Steve Russell: Political Snake Oil

service-economy

Y’all have made it clear for all to see what a lucky man I am.

Cancer stalks us all. Being attacked by that beast is nothing to complain of after all the good things that have come to me.

I find myself with a support system anyone would envy.

Because my Facebook friendships come from several of my lives, some of you don’t know my wife Tracy Russell who demonstrates every day what it means when I say that I “married well.”

What a turn in my life that I can say that after losing Donna Mobley! I don’t know which hits me harder now—how convinced I was that my life had tumbled into nothingness or the fact that Tracy knew it when she took me on as the world’s most unlikely emotional reconstruction project.

That is, she knew I was broken and she married me anyway.

Nobody I’d rather have beside me in this.

Moving outward from my rock solid spouse, I will observe that if you have four kids there will be drama. There is none right now. All hands are on deck backing me up and backing Tracy up.

I live in a retirement community among people with whom I have little in common….except that we all face health challenges.

According to my medical team, I’m doing well. I feel much better but spend much of my time feeling weak as a kitten.

When I told my editors about my diagnosis, they were totally supportive. Reshuffle my work load. Take time off and know the gig would be there for me. Whatever I wanted. What a blessing that is!

I’m trying to keep up with my column, How Did I Miss That?. It does not require an attention span, which I lack right now.

Because I am without the ability to bear down on a topic, I am going to cheat a little for a comment on our current political pass by recycling remarks I made to a Trump voter back when it looked like Trump would snatch defeat from the jaws of victory and lose to an establishment candidate in a change year.

I don’t feel better about Mr. Trump’s announcement that he’s appointed “the highest IQ cabinet in history.” Our history-challenged POTUS should look up what JFK said about that.

I think we were not teleported into this moment. History does matter, so I’m going to re-tell some very recent history from my point of view in this letter to an early Trump supporter:

You claim to be worried about the national debt.

You do not, however, conduct yourself as if the national debt were important.

I expect you voted for Mr. Bush over Mr. Gore and, in that campaign, the primary issue was whether to use the prosperity of the Clinton years to pay down debt or to fund a tax cut.

To the credit of the voters, Mr. Gore won the popular vote, but the Electoral College and the SCOTUS, not necessarily in that order, installed Mr. Bush.

Mr. Bush could, of course, have paid down debt while he had a surplus and explained to voters like you why that’s important.

You pay down debt in a time of surplus. You do not cut the budget into a slow economy, which is exactly what your side of the political street has advocated.

Leaving aside the magic of the aggregate demand curve, which you steadfastly refuse to learn about, there’s another reason. In a recessionary economy interest rates are very low, making it a great time to borrow money.

Businesses typically do not take advantage because a downturn means fewer customers and no need to expand capacity. Very big businesses with lots of cash on the balance sheet use the recession to upgrade on the cheap, but even they seldom expand.

Government, on the other hand, is responsible for a lot of capital improvements that require upkeep: highways, bridges, dams, and airports. Government also should be, but is not at this time, responsible for the electrical grid, which is generations behind Europe and much of Asia.

Government expenditures have something called “velocity.” That is, all expenditures do not stimulate the economy equally.

The same could be said of tax cuts, except the only tax cut with any simulative effect to speak of is the payroll tax.

In a recession, you are not trying to get money into the hands of the folks you call “job creators” because they are not failing to invest for lack of funds. They fail to invest for lack of customers.

All tax cuts are not equal because—Reaganomics to the contrary—the goal is not investment. The goal is spending.

American politicians generally—not just Trump—are selling manufacturing snake oil. Those jobs are gone and few of them will ever come back. Pretending otherwise is irresponsible.

One thing about China’s socialist tradition is they still have five year plans and you can see what they intend to accomplish. They, too, are bleeding manufacturing jobs. Their plan, since they do not have to deal with messy democracy, is to face facts and let them go. Their goal is transition to a service economy.

We already have a service economy. As usual, ahead of their curve.

“Service economy” is not all about flipping burgers. It’s about intellectual property—who creates it and who owns it.

I have taught lots of Chinese graduate students. I’m betting more than you have. Based on my observations, Chinese come to graduate school much better prepared than Americans.

However, they do not do greatly better once they arrive. I teach in social sciences, where we deal in questions that either have no answers or have answers that raise new questions.

American students from first tier universities are used to those kinds of questions. They are, in a word, creative. Chinese students have a much larger store of known facts but their ability to project into the unknown is stunted. They catch on quickly and I don’t mean to denigrate knowing a lot of stuff.

My point is that we can compete and we can prevail. But I digress.

For you and I, balancing a budget means our spending does not exceed our income.

On the macro level, balancing a budget means the debt grows less than the economy does. Any particular year does not matter. When you have a reserve currency, and particular decade does not matter. This does not mean that deficits should be ignored. It’s a statement of priorities. Deficit spending is necessary to reconstruct that aggregate demand curve you choose to ignore.

The amount of demand that is missing is a knowable number. It is not a matter of opinion. It’s a matter of arithmetic.

The recovery has been sluggish because Obama did not get the stimulus needed and much of what he did get came in the form of tax cuts.

Social Security is not as critical as it would be thanks to all those undocumented workers Mr. Trump wants to deport. There’s quite a controversy over how many years undocumented workers add to both Social Security and Medicare but there is no question that having all those people paying in who will never take out does give US taxpayers a margin they would not have otherwise.

The conservative think tank turned political shop, the Heritage Foundation, produced a “study” that claimed otherwise. But I’ve got to think you can see what they did wrong without my prodding.

I agree with Bernie Sanders that SS benefits need to be increased and the retirement age cut rather than raised.

Why? You don’t deal with a structural unemployment problem by forcing people to stay in the work force longer.

How? Remove the cap on the payroll tax. I did not know there was a cap until the first year I hit it and thought I had gotten a pay raise. At those income levels, the impact on the demand curve is marginal. The pain would be nonexistent.

Having people retire earlier with smaller benefits is a concession to the new employment reality. I live in a “retirement community” and everybody works.

Another problem with the new employment reality that must be solved is the impact of the “gig economy.” I learned about it first when I was working my way though school. I knew I would have lots of jobs during the school year but I didn’t know exactly where they would come from and what I would be doing. That’s OK when you are a student. It’s harder for adults.

But the big deal is that the time of the fixed retirement benefit is long gone. People will still need to retire,

The fixed income benefit was a creature of the labor movement, and the labor movement has not figured out a way to organize workplaces that are no longer physical places. Ditto the regime of wages and hours we are used to ever since the New Deal gave us the Fair Labor Standards Act.

Giving the FLSA a 21st Century overhaul is hard with a party controlling Congress that purports to believe that the market exerts all necessary control over wages and hours.

This would be the same party that opposed the federal right to organize in the NLRA.

The same party that called the GI Bill “the dole.”

The New Deal and the Reagan Revolution are blueprints for very different societies.

The Soviet Union paradigm is not an option on the table, except perhaps in the mind of Mr. Putin and his pal Mr. Trump.

They say you run in poetry and govern in prose but I want to suggest you don’t do either in cartoons. It takes real people with real ideas supported by real numbers.

Democratic forms of government are run by who shows up. Those forms do not lend themselves to reification. Government can be stupid if the people who show up are stupid and authoritarian if the people who show up are authoritarian.

I have always tried to show up when necessary, when I thought I could do what was required better than anybody else willing to serve. I am sure as hell not authoritarian and I’m sure you can form your own opinion whether I’m stupid. But I am the government. And so are you, if you choose to be.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s