Selling Social Darwinism

Robert Reich has a blog that is well worth following. He is a knowledgeable person with the facts and the social empathy to present an honest account of the situation that the 99% find themselves in.

Here is his latest post:

The Republican Myth of Obama's "Entitlement Society"

One of the few things Mitt Romney and Newt Gingrich agree on is that President Obama is turning America into “European-style welfare culture.”

In his standard stump speech Romney charges Obama with creating a nation of dependents. “Over the past three years Barack Obama has been replacing our merit-based society with an entitlement society.”

Gingrich calls Obama “the best food-stamp president in American history.”

What’s their evidence? Both rely on federal budget data showing direct payments to individuals shot up by almost $600 billion, a 32 percent increase, since the start of 2009.

They also point to Census data showing that 49 percent of Americans now live in homes where at least one person is collecting a federal benefit – Social Security, food stamps, unemployment insurance, worker’s compensation, or subsidized housing. That’s up from 44 percent in 2008.

Finally, they trumpet Social Security Administration figures showing that the number of people on Social Security disability jumped 10 percent in Obama’s first two years in office.

They argue our economic problems stem from this sharp rise in “dependency.” Get rid of these benefits and people will work harder.

They have cause and effect backwards. The reason for the rise in food stamps, unemployment insurance, and other safety-net programs is Americans got clobbered in 2008 with the worst economic catastrophe since the Great Depression. They and their families have needed whatever helping hands they could get.

If anything, America’s safety nets have been too small and shot through with holes. That’s why the number and percentage of Americans in poverty has increased dramatically over the past three years, including over a third of families with young children.

One scandal, for example, is that only 40 percent of the unemployed qualify for unemployment benefits because they weren’t working full time or long enough on a single job before they were canned. The unemployment system doesn’t take account of the fact that a large portion of the workforce typically works part time on several jobs, and moves from job to job.

Republicans also object to Obama’s health care law, which covers 30 million more Americans than were covered before. But it still leaves over 20 million without health insurance. They’ll get emergency care when they’re in dire straights — hospitals won’t refuse them — but we all end up paying indirectly.

Regressive Republicans pretend they’re about opportunity. In reality they’re back at what they’ve been doing for years — promoting Social Darwinism.

Go read his blog.

The manipulation of statistics to sell their Social Darwinism is utterly cynical. The political right knows that it is lying. It isn't naive. But it trusts in the big lie technique. They know that if they repeat their right wing lies long enough and through enough media, most people will assume it is true because the message is so prevalent.

I remember being incredulous when I matured and discovered that my father believed that if something was printed it had to be true. In his mind, nobody would go to the expense of printing something unless it was true. I could never change his mind. He proved to me just how effective a propaganda campaign could be. He lived a life believing falsehoods simply because "they were printed" and I could never change his mind because my arguments were "just words" and he refused to look at the printed material I presented to him. Propaganda can be very, very effective.

Quote of the Day

Here is a snippet from the book Debt: The First 5,000 Years by David Graeber, a book with an endlessly fascinating take on money, debt, and markets over the long history of civilization:

Another way to look at this might be to say that the new age [1450-1971, the Age of Great Capitalist Empires] came to be increasingly uncomfortable with the political nature of money. Politics, after all, is the art of persuasion; the political is that dimension of social life in which things really do become true if enough people believe them. The problem is that in order to play the game effectively, one can never acknowledge this: it may be true that, if I could convince everyone in the world that I was the King of France, I would in fact become the King of France; but it would never work if I were to admit that this was the only basis of my claim. In this sense, politics is very similar to magic -- one reason both politics and magic tend, just ab out everywhere, to be surrounded by a certain halo of fraud

I highly recommend Graeber's book for an alternative analysis of money, debt, and markets. You may not agree with his analysis, but he will help you broaden your understanding through his deep understanding of anthropology/history deeply rooted in 5,000 years of human civilization.

Painting a False Reality

Here is an excellent example of how the right wing media in the US (especially Fox "News") uses its power to rant and lie to plant false ideas to manipulate the population into holding views that allow right wing politicians to mobilize the public to control elections:



If you watch the video you can see Bill O'Reilly frustrated by being caught in his lies and says in exasperation that he doesn't care what the facts are, he just "knows" that it is bad there and that this evil is coming to get America. In short, despite the facts, he continues to sell his right wing scare story. He isn't a "news" reporter. He is a propagandist selling a story to prop up a political viewpoint.

How Media Misleads

Even public media like NPR misleads the consumer of its "news". Here is an excellent example by Dean Baker in his Beat the Press blog:

NPR Editorializes Against Growth In Europe

A Morning Edition segment on the recent European Union summit was headlined, "Most EU Nations to Sign Pact to Stop Overspending." This is both flat-out wrong and misleading.

It is flat-out wrong because the pact restricts deficits, not spending. It is misleading because it implies that the current crisis was caused by overspending. It wasn't. Most of the crisis countries had declining debt to GDP ratios before the downturn and two, Spain and Ireland, were actually running budget surpluses. The problem was caused by housing bubbles and the inept management of the economy by the European Central Bank.

If the media lies, then a representative government is impossible. And that makes the constitutional requirement for a free press a waste of effort. At least a significant majority of the press must be honest enough to tell the truth. A free press can be honest or sold out. The hope of the writers of the US Constitution was that the media was so fragmented and numerous that it would be impossible to manipulate the press as a whole. But the writers of the US Constitution lived in a simpler time when the US press was more like the bloggers of today: numerous and cheap to set up. They didn't envision "big media" with wall-to-wall coverage and a practical monopoly on the public's attention.

The coming of radio made possible the horrible dictators of the 1930s. The monopolization of the media in the late 20th century made possible the overweening power of right wing politics today. It took WWII to break the power of the dictators and give back popular democracies. What will it take to break the present day monopoly of big media and the rampant right wing politics that have created?

Looking Through Lovely Libertarian Glasses

When I was a kid the big complain was the bizarro world painted by "socialist realism". The hyped and deeply false world view sold by the commies.

Today the world is pervaded by its bizarro world version of reality, the kool-aid of Ayn Rand, that worships the individual and ignores any gummy social cohesion or social obligation. It is every man for himself in the wonder world of the political right. No mushy leftist "it takes a village to raise a child" in the libertarian worldview.

Here is a bit from a NY Times op-ed by Paul Krugman that shows the application of this libertarian "individualist realism" to politics in the US:

Mr. Daniels first berated the president for his “constant disparagement of people in business,” which happens to be a complete fabrication. Mr. Obama has never done anything of the sort. He went on: “The late Steve Jobs — what a fitting name he had — created more of them than all those stimulus dollars the president borrowed and blew.”

...

A big report in The Times last Sunday laid out the facts. Although Apple is now America’s biggest U.S. corporation as measured by market value, it employs only 43,000 people in the United States, a tenth as many as General Motors employed when it was the largest American firm.

Apple does, however, indirectly employ around 700,000 people in its various suppliers. Unfortunately, almost none of those people are in America.

...

Germany remains a highly successful exporter even with workers who cost, on average, $44 an hour — much more than the average cost of American workers. And this success has a lot to do with the support its small and medium-sized companies — the famed Mittelstand — provide to each other via shared suppliers and the maintenance of a skilled work force.

The point is that successful companies — or, at any rate, companies that make a large contribution to a nation’s economy — don’t exist in isolation. Prosperity depends on the synergy between companies, on the cluster, not the individual entrepreneur.

But the current Republican worldview has no room for such considerations. From the G.O.P.’s perspective, it’s all about the heroic entrepreneur, the John Galt, I mean Steve Jobs-type “job creator” who showers benefits on the rest of us and who must, of course, be rewarded with tax rates lower than those paid by many middle-class workers.

...

So we should be grateful to Mr. Daniels for his remarks Tuesday. He got his facts wrong, but he did, unintentionally, manage to highlight an important philosophical difference between the parties. One side believes that economies succeed solely thanks to heroic entrepreneurs; the other has nothing against entrepreneurs, but believes that entrepreneurs need a supportive environment, and that sometimes government has to help create or sustain that supportive environment.

And the view that it takes more than business heroes is the one that fits the facts.

For some reason most people want a cartoon cut-out version of reality. They want a simplified story that consoles them with a happy ending. The real world, just like Nature, is totally indifferent to humans, their aspirations, their needs, or their ideological fantasies. The real world is "red in tooth and claw" because it is so different from the normal human social world of cooperation and empathy. Humans have the ability to create a safe harbour from the cruelties of the world. Sadly, right wing nuts want to destroy the paradise and replace it with a fantasy of "the big man" who creates and destroys for his own pleasure with indifference to others. That is a cruel reality that is offered up by the libertarians as a "better future". Nuts!

Willful Ignorance

Here is a bit from a NY Times op-ed by Paul Krugman that slams what he calls "the serious people", the ideological right, that has called for austerity as the magic elixir for recovering from the worldwide George Bush-induced Depression:

How could the economy thrive when unemployment was already high, and government policies were directly reducing employment even further? Confidence! “I firmly believe,” declared Jean-Claude Trichet — at the time the president of the European Central Bank, and a strong advocate of the doctrine of expansionary austerity — “that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”

Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs. Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.” He then called on President Obama to “do a Cameron” and pursue “a radical rollback of the welfare state now.”

Strange to say, however, those warnings from economists proved all too accurate. And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron.

Which is not to say that all is well with U.S. policy. True, the federal government has avoided all-out austerity. But state and local governments, which must run more or less balanced budgets, have slashed spending and employment as federal aid runs out — and this has been a major drag on the overall economy. Without those spending cuts, we might already have been on the road to self-sustaining growth; as it is, recovery still hangs in the balance.

And we may get tipped in the wrong direction by Continental Europe, where austerity policies are having the same effect as in Britain, with many signs pointing to recession this year.

The infuriating thing about this tragedy is that it was completely unnecessary. Half a century ago, any economist — or for that matter any undergraduate who had read Paul Samuelson’s textbook “Economics” — could have told you that austerity in the face of depression was a very bad idea. But policy makers, pundits and, I’m sorry to say, many economists decided, largely for political reasons, to forget what they used to know. And millions of workers are paying the price for their willful amnesia.

The tragedy is that policy makers and right wing economists prefer lies and "the confidence fairy" more than the simple truth and hard won economic truths. The economics profession has shown itself to be in the hands of charlatans who are willing to corrupt truths won from the Great Depression experience in order to push a political agenda. Tragic!

As always it is the bottom 99% who die when the 1% "generals" order a charge into an open field where they are gunned down by withering machine gun fire (aka reality). But the generals blame the troops and order up another charge. The 99% are expendable. Everybody knows that the 1% are the "cream of society" and must be protected in their ideological bubble at all costs.

Measuring the "Success" of American Foreign Policy

The Americans blindly go around the world making bad situations worse while slapping themselves on the back and congratulating themselves about "spreading democracy" and "American values" throughout the world. The poor American public has no idea and little interest in the failed policies of their political leaders.

Here is a bit from an excellent article in the UK's Guardian newspaper giving an example of how Iraq has been "lifted up" from the horrors of Saddam Hussein's dark torture state to the light of a... what? a new torture state...

The walls of Um Hussein's living room in Baghdad are hung with the portraits of her missing sons. There are four of them, and each picture frame is decorated with plastic roses and green ribbons as an improvised wreath for the dead.

Um Hussein had six children. Her eldest son was killed by Sunni insurgents in 2005, when they took control of the neighbourhood. Three of her remaining sons were kidnapped by a Shia militia group when they left the neighbourhood to find work. They were never seen again.

She now lives with the rest of her family – a daughter, her last son, Yassir, and half a dozen orphaned grandchildren – in a tiny two-room apartment where the stink of sewage and cooking oil seeps through a thin curtain that separates the kitchen from the living room.

Um Hussein looks to be in her 60s and has one milky white eye. She is often confused and talks ramblingly about the young men in the portraits as if they are alive, then shouts at her daughter to bring tea. She told the Guardian how she had to fight to release Yassir from jail.

Yassir was detained in 2007. For three years she heard nothing of him and assumed he was dead like his brothers. Then one day she took a phone call from an officer who said she could go to visit him if she paid a bribe. She borrowed the money from her neighbour and set off for the prison.

"We waited until they brought him," she said. "His hands and legs were tied in metal chains like a criminal. I didn't know him from the torture. He wasn't my son, he was someone else. I cried: 'Your mother dies for you, my dear son.' I picked dirt from the floor and smacked it on my head. They dragged me out and wouldn't let me see him again.

"I have lost four. I told them I wouldn't lose this one."

Afterwards, the officers called from prison demanding hefty bribes to let him go while telling the family he was being tortured. Um Hussein told the officers she would pay, but they kept asking for more. First it was 1m Iraqi dinars (£560), then 2m, then 5m.

George Bush was an idiot whose ideology blinded him and allowed him to create horrors under the flag of "nation building" and "bringing democracy to the Middle East".

Obama is a much more sophisticated thinker who actually understands foreign policy, but sadly Obama continues the blunder and outrages of American "policy". It is clear that these horrors go deeper than just an "administration". What the US is doing around the world is obviously driven by a cynical need to control the world for the benefit of the rich elites in the US. The veneer of ideology or the cynical use of worlds like "freedom" and "democracy" and "women's rights" are rolled out to plaster a veneer of respectability to what is in fact a horror story passing for "foreign policy".

Why America is Confused

Here is the start of a post by Dean Baker on his Beat the Press blog that incisively identifies why the average American is completely confused about the economy, the role of big business, and who politics works:

David Brooks Is Projecting His Self Indulgence Again

Undoubtedly projecting from the fact that he can draw a nice 6-figure income for little obvious work, David Brooks complained in his column:

"Today, the country is middle-aged but self-indulgent. Bad habits have accumulated."

For the most part the column is a confused diatribe against the Obama administration's economic policies with a lecture on moral rectitude thrown in for good measure. He starts by condemning the efforts to stimulate the economy by telling readers:

"Today, Americans are more likely to fear government than be reassured by it.

"According to a Gallup survey, 64 percent of Americans polled said they believed that big government is the biggest threat to the country. Only 26 percent believed that big business is the biggest threat. As a result, the public has reacted to Obama’s activism with fear and anxiety. The Democrats lost 63 House seats in the 2010 elections."

One might think that the fact that the Obama administration relied on a stimulus that was only designed to lower the unemployment rate by 1.5-2.0 percentage points might have played a big role in the election defeat. (Read the number of jobs the stimulus was projected to create, not the baseline forecasts for the economy.) If the government had used bigger stimulus to get the unemployment rate down to say -- 7 percent -- it is difficult to believe that the Democrats would have suffered such a big defeat last year, in spite of people's fear of big government.

After dismissing the stimulative policies of the Great Depression, Brooks then gives us a beautifully crafted grand misunderstanding of economics comparing the economy today with the economy of the Progressive era:

"the underlying economic situations are very different. A century ago, the American economy was a vibrant jobs machine. Industrialization was volatile and cruel, but it produced millions of new jobs, sucking labor in from the countryside and from overseas.

"Today’s economy is not a jobs machine and lacks that bursting vibrancy. The rate of new business start-ups was declining even before the 2008 financial crisis. Companies are finding that they can get by with fewer workers. As President Obama has observed, factories that used to employ 1,000 workers can now be even more productive with less than 100."

The fact that factories can produce large amounts of output with 100 workers is in fact evidence of economic vibrancy, not the opposite. This is called "productivity growth." It is the main measure of the economy's ability to raise living standards through time. The fact that 100 people in a factory can produce the same output as 1000 people did 30 years ago means that we are potentially much richer than we were 30 years ago. We can have the other 900 people doing other productive work. Alternatively, we can all work many fewer hours.

Whether or not this productivity growth generates jobs depends on the structure of the economy. If the productivity growth translates into wage growth, as was the case with the very rapid productivity growth of early post-war period, then it is likely to be associated with a vibrant jobs machine. On the other hand, if the One Percent pocket most of the benefits of productivity growth, then we may have real problems of stagnation and lack of job growth, since the Bill Gateses of the world will probably not increase their spending much if they get another billion or two. The key issue here is the distribution of the gains of productivity growth, a simple fact that totally escapes Brooks.

Go read the whole article. There is much more to learn from Dean Baker.

One reason why Americans keep electing the right wing Republicans is because the media is dominated by fools with a glib and seductive writing style like David Brooks. I confess that I was seduced by his book Bobos in Paradise but I've since had the scales fall from my eyes. Brooks is a seductive writer much like William F. Buckley. It is easy to be seduced by those who dismiss the gritty reality and instead focus on grandiose generalities that blame the victim and put robber barons on pedestals.

DeLong on the Financial Sickness in America

The financial "industry" is a bloated, corrupt section of the economy that grows at the expense of everything else. Here is a bit from UC Berkeley economist Brad DeLong on the Project Syndicate blog:

In 1950, finance and insurance in the United States accounted for 2.8% of GDP, according to US Department of Commerce estimates. By 1960, that share had grown to 3.8% of GDP, and reached 6% of GDP in 1990. Today, it is 8.4% of GDP, and it is not shrinking. The Wall Street Journal’s Justin Lahart reports that the 2010 share was higher than the previous peak share in 2006.

...

But if the US were getting good value from the extra 5.6% of GDP that it is now spending on finance and insurance – the extra $750 billion diverted annually from paying people who make directly useful goods and provide directly useful services – it would be obvious in the statistics. At a typical 5% annual real interest rate for risky cash flows, diverting that large a share of resources away from goods and services directly useful this year is a good bargain only if it boosts overall annual economic growth by 0.3% – or 6% per 25-year generation.

There have been many shocks to the US economy over the past couple of generations, and many factors have added to or subtracted from economic growth. But it is not obvious that the US economy today would be 6% less productive if it had had the finance-insurance system of 1950 rather than the one that prevailed during the past 20 years.

There are five ways that an economy gains from a well-functioning finance-insurance system. First, people are no longer as vulnerable to the effects of fires, floods, medical disasters, unemployment, business collapses, sectoral shifts, and so forth, because a well-working finance-insurance system diversifies and thus dissipates some risks, and deals with others by matching those who fear risk with those who can comfortably bear it. While it might be true that America’s current finance-insurance system better distributes risk in some sense, it is hard to see how that could be the case, given the experience of investors in equities and housing over the past two decades.

Second, well-functioning financial systems match large, illiquid investment projects with the relatively small pools of money contributed by individual savers who value liquidity highly. There has been one important innovation over the past two generations: businesses can now issue high-yield bonds. But, given the costs of the bankruptcy process, it has never been clear why a business would rather issue high-yield bonds (besides gaming the tax system), or why investors would rather buy them than take an equity stake.

Third, improved opportunities to borrow allow one to spend more now, when one is poor, and save more later, when one is rich. Households are certainly much more able to borrow, thanks to home-equity loans, credit-card balances, and payday loans. But what are they really buying? Many are not buying the ability to spend when they are poor and save when they are rich, but instead appear to be buying postponement of the “unpleasant financial retrenchment” talk with the other members of their household. And that is not something you want to buy.

Fourth, we have seen major improvements in the ease of transactions. But, while electronic transactions have made a great deal of financial life much easier, this should have been accompanied by a decrease, not an increase, in the finance share of GDP, just as automated switching in telecommunications led to a decrease in the number of telephone switchboard operators per phone call. Indeed, the operations of those parts of the financial system most closely related to technological improvements have slimmed down markedly: consider what has happened to the checking operations of the regional Federal Reserve Banks.

Finally, better finance should mean better corporate governance. Since shareholder democracy does not provide effective control over entrenched, runaway, self-indulgent management, finance has a potentially powerful role to play in ensuring that corporate managers work in the interest of shareholders. And a substantial change has indeed occurred over the past two generations: CEOs focus much more attention than they used to on pleasing the stock market, and this is likely to be a good thing.

Overall, however, it remains disturbing that we do not see the obvious large benefits, at either the micro or macro level, in the US economy’s efficiency that would justify spending an extra 5.6% of GDP every year on finance and insurance. Lahart cites the conclusion of New York University’s Thomas Philippon that today’s US financial sector is outsized by two percentage points of GDP. And it is very possible that Philippon’s estimate of the size of the US financial sector’s hypertrophy is too small.

Why has the devotion of a great deal of skill and enterprise to finance and insurance sector not paid obvious economic dividends? There are two sustainable ways to make money in finance: find people with risks that need to be carried and match them with people with unused risk-bearing capacity, or find people with such risks and match them with people who are clueless but who have money. Are we sure that most of the growth in finance stems from a rising share of financial professionals who undertake the former rather than the latter?

This is a pretty astounding indictment of the sleaze, corruption, and fraud in America's financial industry that has let it grow huge despite providing no real benefits to justify its larger share of national GDP.

Sadly, no govenment has taken on this issue and tried to cut the financial industry down to size to make it more economically efficient. Exactly the opposite has occurred. Over the last 30 years great laudatory sermons have been given about "enterprise" and "unleashing business from regulation" when in fact this has proven to be catchwords for turning a blind eye to corruption and crime on an unimaginable scale. The American people have been hoodwinked and lied to and nobody has yet been held accountable because the rich and powerful have bought off the politiians.

An Indictment of Obama and Most Western Governments

Here is Paul Krugman in a NY Times op-ed laying bare the open secret: Obama and European governments are contemptuous of Keynes, rejecting his advise, and imperiling the tenuous "recovery" that countries have been experiencing by calling for "deficit reduction" which is just another name for austerity:

“The boom, not the slump, is the right time for austerity at the Treasury.” So declared John Maynard Keynes in 1937, even as F.D.R. was about to prove him right by trying to balance the budget too soon, sending the United States economy — which had been steadily recovering up to that point — into a severe recession. Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way.

Unfortunately, in late 2010 and early 2011, politicians and policy makers in much of the Western world believed that they knew better, that we should focus on deficits, not jobs, even though our economies had barely begun to recover from the slump that followed the financial crisis. And by acting on that anti-Keynesian belief, they ended up proving Keynes right all over again.

... the real test of Keynesian economics hasn’t come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels. It has, instead, come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans — and have suffered Depression-level economic slumps, with real G.D.P. in both countries down by double digits.

This wasn’t supposed to happen, according to the ideology that dominates much of our political discourse. In March 2011, the Republican staff of Congress’s Joint Economic Committee released a report titled “Spend Less, Owe Less, Grow the Economy.” It ridiculed concerns that cutting spending in a slump would worsen that slump, arguing that spending cuts would improve consumer and business confidence, and that this might well lead to faster, not slower, growth.

Sadly a generation will pay the price for this obtuse ideological refusal to accept standard economics in favour if the idiocies of right wing economics that created the deregulation fiasco leading to the S&L crisis, the dot.com bust, and the 2008 financial crisis. These are the failures of government by right wing politicians who have sold the public on the idea that "government is not the solution to our problems; government is the problem". For 30 years bad ideas pushed by right wing politicians have enriched the ultra-rich while the bottom 99% have been left to tread water. Wealth has increased but "trickle down" economics delivered nothing to the poor who are poorer now than since the Great Depression when the lot of the poor was to live in Hoovervilles and stand in bread lines.

The common people need to rise up and say "enough!" and vote in politicians who want to grow the economy for the benefit of the 99% and who want to see a profound redistribution of income so that those who work hard in the 99% get the kind of rewards that for the last 30+ years have only flowed to the ultra-rich. Stop the privatization of government for the bottom 99% with the cutting of services and the raising of "hidden" taxes. Stop the socialization of government for the top 1% with the quiet fraud that lets the rich milk the poor, demand and get sweetheart deals from government, and the continued policy of handouts and bailouts and tax cuts and special tax loop holes for those who can buy government via lobbyists.

Krugman perfectly characterizes the failures of politics today:

We entered 2011 amid dire warnings about a Greek-style debt crisis that would happen as soon as the Federal Reserve stopped buying bonds, or the rating agencies ended our triple-A status, or the superdupercommittee failed to reach a deal, or something. But the Fed ended its bond-purchase program in June; Standard & Poor’s downgraded America in August; the supercommittee deadlocked in November; and U.S. borrowing costs just kept falling. In fact, at this point, inflation-protected U.S. bonds pay negative interest: investors are willing to pay America to hold their money.

The bottom line is that 2011 was a year in which our political elite obsessed over short-term deficits that aren’t actually a problem and, in the process, made the real problem — a depressed economy and mass unemployment — worse.

For three years the political right has been screaming "inflation" and called for austerity to stop the devaluation of "fiat money". In truth, there has been no runaway inflation despite the trillions that the Federal Reserve has pumped into the monetary system.

Keynes called for a coordinated fight on both the monetary and fiscal fronts to fight depression. But since 2008 there has been only a monetary policy in place that is now being withdrawn and there was a very, very small fiscal policy with Obama's 2009 stimulus package. The tools that Keynes outlined have not been used. That is why the Great Recession continues to plague the United States.

Thinking about Debt

Here is a key bit from a post by Paul Krugman on his NY Times blog:

People think of debt’s role in the economy as if it were the same as what debt means for an individual: there’s a lot of money you have to pay to someone else. But that’s all wrong; the debt we create is basically money we owe to ourselves, and the burden it imposes does not involve a real transfer of resources.

That’s not to say that high debt can’t cause problems — it certainly can. But these are problems of distribution and incentives, not the burden of debt as is commonly understood. And as Dean says, talking about leaving a burden to our children is especially nonsensical; what we are leaving behind is promises that some of our children will pay money to other children, which is a very different kettle of fish.

The political right has made a career out of packaging up bad politics as reasonable sounding phrases which don't hold up to scrutiny:

• running government is just like running a business, so the country needs a CEO not a politician


• government is not the solution, government is the problem


• the need to put "God back into the nation's schools", and they don't mean the loving Jesus, or Krishna, Odin, or Moloch, they know that God is that white haired old man sitting on a throne up there in the air somewhere, the avenger of the Old Testament, the guy who is the fixer of the political right


• what America needs is "family values" as laid down by the womanizing, sex-crazed, power hungry politicians of the political right who find time to sit in Congress between screwing their secretaries and divorcing the wives and refusing to pay child support


• get government off our backs by bringing back Joe McCarthy with his demand of "loyalty oaths", or Goldwater with his decision to bomb Vietnam back to the Stone Age with nukes, or Reagan who wanted to stop the limousine liberals from giving money to welfare queens by putting up layer after layer of bureaucratic restriction of aiding the poor while ranting that the problem with government was that it needed to "cut regulations", or the 2000 George Bush who ranted that government had to get out of the business of "nation building" and then he started a couple of trillion dollar wars to bring "democarcy" and "good government" to Afghanistan and Iraq

Debt as a public policy is something that the economists understand but which gets twisted and distorted by right wing politicians into a lie on the same level as the 50 year lie that the United Nations was a front for Communism and that the US should "get out of the UN".

How to Know That Your Government is Rotten

Here is a bit from a Washington Post article that points out that while the "representatives" of the people have gotten fabulously wealthy over the last 25 years, the common people are either treading water or slowly sinking:

Between 1984 and 2009, the median net worth of a member of the House more than doubled, according to the analysis of financial disclosures, from $280,000 to $725,000 in inflation-adjusted 2009 dollars, excluding home ­equity.

Over the same period, the wealth of an American family has declined slightly, with the comparable median figure sliding from $20,600 to $20,500, according to the Panel Study of Income Dynamics from the University of Michigan.

The comparisons exclude home equity because it is not included in congressional reporting, and 1984 was chosen because it is the earliest year for which consistent wealth statistics are available.

The growing disparity between the representatives and the represented means that there is a greater distance between the economic experience of Americans and those of lawmakers.

...

The growing financial comfort of Congress relative to most Americans is consistent with the general trends in the United States toward inequality of wealth: Members of Congress have long been wealthier than average Americans, and in recent decades the wealth of the wealthiest Americans has outpaced that of the average.

In 1984, the 90th percentile of U.S. families had holdings worth six times the median family’s; by 2009, the 90th percentile was worth 12 times the median family, according to the University of Michigan study, a longitudinal panel survey. These figures include home equity.

This growing inequality, not surprisingly, is seen in Congress. Not only has the median wealth increased, but the proportion of representatives who have little besides a home has shrunk. In 1984, one in five House members had zero or negative net worth excluding home equity, according to the disclosures; by 2009, that number had dropped to one in 12.

When the guardians of the government are stuffing their pockets with money while the people are slowly sinking, things are rotten. There is corruption and incompetence in government.

The Republicans loved to say that "government is the problem, not the solution". That's got it wrong. The problem is that the government politicians are the problem, not the solution. These "elected representatives" have been using their power to feed at the trough of government, taking money from lobbyists, selling their votes, all while they have been telling the ordinary citizens that the problem is "big government", not crooked, greedy politicians.

Rather than pass laws to help their constituents. These pigs have been feasting off tax money while blaming "big government" for everything. They are hypocrites, crooks, and liars. And they and their buddies, the elite 1% are doing this at the expense of the bottom 99%.

Note: From this same article. Here is how the rich view themselves as deserving their wealth. This is what a guy who married into the Phillips petroleum empire says of how "hard work" will make you a billionaire:

In 1973, Kelly married Victoria Phillips, an heir to the oil fortune. Kelly’s financial disclosure forms show that among her holdings is stock in Phillips Resources Inc., which is valued at between $5 million and $25 million and which generated more than $100,000 annually in dividends.

Four years out of college in 1974, Mike and Victoria were able to buy a home for $50,000, roughly twice the median value of homes in Pennsylvania at the time, a large, stately house close to downtown.

In 1997, Kelly bought his dad’s business from him, taking out a $1.6 million mortgage to pay for it.

When discussing his wealth and how it came to him, Kelly, who was called “Millionaire Mike” during the 2010 campaign, grows animated.

“The way my dad taught me was pretty basic: You have to kill more than you eat. You gotta wake up every day before anyone else, you better get to work, and you better stay later than everybody else,” he said. “I’m a rich guy because I’ve worked hard. I gotta work every fricking day. Listen, nobody gives it to you. I compete. I’m not the only guy selling hot dogs at the ballpark, okay?”

I don't doubt he worked hard. But tens of millions of people work hard, real hard. A lot of poor people hold down two jobs at minimum wage working incredibly hard. But they don't "build up" car dealerships. This guy Mike Kelly, a Republican, worked hard. I don't doubt it. But he didn't get fabulously wealthy from working hard. His dad owned a car dealership and he bought out his father (probably at a steeply discounted price) and he married an heiress to a fortune. I bet a lot of janitors would me multi-millionaires if their fathers owned car dealerships and they married heiresses. And I bet they would be millionaires if they only put in an "average day" at work. It wasn't the hard work that made Mike Kelly rich. It was his education, his connections, his charm, probably his "flexible" ethics, and certainly some good old fashioned hard work.

America, Land of the Freely Arrested

From an article in the NY Times:

By age 23, almost a third of Americans have been arrested for a crime, according to a new study that researchers say is a measure of growing exposure to the criminal justice system in everyday life.

The study, the first since the 1960s to look at the arrest histories of a national sample of adolescents and young adults over time, found that 30.2 percent of the 23-year-olds who participated reported having been arrested for an offense other than a minor traffic violation.

...

The study did not look at racial or regional differences, but other research has found higher arrest rates for black men and for youths living in poor urban areas.

I have to laugh. Americans love to beat their chest and proclaim their "love of liberty" but they arrest and incarcerate at a rate far beyond almost every other country in the world except for the handful of despot dictatorships. You would think this report would force Americans to look in the mirror. Their myth of "freedom loving" doesn't match up with their eagerness to jail. It is much like the Founding Fathers prating on about "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. while being one of the worse slavery-based societies on the face of the earth.

The Civil War That Won't End

Here is a bit from a post by Robert Reich looking at the bizarre behaviour of America's Republican party:

Two weeks before the Iowa caucuses, the Republican crackup threatens the future of the Grand Old Party more profoundly than at any time since the GOP’s eclipse in 1932. That’s bad for America.

The crackup isn’t just Romney the smooth versus Gingrich the bomb-thrower.

Not just House Republicans who just scotched the deal to continue payroll tax relief and extended unemployment insurance benefits beyond the end of the year, versus Senate Republicans who voted overwhelmingly for it.

Not just Speaker John Boehner, who keeps making agreements he can’t keep, versus Majority Leader Eric Cantor, who keeps making trouble he can’t control.

And not just venerable Republican senators like Indiana’s Richard Lugar, a giant of foreign policy for more than three decades, versus primary challenger state treasurer Richard Mourdock, who apparently misplaced and then rediscovered $320 million in state tax revenues.

Some describe the underlying conflict as Tea Partiers versus the Republican establishment. But this just begs the question of who the Tea Partiers really are and where they came from.

The underlying conflict lies deep into the nature and structure of the Republican Party. And its roots are very old.

As Michael Lind has noted, today’s Tea Party is less an ideological movement than the latest incarnation of an angry white minority – predominantly Southern, and mainly rural – that has repeatedly attacked American democracy in order to get its way.

It’s no mere coincidence that the states responsible for putting the most Tea Party representatives in the House are all former members of the Confederacy. Of the Tea Party caucus, twelve hail from Texas, seven from Florida, five from Louisiana, and five from Georgia, and three each from South Carolina, Tennessee, and border-state Missouri.

Others are from border states with significant Southern populations and Southern ties. The four Californians in the caucus are from the inland part of the state or Orange County, whose political culture has was shaped by Oklahomans and Southerners who migrated there during the Great Depression.

This isn’t to say all Tea Partiers are white, Southern or rural Republicans – only that these characteristics define the epicenter of Tea Party Land.

The Germans let militarists lead them into war after war that led to defeat until Hitler iced the cake with a war to end all wars for the Germans. Hitler left a scorched earth German. Is the Republican party working hard to achieve the same in the United States?

Ideal Tax Law from the Political Right

Here is a post by Paul Krugman on his NY Times blog that captures the intent of the political right to makes sure that the middle class carries the burden of taxation:

Gingrich-Helmsley 2012

From the Tax Policy Center, the Gingrich tax plan:

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Also, it would add $1.3 trillion to the annual deficit compared with current law.

For those too young to remember, Leona Helmsley famously declared that only the little people pay taxes.

So much for the theory of progressive taxation, i.e. those who are able, pay more while the poor are given a break.

Republican Politics

I love the scorched earth warfare that has broken out between the Republican presidential contenders. Here is a bit from a post by Robert Reich on his blog:

Remarkably, the frontrunners for the Republican nomination for president seem to agree. At least, that’s the clear implication from what they’ve said today.

During a morning appearance on Fox News, Mitt Romney said Newt Gingrich should return the $1.6 million in payments he received from mortgage financial giant Freddy Mac.

Gingrich has tried to defend himself by saying Freddy paid him as a “historian,” but anyone with half a brain knows Freddy wasn’t interested in history. It coughed up the money because they wanted Newt to influence his former House colleagues, so they wouldn’t take steps to reduce Freddy’s financial risk or reach.

In effect, Romney is taking a swipe not only at Gingrich but at the well-oiled revolving door linking financial giants to former congressional leaders, Treasury officials, and their staffs. That revolving door is one of the reasons the Street and its auxiliaries (like Fannie and Freddie) took the risks that caused the financial crisis, and have still never paid the price.

What’s Gingrich’s response? He said this morning ”if Governor Romney would like to give back all the money he’s earned from bankrupting companies and laying off employees over his years at Bain than I would be glad to then listen to him.”

Newt is criticizing not only Romney but also the pump and dump practices of Wall Street that have caused hundreds of thousands of Americans to lose their jobs, put countless companies in jeopardy, and earned a fortune for private-equity managers and others.

If this goes on much longer, the Mitt and Newt Show will get a slot on MSNBC.

Hopefully this trench warfare between the behemoths will let the rank-and-file Republicans come to realize that they have been sold a bill of goods by their leaders, that their conservative "principles" are no more than a sellout to ultra-rich interests and have nothing to do with classic conservative politics. I can respect true conservatism, but I utterly loathe the deceitful misrepresentation of "principle" by all the political leaders of the current Republican party.

Failure at the Top and Failing to Admit It

Paul Krugman nails the incompetence of the political right with its continued misdiagnosis of the economy and the ever continuing attempt to administer noxious nostrums to "fix" the economy. From his NY Times blog:

Hmm. I was looking at the Thomson Reuters/Jefferies commodity price index, which has been trending down since the spring:

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And I found myself thinking about the hearing last February in which Paul Ryan accused Ben Bernanke of debasing the currency, using rising commodity prices to argue that dangerous inflation lurked just around the corner.

So, will Ryan demand more expansionary policies from the Fed given the sharp fall in commodity prices this year?

Truly, it is amazing how our political landscape continues to be dominated by people who have been wrong about everything for years.

There will never be an admission from the political right that they are wrong. Just as the political right plotted and maneuvered during the 1930s to "fix" the ailing Germany politics and economics, the present day right is painting us into a corner. Read Krugman's NY Times op-ed to understand the implications of these failings.

A Rationalist in an Irrational World

Here is poor Paul Krugman taking on his enemies one more time. Sadly, they don't want to listen. Politics in the US is a dialog of the deaf:

Why did I criticize Bush’s deficit-increasing policies, then call for more deficit-increasing policies from Obama?

Part of the answer is the difference in economic conditions. Deficit spending is expansionary when the economy is in a liquidity trap; it does nothing but crowd out other spending when you’re not up against the zero lower bound, and the Fed will just raise rates to offset fiscal expansion.

The other part of the answer is that although the Bushies were happy to use Keynesian arguments to justify their tax cuts, those cuts were all designed to be permanent — that is, they were irresponsible precisely because they weren’t temporary. None of what Obama has done commits that sin: his long-term spending, basically on health reform, is paid for, and everything else, like aid to state and local governments or expansion of unemployment benefits, was both designed to be temporary and has proved temporary in reality.

Ah well — just another day in political Bizzaroworld.

Krugman Takes the Gloves Off

Here is the opening bit of Paul Krugman's latest NY Times op-ed. It is well worth reading the whole thing.

Almost a quarter of a century has passed since the release of the movie “Wall Street,” and the film seems more relevant than ever. The self-righteous screeds of financial tycoons denouncing President Obama all read like variations on Gordon Gekko’s famous “greed is good” speech, while the complaints of Occupy Wall Street sound just like what Gekko says in private: “I create nothing. I own,” he declares at one point; at another, he asks his protégé, “Now you’re not naïve enough to think we’re living in a democracy, are you, buddy?”

Yet, with the benefit of hindsight, we can see that the movie went a little off at the end. It closes with Gekko getting his comeuppance, and justice served thanks to the diligence of the Securities and Exchange Commission. In reality, the financial industry just kept getting more and more powerful, and the regulators were neutered.

And, according to the prediction market Intrade, there’s a 45 percent chance that a real-life Gordon Gekko will be the next Republican presidential nominee.

I am not, of course, the first person to notice the similarity between Mitt Romney’s business career and the fictional exploits of Oliver Stone’s antihero. In fact, the labor-backed group Americans United for Change is using “Romney-Gekko” as the basis for an ad campaign. But there’s an issue here that runs deeper than potshots against Mr. Romney.

It is pathetic that the voting public in the US hasn't seen through the scam of a Republican party running on "family values" when in fact the only value it upholds is Wall Street's "greed is good".

Hoisting the Republicans on their Own Petard

Here is an excellent post by Robert Reich on his blog. I love the way he carefully lays out the logic so that when you arrive at the last sentence you realize that he has cornered the Republicans by their own screwy logic:

Every time I try to make sense of Republican tax doctrine I get lost.

For example, rank-and-file House Republicans are willing to increase taxes on the middle class starting in a few weeks in order to avoid a tax increase the very rich.

Here are the details: The payroll tax will increase 2 percent starting January 1 – costing most working Americans about $1,000 next year – unless the employee part of the tax cut is extended for another year.

Democrats want to pay for this with a temporary – not permanent – surtax on any earnings over $1 million, according to their most recent proposal. The surtax would be 3.25 percent.

This means someone who earns $1,000,001 would pay 3 and a quarter cents extra next year.

Relatively few Americans earn more than a million dollars, to begin with. An exquisitely tiny number earn so much that a 3.25 percent surtax on their earnings in excess of a million would amount to much. Most of these people are on Wall Street. It’s hard to find a small business “job creator” among them.

Nonetheless, Republicans say no to the surtax.

This puts Republicans in the awkward position of allowing taxes to increase on most Americans in order to avoid a small, temporary tax only on earnings in excess of a million dollars — mostly hitting a tiny group of financiers.

Not even a resolute, doctrinaire follower of GOP president Grover Norquist has any basis for preferring millionaires over the rest of us.

To say the least, this position is also difficult to explain to average Americans flattened by an economy that’s taken away their jobs, wages, and homes but continues to confer record profits to corporations and unprecedented pay to CEOs and Wall Street’s top executives.

So Republican leaders are trying to get rank-and-file Republicans to go along with an extended payroll tax holiday — but by paying for it without raising taxes on the very rich.

According to their latest proposal, they want to pay for it mainly by extending the pay freeze on federal workers for another four years — in effect, cutting federal employees’ pay even more deeply — and increasing Medicare premiums on wealthy beneficiaries over time.

But even this proposal seems odd, given what Republicans say they believe about taxes.

For years, Republicans have been telling us tax cuts pay for themselves by promoting growth. That was their argument in favor of the Bush tax cuts, remember?

So if they believe what they say, why should they worry about paying for a one-year extension of the payroll tax holiday? Surely it will pay for itself.

That last bit should make Republicans squirm. But it won't. They are shameless hypocrites and liars. Being caught in their big lie causes them no shame.