Go vote. Think first.

In thirty three days, we will collectively make a momentous decision.

There are two major party candidates and two third party candidates. Ardent as their supporters may be, let us posit that neither of the third party candidates will prevail.

That leaves us two candidates, one on the left, one on the right, both less than perfect. Which way do we tack? Continue on to port, or heave to starboard? It will depend on what the majority of American voters think is most important, and how they assess the ability of each candidate to improve their lives.

Let’s take a broad look at a few topics of concern without prescribing solutions or ascribing relative advantage to either candidate.

1.       Globalization and trade

Globalization has caused wrenching changes in all Western economies, not the least here at home. First, manufacturing jobs moved from New England to the South, then to Mexico, and Asia, and India, constantly searching out lower costs of production. The result was directly observed as job losses. It made criticism of trade agreements, such as NAFTA, easy and popular.

But here is the rub. While certain manufacturing jobs, largely low skill, were lost, the cost of purchasing goods was lowered. The American consumer was able to purchase far more with her dollar. Clothing, dishwares, appliances, bedding, furniture – all could be had at Walmart or Costco or Sears at much lower prices.

The loss of low-skill manufacturing jobs is directly experienced and widely observed. But the benefits accrued from international trade, while enormous, are diffuse and not obviously seen. That a family can purchase new school clothes at a significant saving is not seen nor deemed noteworthy. But when multiplied by 100 million households, this one minor example could rack up billions of dollars in savings. Now multiply this by many other examples of savings gleaned from various daily purchases.

American households, given numerous billions of dollars, will now allocate that money in other ways. Savings. Restaurant meals. Vacations. House renovations. All of which generate additional economic activity and new jobs.

Directly observable costs and diffuse benefits – something to be careful of when arguing positions.

2.       Middle class wage stagnation

Globalization, cheered above, has also contributed to middle class wage stagnation. A displaced manufacturing worker who ends up serving french fries is not advancing up the wage scale. It is an absolute requirement that trade deals include benefits and re-training of displaced workers so that they become qualified for higher skill jobs.

But another more pernicious effect is the lack of economic growth. Growth is the engine that creates jobs, increases demand and competition for workers, and drives higher wages. The past eight years since the financial meltdown have achieved very disappointing growth. The President’s administration projected growth in 2010 for the following five years at 3.9%. GDP actually grew by only 2.2% a year during that time. (Wall Street Journal, 10/4/2016, “Judging President Obama on His Own Terms).

In 2013, the administration reduced their four-year growth projection to 3.3%. The actual growth rate stubbornly remained low at 2.3% during that period. While these differences may seem insignificant, consider this: “Compounding growth at 3.6% annually means a 28% larger economy after seven years. Compounding at only 2.1% means 15.7% growth. If the administration’s growth projections were accurate, the GDP would be about $1.8 trillion larger. That’s roughly $6,000 for every man, woman and child in the U.S.”

What would a family of four do with their additional $24,000? First and foremost, it would move them more solidly into the middle class. And, as mentioned above, they would spend it. Savings. Restaurant meals. Vacations. House renovations. All of which generate additional economic activity and more new jobs.

What is standing in the way of higher economic growth? Why have the administration’s projections gone afoul, stranding innumerable erstwhile wage earners in the doldrums?

Many economists, such as John Cochrane of the Hoover Institute at Stanford University, believe it is in great part due to the growth of the bureaucratic state. Cochrane characterizes overly burdensome business regulation as “sand in the gears” of our economy.

At recent count, there are 81,611 pages in the Code of Federal Regulations costing $2.028 trillion per year in compliance costs. (That’s about $25 million per page). Can we intelligently reduce this burden, so that smog doesn’t return to Los Angles and Lake Erie remains swimmable and banks remain solvent?

One would certainly hope so. It is our choice of president and legislators which will determine our course.

Good luck, dear voter. Think deeply.

Math is the Path to the Middle Class

It was great news for Rhode Island recently. General Dynamics Electric Boat has been awarded a $17.6 billion contract to build ten Virginia-class attack submarines and the Quonset Point facility will be adding 450 jobs. Some commuting workers from Massachusetts may benefit as well.

This is consistent with President Obama’s pledge to build the economy from “the middle out.” The wages from these jobs would inject an additional $30 million into the local economy with beneficial ripple effects (the “multiplier”) boosting barbers and bakers and candlestick makers.

But not so fast. Once of the most common positions on the Electric Boat website is a “QP Inside Machinist.” This job is described as follows:

“Set up, program editing and operation of CNC milling and turning centers. Verifying part configuration to plan requirements using various high tolerance precision measuring tools; must be able to work independently and with minimum supervision.”

From the list of qualifying requirements, this one stands out: Strong mathematical skills in geometry & trigonometry preferred.

Oops. How skilled are our recent high school grades in math? Are they ready for the rigors of the workplace? Or, rather, have they succumbed to our cultural aversion to math?

In Hollywood, only geeks and geniuses (e.g., Matt Damon in “Good Will Hunting”) are good at math. The cool kids steer clear. It’s too hard. It’s not cool. It’s the butt of jokes.

But as can be seen, math may be a qualifying requirement for a well-paying middle class job. And as our information-based economy continues to unfold, this will be increasingly true.

Long gone are the days when one can make a good wage based on the sweat of one’s brow. Lifting 50 pound bags of flour is now relegated to pallet jacks, with a single operator displacing dozens of Italian immigrant mothers who had previously been paid to stack tons of goods. We hate technology, but each of us with a smart phone is embracing it. The workplace has changed.

But have our cultural and educational systems changed apace? Has mathematical literacy, numeracy, become increasingly desirable and culturally acceptable? Alas, it has not.

It is shockingly apparent that we have not prepared our kids for the new workplace. They believe math is hard, uncool, geeky, and hence, avoid it. But if the alternative is a minimum wage job as a barista, are we serving them well?

A plethora of studies have shown that high school math skills are correlated to higher earnings later in life. And not just earnings, math ability also eases our way through the increasingly complex thicket of everyday life. A 2013 study done by researchers at Princeton University found that in the financial meltdown of 2008, poor basic math skills correlated strongly with mortgage defaults. Controlling for all other factors (age, ethnicity, education, household income), the researchers studied hundreds of subprime mortgages across New England. Their findings were surprising in that it wasn’t specifically the choice of mortgage contract that led to default, but rather other life behaviors indicating poor overall financial decision making.

How to motivate kids to learn math and teach them more effectively?

One whimsical thought is that if only the media, Hollywood, and sports idols could embrace this cause, things might be different. We have shifted culturally against smoking tobacco and in favor of gay rights, why not a campaign to make math acceptable? It’s too easy to laugh at math geeks, as witnessed by “The Big Bang Theory” whose innumerate character played by Kaley Cuoco wins our affection.

A more serious route being debated by educators is to teach math in context. For instance, high schoolers should be taught basic financial skills and, in the process, exponents and logarithms. That is how interest calculations and amortization tables are made, why not learn how in context and not as part of an abstract course in algebra? This could be amplified by having chemistry and biology teachers, for instance, explaining the math required to understand their subject matters.

After all, math was not invented as an abstract topic. Fractions were an outgrowth of commerce, where early merchants needed to portion out fractional bushels of grain or wheels of cheese. Multiplying 2/3 times 4 was a practical exercise, not something dreamed up to torture a fourth grader.  Likewise, geometry and trigonometry were developed from the building trades and nautical navigation, not as an abstract brain teaser for high schoolers.

This won’t be solved anytime soon, but we must make numeracy a top goal. Those well-paying jobs at Electric Boat are awaiting.

Corporations that we love to hate

Amadeo Giannini, founder, Bank of America

In 1904, Amadeo Giannini founded the Bank of Italy in San Francisco, California.   At the time, banks catered to the wealthy and couldn’t be bothered with the paltry deposits nor minuscule loans of Italian immigrants.  His bank grew quickly, with deposits totaling $18 million by the end of the first year of operation (2010 dollars).  Giannini’s bank, due to good fortune and arduous effort, survived the San Francisco earthquake of 1906.  He was able to reopen immediately after the quake, whereas other banks were closed for weeks.  His was the only source of loans to individuals and businesses trying to rebuild, and the bank flourished.

Over 100 years later, the Bank of America, directly descended from Giannini’s immigrant-friendly depository, has become the corporation that we love to hate.  In November, Occupy San Francisco protestors stormed a Bank of America branch, pounded on desks, defaced walls, and shouted their message, “make banks pay!”  The Federal Housing Finance Agency sued BoA in September, and the Massachusetts Attorney General joined the fray in December.

The Bank of America is, apparently, greedy, corrupt, evil, and yields no benefit to society.  Let’s put them out of business!

Or, perhaps, sit back first and ponder a few facts.

In 2010 (last year available), BoA employed nearly 300,000 workers to whom they paid over $35 billion in wages, health insurance, Social Security, and Medicare taxes. Those employees all paid federal and state income taxes amounting to billions of dollars on those earnings.  And BoA pays billions more in local property taxes for its thousands of properties across the nation.

The greedy shareholders of the bank are looking only for profit; the more, the better.  Who are these gluttonous capitalists?  One example is the teachers, fireman, police, and state workers of California, where CALPERS owns nearly half a billion dollars in BoA stock and fervently hopes that the investment grows.  Otherwise, pension benefits, and retirements, will be endangered.

All of this is not intended to make you want to remain with BoA if you are an unhappy customer.  But the answer is not new government regulations and politically inspired litigation.  The answer is to exercise some personal initiative. 

If you are unhappy with your bank’s fees, try one of these:

•       Consolidate and build your accounts in order to attain the amount needed for free checking.
•       Pay off your credit card balance in full each month.
•       Don't overdraw your account or make a late payment.
•       Find a local bank or credit union and move your accounts.  They will welcome you.
•       Start your own bank.

While that last one may seem whimsical, it is not.  All you need is to sign up shareholders to kick in $4-$10 million (usually 500-1,000 like-minded investors).  Then, incorporate and make a charter application to your state or the federal government.  (Yes, you must become a nasty, corporate capitalist, by law, in order to form a bank).

Once your charter is approved (typically 180 days or more), you are in business and can begin hiring employees, accepting deposits, and making loans.  Remember that the goal of the business is to make a profit and repay the investors.  In addition, as you build your deposits, you may make more loans to worthy individuals and businesses.  If any of those loans are not repaid, you must still ensure that your depositors’ funds are safe and can be refunded on demand, and also retain the faith of your investors.

So while you may sympathize with the Occupy crew, perhaps a whiff of reality will help you see a broader picture.  Corporations in general, and banks in particular, are simply associations of  like-minded people who strive to provide services and earn a profit in return.  In the process of doing so, they create a multitude of jobs and pay a staggering burden of wages and taxes to various jurisdictions.  That can’t be all bad.