Tag Archives: economics

Dueling Mischaracterizations

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David Kennedy, Stanford University Emeritus Professor, responded to The Wall Street Journal‘s Holman Jenkins in Kennedy’s Letters letter in Tuesday’s Wall Street Journal. Kennedy said Jenkins mischaracterized his book regarding Franklin Roosevelt’s handling of government during the Great Depression.

Mr Jenkins has me arguing that “Franklin D Roosevelt didn’t end the Depression, he used it to enlarge the federal government.” True enough but too reductive.
Roosevelt didn’t simply “enlarge” the federal government; he right-sized and reformed it for the conditions of modern society. His initiatives rescued and dramatically upgraded capitalism, as witnessed by the unmatched performance of the US economy in the post-World War II decades. The New Deal gave to the exceptionally fortunate “greatest generation” a scaffolding of institutions and practices that reduced risk in sector after sector of American life, brought stability and predictability to millions, nurtured the shared prosperity and consequent trust that ended the Jim Crow era, and positioned the US for world leadership to century’s end and beyond.

Kennedy’s own mischaracterizations begin with his Roosevelt didn’t simply “enlarge” the federal government; he right-sized and reformed it for the conditions of modern society. This is his cynical arrogance of presenting that claim as though it’s received fact rather than the matter of opinion that it so plainly is.

Kennedy’s other serious mischaracterization is his risible claim that Roosevelt’s New Deal created the conditions for US leadership in producing global prosperity and stability. This is a just-as-cynical omission of the simple fact that in the aftermath of WWII and the war’s global destruction of assets and of lives (the latter far beyond the merely killed), during those decades of the Greatest Generation, the US was the only economy in the world that could function. Nearly any “scaffolding” would have put us in the global economic driver seat.

How much better could we and the world have done without Roosevelt’s wage and price controls, still intact today in one form or another (minimum wage laws directly controlling wages, and price controls indirectly in place with Roosevelt-populated Supreme Court rulings like Wickard v Filburn, which made it illegal for farmers to grow for their personal (and so wholly intrastate) consumption without counting it in their interstate commercial production, a ruling that also called a farmer’s strictly intrastate commercial production a part of interstate commerce)?

Roosevelt’s expansion both artificially created jobs for a bloated civil service, it straitjacketed our free market capitalist economics.

No Government Bailout

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Not even by city governments, and not even for this.

The Wall Street Journal‘s editors noted that

The New York Housing Conference, a nonprofit that promotes so-called affordable housing, warns in a new report that landlords will need $1 billion in government aid to avoid default. “A significant number of affordable housing buildings in New York City are experiencing operating deficits, where rents are not covering expenses,” the report says.

The buildings are publicly financed, and their costs are skyrocketing—costs ranging from insurance to maintenance to unpaid rents.

This is the problem with government paying for stuff, no matter how glitteringly wonderful the intent might seem.

The city government, the State government, the Federal government—none of them—should be forking over any more of the taxpayers’ money for this sort of thing. The best way to solve this kind of shortfall does not include throwing ever more money into the ever expanding maw of city resident dependency.

Instead, cut the buildings’ costs: get out of the way of rent collections, greatly reduce insurance regulations, property taxes (even public housing must pay these), zoning requirements. Lower sales taxes that drive up the cost of maintenance supplies. Let the market determine wage rates, not bureaucrats snug in their government job sinecures.

Globalism

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New York City Mayor-elect and Progressive-Democrat and Socialist Zohran Mamdani has laid it out quite clearly. In his renewed statement that he would uphold an International Criminal Court (to which the US is not signatory) arrest warrant for Israel’s Prime Minister Benjamin Netanyahu, Mamdani said this:

I’ve said time and again that I believe this is a city of international law, and being a city of international law means looking to uphold international law[.]

No. New York City is an American city, and so it is bound by American law. And that means that at the city level (at the State level, come to that), international law is irrelevant. In the case of the ICC, this is doubly so. With the US not being a part of the ICC or the treaty that created it, neither the ICC nor any of its warrants or rulings have any standing in the US.

Whatever one thinks of globalism, this is globalism run amok. This is how far to the left the Progressive-Democratic Party has gone.

If They Depend on Subsidies…

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…then they shouldn’t be in business. The subheadline laid it out:

Republicans want to shift subsidies away from some of the frailest companies in the industry

In this context, “the industry” is the health care coverage industry, and the subsidies are those paid health coverage providers in the Affordable Care Act. I claim, though, that “private” companies that require government handouts are neither all that private nor deserving of staying in business. If they cannot survive without taxpayer money as anything more than a shortish-term loan to survive a catastrophe, they should be left to go out of business.

The news writer at the link made a big deal out of the need for the subsidies to those coverage providers in order to hold down the prices—the premiums—the customers pay for the policies, jerking tears especially for the lower income customers. What he does not address, though, is the deductibles and the out-of-pocket caps those Obamacare policies have. The deductibles and caps each separately represent significant fractions of those lower income customers’ income. They, especially, had better not get sick. If they do, their strait is not much different from that of those folks who are uninsured at all.

The subsidies paid into their hands directly would at least give them a little relief, but that’s only a stop gap. The real solution is to eliminate the ACA altogether and free up the health care coverage industry, restoring it to a health insurance industry in a free market with policies marketable nationwide, rather than limiting them to intrastate sales with the permissions and regulations of fifty different States.

Companies providing health care coverage or insurance should see their prosperity in how well they treat their customers and how well they serve them. Their prosperity should not come from government handouts—transfers from us taxpayers who don’t use their services.

Affordability

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What is this thing, “affordability?” Greg Ip, in his Sunday Wall Street Journal piece, correctly noted that it’s more than just the inflation spike of the Biden administration or an outcome of that spike.

What started as a serious but short-lived spike in inflation from 2021 to 2023 has evolved into something broader and more amorphous. Like the climate crisis or the crisis of democratic legitimacy, the affordability crisis has become an umbrella term for countless loosely connected phenomena.

As a campaign issue, such amorphosity is useful. For us average Americans, though, and for those charged specifically to solve the problem, that’s a useless characterization. A problem needs a specific definition, or its constituent pieces each need a specific definition. That’s where Ip made his own error. He was suitably specific, but in the wrong way.

Strictly speaking, affordability means having the resources to pay for goods and services at current prices. By that standard, the simplest metric is real (i.e., after-inflation) incomes. Real incomes fell behind when inflation shot up, then recovered as inflation receded and wages caught up. Real personal income was up 2.3% in the year through August, and real hourly wages climbed 0.8% in the year through September, both in line with the 19-year average.

None of us spend these mythical “real” dollars, though; they only exist in overall measures of economic questions. “Real” dollars also exist, especially in Ip’s (and my) context, only as a nationwide calculation. All of us, wherever we are in the real (not “real”) world, spend the dollars in our pockets—nominal dollars, the dollars we receive in our paychecks or welfare payments. That’s a fairly steady level for employees of national companies, but it varies widely from region to region for the smaller employers that fit into the “mid-sized” company category; the mom-and-pop wages vary from locale to locale.

Neither do any of us face the nationwide price level that is the outcome of inflation (or deflation); we pay the nominal prices that occur in the specific area where each of us lives. That’s true even for the goods and services that are sold nationwide rather than regionally. California’s prices for energy, for instance, isn’t the same as New York’s, or Texas’, or Nebraska’s, or….

What each of us does do is pay those local or regional nominal prices with the nominal dollars we have. Thus: affordability—usefully specific and accurately defined affordability—is regional and nominal: the relationship between the dollars each of us has and the prices each of us faces in the locale or region in which we live. The military gets at this with the Cost of Living Allowances it adds to members’ paychecks: that’s an addendum intended to cover some of the gap between the nominal dollars servicemen and women receive and the nominal prices they actually face where they’re stationed. Social Security payments get annual adjustments related to the “cost of living,” but those adjustments are nationwide, based on the national inflation rate; they are not adjusted according to where any of us live. Some make out like bandits in their local market places and prices, others are still left well short, most see only most of the gap filled.

Until that is understood, what to do about affordability—if anything—cannot be determined. When real affordability gets addressed, any solutions will have to be at least as finely done as regional. “Affordability” is another area where one-size-fits-all doesn’t fit any.