A New and Improved Definition of ‘NEED’

January 25th, 2014

Well it appears that I’ve found time to make another post.

I feel guilty for neglecting this blog for so long, but I really do need to finish the very lengthy treatise on Human Nature I’ve been working on for quite a while.

Still…every once in a while…

Several months ago, I published on this blog an excerpt from the treatise that addresses the topic of universality with respect to human needs, even though I had not finished editing that section.

Since that time, I have indeed revised it substantially, which is why I decided to delete the previous posting and replace it with the version I’m posting today.

The challenge in this presentation is to construct a definition of ‘need’ that is both more accurate and more helpful to us in our attempts to understand human nature…

I begin by observing that nothing provides us with more felt certainty in this life than Pain & Pleasure.

Almost immediately after we are born, we [intuitively] recognize that pain and pleasure are caused events (nursing gives pleasure, makes the pain of hunger go away).

What is not apparent to us at that age is the fact that we are born with a signature collection of needs—-’features of our existence’—-which are directly responsible for generating any and all of the pain & pleasure that humans experience in their lifetimes.

It doesn’t take us very long, however, to figure out that pain is the undesirable feeling that our most urgent needs generate and impose on us whenever they are deprived of a certain ‘satisfaction’ that they were designed to ‘want.’

At the same time, we also notice that we have other needs which motivate us to act by generating desirable feelings of pleasure (includes relief-from-pain) whenever they have experienced that which they are designed to ‘want.’

We can rationally infer that we have experienced the phenomenon of need-deprivation whenever we have experienced agony, anguish, humiliation, boredom, loneliness, angst, cluelessness, or even just the feeling that ‘something’s missing.’

And we can likewise infer that we have experienced need-satisfaction whenever we’ve felt joy, ecstasy, hope, pride, relief, contentment, security, enlightenment, or even just the feeling of being ‘complete.’

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The many different types of pain and pleasure we experience inform us that we have a great variety of different human needs to deal with, nearly all of them fitting quite nicely into one of two general categories: the needs of the Body and the needs of the Mind.

The analytical traditions of Science have enabled us to make significant improvements in our understanding of the various needs of the Body.

Much of that improvement has been due to our ability to examine the need-mechanisms which generate the physical pain and pleasure we experience.

Consider the observation that our bodies are wrapped in a shielding of tissue we call skin. We learn early in our lives that we have a need to maintain the integrity of that shielding if we want to avoid pain.

Skin and nerve tissue are structured in such a way that, whenever skin is damaged (e.g., a paper cut), an urgent signal is automatically transmitted to the brain via the nervous system.

When damaged-tissue signals reach the brain, some feature of this extensive mechanism converts the signals into ‘feelings’ of pain that the mind immediately begins to suffer/endure.

Thus, the Mind is alerted to the body’s ‘Need For Skin Health’ via a mechanism that is designed into the structure of our bodily tissues.

And so it is with all of the needs of the Body. Tissues are structured in ways which absolutely ensure that the body’s physiological needs will be experienced by the Mind as an impressive variety of distinct sensation events.

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These observations re: human physiology lead us to a more precise definition of what a human need ultimately is:

Human Needs are ultimately mechanisms that were designed into the structure/substance of our essential being. What need-mechanisms do is generate the pain/pleasure that minds experience..

Ultimately, that is what a need is: a mechanism. These mechanisms are created without our permission and they execute their programming as designed.

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But what can we say is responsible for the mental pain & pleasure we experience? After all, we experience ‘painful thoughts’ and ‘hurt feelings’ within our minds, but there is never any tissue damage we can point to that would account for it.

My explanation is that mental pain and pleasure occur for the same basic reason that physical pain and pleasure occur.

Because we know that physical pain/pleasure is generated by mechanisms (needs) that were designed into the structural essence of our bodies, it is perfectly reasonable for us to also assume that mental pain/pleasure is generated by ‘mechanisms’ (needs) that were designed into the ‘structure’ of the ‘essence’ of our mental existence (i.e., our minds).

(No matter what you might imagine the essence of a Mind to be [perhaps a field of energy?] I am surmising that this essence is structured in ways that ultimately create a signature collection of mental need-mechanisms, the need-mechanisms which generate all of the mental pain and pleasure that humans experience.)

When a mental need is satisfied, its ‘mechanism’ starts to generate mental pleasure, or else it diminishes/ends the mental pain it had been generating during the period when it was being deprived of satisfaction. Yes, I suppose you could say that mental need-mechanisms function as ‘switches.’

So we can say that mental needs are identical to physical needs in two respects: (1) they are both ‘mechanisms’ which generate pain or pleasure, and (2) they are both able (by design) to impose the painful/pleasurable feelings they generate on the Mind.

What sort of mental needs am I talking about? Well, whenever I refer to purely-mental needs in this document, I’m thinking of four needs in particular:

  • Our mental Need for Logic (to perceive it)
  • Our mental Need for Security (to perceive compelling reasons to expect future need-satisfaction, or to see that you have an ability to avoid future need-deprivation)
  • Our mental Need ‘To Understand’ (to perceive explanations that are helpful/logical/satisfying, to not be confused)
  • Our mental Need for APPROVAL (to perceive that other human beings approve of you, that they do not disapprove of you)

These are certainly the most influential of the mental/emotional needs we experience.

It is proper for us to refer to these ‘desires’ as needs because we know from repeated experience that they generate mental pleasure/pain—-felt by the mind—-whenever they are satisfied/deprived.

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In almost any psychology textbook you could examine, a definition of human needs can be found that relies primarily on teleological curiosity, which is to say, it focuses on the ultimate purposes that needs appear to serve.

My definition, in contrast, focuses on the efficient cause of the pain and pleasure we feel, on what need-mechanisms do and on what we can say their ‘nature’ ultimately is.

When theorists distinguish between ‘needs’ and ‘wants’, they emphasize a distinction that I find utterly lacking in significance.

Yes, it is true that some pain-generating mechanisms (needs) do not need to be ideally satisfied in order for us to ‘survive’, but they are still going to inflict pain on us that we will not enjoy (or deprive us of some pleasure) if we do not get them satisfied.

So what is the significance they see in pointing out this distinction?

Why Are People So Cruel?

July 19th, 2013

Still much too busy with my treatise on Human Nature to spend any significant time on blogging, but I thought I’d alert regular blog visitors to the existence of an article I wrote entitled, “Why Are People So Cruel?”.

Under the title, I describe it as, “An in-depth examination of the cruel side of human nature and a solution that does not rely upon victims saving themselves.”

It has been receiving some rather flattering appraisals recently from visitors who read it and then took the time to email their impressions of what they had read.

If you visit the link, you’ll notice that a selection of those comments has been placed on the left sidebar, to provide first-time visitors with an idea of what this long article has to offer them.

And it turns out that there are quite a few first time visitors, for if you Google “why are people so cruel?” or simply “cruel people”, you’ll notice that my article is at the top of the list they provide.

For those who are not ‘link-clickers’, here are the comments that can be found on the page:

“I have been reading things online for years and I can’t remember ever being so impressed with a piece…It was fascinating, and the most clear explanation, or theory, that I have ever read of the cruel nature that’s inherent in humans.”

John O’ Keeffe (Ireland)

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“WOW! I have been in counseling for years to try to understand this…I thought it was me…Never understood why!? Now I see it is who THEY are… Thanks!”

‘Rainbow Skywalker’

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“...so beautifully and eloquently thought out. I also believe the author’s unquestionably right in the matter. What’s more, I think it is unique and profoundly compelling reading. I genuinely believe this should be a repeated piece of modern curriculum reading, throughout education. I will be passing this on…Many thanks.”

Michael O’Neill (U.K.)

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“I really love your article…I will read it again and again…You are an amazing and insightful writer…Thanks!”

Lucy Sosa, Northern Illinois University

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“Everything you wrote resonates so true…made the most sense of anything I have ever read on this subject…your amazing perspective on the human psyche of how we interact with one another…as someone said, this is the type of essay that should be taught in schools, dissected to the nth degree, it’s content, involving lengthy deep discussions amongst high school students, their peers and teachers…”

Petrina Steer (Australia)

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As I said, some of the comments that are being received are very flattering, indeed.

How Do You KNOW That Is True?

February 13th, 2013

I’ve been feeling guilty about neglecting this blog, so I’ve decided to start sharing some snippets of the larger project I am currently working on.

What I am putting together is a rather expansive examination/explanation of Human Nature that I think many theorists will find helpful. The arguments I will be presenting are based ultimately on some fundamental assumptions that are sure to be challenged on epistemological grounds.

It is because my assumptions directly challenge a number of the assumptions that are popular among the ‘Transcendent Individuality’ crowd, I expect to be frequently asked, “how do you know that the claims you are making are true?” Thus…

I’ve decided that the best way for me to present some of my analyses re: various philosophical topics is to follow the general approach Rene Descartes used in Discourse on The Method… back in 1637. (“I think…therefore I am…“).

Descartes had observed that “...in relation to practice, it is sometimes necessary to adopt—-as if above doubt—-opinions which we discern to be highly uncertain…” but he knew this practical concession conflicted with his utmost desire: “...to give my attention solely to the search after truth…

So he devised a method that he hoped would provide the greater degree of certainty that he desired. His approach, essentially, was to relentlessly subject all of his ideas/beliefs to the highest degree of skepticism imaginable to see what fundamental truths, if any, could survive such a rigorous test.

What it left him with was a couple of fundamental observations that he knew were true beyond any doubt whatsoever: (1) he exists, and (2) he is ‘a thing that thinks.’ He called these two assumptions the First Principles of the philosophical perspective he was trying to articulate.

At this point in Descartes’ extended argument, I am 100% in agreement with him. I like the idea of beginning with the most fundamental statements one can make re: existence, emphasizing observations of reality that would seem to be beyond the doubts of any earnest soul.

After he establishes these two First Principles, Descartes then sets out to identify that which “...is essential to the truth and certainty of a proposition.

In other words, he wondered what we might be able to rely on—-perhaps some criteria—-that would reassure us that our metaphysical speculations are actually accurate descriptions of the Ultimate Truth.

He rather quickly concluded that humans can, as a general rule, assume that “...all the things which we very clearly and distinctly conceive are true.” (My emphasis)

It is at this point that I must depart from the ‘path of inspiration’ Descartes laid out for us. As much as I like the Cartesian approach, I must agree with those skeptics who found Descartes’ key epistemological assertions here to be quite unconvincing.

It was philosopher/economist David Hume who finally made it excruciatingly clear in 1748 that when the test we apply to a belief [to determine its legitimacy] is that of absolute certainty, very little of that which we call knowledge can pass the test, not even the celebrated Law of Cause & Effect.

It turns out that there are actually very few examples of human knowledge that can ever be known with absolute certainty. They can probably all be counted on a single hand.

For example, I do know with absolute certainty that I am currently existing and that I am—-as Rene Descartes once described it—-’a thing that thinks.’

I am also absolutely certain that I am currently experiencing a number of different sensations/feelings generated by my body’s sensory organs.

I can further say with absolute certainty that I can ‘remember’ existing in previous moments/days/years, but I do not know—-with absolute certainty—-if I am going to exist tomorrow, or even 5 minutes from now.

Every night, I close my eyes fully embracing the guess that my body—-my portal to the world—-will wake up the next morning to another new day. Every morning, as expected, I am rewarded with yet another validation of that particular guess.

My constant assumption that I will continue to exist in future days/weeks/moments is truly only a guess, but experience has taught me that it is one I can put a lot of faith in.

Of supreme importance to that category of guesswork we call Epistemology is the fact that, no matter how many times we may experience a daily event, our confident expectation that it will occur again at the expected time can never be anything more than A GUESS.

Thus, our mental world of thought is largely defined by our often frustrating inability to be absolutely certain about almost anything, except in the most immediate context of experience.

That little tidbit of certainty that we do get to experience is not much, and it is oh-so-fleeting.

But we do have our guesses, and that’s saying quite a bit. For we have accumulated a great many guesses over time that have proven to be rather reliable. Sharing them with each other has proven to be a good idea.

And it sure does seem as though we have been able to depend on the central metaphysical guess that the external world [which includes our bodies] doesn’t seem inclined to change ‘arbitrarily’ on us, but seems rather content to reliably follow certain rules of design/intent/Nature that we are able to infer through our pointed guesses.

Consider the example of electricity. We may not actually understand what electricity really is, but we have nevertheless accumulated a number of guesses about its behavior that have proven to be quite accurate.

Accurate enough, anyway, for us to figure out how to manipulate it in some very clever ways, creating great networks of electrical pathways and circuits, like those found in computers, televisions, electrical lighting, air conditioners, etc.

And yet, in spite of all the wonders we see around us, our knowledge of electricity is still nothing more than a bundle of guesses about something we don’t fully understand.

So from this perspective, it would probably be accurate to describe ‘Science’ as The Art & Discipline of Formalized Guessing—-careful, methodical, narrowly-focused guessing…but nevertheless still guessing.

Back when I used to teach introductory economics courses, I would spend some time on the first day of classes talking about the Scientific Method.

I would explain that there are a number of different words that scientists use to describe the varying levels of confidence that they have in the various theories they like to discuss.

At one end of the confidence spectrum are those guesses which scientists generate through their open-ended speculations. Because these ‘ideas’ are so fresh and untested, any confidence they might feel will be limited.

But if, after some initial discussions/investigations, a speculating scientist decides that her idea/guess is promising enough for her to go ahead and do some research on it, we would then call the guess a ‘hypothesis.’

If the hypothesizing scientist researches her guess and then shares it with some colleagues who end up giving her some encouraging feedback, we would start to refer to her guess as a ‘theory’, a designation used to describe a guess that a scientist has developed a substantial amount of confidence in.

If, when this theory is shared with the greater academic community, it becomes widely-embraced by the vast majority of the ‘experts’ in a particular field, the guess may eventually be commonly referred to as a Principle, or Law.

At this point, a large number of people will begin to refer to the guess as ‘a fact.’

Guesses—> hypotheses—> theories—> principles—> laws—> ‘facts.’ All are words used to describe different levels of confidence that people have in particular guesses.

(NOTE: If you think you might have heard these arguments before, you probably have. I discovered not too long ago that Karl Popper also advanced arguments that are quite similar to the ones I present here, although from a decidedly different perspective.)

It’s all guesswork, but it is also true that some guesses are better than others.

By ‘better’ I mean proven to be reliable by repeated experience (or by our ability to repeatedly demonstrate their dependability). Of course, if we were to suddenly start getting unexpected results, we would have to amend our guesses.

In this category of guesswork we would want to include all of those ‘guesses of science’ (= theories) that we regularly employ to provide for human needs.

Now I really don’t have any problem with people calling these guesses ‘facts’ as a way to describe the very high degree of confidence that they have in those guesses, for I often do this myself.

But I do hope they will be willing, when pressed, to admit that a great many of the assertions they make that they refer to as ‘facts’ are actually—-ultimately—-only guesses…

...but darned good ones, to be sure.

So my response to the skeptics who would question my assertions is to concede their points, but then point out that there is no good reason for us to not embrace our guesses as facts so long as they continue to ‘work’ for us (or ‘appear to work’, as the case might be).

There is, after all, something we call a ‘working assumption’, a guess that may not ultimately be true, but which is the best we have to work with for now, given the limited amount of information we have to go on.

Our guesses re: many matters may be incomplete, and they may ultimately be wrong or partially flawed, but until we can come up with a better explanation, as long as they seem to be working for us, I can’t think of a good reason for us to not embrace them as “The Truth.”

The Skeptic’s position is valid, but ultimately, it really doesn’t matter that we resort to guesswork when we lack certainty. It is really our only choice.

What we have found is that the next best thing to certainty is sharing our guesses with each other, comparing notes, and then gradually improving our guesses over time.

Michael Moore’s Christmas Message . . . The Newtown Massacre

December 25th, 2012

Michael Moore -- Gun Owner

I’m going to be spending less time on my blog for the next few months as I try to complete a major project I’ve been working on for quite a while. But I do have time to share this thought-provoking Christmas message written by Michael Moore, the liberal Catholic film-maker whom Republicans and Centrist Democrats love to hate.

December 24th, 2012

Celebrating the Prince of Peace in the Land of Guns

By Michael Moore

After watching the deranged, delusional National Rifle Association press conference on Friday, it was clear that the Mayan prophecy had come true. Except the only world that was ending was the NRA’s. Their bullying power to set gun policy in this country is over. The nation is repulsed by the massacre in Connecticut, and the signs are everywhere: a basketball coach at a post-game press conference; the Republican Joe Scarborough; a pawn shop owner in Florida; a gun buy-back program in New Jersey; a singing contest show on TV, and the conservative gun-owning judge who sentenced Jared Loughner.

So here’s my little bit of holiday cheer for you:

These gun massacres aren’t going to end any time soon.

I’m sorry to say this. But deep down we both know it’s true. That doesn’t mean we shouldn’t keep pushing forward – after all, the momentum is on our side. I know all of us – including me – would love to see the president and Congress enact stronger gun laws. We need a ban on automatic AND semiautomatic weapons and magazine clips that hold more than 7 bullets. We need better background checks and more mental health services. We need to regulate the ammo, too.

But, friends, I would like to propose that while all of the above will certainly reduce gun deaths (ask Mayor Bloomberg – it is virtually impossible to buy a handgun in New York City and the result is the number of murders per year has gone from 2,200 to under 400), it won’t really bring about an end to these mass slayings and it will not address the core problem we have. Connecticut had one of the strongest gun laws in the country. That did nothing to prevent the murders of 20 small children on December 14th.

In fact, let’s be clear about Newtown: the killer had no criminal record so he would never have shown up on a background check. All of the guns he used were legally purchased. None fit the legal description of an “assault” weapon. The killer seemed to have mental problems and his mother had him seek help, but that was worthless. As for security measures, the Sandy Hook school was locked down and buttoned up BEFORE the killer showed up that morning. Drills had been held for just such an incident. A lot of good that did.

And here’s the dirty little fact none of us liberals want to discuss: The killer only ceased his slaughter when he saw that cops were swarming onto the school grounds – i.e, the men with the guns. When he saw the guns a-coming, he stopped the bloodshed and killed himself. Guns on police officers prevented another 20 or 40 or 100 deaths from happening. Guns sometimes work. (Then again, there was an armed deputy sheriff at Columbine High School the day of that massacre and he couldn’t/didn’t stop it.)

I am sorry to offer this reality check on our much-needed march toward a bunch of well-intended, necessary – but ultimately, mostly cosmetic – changes to our gun laws. The sad facts are these: Other countries that have guns (like Canada, which has 7 million guns – mostly hunting guns – in their 12 million households) have a low murder rate. Kids in Japan watch the same violent movies and kids in Australia play the same violent video games (Grand Theft Auto was created by a British company; the UK had 58 gun murders last year in a nation of 63 million people). They simply don’t kill each other at the rate that we do. Why is that? THAT is the question we should be exploring while we are banning and restricting guns: Who are we?

I’d like to try to answer that question.

We are a country whose leaders officially sanction and carry out acts of violence as a means to often an immoral end. We invade countries who didn’t attack us. We’re currently using drones in a half-dozen countries, often killing civilians.

This probably shouldn’t come as a surprise to us as we are a nation founded on genocide and built on the backs of slaves. We slaughtered 600,000 of each other in a civil war. We “tamed the Wild West with a six-shooter,” and we rape and beat and kill our women without mercy and at a staggering rate: every three hours a women is murdered in the USA (half the time by an ex or a current); every three minutes a woman is raped in the USA; and every 15 seconds a woman is beaten in the USA.

We belong to an illustrious group of nations that still have the death penalty (North Korea, Saudi Arabia, China, Iran). We think nothing of letting tens of thousands of our own citizens die each year because they are uninsured and thus don’t see a doctor until it’s too late.

Why do we do this? One theory is simply “because we can.” There is a level of arrogance in the otherwise friendly American spirit, conning ourselves into believing there’s something exceptional about us that separates us from all those “other” countries (there are indeed many good things about us; the same could also be said of Belgium, New Zealand, France, Germany, etc.). We think we’re #1 in everything when the truth is our students are 17th in science and 25th in math, and we’re 35th in life expectancy. We believe we have the greatest democracy but we have the lowest voting turnout of any western democracy. We’re biggest and the bestest at everything and we demand and take what we want.

And sometimes we have to be violent m*****f*****s to get it. But if one of us goes off-message and shows the utterly psychotic nature and brutal results of violence in a Newtown or an Aurora or a Virginia Tech, then we get all “sad” and “our hearts go out to the families” and presidents promise to take “meaningful action.” Well, maybe this president means it this time. He’d better. An angry mob of millions is not going to let this drop.

While we are discussing and demanding what to do, may I respectfully ask that we stop and take a look at what I believe are the three extenuating factors that may answer the question of why we Americans have more violence than most anyone else:

1. POVERTY. If there’s one thing that separates us from the rest of the developed world, it’s this. 50 million of our people live in poverty. One in five Americans goes hungry at some point during the year. The majority of those who aren’t poor are living from paycheck to paycheck. There’s no doubt this creates more crime. Middle class jobs prevent crime and violence. (If you don’t believe that, ask yourself this: If your neighbor has a job and is making $50,000/year, what are the chances he’s going to break into your home, shoot you and take your TV? Nil.)

2. FEAR/RACISM. We’re an awfully fearful country considering that, unlike most nations, we’ve never been invaded. (No, 1812 wasn’t an invasion. We started it.) Why on earth would we need 300 million guns in our homes? I get why the Russians might be a little spooked (over 20 million of them died in World War II). But what’s our excuse? Worried that the Indians from the casino may go on the warpath? Concerned that the Canadians seem to be amassing too many Tim Horton’s donut shops on both sides of the border?

No. It’s because too many white people are afraid of black people. Period. The vast majority of the guns in the U.S. are sold to white people who live in the suburbs or the country. When we fantasize about being mugged or home invaded, what’s the image of the perpetrator in our heads? Is it the freckled-face kid from down the street – or is it someone who is, if not black, at least poor?

I think it would be worth it to a) do our best to eradicate poverty and re-create the middle class we used to have, and b) stop promoting the image of the black man as the boogeyman out to hurt you. Calm down, white people, and put away your guns.

3. THE “ME” SOCIETY. I think it’s the every-man-for-himself ethos of this country that has put us in this mess and I believe it’s been our undoing. Pull yourself up by your bootstraps! You’re not my problem! This is mine!

Clearly, we are no longer our brother’s and sister’s keeper. You get sick and can’t afford the operation? Not my problem. The bank has foreclosed on your home? Not my problem. Can’t afford to go to college? Not my problem.

And yet, it all sooner or later becomes our problem, doesn’t it? Take away too many safety nets and everyone starts to feel the impact. Do you want to live in that kind of society, one where you will then have a legitimate reason to be in fear? I don’t.

I’m not saying it’s perfect anywhere else, but I have noticed, in my travels, that other civilized countries see a national benefit to taking care of each other. Free medical care, free or low-cost college, mental health help. And I wonder – why can’t we do that? I think it’s because in many other countries people see each other not as separate and alone but rather together, on the path of life, with each person existing as an integral part of the whole. And you help them when they’re in need, not punish them because they’ve had some misfortune or bad break. I have to believe one of the reasons gun murders in other countries are so rare is because there’s less of the lone wolf mentality amongst their citizens. Most are raised with a sense of connection, if not outright solidarity. And that makes it harder to kill one another.

Well, there’s some food for thought as we head home for the holidays. Don’t forget to say hi to your conservative brother-in-law for me. Even he will tell you that, if you can’t nail a deer in three shots – and claim you need a clip of 30 rounds – you’re not a hunter my friend, and you have no business owning a gun.

Have a wonderful Christmas or a beautiful December 25th!


Happy Holidays!

A Message For House Republicans: “First Undo What You Did To Create This Debt Crisis…”

December 2nd, 2012

House Republicans

It’s been good to hear that Barack Obama now feels less pressure to accept bad compromises following his successful re-election bid, but as we approach the coming ‘fiscal cliff’, my biggest concern is not the President’s tendency to triangulate.

What worries me far more is the likelihood that Congressional Democrats will miss out on a golden opportunity to seriously damage the Republican brand in the next several weeks, which is the very thing they must do if they want to regain control of the House of Representatives in 2014.

It is something they will be able to do if they can find a way to get themselves all on the same page regarding THE BLAME THAT THE REPUBLICAN PARTY DESERVES FOR CREATING THE CURRENT GOVERNMENT DEBT CRISIS.

They need to direct the attention of the media to the irony that while the Republicans are sounding the alarm about government debt, calling it a crisis, it is they who created the problem to begin with, back when they irresponsibly reduced the tax obligations of America’s millionaires and billionaires during the George Bush Administration.

Democratic leaders should not hesitate to announce to the press that they have one very simple message they want to deliver to the Republicans in the House:

“First undo what your party did to create this budget crisis. Then, with your credibility at least partly restored, we can talk about your ideas on government spending.”

It was, after all, House Republicans who created the current crisis a decade ago when they decided to reduce the higher tax rates that the Top Two Percent of income earners in our country had paid throughout the Clinton Boom Years without any ill effects.

If the Republicans had not written those rate cuts into the Tax Code, the total amount of revenues the federal government would have collected since that time would have been so substantial (one estimate: $5.9 trillion) that very little borrowing would have been necessary to cover the federal government’s spending throughout Obama’s first term.

Tax cuts for rich people cause tax revenues to drop

Democrats can now say—-without any doubts whatsoever—-that the ‘Debt Crisis’ was created by the tax-cut gift that The Republicans decided to give to their wealthiest campaign contributors when George Bush was President.

Every elected Democrat in Congress needs to repeat this message to the media in hiser own way: Restore the higher tax rates that rich people paid during the Bill Clinton administration [the last time we experienced economic prosperity as a nation] and the debt crisis will automatically be fixed.

Of course, if and when the Democrats do this, the Republicans will loudly protest that raising the taxes of the ‘Job Creators’ will hurt the economy during a period of high unemployment.

It is this predictable response that will provide Democrats with the excuse to review for the media the indisputable historical failure of the Republican Party’s Economic Agenda to do what they said it would do.

Democrats need to make make it clear that the entire package of Republican economic theory was put to the test during the Bush Administration in conditions that were ideally favorable for them and it still failed to deliver.

THE EXPERIMENT WAS TRIED

THE RESULTS ARE NOW IN:

THE REPUBLICAN PARTY’S APPROACH TO GENERATING ECONOMIC PROSPERITY FAILED IN SPECTACULAR FASHION.

IF REPUBLICAN POLITICIANS HAD ANY SENSE OF DECENCY, THEY’D FEEL HUMILIATED BY THE RESULT.

If this approach works, one will be able to tune into news broadcasts and hear:

“Are the Democrats right when they say that the Republican’s tax-cutting economic philosophy is a demonstrated failure? We took an in-depth look at this question and found that the evidence does, indeed, suggest that the Republican approach to job creation just doesn’t work…”

Whether or not Republican economic policies work is no longer a ‘matter of opinion’ or open speculation. It is now a proven historical fact that Republican Economic policies do not actually achieve what their proponents have long claimed they would achieve.

THE GRAND EXPERIMENT

Although it wasn’t depicted as such at the time, a Grand Experiment to demonstrate the effectiveness of Republican economic policies was actually conducted between 2001 and 2009. They had everything going for them. They controlled all branches of government, so there was nothing that the Democrats could do to thwart the execution of their grand design.

They not only cut the tax rates of the Top Two Percent of income-earners, but did so at a time when interest rates were at historical lows. Add to this the fact that Bush Era Republicans also increased government spending using borrowed money.

In spite of all their efforts to ‘stack the deck’ in their favor, we now know the results of this Grand Experiment.

private-sector job growth Bush vs. Obama

THE central tenet of Republican economic mythology is the belief that cutting the tax rates of the wealthiest two percent of income-earners (the ‘Job Creators’) will stimulate vigorous economic growth through private-sector job creation.

That is really the ONLY way a tax cut could conceivably lead to an increase in tax revenue, if it directly led to more jobs being created (more jobs means more people paying taxes = more tax revenues collected). That is how the tax cuts were supposed to ‘pay for themselves.’ But it didn’t happen. The Grand Republican Tax Cut Experiment was tried, and it failed.

As can be seen in the graph above, no wondrous surge in private-sector job creation occurred after the Republicans cut the taxes of rich people. Indeed, the growth in private-sector job creation was weaker following the Bush tax cuts than the growth we saw in that sector during the first four years of the Obama Administration, even though Obama gave no additional tax cut to the ‘Job Creators.’

The Republicans threw hundreds of billions of dollars at millionaires and billionaires and did only as much ‘governing’ as they felt they absolute had to do (which in the case of the financial sector of the economy, was virtually nothing) and none of the good things they said would happen did happen.

So what did happen to all those hundreds of billions of dollars that were thrown at the ‘Job Creators’, if they were not used to create jobs? Well, if we follow the money we can see precisely what happened to it.

THE REPUBLICAN TAX CUTS FOR THE WEALTHY CAUSED THE SPECULATIVE BUBBLE THAT CRASHED THE ECONOMY

Virtually all of the extra money that the Republicans gave to the Top Two Percent of income-earners was pumped into the asset markets within the FIRE Sector of the economy (i.e., the Finance, Insurance, and Real Estate markets).

We’re talking about the stock market but also—-especially—-the real estate market. Very few of the dollars thrown at these secondary markets ever ended up in the real economy.

No matter what financial investments the Two Percent happened to pour their tax-cut dollars into, it all eventually ended up in banks, which means of course that banks were suddenly awash with extra cash to lend (just as they had expected).

As one might also expect, this sudden glut of lendable dollars provided the typical profit-maximizing banker with a potent incentive to pour increasing amounts of this extra money into ever-riskier lending schemes opportunities.

Higher-risk-lending yields higher [interest] rates of return to banks = higher profit margins. In this way, the Republican tax cuts for the wealthy gave bankers a perverse incentive to put the entire financial sector at risk.

Given the freedom-from-scrutiny that they expected from Republican politicians, bankers felt free to create some fantastical paper asset schemes, like bundled variable-risk loan packages, which enabled them to disseminate excessively risky ‘assets’ throughout the financial sector of the world economy.

Not to be outdone by their banking cousins, Insurance companies innovated some novel assets created out of nothing (well, effectively nothing, since they knew full well that there was never a chance that they would ever be able to pay off their obligations if real-estate inflation ever stopped in its tracks).

So the answer to the question…

“What happened to all those billions of dollars the Republicans borrowed in the name of the American taxpayer to give to the Job Creators?”

...is simply this:
The lion’s share of it was wasted on an utterly useless Inflation Event that occurred almost exclusively within the Upper-Upper-Class.

In a runaway inflation event like this (too many dollars chasing too few luxury goods & financial assets), little or no actual improvement occurs in the standard-of-living of the ultra-rich. No improvements, that is, that wouldn’t have occurred anyway—at lower prices—even if the Republicans hadn’t given them a big reduction in their tax rates.

Inflation for The Two Percent

This much we know with absolute certainty: without the big tax cuts the wealthy received from the Republicans, the big run-up in real-estate prices would never have occurred. In other words, there would have been no real estate bubble.

If that money had remained on the federal government’s balance sheet, fewer dollars would have been borrowed by the federal government and we would not now be talking about a ‘Debt Crisis’ and the possibility of possibly devastating government spending cuts.

It is now clear that the Republicans have been making their optimistic claims about tax cuts simply because they’ve really, really, really wanted to believe that it would work the magic that they predicted it would. But now we know—and they know—that it was all just wishful thinking.

INCREASING THE TAX BURDEN OF MILLIONAIRES AND BILLIONAIRES WILL STIMULATE ECONOMIC GROWTH AND CREATE JOBS

Contrary to everything the Republicans have been telling us for years, increasing taxes during a recession increases job creation when the increased tax revenue is collected from the richest of the rich (the biggest savers in the economy) and it is spent on true economic investments like infrastructure and human capital.

That is what the Balanced Budget Multiplier teaches students in Econ 101 classes, but for some unexplained reason, most economics professors forget about it as soon as they get to the chapters on Expansionary Fiscal Policy.

The reason why tax increases generate a net increase in GDP, is because money that would otherwise would have been removed from the economy by savers gets spent, instead, by the government.

That is why, when Paul Krugman decided to chart the economy’s job-creation record following major tax hike/cuts over the past couple of decades, it ended up looking like this:

Now that we know for sure what doesn’t work, it should be rather obvious that if we increase the tax obligations of the Top Two Percent and then use those billions to increase government spending on real economic investments, like infrastructure and human capitol, a net increase in the percentage of Americans working is guaranteed to happen.

(With a tax increase, the Super Wealthy may decrease some of their consumption—even though they could easily afford to buy whatever they want AND pay the higher tax bill—but that drop in consumption spending will be slight—-since most of their ‘extra’ money is not spent on consumption anyway, but only on paper assets. The government’s increased spending on investment more than makes up for the drop in rich people’s consumption spending. Result: a net increase in aggregate spending, which is equivalent to saying GDP will increase.)

Democrats should not hesitate to point out that the Republicans have been wrong about almost everything they’ve claimed about the economy over the past few decades. They need to insist that the media acknowledge the indisputable facts of recent history, that the Republicans failed utterly to create jobs with their now discredited “Tax-Cuts-For-The-Job-Creators!” theory.

Looking ahead to the 2014 mid-term Congressional elections, the Democrats have two years to drive home the message that The Republican Way was tried and it failed spectacularly. Ridicule [of Republican economic myths] is the Prime Directive that Democrats need to follow if they want to become The Majority Party again.

If the Democrats cannot execute this fairly simple political strategy, then perhaps they really are ‘in the wrong business.’

Dear Israel: Please Stop Doing This To Yourself

November 24th, 2012

Israel or Palestine?

Again last year, we all watched as Israel’s military machine launched another of its periodic efforts to aggressively ‘defend’ the Israeli people from the Palestinian militants who launch rockets at them.

Israel’s goal is usually to kill those Palestinians who launched the rockets, those who assisted the militants in their efforts to kill Jews, those who may very well have been considering the idea of killing Jews in the future, and even those who happen to have been keeping company with the militants (e.g., family members).

These muscular ‘lashing out’ responses to Palestinian attacks always provide Israel’s civilian population with a certain amount of short-term ‘satisfaction’, satisfaction that will last for maybe 6-12 months.

But if the Israeli people were to spend some time reflecting on their situation from a long-term perspective, it might occur to them that this ‘gut instinct’ response is actually a very stupid approach for them to embrace—-as a people—-from one generation to the next.

Over the long run, it simply hasn’t worked. Israel’s leaders have embraced the ‘muscular’ approach for over 60 years and that is how many years it has failed to bring lasting peace and security to the Israeli people.

Something else must be done to make the killing stop. Something other than simply preparing for the next ‘beatdown’ that you fully expect to be delivering again sometime in the future.

One would think that over the past 60 years, educated Israelis might have spent some time trying to imagine what a future Lasting Peace with the Palestinians would look like.

(Note: by a lasting peace, I am necessarily talking about one that even the hawks in Israel would find acceptable and worthy of their trust.)

If they were to do this, it just might occur to them that if they want to achieve a lasting peace, it is essential that they find a way to change the feelings that the Palestinians currently have toward the Israeli population in Palestine, from very negative to very positive.

Feelings of hatred, for example, would need to be replaced with feelings of gratitude and good will. Appreciative smiles must replace the furtive looks that only barely hide feelings of fear and loathing.

If this does not happen, how will it ever be possible for the Israeli people to feel secure in their homes?

This really is the key objective that any proposed peace agreement must achieve if it is to have any chance of actually ending the conflict between Arabs and Jews.

After all, any ‘agreement’ Palestinian leaders could be coerced into accepting through muscular diplomacy and international pressure is guaranteed to fail if it does not change what the vast majority of Palestinians feel within their hearts toward the Israeli people.

Isn’t that something that we can all agree on?

So what is this ‘something’ we could conceivably do to bring about a wondrous change in the hearts of the Palestinian people? That is THE question that the Israeli people need to start asking themselves.

EXTREME GENEROSITY

My advice is that the Israelis try an approach that they have never really considered before: EXTREME GENEROSITY.

Keep in mind that I’m not talking about offers that the Israelis might think are very generous; I’m talking about proposals that the Palestinians would perceive as very generous.

In order for the Palestinian people to ‘let go’ of all the bitterness and resentment they feel now, in order for them to start feeling within their hearts some positive feelings of appreciation toward the Israelis, it is absolutely essential that they be able to walk away from the negotiations table feeling as though they had won a tremendous victory.

They need to end up with a settlement that is so incredibly generous, and so filled with face-saving Israeli [and American] concessions, they won’t be able to contain their joy at their good fortune.

They need to feel as though they have won a great victory and their Muslim sympathizers around the world need to see that the Palestinians are delighted with their good fortune.

What the Israeli people need to understand is that this is the kind of Peace Settlement they are going to want the Palestinians to end up with because it is the only kind of settlement that is going to give them the Lasting Peace—-the freedom from fear—-that they yearn for.

They need to change the hearts of the Palestinians with something dramatic. The Israelis will know that they have finally achieved true peace when they start to see smiles on the faces of the Palestinian people, smiles that reflect authentic feelings of gratitude and friendliness toward them.

It’s your choice, Israel. Endless war, with the likelihood of nuclear devastation in the future, or a true and lasting peace with your neighbors.

What will the Israeli people get for the high price they might ultimately have to pay?

Only their “Right to Exist” from the only people who can legitimately grant them that right, the people who used to own the land before Israel’s founding fathers took it from them at gunpoint.

Yes, the Palestinians will be willing to grant the Israelis the right to inhabit and rule the land they once owned, but only if they feel as though they have been handsomely compensated for it.

All of the hatred that half the world currently feels toward Israel would come to an end.

The Israeli people may feel as though their founding fathers achieved a great thing when they resurrected the state of Israel from the dustbin of history, but they really haven’t achieved a thing, yet.

Existing at the cost of being constantly hated is not much of an achievement.

The Israeli people have an opportunity right now to amaze the world with a dramatic and historically unprecedented move to change the deeply resentful feelings that their current enemies have toward them.

What a gift that would be for the children of Israel…a future that is cleansed of their fear of future annihilation. That is what the Israeli people can achieve for themselves if they do something like this:

Agree to a compensation package that overwhelms the Palestinians with its generosity. Give them [virtually] everything they’ve been demanding for the past forty years plus a little bit more. Pre-1967 borders. Jerusalem becomes either an international city, or a multi-capital city.

If it becomes supremely important to Israeli negotiators to turn some of the Jewish settlements in the West Bank into Israeli land, then the Palestinians must be given twice as much pre-1967 Israeli land in compensation.

Remember, the way to win the good will of the Palestinian people is by shocking them with your ‘new leaf’ commitment to astounding generosity.

The Israelis need to get over the urge to get best deal they can, by bargaining ‘tough’ with the Palestinians and threatening them with more pain if they don’t give the Israelis the things that they want. Instead, they need to stun the world with an amazing display of good will and a generous spirit.

On top of all the territorial concessions, throw in a huge amount of cash at the Palestinians. Make them feel as though they had all just “won the lottery.” Would $30,000 per family be enough? $50,000? $80,000? Pour an equally generous amount of money into the construction of new businesses, industries, and a modern infrastructure in the new Palestine.

Where would all the money for this come from?

Well, if we were to take all the money that Israel and the United States are now spending on their Wars on Terror and then solicit big contributions from Europe, Japan, China, and the rich Arab states, it should not be difficult to put together a pot of around $500 billion, which should be more than enough to overwhelm approximately 5 million Palestinians with a feeling of great pride and satisfaction.

They would finally have Peace With Honor.

AN APOLOGY

There is one more thing we could give the Palestinians that would guarantee the success of the Extreme Generosity approach. It is actually something that Israel cannot give them, but the United States can. It is also something that would not cost the American taxpayers a cent.

What might this magical ‘something’ be? A formal admission by the United States government that we had been wrong all along in getting ourselves involved in the dispute between the Israelis and the Palestinians.

Why would we ever want to do such a thing? Because it is the simple truth. Foolish mistakes made by American leaders in decades past are ultimately to blame for the fear Americans currently have of one day suffering a nuclear terrorist attack.

It was good old Harry S. Truman who first got us involved in the Arab-Israeli dispute and it was his decision in 1948 that put us on the side of the Israelis.

At the time, the American people were feeling a lot of sympathy for the Jewish people after the horrors of the Holocaust were revealed, so it was easy for them to consent to a plan to ‘give them a homeland’ where they would be free of persecution.

Unfortunately, everyone in the press conveniently ignored the fact that the land the U.N. decided to give to the Jews happened to belong to someone else.

It is significant that the U.N.’s proposal to grant the Zionists a new homeland out of Palestinian lands was not a popular one with some deeply religious Jews, a fact that most Americans are currently unaware of.

To understand how the Palestinians see the creation of the state of Israel, imagine a similar thing happening here, in America.

What if the Indians who lived in New Jersey 300 years ago fled by boat to Europe instead of becoming assimilated into the developing American culture? What if, over the years, those Indians educated themselves and kept their sense of ‘nationhood’ alive and maintained a dream of some day returning to their homeland?

And what if they started emigrating back to New Jersey in big numbers maybe 75 years ago and made it clear that they intended to get their land back? What if the majority of European nations supported their cause and sent them military hardware and financial support?

How do you suppose the modern inhabitants of New Jersey would feel about the Indian claim that the land really belonged to them because their people had once lived there 300 years ago before colonizing Europeans began to show up?

I’m pretty sure I know how most property owners in New Jersey would respond. Outraged? Absolutely. Militant? You can count on it, especially if the seizure took place at gunpoint, as it did in Israel in 1948.

The ultimate truth here is that it is impossible for the United States to rationally justify its support for Israel at the same time that it is declaring to the world that it is outrageous and immoral for one country to invade and annex another.

It’s theft at gunpoint, any way you look at it.

This is why the Palestinians and their Muslim sympathizers are so crazy angry at the United States, because they see the incredible hypocrisy of our political leaders and are outraged that we do not see the injustice and sympathize with their plight.

Yes, it’s true. Our sympathy for the Jews—-a good thing—-is what ultimately led us to make the incredibly stupid decision in 1948 to approve an illegal and immoral act, one that would inevitably victimize one people (the indigenous inhabitants) in order to benefit another (a favored group of immigrants).

American politicians may not have been guilty of malevolence at that time, but we are nevertheless paying the price today for the moral/intellectual lapse they were guilty of back then.

Since Nine Eleven, we have been spending hundreds of billions of dollars on Homeland Security and on the Iraq & Afghanistan wars and we will be spending trillions more in the future if we cannot get ourselves on the right side of history

Does this mean that we are supposed to start hating the Israeli Jews now? Of course not. But no longer can we play favorites.

WISE PARENTS

Americans have become accustomed to seeing the Israelis as their friends. I’m not recommending that we just toss that aside.

When a parent sees his child being chased by some angry adults who live at the far end of the neighborhood, he will naturally assume that his child is being victimized and will threaten the pursuers if they do not cease chasing his child.

But if he listens to the adults and finds out that his child stole something from them and damaged their property, he will not abandon the child, but will reprimand him and insist that he do the right thing to make amends.

If he is a Wise Parent, he will feel a little embarrassed, but he will not hesitate to scold his child. He will recognize that an opportunity exists for his child to learn some important lessons about life through acts of atonement.

But if he is a Foolish Parent, he will ignore all evidence that is presented to him of his child’s guilt and will accuse the angry adults of ‘just hating’ his child for no good reason. He will focus solely on being loyal to his family members and on defending them from all outsider criticism, no matter what they might have done to arouse the justified anger of ‘strangers.’

For 60 years, America has been a Foolish Parent re: the Arab-Israeli dispute. Because our ‘child’ has always been in the wrong, we now have a lot of people around the world hating us for our moral hypocrisy, who see us as an arrogant enemy of Justice.

We can bring an end to the Arab-Israeli Feud if we would stop being foolish and start being Wise Parents, instead. We have a moral responsibility to try to talk the Israelis into doing the one thing that is going to bring true peace to their land.

For Israel, it is actually quite simple. They are not going to get True Peace without Happy Palestinians and they are not going to get Happy Palestinians unless the Palestinians are able to achieve a negotiations settlement that is ‘unbelievable’ in its magnitude.

Israel can give them that and still keep at least 90% of what they had in 1966. They will have to give up a little, but they will have won the biggest prize of them all, the one that has eluded them for sixty plus years: the acceptance of their ‘right to exist’ by the Palestinians.

When the Palestinians grant them this right, then the rest of the Muslim world will grant it also if face is saved with the gifts of extreme generosity and the United States apologizes to the Muslims of the world for its failure to maintain true objectivity.

If/when the United States does this, there won’t be a dry eye in all of Islam. The ‘Clash of Civilizations’ will be over. Peace will have finally arrived.

OPPORTUNITIES FOR ALL

If they were to embrace this kind of peace initiative, the Israeli people would not only finally have peace and friendly relations with the Palestinians, but would also earn the respect and admiration of ‘the rest of the world’ [i.e., the world that is not America or Western Europe].

The Story of Modern Israel in the history books would no longer be one of colonization and repression and military aggression, but one of a people who decided to transform themselves with a dramatic gesture for peace.

They would become known as the amazing people in the Middle East who everyone likes and admires, who were ultimately able to embrace humility and turn their enemies into friends through acts of atonement.

The current generation of Israelis are in a position to tell the Palestinians, “Look, we are sorry that our parents/grandparents never compensated you for the land they took from your parents and we’re sorry that things have gone so badly for you all these years due to our government’s actions, but we’d like to try to atone as best we can for their sins and to pay you a price for your land that you will see as more than fair (within our abilities).”

If the Israelis are able to embrace this special destiny, it would be impossible for people around the world to see them as anything other than a very special, supremely impressive people, a shining example to the world.

A once-horribly-victimized people who later came to victimize another people during their Period of Great Ignorance, who were finally able to humble themselves before their enemies and invest themselves in The Miracle of Peace.

For the various nations who decide to contribute generously to the financial settlement ‘pot’, the solution offers an opportunity for them to join with other high-minded nations around the world in a collective effort to finally end a bitter, decades-long conflict in an unstable region of the world.

For some of these contributors (e.g., the USA), the Extreme Generosity approach also provides a means for them to atone for any role their leaders might have played in portraying the Palestinians as an irrationally violent people who have no legitimate cause for anger.

Yes, President Obama, it is true that all peoples have a ‘right’ to defend themselves, but sometimes it is really, really stupid to defend yourself in a way that can only ensure that you will be continually surrounded by enemies who hate you and wish you were dead.

When Republican Politicians Say They Are Alarmed By Excessive Government Borrowing, They Are LYING To You

November 9th, 2012

Paul Ryan in the act of lying

There is one time when you can be absolutely certain someone is lying to you, and that is when their words are directly contradicted by their actions.

The Republicans have been blaming the Democrats for excessively high levels of government borrowing in recent years, but it was actually their own actions during the Bush Administration that were/are responsible for virtually all of the borrowing that they decry.

The single biggest reason why the federal government had to borrow hundreds of billions of dollars during Obama’s first term was not because the Democrats had increased government spending dramatically—-they did not—-but was only because the Republicans under George Bush had reduced the tax ‘burden’ of America’s wealthiest income-earners dramatically.

If the Republicans had not cut the tax rates of rich Americans a decade ago the total amount of revenues the federal government would have collected since that time would have been so substantial (one estimate: $5.9 trillion) that very little borrowing would have been necessary to cover the government’s spending throughout Obama’s first term.

The ‘Debt Crisis’ that Congressional Republicans complain about with such passion was created—-without any doubts whatsoever—-by the tax cut gift that The Republican politicians decided to give to themselves and their wealthy friends in 2001 and 2003. It was the drop in revenues that this stupid move caused which forced the federal government to begin borrowing billions of dollars in order to pay it’s bills.

That is where the Debt Crisis started, with the irresponsible behavior of self-serving Republican politicians. Since the government needed to continue its spending levels (and even increase them after Bush started a war with another country), the tax cut gift to rich people was ‘paid for’ by borrowing from the Chinese, among others.

This is the reason why, when Republican politicians say they are opposed to the government piling up huge debts for the next generation to pay off, we can know with certainty they are lying...because it is more than obvious that if they were really concerned about ‘excessive’ levels of government debt, they would never have agreed to cut the taxes of people who never needed a tax cut to begin with.

If they were actually serious about the concerns they claim to have, they would unquestionably have agreed to repeal the tax cuts they passed in 2001 and 2003, once it became clear in Bush’s second term that the cuts were not stimulating job growth.

That is the ONLY way a tax cut could conceivably lead to an increase in tax revenue, if it directly led to more jobs being created. More jobs means more people paying taxes and more tax revenues collected. It is the way that tax cuts are supposed to ‘pay for themselves.’ But it didn’t happen. The Grand Republican Tax Cut Experiment was tried, and it failed.

Once it became clear that their promises were little more than wishful thinking, the Republicans did not do what we would expect honorable, responsible politicians to do: restore the higher rates that they had slashed.

They did not do such a rational thing because the truth about these people is that they really don’t care if the government has to borrow hundreds of billions of dollars, so long as the lion’s share of those borrowed billions is put into the pockets of their wealthiest financial contributors.

And throughout this debate, we’re not talking about restoring the top tax rate to a level that is so onerous and ‘incentive-shattering’, businesses would no longer have any reason to hire people. The last time the nation enjoyed those higher tax rates was during the Bill Clinton Presidency, when a long period of economic growth and prosperity lowered the national unemployment rate below 4%.

Listening to a Republican politician complain about government borrowing is like listening to a stage-three alcoholic complain about ‘drug users.’

Could someone please inform Harry Reid and all the other Congressional Democrats that the appropriate way for a Democratic politician to respond to Congressional Republican complaints about government borrowing is with laughter & ridicule?

Absolutely no legitimacy whatsoever should be granted to these people. We’re not talking about an honest difference of opinion. We’re talking about an utterly discredited economic philosophy that is deserving of only laughter and scorn. Joe Biden knows what I’m talking about.

Their screwball ideas are actually a Great Threat to the American People. They want to talk about the government’s Debt Crisis? Let them first undo what they did a decade ago to create the crisis and then come back to the Democrats to talk about what government spending levels are actually appropriate.

If Barack Obama has learned anything from his first four futile years of trying to compromise with the Masters of Hypocrisy, it should be that they never intend to negotiate in good faith with any sitting Democratic President.

Every time the Republicans bring up the federal government’s debt burden, Obama must use it as an excuse to once again remind the electorate that the Republicans created the Debt Crisis through their irrational and extremely irresponsible use of the government’s power.

Different Republican voices will articulate those phony concerns again and again, but every time they do, Obama should welcome it as another opportunity to review the actual record of Republican stupidity and irresponsibility.

If we can make Congressional Republicans the object of constant ridicule, increasing numbers of Not-Rich Republicans will no longer see anything they want to identify with…

The EVIL Of Republican Politicians

October 19th, 2012

Master of Duplicity

As some of you may already know, I very rarely identify with the Democratic Party anymore, but one thing I can say with a great deal of conviction is that I am strongly Anti-Republican.

With only a slight amount of exaggeration, I frequently describe Republican politicians as simply evil.*

*Evil, in that they maliciously defame and misrepresent their political opponents—and also misrepresent themselves—in order to win elections, embracing with evident enthusiasm the [fundamentally immoral] maxim: “The end justifies the means.”

Almost every example of great evil we refer to in history—-the Inquisition, Stalin’s ‘starvation’ of the Ukraine, Hitler’s Holocaust, Nine Eleven, and all religious wars—-were carried out by people who believed that they were serving The Good, opposing Evil, and that their noble Ends justified their very ugly Means.

In the first Presidential Debate, Mitt Romney followed Republican precedent and freely misrepresented both Barack Obama’s and his own agenda. It was a remarkable performance, one that gives uninformed minds an outstanding example of what GUILE looks like when it is uninhibited by either caution or self-doubt.

There is no doubt in my mind that Mitt Romney is the best (natural, convincing) Front Man the Republican Party has seen since Ronald Reagan, who was able to put a human face on a very cynical and mean-spirited economic agenda. He may not have been a professional actor like Reagan, but he definitely has the same acting talent.

He is especially good at affecting sincerity, perhaps from all those years he spent schmoozing Wall Street Exec’s, trying to persuade them to invest in his company. This talent for projecting sincerity seems ultimately attributable [not to ignorance or gullibility, as with Ronald Reagan, but rather] to the probability that he is one of the cleverest Masters of Duplicity the Republican Party has ever attracted.

President Obama, unfortunately, was utterly unprepared for Romney’s presentation. He conducted himself as if he were debating before an audience of academic professionals, people who place the highest value on decorum, reasoned discourse, and the finer points of logic above all else.

The President gave a much improved performance during his second debate with Romney, having apparently learned the hard way that the Swing Voters out there really don’t care about the logic you use and they don’t really care if you are showing respect for your opponent, but they do care about how they ‘feel’ about you, about your character.

Swing Voters know that they don’t understand the details of the issues well enough to make an informed decision on policy differences. They find it difficult to tell which ‘side’ is telling them the truth, often agreeing with both sides. This forces them to rely—almost entirely—upon their ‘impressions’ of each candidate’s personal qualities.

It is because the Republicans understand this so well, that they never worry about all the ‘substance’ blather that the Dems like to talk about; they simply claim that their policies (throwing money at rich people) will do wonderful things for everyone.

Even though recent history has proven their claims to be spectacularly false, they still repeat them because they’ve gotten away with it so many times in the past.

The Swing Voters are, in fact, the ultimate reason why negative campaigning was created by Republicans...to provide the Swing Voter with a negative impression of the Democrat they are running against. It is why they constantly attack, accuse, and criticize the Democrats with emotion. They want to keep giving their base, and the Swing Voters, a reason to continue to identify with the Republican Brand.

The logic and arguments that Dems are quick to offer mean far less to Swing Voters than ‘appropriate’ displays of emotion. To the most fluid of Swing Voters, demonstrations of emotion are relied upon as an indicator of authenticity (it must be coming from ‘deep inside’). They perceive ‘unemotional’ responses to be suspicious, in comparison.

Yes, the Republicans understand this quite well, which is why they can always be counted on to express strong emotion whenever they criticize Democrats publicly. They know it is the KEY to their ability to persuade millions of people to vote against their own best interests.

The phony outrage ploy is a regular feature of Republican campaigns during the final weeks leading up to voting day. Fox News dispenses this kind of emotion regularly during its coverage of Democrats but a special emphasis is always evident in the last days of a campaign*.

*At the time I am writing this, Romney’s Son has apparently expressed some outrage at the way Obama supposed called his father a liar, saying he wanted to punch the President.

This strikes me as an intuitively clever way to claim the mantle of authenticity through an implied demonstration of [supposedly authentic] strong emotion.

President Obama’s performance in the Second Debate gives me hope that if he does win re-election, he just might reconsider his heretofore futile efforts to ‘bring the country together’ through demonstrations of Good Will and a willingness to Compromise.

Indeed, Republican strategists in the modern era have understood that their chances of winning elections are optimized if they can divide the country into two antagonistic camps, Us and Them.

That is how they win elections, by telling the electorate who ‘We’ are and who ‘They’ are and then persuading the Swing Voters out there to identify with ‘Us’ (We are ‘good’ = socially admirable; They are ‘bad’ = the nerds everyone makes fun of, who are supposedly some kind of threat).

The Republicans have found that the most effective way for them to define themselves in the minds of Swing Voters is by having a group of ‘outsiders’ around whom they can demonize, defame, and insult with great displays of emotion.

Pointing their fingers at these Whipping Boys, they tell the Swing Voters that, “we are not like them, we are good.” They define themselves by defining others, implying their own goodness through their emotionally-expressed criticism of the ‘badness’ of others.

The purpose of having a ‘Whipping Boy’ is to tell The Swing Voters that they have a choice (of identification): they can choose to identify with those people who always seem to be getting criticized all the time, or they can identify with the group that isn’t them.

That, my friends, is how the Republicans are able to persuade the Swing Voters to vote for them, by constantly demonizing the Democrats with emotion.

It is an approach that enables Republican politicians to imply their own ‘goodness’ indirectly while constantly forcing their opponents to play defense. In Biblical terms, they are the Pharisees whom Jesus rebuked often, with some emotional emphasis of his own.

Perhaps the President’s confrontation with Romney has finally awakened him to the fact that Republican Insiders have no desire whatsoever to ‘get along’ with the Democrats or in ‘governing well.’ They want only one thing: to be able to use the Dem candidates as their Whipping Boys, to assassinate their reputations with lies and misrepresentations and innuendo.

Against this threat to both himself and the entire nation, Barack Obama needs to focus his attention exclusively on those Swing Voters who are dependent upon emotional signals to determine whom they should trust.

FDR knew how important this was; it is the ultimate reason why he succeeded so very well against the Republicans for so many years. He knew that he needed to define the Republicans as a group that most people would not want to be associated with.

He used emotion and he used humor (ridicule). It was a time when FDR’s characterizations of The Republicans provided Swing Voters with a Democratic group identity that average folks were quite naturally attracted to.

Because this Swing Voter dynamic is going to determine the winner two weeks from now, Democrats need to focus all of their attention on analyzing the character of Romney and the Republicans in general. Specifically, on the lies and deception they use to hide their true agenda.

And try to show some emotion while doing this, some concern (honest fear) of the consequences of Republican Rule. Someone needs to tell the Swing Voters that The Republicans are scary. Seems like maybe that person should be President Obama.

How else are the Swing Voters supposed to realize that the Republicans are to be feared if the Democratic candidate himself doesn’t show them—through his own expressions of emotion—that they need to be afraid of the duplicity of Republican politicians?

The Swing Voters will vote for the entire Democratic slate if all elected Democrats start working together to communicate their genuine fear of the consequences of Republican Rule; they need to show the emotion that they want the Swing Voters to be feeling toward the Republicans when they walk into the voting booth.

That may not be something they are accustomed to doing, but they need to learn how to speak to the Swing Voters in this way if they want to win against The Republicans. Unfortunately, there are quite a few Democrats who believe that it is immoral for politicians to use fear to influence voters.

The problem with fear-as-a-tactic in politics is not that it is ever used; the problem is that some politicians create fears that are irrational or unjustified or exaggerated. When such fears are used to intentionally mislead citizens into voting against their own best interests, then the use of fear is unethical.

In contrast, if the fear that politicians inspire is legitimate—and their purpose is to alert voters to a danger that they can protect themselves from—then the use of fear is virtuous.

Democrats need to understand that the Swing Voters can be persuaded to fear either party. Right now, too many of them fear The Democrats more than they fear The Republicans.

They will embrace an identification with the Democratic Party only if they have been persuaded that it is The Republicans whom they ought to fear, not the Democrats. It is the Republicans who are not like them, who are simply looking for yet another opportunity to play them for fools.

The ultimate truth of political competition is that Swing Voters always choose a particular candidate or party because they fear the consequences of having ‘the other’ candidate/party in office, the one they didn’t vote for.

Some say that it is better to focus on hope, instead of fear, but even when we are motivated by hope, the key emotion that inspires us to act with a sense of urgency is our fear of losing the thing we are hoping for.

Indeed, people are optimally motivated to support a political campaign when they are inspired by fear of a lost opportunity. Fear is the one emotion that is strong enough to motivate people to go out and vote who have never voted before. (If your big thing is getting out the vote, keep this in mind.)

It is The Republicans who have made the political contest a war of affected emotion and group identity; the only way it is possible for the Democrats to prevail against such tactics is by countering it with some emotion of their own.

They must create a truly accurate image in the minds of the Swing Voters of The Republicans as a group of smiling politicians whom average folks need to fear as shysters and hucksters who are misrepresenting everything about themselves and their ends.

Now, Mitt Romney may very well believe that he and all of his fellow Republicans possess what they perceive to be ‘inherent worth.’ But if you examine the basis of their beliefs that it is ‘good to be a Republican’, it becomes clear that their self-approval is undeserved.

Indeed, the favorable image they have of themselves is derived primarily from their constant denunciations of the people who are ‘not like them’, who are a great threat to America (well, at least their control of America, anyway). Often, the people they condemn do not even exist, but are only Strawmen from their imaginations.

This is the same process, the same dynamic, that is responsible for the fact that Bullies have high levels of measured self-esteem. By constantly mocking and ridiculing outsiders (indirectly praising themselves), they develop a fairly strong sense of being ‘socially approvable.’

All of it derived indirectly from the contempt and ridicule they express for their whipping boys.

This, ultimately, is the basic reason why I view The Republicans as evil. I can see beyond the obfuscation strategies they employ. I can explain why their economic and foreign policy agendas are irrational, foolish, and gravely threatening to the well being of the vast majority of the American People.

If Barack Obama can begin to communicate this to the Swing Voters with some emotion, he will win the election, defeat the evil purposes of The Republicans, and have a legitimate opportunity to bring economic justice to the American People.

Rich Guy Economics

September 24th, 2012

President Romney?

Last night, during a 60 Minutes interview, Mitt Romney was asked if he thought it was fair that he only paid a 14% tax rate on his $20 million income while a guy earning $50,000 paid taxes at a higher rate.

Romney replied,

Yeah, I think it’s the right way to encourage economic growth, to get people to invest, to start businesses, to put people to work.

He was acknowledging the fact that most of his income was taxed at the lower 14% rate that is applied to income defined as capital gains. Romney is just one of a long line of Wall Street apologists who has exploited the impreciseness of the word investment to champion tax policies that sound as though they are beneficial to the economy, but actually are not.

There is no better example of their talents at obfuscation than the famous Capital Gains Tax Rate, promoted by Republican Myth Makers for generations as a great way to stimulate “investment.”

To understand why Republican claims re: the Capital Gains Tax Rate are so patently false, voters need to understand the difference between Financial Investments and Economic Investments. They are not the same thing.

ECONOMIC INVESTMENTS are the kind of investments that actually end up “growing the size of the pie.” They occur when money is spent on capital goods or other economic resources [like humans] that are then used to produce more capital goods or more of the final goods that consumers find desirable. In other words, economic investments either increase output or expand the supply-side’s productive capacity.

That is what happens whenever firms purchase machinery/equipment to improve productive efficiency or when they spend money on the construction of new stores or factories or on the salaries of new employees. However, not all firm expenditures are economic investments. (e.g., money spent by firms on advertising that either (a) misleads consumers or (b) does nothing to help them with their purchasing decisions.)

FINANCIAL INVESTMENTS are purchases or commitments of money that provide the “investor” with an income stream. Saving money is a financial investment because it provides interest income; purchases of assets can be financial investments if they eventually provide a capital gain.

Economic investments made by firms are usually also financial investments because they generate income that exceeds their cost. The economic investments made by governments that improve infrastructure or human capital are not financial investments because they do not provide the government with an income stream.

Some financial investments are also economic investments, but many of them are not. The purchase of a piece of land, for example, is a financial investment if it appreciates in value over time, but it is not an economic investment if it just sits there, undeveloped.

Purchases of stocks in secondary markets (e.g., NYSE, NASDAQ) are clearly financial investments if the stocks appreciate in value, but they are not economic investments because they involve nothing more than exchanges of titles of ownership of already existing assets. One financial investor hands money over to another financial investor for a piece of paper.

These transactions do not typically put any money into the hands of firm managers that could be used for economic investments. That normally happens only when stocks are first sold by companies to underwriters, prior to an initial public offering. New stock issues are rare for companies trying to raise capital, especially when interest rates are at historical lows.

With a clearer understanding of the difference between Economic Investments and Financial Investments, it is easier to recognize the obfuscation game that Wall Streets executives, like Romney, are always trying to sell to the American public.

Romney said that a lower capital gains tax rate encourages ‘economic growth’, that it gets people to ‘invest’, to ‘start businesses’, to ‘put people to work.’ But if you follow the money, it becomes clear that a lower capital gains tax rate does nothing of the kind.

The only ‘investment’ it encourages is increased financial investment in assets—-e.g., stocks and real estate—-creating unhealthy asset bubbles, like the real estate bubble which crashed the economy the last time the Republicans (1) held the White House and (2) cut capital gains tax rates.

With respect to the incentives that Romney said a lower capital gains tax rate provides, he is simply blubbering some of his fondest wishful thinking. In truth, setting a lower capital gains tax rate is one of the worst ways to use government money to try to stimulate real, private sector economic investments.

When do firms need special incentives to motivate them to invest in new capital goods? The answer is never. In modern market economies, competition provides firm managers with the most powerful motivation to continually invest that they will ever need: fear. They ultimately face both the fear of bankruptcy and the fear of lost opportunity.

If your competition lowers its costs by investing in new equipment, or improves the appeal of its products by incorporating new innovations, then you’d better do the same or you will soon find yourself driven out of business. With only a few exceptions, additional government-provided financial incentives are nothing more than an unnecessary waste of tax dollars.

Aspiring entrepreneurs do not need special additional incentives provided by the government to encourage them to assume the risks of creating a new business.

True risk takers believe that their ideas will succeed in the market and have so much of their identities invested in them, they really don’t care if they receive any return at all on their invested time and money, sometimes for several years, as long as they have hope of eventual success.

The problem for entrepreneurs is not that they lack motivation; it’s that they can’t find someone who is willing to provide them with a loan that banks, venture capitalists, and angel investors find too risky.

In confronting this situation, Congress has a couple of options. It can choose to do nothing and simply allow the marketplace to reward firms-that-make-wise-investments with the market share of firms-that-do-not.

The other option would be for lawmakers to help entrepreneurs [and already-established firms that are judged by banks to be ‘too-risky’] to obtain the funding they need in the hope that they might end up becoming competitive with better established firms.

The rational way to do this would be to provide these marginal firms with targeted investment tax credits or perhaps with government guarantees on private loans.

These kinds of initiatives would put the money directly into the hands of those who will be economically investing the money. Compare this to the insane idea of throwing hundreds of billions of extra disposable dollars at wealthy savers in the hope that some small fraction of their extra savings might somehow make their way into the hands of true economic investors.

What are the chances of that happening to an aspiring entrepreneur—-following a CG tax cut—-after private banks have already rejected his/her borrowing plans as too risky. Very little, if any, of those billions of dollars that the government would be giving up would actually end up helping needy entrepreneurs and firm managers.

As per usual, the Republican economic agenda is to throw money at already rich people because they are so sure that it would make all kinds of wonderful things happen to the economy. But the experiment was tried by George Bush and it failed...weaker than normal job growth and catastrophic bubble-bursting consequences of throwing all that money at rich people.

Why would we want to repeat that failed experiment?

How To Simplify The Income Tax Dramatically

August 20th, 2012

Can the tax code be simplified?

I’ve been asked to comment on The Fair Tax idea, which is essentially a proposal that the income tax be replaced with a national sales tax. The champions of this idea claim that it would be ‘fair’ (it is not) and far simpler than the current income tax is.

I’ve written quite a bit on how and why the Progressive Income Tax is the fairest approach to taxation imaginable. When it is imposed on all the rich people who participate in the economy as consumers, absolutely none of them loses any of the total purchasing power that they would have enjoyed if none of them had paid any tax at all.

(Briefly, all of the luxuries/assets the private sector currently produces for the wealthy would still be available to them (and purchased by them) after they have begun to pay higher tax rates; they’d simply be available at lower prices. In real terms, the wealthy would lose nothing, even though paying income taxes at more steeply progressive rates. Their ‘bidding positions’ within the hierarchy of all disposable incomes in the economy would remain unchanged.)

There is nothing fairer than a tax which imposes no loss of purchasing power on those who are required to pay it.

But what I really want to focus on in this essay is tax simplification, specifically on the actions Congress could take that would make The Progressive Income tax as simple as any sales tax, and indeed far simpler than The Fair Tax concept which is currently being promoted as the best approach to tax simplification.

You want to simplify?

As has been pointed out by others, the least complicated aspect of preparing an income tax return is figuring out which tax rate applies to you, once you’ve figured out what the tax code says your taxable income is. It is that calculation that is responsible for nearly all of the complexity that people complain about at tax time.

Simply applying a single rate to your taxable income—-as with a Flat Tax—-does nothing to simplify the process. Whether you ultimately face a single rate, or a number of possible rates, the vast majority of income tax filers would still be looking up the amount of their tax obligation from a table.

Virtually all of the complexity of our current tax code is attributable to the calculations that are necessary in order for taxpayers to take advantage of various deductions, exemptions, allowances, credits, etc., that Congress makes available to those who meet certain eligibility requirements. Seeing if you qualify for them takes a lot of time and calculations.

All of that complexity would be eliminated if Congress were to simply eliminate all deductions, exemptions, allowances, credits, etc., that are currently written into the tax code. If that were done, all that would be left for you to do when filing your tax return is add up all of your sources of income. Then look up in the tables for the amount you owe.

That is what the Income Tax would be if Congress were to simply make every citizen’s gross income their taxable income. If you have all of your documentation gathered together regarding your different sources of income, we’re talking about maybe 5-10 minutes to arrive at your total tax bill.

But wait, it get’s better. As simple as that would make the filing of a tax return, it is still possible to simplify things even further.

Instead of requiring that taxpayers file a return; Congress could simply have the IRS use all of the information it gets anyway from businesses and banks and W-4’s (withholding/interest/dividend information) to generate a tax bill that would be mailed to all taxpayers at a certain time every year.

Citizens would receive an itemized statement, and a copy of all supporting documentation that was used to calculate the tax bill, as well as a check, if they are entitled to a refund.

Why should a complex responsibility/burden be placed on taxpayers—-one that they are willing to pay others to execute for them—-when it simply isn’t necessary? Think of all the money taxpayers would save from not having to pay someone else to calculate their tax bill for them.

Sure, there would still be good reasons why Congress should want to provide various individuals, families, and interest groups (e.g., poor people, home owners) some financial assistance, which is what a tax break/deduction/credit/exemption/allowance is. But there is no compelling reason why we should be employing the tax code as the preferred way to communicate Congress’ generosity.

Create a Congressional Disbursements Agency

The single most important reform that Congress could enact re: the Tax Code is to stop using the tax code as its preferred way to distribute financial gifts from the government. Nearly all of the deductions, allowances, exemptions, credits, etc. that Congress puts into the tax code are based on the recognition that certain individuals, families, or interest groups are deserving of a financial gift from the government (or in order to serve other purposes that are thought to benefit the general public).

I’m not saying that recent home buyers shouldn’t get a gift from the government, based on the amount of interest they have to pay on their mortgages; I’m just saying, “why do it through the tax code?” If Congress wants to give families that are facing steep medical bills a financial gift to help them endure the financial crisis it puts them in, then by all means do so, but again, why do it through the tax code?

The alternative I propose is that Congress create an Agency within the Treasury Department that would be responsible for distributing any and all financial gifts that Congress might want to bestow on various individuals, families, or interest groups, according to various criteria specified by Congress.

The idea is to separate disbursements from revenue collection operations. Citizens who think they might be entitled to one of Congress’ gifts would have to apply for the benefit and that means providing the agency with any documentation that might be required to demonstrate eligibility.

This way, the complexity that is now associated with the Income Tax would be transferred to an Agency that is handing out money and away from the one that is charged with taking money from reluctant taxpayers. Citizens applying for a government check would face many of the same frustrations they used to experience when they prepared their tax returns, but now it would be solely for the purpose of getting a free gift of money from the government.

Certain kinds of gifts from the government—-like those based purely on income deficiencies, e.g., the EIC—-would not need to be ‘applied for.’ After all, the government would already have within the IRS a record of each taxpayer’s income, and so it could be directed to cut a check for any citizens who meet certain income thresholds. (It might be a good idea to require that they ‘sign for’ their government checks to verify receipt.)

No, I have not addressed all of the concerns that critics of this plan would raise, but I think you can now see how it is possible to answer most of them. The time to push for these kinds of reforms is when Progressives have been able to win solid majorities in both Houses of Congress and a sympathetic President. (Doesn’t seem likely any time soon.)

In the meantime, it makes sense to educate the political class re: the options that are available to Congress, whether they like those options or not.

That Scary Inflation Monster

June 15th, 2012

Inflation Monster

If you learn nothing else about Inflation on this day, hopefully it is that Inflation is not some kind of impossible-to-tame monster that will—-if given any quarter—-take off like a runaway freight train. Just how bad is the nightmare of inflation really?

Well, not so bad, it turns out. Actually, many good and wonderful things happen during times of inflation. Virtually all of our economic growth has occurred during times of inflation. It’s only when economies have stopped inflating that bad things have happened. Indeed, it is actually not at all ridiculous to refer to inflation as Our Friend.

Think about it. When economies are experiencing moderately-high inflation (say, 10%-25%), people are never more wealthy, in real terms. Wealth production/consumption is optimized. People are working, and producing, and enjoying the wealth they are producing. In real terms, society as a whole is getting wealthier all the time.

To better understand the distinction between Financial Wealth and Real Wealth, simply imagine what it would be like if everyone were to somehow become extremely rich in dollars one day and then we all decided to retire and live off of our accumulated ‘wealth.’ What we would soon discover is that we would actually possess no real wealth at all, because no one would be producing anything of value that we could buy.

The only reason why money has any value to us is because it gives us a claim on the productive efforts of others. How wealthy you actually are depends more on what others are doing than it does on your personal accumulations of paper notes. The Real economy is the productive behavior of people; it is the actual goods & services that people are producing and trading and consuming.

When we speak of the “Wealth of Nations”, we are not talking about the amount of currency they have in circulation; we are talking about their productive output. The only economic question that should ever matter to us, as a society, is how might we act to increase our production of real wealth?

Generally speaking, in real terms, consumers are not hurt by inflation. Yes, there are typically some exceptions to this rule (those on fixed incomes), but those exceptions are incredibly easy to remedy. Financial subsidies from the government would provide—-with minimum bother—-those on fixed incomes with sufficient income to keep up inflation.

This would enable even those on fixed incomes to continue to enjoy economic security and an optimal level of real wealth consumption in an economy that is experiencing robust inflation. True, it is difficult to make these adjustments (provide $$ subsidies) with precision because inflation measurement methodologies are seriously flawed and poorly applied. They can, however, be improved substantially.

No matter how grave the warnings sound when finance people speak of the “Evils of Inflation”, the ultimate truth is that inflation is always and everywhere harmless when it comes to the purchasing power of consumers. Yes, prices go up, but wages must also be going up, enough to cover the higher costs.

This must be true, or else it would not be logical to blame the price increases on inflation, i.e., a general increase in both prices and incomes that affects everybody. Economists make a distinction between price increases due to inflation and those that occur in particular markets due to ‘supply shocks.’ In the latter case, some people are actually going to be hurt because actual supply has been restricted by some development, but no one gets hurt when price increases are caused by pure inflation.

People may not gain in real terms from increases in disposable income that are due to inflation, but neither do they lose in real terms from inflation. From our understanding of market dynamics, we can know with certainty that if the disposable incomes of consumers ever fail to keep up with the higher prices being charged, then those higher prices would not hold. If that happens, where is the inflation?

Where is the great suffering that inflation is supposed to inflict on society? In real terms, it just ain’t there. Yes, people may worry that they aren’t keeping up with price increases, but this is a psychological anxiety that is not actually justified by the facts. It is an anxiety could be substantially ameliorated if monetary authorities would make an effort to reassure all parties that they are not actually being hurt in real terms by a higher inflation rate.

The simple truth is that, as long as investments in economic efficiencies continue to be made in a ‘high inflation’ economy, then real gains in purchasing power are going to occur even if that economy is experiencing high inflation. (Also keep in mind that investment levels are always at cyclical highs when an economy is experiencing ‘robust’ inflation.)

Feel reassured? Don’t be, say the Inflation Fear Mongers in the Financial Services sector of the economy. They want very much for you to believe that if the official inflation rate were ever go beyond single digits, the economy would take off like a runaway freight train, speeding ahead, out-of-control, destined to eventually plunge into a pit of hyperinflation if drastic action (like another Fed-induced recession) isn’t taken.

Is there any evidence to support this assertion? No, but that will not stop banking and financial industry professionals from continuing to promote the idea. As recently as the mid-1990’s, Chinese monetary authorities were able to successfully ‘slow down’ their economy’s 24% inflation rate until it again reached single-digit levels without bringing their economy’s annual growth rate down below 7.2%.

Intelligently designed credit controls can put an absolute limit on the growth of the money supply. If banks are only allowed to lend a fixed quantity of money in particular loan categories, then—-all else equal—-hyperinflation becomes an absolute impossibility.

We can take comfort in our knowledge that Inflation is never uncontrollable. Our monetary authorities should be able to easily maintain an inflation rate in the 5%-25% range, the higher peaks due to various supply ‘shocks’ that occur from time to time.

There is empirical evidence that supports the assertion that Inflation is essentially a benign economic phenomenon. University of Massachusetts economist Gerald Epstein, from a paper he wrote in 2003:

As reported in Bruno and Easterly (1996) and Epstein (2000, 2002) there is a great deal of evidence that moderate rates of inflation, inflation up to 20% or more, has no predictable negative consequences on the real economy: it is not associated with slower growth, reduced investment, less foreign direct investment, or any other important real variable that one can find.” (Epstein, 2003).

As a society, the question of whether or not we should embrace a Labor Shortage Economy (i.e., a higher inflation economy) should be approached as a rather simple Costs vs. Benefits decision. We need to take an honest look at the costs that a Labor Shortage would impose on us and then weigh those costs against the benefits we can honestly expect to reap from a Labor Shortage Economy. If the real benefits exceed the real costs, then we should fully embrace the goal of having Congress create a Labor Shortage for us.

From the above link:

So once again, what are the benefits of creating a Labor shortage? Well, they are at the top of the chart. If we focus our attention on what is happening to the Real Economy during a Labor Shortage, it soon becomes clear that we would be enjoying an outcome that is true economic perfection.

All those who are able-bodied & able-minded would be producing something of value. In such an economy, the production & consumption of wealth would be optimized. INVESTMENT would be optimized. When production & consumption & investment are all at optimal levels, society gets to experience an ideal economic achievement.

We would likely see an end to the phenomenon that we have always called Poverty. If all able-bodied and able-minded poor people are working, producing more real wealth, then much more money is going to be spent on poor people by poor people. Increased sales would prompt firms to increase the supply of goods and services available to the poor.

Yes, the poorest people in the economy would still be the poorest people in the economy, but in real, material terms, the poor would experience an enhancement of both their standard of living and their economic security. Social pressure would mount on those who are idle. With fewer idle teens and young adults, crime would drop. All in all, poor people wouldn’t have to worry as much.

...

That’s quite a list of mind-boggling benefits to stack up against the few “headache costs” that are so often mentioned by Inflation Worriers. What kind of costs do they bring up? How about the tremendous burden of having to change menu prices more often? How about the unthinkable cost of having to go to banks more frequently? These thoroughly laughable ‘costs’ are actually mentioned quite often by Inflation Worriers with a straight face.

The truth is that these various ‘costs’ are quite miniscule when compared to the horrible cost of unemployment. Indeed, in the net, it would cost society nothing (in real terms) to eliminate unemployment through a Labor Shortage because all of the costs brought on by higher inflation would be overwhelmingly dwarfed by the cost-savings that would be reaped from the Labor Shortage.

There is not even a ‘difficult trade-off’ involved here. Creating and maintaining a Labor Shortage would provide a pure gain to society. Think about it. The gain is not just the elimination of the pain suffered by the unemployed. It is bringing an end to blighted neighborhoods. It’s fixing the problem of Poverty.

It’s having a vastly improved & modernized infrastructure. It’s achieving true economic security. It’s having an economy that would be the envy of the world. We’re talking about a wonderful, wonderful accomplishment for the American people. That is what we have been giving up in order to make the calculations of finance people slightly less complicated.

Bankers and Financial Investors worry about inflation because they worry about all of the variables that affect the rates of return they make on various financial investments. They find inflation disappointing because it makes impressive-looking nominal yields look much smaller once inflation is taken into account.

Their big fear is that inflation could develop so rapidly, they might only end up breaking even on some loans or even ending up with a negative [real] return. This is a prospect that they find so horrifying, they would not hesitate to throw millions of people out of work in order to minimize some of their Uncertainty Of Return.

In real terms, they would actually lose nothing if they simply accepted the challenge of dealing with higher inflation rates that fluctuate in a range of maybe 5%—25%. This is because all other investors have to deal with the same uncertainty and face the same risks. All will try to maximize their returns, period.

Even if their Return-on-Equity drops to a much smaller—-though still positive—-level, in real terms they will be enjoying the absolute zenith of wealth consumption, because their economy will be at an absolute zenith of wealth production.

So much for the horrible monster of Inflation…

Imagine An Economy That Ideally Serves The Poor

May 20th, 2012

Rich vs. Poor

Barbara Ehrenreich’s poignant Preying On The Poor provides us with an all-too-accurate picture of The Poor as chronic victims of a hard-hearted Business Class. It is a sad reality that many of us are forced to experience on a daily basis.

The urge to Do Something about this atrocity is strongly felt by nearly everyone who isn’t a Republican, but what is that ‘something’ that ought to be done?

I happen to be one of those economists who believes that the best way to solve problems like this is through the marketplace. Instead of passing innumerable acts of legislation to deal with specific examples of corporate meanness, I suggest that an effort be made to influence the marketplace in a way that would actually give economic power to The Poor.

From my perspective, when it comes to the issue of Poverty, progressive intellectuals have been asking the wrong questions. Instead of asking, “What can be done about [name a specific act of economic victimization]?”, we should be asking, “What would an economy look like if it ideally served the interests of the poor?”

That is the question I attempt to answer in Make The American People Richer, an article that describes the major features of an economic agenda that would provide The Least Among Us with an economy that is always providing optimally for their needs.

An excerpt:

Members of America’s Privileged Class misperceive their true interests primarily because they do not understand the very important distinction that must be made between Financial Wealth and Real Wealth. To better understand this distinction, simply imagine what it would be like if everyone were to somehow become extremely rich in dollars one day and then we all decided to retire and live off of our accumulated ‘wealth.’ What we would soon discover is that we would actually possess no real wealth at all, because no one would be producing anything of value that we could buy.

The only reason why money has any value to us is because it gives us a claim on the productive efforts of others. How wealthy you actually are depends more on what others are doing—-or not doing—-than it does on your personal accumulations of paper notes. The Real economy is the productive behavior of people; it is the actual goods & services that people are producing and trading and consuming. When we speak of the “Wealth of Nations”, we are not talking about the amount of currency they have in circulation; we are talking about their productive output. The only economic question that should ever matter to us, as a society, is how might we act to increase our production of real wealth?

Indeed, but what kind of job-creating effort are we talking about that would provide The Poor with the ideal economy that they could ever hope for? The answer: Congress could commit itself to achieving the goal of creating and then indefinitely maintaining a chronic LABOR SHORTAGE in the United States.

Creating a sustained labor shortage is not something that is difficult to do. All that is necessary is that Congress increase the federal government’s spending on economic investments and valuable public services. It needs to keep increasing its spending on this production of real wealth until all of the unemployment in the economy is ‘sucked up.’

And after it has done that, it needs to still spend a little more, thereby creating an economy where there are more jobs available than there are people to fill them. In order to get the people it needs to produce additional public wealth, the government would of course offer higher wages, benefits, working conditions to attract those who are already employed in related industries.

The private sector would thus be forced to compete with the government for workers who now have other options. At first, private employers would simply offer higher wages and extra benefits, but then some thoughtful firm-managers will realize that it might be a good idea for them to start treating their employees with respect, and to start exhibiting more patience with their employees and even to adopt a conciliatory tone in their efforts to make their employees happy, to give them additional reasons to remain with the firm.

In a labor surplus economy, there are more workers looking for jobs than there are jobs available. Employers/managers know this, which is why they are all too eager to use threats and anger to motivate their employees. They know that their employees have few options. They can sense that they have a power advantage and so they exploit it.

But in a Labor Shortage economy, the tables are turned. Employers would discover that they don’t need to threaten their employees with termination to motivate them. Anger is the easy way, the lazy way to manage people. Show people that you value them and they will often knock themselves out just to win an appreciative expression of approval.

The simple truth is that there is nothing society could do for the underprivileged that would be more kind, more helpful, or more generous than to maintain a Labor Shortage for them. It would provide poor and Middle-Class Americans with both an increase in the amount of real wealth they consume AND a dramatic improvement in their Economic Security. No, it wouldn’t provide specific-job security, but it would provide employment/income security.

And what about the troubles of organized labor? Well, it turns out that nothing would benefit organized labor more than a sustained labor shortage. Finally, unions would have the negotiating leverage they need in order to obtain good contracts. Fear of job loss would no longer be a reason to avoid union participation. Heck, employers would probably even say that they want their employees to have a union if it would make them happy.

Everything that unions say they want for their members would be achieved through the creation of a sustained labor shortage. How could they not want to pursue this goal as THE KEY to everything they want and need as advocates for wage earners?

If union organizers could ever get their heads around the idea of creating a Labor Party, it would be insane for them to not make the creation of a labor shortage THE centerpiece of that party’s economic agenda.

With the kind of government ‘intervention’ I am recommending, ‘market forces’ are used to effect positive results, making most of the ‘band-aid’ remedies that the Democratic Party has been historically associated with unnecessary. If Congress were to maintain a labor shortage, there would no longer be any need for such ‘do something’ initiatives as minimum wage laws, unemployment insurance, welfare, and even food stamps.

With jobs easy to obtain, people will always have the option of simply working for the money they need…right? (Yes, of course those who are not able to work would be provided for…)

What we are talking about is not some kind of idealistic dream that could never happen. It has happened, during WWII, when the government eliminated all unemployment by increasing its spending dramatically on military procurements. The same thing could easily be done with spending on cleaning up the environment, on upgrading and modernizing all components of the nation’s infrastructure, roads, sewers, bridges, mass transit, public facilities of every sort, government hospitals, government-paid physicians, etc.

Of course, the Corporate Elite will protest loudly that business owners wouldn’t be able to make enough money to stay in business, but none of those complaints will be true. Owners who don’t want to settle for a Normal Profit would be free to abandon their market share to those who can still see a reason to own a [modestly] profitable business. But in spite of the many and various spurious arguments they will raise in their efforts to discredit the idea of a labor shortage economy, they will not be able to deny the true benefits that it would generate for all the economy’s participants:

So once again, what are the benefits of creating a Labor shortage? Well, they are at the top of the chart. If we focus our attention on what is happening to the Real Economy during a Labor Shortage, it soon becomes clear that we would be enjoying an outcome that is true economic perfection. All those who are able-bodied & able-minded would be producing something of value. In such an economy, the production & consumption of wealth would be optimized. Investment would be optimized. When production & consumption & investment are all at optimal levels, society gets to experience an ideal economic achievement.

Yes, it is true that The Poor would be very well off if only Congress would create and sustain a labor shortage for them. But there’s something else about this idea that might not be obvious at first: the Labor Shortage Economy that would do so much for The Poor and Working Class would also be the best possible economy for this nation’s wealthiest citizens.

This becomes apparent when we focus on the REAL economy, and not on money flows and the number of digits in your annual income. It is simply not possible for the wealthy to become better off—-in real terms—-than they would be in a full-employment economy. They would still have the highest disposable incomes in the land, which will still give them the same claim that they now enjoy to the scarcest goods and services that our domestic economy is able to bring to market.

But in addition to the luxuries that they would still be able to purchase (only at lower prices), they would also benefit from the great improvement in the nation’s infrastructure, from the cleanup of the environment, from the disappearance of blight from impoverished neighborhoods, from the reduced threat of crime [now that everyone is working]. And consider: they would be able to brag to the rich people in other countries that the Rich in America know how to ‘take care of’ their poor people; they are all working, most of them on projects that are making the physical appearance of America a wonder to behold.

All of these examples of increased public wealth will be there for the wealthy to enjoy, even though they would have to submit to much higher tax rates to pay for all that additional REAL wealth they’d be consuming. If they have come to understand the difference between financial wealth and REAL wealth, it really wouldn’t bother them to be paying steeply progressive income tax rates. They’d be able to just look around and see the incredible society they have been able to finance with their contributions. The same top-of-the-ladder material prosperity as before for them, only much more security and much more to brag about when traveling overseas.

For my explanation as to why the fears of inflation are way overblown, check out the rest of the article.