The Deniers

There are all kinds of facts: historical facts, judicial facts, scientific facts, among others. And now there are “alternative facts.” The difference is there are rules for determining historical, judicial, and scientific facts. The rules of evidence, for example, control what kinds of things a finder of fact (judge or jury) can hear or see in reaching a verdict (from the Latin roots for “truth” and “say”).

Gazing down at their hand-held devices, people implicitly accept the facts of the science that make them possible. The same is true of any technology: It’s applied science. Expecting it to work entails not only accepting the particular scientific facts and laws that make it work, but also the methods by which such facts and laws are generally determined.

Everybody expects technology to work. How can some of us selectively deny other scientific facts validated in the same way?

One of the reasons courses in the natural sciences are required even in high school (at least when I was in school – maybe still in public schools) is to teach scientific method and logic, that is, the experimental method and the inductive logic that drives it. Understanding what is true about science helps children become citizens who are less likely to be fooled by superstitions and charlatans.

Inductive logic is one of the foundations of science. It says that if a phenomenon is observed once, it may be unique. But if it is observed regularly, it becomes possible to explain the cause and result as a law of nature.

Consider my cat, Jenny Kaye. One of the games she likes to play is to push an object bit by bit to the edge of the table until it falls off. Maybe she just likes to see them fall. They always do. But maybe Miss Jenny Kaye Newton is testing the law of gravity. I can suppose it’s an experiment. Maybe one of these objects won’t fall. That would be even more fun.

Unlike Jenny Kaye, science has rules for deciding what a “regular” observation is: controlled conditions, calibrated instruments, etc. The number of observations is important too. That’s where statistics comes into play, just as it does in political polling, or when actuaries calculate the likelihood of morbidity. Pollsters may not always get it right, but actuaries make life insurers a lot of money by telling them how much to charge for bets on whether their customers will live.

Now consider the data points climate scientists gather in order to calculate global warming. Who knows how many they gather every day? They’re gathered over the whole of earth’s surface, land and sea, at regular intervals every day, and they have been for years and decades, in the United States since 1880. Is it more daily data points than Twitter has tweets (58 million) in a day? Or than YouTube has views (4 billion as of 2012) in a day? Maybe not, but it’s more than enough to be statistically significant.

It’s more than any one denier can gather by looking out into his back yard occasionally on an unseasonably cold day, thinking “the globe isn’t warming much around here today is it?” And feeling very clever about his insight. Maybe this denier should, like my cat, keep gathering data. Very few communities, if any, have not set a temperature record or records in the last ten years. So the denier might have to take a reading every day for ten years at the same time each day before he could be in a position to defend his denials rationally, and then only about the climate in his own community. So why do people who aren’t equipped to gather and analyze climate data nevertheless deny the results deduced by those who can?

To say nothing of what the physicists and chemists have shown about human causality, that is, the release of greenhouse gases as a regular practice for running human societies and economies. I won’t try to describe what they measured and explained. I probably wouldn’t get it quite right. I’ll just point out that I might with equal justification deny that there’s any causal connection between what I am typing on my keyboard and what appears on my computer screen.

People who think climate changes are not due to human activity (like Scott Pruitt, tabbed by Trump to head the Environmental Protection Agency), or that an ingredient in vaccines causes autism (like Robert F. Kennedy Jr., who might like to lead an investigation of the ingredient at public expense), I’m sorry to say, are no smarter than my cat. At any rate they apply inductive logic no better than she. Or other systems of belief are interfering with their implicit belief in the everyday truths of science and technology.

It’s easy to see which belief systems are influencing highly-placed climate change deniers: large accumulations of capital are threatened by policies designed to limit the release of greenhouse gases. Whether and to what extent the opposed policies might have a rational basis other than in the denial of scientific facts, has to be the topic for another post.

Forgotten Again

How quickly they forget!

In its first executive action last Friday, within the hour after Trump took the oath of office, his administration suspended the implementation of a rule that would have reduced the cost of mortgage insurance for FHA-backed loans. The backing helps first-time buyers, people with poor credit, and those who lack funds for a 20% down payment obtain private loans.

About 16% of new mortgages are FHA insured. The premium rate would have been reduced from 0.85% to 0.60%, saving borrowers about $29 monthly on a $200,000 mortgage.

The program, on the one hand, protects the lenders on riskier loans, and, on the other, makes homeowners out of people who wouldn’t be if they had to rely on the lenders alone. It thus strikes a balance between the interests of the capital markets and those of working-class borrowers. It’s a good use of public monies. I assume without knowing it used to have bipartisan support.

Who are these borrowers? I’ll make an educated guess. Millennials too burdened with student debt to save much for a down payment? People of color, just recently working poor, with better jobs but little savings?

How about white rural workers with little education who voted for Trump because they’re wondering where their next decently paid job will come from, or how long the job they’ve got will last? Maybe they had a gap in employment and don’t have much saved either.

In other words, Trump’s “forgotten man,” in the words of his inaugural address. Forgotten again. Almost immediately.

How did this come to pass? It’s an instance of the new contradictions within the Republican party.

Senator Pat Toomey of Pennsylvania, a fiscal conservative but no friend of Trump’s during the fall campaign, questioned Ben Carson at the latter’s confirmation hearing for the post of Secretary of Housing and Urban Development about the FHA’s premium rate reduction. Not surprisingly, Carson was unaware of the change. He told Toomey he wanted “to really examine that policy,” and the suspension was the result.

Fiscal conservatives tend to think that if it’s possible for the markets to do a thing, the federal government shouldn’t be doing it. Liberals look at what private capital is actually doing, and ask whether government can serve a legitimate public need that markets do not. So Senator Toomey would like to turn over the market for substandard mortgage loans to private lenders. But there are Trump voters, working men and women, who may still need the government’s backing to get an affordable loan.

The class contradiction is pretty stark. Except now there are Republicans on both sides of it. The fiscal conservatives won this round. Trump will have to take them on if his forgotten man is to win the next one.

The World is Nuanced

History is nuanced. The connections between what happened historically and the way things are now, are nuanced. Will anyone claim that President-Elect Trump has a nuanced understanding of the ways things are and the history of how they came to be that way?

Tweets are not nuanced. You can express a provocation in 140 characters or fewer, but you can’t express a concept, much less a nuanced concept. That’s why some people are tweeting in chains. But that too is a poor substitute for rational discourse.

Consider all the delicate arrangements Mr. Trump has suggested, not to say threatened, he would like to blow up. Consider what it might mean to blow them up without understanding them first.

I’ll just list some of them and try to indicate, without explaining, the nuances. I certainly make no claim that I could explain them if I tried.

One China: a solution put into place nearly 40 years ago after Nixon’s opening to China. Just one question: Does anybody think Mr. Trump’s understanding of the China relationship and the One China solution is more nuanced than Henry Kissinger’s?

Two States in Palestine: This solution has proven less stable than the One China solution, but you’d have to understand why before you decided to try a different solution, particularly a solution that only one of the affected parties advocates.

Sanctions against Russia: It’s a mistake to let friendship get in the way of a balanced understanding. But in this case all the nuances, or better deviousness, lies with the people who would like to justify Putin’s annexation of the Crimea. The second clause of August, 1941, Atlantic Charter rules out "territorial changes that do not accord with the freely expressed wishes of the peoples concerned." The charter was adopted by the United Nations then opposing the Axis powers, and form the basis for the powers the present United Nations granted to the Security Council after the war. This account may already be too long, but I give it to show that Roosevelt and Churchill and those who inherited the victory over aggression in World War II would have no difficulty understanding what is wrong with Putin dismembering the Ukraine. 

Sanctions against Iran: The burdens of a year’s economic sanctions are possible for a nation to bear, but after thirty-plus years they begin to add up. At the same time, a quantity of fissionable uranium, and the capacity to make more, are bargaining chips of the first order. Naturally any accommodation between the interests represented by these facts is going to be complicated, and people are going to have trouble understanding the nuanced reasons for the result. It’s one thing for congressmen to be simple-minded about them, but a president’s responsibilities are graver. Fortunately Trump will no doubt get an earful from the CEO of Boeing before he can upset this applecart.

Nuclear disarmament: a policy first realized by the noted pacifist (and "loser"?) Ronald Reagan some thirty years ago and followed by every administration since. Maybe Mr. Trump didn’t mean to say “more” nuclear weapons, but rather only “more modern” nuclear weapons, a policy Mr. Obama has been pursuing. But the difference here is not a mere nuance. Not seeing it is worrisome. And why say a second-rate power like Russia should have “more” as well? Who has Mr. Trump been listening too? And what is he hearing?

More could be said on all of these points. But for the present….

What is the opposite of “nuanced”? Shallow? uncritical? naïve? I suppose a person of great understanding can see though all the nuances to the essential point, which then seems simple. But you have to see the nuances first, don’t you? Otherwise you may reach the essential point, but only by good luck, not by good understanding. Or if you happen to be wrong, it’s a case of not knowing that you don’t know: the worst sort of ignorance. It’s much better in such a case, like Socrates, to know that you don’t know.

Trumpen Proletarians Unite!

You have something to lose: your overtime!

Forgetful of the support of working class voters in the election, Mr. Trump will nominate an opponent of the Obama Administration’s new overtime rule, Mr. Andy Pudzer, for Secretary of Labor. The rule more than doubles, to $47,000, the salary threshold at which a worker can be considered overtime exempt based on job duties. It was set to go into effect later this year, subject to a challenge in the federal courts.

In holding this view, Mr. Pudzer does not represent the people with office but not professional skills who manage shifts and departments in fast food restaurants, convenience stores, and retail outlets. Rather he represents the stockholders and franchisees of entitles like CKE Restaurants, which will be looking for a new CEO when Pudzer becomes Secretary.

The interests of these two classes of people are dialectically opposed. Hardee’s franchisees (under CKE’s corporate umbrella) face two near-term risks that would limit their ability to accumulate capital at the rate they presently do: paying shift managers more overtime and paying worker bees a living minimum wage. The franchisee keeps the difference between the amount of money these so-called managers and the working poor are willing to accept under current market conditions, and the net cash flow their work generates. Anything the franchisee has to pay the managers and workers reduces this accumulation. But without the workers: no accumulation at all.

Thus class contradiction. It seems the economic and moral claims of these workers impinge on the transaction, whatever the excuses of the bourgeosie.

The trouble for Mr. Trump is that some of the affected shift managers are white and rural, and may also be uneducated. That is, they are the kind of voters who put him in office. They may not care about the minimum wage. Having to work for minimum wage is what they fear; increasing it is not what is in their immediate interest. But they may well care about being paid overtime when they are asked to work 60-hour weeks for maybe $35,000 a year.

If Mr. Pudzer aligns his policies with his opinions, he will be serving the class that includes franchisees of Hardees, among others, not the class that includes pseudo-managerial workers. And Mr. Trump will have betrayed his voters who belong to that class.

PIMCO Metaphors

Reuters published an item on a PIMCO report predicting a 2 - 2.5% increase in gross domestic product during 2017. I didn’t read the report (the item doesn’t have a link), as I was put off by the following excerpt:

Pimco, a unit of Allianz SE (ALVG.DE), characterized the world as "stable but not secure."

"The only certainty in our view is that the tails of the distribution of potential macro outcomes have become fatter. Left-tail risks are defined by rising debt, monetary policy exhaustion and the populism-powered transition from globalization to de-globalization," Balls and Fels wrote.

"By contrast, right-tail opportunities may emerge from potential deregulation, awakening animal spirits and the accelerating transition from exhausted monetary to growth-supportive fiscal policies."

How can one be certain about something one can only express in metaphors?

Balls and Fels, PIMCO investment officials, are “certain” about the tails. Well, if “tails” is not a metaphor, “fatter tails” surely is. My cat has a tail. “The distribution of potential macro outcomes” has one only metaphorically. And how would the tail of “potential macro outcomes” ever become fatter? To answer that, you’d have to know what a “distribution of potential macro outcomes” is. It’s a very impressive phrase. Perhaps that is what is intended, as it conveys very little unambiguous meaning – at least to someone like me, who can only suspect what it is supposed to mean.

It just gets worse. A fatter “left-tail risk” is something my cat, having only one tail, will never have to worry about. “Monetary policy exhaustion” might be worrisome; maybe they mean the policy will cease to be effective. But policies don’t get tired, people do, and the members of the Federal Reserve Board seem very vigorous to me. 

At least we know for sure who makes monetary policy. Who is behind the “populism-powered transition from globalization to de-globalization”? Why is that a left-tail risk?

It gets a little less vague when you find out what the “right-tail opportunities” are. They “emerge from potential deregulation” (and now we begin to suspect they are talking about the policies of President-Elect Trump) “and the accelerating transition … to growth-supportive fiscal policies” (and now we are pretty sure, as they are talking about infrastructure spending without saying so). Why don’t they just say the growth of GDP depends on whether the contradictory left and right policies Mr. Trump has announced work themselves out?

Not to mention the “animal spirits” these contradictions may arouse. This is not a very flattering metaphor to use of the boards of directors who are supposed to be allocating the capital of their shareholders rationally. But maybe it’s apt for the personalities of billionaires who have their own money to spend.

I guess it’s okay to be vague if you’re trying to make a statement about the economy without mentioning politics. But really, there’s a place for metaphor – in poetry and propaganda, at any rate.

Speaking of propaganda, why are there “risks” only on the left tail and “opportunities” on the right? Plainly the metaphor has a subtext. The populists may turn out to be socialists; maybe the Fed already are; and we all know debt spending is a cornerstone of left-economic policy.

Mr. Balls and Mr. Fels ought to figure out a better way to serve PIMCO’s fund holders (which don’t include me and my family). Clear and direct language in their reports on the economy would be a start.

Originally posted in Economic Populist, A Community Site for Economics Freaks and Geeks, on December 17, 2016.

Patched Up? Or Patched Over?

What Speaker Ryan said on 60 Minutes last weekend about letting “bygones be bygones” with President-Elect Trump may only be partly true. There are certainly contradictions within the Republican party as a whole. But as between these two individuals, both ready to wield powers granted by the Constitution, the proper word would be “confrontation,” not dialectical “contradiction.”

How so? It has to do with their alignments to differing factions in the party. Speaker Ryan is a fiscal conservative. For example, he is planning to reduce the government’s share of the cost of Medicare. Democrats say he wants to “privatize” it, making it a system of health care premium supports or vouchers, rather than an entitlement to government funding. In this equation, the amount the government would save is about exactly equal to the extra amount seniors would have to cover out of their own pockets. But maybe that can be considered “responsible.”

The one thing fiscal conservatives hate worse than entitlements they can’t get rid of is government debt they can’t get rid of. That is, they hate “borrow and spend” and didn’t care for it much even when all the governments of the Western economies were doing it in order to get out of the Great Recession.

Well, on second thought, there’s one thing they hate worse still: “tax and spend.” But Trump isn’t going to do that. He’s going to reduce taxes.

And build infrastructure. And make the military “great” again. But how’s he going to pay for it? If not tax and spend….

He has to borrow and spend, doesn’t he? What fiscal conservatives hate but blue collar workers might love. Trump’s no social conservative, but enough social conservatives sucked it up, voted for him, and got him elected anyway – with the help of Trump’s new, blue collar Republicans.

But is he a fiscal conservative? That’s in doubt, because if Trump wants to spend but not tax, he’ll have to borrow. Moreover, he promised on the campaign trail that he would not “touch” entitlements. Today, with the party ready to take firm control, it may look to some like everything can be smoothed over and worked out. But when push comes to shove (and I say this as a judgment of personalities not as a conclusion of dialectical logic), there will be some pushing and shoving. And the Democrats won’t just be standing around watching.

Originally posted in Economic Populist, A Community Site for Economics Freaks and Geeks, on December 7, 2016.

Another Fine Mess

The Texas judge who threw out the Obama administration’s rule on overtime exempt status needn’t have bothered, had he? The Trump administration wasn’t going to let it stand anyway, right? Not with the Republican Congress on his side!

The legal basis for throwing the rule out doesn’t concern me here. My question-is, who are the losers and who the gainers by the new rule, which was supposed to have gone into effect next year? Specifically, aren’t some of the losers Trump proletarians, working class, uneducated, white voters, many from rural counties? But if the gainers are Establishment Republicans, here lies a contradiction.

The rule would raise the annual earnings floor for overtime exempt status from about $23,000 to about $47,000. Who would be affected? Under current law, for example, the owner of a gas station or convenience store can make somebody a manager, that is, exempt by definition of their job duties, and as long as he or she makes at least $23,000 annually, the owner doesn’t have to pay them overtime. They do have to be replaced if they get tired of the extra hours. But they’re not irreplaceable.

One way to think about this is that, under the new rule, not just the working poor, but the whole of the lower two quintiles of earners would have to be paid overtime under federal law when they work more than 40 hours a week, regardless of their job responsibilities. The middle quintile begins with earners making $41,187 annually; the mean earnings in the second lowest quintile is $31,087 (2014 data).

Another way is to think again about convenience store clerks. Every town in the little red counties Trump carried all across the country – over 2,000 of them – has a gas station or convenience store even if it has nothing else. The managers and assistant managers of those stores might make enough to be overtime exempt under the old rule, which dates to 2002. But maybe not under the Obama rule. Presumably some of them are among the new Republican voters Trump brought into the party. Whether being working class makes the service industry proletarian may be debated. They work for an hourly wage like proletarians, but it is a little harder to see how their services generate surplus value for accumulation to capital the way labor does in manufacturing.

But that’s not essential to the argument that there’s a contradiction either. What’s the worst fear of an hourly worker in the second quintile? Joining the working poor in the lowest quintile. Rejecting the Obama rule does nothing to remove that working class fear.

But it does permit the owner of the enterprise to put what he might have paid in overtime back towards the accumulation of capital. That is, the owner’s bourgeois class interests are in contradiction with those of the worker – the so-called manager.

The more gas stations and convenience stores owned, the bigger the bourgeois, and the bigger the class interest. Until you find yourself in the McDonald’s Corporation boardroom with the Establishment Republican elite, or some other place where the contradiction between working class fears and the interests of the shareholders looms large.

Here’s another fine mess Trump has got his party into!

Originally posted in Economic Populist, A Community Site for Economics Freaks and Geeks, on November 30, 2016.