Author: Henrik

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I had no idea I was such a Keynesian

I have heard a lot about Hayek and Keynes and how they influence the current financial politics, but not until I read this article in The Nation did I realize how much of a Keynesian I am.

For a long time I have considered myself a social liberal. But I have also seen the consumer economy as a big ponzi scheme, which i guess it is. It is always the people coming in at the end (consumers) that end up paying for all the other people. When the consumers is 99% of the US population, then there isn’t much hope for the country as a whole.

So where did the USA lose its way? I believe it was when they started believing the sirens of Wall Street, who claimed that playing in their casino was actually investing, and that their ideas of what valued a company became the measuring stick. From then on the only measurement that mattered for publicly traded companies was the stock market valuation, and the way of keeping that going up was to very short term inflating the numbers. It ended up being about quarterly results, and companies were rewarded for closing factories and firing staff. This combined with outsourcing based on cheap labor and production has led to a significant trade deficit.

And that is where I learned that I was very much in the school of Keynes. He was very much against big trade deficits, and I guess to some degree to a large trade surplus as well, since somebody else would get a deficit because of that. However, increasing that trade deficit is exactly what all our US corporations have been doing, with moving manufacturing abroad and having the US population buying all the goods. The long term effect is that we have almost no manufacturing base, which means that we are losing research in manufacturing disciplines, since they need factories nearby to test anything new and make improvements.

That is why I’m a Keynesian, and I believe that we need to start making products in the US again, not just services. We don’t want to be like the spaceship that crashed into the second earth in Douglas Adams’ Hitchhikers Guide to the Galaxy series.

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What are you worth, and how does it compare?

What we are getting paid for what we do displays in a very crude way what we are worth to society. Crude in the sense that it’s a very one dimensional measurement, but still relevant, since most of our society consists of corporations and their task, in turn, is to maximize the value for their owners.

Of course that means that what you get paid is the lower than the value you contribue, or at least it should be. That is how corporations make money. By paying you less than the value you contribute. If you include all secondary costs that you incur, then the difference between your contribution and your cost is what you bring in as profit for the company. The larger that difference, the more valuable you should be to the company, regardless of how much you are paid.

Of course, the public sector doesn’t try to make profit. They try to provide services for the public in an as efficient manner as possible. As salaried in the private sector go up, keeping good people working in the public sector is getting increasingly difficult. The people have to have other drivers than only salary. Sense of service or status might be some.

However, I sometimes wonder about the priorities that society shows by pay disparities. Is Judge Judy doing a job that is worth 100 time what Justice Scalia does? A US Supreme Court Justice is paid around $200,000 per year. Judge Judy gets around $20,000,000. Along the same lines, are the efforts of Rush Limbaugh worth more than 100 times than the efforts of the President of the USA? The president gets approximately $400,000 per year. Mr. Limbaugh earns about $50,000,000 per year.

I could bring up a lot of other misalignments in reward versus value, even if you look solely at the private sector. But I think it’s worth to keep in mind that the average family income in the USA is in the region of $50,000. That is for a family, not for a person. That means that the effort of 1,000 families is valued at the same level as Mr. Limbaugh.

I believe that if nothing is done about the income disparity, the country of USA will slide into a more and more dire financial situation. Let me know what you think.

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Doing what’s right for the country or doing what sounds right

As I am writing this I have to admit that I feel slightly confused. We are still in an economic downturn, and because of that people are unhappy, which means that they have once again voted in a group of people whose policy choices got us here in the first place. But that is not so surprising. If you only have two choices it’s easy to choose the other just because you are unhappy. There aren’t any other alternatives. Well apathy, maybe, but that does not make anybody happy either.

No, my confusion stems from an even simpler situation. There is a federal office called the Congressional Budget Office (CBO) that is non-partisan and really only crunches numbers and scenarios to see what the effect is of different political decisions. They were instrumental in getting the health care bill balanced last year, although many of the people in congress chose not to listen to all the data. And this is happening again.

The CBO has come out with a report saying that the most effective thing Congress can do right now to stimulate the economy is to make sure that unemployed people get unemployment benefits. The reason is simple. They live on a tight budget, and any money coming in is spent, which in turn turns the wheels of businesses small and large. This in turn has the effect of improving the economy so that these companies need to hire people, lowering unemployment and increasing spending capital. The CBO has also found that the least effective thing that Congress can do is to reduce income tax. Also not entirely hard to understand, since it would leave people who already earn an (un)reasonable amount of money with slightly more money. Money they will be more likely to save, since the economy is bad.

Are you with me so far? Now comes the conundrum. Why is it that everybody in the GOP says that the most important thing is to make sure that the top 10% earners get to keep their tax cuts. Tax cuts that have had their income increase with 10% year during the 2000s, while the rest have not had any net gain at all. Keeping these tax cuts is so important that they would rather have the economy continue to flag and keep the deficit, since they are unwilling to even consider paying for it. Unemployment benefits on the other hand, they need to be paid for, if they are even considering them at all.

Now I ask the follow-up question. Who benefits from this? Well, as we know, it’s the top 10% earners in the country. That means that if all of them vote Republican, they would constitute about 20% of the GOP vote, since overall it’s fairly even between the parties. Even if we assume that they have 100% voting record (Meg Whitman proves that it’s not the case), as opposed to the 50% average that you might get in a general election means that they can be maybe 40% of the republican voters.

Why does the GOP in Congress want to shaft 60% of the people who elected them? And why do that 60% constituency continue to vote for them? If what they did was because it was the best thing to do for the country I could understand it. But it isn’t. And I don’t. I wish somebody could explain.

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An Apple a Day…

We all know the old saying. An apple a day keeps the doctor away. As I brought an apple to work today i thought about that and the possibility to convert this into truly bipartisan health reform. We would get health care for all with support from the fruit farmers. On top of taht it would be cheap. Even if we paid $1.00 per apple, it would still only cost $365.00 per person per annum. Much cheaper than what we have right now. How could that go wrong?

Of course I had to figure out how many apples we need first of all. The latest CIA factbook figure lists the population of the USA as 307,212,123 as of July last year. I’m going to work with 310,000,000 to make it easy. 2 significant digits is good enough for me. Multiply that with 365 and we find that we need around 11o billion apples a year to keep the doctor away from from Americans. I’m sure that all the doctors and their families don’t really want to do that, so I’ll have to do some subtraction. Accorting to Bureau of Labor Statistics there were about 660,000 doctors in 2008. That includes dentists and medical doctors, but no other health care professionals. With the census number of average family size of 2.59 people the size of the group of non-doctor-repelling people would be approximately 1.7 million people. After recalculating I still end up with 110 billion apples. As far as the need for apples go, doctors are insignificant.

Next question is of course, how many apples are produced in the US annually? According to the US Apple Association the average in the early 2000s was about 230 million 42 lb units (in case you wonder that is equivalent of a bushel). This figure is confirmed by USDA figures. Yahoo! answers says that you get about 3 apples to a pound, which would mean that the total US apple production would be approximately 29 billion apples annually. That means that to be able to keep each American with an apple a day we would have to quadruple apple production, or we could import the rest. The funny thing is that, at the moment, the US exports about 2.5 times as many apples as it imports. There is no way every American could get an apple a day. Probably more like an apple every 3 to 4 days. And that would not keep the doctor away.

I was hoping that I had landed on the panacea of bipartisan healt care reform, but it turns out, once again, that we don’t have the resources to keep people healthy. I guess I’ll go back to arguing for a single payer system.

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Comment on the Mount Vernon Statement

I was looking for some information on George Washington the other day, because I wanted to collect something about him for his birthday. During my research I stumbled across the very recent Mount Vernon statement. I had a look at it, and although I generally don’t see eye to eye with the right wing of the Republican Party, I thought it was interesting that the point they put forward are things I can support. Just look at how I read their bullet points:

It applies the principle of limited government based on the rule of law to every proposal.
I agree. We should limit the government based on law. We should never allow the government or its agencies to commit crimes like whole sale wire tapping, torture and illegal support to corrupt regimes abroad.
It honors the central place of individual liberty in American politics and life.
Individual liberty is essential. We should all be free to make decisions that are about our life, bar some protection to avoid infringements on other people’s rights and their property. For example, if it doesn’t harm you or your property I should be allowed to marry somebody of the same sex, or decide whether I want to take a pregnancy to terms or have a doctor help me to end my life if I feel that is the best thing. To be allowed to do what I want with my life as long as it doesn’t infringe on somebody else’s right to live their life.
It encourages free enterprise, the individual entrepreneur, and economic reforms grounded in market solutions.
I think that far to much of our corporate world are getting welfare. I look at farmers producing super crops with subsidies only to have their crops unfairly undercut another farmer. Banks that are allowed to continue to exist, although they have neither the means nor the knowledge to stay competitive on their own. Fighter planes being produced because members of congress have some of the manufacturing in their state, not because the plane is needed. I can go on, but I think you get my drift when it comes to corporate welfare.
We also have the support for the individual entrepreneur. Free health care and education to make sure that he or she can focus on doing what he or she is good at, without having to worry how to get enough money to buy health insurance for the family and save for college for their kids.
It supports America’s national interest in advancing freedom and opposing tyranny in the world and prudently considers what we can and should do to that end.
Most tyranny is based on keeping people suppressed and uneducated. Make sure that you help support education and transparency. Call out corrupt governments and fine the corporations that support them.
It informs conservatism’s firm defense of family, neighborhood, community, and faith.
Allow me to choose how I define my family, neighborhood and community, and allow me to have whatever faith I want. Or none at all if that is what I want.

As you can see there are more than one way to skin a cat, although my cat would disagree. She thinks there is no way to skin a cat. The two points I’m trying to make are, firstly, that if you are unspecific of what you mean it’s easy to read into it what you want, and, secondly, that if we could take off our red/blue polarizing glasses I believe that there are a lot of things we could do. Together. For a better and more vital United States of America. But it’s going to take a lot of listening and thinking.