LyrArc Article Gist
A new West Coast Model is emerging with ballot measures in the states of Washington, California and Oregon. The model is to make up for decades of faulty income distribution which favored tech communities in west coast states leaving behind people from minority communities and the working class outside tech hubs such as San Francisco, San Jose and Seattle. During this period budgets for education and healthcare, social services and essential infrastructure suffered as budgets were squeezed for local governments. Minimum wage also lagged behind and communities struggled to keep up. Washington votes for a ballot measure that raises the minimum wage to $13.25 statewide and mandate paid sick leave for workers. In California a ballot measure makes permanent an income tax surcharge on millionaires to use these funds for education. In Oregon measure 97 places a gross receipts tax on corporations with annual sales in Oregon over $25 million, raising $3 billion a year for schools, health care and other programs. The California and Washington measures are likely to pass, Oregon uncertain, say experts. And even in Oregon supporters have learned from the experience to put forward new proposals on the ballot. The Washington measure is supported by Nick Hanauer, and Zach Silk, president of Civic Ventures in Seattle, who say it is essential to put more money in workers wages to increase growth and to bring better lives outside the tech hub areas. Most of the tech booms of the last two decades have not touched the areas outside tech hub metropolitan areas. The conservative approach adopted in Louisiana and Kansas of reducing taxes first and then when holes in state budgets developed to cut education, health and other service expenditures has not worked, and it has led to the backlash in the form of the new West Coast Model, which is expected to be brought up in other states in the east and midwest. The tech hub areas have grown with the boom in tech but this has largely ignored the rural areas, communities just outside of the tech cities, and led to uneven and distorted growth shortchanging the working class and the middle class, and hurting investment in education and healthcare across each state. Bill Whalen, a research fellow at Stanford University's Hoover Institution conservative think tank ,says that its hard to deny that the balanced growth for all communities across the state has lagged far behind as the tech booms boosted growth in the economies of California, Oregon and Washington. An article in the German online site Zeit on Silicon Valley described this vividly showing how this can happen in communities sitting side by side in the San Jose area, with minority Hispanic communities and working class communties seeing very little of the benefits of growth. ...

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The Labor department reported that unemployment surged to 10.2 % in October 2009. 190,000 jobs were lost in October 2009. Ther breakdown lokks like this. Construction lost 62,000 jobs, manufacturing lost 61,000 jobs forming the bulk of the job losses. Its interesting to note that only 16,000 jobs were gained in the federal government and 16,000 jobs were lost at the local government level making the net gain zero at the government level. And what was gained in the health care sector 28,700 jobs and in educational services 10,700 jobs for a total of 39,400 jobs was completely offset by 39,800 jobs lost in retail sector. The useful point here is that local governments are hurting and retail sector is hurting and little is going to change this as long as job losses continue and the gains at the government level and healthcare and educational services are simply offset by losses inretail and local government. This situation will likely ocntinue into 2010. The losses in manufacturing are likely to continue. A sample of companies like Eaton, Boeing and John Deere shows that 2010 will not generate many jobs. Eaton has decided to have its 55,000 employees take aweek of each quarter, so there is one twelfth work capacity unused which is where Eaton will turn to before hiring. At Boeing there are layoffs of 10,000 planned but its also hiring 3800 workers for anew factory in South Carolina, and at John Deere 452 workers will be recalled in November but in December there is aplanned shutdown. A September Survey by Business Roundtable found that 13% of firms planned to increase employment in the next 6 months, but 40% planned to cut payrolls. So manufacturing looks to go on like this in 2010 with slowing but continued job losses. The numbers show that in October the median number of weeks it takes to find ajob up to 18.7 weeks which is the highest number since the sixties. What gets ignored by the small print you find it in the Wall Street Journal is the broader unemployment rate which is 17.5% when you include those who have stopped looking, those who work part time but need full time work and the marginally unemployed. The rates jump for younger workers here and in Europe also. ...

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President Obama's program for education includes promoting charter schools, closing failed schools, making teacher pay reflect the quality of education they can provide, and providing financing to support better education and better classrooms. Here he outlined his plans in a major speech on education to an Hispanic group.

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A survey of 414 National Association of Business Economics (NABE) economists shows Libertarian candidate Gary Johnson with 15%, overtaking Trump at 14% on who would best manage the economy. On protectionist views only 9% support this. 15% said they have no opinion and 55% said Hillary Clinton would do the best job of managing the economy. About 62% say the election uncertainty is holding back growth. Some aspects of Hillary Clinton's economic plan are the $275 billion infrastructure investment over 10 years, taking action against companies that ship jobs overseas, a capital gains tax paln that encourages long term investments, supporting $15 minimum wage, making upward mobility a top priority, providing government financed access to public colleges for working class and lower income groups. Donald Trump's plan has suffered form lack of specifics, shifting comments, lack of careful study, and excessive use of slogans. Both candidates oppose trade agreements that shift jobs overseas. Trump's plan also suffers from lack of credibility overseas as this is important in a global business structure, with fears of protectionism increasing. and reminding people of the protectionism under Smoot-Hawley that increased the damage from the depression of the thirties. ...

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A statement by German Finance Minister Schauble that Germany would be able to accept inflation of between 2 and 3% showed the new flexibility of the German position after the election of Hollande in France. Schauble said on April 10, 2012, Germany would find inflation "in the corridor between 2 and 3%" acceptable. The ECB's target is 2%. Earlier the Bundesbank in statements to the German parliament indicated that higher inflation rate in Germany was acceptable if the overall eurozone rate remained near target. This would give other eurozone countries an opportunity to improve competitiveness. Schauble also indicated willingness to accept higher wages in Germany because of years of wage concessions by workers in Germany. France's major parties, unions and industry are in agreement on a plan for reducing wages to avoid layoffs. This gives the normal process of adjustments in free markets a chance to function to restore competitiveness and balance. It also addresses the concerns of workers in Germany who would benefit after a decade of wage concessions, and improve consumption in Germany, as demand for Germany's exports adjusts to a slowdown in the global economy....

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In this exceptional report of the housing market in Roanoke, Virgina, Neil Irwin talks to builders, home buyers, renters and young people. San Francisco and Washington D.C. are the exception in housing markets- hundreds of America's midsize cities like Roanoke are seeing smaller rates of household formation leading to a decline in demand for single family homes and fewer homes being built. This accounts for a large part of the smaller growth in U.S. GDP. There are he points out about 2.3 million missing households as a result of a significant change in home buying patterns that is reducing demand for new construction of single family homes. During the period 2001-2006, before the 2008 global financial crisis, the rate of new U.S. household formation was about 1.35 million annually. This dropped to 569,000 in 2007-2013, as the effects of the crisis were felt in a deep recession. One result is more young people are postponing buying a house and living with their parents. Faced with large student debt- the total U.S. student debt passed $1 trillion for the first time recently- purchases of homes are becoming more dfficult. Of 18-34 year olds 27% lived with their parents before 2006, according to Labor Department data. This went up to 31% following the recession. Lack of good jobs is another factor. In 2014 March only 63% of 18-24 year olds had jobs. Even young people older than 24 with jobs felt it necessary to save money by living with their parents. More retirees too are moving into apartments....

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This NYT editorial points to the dangers lurking behid the jobless numbers. The House bill that passed recently for $154 billion to extend unemployment benefits- set to expire in Feb 2010- to June 2010, and increases aid to local and state governments. It also includes infrastructure spending and help for small business. But it does not do enough for young people whose joblesness is at all time high. For instance only 4 in 100 low income black students found work in Fall 2009 This according to a study by the Northeastern University Center for Labor Market Studies. According to the analysis done by this Center the employment rates among teenagers has risen four times faster than the rate among adults since 2000, and todayme over 65 are more likely to find jobs than youth of 16-19 years.

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Under the Volcker Rule setup during the global financial crisis of 2008-2009, banks total investments in private equity, hedge funds and similar higher risk funds cannot exceed 3% of high quality capital. During the financial crisis investment banks were highly leveraged leading to the collapse of Bear Stearns and Lehman Brothers, and the precarious financial condition of other banks. Goldman has pared down about 60% of such investments. Remaining are $4.8 billion in private equity investments, $1.2 billion in real estate, and about $1.1 billion in both credit and hedge funds. Regulators have given the bank till July 2017 to comply. As banks recovered from the impact of the crisis, the tearing of the social fabric that happened with high unemployment in some groups especially older white men, has remained six years after the crisis- as evident in the U.S. election campaigns this year. As a result the mood has shifted for tighter regulation and both party platforms, Republican and Democratic, now call for reinstatement of the Glass Steagall Act, which separated commercial banking from investment banking as part of the lessons learned from the Great Depression. Volcker, was chairman of the U.S. Federal Reserve during the Carter administration, known for taking a tough line against inflation. He was the principal driver of the move to restrict banks from risky activity, and faced considerable opposition from banks during the 2009-2013 period when the rule was being formulated.  ...

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Van Dam says its not that great being a worker in the U.S. because it is hard for the unemployed resulting from competing with workers in other countries with lower wages, and for those who are unemployed harder because worker collective bargaining is weakened over 3 decades. He cites a 296 page OECD report showing very little government support for unemployed and at risk American workers. It says this has contributed to higher income inequality and larger share of lower income people than almost any other advanced a nation. Only Spain and Greece are shown as having more households earning less than half the median income- showing large numbers of people are poor or close to being poor. In the U.S. an average of 1 in 5 lose their jobs each year, and 23% of workers 15 to 64 are in their job less than a year in 2016. The job churn hurts workers because of firing and layoffs being frequent, more than is healthy for a economy. The U.S. and Mexico are the only two countries not requiring advance notice before firings. And fewer than half of workers find a job within a year in the U.S. Two in three families with a displaced worker fall in poverty for some time. Unemployed workers with typically 26 weeks support get less support than any other country in the study. Only 12% of workers in U.S. are covered by collective bargaining. ...

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This editorial in the WSJ after the U.S. presidential election is critical of extreme positions on immigration in the Republican party. It reminds readers that George W. Bush won 40% of the Hispanic vote with some passable Spanish and a friendly attitude on immigration, Romney managed only 29%. It says supporting immigration is a natural position for Republicans because most immigrants are culturally conservative and hard working. It call deportation in large numbers morally wrong and not workable. It also comes as immigration from Mexico is down significantly and many Hispanics are returning to Mexico. Hispanics suffered from the high unemployment in the U.S. following the 2008 crisis making it less attractive to come to the U.S. Growth is also increasing in Mexico with a large middle class and a falling birth rate.

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The U.S. Labor Department report shows 156,000 jobs added in September 2016. The unemployment rate increased by a tenth of a percentage point to 5.0%, because of the increase in the total pool of workers, The labor force increased by 3 million workers over the first 9 months of 2016. The labor force participation rate was up by half a percentage point to 62.9% for the year 2016, as it drew more workers who were earlier discouraged to look for work. Wages grew by 2.6% over the year.

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Modernizing India's construction industry may be one of the keys to keeping global growth from slowing down significantly. Here's why. If China slows down significantly after almost two decades of breakneck growth since the 1990's, as nothing like that goes on forever and China is facing significant environmental challenges, skilled workers and managerial talent constraints, and demands for fair treatment and compensation for workers, that stem from this uncontrolled and haphazard growth and export drive. This would leave India as a potentially large engine for world growth if properly managed, a role China has played alongside the USA for so long. India's infrastructure is one of the critical hurdles to achieving this potential. And neither India or the world can afford not to overhaul India's construction industry which is a roadblock to accomplishing what needs to be done in infrastructure. As described here more than 80% of the people in the construction industry are unskilled workers, usually working as day laborers or migrant workers in tiny crews. The other 20% - the carpenters, welders, painters, tile layers, pipe fitters, brick layers, and other skilled trade workers, are becoming harder to recruit and those unskilled workers that receive basic training by companies like Reliance are keen on looking for better opportunities in the Gulf region. The unskilled workers work at construction sites with little training are mainly workers coming from agricultural areas and villages for better wages and living conditions. One of the striking things about Indian construction sites is the use of few machines with most of the unskilled workers, men and women, carrying loads of bricks on their heads, digging holes with shovels and cutting steel bars with mallets and moving sand with spades. There is a huge opportunity for foreign and Indian manufacturers of construction equipment and rapidly increasing production within India of all types of construction equipment should be one of the first things to be tackled. Special incentives by the government and efforts should be made to bring new foreign and domestic investment and plants for construction equipment. Big construction firms that handle large projects, construction equipment manufacturers worldwide and domestic firms interested in investing, and firms involved in large construction projects throughout the country should be brought together in executing the plans for modernization of the construction industry. Training of unskilled workers chosen and recruited for aptitude, discipline and interest in learning new skills from villages as opposed to just working with "nakas" should be initiated in large numbers. A new vocational training system should be initiated borrowing from ideas of systems in countries that have excelled in this in Europe such as Germany so that workers can go straight from villages or urban areas to vocational schools for training in a craft or trade in the construction industry or in the manufacturing industry. And living conditions have to be improved for workers so that skilled workers see advantages in remaining in India rather than leave their families behind for work in the Gulf, and unskilled workers have the basic but good living conditions, access to clean water, basic but decent housing, and clean toilets and showers, and kitchen facilities. One thing is clear one cannot reach organized and well though out development goals on the back of such a haphazard and ineffective sytem of using the human and machine resources in the best possible manner, and free markets and capitalism may not be the best guide in this matter. China's example may not be a good guide in this matter either. There has to be a better way where treating people right and using the most intelligent use of resources brings better results than haphazard approach as with week by week recruiting through "nakas" and minimal use of machines, and recycling of agricultural labor through free markets in labor. The haphazard approach rejects the idea that the training, the discipline and the well thought out approach on recruiting training and best use of human resources without losing sight of costs can lead to superior and continually improving results. The continual improvement and better methods in the construction industry would free up the infrastructure bottleneck and hurdle to growth. Then it would be best to take an original path to development which would be true to the Indian character and spirit and emphasis on education and thoughtful way of doing things, which means that India should make an efficient use of its human and machine resources, and take advantage of all its human resources and intelligent approaches to develop industry and agriculture and avoid the waste in human resources. ...

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The unemployment rate for young people 16-24 years old is 18% in the USA in 2009, up from 13% in 2008. This has serious consequences, creating a lost generation as happened in Japan in the last decade.

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David Autor, an economist at the Massachusetts Institute of Technology, says he is quite worried about the steadily declining participation of men 16-64 in the labor force from 85% in the decade after World War II to less than 65% today. This is a blow to the men, their families , government revenues and the economy.

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In this interview with Der Spiegel Bernie Sanders reflects on the 2016 election. He says that the Democratic Party missed the fact that many people in the midwest, south and other parts of the country, were worse off after president Obama left than when he came in in 2008. He also says Hillary Clinton relied too heavily on speechwriters and advisers upto the point of  having three speechwriters say why she was running for president. He finds the cuts proposed to healthcare, in the budget, and action on climate change, immoral. He also points out about the investigations that Mr. Mueller is someone everybody respects and that it would be wrong to offer a biased opinion, that Trump supporters would see this in the way that he is picked on when he just came in. He also believes Trump supporters are like other voters and are likely to look at the results, how better off they are under the Trump administration.

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The WSJ cites several surveys showing Hillary Clinton's large lead among voters less than 35 years is declining. This is the reason WSJ says that the overall lead of Clinton among all voters has declined to about 2-4 points. In Michigan for example a Detroit Free Press survey showing a 24 point lead for Clinton declines to 7 points among voters under 35 years, and causes a overall 11 point lead to fall to 4 points. Some of the support has gone to third party candidate Gary Johnson. In the 2012 election president Obama won the votes of about 60% of voters under 30 years, an important part of Obama's coalition. Of the 66 million votes cast 22% were from voters under 30 years age. As a result First Lady Michelle Obama will campaign on a college campus in Virgina. Senator Bernie Sanders will also campaign to attract the younger voters that made his campaign so strong, and Elizabeth Warren will speak at two Ohio universities in coming days. Sanders will stress the importance of Clinton's proposal for debt free college and funding more programs with higher taxes on the wealthiest Americans, and ask young voters to look further than mere personality to what they can expect to improve the lives of students and young people. This is happening 6 weeks before the election. A look back at 2012 about 7 weeks prior to the election in Lyrarc shows Obama with a 6 point lead, but only even with Romney when it came to handling of the economy because of the long recession. This shows how each election presents its own different set of circumstances and challenges. ...

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Matthew Slaughter of the Tuck School, Dartmouth, says that the principle of comparitive advantage should determine what America exports and imports. Under comparitive advantage each country concentrates its energies on the particular goods and services that it does better than other countries. Free trade operates under the idea of comparitive advantage, but in practice it is quite different than its textbook economic counterpart. It is constantly changing as new countries or industries in different countries try to upset the existing pattern. Under a textbook example Airbus should not exist because Boeing was the most efficient manufacturer upto that time, and new entrants in a industry are nurtured for years with support from the governments of their countries. And in some situations the governments may exclude certain companies or industries from support such as Komatsu and construction equipment in postwar Japan, and Infosys and software outsourcing in India, and still survive and grow. Under comparitive advantage Japan should still be importing construction equipment from Caterpillar in the US, and there would be no serious competition in that industry. This would work to the detriment of the principle of competition in free trade which is just as important to free trade as the idea of comparitive advantage, with new entrants in an industry upsetting the old way of doing things and creating price/quality improvements. Slaughter simply pulls back off the shelf the old idea of comparitive advantage without seriously considering its real life aspects. Without dealing with trade distortion from currency manipulation, from the impact on jobs, without considering the continuing critical role of manufacturing in developed economies to provide the standards of living for a large middle class, and creating the kind of society that people of developed countries aspire to. He mentions GE's Immelt and the President's Council on Jobs, but makes no effort to engage Immelt 's statement in his recent op-ed article in the Washington Post, that the concept of transitioning from a export-oriented economic powerhouse to a services led consumption based economy could be done without loss of jobs, prosperity and prestige, was fundamentally wrong. He has only one line for manufacturing's role in America's economy. This line says knowledge intensive industries such as education and software are just as important as manufacturing, but fails to mention that manufacturing has received less attention in recent decades. In so doing he is discounting his own profession of concern for the high rate of joblessness in the U.S., and the need for a new focus on manufacturing in the U.S. to reverse that trend. By saying that imports are not a sign of failure but can raise standards of living, and leaving it at that, Slaughter does not acknowledge that consumer debt that US consumers have taken on in the process certainly affects future prospects for the US economy. And he makes no mention of the need for rebalancing the world economy, which is exactly how free trade should work ideally. Countries that have high imports export more to rebalance the world trading system, as currency valuations are allowed to adjust makig their exports more attractive. By not taking into account the realities of free trade, and the need for practical measures to rebalance without policy induced distortions by state run economies, Slaughter ignores the idea of free trade that works as it should and for all countries. The irony is that Immelt's own committment to jobs and competitiveness has been questioned in online blogs and most recently by an editorial in the Wall Street Journal on January 26, 2011, titled "The Misallocators." That editorial refers to the outsize role of GE Capital in GE's earnings during the past decade, and the lack of credibility of a focus on competitiveness and jobs that this creates for GE. It mentions the loss of 34,000 GE jobs in the US during the last decade. ...