The Price of Oil

November 28, 2021

by Stephen Stofka

On Friday, fears of another wave of Covid lockdowns caused a sharp decline in equity and commodity prices worldwide. The decline was fueled by short-term traders who did not want to hold their positions over the holiday weekend and sold into a thin market. Crude oil prices fell 12% and closed the day below $70, and below the price of oil in the summer and early fall of 2018. Did we forget how high prices were just a few years ago? Rising oil prices helped fuel voter discontent that Democrats rode to take back control of the House that year.

Below is a graph of West Texas Intermediate, one of two oil benchmarks used domestically and shipped around the world. The price is adjusted to 2020 constant dollars.

As the price of oil broke out of its price channel in the early 2000s, companies began to develop more effective horizontal drilling techniques (Mead & Stiger, 2015, 4). In 2013, U.S. production reached a 24-year high and both political parties claimed credit. Oversupply led to a 50% price decline in 2014. Drivers liked the prices at the pump but states which had enjoyed the boom were hurt by the bust. Republican candidates promised better times in these red states if they were elected.  

In a democracy, politicians must play a game of voter persuasion. They spend millions in opinion polls  to test the temperature of voter passions, to discover the emotional buttons that will win votes. They rig Congressional districts to maximize the voter sentiment in one party’s favor. Like heralds marching into battle, candidates wave their principles and values for all to see. We have chosen this system, this political game, as the best alternative to armed conflict in the streets. Many of us were alarmed when the January 6th rioters championed a return to the violence that shook the foundations of civil society in France during the 19th century. Seventy years of successive revolts in that country left many bodies in the streets. We have far more sophisticated weapons and lots of them. Do we want that bloodbath?

As bread was a rallying cry in the French Revolution, the price of oil sparks political passions in the U.S. Higher prices impact rural folk more than urban residents, blue collar businesses more than white collar firms. When workers have to pay $100 – $200 to fill up a 40 gallon tank on a service truck, they complain. If their party is in power, it’s the fault of speculators and they will soon forget the pain when prices decline.  Voters protest loudest at high oil prices when their party is not in power. Politicians promise that their policies will bring down oil prices. They know their promises are as real as unicorns but voters like unicorns and fairy tales.


Photo by David Thielen on Unsplash

Mead, D., & Stiger, P. (2015). The 2014 Plunge in Import Petroleum Prices: What Happened. BSL: Beyond The Numbers, 4(9), 1-8. Retrieved November 27, 2021, from

Savings And Inflation

November 21, 2021

by Steve Stofka

Two billionaires, Warren Buffett and Elon Musk, pause before the packaged meat in a grocery store. This past week the price of rib eye steak, their favorite, has gone up a lot. Elon has had a busy week and wants a good rib eye so he picks out a steak and puts it in his basket. Warren would also like a rib eye but can’t bring himself to spend that much on a meal he will cook at home. He decides to buy the top sirloin and marinate it for a few hours. For whatever reason, Warren has reacted to a rise in the price of one good by substituting another good. Economists call this the substitution effect.

The next day Mary is shopping at that same store for a top sirloin steak for dinner. She notices that a few rib eye steaks are on sale for half-price. The expiration date is the next day but she intends to cook it that night so that is not a concern. Just as Warren did the previous day, Mary has responded to a price change by substituting one good for another. What about Elon? His response was to pay the higher price, substituting a different good, his income, for the higher price. Economists call this the income effect, where we substitute money for the higher price. Where does the money come from?

One source is savings, our backup income stream. Savings is the amount of income we have left over after paying taxes and buying stuff. It’s the money we didn’t spend before. After age 40, we become more conscious of the need to save for the later years in life when we stop working. Here’s a chart of per person savings for those over the age of 55. This does not include the equity that people have built up in their homes or investment accounts, but it does show broad trends.

The first of the Boomer generation turned 55 in 2001, a tumultuous year marked by the 9-11 attack, the dot-com bust and the buildup to the Iraq war. During the 2000s, economists and financial advisors warned that the Boomers had not saved enough. The Boomers complained that higher payroll taxes (Tax Policy Center, 2019), used to support earlier generations who had not paid in enough to Social Security, had reduced their ability to save. When the financial crisis reduced the value of both homes and investments, Boomers realized that their savings were too low. During the following decade, many worked past retirement age. Cautious spending by this age group restrained economic growth following the crisis and kept inflation in check during the recovery.

In the spring of 2020, Covid hospitalizations and death shot up in New York City and other urban hotspots. The Trump administration shut down most of the economy for several weeks. Congress and the administration passed emergency measures to provide relief to people who had lost their jobs. Savings shot up and incomes dropped. The pattern for all adults was the same as for older Americans.

As stores reopened and the economy recovered, it was inevitable that some of those savings would be drained away to buy stuff. The abrupt decline in savings has put pressure on prices. Are inflationary pressures temporary or  more permanent? Older generations have built up a reserve buying power that they did not have at the onset of the financial crisis twelve years ago.

There are 70 million Boomers who are spending down their accumulated savings. The Millennial generation, now 72 million strong, is the counterbalancing force to that dis-savings. Older Millennials are crossing the age-40 threshold when people start thinking that they had better put something away for the future. This tug of war in spending and savings between these two generations could continue to put upward pressure on prices for several more years.


Photo by Damir Spanic on Unsplash

Tax Policy Center. (2019, July 18). Payroll tax rates. Retrieved November 20, 2021, from From 1970 to 1990, payroll tax rates increased by 50%.

Prices Rising

November 14, 2021

by Steve Stofka

Put a bunch of people in a crowded theater, then yell “Inflation!” and no one runs for the exits. Instead they all turn to each other and start arguing. The recent rise in prices has prompted much discussion on the dynamics and causes of inflation. In the first six months of this year, the Fed cautioned us to compare 2021 prices to those of 2019 to get a more accurate picture of inflation. That longer term perspective began at 2.0% in January and slowly rose to 3.0% in June (BLS Series CUUR0000SA0). However, it keeps inching up and topped 3.7% in October. The one-year inflation rates have topped 6%. There are several causes including supply bottlenecks and higher demand but how long will it last? Is it temporary or more permanent? What should the Fed do? Is this the return of 1970s inflation?

This will be a two-parter so that I don’t strain anyone’s attention. First some background. Inflation is an increase in the overall price level. Why do prices go up? Because buyers buy stuff. How do people get the money to buy stuff? By working. In the 1950s, a British economist William Phillips studied a seventy year period of data and established an inverse relationship between unemployment and inflation. If more people are not working, they don’t have the money to buy stuff and prices don’t go up much. During the 1960s, unemployment declined more than 3% to 3.4% and inflation rose from 1% to 5%. This interplay confirmed Phillips’ hypothesis and policymakers believed that they could make a tradeoff between unemployment and inflation, balancing the two to produce an optimal economy. In the 1970s, high inflation and high unemployment dashed those hopes. Later, the Phillips hypothesis was revised, matching the relationship of the change in the inflation rate to unemployment.

Still other revisions included the role of the public’s expectations of inflation. I’ll take a real life example from the late 1970s. The price of a stereo with turntable and speakers is expected to go up in price by 20% next year. A store is offering credit with a 20% interest rate. If a consumer buys it now rather than saving up until next year, the amount of interest equals the change in price. A consumer gets to use the stereo for a year for free! Consumers start moving their future buying decisions toward the present and this ratchets up demand and inflation. 

Let’s go back to the definition of inflation as an increase in the overall price level. Where does that start? It may be the price of a commodity that we all use every day. During the 1970s, the sharp increase in the price of oil certainly had an effect. However, there was a sharp increase in oil in the summer of 2008 and there was not a prolonged bout of inflation. In fact, it may have contributed to the ongoing job loss that began in 2007 and added fuel to the developing housing crisis. Every time people think they got inflation figured out, it ducks and weaves like a boxer.

Without any change in policy, inflation automatically transfers income around the economy. Real, or inflation-adjusted, wages may remain the same but workers pay higher taxes on the nominal gains in wages. Economists call this seigniorage. The price of goods is higher so sales taxes are higher. Older people with savings earn higher interest income but those who want to borrow pay more in interest. Banks bank more profits on the difference, or spread, in the interest they pay on deposits and what they charge for loans. At higher mortgage rates, people can buy less house with their money because mortgage payments in the early years of a mortgage are mostly interest.

At higher rates of interest businesses cut back expansion plans and unemployment increases. This may help curb price pressures but people begin to adopt coping strategies than can prolong or exacerbate inflation. This creates a tug of war over the direction of prices. Next week I’ll review some of these behaviors and data trends from the past decades.


Photo by Vicky Ng on Unsplash

My Permanent Record

November 7, 2021

by Steve Stofka

“This will go on your permanent record, young man,” my fifth grade teacher told me. As children we struggle to envision next month. A permanent record sounds like more than a month, for sure. Throughout our lives, we will buy goods and services and interact with others who are strangers. That requires a lot of trust and trust depends on reputation, a permanent record that companies, institutions and politicians work hard to shape. In the thirty years since the dawn of the internet, we are flooded with information, most of which has no reputation. We can only trust the institutions or people that relay that information to us. How do they build their reputations?

In Carlsbad, New Mexico is a series of one hundred underground caves that forms the Carlsbad Caverns National Park. During a tour, the guide turns off the lights and visitors stand in total darkness. Our vision dominates our navigation through the world. Without it we gather in other data, the sound of a throat clearing, the scuffle of a sneaker on the path through the cavern. We become aware of the musty smell of water trickling down through the rock and the smell of bodies nearby. We may notice the sound of our own heartbeat or pay attention to our toes inside our shoes.

Then the guide turns on a flashlight and we turn our heads to notice whatever the beam of light falls on. We notice the ripple and folds of rock, the different textures and colors of that one spot which the flashlight beam illuminates. How quickly we brush aside all this other sense information that we were just experiencing. Several visitors remarked on this phenomenon. Most of us organize our world primarily through sight.

The screen on our computers or phones is our attention flashlight. Through a series of algorithms Facebook, search engines and social media have learned to tune that light to our interests, our values, what we treasure and what is a threat to us. What engages our emotions or enrages our sensibilities? What music, clothes, activities do we like? They learn our habits and preconceptions, then feed us information that fits those preconceptions because they want us to linger. Just don’t go away, they say. The algorithms don’t care whether capitalism is good or bad, Republicans or Democrats, whether hip-hop is better than soul. All that matters is that we watch the screen and shine our flashlight on the nearby ads. Our attention is the product.

The Industrial Revolution spurred the need for standardization, for the making of products and machines with interchangeable parts (Mass Production, 2021). Human labor is not easily standardized so the task itself must be standardized so that human labor can be harnessed to the task. Generalization leads to specialization and this makes people more productive (Heilbroner, 1997, 80). More productivity leads to higher wages and greater consumption.

Beginning in the 19th century, mass marketing grew into a powerful tool when TV gained wide popularity after World War 2. Media outlets had vague information on the tastes of their audience but ads were a scattershot approach to reach consumers. The advertiser’s message would often fall on deaf ears because the advertiser didn’t know much about me, my unique combination of tastes, my interests and desires. They promoted their products and services, their reputation.

The media giants now have a permanent record of my attention history and buying habits. My unique combination of preferences has been sliced and diced into standardized characteristics that are important to an advertiser. A giant corporation becomes like the proprietor of a general store in a small town. They know my opinions, the news I read, the sports I like and the shows I watch. This digital reputation has become my permanent record.


Photo by CDC on Unsplash

Heilbroner, R. L. (1997). Teachings from the worldly philosophy. New York, NY: Norton & Company.

Mass Production. (2021). Retrieved November 6, 2021, from Scholastic Grolier Online.

An Extinct Proposal

October 31, 2021

By Steve Stofka

In the past 70 years, America has escalated its health care spending from 5% of GDP to 18% of GDP. Stack up all the money Americans spend on housing, cars, fuel, utilities and food and its less than what we spend on health care. Despite all this spending we have the worst rates of infant mortality and preventable death among developed countries. If we exclude the growth of health care spending in the past few decades, the U.S. economy has been stuck in the same rut that has trapped Japan. In that time, China’s economy has erupted from $.5T to $15T and is now the second largest economy, just $7T less than the U.S. We have averaged 2.4% annual real growth in the past three decades, less than the 3% growth of the post WW2 period. How do we get out of the rut?

Thirty years ago, William Clinton emerged the winner of a three man race for the Presidency. Responding to public concern over rising health care costs, he proposed a universal health care plan that received a hostile reception. Republican groups mounted an effective advertising campaign against a “takeover” of health care by government. Republicans rode that momentum to win control of the House in 1994, ending forty years of continuous Democratic control.

In the fall of that year, two economists proposed a Major Risk Insurance Plan that they estimated would lower health care spending by 20% (Feldstein & Gruber, 1994). However, the market continued to adopt HMOs as the dominant model to reduce costs. Today, the US spends far more than other developed countries and has worse health outcomes. Martin Feldstein was President of the NBER, the nation’s premier economic research institute. Jonathan Gruber was a former researcher with the NBER, an MIT professor with a lot of expertise in the economics of health care. Both had a lot of influence, but their proposal did not win converts.

Their study was based on earlier work by Feldstein and a data sample of six thousand respondents collected in 1987 that provided insight into the choices and value that people place on health care. Feldstein and Gruber concluded that the government could insure people under 65 against major health risks for a mere $150 per person, about $300 in current dollars.

Under their proposal people would be insured for half of their annual medical expenses until they spent 10% of their after-tax income, their maximum OOP, or out-of-pocket expense. This would eliminate or reduce the wastefulness of people being over-insured. Those with small copayments or “first dollar coverage” use more health care because it costs them little to nothing except their time. Many younger workers with employer provided health insurance have far more insurance than they use. Thinking that insurance is a “free” benefit, workers don’t realize that they are paying the insurance premium in the form of lower wages.

The proposal aimed for greater efficiency, more patient involvement and wider coverage. Jonathan Gruber would become instrumental in developing Romneycare and Obamacare, nursing both plans through the political butchery and swollen egos that all major legislation endures. The 10% OOP is a progressive feature that empowers and enables the poorest people to access the full benefits of the health care system after spending a small amount. Those with higher incomes pay more into the system. Because everyone has some skin in the game, they use the system more judiciously. However, sensible proposals are not sensational. They don’t dance and sparkle.

The health care and insurance industry relies on misinformation and the inefficiency in the American system for its profits. The burden of that inefficiency has become a ball and chain on the American economy.  Each generation comes to maturity thinking that it will solve the persistent problems that have bedeviled earlier generations. Those who efficiently rake in the profits protect those inefficiencies. Any system that favors the powerful few resists change. In a sense of frustration, people turn to a populist leader who claims that they can fix it because they know how the system really works. We are drawn to our myth builders like moths to the light of a flame.


Photo by Derek Finch on Unsplash

Feldstein, M., & Gruber, J. (1994, September 01). A Major Risk Approach to Health Insurance Reform. Retrieved October 31, 2021, from A bio of Martin Feldstein

A Generation’s Legacy

October 24, 2021

By Steve Stofka

There are two types of federal benefit programs: those that require “dues” to qualify for benefits and those that are means-tested. Social Security is an example of the first type. With some exceptions recipients must contribute to the program to qualify for benefits. Supplemental Security Income (SSI) and the SNAP food program are examples of the latter. A person’s circumstances, not their contributions, determine their qualification for benefits. Because people think of Social Security as an insurance program, not a government charity, it is the “third rail” of politics. Voters feel that they have paid into the system and deserve their promised benefits. The Boomer generation points to the $2.9 trillion in the Social Security Trust Fund as evidence they have indeed paid into the system. Talk of cutting benefits can earn a politician the boot. The question is: have workers paid in enough?

Our choices today are constrained by the priorities and choices of past generations. The Social Security program was created in 1935 to relieve seniors burdened with crushing poverty. The failure of thousands of banks prior to that time had wiped out the lifetime savings of many workers. With a commanding majority in the House and Senate, Democrats responded to the plight of many seniors. Those first generations received far more in benefits than they paid in contributions and created what is called a “legacy debt.”

In 1965 the program was expanded and in 1975 benefits were indexed to inflation. By that time, the sum of contributions exceeded benefits paid so that the trust fund had a reserve of 56% of benefits expected to be paid that year. By 1983, the reserve stood at only 18% of that year’s anticipated benefits. High inflation during the 1970s and some miscalculations in computing inflation adjustments to beneficiaries had depleted reserves. At that time, the Boomer generation ranged in age from 20 to 37, about the same as the Millennial generation today. By 2008, the first of the Boomer generation would be eligible for benefits. A commission recommended accelerating tax increases to build up the trust fund in anticipation of this demographic bulge. When the great financial crisis hit in 2008, the trust funds had 358% in reserves. It should have been much more.

Economists and politicians have remarked on the slow wage growth of the past decades. The cause of that slow growth is a matter of political perspective, but one thing is certain. Labor productivity has slowed as well and there is no consensus on the cause of that. In the chart below, I’ve smoothed out some data from the Bureau of Labor Statistics on Labor Productivity to show the long term trends. I set the 70-year average of 2.2% annual growth at zero to show the periods of below average productivity. The chart shows the two decades of below average growth from 1975 to 1995.

Labor Productivity – 70 year average of 2.2% annual growth set to zero

In a 2001 paper William Nordhaus (2001, 2), a researcher at the National Bureau of Economic Research (NBER) noted “after growing rapidly for a quarter century, productivity came to a virtual halt in the early 1970s.” Nordhaus attributed the growth of the late 1990s to the “new economy,” the communications technology and software development at the dawn of the internet. The productivity surge lasted about a decade, succumbing to the drag of low productivity in the service sector in general.

Because many service jobs have low productivity growth, America has given up the robust growth of the modern industrial age in the post-WW2 period. Low wage growth means less taxes to fund benefits and political tension. Since 2010, Social Security has been tapping the trust funds to pay benefits as the Boomers retire. By 2034, the trust funds will be depleted and the trustees estimate that each year’s taxes will be enough to pay about ¾ of promised benefits unless taxes are raised or general taxes are used to pay benefits. As much as workers have paid in SS taxes, it wasn’t enough. The Social Security trustees estimate that an additional 2.83% in taxes would cure the problem for another 75 years but politicians don’t have the courage to push taxes higher.

The program was created during the depths of the Depression. The generation that enjoyed SS benefits far above their contributions has passed on, leaving their legacy debt with us. They believed that the future would be like the past, that strong productivity and wage growth could pay inflation adjusted benefits for 15-20 years of retirement. Across a divided country and a divided Congress, we must put down the word weapons and ask ourselves “What are we going to do?”


Photo by Markus Spiske on Unsplash

Nordhaus, W. D. (2001, January 01). Productivity growth and the New Economy. Retrieved October 24, 2021, from

SSA. (2021). Social Security – Trust Fund Ratios. Retrieved October 24, 2021, from

The How and Why of Identity

October 17, 2021

by Steve Stofka

A current topic of controversy is a popular comedy special on Netflix featuring the acerbic wit of Dave Chappelle. In this last of several Netflix specials, Mr. Chappelle airs many grievances, one of which involves previous remarks he made about transgender people. Hannah Gadsby, an Australian comedian with a quiver of arrows and the skill of a markswoman, targets the bias and bigotry in our culture. Recently she has aimed at some remarks by Netflix executives who defended Mr. Chappelle’s humor. Ms. Gadsby leads a growing audience of voices who worry that the Chappelle special could inflame hate attacks against people with a non-mainstream sexual orientation or gender identity.

In past centuries society has regarded non-straight orientation as a behavior outside accepted norms and ostracized those individuals as deviants. Social scientists have now recognized the importance of biology in sexual orientation and gender identity. Recent jurisprudence and law have accorded equal access to marriage, property and employment regardless of sexual orientation or gender identity.

Black people have long been ostracized for their skin color and there is no dispute whether skin color is biological or behavioral. Decades of law and jurisprudence have not been able to undo the bigotry and bias against those with black skin. Two comedians, each from a marginalized group, confront each other and the larger society over the nature and construction of identity. This is an enduring debate.

2400 years ago Aristotle attributed the falling of objects to their nature. People accepted that view until Galileo showed that it was a dynamic of forces, not an inherent nature that made things fall. Explanations that attribute causes to nature – the within – are attempts to answer the question of why. Explanations that investigate the dynamic between things answer the question of how. In the 17th century John Locke argued that people had a natural right to private property that no king could dispose of without violating a natural law. That was why society had an obligation to protect property rights. The how of that natural right involved a dynamic between God, Adam and Eve when He turned them out of the Garden of Eden and set them to toil the earth for their food.

In his special Mr. Chappelle adopts a realist approach, arguing that gender is an unalterable fact of nature. An alternative perspective is that gender is a construction of biological, social and psychological factors. The nature vs. dynamic identity debate exists in many fields. Some people claim that only gold has real value as a money, regarding paper money as a mass illusion of value. Economists argue that the value of something is what you will give up for it, a value based on a dynamic. Karl Marx thought the fundamental value of any good was the labor that went into producing or harvesting it. Mainstream economists assume that the value of a good is its utility to the user, a fluid construct of preference, time and price. The debate over sexual orientation and gender identity is another manifestation of this conflict of perspectives.

Some comedians walk the dark alleys of our society and psyche. In the 1960s, Lenny Bruce and George Carlin questioned mainstream values. In a brash and vulgar style, Bruce openly flouted speech prohibitions and police often arrested him during his act. His notoriety helped bring these laws to the Supreme Court where they were ruled unconstitutional. In the 1970s, Richard Pryor offended many with his off-color remarks as he dug deep to unearth the hatred and hypocrisy that rotted our culture. In other cultures today, comedians who ridicule authority figures are arrested. Caustic remarks are against the law. Liberal societies tolerate a wide range of speech and views. Those are the two choices on the menu: authoritarian or liberal. I’ll take the liberal, please.


Photo by ANGELO CASTO on Unsplash

The Weight of History

October 10, 2021

by Steve Stofka

In 1992, several months after a brutal beating by L.A. police officers during an arrest for drunk driving, Rodney King pleaded “Can we all get along?” From his apartment balcony nearby, George Holliday had filmed the incident. Despite the evidence shown in the film, a jury without any black members acquitted the officers and Los Angeles erupted into riots. Mr. Holliday, 61 and in good health, died in September from Covid. He told a friend that he didn’t want to get vaccinated so that he could develop antibodies to the disease (Williams & Chan, 2021). How did vaccines become a lightning rod of disagreement? Mr. King died in 2012 but his words haunt every meeting where human beings gather to negotiate a solution to a problem. Why are there so many irresolvable problems?

Myth and religion have provided answers to this question. The Judaic version is that two people in the Garden of Eden broke a pact with God and all humankind had to suffer. The ancient Greeks thought that the gods of Mt. Olympus amused themselves with the human drama, stirring up trouble when there was too much peace. Animistic traditions believe that the gods take an active part in our daily lives as well. Evangelical and Pentecostal Christians hold a similar belief but limit the agency to one God.

Constant turmoil is necessary for change, and change is the key characteristic of our world. Whether it is the gods on Mt. Olympus enjoying the human soap opera, or a God in heaven answering a prayer for relief from pain, we seek an explanation that features agency. What we fear is the senseless turmoil of random change. We want there to be a clearly identifiable cause and what we find are an abundance of causes for a single event, an overdetermined system.

The system of international relations is characterized by anarchy, the lack of a central authority to enforce the rules. We often see the same anarchy in a republican system of government. In the U.S. system, Congress itself is the higher authority and within that governing body is a Senate with features similar to the Security Council of the UN. The U.S. is one of five members of that council, the P5, who have a veto vote that can kill any resolution. In the Senate, the leader of the majority party can kill any legislation, no matter how popular, by refusing to bring it up for a vote. Should it come to a vote, one Senator’s vote can effectively kill the legislation. This governing structure has enfeebled  both the UN and the Senate. Why did the U.S. adopt the anarchy of the international system?

Writing over three hundred years ago John Locke argued that men in power could not be trusted (Locke, 1988, 395). The U.S. Constitution embodies Locke’s principles and especially this foundational distrust of power in the hands of people. The Constitution constructed the House on the democratic principle of majority vote and majority will. The founders built the Senate like an international organization of nation-states, each state having separate interests and cultures, each state capable of wielding effective, if not outright, veto power. Founded on distrust and the autocratic power of one Senator’s vote, the Senate has become an ineffective political body, a classroom where adults gather to practice the art of international politics. Unable to govern itself, the Senate hobbles the rest of the country with the chains of its ineffectiveness.

Students of history study the flaws of the Roman Senate that led to monarchy and the eventual downfall of the Roman republic. Students of future centuries will study the foundation of distrust that crippled the U.S. Senate at a crucial time in the nation’s history. They will learn that human institutions can become powerless if they attempt to strike an even balance of power. Will they learn from our mistakes? We leave so many lessons that succeeding generations ignore, thinking that they are different or that their circumstances are different. If we could only learn, we might improve our institutions and our lives and construct a more lasting peace.

Peace is not conducive to change and it is the uneven path of change that we must walk. No, Rodney, we can’t all get along. Like donkeys each generation carries the lessons of history on its back but looks forward, unable to truly see and understand what it carries.


Photo by Florian GIORGIO on Unsplash

Locke, John. 1988. Two Treatises of Government: a Critical Edition. ed. Peter Laslett. Cambridge, MA: Cambridge University Press.

Williams, D., & Chan, S. (2021, September 21). Man who filmed Rodney King’s 1991 beating by police dies of covid-19, Friend says. Retrieved October 09, 2021, from


October 3, 2021

by Steve Stofka

This week I enjoyed a video (CFR, 2019) on the 2008 financial crisis that aired on HBO in 2019. VICE reporters interviewed former Fed chairman Ben Bernanke, and former Secretaries of the Treasury Hank Paulson and Tim Geithner, key policymakers during the crisis. They regretted the devastating effect that the crisis had on so many families. They understood the public anger at the bailouts of Wall Street. They attributed the rise of populism to the public perception that there was one rule for the elites on Wall Street who had created the crisis and those on Main Street who suffered the consequences. As I watched the financial Trinity of Paulson, Geithner and Bernanke, I thought they still don’t get it.

A prominent feature of the global political system is anarchy, the lack of a central authority governing all the states. Until the 2008 crisis, the public thought that national institutions supervised the global financial system to make sure that the players in that system did not endanger the public. The Trinity were in control of institutions that were charged with the safety of the public trust. Each of them believed in a light supervisory touch, thinking that the financial system was mostly self-regulating because the players kept each other in check. The crisis demonstrated the fault of that thinking.

Realism is one of the two dominant methods of analysis in international relations. Realists focus on the strength and distribution of military power among states who have competing interests. The force in the financial system is not military weapons but the ability to leverage capital. National governments bestow those weapons of power on their financial institutions. Each of the big investment banks serves their own interests and are supposed to follow the rules. Central banks and supervisory institutions rely on a balance of power between the big financial players to self-regulate this system.

In the global political system, there is no central ruling authority. In the American financial system, the financial industry lobbies against any oversight or regulatory power. They want anarchy – to be left alone until their risk taking reaches critical mass and threatens the global system as it did in 2008. Then the players rush to the Fed or the White House for a bailout. Despite the financial power that Paulson, Bernanke and Geithner had at their fingertips, they felt impotent during the crisis. It was not comforting to watch each of them make gestures of futility as they spoke, arguing that they had to follow the law. Why? The people who ran the investment banks that took extraordinary risks did not play by the rules.

As the crisis unfolded, the public watched the anarchy on display. The big investment banks have the equivalent of nuclear weapons given to them by their governments and there is little effective supervision. The Trinity blamed “liar loans” for contributing to the crisis. Prospective homeowners were told by mortgage companies that they did not have to document their income. Many low-income families welcomed the chance to own their own home for the first time in their lives. They believed the government was supervising these mortgage companies because the mortgages were being bought by government institutions. Even if it sounded too good to be true, the government must know what it was doing. That belief was about to be shaken to its foundation.

The 2000s were marked by a string of government follies. The public was shocked to learn that the nation’s security agencies had been alerted to the threat of the 9-11 attackers. A lack of communication and coordination between agencies had let the attackers slip through the security net. Following that revelation, the Department of Homeland Security was created to coordinate federal agencies. In 2002, the public learned that no one had been supervising the nation’s largest accounting firms. As the giant Arthur Anderson imploded, investors wondered whether the financial statements of the nation’s largest companies were fiction. Enron and some dot-com companies blew up. After demonstrating American military power and technology in the invasion of Iraq, the mismanagement of the war became apparent. The fumbling federal response to Hurricane Katrina confirmed the impotence of the Federal government. Five consecutive years and five government failures.

After all that, the American public still trusted the imprint of the federal government on a mortgage. The financial crisis was the last in a string of government failures that caused a large loss of trust in government. Government institutions like the Fed and the Treasury had trusted Wall Street but not Main Street. Government had broken a bond of trust with the public and these three had been partly responsible for that broken pact. Breaking trust is difficult to understand or acknowledge.


Photo by Aimee Vogelsang on Unsplash

CFR. (2019, May 01). Panic: The untold story of the 2008 Financial Crisis | full vice special report | HBO. Retrieved October 03, 2021, from

Missing Workers

September 26, 2021

by Steve Stofka

As I am out and about I’ve noticed the Help Wanted signs posted in storefront windows. $15 per hour reads the sign at the gas station near me. Why were there so many of these signs, I wondered? The latest Job Openings report reported a 50% increase in job openings, accounting for about 2.5 million jobs. I dusted off my Sherlock Holmes hat, found my magnifying glass and set out to look for the missing workers.

In the latest employment report from the Bureau of Labor Statistics (BLS) there are 6.3 million fewer people working today than in February 2020, just before the first alarming reports of Covid hospitalizations and deaths in New York City. Digging through many series of labor data, the missing workers are spread throughout the population. What was most surprising to me were those segments of the population where workers are not missing.

After the Great Financial Crisis, employment among workers older than 65 surged, almost doubling to 11 million strong by 2020, when the pandemic struck. 1 out of every 12 workers was over 65. For the past decade, economists have identified several reasons for the surge – people lost homes or had their savings significantly lowered. The Boomers didn’t save enough during their working years. Active Boomers did not want to retire. Employers preferred older workers with more reliable work habits than younger workers.

Before the pandemic, 1 out of 4 older people were working. The number of people in this age group has grown by 2 million during the pandemic. If that employment trend had continued, we would expect that 1/2 million workers continued to work. Instead, the number of older workers fell by 600,000. Many older workers who staffed jobs at retail establishments decided to forgo the risk of getting sick. Almost a million workers near retirement, those aged 55 and above, have taken early retirement or simply not returned to work out of fear of getting sick. So far that has accounted for more than two million workers, leaving 4 million unaccounted for.  

The next place I went to look was younger workers who would no doubt be playing video games and enjoying the sweet life. According to recent BLS and Census Bureau surveys, however, the number of workers aged 16-24 is about the same now as it was before the pandemic. Workers aged 16-19 have actually increased by 200,000.

That left only the core work force aged 25-54. Before the pandemic, 4 out of 5 people in this age group were working. In April 2020, it fell to 70% but has recovered to 78%, the same as in October 2016, on the eve of the 2016 election. I don’t remember seeing a lot of Help Wanted signs then. Because the core work force makes up 2/3rds of the 150 million employed, a few percentage points adds up to a lot of workers. Before the pandemic there were about 101 million workers in this age group. Today that number is 98 million, a decline of 3 million workers.

Adding in some known reporting errors and seasonal adjustments account for the bulk of the missing workers but there are some curious anomalies. The number of people who report that they are working part-time because they couldn’t find full-time work is about the same level as it was before the pandemic. Yet many fast food establishments have Help Wanted signs for full and part-time workers. I am guessing that many applicants would prefer not to have jobs in customer service where they are constantly exposed to people on a face-to-face basis.

I sometimes hear that young people don’t want jobs, that they are sitting at home playing video games and collecting extended unemployment benefits. Misinformation and unsubstantiated opinion never take a day off.