Category Archives: Economics

Clinton predicted to beat Trump…because of economics

It’s probably right but I don’t think for the reason they think.

The reason a Democrat will win isn’t about polling or personalities, it’s about economics, says Moody’s. The economy is the top issue in just about every election. When the economy is doing well, the party currently in office usually wins again. When the economy is tanking, Americans vote for change.

Source: Clinton predicted to beat Trump…because of economics | Q13 FOX News

The economy is doing very well but the American middle class isn’t. It doesn’t matter how well our economy is doing in reality when the people can be convinced that it is awful.

The End of Bad Paying Jobs

For years my job was automating manufacturing systems. During that time I saw very few people lose their jobs because of projects I was involved in but I saw a lot of people reassigned and retrained. Most of them saw an increase in pay, the rest of them retired. None of them were replaced and attrition dropped the payroll of the site.

These jobs that faded away were decent paying manufacturing jobs but they were some of the most tedious jobs I’ve ever witnessed. Automating those jobs was an expensive investment but one that paid for itself within five years.

In high school I worked in a McDonald’s. I can not think of a more tedious job than the one I held there. And even though it was a minimum wage job it was stressful. I would have nightmares about working in that store that was the result of the stress.

Automation has also been arriving on the scene at McDonald’s but not to the extent it has in manufacturing. I’ve seen stores go from 15+ employees on a shift down to 5 over the years. However, this hasn’t seemed to affect the employees on the counter much.

It looks like that is changing:

McDonald’s (MCD) has been testing self-service kiosks. But Wendy’s, which has been vocal about embracing labor-saving technology, is launching the biggest potential expansion.

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”

Source: Wendy’s Serves Up Kiosks As Wages Rise, Hits Fast-Food Group | Stock News & Stock Market Analysis – IBD

A 33% increase in labor costs suddenly gives an incentive to automate that wasn’t there before.

The problem I see here is that there is not many places to reassign a fast food worker to and not much of a reason to retrain them. And while these are crappy jobs they are jobs. You can’t raise a family on what they pay but when they were part-time jobs for teenagers who were being supported by parents they were great places to get work experience. Now that will be gone and I’m not sure where teenagers will turn to get that experience.

Trump The Moderate?

This article asks a great question:

If Trump continues tacking towards the economic center, how will Clinton react to distinguish herself? Especially if she’s trying to please both her party’s urban professional vote, while trying to woo anti-Trump Republican voters at the same time?

Source: Why Clinton vs. Trump could bring out Democrats’ worst instincts on economics

Trump has been all over the place with his positions in the primaries and hasn’t been afraid to contradict himself. If he beats Clinton back to the center where does she go to differentiate her policy from his?

Of course she could just forget all of that and run on the “I’m not Trump” platform.

Cycling Means Business

Jason Walker, a Chattanooga radio personality,  vented his frustration with people riding bicycles in the street and with Chattanooga investing in bicycle infrastructure specifically along Frazier Avenue in this Facebook post.  He immediately had a whole host of his followers agreeing with him and going beyond in his comments.

A lot of people in the comments seem to have a huge misunderstanding of the economics of bicycling. If you add bicycle infrastructure to an area, even at the expense of parking spaces for cars, the businesses along the route experience an increase in sales.

Many critics argue that sacrificing on-street parking in order to build bike lanes would hurt local businesses.  However, several studies, including a 2009 study by the Clean Air Partnership in Toronto, show that shoppers who walk or cycle to a business are more likely to return and spend more money in the area than people who drive there.  The Toronto study predicted that instead of harming local businesses, bike lanes would increase commercial activity on the street.[ix]

Source: Bikeonomics: The Economics of Riding Your Bike | lasesana

This is exactly the opposite of effect of what people who view cars as the only legitimate means of transportation expect because they are in cars. People on bicycles see more of the businesses on their route and have less of a problem finding places to park so they are more likely to stop and shop along their way.

From an economic standpoint businesses win when bicycling infrastructure is added to their community.

Edge.org

Dan pointed me to this article which got me thinking about automation and what it does to jobs. Basically, it destroys them, eating at them from the bottom (unskilled) to the top (skilled) and it will eventually put us all out of “work”.

What brings me to that conclusion is this statement:

In short, what today’s flexible software is threatening is to “free” us from the drudgery of all repetitive tasks rather than those of lowest value, pushing us away from expertise (A) which we know how to impart, toward ingenious Rube Goldberg like opportunities (B) unsupported by any proven educational model. This shift in emphasis from jobs to opportunities is great news for a tiny number of creatives of today, but deeply troubling for a majority who depend on stable and cyclical work to feed families.

Source: Edge.org

Regardless of how skilled, a job is nothing more than a series of repetitive tasks. If you buy into the authors views repetitive tasks will be taken over by automation regardless of the degree of skilled required. What that leaves us with will be a series of opportunities we either must seize or we will wither away into poverty.

If you are an opportunist this is not a bad thing. You go about life engaged in your passion and seize opportunities as they arise for which you are richly rewarded.

Unfortunately, most of us are not opportunist.

Most of us keep our nose to the grindstone, whittling away at repetitive tasks, creating consumer goods that people will consume with the money they make keeping their nose to the grindstone at their repetitive tasks.

Under Sanders, income and jobs would soar

Yes, Bernie Sanders wants to increase your taxes but he also wants to eliminate your medical insurance premium and your college tuition costs. Not only that, he’d put people back to work.

Bernie Sanders’ economic plan would create nearly 26 million jobs and increase median income by more than $22,000, according to University of Massachusetts Amherst economics professor Gerald Friedman.

Source: Under Sanders, income and jobs would soar, economist says – Feb. 8, 2016

What is Democratic Socialism?

Here’s an excellent essay on why we shouldn’t run from the label “socialist”. I honestly believe that smaller government is best but with both the Ds and Rs doing nothing but increasing the size of government I’d like to see this government juggernaut we are creating work more for us, the people, than giant corporations and billionaire political donors.

Although Sanders says that America needs a “grassroots political revolution,” he is actually a reformer, not a revolutionary. His version of democratic socialism is akin to what most people around the world call “social democracy,” which seeks to make capitalism more humane.

Source: What is democratic socialism, American-style? (Opinion) – CNN.com

Bitcoin a failure?

Mark Hearn, a former developer and evangelist for Bitcoin, recently had this to say in an article written by him on what he sees as the upcoming failure of Bitcoin:

But despite knowing that Bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly. The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins.

Source: The resolution of the Bitcoin experiment — Medium

I’ll take his word that Bitcoin is a failure, I never had much faith in its long term solvency anyway. What I’m curious about is how he can justify from an ethical standpoint selling a commodity that he is convinced is now, or will soon be, worthless with no possibility of regaining any value?

 

A bit on health care in Georgia

I pointed out yesterday how Bernie Sanders’ single payer health care system would probably save most of us money, even with a tax increase. The more I think about it the more I’m convinced his plan would actually bring the cost of health care down over time due to people having access to health care at the onset of disease when it is cheaper to treat.

I’m convinced of the same thing here in Georgia with the expansion of Medicaid. However, Gov. Deal is hesitant to sign on due to the cost.

Deal, a Republican, said expansion would have cost Georgia more than $200 million in the fiscal 2017 budget (which will begin July 1). “That number would only continue to grow exponentially,” he told a joint session of lawmakers Wednesday.

Source: Ga. health care costs need limits, Deal says | The Augusta Chronicle

It might grow exponentially for the first few years but I think that would level off and we would eventually see a decline in cost due to a healthier population. Regardless of that, though, the $200 million might be well worth the money if it means making health care available to more Georgians.

BernieCare

BernieCare has been estimated to cost us $15 trillion over ten years. That’s $1.5 trillion a year to cover about 319,000,000 people which is $4,702.19 each for the year or about $90.43 per week per person. That covers everyone. With BernieCare everyone goes to the doctor when they are sick and the government picks up the bill and pays for it by taxing us $90.43 a week per person. That’s $361.71 for a family of four. Does your employer pay for your insurance? I just checked my check stub and I see that $346.02 per week is going to pay for three people’s coverage in my family. That’s my share and my employer’s share. This almost looks like a wash to me.

Trickle down economics is wrong — After a point.

The IMF has released a report hailed to be the coffin nail for Reaganomics. Basically Reagan claimed that if you put more money in the hands of the rich they will spend that money and it will fall into the pockets of the middle class. The IMF has found that rich people tend to just put what excess money they have into their investments.

I can understand this. After a certain point you are spending all the money you can and you get no substantial return on your lifestyle by spending any more.

With that in mind I’d like to suggest that maybe up to a certain level of affluence you can improve the economy by easing up on the tax burden but above that level of affluence it no longer works.

Maybe we do need to look at personal wealth along with income to determine the upper end tax bracket. Maybe if a person has a net worth of under $10 million we use the current tax brackets for taxing income. If a person’s net worth is between $10 million and $20 million then any income over $400k is taxed at 45%. For those with a net worth of more than $20 million but less than a $1 billion then any income over $400k is taxed at 75%. For those worth $1 billion or more then any income over $400k is taxed at 95%.

Note that I am saying “any income” here. Why treat earned and unearned income any different for those who are worth more tha $10 million?

 

 ‘We’re not all equal when it comes to water’

A progressive consumption tax would go a long way toward enforcing limits in water usage.

In April, after Gov. Jerry Brown (D) called for a 25 percent reduction in water use, consumption in Rancho Santa Fe went up by 9 percent.

Source: Rich Californians balk at limits: ‘We’re not all equal when it comes to water’ – The Washington Post

Carry this out through the entire economy with a progressive consumption (sales) tax and you would solve a lot of problems.

Are You Saying We Can Borrow Ourselves Into Properity?

Brad DeLong, an economics professor from the University of California at Berkeley, has made this observation.

“Isn’t the point of the market economy to make things that are valuable?” Since the debt of rich countries is “very cheap to make… shouldn’t we be making more of it?”

via Is Government Debt Too Low? – Real Time Economics – WSJ.

This actually makes some perverse sense if one is a Keynesian. Money is really cheap right now and a government, unlike a family, has forever to work and pay off this debt so, sure, borrow more money, fix up the infrastructure and then pay off the debt with the inrush of taxes from the new, mo’ better economy.

Rubio Just Needs to Grab Another Sip of Water

Rand Paul and Marco Rubio did a little jousting today over opening up trade with Cuba. Paul is for it, Rubio is against it. My opinion is with Paul and I believe Paul did a much better job of defending his position that Rubio.

“He has no idea what he is talking about…” he said. “What’s hurting the Cuban people is not the embargo, what’s hurting the Cuban people is the Cuban government.”

via Marco Rubio, Rand Paul trade barbs on U.S.-Cuba deal | Fox News Latino.

I agree that the Cuban government is hurting the Cuban people but I also know that until we resume normal trade with Cuba there can’t be free trade in Cuba. Yes, Cuban citizens will only be allowed to use the U.S. Dollar on the black market in Cuba but look at the black market that can be built.

Georgia Workers Lacking in Skills.

Georgia schools are failing their pupils. And it isn’t just the inner city schools of Atlanta it’s all over the state. We aren’t turning out students capable of writing code or maintaining factory equipment. We can’t find press operators or machinists and all the experienced workers are retiring soon.

At least that’s what the state’s High Demand Career Initiative found after thirteen meeting with more than 80 industry insiders. Their report was released yesterday.

At least 19 companies said they expect a large chunk of their employees to retire soon, and many don’t know how they will be replaced. Several others complained of a shortage of local skilled workers, particularly in the high-demand film and manufacturing industries.

That set off a scramble to fill their ranks. A Toyo Tires executive lamented that the firm had to go out of state to find maintenance workers. Ditto for LMC Manufacturing, which said it had to canvass the country because there are not enough skilled laborers here.

via Wanted: skilled Ga. workers.

We have to do something and I’m not real sure what it is.