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Inequality: A Feature of the System

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In his inaugural speech, New York Mayor Bill de Blasio returned constantly to the theme of “A Tale of Two Cities”. New York is big enough to be both of them at once – one a poor city where people barely get by and another that is wealthy beyond the imagination of most people. But it isn’t just his city that de Blasio wants to fix. “This inequality problem bedevils the entire country,” he intoned. “But it is not just a moral outrage, it is a horrible constraint on economic growth and on giving people the security they need to tackle problems.”

So starts 2014, the year when inequality is certain to be the big social, political, and economic issue. That is a given because after many years of intellectual stagnation the Democrats have a popular issue that they can run with. Where did it come from? A lot of credit has to go to a short video published in November 2012 that still lights up social media. And the reaction to it shows how far we have to go in order to tackle the problems of inequality.

After all, it’s not a matter of policy – inequality is a feature of the system we have.

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Three Million Reads, One Purpose

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To every thing there is a season, and a time to every purpose under the heaven.
Ecclesiastes 3:1 (KJV)

Sometime today, Barataria will hit 3 million total pageviews. Over 6 2/3 years that averages out to 37k per month or 2.7k per post. The views came from regular readers, social media promotion, search engine arrivals, and more than a few people who stumbled in accidentally. Things are pretty tough for me right now, so if you like what you’ve read I’d very much appreciate a donation (which may get my car a new alternator) to help keep this effort going!

But what matters most are you, the readers, because without you there’d be no point to writing at all. The ideas and perspectives I spend time thinking through only come to life after you’ve read and responded, refining them and making them better. It’s a good time to go over this strange year, 2013, to find what conclusions we’ve come to as a community – and to ask you where you think this should go!

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New Rules – New Game?

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Tuesday is scheduled to be the day that everything changes. Not everything, really, but it’s the day that the “Volcker Rule” will finally go into effect. “Leave the capital markets to their own devices without any expectation of government protection and keep the existing safety net for the commercial banking system,” Volcker said in 2009. In practice, this means that commercial banking, with deposits backed by the FDIC, have to be separated from stock trading and similar activities.

It’s not the Glass-Steagall Act, which required completely separate kinds of banks operating as different companies to perform the different kinds of investing. But it’s not bad. And if it sounds simple in principle the regulation authorized by Dodd-Frank takes 800 pages. Four years from its proposal and 3 years from its passage, it’s ready to roll out. How will it go?

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The Immigration Solution

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Barataria has noted before that there are three great forces weighing on the economy today: business cycles, globalization, and demographics (the retirement of the Baby Boom, already starting). Business cycles don’t last forever, and this particularly destructive one should end about the same time the heart of the Baby Boom starts to retire in 2018. The latter is a genuinely double-edged sword, providing opportunities for young people to fill the jobs that open as the burden of retirees on public assistance grows. There is still the potential for a great period of economic expansion in the 2020s if we can manage the downside effectively.

As with everything in economics, a growing economy makes everything easier. But how can we grow the economy through this period if there is a shortage of workers? The missing part of this Managed Depression is, as always, the important policy changes that will set us up for the next economy once this phase of the business cycle is over. One part of this pending in Congress, held up by partisanship, is immigration reform.

In other words, the challenges of globalism present one solution to the challenges of demographics.

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Jobs Debate Heats Up

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The October Jobs Report from the Bureau of Labor Statistics (BLS) came out last Friday, and it was incredibly positive. 204k jobs were added by the official measure, enough to send the stock market up and make everyone happy. Well, not everyone. There were some strange features in this report that only accelerated the criticism of this report that started the month before and sharpened the political debate over jobs in the new economy.

Much of this is long overdue, but some of the criticism was weak and pointless all the same. Labor force participation has fallen from 63.2% of all workers to a 35 year low of 62.8% – a figure that may or may not be important. And anyone paying attention to the ADP Employment report has to question where the great news came from seeing as the latter had a gain of only 130k jobs. What on earth is going on?

The short answer is that everyone is starting to question everything. It’s a good thing – if we can sort it all out. Let’s give it a try.

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