Thursday, October 24, 2013

McResource And Your Tax Dollars

McDonald's, it seems, has a hotline called McResource that helps employees get food stamps and other public assistance.  See  Apparently, McPay is so low, McDonald's knows that many employees will need help from government programs.  So they have institutionalized for employees the process of getting public and charitable aid.

It's nice to know that our tax dollars support McDonald's personnel costs.  What could be a better use for our hard earned tax payments than burnishing the shine on the golden arches and boosting the company's earnings?  Even the private charity McD's employees get is indirectly subsidized by taxpayers, since contributions are likely to be deductible.

One wonders if Micky D's ought pay its employees better.  But, no.  Perish the thought.  Executive bonuses don't increase if employee costs go up.   All the better if the government subsidizes the company.

As for right wing proclamations about cutting back on welfare programs, well, forget it.  Poor people have essentially no political power.  But when public assistance subsidizes Corporate America, there's no chance that those with political power will allow the programs to be substantially reduced.

Monday, October 21, 2013

Are Stock Prices Real Any More?

One wonders if stock prices are real.  Consider the evidence.  Due to political obtuseness, the U.S. barely avoided defaulting on its debt.  The economy continues to expand at a disappointing rate.  Employment growth is tepid.  Middle class incomes are falling, on average.  Consumers are gloomy.  The Federal Reserve Board is gloomier.  Businesses hold back on investing cash.  But, last week, the S&P 500 reached record heights.  When you encounter cognitive dissonance in the financial markets, be careful.  Every time in the past 20 years when things seemed out of whack, it eventually turned out that, in fact, they were out of whack.  In other words, if it looks too good to be true, it probably isn't true.

Could investors be wearing their stupid hats again?  Their 401(k)'s got clobbered in the 2000-01 tech stock crash, and after adjustment for inflation, stocks still haven't recovered.  Investors' 401(k)'s and homes got clobbered again in the financial crisis of 2008, and many haven't recovered from those losses.  What does it take to move up the learning curve?

Maybe, however, the problem isn't investors.  Over 50% of the trading volume in the stock markets comes from high-speed computerized trading.  This activity isn't based on human judgments.  It flows from algorithms and formulae.  Some of the computerized trading is dynamic--it changes based on what it observes in the market.  Since the activity it is often observing is computerized, we now have computers reacting to the activity of computers, which could be reactions to activity by other computers. 

When stocks were valued by humans, we had some idea of what we were dealing with.  Even if things seemed irrational or even bubbly, we could understand what was happening, albeit with a frown.  Now, with stocks being priced by "thought" processes that are impenetrable to the average investor, the market not longer reflects the collective judgment of humans.  Instead, it is an amalgamation of valuation processes that often aren't based on human judgment.  The things that people are concerned with--lousy economy, sluggish jobs growth, falling incomes, dim view of the future--may not be finding their way into stock valuations, at least not in the ways that they historically did.  If so, we can't be sure stock prices are real because we have no idea what the computers will do next.  Caveat emptor.

Thursday, October 17, 2013

The Fiscal Crisis: Can Kicks Are All We Can Expect

Tonight (Wednesday, Oct. 16, 2013), Congress has temporarily "fixed" the fiscal and debt crises by re-opening the government until Jan. 15, 2014, and raising the debt ceiling until Feb. 7, 2014.  In other words, the government will resume operations and not default on its debt until early next year, when we return to crisis mode again.

Can kicking is all we can expect.  The government that the voters elected in 2012 isn't capable of decisive action on divisive issues like government spending.  With the House held hostage by a small but very loud group of Tea Partiers, and the rest of government controlled by the Democrats, dysfunction is baked into the cake the voters made last year.  Maintaining the status quo--a/k/a can kicking--is the only thing a sharply divided government can do.

Early next year, when Congress and the White House revisit the fiscal and debt crises, they will again kick the can through the end of the 2014 fiscal year (which ends Sept. 30, 2014)--because they won't be able to do anything else.  Maybe they'll make minor tweaks, but nothing big will happen.  Come late September or early October 2014, with the 2014 Congressional elections imminent, they will kick the can again past the election date, perhaps into early 2015 for the next Congress to deal with.

To end can kicking, voters need to elect a functional government next fall.  Yes, the idiots in Washington are to blame for behaving like children.  But the electorate put them in office.  Democracies function by compromising.  If narrow-minded, uncompromising fanatics are elected, expect the can to be well-kicked for years to come. 

Friday, October 11, 2013

Why the Republicans Blinked

The Republicans, especially those in the House of Representatives, are rapidly giving ground in their fiscal battle with the Democrats.  A resolution is pretty likely within a week or less.  It will probably provide a short term delay of the debt ceiling and re-open the government, while the parties negotiate over long term fiscal issues.

Why did the Republicans blink?  Because they tried to manufacture a crisis out of a non-problem and a long term problem.  The non-problem is Obamacare.  The truth is that Obamacare offers valuable benefits to millions of people.  The huge traffic jams on health exchange websites demonstrate that lots of people understand Obamacare's value and want to participate in the program.  The Republican attempt to de-fund Obamacare would take away something millions of people want, and that's usually a very poor political strategy.  The Republicans seem to have belatedly figured this out, but not before forming a circle and firing volleys inward.

The long term problem is the federal deficit.  It is a serious problem.  But it's not an immediate problem.  The Republican effort to create a crisis at this moment over something that will play out years and decades from now is too obvious a political ploy.  The minority party wants to call the shots by gratuitously inflicting damage on the economy with a government shutdown and coercing an unnecessary default on the most important financial instruments in the world, U.S. Treasury securities.  Political parties thrive by winning over a majority of voters, not by wrecking economies and financial systems.  The fiscal deficit is not an immediate crisis.  It needs to be addressed, and will be, over the next years and decades as it becomes more pressing.  But the Republican tactic--give us everything we demand or we will destroy your government and wreck your finances--is bound to, and in fact did, alienate a majority of the electorate. 

After Barack Obama's re-election last year, the Republicans launched a process of reflection and reconsideration.  It's unclear that they made much progress, and the fiscal brawl of the past few weeks has surely left the party more damaged than before.  The Tea Partiers have prevented the Republicans from doing the thing that's necessary to political domination--shifting toward the middle.  Since political power abhors a vacuum, the Democrats have easily moved into the breach. 

Wednesday, October 2, 2013

Upsides of the Shutdown

The federal government shutdown isn't all bad.  Some of the good things that resulted include:

White supremacists had to cancel their rally at Gettysburg National Park, because National Parks have been closed.  Poor knuckleheads.

Federal spy agencies have been cut back 70%.  We now have a lot more privacy than we had just a day ago.

Spying on pandas halted, as the National Zoo's panda cam has been cut off.  A lot of people are disappointed, but consider the pandas' point of view.  Wouldn't it be creepy to have a camera focused on you for hour after hour after endless hour?  Aren't pandas entitled to some privacy and dignity?

School lunches and breakfast still being served.  Or maybe, from the kids' point of view, this isn't so good.  Many of them might have been hoping for an excuse to binge on junk food.

Free and discounted food and drinks are being offered to feds and sometimes non-feds by many Washington, DC area bars and restaurants.  Theaters, museums, gyms and other businesses are also advertising free or discounted admissions, goods or services.  Close the government and what do you get?  Party central.

Stock market up.  The S&P 500 rose about 0.8%.  If this is what a shutdown does, there are probably a lot of market players rooting for more government dysfunction.