A Sleeper Reason For Growing Inequality in America

 

Almost daily you hear or read comments about inequality in America. Some phrase it as “a hollowing out of the middle class.” As someone for whom demographics were his beat these past 50 years, it is hard to dispute the clear data.

 

The causes by most in the media run the gamut from Ronald Reagan, Newt Gingrich, Neutron Jack Welsh, the decline of unions, tax policy by all administrations which favor the truly rich, globalization, financialization of the economy, unchecked immigration, an aging population, robots, computers, and the growing threat of artificial intelligence.

 

Well. You may agree with some or many of the reasons listed above but here is one that is rarely mentioned that I find to really have some traction. It is the Minimum Wage Rate in the United States.

 

Do you know what the Minimum Wage Rate is? It is $7.25 per hour. It was last raised in July, 2009. Not a typo, my friends. The rate has not been raised in nearly 14 years. Has your pay remained flat during that period?

 

On April 28, 2021 newly installed President Joe Biden signed an executive order that raised the minimum wage on all federal contracts to $15. I had no problem with that. Federal projects were funded by taxpayer money and debt.  A few months later he asked that it be raised to that level for the 27 million workers who earned less than $15 per hour in the private sector. I had to smile at the absurdity of the suggestion.

 

The president admitted that it would squeeze some employers. What an understatement.

 

Most business startups in the U.S. fail within five years and the majority of them are restaurants (more about them later). Around one half of one percent of shops last 40 or more years and every year hundreds of thousands of small firms go bankrupt. So, a big jump to $15/hour in the minimum wage would not just squeeze small employers. It would put them out of business!

 

Now, while the federal minimum wage is now at $7.25, it varies greatly by state. The prosperous state of Washington pegs it at $15.74 cents an hour and California $15.50. New York is $15 in New York City and $14.20 for the rest of the state. Oregon is $13.50 and Vermont is $12.55.

 

Yet some states including Alabama, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, Tennessee, Texas, Utah, and Wisconsin are still pegged at the 2009 rate of $7.25 per hour.

 

When I bring this fact up with many people some express shock but others shrug and say “it is a great deal less expensive to live in Biloxi, Mississippi than San Francisco.” Agreed, but people still need to buy food, shelter and perhaps a used car at some point and $7.25 is a living wage in very few localities in the U.S.

 

When you dig just a bit, it gets even worse. Many states have a separate minimum wage for “tipped employees.” In states that still pay $7.25/hr., the tipped rate is $2.13/hr. Even Delaware which has a reasonable rate of $11.75, has a required rate of $2.23 for tipped employees. That might work if you are part of the waitstaff at a posh watering hole at Rehoboth Beach, but not everywhere.

 

I have read accounts over the years where investment bankers celebrating closing a new issue or big bond issue may go to a trendy restaurant in Manhattan, order endless bottles of $600 wine and tip the hot waitress several thousand dollars. Okay, good for her. What about the man or woman serving you at a pizza place or casual chain restaurant in Hammond, Indiana? Does he/she get enough tips to take them up to $15/hour in an average night. Highly unlikely.

 

My suggestion and no one in Congresss is listening would be to raise the national rate a few dollars and then index it a point or two above the CPI going forward. Why not simply index it to inflation a la Social Security? Well, what if Jay Powell and company work some magic and bring inflation down to their 2% target rate and somehow keep it there? At a 2% rate, the minimum wage would double in 36 years. Do the math. So, some catch up is needed but you still do not want to kill too many small businesses by doubling it all at once.

 

What can you do as a person? I have two suggestions and they are what I do personally. First, if you are at a white tablecloth restaurant give a generous tip if the service was good. Unless, it was horrible, leave at least 15%. Second, if it is a lunch counter or a casual chain (especially in a rural area), give your server a cash tip. Still want to use a credit card? Okay, give them the cash as a tip and write “on table” on the credit card slip. Servers love it as many have told me they often do not get tip money for a month and if the restaurant goes bust (most do eventually), they never see the tip money in many cases.

 

The second suggestion is when you are traveling. If you stay at an upscale hotel or inn, they invariably leave an envelope in your room market “chambermaid”. This summer many of you will be spending a night or two on a long road trip and could stay at a modest lodging such as a  Holiday Inn or even a Motel 6. Leave a bit of cash for the clean-up team. They get minimum wage but are likely immigrants or single Moms who are struggling. Over the years, people have stopped me in the parking lot or checkout desk and thanked me (some almost in tears) profusely for a $5 tip. C’mon. Leave them something. It will cost about the same as the umpteenth cup of coffee that you get at Starbucks that week.

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

An Unsettling Statistic

 

As is often the case, politicians in Washington are arguing about raising the debt ceiling for the United States. To me, it has always been something of a theatrical pose as they will eventually raise it at the last minute. Actually, it serves no real purpose except to remind them and those of us paying attention to how high the total U.S. debt is.

 

What the media, in my mind, should be paying attention to is a simple calculation that speaks volumes to me. It is total debt to Gross Domestic Product (GDP) expressed as a percentage. I have followed it forever. When Ronald Reagan took office in 1981, it was 31. Twelve years later after George H.W. Bush did the handover to Bill Clinton, it was about 60. Clinton And George W. Bush held the line pretty well and we actually had a balanced budget at one point (under Clinton) so the statistic only crept up to 68. Since then, it has risen dramatically and the last figure that I could find was that the U.S. total debt to GDP was pegged at 129.

 

It is just a number you may say but how does it stack up against the debt levels of other countries? Okay, here is what I have been able to find out recognizing that the numbers change each quarter:

 

 

 

United Kingdom           105

Canada                        118

France                         116

Spain                           120

UNITED STATES        129

Portugal                       134

Italy                              156

Greece                         206

Venezuela                    350

 

Will we be playing tag with Italy in few years? It is possible.

 

Some Northern European countries such as Denmark, Holland and Norway weigh in at round 50 as does Australia. Germany, the largest economy in Europe is about 70 (since the great runaway inflation of the Weimar Republic in the early 1920’s plus the aftermath of World War II, Germany does not like public debt).

 

Again, you may say so what—it is just a number. The World Bank suggests that when your ratio of debt to GDP goes over 77, growth in the economy is hampered by debt service and slows expansion. The more you go over the benchmark, the harder it is to grow. Additionally, your credit rating declines as the possibility of default grows. Would you rather buy an Australian bond or a Venezuelan bond? I think you do not need to do some sharp figuring to decide on that one.

 

Yes, we are the United States of America and the dollar is the global reserve currency. We also are the top military power. Are we headed for default? I would say no as our debts are in dollars and the government can simply print money to cover it. What the purchasing power of those printing press dollars would be is another thing, but, nominally, we would not default on our obligations.

 

Greece and Spain are not in such an enviable position as their debt is in euros which they cannot control. Ditto places such as Argentina which has had debt problems for a few generations and can often only get financing which has to be paid back in “hard” US dollars.

 

So, default is not imminent no matter what the doomsters say. Yet, when I look at the debt to GDP ratio every few months, it gives me pause.

 

I have never been more confused about the state and direction of our economy. This unsettling statistic on debt to GDP does not help any and those in the media world rarely mention it.

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

 

 

What Worries Me in 2023--Part III

 

A major issue which concerns me these days is climate change. My view differs from most in the mainstream. I am neither a climate denier of the “Drill, Baby, Drill” variety nor am I one who feel that we will become carbon neutral in the U.S. by the time some politicians are promising (2045-2050).

 

Let’s back up for a moment with an interesting story about the possible origin of the term “Climate Change.” Frank Luntz has been a long time Republican political strategist and pollster. As a political news junkie, I have seen him in action for a few decades and I must say he moderates focus groups better than anyone whom I have ever seen. In 2002, he is said to have penned a memo about climate science and recommended that candidates stress that there was no consensus about global warming among the scientific community. So, prospective lawmakers should challenge the science but instead of talking about global warming or lack of it, soften the message by using climate change as the topic title. It was felt to be less catastrophic a term than global warming. Interestingly, it has caught on all over the environmental spectrum with even rabid climate activists often saying climate change.

 

Full Disclosure---I began investing in windmill farms in 1985 and solar companies in 2002. Lesson learned was do not get stung in a good cause. Since then, both are producing energy at competitive levels and many mainstream providers and regulated utilities are getting into the game in a big way.

 

So, why do I worry? The plans to go carbon neutral are ambitious, probably unrealistic, and damned expensive (will cost trillions if existing blueprints are followed). Where will that money come from?

 

To me, there are practical approaches that are ignored. A major one is nuclear power which is clean but largely ignored by environmentalists. Even California Governor Gavin Newsom recognized this and extended the state’s last Nuke (Diablo Canyon) to shut down in 2030 instead of 2025. The federal government helped with funding.

 

We have perhaps the world’s largest supply of natural gas which burns twice as cleanly as coal and 34% cleaner than oil. Wind and solar are great, non-depleting and non-polluting but they are intermittent, so they lack 100% reliability. Natural gas is generally used as a backup. However, there is a hold on building natural gas pipelines in the US, particularly in the Northeast. We, as much of Europe, have dodged an energy bullet this year with a mild winter (to date) in the East but next year may be different. Natural gas has been described as a “bridge between fossil fuels and renewables.” Why not build the bridge (gas pipelines) where they do a great deal of good over the next 20 years?

 

Years ago, I thought that the US government would attack the energy issue as they did in World War II with rationing and the Manhattan project. It has not happened perhaps because of strong lobbying by fossil fuel producers. Putting solar panels on all new government buildings, and offering stronger tax incentives for renewables and electric vehicles for citizens would be a great start.

 

Also, many of the carbon neutral plans do not discuss improvements in technology. Again, souped up incentives for battery development, charging stations for personal vehicles that worked quickly, transmitting electricity over longer distances are all discussed but could turn the corner or help slow down climate change.

 

There is also the global human element that does not get enough attention. We seem to be getting more erratic weather patterns with more droughts, high temperatures and freak storms. This is affecting people. As the Colorado river recedes, do you really want to retire to Tucson or other low rain areas?

 

Ever hear of Lampedusa Island, Italy? Probably not. It is a geographical oddity as it is an Italian island that is 80 miles from North Africa but 130 south of Sicily. In recent years, thousands of desperate people leave Libya, Syria, Eritrea, and some west Africa nations in search of a better and/or safer life. The little island cannot handle them and the Italian government, already struggling financially, cannot absorb all the visitors to Lampedusa plus other refugee entry points. Italy is not alone. Many are trying to get access to Spain and parts of eastern Europe and Turkey.

 

Yet, global warming appears to be responsible for the long-term drought in western Africa in particular. Once rich farmland is turning to wasteland and farmers cannot afford fertilizer in many cases. Many millions may have to move north or starve in the years ahead. This is a major humanitarian crisis in the making. Private charities can help people landing in tiny Lampedusa but if it runs into millions of people, Europe cannot absorb the refugees nor afford to feed them.

 

So, yes, I worry about climate change. The US seems hideously naïve about not expanding natural gas usage and Europe faces problems ahead far beyond Vladimir Putin’s energy shutoff after his Ukrainian invasion. Like it or not, anyone reading this will likely still be using some fossil fuels their entire lifetime unless there is some surprising breakthrough with hydrogen-based fuel or battery technology.

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

 

 

What Worries Me in 2023--Part II

 

The topic for this post is demographic shifts in the western world. It may not sound exciting, but it is a major, if not THE major economic and social threat facing developed countries over the next 30 years.

 

Historically, the United States has always had a growing population. We were, after all, a nation of immigrants and people came from all over but largely western Europe. Even military conflicts such as the Civil War did not slow population growth much as immigration picked up the slack of young men perishing In the conflict. To maintain a level population, the “average” woman in a society needs to have 2.1 children. That is usually referred to as zero population growth or ZPG. Today, the US stands at about 1.85. So, if we do not have immigrants coming to America, our population will decline.

 

The situation in western Europe is far more serious for two reasons:

 

1)  The fertility rate is not 2.1 but hovering around 1.4. The Nordic nations and France weigh in at approximately 1.8 but Italy and eastern Europe in the 1.2 range.

 

2)  Unlike the US which has a safety net, European nations have what is known as “the provider state” which provides universal health care, low-cost higher education, and often moderate pensions for the entire population.

 

 

So, Europe is in a bind. People are living longer (due to universal health care and perhaps less stress?), but entitlements are very large via American standards. Yet, as the population ages, those still working will have a huge burden to take care of their older citizens as there will be relatively fewer of them to pay the entitlement bills. And, relative to the US, their tax rates are significantly higher.

 

If you look at individual countries, it gets scary. Take Italy, for example.  A few independent studies have said that in order to maintain present services and transfer payments, in less than 20 years, the retirement age will have to be at 77 years old PLUS 2.2 million immigrants will have to settle in Italy  ANNUALLY and work to cover current entitlement programs. Is that going to happen? I doubt very strongly that such a course of action would be politically viable. France tried to raise the retirement age a few years ago as did Greece and both ideas died quickly as the incumbent political leaders faced a massive revolt.

 

Another great example is Spain. In 1970, the then largely Catholic country had a fertility rate of 3.9 with only Ireland having a higher one at that time in all of Europe. Today, it is approximately 1.1. How is Spain going to keep their welfare state intact? After 2008, when they tried austerity to cover budget shortfalls, the government fell after massive protests.

 

So, a declining birth or fertility rate has huge consequences for public expenditure especially when most people have had a provider state covering basic needs. By the way, Japan has a far older population than western Europe and is now facing similar problems including getting young people to become farmers.

 

Okay, if you have stayed with me this far, how does this relate to the United States? Plenty.

 

At the current rate of spend, Medicare is projected to go broke by 2028 and Social Security, as we know it, will dry up somewhere between 2034-35. Social Security would be an easy fix. Raise the retirement age for FULL benefits a couple of years and increase the tax cap above the rate of inflation (currently, only the first $160,200 is taxed) for high income earners. Right now, if someone makes $10 million per year in earned income only the first $160,200 is subject to Social Security taxes. So, taxing Social Security benefits for the affluent and wealthy would help to keep the system solvent longer along with raising the cap for contributions to the fund.  Medicare is much more complicated and is in more urgent need of reform. Such actions could save both entitlements but not many members of Congress would have the political courage to do something meaningful.

 

Separately, we need to bring in more immigrants to cover our employment needs and continue to provide funds to keep Social Security and Medicare viable. This is a tinderbox issue as many Americans do not want to face economic and demographic reality or are simply racists.

 

Why, you might ask, should someone my age care about this issue? Well, I have children and grandchildren and plan to be around in 2035. 

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

 

 

 

 

 

 

 

What Worries Me in 2023

 

Happy New Year!

 

In the last week of December, I received a few e-mails from people who live thousands of miles apart and I have confirmed have never met. They each asked, “What keeps you up at night as we enter 2023?”

 

Well, family members can confirm that nothing keeps me up at night. Regardless of the situation, I am a world class deep sleeper. At the same time, I do have concerns as we enter this new year and I do not believe that they are covered with much clarity in the major media.

 

They are:

 

1)  The condition of the US and global economy

 

2)  Global demographic trends

 

3)  Reaction to climate change

 

Over the next few weeks, I intend to cover each topic from my own perspective. Today, we touch on the US economy.

 

Candidly, I am surprised how well the economy has held up despite the inflation that we are experiencing. What I find concerning is that in recent years we have been in an “easy money trap” and continue to run huge deficits and also have a Federal Reserve addicted to money printing. Sooner or later, it must end badly.

 

I have been following this trend for 50 years. Each time the “gloom and doomers” forecast disaster. In the 70’s, it was Harry Browne and Harry Schultz. Harvey Peters wrote “America’s Coming Bankruptcy” and Alexander Paris penned “The Coming Credit Collapse.” We did have problems forecast by the gloomsters (milder than their drama but very real) yet they were always literally and figuratively papered over with more debt.

 

So, each time we have a recession or a sizable pullback in the equity markets, I always quietly ask myself—Is this the big one?”  At some point our national credit card will get over the limit. Now, the US government is different than a household. They can print money and tax the public. Yet, the value of the US dollar is based 100% on confidence. As long as people accept it and foreign investors and governments buy our debt, things can go on for a while. If we lose our status as the global reserve currency, then school is out.

 

Financial pundits agree that debt, both public and private, is uncomfortably high in the U.S. but generally mention that most other nations are in worse shape than we are. Comments such as “we are the best-looking house in a seedy neighborhood” or our t-shirt is dirty but Europe’s is filthy” abound.

 

The internet does not help things. Over the years, I have subscribed to many investment advisory and economic forecasting services. Most are not good and I cancel them. They then sell my name to other newsletter writers who fill my e-mail box almost daily with catastrophic forecasts. I rarely open them but, when I do, their predictions are more shrill than the ones I saw in 2008 which gives me pause.

 

Will the world come to an end in 2023? Nope. But we could be headed for a 1970’s style “Stagflation”. What is that? It is a period of slow economic growth, fairly high unemployment, and high inflation. It is difficult to shake as if you fight inflation too hard you kill economic growth and put an upward spike in unemployment.

 

So far, other than some highly publicized tech layoffs, unemployment is historically low. If it starts climbing, we would be in for stagflation which is my biggest fear right now.

 

More to come in the next several days.

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

 

 

The Elephant Fight in Retail

 

For quite a while now, Wal-Mart has been described as the company that changed American retail in the 1970’s and 1980’s while Amazon over the last 20 years has simply changed the way we shop, period. I would agree with both statements.

 

There are many small cities and villages who saw their local retailers go under as Wal-Mart rolled into town with EDLP—Every Day Low Pricing. Amazon took a different approach and was arguably the most consumer centric large company on earth. Jeff Bezos, Amazon founder, did not make a lot of profit for many years but grew the business exponentially.

 

There is also a growing feeling that so many Americans are getting used to the 1-click Amazon experience and that Wal-Mart is on a downward spiral. Looking at a few variables, we find:

 

1)  Sales—Amazon now has more sales than Wal-Mart.

 

2)  Innovation—Amazon clearly leads here with their big advantage in robotics and Artificial Intelligence. Wal-Mart has made big strides in the past few years but are not a digitally driven company as is Amazon or even Nike.

 

3)  Locations—the nod goes to Wal-Mart as some 90% of Americans live within 10 miles of one of their locations.

 

4)  Supply chain—close to a draw as Wal-Mart invented cross-docking and Amazon has amazing logistics.

 

5)  Customer Service—Amazon is the leader here. In 20 years of purchases, speaking personally, I have had only two minor issues that they resolved immediately. Wal-Mart is working on delivery in many areas and is improving for sure. In-store service is lacking at Wal-Mart.

 

6)  Sustainability—Wal-Mart is unusually transparent here and they continue to add solar panels to virtually every location around the world. Amazon is either not doing as much or is secretive about it. Nod easily goes to Wal-Mart.

 

7)  Pricing—for 14 years, I have conducted a “market basket of goods” analysis comparing pricing at Wal-Mart vs. Target, Safeway, Walgreens, CVS and some local grocery stores. Wal-Mart ALWAYS wins. The range has been a win for Wal-Mart of 12-27%. Amazon pricing can vary. The single click is enticing but, if you shop around a bit, you may find better value for a variety of goods elsewhere. On balance, Wal-Mart is usually but not always, a better buy.

 

When Amazon bought Whole Foods, there seemed to be some confusion in the trade press. At best, Whole Foods has 2% of the grocery market while Wal-Mart has over 50% in most US market areas. The press often said this was an opening salvo in Amazon taking over the grocery market. I saw it differently. What always has impressed me about Whole Foods was their site selection process. They look at a metro area and put stores in zip codes the have the highest percentage of people with graduate or professional degrees. They are open to organic produce and can afford to pay top dollar for groceries. That is one reason why Whole Foods is sometimes referred to as “Whole Paycheck.” Also, there was very likely an unusually high correlation between Whole Foods customers and Amazon Prime members so once they had Whole Foods on board they could get some really “big data” on these affluent and highly educated people. They not only knew what they ordered on line but what they ate and drank as well.

 

Can anyone compete with Amazon? Of course. Specialty retailers with over-the-top service can continue to do well. One surprise to me is how retailers who cater to the exclusive 1% are embracing online tactics and that portion of their businesses are soaring.

 

By now, virtually all of you have heard of Bernard Arnault, CEO of LVMH, who recently became the wealthiest man in the world as Tesla and Amazon stock prices cratered. Among the brands that this high-end player owns are Dom Perignon, Moet, Hennessey, Louis Vuitton, Veuve Clicquot, Cloudy Bay, Belvedere, Berluti, Dior, Pucci, Givenchy, Tiffany, Tag Heuer, and Bulgari among others.

 

Lesser known is Swiss based Compagnie Financiere Richemont which has a brand stable including Cartier, IWC, Montblanc, Van Cleef & Arpels, dunhill, Purdey, and Serapian.

 

Both of these luxury brand conglomerates are devoting significant attention to online sales and are experiencing double digit increases for that part of their businesses. Admittedly, they were late to the digital game but the growth is very real. The assumption was that such high-end products (other than the liquors) had to be sold in their stores in New York, London, Paris or Shanghai. Not so any longer!

 

The next recession (2023?) will wipe out more retailers. Amazon, Wal-Mart, Costco and the Dollar Stores  (which have hurt Wal-Mart to a degree) will still be standing. Will Amazon eventually cripple Wal-Mart? At the moment, as I write, Amazon shares are selling for half of what they did a year ago. Wal-Mart stock is down about 10%. Is the market telling us something?

 

Years ago, I worked with a man who had handled many beer brands in his career. At the time, his beat was some struggling brands that were largely regional. Budweiser (Anheuser-Busch) was locked in a huge conflict with Miller Beer. Bud had recently signed a five-year deal with fledgling cable channel ESPN. They ran a minute of commercials per hour minimum on the 24-hour sports channel. The deal was structured to give ESPN much needed cash as they grew so billing by year was $9,7,5,3,1 million per year respectively. By the end of the five-year commitment ESPN had exploded, so it may have been the greatest buy in electronic media history. Miller, their arch-rival, did a lesser but still big buy on USA Network, which early on was a sports channel.

 

I asked my colleague what would happen in this “beer war.” He told me to shut the door. I did, he smiled and said, “ Don, in an elephant fight, only the ants get killed.”

 

Amazon and Wal-Mart are both here to stay.

 

Happy Holidays to MR readers around the world !

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

The Urban/Rural Divide

 

Our mid-year elections in the United States are finally over and a careful look at results once more shows the stark differences in attitudes, voting preferences and lifestyles among people who live in large cities and suburbs as opposed to those in most rural areas.

 

I have seen this trend growing stronger over the years. And, some of it has been with my own two eyes. I am somewhat unusual in that I have actually set foot in all 50 US states and both career travel and some vacations have taken me to all major US cities but also a number of rural outposts. I remember vividly driving through one city as a teenager and now find that this oasis has one third of the population that it had five decades ago. Thousands of homes are vacant.

 

Rural life is getting harder. They are not high paying jobs for many locals and while most of the western countries are aging, many rural areas in America barely have minimal infrastructure left. Rural hospitals have been closing, an ambulance driver might be in his early 70’s and schools in small towns often cannot field a football team anymore.

 

Conversely, as the “knowledge economy” has boomed, then Austin, Seattle, New York, Boston, Washington, San Francisco and even Boise have boomed causing sharply rising real estate prices and serving as a magnet for ambitious young adults.

 

Take a look at a map of the recent congressional elections in America. If you look simply at geography, it appears that Republicans dominated in a huge way. Yet, actually, their majority is paper thin. Democrats tend to win in urban and many suburban areas while Republicans dominate in less populated areas.

 

A good example was the reelection for a third term of the controversial Dr. Rand Paul, Senator from Kentucky. A “landslide” is generally defined as an election where the winner garners more than 60% of the vote. Dr. Paul won easily with 61.8% of votes cast. Break the results down by county and you see that the Bowling Green ophthalmologist won all but three counties in the state. The three that he lost were highly populated jurisdictions housing Louisville, Lexington, and state capital Frankfort.

 

Rural voters appear to feel left out and ignored by politicians. A few upsets have occurred in recent years where the winning candidate made sure to spend time in EVERY county in a state or congressional district despite very low populations. Rural people felt somewhat genuinely cared about them and the presence, even brief, of the insurgent helped.

 

This urban/rural divide has had many theorists to consider the revamping of the composition of the United States Senate. A widely used argument is that rural states have way too much power in US politics. They ask why should California with 39 million people have 52 members in the House of Representatives but two senators while Wyoming with 580 thousand people have one member of the house but two senators? (The only reason that we have a Senate is that the founders wanted to make the smaller states feel comfortable by giving them equal representation in the upper chamber. Little Delaware was the first state to ratify the Constitution while my home state of Rhode Island, the smallest state, was the last of the 13 states to join. Interestingly, we did not have direct election of US Senators until 1913 when the 17^th amendment was passed. Prior to that, state legislatures chose who would represent their state in the Senate).

 

Do these reformers have a case? Maybe but it is a hopeless dream in my view. Changing the makeup of the Senate would require a constitutional amendment and 38 states would have to approve it. Would the smaller states say yes, it is only fair for us to lose a Senator and for California, Texas, Florida and New York to pick up another one or two? Would sitting Senators from smaller states cheerfully encourage people at home to extinguish them out of existence? Ain’t going to happen.

 

So, it appears that rural areas will have disproportionate political clout compared to their populations and economic strength. They have also picked up strength in Republican controlled legislatures with a tactic known as Gerrymandering. Elbridge Gerry was a Massachusetts congressman, governor, and Vice President under James Madison. He is credited with a tactic of “creative redistricting” which is still used to this day. There are two approaches---Cracking and Packing. Cracking divides a district up in some bizarre ways (on a map) but spreads strongholds of the opposing party across several districts. Packing puts as many of your opponents in a single district as possible making other districts more competitive for your party. The GOP has gerrymandered districts in Wisconsin, North Carolina and Texas while Democrats have been guilty recently in New York state and Maryland. Reformers are asking that district lines not be set up by state legislatures but by independent commissions. Right now, rural areas benefit in GOP states and Urban in Democratic strongholds.

 

Some say rural voters have a chip on their shoulders. Young people leave in droves as job and social prospects tend to be much better in major metropolitan areas. A few 20 something MR readers wrote to me saying it was fun to return home to their tiny hometowns during the height of Covid 19 and work remotely. Fun, for a few weeks. All said they could not wait to get back to New York and Boston as they felt socially stymied.

 

Under our present political system and with an aging population and other demographic shifts moving forward, I do not see how this urban/rural divide can be remedied.

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.