The Census Bureau reports that 44 million Americans now live in poverty (that’s 1-in-7), an increase of 4 million from 2008. Given the high unemployment rate, this should not be surprising. Nevertheless, it is galling, because even as GDP has grown, productivity has increased, and profits have rebounded, those at the widening margins of the economy have suffered.
Of course, many argue that the poverty line ($10,830 for a single, $22,050 for a family of four pre-tax) is too low to capture what it intends to capture. With the news a few months ago that an alternative poverty measure was being established, I hoped that it would lay bare the structural injustice of the economy. However, stunning numbers like these in a rich country should by their own merit herald an economic crisis. This isn’t news to those willing to look at our economy away from the rose-colored glasses of neoclassical economics. What will it take for a movement to coalesce around this injustice?
What will it take for a movement to coalesce around this injustice?
Ravi Batra answers in The New Golden Age: The Coming Revolution Against Political Corruption and Economic Chaos (Palgrave, 2007).
So long as the mainstream economists are more worried about federal deficits than about poverty, education, health care, jobs, infrastructure, science, R&D and the fiscal health of our states, counties and cities, you will continue to ask the same question.
Only when they discover that federal deficits are not a problem, but human problems are real, will any progress be made toward finding solutions.
Rodger Malcolm Mitchell
What will it take? Here is some food for thought on what it means to be “poor” in this rich country:
“Overall, the typical American defined as poor by
the government has a car, air conditioning, a refrig-
erator, a stove, a clothes washer and dryer, and a
microwave. He has two color televisions, cable or
satellite TV reception, a VCR or DVD player, and a
stereo. He is able to obtain medical care. His home
is in good repair and is not overcrowded. By his
own report, his family is not hungry, and he had suf-
ficient funds in the past year to meet his family’s
essential needs. While this individual’s life is not
opulent, it is equally far from the popular images of
dire poverty conveyed by the press, liberal activists,
and politicians.123 ”
http://www.policyarchive.org/handle/10207/bitstreams/12856.pdf
Speaking of the “rose-colored glasses of neoclassical economist,” did you see ND economist James Sullivan on the ND newswire? The article is called “ND Expert: Official poverty numbers misleading; better measure needed.” His research shows that if we instead look at consumption-based poverty, we find that poverty has decreased. Here are some excerpts:
“These numbers tell us that this severe recession is taking a particularly hard toll on those on the bottom rung of the income ladder, and that we’ve had little success in jump starting the economy, but there is considerable evidence that most demographic groups are better off today than they were 20 years ago,” says Sullivan.
“A different measure of poverty that’s based on consumption, rather than income, would not only measure poverty more accurately, but would lead to a better understanding of the effects of policy and would help lawmakers craft policies to better serve the nation’s poorest, according to Sullivan.
“Using the consumption-based measure, Sullivan explains, data shows that poverty has fallen by more than 4.5 percentage points over the past two decades. Since 1989, median consumption has risen about 7 percent, and consumption for poor families has risen faster than consumption for the middle class.
http://newsinfo.nd.edu/news/16752-nd-expert-official-poverty-numbers-misleading-better-measure-needed/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+NewsAndInformation/News+(News+and+Information+-+News)
Cynthia, a fascinating and counter-intuitive report, although. I am troubled by the source — the Heritage Foundation — which has a strong, right-wing axe to grind, as exemplified by this paragraph in the report:
“Major programs such as food stamps, public housing, and Medicaid continue to reward idleness and penalize marriage. If welfare could be turned around to encourage work and marriage, the nation’s remaining poverty could
be reduced.”
I doubt whether people don’t have jobs because of food stamps, public housing and Medicade. And I doubt whether “encouraging” marriage (i.e. penalizing being single), would make for a healthier family life.
Nevertheless, even if the numbers are correct (??), I can’t see them affecting any policy decisions. Liberals and conservatives will continue to disagree about giving aid to the lowest income group, no matter how “high” it may be.
Rodger Malcolm Mitchell
I actually kind of agree with Sullivan on this one, after discussing it with him a few weeks back. The issue is measuring consumption, and not including debt-fueled consumption. Sullivan concedes both of these points, but also points out that the income reporting for the poverty stats is shaky. I’d say that we also need to put in some weight for excess labor time, as many of the poor work multiple jobs.
If you can find some errors in the Heritage Foundation report, have at it.
Here’s another quote from the report, pointing out two other inconvenient truths about poverty in this rich country:
“Much poverty that does exist in the United States
can be reduced, particularly among children. There
are two main reasons that American children are
poor: Their parents don’t work much, and their
fathers are absent from the home.
In both good and bad economic environments,
the typical American poor family with children is
supported by only 800 hours of work during a
year—the equivalent of 16 hours of work per week.
If work in each family were raised to 2,000 hours
per year—the equivalent of one adult working 40
hours per week throughout the year—nearly 75
percent of poor children would be lifted out of offi-
cial poverty.
As noted above, father absence is another major
cause of child poverty. Nearly two-thirds of poor
children reside in single-parent homes; each year,
an additional 1.5 million children are born out of
wedlock. If poor mothers married the fathers of
their children, nearly three-quarters of the nation’s
impoverished youth would immediately be lifted
out of poverty.”
If you’re looking for a “movement to coalesce around this injustice,” you might start with an honest recognition of the source of the problem. That usually helps in the search for solutions.
Cynthia, the problem with the Heritage Foundation’s report is not with the numbers, but with the implications that there really isn’t much poverty in America. When you average large groups, you blend the bad with the good.
Did you know that Bill Gates and a homeless man average $30 billion in assets?
Examples:
“The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one and-a-half baths, a garage, and a porch or patio.”
“Only 6 percent of poor households are overcrowded;
two-thirds have more than two rooms
per person.”
Anyone skimming these statements might come to the conclusion there are virtually no poor in America, which is exactly what the Heritage Foundation wants you to believe. Perhaps those folks should drive through Chicago’s south and west sides, to see if they can find any poor people. Or maybe a trip through Appalachia might help.
“The average home” may be a three-bedroom house, but what about all those homes that are below average? Have you never visited a slum?
“Overcrowded” is a subjective term, and what about the 1/3 that have fewer than two rooms per person — far fewer.
The people who want to deny poverty (so they don’t have to address it), remind me of the guy whose wife catches him in bed with another woman. He denies it by saying, “Are you going to believe me or your eyes?”
Cynthia, are you going to believe your eyes or the Heritage Foundation’s interpretation?
Rodger Malcolm Mitchell
If you are suspicious of “averages,” then consider the following, again, taken from that right-leaning Heritage Foundation report that contains so many inconvenient facts (drawn from the presumably right-leaning Census Bureau):
“Forty-three percent of all poor households actu-
ally own their own homes. The average home
owned by persons classified as poor by the Cen-
sus Bureau is a three-bedroom house with one-
and-a-half baths, a garage, and a porch or patio.
• Eighty percent of poor households have air
conditioning. By contrast, in 1970, only 36
percent of the entire U.S. population enjoyed
air conditioning.
• Only 6 percent of poor households are over-
crowded; two-thirds have more than two rooms
per person.
The typical poor American has more living space
than the average individual living in Paris, Lon-
don, Vienna, Athens, and other cities throughout
Europe. (These comparisons are to the average
citizens in foreign countries, not to those classi-
fied as poor.)
• Nearly three-quarters of poor households own a
car; 31 percent own two or more cars.
• Ninety-seven percent of poor households have a
color television; over half own two or more color
televisions.”
Presumably, these numbers are accurate; otherwise, you would have pointed me to the real ones.
Over the fifty years, my travels have taken me to the top of the town and the bottom of the barrel and just abut everywhere in between in the various regions of the US and in many places of the world. In my admittedly anecdotal experience, what the Heritage Foundation implies is fantasy built on a few grains of truth.
Poverty is hardly a new problem, and it is a global one that remains a blight on humanity. The solutions to this problem are complex because the causes are complex and have crystalized culturally and institutionally.
However, the economic solution in general is fairly simple. It is to increase incomes and therefore effective demand globally. Poor people are poor because, well, they don’t make enough money to support themselves at the standard of living. This not because they are lazy or indigent in aggregate, and unemployment does not arise because suddenly so many people decide they prefer leisure to work. Jobs are lacking, and the jobs that are provided at the lower echelon are not even subsistence wage jobs. Many, many people need to work two or three jobs to stay alive and support their families.
In the US, for example, NAIRU decrees that an unemployment buffer of about 6% is needed to control inflation. That means that there is a shortfall of jobs and underutilization of productive capacity. Thus, the problem cannot be lack of productive investment. This output gap and level of permanent employment comes at a cost not only to GDP but also to human resources and human life. See Australian economist Bill Mitchell, The Daily Losses from Unemployment.
As Mitchell and others point out, monetarily sovereign government can always balance employment and price stability with the tools available to them. There is a rich literature on this subject that is so far ignored by mainstream economists and policy-makers. See, for example, Mitchell and Muysken, Full Employment Abandoned (Elgar, 2008) for analysis and documentation. This is also a focus of the Kansas City school in the US.
Much of the world’s economic problems stem from chronic overcapacity and lagging demand, owing to concentration of wealth. This concentration at the top is due largely to economic rent — land rent, monopoly rent, and financial rent, economic “economic rent” being defined as revenue not derived from production. Corruption is also a national and global problem that results in social and political privilege and economic inequality. These are defects that can be corrected if the will is there. If the will is not there, it will continue to lead to systemic breakdowns resulting from imbalances becoming unsustainable.
See the work of Michel Hudson, Ravi Batra, and William K. Black, for example, on economic rent and corruption.
Those are the same numbers as before, but O.K., Cynthia. I agree with you and the Heritage Foundation. There are no poor people, or so few, poverty is not a problem in America, so why even think about it, much less do anything about it?
Feel better?
Rodger Malcolm Mitchell
The interesting, if depressing, thing about poverty in this rich country is that so much (not all) of it is preventable. The underlying and fairly boring cause of much poverty, especially among children, is the failure of their parents to do all of the following:
Finish high school,
Get married before having children, and
Stay married after having children
The reality of poverty in this rich country, as opposed to true poverty in the developing world, is that poor people here actually live pretty well. They have enough to eat (in fact, too much, as obesity rates are inversely correlated with income), a car, a place to live, clothes to wear, and a surprising amount of “stuff” that even affluent people in the past did not enjoy, such as air conditioning, electronic game systems, and cable TV.
So why do so many “progressive” activists insist that the problems of the poor can be solved primarily by taking money from people who are not poor, through higher taxes, and giving it to poor people to buy more stuff? (Of course, we are already doing that through various government programs, such as food stamps and the EITC, which resources are not even included in the income of the “poor.”) Why do we need even more government programs and subsidies, along with the parasitic government agencies to administer same, to solve the problem of poverty?
Cynthia, there is no doubt that the factors you mention are significant and there are others, of course. The questions are how do you get kids to finish their education and be responsible parents. How do you turn ghettoes into thriving communities, how do you change culture and institutions so that transgenerational poverty is reduced, etc. It is not like these are new questions. Obviously, government alone cannot solve these problems. But it can address the economic imbalances involved. The courts have addressed the most glaring institutional imbalances, but that has been far from enough.
So far, no one has figured this out at a societal level in that poverty remains a persistent problem nationally and globally. These are cultural and institutional problems that have been resistant to economic and political solutions by government. Some claim that government has not done enough; others claim that government cannot solve such problems and should butt out and let the private sector handle it.
It is easy to say what amounts to, “Get a large number of people to change their behavior,” but this adds little to the debate at this point. The question is whether there are solutions that are shown to work. We need operational solutions and empirical answers about what works.
BTW, taxes do not fund anything. A monetarily sovereign government funds itself through its currency issuance. It neither taxes to fund itself, nor borrows to finance itself. Taxes withdraw nongovernment net financial assets and should only be used to control inflationary pressure according to functional finance. Treasury issuance as an offset to deficit spending just drains excess bank reserves generated by deficits in order to allow the Fed to hit its target rate in the overnight market.
Regarding subsidies, a monetarily sovereign government does not need to finance its debt. Treasury issuance is operationally unnecessary and the Fed could hit its target rate by paying a support rate on excess reserves. Or we could just go to no bonds.
The interest on Treasury issuance, called the national debt when it is actually nongovernment net financial saving, is actually a subsidy that could be eliminated.
All subsidies constitute economic dead weight, and therefore they must be justified by their contribution to promoting public purpose. We need to review all subsidies on this basis.
The Heritage Foundation tries to imply that:
1. Poverty in America really isn’t so bad, and
2. It’s mostly the fault of the poor.
So, whatever we try to do for them is pretty much wasted.
I’m not sure whether or not Heritage truly believes the myth that money going to the poor comes from the rich. Clearly, Cynthia does.
Anyway, I suspect American poverty doesn’t compare with poverty in, say, Bangladesh. And to some degree, the family history of the poor does exacerbate their poverty.
But, does this mean we now are free from responsibility? May we now guilt-free wash our hands, and turn away as innocent babies are born, grow and die in slums, because, well, it really isn’t so bad and anyway, it’s their own fault? Is that the message, Cynthia?
Rodger Malcolm Mitchell
The original post here lamented the “structural injustice of the economy” as, presumably, the cause of the increasing numbers of Americans officially classified as “poor.” The Heritage Foundation report is useful both in its apparently “counter-intuitive” observation that poverty numbers don’t accurately measure material well-being, and its reminder that the causes of poverty have considerably more do to with poor choices and less to do with any “structural injustice” that can be remedied with additional income redistribution.
That innocent babies continue to be born, grow, and die in lower-income communities is appalling. It’s appalling that the changing cultural and social norms in such communities, aided and abetted by the mainstream media and culture that insists (despite decades of social science research to the contrary) that all kinds of family structures are equally good for children, have resulted in 80% of babies being born to single mothers. Instead of washing our hands of this situation, and pretending that lower-income Americans are suffering because of tax cuts for “the rich,” why don’t we face the truth about poverty in America? It’s not politically correct, of course, and it’s not as much fun to suggest that people change their self-destructive behavior as it is to blame “The Rich,” but in the end it might be a considerably more effective strategy.
There is good empirical evidence that global poverty is related chiefly to unemployment. See Bill Mitchell here, here and here
Frankly, I’ve not heard anyone say, “all kinds of family structures are equally good for children.” Sounds like a straw man to me.
But, O.K. If you insist. Hey, all you poor people. You really aren’t poor. And change your self destructive behavior!!
There. Problem solved.
Rodger Malcolm Mitchell
There is good empirical evidence that poverty in America, especially among children, is related to family structure.
And, yes, “getting a large number of people to change their behavior” is actually the key to the solution to poverty IN THIS COUNTRY. Just as getting a large number of people to use their seat belts was the key to decreasing auto traffic deaths, and getting a large number of people to stop smoking was the key to decreasing smoking-related deaths.
Cynthia, I am not saying that this is not a factor. I am saying that there are a lot a factors that need to be addressed and the way to do this is with solutions that have some empirical evidence of working. I have provided citations to empirical evidence that unemployment is a chief factor, including evidence about means that work to relieve this endemic problem.
You keep saying that there is is a social and cultural problem that leads to poverty. Are you saying that this is the only problem or the chief one. If so, what is the evidence of that? What are the solutions you are proposing for the factors that you see needing to be adressed, and what empirical evidence is there that they work? If you have something constructive to say, please state it, including citations, so we can consider it.
You can start with this one. 63% of poor children under 18 are living in a single-parent household:
http://www.census.gov/hhes/www/cpstables/032009/pov/new02_100_01.htm
What do you propose to do about that? Does your proposal have any empirical evidence to support it.
For example, one solution would be to make all these children wards of the state and put them in foster care at public expense. Another might be to imprison people bearing children out of wedlock, etc. Another would be to defund welfare for unwed mothers and their children and let them fend for themselves. Another would be to imprison the fathers. Some religious conservatives think that this would all go away if bible reading and prayer were mandatory in public schools.
I still don’t know what you are proposing so I can respond.
Tom, there is no proposal. The Heritage Foundation is a typical right wing, pro-religion, anti-government group. Here are some of their “proposals.” Direct quotes from their site:
“Convince policymakers and the public of the role of religious> individuals and institutions in solving social problems, supporting the family in its central role, and maintaining limited government. ”
“Develop the best research and rhetoric to convince new target audiences of the significance of religion and moral values in the American Founding and our current civic life. ”
“Unite religious and economic conservatives more effectively around the goal of restoring the family to its central role, both legally and culturally, and reviving religious liberty.”
“Shape a healthy public discourse that appreciates the historic and continuing significance of religion and moral virtue in American civic life.”
The separation of church and state is an anathema to these folks, for you see, religion is the solution. The fact that on average, the poor already are more pious is an inconvenience.
Cynthia thinks getting men to stay with their wives is similar to passing a seat belt law or increasing the taxes on cigarettes. She may be on to something, as some of today’s poverty benefits reward single parents more than marrieds.
But, the real question is: Why do men leave? And the answer almost certainly has to do with economics. Men who cannot support a family will not support a family.
Rather than trying to solve poverty by teaching men to pray, pay them a Salary For Attending School.
Rodger Malcolm Mitchell
“What do you propose to do about that?”
If the problem is that too many children are being born out of wedlock, thereby greatly increasing their chances of living in poverty, then the solution is to create incentives that will reduce that number. Programs or institutions to teach men (who were themselves raised without a father) to take responsibility both for themselves and the children they bring into the world would would seem to be an obvious first step towards solving the problem of child poverty.
But instead, most anti-poverty activists seem convinced that the root of the problem is an inherently unjust economic structure, and so their proposals usually focus on ineffective but politically palatable measures such as increasing the minimum wage, or strengthening the power of labor unions, or increasing the tax burden on more successful members of society.
“But, the real question is: Why do men leave?”
You can’t “leave” when you were never “there” to begin with.
As in all such social programs, the devil is in the details. Would this be voluntary, or would people be forced to participate? If voluntary, how would people be recruited? How would it be administered? How much would it cost? How would effectiveness be measured? If there any evidence that such a program would be effective in achieving its goals?
So there you have it, Tom. No plan other than getting runaway men to attend a class teaching them why they should stay home and support their wives and children with money they don’t have, rather than running away.
Seems practical.
And then the final gobble-de-gook: “You can’t leave when you were never there to begin with.” Gee Cynthia, if you were never there, then you neither can leave nor come back. So what’s the problem?
Tom, I’ll tell you the problem. It’s the Heritage Foundation’s false propaganda as expressed by Cynthia: “. . . increasing the tax burden on more successful members of society.” Not only is this factually wrong, but it’s morally reprehensible.
Beware of people who talk religion and wrap themselves in the American flag, the Constitution and the Liberty Bell. (Think I’m kidding? See: http://www.heritage.org/Initiatives/First-Principles)
Rodger Malcolm Mitchell
There is nothing “morally reprehensible” in pointing out that taking even more money from those who have earned it and giving it to those who have not earned it is not an effective solution to the root causes of poverty in this country. Not sure why Obama and his minions insist on stoking the fires of class envy rather than stimulating an honest discussion of the serious social problems caused by men who abandon responsibility for the children they create (they’re not running away from their wives because they don’t generally marry the mother of their children, but let’s not quibble over such petty details).
When we stop pretending that poverty in this country is caused by structural injustices in the economy, and recognize that much of it is caused by behavioral factors, we’ll be on the road to creating effective solutions.
Here’s another interesting factoid to consider in evaluating those “galling” poverty numbers: According to the BLS, households in the bottom quintile earned an average income of $10,263 during 2008, but reported spending $22,304.
ftp://ftp.bls.gov/pub/special.requests/ce/standard/2008/quintile.txt
And when we learn that a monetarily sovereign nation like the US simply issues its currency, with no financial need to fund itself with taxes or finance itself with debt, maybe we can get over the “redistribution” myth. Taxes serve to withdraw nongovernment net financial assets to reduce inflationary pressure when inflation threatens as the economy reaches full capacity, and Treasury issuance simply drains excess reserves from the interbank settlement system (FRS) that result from deficits, so that the central bank (Fed) can hit its targeted overnight rate (FFR). If the well-off realized that they are not taxed to fund expenditures to improve the lot of the less well-off, then maybe we could start talking about real concerns that are important.
According to the BLS, households in the bottom quintile earned an average income of $10,263 during 2008, but reported spending $22,304.
Then that’s a problem for the IRS.
It’s also a problem for those who rely on reported income figures to decide how many people are “poor.”
Cynthia, do you understand that the government is not “taking even more money from those who have earned it and giving it to those who have not earned it . . .?”
Tax money does not pay to support the poor. It doesn’t pay for food stamps, welfare, unemployment, housing or any other federally funded effort. In short, the tax money taken from the rich never, ever, ever goes to the poor. Are you aware of that?
Rodger Malcolm Mitchell
Are you aware that money is fungible?
Fungibility of cash simply means that a $10 will get you another $10 bill. What’s you point, and where is your proposal? Or are you claiming that rising poverty is left-wing hoax?
Poverty is not a left-wing hoax. But the claim that the “stunning” new poverty numbers, standing alone, are evidence of the “structural injustice of the economy” demanding a new “movement to coalesce around” said injustice, is absurd. Especially when one takes into account the deficiencies of income numbers as a poverty metric, and when one considers the truly “stunning” numbers of children born to single mothers, who form the core of the poor in this country.
That’s my point. And my proposal is that we stop pretending that an unjust economic system is responsible for poverty, and focus our efforts on the social and cultural factors that prevent poor people from participating in the economic system.
Cynthia, you keep avoiding answers, so I’ll repeat the question. Do you understand that the government is not “taking even more money from those who have earned it and giving it to those who have not earned it . . .?”
Your comment about the fungibility of money was so ludicrously off subject, I wonder whether you understand anything at all about economics. If this is the best the Heritage Foundation acolytes can do, they truly are a sad joke.
Parroting the Heritage mantra “the poor are at fault for their poverty” is truly disgusting, and having zero understanding of economics, while quoting economics to justify that disgusting opinion, is even more disgusting.
My hunch: You’ll vote Tea Party this fall.
Rodger Malcolm Mitchell
And my proposal is that we stop pretending that an unjust economic system is responsible for poverty, and focus our efforts on the social and cultural factors that prevent poor people from participating in the economic system.
My view is that poverty is endemic to the contemporary (neoliberal) notion of capitalism, and capitalism needs to be superseded with an economic system that addresses poverty as central to economics. Presently, the world has been colonized by US and allied interests on the neoliberal model of capitalism. It is not working and needs to be transcended. See, for example, After Capitalism: PROUT’s Vision for a New World by Dada Maheshvarananda, and PROUT: An Economic Solution to Poverty in the Third World by Ravi Batra.
The economic system is a social and cultural phenomenon. It is based on cognitive memes that define norms and give rise to conventions and institutions. In order to change the outer, it is necessary to change the inner, that is, the cultural mindset.
This is a very difficult thing to do owning to a variety of factors, including hysteresis and external conditions beyond anyone’s control. There are also control factors involved that are largely in the hands of those in control, and it is difficult to rest the levers of control from those holding them.
I an not particularly sanguine about change coming politically under the present circumstances. However, in the analysis of Ravi Batra we may be on the brink of a social, political and economic revolution. See his latest book, The New Golden Age: The Coming Revolution Against Political Corruption and Economic Chaos.
This is not mean that I think that people of good will should not be doing all they can to change the present system to make it more user-friendly and hope for the best. For example, I marched against the Vietnam War after I got out of the military, having concluded that the conflict was basically a neo-imperial and neocolonial endeavor. But it was not the protests that brought the Nixon Administration down, but rather its own corruption. The system we have today is thoroughly corrupt, and the seems of its destruction are being sown within it.
The economic system is based on “cognitive memes?”
Somehow, I think we’ve hit an ion storm and ended up in one of those wacky parallel universes where Spock has a beard.
Tom, whew! For a second I thought you again were going to talk about Marxism, as that seems a popular theme on this blog.
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Anyway, I’m not sure capitalism is at fault for poverty. Nor are socialism, communism or tribalism or any other “ism” you can mention, a cure. And I also would exclude monarchy, theocracy and even anarchy. Every nation has poverty, and every nation has had poverty — and each for individual reasons.
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Cynthia is correct in the sense that we all are partly responsible for our conditions. The rich are partly responsible for being rich, for reasons similar to why the poor are responsible for being poor. They (rich and poor) were born that way, or raised that way, or were taught that way, or luck (good and bad) played a role, or they were or were not given ambition, money-making skills or brains.
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She also is correct that some poverty is worse than others, and in large measure, “poverty” is a relative term.
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The rich like to credit their brains, but the poor are smarter. They know that luck is the overriding factor. My kids like to talk about winning the “lucky sperm” lottery.
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The Cynthias of the world don’t understand that. They are safe in the life boat telling those who are drowning, “You should have learned to swim.” I doubt she would share her food with the other life-boat passengers (“You should have brought food with you; I’m not giving you mine”).
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The irony is that the Heritage Foundation talks patriotism, but preaches selfishness, the opposite of true patriotism. Cynthia, remind me again. What does it say on the Statue of Liberty?
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Rodger Malcolm Mitchell
Oh, and Cynthia, do you understand that the government is not “taking even more money from those who have earned it and giving it to those who have not earned it . . .?”
See Nobel Laureate Douglass C. North’s “Economics and Cognitive Science” for a cognitive-institutional approach. It’s short article and definitely worth the read.
Rodger, I said the neoliberal notion of “capitalism,” which not really capitalism at all. It is a bastard version of it that tilts the playing field so that money flows up. Classical liberalism was about addressing economic rent — land rent (which was the principal rent in barely post-feudal English society), monopoly rent, and financial rent. Neoliberalism has become largely an excuse for rent-seeking domestically and exploitation internationally under various guises.
There is a long history of non-Marxist critiques of this so-called capitalism stretching back to Thorstein Veblen that have generated an extensive literature of “heterodox” economics and much lively debate, most of which has been excluded from the mainstream, and when it cannot be completely excluded, then marginalized.
As a branch of Post Keynesianism, MMT falls into the heterodox camp. Several New Keynesians (sellouts to neoliberalism) who are considered to be on the left in economics have said explicitly that they won’t go there. So presently, left is right, and the problems and contradictions pile up.
It’s difficult to argue with a straight face that an economic system that provides many of those officially classified as “poor” with air conditioning, cars, multiple color TVs, cellphones, homeownership, and enough cash to buy cigarettes (nearly a third of the “poor” are smokers) is nevertheless “thoroughly corrupt.”
Cynthia, I think that you are assuming that many people with air conditioning, cars, multiple color TVs, cellphones, homeownership, and enough cash to buy cigarettes aren’t “poor.” Do you want to limit the definition of poverty to the homeless? Do you really think that a lot of those homes aren’t shacks, that the TV’s and A/C’s aren’t from Goodwill, that the cars aren’t smoking clunkers, and that pay-as-you-go cellphone aren’t substitutes for land lines they don’t have the credit to qualify for? If you do, you really need to get out more and see how the poor actually live.
Hang out with them. Hang out with some homeless people. Volunteer at a shelter. It isn’t pretty. Yes, they smoke, drink, smell bad, and die young. A lot of the young ones don’t see much to live for, if they don’t join gangs and become criminals. This is a whole set of subcultures, and talking about “the poor” is ignorant and condescending. Each of them has a story. BTW, this includes the people in prison who will be getting out someday.
I am not claiming that most of these people are either saints or even that they are not in many ways responsible for their situation. But I am claiming that a lot of them are also victims of circumstance, and all of them are human beings who are deserving of respect and humane treatment. Some of them are really great people that are down on their luck and need a boost. Many are children who didn’t ask to be born into this world and need to be treated by society in way that gives them an opportunity to do better.
I am also not saying that society doesn’t choose to supplement low-income families that would otherwise be over the edge. Some of these families work hard and have a minimal standard of living, pretty much as you describe. I know people like this, too. They qualify for Medicaid and food stamps, and this gets them over the hump so that they can live a normal American life without falling through the cracks. Some people may think that “we can’t afford it,” or “I’m paying for this with my taxes.” Those people should read Warren Mosler’s The Seven Deadly Innocent Frauds about how the monetary/fiscal system actually operates.
“The rich like to credit their brains, but the poor are smarter. They know that luck is the overriding factor. My kids like to talk about winning the “lucky sperm” lottery.”
Would you care to elaborate on that point?
Robert,
My kids were born on Chicago’s upscale North Shore, went to the top-of-the-line New Trier High School. I paid for their college and post-grad educations, and now they live good lives on the North Shore. They work hard, but they began the race with a head start.
Compare their lives with the kids born to “crack-mothers” and now fathers, kids who had no chance, and now live in jail. They lost the “luck-sperm lottery.”
“Cynthia, I think that you are assuming that many people with air conditioning, cars, multiple color TVs, cellphones, homeownership, and enough cash to buy cigarettes aren’t “poor.” ”
No, you missed the rest of the sentence. My point is that an economic system that enables those classified as “poor” to live better than most people who have ever lived on this planet cannot reasonably be described as “thoroughly corrupt.”
If you want to see “thoroughly corrupt,” you need to look elsewhere. Perhaps at the worker’s paradise in Cuba.
I hold that the present system is “thoroughly corrupt” because of “undue influence,” read bribery, collusion, fraud, predation, etc., that gone so far as to result in state capture. There is ample documentation of this. It’s just not being investigated and prosecuted because the people in charge are complicit.
Tom, now let us return to the real world. Please point out the political system that has not and does not include “undue influence, bribery, collusion, fraud, predation, etc.”
Cynthia makes two points:
1. Our poor are better off than other nations’ poor, so there is no need to help them.
2. And if they need help, it’s their own fault.
And that is why I would not want to be on a life raft with Cynthia.
Rodger Malcolm Mitchell
Rodger: Please point out the political system that has not and does not include “undue influence, bribery, collusion, fraud, predation, etc
That’s the high school excuse, “Aw, ma, all the kids are doing it.” The US is supposedly the global leader setting the example. “The shining city on the hill.” It isn’t.
The US “poor” are and are not better off than the rest of the world’s poor. True, most of them are but I can show you slums that vie with slums in the Third World. I actually lived in one for a couple of weeks when I was younger just for the experience.
Poverty is basically a demand/income problem. Solve that and world poverty goes away. There are non-Marxian solutions available, such as PROUT, that I cited above. If the governments of the world understood and implemented MMT policy, the problem could be solved also.
The problem is that the present system is 1) rigged toward economic rent — land rent, monopoly rent, and financial rent. Land rent is a vestige of feudalism, monopoly rent is a vestige of the industrial capitalism of the robber barons, and financial rent is a manifestation of the age-old scourge of usury, and 2) so riddle through with corruption that the state has been captured by elites. As a result, demand/income is insufficient to absorb capacity/supply, creating global imbalances as funds are skimmed off at the top instead of being committed to productive investment, R&D, and public purpose, such as infrastructure, that the private sector is either unwilling or unable to undertake.
There is no mystery here. The problem is well understood and solutions are available. They are being systematically excluded or marginalized by those with vested interests in the status quo.
As far as “the welfare state” goes, this was specifically designed during the Great Depression in order to obviate the level of social unrest that led to Soviet Communism in Russia, National Socialism in Germany, and Fascism in Italy.FDR, Churchill, and Keynes realized that they had to act in order to prevent such occurrences in the US and UK. As a result, workers were treated fairly well until the fall of Soviet Communism, when the US elite concluded that continued co-opting the working class was now unnecessary, and they could get back to business as usual, although the push to undermine worker bargaining power began previously under Republican aegis.
“I can show you slums that vie with slums in the Third World.”
Really? You can show me a community in the United States that lacks access to clean water, electricity, and indoor plumbing? Where homes are constructed from materials found in dumpsters, and include neither roofs, windows, or floors? Where the infant mortality rate is in excess of 50 per 1000 live births? Where small children work on the street instead of attending free public schools?
Please elaborate
Go to any number of Native American reservations, hovels in the US South, ghettoes in the cities, where living standards are Third World.
Please point out the political system that has not and does not include “undue influence, bribery, collusion, fraud, predation, etc.”
That’s the high school excuse, “Aw, ma, all the kids are doing it.” The US is supposedly the global leader setting the example. “The shining city on the hill.”
Tom, wishing won’t make it happen. Moses, Jesus and Allah didn’t make it happen. Undue influence, bribery, collusion, fraud, predation, etc. always have been and always will be part of every economic system. Some systems are worse than others, but basing a plan on the elimination of human nature is worse than high school. It’s kindergarten.
It’s true Cynthia has no clue (She absolutely refuses to answer the question, “Do you understand that the government is not “taking even more money from those who have earned it and giving it to those who have not earned it . . .?” ), but you shouldn’t answer her nonsense with nonsense of your own.
This economy has had spectacular growth through the years, even with “influence, bribery . . . etc. ” Trying to rid the nation of those evils is a fool’s mission. Equally foolish is arguing with Cynthia about how poor our poor are, compared with other nations’ poor. She shifts to that incredibly stupid argument, because she has no sensible arguments.
The goal: Always lift, lift, lift ever group, from highest to lowestno matter how wealthy Cynthia thinks the poor are.
Rodger Malcolm Mitchell
Hey Cynthia, are you hiding? Somehow you’ve forgotten to answer the question, “Do you understand that the government is not “taking even more money from those who have earned it and giving it to those who have not earned it . . .?”
I’ve asked it three times. Twice you failed to answer. Once you gave a goofy non sequitur about money being fungible.
You were the one who made the statement, so why are you hiding from your own comment?
Question: How does one get rid of a debt hawk.
Answer: Ask for evidence.
Rodger Malcolm Mitchell
There is no point in answering a silly question. Evidently, we are still in the parallel universe, where taxpayers only THINK they are relinquishing a sizable chunk of their income to various governments, and the recipients of government social programs only THINK they are receiving those funds as welfare payments/EITC checks/housing subsidies/food stamps/free school lunches/Medicaid and a whole host of other transfer payments.
Don’t tell me — let me guess. It’s all worthless Monopoly money, right?
Rodger: Trying to rid the nation of those evils is a fool’s mission.
Then call me a fool.
Cynthia, you need to study up on how the modern (post 1971) monetary system operates.
Talk about a fool’s mission, I am about to give Cynthia a reference that will help her learn post 1971 economics in 15 minutes. Why a “fool’s mission”? Have you ever known a debt hawk who wanted to learn anything?
But, in the incredibly slim chance Cynthia is unique among debt hawks, and has a brain that has not hardened to cement, here goes:
Cynthia, go to http://moslereconomics.com/2009/12/10/7-deadly-innocent-frauds/ and click the link: Seven Deadly Frauds of Economic Policy (June 17, PDF Link).
You’re welcolm.
Rodger Malcolm Mitchell
Seven Deadly Frauds of Economic Policy (June 17, PDF Link).
Right, Warren dispatches the government-finance-is-like-household-finance false analogy very nicely. A monetarily sovereign government that has monopoly provision of a nonconvertible floating rate currency of issue is not financially constrained and does not operationally fund itself with taxes or finance itself with borrowing, although it may create the fiction that it does. The government is the currency issuer and households, firm, and states in the US are currency users.
A monetarily sovereign government as monopoly currency issuer has the sole prerogative and corresponding sole responsibility to provide the correct amount of currency to balance spending power (nominal aggregate demand) and goods for sale (real output capacity). If the government issues currency in excess of capacity, demand will rise relative to the goods and services available, and inflation will occur due to excess demand relative to supply. If the government falls short in maintaining this balance, recession and unemployment result, due to insufficient demand relative to supply. The government attempts to achieve balance through fiscal policy (currency issuance and taxation) and monetary policy (interest rates), based on analysis of data in terms of sectoral balances — contribution of government, households and firms, and foreign trade.
When fiscal policy is not used to direct flows within the economy in a balanced way so that demand/income is distributed, imbalances occur, including chronic unemployment, the result of which is structural poverty. Chronic unemployment and the resulting structural poverty are distributional effects of imbalances resulting from inadequate economic policy. Government has the tools to prevent this and is not using them, owing to a combination of ideology, ignorance, and interest politics.
Or: Federal taxes don’t pay for spending, and deficits are necessary for economic growth.
By the way, “If the government issues currency in excess of capacity, demand will rise relative to the goods and services available, and inflation will occur . . .” no longer is correct. See: http://rodgermmitchell.wordpress.com/2009/09/24/is-inflation-too-much-money-chasing-too-few-goods/
Rodger Malcolm Mitchell
Rodger, the idea that I was conveying is that if government issuance increases nongovernment net financial assets to the point of generating effective demand in excess of the productive ability of the economy to meet it with increased supply, then general price inflation will occur. That is pretty straightforward MMT.
Tom, did you take the opportunity to access the link I suggested? What you said is in essence: “Too much money chasing too few goods,” the old mantra of mainstream economics, that MMT carelessly adopted. It no longer is valid for the reasons explained in that link.
While I agree with most of MMT, I diametrically disagree on the causes and cures for inflation.
Rodger Malcolm Mitchell
Rodger: While I agree with most of MMT, I diametrically disagree on the causes and cures for inflation.
My point is that I was asserting the MMT position, which I don’t think you overturn. You mention the supply side (cost push) type of inflation, which MMT recognizes, too. But the principle I stated applies to demand side (demand pull) inflation. Are you saying that there is no such thing as the later.
MMT’ers are careful to point out that they do not subscribe to the “too much money chasing too few goods” view associated with the discredited quantity theory. They relate inflation to productive capacity/employment/real resources, as I am sure you know. I’ll let you argue this point with the MMT economists, but until they change their views, I’ll represent MMT in their terms.
BTW, I agree that there has been a petro-bubble developing since 1973 that is pushing costs, and it will reassert itself strongly with recovery. While there have been fluctuations in price, the overall trend is up.
Yes, I believe there can be demand-pull inflation, though it has not surfaced since 1971, and is not likely to surface any time soon, if ever.
I question relating inflation to domestic production, employment or resources, because more than ever, we are in a world economy. If we were to run short of factories, factory workers or physical resources, we simply would buy our goods and services elsewhere.
We already are short of some of these things in many industries, and have no difficulty getting them from overseas.
My concerns about trying to treat demand-pull inflation are twofold:
1. People seem to think of all inflations as demand-pull, rather than differentiating between the two, and
2. The treatment ideas seem to devolve to reducing the federal deficits.
The value of money is based on supply and demand, so to fight inflation, you can reduce the supply and/or you can increase the demand. Popular wisdom says to reduce the supply, which is quite difficult to control in the real world, and has huge adverse effects on the economy.
Instead we should increase the demand for money, which is based on risk vs reward. Reward is interest.
The biggest problem our economy faces is the people with Anthropomorphic Economics Disease, who will not or cannot learn the facts about federal deficits and debt. Sometimes, even MMTers become confused, and talk about reducing debt to fight inflation, a proven-to-be terrible tactic.
Rodger Malcolm Mitchell