Benefits of the Great New Economy – Illusory or Selective?

Remember my May 4th blog – A Really Uneasy Feeling – It’s the Stupid Economy? The one about how the President is bragging about how everyone is working (“JOBS, JOBS, JOBS” went the tweet), taxes have been cut, the stock market is soaring, average wages are rising, and GDP growth is solid? The one that tells us that the tax cut really was a deficit boost with real tax savings only for the mega rich. Where we learned that “averages” are highly distorted by the disproportionate high earnings at the top of the economic ladder, but that those at the bottom had a mere 14% chance of moving up the social ladder and those in the middle had not seen an increase in buying power in four decades. Where we saw that costs are rising faster than wage gains. Where debt is soaring – from credit cards to student loans. 

And now we can add the new Trump federal sales tax: tariffs for the stuff we use most. Plus a new threat from China to use rare-earth metal exports as leverage in the trade war with the U.S. These 17 metals are not abundant elsewhere in the world and are essential components for so high-tech applications, from magnets and instrument displays to components that go into everything from iPhones to missiles, electric vehicles and LED lighting. 

Think: American jobs. We have deep stockpiles, but they do have a limit. Oh, and Mr. Trump is now adding Mexico to the tariff list as punishment for their not stopping undocumented families from crossing the border seeking asylum. More consumer taxes from the President. He so deeply does not understand the economic principles behind tariffs.

There’s definitely a boom out there, but only for those in the top five or so percent of the economic ladder. There may be more jobs, but pay has hardly kept up with costs, and job security is pretty much relegated to the history books. Trump’s trade wars, particularly with China, could have hard and deeply dire consequences for most of us. What’s worse, that infrastructure legislation has been put on hold by a president who doesn’t like being investigated, and federal support for scientific research has become the new budgetary sacrificial lamb… along with federal assistance and support for education. Does it bother you that as patent filings in the U.S. decline, Chinese patent filings are soaring… and they have more patents circling artificial intelligence than the United States and the European Union combined? Patents are the real job creators.

Even a neutral Congressional research report suggests that Donald Trump’s much-“self”-touted 2017 massive tax cut legislation as having grown only our deficit. “You may remember all the glowing predictions made for the December 2017 tax cuts by congressional Republicans and the Trump administration: Wages would soar for the rank-and-file, corporate investments would surge, and the cuts would pay for themselves.

“The nonpartisan Congressional Research Service has just published a deep dive into the economic impact of the cuts in their first year, and emerges from the water with a different picture. The CRS finds that the cuts have had virtually no effect on wages, haven’t contributed to a surge in investment and haven’t come close to paying for themselves. Nor have they delivered a cut to the average taxpayer…

“Corporate shareholders, however, have made out great. The repatriated earnings mostly have been used for ‘a record-breaking amount of stock buybacks, with $1 trillion announced by the end of 2018.’ As the CRS notes tactlessly, the same phenomenon occurred in 2004, when a one-time tax holiday allowed companies to bring back earnings stashed abroad at a lower rate. That tax holiday had been promoted as a spur to investment and wage growth too. Never happened.

“Indeed, government statistics show that shareholder dividends fairly exploded in the first quarter of 2018, immediately following the tax cut enactment, while reinvestments of those repatriated funds cratered. (Both figures returned to levels close to their historical averages soon afterward.)” Michael Hiltzik writing for the May 30th Los Angeles Times.

But nothing brings home the frailty of the economic condition of a very large segment of the U.S. population than numbers, numbers based on government research from the Federal Reserve: Nearly 40% of households would struggle to pay for an unexpected $400 expense, Fed says… Many U.S. households are in a fragile position financially, even in an economy with an unemployment rate near a 50-year low, according to a Federal Reserve survey… Despite boom, many in U.S. are financially shaky.

“The Fed’s 2018 report on the economic well-being of households, published Thursday [5/23], indicated ‘most measures’ of well-being and financial resilience ‘were similar to, or slightly better than, those in 2017.’ The slight improvement coincided with a decline in the average unemployment rate to 3.9% last year, from 4.3% in 2017.

“Despite the uptick, however, the results of the 2018 survey indicated that almost 40% of Americans would still struggle in the face of a $400 financial emergency.

“The statistic, which was a bit better than in the 2017 report, has become a favorite rejoinder to President Trump’s boasts about a strong economy from Democratic politicians, including 2020 presidential candidate Sen. Kamala Harris of California.

“‘Relatively small, unexpected expenses, such as a car repair or replacing a broken appliance, can be a hardship for many families without adequate savings,’ the report said. ‘When faced with a hypothetical expense of $400, 61% of adults in 2018 say they would cover it, using cash, savings, or a credit card paid off at the next statement,’ it added… Among the remaining 4 in 10 adults who would have more difficulty covering such an expense, the most common approaches include carrying a balance on credit cards and borrowing from friends or family,’ according to the report.

“Based on a survey of 11,000 people in October and November 2018, the report showed that a quarter of Americans don’t feel like they are doing ‘at least OK’ financially. That number was higher for black and Latino respondents, at roughly one-third for both. For those making less than $40,000 a year, the share who felt they weren’t doing well was 44%.” Matthew Boesler writing for the May 24th Los Angeles Times.

There are still plenty of medical bankruptcies as 20 Republican states fight to have the remaining vestiges of the Affordable Care Act declared unconstitutional… with zero back-up plans. We haven’t seen homelessness at anywhere near current levels since the Great Depression in the 1930s. Contract work – the gig economy with no benefits – is becoming normal, and plants and factories are still shutting down or moving overseas – out of tariff war range – when that just shouldn’t be happening anymore.

Rural communities, less reliant on government services, are doing better than their urban counterparts. “‘We continue to see the growing U.S. economy supporting most American families,’ Fed Gov. Michelle Bowman said in a news release accompanying the report… ‘At the same time, the survey does find differences across communities, with just over half of those living in rural areas describing their local economy as good or excellent compared to two-thirds of those living in cities,’ Bowman said. ‘Across the country, many families continue to experience financial distress and struggle to save for retirement and unexpected expenses.’” LA Times. 

Even rural communities struggle when it comes to medical costs, I might note. We just don’t seem to care about most of us… unless you just happen to be at the top of the economic food chain. Back in the 1970s, the differential between mean employee pay and that of a CEO of a larger company was about 20 to 1. Today, it is over 300 to 1, with some CEOs pulling down 1200 to 1400 times what their middle-paid workers make. Routinely. Yeah, there is something a bit uneasy about all this “good news.”

              I’m Peter Dekom, and history tells us that societies with these levels of distortion are unsustainable.

It’s No Picnic to Park – Homelessness Crisis Silicon Valley Style

From San Francisco to the heart of the Silicon Valley, the closer you get to the centers of employment, the more unaffordable housing becomes. In San Francisco, $1 million buys you, maybe, 800 square feet. According to RentCafe.com, rent for that same space averages $3600/month, rising 5% annually. Rents in Mountain View (Google’s HQ) are over 10% higher, while the average rent in Cupertino (Apple’s HQ) is about 10% less, but still unaffordable.

Work centers in congested cities – places like the Bay Area in California, New York City, Washington, D.C., Seattle, Los Angeles, Miami and Boston – need young, tech-savvy employees, recent graduate or self-taught STEM experts, many recent entrants into the job market. They offer great pay and benefits with a huge catch: younger workers, many slammed with college loans, simply cannot find a place to live.

For some, having lots of roommates is viable (sardine time), but that hardly represents the pledge of independent living normally associated with the pay levels they can generate. Some whose parents are conveniently located, move back to the family nest. Privacy is expendable. Others embrace hours and hours of commute time, trains, busses and cars, to move from affordable rural or small towns to these urban centers. Assuming clear traffic – LOL – the commute time each way from Stockton to Cupertino is an hour and a half, each way. 80 miles.

So, someone with a rich starting pay of $80,000/year paying $3600/month in rent: that’s $43,200/year, grossed up to $60,000 to cover the federal and state taxes on the gross needed to pay that rent. That leaves $20K to cover food, insurance, remaining taxes, clothing, car/Uber/Lyft, utilities, leisure time activities and… drum roll… repayment of student debt. And that assumes they can even find a vacant, average rental. Good luck on that one! If they were earning $60K in a smaller town, where rent on 800 square feet was a more realistic $1000-$1500/month ($12K - $18K, grossed up to $20K-$25K to cover taxes, gives them $35K-$40K to pay for all that other non-rent stuff, and you can bet that local prices for everything else are a whole lot cheaper than what is charged in the Bay Area. Housing is a huge deal in urban California, and homelessness is accelerating fast.

The above numbers are actually pretty elitist when you stop to think about it. $60K, $80K are well-above what most individual Americans earn. Some folks work in grocery stores, shops, or have jobs that will never pay that well (guards, janitors, cooks, waiters, runners, etc.) … just think about how they must live. And they cannot even afford the cost of a long commute!!! “‘If teachers, nurses, trash collectors and other regular workers can’t afford to live in the area, the fabric of society begins to fray, said Alison Hicks, a Mountain View council member… ‘To have a regular functioning town, you need to have occupational diversity,’ she said. ‘You can’t have a town that functions if we only have tech workers living in it.… It won’t be a functioning city as I know it. It wouldn’t be a city I would want to live in.’” Alistair Barr writing for Bloomberg in the May 26^th Los Angeles Times.

The Silicon Valley has evolved another method to cope with the severe cost of housing, one that does not sit will with a lot of local residents: semi-permanently parked RVs on residential or business streets. “Mountain View is a wealthy town that’s home to Alphabet Inc., the world’s fourth most valuable public corporation and Google’s owner. [Local police Sgt. Wahed] Magee spends a lot of his time knocking on the doors of RVs parked on the city’s streets, logging license plates and marking rigs that haven’t moved for several days.

“This is the epicenter of a Silicon Valley tech boom that is minting millionaires but also fueling a homelessness crisis that the United Nations recently deemed a human rights violation. Thousands of people live in RVs across San Francisco and the broader Bay Area because they can’t afford to rent or buy homes.

“In December, Mountain View police logged almost 300 RVs that appeared to be used as primary residences. Palo Alto, Berkeley and other Bay Area towns have similar numbers… Some Silicon Valley towns have cracked down in recent months, creating an even more uncertain future for RV residents. At a March City Council meeting, Mountain View voted to ban RVs from parking overnight on public streets. The ban hasn’t taken effect yet, but soon the town’s van dwellers will need to go elsewhere.

“The City Council also declared a shelter crisis and passed an ordinance to ticket vehicles that ‘discharge domestic sewage on the public right of way.’ At the meeting, some people opposing the ban blamed Google for the housing crisis.

“‘In my neighborhood there are a group of five or six duplexes and a couple that I know lived in one of them for 22 years. When Google moved in next door, their landlord raised the rent by $700 a month,’ resident Susan Barkin said. ‘Preventing parking and throwing more people out of our community is unconscionable. I do not want to live in a town where the only people who can afford to be here are very, very rich techies or very, very old retirees like myself.’… If representatives from Google were in attendance, they didn’t speak up to defend the company or address the housing crisis.

“But the issue has arisen inside the Googleplex. At a staff meeting this year, one Google worker asked why Chief Executive Sundar Pichai was paid hundreds of millions of dollars, while some employees struggle to afford to live in the area. Pichai said the company had little control over the high cost of living, people familiar with the situation told Bloomberg at the time.

“The median rent in Mountain View has almost doubled since late 2010, to $4,151 a month. That’s nearly triple the national average, according to Trulia. The median home value is $1.8 million, up from $750,000 10 years ago, according to Zillow.

“‘We have rising rents. We have gentrification. We have people being displaced,’ said Jennifer Loving, head of Destination: Home, a group that’s trying to reduce homelessness in Santa Clara County, home to Google and Mountain View. ‘All of that together is creating an untenable situation for thousands and thousands of families and individuals who are trying to live and work here.’

“RVs that are used as homes are all over Silicon Valley. They line frontage roads that run alongside highways. There will often be a chain of them on quieter streets in office parks and light industrial areas. But they can also be found on suburban residential streets parked in rows opposite the ranch-style homes common to the area.

“The RVs are often white or beige, and the windows are covered with blinds, sheets or blankets for privacy. Leaves and dust sometimes accumulate on the windshield wipers, and some have generators on the back for extra power. Around Google’s campus there are sometimes multicolored company bikes parked nearby so RV dwellers can ride to work.” Barr. Gee, we feel so bad, but that’s the way it goes!

Some communities are levying a special tax on large local employers to help develop more housing opportunities and support. Some employers have threatened to take their work centers elsewhere in retaliation. “Seattle's city council on Monday [5/14] approved a new tax for the city's biggest companies, including Amazon.com Inc, to combat a housing crisis attributed in part to a local economic boom that has driven up real estate costs at the expense of the working class.

“Amazon, the city's largest employer, said after the vote that it would go ahead with planning for a major downtown office building that it earlier had put on hold over its objections to a much stiffer tax plan originally proposed.

“The tax measure, passed on a 9-0 vote after a boisterous public hearing, would apply to most companies grossing at least $20 million a year, levying a tax of roughly 14 cents per employee per hour worked within the city.” Newsmax.com, May 14^th.

What is abundantly clear is that touting job and wage growth statistics is meaningless without an offsetting analysis of cost increases. And we know that “averages” where the highest earners have never made more in comparison to “most of us” is a deeply distorted measurement of successful policy-making. Of course, those high-earners make the averages go up… but 70% of working America has not seen an increase in inflation-corrected earning power in four decades! Who exactly is looking out for the little guy… most of us?!

              I’m Peter Dekom, and lying with statistics is no longer able to cover up the “average pain of average workers.”

All Hail Jail!

More than 90 percent of state and federal criminal convictions are the result of guilty pleas, often by people who say they didn't commit a crime. theoutline.com, 8/7/17

Standard stuff, really. Someone who cannot afford a lawyer is charged with a crime, perhaps one they committed or perhaps one they did not. A public defender with a massive caseload is appointed, often meeting their appointed client immediately before trial. The prosecutor reminds the person charged that if the plea bargain is not accepted, judges almost always increase the jail/prison time substantially if there is an ultimate conviction by trial. The public defender confirms that harsh reality. For those who simply don’t trust the system… or their overwhelmed public defender… copping a plea is an evil necessity. We all know that, but too many of us believe that folks in that situation probably committed some other crime that they are getting away with… and so what?! We just don’t care. Oh, and in the federal system, where there is no parole, the percentage of plea bargains is 97%!

Looking at the statistics, you can pretty much assume that for the vast majority of those charged with a crime, their fate lies not with a judge or jury but with a single individual (and his/her boss), the prosecutor. So a lot of people go to jail (in theory a short-term incarceration) or prison (generally for sentences of a year or more) simply to avoid much worse. For felonies and even a few misdemeanors, those convicted get a blot on their records that impacts future employment potential, their ability to get certain governmentally required licenses for certain jobs, their families lose their income/nurturing and they get to spend time in one of the cruelest environments our country can offer: dangerous, unfair, constantly noisy, usually overcrowded with horrible food and second-rate medical care. And the United States incarcerates 25% of the world’s total prisoners … and represents only 5% of the earth’s population!

We went through a prison-building spree when three-strikes legislation was in fashion. Many states and the federal government even “outsourced” some of that incarceration to uncaring corporate prisons only concerned with profitability and rife with despicable conduct from guards and prison officials. For those who copped a plea, the unfairness of the system festers. Unwanted gang affiliations might be the price of survival. Anger builds. And if they were second-rate criminals or pure innocents when they entered the system, they sure as heck have attended “lectures” from fellow bragging inmates on criminal opportunity and expertise. With most states following the California pattern, since then-Governor Ronald Reagan led the movement and shut down most state mental hospitals in the late 1960s/early 1970s, the mentally ill have increasingly become charges of the California’s jail/prison system. Mixing it up with the criminally insane is never a good thing.

We’ve shuttered a number of prisons, even though the number of inmates keeps growing. In most states and the federal government, austerity measures have slammed jails and prisons very hard. You have to wonder if jail time in the 21^st century itself violates the proscription against “cruel and unusual punishment” set forth in the Eighth Amendment. Federal courts have so ruled against blue state California’s massively overcrowded prison system. So what’s the solution? Releasing non-violent prisoners early? Releasing folks convicted of marijuana possession, a substance that is now legal in lots of states? Some of that is happening, very, very slowly. But some prison policy makers have tried other solutions in the Golden State. How’s that going?

“[More] than 175,000 people sentenced to county jails instead of state prisons in the last eight years because of sweeping changes to California’s justice system, according to an analysis of state data by the Marshall Project. The reforms were intended to ease prison overcrowding — and they have… But the changes were also supposed to help people convicted of nonviolent crimes, by letting them serve their sentences close to home in county jails with lots of education and training programs.

“It hasn’t worked out that way in some urban counties. Jails built to hold people for days or weeks — awaiting trial or serving short sentences for petty crimes — have strained to handle long-term inmates, many with chronic medical and mental-health problems and histories of violence.” Abbie Van Sickle and Manuel Villa writing for the May 24^th Los Angeles Times.

Yet many jails today are even more overcrowded than regional prisons, often lacking in medical and psychiatric support systems (inadequate everywhere) that are much “better” in prisons built for long-term housing. Violence in many urban jails has long-since passed the breaking point. As case in point, one inmate confined for long-term incarceration in a jail vs a prison:

“Ever since he stole his first car at age 10, Cody Garland has spent much of his life behind bars. Now 35, he has served time at eight different California prisons… But the hardest stint, he says, was not in a state penitentiary. It was in a Sacramento County jail, where in 2016 he was sentenced to serve eight years for burglary, identity theft and other charges.

“Medical care at the jail was even worse than in prison; untreated glaucoma left him legally blind, he says… Solitary confinement — in a windowless room — was a common punishment; Garland says he lost track of whether it was day or night during a spell in solitary and began to hear voices.

“Mental-health help was hard to get, he alleged, even after he started swallowing shards of metal and tried to hang himself. He detailed the treatment in a lawsuit accusing the county of subjecting inmates to inhumane conditions — a claim the county denies… ‘I’ve done a lot of prison time,’ he says, ‘and this was the worst time I’d ever done.’…

“Statewide, assaults on jailers increased almost 90% from 2010, the year before prison downsizing began, to 2017, the most recent year for which there is complete data. Mental-health cases, which had been declining in jails, have risen. County spending on medicine for inmates has jumped (to almost $64 million in 2017 from $38 million in 2010), and the cost of psychotropic medication has recently surged. Legal challenges over inmate treatment have expanded to about a dozen county lockups.

“A spate of suicides… Deaths in California jails jumped by 26% in the years after they started receiving long-term inmates, peaking at 153 in 2014 before falling to 133 in 2017. That year, California had 17.7 deaths per 10,000 inmates; Texas, which has the second-largest jail population, had 13.2…

“California’s experiment in prison downsizing has implications for states across the country as they try to cut the size of their prison systems. Some, such as Texas, are tackling the issue because of the high cost of locking people up, while others, such as Alabama, are under pressure to relieve overcrowding and violence. And in many regions, voters are concluding that prison populations, which include disproportionate numbers of people of color, reflect outdated ‘tough on crime’ policies.” LA Times. And richer municipalities (as in the Silicon Valley) often have vastly superior local jails. It’s money combined with a long-term American proclivity favoring incarceration.

For prisoners, it’s living hell, with profound damage done to those incarcerated, particularly in those cities with the worst and most overcrowded jails. As a follow-up, Cody Garland figured out how to force a transfer to a state penitentiary: “Garland no longer spends his days in the Sacramento jail. Since December, he has been living in a prison medical facility in San Luis Obispo, where he says his health problems have improved.

“How did he get transferred? In 2018, he hit a sheriff’s deputy in the jail. Garland did not contest charges of resisting an officer and assault likely to produce great bodily injury, a felony… He begged his public defender to make sure that this time, he went to prison… ‘They wanted to give me six months in jail,’ he recalled recently. ‘I said I’d take two years if you’d just let me go to prison.’” LA Times. We should be ashamed.

              I’m Peter Dekom, and it seems that all across the land there is this sweeping malaise decimating empathy, sympathy, humanity and respect for our fellow human beings… me, mine and not them or theirs.