Economics 101

As I noted last time, I admit to being untrained in economics, but that does not mean I know less about what drives our economy than professional economists. This is sadly true because of the sad nature of the dismal science, which is all conjecture and bias and precious little science.

The scientific method requires hypothesis, test (experiment), conclusion, reassessment when the next experiment gets done. The economist, whether he is the cluelss Milton Friedman or the more informed Paul Krugman, has to stop after the first step. His version of experiment, testing is, at best, a mathematical model.

Because the model involves math, it intimidates everyone but other economists, so it is often accepted as truth.

But if you want to learn something about the real economy, log on to the New York Times of 1/22/12, Sunday, and read the article "How U.S. Lost Out on iPhone Work."

The central story here is how Steve Jobs suddenly decided he wanted stratch proof glass screens on his iPhone because he had carried the plastic screen iPhone in his pocket and the screen was scratched by his keys. And he wanted the change NOW. So his minions scurried off to China, where the factory had a dormitory filled with workers who were roused from sleep, given a biscuit and a cup of tea and they started churning out the new phones with the new glass screens overnight and Mr. Jobs had his glass screen iPhone.

This is supposed to demonstrate that: 1/ Chinese workers are more flexible and 2/ Diligent 3/ Skilled and 4/ Dedicated than American workers. Those Chinese workers in that factory will never be displaced by American workers. Steve Jobs loved them. His successors at Apple love them.

But the question you have to ask yourself is, how important was it that iPhone had a new glass screen overnight? If American workers had come in the next Monday, after they'd had a weekend at their kids soccer games, hunting or fishing, and they'd got those glass screens into the iPhones, say a week or two later, how much market share would iPhone and Apple have lost?

Here in Hampton, New Hampshire, I was astonished when I first arrived in 2008, and discovered the laundramat closed down at 3 PM on Saturday, as did the barber shops and many of the stores. It was like when I was a kid in Bethesda, Maryland and everything closed down at 1 PM on Saturday and nothing was open on Sunday, which was God's day, and you were supposed to be in church and not worshiping at the palace of Mammon on Sunday.

But you know, we all managed to plan a little and to get our shopping done and that meant we played ball on Saturday and Sunday rather than shopping. I doubt we bought any less; we just planned our shopping in advance.

I could be wrong.

By the time I left Bethesda, I could have my hair cut at 7 AM, Sunday morning by the Vietnamese barber, but, you know, if he had not been open then, I would have gone in on a Monday.

Anyway, this is all a digression, I understand.

A man I know who got rich making dress shirts for executives told me about the factory he had in Arizona. He lived in Maryland, but his factory was in Arizona and ultimately, he discovered he could make the shirts at a factory in China, pay for the shirts to be shipped back to the USA and he still could get the same quality workmanship and shirt for ninety-seven cents less per shirt and when you're selling hundreds of thousands of shirts to Brooks Brothers every year, that savings becomes significant.
But when you really questionned this guy, in a friendly, non judgmental way, what became evident was what really attracted him was he owed nothing to the workers in China. When he got his shirts from China, he sent the cloth in and out came the shirts and he paid the factory owner and he had no more cares than how to get the shirts back to the USA and sell them.

He did not want to be the father of the people who made the shirts. When he complained about "regulations" in the USA, he was talking about inspections to be sure the factory didn't go up in flames, and negotiations over pensions for the workers, and taxes he paid for the workman's comensation insurance, and taxes he paid for the employer's share of worker's taxes and the money he spent on medical insurance for his workers, which any year could rise enough to wipe out any profit margin.

"I just wanted to get a shirt out of a factory," he said. "I didn't want to adopt 400 children."

For this same reason, American companies now "outsource" or contract out lots of tasks and work to people who have a contract, but are not on their payroll. You do a specific task, and I pay you a set fee and I have no more responsibity to you or for you.

This is a far cry from the man in Georgia who kept his broom factory open, making specialty brooms because he had 30 workers who had worked for him for 30 years and he felt he owed them a job. And it's a far cry from the partner in the real estate development firm who kept the firm open after he and his two partners struck it so rich on a single deal that his two partners promptly retired, but he felt he had to keep the firm open because 12 people depended on him for their jobs. His partners were living the lives of country squires in Hunt Country in Virginia, while he went in to the office every day and worried about health insurance costs for his employees.

The fact is, that sort of paternal feeling of the CEO of the company who feels he owes his workers and his country something is becoming quaint and has been rejected as sentimental.

The company is run for the guys who own it, which, even in a publicly owned company like Apple, means Steve Jobs and a few others, who make hundres of millions while the Chinese factory workers live in dormatories.

Is this right?

Wrong question. That's the way it is, under current law and under current American values.

But it reveals the big lie in what the Republicans have been saying, that it's "Regulations" that is keeping American companies from creating jobs for American workers.

Regulations have nothing to do with it. You can say, well regulations which require factory owners to deal with unions are government regulation, and regulations which require the factory not burn down or poison the workers or the river next to it are regulations and regulations which take the form of taxes are government's heavy lash. But the fact is, American factory owners are willing to bear all that to make cars in America because it's still cheaper than trying to do it in Asia, and when it stops being cheaper, those jobs will vanish.

Fact is, making a product can happen anywhere and with current modes of transport, the other side of the world is just fine--the product is as close to you as your nearest Walmart.

American jobs will have to be done here only for those things where proximity matters.

You can out source the reading of an X ray to a doctor in India--and many if not most hospitals have already done this. You go to the emergency room after a brick has fallen on your head and the CT they do there is read in India, by a radiologist who doesn't even have to be roused from bed. He's already awake because it's 3 PM in India. But the neurologist who examines you, the IV tech who starts your intravenous line, the nurse who gives you your medication, those folks cannot be in India.

What's making American workers lose out to Chinese workers is a lot bigger than any set of government regulations. The Republicans are just looking for a scapegoat which will benefit their own election ambitions, and they've found it in "The Government."

Creating jobs here at home will take more thought than a few clever slogans. We've got to figure out what we can do here that those Chinese workers in the factory dormatories cannot do faster and more cheaply. We'll be happy to have what those Chinese factories can give us, but we have to figure out what they cannot do for us and we can do those jobs here.

Envy

I was a science major in college, so I never got much beyond the introductory courses in economics.

I did, however, have lots of courses in anthropology, and some in psychology, and I can still read.

I've been reading Jacob Hacker and Paul Pierson on economics and politics.

What these authors demonstrate, to my mind convincingly, is the very fact the distribution of wealth has become so extreme is a bad thing.

Those who control wealth or those who think they may one day control wealth will say there is no harm in a small percentage of people getting control of most of the wealth in the country, just as long as the pie keeps getting bigger so the small slice left to the "bottom 80%" is actually only relatively small--it is still so big it keeps that bottom 80% happy.

If the American economy is big enough, the poorest among us are still much richer than people in Africa and South America and most of Asia. The poor still have big color TV's, computers, automobiles, if not houses, then warm and dry apartments, entertainment, vacations and, this argument runs, even our poorest would be considered rich in Africa, Brazil, Asia.

The argument is, don't envy the American rich, their wealth does not make you poorer, or hurt you in any way. In fact, the argument goes, their wealth is good for you.

In fact, what Hacker and Pierson demonstrate is neither of these things are true. As the rich have got richer, the poor have got poorer, and in fact not just the poor have got poorer but people who were not poor in the 1950's, 1960's, 1970's have become relatively poorer.

I realize there are all sorts of statistics out there, but this fits my own personal experience. When I lived in a very asymmetric society--Washington, DC, even though I made more money than I do living in New Hampshire I felt poorer, and in fact was poorer in some very measurable ways.

The presence of rich people diminished my life.

How?

I had to compete with a group of much richer people when I went to buy a house. I was barely able to afford a three bedroom house in Washington, a very small three bedroom, with few amenities, because the competition for housing in the WDC area was made intense by rich people who would buy smaller houses, crush them and build McMansions. Gentrification became mansionification.

Money for the rich was simply less valuable than it was for me.

When the small ranch house next door was bought, crushed and a huge McMansion erected, my own house looked like a carriage house, and when I tried to sell, many buyers drove up and passed us buy and many buyers told us they could simply not get around the dwarfing effect of the house next door. Our house, assessed at $850,000 sold for $650,000, in no small part, and in reasonably direct measure, because of the power of the rich guy to diminish the value of what I owned.

The rich simply have the power to bid up prices, to blow away competition.

This is the essence of what Trusts used to do in the days of the robber barons--get control of a market, and ruin their competitors.

Moving to New Hampshire, I find there are rich people here, but not as many, and so my house is much bigger, and I can compete for restaurant meals and other goods and services because there are not enough rich people to out compete me. I feel wealthier, even though I am actually making less money.

People abbreviate this as "a lower cost of living." What that means is, you don't just feel wealthier in a society where incomes are more evenly distributed and there is no heavy weight of rich people tipping the boat over, you are actually safer and more wealthy.

The rich constitute a weight which threatens to capsize the whole boat.

If we taxed the rich at rates which were more prevalent in the 1950's, it's not that we could take what we got from the rich and make individual poor people middle class--those numbers do not add up. But what we could do is make it more difficult for the rich to simply bid up life for the middle class. We could use the money to educate, train and employ the middle class and help more of them to make the leap up to the next level.

The one percent are not irrelevant to the middle class. They are keeping the other 99% down. They may live in walled off, gated communities, but their influence seeps out and contaminates the whole pie.

Money is power and when you allow 1% to have too much power, the whole body politic is poisoned.

That's not the politics of bitter envy. That's simply what happens.

It's not so obvious in rural areas, like New Hampshire, where even poor people have land which makes them feel protected from others around them. It's more obvious to city people, like New Yorkers, who seem the limousines pull up the clubs and restaurants and they see when even 1% of the population wants something, that means you are crowded out. Even more so for living space, and space to recreate. The buildings which line Central Park have no middle class people. Only rich people look out over Park vistas.

We get so accustomed to the idea that, "Well, that is not for people like me," we do not even see any more that things don't have to be that way.

Shoreline property on Lake Winnipesaukee no longer belongs to middle class people, who owned small bungalows. They have all been moved out and displaced by the one percenters. And one of the biggest compounds along the lake belongs to Mitt Romney.

There is no Jones Beach, at Lake Winnipesaukee, no major public beach. The lake has become, for the most part, the property of the rich.

Along the Seacoast, there is public ownership. Hampton has three public beaches, and although private rich homes loom above the beach at Plaice Cove, the beach is open to the hoi polloi.

This is, to put it bluntly, a good thing. But as economic power is ineluctably translated into political power, one can see the movement toward a Lake Winnipesaukee effect may yet, years hence, grip the seacoast.

James Baldwin once observed that slavery harmed not just the enslaved, but it hurt the masters as well. That was a very keen insight. Those who dominate, who have to spend the energy and the malevolent force to dominant others become meaner, unhappier people.

We ought to consider taking the benevolent action of saving the rich and powerful from themselves, by taxing them down to size.

Democrat Nation: Where is Our Don Draper?

Okay, citizens, we need to think.

Republicans have, it must be admitted, outclassed Democrats for years when it comes to selling ideas.

Romney is confronted with the fact he pays only 15% income tax when the average nurse or police officer pays 20%.

"I will not apologize for being successful," he says.

That's a sure fire applause line. Who would want a fellow citizen to apologize for his own, hard won success?

A lot of politics is about saying outrageous things and making them sound reasonable and correct.

So how do we point out the problems with this line?

"It's not your success in making money you should apologize for...it's your unwillingness to allow others to have a chance to be successful."

No, you haven' t shown how his success prevents others from achieving success.

How about, "You mean, you don't have to apologize for bribing the referees?"

That's closer.

Or maybe, "So you refuse to tax billionaires, and you refuse to apologize for that?"

Or, "So, if the game is rigged, the losers are guilty of envy?"

Or, "So, if the casino has rigged the games, the losers are guilty of envy, if they complain?"

I don't know. We need to work on this.

Other things which need to be answered:

The estate tax is the death tax.

Regulations are the government's way of torpedoing our economy. If it weren't for the government, the economy would be going gang busters.

What we need is a Don Draper of our own. We need a bunch of Democrats sitting around a table at a nightclub, a drinking bourbon, thinking up a good ad campaign.

I open the floor to the public. Let me hear from you.

We need some help here in New Hampshire.

Al Sharpton Finds Redemption in Blueberry Pie

Al Sharpton has redeemed himself.

Whatever sins he has committed in the past, however much he has offended by being a blow hard, an exploiter, a self promoter, however much you may have disliked him in the past, go on line and find his "Blueberry Pie," commercial.
Finally, a Democrat who can actually communicate.
He tells the tale of kids being caught with blueberry pie all over their faces and proclaiming their innocence to their indignant mother, who cooked the pie. "Oh, no, it wasn't us!"
You have to see it for yourself. If I were smarter, I'd figure out how to do a link to it.
But it's just right--to pick up the pie motif. The American pie, which the Republicans and their rich patrons have eaten and they claim they had nothing to do with the way the pie got consumed.

Oh, wait, I may have done it. Try clicking on this link:

www.youtube.com/watch?v=uisC1zHcxLk

Every Democrat should be wearing a T shirt or a sweat shirt with the Republican Pie chart (see above) to keep that image in the eyes of every citizen, red and blue.

It is, as Mitt Romney would say, the politics of bitter envy. And it works for us.

Dead Seals and the Feds

This is not a dead seal, although there is a resemblance. This lab is alive.

Someone from the Gulf coast emailed me about my post about the dead seals who were washing up on the Hampton beaches last summer and fall.

The answer is, no there have been no more dead seals.
The federal government picked up each and every one, along with dead birds, and did autopsies which revealed influenza.
The implication was this particular virus had made the leap from gulls to seals, but that was never confirmed.
I cannot resist pointing out how effective and efficient and all around helpful our federal government has been in addressing this distressing event.
Of course, nobody in Hampton or along the seacoast said anything like, "Gee, I'm glad those federal workers were there."
It's not like when Superman swoops in and sets down the little girl, all safe and sound, and everyone beams and shouts, "Gee, thanks, Superman!"
The feds were just doing their jobs and nobody said, "Good old NOAA," or "Thanks."
They just expected this work would be done by someone and would have complained if those seals had been left to rot.
Live Free or Die.

Winner Takes All Politics (and Economics)

Jacob Hacker and Paul Pierson have written a book, Winner Take All Politics, about numbers and politics and economics.

What they discovered was that since the Bush tax cuts, which were sold as tax cuts for all, each of the wealthiest 400 families got $49 million extra dollars, whereas the middle class taxpayer got $600 the first year, and little since.

I think I have those numbers right. There are a lot of numbers.

What they describe, setting the numbers aside, is following World War II, the great bulk of the population got richer, with a huge jump in the percentage of college educated (owing to the federally funded GI bill) and a broad middle class emerged.

What has happened since the Bush tax cuts is the country has moved closer to Mexico and Brazil, where a very small number of very wealthy people are shuttled back and forth between safe havens, gated communities, while the 99% get their houses repossessed, or move back in with their parents.

Some of this was explained as happening as a result of technology and economic forces like the globalization of the economy, but as their work shows, what really drove this gobbling up of all the goodies by the one percent was government rules, laws, policy. The Congress and the Republican Presidents were in the pockets of the very rich and they made sure the very rich got everything they had paid for.

My coworkers at my office tell me they don't care how rich the rich get, as long as the pie keeps getting bigger and there's enough pie for them.

I don't think the American pie can ever get that big.

We are re capitulating history. Silent Cal Coolidge, Herbert Hoover had for their Secretary of the Treasury one of the country's richest men: Andrew Mellon. He pushed through the Mellon plan, which made fortunes for the richest and pushed the nation into the great Depression.

So here we go again.

It's a free country. People like Hacker and Pierson can tell the truth, can organize it, write about it, but other people, like Rush Limbaugh and Mitch McConnell and Mitt Romney are free to drown out the truth speakers.

And in a nation where money is speech--well, we get what we pay for.

Absence Makes the Heart Grow Fonder

Okay, Okay, I admit it. I am only minimally conversant with 21st century social networking, interneting and blogging.

Invoking the image of speaking to nobody at Hyde Park Speaker's corner, I closed this blog in November.

I had no reason to believe this was an action anyone noted.

But, suffering from a congenital syndrome of verbal incontinence, I let loose two subsequent screeds, and, mysteriously, I got emails saying, "Glad you are back." Multiple emails. Some from, Australia. (Go figure.)

There is probably a way of knowing how many people actually click on and read this blog, but I have never figured it out. All I know is despite the lack of "members" or comments, apparently, the number is not zero.

This sounds like a scene from "Contact." Even one contact can sometimes make a difference.

Reminds me of the famous story of the comic who wrote Groucho Marx letters, daily, for years. Never a reply. Eventually, he became a fairly successful comic--Buddy Hackett. One day he sees Groucho in a restaurant and summons up the nerve to go over to his table and blurts, out: "Mr. Marx. I'm a huge fan. I've learned so much from you. My name is Buddy Hackett."

Groucho looks at him for a moment and says, "So why'd you stop writing?"

Any way, I will keep postings short. One thing which I learned during my vow of silence is, there really is no shortage of political commentary and one voice is never missed from the chorus. There are some, like Stephen Colbert, who are really different and inventive. I'm not in that elite stratum. But U.S. Grant did some valuable things, not through brilliance but with persistence. I can aspire to that.

Today's simply is to suggest a modest proposal: Let's spend a little cash to print flags, T-shirts and hats with the American Pie graph shown above. Let us make it our T Party reply.

We will have to think about the label: Republican Pie. Or maybe, American Pie, Republican Division Technique. Or maybe, Republican Pie, Divide and Conquer. Or, Republicans: Let Them Eat Pie.

That's the first contest. Suggestions will be accepted.

The next is what to name the Splinter faction; Democrat 99 percenters. Or, American Pie Party. Or, Bong Hits for Billionaires. Just a few to get you thinking.

Mr. Romney calls this the politics of envy.

I call it class defense. His class has been torpedoes and full steam ahead, sink the rest of us.

The rich accused FDR of class warfare. It always is class warfare when you want to tax the rich, or change the rules so they do not automatically win.