Oh, if only I were poor…

Homeless-Family-Pic-2I envy the poor, or at least the far-right’s vision of what it’s like to be poor. You see, in the right-wing unreality bubble poor is no longer an affliction, a condition, or even an unfortunate happenstance—it’s a lifestyle choice. It’s kind of like being gay, but with a crappier wardrobe.

It turns out, the poor are only poor because they are good at hiding their assets in order to qualify for government handouts. It’s easier to play the system than work a real job.

Take the woman in the picture above. She could clearly be a paralegal at a law firm and have those kids in daycare. But instead she lounges outside with them, soaking up the fresh air and the stray dollars of the occasional sap walking by. She pockets all that money under the table, and then shows up at the welfare office once a week to plead her case and collect her stipend for her sloth. How do we know she’s an economic con-artist? If she were truly destitute, would she have luxury items like a stroller and 2 different colors of marker?  I think not.

But alas, I was raised with a work ethic. My parents taught me not to be dependent on anyone, and that hard work and determination could get me anywhere. So, I’ll probably never know the joys of hanging out on sidewalks all day raking in the cash, or of heading to the supermarket to buy T-bones and caviar with my food stamps.

Damn my mom and dad for giving me a conscience. Otherwise, I’d be on easy street—probably not driving on it mind you, but at least sitting on the curb with a clever cardboard sign. That would be the life.

And I’ve probably cursed my kids too. Like me, they grew up in comfortable suburban homes and got sent to good schools. They’ve never wondered where they were going to sleep at night or how they were going to get a meal that day. Hell, a food crisis in my house is running out of cheese sticks. But once they get a taste of the corporate rat race, the poor house is gonna look pretty damned cozy to them.

Woe unto my children, for they will never know the happiness to be found in the lethargic and slothful lifestyles of the destitute, resting comfortably in the hammock of social welfare programs. For they are condemned to work jobs and pay taxes and own homes and send their own kids to college some day. Oh, the humanity.

Fortunately, the Tea Party has a solution. Let’s cut out all these social handouts to the indigent, the working poor, the disabled, and other assorted barnacles on our great society. Let’s motivate folks to move back indoors, polish up their resumes, and fill all those open jobs. Tell that lady in the picture up there to scoop her baby up off the sidewalk and land herself a real man to take care of her.

And those that can’t turn that corner and pull themselves out of poverty by sheer force of will? Fuck ’em. Let ’em starve. Just like it says in the bible. We don’t need ’em anyway, and they’ll serve as an example of what happens if you pick your nose up off that grindstone.

Besides, getting all those people off welfare programs will lower the taxes on us hard working folks and assure my children will never again know tragedies like last Thursday… when we ran out of cheese sticks. Oh, the humanity.

Data Over Dogma

dataThis can’t be stated often or emphatically enough. If you are willing to dismiss, suppress, or reject evidence because it conflicts with what you want to (or have been told you should) believe, then you are acting irrationally—by definition. And your judgement should be discounted accordingly.

While this situation usually comes up with regard to a specific topic, it reflects a larger problem with mindset. Sen. Marco Rubio demonstrated this most recently when, in an interview with GQ magazine, he was asked how old the earth is. After declaring “I’m not a scientist, man,” Rubio danced with all his might, ending with the declaration that “it’s one of the great mysteries.” (No Marco, it’s really not.) Rubio is previously on record as stating the “crux” of the disagreement is “whether what a parent teaches their children at home should be mocked and derided and undone at the public school level.”

It’s easy to dismiss this as being isolated to the topic of geology or evolution, something that doesn’t impact the lives of the vast majority of citizens.  Rubio asserts as much when defending his GQ statement.  He said this didn’t matter, pronouncing it “a dispute amongst theologians” that has “has nothing to do with the gross domestic product or economic growth of the United States.”

Yet, as I’ve argued in this space before, and as Paul Krugman points out in his recent column, it matters greatly. It matters because we are hindering a crop of potential petrogeologists who are limited to guessing where God hid the oil.  But moreover, it matters because we are teaching kids that evidence can be ignored if it’s uncomfortable. And it is this mindset which is particularly damaging, and not just to the field of science, and as Rubio has demonstrated, not just to kids.

We have adults rejecting global warming and progressive tax codes, not because of evidence, but because of ideology.  We saw dismissal and rejection of pre-election poll data, not because it was inaccurate, but because it supported the wrong conclusion.

We live in an increasingly technological world with a complex multinational economy. Our success as a society, a country, and a culture depends on our ability to carefully and rationally understand and control that abstruse system.  Reliance on irrational explanations and positions in the face of evidence backed models of the world is simply dangerous.

That is not to say that faith and ideology have no place in society. They add value to the lives of many. All the world is not explainable using logic and reason.  Faith and ideology help most fill the gaps. But where data and dogma collide… bet on data every time. All our futures depend on it.

The Dangers of American Exceptionalism

American ExceptionalismSean Hannity often says that America is the greatest best country God has ever given man on the face of this Earth.  It’s an oft repeated mantra, which if taken in the spirit of national pride and unity would be just fine.  However, it is more often interpreted as some sort of birthright that America should rule the world… militarily, economically, intellectually, spiritually, and well hey… did I mention that we’re number one?

The trouble, of course, is that when you view everyone else as subordinate, you tend to believe they have nothing to teach you.  I’ve written before about how there are countries out there with proven successes in achieving exactly the goals we’re trying to achieve in healthcare and education, but we are not even seriously studying or talking about these foreign models.

Now comes evidence that Iceland has done wonders in solving their housing market issues as well as getting their financial system back in order following the 2008 meltdown of both.  In a nutshell, Iceland took over its banking industry rather than just bailing it out as we did here in the US.  It then forgave any mortgage debt above 110% of a home’s value for all its citizens.   This dramatically reduced the debt burden for most households and kept consumer spending from plummeting. It then instituted extensive new regulations on the banking industry to prevent another 2008-style catastrophe.  Further, it has actively pursued criminal charges against almost 300 banking executives who were directly responsible for decisions leading up to the crash.  The result?

Iceland’s $13 billion annual economy declined 6.7 percent the following year, in 2009, but has since rebounded and will expand by 2.4 percent this year and in 2013, the OECD estimated. Meanwhile, in the rest of debt-ridden Europe, the economy will collectively expand by a paltry 0.2 percent this year and only 1.6 percent the next, OECD estimates said in November.

Housing is now just about 3 percent below values in September 2008, just before the financial collapse. So improved is the nation’s economic and fiscal outlook that Fitch Ratings in February raised the country to investment grade with a stable outlook, stating the country’s “unorthodox crisis policy response has succeeded.”

By comparison, the US is projected to grow at 2.2% in 2012, the housing market remains underwater, and the banks are returning to many of the same policies that led to the crash in the first place.

It’s not clear that what happened in Iceland is directly applicable to the US.  Perhaps those programs and policies would not function here as well for one reason or another.  But the crime is that we are not even talking about it—not even trying to learn from their experience.  The mainstream press has given Iceland almost no coverage.  Politicians are not discussing what happened there and debating its applicability to our economy.  As far as the US is concerned, Iceland doesn’t exist.

Is this because we’re too proud to admit a bunch of foreigners have something to teach us?  Or is it because the special interests have a stranglehold on the media and the politicians and are suppressing stories that would lead to policies unfavorable to their moneyed interests?  It’s not clear.  But what is clear is that other countries are solving problems that we need to solve, and we’re idiots if we can’t find something to learn from them.

The Evolution of Christmas

Evil SantaHalloween was several days ago, which can only mean one thing.  Christmas is upon us.  Yes, yes, I know Thanksgiving is in there somewhere, but so far our WalMart overlords haven’t figured out how to commercialize that day beyond a good sale on canned cranberry jelly.  So it doesn’t count.  It’s Christmas dammit!  Why aren’t you out shopping?

Actually several members of my family (those with a preponderance of X-chromosomes), started the Christmas season months ago.  I know this because they started pestering me in July for what I wanted for Christmas, and for what they should buy my teenage sons.  Some consider themselves behind if Labor Day comes and goes and they aren’t wrapping presents yet.

I don’t believe for a minute they simply enjoy gift shopping so much they have to start 6 months early because they can’t wait.  Catch them overtired or with an extra glass of wine and they’ll even admit that while they love the idea of Christmas gifts, the reality is a pain in the tuckus, and they are just trying to get it out of the way.

In fairness, it’s not all downside. Pretty much everyone relishes seeing the unmitigated joy on a young child’s face as they open a Christmas gift.  And kids’ needs and desires change so frequently in those early years that shopping for them is often fun.  But shopping for anyone over 15 gets a little dicier. When shopping for older folks, gifts tend to fall into one of two categories.  Stuff they don’t want, and stuff you can’t afford.  Which explains why on Christmases-past you may have wanted an HDTV, but instead exclaimed, “Yay! Socks!” while quietly dying a little bit inside.

Retailers recognized this problem, and in recent years the advent of e-commerce and online wish lists have made things easier for shoppers to buy gifts people actually desire and value.  In theory, you just hit up your intended’s Amazon Wish List and select from the bounty of gifts he or she has expressed an interest in…  And a couple of clicks later, you’re done.  Which would be bloody brilliant except that most of us don’t bother adding things to our wish lists.  All of which earns us the ire of our loved ones who berate us for depriving them of the opportunity to conveniently show us how much they love us.

So now, instead of struggling to find the perfect gift for Mom, you struggle to find the perfect gift for Mom to give you.  It’s not clear this is better.  And whatever element of surprise there was in the giving of gifts has vanished.  “Oh look!  The new razor I picked out for me.  What a splendid wrapping job you did on it.  Is there any pie left?”

It’s tempting to argue that maybe us older folks should just mutually agree to wallow in each other’s company, embrace the warmth and the strength of our familial bonds, and forgo the whole gift exchange… but apparently that’s just crazy talk.  “These are traditions dammit, and it wouldn’t be Christmas if you didn’t get to open something.  So, just shut your heretical pie hole and tell me what to buy you!”

Looking at the evolution of gift giving on Christmas we see the following progression of things we give to others to celebrate the day:

  • Myrrh from afar or the occasional drum solo
  • Small handmade crafts, toys, or edible treats
  • Small elf-made crafts or toys
  • Thoughtfully or desperately chosen commercially produced stuff
  • Commercially produced stuff chosen by the giftee

Our entire economy is now dependent on Christmas shopping, so we can’t return to just offering each other a little pa-rum-pum-pum-pum without risking a collapse of the entire stock market, and I am not living through 2009 again.  Instead, let’s push this forward.  I think it’s time we move this along to its next evolutionary stage.

Why don’t we all just take responsibility for not only selecting, but for purchasing and wrapping gifts for ourselves from all our loved ones.  Just put their name on it and place it under the tree.  This is a sure way to restore the magic of the day, or at least the element of surprise.  Sure, you’ll still know everything you’re getting, but you’ll have no idea what you’ve given.  Maybe you’ll choose to have the whole family chip in on that TV.  Maybe they’ll each give you an individually wrapped Oreo.  Have you been naughty or nice this year? Who knows?  You do!  (Certainly they don’t.)  Oh, the fun of Christmas morning is back.

Who’s with me?

Printing money is not as crazy as it may sound

MacroeconomicsI am not an economist.  However, for reasons I dare not delve into too deeply, my lady finds discussions of economics a turn-on.  The downside is that now I not only have to compete with George Clooney and Toby Keith, but also with the likes of Ezra Klein and Brad DeLong.  If one of them ever develops tech skills, I’m toast.  In the meantime, “Get in line boys.”

As I’ve written in this space before, one of the damnable things about macroeconomics is that it is so blastedly non-intuitive.  Most of us are schooled or experienced in microeconomics (open systems), whether that be managing a household budget or running a business.  Macro, or closed systems like the U.S. economy, work on a very different set of rules and have a very different set of control levers to work with.  It’s abstruse stuff, and my hope is that maybe I can do a bit of the heavy lifting here, so some elements of macroeconomics make a little more sense.

Presidential hopeful Rick Perry made headlines this week for his statement that if the Fed decides to print more money, it should be seen as a treasonous act. Perry’s not alone here.  While most politicians are distancing themselves from claiming it’s treasonous, many are advocating that the Fed should not take further actions like “Quantitative Easing” to increase the money supply.

So what does all that mean?  Printing money out of thin air sure sounds like a dumb solution.  Doesn’t that just make my hard-earned money worth less? How would that help the economy?  These are all reasonable questions.  Questions which I’ve been struggling to get my own non-economist head around by reading what actual economists are saying.  The trouble is, folks like Matt Yglesias and Scott Sumner often write for an audience of fellow economic geeks.  And it’s often damn hard to wade through the jargon to figure out the underlying principles at work.  But I think I have a handle on it, and want to share my translation and understanding.

First, “printing money” is a euphemism.  No actual currency gets produced.  Rather, the Federal Reserve has a number of levers by which it can alter the supply of money.  Think of the U.S economy as the proverbial pie.  Each slice of pie represents a unit of money, like a dollar.  Increasing the money supply doesn’t change the size of the pie, but it does change the size of the dollar (slice).  If you carve the pie into more slices, then each slice has less in it.  “Quantitative Easing” is one of the levers the Fed can use to increase the size of the money supply.  And yes, the effect of this is to lessen the value of the dollar.

A weaker dollar seems like a bad thing.  It offends the American sensibilities to think of anything about us as weak.  But in cold economic terms, there are pluses and minuses to a devalued dollar.  A weak dollar doesn’t translate to a weak economy.  In fact, in our present situation, it could translate to a stronger one.  But first, a word about… inflation.

Another term for devaluation is inflation, a word that also sounds bad.  Inflation is especially troubling to those of us that lived through the 70’s and early 80’s where double-digit inflation was rampant.  We also saw the economic collapse of Argentina, Zimbabwe, and other countries because of hyperinflation.   But we need to remember that inflation is a lot like oxygen.  Too little can be just as deadly as too much.  Japan’s “lost decade” of the 1990’s was a period marked by very low inflation, economic recession, low productivity, and high unemployment.  Sound familiar?

Inflation in America has been at historic lows for the last couple of years.  The key is to find the sweet spot of around 3% and hold that.  In many respects, this is what the Fed’s job is.  It tries to maintain that small positive healthy inflation rate.  It’s a balancing act.  And an over-correction could send inflation spiraling in either direction.  This is primarily what conservative fear at the moment.  That an attempt to nudge inflation up will start a cascade reaction that will send us back to the 70’s.  No one wants that.  (Unless you’re invested long in polyester and hairspray commodities.)

But why is some inflation good, and why would a little extra be good right now?

In terms of the flow of money in an economy, the net effects of inflation in absolute dollars are a rise in the cost of goods, a rise in the cost of labor (wages), and a rise in value of assets (homes, stocks).  Granted, these don’t always rise uniformly.  Prices tend to rise ahead of wages, causing short term pain.  But wages do follow suit, eventually making the inflation kind of a wash.  Remember back in the early 80’s when getting a 10-15% annual raise was common?

What doesn’t change in a good way with inflation is cash.  In other words, if you’re sitting on a lot of liquid assets, those assets become worth less.   Who’s sitting on cash?  Well, big corporations are sitting on over a $1 trillion, and of course banks have a lot of fixed cash assets, not the least of which are all the mortgages out there.  If you’ve loaned out $100k at 4% for 30 years and inflation suddenly hits 5%, you’re losing money.

On the flip side, inflation would be great for consumers who are currently sitting on near record household debt.  As an example, many people are currently underwater on their mortgages.  Let’s say you owe $200k on a $175k house.  Inflation doesn’t change the amount you owe, but it does increase the value of the property.  So now you’re not underwater anymore.  Further, if you have a low-interest home loan, a higher inflation rate suddenly makes that nearly free money.  It doesn’t decrease your absolute debt, but it does decrease your relative debt, especially as your wages start to rise.

Finally, inflation also punishes people who are sitting on cash.  As almost everyone has said since the economy went south in 2008, we need cash to flow to stimulate the economy.  Think of money like the blood of the economy.  To the body as a whole, it’s less important exactly how much blood you have, than that the blood you have is circulating vigorously through your system.  The U.S. has an ample blood supply, but it’s currently pooled.  We need to get it pumping, and inflation helps that.

There are also advantages to America relative to the world.  A weaker dollar makes our goods cheaper to sell to other countries, and imported goods more expensive here.  This is an immediate boon to exporting companies.  However, given that we import a ridiculous portion of the goods bought in this country, it will drive the cost of those goods higher.  The good news is that there will be less incentive to design, manufacture, and service goods overseas, and that would mean more jobs for Americans as jobs start to come back onshore.  But again, that’s a short term pain for long term gain bargain.

Hopefully by now, you’re starting to think that maybe this whole printing money thing doesn’t sound quite so treasonous. Maybe you’re thinking it’s even worth a shot, or at least that it’s a perfectly reasonable tool to use.  Ironically, Rick Perry himself believes it will have a positive effect on the economy.

Perry said the central bank’s leader would be committing a “treasonous” act if he decided to “print more money to boost the economy.” Such action, the governor told a crowd in Iowa, would amount to a political maneuver aimed at helping Obama win re-election.

Perry is explicitly saying that increasing the money supply would boost the economy.  What he finds treasonous is only that he knows a better economy would help re-elect Obama.  All of which brings us to why increasing the money supply is politically unpopular.

  • It aids Obama’s re-election, so Republicans are opposed
  • It hurts banks so they are opposed
  • It hurts companies who have moved all their operations offshore, so they are opposed.
  • It raises prices ahead of wages and new jobs, so in the short term, voters will be opposed.
  • Voter anger and the resultant news cycles and Gallup polls will crucify incumbents, so they are opposed.

None of these reasons make increasing the money supply bad policy.  They simply mean that this is a situation where the needs of the many outweigh the needs of the few.  Unfortunately, the few are largely in charge of the policy.  However, the beauty of the money supply is that changing it does not require Congressional approval.  The Fed has the authority to act on its own.  Although the Fed is largely populated with people from the financial industries who appear to be way more scared of large inflation than lack of it.  But still, there is less of a barrier to action here than almost any other plan available.

Anything we do to fix the economy is going to cause some pain somewhere.  Increasing the money supply is perhaps the most actionable thing we can try.  It may be insufficient, and there are some risks involved.  But dammit, let’s at least do something.  I’m tired of our strategy being all hope and no change.