Here's the Best News We've Gotten All Year

No joke. This may be boring as hell, but it really and truly is great news:

Federal Reserve officials strongly signaled they will toughen big-bank capital requirements even more than they have since the 2008 crisis, a move that will add to the pressure on the largest U.S. banks to consider shrinking. Fed governors Daniel Tarullo and Jerome Powell, in separate public comments on Thursday, said the Fed would require eight of the largest U.S. banks to maintain more equity to pass the central bank’s annual “stress tests.”

“Effectively, this will be a significant increase in capital,” Mr. Tarullo said on Bloomberg television....Mr. Powell said at a banking conference that the Fed’s move would make big banks “fully internalize the risk” they pose to the economy.

“I have not reached any conclusion that a particular bank needs to be broken up or anything like that,” he said. The point is to “raise capital requirements to the point at which it becomes a question that banks have to ask themselves.”

Bernie Sanders has campaigned heavily on the idea of breaking up big banks. But that shouldn't be our goal. Our goal should be to make banks safer and to reduce the likelihood that they need to be bailed out in the future. That's what higher capital requirements do: they force banks to carry a bigger buffer against losses, which makes them less likely to fail in any future downturn.

As it happens, new regulations put in place since the financial meltdown of 2008 have already increased capital requirements, but big banks still have an unfair advantage in the market: their funding costs are lower because investors figure they'll be bailed out if they ever implode in the future. To make up for this, big banks should, as Tarullo said, "fully internalize the risk" they pose to the economy. In other words, if big banks have an automatic advantage simply because taxpayers have little choice but to rescue them in case they fail, they should be required to pay higher insurance premiums against failure. That's essentially what higher capital requirements do.

This is fair. However, higher capital requirements also make big banks less profitable, which in turn gives them a strong incentive to downsize all on their own. And that's how it should be. There's no reason for the Fed or anyone else to pick and choose banks to break up. We just need to make sure they're reasonably safe and are operating on a level playing field. If we do this, we're providing an organic incentive to downsize. The banks themselves get to decide whether and how to do it.

The only bad news here is that the Fed is unlikely to raise capital requirements enough to suit me. Nonetheless, this is very much another step in the right direction.

Dave Weigel says that conservatives weren't impressed with President Obama's speech yesterday:

I was actually sort of surprised by the lack of conservative reaction to Obama's speech. I guess they must be keeping their outrage to themselves—which is a bit odd, since Obama's speech was about the most partisan attack on Republicans I've ever heard him give outside a campaign. Here's a taste:

I'm going to start with the story that...most Republican candidates up and down the ticket are telling....America’s working class, America's middle class — families like yours — have been victimized by a big, bloated federal government run by a bunch of left-wing elitists like me. And the government is taking your hard-earned tax dollars and it's giving them to freeloaders and welfare cheats. And we're strangling business with endless regulations. And this federal government is letting immigrants and foreigners steal whatever jobs Obamacare hasn’t killed yet. (Laughter.)

....I haven’t turned on Fox News or listened to conservative talk radio yet today, but I’ve turned them on enough over these past seven and a half years to know I’m not exaggerating in terms of their story....But it’s not supported by the facts. But they say it anyway. Now, why is that? It’s because it has worked to get them votes, at least at the congressional level.

Because — and here, look, I’m just being blunt with you — by telling hardworking, middle-class families that the reason they’re getting squeezed is because of some moochers at the bottom of the income ladder, because of minorities, or because of immigrants, or because of public employees, or because of feminists — (laughter) — because of poor folks who aren’t willing to work, they’ve been able to promote policies that protect powerful special interests and those who are at the very top of the economic pyramid. That’s just the truth. (Applause.)

I hope you don’t mind me being blunt about this, but I’ve been listening to this stuff for a while now. (Laughter.) And I’m concerned when I watch the direction of our politics. I mean, we have been hearing this story for decades. Tales about welfare queens, talking about takers, talking about the “47 percent.” It’s the story that is broadcast every day on some cable news stations, on right-wing radio, it’s pumped into cars, and bars, and VFW halls all across America, and right here in Elkhart.

There's more, and it's mostly a sustained attack on conservative misinformation about the economy and Obama's policies. It's also a sustained attack on Donald Trump, even though Trump's name is never mentioned. After seven years of holding his tongue, it's pretty obvious that Obama is eager for the Democratic primary to finish up so he can get out on the campaign trail and tell us what he really thinks of the Republican Party these days.

And if you're interested in policy, here's what Obama had to offer:

  • Raise the minimum wage
  • Increase unionization
  • More early childhood education
  • Free community college
  • Build more infrastructure
  • Expand Social Security
  • Pass TPP
  • Strengthen Wall Street regulations

That all sounds very Hillary-esque, doesn't it?

As you know, several former students at Trump University have claimed that the whole operation was a fraud. Trump's response has been simple: these are just a few malcontents. Most of Trump U's students were delighted with the education they got.

Well, funny thing about that. The recently unsealed documents in the class-action suit against Trump U included the names of a bunch of those delighted students. So Brandy Zadrozny of the Daily Beast decided to give them a call. She managed to contact five of them:

“Trump University is some [of] the best money I ever invested,” wrote Ryan Maddings in one of the evaluations for a 3-day Trump University retreat....“It was a lie,” said Maddings, an ex-marine now 32, who told The Daily Beast that he racked up around $45,000 in credit card debt to buy Trump University seminars and products.

....Julie Lord, 51, of New Port Richey, Florida...said she dropped around $80,000 on Trump University seminars, mentorships, and products, but felt like more of “a target” than a student.

...Despite her current claim that she “got burned by Trump U,” in her written evaluation, Lord rated every aspect of the 2008 seminar as “excellent,” adding several plus signs to the maximum 5 rating. “I am so sorry that I did that,” Lord told The Daily Beast after hearing that her positive review is being used as evidence by Trump’s defense. “But they actually coached you.”

The most positive responses Zadrozny managed to get were from one guy who said Trump U was "fine"—though he says he could have learned the same stuff online for free—and another who said she was happy but had never managed to put her Trump U education to any use. What these two have in common is that they managed to avoid the hard sell and ended up spending only a few thousand dollars on Trump U seminars. The folks who got pressured into signing up for the full con, however, seem to pretty routinely feel they were burned. If these are the folks that Trump plans to trot out as defenders of his scam university, he better think twice.

The Department of Labor announced today that the 4-week moving average of initial unemployment claims was 276,000 in May. "This marks 65 consecutive weeks of initial claims below 300,000, the longest streak since 1973."

Not bad—especially when you consider that the population of the country has increased by 50 percent since then. In fact, we missed a milestone earlier this year: adjusted for population, the number of initial unemployment claims since the beginning of 2016 has been the lowest in half a century. The economy still isn't quite firing on all cylinders, but this is yet another sign that it's doing pretty well.

On Wednesday President Obama joined the retirement crisis bandwagon:

A lot of Americans don’t have retirement savings. Even if they’ve got an account set up, they just don’t have enough money at the end of the month to save as much as they’d like because they’re just barely paying the bills. Fewer and fewer people have pensions they can really count on, which is why Social Security is more important than ever.

We can’t afford to weaken Social Security. We should be strengthening Social Security. And not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous, and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned.

I concur in part and dissent in part. First the dissent: it's not true that "fewer and fewer" people have pensions they can count on. There has been a change in the number of old-style pensions ("defined-benefit plans") vs. 401(k)-style pensions ("defined-contribution plans"), but the overall share of workers covered has stayed pretty steady:

The total share of workers in pension plans of one kind or another was 45 percent in 1979 and 45 percent in 2011. There's been virtually no change over the past 30 years.

But wait! Those old-style pensions were more generous. Surely that's what Obama meant by pensions that people "can really count on"? Not so much, it turns out. The Center for Retirement Research at Boston College has been warning about the retirement crisis for some time, but recently they re-analyzed pension data based on new NIPA data that allows a more accurate look at pension accruals. Here's their updated chart:

The total pension wealth of the American public has barely budged even as the source of pension wealth has changed dramatically. It was about 13 percent of total wages in 1984 and 14 percent in 2012. CRR's conclusion from this new data is that "the accumulation of retirement assets has not declined as a result of the shift from defined benefit to defined contribution plans." As they cheerfully admit, "We are going to have to change our story!"

Now it's true, in theory, that old-style pensions were safer than 401(k) plans, which bob up and down with the stock market. But this difference is often overstated. For one thing, 401(k) plans generally show fairly steady growth over any time frame more than three or four years. Even the Great Recession only weakened them from 2009-12, and they've recovered very nicely since then. For another, all those old pension funds were invested in stocks and bonds as well, and if the market goes south, they go south as well. The most recent example of this is the Teamsters’ Central States Pension Fund.

That said, I concur in part with President Obama. Probably the biggest problem with 401(k)-style plans is that they tend to benefit high earners more than old-style pensions did. The difference isn't enormous—though we can't say for sure since distributional detail isn't available for past decades—but it's probably true that 401(k)s are somewhat less generous to low earners than older defined-benefit plans were. This is not a fatal defect, however, and it's one that's being addressed fairly successfully already. Another problem with 401(k) plans is high fees, and that's also a problem that's being addressed—though for my money it could stand to be addressed with considerably more vigor.

Here's what all this adds up to: the best way to address retirement security is to continue reforming 401(k) plans and to expand Social Security—but only for low-income workers. Middle-class workers are generally doing reasonably well, and certainly as well as they did in the past. We don't need a massive and expensive expansion of Social Security for everyone, but we do need to make Social Security more generous for the bottom quarter or so of the population that's doing poorly in both relative and absolute terms. This is something that every liberal ought to support, and hopefully this is the bandwagon that President Obama in now on.

The Wall Street Journal passes along good news today:

Fed’s Beige Book: ‘Tight Labor Markets’ Are Pushing Up Wages

Tight labor markets are good. But how tight are they, really? The full Fed report is here. Here's the super-abridged version of the twelve regional reports:

  • Boston: Labor demand was robust.
  • New York: The labor market has continued to tighten.
  • St. Louis: Wage growth was strong.
  • Philadelphia: Wage pressure was modest.
  • Richmond: Labor demand rose moderately.
  • Atlanta: Wage pressure was modest.
  • Chicago: Wage pressure picked up some.
  • Minneapolis: Wage pressure was moderate.
  • San Francisco: Wage inflation picked up somewhat.
  • Kansas City: Wages grew slightly.
  • Dallas: Wage pressures were minimal.
  • Cleveland: Payrolls were little changed on balance.

I score it like this: Three districts reported strong labor demand; six reported modest tightening; and three reported minimal change. There's some good news here and there, and overall growth seems to be decent, but that's about it. There's certainly not the slightest suggestion that labor markets are truly tight, or in any danger of overheating. Nor is inflation is danger of overheating: it's still piddling along at well under the target range of 2 percent. As former Fed governor Narayana Kocherlakota says, there's simply nothing either here or in the official inflation figures to suggest that the Fed should do anything to put the brakes on the economy right now.

Go Ahead. Have a Potato Chip.

The FDA wants the food industry to cut down on sodium. Julia Belluz reports:

Public health groups have been sounding the alarm for years about how the food industry's liberal use of sodium is harmful to our health....As it stands, the average American consumes about 3,400 mg of sodium per day. Health officials recommend that people aim to eat no more than 2,300 mg per day.

....The new guidelines, which are still in draft form, set targets for the gradual lowering of salt in a range of products including both processed and restaurant foods over the short term (two years) and long term (10 years).

I don't have anything against cutting back on salt. It's always struck me as sort of a vicious circle: we put more salt in our food; we get accustomed to the higher sodium level; so we put even more salt in our food. What's the point?

But that's just a personal opinion. When it comes to the actual health risks of salt, that 2300 mg recommendation is almost certainly bogus. Here's master debunker Aaron Carroll on a recent study of sodium intake in the New England Journal of Medicine:

Americans consume, on average, 3.4 grams of sodium per day....This is on the low end of the “safe zone” of 3-6 grams in the study. The United States Food and Drug Administration thinks that’s not low enough. It recommends 2.3 grams per day.

Why? There’s surprisingly little rationale for this belief. Last year, experts convened by the Institute of Medicine assessed the evidence concerning sodium intake around the world. They agreed that efforts to reduce excessive sodium were warranted. But they cautioned that no such evidence existed to recommend a very low salt diet....What [the NEJM study] found was worrisome. When compared with those who consumed 3-6 grams per day, people who consumed less than 3 grams of sodium per day had an even higher risk of death or cardiovascular incidents than those who consumed more than 7 grams per day.

This result would be shocking if we in the medical community hadn’t seen it before. But we have. In 2011, researchers published a study in the Journal of the American Medical Association after following 3,681 people over almost a decade. They, too, found that excessive salt intake was associated with high blood pressure. They also found that a low-sodium diet was associated with higher mortality from cardiovascular causes.

The inevitable chart is below. The lesson here is simple: As with everything else, you shouldn't overdo the salt. And if you have a specific medical condition that requires low sodium, then listen to your doctor. Beyond that, though, the chances are that your sodium intake is fine. As near as I can tell, our nutritional establishment remains hellbent on hectoring us about our diets based on a combination of weak evidence and folk wisdom from Satchel Paige. Then they wonder why no one pays attention to them. It's a puzzler, all right.

Jared Bernstein takes on one of my favorite hobbyhorses today: the supposed anger of the American electorate. He concludes that, yes, the economy is in pretty decent shape, but:

For every statistic you can find, I can find one that tells if not a different story, a more nuanced one. Yes, the jobless rate is 5 percent, but the underemployment rate, juiced by 6 million part-timers who want full-time jobs, is a considerably less comfortable 9.7 percent. No question, wages are rising, but the major source of real income growth over the past year has been low inflation. Paychecks aren’t growing so fast as much as prices have been growing a lot more slowly.

....So I think I get why some people are unsatisfied with the economy and beyond. Growth hasn’t reached all corners by a long shot, and policymakers have too often been at best unresponsive to that reality and at worst, just plain awful.

I think this misses the point. Sure, no economy is perfect, certainly not this one. So of course you can always find plenty of things to kvetch about.

But why bother when you can just ask people directly how they're doing? If you do that, you'll find that their responses are fairly positive: better than in 2009, worse than in 1999. But overall, pretty unremarkable. No matter how many economic statistics you haul out, the bottom line remains the same: on average, Americans don't say they're any more or less happy about the economy than they usually are. So unless they're lying, the economy just isn't a big factor in the anger driving this year's election.

So why are voters so angry? That's a good question, except for one thing: it assumes that voters are angry in the first place. It's true that if you go out and talk to people, you can find plenty of angry folks. That's always the case, but it's completely meaningless. The only interesting question is: Are Americans angrier than usual? It sure doesn't look like it, does it?

You can take a look at every poll you want, and what you'll find is that, generally speaking, Americans just aren't unusually unhappy or unusually angry right now. They just aren't. There's virtually no serious data to suggest otherwise.

Except for one thing: Americans are pissed at the government. Especially Republicans. Among Democrats, trust in government since 1980 has bounced around a bit depending on who's president, but it's generally in the range of 20-40 percent. Among Republicans it's more like a range of 10-60 percent:

Right now, trust in government is around 30 percent among Democrats, which is pretty average. But among Republicans it's at a blood-boiling 10 percent—and has been for the past eight years. Obama's presidency—presumably egged on by Fox News etc.—has sent them into an absolute rage about the government.

So if you want to know what's going on, that's it. In general, the economy is OK. Americans are fairly satisfied with their lives. Consumer sentiment is fine. Right track/wrong track has been pretty steady. Only one thing has really changed: The Republican base is furious about the Obama presidency.

That's it. That's your anger right there. That and nothing more.

Those newly unsealed documents in the Trump University case don't paint a pretty picture of either the "university" or Donald Trump himself:

Jason Nicholas, another witness for the plaintiffs who worked as a sales associate for five months in 2007, also said he was appalled by what went on at the university. "They were unqualified people posing as Donald Trump's 'right-hand men,'" he wrote. "They were teaching methods that were unethical, and they had had little to no experience flipping properties or doing real estate deals. It was a facade, a total lie."

In his sworn declaration, Mr. Schnackenberg [said] he quit his job after refusing to pitch the seminars to a couple that he thought couldn't afford them. "They had no money to pay for the program but would have had to pay for the program using disability and taking out a loan based upon equity in his apartment." He said another sales manager "talked them into buying a $35,000 seminar."

And this:

Donald Trump was personally involved in devising the marketing strategy for Trump University, even vetting potential ads, according to newly disclosed sworn testimony from the company's top executive taken as part of an ongoing lawsuit…"Mr. Trump understandably is protective of his brand and very protective of his image and how he's portrayed," Michael Sexton, Trump University's president, said in the 2012 deposition. "And he wanted to see how his brand and image were portrayed in Trump University marketing materials. And he had very good and substantive input as well."

And this:

Corrine Sommer, an event manager, recounted how colleagues encouraged students to open up as many credit cards as possible to pay for classes that many of them could not afford. "It's O.K., just max out your credit card," Ms. Sommer recalled their saying.

Ms. Sommer recalled that a member of the Trump University sales team, who had previously sold jewelry, was promoted to become an instructor. He had "no real estate experience," she said. She added that many of the instructors had the quality that the school seemed to value most: "They were skilled at high-pressure sales," she said.

In other words, Trump was eager to squeeze every cent he could out of his students but played no role in choosing instructors or creating the curriculum. He cared about his image, but that was it. What a guy.

Elon Musk spends all his time on the Tesla factory floor these days. Based on what he's learned, he says that "physics first" principles will soon produce a production revolution:

In a freewheeling talk before shareholders Tuesday, Musk said he and his Tesla team will completely rethink the factory process, hoping to bring “factors of 10 or even 100 times” in improvements in efficiency....“The most important point I want to make is … that we’ve realized that the true difficulty and where the greatest potential lies is in building the factory,” Musk said.

Charging the world's best automotive factories with using outmoded and inefficient systems, Musk said, “We can make dramatic improvements to the machine that makes the machine. A lot of people will not believe us about this, but I am absolutely convinced this can be accomplished.”

Well, he's right about a lot of people not believing this. Increasing the efficiency of an auto factory by 100x is way, way beyond anything Musk has ever done before. Compared to that, building a nice battery-powered car or landing a rocket at sea is child's play. I'll believe this when Musk does more than just talk about it.