As I contemplate Mitt Romney's assertions that the way to solve the health care problems is through the private sector, and the way to cure the economy is through cutting government and coddling rich taxpayers, it makes me cast my mind back over the last couple decades to contemplate how the Right's policy ideas have worked out.
Perhaps some Conservative readers can comment on some policies of the right that have actually worked, but all I see from history and the data is a consistent ability to be wrong.
In the early 1980's Ronald Reagan sold the country on the notion his tax cuts benefitting wealthy folks would "trickle down" to the benefit of everybody else. Well, the data is in. Seems like Mr. Reagan underestimated the ability of wealthy people to find and plug leaks, because they got very wealthy while the rest got nothing other than a big jump in the National debt because of all the taxes the rich folks didn't pay.
Also in the 1980's the right began belittling those with the temerity to suggest our actions are causing climate change, a position which Mr. Romney still espouses. Even if the cause and effect is still somewhat unproven, is the conservative response to potential catastophe to ignore it because its not 100% certain?
Beginning in the 1980's Republicans took the lead in the movement to institutionalize discrimination against gays. They discovered it was an issue that paid big dividends for them at the ballot box, eventually playing a big part in the Republican's taking over Congress and holding it from 1995 to 2007. It also helped George Bush get elected, and reelected in 2000 and 2004. Now even Republican's are beginning to realize that policy is fundementally inconsistent with the freedoms our country was found on. It more and more looks like one of those policies that is going to make people 50 years down the road ask "what were they thinking?"
Once they got hold of Congress in 1995 Conservatives doubled down on the Reagan tax cuts for the wealthy, changed the Capital Gains tax law to turn the housing market into a speculator's casino, and removed the regulations that prevented banks from using our deposits on insanely stupid and speculative investments. By the time they were being shown the door in 2007 we were descending into an economic collapse than nearly took the whole world economy down.
In the early 1990's they beat back the Clinton effort to bring some sanity to our health care market, which for decades has been most noteworthy for its ability to suck up lots of money and provide mediocre care in return (or no care for 50 million people or so). Two years ago they were unable to beat Mr. Obama's push for universal coverage, but they certainly made it much more complicated (and in the end probably more expensive) than it needs to be.
Let us not forget the Republican notion if we just invade Iraq and topple the regime (the same Regime Republican's propped up in the 1980's as a counterweight to Iran) we would be welcomed as heroes and create a democratic country that would solve all our problems with the middle east. No walk softly and carry a big stick for modern Republicans.
Mitt, like most of the Republican's I know, seems a nice fellow, with a nice family and good intentions. I just wish he, and other Republicans, would spend a little more time cultivating the ability to expand their reality beyond their own experiences and ideology.
Wednesday, October 31, 2012
Monday, October 29, 2012
Simple Economic Truths
Wealthy people have more money than they have needs or wants, so they save their money and invest to try to make more money. Their investment funds economic growth.
Lower income people have more needs and wants than money, so they save little and spend a lot. But the money they spend on needs and wants generates economic growth.
To little money to invest stifles the economy. But so does to little growth in the spending money in the pockets of lower income people.
Republican's obsess about the first part of this equation, but ignore the second part.
Asset bubbles are an indicator that too much wealth is going to the folks who's wants and needs are fulfilled. There is not enough consumer demand to support new business, so the folks with extra money laying around start buying up existing assets hoping to sell to someone else for a higher price.
Asset bubbles have been a hallmark of the US economy for the last decade and a half, but Republican's still don't get it. Our economy is weak because too much money is concentrated in the hands of people whose every need and want is satisfied, and not enough is getting into the pockets of people with needs and wants.
Lower income people have more needs and wants than money, so they save little and spend a lot. But the money they spend on needs and wants generates economic growth.
To little money to invest stifles the economy. But so does to little growth in the spending money in the pockets of lower income people.
Republican's obsess about the first part of this equation, but ignore the second part.
Asset bubbles are an indicator that too much wealth is going to the folks who's wants and needs are fulfilled. There is not enough consumer demand to support new business, so the folks with extra money laying around start buying up existing assets hoping to sell to someone else for a higher price.
Asset bubbles have been a hallmark of the US economy for the last decade and a half, but Republican's still don't get it. Our economy is weak because too much money is concentrated in the hands of people whose every need and want is satisfied, and not enough is getting into the pockets of people with needs and wants.
Friday, October 26, 2012
Republican Marketing Genius
The fact that Mitt Romney is in a dead heat with Obama is evidence Republican's are very good at Marketing. Consider these facts:
1. There are always significantly more registered Democrats than Republicans.
2. Empirical historical and economic data show that over the last century the country generally suffers economically when Republicans run the show, and generally does well when Democrats run the shoe.
3. Empirical historical and economic data show that over the last century the countries national debt generally shoots up after Republican's have run the show, and levels off or falls when Democrats have run the show.
4. Within the recent memory of most voters Republicans controlled Congress from 1995 to 2007 and created the conditions that caused the financial collapse of 2008-09 which bogged us down in recession.
5. Mitt Romney's stated economic theories are rooted in beliefs and assumptions identical to the theories the Republican's put into effect between 1995 and 2007 (and also between 1919 to 1933 that led to the great Depression), and indistinguishable from George W. Bush's campaign rhetoric.
6. Barack Obama took office in January of 2009 when the economy was in free fall. The economy shrunk something like 4% in the couple months before he took office and we were losing a million jobs a month. He was like a Dr. who arrived at the scene of a crash as the patient was bleeding out. His administration stopped the bleeding and has the patient well on the way toward recovery. We have now had a couple of years of modest growth while Japan, Europe and the other large economies also sucked into the economic collapse we spawned in 2008-09 are still mired in recesssion.
7. After Republican's took over the House in 2011 their publicly stated policy was to prevent Obama from having any success that would help him get re-elected. They put their policital agenda ahead of the countries business. They played the major role in making the 2011-13 Congress statistically the most do-nothing Congress in history.
On these objective facts the Republican's should get obliterated in this election. The vast majority of voters who are not political and are most interested in figuring out who is going to do the best job for the country should, on these simple facts, vote for Obama and the Democrats.
But it is the facts that have been obliterated.
I thought the Republican's made a crucial mistake about a year ago when they decided to have 12 or 13 televised debates to choose their candidate. I thought it would educate the public about the nonsense of many of their positions. To some extent it did, Republican's have garnered alot of votes over the last couple decades by appealing to voters prejudices about gays, or their outrage about abortion. Both of those issues have lost most of their ability to generate more votes than they lose for Republicans (for the moment).
But the much bigger problem for Republican's in this election was economic. They controlled all the levers of Government in the years leading up to the worst financial collapse since the great Depression. How does one distract voters who lived through those years from that simple, damning fact?
Their answer, which seems to be working, is to inundate the public in politics until they are sick of it. Endless debates, coupled with unprecedented advertsing blitzes on every possible media, have created a sort of fact fatigue. Voters have jobs to do, families to take care of, and want to have some fun. They don't want to spend their spare time sorting through the overwhelming avalanche of information that has descended on us all.
Once fact fatigue is in place the simple principles of marketing that business Republican's are so very good at can be effective. Appeal to emotions with simple messages, and happy images.
It reminds me of the US auto industry that used their marketing expertise to sell us tail fins and images while the rest of the world was developing better cars. Eventually the US auto industry hit a crisis point where a critical mass of consumers realized the US auto industry were selling lousy cars. The US auto industry has never fully recovered.
So when will voters realize the Republican party is selling lousy economics?
Not yet evidently. A tip of the hat to Republican marketing, a razzberry for putting marketing ahead of good policy.
1. There are always significantly more registered Democrats than Republicans.
2. Empirical historical and economic data show that over the last century the country generally suffers economically when Republicans run the show, and generally does well when Democrats run the shoe.
3. Empirical historical and economic data show that over the last century the countries national debt generally shoots up after Republican's have run the show, and levels off or falls when Democrats have run the show.
4. Within the recent memory of most voters Republicans controlled Congress from 1995 to 2007 and created the conditions that caused the financial collapse of 2008-09 which bogged us down in recession.
5. Mitt Romney's stated economic theories are rooted in beliefs and assumptions identical to the theories the Republican's put into effect between 1995 and 2007 (and also between 1919 to 1933 that led to the great Depression), and indistinguishable from George W. Bush's campaign rhetoric.
6. Barack Obama took office in January of 2009 when the economy was in free fall. The economy shrunk something like 4% in the couple months before he took office and we were losing a million jobs a month. He was like a Dr. who arrived at the scene of a crash as the patient was bleeding out. His administration stopped the bleeding and has the patient well on the way toward recovery. We have now had a couple of years of modest growth while Japan, Europe and the other large economies also sucked into the economic collapse we spawned in 2008-09 are still mired in recesssion.
7. After Republican's took over the House in 2011 their publicly stated policy was to prevent Obama from having any success that would help him get re-elected. They put their policital agenda ahead of the countries business. They played the major role in making the 2011-13 Congress statistically the most do-nothing Congress in history.
On these objective facts the Republican's should get obliterated in this election. The vast majority of voters who are not political and are most interested in figuring out who is going to do the best job for the country should, on these simple facts, vote for Obama and the Democrats.
But it is the facts that have been obliterated.
I thought the Republican's made a crucial mistake about a year ago when they decided to have 12 or 13 televised debates to choose their candidate. I thought it would educate the public about the nonsense of many of their positions. To some extent it did, Republican's have garnered alot of votes over the last couple decades by appealing to voters prejudices about gays, or their outrage about abortion. Both of those issues have lost most of their ability to generate more votes than they lose for Republicans (for the moment).
But the much bigger problem for Republican's in this election was economic. They controlled all the levers of Government in the years leading up to the worst financial collapse since the great Depression. How does one distract voters who lived through those years from that simple, damning fact?
Their answer, which seems to be working, is to inundate the public in politics until they are sick of it. Endless debates, coupled with unprecedented advertsing blitzes on every possible media, have created a sort of fact fatigue. Voters have jobs to do, families to take care of, and want to have some fun. They don't want to spend their spare time sorting through the overwhelming avalanche of information that has descended on us all.
Once fact fatigue is in place the simple principles of marketing that business Republican's are so very good at can be effective. Appeal to emotions with simple messages, and happy images.
It reminds me of the US auto industry that used their marketing expertise to sell us tail fins and images while the rest of the world was developing better cars. Eventually the US auto industry hit a crisis point where a critical mass of consumers realized the US auto industry were selling lousy cars. The US auto industry has never fully recovered.
So when will voters realize the Republican party is selling lousy economics?
Not yet evidently. A tip of the hat to Republican marketing, a razzberry for putting marketing ahead of good policy.
Wednesday, October 24, 2012
Health Care Policy - Hiring Caregivers - An Example
Republican's are convinced that Government should have no role in in health-care - at least that is what they profess on the campaign trail. My experience has been that it is private business that is not good at balancing making a profit with good care.
Some years ago I was handling care for a loved one who had a debilitating disease that eventually required almost constant care. At a point, as her needs got more acute, I had to start hiring caregivers to take care of her during periods I could not cover.
There are many private sector companies offerring to provide caregivers for a fee. I turned to a private company first, since that is the easiest and quickest solution. It didn't take long for me to learn you don't get much for your money with private company caregivers. The problem is built into the market. The companies don't want you to get to chummy with a particular caregiver, since you could hire them directly at probably 60% of what you were paying the company, so they moved the caregivers around constantly to keep them from forming relationships with the patients. This not only disrupted the ability of the patient to bond with the caregiver, it also meant every couple days a new caregiver would arrive who knew nothing about the patient, or the patients needs, or the routines of the household. Because the caregivers were being moved around so much they lost interest in forming relationships with the patients and saw no reward in doing good work. They were just punching a clock, doing as little as they could, getting out of the house as soon as they could.
So although it took a lot of my time, I ended up interviewing and hiring caregivers directly. I found the County maintained a list of caregivers. The county did background checks, and provided for bonding as a requirement for a caregiver to be on the list, and set a specific amount as the minimum the caregiver could be paid. Over the next year or so I found a number of really hardworking, caring caregivers on the county list.
At one point I got really busy and didn't feel like I had time to interview people, so I hired another company. I had the same experience as with the first company. So I went back to interviewing.
Now other folks I know around my age are confronting the problem of caring for an aging parent. They often live a long way from the parent, or work all day, so they hire companies to provide assistance. They have the same problems. No continuity in care. Caregivers pushed by the companies to get in and get out quickly so the company can send them to a bunch of different people in a day. So the caregivers do little beyond show up for awhile.
Unfortunately the option I used is generally no longer available because those county offices that maintained caregiver lists have been decimated by budget cuts, impelled by the financial collapse of that other "free" market on Wall Street.
Some years ago I was handling care for a loved one who had a debilitating disease that eventually required almost constant care. At a point, as her needs got more acute, I had to start hiring caregivers to take care of her during periods I could not cover.
There are many private sector companies offerring to provide caregivers for a fee. I turned to a private company first, since that is the easiest and quickest solution. It didn't take long for me to learn you don't get much for your money with private company caregivers. The problem is built into the market. The companies don't want you to get to chummy with a particular caregiver, since you could hire them directly at probably 60% of what you were paying the company, so they moved the caregivers around constantly to keep them from forming relationships with the patients. This not only disrupted the ability of the patient to bond with the caregiver, it also meant every couple days a new caregiver would arrive who knew nothing about the patient, or the patients needs, or the routines of the household. Because the caregivers were being moved around so much they lost interest in forming relationships with the patients and saw no reward in doing good work. They were just punching a clock, doing as little as they could, getting out of the house as soon as they could.
So although it took a lot of my time, I ended up interviewing and hiring caregivers directly. I found the County maintained a list of caregivers. The county did background checks, and provided for bonding as a requirement for a caregiver to be on the list, and set a specific amount as the minimum the caregiver could be paid. Over the next year or so I found a number of really hardworking, caring caregivers on the county list.
At one point I got really busy and didn't feel like I had time to interview people, so I hired another company. I had the same experience as with the first company. So I went back to interviewing.
Now other folks I know around my age are confronting the problem of caring for an aging parent. They often live a long way from the parent, or work all day, so they hire companies to provide assistance. They have the same problems. No continuity in care. Caregivers pushed by the companies to get in and get out quickly so the company can send them to a bunch of different people in a day. So the caregivers do little beyond show up for awhile.
Unfortunately the option I used is generally no longer available because those county offices that maintained caregiver lists have been decimated by budget cuts, impelled by the financial collapse of that other "free" market on Wall Street.
Sunday, October 21, 2012
And The Greatest Generation begat the Greediest
A few years ago there was a lot of celebrating the WW II generation that was reaching the end of their time. It was a whole generation who went to war as a country, instead of hiring people who need the money, to defeat facism. The people who stayed home endured rationing, the nation took on an enormous debt, and millions of soldiers died.
Then after the war was won that generation came home, had lots of babies, and dominated the country from 1945 until 1980. They supported candidates who voted to impose heavy tax burdens, particularly on the wealthy, to pay down the war debt. They believed in our democratic Government because they had seen how government had saved the world from greedy, power hungry fascists, and many were old enough to remember how big business had blown up the world economy in the 1920's.
Then their kids grew up. As the 1980's dawned the kids began to dominate politics, just by sheer weight of numbers. They elected people to Congress who cut taxes, but somehow forgot to cut expenses to match the lost revenue so the country began sinking into debt again. They bought into the notion that business is good and government is bad. Then they cut taxes again, and again, still ignoring the fact the National debt continued to rise.
Here are some statistical facts from an Economist article (*) that sparked this blog.
In 1981 the federal tax rate for a median income American household was 18%. Today it is 11%. The drop in tax rate correlates with a rise in Federal debt. Boomers also supported politicians who granted an expensive prescription drug benefit without bothering to figure out how to pay for it. One economist calculates the average baby boomer can expect 2.2 million dollars in net transfers from the Federal Government (SSN, Medicare etc) over their lifetime. Those aged 65 in 2010 may receive 333 billion more than they pay in taxes, 17 times more than what someone who was 25 in 2010 is likely to receive.
The debt involves more than just money. Annual spending on infrastructure (roads, bridges etc) dropped form more than 3% of GDP in the early 1960's to less than 1% today. We have a big infrastructure debt.
There is no quick fix. By 2030 the over-65 voting age population in the US will rise from the current 17% of total voters to 26%. Older voters won't like inflation. so the Fed will have limited powers to inflate the national debt away.
We boomers have painted ours kids into a corner.
* Economist, September 29, 2012, p.75 "Sponging Boomers"
Then after the war was won that generation came home, had lots of babies, and dominated the country from 1945 until 1980. They supported candidates who voted to impose heavy tax burdens, particularly on the wealthy, to pay down the war debt. They believed in our democratic Government because they had seen how government had saved the world from greedy, power hungry fascists, and many were old enough to remember how big business had blown up the world economy in the 1920's.
Then their kids grew up. As the 1980's dawned the kids began to dominate politics, just by sheer weight of numbers. They elected people to Congress who cut taxes, but somehow forgot to cut expenses to match the lost revenue so the country began sinking into debt again. They bought into the notion that business is good and government is bad. Then they cut taxes again, and again, still ignoring the fact the National debt continued to rise.
Here are some statistical facts from an Economist article (*) that sparked this blog.
In 1981 the federal tax rate for a median income American household was 18%. Today it is 11%. The drop in tax rate correlates with a rise in Federal debt. Boomers also supported politicians who granted an expensive prescription drug benefit without bothering to figure out how to pay for it. One economist calculates the average baby boomer can expect 2.2 million dollars in net transfers from the Federal Government (SSN, Medicare etc) over their lifetime. Those aged 65 in 2010 may receive 333 billion more than they pay in taxes, 17 times more than what someone who was 25 in 2010 is likely to receive.
The debt involves more than just money. Annual spending on infrastructure (roads, bridges etc) dropped form more than 3% of GDP in the early 1960's to less than 1% today. We have a big infrastructure debt.
There is no quick fix. By 2030 the over-65 voting age population in the US will rise from the current 17% of total voters to 26%. Older voters won't like inflation. so the Fed will have limited powers to inflate the national debt away.
We boomers have painted ours kids into a corner.
* Economist, September 29, 2012, p.75 "Sponging Boomers"
Thursday, October 18, 2012
Taxing Corporations and Dividends is Not Double Taxation
Mitt Romney argues that the 14% tax rate he pays is fair, even though most of the rest of the citizens of this country pay a much higher percentage of our income. Mitt says that his 14% is fair because his income is dividend income, and the Corporation has already paid Corporate taxes, so he is in effect being taxed twice.
Leaving aside the fact the Corporate Income Tax is so chock full of loopholes many Corporations pay little or no tax, Mr. Romney's argument is even more fundamentally false.
Corporations are not real. They are a fiction created by the law in order to encourage people to make big, risky investments. A Corporation allows the owners to make big investments, if they do well they get the profits, if it really goes bad, they get to dump calamitous losses on society, instead of absorbing it themselves.
Examples?
Think of the financial collapse we went through a few years ago. The Bankers and Brokers that made tons of money on the stupid business ideas that caused the crash are all still sitting on most of the money, because they operated within Corporations. Their corporations may now be bankrupt, or defunct, but the people who owned and ran the Corporation still have all the money they made. Who bore the risk of loss? The homeowners who lost their homes. The investors that lost much of their wealth. The workers out of a job.
Think of the thousands of plots of land all over this country that are so contaminated with hazardous chemicals they have to be fenced off from public access until someone spends millions to clean up the mess. Generally the mess was made by Corporations that made people very wealthy. The Corporations may be gone, the owners are probably still very wealthy, but it is often government who ends up cleaning up the mess.
That is why Corporations pay Corporate taxes. To compensate society for the risk society is taking that other people will end up paying the price for Corporate folly. Corporate taxes are not a substitute for every citizens obligation to pay their fair share of taxes for running government, they are a cost of doing business as a Corporation.
It is very easy for anyone to avoid Corporate taxes, you just dump the corporation and do business as a partnership. But rich folks don't do that, because if they do, they might actually have to pay for the messes they create.
Mitt should know this. The self proclaimed great businessman who understands how business works has undoubtedly had lots of discussions in his life about whether a business should incorporate or operate as a partnership. But I guess he calculates a lot of regular folk don't, so he can make the argument and get some votes.
Leaving aside the fact the Corporate Income Tax is so chock full of loopholes many Corporations pay little or no tax, Mr. Romney's argument is even more fundamentally false.
Corporations are not real. They are a fiction created by the law in order to encourage people to make big, risky investments. A Corporation allows the owners to make big investments, if they do well they get the profits, if it really goes bad, they get to dump calamitous losses on society, instead of absorbing it themselves.
Examples?
Think of the financial collapse we went through a few years ago. The Bankers and Brokers that made tons of money on the stupid business ideas that caused the crash are all still sitting on most of the money, because they operated within Corporations. Their corporations may now be bankrupt, or defunct, but the people who owned and ran the Corporation still have all the money they made. Who bore the risk of loss? The homeowners who lost their homes. The investors that lost much of their wealth. The workers out of a job.
Think of the thousands of plots of land all over this country that are so contaminated with hazardous chemicals they have to be fenced off from public access until someone spends millions to clean up the mess. Generally the mess was made by Corporations that made people very wealthy. The Corporations may be gone, the owners are probably still very wealthy, but it is often government who ends up cleaning up the mess.
That is why Corporations pay Corporate taxes. To compensate society for the risk society is taking that other people will end up paying the price for Corporate folly. Corporate taxes are not a substitute for every citizens obligation to pay their fair share of taxes for running government, they are a cost of doing business as a Corporation.
It is very easy for anyone to avoid Corporate taxes, you just dump the corporation and do business as a partnership. But rich folks don't do that, because if they do, they might actually have to pay for the messes they create.
Mitt should know this. The self proclaimed great businessman who understands how business works has undoubtedly had lots of discussions in his life about whether a business should incorporate or operate as a partnership. But I guess he calculates a lot of regular folk don't, so he can make the argument and get some votes.
Wednesday, October 17, 2012
The Spooky October Stock Market
Weird things are happening in the Stock Market. Normally stocks go down in the summer and up in the winter.
This last summer, starting about July, stocks started broadly increasing in price despite the fact not many people were trading. The increase has continued into the fall.
What raises this fact to the level of being weird is that each month for the last few months has seen headlines in the financial press about the billions of dollars being pulled out of stock mutual funds by retail investors.
So stock prices keep trending up even though huge chunks of retail investors are abandoning the stock market.
What is going on?
Is it that the money being pulled out by retail investors is being replaced by Corporations - flush with cash but afraid to invest - buying back their own shares? This would have a multiple short term benefit for corporate management, it keeps remaining investors happy that the stock price is up, it qualifies management for bigger bonuses to the extent the bonus is dependant on stock price, and it also boosts up the value of stock management already holds.
But how long can Corporations prop up stock prices when retail investors are bailing? The retail bail-out is not unexpected, people traditionally move out of stocks as they near retirement for the safety of bonds, and big chunks of the baby boomer generation are at or near retirement. What happens to the Corporations when they can no longer prop up their stock price and their market value plummets?
Is the bail out of stocks going to be like a dam breaking instead of a trickle over the top of the dam? Are we about to see an October market freak out like October of 1929, or October of 1987?
This last summer, starting about July, stocks started broadly increasing in price despite the fact not many people were trading. The increase has continued into the fall.
What raises this fact to the level of being weird is that each month for the last few months has seen headlines in the financial press about the billions of dollars being pulled out of stock mutual funds by retail investors.
So stock prices keep trending up even though huge chunks of retail investors are abandoning the stock market.
What is going on?
Is it that the money being pulled out by retail investors is being replaced by Corporations - flush with cash but afraid to invest - buying back their own shares? This would have a multiple short term benefit for corporate management, it keeps remaining investors happy that the stock price is up, it qualifies management for bigger bonuses to the extent the bonus is dependant on stock price, and it also boosts up the value of stock management already holds.
But how long can Corporations prop up stock prices when retail investors are bailing? The retail bail-out is not unexpected, people traditionally move out of stocks as they near retirement for the safety of bonds, and big chunks of the baby boomer generation are at or near retirement. What happens to the Corporations when they can no longer prop up their stock price and their market value plummets?
Is the bail out of stocks going to be like a dam breaking instead of a trickle over the top of the dam? Are we about to see an October market freak out like October of 1929, or October of 1987?
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