The negatives of negative interest rates

The Thinker by Rodin

Donald Trump wants the Federal Reserve to drop interest rates to zero or to even allow them to go negative. It’s pretty obvious why: so he can avoid being at the wheel if a recession inconveniently hits before Election Day. He’s clearly freaking out about the election still more than a year away, as also evidenced by his decision to suspend some tariffs on Chinese goods.

Why should negative interest rates matter to you? It’s not like you can set up a Federal Reserve bank account. The Fed Funds Rate is currently 2.25%. This is the interest rate the Fed requires that one bank charges another bank to park its funds in their bank. It usually parked there only overnight. Any excess reserve a bank has on hand is money they cannot earn interest on. So parking it overnight at another bank allows them to make some money on it.

So what does this mean if the reserve rate is set to 0%? It effectively means there is no reason for a bank to park its excess reserves because it will not earn the bank any money. They might as well lend it. What happens if it’s a negative number, say -1%? Then effectively a bank takes a hit to park its money elsewhere. It would be stupid not to lend it.

A bank could pass its lower profitability from these lower rates onto its depositors. This happens routinely when the Fed Funds Rate changes. We bank at Ally Bank. When the Fed cut its rate by .25%, my savings and money market interest rates were cut by this amount too. Anticipating a rate cut, we at least did one thing smart: we took out a certificate of deposit for one year, which locked in our rate. We’ll earn 2.47% on it after one year, but not before. In general though most people don’t like to tie up their cash like this, so when the Fed Funds Rate drops, they will lose interest income. Better to take that money and risk it on investments is the hope.

Banks could in theory charge depositors’ negative interest rates, i.e. charge them for holding their money. (Considering all the bank fees we pay, some of us in effect already are!) They probably won’t, but accounts that effectively draw little to no interest at least one advantage: safety. Or do they?

Most accounts are fully insured because they don’t pass the threshold of $250,000 per depositor per bank. So yes, if a bank goes under you are likely to get your money back. But since the Glass-Steagall law (passed as a result of the Great Depression) was repealed in 1999, things have loosened. Banks can now invest in speculative investment with depositors’ money. This resulted in the Great Recession when banks loaded up on toxic assets to chase their bottom line. For them, the worst thing that can happen is they declare bankruptcy, which is what happened to so many banks in the Great Recession. The government got to clean up the mess and shoulder any financial losses, i.e. you and me assumed the risk.

Now, as the economy improved and Republicans controlled government again, these financial rules were loosened even further. In 2018, Trump signed into law new regulations that eased oversight on the largest banks, by raising the criteria for what comprises a very large bank. This results in less regulator oversight.

Add in low or negative interest rates though and we add a lot more risk to our financial system. Trump of course is hoping these low rates will incentivize banks to loan money, pumping up the economy. (It might also save him boatloads of money, if he can renegotiate interest rates on his loans.) But by incentivizing banks, we are in effect incentivizing risky loans. In short, we risk another Great Recession, or possibly another Great Depression by doing this.

Some countries are trying negative interest rates to stem deflation or deflation fears. Deflation occurs when money you have today is worth more tomorrow. In that case, there is no incentive to invest the money. Rather, you want to hold onto it, which means it’s not available for others to use. By making savers pay negative interest, it encourages them to loan out the money to stimulate the economy instead.

As a tactic for stopping deflation, maybe it has some merit. It’s working marginally in Japan, which has experienced years of deflation. But the United States is not in a deflationary environment. Hopefully though the Fed is instead trying to prevent deflation from happening in the first place.

Negative interest rates don’t have to lead to financial calamity, at least if they are properly overseen and regulated. But in this country it would be a very nervy thing to do at present. The Fed’s toolset though is very limited and well tried. The Fed’s policy of quantitative easing (imitated by lots of central banks) was one tactic of desperation after the Great Recession when the economy was still a mess even after virtually zero interest rates. Quantitative easing is essentially the Fed buying up investments others don’t want to buy with money the Fed creates out of thin air. They control the money supply, and can create money willy-nilly. That and low interest rates are about all the tools they have left.

A negative interest rate policy looks like the next and more desperate step to keep an economy from sinking into depression. It is basically a tool to use for deflation, which is what happened in the Great Depression. It’s like a fire extinguisher alarm: break glass only in case of emergency.

If investors though figure deflation is going to happen, they have an option: take the money out of the banking system and figuratively put it in the mattress. That way no one can use it but at least it’s safe, unless someone looks in the mattress. It’s more likely though they will move it to currencies and economies that are not deflating.

So hopefully the Fed will take a pass on Trump’s idea. In reality, the problems of our economy are structural and these tactics of the last ten years are basically stopgap measures. The Fed should have been doing more modest increasing of interest rates instead, as our economy, at least if it’s not in a recession, should be able to handle it. Mostly our economy is showing every sign of being over-leveraged and fragile again. If your economy is truly strong, you don’t need to even think about using these tools.

If this house of cards collapses again, it will be felt the way it was last time: soaring unemployment, wiped out savings. A lot of it will be due to risky investments, just like the Great Recession. If you are looking for a true revolution, another Great Recession or Great Depression is a good way to start one.

Who is going to be our next president?

The Thinker by Rodin

Who knows? At this point it’s probably easier to say who it won’t be. That likely includes any Democrat polling at under ten percent nationally. That almost certainly includes any of Trump’s Republican challengers on a quixotic quest to convince Republicans he’s the loser he is, since about ninety percent of them love Donald Trump. There is always the possibility of a great Trump implosion. It’s been long underway; it just doesn’t seem to make any difference. As I noted recently, there’s no bottom for Republicans.

Anyhow, sorry Kamala Harris, Corrie Booker and even Pete Buttigieg, who curiously raised the most money of any Democratic candidate last quarter. Mayor Pete though may be going for the consolation prize: being on the eventual Democratic nominee’s ticket. Not bad for the mayor of a city of only 100,000 people.

Will it be Joe Biden, the current presumptive Democratic frontrunner? If history is any judge, probably not. The odds favor whoever wins the Iowa caucuses. You have to go back to 1992 to find a case where the Democratic nominee did not first win in Iowa. That was because Tom Harkin was running and he was Iowa’s senator. He got 76% of the vote; Bill Clinton got just 3%. New Hampshire’s primary is hardly a bellwether; it’s more often wrong than not at calling the Democratic Party’s eventual nominee.

Polls will doubtless be all over the place between now and February’s Iowa caucuses. The Des Moines Register hasn’t polled the state since June when Biden had a comfortable lead. It will be interesting to see their next poll, since theirs in typically the most valid. Generally though the candidate with the most enthusiastic supporters is the one who ultimately wins, since they show up on caucus night. You have to look hard for Biden enthusiasts. If I had to pick a winner of that primary, it’s most likely to be Elizabeth Warren. At least, that’s the sense I’m gleaning from reporters following her around: she generates the most enthusiasm and highest crowd sizes.

The Iowa caucuses and the New Hampshire primary have the effect of quickly winnowing the field. They also perversely assure that white Democrats get an oversize ability to help pick the eventual nominee. Is this racism? It wasn’t intended that way, as it was set up at a time when our country was overwhelmingly white but today it looks racist. Multicultural Nevada now rings in third, with its caucus on February 22. After Super Tuesday on March 3, which now includes California, we’ll probably know with 80 percent probability who the Democrats nominee will be: whoever has racked up the highest delegate count. Barack Obama was the exception, although he did win in Iowa in 2008.

I don’t think the Democrats are going to nominate Joe Biden. It’s not just because of his gaffes and his tepid support. It’s because if you add up the polling for the other progressive candidates, they trounce him. As candidates drop out, it’s unlikely that those supporting progressives will realign behind Joe Biden. They are more likely to align behind Elizabeth Warren or Bernie Sanders instead.

Warren probably has more enthusiastic supporters, plus Sanders is a known and older commodity. So I think the omens look quite good for Warren, who also happens to be my choice at the moment. Warren has been steadily creeping up in polls.

Democrats would be wise to nominate someone they are actually enthusiastic about voting for. That won’t be Joe. What brings out Democrats in droves on Election Day is someone new and different. Unfortunately, what they often get instead is someone tried, true and tired but favored by party insiders. Their candidate should be someone with good favorability ratings, particularly among independents. Currently, Joe Biden and Bernie Sanders qualify. This will change. Biden’s are declining while Warren’s are rising. Many candidates have underwater favorability ratings solely because most voters don’t yet know who they are.

I’m rooting for Warren and have been giving her $50 a month for many months now. After people really listen to her, they tend to like her. She seems relatable in a way few Democratic candidates are. I’m betting that she wins the nomination and I hope the election too. If she does, I will definitely enjoy watching her debates with Donald Trump. Trump will never know what hit him.

How the “American Dream” killed the American Dream

The Thinker by Rodin

The truth is, I think of Tom a lot. Tom and I go back to fourth grade. He was the new kid in class and unlike any of the other boys there he was a bit geeky like me. So we struck up a friendship. Decades later we are still friends, but we are bicoastal. I’m still on the east coast; he’s on the west coast near Portland, Oregon.

We lost touch with each other for a long time. My family moved south to Florida. His call was advertising, which took him various places further and further west, including Alaska. Tom is a brilliant at advertising and art in general. Frankly, my talents were far less impressive than his. For a long time I didn’t know what I wanted to do. My BA in Communications was largely worthless. It was the rise of computers, the dearth of talent in a rising industry and my willingness to get into a rising field that finally gave me a calling that paid. This led to a career largely working for Uncle Sam, a master’s degree that came later in life at age 42, and retiring in 2014 on a comfortable pension.

Tom, truly the more talented of us, wasn’t so fortunate. Both of us are now age sixty plus. Tom works in an industry that worships the young. Tom has worked for many advertising agencies over the years. These turned increasingly into gig jobs. Younger talent, more conversant in the nuances of social media and willing to work for cheap, tended to get the work instead of him. Mostly he worked for himself. Huge economic forces like the 2008 recession left him reeling. He’s had some ups since then but arguably more downs than ups. Tom is hardly alone.

I am the exception. It’s unnatural to retire at age 57 these days. Only the rules of an old civil service system let me do so. Pensions are getting hard to find, but I got one. It pays for the bulk of my retirement, but I also have a 401K to supplement my income. I also am not quite unemployed. I do some consulting from home, and a little teaching as an adjunct too.

As for Tom, he is scrambling. I’m sure he does advertising gigs when he can get them. His talent though is undiminished, just largely not recognized anymore. Mostly he is scrambling. His most recent “gig” was working at a local Amazon distribution center, working the night shift for a small pay differential. Amazon was shamed into raising wages to $15/hour, so he’s earning a bit more than that. I’m sure his wife is working too. Clinging to their middle class life must be excruciatingly hard with two boys to raise.

How did this happen? It’s been driving me nuts, and filling me with something akin to survivor’s guilt. Granted, I really like retirement, but it feels like a gilded life. It’s not too hard to imagine me in Tom’s shoes. Through someone’s grace I got lucky. Tom didn’t get that grace.

It’s Tom and millions like him. They were supposed to live the American Dream and it was supposed to work for them, as it had for his parents. You educate yourself, you try your hardest, you give the best of yourself and you expect to get rewarded. It worked for Tom for a while, until it stopped. It wasn’t because Tom suddenly became less talented. It was because someone moved his cheese.

An early factor was that Tom dropped out of college. It didn’t stop him from getting into some great ad agencies and even teaching college for a while, but the student loans dried up. His father got his education from the GI Bill that paid all his tuition. Tom never joined the military. Tom’s father also rode a successful career with IBM as an engineer, which gave him a generous pension. You can’t get a pension if you work for IBM anymore.

In short, the American Dream left Tom behind, and he’s a smart white guy like me, supposedly a privileged sex and race. It probably would have left me behind too had not I sensed opportunity in this computer thing, made the best of it, and got lucky. It also helped that I made a career working for the government. There were times when I didn’t like the work, but the bills got paid regularly and I had only one incidence of unemployment.

The American Dream is that if you work hard and apply yourself you can live a reasonably prosperous life, one better than your parents’. The dream is that there will be opportunities there for you and that with persistence and tenacity you too can claim them. For a while, it was the American reality, not just a dream. It wasn’t for everyone of course, but for white men like Tom’s dad and mine it was.

The reality though is that the American Dream wasn’t so much a dream as it was the American system. The “Dream” was made possible by progressive government. The GI Bill funded not only Tom’s father’s education, but also my father’s. Without it, it’s unclear if he too would have gotten his engineering degree. He might have swept floors instead. There were plentiful scholarships for the talented, but also student loans. There were beneficent companies willing to invest in employees for the long term. Both our fathers had such employers. Climbing the ladder was possible because there were many rungs and they were fairly easy to climb.

Since about the time of President Reagan, the tables have turned. Pensions became 401Ks, if your employer even offered a 401K. Student loans became less generous, had higher interest rates and became harder to pay off. The cost of living in general went crazy, with housing disproportionately harder to afford. The cost to buy a ticket on the American Dream kept getting pricier: tuitions skyrocketed, class sizes swelled anyhow but the career you often aimed for often turned into something you could not market profitably. It happened to me with a BA in Communications and would have brought me down too had I not found an aptitude in information technology and low entry requirements at the time. Now, more of us have advanced degrees than ever. They just don’t buy us much. For example, there is my friend Tim who I met when we both worked retail. He has a PhD and earns his living largely through a lot of adjunct teaching. It doesn’t pay very well.

The American Dream used to come with a support system that made it possible. Now that support system is gone. The one that exists is mom and dad, if they are wealthy enough. Unsurprisingly, these people are the ones who are most likely to attain it and prosper. We have decided not to make the investment that makes the American Dream possible. Unsurprisingly a lot of people like my friends Tom and Tim arguably fell through the cracks. A few, like me, got lucky anyhow. But rather than making me feel good, it just makes me feel sick.

No bottom for the Republican Party

The Thinker by Rodin

It looks like I have been giving Republicans too much credit. I assumed there was some core group of Republicans who could agree, “This time Trump has gone too far” and bring him down. Apparently, there is no bottom for the Republican Party.

That’s because I assumed that there were some sane Republicans out there. But it looks like when push comes to shove, sanity takes a back seat to subservience and fealty. Republicans apparently love to take orders. They love authoritarians. I’m guessing it gives them some feeling of comfort that somewhere a Big Daddy is taking care of things. Having decided to get on the Trump train, they can’t seem to find a reason to get off, no matter how surreal and ridiculous it gets.

Signs are pointing to a huge train wreck for Republicans in the 2020 election. Some years back I pointed out that Trump would kill the Republican Party. To severely maim the party, Republicans have to lose both the presidency and the Senate. Barring some massive election fraud, Trump is destined to be defeated in 2020. He’s never polled over 50% and most of the time his approval ratings have been mired in the low 40s or lower. Winning with these sorts of negatives is possible only with massive voter fraud or a third-party candidate that siphons off a lot of Democratic votes. Both the 2000 and the 2016 elections likely would have elected Democratic presidents had it not been for the third-party spoiler effect. It’s not Trump’s base that will win him reelection, but Democratic fragmentation.

Winning the Senate requires flipping three Republican seats, which is a bit of a long shot but not impossible in a wave election. Aside from his base, Trump has managed to piss pretty much everyone off. But even among his base, he is bleeding supporters. White men support him, but according to polling he’s recently lost white women without a college education. Trump is losing farmers from his trade wars, and truckers are seeing major layoffs plus the latest tax law raised their taxes by doing away with a lot of their deductions. Meanwhile, Senate Majority Leader Mitch McConnell is deeply loathed in his home state, with only 33% approval. He can’t even be bothered to pump up a pension fund for coal miners. Yes, in deep red Kentucky, McConnell may lose reelection next year.

Rather than face criticism, Trump does the only thing he knows how to do: reshuffle the deck. This means changing the subject, generally by saying things or posting comments on his Twitter feed that are increasingly outrageous. This is effective but it doesn’t actually fix the issues that got him in trouble in the first place.

Moreover, his pattern never varies. When he decided not to put those 25% tariffs on Chinese goods so people could enjoy nice presents under their Christmas tree mostly made in China, then of course when China added new tariffs on U.S. products as they promised it all went out the window. New tariffs were back on and markets plunged about three percent yesterday. They were doing fine until his announcement.

But just when you thought Trump couldn’t possibly get any wackier, he doubles down on the stupid. Just this week Trump:

  • Said he was the Chosen One, implying he was the King of the Jews
  • Said any Jew voting for Democrats was disloyal and un-American because they should put Israel first … uh, what? And how is putting Israel before the United States showing you are an American patriot? Oh wait, because Trump says so. Gotcha.
  • Ordered U.S. companies to leave China, even though he can’t
  • Decided he could issue an executive order to end birth right citizenship, as if he could unilaterally override the 14th Amendment
  • Blamed the chairman of the Federal Reserve for his economic woes because he wouldn’t cut interest rates fast enough, while apparently absolving himself of the blame of nominating Jerome Powell in the first place
  • Said he wanted to buy Greenland and canceled a summit with Denmark, which manages the island, in a huff because they wouldn’t consider it. Actually, Denmark couldn’t even if it wanted to. Residents of Greenland would have to decide. Oh, and he called their female prime minister “nasty”, his word of choice when acting like the obvious misogynist that he is.

We have a president that is, quite frankly, totally nuts and bonkers. Just one of these by a Democratic candidate like Joe Biden would sink their candidacy. But Republicans so far show nothing but increased fealty to a president who by any objective standard is mentally ill and could not be trusted to even competently manage a child’s savings account.

Moreover, a recession is clearly on the way and every action Trump takes seems to be designed to make it worse. It was tariffs that brought us the Great Depression. Doubling down on tariffs simply increases the odds that a recession will turn into a depression. And if there is a recession, there’s not a single adviser to the president who has either the smarts or the wherewithal to help lead the US out of a recession. The closest we have is Jerome Powell, and only because the Fed is independent of the executive and he can’t be fired. When you surround yourself by incompetent sycophants, well, you get incompetent sycophants. Hell of a way to run a “government” … don’t bother to actually govern!

I was thinking yesterday that the tanking stock market might finally be the straw that broke the Republicans’ back. Moneyed capitalists ultimately hold up Republican power. Yesterday, three percent of their wealth vanished because Trump’s ego was hurt. Likely a lot more of it will vanish soon.

The obvious remedy is the 25th Amendment and twisting Vice President Pence’s arms to get a majority of the cabinet to declare our president is too mentally ill to serve. I’ve been waiting more than two years for this intervention, assuming cooler heads in the Republican Party could prevail. While I still hope for it, increasingly it looks like I misjudged the nerve and sobriety of the Republican leadership. They are wholly captured by their captain, and appear ready to go down with his ship.

Real estate investing is exacerbating income inequality

The Thinker by Rodin

Have you met Kevin? Kevin, i.e. Kevin Paffrath, has a YouTube channel, says he’s a millionaire and will help you get started in real estate investing so you can be a millionaire too. He’s handsome, reasonably young and looks overly caffeinated. The same is true of Graham Stephan who while being a millionaire still lives like a miser. He’s subsisting on a lot of oatmeal according to his many YouTube videos. Both are rich and made their millions buying, selling but mostly renting out their properties. And both are glad to help you do the same, as well as coach you on the secrets that made them rich too, for free if you watch only their YouTube channels but also for money if you want to attend their lectures, get their books or DVDs, and get online with them for semi-private chats.

The YouTube algorithm decided I am interested in real estate investing. I’m not interested enough to actually do what these guys are doing, but I do have a friend locally who is making most of his money through renting out rooms in houses that he owns. Maybe that’s what got me curious. This gives him time to do what he really likes: some IT consulting fixing and maintaining computers, servers and such; and coaching at the local high school which pays much less than the minimum wage.

I’m guessing though that he didn’t get all this property by chance. I’m betting he inherited a significant amount of money that let him get started in this business. I don’t know for sure because I’m too shy to ask him. But Kevin and Graham aren’t that shy, and proudly state that they made their fortune the old-fashioned and new-fashioned way. The old-fashioned way is to buy properties on borrowed money on fixed 30-year mortgages, rent them out and use the rent to maintain the properties and pay the property taxes. The new-fashioned way is to use the tax laws that make it possible for them to pay little in the way of capital gain taxes. It’s the latter that really irks me about Kevin and Graham.

Anyhow, they are happy to try to convince you to get into real estate investing too. It’s also clear from watching their videos that they are more than a little obsessed about real estate and money in general. It’s unclear if they have any time to enjoy their money and seem obsessed with acquiring more and more of it. They figure you are too so why not try to monetize their talent? And to be fair, both men don’t appear to be bamboozling anyone. They qualify themselves as just some guy on the Internet, tell you to get your own independent advice, and that making money in real estate can be profitable if you do it right, but it’s not easy.

I was watching Kevin’s recent video yesterday on why he’s not a fan of Roth IRA’s. It’s definitely a perspective I would not get from my personal financial adviser. He shows you how you could use some of the money you set aside to invest, above the amount you would lose over the years with a Roth IRA (by paying taxes on the money upfront) to buy real estate instead. And conceptually, it sounds great. When you save enough to buy one home, rent it and maintain it and ten years later use its profits to go buy another one.

But it all depends on whether you have the time and energy to commit to buying other properties, maintaining them, and being a landlord. For me, being a landlord runs about dead last on the sorts of things I would do willingly. I might sell used cars first. Basically, I’m bad at confronting nasty people. Not all tenants are bad and making sure you have the right tenant is important to keep an income stream going. But there’s bound to be some nastiness. I don’t want to deal with it. You could contract it out to someone else, but that makes it all less profitable.

Like most homeowners, I discovered that the cost of maintaining houses for over thirty years is considerable. We owned a property in Virginia for 22 years. It was bought for $192,000 in 1993, sold in 2015 for $505,000 but we also spent about $120,000 maintaining and improving it. And of course we paid lots of money in interest payments and other fees. In short, maintaining a house is not for the timid or financially challenged. If you are going to get into this game, make sure you can get cheap loans or have a whole lot of working capital.

I was so busy with my regular job that just maintaining our house was more than enough extra work, and it took 22 years to realize the gain on the property, which was transferred to buying our next property. Fortunately we own it free and clear. If you get into real estate investing, the income may appear to be “passive” but you will probably be working your ass off maintaining these properties and dealing with the hassles of investing in real estate and being a landlord.

In short, real estate investing is not for everyone, and it’s not an easy way to riches. But goodness! I’m learning from Kevin and Graham that there are some real tax advantages to it. And that part had me seeing red. It’s not that I can fault Kevin and Graham for getting these perks, but essentially they delay forever paying taxes on all the appreciation of their properties. Moreover, they can effectively escape ever paying taxes on these gains if you never sell them or don’t use the sale to buy something else. You can, for example, bequeath your properties to your posterity, and they can keep this scheme going indefinitely too.

This is in fact how Donald Trump has made his wealth. It’s why he says he loves debt. Rest assured he is deeply indebted, but if he can sell one property purchased largely with borrowed money and buy another one with the proceeds, he can pocket a lot of cash while deferring gains on them too. This is one of the reasons Trump is pulling all stops to keep his tax returns from getting released. If people discover he pays little to no taxes while they do, they are going to be furious.

When Elizabeth Warren talks about a wealth tax, this is exactly the sort of wealth I want to see taxed. You should too. These are all legal schemes, but they drive wealth inequality, exacerbate deficits and in general keep the government from having the revenue it needs to give us a first-class society.

I’m betting Kevin and Graham would grumble a little, but they definitely owe the rest of us a heap of money in the form of higher taxes. Mostly, we need to tax their capital and property gains. We should not feel the least bit guilty to go after it.

I’m feeling sick and you should too

The Thinker by Rodin

I was in Boston last week when the massive heat wave struck. I was there to attend a Wordcamp, a gathering of people interested in WordPress. (WordPress powers forty percent of websites, including this one.) While the “camp” was great (in part because it was indoors), the heat outside was oppressive. Walking eight blocks or so to dinner from my hotel nearly gave me sunstroke.

For a while, I walked beside a homeless man with a shopping cart. Inside were his prized possessions, such as they were. They included two plastic jugs of water that he kept drinking from. He put on a happy face though amongst his profuse sweating. “Love the heat, love the heat”, he intoned, moving down the sidewalk.

It was probably 98 degrees. To me it, was about as brutal a heat as I could ever remember, which included one 104-degree day in Virginia’s humidity. It was perhaps made worse by all the asphalt and concrete around me. I eventually found the Jewish deli where I had dinner. The threat of heatstroke went away when the waitress poured me glass after glass of ice water.

The homeless man proved to be more resilient than I was, but he had no choice. I figure it would have killed me had I had to stay out in it all day. I felt woozy, sticky, terribly uncomfortable and sweaty beyond belief. I couldn’t fathom how people endured this kind of heat before air conditioning. The truth is though that most of the time they didn’t have to because it very rarely got so hot. What I was experiencing was climate change in action. It is only going to get worse.

I remember back to the 1970s when the Environmental Protection Agency was first established. By the end of the decade, the skies were largely clean and the rivers largely unpolluted. We felt like we had pollution under control. Climate change was not on anyone’s radar, except by maybe some outlier scientists. No wonder that when Ronald Reagan declared Morning in America again in the 1980s we were so enthusiastic. Off went the solar panels on top of the White House that dopey Jimmy (“cardigan sweater”) Carter had put up. We went back to getting our energy the old fashioned way, which at the time meant importing oil from mostly corrupt Middle East countries that we supported. We did manage to modestly increase fuel efficiency standards over the decades, but mostly we tuned out Al Gore’s warnings. Trump, of course, is doubling down on willful ignorance. And he’s hardly alone. In Brazil, their new Trump-like president Jair Bolsonaro declared open season on what’s left of the Amazon.

Addressing climate change is not entirely hopeless, but nearly so. With the exception of the United States, most developed countries agree there is a problem but most are taking half measures at best to address it. It doesn’t begin to realistically address the crisis. To realistically address the crisis, we all need to work together. Moreover, there is no short-term solution. It will require generations of work and carefully nurturing of our ecosystems. In the best case there will be much more massive deforestation, widespread species destruction, mass migrations and added misery and poverty. There’s a lot to be afraid of as the crisis worsens. Most people react to fear by building walls like the Supreme Court decided Trump could do on our southern border on Friday. Countries will try to have their cake and eat it too, which will make things worse for everyone.

Heat and misery then are now the new normal, but the effects of 108-degree records in cities like Paris recently are just beginning. It’s already pushing sea levels to rise but this will get much worse too. There are ten million people in Jakarta, Indonesia but most of it is expected to disappear under rising seas as it sits at just (or below) sea level. And it’s but one of the cities to be impacted the worst by climate change. Everything is changing, and none of it is changing for the better because of climate change.

So I was feeling sick not just from the heat, but because of the legacy I am leaving to my daughter’s generation and all future generations. They may expect that their lives will closely resemble the lives they were born into, but that’s largely not going to be the case. Their lives are likely to be shorter, more miserable and with a lower standard of living than their parents’.

But it’s not just future generations but also my generation too. At least financially I am the exception, but I see plenty of people in my generation that are living precarious lives largely unknown by their parents. I learned this week that my friend from childhood, Tom, is working at a distribution center. He’s just another Amazon droid in a poorly air conditioned warehouse shoving things into bins for distant customers for a little over $15.00/hour. Tom is an extremely talented advertising professional, but at age 61 he simply can’t find much beyond spot work for doing what he does best and most profitably. He’s been aged out and his industry favors the young. So while you sleep, Tom is shuffling things into bins for a fraction of what he’s worth. The only good part for Tom is that Amazon was shamed into raising wages to $15.00/hour. Also, because he works nights he gets a small bonus. Tom is hardly alone. Maybe $15.00/hour is a living wage, but not for a man with a mortgage, a wife, and two kids, one of who is going through a gender transition.

I feel sick for Tom not to mention his friend Jeff who is in a similar situation, and that the economy is failing millions like them. I feel sick for that homeless man too. Being retired and comfortable financially, I spend a fair amount of my leisure trying to rectify the mess my generation has made, such as helping to create a community network. But it’s not nearly enough. The problem is so massive it looks hopeless. I know that fear is a very strong motivator. But since most of us are short-term thinkers, our fear will be used against us to make our lives even more miserable. Malicious idiots seem to be in charge everywhere, and most of us are stupid enough to keep allowing them to do so.

No wonder that I feel sick. I have a feeling though that this is a condition I will never recover from. Neither will you.

Here’s why the improved economy means so little

The Thinker by Rodin

The stock market is reaching record highs again, which make us moneyed people woozy. I’m modestly including myself here although I’m not that well moneyed. But I am retired on a nice pension with plenty of assets to draw on should things go south. The Dow Jones Industrial Average passed 27,000 yesterday and closed for the week at 27,322. Not bad for an index that dropped to 6547 on March 6, 2009, a little over ten years ago.

Happy days are here again? It might help to wonder why the market indexes are so high. The most recent surges are almost surely due to the Fed’s strong hinting that it’s going to reduce interest rates soon. Maybe Donald Trump’s bullying is getting to the Fed, but much more likely the Fed has read the tealeaves and suspects a recession is getting started and is trying to prevent one. And it’s enough to calm Wall Street and make them think happy days will keep on coming.

You don’t have to look hard though to find worrying signs: tariffs are slowing trade, commodity prices are dropping, and the percentage of people in the workforce keeps dropping. This is artificially keeping the unemployment statistics low. Consumers are taking on the same levels of record debt they took on before the Great Recession and Republicans have managed to repeal many of the key safeguards put in place to keep it from happening again. Student loans passed the $1T mark, sucking money from these former students’ wallets that they can’t spend on actual goods and services like houses. Perhaps in response, mortgage rates are dropping again, which is actually not a good sign. Banks are trying to entice people to buy houses, so the lower the rates go the harder time they are having finding people who can afford to take out a mortgage.

Still, many of us including me have been expecting calamity and have been wondering why we have been proven wrong. There are a few positive signs. With unemployment low, workers can bargain for higher wages and it’s working, sort of. They are beating the cost of living by .5 to 1% annually. That doesn’t translate into a whole lot of money, but it beats the decades of wage stagnation we’ve been experiencing. This is hardly the end of wage stagnation, but it is at least a hopeful sign.

Donald Trump is wondering why he isn’t getting more traction on the economy. That’s actually his one bright spot, with a slim majority approving of his handling of it, while his overall approval ratings seem mired in the low 40s. 40% of Americans still cannot find $500 to draw from in an emergency. It could be they are all inept at financial management, which is what Republicans would like you to believe.

The real reasons are much simpler. Much of today’s work requires people with fewer valuable skills, which mean they can’t command as much in wages. That’s why they are working two or three jobs to pay the bills. Even this is not enough, which is the real reason they can’t find $500 and are living paycheck to paycheck.

But there’s one other important factor that is often overlooked. Certain things cost a lot more than they used to (housing is a prime example) and there are other things that cost dramatically more than they used to. The most likely reason you will get thrown into poverty is if you need more medical care than you can afford. The Affordable Care Act was a good first step, but it wasn’t nearly affordable enough, despite the subsidies. You still needed enough income to pay for the bronze plans. And since they came with high deductibles, they mostly only bought catastrophic protection. All those deductibles, copayments and coinsurance payments cost a heap of money and all of it needs to be in the form of disposable cash, which for the most part these people don’t have. They still can’t afford to be sick. Of course, a lot of states won’t offer health care under Medicaid to these people, which they probably could afford if it were offered because copays are minimal when they exist at all. Medical price inflation is still insane and there are fewer mechanisms to check it. The magic of the free market has proven largely illusory with health care costs.

It’s no wonder then that surveys show that for most voters it’s not how well the economy is doing that matters, but how well their economy is doing — and it’s not going that great. The good news is that there is work out there for pretty much anyone who wants it. The bad news is that without a lot of high-paying skills, at best you can barely get by on the wages you are earning. Voters have figured out that health insurance really matters, and it’s their number one concern now. Those who had Obamacare realized that at least for a while it cushioned financial shocks. But they also need health care because they can get sick and simply can’t afford to get well. There are people driving hundreds of miles to Canada regularly just to buy insulin at affordable prices.

While it’s true that Donald Trump is widely seen as unlikeable and unpresidential, what voters are really understanding is that government needs to actually govern, and so little of it is happening. A president can be thrown out after four years, which is likely to happen to Trump. But we need a Congress that compromises in the public interest and tackles real problems like immigration reform and the lack of affordable health insurance ten years after Obamacare.

It may be a long wait. The Supreme Court recently decided states were perfectly free to gerrymander based on political party. In short, it’s allowing states to stay in the business of incumbent protection, making it harder and harder for people to actually have a true republican form of government. With our courts now largely in conservative hands, it’s hard to see how this can change.

Which is why Bernie Sanders’ call for a political revolution makes a whole lot of sense. Achieving it without wholesale insurrection though looks incredibly improbable.

Future generations are going to loath Republicans

The Thinker by Rodin

The Republican Party has been reaching something of a zenith lately. For a brief while they controlled Congress. They still control the White House and arguably they control the courts, at least the Supreme Court, the one that matters most. They control 33 governorships, the most since at least 1990 and have 22 trifectas: where they control both houses of state government and the governorship (Democrats have 13 trifectas.)

But it’s going to really suck to be a Republican in the future. Republicans will be loathed and it’s not hard to see why. The most obvious reason is that they did almost everything possible to not address climate change. Donald Trump will be the most loathed of the bunch, but anyone that supported his agenda will be (at best) hissed at. Fortunately, most of these prominent Republicans are wealthy enough to move to the Cayman Islands. I’d say they’d best move there ASAP. But having been to the Cayman Islands, I discovered it’s not far above sea level. As islands in the Caribbean and Gulf of Mexico go, it’s going to be one of the first to be mostly underwater as sea levels rise.

People will be looking for someone to blame, and you can basically indict the entire Republican Party. Moreover, they don’t seem to learn. In Oregon, a few Republican legislators are not showing up for work. They are trying to prevent a bill from passing that will help the state address climate change through lack of a quorum. Yes, they want Oregon to keep worsening the climate crisis. The optics of this already looks bad. Imagine how bad it will look like in ten years.

They are much worse than the No-Nothings of the 19th century. They either deny undeniable facts or believe them and simply don’t care to address them. It’s hard to say which is worse. Just not caring about the climate crisis is bad enough, but they actively support policies that will make our future even chancier and bleaker is much worse. A migration crisis is already underway, but it’s only 1% as bad as it’s going to get. Republicans are actively making it even worse.

We could be working to contain these crises, by doing things like investing in Central America so its governments are less oppressive and their citizens can have some hope for the future. Instead, to punish them we are taking away what little money we give them. And since at least Reagan, Republicans have been supporting dictators down there. The political repression in places like Honduras, Venezuela and Guatemala are driving the crisis.

Finally, the concentration camps we are creating along our border with Mexico are getting some attention. From a party that almost universally wants to force mothers to carry children to term, even if impregnated by rape or incest, they systematically abuse children in these camps. A Trump spokesman actually went to court to tell the court that these children don’t need soap or showers. It’s not just children who are being treated inhumanely, but most of the other adults too. Putting too many people into “camps” not sized for their population in the definition of a concentration camp. Yet many Republicans are aghast that some are calling them what they really are. No, they are not death camps, at least not yet, although apparently influenza and other preventable diseases are widespread within them, and many migrants have died under our custody. Still, it’s not hard to see a Donald Trump in his second term feeling empowered to turn them into death camps as yet another “final solution”.

Then of course was their rape and pillage of the rest of us: the obscene tax cuts for the wealthy, the constant cutting of benefits like food stamps and Medicare, mostly unsuccessful efforts to kill Obamacare, the dumping of more pollution into our atmosphere and waterways and the ensuing health affects they cause that are already underway. Trump apparently thinks if you can’t see the pollution, it doesn’t count: as if someone suffering from asthma won’t have worse asthma when more of these pollutants are thrown into the atmosphere. Worldwide, 6.5 million death occur annually from poor air quality. In the United States, it kills about 200,000 people a year, and those are 2013 figures. This is far more people than are killed in auto accidents annually (about 37,000 people). These numbers are likely on the rise. All this from the so-called Party of Life!

The Republican Party will be seen as the selfish death and greed party who were predominantly responsible for making our country a poorer and increasingly problematic place to live. They ignored all evidence that suggested they were wrong. Since Trump, they have labeled anything of this evidence as “fake news”, claiming it can’t possibly be correct and were deliberately faked. No one will want to be a Republican and at some point no one will admit to being a Republican because it will be too dangerous.

They are likely to get a comeuppance, and it will probably be in the form of radical income redistribution as we try, probably futilely, to save our nation and our planet. They will be lucky if people don’t come after them with pitchforks. So now would be a good time for Republicans to have sudden change of hearts, but it probably won’t make much difference to future generations that will try to cope with the wreckage they mostly caused.

Republicans, move to the Cayman Islands while you can but it’s unlikely that the citizens there will treat you any more kindly.

Why I think Trump won’t go to war with Iran

The Thinker by Rodin

Traditionally, starting a war is a pretty one good way for a president to get reelected. It worked for George W. Bush, but his Iraq war was kind of a sequel to his war with Afghanistan, seen by Americans as a justified war after 9/11. The complications of his invasion were not totally understood by voters when they gave him a second term in 2004; he essentially got the benefit of the doubt. Reagan did some gunboat diplomacy and it served him well in his reelection. We’ll never know if Kennedy’s Bay of Pigs invasion would have cost him the 1964 election. Teddy Roosevelt saw the Spanish American War as a good war, i.e. not too complicated, where America could flex its growing muscle and try the empire thing without too much cost. Much like our potential war with Iran, it didn’t have much in the way of plausible justification. Yet Teddy Roosevelt enjoyed great popularity.

The times though may be changing. Last night Donald Trump aborted three planned airstrikes on Iran while they were already in flight. Supposedly, this was because he was concerned about the reported 150 casualties that would have resulted from the strikes. (They didn’t brief him on this before authorizing the strike?) Most likely, Trump just got cold feet.

Or it could be someone on his staff looked at polling on the issue. For example, a May Reuters/Ipsos poll found that while half of Americans believe we will go to war with Iran within the next few years, 60% said the U.S. should not strike first. Also 61% of Americans still support the agreement negotiated between Iran, the Obama Administration, and many other countries to curb Iraq’s use of nuclear materials. Just 12% of Americans want us to strike first.

Iran recently shot down one of our drones near the Strait of Hormuz. It’s unclear whether it was done in international waters or not. Killing 150 people to avenge an attack on a bunch of metal does seem to be (forgive the pun) massive overkill.

It’s quite clear that Trump sees his 2020 reelection as essential and will do just about anything to achieve it. He’s already invited the Russians and other states (Norway?) to keep interfering in our elections, and Congressional Republicans seem not to care too. His reelection is literally do or die for Trump. If he can’t win reelection, then he may be charged for potential crimes documented in the Mueller report. But if he wins, the statute of limitations will pass, so at worst he’s charged for various state offenses. Starting a war with Iran is risky, but might be effective in ensuring his reelection.

Then maybe not so much. Trump is clearly no student of history, but it didn’t work well for George H.W. Bush, who ran a war against Iraq very successfully with a coalition of countries, yet still managed to lose reelection. If the 2004 elections had been held six months later, George W. Bush might not have won as the consequences of his botched Iraq war became more noticed and Americans turned decisively against it.

When it comes to armed conflict against a significant adversary, my bet is that Trump is mostly a paper tiger. He talks big about being ruthless with our enemies, but he seems to sense that running an actual war is something out of his league. To begin with, the senior leadership of his Department of Defense is largely gone. He has no Secretary of Defense, the acting one just quit and the acting-acting one is hardly the best person for the job. A president that actually managed his government would have filled these positions by now. Not Trump. He remains distracted and is unconcerned about tending to the mechanics of government. I think he senses that a conflict with Iran is better punted than acted on.

Why? Because he would actually be expected to manage the war and that’s hard and boring. It means convincing a reluctant Congress to fund it, which probably won’t happen. He would lose face and look weak. It’s much better, easier and most importantly less risky to punt on it, like he’s doing on North Korea, Venezuela or for that matter much of Central America. Many of his problems are caused by his neglect, i.e. refusal to actually govern. Governing a country at war is hard.

Reports suggest he’s already had open conflicts with John Bolton, his super-hawkish national security adviser who is openly salivating at the idea of a war with Iran. But when Trump acts on it, he’ll own it, not Bolton. Not that when it goes bad he won’t try to make others take the knee for it. But it paints a bad picture next year when he is running for reelection while this conflict likely becomes tit-for-tat actions instead. Any war or conflict with Iran will be a conflict of his own making. Remember that Trump belatedly called our Iraq War a mistake.

It’s much easier to tweet all day and make bullying noises, plus it avoids a lot of accountability. So I think he’s going to talk strong but ultimately do little in the way of a military response. I hope I’m right.

I really think Nancy Pelosi has this viable “nuclear option”

The Thinker by Rodin

I had an idea the other day on how to get at least a few things done in our federal government again. It’s going to sound crazy because I don’t think it’s been done before. But I see no reason why it couldn’t be done, if for some reason Nancy Pelosi wants to show she has real balls.

As a preface, let’s recall what the House and the Senate are empowered to do. It would seem that the Senate is the more powerful body, simply because it is empowered to do a lot of things without the consent of the House. For example, the House has no say on what treaties the U.S. signs, or who gets appointed to senior government positions like department secretaries, federal judges or ambassadors. This is because our founding fathers saw the United States as a collection of sovereign states, with Rhode Island having the same stake as California.

What unique powers does the U.S. House of Representative have? Well, they can propose legislation, but so can the Senate. Similar bills that pass both houses of Congress go to a conference committee where both houses haggle out their differences and vote on an identical bill.

But there is one area where the Senate cannot go first: on any bill that appropriates money. The U.S. constitution says funding bills must originate in the House. The Senate can propose amendments to these bills, but they can’t originate one on their own.

Our new progressive House has been passing bills right and left for the Senate to consider. They go to the Senate where Senate Majority Leader Mitch McConnell makes a show of refusing to take them up. He’s been proudly calling himself “The Grim Reaper.” This includes legislation that would pass easily on a bipartisan basis. One prominent example is legislation forwarded by the House to reimpose FCC net neutrality rules. There is arguably more important bipartisan legislation McConnell simply won’t advance, like protecting our elections from foreign interference or a path to citizenship for so-called “dreamers”.

What Nancy Pelosi could do is simply refuse to forward to the Senate any funding bill for the U.S. government until Mitch McConnell agrees in writing to advance a handful of these bipartisan bills to the Senate floor for an up or down vote.

It’s fair to say that McConnell won’t like this idea at all. But when the legislation is bipartisan it’s a lot harder to say no, particularly when the federal government must be funded. These days, most funding bills are continuing resolutions. These must originate in the House. The House can pass them long before they are needed. Nancy Pelosi though could simply keep them on her desk and refuse to move them to the Senate until she gets a letter in writing from Mitch McConnell that he will move to the floor of the Senate these likely bipartisan bills within a reasonable period of time, say a month.

Yes, Republican senators may start calling her “Shutdown Nancy”. But I bet they would cave because the American people and both parties are by definition in favor of bipartisan legislation. Pelosi and Democrats would look good for at least partially unsticking the levers of governance.

Prove to me I’m wrong, but I believe that the House does have this nuclear option. Given the intransigence in the Senate, I say it’s time to create this new weapon. Once used successfully, the House may find other ways of making government work again.