Macro Roundup

Ed this ~ echos your questions about NYC real estate, who is going to buy all of these houses and at what price?
"...In the next two decades, as more and more baby boomers look to downsize, more than a quarter of the US homes occupied by their owner(s) will likely hit the market (Romem 2019). If the trends we document continue, the under performance of these homes on the housing market may put increased pressure on baby boomers’ savings, at the exact time that they move into retirement....Not only are large housing market corrections already underway, the combination of lifecycle effects and demographic developments means that these adjustments are likely to continue over the next decade....We combine neighbourhood-level housing market data from Zillow with detailed census information on demographics and housing structures. Figure 3 shows that since 2012 the price growth of houses with more than four bedrooms has lagged the price increases of one- and two-bedroom homes by about one percentage point per year (within the same zip code).... If the trends we document persist, they will have significant macroeconomic effects. The asset position of the middle class tends to move closely with home prices (Kuhn et al. forthcoming), and older Americans are central to these trends....We find that the homes of baby boomers have not only experienced slower price growth but have also become significantly harder to sell. Within the same county, a 1% lower demographic demand shock in a neighbourhood leads to an 11% relative decline in home sales.... Currently, Americans over the age of 55 hold almost 60% of total housing wealth, with 60-75% of their assets held in real estate.... Asset-wise, the middle class is almost completely dependent on housing, with retirement portfolios a distant second. Since many Americans in the middle class will retire within the next few years, they stand to exert demographic pressure on their neighbourhoods. This pressure might significantly affect the $16.5 trillion in real estate wealth held in these households, precisely when they will need those assets most. Covid-19 presents something of a wildcard in this context. The pandemic can reverse or accelerate these adjustments, and it is too early to tell what the wider effects of the virus may be...."

Marijn Bolhuis, Judd Cramer, "Baby boomers and the housing market on the cusp of COVID-19," Center for Economic and Policy Research, April 2, 2020, https://voxeu.org/article/baby-boomers-and-housing-market-cusp-covid-19

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"...“Establishment” voters, in this scheme, means center-left voters who make up just over 60 percent of the total.They stood out as favorably inclined to Nancy Pelosi, Chuck Schumer, Barack Obama and the Democratic National Committee — in other words, to the Democratic establishment. “Progressive left” Democrats, at just under 20 percent,were most favorable to labor unions, Black Lives Matter, the #MeToo movement, Alexandria Ocasio-Cortez and the Democratic Socialists of America. These Democrats viewed business interests — as exemplified by Wall Street — negatively, and they weren’t happy about Joe Manchin, the centrist senator from West Virginia, either. The third group, “neoliberal” Democrats, at 20 percent, is as large as the progressive wing.These voters like what the progressives don’t like — Wall Street, Manchin — and dislike pretty much everything progressives favor, including Ocasio-Cortez and the Democratic Socialists of America....Eitan Hersh, who is also a political scientist at Tufts, suggests in his new book, “Politics Is for Power,” that the Democratic left is threatened by a political side effect of the internet. The web, he writes, has facilitated the growth — concentrated especially in the ranks of well-educated white progressives — of voters seeking “a shortcut to feeling engaged without being engaged,” voters for whom “emotion — righteous anger — is an end rather than a means to an end.” Hersh calls these voters “hobbyists.” They spend an hour a day or more closely following politics primarily on social media, but they rarely, if ever, actually engage in politics through volunteering or other grass roots activity...."

Thomas Edsall, "Bernie Sanders Only Had Eyes for One Wing of the Democratic Party,"New York Times, April 8, 2020, https://www.nytimes.com/2020/04/08/opinion/bernie-sanders-democratic-party.html

Bernie Sanders Only Had Eyes for One Wing of the Democratic Party

Once the mainstream of the Democratic Party’s electorate settled on a candidate to support in this year’s campaign, however flawed Joe Biden may be, Bernie Sanders’s call for a revolution overturning the current American variant of capitalism no longer had a chance. On Wednesday, Sanders finally capitulated to political reality and withdrew from the race. In doing so, he claimed that “Few would deny that over the course of the past five years our movement has won the ideological struggle.”

But is that true?

The fact is that a decisive majority — 60 percent — of the Democratic electorate is made up of men and women loyal to the centrist party establishment, such as it is, and to organizations, from unions to party committees, that are aligned with it.

And there is little or no evidence that the greater part of the American people have the desire, or the stomach, for political revolution.

Earlier this month, Shom Mazumder, a political scientist at Harvard, published a study, “Why The Progressive Left Fits So Uncomfortably Within The Democratic Party,” that analyzed data from a 2019 survey of 2,900 likely Democratic primary voters. “I saw two clear poles emerge within the Democratic Party,” he writes:

The “establishment” and the “progressive left.” A third group also emerged, and while it’s not as clearly defined as the other two, it has some overlap with the establishment and tends to be more fond of Wall Street, so I’m calling that “neoliberals.”

“Establishment” voters, in this scheme, means center-left voters who make up just over 60 percent of the total. They stood out as favorably inclined to Nancy Pelosi, Chuck Schumer, Barack Obama and the Democratic National Committee — in other words, to the Democratic establishment.

“Progressive left” Democrats, at just under 20 percent, were most favorable to labor unions, Black Lives Matter, the #MeToo movement, Alexandria Ocasio-Cortez and the Democratic Socialists of America. These Democrats viewed business interests — as exemplified by Wall Street — negatively, and they weren’t happy about Joe Manchin, the centrist senator from West Virginia, either.

The third group, “neoliberal” Democrats, at 20 percent, is as large as the progressive wing. These voters like what the progressives don’t like — Wall Street, Manchin — and dislike pretty much everything progressives favor, including Ocasio-Cortez and the Democratic Socialists of America.

Mazumder uses the label “establishment Democrats” idiosyncratically. His data shows that at 44 percent, minorities make up a much larger share of these voters than their share of either progressives, at 28 percent, or neoliberals at 32 percent. His establishment voters are roughly 60-40 female, while the other two categories are majority male.

In contrast, Mazumder’s progressives stand out as the whitest group — 72 percent Anglo — of the three categories, the least diverse constituency of an increasingly multicultural and multiracial party.

The progressives were also the only Democratic faction in which a majority — 75.1 percent — said that if they could “wave a magic wand” and make the candidate of their choice the nominee, they would pick either Sanders or Elizabeth Warren.

Only a third of establishment voters chose either Sanders or Warren, and even fewer, a fifth of the neoliberals, would pick either of the two.

A central rationale of the Sanders campaign is that if he is elected, he would wrest control of the Democratic Party from corporate America and turn it over to the working and middle class.

As Sanders put it on Twitter in June 2019:

The cat is out of the bag. The corporate wing of the Democratic Party is publicly “anybody but Bernie.” They know our progressive agenda of Medicare for All, breaking up big banks, taking on drug companies and raising wages is the real threat to the billionaire class.

There are scholars who argue that Sanders’s claim is both credible and warranted.

Martin Gilens, a political scientist at U.C.L.A., wrote in an email:

Bernie Sanders, Elizabeth Warren, and other progressive Democrats are fully justified in believing many of the policies they endorse are opposed by a Democratic Party establishment beholden to moneyed interests.

Gilens acknowledged that “when Democrats are in office, policy tends to shift modestly in ways that advantage the less well off” including minimum wage increases and “modestly more progressive” tax policy.

That tendency does not, however, grow out of a robust alliance between party leaders and their low income constituents, Gilens argues. Instead, in his view,

those policy differences do not exist because the Democratic Party reflects the influence of middle-class Americans. Instead, the policy differences reflect that fact that (in contrast to Republicans) the affluent power base of the Democratic Party embraces a limited set of economically progressive policies.

In practice, Gilens wrote, “the Democratic Party aligns itself rhetorically with the middle-class, but when push comes to shove, its policies reflect the influence of the well-off.”

Gilens and Benjamin I. Page, a political scientist at Northwestern, describe what they believe are the consequences of a Democratic Party dominated by the well off. They contend in the 2020 edition of their book, “Democracy in America? What Has Gone Wrong And What We Can Do About It,” that “wealthy individuals and organized interest groups — especially business corporations — have had much more political clout” in forging government policy, adding that “the general public has been virtually powerless.”

Two papers by four other political scientists challenge the arguments of Gilens and Page. The first of these, “Oligarchy or Class War?” is by Matt Grossmann and William Isaac, both at Michigan State. The second, “Testing Models of Unequal Representation: Democratic Populists and Republican Oligarchs,” is by Jesse H. Rhodes and Brian F. Schaffner, of the University of Massachusetts-Amherst and Tufts.

Gilens, Page and their critics basically agree on the same set of facts. Their differences emerge from their conflicting interpretations of those facts.

Take the enactment of Obamacare. For Gilens, the final legislation reflects the failure of the Democratic Party to achieve progressive goals:

In 2009, with unified Democratic Party control and a filibuster-proof majority in the Senate, the Democratic Party failed even to include a public option in Obamacare, much less establish a health insurance program that would cover all uninsured Americans.

The Affordable Care Act, Gilens continued, is “one illustration of the power of interest groups in constraining Democratic Party policy.”

Critics of Gilens’ argument contend that enactment of Obamacare marks the first major downwardly redistributive federal legislation in generations, a major progressive achievement after decades of conservative success in distributing income and wealth to those in the top brackets.

“The A.C.A. was less sweeping than it could have been because of the constraints imposed by a powerful health care lobby, but it was more sweeping than anything that had come before,” Rhodes wrote by email. “The fact that significant health care legislation was enacted in spite of substantial resistance was a testament to the strength of progressive mobilization at the time.”

In other words, for Gilens, the glass is half empty, for Rhodes, half full.

Grossmann and Isaac write:

The view associated with Bernie Sanders and some scholars, which suggests that both parties have been bought off by rich donors to represent the rich and big business at the expense of the middle class, is inconsistent with the patterns we observe.

The Republican Party, they contend, perhaps unnecessarily,

does seem consistently responsive to business preferences and its positions are more often associated with those of the affluent. On economic policy in particular, Republican leaders much better represent affluent and business preferences.

But the Democratic Party, Grossmann and Isaac argue, “is not aligned with business preferences or affluent preferences in any domain — and actually represents middle-class views over affluent views on economic policy.”

Along similar lines, Rhodes and Schaffner found in their 2017 paper that:

Individuals with Democratic congressional representatives experience a fundamentally different type of representation than do individuals with Republican representatives. Individuals with Democratic representatives encounter a mode of representation best described as “populist.”

In contrast, they continue,

individuals with Republican representatives experience an “oligarchic" mode of representation, in which wealthy individuals receive much more representation than those lower on the economic ladder.

In an email, Rhodes noted that

Democrats are on average more responsive to their less affluent constituents than they are to their more affluent constituents, while for Republicans the reverse is true.

If the standard in judging the Democratic Party is whether it would support a radical upheaval vastly expanding the federal government, Rhodes continued, then

it’s fair to say that few elected Democrats at the national level are contemplating major departures from prevailing economic and political arrangements. There’s little evidence that most elected Democrats want an economic “revolution.”

But, Rhodes continued, “the reality is more complicated” than the Sanders claim that “the party is dominated by corporate interests and is unresponsive to the demands of the working and middle classes.”

Instead, according to Rhodes,

there’s a decent case to be made that many Democratic elected officials are indeed representing their working- and middle-class constituents by taking moderately liberal positions on most economic issues.

Interestingly, the progressive wing of the Democratic Party faces another challenge from an unexpected source.

Eitan Hersh, who is also a political scientist at Tufts, suggests in his new book, “Politics Is for Power,” that the Democratic left is threatened by a political side effect of the internet.

The web, he writes, has facilitated the growth — concentrated especially in the ranks of well-educated white progressives — of voters seeking “a shortcut to feeling engaged without being engaged,” voters for whom “emotion — righteous anger — is an end rather than a means to an end.”

Hersh calls these voters “hobbyists.” They spend an hour a day or more closely following politics primarily on social media, but they rarely, if ever, actually engage in politics through volunteering or other grass roots activity.

Hersh provided data comparing the demographics of hobbyists to non-hobbyists.

First and foremost, hobbyists are white, 82 percent, compared with 67 percent for non-hobbyists. They are majority male, 53 percent, compared with non-hobbyists who are 59 percent female. They are better educated, 37 percent with college degrees, compared with 30 percent among non-hobbyists.

In a further refinement of his analysis, Hersh compared voters who spend an hour or more a day on politics and do no volunteer work with those who spend an hour a day but also perform volunteer work — in other words, those who not only follow politics closely but also engage in grass roots activities.

There were some striking differences, Hersh wrote by email:

The people who spend an hour or more a day on politics but no time in volunteerism are 82 percent white, but those who do volunteering are only 60 percent white. The political hobbyists are 47 percent women but the volunteers are 64 percent women.

I asked Hersh why certain Democrats and liberals were drawn to hobbyism. One factor, according to Hersh, is that many hobbyists are not facing hard times:

College educated whites do politics as a leisure activity because the status quo is pretty good for them, and they are not motivated either by fears or by a sense of linked fate to those who do have pressing needs to get off their couches. They might say they hate Trump, are worried about polarization, are afraid of climate change, etc., but they aren’t really interested in doing anything about it because they don’t find the direction of the country sufficiently threatening to them.

If political hobbyists go ahead and vote, why worry about what they do or don’t do?

Hersh’s answer:

Political hobbyism isn’t just a distinct activity from the pursuit of political power; it hinders the pursuit of political power.

Since politics, including the politics of governing, is a competition in the exercise of power and influence, corporations and rich people are going to press for their interests no matter what. Insofar as progressive forces include a disproportionate share of hobbyists — as they currently do — progressives are going to be weakened in that struggle for power.

Interests will always conflict, and the conflicts are often as intense and bitter within a political party as they are between political parties. But political coalitions like the Democratic Party depend on the willingness of competitive forces to come to a compromise or at least a working agreement.

Unfortunately, intraparty dissension often brings the whole house down. Strategically, the challenge for progressives in the wake of Sanders’s departure from the race is not to defeat the Democratic Party, nor is it to generate a constant drumbeat of hostility from the left. The challenge is to combine forces with the rest of the party and deploy that power to win elections and change lives.