A Welterweight Fight! At Best.
The other day I entered into a Facebook argument (I spend an inordinate amount of time arguing on Facebook) about the comparison between President Obama and Ronald Reagan with regard to their economic achievements. The argument began from a posting of an article by Adam Hartung in Forbes Magazine, “Obama Outperforms Reagan on Jobs, Growth and Investing.” Okay, it was an iffy article, but I can’t resist an opportunity to provoke my right wing friends (of which I have many for some reason).
Right on cue, one of my right wing friends posted a response in the form of an article by Lance Roberts that appeared on the Advisor Perspective website called “Obama Outperformed Reagan? Hardly.” This article contained the typical homage to the miracle of the Reagan economy. Trite comparisons of the recession in the early eighties with the Great Recession faced by Obama. Lame rationales for why any progress under Obama doesn’t count. Graphs arranged in such a way as to emphasize dramatic shifts despite their irrelevance. Complete silence about the fact that Reagan ran monster deficits, grew the government and raised taxes during his time in office. Plus, the author offers the requisite claim that Reagan ushered in an era (20 years according to Roberts) of unprecedented prosperity, despite growing inequality, stagnating wages and an economic shift from manufacturing to a finance driven service sector. Pretty typical stuff, really.
On the other hand, let’s give my right wing friend credit where it is due. Hartung offers some interesting data to support his inference that Obama is “economically, the best modern President.” However, he really does not offer an analysis of GDP. Roberts does, but he hedges by comparing Reagan’s full term to only six years of Obama’s performance. So I figured I would rectify that. Below is the real GDP for Presidents Reagan and Obama in their first six and a half years. Now in this case, I’m looking at the slope of the line, not the raw numbers.
What I see appears to give Obama the edge when it comes to economic growth, but only slightly. So I figured I would bring these two lines together and focus them specifically on growth of GDP with both Presidents starting at zero. The results are as follows.
Again, advantage Obama. Now that does not mean that this advantage will last. There’s still a year a couple of years left.
But this leads me to the larger point. Being in a position to referee this welterweight fight (nothing against real welterweights…you guys are awesome!). When it comes to the economy neither Obama nor Reagan are anything to wave a big, foam finger in the air for. Since at least the Carter Administration, modern presidents, regardless of party, have turned their backs on the New Deal policies that really did usher in an era of prosperity. Economic policies since the seventies have concentrated on just subtle variations of the same theme: deregulation, privatization and free trade. The only real difference between the parties has been in protection of some vestige of the social safety net, with Republicans wishing to pull the rug out from under the poor and privatize the benefits of the old while Democrats continue to, more or less, support at least the existence of a basic, government funded safety net.
Reagan provided the legitimizing paradigm for this shift. “Government is not the solution. Government is the problem.” The Great Communicator so effectively denounced the very government that he grew that it is now inconceivable to argue that government even has a function that cannot be better served by the private sector. The existence of something called “the commons” and “the public interest” are no longer a part of the political vernacular. The message of the Progressive Era and the New Deal has been replaced by admonitions of “big government” and “tax and spend liberals.”
That is the true nature of the so called economic miracle that was the Reagan Era. Indeed, most people have not benefited from the economic growth that has happened since the eighties. Yes, we have some fancier toys, but as far as our standard of living, our wages, our security, most Americans are worse off in the new finance based economy that has supplanted the industrial revolution for which Reagan was the chief spokesman. Yes, it could be argued that this is, in and of itself, transformative. Indeed it is. But “great?” No. Not even close.
So has President Obama diverged from the economic trend of the last thirty years? Well, there’s still a couple of years left, but it’s unlikely. True, there were some early victories. Obama’s stimulus saved the nation from complete economic collapse. Thanks for that! The auto industry was saved despite right wing frothing about “Government Motors.” Dodd-Frank, and the Consumer Financial Protection Agency revealed some early signs that maybe the United States was due for a return to the progressive paradigm. We even got an ever so slight tax increase on the wealthy.
Since those slight detours, however, President Obama has largely returned to the Reagan path. Unlike Reagan, Obama has actually shrunk the size of government. Though Dodd-Frank offers some protection and oversight, the very financial system and arcane derivatives mechanisms that brought about the great recession remain in play. The Obama Administration continues to fight for free trade agreements such as the Trans Pacific Partnership (TPP), the negotiations of which are in secret. Yes, there’s been an uptick of manufacturing, but most of the returning jobs are being done by robots, not human beings. Obama has even overseen the renaissance of the U.S. oil industry despite some increased investments in green energy. If President Obama isn’t exactly on the Reagan Road, he is certainly running parallel to it.
Yes, the Republicans! The Republicans! The confounded Republicans! Keep blocking everything Obama tries to do. Okay. But let’s be honest. Obama hasn’t put an awful lot of effort in getting through the Republican roadblocks. Might things have been different if it weren’t for 2010? Maybe, but I see no indicator that a Democratic 112th Congress would have vouched for us the transformative policies that are necessary for reversing the damage done from thirty years of what we’ve come to know as Reaganomics. We would have gotten more stimulus, which would have been a significant improvement in the lives of millions of people. That’s nothing to scoff at. We’ll be paying for the mistakes of 2010 for at least another decade, if not more. But there is nothing to indicate that President Obama would have presided over an exciting new direction for the American economy. Sorry.
I’ve been thinking a great deal about the Obama legacy since reading Paul Krugman’s article in Rolling Stone defending the President. I’ve found that I’ve spent much of the Obama presidency defending the President from idiotic attacks from the right when what I really wanted to do was challenge the President to make real changes, to institute meaningful reforms that would make for a more just and equitable society. Perhaps, in being so distracted, I’ve been part of the problem. I can’t answer to this quite yet.
At this point, barring some significant changes, good or bad, in the next couple of years, I’m secure in my belief that Barack Obama has been a good president as presidents go. At the very least, I prefer President Obama over the possibility of a President McCain or a President Romney. What he has not been is a great president. And we are in dire need of a great President.
A thought on poverty from our discussion in Social Problems last week
Note: The following post was originally published at The Living Text Blog, my college sociology forum. I thought it would go well here at the Mad Sociologist.
I wanted to comment on something that came up in our discussion on poverty last week…then I got sick and just didn’t feel like it. Now I’m better.
Last week our topic turned to Social Security. During the discussion one student expressed disdain that Social Security payroll deductions were taken out of his check, and I quote, “…at gunpoint.” Really? Gunpoint?
Yeah, technically, not paying social security is illegal, but “gunpoint?”
In fact, it is a very common claim, and a good one, too. It’s brief and visual and violent. It conjures up the image of a bandit, or tinhorn dictator extracting his ransom from the innocent. Of course, bandits and tinhorns don’t ultimately end up providing an old age pension to their victims, but that complicates the matter.
Indeed, the “at gunpoint” meme is very common. It’s used to discredit any particular tax that might be offensive. So, for instance, I as a long time peace activist, may make the claim that a significant portion of my tax dollars is going to the creation of bombs and weapons of mass destruction. Or maybe you are offended that your tax dollars are going to build roads that you will never drive on. Whatever the grievance, the “at gunpoint” meme is your friend. It doesn’t really do anything to advance the debate or to promote enlightened discourse, but that’s not necessarily the point of claimsmaking.
The point is, that people, especially Americans, are resentful for having to spend money on stuff that does not directly benefit us. Indirect benefits do not count. This is part of a larger claim that taxes constitute a theft from the citizens by the government, and the lower the taxes the better.
This is clearly not true. If you want to do a little mind experiment, try to imagine a world without taxes. Imagine every road in the nation being privately owned. How would our economy fair if one had to pay private tolls every time they turned a corner? Clearly, taxes play a role in a successful society. True, taxes can be too high, but they can also be too low.
Instead of understanding taxes as a theft, how about we change the paradigm? Let’s define taxes as dues paid to derive benefits from society. After all, had Bill Gates been born in a rural village in Uganda, he wouldn’t be Bill Gates. He may still be a brilliant businessman and technological innovator, but a multi-billionaire? No. Bill Gates rose to prominence because he was the benefactor of certain entitlements offered to upper middle class families in the United States.
This also implies a change to our understanding of evil government spending. “Government spending!” We practically spit after we say it. To Americans, government spending is rife with graft, corruption and waste. Not without good reason. But is that waste as ubiquitous as we think? Not really. Some conservatives have made the claim that they could cut the deficit just by eliminating waste. They were not, however, able to come up with the numbers. And “waste” is pretty subjective. One’s concept of waste is another’s necessity. Sometimes what looks like waste really isn’t, such as the wasteful government study of goldfish. It turned out, that was part of a government study into underwater robotics with countless applications. All bureaucracies scramble for resources.
Instead of “government spending,” how about “government investment.” Investment infers a certain amount of responsibility into making good investments over bad investments, and a knowledgeable debate with regard to risky investments with the public’s money. The reality is, quite a bit of government “spending” is, in fact, an investment. We mentioned food stamps last week. It seems like an entitlement with no returns, but it turns out that spending on food stamps actually pays a dividend.
Fighting poverty also pays dividends. It’s an investment. Poverty comes with certain inherent costs: crime, disease, educational delays, pollution, early pregnancy, unstable marriages, lower wages, health care, just to name a few. That’s not including the personal costs. The question is, how much of an investment are we willing to put in?
In class, we discussed that most of what is presented as a “solution” to poverty is, at best, “management” of poverty. Indeed, we could identify these plans as a cop out on a willingness to invest in real solutions.
Trickle Down Policies: Reducing taxes, subsidizing business directly or indirectly, is said to result in a “lifting of all ships. Except that there’s never really been an example of this happening. What is the incentive in businesses using their extra money on lifting the poor as opposed to putting the money in their own vaults? There doesn’t seem to be much.
Redistribution: Taxing the wealthy to pay for social safety net programs has, in fact, shown some promise, but enough to justify investment? After all, there is a cost to taxing investors too much. There is also that whole dependence on government thing. On the other hand, what is the difference between being dependent on the government or being dependent on a corporate dominated market? We are all, to a certain extent, dependent. Every time you drive down a road, you are on the government teat (as a friend of mine would say). Regardless, as applied in the United States, redistribution this has fallen short of eliminating poverty.
That leaves Social Investment, which could be seen as a form of redistribution, but with dividends.
So on what should society invest. Well, most of you last week knew that education was key. You will discover, however, that the key is not cut quite as you think. Regardless, social investment in quality education across the board, including public access to tertiary schooling is key.
Secondly, society must invest in jobs. There is plenty of work to be done at the public level. We need more teachers and nurses and public services. American infrastructure is an international joke costing businesses hundreds of billions of dollars every year (perhaps as much as $3 trillion by 2020). We all recognize the need for alternative energy systems and infrastructure. Historically, the nation with the most reliable fuel source wins. Right now many countries like China and the European Union are investing in the next generation of energy while we continue to suck down the last remaining fumes of ancient sunlight. American broadband connectivity is a joke, despite American taxpayers’ initial investment that created the internet.
Millions of people can be educated to do these jobs, then set to work immediately. There’s no need to wait. It just takes a willingness to invest.
Well, the private sector can handle it.
Probably, but they are not, and there’s no reason to believe that they will. Instead, the private sector will invest in nations that already have the infrastructure. This is not a criticism of evil corporations. It’s a commentary on sensible business practice.
The two variables that solve poverty are access to quality education and to jobs paying a living wage. If the private sector will not do it, then that leaves the public sector. So where do we get the money?
Well, I brought this up during class. The reality is that we either get the money from where it is, or we spend money we don’t have. The latter is not entirely unreasonable, but will ultimately create fiscal problems. So then we have to go where the money is. Currently, major corporations are sitting on almost $2 trillion dollars. Or perhaps we can cut back on some of our so called defense spending, but that means cutting back on government contracts that will cost jobs. Can we invest enough to compensate for more unemployed? Raising taxes on the middle class is simply unreasonable right now. The middle class already lacks the buying power to jump start the economy.
And let’s remember, forty percent of working age poor, do, in fact, work. Eleven percent of working age poor are working full time, year round. Over sixty percent from the lowest quintile will pay payroll taxes in 2013. This is not a story about unwillingness to work. It’s a story about misallocation of human resources. After all, why should anyone work, when working does not lift them out of poverty?
The point in this post is not to promote one policy over another. For that, you can go to the Mad Sociologist Blog. The goal is to understand the claims that are being made and what it will take to truly solve the problem in any meaningful way. How, or even if, we solve the poverty problem is in your hands now.
PS: I did some research. Apparently Malaysia has a pretty intense definition of poverty. Really bad example. Better example is Taiwan. Taiwan measures poverty based on a budget economy (minimum income requirement for meeting basic needs) and yet records less than 1% poverty rate.
We are being lied to by the right wing when they say, as conservative leaders like Ron Paul insists, that raising the minimum wage costs jobs. The above graph shows all of the times that the minimum wage was at least partially raised,according to the Department of Labor, corresponding to the total jobs created as recorded by the St. Louis Federal Reserve. Yes, a purist could identify a few instances where the minimum wage was followed by a loss of jobs, but such a person would have to be pretty selective about their data. Indeed, we know that the right wing is just that.
The data for 1978 to the present is the most reliable. Before then, the minimum wage was raised differentially for different sectors. Regardless, that detail is not part of the conservative argument. As ideological purists, the right wing simply contends that raising the minimum wage costs jobs. This graph demonstrates that that claim is simply not true.the next time you hear this ridiculous argument, please feel free to use this graph.
Not raising the minimum wage is simply irresponsible when wages have stagnated over the last 30 years.
Why Austerian Economic Policies are not “mistaken.” They are strategic!
Contemporary Keynesian economists are beside themselves. I have an image of Paul Krugman and Dean Baker et al. trying to cover the bald spots from where they’ve pulled the hair out of their heads. They just can’t understand why, despite overwhelming evidence to the contrary, austerity measures and debt reduction are the dominant paradigms of the day as opposed to public investment and stimulus (or, as Krugman argues, Economics 101). Krugman astutely refers to austerity and deficit hawkishness as “Zombie ideas,” or theories that are constantly being shot down by the evidence, but refuse to die. He and his popular contemporaries inundate us with clear data and sensible explanations of otherwise complex theory proving what our experience already demonstrates. Austerity is the wrong approach to our current economic crisis, and the “Confidence Fairy” is never going to come.
Their economic thinking is, of course, sound. The Keynesians are right. We are in a liquidity trap in which central banks, in our case the Fed, can’t decrease interest rates any more to encourage investment and spending. Families that are lucky enough to have semi-stable jobs are overleveraged or unwilling to spend in uncertain times. Business owners, without a demand base, are unwilling to invest in product or hire employees. No amount of tax breaks or deregulation, or spending cuts for that matter, will change this fact. It is clear that the Lesser Depression is driven by stagnant demand, and if consumers are unwilling to spend, then the government must. Period.
Yes, this would mean deficit spending, but with record low interest now is the time to invest in needed projects and programs. This is not new age radical thought. It is well established and confirmed theory straight out the standard text. We know what caused the Great Recession and we know how to fix it. Now!
“Well that’s great!”
“So why aren’t we doing it?”
Ah, that is the question.
This is one question that Keynesians are ill prepared to answer. They shake their heads and bemoan the fact that we are repeating the “mistakes” of the Hoover Administration. They point out that the austerity paradigm has failed everywhere it’s been tried, from Japan to England, to Ireland (the poster child for austerity). The policies are definitively wrong-headed.
From an economic perspective they are right to be flummoxed. It defies scientific logic to single-mindedly pursue patently inadequate policies if the goal is to turn the economy around. That is where the impeccable logic of the economists leads them astray. To understand the irrational magic that keeps the Zombies stumbling along, one needs a bit of the madness that is the sociological imagination.
The economists, and many others, make three incorrect assumptions in their analysis.
First, economists assume that the so-called Austerians are making a mistake and the government, in following along, is promoting bad policy. Those in authority are not blind to history. They know the consequences of their small government, Hayak/Rand inspired dogma. They are not stupid or ill informed. So why are they pursuing these obviously failed policies? They promote them because they effectively achieve the goals of the corporate elite whom they serve. Their thinking is not mistaken—it’s strategic.
In a strategic sense, austerity policies make perfect sense on the part of the elite. Pounding the drum of fiscal “responsibility” and deficit reduction during a time of economic contraction is advocating freedom from regulation, consolidation of power, and the disempowerment of working people. For the economic elite, taxes, regulations and social safety nets are costs from which they derive no benefit. They are, in other words, bad investments. Especially when the truth is that the corporate elite can get everything that they want and more without these impediments.
The existence of a social safety net rankles the elite. Their own social safety is, of course, assured. They don’t need any stinking laws or programs. They just need to make obnoxious profits, collapse the economy of the entire world, and wait for the taxpayer bailout—from which they will give themselves huge bonuses in the name of quality retention. They don’t need Social Security, or Medicare, or the like, so these things are not only bad investments, they are counterproductive.
Social safety nets, by providing security for working people, are empowering and freeing, decreasing their dependence on employers (arguably increasing dependence on the government, but that’s another matter). A working man who can quit his job without worrying about losing his health care, or who knows he will be able to retire at a certain age, or has an economic cushion in the event that he loses his job, is a liability. On the other hand, an employer who fears for his future if he should step out of line at the workplace is nice and docile, a great investment. People who are free to make use of public investments to improve their social standing are potential competitors. Strategically, it makes no sense for the powerful to empower others. The key is to keep working people as low, as pathetic, as dependent as possible.
Um…without them killing you.
That’s where the government comes in. The only social safety net of value to the corporate elite is a strong police force, a powerful military and an expansive prison system. All the better if they can get working men and women to pay for these things. After all, corporations profit from the expenditures in the form of military defense contracts, weapons and body armor sales to the state, and privately run prisons. It’s quite the set-up.
Currently, only about eight percent of people born in the lowest wealth quintile will work their way up to the top quintile. For the power elite, who reside within the top percentile…or even the top percentile of the top percentile, this minimal social mobility is too close for comfort. They must defend their social position.
The next misconception that economists assume is that the economy is a monolithic whole. Granted, I’m not an economist, so I’m sure I can be taken to task for this statement. Surely, economists in their studies may break the economy down into component parts, but they still refer to “the economy” in the singular when they address a lay audience. We rely on popular intellectuals like Krugman etal. to educate us. For the most part, they do a fantastic job. Presenting the economy as a unified whole may be an effective way of breaking down otherwise complex economic theory, but it neglects a big part of the story. In fact, the market structure can be best described as having at least two distinct “economies” if not more.
The most influential economy is that within which the wealthy live and do business and move their respective politicians around the economic chessboard. This economy is doing just fine. In fact, it’s thriving in this recession. The stock market continues to grow. Profits are up, many at record levels. Effective tax rates remain low for the Koch class. Workers are nice and desperate for jobs and are less inclined to rock the boat with their pesky unions and demands for higher wages and benefits. They are willing to work for less so long as they have jobs. Unions, the only check against corporate abuse, are going the way of the dodo. All corporate misdeeds are federally guaranteed. Yes, the government has sworn upside down and backwards that they will not give any more bailouts, but we know how robust political promises are. Corporate elites and their lobbyists laugh at the unassembled erector set known to us as Dodd-Frank. The government has demonstrated time and again that they will bail out the 1% and pass the costs down to working people, school children and pre-schoolers without asking a single dime from the wealthy.
Why on Earth would the elite and those “very serious people” who work for the elite want to change the status quo? It works so well for them.
The second “economy” is the productive sector of the economy—working men and women. This is the sector that bears the brunt and ultimately pays for the inevitable economic calamities caused by the elite. The dirty little secret that the elite do not want known, however, is that they are entirely dependent upon the labors of the productive economy. The wealthy do not drive the economy, they respond to it. It’s the labors of every day men and women that drives the economy. Instead, the productive class is held hostage to the so called “job destroyers creators” in both body and mind. The resulting alienation, hopelessness and irrational divisiveness among common people plays into the hands of the elite.
Finally, economists assume that it is the government’s function to promote the general welfare of all of its citizens. After all, it is in the job description. From this perspective, the government is blatantly derelict in its duty in pursuing contractionary polices when they know full well that expansionary policies are necessary. It is malpractice most cruel.
The function of government, however, is never to promote the general welfare, certainly not to consider the needs of its common citizens. The function of government is, rather, to promote the interests of the elite and to protect them from the consequences of their own avarice. Occasionally, it becomes contingent upon the government to negotiate between the two economic sectors. This happens when the productive sector takes arms against the elite sector and determines to tear it down. Sometimes the government uses force against such trespass, as in 1877; sometimes when the common man becomes too extensive for slaughter, the government institutes equalizing reforms, such as during the New Deal.
Regardless, the government is always the representative of the elite. Government of the people is a useful fiction pulled out for inaugural addresses and parades. Austerity is the American economic policy, with few minor adjustments made for the sake of campaign cosmetics, because the corporate elite want austerity. Their representatives, bought and paid for, will do as they’re told. What’s more, they will make sure that nothing even close to the New Deal ever happens again. It took them sixty years to tear down the hard fought reforms of the thirties. They are not about to go back now.
Austerity has little to do with economics outside of the devastating effects it has on most Americans. Those promoting austerity are not just pushing a wrong-headed agenda based on an almost religious faith in Randian dogma. They are pursuing an agenda in which the economic elite have invested a great deal and for which they reward their spokespeople handsomely. It is not an economic policy. If it were, austerity zombies would remain in the grave where they were buried with the publication of the General Theory. Austerity is a power strategy…and, so far, a successful one at that.
Note: Just as I was about to publish this blog I noticed a couple of posts from Paul Krugman. Since I used his name in the title and referenced his work quite often it’s only fair that I point out that he has recently offered some institutional analysis of austerity, here and here. Damn you, Krugman, for stealing my thunder! Well, to a certain extent. His analysis is not quite so radical as mine.
No matter how much the conservatives in Congress and pundits across the spectrum want this to seem like some kind of colossal showdown, the bottom line is—as always—the bottom line.
Why do I seem so confident in the prediction that the debt ceiling will be raised? First, raising the debt ceiling is what the government does. The debt ceiling has been raised over a hundred times since 1940. Only once was it ever an issue, 1995 when the Republicans under the leadership of Newt Gingrich tried to bluff President Clinton into cutting taxes and entitlements. President Clinton called the bluff, shut down the government and showed conservatives for the raving ideologues that they are. The Republicans were bluffing then, and as will be shown below, they are almost certainly bluffing now.
What? Saint Reagan raised the debt ceiling more than any other president since World War II? Who knew! I’ll bet conservatives were really pissed that he did that.
Clearly, Republicans are not ideologically averse to raising the debt ceiling. As has been demonstrated in earlier posts, Republicans love their big government and their deficit spending despite their protestations to the contrary. Granted, when measured in dollar amounts, Democrats still hold the record.
Now the pundits want to sell the great Manichaean conflict between left and right, and the debt ceiling issue is a prime discoursive arrangement for perpetuating this marketable myth. After all, conflict sells advertising space, even if it is false conflict. Liberals want to perpetuate the myth that conservatives are crazy enough to destroy the full faith and credit of the United States in the name of ideological purity. Conservatives want to perpetuate the myth that they are ideologically pure enough to draw the battle lines with the socialist opposition.
Both claims are false.
Republicans, representing conservatism, are the handmaidens of the corporate elite. Democrats, aren’t much better, though they do have some slight loyalty among the liberal punditry.
So here is the aforementioned “bottom line.” From Open Secrets, the following data.
As you can see, the Republican Party is in the pocket of finance. The GOPs favor from Wall Street is a statistical embarrassment. To be fair, though the investment is clearly lopsided, the money doled out to the Democratic Party is not exactly chump change.
There is no way that the Republican Party is going to discredit US treasury bonds when their patrons rely so deeply on this safe investment. Private pension funds hold over $600 Billion in US debt, while state and local governments carry another $700 Billion. Banks and insurance companies are depending on the United States to pay off on over $500 Billion in treasuries. Mutual funds hold over $800 Billion. All of this otherwise stable debt, US treasuries still considered among the safest investments in the world, is tied in with more risky investments, perhaps carrying the weight of countless private investments.
Any move that might risk these investments would be frowned upon by the corporate elite so ardently served by the Republicans (and only slightly less dogmatically by the Democrats).
Republicans are not crazy, they are regressive neo-feudalists, but they are not crazy. Surely, they are not crazy enough to bite the hands that feed them.
Which Means that 90% of Americans Don’t Know What They are Talking About!
Most of this data comes from those left wing hippies at the St. Louis FED.
Click Here for Source for Chart Above
Guy Who Doesn’t Know How To Read Data: “Look, the federal deficit is going up!”
Guy Who Knows How to Read Data: (Scratching his head) “No. The y-axis is in negative numbers. The federal deficit is going down.” (Shaking his head)
And for those of you who love your charts and graphs, the St. Louis Federal Reserve Bank FRED interactive is wicked cool! It’s too bad more people don’t do their own research.
Which Means that 90% of Americans Don’t Know What They are Talking About!
Most of this data comes from those left wing hippies at the St. Louis FED.
Click Here for Source for Chart Above
Guy Who Doesn’t Know How To Read Data: “Look, the federal deficit is going up!”
Guy Who Knows How to Read Data: (Scratching his head) “No. The y-axis is in negative numbers. The federal deficit is going down.” (Shaking his head)
And for those of you who love your charts and graphs, the St. Louis Federal Reserve Bank FRED interactive is wicked cool! It’s too bad more people don’t do their own research.
A Commentary by Sociologist Richard Appelbaum
Figure 1: Click to View the Source and the Video
Some interesting questions. Of course, I would like more commentary on the changing nature of power relations in this transitory stage.
Why do Republicans Hate the Stimulus? Because it Worked!
In fact, we could use another one.
Here’s a screen shot of employment from the Bureau of Labor Statistics. I added the stimulus and outlier graphics. Out of fairness, the huge increase in employment in 2010 reflects the huge number of people hired to conduct the census. That was short lived. However, even controlling for this outlier, the trend is clear. An upward trend. Yes, since the census job growth has been rather flat. This shows the bias of choosing your starting dates for the graph. That being said, it’s clear that another stimulus should be in order. Perhaps the American Jobs Act, which Republicans will not allow out of Congress.
What happened to GDP? Well, here it is (year.quarter). Real GDP, according to the Bureau of Economic Analysis, has been steadily increasing. We can argue that it hasn’t increased fast enough. Perhaps another stimulus is in order.
But what would happen to the deficit? The graph below suggests that there might just be an uptick in the deficit
temporarily. Notice that before the end of Obama’s first year in office, the deficit started going down. And no, you can’t credit a Republican congress for this turnaround. The turnaround started in 2010. The Republican Congress did not take their seats until 2011.
And the debt? It looks like a stimulus would do nothing to decrease the growth of the debt. However, it doesn’t look like it increases the growth of the debt. Yes, the debt grew. But it grew at exactly the same rate as it was before Obama took office.
It’s Just Not True
It’s enough to say the deficit has increased. In fact, if you are talking about the “deficit” rather than the “debt” it’s actually decreased.
A Visual Snapshot of the People the Romney Campaign has Written Off
I was planning a commentary on Mitt Romney’s infamous 47% assertions. As I started my research, however, I discovered that much of what I would have added to the conversation has already been adequately covered. Since it’s my goal that this blog serve as a source of innovative thinking on the issues, rather than as an echo chamber for the commentariat, I scrapped my original idea. However, I did find many graphs and charts (and you know how I love graphs and charts) and tidbits of information on the subject that I think are important for highlighting the insulting misconceptions perpetuated by the Romney campaign and his 1%er patrons.
The most surprising revealing information I found was that much of the reason why many in the 47% pay no federal income taxes is because of exemptions and tax credits passed or expanded under Republican administrations. Notice the sharpest increases of those who do not pay federal income tax (according to the conservative Heritage Foundation) happened under Ronald Reagan, and the Bushes. We might also note that the 47% quoted by Romney, which is actually just over 46% according to the most updated research, is lower than the 49.5% who did not pay federal income taxes when President Obama took office. According to Ezra Klein, at the Washington Post, the reason for such compassionate conservatism was a clear case of political compromise. Republicans needed these credits for low income earners in order to justify tax cuts for the wealthy. Now that tax cuts for the wealthy are secured, it’s time to pull the rug out from under the poor.
As you can see in the graphs above (Click the images for the sources) the majority of the 47%, whom Romney so blithely brushed aside, are old people, children and poor people. Those deadbeats and free-loaders!
Of course, the word “deadbeat” might need to be amended. It turns out that the majority of those who do not pay federal income taxes actually pay Payroll Taxes. This means that they
have jobs. Play the ‘awkward moment’ music now.
And what of that percentage of 47%ers who don’t work? Well, as it turns out, they almost all have a history of working. More often than not, they are simply regular folks, like you and me, who have fallen on hard times. Above is a graph you will find on the Krugman Blog at the New York Times. It shows that, except for old people and young people, between seventy and eighty percent of people between 25 and 60 pay federal income taxes and eighty percent pay both income and payroll taxes. Those who are not paying income taxes when they are thirty-one are likely to pay when they are thirty-two, just as they paid when they were thirty.
Also among the 47% are the wealthy. According to Dailyfinance.com, “About 162,000 people among the top 10% of earners have found ways to avoid paying any federal income tax.” This includes about three thousand members of the exclusive .1% of income earners. They are able to do this because of federal law that allows them to write off losses from the year before against their current gains. Perhaps some of this number were sitting in that very room, watching Romney bewail the deadbeat old, young and unfortunate. For all we know, it may have included Mitt Romney at times during the last ten years.
It’s Romney’s claim that this section of the population not only represents a significant portion of Obama’s supporters, but, almost all of them if recent polls are to be believed. Really? Is this an attribute of tax avoiders overall, or does Romney exclude those at the top end of the economic spectrum? Hmmm! In fact, about half of low income earners do not vote. Among those who do, about a third actually vote Republican. Among the elderly, a majority often vote Republican. As the chart above indicates, those states that have the most “deadbeats” in Mitt Romney’s eyes are actually consistent red states.
Despite the overwhelming amount of data calling “balderdash!” to the inane Romney statements on the 47%, don’t expect an apology or an adjustment in the conservative rhetoric. Romney, like Todd Akin before him, is guilty of nothing more than revealing to the public what Republicans say only in private. In this case, Romney didn’t know that he was speaking to the general public, but in the YouTube generation elitist plutocrats pretending to popular appeal must be more careful. This was not a gaffe in the traditional sense of the word. It was a revelation on video of what we’ve always known the Republican Party believes. According to conservative dogma, there is a small knot of people at the top of the socio-economic spectrum who deserve government largesse, namely the investor class. Those of us who work for a living are lucky to have such investors around, the so called job-creators, and should be prepared to sacrifice ourselves at the capitalist altar. As far as the investor class is concerned, it’s us against them. We are “those people”, the hangers on in their world.
it has nothing to do with class.
Yes, the title is part of a direct quote. No, the subtitle is satire, not a continuation of the quote. However, the theme of class has never been more evident and more blatant than during the Koch Brother’s Mitt Romney Fund Raiser in the Hamptons as described by the Los Angeles Times (LAT). Remember, in the United States, talk about class is bad form. America is a meritocratic land of opportunity. If you do not have wealth, power and influence, it is your own fault. Any suggestion to the contrary is pandering to class warfare.
Yet class talk rolls from the mouths of the so-called “VIPs” waiting in line for entrance to the aforementioned Romney fundraiser. This article makes it clear that the wealthy are very conscious of class and the benefits that higher class offers. It is also clear that the attendees feel that they are entitled to their status and that their position is threatened.
So let’s return to the full quote used in redacted form for the title of this essay. According to the LAT reporter, the woman quoted above actually said, “I don’t think the common person is getting it
Nobody understands why Obama is hurting them
We’ve got the message
But my college kid, the baby sitters, the nails ladies — everybody who’s got the right to vote — they don’t understand what’s going on. I just think if you’re lower income — one, you’re not as educated, two, they don’t understand how it works, they don’t understand how the systems work, they don’t understand the impact.”
See. It has nothing to do with class at all. It’s just that lower income people are ignorant and uninformed about how the system works. Not to worry. The wealthy have the message. They understand why Obama is hurting them. Nails ladies and baby sitters and everyone else who has the right to vote (read unfortunately has the right to vote?) just “don’t understand what’s going on.” Nothing elitist about that observation.
It’s clear that these folks, paying as much as $75,000 to scarf food off of the Koch’s fine china, feel that they are entitled to their position. After all, they are the “engines of the economy” while the working class are “the people who rely on that engine.” Working peopleeverybody who’s got the right to vote–should just do what they are told, accept what pittance they get from the caviar class and shut up. After all, they are the ones with the education to know how the system works.
And clearly Romney is one of them. A man who can spend $77,000 on 1/3 of a dancing horse (of course, of course), who has a Swiss bank account[s], and a demonstrated talent for private equity, is certainly cut from the same cloth as those attending the Koch hosted fundraiser. He clearly understands how the system works. There’s some logic to this. He certainly does know how the system works. Specifically, he’s the man whom the 1% knows will perpetuate the system and even tilt the inequalities even further on the side of the VIPs.
The problem is that the system sucks. Oh, the system is awesome if you happen to be among those in attendance in the Hamptons. However, if you are among the other 99% (eh, 80% to correct the meme), the system simply sucks. The system is stacked against any progress on your part. What’s more, the “common people”, despite their presumed lack of education, understand the system very well. They know that it is not designed to work for them.
The bottom line is that people like the Kochs and the their Hamptons guests are not the “engine of the economy.” They are passengers, and they are trying to ride for free. They know it. They know that the true engines of any economy are the workers and employees who actually turn the screws and set the stone, and push the pencils and file the papers. Ultimately, the common people support the system on which their wealth is based. Their risks are guaranteed by us. They need us to keep the engine running, on minimal fuel, zero maintenance and no repairs, and (at the risk of over-extending this metaphor) they are more than willing to drive us into the ground. After all, they can always jump on a Chinese vehicle.
Their hope is that Mitt Romney is the guy who will best protect their class interests.
At the same time, they are hoping that we ignorant common people stop all of that class warfare talk. Of course they do. Unfortunately, a $75,000 a plate fundraiser is not the best venue for trying to convince the “common people” that class privilege isn’t an issue.
Above is a brilliant short video in which Robert Reich explains the Seven Biggest Economic Lies. He has a great blog at www.robertreich.org
Depends on what you mean by “Private Sector”
President Obama took a lot of flack for suggesting that the “private sector is doing fine.” The right wing jumped on him for this gaffe. How could he be so out of touch with reality? Obviously, the private sector is not doing fine.
Well, it’s not quite that simple. Of course, a sociologist always says that, mostly because it’s true. It’s not the intention of this piece to speak for the President. I have no inner circle knowledge of what President Obama meant by his statement. However, there is a sociological analysis that can be done. In this case I use two recent articles from the New York Times to make the point that terms like “Private Sector” are more complicated than can be reduced into a political sound-bite.
If by Private Sector we mean all of those who make their living from privately owned segments of the economy as opposed to tax supported projects¹, then that would include those at all levels of the income spectrum. On average, such participants are not doing fine, but they are recovering.
Figure 1: Click the Chart for the Source
On the other hand, the “doing fine” elements of the private sector are not evenly distributed. If you are that part of the private sector dependent upon wages, salaries and employment, then you are most certainly “unfine.” You are underpaid, underemployed, stuck in a job that you do not want or are overqualified for. Your prospects for the future are lower than ever and you see no way out of this situation.
If, however, you are at the top of the private sector ladder, then you are, indeed, doing fine. In fact, “doing fine” is a profound understatement. You are profiting from the very collapse of the global economy that you may have had a hand in creating.
¹This is, of course, complicated by the fact that many institutions in the private sector also receive funds from the public sector, the taxpayer.
What you are paying for when you buy an i-product
Apple has stated that it will not bring home $60 Billion in foreign profits unless it gets a tax holiday on the money. Of course, they really don’t say what they will do with the money if they bring it home. How much do you want to bet that they’ll put it in their pockets or invest it Wall Street scams rather. After all, if the money isn’t taxed, why should it matter to me or you if they bring it home?
This is a poor form of blackmail. “Let me keep 95% of the money or I’ll keep 100% of the money!” Not exactly a bargin. But blackmail it is, and we as consumers should be disgusted at the arrogance.
This is especially true when one considers the benefits that Apple derives from the American market at the expense of virtual slave labor at Apple off-shore factories. Government trade policies make it cost effective for Apple to produce its products in China and other areas and ship them to American consumers who are willing to overpay for the latest in technology.
Even at that, Apple only pays about 13% effective tax rate on its income. How much do you pay? Also, Apple only pays taxes on about 14% of its profits, claiming that 86% of their income is derived from foreign sales. Actually, Apple off-shores its profits to foreign subsidiaries.
Is Apple really trying to make a political point about how hard it is to be among the mega-rich, taxed so much that instead of having a spare 90 foot mega-yacht at the winter home in Florida they must go through the drudgery of moving the family mega-yacht from the summer home in Maine. Oh, the humanity! Those damn teachers with their pension funds!
Think about that the next time you pay your iPhone bill!
Crime, the Economy and Common Sense Notions Proved Wrong
A few of months ago criminologists were shocked and amazed that, despite the decrepit economy, the crime rate went down. Now, it’s true that the crime rate has gone down, and has been going down for quite some time. However, I cannot vouch for the statement that criminologists were “shocked.” If it’s true that criminologists were shocked, then there’s only one reasonable explanation for this. Criminologists, at least those interviewed by the press, did not pay attention in their mandatory sociology classes.
Most of the articles that I read asked economists to explain the poor correlation between crime and economic integrity. None of them really offered an explanation. They cited interesting research such as the exceptionally high crime rates in the 1960s despite general prosperity as compared to relatively low crime rates during the Depression. One article did offer sociological analyses. For instance, the 1960’s experienced the Baby Boomers entering prime crime commission age, the teens and early twenties. They speculated that the Depression was so severe that communities had to come together to survive, thus decreasing crime. That’s why, in these instances, crime did not follow the economic trends.
The press is playing on the common sense notion that economic hardship leads to higher crime rates. After all, crime rates are higher in poor communities than they are in economically sound communities. This makes sense to the layperson and even to the sociologist. When a person doesn’t have legitimate access to the resources they want, they must turn to illegitimate means of achieving those resources. In sociology this is referred to as Strain Theory. Strain is the inability to satisfy socially accepted goals, such as economic prosperity. Strain, however, doesn’t happen in a vacuum. Regardless of strain, most people do not turn to criminal behavior over all. Most people conform to the norms and values of their culture. Like most common sense notions, this presumed link between the economy and criminal behavior is wrong.
Criminal or deviant behavior is the result of a breakdown in the influence of norms (rules) and values on human agency (the decisions of individuals). Human behavior is influenced by socialization. Socialization regulates human behavior through internal and external controls. Internal controls are values that are internalized by individuals. They are the reason why we recoil when we see people do something we know to be wrong. They are the reason why we feel guilt when we do something wrongthe reason why we hesitate in the face of a deviant act. External controls are the mechanisms in place for identifying and dealing with deviants, such as surveillance, police and corrections policies in society or discipline plans in schools or families. When individuals are certain that they will get caught committing a deviant act and will suffer significant consequences, this is sometimes enough to dissuade their straying from the accepted path.
Crime is likely when these controls fail. What brings people to turn their backs on the norms and values of a society to which they are socialized? Well, of course here we make the assumption that we are all socialized to respect the same norms and values. That’s not necessarily true. Some are taught that the conventional rules do not apply to them and are socialized with contrary norms and values. This phenomenon exists in impoverished communities, subgroups and counter-cultures, but it is also apparent among the elite whose status offers them a certain protection from external controls and whose aristocratic arrogance reinforces an ideology of superiority.
The above scenario, however, should not explain changes in crime rates unless there are significant changes in the relevant populations. So how do we explain a differential acceptance of social controls? Once socialized, these controls are very potent. Yes, we all challenge them in relatively minor ways, but for the most part, we accept the legitimacy of what we’ve learned to be right and wrong. For us to abandon our values the very legitimacy of our socialization must be challenged. This can happen in a number of ways.
First, along the lines of strain theory, the individual may recognize that the values of the society are out of his or her reach. Through the resources and networks at her command, it is impossible to achieve higher status through socially legitimate means. Therefore, one might be inclined to pursue illegitimate means to achieve at least a representation of the desired goal, or will reject the goal outright and establish more local goals. However, this can’t be the only variable, otherwise one would predict that during times of economic hardship, more people will innovate to achieve the desired ends. At best, strain can only be one variable contributing to higher crime.
As a check against strain, social constructs exist that define the misfortunes, or dare I coin the term “disfortunes” of those with the least access to life chances and valued resources as proper, right and even natural. According to these constructs, for instance, society might define those who are poor as being undeserving of wealth. In the United States, such people are blamed for their condition. They are defined as lazy. Today, they are often framed as being parasitic, leaches on the welfare state with no incentive to pursue wealth or improved status. If they would only commit themselves to work and self-improvement, they would reap the benefits of our great nation.
Such a construct is no different than defining the “disfortunate” as being intellectually or, genetically inferior. In this instance, programs for improving the lives of the impoverished are nothing more than wasted resources.
In some societies, the dispossessed are so due to the whims of God. Perhaps they are cursed by God. On the other hand, God may be preserving the poor for a greater reward in Heaven. The legitimacy of iniquitous access to resources, according to this paradigm, is the will of God. Who are we to question the Almighty.
Regardless of the constructs, if those on the wrong end of the status ladder accept their position as right, proper or natural, then they will likely internalize the accepted norms of the society despite their status. However, when these status positions are called into questions, for instance when we see slothful dilatants living the high life, while our own toils go unrewarded, when we are witness to the profits gained by the morally reprobate while we are induced to righteousness, we may call into question the rightness, propriety and nature of our position. In this case, inequality, or shall we say conspicuous inequality, may invalidate established social controls.
Another factor that may contribute to crime is a breakdown in institutional legitimacy. This could result from paradigm shifts that demonstrate the iniquitous and often oppressive nature of accepted institutions. Philosophies recognized as otherwise radical may be vouched popular appeal, calling into question the values that hold our institutions together such as the concept of the social contract during the Ancient Regime. Perhaps a significant exemplifying event may force us to question our values, such as the death of Ann Hutchinson, or the Triangle Shirtwaist fire, or the Kent State massacre. Successful claims may be introduced to the popular discourse, such as feminist critiques of male primacy in the family, scathing Enlightenment critiques of nobility and religion, or the application of the fairness principle in the Civil Rights and LGBT movements. These movements have a moral center, but can serve to destabilize, at least temporarily, institutional legitimacy.
The above happens because, often, the institutions that provide stability and moral legitimacy are, in fact, iniquitous. Patriarchy, racism, sexism, homophobia, economic exploitation, are vulgar foundations on which to establish social stability. An unjust society may be able to enforce, coerce or institute stability for the short term, but not in the long term. Injustice cannot be shrouded in secrecy or legitimized in the face of its victims for long. Eventually all injustices will be confronted and all institutions based on those injustices will be either reformed or ruined. During the interregnum, however, we can expect an increase in crime as institutions are the framework by which external and internal controls are supported.
That’s why crime often travels with the young. Adolescents are ripe for questioning the legitimacy of established social norms. Not yet fully socialized, adolescents offer the best critiques of the validity of our institutionalized norms. In some cases the young person can be persuaded to see the light, so to speak, and accept institutional validity. In those cases where they don’t, they can be drugged or otherwise coerced for a time. This is especially true when the answers to their critiques are blatantly inadequate. It is also true when they understand that their future, in the legitimate sense, is at best questionable.
Economic variables are not the only factors involved in crime. Therefore, it should not come as a surprise that our current calculations of crime show a continuation of its downward trend. However, we should keep in mind that current research is based on 2009 figures. Perhaps it is too soon for the calamities of 2008 to be internalized. However, all of the variables highlighted above, the questionable legitimacy of our institutions, inequitable access to life chances, conspicuous injustice, significant exemplifying events, are all in place today. We established a precedent (not really unprecedented to the historically literate, but unprecedented in the minds of many today) of rewarding those who believe that the established norms do not apply to them, namely the banksters and the Wall Street scammers, with a colossal, tax funded, golden parachute. This was not lost on those who are now expected to pay for the bailouts through punishing austerity measures while the elite toast their success with Dom Perignon.
Moreover, this was not lost on our youth, who learned an interesting lesson about “real” American values. But what did they learn? Did they learn that crime pays, when it’s Wall Street crime? Did they learn that the only way to avoid punishing “austerity” is to get rich by any means? Or did they learn to revile the modern day robber barons and to apply themselves to re-alligning American society with its vaunted values of fairness and opportunity for all? Unfortunately, at this point, there is no way to know for sure. Nobody is asking them. Maybe we should.
Based on the rough outline above, I would predict that the crime rate, especially property crime, will trough soon and start increasing. I base this not on the economy. The economy doesn’t appear to be getting any worse (yet), but on the conspicuous iniquity revealed after the dust of 2008 settled.
A little story about tax inequity
A key battle of the class war is being fought in the tax code. While millions of Americans are without work and millions more are unable to make economic progress or to find financial stability with the low pay jobs that they have managed to find, a small knot of Americans are prospering unlike any other group in history. So when this latter group balks at the premise of paying a little more into a system from which they conspicuously benefit, it makes the rest of us who are just trying to survive this recession without losing our homes, and those of us who are not so lucky, question the validity of our national system. We don’t want to tax the rich to punish them, we simply want them to pay an amount commensurate with the benefits they derive from being members of this society. There’s no doubt that they are benefiting magnificently at the public expense. Now it’s time for them to pay for these benefits.
In an inane attempt to distract us from such glaring inequalities some are trying to suggest that 47% of Americans pay no taxes at all, so why should we focus on the tax inequities of the top 1%? Isn’t that hypocritical? Of course, it isn’t. This argument is nothing more than an attempt to make working Americans look the other way while corporate gangsters steal our thin wallets.
According to the Working Poor Families Project, fifty-one percent of families that fall below the poverty line are, in fact, working. That’s over three million families (note, that’s not three million individuals, but rather families). When you consider that real unemployment is at about sixteen percent, then factor in the number of working poor and that the bottom quintile of family income is less than thirty thousand dollars a year, that 47% figure doesn’t seem so outrageous. The 53%ers are, without intending it, making the case that profound economic inequalities do, indeed, create significant problems with tax revenue. The inferred solution, however, ensuring that poor people pay taxes (they’re fair share?), is simply ridiculous.
First off, let us end the myth that any Americans are paying “no taxes at all.” This is just nonsense. When even the poorest among us, legal residents or not, go to Wal-Mart and purchase a package of underwear, they are paying taxes sales taxes, which are notoriously regressive.
So, one might suggest that the rich also pay their fair share in sales tax. In fact, since they buy more, they are probably paying more than their fair share.
Well, it’s not quite so clear cut. The rich have access to networks that the rest of us do not have. These networks allow them access to greater wealth resources, but also provide the means to escape paying their fair share. Take, for example, yachts. Yachts are a luxury reserved for the wealthy. One would think that the purchase of yachts would generate significant revenue through sales tax. I had the opportunity to discuss this very issue with a yacht owner. We watched a 90-100 foot yacht sporting a Virgin Islands registration pull into a yacht club. The cost of this magnificent vessel was estimated at over $10 million. Yet not a single penny of this sale was received in sales tax. The vessel was purchased in Norway (if I remember correctly) which does not tax the purchase of yachts. It was then registered in the Virgin Islands, again to avoid paying taxes and registration fees in the United States.
The American owner of this giant toy denied the state over $600,000 in tax revenue. We can argue that the poor get out of paying taxes by making use of deductions and exemptions reserved for the poor. How much revenue is denied state and federal coffers under such circumstances? A working head of household for a family of four making $20,000 does not currently pay an income tax. If he or she did, however, pay as much as twenty percent, that would add no more than $4,000 to tax coffers. So if we taxed a hundred and fifty such poor people we would break even for what the wealthy yacht owner was able to duck out of due to social networks that only he and his social class has access to. Of course, that would mean that this head of household must then figure out how to sustain his family on just $16,000 a year. In the meantime, Texas and Florida are engaged in a battle over who can tax yacht purchases the least.
Getting less attention is the benefit that the yacht owner derives from this arrangement. The marked channels in Southwest Florider were dredged and maintained by the state at the taxpayer’s expense. The yacht owner gets to navigate his floating palace through these channels and waterways while most taxpayers will never have the opportunity to use the very infrastructure that they paid for. Here’s another instance of the wealthy benefiting from tax payer subsidized resources while avoiding obligations to contribute their fair share. The poor head of household introduced above has no means by which to duck the few tax obligations that she has, but the wealthy yacht owner has countless measures at his disposal to avoid his obligations, and just as many opportunities to enjoy the fruits that American society has to offer.
This is yet another demonstration of elite privilege. Yes, according to US tax code, the wealthy may pay a slightly smaller percentage of their income in taxes, but it is really no big deal. It’s a matter of one or two percent here or there. Well, this yacht purchase and the corresponding tax scheme are not reflected in statistics on tax inequality. At the same time, it demonstrates the tremendous benefit that the wealthy receive by living in the United States. The yacht owner makes use of communication systems, subsidized by the taxpayer, to make international purchases, denying American jobs, using computer operating systems subsidized by the taxpayer. He then makes use of infrastructure paid for by the taxpayer to enjoy his purchase. Meanwhile he and his ilk are offended that there are so many poor people who “sponge off the system with their fancy Medicaid and TANF and unemployment compensation” without paying into the system. Those leaches.
It’s a topsy-turvy system that expects, nay demands, that the poor pay into a system that does not benefit them, while at the same time allows those who benefit the most to duck their obligations. Only a mass movement focused on economic justice, a movement with teeth, a movement willing to tear down the ramparts of power/privilege, can right this mess.
So we can expect Congress and the White House to do nothing about it!
Where are the jobs? The citizens want to know, where are the jobs? If you listen to the puniditocracy on either side of the great and expanding political divide you hear the same resounding question. Where are the jobs? The conservative critics of the Obama administration blame the socialism mirage, which is only visible from the right, for killing the natural desire of corporations to hire, hire, hire to their hearts’ content. If only the taxes were lower
or even better, nonexistent
then the hiring frenzy would be on. From the left we see a government too bogged down under the weight of corporate lobbyists to dare stand up and provide a real jobs bill. Yes, we blame Obama, but mostly for refusing to engage the Republicans in meaningful political combat.
Economists like Paul Krugman have, by now, lost their discernable fingerprints due to the amount of time and energy expended hammering their keyboards in vain attempts to inject some reason, science or sanity into the debate. The recession slammed homeowners and workers who were unable or unwilling to spend, thus driving down demand. Low demand meant little investment in job creating capital (but not in capital generating investment schemes, which continue to flower). The obvious solution, according to Keynesian economists is to prime demand through job creating stimulus, mortgage restructuring, and an overhaul of our ridiculous health care system.
Wow! That sounds pretty rational. It sounds like a reasonable solution that would require some deficit spending, but leading ultimately to a reinvigorated economy. It’s so rational that I feel bad for Krugman and his peers. They probably cover their heads to hide the fist-size clumps of hair pulled from their scalps as reasonable solutions are denounced as extremist by the very extremist neo-liberals who created this calamity.
What economists often fail to include in their calculations is the influence of power on economic reality. Where are the jobs? They are in nations that allow corporations to exploit laborers (often women, young girls and children) and the environment. And they are not coming back; not without significant government intervention. Of course, this does not make sense from an economic perspective. Lower wages mean lower demand, means less profits. So why wouldn’t the corporate elite be interested in creating jobs that provide enough disposable income to increase demand? Because it’s not simply about economics. It’s about the power that is entangled in our political-economic structure.
The corporate elite have insulated themselves from the collapse of demand. Corporate profits continue to rise despite the fact that the demand base is largely crippled. So where are they getting the money to bolster their profits if not from common consumers? That’s a complicated question, which the economists are better equipped to answer than this writer. In a nutshell, however, they are getting the money from the people who do have the moneymostly from themselves. Just because the wealth and income isn’t in the hands of working people does not mean it does not exist. There is plenty of money out there, floating around. It’s just in the pockets of a freshly networked global elite. And if the elite have anything to say about it (and they do) that’s where it will stay.
This thesis suggests that unemployment cannot be understood as a universal economic bane. As this blog has pointed out in previous posts, the concept of “The Economy” is inadequate for understanding the contemporary marketplace. It’s more accurate to describe two economies¹, one composed of working people, and one composed of the corporate elite. The members of these economies do not have the same interests or goals. So to suggest that unemployment is “bad for the economy” is almost a non sequitur. Unemployment is bad for the market of working people and small businesses, but is actually beneficial to the corporate marketplace if elements of power are factored into the equation. Unemployment continues to exist, more or less neglected by the power elite, because it serves the interests of the corporate class. Furthermore, unemployment will continue to exist, more or less neglected by the power elite, so long as our state and federal governments serve the interests of this same corporate class.
In 1971, Herbert Gans wrote an article for Social Policy called “The Uses of Poverty: The Poor Pay All.” In this article, Gans offered a functional explanation for the existence of poverty. Based on the work of pioneering sociologist, Robert Merton, Gans stated that poverty exists largely because it serves a function for a number of non-poor groups, “
few phenomena are functional or dysfunctional for the society as a whole, and that most result in benefits to some groups and costs to others.” (Gans) This fits in nicely with the above stated thesis that unemployment serves positive functions in the interests of the elite.
The most obvious function of unemployment is its devaluing effect on labor. Large populations of unemployed people become a sink of desperate labor to which corporations are attracted. Large pools of the unemployed applying for scant jobs allows the corporation to acquire not just the most highly qualified applicants, but those who are willing to work for the lowest wage. Thus, workers are trapped in a bitter race to the bottom of the wage pit.
Since the level of desperation experienced by the potential worker is inversely proportional to the value of his labor, the last thing the corporate elite wants is the existence of a meaningful social safety net. Unemployment insurance may just give a job seeker the ability to keep himself afloat financially while seeking the best job for his qualifications and economic needs. This must be done away with. Universal health care liberates the worker from the possibility of financial ruin consequent to becoming sick in the United States, freeing her to seek economic opportunities without the fear of losing her dwindling and inadequate employer provided insurance (if she’s still lucky enough to have it). Medicare and Social Security lock away billions of dollars from private interests while at the same time freeing a growing sector of the population from the burdens of labor. Take away the social safety net for the old and millions more people are forced to look for work until they die or are thrown away by the corporate class.
Now that corporations are liberated from local economies by technologies that allow instantaneous communication, easy travel and information technologies that allow corporate leaders to run their factories from anywhere in the world, this pool is rather a global ocean. If the people of one nation decide to protect their workers through legislation, then corporations simply pack their bags and move to a more amenable third world country that is more “business friendly.” Free trade agreements, like that being negotiated with South Korea, can best be understood as strategies for increasing the pool of unemployed or exploitable labor available to corporate interests.
The fortunate worker who acquires a job is more likely to be a passive producer if she understands that there’s a long line of people willing to replace her, and few opportunities for a better position elsewhere. The choice is stark. Submit to working for less than the value of your labor, or face economic destruction. Any working person understands the consequences of this nasty little mechanism. While worker’s wages have stagnated over the last thirty years, GDP has largely increased. This indicates that workers are producing more and more, but receiving little if any reward. So where does the benefit of this increased productivity go? As the graph at left indicates, the benefits in the form of income are housed in the coffers of corporations and the super wealthy. (For the source of this and other alarming graphs, click the graph itself)
As working people are excluded from the benefits of the marketplace, are marginalized and disempowered, so too are unions. The neo-con war against unions has been largely successful. Private sector unions have been crippled while public sector unions are engaged in a battle for survival. As Think Progress reports, the collapse of unions corresponds directly with the collapse of the middle class. (Again, click the graph to see the original source). In our contemporary world of money politics, a self-sustaining middle class and a strong union structure are frighteningly effective checks against unrestrained corporate power. The corporate elite cannot allow such a great alliance to stand. So unions are busted by corporate lap-dog politicians while corporate media paints unions as inimical to the middle class.
With the fall of the unions we see a concurrent attack against community organizing and voter registration efforts. Let’s face it, organized communities and blocks of unemployed and impoverished voters are the last things the corporate elite want to see. So groups like ACORN must be destroyed for doing nothing more than empowering the poor. Laws must be put into effect to make it more difficult to register to vote. Voting districts must be redrawn to mute the interests of the commons.
What about small businesses? We hear a great deal about the plight of small businesses, with nothing actually being done to save them but for inadequate tax cuts here and there. Small businesses are not insulated from the collapse of demand. Demand is key to their existence. Yet, when demand declines, so does the value of the business and desire to invest in such enterprise. Again, this could be understood as bad for the economy, but one might analyze how weakening small business benefits the corporate class. As small businesses fold or are forced to sell out to larger interests while prospective entrepreneurs refuse to take the risk of entering a dull market, corporations benefit from a decrease in competition. There’s nothing that corporations hate more about capitalism than competition. The corporate elite are interested in consolidation, conglomeratization and monopoly, not competition.
Fortunately, there is one place for a young man or young woman to find stable work, income and experiencethe military. While corporations off-shore production and accumulate wealth, and any attempt at establishing a government jobs programs is derided as socialism, the military becomes a de facto WPA
and yet is not considered socialist. It’s not considered socialism because the Military Industrial Complex is largely a giant corporate welfare program; and corporate welfare, unlike welfare for poor people, is not socialism according to the very corporations that benefit from this dole. The de facto Military Works Progress Administration is an amazing hybrid born of the unholy union between corporate and government elite. As American corporations expand globally, they require a greater military presence to ensure access to markets and protect/acquire vital resources such as oil. The very dispossessed workers suffering from global expansion must then exert their labors, and spill their blood, to enforce corporate globalization. These globalized corporations will then turn around and further exploit the workers and soldiers into participating in this bloody, iniquitous market. It’s brilliant and sinister!
Despite the fact that the number one concern of the American people is jobs, politicians in both parties are largely silent on the prospects of actually creating jobs beyond their own rhetorical renunciations of the other. Can anyone reading this blog name a single, solid piece of legislation designed specifically for job creation? Yes, there is the ubiquitous propaganda about how lowering taxes will create jobsit won’t, or how monetary policy can be used to stimulate jobsit can’t, or the necessity of fiscal consolidation to awaken the magical Confidence Fairies to produce jobsyeah, right. Everything from health care reform to extending the Bush Tax Cuts is premised on the promise of creating jobs. So far, every single claim has proven empty. Meanwhile, our so called representatives expend most of their time and energy on debating the debt, taxes, abortion, entitlements, even the penises of their colleagues when such matters come to attention. With regard to jobs, however, all we hear is cricket songs.
Jobs are created when institutions exchange currency for labor
period. There is no other formula. Corporations, as the dominant hiring institutions, are unwilling to create such exchanges not because they are insecure, as conservatives insist, or suffering from a lack of demand, as liberals argue, but because they benefit from high unemployment. If corporations are unwilling to hire, then some other institution must step up and perform that function. Keynes suggested that the only institution capable of such a task is the government. But what happens when the government serves the interests of the very corporations who benefit from high unemployment? Look around
there’s your answer. ______________________
- It might be more accurate still to describe multiple economies, but such would unnecessarily complicate the theme of this essay.
Reuters reports, today, that bondholders and creditors are not worried about the United States defaulting on its credit obligations. It’s not that such a default is really no big deal, and creditors are perfectly willing to wait a few days before payments are made on the interest to US debt. No. The source of their comfort is that a US default would be so globally catastrophic that the United States would never allow such a thing to happen.
That’s what you’re going with?
Your thesis is that the Tea Party isn’t crazy enough to tank the economy of the entire world to satisfy their mindless ideological dogma.
Good luck with that!
I’ll Give You a Hint. It Wasn’t TARP!
Below is an interesting graph that comes from the non-partisan Center on Budget and Policy Priorities. Based on information from the Congressional Budget office it is a very telling chart. Again, I’m not sure why every Democrat does not have this chart printed on T-Shirts. It turns out all the balderdash about the Obama Administration drowning our economy in an ocean of debt is just that, balderdash! It turns out that the Bush Era Tax Cuts, the unpaid for wars in Iraq and Afghanistan and the economic downturn that took place under George W. Bush’s watchful eye account for the biggest part of the budget deficit. The part attributable to Obama? Well that accounts for about 10% and has mostly stabilized. That part of the debt that is left over has actually been going down under the Obama Administration.
(Click the chart to go to the CBPP website)
If you want a quick primer on how contemporary social discourse is tilted in matters of class and inequality just look at the recent Tax Cuts debate. The debate can be described graphically below highlights the issue perfectly. At stake was extending ruinous tax cuts that disproportionately benefited the wealthy at the expense of the deficit and extending unemployment benefits to those destroyed by the rich at a significantly lower expense of the deficit.
For the wealthy, the difference was mostly symbolic. Yeah, if you make $250,000 a year, losing about $7000 might be hard to swallow, but it’s certainly not ruinous. If you are an unemployed, working class person, however, a loss of unemployment income is the difference between poverty and destitution, maybe providing a roof over your family’s heads or living under a bridge.
Missing from this debate was a productive discussion on the responsibility of the haves for those who have become have nots, mostly due to the policies of the haves. Missing from this debate was a serious discussion on providing meaningful work for those who need, want and deserve it.
So the accounting went from about $3-4 Trillion over ten years, depending on whose deplorable plan you were counting, to just under $1 Trillion over two years with a brief extension of unemployment benefits provided as a so called “compromise!” Um
I’m no math genius, so correct me if I’m wrong. We started out with a cost of $300 billion to $400 billion a year. But because we were concerned about the deficit we settled for a compromise that costs about $500 billion a year! There must be a math class that politicians take that the rest of us are just not privy to.
Regardless, what might have been a better way to spend $500 billion? After all, we are obviously willing to spend that money anyway regardless of the deficit. How about 16,000,000 jobs paying $30,000 a year? According to the Bureau of Labor Statistics there are 15.1 million unemployed Americans. So if that money was spent on direct hiring rather than tax cuts and unemployment we could eliminate the official unemployment rate! (Not really. The real unemployment rate is much higher. These folks would be inclined to look for work and, would thus be recorded as unemployed) These would be people who are able to catch up on their bills and make purchases that they have been putting off. This would help small business more than any tax cut. The improvements to infrastructure, the green technology, increased teachers in the classroom etc, would save us billions on top of what was being added to the economy.
Yet the above plan never became part of the discourse. And we cannot use the excuse that we can’t afford such program, because what we can afford is obviously not at issue. The underlying issue is the blind acceptance of a de facto two tier society that has embedded itself into our discourse and, thus, into our mentalities.