Voters Were Right About the Economy. The Data Was Wrong.
Here’s why unemployment is higher, wages are lower and growth less robust than government statistics suggest.

Before the presidential election, many Democrats were puzzled by the seeming disconnect between “economic reality” as reflected in various government statistics and the public’s perceptions of the economy on the ground. Many in Washington bristled at the public’s failure to register how strong the economy really was. They charged that right-wing echo chambers were conning voters into believing entirely preposterous narratives about America’s decline.

What they rarely considered was whether something else might be responsible for the disconnect — whether, for instance, government statistics were fundamentally flawed. What if the numbers supporting the case for broad-based prosperity were themselves misrepresentations? What if, in fact, darker assessments of the economy were more authentically tethered to reality? (...)

“The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.”

 rgio wrote:

AFAICT economics has blithely ignored or underestimated the difficulty of transitioning into a new industry, esp. when workers are coming from jobs that didn't require much skill or didn't have skills that applied to the new industry. It's psychologically daunting and isolating. And while some American re-training programs are well designed, they typically offer insufficient stipends for people to live on while they re-train. 

The US has been through this before. The steelmaking areas have suffered long-term decline. Even in areas like the Lehigh Valley, PA where employment % has rebounded from the loss of Bethlehem Steel jobs, household income levels are below the US average. 

 NoEnzLefttoSplit wrote:

agreed...cos made money and also helped keep inflation in check for 30 years. 
but like the article said, everyday low prices are no good if you don't have a job and are strung out on opioids. 

besides china, the other big shift was specialization, which also became an issue during the pandemic. An auto mfg might have hundreds of vendors, but for each part maybe just one or two mfg. 

this is in today's issue:

China’s Xi Is Building Economic Fortress Against U.S. Pressure

As Trump turns up the heat on Beijing, China is trying to become more technologically self-sufficient, but its efforts have a significant cost

Instead of relying on foreign firms for robots and medical devices, China is now making more of its own. Chinese-made solar panels are replacing some of the country’s need for imported energy. The success of China’s electric-vehicle makers and artificial-intelligence upstart DeepSeek has ignited fears that China might even eclipse the West in some cutting-edge sectors.

Beneath those wins, however, Xi’s industrial policy is hugely expensive, eating up state resources as government revenues are stagnating. One estimate by the Washington-based Center for Strategic and International Studies put China’s annual spending on industrial policy at around $250 billion as of 2019

https://www.wsj.com/world/chin...

 NoEnzLefttoSplit wrote:
This paragraph is MAGA in a nutshell.  There are 2 groups, the ones described here:

But, the economists find, the people who were hurt by the China Shock did not recover. Manufacturing workers did not transition to these new sectors. The economists find that the people who took the new jobs, concentrated in the service sector, were often newcomers and demographically different, including immigrants, U.S.-born Latinos and younger workers with college degrees. Meanwhile, the ladders in manufacturing that once provided workers without a college diploma a solid wage and upward mobility were kicked over. The research on the China Shock had already illuminated why so many Americans have been swayed by President Trump's brand of populist, nativist politics. This new installment is even more eye-opening on that front.

And those that use the anger of this group for their personal gain.  

Undereducated, manufacturing workers couldn't find work and didn't have transferrable skills... so they blame education and immigrants (who do certain jobs many Americans won't).   These folks were told at an early age that they could have a nice, comfortable living by working in the mill, the plant, the factory... and then it all disappeared after they had under-performed in school.  There is no way out...and they're pissed.  What's the point of being angry with yourself.  The American Dream achieved through rugged individualism is just too damn hard.  It's a hell of a lot easier to blame everyone else.

Stupid and racist creates angry, and the selfish people figured out they could get even richer if they had that anger directed at policies that would help them keep their money.   Any person in America who somehow believes their lives are improved when billionaires pay less tax deserves everything they (don't) get.
 

 black321 wrote:

Agreed. I remember similar charges being levelled against Japan in the sixties and seventies. I don't think offshoring industry per se is the main issue but rather the wider political context. The Chinese state has actively pursued a policy of obtaining a monopoly on industrial expertise by a combination of buying out foreign companies to get their know-how and then price-dumping the resulting products to force any remaining foreign companies they don't control into bankruptcy and then buying them up cheaply or watch them go under. I can understand why the Chinese state would want to do this, as they want to be the very hub of the world economy, but for far too long western nations assumed that China was just another international market where the principles of fair trade apply or will in the near future as it transitions to democracy. 

OTOH to vilify China would be far too simplistic. A lot of western companies have earned massive profits doing business with China (which is what business is all about) and open trade between China and the west should be sought, at least in an ideal world where we were all playing by the same rules. But, we are not.

Prior to Trump's reelection I saw positive signs in the move towards reshoring critical industries due to the exposure to supply chain risks that became manifest during corona. Now, it is all just a mess. I have no idea what is going to happen.

And the Chinese economy, despite its impressive growth is starting to show the first signs of implosion, which would be bad for all of us.

Personally, I would love to see a return to greater diversity within geographic regions, a set of global villages instead of just one.  No idea how to get there though.

EDIT i.e. greater regional autarky but still with open borders between regions..   yeah, I know, trying to square the circle.

 NoEnzLefttoSplit wrote:

some issues with the article, like indicating china shock started in 2021, when it started back in the early 90s.
of course the china trade started with the thought, oh we are only importing cheap trinkets, tshirts and such, nothing substantial like chips, electronics, ha.
so how do you unravel this? 
Will tariffs do the job? Maybe as part of a long-term strategy to onshore or even nearshore mfg with our friendly neighbors, remember Canada and Mexico?
As it stands, implementing tariffs overnight is only punishing mfg and consumers.
We have seen some diversion in apparel and footwear, usually to other fareast countries like vietnam.
Other mfg, like healthcare, has shifted too, but some sourcing will never shift. Cardinal health indicated just the same in a recent earnings call. 

So again, how do we unravel the last 40 years? I do believe China is the west's biggest threat, and it was foolish to hand over so mfg to an adversary, especially healthcare (while unraveling extensive pharmaceutical mfg in puerto rico). 
But even if we wanted to, the US doesnt have the expertise/ management to handle manufacturing. 

 NoEnzLefttoSplit wrote:

Good article. True answers are always more complicated then what is presented in the media. It also takes a long time for policy affects the economy in most cases but I think it will happen quicker this time, at least the negative effects. How long before people notice or will they? Given the unusually high numbers for his approval ratings, its still going to be awhile. But, or course, when things do get bad, he will just blame everyone else and they will believe him, apparently. I am hoping I have gotten past under-estimating the stupid, but that just leaves depressingly pessimistic.

China Shock
Seems like a good example of how textbook economics often fails to map the nitty gritty implications of policy changes and also a big reason for the massive dissatisfaction leading to Trump V2.

Enjoy your MAGA import taxes
White House confirms 25% tariffs against Mexico and Canada starting this Saturday
The US will also impose a 10% levy on goods from China over fentanyl trafficking



More than 90% of interdicted fentanyl is stopped at Ports of Entry (POEs), where cartels attempt to smuggle it primarily in vehicles driven by U.S. citizens.

 rgio wrote:

I dont know if this is an accurate theory. Most small town grocers are sourced by large grocery coops, which share the profits with the independent retailers...so they have competitive costs.
Perhaps the bigger issue is $ stores moving into these markets, sucking up the center store sales. And obviously city markets need to deal with crime/shrink.  

 black321 wrote:
So this is where the Trump appointees will begin attacking each other and possibly Trump, and Donnie will either just ignore things or have to take a stand that will limit his "change agents" abilities to make change.

RFJ Jr. is a nut, but his stance on food makes sense.  We eat processed shit...and need to cut it out.  To enable that, something like the "fairness" in the Atlantic article is necessary.  To do that, he'll need to fight the Walmart and Amazon lobbyists.  Trump will have to decide.... health or money.  

I've got little doubt where that goes...meaning RFJ gets pissed off and begins to lose faith and interest in the gig while remembering why he referred to Trump as "a terrible human being", "a sociopath", and "the worse president ever" before selling his soul to the orange overlord.  

Interesting Atlantic story about food deserts. What hit me is that without the repeal of this regulation, inflation over the last 40 years would have been higher...or if we tried to brink it back, it would increase inflation. Not that I am arguing to keep or repeal...not sure where I stand on it.

The Atlantic writes:

"Food deserts are not an inevitable consequence of poverty or low population density, and they didn’t materialize around the country for no reason. Something happened. That something was a specific federal policy change in the 1980s. It was supposed to reward the biggest retail chains for their efficiency. Instead, it devastated poor and rural communities by pushing out grocery stores and inflating the cost of food. Food deserts will not go away until that mistake is reversed."

The Atlantic argues that the mistake that needs to be reversed is the decision - made by the Reagan administration, and virtually coinciding with the emergence of food desert, not to enforce the Robinson-Patman Act, which bans price discrimination, "making it illegal for suppliers to offer preferential deals and for retailers to demand them."

"If you were to plot the end of Robinson-Patman enforcement and the subsequent restructuring of the retail industry on a timeline," The Atlantic writes, "it would closely parallel the emergence and spread of food deserts. Locally owned retail businesses were once a mainstay of working-class and rural communities. Their inability to obtain fair prices beginning in the 1980s hit these retailers especially hard because their customers could least afford to pay more."

The Atlantic writes that "the problem of food deserts will not be solved without the rediscovery of the Robinson-Patman Act. Requiring a level pricing playing field would restore local retailers’ ability to compete. This would provide immediate relief to entrepreneurs who have recently opened grocery stores in food deserts, only to find that their inability to buy on the same terms as Walmart and Dollar General makes survival difficult. With local grocery stores back on the scene in these neighborhoods, chain supermarkets may well return, too, lured by a force far more powerful than tax breaks: competition."

There is, of course, a political component to all this:

"The Biden administration has begun to connect the dots. Alvaro Bedoya, a member of the Federal Trade Commission, has been an outspoken proponent of Robinson-Patman enforcement, and the FTC under Chair Lina Khan is widely expected to file its first such case in the coming months. But Donald Trump’s election casts doubts on the long-term prospects for a Robinson-Patman revival

"Although the law has garnered support among some GOP House members, powerful donors are calling for corporate-friendly appointments to the FTC. Hopefully the incoming Trump administration realizes that the rural and working-class voters who propelled him to power are among those most affected by food deserts - and by the broader decline in local self-reliance that has swept across small-town America since the 1980s. A powerful tool for reversing that decline is available. Any leader who truly cared about the nation’s left-behind communities would use it."

You can read the entire story here.

Former Chief of Staff to Colin Powell, Col. Lawrence Wilkerson, says if he lived in a swing state, he would vote for Harris, in spite of having no sympathy for the leadership of the Democratic Party. He analyzes how America's social fabric is unraveling and how this explains Trump's mass appeal. He warns that rebellion within the military remains possible, discusses the role of Christian nationalism in the armed forces, and examines how economic inequality has destabilized American society.

Convo on the debt

https://www.barrons.com/podcas...

Jack Hough: Got it. The last question I wanted to ask you about the debt is just, it's the toughest one, I guess. How do you fix it? How do you fix everything? You must look at where the money goes, right? You must think to yourself, "Boy, if I ran this place for a year, we'd get things ship shape around here." I know it's not easy, but do you see any low hanging fruit? I know that this gets into politics and policy choices and so forth, but are there any paths that you see to getting spending down or getting the deficits under control that are more benign than others?

Jonathan Pingle: I'm afraid to have actually the opposite answer to what you're getting at. That is that by waiting, we've made many of decisions increasingly difficult. Think about it this way. When I was born, defense spending was about 9% of nominal GDP. When I graduated from high school, it was about 6% of nominal GDP, now, it's 3%, and the Congressional budget office predicts it's headed towards 2% of nominal GDP. That has freed up a lot of economic resources for us to fund other parts of mandatory spending and other spending priorities.

Jack Hough: It sounds like great news so far. Tell me, what wise choices have we made?

Jonathan Pingle: The problem we have is defense spending's not going from three to zero. We've exhausted, to some extent, the ability to just shrink our other spending in order to free up more resources. We really are now at a point where we have to make some choices. We have to make some choices about do we start to restrain the growth of the old age programs? Do we raise taxes? How do we want to structure the federal budget to put it on a more sustainable path going forward? That's going to be trade-offs between a lot of different interests, whether it's funding for education, the inner cities, transportation infrastructure, the military, defense, environment, the national park, I mean, everything that Americans use and enjoy, the weather service, the national hurricane... List on and on and on, the role and features of the government in our society and economy. We're at a point now where we're going to have to start deciding how to fund it better and also what we really want to fund.

Jack Hough: But Jonathan, we're big, right? The economy is big, and when you're big and you spend a lot, you're supposed to get economies of scale. That's how Costco works, right? You load up with so many rolls of paper towels, they give you a good deal. Let's put it this way, even if you don't have the specific prescription, there is a way to run this economy with the amount of money we have at our disposal that could be sustainable and manageable. Right? This can still be done, would you say or?

Jonathan Pingle: Oh, no. I do. No, I do think it is. It's not really for me to say, "Hey, we should get rid of this component of the Department of Labor's program on X or the Commerce Department office of Y." But you can make a case that certainly there are big parts of these agencies that might be able to run better as well. But overall, when you look at the budget and you think about some of the big parts, I mean, they really are some of the mandatory spending programs like Medicare and Social Security and even Medicaid. When you start to think about the remainder, that's actually a relatively small part. Now, there's probably room to better manage it as well. I think you're right that if you think about the size of the economy, we should be able to effectively fund and run a government. But we've gotten ourselves into a position now where revenues and spending are not aligned and going forward, they're not projected to align.

Jack Hough: I'm just curious, would you say that you personally are an optimistic investor when you're setting aside money and you're like, let's say, talking with your family, do you say, "Hey, we've got some problems, but things are going to be okay long-term, this is still a place of opportunity,"? Or do you say, "Hey, you know what I've seen under the hood on this thing, and we've got some big issues here. There's trouble brewing." How optimistic are you as a long-term investor?

Jonathan Pingle: First of all, I love the United States of America, and I think we are the greatest country on earth, and I am optimistic about our future. However, when I look at our federal budget, I think it is definitely concerning. Just to go back to one of your earlier questions on things that break and pick up on this defense spending point, the US is at risk of having to pay a premium to be able to finance the magnitude of this debt over time. If we do that, that's only going to make the spending and revenue decisions harder because we're going to crowd out important investments that we expect the government to make on infrastructure education or elsewhere if we are continuing, not only to pile up debt, but then also if the private markets start to add a 10th, another 10th, and another 10th and another 10th as a cost of financing.

But there's also these implicit costs they have been taking, take the defense spending experiment for a second, or the thought exercise. Right now defense spending is a share of nominal GDP is 3%, but let's say it was still 5% of nominal GDP, and then you thought about the US's ability to project power, fund allies, et cetera. Would we be facing the same geopolitical environment we are now the same volatility in macro markets that that's caused periodically in the last few years. I think that's a good question of whether or not we're already paying some of these costs from having allowed the budget outlook to deteriorate to the extent it has.

The Politics of Wealth Inequality

How Rich Are Dictators?

Forget about Jeff Bezos, Bill Gates, and Warren Buffet. The richest person in the world is probably found amongst the list of remaining dictators. For example, it was revealed that both Muammar Gaddafi and Hosni Mubarak were rich beyond belief when their accounts were uncovered after they fell from power. They are not the only ones, as suggested in this article. Yet, we do not know who is richest – and we probably never will. Dictators are secretive about their wealth and hide it from the public eye. In addition, it is often hard to know where the state’s coffers stop, and where the pockets of the individual start. Therefore, dictators usually do not figure on lists over the richest people in the world, including Forbes’ annual rankings of the World’s Billionaires. This is problematic for a number of reasons.

While we occasionally see wealthy self-made businessmen turning authoritarian, most dictators make their wealth while in office either through embezzlement, fraud, or shady deals; or they inherit it as part of the governing family, such as the Saud family who are worth up to $1.4 trillion. Many would, therefore, perceive their fortune as illegitimate, and, as a result, most dictators have good reasons to be secretive about their wealth. Corruption is an issue of particular concern to many people, and even though dictators are not accountable through free and fair elections, they occasionally fall out with the masses, and risk sparking public outrage; and perhaps being removed in a revolution.<1> Hence, being officially filthy rich through ill-gotten gains is a bad survival strategy. In addition, because they risk having their wealth confiscated if they are removed, dictators store much of their fortune abroad in secret accounts. And to be sure that they are not sanctioned by the international community or exposed, they often hide their money in other people’s names. It is estimated that 57% of the Gulf countries financial wealth is held offshore, while the number for Russia is 50% and 30% for Africa.<2> Thus, while Putin earned roughly $135,000 in 2018 from his official salary, a military pension, interest on savings, and investment gains, and officially lives in a small apartment, we have good reasons to suspect that he is far, far richer – some even speculate that he is the richest person in the world.

Yet another challenge arises when trying to estimate these dictators’ wealth, as we cannot separate the fortune of the state from the wealth of the individual. Erdogan built a presidential palace with 1,150 rooms for himself, although the building officially belongs to the Turkish state, and it was estimated that Trujillo of the Dominican Republic at some point during his regime controlled about 80% of the industrial production, and 60% of the country's economic activity. Some dictators even acquire such a dominant position and so much power that we can reasonably speculate whether everything in the country is owned by them, summarized by the phrase L’etat c’est moi, attributed to Louis XIV in his time. This is akin to what we sometimes call a personalist dictator, and can manifest in absurdly ostentatious ways, such as Saparmurat Niyazov of Turkmenistan’s affinity for golden statues, or Jean-Bédel Bokassa of Central African Republic’s extremely lavish coronation ceremony that cost a quarter of the gross national product.

While these examples are fascinating, it is also deeply problematic that so much illegitimate wealth lies in the hands of individuals and is hidden away from the public’s eyes. Dictators are squeezing their – often very poor – populations to live lavish lifestyles. Dictators and their inner circles are, in some cases, so wealthy that redistributing their wealth could make a significant difference for the population they govern. Uncovering the fortune of dictators and informing people about their wealth is the first step towards holding them accountable and putting the pressure on for a different form of government. In addition, we now and then see news articles claiming that democratic leaders are very well paid. For example, this list of the 20 of the highest paid world leaders by USA Today is dominated by democratic leaders. If we do not take into account the wealth of autocrats, we risk holding up an unfair comparison to democracy which can lead to resentment of democratic politicians and make people too eager to drain the swamp by voting for a strong man. In fact, members of America's Congress are paupers compared to their Chinese counterparts. While we should have a discussion about whether democratic leaders earn too much (or too little) and the extent to which they are corrupt, the advantage of democracy is that voters can hold their leaders accountable through the ballot box. Ultimately, I believe that one of the best arguments for democracy is that dictatorships far too often become a rich man’s club, where a wealthy group are pillaging their country and redesigning the economic system to a kleptocracy benefitting the few instead of the many. And getting out of this equilibrium (again) can be very hard.

'Global Oligarchy' Reigns as Top 1% Controls More Wealth Than Bottom 95% of Humanity | Common Dreams

A report published Monday by the humanitarian group Oxfam warns that decades of intensifying inequality have left the world in the grip of a "global oligarchy" under which the richest sliver of humanity owns more wealth than nearly everyone else combined—a state of affairs that undermines democratic institutions and international cooperation on climate, pandemics, and other crises.

Oxfam's analysis of data from the investment banking giant UBS found that the fortune controlled by the top 1% is now larger than the collective wealth of the bottom 95%.

Such inequality pervades the global economy, Oxfam noted, with a small number of corporations dominating key sectors. Nearly half of the global seed market, for example, is controlled by just two corporations, Bayer and Corteva. At the same time, just three U.S.-based financial behemoths—Blackrock, State Street, and Vanguard—oversee nearly 20% of the world's investable assets, around $20 trillion.

What's more, such massive corporations are increasingly run by billionaires: According to Oxfam, a billionaire either heads or is the top shareholder of more than a third of the world's leading 50 corporations.

"While we often hear about great power rivalries undermining multilateralism, it is clear that extreme inequality is playing a massive role," Oxfam executive director Amitabh Behar said in a statement. "In recent years the ultra-wealthy and powerful corporations have used their vast influence to undermine efforts to solve major global problems such as tackling tax dodging, making Covid-19 vaccines available to the world, and canceling the albatross of sovereign debt." (...)

um, let me try that again

this was surprisingly succinct.