Economics and Religion

   Politics and religion don't mix, it has long been said. And when economic policy takes on the trappings of a religious fervor, that too is a dangerous mix.
   Politics and economics are inextricably linked, both having been born and matured ever since the body politic began working on how to make use of what resources are available.
   However, when followers and believers convince themselves that theirs alone is the orthodox, or "right way" to utilize resources, then those who hold alternate beliefs become by definition unorthodox, heretics, and infidels, since they do not share the same views as the dominant group.
   In that sense, a heretic is simply a person who disagrees with Establishment wisdom.
   Copernicus taught that the Earth revolved around the Sun, contrary to church doctrine that the Earth was the center of the universe. And when Galileo picked up on that theory and incorporated it into his teachings, church leaders accused him of heresy and threatened him with excommunication.
   So it is with politics and economics. Those who disagree with the basic beliefs of those in power are labeled heretics, and therefore to be ignored at best and persecuted at worst. However, as Galileo is reputed to have said -- quietly, out of hearing range of the clergy -- after he was forced to recant his teaching, "Nevertheless, it (the Earth) moves."
   Consider this: Politics is about getting elected. Government is about getting things done. And economics is about how and what to do with whatever is available. Adding religious fervor to the mix, and a refusal to even acknowledge that there may be alternatives that are also good, and the result can have consequences unacceptable in any society, especially a democracy.

A Rising Tide?

   Economists are fond of saying that a rising tide lifts all boats. While that may be true for yacht owners in a harbor, extending the metaphor to an entire economy doesn't always work.
   However, it's sometimes a good idea to draw confidence from whatever statistical numbers you can find. The danger, of course, is in putting too much confidence in too few numbers.
   That said, here's a new number that may (or may not) give some hope for a growing recovery. The Census Bureau reported today that Gross Domestic Product (GDP), the total value of goods and services produced in the U.S., expanded by 2.3 percent in the second quarter of this year, compared to a rise of just 0.6 percent in the first three months of the year.
   That's a healthy growth rate for the quarter ended June 30. However, here are the caveats. That 2.3 percent is a first estimate, based on an early survey. The estimates for the first quarter -- even when revised -- remained thin. For example, the first estimate for the January to March period was a negative -- -0.7 percent. The second estimate brought the rate up to -0.2 percent, and not until the third estimate, announced yesterday, did the growth rate for the first quarter go into positive territory, a bare 0.6 percent.
   Now the government says the second quarter growth rate is 2.3 percent, a sharp increase in output from the less than 1 percent in the first three months of this year.
   That's a lot of numbers to digest in a single, fast reading. Keep in mind, however, that so much volatility over a short time is no guarantee that we're in for a super spurt of economic progress.
   Technically, the Great Recession ended several years ago, but recovery has been slow and sporadic, which helps to explain why the Federal Reserve Board has been so cautious in doing anything that might stall the recovery and send the nation back into a recession.

Watching and Waiting

   Don't hold your breath waiting for the Federal Reserve to raise interest rates. The latest statement from the Fed's Open Market Committee (FOMC), which monitors and controls the central bank's investment activities, started with its usual optimistic comments, but deep within the statement is the note that the committee "reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate."
   When will that change? When there is progress "toward its objectives of maximum employment and 2 percent inflation," the statement said.
   Meanwhile, even if these targets come near to being met, "economic conditions may, for some time, warrant keeping the target federal funds rate below" normal levels.
   As noted here several weeks ago, boosting interest rates to match a stronger economy is not likely until next summer.

Austerity is Poison

   Money is the lifeblood of any economy. When the money flow stops, the body politic suffers. Austerity on a national level only stifles the money flow, and thus sickens the entire economy.

   Republican presidential candidate Jeb Bush wants to cut the government workforce by 10 percent, reduce government spending, and mandate a balanced budget through a Constitutional amendment.
   This is an economic recipe for disaster, and here's why.
   Cutting the government workforce means more people out of work, therefore they have less money to spend.
   Reducing government spending further weakens the economic body politic, by slowing the flow of money.
   A balanced budget is a fine idea in good times, but when times get tough government plays a major role in getting things going again, largely because the private sector can't.
   There are two ways to balance a government budget: Raise taxes or reduce spending. Either means less money available to workers and consumers to buy stuff. Doing both is a double dose of economic poison. Fewer sales means less production, and soon fewer workers as companies reduce employment levels. More people out of work means less money to spend, which means fewer purchases, which means less production, which means fewer workers. And around and down it goes.
   To stop the downward cycle, government steps in to spend money and provide jobs, which means more workers, more money in the economic lifeblood, which means more purchases, which means more production, which means economic recovery.
   Simplistic? Yes, but that's what happened during the Great Depression in the 1930s, as well as the more recent Great Recession less than 10 years ago.
   "Buy now," said the Republican President in the early 1930s.
   "With what?" replied the out-of-work American laborer.
   The tragedy in Greece can only worsen, as unemployment soars and banks close and a bankrupt government cannot get help from those who insist on national austerity. That's well enough to say by prosperous, moralistic countries with leaders who have forgotten the lessons their parents learned during the worldwide catastrophe of 75 years ago.
   "Austerity is the cure," they say.
   On the contrary, austerity is poison, and to insist on massive, widespread reductions in government workforce and spending can only lead to another economic downturn in America. Unless there is a prosperity boom in the private sector. Until that happens, the federal government can and should step in with a fiscal infusion to maintain the flow.

Media and Message

   "No, no, no. You're finished. Sit down." --Donald Trump to MSNBC  and Telemundo news anchor Jose Diaz-Balart as he tried to ask questions of the candidate.
   Trump staff ban Des Moines Register reporters from a news event after the newspaper's editorial page urged Trump to abandon his presidential campaign.
   What's next? Banning any journalist who dares to ask tough questions, or any citizen who dares to disagree with the candidate?   

   Politicians have always tried to control their message, sometimes by trying to control the medium through which it flows to the public.
   They do this partly by ignoring the question, and partly by not consenting to interviews by those likely to ask tough questions. Rachel Maddow, for example, an avowed liberal and an aggressive interviewer, has acknowledged that few Republicans agree to appear on her television program.
   But even neutral reporters -- those who ask tough questions and push for answers -- often are unable to get one-on-one interviews with some candidates, especially those who insist on controlling the interview.
   Anderson Cooper of CNN is a good interviewer, but Donald Trump easily dominated the interview, repeatedly interrupting and/or ignoring the question.
   Walter Cronkite, far and away one of the best television journalists of the 20th Century, relates in his memoir of the time Lyndon Johnson -- then Senate Majority Leader -- showed up for a news interview with a panel of CBS journalists and handed out a list of questions that he insisted would be asked by the panel, including at least one that must not be asked. Cronkite demurred, and rather than lose the interview with LBJ, he would try to steer the panel away from that particular subject. Sure enough, however, as soon as the program went on the air, that very question was the first one asked.
   Even today, in some countries newspapers and broadcast media are shut down when they report something that the government doesn't like.
   There are some in America who feel the news media are "out of control," and should be reined in. Granted, there are excesses and rudeness by some reporters. But politicians also are prone to excesses and rudeness, even to spouting character attacks, half-truths and downright lies. However, where would the voting public be without an active news media checking facts and exposing hypocrisy? The public also has a very effective way of dealing with incompetent news reporting or poor commentary -- change the TV channel, or stop buying the publication. In addition, there are laws dealing with libel. But the defenses against libel accusations are these: The story is true. It is provably true. It was published without malice. (This last was established in the case of a full-page advertisement which turned out not to be true. However, the target chose not to sue the buyer of the ad space, but rather the owner of the newspaper, who had more money.)

    Behind all this, moreover, is the fundamental right of free speech and freedom of the press, as guaranteed by the First Amendment to the U.S. Constitution. Always remember. meanwhile, that the Constitution does not grant these rights. Rather, it guarantees rights we already have; rights that we were born with.

   The point is this: Political leaders attempt to control the flow of information, including the questions to be asked and the people who might ask uncomfortable questions.
   Journalists have no special rights about attending events, asking questions and reporting on them. All citizens have these rights. Reporters are citizens, and while they have no more rights than other citizens, they have no fewer.

   You have a right to speak.
   I have a right to ignore you.

Prattle Battle

You're only young once, but you can be immature forever.

   The current presidential campaign -- with Election Day still 15 months away -- has become a prattle battle, with little or no discussion of substantive issues. Americans are being GOP-smacked by an overcrowded Republican field of hopefuls, who are dishing out insult, invective, pettiness and childish behavior that normally is expected from recalcitrant juveniles, but not from allegedly mature adults.
   The candidates on the Democratic side, meanwhile, are not getting the exposure they deserve, as television news producers focus on the more outrageous or entertaining of the candidates.
   And rather than answer a direct question from reporters, candidates obfuscate, ignore the premise of the question, and rattle on at great length over their previously prepared talking points. There's nothing new here, of course. Politicians have been doing this for generations, but this year it seems more obvious than before.
   Coupled with the practice of ignoring fact or reality when truth does not fit with their campaign strategy, it's enough to drive a serious voter to strong anger, and a wish to be able to vote for None Of The Above.
   Part of the blame certainly goes to the media, especially television "news" programs, which pick up on the most outlandish behavior and fail to push for answers to direct questions when the candidate ignores the premise. This could be either because the politician does not want to deal with the question, or because he or she is ignorant of the subject. Or it could be that the interviewers don't have the knowledge or the courage to push the candidate for answers.
   There are indeed some major network news hosts who have the ability and knowledge to back a candidate into a corner when answers are not provided, but far too often, the candidates themselves refuse to appear with these journalists. This is usually because they fear that the holes in their positions will be exposed, or they feel they will be unable to control the interview.
   Here lies the danger: That the public may have to choose between two ignoramuses to be the next president of the nation, or that the successful candidate will be the one most able to control the information flow.
   Big Brother is waiting in the wings.

Who Votes? Who Cares?

Voter turnout is at the lowest level since 1978.

If you don't vote, don't complain.

   The 2014 congressional election turnout rate of 41.9 percent was the lowest since the survey began in 1978, the Census Bureau said.
   Thus, fewer than half of eligible Americans bother to vote in Congressional elections, according to government records. Turnout is better in Presidential election years, but not by much. The lowest rate was posted in 1996, when only 49 percent -- half of the number of Americans eligible to vote -- showed up to vote in the election that returned Bill Clinton to the White House for a second term. The highest turnout rate for a presidential election was in 1960, according to government records, but even then it was just 62.8 percent, meaning that more than one-third of the electorate bothered to exercise their voting franchise.
   In contrast, voter turnout in Canada for federal elections is commonly more than 70 percent, and sometimes close to 80 percent.
   Since 1968, the turnout rate in America has declined, despite an increase in the eligible population, said the Bipartisan Policy Center, to 62.3 percent in 2008 to just 57.5 percent in 2012. And in that most recent Presidential election year, the turnout percentage was down from 2008 in every state and the District of Columbia except two -- Iowa and Louisiana, the Center said.
   Older voters show up in greater numbers, the Census Bureau said. Some 60 percent of those over 65 cast ballots in 2014, but only 23 percent of voters under 34 showed up.
   Overall, the turnout rate dropped 7 points from 1978, to a low of 41.9 percent last year. In 2010, the last Congressional election years, overall turnout was 45.5 percent.
   What does all this mean? "Voting rates tend to increase significantly with age," said Thom File, a Census Bureau sociologist and author of the bureau's latest report on voting during non-Presidential election years. Moreover, these age differences "cut across racial and ethnic groups as well," File said.
   Bottom line: Senior citizens of all demographic groups vote more than their children and grandchildren. Yet government policy changes often have more effect on young people than on older citizens.
   Moral: If you don't vote, you shouldn't complain.

Demagogues and Dictators

Don't let the facts get in the way of a good tirade.

My head's made up. You can't confuse me with the facts.

   Few people pay much attention to statements on economic issues. Reporters think "it's too hard" to understand and explain these trends and concepts, and "nobody cares anyway." But many readers do and should care. The challenge to reporters is in making the story interesting. Failure or unwillingness to do so only indicates laziness.
   Granted, it's far easier to record and report on the bluster of aggressive politicians who rant on emotional issues, playing on deep-seated fear and bigotry. It "makes good copy," as the old newsroom saying goes. One example from the past is McCarthyism and the Red Scare of the 1950s, when Sen. Joseph McCarthy capitalized on fear of a Communist takeover, until he was exposed as a demagogue ranting half-truths and outright lies to advance his political ambitions.
   And while demagogues may "make good copy" in the short term, and may be entertaining to television audiences, they too often become dictators as they rise in political prominence.
   Consider also the posturing and bluster of Benito Mussolini in Italy in the 1930s. Now compare that to the bullying, insults and invective, coupled with half-truths and deliberate ignoring of fact when it does not fit their agenda, as practiced by some high-profile candidates today.
   If these tactics today remind you of past dictators, with their bullying and insulting dismissal of any who question or disagree with them, be afraid. Be very afraid.

Delay Dilemma

That was then. This is now.

   The Federal Reserve now says that "conditions warranting an increase for the federal funds rate had not yet been met." Previously, the Fed had indicated that it would likely boost its key interest rate this summer.
   That, however, was before the Greek dilemma had reached crisis proportions that resonate throughout Europe and the world. At its most recent meeting (last month) of its policy-setting Open Markets Committee, notes of which were released Wednesday, the Fed said "additional information on the outlook" was needed before acting. And one FOMC member "indicated a willingness to wait another meeting or two" before raising the target range of 0 to 1/4 percent.
   On Tuesday, we broached the idea that the Fed would probably not act until next summer. That was a day before the Fed released the minutes of its meeting that was held June 16-17. That release confirms the prospect of a longer delay before the Fed acts. Key to its rate-raising move will be an improving economy, a healthier jobs market, lower unemployment, and most important, an inflation rate of 2 percent. Inflation is still below that target rate, which means the Fed will keep interest rates low as part of its program to keep the economy healthy.

Money Monitor

Things to monitor this summer.

There's always a but.

   Watch for another standoff between Congressional conservatives and the Administration over the federal budget and the debt ceiling.
   Don't expect the Fed to raise interest rates for another year.

   The government's fiscal year begins October 1, and the federal budget needs to be approved by Congress before that, or the nation faces the risk of another government shutdown as conservatives refuse to raise the debt ceiling in an attempt to force radical changes in federal spending.
   Economic recovery may be under way, despite a stumble in the first three months of the year, but "there are vulnerabilities that cannot be ignored," according to an analysis by the International Monetary Fund. And the biggest danger to future economic strength is in the financial sector, the IMF report said.
   "Barring any negative shocks," the IMF added, "the U.S. economy should be able to bounce back to 3 percent by 2016." However, the housing recovery is "not yet on a solid footing," the IMF said, and weaker growth in the rest of the world could suppress U.S. exports, and drag down growth.
   In addition, the inability of Congress and the Executive Branch to pass a budget will create uncertainty and damage the economy. Already, congressional failure to approve a budget and raise the debt ceiling shut down the government for 16 days in 2013, and political gamesmanship this year could close the doors again after October 1, even as campaigning for the Oval Office job goes into high gear. And we still have a year to wait before candidates are even nominated, another few months until Election Day in November of next year, and still more time until the next President takes office on January 20, 2017.
   Meanwhile, the economic ship is gaining speed, but could be torpedoed by easily avoidable risks, such as the failure to approve spending and regulatory measures to slow down irresponsible behavior in the financial sector, such as banking and insurance companies.
   In any case, assuming all goes well, the IMF forecast a growth rate of 2.5 percent this year and 3 percent next year. But unless "structural weaknesses" in the economy are dealt with, the growth rate could fade to 2 percent.
   In dealing with all this, the Federal Reserve Board, which has held interest rates near zero while it waits for the economy to gain health, will likely wait until next summer before it acts.