Not getting better using this. Let's see how many tabs I clear from my browser this time, beginning with the oldest.
In the south, and especially in Harris County, if you have no money, you have no justice.
The next time a Republican tells you that conservatives support equal rights for women, tell him about this. Or tell him he's full of shit. Both are true. (By the way, this story is from 2015, but Strickland still holds office.)
If you live someplace in Texas with a homeowner's association, or with a deed restriction, you may find out the hard way that you don't own your home at all- and that you have no legal rights worth respecting to try to keep it. HOAs in Texas are insanely powerful- and unaccountable.
Thanks, Bill and Hillary Clinton. Some of us remember.
Cutting taxes only boosts wealth for the rich. It doesn't make the economy stronger. Also, water tends to be slightly damp.
Remember, hard work does NOT equal success. If your boss can get away with paying you less than you're worth, he WILL- and he'll pat himself on the back for doing it.
The next time a conservative says, "You socialists just want stuff for free! I paid for mine!", point out that they could be getting what they're paying for for a LOT cheaper- by socializing it. That's how Scandinavia does it.
Responsible (white) gun owner pulls gun on black man because he's scared of black people.
Three victims of the CIA's torture program sued the doctors who designed the torture methods. And they won.This is the first, and so far only, victory for those seeking justice for the Bush administration's crimes.
(Paywall) Kansas gutted taxes; California hiked them sky-high. Now Kansas is sinking economically while California is soaring.
An excellent argument, with studies cited, against universal gun ownership, but my favorite bit is the simple response to the insane notion that the Second Amendment preserves the right to armed resistance against our elected government.
The Atlanta Braves got a special law passed for their new Cobb County stadium to give them a monopoly on expensive parking spaces- with no public transit option- all in the name of "safety." Riiiiight.
That's all Blogger will let me do for now...
Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts
Monday, August 28, 2017
Monday, May 23, 2016
Why Worry About a Clinton Presidency?
I have no love whatever for either Bill or Hillary Clinton, mostly because I remember how Bill worked harder than anybody in Washington to get the Republican economic plan enacted.
"Wait a minute," you say. "Bill's a Democrat. Are you saying there's no difference between the parties?" No, there is a difference between the parties... but when it comes to strictly economic matters, it's very hard to find it.
Let's begin with this interview with Thomas Frank, author of What's the Matter With Kansas? and The Wrecking Crew and, most recently, Listen, Liberal, a scathing critique about how the centrist-led Democratic Party has abandoned everyone except the wealthy upper class for the past quarter century. Frank lines up the major policy victories the Clinton administration claimed.
Let's omit the Crime Bill of 1994, which is not exclusively economic in nature. (Also worth noting: it's the only one of those five that either Bill or Hillary has expressed any remorse over.)
The same interview, Mr. Frank on NAFTA:
This is why union leaders picked Clinton, but union members picked Sanders in the primaries. The leaders are part of the Democratic power structure, but the actual rank and file remember full well how routinely and thoroughly Bill Clinton shafted them.
For a bit more detail on this and the other points, quoting from These United States by Glenda Elizabeth Gilmore and Thomas J. Sugrue:
I'll just pause in the quotes to point out two things. First, in an open market, when people compete, prices come down. In this case, the competition is between American workers and peasant or slave labor in places like Mexico, China, Bangladesh, etc. etc. etc. "Competitiveness" means lower American wages in this context. Second, expanding American firms' job share is not the same thing as expanding American incomes. In fact the opposite has happened; while American firms did indeed expand their "job share," American workers have seen their jobs vanish and their pay stagnate or fall. Looking at the evidence, there's no doubt in my mind that this was deliberate on the part of conservatives. The best you can say for the Clintons is that they aided and abetted the mechanism, even if you can't prove lowering American wages was their goal.
Continuing quotes from These United States:
One more trawl from the book:
The book doesn't mention that, under the guidance of conservative Democrats Robert Rubin and Lloyd Bentsen, and ex-Nixon staffer Leon Panetta (who went on to become CIA Director under Obama), Bill Clinton had pushed for financial industry deregulation from his first day in office, while he still had Democratic majorities in both houses of Congress, and less than four years after the economic shock of the savings and loan collapse. Bill Clinton believed strongly in deregulating Wall Street, and the kindest thing you can say is that he never foresaw the consequences. And even that is hard to say, considering he continues to defend all his deregulatory accomplishments, and considering Hillary Clinton, for her talk of reforming Wall Street, is still opposed to restoring Glass-Steagall barriers to using federally insured deposits for stock market gambling.
And then let's look at the second biggest thing (after health care reform) that Clinton attempted and failed: privatizing Social Security.
Yes, I'll repeat that: Bill Clinton tried to privatize Social Security. The linked article quotes from The Pact by Steven M. Gillon:
A couple of names you might recognize: Mark Penn was the pollster-turned-campaign-manager whose incompetence and double-dealing was probably the reason we aren't talking about the successor to President Hillary Clinton right now. Erskine Bowles went on from being Clinton's chief of staff to being hand-picked by Barack Obama, along with Alan "Social Security is a sow with a million teats" Simpson, to chair Obama's deficit reduction supercommittee, which had fourteen out of eighteen members picked who supported either privatization or outright abolition of Social Security. (For more on how Obama has continued centrist austerity policy, read this (admittedly biased) blog post.)
Most pundits argue that the Social Security deal was sunk by the Lewinsky scandal and Clinton's impeachment. According to at least one source, however, Clinton himself didn't see it that way:
"But the American economy was great under Bill!" his supporters will cry. Eh... not all that great. There was a brief burst of explosive growth in his first two years, which became weaker and weaker despite the dot-com boom and bust, ending with a recession that technically began during his last months in office. As Paul Krugman points out, the Clinton economy was more a matter of Bill Clinton being lucky than his policies being wonderful:
And why does any of this matter? Supporters of Hillary Clinton in 2016, when confronted with Bill Clinton's regressive economic policies, insist, "They're two different people. Hillary wasn't really involved in economic policy during Bill's presidency." I say: hogwash. Bill and Hillary were sold to the American people as a two-for-one package deal from the very beginning, indeed from Bill's first run for governor of Arkansas. A large portion of Hillary's "25 years of national experience" is her time in the White House, when she was referred to as the "co-President". The two are, politically speaking, a unit.
The most recent proof? Hillary has declared her intent to put Bill in charge of her economic policies once elected.
It's this sort of thing which makes Hillary Clinton's claims that she will protect Social Security ring hollow:
And as for the Trans Pacific Partnership trade deal, which Clinton was "for it before she was against it" (paraphrasing John Kerry's 2004 campaign-dooming gaffe), there's plenty of reason to doubt her current opposition:
"But that was her job as Secretary of State," Clinton supporters will argue, "to support the President's policy." Two points: first, all that does is make Barack Obama equally complicit in working to lower wages and boost corporate profits at the expense of ordinary Americans. Second, her memoir was released after she resigned as Secretary of State. She was under no obligation whatever to continue delivering Obama's message; we must assume, therefore, that what she wrote in Hard Choices is her own belief at the time.
Considering that Hillary Clinton only becomes an opponent of unlimited free trade when she's running for office, and then becomes an enthusiastic supporter once actually in office, it's only sensible to assume that her current lukewarm opposition to TPP will turn to enthusiastic support for ratification if and when she becomes president- with all TPP's many horrible anti-democratic features intact.
And certainly Wall Street doesn't think much of Clinton's promises to reform and regulate them. Going back to where we began, quoting from Listen, Liberal:
When all else fails, Clinton supporters will pull out the old centrist Democrat standby: "It's us or the Republicans! Are you really willing to throw the election to Trump just to show what a good purist you are, you horrible socialist splitter?" It's a cudgel the Clintons have used many times before, and are still using today, to blame voters for their lack of enthusiasm for anti-worker, neo-liberal policies.
Answer: no, probably not. Clinton probably won't throw liberals into concentration camps, and Trump probably will, if his rhetoric is to be believed.
But given all the above, you might understand why a lot of economic liberals will be throwing the lever for Clinton with a feeling of disgust, disappointment, and sadness that the abuse of the American worker and the glorification of the American plutocrat will continue for at least another eight years.
"Wait a minute," you say. "Bill's a Democrat. Are you saying there's no difference between the parties?" No, there is a difference between the parties... but when it comes to strictly economic matters, it's very hard to find it.
Let's begin with this interview with Thomas Frank, author of What's the Matter With Kansas? and The Wrecking Crew and, most recently, Listen, Liberal, a scathing critique about how the centrist-led Democratic Party has abandoned everyone except the wealthy upper class for the past quarter century. Frank lines up the major policy victories the Clinton administration claimed.
"Fulfilling so much of the GOP agenda": That is a point worth reiterating. Clinton had five major achievements as president: NAFTA, the Crime Bill of 1994, welfare reform, the deregulation of banks and telecoms, and the balanced budget. All of them -- every single one -- were longstanding Republican objectives. His smaller achievements were more traditionally Democratic (he raised the earned-income tax credit and the minimum wage), but his big accomplishments all enacted conservative wishes, and then all of them ended in disaster.
. . .
The final conservative consequence of the impeachment, although this one was surely not intended: impeaching Clinton made him a martyr and hence a hero to Democrats. It secured his family's and his faction's grip on the Democratic Party apparently forever.
Let's omit the Crime Bill of 1994, which is not exclusively economic in nature. (Also worth noting: it's the only one of those five that either Bill or Hillary has expressed any remorse over.)
The same interview, Mr. Frank on NAFTA:
Clinton never had a really great relationship with workers' organizations, but the worst thing Clinton he did to them was NAFTA. There were many trade agreements, of course, but NAFTA was the one that mattered, both because it was the first one and because labor put everything into stopping it. Indeed labor had stopped it when George H. W. Bush tried to get it through Congress. Clinton got it done, however, with a little muscle and a vast fog of preposterous claims about how NAFTA would increase exports and manufacturing employment.
His admirers saw NAFTA as his "finest hour," because he had stood up to a traditional Democratic constituency. What an achievement. NAFTA handed employers all over America the ultimate weapon against workers: They could now credibly threaten to pick up and leave at the slightest show of worker backbone -- and they make such threats all the time now.
This is why union leaders picked Clinton, but union members picked Sanders in the primaries. The leaders are part of the Democratic power structure, but the actual rank and file remember full well how routinely and thoroughly Bill Clinton shafted them.
For a bit more detail on this and the other points, quoting from These United States by Glenda Elizabeth Gilmore and Thomas J. Sugrue:
Clinton was the most prominent member of the Democratic Leadership Council (DLC), a group of insurgent Democrats founded in 1985 who argued that for the Democratic Party to survive, it needed to move rightward on civil rights, foreign policy, and especially economic policy. DLC members argued that liberals had lost touch with the majority of voters, particularly white working- and middle-class men...
The DLC was particularly attractive to younger Democrats from the Sunbelt. Its first six chairs were all from southern or border states... The DLC's pro-business politics attracted substantial corporate support. By 1991-92, of its one hundred "sustaining members", fifty-seven were corporations and another twelve were professional and trade associations...
At its 1990 conference, the DLC laid out its principles in the "New Orleans Declaration," a document that became a blueprint for Clinton's candidacy. The "Democratic Party's fundamental mission," it stated, "is to expand opportunity, not government." This meant embracing pro-business policies, including free trade, a streamlined, business-friendly tax code, and government subsidies for high-tech research and development. It criticized welfare for maintaining the poor "in dependence." Finally, the DLC echoed Republican calls for "individual responsibility"...
... Most Republicans supported NAFTA, but it faced stiff opposition among Democrats, who argued that it would accelerate "runaway jobs" to Mexico, where companies would have easy access to cheap labor without the burdens of environmental and safety regulations. Clinton countered that NAFTA would encourage American "competitiveness" and, over time, expand American firms' job share...
I'll just pause in the quotes to point out two things. First, in an open market, when people compete, prices come down. In this case, the competition is between American workers and peasant or slave labor in places like Mexico, China, Bangladesh, etc. etc. etc. "Competitiveness" means lower American wages in this context. Second, expanding American firms' job share is not the same thing as expanding American incomes. In fact the opposite has happened; while American firms did indeed expand their "job share," American workers have seen their jobs vanish and their pay stagnate or fall. Looking at the evidence, there's no doubt in my mind that this was deliberate on the part of conservatives. The best you can say for the Clintons is that they aided and abetted the mechanism, even if you can't prove lowering American wages was their goal.
Continuing quotes from These United States:
Since his days in the DLC, Clinton had argued for "personal responsibility." He and conservatives alike argued that poverty was the result of dysfunctional families, parents who lacked the motivation to work, and teens who engaged in crime and promiscuous sex. Behind all these changes was an overgenerous welfare system. Poor people needed a dose of "traditional values" like thrift, deferred gratification, and work discipline.Another pause here. Without saying so outright, These United States portrays Bill Clinton as someone who believes the poor, and especially the African-American poor, need to be punished for being poor so they will be forced to work and get out of poverty. The problem with this is twofold. First, work requirements only function if there are sufficient jobs available for all those who seek work. As happened during the 2000-2002 recession and again in the 2008 crash and its aftermath, when jobs dry up during hard times, Clinton's reforms guaranteed there would be no aid for those who needed it most. Second, by requiring work as a condition for public aid, Clinton and Gingrich effectively converted Welfare from an anti-poverty program to a business subsidy for low-wage jobs. The work requirement effectively kills the ability of poor people to reject low-paying, hazardous or degrading work conditions, thereby allowing big business to save money and increase profits at the expense of their workers. Again, the kindest thing you can say about Clinton here is that he was complicit.
This criticism of welfare focused mostly on urban African Americans, who lived in communities that had been hit the hardest by disinvestment and depopulation...
In 1996 President Clinton and Speaker Gingrich negotiated the Personal Responsibility and Work Opportunity Reconciliation Act. A triumph of bipartisanship, it abolished AFDC, replacing it with a new program called Temporary Assistance for Needy Families (TANF). ... It was telling that ending poverty was not even listed as one of the law's primary goals. As Representative E. Clay Shaw (R-FL), one of the bill's sponsors, argued, TANF was about discipline. "You're going to have some who are just not going to be able to make it," he stated. Welfare reform "presented a certain amount of pain for not being able to take control of your life." The reform forced individuals to fend for themselves, whatever the consequences might be.
... The new, daunting eligibility rules discouraged many needy parents from applying for TANF, even though they were eligible for support. In the decade following the enactment of TANF, welfare rolls nationwide dropped by nearly 60 percent. By contrast, poverty rates fell modestly in the late 1990s... a 1999 study of poor families in thirteen states reported finding "evidence of lives made harder by the loss of cash assistance." To make ends meet, families often missed rent and utility payments... When poverty began rising again in 2001, their situation would get worse.
One more trawl from the book:
The most sweeping transformations in the 1990s involved the deregulation of the financial sector. Here too Clinton found common cause with conservative Republicans. Beginning in 1995, the president's economic advisers pushed for a "financial services modernization," including repeal of one of the signature New Deal regulations, the Glass-Steagall Act, which forbade banks to speculate in stocks and real estate using individual depositors' money... Clinton's aides knew that "allowing banks to engage in riskier activities like securities or insurance could subject the deposit insurance fund to added risk." It was a risk they were willing to take.
In 1999 Clinton signed the Gramm-Leach-Bliley Act, which undid Glass-Steagall... Over the next eight years, banks created all sorts of new high-risk financial products, without close regulatory scrutiny.
The riskiest involved home mortgage lending, one of the Clinton administration's top priorities... By the late 1990s, lenders, including Washington Mutual, New Century, and Countrywide, began targeting working-class and minority communities with high-interest loans, often with substantial up-front closing costs and hidden fees. The loans were immensely profitable but also incredibly risky.
Predatory loans were especially appealing to those working Americans whose wages had stagnated or fallen...
The book doesn't mention that, under the guidance of conservative Democrats Robert Rubin and Lloyd Bentsen, and ex-Nixon staffer Leon Panetta (who went on to become CIA Director under Obama), Bill Clinton had pushed for financial industry deregulation from his first day in office, while he still had Democratic majorities in both houses of Congress, and less than four years after the economic shock of the savings and loan collapse. Bill Clinton believed strongly in deregulating Wall Street, and the kindest thing you can say is that he never foresaw the consequences. And even that is hard to say, considering he continues to defend all his deregulatory accomplishments, and considering Hillary Clinton, for her talk of reforming Wall Street, is still opposed to restoring Glass-Steagall barriers to using federally insured deposits for stock market gambling.
And then let's look at the second biggest thing (after health care reform) that Clinton attempted and failed: privatizing Social Security.
Yes, I'll repeat that: Bill Clinton tried to privatize Social Security. The linked article quotes from The Pact by Steven M. Gillon:
There were also hopeful signs that the public was ready for a serious discussion about Social Security reform. An August 1997 survey by Clinton pollster Mark Penn found that 73 percent of Democratic voters favored some form of privatization, and support was especially strong among younger workers. Independent polls also showed that many young people believed that without significant change the programs would not be able to provide for them in their old age...
Given the high risk involved, Clinton realized that he could not undertake this without bipartisan support, and, Chief of Staff Erskine Bowles reflected, "He knew to do this he needed to work with Gingrich.'' He was confident that he could hold moderate and conservative Democrats and bring enough Republicans to the table to make significant reform...
It did not take long, however, for Gingrich to recognize the potential of a possible Social Security reform package. Bowles provided Gingrich with the same assurances that the president offered to Archer. The president would take the political heat for controversial proposals. Politically, the president and the speaker were closer than anyone realized. They recognized that their parties needed to change in response to new circumstances. They both believed that any effort to update Social Security would require government to incorporate some measure of choice, and that meant some form of privately managed account.
...Instinctively, both men still wondered whether the other was setting a trap in preparation for the upcoming elections. Would Clinton leak word that Gingrich was once again trying to tamper with Social Security and Medicare, reinforcing his image as hostile to the old and poor? Would Gingrich tell reporters that the president was ready to accept the centerpiece of Republican proposals for Social Security: privately funded accounts?
...
All the key players—Clinton, Gingrich, Bowles, White House congressional liaison John Hilley, and Bill Archer—were cautiously optimistic. ''It wasn't crazy for them to think that if they could do the impossible and pass welfare reform and the balanced budget bill, they could do Social Security,'' reflected Bruce Reed, the president's chief domestic policy adviser.
A couple of names you might recognize: Mark Penn was the pollster-turned-campaign-manager whose incompetence and double-dealing was probably the reason we aren't talking about the successor to President Hillary Clinton right now. Erskine Bowles went on from being Clinton's chief of staff to being hand-picked by Barack Obama, along with Alan "Social Security is a sow with a million teats" Simpson, to chair Obama's deficit reduction supercommittee, which had fourteen out of eighteen members picked who supported either privatization or outright abolition of Social Security. (For more on how Obama has continued centrist austerity policy, read this (admittedly biased) blog post.)
Most pundits argue that the Social Security deal was sunk by the Lewinsky scandal and Clinton's impeachment. According to at least one source, however, Clinton himself didn't see it that way:
But Kies remembers differently. As he told me when I was researching my book, The People's Pension: The Struggle to Defend Social Security Since Reagan, the secret talks continued without missing a beat. They even expanded, to include outreach to members of Congress such as Democratic Sen. Bob Kerrey of Nebraska and even officials in the mutual fund industry. Clinton’s advisors pursued more public discussions with lawmakers about a Social Security deal as well. Keeping all options open, Clinton’s advisors told some reporters the president hadn't rejected partially privatizing the program by carving private investment accounts out of workers' payroll tax contributions.Up to now I've made a point of saying, "The kindest thing you can say about Clinton is that he aided and abetted." But when you take all these things together, how credible is it that a supposedly super-intelligent man, a Yale Law School graduate, did all of these things in his presidency without realizing their likely outcome? Others may have doubts, but I don't; Bill Clinton spent his entire presidency working to loot the lower and middle classes for the benefit of the wealthy, and he's not one damn bit sorry about the consequences.
By early December 1998 -- shortly before Clinton's impeachment -- Sperling and Kies had come very close to a deal. Later dubbed by Kies the Social Security Guarantee Plan, the proposal called for setting up mandatory private savings accounts for every American worker. The federal government would fund these accounts with annual contributions equal to 2 percent of the wage base used to compute old-age and survivors' benefits under Social Security. Workers’ payroll tax contributions would continue to go into Social Security as before; there would be no “carve-outs” to fund the private accounts. When the worker was ready to retire, the Social Security Administration would calculate a monthly stream of payments based on the balance in her account. If the amount was less than her expected benefit under traditional Social Security, the program would make up the difference. If the amount exceeded her entitlement, she could keep the extra for herself.
. . .
The prospect seemed almost too good to be true.
Which, indeed, it was. Despite the absence of carve-outs, a study released the following year by the Center on Budget and Policy Priorities, after the plan became public, found that it suffered from many of the same deficiencies as outright privatization. First, there were transition costs -- the massive borrowing needed to fund the private accounts. This would cost the Treasury some $300 billion to $600 billion a year from 2016 to 2042... The accounts might not be the windfall their proponents expected, either. Investment providers would be able to charge their administrative and marketing costs against the assets, pocketing some $34 billion a year by 2030 and more thereafter. Only affluent households would likely enjoy much upside from the accounts, according to the CBPP, since only they would accumulate enough assets to exceed their projected income from Social Security. That in turn would undermine better-off Americans’ support for Social Security, since their entire contribution to the program would, effectively, be used to fund other people’s benefits.
Yet Kies recalls no pushback from White House negotiators in “detailed” talks about the Guarantee Plan in fall 1998. Mostly, they focused on the details. The administration wanted to add a Social Security benefit enhancement for lower-wage workers to the package, while Gingrich and the Republicans wanted retirees to be able to pass on any unused private-account assets to their heirs.
- See more at: http://historynewsnetwork.org/article/147641#sthash.ciQ42hTn.dpuf
"But the American economy was great under Bill!" his supporters will cry. Eh... not all that great. There was a brief burst of explosive growth in his first two years, which became weaker and weaker despite the dot-com boom and bust, ending with a recession that technically began during his last months in office. As Paul Krugman points out, the Clinton economy was more a matter of Bill Clinton being lucky than his policies being wonderful:
Specifically, the 1990s were the decade in which American business finally figured out what to do with computers — the decade in which offices became networked, in which retailers like Wal-Mart learned to use information technology to manage inventories and coordinate with suppliers. This led to a surge in productivity, which had grown only sluggishly for the previous two decades.The technology takeoff also helped fuel a surge in business investment, which in turn produced job creation at a pace that, by the late 1990s, brought America truly full employment. And full employment was the force behind the rising wages of the 1990s.Oh, and yes, there was a technology bubble at the end of the decade, but that was a fairly minor part of the overall story — and because there wasn’t a big rise in private debt, the damage done when the tech bubble burst was much less than the wreckage left behind by the Bush-era housing bubble.But back to the boom: What was Mr. Clinton’s role? Actually, it was fairly limited, since he didn’t cause the technology takeoff. On the other hand, his policies obviously didn’t get in the way of prosperity.
My personal theory is that the combination of GHWB's tax hikes and Clinton's lesser tax hike in the early 1990s, combined with the new technologies and opportunities Krugman mentions, caused the investor class to relax their grip on their money, pouring cash back into the economy and enabling a bottom-up period of economic growth. Previously, under Reagan and GHWB, the wealthy had been squeezing corporations, workers, the government, anything and everything for every penny they could get, building up enormous piles of wealth, and sitting on them. This behavior resumed immediately after GWB was elected, and it's continued ever since, with the result that any inflation from economic growth is offset by the deflation of money removed from circulation for the purposes of wealth-hoarding.
In short: the Clinton economic boom, which was big only in comparison to the truly anemic Reagan-era economy, was due not to his big-business economic policies but rather in spite of them, as an offshoot of the wealthy seeking to evade higher tax brackets and to gamble on the dot-com bubble. Ten years earlier or ten years later, his policies would have been indistinguishable from Reagan's or George W. Bush's- with identical results.
The most recent proof? Hillary has declared her intent to put Bill in charge of her economic policies once elected.
"I've told my husband he's got to come out of retirement and be in charge of this because you know he’s got more ideas a minute than anybody I know," she said, while talking about manufacturing and jobs.That's right. More ideas a minute. Ideas like gutting the social safety net, free-trade agreements that offshore jobs while allowing corporations to evade American taxes, deregulating an already shamelessly corrupt financial industry, and cutting or privatizing Social Security.
It's this sort of thing which makes Hillary Clinton's claims that she will protect Social Security ring hollow:
In a September 2007 MSNBC debate, Clinton held up the 1983 bipartisan deal between President Reagan and House Speaker Tip O’Neill as a model for how Social Security’s long-term solvency problems needed to be addressed. That was the deal that gave us the increase in the retirement age from 65 to 66 now and 67 by 2027, as well as an increase in the payroll tax. “I think we do need another bipartisan process,” she said at the time. “You described what happened in ’83. It took presidential leadership, and it took the relationship between the White House and Capitol Hill to reach the kind of resolution that was discussed.”
She also put a heavy emphasis on “fiscal responsibility.” Specifically responding to a question of whether she would support lifting the cap that now exempts earned income above about $118,000 from Social Security payroll taxes, Clinton said, “Well, I take everything off the table until we move toward fiscal responsibility and before we have a bipartisan process. I don’t think I should be negotiating about what I would do as president. You know, I want to see what other people come to the table with.”
Clinton’s desire to leave herself negotiating room “until we had a much better understanding of what I would accept and what I would not accept as president” was not only in sharp contrast to the bright lines drawn by Sanders – “… [O]ur job cannot be to cut Social Security. Our job must be to expand it” – but in ran counter to the demands of the coalition of organizations at the forefront of the fight to defend Social Security that recently launched a petition drive calling for Social Security expansion.Any of this sound familiar?
And as for the Trans Pacific Partnership trade deal, which Clinton was "for it before she was against it" (paraphrasing John Kerry's 2004 campaign-dooming gaffe), there's plenty of reason to doubt her current opposition:
As President Obama seeks fast-track authority for a 12-country Pacific trade deal and Congress inches toward giving it to him, Clinton is hedging on a deal she once strongly backed.
"She will be watching closely to see what is being done to crack down on currency manipulation, improve labor rights, protect the environment and health, promote transparency and open new opportunities for our small businesses to export overseas," an aide said in a statement Friday. Additionally, any trade deal would need to pass two tests for Clinton to support it, the campaign said: (1) Protect U.S. workers and raise wages, and (2) strengthen national security.
Yet, previously as secretary of state, Clinton called the Trans-Pacific Partnership the "gold standard in trade agreements." In her second memoir, Hard Choices, released in 2014, Clinton lauded the deal, saying it "would link markets throughout Asia and the Americas, lowering trade barriers while raising standards on labor, the environment, and intellectual property." She even said it was "important for American workers, who would benefit from competing on a more level playing field." She also called it "a strategic initiative that would strengthen the position of the United States in Asia."
"But that was her job as Secretary of State," Clinton supporters will argue, "to support the President's policy." Two points: first, all that does is make Barack Obama equally complicit in working to lower wages and boost corporate profits at the expense of ordinary Americans. Second, her memoir was released after she resigned as Secretary of State. She was under no obligation whatever to continue delivering Obama's message; we must assume, therefore, that what she wrote in Hard Choices is her own belief at the time.
Considering that Hillary Clinton only becomes an opponent of unlimited free trade when she's running for office, and then becomes an enthusiastic supporter once actually in office, it's only sensible to assume that her current lukewarm opposition to TPP will turn to enthusiastic support for ratification if and when she becomes president- with all TPP's many horrible anti-democratic features intact.
And certainly Wall Street doesn't think much of Clinton's promises to reform and regulate them. Going back to where we began, quoting from Listen, Liberal:
"None of them think she really means her populism," wrote a prominent business journalist in 2014 about the bankers and Hillary. The Clinton Foundation has actually held meetings at the headquarters of Goldman Sachs, he points out. He quotes another Morgan Stanley officer, who believes that "like her husband, [Hillary] will govern from the center, and work to get things done, and be capable of garnering support across different groups, including working with Republicans."
How are the bankers so sure? Possibly because they have read the memoirs of Robert Rubin, the former chairman of Citibank, the former secretary of the Treasury, the former co-head of Goldman Sachs. One of the themes in this book is Rubin's constant war with the populists in the Party and in the Clinton administration -- a struggle in which Hillary was an important ally. Rubin tells how Hillary once helped him to get what he calls "class-laden language" deleted from a presidential speech and also how she helped prevent the Democrats from appealing to "class conflict" in a general election -- on the grounds that it "is not an effective approach" to the "swing voters in the middle of the electorate."
When all else fails, Clinton supporters will pull out the old centrist Democrat standby: "It's us or the Republicans! Are you really willing to throw the election to Trump just to show what a good purist you are, you horrible socialist splitter?" It's a cudgel the Clintons have used many times before, and are still using today, to blame voters for their lack of enthusiasm for anti-worker, neo-liberal policies.
Answer: no, probably not. Clinton probably won't throw liberals into concentration camps, and Trump probably will, if his rhetoric is to be believed.
But given all the above, you might understand why a lot of economic liberals will be throwing the lever for Clinton with a feeling of disgust, disappointment, and sadness that the abuse of the American worker and the glorification of the American plutocrat will continue for at least another eight years.
Thursday, May 10, 2012
Is One State Better Than Another, or Are We All Screwed?
Today I read a sensational press release from the Pew Charitable Trust about a study they recently released showing which states have better or worse economic mobility. Economic mobility, if you didn't know, is the ability to rise (or fall) from one economic class to another. The American Dream is all about economic mobility- giving your kids a better life and better opportunities than you had yourself.
Their "key findings": (1) Northeastern states, generally liberal... oh, and also Utah, which ISN'T... have better upward mobility; and (2) ex-Confederate states either have worse upward mobility or more downward mobility.
But their determination of this seemed, well, a bit glib. I wanted to get into the guts of this study and see what it really means.
Details:
(1) The study focused on baby-boomers and slightly before- people born from 1943 to 1958.
(2) The study covered the ten year period from 1998 to 2007. (This means the numbers include the peak of the dot-com boom, the dot-com/9-11 bust, but doesn't include the economic meltdown of 2008.)
(3) The study used US Census Department and other anonymous sources and statistical analysis; it did NOT follow specific individuals over a ten-year period.
(4) The absolute percentage of income growth DOES include inflation; the 2007 income is compared to what the similar 1998 income would be in 2007 dollars. (This is a good thing, since according to data I looked up at US Inflation Calculator, cumulative annual inflation means prices went up by about 29% from 1998 to 2007- and NO state in the Pew study showed an absolute income growth of 29%, or even close.)
(5) "Relative income mobility" is measured twice.
(5a) Positive mobility is measured by tracking people in the bottom half of all earners and counting those who moved up by ten percentile points. (For example, someone who makes more than 35% of Americans moving up to making more than 47% of Americans counts; someone only making more than 8% of all Americans moving up to 15% does NOT. Nor does someone moving from 51% to 81%.
(5b) Negative mobility is measured by tracking people in the top half of all earners and counting those who moved down by ten percentile points. That means someone dropping from lower-middle-class (say, the 40% mark) into poverty (16%) doesn't count, but someone dropping from 90% to 75% does.
In both cases, the ten percentile movement minimum is meant to eliminate statistical noise- small movements that don't show actual long-term trends.
(6) Only people who had positive income for all ten years were counted. Take a loss one year for tax purposes, or hit a rough patch in life's highway, and Pew didn't count you.
(7) Some states had sample sizes so small as to be statistically questionable, and nine small enough that they had to be lumped together into supergroups to return any meaningful conclusions at all. Thus, Maine and Vermont are considered interchangable; Alaska is considered the same as Idaho, Montana and Wyoming; and Iowa, apparently, is an extension of North and South Dakota (or vice versa).
These last three items give me SEVERE misgivings about this study. It seems to me that a lot is being ignored for the sake of being able to give simple, happy, pat answers at the end of the study. If any statistician or student of demographics reads this, I'd appreciate their views on how Pew handled this. Myself, I'm not all that impressed.
But still I am curious as to the details. So- I looked at their actual data sheet rather than the interactive map linked to above to see what their actual numbers were.
The national averages to compare each individual state to:
ABSOLUTE MOBILITY: 17% (the mean American earner saw earnings grow by 17% after inflation)
RELATIVE UPWARD MOBILITY: 34% (of the bottom half of earners, 34% rose ten percentile points or more in the absolute ranking of American earners)
RELATIVE DOWNWARD MOBILITY: 28% (of the top half of earners, 28% dropped ten percentile points or more in the absolute ranking of American earners)
And already there are all sorts of unanswered questions here. Why don't #2 and #3 equal out? How many of the top half got richer than their peers, and how many of the bottom half sank deeper? There really isn't much meat in this study, is there?
But to persevere. Texas was ranked as one of the "loser" states because, according to their definitions and statistical analysis, it had worse-than-national-average results in two of the three stats. Oh so?
Here's a direct comparison:
ABSOLUTE MOBILITY: Texas 15%, national avg. 17%, marked FAIL (interesting: Arizona also shows 15%, but is NOT marked fail. Pew's excuse is that they didn't mark as above or below average states with small sample sizes unless the difference was BIG, due to margin of error calculations.)
R. UPWARD MOBILITY: Texas 31%, national avg. 34%, marked FAIL
R. DOWNWARD MOBILITY: Texas 30%, national avg. 28%, marked AVERAGE (apparently 2% is within margin of error on this, but not on Absolute Mobility)
And that's just my home state. The more I look at the results from the other states, the more they seem all over the map, thanks in no small part to Pew's margin-of-error issues. Well, to hell with their margin of error issues- let's ignore that and go by the actual numbers they used.
If we go by a straight 3% deviancy threshhold- that is, any measure 3% off from the national average counts as "above" or "below" average, then here are the states that come out very good (all three above average), good (2/3 above), bad (2/3 below) or very bad (all below). Boldface indicates states Pew didn't list in their key findings. Italics indicate a state Pew listed which, by a 3% threshhold, this method eliminates.
VERY GOOD: Maryland, New Jersey, New York
GOOD: Oregon, Michigan, Delaware, Pennsylvania, Connecticut, Massachusetts, Rhode Island, Kansas, Utah
BAD: Missouri, Nebraska, Arkansas, Florida, Kentucky, Mississippi, North Carolina, New Mexico, Texas (just out)
VERY BAD: District of Columbia, Alabama (promoted from Bad), Louisiana, South Carolina, West Virginia, Oklahoma
So, yes, there's still a big clump of bad in the Confederacy and a big clump of good in the Northeast and Mid-Atlantic. But what do Utah and Kansas have in common with the Northeast? What does Oregon have in common with either group? And what does New Mexico, or the national capitol, share with the old South that makes them crappy?
As an experiment, let's try adding the categories of Good-ish and Bad-ish to see how things develop. Good-ish is 1 above-average stat and no below-average stats; Bad-ish is the opposite.
GOOD-ISH: California, Michigan
BAD-ISH: Nevada, Maine/Vermont, Alaska/Idaho/Montana/Wyoming, Florida, Georgia, Tennessee, Texas
No, the closest that comes to resolving anything is that it sucks to be in the old South. Not all red states suck, though- the Dakotas are OK (unless Pew's stats have Iowa bailing them out in that stupid supergroup), as is Arizona. New England apparently isn't all roses either (is Maine dragging Vermont down in THAT supergroup, or do they both kind of suck equally?).
For your own graphic aid, here's a quick and dirty flood-fill map I made of the states: dark green = very good, blue-green is good-ish, yellow is bad-ish, dark red is very bad.
So, what does all of this tell me? It tells me that this study is useless if you intend to use it for any advocacy position. The methodolgy and data analysis can be questioned half a dozen ways by a layman- and, I'm sure, much more thoroughly by experts. It just so happened that, if you looked at the stats in one particular way, it showed a couple of patterns. Look at the stats more deeply, though, and you see two things: (1) the patterns go away, except for a bias against the old South; and (2) the stats look VERY shaky for the purpose of comparing states, when there are at least fifteen states whose stats are too weak to compare reliably on a one-on-one basis to the rest.
If you were planning on using this study to say things like, "Blue states GOOD! Red states BA-A-A-AD!" please don't. There's probably good evidence for the assertion... but this isn't good evidence for much of ANYTHING. Don't discredit your cause with junk numbers; that's what conservatives do.
Their "key findings": (1) Northeastern states, generally liberal... oh, and also Utah, which ISN'T... have better upward mobility; and (2) ex-Confederate states either have worse upward mobility or more downward mobility.
But their determination of this seemed, well, a bit glib. I wanted to get into the guts of this study and see what it really means.
Details:
(1) The study focused on baby-boomers and slightly before- people born from 1943 to 1958.
(2) The study covered the ten year period from 1998 to 2007. (This means the numbers include the peak of the dot-com boom, the dot-com/9-11 bust, but doesn't include the economic meltdown of 2008.)
(3) The study used US Census Department and other anonymous sources and statistical analysis; it did NOT follow specific individuals over a ten-year period.
(4) The absolute percentage of income growth DOES include inflation; the 2007 income is compared to what the similar 1998 income would be in 2007 dollars. (This is a good thing, since according to data I looked up at US Inflation Calculator, cumulative annual inflation means prices went up by about 29% from 1998 to 2007- and NO state in the Pew study showed an absolute income growth of 29%, or even close.)
(5) "Relative income mobility" is measured twice.
(5a) Positive mobility is measured by tracking people in the bottom half of all earners and counting those who moved up by ten percentile points. (For example, someone who makes more than 35% of Americans moving up to making more than 47% of Americans counts; someone only making more than 8% of all Americans moving up to 15% does NOT. Nor does someone moving from 51% to 81%.
(5b) Negative mobility is measured by tracking people in the top half of all earners and counting those who moved down by ten percentile points. That means someone dropping from lower-middle-class (say, the 40% mark) into poverty (16%) doesn't count, but someone dropping from 90% to 75% does.
In both cases, the ten percentile movement minimum is meant to eliminate statistical noise- small movements that don't show actual long-term trends.
(6) Only people who had positive income for all ten years were counted. Take a loss one year for tax purposes, or hit a rough patch in life's highway, and Pew didn't count you.
(7) Some states had sample sizes so small as to be statistically questionable, and nine small enough that they had to be lumped together into supergroups to return any meaningful conclusions at all. Thus, Maine and Vermont are considered interchangable; Alaska is considered the same as Idaho, Montana and Wyoming; and Iowa, apparently, is an extension of North and South Dakota (or vice versa).
These last three items give me SEVERE misgivings about this study. It seems to me that a lot is being ignored for the sake of being able to give simple, happy, pat answers at the end of the study. If any statistician or student of demographics reads this, I'd appreciate their views on how Pew handled this. Myself, I'm not all that impressed.
But still I am curious as to the details. So- I looked at their actual data sheet rather than the interactive map linked to above to see what their actual numbers were.
The national averages to compare each individual state to:
ABSOLUTE MOBILITY: 17% (the mean American earner saw earnings grow by 17% after inflation)
RELATIVE UPWARD MOBILITY: 34% (of the bottom half of earners, 34% rose ten percentile points or more in the absolute ranking of American earners)
RELATIVE DOWNWARD MOBILITY: 28% (of the top half of earners, 28% dropped ten percentile points or more in the absolute ranking of American earners)
And already there are all sorts of unanswered questions here. Why don't #2 and #3 equal out? How many of the top half got richer than their peers, and how many of the bottom half sank deeper? There really isn't much meat in this study, is there?
But to persevere. Texas was ranked as one of the "loser" states because, according to their definitions and statistical analysis, it had worse-than-national-average results in two of the three stats. Oh so?
Here's a direct comparison:
ABSOLUTE MOBILITY: Texas 15%, national avg. 17%, marked FAIL (interesting: Arizona also shows 15%, but is NOT marked fail. Pew's excuse is that they didn't mark as above or below average states with small sample sizes unless the difference was BIG, due to margin of error calculations.)
R. UPWARD MOBILITY: Texas 31%, national avg. 34%, marked FAIL
R. DOWNWARD MOBILITY: Texas 30%, national avg. 28%, marked AVERAGE (apparently 2% is within margin of error on this, but not on Absolute Mobility)
And that's just my home state. The more I look at the results from the other states, the more they seem all over the map, thanks in no small part to Pew's margin-of-error issues. Well, to hell with their margin of error issues- let's ignore that and go by the actual numbers they used.
If we go by a straight 3% deviancy threshhold- that is, any measure 3% off from the national average counts as "above" or "below" average, then here are the states that come out very good (all three above average), good (2/3 above), bad (2/3 below) or very bad (all below). Boldface indicates states Pew didn't list in their key findings. Italics indicate a state Pew listed which, by a 3% threshhold, this method eliminates.
VERY GOOD: Maryland, New Jersey, New York
GOOD: Oregon, Michigan, Delaware, Pennsylvania, Connecticut, Massachusetts, Rhode Island, Kansas, Utah
BAD: Missouri, Nebraska, Arkansas, Florida, Kentucky, Mississippi, North Carolina, New Mexico, Texas (just out)
VERY BAD: District of Columbia, Alabama (promoted from Bad), Louisiana, South Carolina, West Virginia, Oklahoma
So, yes, there's still a big clump of bad in the Confederacy and a big clump of good in the Northeast and Mid-Atlantic. But what do Utah and Kansas have in common with the Northeast? What does Oregon have in common with either group? And what does New Mexico, or the national capitol, share with the old South that makes them crappy?
As an experiment, let's try adding the categories of Good-ish and Bad-ish to see how things develop. Good-ish is 1 above-average stat and no below-average stats; Bad-ish is the opposite.
GOOD-ISH: California, Michigan
BAD-ISH: Nevada, Maine/Vermont, Alaska/Idaho/Montana/Wyoming, Florida, Georgia, Tennessee, Texas
No, the closest that comes to resolving anything is that it sucks to be in the old South. Not all red states suck, though- the Dakotas are OK (unless Pew's stats have Iowa bailing them out in that stupid supergroup), as is Arizona. New England apparently isn't all roses either (is Maine dragging Vermont down in THAT supergroup, or do they both kind of suck equally?).
For your own graphic aid, here's a quick and dirty flood-fill map I made of the states: dark green = very good, blue-green is good-ish, yellow is bad-ish, dark red is very bad.
So, what does all of this tell me? It tells me that this study is useless if you intend to use it for any advocacy position. The methodolgy and data analysis can be questioned half a dozen ways by a layman- and, I'm sure, much more thoroughly by experts. It just so happened that, if you looked at the stats in one particular way, it showed a couple of patterns. Look at the stats more deeply, though, and you see two things: (1) the patterns go away, except for a bias against the old South; and (2) the stats look VERY shaky for the purpose of comparing states, when there are at least fifteen states whose stats are too weak to compare reliably on a one-on-one basis to the rest.
If you were planning on using this study to say things like, "Blue states GOOD! Red states BA-A-A-AD!" please don't. There's probably good evidence for the assertion... but this isn't good evidence for much of ANYTHING. Don't discredit your cause with junk numbers; that's what conservatives do.
Sunday, April 27, 2008
How Bad is Inflation Anyway?
Getting away from the Presidential horse race and the horse shit road apples it produces, I was pointed to this article concerning the true rate of inflation by an acquaintance on LiveJournal. Personally I think the numbers are a bit exaggerated, but it should be completely unsurprising that the government jiggers its own statistics on unemployment and inflation for its own purposes.
Before I go into the actual inflation numbers, let me try to sum up what drives inflation in our regulated market economy. (Actual economists are welcome to correct me on outright errors in fact, but bear in mind that I personally believe economists make a living by making wild-ass guesses. Accuracy is by no means necessary- see "supply-side economics" on the one hand and the Von Mises Institute on the other hand.)
To paraphrase a quote from somewhere in J. R. R. Tolkien's many writings, you need gold to breed gold; that is, in a capitalist society you need capital in order to acquire more. Most people do not start life with much capital- little more, in fact, than the productivity of their hands and mind, plus such support as family and friends can contribute. In order to build upon this, a person must gain access in some form to capital in the form of currency. That usually means borrowing money.
Moneylending, of course, never began as a way of financing business; on the contrary, it was used to finance luxury and waste. The modern banking system came about to enable the wealthy to build mansions and castles, to allow kings to prosecute wars with empty treasuries. Only with the dawn of the mercantile era, beginning with the Dutch and English, do you have business turning to the moneylenders on a major scale to finance enterprise.
Moneylenders charge interest on their loans to make their profit. As a general rule, the more risky a loan, the higher an interest is charged. Competition among moneylenders, as a general rule, curbs the greed impulse. In the early days a moneylender could only loan out money he actually had, but this changed about the time of the American Revolution, when some bright people discovered that they could loan out much more money than they actually had... provided that people believed the money would be found if asked for.
This brings us down to our modern system, where less than half the currency in circulation has any actual relationship to real money. The majority of dollars in your bank account exist only because somebody, somewhere, loaned them to somebody else and thus, in effect, created them out of thin air.
If this sounds like a recipe for disaster, you're right, and it's happened before. The trick of loaning out more money than you have only works so long as the vaporware dollars are treated as if they were the real thing. When too many people come back to the bank and demand real money- or, worse, withdraw the investments that provide the core funds to support the loans- this is called a bank run.
If a bank suffers a run, it goes bust, and all the funds that it loaned out without backing suddenly become worthless. In the 19th Century, when banks were allowed to print their own paper currency, this resulted in a lot of people becoming penniless overnight. Bank runs caused three economic collapses- the Panics of 1837, 1853, and 1873- each much worse than the Great Depression. Government eventually solved this problem by regulating it away- but more on that in a moment.
Now, let's put this system into a closed loop, where there is only a finite and unchanging amount of currency. People borrow money; they eventually have to pay it back, plus a bit extra. Some people can pay this money back, in which case the lender profits; some can't, in which case the lender loses all. The system never breaks down completely, but there's a great deal of instability. This means that the economy can never grow very large (which is bad for everyone); it also means that the wealthy risk going bust, which they won't tolerate if they can help it.
Now let's adjust things a bit by allowing a trickle of new currency to enter the system- just a little, but steadily. The first thing this does is make it slightly easier for people to pay their debts- which means that lenders are protected from their own risk-taking. When lenders are protected, so is anyone who has money "created" through the act of lending beyond cash reserves. This results in a more stable and predictable economy. The downside is, of course, inflation.
Inflation is what happens when a currency buys less than it used to. Usually (but not always) this is due to an increase in the amount of currency in circulation. As any collector will tell you, the more there is of something, the less valuable it becomes. If you're a member of the investor class, this is not a problem- you stay ahead of the curve by lending or investing at rates higher than the rate of inflation. If you're poor, or if you are on a fixed income, or if you just sit on your money, then it's a bad thing, because prices go up while your ability to buy goes down.
Deflation, of course, is the exact opposite. Deflation is a good thing for those with little money, because it means they effectively have more. It is very, very bad for investors, though- because when existing money is worth more, there is less incentive to borrow. In deflationary periods loans are paid off and not renewed. Interest rates are forced down by lack of demand. For the truly wealthy this is not too much of a problem. For businesses who only act as middlemen between those with the money and those who borrow it- most banks, for instance- it can kill, leading to the same problems as a bank run.
With this theory firmly in mind, United States banking regulations have skewed towards preserving the system- usually on the premise that it's better for the poor to be ground down by inflation than for the whole economy to collapse. The United States has not had a significant deflationary period since the Great Depression. Government policy has been to keep inflation controlled... but, more practically, to keep inflation, period.
Fast forward to the past ten years or so. During the Republican ascendancy in Congress, and then the Bush White House, regulations and policy have been changed to allow or require more lending, for higher interest. Laws against usury (charging excessive interest on loans) have been relaxed, to the point that some credit cards issued today charge interest of as much as 35% per year- rates which, twenty years ago, would be called loan sharking. The interest rates charged by the government to loan money to keep banks stable have been kept low deliberately to encourage people, both businesses and individuals, to borrow and spend more money. Worst of all, massive deficit spending by the government has led to massive borrowing by that government.
By removing the caps on interest, government has encouraged lending to high-risk borrowers who otherwise couldn't get credit... and who, therefore, don't get the benefit of competition, which means major profit for the lender. Low overall interest rates encourage people to seek loans more often. Government borrowing and spending brings in currency from outside the nation. All of these things mean more loans, which means more "created" money, which means more currency in circulation...
... which means more, much more, inflation.
The result? A period of illusory prosperity. The economy appears to expand, but since the expansion is entirely based on borrowed money created for the purpose, any actual gain in value is concentrated exclusively in the investing classes. Those who don't loan out money for a profit find that any gains they make go into paying interest. Meanwhile, prices go steadily up, and up, and the more money is borrowed, the faster the prices go up.
There are two ways to control or reverse inflation. The more pleasant method is to make the currency in question more desirable- that is, to increase its buying power. This can be done, but it depends on a stable economy and a government budget that's at least close to balanced- which isn't happening any time soon.
The other way is to take money out of circulation. That means, in this case, cutting back on all the borrowing and lending- cutting back a LOT.
The problem is, if you cut back on borrowing and lending, you get a recession- a period where the economy shrinks. That's unpopular on multiple levels. The fact that sometimes it is necessary appears to be lost by everyone in government at the moment. Again, stability of the system (and the benefit of the wealthiest) is more important to those in power than long-term effects from an artificially "productive" economy based on borrowing.
So- what's being done, now that loans are beginning to default on massive levels?
First- lenders who loaned money unwisely are being bailed out of the consequences of their mistakes.
Second- those who borrowed money on blatantly false pretenses are NOT being bailed out. Net result of these two points- an encouragement to loan out more money, and to deliberately deceive borrowers in the process.
Third- government policy is keeping interest rates to banks low. Result- encourage, you guessed it, more lending and borrowing.
Fourth- deficit government spending continues to increase, which requires- guess what?- more lending and borrowing.
Thus, in trying to stave off recession, the government creates more and more inflation. Eventually these efforts will not be sufficient- we may have got to this point already- and we get stagflation, which is where the economy shrinks and inflation grows at the same time. Jobs dry up, wages either stay low or fail to keep up with inflation. This is the worst of all possible worlds...
... for everyone except the moneychangers, who in the short term will make a killing as they loan money to people who try to extend their standard of living a bit longer, hoping the period will pass. Evidence strongly suggests we're already at this stage, and have been for most of the Bush Presidency.
If it doesn't pass, then you get a crash- a deep recession such as the 1970s, or maybe even a new Great Depression.
The softest solution would be a mild deflationary period- allow people to get out of debt, retract the borrowing, balance the federal budget, and consolidate the national economy. This would especially benefit the very same people who are currently facing foreclosure and bankruptcy- bankruptcy under rules recently changed to benefit the lenders and to make it much, much harder to get out from under crippling, unrepayable debt.
But, since deflation is bad for banks, bad for investors, bad for the wealthiest of the wealthy... neither the Democrats nor the Republicans are willing to consider it.
A major crash is coming. It's been coming for thirty years or more, since the very term "stagflation" was coined during the Nixon administration. The longer that crash is averted, the worse it will be when it hits. Unfortunately, rather than aim for a soft landing, our politicians are attempting to avoid the crash entirely, pretending that an economy can grow forever and that borrowing to sustain that growth can be done indefinitely without consequences.
And what has been the result? Well, for my little business it's meant that the prices I charge today for product are, roughly speaking, 150% the prices I charged ten years ago. (And they're about to go up a bit more.) It means that a soft drink that cost $0.89 in 2000 costs $1.39 now- about the same price change as a dozen large eggs, or a cheap loaf of bread. It means that people who have had a 2% annual increase in income every year have actually been losing money, because prices have been going up by more than that- much more. It means that all but a tiny segment of Americans have been getting steadily poorer, not richer...
... and it's been that way for quite some time now.
To end at the beginning, let's look at the chart which makes up the basis of the article I mentioned reading.
Averaging out the monthly estimates of annual inflation into a single number for the year- and, to make it easier on myself, a whole number estimate of that- here's what the chart says:
CURRENT GOVERNMENT STANDARD:
2001 - 3%
2002 - 2%
2003 - 2%
2004 - 3%
2005 - 4%
2006 - 4%
2007 - 3%
PRE-1998 GOVERNMENT STANDARD:
2001 - 5%
2002 - 4%
2003 - 5%
2004 - 6%
2005 - 7%
2006 - 7%
2007 - 6%
PRE-1983 GOVERNMENT STANDARD:
2001 - 9%
2002 - 8%
2003 - 8%
2004 - 9%
2005 - 10%
2006 - 10%
2007 - 11%
Using these numbers, by the Clinton-Bush standard what you could buy for $100 in 2000 now costs $123; by the Reagan standard, that $100 in 2000 dollars now costs $147; and by the pre-Reagan standard, that $100 worth of stuff now costs a whopping $186.
I think we can all agree that the first standard is an outright lie. We can discuss which of the other two is more accurate, but fact is that both are very, very bad. If inflation isn't curbed (or, for personal preferenced, reversed for a while), the economy will collapse not from the top down but from the bottom up, as the buying power of the lower and middle classes dries up. That will lead to a prolonged depression and catastrophic reduction of money supply.
It took a world war and the gutting of the economy of the rest of the world for the United States to recover from its last depression. If it happens again, what will it take to recover?
WILL we recover?
And if we can't answer those questions, then why don't we find a solid, long-term solution to the problem instead of temporary patches and quick-fixes that will only make the crash worse when it comes?
Trickle-down economics doesn't work in the long term, rich folks. If you want to preserve your spot on top of the economic ladder, you'll start making sure the rest of the rungs don't fall out.
Before I go into the actual inflation numbers, let me try to sum up what drives inflation in our regulated market economy. (Actual economists are welcome to correct me on outright errors in fact, but bear in mind that I personally believe economists make a living by making wild-ass guesses. Accuracy is by no means necessary- see "supply-side economics" on the one hand and the Von Mises Institute on the other hand.)
To paraphrase a quote from somewhere in J. R. R. Tolkien's many writings, you need gold to breed gold; that is, in a capitalist society you need capital in order to acquire more. Most people do not start life with much capital- little more, in fact, than the productivity of their hands and mind, plus such support as family and friends can contribute. In order to build upon this, a person must gain access in some form to capital in the form of currency. That usually means borrowing money.
Moneylending, of course, never began as a way of financing business; on the contrary, it was used to finance luxury and waste. The modern banking system came about to enable the wealthy to build mansions and castles, to allow kings to prosecute wars with empty treasuries. Only with the dawn of the mercantile era, beginning with the Dutch and English, do you have business turning to the moneylenders on a major scale to finance enterprise.
Moneylenders charge interest on their loans to make their profit. As a general rule, the more risky a loan, the higher an interest is charged. Competition among moneylenders, as a general rule, curbs the greed impulse. In the early days a moneylender could only loan out money he actually had, but this changed about the time of the American Revolution, when some bright people discovered that they could loan out much more money than they actually had... provided that people believed the money would be found if asked for.
This brings us down to our modern system, where less than half the currency in circulation has any actual relationship to real money. The majority of dollars in your bank account exist only because somebody, somewhere, loaned them to somebody else and thus, in effect, created them out of thin air.
If this sounds like a recipe for disaster, you're right, and it's happened before. The trick of loaning out more money than you have only works so long as the vaporware dollars are treated as if they were the real thing. When too many people come back to the bank and demand real money- or, worse, withdraw the investments that provide the core funds to support the loans- this is called a bank run.
If a bank suffers a run, it goes bust, and all the funds that it loaned out without backing suddenly become worthless. In the 19th Century, when banks were allowed to print their own paper currency, this resulted in a lot of people becoming penniless overnight. Bank runs caused three economic collapses- the Panics of 1837, 1853, and 1873- each much worse than the Great Depression. Government eventually solved this problem by regulating it away- but more on that in a moment.
Now, let's put this system into a closed loop, where there is only a finite and unchanging amount of currency. People borrow money; they eventually have to pay it back, plus a bit extra. Some people can pay this money back, in which case the lender profits; some can't, in which case the lender loses all. The system never breaks down completely, but there's a great deal of instability. This means that the economy can never grow very large (which is bad for everyone); it also means that the wealthy risk going bust, which they won't tolerate if they can help it.
Now let's adjust things a bit by allowing a trickle of new currency to enter the system- just a little, but steadily. The first thing this does is make it slightly easier for people to pay their debts- which means that lenders are protected from their own risk-taking. When lenders are protected, so is anyone who has money "created" through the act of lending beyond cash reserves. This results in a more stable and predictable economy. The downside is, of course, inflation.
Inflation is what happens when a currency buys less than it used to. Usually (but not always) this is due to an increase in the amount of currency in circulation. As any collector will tell you, the more there is of something, the less valuable it becomes. If you're a member of the investor class, this is not a problem- you stay ahead of the curve by lending or investing at rates higher than the rate of inflation. If you're poor, or if you are on a fixed income, or if you just sit on your money, then it's a bad thing, because prices go up while your ability to buy goes down.
Deflation, of course, is the exact opposite. Deflation is a good thing for those with little money, because it means they effectively have more. It is very, very bad for investors, though- because when existing money is worth more, there is less incentive to borrow. In deflationary periods loans are paid off and not renewed. Interest rates are forced down by lack of demand. For the truly wealthy this is not too much of a problem. For businesses who only act as middlemen between those with the money and those who borrow it- most banks, for instance- it can kill, leading to the same problems as a bank run.
With this theory firmly in mind, United States banking regulations have skewed towards preserving the system- usually on the premise that it's better for the poor to be ground down by inflation than for the whole economy to collapse. The United States has not had a significant deflationary period since the Great Depression. Government policy has been to keep inflation controlled... but, more practically, to keep inflation, period.
Fast forward to the past ten years or so. During the Republican ascendancy in Congress, and then the Bush White House, regulations and policy have been changed to allow or require more lending, for higher interest. Laws against usury (charging excessive interest on loans) have been relaxed, to the point that some credit cards issued today charge interest of as much as 35% per year- rates which, twenty years ago, would be called loan sharking. The interest rates charged by the government to loan money to keep banks stable have been kept low deliberately to encourage people, both businesses and individuals, to borrow and spend more money. Worst of all, massive deficit spending by the government has led to massive borrowing by that government.
By removing the caps on interest, government has encouraged lending to high-risk borrowers who otherwise couldn't get credit... and who, therefore, don't get the benefit of competition, which means major profit for the lender. Low overall interest rates encourage people to seek loans more often. Government borrowing and spending brings in currency from outside the nation. All of these things mean more loans, which means more "created" money, which means more currency in circulation...
... which means more, much more, inflation.
The result? A period of illusory prosperity. The economy appears to expand, but since the expansion is entirely based on borrowed money created for the purpose, any actual gain in value is concentrated exclusively in the investing classes. Those who don't loan out money for a profit find that any gains they make go into paying interest. Meanwhile, prices go steadily up, and up, and the more money is borrowed, the faster the prices go up.
There are two ways to control or reverse inflation. The more pleasant method is to make the currency in question more desirable- that is, to increase its buying power. This can be done, but it depends on a stable economy and a government budget that's at least close to balanced- which isn't happening any time soon.
The other way is to take money out of circulation. That means, in this case, cutting back on all the borrowing and lending- cutting back a LOT.
The problem is, if you cut back on borrowing and lending, you get a recession- a period where the economy shrinks. That's unpopular on multiple levels. The fact that sometimes it is necessary appears to be lost by everyone in government at the moment. Again, stability of the system (and the benefit of the wealthiest) is more important to those in power than long-term effects from an artificially "productive" economy based on borrowing.
So- what's being done, now that loans are beginning to default on massive levels?
First- lenders who loaned money unwisely are being bailed out of the consequences of their mistakes.
Second- those who borrowed money on blatantly false pretenses are NOT being bailed out. Net result of these two points- an encouragement to loan out more money, and to deliberately deceive borrowers in the process.
Third- government policy is keeping interest rates to banks low. Result- encourage, you guessed it, more lending and borrowing.
Fourth- deficit government spending continues to increase, which requires- guess what?- more lending and borrowing.
Thus, in trying to stave off recession, the government creates more and more inflation. Eventually these efforts will not be sufficient- we may have got to this point already- and we get stagflation, which is where the economy shrinks and inflation grows at the same time. Jobs dry up, wages either stay low or fail to keep up with inflation. This is the worst of all possible worlds...
... for everyone except the moneychangers, who in the short term will make a killing as they loan money to people who try to extend their standard of living a bit longer, hoping the period will pass. Evidence strongly suggests we're already at this stage, and have been for most of the Bush Presidency.
If it doesn't pass, then you get a crash- a deep recession such as the 1970s, or maybe even a new Great Depression.
The softest solution would be a mild deflationary period- allow people to get out of debt, retract the borrowing, balance the federal budget, and consolidate the national economy. This would especially benefit the very same people who are currently facing foreclosure and bankruptcy- bankruptcy under rules recently changed to benefit the lenders and to make it much, much harder to get out from under crippling, unrepayable debt.
But, since deflation is bad for banks, bad for investors, bad for the wealthiest of the wealthy... neither the Democrats nor the Republicans are willing to consider it.
A major crash is coming. It's been coming for thirty years or more, since the very term "stagflation" was coined during the Nixon administration. The longer that crash is averted, the worse it will be when it hits. Unfortunately, rather than aim for a soft landing, our politicians are attempting to avoid the crash entirely, pretending that an economy can grow forever and that borrowing to sustain that growth can be done indefinitely without consequences.
And what has been the result? Well, for my little business it's meant that the prices I charge today for product are, roughly speaking, 150% the prices I charged ten years ago. (And they're about to go up a bit more.) It means that a soft drink that cost $0.89 in 2000 costs $1.39 now- about the same price change as a dozen large eggs, or a cheap loaf of bread. It means that people who have had a 2% annual increase in income every year have actually been losing money, because prices have been going up by more than that- much more. It means that all but a tiny segment of Americans have been getting steadily poorer, not richer...
... and it's been that way for quite some time now.
To end at the beginning, let's look at the chart which makes up the basis of the article I mentioned reading.
Averaging out the monthly estimates of annual inflation into a single number for the year- and, to make it easier on myself, a whole number estimate of that- here's what the chart says:
CURRENT GOVERNMENT STANDARD:
2001 - 3%
2002 - 2%
2003 - 2%
2004 - 3%
2005 - 4%
2006 - 4%
2007 - 3%
PRE-1998 GOVERNMENT STANDARD:
2001 - 5%
2002 - 4%
2003 - 5%
2004 - 6%
2005 - 7%
2006 - 7%
2007 - 6%
PRE-1983 GOVERNMENT STANDARD:
2001 - 9%
2002 - 8%
2003 - 8%
2004 - 9%
2005 - 10%
2006 - 10%
2007 - 11%
Using these numbers, by the Clinton-Bush standard what you could buy for $100 in 2000 now costs $123; by the Reagan standard, that $100 in 2000 dollars now costs $147; and by the pre-Reagan standard, that $100 worth of stuff now costs a whopping $186.
I think we can all agree that the first standard is an outright lie. We can discuss which of the other two is more accurate, but fact is that both are very, very bad. If inflation isn't curbed (or, for personal preferenced, reversed for a while), the economy will collapse not from the top down but from the bottom up, as the buying power of the lower and middle classes dries up. That will lead to a prolonged depression and catastrophic reduction of money supply.
It took a world war and the gutting of the economy of the rest of the world for the United States to recover from its last depression. If it happens again, what will it take to recover?
WILL we recover?
And if we can't answer those questions, then why don't we find a solid, long-term solution to the problem instead of temporary patches and quick-fixes that will only make the crash worse when it comes?
Trickle-down economics doesn't work in the long term, rich folks. If you want to preserve your spot on top of the economic ladder, you'll start making sure the rest of the rungs don't fall out.
Friday, February 1, 2008
Cull Day, After a Long Time
My web browser's running slow, possibly due to all the news articles I've been holding onto the past few days. Let's get rid of some of those, shall we?
First, Hillary Clinton. The last couple days Hillary has been singing John Edwards' praises, but it's worth remembering that the Clinton campaign ran negative robo-calls the day of the South Carolina primaries. Granted, I agree with the content of the calls: I'm glad as hell John "Got Rich on Malpractice Suits Using Junk Science" Edwards is out of the race. But the transcript of these calls shows more and more what kind of people the Clintons are: burn your bridges now, mend them later after the battle's won. I'm hoping that Obama represents a bridge too far...
The rump FEC commission rules that two people pooling their money to attend a political convention or do anything else constitute a PAC... and thus must file with the FEC and abide by spending and donation limits and reporting. Thank God the Democrats are blocking four replacement members of the FEC against Bush's board-packing scheme, otherwise this piece of garbage would actually act as law. As it is, this ruling would quite effectively prevent any new or small groups from getting anywhere in the political arena, while old established PACs and the two big political parties can keep trundling on. Anyone who thinks the Bipartisan Campaign Reform Act was a good idea and that "public funding" of elections is a better one, beware... this is what your policies result in- the silencing of individual free speech.
You've probably heard this one again and again... Bush Administration Lied Nearly 1,000 Times About Iraq. My response: no shit, Sherlock.
Ezra Klien debunks Republican claims that the Bush years have been good for the economy. In truth, Dubya, who claims an economic record "other Presidents would envy", only beats out his father. All other Presidents back to JFK had greater economic growth in their Presidencies... even Jimmy Carter. (Shocker: Carter had the same rate of economic growth in his Presidency- four years- that Reagan had in his Presidency- eight years.)
The day after the State of the Union, the Bush administration kills the largest clean-coal experimental project. Apparent reason: the FutureGen project had chosen a site in Illinois for construction... rather than any of several proposed sites in Texas. Irony: this was done the day after Bush said, on worldwide television, that America needed to invest in new, experimental clean-coal technology. Apparently not unless those investments benefit Bush's buddies, huh?
Well, that seems to have sped up my browser. Let's look through a few of the O-L-D news bookmarks from last year and see if there's anything I can dispose of, hm?
From May of last year: Jim MacDonald writes about how the FBI and CIA actually creates domestic terror cells. Specifically, he talks about how agents act as provaceteurs and encourage nitwits to become terrorists for the promise of money. As soon as the nitwits begin botching together a plan- usually with the help of those undercover FBI agents- the Feds bust them, then brag about how they're protecting us from those evil horrible Islamo-fascists. And this helps us remain secure... how?
As was mentioned by Hillary Clinton last night- so this is still current eight months after this was written- the Pentagon has drawn up no contingency plans for leaving Iraq. They have contingency plans to invade Canada, in the event that a communist beaver regime takes over in Ottawa, but they're not even considering getting out of a nation which, more and more, is expressing its wish to be shed of us.
Jack Markowitz writes that we already have socialized medicine on the state level: the wasteful bureaucratic morass that is Medicaid. Although a ton of people are technically eligible, the paperwork requirement to prove you qualify is enormous... and yet the states, in particular Texas, have funded and expanded the program until it constitutes between a quarter and a third of all state budgets. All, according to Markowitz, in order to get votes and Federal matching funds. There may be an argument in favor of national health care, but Medicaid certainly isn't it.
One of the bad laws that passed the Texas legislature last year: now, if fifteen or more students request a bible study class, your local school district must provide it. Don't know if Perry signed it, but I don't see him not signing it, to be honest. There's no guarantee that the "religious studies" classes won't be used for Christian prosletyzing... and considering my home state, every reason to expect they WILL be used that way.
And finally... some of the richest people in the new Internet economy got that way by cyber-squatting. Have you ever typed in a URL and got, instead of what you expected, a page full of spam ads? These are the guys responsible. The leader, Kevin Ham, makes no bones about his plans: he wants to be one of a handful of people to control the Internet. It's time to drop a heavy boot on cybersquatting and misleading URLs and reopen domain name registry to the common man.
That's plenty of trouble for now...
First, Hillary Clinton. The last couple days Hillary has been singing John Edwards' praises, but it's worth remembering that the Clinton campaign ran negative robo-calls the day of the South Carolina primaries. Granted, I agree with the content of the calls: I'm glad as hell John "Got Rich on Malpractice Suits Using Junk Science" Edwards is out of the race. But the transcript of these calls shows more and more what kind of people the Clintons are: burn your bridges now, mend them later after the battle's won. I'm hoping that Obama represents a bridge too far...
The rump FEC commission rules that two people pooling their money to attend a political convention or do anything else constitute a PAC... and thus must file with the FEC and abide by spending and donation limits and reporting. Thank God the Democrats are blocking four replacement members of the FEC against Bush's board-packing scheme, otherwise this piece of garbage would actually act as law. As it is, this ruling would quite effectively prevent any new or small groups from getting anywhere in the political arena, while old established PACs and the two big political parties can keep trundling on. Anyone who thinks the Bipartisan Campaign Reform Act was a good idea and that "public funding" of elections is a better one, beware... this is what your policies result in- the silencing of individual free speech.
You've probably heard this one again and again... Bush Administration Lied Nearly 1,000 Times About Iraq. My response: no shit, Sherlock.
Ezra Klien debunks Republican claims that the Bush years have been good for the economy. In truth, Dubya, who claims an economic record "other Presidents would envy", only beats out his father. All other Presidents back to JFK had greater economic growth in their Presidencies... even Jimmy Carter. (Shocker: Carter had the same rate of economic growth in his Presidency- four years- that Reagan had in his Presidency- eight years.)
The day after the State of the Union, the Bush administration kills the largest clean-coal experimental project. Apparent reason: the FutureGen project had chosen a site in Illinois for construction... rather than any of several proposed sites in Texas. Irony: this was done the day after Bush said, on worldwide television, that America needed to invest in new, experimental clean-coal technology. Apparently not unless those investments benefit Bush's buddies, huh?
Well, that seems to have sped up my browser. Let's look through a few of the O-L-D news bookmarks from last year and see if there's anything I can dispose of, hm?
From May of last year: Jim MacDonald writes about how the FBI and CIA actually creates domestic terror cells. Specifically, he talks about how agents act as provaceteurs and encourage nitwits to become terrorists for the promise of money. As soon as the nitwits begin botching together a plan- usually with the help of those undercover FBI agents- the Feds bust them, then brag about how they're protecting us from those evil horrible Islamo-fascists. And this helps us remain secure... how?
As was mentioned by Hillary Clinton last night- so this is still current eight months after this was written- the Pentagon has drawn up no contingency plans for leaving Iraq. They have contingency plans to invade Canada, in the event that a communist beaver regime takes over in Ottawa, but they're not even considering getting out of a nation which, more and more, is expressing its wish to be shed of us.
Jack Markowitz writes that we already have socialized medicine on the state level: the wasteful bureaucratic morass that is Medicaid. Although a ton of people are technically eligible, the paperwork requirement to prove you qualify is enormous... and yet the states, in particular Texas, have funded and expanded the program until it constitutes between a quarter and a third of all state budgets. All, according to Markowitz, in order to get votes and Federal matching funds. There may be an argument in favor of national health care, but Medicaid certainly isn't it.
One of the bad laws that passed the Texas legislature last year: now, if fifteen or more students request a bible study class, your local school district must provide it. Don't know if Perry signed it, but I don't see him not signing it, to be honest. There's no guarantee that the "religious studies" classes won't be used for Christian prosletyzing... and considering my home state, every reason to expect they WILL be used that way.
And finally... some of the richest people in the new Internet economy got that way by cyber-squatting. Have you ever typed in a URL and got, instead of what you expected, a page full of spam ads? These are the guys responsible. The leader, Kevin Ham, makes no bones about his plans: he wants to be one of a handful of people to control the Internet. It's time to drop a heavy boot on cybersquatting and misleading URLs and reopen domain name registry to the common man.
That's plenty of trouble for now...
Tuesday, January 22, 2008
What's Wrong With the Bail-Out Proposals?
This morning the American stock markets opened with a four hundred point plummet before recovering; as I type this, it's fluctuating wildly between fifty points down and one hundred fifty points down for the day. One of the reasons given for the recovery is the .75% rate cut announced by the Federal Reserve as an emergency measure.
My opinion: they should have let it crash.
Why? Why do I want people to lose their retirement investments, companies to lose their funding, investment banks to fold up, I hear you ask?
Because the past five years of what the Bush Administration called a healthy economy has been achieved almost entirely on borrowed money, that's why. Borrowing by federal and state governments; borrowing by corporations who saw no end in sight to expansion; borrowing by individuals who either couldn't resist impulse buys or, more often, had to borrow and keep borrowing just to maintain their existing standard of living.
The past month of fluctuating and downward-drifting stock returns, and the whispers of recession growing louder every day, was air hissing from a leak in a massive bubble economy- a bubble that surpasses the dot-com bubble, which happened during a period of balanced federal budgets. Dropping the key rate does nothing more than slap an adhesive patch on the leak and add fresh air to replace what's leaking out.
If you want to save the economy, there are several things which need to be done.
(1) Deflation. There's just too damn much real and virtual American money in circulation. This has driven down the value of the currency, driven up prices, and utterly failed to drive up the common man's wages. The result: transfer of more actual capital out of the hands of the poor and middle classes and into the hands of the wealthy... and also into the hands of foreign governments like China and Saudi Arabia, who already use this fact to exert influence on our foreign and economic policies. We need a period during which money goes out of circulation and stays out of circulation, so the value of each remaining dollar goes up.
(2) Wealth equalization. Simply put, the place to take money out of circulation from is at the very, very top of the wealth pyramid, where 1% of the nation's population owns fully half its capital. At least for a short time the federal income tax needs to be made steeply progressive- I propose taking all but the top income bracket off the rolls entirely and jacking up the top bracket's rates to make up for the lost income. I'd even go so far as to eliminate separate Social Security and Medicare taxes, lump funding for those programs into the general fund, and make the rich pay for that too- temporarily. This will encourage the wealthy to stop grabbing nine-figure annual salaries plus stock options and instead allow their employees to take home more pay.
(3) Balanced budgets aren't enough: we need surplus spending. Our governments need to bring in more than they are spending, using the surplus to pay off debts and bonds... and, once paid off, not run it up again. This will make the dollar more stable in the long term, as other nations gain faith in our government's ability to pay our debts. At the same time- and more important- it will allow taxes in the long term to be cut and STAY cut. The best way to achieve surplus spending, of course, is to cut government spending overall- and cut it radically.
So, what's in the wind for the federal economic recovery plan- points that both Republican and Democrats basically agree on?
Tax rebates/refunds to everyone... rebates and refunds not matched to cuts in spending or tax hikes at any point.
Emergency freezes on foreclosures to allow debtors and lenders to negotiate new loan agreements.
New spending programs to create government jobs and assistance programs, thus running up more debt.
In other words, the money supply is going to increase, the national debt is going to get bigger... and the wealthy are going to get wealthier. In exchange, the pain of the correction, when it comes, is put off a while.
I personally believe that the correction must come, sooner or later, on the grounds I mentioned. Yes, a deflationary period will be very painful, as will a smaller government that provides less for the citizens. Banks will fold, credit will shrivel up. It's a very unattractive prospect.
But it's going to happen anyway, eventually. As it is, we've put it off since at least 1992. The longer it takes to happen, the worse it's going to be when it does hit... and if not done in a controlled way, it could lead to a global depression the likes of which my generation not only hasn't seen but can't even imagine.
My opinion: they should have let it crash.
Why? Why do I want people to lose their retirement investments, companies to lose their funding, investment banks to fold up, I hear you ask?
Because the past five years of what the Bush Administration called a healthy economy has been achieved almost entirely on borrowed money, that's why. Borrowing by federal and state governments; borrowing by corporations who saw no end in sight to expansion; borrowing by individuals who either couldn't resist impulse buys or, more often, had to borrow and keep borrowing just to maintain their existing standard of living.
The past month of fluctuating and downward-drifting stock returns, and the whispers of recession growing louder every day, was air hissing from a leak in a massive bubble economy- a bubble that surpasses the dot-com bubble, which happened during a period of balanced federal budgets. Dropping the key rate does nothing more than slap an adhesive patch on the leak and add fresh air to replace what's leaking out.
If you want to save the economy, there are several things which need to be done.
(1) Deflation. There's just too damn much real and virtual American money in circulation. This has driven down the value of the currency, driven up prices, and utterly failed to drive up the common man's wages. The result: transfer of more actual capital out of the hands of the poor and middle classes and into the hands of the wealthy... and also into the hands of foreign governments like China and Saudi Arabia, who already use this fact to exert influence on our foreign and economic policies. We need a period during which money goes out of circulation and stays out of circulation, so the value of each remaining dollar goes up.
(2) Wealth equalization. Simply put, the place to take money out of circulation from is at the very, very top of the wealth pyramid, where 1% of the nation's population owns fully half its capital. At least for a short time the federal income tax needs to be made steeply progressive- I propose taking all but the top income bracket off the rolls entirely and jacking up the top bracket's rates to make up for the lost income. I'd even go so far as to eliminate separate Social Security and Medicare taxes, lump funding for those programs into the general fund, and make the rich pay for that too- temporarily. This will encourage the wealthy to stop grabbing nine-figure annual salaries plus stock options and instead allow their employees to take home more pay.
(3) Balanced budgets aren't enough: we need surplus spending. Our governments need to bring in more than they are spending, using the surplus to pay off debts and bonds... and, once paid off, not run it up again. This will make the dollar more stable in the long term, as other nations gain faith in our government's ability to pay our debts. At the same time- and more important- it will allow taxes in the long term to be cut and STAY cut. The best way to achieve surplus spending, of course, is to cut government spending overall- and cut it radically.
So, what's in the wind for the federal economic recovery plan- points that both Republican and Democrats basically agree on?
Tax rebates/refunds to everyone... rebates and refunds not matched to cuts in spending or tax hikes at any point.
Emergency freezes on foreclosures to allow debtors and lenders to negotiate new loan agreements.
New spending programs to create government jobs and assistance programs, thus running up more debt.
In other words, the money supply is going to increase, the national debt is going to get bigger... and the wealthy are going to get wealthier. In exchange, the pain of the correction, when it comes, is put off a while.
I personally believe that the correction must come, sooner or later, on the grounds I mentioned. Yes, a deflationary period will be very painful, as will a smaller government that provides less for the citizens. Banks will fold, credit will shrivel up. It's a very unattractive prospect.
But it's going to happen anyway, eventually. As it is, we've put it off since at least 1992. The longer it takes to happen, the worse it's going to be when it does hit... and if not done in a controlled way, it could lead to a global depression the likes of which my generation not only hasn't seen but can't even imagine.
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