Father of the Bernie Sanders Presidency

President Trump’s elite-managed populism opens a path for a more genuine version.

On the usual political spectrum, there are left and right, people who call themselves progressive or conservative, socialist/social democrat or capitalist. But these labels seem to mean less today than in the past. The Trump phenomenon highlighted another divide that has little to do with the historic left and right. Crudely speaking, we can call it coastal vs. non-coastal, urban vs. rural, ethnically diverse vs. more homogeneous, elitist vs. populist. This at least is the way the dominant media sees it.

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At the same time, the old labels are not completely dead. So if we try to overlay the new on the old and to categorize the Trump following, we could say that some of the old guard conservatives joined forces with the new rural populists. This is a little complicated and barely makes sense given that the former include some of the elites, in other words the very same people who have angered the populists for the past decade. Many people who want lower taxes and free trade and globalization voted for the same person, Donald Trump, as did people who want import tariffs and restrictions on the flows of people, capital and goods. Some of the same people who survived in 2008 thanks to Wall Street bailouts voted for the same candidate as did people who are still seething over the bailouts. Read more

Trump Country: Where the Immigrants Aren’t

Trump did best in the states with the lowest percentages of foreign-born residents.

“I love the poorly-educated”, gushed Donald Trump after winning the Nevada primary in February. But in the end, what happened in the primary, stayed in the primary. Come November, Trump lost the state to Hillary Clinton, a turn that is explained by the fact that there is a higher percentage of foreign-born residents in Nevada than in any state won by Trump, save Florida.

In fact, Trump won the general election because he carried almost all of the states where there are few foreign-born residents. His anti-immigration message resonated most in the parts of the country that have the fewest immigrants. Of course, he also won immigrant-heavy Arizona, Florida and Texas, but mainly by prevailing in rural counties. He lost in the counties that include the major urban centers of Miami, Orlando, Tampa, Dallas, Houston, Austin and San Antonio. He did win in Maricopa county where Phoenix is located but perhaps not in Phoenix itself. (Maricopa county encompasses a lot more than Phoenix as it is larger by itself than the entire state of New Jersey, and larger than Connecticut and Delaware put together.) Read more

The Mainstream Media Will Rise Again

The news media was flattened on November 8th but its recovery has already started.

One of the striking features in all the commentary on Facebook about Donald Trump’s victory is the number of times that the words I, me and my appeared in member posts. For example, “I am proud”, “I am optimistic” or “I am fearful”, “I am worried” etc. The comments celebrating or lamenting the event were mostly about the way the writer felt about the event, not about the event itself. That looks like a subtle difference but it reveals a demarcating line between an introverted reaction vs. an extroverted one.

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None of this is too surprising because even in normal times, Facebook’s format and primary raison d’être are to enable people to talk about themselves and to update their friends on their comings and goings. On any given day outside of an election period, the blue bannered webpage seems to be 80% introversion (photos and news of one’s own family, or one’s own meal, or one’s own travels, challenges and accomplishments) and 20% extroversion (posts of articles about third parties). Read more

On White Collar Prosecutions, with Jesse Eisinger

“The government no longer has the will and ability to prosecute top corporate executives across a wide variety of major industries.”______ Jesse Eisinger

photo_7887Jesse Eisinger is a senior reporter at ProPublica and a former reporter at the Wall Street Journal. He has studied, investigated and written extensively on the 2008 financial crisis, its causes and consequences. In 2011, he and a colleague won a Pulitzer Prize for National Reporting. In addition, he has won the 2015 Gerald Loeb Award for commentary.

Eisinger is the author of a forthcoming book on white collar prosecutions, to be published next year by Simon & Schuster. He speaks to populyst’s Sami J. Karam about the reasons why there have been few such prosecutions in recent years. Among these reasons, Eisinger identifies ‘elite affinity’, a revolving door between government and business, and a resource shift that took place at the FBI after 9/11. The conversation closes with Eisinger’s discussion of current anti-trust issues and some comments on the 2016 US presidential race.

TO HEAR THE PODCAST, CLICK HERE OR ON THE TIMELINE BELOW:

Talking About Brexit with Andrew Stuttaford

“So far as the original founders are concerned, the journey [of European integration] continues. The problem is it is not what most British people thought they were signing up for.” ____Andrew Stuttaford.

Screen Shot 2016-06-19 at 6.15.53 AMAndrew Stuttaford is a British-born contributing editor at National Review and a frequent writer on British and European topics. In recent months, he has been an advocate of ‘Brexit’, the United Kingdom leaving the European Union. A few days before the June 23rd referendum, Stuttaford explains the factors that made him increasingly wary of further European integration. Read more

The Candidates’ Other Demographic Challenge

It is massively larger than 11 million illegals.

Hans Rosling, co-founder of Gapminder, calls it “the biggest change of our time”. It is Africa’s population growth from 1 billion people today to 2.5 billion by 2050 and 4 billion by 2100.

You could say that a close “second biggest change of our time” is the aging and stagnation of the population in rich countries. The combined population of North America, Europe, Japan and Australia/New Zealand is now at 1.3 billion and it will remain at 1.3 billion by 2050 and 2100 with small gains in North America and Oceania offset by declines in Europe and Japan. Read more

The Economy’s New Boss: Demographics

The next President will have to contend with unfavorable demographics.

An enormous amount of money will be spent in the last few weeks of the Presidential campaign. Each side will promote its candidate and his platform with much passion and conviction. In the end, one side will treat victory as the road to salvation and the other will see defeat as an unprecedented and largely irreversible calamity. But in reality, this time around, the identity of the winner will probably matter less to future growth prospects than in previous contests. This is because the demographic input in the economy for the next four years is already programmed on an immovable trajectory and it is less positive than in the past.

Because of the overhanging debt and a poor demographic picture, the next four years will continue to be challenging (though not necessarily recessionary), regardless of whether Barack Obama is re-elected or Mitt Romney replaces him. Like it or not, the boss of the economy, and therefore to some degree of all of us, will be demographics. One could argue that this boss has been with us since at least 2005 when the dependency ratio started to rise again in the United States.

Among all the important factors which drive economic growth, the demographic factor is now weaker than it has been in decades and as a result, domestic demand for most goods and services will be weaker than it has been in a long time. The most telling numbers are as follows:

– The US population grew by over 1% a year until 2007 and is now growing by less than 1% per year. Its rate of growth will continue to decline as the number of baby boomer deaths rises relative to the number of new births.  Since 2008, the US total fertility ratio (TFR) has fallen below the replacement level of 2.1 and is now approaching 1.9 children per woman. See the data here and here. (Note that the TFR is an imperfect measure and a decline may only mean that more women are delaying, not altogether foregoing, having children.)

– The total number of Americans aged 30 to 60 years, the most economically active bracket, grew by over 1% per year for 30 years, from the mid 1970s to around 2005.  It has levelled off and will essentially remain flat at around 120-125 million until the end of this decade. Stagnation in the size of the most economically active bracket combined with growth in the young and elderly brackets will result in lower economic growth. I made a case here that the resulting effect on housing will not be positive.

– The US dependency ratio, which is the sum of people under 14 and over 65, divided by the number of people aged 15-64, has declined for several decades from 0.67 in 1960 to 0.49 in 2005 but, according to UN estimates (see pages 478 and 479 of this UN report), it is now expected to climb back to 0.53 by 2015, 0.56 by 2020, 0.64 by 2030 and 0.67 by 2050. Discretionary spending is bound to come under pressure as more funds are diverted to take care of dependents. (Note that the dependency ratio as defined by the UN and others considers any person under 14 and over 65 to be a ‘dependent’.  This seems antiquated on both ends. In the US, a young person is still a dependent until at least 18, and in some measure as late as 25. And an older person may not become a dependent until the retirement age of 67, or more likely 70.  I ran the numbers for these brackets here and they show that raising the retirement age from 67 to 70 would buy us some time and help the economy.)

– Assuming a run rate of 1 million newcomers per year, immigration, though a clear net positive in the long run, will be insufficient to neutralize or reverse these negative effects in the short run. It would take a much greater number of immigrants to offset the slack. But as noted by some demographers, citizens of any given country become less welcoming of immigrants when that country’s fertility ratio declines or when the economy is weak.

Although much frustration is expressed on the stagnation of the economy, in particular the unemployment rate and the rising deficit, pinning the blame on one or the other of the two political parties ignores a stronger underlying dynamic. The next POTUS will be similarly constrained as POTUS 43 (Bush) in his second term and POTUS 44 (Obama) and will have to implement some steps to mitigate the negative demographic effect. If demographics are failing us, there are other levers to stimulate  growth but we will need to work them harder.

Europe: Aging Population Undermines Longer-Maturity Bonds

ANCHALEE WORRACHATE writes in Bloomberg News and highlights the adverse rise of the dependency ratio undermining European debt reduction efforts:

The euro-region’s ability to grow its way out of the debt crisis faces a roadblock — an aging population.

While Italian Prime Minister Mario Monti and his Spanish and French counterparts push for measures to spur an economic expansion, Italy’s structural dependency ratio exceeds 50 percent. In other words, the number of working-age people is less than half the total population. The government forecasts the ratio will reach 63 percent in 2030 and 83 percent by 2065.

Aging and shrinking labor pools are adding to budget woes in the region where the unemployment rate is already at a record high. The risk is that without an overhaul of benefit programs, governments will be unable to balance their books as tax revenues shrink and unfunded pension and health-care liabilities balloon. Longer-maturity bonds in Spain, Portugal and Greece are underperforming their shorter-dated counterparts amid concern the nations’ finances will keep deteriorating.

“You just can’t create growth out of thin air and the demographic trend in the euro zone isn’t conducive to growth,” said Humayun Shahryar, who helps oversee $100 million as chief executive officer at Auvest Capital Management Ltd. in Nicosia, Cyprus. “For a long time, the economic expansion in the region was fueled by low borrowing costs that came with the monetary union. That’s no longer the case and the shrinking working-age population is a problem.” READ MORE.

California Voters Approve Pension Cuts

IAN LOVETT WRITES IN THE NEW YORK TIMES:

LOS ANGELES — As Wisconsin residents voted on Tuesday not to recall Gov. Scott Walker — who has become an enemy of labor unions nationwide — two California cities dealt blows of their own to organized labor.

In San Diego and San Jose, voters overwhelmingly approved ballot initiatives designed to help balance ailing municipal budgets by cutting retirement benefits for city workers.

Around 70 percent of San Jose voters favored the pension measure, while 66 percent of San Diego residents supported a similar measure.

“This is really important to our taxpayers,” Mayor Chuck Reed of San Jose, said Tuesday night. “We’ll get control over these skyrocketing retirement costs and be able to provide the services they are paying for.” READ MORE.

CBO: US Entitlements Put Federal Debt on Unsustainable Path

PETER SUDERMAN WRITES IN REASON:

The latest long-term budget outlook from the Congressional Budget Office reads like a particularly dark noir: Things start out pretty bad. And then they get worse.

“Over the past few years,” the report’s first sentence explains, “the federal government has been recording budget deficits that are the largest as a share of the economy since 1945.”

Before the year is out, debt held by the public — the federal government’s outstanding debts to outside parties — will equal 70 percent of the total economy. That’s not a pretty picture. And it’s not likely to get better. It is a foregone conclusion that large entitlements, Medicare and Medicaid in particular, are destined to cost far more as a percentage of the economy due to the aging of the Baby Boomer generation, the rise in health costs, and long-term care expenses born by Medicaid. If today’s laws are kept on the books, “spending on the major federal health care programs alone would grow from more than 5 percent of GDP today to almost 10 percent in 2037 and would continue to increase thereafter.”

In a quarter century, entitlements, which currently account for about 10 percent of GDP, would alone chew up a full 16 percent of the economy. That would represent a massive historical shift: For the last four decades, the entire federal government, including entitlements, has consumed an average of 18.5 percent of the country’s economic output.  Relative to the size of today’s economy, that would be like spending an extra $850 billion annually on entitlements. In a growing future economy, it will be far more. READ MORE.

OR READ THE CBO’S FULL REPORT.