• 29 Apr 2018 7:55 AM | Daniel Mitchell (Administrator)

    Mitchell’s Musings 4-30-2018: Oil in Troubled Waters Can Dampen Blue Waves

    Daniel J.B. Mitchell

    Sometimes, a bunch of seemingly-unrelated things come together. Consider these events. There is the me-too movement linked to sexual harassment. There is California as a very blue state that is particularly sensitive to the sexual harassment issue and to ethnic minority concerns. It is also sensitive to environmental issues. There is the long-term decline of “good” blue-collar jobs. There is the decline of unions long term, especially in the private sector. There is the link between unions and the Democratic Party in California. And there is the fact that direct extraction of oil and gas in California involves something over 5,000 employees. Refining of petroleum involves another 13,000+ employees.

    Some observers have forecast, based on national demographic trends, that U.S. politics will – in the long run – grow to look like California’s. The proportion of the population with immigrant roots will increase, white males (stereotyped as Trump/Republican voters) will die off, liberal millennials will come to dominate, etc. The nation will turn blue and Republicans will be marginalized, as they have been in California. Demography is political destiny in this scenario. But there is a problem.

    First, it is true that California demographics (minority-majority or maybe majority-minority) will eventually be followed by the rest of the U.S. However, voting patterns are not simply demographically determined. Estimates for California are that at present, about 6 out of 10 “likely voters” are white, non-Hispanics. So roughly 3 in 10 are white male, non-Hispanics in the state.[1] Let’s just call it 30%. Census estimates for the proportion of folks who were white, non-Hispanic nationally and who voted in 2016 was a little over 73%. Thus, the male piece of that total was maybe 36-37%. You can’t explain the difference between California – where Republicans in statewide elected office have zero presence – and the rest of the U.S. by that 6-7% difference among white, non-Hispanic males.

    Second, the long-run demographic tale assumes that voting patterns by demographic group will remain stable over decades. But many of the white male Trump voters are the descendants of immigrants who came in the last big immigration wave in the late 19th and early 20th centuries. There is the old saying, “the last one in says shut the door; we’re all here.” Who is to say what Hispanic and Asian-origin populations will have as their political leanings in 2050?

    Third, even if you lean towards some version of demographics-is-political-destiny, you need to show a path between now and that future. And just as there are contradictory elements in the Republican electorate, e.g., libertarians versus social conservatives, there are analogous conflicts among Democrats. So let’s look at some of the seemingly-unrelated events described earlier as an illustration of the latter.

    As noted, “blue” California embraces such social trends as the me-too movement. One member of the California legislature who was initially seen as a big supporter of me-too was Assemblywoman Cristina Garcia. She was also a big supporter of other “progressive” causes, notably environmental. However, accusations began to surface that she had engaged in sexual harassment and related behavior, ultimately forcing her to take a leave of absence from the legislature. Garcia is nonetheless currently running for re-election. But as she campaigned, a full-page ad ran in the LA Times which we reproduce below.

    [Note: Because of technical limitations, images can no longer be shown on EPRN. To see this musing with the image, go to:

    You’ll note that the ad does not mention Garcia. Still, at about the same time as it appeared, new accusations surfaced; this time it was said that Garcia had made homophobic slurs and anti-Asian remarks. Finally, this report appeared in the Los Angeles Times:

    The decision by a politically powerful labor group to openly campaign against an embattled Los Angeles-area lawmaker drew a sharp rebuke on Friday from Assembly Speaker Anthony Rendon. The Lakewood Democrat lashed out hours after the State Building and Construction Trades Council of California filed paperwork for a political action committee to defeat Assemblywoman Cristina Garcia (D-Bell Gardens). Garcia, who’s seeking her fourth term, took an unpaid leave of absence in February following allegations of sexual misconduct. She has denied the reports and an Assembly investigation remains underway.

    Rendon didn’t criticize the labor group by name, insisting instead that the decision was driven by oil and gas industry interests. "This is a thinly veiled attempt by Big Oil and polluters to intimidate me and my members. It is an affront to my speakership,” Rendon said in a statement. “We are proud of the work that the Assembly has done to increase jobs and wages while defending our environment. We will vigorously defend the members of our caucus from any ill-advised political attack."

    A statement from the labor group, which sparred with Garcia last year on her effort to link new climate change policies with a crackdown on air pollution, said it had decided to “reverse” past support for her. “The Trades have thousands of hard working members in Garcia’s district, and we look forward to lifting up another Democrat in the 58th Assembly to better represent them and their families,” said the statement…[2]

    Even if Assemblywoman Garcia is replaced, another Democrat will be elected in her place - so there will be no changes in the balance of the two parties in the California legislature. You can decide for yourself whether the steady surfacing of the various accusations against Garcia and the campaign by labor groups to replace her is just a coincidence. We have noted in past musings that in the current social climate, me-too accusations can be weaponized for political purposes.

    In any event, the Garcia brouhaha illustrates the tension that exists between organized labor – a significant funding source for Democrats – and the wing of the party that is particularly concerned about quality-of-life type issues as opposed to “bread-and-butter” job-related issues.[3] Democrats are poised to lose support from public-sector unions due to a pending U.S. Supreme Court case. Defections of private-sector unions, such as those behind the LA Times ad, would be a further blow to Democrats, especially in potential swing states and districts.

    Consider, too, the gerrymandering in many states by GOP-dominated legislatures, the planned inclusion in the 2020 Census of a question on citizenship that may reduce response rates in states such as California with large immigrant populations, and various voter suppression efforts. Given those considerations, the blue path running from now to the future based on purely demographic factors must be seen to be strewn with pitfalls. And, in the near term, the 2018 election appears likely to be fought out against a background of very low unemployment. Yes, the labor-force participation rate is several percentage points below where it was at the turn of the century, but its downward trend ended several years ago. Labor-market conditions have to be seen overall as pretty good. Counting on an inevitable blue wave election in 2018, or on a gradually rising demographic blue tide, would be a risky strategy for Democrats.



    [1] Males and females don’t differ much in propensity to vote.



  • 18 Apr 2018 12:16 PM | Daniel Mitchell (Administrator)

    Note: We are no longer able to include images at this site. For the complete musing with images, go to

    Mitchell’s Musings 4-23-2018: Grandma is the Unfunded Liability 

    Daniel J.B. Mitchell

    A recent op ed in the LA Times points out that the Trump tax cuts are the first stage of a larger strategy:

    Tax cuts do not pay for themselves — not the Trump tax cuts, nor in any other case in modern U.S. practice. So we face only two possible courses of action: Either we tax ourselves more, or we dismantle the social safety net (in particular, Social Security, Medicare and Medicaid) that protects Americans from destitution or disability. Which is the right direction for our country to pursue?

    One political movement has its answer at the ready: Slash the safety net.

    Five fellows at the conservative Hoover Institution recently laid bare in a Washington Post opinion piece how the Tax Cut and Jobs Act of 2017 was just the first step in a two-step dance. The full tango goes like this: Note that our deficits are unsustainable. Blame "entitlement spending" (code for Social Security and Medicare) rather than tax cuts. Demand cuts to social spending on the pretext that some imaginary iron laws of reduced tax collections and deficit concerns require it…[1]

    This strategy did not originate in 2017, nor is it confined to the Hoover Institution. It usually is accompanied by calculations of the “unfunded liability” of Social Security and Medicare which is viewed with alarm. And it assumes that if you cut entitlements, the unfunded liability will go away somehow. But that assumption ignores the demographics – particularly the demographics of the population bulge known as the baby boom.

    Do you want to see the actual unfunded liability? You don’t need to wade through government reports. Here it is below. Grandma and grandpa are the unfunded liability.


    For image, go to


    The aging boomers that are the unfunded liability will eventually go away through the natural process, of course, but not because of tax cuts or budgetary calculations. So taking them out of the federal budget solves nothing. They exist and somehow society will have to fund their consumption.

    Issues regarding “entitlements” involve how the GDP of 2030, 2040, 2050, 2060, etc., will be split between active workers, retirees, and other dependents (mainly children). We can have a sensible conversation about that division and come up with solutions. Or we can wait until the “strategy” described earlier creates a political crisis. As the chart below shows, the demographics are coming, tax cut or not.


    For image, go to


    Years ago, I wrote a book describing political turmoil in the 1930s and 1940s in California which was then an elderly state. Many of the elderly in California in that era, absent an adequate safety net, supported hair-brained plans and backed political con artists promising pie-in-the-sky solutions.[3] If we get such results in the coming years at the national level, I suspect the folks at the Hoover Institution and other conservative think-tanks won’t like the outcome of their planned crisis. One thing about the elderly; they vote in large numbers.




    [2] The chart is from

    [3] Daniel J.B. Mitchell, Pensions, Politics, and the Elderly: Historic Social Movements and Their Lessons for Our Aging Society (M.E. Sharpe, 2000). Now available as an eBook and through Routledge.

  • 11 Oct 2016 6:10 PM | Daniel Mitchell (Administrator)

    Mitchell’s Musings 10-17-16: Most Economists

    Daniel J.B. Mitchell

    I happened to hear a public radio broadcast from NPR recently on the recent depreciation of the British pound and the Brexit vote of last June.[1] The program began with this sentence:

    Since the U.K. voted to leave the European Union last summer, the country's currency - the pound - has lost about 16 percent of its value against the dollar. Most of the damage, according to economists, was self-inflicted.

    It ended with this sentence:

    The pound dropped again this morning trading below $1.23. Most economists think it has yet to hit bottom.

    In between the beginning and the end, there was what you might expect. There were references to the Brexit vote of June, anecdotes on how foreign tourists in Britain were benefiting from reduced costs, etc. But let’s start with the beginning sentence which references the fall in the pound.


    Source: as of October 11, 2016.


    As the chart above shows, relative to the euro, the pound at this writing is about where it was during and in the aftermath of the Great Recession. Until the Brexit vote, it tended to rise relative to the euro. When the vote occurred, it fell. And the pound has generally fallen since.

    The NPR program describes the fall in the pound as “damage” which was “self-inflicted.” There is no doubt that that the Brexit vote was an Act of Man rather than an Act of God. But is it correct to view a currency depreciation as “damage”? Note that if the pound declined relative to the euro, it is also true (by inversion of the pound/euro ratio) that the euro appreciated relative to the pound. So was the euro-zone “helped” by its currency’s appreciation?

    Other things equal, the decline in the pound made British exports more competitive and imports to Britain less competitive. So on that dimension, you could just as well say Britain was helped and the euro-zone was damaged. Suppose you applied the same logic to the U.S. and its dollar that the NPR broadcast applied to Britain and its pound. The chart below shows an index of the U.S. dollar relative to the currencies of its trading partners since 2000.

    If you equate the exchange rate with national welfare, we were never as well off as we were just after the dot-com bust and the related recession. During the recovery from that recession, things got progressively worse if we use the exchange rate as our measure. The Great Recession then gave our welfare a big boost temporarily. But the recovery from that recession made us worse off again. We didn’t see a big improvement until the 2015-16 election cycle made the future of U.S. economic policy uncertain. If nothing in that interpretation makes much sense to you, you now can see the folly of identifying exchange rate trends with national welfare.


    Source: FRED database of the Federal Reserve Bank of St. Louis.


    There seems to be an underlying assumption in the NPR broadcast that the fact that Brexit inherently changed some fundamental determinants of the British exchange rate means the pound must be lower than it was. However, the demand for the pound is ultimately a function of the demand for British exports and for British investment assets (British stocks, bonds, real property, etc.); the supply of the pound is ultimately a function of British demand for imports and foreign investment assets. How the demand and supply will balance out once the dust settles, i.e., what the eventual long-term exchange rate will be, is unknown. It will depend on such things as British inflation relative to that of its trading partners and rates of saving at home and abroad. But note that the question of whether or not Brexit was a good idea for Britain in terms of its national economic and political welfare is simply not the same thing as the exchange rate.

    Well, that’s fundamentals. The broadcast closes with the idea that “most economists” think – was there a survey? – that the pound will fall further. That prognosis isn’t accompanied by a time period. Is it by tomorrow? By next week? Whatever the time period may be, it seems to be a short-term prediction. And if it is short term, it should also be the case that most economists are going short on the pound because they know it will soon fall. But is there any evidence that, for example, British economists have been putting their holdings in euros? Are they going further and borrowing pounds and then investing them in euro-denominated assets? If it were evident that the pound would be notably lower in value relative to the euro in the near future, the rush into euros would make it lower relative to the euro today.

    Bottom lines:

    1) Will the pound be lower tomorrow than it was today? If you say “yes,” you have about a 50-50 chance of being right.

    2) Is it a Bad Thing for Britain that the pound exchange rate is lower than it was pre-Brexit? Other things equal, depreciation of the pound stimulates British exports and discourages imports. So let’s just say that the answer is more complicated than assuming that national welfare moves with the exchange rate.

    3) Finally, what should NPR have said in its broadcast? Probably not much more than with the decline in the pound, Americans might want to consider a London holiday.


    [1] “Brexit Results Prove Increasingly Costly to Britons,” Morning Edition, October 11, 2016. Available at:

  • 08 Oct 2016 1:43 PM | Daniel Mitchell (Administrator)

    Mitchell’s Musings 10-10-16: Makes Sense to Me

    Daniel J.B. Mitchell

    I came across an article in the Los Angeles Times business section recently with the print-version headline “Trade is seen as harmful.”[1] The article noted that a Pew Research Center poll found that “eight out of ten adults regarded outsourcing of jobs overseas and the growth of imports of foreign-made goods as harmful to U.S. workers. By comparison only half of the people surveyed saw automation as hurtful – even though many economists believe that new technologies and the mechanization of work have led to as many job losses as imbalanced trade.” The article went on to relate the trade concerns to the current presidential election campaign.

    Above are the actual poll results from the underlying Pew study.[2] Although the LA Times article seems to imply that respondents have misdiagnosed the relative importance of trade vs. automation, there may be an explanation. Unfortunately, Pew does not provide the precise wording of the questions asked. So exactly how respondents interpreted words such as “outsourcing” and “automation” is not clear. Were they given definitions? The hurt vs. help contrast also raises some questions. Do the words mean destroy jobs vs. create jobs? Or do the terms suggest making jobs more difficult to do vs. assisting workers to do their jobs? Or do the terms suggest some kind of good jobs vs. bad jobs distinction?[3] The LA Times article implicitly assumes the destruction/creation interpretation.

    Despite the ambiguities, let’s limit the interpretation to destruction vs. creation when thinking about the trade issue and how survey respondents reacted. Other things equal, the large trade imbalance (deficit) that has characterized the U.S. for decades has to be a source of net destruction. There are caveats, of course. Important among them is the fact that workers whose jobs are lost may end up in the non-trade sector (such as retail).[4] That is, imbalanced trade may shift the mix of jobs towards the non-trade sector without changing the total number of jobs.

    What about automation as a concern? Note that the LA Times article seems to use automation and technology interchangeably. If that is also how respondents reacted, at least some of them may have been thinking about the way technology provides an assist to workers in doing jobs. Thanks to computer technology, for example, it is easier to access information needed on the job than it used to be. Medical records are now available readily without going through paper files. There are many such examples.

    Finally, what about immigration? Respondents are roughly split on whether immigration hurts or helps American workers. The LA Times article notes that ten years ago, the result was much more anti-immigrant than it is now. Although the pace of illegal immigration is hard to measure precisely, another report from Pew suggests that during the past decade, net illegal immigration has halted.[5] That is, the absolute of number of illegal immigrants residing within the U.S. has stayed about constant, as shown on the chart below. Presumably, the Great Recession and its aftermath had an impact in discouraging a net inflow; up until the Great Recession occurred, the number had been rising. That shift to a net of zero may explain the attitudinal change.[6]

    In short, the Pew survey results do not seem to be counter-intuitive. They seem to go with the election narrative. Reflected in the outcome, you have the followers of Bernie Sanders who think trade is a problem but not immigration vs. the followers of Donald Trump who think both are a problem.  You have automation-technology seen as good and bad, perhaps because the question is posed ambiguously. It makes sense to me.


    [1] The online version of the article had a different headline focused on immigration, not trade: “Americans are feeling better about immigrants' economic effect — but Republicans aren't, survey shows.” See  

    [2] The full report is at A summary is at   

    [3] The fact that decline of unions is seen as more hurtful than helpful in the survey suggests that respondents may have been thinking – at least in part – about job characteristics such as pay and benefits.

    [4] Exports and imports may differ in their labor-using characteristics. At least in theory, however, U.S. imports should be more labor-intensive than exports which would intensify the net destruction effect. That is, even with balanced trade, there might be net displacement.

    [5] Even when the stock of illegal immigrants is constant, there may be gross flows into and out of the U.S. But the inflows and outflows must be balanced, i.e., a net of zero, for the total stock to stay the same.

    [6] Immigration has had a U-shape in terms of skill with a concentration of unskilled immigrants and a lesser concentration of highly-skilled immigrants. Since this pattern is not a replica of the existing U.S. workforce, there may be both competition among substitutes (e.g., low-skilled natives vs. low-skilled immigrants) as well as complements, e.g., natives for whom demand for their labor is enhanced by the presence of immigrants. For example, native supervisors in southern poultry packing plants may benefit from the influx of low-skilled production workers. It seems unlikely, however, that this nuanced view of the impact of immigration across different groups within the workforce is driving the survey results.

Employment Policy Research Network (A member-driven project of the Labor and Employment Relations Association)

121 Labor and Employment Relations Bldg.


121 LER Building

504 East Armory Ave.

Champaign, IL 61820


The EPRN began with generous grants from the Rockefeller, Russell Sage, and Ewing Marion Kauffman Foundations


Powered by Wild Apricot. Try our all-in-one platform for easy membership management