I have an app on my iPhone, iPad and computer called
Pocket. It allows you to save articles
you would like to read later and have them show up on any of your devices. As it turns out, the good folks at Pocket
keep track of how much you read. Last
week, they sent me an email telling me that I have read over 929,000 words this
year, the equivalent of 20 books. Of
course, that doesn’t include the other dozen books, newspapers or magazines
that I read which might add another half mil or so. Conservatively, let’s put the total at a
million.
So, what have I learned from all this? First, there are two kinds of birdbrains
running our government in Washington:
Republicans and Democrats. If you
buy into the dogma of either party, you’re not getting any truth. Second, the media can’t be counted on to help
you figure things out. They don’t report
the truth. They report what people
say. There’s a difference.
Maybe you already know that.
You didn’t need to read a million words to figure it out. If that’s the case, you can stop reading
right here and go play another game of Candy Crush or Game of War.
For the rest of you…
The economy
Presidents take too much credit for a good economy and get
too much blame for bad ones.
The Bush tax cuts were intended to create economic growth;
however, GDP growth during the Bush years equaled the growth in our national debt. Net zero!
That said, the Bush tax cuts didn’t cause the financial
crisis, the causes of which can be traced to the 60’s. Presidents and Congresses of both parties as
well as multiple Fed Chairmen precipitated the crisis.
The recent spurt in GDP growth has not been caused by the
Obama stimulus or any other policies of his administration. Virtually all the jobs created since 2009
were created by the energy boom as can easily be seen by reviewing this graph using
data from the St. Louis Fed:
Absent the energy boom, the US economy would look much like
Europe’s. All of which adds perspective
to the recent ban on fracking by the governor of my home state of New York, a
state that has been losing jobs and population to the Sunbelt due to the blue
state folly of overregulation, high taxes and debt.
Climate Change
The debate over global warming is fueled more by passion
than science. Reportedly 97% of
climatologists have concluded that climate change will cause vast expanses of
the civilized world will be covered by water within 100 years. My reading of the definitive report by the UN sponsored International Panel on Climate Change (IPCC) lends some doubt on
those projections as the IPCC uses the adjective “likely” or “very likely” when
describing their projections. Science is
never certain. My correspondence with
scientists suggest that nothing as complex as the climate can be predicted with
any degree of certainty 100 years in the future.
That said, the result of burning fossil fuels is toxic. Efforts to convert to renewable energy are beginning to bear fruit and are cost effective. Government investments (like
venture capital investments) have resulted in some high profile business
failures. However, subsidies for
renewable energy have had the desired result.
And, the EPA state-by-state plan for conversion to renewables by 2030 is
well considered and appears to be economically viable. The first phase of this plan involves a
substantial conversion of coal-fueled power plants to natural gas by 2020. (See fracking above.)
To get from here to there, we need to understand that we
will continue to burn fossil fuels for decades.
Converting to lower emission energy sources (such as coal to natural
gas) will diminish the damage during the transition. There is a web of hundreds of pipelines
transporting oil and natural gas around the US and Canada. If we fail to support the addition of new
pipelines, not only are we adding an economic burden but also we are forcing
producers to transport the stuff less safely by rail.
Institutions from Yale to MIT have analyzed the risks of fracking. Most of the press reports
linking fracking to damage to the water supply and earthquakes are
erroneous. But, the press is in the
thrall of an unyielding environmental lobby.
So, the public believes that fracking is more dangerous than it really
is.
Income inequality
French economist Thomas Piketty made a splash this year with
an extensively researched book, Capital in the 21st Century, which
concluded that income inequality was the result of returns on capital exceeding
return on labor. So, the rich get richer
and the poor get poorer. This conclusion
should surprise no one. Why would anyone
invest capital if they would not get a superior return?
Yet, the book fed the confirmation bias of liberals who
think that government should redistribute income and that income inequality is
a serious problem in the US. A parallel study done at Cornell took a different view.
Piketty’s analysis failed to take into account the impact of government
benefits. When considering that impact,
the bottom quintile of earners in the US experienced a 33% increase in income
from 1979 to present rather than the 31% decrease reported by Piketty.
We could continue to increase those benefits and increase
the minimum wage and we would still not make a dent in the real problem. At the core of our social problems are inner
city communities and families that are broken and dysfunctional. The real fix – if there is one – is improved
education. In my hometown of Rochester,
only 5% of high school graduates are ready for college or careers – last in the
country. School choice is the only
answer. I would ask why our high school
options shouldn’t look like our college options. Some public, some private… some affordable, some not. Ultimately parents play a large role in
selecting a college for their children based upon income and other
factors. Why not the same for grammar
school and high school?
Healthcare
The West achieved global leadership, in part, because of
advances in healthcare during the 19th Century. Maintaining a healthy, working middle class
is essential to our security and financial sustainability. The Affordable Care Act does little to
address an underlying cost structure that, combined with demographics, will
continue to increase the share of GDP absorbed by healthcare. In a recent article by Pascal Emmanuel Gobry
titled “What Americans Won’t Learn About Healthcare”, the author suggests that Singapore’s
system might serve as the best straw man for real reform in the US.
Looking forward
There is always a lot of hand-wringing and sniping during
periods of economic malaise. Perhaps we’ll
catch a break from that starting next year.
I expect that we will see the beginning of wage increases
that will affect the middle class positively and the hand-wringing will abate. The demand for labor will be driven by the
return of manufacturing to our shores.
The Boston Consulting Group (BCG) predicts that the US will become the least expensive place among industrialized nations to produce manufactured
goods within a few years due to lower energy costs, more flexible labor laws
and the world’s most efficient transportation system. BCG projects that China’s costs will be 95%
of the US – insufficient to motivate companies to locate new factories
there.
The hitch is that new factories will not employ low skilled
labor in large numbers. The modern
factory is highly automated and those who work there will need to have the math
skills to operate sophisticated machinery.
Politics in DC
I tend to read more about policy than politics. So, I am not confident about my insights into
our electoral prospects.
The recent national election has pundits leaving Democrats
for dead. But, this has happened many
times before. In a brief blog post,
Walter Russell Mead of the American Interest provides several examples of broad
electoral victories that were reversed by a fickle public within 2 to 4 years
and provides an interesting perspective on why we keep swinging from left to
right and back again.
For my part, I see one very troubling element that
undermines our national charter.
The Religious Right has been a key element of the Republican
voting bloc since Ronald Reagan first shook hands with Ralph Reed. In my view, their views are contrary to the
libertarian philosophy otherwise espoused by the party. Freedom is freedom. A small minority of Americans shouldn’t be
able to impose their moral values on the majority. It is noteworthy that religious conservatives
have not achieved their goals despite electing conservative presidents in 5 of
the last 9 elections.
The country is becoming more urban and more liberal. The US map shown to us by the media after
each election with Republican counties colored in red and Democrats in blue
presents a very red picture. But,
electoral votes aren’t allocated by acreage. Over 80% of voters now live in
urban or suburban communities and those communities – including the big cities
in conservative states like Georgia and Texas – overwhelming vote Democrat.
Social attitudes are becoming more liberal. A majority supports both reproductive choice
and same sex marriage. If the Republican
Party can’t find a way to nominate candidates who don’t pander to this element
of the party, they will have a very difficult time winning the White House.
That’s it… it’s time to reformat the hard drive and start
reading new stuff in 2015.
WHO WILL LEAD?
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