Friday, January 3, 2020

Looking Back on 2019, and What 2020 Starts With

A fine choice of publications for a quick glance at anything is The Week.  It is a newsmagazine with an especially compact format, excerpts from other periodicals, and pithy original articles.  One of the latter was January 1st’s “the big things we learned about the economy in 2019.” 

After calling 2019 “not the most dramatic year of the past decade” and contending that “wages, growth, and livelihoods are not doing as well as some headline figures suggest,” this piece offered five points.  The first was “we have no idea where full employment is.”  A look at my American Job Shortage Number provides one view, that, despite jobless rates at 50-year lows, we could still fill 15 million more positions.  There should be no mystery about why “inflation was nowhere in sight,” despite double-figure annual gains in money supply measures – it is from cash pooling up and not circulating in its historically usual Keynesian fashion.  The second, “lots of rich geniuses aren’t all that smart,” discussed Adam Neumann, CEO of business space rental company WeWork, of which “the IPO fell apart,” but Neumann proved to be plenty intelligent indeed, as the concern paid him $1 billion (!) to leave.

The third item, “private businesses aren’t good at self-policing,” used Boeing’s mysteriously apparently unresolvable 737 Max problem as an example.  The fourth, “The Trump administration’s economic policy still isn’t working,” was controversial but reasonable, calling the 2017 tax cuts a “complete dud” with “no discernible effect on business investment, on wages, or on employment,” evidently just making the aforementioned money pools larger, and the trade war achieving “nothing of significance.” 

The system is so large and open, though, that we don’t know how good or bad those policy changes really were.  The same thing goes for The Week’s fifth item, that “the minimum wage, however, is working.”  This issue, and even research done on it, is so politicized that we can’t be sure.  As I have said before it is logically virtually impossible, without 100% of the extra money circulating, that forced pay increases cannot cost any jobs at all, but a small number would be permissible for studies to show, per the article, that such “hikes generally have no significant effect on employment.”  Especially in good times, such work must also consider how many jobs higher mandatory pay caused to go uncreated, something almost impossible to accurately assess.   

That last point is a good transition to our new year, in which “minimum-wage workers in more than 20 states just got a raise,” published on New Year’s Day by Wise Publishing in Yahoo Finance.  Although I am against government-set floors on pay in general, it makes much more sense to me for states, cities, or even neighborhoods to agree on higher ones for themselves instead of imposing them on the entire diverse nation.  Here we learned that 29 states have lowest hourly rates higher than the federal $7.25, and 21 of those had January 1 increases.  The amounts range from Montana’s 15 cent boost to Washington state’s $1.50, with the latter now having the highest rate of those at $13.50, followed by California’s larger-employers $13.00 mandate, Massachusetts’s $12.75, and $12.00 in Arizona, Colorado, and Maine.  It seems to me quite reasonable that New York City has $15 per hour, less so for one of its congresspeople, Representative Alexandria Ocasio-Cortez, to require that much “to give labor dignity” throughout the country, which, per the “nonpartisan” Congressional Budget Office, could cost 3.7 million Americans their jobs.

Will we have a recession this year?  Probably not.  Our conditional prosperity may be stuck in place for a while.  And accordingly, the money-backed line of our president being reelected, now 3 to 2 in favor of that happening, may stay at about that level.  Beyond that, 2020 is already ticking away.   

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