Category Archives: Economics: Principles and Issues

The Minimum Wage Revisited

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A post by Arnold Kling (askblog) reminds me of a post of mine from 2009. Kling begins noting the Nobel prize that was awarded to David Card and two others. It was Card and his late collaborator, Alan Krueger, who “proved” that the minimum wage doesn’t cause unemployment.

Kling notes that

Noah Smith goes way overboard in praise of the new laureates. He makes it sound as though the results that David Card and Alan Krueger claimed about the minimum wage were only controversial because they were surprising. But they were also controversial because they were wrong.

Here is the abstract of the paper to which the second link in the block quotation leads:

We re-evaluate the evidence from Card and Krueger’s (1994) New Jersey-Pennsylvania minimum wage experiment, using new data based on actual payroll records from 230 Burger King, KFC, Wendy’s, and Roy Rogers restaurants in New Jersey and Pennsylvania. We compare results using these payroll data to those using CK’s data, which were collected by telephone surveys. We have two findings to report. First, the data collected by CK appear to indicate greater employment variation over the eight-month period between their surveys than do the payroll data. For example, in the full sample the standard deviation of employment change in CK’s data is three times as large as that in the payroll data. Second, estimates of the employment effect of the New Jersey minimum wage increase from the payroll data lead to the opposite conclusion from that reached by CK. For comparable sets of restaurants, differences-in-differences estimates using CK’s data imply that the New Jersey minimum wage increase (of 18.8 percent) resulted in an employment increase of 17.6 percent relative to the Pennsylvania control group, an elasticity of 0.93. In contrast, estimates based on the payroll data suggest that the New Jersey minimum wage increase led to a 4.6 percent decrease in employment in New Jersey relative to the Pennsylvania control group. This decrease is statistically significant at the five-percent level and implies an elasticity of employment with respect to the minimum wage of -0.24.

That’s far from the only time that Card and Krueger’s “proof” has been demolished.

I joined the bandwagon in 2009, with an analysis documented in this post, which ends thus:

On the basis of the robust results [derived from data for 1959 – 2009,] I draw the following conclusions:

  • The baseline unemployment rate for 16-19 YO [year-olds] is about 9 percent.
  • Unemployment around the baseline changes by about 1.5 percentage points for every percentage-point change in the unemployment rate for 20+ YO.
  • The minimum wage, when effective, raises the unemployment rate for 16-19 YO by 0.6 percentage points.

Therefore, given the current number of 16 to 19 year old males in the labor force (about 3.3 million), some 20,000 will lose or fail to find jobs because of yesterday’s boost in the minimum wage. Yes, 20,000 is a small fraction of 3.3 million (0.6 percent), but it is a real, heartbreaking number — 20,000 young men for whom almost any hourly wage would be a blessing.

But the “bleeding hearts” who insist on setting a minimum wage, and raising it periodically, don’t care about those 20,000 young men — they only care about their cheaply won reputation for “compassion.”

The minimum wage is just another blow to liberty and prosperity from the left, which holds that Americans must be impoverished to battle the chimera of anthropogenic global warming, that police (who protect the poor as well as the rich) must be defunded, that people should be paid not to work, that the expression of views contrary to leftist dogma is criminal, and that human life may be disposed of like garbage.

The False Promise of the Fiscal Multiplier

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With a bit of trickery that is hard to spot, it is possible to “prove” that 1 + 1 = 3. (Watch this video and look carefully at the fourth and fifth lines of the “proof”, neither of which follows from the preceding line.)

Building on the logical and empirical analyses of some notable economists, I (and many others) have found the trickery in the “proof” that there is a fiscal multiplier: an additional dollar of government spending, not financed by borrowing or taxes) generates more than a dollar’s worth of additional GDP. The multiplier is both logically unsound and empirically invalid.

I urge you to read my page, “Keynesian Multiplier: Fiction vs. Fact“, for the details of my disproof. (For a recent discussion of the empirical invalidity of the multiplier, see this post by Veronique de Rugy.) I won’t repeat the details here, but I will focus on a particular aspect of the disproof. It exposes the logical trickery that underlies belief in the multiplier.

It used to be (and perhaps still is) the case that courses in the principles of macroeconomics began with a circular-flow model of a static economy. If everyone did the same thing, year after year, the same economic units would produce the same things. Each economic unit’s output would be valued in the marketplace, and that value would give the economic unit a claim on a slice of the total production of goods and services. The division of output between consumption (goods and services enjoyed here and now) and investment (replacement of the stock of capital as it deteriorates) would be determined by the willingness of producers (earners of income) to forgo consumption in favor of saving. (It is saving, non-consumption, that allows the diversion of resources to the production of capital goods.) The rate of investment would be just enough to sustain the output of goods and services at constant rates.

The circular flow could be perturbed for many reasons (e.g., population growth, a natural disaster, technological innovation). But what would happen to the circular flow in the event of such a perturbation? The output of goods and services would be increased or decreased by the immediate effect of the perturbation and by its secondary effects on the economy.

Take a simple two-producer economy, for example, where Joan makes guns and Ralph makes butter. Joan and Ralph exchange some of their output of guns and butter, so that during the year each of them earns a combination of guns and butter. If Ralph dies, and Joan is unable to make guns, the only output will be butter. And if Joan doesn’t need as much butter as she used to produce (some of which she traded to Ralph for guns), she will produce less butter — just enough for her own consumption. So there is the immediate effect of Ralph’s death (no guns) and the secondary effect of Ralph’s death (Joan produces less butter but consumes the same amount as before).

The multiplier doesn’t work that way. According to the multiplier, the reduction in Ralph’s spending on butter would affect Joan’s spending according to her marginal propensity to consume (the rate at which each increment of her income is translated into more or less spending on consumption goods). But it doesn’t. Joan, quite sensibly, simply consumes as much butter as before, though she produces less of it. There is no multiplier effect. There is just a reduction in the economy’s total output: no guns, and just enough butter for Joan’s needs.

A defender of the multiplier would respond that my economy doesn’t represent an advanced economy like that of the United States, in which most transactions don’t take place at arms length (through barter) but, rather, through a medium of exchange (U.S. dollars). In such an economy, the defenders would argue, an exogenous reduction or increase in the demand for goods and services would cascade through the economy. Less demand for A would reduce the income of the producer of A, who would spend less on B through Z; the producer of B would spend less on A and C through Z; etc. In the end, the economy would shrink by the sum of each producer’s reduced spending — the multiplier effect. Here is the standard derivation of that effect, which I explain here:

Derivation of investment-govt spending multiplier

Y is GDP, C is consumption spending, I is investment spending, G is government spending (all in “real” terms), and b (as stated) is the marginal propensity to consume.)

Because b is less than 1, the expression 1/(1-b) must be greater than 1 — thus the “multiplier” on an exogenous change in spending. And despite the heading, the multiplier effect, in theory, applies to any exogenous change in the amount or rate of spending or saving. It could be a consumption or saving multiplier, for example. That is one of the tricks of the multiplier: If it exists, it isn’t just a government-spending multiplier, much as the proponents of bigger government would like you to believe.

Another trick is the mysterious mechanism by which an exogenous change in the rate of spending results in even more spending. It’s time to expose the mechanism.

What is Y but the sum of the dollar values (adjusted for inflation) of the output of all “final” goods and services (including changes in inventory) during a given period? What does Y therefore represent? As long as we’re using the terminology of macroeconomics, in which everything is implicitly homogeneous, Y represents the familiar (to some) equation of exchange:

MV = PQ, where, for a given period,

M is the total nominal amount of money supply in circulation on average in an economy.

V is the velocity of money, that is the average frequency with which a unit of money is spent.

P is the price level.

Q is an index of real expenditures (on newly produced goods and services).

The multiplier implies that, everything else being the same, a change in Q will result in proportional changes in PQ and MV. If there are unemployed resources and an exogenous increase in government spending employs them (and does nothing to prices), an increase in M (deficit spending) is exactly matched by an increase in Q (real output), so that the equation MV = PQ isn’t violated.

But how does an increase in Q (the initial burst of additional output) result in further additions to Q, as the multiplier implies? If P doesn’t increase (and it shouldn’t if the multiplier is “real”), then MV must rise. There is an increase in M — the jolt of exogenous government spending. But there is no further increase in M. So MV must rise because V increases as a result of the initial jolt of government spending. The multiplier, however, says nothing about V, unless increases in spending that result from the initial jolt in Q can be construed as increases in V and Q.

Let’s step back from this conundrum and consider the situation of a static economy with unemployed resources. An increase in M (deficit spending), of targeted perfectly, resulting in a proportional increase in Q. The persons who earn income from that increase spend some of it (that is, their rate of spending rises temporarily). There is no new M, but V rises (that is, the rate of spending rises) in proportion to the rise Q. So, temporarily, MV’ = PQ’.

This is the only sensible way of explaining the multiplier. But look at how many things must happen if an exogenous increase in government spending is to result in an actual increase real output:

The additional spending must be targeted so that it elicits additional production from unemployed resources.

The addition production must, somehow, be delivered to persons who actually benefit from it.

The recipients of additional spending must at least some of their new income into spending that results in the employment of hitherto unemployed resources, and the result must be the production of additional things that are delivered to persons who benefit from the production.

And so on and so forth.

What happens in practice, of course, is that deficit spending results in the production of things that politicians and bureaucrats favor (e.g., economically useless bullet trains and bridges to nowhere). but which have little or no economic value. And the spending often crowds out the production of other things because many (most?) of the resources involved are already in use (e.g., engineers and trained mechanics, not unemployed high-school dropouts from inner cities). Those are among that many things that are skipped over in the “proof” that the multiplier is real and positive. (See my page about the multiplier for much more.)

The bottom line is that the multiplier might well be positive, in nominal terms. That is, GDP might seem to rise, at least temporarily, but real GDP — the actual output of things valued by consumers — is another matter entirely. As I suggest here — and as is pointed out in my page about the multiplier and the article by Veronique de Rugy — the actual output of things valued by consumers may not rise at all, and probably will be crowded out by additional government spending.

Things valued by consumers certainly will be crowded out by additional government spending, because — in the long run — temporary additions usually become permanent ones. Which is just what the proponents of the multiplier want to happen. The multiplier isn’t just phony, it’s an excuse to boost government spending, that is, the share of the economy that is directly controlled by government.

Have you noticed lately what a great job government is doing for the citizenry, especially in Blue States and cities?

Why I “Heart” My HOA Neighborhood

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Yesterday I came across one of the dumbest pieces that I have encountered in more than 20 years of blogging — and that’s saying a lot about the dumbness of the piece. I’m referring specifically to this post, in which the author cites and quotes from an attack on homeowners’ associations (HOAs). He appends this comment:

They [HOAs] give you a very good look at America under Communism, with Karens in charge. You don’t want that.

Until 2003 I hadn’t owned a home in an HOA neighborhood. I have now lived in an HOA neighborhood for the past 18 years. I’m here to tell you that I’d rather live in an HOA neighborhood than not — at least the kind of HOA that I’ve experienced.

First, living in an HOA neighborhood is nothing like living under Communism. It’s voluntary; Communism isn’t. If you don’t like the idea of living in an HOA neighborhood, you shouldn’t, but you’ll be giving up a lot of things:

A neighborhood where homeowners take pride in their homes, keep attractive yards, and spend what it takes to keep their homes well-maintained.

A quiet neighborhood where homeowners respect each others’ privacy and do not bombard their neighbors with loud music or inflict drunken parties on them.

A neighborhood where homeowners can band together under the aegis of the HOA when the peace of the neighborhood or property values are threatened by bad actors.

A neighborhood whose residents are predominantly white-collar professionals whose wide-ranging tastes overlap considerably (to the benefit of social comity) but which aren’t in lockstep.

In sum, a neighborhood that is much like a loose-knit social club where members pay dues to enjoy the amenities of the club but without forced socialization.

What about those Karens? (overbearing scolds). I have yet to meet one or hear of one in my neighborhood. Why not? Probably because the people who live here do so because they like the neighborhood the way it is and wouldn’t do anything to change its character. And if they did, and a Karen swooped down on them, good for the Karen. Most peple who live in HOAs do so for the reasons listed above. Renegades who create eyesores and cause property values to drop aren’t welcome.

And there’s nothing wrong with protecting the value of one’s property, as long as one’s neighbors are of the same mind about how to protect it. An HOA makes that possible.

If you don’t like an.HOA neighborhood, sell and move out. And reap the handsome profit that accrues to a well-maintained home in a pleasant, attractive neughborhood.

All of which seems rather American and pro-liberty to me.

Natural Experiments in the Effect of Party Politics on Economic Performance

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As “Tyler Durden” puts it at ZeroHedge, “US Set For Epic Labor Market Experiment: Red States Vs Blue States“. The experiment has to do with the effect of the cessation of extended unemployment benefits on unemployment rates:

According to JPMorgan’s Daniel Silver, as of this moment some 23 – all republican – states have announced at least some form of early reduction in pandemic-related unemployment insurance benefits ahead of the September expiration at the federal level. These programs, he suggests, are likely limiting labor supply, generating a potential economic argument for ending these programs early….

So, while the left are desperately gaslighting that this is a skills or geographic mismatch, the chart above makes it clear that paying people to stay home is not good for growth (or social stability).

Which is why 23 (Republican) states have listened to their business owners and started to cut those benefits. In fact, as Mike Shedlock notes, that means around 3.5 million Americans will come off Pandemic emergency benefits in the next few weeks….

And since Democrats will likely not end UI benefits any time soon – or ever, if they could –  this sets up the US economy to become an epic real-time economic experiment, one where everyone can keep track of the unemployment across in Red states (most of which have ended their UI benefits), and blue states where claims will keep potential workers at home, pressuring unemployment rates….

By way of early confirmation of our thesis that government handouts are repressing the recovery by encouraging people not to work, according to an analysis published this week … job searches jumped by 5% the day each state announced its intent to pull out of the federal programs.

I have compiled some statistics from another natural experiment. They support the thesis that Republican-controlled States outperform Democrat-controlled ones economically.

Although the central government’s tentacles reach deep into every State’s economy, there is still latitude for State and local action — or lack thereof. Republican-controlled States should have somewhat freer economies than Democrat-controlled ones. (See, for example, the Tax Foundation’s 2020 Business Climate Tax Index.) Republican-controlled States should therefore be more growth-prone than Democrat-controlled ones. Regional statistics support this hypothesis:


Constructed from the regional data tool of the Bureau of Economic Analysis, starting here.

The red lines represent regions that are dominated by Republican-controlled States; the blue lines, regions dominated by Democrat-controlled States. The constituent States of each region are as follows:

Far West — Alaska, California, Hawaii, Nevada, Oregon, Washington

Southwest — Arizona, New Mexico, Oklahoma, Texas

Rocky Mountain — Colorado, Idaho, Montana, Utah, Wyoming

Southeast — Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia

New England — Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont

Plains — Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota

Mideast — Delaware, DC, Maryland, New Jersey, New York, Pennsylvania

Great Lakes — Illinois, Indiana, Michigan, Ohio, Wisconsin

Despite the Far West’s slight lead over the Rocky Mountain and Southwest regions, it is obvious that, on the whole, Republican-dominated regions have enjoyed much higher rates of growth than Democrat-dominated ones.

What Do Wokesters Want?

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I am using “wokesters” as a convenient handle for persons who subscribe to a range of closely related movements, which include but are not limited to wokeness, racial justice, equity, gender equality, transgenderism, social justice, cancel culture, environmental justice, and climate-change activism. It is fair to say that the following views, which might be associated with one or another of the movements, are held widely by members of all the movements (despite the truths noted parenthetically):

Race is a social construct. (Despite strong scientific evidence to the contrary.)

Racism is a foundational and systemic aspect of American history. (Which is a convenient excuse for much of what follows.)

Racism explains every bad thing that has befallen people of color in America. (Ditto.)

America’s history must be repudiated by eradicating all vestiges of it that glorify straight white males of European descent. (Because wokesters are intolerant of brilliance and success of it comes from straight white males of European descent.)

The central government (when it is run by wokesters and their political pawns) should be the sole arbiter of human relations. (Replacing smaller units of government, voluntary contractual arrangements, families, churches, clubs, and other elements of civil society through which essential services are provided, economic wants are satisfied efficiently, and civilizing norms are inculcated and enforced), except for those institutions that are dominated by wokesters or their proteges, of course.)

[You name it] is a human right. (Which — unlike true rights, which all can enjoy without cost to others — must be provided at cost to others.)

Economics is a zero-sum game; the rich get rich at the expense of the poor. (Though the economic history of the United States — and the Western world — says otherwise. The rich get rich — often rising from poverty and middling circumstances — by dint of effort risk-taking, and in the process produce things of value for others while also enabling them to advance economically.)

Profit is a dirty word. (But I — the elite lefty who makes seven figures a year, thank you, deserve every penny of my hard-earned income.)

Sex gender is assigned arbitrarily at birth. (Ludicrous).

Men can bear children. (Ditto.)

Women can have penises. (Ditto.)

Gender dysphoria in some children proves the preceding poiXXXX

Children can have two mommies, two daddies, or any combination of parents in any number and any gender. And, no, they won’t grow up anti-social for lack of traditional father (male) and mother (female) parents. (Just ask blacks who are unemployed for lack of education and serving prison time after having been raised without bread-winning fathers.)

Blacks, on average, are at the bottom of income and wealth distributions and at the top of the incarceration distribution — despite affirmative action, subsidized housing, welfare payments, etc. — because of racism. (Not because blacks, on average, are at the bottom of the intelligence distribution and have in many black communities adopted and enforced a culture the promotes violence and denigrates education?)

Black lives matter. (More than other lives? Despite the facts adduced above?)

Police are racist Nazis and ought to be de-funded. (So that law abiding blacks and other Americans can become easier targets for rape, murder, and theft.)

Grades, advanced placement courses, aptitude tests, and intelligence tests are racist devices. (Which happen to enable the best and brightest — regardless of race, sex, or socioeconomic class — to lead the country forward scientifically and economically, to the benefit of all.)

The warming of the planet by a couple of degrees in the past half-century (for reasons that aren’t well understood but which are attributed by latter-day Puritans to human activity) is a sign of things to come: Earth will warm to the point that it becomes almost uninhabitable. (Which is a case of undue extrapolation from demonstrably erroneous models and a failure to credit the ability of capitalism — gasp! — to adapt successfully to truly significant climatic changes.)

Science is real. (Though we don’t know what science is, and believe things that are labeled scientific if we agree with them. We don’t understand, or care, that science is a process that sometimes yields useful knowledge, or that the “knowledge” is always provisional, always in doubt, and sometimes wrong. We support the movement of recent decades to label some things as scientific that are really driven by a puritanical, anti-humanistic agenda, and which don’t hold up against rigorous, scientific examination, such as the debunked “science” of “climate change”; the essential equality of the races and sexes, despite their scientifically demonstrable differences; and the belief that a man can become a woman, and vice versa.)

Illegal immigrants migrants are just seeking a better life and should be allowed free entry into the United States. (Because borders are arbitrary — except when it comes to my property — and it doesn’t matter if the unfettered enty ro illegal immigrants burdens tax-paying Americans and takes jobs from working-class Americans.)

The United States spends too much on national defense because (a) borders are arbitrary (except when they delineate my property), (b) there’s no real threat to this country (except for cyberattacks and terrorism sponsored by other states, and growing Chinese and Russian aggression that imperils the economic interests of Americans), (c) America is the aggressor (except in World War I, World War II, the Korean War, the Vietnam War, Gulf War I, the terrorist attacks on 9/11, and in the future if America significantly reduces its defense forces), and (d) peace is preferable to war (except that it is preparedness for war that ensures peace, either through deterrence or victory).

What wokesters want is to see that these views, and many others of their ilk, are enforced by the central government. To that end, steps will be taken to ensure that the Democrat Party is permanently in control of the central government and is able to control most State governments. Accordingly, voting laws will be “reformed” to enable everyone, regardless of citizenship status or other qualification (perhaps excepting age, or perhaps not) to receive a mail-in ballot that will be harvested and cast for Democrat candidates; the District of Columbia and Puerto Rico (with their iron-clad Democrat super-majorities) will be added to the Union; the filibuster will be abolished; the Supreme Court and lower courts will be expanded and new seats will be filled by Democrat nominees; and on, and on.

Why do wokesters want what they want? Here’s my take:

  • They reject personal responsibility.
  • They don’t like the sense of real community that is represented in the traditional institutions of civil society.
  • They don’t like the truth if it contradicts their view of what the world should be like.
  • They are devoid of true compassion.
  • They are — in sum — alienated, hate-filled nihilists, the produce of decades of left-wing indoctrination by public schools, universities, and the media.

What will wokesters (and all of us) get?

At best, what they will get is a European Union on steroids, a Kafka-esque existence in a world run by bureaucratic whims from which entrepreneurial initiative and deeply rooted, socially binding cultures have been erased.

Somewhere between best and worst, they will get an impoverished, violent, drug-addled dystopia which is effectively a police state run for the benefit of cosseted political-media-corprate-academic elites.

At worst (as if it could get worse), what they will get is life under the hob-nailed boots of Russia and China:; for example:

Russians are building a military focused on killing people and breaking things. We’re apparently building a military focused on being capable of explaining microaggressions and critical race theory to Afghan Tribesmen.

A country whose political leaders oppose the execution of murderers, support riots and looting by BLM, will not back Israel in it’s life-or-death struggle with Islamic terrorists, and use the military to advance “wokeism” isn’t a country that you can count on to face down Russia and China.

Wokesters are nothing but useful idiots to the Russians and Chinese. And if wokesterst succeed in weakening the U.S. to the point that it becomes a Sino-Soviet vassal, they will be among the first to learn what life under an all-powerful central government is really like. Though, useful idiots that they are, they won’t survive long enough to savor the biter fruits of their labors.

The Real Unemployment Rate

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It’s bad. How bad? Here is the newly updated Part VI of “Economic Growth Since World War II“.

The real unemployment rate is several percentage points above the nominal rate. Officially, the unemployment rate stood at 6.1 percent as of April 2021. Unofficially — but in reality — the unemployment rate was 13.8 percent.

How can I say that the real unemployment rate was 13.8 percent, even though the official rate was 6.1 percent? Easily. Just follow this trail of definitions, provided by the official purveyor of unemployment statistics, the Bureau of Labor Statistics:

Unemployed persons (Current Population Survey)
Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.

Unemployment rate
The unemployment rate represents the number unemployed as a percent of the labor force.

Labor force (Current Population Survey)
The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary.

Labor force participation rate
The labor force as a percent of the civilian noninstitutional population.

Civilian noninstitutional population (Current Population Survey)
Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

In short, if you are 16 years of age and older, not confined to an institution or on active duty in the armed forces, but have not recently made specific efforts to find employment, you are not (officially) a member of the labor force. And if you are not (officially) a member of the labor force because you have given up looking for work, you are not (officially) unemployed — according to the BLS. Of course, you are really unemployed, but your unemployment is well disguised by the BLS’s contorted definition of unemployment.

What has happened is this: Since the first four months of 2000, when the labor-force participation rate peaked at 67.3 percent, it declined to 62.3 percent in 2015 before rising to 63.4 percent just before the pandemic wreaked havoc on the economy. Then, the participation rate dropped to 60.2 percent before recovering to 61.7 percent in April 2021:

FIGURE 9

Source: See figure 10.

The decline that began in 2000 came to a halt in 2005, but resumed in late 2008. The economic slowdown in 2001 (which followed the bursting of the dot-com bubble) can account for the decline through 2005, as workers chose to withdraw from the labor force when faced with dimmer employment prospects. But what about the sharper decline that began near the end of Bush’s second term?

There we see not only the demoralizing effects of the Great Recession but also the growing allure of incentives to refrain from work, namely, disability payments, extended unemployment benefits, the relaxation of welfare rules, the aggressive distribution of food stamps, and “free” healthcare” for an expanded Medicaid enrollment base and 20-somethings who live in their parents’ basements*. That’s on the supply side. On the demand side, there are the phony and even negative effects of “stimulus” spending; the chilling effects of regime uncertainty, persisted beyond the official end of the Great Recession; and the expansion of government spending and regulation (e.g., Dodd-Frank), as discussed in Part III.

More recently, COVID caused many workers to withdraw from the labor force out of an abundance of caution or because they couldn’t work from home. The recovery has stalled, in large part because of “free” money and extended unemployment benefits. The effects are being felt by employers who are unable to fill job openings, thus refueling a resurgence of inflation.

Another factor, though of less significance, is a decline in the percentage of employed persons who are working full-time. It dropped from 83.3 percent in 2000 — its highest level since 1989 — to 79.9 percent in 2010 before rising jaggedly to 83.5 percent in April 2021. A shift from full-time to part-time work is really a form of disemployment, and ought to be reflected in the unemployment rate.

I constructed the actual unemployment rate by adjusting the nominal rate for (a) the change in the labor-force participation rate and (b) the change in the percentage of workers in full-time status. The disparity between the actual and nominal unemployment rates is evident in this graph:

FIGURE 10

Derived from SeriesLNS12000000, Seasonally Adjusted Employment Level; SeriesLNS11000000, Seasonally Adjusted Civilian Labor Force Level; Series LNS11300000, Seasonally Adjusted Civilian labor force participation rate; and Series LNS12500000, Employed, Usually Work Full Time. All are available at BLS, Labor Force Statistics from the Current Population Survey.

The bad news — which the stock market has chosen to ignore (as of 05/07/2 1)  — is that the real unemployment rate is where it was in the darkest days of the Great Recession.
_________
* Contrary to some speculation, the labor-force participation rate is not declining because older workers are retiring earlier. The participation rate among workers 55 and older rose between 2002 and 2012. The decline is concentrated among workers under the age of 55, and especially workers in the 16-24 age bracket. (See this table at BLS.gov.) Why? My conjecture: The Great Recession caused a shakeout of marginal (low-skill) workers, many of whom simply dropped out of the labor market. And it became easier for them to drop out because, under Obamacare, many of them became eligible for Medicaid and many others enjoy prolonged coverage (until age 26) under their parents’ health plans. For more on this point, see Salim Furth’s “In the Obama Economy, a Decline in Teen Workers” (The Daily Signal, April 11, 2015), and Stephen Moore’s “Why Are So Many Employers Unable to Fill Jobs?” (The Daily Signal, April 6, 2015). On the general issue of declining participation among males aged 25-54, see Timothy Taylor’s “Why Are Men Detaching from the Labor Force?“, (The Conversible Economist, January 16, 2020), and follow the links therein. See also Scott Winship’s “Declining Prime-Age Male Labor Force Participation” (The Bridge, Mercatus Center, September 26, 2017).

Is a Reckoning at Hand?

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If it is, it will arrive on two fronts: political and economic.

On the political front, Conrad Black and Victor Davis Hanson are (sort of) optimistic that the left’s audacious power-grab will fail. A recent op-ed by Black at Epoch Times ends with this:

But we are almost at the point where this administration’s attempt to revolutionize American elections by practically abolishing any verification process for ballots and turning election day into a weeks-long orgy of ballot-harvesting, while packing the Senate and the Supreme Court and gagging congressional minorities, will collide with public opposition to all of these measures.

In those circumstances, the Supreme Court, its attempt at appeasement of the Democrats by abdicating as head of a co-equal third branch of government having failed, might also reassert the legitimacy of the Constitution.

A turning in the road is almost at hand.

Hanson’s view complements Black’s:

We are becoming cynical 1980s Eastern Europeans who quietly scoffed at their daily government news. And this is step one to a repudiation of the lies we have been living with—that masks were necessary outdoors even for those fully vaccinated; that derelict, sexual harasser Andrew Cuomo is a noted author, Emmy-winner and national icon rather than a reckless sexual-harasser and responsible for needless death and misery by his unhinged long-term facilities policies; that Oprah, LeBron, and the Obamas are genuine voices of what it is like to be oppressed in America, and all the subsidiary untruths: the “brave” former intelligence officials who signed campaign-sensitive affidavits seconding Joe Biden’s insistence that Hunter’s laptop was a Russian disinformation trick; that Trump scoffed at “proof” that Russians put bounties on Americans in Afghanistan as they were appease;, and that Joe Biden has no cognitive issues and never did, at least of the sort that prompted his predecessor to take cognitive tests and draw the attention of a Yale psychiatry professor to diagnose him as unhinged in absentia.

In sum, the woke movement daily, hourly, second-by-second hinges on untruth, from the 1619 canard to America is systemically racist. And the number who spot the lies is beginning to outnumber the number who lives by them—which means the Revolution is likely to follow the Jacobin rather than Bolshevik fate.

On the economic front, the huge increase in government spending over the past two years — which Biden wants to perpetuate — will bear rotten fruit.

Here is the increase, in perspective:


Derived from Bureau of Economic Affairs, Table 1.1.5 Gross Domestic Product (billions of dollars, seasonally adjusted at annual rates) and Table 3.1. Government Current Receipts and Expenditures (billions of dollars, seasonally adjusted at annual rates)

As I have amply documented, government spending doesn’t “multiply”. If fact, it “divides”; that is, it causes real GDP to decline because government spending (and the regulatory activities funded by it) result in the transfer of resources from productive private uses to unproductive and counterproductive government uses, while also discouraging business expansion and productive investments in capital formation.

The bottom line is that a sustained increase in the share of GDP spent by government from about 33 percent (the average for the 10 years before the recent surge) to about 45 percent (the average for the recent surge) would cause a long-term reduction 4 percent of real GDP. If that doesn’t seem like a lot, consider that it would be the equivalent of a Great Recession that lasts for years on end instead of two or three years.

Voters flocked to the Democrat Party in the 1930s because they believed (mistakenly) that it — and especially FDR’s “New Deal” — would rescue them from the Great Depression. Voters will flock the the GOP in the 2020s if the Democrat Party remains stubbornly “woke” and persists in economic policies that impoverish them.

And if voters fail to switch in droves, it will prove the wisdom of the Framers’ (long-abandoned) Constitution, which was designed to prevent demagogues from pillaging the nation.

Related reading:

Victor Davis Hanson, “Are Americans Becoming Sovietized?“, The Daily Signal, May 6, 2021
Patricia McCarthy, “Aldous Huxley Foresaw Our Despots — Fauci, Gates, and Their Vaccine Crusaders“, American Thinker, May 5, 2021
Jeffrey A. Tucker, “Is the U.S. Economy a Virtual Reality?“, AIER, May 2, 2021

Related post: Turning Points

The Fed and Business Cycles, Revisited

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This post updates “The Fed and Business Cycles” of June 11, 2011.

The following graphs depict the length of expansions and contractions (and the trends in both), before and since the creation of the Federal Reserve System in December 1913.



Source: “Business Cycle Expansions and Contractions,” National Bureau of Economic Research.
Note: The logarithmic scale on the vertical highlights proportional changes in the lengths of business cycles.

The creation of the Fed might have had a hand in the lengthening of expansions and the shortening of contractions, but many other factors have been at work.

What the graphs don’t depict is the relative severity of the various contractions. It is worth noting that the worst of them all — the Great Depression — occurred after the creation of the Fed and, in part, because of actions taken by the Fed. (A note to the history-challenged: The Great Depression began in September 1929 and ended only because of America’s entry into World War II.) Moreover, the worst downturn since the Great Depression — the Great Recession — was clearly the work of the Fed, in unwitting(?) complicity with the politicians who insisted on expanding home ownership through subprime loans.

In any event, the long-run cost of economic stability has been high. (See this, this, and this, for example.)

A 100-Day Scorecard

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On January 6, 2021, in “Here We Go … “, I essayed 17 predictions about changes Democrats would attempt to consolidate their grip on America and make it over into a European-style “social democracy” with the added feature of subservience to China and Russia. As I said in the original post, not every item on the list will be adopted, but it won’t be for want of trying.

How are my predictions panning out? Quite well, sadly.

Judge for yourself. Here they are:

1. Abolition of the Senate filibuster.

2. An increase of at least two seats on the U.S. Supreme Court (USSC), though there may be some vacancies to be filled.

3. Adoption of an interstate compact by states controlling a total of at least 270 electoral votes, committing each member state’s electoral votes to the presidential candidate who compiles the most popular votes nationwide, regardless of the outcome of the popular vote in each state that is a party to the compact. (This may seem unnecessary if Biden wins, but it will be a bit of insurance against the possibility of a Republican victor in a future election.)

4. Statehood for either the District of Columbia or Puerto Rico, or for both of them. (Each would then have two senators and a requisite number of representatives with full voting privileges in their respective bodies. All of them will be Democrats, of course.)

5. Empowerment of the executive branch to do at least three of the following things:

a. Regulate personal and business activity (in new ways) with the expressed aim of reducing CO2 emissions.

b. Commit at least $500 billion in new obligational authority for research into and/or funding of methods of reducing and mitigating CO2 emissions.

c. Issue new kinds of tax rebates and credits to persons/households and businesses that spend money on any item on a list of programs/technologies that are supposed to reduce CO2 emissions.

d. Impose tax penalties on persons/households and businesses for their failure to spend money on any item in the list mentioned above (shades of the Obamacare tax penalty).

e. Impose penalties on persons/households and businesses for failing to adhere to prescribed caps on CO2 emissions.

f. Establish a cap-and-trade program for CO2 emissions (to soften the blow of the previous item). (Needless to say, the overall effect of such initiatives would deal a devastating blow to economic activity – meaning massive job losses and lower real incomes for large swaths of the populace.)

6. Authorization for an agency or agencies of the federal government to define and penalize written or spoken utterances that the agency or agencies declare “unprotected” by the First Amendment, and to require media enforcement of bans on “unprotected” utterances and prosecution of violators (e.g., here). (This can be accomplished by cynically adopting the supportable position that the First Amendment protects only political speech. The purported aim would be to curb so-called hate speech, but when censorship is in full swing — which would take only a few years — it will be illegal to criticize or question, even by implication, such things as illegal immigration, same-sex marriage, transgenderism, anthropogenic global warming, the confiscation of firearms, or the policies of the federal government. Violations will be enforced by fines and prison sentences — the latter sometimes called “sensitivity training”, “citizenship education”, or some other euphemistic term. Candidates for public office will be prime targets of the enforcers, which will suppress open discussion of such matters.)

7. Imposition of requirements for organizations of all kinds — businesses, universities, charitable organizations, clubs, and even churches — to favor anyone who isn’t a straight, white male of European descent. (The “protections” will be enacted, upheld, and enforced vigorously by federal agencies, regardless of their adverse economic and social effects.)

8. Effective nullification of the Second Amendment through orders/regulations/legislation, to enable gun confiscation (though there will be exemptions for private security services used by favored elites).

9. Use of law-enforcement agencies to enforce “hate speech” bans, mandates for reverse discrimination, and gun-confiscation edicts. (These things will happen regardless of the consequences; e.g., a rising crime rate, greater violence against whites and Asians, and flight from the cities and near-in suburbs. The latter will be futile, anyway, because suburban and exurban police departments will also be co-opted.)

10. Criminalization of “sexual misconduct”, as it is defined by the alleged victim, de facto if not de jure. (Investigations and prosecutions will be selective, and aimed mainly at straight, white males of European descent and dissidents who openly criticize this and other measures listed here.)

11. Parallel treatment for the “crimes” of racism, anti-Islamism, nativism, and genderism. (This will be in addition to the measures discussed in #7.)

12. Centralization in the federal government of complete control of all health care and health-care related products and services, such as drug research, accompanied by “Medicare and Medicaid for All” mandates. (Private health care will be forbidden or strictly limited, though — Soviet-style — there will be exceptions for high officials and other favored persons. Drug research – and medical research, generally – will dwindle in quality and quantity. There will be fewer doctors and nurses who are willing to work in a regimented system. The resulting health-care catastrophe that befalls most of the populace will be shrugged off as necessary to ensure equality of treatment, while ignoring the special treatment accorded favored elites.)

13. Revitalization of the regulatory regime (which already imposes a deadweight loss of 10 percent of GDP). A quantitative measure of revitalization is an increase in the number of new rules published annually in the Federal Register by at least 10 percent above the average for 2017-2020.

14. Proposals for at least least two of the following tax-related initiatives:

a. Reversal of the tax-rate cuts enacted during Trump’s administration.

b. Increases in marginal tax rates for the top 2 or 3 income brackets.

c. Imposition of new taxes on wealth.

15. Dramatic enlargement of domestic welfare programs. Specifically, in addition to the creation of “Medicare and Medicaid for All” programs, there would be a “fix” for Social Security that mandates the payment of full benefits in the future, regardless of the status of the Social Security Trust Fund (which will probably be abolished). (Initiatives discussed in #5, #7, #9, #10, #11, #12, #13, #14, and #15 would suppress investment in business formation and expansion, and would disincentivize professional education and training, not to mention work itself. All of that would combine to push the real rate of economic growth toward a negative value.)

16. Reduction of the defense budget by at least 25 percent, in constant dollars, by 2031 or sooner. (Eventually, the armed forces will be maintained mainly for the purpose of suppressing domestic uprisings. Russia and China will emerge as superpowers, but won’t threaten the U.S. militarily as long as the U.S. government acquiesces in their increasing dominance and plays by their economic rules.)

17. Legalization of all immigration from south of the border, and the granting of citizenship to new immigrants and the illegals who came before them. (The right to vote, of course, is the right that Democrats most dearly want to bestow because most of the newly-minted citizens can be counted on to vote for Democrats. The permanent Democrat majority will ensure permanent Democrat control of the White House and both houses of Congress.)

If you’re keeping up with the news, you will know that almost all of those actions are underway or clearly telegraphed by official statements. It’s hard to chosse the most chilling of those statements, but the one that clearly reveals Biden’s totalitarian urge is his campaign against “white supremacy as domestic terrorism”. This will morph into the suppression of anyone who dares question the doctrine that blacks are where they are because of white racism, and not because of their generally inferior intelligence and cultural traits, or anyone who questions the justice of racial discrimination when it favors blacks. Stay tuned.

Which Labor-Supply Curve?

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A labor-supply curve, in economics, is a graphical or mathematical representation of the number of units of labor (work) of a specified kind that will be offered in a specified period of time (hour, day, week, etc.) at various rates of compensation (hourly wage or periodic salary or expected earnings from self-employment, plus the monetary value of benefits such as vacation time, pension contributions, etc.). A supply curve (like a demand curve) is ephemeral, in that it consists of the summation of the supply curves of many persons (or firms), each of which varies widely at a given time and shifts over time.

A person’s labor-supply curve is said to represent the choices that the person would make between work and leisure at various rates of compensation. On the assumption that leisure becomes more attractive than work at some point (i.e., a relatively high wage rate or salary that affords the person more than “enough” on which to live), the labor-supply curve is depicted as backward-bending after that point; that is, the worker will work less as his wage rate rises above the critical point. Graphically:

Figure 1

There are also complications due to unionization and minimum wage laws, both of which tend to set a wage rate that is above the wage that most workers would accept in a one-on-one transaction with an employer or prospective employer. (If unions or governments don’t mean to bargain for or dictate a wage above that which an individual worker could obtain on his own, that would vitiate the main justification for unionization and minimum-wage laws.) In any event, the effect of unionization and minimum wage laws is to deprive many workers of employment; thus:

Figure 2

The preceding relationships, interesting as they are, don’t paint a complete picture of the determinants of a person’s labor-supply curve. They are, perforce, inadequate to the task of explaining how various conglomerations of workers (e.g., unskilled laborers in Texas, pipefitters in Michigan, plastic surgeons in Malibu) will respond to compensation incentives.

For one thing, leisure — in the standard treatment — is a catchall for non-work activities: eating, sleeping, recreation, etc. It is simplistic to bundle those disparate activities. For another thing, most workers these days aren’t affected (directly, at least) by unionization or minimum wage laws. In general, the standard treatments fail to account adequately for other factors that may influence a person’s willingness to work for a give rate of compensation; for example, the perceived need to sustain a certain standard of living by working more to offset a reduction in one’s rate of compensation. I therefore submit the following step-by-step analysis of the labor-supply function, which is more complete and accordingly more complex than the standard treatments.

I will begin at the beginning, though I will refer to Figures 1 and 2 where they apply.

A person’s willingness and ability to perform a certain amount of work (L) of a particular kind is a function of several parameters: C, U, B, X, T, N, S, and E, each of which is defined below. I begin with the basic relationship between L and C, and then introduce the variations due to the other parameters.

C = total net compensation for work. This is the product of net compensation per unit of work (c) and the number of units of work (L). Net compensation is the after-tax, discounted present value of wages/salary and benefits (as perceived by the worker), for a given set of government policies that affect net compensation, directly or indirectly. In a simple labor-supply function, L = f(c), in which W responds positively and monotonically to increases in c; that is, the function is represented by an upward-sloping line (L), where c is measured on the vertical axis and L is measured on the horizontal axis:

Figure 3

(The rectangle bounded by the horizontal and vertical axes and the dashed lines that represent specific numbers of units of work, L1, and net compensation per unit, c1, has an area equal to the total compensation for that combination of c and L, which in this case is C1.)

U = utility or satisfaction derived from consumption and wealth accumulation resulting from work. This is usually depicted as a positive and rising relationship of the kind shown in the preceding graph. That is to say, the standard labor-supply curve is upward-rising because U generally increases as c rises (that is, as L rises) because of improvements in the quantity and quality of goods consumed and the accumulation of wealth (which provides even more access to goods of high quality, greater social standing, etc.). The following parameters complicate this seemingly simple relationship between c and L.

B = the effect of meeting basic necessities on the amount of labor that a worker is willing to offer. One factor that complicates a worker’s labor-supply function is the need to earn enough to cover basic necessities (e.g., minimal food, clothing, and shelter). The worker may be willing to work as much as required to pay for those necessities. For example, if his necessities cost him $100 a week and he can earn $10 an hour, he will be willing to work at least 10 hours a week, but if he can earn only $5 an hour, he will have to work at least 20 hours a week to pay for his basic necessities. It is entirely possible that a person who earns $500,000 a year will consider that amount necessary to meet his basic necessities, and that a change in his earning power or government policies will induce him to work more in order to net $500,000 a year. In any event, here is a depiction of the relevant portion of a labor-supply curve where B prevails:

Figure 4

If the worker is willing and able to deliver his labor beyond L3, his supply function would extend upward and to the right from that point. That is, having satisfied his basic needs, he would then be able to increase his utility by working more hours for higher rates of compensation.

X = the effect of changes in government policies on net compensation per unit of work, and therefore on the number of units of work that a worker will offer at a given rate of net compensation. If a worker has certain basic necessities (e.g., minimal food, clothing, and shelter), he will offer to work at least as much as required to meet those necessities, and may therefore offer to increase the number of units worked in response to X. For example, if the necessities have a cost to him $500 per week, he will offer to work as many hours as necessary to earn net compensation of $500 per week. And if his taxes increase by, say, $50 per week, he will seek additional work in order to offset the tax increase. But, if he is earning more than is required to cover his basic necessities, a tax increase of $50 a week — an effective reduction in his  compensation — will cause him to work less.

In this case, the graph of the relevant portion of the worker’s supply curve would look like Figure 3 or Figure 4, but c would be higher at each point along L; that is, the new supply curve would be above and parallel to the old supply curve.

T = taste for work of a particular kind. T is positive and rising with L if the work itself offers some pleasure to the worker (e.g., a doctor who enjoys helping the sick, an athlete who enjoys his sport for its own sake, a lawyer who revels in argumentation), or negative and declining with L if the worker works only for the compensation because of his distaste for the work (e.g., cleaning toilets, babysitting brats, working for pointy-haired bosses). This “psychic income” or “psychic penalty” raises or lowers the amount of work that the worker is willing to perform for a given rate of compensation (c).

Imagine a person who is capable of performing two different kinds of labor, X and Y. If Figure 3 or Figure 4 refers to X, and if the person has a “taste” for Y, his supply curve will for Y lie below the ones depicted in Figure 3 and 4; that is, he will require less compensation to do Y rather than X.

N = preference for non-work time (which includes leisure and time spent on personal functions such as meeting familial obligations, eating, and sleeping). This is the backward-bending relationship depicted in Figure 1. The portion of the supply curve that runs upward and to the right incorporates the tradeoff between compensation and leisure. But at some threshold value of C, the worker responds to higher c by reducing L. It seems to me that this effect should be depicted in this way:

Figure 5

That is, the worker reaches his “saturation” point at L3 and reduces the amount of work that he does as c rises past c3. In this case, he reduces his work time so that his total compensation remains the same as it was at L3.

S = subsidies that discourage work (e.g., unemployment benefits, “disability” payments, food stamps, subsidized housing). Where these are available to a worker, they reduce the amount of work that he is willing to do because they enable him to attain a given U without working. T may be positive and offsetting, but this is unlikely among workers who qualify for subsidies. The S effect pushes the supply curve upward; that is, less labor is offered for a given rate of compensation.

E = external forces that limit the amount of labor that a person is able to offer. There are at least two significant forces of this kind. One is the effect of laws and regulations that dictate the maximum amount of work that may be performed (e.g., zero in the case of most children under the age of 16) or the rate of compensation that must be paid (e.g., the minimum wage, overtime pay for persons in certain occupations). The other major force is the effect of employer-union contracts that dictate rates of compensation and hours of work that cannot possibly reflect the uncoerced preferences of many (or most) individual workers. (E, in its various manifestations, is treated in standard economics by overlaying “floors” or “ceilings” on the labor-supply curve.)

Figure 2 depicts this effect.

In conclusion, a labor-supply curve — even that of one person — can be a complex function, and one that responds in various ways to parameters other than the utility that is gained (or lost) by working more (or less). It is hard to imagine that a meaningful supply curve can be drawn for whole classes of workers. To draw such a curve, the workers must be rather homogeneous in their skills, their tastes (for leisure and other things), their wealth (which can strongly influence one’s willingness to perform certain kinds of work), and their exposure to various governmental policies (unionization, minimum wage laws, etc.). The fluidity of the labor market in the age of the “gig economy” supports my view.

Presidents as Regulators: From Ike to The Donald

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According to the Regulatory Studies Center of George Washington University,

the number of total pages published in the CFR [Code of Federal Regulations] annually provides a sense of the volume of existing regulations with which American businesses, workers, consumers, and other regulated entities must comply.

The dataset published by the Center provides a consistent measure of the total number of CFR pages for each year from 1950 through 2019, and for 2020 through July 9. Armed with those numbers, I computed the annual rate of increase in the size of the CFR under each administration, from Eisenhower’s to Trump’s (as of July 9, 2020). The result is shown below.

It is no surprise that Trump’s administration was the least heavy-handed. Nor is it surprising that each Democrat administration was generally more heavy-handed than its GOP predecessor. The surprising exception is Clinton’s regime, which was better than Bush I’s, and was second only to Trump’s in its regulatory austerity.

About Those “Green” Jobs

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The Biden bunch is regurgitating a bit of economic hogwash that originated in the Clinton clatch (#3 here): “Green” jobs will replace jobs that are based on the use of fossil fuels.

First, there will be fewer jobs overall because the economy will tank with the decline of fossil fuels. Second, the resulting “green” jobs will exemplify the broken windows fallacy.

The fallacy is that a broken window is a good thing because it generates business for a glazier. On the same principle, war is a good thing because it results in the recruitment of soldiers. And the killing of solders is a good thing because it results in the recruitment of additional soldiers.

The only thing to be said about Biden’s hysterical call to “climate action” is that it will result in the killing of a lot of a productive jobs and the creation of a smaller number of unproductive and counterproductive jobs.

Here We Go …

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Down the tubes. It is almost certain that the Democrat candidates will be declared the winners of Georgia two Senate seats. The Senate will then be divided 50-50, and control will pass to the Democrats because VP Harris will cast deciding votes in the case of ties.

This won’t be the first time that Democrats have controlled Congress and the White House, but this Democrat Party isn’t your grandfather’s party, or your father’s party. It isn’t even the party that was led by Barack Obama, who was (and is) an ardent advocate of government control. Today’s party is filled with Obamas and politicians who make the Obamas seem moderate.

What, exactly, happens now (or as soon as Democrats get organized)? The follow list is borrowed from an earlier post. Not every item on the list will be adopted, but it won’t be for want of trying.

1. Abolition of the Senate filibuster.

2. An increase of at least two seats on the U.S. Supreme Court (USSC), though there may be some vacancies to be filled.

3. Adoption of an interstate compact by states controlling a total of at least 270 electoral votes, committing each member state’s electoral votes to the presidential candidate who compiles the most popular votes nationwide, regardless of the outcome of the popular vote in each state that is a party to the compact. (This may seem unnecessary if Biden wins, but it will be a bit of insurance against the possibility of a Republican victor in a future election.)

4. Statehood for either the District of Columbia or Puerto Rico, or for both of them. (Each would then have two senators and a requisite number of representatives with full voting privileges in their respective bodies. All of them will be Democrats, of course.)

5. Empowerment of the executive branch to do at least three of the following things:

a. Regulate personal and business activity (in new ways) with the expressed aim of reducing CO2 emissions.

b. Commit at least $500 billion in new obligational authority for research into and/or funding of methods of reducing and mitigating CO2 emissions.

c. Issue new kinds of tax rebates and credits to persons/households and businesses that spend money on any item on a list of programs/technologies that are supposed to reduce CO2 emissions.

d. Impose tax penalties on persons/households and businesses for their failure to spend money on any item in the list mentioned above (shades of the Obamacare tax penalty).

e. Impose penalties on persons/households and businesses for failing to adhere to prescribed caps on CO2 emissions.

f. Establishment of a cap-and-trade program for CO2 emissions (to soften the blow of the previous item). (Needless to say, the overall effect of such initiatives would deal a devastating blow to economic activity – meaning massive job losses and lower real incomes for large swaths of the populace.)

6. Authorization for an agency or agencies of the federal government to define and penalize written or spoken utterances that the agency or agencies declare “unprotected” by the First Amendment, and to require media enforcement of bans on “unprotected” utterances and prosecution of violators (e.g., here). (This can be accomplished by cynically adopting the supportable position that the First Amendment protects only political speech. The purported aim would be to curb so-called hate speech, but when censorship is in full swing — which would take only a few years — it will be illegal to criticize or question, even by implication, such things as illegal immigration, same-sex marriage, transgenderism, anthropogenic global warming, the confiscation of firearms, or the policies of the federal government. Violations will be enforced by fines and prison sentences — the latter sometimes called “sensitivity training”, “citizenship education”, or some other euphemistic term. Candidates for public office will be prime targets of the enforcers, which will suppress open discussion of such matters.)

7. Imposition of requirements for organizations of all kinds — businesses, universities, charitable organizations, clubs, and even churches — to favor anyone who isn’t a straight, white male of European descent. (The “protections” will be enacted, upheld, and enforced vigorously by federal agencies, regardless of their adverse economic and social effects.)

8. Effective nullification of the Second Amendment through orders/regulations/legislation, to enable gun confiscation (though there will be exemptions for private security services used by favored elites).

9. Use of law-enforcement agencies to enforce “hate speech” bans, mandates for reverse discrimination, and gun-confiscation edicts. (These things will happen regardless of the consequences; e.g., a rising crime rate, greater violence against whites and Asians, and flight from the cities and near-in suburbs. The latter will be futile, anyway, because suburban and exurban police departments will also be co-opted.)

10. Criminalization of “sexual misconduct”, as it is defined by the alleged victim, de facto if not de jure. (Investigations and prosecutions will be selective, and aimed mainly at straight, white males of European descent and dissidents who openly criticize this and other measures listed here.)

11. Parallel treatment for the “crimes” of racism, anti-Islamism, nativism, and genderism. (This will be in addition to the measures discussed in #7.)

12. Centralization in the federal government of complete control of all health care and health-care related products and services, such as drug research, accompanied by “Medicare and Medicaid for All” mandates. (Private health care will be forbidden or strictly limited, though — Soviet-style — there will be exceptions for high officials and other favored persons. Drug research – and medical research, generally – will dwindle in quality and quantity. There will be fewer doctors and nurses who are willing to work in a regimented system. The resulting health-care catastrophe that befalls most of the populace will be shrugged off as necessary to ensure equality of treatment, while ignoring the special treatment accorded favored elites.)

13. Revitalization of the regulatory regime (which already imposes a deadweight loss of 10 percent of GDP). A quantitative measure of revitalization is an increase in the number of new rules published annually in the Federal Register by at least 10 percent above the average for 2017-2020.

14. Proposals for at least least two of the following tax-related initiatives:

a. Reversal of the tax-rate cuts enacted during Trump’s administration.

b. Increases in marginal tax rates for the top 2 or 3 income brackets.

c. Imposition of new taxes on wealth.

15. Dramatic enlargement of domestic welfare programs. Specifically, in addition to the creation of “Medicare and Medicaid for All” programs, there would be a “fix” for Social Security that mandates the payment of full benefits in the future, regardless of the status of the Social Security Trust Fund (which will probably be abolished). (Initiatives discussed in #5, #7, #9, #10, #11, #12, #13, #14, and #15 would suppress investment in business formation and expansion, and would disincentivize professional education and training, not to mention work itself. All of that would combine to push the real rate of economic growth toward a negative value.)

16. Reduction of the defense budget by at least 25 percent, in constant dollars, by 2031 or sooner. (Eventually, the armed forces will be maintained mainly for the purpose of suppressing domestic uprisings. Russia and China will emerge as superpowers, but won’t threaten the U.S. militarily as long as the U.S. government acquiesces in their increasing dominance and plays by their economic rules.)

17. Legalization of all immigration from south of the border, and the granting of citizenship to new immigrants and the illegals who came before them. (The right to vote, of course, is the right that Democrats most dearly want to bestow because most of the newly-minted citizens can be counted on to vote for Democrats. The permanent Democrat majority will ensure permanent Democrat control of the White House and both houses of Congress.)

*      *     *

The list is in keeping with the direction in which the country is headed and, in many cases, has been headed since the 1930s — despite Reagan and Trump, and with the connivance of Ike, Nixon, the Bushes, and (in some crucial cases) the USSC.

The Constitution’s horizontal and vertical separation of powers, system of checks and balances, and limitations on the power of the federal government have been eroded almost to the point of irrelevance. The next few years will put an end to the pretense (or false hope) of governance in accordance with the Constitution as it was written. The next few years will see the destruction of liberty, the bankruptcy of America, and the onset of obeisance to Russia and China.

GDP Update

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The Bureau of Economic Analysis yesterday released its revised (second) estimate of GDP for the third quarter of 2020 (2020Q3). The recovery from the recession that was induced by COVID-19 lockdown orders continues, but there’s still a lot of lost ground to make up. And the lost ground to be made up isn’t just from the pre-COVID-19 rate of output, but from the post-Great Recession slump that persisted despite Trump’s deregulatory efforts.

Here’s the big picture:

This graph zooms in on the declining rate of growth in real GDP:

This graph highlights the declining rate of growth from business cycle to business cycle:

The unnecessarily draconian response to COVID-19 made a bad situation even worse.

Election 2020: Modified Betting Propositions

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In “Election 2020: Some Betting Propositions“, I laid out the terms of a bet that I had proposed to correspondent who is a “conservative” collabo. The underlying conditions — Democrat control of the White House and Congress — may not be met, at least not in 2021-2023. But the day will come, and Americans will rue it.

So, what will happen if Biden is elected but the GOP still controls the Senate and is able to prevent the left from enacting some of its agenda? Plenty. I have gleaned some examples from the blogosphere (links at the bottom of this post), and here they are:

Stopping construction of the border wall by not requesting funds for it, not reapportioning funds to it, and canceling all work in progress.

Encouraging illegal immigration (e.g., lax enforcement, reinstatement of DACA) to reopen the floodgates at the southern border.

Issuing executive orders that reverse the economic recovery in the name of combating COVID-19.

Rejoining the Paris climate scam, severely restricting U.S. oil production and the use of fossil fuels, and promoting “renewable” energy through  executive-regulatory actions, which will have almost zero effect on the climate and make Americans generally poorer and more miserable. (A full-bore legislative package — if Biden could get it passed — would be disastrous.)

Reinstating U.S. support of WHO, a corrupt pro-China, anti-life operation.

Reinstating Obama’s supine, America-last foreign policy. In particular, reinstating the Iran nuclear deal and resuming the shipment of bales of money to Iran to finance its “peaceful” nuclear research, continue to build its regional military prowess, and acquire the means to strike the U.S. with missiles; and ilting strongly in favor of radical Islam and Palestine, and strongly against Israel, which will foment conflict in the Middle East.

Progressing further toward thought control by encouraging more and stricter pro=left censorship by internet-based purveyors of “news” and anti-social media.

Advancing “critical race theory”, which blames whites for all of the miseries of blacks, many of which are self-inflicted by black culture, and others of which are due to innate racial differences in intelligence.

Actively pursuing extra-legal “punishment” of Trump’s allies and supporters.

Using the Justice Department to further erode law and order in the United States by hamstringing police departments.

Not mentioned at any of links below, but a key proposition from my earlier post: Diminution of America’s armed forces in the face of increasing adventurism by Russia and China — thus encouraging even more and bolder moves by those countries against American’s interests. This is a move that Harris-Biden can make unilaterally by slashing defense budgets submitted to Congress, and which the House can help to attain by holding the defense budget hostage until the Senate acquiesces in the cuts.

And one more crucial thing. Harris-Biden will openly flout rulings by the Supreme Court when such rulings conflict with the regime’s policies. (This is something that Trump/Hitler never did.)

I will package these items as a proposed bet for my correspondent. He will probably decline to take the bet (as he declined my earlier offer) because, in his ostrich-like way he doesn’t want to acknowledge the damage that Harris-Biden will do to the nation. He couldn’t see past his Trump hatred.

I will end this on a more pleasant note, with a link to Joy Pullman’s post at The Federalist, “12 Ways For Trump To Bomb The Battlefield While Biden Claims The Presidency” (November 10, 2020).

Links:

Carina Benton, “Totalitarian Left Promises Purges And Punishment For All Trump Voters“, The Federalist, November 10, 2020

Sam Dorman and Hillary Vaughn, “Biden Plans to Rejoin Paris Agreement, WHO, and Undo Other Trump Decisions on Day 1“, Fox News, November 9, 2020

Tilak Doshi, “The Coming Energy Shocks Under a Biden Administration“, Forbes, November 11, 2020

David Gerstman, “Former Biden Aide: Rejoining Nuclear Deal Is ‘High’ on Biden’s Agenda“, Legal Insurrection, November 10, 2020

Fred Lucas, “7 Big Items on Biden’s White House Agenda“, The Daily Signal, November 8, 2020

Heather Mac Donald, “The Biden Threat to Law Enforcement“, City Journal, November 10, 2020

Steve Postal, “How a Biden–Harris Administration Would Unravel Middle East Peace “, The American Spectator, November 10, 2020

Jarrett Stepman, “Biden Would Likely Issue Flurry of Executive Orders on Climate, Abortion, Immigration“, The Daily Signal, November 10, 2020

Jonathan Turley (eponymous blog), “‘Shredding The Fabric Of Our Democracy’: Biden Aide Signals Push For Greater Censorship On The Internet“, November 10, 2020

Francis Menton, “How Much Damage Can Biden Do to America with His Climate Plan?“, Manhattan Contrarian, November 14, 2020

Eugene Volokh, “Biden Transition Team Member’s Op-Ed on ‘Why America Needs a Hate-Speech Law’“, The Volokh Conspiracy, November 17, 2020

Frances Martel, “Six Disastrous Obama-Era Foreign Policies Set to Return Under Biden“, Breitbart, November 26, 2020

Art Keller, “Will Biden Resurrect the Iran Deal?“, Quillette, November 29, 2020

Election 2020: Liberty Is at Stake

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I have written many times over the years about what will happen to liberty in America the next time a Democrat is in the White House and Congress is controlled by Democrats. Many others have written or spoken about the same, dire scenario. Recently, for example, Victor Davis Hanson and Danielle Pletka addressed the threat to liberty that lies ahead if Donald Trump is succeeded by Joe Biden, in tandem with a Democrat takeover of the Senate. This post reprises my many posts about the clear and present danger to liberty if Trump is defeated and the Senate flips, and adds some points suggested by Hanson and Pletka. There’s much more to be said, I’m sure, but what I have to say here should be enough to make every liberty-loving American vote for Trump — even those who abhor the man’s persona.

Court Packing

One of the first things on the agenda will be to enlarge the Supreme Court and fill the additional seats with justices who can be counted on to support the following policies discussed below, should those policies get to the Supreme Court. (If they don’t, they will be upheld in lower courts or go unchallenged because challenges will be perceived as futile.)

Abolition of the Electoral College

The Electoral College helps to protect the sovereignty of less-populous States from oppression by more-populous States. This has become especially important with the electoral shift that has seen California, New York, and other formerly competitive States slide into leftism. The Electoral College therefore causes deep resentment on the left when it yields a Republican president who fails to capture a majority of the meaningless nationwide popular vote, as Donald Trump failed (by a large margin) in 2016), despite lopsided victories by H. Clinton in California, New York, etc.

The Electoral College could be abolished formally by an amendment to the Constitution. But amending the Constitution by that route would take years, and probably wouldn’t succeed because it would be opposed by too many State legislatures.

The alternative, which would succeed with Democrat control of Congress and a complaisant Supreme Court, is a multi-State compact to this effect: The electoral votes of each member State will be cast for the candidate with the most popular votes, nationwide, regardless of the popular vote in the member State. This would work to the advantage of a Democrat who loses narrowly in a State where the legislature and governor’s mansion is controlled by Democrats – which is the whole idea.

Some pundits deny that the scheme would favor Democrats, but the history of presidential elections contradicts them.

Electorate Packing

If you’re going to abolish the Electoral College, you want to ensure a rock-solid hold on the presidency and Congress. What better way to do that than to admit Puerto Rico and the District of Columbia? Residents of D.C. already vote in presidential elections, but the don’t have senators and or a voting representative in the House. Statehood would give them those things. And you know which party’s banner the additional senators and representative would fly.

Admitting Puerto Rico would be like winning the trifecta (for Democrats): a larger popular-vote majority for Democrat presidential candidates, two more Democrat senators, and five more Democrat representatives in the House.

“Climate Change”

The “science” of “climate change” amounts to little more than computer models that can’t even “predict” recorded temperatures accurately because the models are based mainly on the assumption that CO2 (a minor greenhouse gas) drives the atmosphere’s temperature. This crucial assumption rests on a coincidence – rising temperatures from the late 1970s and rising levels of atmospheric CO2. But atmospheric CO2 has been far higher in earlier geological eras, while Earth’s temperature hasn’t been any higher than it is now. Yes, CO2 has been rising since the latter part of the 19th century, when industrialization began in earnest. Despite that, temperatures have fluctuated up and down for most of the past 150 years. (Some so-called scientists have resolved that paradox by adjusting historical temperatures to make them look lower than the really are.)

The deeper and probably more relevant causes of atmospheric temperature are to be found in the Earth’s core, magma flow, plate dynamics, ocean currents and composition, magnetic field, exposure to cosmic radiation, and dozens of other things that — to my knowledge — are ignored by climate models. Moreover, the complexity of the interactions of such factors, and others that are usually included in climate models cannot possibly be modeled.

The urge to “do something” about “climate change” is driven by a combination of scientific illiteracy, power-lust, and media-driven anxiety.

As a result, trillions of dollars have been and will be wasted on various “green” projects. These include but are far from limited to the replacement of fossil fuels by “renewables”, and the crippling of industries that depend on fossil fuels. Given that CO2 does influence atmospheric temperature slightly, it’s possible that such measures will have a slight effect on Earth’s temperature, even though the temperature rise has been beneficial (e.g., longer growing seasons; fewer deaths from cold weather, which kills more people than hot weather).

The main result of futile effort to combat “climate change” will be greater unemployment and lower real incomes for most Americans — except for the comfortable elites who press such policies.

Freedom of Speech

Legislation forbidding “hate speech” will be upheld by the packed Court. “Hate speech” will be whatever the bureaucrats who are empowered to detect and punish it say it is. And the bureaucrats will be swamped with complaints from vindictive leftists.

When the system is in full swing (which will take only a few years) it will be illegal to criticize, even by implication, such things as illegal immigration, same-sex marriage, transgenderism, anthropogenic global warming, or the confiscation of firearms. Violations will be enforced by huge fines and draconian prison sentences (sometimes in the guise of “re-education”).

Any hint of Christianity and Judaism will be barred from public discourse, and similarly punished. Islam will be held up as a model of unity and tolerance – at least until elites begin to acknowledge that Muslims are just as guilty of “incorrect thought” as persons of other religions and person who uphold the true spirit of the Constitution.

Reverse Discrimination

This has been in effect for several decades, as jobs, promotions, and college admissions have been denied the most capable persons in favor or certain “protected group” – manly blacks and women.

Reverse-discrimination “protections” will be extended to just about everyone who isn’t a straight, white male of European descent. And they will be enforced more vigorously than ever, so that employers will bend over backward to favor “protected groups” regardless of the effects on quality and quantity of output. That is, regardless of how such policies affect the general well-being of all Americans. And, of course, the heaviest burden – unemployment or menial employment – will fall on straight, white males of European descent. Except, of course, for the straight while males of European descent who are among the political, bureaucratic, and management elites who favor reverse discrimination.

Rule of Law

There will be no need for protests riots because police departments will become practitioners and enforcers of reverse discrimination (as well as “hate speech” violations and attempts to hold onto weapons for self-defense). This will happen regardless of the consequences, such as a rising crime rate, greater violence against whites and Asians, and flight from the cities (which will do little good because suburban police departments will also be co-opted).

Sexual misconduct (as defined by the alleged victim), will become a crime, and any straight, male person will be found guilty of it on the uncorroborated testimony of any female who claims to have been the victim of an unwanted glance, touch (even if accidental), innuendo (as perceived by the victim), etc.

There will be parallel treatment of the “crimes” of racism, anti-Islamism, nativism, and genderism.

Health Care

All health care and health-care related products and services (e.g., drug research) will be controlled and rationed by an agency of the federal government. Private care will be forbidden, though ready access to doctors, treatments, and medications will be provided for high officials and other favored persons.

Drug research – and medical research, generally – will dwindle in quality and quantity. There will be fewer doctors and nurses who are willing to work in a regimented system.

The resulting health-care catastrophe that befalls most of the populace (like that of the UK) will be shrugged off as a residual effect of “capitalist” health care.

Regulation

The regulatory regime, which already imposes a deadweight loss of 10 percent of GDP, will rebound with a vengeance, touching every corner of American life and regimenting all businesses except those daring to operate in an underground economy. The quality and variety of products and services will decline – another blow to Americans’ general well-being.

Taxation

Incentives to produce more and better products and services will be further blunted by increases on corporate profits, a more “progressive” structure of marginal tax rates (i.e., soaking the “rich”), and — perhaps worst of all — taxing wealth. Such measures will garner votes by appealing to economic illiterates, the envious, social-justice warriors, and guilt-ridden elites who can afford the extra taxes but don’t understand how their earnings and wealth foster economic growth and job creation. (A Venn diagram would depict almost the complete congruence of economic illiterates, the envious, social-justice warriors, and guilt-ridden elites.)

Government Spending and National Defense

The dire economic effects of the foregoing policies will be compounded by massive increases in government spending on domestic welfare programs, which reward the unproductive at the expense of the productive. All of this will suppress investment in business formation and expansion, and in professional education and training. As a result, the real rate of economic growth will approach zero, and probably become negative.

Because of the emphasis on domestic welfare programs, the United States will maintain token armed forces (mainly for the purpose of suppressing domestic uprisings). The U.S. will pose no threat to the new superpowers — Russia and China. They won’t threaten the U.S. militarily as long as the U.S. government acquiesces in their increasing dominance.

Immigration

Illegal immigration will become legal, and all illegal immigrants now in the country – and the resulting flood of new immigrants — will be granted citizenship and all associated rights. The right to vote, of course, is the right that Democrats most dearly want to bestow because most of the newly-minted citizens can be counted on to vote for Democrats. The permanent Democrat majority will ensure permanent Democrat control of the White House and both houses of Congress.

Future Elections and the Death of Democracy

Despite the prospect of a permanent Democrat majority, Democrats won’t stop there. In addition to the restrictions on freedom of speech discussed above, there will be election laws requiring candidates to pass ideological purity tests by swearing fealty to the “law of the land” (i.e., unfettered immigration, same-sex marriage, freedom of gender choice for children, etc., etc., etc.). Those who fail such a test will be barred from holding any kind of public office, no matter how insignificant.

Real vs. Nominal Unemployment Rate

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The labor-force participation rate peaked in January 2000:

The business-cycle recession of 2008-2011 slammed full-time employment; the temporary closures of 2020 had the opposite effect:

The real vs. nominal unemployment rate (setting the real unemployment rate equal to the nominal rate in January 2000, and adjusting for subsequent changes in the labor-force participation rate and the fraction of employed persons working full-time):

Go here for an explanation of the method and the reasons for the decline in the labor-force participation rate from 2000 to 2016.

Election 2020: Installment 1

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I was right about Election 2016. Now I’ll start posting regularly about Election 2020. It will be a while before there is some reliable polling about the presidential race. In the meantime, I’ll post about relevant issues, such as Trump’s popularity, the state of the economy, and the retreat of the COVID-19 outbreak.

There’s good news and bad news in this post. Whether the good news is good and the bad news is bad depends on whether you prefer Trump to Biden (or his replacement).

One piece of good news for Trump is the decided drop in the rate at which COVID-19 cases and deaths are occurring (if you believe the official numbers). Here are my tallies, averaged over 7 days to smooth over delays in reporting:

It’s too soon to know whether the curves will ascend again (or ascend significantly, if they do) as a result of “reopening”, which began in earnest over the Memorial Day weekend. Stay tuned.

Two pieces of very bad news for Trump are the sharp declines in (a) his popularity (as measured by an unbiased pollster, Rasmussen Reports) and (b) Americans’ view of the state of the nation (also as measured by Rasmussen).

This is worrying (or not) because it reflects sharply declining poll numbers for Trump, as against rising poll numbers for Obama at this stage 8 years ago:

And this is worrying (or not) because voters’ assessment of the state of the nation is well below where it was when Obama was reelected:

A piece of provisional good news is the possibility (to which I subscribe) of a quick turnaround in the economy. But don’t take my word for it. Consider this:

In early April, Jason Furman, a top economist in the Obama administration and now a professor at Harvard, was speaking via Zoom to a large bipartisan group of top officials from both parties. The economy had just been shut down, unemployment was spiking and some policymakers were predicting an era worse than the Great Depression. The economic carnage seemed likely to doom President Donald Trump’s chances at reelection.

Furman, tapped to give the opening presentation, looked into his screen of poorly lit boxes of frightened wonks and made a startling claim.

“We are about to see the best economic data we’ve seen in the history of this country,” he said….

“Everyone looked puzzled and thought I had misspoken,” Furman said in an interview. Instead of forecasting a prolonged Depression-level economic catastrophe, Furman laid out a detailed case for why the months preceding the November election could offer Trump the chance to brag — truthfully — about the most explosive monthly employment numbers and gross domestic product growth ever.

Since the Zoom call, Furman has been making the same case to anyone who will listen, especially the close-knit network of Democratic wonks who have traversed the Clinton and Obama administrations together, including top members of the Biden campaign.

Furman’s counterintuitive pitch has caused some Democrats, especially Obama alumni, around Washington to panic. “This is my big worry,” said a former Obama White House official who is still close to the former president. Asked about the level of concern among top party officials, he said, “It’s high — high, high, high, high.”…

Furman’s case begins with the premise that the 2020 pandemic-triggered economic collapse is categorically different than the Great Depression or the Great Recession, which both had slow, grinding recoveries.

Instead, he believes, the way to think about the current economic drop-off, at least in the first two phases, is more like what happens to a thriving economy during and after a natural disaster: a quick and steep decline in economic activity followed by a quick and steep rebound….

Furman’s argument is not that different from the one made by White House economic advisers and Trump, who have predicted an explosive third quarter, and senior adviser Jared Kushner, who said in late April that “the hope is that by July the country’s really rocking again.” White House officials were thrilled to hear that some of their views have been endorsed by prominent Democrats.

“I totally agree,” Larry Kudlow, head of the White House National Economic Council, replied in a text message when asked about Furman’s analysis. “Q3 may be the single best GDP quarter since regular data. 2nd half super big growth, transitioning to 4% or more in 2021.” He called Furman, whom he said he knows well, “usually a straight shooter. Hats off to him.”

“I have been saying that on TV as well,” said Kevin Hassett, a top Trump economic adviser, who pointed to a Congressional Budget Office analysis predicting a 21.5 percent annualized growth rate in the third quarter. “If CBO is correct we will see the strongest quarter in history after the weakest in Q2.”

Peter Navarro, a Trump trade and manufacturing adviser who’s a Harvard-educated economist, called the high unemployment America is currently facing “manufactured unemployment, which is to say that Americans are out of work not because of any underlying economic weaknesses but to save American lives. It is this observation that gives us the best chance and hope for a relatively rapid recovery as the economy reopens.”…

[A] former Obama White House official said, “Even today when we are at over 20 million unemployed Trump gets high marks on the economy, so I can’t imagine what it looks like when things go in the other direction. I don’t think this is a challenge for the Biden campaign. This is the challenge for the Biden campaign. If they can’t figure this out they should all just go home.”…

Between now and Election Day, there will be five monthly jobs reports, which are released on the first Friday of every month. The June report, covering May, is likely to show another increase in unemployment. But after that, Furman predicts, if reopening continues apace, the next four reports could be blockbusters. “You could easily have 1 to 2 million jobs created a month in those four reports before November,” he said.

He added, “And then toward the end of October, we will get GDP growth for the third quarter, at an annualized rate, and it could be double-digit positive economic growth. So these will be the best jobs and growth numbers ever.”…

Furman is an economist, but he had some strategic advice for the Biden campaign. “Don’t make predictions that could be falsified. There are enough terrible things to say you don’t need to make exaggerated predictions,” he said. “The argument that we are in another Great Depression will look like it was overstated. Trump can say, ‘Two million deaths didn’t happen, Great Depression didn’t happen, we are making a lot of progress.’”

The stock market reflects Furman’s (and my) assessment:

Give them jobs and their hearts, minds, and votes will follow.

Related posts:

Is a Perfect Electoral Storm Brewing?
“Give Me Liberty or Give Me Death”

Lockdown or Re-open?

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UPDATED 05/03/20

Why are governments forcing businesses to close, costing tens of millions of jobs at least temporarily (and millions permanently), thus causing unemployment compensation claims to soar while tax revenues drop, and therefore causing some states to verge on bankruptcy, while also inflating unemployment compensation payouts and thereby making many workers reluctant to return to work even if they could? Nowhere mentioned in that breathless litany are the social and economic effects of lockdowns and job losses on families, friendships, social circles, etc., etc., etc.

The comfortable and fearful — a set that contains mostly leftists, who tend to be more affluent and more neurotic than the “deplorables” whom they disdain — are wont to worry about the consequence of re-opening “too soon” (i.e., before they are personally affected by lockdowns). That consequence, of course, is the possibility that the rate of COVID-19 infections and deaths will rise rather than fall to zero.

But so what? Suppose that a doctor — of all people — were to reopen his practice, tell patients that he will take every reasonable precaution to shield them from infection, require them to take similar precautions, have them sign releases holding him harmless should they later be found to have contracted COVID-19. Wouldn’t you go to that doctor if you needed to, rather than have him try to diagnose you telemedically? I would.

The same kinds of protocols could be followed by businesses of all kinds, and followed not only with respect to customers but also employees. Aren’t there tens of millions of citizens who would rather shop and work in the real world rather than in the virtual world? There certainly are tens of millions who would rather go to work instead of collecting unemployment compensation and watching their savings dwindle (if they have any to begin with). Moreover, the protocols could be backed by State governments granting to employers immunity from criminal and civil prosecutions if they follow specified procedures and all parties execute standard forms.

Why are governments preventing citizens from taking reasonable, informed risks so that the affluent and neurotic can sleep more easily — and enjoy watching frustrated “deplorables” protest in vain? Oh, that’s it. The suffering of “deplorables” given pleasure to leftists (e.g., this), and they’re in charge in too many places.

Which just goes to show, once again, that there’s no such thing as a social-welfare function. How can the pleasure gained by leftists possibly offset the pain they are causing to tens of millions of real Americans?

P.S. Jay Cost elaborates on the tension between the “haves” and the rest of us. The “haves” keep lecturing the rest of us to think of others. But it’s they who aren’t thinking of others; they’re only thinking of themselves. Well, if they don’t want to be exposed to COVID-19, they can just shelter in place while everyone else makes the economy work for the benefit of them (i.e., the “haves”).

My blue-collar roots are showing.

Why the UBI Is a Bad Idea

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There are many reasons to oppose a universal basic income — a guaranteed stipend to be granted to every adult American citizen (or person regardless of age, or resident regardless of citizenship). I won’t enumerate all of the reasons, when one should be enough:

1. Almost every adult citizen (even including many with sever mental or physical handicaps) is capable of producing something of value for others.

2. A UBI is a disincentive to work, that is, to produce.

3. A UBI would nevertheless given its recipients a claim on the output of others.

4. Ergo: a smaller “pie” (total output), shares of which would be given to persons who had no hand in making the “pie” (or less of a hand than would otherwise be the case), and shares of which would therefore be taken from persons who actually had a hand in making the “pie”.

UBI is just another kind of government-enforced form of charity, which — like other forms — disincentivizes work (among beneficiaries and taxpayers alike) and reduces economic output. It also disincentivizes private charity.

Private charity actually incentivizes work (on the part of givers) because it is one of the ends that is served by work, along with affording the necessities and luxuries of life for oneself and one’s family. Private charity is also less likely to disincentivize work by its beneficiaries because it can be more easily aimed at those who need it in order to be capable of work (basic shelter, food, clothing, etc.), and can be tied to the actual performance of work (e.g., Goodwill Industries).

Scrooge, before his conversion to soft-headedness, was right about workhouses. Ironically, they were government-run institutions that had it right: charity in the form of gainful, productive employment. But then charity became a right, and the rest is history.

As the old saying goes, a hand up is better than a handout. Or, as another one goes, give a man a fish, and you feed him for a day; teach a man to fish, and you feed him for a lifetime.