Wednesday, October 10, 2012
Income Inequality - Good or Bad?
Is income inequality good or bad?
The answer seems to depend on what goal you are seeking to achieve.
If your goal is to maximize the economic strength and vitality of the United States, history shows pretty clearly it is bad. In the last 100 years the two periods where income inequality rose rapidly ended in the two most crippling economic collapses, the great depression and the great recession. The long period from the late -1930's to early 1980's where income inequality was falling or stable at lower levels was marked by a very long period of pretty stable and strong growth.
The average American should be against income inequality. A survey from about a year ago found the average American, if they had an income of $70,000 a year, felt comfortable and secure and was willing to commit more time to enjoying life. Because for average Americans wealth is not about competition or power, its about creating a life for themselves and their family. So their goal should be a strong and vital economy for the United States.
On the other hand, if your pre-eminent goals are personal maybe income inequality is good (if you are on the up side of inequality). Psychological studies found some years ago that most rich people care more about relative wealth than absolute wealth. What motivates them is to be much wealthier than everyone else, rather than to achieve any particular amount of wealth or security. There is no magic number at which they are ready to enjoy life and family, because what motivates them is the competition to garner personal wealth and the power to goes with wealth. They don't really care what is good for the country, if it gets in the way of their personal ambitions.
It is sort of like they just want to be a big fish, and if the pond has to shrink for them to be a big fish, so be it. So, unfortunately for the rest of us, our pond has been shrinking because the folks who like income inequality have dominated the public discourse the last few years.
Sunday, October 7, 2012
Businessmen as Presidents
History suggests businessmen don't make very good Presidents. In the last 100 years we have had, by my reckoning, 5 Presidents whose primary qualification according to the way they characterized themselves was their success as business people.
The first three were Republicans.
First wealthy newspaperman Warren G. Harding from 1921 to 1923. He died in office in 1923 as his administration was engulfed by the Teapot Dome corruption scandal. He was replaced by Calvin Coolidge. Silent Cal was a career Republican politician and seems to have been a pretty smart guy. He managed to defuse and deflect the scandal from the Harding administration and, since the economy was doing reasonably well get re-elected in 1925. His term in office was marked by a hands off, business knows best attitude, during which stock market and housing bubbles began to really inflate. Coolidge choose not to run in 1929.
With Coolidge bowing out Republican Herbert Hoover, a successful mining engineer who had moved into politics and served in both the Harding and Coolidge administrations rode the still bubbling euphoria of the roaring twenties into office. Within a year the bubbles began collapsing and the nation began sinking into what came to be the Great Depression. Hoover tried to use business friendly free market economic policies to stop the slide, they only made it worse. He reduced income tax rates, and, believing in limited government, vetoed a series of efforts attempting to develop a coordinated national response to the deepening crisis. By the 1932 election thousands of banks had failed, the unemployment rate was nearing 25%, businesses were failing across the country and the nations deficit was skyrocketing. Coolidge lost to Roosevelt and we did not have another Republican President until Ike 20 years later.
The next businessman President was a Democrat, Jimmy Carter, the Peanut Farmer. Although Carter wasn't truly a big business candidate, and didn't necessarily ascribe to the notion the free market is self correcting and government is bad, his administration began in a period of economic stagnation and he managed to do little to turn the tide.
The next business man President was George Bush Jr. (Although his Dad had considerable business experience, he did not market himself as a businessman). Mr. Bush, as we all know, took over a country with a balanced budget and a strong economy and walked out the door eight years later with the housing market in a shambles, Lehman Brothers having just collapsed, over 4 million people having lost their jobs in the months before he left and the deficit skyrocketing.
The first three were Republicans.
First wealthy newspaperman Warren G. Harding from 1921 to 1923. He died in office in 1923 as his administration was engulfed by the Teapot Dome corruption scandal. He was replaced by Calvin Coolidge. Silent Cal was a career Republican politician and seems to have been a pretty smart guy. He managed to defuse and deflect the scandal from the Harding administration and, since the economy was doing reasonably well get re-elected in 1925. His term in office was marked by a hands off, business knows best attitude, during which stock market and housing bubbles began to really inflate. Coolidge choose not to run in 1929.
With Coolidge bowing out Republican Herbert Hoover, a successful mining engineer who had moved into politics and served in both the Harding and Coolidge administrations rode the still bubbling euphoria of the roaring twenties into office. Within a year the bubbles began collapsing and the nation began sinking into what came to be the Great Depression. Hoover tried to use business friendly free market economic policies to stop the slide, they only made it worse. He reduced income tax rates, and, believing in limited government, vetoed a series of efforts attempting to develop a coordinated national response to the deepening crisis. By the 1932 election thousands of banks had failed, the unemployment rate was nearing 25%, businesses were failing across the country and the nations deficit was skyrocketing. Coolidge lost to Roosevelt and we did not have another Republican President until Ike 20 years later.
The next businessman President was a Democrat, Jimmy Carter, the Peanut Farmer. Although Carter wasn't truly a big business candidate, and didn't necessarily ascribe to the notion the free market is self correcting and government is bad, his administration began in a period of economic stagnation and he managed to do little to turn the tide.
The next business man President was George Bush Jr. (Although his Dad had considerable business experience, he did not market himself as a businessman). Mr. Bush, as we all know, took over a country with a balanced budget and a strong economy and walked out the door eight years later with the housing market in a shambles, Lehman Brothers having just collapsed, over 4 million people having lost their jobs in the months before he left and the deficit skyrocketing.
Subscribe to:
Posts (Atom)