Racism and Black Progress

Posted on July 19, 2016 by jackheidel

At this time of heightened racial tensions in the U.S. it is worthwhile to step back and take a broader view of the economic and social status of blacks in America. The Washington Post’s Robert Samuelson has done just this in a recent column. As pointed out by Mr. Samuelson blacks have made much progress since the 1960s:

Poverty. Black poverty has dropped from 39.3% in 1967 to 26.2% in 2014, which was still double the white rate of 12.7%
Education. In 1950 only 13.7% of adult blacks had completed high school. By 2014 this had jumped to 86.7%. Over the same period the percentage of black adults with a four year college degree jumped from 2.2% to 22.8%. The corresponding percentage for whites in 2014 is 36%.
Upward Mobility. The black upper middle class (with incomes of $100,000 or more, inflation adjusted) has grown form 2.8% of households in 1967 to 13% in 2014. For the U.S. population as a whole it is now 31%.
Politics. In 1965, when the voting rights act was passed, there were five blacks in Congress, now there 46. Over the same time period, the number of black state legislators grew from 200 to 700.
Life Expectancy. The life expectancy gap between blacks and whites shrank from 8 years in 1970 to 5 years in 2010.

Conclusion. Most people understand that life for blacks in America is more difficult than it is for whites. On the whole American society is trying to help blacks lift themselves up to be able to enjoy a more prosperous and satisfying life. Much progress has been made in this respect in the last half-century but there is clearly still a long way to go in achieving full equality with white America. In my next post I will discuss one of the biggest barriers which remain in achieving equality between races.

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Why the U.S. Strategic Defense Initiative Is So Important

Posted on February 16, 2016 by jackheidel

North Korea recently launched another long-range rocket as reported by the New York Times, the Wall Street Journal, and the Washington Post The editorial boards of all three newspapers deplore this development but differ in suggesting how the U.S. should respond.

The NYT says that sanctions should be imposed to limit North Korea’s ability to finance warheads and missiles. Such sanctions would most acutely be felt by the Chinese companies doing business with North Korea.
The WP supports economic sanctions as well as deploying an advanced missile defense system in South Korea as quickly as possible.
The WSJ is concerned about the “rogue state” ICBM threat in general. North Korean missiles can now reach Los Angeles, Denver and Chicago. Iran recently conducted two ballistic missile launches in violation of the recent nuclear deal.

Ronald Reagan’s launch of the SDI in the 1980s helped win the cold war. The Bush Administration is responsible for the missile defenses which exist today, including long-range missile interceptors in Alaska and California and Aegis systems aboard Navy warships. The Obama Administration has cut its missile defense budget request from $9.8 billion in 2016 to $9.1 billion for 2017.
Admiral Bill Gortney, Commander of the North American Aerospace Defense Command, says that “We’re ready 24 hours a day if he’s (Kim Jong Un) dumb enough to throw something at us.” But any miss would be catastrophic and a 100% interception rate won’t happen without engineering advances and presidential leadership.
SDI should be a very high priority within the overall military budget. Our national security depends on it!

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The Six Issues That Could Cause a Government Shutdown

Posted on September 20, 2015 by jackheidel

It is now just ten days until the new government fiscal year begins on October 1 and Congress has not yet passed a budget for the new fiscal year. Although a temporary funding bill could be brought up and passed at any time, the Washington Post thinks that there are six big impediments to adopting a new budget.
They are:

Planned Parenthood. 31 House Republicans insist that they will support no spending bill which has funding for Planned Parenthood. Short term funding should not be in danger because the Democrats will step in if necessary to keep the government open.

The Sequester. This is a much tougher issue because the Democrats want to break the 10 year Sequester spending limits. It’s the Republicans strongest leverage and they should insist on dollar for dollar spending cuts elsewhere in order to relax the Sequester cuts.

A Challenge to Boehner. The anti-Planned Parenthood caucus is threatening to try to oust John Boehner as Speaker if they don’t get their way. Hopefully the Democrats would help to keep Boehner because any replacement would be more conservative and less accommodating to them. I personally think that John Boehner is a miracle worker given the hyper-partisanship in Washington at the present time.

The Iran Nuclear Deal. Republican desire to express opposition to the Nuclear Deal could surface as a bargaining chip in budget negotiations. As bad as the Nuclear Deal is, this is a bad budget strategy.

The Export-Import Bank. The Ex-Im Bank expired in June. Its supporters might try to refund it as part of a budget deal for next year. It should be allowed to die unless it undergoes reform to remove subsidies for big businesses such as Boeing and GE.

The Highway Trust Fund. The problem is that the 18 cent/gallon federal gasoline tax is insufficient to fund our infrastructure needs. The most sensible approach is to raise the gas tax by a few cents per gallon. Attempts to provide funding from other sources should be resisted.

Bottom Line: Republicans should be flexible except on overall spending limits. It is absolutely essential to the future wellbeing of our country to strongly focus on eliminating budget deficits.

Baltimore Is About Economics, Not Racism

Posted on May 5, 2015 by jackheidel

The death of another black man at the hands of the police, this time Freddie Gray of Baltimore, has again set off a national debate about poverty, inequality and racial injustice.
The Washington Post journalist Marc Thiessen wrote about this several days ago in, “The Baltimore Democrats Built,” saying that:

Although 63% of Baltimore residents are black, so are 40% of police officers.
City officials injected $130 million into the Sandtown-Winchester community (where the riots took place) in a failed effort to transform it.
The poverty rate in Baltimore is 24% compared with 14.5% nationally.
The unemployment rate for black men in Baltimore between the ages of 20 – 24 is 37%.
Among the nation’s 100 largest counties, the one where children face the worst odds of escaping poverty is the city of Baltimore.
In 2014, Baltimore public schools ranked third in the country in per-pupil spending, yet 55% of Baltimore fourth graders scored below basic in reading.
In the Sandtown-Winchester community, nearly half of all high school students missed at least 20 days of school in 2011.
This community’s murder rate is double the average for Baltimore, which in turn had the fifth highest murder rate last year among major U.S. cities.

In other words, Baltimore’s problems cannot be blamed on racial prejudice or on a lack of resources to combat poverty and low educational performance. Clearly needed are better schools and more employment opportunities. Better state and local leadership would help in this respect. But what is most needed is faster economic growth for the whole country. There are many things which could be done to accomplish this. It’s a shame that our current political system is too fractured to allow this to happen.

Status Quo on the Budget Is Not Good Enough

Posted on December 23, 2014 by jackheidel

I have now been writing this blog for just over two years. I usually write three posts per week and this one is #280. My top sources for background information are the New York Times and the Wall Street Journal. My own local newspaper, the Omaha World Herald, carries the Washington Post economics journalist, Robert Samuelson, whom I greatly respect.
A column of his discusses a recent report from the Senate Budget Committee prepared by its outgoing chair, Patty Murray (D-WA), entitled “The updated fiscal outlook and its implications for the budget debate next year.” To me this report clearly shows why there has been so little progress made in straightening out the budget over the past few years.
Here are some highlights of the report:

“Both our current fiscal situation and the outlook going forward have significantly improved, meaning we need a budget approach more focused on jobs and growth, not just on cuts.”
“Deficits have fallen dramatically over the last five years, and projected debt and deficits have also declined.”
“Revenue losses due to the recession and slow recovery were significant enough to counteract nearly half of the improvement in projected deficits, which highlights the need for new revenue from the wealthiest Americans and biggest corporations as part of any future deficit reduction effort.”
“It is clear that we need a federal budget approach more focused on jobs and growth, not on cuts for the sake of cutting. That leaves Republican leaders with a critical choice.”

In my opinion there are two basic problems with Senator Murray’s analysis:

Deficits have indeed fallen dramatically from their very high level in 2009, but not far enough! Deficits are projected to rise back to 3.9% in just ten years, as shown in the first chart. This means that debt will keep growing indefinitely, as shown in the second chart. This is unacceptable!
We do badly need to focus on jobs and growth but more deficit spending is not the way to do it. Although immigration reform and expanded trade would help, fundamental tax reform, individual and corporate, is what is really needed to grow the economy.

Hopefully a new Congress will be able to move in this direction next year!

What the EPA Is Doing about Climate Change

Posted on November 4, 2014 by jackheidel

My last post, “The Latest Scientific Report on Climate Change,” summarizes a new report from the Intergovernmental Panel on Climate Change. It makes a very strong case that global warming is real and that it will badly disrupt human civilization before the end of the twenty-first century if not substantially mitigated.
What are we doing about it? The Environmental Protection Agency reports on its many actions as follows: “What EPA is doing about Climate Change”

Inventorying of U.S. Greenhouse Gas Emissions and Sinks has been tracking all GHG emissions since 1990.

Developing “Common Sense” Regulatory Initiatives. For example, EPA’s vehicle greenhouse gas rules will eliminate 6 billion metric tons of GHG pollution by 2025. EPA is developing carbon pollution standards for the power sector which will cut carbon emissions 30% below 2005 levels.

Partnering with the Private Sector. EPAs partners reduced over 345 million metric tons of GHG in 2010 alone.

Advancing the Science. EPA works with the IPCC to understand the environmental and health impacts of climate change.

Here is how the Washington Post describes another EPA activity, the recently announced Clean Power Plan. “The rule provides every state with a target carbon-emissions intensity for its power plants, with preliminary standards kicking in by 2020 and full goals to be achieved by 2030. As the map (below) shows, the rule generally asks the least from the states with the worst carbon-intensity at present – those that are very dependent on coal generation, such as West Virginia, Kentucky and North Dakota. While cross-state variations in the intensity of pollution controls are a standard feature of regulation under the Clean Air Act, they usually have a compelling justification: the negative effects of emissions are local, and so areas suffering from pollution problems must be more stringent. But greenhouse gas concentrations are uniform globally, making it somewhat awkward to subject identical emitters to divergent standards simply because their home states’ power mix is more or less carbon-intensive.”
The purpose of this whole discussion is to illustrate how complicated it already is and will continue to be to achieve a significant reduction in GHG carbon emissions by regulation alone, even the relatively modest 30% reduction which the EPA is trying to accomplish.
Fortunately there is a better way of achieving an even bigger reduction in carbon emissions. Stay tuned for my next post!

Does Tax Reform Have a Future?

Posted on March 9, 2014 by jackheidel

My post on February 27, “A Breath of Fresh Air” praises the new tax reform proposal from the House Ways and Means Committee which both lowers and consolidates tax rates in a revenue neutral way as well as greatly simplifying the tax code. It would be a big step in the right direction. But the Washington Post’s Robert Samuelson makes a good case in ”Does Tax Reform Have a Future?” that the House bill does not go far enough.
Mr. Samuelson argues that if we’re going to eliminate tax deductions and loopholes, and thereby alienate lots of special interest groups, in order to get lower tax rates, then we should avoid half measures and eliminate virtually all deductions in order to get the lowest possible rates. In other words, eliminate the mortgage interest deduction rather than just limiting it, eliminate deductions for charitable contributions as well as deductions for state and local taxes. Eliminate the deduction for employer provided healthcare (which by itself would go a long way towards reforming healthcare.)
Mr. Samuelson would retain only the Earned Income Tax Credit (which encourages low-income people to work) and also the tax preference for contributions to retirement accounts (without which most Americans wouldn’t save for retirement.)
We badly need broad based tax reform to stimulate our economy. Douglas Holtz-Eakin, the former director of the Congressional Budget Office, has estimated “Reforming Taxes, Goosing the Economy”, that even the imperfect House tax reform proposal would raise GDP by .5% annually for 10 years and create 500,000 new jobs each year over this time period.
Full-fledged tax reform, a la Samuelson, would provide an even greater stimulus but let’s at least do something to put the millions of unemployed and underemployed people back to work and reduce our staggering budget deficits!

How Can We Boost Stagnant Wages?

Posted on August 26, 2013 by jackheidel

Today’s Wall Street Journal has a column by Neil Shah, “Stagnant Wages Crimping Economic Growth”, pointing out that the average hourly pay for non-supervisory workers, adjusted for inflation, has declined to $8.77 last month from $8.86 in June 2009, when the recession ended. It has also been reported recently, e.g. in the New York Times, that U.S. medium household income, now at $52,100, has not nearly recovered from its prerecession peak of $55,500 and is even below its $54,500 level in June 2009, at the end of the recession.
Lower income for workers and households mean lower consumer spending. This is a major reason for our economy’s low annual growth rate of only 2% of GDP since the end of the recession. Of course, the high unemployment rate, currently 7.4%, as well as increasing global competition, contribute to downward pressure on wages. But there is another factor, directly under government control, which is a major contributor to stagnant and declining wages.
Washington Post columnist, Robert Samuelson, in a recent column reprinted in the Omaha World Herald, reported that, from 1999 to 2013, wages and salaries rose 50% (adjusted for inflation) while health insurance premiums increased 182%.
Most health insurance is provided and largely paid for by employers and is therefore an indirect form of compensation. The huge disparity between wage gains and health insurance premium increases in recent years means that wages are being held back by the rapidly increasing cost of health care. The U.S. spends 18% of GDP on healthcare, twice as much as any other country and this is clearly out of line.
The best single thing we can do to slow down healthcare inflation is to remove the tax exemption for employer provided healthcare (and offset it with lower overall tax rates). Employees would then pay taxes on their health insurance benefits as part of their pay. This would have the beneficial effect of making consumers far more conscious of the true cost of healthcare and therefore consumers a strong incentive to hold down these costs.
It is up to Congress to change this provision of the tax code. Let’s insist that they get this done!

It Does Not Add Up

Jack Heidel's blog on fiscal responsibility

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