Month: June 2023

Over at New York today, Zak Cheney-Rice has a long piece about the imminent death of affirmative action if the Supreme Court, as expected, kills its final foothold in higher education later this year. It's a good piece, with loads of historical detail, and Cheney-Rice is certainly correct that the backlash against affirmative action in the '70s was all but instantaneous:

[Affirmative action for jobs] was ultimately doomed by several overlapping factors: the GOP’s wholesale turn against Black communities, the white working class’s betrayal of their Black peers, and the government’s terror of sparking a backlash from white voters. Alongside the Harvard Plan [for higher education], it represented the other half of the affirmative-action equation: the idea that the government could help build a Black middle class the same way the labor movement made a white middle class, by creating good-paying jobs for low-skilled workers without a lot of education. And it never had a chance.

I hate to pick nits in a thesis that I think is basically correct. But there really is more to this story. For one thing, although it's true that whites have long opposed affirmative action, it's been unpopular even among Blacks for the past quarter century:

There are legitimate issues with affirmative action, and not all of them are motivated by white racial animus. These problems are serious enough that I've long believed class-based affirmative action would, on net, be a better policy than race-based affirmative action.¹

But there's also this:

Black small business owners account for 6.7% of federal procurement spending compared to an overall Black business ownership rate of 8.9%. I don't know precisely what this number was in 1970, but I think it's safe to say that it was more or less 0%—and the increase since then has been at least partly due to minority hiring requirements.² That is, affirmative action.

It's been one of my longtime wishes that we could all keep two thoughts in our heads at once. It is simultaneously true that affirmative action faced enormous opposition among whites from the very beginning and that it nevertheless had (and has) a continuing impact on Black outcomes in various areas.

In other words, things can be better but still need to improve. The evidence suggests that affirmative action has been effective for the past 50 years but that most people—including minority populations—don't believe it should last forever. Its importance has faded over time, but perhaps that's as it should be.

¹If you want more detail about why I believe this, I've written about it before. Here's a piece from 2003, here's one from 2010, and here's yet another from 2013.

²I would love to see a time series of this and related statistics, but I was unable to find one

The Wall Street Journal says that investors are feeling good about credit card debt:

Missed-payment rates on these loans have ticked higher from ultralow levels hit during the pandemic, but they still sit well below the heights reached during past downturns. Over the past few months, the easing of bank stress has helped keep the economy on course, and the recent debt-ceiling deal erased another source of risk.

That has turned investors more bullish on the roughly $300 billion public market for U.S. car- and credit-card debt, known as asset-backed securities.

This is all true. Missed payments have ticked up over the past couple of years but are still much lower than average. People are paying off their credit card debt consistently and on time.

There's a good reason for this: people aren't using their credit cards nearly as much as they used to. Here is the average balance carried on credit cards:

Credit card spending has increased since its low in 2021, but it's still 7% lower than it was before the pandemic. And lower balances mean not just that consumers are being more careful about debt, but that they have lower payments that are easier to make.

In other words, the asset-backed security market is safer but smaller. Will it stay safer if credit card balances continue to grow and personal savings shrink toward their pre-pandemic trends? Good question.

I've seen a lot of stories like this lately:

Tech companies that led the way in embracing remote work early in the pandemic are increasingly leading their workers right back to the office—whether they like it or not.

Alphabet-owned Google, Lyft, Facebook parent Meta Platforms and Salesforce have all recently walked back remote-work policies they originally set forth, or gotten serious about enforcing existing policies, after deciding that working in the office is more efficient and cost-effective.

I admit that for a short while it began to look like remote work really was going to be a permanent change caused by the pandemic. But everything always takes longer than you think, and companies that put up with it for a long time are finally getting sick and tired of remote work—which simply isn't as productive as office work no matter what remote workers say. Too much evidence has piled up to credibly deny this any longer.¹

This doesn't mean that all remote work will go away, of course. There was remote work before the pandemic and there will be a little more after the pandemic. But it's going to be measured in a small handful of percentage points, not as a revolution in work.

¹To summarize: (a) remote work is bad for new hires and junior employees, (b) even workers think remote work causes more problems than in-person work, (c) remote workers put in 3.5 hours less per week compared to in-person workers, and (d) anecdotally, Bambee's CEO says production drops 30% on days when everyone is working remotely.

For 30 years Roy Emerson held tennis's record for men's Grand Slam titles at 12. His record seemed all but unbeatable until, finally, Pete Sampras broke it in 2000. But only barely: Sampras finished his career with 14 titles.

Then, over the course of only 20 years, three players all broke Sampras's new record. By a lot. In 2018 Roger Federer won his 20th slam. In 2022 Rafael Nadal won his 22nd.

Today at the French Open Novak Djokovic won his 23rd—and with Federer retired and Nadal injured, who's left to keep him from piling up even more? He's 36, but he beat the top seed easily in the semis and then took the final in straight sets. He might as well be 26.

My heart will always be with Roger Federer, who played an elegant game that was a joy to watch. You can't say the same about Djokovic, who plays a standard issue ball-mashing baseline game that inspires respect but not admiration.

Nevertheless, this game has made him the best of all time. Is there any serious doubt about that any longer?

Conventional wisdom says that rising wages feed through into rising inflation. Thus, the only way to reduce inflation is to tighten monetary policy until wages start to decline. But a research letter from Adam Hale Shapiro of the San Francisco Fed casts some doubt on this:

The estimates on both goods and housing services inflation are small and statistically indistinguishable from zero, as shown by the dark blue 90th percentile confidence bands around the point estimates. The impact of the Employment Cost Index (ECI) on NHS inflation is statistically significant, but the magnitude is quite small. A 1pp increase in the ECI increases the contribution of NHS inflation to core PCE inflation by 0.15pp over four years—an effect of 0.04pp per year. As ECI growth has increased by about 3pp from its pre-pandemic level, this means that labor costs have added approximately 0.1pp to current core PCE inflation.

Core PCE inflation is currently running at 4.7%, which means that labor costs account for only about 2% of the overall core inflation rate. That's insignificant. Labor costs could double or triple and still have only a minuscule effect.

So what is causing high inflation? As usual, I think it's primarily the effects of pandemic shortages and pandemic spending, which continue to linger. However, both are waning and core inflation, in turn, has already come down substantially. Over the next few months it will come down even more as pandemic effects (supply chain problems, high personal savings, the rent boom caused by eviction moratoriums, etc.) fully fade away.

At age 92, he's stepping down:

George Soros, the legendary investor, philanthropist and right-wing target, is handing control of his $25 billion empire to a younger son—Alexander Soros, a self-described center-left thinker who grew up self-conscious of the family’s wealth and wasn’t thought to be a potential successor.

The 37-year-old, who goes by Alex, said in the first interview since his selection that he was broadening his father’s liberal aims—“We think alike,” the elder Soros said—while embracing some different causes. Those include voting and abortion rights, as well as gender equity. He plans to continue using the family’s deep pockets to back left-leaning U.S. politicians.

Of course, dog-whistling conservatives can still just say "Soros backed" and no one will know the difference. But Alex is a Bill Maher fan who's perhaps a bit more centrist than his father:

Alex is more focused on domestic politics than his father, he said. Alex is helping Democrats appeal to Latino voters and improve turnout among Black voters. He has urged Democratic politicians to better hone their message, broadening the party’s appeal. “Our side has to be better about being more patriotic and inclusive,” he said. “Just because someone votes Trump doesn’t mean they’re lost or racist.”

So more money for US politics but possibly a modestly different focus. It sounds like everything is in good hands.

What a bizarre story:

Trump uses Democrat Matt Damon's voice in post-indictment video

When I read this I thought it was yet another bit of AI fakery. But no. The Trumpies literally lifted a Matt Damon monologue from the movie Air and used it as narration for a campaign video.

I guess they figure that if you can steal top secret documents and claim it's legal, then stealing someone's voiceover is small potatoes. The chutzpah here is otherworldly. Republicans are going nuts with campaign video shams these days.

Earlier today Paul Krugman plugged the Stone Center, which recently created The GC Wealth Project, a cross-country database of wealth and wealth inequality. I decided to go play with it, but I didn't look much at inequality. I mostly looked at average wealth in half a dozen advanced economies:

As recently as 2012, every country was relatively close to everyone else. Then US wealth suddenly exploded. Today the average person in the US is about 50% wealthier than any other large advanced economy. If this series were extended to 2023 the difference would probably be even larger.

In the US, the richest 10% own 70% of all wealth. This is the third highest inequality among the 43 countries in the database, behind only Russia and South Africa.

According to the CDC, fewer than 4% of Americans are completely unprotected from COVID. The other 96% are either vaccinated or have been previously infected:

These figures are taken from blood donors, who might be systematically different from the population as a whole. The study sample was weighted to account for this, but even so the 3.6% number should be taken as a rough estimate, not gospel.

The CDC did the same estimates for different age groups and the results were similar across the spectrum. The number who have never been infected or vaccinated are all below 4%.

But this is not entirely good news. COVID has become more infectious over time, and estimates for the Omicron variant suggest that to reach herd immunity the share of the population that's either vaccinated or previously infected needs to be 98% or higher. We're not there yet, as should be obvious from the fact that in the US there are still 10,000 new cases and 200 COVID deaths per week.

But we're continuing to make progress. About 30% of Americans are still not vaccinated, and if we could persuade as few as a tenth of those to get the vaccine our protection rate would go up to 99% or so. Would that provide herd immunity? Maybe, but COVID mutates rapidly and immunity appears to last only a year or so. Because of that, herd immunity might be permanently out of reach no matter how high our vaccination and infection rate is.

I want to highlight this excerpt from the Trump indictment:

What's interesting to me is not the obvious obstruction of justice, which we know is a core part of the indictment, but Trump's obsession toward "my boxes." His sense of possession is palpable: even though he knows better, he's convinced they are "my" boxes and he wants to keep them all to himself.

It continues to be a mystery why he felt this way. He doesn't seem to have actually done anything with the documents he took aside from periodically waving them around while he rants about something related. Was he keeping them "just in case"? Or what?

My wife says she knows the answer: Trump is a wackadoodle and he just does weird, unexplainable stuff. Maybe that's all it is.