Who’s Afraid of Democracy?

“it suggests that people have a profound sense of economic fairness”

This is a very wrong analysis. Rather the correct analysis is that we do not want others to have stuff we do not have. It is only “fair” in the same sense as if i go and take away *your* ball so no one can play the game. In other words, we the people are a petty bunch indeed. (The studies that show how we treat people when we can inflict physical pain on them are also very interesting.)

That said, i think it is fair to assert that democracy is the worst form of government, except for all the rest.

I would like to recommend that Mr. Caplan (and Mr. Hayes) adjust their thinking first by eliminating all assumptions about the American voter/Consumer.

Hardly anyone can, or tries to relate to ordinary working people. It is so much easier and less complicated to set up the usual criteria we hear from economists and other data-drummers based on government bureaus.

Since they all learned from the same textbooks, read the same reports, and are not inclined to talk to real people, books like this will be written and passed on between them as dogma.

In reality we have very little influence on either what we can buy, or where we can buy it. It has been decreed (by gov. and corp) that cheap foreign made goods are what we will choose. But I can�t remember when I could buy a shirt made in the USA. For a while the scam was a certain percentage of the work done would get the USA label.

As for voting � even with nearly everyone running, leaking a possibility of running or willing to run if asked � we have to accept that none can afford to speak his true opinion � he/she must �appeal� to each special interest category while not alienating �his base� or �core� support.

No wonder they all come across as less than inspiring.

I believe both Caplan and Mencken are off with their view of Democracy as evidenced by American consumers and voters.

� Caplan, �Democracy fails to produce good policies precisely because it reflects the will of the majority.�

I challenge any average American (Not a big campaign donor and not personally known by a member of congress) to actually communicate directly with that member on any issue. Canned email and form letter responses don�t count.

They not only don�t know the will of the people, they don�t care to.
Polling is less time consuming, more controllable but as big a scam as anything a carnival barker has ever come up with.

� H.L. Mencken, �Democracy is the theory that the people know what they want and deserve to get it good and hard.�

People may know what they want, but they so seldom get it from our government, they no longer expect results from those who run for office.

Economists, social or otherwise, are notoriously numbers oriented � even Nassim Nicholas Taleb, author of �The Black Swan� (basically a book on how to think critically) shows his Wall Street background �

He says, �There is more money in designing a shoe than in actually making it: Nike, Dell, and Boeing can get paid for just thinking, organizing, and leveraging their know-how and ideas while subcontracting factories in developing countries d the grunt work...�

One problem an economist or investment analyst conveniently ignores is � how many people does it take to design versus make those products? What happens to the former shoemaker, assembler or inspector? Not likely he will become a designer � and if he did, how long before that too leaves for a cheaper designer somewhere? He may need to be exported with the shoe.

Lou Dobbs may not have all the answers and he certainly distresses a lot of people, but he does give voice to a lot of issues average citizens see as far less than rational in both our economy and government.

Caplan is a notorious free-market nutcase. There must be something seriously wrong with George Mason.

http://economics.gmu.edu/bcaplan/

Interestingly, during the minimum wage fight some time back, a rather startling number of conservative pundits like George Will - and 28 GOP senators - agreed with Caplan’s view that the best minimum wage is no minimum wage, at all.

But he speaks for the majority of libertarians, paleocons, and other conservatives who dread the power of the demos to metaphorically raid the granaries of the rich by insisting on things like wages and hours legislation, workplace safety protections, a variety of workers’ rights that diminish “flexibility”, and pretty much absolutely every piece of legislation for the last century that has protected workers, consumers, or even just bystanders from the rapacity of capitalism by limiting the freedom of the “free market” to be as devastatingly evil as capitalists are legally free to make it.

The demos and their friends may see such things as both just and necessary. Who is surprise that such fierce and shameless enemies of the people as Caplan claim they do not?

The only suprise is that anybody reading this online mag would be such a reactionary as to even give Caplan a moments credence. Or that In These Times would treat him with one second’s respect.

Caplan’s existence is an offront to social justice and a standing threat to the well-being of the working people, the consumers, and all other ordinary people of America.

Hayes says:

“The consensus economic model that he subscribes to�and that forms the worldview of the economists that he cites as definitive�is grounded on the assumption that people are rational.”

In terms of economics yes. But there is a difference when it comes to voting and politics. Views on economic policy are easy to have since the gain in learning more about policies doesn’t really deliver any direct benefit. This is very different from personal economic decisions in the context of the marketplace where how we behave economically has a very direct impact and any knowledge directly helps....meaning that logic matters more and reason prevails.

In politics, the single vote of one person is not greatly felt and the views that one holds are “cheap” since the price of being wrong is minimal in a direct personal sense.

“...limiting the freedom of the �free market� to be as devastatingly evil as capitalists are legally free to make it.”

I agree with the quotation marks here - markets are never free - they are merely (potentially) efficient tools for redistributing resources.  A truly competitive market requires outside regulation in order to guard against monopolies, protect monopsonies, and ensure that _all_ the costs of production are factored into prices (e.g. the environmental impact of production.) It’s telling that the four biases mentioned in the article, “anti-market bias (a skepticism that the price mechanism works), anti-foreign bias, make-work bias (a desire to create jobs even if it�s inefficient) and pessimistic bias,” all are biases that reflect decisions made for personal gain over systematic efficiency (a situation that shouldn’t exist under “free” market fundamentalism.)

Gaius, ztnjv, Matt W,

I believe we need to differentiate between those who pontificate out of ignorance and those who manipulate from greed.

It�s not always easy to determine and makes no difference to the results, but at least not all are the self-centered bastards they appear to be � just untouched by the process � so far.

For decades our textbooks have codified the economic tenets of free enterprise and free markets. They have become the holy book to which allegiance is pledged and evangelized daily in all forms of media.  Once in a while a heretic emerges, or in some cases, is actually sought to become the CNBC �idiot� poster boy.

There is just enough truth in the dogma to remain generally plausible. Additionally, a lot of money can be made by playing the game by those rules � until some limit is passed or an unexpected factor intervenes (1929, the late �60s & early �70s, 1987).

A textbook for the Age of Digital Globalization has yet to be written.

However, in a sense the only true market IS always �free�.  The basic rule of supply and demand will win in the long haul. As an item disappears the cost will rise regardless of subsidies and tax breaks � which only mask the real price. This applies to corn which will cost other corn users and consumers at the supermarket. This applies to sub-minimum imported labor � by passing the hidden costs to taxpayers while employers benefit. The over supply of labor globally is leaving us with a deflation of labor value here.

In 1984 my son went to the Soviet Union with his high school class. Even after nearly 70 years of strict government price controls the real economy was the black market. Bartering for Levis, Elvis records and U.S. news magazines was heavy.

Some of us have returned to this system here. As my business evaporated my barber saw his falling as well. When income drops people can go an extra few days or a week between haircuts or have a home trim job. For the last couple of years he has been cutting my hair and I�ve been doing business cards, direct mail flyers and other advertising related jobs for him.

One problem with capitalism comes from selective government regulation � the savings and loan mess was too little restriction on who could become a lender and the US Fed guaranty up to $100,000.

Business restriction such as: the EPA, OSHA, child labor laws, minimum wage hamper U.S. companies � but no similar costs are added on foreign imports.  Who knows what we are eating?

Add to the above the continual skewing of financial/economic data which allows sophisticated manipulation and our enterprise system is anything but free.

Whattheheck,

Paragraphs 1-2: My point was there is a difference between a rational consumer and rational voter. The effects of personal choices are felt while the effects of political choices are felt less directly. For example, most (and I do mean nearly all) professional economists are in agreement that free trade is a net benefit for society...by far. Anf that impediments to free trade hurt our economy. This is based on sound economic principle and does NOT ignore that it will temporarily hurt some.  Yet people, based on faulty merchantilist logic, have a problem with free trade and for the wrong reasons. The overwhelmingly large large majority of people are helped with free trade. The shifting of capital has side-effects but overall, nealry everyone is better off. Few real economists, if any, disagree. Therefore, free trade should not be impeded by dwelling on the few who are hurt at the expense of everyone else. Those people should simply be helped. It’s not callous to say this. It’s simply true.

Paragraph 3: I do not believe free markets are as codified as you think. I simply don’t see it. If anything, the emotional economics of over-exposing the side-effects of (somewhat) free markets gets far more press than the overall benefits. And mind, this is based on a shadowy, weaker version of free markets...not real free markets. And, little attention is ever given to role that ill-conceived government action affects our reality. This is what is really missing.

#4: you seem to blaming recessions and depressions on free markets and greed borne from them. A few problems: there were no true free markets to speak of and, more importantly, those crises were brought about more by bad monetary and credit policy which causes market distortions and the “business cycle” though each was a little different in certain details. But general markets were not really to blame and it really makes little sense to say they were.

#5: wow. As an item disappears, it cost will rise?? Yes, if people stiil demand it....but there are few cases of such an item.....what disappears? If your referring to oil, well, blame the government for coddling the industry with subsidies that reduce incentive to innovate. This goes back decades and breaks economic principle by trying to, in essence, control the energy market. No free market.

This is false: “The over supply of labor globally is leaving us with a deflation of labor value here.” Not true. Firstly, real wages are not really falling. And if they are in certain segments, it’s a reflection of the marketplace. Wages are like prices...always changing and adapting to demand. If anything, certain labor policies (a mask for price controls on wages) are distorting wage “Values” in a variety of ways that ultimately affect others via prices. Overall wages are increasing. BUT, this is not really where we need to look. Falling prices increase demand which opens employment in a variety of other sectors and labor and captial shift according. It happens all the time. this topic, however, is too broad to squeaze into this post. I’ll leave it there.

#7: yes, price controls don’t work.

i’ll leave it there. I don’t want to go too far because it’s more complex than I’m able to explain.

Wolf is absolutely correct: that is not “fairness,” that is “resentment.”

This, of course, is exactly the conflation that allows socialism to continue to masquerade among the muddle-headed, but resentful, as a morally superior doctrine.

Wrong: it is simply the political doctrine that enshrines resentment as its animating force, but calls it fairness.

That’s it.

And HA - “Gracchus.” Gracchus was a manipulative bastard who sought to make himself the champion of suddenly enfranchised masses, who, in Rome’s client system, would back Him, who would thereby become the most powerful political figure in the Republic, a single-handed counterweight to the Senate and patrcians therefore their superior. 

Social justice - there is no such thing as “social justice,” you nitwit.

Agreed Kulthur.

I confess I used to hold tentative leftist views on economics trying to find balance between this mindset “subjective fairness”, the “need” for government to enact this “fairness” and desire to see business flourish so people could live better lives.

Perhaps because I was trying to be objective to both sides, I missed the core problem and the answer was there all along:

Government’s help yields poor results in most cases. Much of what is reviled and fought against on an economic level has more to do with bad, inefficient policies that do not fix the problem and muddle the economic landscape (leaving “markets” and “capitalism” open to scorn). The needless “fairness doctrine” of so many liberal ideas is ironically what is creating the very problems and excacerbating them at the same time.

It was the very Liberal instincts I held that pushed me away from Leftist conventions and truisms. More than not, our economic problems are caused by market-distorting mechanisms introduced by government. These mechanisms aim at one problem and without really fixing the problem (if it even really was a problem....it’s more than likely a grievance by a narrow group) they create spill over distortions into other areas and on and on. In the end, new problems, real ones, are then blamed on captialism and greed when they were really wrought by “unfair"---ironic---interference by a patronizing and pandering government that then offers to step in and help with more government (NO!).

In the realm of wages, prices, trade, competition and productivity and monetary policy--the things that really matter in generating wealth and better life for all---the government does a poor job because it can’t possibly deliver the “fairness” that narrow special interests want . These interests are “unfair” by nature in that they are SPECIAL interests....be it labor or industrial.

Talk about the arsonist playing fire fighter!

Word.  It isn’t difficult to sympathize with the revulsion inspired by massive wealth, or the terrible struggle many people endure merely to maintain for themselves an unenviable existence, but frankly that does not mean there is a duty to redistribute wealth from one to the other.  Since Aristotle this has been an ambiguous principle at best, and has always arisen from a close consideration of actual circumstances and a communal “happiness” that has required a kind of Procrustean enforcement proportionally increasing with the number and complexity of a population.  This has the same ontological status as the mere fact of random luck at birth and amid the flux of circumstance, and there’s nothing, despite the powerful technology of government, that anyone can do about it.  Besides, compassion and revenge are uncomfortably close in the circuitry.  Beware.

ztnjv,

Paragraphs 1-2:  I would agree the consumers� decisions are felt more specifically and more immediately - when they have a choice. With nearly everything being manufactured off shore freedom of choice is increasingly limited.

�...most (and I do mean nearly all) professional economists are in agreement that free trade is a net benefit for society…
�
We are in total agreement on this statement. But I believe they are out of touch and locked into a training and educational backwater. It is based on economic theory and ignores mitigating factors. In past labor shifts � agriculture/industrial, manual/mechanized � a greater time span allowed a more gradual readjustment.

This one is far different � less than a generation, to people in what we think of as their most productive years, for less money not more, worse working conditions not better and with much of the financial gain going out of the US. The overall effect is showing in the huge trade imbalance, the burgeoning debt (national and personal) and an attitude of indifference among our government leaders of both parties.

Paragraph 3: �...this is based on a shadowy, weaker version of free markets...not real free markets. And, little attention is ever given to role that ill-conceived government action affects our reality. This is what is really missing.�

Exactly! � My main point.

#4: My point is that people can go merrily along, listening to cherry economic blather and making money on increasingly shaky financial ground.... until a crash (the reasons will be a variety of afterthoughts).

#5: �This is false: �The over supply of labor globally is leaving us with a deflation of labor value here.� Not true. Firstly, real wages are not really falling. And if they are in certain segments, it�s a reflection of the marketplace. Wages are like prices...always changing and adapting to demand.�

This is happening across the US right now. The 4.5% unemployment is simply untrue. It has gone on over a period of decades. With the huge global supply of cheaper labor US workers will have a very difficult time adapting to the low demand in most historically well paying categories. This was first felt in lower skilled manufacturing being replaced by robotics. Then even skilled jobs such as tool & die makers were cut. There is now a shortage since there are few qualified to teach the younger generation.

In recent months even the college educated have been facing competition from India here and financial, law, medicine jobs are going abroad by the thousands.

Retail was hit last month when Circuit City fired 3,400 �good employees� to �replace them with people willing to work for less. (so said management).

You think �...real wages are not falling...�? Go to the US Census Bureau website and read what happened between 1996 and 1996. Most reports are cut to sound bites and compare short range data.

Between �69 and �96 median income rose 6.3% adjusted for inflation.
Average rose 24% in the same period. (It is the high end which has gained by far and averaging this may be what contributes to your idea real wages are up.)

Back in the 1960s most CEOs earned approximately 40 times their lowest employee � the latest data (2004) is over 400 times!

http//www.census.gov..hhes/income/histinc/p01.html

Table 1. Percent Difference Between 1969 and 1996 in Selected Economic Measures (amounts in 1996 dollars)

You may note there are now more people per household working and still the low median.

ZTNJV -

Firstly, real wages are not really falling.

A simple statement of a simple truth, solidly backed up by economic statistics and multiple studies, as documented by Alan Reynolds, Steve Conover, and others.

But this is not the leftist position.  The Dimocratic Party, the New York Times, and leftists everywhere insist that incomes of the lower economic groups are falling.  They also insist that unemployment is NOT near record lows, but that government and economic unemployment figures are not accurate. 

If incomes are rising and unemployment is falling toward record lows, President Bush’s economic policies are working and globalization is a success as most economists, President Clinton, and President Bush agree.  We can’t have that!  The leftists require that President Bush is stupid and ineffectual, in spite of all evidence to the contrary.  The leftists arguments are emotional and ideological, not based on fact.  The Dimocrat “Reality Party” lives in a separate reality, not based on truth or logic. And they think they deserve to run the country.

ADDED FIVE MINUTES LATER AFTER READING WTH’s COMMENTS DIRECTLY ABOVE:

See what I mean?  WTH says “The 4.5% unemployment is simply untrue.” How can you argue with deluded illogic like that?

ztnjv,

I would add the rational voter has even less to choose from the the rational consumer. At least it strikes me that way.

While I have generally considered myself conservative in most categories (less so religiously and socially). I could just about have flipped a coin in the last two presidential elections. I did not see much with Gore, Kerry or Bush.

You are right when you point out the dilution of an individual�s political views. I go even further in that I believe our representative form of government has also been so diluted that unless one is part of a really influential special interest (like the NRA) your opinion is meaningless.

The constant polling we hear is all suspect. Unless you know how a question was phrased, how large a sampling was taken and from whom � polls are just another way of �proving� a foregone conclusion.  Independent polls? It depends on who pays them for it.

I want to make clear to everyone too young to know this…

George Bush is in no way a conservative. This �neo� stuff has nothing to do with true conservation of anything. Bush is not even a conservative Christian � he�s a fundamentalist and not a very bright one at that.

Who’s Afraid of Democracy?

Umm, the founding fathers?

Democracy has nothing to do with it.  This is a republic, not a democracy.  A lynch mob is democratic; the victim is simply outvoted.

Regarding the libertarian ideas being explained by kulthur and ztnjv:

“For example, most (and I do mean nearly all) professional economists are in agreement that free trade is a net benefit for society...by far.”

What do you mean by free trade?  Do you mean trade conducted without any external (read government) interference?  Such a thing is impossible.  At the very least government has to police trade activity so that, for instance, I can’t point a gun at you and demand your big screen TV without at least some fear of negative consequence.  There also needs to be some form of contract enforcement, definition of private property (a concept created by and only meaningful within governed political systems), and dispute arbitration.  All of these functions, no matter how locally they are implemented, entail some form of subjectivity, which means that they will tend to benefit one party over another. 

What we call “de-regulation” is really government preference for one entity or industry over another.  So, when effluvia from a chemical factory seep into a river, kill off the fish and ruin the downstream fishing industry, de-regulation asserts that the downstream fishing industry will bear significant costs for producing the chemicals with no chance for remuneration - hardly a “free” situation by anyone’s standard.  If we use the principle of highest overall economic benefit (reduced chemical prices are good for consumers and reduced costs might help create jobs at the chemical factory, which could outweigh the damage done to the fishing industry), this again implies arbitration of some kind and tends to be at least somewhat subjective, not to mention comes close to sounding like “fairness” doctrine itself.

Leaving altruism aside (though altruism is a real, perhaps non-rational, motivator for actual people’s political and economic action) a pithy justification for Rawlsian fairness doctrine is that economic churning makes my situation as a beneficiary of the status quo unstable, e.g. average American white collar executives change jobs 8-10 times in a career and average white collar unemployment runs from 6-12 months.  More extreme examples are the violent cultural revolutions in China and Cambodia last century.

Markets are not bad - they are very good and useful tools, but they are not self-regulating.  They require a political framework, and as such are subject to the same critiques that political systems are: namely in-depth examination of ends and means.  It is perfectly valid to ask, “What is the market for?” “Whom is it serving best?” “Is it functioning in such a way to provide greatest benefit to society” and “How can we make it function better?”

Whattheheck, (scorp, see below the line)

Thanks for the repsonses.

Rational consumer: The consumer IS rational. Let’s not change what “rational” means. WHERE the product comes from, as far as I understand, is not a component of rational consumption...it is simply based on cost and benefit.

Person X’s desire for product A justifies the price as opposed to another choice based on his benefit. People simply don’t discriminate on where the product comes from. PERHAPS, it could be proven that side by side, product A “MADE IN USA” next to product B “MADE IN CHINA” may (MAY) result in a preference for product A....all other things basically equal but I don’t see this as mattering in the general theory of the rational consumer. Rational is in the context of using limited resources to satisfy needs.

Dealing with mitigating factors is a choice we make...but we must understand that the nature of methods can prolong the difficulty of transition. Purists feel it is best left to the private sector to handle this. This may seem cold and perhaps it is. I have no problem with help in cross-training and help. BUT, we must understand that this allocation resources may *(MAY)* not be as efficient as just leaving the resources in private hands to offer solutions.

Competition for jobs is normal. Again, you look at the 4,300 Circuit City Jobs but ingore the millions who purchase from Circuit City or the increased production and growth circuit city will see in other departments....same with the college-level jobs. Wages are a reflection of market conditions...like prices. People used to get paid to do what machines do now. Are we poorer for it? NO. we are richer. The lower cost and increased production GROW the economy with new opportunities. Imagine paying someone to bottle beverages by hand! It really does illustrate the point. The increased wealth and purchasing power CREATED with this increased productivity opens new doors and growth in other areas. Purchasing power affects wealth than wages. To this end, we should consider how our purchasing power has been diminished. The market doesn’t do that...at least not without help from statist capitalistic policies that wreak havoc over time on consumers along with irrepsonsible monetary policies.

What CEO’s earn in relation to other employees is really irrelevant. Again, wages are based on market conditions. The board will not pay wages that do not produce results....at least not for long. And to dwell on such things pulls attention away from what really matters and affects wealth: productivity, purchasing power and efficency. The government is simply not in a position to do this effectively.

Some of the correlllaries you point out over time are just that: correllaries. There is no causation proven there. I would posit that the real causes for good and bad events are found elsewhere in factors that have nothing to do with cohersed “subjective fairness”.

--------------------------------------

Scorp, while, I agree on general policy and the big picture, I do take issue with some details. Bush is not an economic wizard and has done plenty wrong along with what he’s done right. We are not doing the best we can do....it could still be much better. Besides, that tone incites argument with leftists, not discussion. Be a little nicer, my friend. ;)

Matt W.

Firstly, I said FREE trade. See the quote. Then you used fair trade. Fair trade is an obscure term with subjective meanings. I don’t like it.

secondly, you said:

“At the very least government has to police trade activity so that, for instance, I can�t point a gun at you and demand your big screen TV without at least some fear of negative consequence.  There also needs to be some form of contract enforcement, definition of private property (a concept created by and only meaningful within governed political systems), and dispute arbitration.”

That’s not about trade policy. That’s matters of constituional law to private propery and legal protection. We have courts for all that. And that matter of pointing a gun has no relevance to free, fair or unfair trade. That’s a criminal matter of using force against an individual.

Matters of the environment and pollution are, when reduced to their essence, matters of destruction of property that do not belong to the polluter. Environmental law is a little different and it’s not really the issue in trade. Some theorists will argue that enviromental regulation is actually inneccessary for a variety of legal and market reasons. While I’m not totally convinced, I see their logic. That said, I see no problem with smart regualtion (if it can be said) on the environmental. Actions that cause irreparable damage that are detrimental to the earth should be dealt with thru protective measures. How, is a another matter.

As for whether markets are self-regulating, they are. Of course, I’m talking about competition, consumer solutions, wages, prices and the flow of captial, innovation, wealth creation and distribution and matters of that nature. We cannot make it better. We can only make it work different for the benefit of a few at the expense of others and plant seeds for future distortions that then are a opening for more “changes”. In this sense markets don’t “need” a political framework. The protection of consitutional rights and matters of property in a free society DO need a political framework and we have one. When these protections affect markets, it’s on the grounds of stated rights and property...NOT regualtion of markets. This is how it should be. Unfortunately, people are led by special interests to justify undermining the basic framework , thru senselss and truly “unfair” policies, for ends that are not the job of government and moreover, cause socio-economic problems that were avoidable with adherence to the consitution and become hard to discern in terms of cause and effect. This all goes back to the original theory posed by Caplan.

“Firstly, I said FREE trade. See the quote. Then you used fair trade. Fair trade is an obscure term with subjective meanings. I don’t like it.”

Sorry about that.  I meant to type “free trade” - guess that was a freudian slip - I’ve edited my comments to correct it.

“That’s not about trade policy. That’s matters of constituional law to private propery and legal protection. We have courts for all that. And that matter of pointing a gun has no relevance to free, fair or unfair trade. That’s a criminal matter of using force against an individual.”

My point was that courts (which provide protection from the gun situation - thus making trade possible at all), and the political system they inhabit, necessarily imply restrictions on trade, or, to put it another way, “stated rights and property” imply an unspoken regulatory framework.  Because markets cannot exist outside of a political system (with courts, police, etc), they are subject to the same values that inform the political system, and to critiques of these values as well.

“Unfortunately, people are led by special interests to justify undermining the basic framework thru senselss and truly ‘unfair’ policies, for ends that are not the job of government”

What are we talking about here?  Union protections?  Child labor prohibitions?  Recent corporate financial accounting regulations?  Social security?  Anti-trust laws?  Public schools?  Municipal libraries? US Postal Service?  Product labelling?  Minimum wage laws? The FMLA? Retirement and college savings tax shelters?

Is government responsible when people’s _survival_ is at stake?

Matt,

�Markets are not bad - they are very good and useful tools, but they are not self-regulating.�

As with any tool, markets are neither inherently good nor bad � it is people who make either good or bad decisions � at times in spite of regulations (which may be good or bad).

Scorp:

�Firstly, real wages are not really falling.  A simple statement of a simple truth, solidly backed up by economic statistics and multiple studies, as documented by Alan Reynolds, Steve Conover, and others.�

It always amazes me when I get lumped in with leftists. I voted for Nixon, Goldwater, Nixon again, Reagan and two Bushes. (Not always because I thought they were good as I stated earlier).

My investments are far more conservative than investment theory recommends even at my age of 69. My basic political opinion calls for less spending and fewer laws, but…

In spite of commonly accepted data and spin I submit that taxes have been increasing and spendable income decreasing for three decades. If you are happy and contented with what you are hearing from your sources and have had no personal experiences to the contrary and no friends or relatives feeling the squeeze � consider your self fortunate.
------------------------

WTH says �The 4.5% unemployment is simply untrue.� How can you argue with deluded illogic like that?

Well, you might start by investigating for yourself instead of accepting only what makes you feel good. You refer to Reynolds and Conover as sources � does it cross your mind that perhaps people who make their living by touting the market are not the place to look for unbiased opinion?

I say again: �...a lot of money can be made by playing the game by those rules [the greater fool approach]� until some limit is passed or an unexpected factor intervenes.�

The current markets are over extended and still analysts say PEs are low (forward looking PEs as if people can truly predict).

The DOW continues to rise, but this should not be confused with a �good economy� � on several up days recently, down volume has exceeded up as well as the number of companies up/down.

I am not saying �rich is bad� � how one gets rich is another matter.

ztnjv,

�What CEO�s earn in relation to other employees is really irrelevant. The board will not pay wages that do not produce results....at least not for long.�

I have had occasion to witness up close what boards will do. I�ve seen a CEO get a six-figure bonus when profits were down over 23 percent. Locally, I�ve worked with companies (4) whose boards were composed of overlapping membership � all voted great deals for each other.

Boards often present each succeeding CEO with a better package and contract which were paid off even when firing a guy for doing a poor job. Can you honestly be unaware of these situations. Not relevant to you perhaps, but certainly to shareholders and employees.

�...what really matters and affects wealth: productivity, purchasing power and efficiency.�

Yes this affects wealth by boosting stock prices and options. It does not necessarily affect purchasing power in a positive way or service and product quality. Wealth has increased for some while service has been downgraded � tech support for example.

It took me 65 days and 12 different people to change phone service last year.  At McLeodUSA, Inc. (telephone co.) The Americans in Iowa lost their jobs, India gained them and someone made money on the deal � any guesses who that may be?

I am talking real life situations, you are talking theoretical � �I would posit that the real causes for good and bad events are found elsewhere in factors that have nothing to do with coerced �subjective fairness�.

What I am addressing are blatantly unfair policies. Sponsored and passed by both political parties and favoring big corporations (big campaign donors). The American Jobs Creation Act of 2004 is a good example. The unexpensed stock options another. The pushing of globalization at the expense of the American worker and favoring big business.

re; product choice� �I don�t see this as mattering in the general theory of the rational consumer. Rational is in the context of using limited resources to satisfy needs.�

It matters when selection is limited to foreign only.

It matters if your job has left the country and you are working part time at multiple jobs and without benefits.

It matters if you are 50 plus and had always thought you could send your kids to college. 

It matters if you are about to graduate from college with a huge debt and an Indian PhD will work for less than you can afford to.

All these things matter to an increasing number of our fellow citizens.
---------------

“Yes this affects wealth by boosting stock prices and options. It does not necessarily affect purchasing power in a positive way or service and product quality. Wealth has increased for some while service has been downgraded � tech support for example.”

I disagree competley. These things do affect purchasing power and quality in positive and they are the main factors in wealth creation for all people....as opposed to government mechanisms. Artiificially high gains in stock markets are due more to monetary policy than anything. The wealthy money handlers suffer least from inflation.

Tech support has been swinging back into the limelight. After trying to cut costs on this, many companies are realizing that consumers are reacting negatively to such downgrades. As a result, they have determined that their profits are often hurt, not enhanced by outsourcing tech support and some are beginning to bring those jobs back. The market handles these things better and this is but one example. It’s a matter of efficiency. Companies do better when they meet people’s needs and will change in order to do it because based on market feedback, they best how to allocate and REallocate their resources.

Increases in productivity yield better service, value and product availibility. Companies know best how to find these balances and should be left as free as possible to pursue them.

As for that example about the phone company, they will find out soon enough if they are meeting their consumers needs and require change. Of course, if there is a lack in market competition and too much cartelizing regualtions, that change is less urgent and the consumer suffers. Besides, I think we are too quick to point fingers at the market place. ideas are tried, tested and reevaluated all the time. This is how things improve and produce better results for everyone on every level. The same scrutiny of how unneeded government government action causes distortions and inefficiency is often less or non-existent. Whats’s worse is these very problems are blamed on the market when the culprit may have government policy that set events in motion to arrive at the problem in question.

I’m all for fighting unfair policies that hurt people while favoring others. These complaints you mention come from the lack of free market and trade....that’s rigged trade and competiiton-killing priviledge. I make no exceptions. I’m very consistent on these matters....or at least I try to be. I haven’t seen an inconsistency yet on my part.

WTH (continued)

On what matters:

No it doesn’t matter when the selection is only foreign. There’s usually a good reason for it and we are all better off. The only exception would be in somehow an un-free and unfair measure was taken to make foreign goods artifically more competitive than domestic. In this case, there is no free trade but rather rigged trade and special interest at work,

No it doesn’t matter if your job has left the country in terms of the topic at hand. That matters in a discussion about helping people adapt to changes and taking a better look at why purchasing power may be lower....in that latter one, Uncle Sam is often the arsonist in some respect here while trying to play fire fighter.

College: again, you are looking at things differently than me. This is unfortunate and needs to be looked at more broadly: why is school so much? How much can the government do to address these cases within the context of all of society without creating new problems? How has the govt. ALREADY done this? These are real questions that have insightful answers....the real answers. When emotion drives us to conclusions about senstive yet complex issues, we often advocate polcies that do not solve problem nor do they take the sources of the problem into account nor do they happen without causing other problems. Again, this goes back to Caplan’s premise.

Indian PhD?? we all need to make choices. You seem to take thinking about ones choices lightly and why he or she is in that position and wondering more about how to socialize the effects of bad or inefficient practices...THIS IS WHAT BIG BUSINESS does with special interest legislation and regulation in the name of some altruistc goal.

ZTNJV -

I do take issue with some details. Bush is not an economic wizard and has done plenty wrong along with what he’s done right. We are not doing the best we can do....it could still be much better.

Since this is the strongest economy in the history of the world, can you please tell me all the “plenty wrong” things President Bush has done?  And if we are not doing the best we can do, how will we do much better?  Raise taxes, as the Dimocrats propose?  Lower interest rates, and overheat the economy?  Tighten the money supply, and reduce economic activity? 

Every economic action has an effect, and the effect is often counterintuitive.  Our knowledge of the workings of economic mechanisms has improved vastly since the start of the Great Depression, when we raised taxes and restricted trade, and discovered that such actions made the Depression immeasurably worse. 

In President Kennedy’s Administration, economists started to argue that lowering taxes would promote economic growth and employment, and greater economic activity would generate greater tax receipts.  Taxes were lowered, unemployment dropped, business improved, and tax receipts rose.  Lowering tax rates in order to raise tax receipts was controversial, as well as counterintuitive, but it worked as predicted. 

Unfortunately, President Johnson failed to plan for the costs of the Vietnam War and the Great Society, and the American economy went into a seventeen year period of limited growth and stagnation, including three recessions, culminating in record high interest rates and inflation rates during the Carter Maladministration.  Carter suggested that the American economy had reached a limit, and the best we could do was to reach an accommodation with the Soviets, who were thought to be prospering, after a fashion.  This was just ten years before the Soviets collapsed of corruption and inefficiency. 

Presidents Reagan and Bush 43 lowered taxes, just as President Kennedy did, with the same salutary results, interrupted only by the Clinton tax increases and the Clinton dot.com Bubble, which led to the recession at the end of the Clinton Administration.

So, with the economy doing so well, what is the Dimocrats’ economic program?  Raise taxes and restrict trade! 

Dimocrats are insane.  You can be nice if you want to, but Dimocrats are screwing with my economic well-being.  And yours, if you care to notice.

Scorp,

why so hostile? And what’s with the fixation with “dimocrats”? I feel like I’ve written a small book’s worth of posts on this thread. Have you read my posts? Do I sound like a Dem or Leftist to you? FYI, I came here via Caplan’s blog, ECONLOG, which I read everyday.

I’m more of a free market advocate than most Republicans and no, I’m not a Republican either, nor a Keynesian of of any kind.

You spent a lot time asking rhetorical questions which you should be able to easily answer based on what I’ve written already.

I guess one I take issue with is the tone and the reduction of everything to presidents and simple platitudes and anecdotes. Things are a little more complex than that and talking about everything in terms of Bush or Clinton or Reagan or any president and citing a tax hike or cut here and there is a bit simplistic and doesn’t help when talking to people who don’t agree with your point of view. I try to stick to economics and learning and understanding policy. Going down that path, I’ve lost the taste and the urge to talk in such partisan terms.

You can call it playing nice, I call it being civil and engaging.

Anyway, how can things be better? My god. Does spending matter to you?? Are you happy with taxes? I think their too high and only serve to justify outrageous bloated budgets. The GOP had Congress and the White House for 6 years. Aside from one round of tax cuts, they didn’t do much else. Trade? What barriers have they dropped?

If YOU care to notice, the GOP managed to pile on a ton of entitlement spending with Medicare, created new bureaucracies that aren’t working and increased spending in some areas like education when they should have been decentralizing it and spending less, leaving it to the states. They’ve also been increasing subsidies to a variety of industries. Reigning in spending instead of letting it explode could have given more room for some serious tax reform (or abolition of some taxes all together).

In short, there was a lot that could have been done and undone that was not and we’d be better off for it. I guess my standards are a little higher than yours. I’ve barely even scratched the surface. Could things be worse? Yes, a lot worse. Could things be better? yes, a lot better.

ztnjv,

� �...what really matters and affects wealth: productivity, purchasing power and efficiency.�

�These things do affect purchasing power and quality in positive and they are the main factors in wealth creation for all people....�

Theory again.
If methods of increasing productivity, whether robotics or cheaper foreign labor eliminate your job it hardly is a positive on your purchasing power.

-----------
� �...as opposed to government mechanisms.�

My argument is that government mechanisms are skewed to favor the wealthy in the US�s trading policies. The 2004 American Jobs creation Act was a sop to big US corporations after congress placated the EEU�s complaints. It provides NO job jobs in the US, but allows foreign earnings to return here at a reduced tax rate.

The employing of illegals in this country (also illegal) at less than �minimum� wage is a �government mechanism� to favor business and suck up to the Hispanic vote.

China charges 25% on our goods going there and we charge 2.5% on theirs coming here. Pre-NAFTA we had a trade surplus with Mexico, now a big deficit. Another �gov. mech.�

-----------
� �Artificially high gains in stock markets are due more to monetary policy than anything.�

Another �government mechanism� � the Fed held rates too low, too long � allowing recovery from the 2000 market plunge by using home equity as a source of funding � creating a feeling of wealth and the current inflation of the housing market.

� �The wealthy money handlers suffer least from inflation.�

Agreed. The wealthy suffer least from nearly anything. A former client is slowly dying of a form of dementia. He doesn�t realize anymore what is happening, but terribly tough thing for his family. They can afford 24/7 home care and will not be left destitute. The same cannot be said if this happens to the 25 and 30-year employees whose jobs went to Mexico, China and S. Africa and increased his wealth by millions.

� �No it doesn�t matter when the selection is only foreign. There�s usually a good reason for it and we are all better off. The only exception would be in somehow an unfree and unfair measure was taken to make foreign goods artificially more competitive than domestic. In this case, there is no free trade but rather rigged trade and special interest at work,�

This IS happening now.

After reading the balance of your comments I can see we are on parallel tracks. You are speaking in generalities while I am speaking from empirical evidence � my own recent experiences and those of over 50 people that I know. People who fit the examples I have been writing about.

�In theory, theory and practice are the same. In practice they are different.� � Albert Einstein

ZTNJV -

why so hostile?

Ummm, because “Dimocrats are screwing with my economic well-being.  And yours, if you care to notice.”?  But I already said that.

I am not questioning your politics.  We started out agreeing that:

Firstly, real wages are not really falling.

The Dimocratic Party, the Old Media, and WTH are loud and clear (and dishonest and misleading) that wages really are falling for the lower economic quintiles.  Why are they promoting this falsehood?  Ignorance?  No, they have a political agenda which they cannot accomplish by telling the truth.

I guess one I take issue with is the tone and the reduction of everything to presidents and simple platitudes and anecdotes. 

You are not paying attention:

Every economic action has an effect, and the effect is often counterintuitive.  Our knowledge of the workings of economic mechanisms has improved vastly since the start of the Great Depression, when we raised taxes and restricted trade, and discovered that such actions made the Depression immeasurably worse.

Seventy-five years after we discovered what did not work, and forty years after President Kennedy discovered that lowering taxes improved economic activity and raised tax receipts, and ten years after President Clinton confirmed that lowering trade barriers improved our economy and the world economy, the Dimocrats are advocating policies that had disastrous consequences seventy years ago: raising taxes and restricting trade.  We are talking economic policies here, not “the reduction of everything to presidents and simple platitudes and anecdotes”.  I find it ironic that Dimocrat Kennedy originated the application of tax cuts and Dimocrat Clinton was a princpal originator of the application of free trade; these are the two biggest economic insights of the last hundred years, and the current Dimocratic Party is actively trying to revoke both of them.

Speaking of economic policy (we were speaking of economic policy, weren’t we?), what do budget priorities (budgets originate in the Congress, you know) have to do with economic policies, which are questions of money supply, interest rates, tax rates, employment rates, and such?  The economy is working near a practical optimum, and will not make any major advances (unemployment negative five percent?), but is subject to major mistakes, such as Clinton’s major tax increases and the dot.com Bubble near disaster.

President Bush’s first priority is the war on terror.  With an extremely strong economy (if nothing spectacular happens, the budget will go into surplus in less than a year), President Bush can indulge the spending priorities of Congress in order to maintain the war on terror, which is an existential absolute.  The Dimocrats oppose, and are lying about, the war on terror, just as they oppose, and lie about, the status of the economy.

The budget should not be allowed to go into surplus, of course.  If you can borrow money at three percent and invest it with a ten percent rate of return, you should borrow all you can.  This is more-or-less the state of President Bush’s economy right now.  Our priorities should be solving SS/Medicare, national infrastructure, and the energy equation, not paying down the debt, which is utterly benign. 

The spending priorities of the Congress were not “GOP”, as you maintain, but bipartisan foolishness.  The GOP paid a price for spending, entitlements, earmarks, etc, in the last election.  Perhaps they will learn something, and get back to first principles.  But don’t count on it.  We have a national history of stumbling from crisis to crisis, and coming out better than anyone else, thanks to the genius of republican (small r) governance and the rule of law.

Posted by scorp:

“blah blah blah Dimocrat blah blah blah Dimcrats blah blah blah blah Dimocrats”

You make interesting, though I submit highly misleading, arguments, but the use of infantile pejoratives merely makes you seem loutish and stupid.

The Democratic Party is no more monolithic in ideology than the Republican Party.  There are indeed Democrats who sit way over on the libertarian side when it comes to government influence, taxation, and spending, just as there are Republicans who seem to favor big government and out of control spending (current administration included.)

“The budget should not be allowed to go into surplus, of course.  If you can borrow money at three percent and invest it with a ten percent rate of return, you should borrow all you can.”

One wonders then why the current debt rides at close to $10 trillion.  At some point, our debt load will start to make buying government bonds here look like a very bad investment.  At that point, we will be forced to either curtail spending drastically or increase taxation drastically, both of which will probably have a recessive effect on the economy - maybe even leading to a deep depression.  If, horror on horrors, we should be forced to default on any of the debt, we will be pushing around wheelbarrows full of dollar bills in order to buy bread.  Suggesting that federal financial irresponsibility is anything other than irresponsible is .. well.. irresponsible.

Oh, so many comments to make and so many ideas to diget from the assorted posts.  I will choose to comment on the concept of “rational” consumers. 

What is rational about a person buying an oversized house and an oversized car? What is rational about people who continue to fill up those oversized cars and pay to heat and to cool oversized houses even as they cut back on dining at local establishments and buying from local retailers?

What is rational about a person spending $100 at a dollar store just to have lots and lots of “stuff?”

What is rational about spending $60 for a cell phone when a landline and a pay phone could cost $40 per month, without any long-term contract or required expensive phone?

What is rational about paying for high-speed Internet service when all that is needed is basic access to a few newspapers and family e-mail?

I opine that the consumer is as rational as the voter, both of whom are more likely than not to be focused on what the national budget means for themselves and their immediate families.

Matt -

Would you care to list and debate any of my “highly misleading, arguments”?

You might start by trying to defend this perfectly ridiculous statement:

One wonders then why the current debt rides at close to $10 trillion.  ($8,914,896,000,000 and counting by Conover’s calculation two minutes ago, but OK.) At some point, our debt load will start to make buying government bonds here look like a very bad investment.  At that point, we will be forced to either curtail spending drastically or increase taxation drastically, both of which will probably have a recessive effect on the economy - maybe even leading to a deep depression.

Ummm, no.  Interest rates are stable, indicating that there is no indication of panic such as you project.  In fact, as long as I have been following this, a number of years, doomsayers such as yourself have come up with these wild-eyed catastrophe scenarios that never materialize.  On the contrary, China, India, and other developing countries are desperate to buy our debt, in order to stabilize their own shaky currencies and create a store of value for themselves, which they use to increase their investment and growth, thereby increasing world prosperity, including our own.  Meanwhile, the cost of supporting this debt is minimal and the productive uses of the money borrowed is maximal if we can keep the hands of the Congress out of our cookie jar. 

A short historic review of our economic growth is helpful, and is readily available on numerous sites.  Data360 will suffice nicely, if you are not familiar with the information. 

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=230

Please refer to the constant dollar (red) line.  Note the sharp upward break in GDP growth when the Reagan reforms kicked in in 1982, the even sharper upward break in 1996 when the Bubba Bubble developed, the stagnation that followed the collapse of the Bubble, and the resumed growth when the Bush tax cuts kicked in.  Please don’t be afraid of this data.  It is quite factual, and ignorance is much more expensive and hurtful than knowledge. 

Economic conditions are the product of economic decisions.  We know that raising taxes lowers economic activity, lowers employment, and lowers tax receipts.  There is no reason to delberately hurt the economy, as the Dimocrats propose to do, by raising taxes. 

There are many challenges facing our economy (SS, Medicare, energy) and we need maximum growth to pay for these.  The Dims are promising minimal growth (or another recession) by promising tax increases.  I know of no Republicans that are advocating tax increases, in spite of your attempt to differentiate the political viewpoints within the parties.

What happens when america has to pay back our debt? Other countries will own us, our economy is borrowed and favor the rich, 7 million people that lived in the middle class under clinton now lives in poverty.
U.S. took in 2.1 trillion in taxes last year and spent 2.23 trillion the next day so we have to borrow about a trillion a year from other counties to make it until next year. How long can the U.S. do this before we start paying back and getting out of debt?

scorp,

--"Meanwhile, the cost of supporting this debt is minimal and the productive uses of the money borrowed is maximal if we can keep the hands of the Congress out of our cookie jar. “--

Interest on the debt chews up a sizable portion of the budget. And Congress’s hand in far from out of the cookie jar. It looks like the actual cookie jar to me and just keeps growing.

There’s no excuse for this. Of course the reason is pure capitulation to get re-elected. Few are immune to criticism for all this....on these matters, people like Ron Paul stick out like a sore thumb and get branded “Dr. No” and a kook when he’s the most rational person there.

And SillyLeftist,

The consumer is still rational. What you describe has nothing to do with disproving that idea. In fact, I say that they are being rational based on the information that have via interest rates....which are often ARTIFICIALLY LOW. A more accurate interest rate and monetary policy that wasn’t manipulated so much would allow consumers’ rationality to not lead them into traps.

Scorp, Silly leftist, ztnjv, Matt, brian28,

The consumer may be rational in his thinking and still make poor decisions based on false or misleading info.

Take Scorp�s comment for example �

�The Dimocratic Party, the Old Media, and WTH are loud and clear (and dishonest and misleading) that wages really are falling for the lower economic quintiles.� Why are they promoting this falsehood?� Ignorance?� No, they have a political agenda which they cannot accomplish by telling the truth.�

For now, let�s just ignore his assumptions that anyone who disagrees with him MUST have a political agenda, be lying, ignorant, etc. and see where he is coming from…

Scorp gave two names a while back as sources for his economic view that real wages are not falling � Alan Reynolds and Steve Conover. I had never heard of either, but after reading a bit about them and by them, I see they are in the business of giving investment advice.

A.) Alan Reynolds �

Consultant in Foreign Trade and Investment Promotion

From his resum� ��2005 completed 4 weeks in China developing trade promotion�

Could this in any way influence his global economic view?

B.) Steve Conover �

1. Carrot Economics: “Growth is good."�
2. Stick Economics: “Rich is unfair.”

There are more details at his blog, but he keeps it nice and simple with two choices. One all sweetness and light � the other a real downer.

Now I better understand why Scorp is so touchy � it gets too confusing to try to deal with ideas which may propose life is more complex.  Anyone submitting such complications MUST have a vile, ulterior motive.

I believe for any issue or problem there is an infinite number of possible causes � and usually a combination of several.

Watch out now… I�m going to pick on one of your points.

�China, India, and other developing countries are desperate to buy our debt, in order to stabilize their own shaky currencies and create a store of value for themselves...�

Not too desperate �recent indications are that China has begun buying other than dollar debt. The dollar is down over 20% in the past year. The only reason China is not selling is because that would devalue the huge amount of US debt they are holding. (Yes, I know there are those who claim a weak dollar is good for our exports, but about all we have to export anymore is ag products.) I�ve been doing just fine swapping between dollars and euros and trading in precious metals, but I would prefer a good solid US operating company like I invested in 30 years ago.

I would prefer that my friends and my sons could depend on our economic policies to benefit ALL Americans � I have no political agenda nor see any politician worth voting for at the national level.

Brian -

What happens when america has to pay back our debt?

Why would we do a silly thing like that?  We are constantly turning over our debt, paying off old and issuing new.  We have done this for decades, if not centuries.  We do not need to pay off the debt, only renew it.  The debt performs many valuable functions for us and for those who are so desirous of it.  Buying American debt is the best thing China and Saudi Arabia can find to do with their money.  If they had a better place to park their cash, they would do so. 

7 million people that lived in the middle class under clinton now lives in poverty.

Name two, besides WTH.  I must request that you justify this statement.  That is the type thing NYT or Howard Dean would say, and it is utter fiction.  The economic well-being of every quintile of the population is constantly improving.

And the difference between $2.23 trillion and $2.1 trillion is $0.13 trillion, not “about a trillion a year from other counties “.  Moreover, less than 25% of the debt is owned by foreigners.  And there is nothing in the record to support your figures.  Try again.

WTH -

The only reason China is not selling is because that would devalue the huge amount of US debt they are holding.

Ummm, no.  China has maintained a close peg with the dollar for a long period.  Therefore, the renminbi stays constant with the dollar no matter what the dollar does.  The dollar has just experienced a substantial realignment, but moving out of dollar now would have little effect, except to hurt China.  China is diversifying its portfolio, including investments which will provide a higher return.  This is quite prudent.  This, in fact is what the USA should be doing with the money it borrows.

... about all we have to export anymore is ag products ...

You come up with the damnedest nonsense.  In January -March 2007 we exported:

Services $107 billion
Agricultural $18 billion
Industrial $72 billion
Capital Goods $107 billion
Automotive $28 billion
Consumer $35 billion
Other Goods $13 billion

Where do you get this crap?  From the same source you get your unemployment figures?

The biggest chunk (about 25 percent of the $8.5 trillion total) is held by foreign governments. Japan tops the list (with $644 billion), followed by China ($350 billion), United Kingdom ($239 billion) and oil exporting countries ($100 billion).
But the current trends aren’t promising. At the moment, the U.S. economy is still relatively strong - both unemployment and inflation are relatively low. But growth seems to be slowing and, at some point, the economy could slide into a recession. When that happens, the economy shrinks and so do tax revenues. But Uncle Sam still has to the pay interest on what he’s borrowed - just like you don’t get a break on your mortgage payment when you lose your job. If we keep spending more and more on interest, the federal budget gets squeezed that much harder when the economy eventually stumbles.
American investors and companies also have investments in foreign countries. Last year marked the first time since 1915 that the net balance of this investment turned negative.

“Foreigners now earn more on their U.S. investments than we do on our investments abroad. In effect, we’ve used up our bank account and turned to our credit card. And, like everyone who gets in hock, the U.S. will now experience ‘reverse compounding’ as we pay ever-increasing amounts of interest on interest.”

I believe that at some point in the future, U.S. workers and voters will find this annual ‘tribute’ (of interest payment on the debt) so onerous that there will be a severe political backlash. How that will play out in markets is impossible to predict – but to expect a ‘soft landing’ seems like wishful thinking.
From an even then huge $531 billion in 2003, the current-account deficit has been rising in recent years by more than 20% a year, last year’s was $805 billion, and the projection for 2006 is more than $975 billion - that’s almost 7% of gross domestic product. In other words, America’s spending addiction, from DVD players to destroyers, means that the nation consumes 7% more than it produces.
From reaching a high of $117.2 billion in August 2005, the TIC reports are showing a steady decline in foreign inflows, down to $74 billion in December, and $78 billion for January, the last month for which data are available. The nasty thing about this is that with a projected $975 billion current-account deficit for this year, the US is no longer getting what it needs from the world to maintain its lifestyle. The foreign-capital food supply is dwindling just as the hunger increases.
If foreigners with export earnings from the US do not put it back into US assets, they will not just keep it stuffed in their mattresses; they will look around for interest-bearing instruments denominated in euros, sterling, yen, or a dozen other currencies.

http://www.thinkandask.com/news/jobs.html
The “official” unemployment rate in the United States is 5.5 percent (July 2004), a contradiction to the actual number of unemployed men and women in the United States, which stands at 16,265,736. The United States government only keeps you “unemployed” for six months, whether or not you find a job. The Labor Department (BLS) reports that an additional 300,000 workers fell out of the labor pool (an average monthly share throughout 2003.) Some 6,700,000 professionals have fallen off their unemployment benefits without finding a new job. Employers added no hope, creating only 32,000 jobs in July 2004.
Those who have filed for unemployment, allow benefits to run the course without finding a job already know that when you call the unemployment office that one extra time...hoping to slip in one more $300 check request....the recording tells you that you are no longer listed as “unemployed.”

This is a good economy however, according to the White House.

Update: July 2004
U.S. Labor Department numbers for June 2004 show that national unemployment remains unchanged at 5.6 percent.

No offense to those living in North Dakota, where the unemployment rate is 3.4 percent, but a strong economy is more reflective of the populated states… here is a look at some numbers from June 2004 using Labor Department figures.

Michigan 6.5 percent
Illinois 6.4 percent
California 6.2 percent
Washington (state) 6.1 percent
New York State 5.9 percent
(Manhattan 7.2 percent)
Texas 5.7 percent
Alaska has the highest state unemployment at 7.3 percent. The actual number of professionals out of work is not tracked by the Labor Department.

2003 Unemployment Rates by Country: U.S. rate includes those off unemployment benefits, which is how E.U. countries measure their true unemployment.

United States 9.7 percent
France 9.6 percent
Germany 9.3 percent
European Union 8.8 percent
Italy 8.5 percent
Canada 7.6 percent
Japan 5.2 percent
United Kingdom 4.9 percent

Job creation is a hot topic during this election year; and while the White House statisticians report the lowest unemployment rate in 14-months, during President George W Bush’s reign the economy has lost 2.3 million professional jobs.

No matter which political party owns the White House, keeping the true numbers of unemployed artificially low boosts the perception of job creation and economic growth. And there are some fun number games you can play to help the process along, including: Not counting the actual number of people who file for unemployment benefits.

One would think an accurate count of unemployed could come from 350,000-plus workers per week who file new jobless claims, but that is not how the government counts the tiny fraction of workers who lose their jobs.

For the most part, the numbers in the chart correspond to the annual compounded rates of progress for each indicator.2 The indicators have also been inverted in some cases, so that positive scores represent moves in the right direction, and negative scores represent moves in the wrong direction. For example, poverty declined by an average of 2.29 percent in the Clinton years (a move in the right direction), and it grew by 4.33 percent annually in the Bush years (a move in the wrong direction). To make the decline a positive number and the growth a negative number, we have changed the indicator to poverty reduction. Thus, Clinton’s score is plus 2.29 percent, and Bush’s is minus 4.33 percent.3

Debt Reduction Relative to GDP4
The national debt is the net amount of debt held by the federal government ($3.9 trillion in 2003).5 It increased under both administrations (in today’s dollars). But under Clinton the debt rose more slowly and GDP rose faster than under Bush. The result is that the ratio of debt to GDP went down an average of 3.89 percent per year during the Clinton years, but has gone up an average of 0.94 percent per year during the Bush years.
One of the most important measures of economic well-being is the number of people with jobs. The number of jobs in the economy increased 2.38 percent per year under Clinton, but it has decreased 0.17 percent per year under Bush.9 While it’s clear that the economic downturn in 2001 was not Bush’s fault, the sluggishness of the recovery is unprecedented in the period since the federal government began issuing detailed employment reports in the 1940s. There have been 1.7 million jobs created since September 2003, which may sound like a lot, but that number falls short of the 1.8 million jobs that must be created per year just to match population growth, and it falls far below the 3.7 million jobs that the administration predicted would be created when the president signed his 2003 tax cut into law.10 This slow job growth is largely attributable to both the failure of the administration’s fiscal policies (which targeted tax cuts to stimulate savings rather than spending) and the failure of its trade policies (which have done a poor job of opening foreign markets to spur export growth, and have not created the conditions for an orderly decline in the value of the dollar, which would have helped ease the trade imbalance
http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=107&subsecID=295&contentI ID=252964

During The O’Reilly Factor, O’Reilly aired a clip of Clinton’s interview on the September 18 edition of ABC’s This Week, in which Clinton argued that Republicans are not committed to reducing poverty. O’Reilly then informed his audience that the poverty rate in 1996 was higher than the poverty rate in 2004. While this assertion on its face is accurate, his comparison obscured the more relevant fact that the poverty rate declined every year of the Clinton presidency and has increased every year under the Bush presidency. During Clinton’s tenure, the poverty rate fell from 15.1 percent in 1993 to a low of 11.3 percent in 2000; it has risen every year that Bush has been in office, from 11.7 percent in 2001 to 12.7 percent in 2004. Media Matters for America has previously documented (here and here) O’Reilly’s use of this misleading comparison O’Reilly claimed that the tax rate under Clinton climbed higher than at any point since World War II
O’Reilly used misleading statistics, fiscal falsehoods to defend Bush economic record

scorps facts.

my perspective on this exchange:

Keep in mind that I say this as neither a defense or attack on either Bush or Clinton.

In this really the right way to discuss these things? I say no.

I mean really, what does showing poverty rates between the two presidents’ terms even mean? I don’t think it means as much as the insinuations lead on. Same holds for other “stats” on wages or whatever. I think this style of debate that uses correllaries to somehow join the stats with a president’s tenure is incomplete and dishonest because it’s just a short cut way to somehow use stats as a condemnation or vindication of a president’s policies without really looking at what factors matter and which ones don’t.

I think closer analysis would reveal a variety of factors that would leave devout partisans unsatisfied and unable to pop out quick cursory observations to explain away numbers.

Wow - Jimmy Weinstein must be rolling over in his grave.  A socialist magazine where the socialists fight with one hand tied behind their back and concede all of libertarians’ points before the debate even starts. 

1.  Egalitarianism is NOT the same thing as resentment and is perfectly defensible.  Things were better when the rich, by taste didn’t flaunt their wealth so ostentatiously.  Like Paris Hilton, anyone?  And no, the fact that I can buy more junk than my parents could doesn’t refute this - doesn’t render it irrational.  Sure, egalitarianism can be taken too far, like anything else - such as inegaliatarianism, which reigns supreme today, but some dose of it is essential for the smooth running of the system.

2 And no, the depredations of the corporate elite are not self-correcting in any meaningful interval of time.  It gives me no comfort to know that the stockholders will eventually rise up in about fifty years or so and throw the bums out.  In the long run we are all dead.  Democratic regulation, even if it is sometimes economically irrational, may be more efficient than waiting for stockholders to come to their senses.

3.  Nothing is refuted just because Lou Dobbs says it.  Dobbs may be a racist asshole, but it simply isn’t necessary for Chris Hayes to dissocatiate himself from anything Dobbsian at the start.  The valuable part of Dobbs is precisely that he posits that corporations chartered by the United States of America have some responsiblity to its citizens.  Tax-shelter islands, relentless offshoring to countries that pursue calculated industrial policies, while the USA “selflessly” refuses to do the same for its citizens - while the “selfless” princes of the corporate world laugh all the way to the bank.  Attacking everything Dobbsian may be de rigeur in today’s Left - and that’s too bad because it leaves people like Chris Hayes fighting with one hand tied behind their back.

And no, you don’t have to have a mystical faith that “the people” are always right to appreciate that no policy that is tyranically imposed on them by a well-meaning elite is likely to be better than what “the people” come up with.

sTiVo -

Democratic regulation, even if it is sometimes economically irrational, may be more efficient than waiting for stockholders to come to their senses.

Ummm, no The stockholders own the corporation, and the Democrats and the democrats do not.  Just what we need, Democratic democrats making “economic irrational” decisions, otherwise known as socialism.

Tax-shelter islands, relentless offshoring to countries that pursue calculated industrial policies, while the USA �selflessly� refuses to do the same for its citizens - while the �selfless� princes of the corporate world laugh all the way to the bank. 

Please name all the “(t)ax-shelter islands” and all the “countries that pursue calculated industrial policies” that exceed American incomes and standards of living. Why do you suppose your list is so short?  And when you come to your senses, stop talking so foolishly.

And no, you don�t have to have a mystical faith that �the people� are always right to appreciate that no policy that is tyranically imposed on them by a well-meaning elite is likely to be better than what �the people� come up with.

Ummm, a policy like the global warming hysteria, perhaps?  Global warming is the illogical successor to global cooling, Alar, and Y2K.  In five years it will be something new, when the �the people� realize that they are being shafted by a “well-meaning elite” named Al Gore and MSM.

scorp -

Write back when you grow up, ok?

I work for one of the country’s largest corporations.  If the stockholders could see what goes on with their money they would throw it over tomorrow.  But they can’t and they’re shielded from the consequences of bad executive decisions by the vast amounts of corporate welfare that the Republicans so-small-you-can-drown-it-in-a-bathtub government keeps throwing their way.

Tax shelter islands?  Oh I don’t know, the Caymans?  Gee, sorry, I guess I must have misspoke, it isn’t an island, but what about Dubai, where Halliburton is now chartering itself?  I may be old-fashioned, scorp, but as a citizen and a taxpayer, I feel that part of that tax dodge is MY money they’re playing with.  Got it?

Calculated industrial policies?  I don’t know, you think the Indian gov’t isn’t helping grow their high-tech sector?  Yean, I know, our standard of living is much higher than theirs, but it’s probably on borrowed time.  Think Japan isn’t making decisions about what industries it wants to be in?  Korea?  China?  Singapore?  Fifteen years ago William Greider asked “Who Will Tell the People” and for fifteen years no one has told them what industries we won’t be giving away.

And what rant would be complete without a denial of global warming which of course, scorp just KNOWS can’t possibly be caused by humans.

scorp will never admit defeat he drinks to much orielly kool-aid.

sTiVo, Brian -

Write back when you grow up, ok?

scorp will never admit defeat he drinks to much orielly kool-aid.

I am impressed!  I didn’t know that people of your ilk could be so profound.

I’m afraid you can’t tell me much new about corporate behavior, but that is beside the point.  The Soviet Union collapsed from corruption and inefficiency, so I am certain their corporate behavior was much worse than our own.  Old Europe putters along well below tt’s capability, due to their stultifying socialist bureaucracy.

In the 1980s, Japan was growing so fast that there was serious consideration that they would take over Asia, the industrial world, planet earth, even the universe.  So, where is Japan now?  Japan has reached it’s limit.  Given optimum conditions (republican democracy, free markets, the rule of law) a country will rise to near its potential, which is what Japan has done, following our example. 

The strength of the United States is not in some petty tax shelter island or somebody’s industrial policy.  If you worry about such things, you miss the whole point.

>> I’m afraid you can’t tell me much new about corporate behavior, but that is beside the point.

Really?  What is your experience?  I work at one of the world’s largest corporations.  My wife works at a dysfunctional public hospital with no money.  If we listed the dysfunctional things happening at both places and jumbled them together, you wouldn’t be able to tell which was which.

>> The Soviet Union collapsed from corruption and inefficiency, so I am certain their corporate behavior was much worse than our own.

No doubt, but if that’s where you’re setting the bar, you’re setting it too low for me.

>>Given optimum conditions (republican democracy, free markets, the rule of law) a country will rise to near its potential, which is what Japan has done, following our example.

Really?  Following our example?  Which industries has Japan given away?

>> The strength of the United States is not in some petty tax shelter island

No kidding.  That’s one of its weaknesses.

sTiVo -

>> I’m afraid you can’t tell me much new about corporate behavior, but that is beside the point.

Really?  What is your experience?  I work at one of the world�s largest corporations.  My wife works at a dysfunctional public hospital with no money.  If we listed the dysfunctional things happening at both places and jumbled them together, you wouldn�t be able to tell which was which.

United State Army, the world’s largest oil company, and several of the largest international engineering and construction companies.  I’ve published a book on disfunctional managers in organizations, based on my experiences in the military and industry.

>> The Soviet Union collapsed from corruption and inefficiency, so I am certain their corporate behavior was much worse than our own.

No doubt, but if that�s where you�re setting the bar, you�re setting it too low for me.

That is a phenomenally dumb statement, even from you.  We are discussing the successes of democracy, free markets, and the rule of law, not the failures of socialism.  The SU just provides a comparison and a lower-limit reference point.

>>Given optimum conditions (republican democracy, free markets, the rule of law) a country will rise to near its potential, which is what Japan has done, following our example.

Really?  Following our example?  Which industries has Japan given away? 

Steel making and ship building.  Shortly after WWII, Japan and MITI concentrated on areas where they had some expertise, and practiced protectionism.  As their economy improved, they made a conscious decision to move out of basic industries into high tech areas where they could be more competitive.  As they became more competitive, and under international pressure, they reduced their protectionism.  Now almost 75% of the Japanese economy is service based, and Japan is the second largest industrial and economic power in the world.  You are genuinely unaware of all this, aren’t you?

>> The strength of the United States is not in some petty tax shelter island

No kidding.  That�s one of its weaknesses.

Are you fucking crazy?  Some petty tax shelter island is a weakness to the USA?  What are they going to do, attack us?

Gee, Brian was right.  You are kind of like an energizer bunny aren’t you?  You just go on and on.

I’ve published a book on disfunctional managers in organizations, based on my experiences in the military and industry.

Really?  Give me the title and publisher, I’ll be sure to check it out.

We are discussing the successes of democracy, free markets, and the rule of law, not the failures of socialism.

Silly me, I thought these two topics go hand in hand.  Oh, and scorp, who brought up the Soviet Union?  Wasn’t me.

they made a conscious decision to move out of basic industries into high tech areas where they could be more competitive.

A conscious economic decision by a government.  In other words, an industrial policy.  I thought you were against this type of thing.  But it isn’t exactly “following in our footsteps”, is it?.

Are you fucking crazy?  Some petty tax shelter island is a weakness to the USA?  What are they going to do, attack us?

Some weaknesses aren’t military.  This one is more like rot from within.

sTiVo -

Really?  Give me the title and publisher, I�ll be sure to check it out.

Sorry, I will have to decline.  Hardesty on this site has already threatened to shoot me with his genuine .357 Mag, behead me, and come to my house and whip my ass, if I would only tell him where I live.  You know how irrational these leftists can be. 

But I will give you a hint.  Have you ever heard anyone say, “I am a tough son-of-a-bitch” or “I’m a tough little bastard”, anything similar?  If you have heard this statement, was the person really tough, or do you think he (she) was disturbed, and disturbing?  Tough as they claimed to be, did they get good results?

Really?  A conscious economic decision by a government.  In other words, an industrial policy.  I thought you were against this type of thing.  But it isn�t exactly �following in our footsteps�, is it?.

If you will go back and read what I wrote, I specifically addressed Japan’s condition at the end of WWII and it’s development afterward.  MITI was the most powerful ministry in Japan, and being head of MITI was a requirement to become Prime Minister.  Now MITI no longer exists.  I am certainly not endorsing “industial policy” or its many variations, but every advanced nation has gone through it in some form.  At some point it is no longer needed, unless you are a socialist, and then you will never stop needing it.  You are genuinely unaware of all this, aren�t you?

Thanks for the history lesson on MITI.  You obvously know a bit more about Japanese history than I do.

Nonetheless, do you suppose, now that the Japanese have decided to go after high tech rather than heavy industry, that their cabinet ministers in charge of the economy are going around saying “outsourcing is a good thing for Americans” as one of ours did, cheering as they push high tech out the door?  No, the Japanese decided what they want to emphasize and they’re emphasizing it.  They’re fighting, as a nation, for those sectors of the economic turf they want to specialize in.

Whereas here, in the good old USA, it’s whatever the CEO’s and the stockholders want.  If they can make more money by outsourcing, more power to em!  All outsoucing is good!

Just what is it we’re specializing in?

scorp go on a right wing blog, you are like debating with a wife, the left will always be wrong and you will always be right, facts to you although interesting are irrevalant. You cherry pick facts to fit your needs just like bush. When you are proven wrong you dismiss it or attack somebody in a rant, if you go to a right wing blog you will be with your own people. What ever happened to tina-1 she said she would kill herself if the demos won the house and the senate. I hope she is alright.

Egalitarianism is not resentment?

The problem with socialists is they’ll never be good economists because they subscribe to the uber-ideology, and therefore can never become good psychologists.  Don’t you people ever read your Nietszche?

Of course it’s resentment.  Inegalitarianism will Always Reign, and never has it Not reigned.

To quote Stendhal, inventing a citation from Machiavelli, “is it my fault if that’s the way things are?”

I’m actually not a libertarian; economics is only part of the picture. 

Capitalism is what happens when no one makes rules - that’s all.  Of course it gets codified, but it gets codified In Law, because That’s What Law Is.  I like this idea, since the evidence shows a society that adopts as its ideal a centrally-planned economy, of necessity in such a highly unnatural, Procrustean, and artificial rubric such as socialism, will wither into totalitarianism of one form or another, utterly dependent on its predecessor for all its cultural capital.  Neither form of economic preference will ever be perfectly realized, as with everything else in the world, and so I’d much rather the tendency be toward natural freedom.  If I were born a trustfund baby, I could become Bill Gates or I could become one of the four or five self-immiserated, confused heroin addicts I know.  Or I could become an insurance adjuster. 

The great irony of the culture of socialism is that, for all its conceit about eschewing materialism (acquisitiveness), socialists are at least as deeply preoccupied with material things as are the most selfish “capitalists” I know.  Sort of like how strident Muslims supposedly hate life as inimical to the pure love of Allah, and yet believe they should rule over all material things and regulate all habits, down to bodily functions.  This necessitates a rather maniacal familiarity with “the world,” no?

It’s like this whole healthcare “crisis:” we are constantly reminded by certain Democrats and others that we have 48 million US citizens without any form of healthcare.  Gee, that means we have about 252 million people With some form of healthcare.  The year is 2007.  I wonder how many people in 1907 had healthcare, and what it consisted of.  I’m not saying it’s all dandy that 48 million people don’t have healthcare of any kind, but I do think people are misiniterpreting the significance of that number with respect to national health.

Frankly, since I am not an ideologue nor an economist, all I do is look at the verdict of history over, now, quite a nice chunk of time, and all I see is ruin where once were rather vibrant cultures anywhere that socialism prevailed.  All this was achieved in amazingly short order, too.  About the only thing that it managed to resolve once and for all was literacy - but this was a function of totalitarian political necessity, not liberal enlightenment or economic justice. and the available curriculum was therefore a little bit, shall we say, truncated.

By the way, the cult of Paris Hilton is a function of Technology and Stupidity, not a function of Capitalism or Inegalitarianism, sillypants.  Besides, the media just puts crap out there and people watch crap out of habit.  That’s it.  Sometimes a leggy blond is just a leggy blond, amigos.

sTiVo -

I detect a certain seriousness of purpose in your latest post, when previously we were just talking past each other.  I would welcome a serious converstion on Japan or any other topic. 

To help us establish a common ground for discussion, please demonstrate some knowledge on who J. Edwards Deming was, why the most prestigious industrial award in Japan is named after him, and how this relates to the fact that Toyota surpassed GM as the world’s largest automobile