“Our grass roots are very confused”

Isn’t politics fun?

“If you just dropped in from outer space, you wouldn’t know what the last eight months have been like,” said Rep. Peter King, R-N.Y., recalling the friendly exchanges between Trump and Schumer during the meeting with New York and New Jersey lawmakers.

That would be the same Schumer whom the president had previously slammed as a “clown” and “Cryin’ Chuck.”

And now?

“In some ways it’s almost like they were completing each other’s sentences,” King said.

On display at that chummy scene Thursday was the Trump who’s emerged in full this past week: Trump the independent.

A president who spent months catering to the Republican conservative wing now appears unbound by ideology and untethered by party allegiances.

It’s not a complete surprise to his fellow Republicans. They long have worried that Trump, a former Democrat, might shift with the political winds. But Trump’s overtures to Democrats have left Republicans in an awkward and perplexing position, undercut by their leader and unsure of what’s next.

“Our grass roots are very confused,” said Rep. Mark Meadows, R-N.C., head of the conservative House Freedom Caucus, on MSNBC Friday.

Grass roots “confused”?  Would those be the people who didn’t understand that Trump is a pathological liar?

And this:

Schumer announced on the Senate floor Thursday morning that Trump called him and asked how he could help advance legislation that would protect from deportation an estimated 800,000 immigrants who came to the country illegally as children.

Why am I not surprised?

Here’s what I wrote in April:

New predictions; contrary to campaign promises:

Trump won’t significantly change our trade relationship with Mexico and China.  China is not a “currency manipulator”.

Trump won’t do anything significant to help blue-collar workers.

Trump won’t repeal Obamacare, at best he’ll modify it.

Trump won’t significantly change immigration policy.

Trump won’t pay off the national debt.

Trump won’t significantly improve the economy.

Trump will hurt the GOP in the 2018 midterms.

Basically, Trump won’t Make America Great Again.  Instead he’ll mostly maintain Obama’s policies.  The economic performance will be similar to what it was under Obama.

Trump is bad in just about every possible away a person can be bad.  Fortunately some of those bad characteristics offset.  Thus his bad policy ideas are offset by his complete incompetence, which forces him to rely on experts.  Thank God there are damn few alt-righters who have the expertise required to be top policymakers.  It looks like people like Jared Kushner and Gary Cohn (who are basically Democrats) will run the show.

I’m sticking with these predictions (assuming Jared stays out of jail.)

PS.  Speaking of predictions, I’ve claimed that financial crises are unforecastable.  More specifically, I’ve been skeptical of predictions that China was about to collapse (while acknowledging that at some (unknown) point in the future they may have a financial crisis.)  Now it seems even the China bears are about to throw in the towel:

Investor Who Lost Millions Finally Gives Up on His China Bet

Mark Hart spent seven years and $240 million waiting on a crash in China’s currency.

He lost sleep. He lost clients. He damn near lost his sanity.

And now he’s lost his conviction: Hart, who called for a more than 50 percent yuan devaluation last year, has turned bullish on China and its currency.

An average rate of GDP growth of roughly 3% during the 2010s (as one expert predicted)?  I don’t think so.  More like 7.4%.




55 Responses to ““Our grass roots are very confused””

  1. Gravatar of Major.Freedom Major.Freedom
    10. September 2017 at 08:49

    Add another to the Clinton body count. WSJ journalist investigating Hillary Clinton’s ties to Russia has been found dead under suspicious circumstances:


    In other news, AP just published an article referring to Benjamin Netanyahu’s son as anti-Semitic after he called out Soros on his Facebook page. The fake news WaPo is doing the same. Looks like Soros money is in a lot of places.

    Interesting how criticizing an actual former Nazi gets you called a neo-nazi.

  2. Gravatar of JG JG
    10. September 2017 at 09:13

    Because none of the GOP candidates could have defeated trump and flipped the blue states, some trump voters held their nose and voted for the reality tv star. Scott , obviously, would select Clinton over trump Given no other choice.

    For all his stupidity and blather his conservative cabinet is much preferred over any of clinton’s potential nominees. And trump will put in place more federal judges than either obama or bush , and, perhaps, two Supreme Court judges.

    But it again obvious scott would have pulled the lever for Clinton given only two choices – trump or Clinton.

  3. Gravatar of E. Harding E. Harding
    10. September 2017 at 14:16

    “Trump won’t do anything significant to help blue-collar workers.”
    Wait, Scott, I thought you didn’t like Obama’s overtime rule?

    “Trump won’t significantly change immigration policy.”
    Trump HAS significantly changed immigration policy by ending DACA. Congress does not seem likely to significantly change immigration policy.

    I’m still very glad I voted for Trump, though I do not approve of his performance as president.

    It looks like people like Jared Kushner and Gary Cohn (who are basically Democrats) will run the show.

    Well, that didn’t happen. Trump pulled out of DACA and the Paris Agreement.

  4. Gravatar of Benjamin Cole Benjamin Cole
    10. September 2017 at 15:57

    The People’s Bank.of China has been doing a.better job than the Fed for at least 20 years.

    The PBoC will also periodically purchase bad debt from lenders, an interesting policy.

  5. Gravatar of Benjamin Cole Benjamin Cole
    10. September 2017 at 17:56


    An AEI scholar wants helicopter drops! His blog will likely not persuade many (nobody is ever right or wrong in macroeconomics, or so I have learned), but the interesting point is that a member of a right-wing redoubt is calling for chopper drops.

  6. Gravatar of BC BC
    10. September 2017 at 18:21

    One thing I don’t understand is how Trump could have “cut a deal” with the Dems or “sold out” Ryan and McConnell on the debt limit. The Republicans still control both houses of Congress. Wasn’t it still up to Ryan and McConnell to decide what bills would be voted on regarding hurricane relief and debt limit extension? If Ryan and McConnell wanted to, couldn’t they have introduced clean hurricane relief bills, clean debt limit extension bills, or tied the hurricane relief to longer extension of the debt limit and dared Democrats to vote against it? Would Trump have vetoed those bills, if passed? I doubt it.

    To get to 60 votes in the Senate on hurricane relief, debt extension, DACA, or anything else, obviously Republicans will have to make some concessions to Democrats. Everytime Ryan and McConnell are willing to make concessions that will be unpopular to the Republican base, will we now hear that Trump “cut a deal” with the Dems? In other words, will Trump play bad cop (from the Republicans’ perspective) to Ryan and McConnell’s good cop? The kicker is that Trumpistas are so blindly loyal that, even when Trump appears to be selling out the Republicans, they praise Trump and criticize Ryan and McConnell!

  7. Gravatar of ssumner ssumner
    10. September 2017 at 19:05

    Harding, You might want to keep up with the news. Trump is encouraging Congress to reinstate DACA

  8. Gravatar of Benjamin Cole Benjamin Cole
    10. September 2017 at 22:46

    OT, more on American wages.

    Well, Brookings Institution is usually thought of as a “serious” think tank, not shills for lefties or righties, or special interests.


    Brookings is holding an entire seminar-conference on the topic later this month, and they seem inclined to believe wages have stagnated.

    I think there is a real problem in the US around declining real wages (and higher taxes, especially Social Security taxes, compared to 50 years ago) and exploding house prices.

    If we want voters to embrace “free markets” and not socialism, then increasing the rewards for working and decreasing housing costs are probably on the front burner.

    I suspect tax cuts for the rich and cutting the minimum wage will not appease voters. Just a guess.

    Remember, the past three finalists for the Presidency were Trump, Clinton and Sanders.

    A mercantilist, a crony capitalist-socialist and a socialist.

    2020 could be worse.

    Maybe the Fed will fix matters with tighter money.

  9. Gravatar of Benjamin Cole Benjamin Cole
    11. September 2017 at 04:53


    The chart takes into account benefits, not just pay.

    U.S. workers are about paid the same now as in 1973. More than four decades of sideways drift.

    Taxes are higher.

  10. Gravatar of E. Harding E. Harding
    11. September 2017 at 13:06


    Double standard. First you count Congress being unable to keep Trump’s promises as a mark against Trump’s credibility, then you count Congress (probably) being unable to break Trump’s promises as a mark against Trump’s credibility. Pick one standard or the other.

  11. Gravatar of morgan warstler morgan warstler
    11. September 2017 at 13:10

    Scott, You are just so full of it.

    In the run up to the elex, I, ME, Morgan, ME… I said over and over Trump will routinely play GOP against Dems – and that’s a GOOD THING.

    I argued LOUDLY, that Trump is Dangerfield in Caddyshack and Back to School, and Trump Voters™ — CHOSE HIM to fight the culture war.

    This doesn’t mean be a social con, they could have chose Cruz. This means SMASH Left, hurt them, make them cry, not bc they are ALWAYS WRONG, but bc they have to KNOW they are NOT IN CHARGE. Trump Voters are the HEGEMONY.

    Think of Trump Voters as the assh*le of the body I’d say, every other body part must be brought low, made to FEAR.

    If it helps you Scott, think of Trump / Nixon as the CHUCK NORRIS Fed strategy for NGDP of Red America who do not Want to fight, they just want to be feared.


    You were wrong! I was right!

    You have gone thru all the stages of liberal grief. Trump is Hitler, Tump is incompetent, Trump is liar, blah blah.

    I said, FINALLY we can have a guy who BY INSTINCT talks down to BOTH and makes fun of BOTH snooty rich wall street guys and academic eggheads.

    I said FINALLY we have a guy who thinks about EVERYTHING like a very successful SMB owner, someone who understand how DUMB YOU ARE SCOTT for saying things like Wall Street guys place capital and thats SOOO IMPORTANT. Yeah it’s dumb. It’s super dumb.


    You could have looked at Trump and said, whelp, this will be a good lesson that brings about the coming next Reagan and Bill Clinton plays from GOP and Dems over next 24 years….

    You could say we’re going to see Antifa get shot like Kent State / Jackson State maybe next year (1970) and Trump’s popularity will grow from there.

    You COULD admit that by just forcing illegal immigration to fall 80%…Trump has already won, not just bc lower, but by PROVING Obama could have stopped it and didn’t… which means he was encouraging it.

    You COULD admit that Amazon picking up and moving “2nd” HQ to somewhere nearer Trump Voters™, the very deepest roots of FAR LEFT in America – Seattle local politics have be YANKED OUT and thrown in burn can.

    You COULD admit that Nancy Pelosi just said TWICE in one day, ‘of course we have to protect our borders” and “we’re going to give Trump his wall”

    Yes, yes, she said no wall, but Trump’s wall has HOLES (so 60 lb bags of drugs don’t land on people) so she gets to call it a FENCE, and she’s already said and voted for fences are part of border security.

    You could MARVEL at South Korea giving China the finger and getting the regions ready for massive build up of US military weaponry in their country.


    Just be wrong Scott!

    Admit what I was saying was GOOD, did happen. is happening.

    When I was wrong about Obama in out bet, in 2012, I didn’t act like I wasn’t wrong, and I didn’t spend the next 4 years lashing out bc of it.

    Trump wins 2020 again at this rate Scott. He wins bc left STILL THINKS there is MORE LBJ right around corner.

    Red America is over that, the only Q is how quickly Dems realize they gotta run to center.

  12. Gravatar of Benny Lava Benny Lava
    11. September 2017 at 14:42

    Catholics and Evangelicals turned out in droves for a candidate that has probably paid for his share of abortions. Lol.

  13. Gravatar of morgan warstler morgan warstler
    11. September 2017 at 14:45

    See Scott, even Benny Lava agrees with me…

    Social Sons VOTED FOR someone who would PUT BOOT ON THORAT of their oppressors, they did no elect one of their own.

    It pains me Scott that you who grew up in the age of Nixon, struggle to see Trump as no worse, and perhaps better.

    Don’t you feel silly about all the histrionics? You aren’t that guy.

  14. Gravatar of Matthew Waters Matthew Waters
    11. September 2017 at 16:51


    The EPI is the original source for that graph, which always makes me worried.


    One thing I’m unclear on is what the EPI defines as compensation. It needs to include higher employer payroll tax costs, higher workers comp costs, etc.

    From the EPI’s own figure, the average wage is much closer to productivity than the median wage. This figure is almost always shown without the average wage. If capital has a consistent rate of return, then only the AVERAGE wage should equal productivity.

    Showing the average wage at least allows discussion of the skewness of the real wage distribution.

  15. Gravatar of Anon Anon
    11. September 2017 at 19:44

    Also, why are we limiting the analysis to production/nonsupervisory workers?

  16. Gravatar of Scott Sumner Scott Sumner
    11. September 2017 at 22:41

    Ben, That EPI study has been totally discredited. Please just give up.

  17. Gravatar of Major.Freedom Major.Freedom
    11. September 2017 at 23:03

    To the closeted Marxist globalist advocates on this blog, please respond to this video of investigative journalism showing that Sweden’s police can no longer keep up with even investigating the numbers of rapes committed by anti-western values migrants:


    Imagine living in a country where mysoginisitic – ACTUAL mysogistinistic – men can attack a woman, while the police are overloaded with other sexual attacks so cannot even investigate it. Hmmm, Sumner almost had his way about the election. Clinton would have attacked them like she did to the rape victims of Bill Clinton, Joy Bahar would have called them wh@r3s, and Sumner would have remained silent.

    In Birmingham, England, the rapist migrants take jobs as taxi cab drivers to pray on young girls, as young as 15. It just happened in Birmingham that a taxi cab driver raped the girl, then after she escaped and ran for help, flagging down a passing car begging to be helped, what happens?, the damn driver rapes her as well.

    Sumner will of course stay either silent, or submit blogposts citing censored sources “proving” that people who have routinely oppressed women and threw gay people off of rooftops, have absolutely no greater propensity to commit crimes against women and gay people should they move to another country of magic and fairy tales. After all, Marx did convince a lot of people that people behave in accordance with the economic environment in which they live, so all the mysogyny and rape is just a reflection of the Swedish economy [insert gong show sound here] which also, incidentally, explains the censorship. Admitting the truth is admitting their own practical and theoretical failure.

    It is a wise and good thing to scrutinise visitors before allowing them into your own home. This is not an anti-visitor policy, it is a pro-individual owner determined visitor policy. But most on this blog understand the alt left game, namely, if you are not a communist, you must be a fascist.

    DuckDuckGo the term “Communist Third International”, and search the images. If you look at the first few, you’ll see a picture with a giant flag on the back wall of the building interior. That flag is the same flag the alt left financed Antifa are parading around while donning masks and wielding baseball bats. If you are not a communist, you are a fascist. Fascism is worse apparently, but in fact history shows Communism to be far worse, if by worse we mean number of people killed by it. It isn’t even close.

    I just know there will eventually be a detailed blogpost of a threat of a Stalin 2.0, or a Pol Pot 2.0, or a Mao 2.0. 12 million people killed can’t be worse than almost 100 million. Right? Anyone?

  18. Gravatar of Matthew Waters Matthew Waters
    11. September 2017 at 23:19

    “Also, why are we limiting the analysis to production/nonsupervisory workers?”

    According to the paper, the average production/nonsupervisory wage tracks the median wage of all workers. The median wage of all workers is only available after 1973, while production wages go back to 1948.

    The EPI graph was actually discussed here a lot. Much of the graph is complete bunk due to using a non-chained inflation index for wages but a chained index for productivity. The difference between average compensation of all employees and productivity substantially goes away with using PCE instead of unchained CPI.


    On average/median differences in total compensation, I would actually go further than Scott did at the time. From what I can tell, there is no “median hourly total compensation” dataset and the EPI performed the following steps:

    1. Took the national account data for wage and non-wage compensation to get a total compensation to wage ratio.
    2. Multiplied the median wage by this compensation/wage ratio from national accounts.

    As far as I can tell, the possible issues with this methodology weren’t discussed by the paper. If health benefits are flat as employees earn more and FICA taxes are capped, then compensation/wage ratio may be higher for the actual median employee than the national accounts’ ratio. Furthermore, government employees are much more likely to have larger compensation/wage ratios.

    There would still be a large gap in median/mean total compensation with a moderate adjustment of median total compensation upward. I also think there is some real shift towards capital due to market power. But most “wage stagnation” is issues that affect productivity and wages: inefficiency in health care, higher education and housing.

  19. Gravatar of Christian List Christian List
    11. September 2017 at 23:46

    Scott, your “predictions” were unimpressive a few months ago and they are unimpressive now. Offer a bet that got some value, something that can not be predicted easily by a half-wit.

  20. Gravatar of Timothy Hopper Timothy Hopper
    12. September 2017 at 02:42

    Scott, why are you quoting the Irish Republican murderer and terrorist Peter King as an authority on any subject whatsoever?

    And why the literal Hell are you quoting him as an authority on politicians being liars, traitors, hypocrites and turncoats?

    No, wait, the reasons for Rep. King’s knowledge and expertise in such matters are actually self-evident; forget I said anything…

  21. Gravatar of Willy2 Willy2
    12. September 2017 at 05:40

    – “PS. Speaking of predictions, I’ve claimed that financial crises are unforecastable.” ??????

    – A qoute form John Maynard Keynes: “Markets can remain irrational longer than you can stay liquid”.
    – Steve Keen has an extremely simple model to predict (economic) expansions/contractions. “GDP = Income + change in debt”. If/when that “change in debt” starts to shrink then a recession is imminent. With that model he saw in (very) early of 2008 that the australian economy started to shrink in december of 2007.
    – When the growth of debt turns into shrinking of debt then we have a crisis on our hands.
    – What do you mean “unpredictable” ?

    Regarding Trump:
    – people on the right of the political spectrum are “up in arms” because they consider Trump talking to Pelosi & Schumer as treason. Don’t know if this will end well (for Trump).

  22. Gravatar of Willy2 Willy2
    12. September 2017 at 05:45

    – Correction: the words should be “the australian economy landed into a recession in december of 2007.”
    – I think that Trump will attract A LOT OF fire from Bannon’s BREITBART. Bannon is allegedly responsible for A LOT OF leaks and after being fired from the Trump team he also will target Trump even more.

  23. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    12. September 2017 at 06:20

    As usual, the criticism Trump is taking regarding DACA is pure hypocrisy;


    Mr. Obama’s double-dealing begins with his time as junior senator from Illinois, when he helped sabotage a bipartisan immigration package supported by George W. Bush and Ted Kennedy. Mr. Obama’s dissembling continued during the first two years of his own presidency, when he had the votes to pass an immigration bill if he had chosen to push one. It was all topped off by his decision, late in his first term, to institute the policy on DACA that he himself had previously admitted was beyond his constitutional powers.

    …here’s the point about Mr. Obama: For all his big talk about how much he’s wanted an immigration bill, whenever he’s had the opportunity to back one, he’s either declined or actively worked to scuttle it.

    Start with 2007, when a coalition of Republican and Democratic senators came up with a bill that also enjoyed the support of the Bush White House. It wasn’t perfect, but it extracted compromises from each side—e.g., enhancements for border security, a guest-worker program, and the inclusion of the entire Dream Act, the legislation for children who’d been brought here illegally that Mr. Obama claims he has always wanted.

    Sen. Obama opted to back 11th-hour amendments that Kennedy rightly complained were really intended as deal-breakers. At a critical point, Kennedy urged that President Bush ask then-Senate Majority Leader Harry Reid to keep the Senate in session to get the last few votes the bill needed. Mr. Reid opted for the Obama approach: Concluding he’d rather have the political issue than actual reform, he adjourned the Senate for the July 4 recess.

    A year later Mr. Obama was running for president. Before the National Council of La Raza, he vowed: “I will make [comprehensive immigration reform] a top priority in my first year as president.” Yet notwithstanding the lopsided Democratic majorities he enjoyed in Congress his first two years, he didn’t push for immigration legislation, which makes his promise to La Raza rank right up there with “if you like your health care plan you can keep it.”

    Mr. Obama frequently noted the limits on his powers. “I know some here wish that I could just bypass Congress and change the law myself. But that’s not how democracy works,” he said. Then in 2012 he decided he would indeed change the law himself. ….

    Today Carl Cannon, executive editor and Washington bureau chief for RealClearPolitics, is almost alone in the national press in pointing to this history, in a piece pegged to the Democratic response to President Trump’s pitch to codify DACA into law. “Instead of responding to this overture in a spirit of compromise,” Mr. Cannon writes, “Democrats chose vitriol and name-calling, their default position in the Trump era.”

    Perhaps, suggests Mr. Cannon, a “certain ex-president” is accusing Mr. Trump of cruelty “to help us forget” that when he and other Democrats “had the chance to grant 11 million immigrants access to the American dream, they instead chose, for partisan purposes, to keep them in the shadows.” Fair enough to criticize Mr. Trump and Congress for whatever they do going forward to clean up this mess. But let’s remember the Obama duplicity that created it.

  24. Gravatar of Steve F Steve F
    12. September 2017 at 09:09

    Morgan, love the asshole analogy.

  25. Gravatar of Major.Freedom Major.Freedom
    12. September 2017 at 14:00

    Harding, when you read this:

    “Harding, You might want to keep up with the news. Trump is encouraging Congress to reinstate DACA”

    From Sumner you always need to mentally add “fake” before the word news.

    Trump doesn’t want Congress to legalize DACA because Trump suddenly switched from being anti to pro DACA. He wants the PROCESS to be followed. Obama could not get Congress to legalize it, so Trump the non-Obama dictator is asking Congress to legalize it within 6 months or else he will revisit it. The 6 months window to end DACA was a prompt to Congress to legislate something this important. He is not asking to make DACA legal now, he is asking Congress to make a decision on it within 6 months, which is a democratic process for this.

    You obviously have no clue how Trump operates. His method is to say something outrageous initially, to get the communications going in Washington with gusto, in order to get political hacks in a state of panic and needing to respond to prove him wrong, all so that the resulting middle ground outcome is what he wanted all along. Read Trump’s book The Art of the Deal for crying out loud, he spells it out in black and white.

    You simply cannot know your opponents if you refuse to read what they believe in detail. That is just lazy.

    This blog is crap.

    Here’s another tip,

  26. Gravatar of Major.Freedom Major.Freedom
    12. September 2017 at 14:04


    California had more votes than voters.

    New Hampshire had enough fraudulent votes to make that state swing the other way.

    The deep state is more dangerous than Trump by a light year. It is not even close. A man with over 40 years business experience, negotiating deals, versus career bureaucrats who haven’t contributed to society’s net wealth their entire lives? Again, this blog is crap.

    Apologies Harding, the part starting with “You obviously have no clue” was directed at the blog, not you.

  27. Gravatar of Major.Freedom Major.Freedom
    12. September 2017 at 14:36

    Speaking of pathological liars, was it not this blog that contained a post with an admission that lies were purposefully told “for the greater good”, but only stopped, haha, supposedly, because the readers were too clever to be duped?

    Sometimes I wonder of the real reason Sumner hates Trump so much is because he reminds him of himself, minus the wealth and power and influence and popularity and…

  28. Gravatar of Benjamin Cole Benjamin Cole
    12. September 2017 at 16:15

    Matthew Waters: I agree that the EPI is a lefty group. They probably slant the data. Still, the gap between productivity and wage gains is so large as to make laughable the idea that productivity will lead to wage gains.

    Scott Sumner: if the EPI chart has been discredited please give us a cite.

    And if the idea of wage stagnation is so sophomoric, why is the Brookings Institution holding an entire conference on the topic?

    Tyler Cowan has posted that young males in the US make about 30% less today than in the early 1960s…

  29. Gravatar of Benjamin Cole Benjamin Cole
    12. September 2017 at 19:39

    On the other hand, some goods news on median family incomes here:


    I would like to see some stats on hours worked vs. median incomes….

    For example, the two-income family of professionals today putting in 120 hours a week vs the 40-hour dad-working family of 1963…

    Interesting topic….

  30. Gravatar of Mark Mark
    12. September 2017 at 20:25


    Though I think most of your predictions are about right, one should give credit where credit is due: the rollback of many burdensome regulations under his admin will be good in the long run (even if the short run had greater impact on politics).

    Also, I think the jury is still out on how he’ll affect the GOP electorally going forward. The Democrats are moving hard to the left, with their major standard bearers now mostly supporting fully socialized medicine outright. If this trend continues, it may be a boon for Trump among moderates and reluctant conservatives. After 2016, we should know now that it is not enough for Trump to be very unpopular for him to lose; his opponent has to be marginally less unpopular. I don’t think it’s clear yet that this is/will be the case in 2018.

    That aside, I’d have never thought Schumer to be the brilliant tactician of the Democratic party, but here he is, making use of that common ground between them and Trump as well as the latter’s unabashed susceptibility to flattery.

  31. Gravatar of Kevin Erdmann Kevin Erdmann
    12. September 2017 at 20:58


    The inverse of that Keymes quote is more apt most of the time:

    “Markets can remain liquid longer than you can stay irrational”.

  32. Gravatar of Benjamin Cole Benjamin Cole
    13. September 2017 at 02:06

    OT but China again….another boom pending?


  33. Gravatar of Christian List Christian List
    13. September 2017 at 10:26

    Jamie Dimon on Bitcoin. Even “better” than Shiller:

    “You can’t have a business where people are going to invent a currency out of thin air,”

    “Don’t ask me to short it, it could be at $20,000 before this happens but it will eventually blow up. It’s a fraud and honestly I’m just shocked anyone can’t see it for what it is, […] it’s worse than tulip bulbs”.


    I assume Dimon is THE expert on fraud and creating money out of thin air. =)

    You can’t make this stuff up, it’s so surreal.

  34. Gravatar of Matthew Waters Matthew Waters
    13. September 2017 at 13:25


    All of the detailed discussion was in my link to a previous post. This is the “citation.”


    Particularly Matt Rognolie’s comments about price indexes. It’s before the comment Scott linked to.


    It seems like you’re starting out with the productivity/wage gap as fact and then saying this “fact” can’t be explained. Perhaps that productivity/wage graph has been shown so often that it really, truly seems like fact. But those productivity and wage numbers took a ton of analysis, with some downright indefensible methodological choices by the EPI.

    If you need a rehash, first of all the graph REALLY should never just show median income. The median/average compensation difference is important, but it should be differentiated from pure excess returns to capital. In some ideal where productivity flows directly to OVERALL workers, then AVERAGE compensation tracks productivity. Indeed, average compensation is much closer than median.

    For the avg. comp/prod. difference, the EPI themselves say most of it is “terms of trade.” The goods bought by workers are not the same as the goods sold by workers. The goods sold by workers include exports and investment goods. The goods bought by workers include imports. Few things with this “terms of trade”:

    1. If capital got no extra bargaining power, then the wages that flow through are based on revenues of capital. Companies can only pay what they get for their sales and match that to what each employee produces.

    2. It’s not innately bad that investment goods (such as software, machining, etc.) had less inflation than consumption goods. What if investment goods such as software had same inflation as consumption goods such as health care? Would the median worker have higher or lower standards of living? It’s absurd to think investment and consumption goods must somehow have equal inflation.

    3. The terms of trade were VASTLY overestimated by using unchained CPI for wages while GDP deflator was used for productivity. The CPI kept the proportions of different goods constant back to 1950’s. But we actually do substitute categories that become relatively lower in price. So the chained price index will have a lower inflation rate. Using the unchained CPI instead of PCE really just can’t be defended.

    You take these factors and capital still has higher returns, likely due to better market power. But it’s much smaller than avg. comp/productivity gap and MUCH, MUCH smaller than the median comp/productivity gap.

    For median/avg compensation difference, that’s far less dubious than the avg comp/productivity difference. It’s another post about what drives it. Basically, I think the proletariat is correct that something is rotten with >90% and >99 percentile wages.

  35. Gravatar of E. Harding E. Harding
    13. September 2017 at 15:36

    Welp, Sumner, looks like your stuff was out of date:

  36. Gravatar of Major.Freedom Major.Freedom
    13. September 2017 at 16:17

    53% of California democrats oppose free speech?

    I didn’t expect it would be that easy for globalist communists to manipulate the “useful idiots”.

  37. Gravatar of Benjamin Cole Benjamin Cole
    13. September 2017 at 16:38

    Matthew Waters:

    Great comments by you.


    How to apply hedonics to housing?

    Is someone buying an $800,000 house in Los Angeles today really buying a house that is 20 times better than the same house in 1974 ?

    Also, did the Economic Policy Institute ever issue a defense of their methodology? What did they say?

    And remember this: no one is ever wrong and macroeconomics. Studies which confirm your biases are correct, and studies that do not are flawed methodologically .

  38. Gravatar of Major.Freedom Major.Freedom
    13. September 2017 at 17:17

    “How to apply hedonics to housing?”

    You apply them until you get the politically palatable outcome for the rate of inflation

  39. Gravatar of Major.Freedom Major.Freedom
    13. September 2017 at 17:22

    Remember when months ago the usual yokels on this blog poo poohed this as a conspiracy theory?


    Obama did spy on Trump

    Of course the reason given is a lie, but it is an admission nonetheless.

  40. Gravatar of Benjamin Cole Benjamin Cole
    13. September 2017 at 19:11

    Matthew Waters:


    This is Feb. 2017 study from the BLS, comes to conclusion that labor share of national income declining after 2000, a real change in old norms.

    Here is the thing: I am sure someone can go through this study and challenge its methodology on some point, and then say the study is not accurate.

    On the other hand, perhaps a leftie could go through the study, and cite reasons why it understates the actual decline of labor share of income.

    I am hardly a leftie or a righty. For example, I think social welfare programs largely do not work. Military outlays are boondoggles.

    Yet when I hear the Fed prattling on about labor shortages (national and fluid markets, easy to advertise for free through the web) but go mute on housing shortages (actual physical limitations on supply in many geographies) I wonder if bias has not seeped into the field of orthodox macroeconomics.

  41. Gravatar of Scott Sumner Scott Sumner
    13. September 2017 at 20:38

    Timothy, I was joking.


    1. It’s hard to believe that people keep repeating that idiotic quote from Keynes.

    2. That’s quite a “model”.

    3. Australia hasn’t had a recession since 1991.

    Ben, You said:

    “if the EPI chart has been discredited please give us a cite.”

    I gave you the link a few days ago. Did you not read it?

    Harding, Nice try, but I never once commented on the views of California Dems.

  42. Gravatar of Matthew Waters Matthew Waters
    13. September 2017 at 23:27

    The BLS link goes through the methodological choices and how they may explain a decent bit of labor/capital share changes.

    First of all, they use gross output. Using net output makes a lot more sense to me. Even the EPI used production net of depreciation. I mean, if you own a company, you take profits after BOTH paying your workers and doing capital investment.

    The top graph also has a low estimate of proprietors’ income. As the BLS says, a different estimate wipes away a substantial portion of labor/capital gap. But it’s also really difficult to estimate. Some proprietor income is result of wage inequality and some is market power of capital.

    There really is something rotten in Denmark. But I do think it’s important to zero in on what’s rotten exactly. It’s not just about how production is sliced up between capital, the 1% and the 99%. Production has grown too slowly. Inefficiencies in housing, health care, military, etc. make the pie smaller. Then capital and the 1% did get bigger slices, making the 99% slice growth anemic.

  43. Gravatar of Matthew Waters Matthew Waters
    13. September 2017 at 23:40

    “It’s hard to believe that people keep repeating that idiotic quote from Keynes”

    Keynes probably didn’t say it, but I don’t get how the quote is idiotic. For example, some investors were wondering how to short Bitcoin at $1k. Now it’s at $4k. In the late-90’s, fundamental short investors went belly-up because they couldn’t make margin calls.

    Maybe the quote is idiotic because it says the market can be irrational. Well, I do think the market is irrational precisely for reasons in the quote. The fact a mispricing exists doesn’t make it easy to profit off of it.

  44. Gravatar of Benjamin Cole Benjamin Cole
    14. September 2017 at 04:38


    Yes I read the links.

    Maybe the EPI chart is suspect. To repeat what I said to Matthew Waters, perhaps a smart lefty could go through data and say the EPI understates the decline in real wages. Especially after Social Security taxes and rising sales taxes are factored in.

    I am wondering about hedonics and housing costs.

    BTW, here is one no one ever talks about; We have proposals for VAT taxes, or border adjustment taxes, or propels to reform the 75,000-page income tax code.

    Why not a national property tax?

    Income taxes are loathsome, difficult, What is income? Can it be hidden (ponder $32 trillion in offshore accounts)? And why tax productive behavior anyway?

    The amazing thing: There is no literature on a national property tax. Terra incognito.

  45. Gravatar of Matthew Waters Matthew Waters
    14. September 2017 at 11:48

    “Especially after Social Security taxes and rising sales taxes are factored in.”

    Sales taxes are part of CPI/PCE.

    The employer portion of social security taxes are added to the total compensation number. The higher employee portion shouldn’t be “factored in.”

    The 60’s payroll tax level was completely unsustainable. Even in a perfect system with no excess capital returns or increased wage inequality, payroll taxes had to be increased to keep the trust funds solvent.

  46. Gravatar of Benjamin Cole Benjamin Cole
    14. September 2017 at 19:45

    Matthew Waters;

    I agree the the Social Security trust fund would have been depleted if tax revenues had not been hiked (there is another argument that FICA taxes were over-raised for long time, to fund federal outlays, so that that income tax payers could pay less, but let that go).

    But why is it chiseled in granite that payroll taxes are the only method to put money in the SS trust funds?

    Why not gasoline taxes, or property taxes, or money-financing fiscal helicopter drops? Tariffs on imports, or incomes above $1 million.

    I feel like a trained monkey who is supposed to answer, “Why, payroll taxes are the only way to fund Social Security.”

    Funny, every year the GOP hollers about income tax reform…but never even ponders granting relief to employees and employers paying onerous FICA taxes. We are taxing people who work and hire—the very people we should NOT tax. The Dems are worse.

    The income tax code is rigged, about 75,000 pages of it. Any long-standing tax code of 75,000 pages is going to be rigged. Call it prima facie evidence.

    Here is the Thai income tax set-up:

    Thai Income Tax Bands – 2016

    Income Band Rate Notes
    0 – 150,000 Exempt
    150,000 – 300,000 5% New Tax Rate
    300,000 – 500,000 10%
    500,000 – 750,000 15% New Tax Rate
    750,000 – 1,000,000 20%
    1,000,000 – 2,000,000 25% New Tax Rate
    2,000,000 – 4,000,000 30%
    4,000,001 and Up 35% New Tax Rate (Reduced from 37%)

    Basically, average or lower workers pay no income taxes. Better off workers pay 10% above 300,000 baht a year. You can see the table.

    Why not a simple income tax system like this?

    PS: Yes, I am sure there is plenty of corruption in the collection of Thai taxes, and in hiding and defining income. There is a global reason for the $32 trillion in offshore bank accounts.

    But at least the Thai system is comprehensible.

    Obviously, the US establishment does not want a comprehensible tax system. What does that tell you?

  47. Gravatar of Christian List Christian List
    15. September 2017 at 05:49


    Here is the thing: I am sure someone can go through this study and challenge its methodology on some point, and then say the study is not accurate. On the other hand, perhaps a leftie could go through the study, and cite reasons why it understates the actual decline of labor share of income.

    You can say something similar about nearly ANY study. You are basically falling for the “golden mean fallacy” here.

    In reality a good study must be right to the point with close to zero flaws. When there are relevant flaws it’s simply not a good study. Period, end of story.

  48. Gravatar of Christian List Christian List
    15. September 2017 at 06:25

    I’m still very glad I voted for Trump.

    This sounded VERY different during the last months. Can you stop being borderline, please? Or maybe not. Himmelhoch jauchzend zu Tode betrubt seems to be a key characteristic for quite some Trump voters (and Trump himself).

  49. Gravatar of Christian List Christian List
    15. September 2017 at 06:32

    Like Matthew said: “The evidence linking the quote to Keynes is very weak, and may be due to confusion with another saying attributed to Keynes.”

    Keynes said this: “There is nothing so disastrous as a rational investment policy in an irrational world.”


  50. Gravatar of Christian List Christian List
    15. September 2017 at 06:38


    The amazing thing: There is no literature on a national property tax. Terra incognito.

    From what I read most local governments in the US impose a property tax as a principal source of revenue. Do you even know that??? Why would you make this tax national/federal? What would be the difference?

  51. Gravatar of Matthew Waters Matthew Waters
    15. September 2017 at 09:02


    You’re going all over the place, talking about policies that don’t have to do with capital/labor imbalance. The EPI study is very flawed. I couldn’t find a serious defense of the price index selection.

    You’ve argued for a far more progressive tax regime, which may be a good idea. But that doesn’t have to do with this argument. This argument is whether:

    1. Capital has excess returns, which is BEFORE any taxes.
    2. Wage inequality, again BEFORE any taxes.

    There is some real excess return to capital. Definitely, there is pre-tax wage inequality. Using taxes to rectify it is a second-best solution and doesn’t really address the underlying problem.

  52. Gravatar of Benjamin Cole Benjamin Cole
    15. September 2017 at 16:39

    Matthew Waters:

    You are correct about my wandering commentary.

    Anyway, Brookings is having its conference on wage stagnation later this month. Maybe some informative papers will be presented.

    Let’s keep an open mind.

  53. Gravatar of Benjamin Cole Benjamin Cole
    15. September 2017 at 16:43

    Christian List: I think a national property tax is a better idea than national payroll taxes.

    Why tax working and hiring?

  54. Gravatar of Benjamin Cole Benjamin Cole
    15. September 2017 at 20:02

    Food for thought;

    “Lakewood CA (SoCal) is a planned, post-World War II community.[10] Developers Louis Boyar, Mark Taper and Ben Weingart are credited with “altering forever the map of Southern California.”[10] Begun in late 1949, the completion of the developers’ plan in 1953 helped in the transformation of mass-produced housing from its early phases in the 1930s and 1940s to the reality of the 1950s.[10]
    WWII veterans could get home loans with no down payment and a 30-year mortgage at only 4 percent interest. On the first day of sales, on March 24, 1950, an estimated 30,000 people lined up to walk through a row of seven model houses. By the end of April, more than 200,000 people had flocked to the Lakewood Park sales office and more than 1,000 families had purchased homes (30-a-day on average). Once, 107 homes sold in just one hour. The monthly cost was only $44 to $56, including principal, interest and insurance.
    The building of Lakewood broke records and made Lakewood the talk of the nation. Empty fields became 17,500 houses in less than three years. A new house was completed every 7 1/2 minutes, 40 to 60 houses per day, with a record 110 completed in a single day.[11]”


    The CPI-math on $44 a month in 1950 is $440 in today’s dollars. By chance, 10-to-1. In 1950, you could buy a single-family detached house, new, for $400-$500 a month (today’s dollars) in Lakewood.

    So, are living standards higher or lower in SoCal today than in 1950?

    Add on: Those Lakewood homes today (now 60-odd year-old structures) sell for about $550,000. Assuming $50k down, your monthly mortgage payment is $2,231, excluding insurance.

    By this metric, housing is four to five times as costly as in 1950, in Lakewood.

    They keep telling us living standards are going up in the USA. Well…..

    BTW, Lakewood is not the glamour district of SoCal. House prices are much higher in many parts of the region or Orange County.

  55. Gravatar of Christian List Christian List
    17. September 2017 at 14:34


    I think a national property tax is a better idea than national payroll taxes. Why tax working and hiring?

    You are partially correct only, because a tax on saving and investment is not too smart as well. That’s why Scott likes to talk about consumption taxes so often. There’s no federal VAT in the US either.

    But taxes seem to be pretty low in the US anyhow. So I don’t think taxes are a big issue in the US either way. The bigger issue seems to be regulations and way too many people that earn their living thanks to an overblown bureaucratic political legal complex, and not with actually productive work.

    I thought about working in the US for quite a while. The problem wasn’t taxes, it was regulations, bureaucracy and some many absurd legal issues.

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