Thursday, May 31, 2012

The drip, drip, drip of bad economic numbers.

"the governing elite . . . continue to flail about, believing in their self-anointed right to 'manage the economy' and plunder the private sector to keep their power and their government-centric world alive. . . The solution lies in restoring the balance between an over-sized public sector and the private sector. . . the repeal of overly burdensome and unnecessary regulations, and tax reform that broadens the tax base while lowering marginal tax rates. . . The time has arrived to curtail the power of the governing elite."

 --Charles Kadlec, Forbes  

Bad numbers summary:

➢ May was stock market’s worst month in two years.

➢ GDP revised downward to 1.9%.

➢ Consumer Confidence index down 4% in May.

➢ Only 75.7% of prime age workers (25-54) have jobs.

➢ Since recession began, 8.2 million fewer workers under 55 have jobs.

➢ Unemployment rate for teenagers: 25%.

➢ Recession recovery in jobs just 1.9% in 34 months.

➢ Recession recovery in GDP is worst of all 11 recessions in past 60 years, just half average rate of previous recessions.

➢ Record increase in number of people in poverty, approaching the 1960s levels that led to War on Poverty.

➢ Budget deficit and federal debt have reached their highest percentage since World War II, as has federal spending as percentage of GDP.

➢ During June 2009 to June 2011 “recovery,” median annual household income fell by 6.7%--greater decline than during recession itself.

➢ Standard of living has fallen longer and more steeply over past three years than any time since government records began 50 years ago.

➢ Housing crisis worse than during Great Depression, with home values one-third less than they were five years ago and home ownership rate lowest since 1965.

➢ Government dependency—percentage of persons receiving one or more federal benefit—highest in history.

➢ Real business nonresidential fixed investment (RBNRFI), which triggers economic growth and job gains, was highly positive under Clinton, healthy under Bush, but is negative under Obama.  

Bad numbers details:

Stocks in May had their worst month in two years. Government revised downward the U.S. GDP growth rate for the year’s first quarter from a weak 2.2% to a weaker 1.9%. The Consumer Confidence Index dropped a sharp 4% in May after falling slightly in April, suggesting to those who calculate the index that “the pace of economic growth in the months ahead may moderate."

Deeper down, one encounters more negative hard numbers. Peter Whoriskey, in the liberal Washington Post, writes that “the proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession,” reflecting the “profound and lasting effects” the downturn has had on workers. According to Whoriskey:
The percentage of workers between the ages of 25 and 54 who have jobs now stands at 75.7%, just 1% over what it was at the downturn’s worst. . . Before the recession the proportion hovered at 80%.
Mort Zuckerman, U.S. News publisher, expands on Whoriskey’s findings:
employment for those age 55 and up has risen 3.8 million since the recession began in December 2007, whereas the ranks of the employed in the under-55 age cohort have shrunk by 8.2 million. [So] as aging baby boomers remain in their jobs, youth employment shrinks; the unemployment rate for teenagers is now at 25%.
Harvey Golub is ex-CEO of American Express. In the conservative Wall Street Journal, Golub informs us that:
Over the past 60 years, there have been 11 recessions and 11 recoveries. Sadly, this recovery is near the bottom of all 11. Cumulative nonfarm job growth is just 1.9% 34 months into recovery, the ninth-worst performance [#10 and #11 were double recessions that would have had speedier recoveries, if each double were cut in two and measured separately] and well below the average job growth of 6.5%. Cumulative GDP growth is just 6.8% 11 quarters into this recovery, less than half the average (15.2%) and the worst of all 11.
Peter Wehner, in the conservative journal Commentary, offers a grand summary of bad economic news, some familiar, but much new to me:
during the Obama presidency the number of people in the U.S. who are in poverty has seen a record increase, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty. In addition, the budget deficit and federal debt have reached their highest percentage since World War II. The same is true when it comes to federal spending as a percentage of GDP. During the post-recession period from June 2009 to June 2011, the median annual household income fell by 6.7% – a more substantial decline than occurred during the Great Recession. The Christian Science Monitor points out, “The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the U.S. government began recording it five decades ago.” The housing crisis is worse than the Great Depression. Home values worth one-third less than they were five years ago. The home ownership rate is the lowest since 1965. And government dependency, defined as the percentage of persons receiving one or more federal benefit payments, is the highest in American history.

There’s a less known, but equally disturbing, statistic—the rate of real business nonresidential fixed investment (RBNRFI). Louis Woodhill, writing in Forbes, has the details. The capital gains tax cut that took effect on January 1, 1997 caused RBNRFI to grow by 38.6% during the first three years of Clinton’s second presidential term. Over the same period, real GDP increased by 14.3%, and total employment increased by 5.2%. During the comparable period of Bush 43’s second term, the increases were RBNRFI: 22.7%; real GDP: 7.8%; total employment: 4.4%. During the first three years of Obama’s term, however, the figures were disastrously worse: RBNRFI: -6.6%; real GDP: 1.2%; total employment: -1.8%.

Joel Kotkin is a geographer at Chapman University. He offers a look at troubles in his state—our largest and often our national trend-setter—California:
[Governor Brown’s] November ballot initiative . . . would primarily [tax] those whom Democrats call "millionaires" (i.e., people who make more than $250,000 a year). [Yet] people who are at the very high end of the food chain, they're still going to be in Napa. They're still going to be in Silicon Valley. They're still going to be in West L.A. It's really going to hit the small business owners and the young family that's trying to accumulate enough to raise a family, maybe send their kids to private school. It'll kick them in the teeth.
According to Kotkin, upwardly mobile families are fleeing in droves. As a result, California is turning into a two-and-a-half-class society. On top are the "entrenched incumbents" who inherited their wealth or came to California early and made their money. Then there's a shrunken middle class of public employees and, much farther below, a permanent welfare class. Today about 40% of Californians don't pay any income tax and a quarter are on Medicaid. The welfare recipients, Kotkin emphasizes, "aren't leaving. Why would they? They get much better benefits in California.”

Kotkin's summary: "the state is run for the very rich, the very poor, and the public employees."

And Obama wants to bring to the nation Brown’s (dare we say?) Californication of the upwardly mobile?! As Golub says:
The "animal spirits" so necessary for a true recovery have been dampened by this administration's policies and rhetoric. . . The president has said, over and over again, that he wants to increase taxes on businesses—small and large—and on financially successful individuals. He doesn't quite [use those words], but that is the effect.

Monday, May 28, 2012

Capitalism or Socialism--Your Choice

“our rugged individualism and our healthy skepticism of too much government. . . fits well on a bumper sticker. But here’s the problem: It doesn’t work. It has never worked.”

--Barack Obama

There’s more from the leader of the world’s #1 market economy. Writes Debra Saunders, house conservative at the San Francisco Chronicle,
The president explained that the goal of private investment is to "maximize profits," whereas a president's job is to make sure that everyone has "a fair shot" and that everyone pays his or her "fair share" of taxes. That's the problem with Obama; he thinks he's the fairness czar. He didn't say that a president is supposed to create an environment that nurtures business success. He said a president is supposed to make sure that nobody walks away with too much.
In his Forbes article “Is It Within Bounds To Ask: Is Obama A Socialist?”, conservative Paul Roderick Gregory points to a
remarkable overlap between Obama’s electoral platform and the Party of European Socialists, which represents leftist and socialist parties in the European parliament. . . French socialist Francois Hollande’s and Obama’s platforms are virtual carbon copies, and Hollande is quite open about and proud of being a socialist.
Obama brings to the table a deep distrust of free enterprise and a belief in government as the solution to most problems. . . Obama should make his health care reform a centerpiece of his campaign rather than pretend it does not exist.
Gregory is right to note that socialism is still a bad word in the U.S., connected in American minds more to Soviet-style Communism than to Western European social democracy. It’s the latter force that today so attracts liberal Democrats, including Obama. Rather than re-educate the country on the benign nature of democratic socialism, however, Democrats prefer to avoid the label “socialist” entirely, even though doing so is inaccurate.

Europe is a mixed economy, top-down with government in charge, and with a titanium safety net that includes universal health care. Democrats love old Europe, while Republicans are wary.

And worried.   Conservatives want a different America. They oppose democratic socialism. Here’s conservative David Brooks of the New York Times:
Private equity firms are not lovable, but they forced a renaissance that revived American capitalism. The large questions today are: Will the U.S. continue this process of rigorous creative destruction? More immediately, will the nation take the transformation of the private sector and extend it to the public sector? While American companies operate in radically different ways than they did 40 years ago, the sheltered, government-dominated sectors of the economy — especially education, health care and the welfare state — operate in astonishingly similar ways.
And Brooks again:
The American founders . . . dispersed power to encourage active citizenship, hoping that as people became more involved in local government, they would develop a sense of restraint and responsibility.
And Thomas Sowell, at Stanford’s Hoover Institution:
When the people want the impossible, only liars can satisfy them. . . if the people as a whole cannot afford something, neither can the government.
I think conservative Washington Post columnist George Will best captured the socialist state’s entitlement mentality when he reported:
Campaigning recently at Bradley University in Peoria, Ill., Romney warned students about their burden from the national debt, but when he took questions, the first questioner had something else on her peculiar mind: “So you’re all for like, ‘Yay, freedom,’ and all this stuff and ‘Yay, like, pursuit of happiness.’ You know what would make me happy? Free birth control.”
Conventional Paul-Krugman/New York Times social democracy thinking teaches us that big government’s greatest achievement was spending our way out of the Great Depression during World War II. So now comes Forbes’ Steve Forbes' attempt to put that shibboleth to rest:
Free markets, not big government, are the true source of America’s incredible strength. They enabled us to win World War II, thereby saving Western civilization.
It’s easy to say, “Build planes in an assembly-line manner, like cars.” A typical car in those days had 15,000 parts. The B-24, which Ford eventually produced in prodigious numbers after endless difficulties, had 488,193 parts, which broke down to 30,000 components. The B-29, a plane conceived in the 1930s as a dreadnought in the sky, was a horrific nightmare to bring to reality. The engines alone required 900 modifications. The B-29 was slated for cancellation before [GM’s Bill] Knudsen [picture] was brought in to save it. Doing so broke his health.
Who knew? Bill Knudsen, not big government.
So Romney, not big government.

Sunday, May 27, 2012

More “Big Flip”: Democrats “Work with” Wealthy

"High tax rates in the upper income brackets allow politicians to win votes with class warfare rhetoric, painting their opponents as defenders of the rich. Meanwhile, the same politicians can win donations from the rich by creating tax loopholes that can keep the rich from actually paying those higher tax rates -- or perhaps any taxes at all."

--Thomas Sowell, Stanford’s Hoover Institution

Sowell is being polite. Those he calls “politicians” are class warfare Democrats who both attack and take money from the rich. Jay Cost of the conservative Weekly Standard wrote more bluntly that Democrats are “a party whose leaders simultaneously press the case for ‘fairness’ while giving unfair access to wealthy donors.” According to Cost:
the Democratic party. . . has become the opposite . . .of what it claims to be today. [Its model is old] Tammany Hall, and [Tammany’s] coziness with Wall Street . . . Tammany [won] through the support of the Irish, [and] by keeping its financial sponsors on Wall Street happy. . . That is the modern Democratic party in a nutshell.
Cost’s reference to Tammany Hall’s “Irish” alludes to the Democrats' earlier base among ethnic minorities, including Italians, Poles, and Jews. Today’s Democratic base includes America's non-white—25% of the voters and rising, 80% of whom support Obama. Combined with the paid-off rich, the “modern Democratic party in a nutshell.”

Cost added that the party’s embrace of the privileged “has basically been the way of the world for the last 30 years.” What? It’s been the way of the world forever. The rich make their way under whatever system governs.

Since the old GOP collapsed under Herbert Hoover in 1932, the elite has been playing ball with Democrats. Cost corrects the record in a more recent article:
the modern Democratic party. . . was founded by General Andrew Jackson – “Old Hickory” as they used to call him – back in the 1820s to fight political privilege, on behalf of the “humble members of society,” as Jackson called them. Old Hickory was a straight shooter [who] hated the idea of the government playing favorites.

But . . .Franklin Roosevelt transformed the Democratic party . . . using the power of big government to buy off special interest groups, like the big city machines and organized labor. . . later Democratic presidents [added] African Americans, government workers, environmentalists, feminists, corporations, gay rights groups, trial lawyers and more . . . And today [Democrats have] become [the] party of special interests. . . benefit[ting] privileged groups.
Back then: the Irish + Wall Street = power.  Now: minorities (including unmarried women) + money = power.

Cost also recognizes the deep divisions we see in American politics today stem from an economy so weakened that Democrats are no longer able to seize enough wealth to care for their base constituencies:
The American political process is starting to break down because of major changes to the political economy of this country. For half a century after World War II, the economy grew at such an incredible pace that we could have low taxes, high social welfare benefits, and a low deficit. . . there could be bipartisanship [because] economic growth bankrolled . . . compromises. It had very little to do with the foresight, courage, or moderation of the pols in Washington. They were just riding the wave generated by the private sector.
Again and still: the economy, stupid.

Tuesday, May 22, 2012

“The Big Flip”

Todd S. Purdum, writing in the slick, liberal Vanity Fair, has quite rightly proclaimed that “over the past half-century, the two parties completely switched roles, with the G.O.P. turning into rebels and the Democrats defending the status quo.”

As Purdum says, Republicans have become
a radical insurgency bent on upending the prevailing practices of the national government . . . For most of its history the Republican Party was something else entirely: a steward of the status quo. It was the Democrats who were historically on the barricades in the fight for radical change. But the Democrats these days have turned into the stewards—beleaguered defenders of the government and country we have evolved into. The two great national parties have. . . switched roles . . .—the Big Flip—is . . . a substantial reality and it’s substantially complete.
Purdum’s attempt to characterize today’s GOP is way wide of the mark. According to Purdum, Republicans have moved so far to the right today they wouldn’t nominate either Ronald Reagan or Abraham Lincoln. It would seem that liberals—Purdum anyway—have so refashioned Reagan into a tax-raising moderate, and Lincoln into a big government hero, that they believe Republicans no longer worship the two. Wrong. Really so very wrong and so deeply removed from reality.

On today’s Democrats, Purdum says they are fighting “simply to stay in the same place.” They are “status-quo oriented, centrist protectors of government.” Right. And the reason Republicans aren’t is because our status-quo government is ruining America. We cannot afford today’s entitlement society with its annual deficits over $1 trillion, with federal government spending at 25% of GDP and rising, and with, according to House budget chair Paul Ryan, 70% of Americans getting more back from the federal government than they put in.

The two parties have flipped. Here’s what remains the same: those fighting to preserve the status quo are on history's losing side.

Friday, May 18, 2012

Regenerating America: the Next 35%

Bringing America back means caring about those just down from the top—the next 35%—those who are trying. If the next 35% succeed, so too can those below them, in a cascade, not a trickle.

Last year, we found that the top 20% (quintile) of U.S. households actually contains, because of larger households at the top, 25% of our population. We also found the top group makes up 26% of the electorate. Though this better-educated 25% tends to be liberal and vote Democratic, Republicans and conservatives are also present in the top quarter. Living there is truly competitive, with many options available. Educated, employed, involved, successful—those living at the top have a good life.

What about the bottom 75%? I believe lack of education—good education, any education—limits their options. Here are today’s educational facts (for the population over 25):

➢ we have an underclass of 12%--those who didn’t even graduate from high school;

➢ those who have achieved educational success—graduating from college—make up 30% of the population;

➢ an additional 27% have some college education, including 10% with associate (junior college) degrees, and;

31% of the population are high school graduates only.

Below the top 25%, the “next 35%” then include some college graduates--those doing less well economically--plus most of those who have education beyond high school, as well as some high school graduates with higher ambitions.

This group can benefit greatly from what the New York Times’ Tom Friedman writes about in his latest column. Friedman has found that online courses from top universities are wildly popular, highly accessible, and cheap, making superior education much more widely available. So we have an immediate, welcome, high technology payoff.

Let the upper class marinate in their club-like, ivy-covered educations. Achievement-oriented people from poorer families now can receive the benefits of a top education at a fraction of the cost.

Success, of course, is marked by so much more than educational attainment. We used to stream students by academic achievement and aptitude scores. Now we know humans possess many varieties of intelligence. Educational choice, multiple educational opportunities, enable each person to triumph in pursuit of the dream most inspiring to that individual.

What’s required is personal responsibility. That’s something beyond “Life of Julia” feeding at the public trough.

Thursday, May 17, 2012

Stock Market Tailspin

Stocks continue their losses, down for the 11th time in 12 sessions. The FOX Index, which reached its all-time high of +1,935 just 16 days ago, has dropped to a modest +761 (see chart), closer to a negative “unhealthy” than it is to its May 1 peak (the Index tracks the distance from 15,800, a “healthy” market total of a Dow of 12,000, an S&P 500 of 1,300, and a NASDAQ of 2,500). The S&P 500, at 1,304, is just 4 points from sinking below its “healthy” minimum.

The market's problems are Greece, related bank problems in Spain, Italy, and Portugal, JP Morgan’s $3 billion in trading losses, and other economic problems at home. But Facebook’s initial public stock offering (IPO) tomorrow could set off a welcome market buying spree.

America’s hagiographic television: NBC, CBS, ABC, CNN, PBS

journalism is produced in “an adversary environment where the goals of the reported inherently conflict with the goals of the reporter and the reader. It is this daily conflict that gives concrete importance and meaning to the First Amendment, to freedom of the press. Without that freedom there is no conflict, and without that conflict there is no truth.”

 --Ben Bradlee, executive editor of The Washington Post (1974)

Russian television (RTV) is now available in English in hotel rooms overseas, right alongside BBC and CNN. It looks quite professional, much like the other networks. Of course the news is focused on Russia (as CNN emphasizes the U.S.), and of course President Vladimir Putin is presented in a favorable light. Under its slick veneer, RTV is hagiographic television.

Back in the ex-U.S.S.R., there are three major Russian TV networks. Two are owned by the state, and the third, commercial NTV, is a Gazprom-owned network. But Gazprom in turn is majority-owned by the state. According to a study by Professor Sarah Oates, University of Glasgow, most Russians believe news reporting on their three national channels is selective and unbalanced, but view this as appropriate. The people Oates interviewed made it clear they believe state television should provide central authority and order in troubled times.

You know what? American TV today looks a lot like RTV. News shows present President Obama and his family in a hagiographic manner; they are selling the Obamas to their audience. It’s as if the state actually owned NBC, CBS, ABC, CNN, and a majority, not just a piece, of PBS. This happens to Democratic presidents only, and has since Newt Gingrich shut down the Federal government in 1995, turning the media from an adversary to an advocate for then-President Clinton.

We’ve come a long way from where Ben Bradlee had the Washington Post positioned in 1974, a paper hard on presidents of both parties.

America in Decline

Financial Times columnist Edward Luce has written a new book called Time to Start Thinking: America in the Age of Descent. Saying “America-Descent” has “received well-deserved acclaim and recognition not only for its superb reporting of the on-ground reality of America's current economic crisis but also because it is an unflinchlingly brave book,” Foreign Policy’s latest issue features an interview with Luce, whom the magazine tells us has “followed in [Democracy in America’s Alexis de] Tocqueville's footsteps.” High praise indeed.

So what does Luce really think of us? First, Luce’s more defensible assertions:

Ø Since 2009, “very, very few jobs were created and . . . the higher value-added jobs tended for the most part to be replaced by lower paying ones.”

Ø “the education problem -- the problem of K through 12” is “a portal onto America's competitiveness problem. But it's also a cultural problem.”

Ø “American values, the first- or second-generation immigrant spirit [of] a Tiger Mom or in some Italian family in Brooklyn in which parents force kids to study at night is a truly American value.”

Ø “the swing towards celebrating the child, elevating the child, over-praising the child, boosting constantly at every opportunity the self-esteem of the child, assuming the child is a fragile little eggshell that can be broken at any moment, is something quite un-immigrant and therefore quite un-American, and also a great disservice to the child.”

Ø “Casinos, sports arenas, and convention centers don't generate income for those who've lost their jobs. The casino is a particularly apt metaphor for the intellectual bankruptcy of thinking, because, if done well, you can generate short-term income and tax revenues. But the costs are [only] pushed back a little bit further.”

Unfortunately, more of what Luce says about us seems questionable:

 Ø “there is a lot of evidence in studies of other economies that . . . you have gross, Latin American-style inequality”

FACT: The World Bank’s ranking of nations by Gini coefficient, which measures income inequality, places the U.S. at 41 more equal than any Latin American country, closer to New Zealand, Australia, the U.K., and Italy than to Peru, closer to Switzerland and Ireland than to Ecuador, closer to Canada, Belgium, and France than to Costa Rica, closer to the Netherlands, Luxembourg, and South Korea than to Chile and Mexico, as close to Germany as to Brazil, and closer to Japan at the top than to Bolivia, 9th from the bottom.

 Ø “The most powerful piece is also the most recent, and that is the distribution of growth since 2009 [from a] paper by Saez and Piketty from Berkeley University”

COMMENT: “Berkeley” University is a diploma mill that produces no serious academic studies. Luce most likely meant to say the University of California (Berkeley).

Ø “As America's inequality is growing to Latin American levels, social mobility has fallen to sub-European levels.”

 FACT: A 2010 OECD study of social mobility ranked (chart, p. 7) the U.S. 10th of 12 measured developed nations (not dead last), just behind France and ahead of Italy and the U.K. Germany at 7th has a larger population than any nation ranked above it; Germany’s social mobility score was just 31% better than the U.S.’s. Within the U.S., a Minneapolis Federal Reserve study of household income by quintile over 2001-2007 found that 44% of those in the bottom 20% left their quintile within 6 years, 61% of those in the 4th 20% left, 58% of those in the 3rd 20% left, 55% of those in the 2nd 20% left, while 34% of those at the top dropped down—a fair amount of social mobility.

Ø “People tend to make a fetish out of Washington and blame Washington on itself, as if somehow it is just in suspension from the society that elected it. But . . . my skepticism about how easy it will be for America to rejuvenate itself stems from that fact that Washington[‘s problems are] deeply rooted in trends beyond the Beltway, in the real America.”

COMMENT: Defending Washington at the expense of the American people scores points only with our country’s national elite and their Democratic Party supporters.

Ø “if you have a proper understanding of American history and you know what role government played in American development and in American capitalism, then [what’s happening] isn't fine at all.”

 FACT: Before the New Deal 80 years ago—that is, during America's first century and a half—private initiative built our nation far, far more than did our small Federal government.

Ø “what stops democracy from [working] in America? . . . we go back to the world of Latin Americanization of American society; [b]ut we also go back again to the American people.”

COMMENT: British observer Luce once again falsely “Latin Americanizes” our country; once again appeals to our elite at the expense of the masses. It's considered "unflinchlingly brave," apparently, for a foreigner to be able to insult ordinary Americans. Sad, sad, and certainly no Tocqueville lauding a free people.

Tuesday, May 15, 2012

Primitive Communism’s Appeal

“In the end, as virtually every serious political thinker from the dawn of time has agreed, republics do not long survive without virtue — in the people as a whole, and among the powerful.”

 --Walter Russell Mead, American Interest  

“to each according to his need”

--Karl Marx (1875)  

New York Times columnist Ross Douthat, along with many other conservative commentators, is intrigued by the Obama campaign’s propaganda slide show “the Life of Julia.” Douthat says “Julia’s” life offers a
sweeping vision of government’s place in society, in which the individual depends on the state at every stage of life, and no decision — personal, educational, entrepreneurial, sexual — can be contemplated without the promise that it will be somehow subsidized by Washington. The condescension inherent in this vision is apparent in every step of Julia’s pilgrimage toward a community-gardening retirement.
Of course nothing in the slide show even hints at how all these government programs will be paid for. But, Douthat warns,
in an increasingly atomized society, where communities and families are weaker than ever before, such a vision may have more appeal — to both genders — than many of the conservatives mocking the slide show might like to believe.
People—voters—long for security, and government is ready to promise it, whether or not it can deliver.

More surprising, perhaps, than Douthat’s sympathy for “Julia” is Lee Harris’ defense, in the pages of the conservative American Enterprise Institute’s journal American, of David Graeber, dubbed the “Anti-Leader” of “Occupy Wall Street.” Harris calls Graeber a “brilliant economic anthropologist;” the author of Debt: The First Five Thousand Years. Harris says the central idea in Graeber’s book is his claim that
communism should not be seen as an alternative system to capitalism[,] but rather as a mode of social life that has always been present and that is a fact of life even in the most advanced capitalist nations, such as the United States. Or, to put it as Graeber likes to: We are all communists already.
As Graeber writes,
People of all cultures, including our own, invariably practice the communism of everyday life when dealing with their family and close friends. A mother does not expect her child to pay her for her baby-sitting services. A brother does not rent out his baseball glove to his brother on an hourly basis. If a friend is sick and needs something from the store, we pick it up for her and would never think of asking for gas money in return. . . during a crisis, such as a natural disaster. . . people will voluntarily, even cheerfully, extend a helping hand to those who are most in need of one.
Harris notes two big obstacles should prevent voluntary communism from actually working. One is criminals using violence to seize what they want. Graeber recognizes violence does exist, but so too do laws and police to control criminal behavior. The other obstacle is freeloaders taking what they are offered, but giving nothing back in return. Freeloaders are beyond law’s reach—they commit no crime, but ultimately, their actions bring down a system based upon voluntary reciprocity. Graeber’s book unfortunately fails to grapple with the freeloader problem.

The answer, ironically for Communists who believe religion is the opiate of the masses, may be religion. Graeber is the unusual radical who is positive about religion. He recognizes religions rely on individuals who live the spirit of everyday communism, with their own shining example inspiring others to do the same.

Thursday, May 10, 2012

Austerity in Western Europe?

"Socialist governments traditionally do make a financial mess. They always run out of other people's money."

 --Margaret Thatcher (1976)

Liberal E.J. Dionne at the Washington Post is apparently a disciple of Nobel-prizewinning economist Paul Krugman.  Krugman, from his lofty perch at the New York Times editorial page, has blessed America with the word “austerity”—budget cutting instead of Keynesian deficit spending to boost economic output. Now Dionne tells us:
it's conservatives who want to follow the Western European path of austerity that voters in France and Greece rejected last weekend. The Obama administration, by contrast, has chosen a distinctly American path that kept austerity at bay. As a result, the American economy has climbed out of the Great Recession more quickly than most of Europe. Had Obama accepted the right wing's assertions that cutting government is the one and only route to prosperity, we would have gone the way of Britain, which is slipping toward recession again. . . Obama's thoroughly moderate economic policies are an excellent example of a practical American exceptionalism. [emphasis added]
Setting aside his assertion--challenged  here--that Obamanomics is actually working, Dionne is going beyond Krugman to claim that Obama, like Krugman and Dionne an unabashed admirer of European democratic socialism (see Obamacare), is in fact the polar opposite of our European friends—he is an American exceptionalist! What hogwash, a Goebbles-like “big lie” except Dionne is just playfully pulling our leg.

Michael Tanner, in the conservative National Review, gives us a more objective slant on what’s actually happening in Europe. Most of the “austerity”—the budget cuts—are small, set in the future, and easily overwhelmed by tax increases on the rich and even new spending. The European record is a chronicle of the very soak-the-rich tax hikes Krugman, Dionne, and Obama so love. Country by country:

➢ Portugal . . . pumped more than €2.2 billion into [its] economy in 2009, 1.25% of its GDP. The result[:] economic growth stayed negative, while unemployment rose by roughly 3 million.

➢ France [imposed] a 3% surtax on incomes above €500,000, an increase of 1% in the top marginal tax rate (from 40% to 41%), and [halted] automatic indexation of tax brackets for inheritance, wealth, and income taxes. [It hiked] the corporate income tax on businesses with revenue of more than €250 million, . . . the capital-gains tax, and [closed] several corporate tax breaks. And [t]here was an increase in the Value Added Tax (VAT) and the excise taxes on tobacco and alcohol.

➢ Britain [hiked] the personal income tax to 50% for those earning more than £150,000 a year[, which decreased] income-tax revenues by £509 million. . . British government spending still consumes more than 49% of GDP. Government spending actually increased by £59.2 billion from 2009 to 2011.

➢ Spain imposed a “wealth tax” on citizens with €700,000 of assets, and a 7% income tax on those earning more than €300,000 per year; capital-gains taxes were also hiked.

➢ Italy imposed a “Solidarity Tax” of 3% on all taxpayers who earn more than €300,000.

➢ Greece increased taxes by nearly twice as much as it cut spending, including a 5% surtax on the wealthy.

Tanner also notes that governments boosted the infamous European VATs (value added taxes), along with fuel, alcohol, and tobacco taxes, nearly everywhere, all of which hit the average Jacques. Tanner concludes,

It should come as no surprise that all those new taxes, combined with a lack of spending restraint, has threatened to throw Europe back into a double-dip recession. Is it any wonder that French, Greek, and British voters were anxious to “throw the bums out”? 

So, setting the record straight, Europe did what Obama wants by taxing the rich, it didn’t work, and Europe responded by voting their leaders out.

Wednesday, May 09, 2012

Yet another weak jobs report.

American employers added 115,000 workers in April, the smallest increase in six months. Bloomberg News-surveyed economists had estimated a 160,000 advance. The March total, however, was revised upward from 120,000 to 154,000. At the same time, the jobless rate unexpectedly fell to 8.1%, but only because more people left the labor force, adding to concern the economic expansion is cooling. The unemployment rate has exceeded 8% since February 2009, the longest such stretch since monthly records began in 1948. Average hourly earnings were unchanged from the month before, the first time without a wage increase since August, and the average employee workweek held at 34.5 hours. Growth in both figures would have suggested future job gains.

Stocks are down, reflecting the negative jobs news. The FOX Index, which defines a “healthy” market as above 15,800—a total formed from adding a Dow of 12,000, an S&P 500 of 1,300, and a NASDAQ of 2,500—is positive at +1,325 (chart), but has dropped over 600 points from its all-time high of +1,935 reached on May 1, when each component had topped the next level, meaning a Dow over 13,000, an S&P over 1,400, and a NASDAQ over 3,000. Currently, the numbers are down to Dow 12,835, S&P 1,355, and NASDAQ 2,935.

Nevertheless, our chart measuring progress toward Obama’s unemployment goals (below) continues showing he likely will be able to claim (very slight) net job growth by the time the pre-election October jobs report comes out.

Partly because Obama will be able to claim net job growth, conservatives are increasingly focusing on America’s awful labor force participation rate. That rate, which documents the total share of working-age people actually in the labor force, has fallen to 63.6%, its lowest level since December 1981.  That was a time when women were still joining the workforce, thereby sending the labor participation rate higher. Now, as the chart below shows, the participation rate is moving ever more depressingly lower.

It’s our labor force’s frowny face.