Macro Roundup

Steve Sailer, “….So, the simplest work-around is simply to compare blacks to all nonblacks. If blacks make up 13.4 percent of the population at present, then they were 7.9 times more likely to be homicide offenders than nonblacks on a per capita basis in 2018 and 7.4 times more in the decade of 2009-2018. Here’s the formula for 2018: (54.9% of murderers are black / 13.4% of population is black) / ((100% - 54.9%) / (100% - 13.4%)) = 7.9Incredibly, among known killers in 2018, the ratio of blacks to nonblacks (7.9 times greater) was bigger than the ratio of males to females (7.1 times)….”

Steve Sailer, "Crime Roaring Twenties,"Taki's Magazine, August 12, 2020, https://www.takimag.com/article/crime-roaring-twenties/

Heather Gillers and Andrea Fuller, "Cities Weigh Cutting Police Budgets and Discover How Hard That Is,"Wall Street Journal, August 12, 2020, https://www.wsj.com/articles/cities-weigh-cutting-police-budgets-and-discover-how-hard-that-is-11597261079

Cities Weigh Cutting Police Budgets and Discover How Hard That Is

Cities across America are weighing whether to reduce or redirect spending on police. Some, with backing from mayors and city councils, are already undertaking efforts to do so, as protesters in their streets call for “defunding.”

They’re quickly learning that police budgets, built up over generations with broad public support, are difficult to dismantle.

Elected officials in New York, Seattle, Los Angeles and Minneapolis, among other places, have approved plans to reduce police budgets in response to the nationwide protests following the killing of George Floyd in police custody in Minneapolis.

But many of the cuts are cosmetic, temporary or represent a relatively small part of budgets. In the case of Minneapolis, they may not stick. A Minnesota state commission has delayed a city council plan to put a proposal to disband the police department on the November ballot.

On Monday, Seattle’s city council approved about a $3 million cut to police spending for the remaining budget year, around 1% of the annual police budget but far less than the 50% target some on the city council have proposed. Police Chief Carmen Best, the first Black woman to hold the post and who opposed sharp spending cuts, announced her retirement in the wake of the decision and decried a “lack of respect” for officers.

The calls for cutting come amid a rise in violent crime in several large U.S. cities this year, including a murder increase in most large ones. Chicago on Sunday night saw heavy looting of its Magnificent Mile and other upscale shopping districts following a police shooting that wounded a man in another area. Officers said he had fired on them first.

Chicago recorded 94 homicides in the 28 days ended Aug. 2. Speaking before Sunday’s looting, Alderman Matt O’Shea, a Democrat, said, “We just had the most violent month in 28 years. Is now really the time to talk about defunding, whatever that is?”

Even activists differ on what defunding the police means. Some want to outright end or deeply cut police departments. Others say the term means redirecting a portion of police money to things such as social workers, education, and job programs, or moving functions to other departments.

Recent polling suggests Americans support changes in policing, but also broadly support police. In a mid-June poll by Pew Research Center, following the first of the protests after the George Floyd killing, about 42% of Black adults surveyed favored reductions in spending on policing in their areas, and 21% of white adults did.

Gallup polling released more recently found that 47% of all respondents and 70% of Black respondents supported shifting some police spending to social programs. Still, 67% overall and 61% of Black Americans wanted to see the police presence in their neighborhoods remain the same, and about one-fifth of both groups wanted to see it increase.

The polling showed 58% of Americans support major changes to policing, but just 15% support abolishing the police.

“What I know from being in city council and now as mayor is that people don’t necessarily take exception to the presence of police in their communities,” said Atlanta Mayor Keisha Lance Bottoms. “They take exception to bad police in their communities.”

Support from voters and politicians is a reason that local spending on police—now around $100 billion a year—has outpaced the overall growth of city and county budgets over roughly four decades, rising faster than K-12 education, sanitation and parks and recreation, according to a Wall Street Journal analysis of Census data compiled by the Urban Institute think tank. Between 1977 and 2017, local spending on policing rose 176%, versus a 137% rise in general expenses, accounting for inflation.

“In Atlanta when I look at our police budget, I see capital costs, I see salaries, I see pension costs, I see workers’ compensation,” said Ms. Bottoms, a Democrat. One of her first moves as mayor in 2018 was to increase police salaries.

She has also invested city resources in community programs and is pushing to overhaul use-of-force practices. In June, the Atlanta city council narrowly voted down police budget cuts called for by some activists.

“Re-imagining our police department is a conversation that I’m very much interested in having,” Ms. Bottoms said. “Eliminating the police department is a nonstarter of a conversation.”

Some defunding proponents acknowledge that police budgets can’t be quickly or easily dismantled. But they say it is the only way to end law-enforcement tactics they say disproportionately impact minority communities.

Reducing police funding “is going to be a process over time,” said Andrea Ritchie, a researcher at the Barnard Center for Research on Women. She has publicly advocated deep cuts in police spending, saying the money could be better spent addressing the root causes of violence.

Police budgets are set by elected officials at local and state levels, with spending often enshrined in multiyear labor contracts negotiated with unions, and with pension obligations that last for decades. Some police spending is obligated by court settlements over use of force.

Compensation makes up more than half of police department operating budgets, without counting benefit and pension costs, according to a Journal analysis of data from the Census Bureau and a Justice Department unit called the Bureau of Justice Statistics. Cities that pay below-market salaries risk losing officers to neighboring towns.

Agreements with police unions establish work conditions—typically pay, hours and benefits—in 71% of departments that serve a million or more people and in 53% of police departments serving 500,000 to a million people, according to a Bureau of Justice Statistics report from 2013, the most recent. Sometimes, union rules mandate the number of officers on a shift or assignment.

New York City’s spending on police department pensions has risen 94%, accounting for inflation, since 2005 to $2.8 billion in 2020, according to data collected by the Citizens Budget Commission, a watchdog group. The pension rise was steeper than any other major budget item relating to the police.

Police misconduct creates another set of spending obligations, as departments have faced persistent problems with the use of force. The 10 U.S. cities with the largest police departments paid out more than $1 billion in settlements and judgments from 2010 through 2014, an investigation by the Journal found. Justice Department probes have led to expensive changes such as adding body cameras and capping the numbers of officers per supervisor.

“All of this stuff is really hard to dislodge,” said Michael Leo Owens, an associate professor of political science at Emory University in Atlanta. “If you look at the reforms are mentioning, they’re not talking about serious money.”

Since the killing of Mr. Floyd on May 25, some local elected officials have been more receptive to shifting some police money or finding ways to raise spending on other services. They are pledging more for mental-health counselors in Austin, Texas, and social services in Los Angeles.

The remaining $439 million is from canceling a police-academy class and, especially, from a planned decrease in overtime. The Democratic mayor said this year’s lack of parades and sports will cut overtime needs. Budget projections show overtime bouncing back in future years.

In Los Angeles, city council members approved $150 million in cuts to the nearly $1.9 billion police budget. The city, which is already contractually obligated by an agreement last year to raise police salaries, expects to achieve the cuts by significantly reducing overtime and reducing the force through attrition, according to people familiar with the city’s affairs.

In Seattle, where protesters took over several blocks for three weeks in June, a spokeswoman for the mayor’s office said about half of the roughly $3 million police spending cut approved by the city council is to come from layoffs that must be bargained with the police union.

Facing a violent-crime rate three times the national average, Albuquerque’s city council in 2018 raised sales taxes, mostly to increase the police and fire budgets. The city also has had to increase spending on police equipment and cap the number of officers per supervisor because of a federal settlement of allegations of use of excessive force.

For the community safety department’s $10 million or so budget, Albuquerque expects to be able to shift about $1 million from the police department—about half of one percent of the police budget.

U.S. public support for police increased after mass shootings in 2016, including the Orlando, Fla., Pulse nightclub attack and the targeted killing of five Dallas police officers. A Gallup poll later that year showed Americans’ respect for local police at its highest levels since 1967. A Pew poll the same year found a majority of respondents thought the police presence in their communities was the right size; more than a third wanted to see more police, and only 8% wanted fewer.

Support dropped following Mr. Floyd’s killing and the nationwide protests. In the Pew poll in June, just 34% of respondents said police did a good or excellent job of treating racial and ethnic groups equally, down from 47% in a Pew poll conducted in 2016.

Also lower was the share who said police do a good or excellent job of using the right amount of force; 35% said so, compared with 45% in 2016.

The roots of today’s U.S. police budgets trace to a surge late last century in the rate of violent crime. It rose from lows in the 1960s to a peak in the early 1990s of about 758 violent crimes per 100,000 people, according to Federal Bureau of Investigation statistics. A Wall Street Journal/NBC Poll in the early ’90s found 93% of respondents regarded dealing with crime as an absolute priority.

Violent crimes fell by half from 1993 through 2018, to 369 per 100,000 Americans, according to FBI data. Arrest rates in the mid-2010s dropped to the lowest in decades.

Meanwhile, police mandates expanded. By 2016, more than 40% of departments serving 100,000 or more people had task forces on terrorism and cybercrimes. Police became the first government contact for people with troubles such as addiction, mental illness and homelessness. Officers increasingly were stationed in schools to protect and monitor students.

The officer facing murder charges for killing Rayshard Brooks in Atlanta wasn’t responding to a call about crime but about a man asleep in his car in a Wendy’s drive-through line.

“The job description has changed. It goes from just doing police work to states disinvesting in mental health, where now we have more and more crisis intervention,” said Calvin Williams, chief of Cleveland’s division of police.

Cleveland added body cameras and training aimed at reducing the use of force following a Justice Department investigation and a high-profile 2014 case in which a white officer shot and killed Tamir Rice, a Black 12-year-old boy who was carrying a plastic pellet gun. The city agreed to pay $6 million to the child’s family.

The cameras and the cost of paying other officers to fill in for those undergoing days of training were very expensive, said Cleveland’s Democratic mayor, Frank Jackson. “Racism is still here,” Mr. Jackson said. “And how do you keep it in check? Sometimes it costs money to do that.”

Some of what budget setters wrestle with can be seen in Santa Ana, Calif., population about 332,000, where the city council last year approved $25.6 million in salary and benefit increases for the police over three years, in a package negotiated with a police union.

Should the level of spending on police departments be changed? Join the conversation below.

Jose Solorio, a council member who voted for the increases, said he was concerned about crime. For every 100,000 people in 2018, Santa Ana logged 468 violent crimes, vs. the national average of 369.

“It was necessary to compete in hiring officers in a competitive environment,” Mr. Solorio said.

Santa Ana police officers are paid $88,692 to start, rising to $102,684 after 2.5 years, plus benefits. Sergeants and lieutenants earn more. Officers volunteered to delay a raise from the current level for six months to ease the pandemic’s effect on the budget.

Cecilia Iglesias was one of two council members who voted against the raises. “The additional money, the $25 million, that could have gone to a lot of services,” she said, such as programs for youth and seniors.

Ms. Iglesias lost her council seat in May. The Santa Ana Police Officers Association spent a total of about $300,000 seeking a recall election and then supporting her ouster after a recall vote was set, election filings show.

Association President Gerry Serrano said the union’s support for her recall wasn’t related to her vote. He said she “villainizes” those who work to provide public safety.

Ms. Iglesias said, “I support law enforcement and law and order.” She said it’s the police union she disagrees with.

Good Brad post, as dollar's value declines dollar reserves go up, as dollar goes down, foreign demand for Treasuries also goes up... not intuitive but from his charts very predictable

".... And one of the most regular patterns in the global economy is that dollar reserve holdings tend to go up when the dollar goes down.
…Many export-based economies with large external surpluses are willing to let their currency fall against the dollar, but they remain reluctant to let their currency appreciate against the dollar when the tide turns. And thus the bulk of the world’s accumulation of dollar reserves has tended to come when the market is pushing the dollar down not up...."

This is also a great chart of the supply of US safe assets versus relative demand (as a share of American GDP)

James C. Capretta, "Biden's Budget," Real Clear Policy, August 11, 2020, https://www.realclearpolicy.com/articles/2020/08/11/bidens_budget_501552.html

Biden's Budget

Joe Biden won the Democratic nomination by emphasizing his relative moderation, but he is preparing to govern as an activist. His campaign has outlined plans for nearly $8 trillion in new federal spending over the coming decade, and $3 trillion or more in new taxes. Think LBJ (or maybe Hubert Humphrey, if he had won in 1968), not Bill Clinton.

Earlier this year, Biden’s mission was to dispatch competitors from the activist wing of the party, most especially Senators Bernie Sanders and Elizabeth Warren. He did so by hammering the $30 trillion price tag of Medicare for All, the middle-class tax hikes it would necessitate, and the elimination of private insurance it would require. When his opponents offered unpersuasive rejoinders, Biden’s eventual victory was assured. A pivot to a more expansive platform was inevitable after the primaries to sharpen the contrast with President Trump. Two factors are pushing Biden to make new federal programs and spending an even more prominent focus in the general election.

First, the Sanders-Warren wing of the party is a force independent of its preferred candidates. It may not be able to decide primary contests, but it can influence voters in November by signaling enthusiasm or apathy for the party’s nominee. The Biden campaign wants to avoid intraparty sniping, and, toward that end, worked for months to produce a “unity” agenda with the Sanders camp. On health care and student loans, Biden embraced expensive ideas promoted by his former rival.

Second, the COVID-19 pandemic has dramatically altered the landscape. The economy has suffered a severe blow, and millions of Americans have lost their jobs and seen dramatic falls in their earned incomes. Many Democrats believe the rapidly shifting political environment has opened up new possibilities for expanding social welfare programs to address voters’ rising insecurity.

The dramatic widening of legislative possibilities is evident in the flurry of bills passed by Congress since February, with a combined ten-year cost of $3.7 trillion and another $1.5 to $2 trillion waiting in the wings. The Biden campaign, and Democrats generally, expect the current, spending-friendly environment to carry into 2021 no matter who is president.

The most expensive item on the emerging Biden agenda is health care, just as it was for President Obama a dozen years ago. Biden wants to increase Affordable Care Act (ACA) subsidies, boost enrollment in Medicaid, create a new public option for working-age Americans and their families, and, at Sanders’ urging, expand Medicare to persons age 60 to 64. All totaled, Cornerstone Macro (a financial research and advisory firm) expects these provisions to cost $2.0 trillion over a decade. New price controls on prescription drugs might provide $0.4 trillion in offsetting savings.

The next most expensive item — at $1.7 trillion — is for federally-financed infrastructure, green energy, and carbon reduction programs. There will be new subsidies for the auto industry, railroads, highways, city transit systems, electric vehicles, and much else. It is not the $10 trillion-plus program that some in the party have advocated, but it is a sizeable step in same direction.

The campaign has also released plans for: primary and secondary education ($0.8 trillion); student loan relief and higher education support ($0.8 trillion); manufacturing and industrial sector support ($0.8 trillion); housing subsidization ($0.6 trillion); paid leave for sicknesses and family reasons ($0.5 trillion); expanded Social Security benefits ($0.5 trillion); financial support for caregivers of children and the elderly ($0.5 trillion); and funding for the opioid crisis, narrowing economic disparities for minority populations, and much else.

To cover this new spending, Biden has specified $3 to $4 trillion in new taxes, almost all of which would fall on higher-income households. He would: push the corporate tax rate up from 21 to 28 percent; apply the combined employer-employee Social Security payroll tax rate of 12.4 percent to all earnings above $400,000 annually; increase the top income tax rate to 39.6 percent immediately, up from 37.0 percent today; tax capital gains as ordinary income; phase out passthrough business income deductions for households with total incomes over $400,000 annually; impose new taxes on pharmaceutical manufacturers, banks, and real estate companies; and impose many other smaller tax hike provisions.

Campaign plans can be both over and under-hyped. They are not dispositive of what will happen after the election. Some ideas pushed during a campaign are unworkable, or not of sufficient priority to put on the agenda in the early months of a presidency. But voters do expect winning candidates to be faithful to what was promised, at least in general terms.

If Biden were to win in November, it is certain that health care, education, green energy, manufacturing jobs, and tax hikes would be front and center on the congressional agenda, along with continued pandemic relief measures. And if the Democrats were to take control of the Senate, much of this agenda could be enacted through the budget reconciliation process, which allows budget-related items to pass with a simple majority instead of 60 votes. There is also talk among some Democrats of eliminating the legislative filibuster, which would open up even more possibilities.

Still, it is rare for presidents to get their entire agendas through Congress even when their parties are fully in control of it. So, if Biden were to win, some items wouldn’t make the cut. For instance, an expansion of Medicare to those age 60 and older may fail because of the program’s already substantial financial challenges.

The former vice president was a pragmatic dealmaker during his long Senate career, and that profile is still evident during the current campaign. But 2020 has upended American life, and the nation’s politics. All signals are that he is now prepared to champion the much-expanded federal role in American life that many in his party favor, even if that isn’t the mission he envisioned when he decided to run.

“…Biden wants to increase Affordable Care Act (ACA) subsidies, boost enrollment in Medicaid, create a new public option for working-age Americans and their families, and, at Sanders’ urging, expand Medicare to persons age 60 to 64. All totaled, Cornerstone Macro (a financial research and advisory firm) expects these provisions to cost $2.0 trillion over a decade. New price controls on prescription drugs might provide $0.4 trillion in offsetting savings. The next most expensive item — at $1.7 trillion — is for federally-financed infrastructure, green energy, and carbon reduction programs. There will be new subsidies for the auto industry, railroads, highways, city transit systems, electric vehicles, and much else. It is not the $10 trillion-plus program that some in the party have advocated, but it is a sizeable step in same direction. The campaign has also released plans for: primary and secondary education ($0.8 trillion); student loan relief and higher education support ($0.8 trillion); manufacturing and industrial sector support ($0.8 trillion); housing subsidization ($0.6 trillion); paid leave for sicknesses and family reasons ($0.5 trillion); expanded Social Security benefits ($0.5 trillion); financial support for caregivers of children and the elderly ($0.5 trillion); and funding for the opioid crisis, narrowing economic disparities for minority populations, and much else. To cover this new spending, Biden has specified $3 to $4 trillion in new taxes, almost all of which would fall on higher-income households. He would: push the corporate tax rate up from 21 to 28 percent; apply the combined employer-employee Social Security payroll tax rate of 12.4 percent to all earnings above $400,000 annually; increase the top income tax rate to 39.6 percent immediately, up from 37.0 percent today; tax capital gains as ordinary income; phase out passthrough business income deductions for households with total incomes over $400,000 annually; impose new taxes on pharmaceutical manufacturers, banks, and real estate companies; and impose many other smaller tax hike provisions….”

WSJ write up of Rose’s Urban research

Josh Zumbrun, Not Just the 1%: The Upper Middle Class Is Larger and Richer Than Ever,"Wall Street Journal, June 21, 2016, https://blogs.wsj.com/economics/2016/06/21/not-just-the-1-the-upper-middle-class-is-larger-and-richer-than-ever/

Not Just the 1%: The Upper Middle Class Is Larger and Richer Than Ever

A range of data after the recession and the housing bust supported the idea that only a tiny elite of U.S. society, generally seen as the top 1%, had rebounded and was doing well.

But a growing body of evidence suggests the economic expansion since the 2007-09 financial crisis has enriched a much larger swath of the upper middle class, and that a deeper income divide is developing between that top quarter or so of the population and everyone else.

The latest piece of evidence comes from economist Stephen Rose of the Urban Institute, who finds in Research that the upper middle class in the U.S. is larger and richer than it’s ever been. He finds the upper middle class has expanded from about 12% of the population in 1979 to a new record of nearly 30% as of 2014.

“Any discussion of inequality that is limited to the 1% misses a lot of the picture because it ignores the large inequality between the growing upper middle class and the middle and lower middle classes,” said Mr. Rose. The Urban Institute is a nonpartisan policy research group.

Using Census Bureau data available through 2014, he defines the upper middle class as any household earning $100,000 to $350,000 for a family of three: at least double the U.S. median household income and about five times the poverty level. At the same time, they are quite distinct from the richest households. Instead of inheritors of dynastic wealth or the chief executives of large companies, they are likely middle-managers or professionals in business, law or medicine with bachelors and especially advanced degrees.

Smaller households can earn somewhat less to be classified as upper middle-class; larger households need to earn somewhat more.

Mr. Rose adjusts these thresholds for inflation back to 1979 and finds the population earning this much money has never been so large. One could quibble with his exact thresholds or with the adjustment that he uses for inflation. But using different measures of inflation, or using higher income thresholds for the upper-middle class, produces the same result: substantial growth among this group since the 1970s.

Mr. Rose’s new paper is part of a broader body of research reappraising and seeking to measure the upper middle class. This reappraisal does not fit comfortably in the left or the right’s political narratives. While it underscores the growth of American economic inequality, it undermines the idea of lower- and upper-middle-class voters being in the same boat. It suggests that the majority of Americans have indeed struggled but that a large minority has thrived.

Research from Sean Reardon of Stanford University and Kendra Bischoff of Cornell University, for example, found in research published in March that the number of families living in affluent neighborhoods has more than doubled, to 16% of the population in 2012 from 7% in 1980. They define these neighborhoods as those where the median income is at least 50% higher than the rest of the city.

The Pew Research Center last month found that 203 metropolitan areas have seen their middle class shrink, but in 172 of those cities, the shrinkage was in part due to the growth in wealthier families. (In 160 of the cities, the share of lower-income families grew as well.) So Pew found the middle class shrinking from both ends—not just from families falling below the middle class, but also because of families rising out.

Richard Reeves, a senior fellow at the Brookings Institution, a centrist think tank, is writing a book called “Dream Hoarders” that looks at the way upper-middle-class families perpetuate their status across generations, in ways that can sometimes be harmful to middle- or lower-middle-class families. Mr. Reeves argues that many of the social anxieties and resentments against inequality are in fact driven by what he calls “the dangerous separation” between middle- and upper-middle-income families.

Take high housing costs or the soaring costs of higher education. The spread of $3,000-a-month apartments or a national average $32,000-a-year college tuition bill is not driven by heirs or CEOs renting dozens of apartments or sending dozens of children to college. It’s driven by millions of upper-middle-class families with enough income to foot those bills, Mr. Reeves said.

“It’s true the top 1% or top.1% have galloped away more quickly,” Mr. Reeves said, but ignoring the role of the upper middle class “gets in the way of an honest conversation about what’s happening with American inequality.”

Urban Institute looks at changes is income distribution in absolute not relative terms and finds the middle class hollowing out was driven by the rise of the upper middle class

“…This study found that the proportion of the population in the upper middle class went from 13 percent in 1979 to over 29 percent in 2014. The effect of this growth was magnified by the greater income differences between this group and the rest of the population. Although wealthier people always have a greater share of total income, this report documents a major shift in the distribution of economic resources. In 1979, the bottom three income groups controlled 70 percent of all incomes, and the upper middle class and rich controlled 30 percent. By 2014, this distribution shifted to 37 percent for the bottom three groups and 63 percent for the upper middle class and rich groups. The middle class alone saw its share of income decline from 46 percent in 1979 to 26 percent in 2014. Any discussion of inequality that is limited to the 1 percent misses a lot of the picture because it ignores the large inequality between the growing upper middle class and the middle and lower middle classes. This difference has a physical dimension in that most metropolitan areas differ greatly by the size and price of the homes in their neighborhoods and communities. We try to limit segregation by race or ethnicity, but segregation by income (which is growing) is accepted as a fact of life. By setting up an absolute standard of living as the defining characteristic of social classes, economic growth takes the form of people moving up from lower income groups to higher ones. As figure 1 shows, only people in the bottom five adjusted-income percentiles had lower real income in 2014 than in 1979. As incomes rise from the 7th to 99th percentile, real income growth progressively rises. So, the lower and “middle” middle class decline is because of more families qualifying for the upper middle class.As figure 3 shows, this movement would have been much larger if the 53 percent average income growth had been shared equally across the entire income distribution. Although this study found that median income grew 29 percent (only the bottom six percentiles had no real income gains), this gain excludes the growing benefits provided by employers and other sources of income. The CBO (2016) includes these factors (adjusts for family size and uses the PCE as the price deflator) and finds that median incomes grew 37 percent from 1979 to 2013 (the last year of their published data). Finally, ongoing research will focus on the demographic characteristics of the growth of the upper middle class and rich by family status, education, and race/ethnicity. The upper middle class and rich in 2014 were composed predominantly of people who were married or cohabiting (82 percent in 2014 and 86 percent in 1979), who had a bachelor’s or graduate degree (30 percent in 1979 and 59 percent in 2014), and who were non-Hispanic whites (79 percent in 2014 and 93 percent in 1979)….”

Stephen Rose, “The Growing Size And Incomes Of The Upper Middle Class,” Urban Institute, June 2016, https://www.urban.org/sites/default/files/publication/81581/2000819-The-Growing-Size-and-Incomes-of-the-Upper-Middle-Class.pdf

Cited In CBS Q&A“…A recentBrookings studyfinds the share of working- and middle-class families falling from about 80% of families in the late 1960s to 50% today, with the entire loss coming from families with rising incomes….”

In 1981 68% of the population was middle (50%) or upper middle (18%). In 2002 the same 68% of population was in the two groups but the middle middle -11% (39%) and upper middle was +11 (18% to 29%) in 2016 the share of the two ground was up to 69% of population with the middle-middle being 36% of population and upper middle 33% of population.

“..Figure 1 shows the rise in median family incomes from the first to last year (inflation- and sizeadjusted to reflect a family of three) over the two periods. The later period has higher income levels but much lower growth rates. Between 1967 and 1981, median family income rose by 27%, more than three times as much as the 8% growth experienced in the period between 2002 and 2016. It is interesting to note that in the last period, the steep recession of 2008 and slow recovery did not lead to declining real median incomes for prime-age adults. here is however a good deal of variation between individuals and families. While some will see a big jump in income, others may see a fall. Figure 2 shows the proportion of each cohort experiencing losses or gains in income. Three times as many people in the later 15-year period experienced a large loss, defined as a drop of more than 25%, compared to the earlier period (12% v. 4%). Overall, the share of people losing ground (a loss of income of at least 5%) doubled from 15% to 30% in the last period. Many fewer experienced a large gain (33% v. 53%)…Next, I show the size of the five income classes (as defined above) at the beginning and end of the two periods, i.e. 1967 and 1981; 2002 and 2016. As Figure 3 shows, the higher income classes expanded significantly during the first period. Between 1967 and 1981, the upper middle class tripled in size (from 6% to 18%) and the MMC grew by 3 percentage points (from 47% to 50%). Offsetting these gains were a corresponding shrinkage of the lower middle class (LMC) from 31% to 20% and the poor/near-poor (PNP) from 16% to 11%....The analyses presented here confirm the broadly accepted picture of rising income inequality and slowing income growth for middle-class Americans. But a few additional points are worth drawing out. First, while the benefits of economic growth have not accrued equally, they have not gone solely to the top 1%. The upper middle class has grown. Second, the main reason for the shrinking of the middle class (defined in absolute terms) is the increase in the number of people with higher incomes. Third, while there has been some narrowing of racial income gaps, and an improvement in the position of Black people in particular, they remain wide. Fourth, education matters more than ever in terms of securing a place in a high or even middle income bracket. Fifth, there has been a significant increase in the number of Americans experiencing downward mobility. Sixth, the growth of median incomes for working-age adults over a fifteen year period has declined sharply.The advantage of using longitudinal data is that it tracks the actual economic trajectory of individuals over time. It may therefore provide a better guide to how Americans, especially those in the middle class, experience their own economic position and progress. People are likely to use their own economic history as a benchmark for their progress, as well as an assessment of how well other people are doing. The big winners in recent decades have been those in the mainly college-educated upper middle class. Slower income growth for of the rest of the population, combined with a heightened risk of losing economic ground over time, may help explain the current discontent of many in the American middle class….”

New Brookings from Rose, following up on his previous research (attached) looks at the evolution of the middle class (in absolute terms) using longitudinal data to follow individual’ trajectories over time shows the primary driver of the “hollowing out” of the middle class has been the increase in the number of people with higher incomes. He does not that there has been “a significant increase in the number of Americans experiencing downward mobility” 30% which is 2x the rate of the previous period (that is an income lost of at least 5%) share of population that is poor or near poor went from 11% in 1981 to 13% in 2016. Note he does say due to immigration there are more Hispanic respondents which might account for that, though he doesn’t carve that out

“…Butthe real political legacy of the decade comes from the Civil Rights Act of 1964. It contained highly intrusive measures that were justified, in the minds of the American public, by the need to end Southern racial segregation—with its separate facilities, its inferior schools, its exclusion of Blacks from voting. The new law cut constitutional corners, constraining freedom of association, exposing criminal defendants to being retried for crimes of which they’d been acquitted, and drawing the federal government into the running of local elections.It opened the door to new kinds of lawsuits: The U.S. attorney general, for instance, could now file discrimination suits against local school districts. It imposed a degree of federal management on all institutions that received federal money. And it created a vast investigative infrastructure through the Equal Employment Opportunity Commission and various cabinet offices of civil rights….”

Christopher Caldwell, "The Democrats’ Refounding of America,"Wall Street Journal, August 13, 2020, https://www.wsj.com/articles/the-democrats-refounding-of-america-11597342320

"....That leaves the middle suburbs, with a large share of less educated and less prosperous white voters, as the battleground. These are places like Lake County, Ill.; Macomb County, Mich.; Beaver County, Pa.; and Racine County, Wis. After giving George W. Bush an edge of 2 points in 2000 and 6 in 2004, these areas turned for Barack Obama by 3 points in 2008 and shifted back to Mitt Romney by 2 in 2012. Mr. Trump prevailed in these working-class suburbs by an astonishing 13 points, propelling his narrow victories in Upper Midwest states that Republicans hadn’t carried since the 1980s.... As conservative rural and small-town voters shifted their allegiance toward Republicans and the suburbs became more important to the Democratic coalition, the party moved left on many issues.... Taken as a whole, the party’s agenda would substantially expand the size, scope and cost of the federal government. That will require higher taxes on corporations, wealthy Americans, investors and estates....."

William Galston, "Democrats Move Left, but the Center Holds,"Wall Street Journal, August 14, 2020, https://www.wsj.com/articles/democrats-move-left-but-the-center-holds-11597429469

Today’s Democratic Party is very different from the party that nominated Bill Clinton 28 years ago. It is more liberal and more ethnically and racially diverse than ever before, and more united on essentials than at any time in its recent history.

In 1994, Gallup reports, self-described moderates made up half the party, liberals and conservatives a quarter each. Today, liberals are half the party and moderates a bit more than one-third, conservatives only 14%. By contrast, conservatives already dominated the Republican Party in the 1990s—about 60% of its voters compared with a bit more than 70% today. The content of these ideological labels has changed over three decades. But Democrats’ center of gravity has shifted far more than the Republicans’. (Independents are 45% moderate, 30% conservative and 21% liberal, each within a few points of their 1994 share.)

A June 2020 report from the Pew Research Center details the party’s demographic shifts. It has become less white and more educated. In 1994, 23% of Democrats were nonwhite. Today 40% are, compared with 17% of Republicans. When it comes to education, the parties have switched places. In 1996, 22% of Democrats and 27% of Republicans had college degrees. The figures are now 41% and 29%, respectively. College-educated whites rose from 19% to 28% of Democrats, while whites without degrees fell from 58% to 30%. Non-college-educated whites now make up 57% of Republicans.

This shift has been especially pronounced among women. In 1994 nearly half of white women with college degrees identified as Republican, compared with only one-third today. White men have moved more slowly in this direction, from 59% to 51%.

Add religion to the mix, and Republicans look like the America of the 1990s while Democrats resemble projections for the 2050s. In 2008, the earliest year for which Pew has data, white Christian Democrats outnumbered religiously unaffiliated ones by 26 points. Today, unaffiliated Democrats outnumber white Christians by 12 points. By contrast, more than 6 in 10 Republicans are white Christians, and only 15% of Republicans are unaffiliated.

The level of religious polarization is the highest in the history of modern survey research. Republican identification has increased among white evangelical Protestants (from 61% in 1994 to 74%), among white Catholics (45% to 57%) and among Mormons (61% to 74%). Democratic identification among unaffiliated voters has risen, from 52% to 67%.

Then there’s geographic polarization. Urban voters have increasingly identified with Democrats and rural voters with Republicans, a trend that accelerated in 2016. Twenty percent of Mr. Clinton’s 1992 vote came from rural America, compared with only 9% of Hillary Clinton’s, according to Boston College political scientist David Hopkins.

The battleground is the suburbs—evenly divided in the early 1990s and now. The suburban share of the presidential vote has steadily increased, to an all-time high of 56% in 2016, Mr. Hopkins finds. A pronounced suburban shift toward one party would be a decisive change in the partisan balance that could reshape American politics for a generation. Democrats have become increasingly dependent on suburban voters, whose share of the Democratic presidential total has risen to 52% from 40% while the party’s urban vote share remained stable and its rural share collapsed.

These trends are even more pronounced in congressional elections. According to Mr. Hopkins, the share of Democratic House seats in predominantly suburban districts rose to 60% in 2018 from 41% in 1992, while the share in rural districts fell to 5% from 24%. The share of Democratic senators from predominantly suburban states rose to 79% from 55% while the share from rural states fell to 6% from 28%.

Suburbs are politically heterogeneous. Mr. Hopkins finds that Democrats have improved their presidential performance in the suburban counties surrounding the 20 largest metropolitan areas but not smaller ones. In a parallel analysis, George Washington University’s American Communities Project divides these places into three categories: urban suburbs, middle suburbs and exurbs. Democrats have long dominated the urban suburbs, with their ethnically diverse, highly educated and prosperous populations. Mrs. Clinton outpolled Mr. Trump in these areas by 19 points in 2016. At the other end are the exurbs, also highly educated and well-to-do but mostly white and adjacent to rural areas. Long dominated by Republicans, they gave Mr. Trump a 17-point margin.

That leaves the middle suburbs, with a large share of less educated and less prosperous white voters, as the battleground. These are places like Lake County, Ill.; Macomb County, Mich.; Beaver County, Pa.; and Racine County, Wis. After giving George W. Bush an edge of 2 points in 2000 and 6 in 2004, these areas turned for Barack Obama by 3 points in 2008 and shifted back to Mitt Romney by 2 in 2012. Mr. Trump prevailed in these working-class suburbs by an astonishing 13 points, propelling his narrow victories in Upper Midwest states that Republicans hadn’t carried since the 1980s.

Demography and geography have reshaped the Democratic Party’s ideology. As conservative rural and small-town voters shifted their allegiance toward Republicans and the suburbs became more important to the Democratic coalition, the party moved left on many issues.

Other forces contributed. Industrial labor unions, which were moderate on culture and foreign policy, have waned while more ethnically diverse, left-leaning public-employee and service-sector unions gained ground. The financial crisis of 2008-09 exacerbated doubts about the market-friendly orientation that dominated the party during the 1990s, as did rising inequality and corporate concentration. Occupy Wall Street in 2011 was a harbinger of the progressive coalition that Sen. Bernie Sanders, an independent who calls himself a democratic socialist, mobilized in his 2016 challenge to Mrs. Clinton. The surprise primary victory of another democratic socialist, Alexandria Ocasio-Cortez, over a Democratic House leader turned out to be the first of several such upsets in 2018 and this year.

As the 2020 primaries began, the left had reason to hope that this would be its year. Sens. Sanders and Elizabeth Warren got off to strong starts, and early primaries made Mr. Sanders a front-runner. If African-Americans—many of whom who are more moderate than white progressives—hadn’t united behind Mr. Biden in South Carolina, the Vermont senator probably would be the party’s nominee.

The Biden campaign understood the need to conciliate the left—something Mrs. Clinton failed to do in 2016. It set up six “Biden-Sanders unity task forces” to work out compromises on contested issues. Mr. Biden made speeches and put out briefing papers that were well to the left of positions he had endorsed during the primaries. He has sought to promote party unity without alienating either his moderate base or the suburban independents and moderate Republicans who held their noses and voted for Mr. Trump four years ago.

Mr. Biden’s challenge, in short, has been to keep his balance. Even with the left-wing insurgency, most Democrats are reformers, not revolutionaries. They want to improve capitalism, not establish socialism. They worry that social mobility has slowed and not all Americans have enjoyed the fruits of economic growth. They believe that corporate concentration has inhibited innovation and that financialization has distorted the economy. They think all Americans deserve shelter and medical care. They want to make society more inclusive. They are convinced that climate change is dangerous and human activity contributes to it. They believe that alliances and international institutions help advance American interests but pushing for regime change usually doesn’t. These views are contestable but hardly radical.

The 2020 Democratic platform is evidence that the center has held. Here’s a list of what it doesn’t endorse: Medicare for All, the Green New Deal, reparations for slavery, defunding the police, free college for all, cancellation of all student debt, open borders, abolishing Immigration and Customs Enforcement, a national ban on fracking, deep cuts in the defense budget, and the anti-Israel boycott, divestment and sanctions movement.

Instead, it calls for reforms to existing programs aimed at making affordable health insurance available to all, reducing carbon emissions with new technologies, improving police practices, equalizing opportunity across racial and ethnic lines, reducing the costs of college, making immigration enforcement more humane, and reducing the costs of defense procurement.

Still, the Democratic Party leans further left than it did in 1992. Taken as a whole, the party’s agenda would substantially expand the size, scope and cost of the federal government. That will require higher taxes on corporations, wealthy Americans, investors and estates. Other positions put the party at odds with Republicans in ways that are longstanding and familiar. Today’s Democrats aren’t supply-siders, but they haven’t been since Lyndon B. Johnson’s administration. They continue to believe vigorous regulation is compatible with economic growth and innovation.

Democrats are more focused than ever on equality for women, racial and ethnic minorities, disabled Americans and the full range of gender identities. They are more united on social and cultural issues than on their prescriptions for the economy. Their unity presages intensified conflict with social conservatives, with no end in sight.

Although a Biden foreign policy would break sharply with Mr. Trump’s, it would do so mostly by restoring the status quo ante. Democrats want to rejoin the Paris climate accords, the World Health Organization, and the Iran nuclear deal. They seek to strengthen alliances in Europe and Asia and don’t think relations with nations like Germany and South Korea should be held hostage to disagreements about funding for alliances and military bases. They’re wary of China but don’t want a new cold war. Although the party has a vocal anti-Israel faction, the 2020 platform continues to describe Israel as a “Jewish and democratic state,” and it reiterates the longstanding Democratic commitment to a two-state Mideast solution, “a strong, secure, and democratic Israel,” the Jewish state’s “qualitative military edge” and its “right to defend itself.”

By nominating Joe Biden and endorsing this platform, the Democratic Party has reaffirmed its identity as a center-left party of reform. The Trump campaign will do its best to blur the line between reformist policies and radicalism. The voters will decide which characterization of the Democrats’ agenda is credible.

Good factoid Rogoff estimates that real estate and related industries have contributed roughly 29% of China's GDP and estimate the impact of slowdown in the sector on GDP

Ken Rogoff and Yuanchen Yang, "Peak China Housing," National Bureau Of Economic Research, August 2020, https://www.nber.org/papers/w27697

“…we provide a quantitative characterization of the upstream and downstream contribution to GDP of China’s real estate sector by exploiting newer input-output tables. Our updated measure, based on cross-industry correlations derived from China’s most recent input-output matrix, and taking into account higher-order effects (in addition to first-order) is 29%, even higher than in earlier studies..... Applying a similar method, we can estimate the dependence on real estate sector of other major economies in the world (Figure 24). China is even more dependent on housing construction than Ireland and Spain just prior to the financial crisis, and far more dependent than the United States….We present new and significantly updated data to suggest the real estate sector has an outsized footprint on China’s economy, and that broadly construed (using an input-output table and taking into account higher-order effects) constitutes 29% of China’s economy, even higher than previous estimates. (Taking into account the external sector lowers the estimate to 24%.) Moreover, demand supply factors have tilted significantly in recent years, suggesting the possibility of significant downward pressures, especially due to slowing trend growth. Based on input-output and scenario analyses, we find that 20% fall in the housing sector and related activities (if one did occur), could lead to a roughly 5-10% decline in the level of output….”

"....Using new narrative measures of exogenous variation in marginal tax rates associated with postwar tax reforms in the US,this study estimates short run tax elasticities of reported income of around 1.2 based on time series from 1946 to 2012. Elasticities are larger in the top 1% of the income distribution but are also positive and statistically significant for other income groups. Previous time series studies of tax returns data have found little evidence for income responses to taxes outside the top of the income distribution. The different results in this study arise because of additional efforts to account for dynamics, expectations and especially the endogeneity of tax policy decisions. Marginal rate cuts lead to increases in real GDP and declines in unemployment. This study also presents evidence that the responses are to marginal tax rates rather than average tax rates.Counterfactual tax cuts targeting the top 1% alone have short-run positive effects on economic activity and incomes outside of the top 1%, but increase inequality in pre-tax incomes.... Moving outside of the top 1% or 5%, the elasticities drop off sharply and are generally insignificant. Based on the results in Table 2, the evidence for a sizeable response outside the top 1% or in the aggregate appears weak or nonexistent.The relatively large short run elasticities for the top 1% also do not contradict more modest long run responses.....Cuts for taxpayers outside of the top 1% also lead to increases in incomes and economic activity, but with a longer delay…..”

Karel Mertens and Jose Montiel Olea, "Marginal Tax Rates And Income: New Time Series Evidence," National Bureau Of Economic Research, June 2013 Revised September 2017, https://academic.oup.com/qje/article-abstract/133/4/1803/4880451

Reviewed the first of the two of the paper's David Rivera sent, looks at relationship btw marginal tax rates and elasticities by incomes (this is pre-TCJA) paper finds that top 1% incomes show strongest short run response to tax rates, but also finds statistically significant drop off @ cutoff of top 5% income; they do find that lower income earners also see an increase in income but with a time lag:“…The regression results indicate thatincomes in the top 1% of the income distribution display the strongest short run response to tax rates, which is consistent with the notion that high income tax payers display more avoidance behavior. However, contrary to prior time series studies of tax return data, wealso find statistically significant elasticities for lower income groups and narrower wage income measures. Moreover, marginal rate cuts lead to increases in real GDP and declines in the unemployment rate that are broadly consistent with existing macro results. Simple calculations suggest aggregate hours elasticities of 0.37 on the intensive margin and 0.41 on the extensive margin…”