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What We Read Today 22 January 2017

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Topics today include:

  • Why the Arab World Is Alarmed by Trump

  • Donald Trump Wants to Know Why Protesters Didn't Vote

  • White House Says Media Delegitimizing Trump, won't 'take it'

  • 2015 Produced a Data Point Against Increasing Inequality

  • Cumulative Wage Growth Demographics Offer Strong Reason for Trump's Victory

  • Social Bias Correlates with Votes for Trump

  • The White House Climate Change And Civil Rights Webpages Are Gone

  • Nuclear North Korea:  An Important Issue for Trump

  • The Economics of Obamacare

  • Why It's Not the Size of the Crowd that Matters

  • Varoufakis:  We Need a New Alternative to Trump's Nationalism

  • Trump Assumes Control of the Most Powerful Presidency Ever

  • Debunking the NAIRU Myth

  • And More

Articles about events, conflicts and disease around the world

Global

  • Arab World Sees Trump Address As Declaration Of War (vocativ)   Social media in the Middle East has been blowing up since President Donald Trump vowed in his Friday inaugural speech to “unite the civilized world against radical Islamic terrorism” and eradicate the phenomenon “completely from the face of the earth” — a statement seen by tens of thousands as a clear declaration of war against all of Islam.  Among the more than 95,000 Twitter users posting under the Arabic hashtag #TrumpInauguration (#تنصيب_ترامب) were Trump critics from Jordan to Egypt to Saudi Arabia outraged by the president’s inflammatory conflation of Islam with violent extremism. Many accused the 45th president of singling out Islamic terrorism while refusing to address radicalism in other forms, including within his own constituency.

trumps.first.order.arabic

U.S.

Protesters:  Why Didn't They Vote? (Twitter)  Econintersect:  This is a logically disconnected question.  The assumption that many (or even a sizable minority) didn't vote has no basis in fact.  It would be just as logically fallacious to say that the 3 million protestors were the 3 million whose votes constituted the popular vote majority for Clinton, which some replies to this tweet suggested.  Perhaps a better question would be:  Why did all the Jill Stein voters protesting not vote for Clinton if they are so adamantly opposed to Trump?  Yes, we know the answer:  This entire situation is not about logic, but mainly about emotions.

trump.protestors.vote

  • White House says media delegitimizing Trump, won't 'take it'  (Reuters)   The White House vowed on Sunday to fight the news media "tooth and nail" over what officials see as unfair attacks on President Donald Trump, setting a tone that could ratchet up a traditionally adversarial relationship to a new level of rancor.  A day after the Republican president used his first visit to CIA headquarters on Saturday to accuse the media of underestimating the crowds at his inauguration, White House Chief of Staff Reince Priebus expressed indignation at the reports and referred to them as "attacks".  Priebus said on "Fox News Sunday":

"The point is not the crowd size. The point is the attacks and the attempt to delegitimize this president in one day. And we're not going to sit around and take it." 

  • Strong across-the-board wage growth in 2015 for both bottom 90 percent and top 1.0 percent (Economic Policy Institute)  Hat tip to Stephanie Kelton.  Annual inflation-adjusted earnings of the top 1 percent of wage earners grew 2.9% in 2015, and the top 0.1 percent’s earnings grew 3.4%, according to our analysis of the latest Social Security Administration wage data. What is relatively unique about 2015 was that the 3.4% wage growth for the bottom 90 percent matched that of the top 0.1 percent. This strong wage growth for the bottom 90 percent reflects both the lull in inflation (up just 0.1%) and the failure of wage inequality to continue its growth in 2015. Annual wages of the bottom 90 percent now stand 3.5% above what they were pre-recession in 2007, with all of that growth essentially occurring in 2015.  But 2015 is an outlier year - see also next item.

wage.growth.1979.2015

  • Cumulative Wage Growth 1979-2015 (Twitter)  Stephanie Kelton has contributed to GEI.  The wage data indicates one of the reasons that the two populist candidates (Trump and Sanders) got 44% of the primary votes, while the other 13 "major" candidates got 56%.  That's an average of 22% per populist vs. 4% per traditional candidate.  But economics was not the only correlation - see next item.

Click for large image.
cummulative.wage.growth.1979.2015

  • Explaining White Polarization in the 2016 Vote for President: The Sobering Role of Racism and Sexism (people.umass.edu)  Correlations between attitudes and Trump votes show that the effect of economic dissatisfaction is dwarfed by the relationship between sexism and racism.  Econintersect:  It is critical to note that these correlation of attitudes with voting pattern do not indicate a causality:  There is nothing here that proves people voted for because of social biases.  Economic issues may have been more of decision factor than bias - we just don't know.

Figure 3: Predicted probability of voting for Trump based on values of economic dissatisfaction, racism, and sexism

  • The White House Climate Change And Civil Rights Webpages Are Gone (vocativ)  Immediately after Donald Trump was sworn in as the 45th president of the United States, several official White House webpages and reports were wiped off the internet. It didn’t take long for the press to notice that the “climate change,” “civil rights” and “lgbt” pages on WhiteHouse.gov’s “Issues” section are gone. A Department of Labor report on advancing LGBT workplace rights was also removed. It’s not immediately clear on whether those pages will be replaced with something else.  Further:

The Trump administration instead replaced Obama’s “issues” directory with a new one of its own, listing six different initiatives. In his “America First Energy Plan,” he says that the Climate Action Plan, an initiative aimed at cutting down on greenhouse gas emissions, is “harmful” and “unnecessary.” In the “Standing Up For Our Law Enforcement Community” section, President Trump argues for “more law enforcement.”

Trump has also taken the reins of the @POTUS Twitter handle. All of the Obama Administration’s tweets and follows have been moved over to @POTUS44, and surprisingly, Trump hasn’t sent a single tweet from his new presidential account yet.

North Korea conducted its fifth nuclear test in September, and its leader, Kim Jong Un, said on Jan. 1 that his country was in the “last stage” of preparations to test-fire a long-range missile capable of carrying a nuclear warhead to the continental United States. In response, President-elect Donald Trump tweeted that the missile test “won’t happen,” and he blamed China for refusing to help rein in Pyongyang.


People watch a TV news channel airing an image of North Korea's ballistic missile launch at a Seoul railway station on June 23. (Ahn Young-joon/AP)

Other Scientific, Health, Political, Economics, and Business Items of Note - plus Miscellanea

  • Analysis: The Economics Of The Affordable Care Act (Insurance News Net)  The Affordable Care Act (ACA), which President-elect Donald Trump and the Republican-controlled Congress have vowed to repeal, was crafted to overcome two basic problems in the provision of health care in the United States. First, the costs are incredibly skewed, with just 10% of patients accounting for almost two thirds of the nation’s healthcare spending. The other problem is asymmetric information: Patients have far more knowledge about the state of their own health than insurers do. This means that the people with the largest costs are the ones most likely to sign up for insurance. These two problems make it impossible to get to universal coverage under a purely market-based system.

The Centers for Medicare and Medicaid Services projects that per capita spending on health care in the US will average $10,800 in 2017. But the cost for the most expensive 10 percent of patients will average $54,000 per person, compared to an average of just $6,000 for everyone else. The cost for the healthiest 50 percent of patients averages under $700 per person.

Thus far, the ACA has actually worked better than expected in most respects. The number of uninsured actually dropped somewhat more than had been projected, despite the fact that a number of states controlled by Republican governors and/or legislatures opted not to expand Medicaid as had been required in the measure passed by Congress. The cost of the program has also been less than projected as health care cost growth has slowed sharply in recent years. The ACA likely contributed to slower cost growth, although that slowdown preceded the ACA, so other factors are clearly involved.

not.the.size

A clash of two insurgencies is now shaping the west. Progressives on both sides of the Atlantic are on the sidelines, unable to comprehend what they are observing. Donald Trump’s inauguration marks its pinnacle.

One of the two insurgencies shaping our world today has been analysed ad nauseum. Donald Trump, Nigel Farage, Marine Le Pen and the broad Nationalist International that they are loosely connected to have received much attention, as has their success at impressing upon the multitudes that nation-states, borders, citizens and communities matter. 

However, the other insurgency that caused the rise of this Nationalist International has remained in the shadows: an insurrection by the global establishment’s technocracy whose purpose is to retain control at all cost. Project Fear in the UK, the troika in continental Europe and the unholy alliance of Wall Street, Silicon Valley and the surveillance apparatus in the United States are its manifestations.

Today, on inauguration day, Trump inherits what decades of credulous Congresses have wrought. The power to further unbalance our constitutional system is in his hands. 

A Clinton presidency (or a Sanders presidency, or Cruz presidency) would have raised these worries too, given the state of presidential power in 2017. However, most politicians are thoroughly steeped in democratic norms respecting legitimate opposition and the rule of law. A Trump presidency, which seems utterly unrestrained by those norms, raises more frightening questions. 

  • Debunking the NAIRU myth (Matthew C. Klein, FT Alphaville)  Hat tip to Stephanie Kelton.  The "Phillips Curve" purported to define a relationship between inflation and unemployment.  While the data in selected time periods does show such a relationship, over longer time periods the relationship does not exist.  See graphics below.  Some excerpts:

First, some history. In 1926, Irving Fisher found a relationship between the level of unemployment and the rate of consumer price inflation in the US. In 1958, AW Phillips studied UK data from 1861-1957 and found a relationship between the jobless rate and the growth of nominal wages, although the relationship seems to have been an artifact of the gold standard given the vertical line he found in the postwar period:

Phillips Curve 1948-1957 original

Some people (wrongly) interpreted Phillips’s data to mean that there was a straightforward trade-off between the inflation rate and the unemployment rate. 

 This worked out poorly, but the reaction took the form of an equally dubious idea: the Non-Accelerating Inflation Rate of Unemployment, or NAIRU. In this view, the change in the inflation rate should be related to the distance between the actual jobless rate and some theoretical level. If the unemployment rate were above this “neutral” level the inflation rate would slow down and potentially turn into outright deflation. If the jobless rate were “too low”, however, consumer prices would rise at an accelerating rate.

Regressing changes in core inflation against changes in the jobless rate gets you an r-squared of 0.11, which is basically meaningless. Moreover, that result is purely a product of the data points in the blue circle, which all occurred during the teeth of the financial crisis and could be blamed on the co-movement of employment and commodity prices. Take those out, and you end up with two perfectly unrelated series 

 


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