Donald Andrew Henson II

Archive for the ‘American Economy’ Category

Two Prophets of the End Times

In American Economy, American Society, Current events on February 23, 2014 at 11:10 pm

The Transfiguration

I would call most of what I do on this blog ‘commenting’ – I have a look at what people are saying and doing, and talk about how I think it’s good or bad for America. I like to play the Devil’s Advocate, questioning concepts that we take for granted, looking at the bad ideas that are often floating around, extending them out to their often frightening logical conclusions, wondering aloud how our society could be better if we could just break out of lazy, routine habits of thought. I do not believe that our future as a nation has already been decided by an all-knowing deity somewhere at the center of the cosmos; we, ourselves, will decide our own future, either through purposeful action or blind inaction, for good or ill.

Sometimes, however, while looking for something germane on which to comment, I encounter a real prophet. In doing some research about Scots-Irish immigration to America, I ran across an irreverent essay written by Joe Bageant, How the Scots Irish Screwed Up America. That’s actually the subtitle; I’ll warn gentle readers that the main title might offend. Bageant’s writings show an understanding of the plight of the used-to-be middle class better than other I’ve read. Here’s an excerpt from his essay Waltzing at the Doomsday Ball that truly explains our economic problems today:

“As an Anglo European white guy from a very long line of white guys, I want to thank all the brown, black, yellow and red people for a marvelous three-century joy ride. During the past 300 years of the industrial age, as Europeans, and later as Americans, we have managed to consume infinitely more than we ever produced, thanks to colonialism, crooked deals with despotic potentates and good old gunboats and grapeshot. Yes, we have lived, and still live, extravagant lifestyles far above the rest of you. And so, my sincere thanks to all of you folks around the world working in sweatshops, or living on two bucks a day, even though you sit on vast oil deposits. And to those outside my window here in Mexico this morning, the two guys pruning the retired gringo’s hedges with what look like pocket knives, I say, keep up the good work. It’s the world’s cheap labor guys like you — the black, brown and yellow folks who take it up the shorts — who make capitalism look like it actually works. So keep on humping. Remember: We’ve got predator drones…. 

Capitalism is about one thing: aggregating the surplus productive value of the public for private interests. As we have said, it is about creating state sanctioned “investments” for the workers who produce the real wealth. Things like home “ownership” and mortgages, or stock investments and funds to absorb their retirement savings. That crushing 30-year mortgage with two refis is an investment. So is that 401K melting like a snow cone (on) the beach.

As the people’s wealth accumulates, it is steadily siphoned off by government and elite private forces. From time to time, it is openly plundered for their benefit by way of various bubbles, depressions or recessions and other forms of theft passed off as unavoidable acts of nature/god. These periodic raids and draw downs of the people’s wealth are attributed to “business cycles.” Past periodic raids and thefts are heralded as being proof of the rationale. “See folks, it comes and goes, so it’s a cycle!” Economic raids and busts become “market adjustments.” Public blackmail and plundering through bailouts become a “necessary rescue packages.” Giveaways to corporations under the guise of public works and creating employment become “stimulus.” The chief responsibility of economists is to name things in accordance with government and corporate interests. The function of the public is to acquire debt and maintain “consumer confidence.” When the public staggers to its feet again and manages to carry more debt, buy more poker chips on credit to play again, it’s called a recovery. They are back in the game.

Dealer, hit me with two more cards. I feel lucky….”

Unfortunately, Joe passed away in March, 2011, so his prophecies have come to an end. I am enjoying the work he left behind little bits at a time so that I can savor every word. If you haven’t yet read Deer Hunting with Jesus, grab a copy; he really understands what makes America’s white underclass tick.

Still alive and kicking – and seemingly as mad as a hornet – is another doomsday prophet, James Howard Kunstler. Where Bageant seems annoyed, Kunstler is truly pissed off. And, like any good prophet, he predicts a host of calamities that will soon beset the world order as we know it. If you want to know how 2014 is going to turn out, have a look at a Burning Down the House, a recent post on his blog, the title of which, once again, may offend the gentle reader. Here’s a sampling of some of his least frightening observations:

“Sorry to skip around, but a few stray words about the state of American culture. Outside the capitals of the “one percent” — Manhattan, San Francisco, Boston, Washington, etc. — American material culture is in spectacular disrepair. Car culture and chain store tyranny have destroyed the physical fabric of our communities and wrecked social relations. These days, a successful Main Street is one that has a wig shop and a check-cashing office. It is sickening to see what we have become. Our popular entertainments are just what you would design to produce a programmed population of criminals and sex offenders. The spectacle of the way our people look —overfed, tattooed, pierced, clothed in the raiment of clowns — suggests an end-of-empire zeitgeist more disturbing than a Fellini movie. The fact is, it simply mirrors the way we act, our gross, barbaric collective demeanor. A walk down any airport concourse makes the Barnum & Bailey freak shows of yore look quaint. In short, the rot throughout our national life is so conspicuous that a fair assessment would be that we are a wicked people who deserve to be punished.” 

Old Testament doomsayers such as Ezekiel or Nehemiah could hardly have said it any better. Is anyone paying attention?

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Also, check out my newest blog – nevercomingback – for tales from my travels abroad.

Which Economy?

In 2012 Election, American Economy, Current events on October 10, 2012 at 12:59 am

English: Stop sign in Quebec Français : Pannea...

I know I’m waxing political the last couple of weeks, and neglecting my sworn duty to blog the entire New Testament this year; it is election season here in the US, after all, and it’s hard to escape the noise of it coming from every direction. I promise I’ll be back to my secular rants about the NT soon.

I’ve written about the apparent confusion of the language here in the US between conservatives and liberals, commented on how the word ‘entitled’ has been transformed from a criticism of the upper classes to a pejorative for the working poor, and lamented that some accept lies as facts simply because they have heard them hundreds of times. But in all of this confusion, there is one idea that is so muddy and unclear that one hardly knows what it means – or whether it means anything at all. In fact, I think we may all have quite a different idea in our heads when we hear the words ‘the economy’.

Studies of bi-lingual children have shown that the same word spoken in different languages can produce very different images in the mind. One study involved French-Canadian children between the ages of 4 and 7 years old who had one English-speaking parent at home and one French-speaking one, and could use both languages with equal skill. The children were given a piece of paper and some crayons and were asked by an instructor, in English, to “draw a dog for me, please.” The children happily complied. The drawings all looked very similar, as do most drawings done by children of this age. No surprises.

The next day, the same children were given the exact same instruction, but this time, the whole event was conducted in French instead of English, so the children were told to “dessinez un chien pour moi, s’il vous plait.” Again, all of the drawings looked very similar to each other – but to the astonishment of the instructors, they all looked decidedly different from the drawings of the previous day. The study was repeated with a variety of different objects and creatures school children might be familiar with – every time with the same surprising result.

It seemed that when the children were communicating in French, they were actually thinking differently than when they were speaking in English. Is it possible that ‘un chien’ produces one image in the mind, while ‘a dog’ conjures another? Can it be that not only do different cultures have different ideas kicking around in their brains, but also different ideals?

Or, that what one person means when he says ‘the economy’ isn’t the meaning I get when I hear him say it? This might explain why we are in so much disagreement about how to fix our ‘economy’.

I’ve never been rich, so I have a decidedly middle-class idea of what a good economy might look like. To me, a good economy means that everyone who wants to work can find a job, and that those jobs pay enough to provide the necessities of life. With a bit of hard work, other opportunities to obtain better jobs with better pay become available, and some of the niceties of life, such as a house or car, can be afforded as well. Over time, not only can one afford a few comforts and modest luxuries, but a modicum of financial security. Professionals and successful entrepreneurs can scale to even greater financial heights, but pretty much everyone can expect to exchange his or her labor for a typical American lifestyle. Government assistance is for those who have temporarily fallen upon hard times or who legitimately can not work.

The availability and quality of work is an integral part, in my mind, of a good economy. But what about for those who don’t work for a living, but instead depend on the accumulation of wealth and a positive return on investments? I’m guessing that ‘a good economy’ means something altogether different for them than it does for me.

Notice that how well Wall Street is doing doesn’t factor into my thinking about the economy, but it would be perhaps the single most important factor for someone with a huge accumulation of wealth. For me, I’d like to do something I enjoy doing, and pay the bills doing it. For a person who doesn’t need to work, doing what he wants to do and paying the bills while doing it is a foregone conclusion; what he wants is something completely different from what I want – and thus his idea of what is ‘good for the economy’ probably doesn’t line up with mine.

He wants a good return on his investment. I want a good return for my labor. He might be able to win some, lose some; I cannot afford to work at something that doesn’t pay.

So, when Mitt Romney and other conservatives tell us that tax cuts for the rich are good for the economy, we need to ask, “Which economy?” When the rich have more cash, they invariably invest more into the stock market. As more money pours in, stock prices rise – whether the companies selling shares perform better or not, more buyers than sellers creates an influx of cash for a finite number of shares, causing  prices to rise. Therefore, tax cuts are good for the stock market and those who invest in it. If this is your measure of ‘a good economy’, then saying that cutting taxes for the rich is good for the economy is true.

However, if your idea of a good economy looks like mine, then tax cuts are counter-productive. Teachers, policeman, firemen, and other government employees get axed when taxes are cut, which sends most communities into a downward spiral. Those who lose their jobs can no longer shop or buy, meaning that local businesses lose income as well, meaning they may have to lay off employees as well. All those folks without jobs means lower tax revenues next year, which necessitates even further job cuts.

Depending on how it’s managed, this can still be good news for shareholders. Those redundant employees might be forced to take lower-paying jobs than they had before, and low wages increase the bottom line for big business.

But notice the big difference – the investor class can do well in either type of ‘good economy’, when companies are expanding and adding employees or when they are cutting costs by letting them go. If he’s savvy, the investor can make even more money when stock prices go down.

The man who depends on his labor for his living is not in the same predicament. When the economy is bad, he suffers. Some may find a way to start a new business in bad times, but most end up making less money than they did before. There’s no upside to a downturn for the working man.

I’m afraid I don’t have much sympathy for what ails the rich, nor am I concerned about what benefits that class without benefiting others. Mitt Romney pays 15% or less on his millions, which grow while he sleeps, while I pay 30% on what I earn by the sweat of my brow. He can adjust his investment strategy to incorporate a downturn; I’m left with the ultimate tax break – I get to pay 0% if I have no income at all.

When you go to the polls in the next few weeks or drop of your ballot before election day, you’ve got to ask yourself  – which economy are you interested in?

Where Is The Evidence That Cutting Taxes For The Wealthy Creates Jobs?

In 2012 Election, American Economy, American Society on October 8, 2012 at 12:49 am

Before my conservative friends get all in a frenzy, remember that this is not a liberal website, but a secular one. Secularism, as defined by the man who coined the term, is “a form of opinion which concerns itself only with questions, the issues of which can be tested by the experience of this life.” In other words, one of the chief goals of secularism is to separate dogma from the debate; if you want to establish that something is true, repeating it hundreds of times might persuade the weak-minded, but has no effect whatsoever on those accustomed to basing beliefs on evidence.

Since Ronald Reagan, the conservative solution to every single problem has been to cut taxes. Known as ‘trickle-down’ economics in the ’80s (or ‘voodoo’ economics to George H.W. Bush, when he ran against Reagan in the 1980 Republican primaries), the assumption goes something like this:

Taxing those individuals who have realized the greatest financial success in our country is counter-productive, if not downright immoral. They are the movers and shakers, the job creators that keep the American economic system purring along like the finest luxury car. If we lighten their tax load, they will use that extra cash to do wonderful things, like build factories, hire employees, give to worthy charities, etc. This will, in turn, crank up the economy, and those new employees of those new factories will sing the praises of the ‘creators’ as they toil away for their weekly paycheck. Everybody wins – the rich benevolently bestow upon the lesser classes all the good things they have not the industry nor morality to produce for themselves.

Except – there’s absolutely no evidence that it actually works this way.

While every conservative politician will say ‘raising taxes hurts the economy’ or ‘cutting taxes creates jobs’, you’d be hard pressed to find a single study that supports this point of view – and hundreds graphs, charts, and studies that refute the idea.

Go ahead and do a Google search yourself – I’ll wait right here for a moment.

If you’re a conservative, you will obviously discount anything from the liberal sites like HuffPost or MSNBC.  But my search, “Do low tax rates create jobs?” turned up a great big ‘NO’ from pretty much every site I could find – at Forbes, here, and here; at US News and World Report; Business Insiderand a number of other sites not particularly noted for their liberal bias, all supported by data. In fact, the only ‘Yes’ answers I found were in the Wall Street Journal,  editorial commentary from conservative newspapers and blogs, and quotes from Mitt Romney. Not particularly in-depth economic analysis.

Take a look at these charts from the Center for American Progress:

This one shows that there is no correlation between the top marginal tax rate – what the richest Americans hypothetically pay – and the GDP. It does seem that lower tax rates flattened out the volatility in GDP, but didn’t cause it to spike upward. As a strong output generally indicates good employment conditions, it would appear from this chart that the effect of taxation on the economy was negligible.

This bar graph is astounding. It appears that when the top individual tax rate is ABOVE 39%, the number of jobs has grown around 2 to 2.5 percent. When the tax rate is lower than 39%, job growth has been minimal. How do conservatives account for this gap between what they preach and what the data shows?

And finally, a graph that shows growth rates rising when taxes are increased, plummeting when taxes are cut.

Now I’m not suggesting that raising taxes will automatically increase the number of jobs in this country – that’s something for honest, hard-working economists to decide. But a 5th-grader could look a these charts and see that the conservative mantra just simply isn’t true. Employment is a complicated thing, based on a lot of parameters. But one thing we do know is that when the economy is good, jobs are created. Raising taxes or cutting them may have a variety of effects, but creating or destroying jobs doesn’t seem to be one of them. Yet politicians are saying it hundreds of times a day.

Perhaps the idea of trickle-down or supply side economics would have been a valid economic theory in the 1950s. Back then, a successful man with excess cash on his hands had few investment choices. He could reinvest in his own business, help to start up another one, or invest in a stock market chock-full of good old-fashioned American companies. Any of those choices might have helped to improve the American economy, create jobs, etc.

But today, the world of finance and investment is radically different. So many financial vehicles today involve moving money around more than actually ‘investing’ it in to one place, and brokers and hedge fund managers often see a far better return in developing markets such as China or Russia. So the rich may still be job creators in a sense – it’s simply that the factories they are building and the jobs they are creating aren’t necessarily American. That money that wasn’t collected in the form of taxes, because of the idea that it would hurt investment, ends up building an Indian factory or collecting interest in a Swiss bank account.

One last thing that we know for sure about cutting the tax rates for the nation’s wealthiest (especially while fighting a couple of ill-conceived wars), is that it creates huge deficits:

I’ll admit that spending needs to be tackled as well – but there’s no question that if you take in less money, you’ll end up with more debt. What happens when governments face deficits? The have to fire policemen, teachers, firemen, and other government employees, meaning that unemployment rises.

So, as a secularist, I have to say that I’m still waiting for some evidence that cutting taxes for the richest Americans will help the economy. So far, that claim doesn’t make the cut. Got a chart or data to back up your claim? Share it with me.