Category Archives: Economics

We’re All In This Together

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Harris Rosen is a real person.  He really did give free daycare and college scholarships to all high school graduates in this very poor little neighborhood in Orlando, FL.  It is unclear for how long he did this or if he continues to do this now and the graduation rate statistic is suspect, but it’s still truly inspiring.  What is interesting is how different people find this inspiring.  A conservative friend is the one who posted this on Facebook (Yes this is another Facebook argument.  Yes something is wrong with me.).  My response was this:

Imagine all the money the government is going to save on welfare. Imagine all the extra money the government is going to make in taxes from the increase in income that comes from going to college. Imagine that instead of one neighborhood winning the rich-guy lottery, we all got together and pooled our resources to make this a reality for all. Imagine if everyone in the U.S. had free daycare and college scholarships. Imagine how much better the U.S. and the world would be as a result.

When talking to conservatives, use conservative talking points.  Don’t throw in inflammatory barbs like “Imagine if there were someone running for president right now that has promised to provide these things.  Feel the Bern!”  Though I was sorely tempted, that’s just poking the bear.  His response was:

I get it dude, but forced philanthropy breeds resentment and entitlement. There’s no substitute for a kind heart with a smiling face, proving to a neighborhood that they matter, are not forgotten, and have a gift that requires stewardship.

Which is really along the lines of “That’s all fine and dandy but if you force people to do the things that inspire them they’ll resent you and the people that benefit from it will feel all entitled and stuff.”  It’s such a low view of humanity.  It’s as if benefits don’t count unless you can put a face to the benefactor.  Which is absolutely hilarious when you realize that this seems to be a very popular view in certain Christian circles.  Maybe it has something to do with being told from birth that you’re a dirty sinner and undeserving of anything and thus must work hard from conception to get what you want.  Try to pinpoint exactly who would be resentful and who would feel entitled and you can’t (You know, people.  Not me.  Not my friends.  Those other people.), which was my next point:

 Resentment from whom? Entitlement from whom? Those who would resent this are already resentful. Those who would feel entitled already feel entitled. I think most would feel grateful. Most would feel empowered. Everybody would win; the resentful, the entitled, the rich, the poor. If you’re the one who would feel resentful, fine, conversation over, but if you wouldn’t feel resentful, you are much closer to those that are resentful than I. Change minds. Change spirits.

He “liked” this which is basically a polite way of ending the conversation, but then someone else posted something that I think gets to the heart of why conservatives don’t quite get what the stakes really are even though they should be blindingly obvious:

Let me empty your bank account to pay for my sister’s medical bills and we’ll see who’s resentful.

If you legislate charity, it becomes theft. If you force someone to give..it’s not giving. And if you didn’t make the money, it’s not yours to give.
I’d like a great many things, doesn’t mean I should get them. And just because someone is in unfortunate circumstances, doesn’t mean they should have someone else solve their problems.

I wanted to concentrate on the first sentence only because the rest is just boilerplate libertarian nonsense that people reflexively repeat.  The last sentence is also worth commenting on briefly, though.  This person is obviously Christian and obviously cares about certain things.  These things even correlate very closely with the goal of providing basic childcare to all children.  But she wants to decide exactly whom to help.  She wants to be able to pick a winner and loser.  Take that agency away from her and you suddenly go from an obvious good to grounds for rebellion.  But back to the first sentence:

Um, I am a perfectly healthy male with insurance. I DO pay for your sister’s and hundreds of thousands of other people’s medical bills. Probably not your sister specifically since we are almost assuredly on different health plans, but you get the idea. Plus, we’re kind of switching subjects from education to healthcare, but the whole point of pooling resources is so that any individual DOESN’T get their bank accounts emptied. That was the biggest problem with insurance pre-Obamacare. Have a preexisting condition and you’re uninsurable and you either find a way to pay for your condition or find a magical benefactor or you die. I gladly pay property taxes for the education of children that I won’t have because a better education for all makes us all better. I would gladly pay more in taxes to provide daycare for all because well taken care of children make better prepared children makes us all better. I would gladly pay more in taxes to provide a college scholarship for those that graduate highschool because smarter people get higher paying jobs which allows them to buy more things and provide more things which makes us all better.

I don’t want to live in a world which depends on a magical benefactor who sweeps down on a vanishingly small subset of humanity to provide for a basic need like a child’s education. I want to live in a world where we all recognize that childcare and education are a fundamental necessity for children who had zero choice in to whom they were born and where they were raised. I want us to recognize that this benefits not just the children but all of us. I want to live in a world where the popular belief of “I suffered and so should you” is replaced with “we suffered now let’s try to make things a little better for you”. I am my brother’s keeper. I am my sister’s keeper. My brother is not just Tangelo Park. My sister is not just Orlando, FL. My brother, my sister is the United States of America. Harris Rosen has proven how beneficial childcare is to primary education on a small scale. Let’s make it nationwide and reap the whirlwind of benefits together. No child is not deserving.

It’s a little speechy (I sometimes get like that when I write), but I believe it hammers home my point.  We’re all in this together.  Not a single one of us has the wisdom to decide who is deserving and who is not.  This is true for every single human being, but especially true for children who should be considered deserving by default.  One person proving that providing basic childcare benefits those children immensely is absolutely inspiring.  Learning from that and pooling our resources to make it a reality across the entire United States would be awe inspiring.

The Beatings Will Continue Until Morale Improves

Man, the Eurozone is a complete mess.  Yep, it’s still trying to hash things out with Greece.  Twice this week, there have almost been deals to basically kick the can down the road and proceed with the same completely not sufficient solution of bleeding Greece dry.  Today, Germany quashed that agreement because…something something.

The actions of Germany during this whole fiasco both make some sense and make no sense at all.  They make sense because concessions to Greece will likely mildly hurt Germany’s economy.  Germany likes being on top.  That’s understandable.  But what they’re trying to force Greece to do is barbaric.  Greece has already had its economy shrink by 25% because of the austerity forced upon them by the European Central Bank and its people are suffering horribly as a result.  This is Weimar republic post World War I levels of shrinking that was forced upon Germany by the Allies.  Germany and many other countries want to squeeze more blood out of that rock.

The sad thing is all of this could easily go away with just a little debt forgiveness.  Greece is already making enough money cover its day to day costs.  They just need to borrow money to service the interest on their debts.  Keep the status quo and offer up some debt forgiveness and Greece would be in ok shape to grow back to a nominally functioning economy.  But debt forgiveness is verboten in any discussion because how will they learn their lesson if they don’t suffer.

There’s also some weird politics going on here as well.  Greece recently elected a solidly left government whereas the rest of the Eurozone is fairly center-right.  Gotta keep the right happy or your government collapses and you lose power.  And much like here in the U.S., staying in power is the first rule of business.  So the right wants to stick it to the only left leaning government to show that a left government can’t function and the center goes along with it because they are somewhat of a same mind and want to keep control.  And damn the consequences.

What are the consequences?  Well, Greece would be stupid to accept more austerity.  That doesn’t mean they won’t, but I don’t get the feeling the current government wants to go down that path both because they campaigned on less austerity and because it’s fairly obvious from the performance of other nations that austerity doesn’t work.  It looks as if the Eurozone is not willing to budge either which means Greece leaves the Euro and defaults on its loans.

And now we come to completely uncharted territory.  Greece leaving the Euro is likely to be devastating to Greece, but also pretty harmful to the rest of the Eurozone as well, leading to another European recession.  Greece, its economy in shambles, will be unable to repay its debts by itself at a time when the Eurozone will demand it.  This means a third party has an opportunity to step in and lend Greece assistance.  Who can do this?  Well, certainly not the Eurozone.  The U.S. could and should do it, but I doubt we have the political will to do so.  So that leaves China, which hasn’t shown much interest in meddling with European political affairs and Russia.  Russia is currently fighting a proxy war in eastern Ukraine, has control of the Crimean Peninsula, and shows all outwards indicators of wanting to expand that influence.  In exchange for money, Greece allows Russia to build naval bases thus giving Russia a base of operations in the Mediterranean Sea and locking its dominance of the Black Sea.  If a far-right ultra-nationalist party comes to power in Greece as a result of these maneuvers, we have all the makings of a recipe for disaster.  Greece could then decide to solve its border disputes with Turkey and Albania with a healthy backing of arms from Russia and the world has a second proxy war.  Things can only escalate from there.

All because no one will agree to a little debt forgiveness.

Happy Privilege Day!

Ah, there’s nothing like the post-Christmas food coma day to talk about the dichotomy of our society here in the United States.  Everybody’s off of work, nursing their hangovers or returning the crappy presents that their Aunt Matilda got them.  Well, except the people in retail who have to put up with all your over-privileged complaints.  Or the people who clean your houses and offices.  Or the people who pick your food.  Or the people who deliver your packages.  You know, all the people who get paid crap and keep the economic engine that we all depend on functioning normally.  Be nice to them.  Their job sucks way worse than yours does.

It is amazing how different downtown Chicago is on the day after Christmas (and I’d assume the day after Thanksgiving).  It’s like a ghost town.  Well, most of it is.  Chicago is a fairly heavily segregated city.  Even in downtown, where there are no hard and fast racial borders, it is noticeable.  Today, especially so.  Millennium Station, which on a normal day I would guess serves 60-70% Black people is almost 100% Black today, except for the line at Starbucks.  And speaking of Starbucks, there are Starbucks stores that are closed today!  I didn’t think that was possible, but if you work in a skyscraper with its own economic ecosystem and that ecosystem includes a Starbucks, chances are it and most of the other stores and shops and restaurants are closed.

The finer restaurants will be open today and the early staff of mostly Hispanics are patiently waiting for their almost assuredly White manager, who is late, to arrive for the day to open up for them.  I’d imagine that if they were late, the consequences would be dire.  They will cook our food and serve it to us privileged as we all enjoy a welcome and deserved respite from the toils of everyday life, completely oblivious to those surrounding us that every bit deserves the respite we enjoy, but do not have the social standing to demand one.  So tip them well.

Privilege isn’t anything to feel guilty about.  In fact, you should enjoy it!  But you should also recognize it.  A little introspection can go a long way and if you believe you got to where you are by sheer force of will, you are either deceiving yourself or you’re a complete dick.  The latter can  likely not be corrected, when you’re a dick you’re a dick all the way from your first cigarette to your last dying day, but self-deception can be fought against and it is worth fighting to become a more socially conscious individual.

Whither Scotland?

I really don’t have much to say about the subject, I just think that anytime you can find an excuse to use “whither” in a post you should take it.

Scotland is voting for independence from the United Kingdom today.  This makes Scotland the first country in decades to not be bombed into independence by the United States.

There are lots of good reasons for independence and lots of good reasons for remaining in the union.  The best reason for Scotland going its own way is that Scotland’s official animal is the unicorn.  It’s even on their seal.  We totally need more unicorns on flags.  There is also the fact that England treats them like the red-headed step-child of the family.  Hmm, I wonder if that term actually came from England’s treatment of Scotland…  As for staying, Scotland is basically the left wing of Parliament.  If Scotland leaves, it would make the United Kingdoms veer more heavily to the right than they already are.  There’s also the whole “your economy will collapse if you leave” thing, but you know, whatevs.

The economic question is actually quite interesting.  Scotland has oil, but all signs point to it already being past its prime in oil producing capacity.  There’s certainly enough there still to help it through the initial hard times they are likely to encounter once they go independent.  Then there’s the currency.  What do they do there?  Stay on the British Pound?  Unlikely.  You don’t want your economy to be tied to the currency of the lover you just spurned.  Go with the Euro?  A better choice, but still there’s the whole not having control of your own currency problem.  Create your own currency?  If they are going to have unicorns on it, yes!  Being able to control your own currency is very important in riding out economic hardships, but Scotland’s not terribly large and there’s the danger that the international community could sink the new currency.  It’s not an easy choice.

Whichever Scotland chooses, I wish them the best.  They’ve gotten short shrift for too long.  I, personally, hope they stay because of the whole England turning righter than the Republican party thing.

Here’s A Litmus Test For Obama Derangement Syndrome

Forbes Magazine has an article out showing that President Obama’s term in office has economically outperformed President Reagan’s in pretty much every category.  Oh, and he also has shrunk the deficit and reduced government.  The deficit grew dramatically under Reagan and the size of government increased as well.  I don’t see this as a “take that Reagan lovers!” article as much as it’s a “take that imaginary history!” article.

Here’s the problem with idols; your image of them is grossly distorted from their reality.  In fact, your image of them is more a reflection on yourself than reality.  Reagan is the epitome of this.  Everything good under the sun is attributed to Reagan even though a very simple analysis of the data would show that he wasn’t really that great.  Lots of bad stuff happened under his watch.  Unforgivable stuff.  Some good stuff happened too, but most of the good stuff is made up from whole cloth.

Maybe twenty years from now, the image of Obama will be like that of Reagan today.  Who knows?  I doubt it, though.  Obama will likely go down in history as the perfectly adequate politician that he was.  A pragmatist to Reagan’s idealism.  And that’s the story of Republicanism in the United States these days.  Idealism divorced from reality.  It works wonderfully for short-term gains.  Everyone loves people who pretend to be idealists.  The next Presidential election will be full of them.  Pretty much everyone that is expected to run for the Republican ticket is a pretender and so is likely next POTUS Hillary Clinton.  Sadly, that’s how you win elections.  Even Obama ran on a very idealist platform while all the time showing himself to be a pragmatist’s pragmatist.  The results have been mostly good with some bad thrown in.  Seriously, ignore the faux-scandals and make a list of all the stuff that was accomplished.  You know, stuff that was passed.  Here, let me help you (caution, swears).  List them in two columns, ones that are good and ones that are bad.  You would be hard pressed to come up with a list containing more bad than good.

All You Need To Know About Economics

There are two things I know about economics:

  1. Making money move makes money multiply.
  2. Money has a tendency to accumulate in one place.

Point number one is a variation on you have to spend money to make money.  The more any given dollar exchanges hands for goods or services, the more robust the economy is.  This should strike everyone as completely non-controversial.  Basically, if money is not exchanging hands, it might as well just be a paper weight.

Point number two is a variation on the rich get richer.  All things being equal, money tends to float to the top and into the hands of a very few people where a majority of it stops exchanging hands.  So what we get is a trillion dollar paper weight at the top of the economic pyramid.  This one is probably a little controversial, but there is enough history to show this to be true unless steps are taken to prevent it.

What do these two points mean?  Well, to me, it means that seeding the lower economic levels with money would lead to an marked increase of economic growth.  The poorest of the poor need to spend money.  They only don’t because they don’t have the money.  All that extra money circulates back into the economy immediately causing goods to be purchased which causes more goods to be made which causes more jobs to be created which causes rich people to make more money.  It’s the great economic circle of life.

So, what steps should we take?

Top on my list would be to treat all capital the same.  Right now, we have this backwards system of taxation that taxes money made from working a job at higher rates than money made from stocks and dividends.  Tax all capital equally and we create an economic playing field that is still woefully lopsided, but at least evens how everyone is taxed on that playing field.  Removing just the capital gains and dividend preferences would also give the federal government about $38 billion per year in extra income.  Next on my list would be raising the top income tax brackets back to the late 1940’s level.  That would make the top tax rate somewhere above 80%.  And before you go complaining that rates that high will hurt economic growth, average GDP growth during that time was over 15%.  That isn’t to say that the high rate helped economic growth, because there is zero correlation between the top tax rate and economic growth, it’s more to show that it won’t hurt it.

And what do we do with all of this extra money?  I’ve always liked the idea of a minimum income.  Every non-dependent adult receives $1,000 or so a month from the government.  Those that have a job would receive more, perhaps $1,500.  This system both provides for those who can’t or won’t find a job and provides an incentive for people to have a job.

I believe this system will prime the economic pump and cause the economic circle to keep rolling.  Booms may end up being less boomy, but busts would also become less busty.

Mmm, Food Desserts…

Oh, wait, no, that’s food deserts.  My bad.

A food desert is an area of residential housing that is underserved by traditional grocery store but often over-served by fast food stores.  These tend to occur exactly where you’d think they’d occur; in poor neighborhoods.  Being poor and living in a food desert makes it almost impossible to make healthy food choices.  Now, you would think that a great solution would be to bring grocery stores to this area.  A few studies have recently been released that show when a grocery store finally comes to a food desert, the dietary habits of the residents don’t really change much.  What’s going on here?

Well, first off, it’s only a couple of studies so there may be certain things not controlled for, but the studies certainly pass the smell test.  So why would poor people choose to still go to the fast food joint when there’s a much cheaper and healthier alternative right next door?  If you took $10 worth of groceries and $10 worth of McDonald’s stacked side by side the choice seems absolutely preposterous.  You can make many meals out of the groceries but only one from the McDonald’s.  Look closer, though.  See the problems?  That McDonald’s value meal is ready to eat right now.  No cutting vegetables or measuring out spices.  No stirring of sauces or browning of meat.  No washing of dishes or cleaning the kitchen.  It takes five minutes to get fast food while cooking and cleaning can take an hour or more.  And that’s just one out of three meals.  We are so used to having time that we don’t realize how much of a luxury time actually is.  And it’s a luxury that the working poor can not afford.  There are second jobs to get to and precious sleep to catch up on.  How are you going to throw fresh food into that mix?

So if grocery stores aren’t the answer, what is?  I’ve always been a fan of something along the lines of a slow food co-op.  The basic idea being that there is a kitchen somewhere that can cook very large portions of healthy meals and local residents can come in and pick up these meals for slightly less than what you’d pay at a fast food restaurant.  The kitchen is local, the workers are local, the patrons are local.  All that plus the locals can eat healthier and save slightly more than they had been with their fast food choices.

It’s a very simple idea.  Of course, how to implement something like that is well beyond my pay grade.  I wouldn’t even know where to start.  Churches would probably be a good bet.  It’s times like this when I wish I knew someone who actually knows something about these things.

Three-Fifths Of A Living Wage

I recently read that phrase on a blog post that I have since forgotten, but the phrase itself stayed with me.  That’s some really powerful imagery in a few words.

Obviously, living on minimum wage is not anything nearly as bad as slavery was, but the phrase isn’t meant to evoke the way minimum wage earners are treated physically but the way they are treated politically and socially and in that respect there is a lot of similarity.  Giving every person the ability to have a 40 hour work week which pays a living wage would go a long way towards equality.

I don’t have much else to add about the subject past what I’ve already written in my American Disdain for the Poor post.  The phrase just stuck with me so I thought I’d share.

Goodbye Net Neutrality

Here’s an inventive way to screw over the Internet.  Take a service you put an arbitrary cap on, say cell phone data plans, and then offer companies an opportunity to bypass that cap by paying a nominal fee.  As if I needed another reason to hate AT$T.

I have to admit, it’s a wickedly inventive way to wedge your way into disbanding net neutrality.  Cell phone companies have long charged more for more use for minutes and texts and data plans, but now they’re offering customers the chance to use certain web sites that won’t count as going over their cap.  It’s a win-win situation for AT$T.  Customers get to use unlimited data for certain sites and AT$T gets more money from the companies that can afford to bribe them the extra costs.

AT$T gets away with that for a few years and then Comca$t can come in and complain that AT$T has a market advantage by being able to charge more for allowing companies unlimited access to their networks.  Soon, all of net neutrality is completely thrown away causing a massive shrinkage in the amount of commercially viable websites on the Internet.

What If There Were No More Inflation?

If you ever want to know how much a person actually knows about economics, ask them if inflation is good or bad.  If they say that it’s good, you should immediately laugh in their face and never listen to them about economic matters again.  If they say that it’s bad, you should also immediately laugh in their face and never listen to them about economic matters again.  The only correct answer is to say that it depends on what you’re trying to accomplish.  Another somewhat related question you can use is to ask if we want a strong dollar or a weak dollar.  Again, the only answer is it depends upon your goals.

All that to say inflation can be a very useful tool to manipulate economic conditions.  But it is generally accepted by economists that it is only useful because of a persnikity number.  That number is zero.  Or, to be more precise, the zero lower bound of short term interest rates, a situation we find ourselves in now.  If you are at the lower bound and you want to increase demand, your main weapon is inflation.  You set an inflation target high enough so that businesses and individuals would rather spend their money now than lose purchasing power due to inflation.

But what if you got rid of the zero lower bound?  What if you could go negative on interest rates?  In other words, what if we could make it so that you would have to pay banks to hold your money?  Economist Miles Kimball is proposing just that.

The details of it elude my rudimentary economic knowledge, but it has to do with a switch to electronic money.  If I understand it correctly, paper money doesn’t work because if you go with negative interest rates people/businesses will simply not put their money in the bank.  Electronic money forces you to have a holding company for your money which also makes you suceptible to negative interest rates.  The Federal Reserve can then use their power to manipulate short term interest rates to effectively eliminate inflation and, theoretically, recessions.

It’s a fascinating idea.  It reminds me of Bitcoin, the underground all electronic world currency.  If Kimball’s proposal achieves acceptance, it sounds to me like we’ll soon have a governmentally controlled version of Bitcoin.