The Progressive Ensign

insights and analytics to build an economy that works for all

Author: Patrick Hill (Page 1 of 17)

Saving Democracy: Congressional Representative Districts Drawn By Independent Commission

(Editor Note: This is the third post in a series on renewing the institutions of our federal government and democracy to ensure that it will endure. Looking at trends today with data, analysis of the present situation and recommendations for changes. Todays post focuses congressional districts being set by an independent commission not legislators. )

Sources: North Carolina General Assembly, Kontretykieta.com – NC Redistricting 2016

The next census count of the population of 50 states is to be completed in 2020, with states losing population or gaining population being forced to redistrict their Congressional Representative districts.  Southern and Western states like North Carolina, Texas, Florida, Virginia, California, Oregon, Arizona, and Colorado are likely to gain seats.  Northeastern and Midwestern states like Pennsylvania, New York, Rhode Island, Ohio, Michigan, Illinois, and Minnesota plus Alabama and West Virginia are likely to lose seats.

The redistricting process must be completed by the time ballots are printed for the 2022 election. Only 6 states use independent commissions of equal representation of each party and varying numbers of independent non-partisan members. The other 44 states use some form of state legislature approved redistricting. The legislatures are given the power to establish congressional districts by the Constitution.

Source: Wikipedia – 4/1/19

Does it really make sense to have the foxes running the hen house?  All states have partisan legislative bodies (except Nebraska), the majority party ensures that they can dominate the next congressional election by gerrymandering the state district map.   Legislators should not be deciding who voters vote for, voters should be making that decision.  In North Carolina, General Assembly Republican, Rep. David Lewis said, “I think electing Republicans is better than electing Democrats,” of a map plan passed by the legislature in 2016. When voters went to the polls that fall, 10 GOP representatives won seats, while only 3 Democrats were elected yet the GOP only won 53 % of the popular vote  Now this redistricting issue is before the Supreme Court to be decided later this year. Other states have been in and out of federal courts including Maryland and Wisconsin for redistricting violations based on party affiliation. State legislatures have a long undemocratic history of creating poll taxes for ethnic groups they didn’t like or discriminating against minorities by placing them in loaded districts away from their logical geographic location.

Let’s safeguard from partisanship the most important of democratic institutions – voting, by ensuring that voters will be located in diverse districts from all political points of view.  Congress needs to pass a law requiring all states to institute Independent Commissions to draw congressional district maps.   Maybe if we had more representative districts candidates would offer more compromising positions, so when they go to Congress they might just learn to work together and do what’s best for the people not corporations or the Elite.

Millennials Left Out of the Economic Boom

Image: fee.org

Millennials have seen the lowest level of GDP growth of three major generations since WWII.  Baby Boomers, Gen X enjoyed GDP growth rates of between 30 – 40 % in the ten years after they turned 18 years old.  While, Millennials experienced half those GDP growth rates .

Sources: Commerce Department, The Washington Post – 3/15/19

To gain entrance to good jobs, Millennials became the most educated cohort in America’s history – yet at a price.  Student debt is at an all-time high of $1.5 trillion. This debt level has caused at least 400,000 potential young buyers of homes to be left out of the housing market in 2014, according to Federal Reserve economists.  One reason students needed to take on such massive debt loads is states for the past 30 years have been drawing down their financial support of college education by between 60 – 50 %.  Universities were left no choice to fill the funding gap except by raising tuition. 

We have documented in previous posts that real wages for the 80 % in income group have been basically stagnant for the last 30 years.  As the nation’s top 20 % gains 90 %  of the income and wealth gains since the Great Recession, Millennials have been further challenged to keep up, particularly if they have no college education living in inner cities and Midwest rural regions.  The hallowing out of manufacturing in the Midwest and South has produced low wage, low benefit, limited future jobs for young people. Add the slow Internet infrastructure and lower quality healthcare makes the future look dim.  Is it any wonder that the Heartland has the highest opioid death rate in the country?

Millennials feel their lack of an economic future in other ways, delaying marriage by 8  to 10 years and having children 5 – 6 years later than other generations.

Next Steps:

A whole generation has been missing out on the benefits of the fastest growing wealth generation economy in the world.  As income and wealth goes to the top 10 % to the highest level of concentrated wealth since 1929, the education services that make for a broad based pluralistic economy have fewer student slots and extremely high tuition.  Corporate and wealthy individual taxes are at the lowest levels in 50 years.  Our higher education system is turning into a grinder for people of modest means, carrying a heavy burden of debt for young people to begin their careers and families.

The number one issue for Millennials is student debt.  We need as a country to deal with this problem.  Students did not withdraw support for state colleges and universities, taxpayers and state governments did withdraw financial support with huge consequences for our young people and our economy. There have been a variety of proposals to reduce student debt including, forgiving debt completely, or forgiving debt for service to the country (as a proposal we made in a post to focus on investing in our Midwest communities), require corporations to provide more training for employees, and corporate support of a national apprenticeship program at a funding level and quality of Germany’s apprentice program for non – college careers.

The key is we need to end the bickering between conservatives, independents and liberals and take on the economic challenge of huge debt that our young people have today.  Certainly, these people need to take responsibility for their own economic future, but we who created the present economy of winners and losers need to do better by our young people or when they gain positions of economic power we may not like the economic system they setup.

Saving Democracy: Make Voting Rights, Systems Uniform For All 50 States

(Editor Note: This is the second post in a series on renewing the institutions of our federal government and democracy to ensure that it will endure. Looking at trends today with data, analysis of the present situation and recommendations for changes. Todays post focuses voting rights being made universal for all states without state manipulation of the voting process or access for all eligible voters.)

Photo: mashable.com

Over the past ten years 23 states have passed laws to restrict voter rights.  Some states of have instituted cumbersome identification procedures, cut down pre-election day times to vote, added restrictions on mail in ballots, taken voters off the rolls for political reasons, and made voter registration more difficult.

Source: The Brennan Center for Justice – 3/5/19

Automatic Voter Registration (AVR) is a concept gaining momentum in many states, the Brennan Justice Center for Justice outlines their proposal in this way:

First, AVR makes voter registration “opt-out” instead of “opt-in”— eligible citizens who interact with government agencies are registered to vote or have their existing registration information updated, unless they affirmatively decline. Again, the voter can opt-out; it is not compulsory registration. Second, those agencies transfer voter registration information electronically to election officials instead of using paper registration forms. These common-sense reforms increase registration rates, clean up the voter rolls, and save states money.”

The plan would automatically use registration information at a state agency for eligible voters to be registered to vote: for example, when 18 year old goes to the DMV for a driver’s license their registration information would electronically be sent to the Secretary of State and their name added onto the voting rolls where they live. Citizen interactions with other state agencies where registration is required would follow a similar procedure.

The House of Representatives has just passed HR 1, a comprehensive voting rights act making voting registration, rights, procedures, identification, pre-election day voting, public funding of candidates, tax returns by candidates for President and Vice – President, election day a federal holiday and other innovations to bring our voting process into the modern age, here is a summary of the bill from the House website:

This bill addresses voter access, election integrity, election security, political spending, and ethics for the three branches of government.

Specifically, the bill expands voter registration and voting access, makes Election Day a federal holiday, and limits removing voters from voter rolls (and automatic voter registration).

“The bill provides for states to establish independent, nonpartisan redistricting commissions.

The bill also sets forth provisions related to election security, including sharing intelligence information with state election officials, protecting the security of the voter rolls, supporting states in securing their election systems, developing a national strategy to protect the security and integrity of U.S. democratic institutions, establishing in the legislative branch the National Commission to Protect United States Democratic Institutions, and other provisions to improve the cybersecurity of election systems.

This bill addresses campaign spending, including by expanding the ban on foreign nationals contributing to or spending on elections; expanding disclosure rules pertaining to organizations spending money during elections, campaign advertisements, and online platforms; and revising disclaimer requirements for political advertising.

This bill establishes an alternative campaign funding system for certain federal offices. The system involves federal matching of small contributions for qualified candidates.

This bill sets forth provisions related to ethics in all three branches of government. Specifically, the bill requires a code of ethics for federal judges and justices, prohibits Members of the House from serving on the board of a for-profit entity, expands enforcement of regulations governing foreign agents, and establishes additional conflict-of-interest and ethics provisions for federal employees and the White House.

The bill also requires candidates for President and Vice President to submit 10 years of tax returns.”

Senate Majority Leader McConnell, denounced HR1 as a ‘power grab’, which seems dismissive of a way to effectively bring our voting processes into the modern age and make voting more democratic rather than manipulated by a controlling party in the state to enhance the turnout of their voters over others in elections. 

It is about time we had universal voting rights, processes and programs across all our states to ensure that voting is accessible by all citizens regardless of ethnicity, race, religion, or wealth.

Our next post: will focus on congressional districting, crucial to fair elections.

(In a series: on key topics for renewal of our democracy; voting rights, corporate power and reform, Electoral College reform, congressional district reform, Congressional reform (not three presidents) (campaign finance reform), using the Internet and high tech (AI is a common good) to strengthen democracy, innovative government program implementation using Silicon Valley model, support of the Press (our Fourth Estate), educational reform, ethical government service, finance and stock market reform, land and home ownership, environmental stewardship, citizenship and service, civil discourse (choose our words), using evidence to pass laws and create policy, and our global leadership role.)

Saving Democracy: Renewing Our Government Infrastructure v2.0P

Source: editorials.voa.gov

“We can’t have an economy that works for all if we don’t have a democracy that works for all.” TPE, Editor, Patrick Hill

By returning political power to the people then economic opportunities can be once again be made available to all.   Why is this reform and rebuilding effort important? Because the people don’t trust their government.  If citizens don’t trust their democratic institutions to do the right things for them, they will turn to demagogues who use hate, fear, divisiveness, pride, and power to weld control over the people to gain wealth and power for themselves. Here is a poll from NPR/Marist on the trust people have in various forms of U.S. government:

Sources: NPR, Marist – 1/17/18

Congress comes in dead last of all the major institutions, with the Military first and the Supreme Court second (though as the court becomes more politicized this level of trust may change). The Presidency under our present POTUS has not helped in terms of trust, since he was not elected by the majority of people falling almost 3 million votes short and then proceeded with policies that only appeal to his minority base. People inherently believe the majority person or policy should win. In our 2016 presidency election the majority candidate did not win, so the majority opinions are not represented in the Executive branch. The Executive branch starts out with a lack of support, trust or mandate to govern. Our government by the people for the people and of the people can only survive if people have trust in their government. What is even worse is the level of confidence Americans have in their government to handle international or domestic problems has dropped significantly:

Source: Gallup – 1/31/19

One month after the 9/11 tragedy the American public rallied around their government and leaders to provide protection and bring the perpetrators to justice.  Since 2001, the confidence the public has in their government to handle problems has declined to a 18 year low.

One reason trust is so low is the government actually does not represent the people when it comes to passing laws in accordance with citizen opinions, needs and condition.  Professors Martin Gilens, at Princeton, and Benjamin Page, at Northwestern examined thousands of opinion poll surveys from 1981 to 2002, and grouped them based on the top 10 % in income versus the bottom 90 %.  Then, they reviewed 1779 policy proposals versus the opinion surveys and found the elite saw 76 % of their opinions reflected while the general public only 3%.  Special interest groups gained 56 % of their positions reflected in policies. It is little wonder that the general public is frustrated with their federal government.

Democrats, Republicans, and Independents need to step back a moment, or a year and think about our democracy first and their policies second.  The most salient aspect of politics since the 1980s is the ascendency of corporations, the wealthy and special interest groups gaining and sustaining power in Washington supported by both major parties. At the same time wages for the working class and 80 % in income have basically stagnated on a real wage basis. Our government needs to work for everyone: conservative, liberal, immigrant, native born, poor or wealthy.  We need more government processes focused on building consensus rather than the predominant government, Internet and media processes fanning the flames of division. Division is freezing our ability to move ahead and even look ahead 10, 20 or 30 years to solve problems before they become too immense to solve without great loss of life or economic damage. The fact that we cannot seem to make the right legislative, corporate decisions or encourage environmental sound citizen behaviors to save our planet is evidence enough of the breakdown of our democracy to solve real problems. Are these problems solvable? Yes, but only if we work together bringing the genius of our diverse people to focus in effective ways to solve those existential issues we face. There are so many narratives that are disconnected, people talking past each other. We need to connect the narratives and arrive a one narrative that the majority of Americans can support on each major issue.

Our next post: will focus on voting, the heart of our democracy.

Trust in the Federal Government at 20 Year Low

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: promarket.org

To build the common good, we need to have our citizens feel that their government is functioning well enough to handle domestic and international problems. A trust peak of 83 % was made in 2001 right before the 9/11 event where the public trusted the government a ‘fair amount’ to handle international problems slightly less for domestic.  Gallup reports that in January 2019, the figure for trust to handle international problems had sunk to 35 %, with domestic slightly higher at 41 %.

Sources: Gallup, The Wall Street Journal, The Daily Shot – 2/

This is a crisis in public trust for sure.  Government took a big hit in trust with the Nixon Watergate scandal, the Bill Clinton impeachment and finally the 9/11 terrorist attack.  Do we feel our government can handle a fast moving international world that is increasingly dangerous to U.S. interests and people?  Domestically, the civic dialog has sunk to a new low in lack of civility and respect, largely due to the example of our President.

How do we restore the trust so our government can function the way it needs to in protecting our freedoms, ensuring domestic tranquility and equal opportunities?  Trust can be strengthened by government becoming more responsive and transparent in its functioning.  We need sunshine laws that require Congress disclose all appointments during the day, who they meet with and the interests or corporations they represent.  All senators and representatives need to hold regular Town Hall meetings to listen and understand the needs of their constituents while respecting differences.  On a national level we need a President who will show through his example how to listen to others, use inclusive processes, research and science in making policies.

For groups feeling left out of the economic mainstream; in our core inner cities, Midwest and rural areas of the South, government needs to be engaged in actively solving their problems. Government falls short by implementing band-aid programs that do not go to the heart of issues: like the opioid epidemic which strikes rural communities twice as hard as coastal areas. We have proposed a Heartland Venture Marshal Plan to invest in a variety of infrastructure needs in the Midwest including: healthcare, upgraded digital Internet access, job training, improved college access, apprenticeships and self-renewing economic systems similar to Silicon Valley’s innovative infrastructure. Internationally, our country needs to rejoin the democracies of the world by supporting the Paris Climate Accord, strengthening NATO, supporting the U.N., treaties with Russia on nuclear missiles and the Iran nuclear agreement. We need to overall treat our allies as partners and our adversaries warily. It is time to make the changes before a major crisis domestically or internationally forces our government processes to change possible in ways that a poorly designed and thought through.

Corporations Need To See Themselves As A Member of the Community

Photo: target.com

Amazon announced last Wednesday that they were pulling out of the deal to locate a second corporate headquarters in Queens, New York City.  The company pledged thousands of jobs, hiring of local contractors and to develop state of the art technology campus to revitalize the neighborhood.  To lure the huge firm to New York, Gov. Cuomo and New York Mayor de Blasio offered over $3 billion in tax and other incentives.  Local politicians were blindsided by the incentive package triggering grassroots opposition.  Amazon only allocated one person to work with local groups, who did not move into the area until the last few weeks.  Too little local focus too late.

Let’s look at the real issue, the company coming in from Seattle is an outsider.  To become a member of the community it needs to start with local leaders, interest groups and those possibly displaced by the move in.  Plus, the company executives had to realizes there would be blow back about the incentives in a community that is concerned with affordable housing, healthcare and jobs for all levels of income not just high paid tech workers. The neighborhood leaders are going to be suspicious of an outsider to begin with, then add the huge corporate power of Amazon and the fight was on.  Local politicians saw this move in as an example of big corporations taking advantage of local communities to make more profits for itself at the cost of taxpayers.   The $3 billion dollars will not be spent on local programs, healthcare, job training, or affordable housing the community needs.

Executives should have realized they are joining a community, and needed to win over local leaders just as a resident might move into a new neighborhood and make friends with the neighbors first before building a monster home (changing the design to be acceptable).  Companies are used to being able to get their way, make profits at the cost of local communities and not worry about the politics.  Those days are over, the political tide has shifted from worshipping corporations to seeing them as having all the laws, rules of markets and labor go their way for the last 20 years.  Including, millions of dollars corporations spend on lobbyists in Washington to ensure they maintain their advantage over citizens in the halls of power.

Companies have to see that they must design their corporate policies, programs, and worker relationships to build the common good.  The common good can support companies taking initiative, innovating, and sharing their wealth, while still providing a good return to shareholders.  Executives that balance the needs of the community with their requirements to make reasonable profits will be the most successful, others will find arrogance will lead to fights, lawsuits and new laws eventually hitting the bottom line.

The Big Myth: Stock Buybacks Boost the Economy & Create Jobs

After the recent NY Times op-ed by Senators Bernie Sanders and Chuck Schumer to require corporations share profits with workers before stock repurchases, there has been a lot of confusion about how stock buybacks work and their impact on the economy.  Let’s clarify how share buy backs work first.

Corporate stock is bought and sold in open markets between a buyer and seller. On any one day the share price moves up or down depending on the demand for shares between a buyer and seller.  Corporate executives can manipulate the price of shares by reducing the pool of shares on any trading day, according to SEC rules up to 25 % of the daily volume and not executing a repurchase within the first 30 minutes of the open or the close.  If shares are taken off the market on any one trading day, posted to the books of the company those shares are effectively taken out of the market and if demand stays the same the price goes up.  Of course, the share price can go down as well, if demand drops on the repurchase day.

Stock buybacks cause misleading reports on earnings per share.  A simple example, if Gigantic HiTech has profits of $1 million for the quarter and 1 million shares are outstanding in the market, then the EPS is $1.00.  However, if the firm purchases 100,000 shares during the quarter and takes them off the open market the total number of outstanding shares is reduced to 900,000 artificially boosting EPS to $1.11 or 11 %.  The company has not increased profits during the period they have just reduced the number of shares outstanding and report the EPS figure in non GAAP reports.  GAAP reporting requires EPS be calculated on the number of outstanding shares before repurchase.

So, the dollars spent on stock share repurchases do not go into ‘jobs, the economy or re-invested’ the money is spent on goosing stock prices. The SEC in 1982 prior to the Safe Harbor policy that allows for stock repurchases called corporate stock repurchasing ‘stock price manipulation’.  From 1982 to today the policy allowed corporations to execute market stock purchases and not be held liable in shareholder lawsuits for price manipulation.  Plus, companies only had to report open market purchases each quarter voluntarily.  Effectively, the SEC gave companies the green light to drive stock prices anyway they wanted. Just because time has gone buy that does not change the manipulative character of the stock repurchase practice.

How big a problem is it?  Goldman Sachs estimates that $940 billion stock repurchases were made in 2018, and they continue to forecast a similar figure for 2019.  Major players in FAANG stocks repurchase billions of dollars of shares supporting stock prices.  Forbes estimates that Apple spent $100 billion in share repurchases in 2018.  CNBC calculated a year ago that Apple share prices were inflated by as much as 20 %.  Between 2015 through 2017 S & P companies spent 60 % of all profits on stock buybacks, according to Forbes.

So, where else could they be spending the money instead of driving stock prices up and increasing the compensation of executives?  On employee wages, but wage increases are not happening, interestingly since 1982 when the SEC Safe Harbor provision went into effect real wages have declined.

Source: Global Technical Analysis – 2/5/19

Real wages after inflation have continued to decline when allocated across all persons employed.  Bankrate surveyed 1,000 workers at all income levels last year finding only 27 % received raises. Corporations are not increasing wages even to keep up with inflation.

What about capital expenditures are they up?  No.  With all the pronouncements of executives that they are investing in their companies to increase innovation and productivity they are in fact not performing, here is the analysis of business investment as percent of GDP since 1998:

Sources: The Wall Street Journal, The Daily Shot – 11/9/18

Note the declining business investment line in the chart from 4.5 % of GDP in 1998 to 2.5 % in 2018, a 44 % reduction.

Maybe corporations are still increasing productivity anyway so they can afford to do stock repurchases?  No.  Productivity continues to stall.  The following chart shows total factor productivity (TFP) since 1948, the long term average is the green line from 1948 to 1971 versus 1972 to today red line today, plus growth in productivity is close to zero:

Sources: San Francisco Federal Reserve, Real Investment Advice – 1/16/19

Executives have made decisions about how to allocate profits that are not increasing productivity, raising wages, hiring workers or reducing prices.  Our economy and our workers are the losers while executives and the wealthy elite who own stocks profit from these short term decisions.

Next Steps:

Do executive decisions on profit allocation really affect workers and consumers?  Yes.

GM last year announced the closing of their Lordstown plant and the layoff of 15,000 workers due to a shift in consumer buying to trucks and misallocated investments in poor selling product lines.  Yet, since 2014 GM spent $13.9 billion in stock repurchases according to the Wolf Report.  GM could have spent that money on employee training, shifts in product development, the phased closing of plants and phased in building of new plants and likely would not have had to resort to massive employee layoffs.

Mylan announced 18 months ago a 584 % increase in the price of EpiPen’s used in life – death situations to counter act food allergy shock.  At the same time Mylan executives took care of themselves first with over $1 billion in stock repurchases to drive stock prices up. Analysts evaluated the product cost of goods and assembly for EpiPens and estimated it cost Mylan about $2 billion to manufacture, so the $1 billion could have gone toward reducing the cost of the EpiPen by 50 %.

In both examples corporate executives took care of themselves first, and their employees or patients second.  This profligate management of profits from customers and patients was not allowed prior to 1982. Corporate executives have a social and ethical responsibility to allocate funds in the balanced interests of the company, employees and the community

Executives are executing stock buybacks at the cost of sound financial management as well. The debt to cash ration of S & P 500 corporations is at 18 %, a lower level than at the 2008 recession. When the economy slows corporations will be squeezed between debt loads, operating costs and low cash reserves.

Sources: Wells Fargo Investment Institute, Factset – 2/14/19

Our economy continues to decline as GDP shrinks year over year, in part by trillions of dollars being wasted on stock repurchases instead of being invested in worker training, wages, capital equipment and research and development. A trillion dollars is 5.26 % of the U.S. economy shifting buy back dollars could have a huge impact. Corporate executives have magnified the problem by borrowing money at low interest rates to keep stock repurchases going even when profits lag. Today, corporate debt is 45 % of GDP at all time high inflating the economic bubble.

Sources: St. Louis Federal Reserve, Real Investment Advice – 2/21/18 (recessions in gray)

A reduction in corporate borrowing to inflate stock prices would go a long way toward putting the economy on a more solid business foundation. A major SEC policy shift ending stock buy backs would need to be phased in as a percentage over several years to allow markets to adjust, yet if we are to build an economy that works for all we need to end this misleading, damaging and costly practice.

Hundreds of Thousands Of Lives Disrupted Needlessly Because of Lack of Evidence Based Government

Image: civilserviceworld.com

Thirty five days ago the GOP held control of both houses of Congress and the Presidency and yet an ill-advised policy based on ignorance was allowed to hold 800,000 federal works hostage.  How did this happen?  Majority Leader McConnell, Leader Schumer,  Speaker Ryan and Minority Leader Pelosi all agreed just before Christmas to extend a spending bill for a few weeks enabling the federal government to keep running while discussions were pursued on a Border Wall. POTUS went along with this plan and told Majority Leader McConnell he would sign the extension bill.  Yet, that evening POTUS started listening to commentators from his far right base – changed his mind and demanded funding of $5.7 billion for a wall or he would as he said a week earlier ‘take pride in shutting down the government’.  The Border Wall idea has no solid evidence to support that it would work to stem the tide of drugs of which 90 % come through ports of entry, drug leaders and gangs who fly over the border.  PBS sent a reporter to the border near Nogales, Arizona to gather real data on what was actually happening at the border.  He found that people on the border did not want a huge wall except for sections of see-through barriers in cities, yet wanted more border police, more access roads and surveillance technology. Speaker Pelosi made an excellent point in her press conference today, after POTUS caved when it was obvious the shutdown was causing real harm to many Americans, plus federal workers and their families.  She declared, ‘we support more border security measures, that are evidence based,’

Her focus on evidence based policy was music to our ears.  When was the last time during this GOP administration have we heard that policy would be ‘evidence based’ (with real facts not made up ‘alternative facts’)? The EPA has moved quickly to shift policy making processes to not use scientific based reports or data in making policy decisions. Immigration policy is based on scapegoating of Muslims, Mexicans, and Central Americans instead of the facts.  The facts are that new businesses are twice as likely to be started by immigrants, that when the Mexican economy thrived cross border immigration fell dramatically and that majority of immigrants fill jobs that most American workers don’t want to do.  Canada has looked at their trend of an aging population and declining workforce.  To build the size and skills of their labor force for the future they are welcoming immigrants – we should be doing the same thing. Our population is aging quickly, so without an immigrant influx of entrepreneurs and workforce we will be faced with a stagnant economy looking much like Japan’s.

The effectiveness of modern medicine was revolutionized when evidenced based medical practices and research was implemented as a standard clinical practice in the 1960s.  Businesses today use Big Data analysis, models, forecasting and innovate new products based on data, research and analysis before making investments. The dramatic increase in our standard of living is based on innovative processes in universities, businesses and financial services all insisting on ‘getting the data’ first before making proposals or investments.

We should accept nothing less than evidence based government. We are behind by 20 years on combating the effects of scientifically proven climate change. Our future will depend on making intelligent decisions based on evidence to implement sound policies and investments to ensure the existence of humanity.

Midwest Hit With Tariffs & Shutdown Adds to Years of Recession – Needs A Heartland Venture Marshall Plan

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: heartlandhospice.com

Midwest farmers are declaring bankruptcy at a rate not seen since the Great Recession.  As prices for corn, soybeans, milk and corn decline to decade lows, the Minneapolis Federal Reserve reports that Chapter 12 bankruptcy filings in 5 states of the Ninth District.

Sources: United States Courts – Fed Ninth District, Federal Reserve Ninth District, FedGazette – 11/14/18

The Federal Reserve notes that based on the level of bankruptcies and the trajectory of the increase that bankruptcies will only increase. The government shutdown is exacerbating farmland pain.  The Trump administration announced last summer $12 billion in farmer subsidies.  But, because of the shutdown many farmers applying for subsidies and loans to plan for spring planting are not receiving the money they need. Many farmers and agriculture businesses are affected by the Department of Agriculture shutdown versus coastal states as shown below.

Source: Axios – 1/12/19

China turned to Russia and Brazil for soybeans in particular in the 4th Qtr of last year.  US sales to China dropped to almost zero. As a negotiating tactic, China last week did pledge to buy more soybeans as traders in Chicago noted last week an increase in sales orders. However, when China switched purchases to major suppliers last year it will be difficult for US farmers to unhook those deals already in place. As one farm owner noted, “ it just seems like it’s one thing after another, over and over.”

Heartland challenges have actually been going on for years even before the Great Recession with the loss of millions of manufacturing jobs since China joined the WTO in 2000.  The rural regions of the country have seen their wages grow at half the rate of metro areas.  The opioid epidemic has cost thousands of young workers future careers, unemployment is twice what it is in the East and West. The digital internet infrastructure in rural areas is quite often at analog rates 4 times slower than broad band.  Companies are at a disadvantage versus their metro competitors with slow bandwidth.  Rural region hospitals are closing at an increasing rate leaving many rural people with hundred mile or more drives to the nearest emergency room. Life expectancy in Mississippi is the same as Libya.  Heartland America has been left out the metro mainstream economy for the past 20 years. Our post – The Hallowing Out of Heartland America shows how rural regions have fallen behind in many infrastructure areas including: healthcare, Internet bandwidth, jobs, education with limited upward mobility for young people.

Next Steps:

The Heartland Venture Marshall Plan is similar in concept as the Marshall Plan deployed by the U.S. to rebuild the infrastructure of Europe after WWII, but instead of a government bureaucracy the Silicon Valley style innovation venture model is used.  Venture development is designed to start small, build on successful prototypes and use multiple sources of funding to gain as much support as fast as possible to make the venture a success.  Failure is part of the success fast, try several prototypes, do it, tweak it, try it again until it works or achieves the goals we set for the venture.

Here is a summary of the idea from our post of September 2017:

We propose building a startup non-government organization. We are recommending a difference approach by the Federal government to act as an investor in a non-government organization called a Heartland Development Center.  An HDC acts as a central hub of critical services and infrastructure development while providing a continuous innovation system. The Heartland Development Center acts as a catalyst creating an innovation ecosystem to jumpstart local economics and social structures. HDCs would focus on all the key issues that a region needs to address to rebuild their economy and people’s lives: business formation, education and training, digital infrastructure, affordable housing, engaged local innovation media and health care.

The Federal government would seed the financing of these NGOs in key regions with additional funding from local and state governments, and major corporations who would benefit from the newly available job force tuned to their needs. HDCs would be ‘startup’ organizations installed at Land Grant universities bringing in leaders in their respective fields – ie. business formation – Y Incubator, preventive health – Cleveland Clinic, or training – Opportunity@Work as contractors to the HDC.  These NGOs would establish continuously renewing innovation processes to stay in touch with their citizen – customers and businesses. Administration services would all be contracted using cloud software services for HR, Payroll, Training, Benefits and other internal systems to keep costs down. The HDC startups would be piloted in 3 non metro areas, where they would tune their business and socio economic models for maximum impact, then use those working models to implement HDCs in 25 or more other key regions for 5 – 10 years.”

Economists see the opportunity to invest in rural regions to jump start a part of the economy in innovative ways. Joseph Stiglitz, nobel prize winning economist for example advocates turning blue collar rural areas into ‘green collar’ hubs focused on developing innovative environmental technologies, systems and services.

Congress sees the need as well, as Congressman Ro Khanna – D-17 California is working on legislation patterned after the land grant college Morrell Act of 1862 to make an investment in technology job development in rural sections of the U.S. Khanna has supported computer programming training in West Virginia and toured the Midwest with Silicon Valley executives and venture capitalists to encourage investments in the Heartland. He points out that there is no need to send jobs to China, Brazil or India when there are people in our Heartland who can do those jobs well and at lower cost than expensive coastal regions.

There is one indicator of the desperation that many rural people feel is the fact that the opioid epidemic has a 50 % greater incidence in the Heartland than in our metro or coastal cities. We need to be building bridges through programs like the Heartland Venture Marshall Plan between our coasts and the inland empire to bring together our people developing consensus and shared experiences. Each HDC would be staffed by a equal mix of apprentice and college graduates from local rural education systems and metro university graduates. They would comprise a ‘Heartland Service Corp’ modeled on the AmeriCorp program with a benefit of complete forgiveness of student debt for two to four years of service depending on the debt balance. We would be building shared experiences of our young people to bridge the gap between inland and coastal cultures. These young people can innovate new opportunities to create an economic future that works for all.

Where Is the Common Good? Our Families is a Good Place to Start

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Everyone has a mother and father (even if they are not living with them now).  Many of us have brothers, sisters, aunts, uncles, grandfathers and grandmothers.  How about looking at local, state and federal government policies and laws through the eyes of our families. Does this healthcare insurance make sense for families?  Does it provide for services, drugs and care from birth to death?  How can we build families as a unit of government services?

Families are really the basic unit of our communities.   A household is in an apartment, or home with a set of family members – as those members define their household.  For many there are multiple generations in a household, aunts, uncles, grandpa and grandma.  Can we start with family as an economic unit too.  How do we support those who have jobs in the household?  Can we support multiple family members having jobs? For example with child care so that Moms can work if they want to.  Can we have more women friendly corporate policies such that a women can move from home to the work world and back without losing pay or career opportunities.  Why not have paid parental leave like most developed countries of the world?

Children in the household need an education in the household to survive in this world.  Why not make pre kinder programs available for all families not just wealthy ones.  Why not offer public education that is equal across communities not just rich ones getting the good teachers and supplies?  Why not offer a college education or high quality apprenticeship programs to all children regardless of community at no cost to the family or limited cost. When are we going to invest in our children to the level that we did in the 1970s when states spent 3 or 4 times what they spend now secondary and higher education. 

When a household job holder is out of work what happens?  How can we support that person get another job, offer health insurance when they need it between jobs as no additional cost. When will we make companies that layoff workers do so in an equitable way along with manager and executive layoffs?  How do we get equitable pay for employees that is at a livable wage instead of 300 % less than executive pay.  In the 1950s executive pay was 50 % higher than the average worker, it worked then why not now.  Instead of allowing corporations to take the money they make off the hard work of employees, and funded by customers to throw stock buyback money down the drain – take those funds and fund equal education for all or healthcare for all.

Family time together needs to be supported, in Europe they have the full month of August off to be together with their families or friends.  Instead, US workers work the most number of hours in a year of all workers in the world.  Germany does fine with an economy that provides a good standard of living for all workers and they have 5 weeks off each year.

Today we have the highest level of wealth concentration since 1929, we know what happened after that year, the stock market crashed, companies went of business, unemployment was over 20 %, many people starved.  Unless, we take dramatic steps to share the benefits of our economy for all, it will crash again, causing great pain and suffering to many for 5 to 10 years as the economy rebalances wealth and reverts to the mean of wealth for the past 88 years. Throughout history, societies become prosperous, the rich take control of government and resources and eventually those that are left out revolt or the economic model becomes too top heavy to work and deflation, depression and decline takes place.  Then, as wealth rebalances the industrious are rewarded again and the society begins to grow again on a solid foundation.  That foundation is the family. There is another benefit to putting families first. We are actually all part of the same family of humanity, maybe when we put the focus on families we will treat each other with respect, understanding and civility.

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