Occupy WALL STREET

So I had a conversation recently about Occupy WALL STREET, and it made me think.  Also, as a Ravingleftatic, economic egality is one of my niches, so I've been remiss in commenting.

I'm going to divide this post in twain.  The first half will be to rebutt my darling wife's comments.  The second will be to offer a firm plank to the occupiers.

Some of the comments about the occupiers I heard that was that the whole movement was basically a waste of time, with little or no focus, and that people like that make people like us look ridiculous, and that this news has been front page news for three years already.

Waste of Time:  Basically, the argument goes like this: they're bankers, not elected officials.  Why would they care?  Go occupy D.C.

Rebuttal:  It's not what the banker's think so much as the amount of media attention they get.  Having worked in the area, I can tell you: Zucotti Park is small.  A force of 100 protestors would look like a huge crowd.  That's important, small spaces make small protests look good.  And success begets success.  Such that Amy Goodman has now reported "thousands" of protestors, and has respawned in cities around the world.  By the way, the Guardian article linked to above, provides an excellent history on the movement.  D.C. on the otherhand is built for protests, wide open spaces that can swallow a thousand people with no problem.  Another thing?  If she thinks people in D.C. care about protestors...she's got another thing coming.  I went to college there.  There's always a protest.  A protest about a unique group of people in a unique site, is far more inventive and news worthy, than just another protest on the mall.  So the level, and length of media attention devoted to something is an important factor in deciding its effect.  That I'm writing about this now, shows that this movement has staying power, in the words of E. Roger's seminal work on technological innovation, I am a laggard (Early Adopters, Late Majority, etc.).  I get to the party when its ending (which doesn't say much about the occupation--but there it is).  I remember when people began talking about it.  I thought it was a miniscule, small movement that would die out by the next news cycle.  I was wrong.  So already it has had a tremendous effect.  The last point I'd like to make on this is the following:  Banker's aren't elected officials, but they're voters.  And they're vote matters a hell of a lot more than you or I: they vote with their checkbooks.  Obama received more money from Goldman Sach's than from any other group.  So changing their views and their opinion matters.  Will a movement of "dirty hippies" change their minds or serve to further polarize them?  Well--that's a reasonable debate.

No Focus:  The basic argument here is that, if I understand it correctly, they don't have a clear list of demands, a clear leadership, and they all appear to wear different causes. 

Rebuttal:  Having spent four years in D.C. during the worst President in history's first term, I can tell you:  Protests today don't have a lot of focus.  As a rule.  I'm no expert, but I do have some on the ground experience.  One of my favorite things to do as a student, was to wander around D.C. during a protest, and did so on at least six occasions.  I also was at the New York anti-war protests after college.  The people were spectacular.  Dressed (or undressed) they were always charasmatic and inventive.  There were always a lot of them, and they all sported their own causes, gay rights, anti-war, anarchy, anti-torture, to economic injustice and totalitarianism.  I think this focus accusation (which I've heard a lot from the very beginning) is a red herring.  In the 1960s and 1970s, the world, was technologically a very different place.  Information flowed in very different ways, and through very different nodes.  And, as a consequence, people are different.  We all have more than one cause.  And we want people to know that when we get it up to go out and protest.  It's not a repudiation of singularity of purpose, it's a celebration of diversity and a bringing together of diverse causes.  Add to that a well documented fact that people (Ravingleftatics, and Republithugs--alike) have less trust, and less reason to trust their governments than they've EVER had.  So no, not only do I NOT think that Occupy Wall Street is unclear or lacking focus, I believe that their diversity of values is a strength and a badge of honor.

They Make Us Look Ridiculous:  This is a sensitive one for many people.  I understand it, but let's say:  maybe my understanding is based on my own reasons.  It goes like this: Premise:  The Occupiers are kids, college students and career protestors.  They likely don't know much (or anything about finance, the economic collapse, what's been done since, etc.) all they have is their passion, and undereducated passion is dangerous in a democratic society.  Premise 2:  We DO know what we're talking about, lived here during the economic collapse, have alternately worked in the business, known people who have, and have read a lot of material to support our opinions.  Therefore, the people in the park, Park People, the occupiers, make us, temperate, educated, well reasoned people look bad.

Rebuttal:  Having written it out like that, I think the premise and conclusion rebut itself.  We obviously don't know any of these people, we have only news reports of their consistency to go on, and the news coverage has been anti-protest from the get-go.  Making the inference that any of these people are uneducated is unfair, and moreover may be completely untrue.  If they are college students, likely their learning is fresher in their minds than that of the vast majority of us.  If they're career protestors--dirty hippies-- (career protestors definitely exist, I've met them) they spend their long train rides from protest to protest reading material about that which has peaked their interest.  However, it is unequivocally true that the vast majority of them have never worked in finance, or finance related industries.  But then again, that's why we're so mad.  Finance is America's largest industry as a percentage of GDP.  People who actually make things, make nothing, where people who literally divide up piles of nothing, into other piles of nothing, to make more piles of nothing look like bigger piles of nothing get multi-million dollar bonuses.  And in most cases, they're no better educated  or qualified than we are!

Old News:  The old news argument is factually quite true.  The 99% is a well documented fact.  The fact that average and wages have actually decreased in the past forty years is true. 

Rebuttal:  There's nothing new to report here, it's true.  My rebuttal here, is based purely on my own memory and perception of the events of the past decade.  For the vast majority of Americans 2004 to 2007 was no better than 2008 to the present.  Wages didn't go up at all.  They decreased, and healthcare costs have risen geometrically.  As I've said before, most Americans are one epic disease away from the poor house.  What did go up, was the stock market.  For most Americans the only meaningful aspect of that was a commensurate rise in home values.  People's wealth increased, merely because of the housing bubble.  And during that time, people were encouraged, by unethical bankers and loan companies, to refinance the hell out of their homes.  So they took that loaned money, thinking it was theirs and bought new cars, iPods, flat screen, thin screen tvs, Bose stereos, or new homes.  And when the bubble popped, they were underwater.  Ok, talk about old news, Ravingleftatic.  We know all of that.  Why is that important?

It's important because in the past decade I have seen three major groundswells of positive liberal energy.  One: The anti-war movement that swept the 2006 elections and stopped the Republican majority (note that it wasn't a coup, they still had a president and one branch of the legislature--sound familiar?)  Two:  The next year, but particularly the last few months of the 2008 election.  Hope, etc.  And Three:  Occupy Wall Street.  As a consequence of those three bands of energy, 1) we took back congress 2)  we took back the presidency, passed healthcare reform, and a financial reform act.  And 3)  Well?  We'll see.  Get Obama another 4 years, reaffirm our hold in the Senate and take back the House?  Maybe. 

In between these groundswells of liberal energy, cynicism takes hold, and the otherside fights back.  We lost the 2010 mid-terms because people forgot that the state of healthcare in this country is an outrage.  They forgot that the AIG brass received million dollar bonuses of the public's money.  Whether or not they forget it, the media keeps redirecting attenion away.  The myth of the Tea Party is that they were something new, something exciting.  Research has shown that self-identifying Tea Partier's are merely Republicans who can tolerate gays.  The whole movement was made to order by the Koch Brother's funding, and put on for show by the major media outlets because they talked about liberty and wore tri-corner hats!

Sigh.  Let me bring it down a notch, and wind this up, I'll have to save the Plank for another Post.  (ha ha!)  This IS old news.  But the disparity between the 1 and the other 99% hasn't shrunk, it's grown.  Egality, and justice still favor those who can afford to pay for it, not those who deserve it or require it.  So no, it's not old news.  It is the most important news, and it always will be to a Ravingleftatic.

New Poll: Americans want their Cake

A fabulous new CNN poll says absolutely nothing of value.  Apparently, a majority of Americans want taxes raised on the wealthy.  And, they want deep spending cuts.  They just don't want medicare or social security cut.  Oh.  It's that other spending we do that costs so much.  You know, that spending.  Doesn't this seem fundamentally ignorant to you too?

Americans are terrified of debt, and there's some reason for this.  Many of them have been foreclosed on, refinanced their home two or even three times.  Since their income's have been stagnant and rising at a rate well below inflation, they've been using their credit card to substitute as income.  So they've had consumer debt.  And though they knew things were bad in 2007, at least they had jobs and homes back then.

That aside, this ludicrous idea that people want the government to cut spending, but can't reconcile any spending in particular which they'd like to see cut--is just embarrasing.

Conservative v. Liberal: Economic Jujitsu

Ok, nothing substantively new in this post:  just thoughts.

The two parties offer radically different prescriptions for economic recovery, both with short-term and long-term ramifications.

The Liberal Plan:

Short Term:  Massive government spending, in infrastructure, education and transfer payments, keeps the money flowing directly to those who are spending it.  Every dollar spent by the government equals $1.8 dollars spent cumulatively, as each party down the lines spends 80% of the income received.  This is called an economic stabilizer, and economists from both parties agree them to be absolutely necessary.  For any economy to grow, it needs to find stability first. 

Long Term:  Investments in education pay off, as companies can hire more and better educated employees, who fill the structural employment gap noted by Libertarian economists as the reason why unemployment is currently so high.  Liberal economists would argue that with the massive government outlay listed above, unemployment is already reduced, and educated employees contribute to accelerated GDP growth in the long term.  Massive investment in infrastructure means employees can go where the work is, means companies can ship their goods at cheaper rates, means the costs of production generally go down, which makes demand leap up, etc. etc.  Continued transfer payments draw off as the unemployment rate lowers, as the baby boomer's continue to die off, and Generation Y finally goes to work.  Deficit gets reduced, GDP goes up, QED.

The Conservative Plan

Short Term:  By lowering tax rates, and generally drawing down restrictions and regulations on companies, the costs of production are lowered.  By lowering the costs of production, demand is allowed to rise with cheaper prices, and the economy slowly recovers.  Though there is much short term suffering as lowering costs reduce the social safety net, general prosperity will increase in the future, and until then, everyone who isn't making buck just needs to try harder. 

Long Term:  The lower tax rates, don't lead to new business.  Companies have simply taken the money and run, or continue to wait for positive signs in the economy to invest.  However, as the food lines are around the block, home ownership drops, and a dearth of government services mounts, the existing infrastructure crumbles, and business relocate to richer states, or completely different companies where the infrastructre remains solid, it is abundantly clear that this is NOT the time to invest. 

Moreover, tax savings begin to vanish, as the momentary surge in short term demand leveled off within the first year, and companies continue to lay off workers, because people just aren't buying.  Worse, now that transfer payments have cut off abruptly, the nation's baby-boomer's are dying in abandoned ghettos in Florida and New Mexico. 

The unemployed are forced to resort to crime, since there are no jobs.  Fortunately, conservatives are big fans of prisons, and the prison population swells.  The prison population ends up consuming all of the government's excess resources, until they're privatized, at which point, the inmates are neglected, fed based on work output, worked to death, and/or are genetically modified, and generally lose all the rights inherent to being human. 

Let's not forget that the conservatives have cut off all regulatory bodies, or worse, corrupted them to the point where they become industry revolving doors (I know, I know) and the public suffers from a rash of quack remedies which are untested at best, and dangerous at worse.  The only government services receiving any funding at all, are the police, who are advised to use extreme force wherever necessary. 

Financial regulatory bodies like the SEC have completely ceased to exist which means that the only check on the financial system are the public accountants who are paid by the companies themselves to ensure compliance.  Needless to say, compliance fades as businesses, desperate to derive some profits, switch to cheaper and less experienced accountants, who say everything is rosy. 

Everything is rosy, until someone notices the Emperor doesn't have any clothes, at which point the stock market begins to buck and writhe like a rollercoaster, and investors begin to unload U.S. stocks in a panic. The big banks close their doors and layoff hundreds of thousand employees, and as the government has completely defaulted on its debt, no one is willing to lend the money to bail out the government except China, Japan or Germany to bail out the failing U.S. economy.  China, which has been working like hell for self-sufficency tells the U.S. to get bent, takes the loss, because let's face it, they really could care less if their peasants starve or riot.  Japan which has its own crisis to deal with, takes a small portion of the debt, but not nearly enough, further losing their shirts in the decade after the worst decade in the history of the World.  The highly zenophobic population of the U.S. turns to Germany as its last savior...and on and on and on...

Simpsons: Generation Awesome Does it Again!

This might be my new favorite Simpsons quote:  From the most recent episode, available on hulu.

Lenny: Homer, use your head, just buy a new car!
Homer: Great idea Lenny, but I don’t have any money!
Carl: You can take out a loan with your house as collateral
Homer: I wouldn’t have to pay it back for three more years! What are the odds of that much time happening?
Lenny: Pretty close to zero, I’d say.
Homer: Problem solved, generation awesome does it again!

(All three chest bump)

Tax Cuts: Apologists in Full Swing

So the first day was anger, and then we skipped two stages of grief and went right to acceptance?  The real tragedy here is that there was never any evidence on the other side of the debate.  The two main arguments for keeping the tax cuts were that they would hurt employment, and that it would decrease overall investment.

The first point was picked apart by Andrew Leonard at Salon yesterday, "that, at best, extending all the tax cuts would lower the U.S. unemployment rate by an additional 0.1 percent by the end of 2012" Add to that the fact that American's tax burden is the lowest its been in 60 years.  American's corporate tax burden is the lowest it's been in 60 years by A LOT.  See the gap between the middle blue hue and the darkest blue, see how it gradually disappears?

The second point is defrayed by the simple fact that corporations are getting the highest profits ever recorded (link to Department of Commerce press release), and are getting the largest pay checks ever reported, and it doesn't matter if 10% of the country is unemployed, because they're obviously the ones who deserve to be, because corporate income taxes are just 11% of 2010's Federal budget receipts, whereas individual and social insurance count for another 82%.  And with all of that money, the Fed still has to grease the wheels with quantitative easing because corporations are hoarding they dolla bills instead of spending them!

And now they're framing this as a New Stimulus bill (link to David Leonhardt's Op-Ed in the NYTimes.)  Right, good frame Democrats, it's not like the Stimulus plan is the most hated American program in the past decade when only 29% of the people think it accomplished anything.  How?  Well, because of the unemployment benefits for starters.  How else?  Because of the 2% cut in the payroll tax.  My prof spoke about this last night, and was completely mystified, couldn't think of any stimulative effect this was going to have.  And in fact, since the payroll tax pays into Social Security is more likely to reduce American's retirement funds than anything else.  My favorite line:  "In exchange, Republicans agreed to extend unemployment benefits, cut payroll taxes and business taxes, and extend a grab bag of tax credits for college tuition and other items." Oh, I'm sure Obama had to suck a couple to get the Republicans to agree to a cut in business taxes.  Puhleeease!

One last point.  I've soliloquised before on why I think tax cuts are the worst kind of stimulus.  I won't belabor the point.  Standard economic theory has proven that the multiplier is much higher for direct government spending than it is for tax cuts.  While stimulus was always a terrible a word, weak, pitiful, indirect, and bureaucratic, this only qualifies as a stimulus in the most threadbare sense of the term.

For the record, I'm told my vernacular is somewhat offensive here.  I have the highest esteem for the President, and there's no shame in "sucking a couple" of lollipops.

Also, I'd like to add a correction to yesterday's post.  I indicated that the expiry of the tax cuts would have an immediate effect come April.  I asked my tax professor about this.  He said that the effects would occur immediately, bringing higher government revenues to bear immediately.  Remember that pay-as-you-go means just that.  Tax Day is just when you find out what, how much, if anything, you may have overpaid.  Also, even if taxes were to go up, if the Republican Congress were to revisit the issue and get a bill passed, it could take effect more or less immediately, and at least all of us would be able to file an amended return.  No harm, no foul.

Mid Term Thoughts, Tax cuts and Quantitative Easing

Sorry for the absence.  My new job is a major stress, and grad school is kicking my ass.

Ok.  Disappointment.  Given that the Republicans will not add ANYTHING to the debate for the next two years owing to a strategic necessity to get a Republican into office in 2012, I despair.  Not for partisan reasons, but that means that the suffering of the middle class and the poor will continue for at least another six years, if not worsen.  Already displays of racism, and calls for insurrection, and secession abound, what else is in store?

Tax Cuts.  We've discussed this a great deal in my tax class, and even though my tax professor has argued against letting them expire, the only argument he can offer in support is that "you don't raise taxes in a bad economy."  Which is exactly the opposite of the truth.  Taxes are predominantly raised during bad economic times.  Why else?  Government revenues are up when people are employed and making money.  And government automatic stabilizers need funds during the down times.  That said, I think the best graphic I've seen yet on this was in the Rachel Maddow show (god bless her).  Deficit concerns aide, do 98% of Americans really want to underwrite that massive bloat, for rich arseholes who did more to contribute to the recession than any other demographic?

Quantitative Easing.  I love this term.  I want to write a song about it.  Or a poem.  We keep a bottle of Quantitative Easing under the nightstand.  There's a lot of on air blather about this out there, but there a couple of things you should know.  The main concerns are inflation, capital flight, and deficits.  The fears of inflation are irrelevant right now, inflation is at all time lows.  One of the commentators linked to above insists that the Fed can directly increase inflation by creating money in bonds.  This is the Fed's job, they do it everyday, and the fed uses the same metrics to calculate inflation regardless of how they choose to do it.  If inflation gets too high, the Fed can simply retire the debt.  This is ordinary monetary policy, what's unordinary is the fantastic amount of money they're planning on creating.  Capital flight fears are more interesting.  They suggest that the new money coming into the system won't be used in this country at all, it will be used in growth markets like China and India, where GDP is going up 10% a year.  This seems a more reasonable critique to me, but to be fair, investment in developing markets helps us too.  As the standard of living rises in the developing world, labor prices increase.  There are huge rumblings of this occurring in China and India already. Which means the gross export inequities between East and West will eventually have to end.

Anyway, I have one simple argument for Quantitative Easing.  The Fed doesn't need Congress to do it, and the economy needs something, now.  And given the disastrous midterms, Obi One Bernanke, you're our only hope.

Fyi:  You need to watch this video:

Judging the Stimulus

This post, as so many of mine are, was spawned by listening to the planet money podcast on a similar topic. There were a few things they didn’t cover, or didn’t cover sufficiently, which I’d like to address.

A third of the stimulus was tax cuts.

I’ve written about tax cuts before. Let me say again, the stimulative factor of tax cuts is pretty low, and only really effects certain demographics. They’re political fodder, because people like the way tax cuts sound, but not the way bailouts sound. Mind you, if the individual was bailed out, they might be singing a different tune. But anybody who draws a wage in this country, who is above the poverty level, pays taxes in the pay-as-you-go system. Meaning that, you and your employer, pay your taxes through a withholding each pay period. When you get excited about tax cuts, you think, oh goodie, I’ll have more of my pay check. But that isn’t necessarily so. If they change the tax rate, it would definitely recalculate, but changing the tax rates is even harder to do politically than getting bailout money—and for very good reasons. Otherwise, so long as your withholdings remain the same, the same amount gets withdrawn out of your pay check. No more money in your account, that is, until you get your refund. Or unless you got one of those measly stimulus checks.

So in other words, for most of the populace, a third of the bailout money, was doled out in tax cuts that will get spent in one month the following year. Same with your stimulus checks. Spent the day after they were received. Yeah, that will influence demand for the year.

And that’s if you spent it, if you’re like most people, you’re just barely getting by, and you’ve got bills piling up frenetically. So your stimulus checks don’t stimulate demand at all, instead they go into the accounts receivables of your phone company, mortgage, lease, college loan, or what have you. Which is money, get this, that they’ve likely already booked as income! So no new demand there!

A third was doled out in the form of transfer payments:

Transfer payments is a fancy economic term, all it means basically, is money you’re entitled to without working for it. Social Security, Unemployment, you get the picture. This money is definitely more effective as a stimulus. Even the Miltonians agree these can be pretty effective. They’re called automatic stabilizers, payments that get made through current welfare systems that help even out the blips. It’s getting paid out more often, at different times. That props up demand, which is great, but not good. The Miltonians of the world hate this, because they argue that it’s “fake” demand. And its hard to resist this argument. The only argument against it, is that its kicking the can down the road until the good ship Economy rights itself (Keynsian) or spreading the pain of recession indefinitely (Miltonian/Hayekian). Personally, I favor the Keynsian approach here. The good ship Economy is such a complicated thing, that kicking the can down the road indefinitely is entirely possible, and the next good wave that hits, will take care of any debts accrued during the can-kicking phase. Problem is, how long till the next innovation? And won’t that just be a bubble economy too?

The last third went into what I call Restructuring Stimulus. This to me is the most effective stimulus there is. Unfortunately, it’s the hardest to quantify. One way to look at it is in terms of jobs saved. How many construction companies hired workers for these projects? How much were they paid? That typically is how these sorts of stimulus get quantified. I think that’s a load of bull pucky. Why? A stimulus is supposed to stimulate demand, and as Mark Zandy said, by that measure the stimulus was a complete success. Demand perked up, and GDP began to rise again (which by the way is the definition of a recession anyway, the percent by which the GDP is rising). But that doesn’t fix anything, because it still rides on the concept of the market being an all seeing entity, that will right itself given time. The purpose of Restructuring stimulus isn’t to prop demand, it’s to streamline the costs of production. This was the real success of the pre-war build up. The way American factories built up to meet the demands of the government for arms, was a story of effective production. The story of how Harry Hopkins got millions of Americans work, how the TVA gave electricity to much of the south for the first time, these are stories of how the costs of production were effectively lowered. And that is what real stimulus ought to do—lower the costs of production. How do you that? Road building, train building, that’s all part of it. Getting laborers to where the market needs them cheaply and effectively. That’s why infrastructure spending is so important, particularly as a gateway to capital. It’s actually cheaper for American companies like Dell, to ship their computer parts six thousand miles, crossing the Atlantic multiple times, to bring their products to market, because the costs of shipping them in any one country is far too prohibitive. That’s great for globalization, but terrible for the environment, and terrible for our economy.

So yes, like the great unwashed, I don’t think the stimulus was particularly effective, only a third of it got spent the way I think it ought to have been. But, another third of that was very effective at keeping people out of the streets.  And, America without the stimulus? Full scale race riots, rampant power outages, civic services plummeting, healthcare costs exorbitant crippling families for generations, dogs and cats, living together, mass pandemonium.

Rachel Maddow's Job Chart -- The Bikini Graph

I think this is the most unreported economic story of the month. Amazingness points to Rachel Maddow for pointing out. And I think Rachel Maddow and staff got from a blogger whose been charting the numbers.

It's called the Bikini Graph, and it charts jobs loss/growth over the last few years, month by month. There are no great pictures available on the net that I could find, so I took the liberty of taking this one from the Rachel Maddow blog itself, a still from her April 2nd broadcast.

If you're an economist tracking the economy, this is a pretty great trend. Nevermind that the unemployment rate is still 10%. Not that it's not important, but the unemployment rate is calculated based on the number of job seekers. In a long recession, people give up searching and leave the rolls. They come back when they become more optimistic. So that number is likely to go up for a couple of months. But look at the action on that chart. The peak of job loss was back in December of 2008, the last month of the Bush Administration. Numbers have gone from terrible to bad, to good. And the fact that there is a long tail on the improvement, indicates to me that it's a pretty solid trend. One that could go all pearshaped if the Dems don't hold the House and Senate.

But I'm no economist. Yet. The simple fact is that the mid-terms will depend in part on how American's view the economy. And as Sarah Palin said to mock Obama, I think this provides ample evidence that "that hopey-changey-thing" is working out for us. More people have got to see this... So take this picture, or a better one if you can find it, and post away.