Is This Another Upswing?

Posted on August 15, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

Something is going on in the American culture and psyche, a change that I believe will return us to a more optimistic era of hope and possibilities.

I see what Pulitzer prize-winner and Political Scientist Robert Putnam (author of Bowling Alone) and co-author Shaylyn Romney Garrett describe in their new book, The Upswing; How America Came Together a Century Ago and How WE Can Do It Again, as a return to a more progressive “We” era, a societal coming together with less divisiveness than we have experienced in recent decades.

Simon&Shuster

“Americans Hate Divisiveness, We Need to Demand More,” is the headline of a recent PEW Research poll, in which: “57 percent of Americans believe that partisan conflicts receive too much attention these days. And 78 percent say there is too little focus on important issues facing the country. But if we want something different in the political dialogue, we the people need to demand it by rejecting divisive rhetoric and rewarding substance and solutions.”

I have called recent decades the Age of Narcissism. It was a time when “what’s in it for me” topped “what’s in it for us.”

Putnam and Garrett describe American history over the past 125 years with the “I-We-I” curve, using a series of bell-shaped curves to evidence the history of “a gradual climb into greater interdependence and cooperation, followed by a steep descent into greater independence and egoism.”

There is mounting evidence we have begun such a change that resembles earlier, more progressive eras. Putnam and Garrett have called it “The Upswing”, a return to the “We” era that we last experienced in the 1960s, before the Vietnam War and killings of the Kennedy brothers and Martin Luther King Jr., tore our country apart in a de facto civil war of red states vs. blue states.

The Kennedys and MLK, Jr. were the upholders of the last “We” era before we descended into our dark ages, accompanied by a greater lawlessness and distrust of our laws and institutions.

The sixties was the decade of greater voting and civil rights, income equality, and equal opportunities in education and the workplace with the enactment of anti-discrimination laws.

I came of age when President Kennedy promised a New Frontier of peace and end to the cold war that I also believed would happen after listening to him as a student and then volunteering for the Peace Corps. Kennedy instilled a ‘can do’ spirit that anything and everything was possible when he said there were better ways to serve the country than war: “Ask not what your country can do for you, ask what you can do for your country.”

Sarge Shriver, the Peace Corps first director, then adopted Rotary’s motto for PC Volunteers, “Service Above Self.”

The descent into darkness was also a time when many Americans were in the throes of “Deaths of Despair…” said Nobel Prize-winner Angus Deaton and Anne Case, who uncovered the damage done by drug use and suicides among the rust-belt workers who had lost their industrial age jobs.

Maybe the change from the darkness to light was first noticeable during the COVID-19 pandemic, when the weaknesses of excessive individualism became evident in the partisan divide over the treatment of its victims—when literal survival required cooperation over competition, regardless of the politics or religion.

Positive changes also occurred with modern technologies such as the Internet that enabled Americans to talk to each other more freely. This may sound counter-intuitive with the ‘anything goes’ frontier mentality of its abusers and propagandists, but it has enabled the younger generations to be seen and heard much more than older generations.

Pollsters have seen the changes in our younger generations towards more communality. They are the Internet generations that communicate and get their news via cell phones and laptops, are more ethnically diverse, and less intolerant.

PEW reported in 2020, “Generation Z represents the leading edge of the country’s changing racial and ethnic makeup. A bare majority (52%) are non-Hispanic white – significantly smaller than the share of Millennials who were non-Hispanic white in 2002 (61%). One-in-four Gen Zers are Hispanic, 14% are black, 6% are Asian and 5% are some other race or two or more races.”

The earliest era of great change described by Putnam and Garrett was when citizens and parties come closer together in the turn of the last century, the Progressive era, which gained full force when Vice President Teddy Roosevelt became the President with the assassination of William McKinley in 1901.

“The Progressive movement did not eliminate polarization, to be sure, but in reflecting reformist, egalitarian, and even communitarian sentiments among leaders of both major parties, it laid the groundwork for decades of declining polarization,” they said.

There is something else bringing people together, much of it involuntary—the growing threat of climate change. The overheating and droughts in major regions of planet Earth have caused massive migrations from areas of famine and overpopulation that is creating a more global population mix.

There’s a consequent backlash that is creating anti-immigrant policies such as Brexit, but it is being countered with the so-called DEI policies (Diversity, Equity, Inclusion) policies created by progressives that increase egalitarianism, which is another way of saying it means to reduce the record wealth and income inequality fostered during the dark ages.

It will require more egalitarianism among developed countries with labor shortages such as the U.S. as we become even more ethnically and racially diverse. We have no choice but to welcome immigrants to maintain economic growth.

In fact, we see it already happening with the younger generations.

“A recent online survey found that younger generations are more optimistic than older generations about becoming wealthy in the future.  Fully 69 percent of Gen Zers and 54 percent of millennials who don’t consider themselves wealthy now said that they think that they will be wealthy someday, a survey by Lending Tree revealed, as opposed to 41 percent overall. The survey, conducted by Question Pro in early September was taken by 2,000 U.S. consumers ages 18 to 77.”

I have listed just a few of the changes for good that are coming. It’s happened in the past and WE are doing it again!

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Let’s Make Healthcare More Equal!

Posted on August 12, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

Healthcare is back in the news, and Republicans still don’t get its importance as an election issue in its continuing efforts to repeal Obamacare, the 2010 Affordable Care Act (ACA), enacted that I wrote about in 2017 in the Huffington Post.

The Republican Party is now Trump’s party, and nothing has changed. Trump’s failed effort in 2017 to repeal the health-care law was blasted at the time over the prospect of millions of Americans losing their health insurance. Senator John McCain killed Republican’s last attempt in 2017 when I first wrote about it.

“Americans have just avoided another health care disaster in voting down the Senate’s ‘skinny’ Obamacare Repeal and Replace bill,” I said then. “Even though maintaining most of the taxes to pay for the Medicaid portion, it would have made insurance coverage prohibitively expensive for those older and sicker users with the removal of the private and employer mandate requirements that would cause younger and healthier people to leave the insurance markets.”

“Republicans’ Obamacare repeal bill would leave 17 million more people uninsured next year, and 32 million more in 2026, the Congressional Budget Office said in a 2017 estimate. Premiums would double by 2026…By 2026, three quarters of the population would live in areas with no insurers participating in the non-group market, due to upward pressure on premiums and downward pressure on enrollment, the report found.”

This is even “Although overshadowed in the national political discourse by discussions about the importance of the economy, immigration, or abortion, voters have expressed that health care continues to be one of their highest priorities,” said a recent Brookings commentary.

“In fact, a May 2024 poll by Pew found that health care was the third-highest issue priority for voters, garnering a robust 57% from respondents”, continued Brookings.

Yet former President Donald Trump on the 2024 campaign trail said once again that he is “seriously looking at alternatives” to the Affordable Care Act if he returns to the White House, reports the NYTimes, “reigniting his longstanding crusade against former President Barack Obama’s signature health-care law.”

Then why do Republicans continue to attack Obamacare when it is so popular? It’s total self-interest, the hubris of the entitled, now in stark relief. Republicans have opposed almost any government-run social welfare legislation. Remember Bush II’s attempts to privatize social security, which would have raised its cost astronomically and given his Wall Street backers a multi-billion-dollar windfall?

This first became evident in Ronald Reagan’s 1980 original campaign slogan, “government is the problem”, which was a ploy to divert at least $1 trillion from wage earners to the holders of capital by busting the labor unions and cutting taxes for the wealthiest. It was the start of a new Gilded Age that created great wealth for the top 10 percent and the great inequality we have today.

America now has the worst income inequality in the developed world, according to the CIA World Factbook. And studies have shown that those countries with the most inequality also rank lowest in healthcare benefits.

The U.S. was in 106th place of the 149 countries in income inequality as ranked by the CIA’s World Factbook; with a Gini inequality index of developing countries like Peru and Cameroon in 2017. Whereas Finland and the Scandinavian countries are at the top of equality rankings, Germany and France are 12th and 20th, respectively, as I’ve highlighted in past columns. The higher the index, the greater the gap between wealthy and poorer citizens of a country’s population.

Another June 2024 Hart Research And Protect Our Care Poll cited by Protect Our Care, a social welfare nonprofit, found that over 60 percent of voters view Obamacare favorably.

Its many features include pre-existing condition coverage and no-cost preventive care, as well as allowing young adults on parents’ insurance. There is also broad support (82% favor, 47% strongly favor) for permanently lowering the cost of premiums for people who buy insurance through the ACA.

ProtectOurHealth.org

A recent NY Times article reported that more than 45 million people are enrolled in Affordable Care Act-related coverage, according to a recent report from the Department of Health and Human Services. A record number of people — more than 20 million — have signed up for plans on the act’s marketplaces this year, according to the Biden administration.”

What would happen if Republicans return Donald Trump to power? Americans already have the worst health outcomes in the developed world, precisely because America is the only developed country—in fact, even of undeveloped countries—that doesn’t have universal coverage.

The result is one of the highest birth death rates, as well as diabetes, heart and other infectious disease rates—which are diseases usually associated with poorer, undeveloped countries and regions.

On the other hand, a 2016 Commonwealth Club study lists Obamacare’s benefits:

“…evidence indicates that the ACA has likely acted as an economic stimulus, in part by freeing up private and public resources for investment in jobs and production capacity. Moreover, the law’s payment and other cost-related reforms appear to have contributed to the marked slowdown in health spending growth seen in recent years.”

The accrued savings in health care spending relative to their projected growth prior to the ACA are substantial: Medicare alone is now projected to spend $1 trillion less between 2010 and 2020.

The lobbies behind the Obamacare repeal effort have succeeded in making more Americans ill. I don’t even want to imagine what percentage of the 32 million would ultimately lose their coverage, if Trump keeps his promise to repeal Obamacare.

Senator McCain said back then that now is the time for Republicans and Democrats to work together in “regular order” to craft something better, maybe a universal healthcare bill that insures all Americans?

That would truly make Americans healthier.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Consumers Keep Shopping

Posted on August 8, 2024 by Popular Economics Weekly

Financial FAQs

It’s no secret why the US economy is still growing and fully employed. Consumers have kept spending, and such activity accounts for two-thirds of US economic activity these days. So, it’s extremely important to track how long consumers will continue to spend, and when they begin to save more and spend less.

The best read on spending is how much they borrow, and they are borrowing less. It’s because the Fed has upped their borrowing costs with the Prime Rate now 8.5% and credit card borrowing rates above 20%.

FREDconsumercredit

The St Louis Fed’s consumer credit graph shows the sharp drop in borrowing since consumers’ post-pandemic spending splurge. It sends a warning signal that consumers are becoming tapped out and may begin to save more. Recessions begin when that happens.

Borrowing turned negative during the Great Recession of 2008-09 and after the brief two-month post-pandemic recession (gray bar) in the above graph, for instance.

FREDpersonalsavings

Consumers also began to save more during those recessions. This graph portrays the large uptick in personal savings in 2020 after the same post-pandemic recession. But it has returned to a post-pandemic low since. The question then becomes how much longer can consumers live with depleted savings and begin to save more in such uncertain times?

In fact, a British Lord JM Keynes was the first to identify the cause of modern recessions in 1936 during the Great Depression, when he wanted to understand what had caused it.

He said it was when citizens spirits were low; he called it their “animal spirits”; and they began to save more and spend less. It’s just an economic way of saying consumers were saving more of their income for the bad times; when the unemployment rate ultimately reached 25 percent.

Keynes said, “Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits — of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.”

Modern economic theory has evolved into what is now termed behavioral economics, because consumers’ confidence in their future must be taken into account. And it is easily shaken, as Nobel Prize Laureates such as Robert Shiller have explicated in books like Irrational Exuberance, where many actions to buy and sell—“the spontaneous urge to action”—are not dependent on research, or news that they may not be able to adequately access, but hearsay and rumors.

That is perhaps a harsh judgement on how consumers behave, and also why consumer confidence has been down of late, even though second quarter economic growth doubled to 2.8 percent from 1.4 percent in Q1 in its first reading.

It’s probably also why the Conference Board’s latest Consumer Confidence Index is showing growing pessimism, per Conference Board Chief Economist Dana Peterson, in its latest release:

“The proportion of consumers predicting a forthcoming recession ticked up in July but remains well below the 2023 peak. Consumers’ assessments of their Family’s Financial Situation—both currently and over the next six months—was less positive. Indeed, assessments of familial finances have deteriorated continuously since the beginning of 2024.”

Consumers shouldn’t be blamed for their pessimism, despite being fully employed. Prices are still 20 percent higher on average than before the pandemic. But their moods should considerably improve if and when the Fed finally begins to cut interest rates, and their fears of an upcoming recession lessen.

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

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When Will Housing Recover?

Posted on August 7, 2024 by Popular Economics Weekly

The Mortgage Corner

With the Federal Reserve saying it is about to cut rates, will the housing sector finally come out of its own recession? All the indicators of housing health—existing-home sales, new-home sales, construction, and for sale inventories—are at multiyear lows, mainly because the Fed believes its only inflation fighting tool is restricting credit via higher interest rates.

FREDexistinghomesales

For-sale inventories have edged up some 40 percent this year, as existing homeowners see a chance to either move to a smaller unit, or into a retirement home now that mortgage rates are plunging. But existing-home sales are currently just 3.89 million units, per the FRED graph, far from its longer-term 4-5 million unit average—as much as 7 million during the 2005 housing bubble.

We have a housing shortage of somewhere between 1-3 million residential dwellings, including owner-occupied and rental units, without considering housing for the homeless.

But what happens if the Fed waits too long to ease up on the brakes, job losses continue to climb and the overall economy goes into recession? That seems to be happening with last week’s bummer of an unemployment report, and financial market interest rates are reacting after more than two years of sky-high mortgage rates, for starters.

Mortgage rates decreased across the board last week and mortgage application volume reached its highest level since January of this year, according to the Mortgage Bankers Association (MBA).

“The 30-year fixed rate fell to 6.55 percent, reaching its lowest level since May 2023, following doveish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. 

FRED30yrfixed

The average rate for a 30-year mortgage backed by the Federal Housing Administration for entry-level and first-time homebuyers was 6.49% (that are backed by government-insured bonds), down from 6.69% the previous week, the 15-year was down to 6.03% from 6.27% the week before, and the rate for adjustable-rate mortgages was down to 5.91% from 6.22%, according to FNMA.

Most of the mortgage activity was in refinance, up 60 percent in a year, says the MBA. Homeowners have waited this long for the opportunity of a lower interest rate. Home purchases have barely budged; the MBA’s purchase index is down 11 percent in a year, mainly because home prices are still increasing 4-5 percent per year, and only the highest credit scores—upwards of 760—get the best rates.

Credit standards have barely eased, in a word. A score of 680 was acceptable to Fannie and Freddie for their best conventional mortgage rates prior to the Great Recession. The Fed’s inaction has only made matters worse for homebuyers (and therefore renters) due to the housing shortage.

What do I see for the rest of this year? It depends on the Fed’s actions. If it drops rates, then more homes become affordable, and more homes can be built because construction costs are controlled by the Fed’s short-term rates.

Fixed conventional 30-year mortgage rates set by Fannie Mae and Freddie Mac that guarantee most conventional loans (i.e., not government insured or privately held by banks) had been at or below 5 percent since the Great Recession of 2008-09 (gray bar in 30yrfixed graph is pandemic recession), before they began their upward spike in 2022.

It’s a long way back down that interest rate mountain for housing to become affordable again and many more homes built to ease the housing shortage. A Fed-engineered recession will bring down interest rates and housing prices sooner, but that also means fewer working folk can afford them, so who will it benefit?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Federal Reserve Now Behind the Curve?

Posted on August 2, 2024 by Popular Economics Weekly

Popular Economics Weekly

FREDunemployment

Well, now it has happened. Powell’s Federal Reserve may have waited too long to begin the rate cuts. The financial markets think so, at least, as a stock selloff has begun and bonds are rallying in a flight to quality, as fears of a looming recession are now in the air.

It’s understandable, as the unemployment rate has been steadily rising from its low in January 2023 of 3.4 percent to 4.3 percent in July 2024–the beginning of a definite trend. Average hourly wage increases have declined to 3.6 percent, falling in line with the declining inflation figures that we reported last week.

It is the first time since July 2022 that retail inflation as measured by the U.S. Consumer Price Index (CPI) has turned negative.

The Consumer Price Index has now had two months of zero price increases. It could have been predicted because consumers have known for months that stores were discounting and shopped more at big box retailers like Target, Walmart and Costco.

Most alarming isn’t the lower job creation total, though, but that most new jobs were in the lower paying service sector that had 80,000 of the 114,000 jobs total, mostly in Leisure activities, Education & health care. That means job growth is still dependent on consumer spending, and consumers have had to borrow like crazy to keep spending, which can’t go on forever.

The manufacturing sector, which depends on capital expenditures (i.e., investments), added just 1,000 jobs. The Institute for Supply Management’s manufacturing index slid to 46.8% last month from 48.5% in June. Numbers below 50% signal the manufacturing sector is shrinking.

“U.S. manufacturing activity entered deeper into contraction,” said Timothy Fiore, chairman of the ISM survey. “Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions.”

Those remarks tell us exactly what is on the line. The Fed now must play catch up once again because of its fixation on theories that are not applicable to a post-pandemic economy which had a temporary inflation bulge due to COVID-19 caused supply shortages.

And U.S. factory orders fell 3.3% in June mostly because of weaker demand for passenger plans and military aircraft, but the ongoing slump in manufacturing showed no sign of ending.

The one bright spot in the report, according to MarketWatch’s Jeffry Bartash: So-called core orders, a measure of business investment, rose by a healthy 0.9%. Investment has barely risen in the past year, however.

The weak factory shipments in the past year reflect an ongoing slump among manufacturers due to high interest rates and lukewarm consumer demand for big-ticket items such as new cars.

But part of the car problem was a cyber-attack on car sales. Sales of new cars and trucks rebounded in July after auto dealers fixed their computer systems following a major cyberattack and were able to complete thousands of delayed purchases.

So auto sales increased at an annual rate of 15.8 million last month, up from 15.2 million in June, according to Ward’s Intelligence. An estimated 600,000 sales in June were affected by a criminal attack on dealers’ computer networks as part of an attempt at extortion, though sales of new cars and trucks in the U.S. are still being depressed by high interest rates.

The bottom line is that no country was exempted from the effects of the COVID-19 pandemic that killed some 6-7 million people.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Let’s Make America More Equal Again!–Part 2

Posted on August 1, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

Piketty-Saez

Why did our income inequality begin to worsen in 1980, as can be seen from the above graph? The Arab-OPEC oil embargo of 1973 was the first indication that Big Business under the newly created Business Roundtable of corporate executives wanted more of the national income pie.

No one liked the long gas station lines and fears America could run out of oil, so it was relatively easy for fear mongers to push through economic changes that lessened the incomes of working folk and increased the incomes of Big Business.

The fossil fuel industry needed more money to find new oil sources, and create new technologies such as fracking, so they wanted a larger income share, which was achieved by suppressing wages and cutting taxes without cutting spending. and it became a national security priority with the ongoing cold war and arms race that followed.

The Reagan administration ran up the first $400 billion federal budget deficit during his eight years in part because tax rates for the wealthiest were slashed. The highest personal income tax rate was first reduced from 70 to 50 percent in 1981, then down to a 28 percent maximum personal tax rate in 1986 when he was re-elected.

Because most of the income gain went to the top 10 percent, the Reagan tax cuts became known as ‘trickle-down” economics. It could also be called “stealth economics,” because Wikipedia cites at the time, “people weren’t substantially informed about the tax cuts, as an ABC News Poll in September 1986 showed that 63% of Americans didn’t know enough about the Tax Reform Act of 1986 to say if it was good or bad.”

Republicans sold it to the public with an unproven theory. A Doctoral student named Arthur Laffer in the 1970s had convinced conservative Republicans with a diagram on a napkin (the so-called Laffer Curve) that lower taxes gave people the incentive to work harder and earn more, whereas higher taxes discouraged work.

It’s hard to believe such a theory today because the federal budget deficit only grew under the Republicans’ trickle-down theory. GW Bush created the first $1 trillion deficit, and Donald Trump’s added another $5 trillion to the federal budget deficit with his tax cuts. That’s as good proof as any that lower taxation rates didn’t increase tax revenues enough to pay down the extra debt as promised.

Perhaps the most shameful result of the redistribution of Americans’ wealth, the richest country in the world, was we now had the worst income inequality of developed countries, as measured by the CIA’s authoritative World Factbook.

It measures the income inequality of countries with what is called the Gini Index that calculated the percentage of wealth held by a country’s different socio-economic brackets. A higher percentage means a larger share of a nation’s income is held by the wealthier segment of its population.

“The more nearly equal a country’s income distribution, the lower its Gini index, e.g., a Scandinavian country with an index of 25,” says the World Factbook. “The more unequal a country’s income distribution, the higher its Gini index, e.g., a Sub-Saharan country with an index of 50. If income were distributed with perfect equality the index would be zero; if income were distributed with perfect inequality, the index would be 100.”

The latest US Gini Index coefficient of family income was 39.8 percent, which is even higher than Russia’s, and close to that of African and South American Third World countries, whereas the European Union averaged 30.8 percent in its most recent report.

That is why two out of three Americans are dissatisfied with the way income and wealth are currently distributed in the U.S. This includes three-fourths of Democrats and 54 percent of Republicans, according to a Gallup poll, I said last week.

It is also why much of that inequality is in the Midwestern rust belt states that lost blue-collar manufacturing jobs during the globalization and multi-nationalization of US corporations that President Trump promised to bring back again.

It is also why an election-denier even won one term as President and can endanger our Democracy with a Supreme Court majority now giving him a helping hand.

The most efficient way to right the inequality is to bring back tax rates that prevailed during Americans’ most prosperous times, the 1950s to 1970s when the maximum personal tax rate was 70 percent, or even higher.

The maximum tax rate was 92 percent during President Eisenhower’s administration because we were building the nation’s post-WWII infrastructure and modern technologies, as well as going to the moon.

President Eisenhower was reputed to have said, “Because high corporate tax rates create incentives for big business to spend on things like new locations, new hires, new equipment and product research and development which are deducted from taxable earnings, in other words, it’s better to spend a majority of earnings on expansion than to horde it and pay Uncle Sam 90% of it.”

No one likes higher taxes, of course. And much of the middle class bought into Reagan’s myth of trickle-down economics that caused its demise and poverty levels we have today. But if Americans won’t pay the bill for modernizing the US economy, rather than put off payment with more borrowing, America’s record income inequality can only get worse.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Plenty of Available Jobs!

Posted on July 31, 2024 by Popular Economics Weekly

Financial FAQs

As a precursor to July’s unemployment report, the Labor Department’s JOLTS report that measures the number of job openings—jobs waiting to be filled—has just come out. The number of openings is still the highest in decades, per the FRED graph (it peaked during the pandemic shutdown).

“The number of job openings was unchanged at 8.2 million on the last business day of June, the U.S. Bureau of Labor Statistics reported. Over the month, both the number of hires and total separations were little changed at 5.3 million and 5.1 million, respectively.”

This means there aren’t enough workers to fill those 8.2 million job openings and 5.3 million hires in June. Our economy remains fully employed, despite the Fed’s attempts to restrict the number of hires by keeping interest rates high.

Why do they want higher unemployment when one of the Fed’s twin mandates is maximum employment (with stable inflation)? Because many of the Fed Governors seem to subscribe to an economic theory from the 1970s by the conservative Nobel Prize Economist Milton Friedman who postulated that the amount of money in circulation (monry supply) controls economic activity. Therefore the Fed has reasoned keeping interest rates high to restrict the money supply will slow growth enough to control inflation.

But this inflationary surge was caused by worldwide supply shortages from the pandemic shutdown that led to a temporary inflation surge, not too much money in circulation. Inflation has declined despite the abundance of money still in circulation to pay for our economic renewal— infrastructure projects and computer chip factories, for starters—for which $trillions are needed.

FREDjobopenings

The inflation decline has been corroborated while second quarter GDP growth doubled from 1.4 percent to 2.8 percent, I reported last week. Despite such a growth surge, its price index for gross domestic purchases increased just 2.3 percent in the second quarter, compared with an increase of 3.1 percent in the first quarter. The personal consumption expenditures (PCE) price index increased just 2.6 percent, compared with an increase of 3.4 percent in Q1.

These declining inflation rates are telling us it’s time for a rate drop. But are consumers getting the message? The Fed’s money tightening has been making consumers more cautious in their outlook but they aren’t seeing much light at the end of the inflation tunnel. The Conference Board’s latest Consumer Confidence Index is still showing pessimism.

Conference Board

Conference Board Chief Economist Dana Peterson said in its latest release, ““The proportion of consumers predicting a forthcoming recession ticked up in July but remains well below the 2023 peak. Consumers’ assessments of their Family’s Financial Situation—both currently and over the next six months—was less positive. Indeed, assessments of familial finances have deteriorated continuously since the beginning of 2024.”

Consumers shouldn’t be blamed for their pessimism, despite being fully employed. Prices are still 20 percent higher on average than before the pandemic. But their moods should considerably improve when the Fed finally begins to cut interest rates, and their fears lesson of an upcoming recession.

We are at the beginning, not the end of the post-pandemic recovery, in other words, which could continue for most of this decade and is generating many new high-paying jobs.

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Make America More Equal Again!

Posted on July 30, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

Piketty-Saez

I have a suggestion for a campaign motto I first wrote about in a 2017 Huffington Post piece that could give a boost to VP Harris’s presidential campaign.

Instead of Trump’s slogan, “Make America Great Again.” let’s “Make America More Equal Again,” just as it was in the 1960’s and 70’s, when we had a thriving middle class in which children could hope to exceed their parents’ station in life.

It was our thriving middle class as portrayed in the above graph of pre-tax income that kept the more extreme elements of both political parties and persuasions at bay, so that Republicans and Democrats talked to each other. A middle class will only thrive where there is less income inequality, something that most well-meaning Americans support.

But that was then and we live now, when most children of retiring baby boomers do not hope to exceed the economic status of their parents, as income inequality has worsened to levels last seen in the 1920s.  Household incomes have stagnated since the 1970s, and the top income earners since the Great Recession now have garnered almost all the increase.

The Great Recession was brought on by the deregulation boom of the Clinton and GW Bush presidencies and a greater inequality that peaked in 2012 per the Piketty-Saez graph. So why not create programs that “Make America More Equal Again?”

That is why two out of three Americans are dissatisfied with the way income and wealth are currently distributed in the U.S. This includes three-fourths of Democrats and 54 percent of Republicans, according to a Gallup poll.

Overall, the share of Americans living in middle-class households has declined from 61 percent in 1971 to 50 percent, reported a 2015 Pew Research study. The hollowing out of the middle class has been a source of consternation among many economists, politicians and the public at large, says those surveyed. They say as Americans move toward the economic extremes it is harder to find common ground, and a common sense of what it means to be an American.

Much of that inequality is in the Midwestern rust belt states that lost blue-collar manufacturing jobs during the globalization and multi-nationalization of US corporations that President Trump promised to bring back again.

President Trump was no dummy in recognizing this fact. Then how could Democrats become so blasé and oblivious to this fact among their former supporters? Everyone saw it coming; the disenfranchisement of whole segments of working-class voters that had descended into depression and drug use in those formerly blue and Democrat-voting states.

There were many suggestions of how to bring back higher-paying jobs during Trump’s term, but he only succeeded in enriching the top 1 percent of income earners with his tax cuts. He couldn’t pass an infrastructure bill, did slightly alter NAFTA by drastically raising import tariffs (even on Canadian lumber and dairy products, which raised their prices); built very few walls but imprisoned immigrants seeking asylum at the southern border in camps, and separated immigrant mothers from their children.

Trumps was also unsuccessful in recalling Obamacare that has benefited more than 20 million Americans.

VP Harris has a much better record to run on. For instance, Biden’s Inflation Reduction act is expected to fund $800 billion in green-energy projects, invest $50 billion to foster building computer chip factories, and $1 trillion to fund infrastructure projects that modernizes our public infrastructure; from roads and bridges to our energy grid and water and sanitation facilities.

There are many reasons for Democrats and even truly populist Republicans to support programs that increase income equality in the coming years. But they can’t be about building more walls. A robust and more politically temperate American middle class must include Americans of all nationalities and ethnicities.

A good start would be to bring back the Child Tax Credit that was first enacted in 1997. A better version recently passed the House with a huge majority but its renewal is now stalled in the Senate by Republicans.

The American Rescue Plan Act of 2021 temporarily expanded the child tax credit for the 2021 tax year to $3,600 per child younger than age 6 and $3,000 per child up to age 17. The expanded child tax credit reached over 61 million children in more than 36 million households, and funds were primarily used for child care, food, housing and other basic needs. In 2021 child poverty fell to its lowest level ever in America, but in 2022 Congress did not renew CTC expansion, and child poverty surged by 41%.

Bringing back the middle class is a slogan of the Harris campaign. A corollary can be “Let’s Make America More Equal Again.” Renewal of the CTC that decreases child poverty is perhaps the best way to boost our middle class; by giving hope to our youngest that they might again be able to better their lives.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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An End to the Greater Lawlessness?

Posted on July 26, 2024 by Popular Economics Weekly

Answering Kennedy’s Call

I believe we are at another turning point in history, a return to an era of lawfulness that one political party has ignored since the deaths of JFK, Brother Bobby Kennedy, and Martin Luther King, Jr.

And that’s for a few reasons. First was Joe Biden becoming our President, defeating the most lawless president in history, now a convicted felon, and enabling legislation that has given more rights to Americans, rather than taking them away.

Secondly, President Biden has chosen VP Kamala Harris to succeed him in the upcoming presidential election, a former District Attorney and California Attorney General, who understands lawlessness and lawbreakers.

Who would believe events could turn so quickly, from a MAGA Trumpocracy looking backward and promising to destroy our democracy, to a Black-Asian woman who is already exciting many of the younger generation by saying we should look forward to a brighter future?

The JFK assassination on December 22, 1963, was a turning point for me—from hope in Kennedy’s New Frontier to a better future and end to the Cold War, to the hopelessness of a Vietnam War and all that followed.

It reminded me in many ways of the 1960s when there was just as much social unrest and different ideas of democracy. This was the era of McCarthyism and communist witch-hunting, right wing against left wing political views, the civil rights movement, and an unpopular war in Vietnam that was fracturing American communities.

I coped with the dysfunction and cynicism then by searching for communities that could mirror my values and ideals by working in public service organizations and as a Peace Corps Volunteer.

It’s been a long wait for the return to the optimism and can-do spirit I experienced in the 1960s. I began to understand why when I began writing about what was then called the Age of Narcissism.

Social historian Christopher Lasch was perhaps the first to broach the subject in various critiques of modern American society. This included his 1979 best-seller, The Culture of Narcissism: American Life in an Age of Diminishing Expectations that took “what was still mainly a narrow clinical term and used it to diagnose a pathology that seemed to have spread to all corners of American life,” per a NY Times summary of his book.

Former President Trump is a man who epitomized such narcissism and has been diagnosed by multiple mental health professionals with a Narcissistic Personality Disorder (NPD), “using other people as instruments of gratification even while craving their love and approval,” in the words of Lasch.

Lasch saw this as a societal pathology that took individualism to its destructive extreme of ‘me first’ over any concern for others with the breakup of communities and headlong rush to a post-WWII, consumer-driven economy. The extended family was transformed into the nuclear family of a married couple with children; grandparents migrating to senior living centers; as the growing middle class moved to the suburbs and away from traditional family and community values.

“In Lasch’s definition (drawn from Freud), the narcissist, driven by repressed rage and self-hatred, escapes into a grandiose self-conception, using other people as instruments of gratification even while craving their love and approval,” said the review. “Lasch saw the echo of such qualities in “the fascination with fame and celebrity, the fear of competition, the inability to suspend disbelief, the shallowness and transitory quality of personal relations, the horror of death.”

Is this just the beginning of an end to the Age of Narcissism, a turning point away from the worship of celebrity? I believe so. And who better to turn that page than such a highly qualified woman, former Vice President, and maybe our first female president?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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Much Improved Q2 Economic Growth

Posted on July 25, 2024 by Popular Economics Weekly

Financial FAQs

Today’s second quarter Gross Domestic Product (GDP) grew 2.8 percent, double first quarter’s 1.4 percent, which will give a huge boost to confidence that no recession is imminent, but also enough ammunition for the inflation hawks that say inflation is still too high.

BEA.gov

This is when the BEA said the price index for gross domestic purchases increased just 2.3 percent in the second quarter, compared with an increase of 3.1 percent in the first quarter. And the personal consumption expenditures (PCE) price index increased just 2.6 percent, compared with an increase of 3.4 percent.

These are declining inflation rates that affect consumers and tell us it’s time for a rate drop. Gas prices have plunged, as have grocery prices.

But I find it worrisome that manufacturing is still faltering. We won’t see a full recovery from the pandemic otherwise, because manufacturing is part of our infrastructure modernization, as well as the CHIPS Act renewal that is bringing back the microchip factories important to our national security.

The services sector is powering our growth at present, which includes health care, leisure and hospitality, and means consumers are still going on vacation, as can be seen from the crowded airports and highways.

MarketWatch’s Jeffry Bartash reports the first reading of the S&P U.S. services index of purchasing managers climbed to a 28-month high of 56.0 in July, from 55.3 in the prior month. Numbers above 50 signal growth.

The service side of the economy — retailers, banks, hospitals and the like — employs most Americans and has driven the expansion since the pandemic, said Bartash.

The preliminary U.S. manufacturing PMI, however, fell to a six-month low of 49.5, dipping back into contraction territory. Manufacturers are even more important today to win the cold war and actual wars that are a major reason authoritarian governments still exist.

What is powering most of the expansion? The Federal Reserve’s consumer credit measure for May—the 2nd month of the second quarter—just showed a big jump in consumer borrowing, I said last week. Total consumer credit rose $11.3 billion in May, up from a $6.5 billion gain in the prior month, per the Federal Reserve. 

Consumers’ personal savings have shrunk, which is why they are now even more dependent on credit, and why I’ve been saying such spending can’t continue with the sky-high 8.5 percent Prime Rate translating to 20 percent plus credit card rates.

And how about the housing market? Both existing and new-home sales are declining to post-pandemic lows because of excessively high construction costs and mortgage rates, at a time when we need more housing than ever.

When will the Fed get the message?

Harlan Green © 2024

Harlan Green on Twitter: https://twitter.com/HarlanGreen

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