Global Trade and Tariffs

While the US President proceeds with tariffs, 11 countries sans the US just signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership that will reduce tariffs among theses countries. This is the infamous TPP that the President pulled out of early in his Presidency.

David Smick, an economic advisor to Presidents Ronald Reagan and Bill Clinton said both Presidents loved global trade. It should be noted that more jobs were created under these two Presidents with Clinton #1 at 22.9 million and Reagan at #3 at 16.1 million (FDR was second). While we need to be mindful of and help employees impacted by job loss, we need to recognize global trade is accretive to the US economy and creates more jobs. We do well when we all do well.

As one global economist said, tariffs and trade wars are how recessions start. So, in protecting some jobs, we will likely be impacting negatively a much greater number.


Saturday’s Alright for Fighting

One of Elton John’s more boisterous songs is the title of this post. It is OK to stand up for the rights of others and yourself, but we need not resort to physical fighting. We must do so with our words that express our ideas. Words that are hurtful or demean are a verbal form of fighting.

I mention this as we must not follow the example of how the President chooses to communicate. We must be civil and listen to each other’s ideas and perspectives. Name calling is a shortcut when the speaker does not have a good argument. When I hear the President or anyone else name call, it makes me pay attention to the opposing side’s argument. The same holds true when he berates people.

The sad truth is people who act like this do so to be tough and bully others into doing things their way. Eventually it wears thin and others won’t want to be around people who act this way. It is one reason the White House has so much turnover. It is reported the latest departure is due to her being constantly berated by her boss. It came to a head when she admitted under oath she told “white lies” on his behalf.

Our issues are complex and deserve rational and reasoned debate. The causes are often multi-faceted and deserve holistic solutions. They do not need to be based on whims or inaccurate information. They do not need to be rashly done without vetting, especially when others need to be aware of and can plan for them. The rash decision by the President to impose tariffs is a good example because it caught the White House staff, members of Congress, our trading partners, investors and business leaders off guard.

This should not be how important decisions are made. We should rationally talk through them and look at their ramifications. We should invite input as complex issues need to be vetted. They need buy-in. This one was not. Tariffs may sound good, but they usually have devastating results. As one global economist said “this is how recessions start.”



While we were distracted, look what oozed in through the keyhole

On December 5, 2017, the Department of Labor under the guidance of the self-proclaimed populist President offered proposed regulations that would affect tipped employees. The 60 day comment period just expired, so unless the push back was convincing this proposal may become regulation. The proposal unwinds an Obama regulation which prohibits an employer from garnishing tips from workers who make at least the $7.25 minimum wage.

It should be noted that restaurant workers have a lesser minimum wage of only $2.13 which has been in place for twenty plus years. They can be paid an hourly wage this low, provided their tip income brings their total hourly pay to $7.25. As of May, 2017, the average combined wage and tip income for restaurant workers was $11.82 per hour.

In essence, the proposed regulation would allow an employer to garnish the extra tips above a total wage rate of $7.25. Now, the employer could be altruistic and reallocate this tip income to all workers, such as the cooks and buspeople (those that clean off the tables). This could also include the tipped worker who would receive a reallocated portion, but less than the direct tips garnished.

Yet, a very troubling part of the proposal is the employer could keep the tips and not reallocate them to workers. It is noted therein that the tips could be made for structural improvements or to reduce menu prices. Note, this is a low margin business, so it would not be a leap to see more than a few employers not reallocate all or any of the money. This is especially concerning within an industry where some managers exploit all and harass female workers (note read “Nickeled and Dimed in America” by Barbara Ehrenreich on working in minimum wage jobs that perpetuate poverty).

Per an article in The Washington Post (see link below), “‘There is no way to do a good face estimate and maintain the fiction that this rule isn’t terrible for workers,’ said Heidi Shierholz, who previously served as chief economist for the Labor Department, in a conference call on Thursday arranged by EPI.”

Many things concern me about this. If the employer were made to reallocate the garnished tips to other workers including the affected worker, then it would be more understandable as an employment term. A worker could then decide to work elsewhere if they felt they could make more there. It should be noted that in some cities that are phasing up to a $15.00 per hour minimum, some restaurants are going without any tipping, but that is understood beforehand and communicated to patrons.

The troubling part is the employer being able to choose to keep some or all of the money, provided the below market minimum wage is used. Help me understand how this helps those masses of people who voted for a man to make their lot in life better. Coming on the heels of other changes that have been made to favor Wall Street, such as the Tax Bill, this President does not look very much like a Main Street man.

What are your thoughts? Have you ever worked in a restaurant?

A little bit of this and that

It is a rainy Sunday, so it is a great day to drink coffee and read. Since I am struggling for a longer post subject, here is a little bit of this and that for your reflection and thoughts. In no particular order:

There are many people who will tell you what is wrong with the Middle East, but I don’t believe it is a solvable problem. There are too many passionate religious and tribal differences that cross borders. Unless like minded people had control over their situation, did not need to rely on others and could respect the rights of others, peace is simply not achievable. In my simple view, the best anyone can achieve is to place lids on simmering pots on a stove.

The global economy is expected to grow by 3.9% each of the next two years, up from slightly lower results in 2016 and 2017. Yet, Christine LaGarde, the head of the International Monetary Fund, cautioned at Davos last week over concerns of socio-economic inequity and the rising debt in the US. Not everyone is benefitting from the growth which will cause greater uncertainty and unrest.

In a very interesting and not unexpected development, Canada and other nations completed the TPP, which is the Asia-Pacific trade agreement the US exited, When the US tried to negotiate a bilateral agreement with Japan, the Japanese trade leaders suggested the US reconsider the TPP instead. The US finds itself on the outside looking in. I find it interesting that the US President said in an interview which will air tonight that he would reconsider the pullout from Paris. It is hard to have a relationship when you are not in the room with others.

On a related subject, if Brexit follows through with the commitment to leave the EU, other cities will continue to benefit from EU headquarters migration from London. Paris, Dublin and Frankfurt are each benefitting from conpanies moving EU headquarters. A softer Brexit will help reduce the migration, but it will continue.

I guess if there is a theme to all of these subjects it is working together across country borders and regions within is more productive than going it alone. Yet, one thing remains true – collaboration is hard work. It requires give and take. If one party gets everything it wants, then the others will not, so detente is harder. So, when I hear someone who likes to win say an agreement is a disaster, I don’t put as much credence in those comments. Lifting all boats makes more money for everyone. A man won a Nobel prize for this concept. So, let’s work hard together for peace and prosperity for all. It beats the hell out of the alternatives.


Headwinds and Tailwinds to the Economy

Presidents get too much credit and blame for the economy. They can provide headwinds and tailwinds, but global market forces tend to control what happens. By headwinds, I mean the wind is against the economic growth, with tailwinds aiding economic growth.

In the US, we are under the third longest economic growth period in our measured history with 103 consecutive months of growth. We have also had seven consecutive years of 2 million plus jobs created. And, the stock market more than doubled under Obama and continues its rise under Trump. These are great numbers. But, before we pat ourselves on the back too much, not everyone has benefitted and wealth disparity among economic classes has been widening for the past thirty-five years.

Economists I have watched project the good news to continue for the year, but several have cautioned about the future and if we don’t address the inequity, we will have major problems on top of other concerns.

On the tailwinds ledger, the global economy continues to grow and the World Economic Forum projects a 3.9% increase for the year. In the US, the cut back on regulations, plus the reduction in new ones over the rates of the past, have given more confidence to businesses (more on this later). Plus, the reduction in corporate tax rates will help fuel some growth, provided these companies who are sitting on cash, choose to invest it in their people and business. And, with more money in many people’s pockets, this will add some fuel.

On the headwinds ledger, several economists have noted we are robbing Peter to pay Paul, leveraging our future with even more debt. Not only did we not address the expected increase in debt taking it from $20 trillion to $30 trillion in 2027, the tax law will increase it by $1.5 trillion. The interest cost thereon will take a greater bite out of our budget. But, other headwinds are of concern. Retrenching from global markets and trade agreements replacing them with binary ones, will be dilutive to growth. Not investing as much in science and innovation is a major concern to Joseph Stiglitz, a Nobel laureate in economics.

This will be heightened if we restrict immigration. What seems to get lost in the argument where some have become too cold-hearted in my view, is immigration is accretive to the US economy. Plus, the people immigrating tend to be more entrepreneurial and better educated, in many cases. These sh**hole countries that someone demeaned are sending us more educated people than reside here in the states, on average.

We should not fail to remember that “innovation is portable” so says David Smick, an economic advisor to Ronald Reagan, Bill Clinton and Jack Kemp, one of the smartest Congresspersons who considered a run for President. If we do not provide an inviting place, innovation may be hindered. I should note that Steve Jobs was born to Syrian immigrants to the US. What if they had been denied entry? Apple might not have ever come to fruition.

Finally, not all regulations are bad, so restricting regulations may cause headwinds down the road especially with more freedoms given to pollute the environment and take advantage of customers. This is a developers mindset. Remove obstacles to build, but leave the clean up for others. Unfortunately, we taxpayers are the others. We citizens, that must drink and breathe more polluted waters and air and realize the impact of climate change, are the others. As coal ash deposits have taught us, there is a cost to environmental degradation.

So, we need to be mindful of what we are facing. I have communicated with numerous Congresspersons, Senators and the President, that we are avoiding some elephants in the room – debt, climate change, water crisis and income inequity. In my view as an Independent voter, passing a tax law that increases the debt was extremely poor stewardship, as we cannot cut our way out of this problem. The math won’t work.


Keep on pushing forward ladies

Disillusioned by tribal politics and a President who has reduced civil discourse to a new low and untruthfulness to a new high, it was nice to get outdoors and participate in the second Women’s March in my city. My wife and I joined some friends and over 5,000 more marchers to hear important messages about pushing women and human issues forward.

I am very encouraged by the 26,000 women who have moved ahead with running for office. We need more women in all forms of government as they are woefully underrepresented. Some of the highlights from the speeches in addition to the above are as follows:

– while the push for equality was mentioned most, I was impressed by a Muslim American woman, Rose Hamid who spoke of equity, to value our differences in perspectives and not let fear of the unknown drive wedges between us. Hamid gained notoriety for sitting quietly in a Trump campaign event, until she was escorted out.

– I was appalled to hear a statistic that I had written about a couple of years ago continues to get worse – we have an increasing rate of maternal mortality around childbirth and our global ranking on this statistic is even more negative. A key driver is the lack of healthcare insurance access and education in too many areas of the country.

– I was troubled by the increasing statistics around domestic violence. Locally, the first four homicides of the year in my city were related to domestic violence. Men and women need to help women get out of relationships where signals are apparent. And, better education for boys and girls need to occur that violence is not the answer to relationship conflict.

– I am encouraged by the unifying voices from various fabrics of our culture regarding the need to treat everyone with dignity and respect. And, we must listen to each other and glean points of view. We are listening to respond, not hear.

– I am encouraged by the recognition to act and not just talk or tweet. One speaker said the quote, which may have been made by Rosa Parks, that “even the mighty oak tree was once a nut that stood its ground.” So, don’t worry if someone is calling you a nut.

I have often written about the tough-to-read book “Half the Sky,” by Nicholas Kristof and Sheryl WuDunn about the plight of women and girls around the globe. The Chinese proverb is “women hold up half the sky.” Not only is it the right thing to do, but treating women with dignity, respect and equality is the economic best thing to do. Otherwise, a country or area is competing with only 1/2 of its intellectual capital.

As our country enters its 104 consecutive month of economic growth and closes out its seventh consecutive year of 2 million plus jobs added, we should celebrate our economic success, but it is not bearing fruit equitably for everyone. Our economic classes have become more disparate and women remain relatively underpaid. Plus, with significant pay disparity, women are subject to more sexual harassment to keep better paying jobs or get better work scheduling for their parental duties.

So, let’s applaud this push by women. We will all benefit with more female voices being heard and heeded. That sky is heavy without the extra half holding it up.


A few straightforward suggestions to fight poverty

“If incarceration had come to define the lives of men from impoverished black neighborhoods, eviction was shaping the lives of women. Poor black men were locked up. Poor black women were locked out.”

The above quote comes from the Pulitzer Prize winning book “Evicted” by Matthew Desmond. Its subtitle is also telling – “Poverty and Profit in the American City.” The dilemma is we have a poverty problem that stretches from urban to rural America. Yet, it manifests itself daily in the eviction courts of American cities and towns, whether it is from apartments, houses or mobile homes.

The book speaks of how fragile the rental community is regardless of race, yet the black community tends to have a higher rate of exposure to evictions in urban areas. Unexpected expenses, transportation problems, and tragedies can push people paying a very high portion of their rent over the edge and out the door. Ideally, 30% of family income should be toward housing and utilities. Too many of these folks are paying well above that percentage.

It should be noted that there are other drivers of fragility. Some have opioid and other dependencies. Some are fragile due to too many children that stretch the budgets of even the best planners. Some are in downward spirals with unsupportive landlords. And, many of those unexpected expenses that arise are healthcare related.

What are some suggestions to remedy these issues? Based on my experience as a volunteer Board member helping working homeless families and my reading, I would like to throw out some ideas for consideration.

First, we need to talk more about it. America has a huge disparity in distribution of wealth which is not talked about enough by leaders. Where and to whom one is born are greater predictors of success as the American Dream  has waned for too many.

Second, we need to fund more family planning efforts not less. There is a high correlation between poverty and large families. When family planning is funded and birth control access and education are increased, poverty declines, system health care costs decline and abortions decline.

Third, more mechanisms to reduce evictions need to be in place and funded. Crisis assistance funds show success in helping keeping the electricity on and, when funded, reducing the number of evictions. Stopping homelessness (or fragility) before it starts can make a huge difference and will have a positive echo effect.

Fourth, we must invest in impoverished  areas making them more suitable for families both with opportunity and resources. In their absence, crime and other poor influences fill the void.

Fifth, while I have concerns about the new Tax law with its impact on debt and heavy emphasis on the wealthy and corporations, a huge opportunity was missed when we could have added an increase in the minimum wage tying it to automatic increases due to wage inflation. I worry that less money than expected by the law’s drafters will end up in the hands of workers.

Sixth, we must address our opioid crisis in America. To be frank, cutting access to healthcare and mental care insurance benefits are not the answer. We must stabilize access and cost of healthcare, yet opposite measures have been taken in the past few years under the guise of political gain.

There are many more ideas, but these will help. On the investing front, many locations have seen success with using historical tax credits leveraging private money. There is a concept called ABCD (Asser Based Community Development) which shores up or repurposes an deteriorated asset creating jobs.

But, first we need to talk about this real and pervasive problem.