Tag Archives: economics

Will economics matter in November

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Social issues — together with some economic factors — could decide the fate of Team Biden

Source: Investopedia

Economics, we were taught in grad school, assumes that people will act rationally and in their self-interest. But do they always? And do they always act on valid information? Beyond that, can other factors outweigh economic ones?

The coming election may test some common economic assumptions. And it may be decided on matters entirely apart from household finances.

By most Big Picture indications, the U.S. economy is faring pretty well. As President Biden has repeatedly noted, the unemployment rate has been below 4% for the last 26 months, the longest such stretch in more than 50 years. That is a stunning contrast to the 14.7% jobless rate of April 2020, when Covid shut down much of the economy.

And, to take a couple more key indicators, wages have grown substantially since January 2021, when Biden took office, with the 12-month moving average of wage gains starting at 3.4% that month and rising to 5.4% in February 2024 (with an uptick a year ago to 6.4%). By contrast, inflation has slipped to a 3.2% annual rate so far this year, down from its annual high of 7% in 2022, and falling well below the gains in pay most workers are enjoying.

Even in manufacturing – a long-declining sector – employment recently has been topping 12.96 million each month, the largest number since the fall of 2008. While still a far cry from the 17.9 million jobs in the sector we saw in 1990, it’s a healthy gain from the 11.4 million of the worst Covid period in early 2020.

But it is also true that we live in a split-screen economy. Behind the big numbers are unsettling realities that many Americans are having trouble coping with, factors that could outweigh the macro achievements that Team Biden points to. As a friend noted, things are pretty good for the upper middle class and above. Below that, not so much.

Mortgage rates and housing prices are too high for many folks to afford homes, for instance. And high prices, coupled with high loan rates, even put cars out of reach for some — certainly the electric cars that the administration is incentivizing.

“Anyone who wants to buy a house or a car faces a double whammy of higher prices and far higher rates,” The Wall Street Journal noted. “Few are even bothering to apply for a mortgage, with applications for loans to buy a home in the past year at their lowest since 1995. Those who have already achieved the American dream are fine, but it’s getting further away for those still reaching for it.”

And, while inflation rates are coming down, the price of groceries isn’t dropping. Sticker-shock at the cash register continues to be the kind of in-your-face reality that American shoppers face regularly. “Average annual food-at-home prices were 5.0 percent higher in 2023 than in 2022. For context, the 20-year historical level of retail food price inflation is 2.5 percent per year,” the USDA reported. “Price growth slowed in 2023 compared with 2022, when food-at-home prices rose by 11.4 percent.”

Gerald Ford’s failed effort against inflation, source: Wikipedia

Such inflation, it has been said, had a lot to do with turning Jimmy Carter and Gerald Ford into one-term presidents. While the average inflation rate under Biden has been far lower than the others experienced (9.9% on average under Carter and 8% for Ford), Biden’s 5.7% average rate so far has him tied with the rate that obsessed Richard Nixon in his day – hardly a welcome comparison for Team Biden.

And inflation hits some folks far harder than others. Those on the lower end of the economic scale – historically more likely to vote Democratic – are those struggling the most. Many may not realize that presidents have little power over inflation, a challenge that falls to the independent Federal Reserve. But they keenly understand the cash-register effect and that could drive them to seek a change, especially since inflation during the Trump years averaged just 1.9%.

So, if one asks whether a voter is better off now than he or she was four years ago – a line that got Ronald Reagan elected over Carter in 1980 — the answer will vary. Are most voters in Michigan, Ohio and other swing states better off? Unquestionably, they are better off than when Covid raged, but aside from that aberration, are they faring well enough to reward Biden with a second term? Have they been aided enough by the billions Biden pumped into the economy to prevent a repeat of recession after the two-month downturn of early 2020?

Beyond questions of economics, though, social issues such as immigration and abortion policy may weigh heavily, along with the age of both candidates and perceptions about their mental capacities. Will voters recall that Trump quashed bipartisan efforts in Congress to fix the southern border problem, or will they just hear his often-racist podium-pounding on it? Will they react to Republican efforts to bar abortion, even to the extent of curtailing IVF procedures, as the Alabama Supreme Court sought to do before state lawmakers hastily decided to put in protections? Will they consider Trump’s questionable thinking processes, which may far overshadow Biden’s gaffes, as well as Trump’s many self-induced legal woes?

Source: LA Times

Indeed, provided he stays out of jail, will those legal woes help Trump with his backers, as they play into his victim narrative? They certainly keep him in the headlines.

Voters have an extraordinary ability to overlook flaws in the candidates they pin their emotions on. The passion that MAGA enthusiasts feel for their candidate blinds them to his legal and personal flaws, it seems, and their depth of commitment far exceeds the feelings that Biden generates among his backers. Will such passions, coupled with a mixed bag of economic realities, be enough to put Trump back into office?

Moreover, given the distortions of the Electoral College system, where each vote in a less populous and more socially conservative state counts more heavily than each one in more urbanized states, the coming election is hardly assured for the man whose team can claim a lot of credit for restoring a healthy U.S. economy. It’s no wonder the polls put the contenders pretty close to neck and neck. The coming few months promise a lot more drama and, one hopes, better things for voters in time for November.

China: land of contradictions

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As we walked to lunch with faculty and a couple administrators the other day, we passed demonstrators holding a sit-in outside the Tsinghua administrative offices. Their placards told of how they wanted more money for the destruction of their homes, which was planned to make way for faculty housing. Our hosts, chagrined by the protest, nonetheless noted that this was an example of free speech. These people, it seemed, had a right to make their grievances known.

It seemed a lot like home. But, then at lunch, we got some friendly advice from a Party official who is a fellow academic. Be mindful of what we say in class, we were counseled. Chinese students, especially those from the countryside, give teachers enormous deference in this Confucian society. Moreover, with social media alive and well in China – through local knockoffs of Facebook and Twitter – anything we say may find an audience well beyond the classroom. Privately, say what you want. Publicly, be discreet. There’s a difference in China between the private and public realms.

We’re not in Kansas anymore, Toto. But, what a perplexing country this is. On the one hand, it has embraced so much about the West. Just look at the soaring skylines in cities such as Beijing, Shanghai and Hong Kong. And consider the recurring 10 percent-plus annual growth rates that put the U.S. and the rest of the economically turbulent West to shame. The Chinese are setting the pace for the world.

School of Economics and Management

Their passion for capitalism is obvious. The school of economics and management here is a towering modern compound fronting on the strip of stunning buildings that adorn a stretch near the main gate. Inside one of the several buildings, portraits of Nobel Prize-winning economists make a long line in the lobby – seemingly, all are Americans, including New York Times columnist and Princeton economist Paul Krugman. By contrast, the university’s school of Marxism is tucked off in a less impressive quarter of campus, housed in a small, older building. I’ve heard Marxism is regarded as a matter of philosophy, nothing quite so practical as economics and management. Certainly, there’s no doubt who these folks want their students to look up to.

Merit is also prized here, whether in school or in government. To join the Communist Party, our colleague explained, one must be in the top of one’s class academically. The Party is for the elite, those who can lead the country, and getting through the application process is tough and time-consuming. Only about six percent of the 1.3 billion people in the country qualify for Party membership (a surprising share, even if that amounts to 80 million folks).

Indeed, the Party leadership is composed of practical men with impressive academic backgrounds. Some have graduated from Tsinghua, with degrees in subjects such as water engineering. The current president, Hu Jintao, is an alum. The children of some of these men now study at Western institutions such as Harvard. These are bright people who, it seems, take seriously the need to intelligently manage a country where vast numbers still live in poverty a world apart from privileged city-dwellers. They seem to want to spread the wealth and manage the growth of their country well.

And yet, there is a limit to how far western approaches go here. I bumped up against it the other day, when I wanted to shoot some photos at a central athletic field on campus. Large numbers of students paraded about the sprawling field in military uniforms. Military training, a student here told me, is required of all freshmen. Indeed, days earlier I saw similar troops of students marching around campus and singing songs of loyalty to the nation. It was reminiscent of years ago in the U.S., when students had to go through ROTC training on many campuses.

Struck me as interesting. But a fellow in a black athletic outfit thought otherwise. “Delete,” he told me politely — but firmly — as he appeared out of nowhere. This was arguably a public place, and certainly would have been considered so in the U.S. Further, he was not in uniform and didn’t say who he was. But I was in no position to argue. I am, after all, a guest in this country and must behave as one. I certainly don’t wish to offend my hosts, whose graciousness has gone above and beyond.

School of Marxism

Odd thing is, other military events on campus seem to be fair game. For instance, I was able days before to photograph a flag-raising ceremony conducted by young people in front of the main administration building. Chinese people were similarly taking photos. That, it seemed, was acceptable even as the larger parade was not.

So, every once in a while, I expect I’ll run into reminders that the rules are different here. As long as I am a guest, I will comply. Anything else would be ungracious, to say the least.

Making business journalism sexy (almost)

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Looking for ways to make business journalism come alive for students? How about creating scavenger hunts for juicy tidbits in corporate government filings? What about mock press conferences that play PR and journalism students against one another? Then there are some sure bets – awarding $50 gift cards to local bars for mock stock-portfolio performances and showing students how to find the homes and salaries of university officials and other professors – including yourself — on the Net.

These were among the ideas savvy veteran instructors offered at the Business Journalism Professors Seminar last week at Arizona State University. The program, offered by the Donald W. Reynolds National Center for Business Journalism, brought together as fellows 15 profs from such universities as Columbia, Kansas State, Duquesne and Troy, as well as a couple schools in Beijing, the Central University of Finance & Economics and the University of International Business and Economics. I was privileged to be among those talented folks for the week.

We bandied about ideas for getting 20-year-olds (as well as fellow faculty and deans) excited about business journalism in the first place. The main answer was, of course, jobs. If they’d like good careers in journalism that pay well, offer lots of room to grow and that can be as challenging at age 45 as at 20, there really are few spots in the field to match. These days, with so much contraction in the field, business and economic coverage is one of the few bright spots, with opportunity rich at places such as Reuters, Bloomberg News, Dow Jones and the many Net places popping up.

The key, of course, is to persuade kids crazy for sports and entertainment that biz-econ coverage can be fun. The challenge is that many of them likely have never picked up the Wall Street Journal or done more than pass over the local rag’s biz page. The best counsel, offered by folks such as UNC Prof. Chris Roush, Ohio University’s Mark W. Tatge, Washington & Lee’s Pamela K. Luecke and Reynolds Center president Andrew Leckey, was to make the classes engaging, involve students through smart classroom techniques and thus build a following. Some folks, such as the University of Kansas’ James K. Gentry, even suggest sneaking economics and (shudder) math in by building in novel exercises with balance sheets and income statements.

Once you have the kids, these folks offered some cool ideas for keeping their interest:

— discuss stories on people the students can relate to, such as the recent Time cover on Mark Zuckerberg or the May 2003 piece in Fortune on Sheryl Crow and Steve Jobs, and make sure to flash them on the screen (at the risk of offending the more conservative kids, I might add the seminude photo BW ran of Richard Branson in 1998)

— scavenger hunts. Find nuggets of intriguing stuff in 10Ks or quarterly filings by local companies or familiar outfits such as Apple, Google, Coca-Cola, Buffalo Wild Wings, Hot Topic, The Buckle, Kellogg, etc., and craft a quiz of 20 or so questions to which the students must find the answers

— run contests in class to see who can guess a forthcoming unemployment rate, corporate quarterly EPS figure or inflation rate

— compare a local CEO’s pay with that of university professors, presidents or coaches, using proxy statements and Guidestar filings to find figures

— conduct field trips to local brokerage firm offices, businesses or, if possible, Fed facilities

— have student invest in mock stock portfolios and present a valuable prize at the end, such as a gift certificate or a subscription to The Economist (a bar gift card might be a bit more exciting to undergrads, I’d wager)

— follow economists’ blogs, such as Marginal Revolution and Economists Do It With Models, and get discussions going about opposing viewpoints

— turn students onto sites such as businessjournalism.org, Talking Biz News, and the College Business Journalism Consortium

— have students interview regular working people about their lives on the job

— discuss ethical problems that concern business reporters, using transgressors such as R. Foster Winans as examples. Other topics for ethical discussions might include questions about taking a thank-you bouquet of flowers from a CEO or traveling on company-paid trips, as well dating sources or questions about who pays for lunch

— discuss business journalism celebs, such as Lou Dobbs and Dan Dorfman

— discuss scandals such as the Chiquita International scandal (Cincinnati Enquirer paid $10 m and fired a reporter after he used stolen voicemails)

— use films such as “The Insider,” “Wall Street,” and “Social Network” to discuss business issues

— use short clips from various films to foster discussions of how businesses operate. Good example: “The Corporation”

— team up with PR instructors to stage a mock news conference competition pitting company execs in a crisis against journalism students. Great opportunity for both sides to strut their stuff.

We also heard helpful suggestions from employers, particularly Jodi Schneider of Bloomberg News and Ilana Lowery of the Phoenix Business Journal, along with handy ideas from Leckey and Reynolds executive director Linda Austin, a former business editor at the Philadelphia Inquirer. My biggest takeaway: run some mock job interviews with students and teach them to send handwritten thank-you notes.

And we were treated to some smart presentations by journalists Diana B. Henriques of the New York Times about the art of investigative work (look for her new Madoff book), the University of Nevada’s Alan Deutschman about the peculiar psychologies of CEOs (narcissists and psychopaths are not uncommon), the University of Missouri’s Randall Smith’s view of the future for business journalists (it’s raining everywhere but less on business areas). We got some fresh takes on computer-aided reporting, too, by Steve Doig of the ASU Walter Cronkite School of Journalism and Mass Communication as well as on social media by the Reynolds Center’s Robin J. Phillips.

For anyone interested in journalism, especially biz journalism, it was a great week. As I take the lessons from ASU to heart, my students will be better off. My thanks to the folks there.