The Economics of the Black Live Matter protests why Republicans need to get the log out of their own eye

Much as it pains me to write it, I agree with Mark Thiessen on two points:

• First, I do think Republicans should follow the lead of their only declared African American candidate and engage the #Blacklivesmatter movement before protesters disrupt more rallies. 
• And Second, I also think it would be good if those same protestors show up at more Republican rallies.

But that’s where our agreement ends.  I don’t think the “over the top” tactics of the movement will backfire – in its day privileged, powerful whites called the Montgomery Bus Boycott an over the top uncivil approach to civil rights – and yet it crippled a major American city and led to the Civil Rights Act  whose impact is still being felt today.  Those who are threatened by protest movements, whether Black Lives Matter or Occupy – always say the tactics are uncivilized and will backfire – even though those same tactics are the least radical response a marginalized, oppressed community can deploy (see Riots – Watts for the more violent approach to the same problem).

I also disagree that President Obama’s policies are the reason African Americans (and poor whites, and Latinos and Asians) are in the straights they are.  Minority and impoverished communities are reaping 30 years of Trickle Down Economics write both large and small, and it hasn’t worked.  The 300 to 1 ratio often quoted in the news media as the return to COE’s vs. return to employees in our “recovery” is NOT related to anything the President has done – rather it reflects both corporate boardroom choices, and the Republican insistence on deficit funding wars (while reducing domestic spending to allegedly pay for them) along with the idea that tax cuts for the rich and corporations will spur growth (which they haven’t) – with a healthy side order of “free trade agreements” supported by BOTH parties that have been nothing more the shell games to move American manufacturing to cheaper countries – gutting the middle class and all but destroying private sector unions.  Supply Side economics has certainly benefitted the American rich who are overwhelmingly white; it has done absolutely nothing to benefit the poor – who are more often than not people of color.

Further, Thiessen sidesteps completely the fallout of all the domestic cuts he and his Party of Record have supported – namely the reduction in services for poor people who want to climb out of poverty.  Thiessen talks about how Republican should create equal opportunity for everyone to succeed economically.   Which would be great if Republicans would actually fund job training programs, daycare, effective public transportation, drug rehabilitation, and quality public education which are all needed services if our Nation’s poor will ever hope to compete on the economic stage. Absent that critical support – a strong recognition that Black Lives Matter if ever there was one - Mr. Thiessen and his ilk are blowing so much more smoke to hide the true intentions of their oligarchic political establishment.  Republicans need to address the log in their own eyes before they shout again about the spec in someone else's.

Say What You Will - the Semantic Art of Running Away From Real Economic Consequences.

Modern political discourse – or what passes for it anyway – seems to be mostly about semantics, and not really about substantive discussion and debate to find solutions.  Today’s 113^th Do Nothing Congress (as I hope History will remember them) spends more time parsing what is “revenue” and what isn’t then they do actually proposing policy and legal solutions to the nation’s problems (like 40 plus votes to repeal the Affordable Care Act in the House without a single vote on an alternative).

So, along comes Robert Samuelson in the Washington Post to politely suggest that the final piece holding us back from prosperity in our country is the semantics of what to call our economy. 

Among our problems is a failure of economic language. We lack the words and concepts to describe observable reality. By conventional wisdom, the Great Recession is long over. “Recession” connotes shrinking output. “Expansion” signifies the opposite. That’s how the National Bureau of Economic Research, a group of academic economists, defines business cycles. Following this logic, the bureau determined the economy stopped contracting in mid-2009. Yet, most Americans — 53 percent, says a recent National Journal/Allstate survey — think we’re still in recession, by which they doubtlessly mean “bad times.”

It’s a tempting argument – if our “real” problem economically right now is we don’t know what to call our current decline (if it is even a decline), then the clear solution is to present different language.  The implicit benefit is that if we can better describe the “real world” as we see it, then we can get at those mysterious “causes” that keep Americans from being “confident” and recreating the post-WWII growth era into which so many of them were born.  Samuelson then postulates that if we got the terminology right, we’d be able to overcome a condition in which:

The problem might not be a dearth of investments so much as a surplus of risk aversion. For that, candidates abound: the traumatic impact of the Great Recession on confidence; a backlash against globalization, reduced cross-border investments by multinational firms; uncertain government policies; aging societies burdened by diminishing innovation and costly welfare states.

It all sounds cozy and nice, right?  The problem is that Mr. Samuelson, like so many on the Right side of the political aisle (where Mr. Samuelson sits his own protestations not withstanding), is unwilling to grasp a fundamental – and easily described truth of our current economic situation:

 The problem, then, is not machines, which are doing a great deal to boost productivity; the problem is that the benefits from increased productivity no longer accrue to workers. In a provocative paper earlier this year, Josh Bivens and Mishel argued that the gains for the richest 1 percent were due to “rent-seeking” behavior by CEOs and financial professions, not competitive markets. As John Kenneth Galbraith said, “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.” The newly minted rich want to blame robots for declining wages at the bottom and their innate superiority for their disproportionate share of the income. But these excuses mask their theft of productivity gains that rightfully belong to the rest of us.

Put another way, when real wages decline against spending power in most jobs as the increased “productivity” in the economy goes to a small group of investors (also known by the counter intuitive term “rentiers”) and isn’t spread across the workforce, that loss of productivity contributes to the further erosion of wages by driving down demand for goods and services.  It also contributes to stampedes at Walmart on Black Friday in which people are killed for deep discounts on consumer goods.  Powerful economic elites probably lament the disorder that all this creates (hence their walled communities and bulletproof houses) but at the end of the day they seem to think many of those at the bottom have earned it.  

The ultra simple version is you can't solve demand side economic problems with supply side approaches or solutions.  But we've been trying ever since David Stockman helped President Reagan create the now infamous (and discredited by Stockman no less) Voodoo economics approach.

Cast against all this – and interestingly so given the professed Catholicism of so many conservative pundits and politicians – are the recent writings of Pope Francis.  Ever the Jesuit (and thus dedicated to the state of the nation’s poor and down trodden as few others are) his recent The Joy of the Gospel calls all this out for the heartless and discordant pursuit it is:

The great danger in today’s world, pervaded as it is by consumerism, is the desolation and anguish born of a complacent yet covetous heart, the feverish pursuit of frivolous pleasures, and a blunted conscience. Whenever our interior life becomes caught up in its own interests and concerns, there is no longer room for others, no place for the poor.

As E. J. Dionne reminds us in today’s Washington Post:

His apostolic exhortation, “The Joy of the Gospel,” is drawing wide and deserved attention for its denunciation of “trickle-down” economics as a system that “expresses a crude and naive trust in the goodness of those wielding economic power.” It’s a view that “has never been confirmed by the facts” and has created “a globalization of indifference.” Will those conservative Catholics who have long championed tax-cutting for the wealthy acknowledge the moral conundrum that Francis has put before them?

But American liberals and conservatives alike might be discomfited by the pope’s criticism of “the individualism of our postmodern and globalized era,” since each side defends its own favorite forms of individualism. Francis mourns “a vacuum left by secularist rationalism,” not a phrase that will sit well with all on the left.

Mr. Dionne is right, of course, that many so-called Liberals have also made their beds with the gods and goddesses of the Market – how else to explain our current “Democratic” President’s interest in placating Wall Street (by not prosecuting them for their crimes in the court of public opinion, to say nothing of the actual courts).  Mr. Dionne goes on:

The difference is that a concern for the poor and a condemnation of economic injustice are at the very heart of Francis’s mission. “In this system, which tends to devour everything which stands in the way of increased profits,” he writes, “whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.” Can you imagine an American liberal who would dare say such things?

Well, as a liberal who has written similar words, why yes, Mr. Dionne, I can imagine it very well thanks you.

But to point is still well made – we as a Nation, a society, and as individuals do indeed have the language we need to accurately describe the world in front of us.  We don’t need to adopt the cumbersome semantic twisting of those who refuse to acknowledge the failures of clinging to economic myths simply because those myths both bolster our socio-cultural myths and shield those who have worked actively against the coming to fruition of our full potential personally and nationally.  If a Jesuit Pope from South America can accurately call out America’s ever failing supply-side experiment, using readily available words (and not in his native language), why can’t you Mr. Samuelson?

A Trickle Down Econimic Question for Conservatives

So, dear economically conservative fellow citizens, this liberal asks a fundamental, fact based question - if CEO pay went up 16% last year and real labor wages continue to decline (in inflation adjusted dollars) as is widely reported in the MSM these days, how is trickle down economics working, exactly?

I'll be waiting for an answer . . . .

Supply SIde Economics is SO Last Century - And Why That's Bad for America's Economy

Milton Friedman and his Supply Side followers got precisely one thing right in their economic theory - money taken out of the economy in taxes is not readily available for private capitol uses.  Sure, that money then reenters the economy down stream as labor wages for government workers, and as purchasing by government agencies (which then creates other labor wages in other sectors).  But tax expenditures do, in fact, remove money from first order private economic activity.

And in Friedman's day, altering that balance MAY well have led to more capital investment, since the economy of his time was dominated by newly rising industrial manufacturing and more industrialization of farming and food production.  So he was potentially right - way back then - that a key to economic growth in recessions might have once been diverting tax revenue back to the private sector where there were incentives (increased private profits) to grow manufacturing capacity and hire more and better paid workers.

The problem for modern Republicans - who cling to his Supply Side theories as if they were inviolate Gospel - is that those theories fall apart in service oriented, demand driven economies that are founded on consumption and provision for services, and less so on manufacturing (even if manufacturing is needed somewhere to feed the consumption demand).  The theories aren't even applicable to rent seeking economies (and the ultra rich who participate in such economies), because as rents increase (i.e. as more profits are made on financial transactions in Wall Street, Derivatives markets and the like), economy can "grow" with fewer people actually doing work.

Thus, as we have seen since the Great Recession began, historically low rates of income taxation on top economic earners and corporations do NOT trickle down to increased labor wages for the rest of the economy, nor do they lead to more hiring even as the economy appears to "grow."  The reason is really very simple - there is a perverse or negative incentive structure in returning more tax revenue to private hands in this kind of economy because the more funds a rent seeking 1%'er has, the more rents he or she will seek, and the more he or she will seek to dampen competition for those rents.  In an economy that grows because labor wages grow, an increasing number of people will move up the ladder to a point where more of their income can also be rent seeking, driving DOWN the amount of money to be made in that sector of the economy by any one person or corporation.

So if you support Republican "slash and burn" tax policy, you're not only deflating government's size and ability to control markets (which are historically bad at self-regulation), but you are destroying middle and lower class economic opportunity in order to destroy competition for rents.  That's, by definition, the OPPOSITE of " a rising Tide lifts all boats."  And I wish Republicans would just come clean about it.

The Great Recession - tip of the economic iceberg

When the final history of the Great Recession of 2008-???? is written, I hope two key points will guide the narrative. First, the recession came about because the wealth of the nation was not equitably distributed, but rather collected in the hands of a conniving few, for whom controlling and maintaining that wealth became a business investment:

The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

Second, as our Nation struggles to lift itself out of a "jobless recovery" we have run head long into a type of inflation that is not amenable to "traditional economic solutions" nor is it driven by American consumption or supply and demand mismatches:

It’s not just that prices are rising — it’s that wages aren’t.

Previous bouts of inflation have usually meant a wage-price spiral, as pay and prices chase each other ever upward. But now paychecks are falling further and further behind. In the past three months, consumer prices have been rising at a 5.7 percent annual rate while average weekly wages have barely budged, increasing at an annual rate of only 1.3 percent.

And the particular prices that are rising are for products that people encounter most frequently in their daily lives and have the least flexibility to avoid. For the most part, it’s not computers and cars that are getting more expensive, it’s gasoline, which is up 19 percent in the past year, ground beef, up 10 percent, and butter, up 23 percent.

Rather, the capture of the political system by those wealthy few, for whom the status quo is a virtual economic requirement,has led us to a place where we can not address either wage stagnation, nor inflation caused by competition for consumer goods. Simply put, we as a Nation have traded our long-term economic and food security - and a decline in standard of living for nearly all Americans - for a oligarchical political system that protects the top 1% of Americans wealth. We made that trade explicitly, knowingly, because we were misled into thinking that the rising tide would indeed lift all ships, even though repeated world events (from the Roman Empire to Tahrir Square) continue to show us our folly. This, perhaps, is the most egregious example of non-military American Exceptionalism, and it may be more our undoing then any misadventure in Libya.

Vodoo economics v2.0 - the continued foilbes of Republican math

What he said.

Can we all DEMAND some change now?

Listening to Michael Steele, newly minted Republican National Committee Chair on ABC’s This Week with George Stephanopolous, I started having really bad 1980’s flashbacks. As the interview unfolded, it became clear why all the House Republicans and many of the Senate Republicans were so opposed to the Democratic stimulus bill then in the Senate for debate. Here’s the exchange that really got me going, from the ABC website transcript (emphasis mine):


“ STEPHANOPOULOS: He suggests that you and Republican Party leaders here in Washington are on the wrong side of the biggest issue, jobs.

STEELE: Well, no -- you know, with all due respect to the governor, I understand where he's coming from. Having been a state official, I know what it means to get those dollars when you're in tight times. But you've got to look at the entire package. You've got to look at what's going to create sustainable jobs. What this administration is talking about is making work. It is creating work.

STEPHANOPOULOS: But that's a job.

STEELE: No, it's not a job. A job is something that -- that a business owner creates. It's going to be long term. What he's creating...

STEPHANOPOULOS: So a job doesn't count if it's a government job?
(CROSSTALK)

STEELE: Hold on. No, let me -- let me -- let me finish. That is a contract. It ends at a certain point, George. You know that. These road projects that we're talking about have an end point. As a small-business owner, I'm looking to grow my business, expand my business. I want to reach further. I want to be international. I want to be national. It's a whole different perspective on how you create a job versus how you create work. And I'm -- either way, the bottom line is...

STEPHANOPOULOS: I guess I don't really understand that distinction.

STEELE: Well, the difference -- the distinction is this. If a government -- if you've got a government contract that is a fixed period of time, it goes away. The work may go away. That's -- there's no guarantee that that -- that there's going to be more work when you're done in that job.

STEPHANOPOULOS: Yes, but we've seen millions and millions of jobs going away in the private sector just in the last year.

STEELE: But they come -- yes, they -- and they come back, though, George. That's the point. When they go -- they've gone away before, and they come back. And the point is that the small-business owners take the risks. They're the ones that are out there in the morning putting that second mortgage on the house, taking the risks that are necessary so that they can employ your -- your kids and my kids and future generations. That's sustainable, long-term growth. Otherwise, then why do we need the small-business community? Why don't we all just get a government job and call it a day? “


What’s so remarkable here is that Mr. Steele has all but admitted that, in spite of the current economic state, including the recent loss of over 500,000 jobs in a single month, the Republican Party still believes that the government can not create jobs. It can only make work. So, opposition to the stimulus, even sweetened as it is with a variety of tax cuts, incentives and reductions, is all about sticking to a deeply held political and economic principle, no matter what the facts on the ground or the truth in evidence.

I'd love to see MR. Steele, who is no moderate, try to make that distinction to a family now living in a homeless shelter because they have lost their house to foreclosure after loosing their jobs inthe last year. He'd fail miserably, since to many unemployeed, the distinction is meaningless. Sure, as my colleague Mike at the Big Stick points out, it would be better to have high demand for high skilled labor created by the stimulus package. It would be ideal. We're way past ideal.

So why are Republicans clinging so tightly to this line of reasoning? Several thoughts come to mind. First, the Republican Party is still a Social Darwinist, supply side economics, monetarist policy party. They firmly believe that markets can indeed solve economic crises, and that market failures of any type should not ever be addressed through government action – which is welfare in their world view. Second, any economic action taken by government must be directed at businesses, not workers, because it is businesses that create jobs, and supply. And finally, Republicans still believe in supply side economics, no matter what the evidence of the last 30 years shows.

The biggest problem with this world view, however, is that if we follow their reasoning we’ll spend an aweful lot of time, and money (yours and mine incidentally) trying to fix what is now a demand side problem with supply side glue. As unemployment continues to rise, and the economy continues to contract, demand drops like a stone. President Obama said as much last night in his first Prime Time press conference:


“Question: Thank you, Mr. President. Earlier today in Indiana, you said something striking. You said that this nation could end up in a crisis without action that we would be unable to reverse.
Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have not? And do you think that you risk losing some credibility or even talking down the economy by using dire language like that?

Obama: No, no, no, no. I think that what I've said is what other economists have said across the political spectrum, which is that, if you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of.
We saw this happen in Japan in the 1990s, where they did not act boldly and swiftly enough and, as a consequence, they suffered what was called the lost decade, where essentially, for the entire '90s, they did not see any significant economic growth.
So what I'm trying to underscore is what the people in Elkhart already understand, that this is not your ordinary, run-of-the-mill recession. We are going through the worst economic crisis since the Great Depression.
We've lost now 3.6 million jobs, but what's perhaps even more disturbing is that almost half of that job loss has taken place over the last three months, which means that the problems are accelerating instead of getting better.
Now, what I said in Elkhart today is what I repeat this evening, which is, I'm absolutely confident that we can solve this problem, but it's going to require us to take some significant, important steps.
Step number one: We have to pass an economic recovery and reinvestment plan. And we've made progress. There was a vote this evening that moved the process forward in the Senate. We already have a House bill that's passed. I'm hoping, over the next several days, that the House and the Senate can reconcile their differences and get that bill on my desk.
There have been criticisms from a bunch of different directions about this bill, so let me just address a few of them.
Some of the criticisms really are with the basic idea that government should intervene at all in this moment of crisis. Now, you have some people, very sincere, who philosophically just think the government has no business interfering in the marketplace. And, in fact, there are several who've suggested that FDR [President Roosevelt] was wrong to interfere back in the New Deal. They're fighting battles that I thought were resolved a pretty long time ago.
Most economists almost unanimously recognize that, even if philosophically you're -- you're wary of government intervening in the economy, when you have the kind of problem we have right now -- what started on Wall Street, goes to Main Street, suddenly businesses can't get credit, they start paring back their investment, they start laying off workers, workers start pulling back in terms of spending -- that, when you have that situation, that government is an important element of introducing some additional demand into the economy.
We stand to lose about $1 trillion worth of demand this year and another trillion next year. And what that means is you've got this gaping hole in the economy.
That's why the figure that we initially came up with of approximately $800 billion was put forward. That wasn't just some random number that I plucked out of -- out of a hat. That was Republican and Democratic, conservative and liberal economists that I spoke to who indicated that, given the magnitude of the crisis and the fact that it's happening worldwide, it's important for us to have a bill of sufficient size and scope that we can save or create 4 million jobs.
That still means that you're going to have some net job loss, but at least we can start slowing the trend and moving it in the right direction.
Now, the recovery and reinvestment package is not the only thing we have to do. It's one leg of the stool. We are still going to have to make sure that we are attracting private capital, get the credit markets flowing again, because that's the lifeblood of the economy.
And so tomorrow my treasury secretary, Tim Geithner, will be announcing some very clear and specific plans for how we are going to start loosening up credit once again.
And that means having some transparency and oversight in the system. It means that we correct some of the mistakes with TARP [Troubled Asset Relief Program] that were made earlier, the lack of consistency, the lack of clarity, in terms of how the program was going to move forward.
It means that we condition taxpayer dollars that are being provided to banks on them showing some restraint when it comes to executive compensation, not using the money to charter corporate jets when they're not necessary.
It means that we focus on housing and how are we going to help homeowners that are suffering foreclosure or homeowners who are still making their mortgage payments, but are seeing their property values decline.
So there are going to be a whole range of approaches that we have to take for dealing with the economy. My bottom line is to make sure that we are saving or creating 4 million jobs, we are making sure that the financial system is working again, that homeowners are getting some relief.
And I'm happy to get good ideas from across the political spectrum, from Democrats and Republicans. What I won't do is return to the failed theories of the last eight years that got us into this fix in the first place, because those theories have been tested, and they have failed. And that's what part of the election in November was all about.”


Stop and think about that for a second. $ 1 Trillion in DEMAND lost each year for two years. DEMAND. How do you stem that with supply side approaches like tax cuts? How does a machinery reinvestment tax credit address this? And what good would a two year payroll tax holiday (that’s Social Security, Medi-care and Medi-cade, BTW) do to increase DEMAND? The only way I know of to increase demand is this – put people to work, and make sure they can work for long periods of time. Get the credit markets flowing again (Hello TARP, the people are still waiting) so people can borrow again, and then let them DEMAND so that supply can again be ramped up.

Of course, to make Republicans happy, we’ll probably have to use another term besides DEMAND to describe our position. It sounds too personal, too much like something an individual might control, rather then a business. And we’ll especially have to make sure we don’t “make work” while we do it.