Economics for Dummies or....Something about a Goose and an Egg

4/24/11

Talk about taxes and deficits seems all the rage now. More popular than Jersey Shores? Of course not. Still, fiscal policy is getting some attention these days. I’m largely ignorant about economics. I don’t understand monetary theory, how China manipulates their currency or why conservatives are more concerned about inflation (BUY GOLD NOW!) and liberals are more concerned about deflation. Still, before we decide where we want our country to go, there are a few things everyone should know.

#1 foolish misconception: Wealth is static. Some people (liberals) seem to think there is a fixed amount of money and if one person makes a lot, it’s because it was taken from someone else. Wealth is not so much to be made by all but to be spread around. Two seconds of thought would obliterate this foolish notion. 150 years ago, most babies died and leisure time was only for the rich. In the last 50 years, people have gained leisure time, bigger houses (The size of homes has more than doubled since 1950.), more mobility, more and better gadgets, and longer life spans. Across ALL income levels we spend less of our income on food and necessities.

#2 foolish misconception (a favorite of the left): The government creates jobs. The government does not make money and therefore cannot create a job. All it does is take money out of the economy and put it somewhere else. At best, that is a net wash of jobs. More likely, however, that money would have flowed naturally and efficiently to where it was needed. The government artificially moves it to somewhere after it is eaten up by the usual waste and fraud.

#3 foolish misconception: The rich hardly pay any taxes. The top 1% of earners pay 38% of all federal income taxes. The top 5%? 59%. The bottom 50%? Less than 3%. The percentage of federal income tax that the bottom 50% pays has also dropped substantially since 1980, from 7% to 2.7%. http://www.taxfoundation.org/news/show/250.html

#4 foolish misconception: The rich get richer and the poor get poorer. This is half true. The stinking rich are indeed stinkier and as a share of total income, the bottom 50% do have a smaller percentage, 17.68% in 1980 and 12.75% in 2008. However, looking at data to 2008, the poor are not getting poorer. The poverty rate has dropped from 22.4% in the 1950’s to 12 percent in recent years. http://en.wikipedia.org/wiki/File:US_poverty_rate_timeline.gif. The bottom 20% average income dollars has roughly stayed the same according to one source, http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1967-2003.svg , but has risen greatly according to others. A May 2007 report by the nonpartisan Congressional Budget Office, http://www.cbo.gov/doc.cfm?index=8113, stated that the poorest fifth of families with children had the fastest overall earnings growth, more than 33% between 1991 and 2005. It’s true that top incomes have climbed substantially but the poor are no worse off and are indeed much better off by many measures. Poverty used to mean hunger. Now, the poor are often obese, the problem being an abundance of cheap and tasty food. (Taco Bell, oppressor of the masses?)

#5 foolish misconception: Our governments are not really broke; They just lack the political will to tax the rich. It’s true there is a great deal of money out there and if the government just took it, it would indeed solve the budget problem. But what would we do next year when the economy collapses? Why do some people (liberals) fail to realize that if the rich are targeted, they will invest their time in tax avoidance or, God forbid, stop spending money altogether. At some point, higher taxes have to discourage the risk taking necessary to invest and create new businesses. They don’t hide their money under mattresses (not yet anyway). They put it to work, which creates jobs. This was a major lesson FDR never learned. He raised the top rates and got less and less revenue. Enraged at their greed, he did nothing to create incentive for economic investment.

Clearly, it is frustrating for those who struggle, who have been laid off, who are deeply insecure about their finances, to see others living in luxury. I’m no fan of the rich myself. Frankly, I’m jealous of their cool cars. I have no problem with taking their money but at some point, going after the wealth makers and job creators shoots us all in the foot. Why kill the goose that lays the golden egg?

Sons of Revolution: Part I

3/9/11

Sons of Revolution: Part 1

The world is going to hell in a hand basket. Japan is glowing. The earthquake did more damage than Godzilla. Ghadaffi is strafing civilians and the rest of the Middle East is still in turmoil. While Japan will probably remain stable, the Arabs still have revolution on their minds and, while revolutions are exciting and fun, we must continue to think of the values that drive them.

The longer I live, the more I’m convinced there are only two great political philosophies: The left and the right. Little in modern history illustrates their differences more than comparing the American and French Revolutions. Sorry for the pretentious history lesson but this is relevant stuff. What were the values that compelled our founders to fight George III? Where did these values come from? What about the French? You may have heard that Marie Antoinette uttered, “Let them eat cake”, (she did not) or that the oblivious Louis XVI was downright callous during a time of great hardship (he was). But what really caused the French Revolution (1789-1799) and why was it so bloody?

Hordes of women tearing through the palace of Versaille in 1789 looking to put the queen’s head on a pike, starving and angry as they were, did not drive the revolution. It was driven by the values of the Enlightenment: Science and reason, progress, the goodness of human nature, the individual as master of his future. This was a true revolution, complete, compelled by radical egalitarianism and the total eradication of all class and distinction.

The charismatic utopian, Maximilien Robespierre, sought a dramatic restructuring of society. All vestiges of privilege were pounced upon and torn apart. Words like “madame” and “monsieur” were banished because they sounded bourgeois. The Catholic Church was effectively banned. Its property was seized. Priests were tortured and sometimes executed. While many of the movement leaders were atheist, Robespierre was a deist. Believing that religion was important for the people, he instituted, “The Cult of Reason”. To commemorate it, he had a huge papier mache mountain built at Notre Dame. Robespierre descended the mountain as “The Goddess of Reason”. Up to then the citizens of Paris had been fine with the rolling heads and property seizures but even they seemed to be saying, “Who does he think he is, God?”

During the 1793-1794 Reign Of Terror (otherwise known as the year the French really lost it*), up to 40,000 had been executed for the sin of having money or simply not having sufficient revolutionary zeal. Blood literally ran through the streets on days when the guillotine was busy. Professional malcontent and chief agitator, Jean Paul Marat, stoked the violence from his bathtub. On 7/26/1790, he raged against those revolutionaries he judged too conservative, saying, “Five or six hundred heads would have guaranteed your freedom and happiness but a false humanity has restrained your arms and stopped your blows…”

Perpetually bloodthirsty, the revolution eventually turned on Robespierre himself and many of the other leaders. The chaos finally ended with the dictatorship of Napolean Bonaparte. Since 1789, France has seen the Monarchy restored twice, two more revolutions, and a total of 15 different governments. But they make good wine.

Part II: Why the American Revolution was so different and why anybody should care.

* Amidst much competition for this title.

Tahrir Square and Andy Dick

2/16/11

 

Tahrir Square

and Andy Dick

The Middle East is ablaze right now. Not with the usual perpetual outrage, mind you; Real revolution is on the mind of everyone and no one knows how this will turn out. When I think the of word “revolution”, the first thing that comes to mind is not what you think; It’s the drug fueled comedic genius of Andy Dick. Suffering a mid life crisis at 30, his character Matthew Brock on Newsradio becomes a punk rocker with a bad Cockney accent. When confronted by his boss, he lifts up his shirt and screams “REVOLUTION!!”

 Watch http://www.youtube.com/watch?v=3IX-9zdNkpw&feature=related from 7:50 to 9:06.

So the question is: Will the uprisings in Egypt, Tunisia, Iran, Bahrain, Jordan, and others spawn democracy, peace with Israel, greater economic opportunity?

In the last 50 years, there have been a few revolutions that didn’t turn out so well. The 1956 Hungarian uprising started pleasantly with the toppling of a 30 foot Stalin statue and the overthrow of their communist dictatorship. Their jubilation ended with Soviet tanks, 200,000 refugees and 2500 dead Hungarians. Between 1956 and 1959, Tibetans rebelled against the Chinese. The result? 180,000 dead, many by execution and torture. More recently, the massive uprisings in Iran resulted in mass beatings and even a few being shot.

Of course, many revolutions in history were indeed successful: Ours for one, the French for another. In 1979, the corrupt Shah of Iran was successfully overthrown. But even though the uprising was populist and driven by freedom minded modernists, it was stolen by the more organized and motivated Islamists. The Cedar revolution in Lebanon also began with democracy and hope. Just last month, Hezbollah, a decidedly undemocratic movement, took over the government through dubious but totally legal means. The results remain to be seen but most experts do not predict liberty will flourish.

So what makes for a good revolution? Surely the Facebook savvy youth in Egypt are righteous and justified. Surely they deserve our support. Our own nation was birthed by radicals with guns. But all this recent upheaval has caused me to ponder the nature of revolution itself and I keep coming to the question of values. What is in the hearts of the rebels and does it matter? The “whys” of the revolutions do matter. The American and French Revolutions had some similarities. Both were driven by Enlightenment ideals but the Americans were also driven by religious values. Why does it matter? Because the two rebellions themselves and the results they gave us were so drastically different. The American Revolution turned out pretty well. The French Revolution was a blood bath ending in dictatorship.

So as I watch the ecstatic cheers of the Egyptians in

Tahrir Square

, I can’t be helped but be filled with hope and anticipation. But I also can’t get the images of Iran’s Ayatollah Khomeini and Hezbollah’s Hassan Nasrallah out of my head. Matthew Brock’s rebellion wasn’t born of nobility but by a childish sense of oppression and angst. So I have just one question for you, the Arab youth with your fist in the air: Are you George Washington? Or Andy Dick.