Month: December 2020

A Test of Democracy

Leave a comment

December 27, 2020

by Steve Stofka

In 2008, Barack Obama won almost 25% of counties, a high percentage for a Democratic candidate. In 2016 and 2020, a sixth of counties voted for a Democratic President. Though a small percentage, those counties represented more than 2/3rds of the nation’s GDP. The most productive part of our economy votes Democratic, but a county electoral map looks mostly red. How can that be?

More than half of the U.S. population lives in less than 5% of counties (Census Bureau, 2019). A county electoral map gives the same weight to a county in Colorado with a few hundred people as it does to L.A. county which has 10,000,000 inhabitants. A person looking at that map gets the impression that “most of the country” votes Republican but land doesn’t vote – people do.

A more accurate electoral map is by congressional district like this one at FiveThirtyEight (2018). Voting districts are assigned by population, not land area. I’ll copy their Colorado map to illustrate the point. There are as many people living in a few square miles in Denver as there are in more than half the state.

As the population concentrates close to urban areas, a county-by-county analysis reveals some long-term trends. Historian David Kennedy recently noted a shift in sentiment over the past four decades (2020). In 1980, 13% of counties were dubbed “landslide” counties in which the Presidential candidate won by 20% or more of the vote. By 2000, 19% of counties voted that way. In the 2020 election, more than 50% of counties were landslide.

Kennedy referred to Bill Bishop’s 2009 book The Big Sort which described how Americans were moving to places where they lived with others whose political sentiments were like their own (2009). For more than a century, we have been moving from the country to the city. After World War 2, the automobile gave us the freedom to move further away from where we work. We like living with people who resemble us.

A trend that has been going on for a century is likely to continue. Those hoping that election tensions will ease in the future will be disappointed. Although social media helps spread election conspiracy theories, Americans are fond of such theories. Those on the left side of the aisle were convinced that the governor of Ohio stole the 2004 election for George Bush (Weiss, 2020). That was on the heels of the 2000 election which Florida governor Jeb Bush stole for his brother George.

Each election begins in earnest on inauguration day. Immediately after President Obama’s inauguration in 2009, Mitch McConnell succinctly summed up his job as the Senate’s Minority Leader – his job was to make sure Obama was a one-term President. With the nation deep in a financial crisis and millions of people out of work, Democrats condemned McConnell’s remark.

From the first day of President Bush’s presidency in 2001, Democrats rallied and protested the boy made king by an activist Supreme Court. In a 5-4 decision, five supposedly conservative justices tossed aside conservative jurisprudence and voted to overthrow the decision of Florida’s Supreme Court. Henry Monaghan argued against the hundreds of legal scholars who condemned the court’s jurisprudence. The first few pages summarize the circumstances of that election and the many criticisms of the court’s decision (2003).

Eighty years ago, FDR wielded his executive pen like a sword to cut through any Congressional opposition from those on either side of the Congressional aisle. In his 3-1/2 terms, he signed more than 3000 orders, a record that will likely never be broken. Today, our Presidents rule by executive order. Each President spends his first year undoing the executive orders of the last President if that President was from the other party. Without the consistency of law, the American people lose respect for the law, regarding it as little more than personal whim.

The Constitution gives the President the power to grant pardons for Federal crimes. Each President’s use of the pardon power demonstrates that personal sentiment and political alliances matter more than justice. After President H.W. Bush pardoned all the co-conspirators in the Iran-Contra scandal, the American people began to lose faith in the law.

The Supreme Court’s 2000 Bush v. Gore decision reinforced the notion that America was like the old European nations, a country of patronage and favor, not one of law. Mr. Bush disregarded good judgment, the law, and his own intelligence services to justify an attack on Iraq in response to the 9-11 tragedy. Business scandals punctuated the first four years of his administration. His re-election in 2004 convinced many Americans that corruption, not competence, was the American way. Mr. Bush’s second term reinforced that impression.

President Obama’s political rhetoric was strong and even-tempered, but his policy response to the financial crisis was weak and un-tempered. Within two years the American people chose political paralysis, wresting control of state governments from Democrats and handing the House to the Republicans. Like Mr. Bush before him, Mr. Obama found fault with others, not himself.

After electing an unseasoned backbench Senator Obama to office, the American people elected a TV star to the Presidency. Why not? America, the competent, has become a country of fools. Why would we not elect New York City’s leading buffoon?

Each day more people die of Covid than lost their lives in 9-11. The country now turns from the Jester to a seasoned former Senator, Mr. Biden, to lead the country. Unlike Mr. Obama and Mr. Trump, Mr. Biden is not in love with his own rhetoric or his judgment. Can he restore competence to the White House? Perhaps.

What he can’t do is restore the competence of the voters, who love their opinions more than their interests. Regardless of his success or his policies, half the country will condemn him because we have sorted ourselves into them and us. James Madison, the chief architect of the Constitution, worried most about the rise of factions because that is what brought down the Roman empire. We fought a Civil War and have not been a United States since then. We are transforming ourselves into a type of European confederation, divided into regional, rural, and urban interests, clutching our contempt for our fellow Americans to our hearts. Is this the century when we finally abandon the experiment of the United States?

/////////////////

Photo by Den on Unsplash

Bishop, B. (2009). The big sort: Why the clustering of like-minded America is tearing us apart. Boston: Mariner Books. [Kindle price $1.81 from https://www.amazon.com/Big-Sort-Clustering-Like-Minded-America/dp/0547237723/ref=sr_1_1

FiveThirtyEight. (2018, January 25). The Atlas Of Redistricting. Retrieved December 25, 2020, from https://projects.fivethirtyeight.com/redistricting-maps/

Kennedy, D. (2020, December 9). David Kennedy: The Future of Democracy in America. Retrieved December 25, 2020, from https://www.commonwealthclub.org/events/archive/podcast/david-kennedy-future-democracy-america

Henry P. Monaghan, Supreme Court Review of State-Court Determinations of State Law in Constitutional Cases, 103 COLUM. L. REV. 1919 (2003). Available at: https://scholarship.law.columbia.edu/faculty_scholarship/164

US Census Bureau. (2019, May 23). Big and Small America. Retrieved December 25, 2020, from https://www.census.gov/library/stories/2017/10/big-and-small-counties.html

Weiss, J. (2020, December 21). What Happened to the Democrats Who Never Accepted Bush’s Election. Retrieved December 25, 2020, from https://www.politico.com/news/magazine/2020/12/19/2004-kerry-election-fraud-2020-448604

A Coin of the Realm

Leave a comment

December 20, 2020

by Steve Stofka

As bitcoin surged past $20,000 in value this past week, I wondered what the world would look like if bitcoin were the dominant medium of exchange on our planet. A little more than a decade ago the algorithm behind bitcoin was invented. From its inception, the supply of bitcoin was limited. Although it may function as a medium of exchange, its fixed quantity makes it ideal for buying – not being – currency.

When a currency is limited, the value of that currency increases, a matter of supply and demand. The goods and services that the currency buys fall in value, a process called deflation. It is the opposite of inflation or rising prices.

Limited currencies encourage saving, not spending. Bitcoin savers are called “hodlers” after a typo for advice to “hold” the currency on a message board in 2013 (Frankenfeld, 2020). In a deflationary environment, that is the best strategy because the currency will buy more next year. It pays to delay consumption. Businesses put off buying equipment that will make them more productive. People who own equipment are motivated to sell it before it loses even more value. These two impulses cause a deflationary spiral. At the bottom of that spiral, everything sells for dirt cheap.

A version of this happened during the Great Depression eighty years ago. In the years after the 1929 stock market crash, the central bank was, believe it or not, worried about inflation and limited the supply of money (Friedman, 1968). The central bank turned a sharp correction into a severe depression. Knowing that perverse history, former Fed chief, Ben Bernanke, assured Congress that the central bank would not make the same mistake in response to the 2008 financial crisis.

Let’s imagine a world where bitcoin is the medium of exchange. Because your car is eight years old, you anticipate more repairs. Is now the time to buy? The local dealership is offering a reliable car for 1 bitcoin, but you remember that just a few years ago, that same car sold for 1.5 bitcoin. If you wait until next year, you can probably get it for maybe ¾ bitcoin. You decide to drive your old car for another year.

A lot of people make that same decision and hold off buying new cars. Auto repair shops see an increase in business because people are repairing their cars instead of buying new. Car dealers, anxious to move cars off their lot because they owe the bank for those cars, lower prices even more. This induces some people to buy new cars, but it convinces even more people that their prediction was true; it is better to wait.

Car dealers start slowing their purchases from the factories, cause some factories to close. Those workers lose their jobs; why don’t all those workers just become car mechanics? First, car factories employ a concentrated workforce; auto repair shops are dispersed across a wide area. Second, building new cars and repairing old cars take two different sets of skills. Some workers will make the transition, but many won’t.

Because there are fewer cars being made, the price for new cars doesn’t fall as fast. People who had expected the price for a particular model car to fall to ½ bitcoin are disappointed. Some decide to buy now because car repair rates have gone up faster than new car prices are going down. But some people look around at the people losing their jobs and decide to play it safe. The buying power of the bitcoin currency holds steady for a while.

Uncertain about the growth of auto sales, auto manufacturers close more factories. The reasoning is simple. Although bitcoin as steadied in buying power, they anticipate that the currency will continue to grow faster than profits from making cars. As more auto factory workers lose their jobs, people become more cautious and hold off buying. The anticipation of future deflation contributes to further deflation.

For those who remember the hyperinflation of the 1970s, inflation does the same thing. That is why central banks are wary of a strong tendency toward inflation or deflation. They are self-reinforcing phenomena.

Let’s step out of the world where bitcoin is the global medium of exchange and back into the present world. What is bitcoin? Its limited quantity makes it like a collectible – a fine painting, or an old coin, but is not a collectible because there needs to be an agreement of the blockchain before anyone can buy a bitcoin. You can buy a painting without that consensus.

Its ability to act as a medium of exchange makes it like a currency, but it is not a currency because it doesn’t have a critical feature of a sustainable currency. As a unit of account, it behaves like an asset or commodity itself, not a ledger of account for a commodity. A stable and sustainable currency is an asset of the larger community, not just a store of value for an individual.  

So, what is bitcoin? It is a hybrid animal like the platypus, part bird and part mammal. Like the platypus, bitcoin is a species best suited to an island ecology. Bitcoin advocates point to the number of asset and hedge funds buying bitcoin as a demonstration of its growing acceptance as a global currency. Some funds have added bitcoin to their portfolios because it is a specialty, part of a broad asset mix. Like the platypus, it will only survive in a protected environment. Protected by? A stable currency like the dollar.

////////////

Photo by Bermix Studio on Unsplash

Frankenfield, J. (2020, August 29). HODL. Retrieved December 18, 2020, from https://www.investopedia.com/terms/h/hodl.asp

Friedman, M. (1968). The Role of Monetary Policy. American Economic Review, 58(1). https://www.aeaweb.org/aer/top20/58.1.1-17.pdf. p.3.

Dueling Dancers

Leave a comment

December 13, 2020

by Steve Stofka

As I read and listen to arguments on both sides of an issue, they fall into two categories: the ontological and the utilitarian. Those terms make our arguments sound erudite and rational. In the wrestling match of ideas and opinions, we need shorter names that will fit on a wrestler’s robe: the Onts and the Utis. This fight has been going on a long time.

If you are an Ont, you argue about the nature of things. Most of the time, you try to gain the upper hand in defining an issue. If someone is new to this country and is hungry or homeless, you might argue that people who have just arrived here are not entitled to government benefits. They may be human beings, but you narrowly describe them as free riders, something which is of great interest to Onts, who see everyone else’s free riding, but not their own.

The Ont does not think city governments should tolerate homeless people on downtown streets. Onts have characterized homeless people as drug addicts and self-indulgent people who should get a job or sit in jail making license plates. Homeless people command a lot of city services, particularly visits to the local emergency room. Taxes support the well-being of free riders, a divisive issue with Onts.

Onts are concerned about moral hazard, the inducement to take on more risk when a person doesn’t have to suffer the consequences. If an Ont gave a homeless person some money, that person would probably spend it on drugs, putting themselves further at risk. The Ont is doing a noble act by not encouraging the ruinous behavior of a homeless person.

If you are a Uti, you think that the practical solution is the right solution in an imperfect world. You care about the homeless person because you care about yourself and can’t stand the thought that you live in a society that would permit such human tragedy. Do you go downtown and hand out some of your savings to those homeless people to show you care? Well, maybe that wouldn’t be practical, you tell yourself.

A Uti recognizes moral hazard but doesn’t crusade against it the way that an Ont does. People put themselves at risk because they don’t bear the consequences of their risky behavior. Yes, we’d like to minimize that, but we don’t want to put others at even more risk because the community ultimately bears the consequences of their risky behavior.

A Uti lives in the real world, an imperfect version of the imagined utopia of the Ont. Yes, things are supposed to work a certain way, but “frictions” – messy entanglements – interfere with the perfect. The Uti wields his scythe, cutting the harvest while the Ont hoists his pickaxe and joins the crusade against the unholy.

A thousand years ago, Pope Urban II called on Christians in Europe to free the Holy Land from the Muslim infidels. The Pope appears on his balcony above the faithful crowds at the Vatican. At his rallies, President Trump emerges from his big plane and speaks to the devoted crowd. Think of President Trump wearing a pope hat embroidered with “MMGA” – Make Me Great Again.

Like the crusades of old, 136 Congressmen joined the army behind Texas’ attempt to get the Supreme Court to nullify the electoral votes of four battleground states. The court told them to turn in their pickaxes and go home. An Ont clings to their conviction that their solution is right even when it is not practical. If challenged, an Ont redefines the issue.

The practical problem that an Ont wants to solve is how to be right on every issue. The Ont is a Uti in disguise. The Uti use an Ont maneuver when they define the practical solution as the right solution in an imperfect world.

When both wrestlers in any argument take their robes off, it is difficult to tell them apart. As the two wrestlers circle each other, bystanders cheer on their favorite fighter but it is the bystanders who get hurt in a tangle between two political heavyweights. Media companies profit hugely; we are both the unpaid performers and the spectators of the political and cultural circus.

Who knew that philosophy could be so much fun?

/////////////////

Photo by The New York Public Library on Unsplash

Alt Belief

Leave a comment

December 6, 2020

by Steve Stofka

Cognitive dissonance controls our political sensibilities. We speak in cryptic code and listen only to those whose code we understand. Our understanding is the standard by which we judge all other versions of reality. There is a dedicated band of people determined to preserve out of fashion ideas and explanations. Life would be easier if the people who disagreed with us would change their minds.

Listening to Washington Journal on C-Span this past week, I realized why my sensibilities lie with the Democratic Party. I can argue with their ideas, some of which I do not agree with. A Republican Congressman said that the government has no right to dictate the personal behavior of people, even though that behavior might kill people. On the other hand, the government does have the right to dictate the personal behavior of women on the chance that they might kill their fetus. My head exploded and I moved on to something else.

Several decades ago, Republican voices used to make more sense. Either the party has changed, or I have. Is this any way to discover my political allegiances? American politics is driven more by disaffection. The enemy of my enemy is not my friend, but more like my foxhole companion on the political battlefield. Both sides of the political aisle would benefit more if they cooperated, but it pays to compete, or to defect as it is known in Game Theory. If the other side says 2+2=4, then our side will claim the answer is 5. Rally ’round the flag, boys. In this prisoner’s game, the American public is forced to play along.

The American people and the members of Congress, but especially the Senate, live in different realities. Many families cannot pay their rent; the lines at food pantries stretch for many blocks; 20% of retail businesses have closed their doors; depression, drugs and suicide are increasing. Lounging in their Roman baths, our Republican Senators argue the ontological points of another aide package. Republican led states, dependent on energy or tourism, are begging their party for help. Senate Majority Leader McConnell wraps his white tunic about him, bids his slaves to draw his bath, and refuses to budge.

It’s always the other fella who is living in an alternate reality. When Einstein first noticed that, he built himself a theory. Some people thought he was living in an alternative reality, but after a century, most agree that his explanation was a good one. E=mc2 is as well-known as the 2600-year-old Pythagorean theorem a2 + b2 = c2.

Many alternate realities die as people come to agree on things. There are a few people who won’t let an explanation die. The earth is still flat. The moon landing was a hoax. So is Covid. Massive voter fraud gave Joe Biden a 7 million vote victory over Donald Trump. I used to think that ideas changed one death at a time. Now I’m not so sure. Some ideas are stubborn.

People and mules have much in common. We respond better to carrots in front of us instead of whips behind us. Why then do people on each side of the political aisle whip each other with words? Did we all run out of carrots?

People fix their minds on something and never change. That’s a conservative. Facts will not budge them from their ideological foxholes. The economist John Maynard Keynes said that he changed his mind when presented with new facts. That’s a liberal. They respond to the whip of facts and the carrot of something better.

We begin life with no fixed ideas. Our parents and the people around us put their ideas in our heads. Some of them grow, some fall out. People get mad at us when the ideas they planted don’t take hold in our minds. As adults, we learn that lesson at the Thanksgiving dinner table.

We are more comfortable when we are with those who share a common perspective. Perhaps we think God controls every detail of our lives, or that [insert name here] is part of a conspiracy that controls every detail of our lives.

No matter how different political and religious institutions are, they want us to believe what they believe. That is the problem: getting others to believe what we believe. We believe that what we believe is not a belief, but reality. Your belief is a belief. You see that, don’t you?  

/////////////////

Photo by K. Mitch Hodge on Unsplash