|RANT FROM JANUARY 2009
"Economics Made Simple"
Other than the family budget my only direct experience with what someone called "the dismal science" was as bookkeeper with my wife's drapery business. I learned that bookkeeping was indeed dismal, when there wasn't enough money to pay the bills, when "accounts payable" were larger than "accounts receivable." When there was good "cash flow," it was almost fun.|
Economics has become the big story in today's news, overshadowing war, racism, hunger, weather and natural disasters. The media use the word "economy" to refer almost exclusively to Wall Street and the stock market. The stock market is part of the economy, but not near all of it. It is not even the most important part of it. Those who actually do the work are the most important part.
The "science" has become very esoteric, requiring advanced degrees in mathematics to be able to decipher the "models" presented. But I can't help thinking that the questions, and the answers and the required decisions, are all really quite simple. To wit:
1. Inflation. I used to worry about what I was calling "Cheney's stunt" -- whatever horror the current administration could perpetrate during the lame duck period. Now I see it was not bombing or invading somebody -- it was the seven hundred billion dollar giveaway to the bankers. Now there is no money left for the new administration to do any of the wonderful things promised during the election campaign. The sky-rocketing deficit can only mean one thing -- the money becomes worth less, which is inflation. They can't cut interest rates "to control inflation" any further. So the money loses value. Printing more money, to do necessary things, devalues the money, and steals from those who have the least, who need what money they have to be worth something in order to buy necessities, like food.
2. Tax cuts and stimulants. It is now widely admitted that the "trickle-down," or "tinkle-down," theory of prosperity has been proven to be fraudulent. It does not help "the economy" to cut the taxes of those who have the most already. Really, it has been perfectly obvious all along. The government has to get its income by taxing those who have something. The least painful way would be to tax those who have something extra. It is obvious that, if we want a government that does for us what we want done, we will have to get the tax rates back to the progressive levels of the 1950s. Those who have the most pay the most.
Those who have the least are the ones who need a tax cut, and that would stimulate the whole economy, because they would spend the newly available money on necessities immediately. The self-employment tax is a glaring example of what needs correcting. As of now, the small business owner owes 15% of the very first dollar he earns. Allowing a modest untaxed initial income would stimulate the bottom levels of the economy greatly.
3. Bail-outs. "Too big to fail" means too big. Small is beautiful. It is interesting that the Congress was quickly ready to give 700 billion to the banks which caused the economic crisis, with almost no strings attached. Rewarding the mistake-makers -- or were they criminals? -- is not good economics. It would made more sense to punish the perpetrators and assist the victims.
Then the Congress stalled when asked for one-fiftieth as much -- 700 divided by 50 equals 14 -- $14 billion to bail out the U.S. car industry, which impacts millions of American workers. Many in Congress used the occasion to attack the labor unions, as if the workers were the cause of the problem. It's another case of ideology creating bad economics.
When those who do no useful work are paid several hundred times as much as those who actually do do the work, trouble is bound to turn up in the long run. CEOs and bankers -- those in neckties, one could say -- will finally have to be reined in and brought back to reality.
4. Social Security. The last hope of many humble ordinary people is Social Security. It's what's left of the solidarity net holding up the whole enterprise. Thieves want to steal it. Persons of questionable ethical sensitivity have already "borrowed" from the trust fund, which should be sacrosanct.
Now those who have cast greedy eyes on that fund say that it is "in trouble," that someday there will be no money to make payments. So, they want us to give what there is left to them, through Wall Street transaction commissions. Bad economics, except for the thieves.
There are two simple solutions to the imaginary Social Security "problem." [a] Keep the Pentagon's hand off the trust fund. [b] Remove the cap on the income amount taxable for Social Security. As it is now, persons making more that around $80 thousand per year pay only a fixed amount. Remove that cap, so that everyone is paying at the same rate. When that is done, there will be plenty of money. As it is now, the poor are paying much more than their share. Bad economics, again.
5. The Pentagon. The hole in the bucket of the Federal Budget is the Pentagon. War, weapons of mass destruction, shock and awe bombing from remote places, and all forms of organized state-sponsored violence will have to be renounced, as not useful instruments for enhancing national policy. We'll simply have to quit it. It is terrorism, and we as a nation are opposed to it. That is, we pretend to oppose it, but lately we have been committing it on a huge scale. It is really quite simple. Just stop. We did it once already, in Vietnam. It ended, when we quit.
Then the economic correction can set in. Reduce the Pentagon budget by half annually, until all that's left are pensions for the ex-personnel. That will make a lot of money available for other useful purposes.