Entries in "Spreading the wealth"

October 29, 2008

Spreading the wealth-8: On living simply and with dignity

I knew an old couple that lived in Youngstown, Ohio. They had grown up in the Great Depression but later as teachers led comfortable middle class lives. But they never forgot their hard beginnings. I remember being their weekend house guest about thirty years ago and noticed that the bars of soap in the bathroom and kitchen rested on their narrow faces, not the usual broad one. When I asked them about it, they said that this way there was less waste of soap from seepage due to contact with the counter surface.

It was a telling sign that they were frugal people who abhorred waste. You knew that they would squeeze the very last bit of toothpaste out of every tube, that they would dilute the last bit of shampoo in the bottle at the end so that they got all of it out, and that no food would be thrown away uneaten. But while thrifty they were by no means stingy. In fact, while they eschewed ostentatious living, they were very generous people, giving both of their time and money to benefit others, supporters of worthy causes and charities, and you would receive a warm welcome in their home. But they knew how to live on a tight budget, and tried to live simply even when they were not forced to.

When we look back at the times that give us the most sense of pride as a people, it is usually those times when people made it through hardships, like the Great Depression or World War II, when things were hard to obtain and people made do with very little. It gives us the reassuring sense that we can survive tough times again if we had to. While there is no intrinsic virtue to being poor, going through tight financial times at some point in one's life teaches one how to live carefully. One looks back with a sense of pride that one was able to overcome it.

When we came to the US, our first ten years were nomadic, living in small apartments in low-income neighborhoods, with thrift store furniture, an old and cheap used car (when we had a car), and simple food. All our clothes were purchased at sales. We never even bothered to go to the main floors of the department stores where the regular priced items were. In those days, the phrase 'bargain basement sales' was literally true. Department stores had separate entrances from the sidewalk that led straight to the basement where all the clearance items were, so us poor people could go straight there and not clutter up the main store.

Even though I have no wish to relive those days, I don't look back at those times with horror. There is no shame in being hard up. And we were fortunate that we were never hungry or fearful of not being able to pay the rent, at least in the short run. Those experiences have given me the assurance that should things turn out for the worse and I can no longer live the fairly simple way I do now, I can revert to an even simpler lifestyle with a much lower income without much difficulty. The thought of becoming poor again does not frighten me.

During the current financial crisis, I have been reading and listening to stories about how people are trying to deal with suddenly lowered incomes. What often surprises me is the description that some people give of their lives before the crisis hit. Although they seem to be people who have jobs and incomes similar to mine, they live lives that are quite different. They have mortgages that are three to five times my own, eat out at restaurants four or five times per week, and routinely go on vacations to exotic locations. People seem to have the sense that this is what normal life is or should be, rather than an exceptionally extravagant lifestyle. Or maybe it is me who is out of step.

I particularly wonder about retirees who feel that they are entitled to a very good life in their so-called 'golden years', the sense that they are somehow entitled to play golf and go on cruises and travel the world, and who vehemently oppose any tax measures that might lower their lifestyles even slightly in order to provide more public services or benefits to those less well off. Because such people tend to vote in large numbers, politicians pander shamelessly to these well-to-do retirees, especially in states like Florida and Arizona, further encouraging this sense of greedy entitlement.

At the same time I see old people continuing to work at low paying jobs that require considerable physical energy long after they should have retired, obviously because they need the money to just make ends meet. Surely some well-to-do older people can forego a few of their luxuries so that all old people can spend their last years with dignity, and not be forced to push their ageing bodies through difficult workdays.

The only things I feel that anyone is entitled to, that are fundamental human rights, are the basic needs of food, shelter, clothing, and health care. Everything else is a luxury that is nice to have but not an entitlement. Living to a ripe old age with reasonably good health is itself is a gift, a luxury denied to many people. We should be thankful for it.

There is no intrinsic virtue in being poor. But going through such an experience, especially early in life, teaches you how to cut corners and live simply and, hopefully, gives you empathy for those who have not been as fortunate and who may be still living the life that you left behind. This is why I think that it is good for young people to experience at least a few years of living on a low income.

People who are well-to-do should stop complaining about paying higher taxes. We often don't appreciate how much luck went into us being where we are. Those of us who are lucky to be so well off should be glad to spread the wealth around to improve the conditions of those who did not get the breaks we did.

POST SCRIPT: Happy Days are here again

Andy Griffith, Opie, Richie Cunningham, and The Fonz give out some election advice.

See more Ron Howard videos at Funny or Die

October 28, 2008

Spreading the wealth-7: More on the opposition

In the previous post, I said that the arguments in favor of having a more progressive tax system are so obvious that it was an interesting exercise to see why even those who would directly benefit from it still oppose it. I suggested some reasons for this behavior and in this post want to explore some more.

Another group consists of those who are still living in the shadow of the Cold War and have been effectively brainwashed to think that any effort to raise the living standards of the less well-off is 'socialism'. The label socialism has been demonized so much that for such people anything to which that label is attached is automatically a bad thing, even if they do not understand the term and are really poor and would benefit from the proposed plan. Witness how universal, single-payer health insurance is fought by the health insurance-pharmaceutical-physician complex by labeling it as socialism, though the only people who really benefit from not having it are the very wealthy and the health insurance-pharmaceutical-physician complex.

This group of people have completely bought the myth sold to them by the rich that we would all be better off if we let a very few people make and keep as much money as they can by whatever means. It is this group that the McCain-Palin rhetoric is aiming at.

The instinctive siding of such people with the 'plight' of someone who makes $250,000 or more even while they make a small fraction of that and have little or no chance of ever joining those ranks reveals the depth and extent of this brainwashing. They may be finding it hard to pay the rent or the mortgage, they may be fearful of losing their jobs, they may have little or no health care, they may be living in decaying neighborhoods that cannot provide basic services, but somehow they think the very rich and the giant corporations and Wall Street are on the same side as them and deserve to have even more money. Such people are simply not thinking things through.

Another possible reason is that many people share the illusion that some day they too will be rich, and when that happens they want to be able to enjoy the unfettered high life, even though they may be quite vague about how this could come to pass. For some the fantasy may be little more than thinking they will win the lottery. For others, it may be that they have some talent they are proud of and think that they may be 'discovered' by a talent scout and suddenly become a world famous singer or model or comedian or actor or writer or athlete. They do not want to spoil the imagined enjoyment of that future success by supporting policies now that might even slightly reduce the free-spending habits they hope to have when they strike it rich.

The media helps maintain this illusion by feeding this obsession about what rich and famous people are really like. Notice how the interviews with these famous people usually emphasize that they are just like you and me, except for being very wealthy. George Clooney eats corn flakes for breakfast, just like me! Scarlett Johannson likes to lounge around in sweat suits at home, just like me!

At the same time these same media features also indulge in what might be called wealthy-lifstyle-porn, talking about the massive houses, many cars, elaborate parties, and jet-setting lifestyles of the celebrities. The popularity of celebrity-lifestyle TV shows and magazines and the existence of a paparazzi industry to bring us snippets of personal information about these people ("Look! We have photos of Branjelina's babies!") testify to the dream world these audiences are creating for themselves.

All these reinforce the belief that the only thing that separates the very wealthy from you and me is a single stroke of luck. This might well be true. But to base your political decisions on the chance that lightning will strike, that you will hit the jackpot, is foolish. To think that your interests coincide with those few very wealthy people is to live in a dream world.

Tom Tomorrow wrote about this fantasy world that people inhabit and which is encouraged by the celebrity-obsessed media.

A few years back, I was on a road trip with my wife, and somehow, probably from some junk shop along the way, we ended up with the audiobook version of Valley of the Dolls, the classic trashy novel about the lives of the rich and unhappy. After the third or fourth lengthy description of wealthy people enjoying caviar and champagne, I commented that the book was not intended to be about the lives of the wealthy, but rather, about the lives of the wealthy as imagined by the trailer park set: they spend all their time drinking champagne! And eating caviar! (Which brings to mind something I was once told by a prominent contributor to Vanity Fair — that it’s not a magazine aimed at the upper class, it’s a magazine for the middle class to buy believing they are reading a magazine aimed at the upper class. But I digress.)

All these things are designed to give the middle class and the poor the sense of identification with the wealthy. It is quite an amazing thing to see. The reality is that any person with no inherited wealth and who depends on a regular paycheck to meet life's needs has far more in common with the financial situation of a janitor than they have with Paris Hilton.

But as long as they fail to realize who their real allies are, they will continue to be exploited.

POST SCRIPT: Undecided voter=idiot?

The Daily Show tries to understand how people could still be undecided at this stage of the election.

October 27, 2008

Spreading the wealth-6: Understanding the opposition

Recently, Joe Biden said it would be patriotic of rich Americans to pay more taxes and Sarah Palin chided him for it, saying that no one should pay more taxes and that everyone should want to pay less. This is the mantra of the right-wing ideologues. While I disagree with Biden's choice of the word 'patriotic' (a word that has long since ceased to have any operational meaning but instead is just used as a political weapon), I cannot understand the logic of people who think that paying less taxes is always better. Even the ever-conventional New York Times columnist Tom Friedman took issue with Palin on this fetishization of lower taxes for everybody. (Thanks to Norm for the link.)

Recall that what is being proposed is to make the income tax structure more progressive by raising the rates on the highest slabs of income and reducing it for the lower tax slabs. This seems so eminently reasonable, even downright common sense, that we should try to understand the sources of the opposition to it.

One group consists of rich and greedy and callous people. Such people simply do not care about the poor. They have made (or inherited) a lot of money and it gives them a weird sense of entitlement, that this somehow makes them superior to those who have less. They seem to take pleasure in ostentation. Such people enjoy being much richer than others and think that creating a more a more progressive tax scale is somehow unfair to them.

There are also those ideologues that think that the best system is one in which there is no government at all and that all taxation should be abolished and a pure unadulterated free market should reign supreme. Of course these people are nuts. Such a system has never existed except perhaps in small isolated communities back in hunter-gatherer times. Modern societies are far too large and complex to function without significant government involvement and the only meaningful debate is about the proper balance between the private sector and government.

In fact it is the presence of government that has enabled people to be highly productive by specializing in one or two areas of activity and excelling at it, rather than having to take care of all their needs themselves.

Then there are others, who while not rich themselves, subscribe to the economic theory that says that having a few people make enormous amounts of money is good for all of us because this gives them the incentive to work, hard create new inventions, make new discoveries, and use the wealth generated by the fruits of their labors to invest in more businesses that will create more jobs and so we all benefit in the long run. This is the theory of trickle-down economics.

But does this happen? Do people who make enormous amounts of money use the excess after meeting their living needs to invest in new businesses that create well paying jobs? Or do they largely use it for ostentatious living that results in the creation of mainly low-paying service sector jobs (waiters, valet-parkers, maids) to support that lifestyle?

In other words, is trickle-down economics a good theory? That is a question that one should be able to answer empirically and I will leave it to the economists to provide a definitive answer. But there is clear evidence that the rapid rise in income inequality that started around 1980, with huge gains for the very rich has not produced a commensurate rise in the general well being.

Look at figure 2 in this paper that analyzes the rising inequality in incomes from 1980 (which is the year that the stock market started to rise like a rocket) and 2000. Notice that while the lowest four quintiles of family income have stagnated and even decreased slightly over that period, the share of the national income earned by the top 1% rose steeply, doubling its value. So we know who actually benefited from the so-called boom years of Reagan, Bush I, Clinton, and Bush II.

In fact, as we see from the graph below taken from this paper, the share of the total income of the top 1% of households rose from about 8% in 1980 to 20% in 2006.


As Table 1 in the same paper shows, from 2002 to 2006, when George Bush and the Republican congress gave massive tax cuts for the rich, the income of the bottom 90% of households rose by only $1,446 (4.6%) while the incomes of the top 0.1% rose by a whopping $1,809,824 (57.6%).

Note that the only time in the past when the wealthy had this large a share of the national income was in 1928, just before the Great Depression. That is not a good indicator of what lies ahead. The idea that allowing a few to amass great wealth is good for all of us is an argument that is hard sustain.

POST SCRIPT: The people in your neighborhood

Stephen Colbert looks at the new middle class loved by McCain and Palin, which consist of those people who are identified solely by their first names and occupations, like the famous Joe the plumber and Tito the builder.

October 24, 2008

Spreading the wealth-5: Class warfare against the poor

Why do so many have a reflexive aversion to paying taxes and think that any adjustments in the tax system to shift the burden away from the poorer and towards the richer is somehow unfair? This is because class warfare has been consistently waged against the poor for so long by both parties that we have come to think of it as the norm. But when attempts are made to redress this balance, the rich are quick to shout 'class warfare!' to distract attention from the fact that they are the masters of it.

One reason is that people have been conditioned to think that there is massive waste in government and that this waste is due to the poor taking advantage of government social programs. Of course there is waste and it should be eliminated. But the level of animosity that is expressed by the well-to-do against the poor seems to be based on something more visceral

I was at a social function recently and was listening to a couple who are very wealthy and live in a large house in a fancy neighborhood and send their children to private schools, and they were railing at how their taxes were going to benefit people whom they clearly thought of as being good-for-nothing. It was quite extraordinary. It never seemed to strike them that only a small fraction of their taxes was going towards any benefit to the poor. They seemed to be driven by a feeling that the poor were poor because they were no good and should therefore be punished and not 'rewarded' for their failures.

People have been taught to hate and despise the poor. They think that such people are shiftless free-loaders and resent their own money being used to seemingly benefit the 'undeserving poor', to use Alfred Doolittle's phrase, and who have done nothing to warrant any consideration. Taxes have become portrayed as a redistributive system to shift money and resources from worthy, hard-working individuals to lazy and less worthy individuals, rather than as a means to shift money from private individuals to the public good that in turn also provides benefits to those same private individuals that they could never obtain otherwise.

The reality is quite different. It is the rich who are the real free-loaders. I wrote before about how the tax system is rigged to siphon money from the poor to the rich and I will quote part of it again to show how this is done.

New legislation was passed in 1977 that reduced benefits and raised the payroll tax to its current value. As a result of the formula that was used, this initially increased revenues by small amounts but eventually the surpluses became large enough that between 1983 and 2003, while the sum of the government deficits for those twenty years (i.e., the excess of expenditure over revenues for those years alone) was $5.4 trillion, the addition to the national debt (i.e., the total accumulated amount of all deficits over all time) was 'only' $3.6 trillion. The $1.8 trillion difference was due to the fact that the Social Security account was running up huge annual surpluses. (David Cay Johnson, Perfectly Legal: The covert system to rig our tax system to benefit the super rich – and cheat everybody else (2003), p. 123)

This Social Security surplus was used to create a false sense of the country being flush with money and this enabled Ronald Reagan in 1981 to push through his tax cuts for the rich. The Social Security surplus was used to hide the true costs of the massive tax giveaway to wealthy people.

In 1983 there was glitch in that Social Security ran a small deficit due to the fact that 10 million people were then out of work and thus payroll tax revenues were down. While most people felt that this was a short-term problem that would go away when the economy revived, others like Wall Street favorite Alan Greenspan (then chairman of the Federal Reserve Board) panicked people into thinking that Social Security was in crisis and Congress again passed new rules reducing benefits and raising the retirement age in the future. This resulted in Social Security starting to run up surpluses again.

The siphoning away of the Social Security surplus to benefit the rich was repeated during the George W. Bush administration. The federal government was running a total budget surplus at the time that he came into office in 2000, and again this was largely due to the Social Security surplus. In fact, between 1999 and 2002, Social Security revenues exceeded expenditures by $640 billion. Bush used this surplus to hide the true cost of the huge 'temporary' tax cuts for the rich pushed through by him in 2001. More than half of the $1.3 trillion that those tax cuts cost the government went to the richest 1% of the population. (Johnson, p. 127)

Remember that the social security payroll tax is a regressive tax whose burden falls disproportionately on the poor and middle class because everyone pays a flat rate on all their earnings up to around $100,000 and nothing on incomes above that limit. Hence the more income you earn above that limit, the lower your tax rate is. But the tax cuts disproportionately benefited the rich.

Why didn't people scream with outrage at this reverse Robin Hood action by the government? Because there is this curious phenomenon of the middle class thinking of themselves as closer somehow to the millionaires than to the poor, although they are often just one paycheck, or worse a pink slip, away from joining the ranks of the poor and the homeless and the destitute, while their chances of becoming one of the rich are almost negligible.

People seem to think that life is like American Idol, that one day through some fortunate combination of luck and effort they will become wildly rich. True, it might happen and does happen to a very small number of people. But to bank on it is as unrealistic as the expectations of a child who abandons his studies in order to practice basketball thinking that he will make it to the NBA just because Le Bron James did. The odds are totally against you. Furthermore, while there is no virtue in being poor, being rich does not necessarily bring with it the psychic rewards and pleasures that make life truly worth living.

As long as this illusion that their interests are closer to those of the very wealth than to the poor is allowed to continue, the middle class (and even segments of the poor) will continue to be suckers exploited by the rich.

POST SCRIPT: The really real America

Jason Jones visits Wasilla to see exactly what the really 'real' America looks like and the extensive executive experience that being the mayor of that town provided Sarah Palin.

October 23, 2008

Spreading the wealth-4: Who is in the middle class?

The problem with discussing the distribution of wealth and income in the US is that politicians of both parties have for years been pandering to the 'middle class' and courting their votes by promising to improve their condition.

The rich have exploited this by giving small income tax benefits to the middle class while giving themselves huge tax benefits, and then claiming that the entire middle class has benefited. David Cay Johnson in his book Perfectly Legal: The covert system to rig our tax system to benefit the super rich – and cheat everybody else (2003) describes how this spreading the wealth in favor of the rich is done. The title of his book says it all. Then the rich (and the middle class dupes who have been taken in by this scam) get outraged and scream 'socialism!' when someone comes along to try and spread the wealth in the opposite direction.

They have been getting away with this because the phrase 'middle class' has been bandied around a lot without being defined by politicians and the media. As a result, we have the curious phenomenon that almost everyone, from the quite poor to the quite rich, thinks of themselves as middle class. Thus someone who is earning $30,000 a year feels they are in the same class as, and feel a sense of class solidarity to, someone earning $250,000 a year. Hence they react with a sense of grievance when someone with much higher income than them doesn't come out ahead because of any change in fiscal policies.

The word class has become perceived as based not only on income but also as a proxy for family background, the nature of one's job, the social circle one moves in, and lifestyle practices. This vagueness has enabled almost everyone to think of themselves as middle class because in at least one area of their life they may overlap with those much better off than them. So someone who has a good formal education but now works at minimum wage job may still consider himself middle class because he reads newspapers and books, listens to classical music, and is involved in arts and community activities.

But if we narrow the definition of class to purely income and leave those other unquantifiable elements out, we can get a better idea what the terms 'poor', middle class' and 'rich' might mean.

To see how income is distributed in the US, take a look at this table published by the Bureau of Labor Statistics and the Bureau of the Census. It gives the range of income in 2005 for each quintile of households. Note that this is for households, not individuals, and thus includes the income of all the wage earners in a household.

20% of households earn less than $19,178
20% of households earn between $19,178 and $36,000
20% of households earn between $36,000 and $57,568
20% of households earn between $57,568 and $91,705
20% of households earn over $91,705

Only 5% of households earn over $166,000.

It is reasonable to think of the middle three quintiles as defining the middle class, so it consists of those households with incomes roughly between $20,000 and $90,000, where I have rounded each figure to the nearest $10,000. If one wants to, one can split those three middle quintiles into lower-middle class, the 'true' middle class, and upper-middle class.

Those earning below $20,000 can be called poor and those earning over $90,000 can technically be described as rich. But there is something jarring about the notion that those earning around $90,000 are actually rich. That level of income does not really allow for the kind of lifestyle that one associates with really rich people. It may be more accurate to label that group as simply 'well-to-do'.

But if we split the well-to-do group into finer-grained slices, we can perhaps get a better understanding of who is really rich. Footnote 1 of this paper provides a link that downloads a spreadsheet that breaks down the income ranges for the highest income groups (excluding realized capital gains) in 2006. (See Worksheet Table 0)

It shows that:

10% of households earn between $100,349 and $138.254
5% of households earn between $138,254 and $329,070
1% of households earn between $329,070 and $482,129
0.5% of households earn between $482,129 and $1,401,635
0.1% of households earn between $1,401,635 and $6,473,710
0.01% of households earn over $6,473,710

Using this table, one can subdivide the top quintile of the well-to-do category into the 'rich' (the roughly 5% of households earning between $140,000 and $330,000), the 'very rich' (the 1% earning between $330,000 and $480,000), and the 'super rich' (the 0.6% earning over $480,000), where again I have rounded each figure to the nearest $10,000. These labels agree more with out intuitive notions.

So Joe the Plumber, who says he hopes to earn over $250,000, rather than being the middle class everyman he has been portrayed to be, belongs to a very tiny and select group, definitely rich and approaching the very rich. He is in the top 2-3% of income earners.

So why is he is whining about his marginal income tax rate for the amount over $250,000 being increased from 35% to 39%, which is hardly going to have any impact on his ability to meet the needs of him or his family? And why do so many people, who will never ever get close to earning that kind of money in their entire lives, identify with him and are sympathetic to his complaint?

More on this later.

POST SCRIPT: McCain supports 'spreading the wealth'

Listen to what John McCain says at the end of this clip at a town hall meeting in 2000:

Transcript of last portion:

Audience member: "Why is it that someone like my father who goes to school for 13 years gets penalized in a huge tax bracket because he's a doctor."

McCain: "I think it's to some degree because we feel obviously that wealthy people can afford more."

Audience member: "Are we getting closer and closer to, like, socialism?"

McCain: "Here's what I really believe: That when you reach a certain level of comfort, there's nothing wrong with paying somewhat more."

Stewart: "That, of course, is the late socialist leader John McCain. I believe he passed away during the Republican primaries. He will be missed."

Looks like McCain was for spreading the wealth before he was against it.

October 22, 2008

Spreading the wealth-3: Meeting a hierarchy of needs

My view is that one should formulate tax policy based on the extent to which one meets a hierarchy of needs.

The first level of needs is to provide food, shelter, clothing, and medical care for oneself and one's family. That undoubtedly takes priority over everything else. People who are struggling financially just to get by even if they live frugally, would tangibly benefit from paying less taxes and should pay less. In fact, there is no reason why such people should pay any taxes at all. Tax cuts or policies that result in higher incomes meet that level of need very well.

But once those needs are met, the next level of needs consist of safe neighborhoods, well-lit and well-maintained streets and sidewalks, parks and recreational areas for children and adults to enjoy, well-stocked libraries, and good schools. Those are very real and tangible needs that I would directly and personally benefit from but it beats me how giving me a tax cut is going to help me attain any of them. This level of needs cannot be met by tax cuts or even higher income, unless the increased income is so large that I can live in a gated communities, send my children to private schools, hire private security services, and otherwise pretty much cut myself off from most of humanity.

Since that is unlikely (and even undesirable from my point of view) am I supposed to take the few hundred extra dollars a month in tax cuts and go around and find other people who share my needs and we then pool our money to build a park? To hire police? To build schools and libraries? That is madness. Only an organized system like government can provide the kind of personal benefit that comes from creating a public good.

Giving people tax cuts when they are already able to meet their first level of needs while this second level of needs is not met makes no sense. It seems to be based on the belief that by using that money to buy consumer goods like iPods, I can compensate for the decay of public services.

Beyond the level of meeting the first level of basic needs, the deeper pleasures and joys of life do not come from private wealth but communal wealth. I would gladly pay more taxes to pay for those needs that can only be met by a collective community effort. What is the point of buying a large flat screen plasma TV instead, unless I am planning to shut myself up in my fortress home, cut off from the pleasures that come with being a social being? Surely this should be obvious? Or do people think that they can be happy in a cocoon while surrounded by poverty and decay?

But I also have a third level of needs, this time on a psychic level. At some level of my subconscious and occasionally of my conscious mind, it bothers me that there are people who go to sleep each night hungry, live in sub-standard and rat and cockroach infested housing in dangerous neighborhoods, whose schools are experiencing physical decay and lack of resources, and who suffer and die from treatable illnesses because they do not have access to affordable health care.

I do not routinely see these people because I am fortunate enough to be able to afford to live and work in neighborhoods where they are largely absent, or at least invisible. But I know they are out there and sometimes as I drive through poorer neighborhoods I can envisage the grim lives such people must be leading. It is depressing. I would gladly pay more taxes to alleviate the hardships those people face.

In order to meet that psychic need, I would gladly pay higher prices for my food if that meant the food service workers were paid better. I would gladly pay more for my groceries if that meant that agricultural workers lived better lives. I would gladly pay more for my clothes if that meant that sweatshops were shut down. And I would gladly pay more taxes to pay for better housing for low-income people and to create a single-payer universal health care system so that no one is denied appropriate care.

All those are also ways to ''spread the wealth around' and they are good things, just as it is a good thing to raise taxes on the well-to-do and use that money to create greater social goods that everyone benefits from.

Even those who do not share my third level of needs must surely recognize the value of the second level, which is why the opposition to spreading the wealth is so surprising.

POST SCRIPT: Fake Americans unite!

Jon Stewart rips into the ridiculous notion put out by McCain and Palin that there is a 'real' America and a fake (?) America.

October 21, 2008

Spreading the wealth-2: Why this benefits all

What is interesting about the flap over Obama telling Joe the plumber about the benefits of spreading the wealth around, is that if you listen to the exchange between Joe and Obama, what Obama is saying not only makes absolute sense, its truth should be blindingly obvious to anyone.

What Obama said was that while he was happy for Joe's success, he also cared about the waitress and the teacher and the store clerk and the policeman and all the others in that community who do not earn anything close to $250,000 per year and were currently struggling and who needed a break. He pointed out that if they were able to do better in life, then they were more likely to be able to afford the services of a plumber like Joe and he would do better too.

That is exactly right. I myself hate plumbing chores. Even though I do not earn anywhere near the $250,000 that Joe is hoping to earn, fortunately I still can afford it so that when something goes wrong in our home I call Nate the handyman and he comes along and promptly takes care of it, while shooting the breeze with me, exchanging information about our families. It is all very pleasant.

As a result, my plumbing problems get solved by an expert professional, Nate gets my business and some income, and this frees up my time and energy to do the things that I enjoy, such as reading and writing. We are both better off.

If I could not afford Nate's services, I would have to learn to do the plumbing work myself and spend a lot of my spare time on it and would probably end up doing a lousy job if not actually flooding the house. And if that fails, I would have to ask friends who know more about plumbing to help me out. A lot of poor people do exactly that. They sacrifice their own time and energy to do such things, bartering their own skills and services for those of others. That is perfectly fine, but it does not help the neighborhood plumber's business.

This example can be multiplied over and over. I pay people to work on my car, to repair the roof, to trim the tress in my yard, to plow my driveway in winter, and so on, because I can afford to. And we all benefit from that in different ways.

But if most people are impoverished and barely making ends meet, and the more concentrated wealth becomes, the less likely it is that small businesses will succeed since fewer people will be able to afford their services. It is far better for a plumber to have a hundred middle class people in his neighborhood than one multimillionaire and a hundred poor people, since a single rich person will not have a hundred times the plumbing needs of a hundred homeowners.

Henry Ford discovered this many years ago when he realized that if he and other employers like him did not pay their employees good wages, there would not be a large enough market of consumers who would be able to afford to buy the cars he made. So while higher wages reduced his profits in the short run, it increased the viability of his business in the long run.

But this basic truth has to be obscured in order that the rich can benefit by impoverishing others, The rich have always depended upon duping the poor to support their lifestyles. As Voltaire said, "The comfort of the rich depends upon the abundance of the poor." But they also have to persuade the less well-off that that this exploitation is good for them. They do this by using their wealth and power to make the political structure serve their needs, then suggest that the resulting structure that redistributes wealth to benefit the rich is 'natural' and that reversing that change to benefit the majority is somehow unfair. What is amazing is that so many poor and middle class people actually believe that argument.

This English nursery rhyme (c. 1764) captures the idea of how the laws have always favored the wealthy. (Thanks to blog reader RCarla.)

They hang the man and flog the woman
That steal the goose from off the common.
But let the greater villain loose
That steals the common from the goose.

The law demands that we atone
When we take things we do not own.
But leaves the lords and ladies fine
Who take things that are yours and mine.

'Spreading the wealth' means taking the commons back from those who have taken it for their private benefit. It has so many benefits for so many people that one has to wonder why there is so much fierce opposition to the idea from the very people who would benefit.

In the next post, this question will be explored further.

POST SCRIPT: The other Palin for president

October 20, 2008

Spreading the wealth-1: Introducing Comrade Bush

By now, practically everyone must be sick of hearing about Joe the Plumber. But bear with me for a minute as he provides me with a peg on which to hang a point I wish to make. I thought his interaction with Obama was quite interesting and was planning to comment on it even before Joe became John McCain's BFF.

What I found most amusing is how the right wing has seized upon Obama's comment to Joe about the need to 'spread the wealth around' and has thrown one of their by now patented manufactured outrage hissy fits, screaming "There, I told you! Obama is a socialist!" and warning that if he is elected president he is immediately going to take all our money and give it to winos and panhandlers and make us wear grey tunics and work on collective farms.

There is a priceless irony at play here in making the charge of socialism against Obama, coming as it does just after the Bush administration has effectively nationalized Fannie Mae, Freddie Mac, and AIG and is planning to use at least part of its $700 billion to obtain part ownership in many banks.

To appreciate the irony we have to realize that it has been almost a permanent feature of US government policy to demand of foreign governments that they privatize their public sector and open their markets to US goods and services by reducing or eliminating tariffs and barriers. The US government routinely uses its power in the World Bank and the International Monetary Fund to force foreign governments to adopt something called Structural Adjustment Programs if they want to receive any aid even to tide over emergencies.

This package of measures, in addition to the privatization and open markets demands, also usually require the reduction or elimination of any subsidies of food, energy, transport, and the like that keep the prices of these commodities low so that regular people could afford them. Governments have been known to fall as a result of the unrest and even riots that resulted from the hardships imposed on their people because of acquiescing to these demands.

It is precisely because Cuba refused to go along with these demands that it has been punished by the US by the blocking of aid, trade embargoes, and the like.

People in the US may not have heard about structural adjustment programs but they are almost household words to any person in developing countries. I heard about them long ago because the newspapers in Sri Lanka would regularly report the parliamentary debates about what the latest demand by the World Bank and the IMF was for any aid, and how the government would deal with it. We all knew that adopting it would lead to financial hardship for ordinary people, at least in the short run.

But now, by adopting policies of acquiring ownership of major institutions to deal with their own financial crisis, the Bush administration has to endure the taunts foreign leaders and analysts who are pointing out all the times that Bush and previous presidents have accused those governments of becoming tyrannical when they did things very similar to what Bush is now doing, and nationalized vital sectors of their own economies.

Many countries are savoring the pleasure of the US now having to eat its own words. As this McClatchy news report says:

They don't call him President Bush in Venezuela anymore.

Now he's known as "Comrade."

With the Bush administration's Treasury Department resorting to government bailout after government bailout to keep the U.S. economy afloat, leftist governments and their political allies in Latin America are having a field day, gloating one day and taunting Bush the next for adopting the types of interventionist government policies that he's long condemned.

"We were just talking about that this morning on the floor," said Congressman Edwin Castro, who heads the leftist Sandinista congressional bloc in Nicaragua. "We think the Bush administration should follow the same policies that they and the International Monetary Fund have always told us to follow when we have economic problems - a structural adjustment that requires cutting government spending and reducing the role of government.

"One of our economists was telling us that Bush has just implemented communism for the rich," Castro said.

No one in Latin America has been making more hay of Bush's turnabout than Venezuela's President Hugo Chavez, a self-proclaimed socialist who is the U.S.'s biggest headache in the region.

"If the Venezuelan government, for example, approves a law to protect consumers, they say, 'Take notice, Chavez is a tyrant!'" Chavez said in one of his recent weekly television shows.

"Or they say, 'Chavez is regulating prices. He is violating the laws of the marketplace.' How many times have they criticized me for nationalizing the phone company? They say, 'The state shouldn't get involved in that.' But now they don't criticize Bush for having nationalize . . . the biggest banks in the world. Comrade Bush, how are you?"

The audience laughed and Chavez continued.

"Comrade Bush is heading toward socialism."
. . .

Mark Weisbrodt, director of the leftist Washington-based Center for Economic and Policy Research, advises numerous Latin American governments.

He called the recent Bush administration policies ironic.

"The biggest nationalization in the world was of Fannie Mae and Freddie Mac. The biggest nationalization of an insurer was AIG. People are saying that Bush is privatizing risk and socializing losses," Weisbrodt said.

John Ross, who has begun providing advice to the Chavez government, along with his boss, former London Mayor "Red" Ken Livingstone, criticized the U.S. president and his conservative political allies.

"They have abandoned every policy that they've advocated that other governments should follow over the past 20 years," Ross said by telephone from London. "And they've adopted the measures that they've condemned other governments for taking.

"This is not the end of capitalism. But it is the end of Reaganism and Thatcherism," he added.

This kind of hypocritical policy making is not completely unprecedented. After all, Richard Nixon, another avowed free-marketeer imposed wage and price controls (another policy strongly frowned upon by the US when done by other countries) for nearly three years when he was president.

Next: Meeting a hierarchy of needs.

POST SCRIPT: Careless McCain staffers

John McCain has a close call.

John McCain Accidentally Left On Campaign Bus Overnight

(Thanks to onegoodmove.)