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Economics and commerce, all built from scratch.

Smaller Government, Peaceful Government

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“Get government off our backs!” It’s a chant we’ve heard a lot of over the last few years, usually in the deep, gruff voice of those old enough to remember the heyday of our parents and grandparents. It’s a call to a simpler time when there was less government, less taxation, and more to go around. At least, that’s the story we are told.

But an analysis of the size of our Federal Government as a share of the economy shows that while it is a shade bigger than it used to be, it’s way below its maximum. There are peaks in Federal Government size which fit not to an increase in social benefits or productive spending, but the very expensive line item that has been pricey enough to bring down governments and cultures for centuries – war.

In short, it’s time for the progressive left to embrace “smaller government” of a kind and to show that world that peace is not idealistic but practical.

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Capital Idea

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It was 70F in St Paul today, and my mind is on other things.  This repeat from 2013 is still good, but the numbers have changed slightly since it was written.

Borrowing money isn’t bad.  When it’s used to purchase something big that will last for years, like a house or a car, it often makes sense to do it now and pay the finance charge.  Borrowing to buy equipment or a build to be rented is an investment – as is borrowing money to learn a good trade.

When we look at how the Federal government borrows to keep itself going we can and should be able to ask the same questions – was this an investment?  Did we get anything good for the money?  Unfortunately, the accounting practices used by the Feds lump capital and other investment into the same pot as operational expenses, making it impossible to tease everything out.  It’s a procedure the Founding Fathers would recognize, if you wanna get all Tea Party on the practice.  But it’s still a dangerously stupid way to run things – and totally counter to the way any business or state is run.

As we talk about the need for serious reform in Washingtoon, we should add this to the list.

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Payday Can’t Come Fast Enough

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The woman ahead of us in line at the convenience store had a bit more than the impatient, bored look we all shared. She held her head high and spoke to the cashier in a friendly tone, paying for the gasoline she was going to pump. Like many people at this store, in this part of St Paul, she paid with cash – but hers came in crisp twenties slid neatly out of a bank envelope. After we paid our own way out of the line I asked my daughter if she noticed. “My guess is she just cashed her paycheck because she doesn’t have a bank account,” I told her. It was a good guess, because it turns out that more than 17% of that particular neighborhood’s households have no bank account – and many rely on the UnBank check cashing up the street.

There are many reasons people don’t have bank accounts, up to and including the fact that check cashing stores can actually be cheaper than fees on everything. But some people wind up using these places for a “Payday Loan”, or a one-month advance on the next paycheck. A recent study shows that people who do this have to take out another loan the next month to pay off the first, and so on – with 62% eventually hitting 7 or more months in a row, the point where the interest payment exceeds the loan amount.

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Fed Raising Rates …. When?

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It’s been nearly a year since Janet Yellen, in her first testimony press conference after a Fed Open Market Committee (FOMC)  meeting, told the world just what she was looking for before raising the Fed Funds Rate (and everything that rises along with it). The openness was remarkable for a Fed Chair and a sign of a new era as a woman took control of what is arguably the most power job in the world.

Since that time, we have followed “Yellen’s Dashboard” with periodic updates to just just how we’re doin’. Nearly everyone agrees that interest rates will rise sometime this year, probably around June, as she has told us.  But how does that stack up against her very public criteria? It’s worth checking in with some math to see where we are with rates and what we can expect.

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Redefining Work

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Is technology a net creator or destroyer of jobs? The question is as old as the Industrial Revolution, when workers in mills found themselves put out of work by large industrial looms. In France, they threw their shoes (sabots) into the weaving machines to destroy them – the origin of the term “sabotage”. The protests didn’t stop the machines, however, and the workers had to find something else to do in an ever-changing economy where machines did more and more work.

Today, the pace of technological change is faster than ever, with new gadgets coming into our lives constantly. Automation is also transforming our lives, with new robots and artificial intelligence replacing workers constantly. Are today’s productivity gains tomorrow’s unemployment? Increasingly those who study technology in our lives and the popular media are coming to the conclusion that yes, workers are net losers in the race against tech. And this is not a partisan issue.

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