To The Minneapolis And Saint Paul City Councils

To:  Our Bobbleheaded Overlords
From: Mitch Berg, Irascible Peasant
Re:  “Fight For Fifteen!”

All,

From a friend of this blog, here’s where the $15/hour minimum wage leads, inevitably and inexorably:

It’s at Seattle/Tacoma International Airport – an early adopter of the #FightFor15 – in case you were wondering. Photo courtesy Brian Skon.

Let me just take a moment to say, I don’t think the “#FightFor15” has anything to do with raising worker wages, or taking any sort of care of the little guy.  If it were, you’d be fighting for the only sustainable minimum wage there is – widespread prosperity

No.  This is about virtue-signaling to your base (and I don’t mean minimum wage earners) and showing small business who’s boss.

That is all.

Grrrrr

Joe Doakes from Como Park emails:

Just before handing over power, the Obama Justice Department sued Klein Bank for redlining.  Prosecution exhibits at the link include a map of Klein’s service territory, a crescent around the West side of Minneapolis.  They don’t lend in the inner cities, that’s not their business model.  But those are the highest concentration of people of color!  Why wouldn’t Klein want to make loans there? 

 Gee, I wonder: why would any prudent lender think race or neighborhood would have anything to do with loan profitability?  Have you ever driven through North Minneapolis or Frogtown?  Looked at all the foreclosed properties? Why would any sane lender want to lend money there?

 Social Justice types insist there’s no difference in foreclosure rates between Black and White neighborhoods, that’s just a racist stereotype.  And yet every study by Social Justice types undercuts the narrative supporting the Community Reinvestment Act’s requirement of lending to people who can’t afford to repay.  Here are some from the Twin Cities, who see the damage:

 http://isaiahmn.org/2012/05/east-side-of-st-paul-hit-hardest-by-foreclosure-crisis-impact-to-entire-city/

 http://www.mn2020.org/issues-that-matter/economic-development/map-of-the-week-submarkets-shape-foreclosure-crisis

 http://www.irpumn.org/uls/resources/projects/IRP_mortgage_study_Feb._11th.pdf which contains this especially good paragraph:

 “The enormous costs of foreclosures—to families who lose their homes as well as to cities and towns losing tax resources—have been greatest for communities of color. Both subprime lending rates and foreclosure rates have been highest in neighborhoods with the highest percentages of people of color. The impact of these patterns is especially notable in North Minneapolis, an area where prime lenders are noticeably under-represented and subprime lenders are significantly over-represented.”

 Prime lenders are underrepresented?  Why would that be?  The Community Reinvestment Act demands that banks lend money to persons of color.  But that group tends to have worse credit ratings and (at least in some people’s minds) a culture that fails to emphasize adhering to your contracts.  So lenders don’t consider them prime candidates for a loan; instead, lenders demand a risk premium in the form of higher interest rates to make those loans, which makes it harder for the borrower to pay the loans when there’s an economic hiccup, which results in massive foreclosures in neighborhoods of color.  Not all of them, mind you – the foreclosure rate in the Asian community is a fraction of that in the Black and Hispanic community – which gives support to the notion that cultural differences matter.

 The Social Justice solution, of course, is not to work with persons of color to raise their credit scores or change their culture.  Their solution was to lower the lending criteria for a prime rate loan.  That way, everybody would get the cheap rates so nobody would default.  Except it didn’t work, as a decade of foreclosures and bailouts has amply demonstrated.

 The Community Reinvestment Act is unicorn thinking and bad banking practice.  It caused the real estate crash that cost an entire generation most of its life savings.  The Act should be repealed before it causes another.

 Joe Doakes

Fake Economic News

As Joel Kotkin points out, Donald Trump faces two major hurdles.  One is the structural mess Barack Obama left; a shallow, fragile “prosperity” (nonetheless called a “boom” by the Democrat media) built on hoarding low-interest cash.

The second?  The perception that the media is pumping out that this potemkin prosperity is actually a “boom” (emphasis added):

Yet this is more a matter of perception than reality, a kind of “fake news.” To be sure, President Barack Obama inherited a disastrous economy from George W. Bush and can claim, with some justification, that on his watch millions of jobs were restored and the economy achieved steady, if unspectacular, growth. Under Obama average GDP growth has been almost twice as high as under his predecessor, but roughly half that of either President Reagan or Clinton.

(And, lest anyone forget, “under Clinton” really means “under Gingrich”, since Clinton showed every sign of being no  better than Obama for his first two years).

Less appreciated, however, are the fundamental long-term weaknesses in the U.S. economy that Obama and Bush have left for Trump. A recent report from the U.S. Council on Competitiveness details a litany of profound, lingering flaws — historically slow growth, rising inequality, stagnant incomes, slumping productivity and declining lifespans. As the report concludes: “The Great Recession may be over, but America is dangerously running on empty.”

Like everything by Kotkin, it’s worth a read.

Unexpected!

Last summer, when the people of the UK voted to leave the EU in the fabled “Brexit”, the same pundits who routinely Americans for “voting against their best interests” took a time out to chide Brits for voting…against their “best interests”.   The Brit economy was going to tank, returning the UK, if not to the Third World, at least into an impemetrable economic fog.

The landed punditry hasn’t been doing so well this year:

Business activity hit a 17-month high last month, meaning that the economy grew by 2.2 per cent last year — more than the six other leading nations, including the US, Germany and Japan.

Far from slowing after the referendum in June, as predicted by the Treasury and Bank of England, [and a rogue’s gallery of American pundits with portfolio – Ed.] growth appeared to have improved. GDP grew at 0.3 per cent and 0.6 per cent in the first two quarters of last year, compared with 0.6 per cent and an estimated 0.5 per cent in the final period.

On the one hand, time will tell.

On the other hand, our departing president wishes he’d had two consecutive quarters as good as that particular “failed experiment”.

Participation

Joe Doakes from Como Park emails:

Liberals object when I say we ought to run government like a business.  Here’s an example why we should (from the public land records, nothing confidential, all public information):

 House in the 1300 block of Fremont Avenue in St. Paul sold in 2007, peak of the market just before the collapse.  First mortgage $164,000 federally insured loan; second mortgage $20,000 to Family Housing Fund; third mortgage $3000 to Minnesota Housing Finance Agency.  Fourth mortgage in 2010 for $6,000 to St. Paul HRA.

 House was foreclosed in 2016, bank bid $97,000, sold it this Fall to new buyer for $90,000 using a realtor, for which the bank paid the commissions.

 All told, the public lost about $100,000 on that single deal. 

 Yeah, but it helped out a poor person, right? She had a place to live for nearly 10 years. 

 Sort of.  She made payments on four mortgages – that’s enough to cover a ton of rent – and now she has a foreclosure on her credit report and possibly an eviction on her judgment history.  Nobody will lend her any money now, and no landlord wants to rent to her, either.  So did pouring that public money down the drain really do her any good?

 I wonder if she got a participation trophy?  Seems like the least they could do.

 Joe Doakes

When you make something “worth” other than what people would pay for it on their own, there will be unintended consequences.

Brown Bag Nation

Joe Doakes from Como Park emails:

The Post makes a discovery.  About 20 years behind the rest of the nation, but yeah, lunch is expensive.  How is this possible, since there’s no inflation under the Obama administration?  The article doesn’t say.

The correlation between price and the decline in visits is a revelation to the Post but glaringly obvious to me.  Prices have shot way up.  Three years ago, the Golden Arches offered several value meals for under $5.00.  Now there aren’t any, most are in the $7.00 range.  A 40% price increase is noticeable to guys like Joe Shlabotnik, whose disposable income has not kept pace.  So he packs a lunch from home, which pointy-headed economists call “substitution” but which everybody else calls “the new normal.”

 More proof of the utter disconnect between coastal elites and fly-over country hicks.  We knew about this years ago; they’re just now figuring it out.  So who are the real dummies?

 Joe Doakes

Rhetorical question, right, Joe?

Diminished Expectations

I find myself more and more these days trying to give historical context to current events, to clarify current events for the various millennials in my life.

Here’s a big one:  while the media is turning cartwheels about the “Obama Recovery” (happening an unprecedented eight years after the crash – worse than the Great Depression), the best quarter of GDP growth in this “recovery” is lower than the worst quarter of Reagan’s recovery, from 1983 through 1987.

But never mind – the media will keep the narrative of Obama the Economic Lightworker warm and dry.

But with Hillary Clinton in the picture, there’s another wrinkle.   John Hinderaker notes at Powerline (with some emphasis added):

n 1992, Bill Clinton announced that “It’s the economy, stupid.” That was pretty much the sole theme of his campaign. He ludicrously claimed that the country was then experiencing “the worst economy since the Great Depression,” a lie that the press, to its everlasting shame, not just allowed but often endorsed. So what was the level of GDP growth that Clinton relentlessly denigrated?

According to the Bureau of Economic Analysis, the quarterly growth numbers for 1992, in chained 2009 dollars, were 4.8%, 4.5%, 3.9% and 4.1%. That’s right–the growth that Bill Clinton derided as the “worst economy since the Great Depression” was around four times what we are now seeing under Barack Obama. And Hillary Clinton promises to continue Obama’s anti-growth policies.

I remember the recession at the tail end of the Bush 41 administration – as the economy adjusted from a Cold War economy to civilian spending – very well; it slowed down my transition from radio to IT by a few harrowing months when I was welcoming a couple of new children into the world.  But it was a short recession with a sharp recovery (“Thanks, Ronald Reagan, for that “peace dividend!”) that led to 15 mostly-prosperous years…

…whose various windfalls are long in the past.

Some Poor Chump Is Always The Last To Get The Word

Joe Doakes from Como Park emails:

The US economy grew in the first quarter of 2016, but only a tiny bit, 0.5%.  That’s technically enough to keep us out of a “recession.”

 First, do you believe that number?  Economic estimates are routinely announced with pronounced spin showing how well the administration’s policies are working, then quietly revised downward a few months later.  There’s not much room to revise this number downward.

 Second, look at the formula for calculating GDP: 

Gross Domestic Product = Consumption + Investment + Government Spending + (Exports – Imports)

 If the federal government wants the GDP number to look good, it can manipulate the result by increasing government spending to offset decreases in Consumption, Investment and Net Exports.  But federal government spending slowed down in the first quarter as Quantitative Easing winds down.  And the GDP number is falling as a result.  The implications are important.

 It means there never was any growth in the Consumer or Investment side of the economy, that’s all been propped up by federal government spending.  In other words, we’ve been experiencing negative economic growth for months, maybe years, but it’s been masked by federal government spending.  I’m looking at you, Barack Obama, and your $20 Trillion national debt.

 The take-away is simple: don’t worry about Great Depression 2.0 coming; it’s already here.  Worry about what happens when the ordinary public figures it out.

 Joe Doakes

Look!  Bathrooms!

Your Smile Is Thin Disguise

Joe Doakes from Como Park emails:

Liberals claim the economy has been turned around for years, big recovery going on, stock market booming, unemployment at all-time lows.  I don’t believe the government’s statistics; I think bureaucrats manipulate the numbers to make the administration look good. 

 How about a more concrete number: vacant buildings in St. Paul.  856.   Economy is in a huge rebound thanks to the libs who have fixed all Bush’s errors but 856 vacant properties remain?  That’s nearly as high as during the bad years.  People generally don’t just walk away from their homes, their businesses, their investments, not without a damned good reason and in recent years that reason has tended to be “can’t afford to make the payments.”  That is not a sign of prosperity.

 When the city is littered with vacant buildings, businesses are moving out, restaurants are folding up, but the government statistics say everything is rosy, who are you going to believe: them or your lying eyes? 

Joe Doakes

There’s a place for “fake it ’til you make it”; the old Hungarian saying “the best way to become wealthy is to appear as if you already are” is one of the guiding principles of my life.

But not for “journalism”, thankewverymuch.

What Could Possibly Go Wrong?

Obama apparently had so much fun during the original Housing Bubble, he’s setting up another.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Read:  Again, the government will socialize the risk, while privatizing the rewards.

Eating The Seed Corn

Minnesota DFLers are romping and frolicking in money from the “surplus” – a misnomer referring to the billion dollars overtaxed from Minnesota’s productive class.

DaytonDustbowl

But more and more, the evidence shows that the “surplus” is a false positive – and that Minnesota’s productive class is choosing greener, lower-tax pastures:

Minnesota, on net, lost $1 billion of income to other states between 2013 and 2014. Specifically, the state lost $944 million in adjusted gross income reported by tax filers who moved in and out of Minnesota. This is the largest net loss of income ever reported for Minnesota, and it represents a dramatic rise from just three years ago, when the state lost $490 million.

Gotta tell you – if Wisconsin somehow manages to stay the course, the greater Hudson area is looking better and better…

“But it’s mostly retirees leaving the state!”.

Well, no (emphasis added):

While the IRS has been tracking income movement since 1992, it released a new data series last year that for the first time provides annual information on who is moving from state to state, based on age and income. These new data refute a long-held assumption that Minnesota’s income loss is primarily due to retirement.

In fact, people in their prime working years represent the largest portion of the net loss of taxpayers and income. Working-age people between 35 and 54 account for nearly 40 percent of Minnesota’s net loss of tax filers for the 2013-14 period. People between 55 and 64 — most of whom are still in the workforce — account for another 23 percent.

“But it’s just the ‘one percent’, moving to their beach houses in Coral Gables!”

Some of them certainly are; capital is mobile, and when it needs to, it moves.

But no – in fact, the biggest chunk is the part of the middle class that provides both much of the spending and many of the entrepreneurs that provide jobs for, well, everyone else:

But this isn’t just about the top 2 percent, as the governor wants people to believe.

Minnesota taxes on the middle class are still high relative to other states. Not surprisingly, Minnesota is, on net, losing this population, too. In fact, between 2011 and 2014, taxpayers earning between $100,000 and $200,000 accounted for 41 percent of the state’s net population loss.

 

Minnesota’s consistent net loss of people and income to other states poses serious challenges to the state both today and into the future. Economic growth is currently constrained by a tight labor market, which, in part, is due to the state not attracting the people with the qualifications necessary to fill today’s jobs.

The parable of the ant and the grasshopper springs to mind.

The DFLers are the grasshoppers.

Capital Runs

Carls Junior / Hardees corporate HQ flees California for Tennessee.

Yes, we know that CKE’s official line is that the firm is relocating because it has less need for office space as it consolidates operations. But the company executives say this with a wink. Tax savings are a big factor, as is the stifling regulatory environment on the left coast, where businesses are treated like villains and rich people as cash dispensers for big government programs. It’s not a coincidence that CKE’s CEO Andy Puzder has been one of the leading critics of high taxes and onerous rules in Washington D.C. and Sacramento.

The next time some liberal hamster asks “what’s the matter with Kansas?”, one might respond “the usual.  What’s the matter with California?”

The state legislative group ALEC finds in its latest “Rich States, Poor States” rating of the states on business climate that California ranks 44th of all the states in business competitiveness.  California has lost roughly 9,000 companies over the last decade, with most of them moving to Texas, Florida, and Tennessee. Last year, in a major loss, Toyota moved its North American headquarters from the Golden State to North Texas.

And that’s just the headquarters – although with many small-to-medium companies, the HQ and the production/distribution/retail is all under one roof.

But with bigger companies?

Minnesota liberals love to hide behind the fact that the Twin Cities is home to a lot of Fortune 1000 companies.  The part they omit (or don’t understand) is that the Headquarters  – with its staffs of senior executives and high-level technocrats, with their taste for the lifestyle and ameniities and central location of major metro hubs like the Twin cities – is a small part of the organization.

Quick – when was the last time 3M or Ecolab built a manufacturing or distribution facility in Minnesota?

(Don’t use Target for an example; it manufactures nothing. It’s employees are all white-collar headquarters workers, and red-collar service employees out in the retail world).

But when things get bad enough?   Even the headquarters staff can move – or, as 3M did during the tax-happy Perpich and Carlson eras, start thinning out the central HQ and moving people to Austin.

Armageddon Lost

1985:  “IBM is going to dominate the entire world!”.   1995:  IBM is fading fast.

1995:  “Microsoft is going to own the entire world!”  2005:  Microsoft has settled into a niche.

2005:  “WalMart is going to destroy small business!”.  2016:  WalMart seems to be hitting limits.

As little as the left seems to trust the market, it seems to be keeping “monopolies” pretty well under control.

Who could have foreseen it?

(Answer:  every single free market conservative).

Low Expectations

Democrats are fond of trying to find statistics that try to show that the Obama Administration has not been a complete economic disaster.

One way is via a blizzard of charts that claim to show a long series of months with job growth:

Raw Numbers

“It’s Bush’s fault! It’s Bush’s fault!”

Of course, as Mark Twain once said – and it’s a cliche I almost regret to say – but there are three types of data; lies, damned lies, and statistics put out to defend Democrat economic policy.

A graph will look very, very different, and depict very different things, depending on the two dimensions you select, as Philip Bump points out in the Wall Street Journal.

Obama looks best when you compare his job creation record with the day he took office – a graph which, by the way, has some liberals chortling, in that it makes Jimmy Carter look like a boss job creator:

Versus First Month

Of course, Clinton is the champ – he’s the only two-term president since World War II that didn’t have a recession on his watch – thanks, of course, to Ronald Reagan and the Peace Dividend, as well as Newt Gingrich stifling the worst of Bill and especially Hillary’s agenda.  Clinton was a champ in spite of himself, and largely due to his opposition.

We also note that more jobs were created on Dubya’s watch in three years than in six and a half of Obama; remember, Dubya had the 9/11 recession and the housing bubble in his eight years.

But isn’t comparing job growth versus a president’s first day in office a little artificial?

Sure.  Let’s compare presidents with their administration’s low points:

Versus Low

 

 

So in other words, Obama’s like Nixon.  I wasn’t very old at the end of the Nixon administration, but we all know what a lousy time that was.

But of course, the population has changed; Reagan added 17 million jobs in a population that was around 260 million.  Obama has added nine million jobs in a nation of 315 million (although nobody’s really counting anymore).  So how about we measure this in terms of concrete percentages?

Versus Population
As anyone who was looking for work back then knows, life under Reagan was infinitely better; the economy added a higher percentage of jobs in the quarter after the end of the’82 recession than it has in the six years of the Obama recovery.

Print out that last graph.  Share it with your liberal friends.

Follow The Money. And Jobs. And People.

I do a lot of speaking to GOP, Tea Party and Conservative groups around the Metro Area.  And when I drive out to a place like Mound, or Maple Grove, or Lakeville, I often start my remarks with something like “It’s so nice to be here – with that smell of competence, prosperity and success all around”.

It’s at least in part a dig at Saint Paul – a beautiful city with a failed one-party government.

But census data also shows it’s absolutely true; Red states are leading whatever economic “recovery” that’s going on:

The new Census data on where we live and where we moved to in 2014 shows that the top seven states with the biggest percentage increase in in-migration from other states are in order: North Dakota, Nevada, South Carolina, Colorado, Florida, Arizona, and Texas. All of these states are red, except Colorado, which is purple.

Meanwhile the leading exodus states of the continental states in percentage terms were: Alaska, New York, Illinois, Connecticut, New Mexico, New Jersey, and Kansas. All of these states are blue, except Alaska and Kansas.

There’s a reason the left’s noise machine focuses as much “energy” as it does on Kansas; it’s neither a failing Democrat hellhole like New York, nor a booming Conservative success story like North Dakota, Florida or Texas.

“A Cold Mississippi”

One of the Minnesota left’s favorite conceits is that Minnesota is just plain better than The South.  Their favorite imprecation against some conservative budget-cut or program-trimming plan is that conservatives would “turn Minnesota into a cold (fill in a southern state)”.

Perhaps Minnesota’s African-American community would wish that were the case; household income for black people in Minnesota plunged 14% in the past year, dropping black Minnesotans’ incomes below those in Mississippi (I’ve added all emphasis):

From 2013 to 2014, the median income for black households in the state fell 14 percent. In constant dollars, that was a decline from about $31,500 to $27,000 — or $4,500 in a single year.

Meanwhile, the statewide poverty rate for black residents rose from 33 percent to 38 percent, compared to a stable overall state poverty rate of 11 percent.

The median black household in Minnesota is now worse off than its counterpart in Mississippi. Among the 50 states, along with Puerto Rico and Washington, D.C., Minnesota ranked 45th in median black household income. Mississippi ranked 44th.

Income and poverty for other racial groups in Minnesota — whites, Hispanics and Asians — remained stable. Only blacks saw a worsening of income and poverty.

“It’s alarming,” said Steven Belton, interim president and CEO of the Minneapolis Urban League. “It’s a deepening of the income disparity, not only across the state but across the nation. When you pair that with the continuing disparities we have in education, health and wealth, it’s disturbing.

“The alleged rising tide has not lifted all boats.”

Of course, the Urban League is a DFL front; of course they’re going to take a whack at classic bit of conservative rhetoric.

But the truth is this; the vast majority of Minnesota’s Afro-Americans vote DFL, and live in DFL-dominated cities.   I don’t have the figures handy, but I don’t think it’s controversial to say that they are disproportionally not heavily represented in the parts of Minnesota’s economy that are prospering – health insurance, medical devices and financial services, all heavily subsidized by the Obama Administration.

They tend to live – again, no stats immediately at hand, but by all means, try to prove me wrong – on the economy that the rest of Minnesota lives on; the one that, for all of the DFL’s boasting and bragging, just isn’t doing all that well.

Consistent

SCENE:  Mitch BERG is sitting on the hood of a Dodge, drinking warm beer in the soft summer rain, beneath the light of a giant Exxon sign.  

Avery LIBRELLE putters up to BERG in a Prius and climbs out of the car.  

LIBRELLE:  Hey, Merg!

BERG:  Hey, Avery.

LIBRELLE:  I’ve got a question for you, mister Immigrant Hater.

BERG:  Bla bla bla.  I don’t hate immigrants, and I won’t let a stupid manipulative strawman pass without showing it up as the idiocy it is.

LIBRELLE:  Why do you hate science?  Anyway – so it’s time for you immigration opponents…

BERG:  …We’re not “immigration opponents”.  We oppose illegal immigration.

LIBRELLE:  If NPR says it, it’s settled science.  Anyway – it’s coming time where you have to decide; are immigrants taking our jobs, or are they soaking up welfare dollars?   You can’t have both.

BERG:   Saying the two are mutually exclusive is like saying there’s no way white people could simultaneously produce Beethoven and Jefferson and James Watt while also including people who sit around Walmart parking lots lighting their beer farts and arguing about whether Van Halen is hard rock or heavy metal.

Because it’s a fact that Immigrants are disproportionally on welfare – counter to years of media chanting points – and they are also taking most of the new jobs in the Obama Economy this past seven years.  You’re presenting me a false dilemma – and, given that this policy disporoprtionally affects African-Americans, presenting yourself a real dilemma.

So there is no contradiction.  Fact is, unrestricted immigration of low-skill workers drives down the price of low-skill jobs – which aren’t worth much to begin with, and don’t pay much with the glut of workers, who have families, which disproportionally use welfare.

LIBRELLE:   Why do you hate women?

BERG:   Of course.

And SCENE.  

Imbalance

Joe Doakes from Como Park emails:

Does it seem as if Americans are struggling to find jobs, but immigrants have no problem? That’s because it’s true.

Joe Doakes

“They take the jobs Americans won’t to do”, in some cases, because Americans don’t get to them first.”

No, it’s not hyperbole:

The one chart that matters more than ever,has little to nothing to do with the Fed’s monetary policy, but everything to do with the November 2016 presidential elections in which the topic of immigration, both legal and illegal, is shaping up to be the most rancorous, contentious and divisive.

The chart is the following, showing the cumulative addition of foreign-born and native-born workers added to US payrolls according to the BLS since December 2007, i.e., since the start of the recession/Second Great Depression.

Anyone wanna seize this one from The Donald?

The New Consumer Math

Joe Doakes from Como Park emails:

In the olden days, waitresses got less than minimum and earned the rest in tips.  It created a moral obligation to tip: if you can’t afford the tip, you can’t afford the meal, you owe her a tip as part of her wages.

Now that waitresses make $9.00 hourly, they don’t need to rely on tips to supplement wages.  They can quit trying so hard and I don’t need to feel guilty about not tipping, right?

Joe Doakes

Oh, why not?  Every other consequence of political manipulation of wages is unintended; why should quality of service be any different?