Not About Covid

Imagine what it was like in the 1940s during World War II. What did people talk about? Of course, the course of the war and what they had heard about friends and loved ones involved with the war. Today, Covid is our World War II. It’s hard to have a conversation with anyone that doesn’t eventually focus on Covid. What is it? How did it start? How does it spread? How do we stop it?

My title says this is not about Covid so you are probably wondering where this is headed. Where I am headed is to think about the source of our disagreements about it – and about recent racial incidents and about the recession, and so on.

I was walking around Green Lake talking with my friend Barbara and it dawned on us that we live in an incredibly testy world. We wondered why it had to be so ugly and non-productive. I found myself giving my standard answer – our confrontations are about extreme ideologies and the people who follow them.

But as we talked more about Covid disagreements, it seemed pretty obvious that those heated disagreements were not caused by Karl Marx or Adam Smith or Al Gore and Rush Limbaugh. Similarly, racial animosities are not so easy to predict.

So as we sidestepped a lot of goose poop and watched the geese and ducks match their cloaca, we dug deeper into our differences.

We came up with 17 causes of our differences – I know I must be able to find a couple more. Maybe you can help me. 

The truth is that those 17 are not really independent so I guess I won’t worry about the number.

As I rattle these off, keep in mind how these differences might play into your opinions about various issues today. Notice, too, which ones of the 17 come into play for a particular issue but not for others. Thus we might not see the same people lining up together to take positions on any given issue. For example, liberals might not agree with other liberals about a cure for Covid. Some conservatives may have very little in common with other conservatives as they try to resolve racial issues.

These 17 are in no particular order.

1.    Financially Selfish v Generous – you want to keep what you make/you are very charitable

2.    Inward oriented v greater good – you are focused mostly on you and your family and friends/you speak often of the greater good

3.    Philosophical purity v practical/law abiding – you adhere to a philosophical position/you like to think you do things that are efficient or practical including following the law

4.    Empathetic v rule following – you feel strongly about the plight of others/you mostly want people to abide by or not deviate from the laws

5.    Competitive v cooperative – you see much of life as a contest that you want to win/ you work with others

6.    Loyal to people v loyal to ideas – you are loyal to your spouse or your boss or your friends/you prefer to be loyal to ideas or laws

7.    Spiritual v practical – you are driven by the values of a religion/your behavior is mostly driven by practicality

8.    Religious v spiritual – you adhere to a specific religion/you mostly are driven by religious values but not a particular religion

9.    Habitual v free spirited – you are very disciplined and predictable/you are hard to pin down.

10. Rich v poor -- you were born with a silver spoon in your mouth/you were born into poverty

11. Energetic v lazy -- you love to be creative and productive/you love watching Popeye reruns and laying on the couch

12. Smart v not so smart -- biology gave you raw brain power/heredity didn't help you learn 

13. Healthy v Sickly -- you are well and maybe athletic/you are chronically ill and often need medical attention

14. You take recreational drugs v you don't drink alcohol or take drugs -- you are a little wild & crazy/you have empathy for those who need help with chemicals

15. Sloppy v Neat -- you pay attention to details/you let it all hang out

16. Huggy v Standoffish -- you love to be with people and get attached/you dislike close or emotional relationships

17. Bourbon v Scotch – okay this one is for fun and gives me 17. :-)

I am sure there are more of these. What’s missing in my list of 17?

Here’s the trick. Some of these choices put you in the D or R camps. Maybe Rs are financially selfish and Ds are generous? But surely you see that you cannot easily assign a person the same ideology or a party based on each of these very strong character traits.

And that is why I believe that Covid and recent racial tensions are not easy to parse. We are not getting predictable things coming from the mouths and behaviors of our friends and relatives and politicians.

Maybe this is good. Maybe ideological living is not good for us. Maybe we will spend more time thinking and doing less shouting and cheering? Maybe our most vexing current problems do not require an ideological basis for understanding or solution. 

I don’t know but it sure was nice walking around Green Lake in the summer.

Me, Myself, and I: International Trade Policy

Do you want to join a club? Maybe a reading club? I don’t know. Maybe those other people want to read things you don’t want to read. Maybe some of the people in the club want you to pay dues but will never listen to what you want? But then being in a reading club might make you a better reader and more knowledgeable – and maybe it will be fun. Hmm. Which way to go?

As we get closer to the election this year we are going to have to wade through a lot of bologna. Recently I was reading about the international trade plans of the two candidates. Trump is clear about “Me, Myself and I”. He has never seen a club he likes. He’s a loner. Anything “international” seems to him to be a way to take advantage of Americans.

Biden is not like previous Democrats. He does not fully embrace the idea than anything “global” is beautiful. Especially given the recent circumstances of Covid 19, he is more mindful of jobs for Americans and he doesn’t want to support any policies that might take jobs away from Americans. He is talking about industrial polices and tax policies that will keep jobs in America. “Me, Myself, and I” figures prominently into both candidates plans. 

It is interesting to me how far we have come in less than a year. I used to like free trade agreements. I used to like the idea of promoting freer trade. I liked the idea of lots of “clubs” to join. Maybe you could call that philosophy “Us, We, and Ya’ll.  Why did I like UWY? You can pronounce it like OOWE – as in OOWE G00WE was a worm.

I liked UWY because it seemed so logical. It seemed so intuitive. None of us make our own stuff. Okay maybe you grow some tomatoes. But mostly what we do is learn how to do something – call that your occupation. We earn money and we use that money to buy squash, beer, and Impossible Burgers. You don’t, in contrast, grow all your own food, produce your own steel, make your VW Bus, or any of that stuff.

Why do you do that? Because we believe in the benefits of specialization. If I tried to make my own Hawaiian shirts, they would be very ugly and probably cost me a ton. It is better for me to spend my time trying to be a good teacher and earn enough money to buy shirts from someone who really knows how to make shirts.

The idea of free trade extends these intuitive notions to nations. Why try to be a jack of all trades when you can specialize in some things, earn income, and then buy things from others? The result is that we would have much more product that way and at a better price.

I can hear you singing your favorite hymn right now. What’s wrong with this simple plot?

Several things are wrong.

First, like any club, this international scheme means we count on our trade partners to play by the rules. For example, they shouldn’t use trade policy as a big stick to gain other advantages. If Country A wants to invade Country B, they might threaten to cut off trade with B so that they ignore their bad behavior outside of trade.

Second, countries can gain by giving unfair advantages to their own workers and firms. Should we produce our own Panama Hats? We might have some great hat makers in the USA. But what if country C decides to give big subsidies to their hat makers? The world decides to buy hats from Country C instead of the US. US firms and workers are hurt.

Third, similar to the second point, countries can advantage their own companies and workers through a variety of protectionist policies including tariffs, health and safety regulations, labor regulations, and a number of other non-tariff barriers.

Fourth, transitions can be slow and treacherous. Perhaps natural economic advantages change over time? Suppose one of these changes negatively impacts US firms and workers. No cheating going on. Just change unfolding. The reality is that US firms and workers will be hurt. It will take time and much effort for those people to move away from earnings associated with declining industries – and move into more promising ventures. A 60 year-old worker might not transition easily from making hats to writing code.

Those are four things that come to mind that jeopardize a faith in free trade. We don’t want any of those things to happen.

But the truth is that we also may not want to go to the other side. We may see very negative outcomes or at least risks arising from an industrial policy that uses the deep pockets of government to routinely assist and regulate the trade of companies.  We may see negative side-effects coming from a broad and continuous system of trade protectionism.

What do we do? As usual, try to waddle through the middle.

The benefits of free trade might be a lot like the figurative free lunch. They sound good but maybe they are not what they are cracked up to be. Of course, an economy that is run and controlled by the government might have some drawbacks too. So we walk right down the middle knowing that it will be a fight to try to get the most out of free trade knowing that government will play a role. 

Like walking on a tightrope – swaying too far in one direction or the other, means a ride to a hard surface. Staying on the rope might mean a little movement either direction but not enough to topple you.

That balance is quite a challenge! I’m not sure Biden or Trump has the balance.

Oldie Goldie From March 16, 2010 "More About Working Together"

This week I am republishing a post from 10 years ago. I think I was much too optimistic but I was younger then. :-)

In the previous post I forecast that extremist policy views would soon be seen as selfish, inappropriate, and counter-productive -- and will be edged out by saner ideas based on cause and effect logic. I know that sounds crazy but the evidence is piling up. I know -- it doesn't seem to be apparent in the health care reform debate but it is showing up in other places. I quote from yesterday's article in the Financial Times (page 11, March 15) "A frugal budgetary policy is the better solution" by George Osborne and Jeffrey Sachs...

"Our macroeconomic view, in short, can be stated as follows. We must escape from economic management by quarterly indicators and the demands of the political business cycle....Our priority should be a medium-term fiscal framework, with the first steps starting this year. That must be matched by improvements in the delivery of health, education, skills, and technology; social protection for those in need; and a decent regard for the long-term investments needed to rebuild an economy crushed by the bubbles of wishful thinking."

Sachs and Osborne point out what most of us know -- we will never return to good economic growth with unsustainably high government budget deficits -- so they advocate real policies to quickly address and reduce the size of government deficits. Well intended short-term stimulus at this point, according to these authors, would be counter-productive. But they do not discount a role for government since they forcefully advocate a public role in "... regulation, high quality education, pre-commercial innovation, and a world-class science and technology base.

Sachs is director of the Earth Institute at Columbia University . More information about him and a link to the FT article can be found at:http://www.earth.columbia.edu/articles/view/1804

It is a question of priorities. It doesn't matter if it was Bush or Obama who caused a larger national debt. It doesn't even matter the goodness or the motivations of the government spending. What matters most today is that most people -- at home and abroad -- wonder and worry if the US will find a way to reverse the very large deficits of the last couple of years. We see what those kinds of worries did to Greece and the Euro. Greece now must experience a macro shock treatment if it is to convince the world that it is credit-worthy. The US situation is not as dire now -- but the lesson is instructive.

First things first. If we remove the shackles of debt incredibility then we set the stage for a return to economic growth. It is this economic growth that will restore the job engine and the income growth that will allow some wiggle room to work on social inequity. Reversing the order of things right now makes no sense and helps no one.

Gored by Al Gore

If you stab someone with a sword then you have successfully gored them. After reading Al Gore’s latest mind poop in the Wall Street Journal* I feel like someone stabbed me.

There’s nothing like an emergency to bring out the Kooks. They say something like, “Aha, I told you so. If you don’t put away your toys at night, the goblins will come and haunt you. You see, that hurricane came and destroyed our house. If you had just kept your room cleaner, then none of this would have happened.”

And so Al Gore for the ten thousandth time has another reason to get behind his bloody pulpit and tell us the same things over and over and over.

It’s hardly worth rehashing but Covid has me bored and this process might be good for my mental health.

Let’s start with the title of his piece...Capitalism After Coronavirus.  He says he prefers sustainable capitalism to mere capitalism. Really, what does Al Gore know or even like about capitalism before or after Corona? The answer is nothing. Capitalism is the antithesis of what he calls sustainable capitalism. It’s a mind/word game to make you think he isn’t trying to turn the world up-side-down for his own philosophical and political needs.

Capitalism is defined as an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than the state. He wants just the opposite. He loves the word stakeholders. When firms decide to raise the price of raisins – he wants  the owners of Raisin Are Us to be joined in the decision by the city council, the Boys and Girls Club board, the labor council, Save our Bees Club, and a lot of others who might be impacted or at least insulted by the price of raisins. Of course, with Al Gore, a lengthy study on the impact on global climate change would be required as well.

Reading Gore would make one think that capitalism is now running roughshod in the world without government regulation and without plenty of representation by labor and other groups. One might think that most company boards are sitting around in luxurious meeting rooms drinking expensive Spanish Cava talking in hushed voices about how they are going to acquire reams of money to exceed the fortune of Scrooge McDuck. And of course, they do all this over the broken backs of their employees and neighbors while farting huge dark clouds of poisonous gas into the atmosphere.

If one wants to think of corporations that way, that’s okay. I am sure there are plenty of companies who fit the bill. But to think that most companies will be better off or to think the country will be better off with even more ESG, then you have a lot of convincing to do. By the way, I had to look that up. ESG means environmental, social, and governmental factors.

Isn’t it interesting how extreme he writes. He says “All investments made today must factor in long-term climate and social implications.” Are you kidding me? Does he know what the word “all” means? Investment is what makes us more competitive and it builds our future. Do we really have to hire a team of accountants and lawyers every single time we buy a piece of capital? Did I say every single time?

And then there is the very explicit idea that everything is class struggle. The ESG notion presumes that those fat cats smoking Cuban cigars and eating caviar have a huge disdain for all those employees – all those programmers, accountants, and factory hands. Those owners apparently revel in stealing a dollar from their unsuspecting employees. Nowhere does Gore show any understanding of modern management wherein output and profit is a joint result of a management team best employing capital, labor and technology within the laws of society to ensure prosperity and survival.

Has Gore ever held a job? Has he never seen how companies must be smart and work hard to survive? Does a smart company treat its employees like crap? Does a smart company ignore its social surroundings? Does a smart company always focus on quick gains at the expense of long-term stability and growth? 

One last point of emphasis. I am not decrying government regulation of business. When companies act badly, they should be fried. And there are always new situations which could result in even more government regulation. What I am saying in this post is that Al Gore has a political agenda and he doesn’t know when to say no. He doesn’t want capitalism of any kind. He wants government control of the economy. He wants to treat equity and environmental issues before anything else.

He wants to throw out the baby with the dirty bathwater. I don’t.

* Al Gore and David Blood WSJ 6/30/20 Capitalism After Coronavirus

Mixing Things

We mix a lot of things.

For example, I like Jack* mixed with ice or what is called “Jack on the Rocks.” Sometimes I prefer Jack with some bitters and Maraschino cherries, sometimes called an Old Fashioned. On special occasions I have a dry martini which means you mix a nice dry gin with a little bit of white vermouth. Shake it in a metal tumbler with some ice until your hand freezes. Add olives. 

Basketball teams mix tall people with short people and often times mix people of color with whites. A “mixer” is often used to describe a social event or a dance that mixes the sexes. A cake mix mixes together a bunch of ingredients. And what about a pizza? Wow.

We apparently love to mix. Mixing in the above and many more ways suggests that things don’t always have to stand alone. It does not have to be one or the other. For example, Jack is fine straight up out of the bottle. And Maraschino cherries – wow, they are wonderful alone. Most French fries don’t even need a hint of catsup.

Yet, despite the wonderfulness of things alone, we often find that combining them produces better outcomes. Straight Jack might be too strong for some people. Gin is not only strong but it has a specific flavor related to the juniper berry that some people prefer with some sort of embellishment. Some people are much better single while others can barely exist without a continuous partner.

All the above got me thinking about people on the ideological extremes. Like a good ounce of bourbon, a liberal progressive has some very clear and important characteristics. A conservative makes some points so true and tasty that even pommes frites eaten in a Maastricht square could not compete.

But isn’t it interesting that even though liberals and conservatives each have very important beliefs and messages, they don’t see the benefit of mixing? Sure, we have people called centrists and moderates who blend these ideas, but isn’t it interesting that the moderates don’t seem to have much sway these days.

Economic conservatives love motivation and the idea of creating incentives to get people to do things that are good for themselves and for society. For example, a financial conservative might favor giving a company a tax break so that it might hire more people and produce more goods.

A liberal worries that incentive is not enough or that it might be wasted. A liberal might prefer a more direct approach as in a regulation or a penalty that might drive a firm to hire more people.

The conservative retorts that liberal regulations can be misspent and ineffective; the liberal believes the same of the tax incentive.

This is just one example of the differences between conservatives and liberals. The point is that they both have good ideas. As in gin & tonic or a Bloody Mary, why can’t liberals and conservatives see the beauty in each other’s approaches? In the above example, perhaps some mixing of incentives and regulations might be better than the extreme or purely ideological approaches. Giving a firm incentives to grow, while at the same time putting some parameters around how the incentives are spent, might work. Paying close attention to the unintended effects of tax cuts and/or regulations suggests getting the most out of policies.

Yet as reasonable as all that sounds, we see moderates drowned out by extremism on the left and right. Has our world always been that way? Do we lack so much in entertainment or in so much heart-felt emotion, that we have to fume and scream at each other when we know that mixing might be better than extreme policies? Is it simply more fun to scream at people who see the world a little differently? Must Jack on the Rockers scream at Old-Fashioners?

I don’t know about you, but I am getting pretty thirsty. A French fry wouldn't hurt either.

Comment by Bruce Gingles* on Covid, Recent Policy, and Supply-Side Economics

Dear Larry,

Very respectfully, I offer the courteous rebuttal to your current posting on supply economics.

Year to date, tech stocks are up 20%. This is relevant to supply policy since technology has become the economic equivalent of a coronavirus vaccine. New machine tools allow people to work from home, order curbside pick up, take orders and deliver goods without direct human contact, and do practically everything much faster, safer and at lower cost than high-touch methods (who waits in line at the bank anymore except me? I have the place to myself).

As technology finds its way deeper into finance, manufacturing, leisure, construction, healthcare, agriculture, services and even sports (the nerdy world gamers convention draws a live audience about the size of the Super Bowl), fewer people will drive higher productivity and lower cost. It’s not an entirely rosy picture, especially for those left out, and there will be many, but supply may expand before we solve Covid. Supply side policy looks different than in 1990, when we equated productivity with employment.

A thought experiment asks whether a progressively taxed tycoon with wealth equal to total US GDP could ethically support the livelihoods of all Americans while employing his/her legal business practices, including technology, to the exclusion of human labor. This person’s taxes are adequate to sustain all US citizens at their current wage.

While not a perfect analogy, our current federal payments to businesses and individuals as relief from an infectious pandemic provide a glimpse of what such a scenario might look like, without incurring Treasury debt. Is this case example morally defensible? If so, one could argue that productivity (imagined as supply) is an end justified by its means. Only technology provides a plausible proof of this theoretical construct. We already see this trend emerging in the form of three McDonald’s menu/payment kiosks replacing 5-6 human order-takers in activist minimum wage locales.Automation tracks wage acceleration fairly closely.

In conclusion, I believe very little attention needs to be paid to supply-side policies as these are already being efficiently addressed by the free market, largely in the form of advanced technologies capable of increasing productivity during and after periods of decimated labor due to pandemics.

https://www.google.com/amp/s/www.cnbc.com/amp/2017/08/16/evidence-minimum-wage-hikes-result-in-workers-being-replaced-by-robots.html

*Bruce Gingles resides in Bloomington, Indiana

Covid, Recent Policy, and Supply-side Economics

Let’s suppose you get a flat tire on your new red Schwinn. You take it to the Schwinn store, and the guy starts messing with the chain on your bike. You say, why are you messing with the chain when my tire is flat? He says, I didn’t know how to fix a tire but I have a lot of experience fixing chains.

That’s how to think about monetary and fiscal policies these days. Our policymakers know about one thing and one thing only – demand. Those of you with excess education might remember taking economics and learning that a complete market analysis includes a demand curve and a supply curve. If we demand more weed and less beer, then the price of beer goes down. If the farmer brings a lot of tomatoes to market, then the price of tomatoes goes down. Sometimes the issue in a market is a change in demand. Sometimes the issue is a change in supply. Viola.

But when it comes to macroeconomic policy, we are all Keynesians, which means we think only about demand. Supply is for suckers. Jay Powell at the Fed and all those sharp tacks in Congress know nothing about supply. This makes it easy on them. If the economy slows down, get people to buy more stuff. If the economy speeds up, get people to buy less stuff. Demand, demand, demand. Easy peasy.

What's wrong with a focus on demand? It sounds intuitive. If the economy is weak, then drive interest rates to zero and give everyone a tax cut. Go back a couple of paragraphs. If the problem is your tire, then maybe fixing your chain won’t help much. The remedy ought to reflect the problem. Find a guy who knows how to fix tires! Surely, Larry, you must be smoking funny cigarettes. People today lost their jobs and they are buying less. Isn’t that a demand problem?

Yes and no. Let’s get really abstract now. Suppose X causes a change in Y and then the change in Y causes a change in Z. If you don’t like the change in Z, then what’s the best thing to do? You might say, work on Y. It is the proximate or intuitive problem. But wait, unless you change X, you are still going to get Y and Z. Ugh.

You have to go to the real source or the ultimate cause of the problem. In my example, the real cause of the problem is X. Work on X.

That’s what is happening now. A supply shock caused a change in demand and the change in the demand caused the economy to collapse. Changing demand might seem logical but you are not going to get any real progress until you deal with a critical supply shortage.

What is the supply shortage now? Simple. Covid. Covid is why stores closed. Covid is why factories closed. Covid is why we have historically high unemployment and falling incomes. All that is aggregate supply stuff. Of course, once all that hit, our desire and ability to buy stuff fell dramatically.

But just as Y is not the solution for Z, demand-oriented policies will not solve our weak economy problem. Just as a new chain might make the bicycle run better in some ways, attacking a supply problem with a demand remedy might have some remedial impacts but it won’t solve the problem.

Is this a simple ignorance problem? Do our policymakers not know about supply-side policy? No and no.

This is an ideological problem. Do you old folks recall the 1970s when we discussed supply-side problems? What did we call them ...voodoo, trickle down or Trojan horse.  Wow, if I was a supply-side policy, I wouldn’t want you calling me all those ugly names. But some folks noted correctly that supply-side policy was aimed at restoring supply! Crazy as that might sound, these name-callers noted that the supply-side was largely impacted by SUPPLY. Imagine that. A policy aimed at supply – and suppliers.

Unfortunately, suppliers are business firms. And to our name-calling friends, business firms are selfish rich folks who do not deserve to be assisted. Thus, any remedy aimed at the supply-side of the economy is immediately discounted because it BEGINS by impacting suppliers first. Dead on arrival!

How do we know business firms won’t just give a subsidy or tax benefit to rich stockholders? How do we know they will use the money to restore supply? Fair questions. How do you know that a demand-side tax cut won’t just be hoarded and not spent by households? You don’t know that either. So, what you do is fashion the policy so it is more difficult to not use it for the intended purposes.

But that is not the real problem anyway. The real problem is that some of the name-callers who won’t consider supply-side policy do it because they are driven only by distribution of income issues. To them, supply-side policy looks very nasty. To them, any policy that doesn’t begin with a remedy for distribution of income is not worth discussing.

Am I saying we should not be worried about distribution of income? NO! We should be. We should be spending a lot of our money on solving Covid. Covid is the supply shock. If we solve that problem, then XYZ and most other things will be solved! We know now that lower income people are getting decimated by Covid. With money on Covid, we solve distribution of income AND the economy.

Otherwise, our policies should be aimed at both short- and long-run economic growth. We should forget about demand. If we resolve supply constraints, then the demand constraints will be solved as well. With companies expanding and more people being employed, demand will rise accordingly.

Trickle down, blah blah blah. In 2020, if you want to help people, then work on market opening initiatives that minimize negative health impacts and put some gas into the engine. Let the economy return using sensible policies to control Covid. Try to directly stimulate demand, and you will get very little lasting benefit to the economy.

Everything About Masks

Relevant examples:

If a baby poops a lot, then it should wear a diaper to protect others. If a baby is near other babies who poop a lot, then the other babies should wear diapers. Thus, all babies should wear diapers.

Some women prefer to wear undies. Other women prefer to not wear undies. Should all women wear undies?

Before 2020 we knew a lot about masks.

          In French, the word masque means to hide or protect the face.

          In China, masks were thought to originate in ancient religious ceremonies. Some masks were meant as thank-yous to deities and others were worn to ask for protection from Donald Trump.

          Masks were used in Greek theater to accentuate character and emotion.

          In ancient Korea, masks were worn by soldiers and their horses.

          During Mardi Gras in New Orleans, masks are worn so no one knows who is the drunken fool behind the mask. Keeping the mask on during and after sex insures your mate will never know your identity after Mardi Gras.

The Lone Ranger and robbers wore masks to hide their identities.

Vigilantes and the KKK are known to wear masks to frighten others and to conceal their identities.

All kinds of masks – surgical mask, oxygen mask, welding mask, gas mask, ski mask, catcher’s mask, football helmet face mask, fencing mask, hockey goalie mask, underwater mask, ski mask, carnival mask, wrestler’s mask, masquerade ball mask.

An article in the Journal of the Royal Society of Medicine says there is no strong evidence to support the claim that surgical masks protect either health professionals or their patients.

When I had my tonsils out at the age of 3 I recall the surgeon wearing a mask. 

After March of 2020, we know a lot more about masks.

Mask choice: Bandanas, scarves, handmade face coverings, disposable masks, vented masks, face shields, panties.

Glasses fog up wearing masks.

Have a portfolio of masks.

Remembering to bring your mask.

Wash your mask.

Talking to people/servers with masks.

Servers behind plastic shields.

Talking to people and you can't tell if they are smiling or frowning. 

If you cannot tell if someone is smiling should you hand over the contents of your cash register? 

Without smiling what happens to Serotonin and other neurotransmitters?

When should you wear/not wear a mask: outside, inside, 5 feet away, 7 feet away, windy day, air conditioning, near people talking loudly, near people who sneeze a lot, near people who look sleazy.

Why do some people talk so loud in public?

Masks make your ears look funny.

Masks irritate your face. 

Should you wear a mask when driving in your car alone or when standing in the middle of a desert?

Mask wearing tips – cover your mouth and nose together, make sure you cover your whole nose not just the tip, don’t leave your chin exposed, don’t wear it loosely but don’t strangle yourself either, don’t cover your eyes or your ears.

Don’t use your mask mistakenly as a handkerchief.

How many masks should you have? Will Tide clean them?

Wear a mask that associates yourself with America and/or all good, caring, thoughtful, well adjusted, educated, beautiful people.

Don't wear a mask because you are a curmudgeon. 

Wear a mask that shows you are a solid Democrat, Republican, or member of a local gun club.

Wear a mask with either rabbits or kittens on it.

Should you wear a mask when drinking JD?

That’s all I’ve got. Did you ever think people would talk about masks so much?

Macroeconomics in 2020

I was invited to give a Zoom talk about the economy to a group of friends from my gym here in Seattle. So I thought, why not kill two birds with one stone? (To my pet-friendly friends, that is figurative, I will not kill any birds with any stones.) Why not write out what I want to say at the Zoom on my blog?

So here goes. Some of my faithful readers might be curious about my process for these posts. Be curious no longer. My process is mostly iterative. I write one phrase, maybe a whole sentence. Once it is written I wonder what might come next. If nothing follows, then I take a nap. If something follows, then I write it down and then read both sentences. And so on. This approach contrasts greatly with the idea that I might think through an issue in totality and then cleverly write it out in a consistent and forceful manner. Hmm…I wonder what I should say next?

The objective of this piece today is to present what I know about macroeconomics to a group of lady weight-lifters. I could go on and on about that topic but I fear these ladies deserve a punchline and something I can say in about 15 minutes. I am writing this draft on June 3, 2020, so whatever I might say about macroeconomics ought to reflect the fact that the world as I have always known it has turned upside down. I have studied macroeconomics since Spanky played with Our Gang. But most of what I thought I knew essentially went out the window in the last months.

Some say that experience and history form our understanding of the world today and our forecasts of the world tomorrow. Not now. I feel a little like the guy who leaves the Earth and finds himself on another planet and immediately starts looking for a Wendy’s. Surely there must be a nice cheeseburger around here somewhere. Maybe not.

Blog posts should have three points. So that is my first one. If you were hoping for a macroanalysis or a forecast today, then go to that planet and find me a double cheeseburger with fries. Economists and politicians are falling all over themselves these days to tell us what lies ahead in the economy. They agree on one thing – the US economy is in a recession right now. AGREED! That means the economy sucks pond water. That means the unemployment rate is high and rising. That means people are trying to spend less than my parents did in 1929. That means companies are going out of business left and right.

But when it comes to the future, the experts are all over the place. The Congressional Budget Office said we will not grow for 10 years. Others are focused on the alphabet when it comes to the future. A V-shaped recovery is fast while a U-shaped recovery takes a while longer before we are eating chili dogs on Coney Island. I am thinking about a double U/V/inverted W-shaped recovery but dry Martinis are involved with that so you might want to hold off on that one.

My first point? Don’t listen to all that crap. You have better things to do.

Which brings me to point 2. Point 2 is that even if you could decipher point 1, it’s all macro and in 2020, macro has almost nothing to do with you. Imagine how different 2020 is from any time you or your grandpa or grandma have ever known. What are you? A wacky millennial? Are you just graduating from college? Are you an old fart like me? Are you white privileged? A person of color? Do I need to go on?

Have you ever imagined a time like this when the world is impacting each of us so differently? Whether it is Covid or race relations or the many economic/sociological impacts of those major changes – we are not being impacted equally. In macro we talk about the average person. Today there is no average person. I love to tell the following joke about the average person. Imagine a person in his kitchen with his foot in a hot oven and his hand in the freezer. On average his temperature is just fine. Hmmm.

Summarizing. Point 1. There is no macro. Point 2. There is no macro.

Point 3 comes next. It is the coup de gras, whatever that means. If there is no macro, then there is just one thing left – it is you. You is what really matters because whatever has already happened and whatever will transpire, there is very little you or I can do to stop it. This is the proverbial rock and hard place. Things are not good, and they are not going to get better very fast. So, there you are. Rock. Hard place. You.

What can you do? What you can do is decide how you are going to live in that spot. You can piss and moan. Some people like to piss and moan. It might make them feel better. If that is you, then by all means please P&M. But please don’t do it in my soup. Some of us, even though it is tough to do, would prefer to think about good things. Maybe you like to remember when your mother used to tell bedtime stories to you. Maybe you love to hug your kids or your boyfriend. Whatever, it is possible to face tough situations with a positive mental attitude.

I hear some of you saying,Yea, Davidson you have it made. You are old and living off your fortune. You have a girlfriend who does your laundry. You have it easy. Okay, so maybe I am not suffering like others. But I will appeal to a book I read recently written by a psychologist* who was in a Nazi prison camp. He was pretty sure he would never get out. So, like a good psychologist he did a study of his fellow inmates. He concluded that those who could not find anything good to think about or plan for died in camp. Those who, despite the current deprivation and uncertainty about ever leaving it, planned for the future and lived.

Like those in the Nazi camps – we have a choice. Whatever yours is, I hope we can find some solace and all get through this rock and hard place. No – that’s not macro.

*Man's Search for Meaning by Viktor Frankl

The Media's Self-Censors

In the Wall Street Journal today was an article The Media’s Self-Censors  with the following quote, “In the past week, the editorial page editor of the New York Times, the editor of the Philadelphia Inquirer and the editors of Bon Appétit magazine and the young women’s website Refinery 29 have been forced out by the staff and owners of their publications for offenses regarded as at odds with the beliefs of the current protests.”

I don’t usually add more than one post on my blog in a week because I know you are busy. But this one really jumped out at me.

The veteran opinion writer at the WSJ could not have been more wrong when he argued that those editors were protected by the Constitution and were unduly fired.

He is conflating private business decisions with government control and the freedom of the press. He is arguing that writer’s have constitutionally protected rights. Yes they do, but not against their own bosses. The New York Times professional who was fired was not let go by a government official but by his boss. The NY Times is a business and as a business it is free to hire and fire those that help accomplish the paper’s objectives. He even associates the roles played by these newspapers with social media platforms like Facebook and Twitter. This equivalence makes no sense.

These papers exercised the freedom to make a business decision, but it clearly did not subtract from anyone’s Constitutional right of free speech. Can’t a newspaper decide to send a consistent message through its editorials?

Taxing Corporations and the Rich

This article was published in the Wall Street Journal on Saturday, May 30, 2020 “Democrats Stick With Tax-Rise Policies as They Make Plans for 2021 Majority.”

The article is specific about how some Democrats want to solve income inequality issues, both old and new, by raising taxes on corporations and rich persons.

It makes me wonder if this is an earnest effort to help those harmed by the impacts of Covid or just another excuse to accomplish what they always want to do politically. 

In this piece today I do not want to argue what sorts of economic policy we need today to heal the many harms to the economy. I wish I knew. But I do want to remind us about where we were before Covid destroyed our economy. 

Below is a table I extracted and modified from the Congressional Budget Office. The CBO periodically projects the government budget into the future using requirements from enacted legislation and assumptions about the economy. This projection was done in early 2020 before anything was known about Covid. 

The point of the table is to show you the incredible irresponsibility of our leaders. 

Despite decades of talk about the potential harm done by government deficits (spending more than we take in taxes), the one-year deficit in 2019 goes from a little less than $900 billion to about $1.3 trillion in 2025. That's an increase of 33 percent. Clearly there is no intent to reduce annual deficits. 

This reluctance to do what is responsible, leads to a total debt increase from $17 trillion in 2019 to about $24 trillion in 2025. That's a 41 percent increase. Hmm. Our debt was too large in 2019 so we raised it by 41%. Wow. 

Was this because they expected the economy to tank? It sometimes makes sense for the government to have larger deficits to offset a weak economy. Nope, Gross Domestic Product was expected to rise by 26% in those 6 years.

Was the larger government deficit and debt the result of big tax cuts? I don't think so. Tax revenues were expected to rise by 32 percent. Corporate taxes expected to rise by 68%. 

Did it have anything to do with paying interest on the past accumulated debt? Maybe. Notice interest on the national debt is expected to rise by 50 percent. 

What about overall government spending? It appears it rose no faster than tax revenues. But here the percentages are misleading. Since spending is much larger than taxes, notice that spending increases by $1.4 trillion while revenues rise by $1.1 trillion. This difference contributed to the larger deficits and debt. 

So what? The table is all about what was expected before the Covid tornado hit us. It's water under the bridge. Maybe. What is not water under the bridge is an incessant desire by some Democrats to reduce income inequality by demanding that rich persons and corporations always pay more...and more. How much is enough? 

Is Covid an excuse to continue this bent and legislate what will become even more burdensome permanent taxes on the rich and corporations --  or is it a sincere effort to undertake the right policies to get us through Covid? 

The CBO believes that Covid will reduce the rate of growth of the US economy for 10 years.  They believe we will lose over $7.9 trillion in output. Thus the next decade could see even larger deficits and debt as Congress taxes and spends more and more. 

Does this look like a train wreck coming? How many decades will it take after 2030 to pay down the debt? Or will the US government declare bankruptcy? Is there no way out of this mess? Is there no other way to promote output, jobs, and incomes?

Table 1.
CBO’s March 2020 Baseline Budget Projections, by Category Actual,         2019 2025 In Billions of Dollars Revenues Individual income taxes 1,718 2,266 Payroll taxes 1,243 1,584 Corporate income taxes 230 386 Other 271 326 _____ _____ Total 3,463 4,562 Outlays Mandatory 2,734 3,700 Discretionary 1,338 1,604 Net interest 375 564 _____ _____ Total 4,447 5,868 Deficit (-) or Surplus -984 -1,306 On-budget  -992 -1,134 Off-budgeta 8 -172 Debt Held by the Public 16,801 23,694 Memorandum: Gross Domestic Product 21,220 26,653

Be Careful What You Wish For

We used to wish for a lot of things.

I hate battling the traffic every day. Wouldn’t it be nice if the traffic went away?

I hate that guy at work who talks to his girlfriends on the phone all day. Wouldn’t it be nice if I wasn’t so close to him?

I hate doing all my shopping on the weekends when there are always giant crowds at the malls. Wouldn’t it be nice if shopping could be done without traffic and parking congestion?

I hate it when my favorite restaurant has an hour wait. Wouldn’t it be nice if I could just go in and find a good table?

I hate having to decide what to wear each day. Did I wear that tie last Thursday?

I never get to see my kids and when I do it is always so hurried. Wouldn’t it be nice to spend more time with them?

I never have enough time to (fill in the blank)_________. Wouldn’t it be nice if I had time to reorganize my closets, pick all those weeds in the garden, do puzzles, make-out with my girlfriend, etc.

Enough? Point made?

It used to be very easy and vivid to describe all that was missing and/or stressful in our modern lives. The list of things was easy and large. That’s life, we would comment and agree. But then, wouldn’t it be nice if . . . 

So here we are! Our commute time is measured from the time it takes to move from the bedroom to the laptop. Traffic is measured by the number of kids you hop over to get to your laptop. Your office mates are clustered and sequestered, like you, behind walls in houses and apartments spread over the nation. Like your work, you shop with your fingers on your trusty laptop. You never have to wait in line at restaurants. Your family sees each other so much that you can read each other’s minds. You have now done every conceivable task around your house, and you have eaten your way through two belt sizes. Luckily, your sweatpants are capable of expanding easily to size 50. No one will remember how many times you wore the gray ones or even notice the gravy stains.

Clearly, we are getting what we wished for. But it’s like that guy who broke his arm and prayed to God that his arms would again be the same. So, God broke his second arm.

The lesson is that when we wish for things, we need to be more thoughtful and complete in our wishes.

But let’s face it. Nothing ever changes. The problem is not Covid-19 and it isn’t stressful lives – the problem is us. It is our nature to see the glass half empty. It is our nature—no matter how many beautiful things are going on in our lives – to focus on the negatives. 

We pray each night for our former lives to return. Why? Did we already forget how much we stressed out over calendars and traffic and jobs?

Not really, but we are always looking for that Holy Grail. And always forgetting that the Holy Grail comes with its own complications and challenges. There used to be a TV shows back in the 50s called “The Millionaire.” Apparently, if most of us jokers get a bunch of money, it always comes with problems – big problems.

So what do we do now? No one can predict and control what’s happening with health and jobs and incomes. I am not making light of Covid adjustments. But I am saying that we can’t really control those circumstances. We can, however, control our own minds and bodies. We can try to adjust to the harshest of impacts and at the same time cherish and value all the good parts of our new lives.

Hug your family. Exploit your talents. Stand near an expressway and marvel at the lack of cars. Order something from Amazon. Order burgers and tacos for pick-up, enjoy those sweat pants, kiss your Covid girlfriend.

Soon enough, the world will be full of cars zooming everywhere, parking lots with no spaces, kids going to ballet, soccer, and transcendental mediation classes. Embrace the present. Deep breaths. Enjoy. 😊

Jerome Powell and Dangerous Words

Below are some of the words I lifted from the Wall Street Journal, quoting the head of the US Federal Reserve, Jerome Powell

May 14, 2020 8:43 am ET | WSJ PRO

Good day. The Dow Jones Industrial Average dropped more than 500 points yesterday after Jerome Powell said more stimulus from Washington could be needed to support the U.S. economic recovery. The Fed Chairman said the economic outlook is “highly uncertain and subject to significant downside risks." 

Note: The 14th was a while ago. But in his remarks since then Powell has been a consistent pessimist about the economy and has urged the government to spend more and more -- there doesn't seem to be enough stimulus no matter what the government or the Fed does.

I’ve been writing and criticizing the Fed lately, but this went beyond my usual need to spout off. This is about him, not the system. Even while some of his lieutenants are predicting a relatively quick return to growth, Powell is shoveling gloom and doom on us.

Why is this dereliction of duty? Because the Fed is supposed to be a bastion of honesty, and it should be about doing and saying what is necessary to heal a weakening economy.

Since when is spreading gloom and doom part of the Chairman's job? Since when is spreading gloom and doom part of his tools to improve the economy? I don’t really care if the stock market swooned after his thoughtless and baseless statement. What I care about are the millions of people who will act on the fact that the head of the world’s most respected and powerful institution told people they should act in ways to protect themselves from a horrible economy. It’s like the fireman arriving at the fire scene telling people to jump out of the windows on the 99th floor.

What do people do when they are made to be surer that the economy is going to hell? They hunker down. They don’t spend; they save. They don’t borrow and invest. They hold money or gold. They don’t seriously look for a job. That’s what Jerome Powell told all these folks. Hunker down. How can that be good for the economy? Were there no upside risks for him to talk about? Apparently all the risks worth his time are downward. 

Does he have a crystal ball that lets him be so sure? And what about his colleagues at the Fed that hold different opinions? What about all those other economists who are talking about the different shapes of the recovery? What about those people who see a V-shaped recovery? Did he talk about that? No – he said jump from the 99^th floor.

Let’s suppose a recession has already started and will probably last a while. Is that news? Does the head of the Fed need to remind us of that? Why can’t the head of the Fed educate us about the facts that recessions – even severe ones – come and go? Why couldn’t he balance the gloom and doom with some positive realism? Or maybe it is political? Maybe he’d like to be working with a different President next year?  

He also advised more stimulus from Washington. He already said he would do whatever is necessary to flood the economy with money. That’s terrible enough but then two minutes after the government has already legislated how many trillions of new spending and tax cuts, he is advising that the government should do a lot more. A lot more? We have not had more than a moment to know the effects of the new trillions in spending – and he wants trillions more? Where do we get these guys from?

Apparently, he drinks the Kool-Aid that says that that there is no limit to how much money, deficits, and debts our country can absorb. I wish we could go back to Paul Volcker.

Covid Business Tax Cuts

As a card-carrying macroeconomist, I can proudly admit that I am not an accountant and I am definitely not a tax accountant.  Just as I am not an epidemiologist, I am among the rest of you who must try to understand everything that is going on because of Covid.

I just read an article in the Wall Street Journal about corporate tax changes under Covid. As I read it I had several reactions.

The first reaction is that one must be a tax accountant to understand and comply with these new laws. You say pasha Larry – companies are supposed to hire people to do their accounting. What’s the big deal? Well the big deal is that companies might know how to read these new laws but even companies won’t fully understand them. Nolan wanted me to play Pokemon with him. I could play checkers or War with him but Pokemon? I have no idea how to do that. He thinks grandpa is pretty dumb. I think our tax accountants will feel the same way.

Okay so companies don’t know exactly what to do. But worse yet, if you have gotten a new driver’s license lately and interacted with government, are you sure that there are enough  government workers trained in tax accounting who will be able to audit what companies turn into them? Imagine the load of tax returns coming in with huge tax advantages that must be audited. Is government really up to that task? Will Arthur Anderson have enough surplus employees they can loan to the government? At what price? What will guarantee that the work is done with quality?

Sound doable? Maybe. But let’s think about incentives. What are the incentives for most companies under the new laws? What do companies ALWAYS do when it comes to their taxes? What they ALWAYS do is lie and exaggerate the truth for one purpose – to reduce their taxes and increase their after-tax profits. This is a law of behavior more famous than Pavlov’s dogs who salivate every time they hear the name Trump.

What is cute about the current situation is how many new lies they can tell. Think about it. Let’s suppose a tax break is related to how many workers they pay for not working. Imagine how many workers they might be able to claim which might include the neighborhood dog walker. Who is going to audit all that?

As I said I am not a tax accountant but just try to imagine how creative those very creative tax accountants will be when faced with thousands of new pages of instructions for tax compliance. Wow. That blows my mind. And what really blows my mind is to think of  government hiring zillions of new employees whose job will be to comb through all those creative stories. How many threatening letters will they write to companies? How much time and spleen will be devoted to that whole load of correspondence and the process of divining who is right?

But that is the tip of iceberg. Another truth we all know is that there always has been a war between the owners of the companies and their employees. That war will never end. A dollar comes into Joe’s Banana Foster Truck on Aurora. After sending a buck to various governments, what is left in the till is split between Joe and his employees. 

This split is the source of much discussion in America. Unions were created to protect Joe’s workers. Various laws protect Joe’s workers. But Joe still has some leeway in deciding the split. That decision is always important. Joe has nine kids and a well-dressed wife, so Joe is under pressure to get a decent share.

Under these new laws, Joe and his tax accountants might see a silver lining – maybe he can figure out a way to look like he is following the new myriad laws and end up with a bigger share of what’s left after taxes. The workers are not tax accountants and they surely do not understand the new laws. Joe has a big opportunity to go bowling more often and buy his honey a new silver heart-shaped necklace.

Clearly, once all these laws get put into place, labor will figure out that Joe is trying to screw them. A labor/owner war will ensue. Given all the unpleasantness and stress caused by Covid, this war will get ugly.

One final point before you enter that well-earned nap. All those laws and parts of laws! All those extra government employees needed to audit all those tax returns. Do you really believe that they will disappear like Zorro in the night when the economy starts improving? Government has exhibited an historical tendency to grow without shrinkage. Will we ever get back to anything approximating a normal government?

Covid: Between a Rock and a Hard Place

Not only am I sequestered with an idiot named Larry but he keeps talking to me. And I talk back.

At least I had the Internet and TV and long walks around Green Lake wherein there are hundreds of signs directing people how to walk while 6 feet apart. The funniest one says that congested parks will be closed parks. So they are telling people who are walking on the trail to not walk on the trail or they will close the whole park. Hmm…sounds like a Catch 22 to me. If no one walks, then the park is already closed. Right?

The world is full of quirks these days. The same people who wear really cool masks are the ones who don’t bother to read the many signs at Green Lake asking people to walk in the same direction. Walking the same direction is supposed to reduce the incidence of people apparently coming too close to each other and swapping spit. These people care enough to wear a mask but they don’t care enough to follow rules that prevent virus spread? Weird.

Back to Internet and TV. Both went out on me a few days ago. A tech person is supposed to come today to fix it but since I just took over a new lease the other day, they are probably going to be corresponding with a guy who had the lease before me and who lives in  Colorado.

Given all the trouble I had arranging the tech visit, I am guessing things will not go well today. You may scoff at my situation but keep in mind I moved to Seattle recently and don’t have a ton of friends who would risk death to come and sit 6 feet away and talk to me. Not having TV/Internet essentially assigns me to Larry Davidson hell.

What else? I have been reading about Covid or Corona or whatever the hell they call this thing. Correct me if I am wrong, but after all this time and all these experts, we still do not know squat about why or when it started, how it spread, or how you stop it from spreading. The key word is still don’t know. That implies we never knew. Some of you might disagree because you are persuaded by one side of one or more of the issues more than the other side. But let’s be honest. You don’t know squat and if we follow whatever it is you want to do about it – the probability of huge negative impacts is huge.

Some of you want to let us go to Target and buy cool stuff, and you are willing to let us infect each other and kill off another x thousand or so. You feel cooped up and miss shopping at your favorite stores and of course, many of you are running out of hair dye.

The rest of you love turtles and salmon and people and want even sterner signs and laws that tell us we have to stay home with our "former" loved ones who will no longer speak to us. Doing so will not only raise the murder rate within families but it will also pretty much kill off the economy. Amazon can only process so many orders.

My last point is the one some of you are going to hate. Too many of you could not avoid the temptation to blame politicians for saying or doing things wrong from the get-go. Yes, I mean Trump. Given what I said above, do you really believe Biden or Pelosi would have said perfect and brilliant things three months ago? Two months ago? Two minutes ago?

Get on your high horse if you must. But this menace is new and none of these bozos we call politicians had or have a clue about what to do. No, I don’t love Trump any more than most of you. He/we would be better off if someone taped his mouth shut and asked him to play golf all day. 

Taking a strong ideological stance now is simply wrong in my humble estimation. We need folks who are capable of dealing with facts, figures, and who can do a risk analysis of what to do with a problem whose solutions involve horrible trade-offs. We aren’t getting out of this without scars. We need real leaders who will help us decide which scars we can tolerate.