opulently. Openly opulent that is. (See below.) It's another thing, however, when the shrinking middle class and their shrinking disposable incomes are so reduced that there are no longer enough markets or customers to fuel the bottom lines of the privileged.

Now they are concerned. Concerned because a diminished middle class is bad for business and thus bad for their assets.

On the other hand, the high-end continues to do very well. "Luxury is not a dirty word anymore, reports a consultant with Robb Reports, a lifestyle magazine for wealthy readers. "In 2008, luxury was a dirty word."

No longer.

Maserati, with sales up 55 percent in 2013, is opening dealerships all across the United States and Rolls-Royce had its best, most profitable year last year. The CEO of The Collection, a luxury car dealership in Coral Gables, Florida, was recently quoted in the New York Times as saying that "People were pulling back when they had to let people go. They'd come in to buy, but it would be the same car and same model so no one knew they got a new car." Now, once again, rich buyers are apparently not having a problem flaunting it.

In 2012, the top 5 percent were responsible for 38 percent of domestic consumption, up from 28 percent seven years earlier. And since 2009, the year the Big Recession technically ended, spending by this top 5 percent of earners rose 17 percent, compared with just 1 percent by the bottom 95 percent.

And thus goods and services that have traditionally targeted the middle class are hurting. Sears and J.C. Penney, as evidence, are in dire straits. Both are in danger of going out of business. Sears is closing its Chicago flagship store and J.C. Penney recently announced it will be shuttering 33 stores and laying off 2,000 employees. Loehmann's, where generations of middle-class women clamored to buy discounted designer-label dresses is bankrupt and already out of business. As another sign of the times, high-end retailer Barneys, which moved out of its original New YorkCity store and rented the space to Loehmann's, is moving back in, feeling that the exponential growth of downtown gentrification will assure the store's success.

As bellwethers, restaurants that depend on middle-class diners are suffering. Foot traffic at Red Lobster and Olive Garden has dropped every quarter since 2005. An average meal at Olive Garden is $16.50 a person and that relatively steep ticket requires middle-class customers. And with fewer and fewer of these every year, places such as Olive Garden and Red Lobster are in trouble.

But now the affluent are worried. Not because they will soon no longer be able to get their garlic knots at Olive Garden but because its stock price is way down, as are other companies' that traditionally draw on the middle-class.

Something that I find curious is the passivity of the middle-class as they see their prospects shrinking. Unlike in the past when there were serious downturns and structural reshaping of the larger economy, this time, with the exception of the short-lived Occupy Wall Street movement and aspects of the Tea Party agenda, there is silence.

Economic downturns are common. In fact, they were so common during the late 19th century through the World War II that hard times for the majority was the norm. Also the norm were the ways in which displaced and exploited working people responded to the recessions and panics and depressions.

I've been reading Doris Kearns Goodwin's Bully Pulpit, her biography of Presidents Theodore Roosevelt and his successor and friend, William Howard Taft. From the economic tumult during their collective 11 years in office there is a lot to learn about our current troubles and how the public responded to it.

Between 1901, when Roosevelt became president after the assassination of William McKinley, and 1913, the year Woodrow Wilson took office, there were no fewer than four crises--the Recession of 1902, the Panic of 1907, the Panic of 1910, and the Recession of 1913.

And in every case, right through until the end of the Second World War (there were a total of seven severe economic downturns between 1913 and 1945), including, in 1929, the biggest Depression in American history), each recession and panic elicited direct and credible threats to the United States' economic system.

There were bomb-throwing anarchists and fierce socialists and communists who organized nationwide strikes that paralyzed entire industries from the railroads to the steel mills to the coal fields.

There were many times when our political leaders thought that unless the economy picked up, unless something was done to reform factory work and bust trusts and legislation was passed to provide the beginnings of a social safety net to take care of people falling through the cracks, unless this and more was accomplished, our very capitalist system might be overthrown. All the agitation the result of aggressive investigative journalism (an important subject in the Goodwin book) and pressure from the bottom up, very much including union activity and progressive political advocacy.

Now, again with the exception of a few months of non-violent demonstrations by Occupy Wall Street protestors, things have been preternaturally quiet.

Is there anything ticking out there? Any undercurrent of threat to the system itself?

Nothing of this sort appears to be looming on the horizon.  Perhaps, though, it things for the middle class continue to deteriorate, if they see opportunities for their children more permanently threatened, the great sleeping giant--the American people--will rise from their Barcaloungers, put aside their iPhones,  and . . .

No wonder the 5 percenters are worried.