Posts Tagged ‘Great Recession’

The Thinker

Sucking it up for Herman Cain

Herman Cain is Tea Party America’s favorite presidential candidate of the moment. Recent polls show him leading among Republican voters. While recent history suggests that Cain fascination will be brief (Michele who? Rick who?), you can understand why conservatives would be gaga over him. Cain, when speaking about Occupy Wall Street protesters, had this retort:

Don’t blame Wall Street, don’t blame the big banks, if you don’t have a job and you’re not rich, blame yourself! [...] It is not someone’s fault if they succeeded; it is someone’s fault if they failed.

Attention 99% America: this may not be obvious to you but anyone can succeed in America. The only reason we are all not millionaires is because only one percent found the moxie to become a success. The ability to achieve success includes everyone: including the crippled, the disease ridden, the mentally retarded and the homeless. You can all become independently rich if you try hard enough. And if you don’t, you are a failure. A complete looooser.

If you are still not getting it, consider the curve of standard deviation below. It seems in nature most of us fit somewhere in the middle of the curve, but some of us are must inevitably be on the low or the high end. There are very few in the top one percent of the curve. Herman Cain is one of them. You and me, we’re in the 99% and the reason that I infer this is true, channeling Herman Cain, is because we chose to go fat and be lazy:

If you are not in the top 1%, you are a looooser

In the world of Herman Cain and Tea Party America, here is where we could all be if we tried hard enough:

The possible American world according to Herman Cain

The possible American world according to Herman Cain

That’s right. We all can all be millionaires, just suck in it, suck it up, be clever, put your nose to the grindstone and inevitably you too, like Herman Cain, can rise from humble circumstances to become a millionaire. It’s that simple. When you have the right mental attitude, just like God, you can move mountains. End of story.

But some people just aren’t getting it. They apparently include Matt, a guy I hired to do some handyman work for me. The guy I tried to hire was too busy, so he referred me to Matt. Matt is a guy who lives somewhere off I-66 in Virginia’s Piedmont. Five days a week he works a full time job somewhere that obviously does not come close to covering his modest lifestyle. When not working, he is taking care of his four kids so his wife can work at her odd part time jobs. On some Friday and Saturday nights, if he is lucky, he gets gigs playing the guitar at local pubs, which contributes some spare change to household expenses, and is his one passion in life. On Thursdays and Saturdays he runs his other business: handyman for hire. He does about a third of the work himself, but he also hires other good ol’ white boys like him to put in a few hours here and there to handle customers like me who are not Tool Time Tims. All of them so far that I’ve met smoke and all appear to live hand to mouth. They are Joe Bageant’s poor working class. This week some of them made some spare change because Matt subcontracted some of my work to them.

The weather has not been a construction worker’s friend this week. We had torrential rain for a good part of yesterday. The guys tried to tack down the new screening on our deck between downpours; otherwise they were in our garage trying to put up a new garage ceiling. For some reason the morons who built our house back in the 1980s attached drywall to the ceiling of our garage. About a quarter of it fell out while I was cleaning it a few weeks back, fortunately not while I was directly under it. I’m having them replace it with sturdier particleboard, and directed that they actually use screws to attach the boards into the joists instead of the drywall nails used when the house was constructed. Anyhow, progress has been slow.

Matt apparently is not working hard enough to be a success. He was managing multiple other projects with other good ol’ boys, which meant frequent trips to Manassas and other places to make things right. He’s pissed that he’s behind on our job, and is apologetic. Fortunately I am in no hurry.

Matt is basically doing everything possible to make money in this economy with his natural talents, but even with three jobs and essentially working twelve or more hours a day seven days a week, it’s still not enough. What’s the problem here?

If you were thinking, “Well, the economy is not doing too great, and a handyman’s wages are pretty modest, and gosh, it takes a lot to feed a family of six” you are one of the 99% and hence a looooser. If you are the surreally out of touch Herman Cain, the solution is obvious: Matt is a failure. Moreover, he is simply not trying hard enough. Maybe if in addition to working seven days a week he gave up the guitar gigs and worked instead of sleep, he could finally achieve success. He basically should run himself into the ground even more than he is doing now, which is leaving him obese, tobacco addicted and with circles under his eyes.

I bet you can guess where I stand on this. It’s pretty simple. Herman Cain, you may be a success, but in many ways you are also a moron who cannot see one centimeter past the bridge of your nose. Only a moron or a conservative would actually believe this crap that you spewed out. And yet it seems part of our American character to believe your crap. The fault is never in our stars, or in the broader economy, or in life’s circumstances, or our genetics, or our abusive parents, or our substandard schools but only in ourselves. Just like original sin that the Catholics believe in, in your mind the original sin is the inability of everyone to replicate what you achieved. The rest of us are failures, basically dog poop.

Mr. Cain, please print this out and stick it up some orifice in your body where the sun don’t shine. Consider it a little thank you from one of the 99%. And Matt, I feel nothing but compassion for you and the good ol’ boys who work for you, even if I can’t get too close to you because I am a nonsmoker. You are doing extraordinary things and while it is still clearly not enough, you have my respect and heartfelt sympathy. You also have my sincere hope that the economy improves quickly so you don’t need to be someone’s handyman anymore and get the chance to breathe again. And I hope you get more gigs strumming out those songs that you love.

 
The Thinker

The dangers of deficit fever

Why study history? After all, many people (particularly students) find history boring. However, there are excellent reasons for studying history. By observing our actions in the past and their effect we can predict with a fair amount of confidence whether they will work again. For example, based on our experience during the Great Depression, cutting spending lead to less economic activity and prolonged the Great Depression. Lesson: the government should keep spending in ways that stimulate the economy until a recovery is sustainable.

So what are we doing as we just begin to emerge from the Great Recession? Why, we are cutting spending! With history as our example, we now know that we are almost guaranteeing a double dip recession. Moreover, what we are cutting suggests profoundly stupid choices. It appears that whenever we finally emerge from our economic doldrums and near double-digit unemployment, our status of still being a superpower will be problematical.

It is easy to look at countries like Greece, which is in the midst of a terrible deficit-driven crisis, and figure we need to buckle down ourselves. Greece is buckling down, largely because it had no choice. Here is what austerity is also bringing in Greece: a sharp and marked drop in standards of living, a rise in already high unemployment rates, and credit that is hard to get and when available only at usury rates. There is also a lot of civil strife. Students, pensioners and government employees are marching in the streets. Rioters have already killed some people and damaged considerable property. Greece is on the edge of anarchy.

However, here in the United States both our “welfare state” and our total debt as a percentage of GDP is a fraction of Greece’s. This suggests we are in no danger immediate danger from excessive debt. In fact, as financial markets now look shaky again, even more money is flowing into U.S. Treasury bills. So our country is still seen as a safe haven for money, and our debt is seen as good debt, at least compared with other investments. Unlike in Greece, only a small percentage of us retiring at fifty-five or sixty are retiring on a pension. Most of those retiring are retiring only because they lost their jobs and no one will hire them.

Having lost their jobs, they have far less money in their pocket, so they are spending less. When people spend less and earn less, governments collect less in the way of taxes. For the most part, state and local governments cannot raise taxes enough to make up the difference, so they must cut services instead. And since states and local governments have little in the way of bloat, essential services are being cut. Firefighters, police and teachers that thought they had steady jobs are finding themselves unemployed. Here is a real trickledown effect. Because they have less to spend, retailers receive less and perhaps cut their workforce, or reduce hours. When retailers sell less, they need less from wholesalers who also cut jobs. When wholesalers need less, producers and manufacturers make less so they cut jobs. So the economic effect keeps trickling down, exacerbating unemployment, reducing tax revenues and extending our economic doldrums.

Moreover, our supposedly precious children are getting inferior educations. They are stuffed into classrooms with more students, lose opportunities for extracurricular activities and in at least 120 school districts have four-day school weeks. We will depend on their income in our own retirements, but it’s hard to understand how. By teaching them less today, they will likely be behind children in other countries. All these negative effects are because we are now alarmed over short-term deficits that it appears we can comfortably sustain over the short term.

If you have trouble starting your car, you might pump the accelerator hoping the engine will start. The same is true with our economy. What you don’t do is the moment it sputters to life stop giving it gas.

Deficits remain important in the long term. However, Republicans don’t seem to understand that raising taxes is a viable way to solve deficits. If deficits are truly more important than anything else is, then raising taxes has to be on the table. Otherwise, keeping taxes low is more important than deficits, which is the philosophy they have traditionally embraced. It is also important to get spending in line with revenues. But first things first. First the economy has to be vibrant enough so that economic activity reduces unemployment and drives wealth. When this happens, tax collections also increase, reducing deficits.

Unquestionably, we waste and misdirect much of our tax dollars. Our spending on war in Afghanistan is an egregious waste of money because it is a lost cause. A lot of the money given to the Afghan government instead lines the pockets of its largely corrupt Afghan officials. It also goes to pay off warlords who look the other way so our supply trucks carry cargo safely to remote locations. Aside from the wars in Iraq and Afghanistan, huge amounts of money are wasted within the Department of Defense. Secretary of Defense Robert Gates agrees. There is also huge waste in the Medicare system. Some of these expenditures, like building aircraft engines we don’t need, do feed American families. However, but they don’t go to buy things we need to make our country stronger and safer.

It’s pretty clear what we do need to do.  We need to create jobs for the unemployed that will leave us with a stronger country. Jobs provide money, but also feed faith in the future. You don’t get there by laying off teachers, policemen and firemen. These are our first priorities, which is why it makes no sense for Republicans (and one turncoat Democrat) to kill a bill that keeps them employed. You also get there by building and rebuilding bridges and roads, funding innovative research for the 21st century and by investing in the educational needs of all our citizens, activities that are underway but where more money is likely needed. You don’t get there by cutting off unemployment benefits because people have been two years without a job. All that does is breed poverty and homelessness. However, if a chronically unemployed person at least has a check coming in, maybe he can pay his rent and buy food and clothing. That money stimulates a lot of economic activity.

You also raise taxes where it makes sense to do so. Aside from the poor economy, what is feeding the deficit? Mostly tax cuts that we gave to the richest Americans. These are people who can certainly afford to pay more taxes and in some cases genuinely want to pay more taxes. These huge tax cuts drove the problem that caused our deficits to explode. Certainly now is not the time to raise taxes on middle and lower income people, but those who can afford to pay more in taxes certainly should, particularly when richer Americans historically have paid much higher tax rates and still maintained a great standard of living.

Perhaps to achieve fiscal solvency it will be necessary to extend retirement ages or cut benefits in social programs like Medicare and Medicaid. These cuts become much more likely though in a hampered economy. I know my lifestyle would take a severe hit if I lived on half my income. The same is true with our government. A thriving economy will be the engine that creates this wealth again, as it did under Bill Clinton.

We need to spend more to get this economy moving again, even if the debt numbers look scary in the short term. Just as importantly, we need to spend wisely, investing on essentials like education, our state and local governments, and our infrastructure. Doing so prepares us for the economic challenges of the 21st century. To narrow the deficit, we need to repeal tax cuts given to the rich. At the very least, we need to redirect wasted money from places like Afghanistan into useful activities, like maintaining basic services for our citizens. What we do not need is what we have now: a panicky and foolish Congress that cannot see that their version of austerity is just another word for continued recession, unemployment and our quick descent into a second world country.

 
The Thinker

The Aughts: worst decade ever? Umm, not even close.

The corpse of the last decade has not even started cooling but pundits are all over the place proclaiming what an awful decade it was. No question about it: on the macro level, the years 2000 through 2009 had little to recommend them. Most of us will not look fondly on the decade. At best, our real income stayed even but in many cases our net income declined, much of it eaten away by out of control health care costs. Then of course there was September 11, 2001, which, for us Americans, was the defining day of our decade. Naturally, we attacked the problem of terrorism using 20th century tactics that had proven widely discredited. This quickly resulted in quagmires in both Iraq and Afghanistan costing us thousands of lives and wasting trillions of dollars. Just when we thought it could not get any worse, our laissez-faire never-think-about-tomorrow economy all came tumbling down only to be rescued by massive overspending. Our overleveraged country went into what is now widely called the Great Recession. It was not as bad as the Great Depression but oh Lord it sure was not good. We start 2010 technically out of the recession but as a nation feeling like we were gang raped. Only, we mostly did this to ourselves through rampant selfishness and a lack of anything resembling fiscal discipline.

I am glad to say goodbye to the 2000s. However, I have also lived long enough to realize that most of the decades I have lived through sucked. Of course, many of you reading this were not even alive back then. I was born at the crest of the baby boom in 1957, so I can speak accurately from 1960 and beyond. In addition, I can also speak with a reasonably informed opinion about my parents early years and how they saw things. Let me take you on a tour of the decades from 1930 or so. Maybe you will appreciate that the aught decade did not suck as much as you thought.

The 1930s. This was unquestionably the worst decade of the 20th century, although the Great Depression actually began in the 1920s. For my deceased mother, born in 1920, the 1930s were a horrible, terrible, no good, very bad decade that framed the rest of her life and came close to destroying her spiritually. This was because like most Americans, she was a victim of the Great Depression, but even worse, she was one of a dozen children in an immigrant household, which meant she experienced the worst of the worst of it. It is hard for us today to understand how bad things were during those times, but you can get an idea of it from books like this one or watching movies like Seabiscuit. You think ten percent unemployment is bad? During the worst of the Great Depression, it was double that. The decade ended with the worst over but with America feeling something like the Great Recession we endured the last few years. For almost everyone in this country and overseas, it was a miserable decade full of painful lessons about the precariousness of life.

The 1940s. If you studied your history books, you know that the Second World War framed this decade. The only thing you can say that was good about this war is that it kicked us out of the Great Depression. Tens of millions of soldiers and civilians lost their lives, and fortunes beyond imagining we spent trying to win wars on two fronts. The war killed an uncle I never met. In the end, both Germany and Japan were defeated but it left pretty much every country except the United States destitute and impoverished. The Second World War destroyed the British Empire. While it left America ascendant, new trouble was stirring in the Soviet Union. A new and costly Cold War was beginning. America’s nuclear trump card was to be quickly neutered when the Soviet Union also figured out how to build the bomb. The decade ended with the Chinese Communist revolution. Our new world looked painted red.

The 1950s. The rapid spread of communism left Americans scared and paranoid. We quickly were bogged down in our first unwinnable war on the Korean peninsula, which ended not with peace, but a cessation of hostilities and only when President Eisenhower threatened to nuke North Korea. Communist hysteria was everywhere. Joseph McCarthy, the alcoholic and gleefully abusive senator from Wisconsin, whipped its flames. People were harassed or imprisoned for imagined or real (but generally entirely lawful) associations with communists and socialists; some died from guilt by association. A number of severe recessions rocked the decade. America became puritanical and plastic. Toward the end of the decade, the Soviet Union shot a satellite into space and we tried desperately to think of an appropriate response.

The 1960s. To quote Charles Dickens, they were the best of times and the worst of times. The best of times came in response to Sputnik. America quickly became ascendant in the space race and ended the decade putting men on the surface of the moon, a feat so mind boggling that it is still hard for us to get our minds around it. The worst of times were the Vietnam War, which framed the decade and much of the 1970s as well. We could not quite afford the Great Society we created and it did not work as advertised. Millions died in Vietnam in a stupid and pointless war. The civil rights struggle was rampant. Our cities burned in riots and our best and brightest died from assassins’ bullets, including Martin Luther King, Malcolm X and two Kennedys. We ended it by electing the biggest crook to ever sit in the Oval Office: Richard M. Nixon.

The 1970s. This was my coming of age decade and I remember it well. We spent years trying to get out of Vietnam. Vietnamization in the end turned out to only be a ruse to let us withdraw from Vietnam. As our forces withdrew, the Vietcong and the North Vietnamese Army quickly overran the country. We left humiliated and defeated. All this was happening whilst Watergate was unfolding and we found our constitutional system rocked to its core. The good news is that unlike during the Bush Administration, it worked in holding power accountable, mainly Congress took itself as a coequal branch of government seriously. We had two major oil shocks in the 1970s. Inflation routinely ran close to or above ten percent a year while unemployment was also high. While we waited in line to buy gas, Iranian revolutionaries invaded our embassy in Tehran and held Americans captive for 444 days. Disco was briefly in. President Carter wanted us to conserve energy and wear sweaters. We blew off his common sense and instead elected Ronald Reagan who promised us the plasticity of the Eisenhower era again.

The 1980s. If it was Morning in America again, you could not tell for the first half of the decade due to what was then the worst recession since the Great Depression. Reagan’s solution to solving the Cold War was to outspend the Soviet Union, at the cost of reckless federal spending and huge deficits. So many things went wrong in this decade including:

  • A bombing in Beirut that killed hundreds of Marines
  • A silly war to stop Communism in Grenada of all places
  • A Savings and Loan debacle that after our most recent bailout now looks minor
  • The Iran-Contra affair in which we helped make Iran an even bigger threat to us
  • Our helping insurgents in Afghanistan fight the Soviet occupation, who we would abandon when we would find it convenient. They would train their hatred on us in 2001.

Reagan was a great communicator but in reality, a lousy president who stayed largely detached from government and made sure he got his afternoon naps. His staff largely ran the government. Toward the end of his final term, it was clear he was turning into a space cadet. Later we would learn he had Alzheimer’s Disease.

The 1990s. To the extent we had a great decade, this was it. With the Cold War gone we could spend money on things that mattered again. Still, it was no cakewalk. It began with the Persian Gulf War, which was militarily successful but inconveniently caused a bad recession, resulting in voters turning George H.W. Bush out of office. Bill Clinton probably won only because spoiler Ross Perot got votes that would have otherwise gone to Bush. We had real prosperity in the 1990s and family incomes at all levels rose steadily. We found a good balance between taxing and spending and the government lived within its means. The decade ended with a substantial federal surplus. Still, there were a scattering of seismic events that precluded bad things to come: the bombing of the federal center in Oklahoma City by our homegrown terrorist Timothy McVeigh as well as bombings of embassies overseas. Republicans got into a huge snit with Bill Clinton because he lied about oral sex with an intern while the rest of America truly didn’t give a damn. Yet, Republicans impeached him basically because he was not a Republican. The Republicans also delivered on their Contract with America that turned into a contract on America, principally when they shut down the government in 1995 in a mean partisan snit. The tech bubble bubbled to overflowing by the end of the decade, but we saw the emergence of the Internet economy and the real delivery of the information age.

In summary, we have been through a rotten decade, but some perspective is in order. Most decades are rotten, but life goes on somehow. If you want to feel nostalgic about a decade, feel nostalgic about the 1990s. None of the other decades deserve fond remembrance.

 

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