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Im-Politic: Some Good News on the U.S. Race Relations Front

13 Monday Sep 2021

Posted by Alan Tonelson in Im-Politic

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African Americans, critical race theory, families, Im-Politic, interracial marriage, marriage, race relations, racism, seniors, society, South

With all the media commentary lately about how the United States has gone to pot (no, not literally) since the unity displayed right after the September 11 terrorist attacks (see, e.g., here), I couldn’t help but be struck by some undeniably great news reported recently by Gallup. According to this big polling company, nearly all Americans now are just fine with interracial marriage – and specifically those unions involving whites and African Americans.

Even better – the polarization along any number of lines revealed on so many issues by so many recent polls has all but vanished when it comes to interracial marriage.

Gallup’s new findings show that fully 94 percent of all Americans now approve of interracial marriages – up from four percent in 1958, when it first posed the question. Moreover, the trend line looks nearly as strong during this period as that for the Dow Jones Industrial Average.

 

 

Don’t look for an interracial gap in attitudes on interracial marriages, either. Back in 1968, it was 56 percent of non-whites approving, and only 17 percent of whites. Today it’s just 96 percent for the former and 93 percent for the latter.But maybe a generation gap persists? Nope, that’s basically gone, too. Gallup reports that in 1991, interracial marriage was approved by 64 percent of Americans aged 18-29, but only 27 percent of the over-fifties. The latest numbers? 98 percent and 91 percent, respectively.

Surely, though, the Old South, former home of Confederacy and Jim Crow laws and often violent resistance to the Civil Rights movement remains at least relatively unenthusiastic? (And yes, the North saw some violent resistance to integration, too. See, e.g., here and here.) Sorry – there’s no regional gap, either.

In 1991, only a third of southerners approved of such marriages, compared with 54 percent of easterners, half of midwesterners, and sixty percent of westerners. In 2021, southern approval was up to 93 percent – the same as the share of midwesterners, just a percentage point lower than northerners’, and a mere four percentage points lower than that for westerners.

Even though race relations in America seem to have gotten pretty rocky lately (or maybe race mongers are just receiving more attention?), these results are unmistakably good news – and especially because the trends are so strong and the majorities so overwhelming. After all, what could matter more to a genuine racist than the prospect of racial divisions fading away? For the same reason, they’re awfully hard to square with the claims of Critical Race Theory supporters – that long after the end even of legal segregation, white America is pervaded with all manner of informal racist practices and especially attitudes that continue holding African Americans back.

Many years ago, I traveled to Morocco (my first trip to the developing world, or the Arab world, or the Muslim world) and was astonished to find the spectrum of faces I saw on my way from Casablanca airport. The standard racial categories seemed like a sadly dated joke given the kaleidoscope of skin tones and physical features and combinations thereof I saw as I rode by.  It made me wonder whether the whole racial discrimination thing across the whole planet would eventually be brought to an end “in bed.” This Gallup survey is one sign indicating thats this outcome may come a good deal sooner than I expected.         

 

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(What’s Left of) Our Economy: Can the U.S. Really Eliminate All Its Lousy Jobs?

25 Friday Jun 2021

Posted by Alan Tonelson in (What's Left of) Our Economy

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automation, CCP Virus, coronavirus, COVID 19, Daniel Alpert, elder care, Ezra Klein, hospitality, hotels, Jobs, low-wage jobs, productivity, restaurants, seniors, technology, The New York Times, wages, workers, Wuhan virus, {What's Left of) Our Economy

Over the last month, two noted and anything-but-radical economics commentators have voiced an idea that’s really radical. How radical? It could produce much more fundamental change in the U.S. economy than any actual or even potential effects of the CCP Virus if its policy implications (which they may not be fully aware of) are acted on.

The idea is that the pre-virus economy (they didn’t specify for how long, but there’s no reason to believe the development began recently) was highly dependent on creating huge numbers of crappy, dead end, low-wage jobs, and that a combination of labor cost-boosting factors – like worker shortages created largely by sudden economic reopening, higher minimum wage requirements, and mandates for businesses to adopt more family-friendly practices – is bringing that era to an end.

The implications: Enormous numbers of the companies and even critical masses of entire industries relying on such jobs may go under, and that nothing should be done to restore the previous status quo because in economic terms (which are also reflecting the public’s non-economic preferences) those exploitative business models are simply becoming thoroughly uncompetitive.

In other words, especially in sectors like restaurants, retail, hospitality, and elder care, where the quality of personal service is valued by customers (not that they always get the quality they want), many and even most employers simply may find significantly higher labor costs unaffordable. And many may not be able to persuade enough customers to pay the higher prices they’d need to charge to stay afloat. So they wouldn’t – and good riddance.

The analyst who first led me to these thoughts was Daniel Alpert, a Cornell University Law School fellow, economist, and Wall Street investor. In a June 1 New York Times op-ed article, he argued that:

“The chronic problem we face as we put Covid-19 in the rearview mirror is that the U.S. economy before the pandemic was incredibly dependent on an abundance of low-wage, low-hours jobs. It was a combo that yielded low prices for comfortably middle-class and wealthier customers and low labor costs for bosses, but spectacularly low incomes for tens of millions of others.”

Less than two weeks later, The Times published another article, by columnist Ezra Klein, that similarly contended:

“The American economy runs on poverty, or at least the constant threat of it. Americans like their goods cheap and their services plentiful and the two of them, together, require a sprawling labor force willing to work tough jobs at crummy wages….We discuss the poor as a pity or a blight, but we rarely admit that America’s high rate of poverty is a policy choice, and there are reasons we choose it over and over again.”

Klein also wrote about some of the likely tradeoffs of mandates that created higher labor costs: “[S]ome small businesses would shutter if they had to pay their workers more. There are services many of us enjoy now that would become rarer or costlier if workers had more bargaining power.” But this prediction seems greatly to low ball the downsides and the collateral damage.

For example, according to this normally reliable source, the number of restaurants in the United States numbered about 660,000 in 2018. That’s more than 18 percent of all the 3,618,550 businesses with more than five employees that the Census Bureau says existed in the United States as of 2019 (the last pre-pandemic year). Since some dining establishments are very small and employ between one and five staff, the percentage of all U.S. businesses that are restaurants is probably somewhat lower. And surely not all of these would close their doors if labor costs rose meaningfully. But it should be obvious that lots of nationwide economic disruption would surely result.

As I’ve repeatedly written, (e.g., here) there’s an alternative to employers offsetting these higher labor costs. Rather than raise their prices significantly (a tactic that may not accomplish all or most of is goal), they could increase productivity. After all, many of these labor-intensive industries are labor-intensive because they’ve been such laggards on the productivity front. For example, between 1987 (the first year such data are available) and 2019 (the last pre-pandemic year), overall labor productivity in U.S. businesses outside the financial sector grew by 71.74 percent, in non-casino hotels and motels by just 51.33 percent, and in restaurants and other eating places, a mere 18.34 percent. And as known by RealityChek regulars, this period hasn’t exactly been a bang-up time for U.S. productivity growth.

There’s no doubt that more automation in particular would wind up displacing jobs – which certainly wouldn’t leave many workers better off on net. It’s entirely possible, though, that even greater net national employment opportunities could be created by these more efficient companies’ greater ability to service more customers affordably, thereby spurring the need to hire to staff expanded operations in other capacities. And in theory, anyway, more automation and use of new technologies could create entire new industries – and impressive employment opportunities. That’s certainly been the case with the internet. But there’s a big rub: Not all the displaced workers might possess the skills or other qualifications to handle any of these new positions.

Moreover, as suggested by my reference to the quality of service, for non-economic reasons, boosting productivity may not be enough to save many of these businesses. For many customers might be turned off by the prospect of dealing with machines rather than courteous and personable human beings, and decide not to patronize these businesses even if automation etc restored affordability.

And in fields such a elder care, it’s doubtful that machines could safely replace humans in quality terms for many years – and that seniors and their family members would find them acceptable on any grounds for many more years. Given America’s aging population, that of course portends a problem transcending economics. One way out: Much greater government subsidies for elder care businesses, or even outright nationalization of this sector. But don’t expect such proposals to uncontroversial.

Another possible way out of this dilemma for business owners generally in low-pay sectors where wages are surging is to accept much lower profits. But any industries that experience such a shift seem doomed to stagnation and even gradual extinction. For how many would want to invest their capital and effort in sectors where the best or even likeliest possible return is scraping by?

The cumulative effect of all these developments on society, as opposed to the economy, wouldn’t be trivial, either. For example, before the CCP Virus’ arrival, dining out and taking out in particular had surged in popularity in the United States for decades. One indication: “In 1955, 25 cents of every $1 spent on food went to restaurants. Today, it’s more than half.” One reason of course is the rise of the two-income household, and the resulting decrease in hours available for food preparation.

In addition, though, as more Americans patronized dine-in restaurants in particular, more surely came to value their particular pleasures. Could they find an adequate substitute if they needed to? And how would such a shift change the rest of their home and work lives? As for society itself, what would the impact be of the disappearance or great scaling back of one major form of communal activity?

The situation is potentially even more dire for the nation’s bars. Between 1987 and 2019, their labor productivity actually plunged by 14.50 percent. Will elevated labor costs spell the end, at least in America, of an institution that’s been around and central to human life for…how many centuries? Millennia? Or will customers get used to robot bar-tenders?

The answers to all the questions posed here are definitely above my pay grade. But something I do know: Despite the pressing need to improve the earnings and lives of low-wage workers, some significant and possibly unprecedented tradeoffs will emerge. And it will be far from easy to make sure that a genuinely New Normal is better on net for these workers and the country at large than the Old.

Im-Politic: The CCP Virus Crisis Has Become Even More of a Nursing Home Crisis

19 Tuesday May 2020

Posted by Alan Tonelson in Following Up

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Canada, CCP Virus, coronavirus, COVID 19, Europe, Following Up, lockdown, nursing homes, reopening, seniors, shutdown, Sweden, The New York Times, United Kingdom, Wuhan virus

About three weeks ago, I posted about the degree to which total U.S. CCP Virus-related deaths were occurring in nursing homes and other special facilities for seniors. And I noted that the answer – “really big” – provided significant evidence for the idea that substantial reopenings of the U.S. economy were much more feasible than widely believed.

The reason: If the virus’ main dangers were so highly concentrated in a single, highly vulnerable, and already confined population, then by definition, such dangers to the rest of the public were considerably less serious than widely believed. Therefore, relatively low-risk populations could be permitted to reengage in normal economic activity sooner rather than later.

Three weeks later, the case for faster, wider reopenings is even stronger – along with the arguments for focusing virus containment measures on seniors, and especially those inside or outside such facilities.

For example, that previous post cited data indicating that about twenty percent of all U.S. virus deaths were taking place in elder care facilities. More recently, a comprehensive New York Times survey pegged the share at 35 percent.

Moreover, data are coming in making clear that this pattern is hardly confined to the United States. In Canada, the share has been reported at 81 percent. Across Europe, national shares are thought to be between 42 percent and 57 percent. In the United Kingdom, it’s estimated at 25 percent.

Possibly the most intriguing findings concern Sweden. That’s because its lockdown was the lightest imposed among the wealthier national economies. The overall Swedish virus death rates, however, have been right in the middle of the pack for Europe.  (See here for the latest numbers.) Yet the Swedish government has also reported that nearly half those deaths have taken place in elder care facilities.

In other words, if Sweden had its nursing home act together, its virus fatalities would have been about 185 per million people – which would have put it well behind the United States, Spain, the United Kingdom, Italy, France, Belgium, the Netherlands, and Switzerland. Sweden’s economy, unfortunately, seems unlikely to escape taking a major virus-related economic hit anyway. But the toll seems largely due to its relatively small size and as a result its relatively heavy reliance on foreign trade – not to its failure to shut down more broadly.

The United States, of course, is much less reliant on foreign trade. In theory, then, if its nursing and similar facilities get the aid they need, America’s economy can continue reopening – and even faster than at present – without running major further health risks. Indeed, as I’ve also noted previously, such reopening per se could well curb other emerging public health dangers. Moreover, as observed by the Washington Post editorial board, moving toward the Swedish model might speed up progress toward creating herd immunity in the United States. This status would mean considerable protection against the second virus wave that might arrive along with cooler weather this fall.

As always, “reopening” doesn’t mean an immediate, complete return to the pre-virus normal. And serious uncertainties continue surrounding the nursing homes data, and indeed all virus-related data. But a pattern visible in so many high income countries can’t be dismissed, either, and it should put ever more pressure on backers of slower reopenings to justify their positions.

Im-Politic: The Cost of a Governor’s CCP Virus Grandstanding

30 Thursday Apr 2020

Posted by Alan Tonelson in Im-Politic

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Andrew Cuomo, CCP Virus, conservatives, coronavirus, COVID 19, Im-Politic, Larry Hogan, Maryland, New York State, nursing homes, Republicans, seniors, test kits, testing, The Washington Post, Trump, Wuhan virus

First, full disclosures: I’ve been a Maryland resident for more than 15 years now (though still a New Yorker at heart). I’ve voted for Larry Hogan for governor twice (different elections!) and think he’s done as good a job in Annapolis as could any Republican in a state that’s heavily Democratic (albeit one with a long tradition of choosing moderate Republicans as governor).

But I’ve always thought that he’s spent a little too much time and energy sniping at President Trump and fostering an image as a moderate, unifying, possible GOP and conservative alternative to Mr. Trump’s needlessly polarizing brands of politics and policy.

And my irritation at Hogan just ticked up a notch upon reading this Washington Post piece reporting his decision yesterday to test all nursing home residents and staff for the CCP Virus.

Yes, you read that right: “Yesterday.” Even though the unmistakable and tragic nationwide concentration of virus deaths and infections in such facilities has been clear for months now – in part because of their elderly populations and in part because of their confined quarters. Even though the state’s own new data show that “half of Maryland’s confirmed covid-19-related deaths and more than a fifth of its cases were linked to skilled-nursing facilities.” That’s a higher nursing home death rate even than in New York State, whose Governor Andrew Cuomo is catching flak for his own costly decisions in this regard.

Where’s Hogan been? In part, keeping busy by missing few opportunities to show up the President, and winning praise even from Democrats – most recently by crowing about his Korean-American wife’s success at procuring half a million test kits from South Korea — and conspicuously dissing the President in the process. Interestingly, though, it now turns out that the governor is discovering that turning this showy purchase – which may have been wholly unnecessary – into an effective testing program even in his smallish state isn’t as easy he and other Trump critics have implied. (See here for details.)

If Hogan runs for reelection, I’ll almost surely vote for him again – assuming that Maryland Democrats keep nominating tax-and-spending-happy, Sanctuary State- and city-backing, identity politics-obsessed rivals. But I’ll certainly be hoping that Hogan starts remembering those adages about people living in glass houses and tending to their own gardens.

Im-Politic: A (Huge) Nursing Home Factor in U.S. Virus Deaths

25 Saturday Apr 2020

Posted by Alan Tonelson in Im-Politic

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ABC News, CCP Virus, coronavirus, COVID 19, demographics, Europe, Im-Politic, lockdown, long-term care facilities, nursing homes, reopening, restart, seniors, shutdown, WHO, World Health Organization, Wuhan virus

Whenever I hear about a CCP Virus outbreak at a nursing home or similar seniors facility, I wonder how these especially tragic episodes have been influencing the national data. The issue matters greatly, because the numbers could reveal much about the virus’ spread and virulence among Americans not so aged and confined – i.e., the vast majority of the population.

Of course, avoidable and unavoidable testing shortcomings are making all the statistics dodgy.  And state and local authorities’ standards for identifying and reporting CCP Virus cases – and therefore deaths – are both highly diverse and constantly changing.  What’s emerged so far, though, shows that nursing homes and the like are indeed where the disease’s worst effects are appearing, and by wide margins. As a result, however, these statistics also strongly indicate that the virus is much less dangerous for other Americans than originally thought.

The most comprehensive picture we have of nursing homes’ role has come from ABC News. Its examination of state-level numbers concluded that, as of yesterday, at least 10,631 of nationwide CCP Virus-induced fatalities had been long-term care residents. That’s about a fifth of the U.S. total. But the “at least” in the previous sentence is really important. For the ABC numbers are based on information from only 28 of the states plus the District of Columbia. That leaves the nursing homes’ share of fatalities unknown for 22 states. ABC didn’t say which states were and weren’t included in the count, but it’s almost certain that the more state figures are examined, the higher the nursing home share will rise.

One reason for confidence in this conclusion: The World Health Organization (WHO) stated on Thursday that as many as half of all of Europe’s coronavirus-related deaths have occurred in long-term care facilities. Of course, WHO’s performance during the pandemic has been roundly criticized. But you have to assume that it’s found it much easier getting reliable data from Europe than from dangerously secretive China.

It’s also important to note that Europe’s populations are significantly older than the United States’, which no doubt explains much of that towering European estimate. In addition, Europe was hit by the virus earlier. But along with the incomplete nature of the U.S. data, the the demographic gap is narrow enough to suggest that nursing home residents’ share of American deaths will continue growing.     

Combined with mounting evidence (see, e.g., here and here) that the CCP Virus has infected many more Americans than first estimated – meaning that the disease’s lethality looks considerably lower than once feared – the apparent concentration in nursing homes is unquestionably good news for most of the nation (except, of course, if any of your loved ones lives in these facilities). One possible implication:  With the right, targeted, precautions, a more extensive earlier reopening of the U.S. economy is warranted. The bad news, however, is that the virus’ impact is most deadly in one of America’s most vulnerable populations. Let’s all hope that, if this finding holds up, one result will be more mitigation where it’s needed most.

(What’s Left of) Our Economy: How Not to Rate the States’ Economies – & Their Prospects

23 Wednesday Dec 2015

Posted by Alan Tonelson in (What's Left of) Our Economy

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California, demographics, domestic migrants, entitlement programs, Florida, Forbes, government workers, immigrants, inflation-adjusted growth, innovation, Medicare, Missouri, New York, New York City, Pennsylvania, population, private sector, productivity, retirees, seniors, Social Security, taxes, William Baldwin, {What's Left of) Our Economy

Thanks to Forbes magazine, it’s possible today to teach a useful lesson about the limits of statistics and the studies they’re based on – especially if those studies seem to be intended to prove a point rather than seek the truth.

The post in question, by former Forbes editor William Baldwin, looks like it makes a claim that’s not only important but irrefutable: U.S. states whose numbers of “takers” (government workers plus recipients of government transfer – welfare – and entitlements payments) greatly exceed the “makers” (private sector workers) are in “death spirals.” But states in the opposite situation have promising economic futures. In particular, employers are much likelier to create the private sector jobs crucial to continued healthy growth in the “maker” states.

It’s easy to understand Baldwin’s reasoning. The private sector undeniably is more innovative and productive than the public sector – two of the main ingredients of that healthy growth. And states with big populations of entitlements recipients (e.g., Medicare and Social Security) are almost by definition states with older populations – raising the question of who’s going to pay for all those benefits for non-working or even only semi-retired seniors. Case closed? Not exactly.

Interestingly, doubts start arising as soon as you eyeball the author’s chart. For example, he places California in the “death spiral” category. Since the Golden State represented 13.40 percent of the entire national economy as of 2014, it’s clearly a crucial example. But U.S. government figures also make clear that California enjoyed inflation-adjusted growth last year (2.80 percent) that was considerably faster than the national average (2.20 percent). That doesn’t sound like much of a death spiral to me. And in case you’re wondering whether 2014 was an outlier, California also out-grew the nation as a whole from 2011 to 2014 – by 7.81 percent to 6.26 percent.

Demographics don’t support Baldwin’s portrait of California, either. According to the U.S. Census Bureau (click here for the various relevant spreadsheets), between mid-2010 and mid-2015, the United States population as a whole as a whole grew by 12.661 million. Nearly 58 percent of the increase came from more babies being born than legal residents passing away, and the rest came from net migration from abroad.

California was responsible for nearly 15 percent of this increase – which means that the state punched above its weight demographically. In 2010, its share of the national population was only 12.07 percent. So it looks like there will be plenty of new Californians to pay for public services and retirement costs. And although many of the nearly 835,000 immigrants to come to the state during this period were illegals, many obviously were not.

The situation in another one of Baldwin’s death spiral states – New York – doesn’t look nearly so dire, either, on closer inspection. New York’s after-inflation economic growth between 2011 and 2014 wasn’t as fast as California’s. But at 6.79 percent, it still beat the national average.

New York also lost a little population from 2010 to 2015 (22,308 residents moved away). But births outnumbered deaths by 1.59 to 1, which is a bit better than the national average. And although just over 653,000 New Yorkers moved out of the state during that period, nearly 631,000 immigrants arrived. Of course, many have been illegal and low-wage. But many others have been foreign oligarchs who have rocketed the New York City real estate market into the stratosphere. In fact, the city’s property and income tax receipts for the fiscal year ending June 30 are so immense that its budget surplus is likely to approach $1 billion. So there’s no revenue shortage there.

Now let’s move to one of Baldwin’s more promising states: Florida. The Sunshine State has handily beaten the national average on 2011-2014 growth (7.07 percent) – although its performance has been affected by the depth of its housing-bust-fueled recession. On the surface, its population trends look good, too – as has historically been the case. In 2010, Floridians represented 6.09 percent of all Americans, but over the next give years, the state’s increase came to 11.58 percent of the national total.

Less good, however, were the internals – especially for Baldwin’s “death spiral” thesis. Florida’s population growth has been powered by immigrants and Americans from other states to a roughly equal extent. Surely wealthy foreigners have been well represented in immigrant ranks along with poorly paid illegals. But anyone who knows Florida knows that many of the domestic migrants have been retirees. That can’t bode well for the tax base.

Florida’s neighbor, Georgia, is another odd Baldwin success story. Its 2011-2014 growth trailed the U.S. average (at 5.32 percent). Yet its population growth (4.16 percent of the nation’s total) was greater than its 2010 share of the overall population (3.14 percent). It’s true that Georgia’s subpar population increase may eventually translate into stronger-than-average growth. But should that be considered a solid bet? Stranger still is the author’s positive assessments of Missouri and Pennsylvania, which have been under-performing both in terms of economic and population growth.

Of course, Baldwin has pegged many states right. But misses that are this big, especially for places like New York and California, make clear that the sources of healthy growth and bright economic futures are much more varied than entitlement spending, government workforce sizes, and even generational demographics. Lifestyle clearly plays a major role – what else explains California consistently defying predictions of economic doom triggered by alarm over high taxes, burdensome regulations, and the like? Along with New York and Washington state (another one of Baldwin’s losers, despite the attractions of Seattle), it’s long likely to remain a magnet for talent, as well as wealth (whether ill-gotten or not).

Although I’ve never met Baldwin, I do know that Forbes has long been one of the media world’s strongest champions of Darwinian free market thinking – and of course an equally ardent opponent to Big Government. So it looks reasonable to me that this ideology overwhelmed a more holistic view of economics and business – which his successors at Forbes might have realized just by looking out the windows of their Manhattan offices.

(What’s Left of) Our Economy: Has the Fed Gotten Savings Incentives Completely Wrong?

17 Thursday Dec 2015

Posted by Alan Tonelson in Uncategorized

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Baby Boomers, banks, consumers, debt, deposit rates, federal funds rate, Federal Reserve, finance, Financial Crisis, housing, incomes, interest rates, recession, retirees, savings, savings rate, seniors, spending, The Economist, zero interest rate policy, {What's Left of) Our Economy

As many of you may know, the Federal Reserve yesterday raised the interest rate it directly controls above an effective zero level for the first time in seven years. So it’s especially interesting and important that a post from The Economist just before the rate hike made a strong case that one of the main rationales for keeping interest rates so low has backfired big-time on ordinary Americans and on the consumer spending still driving most U.S. economic activity.

Just after the height of the financial crisis, the Fed lowered its so-called funds rate to zero (actually, it was a range of zero to 0.25 percent) in part to make sure that the carnage that was spreading from housing to Wall Street and increasingly to the rest of the economy wouldn’t scare households into closing their wallets,and therefore choke off even more growth. The federal funds rate doesn’t directly set consumer borrowing rates – it’s the rate offered by the central bank to the country’s biggest banks. But the Fed was hoping that super-easy money would have twin stimulative effects.

First, when these banks’ borrowing costs fall, they can offer cheaper loans to both consumer and business borrowers and stay just as profitable. And the more affordable credit becomes, the more borrowers were expected to use. Second, the Fed was hoping that super-low rates would penalize saving. A rock-bottom federal funds rate would drive way down the returns on such popular consumer savings vehicles as money market funds and certificates of deposit and savings bonds, and convince Americans that they were better off spending existing savings and incoming income rather than receive literally no reward for thriftiness.

The Economist, though, has argued that the Fed’s penalize-savings strategy was misbegotten. And it looks like it should have been obvious even then. As the magazine points out, the biggest reason Americans save is to ensure a comfortable retirement. For any retirees or those nearing that age who already have substantial savings, even very low-yielding assets can together spin off enough income to ensure the golden years living standards they want.

But then ask yourselves how many Americans were in this situation when the financial crisis and recession struck. Inflation-adjusted incomes for the typical household had been stagnating. Thrift became a forgotten virtue; in part because of those stagnant incomes and in part because perpetually rising home values were hyped as an acceptable substitute, the nation’s personal savings rate hit historic lows and in fact briefly fell below zero. Then, of course, home values began cratering and the stock market went into free fall. So safe but low-yielding assets looked like the only viable savings game in town.

Unfortunately, the lower the return, the bigger the pot needed to guarantee that comfortable retirement. As a result, more and more of the aging American population has felt greater and greater pressure to salt away any new income not needed to cover ongoing living expenses.

Nor do you need to take The Economist‘s analysis on faith. For nothing has been clearer during this weak economic recovery than the continued consumer caution so responsible for holding it back. Many analysts attribute this behavior to a simple – possibly excessive – “once burned-twice shy” fear. But The Economist‘s treatment at least points to another important factor: For Americans with stagnant incomes and meager liquid savings – along with continuing debt – returning to pre-crisis and recession-level spending simply hasn’t been an option. In fact, evidence is accumulating that growing numbers of seniors, including recently retired baby boomers, are feeling these pressures, too – especially on the debt front.

Not that the Fed’s quarter-point rate hike will change matters much. In fact, signs haven’t even appeared yet that it’s a step in the right direction, as those banks that have raised the rates they’re charging for borrowers haven’t raised those that they’re paying to depositors. Until rates rise high enough to reward savings significantly again, most Americans will have ample reason to view recent Fed policies as lose-lose propositions.

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  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
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  • Housekeeping
  • Im-Politic
  • In the News
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The Snide World of Sports

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Guest Posts

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

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