The Reign of Trump: Understanding Crazy in Washington [feedly]

The Reign of Trump: Understanding Crazy in Washington
http://cepr.net/publications/op-eds-columns/the-reign-of-trump-understanding-crazy-in-washington

The Reign of Trump: Understanding Crazy in Washington

Dean Baker
The Hankyoreh, May 28, 2017

See article on original site

It must be very difficult for anyone outside of the United States to understand what is going on in Washington these days. Presidents of the United States have not always been great intellectuals, but usually it could be assumed that they would have at least some understanding of the major issues affecting the country and the world. Furthermore, regardless of political leanings, they would be sure to have people around them who were expert in the areas assigned and they would rely on these people to shape policy and their public statements.

The history here is not glorious. President George W. Bush's experts took the U.S. into a needless and seemingly endless war in Iraq. The top economic advisers to Presidents Clinton and George W. Bush laid the groundwork for the housing bubble, the collapse of which gave us the worst economic crisis in seven decades, from which we still have not fully recovered.

But even with such horrendous mistakes, presidents did make an effort to be informed on major policy areas. This is not true with President Trump. He really is clueless in most areas of foreign and domestic policy. He knows remarkably little about basic policy issues for someone who has lived in this country for 70 years, and perhaps even more serious, he doesn't care.

His incredible ignorance shows itself almost daily. Trump vigorously denounced China throughout his campaign as a world class currency manipulator. Yet he told everyone about his great relationship with China's President Xi Jinping after their meeting last month. He said that he didn't want to ruin the relationship by talking about currencies, and came away the meeting with the interesting tidbit that Korea used to be part of China.

His knowledge of domestic matters seems little better. In February, the month designated to highlight African American history, Trump referred to the great slavery abolitionist and civil rights activist Frederick Douglass as though he were still alive. (He's been dead for 120 years.) He also suggested that people should examine the causes of the U.S. Civil War, an issue that is already the topic of an immense body of research.

He apparently does not even understand the Electoral College system whereby he managed to win the presidency even though lost the popular vote by almost 3 million votes. He routinely hands out maps of the 50 state electoral vote to reporters interviewing him, as though he is providing new information. All these reporters already know the map by memory.

It would be possible to go on at considerable length about President Trump's ignorance and incompetence, but the real question is why do the Republicans stand behind a president who is embarrassingly unqualified for the job? The answer is they don't care.

The Republican Party has become a vehicle for the rich to take as much as they possibly can as quickly as they possibly can. There is no ideology or philosophical commitment involved; this is simply a question of filling their pockets.

This is apparent in all of their actions. The centerpiece of their health care reform proposal is a tax cut of more than $600 billion over the next decade, which goes almost exclusively to the richest one percent in the country. As a bonus, they stand to pay less for their health care insurance, if they also happen to be in good health. (The plan is also likely to cost 24 million people their insurance.)The tax reform plan that Trump has outlined could give millions of dollars in tax savings each year to the country's richest families and save their families billions when they die by eliminating the estate tax.

But it is not just on the tax side that Trump's policies will make the rich even richer. Trump and the Republicans are fighting financial regulations that are designed to hold down the fees charged by the financial industry on everything from student loans and retirement accounts to credit card transactions. In addition to abandoning efforts to curtail greenhouse gas emissions, the Trump administration is also weakening environmental regulations that essentially require industry to clean up after itself.

A great example was Trump's use of an executive order to overturn a regulation that required the mining industry to restore land after it engaged in mountain top mining. While this was sold as a measure to protect the jobs of mineworkers, it will likely have the opposite effect. Trump was making it cheaper for coal companies to replace labor intensive underground mining with mountain top mines that employ far fewer workers. His executive order was about coal industry profits and nothing more.

The Republicans in Congress, who have the power to remove a president that is clearly not qualified for the job, have no intention of taking any action as long as he can produce results for the very rich. These people care about being re-elected and when their career in Congress is over they look to a second career as an incredibly well-paid lobbyist.

The only way that Republicans will abandon Trump is if he actually becomes so much of a public embarrassment that he jeopardizes the re-election prospects of a substantial percentage of Republican senators and Representatives. We clearly have not reached this point, which means that Trump can keep being as crazy and corrupt as he wants.

 -- via my feedly newsfeed

Hints of Progress for Labor in the United States [feedly]

Hints of Progress for Labor in the United States
http://cepr.net/publications/op-eds-columns/hints-of-progress-for-labor-in-the-united-states

Hints of Progress for Labor in the United States

Dean Baker
Intereconomics, Volume 52, May/June 2017, Number 3

See article on original site

With Donald Trump sitting in the White House and right-wing Republicans controlling Congress, there is not much for labor to cheer about on the American national political scene. In addition, the overall prospect for union organizing does not look very good. Republicans are pursuing policies at both the national and state level to further erode union membership. But with all the bad news, there have been some important victories at the state and local levels that can perhaps lay the groundwork for gains nationally in future years.

The most important of these battles has been the drive for an increase in the minimum wage. The national minimum wage has been set at $7.25 an hour since 2009. In the intervening eight years, inflation has reduced its purchasing power by almost 17%. Measured by purchasing power, the current national minimum wage is more than 25% below its 1968 peak. That is a substantial decline in living standards for the country's lowest-paid workers. 

However, the situation is even worse if we compare the minimum wage to productivity. From 1938, when a national minimum wage was first put in place, until 1968, it was raised in step with the average wage, which in turn tracked economy-wide productivity growth. If the minimum wage had continued to track productivity growth in the years since 1968, it would be almost $20 an hour today, more than two and a half times its current level. That would put it near the current median wage for men and close to the 60th percentile wage for women. This is a striking statement on how unevenly the gains from growth have been shared over the last half century.

The Obama administration tried unsuccessfully to make up some of this lost ground during his presidency. While it may have been possible in his first two years when the Democrats controlled Congress, higher priority was given to the stimulus, health care reform and financial reform. Once the Republicans regained control in 2010, increases in the minimum wage were off the table. Needless to say, it is unlikely (although not impossible) that the Trump administration will take the lead in pushing for a higher minimum wage any time soon.

Although the situation looks bleak nationally, there have been many successful efforts to increase the minimum wage in states and cities across the country in recent years. This effort has been led by unions, most importantly the Service Employees International Union (SEIU), whose "Fight for $15" campaign is pushing to make $15 an hour the nationwide minimum. The drive gained momentum with its endorsement by Bernie Sanders in his remarkable campaign for the Democratic presidential nomination last year. While Sanders was of course defeated for the nomination, his push for a $15 an hour minimum wage won the support of many voters. It is now a mainstream position within the national Democratic Party.

However, the action for the near term is at the state and local levels, where there have been many successes. There are now 29 states that have a minimum wage higher than the national minimum. The leader in this effort is California, which is now scheduled to have a $15 an hour minimum wage as of January 2022. With over 12% of the US population living there, this is a big deal. Washington State is not far behind, with the minimum wage scheduled to reach $13.50 an hour in January 2020. New York State's minimum wage will rise to $12.50 an hour at the end of 2020 and will be indexed to inflation in subsequent years.

Several cities have also jumped ahead with higher minimum wages. San Francisco and Seattle, two centers of the tech economy, both are set to reach $15 an hour for city minimums by 2020. Many other cities, including New York, Chicago and St. Louis have also set minimum wages considerably higher than the federal and state levels.

What has been most impressive about these efforts to secure higher minimum wages is the widespread support they enjoy. This is not just an issue that appeals to the dwindling number of union members and progressive sympathizers. Polls consistently show that higher minimum wages have the support of people across the political spectrum. Even Republicans support raising the minimum wage, and often by a large margin.

As a result of this support, minimum wage drives have generally succeeded in ballot initiatives when state legislatures or local city councils were not willing to support higher minimums. The last minimum wage increase in Florida was put in place by a ballot initiative that passed in 2004, even as the state voted for George W. Bush for president. Missouri, which has not voted for a Democratic presidential candidate in this century, approved a ballot initiative for a higher minimum wage in 2006. South Dakota, Nebraska and Arkansas, all solidly Republican states, approved ballot initiatives for higher minimum wages in 2014. In short, this is an issue where the public clearly supports the progressive position.

These increases in state and local minimum wages have meant substantial improvements in the living standards of the affected populations. In many cases, families are earning 20-30% more than they would if the minimum wage had been left at the federal minimum.

In addition, several states, including California, have also put in place measures to give workers some amount of paid family leave and sick days. While workers in Europe have long taken such benefits for granted, most workers in the United States cannot count on receiving paid time off. This is especially true for less-educated and lower-paid workers. In fact, employers in most states do not have to grant unpaid time off and can fire a worker for taking a sick day for themselves or to care for a sick child. So the movement towards requiring paid time off is quite significant for many workers.

This progress should be noted when thinking about the political situation and the plight of working people in the United States, but there are also two important qualifications that need to be added. The first is that there are clearly limits to how far it is possible to go with minimum wage increases before the job losses offset the benefits. Recent research has shown that modest increases can be put in place with few or no job losses, but everyone recognizes that at some point higher minimum wages will lead to substantial job loss. A higher minimum wage relative to economy-wide productivity was feasible in the past because the US had a whole range of more labor-friendly policies in place. In the absence of these supporting policies, we cannot expect the lowest-paid workers to get the same share of the pie as they did half a century ago.

The other important qualification is the obvious one: higher minimum wages do not increase union membership. The SEIU, the AFL-CIO and the member unions that have supported the drive for a higher minimum wage have done so in the best tradition of enlightened unionism. They recognize that a higher minimum wage can benefit a substantial portion of their membership, since it sets a higher base from which they can negotiate upward. Of course, it is also a policy that benefits the working class as a whole. For this reason, unions collectively have devoted considerable resources to advancing the drive to raise the minimum wage.

However, this has put a real strain on their budgets at a time when anti-union efforts are reducing the number of dues-paying members in both the public and private sectors. This will make it more difficult to sustain the momentum for raising minimum wages and mandating employer benefits. For this reason, the good news on the minimum wage must be tempered. It is a rare bright spot for labor in the United States in the last decade, but it will be a struggle to sustain the momentum in the years ahead.

 -- via my feedly newsfeed

President Trump’s Draconian Budget Hits West Virginia Hardest [feedly]

President Trump's Draconian Budget Hits West Virginia Hardest
http://www.wvpolicy.org/president-trumps-draconian-budget-hits-west-virginia-hardest/

For President Trump's proposed Federal "Blueprint" Budget for 2018, the bottom line is clear: West Virginia stands to lose more than any other state. The proposed budget, which was sent to Congress virtually unchanged from its original form in March, cuts discretionary funding for major federal agencies by $54 billion and it is estimated to cut mandatory funding by $5 billion for 2018, and an estimated $800 billion over the next 10 years. Discretionary funds are appropriated by the federal government to states for vital services and programs, while mandatory funds go toward safety net programs that bypass the state legislature.

West Virginia relies more on federal assistance than other states because of our high poverty rates, low-wage jobs, and our generally unhealthy and aging population. In FY 2017, West Virginia received over $965 million dollars for discretionary spending from the federal government, which will be reduced by nine percent, or about $86.5 million overall, in the president's FY 2018 proposal. The cuts at the federal level will shift the responsibilities onto states to provide the necessary funds to maintain discretionary programs such as 21^st Community Learning Centers and the Appalachian Regional Commission. It is highly unlikely West Virginia would chose to fund any of these programs.

Cuts to mandatory funding will have a deep impact as well. In FY 2017, the state received over $4 billion in mandatory funding, for programs like Medicaid, Supplemental Security Income, Social Security and Disability Income, and Supplemental Nutritional Assistance Program. If the president's proposal is enacted, West Virginia will lose about five percent or $187 million, of those funds next year. West Virginia is in no position to inherit this combined $273 million expense next year in light of the current budgetary shortfalls. Over the next 10 years, that number will grow as reductions in vital safety net programs such as SNAP begin in 2020.

Proposed Budget Cuts to Discretionary Funds

The fiscal impact of the elimination of federal grant programs by the president's budget will vary from state to state. Some states simply require less federal assistance than others due to the relative disparities in economic strength. A $94 million reduction in discretionary funds is disconcerting because it will lead to increased economic insecurity and decrease access to programs that provide basic housing, nutritional, and health needs. These funding cuts will come from eliminating educational programs, vouchers for nutritional and housing needs, job training programs, and other federal initiatives aimed at economic development in Appalachia's rural communities. The only department that is not seeing any cut is the Department of Transportation, which is getting a $9 million increase. However, this slight increase counts for only 1 percent of the total discretionary funds.

The Department of Education has served an estimated 200,000 West Virginian students since 2004 through the 21^st Century Community Learning Centers program, which provides academic enrichment opportunities during non-school hours for children, particularly those who live in high poverty and low performing school districts. President Trump's budget completely eliminates this program. As of 2014 there are 133 sites across the state providing mostly elementary students with resources to meet state and federal education standards.

The Appalachian Regional Commission (ARC), which the President singled out and entirely eliminated under his proposed budget, was one of the most ambitious programs currently investing in West Virginia and the Appalachian region. The ARC brought nearly $24.1 million to 55 projects throughout West Virginia in the last two years and was set to attract nearly $28 million more in private investment to create economic opportunities, a ready workforce, and critical infrastructure.

Proposed Budget Funding Cuts to Mandatory Funding

Cuts to mandatory funding could be somewhere around $800 Billion over the next 10 years, according to experts. Programs that serve as a basic safety net have long since been considered instrumental to the country's national wellbeing. For example, without Social Security an additional 122,000 seniors in West Virginia would live in poverty. In West Virginia, and in many other states, safety net programs are also a large share of the state's economy.

An illustrative way to measure how much of an impact these programs have on West Virginia's economy is to look at each program's contribution as a percentage to the state's personal income – a proxy for a state's economy.  Medicare for instance, brings in about 6.4 percent of the state's personal income, the most of any state.

The Supplemental Nutritional Assistance Program (SNAP), also known as food stamps, which helps struggling families and workers put healthy food on the table, reached nearly 357,000 West Virginians, or 20 percent of the state's population and put approximately $499 million into West Virginia's economy. The president's proposal cuts $193 billion (25 percent) of SNAP's funding nationally over the next 10 years. For West Virginia, that would mean an annual state contribution of $125 million, and $869 million over the next 10 years to replace the loss in federal funds.

West Virginia will likely see deep cuts in Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI), as well. SSI and SSDI benefits go directly toward low-income households who had professional careers cut short due to a disability and families caring for children with disabilities such as down syndrome, autism, and blindness. The president's proposal cuts $72 billion over 10 years to disability programs, including SSI and SSDI. A reduction to these funds will mean those already struggling to make ends meet will struggle even more for the assistance they need to support themselves and their families and stay out of bankruptcy. Once again, West Virginia relies more on these programs than any other state.

The president's proposed budget is an effort to reduce overall federal spending on programs and strengthen the military, it achieves this through targeting the nation's poorest and most vulnerable populations by drastically reducing funding for the programs they rely on. The figure below is an illustration of major federal programs (SNAP, SSI, SSDI, Medicaid, and Medicare) together as a share each state's personal income. West Virginia stands to lose the most from the funding cuts proposed by the president not only in real dollars flowing into the state, but perhaps even more importantly, in the quality of the services these programs provide (Figure 1).

 -- via my feedly newsfeed

Waiting For Lefty: The Deeper Meaning Of Corbyn And Brexit [feedly]

Waiting For Lefty: The Deeper Meaning Of Corbyn And Brexit
http://www.huffingtonpost.com/entry/deeper-meaning-corbyn-brexit_us_5934845ae4b02478cb9cc7a7

LONDON – British journalists, pollsters and political strategists are struggling to interpret Jeremy Corbyn's stunning rise in the pre-election polls. Corbyn, at 68, and a proud leader of Britain's left, had been dismissed by British elites as a hopeless case.

Corbyn had become Labour Party leader only because of a change in the Party rules that inadvertently gave the decision to grassroots radicals―who can pay a few pounds, join the Party and cast votes to select a leader with the consent of only a minority of Labour MPs.

The Parliamentary Labour Party used to select the Leader. Today it's filled with centrist followers of former Prime Minister Tony Blair, most of whom opposed Corbyn.

In April, when Prime Minister Theresa May called a June snap election in hopes of increasing her Conservative majority in the House of Commons, now just 17 seats, polls showed Labour 24 points behind the Tories, and poised to lose dozens of seats.

Now, with the June 8 election just days away, Corbyn has surged to within a few points of May. To a visiting American journalist, the election feels like a cross between Sanders versus Clinton and Clinton versus Trump.

Like Sanders, Corbyn is demonstrating that there is a broad hunger for progressive populism, awaiting only the right leader. Ordinary Brits have gotten screwed by the elite globalization embraced by both the Tories and the Labour Party under its last two governments led by Blair and Gordon Brown (1997-2010).

With the June 8 election just days away, Corbyn has surged to within a few points of May.

Corbyn's program, For the Many, Not the Few, ridiculed by the usual suspects as hopelessly leftwing, evidently appeals to a lot of Britons, and is also sensible economics: Raise taxes on the affluent, restore public services, including free higher education, reclaim union bargaining rights, re-nationalize the results of failed privatizations, clamp down on predatory private capital.

Like Hillary Clinton, Prime Minister Theresa May has proved to be a spectacularly inept politician. The more people see her, the less they like her. 

The Tories feinted to the center, pledging to shore up the National Health Service. But in order to plug a budget gap, they proposed to tax estates of over 100,000 pounds—about $130,000—to recoup money paid out by the health system for long term care.

This was promptly dubbed "the dementia tax." May reversed course, and then looked even stupider when she denied changing her stance.

May also ducked a candidates' debate, sending in her place the government's Home Secretary, Amber Rudd. May's strategy has been to try to be above it all. This is also backfiring.

Meanwhile, Corbyn, not an especially charismatic politician, has become more and more confident, relaxed, comfortable in his own skin, and likable. Voters increasingly experience Corbyn as a man of principle and May an opportunist. Even if they don't agree with his entire program, they see Corbyn as on the side of the common person, and as a man of integrity.

It's very reminiscent of Clinton versus Sanders, even down to the role of the Democratic National Committee. The established Labour Party, very Blairized, loathes Corbyn as a throwback to the kind of radicalism that Blair was trying to expunge.

Even two grizzly terrorist attacks, one last week in Manchester and the other Saturday night on London Bridge, have not produced the usual rallying around the government.

The election will come down to turnout. Polls indicate that Corbyn has the support of overwhelming numbers of young people. Traditionally, however, the young turn out at a much lower rate than the old. 

This time might be different. Under the British system, you have until two weeks before the election to register to vote. The Corbyn surge began in mid-May. There are enough voters registered to elect him. The question is how many will show up at the polls. 

The election could well produce what the British call a hung Parliament, in which neither Labour nor the Tories have an absolute majority. This would give the balance of power to the Scottish Nationalist Party (SNP), who are expected to win about 50 seats in the 630 member House of Commons. The odds are that the SNP would back a minority Labour government rather than May and the Tories.

And this raises the issue of Britain's exit from the European Union, one of the most bizarre cases ever of a governing class shooting itself in the foot.

When the Brexit madness does pass, the harder work of rebuilding a decent Britain that works "for the many, not the few," only begins.

THE MORNING EMAIL

Start your workday the right way with the news that matters most.

Former Prime Minister David Cameron decided to bet Britain's future on two reckless rolls of the dice. He gave Scotland the right to have a referendum on whether to stay in the U.K. (the Scots narrowly voted to stay in 2014). And he hoped to silence critics of the E.U. both in his own Tory party and in the more rightwing United Kingdom Independence Party (UKIP) by offering a referendum on whether Britain should quit the E.U.

But oops, Cameron guessed wrong on that. In the so-called Brexit vote of June 2016, a narrow majority of 52 to 48 cast their ballots to leave the E.U. Cameron's own ignominious exit as British prime minister followed in short order.

And then, to compound the weirdness, Theresa May, who succeeded Cameron as prime minister, had been opponent of Brexit, but she decided that her ticket to political success was to "make Brexit work." And she concluded that the way to marginalize the rightwing nationalists of UKIP was to be just as hard line as they on the subject.

This was a tactical success—UKIP has gone into eclipse as the Tories have become the party of Brexit—but a strategic disaster. For there is simply no way to make Brexit work.

Consider just a few items:

Britain wants to have its cake and eat too, keeping tariff-free access for trade with the nations of the E.U, but having the freedom to limit free movement of people, and also opting out of many E.U. laws and regulations. But there is no way the E.U leadership will allow that. 

Some 14,000 trucks travel between Dover and Calais every day. Imagine if they were subject to border inspections?

The defunct British auto industry was rescued by Japanese and Korean carmakers after the Thatcher government extended generous tax breaks. Britain became their export platform to continental Europe. If there is no more free trade between Britain and the continent, other nations will be happy to take these factories.

Fully half of all British exports go to E.U. countries. But only ten percent of E.U. exports go to Britain. Guess which side has more leverage in the negotiations?

Since Thatcher, Britain's most important industry has been international finance. With the threat of Britain losing access to barrier-free export of financial services, the big American and British banks are already making contingency plans to move operations to Dublin, Amsterdam, Frankfurt, and so on.

The state of play is that negotiations on the details will continue through 2019 or 2020. At some point, the reality will sink in that Brexit can't be done, except at immense pain to Britain's economy.

Denis MacShane, former Europe minister in the Blair government, wrote a prophetic book in 2015 on how Britain's governing class was setting itself for a catastrophe in the 2016 Brexit vote. 

MacShane has a new book due out in July, explaining just why getting out of the E.U. is like unscrambling an egg. "There are 750 separate treaties that would have to be negotiated," he told me. British citizens would lose benefits they've come to take for granted, such as the right to retire in pleasant places on the continent, and free health care while they are traveling in Europe. The more all of this sinks in, the less popular Brexit will be,

And this brings us back to Corbyn and May. Corbyn was never a strong supporter of the E.U., which he viewed as a source of imported neo-liberalism. Nominally, Labour supports making Brexit work. But if he is the next prime minister, Corbyn is not likely to lead Britain out of the EU on the terms that will be offered.

And if his government requires the support of the Scottish Nationalist Party, Brexit becomes even less likely, since the Scots are passionate about not wanting to quit the E.U. A Britain that left the E.U. could well pave the way for a Britain without Scotland.

Even if May is re-elected, pressure will keep increasing from the Conservatives' usual constituency of Britain's ruling elites not to commit the folly of Brexit. The best outcome would be for the sheer opportunism of two successive Conservative prime ministers to discredit their party for a long time—but not at the price of a catastrophically bad decision to quit Europe.

Of course, when the Brexit madness does pass, the harder work of rebuilding a decent Britain that works "for the many, not the few," only begins.

Robert Kuttner is co-editor of The American Prospect and professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility. 

Like Robert Kuttner on Facebook.

Follow Robert Kuttner on Twitter. 

 -- via my feedly newsfeed

Jobs report: Some softening in May. Should the Fed hold off on next rate hike? I say…[read on] [feedly]

Jobs report: Some softening in May. Should the Fed hold off on next rate hike? I say…[read on]
http://jaredbernsteinblog.com/jobs-report-some-softening-in-may-should-the-fed-hold-off-on-next-rate-hike-i-say-read-on/

Employers added only 138,000 jobs last month, well below expectations for 175,000. Revisions to payrolls for the prior two months reduced employment gains by 66,000. The unemployment rate fell to 4.3 percent, its lowest level since 2001, but for the wrong reason: labor force participation fell by two-tenths of a percent. In other words, this is a considerably weaker-than-expected jobs report.

Given the noise in the monthly data, the question is: does this report signal a real downshift in job growth or is it a blip? Also, if we're really at full employment, we should expect some slowing in payroll gains as employers bump up against supply constraints. And what does this all mean for the Federal Reserve when they meet in a few weeks to consider another rate hike that is firmly priced into the markets?

A good place to start is by smoothing out the monthly noise with the official JB smoother, which takes monthly averages over the past 3, 6, and 12 months. It shows a marked deceleration in job growth, from about 190,000 over the 12-month period to 121,000 over the past three months. While this is suggestive of a softening of the job market, it is also consistent with supply constraints.

However, if such constraints were operative, we should see wage growth accelerating. Yet the next two figures show that while year-over-year wage growth did accelerate as the job market tightened, it has since settled in to about a 2.5 percent pace, showing little acceleration in recent months. That's more of a softening than a tightening story.

The labor force participation rate is another important place to look in this regard, but it is a) a very noisy monthly indicator, and b) the overall rate is down in part due to retirement of aging boomers. A better indicator is thus the prime-age (25-54 year-old) employment rate. After falling 5.5 percentage points in the last recession, this rate has slowly been climbing back–score one for the tightening narrative. However, it ticked down a bit in May and, more importantly (this indicator is also noisy), is still about 2 percentage points below its pre-recession peak.

The underemployment rate, which includes 5.2 million involuntary part-time workers who'd rather be full-timers, fell to a cyclical low of 8.4 percent, though this too reflects May's labor force exits. On the other hand, involuntary part-time work is down a solid 1.2 million over the past year.

Industry employment patterns reveal job losses in retail trade, down about 80,000 over the past four months, as brick and mortar stores lose demand to internet sales. Manufacturing remains soft, and state/local government shed 17,000 jobs in May. Health care continues to deliver, but gains in the sector have averaged 22,000 per month so far this year, compared to 32,000 per month last year.

So which is it: tightening or softening? I've got one more indicator to bring to bear before I render my judgement on this Talmudic question: core inflation.

Prior to the release of the jobs report, the futures market was assigning a 93.5 percent probability to another quarter-point rate hike by the Federal Reserve at their mid-June meeting. However, as the figure below shows, while unemployment is clearly below the Fed's full-employment-unemployment rate of 4.7 percent, core inflation has been going the "wrong" way, i.e., slowing, not speeding up (see its down-tick at the end of the figure).

So, putting it all together, I think there's enough evidence that the Fed's tightening campaign has slowed the job market down for them to pause in their June meeting. I recognize that this will shock markets, but the Fed's client is not the stock market. It's the macroeconomy, and the dual mandate: full employment at stable prices. Given at least some evidence of softening in the job market in tandem with slower core price growth, a data-driven Fed should pause and take stock of where we are.

The members of the central bank apparently think the recent slowdown in price growth is transitory, and that at some point, price pressures will reflect the tightening of the job market. That's certainly plausible, but the last figure shows that they've been missing their 2 percent inflation target for years now. More likely, the historical correlation between inflation and unemployment is much diminished, such that the Fed cannot reliably estimate the lowest unemployment rate consistent with stable, 2 percent inflation.

From this perspective, the Fed is being less data driven than they like to claim, and is in more of an ad hoc mode. They're raising because the governors broadly believe that in year eight of an economic expansion closing in on full employment, rates should be at a more normal level. By doing so slowly, they can monitor the impact of their campaign, and I suspect that, as far as they can see, it looks to be going well–they're "normalizing" the rate, yet, May's results aside, not much dampening the pace of output or job growth.

There are two problems, however, with this approach. One, since they're not data driven, at least as far as the inflation data are concerned, it is hard for observers to know where they're going next. Ad hockery is tougher on expectations than following the data. Two, and this is a more serious concern, for the least advantaged workers to get ahead, the job market has to run very hot, and even small taps on the brakes push the wrong way in that regard.

Given some evidence–uncertain and shaky to be sure–that the job market has cooled a bit while inflation is non-threatening, from what I see from here, the Fed should revert to data-driven mode and punt on a June hike.

 -- via my feedly newsfeed

Links for 06-03-17 [feedly]

Links for 06-03-17
http://economistsview.typepad.com/economistsview/2017/06/links-for-06-03-17.html

• Trump's Rogue America - Joseph E. Stiglitz
• The Truth Behind Today's US Inflation Numbers - Brad DeLong
• Trade Deficit increase to $47.6 Billion in April - Calculated Risk
• A Tax Cut Might Be Nice. But Remember the Deficit. - Greg Mankiw
• The economic consequences of family policies - VoxEU
• Valuing Workplace Benefits - Liberty Street Economics
• Trump's Confusion Regarding Chinese Coal - EconoSpeak
• GE2017 and the stages of Leaver grief - mainly macro

 -- via my feedly newsfeed

Paul Krugman: Making Ignorance Great Again [feedly]

Paul Krugman: Making Ignorance Great Again
http://economistsview.typepad.com/economistsview/2017/06/paul-krugman-making-ignorance-great-again.html

The truth is out there, but it's buried under a large pile of nonsense, lies, misleading statements, and deception:

Making Ignorance Great Again, by Paul Krugman, NY Times: Donald Trump just took us out of the Paris climate accord for no good reason. I don't mean that his decision was wrong. I mean, literally, that he didn't offer any substantive justification... It was just what he felt like doing.

And here's the thing: What just happened on climate isn't an unusual case — and Trump isn't especially unusual for a modern Republican. ... Facts and hard thinking aren't wanted, and anyone who tries to bring such things into the discussion is the enemy.

Consider ... health care. ... Did the administration and its allies consult with experts, study previous experience with health reform, and try to devise a plan that made sense? Of course not. In fact, House leaders made a point of ramming a bill through before the Congressional Budget Office ... could assess its likely impact.

When the budget office did weigh in, its conclusions were what you might expect:... a lot of people are going to lose coverage. Is 23 million a good estimate...? Yes — it might be 18 million, or it might be 28 million, but surely it would be in that range.

So how did the administration respond? By trying to shoot the messenger. Mick Mulvaney, the White House budget director, attacked the C.B.O...

So, Mr. Mulvaney, where's your assessment of Trumpcare? You had plenty of resources to do your own study before trying to pass a bill. ...

But Mulvaney and his party don't study issues, they just decide, and attack the motives of anyone who questions their decisions. ... Truth, as something that exists apart from and in possible opposition to political convenience, is no longer part of their philosophical universe. ...

And as health care and climate go, so goes everything else. Can you think of any major policy area where the G.O.P. hasn't gone post-truth? ...

But does any of it matter? The president, backed by his party, is talking nonsense, destroying American credibility day by day. But hey, stocks are up, so what's the problem?

Well, bear in mind that so far Trump hasn't faced a single crisis not of his own making. As George Orwell noted ... in his essay "In Front of Your Nose," people can indeed talk nonsense for a very long time, without paying an obvious price. But "sooner or later a false belief bumps up against solid reality, usually on a battlefield." Now there's a happy thought.

 -- via my feedly newsfeed