The View from Right Field

A “V”-Shaped Recovery – Or a Gentle Upward Slope?

So where is the economy going?  The stock market would have you believe it is coming back – and quickly.¹  That would be a so-called “V” recession.  Quickly down and just as quickly back up.  Given it was a government-ordered shutdown that caused the sudden down, maybe a removal of the shutdown will allow things to rebound suddenly.  And that could be the way things go – as long as the confidence we had before the pandemic comes back, too.  If the confidence is back, maybe the economy will be back.

That is the question, isn’t it?  Because even if the government discontinues its shutdown, are we going to discontinue our shutdown?  If there was a vaccine, it might happen – subject to the effect of all those businesses and jobs that got lost during the shutdown.

Coronavirus Emergency Legislation: Fixing “Bugs” and Keeping “Features”

I said in my post of March 23, which is currently pinned to the top of this blog:

“As we get thru this, we must all remember that mistakes will be made. Things will be done that shouldn’t have been. Things will be left undone that should have been done. But helping each other is more important than blaming each other.”

Which means, among other things, that we shouldn’t blame Congress for mistakes or the unintended consequences in the bills that were passed in March and April to deal with the economic fallout of COVID-19.  However, the fact that we shouldn’t blame Congress for provisions that have not turned out as we expected, doesn’t mean that we shouldn’t change or fix provisions that aren’t working as we thought they would or that have consequences we didn’t intend.

Missing Milton – and the Magic Money Tree

A year ago I wrote about what, at that time, I called “one of the new big things” in economics and politics: Modern Monetary Theory (“MMT”).¹  I explained MMT by quoting from The Wall Street Journal:

“Ms. Kelton² argues the government doesn’t need to worry so much about how much it borrows to pay for spending programs.  Unlike a household or business, it can never run out of money.  The government can always print money to pay for debts.  The constraint, according to MMT, isn’t the deficit, but whether the borrowing and spending spurs inflation and disrupts economic activity.”

Disappearance of Physical Cash Is Great – Or Is It?

In an opinion piece in yesterday’s Financial Times,¹ Gary Cohn, a former director of the National Economic Council under President Trump, said that, with coins and bills being potential carriers of Covid-19, he has stopped using cash, and he supports the idea of the US Federal Reserve creating “digital dollar accounts and wallets for all citizens.”

Mr. Cohn sees all kinds of advantages to such digital wallets, in addition to those that are Covid-19-related.  Tax-avoiding black-market sales of cannabis could be effectively stopped.  Digital wallets would have made it easier for the government to send stimulus payments directly to individuals.  While Mr. Cohn admits there are privacy implications to the government having access to peoples’ digital wallets, he likes “how much quicker and efficient the tax process could be.”

Solving the Covid-19 Crisis with Proposals You Would Have Made Anyway

As our leaders suggest solutions for the problems caused by Covid-19, it is fascinating how many of the proposals are ideas those leaders would have suggested without Covid-19.  Texas is saying abortion clinics aren’t essential businesses, while New Jersey says that gun shops aren’t essential.  And House Speaker Nancy Pelosi has suggested retroactively repealing the SALT deductibility limit for 2018 and 2019 as a way to get more disposable income to people.¹

Overall, I think the proposals you might want to give the most thought to are ones made by people who would not have suggested those ideas before Covid-19 but who think they may be appropriate now.
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¹ I suppose it would give money to people, though almost of it to rich people.
UPDATE (3/31/20 12:24 am): I deleted footnote 2, which I decided was not in keeping with the spirit of my post of March 23, 2020.

Uncertainty: The Reason the Economy Isn’t As Good As It Could Be

Donald Trump, like the real estate developer and TV host he was, calls everything the best and the greatest – and other adjectives I can’t come up with right now.  He says this about the economy.  The problem is that it isn’t true, but it could have been.  The 2017 tax reform act was a boost to the economy,¹ as were the cutbacks in regulation by the Trump administration and the end of the constant uncertainty as to what new regulation or interpretation or guidance the Obama administration might come up with next.  Because of these actions by people in the Trump administration, the economy started growing faster than under the Obama administration.

But, in spite of President Trump’s boasts and tweets, the economy hasn’t grown as much as it could have – because President Trump brought in his own brand of uncertainty.  In 2018, President Trump tweeted that “trade wars are good, and easy to win.”  The American economy doesn’t agree.  While we needed to do something about China’s unfair trade practices, President Trump’s approach of unilateral tariffs, plus China’s retaliation, resulted in higher costs and more uncertainty.  While China might have been hurt, we have been hurt, too.  Uncertainty is a drag on an economy, no matter what else you do.

Inequality, Social Mobility, and a “Fair Go”

A new post on the New Zealand idea of a “fair go” is up on my other blog, “A Different New Zealand.”  You can find it here.

If “What’s the Matter with Kansas?”, Then What’s the Matter with Me?

In 2004, Thomas Frank wrote a book entitled What’s the Matter with Kansas?¹  The main idea of the book was that Republicans had used issues like abortion, school prayer, etc., to get working class and other Kansans to vote Republican, against their economic interests.

I thought about this book over the weekend when I did the monthly review of our 401(k)s.  I am lousy at investing, so we just own index mutual funds (some in stocks and some in bonds).  The thing I noted was how high the stock market is.  It is amazing to me, but the stock market has seemed to take off since Donald Trump was elected.  I don’t understand it, and I don’t know why it keeps going up,² but it has.³

Government Subsidies – Programs That Never End

There is a saying that the only things certain in life are death and taxes.  And the only thing permanent is a government program.  The inability of the federal government, and state and local governments, to terminate programs that don’t work is proof of the latter.  Instead of getting rid of the old programs that don’t work, governments just set up a new program – again and again.  Which results in four or five (or more) programs all trying to solve the same problem, and none of them doing it well (if at all).

Overseas, the forever programs are often subsidies: for food, fuel, etc.  In theory, the subsidies are set up for good purposes: to help the poor.  (Of course, they are also set up to help politicians – get votes.)  The problem is that, over time, the subsidies become more and more expensive, as costs go up and prices don’t.  And corruption seeps in: subsidized fuel, for example, is sold to neighboring countries where prices are subsidized.

The Purpose of a Corporation. I’ll Go with Milton Friedman.

Last Monday, the Business Roundtable, a group of chief executive officers of big U.S. corporations, announced that it had changed its statement on the purpose of a corporation and had issued a new “Statement on the Purpose of a Corporation.”¹  This was a big deal:

“The leaders of some of America’s biggest companies are chipping away at the long-held notion that corporate decision-making should revolve around what is best for shareholders. …

No longer should decisions be based solely on whether they will yield higher profits for shareholders, the group said.  Rather, corporate leaders should take into account ‘all stakeholders’ – that is, employees, customers and society writ large. …