Ecolems

Occasionally I feel I retained only one thing from my undergraduate degree in Economics, although it would bear me a valuable understanding over the years. Simply put it is this: Economics is not an exact science, it is a social science.

Despite what you might hear or infer from intellectuals, politicians, teachers or economists who present numbers, formulas and endless analysis about cause and effect (with abundant certitudes), it’s really just about human behavior, with all the mystification you might assign to your crazy uncle at the Thanksgiving dinner table.

In that sense applied Economics as a discipline struggles with predictability... and predictability is the key to economic success or the lack of it its failure.  What could be less conducive to predictability than fear driven human behavior.

Two examples: I have a truly lovely friend who bristles at hearing the word welfare, let alone discussing it, because she is so certain of its negativity.  Or dropped onto any city street or town square and it would take me only seconds to find a person who knows that taxes are bad, by definition!

 These folks find themselves in a bubble of shared identity with others of like mind who vacillate wildly due to misunderstanding or lack of education. They are ripe pickings for pundits and/or preachers who, to promote their own self interest, insulate them from diverse views.

I’ll call these good folks Economic Lemmings or, say…Ecolems.

The bubbles that exist in the American culture today, which house our Ecolems, have never been so distinct.  One can speculate on historical comparisons, but due to technology, the nature of communication today has no precedent.  People have always lived in bubbles of a sort, but never have the bubbles been so big.

Economic certitudes are often combined with regional identity, religious affiliations, or provincial history.  All of a sudden, notably since the turn of this new century, Republicans and Democrats have become Red America and Blue America. This must feel similar to the not-so United States in the 1850s.

To use the immortal words of Donald Trump; what the hell is going on? Donald, you know exactly what’s going on, as your followers are comprised entirely of Ecolems.

Let’s look at the two economic issues mentioned above and see how the Ecolems respond; welfare and taxes, which are not mutually exclusive.

Welfare quite simply is the transfer of resources from one person to another without a transaction between the two taking place, although there is an implied benefit for both parties.  It makes no difference of the economic station of either party and a gift meets the definition.  It is everything from Social Security, to Church kitchens, to section 8 housing, to food stamps, to evangelical missions, or to boomerang children.

The controversy comes with the inclusion of choice.  My Ecolem friend thinks charity is great, even though that’s still welfare (shhh…don’t tell her). To think (as she does) that we can leave issues of poverty and homelessness up to churches shows that her understanding of the economics of welfare doesn’t extend beyond her middle class neighborhood.

The idea that strangers are at the receiving end of a transfer handled by a third party has become an anathema for her.  She cannot see the purposes of the transfer even though she is potentially a beneficiary…she gets to live in a society with less deprivation, more opportunity, and probably less crime.

Instead of questioning the quality or efficiency of the transfer she prefers to embrace the certitude that welfare is just plain bad, mostly because she perceives the unworthiness of the recipient. She’ll follow the advice of like minded preachers even though it leads her to an ocean bluff. 

When more people survive economically everyone benefits. The fewer…then everyone bears the cost. Think health care.

This flight from economic awareness is even more prevalent when it comes to taxes.

So complete has the concept of taxation been defined by those who are most affected (i.e. the rich) that it’s as if each American at birth were issued a gun with the sole purpose of shooting themselves in the foot when they reach the age of majority.

The reality is that the concentration of wealth is the single biggest drag on economic growth. Ironically, it negatively affects the future wealthy along with everybody else.

Wealth concentration, contrary to Republican BS, does not create jobs. Think social or human behavior.  People, including the wealthy, tend to flip from production to protection of wealth once it’s accumulated.  Money is effectively pulled out of the economy and primarily used as an investment tool for accumulating more wealth with the dangerous use of speculation.

In 1993 with a large Democratic majority Bill Clinton pushed through and signed into law one of the biggest tax increases on the wealthy in modern history (The Omnibus Reconciliation Act of 1993). His eight year term in office ended with spectacular economic success, including economic growth, budget surpluses, record employment, and low inflation to name a few.

In 2001 George W. Bush, with a slight Republican majority in Congress, passed his EGTERRA (aka Bush Tax Cuts), the largest tax cut for the wealthy in the history of the Country, then followed with immense government spending into limited markets (military e.g.) which further concentrated wealth.  The Conservative Heritage Foundation predicted these cuts would eliminate the National Debt in 9 years. Bush’s eight years ended with near total economic collapse of the Nation, record unemployment, and massive debt…oops.

The continuation of these cuts under the Obama Administration is a primary reason why the economic recovery since 2008 has been so slow, since it has had to rely chiefly on debt.

There are many supporting factors that relate to these Administration’s successes and failures. Nevertheless, taxes properly leveled and revenue properly applied are the single biggest engines for economic growth because they reduce inequality of wealth, generate spending, and (hopefully) reduce debt.

You could read the conclusions of Nobel economist Joseph Stiglitz (and others) to Ecolems all day.  No matter.  Ecolems know all taxes are bad and will vote for anyone who wants to cut them or oppose anyone who suggests taxing the wealthy. The Ecolems oddly have no problem submitting to consumption taxes (sales tax e.g.) which puts the revenue burden squarely on the non-wealthy.  They march dutifully to the cliff’s edge, even with all those holes in their feet.

As Hillary Clinton and Bernie Sanders have proposed, an immense public works effort to update US infrastructure would be an economic boom for the Country. However, the revenue source cannot be debt nor taxation of the lower and middle classes.  This needs to be borne by the top 20% and mostly from the top 2% based on income and net worth.  Everyone would benefit, but interesting the top 20% would still benefit the most.

Vote Republican and you’ll never see it happen.

There is nothing inherently wrong with inequality; in fact we’re better off because of it since it promotes the predictability of hard work and ingenuity. However, when it gets extreme as it has today, human nature takes over. The economy begins to feed on itself by economic growth yielding to the incessant concentration of wealth by the rich. The Ecolems continue their march to the sea