Trickle down, turn around, truck a trail of bluster.
Pundits, reporters and analysts have been having a field day parsing the tax reform plans put forth by Jeb Bush and Donald Trump this week, noting that the plans really favor the ultra rich even as the candidates tout supposed benefits to everyone else.
To claim that the new plans would mean low and moderate income folks would pay no income tax at all ignores the reality that many of them don't pay any now, because their wages are so low and their standard deductions are so high.
As for favoring the wealthy, consider this: One part of the Trump plan, for example, would increase the tax rate on one source of income by 5 percentage points, but would decrease another by 15 points. The candidate insists that he will make sure all taxpayers pay their fair share, and his plan would cut taxes for everyone. But look at the numbers. By raising the tax on one income source by 5 percentage points and cutting another tax rate by 15 points, that's a net benefit to high income earners of 10 points.
And according to one analysis, low income households would save $250 in a tax year, while the one-percenters would keep $185,000.
That's supply-side, trickle-down, voodoo economics on steroids. It didn't work during the Reagan Era, and it won't work now. The rationale at the time was provided by economist Arthur Laffer, who sketched his famous Laffer Curve to "prove" that as tax rates go down, economic activity goes up, generating more revenue and thus more tax payments to replace the money "lost" through tax reductions. Moreover, as wealthy families and corporations increase their income, they therefore spend more, and the net benefits trickle down, over time, eventually, in the long run, to the rest of the population.
We should live so long. Even Jeb's father, George H.W. Bush, called it "voodoo economics" during the nomination battle with Ronald Reagan.
Now son Jeb is trotting out a plan that is nearly identical to that offered by Trump, except for some different numbers.
The candidates claim that the net result will be more savings for households plus an increase in economic activity nationwide to compensate for lost tax revenue, so the changes would be "revenue neutral," and could actually enable the federal government to reduce its deficit.
Despite his criticism of "voodoo economics," George H.W. Bush accepted the nomination as vice president under Ronald Reagan, both Republicans, and federal spending over that 12-year period ended January, 1993, left their successor, Democrat Bill Clinton, with a struggling economy and a national debt of $6.9 trillion. Even so, Clinton managed a revived economy and engineered a budget in surplus for four consecutive years.
Clinton's successor, Republican George W. Bush, cut taxes and increased spending, which more than doubled the national debt. In less than one year after Bush took office, his administration squandered a budget surplus and the national debt plummeted to $1.4 trillion.
So if past history is any indication of future performance, tax reductions that favor the already wealthy, while reducing spending that helps the needy, do not lead to economic health for the nation.
Moreover, as noted in this space September 15 in a post titled Political Economics, and an earlier posting August 28 titled Zombie Economics, national crises, downturns and depressions are far more likely to happen during Republican terms than when a Democrat occupies the White House.
Be careful what you wish for. You may get it.
Wednesday, September 30, 2015
Tuesday, September 29, 2015
Candidate Con
"Trouble. Oh, we got trouble,
Right here in River City."
Say something loud enough, long enough, to enough people, and eventually some will begin to believe it. Then you can build on that base of sham and bigotry, adding those who may not be sure of the message, but go along with what they perceive as the wisdom of the crowd and the candidate, and soon you have a political movement.
The True Believers gather around the candidate, who tells them what they want to hear, regardless of fact or reality.
He preaches the Great Truth to the local choir of True Believers, who embrace his message of Trouble and his vow to make things great again. As if things are not great now, but the master salesman can fix it.
"The Music Man" is the story of a master salesman -- really a con artist -- who tells the people of River City that there's Trouble, Trouble, Trouble, and persuades them that he can solve all their problems.
The fast-talking salesman-con artist insists he has the solution, to make things great again, since the coming of a new element that has drugged and robbed the countryside of its greatness. He plays on the fears and suspicions of people who are eager to blame someone for their problems, even those they didn't know they had.
But where's the evidence that River City is no longer great? The Music Man -- salesman/con artist -- blames it on pool. Not billiards, a fine, upstanding game, the salesman notes, but on the new game, pool. The reality, however, is that pool is largely a variation on the older, more traditional game of billiards. But because it's new, people can be persuaded that the new is to blame for whatever trouble there might be in River City. If, in fact, there is any trouble at all, and what troubles do exist have little or nothing to do with the newcomer.
Similarly, there is a master salesman today running for high office who insists there is trouble, trouble, trouble. He blames newcomers for it, and promises that if people join his band, all their troubles will be ended.
The reality in River City, however, was that there was very little trouble, and what little there was could not be blamed on a newcomer game. In addition, the salesman/con artist knew nothing about music.
In America today, there are problems, of course. There always are. But the economy is growing, the unemployment rate is down, and more jobs are becoming available. So where's the trouble? According to the leading candidate, it's the newcomers, the immigrants who are somehow different. Just as billiards is different from pool.
People often act on belief, but not always on reality. A master salesman/candidate/con artist cultivates preconceived beliefs to bank his billiard moves and score voter points to win the game. Except there's more at stake than just winning.
Meanwhile, we've got trouble. That starts with T and that stands for ...
Right here in River City."
Say something loud enough, long enough, to enough people, and eventually some will begin to believe it. Then you can build on that base of sham and bigotry, adding those who may not be sure of the message, but go along with what they perceive as the wisdom of the crowd and the candidate, and soon you have a political movement.
The True Believers gather around the candidate, who tells them what they want to hear, regardless of fact or reality.
He preaches the Great Truth to the local choir of True Believers, who embrace his message of Trouble and his vow to make things great again. As if things are not great now, but the master salesman can fix it.
"The Music Man" is the story of a master salesman -- really a con artist -- who tells the people of River City that there's Trouble, Trouble, Trouble, and persuades them that he can solve all their problems.
The fast-talking salesman-con artist insists he has the solution, to make things great again, since the coming of a new element that has drugged and robbed the countryside of its greatness. He plays on the fears and suspicions of people who are eager to blame someone for their problems, even those they didn't know they had.
But where's the evidence that River City is no longer great? The Music Man -- salesman/con artist -- blames it on pool. Not billiards, a fine, upstanding game, the salesman notes, but on the new game, pool. The reality, however, is that pool is largely a variation on the older, more traditional game of billiards. But because it's new, people can be persuaded that the new is to blame for whatever trouble there might be in River City. If, in fact, there is any trouble at all, and what troubles do exist have little or nothing to do with the newcomer.
Similarly, there is a master salesman today running for high office who insists there is trouble, trouble, trouble. He blames newcomers for it, and promises that if people join his band, all their troubles will be ended.
The reality in River City, however, was that there was very little trouble, and what little there was could not be blamed on a newcomer game. In addition, the salesman/con artist knew nothing about music.
In America today, there are problems, of course. There always are. But the economy is growing, the unemployment rate is down, and more jobs are becoming available. So where's the trouble? According to the leading candidate, it's the newcomers, the immigrants who are somehow different. Just as billiards is different from pool.
People often act on belief, but not always on reality. A master salesman/candidate/con artist cultivates preconceived beliefs to bank his billiard moves and score voter points to win the game. Except there's more at stake than just winning.
Meanwhile, we've got trouble. That starts with T and that stands for ...
Thursday, September 24, 2015
Number Games
A TV news anchor fell in love with the word "countless" during the Pope's visit to America, using it most tellingly in describing the "countless" number of airplane flights the Pope had taken during his visit as he landed in New York City.
Reality check: The number of flights could at that point be counted on the fingers of one hand, namely three flights. From Rome to Cuba, from Cuba to Washington, and from Washington to New York. Later, there would be a flight from New York to Philadelphia, and from Philadelphia back home to Rome. Total: Five airplane flights. Hardly "countless."
Then there was the college student years ago who referred to a trip from the U.S. to Asia across "countless" time zones. Total number of time zones on the planet: 24.
Scary numbers
Also in the news is the report that Caterpillar will cut 10,000 jobs. Stories like this are written in such a way as to imply that the same number of people will lose their jobs. But that's less than 10 percent of the Caterpillar corporation's total work force, and involves only management and salaried employees, not hourly workers. In addition, the cuts will be done over two years. And typically, corporate job reductions are done largely by not refilling a slot when someone retires, and by telling the personnel department to eliminate several positions. Which is to say, don't hire some new people.
Bottom line: Few people, if any, are actually fired, and big investors and stockholders are pleased to see cost reductions.
Reality check: The number of flights could at that point be counted on the fingers of one hand, namely three flights. From Rome to Cuba, from Cuba to Washington, and from Washington to New York. Later, there would be a flight from New York to Philadelphia, and from Philadelphia back home to Rome. Total: Five airplane flights. Hardly "countless."
Then there was the college student years ago who referred to a trip from the U.S. to Asia across "countless" time zones. Total number of time zones on the planet: 24.
Scary numbers
Also in the news is the report that Caterpillar will cut 10,000 jobs. Stories like this are written in such a way as to imply that the same number of people will lose their jobs. But that's less than 10 percent of the Caterpillar corporation's total work force, and involves only management and salaried employees, not hourly workers. In addition, the cuts will be done over two years. And typically, corporate job reductions are done largely by not refilling a slot when someone retires, and by telling the personnel department to eliminate several positions. Which is to say, don't hire some new people.
Bottom line: Few people, if any, are actually fired, and big investors and stockholders are pleased to see cost reductions.
Wednesday, September 23, 2015
Weasel Words and Fuzzy Phrases
Political candidates often play fast and loose with truth, to the extent that many of their statements are flat-out lies. It is therefore up to news media to expose these information manipulations for what they are. Sad to say, in the name of "balanced coverage," news media outlets report an opposing opinion regardless of its blatant asininity.
Gov. Chris Christie (R-NJ) claims he was named a federal prosecutor the day before the 9/11 disaster. Fact: There may have been a private phone call asking him to take the job, but that appointment was not announced until December, three months later.
Candidate Carly Fiorina claims she doubled the revenue of the Hewlett-Packard Corp. while she was chief executive officer. True, through the acquisition of Compaq. Corporate profits, however, crashed, and she was fired.
They're Baaa-aaack!
You would think that by now the Birther Blowhards have given up on the claim that a President must be born in the U.S. to be eligible to hold that office. Even worse, the biggest mouth in the Birther movement now insists he won't comment on the issue. "I've moved on," says Don Trumpolini. Not that he would ever admit he's wrong. About anything. In any detail. Ever. He won't even use the cop-out phrase that he "mis-spoke."
Meanwhile, we haven't heard any protests from the Radical Righteous that Sen. Ted Cruz, another Republican candidate, is ineligible because he was born in Canada.
Cruz is a U.S. citizen because his mother was a citizen, so there was no need for him to "renounce" any claim to Canadian citizenship. Not that he ever had it, since he returned to the U.S. as a child.
Similarly, Barack Obama's mother was a U.S. citizen, so it would not matter where he was born. Even so, it has been documented that he was born in Hawaii. At last report, those islands were at the time part of the U.S. And they still are.
In any case, President Obama has only about 15 months remaining in his second term in office. Attention birthers: Give it up, already!
Here's a thought: Isn't it time the Blowhard-In-Chief produce his own birth certificate?
Ponderous Pomposities
"You have to understand that ... "
Implication: When you understand, you will agree.
"Don't you think that ...?"
The questioner does not want opinion, but agreement.
Gov. Chris Christie (R-NJ) claims he was named a federal prosecutor the day before the 9/11 disaster. Fact: There may have been a private phone call asking him to take the job, but that appointment was not announced until December, three months later.
Candidate Carly Fiorina claims she doubled the revenue of the Hewlett-Packard Corp. while she was chief executive officer. True, through the acquisition of Compaq. Corporate profits, however, crashed, and she was fired.
They're Baaa-aaack!
You would think that by now the Birther Blowhards have given up on the claim that a President must be born in the U.S. to be eligible to hold that office. Even worse, the biggest mouth in the Birther movement now insists he won't comment on the issue. "I've moved on," says Don Trumpolini. Not that he would ever admit he's wrong. About anything. In any detail. Ever. He won't even use the cop-out phrase that he "mis-spoke."
Meanwhile, we haven't heard any protests from the Radical Righteous that Sen. Ted Cruz, another Republican candidate, is ineligible because he was born in Canada.
Cruz is a U.S. citizen because his mother was a citizen, so there was no need for him to "renounce" any claim to Canadian citizenship. Not that he ever had it, since he returned to the U.S. as a child.
Similarly, Barack Obama's mother was a U.S. citizen, so it would not matter where he was born. Even so, it has been documented that he was born in Hawaii. At last report, those islands were at the time part of the U.S. And they still are.
In any case, President Obama has only about 15 months remaining in his second term in office. Attention birthers: Give it up, already!
Here's a thought: Isn't it time the Blowhard-In-Chief produce his own birth certificate?
Ponderous Pomposities
"You have to understand that ... "
Implication: When you understand, you will agree.
"Don't you think that ...?"
The questioner does not want opinion, but agreement.
Religious Test
When you quote the Constitution, quote it correctly.
The lead editorial in the New York Times (9/23/2015) misquoted the U.S. Constitution when the writer said, "The freedom of religion embedded in the First Amendment rules out the very idea of a religious test for public office ... "
It's a major surprise to see a gaffe this serious from one of the nation's largest and most influential newspapers. Why? The ban on a religious test for public office is not mentioned in the First Amendment, but in the main body of the Constitution itself, in Article VI, and the wording is specific: "No religious test shall ever be required as a qualification for any office or public trust under the United States."
The First Amendment states that "Congress shall make no law restricting freedom of religion," and the important thing to remember is that while the Bill of Rights guarantees freedom of religion, the Constitution itself guarantees freedom from religion.
Only in the past week have broadcast pundits been emphasizing the Article VI ban on any religious test for public office, but that issue was covered on this blog last March. In any case, editorial writers should have been aware of a ban that has been in effect since the Constitution was adopted in 1789.
For more detail, here's a link to a posting March 27, 2015, titled "Freedom From Religion": http://editorsrevenge.blogspot.com/2015/03/freedom-from-religion.html. And here's another, dated March 24, 2015, titled "Religion and Politics": http://editorsrevenge.blogspot.com/2015/03/religion-and-politics.html.
It's sad enough when candidates for President show their ignorance of the Constitution, but worse when it comes from journalists.
The lead editorial in the New York Times (9/23/2015) misquoted the U.S. Constitution when the writer said, "The freedom of religion embedded in the First Amendment rules out the very idea of a religious test for public office ... "
It's a major surprise to see a gaffe this serious from one of the nation's largest and most influential newspapers. Why? The ban on a religious test for public office is not mentioned in the First Amendment, but in the main body of the Constitution itself, in Article VI, and the wording is specific: "No religious test shall ever be required as a qualification for any office or public trust under the United States."
The First Amendment states that "Congress shall make no law restricting freedom of religion," and the important thing to remember is that while the Bill of Rights guarantees freedom of religion, the Constitution itself guarantees freedom from religion.
Only in the past week have broadcast pundits been emphasizing the Article VI ban on any religious test for public office, but that issue was covered on this blog last March. In any case, editorial writers should have been aware of a ban that has been in effect since the Constitution was adopted in 1789.
For more detail, here's a link to a posting March 27, 2015, titled "Freedom From Religion": http://editorsrevenge.blogspot.com/2015/03/freedom-from-religion.html. And here's another, dated March 24, 2015, titled "Religion and Politics": http://editorsrevenge.blogspot.com/2015/03/religion-and-politics.html.
It's sad enough when candidates for President show their ignorance of the Constitution, but worse when it comes from journalists.
Saturday, September 19, 2015
Language Smorgasbord
Presidential candidate Carly Fiorina claimed that English is the official language of the United States. Not so. There is no such thing, even though many would like to enforce an "English Only" policy. English is surely the most widely spoken language in America, but it has not been nationally designated as "official." Nearly 35 million Americans speak Spanish at home, according to an analysis by the Pew Research Center, using U.S. Census data. This makes Spanish the most widely spoken language other than English in America. The next in line are Chinese, with nearly 3 million speakers; Hindi, Urdu or other languages from India, 2.2 million; French or French Creole, 2.1 million, and Tagalog, the language of the Philippines, 1.7 million.
There are many who feel that English should be the official language of the country (Sarah Palin refers to the country's language as "American"), and even some proponents insist this is different from "English only" proposals. There are other countries that have designated one or more "official" languages (India has 22 of them).
The English language itself is an amalgam of many other languages, beginning when French-speaking invaders from Normandy dominated the island of Britain with its Anglo-Saxon speakers (themselves invaders from Germany), and earlier Celtic speakers. These three eventually blended to become a new language, known as English. And even though 85 percent of its vocabulary is rooted in the classical languages of Latin and Greek, English is classified as a Germanic language because of its grammatical structure.
In addition to extensive borrowings from Latin, Greek and French, English also borrows heavily from Spanish, especially in the West, with its many cities of Spanish names -- for example, San Antonio, San Francisco, Los Angeles, Santa Fe, San Diego, as well as the states themselves, including California, Colorado, Montana, Arizona and Texas. Speaking of which, there is the story of the visitor to Texas who complained of the many people of Mexican heritage there. The visitor was reminded that Texas used to be part of Mexico. As were the other states mentioned, as well as the state of New Mexico.
Add to the English vocabulary the many words borrowed from Native American tribal languages, plus terms from other colonial-era settlers from Sweden, Norway, the Netherlands and other countries and you have a linguistic smorgasbord -- itself a borrowed word, as are the many terms for food, borrowed from French, Italian, Chinese and other languages..
Diversity is one of America's great strengths, and this deals with a wide range of cultural, linguistic, ethnic, social, religious, literature, music, and many other areas that make America what it is -- not a melting pot, but a buffet.
Or a smorgasbord.
There are many who feel that English should be the official language of the country (Sarah Palin refers to the country's language as "American"), and even some proponents insist this is different from "English only" proposals. There are other countries that have designated one or more "official" languages (India has 22 of them).
The English language itself is an amalgam of many other languages, beginning when French-speaking invaders from Normandy dominated the island of Britain with its Anglo-Saxon speakers (themselves invaders from Germany), and earlier Celtic speakers. These three eventually blended to become a new language, known as English. And even though 85 percent of its vocabulary is rooted in the classical languages of Latin and Greek, English is classified as a Germanic language because of its grammatical structure.
In addition to extensive borrowings from Latin, Greek and French, English also borrows heavily from Spanish, especially in the West, with its many cities of Spanish names -- for example, San Antonio, San Francisco, Los Angeles, Santa Fe, San Diego, as well as the states themselves, including California, Colorado, Montana, Arizona and Texas. Speaking of which, there is the story of the visitor to Texas who complained of the many people of Mexican heritage there. The visitor was reminded that Texas used to be part of Mexico. As were the other states mentioned, as well as the state of New Mexico.
Add to the English vocabulary the many words borrowed from Native American tribal languages, plus terms from other colonial-era settlers from Sweden, Norway, the Netherlands and other countries and you have a linguistic smorgasbord -- itself a borrowed word, as are the many terms for food, borrowed from French, Italian, Chinese and other languages..
Diversity is one of America's great strengths, and this deals with a wide range of cultural, linguistic, ethnic, social, religious, literature, music, and many other areas that make America what it is -- not a melting pot, but a buffet.
Or a smorgasbord.
Friday, September 18, 2015
The Riley Syndrome
"My head's made up. You can't confuse me with the facts." -- Chester A. Riley
Belief without thought endangers freedom remains the guiding principle for brief essays in the Editor's Revenge commentaries. Unfortunately, too many people are so convinced in the righteousness of their beliefs that no amount of factual information will sway them. Political candidates play on these prejudged opinions to gain votes, and in the process help to spread bigotry, suspicion and other pernicious feelings that endanger the rights and freedoms of everyone.
This came up again during a political rally in New Hampshire when a questioner insisted that the current President of the United States "is a Muslim, and not even an American." Unfortunately, the candidate who fielded the question insisted he did not hear the comment, even though everyone else in the country with access to a TV set did hear it. The candidate's non-response response was something to the effect that "we'll be looking into that and other things as well."
This from the same candidate who was a leader in the so-called birther movement that claimed Barack Obama was not born in America and therefore was not eligible to be President. Did he not have the courage to endorse a position he previously held, or did he not have the courage to say the questioner was wrong?
Fact: The Constitution specifies that a president must be a "natural born citizen." This is different from "native born."
Fact: "No religious test shall ever be required as a qualification to any office or public trust" in the United States. So says the Constitution. And just as the First Amendment guarantees freedom of religion, the main body of the Constitution guarantees freedom from religion. There is no requirement that a candidate for President be a Christian, or any other faith.
Fact: There are more Muslims in America than there are Jews, or Buddhists, or any of many other religious organizations.
Fact: If one parent is an American citizen, the child inherits American citizenship, no matter where the child is born.
Fact: Barack Obama's mother was from Kansas, so he is a U.S. citizen.
Fact: His citizenship was documented by a birth certificate issued in Hawaii, which was used to register to vote in Chicago at age 21. A claim that it was a forgery should have been lodged 40 years ago.
Fact: Sen. Ted Cruz (R-Texas) was born in Canada to an American mother. If the birthers are correct, Sen. Cruz should drop his candidacy on the ground of ineligibility.
Just as voters are free to make their choices based on their own religious preferences, the government may not mandate that a candidate subscribe to one particular spiritual path.
Many readers may disagree with the comments put forth in these brief essays. But the purpose is to prompt thinking, and if a believer considers alternatives and remains faithful to an earlier belief, that's good, because the thinker has reinforced and strengthened the foundations. But to remain committed to an opinion even when confronted with strong evidence of an equally valid position and refusing to modify or even accept another view only proves obdurate bigotry.
Belief without thought endangers freedom remains the guiding principle for brief essays in the Editor's Revenge commentaries. Unfortunately, too many people are so convinced in the righteousness of their beliefs that no amount of factual information will sway them. Political candidates play on these prejudged opinions to gain votes, and in the process help to spread bigotry, suspicion and other pernicious feelings that endanger the rights and freedoms of everyone.
This came up again during a political rally in New Hampshire when a questioner insisted that the current President of the United States "is a Muslim, and not even an American." Unfortunately, the candidate who fielded the question insisted he did not hear the comment, even though everyone else in the country with access to a TV set did hear it. The candidate's non-response response was something to the effect that "we'll be looking into that and other things as well."
This from the same candidate who was a leader in the so-called birther movement that claimed Barack Obama was not born in America and therefore was not eligible to be President. Did he not have the courage to endorse a position he previously held, or did he not have the courage to say the questioner was wrong?
Fact: The Constitution specifies that a president must be a "natural born citizen." This is different from "native born."
Fact: "No religious test shall ever be required as a qualification to any office or public trust" in the United States. So says the Constitution. And just as the First Amendment guarantees freedom of religion, the main body of the Constitution guarantees freedom from religion. There is no requirement that a candidate for President be a Christian, or any other faith.
Fact: There are more Muslims in America than there are Jews, or Buddhists, or any of many other religious organizations.
Fact: If one parent is an American citizen, the child inherits American citizenship, no matter where the child is born.
Fact: Barack Obama's mother was from Kansas, so he is a U.S. citizen.
Fact: His citizenship was documented by a birth certificate issued in Hawaii, which was used to register to vote in Chicago at age 21. A claim that it was a forgery should have been lodged 40 years ago.
Fact: Sen. Ted Cruz (R-Texas) was born in Canada to an American mother. If the birthers are correct, Sen. Cruz should drop his candidacy on the ground of ineligibility.
Just as voters are free to make their choices based on their own religious preferences, the government may not mandate that a candidate subscribe to one particular spiritual path.
Many readers may disagree with the comments put forth in these brief essays. But the purpose is to prompt thinking, and if a believer considers alternatives and remains faithful to an earlier belief, that's good, because the thinker has reinforced and strengthened the foundations. But to remain committed to an opinion even when confronted with strong evidence of an equally valid position and refusing to modify or even accept another view only proves obdurate bigotry.
Thursday, September 17, 2015
Steady Fed
No surprise in this corner as the Federal Reserve announced today it would hold interest rates steady at the near zero mark even as the economy continues its "moderate" improvement. The labor market is getting better, the Fed said, unemployment is declining, and inflation is still below the central bank's long-term objective.
Even so, when the unemployment and inflation approach the Fed's target range, "economic conditions may, for some time," warrant keeping interest rates low.
Translation: Don't look for a Fed pullback from its current strategy for several more months.
Even so, when the unemployment and inflation approach the Fed's target range, "economic conditions may, for some time," warrant keeping interest rates low.
Translation: Don't look for a Fed pullback from its current strategy for several more months.
Tuesday, September 15, 2015
Political Economics
Correlation is not necessarily causation.
Once is an accident, twice is a coincidence, but three times is a pattern.
From the Civil War to the Great Depression, 15 men served as President of the United States. In that time, the Republican Party had a virtual lock on the Oval Office, since all but three of the occupants have been members of the GOP. Those three were Democrats: Andrew Johnson, Grover Cleveland, and Woodrow Wilson.
Meanwhile, in those 67 years, the nation suffered four economic crises or recessions, three of which began while a Republican occupied the White House. The four crises were the Panic of 1873, the Panic of 1893, the "Rich Man's Panic" of 1907, and the Great Depression, which lasted 11 years, from 1929 until the onset of World War II.
Correlation, of course, is not always causation, but it can also be said that once is an accident, twice is a coincidence, and three times is a pattern.
With that in mind, consider this: The Panic of 1873 occurred while Republican Ulysses S. Grant was President, the downturn of 1893 began in January of 1893, at the end of Republican William McKinley's term (at the time, Presidents were not inaugurated until March), and the so-called "Rich Man's Panic" of 1907 under Republican Theodore Roosevelt. These, however, were relatively minor compared to the disaster of the 1930s.
Vice President Andrew Johnson, a Democrat, became President when Republican Abraham Lincoln was assassinated, and was highly disliked by Congress, to the extent that he was impeached (but not convicted). Cleveland was elected twice, but not consecutively; Republican McKinley having been elected between the two Cleveland terms. The third Democrat to serve as President in that time frame was Woodrow Wilson, who won the election in 1912 largely because Theodore Roosevelt split the GOP, organizing a third party (the Progressive Party), which took votes away from Republican incumbent William Howard Taft, thus ensuring Wilson's victory.
So it would seem there is a correlation; when Republicans are in charge, the economy crashes. Now consider the Big One.
The Great Depression, which began its chaotic slide in October of 1929, while Republican Calvin Coolidge was President, and continued to slide during Republican Herbert Hoover's administration. The one exception was the Panic of 1893, just as Democrat Grover Cleveland was taking over from Republican Benjamin Harrison, so it could well be argued that Harrison was to blame for the downturn and Cleveland engineered a recovery. Similarly, it was Franklin D. Roosevelt who inherited the damage from the 1929 Crash, and presided over recovery efforts through the 1930s. Even so, however, Hoover wrote to President-elect Roosevelt urging a balanced budget, "even if further taxation is necessary," as well as "no tampering or inflation of the currency."
As economist John Kenneth Galbraith wrote in his book The Great Crash, 1929, rejecting both fiscal and monetary policy "amounted precisely to a rejection of all affirmative government economic policy," and would "disavow all the available steps to check deflation and depression." This was, Galbraith wrote, "a triumph of dogma over thought. The consequences were profound."
Fast forward, now, to the Presidency of Bill Clinton, a Democrat (1993-2001), who not only reduced the federal deficit but posted four consecutive budgets with surplus funds. Then, under Republican George W. Bush, the surplus he inherited disappeared and the federal budget plunged to a record deficit of $1.4 trillion as the nation stumbled into the worst economic crisis since the Great Depression. His successor Barack Obama, a Democrat, has cut that deficit by two-thirds, and according to the Congressional Budget Office, the country will end its fiscal year this month with a budgetary deficit of $426 billion. This would be the smallest deficit since 2007, according to the CBO, when the Great Recession began.
This downturn, the largest since World War II and the worst since the Great Depression of the 1930s, began in December 2007, and ended in June 2009, five months after President Obama took office. Government fiscal years begin Oct. 1, so Obama had to cope with a budget submitted by his predecessor as the unemployment rate continued to rise, peaking at 10 percent in October 2009. It has only recently returned to its pre-recession level of 5 percent.
There are always ups and downs in the business cycle, but the question is, what can or should be done about it, to smooth the path from profit to pain and back again. Conservative economists and politicians maintain that nothing can be done, that the cycle is part of economic life, and government has no business interfering with the private sector.
However, history shows otherwise. When Republican Administrations pull back, invoking austerity measures in the name of balancing the federal budget and waiting for the economy to recover, reality only widens the chasm between the haves and the have-nots.
There were no significant recessions from the Great Depression of 1929-1940 until the Great Recession of 2007-2009. There was, of course, a post-war downturn in 1946 as the nation reconverted to consumer production, another in 1949 as the nation readjusted from its postwar boom, and a brief pause in 1958. But these were not significant, as MIT economist Paul Samuelson has written, compared to the chaotic years of the 1930s.
It is also true that war production rescues the economy from its doldrums. But that's no way to defeat a downturn. The loss of human life is too high a cost.
Once is an accident, twice is a coincidence, but three times is a pattern.
From the Civil War to the Great Depression, 15 men served as President of the United States. In that time, the Republican Party had a virtual lock on the Oval Office, since all but three of the occupants have been members of the GOP. Those three were Democrats: Andrew Johnson, Grover Cleveland, and Woodrow Wilson.
Meanwhile, in those 67 years, the nation suffered four economic crises or recessions, three of which began while a Republican occupied the White House. The four crises were the Panic of 1873, the Panic of 1893, the "Rich Man's Panic" of 1907, and the Great Depression, which lasted 11 years, from 1929 until the onset of World War II.
Correlation, of course, is not always causation, but it can also be said that once is an accident, twice is a coincidence, and three times is a pattern.
With that in mind, consider this: The Panic of 1873 occurred while Republican Ulysses S. Grant was President, the downturn of 1893 began in January of 1893, at the end of Republican William McKinley's term (at the time, Presidents were not inaugurated until March), and the so-called "Rich Man's Panic" of 1907 under Republican Theodore Roosevelt. These, however, were relatively minor compared to the disaster of the 1930s.
Vice President Andrew Johnson, a Democrat, became President when Republican Abraham Lincoln was assassinated, and was highly disliked by Congress, to the extent that he was impeached (but not convicted). Cleveland was elected twice, but not consecutively; Republican McKinley having been elected between the two Cleveland terms. The third Democrat to serve as President in that time frame was Woodrow Wilson, who won the election in 1912 largely because Theodore Roosevelt split the GOP, organizing a third party (the Progressive Party), which took votes away from Republican incumbent William Howard Taft, thus ensuring Wilson's victory.
So it would seem there is a correlation; when Republicans are in charge, the economy crashes. Now consider the Big One.
The Great Depression, which began its chaotic slide in October of 1929, while Republican Calvin Coolidge was President, and continued to slide during Republican Herbert Hoover's administration. The one exception was the Panic of 1893, just as Democrat Grover Cleveland was taking over from Republican Benjamin Harrison, so it could well be argued that Harrison was to blame for the downturn and Cleveland engineered a recovery. Similarly, it was Franklin D. Roosevelt who inherited the damage from the 1929 Crash, and presided over recovery efforts through the 1930s. Even so, however, Hoover wrote to President-elect Roosevelt urging a balanced budget, "even if further taxation is necessary," as well as "no tampering or inflation of the currency."
As economist John Kenneth Galbraith wrote in his book The Great Crash, 1929, rejecting both fiscal and monetary policy "amounted precisely to a rejection of all affirmative government economic policy," and would "disavow all the available steps to check deflation and depression." This was, Galbraith wrote, "a triumph of dogma over thought. The consequences were profound."
Fast forward, now, to the Presidency of Bill Clinton, a Democrat (1993-2001), who not only reduced the federal deficit but posted four consecutive budgets with surplus funds. Then, under Republican George W. Bush, the surplus he inherited disappeared and the federal budget plunged to a record deficit of $1.4 trillion as the nation stumbled into the worst economic crisis since the Great Depression. His successor Barack Obama, a Democrat, has cut that deficit by two-thirds, and according to the Congressional Budget Office, the country will end its fiscal year this month with a budgetary deficit of $426 billion. This would be the smallest deficit since 2007, according to the CBO, when the Great Recession began.
This downturn, the largest since World War II and the worst since the Great Depression of the 1930s, began in December 2007, and ended in June 2009, five months after President Obama took office. Government fiscal years begin Oct. 1, so Obama had to cope with a budget submitted by his predecessor as the unemployment rate continued to rise, peaking at 10 percent in October 2009. It has only recently returned to its pre-recession level of 5 percent.
There are always ups and downs in the business cycle, but the question is, what can or should be done about it, to smooth the path from profit to pain and back again. Conservative economists and politicians maintain that nothing can be done, that the cycle is part of economic life, and government has no business interfering with the private sector.
However, history shows otherwise. When Republican Administrations pull back, invoking austerity measures in the name of balancing the federal budget and waiting for the economy to recover, reality only widens the chasm between the haves and the have-nots.
There were no significant recessions from the Great Depression of 1929-1940 until the Great Recession of 2007-2009. There was, of course, a post-war downturn in 1946 as the nation reconverted to consumer production, another in 1949 as the nation readjusted from its postwar boom, and a brief pause in 1958. But these were not significant, as MIT economist Paul Samuelson has written, compared to the chaotic years of the 1930s.
It is also true that war production rescues the economy from its doldrums. But that's no way to defeat a downturn. The loss of human life is too high a cost.
Wednesday, September 9, 2015
Budget Bliss
There is no statute of limitations on hypocrisy.
The federal budget is heading toward balance, according to the Congressional Budget Office (CBO), but what should be met with conservative cheers has hardly prompted a peep.
Could it be that the massive hole dug by Republican Administrations, now being filled by Democrats, is a concept too much for them to handle? In any case, the many calls for austerity are gone from the electioneering chant.
Here are some numbers: The Clinton Administration posted budget surpluses for four fiscal years, and handed the incoming George W. Bush a nest-egg surplus of $127 billion for the fiscal year ended Sept. 30, 2001. (This was the first year the budget was in the black since 1969.) In less than one year, however, that surplus was gone and then some -- a $250 billion turnaround, causing a deficit of $158 billion for FY 2002.
Over his next two presidential terms, the Bush-led federal budget deficit increased so much that President Barack Obama in his first year in office had to cope with a deficit of $1.4 trillion. Since then, however, the federal budget deficit has been trimmed to $426 billion for the fiscal year that ends in three weeks, on Sept. 30.
Now, the nonpartisan CBO says 2015 "will mark the sixth consecutive year in which the deficit has declined." That new deficit figure, the CBO said, will be "the smallest (deficit) since 2007, and at 2.4 percent of GDP, it would be the below the average deficit over the past 50 years."
In addition, the CBO expects the nation's economy will expand this year, as well as for the next two years.
So things are looking good, with the economy improving and budget deficits declining. That is, of course, assuming a new administration that would take over in January of 2017 doesn't blow it.
The Reagan-Bush Sr. years (1981-1993) saw the federal budget fall further into a deficit hole, bottoming out at $290 billion for the fiscal year ended Sept. 30, 1992. Nonetheless, President Bill Clinton not only brought the federal budget into balance, but posted surpluses for four years straight. That was the first surplus since fiscal year 1970, under another Democrat, Lyndon B. Johnson. The only other period there were multi-year surpluses was in the years 1947-1950, under Democrat Harry S. Truman.
Granted, during war years and economic downturns there have been unavoidable deficits. But now that the federal budget hole is being filled, where is the praise for what has long been called for by those who demand radical cuts in federal spending?
Silence.
The federal budget is heading toward balance, according to the Congressional Budget Office (CBO), but what should be met with conservative cheers has hardly prompted a peep.
Could it be that the massive hole dug by Republican Administrations, now being filled by Democrats, is a concept too much for them to handle? In any case, the many calls for austerity are gone from the electioneering chant.
Here are some numbers: The Clinton Administration posted budget surpluses for four fiscal years, and handed the incoming George W. Bush a nest-egg surplus of $127 billion for the fiscal year ended Sept. 30, 2001. (This was the first year the budget was in the black since 1969.) In less than one year, however, that surplus was gone and then some -- a $250 billion turnaround, causing a deficit of $158 billion for FY 2002.
Over his next two presidential terms, the Bush-led federal budget deficit increased so much that President Barack Obama in his first year in office had to cope with a deficit of $1.4 trillion. Since then, however, the federal budget deficit has been trimmed to $426 billion for the fiscal year that ends in three weeks, on Sept. 30.
Now, the nonpartisan CBO says 2015 "will mark the sixth consecutive year in which the deficit has declined." That new deficit figure, the CBO said, will be "the smallest (deficit) since 2007, and at 2.4 percent of GDP, it would be the below the average deficit over the past 50 years."
In addition, the CBO expects the nation's economy will expand this year, as well as for the next two years.
So things are looking good, with the economy improving and budget deficits declining. That is, of course, assuming a new administration that would take over in January of 2017 doesn't blow it.
The Reagan-Bush Sr. years (1981-1993) saw the federal budget fall further into a deficit hole, bottoming out at $290 billion for the fiscal year ended Sept. 30, 1992. Nonetheless, President Bill Clinton not only brought the federal budget into balance, but posted surpluses for four years straight. That was the first surplus since fiscal year 1970, under another Democrat, Lyndon B. Johnson. The only other period there were multi-year surpluses was in the years 1947-1950, under Democrat Harry S. Truman.
Granted, during war years and economic downturns there have been unavoidable deficits. But now that the federal budget hole is being filled, where is the praise for what has long been called for by those who demand radical cuts in federal spending?
Silence.
Monday, September 7, 2015
Fed Up
The days of "free" money may be over.
The Federal Reserve takes its turn at bat next week, when the Open Market Committee meets to listen to more pitches to raise interest rates.
The issue is whether the U.S. economy has recovered enough to slow the flow of cheap money and let the body politic walk on its own. Wall Street investors and corporate executives, however, have gotten so used to borrowing at near zero interest rates that they may become skittish at the mere mention of an end to "free" money.
Meanwhile, credit card firms charge consumers upwards of 20 percent or more in interest, even as they tap into the banking system for operating cash for nearly nothing. At the same time, savings accounts reward conscientious consumers with an interest rate of less than 1 percent, and inflation kicks up prices at double that rate.
This means there is no reward for thrift. Setting money aside in a savings account only leads to a loss in the purchasing power of a dollar. If prices rise at 2 percent and savings accounts pay less than 1 percent interest, you are in effect losing money. As well buy now before prices rise again, but that means depleting a savings account, leaving no hope for a secure future.
On the other hand, why reward greedy vendors as the wealth gap widens?
Taking a larger view, the Fed's job is to modify the flow of money to help when the economic cycle is down and to stabilize the economy when things look good. Things did not look good during and after the Great Recession, but have improved somewhat steadily since 2008.
So the issue before the Fed next week will be whether the economy is healthy enough so the Central Bank can reduce its pump-priming efforts. The dangers are that as interest rates rise, so will prices, and if wages remain stagnant, workers will suffer, as will pensioners. However, those who rely largely on interest income will be better off, and the wealth gap will widen.
At the same time, firms and investors who have relied on cheap money to finance their activities may be frightened into cutting back production and investment, thus putting the country at risk of another downturn.
It has happened before, in 1938 when government efforts to support the economy during the Great Depression were scaled back, and the nation stumbled again, until wartime investment in military material rescued the economy from its downward spiral.
War, however, is a terrible price to pay for economic health, and is no way to win a ball game.
The Federal Reserve takes its turn at bat next week, when the Open Market Committee meets to listen to more pitches to raise interest rates.
The issue is whether the U.S. economy has recovered enough to slow the flow of cheap money and let the body politic walk on its own. Wall Street investors and corporate executives, however, have gotten so used to borrowing at near zero interest rates that they may become skittish at the mere mention of an end to "free" money.
Meanwhile, credit card firms charge consumers upwards of 20 percent or more in interest, even as they tap into the banking system for operating cash for nearly nothing. At the same time, savings accounts reward conscientious consumers with an interest rate of less than 1 percent, and inflation kicks up prices at double that rate.
This means there is no reward for thrift. Setting money aside in a savings account only leads to a loss in the purchasing power of a dollar. If prices rise at 2 percent and savings accounts pay less than 1 percent interest, you are in effect losing money. As well buy now before prices rise again, but that means depleting a savings account, leaving no hope for a secure future.
On the other hand, why reward greedy vendors as the wealth gap widens?
Taking a larger view, the Fed's job is to modify the flow of money to help when the economic cycle is down and to stabilize the economy when things look good. Things did not look good during and after the Great Recession, but have improved somewhat steadily since 2008.
So the issue before the Fed next week will be whether the economy is healthy enough so the Central Bank can reduce its pump-priming efforts. The dangers are that as interest rates rise, so will prices, and if wages remain stagnant, workers will suffer, as will pensioners. However, those who rely largely on interest income will be better off, and the wealth gap will widen.
At the same time, firms and investors who have relied on cheap money to finance their activities may be frightened into cutting back production and investment, thus putting the country at risk of another downturn.
It has happened before, in 1938 when government efforts to support the economy during the Great Depression were scaled back, and the nation stumbled again, until wartime investment in military material rescued the economy from its downward spiral.
War, however, is a terrible price to pay for economic health, and is no way to win a ball game.
Repeal Say's Law
If supply creates its own demand, as propounded by the French theorist Jean-Baptiste Say in 1803, then the way to prevent economic illness is to increase supply.
But an emphasis on supply is an over-simplification, and reflects classical, laissez-faire economics, which continues its zombie-like existence among supply-siders today.
As a central tenet of classical economic theory, Say's Law emphasized the need to encourage production. Then, as more goods become available, consumers -- those on the demand side of a society -- will respond and buy, thus improving general economic health.
However, this theory ignores a reality, that consumers may not want or even be able to respond to an increased availability of something. When people are unemployed and have no income, they cannot buy. And as demand slackens, producers have no incentive to boost supply. Therefore, they cut back production as buyers retreat. Result: A recession worsens.
Here's another example to refute Say's Law: A firm introduces a new product, creating a new supply. But there is at first no demand, and the product is greeted with comments like, "What do I want with that?" Or, "That's the dumbest thing I've ever seen, and I don't want it."
Consider the introduction of Post-It notes by the 3M Corp. The public had never seen anything like it, didn't know what to do with it, and so didn't want it. The company reportedly had trouble giving it away.
However, with shrewd marketing and promotion, 3M not only created a supply, but a new demand as well.
Or this example (which may also be apocryphal): When canned tuna was introduced, marketers had to overcome the overwhelming demand for canned salmon, preferred by many families. The marketing strategy was a new slogan: "Guaranteed not to turn pink in the can."
The point is that supply does not necessarily create its own demand, which must be encouraged, if not created, by the supplier.
Here then is a major flaw in supply-side economics, a doctrine subscribed to by conservative politicians aided by economists who still hold to a one-sided classical view that limits government intervention.
Conclusion: Both supply and demand considerations are important in encouraging economic growth. And government, far from being a non-participating observer, may -- indeed must -- at times intervene on either of the two sides. Sometimes by increasing (or limiting) supply, or sometimes by encouraging (or restricting) demand.
By encouraging demand through public works projects that employ workers who then have paychecks to enable them to buy, a slump can be reversed. Conversely, by limiting supply, government can bring about higher prices, thus benefiting private companies.
The trick is in knowing when to do what.
But an emphasis on supply is an over-simplification, and reflects classical, laissez-faire economics, which continues its zombie-like existence among supply-siders today.
As a central tenet of classical economic theory, Say's Law emphasized the need to encourage production. Then, as more goods become available, consumers -- those on the demand side of a society -- will respond and buy, thus improving general economic health.
However, this theory ignores a reality, that consumers may not want or even be able to respond to an increased availability of something. When people are unemployed and have no income, they cannot buy. And as demand slackens, producers have no incentive to boost supply. Therefore, they cut back production as buyers retreat. Result: A recession worsens.
Here's another example to refute Say's Law: A firm introduces a new product, creating a new supply. But there is at first no demand, and the product is greeted with comments like, "What do I want with that?" Or, "That's the dumbest thing I've ever seen, and I don't want it."
Consider the introduction of Post-It notes by the 3M Corp. The public had never seen anything like it, didn't know what to do with it, and so didn't want it. The company reportedly had trouble giving it away.
However, with shrewd marketing and promotion, 3M not only created a supply, but a new demand as well.
Or this example (which may also be apocryphal): When canned tuna was introduced, marketers had to overcome the overwhelming demand for canned salmon, preferred by many families. The marketing strategy was a new slogan: "Guaranteed not to turn pink in the can."
The point is that supply does not necessarily create its own demand, which must be encouraged, if not created, by the supplier.
Here then is a major flaw in supply-side economics, a doctrine subscribed to by conservative politicians aided by economists who still hold to a one-sided classical view that limits government intervention.
Conclusion: Both supply and demand considerations are important in encouraging economic growth. And government, far from being a non-participating observer, may -- indeed must -- at times intervene on either of the two sides. Sometimes by increasing (or limiting) supply, or sometimes by encouraging (or restricting) demand.
By encouraging demand through public works projects that employ workers who then have paychecks to enable them to buy, a slump can be reversed. Conversely, by limiting supply, government can bring about higher prices, thus benefiting private companies.
The trick is in knowing when to do what.
Saturday, September 5, 2015
The New Normal
When profit drives policy, economics overcomes patriotism.
If money talks, it follows that the more money you have, the louder will be your voice. Whether it is more persuasive is another question. Nor does wealth guarantee wisdom.
Education is the acquisition of knowledge. Knowing what to do with it is wisdom.
During the Gilded Age, the super-rich paid no income tax, and the wide disparity of wealth enabled them to live lavish lifestyles while paying their numerous household staffers a bare minimum, with no benefits or security.
Along with this higher standard of living came an assumption that because they had more money, they were therefore more intelligent and wiser than their employees. A heroic assumption at best, and often false, especially in families of inherited wealth.
It was also assumed that poverty was pre-ordained, and people were poor because they deserved to be poor. That disparity began to slide, however, with the coming of organized labor and taxes on income. As workers gained more income, they were able to purchase more goods and services. Even Henry Ford, no fan of labor unions, paid his factory and assembly line workers well enough so they could afford to buy the cars they helped to assemble, thus becoming a built-in market.
Currently, however, paying a paltry or minimum wage means many workers must depend on food stamps and other forms of assistance, which means government is subsidizing companies that pay workers only the minimum.
So much for the ideology of no government involvement in business.
Meanwhile, income inequality has reached levels not seen since the federal income tax was imposed in 1913.
As for eliminating a wage floor and canceling government aid programs, the result would be not only starvation wages, but also anger, resentment and social upheaval. Those days should have ended with the Great Depression, but many ultra-conservative politicians and business leaders still call for lower taxes and government austerity to solve a problem that does not really exist. Or, as Dick Cheney recently said, "Deficits don't matter."
Now we are engaged in a great political donnybrook, testing whether government policies of the past six years have been enough to rescue the U.S. economy from another disaster. Right-wingers call for stricter measures to control a putative immigration problem, spending billions to close national borders even as they demand cuts in government spending and reduced taxes on corporations.
Many follow the Laffer Curve, named after a Reagan-era academic who claimed that reduced taxes (under certain circumstances) lead to more government revenue.
Unfortunately, some follow the Laffer Curve around a rational bend and careen off the road to prosperity into a deeper chasm of income inequality.
Consider this: Much, if not most, of the campaign rhetoric is designed solely to win elections. After all, politics is not about getting things done; it's about winning elections. Getting things done is the responsibility of government.
So when should government step in to get something done and rescue a faltering economy? The answer is not to do things that the private sector could do as well or better, but to do things that are not being done at all. Then, when recovery is strong enough, government involvement must recede.
If money talks, it follows that the more money you have, the louder will be your voice. Whether it is more persuasive is another question. Nor does wealth guarantee wisdom.
Education is the acquisition of knowledge. Knowing what to do with it is wisdom.
During the Gilded Age, the super-rich paid no income tax, and the wide disparity of wealth enabled them to live lavish lifestyles while paying their numerous household staffers a bare minimum, with no benefits or security.
Along with this higher standard of living came an assumption that because they had more money, they were therefore more intelligent and wiser than their employees. A heroic assumption at best, and often false, especially in families of inherited wealth.
It was also assumed that poverty was pre-ordained, and people were poor because they deserved to be poor. That disparity began to slide, however, with the coming of organized labor and taxes on income. As workers gained more income, they were able to purchase more goods and services. Even Henry Ford, no fan of labor unions, paid his factory and assembly line workers well enough so they could afford to buy the cars they helped to assemble, thus becoming a built-in market.
Currently, however, paying a paltry or minimum wage means many workers must depend on food stamps and other forms of assistance, which means government is subsidizing companies that pay workers only the minimum.
So much for the ideology of no government involvement in business.
Meanwhile, income inequality has reached levels not seen since the federal income tax was imposed in 1913.
As for eliminating a wage floor and canceling government aid programs, the result would be not only starvation wages, but also anger, resentment and social upheaval. Those days should have ended with the Great Depression, but many ultra-conservative politicians and business leaders still call for lower taxes and government austerity to solve a problem that does not really exist. Or, as Dick Cheney recently said, "Deficits don't matter."
Now we are engaged in a great political donnybrook, testing whether government policies of the past six years have been enough to rescue the U.S. economy from another disaster. Right-wingers call for stricter measures to control a putative immigration problem, spending billions to close national borders even as they demand cuts in government spending and reduced taxes on corporations.
Many follow the Laffer Curve, named after a Reagan-era academic who claimed that reduced taxes (under certain circumstances) lead to more government revenue.
Unfortunately, some follow the Laffer Curve around a rational bend and careen off the road to prosperity into a deeper chasm of income inequality.
Consider this: Much, if not most, of the campaign rhetoric is designed solely to win elections. After all, politics is not about getting things done; it's about winning elections. Getting things done is the responsibility of government.
So when should government step in to get something done and rescue a faltering economy? The answer is not to do things that the private sector could do as well or better, but to do things that are not being done at all. Then, when recovery is strong enough, government involvement must recede.
Friday, September 4, 2015
Fortress America
My way or the highway! No compromise!
The U.S. jobless rate fell again last month to 5.1 percent as the nation added 173,000 jobs, the Labor Department said, another sign that the economy continues to recover.
Earlier, the Federal Reserve cited more good signals. Meanwhile, other major nations continue to struggle. The economy in China, a major U.S. trading partner, is slowing. The Ukraine economy may be close to collapse, and could drag down Eastern Europe. The migrant crisis in the rest of Europe, coupled with financial woes among members of the European Union, may threaten the unity of the group, beginning with the failure of the common currency.
Along with other issues, as the U.S. strengthens and the rest of the world suffers, this may prompt conservative candidates to call for closing off America from the rest of the world. Feelings of isolationism have been strong before, most notably during the inter-war years and the Great Depression, when many Americans were strongly against involvement in problems plaguing the rest of the world.
Since World War II, however, America has steadily built stronger ties worldwide through economic and international trade ties. No surprise. Economists have known since Adam Smith published "The Wealth of Nations" in 1776 that international trade benefits both sides.
Nevertheless, there remains a vocal minority who insist that there can be only one victor, and their version of the art of the deal stipulates a winner-take-all strategy.
So watch for more calls for an isolated America, especially from the Radical Right who believe their way is the only way, with no compromise, and any who disagree should be compelled to submit.
The U.S. jobless rate fell again last month to 5.1 percent as the nation added 173,000 jobs, the Labor Department said, another sign that the economy continues to recover.
Earlier, the Federal Reserve cited more good signals. Meanwhile, other major nations continue to struggle. The economy in China, a major U.S. trading partner, is slowing. The Ukraine economy may be close to collapse, and could drag down Eastern Europe. The migrant crisis in the rest of Europe, coupled with financial woes among members of the European Union, may threaten the unity of the group, beginning with the failure of the common currency.
Along with other issues, as the U.S. strengthens and the rest of the world suffers, this may prompt conservative candidates to call for closing off America from the rest of the world. Feelings of isolationism have been strong before, most notably during the inter-war years and the Great Depression, when many Americans were strongly against involvement in problems plaguing the rest of the world.
Since World War II, however, America has steadily built stronger ties worldwide through economic and international trade ties. No surprise. Economists have known since Adam Smith published "The Wealth of Nations" in 1776 that international trade benefits both sides.
Nevertheless, there remains a vocal minority who insist that there can be only one victor, and their version of the art of the deal stipulates a winner-take-all strategy.
So watch for more calls for an isolated America, especially from the Radical Right who believe their way is the only way, with no compromise, and any who disagree should be compelled to submit.
Thursday, September 3, 2015
The Cost of Isolation
The balance of trade with America's neighbors to the north and south is some $10 billion in favor of the U.S. Therefore, erecting walls and isolating America would be an economic disaster.
Canada and Mexico together account for $652.6 billion worth of exports to those nations yearly, while $641.9 billion worth is imported, according to new data from the U.S. Census Bureau.
Meanwhile, the overall international deficit of American trade worldwide fell by 7.4 percent in July, to $41.9 billion, according to the U.S. Commerce Department. Exports rose 0.4 percent in July to $188.5 billion, while imports dropped 1.1 percent to $230.4 billion.
In addition, one third of all the people in the world live in just two countries -- China and India, the Census report said. The world's total population is 7.2 billion, with 1.37 billion people living in China, followed by 1.2 billion in India. The U.S. is a distant third, with a population of 321 million.
American exports to Mexico totaled $240.2 billion in value, second only to Canada, where $312.4 in exports were shipped. Exports to China were third, at $123.7 billion.
Imports from China totaled $466.8 billion, the government data showed, followed by Canada, at $347.8 billion and Mexico, at $294.1 billion.
Therefore, antagonizing either neighbor and paralyzing international trade with them would lead to a serious economic downturn that could easily trigger a worldwide depression.
Canada and Mexico together account for $652.6 billion worth of exports to those nations yearly, while $641.9 billion worth is imported, according to new data from the U.S. Census Bureau.
Meanwhile, the overall international deficit of American trade worldwide fell by 7.4 percent in July, to $41.9 billion, according to the U.S. Commerce Department. Exports rose 0.4 percent in July to $188.5 billion, while imports dropped 1.1 percent to $230.4 billion.
In addition, one third of all the people in the world live in just two countries -- China and India, the Census report said. The world's total population is 7.2 billion, with 1.37 billion people living in China, followed by 1.2 billion in India. The U.S. is a distant third, with a population of 321 million.
American exports to Mexico totaled $240.2 billion in value, second only to Canada, where $312.4 in exports were shipped. Exports to China were third, at $123.7 billion.
Imports from China totaled $466.8 billion, the government data showed, followed by Canada, at $347.8 billion and Mexico, at $294.1 billion.
Therefore, antagonizing either neighbor and paralyzing international trade with them would lead to a serious economic downturn that could easily trigger a worldwide depression.
Elasticity
Elasticity: In economic terms, the degree to which one thing changes in response to change in another input.
The so-called sin taxes, on products such as tobacco and alcohol, are major sources of government revenue.
Economic incentives are far more powerful than moral suasion.
Banning alcohol didn't work in America during Prohibition, and neither will a total ban on narcotics. Efforts to shut down supply are useless without equal efforts to reduce demand.
In the case of drug addicts, their demand or need does not change even as supply is cut, thus driving up prices. In econo-speak, their demand is inelastic. It does not change, so the addict is willing to pay any price to satisfy the body's demand.
Smugglers know this, so to compensate for the added risk and higher cost of shipping the supply as governments try to shut them down, the price to addicts rises.
Normally, when a price rises, demand falls. Among other consumer products, coffee for example, when the price rises substantially, users switch to tea or some other beverage. But since addict demand does not change (inelastic), dealers charge higher prices.
Result: Addicts turn to more desperate measures, including crime, to get money to satisfy their addiction, just as dealers raise prices to compensate for added risk in evading law enforcement. Similarly, law enforcement adds to government expense in trying to cope with the rising crime rate.
As long as government efforts fail to reduce demand, this economic function of demand inelasticity will lead to greater cost in treating addicts and fighting increased crime and violence.
Thus, an inelastic demand for alcohol during Prohibition led to smuggling, crime, violence and soaring law enforcement budgets. In addition, there was the added cost of treating those who were sickened by using cheap and dangerous substitutes for alcoholic beverages that previously were subject to government safety regulation.
In economic terms, the problem of illegal narcotics is little different. Since a full prohibition doesn't work, it may be useful to consider at least a partial decriminalization, accompanied by significant tax revenue, which could be used for addiction treatment and counseling, as well as education to prevent addiction. Some states have already decriminalized marijuana, saving money on law enforcement, and raising revenue through taxes.
In economic terms, a similar quandary of inelasticity exists for anti-abortionists. The demand for safe, healthy means to terminate pregnancies is there, but efforts to outlaw the procedures can only drive both providers and consumers into shady, dangerous areas. The demand is there, and it will be served by suppliers, legal and otherwise.
As for the self-appointed guardians of the public morals, they have a right to subscribe to and practice their own moral code, but they have no right to inflict that code on others.
The so-called sin taxes, on products such as tobacco and alcohol, are major sources of government revenue.
Economic incentives are far more powerful than moral suasion.
Banning alcohol didn't work in America during Prohibition, and neither will a total ban on narcotics. Efforts to shut down supply are useless without equal efforts to reduce demand.
In the case of drug addicts, their demand or need does not change even as supply is cut, thus driving up prices. In econo-speak, their demand is inelastic. It does not change, so the addict is willing to pay any price to satisfy the body's demand.
Smugglers know this, so to compensate for the added risk and higher cost of shipping the supply as governments try to shut them down, the price to addicts rises.
Normally, when a price rises, demand falls. Among other consumer products, coffee for example, when the price rises substantially, users switch to tea or some other beverage. But since addict demand does not change (inelastic), dealers charge higher prices.
Result: Addicts turn to more desperate measures, including crime, to get money to satisfy their addiction, just as dealers raise prices to compensate for added risk in evading law enforcement. Similarly, law enforcement adds to government expense in trying to cope with the rising crime rate.
As long as government efforts fail to reduce demand, this economic function of demand inelasticity will lead to greater cost in treating addicts and fighting increased crime and violence.
Thus, an inelastic demand for alcohol during Prohibition led to smuggling, crime, violence and soaring law enforcement budgets. In addition, there was the added cost of treating those who were sickened by using cheap and dangerous substitutes for alcoholic beverages that previously were subject to government safety regulation.
In economic terms, the problem of illegal narcotics is little different. Since a full prohibition doesn't work, it may be useful to consider at least a partial decriminalization, accompanied by significant tax revenue, which could be used for addiction treatment and counseling, as well as education to prevent addiction. Some states have already decriminalized marijuana, saving money on law enforcement, and raising revenue through taxes.
In economic terms, a similar quandary of inelasticity exists for anti-abortionists. The demand for safe, healthy means to terminate pregnancies is there, but efforts to outlaw the procedures can only drive both providers and consumers into shady, dangerous areas. The demand is there, and it will be served by suppliers, legal and otherwise.
As for the self-appointed guardians of the public morals, they have a right to subscribe to and practice their own moral code, but they have no right to inflict that code on others.
Progress Report
Thanks to all regular readers of the Editor's Revenge blog, the number of countries reached now totals 80.
Please encourage friends to join the readership by forwarding postings and providing links to the site.
As always, the goal is to provoke thought, not confrontation.
"Belief without thought endangers freedom."
Please encourage friends to join the readership by forwarding postings and providing links to the site.
As always, the goal is to provoke thought, not confrontation.
"Belief without thought endangers freedom."
Wednesday, September 2, 2015
Religion and Politics
Please God, protect me from your True Believers
Religion and politics don't mix, say some, but far too often people combine them regularly, attempting to foist one set of beliefs -- political or religious -- on others.
Some spread their political beliefs with a fervor common to religious fanatics. Others try to impose their religious beliefs onto and throughout a political system, demonizing any and all non-believers and using the allegation of heresy to justify punishment of opponents.
However, the word heretic derives from a Greek term meaning someone who disagrees. Religion has too often been used as a cover to justify or rationalize persecution of those who do not share the "correct" beliefs. To those in power, disagreement equals heresy and is therefore an evil which must be purged.
This attitude even extends to those within the same larger set of beliefs Some claim those who disagree "don't worship the right way," which to them means their way, so the unorthodox worshipers are deemed heretics. (Orthodox derives from the Latin ortho-, meaning "right, straight, correct" and -dox meaning way. Similarly, an orthodontist is someone who straightens teeth.)
Consider this concept: Judaism, Christianity and Islam are all variations on a Middle Eastern desert religion. It has been said that Christianity is Judaism fulfilled, and Islam a movement to reform or return the desert religion to a more pure form.
Is that heresy? Perhaps, but only in the sense that it disagrees with what some insist is the "correct" form.
Or as Thomas Paine put it, "No one will deny or dispute the power of the Almighty" to communicate a revelation to one person and not to any other. But "it is a revelation to that person only." When that person tells it to others, "it ceases to be a revelation" to all the others. "It is a revelation to the first person only, and hearsay to every other, and consequently they are not obliged to believe it."
However, there remains a choice. The others may choose to believe, but for the first to demand and persecute others and force them to accept a "true belief" is dangerous and a heresy against the morality of free will.
Religion and politics don't mix, say some, but far too often people combine them regularly, attempting to foist one set of beliefs -- political or religious -- on others.
Some spread their political beliefs with a fervor common to religious fanatics. Others try to impose their religious beliefs onto and throughout a political system, demonizing any and all non-believers and using the allegation of heresy to justify punishment of opponents.
However, the word heretic derives from a Greek term meaning someone who disagrees. Religion has too often been used as a cover to justify or rationalize persecution of those who do not share the "correct" beliefs. To those in power, disagreement equals heresy and is therefore an evil which must be purged.
This attitude even extends to those within the same larger set of beliefs Some claim those who disagree "don't worship the right way," which to them means their way, so the unorthodox worshipers are deemed heretics. (Orthodox derives from the Latin ortho-, meaning "right, straight, correct" and -dox meaning way. Similarly, an orthodontist is someone who straightens teeth.)
Consider this concept: Judaism, Christianity and Islam are all variations on a Middle Eastern desert religion. It has been said that Christianity is Judaism fulfilled, and Islam a movement to reform or return the desert religion to a more pure form.
Is that heresy? Perhaps, but only in the sense that it disagrees with what some insist is the "correct" form.
Or as Thomas Paine put it, "No one will deny or dispute the power of the Almighty" to communicate a revelation to one person and not to any other. But "it is a revelation to that person only." When that person tells it to others, "it ceases to be a revelation" to all the others. "It is a revelation to the first person only, and hearsay to every other, and consequently they are not obliged to believe it."
However, there remains a choice. The others may choose to believe, but for the first to demand and persecute others and force them to accept a "true belief" is dangerous and a heresy against the morality of free will.
Drug Demand and Supply
Whatever the demand, someone will provide a supply.
As long as there is a demand for drugs, there will be suppliers.
Smugglers ship drugs to the U.S. because "that's where the addicts are," said one dealer. Any attempt to deal with a widespread drug abuse problem by shutting down supply is doomed to failure, unless equal measures are taken to reduce demand.
This was proven on a national level during Prohibition. Nearly 100 years ago, a constitutional amendment banned the sale of liquor in America, but that attempt to eliminate supply only led to a soaring crime rate and a waste of law enforcement resources.
Labeling the distribution and sale of narcotics as a criminal enterprise without at the same time discouraging the misuse and abuse of such drugs will also fail, just as the prohibition of alcoholic beverages failed during the 1920s and 1930s.
Economics 101 emphasizes the Law of Demand and Supply, but it's important to remember that neither dominates. Together, they operate to establish supplies of any product to fill a demand and establish a price.
Any effort, therefore, to destroy the narcotics trade in America by shutting down suppliers in other countries cannot succeed on its own. People grow and sell opium-based narcotics and other drugs because there is an economic incentive to do so. Opportunities are few in many agricultural and poor areas of the world. One opportunity that is available, however, where initial investment is low and financial return is high, is in the growing and harvesting of opium poppies. Examples include countries like Colombia, Afghanistan and Mexico.
This is not to say that prolonged use of narcotic drugs is a good thing. Such painkillers can be very helpful to those who need them, and when used under medical supervision.
But as the name implies, a narcotic induces sleep, and in this case the drug puts nerves to sleep so that pain signals are not sent to the brain. However, other bodily functions, such as breathing and heartbeat, can also be put to sleep, and that sleep can be permanent.
So instead of attempting to shut down growers and suppliers in other countries, at least equal emphasis should be on reducing demand in America by discouraging misuse and abuse.
Any student of Economics 101 knows that once you understand the Law of Demand and Supply, you've got it knocked.
As long as there is a demand for drugs, there will be suppliers.
Smugglers ship drugs to the U.S. because "that's where the addicts are," said one dealer. Any attempt to deal with a widespread drug abuse problem by shutting down supply is doomed to failure, unless equal measures are taken to reduce demand.
This was proven on a national level during Prohibition. Nearly 100 years ago, a constitutional amendment banned the sale of liquor in America, but that attempt to eliminate supply only led to a soaring crime rate and a waste of law enforcement resources.
Labeling the distribution and sale of narcotics as a criminal enterprise without at the same time discouraging the misuse and abuse of such drugs will also fail, just as the prohibition of alcoholic beverages failed during the 1920s and 1930s.
Economics 101 emphasizes the Law of Demand and Supply, but it's important to remember that neither dominates. Together, they operate to establish supplies of any product to fill a demand and establish a price.
Any effort, therefore, to destroy the narcotics trade in America by shutting down suppliers in other countries cannot succeed on its own. People grow and sell opium-based narcotics and other drugs because there is an economic incentive to do so. Opportunities are few in many agricultural and poor areas of the world. One opportunity that is available, however, where initial investment is low and financial return is high, is in the growing and harvesting of opium poppies. Examples include countries like Colombia, Afghanistan and Mexico.
This is not to say that prolonged use of narcotic drugs is a good thing. Such painkillers can be very helpful to those who need them, and when used under medical supervision.
But as the name implies, a narcotic induces sleep, and in this case the drug puts nerves to sleep so that pain signals are not sent to the brain. However, other bodily functions, such as breathing and heartbeat, can also be put to sleep, and that sleep can be permanent.
So instead of attempting to shut down growers and suppliers in other countries, at least equal emphasis should be on reducing demand in America by discouraging misuse and abuse.
Any student of Economics 101 knows that once you understand the Law of Demand and Supply, you've got it knocked.
Tuesday, September 1, 2015
Migration
Walls don't work
People have been on the move for millennia as they search for better lives, but the countries that try to shut them out only suffer a decline and fall.
Romans built two walls across Britain to keep out Scots. The Biblical story of the Exodus describes how Jews left Egypt, wandering for years and being welcomed as a new labor source in some areas, while those in Jericho, for example, tried to wall them out.
China in the early 15th Century was one of the most technologically advanced cultures in the world, sending a Great Treasure Fleet literally around the world and landing in America in 1421, some 70 years before Columbus. However, the Ming Dynasty decided to isolate the country and closed off all contact with others. Result: A gradual decline that lasted for hundreds of years, until the Communist rulers in the 20th Century adopted and adapted some aspects of Western capitalism and reopened its borders to trade.
Currently, many people are fleeing the Middle East for safety and opportunity in Europe, but are met with razor wire fences in Hungary and Austria. Others get as far as the French coast, but are stopped as they try to get through the tunnel to England. England doesn't want them, and France can't or won't send them back.
In America today, there are demands that a wall be built on the southern border to keep out Latinos. There has even been a proposal to erect a wall along the U.S. northern border, to bar undesirables coming in from Canada.
It's little different from 19th Century prejudices against immigrants from Ireland. Or blocking Jewish refugees from the Nazi Holocaust. Or the government roundup of Japanese families on the West Coast in the early 1940s, putting them in internment camps even though many of the families had been here for generations. Or corporate hiring prejudices against opportunity seekers from Italy.
Migration is part of the human experience. So also is resistance by the established population.
"America for the Americans," is the chant. But we are all immigrants, or we are descended from immigrants, whether one or many generations ago. Unless you are Mohawk, Arapaho, Cherokee, Iroquois or a member of any of the many other tribes, and even they are descendants of those who crossed the Bering Strait to Alaska many centuries ago.
Fences don't work. People will go around them, under them, over them or through them. Somehow, those seeking refuge and opportunity will find a way.
Closing the doors to newcomers and isolating the country, as was attempted in the past in America and in other countries and is now being considered again, can only lead to economic and political decline. And worse, to a fall.
People have been on the move for millennia as they search for better lives, but the countries that try to shut them out only suffer a decline and fall.
Romans built two walls across Britain to keep out Scots. The Biblical story of the Exodus describes how Jews left Egypt, wandering for years and being welcomed as a new labor source in some areas, while those in Jericho, for example, tried to wall them out.
China in the early 15th Century was one of the most technologically advanced cultures in the world, sending a Great Treasure Fleet literally around the world and landing in America in 1421, some 70 years before Columbus. However, the Ming Dynasty decided to isolate the country and closed off all contact with others. Result: A gradual decline that lasted for hundreds of years, until the Communist rulers in the 20th Century adopted and adapted some aspects of Western capitalism and reopened its borders to trade.
Currently, many people are fleeing the Middle East for safety and opportunity in Europe, but are met with razor wire fences in Hungary and Austria. Others get as far as the French coast, but are stopped as they try to get through the tunnel to England. England doesn't want them, and France can't or won't send them back.
In America today, there are demands that a wall be built on the southern border to keep out Latinos. There has even been a proposal to erect a wall along the U.S. northern border, to bar undesirables coming in from Canada.
It's little different from 19th Century prejudices against immigrants from Ireland. Or blocking Jewish refugees from the Nazi Holocaust. Or the government roundup of Japanese families on the West Coast in the early 1940s, putting them in internment camps even though many of the families had been here for generations. Or corporate hiring prejudices against opportunity seekers from Italy.
Migration is part of the human experience. So also is resistance by the established population.
"America for the Americans," is the chant. But we are all immigrants, or we are descended from immigrants, whether one or many generations ago. Unless you are Mohawk, Arapaho, Cherokee, Iroquois or a member of any of the many other tribes, and even they are descendants of those who crossed the Bering Strait to Alaska many centuries ago.
Fences don't work. People will go around them, under them, over them or through them. Somehow, those seeking refuge and opportunity will find a way.
Closing the doors to newcomers and isolating the country, as was attempted in the past in America and in other countries and is now being considered again, can only lead to economic and political decline. And worse, to a fall.
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