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Angry Mom: Thanks, Joe “2022 Will Be an Electoral Bloodbath” Manchin [UPDATE-2]

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[NB: Check the byline, thanks. Updates at the bottom of this post. /~Rayne]

I have no choice but to warn you I write this as one hella angry mom. I want to put some people in time out badly.

First, a caveat and an ear-boxing:

The GOP is worthless. They have systematically refused to govern during a time of crisis. What the GOP has done instead has exponentially increased risk to America – Making America Great at Stupidity – and to the rest of the world with its anti-science, anti-vaccine, anti-mask propaganda.

They’ve fought every single damned effort to offer aid to the country. Their congressional voting record documents this for posterity as well as in state legislatures. They resist rational science-based efforts to stem the pandemic because of weak sauce excuses like “muh freedum!” which means protecting the unconstitutional right to increase others’ risk of sickness, disability, death, and loss of business.

They’re not a political party with a reasoned platform based on a sound ideology with which the country can identify. Instead it’s an organization intent on maintaining a grip on power by aggregating Know-Nothings, Do-Nothings, and Stop-Everythings, which includes stopping this country from realizing a more perfect union.

If the GOP was a sane and legitimate political party I wouldn’t have had to write this post.

That said, Senator Chuck Schumer and President Joe Biden have screwed up in a big way, a couple times over. They need to be schooled for this.

~ ~ ~

Joe Manchin appeared on fucking Fox News yesterday to say he wasn’t going to support the Build Back Better Act which has already been passed in the House.

If that wasn’t a deliberate in-your-face “Fuck You!” to Biden, the Senate Democrats, his West Virginia constituents, and the entire country, I don’t know what is.

Not NBC, not CBS, not ABC. Not NPR, not even a local West Virginia news station.

He went to Fox Home of Demoralizatsiya News.

And he was able to do so because Schumer and Biden allowed the Infrastructure Investment and Jobs Act (a.k.a. Bipartisan Infrastructure Framework – BIF) to be delinked from passage of the BBB, putting the BIF first and BBB second in order to obtain Manchin’s support.

Except the BIF is the only thing Manchin wanted to the benefit of his corporate overlords. BBB gives money to those people he doesn’t trust, like most of the constituents of his state, the second poorest state in the country.

Can’t have that.

Ask Adam Jentleson about it. He does a better job in this Twitter thread explaining how this negotiation was fucked up all to hell.

Don’t ask the progressive House Dems about this situation; you should already have been able to hear them warning before this all went down that Manchin couldn’t be trusted. Their fury is righteous.

And I absolutely mean righteous because there’s no goddamned way in hell someone like Ady Barkan, who has fought so vigorously for American’s health care, should have to worry about services he needs as he fights a mortal illness.

There’s also no way that the roughly 10% of Americans who are diabetics should have to continue to worry about coming up with $1000 per month to pay for insulin which costs a few bucks to make. They should be rejoicing about a $35 month price instead, but no – Manchin fucked them over, and Chuck and Joe failed to see the fucking coming at us.

Don’t get me started on the other fuck-ups like the Child Tax Credit, about which one tweeter wrote, “2022 will be a Electoral bloodbath” (sic).

Imagine this happening to a household which has had reduced hours, wage cuts, or has been on minimum wage, or dealing with unpaid time off due to COVID over the last year. Just do the simple math of two young parents trying to manage this on 40 hours a week at prevailing local minimum wage.

People have to pay bills NOW, and in January, and in February, in spite of work disruptions and increased cost of daycare and other childcare expenses…they can’t just float everything until this is fixed or the credit is paid out after they file 2022 tax returns.

Also extremely unhelpful is Biden’s persistent refusal to use his executive power to forgive student loans in part or in whole.

Parents of young children with student loans are doubly screwed by the failures of both the White House and the Senate Leader. And yet there’s head scratching about Biden’s weak approval rating going into 2022 especially with younger voters.

Why the hell should Millennials and Gen Z turn out to vote when they can do the math and they know the Democratic Party hasn’t delivered for them – especially as they go into another COVID hurricane thanks to Omicron?

~ ~ ~

Look, the BBB is an economic stimulus package. Every single household saddled with burdens BBB could alleviate would be able to participate more fully in the economy.

Some of that “economic anxiety” the media hyped up as one reason behind Trump’s election in 2016 could be partially relieved.

Forgiving student loans is likewise an economic stimulus targeted at a segment of the population which is most likely to spend income immediately, locally, and on goods and services which propel our economy.

This is what Joe Manchin failed to recognize and couldn’t explain to his constituents AND his corporate overlords because he’s a selfish dumb ass.

The BBB is economic stimulus — this is the justification for Schumer and Biden to approach moderate GOP members like Lisa Murkowski (AK) and Susan Collins (ME) to obtain their votes (Collins owes women this, big time).

Other people have been explaining it quite capably:

Yet Manchin refuses to accept the assist.

Meanwhile, Goldman Sachs downgraded its estimates of U.S. economic growth yesterday.

Which leads me to ask one rather important question, given Manchin’s announcement on goddamned Fox News and Goldman Sachs’ downgrade on a Sunday.

Who knew about Manchin’s decision and shorted the market?

Heaven help you if you did, Manchin.

~ ~ ~

UPDATE-1 — 2:50 PM 20-DEC-2021 —

Thanks to Kendall Brown for saving us a click so we didn’t have to read all the revolting Manchin-sympathetic journalism to get to this bit:

I’m even more convinced something shady happened than I was before if Manchin is going to blame incivility by the White House as a reason to walk away from the BBB.

Who didn’t know Manchin was the hold up? We all of us knew it, it wasn’t a surprise. The White House naming him as the lone Democratic holdout only confirmed what we’d known and what the House progressive caucus was worried about — that a single Democrat would be the sole reason the bill would fail, and look, it was one of the two senators most-likely-to-DINO-tank-a-bill.

Doesn’t he make enough from his other investments to take care of his family if he’s so worried about them being included in harassment because he’d rather tank the entire BBB and hurt Americans in the process? Maybe sell your Maserati, Manchin, and buy a couple security people.

Jesus Christ, what a whiny baby he is.

Rep. Jayapal is now looking at executive action as a Plan B to realizing key components in the BBB.

What a pity Manchin didn’t take a hint from all the feedback he got from average Americans to simply agree to pass the bill and be a hero instead of self owning by appearing to flip flop on his demands throughout the course of the negotiations in full sight of the public who could see he was the bottlenecking gatekeeper.

He looks even more weak and pathetic having to go to yet another sympathetic outlet to make his non-existent case.

UPDATE-2 — 11:50 AM 21-DEC-2021 —

There have been rumbles over the last 24 hours about the BBB possibly being revamped if not revived or resuscitated. But Manchin’s homies have also taken issue with his position on BBB:

The West Virginia Dems had done a fair amount of organizing recently which showed up in polling about the BBB:


Hard to get around these numbers which show bipartisan support among constituents for BBB.

Goodbye, American Dream: The Unaffordability of American Life

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My oldest sent me a text this past weekend:

Also houses down here are going for 1.5x value. [Friend] put an offer in at 200k for house selling for 160k and it ended up selling for 240k. There’s no way it’ll appraise that high but EVERY house is selling like that.

Folks in big coastal metro areas will laugh at these prices, but until recently $160,000 bought a 900-1200 square foot home, three bedrooms and two bathrooms, a basement and a two-car garage in a suburban setting here in Michigan. At this price one wouldn’t find a brand new home but one between 10 to 50 years old, with a medium sized suburban lot. If one was really lucky, the house would be move-in ready, the yard would be fenced, and there might be a shed in the backyard for the lawn mower.

A young professional earning $80 to $100,000 a year could afford this and a family and still have a tiny bit left over to put in retirement savings.

But it’s a stretch at $200,000, and absolutely out of their range at $240,000. They may not even have the 20-25% down payment for this larger price, and the housing market has tightened so quickly they certainly haven’t been able to come up with an additional $20 to $40,000 to put down.

Wall Street Journal reported last week that as much as a third of single-family residential housing is now being snapped up by investors.

Big foreign investment firms that buy office buildings, hotels and shopping centers around the world have a new favorite real-estate play: single-family homes in American suburbs.

These institutions are partnering with U.S. housing companies to buy or build rental homes by the thousands. In suburban neighborhoods near cities such as Atlanta, Las Vegas and Phoenix, blocks of families are sending monthly rent checks to ventures backed by Canadian pension funds, European insurers, and Asian or Middle Eastern government-run funds.

The overseas investors are following in the footsteps of many big U.S. investment firms and pension funds, which started buying single-family homes on a large scale in the aftermath of the financial crisis.

This may well explain the huge jump in prices over the last 12-18 months.

The situation is so bad it’s become a joke on TikTok and Twitter:

Speculation is doing to residential property what it did to oil prices before June 2008 when Congress passed legislation requiring an increase from 10% to 30% margin on options. Oil prices then dropped greatly, but not enough fast enough to prevent economic Jenga – many mortgages failed because homeowners had to choose between a tank of gas to get to work or making their house payment.

~ ~ ~

Now imagine the frustration of a prospective house buyer like [Friend] above. They’re a two-career household with a small family, which means they have car payments, childcare expenses which likely exceed car payments, and student loans they’ll be paying down for at least another decade if they are trying to juggle all these expenses.

They’ve scrimped and saved, kept their lifestyle minimal – not hard to do if you’ve had to weigh going to the movies on a date night against the cost of a babysitter and movie tickets – and they’ve amassed enough cash to put down 20% on a house and been pre-approved for a mortgage between $120,000 and $160,000. The higher end would be a push for them but sometimes the right house is a little pricier.

And then the dream for which they’ve scrimped and saved is gone in a heartbeat. As soon as they see the house on market they bid but they couldn’t counteroffer enough money fast enough and it’s gone.

Even in a pandemic with so many people out of work, the right house is gone.

It’s probably been sold to a speculator who will put it up for rent at a price which is the same as [Friend]’s mortgage payment would have been, but at that price there’s no room to save any extra money.

And that’s what it’s like in the Midwest. What’s it like in more densely-populated coastal states?

How do young people who are competing for jobs on a national basis, earning pay which doesn’t adjust all that much for location, buy a home and attain the American Dream?

They’re giving up children to do this, we can see that by the flat to falling birth rates.

A major one. The National Bureau of Economic Research says that the largest component of child-rearing costs is housing. And the cost of housing in America has skyrocketed. The median U.S. home in 1953 cost $18,080, or about $177,000 in today’s inflation-adjusted dollars. Today, the median home price is $301,000. Young people who cannot afford homes or even a two-bedroom apartment are less inclined to marry and to have children. One 2014 study published in the Journal of Public Economics explicitly linked housing costs to fertility, suggesting that for every $10,000 jump in housing values, fertility among nonowners fell 2.4 percent. Economists also point to the fact that the fertility rate has fallen every year since 2007, and suggest that the Great Recession compelled many Millennials to put off child-rearing for years. “What we learned from the Great Recession is that every 1 percentage point increase in the unemployment rate reduces births by 1 percent,” said Wellesley College economics professor Phil Levine.

And in places like the greater San Francisco area they go homeless, living in their vehicles because they can’t afford rent *if* there’s rental housing available.

~ ~ ~

One solution to this mess is reducing student loan burdens. Getting tens of millions of young people out from underneath $50,000 and a decade or more of payments would free them to have children and/or buy a home.

I hesitate to say they may also save for retirement but it’s possible they’re not able to until they are out from under their student loans.

This problem may explain why so many young people have jumped at online trading apps like Robinhood, causing increased volatility in the stock market. They can get in with very little money, get out quickly, and do it all over again rapidly. It offers them a chance to increase their asset value though it does nothing for the overall stock market while compromising their personal data privacy.

But putting some portion of their meager savings in the stock market isn’t a solution — it’s far too risky, too easily gamed (hah, GameStop, get it?). It’s not a prudent approach to funding necessities.

Getting out from under student loan debt, though, would be a doable help with very little downside.

~ ~ ~

Removing at least part of student loan debt from younger consumers’ shoulders will act as an economic stimulus, too. Those who are able to end their loan payments will be able to spend more of their income on expenses they’ve deferred in addition to housing.

Employment should rise as demand increases, and a tighter employment market will help boost some if not all wages.

Which brings us to the section of the market which may not benefit directly from canceling student debt. Workers who make minimum wage or are employed in tipped hourly jobs can’t afford to buy the average home in the U.S.; they are struggling to pay rent let alone save a down payment. Many of them are students.

Do the math:

Minimum federal wage $7.25  x  40 hour week  x  52 weeks  =  $15,080 a year.

That’s nowhere near enough to make a payment on the median home priced at $301,000. It’s not enough for a tiny dump of a house at one-third of median price.

The equation above already contains numerous generous assumptions: the employee makes 1) minimum federal wage, 2) at a full-time job, 3) for the entire year. For most minimum wage workers, at least one of these three points doesn’t apply. Most employers who hire minimum wage workers avoid paying unemployment taxes by employing workers less than full time, which means a minimum wage worker must work two jobs (or more) to make $15,080.

Forget about it if the worker holds down a tipped hourly job; while in some cases tips can be quite good, the base wage in at least 16 states is $2.13 an hour. On a bad day it may cost a worker more to show up than they make if they pay for any form of transportation besides shoe leather or a bicycle.

The minimum wage must be raised if roughly 1.8 million Americans have any chance at saving a down payment on a house, let alone buying one. And if businesses aren’t already increasing wages now during pandemic market conditions, they’re not likely to do so unless they’re forced to by law.

~ ~ ~

Canceling a big chunk of student loan debt and raising the minimum wage will still not be enough to help tens of millions of Americans afford to buy their own home.

Once these folks have more disposable income and increase demand on the housing market, speculators will swamp the market even more so than they are right now.

(Domestic policy aside, it’s a marvelous way to ratchet up class conflict by locking out a couple generations of potential homebuyers if a hostile country’s sovereign fund was looking to both invest and destabilize the U.S. at the same time.)

Canada’s domestic housing policy encourages home owner occupancy of single family homes; speculative investment is far less than it is in the U.S. It hasn’t solved their housing market problems — Toronto housing is incredibly expensive — but it does reduce competition for homes.

There must be some form of legislation which reduces market demand by speculators so that the only participants in the single-family home market are single families.

There should be some limitation on speculation for multi-family housing so that rental properties remain affordable. Eliminating overseas buyers or funds is one possibility.

~ ~ ~

We’ll hear all kinds of caterwauling about how unfair it is that some students will have all their debt paid for them by canceling $50,000  while they had to pay for all their student’s education.

Bah. They can suck it up.

This month I finished shelling out a total of $200,000 for two kids to go to college. This doesn’t include what I’ve paid for their cell phone, health care insurance, and for the vehicles and auto insurance they’ve needed.

$200K covered tuition, books, fees and some of the housing and food for one kid on a half ride to a private school, and a kid at a Big 10 public university. Both kids worked throughout their four-year programs and paid for their own gasoline and rent off campus, along with some sundries.

Because of this investment in them I’ve got to come up with income for another seven-plus years to pay for my health care, but at least my kids have a fighting chance right now that most of their cohort don’t have. They don’t need to live at home with me to scrimp and save. They can move out out state and chase a better job.

But even with this investment in both of my kids it will take years for them to save enough to make a down payment on a home and have a 6-month cushion in the bank.

I don’t resent the fact they don’t have school loans which might be canceled. What I resent is that they don’t have the kind of world I had as a young adult, where if one worked hard they could make enough money to get ahead and expect a better life. (I do resent having to pay through the nose, five to ten times over what I paid for college, but that’s another matter.)

If housing prices jump 20-60% almost overnight, my kids don’t have that chance. They can’t expect their friends to uniformly have that chance, either, as [Friend]’s situation demonstrates.

If their entire cohort is stifled by student loan debt, wages stagnant for decades, and competition for housing from speculation, even steep parental investment isn’t enough to help them tread water.

And if all of their cohort of 20-somethings are stuck in the same boat, the entire economy is deeply skewed and screwed. Whatever assessment analysts are making of the stock market and the economy is manipulated by this iceberg of frozen, frustrated demand which cannot remain in stasis forever.

Something has to give.

We can start with canceling $50,000 student debt, increasing the minimum wage to $15 an hour, and eliminating overseas speculation from the housing market while limiting single-family homes to sales between occupants and their heirs.

Money by Kevin Dooley via Flickr

The New Bezzle

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John Kenneth Galbraith gave us the term “the bezzle” in his 1955 book The Great Crash, 1929. Galbraith saw that there was often a long time between a financial crime and its discovery. In the interim holders of the financial asset involved in the crime experiences “psychic wealth”, because they are unaware of the actual losses. Eventually, something changes, and they find out. The Bernie Madoff case is a good example. Until he was exposed after the Great Crash, his loser investors thought they had $57 billion in their accounts. Turns out they had net recoveries of about $10 billion on the $17 billion they invested. That puts the bezzle at $47 billion.

Here’s another example. In the Antebellum South, there were nearly 4 million slaves with a value estimated at between $3.1 and $3.6 billion. After the war, that value went to zero. What was the net worth of the slavers in the late 1850s? They thought they were rich enough to battle the Union on equal terms, but the value of slaves wasn’t nearly equal to the value of the steel mills and industry of the northern states.

The problem of identifying the value of capital interests is very difficult. In Capital in the Twenty-First Century Piketty acknowledges the problem, and selects a solution appropriate to his purposes: the market valuations of the many forms capital can take. Here’s an excellent essay discussing this choice and its critics. By using this definition, Piketty simply ignores the problem of the bezzle, which makes sense in the terms of his project. Using Galbraith’s definition I suspect it wouldn’t make make a difference.

But I think the term leads us to a broader definition. The Great Crash provides a good example of what that new definition should be. The current estimate is that the Great Crash resulted in the loss of nearly 30% of household net worth between 2007 and 2010. The average household lost nearly $50 thousand in net worth between 2007 and 2010 according to the GAO report. Page 27 in the .pdf. By 2013, when markets were functioning — let’s say normally — the GAO estimated total household paper wealth losses at $9.1 trillion. Report here.

A large part of this paper loss was the decline in financial assets which affected people directly and through their pensions and retirement plans. Another large part was the result of lower house prices, which left many people with mortgage debt higher than the new prices. Here’s a priceless sentence from the report:

Economists we spoke with noted that precrisis asset prices may have reflected unsustainably high (or “bubble”) valuations and it may not be appropriate to consider the full amount of the overall decline in net worth as a loss associated with the crisis.

I bet the millions of people who lost that money don’t really care what economists think now, because none of the economists who could have made this stick before the Great Crash said this when it would have mattered. Far from it: the economics tribe insisted that markets were all-knowing and perfect in their understanding, and spent their days explaining why this time was different.

This superficial description shows that these households are in the same position as Madoff investors and Southern slavers: they thought they had something they didn’t, and they changed their behavior based on it.

I can just hear Paul Krugman explaining that bubbles and bezzles are really hard to model, and that’s why no one studies them. That’s probably true. Also, so what? Here’s my clever idea: look for data and see what it tells us. It worked for Piketty, who found that the historical record showed that inequality increases when r > g. Piketty and Saez, and Gabriel Zucman who did the estimate on tax shelters, didn’t have a model. They did have dusty records and big computer skills, just like all their contemporaries.

I hope that somewhere in academia there are young economists who look at Piketty, Saez and Zucman and their colleagues and say “I could do that”. And it’s just not that hard. Here are some hints.

1. There’s a big pile of student loan debt that isn’t going to be repaid. How much of that is on the books of the US Treasury, and how much is private sector? How much in the latter category is delinquent? Who holds it and in what form? If it’s in trusts, there isn’t going to be any enforcement, and the losses will fall on the owners of the securities. If it’s in the hands of originators, what happens to their balance sheets as this stuff cascades into default?

2. Every month we see another big business crash and burn. Often they fail because they are held by private equity investment firms. The crashes mean that a lot of debt isn’t going to be repaid. How big is that likely to be, and who’s going to eat that loss?

3. For the past 8 years or so, investors have been chasing yield. There’s some Galbraith bezzle in this stuff. How much dreck is sitting in their portfolios?

4. What does the rest of the mortgage overhang and related RMBS look like?

5. How much money is there in organized crime? A big part of the profits filters into the economy in the form of some kind of investment. How much of it is in the stock market? What happens when or if that ever gets traced and seized?

6. In the same way, how much have oligarchs and politicians stolen from other nations and moved into world financial markets? What happens if we got serious about that?

7. Another form of points 5 and 6: Rich people have stashed as much as $32 trillion in overseas tax shelters. If people got serious about this, their governments could seize this money and/or impose huge taxes on it. Say half of it, $16 trillion, got sucked up by taxation and seizure, and was removed from the financial markets and banks where it sits. What would happen then?

So, economists, just how big is the bezzle?