See the warnings about Trump’s infrastructure plan. It’s betraying populism.

Summary: US stocks have risen since the election on expectations that Trump will bring massive debt-financed infrastructure spending and tax cuts for the rich (with droplets for everyone else). As we learned from the Reagan and Bush Jr. programs, we should beware the details. These articles warn what to expect, giving us time to fight back.

Donald Trump digging
Donald Trump breaking ground for new hotel in Washington, 23 July 2014. Photo: Evan Vucci, STF/AP.

“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement,” he says. “It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”
— Steve Bannon, Trump’s Chief Strategist, in The Hollywood Reporter.

This massive infrastructure plan sounds alluring, like debt-funded tax cuts. Ronald A. Klain warns us about the probably results: “Trump’s big infrastructure plan? It’s a trap.” To understand why, see the details in “Trump Versus Clinton On Infrastructure” by Peter Navarro (prof of economics and public policy at UC-Irwin) and Wilbur Ross (billionaire LBO entrepreneur) — both senior advisors to Trump. Paul Krugman gives the summary (read it in full).

Trumpists are touting the idea of a big infrastructure build, and some Democrats are making conciliatory noises about working with the new regime on that front. But remember who you’re dealing with: if you invest anything with this guy, be it money or reputation, you are at great risk of being scammed. So, what do we know about the Trump infrastructure plan, such as it is?

“Crucially, it’s not a plan to borrow $1 trillion and spend it on much-needed projects — which would be the straightforward, obvious thing to do. It is, instead, supposed to involve having private investors do the work both of raising money and building the projects — with the aid of a huge tax credit that gives them back 82 percent of the equity they put in. To compensate for the small sliver of additional equity and the interest on their borrowing, the private investors then have to somehow make profits on the assets they end up owning.

“You should immediately ask three questions about all of this. … All of these questions could be avoided by doing things the straightforward way: if you think we should build more infrastructure, then build more infrastructure, and never mind the complicated private equity/tax credits stuff. You could try to come up with some justification for the complexity of the scheme, but one simple answer would be that it’s not about investment, it’s about ripping off taxpayers.

We have recent experience with this strip-mining of the public for private gain: the privatization of education, including the student loan business. Rana Foroohar reviews seven new books about this at the New York Review of Books.

“When the financial industry — banks, hedge funds, loan companies, private equity — gets too involved in any particular activity of the economy or society, it’s usually time to worry. The financial sector, which represents a mere 4% of jobs in this country but takes a quarter of all private sector profits, is like the proverbial Las Vegas casino — it always wins, and usually leaves a trail of losers behind.

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Ignore the hype. There are few shortages of skilled workers in America.

Summary: The shortage of STEM workers is a zombie myth too politically useful to die. But here’s data that should kill it. Worse, it implies we might soon see a surplus of highly educated workers, undercutting the more education as a solution to automation story. We’ll need to consider more radical ideas.

“While there are over 500,000 computing jobs currently unfilled in the U.S., only 42,969 computer science students graduated from U.S. universities into the workforce last year.”

— “Computer Science in K-12 Classrooms” by the Computer Science Education Coalition, one of the many lobbying groups funded by corporations to ensure cheap labor. Median wages for people with PhDs in computer science were $121,300 in 2013, down 7% from 2008. There is no shortage, even in this hottest of fields.

Wages show the supply & demand for people with Ph.D.s.
Their wages are falling, so there is no shortage.

Data on PhD holders jobs and salaries, from WSJ

For years corporations and their paid propagandists at think-tanks have bombarded us with news about the shortage of workers in the STEM fields (Science, Technology, Engineering and Mathematics), which will cripple America in the 21st century. Looking to the future, we’re told growth in these fields would offset some of the massive unemployment from automation.

Oddly, despite the ludicrously high numbers of unfilled jobs reported, wages in these fields have not been rapidly rising (excerpt in a few hot specialties, as it takes time for students to graduate into them). Has the law of supply and demand been repealed? No, since not only is there no shortage, but even Ph.D.s in these fields are in excess supply and seeking employment in other fields, or at jobs in their field not requiring their level of training.

Worse, the data suggests that in the future we might have an oversuppy of highly educated workers (the large surplus of attorneys might be the exemplar of what’s to come).

What we see here is corporations using the news media and government to ensure an ample supply of cheap skilled workers. An entire movement has been built on this fake story.

Here’s the latest of the articles presenting the facts about higher education in the second decade of the 21st century.

Job-Seeking Ph.D. Holders Look to Life Outside School
by Douglas Belkin in the Wall Street Journal
“New doctorate holders are grappling with dwindling employment prospects.”

“…The percentage of new doctorate recipients without jobs or plans for further study climbed to 39% in 2014 from 31% in 2009, according to a National Science Foundation survey released in April. Median salaries for midcareer Ph.D.s working full time fell 6% between 2010 and 2013.

“The reason: supply and demand. Production of doctorates in the U.S. climbed 28% in the decade ending in 2014 to an all-time high of 54,070. That surge has come as more Americans see a postgraduate degree as a hedge against stagnating wages and unemployment in an economy demanding increasingly specific skills and expertise.

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The numbers about immigration that fuel Trump’s campaign

Summary:  Trump serves a common and vital role in US politics, introducing popular issues that the elites of both parties suppress. Such as immigration. Here are some of the numbers that show why many Americans worry about the high rate of immigration (but not our elites, who love the cheap workers and politically passive voters).  {1st of 2 posts today.}

Trump and motto
Photographer: Victor J. Blue/Bloomberg

Cui bono from the recovery?

This graph and the accompanying analysis from the ECRI shows that the employment to population ratio (E/P) for those with less than a high school diploma (orange line) hit bottom in 2011. Since then it has regained almost two-thirds of the losses in the great recession. But the E/P ratio for high school and college graduates (90% of adults; purple line) has not recovered since the recessionary losses. The new jobs have gone to the least educated — and so the lowest-paid — workers.

ECRI: Employment to Population RatioCombined with the income gains to the top 10%, we have a recovery that has done little for most Americans. No amount of cheer-leading by Team Obama and Wall Street can change that.

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Education is not a solution to automation

Summary: We’re on course to repeat the mistakes of the first 2 industrial revolutions in the 3rd. The wonders of increased productivity benefit the 1%, while the middle class seeks easy but chimerical ways to preserve their way of life. Anything but the work and risk of collective political action. Today we examine the favorite recommended cure to automation: more education. It works as well as frogs climbing over each other to escape a pot.  {1st of 2 posts today.}

Frog Pile
Without growth, education doesn’t help the group. Just a lucky few.

More education is the most common response to the job losses and wage stagnation caused by automation. People, young and old, frantically train and retrain themselves for jobs in the ever-shrinking pool of jobs supporting a middle class lifestyle. Only lately has the futility of this become obvious, as experience shows its flaws.

Nick Bunker (Washington Center for Equitable Growth) gives a summary of the fallacies: “Is higher education the answer to reducing income inequality?” — The money paragraph, undercutting the key assumption of more education as a solution:

Intuitively, then, increasing the supply of educated workers should reduce inequality as it would increase wages among a broader supply of more educated workers. But that assumes the demand for educated workers will continue to rise. Problem is, recent research finds that the demand for skilled labor appears to be on the decline.

See this article for more about this, and links to research. It’s true even for advanced STEM degrees. That’s the bad news. Now for the worse news.

Education puts workers on a new kind of boom-bust cycle.

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The promise and peril of automation: now everyone sees the challenge

Summary: It was long denied,  but now everybody sees the coming of the next industrial revolution. We enter the next phase, when experts assure us that the obvious will not happen, that the dynamics of past industrial revolutions would not repeat (although they don’t explain why). Today we look at experts grappling with these issues, and see some simple truths.

Robot-human partnership
Don Klumpp | Photographer’s Choice | Getty Images

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Now that the 3rd industrial revolution has appeared on the front pages, Pew Research polls experts to learn its consequence: “AI, Robotics, and the Future of Jobs“, Aaron Smith and Janna Anderson, 6 August 2014 — Excerpt:

The vast majority of respondents to the 2014 Future of the Internet canvassing anticipate that robotics and artificial intelligence will permeate wide segments of daily life by 2025, with huge implications for a range of industries such as health care, transport and logistics, customer service, and home maintenance. But even as they are largely consistent in their predictions for the evolution of technology itself, they are deeply divided on how advances in AI and robotics will impact the economic and employment picture over the next decade.

… Some 1,896 experts responded to the following question: Will networked, automated, artificial intelligence (AI) applications and robotic devices have displaced more jobs than they have created by 2025?

Half of these experts (48%) envision a future in which robots and digital agents have displaced significant numbers of both blue- and white-collar workers — with many expressing concern that this will lead to vast increases in income inequality, masses of people who are effectively unemployable, and breakdowns in the social order.

The other half of the experts who responded to this survey (52%) expect that technology will not displace more jobs than it creates by 2025. To be sure, this group anticipates that many jobs currently performed by humans will be substantially taken over by robots or digital agents by 2025. But they have faith that human ingenuity will create new jobs, industries, and ways to make a living, just as it has been doing since the dawn of the Industrial Revolution.

Most of the answers are exercises in making stuff up, just faith-based guessing (see examples here). Which is sad, as they disregard the painfully gained knowledge from previous industrial revolutions. History, economics, political science, and sociology give insights as to what we can expect from the massive increase in productivity that might loom ahead. But using our imagination is more fun.

There are others with a more scholarly approach, such as the study described by Matthew Yglesias in “Robots won’t destroy jobs, but they may destroy the middle class“, VOX, 23 August 2014 — Excerpt:

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The shortage of STEM workers: another bogus crisis crafted to benefit the 1%.

Summary: Another day, another astonishing bogus crisis (the STEM shortage) in which well-meaning Americans labor against their own interests to further enrich the 1%. The true nuggets of insight in the news media reveal so much, but accomplish nothing unless they spark action.

Better days are here, for some of us.

“Big industry constantly requires a reserve army of unemployed workers for times of overproduction. The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it …”
— Marx (1847, unpublished work)

“Taking them as a whole, the general movements of wages are exclusively regulated by the expansion and contraction of the industrial reserve army …”
— Marx, Das Kapital (1867)

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This is a tale of the New America: the mythical STEM crisis:

  1. The STEM Crisis Is a Myth“, Robert N. Charette, IEEE Spectrum, 30 Aug 2013 — “Forget the dire predictions of a looming shortfall of scientists, technologists, engineers, and mathematicians.”
  2. The STEM Crisis: Reality or Myth?“, Michael Anft, The Chronicle of Higher Education, 11 November 2013
  3. The truth about the great American science shortfall“, Karin Klein, op-ed in the Los Angeles Times, 24 February 2014
  4. The Tech Worker Shortage Doesn’t Really Exist“, BusinessWeek, 24 November 2014 {update}

It’s an example of how America works in the 21st century: well-meaning but foolish people serving the plutocracy:

  1. Plutocrats (e.g., Bill Gates) see a need for more cheap workers.
  2. Create fake scare: a shortage of workers trained in science, technology, engineering, and mathematics.  STEM! Some seed money, mostly for marketing.
  3. A thousand organizations — Federal to local schools, charities (e.g., Boy Scouts), businesses — rally to action.

That the shortage of STEM workers was bogus was quite obvious from the start, as Klein explains. It is Econ 101:

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The education crisis spreads to the professions. Watch the universities crack.

Summary: Posts on this website have long forecast massive structural change in America. In 2013 this process slowly becomes visible.   Today we look at the first signs of collapse in the business model of America’s universities. The For More Information section has a wealth of information about the crisis in education (and links to posts about the crisis in journalism).

Structural Change

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Contents

  1. More education as a solution for America
  2. The universities act like vampires, bleeding their students
  3. The law of supply and demand strikes back
  4. Articles about the collapse of universities
  5. For More Information

(1)  More education as a solution for America

Decades of falling real wages has sparked a frantic scramble by youth (and increasing numbers of older people) for undergraduate and advanced degrees. In July 2009 I wrote that this made sense for an individual — but could not work for a nation, and would not end well.

For a generation or two college costs have risen faster than both US household incomes AND governments’ tuition support. The effect of rising costs was muted by increased borrowing by parents and students.

… A college diploma has value unconnected to anything actually learned by the student, as it became the key component of American’s social allocation system — by which a new generation was steered into the job market.  Colleges charged excess tuition to skim off as much of this as possible, expanded their costs to the maximum extent the market would bear. This is classic rent-seeking by colleges, described by Wikipedia.

Now that structure has crashed.  People are less willing to borrow for college; lenders are less willing to lend to parents and students.  Students and parents know a liberal arts education is seldom worth the cost either financially or intellectually. Now they increasingly wonder if the diploma is worth the cost.

Colleges are left with broken business models:  large  inflexible cost structures, and disenchanted clients.  Much like newspapers and airlines.  And like them, those working in colleges only slowly realize the grim outlook.  Their first response is to hope the good times return.

(2) The universities act like vampires, bleeding their students

People crowded into professional degree programs, seeking to rise above the falling-wage rat race. Universities responded by what economists call “rent-seeking”. They increased tuition to capture a larger share of the value-added by their degrees. For example, law schools are one of the major profit centers of US universities. Look at the increases in median annual tuition at ABA-accredited schools (in 2011 dollars):

  • 1985:  $15,438
  • 2011:  $39,915

That’s a lot of money. Fortunately we have public universities. Unfortunately, their tuitions have increased even faster (per Paul Campos):

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