A Cynical New Low

A destructive, idiotic tax plan that seems to purposefully be crafted to do damage

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https://itep.org/senatetaxplan

This is the most cynical, disruptive, baseless change in the tax code since Bush’s giveaway. It runs up a huge deficit to the tune of $1.5T, but does offer up a fig leaf of increasing taxes on America’s bottom half so it at least feels like its screwing someone. Why not do away with that bit and just make it a cool $2T? No, better throw the country’s account into the toilet with a little English on the ball, the bootstraps crowd will eat it up on Fox and the radio.

Meanwhile, the largest living, breathing beneficiaries of the bill are… foreign investors. Not Americans. Not even rich Americans. Our economy is so financialized the America First #MAGA party can’t even figure out a way to actually make America first; we’ve sold it all so much that it isn’t even ours anymore to play with.

I think the most offensive thing in all this is that it doesn’t have to be like this. A little over half the country literally, state-by-state, district-by-district, chose these assholes.

Researchers shocked to discover poor people are sapient, rational

Apparently they’re rational, thinking homo sapiens WTF

The self-serving narratives that define concepts like Meritocracy as a self-evident expression of worthiness, rather than a fluid sort of filter that encrypts class and race based sorting in a vernier of objectivity, are the sorts of narratives that can feed themselves for decades.

The altogether radical concept that poor people are, generally, as deserving and rational as anyone else, yet also more desperate and likely to make very rational yet unfortunate choices based on those entirely transient negative conditions they live in, resulting in antisocial decisions that reinforce the negative transient conditions they live in, is a lost one. Basically it’s easier to imagine the poor as deserving their desperate conditions than accept that but for the grace of God, there go I.

The myth of Meritocracy is alluring because it tells the ruling aristocracy that not only are they worthy, but those which have not yet ascended are unworthy. We can, of course, do better. There is a tremendous amount of wasted potential out there cloaked by the circumstances of being poor and these compassion-eroding narratives: the poor don’t work hard, they’re less intelligent, they’re ultimately less deserving.

The fact is that the poor suffer from a deleterious condition which truly does affect them and their ability to learn and make decisions and it is called “being poor”, and its solution is “not being poor”. The largest, most immediate hurdle to raising the poor up is their poverty itself, a cause and not a symptom; it is not some virtuous sortation mechanism nor an insurmountable obstacle… though that latter assertion is one I’ll have to leave for later.

Conservativism, Socialism, America, and Fear

America is so afraid of Communism that we’d rather go bankrupt than buy better health, cheaper

I rather like the information here, especially the median wealth information, and what it means compared to the information here, about median income, and the information here, on net debt-to-GDP. In the end they tell a story about some tremendous, obvious failings within America’s economic system, failings with both antiseptic negative economic impacts as well as moral failings. It’s a story about fear, and what it means to be culturally American.

There are a few stories here when you look at all these links together:

  • The gap between median wealth and net mean wealth is a good measure of how unequal the distribution of wealth is in the country. Consider a place with ten people in it, nine owning $0 and one owning $10M: it has a median wealth of $0 and a mean wealth of $1M. That’s not a great place to live.
  • The median wealth countries all tend to embrace socialized medicine and strong public support for post-secondary education. Medical bankruptcy is the most-common form of bankruptcy in the US, an incredibly disruptive and wealth-destroying event, and university education is a tremendous hole of American debt. It’s no wonder that the US can draw in such good income (see the second link) yet have much less to show for it.
  • The US has, in terms of median wealth, 64% of the OECD average of median wealth. We’re on par with Portugal and Slovenia, places that make two-thirds or half of what Americans do. Put differently: for every $1 a typical American makes in a year, they end up converting that, year-on-year, to $1.46 in wealth over their lifetime. Someone in Portugal converts $1 in yearly income to $2.75 in ultimate wealth. They’re more frugal to some extent because they earn less and culture is clearly part of this equation rather than just numbers, but there’s still a story in those numbers about how inefficiently the US converts income into wealth.
  • Taking a look at the third link, with debt-to-GDP, and you see that the US is on par with France. Running a nationalized healthcare system is economically wise at both the personal and national level: free market healthcare is a scam. The US spends 17% of our GDP – the highest in the world – on healthcare (about $2.9T), it is an average product, it is bankrupting us, and we have nothing to show for it. Sweden is in second place in the OECD with 12% of their GDP towards healthcare. If we could wave a magic wand and have Sweden’s system, we’d be spending around $800B a year on anything else other than a system that bankrupts us. It’s a terrible inefficiency.

It seems clear to most that there are some industries, services, what-have-you, which are not well-managed by markets with respect to the customers/citizens at large. That rationale is precisely why I support things like socialized medicine; it just so happens that others draw the line at, say, roads and parks. I’d call that overly conservative, but in the end the exercise of the rationale feels to me to be an ultimately conservative line of thought: test, move cautiously, keep what works… the part that seems missing in American conservativism is that one ought to eventually feel comfortable also tossing aside what doesn’t.

“Seizing the means of production” is an overwrought phrase that, when unreservedly adhered to in practice, tends to look like Zimbabwe. Central planning is not a universal panacea. Making wise decisions about what markets can and can’t do, however, and respecting that there are certain things that they magically cannot or will not do will in certain cases look like big bad Communism, and the question then is what are you scared of, and is it truly relevant. For example, I don’t see many gulags in France because of universal health care and generous leave policies and their post-secondary education system. Their finances are doing rather well, actually, at the national and personal level – in the latter case, much better than the US in terms of widely building wealth between generations regardless of class distinctions. Yet Zimbabwe and Venezuela are held up as what happens when you decide that markets run healthcare systems rather poorly, despite the tremendous gap between “socializing the healthcare system” and “nationalizing your country’s most-vital export” that only seems to be bridged by fear rather than an appreciation for what it actually takes, socially and historically, for that final event to come to fruition.

Progressive conservativism is a thing. It’s about as popular as libertarianism, I imagine, though I think it’s the fundamental position of the reformacon commentariat.

You can see DOOM from here

fig_us_decomp_10

This picture comes from: https://growthecon.com/blog/Decomposition/, and it is a sad story of a whimper, not a bang. It’s doubly sad when you consider we had a bang as well, in 2007.

Anyhow, what you’re looking at here is the shining, increased productivity in some awesome sectors of the economy (in black) and the sad fat trombone bleat of everyone else (in grey). That’s labor moving from high productivity to low productivity. It’s labor leaving the factory and greeting people at Walmart, and it’s a curve that’s been sliding down for thirty years.

It’s not going to get better for a very long time, and this does very much look like the new normal.

Missing the Point of Manufacturing’s Decline

Manufacturing output per American worker is 70% of what it was in 1973

American manufacturing has a peculiar status in American political discourse, in how we’re going to be making great stuff again and the Chinese are screwing us and the unions are dead. It’s a conduit through which a lot of hopes and fears are projected, because it hearkens back to some halcyon time when blue collar workers without college degrees could have a steady job, good pay, a home, and a retirement. It turns out that’s not really the case (if you were manufacturing in the 70s, you’re retiring now, and that means if you’re an average American retiree you’re a lot more dependent on your Social Security check than you thought you’d be in your thirties), but so it goes with myths.

Anyhow, the latest version of manufacturing-as-America comes in The Atlantic in a piece that’s ostensibly about Trump having bad ideas about the economy but is really about how manufacturing is never coming back big in America. That may be, but there’s nothing so fatalistic about it as presented, and let me show you why I think that’s the case:

fredgraph

This graph presents two lines: in blue is the industrial production of the American manufacturing sector, per worker. We’re adjusting the scale so that this equals 1. So, 1 worker in American manufacturing in 1973 produces 1 unit of worth. Today, that 1 worker creates around 0.71 units of worth. Note that we’re adjusting for inflation here; in nominal terms that worker is creating a lot more dollars, but those dollars are worth less than they were in 1973.

In red, we have manufacturing capacity. That is, how much could we actually produce? Again, this is scaled so that our capacity in 1973 is 1. Today it’s around 0.85, or 15% less than what it was in 1973.

The story here is that the American manufacturing sector is more idle than it was in 1973, and making less real output per worker. Even if capacity was operating at its 1973 levels, we’d still be manufacturing less in terms of real output. We’re simply less competitive.

I don’t have the capacity to go into the why, here, but I will say that manufacturing is America is not beaten down from some unseen hand. It’s simply less efficient than it once was and holds a less imposing presence in the world than it once did. Bringing back high-paying manufacturing jobs isn’t going to do anything, and is sort of nonsensical on its face for Presidents to be talking about unless they’re considering subsidizing manufacturing wages. In the real world, somehow the American manufacturing sector must get more productive and efficient relative to the rest of the world in order to bring back American manufacturing, and that’s an issue that’s much bigger than the sector requiring greater base skill and education in order to be hired. It’s the existing sector itself which needs help and in a deep, structural way, not simply more labor.

Retirement and the American Hustle

Nothing changes unless something changes.

America can’t retire. There just isn’t enough money saved, for reasons like:
  • Decades of stagnant wages
  • Increased healthcare and housing costs
  • Decline of the pension
  • …and most importantly, American optimism
The problem isn’t just personal – it’s systemic. Pensions are underfunded with around $3T of unfunded liabilities – amounts the institutions were supposed to pay into the pensions but didn’t, hoping to get around to it later. They haven’t. It’s only going to get worse.
 
There’s a mismatch between expectations and reality which is pervasive in America, and it goes both ways. Everyone was sold the idea that each generation will be better than the previous, and it’s become so much of a given that no one is really pushing to actually make that happen… they just expect it to happen. Employers don’t pay employees in order to hoard cash and execute stock buybacks to pump their paper worth for shareholders; the wealthy are happy to underfund public education and infrastructure and healthcare because they can get around those hurdles; government expects that everything is going to be fine because markets are magic; employees don’t organize or make demands because they’ve been systemically disempowered and are just happy for crumbs.
 
There’s no architect’s union. No programmer’s union. No barista’s union. The only talk of Social Security is how to cut it. Companies are happy to pay less wages until for some reason no one has enough money to buy their trinkets. Everyone is complicit because no one can take responsibility individually for the entire mess, and there’s not enough social cohesion to make the sort of culture-wide compact to work together to solve the problem. In the end people look to the federal government to either institute some kind of socialist-light response or to back off and just let the market double-down on all the failures they already own. Neither one of those work any more because the aristocracy won, and no one wants to bother with a revolution because things are juuuuuuust good enough to let them ride a bit longer.
 
Something’s eventually going to give.