President Biden’s New Deal Budget Helps All of US

Posted on June 2, 2021 by Popular Economics Weekly

Financial FAQs

President Biden’s $6 billion 2021-22 budget proposal would rebuild America’s infrastructure and social safety net, supporting those essential workers that need it the most.

“It also represents the most substantial expansion of the federal government’s spending powers since World War II and a direct rebuttal of the small-government principles of his Republican, and even many Democratic, predecessors,” reports VOX.

Then why are 24 states terminating the additional $300 per month payments early that Biden’s $1.9 billion American Rescue Plan has extended until September, reports NY Times Binyamin Appelbaum?

The simple truth is that red states are suppressing any additional aid for their workers as much as possible in keeping with their small government principles. Why else give up $26 billion that will flow to them if they allow their workers to keep the additional benefits?

It is also a sign that Republicans will oppose President Biden’s new budget, which is really his ‘new’ New Deal that scares the daylights out of conservatives because it will show that government can work for all Americans, not just the wealthiest as it has over the past 40 years.

Biden’s budget proposal includes the a $2 trillion American Jobs Plan — which would embrace an expansive definition of infrastructure, not only to modernize America’s road and bridges, but to invest in broadband and elder care — and a $1.8 trillion American Families Plan, which would establish free higher education and expand child care, health care, and tax benefits for needy families.

“As proposed, the budget would reinvest in infrastructure and education, raise taxes on the wealthy and corporations, and meet many — but not all — of Biden’s campaign promises,” says VOX.

AtlantaFed.org

This is while the Atlanta Fed has just updated their second quarter growth prediction:

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2021 is 10.3 percent on June 1, up from 9.3 percent on May 28. After this morning’s Manufacturing ISM Report On Business from the Institute for Supply Management and the construction spending report from the U.S. Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic investment growth increased from 8.6 percent and 20.7 percent, respectively, to 9.5 percent and 22.0 percent, respectively,” said the Atlanta Fed.

Goldman Sachs estimates 9.5 percent Q2 GDP growth while the New York Fed posts a much more conservative 4.5 percent spurt.

In fact, manufacturing activity is surging with the Institute for Supply Management reporting that The May Manufacturing PMI® registered 61.2 percent, an increase of 0.5 percentage point from the April reading of 60.7 percent. This figure indicates expansion in the overall economy for the 12th month in a row after contraction in April 2020.

President Biden’s budget, if enacted, would give a boost to GDP growth for the rest of this year because it targets working people that generate most economic activity, including essential workers that provide health care, police and fire protection, because they spend the largest percentage of their incomes.

And that is just a few of its elements, says VOX. “It also proposes universal pre-K, affordable childcare, and paid leave. It also puts the climate crisis front and center, with proposals dedicated to reducing US emissions, creating jobs in the clean energy sector, and funding climate research.”

Focusing on those folks that most need the support, this budget will boost what economists maintain will give the biggest boost to economic growth. The Federal Budget has supported the wrong segments of society for too long by cutting taxes and social services, when just the opposite is needed to end this coronavirus pandemic and be ready for whatever comes next that could damage economic growth—maybe our changing climate, or another pandemic?

Harlan Green © 2021

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Some Workers Reluctant to Return to Their Jobs

Posted on May 26, 2021 by Popular Economics Weekly

Financial FAQs

CNBC.com

“In the week ending May 15, the advance figure for seasonally adjusted initial (jobless) claims was 444,000, a decrease of 34,000 from the previous week’s revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000,” says the US Bureau of Economic Analysis.

Most of the decline came from a decrease in those getting benefits through pandemic-related emergency programs. States showing the largest declines included Georgia (-8,216), Kentucky (-7,175) and Texas (-4,828), according to unadjusted data. New Jersey showed the biggest gain, with 4,384.

Along with the steady slide in the headline number, the total of those receiving various government benefits tumbled by nearly 900,000 to just shy of 16 million, according to BEA data through May 1.

The high number still receiving benefits has caused some 23 states to back out of the $300 weekly federal bonus checks as soon as June, with Florida being the latest state to announce it is canceling extended federal unemployment benefits. That’ll cut off more than 3.6 million people from getting enhanced benefits related to the pandemic that Congress has authorized to expire in September..

State governors claim that this unemployment coverage discourages workers from taking jobs, citing labor shortages. Some economists and analysts disagree, noting that several factors are preventing people from finding suitable work, including lack of child care and fear of contracting COVID-19.

The 2 million person gap between Job Openings and actual Hires in the government’s latest JOLTS report is growing evidence that there is a red-hot demand for workers after what I call the pandemic recession, even with the high number out of work and still receiving benefits.

Why the record number of job openings at the same time so many are still receiving benefits? It will take time for workers to find suitable jobs, while employers need to raise their minimum wages for essential workers in the service sector (that are the lowest paid) to attract them back to work.

Service sector employers such as Amazon say they are raising their minimum wage to $15 per hour, while Bank of America is raising the minimum wage from $20 to $25 per hour for its clerical workers.

It is perhaps why a record number of small businesses said they could not fill open jobs in April, adding to a growing national controversy over whether extra unemployment benefits are keeping scores of people from re-entering the labor force.

Some 44 percent of small businesses reported job openings went unfilled, according to the National Federation of Independent Business. The NFIB is the nation’s largest small-business lobbying group.

It is less understandable why the red states are the first to terminate extra aid to their own lowest-paid workers before September, maintaining that it is keeping them from working in jobs that probably pay less than the weekly benefits (aid that is also free $$ to the states), as I said.

It not such a good idea because cutting off the additional benefits is exacerbating the income inequality that has been a major cause of record drug use and suicide rate among high school-educated white males that have lost formerly high-paying jobs in the rust belt.

It also tells us that red states governors, (such as Arkansas Governor Asa Hutchinson in a recent NPR interview), think little of the plight of Arkansas’ own essential workers that fill most of the lower-paying jobs after having weathered one year of pandemic hell.

The good news is that workers are now getting to pick and choose what jobs they would prefer. That is just one of the changes we are seeing as the 2020’s economy begins to roar.

Harlan Green © 2021

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Why So Much Inequality?

Posted on May 17, 2021 by Popular Economics Weekly

Answering Kennedy’s Call

Epi.org

There aren’t many economists that still debate the origins of our record income inequality, the worse in the developed world, and even in some of the developing world.

A loss of $10/hour in the typical worker’s compensation is the result of employers’ successful efforts to keep wage growth down over the past 40 years, according to a new paper by EPI distinguished fellow Larry Mishel and EPI director of research Josh Bivens.

Mishel and Bivens maintain that while productivity increased 69.6 percent from 1979-2018, employees’ compensation increased just 11.6 percent, per the EPI graph.

How did this happen? The obvious reasons are the growing strength of corporations and loss of labor union bargaining power that has allowed states to pass anti-labor laws and American corporations to ship many high-paying jobs overseas with little government regulation that would mitigate the job losses of domestic workers.

But it goes deeper. It goes back to the origins of the so-called economic sciences and the economic theories that politicians utilize to rationalize their policies.

They really derive from political economics, the original pseudo-science that attempted to understand human financial behavior, which is not that difficult to understand when we are talking about dollars and sense.

The owners of companies and the capital that controlled them wanted few regulations and lower taxes. So from 1980 onward Republican administrations and Big Business began to deregulation whole industries, and the labor laws and practices that guaranteed employees their fair share of the profits under what have been called Laissez Faire or free market economic theories.

Less government oversight and lower taxation, for instance, was based on the supposition that it encouraged greater growth, since corporations would create more jobs to produce more goods and services.

Industries have become more productive, but the increased profits were kept by the owners and chief executives of those companies rather than passed on to their employees; so much so that the gap has widened between employee’s hourly compensation and productivity to a level that doesn’t guarantee the majority of today’s service workers a living wage.

That justified lower trade barriers in turn, so that consumers with their reduced incomes could afford the cheaper goods now made made overseas.

Even the Supreme Court got into the act by allowing public employees to avoid paying any fees if they so choose, even though receiving all the benefits of union membership—higher wages, pensions, worker safety, the list goes on and on.

The Supreme Court issued a sweeping ruling in 2016 that dramatically undermined unions for teachers, firefighters, police officers, and other public employees throughout the United States.

The case, Janus v. AFSCME, involved a challenge to the practice of public sector unions charging “agency fees” to employees who decline to join the union but who still benefit from the deals it bargains.

And twenty-eight states have ridden the free market banner that have “right to work” laws banning agency fees. Such laws create a free-rider problem: People don’t have to join unions or pay agency fees to get the unions’ benefits, so the unions lose members and political influence.

There is an ongoing dispute over how much of the economic pie should be going to workers vs. the owners of capital, but not the fact that it has happened. Our badly degraded infrastructure and a warming planet tell us that public works have been badly neglected that would prepare US for future catastrophes as well.

The ongoing political and economic debate is how to right the fact that most of the rewards of higher productivity have not increased the public good, but diminished it. Mishel and Bivens are helping us to see that labor must have a greater voice in that debate.

Harlan Green © 2021

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Job Openings Soar

Posted on May 12, 2021 by Popular Economics Weekly

Financial FAQs

Calculatedriskblog

“The number of job openings reached a series high of 8.1 million (yellow line in graph) on the last business day of March, the U.S. Bureau of Labor Statistics reported today. Hires were little changed at 6.0 million (blue line). Total separations were little changed at 5.3 million (red bar). Within separations, the quits rate was unchanged at 2.4 percent while the layoffs and discharges rate decreased to a series low of 1.0 percent.”

In the arts, entertainment and recreation industry, vacancies increased by 81,000 jobs, said Reuters. Vacancies also increased in manufacturing, trade, transportation, and utilities industries as well as in finance. Job openings rose in the Northeast and Midwest regions. But vacancies dropped in the healthcare and social assistance industry.

There is a red-hot demand for workers after what I call the pandemic recession. So we are essentially at the starting gate of the next growth cycle with first quarter GDP already showing 6.4 percent growth.

So economic indicators will show crazy numbers until we reach herd immunity and everyone—including teachers, day-care workers and government workers—are able to return to work. There are still 2 million fewer women and 1.5 million fewer men in the labor force than pre-pandemic levels.

This Calculated Risk graph says that companies are holding on to more of their employees with lower separations and quits, while last Friday’s unemployment report actually showed some 1 million new jobs were created, but just 266,000 above the normal seasonal rate of hiring.

The 2 million gap between Hires and Job Openings in the graph this means companies are looking for workers. But it will take time for workers to find suitable jobs, and employers perhaps to begin to raise their minimum wages for essential workers in the service sector (that are the lowest paid).

A record number of small businesses said they could not fill open jobs in April, as well, adding to a growing national controversy over whether extra unemployment benefits are keeping scores of people from re-entering the labor force. The extra $300 in jobless benefits was extended to September in Biden’s $1.9 trillion American Recovery Act.

Some 44 percent of small businesses said job openings went unfilled in April, according the National Federation of Independent Business. The NFIB is the nation’s largest small-business lobbying group.

And we have yet to see the enactment of an American Jobs Plan for massive infrastructure spending that will create even more jobs. Does that mean we will have a labor shortage with more then 8 million still out of work who say they are looking for work?

There are supply bottlenecks while companies ramp up production again, and the inflation rate is hitting new highs since the Great Recession. Will wages begin to rise as well from their lows of the last 40 years?

The consumer price index soared 0.8 percent to match the biggest monthly increase since 2009, the government said Wednesday. Economists had forecast a smaller rise. The rate of inflation over the past year jumped to 4.2 percent from 2.6 percent in the prior month — the highest level since 2008.

Wages have been held down for most workers by the rising power of corporations and weakening of labor unions since 1980. However, the trend is about to reverse as the demand for workers increases.

Will it cause the Fed to boost their short term interest rates? Fed Chair Powell doesn’t want to, but Treasury Secretary Yellen believes rates will have to rise if higher inflation continues.

Who is right? It is too early to tell. This also means the US economy is in for a wild ride this decade.

Harlan Green © 2021

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A disappointing Jobs Report

Posted on May 7, 2021 by Popular Economics Weekly

Popular Economics Weekly

MarketWatch.com

Not everyone is eager to go back to work, according to this morning’s unemployment report. The US economy added just 266,000 new nonfarm payroll jobs in April. Leisure and hospitality led the way with 331,000 jobs and governments added 48,000 new jobs.

“Both the unemployment rate, at 6.1 percent, and the number of unemployed persons, at 9.8 million, were little changed in April,” said the US Bureau of Labor Statistics. “These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the coronavirus (COVID-19) pandemic (3.5 percent and 5.7 million, respectively, in February 2020).”

Transportation/warehousing and Professional/business sectors had 153,000 fewer jobs that would be normal for this time of year, since the jobs numbers are adjusted for seasonal factors. There was a pause in hiring in those sectors probably because they couldn’t find enough workers, since there has been no slowdown in business activity in both the manufacturing and service sectors of the economy.

This is in part because the government’s various aid programs are enabling more women to stay at home until their children go back to the slowly opening schools, and many of the 8 million that were laid off are still receiving good unemployment benefits.

The good news is that the size of the labor force grew by 430,000 in April to 161 million, close to the 164.5 million working before the pandemic when the unemployment rate was 3.6 percent.

“The shortfall in new jobs in April is likely just temporary,” said MarketWatch’s Jeffry Bartash in his comments on this morning’s disappointing nonfarm payroll report. “Falling coronavirus cases and massive federal stimulus have turbocharged the economy and job openings have surged. The U.S. is still set up for a summer of strong economic growth, especially if the coronavirus is mostly squelched.”

Employment by local governments also rose 31,000 in April as more schools reopened. Some very essential workers neglected until now—bus drivers, cafeteria workers and other personnel had been unable to work with schools closed, while employment declined in retail, health care, transportation and manufacturing, as I said.

Reuters’ ICAP says “The deceleration in payroll growth this month is not an argument for easier monetary policy.  As Chair Powell keeps reminding everyone, virus-related constraints are the key variable in the outlook.  For much of the past year, the major effect of those constraints was to restrict demand. Given the large number of employers who say they cannot find enough new workers, it is clear that the deceleration in hiring in April was not due to insufficient demand.”

This is only the beginning of what will be a decade-long recovery, with much of it to come from the just-passed American Recovery Act, and upcoming American Jobs Plan, a requested total of more than $4 trillion in additional government spending that will create even more good jobs.

The real question with all this stimulus spending is what will full employment look like in the years to come? Will there continue to be a labor shortage, for instance, with the current declining US birth rate and lower immigration numbers?

It must be one reason the financial markets are boosting tech companies’ stock values (i.e., NASDAQ). They are betting on a big 5G future need for more robots and Artificial Intelligence that will be needed to supplement what could be a looming labor shortage.

Harlan Green © 2021

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The Age of Narcissism is Ending

Posted on May 6, 2021 by Popular Economics Weekly

Answering the Kennedys’ Call

PEWResearch

The election of President Biden is bringing an end to the age of narcissism, or as Tom Wolfe titled it in 1976, “The ‘Me’ Decade”. Only 30 percent of adult Americans say they still like our former Narcissist-in-Chief in the latest polls since Donald Trump’s defeat in November.

Donald Trump epitomized what psychologists have described as a Narcissistic Personality Disorder (NPR). Psychologists Jean Twenge and W. Keith Campbell described in their 2009 book, “The Narcissism Epidemic”, the destructive effects of narcissistic behavior: the breakdown of institutions that bind families and communities, thus encouraging divisive and antisocial, short-term behaviors over long-term, collective decision-making.

There is much more to the definition, of course, but psychologists are in general agreement a person with NPR, such as former President Trump, has sociopathic behavior with an almost complete lack of empathy, or regard for others.

Dennis Shen, in a London School of Economics article maintains narcissistic behavior became prevalent in baby boomers and millennials, the Gen X and Y’ers born approximately between 1946 to 1980, as they focused on their own needs rather than the needs of others.

It was a sharp divergence from the post-Depression and World War II generations, when a rare consensus within America emerged, the result of existential crises in the form of the World War and looming Cold War.

“This post-war era of togetherness saw unprecedented economic stability and trust in the state as the steward of the people,” said Shen., “The nation backed global reciprocity, exemplified during the founding of the United Nations, Bretton Woods institutions and Marshall Plan.”

And we now have a president who is explicitly restarting global reciprocity by rejoining alliances such as the Paris Accord on climate change and restoring economic stability with a ‘new’ New Deal of Rooseveltian proportions—more than $6 trillion in government spending to ‘build back’ American institutions and programs designed to heal communities and families.

And we now have a younger generation facing serious existential crises in their lives—diminished economic and educational opportunities, a deteriorating physical environment and polarized political environment that has endangered our constitutional-based democratic system.

They don’t like what America has become.  Gen Zer’s (born after 1996) are more progressive and pro-government, most see the country’s growing racial and ethnic diversity as a good thing, and they’re less likely than older generations to see the United States as superior to other nations, said a recent PEW survey.

A look at how Gen Z voters view the Trump presidency provides further insight into their political beliefs. A Pew Research Center survey conducted in January of this year (2020) found that about a quarter of registered voters ages 18 to 23 (22%) approved of how Donald Trump is handling his job as president, while about three-quarters disapproved (77%).

Millennial voters were only slightly more likely to approve of Trump (32%) while 42% of Gen X voters, 48% of Baby Boomers and 57% of those in the Silent Generation approved of the job he is doing as president.

So Americans are coming together again with the election of President Biden, who has asked “that we all do our part”. And it is the younger generations in particular that are reacting as did those of the Great Depression and World II when faced with existential threats.

Harlan Green © 2021

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American Economy Gets a New Deal

Posted on April 29, 2021 by Popular Economics Weekly

Popular Economics Weekly

BEA.gov

President Biden announced in his first ‘non-State of the Union’ address that “America is on the move again,” saying in effect that government isn’t the problem but the solution to today’s problems, including the horrific events of the past year.

We are seeing the effects of those solutions in today’s first estimate of Q1 Gross Domestic Product growth: Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021, said the BEA, reflecting the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic.

All sectors expanded, with consumer spending surging 10.7 percent, the economy adding`1.5 million new jobs. business investment jumped up 10 percent and housing investments up 11 percent in the ongoing housing boom.

Much of this is possible because of the still record low interest rates that the Fed has promised to maintain al least through next year. But consumers have benefited the most with the assistance payments, of course, so much so that disposable personal income increased $2.36 trillion, or 67.0 percent, in the first quarter, compared with a decrease of $402.1 billion, or 8.8 percent, in the fourth quarter. 

And personal saving was $4.12 trillion in the first quarter, compared with $2.25 trillion in the fourth quarter, which has boosted the personal saving rate—personal saving as a percentage of disposable personal income—to a huge 21.0 percent in the first quarter, compared with 13.0 percent in the fourth quarter, and 3-5 percent historically.

Consumers with more money in their pockets means the economic recovery has just begun and businesses will be playing catchup to the increased demand for the rest of this year, further boosting economic growth.

The American public seems to like governmental solutions to our problems, says Gallup’s Frank Newport:

“The latest update (of polling data) shows that 54% of Americans say the government should do more to solve our country’s problems, while 41% say the government is trying to do too many things that should be left to individuals and businesses. This is the highest percentage choosing the “government should do more” option since Gallup began asking the question in 1992.”

But will the rising sentiment for big government continue as President Biden asks for more spending?

President Biden outlined his American Families Plan at last night’s address that is summarized by the White House announcement:

“The American Families Plan is an investment in our children and our families—helping families cover the basic expenses that so many struggle with now, lowering health insurance premiums, and continuing the American Rescue Plan’s historic reductions in child poverty. Together, these plans reinvest in the future of the American economy and American workers and will help us out-compete China and other countries around the world.”

It is a ‘new’ New Deal that brings us out of this pandemic and the deterioration of American education, infrastructure, research & development, and environmental protection that is despoiling the planet and our ability to survive as a democracy.

“History shows that Americans tend to adopt big government initiatives when there are big problems facing the nation,” Gallup’s Newport continued. “including COVID-19, the Great Recession, 9/11, World War II and the Great Depression.”

But there has been too little agreement on how we should be paying for future generations since World War II, I said in my last column.

Let us hope we are willing to pay enough forward to win this world war against COVID-19 that is also a battle to save the liberal democracy our constitution has envisioned.

Harlan Green © 2021

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A Better Use of Economic Growth

Posted on April 26, 2021 by Popular Economics Weekly

Popular Economics Weekly

AtlantaFed

The Atlanta Federal Reserve Bank puts out a GDP now forecast of upcoming monthly GDP growth, and its latest estimate puts growth at the highest level since the 1980s, as we recover from the COVID-19 pandemic.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2021 is 8.3 percent on April 16, unchanged from April 15 after rounding,” say the Atlanta Fed. “After this morning’s housing starts report (last week) from the U.S. Census Bureau, the nowcast of first-quarter real residential investment growth decreased from 10.6 percent to 10.2 percent.

However, new-home sales’ figures Friday showed even faster residential investment growth ahead, reports the US Census Bureau. Sales of new single-family houses in March 2021 were at a seasonally adjusted annual rate of 1,021,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 20.7 percent (±23.7 percent) above the revised February rate of 846,000 and is 66.8 percent (±36.7 percent) above the March 2020 estimate of 612,000.

The problem is not finding more ways to boost GDP growth, per se, but how it will be utilized. Since the 1980s, a growing percentage of the Gross National Income derived from GDP growth has gone to ‘rentiers’, i.e., people that derive income from their assets rather than wages.

That is in part due to the huge decline in personal and corporate taxation of said wealth that has allowed rentiers to accumulate more private wealth, rather than investing in productive enterprises.

What creates GDP? The aggregate, or effective demand of all goods and services produced domestically. Economists have broken it into four components, of which consumer spending is the largest portion. The rest is made up of net exports, government expenditures, and investments.

Consumers spend on private consumer goods, so it is up to investment and government spending to build for future growth, and that has not happened because corporations haven’t been maintaining a decent level of capital expenditures, and government investments in infrastructure, education, R&D, and our social safety net that would keep workers healthy enough to be more productive have been cut sharply since the 1970s.

GDP growth has been paying too little forward for future generations since then, in other words, so taxing some of the wealth accumulated since 1980 is needed to pay it forward for future generations.

President Biden’s $2.3 trillion American Jobs Plan is meant to correct the underinvestment in the public good. He is calling for more than $1 trillion to be invested just in the various components of infrastructure, including better roads, bridges, public transportation, expanding broadband and electric grids, as well as electric vehicle use.

He is also calling for more spending on health care and the national housing shortage—more than $213 billion to “build, preserve and retrofit more than 2 million homes and commercial buildings to address the affordable housing crisis,” $100 billion to modernize public schools and early learning facilities, $180 billion in research and development of future technologies, and more.

This supports much more than infrastructure, as it fulfills every person’s basic need of food, shelter, and security.

Initial first quarter GDP comes out Thursday, and consensus predictions are for 7 percent growth. Whatever it will be, it is important that it be used in productive ways, and the just-passed American Recovery Act and upcoming American Jobs Plan begin that process of utilizing America’s GDP to support a better future for all Americans.

Harlan Green © 2021

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How High Go Housing Prices?

Posted on April 21, 2021 by Popular Economics Weekly

The Mortgage Corner

Calculatedriskblog

How high can housing prices go? They rose in double digits annually in the early 2000s during the housing bubble. But that was when the housing supply could not keep up with the demand for housing, and interest rates were low, a demand inflated by so-called ‘liar’ loans requiring no verification of income.

Housing is one of society’s basic needs, along with food and clothing. So we must pay attention to what happens to housing if we want a functioning democracy.

Demand for housing isn’t being inflated by loose credit conditions today, but housing construction hasn’t kept up with demand since the housing bubble for a number of reasons, including the pandemic.

The result is housing prices are rising fast again in states like California with its rising homeless population.

The Calculated Risk graph dating from 1976 shows the various price bubbles in the 1970s, 80s, 2007 housing bubble, and today. It shows prices rising again at almost the same clip as during the housing bubble.

A federal judge overseeing a sprawling lawsuit about homelessness in Los Angeles has even ordered the city and county Tuesday to offer some form of shelter or housing to the entire homeless population of skid row by October, according to the LA Times.

In the last homeless count in January 2020, more than 4,600 unhoused people were found to be living on skid row — about 2,500 in large shelters and 2,093 on the streets, according to the LA Times. They account for only slightly more than 10% of the city’s overall homeless population, and it’s not clear what presiding Judge Carter’s order might mean for other parts of the city.

America’s lack of adequate housing has reached crisis levels, in other words, with so many losing their homes and livelihoods during and the pandemic.

It is the reason some $213 billion of the American Jobs Act is being allotted “to produce, preserve, and retrofit more than two million affordable and sustainable places to live.”

The While House website says it pairs this investment with “an innovative new approach to eliminate state and local exclusionary zoning laws, which drive up the cost of construction and keep families from moving to neighborhoods with more opportunities for them and their kids.”

It will also help address the growing cost of rent and create jobs that pay prevailing wages, including through project labor agreements with a free and fair choice to join a union and bargain collectively.

The reasons for our housing crisis are too many to list at once. It has as much to do with income inequality as with NIMBY exclusionary zoning regulations that segregate communities.

It also has to do with our outmoded infrastructure that lacks improved roads, bridges, and mass transit systems to get to and from work centers. So outlying communities become detached from inner cities, creating high-priced gentrified ghettos.

Housing construction and sales have been the first to rally after the pandemic. Demand is so hot that the median existing-home sales price rose to $303,900, 14.1 percent higher from one year ago, I said in January. And as of the end of January, existing-home inventory fell to a record-low of 1.04 million units, down by 25.7 percent year-over-year – a record decline.

Total existing-home sales,1 https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 6.6% from January to a seasonally-adjusted annual rate of 6.22 million in February. Sales in total climbed year-over-year, up 9.1% from a year ago (5.70 million in February 2020).

“Despite the drop in home sales for February – which I would attribute to historically-low inventory – the market is still outperforming pre-pandemic levels,” said Lawrence Yun, NAR’s chief economist.

And now the US Census Bureau is saying privately-owned housing starts (construction) in March were at a seasonally adjusted annual rate of 1,739,000. This is 19.4 percent (±13.7 percent) above the revised February estimate of 1,457,000 and is 37.0 percent (±15.2 percent) above the March 2020 rate of 1,269,000.

That is a return to boom times for homeowners and buyers, but not for renters and the growing homeless population.

So governments, and the legal system in some cases, must step in to care for those that private industry cannot—since our general welfare is as important for a healthy democracy.

Harlan Green © 2020

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A Debt-Fueled Recovery Needed

Posted on April 20, 2021 by Popular Economics Weekly

Popular Economics Weekly

To: Barron’s Letters

Published: April 19, 2021

Barron’s Lisa Beilfuss cites David Rosenberg’s worries about hyperinflation (because of the Federal Reserve’s inability to keep inflation within acceptable rates), as the reason to worry about a sustainable “debt-fueled” recovery.

But rather than compare the current economic recovery from the COVID-19 pandemic to the ‘roaring 20’s’ recovery from the Spanish flu pandemic, why not compare it to our recovery from World War Two?  Fighting that war required record debt-to-GDP levels that were brought down by record growth and consumer prosperity after the war, because there was agreement that high government and private spending geared to future growth was necessary with the building of American modern infrastructure and higher education system.

Our capitalist system has always required debt to leverage higher growth and the result has been accelerated growth to reduce said debt to the historical level.  Even the CBO in a recent report stated that “Between 1946 and 2019, the deficit as a share of GDP has been larger than that (3.0 %) only twice.”

A major goal of the Biden spending bills is to reverse the record income inequality that has reduced consumers’ ability to spend without higher debt levels since 1980.  The COVID-19 pandemic has cost more lives than World War Two and devastated economic growth worldwide.  So President Biden’s focus on not only rebuilding infrastructure, but improving our social safety net and reducing the record income inequality of working families will create a more sustainable recovery. 

Harlan Green © 2021

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