May 20, 2012

Austerity? Europe never even got there.

May 10, 2012 By Leave a Comment

Just because France and Greece have decided, by majority vote, that they don’t want to cut down the welfare state does not mean that they can afford to continue spending. Nor does it mean, as Democrats would have you believe,  that cutting the deficit is a bad idea.

All it means is that a majority of voters in France (about 51.8%...not exactly a resounding mandate) picked Socialist Hollande and his promise to end “austerity.”  Meanwhile,  in Greece, where unemployment is well over 20%, Coalition for the Radical Left  leader Alexis Tsipras, when given the opportunity to form a governing majority, thumbed his nose at the holders of Greece’s debt and edged his country closer to national bankruptcy.

World markets responded accordingly…meaning, European stocks dropped when investors fled, taking their money to places where people actually face reality with seriousness.  Places that don’t rhyme with “syrup.”

None of this means, however, that “austerity” is wrong.

In fact, it’s not even clear that Europe has even entered the phase of “austerity” programs where austerity happens. Taxes have been raised on the wealthy, says Michael Tanner, but austerity programs won’t actually kick in for several years.

For example, France will raise its retirement age from 60 to 62, but not until 2017! A cap would also be put on government health-care spending, starting next year. It is a little hard, therefore, to discern whether it is budget cuts that may or may not happen some day in the future, rather than tax increases today, that have slowed French economic growth.

Or take Britain, where the Tory-Liberal coalition recently suffered a drubbing in local elections, in part as a reaction to so-called austerity measures. Among the Cameron government’s first “austerity” measures was to hike the personal income tax to 50 percent for those earning more than £150,000 a year. That measure managed to actually decrease income-tax revenues by £509 million. The U.K. did trim government payrolls and cut back on some government programs, but British government spending still consumes more than 49 percent of GDP. Government spending actually increased by £59.2 billion from 2009 to 2011.

It’s a “tax today and maybe we’ll cut entitlements in the distant future” type approach. There’s no austerity happening. Just promises austerity accompanied by immediate increases in tax rates on the wealthy and middle-class. Says Tanner

  • Spain: imposed a “wealth tax” on citizens with €700,000 of assets, and a 7 percent income tax on those earning more than €300,000 per year; capital-gains taxes were also hiked.
  • Italy: imposed a “Solidarity Tax” of 3 percent on all taxpayers who earn more than €300,000.
  • Greece: increased taxes by nearly twice as much as it cut spending, including a 5 percent surtax on the wealthy.
  • On the middle-class Europe-wide: VAT hikes,  as well as tax increases on fuel, alcohol, and tobacco.

Any wonder why European stocks dropped yesterday? No one wants to invest in a country–or a continent–where their investment isn’t going to grow and in fact faces a very real likelihood of being taken, too.

This shouldn’t be a debate over “raising taxes” and the “cutting taxes.” Rather, it should be about government spending less so that the tax burden on business is not so heavy. The way to growth is to make it easier, and cheaper, for businesses to grow, there by putting more money into the pockets of individuals to spend. You can’t with one hand run up big surpluses and with the other hand raise taxes or print more money. The result is a net loss, especially to those who can afford to save less.

Europe never stopped spending, at least not less than it taxed. Greece and France are going that reality really is non-negotiable. Especially when Germany, who holds the cards, tells them ‘no’ to new bailouts.

“Greece can rely on the solidarity of Europe, but if Greece does not help itself, there is nothing to be done,” German Finance Minister Wolfgang Schaeuble told a news conference.

“Whether Greece is ready to do what is necessary – only the Greek people can decide.”

When it comes down to it, the Democrats in America can point to the votes in France and Greece as for why cutting government won’t put people back to work. At the end of the day, though, Democrats are wrong. Three years of spending has not brought about real change in our employment or our wealth creation. We are still at around 15% unemployed (when counting those who are underemployed or no longer seeking work).

 

[CBS] [CNBC] [Christian Science Monitor] [CATO]

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Book Review: “The Big Short: Inside the Doomsday Machine” by Michael Lewis

April 4, 2012 By Leave a Comment

The Big Short: Inside the Doomsday Machine

Michael Lewis can tell a story like no other.  In fact, even before I finished reading his “The Big Short,” I wanted to work the book into every conversation I had. The story was that interesting and compelling.  Anyone who can take the financial crisis of the last few years, find a story in it that centers around subprime mortgages and shorting the market (if you understand what that means and how to do it, you’re more than a step ahead of me and about anyone else I’ve mentioned it to over the last couple weeks), and then make it interesting to the lay reader deserves to be read.

In many ways (if not all ways), the stock market is a giant enigma to me, which suggests how Winston Churchill once described Russia: “I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.” If there is a key to the enigma, with that riddle wrapped in a mystery inside it, that is the stock market, perhaps the key is found in the self-interest of the individuals participating in the market. Not just the stock and bond traders that made up the named characters of “The Big Short,” but even the home buyers and owners that took out second, third, and fourth mortgages, bought two, three, and four “investment” properties, the loan originators who sought them out and offered no interest loans, and the banks that sliced up the loans to fill tranches (there’s another cryptic word for you) for trading as bonds to and between the financial houses on Wall Street.

In other words, as Gordon Gecko might say: greed. Greed of bonds traders, floor traders, home buyers, loan originators, strawberry pickers, and house cleaners. Greed by just about everyone involved, from the top all the way down to the bottom.

Lewis, known for his writing in “The Blind Side” and in “Money Ball,” with “The Big Short: Inside the Doomsday Machine” returns to his original stomping ground covered in “Liar’s Poker: Rising Through the Wreckage on Wall Street.” Finding the few who saw the crash coming, he pulls together a narrative about those who anticipated the crash and saw it coming. While so many were getting rich off trading subprime mortgage based bonds, a few individuals realized that the underlying assets to the housing bubble were not stable and predicted that as interest rates on adjustable rate mortgages became due, defaults would sky-rocket and the bonds’ values would crash.

And then they bet against it, cashing in lucratively when the predicted defaults began.

, author of the best-sellers Moneyball, The Ne...

Michael Lewis, author of the best-sellers Moneyball, The New, New Thing, Liar's Poker, and others at a Hudson Union Society event in 2009. (Photo credit: Wikipedia)

What makes the story fascinating, of course, is the attention to the often colorful and more than slightly eccentric personalities that comprised the handful of individuals in the story. The stock market is difficult to understand for a simple reason–its workings are data driven and few pay the price to understand the numbers and analysis behind the market. In contrast, those who did, and those who got lucky, were often driven by a narrow-minded focus the data. From a neurologist turned hedge fund manager diagnosed with Aspergers in the midst of the story to a couple of young college grads who all but lucked into it, to a loud mouthed malcontent who made a habit of sticking it to the big wigs on Wall Street who lost investors money to the crisis, the “The Big Short” is replete with Lewis’s deft story telling.

Whether you are interested in finance or just looking for a great story, “The Big Short” is worth the time to read. I listened to it in the car, and often found myself sitting in the driveway waiting for the end of a section. More, it introduced me to concepts and interests that I’m exploring further in other books. Read in conjunction with “Too Big to Fail,” which I read last year, it provides an up close look at what was going on and why our economy is dragging through the longest recession in a generation.

One last observation: one aspect that this book noted that continues to shock me no matter how many times I hear it over the last four years is how people with little or no credit history or ability managed to get so much financing. From immigrant strawberry pickers in California with $750,000 mortgages to house cleaners in Brooklyn with four and five town homes, obtuse financial incentives to originators and investors alike distorted the market in ways that were dangerous to all of us. While I look forward to other financial histories for other perspectives, Lewis seems to make clear that it wasn’t so much the free market that failed, but the financial incentives that were built into it. In the end, the old adages “if it’s too good to be true, it probably is” and “there’s no such thing as a free lunch” seem even more relevant today than ever. Be careful when the snake oil salesman comes calling. He may not have your best interests at heart, and he may not even know it himself.

View all my reviews

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Economics simplified…a lot.

March 27, 2012 By Leave a Comment

Brought to you by NPR, three minimalist posters designed by economists.

Catch the article here.

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Obama’s 2012 Budget Proposal is a Trip to La-la Land.

February 21, 2012 By Leave a Comment

What would you say if I told you that the Obama Administration is proposing a budget that cuts spending  in an amount about the equivalent to coupon for a penny off of your Wendy’s value meal?

Let’s be clear: for an administration that has had to deal with the worst economy in decades, the Obama Administration has proven an uncanny ability to live in La-la Land when it comes time to make a budget. Each year it submits a dreamily out of reality budget, and each year, both Democrats and Republicans in Congress vote it down.

I don’t say this to attack the Obama Administration on its handling of the economy…at least not directly. Rather, I point it out because the federal budget is how the executive branch sets its priorities for the coming year. As yet, over the course of his tenure in the White House, the President has not had a budget survive Congress, even when his party controlled both the Senate and House.  This is unprecedented in American history.

It is widely accepted by economists that once national debt exceeds 90% of GDP (gross domestic product or the value of everything a country produces in a year),  ”annual economic growth tends to be about one percentage point lower.”  As of this writing, the current GDP for the US is about $14.58 Trillion. Our national debt? $15.087 Trillion, or about 103.45% of GDP.

That’s right. We’re in the territory where the debt starts to slow economic growth.

Just how much money is $15 Trillion, anyway? That’s the equivalent of one person spending almost $20 Million a day since Jesus was born.

Where has all that money even gone to? How did we get so deep in the hole without building every American a palatial home complete with a Rolls Royce and driver?

But I digress. The budget.

So, without having yet passed a budget during his Presidential career, a weak  economy, national debt higher than the market value of everything Americans will create this year, and his reelection campaign all on the docket for 2012, what does the President propose in his 2012 budget?Barack Obama - Caricature

Does he tact to the right to find a middle place where the Republicans can compromise? Does he propose solutions that can strengthen the economy?

NOPE.  Senator Sessions of Alabama and budget hawk Congressman Paul Ryan of Wisconsin recently said that

Although it claims to include $4 trillion in deficit reduction, the president’s budget actually contains virtually no credible deficit reduction at all. Under his plan, the government is projected to borrow $11.2 trillion over the next 10 years. This is roughly the same amount of debt we are expected to incur under realistic projections of current policy. The budget does not change our debt trajectory.

In other words, the President is doing a lot of talking, but not a lot of walking. He’s promising a fiscally responsible budget from the the lectern, but hoping no one will notice that the budget he submitted to Congress actually adds to the national debt.

But Senator Sessions and Congressman Ryan are just Republicans doing what Republicans do when the guy in the White House is a Democrat, right? They’re just the party in opposition.

They aren’t alone in their analysis.

Enter the Wall Street Journal which said that the President’s budgeting skills earned him a “fiscal record [that]  is the worst in modern American history[]” and that he is pointing to a “mirage” when setting projections for growth.  Want more gory details?

  • One CATO analysis says that the budget proposed only gives savings of “$24 billion in a $3.8 trillion budget.” That’s 1/158.333333th of the budget. Kind of like going to buy a $2.99 value meal at Wendy’s with a coupon for about $.02 off of your meal. Actually, even less than that.
  • According to the WSJ, “[f]our years of spending of more than 24% of GDP, the four highest spending years since 1946. In the current fiscal year of 2012, despite talk of austerity, Mr. Obama predicts spending will increase by $193 billion to $3.8 trillion, or 24.3% of GDP.”
  • And “[a]nother deficit of $1.327 trillion in 2012, also an increase from 2011, and making four years in a row above $1.29 trillion. The last time that happened? Never.”  Ouch.
  • Tax “[r]evenues at historic lows because of the mediocre recovery and temporary tax cuts that are deadweight revenue losses because they do so little for economic growth. The White House budget office estimates that for the fourth year in a row revenues won’t reach 16% of GDP. The last time they were below 16% for any year was 1950.”

PS. None of that debt includes what current tax payers will have to pay out to current and future retirees for Social Security.

How does the Obama Administration think this budget is possible? How can they A) raise spending and B) cut the deficit?

Easy. Raise taxes on anyone making more than $200,000 (see my analysis of the so-called “Buffett Rule” here) and economic growth at 17.8% of GDP.  Tax rates will increase, in some cases very dramatically. “[C]apital gains to 30% from 15% today; dividends to 30% from 15%; the estate tax to 45% from 35%.” Even the payroll tax cut, which is probably the only thing going for employers, is only slated to last another 10 months, at which point President Obama wants it to end.

According to Michael Tanner at CATO, that’s not going to help the economy, not by a long shot:

Instead, what the budget does contain is a renewed call for tax increases on people and small businesses making as little as $200,000 per year. In addition, there’s the usual panoply of tax hikes on energy products, businesses, investment, and pretty much anything else the president can think of. The budget also helpfully points out that 2013 is the year in which most of the new taxes under Obamacare will take effect. Overall, the president would increase tax revenue to 20.1 percent of GDP. That’s a huge increase from the current 15.4 percent, and higher than the post–World War II average of 18.0 percent. Tax increases of that magnitude cannot help but slow economic growth and job creation.

 Furthermore, ”even if the President were to get every penny of the tax hikes he wants, his budget would never balance. The closest he would ever come would be in 2018, when the deficit would be only $575 billion. After that, deficits begin rising again, reaching $704 billion by 2022.”  (Deficits are the difference between what we raise in tax revenues and what we spend beyond that. Think of it like credit card debt you incur when you spend more in a given month than you earn. Pretty much, we’ve spent more than we earn for so long that we owe more than we are will earn in any given year…and that’s not taking account that we need to pay it all back).

Democrats denounced George W. Bush for allowing so much red ink, but his deficits averaged only 3.5% of GDP if you don’t count 2001 but do include the 10.1% of 2009. Mr. Obama’s deficits have averaged 9.1% of GDP if you count 2009, as you should because his $800 billion stimulus passed that February.

Let me sum it up: budget = President’s plans, and President’s plans = status quo. Because, as one friend put it, “why pass a budget that causes you to compromise when you can pass a bunch of continuing resolutions that keep the Republican controlled House out of the picture?”

That’s playing politics, not good policy, and its bad government policy, bad for our economy, and bad for America.  With the national debt proving to be a giant drag on the economy, the Obama Administration is living in a dream where taxes are high and the economy grows at rates it hasn’t seen–ever.

APROPOS: Did I say that the President was planning on paying for his budget increase with taxes on the rich through the Buffett Rule? Oops. My mistake. Just kidding. Turns out, according to this guy, he doesn’t even put the Buffett Rule into the budget, despite devoting substantial space to it in his State of the Union speech. Grandstanding, much?

[The Washington Post] [Wall Street Journal] [CATO]

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Need a primer in Austrian economics? [video clip]

January 17, 2012 By 6 Comments

You’ve been watching the debates (except for that one at 7 AM on Sunday morning), and you keep hearing references to Austrian economics. They keep mentioning names like Hayek, Friedman, and Mises .  What’s with all these German sounding names, you say. And why is Ron Paul staying up to read an economics textbook while the rest of these bozos are watching college football?  (ok, maybe Friedman is more Chicago style, but his name sounds German, too, and Paul does ascribe to certain aspects of Friedman philosophy, as well).


I know, and you know, who Keynes is (because we “are all Keynesians, now,” right? Wrong…but I digress, as usual), but who are these other guys?

Friedrich Hayek

Two of them are Nobel prize winners (Hayek and Friedman), and all are the fathers of Ron Paul’s political philosophy. If that’s not substantial enough for you to spend at least five minutes figuring out who the Austrian economists are, as well as what they believe, then I don’t know what is.

To help us out, we have Peter Boettke, an economist himself at George Mason University. He recently spoke to The Browser and, in addition to providing a brief explanation of the Austrian school of economics, recommended a few books that could get you started on your way to understanding Austrian economics better. Here’s how he describes the way Austrian economists view the world:

Classical economists, Austrian economists, and New Institutional economists reside in the box that starts with a complex problem situation but nevertheless gets you social order. The way you do that is not based on the behavioural assumptions of the actors, but on the institutional assumptions underlying them, ie things like the political, legal and cultural context within which individuals engage and exchange. If that context is the right context, then even in the most difficult of situations, individuals can generate social order. They can cope with their ignorance, they can take care of uncertainty. When the market goes astray, it’s not because there is something wrong with the market mechanism, it’s because the rules under which the market mechanism operates have got distorted.

That last word is very interesting. I think if we were to go back and check out what Ron Paul’s been talking about during the campaign, I think we would find out that his complaints about the government spending, healthcare reform, entitlements, and perhaps even defense spending and American projection of power abroad, often root from his views that government is interfering in the natural workings of the market. In other words, distortions.

Check out the rest of his analysis. It’s interesting and compares the Austrians to Marxists and Keynesians. It’s well worth the read.

So what books does he recommend?

  • Human Action by Ludwig von Mises. “[...] when the government distorts the monetary unit, through the manipulation of money and credit, it can generate boom-and-bust cycles. So rather than the business cycle being inherent to capitalism, it’s a consequence of distortions caused by the manipulation of money and credit.”
  • Individualism and Economic Order by Friedrich Hayek. “Hayek’s writings set off a research programme to study how it is that information gets communicated within a complex system, and a variety of different people have picked up on that, and worked with that idea and taken it in directions that even Hayek couldn’t have envisioned.”
  • Calculation and Coordination  by Peter Boettke. “What I’m doing is trying to get the history right and then get the political economy analytics right, and then trying to use both of those to explain that from that original history it was logical that we ended up with the system that we ended up with, rather than the system that we wanted to end up with.”
  • The Invisible Hook by Peter Leeson. “I think The Invisible Hook does a fascinating job of communicating to people the enjoyment of just thinking through a problem like an economist.”
  • After War by Christopher Coyne. “What he found was that in US-led efforts, basically somewhere between two-thirds and three-quarters of the efforts failed to meet even that minimum standard.”

I’ve not read any of these, yet, but I’m looking into them. I could certainly use an expanded understanding of our economy. Which will you pick up this week? Are there others that you recommend?

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Romney wins New Hampshire, demands we offer an “alternative vision.”

January 10, 2012 By 1 Comment

Mitt Romney has won the New Hampshire primary, a week after winning the Iowa caucus.

That’s historic, if you didn’t know.  As John English accurately observes, no Republican candidate for President has won both Iowa and New Hampshire.

“We have to offer an alternative vision,” says Romney upon winning New Hampshire and that alternative is a path to a place “where we are lifted up by our desire to succeed, not dragged down by a resentment of success.”  In case anyone is forgetting, this election is about the economy, and Mitt’s proving that people want someone who they trust on the economy.

Below is Mitt’s high energy victory speech.

APROPOS: Between Mitt Romney’s 39.3% and Jon Huntsman’s 16.9%, New Hampshire gave 56.2% of its votes to Mormons…could that indicate that the LDS faith is less of a liability for Romney than some Baptist preachers and Texas politicians might want?

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In (plenty of) time for Christmas, go get an Occupy t-shirt.

November 22, 2011 By 2 Comments

Just in time for Black Friday, Despair, Inc brings you the perfect t-shirt for the Occupier on your Christmas list.:

Go get it from Despair,Inc.

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The Conservatives’ Challenge on Economic Inequality

November 18, 2011 By 6 Comments

[This is the first in a set of pieces by Benjamin Lusty, lawyer and an occasional contributor to Publius Online, on the topic of economic inequality]

______________________________________________________________

Americans tend not to wage class war.  The rugged individual within us celebrates economic success.  True, we loathe profit by malfeasance, but we do not begrudge those who prosper fairly.  No Occupy Wall Street protestor demanded expropriating Steve Jobs’ vast fortune (despite his legendary indifference to philanthropy).  But a hazy mistrust of “the rich” is falling over the nation’s collective conscience.  Although most Americans do not believe that wealth is theft, many are questioning whether playing by the rules profited them.  Occupy Wall Street represents only the radical rim of America, but it is speaking directly to a new discontent enveloping the middle class.

It is tempting to conclude that the nation simply suffers from anxiety naturally accompanying prolonged periods of high unemployment.  But America’s trouble is of a different quality all together.  Economic mobility, and more importantly, Americans’ perceptions of economic mobility is stalling.  Business Insider (in a fascinating series of graphs available here) reports that since 2009, average annual household income dropped 10% even though the S&P 500 gained 80% over the same period.  Likewise, since the 1960s, inflation-adjusted wages have essentially flat-lined, despite rising productivity.  A 2008 Pew Research Study reported 79% of Americans felt that it was harder to maintain middle class living standards.  Critically, new surveys report that 57% of Americans no longer believe their children will lead better lives.  It all makes for a plaintively stoic resignation of the typically tough American psyche.

And yet, America’s economic inequality is growing.  As of 2007, the wealthiest 10% of households owned two-thirds of the nation’s wealth.  Since 1979, the top 1%’s share of income nearly doubled.  Not surprisingly, the left wants to leverage economic anxiety to pass a “new” New Deal of high taxes, high spending, and busy regulation.  Their operative assumption is that inequality is the problem and redistribution is obviously the answer.

For conservatives, the current economic nervosa poses an existential threat.  Conservatives traditionally ignore economic inequality, dismissing it as a necessary (if unfortunate) by-product of liberty, property rights, and free markets.  Although income equality may be vaguely desirable, it is elementally inconsistent with freedom.  In truth, it is inevitable that a free society facilitates different economic outcomes.  People have different tastes, capabilities, interests, ethical creeds, and willingness to work.  The market divides rewards based upon value created, but free societies allow people to choose how much value they wish to create and how they create it.  We do not force people to work.  Nor do we assign occupations, locations of residence, or educational levels.  This results in a vibrant and mercurial society where each individual chooses her school, her study, her occupation, her location, her family situation, and ultimately her life.  The tricky thing though, is that choices are hard and free societies are harder.

But choice explains the gulf between rich and poor.  Educational attainment and annual income are positively correlated, but educational achievement is a choice (or rather thousands of choices made over a lifetime).  Careers, too, result from cascades of choices, each with varying degrees of compensation and commitments.  The unbreakable truth, of course, is that nobody is free to make choices outside of the context of everybody else’s choices.  Indeed, the economy is nothing more than a tangled, spider web-like matrix of trillions of choices made every day by billions of people.  This swirling commotion of commerce spins unpredictably, but in a surprisingly coordinated fashion.  It is, after all, the supposedly chaotic and merciless free market that feeds and clothes billions.  It also links hearts, minds, and pocket books across supply chains, web links, and telephone calls.  And only choice really controls it.

The conservatives’ challenge is stark.  Occupy Wall Street wants less choice because it demands higher taxes, more regulation, and forgiveness of debt (e.g., undoing financial choices).  The left wants now, as it has always wanted, more government control and less private initiative; all to make us “equal.”  They call it “social justice,” “common sense,” or “middle class solutions,” but the upshot is always more central command and less choice.

Of course the danger is not that the left is now demanding these things–it always has.  The danger for conservatives is that Americans’ confidence in their ability to make effective choices is eroding. Why should good choices matter if the average worker hasn’t gained over the course of an entire generation?  Why go to college for a highly leveraged piece of paper (formerly known as a diploma)?  The left promises free health care, food stamps, and debt forgiveness. Why not accept that, especially if (as the left would have us believe) this is all somebody else’s fault anyway? After all, taxing somebody else will make us all richer anyway….

 

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An interesting thing happened on the way to Occupy Wall Street…

October 18, 2011 By 2 Comments

An interesting thing happened on the way to the Occupy Wall Street protest…

The wealthy got involved.

Since sometime last week, a new meme has circled the internet.  ”We are the 1%,” it says, and it shows independently wealthy twenty and thirty hoisting cardboards and papers with short manifestos written in Sharpie. It almost always looks something like this:

Wealth I didn’t earn has bought me education, health care, and safety.

I want those for EVERYONE.

Born into the 1% – Tax me!

I’m for wealth redistribution.

There are hundreds of them, and they are–so kindly–willing to share their wealth with everyone else.

By their own admission, almost none of them have earned or worked for their wealth.Whether they are motivated by a sense of guilt or charity, or some other motivation, I do not know.

Two things are obvious, though: 1. the IRS will take a check. One percenters should feel free to write a check in an amount that will assuage their conscience at any moment. No one is stopping them, least of all the IRS.

2. Overwhelmingly, and by their own admission, none of them have ever had to work for what they have. While there is the occasional guy who says “I got lucky” and made lot of money, but most of them are clear: they didn’t earn it, they didn’t work for it, and they are glad to share it…as long as the government raises taxes on them all together…

…which leads me to think they aren’t really that charitable, but rather motivated by a sense of guilt or embarrassment, or perhaps noblesse oblige.  Going out in public and holding up these signs doesn’t cost them anything except time, and we’ve already established that most of them don’t need to work because of independent wealth. Holding up these signs says “I stand with you, Occupiers! I am one of you (even though I’ve never had to work a day in my life, flip burgers or work construction, use power-tools or lift a hammer, have ready access to cash and capital for school, vacations, and investment, don’t carry student debt or a mortgage,…other than that, I stand with you)!”

Nevermind that when the occupation ends, the 1% will go back to their lives fully paid for by some ancestors’ labor and ingenuity, while the rest will go back to the next left-wing cause of the week, their jobs, their debt, their underwater mortgages…

Meanwhile, the rest of us, are left scratching our heads. We’ve been working, sometimes two or three jobs, volunteering at our children’s schools, donating the occasion can of food to the local food bank, skimping on cable and internet bandwidth to pay down our mortgages and student loans, and generally, doing what we can to try to get ahead. We understand the American dream is what might be best summed up as “rise early, work hard, and strike oil.” And we don’t understand why the children of people who lived that dream now want to go ask the government to take it from them.

Write a check. No one is stopping you. Put your money where your mouth is.

Then go start a business with all that extra capital you’ve got lying around as part of the 1% and put some of those protesters to work. It would serve our country better than chanting anti-capitalist and anti-free market mantras. And, frankly, you aren’t standing with the 99% anymore.

We are the 99 percent. We are getting kicked out of our homes. We are forced to choose between groceries and rent. We are denied quality medical care. We are suffering from environmental pollution. We are working long hours for little pay and no rights, if we’re working at all. We are getting nothing while the other 1 percent is getting everything. We are the 99 percent.

That’s a sad story, but distinctly not what 99% of America believes or is experiencing.   Here are a couple of statistics from Daniel Indiviglio at The Atlantic [via Connor's Conundrums]:

  • Foreclosure activity may affect somewhere in the ballpark of 10% of U.S. households. That’s a tragically high percentage, to be sure. But it’s no where near 99%.
  • 15% of Americans live below the poverty line. That’s clearly far too high a percentage, but again, it’s a small minority.
  • Before last year’s Affordable Care Act, about 30 million Americans were uninsured, which is roughly 10% of the population. Of course, with the new law in place that number should approach zero.
  • I have no idea how to quantify how many people are suffering from environmental pollution, but I strongly suspect if you got 100 people in a room and asked them, 99 would not say pollution is a huge problem in their lives.
  • Wage growth certainly has been weaker than would be ideal, but 87.5% of Americans are satisfied with their jobs, according to Gallup. The underemployment rate is 16.2%.

If that weren’t enough, public support for income redistribution is dwindling. Dramatically. While it would seem to be in the interest of the middle and lower classes (the so-called 99%) to redistribute income to themselves, the reality is, as Scientific American reports, that Americans would rather not take from Paul to give to Peter.

It’s called the “Last Place Aversion,” and it isn’t even driven by the white, Republicans that the left loves to hate. In fact, the aversion is greater among minority populations and Americans who have below average income. In both polls and laboratory experiments, researchers Kuziemko and Norton  found that nobody wants to be in “last place,” financially, and if redistribution leaves them poorer than people below them, they’d rather just give the money to the wealthy.

In our experiments, most people still give to the person below them – after all, the alternative is to give $2 to a person who already has more money than you. People in second-to-last place, however, who would fall to last place when giving the money to the person below them, are the least likely to do so: so strong is their desire to avoid last place that they choose to give the money to a wealthier person (the person above them) nearly half the time. If Americans behave like people in our experiments, then it could be challenging to unite those in the bottom of the income distribution to support redistribution.

In short, it’s hard to believe that the Occupiers are A) representing the 99% or B) composed of people who know what it means to work, to earn, and to value property. Instead, as I look at the pictures of predominantly white, upper middle-class people hoisting cardboard manifestos for digital cameras made by low wage workers in Singapore and China, I see people whose noblesse oblige is driving them to push for what they think is in the interests of those who aren’t as well off as themselves.

I’ll repeat what I have said before: you cannot take from Paul and give to Peter and expect it to result in a net gain. People who have never had to work are rarely an appropriate party to decide what is “fair” for the rest of us to do with our money, our property. (and this isn’t even addressing that raising taxes on “millionaires” wouldn’t make a lot of difference in American tax revenues, anyway). If they were so charitable, why demand that everyone else be taxed equally? Why wait for the government to take it? Why not just give it, quietly and anonymously?

APROPOS: I have said nothing about corporatism or the interaction between corporate money and government. Sweet heart deals, tax loop holes, corporate contracts, and easy access to government officials are aspects of corporatism that have no place in healthy governance. However, the Occupy Wall Street protest has by and in large become less about corporatism and more about wealth redistribution, and that is the piece that I believe is unhealthy for our country.

APROPOS II: See the article below that says 49% of Occupy Wall Street Protesters supported TARP. I mean, what?!

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Occupy Wall Street v. Steve Jobs

October 7, 2011 By 10 Comments

Every time one of those Occupy Wall Street (and their lesser known cousins, like Occupy Salt Lake) tweet their status on their iPhone, I am struck by the irony. Steve Jobs was a capitalist, and were it not for Wall Street, there might not have been a Steve Jobs or that iPhone. It was the access to finance that Wall Street represents that made Steve Jobs’ ideas, creations, and innovations possible. Says Edward Hudgins:

Steve Jobs was a capitalist hero. He had a vision of computers for everybody in 1976, at a time when it was assumed that only the most prosperous businesses and the most advanced and well-funded research labs would ever need or be able to afford them. He built his first computer in his garage with Apple co-founder Steve Wozniak, and they marketed it from his bedroom. Good thing that local government regulators—the kind who shut down children’s lemonade stands today—didn’t arrest him for operating a business without a license and against zoning regulations!
But don’t try to convince the super entitled, union subsidized, “middle-class” folk who are not happy about…well, everything, of that.
people asked me 'what are they protesting?' I said 'everything' to one guy. he excitedly replied 'well allright!' #occupyslc #occupysaltlake
October 6, 2011 12:42 PM via Twitter for iPhoneReplyRetweetFavorite
@occupy_slc
Occupy SLC
I know. You can’t make this kind of stuff up.Hudgins goes on.

Jobs, with his Apple colleagues, pioneered the home computer market, came out with the first commercially available system with a graphic interface, and introduced the iPod, iPhone, and iPad. Jobs himself founded Pixar, which brought a new and exciting look to movies. The result was a transformed communications and information world. Today, Apple Inc. has annual revenues of $65 billion, nearly 50,000 employees, and a market capitalization of $300 billion, second in publicly-traded companies only to Exxon. Wall Street loves Apple!

[Awkward moment as Occupy Wall Street looks down at their iPhones for a status update and realize that the update, be it on Facebook, Google+, or Twitter, was funded by...Wall Street.]

It is one thing to protest government policy, to donate to and join the campaigns of reform minded politicians, and to lobby elected officials to refuse donations, change regulatory laws, or lead out in pushing back against corporatism. It is another thing altogether to protest Wall Street and what it represents–investments in the American free market by investors both large and small, both tycoons and brokers and the moms and pops who live next door. (In the interest of full disclosure, my stock portfolio earned 5% yesterday…and lost .38% today).  What exactly are these “occupiers” protesting? Success? The free movement of capital? People who have jobs?

Do the protesters even realize what they are protesting?

Investment bankers direct funds—called capital—to promising enterprises. While many start-up companies rely on the personal savings of their founders or funds borrowed from their friends and family, the expansions of enterprises are fueled by financiers. Commercial ventures are usually risky and many investments are lost. But that’s how the system works. Because no one—certainly not government functionaries or politicians—knows ahead of time which companies will succeed or fail. For example, most investors in the ’70s thought the idea of a personal computer on every desktop was crazy.

But who would call the iPad crazy? You want one, I want one, even the protesters want one. Heck, half of them are probably updating their status on one.

One picture made me chuckle. The woman in the picture, which is from Salt Lake City, bemoans the loss of the “middle class” and it’s imminent posting on the endangered species list. She is holding an umbrella in leather gloves and while wearing what appears to be a fur or leather coat. Perhaps it could be faux leather, but I have a hard time associating how she looks with the end of the middle class. If this is politics, and politics is perception, then she’s giving of mixed messages. Instead of a beleaguered middle classer, I see an entitled woman with time to protest in the middle of the day while the rest of the middle class is at work.

But don’t bother them with intellectual consistency. The protesters purpose isn’t to make sense. It’s to protest. If the anarchists at the left are to be believed, it might even be worse. It might be to destroy.

This brings us to another difference between Jobs and the anti-capitalist protestors. Jobs in his work needed to be ruthlessly rational and reality-oriented. He couldn’t just dream of personal computers or devices that no one could imagine. He and his colleagues had to figure out how to create those products and at such a low cost that millions of consumers could purchase them.

The anti-capitalist protestors are the ultimate irrationalists, living in a mental fantasy land. They simply vent emotions and frustrations, which are often the result of their ignorance and refusal to understand the capitalist system they damn. Needless to say, most have nothing to offer resembling a practical alternative.

The ugly and unthinking spirit of these protestors is manifest in the comments of unfunny comedienne Roseanne Barr. She said, “I am in favor of the return of the guillotine.” She would confiscate much of the wealth of “guilty bankers” and for those who couldn’t live on what she would allow them to keep, “they should … go to the reeducation camps and if that doesn’t help, then [they should be] beheaded.” The soul of a killer versus the soul of a creator!

In this life, you can transcend by killing and destroying or by building and creating. People have often mocked Ayn Rand for her myopic devotion to capitalism and the almighty dollar, but for all her short comings Rand got one thing–building is hard, and we all owe what we have to them.  This republic may have been founded with the right to dissent, but it was headed and begun by people who wanted the right to build and create and own what they created.

Steve Jobs is an example of what the free market capital system can create and support in the human spirit. As we mourn his passing and celebrate his life, perhaps the protesters would be wise to take a few minutes to pull up  a book on their iPads or iPhones and start learning what the capital system they are protesting is, how it works, and why they are, in so many ways, barking up the wrong tree. The problem is not the folks who work on Wall Street, or the people who invest there, either. The problem is in Washington, in how people deal with the problem, and how we think about our problems.

If there is one thing Steve Jobs taught us, it was to change how we think and our results will change, too. If the protesters would recognize their role in the economy, in their own lives, and destiny, and that they are not powerless pawns for the wealthy, they might spend more time moving forward and less time shouting at things they cannot change.

[VIA]

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