Wednesday, November 25, 2020

October personal income declines, but still well above pre-pandemic peak; increased likelihood of negative pandemic reversal in jobless claims


 - by New Deal democrat

Before I turn to this week’s report on jobless claims, a brief word first about October personal income and spending.

Although personal income declined in October compared with September, more importantly depending on how you measure it, real personal income is still 2.6% to 3.4% *higher* than it was at its peak in February just before the onset of the pandemic: 

Much of that is the emergency pandemic aid passed by Congress. When you take out such “government transfer receipts,” personal income actually continued to improve in October, but is still -0.8% below its February peak.

This demonstrates the efficacy of the emergency aid, the urgency of continuing it after the end of the year as the pandemic continues to rage, and also is a likely explanation for why Trump did considerably better, even though he lost, than other economic fundamentals forecast.

Bottom line: we need renewed Congressional aid until the promising vaccines are widely available.

Turning now to this week’s new jobless claims, they increased further from the pandemic lows of two weeks ago, while continued jobless claims, which lag slightly, again declined to new pandemic lows.

On a unadjusted basis, new jobless claims rose by 48,360 to 827,710. Seasonally adjusted claims rose by 30,000 to 778,000, which is also 67,000 higher than their pandemic lows two weeks ago. The 4 week moving average also rose from last week’s pandemic low by 5,000 to 748,500. Here is the close up since the end of July (for comparison, remember that these numbers were in the range of 5 to 7 million at their worst in early April): 

Unadjusted continuing claims, which -importantly - lag initial claims typically by a few weeks to several months, continued to decline by 167,617 to 5,911,965. With seasonal adjustment they declined by 299,000 to 6,071,000, both new pandemic lows:

Seasonally adjusted new jobless claims have declined about 88% from their March and April pandemic high, and continuing claims have declined about 75% from the April high:

Both of these are slightly higher than their worst levels of the Great Recession.

It appears increasingly likely that two weeks ago will mark an interim low, due to the pandemic spiraling out of control again in most of the country. How much worse the jobless situation gets will depend on how much worse the pandemic continues to get. In particular, even without lockdowns increasingly cautious or frightened people are going to engage in less economic activity that involves in-person social interactions.

Monday, November 23, 2020

Benjamin Franklin vs. John Locke on the Legislature vs. the Executive


 - by New Deal democrat

An initial note: there is very little economic data this week. Some house price information gets updated tomorrow, and then on Wednesday we get a slew of data, including Q3 corporate profits, jobless claims, new home sales, durable goods orders, and personal income and spending. That’s probably worth two days’ of posts, at least one of which will probably be at Seeking Alpha.

Shorter version: don’t be surprised by light posting here this week!

In the meantime, as we wait to see whether the GOP Michigan and Pennsylvania legislatures will officially turn the United States into a banana republic, here are a couple of quotes worth your noting about Legislative and Executive power. Bolded sections are my emphasis.

John Locke, in his Second Treatise of Government, held that the Legislature must be the supreme authority in all well-ordered republics. But because it was not necessary, not beneficial, for the Legislature to sit permanently, there must be a permanent Executive power to enforce the laws at all times, including the use of “prerogative,” i.e., discretion:

Sect. 134. The ... first and fundamental positive law of all commonwealths is the establishing of the legislative power.... This legislative is not only the supreme power of the commonwealth, but sacred and unalterable in the hands where the community have once placed it; nor can any edict of any body else, in what form soever conceived, or by what power soever backed, have the force and obligation of a law, which has not its sanction from that legislative which the public has chosen and appointed...; and therefore all the obedience, which by the most solemn ties any one can be obliged to pay, ultimately terminates in this supreme power, and is directed by those laws which it enacts: 

Sect. 143. The legislative power is that, which has a right to direct how the force of the commonwealth shall be employed for preserving the community and the members of it. But because those laws which are constantly to be executed, and whose force is always to continue, may be made in a little time; therefore there is no need, that the legislative should be always in being, not having always business to do.... [T]herefore in well ordered commonwealths, where the good of the whole is so considered, as it ought, the legislative power is put into the hands of divers persons, who duly assembled, have by themselves, or jointly with others, a power to make laws, which when they have done, being separated again, they are themselves subject to the laws they have made; which is a new and near tie upon them, to take care, that they make them for the public good.

Sect. 144. But because the laws, that are at once, and in a short time made, have a constant and lasting force, and need a perpetual execution, or an attendance thereunto; therefore it is necessary there should be a power always in being, which should see to the execution of the laws that are made, and remain in force. And thus the legislative and executive power come often to be separated.

Sect. 161. This [Executive] power, whilst employed for the benefit of the community, and suitably to the trust and ends of the government, is undoubted prerogative, and never is questioned: for the people are very seldom or never scrupulous or nice in the point; they are far from examining prerogative, whilst it is in any tolerable degree employed for the use it was meant, that is, for the good of the people, and not manifestly against it: but if there comes to be a question between the executive power and the people, about a thing claimed as a prerogative; the tendency of the exercise of such prerogative to the good or hurt of the people, will easily decide that question.

With another century of experience, 100 years later here is how Benjamin Franklin responded during the US Constitutional Convention, on June 4, 1787:

Docr. FRANKLIN. [In] ... the case of the U[nited] Netherlands [i.e., the Dutch Republic]..., [t]he people being under great obligations to the Prince of Orange whose wisdom and bravery had saved them, chose him for the Stadtholder. He did very well. Inconveniences however were felt from his powers; which growing more & more oppressive, they were at length set aside. Still however there was a party for the P. of Orange, which descended to his son who excited insurrections, spilt a great deal of blood, murdered the de Witts, and got the powers revested in the Stadtholder. Afterwards another Prince had power to excite insurrections & to make the Stadtholdership hereditary. And the present Stadthder. is ready to wade thro a bloody civil war to the establishment of a monarchy. Col. Mason had mentioned the circumstance of appointing officers. He knew how that point would be managed. No new appointment would be suffered as heretofore in Pensa. unless it be referred to the Executive; so that all profitable offices will be at his disposal. The first man put at the helm will be a good one. No body knows what sort may come afterwards. The Executive will be always increasing here, as elsewhere, till it ends in a Monarchy.”

As I have written before, every single Presidential Madisonian democracy except for the United States (so far) has devolved into Presidential autocracy. Every. Single. One.

Sunday, November 22, 2020

John Locke: decisionmaking by standing rules set in advance is a foundational requirement for civil government


 - by New Deal democrat

John Locke’s “Second Treatise of Government,” published in 1690 just after and in support of the Glorious Revolution, is the founding philosophical document of modern liberal representative democracies.

In it he anticipates John Rawls’s “original position.” Locke argues that, in order to protect their property, over time all groups of humanity form “civil societies” by agreeing *in advance* to rules that will be applied to public and private controversies, civil and criminal; and by establishing a legislature which will make further laws - again, *in advance* - to govern new controversies which may arise.

The essence of this argument is found in Sections 87, 88, 89, 94, 124, 131, and 142, which I have abridged below (advance warning: Locke writes in *extremely* long and convoluted sentences!)(bold emphasis is mine):

Sect. 87. ... [B]ecause no political society can be, nor subsist, without having in itself the power to preserve the property, and in order thereunto, punish the offences of all those of that society; there, and there only is political society, where every one of the members hath quitted this natural power, resigned it up into the hands of the community in all cases that exclude him not from appealing for protection to the law established by it. And thus ... the community comes to be umpire, by settled standing rules, indifferent, and the same to all parties; and by men having authority from the community, for the execution of those rules, decides all the differences that may happen between any members of that society concerning any matter of right; and punishes those offences which any member hath committed against the society, with such penalties as the law has established .... 

Sect. 88. And thus the commonwealth comes by a power to set down what punishment shall belong to the several transgressions which they think worthy of it, committed amongst the members of that society, (which is the power of making laws) ... and all this for the preservation of the property of all the members of that society, as far as is possible. ... [E]very man who has entered into civil society ... has given up to the legislative in all cases, where he can appeal to the magistrate, he has given a right to the commonwealth to employ his force, for the execution of the judgments of the commonwealth .... And herein we have the original of the legislative and executive power of civil society, which is to judge by standing laws, how far offences are to be punished, when committed within the commonwealth; and also to determine, by occasional judgments founded on the present circumstances of the fact, how far injuries from without are to be vindicated; and in both these to employ all the force of all the members, when there shall be need.

Sect. 89. Where-ever therefore any number of men are so united into one society, as to quit every one his executive power of the law of nature, and to resign it to the public, there and there only is a political, or civil society. And this is done, where-ever any number of men, in the state of nature, enter into society to make one people, one body politic, under one supreme government; or else when any one joins himself to, and incorporates with any government already made: for hereby he authorizes the society, or which is all one, the legislative thereof, to make laws for him, as the public good of the society shall require; to the execution whereof, his own assistance (as to his own decrees) is due. And this puts men out of a state of nature into that of a commonwealth, by setting up a judge on earth, with authority to determine all the controversies, and redress the injuries that may happen to any member of the commonwealth; which judge is the legislative, or magistrates appointed by it. And where-ever there are any number of men, however associated, that have no such decisive power to appeal to, there they are still in the state of nature.

Sect. 94. ... [Y]et [over] time, ... the people finding the[y] ... could never be safe nor at rest, nor think themselves in civil society, till the legislature was placed in collective bodies of men, call them senate, parliament, or what you please. By which means every single person became subject, equally with other the meanest men, to those laws, which he himself, as part of the legislative, had established; nor could any one, by his own authority; avoid the force of the law, when once made; nor by any pretence of superiority plead exemption, thereby to license his own, or the miscarriages of any of his dependents. No man in civil society can be exempted from the laws of it ....

Sect. 124. The great and chief end, therefore, of men's uniting into commonwealths, and putting themselves under government, is .. [t]here [must be] an established, settled, known law, received and allowed by common consent to be the standard of right and wrong, and the common measure to decide all controversies between them: for though the law of nature be plain and intelligible to all rational creatures;

Sect. 131. ... [M]en, when they enter into society, ... it being only with an intention in every one the better to preserve himself, his liberty and property; (for no rational creature can be supposed to change his condition with an intention to be worse) the power of the society, or legislative constituted by them, ... is obliged to secure every one's property, by providing [that] ... whoever has the legislative or supreme power of any commonwealth, is bound to govern by established standing laws, promulgated and known to the people, and not by extemporary decrees ....

Sect. 142. [T]he bounds ... to the legislative power of every commonwealth, in all forms of government [are] [f]irst, [that] they are to govern by promulgated established laws, not to be varied in particular cases, but to have one rule for rich and poor, for the favourite at court, and the country man at plough.

Note further that Locke writes that magistrates (a combined Executive/Judicial power - remember the independent judiciary is a modern concept dating from the UK just after the Glorious Revolution) are to simply enforce those standing laws in particular cases. This is exactly the position taken by Alexander Hamilton in Federalist Papers numbers 78 and 81 as to how he envisioned the US Supreme Court and inferior Courts were to function, including being bound by pre-existing precedent.

Put simply, the ad hoc creation of retroactive new rules after the fact is fundamentally inconsistent with liberal democracy. This is why what Trump is attempting is a coup.

According to Article II, Section 1, Clause 3 of the Constitution, Congress “may determine the Time of chusing the Electors, and the Day on which they shall give their Votes.”

Congress set Election Day as November 3. If this is “the Time of chusing the Electors” under the above Clause, then there is no legislative power for a retroactive change.

But of course, that could ultimately be a controversy in which the Supreme Court might weigh in. If one could be confident that this Supreme Court would consider itself bound by precedent, that might not be a significant worry. But in the last two years alone this Supreme Court has overturned 8 precedents that were at least 30 years old.

To put it bluntly, allowing legislatures to intervene and set aside the result of an election that the majority of legislators did not like would be a fundamental offense against the foundational requirements of a civil society. That there is substantial doubt that legislatures and the US Supreme Court will uphold those foundational requirements is a warning siren about the condition of the US as a Republic operated by representative democracy.

Saturday, November 21, 2020

Weekly Indicators for November 16 - 20 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Nothing definitive yet - after all weekly data is going to be noisy - but there is some indication that the recovery in coincident conditions in the economy have ceased to make progress, and maybe even have begun to reverse, probably due to the pandemic being out of control, and new restrictions put in place in some States as a result.

As usual, clicking over and reading should bring you right up to the moment, and reward me with a penny or two for the effort I put in to bring you this report.

Friday, November 20, 2020

Coronavirus dashboard for November 20: North Dakota “leads” the world


 - by New Deal democrat

Total US infections: 11,715,316*

Average last 7 days: 165,029/day (new record high = 1 out of every 2000 Americans infected per day!)

Total US deaths: 252,535
Average last 7 days: 1,335/day

Source: COVID Tracking Project

*confirmed cases only: I suspect the total number is on the order of 17 million, or 5% of the total US population (other estimates are much higher).

Just how ghastly is the situation in the northern Great Plains and Mountain States? So bad that if North Dakota were a country, it would be “leading” the world in infections and new deaths per capita, and rapidly approaching “leading” the world in total deaths per capita.

Here are the “top 10” US States for total confirmed infections (plus New York for comparison purposes):

Almost 9% of the entire population of North Dakota has had a *confirmed* infection. In about another week, that should be over 10% (and probably is already including infections that have not been confirmed).

Further, while New Jersey still has had the most deaths per capita due to the early outbreak, North and South Dakota are rapidly catching up, and likely will be approaching the total numbers of New York and New Jersey within about 2 weeks:

Even worse, here’s what North Dakota’s total confirmed infections per capita look like in comparison with every country in the entire world:

North Dakota “leads” the world.

And here is what North Dakota and New Jersey look like compared with the rest of the world in total deaths per capita:

The only reason North Dakota might not take the “lead” in the world for deaths is that Belgium is having nearly as bad a new out of control outbreak, and will probably get there first.

But in terms of *new* deaths per day over the past week, North Dakota already “leads” the world:

As I remarked to several friends last weekend, never have I seen a society as a whole abjectly fail the “marshmallow test.” All because “libertarianism” in deep red States means doing exactly what I want and can get away with, the effects on everybody else be damned.