Thursday, February 24, 2011

A Tale of Two Narratives

There is an extreme disconnect between liberals and conservatives regarding what needs to be done to right the economy and reduce unemployment.

The usual conservative claim is that we need to cut taxes to spur growth and reduce spending to reduce the deficit in order to maintain economic security. Reducing spending is what is often referred to as "austerity measures". Basically, cutting back on government services in order to narrow the budget deficit.

The usual liberal claim is that we need to stimulate the economy through government spending in the short term by investing in infrastructure, education, and technology (President Obama's 3 pronged "Win the Future" mantra from his recent State of the Union). Though unspoken by a majority of liberal politicians, the other aspect of this is - raise taxes to narrow the revenue-expenditure gap.

For a very long time the way our government functioned was rational. Running a surplus or modest deficit (small, short term federal deficits are economically beneficial due to the economic utility of the bond market) during good times in order to pay for the costs of wars or recessions. War is self-obvious - they're expensive. But recessions are important too, because tax revenue declines (less income to tax) and demand for social services increases (unemployed seeking benefits, people dropping into poverty, etc). This made sense and everyone understood it - both left and right.

However, in the 1980s President Ronald Reagan claimed deficits didn't matter. Deficit spending by the federal government, which until that time had been modest except during war or extreme recession, ballooned into standard practice.
figured borrowed from

As you can see from this figure, other than World War II, surpluses and deficits were modest from 1945 until the early 1970s when we had our first post war recession. That golden era of capitalism, from approximately 1945 to 1973 represented the most sustained and robust economic growth in our nation's history. A rising tide lifted all ships as business owners and workers alike saw their incomes greatly outpace inflation.

When Reagan took office in 1980 we began to see much larger deficits through both his and his successor's terms. President Clinton increased revenue and reduced spending to achieve our first budgetary surpluses since the 1950s. These were squandered during a time of relative economic growth by his successor, George W. Bush, who cut taxes and went to war. An unfunded war, which contributed greatly to our real deficit, but was ignored by his administration's accounting practices. In that 8 year period our national debt increased from $5.7 trillion to $9.2 trillion. $3.5 trillion in just 8 years after accumulating $5.7 trillion in the previous 211 years. How was that even possible? And during a period of relative economic prosperity?

It's simple. He cut taxes and increased spending precipitously. Look at the blue and orange lines from the figure above. Around about 2001, tax revenue plummeted while spending continued to increase.

You're probably saying, that's all great, but how does it relate to the disparity in opinions between left and right in ways to fix our economy? Well, that brings me to the NY Times piece from two days ago, which demonstrates that stimulus, not austerity, is the path to recovery. Britain's economy has contracted since their austerity measures were announced. Germany's economy has slowed since their stimulus spending has ebbed. The American recover remains robust, because our stimulus has not yet run out.

If we allow our stimulus spending to expire, our growth will likely slow to something similar to Germany - though they have a more robust manufacturing base than we do so it's tough to draw a complete parallel. If we actually cut our federal spending, as is currently being proposed by both sides of the aisle, we risk a double-dip recession like the UK is currently experiencing. Even Goldman-Sachs is worried about the spending cuts, stating that it will likely result in a 2% reduction in expected growth in our GDP next year. 2% sounds small, but it's substantial.

The solution, of course, is not easy. President Obama's proposed 3 pronged approach to continued growth and development makes a lot of sense. This will cost money, but that money will be well worth the investment if we can improve our educational attainment, improve our infrastructure, and advance our technologies. That would have an additional benefit of providing more stimulus to our fragile economic recovery. Unfortunately, Congress appears to have no stomach for it.

Now to taxes. There is ample evidence that reducing taxes does not increase tax revenue, despite persistent claims by conservative politicians to the contrary.

The other prong of that solution is to raise taxes on the income for the wealthy, tax capital gains equitably, and end corporate tax loopholes. To make that last part clear, corporate earnings represent the single largest source of our GDP, yet corporations now pay the lowest percentage of federal revenue since at least 1950 (haven't seen data earlier than that). Conversely, personal income (wages) are now the smallest percentage of our GDP since the government began keeping track, yet personal incomes taxes remain the largest source of federal revenue. So the biggest portion of our economy contributes the least government funding while the smallest portion contributes the most.

Income inequality continues to pervade, and yet a substantial percentage of our population is oblivious to why this is an unsustainable problem. Maybe I'll try to tackle that in a future post.

Sunday, February 20, 2011

Proud to be an American?

I liken the U.S. to Sir Winston Churchill's quote ... "Democracy is the worst form of government, except for all those other forms that have been tried." I'd say America is the worst country to live in, except for all the others. 

That's not exactly true, of course. There are a number of lovely countries with idyllic landscapes, great weather, robust economies, and representative (free) governments. But the U.S. with its unparalleled freedoms, cultural diversity, widely varying topography, ample arable land, etc. is a pretty unique place in the world. 

But our American exceptionalism has disappeared. Evaporated. 

Take a look at this graphic from the New York Times. And then let's break it down column by column.  

1. We now have higher income inequality than all but Hong Kong and Singapore among "Advanced Economies". Analogous to this, though not shown in the figure, is that wages as a percentage of U.S. GDP have reached an all-time low. Let me repeat that. Wages - our paychecks - have reached an all-time low as a percentage of our economy. Since the government began keeping statistics on this issue, at no point have American workers taken home a smaller piece of the economic pie.  

2. The second column reflects the current unemployment rate for each advanced economy. As you can see we're not the worst at 9%, but we're at more than double a number of "social democracies", which are supposedly bad for business. Well, we're at a point where "bad for business" means "good for workers" so we're at a stalemate I guess. 

3. "level of democracy" ... should be our bread and butter, right? Nope. We're in the middle of the pack. I haven't researched how this metric is calculated, but if we take it on face value we're pretty much "average" when it comes to our democracy, at least among advanced economies.

4. "wellbeing index" ... that's the percentage of our citizens who are "thriving" ... we're at 57% ... or middle of the pack again. 

5. "food security" based on a question about whether in the past 12 months people have lacked having enough money to put food on their table. This is expressed as a percentage of the country. A full 16% of Americans answered yes to this question. 16% of us have not had enough money to adequately feed our families or ourselves in the past 12 months. Compare that to 3% in Denmark. Or 6% in Germany. 

6. Life expectancy at birth. Here we're in the "red zone" ... We rank ahead of just 5 of the 32 other advanced economies. We're fat. We're unhealthy. We're eating copious amounts of processed foods high in salt and preservatives. We have limited access to quality health care thanks to our predominantly employer-based private health insurance system. It's now being estimated that our children will have shorter life expectancy than we do.

7. We have more than twice the prison population (as a percentage of our citizens incarcerated) of any other advanced economy. 

8. We now rank equivalent to the Czech Republic in math and science scores based on international standardized tests. The Czech Republic. 

We can do better, people. But it requires cooperation, hard work, and sacrifice. All things that seem to be rapidly becoming exceptional behaviors in our republic. 

Saturday, February 19, 2011

Wisconsin - the new front in the War on America

I'm not sure how many of you have been paying attention to the protests by unionized public workers in Wisconsin this past week. Their turnouts have been much larger and more impassioned than most Tea Party events I've seen, but that's not exactly the point.

At issue is the attempt by Wisconsin Governor Scott Walker (R) to end collective bargaining by public employee unions. There has been an enormous push by conservative state governments around the country - and an organized national effort by conservative PACs to marginalize public employee unions as being at fault for budgetary shortfalls around the country. This is an outright lie, but that never seems to matter when money is at stake. 

This attempt by Governor Walker to to fix his budget (read: austerity measures) comes in the wake of him passing a tax cut for ... you guessed it ... the wealthy. As I've explained before, you don't narrow budget gaps by lowering taxes.

Here's the problem with Governor Walker's plan. If he really wanted to simply lower state expenditures he could do so by negotiating less generous benefits with the state employee unions. They've already offered to reduce their benefits packages to help with the short fall. But he's not taking that offer. He's demanding the end of collective bargaining. Without collective bargaining, unions have no teeth. They can't actually improve the quality of working conditions or compensation for their members. 

This is a bald attempt by a conservative governor to kill a union. His supporters claim Wisconsin teachers make too much and have too sweet a deal. I personally don't think teachers make enough anywhere, but I am a strong believer in the importance of improving our educational system and I don't see how that's possible if you reduce the incentives for people to actually become teachers in your community (which is the effect this would have in Wisconsin). Also, putting teachers aside for a moment - this school union includes bus drivers and janitors. Not exactly fat cat bureaucrats, are they?

Why is this so important? Why am I bothering to blog about something that's happening in a single state? Well, its pretty simple. The Supreme Court's Citizens United ruling gave corporations and labor unions the right to spend unrestricted amounts of money on political advertising. If conservative states are successful in busting public employee labor unions, they appreciably weaken the ability of Democrats to raise funds and finance advertising for progressive political issues. In short, if the war against unions takes hold and corporations are successful in ending organized representation of labor, there will be very limited funding for liberal political campaign activities. 

Like I said, it all comes down to money, but not in the way you might think. This has little to do with Wisconsin's budget deficit and very much to do with the ability to dominate American politics with cold hard cash. 

Corporate interests are already in control of way too much of our daily lives and this will make it even worse. Support the proud public employees of Wisconsin. 

Tuesday, February 8, 2011

New becomes Old and vice versa

A couple interesting things happened in the world of the political press this week.

First, The Huffington Post, an independent online newspaper and blog site, was purchased by AOL for $315M. Founder Ariana Huffington called it a merger of visions. That remains to be seen. AOL is clearly hurting for eyeballs and HuffPo has quickly become one of the biggest news sources on the web. In this case a Web 1.0 giant absorbed a Web 2.0 wunderkind. Unfortunately,  HuffPo's independence was where it had value as a news source. Now its merged into the AOL-TimeWarner media conglomerate and that independence is going to be difficult to maintain. I don't blame Ariana for taking such a generous offer, but I am also disheartened to see one of the truly independent new media news sources lose its autonomy.

Second, Keith Olbermann, former MSNBC political pundit and raconteur extraordinaire,who built his post-ESPN reputation on taking President Bush to task, announced today he's joining CurrentTV. This is a bold move for Mr. Olbermann who left the NBC family to join a "high on the dial" cable TV network that specializes in user generated news reporting and mini-documentary pieces to fill their slate. I love the channel - it's perhaps the purest form yet of a democratized press on cable TV and their website is pretty slick too. Some might dismiss this as the best he could do, but I'm guessing they'd be wrong. CurrentTV is a preferred news source for younger, trendier "new media" savvy people and Olbermann's going to feed their political activism.

Why does all this matter? It's probably not an enormous shift, but just in the past few days we've seen a popular online new media site absorbed by an enormous old-school media company and now an old-school media veteran joins a hip new media alternative news source. I think we're seeing some pretty drastic changes in how news is absorbed and acquired and these are emblematic of those shifts.

Here's hoping HuffPo can maintain their autonomy despite new ownership and that Keith Olbermann can turn millions of people on to CurrentTV.

Friday, February 4, 2011

Aruging Politics on Facebook

It's been said that winning an argument on the internet is like winning the Special Olympics. This was true when the forums for these debates among strangers were AOL chat rooms and random special interest message boards. Everyone hid behind a username and avatar. The "debates" often became flame wars and people were routinely given time outs or banned by moderators for crossing invisible lines in the sand of internet decorum. It was the wild, wild west of internet socializing.

Facebook has been transformative. We now present ourselves online. Some still use pseudonyms (I am friends with Ralphy Wig-mm) and many don't use pictures of themselves, but we're out there now. We're "friends" with our family, friends, friends' freinds, coworkers, acquaintances, and even sometimes people we've met on internet message boards. I occasionally get friend requests from people who have seen my comments on other friends pages. I sometimes accept these. I now have over 600 "friends" ... that's many more than my mother has, but far fewer than some of my show business friends have. Psychological research has suggested humans are not capable of maintaining more than 150 or so relationships. I suspect this is true, though facebook is making it easier for us to try.

And this is where I think arguing on the internet has become more important. We're no longer arguing in a chatroomful of strangers, trying to convince them of our point of view.  Besting such an opponent in a political debate is a hollow victory at best. You know nothing about their intelligence or mental stability. More importantly since it's not actually about "winning" or "losing", you have no idea how you've changed the world view of the people who've read your arguments.

Facebook is different. On facebook our debate takes place in public. For the most part, all our friends or our friend's friends can see the arguments and judge their strengths and weaknesses for themselves. This provides us with a forum for exchanging our ideas with a much larger audience than we would usually be able to reach. For example, during the health care reform debate I was involved in a discussion on a friend's wall. He is a professional musician with over 2,200 friends. I have no idea how many people read my comments, but it was likely far more than read this blog.

What is perhaps most rewarding from political discussions on facebook is seeing the evolution of ideas among our friends. I've watched far right conservatives become more moderate in their beliefs. I've seen arrogant liberals soften their rhetoric when they realize some conservatives have reasonable points of view and justification for those positions. I've seen people completely ignorant on an issue become sponges for information once they've been awakened to the topic.

I've also seen some of the ugliness that appeared on the old message boards - the homophobia, the race baiting, the name calling. And I've watched as this poor behavior is condemned by friends of the offended. This is progress.

It's not perfect. Too often our facebook friendships are too homogeneous. A Massachusetts liberal's ridicule of GOP Senate filibusters will go unchallenged by any of their friends while a Texas conservative's disparagement of President Obama will get plenty of cheers and no jeers. It's difficult to be exposed to alternative points of view when all of your friends think like you do.

But ultimately this exchange of ideas in the forum that is facebook is a net benefit to our political discourse. We should discuss policy issues with one another. It's part of our responsibility as citizens to gather information, share ideas, and ultimately draw our own conclusions. It's part of what makes our republic so vibrant.

Now if you'll excuse me, I have someone to poke.