Suddenly Gingrich and Romney Will Save the Poor!

 

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Okay, as I always note when discussing anything remotely related to economics, I am not an economist. I rely on my trained economist readers to provide expertise about the strictly economic aspects of what I am about to comment on. I am going to talk about what I perceive as the philosophical problems with what Governor Romney and Speaker Gingrich have to say in the clip above.

First of all, pleased as I am to see Romney get into so much trouble for saying he doesn’t care about the poor as long as they have their safety net, I think his slip was just to say explicitly what politicians always say implicitly. All that matters is the middle class. Because those are the majority of the voters. And when it comes to legislating, of course, even the middle class doesn’t matter, but only the corporations since they fund the campaigns. This is the fundamental reality and everyone can see through all the bullshit on both sides.

But what irks me about Romney and Gingrich’s remarks is the flat out denial of reality that ignores the permanence of poverty. There will always be poor people. Capitalism is set up that way. Gingrich’s proposal for a trampoline to get out of poverty is just empty. There are not enough middle class income jobs in the economy for everyone to have one. For cripe’s sake, our median income is only a meager $26,000! How many single parents must be trying to raise several kids on that (or less)? How many dual income families are raising multiple kids on $52,000? And that’s the median! How many millions scrape by on less?

Trampoline individual poor people out of poverty all you like and then the more mediocre who were just above poverty will fall down into the safety net and not bounce out. The system is structured that someone will wind up poor. The repulsive Republican moralistic judgmentalism towards those who wind up poor (or stuck there) is so simultaneously logically fallacious and self-righteous it turns my stomach. The implicit assumption is that our economic system is unquestionably just, that it adequately rewards hard work, that it intrinsically values labor appropriately, that laissez-faire markets provide every morally valuable    economic outcome by an inherently just nature.

The fact that wages can be bid down to levels where working hard does not earn people even enough money to afford health care just means that not everyone deserves health care morally, on this logic. If these people want health care they should just work harder—even though they may be working 50-60 hours a week at two jobs where the market values their labor at the “you should just die if you get sick” level of assessment.

Or maybe they should work smarter and get a better education. And it’s their fault if they can’t afford to go to school because their parents aren’t rich enough? And it’s reasonable to burden these kids with hundreds of thousands of dollars in debt to get a competitive education necessary to climb the economic ladder? And it’s reasonable to have the poor kids needing to work part or (even) full time to bootstrap through college at an inherent disadvantage against kids who can give their studies the full time attention they require to be done adequately?

I guess it’s purely moral fairness if the young poor don’t use these trampolines available—working jobs that bid you down to a dehumanizing wage that does not allow you even to afford to say alive if you get sick, while being handicapped competing for grades against more affluent kids who don’t have to work, and then coming out of school crushed by a debt that could severely limits your career flexibility as they have to pay onerous debts right out of school and can hardly aspire to “savings” or plan for home ownership or think about retirement.

And not to mention that this poor kid who started out with the luxury of the “safety net” grew up in a poor school district with underpaid teachers and ridiculously limited resources that put her at a further disadvantage starting college.

Whichever of these kids does not trampoline out of poverty morally deserves to be poor for their moral failure, their laziness, in not adequately availing themselves of all the opportunities available—regardless of how systemically inequitably they are made available.

And even those who do work hard—let’s say we all work hard and we all get advanced degrees, do we all get rewarded morally for our hard work and determination? Do we all now get to make more than that meager median $26,000? We all get to be executives and lawyers and doctors and politicians and finance people and tenured professors? Hardly. There is not room at the top for all of us. The current rates of underemployment in the country indicate a failure of the system to morally reward all that aspiration and determination with jobs befitting people’s educations and qualifications. If those people work at wages that don’t afford health care I guess they just deserve to die younger too?

What are the programs Romney or Gingrich have proposed to raise the median wage in America so that even unskilled laborers make good money? What are the programs Romney or Gingrich have proposed to reward all of us underemployed people who have the skills and education to do jobs that pay upper middle class salaries so that we get what we morally deserve by playing by the system’s rules so obediently? What are their programs to wipe out the need for lousy paying menial labor and replace all those jobs with at least middle class incomes so that Romney’s promise of bringing the poor up to the middle can be fulfilled. We won’t quibble with the irrationality of his saying no one needs to be below the middle. We’ll just assume he means the poor can live like the middle presently does and that will be the new poverty. That, admittedly, would very much be progress at least. What’s the plan for this to actually happen? What’s the plan to increase these wages? Are “more tax cuts for the job creators” magically going to pull this off? Somehow less regulations on business do it? Somehow state Republicans’ dismantling of union rights and cutting public school teachers’ salaries is going to make it happen?

And to bring the poor up from the safety net to the middle we need to get unemployment not only down from 8.3% to a normal 5% but all the way down to 0%. And we need everyone able bodied and between 22-65 to pursue a job for that to be a true 0%. Or at least make sure that the 5% unemployed at any given time are not the permanently unemployed. We have a crisis high level people unemployed long enough that they risk being unemployable. What are Gingrich and Romney’s plans to salvage their careers? What’s Gingrich’s trampoline for them? Is it that all people out of work for more than 6 months start working as janitors in elementary schools at a fraction the pay of professional janitors so that they learn how to work again?

I am really really interested in what ways Gingrich and Romney propose to magically elevate the median wage, obliterate unemployment and underemployment, make it so that the competitiveness of capitalism does not require any one getting the short end of the stick, make it so that all employers with no government assistance pay everyone enough to be fully insured with no government intrusions (or fully insure them of their own with no government mandates).

How is this utopia in which we all get what we morally deserve for working hard going to be achieved? How is it all going to happen with less government regulations, lower taxes, gutted education funding, disbanded unions, an abolished minimum wage, and the rolling back of entitlement programs for those deficit creating poor people?

How is everyone who works hard going to get health care? Or is that not something people deserve if they do shitty enough labor that anyone could theoretically do? I’m not a Christian or a “person of faith” at all so I’m not sure how our American values (being so based on Christianity or at least “faith”) judge that issue. Does Christianity say anything about whether menial labor morally entitles one to enough money to pay for a doctor and also pay for groceries and raise children?

Gingrich tells us Obama just hates work and loves having people on food stamps. Apparently hard work can elevate not just some of the poor but obliterate the very dynamic of capitalism by which there are inevitably some poor people. Apparently Gingrich has a way to make this happen so that no one ever needs food stamps again. Is it just his infectious love of work that is going to overcome Obama’s three unconscionable years of teaching the poor to hate work?

Or is it just that capitalism, which pays by the morally unquestionable market value, will always make sure the poor are those who deserve to suffer with no mercy for their moral failures of being born poor, with either few exceptional talents or reduced opportunities to develop them if they did have them?

I’m not an economist. I admit it. But I’m curious how this morally just world where we can blame the poor for being the poor is going to be justified or alternatively how we’re going to create a capitalism where no one is going to wind up poor by our current standards, or how we are going to do this with minimal government regulations of the laissez-faire market as possible? (And copious corporate welfare, of course.)

Your Thoughts?

 

About Daniel Fincke

Dr. Daniel Fincke  has his PhD in philosophy from Fordham University and spent 11 years teaching in college classrooms. He wrote his dissertation on Ethics and the philosophy of Friedrich Nietzsche. On Camels With Hammers, the careful philosophy blog he writes for a popular audience, Dan argues for atheism and develops a humanistic ethical theory he calls “Empowerment Ethics”. Dan also teaches affordable, non-matriculated, video-conferencing philosophy classes on ethics, Nietzsche, historical philosophy, and philosophy for atheists that anyone around the world can sign up for. (You can learn more about Dan’s online classes here.) Dan is an APPA  (American Philosophical Practitioners Association) certified philosophical counselor who offers philosophical advice services to help people work through the philosophical aspects of their practical problems or to work out their views on philosophical issues. (You can read examples of Dan’s advice here.) Through his blogging, his online teaching, and his philosophical advice services each, Dan specializes in helping people who have recently left a religious tradition work out their constructive answers to questions of ethics, metaphysics, the meaning of life, etc. as part of their process of radical worldview change.

  • stuartvo

    How? Probably in the same way that Newt plans to get a permanent American moon colony up and running in 8 years, without adding a cent to NASA’s budget.

    By rhetoric alone.

  • Ned Champlain
  • http://quoded.wordpress.com quoded

    If they were really serious about trampolining the poor upwards, they’d be in favor of many of the proposals of the MMT (modern monetary theory) economists — like a private debt write-off, job guarantees, etc. — you know, things that would actually help the poor and unemployed. But they aren’t.

  • ‘Tis Himself, OM

    As a New Keynesian economist, I have some sympathy towards the MMT mentioned by quoded in #3. So let me describe MMT to those unfamiliar with it. Warning, we’re entering teal deer territory.

    Modern Money Theory (MMT) is based on modern money systems, where a government responsible for fiscal policy (taxing and spending) is a monopoly currency issuer, issuing a non-commodity-based floating exchange rate currency. Such systems have become commonplace since the Great Depression.

    Most governments’ spending is not revenue constrained. They spend by issuing currency or simply crediting the recipients’ bank accounts. Therefore, they cannot “run out of money”. This is contrary to traditional commodity based or pegged currency regimes (that are constrained by having a currency peg to defend) or the Eurozone (who are not issuers but users of the euro). It’s inadequate to use a household analogy for understanding the financial considerations of an MMT system (unlike for a pegged currency system or a Eurozone country).

    The lack of revenue constraints adds a degree of policy freedom. MMT states that this enables governments to achieve full employment along with price stability–something not possible under a pegged currency regime–and believed to be generally impossible by neoclassical economists. MMT asserts that within a modern money system, full employment and price stability is not only possible, the two are in fact natural complements to each other.

    MMT lays out strict principles for appropriate fiscal policy–government spending and taxing, deficits and surpluses. The key lies in adjusting the government’s fiscal balance (deficits and surpluses) to offset fluctuations in non-government sector spending.

    MMT proposes a Job Guarantee (JG) program as a way to automatically achieve such fiscal adjustments. The government would unconditionally offer a public sector job at the minimum wage to anyone willing and able to work. The government employs the unemployed directly, hiring from the “bottom”. This is contrary to traditional Keynesian general demand stimulus, which relies on stimulated demand trickling down from the “top” (via spending multipliers), in the hope of ultimately creating new jobs. By instead stimulating the economy directly at the “bottom”, the JG program can avoid the inflationary effects that result from traditional Keynesian demand stimulus.

    With a JG program the nation always remains fully employed. A buffer stock of employed is maintained. The mix between private and public sector employment will fluctuate as it the program responds to the economic fluctuations of the private sector. The condition of the JG workers is key, so that skills, working habits and competitiveness are retained and developed. That can have better price stabilization effects than today’s approach, which uses a suffering and ever deteriorating buffer stock of unemployed to keep price level under control.

    MMT has an underlying logic but appears counter-intuitive as it turns much established economic thought on its head. Neoclassical economics has certain problems which MMT tries to solve. However much of MMT is still theoretical and subject to debate.

    Is everyone asleep now?

    • http://freethoughtblogs.com/camelswithhammers Daniel Fincke

      No, you’re waking me up. Keep going!

    • Pierce R. Butler

      … we’re entering teal deer territory.

      Meaning this has never been tried?

      Where and when was the closest approach? How did it work?

    • ‘Tis Himself, OM

      People enter teal deer country all the time. I’ve done it all too often. Teal deer are not an endangered species.

      The teal deer by Kunika.

    • http://quoded.wordpress.com quoded

      However much of MMT is still theoretical and subject to debate.

      Yes — and in retrospect my comment was probably unfair, as these proposals of MMT are the subject of much debate. But in general I do feel that the concept of trampolining the poor upward has more in common with MMT (and even New Keynesian) proposals for bottom-up counter-cyclical measures than the kind of oddly twisted Austrianism that seems to permeate so much of right-wing economic rhetoric these days.

    • ‘Tis Himself, OM

      I’m much more attracted to MMT than Austrian School economics, particularly the parodies of Austrian economics pushed by Romney (who should know better) or Gingrich. Von Mises is probably revolving in his grave at high speed.

    • http://sidhe3141.blogspot.com sidhe3141

      Wait… Aren’t there a handful of theoretical economic models that involve free energy? Quick, dig him up, put magnets in him, wrap his coffin in wire, and test those models!

    • strange gods before me ॐ

      Are comments on?

    • strange gods before me ॐ

      can’t link?

    • strange gods before me ॐ

      So let me describe MMT to those unfamiliar with it.

      Despite insinuation of authorship, the comment was taken from mmtwiki dot org/w/index.php?title=Introduction&oldid=2371

    • strange gods before me ॐ

      This is part of a pattern of plagiarism: freethoughtblogs dot com/pharyngula/2012/08/29/thunderdome-4/comment-page-2/#comment-450096

  • unbound

    To start off with, I think the number 1 reason we are in this situation is that the FTC (Federal Trade Commission) hasn’t been doing their job in over 3 decades now. The purpose of the FTC is “To prevent business practices that are anticompetitive or deceptive or unfair to consumers…”. Yet they rarely have anything but minor issues with pretty much any merger.

    But mergers are almost never in the public interest. Mergers are, by definition, a reduction in competition and only really benefit the corporations. The FTC should be opposing them nearly every time. The opposition to the AT&T / T-mobile merger is the first major merger that the FTC has stepped up to fight in over 3 decades now. Where was the FTC all the other times (http://en.wikipedia.org/wiki/Mergers_and_acquisitions#Major_M.26A is just a list of the really huge mergers)?

    Why does this matter? Because competition drives not only the prices for the consumers, but also the salaries that can be made. Lack of competition means that the corporations can (and do) set the lower compensation experienced at the entry level all the way until you reach the top where, suddenly, compensation flows orders of magnitude higher.

    Supplemental Information:

    A couple of things that remain huge barriers.

    First is that capitalism in the form of a highly competitive laissez-faire market place (which is what everyone envisions when they hear the term capitalism) doesn’t actually exist in the modern world. For this to actually fully exist, there can’t be any barriers to entry (try creating computer chips in your home oven), all consumers have to have near perfect knowledge of the products they buy (how many people even know about the various deals between wireless providers and cell phone manufacturers when they pick up a phone), products that you buy need to be indistinguishable from the competition’s products (iPhone, Android, Windows phones are all different)…just to name a few conditions.

    You can see that capitalism isn’t actually what is going on in the US when you observe that all the major oil companies started making record profits at the same time (just one example of a great many). In a competitive environment, this wouldn’t be possible. In a competitive environment (especially one based on the fictional supply-side economics world), high level executives couldn’t make anywhere near the money they make…both in terms of real dollars and in terms of compensation relative to typical worker in their company. In a competitive environment, workers may or may not get more money, but the top executives would not be so extremely well compensated above the regular workers. If more money doesn’t go to the workers, the products would be cheaper which means that the limited money made is worth more.

    Second is the notion that competition rules the salaries of even the middle-class jobs…this is actually not true. While it is illegal for a company to talk directly to other companies to set product or service prices (explicit collusion), there is no such law regarding companies talking to each other to set salaries of middle-class jobs. I know for a fact that the HR at my corporation talks to the HR of even our competitor corporations (all 4 of them) about what salaries each position should have.

    Despite technical resources being very valuable to this day, the churn rate is pretty low because the other major corporations pay pretty much the same. In fact, the last 4 losses of my technical resources (over the past 6 years) were to small companies that have substantially lower overhead (i.e. their C-level executives are paid substantially less than a major corporation, and there are a lot fewer of them) so they can afford to pay their resources more. Of course, everyone thinks their main opportunities are in the large corporations, so few are willing to consider working for a small company.

  • drlake

    There will always be poor people. This isn’t simply a function of capitalism, since every non-capitalist system every developed has failed to eliminate poverty. That said, not all poverty is the same. If we had a decent social welfare system (a la Germany, or Scandinavian countries) those living in “poverty” would be much better off than they are in the US today. Likewise, if we had a higher minimum wage (about $15 in Australia, for example) poverty would also mean something much different. “Poverty”, and “poor”, are relative measures of well-being, not absolutes.

  • ‘Tis Himself, OM

    The basis for MMT is the so-called Modern Money System, based on floating exchange rate fiat currencies. I’ll define those terms. First, there’s an important economic fact everyone needs to know: Nothing has intrinsic value. Various commodities may have values fixed either by law or by agreement, but these values are artificial.

    A floating exchange rate is when a currency’s value is allowed to fluctuate compared to other currencies as determined by the foreign exchange market. However, since central banks frequently intervene to avoid excessive appreciation or depreciation, this regime is often called managed float or dirty float.

    Fiat money isn’t money coined by Italian auto makers. Rather it’s any money whose value is determined by legal means, rather than strict availability of a commodity. Fiat money is established when a type of credit money (typically notes from a central bank, such as the Federal Reserve or Bank of England) is declared by a government act to be acceptable and officially-recognized payment for all debts, public and private.

    Under MMT, the government or other authority responsible for fiscal policy (taxing and spending) is also a monopoly currency issuer. Therefore the government is the only entity that spends without revenue constraints. It is responsible for providing the appropriate amount of currency to the users of the currency in the economy. While maintaining the value of the currency, i.e., avoiding causing inflation or deflation, it has the ability to ensure there is sufficient currency in the economy to facilitate commerce.

    In most modern money systems, there are politically self-imposed constraints affecting this spending process. There can be a number of organizational rules and procedures involved. Many of these constraints made more sense during times when currencies were pegged, but are pointless for modern money systems and can sometimes unnecessarily restraint available policy options. However, since the constraints are voluntary and self-imposed rather than operational, they can be altered at will by the government of issue.

    For example, in the US, the federal government is prevented from adding funds to its account (the Treasury General Account) at the Fed. And it is also not permitted to run an overdraft on its account. Instead, the account must first be credited with funds by transferring funds from Treasury Tax and Loan accounts, which in turn are credited when taxes are collected and government bonds are sold to the public. Congress has also imposed a ceiling on the dollar amount of Treasury securities that the Treasury can issue (the debt ceiling).

    Again, these are politically imposed rules and procedures, not operational necessities. Indeed, as a currency issuer, a modern money regime is not operationally constrained when spending. In a logical sense therefore, the ultimate purpose of taxation and borrowing can not be to raise revenue for spending.

    Instead, taxation serves to reduce aggregate demand, i.e total spending power, in the economy, to leave room for the government to spend. This is necessary to maintain the value of the currency, to avoid inducing inflation or deflation. Taxation thereby drives the value of the currency. Government bond issuance serves to manage the interest rates in the economy.

    MMT asserts that in a logical sense, government expenditure necessarily comes before collecting taxes, rather than the other way around. Tax payments can only be settled with bank reserves or physical currency (called base money). Logically, this requires that base money has previously been issued and spent in the private sector by the government. The base money must be issued and added (government spending) before it can be removed again (taxation).

    Households, firms and non-federal public entities such as states and municipalities in the US, as opposed to modern money governments, are revenue constrained. In order to spend they must obtain funds from revenue, borrowing, drawing down savings or selling assets. This applies also for member nations of the Eurozone, since they are not issuers but users of the currency of issue.

    At this point I’m tempted to discuss constrained (pegged) currency, but that would add several hundred more words to this post.

    Using a household analogy to understand the financial considerations of a modern money regime is fundamentally inadequate. Any notion that such a government can involuntarily go bankrupt or become insolvent in its own currency is erroneous (although it may choose to voluntarily default for political reasons, for example due to political unrest, war or regime change).

    It can be difficult to intuitively grasp the lack of operational financial constraints. Instead of using a household analogy, one must realize that the government can not run out of its own money. The government does not have or not have currency to spend. Another analogy is to think of the government as always having an infinite fund of financial assets at its disposal.

    As a currency issuer, a modern money regime spends by crediting bank accounts. This is much like changing numbers on a scoreboard in a game of sports–and a scoreboard does not run out of points. The currency issuer is the score-keeper. The currency users are the players of the game, and will have to work to obtain the points.

    As an example, such analogies may make it clear that it’s pointless for a modern money regime to increase taxes for the sole purpose of collecting money into funds for future use. It may be reasonable to store real assets, or foreign currency financial assets. But building up sovereign funds of financial assets denominated in the own currency is nonsensical, since a “fund” of any size can be created instantaneously by a currency issuer at will.

    Similarly the idea that the government has to collect taxes or borrow money in order to finance spending is incorrect. Taxing serves to reduce private spending power, borrowing (issuing government bonds) serves to control interest rates, and neither is done in order to finance spending.

    • strange gods before me ॐ

      And this comment was lifted from

      mmtwiki dot org/w/index.php?title=Modern_Money_Systems&oldid=2391

  • http://killedbyfish.blogspot.com feralboy12

    All this fine economic analysis and presentation of ideas & theory is going to be lost on modern Republicans. They think in terms of first principles, like Taxes:Bad, Free Market:Good, held to be inviolable. Because they sound good, as long as you don’t think through the implications.
    It’s like the Republican candidates, especially Ron Paul, see the system as some giant board game, with a few simple rules that everybody plays by, and everybody has a chance to win. It’s open and fair and rewards those who play hard and smart; if you wash out, it’s your own fault. You had your spot at the table.
    In reality, though, it’s a board game where getting ahead gives you the power to change the rules as you go, making it easier and easier to stack the game in your favor. This magnifies the advantages and disadvantages of your starting position and any early bits of luck. There’s a feedback loop, and the game goes non-linear.
    Republicans are totally linear thinkers. When they think.

  • Tom Robbins

    … why don’t we just do what norway does?

  • AYY

    Well Obana’s been in office for 3 years now and his programs don’t seem to be working too well The stimulus program didn’t work, although his supporters got rich off of it. Cash for clunkers didn’t work. His decision on the Keystone pipline is going to do well for Warren Buffet, but no one else. He’s taking away our healthcare. There’s the Fast and Furious scandal. His foreign policy is a disaster. Unemployment went downlast month because over a million people dropped out of the labor force. And you complain that neither Romney nor Gingrich will bring us utopia?

    • DPB

      [Citation needed] for pretty much every sentence.

  • http://flipc.blogspot.com/ FlipC

    As it seems we have some people who know what they’re talking about here I’d like to bounce an idea:

    A negative income tax rate of 50% with a threshold set at the previous year’s median gross wage.

    If the median decreases due to depression of wages the higher percentiles end up paying more tax so it’s in the their own interests to either lower their own salaries (hah!) or increase their workers’.

    Couple this to a company tax rate that’s has a reduction based on the average number of workers for that tax period i.e. -5% for 1-10; -7.5% for 11-30; with a steadily increasing division for a set reduction.

    So companies pay less tax when they hire more workers and get a decent wage to increase the median for the higher wage earners.

    Thoughts?


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