If this were only true

Steve Levy (not of ESPN):

President Bill Clinton’s welfare reform required recipients to work as a prerequisite to a government check. It led to more Americans participating in the workforce and a remarkable reduction of the welfare rolls.

Taxpayers and the recipients themselves benefited.

But those tight work requirements were loosened considerably in the Obama years, as were the eligibility rules for disability claims. Both were at least partially responsible for the huge increase of people no longer in the workforce (up to 40 million in the 25 to 64 age bracket).

Fortunately, that trend is suddenly being reversed thanks to President Trump’s vibrant economy. The number of Social Security Disability (SSDI) applications this year is at the lowest rate in 16 years. Another positive trend is the new administration’s formulating of rules requiring work for Medicaid.

It’s about time.

With all the debate over the healthcare bills, little attention focused on how the explosion of Medicaid can fundamentally change the basic underpinnings of American society.

The media gushes over how millions of Americans now get health insurance thanks to the expansion of Medicaid. They fail to mention that once you become dependent on that program, rather than through an employer, you can be forever trapped by being on the dole. That means you become more concerned about keeping your eligibility for Medicaid, and the healthcare it bestows, than upon advancing on a career path with promotions, higher wages — or even getting a job in the first place.

Medicaid ballooned by $100 billion between 2013 and 2015, while food stamp rolls grew 36 percent in the decade prior to the Trump administration.

Simultaneously, workfare requirements were being gutted.

Even further overlooked is the fact that Supplemental Security Disability Income had grown from 4.3 million in 1990, to 6.7 million in 2000, to 8.6 million today. This left us with one in 19 Americans collecting a disability check while not being fully employed.

Did the American workplace suddenly get infinitely more dangerous over the last 20 years? Hardly. Our work conditions have never been safer.

In 2013, former Sen. Tom Coburn, R-Okla., through a Homeland Security and Governmental Affairs Committee report, exposed the fact that many residents in West Virginia waited for their 99 weeks of unemployment to expire in the midst of the Great Recession, only to turn around thereafter and apply for disability benefits.

Remarkably, 15 percent of the state’s population was on disability. It’s emblematic of an explosion of an underclass that could forever be dependent on a government check and lose all incentives to rejoin the workforce.

While no one was looking, lawmakers quietly liberalized provisions that opened the floodgates for mere stress or back pain to be a qualifier for disability benefits. These categories are among the fastest growing in the system.

How many of us over 40 don’t have stress or back pain?

1.3 million additional recipients were added during the Obama years through 2015, due to an expediting of the administrative process that overwhelmingly sided with the applicant.

The nonpartisan National Bureau of Economic Research (NBER) noted that rules were changed to allow for more weight on self-reporting, relaxed screenings of mental illness, and the accepting of medical evidence from the applicant’s own doctor — while no taxpayer advocates were involved in the process.

Those on disability also qualify for Medicare. And because the Feds foot the whole disability bill, while only providing 50 percent of many Social Services costs such as food stamps, at least one state,Missouri, was actually paying a consultant (Public Consulting Group) to move people from their welfare rolls and onto disability.

As Chana Joffe-Walt wrote in her staggering article for NPR’s “Planet Money,”  ” . . . disability has also become a de facto welfare program for people without a lot of education or job skills.” Her report further indicated that, “Once people go onto disability, they almost never go back to work.”

Perhaps, until now.

The tax cut plan and its resulting kick-start to the economy has boosted job opportunities and consumer confidence. Greater hope equates to greater motivation. Add to that an increase individual dignity by tying benefits to a requirment to work.

The administration should go further to require that anyone on disability, who has not lost his limbs or eyesight, or isn’t undergoing treatment for a terminal disease, report to an employment site established by local government and be given a job — even if it is filing papers.

Pay these individuals the same they get right now. While there won’t be direct savings there, a massive amount will be saved by weeding out fraudulent applicants.

Since those applicants have to report to a designated location 40 hours a week anyway, we’ll see how fast they say their stress isn’t all that bad and perhaps they can do their old job, and get paid by their employer, rather than the taxpayer.

One reason I’m skeptical about this is, as employers can tell you, merely having a body in the office doesn’t exactly help the business. It’s hard to imagine a less motivated employee than someone who has already been a malingerer due to his or her stated disability that prevents them, or so they claim, from doing any work at all.

Those of us who work 40 or more hours a week to support those who work zero hours per week deserve this much.

 

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Politics, the media and “common ground”

Margaret Sullivan:

Ken Doctor saw it coming. A few years ago, the media analyst looked at the trend lines and predicted that by 2017 or so, American newsrooms would reach a shocking point.

“The halving of America’s daily newsrooms,” he called what he was seeing.

Last week, we found out that it’s true. A Pew Research study showed that between 2008 and last year, employment in newspaper newsrooms declined by an astonishing 45 percent. (And papers were already well down from their newsroom peak in the early 1990s, when their revenue lifeblood — print advertising — was still pumping strong.)

The dire numbers play out in ugly ways: Public officials aren’t held accountable, town budgets go unscrutinized, experienced journalists are working at Walmart, or not at all, instead of plying their much-needed trade in their communities.

One problem with losing local coverage is that we never know what we don’t know. Corruption can flourish, taxes can rise, public officials can indulge their worst impulses.

And there’s another result that gets less attention:

In our terribly divided nation, we need the local newspaper to give us common information — an agreed-upon set of facts to argue about.

Last year when I visited Luzerne County in Pennsylvania to talk to people about their media habits, I was most struck by one thing: The allegiance to local news outlets — the two competing papers in Wilkes-Barre, and the popular ABC affiliate, WNEP, or Channel 16 as everyone called it.

The most reasonable people I talked to, no matter whom they had voted for, were regular readers of the local papers and regular watchers of the local news. (The county was one of those critical places that had voted for President Obama in 2008 and 2012, and flipped red to Trump in 2016.)

By contrast, those residents who got news only from Facebook or from cable news were deep in their own echo chambers and couldn’t seem to hear anything else.

Last week, President Trump, at his rally in Wilkes-Barre, again trashed the national media — to the crowd’s delight. But I would guess that many of the attendees would give a pass to their local media sources.

After all, the reporters and editors for those news outlets might send their kids to the same schools, shop at the same Dollar General, fill up their gas tanks at the same Sheetz.

When he made his prediction in 2015, Ken Doctor noted that the largest and the smallest of the nation’s newspapers seemed to have some immunity.

Tiny papers have little competition, an enduring connection with their towns, and thus still are able to attract advertising and reader loyalty. The largest of the papers — including the New York Times and The Washington Post — are finding new ways to support themselves with a combination of digital ad dollars and subscriptions, among other revenue sources.

But the regional papers, such as the Denver Post, have taken the worst hits. And to make matters worse, many are owned by hedge funds that couldn’t care less about journalism. They are only interested in bleeding the papers dry of whatever remaining profits they can produce with ever-shrinking staffs.

“Will hitting the halving point finally send a signal of news emergency?” Doctor asked. And he answered himself: “Probably not. Who would send it? Who would receive it? What does any citizen/reader feel he or she can really do about it?”

That’s the rub. What’s more, as papers decline, there’s less reason to subscribe because coverage isn’t what it used to be.

“We’ve had to make some tough decisions,” Ken Tingley, editor of the Glens Falls Post-Star, a Pulitzer Prize-winning daily in the Adirondacks region of New York, told me recently. With his staff down by about half, he has pulled in the news coverage from a far-flung region to concentrate on just the metro area.

What he worries about most, Tingley said, is that there’s not much of a career ahead for the young reporters on his staff.

“Where are they going to go?” he said, when bigger metro dailies keep shedding reporters like so many autumn leaves. (One recent example: The New York Daily News, which halved its newsroom.)

To be sure, the picture isn’t entirely bleak: Nonprofit news organizations spring up, relying on grants and membership; organizations such as Report for America help fill the gaps at shrunken news organizations; and in Denver, a new outfit called Civil is funding an alternative to the decimated Post with the digital Colorado Sun, and hopes to produce many more like it. Some regional papers have been bought by well-meaning philanthropists.

But you can’t argue with the numbers, or the crisis.

Yes, the emergency signal has gone out, if too faintly, and there is a response.

But I’m afraid it won’t be nearly enough to make up for what’s lost. And in a deeply divided America, that’s a tragedy.

After 30 years in journalism, I can conclude that, first, reporters shouldn’t work for publicly traded media companies, since they are driven by the imperative of maximizing shareholder returns. That’s good if you’re a shareholder. (Which, at a minimum through 401K accounts, at least half of U.S. families are.) It’s not so good if you work there and the company has a bad quarter. (As you know, I write from experience about this.)

Beyond that, some decry the increasing chain ownership of media outlets. That, however, is not a blanket statement one can really make. There are good media companies and bad media companies, and there are good family-owned media outlets and there are bad family-owned media outlets.

To believe that the media is or should be immune to the laws of economics is naive. The medias biggest financial problem is increased competition for its top source of revenue, advertising. When profit margins shrink or disappear, business decisions are made.

The biggest problem with this, though, is the assumption there is common ground in our society today. Where? In what? And why is it the media’s job to reinforce it? The media is supposed to report the news, without fear or favor, and without a reporters opinion.

Media cause and government effect

Robert Gebelhoff of and in the Washington Post:

Nowadays, if you want to be an incompetent — or even corrupt — elected official, there’s a place for you to work where the risk of facing recourse is fast getting smaller: local government.

That’s because so few people are paying attention. Not only has voter participation in local elections fallen to dangerously low levels, but the health of local newspapers, traditional watchdogs for the most direct and abundant form of government in the United States, has also been deteriorating.

This is a crisis for democracy in general. But politically speaking, the Republican Party — yes, the same party whose leader derides the media as “fake news” and “the enemy of the people”  — should be particularly alarmed. Because if conservatives are concerned about keeping government as efficient and local as possible, they need the hundreds of local newspapers to make the system work across the country.

Researchers have illuminated a sort of symbiotic relationship between local papers and the governments they cover. The governments provide papers with content to fill their pages; the papers, in turn, offer a healthy level accountability and make information more accessible among the electorate. If a newspaper is suddenly forced to close due to economic forces — for example, if competition from online advertising sites suddenly dries up its revenue — the government, too, becomes sick.

This isn’t just theoretical; it translates to hard dollars and cents, as illustrated by a new paper, presented this week at the Brookings Institution’s Municipal Finance Conference.

The paper, which is in the process of being peer-reviewed, looked at newspaper closures between 1996 and 2015 and found that once a newspaper goes under, it becomes more expensive in the long run for its local government to borrow money. In the three years following a closure, the study found, municipal borrowing costs for counties where newspapers closed increased by .05 to .11 percentage points. That might not sound like a lot, but when we’re talking about borrowing millions of dollars, it’s nothing to sneeze at.

Authors of the paper theorize that this is the result of less information being publicly available, resulting in poorer-quality governance. And as a result, local investors in such communities are more likely to see municipal bonds as risky, driving up interest rates.

Before you say “correlation is not causation,” consider the strong evidence that the link between newspaper closures and higher borrowing costs is causal. First, the authors compared counties where newspapers closed to neighboring counties with operating newspapers. On average, the counties where newspapers folded had bond yields that were .07 percentage points higher.

The effect was also dependent on the number of papers covering a government. Counties with multiple papers saw no significant effect if one of their papers went under. But counties with only one paper that closed did.

In fact, the authors were able to track this effect on rising borrowing costs with the expansion of Craigslist. The advertising website, which drained local newspapers of revenue from classified ads, was gradually rolled out across the country over time. They found that Craigslist-induced newspaper closures increased municipal bond yields by .04 to .06 percentage points.

All of this is to say that the health of local newspapers is intensely connected with government efficiency. And it’s not just bond markets. Newspaper closures are also linked to rising wages for government employees and to growing numbers of government employees per capita in a county. Other research shows that elected officials from areas with little local media coverage are less responsive to their constituents.

For conservatives who say they want as much government responsibility allocated to state and local governments as possible, these trends should be terrifying. We can only support a federalist political system if it is well oiled at each level, and local reporting is an invaluable grease for the machine to function.

There’s no easy solution to the decline of local newspapers. Market forces are fundamentally changing the media landscape, and it remains to be seen what will happen to small outlets that can’t so easily transition online. But one thing is for sure: The decline of the local free press is a threat to the decentralized system of government envisioned by the Founding Fathers.

That is an interesting study conclusion if it’s correct.

That study was reported last week. Earlier this week came this news reported by the New York Times:

The meeting lasted less than a minute. By the time it was over, reporters and editors at The Daily News, the brawny New York tabloid that was once the largest-circulation paper in the country, learned that the newsroom staff would be cut in half and that its editor in chief was out of a job.

In the hours that followed, journalists in various departments, from sports to metro, received formal notification that they had been laid off by Tronc, the media company based in Chicago that bought the paper last year.

“People were crying and hugging each other,” said Scott Widener, a researcher who had worked at The News since 1990. “I’ve dodged a lot bullets over the years, and I just couldn’t dodge this one.”

In its heyday, The News was a staple publication of the city’s working class, an elbows-out tabloid that thrived when it dug into crime and corruption. It served as a model for The Daily Planet, the paper that counted Clark Kent and Lois Lane among its reporters, and for the scrappy tabloid depicted in the 1994 movie “The Paper.”

With Tronc’s firing of more than 40 newsroom employees — including 25 of 34 sports journalists and most of the photo department — The News joins the ranks of walking-wounded papers at a time when readers have gravitated toward the quick-hit convenience of digital media.

Under Jim Rich, the editor who lost his job on Monday, The News positioned itself as an unapologetically liberal counterpuncher to Rupert Murdoch’s New York Post. Mr. Rich, who declined to comment for this article, transformed the front page — “the wood,” in tabloid parlance — into a venue for criticizing and often ridiculing President Trump.

Last Tuesday, The News commemorated the president’s appearance with President Vladimir V. Putin of Russia in Helsinki, Finland, with the headline “Open Treason.” Beneath the bold black letters was a cartoon of Mr. Trump holding hands with a shirtless Mr. Putin; with his other hand, Mr. Trump was firing a pistol at Uncle Sam’s head.

Hmmm. Ridiculing Trump. How has that worked out?

Tronc announced on Monday that Mr. Rich’s replacement would be Robert York, a media executive who has spent most of his career in San Diego. In 2016, Tronc named Mr. York the editor and publisher of The Morning Call, a newspaper owned by the company in Allentown, Pa.

The layoff did not come out of nowhere. The News has lost millions of dollars as it struggled to replace the revenue once reliably provided by the advertisements that fattened its papers and the readers whose morning routines included a stop at the newsstand.

“The web kind of changed the DNA of every paper,” said Joel Siegel, a former managing editor at The News who is now managing editor of the cable news channel NY1.

Grant Whitmore, an executive at Tronc, presided over the brief meeting, which took place shortly after 9 a.m. in the paper’s seventh-floor newsroom in Lower Manhattan. About 50 staff members were in attendance, a group that did not include Mr. Rich or Kristen Lee, the managing editor, who was also laid off.

Afterward, human resources workers delivered the bad news to employees, including the sports columnist John Harper, the arts reporter Joe Dziemianowicz and the City Hall reporter Erin Durkin.

“I firmly believe that today’s actions will position The Daily News for growth in the years ahead,” Mr. Whitmore said in a memo to the remaining staff members at the end of the day, “and I look forward to working with this group to capture the opportunities in front of us.” He added that Tronc remained “committed to print.” …

It is hard to fathom what the paper’s next issues will look like, given that the newsroom had shrunk significantly under its previous owner, Mortimer B. Zuckerman, the New York real estate developer and media mogul who bought the paper out of bankruptcy in 1993.

Ambitious projects like the series on New York Police Department’s abuse of eviction rules — for which The News shared a Pulitzer Prize with ProPublica in 2017 — would seem difficult to pull off with an even smaller staff. Sarah Ryley, the editor of the series, who left The News last year, said it had taken three years to complete because reporters and editors were stretched thin after the layoffs under Mr. Zuckerman.

“You used to go into the office and feel the energy,” said Frank Isola, a sports columnist at The News for nearly 25 years, who was among those laid off on Monday. “I’ve probably been in the office, I would say, maybe three times in the last three years. People tell me: ‘Don’t come in. It’s depressing.’”

Since Tronc bought the ailing tabloid from Mr. Zuckerman in September 2017 — for a reported $1; yes, one dollar — the company has been working to transform The News into something more digital.

“But we have not gone far enough,” the company said in a memo to the staff that announced its decision to reduce “the size of the editorial team by approximately 50 percent” and to shift its focus to breaking news.

Some News employees started packing last week, after the media newsletter Study Hall reported that the company planned to lay off a large portion of the staff.

Although daily print circulation had sunk to roughly 200,000, Mr. Rich breathed new life into the paper. During two stints as editor — a 13-month run that ended in 2016, and an encore that began in January — he regularly published front pages that captured the staccato energy of social media.

He was typically combative in a Twitter post on Monday: “If you hate democracy and think local governments should operate unchecked and in the dark, then today is a good day for you,” he wrote. Mr. Rich also dropped the Daily News affiliation from his Twitter bio. “Just a guy sitting at home watching journalism being choked into extinction,” it reads.

The News had a digital reach of 23 million, but it wasn’t enough. The challenge of wringing profits from page views has eluded much of the industry, and the paper proved unable to end its losing streak. According to securities filings, it lost $23.6 million in 2016. Since then, its business has continued to suffer.

In naming Mr. York as the replacement for Mr. Rich, Tronc is following a playbook that did not have success at The Los Angeles Times, when, in similar fashion, it gave the job of top editor to an outsider with a business background.

Lewis D’Vorkin, an executive at Forbes Media who specialized in broadening the company’s native-advertising offerings, was Tronc’s choice for the Los Angeles job. The newsroom greeted his appointment with skepticism, and Mr. D’Vorkin lasted two months in the role. After tensions between the newsroom employees and Tronc continued, the company sold the paper to Dr. Patrick Soon-Shiong in February for $500 million.

The longtime home of the columnists Jimmy Breslin, Dick Young and Liz Smith and the cartoonist Bill Gallo, The News reveled in its role as the voice of the average citizen. Etched into the stone above the entrance of its former home, the Daily News Building on East 42nd Street, is a phrase attributed to Abraham Lincoln: “God must have loved the common man, he made so many of them.”

“You used to see everybody reading the newspaper on the subway,” said Michael Daly, a onetime News columnist who now writes for The Daily Beast. “The News was the right size. It was the perfect size for the biggest city.”

“You used to see everybody reading the newspaper on the subway,” said Michael Daly, a onetime News columnist who now writes for The Daily Beast. “The News was the right size. It was the perfect size for the biggest city.”

One of its most famous headlines — “Ford to City: Drop Dead,” from 1975 — summed up President Gerald R. Ford’s refusal to send federal aid to a city on the verge of bankruptcy. Ford later said the headline had played a role in his losing the 1976 presidential election.

The News, winner of 11 Pulitzers in its 99-year history, underwent a crisis when 10 unions walked off the job in 1990. The Tribune Company, its owner since its founding in 1919, threw the paper into bankruptcy at the end of the long strike — and the man who rescued it, the British mogul Robert Maxwell, became tabloid fodder himself when his body was found floating near his yacht soon after he entered the New York media fray.

Mr. Zuckerman took control in 1993, but times were hard, even then, well before digital media threatened the business model that had produced newspaper barons, star columnists and city reporters with steady paychecks. Before rolling out the first issue under his ownership, Mr. Zuckerman laid off 170 employees. It was a sign of layoffs to come, as a bustling newsroom morphed into a workplace populated with a bare-bones staff of fewer than 100 on his watch.

You will not believe! what the Washington Examiner reports what happened next:

New York Gov. Andrew Cuomo, a Democrat, said he would put state resources behind the New York Daily News if it will help curb mass layoffs that reportedly just hit the left-leaning tabloid’s newsroom.

Cuomo said in a statement Monday that the state “stands ready to help” after the New York Times reported that the tabloid’s reporting staff would be reduced by about half.

“The Daily News, now owned by Tronc, Inc., is apparently firing a major portion of their reporting staff,” he said. “This will undoubtedly devastate many households and hurt an important New York institution and one of our nation’s journalism giants. These layoffs were made without notifying the state or asking for assistance.”

I was unaware that Mario Cuomo had bailed out the Post. That was a horrible idea, and bailing out a media outlet with government money is a hideous idea.

Little Cuomo’s tweet provoked these responses:

  • Governor offers to rescue a friendly media outlet. Doesn’t that muddy the concept of a free press?
  • I guess he thinks it’s a state-run media outlet and the state will decide whether to lay people off or use taxpayer money to prop up a failing political propaganda machine.
  • So former Gov Mario Cuomo “came to the aid of the New York Post when it was facing difficult financial times.” Huh. I’m SURE that didn’t affect their objectivity at all when it came to covering Cuomo, his admin, or Democrats in general.
  • You want state-run news? This is how you get state-run news. Your ideals are not ideals if you can’t apply them across the board (or aisle); they’re just additions to the hypocrisy of which there’s already enough.
  • government money mixing with the media–what could possibly go wrong?

Exactly.

Economics 101, retail edition

Tom Woods:

Bernie Sanders just tweeted:

“Walmart’s CEO Doug McMillon made about $11,000/hour in compensation last year. I’d like to hear from him why he thinks his workers don’t deserve to be paid a living wage of $15/hour.”

One of my Facebook friends replied, correctly, with this:

$11,000/hr is $22,880,000 assuming 40 hrs a week.
Redistribute that to the 2,300,000 Walmart employees and you get a whopping $9.94 per employee PER YEAR. With the CEO working for free.

OK, so maybe we’re not going to get to $15/hr by stealing from the CEO, but maybe we can get there by expropriating the shareholders.

Walmart had a net income of $9,862,000,000 last year. Redistribute that to the 2,300,000 employees and you get about $2/hr. Still not enough to have cashiers making $15/hr.

And of course if investors knew you would expropriate them in this way they wouldn’t have put up the money to build Walmart and it literally would not exist.

(Now before you tell me that Walmart uses the government’s roads, or gets some hidden privilege, that’s all beside the point: you think Bernie or his followers are making subtle distinctions like that?)

People in the thread were explaining about the value of the CEO, and why this kind of Tweet is — at the very least — extremely unhelpful.

Someone responded with:

“yeah but 11,000$/ hr thats f***ing absurd”

Why?

“because the average person working at that company makes like 10$/hr. ceo’s are not worth 1000x of 1 person”

Then why do they make that much?

“good question”

Then I jumped in: “Since you can’t answer the question, is it possible that you’re not really understanding the way the economy works? Maybe it’s a little more complicated than ‘this phenomenon seems unreasonable to be, so I shall condemn it’? Why would you think the contribution of the janitor in one building is comparable to a CEO running a worldwide enterprise, making decisions that affect millions of people?”

He said that “1 person is not worth 1000x of another person,” and that the real value added comes from “the people working the actual jobs on the front line.”

A philosopher in the thread responded, “I don’t know if any human being is worth 1000x another human being. However, yes, some people’s labor is worth 10,000 times other people’s labor.”

Then I chimed in (bold to make it easier to read): My father was a forklift operator in a food warehouse. He was intelligent enough to understand that his brawn alone would have accomplished nothing. Thanks to the capital investment by capitalists, he had a forklift that vastly increased what his labor was able to contribute to the enterprise. Not to mention the organizational genius necessary to coordinate the almost incalculable number of moving parts involved in running hundreds of grocery stores.

“No one should earn that much money,” you say. That’s just prejudice.

According to you, since lots of people struggle to earn even a fraction of that, they should simply earn more and other people should earn less. Why? How? On what basis? Your personal prejudices?

If you’re so concerned about inequality, I have news for you: you yourself are in the global 1%. To most of the world, you look like that CEO looks to you. What specific steps are you taking to make yourself more equal to them?

I never got an answer about what steps he was taking. You can imagine my surprise.

It’s always about what other people should be doing with their wealth.

There’s a lot of economic ignorance out there.

Sorry/not sorry, Democrats

University of Oregon Prof. Time Duy:

Headlines blared the latest recession warning [Friday], this time from David Rosenberg of Gluskin Sheff & Associates. The culprit will be the Fed:

“Cycles die, and you know how they die?” Rosenberg told the Inside ETFs Canada conference in Montreal on Thursday. “Because the Fed puts a bullet in its forehead.”

I get this. I buy the story that the Fed is likely to have a large role in causing the next recession. Either via overtightening or failing to loosen quickly enough in response to a negative shock.

And I truly get the frustration of being a business cycle economist in the midst of what will almost certainly be a record-breaking expansion. Imagine a business cycle economist going year after year without a recession to ride. It’s like Tinkerbell without her wings.

But the timeline here is wrong. And timing is everything when it comes to the recession call. Recessions don’t happen out of thin air. Data starts shifting ahead of a recession. Manufacturing activity sags. Housing starts tumble. Jobless claims start rising. You know the drill, and we are seeing any of it yet.

For a recession to start in the next twelve months, the data has to make a hard turn now. Maybe yesterday. And you would have to believe that turn would be happening in the midst of a substantial fiscal stimulus adding a tailwind to the economy through 2019. I just don’t see it happening.

As far as the Fed is concerned, I don’t think we are seeing evidence that policy is too tight. The flattening yield curve indicates policy is getting tighter, to be sure. But as far as recession calls are concerned, it’s inversion or nothing. And even inversion alone will not definitively do the trick. I think that if the Fed continues to hike rates or sends strong signals of future rate hikes after the yield curve inverts, then you go on recession watch.

With inflation still tame, however, the Fed may very well flatten the yield curve with two more hikes and then take a step back. To be sure, it will be hard to stand down or even reverse course on the yield curve alone. After all, the yield curve is a long leading indicator. It will be the outlying data. But there is a reasonable chance the Fed will not tempt fate in the absence of a very real inflationary threat.

Let’s say for the sake of argument that I am wrong and the Fed inverts the yield curve in December of this year, keeps hiking, and doesn’t try to reverse course until it is obviously too late. Furthermore, assume the inverted yield curve foreshadows a recession like in past cycles. That means at least a year and maybe two before a recession actually hits. So the minimum timeline to recession is 18 months, even if everything goes right (or is it wrong?).

Also, we really shouldn’t discount the possibility that the Fed pauses even before a yield curve inversion. A market disruption from a trade war or external financial crisis that threatens to spill over into Main Street could put the Fed back on the defensive. So the whole story that the Fed will soon kill this expansion is a bit premature.

Bottom Line: The business cycle is not dead. The future holds another recession. But many, many things have to start going wrong in fairly short order to bring about a recession in the next twelve months. It would probably have to be an extraordinary set of events outside of the typical business cycle dynamics. A much better bet is to expect this expansion will be a record breaker.

Given that most voters vote in national and state elections based on their perception of the economy, that is not good news for Democrats looking for an economic downturn to fuel their blue wave in November.

Well, Democrats?

Investor’s Business Daily:

Rather than rooting on the strong economy, Democrats have taken to ignoring it, belittling it or, like Bill Maher did over the weekend, rooting for a recession. The extent to which Trump critics will go is truly mind-boggling.

The unemployment rate is at 49-year lows overall, and lower than ever for African-Americans. Household incomes are at record highs. The U.S. reclaimed its No. 1 rank in competitiveness. Economists are revising their growth forecasts upward. Optimism is at levels not seen in more than a decade.

Clearly the economy is doing well. And what’s more, the public is increasingly crediting President Trump for it — as they should, since much of the turnaround is due to his dumping Obamanomics.

But what’s a Democrat hoping to reclaim the House majority in November to do?

One is to ignore the economy altogether. So, Democrats are trying to turn attention to things like ObamaCare premiums or alleged corruption in the Trump administration.

Ignoring the economy will be tough, however, particularly if GDP growth comes in strong in Q2 and unemployment continues to fall.

The second option is to belittle it.

Nancy Pelosi, having dismissed the tax-cut-fueled raises and bonuses that millions of workers received as “crumbs,” is now dismissing the good economic news as no big deal. Why? “Because of the wage stagnation.”

“Our economy,” she said, “will never fully reach its possibilities unless we increase the consumer confidence.”

The army of media fact-checkers must have been asleep when she said this, since her claims are so easy to debunk.

Average hourly wages climbed 2.7% in May, according to the Bureau of Labor Statistics. And as we noted in this space recently, median household income is at historic highs.

Meanwhile, every survey shows confidence levels at or approaching new highs since Trump took office.

The IBD/TIPP Economic Optimism Index, currently at 53.9, has averaged 53.5 under Trump, compared with 47 during President Obama’s entire second term. (Anything over 50 is optimistic).

The Consumer Confidence Index is currently at 128, which is 25 points higher than it ever reached under Obama, and higher than it’s been in 17 years.

Dismissing this good economic news as meaningless — after spending eight years proclaiming how great the stagnant economy was under Obama — isn’t going to dispel the notion that Democrats are out of touch with working families.

The third option is to admit openly what many Democrats no doubt feel privately: That a good recession is what the party needs to reclaim its former glory. After all, it did get Obama elected president.

Over the weekend, HBO talk show host Bill Maher spoke the words out load.

“I feel like the bottom has to fall out at some point,” he said, talking about the booming economy. “And by the way, I’m hoping for it because one way you get rid of Trump is a crashing economy.

“Sorry if that hurts people, but it’s either root for a recession or you lose your democracy.”

Let’s leave aside the glaring logical fallacy Maher commits with his false dilemma, and ponder what he is saying.

Maher would, if he could, throw millions of people into unemployment and poverty, watch as hard-earned savings vanish, wages stagnate and hope gets crushed, if that might keep Trump from winning re-election.

Wow.

Of course, it’s easy for Maher to wish that, since he’s already made his millions attacking Republicans. But just how many of his fellow Trump-loathing Democrats secretly feel the same way?

Reporters love to force Republican politicians to answer for anything outrageous that a conservative says. Shouldn’t these same reporters, to prove their lack of political bias, press every single Democrat running for office in November to condemn Maher’s economic death wish?

That question should be asked of Wisconsin Democrats running against Gov. Scott Walker and other Republicans as well. (To normal people the definition of “fail” is not insufficient government spending or regulation in your favorite area of either.)

The circular financial firing squad

Investors.com:

Sen. Elizabeth Warren wants her fellow Democrats to take on what she calls the “billionaire class.” Does Warren know that many, if not most, of this tiny group of people are liberal Democrats?

On a recent podcast hosted by Mehdi Hasan of The Intercept, Hasan asked Warren if she thought Democrats lacked the “guts” to go after billionaires.

Warren response was “Yeah.” She’s particularly upset at the handful of her fellow Democrats who voted for a bill that watered down the Dodd-Frank banking regulation behemoth.

Warren went on to say: “Until we have all the Democrats who are willing to take on the billionaire class, until we have all the Democrats who are willing to fight for the American people and not for a handful of billionaires and giant corporations, then it’s going to stay an uphill fight.”

This makes little sense.

For one thing, there are only 585 of them in the U.S. today, according to Forbes. And plenty of them are big-time Democrats.

Does she intend, for example, to take on Warren Buffett, who, with a net worth of $84 billion, is the third richest man in the world? He’s a longtime Democrat who’s pushed for tax hikes on the rich, backed Hillary Clinton, and who gave 99% of his money to Democrats and liberal groups in the past four election cycles.

Maybe she means Michael Bloomberg, 11th richest man in the world (net worth $50 billion). He’s a huge gun control supporter.

What about George Soros, who’s worth $8 billion? He’s an uber liberal who finances a multitude of left-wing groups like Center for American Progress and Moveon.org. He recently invested $3 million in The New York Times.

In 2016, Soros gave at least $7 million to Hillary Clinton’s Priorities USA super-PAC. He’s donated more than $61 million to Democrats and liberals since 1989, according to OpenSecrets.org.

Does Warren want to “take on” environmental activist Tom Steyer — net worth $1.6 billion. He donated more than $91 million to Democrats in 2016 alone, and funded a $20 million ad campaign calling for President Trump’s impeachment.

Or perhaps she means Netflix CEO Reed Hastings (net worth $2.7 billion). Except that Hastings is another prominent Democrat who eagerly supported Clinton and just signed a deal with Barack Obama to produce programs for Netflix.

Other billionaires Warren says Democrats should have the “guts” take on would include liberals like Google’s Larry Page ($48.8 billion), Laurene Powell Jobs ($18.8 billion), Oprah Winfrey ($2.7 billion), Starbucks’ Howard Schultz ($2.7 billion), Facebook’s Sheryl Sandberg ($1.6 billion).

Of the 36 billionaires who made campaign contributions over the past four election cycles, 40% of their money — totaling $148 million — went to Democrats, according to data compiled by OpenSecrets.org. And this doesn’t include “dark money” donations — funds given to groups engaged in politics that don’t have to disclose their donors.

What about those greedy bankers? Turns out, plenty of them are Democratic supporters, too.

A few years ago, Yahoo Finance teamed up with Crowdpac to rank CEOs based on political donations. One of the five most liberal on the list was Goldman Sachs (GS) CEO Lloyd Blankfein, whose company made news during the election when it turned out that Goldman had paid Hillary Clinton $675,000 to appear at three Q&A sessions, two of them run by Blankfein himself.

In 6th and 7th place were James Gorman of Morgan Stanley (MS) and Jamie Dimon of J.P. Morgan Chase (JPM).

Billionaire hedge fund manager Jim Simons gave more than $7 million to Hillary Clinton’s Priorities USA Action super PAC. He gave $2.6 million to the Democratic House and Senate Majority PACs, according to OpenSecrets.org.

Laurence Fink, CEO of the investing giant BlackRock (BLK), is another prominent Democrat who wants companies he invests in to have a “positive impact on society” (i.e., support liberal causes).

Bank of America (BAC) CEO Brian Moynihan has over the years given money to Jeanne Shaheen, Patrick Kennedy, Harold Ford Jr., Ted Kennedy, Ed Markey and John Kerry. He even gave $6,300 to then Sen. Chris Dodd — he of Dodd-Frank fame.

Sure, lots of billionaires support Republicans and oppose Warren’s leftist politics. So do lots of people at all income levels.

But the idea that the “billionaire class” opposes all that is good in this country and that they must be defeated to get anything done is nothing more than sophomoric political posturing.

Those who advocate this need to explain how taking money away from billionaires is going to make the rest of us better off, especially considering how billionaires are able to hire squadrons of CPAs to keep their money away from the government.

 

How to correct a Trump error

National Review:

Several of the groups that make up the Koch network are getting ready for a long-haul push against the Trump administration’s tariffs and to promote the cause of free trade between the United States and other countries.

Freedom Partners Chamber of Commerce, Americans for Prosperity, and The LIBRE Initiative today announced a multi-year, multimillion-dollar initiative to champion the far-reaching benefits of trade and the consequences of tariffs.

The campaign will include “paid media, activist education and grassroots mobilization, lobbying and policy analysis — all intended to transform the way Washington and the rest of the country consider and value trade with other nations.”

“This campaign makes a clear statement: Trade is a major priority for our network,” said James Davis, executive vice president of Freedom Partners. “We will work aggressively to educate policymakers and others about the facts. Trade lifts people out of poverty and improves lives. It is critical to America’s future prosperity and our consumers, workers and companies. Tariffs and other trade barriers make us poorer. They raise prices for those who can least afford it. That’s why this issue is so important. This announcement is a demonstration of our long-term commitment to advance common-sense trade policies that will ensure America’s brightest days are ahead, and to directly confront the protectionist ideas that would hold us back.”

The Koch network remained neutral in the 2016 presidential election, but by January 2018 was largely pleased with what it had seen in the first year of the Trump administration.

“The Trump administration has taken some incredibly positive steps for the American economy, but tariffs will undercut that progress and needlessly hamstring our full economic potential,” said Tim Phillips, president of Americans for Prosperity. “There are better ways to negotiate trade deals than by punishing American consumers and businesses with higher costs. Instead of pursuing protectionist policies that we already know don’t work, let’s help everyone win by expanding trade, opening new markets and lowering costs.”

“The taxes and trade barriers imposed by our government on U.S. consumers raise their cost of living and impose unnecessary costs on American firms in competition with others based abroad,” said Daniel Garza, president of the LIBRE Initiative. “Hispanics and low-income workers are among the most badly hurt by this drag on economic growth and government-mandated price increases. We are pleased to stand with those who understand how greatly America benefits from trade — and how badly hurt we are by tariffs and other barriers.”

The good news for the Koch network effort is that, at least in the abstract, Americans think well of free trade. A March Wall Street Journal/NBC News poll found that among both “party Republicans” and “Trump Republicans,” “more than half of those in each group see trade as a potentially good thing rather than an economic threat.” Of course, the Trump administration would argue it doesn’t oppose free trade in theory, merely bad agreements signed in the past.

The Koch brothers are correct, and Republican opponents of free trade are wrong. Wisconsin, as has been reported in numerous places, overwhelmingly benefits from free trade.

 

The correct measure of unemployment

You may have seen Gov. Scott Walker triumphantly announcing this state’s 2.8 percent unemployment rate.

I prefer a better measurement, the U6 rate, which includes, to quote the U.S. Department of Labor, “total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.” That means those who are working part-time though they want to work full-time, as well as those who have stopped looking for work.

And that looks like this (compared with the official unemployment rate, the “U3” rate), averaged from the second quarter of 2017 through the first quarter of this year:

Certainly Wisconsin is better off than the national average and most states, but the employment situation isn’t as good as those running for reelection would have you believe. Of course, the opposition party in Madison was in charge when the U6 rate was well beyond 10 percent, thanks to their handiwork of $2.2 BILLION in tax increases and the economic ineptitude of the Obama administration.

 

 

Small business and business taxes

Small business owner Wm. Michael Simmons:

This week is National Small Business Week. It’s an opportunity to emphasize the big role small businesses play in the economy and labor market. Small businesses account for half of GDP and half of all jobs. And they create the majority of new jobs and new inventions. I have been fortunate enough to lead several small businesses over my career and witness their outsized importance first-hand.

While we recognize the small business backbone of the economy this week, we should also take a moment to examine the public policies that allow small businesses to thrive in the first place. I am continually amazed that so many people — including politicians and community leaders — believe that small businesses are simply a part of nature — like Lake Michigan — that they aren’t affected by broader economic trends or public policies.

In reality, public policy has a major impact on small business success. Take it from me: Entrepreneurs consider the costs of taxes and regulations before making any decision to hire or expand. For decades, over-taxation had an especially damaging effect on small business creation and expansion, ranking among the biggest hurdles small businesses faced.

Recently passed federal tax cuts have changed that. They created a new 20 percent small business tax deduction — the biggest small business tax cut in the country’s history. Though this aspect of the tax cuts has been overlooked by the media, it arguably has the biggest impact on the economy and the small business dreams of entrepreneurs in Wisconsin and throughout the country. These necessary tax cuts provided me the opportunity to start two Wisconsin businesses: Flags For Schools and eTOP Sports Innovations.

Prior to the tax cut, small businesses faced a top marginal tax rate of 40 percent — not including state and local taxes. At this level of taxation surviving is difficult for many small businesses — let alone thriving. This is reflected in the declining small business creation of recent years — one of the few economic indicators not to recover from the Great Recession.

The new 20 percent tax deduction effectively lowers the top small business tax rate from 40 percent to 30 percent — a 25 percent tax cut. It allows small business owners to protect one-fifth of their earned income from taxes. This capital can instead be used to expand into new product lines, open new locations, hire new employees, and give existing ones raises. No wonder small businesses support the new tax cuts by a margin of ten-to-one, according to a recent national survey.

Given small businesses’ major role in the economy, their benefits are shared by everyone. Less money extorted from Wisconsin small businesses by the IRS means more money stays at home in communities where it is needed. Less taxes means more investment, consumption, and jobs.

The nonpartisan Congressional Budget Office has recognized this tax cut stimulus. It recently raised its growth forecast for the year to 3.3 percent, a level that mainstream economists said couldn’t be achieved. At this level of growth — more than twice the rate of the last year of the Obama Administration — living standards rise noticeably.

This economic growth will create a feedback loop for small businesses, giving them new customers, with more disposable income — something every small business wants. In this sense, the tax cuts are a gift that keeps on giving.

So while we celebrate small businesses this week, we should also reflect on the public policies that go hand-in-hand with their success. These should also be celebrated during National Small Business Week this week.