Biden’s Biggest Challenge: Don’t Overheat a Strong Economy


As President Joe Biden takes office, the coronavirus daily infection rate is beginning to drop significantly and vaccines are rolling out.  Most Americans will soon be back to work and schools will reopen full time.

As I pointed out in my last post, fundamental inflationary forces, caused by world-wide demographic changes, are starting to reappear in the world economy.  This will have a serious negative consequence for our national debt by dramatically increasing interest rates and, therefore, interest payments on the debt.

Furthermore, even short term inflationary forces are rearing their heads:

  • Five-year inflationary expectations are growing rapidly.

  • S. fiscal stimulus (including Biden’s new $1.9 trillion proposals), is massive by world standards.

In evaluating the need for more stimulus, it is important to take into account the underlying strength of the economy:

  • Median U.S. household income has grown dramatically in recent years and was $68,703 at the end of 2019, right before the pandemic hit.

  • The unemployment rate, a very low 3.5% when the pandemic hit, has already dropped back down to 6.7% from a pandemic high of over 14%.

  • The federal debt held by the public, now $21.3 trillion, is a very high (and rapidly growing) 99.4% of GDP.

  • Only a relatively low 9.2% of U.S. citizens are without health insurance, the lowest number in many years.

The above overall data show the good shape of the American economy, as we are pulling out of the pandemic.  All of these factors indicate a need for restraint in providing additional fiscal stimulus.

Conclusion.  The combination of the underlying good health of the U.S. economy plus the building up of inflationary forces worldwide, suggest that any additional fiscal stimulus for the U.S. economy at the present time should be quite limited.

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The Return of Inflation

The main theme of this blog, It Does Not Add Up, is our country’s huge and out-of-control, national debt.  This rapidly growing debt will have very serious long-term consequences.

There is a simple connection between inflation and debt.  Higher inflation means higher interest rates because investors will insist on higher returns.  But higher interest rates mean higher interest payments on the debt.  In recent years, interest rates have been so low that our debt is virtually free money.  This has lulled national leaders into complacency.  As interest rates rise, interest payments on the accumulated debt will increase dramatically and, before long, will cause a new fiscal crisis.

The threat of inflation is rearing up, short-term and long-term.  Short-term because of the expected rapid recovery from the pandemic, see here and here, as vaccines become widely available.  This is not especially alarming in the short term.

It is the long-term, fundamental trend which should be of great concern.  This is well explained in a new book, “The Great Demographic Reversal: ageing societies, waning inequality and an inflation revival” by the economists Charles Goodhart and Manoj Pradhan.


  • Between 1990 and 2017, the working-age population of China increased by 240 million and in the USA and Europe by 60 million. The employment of women also greatly increased.  This meant a dramatic decrease world-wide of the dependency ratio, the ratio of workers relative to non-workers.
  • The effective labor supply for the world’s advanced economic trading system more than doubled over the 27 years from 1991 to 2018. The inevitable result is a weakening in the bargaining power of the labor force.
  • This produced a strong deflationary force which has been so aggressive that it has caused inflation to remain at or below 2% since 1990.
  • Over the next few decades, the steady decline in birth rates to below the rate at which the population is self-sustaining will bring about a sharp reduction in the growth of the labor force in many countries.
  • This means that the deflationary bias of the past 30 years will change to an inflationary bias. The sharp worsening of the dependency ratio around the world means that non-workers who consume but do not produce will outnumber the workers who do produce.
  • The bargaining power of the decreasing number of workers will increase and so real wages, and the relative income share of labor, will start rising again. This produces inflation.
  • It also means that inequality between lower-income and higher-income workers will begin to fall.

Conclusion.  As the demographic trend reverses, and the current world-wide surplus of workers over non-workers begins to make a fundamental shift in the other direction, workers will be able to demand higher wages.  This will have a large inflationary effect.  It will also lessen inequality.  In other words, our current climate of low-interest rates, low inflation, and higher inequality will reverse to high inflation, high-interest rates and less inequality.  This demographic reversal has many implications for public policy.  Stay tuned!

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Trump’s Political Future: Bleak; His Political Legacy: Huge

Donald Trump crossed a constitutional line on January 6 when he recklessly urged his followers to march on the U.S. Capitol.  This is an impeachable offense.  Here is how it is likely to play out:

  • The Democratic House of Representatives will impeach him.
  • Since the Republicans still control the Senate until January 20, when Joe Biden becomes president, there may not be a vote to convict, and if there is, it may fail to get the required 67 two-thirds majority.
  • It is unlikely that Mr. Trump will be the Republican presidential nominee again in 2024. He has now become too toxic for many traditional Republican voters, who were already starting to leave him in the 2020 election.

But consider his significant accomplishments as president:

  • First of all, the focus on populist and nationalist policies such as cracking down on China for unfair trade policies and securing our southern border to keep out illegal immigrants. Both of these policies are directly beneficial to his working-class base.
  • The tax reform and deregulation led to the low unemployment rate of 3.5% for several months before the pandemic hit. Such low unemployment means big wage gains for low-income and middle-income workers and increases their economic wellbeing.
  • Major reform in foreign policy: withdrawing troops from Afghanistan, Syria, and Iraq and switching focus from the Middle East to eastern Asia and especially China. China is rapidly becoming the biggest challenger to continued U.S. world primacy.
  • Aggressively and successfully appointing 200 conservative judges to the federal bench. This will have a long-lasting stabilizing effect on American society.

Conclusion.  Of course, some of these significant successes will be diminished by the incoming Biden administration.  But this will draw a sharp contrast between the Trump policies and the likely less successful Biden policies.  Trump’s free-market reforms will compare well with what is likely to come next.  Such political competition will define the national elections in 2022 and 2024.

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My World View at the Beginning of 2021

The beginning of a new year is a good time to assess one’s overall business strategy.  My “business” (as a retired math professor!) is discussing major policy issues facing the United States.  In my last post I discussed the U.S. economy which is on the verge of a rapid recovery as vaccines for Covid-19 become widely available in the next few months.

Today I summarize my overall world view:

  • U.S. standing in the world. The U.S. is by far the strongest country in the world, both economically and militarily.  This overwhelming strength has provided unipolar status to the U.S. in world affairs since the end of WWII.  It has been the main contributor to overall world peace and stability since 1945.
  • The Cold War ended in November 1989 with the falling of the Berlin Wall. The Soviet Union collapsed in 1991 because of the unworkability of its communist/socialist economy.  Free enterprise (capitalism) has reigned supreme in the world ever since.  The Russian economy, now ranked 11th in the world in GDP, is mired in corruption. Russia is now only a disrupter in world affairs.
  • The rise of China. China decided in the 1970s to combine capitalism with communist authoritarianism and now has the second-largest economy in the world.  It may soon surpass the U.S. in economic strength.  In other words, the world is rapidly becoming bipolar with China as the major challenger to U.S. dominance.  The west has many strengths in the competition of democracy vs totalitarianism, see here and here.

  • The outlook for U.S./Chinese trade relations. The two economies are heavily linked with hundreds of billions of dollars in annual trade.  Various trade issues, such as increasing U.S. access to Chinese markets and intellectual property theft by China, can be solved peaceably.
  • Will the U.S. defend Taiwan? China feels strongly that Taiwan, with 24 million people, should be returned to the mainland.  But Taiwan wants to remain free and independent.  It is a symbol that Chinese people desire personal and political freedom, even though the Chinese Communist Party dictatorship is now in control of the mainland.  The U.S. will lose much credibility if it fails to defend Taiwan’s independence.
  • Global warming is a serious problem worldwide. Much of the world, including the U.S. and Western Europe, is making progress in reducing carbon emissions.  But Chinese emissions are still rapidly increasing (see chart).  The world needs Chinese participation to mitigate global warming.  What if China offers to get serious about global warming if Taiwan is forced to unite with the mainland?  Will the U.S. go along with such a deal?

Conclusion.  The U.S. is still dominant because of its economic and military strength.  But the Chinese economy is growing fast and China has already become a major challenger.  The U.S. and its democratic allies have many advantages in the competition between two very different systems.  But continued support for Taiwan against Chinese encroachment is crucial.

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The U.S. at Year-End 2020: Mostly in Good Shape


As 2020 winds to a close and everyone hopes for a much better 2021, it is useful to look at where things stand in the U.S. right now.  Consider:

  • The pandemic. As the number of hotspots for new infections begins to wind down and vaccines become widely available, life should soon begin to return to normal.

  • The U.S. economy is poised for a rapid recovery in 2021 as more and more people become vaccinated against Covid-19.
  • U.S. adversaries around the world. China is a tough competitor but has many internal problems and should not be overrated.  Russia is in decline but is still capable of causing trouble, especially in terms of cyber disruption.
  • The strength of democracy. Besides our own economic and military strength, we can rely on the prevalence of democracy around the world. Other democratic countries are our natural friends and allies.

  • Minority progress. Despite a summer of racial protests after the death of George Floyd in late May, and a belief that black progress in America has stalled, blacks are making steady economic and educational progress in many ways.

  • The national debt, however, is a most serious problem, looming in the background. There are sensible ways of addressing it but is there the political will to do so?  Much more on this coming soon!

Conclusion.  The U.S. has responded to the hundred-year Covid-19 pandemic threat very successfully overall.  Next year should see a rapid economic rebound.  Our country is strong in many ways: democratically, economically, and militarily.  All of this bodes well for the future.  The rapidly growing national debt, however, will likely become a major problem quite soon.  How long will it take us to realize this and take it seriously?  I will be returning to this often, and in much more detail, in the coming days.

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Economic Opportunity in America


In my last post, I stated that blacks would be better off if they spent less time complaining about being victims of white supremacy and more time taking personal initiative to participate more fully in the upwardly mobile American economy.  Of course, this applies to all Americans who would like to better their station in life, not just minorities.

Today I would like to discuss some specific ways to accomplish this.  For example:

  • 30 million workers in the U.S. have abilities to earn 70% more than their current job pays. This applies especially to workers without a four-year college degree. It typically requires a combination of personal initiative, foundational skills and perhaps additional preparation such as an outside course or company sponsored training.

  • A revolution in how people – high school students, college-goers, midcareer adults, and others – are prepared for the labor market, has occurred in the last decade.  A variety of public and private organizations are providing the leadership in implementing this program.
  • Here is a list of 20 specific skills in great demand in today’s workforce.
  • Finally, here are some suggestions from Linda Chase, who created the company Able Hire to especially help people with disabilities build rewarding, successful careers.

How to Enter the Business World

If you’re entering the job market for the first time in years — or the first time ever — it can be difficult to know how to make your mark. Our guide offers advice on how to make the most of your job search and land a role that will bring you personal and professional fulfillment.

Getting A Degree

You always hear about those famous, influential business people who took the market by storm despite not having a degree. This can fool you into thinking that college isn’t necessary but remember: they’re famous because they’re rare. The vast majority of successful business people have gone to college and took it seriously.

College isn’t just a chance to learn (although it is that). It’s also a chance to build vital connections. Your network can make or break your ability to succeed, and college is most people’s first chance to start building up that network. Take advantage of professional groups and networking opportunities, and always go the extra mile to foster connections.

As far as what kind of degree you’re interested in, ultimately it comes down to what appeals to you and what you’re good at. It’s always wise to pick a degree that lends itself to both traditional employment and self-employment in order to keep your options wide. For example, studying IT gives you the technical skills companies look for, but also plenty of self-sufficiency. Accounting and technical writing offer similar career outlook flexibility, but these are far from the only options. Look through degree offerings and see what excites you.

Finding Internships

Most degrees will require an internship before you graduate, and for good reason. Simply put, your coursework is not enough to prove to companies that you know what you’re doing. After all, many people can pass a class without any of the skills you truly need to succeed in the business world.

However, landing a good internship takes a lot of the same work finding a paying job does, because you’ll likely be competing with other qualified candidates. Do plenty of practice interviews and learn how to sell your strengths — this will serve you well at the collegiate level because many of your peers will not know how to interview well.

The Job Hunt

Once you’ve earned your degree, it’s time to find your post-college job. This is where that network you built in college comes in. Hiring managers love meeting people that come highly recommended by someone they know within the company, so make sure people in your network know you’re searching, and don’t be afraid to ask for an opportunity directly. You’ll have a far easier time getting in the door with an ally at your side.

The business world may take some work to break into, but that doesn’t mean you can’t make your mark. Find your allies, keep focused on your goals, and don’t be afraid to speak up for yourself. The road might not be easy, but it will be worth it.


Conclusion.  There are a huge variety of opportunities for all Americans to move up the ladder of economic and social success.  Of course, a certain amount of hard work and perseverance will likely be needed.  But individual initiative is the primary ingredient for success.  Good luck in your endeavor!

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Why Has Black Progress Stalled in America?


The noted author, Robert Putnam, has recently addressed the topic of black economic and social progress in America.  He and his coauthor, Shaylyn Garrett, show that blacks had already made much progress before the civil rights era of the 1960s.  For example:

  • The life expectancy gap between black and white Americans narrowed most rapidly between 1905 and 1947 (see chart), after which gains were much more modest.

  • The black/white ratio of high school completion improved dramatically between the 1940s and early 1970s, after which it slowed (see chart).

  • Income by race converged at the greatest rate between 1940 and 1970, and has since stalled (see chart).

  • The South saw a dramatic increase in black voter registration between 1940 and 1970 which has since slowed down (see chart).

The authors attribute the lack of faster progress in the above measures since the civil rights era to:

  • white backlash and
  • a widespread change in American society from a sense of shared values to a more self-centered culture. The authors measure this trend with an inverted U-shaped I-We-I curve (see chart) which, they show, has fundamental social significance.

I do not doubt the value of the I-We-I interpretation of American history and society.  It will prove to be a useful explanatory tool in many contexts.  But it is not a major factor in understanding the stalled black progress of recent years.

As I have already discussed, too many blacks consider themselves victims of white supremacy and therefore unable to make it on their own.  The American way, the reason we are the most economically and socially advanced societiety on earth, is based on our belief that personal success depends on individual initiative.
Of course, some people have a head start in life.  But the answer to this reality is to strive to provide more opportunity for everyone, and especially better opportunities for the disadvantaged.   More on this coming soon!

Conclusion.  The inverted U-shaped I-We-I curve is an important sociological discovery with many ramifications.  But blacks will move up more rapidly in American society as they take more personal initiative for their own success and stop considering themselves as victims of white supremacy.

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Looking Forward to the Post-Pandemic World

Even though the U.S. infection rate is now over 200,000 per day, several effective vaccines are near approval by the FDA.  Distribution to both front-line healthcare workers and nursing home residents could begin in a few weeks.  In other words, we are likely over the hump and relief will arrive soon.

(On a personal note, I live in Omaha and, even though the Nebraska infection rate is relatively high at 69,000 per million residents, I feel very safe in Omaha with its mask mandate.  Many other Nebraska cities have mask mandates as well.  Furthermore, the Nebraska unemployment rate is now down to 3% (for October), the lowest in the nation.  In other words, Nebraska is handling the pandemic quite successfully.)

In my last post, I expressed great optimism for the future of the “American project.”  For sure, there are always ways to improve society.  But there are also several significant issues on the horizon whose sensible resolution will provide much more stability going forward:

  • The national debt is now growing rapidly (partly because of the pandemic) and is essentially out of control. There are many reasons (which I will be discussing in detail soon) why debt control is so urgent.  It is not yet clear whether the new Biden administration will take debt seriously as the economy recovers.
  • Populism and nationalism aren’t going away just because Trump was defeated for reelection.  Simply put, this means paying more attention to the problems of ordinary, working-class Americans and worrying less about the rest of the world.
  • Polarization in national politics. National officeholders reflect the views of the polarized constituents who support them.  Polarization should substantially decrease if the Republicans maintain control of the Senate after the Georgia runoff elections.  This will force President Biden to work closely with the Republican majority in the Senate.

Conclusion.  The political success of the supposedly unqualified Donald Trump means that populism and nationalism will continue to be addressed by political leaders.  Likewise, polarization will likely decrease if the voters continue to support divided government.  Debt is thus our biggest problem. Without requiring a balanced budget, as all the states do, national officeholders are always under political pressure to spend more rather than to spend less.

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America: the Land of the Free and the Hope for the Future

What a year 2020 has been!  A pandemic, a fractious presidential election, and race riots have all created unprecedented interest and public discussion about life in America.


  • The pandemic. Since early March we have experienced rolling waves of new infections of the coronavirus  The third and largest wave peak so far now appears to be subsiding (see chart).   Our national coping strategy is decentralized: governors are in charge of making mask mandate and lockdown decisions in their states.  The overall economy is recovering rapidly with the unemployment rate already down to 6.9% for September.  Vaccines will soon be available, letting us return to normal life.

  • The presidential election. President Trump narrowly lost his bid for a second term in an apparently scandal-free election with a huge turnout of 67% of all registered voters.  This is democracy in action!  At the same time, Republicans more than held their own in down-ballot races.  In other words, voters used discrimination in making their ballot choices.
  • Race riots. The death of George Floyd, while being arrested by the Minneapolis police, led to summer-long rioting in many cities across the country.  But is there really systemic racism in the U.S.?  Blacks lag behind in terms of economic advancement and other measures of social success, but a big problem is their mindset of victimization.  Still, the government might be able to help by focusing attention on the need for better educational outcomes.   
  • Foreign policy. We’re in good shape domestically (as described above) but how about relations with the rest of the world?   Our unipolar world status since the end of the cold war is now being challenged by China.  But China has much bigger problems than we do.  We should treat China as a strong competitor (economic and geopolitical) rather than as an existential threat to freedom and democracy (more later).
  • Political polarization is, of course, detrimental to our political discourse. But our elected representatives are reflecting the views of the polarized constituents who support them.  Here is a little bit of hope on this score.  The liberal NYT columnist, Maureen Dowd, lets her pro-Trump brother write her column every year on Thanksgiving weekend.  I give her much credit for doing this!

Conclusion.  I am upbeat about the future of the “American project.”  Prosperous democracies like the U.S. can always get better.  The biggest issue we’re facing right now (besides our debt problem, of course, more later!!!) is a fundamental shift, instigated by Donald Trump, towards populism and nationalism.  So far, we are making this needed shift in a relatively smooth manner, considering the magnitude of the issues involved.

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Is Donald Trump Subverting Democracy by Refusing to Concede the Election?

Joe Biden has clearly won the presidential election with 306 electoral votes to Donald Trump’s 232 electoral votes.  One of the closest votes was in Georgia which has now done a recount showing that Biden still won by a similar margin.

Consider the following:

  • The Trump campaign claims vote voter fraud was committed in the election process but has not been able to convince any court to intervene and time is running out.  It has also tried to persuade state legislators in Michigan to intervene in the vote certification and electoral-college vote assignment process which would surely be challenged in court if it happened.
  • The 2020 presidential election attracted an unusually high 67% of registered voters. Far more voters were voting against Trump than were voting for Biden.  In other words, Trump has dramatically increased political participation in the U.S.  This bodes well for the future of democracy.
  • Donald Trump will no longer be the U.S. President as of 12:00 noon on January 20, 2021. But his influence on American politics will continue.  At this point, he virtually owns the Republican Party whose candidates in the election did surprisingly well all over the country.  In other words, Trump has big coattails, even in defeat.
  • As for his political future, he will likely keep up his daily tweeting after he leaves the White House. Furthermore, he has the option of running again in 2024.  If he does, he will be the frontrunner in the Republican primaries.  His chances in the general 2024 election will depend on how the Democrats do in the meantime.

Conclusion.  Trump’s clumsy attempt to overthrow the election results may appear appalling and antidemocratic.  But this is the crude and politically incorrect style responsible for his enormous political success in the first place.  Overall, his participation in U.S. politics has been, and will continue to be, highly effective in maintaining public interest in the political process and therefore strengthening American democracy.

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