Wealth Bubble In ‘Scary Graph’ Flashes Warning About Future U.S. Downturn

Bloomberg: “Americans are about as wealthy as they’ve ever been—and that’s a worry?”

“Yup, say veteran economists Daniel Thornton and Joe Carson. They’re concerned that the swelling of wealth could prove unsustainable because it’s far outstripped the growth of the economy since the recession’s end in 2009.”

“The problem, he said, is that ‘the financial cycle is way ahead of the economic cycle.’ That’s a worry given that the past two downturns were driven by asset-price deflation.”

“‘Nobody knows what’s going to happen,’ Thornton said. ‘But there’s plenty of reason to think that’s a scary graph.'”

Misconceptions about the State of Higher Education

Vox: “Commentators, politicians, and journalists have thrown themselves — and, in turn, the public — into a state of persistent panic about the future of higher education with scary talk about spiraling student-loan debt, worthless degrees, and reckless spending by colleges.”

“Here are four myths that often recur in commentary about American higher education…”

“1) Most college graduates are not being crushed by a mountain of debt. Forty percent of public-college students owe nothing when they graduate, and the vast majority of people with six-figure borrowing for higher education have gone to graduate or professional school…”

“2) Free tuition is no solution to the most serious problems we face. Tuition-free college is way less help than some people need and way more than others require.”

“3) College students are not ending up working as baristas. College degrees, and bachelor’s degrees especially, pay off big-time.”

“4) It’s not ‘academic bloat’ that has been pushing public-college tuition up. It’s the failure of state government funding to keep up with enrollment growth. In most of public higher education, the number of non-faculty staff has actually fallen modestly in recent decades, while the faculty-to-student ratio has actually grown a bit.”

 

Affordable Care Act Premiums Are Lower Than You Think

Brookings Institution: “Since the Affordable Care Act’s (ACA) health insurance marketplaces first took effect in 2014, news story after story has focused on premium increases for certain plans, in certain cities, or for certain individuals. Based on preliminary reports, premiums now appear set to rise by a substantial amount in 2017.”

“What these individual data points miss, however, is that average premiums in the individual market actually dropped significantly upon implementation of the ACA, according to our new analysis, even while consumers got better coverage. In other words, people are getting more for less under the ACA.”

 

Obama Administration Will Fight to Block Health Insurance Mega-Mergers

Vox: “The Obama administration wants to block two health insurance mega-mergers. The Department of Justice announced Thursday that it would file lawsuits against the proposed merger of Cigna and Anthem, and of Humana and Aetna.”

“Right now there are five major health insurers in the United States — and if these mergers went through, that would drop to three. Taken together, those three companies would cover around 132 million Americans — about half the population under age 65.”

“‘These mergers would restrict competition for health insurance products sold in markets across the country and would give tremendous power over the nation’s health insurance industry to just three large companies,’ US Attorney General Loretta Lynch said in a statement Thursday. ‘Our actions seek to preserve competition that keeps premiums down.'”

 

Trump’s NATO Comments Reaffirm His Popularity in Russia

New York Times: “Asked about Russia’s threatening activities, which have unnerved the small Baltic States that are among the more recent entrants into NATO, Mr. Trump said that if Russia attacked them, he would decide whether to come to their aid only after reviewing if those nations have ‘fulfilled their obligations to us.'”

“The United States created the 28-nation alliance, and Article 5 of the NATO treaty, signed by President Truman, requires any member to come to the aid of another that NATO declares was attacked.”

Though the Kremlin’s Dmitry Peskov publicly denounced Trump’s comments, saying that it is “not the best formulation” to “unnecessarily talk about a hypothetical Russian attack on someone,” Politico reports that “the most passionate dreamers here [in Russia] imagine an almighty Trump ordering an American exit from NATO, just as the United Kingdom voted to exit the EU…”

“For Putin, Trump is the gift that keeps on giving.”

 

It’s Getting Too Hot to Work, and It Could Cost the Global Economy Trillions

Quartz: “The heat is rising, and it could cost the global economy $2 trillion by 2030.”

“New research suggests that climbing temperatures will make it harder for workers to do their jobs, particularly in the world’s poorest economies. The situation is worst for those in the lowest paid and most heat-exposed professions, such as construction and farming.”

“India and China together stand to lose $450 billion in output by 2030. The economies of richer nations, such as Japan and the UK, were unaffected by heat stress—only the US saw a modest dip of 0.2% of GDP.”

Majority of Americans Oppose Trump’s Immigration Plans

A new Gallup poll shows that Americans overwhelmingly oppose Donald Trump’s immigration plans.

84% of Americans and 76% of Republicans favor “allowing immigrants living in the U.S. illegally the chance to become U.S. citizens if they meet certain requirements over a period of time.” 66% of Americans oppose “building a wall along the entire U.S.-Mexico border,” and the same number oppose “deporting all immigrants who are living in the U.S. illegally.”

The poll shows Republicans more likely to favor building a wall and deporting immigrants than other Americans, but Independents swing the poll, strongly opposing those measures.

Why Is Glass-Steagall So Politically Popular and What Does It Really Mean? 

Brookings Institution: “Reinstating Glass-Steagall, the 1930s era signature financial regulation act, has achieved a rare feat, now included in both party’s platforms. How did this arcane, 80-year old law, suddenly become the trendy cure-all for our nation’s financial regulatory system?”

“Bringing back Glass-Steagall is good politics and bad public policy, as is often the case.”

“The major component of Glass-Steagall is the separation of commercial banking, investment banking, and insurance. Reinstating Glass-Steagall would mean that, for example, USAA could not be both a commercial bank and an insurance company to its millions of customers. Does anyone think that would help prevent another financial crisis? It would not have prevented what Lehman Brothers, Bear Sterns, Washington Mutual, Countrywide, or AIG did up to and during the financial crisis.”

“Glass-Steagall reinstatement would force a divorce of the shotgun marriage of Bank of America and Merrill Lynch that was arranged to stabilize the financial system. It would break Citigroup and JPMorgan Chase into smaller pieces. But Glass Steagall would not materially change Goldman Sachs, Morgan Stanley, or the $2.7 trillion hedge fund industry.”

“The public should be careful about buying what is sold as a magic elixir. If they look at exactly what reinstating Glass-Steagall would and would not accomplish, they will be disappointed. Just as many of us pine for some of the sensibility and values of our grandparent’s generation, most of us do not want to replicate it.”

The Problem with a “Free” College Plan

New York Times: “This month, Hillary Clinton announced a plan to make public colleges free for the children of any family earning less than $125,000 a year. The move was widely seen as an appeal to supporters of her primary opponent Bernie Sanders, who made free college a pillar of his insurgent campaign.”

“Binyamin Appelbaum of The New York Times wrote Saturday that the plan could have the perverse effect of driving tuition higher. As is often the case with campaign promises, the details are fuzzy. And probably for good reason. A look at how states finance higher education shows that the more Mrs. Clinton tries to make good on her free college promises, the more problematic the policies needed to get there become.”

“The problem boils down to the consequences of building higher education policy around a single price: $0. If that’s a given, Clinton will have to choose between an extremely expensive and grossly unfair policy that actually fulfills her highly publicized promise, or a more affordable and reasonable policy that leaves hundreds of thousands of students with more than $0 to pay.”

“By taking on the mantle of free college, Mrs. Clinton may have won the loyalty of reluctant Sanders supporters and increased her odds of being elected president. But in doing so, she has created significant new problems to overcome if she wins.”

Turkey Coup Attempt Leaves America With Stark Choice

Bipartisan Policy Center: “In the aftermath of Turkey’s attempted, and failed, coup, Washington is primarily concerned about the future of the U.S.-Turkish alliance and its central objective these days: the fight against Islamic State (ISIS). In particular, U.S. policymakers are concerned about the fate of U.S. access to the Turkish airbase at Incirlik, from which assets used in the campaign against ISIS currently operate. Even though U.S. operations at Incirlik have resumed after being briefly suspended this weekend, there are good reasons to believe that the bases’ final status still hangs in the balance.”

“Erdoğan has already proven he is happy to manufacture evidence to achieve his political goals… And those political goals are increasingly authoritarian. The coup’s aftermath—with thousands of judges and police officers arrested—is evidence enough of that. Which puts the United States in a difficult position, after having stood up for Turkey’s democratically elected government, should it also stand up for other hallmarks of democracy, like rule of law, freedom of press and expression, checks and balances?”

“The United States did little as Erdoğan consolidated power and silenced critical voices prior to the attempted coup, but it should now have plenty of evidence of the dangers of ignoring Turkey’s declining democracy. Erdoğan’s abuses of power are directly linked to spiraling instability in this critical country, not only in the form of the coup attempt, but also a spate of ISIS attacks that has gone nearly unaddressed while the government wages an ethnic civil conflict against the Kurdistan Workers’ Party.”

“The choice facing U.S. policymakers is thus whether to pursue more of the same—access to Incirlik while Erdoğan grows stronger and Turkey weaker—or to risk the one thing the United States has cared most about thus far—Incirlik—in order to take a stand against the destabilizing forces Erdoğan is unleashing.”

In 2015, CEOs Made 276 Times the Average Pay of the Typical Worker

Economic Policy Institute: “In 2015, CEOs in America’s largest firms made an average of $15.5 million in compensation, which is 276 times the annual average pay of the typical worker. While the CEO-to-worker compensation ratio is down from 302-to-1 in 2014, it is still light years beyond the 20-to-1 ratio in 1965.”

“Exorbitant CEO pay means that the fruits of economic growth are not going to ordinary workers since the higher pay does not reflect correspondingly higher output.”

“CEO pay is growing a lot faster than profits, the pay of the top 0.1 percent of wage earners, and the wages of college graduates. This means that CEOs are getting more because of their power, not because they are more productive, or have special talent, or more education. If CEOs earned less or were taxed more, there would be no adverse impact on output or employment.”

Trump’s Coalition Looks a Lot Like Brexit Voters

Bloomberg Politics: “If the Britons who powered Brexit to victory were Americans, they’d look a lot like Donald Trump voters.”

“Both camps are fueled by older, working-class whites spurred by nationalism and nostalgia for a bygone era. Their economic prospects have diminished in an era of globalization, and they feel that immigration is damaging their pocketbooks and their cultural identity. And they think the elites aren’t listening.”

“Yet the faster pace of demographic transformation in U.S. makes Trump’s task of assembling a winning majority more difficult than the Leave campaign’s road to victory. The American electorate of more ethnically diverse voters, along with the state-by-state nature of the U.S. presidential election, give his opponent, Hillary Clinton, a major advantage—and are factors not mirrored in the Leave referendum.”

“Still, a rising tide of populism and distrust of political elites in the U.S., similar to that which fueled Brexit, gave even Clinton a scare in her Democratic primary, where democratic-socialist insurgent Bernie Sanders won millions of vote and exceeded expectations.”

America: Digitally Divided 

Brookings Institution: “Rural areas have significantly slower internet access, with 39 percent lacking access to broadband of 25/4 Mbps, compared to only 4 percent for urban areas. This rural/urban ‘digital divide’ in access severely limits rural populations from taking advantage of a critical component of modern life.”

“This discrepancy in access inhibits rural communities in often unforeseen ways. While their YouTube stream may not be the highest quality, rural communities may also be unable to efficiently provide internet access to students in public schools… Rural schools lack access to high-speed fiber and pay more than twice as much for bandwidth. In a growing world of personalized online curricula, internet-based research, and online testing, this severely restricts rural students from educational opportunities their urban counterparts may enjoy.”

“Furthermore, rural communities may be unable to access critical government services. From Social Security to FAFSA, government services are transitioning to online access. Tax forms and services are being increasingly streamlined through online portals and tools, and with limited broadband speed, rural America may struggle to access these services.”

“…the FCC must expand access alongside advances in technology rather than after the fact, satisfying increased demands for faster internet with infrastructure growth. Otherwise, rural communities will continue to play catch up with their urban counterparts and the U.S. will remain digitally divided.”