Sunday, March 30, 2014

The New Economy

In the early 1990’s, IBM laid off 135,000 workers (this is a number that I remember but I can only find support online for 115,000, still a HUGE number to be laid off in less than two years).  Few to none of them were low-skill workers.  And the number was SO huge that it was 10 times the total number employed at the time by Microsoft, the company that more than any other was making IBM’s life miserable.

From the early 1980’s through the early 2000’s, General Electric under the leadership of “Neutron Jack” Welch laid off between 120,000 and 160,000 workers (internet research supplies varying numbers).

From the distant past, I dredge up these two cases to make the point that “The New Economy” (the economy that is less and less dependent upon human labor, or high-skilled American labor) is not merely the consequence of computer / internet-based productivity gains or globalization / out-sourcing manufacturing jobs.  These two and other early massive layoff events were often a consequence of “Mergers and Acquisitions.”  M&A was part of a new strategy to boost corporate Bottom Lines – by terminating workers who did not contribute directly or adequately to that goal.

Thursday, March 27, 2014

A. Lincoln on Capitalism

These words are the words of Abraham Lincoln, a Libertarian before his time.
You cannot bring about prosperity by discouraging thrift.
You cannot strengthen the weak by weakening the strong.
You cannot help little men by tearing down big men.
You cannot lift the wage earner by pulling down the wage payer.
You cannot help the poor by destroying the rich.
You cannot establish sound security on borrowed money.
You cannot further the brotherhood of man by inciting class hatred.
You cannot keep out of trouble by spending more than you earn.
You cannot build character and courage by destroying men's initiative and independence.
You cannot help men permanently by doing for them what they can and should do for themselves.

Monday, March 24, 2014

A Workers' Paradise

Who first spoke the expression “a workers’ paradise” is not certain.  It may have been Karl Marx glorifying a stage on the path to a Socialist Utopia, or it may have been coined (or re-coined) by a very Left Wing American in the 1930’s as a reference to Stalin’s Soviet Union.  Few people today believe that Marxist Socialism would be a paradise, and everyone (even those 1930’s Communists) today knows that Uncle Joe’s USSR was more a workers’ Hell than a workers’ paradise.

But there is a real workers’ paradise, and it is here – in the good old USA.

Monday, March 17, 2014

Republicans and Democrats

The core difference between the two major political parties is over the role of government in our lives.  Republicans believe that government interferes with our lives and should be kept to a minimum.  “The government that governs least governs best” (Thomas Jefferson said that).  Democrats believe that government should help us out when we need its help.  “I am my brother’s keeper” (Genesis' Cain did NOT say that).

Republicans believe in competition; Democrats believe in cooperation.  Mostly.

Republicans believe in self-reliance; Democrats believe in teamwork.  Mostly.

Rural areas are always more Republican than urban areas, and urban areas are always more Democratic than rural areas.

Women are always more Democratic than men, and men are always more Republican than women.

The more religious tend to vote Republican, while the more secular tend to vote Democratic.  Those who favor faith over science tend to vote Republican, while those who favor science over faith tend to vote Democratic.

Businessmen tend to be more Republican, and those whose livelihood is not business tend to be more Democratic.

Owners and managers are more often Republicans, and workers are more often Democrats.

All else being equal, the young are more likely to be Democratic and the old more likely to be Republican.

Look at this list of alternatives again; do we really believe that one alternative is better than the other?  Don't we really need both alternatives?

He who believes that any American with a different political belief system than his own is either stupid or evil needs to spend more time in the other fellow’s shoes.

We are all Americans.

Thursday, March 13, 2014

American Exceptionalism

Watch this video because I will not be repeating what the news anchor says to his audience.  If you don’t watch it, you will miss some of the context for what I have written.  Go ahead; it is an entertaining and dramatic eight minutes.


America is not the greatest country in the world.

But she used to be, in the same ways in which she is no longer.

And she can be again.

But if you are convinced that America is still the greatest country in the world, then we have nothing to do to keep her there but to keep on doing what we have been doing.  If that is OK with you, then you are part of the reason why we are not the greatest country in the world any more.  Because we don’t have to exert any effort to be Number One, we just ARE Number One.  And that’s crap.

So, saying we are NOT the greatest country in the world is not an unpatriotic sentiment; it is the necessary precondition for us all to get moving and do what we need to do.  My blog, my book, all that I have to say to you is about that: what you and I have to do to restore this country to its once and future greatness, lest we surrender this century to the Chinese (and I have nothing against the Chinese; but I am an American and I want the best for US first).

Before you go away totally pissed at me, …

We ARE still exceptional!  But we have lost our edge.  We are not as exceptional as we once were; our only real competition for the honor is ourselves, in the past.

There is no country in the world where you and I can say any damn thing we want to without fear of fine or imprisonment.

There is no country in the world where a single person of humble origins can make such a huge difference, in his country and in the world.

There is no country in the world where I had rather been born.

But be careful, because even these truths are slipping away.

Addendum: Wednesday, 10/21/2015
An update by the Washington Posts's economist Robert J. Samuelson.

We’re Broke

You’ve heard this before.  “We’re broke.”  You’ve heard it many, many times.  You’ve heard it so many times that you probably believe it, because in many ways it seems true.

But it is not true.

First, some context.  When a politician says “we’re broke,” he is always arguing to cut government spending and/or arguing against tax increases or for tax cuts, usually for the wealthy.  If “we’re broke,” we surely cannot get blood from the stone of people’s incomes.

Admittedly, there are ways in which we are broke.  The number of American households living in poverty keeps increasing, the number of households on food stamps, on unemployment insurance, beyond unemployment insurance – all keep increasing.  The number of people working two or more jobs, working part-time when they’d rather work full-time, keeps increasing.  The number of people working for less pay than last year or even five years ago keeps increasing.  When we look at the economy this way – for many if not most Americans – we are indeed broke.

But look at the stockmarket.    No matter what time frame you look at, investors don’t think we are broke.  CEO’s and Hedge Fund managers have never done better; they don’t think we are broke.  The numbers of American billionaires and millionaires keeps increasing (if you can find better sources, please let me know), and they don’t think we are broke.  Not only is the top 1% doing better than ever before taxes, their tax rates are at historically low levels.  The money that no longer finds its way into your pockets and mine has not disappeared; it is flying into the already full-to-overflowing pockets of the rich and (not-so) famous.

Warren Buffett has said: “When a country needs more income, they should get it from the people that have it.”  If Buffett, a supremely rich man, thinks that he and his moneyed class should pay much more in taxes than they do, why would you argue with him?

You and I may be broke, but the country is not broke, and all our money is just going to fewer and fewer pockets; and those who are doing more than OK should be footing more of the bill.  As they used to.  Without complaining about it.

Sunday, March 9, 2014

Redistribution of Wealth

Every penny, every cent, every sou, every shilling, every yen that is ever taken by taxation at any time in history and anywhere in the world is a “redistribution of wealth.”  NEVER is a single penny taken in tax NOT a redistribution of wealth.  Whether it is taken in the form of a sales tax, an income tax, a property tax, an excise tax or a luxury tax, every cent that gets taken by government will be “redistributed.”  To government workers who handle the collection and distribution of tax monies, to other government workers, to construction teams, to doctors and hospitals, to teachers, to police and fire-fighters, to sanitation workers, to mass transit workers, and, yes, to thieves.  You may indeed be a beneficiary of your own tax dollars, but that benefit will rarely be the same as what you paid in taxes.

Republicans use this phrase when they want to undermine Democrats' attempts to raise taxes on the wealthy, and redistribute tax monies DOWN, from the wealthy to the middle-class and the poor.  Rarely if ever do Democrats charge Republicans with the same crime when they want a tax cut for their wealthy donors, even though it is equally true, as it redistributes tax monies UP, from your pay-check to the brokerage accounts of the wealthy.

The main questions we should ask about our tax bills are: “what programs and what people will benefit from my taxes?” and “are others more fortunate than me paying their fair share?”   Taxes are always a redistribution of wealth.  The only crime is when they are redistributed UP (as they were in the story of Robin Hood, where the poor had to pay taxes to benefit the king and the nobility).

Obamacare: The Good, the Bad and the Ugly

I do not like Obamacare AKA the Patient Protection and Affordable Care Act (ACA).

But before getting to the particular points of this blog post, let me say that if you think that Obamacare is 100% perfect, or if you think it is 100% evil, in both these cases you are displaying an impatience with thoughtfulness and detail.

So, let me now beg your patience for a while.

First, Obamacare is not so awful that, if it were totally repealed, it would not have to be replaced by something better, because it IS better than what we have had for the past 35 years.  And here is why:
  1. It aims at Universal Coverage (a worthy aim that it has failed utterly to achieve).
  2. It forces health insurance companies to ensure Americans with pre-existing conditions (a good thing unless you are someone who believes you will live forever in perfect health and you don’t want to pay higher rates because someone else might actually get sick).
  3. It forbids health insurance companies from placing a limit on their payments to an insured (another good thing, as it will keep folks from having to sell the house and empty their retirement savings in order to pay for life-saving medical care).
  4. It allows families to keep their unemployed children up to age 26 in their family policies (a good thing for families with kids in college).
  5. It lends a helping hand to people who would have difficulty paying retail for their heath insurance.
  6. And, once it gets over its considerable (and never ending!) birthing pains, its price increases will begin to slow down.
Those are Obamacare’s good parts.  Now for the not so good parts.

Tuesday, March 4, 2014

Mankiw on Economic Inequality: Part II

Argument 1 – The title “Yes, the Wealthy Can Be Deserving” is disarmingly inoffensive.

Reply 1 – Is there a person alive who does not agree that “the wealthy can be deserving,” the logical equivalent of which is “some of the wealthy are deserving”?  The title is deceptive as no one wants to debate it, and surely no argument is necessary to defend it.  Surely Professor Mankiw means to argue more than his title suggests; and that is what I will answer.

Argument 2 – “Robert Downey Jr. was paid $50 million for his work on The Avengers.  Do you think that is unfair?”  Most of you will say no, it was not unfair.  After all, many of you chose to see the movie BECAUSE of Downey’s participation (and are more than happy to contribute a piddling $0.25 to Downey’s fortune out of the $8.00 you paid to see the movie).

Reply 2 – For starters, a $50 million payoff for one movie is hardly typical, of Downey or of Hollywood.  But what if there was a follow-up question.  What if Professor Mankiw had asked, “but do you think that Downey should pay a higher tax rate on this fortune than you (the reader) pay on what you earn?”  What if Professor Mankiw had asked, “do you (the reader) think that the producer – whose name you do not even know and who will take home more than Downey – should be paid what he will take home?  And do you think that he should pay a higher tax rate on HIS earnings?”  Maybe the answers to these questions will be different.

Monday, March 3, 2014

Mankiw on Economic Inequality: Part I

N. Gregory Mankiw, professor of Economics at Harvard, and author of THE Economics 101 college textbook, wrote a piece for The New York Times published on February 15th, 2014, called “Yes, the Wealthy Can Be Deserving.”  What follows is my open reply to his article, which you should read (click on the title link) before reading my reply.

But what became clear writing this reply is that there is such fundamental confusion regarding the issue of economic inequality that I must deal with the confusion – first.

One: There are those who would frame the debate as “Economic Inequality vs. Economic Equality: which is preferable.”  This is deliberately deceptive, as there is no one whom I have ever encountered who urges economic equality – perfect equality, Utopian Socialism, or even garden variety socialism – as the remedy to the problem of economic inequality.  If you can show me anyone in the Inequality debate who preaches this kind of economic equality – what Paul Ryan calls equality of outcomes – show me, and I will apologize publicly and alter my position accordingly.

Two: Congressman Paul Ryan, chairman of the House Budget Committee, likes to frame the debate as “equality of outcome vs. equality of opportunity.”  This would be a very compelling argument if he could point to any Republican efforts in the past several decades to promote equality of opportunity among Americans who clearly NEVER have had any such thing.  Once again, if you believe that I am mistaken, show me, and I will apologize publicly and alter my position accordingly.

Sunday, March 2, 2014

The National Debt

This is the first of many blogs on this subject.  And the reason I know I will post on the subject again is the widespread misunderstanding of what should be easy stuff.

The National Debt is the sum of all annual Deficits minus the sum of all annual Surpluses plus Interest on the Balance.   Debt = Deficits – Surpluses + Interest.

What the Interest part should tell us – now that the Debt is at $17 Trillion – is that we should work to CUT the Debt, as Interest payments are beyond starting to get serious.  Even at only 1% interest, the annual cost of Interest on the Debt is $170 Billion.  When interest rates begin to creep up – as they surely must – the Interest hit will become $300 Billion or $500 Billion or $700 Billion, every year.  The current low figure – $170 Billion – costs every man, woman and child $535 / year in taxes, or a family of four $2140.  Not chump change, for the nation's credit card interest.

But here is the meat of this brief post: the Deficit part of the equation is NOT equal to government spending.  The Deficit is spending that is not paid for; that is – government spending less tax collections.  In the same way, your credit card "deficit" for the month is not what you BOUGHT this month; it is what you bought that you don't want to pay for.

Those who refuse to raise taxes are not serious about the National Debt.  You can’t curse the Debt and demand lower taxes in the same brain.  If this is not clear I have failed to make a very easy point.  The National Debt is a) government spending b) that we refuse to pay for.

OK, so why does this happen to us?  Because while we all like to buy stuff and pay for it with plastic, no one likes to pay his credit card bill every month.  It’s easy to spend, but it’s way less easy to pay for what we bought.  Similarly, no one likes to pay taxes.  And no one ever got elected on a platform of raising your taxes, even if it was necessary to pay for what you already bought.

Paying down the National Debt requires surpluses, and surpluses are the result of government taking in more money in taxes than it spends on government programs.  That sound OK with you?  The government taxing more than it needs this year?  No?  Well, then, stop bitching about the Debt, because you don't really give a shit.

If this puzzles you, please re-read, as I have done the best I know how to try to explain it.  The National Debt is to a great degree the inevitable result of having a democracy and liking to buy stuff and not liking to pay for it.