Things you won't hear

August 13, 2002 7:22 AM

Things you won't hear at the Wacko dog and pony show today on the economy. Would some real discussion of these issues have been so bad? Isn't public discussion and consensus how our form of government is supposed to work? Isn't the keynote speaker a prime example of what is wrong in corporate America today?
posted by nofundy (68 comments total)

The Sky is Falling!
posted by revbrian at 7:23 AM on August 13, 2002

The writer is president of the AFL-CIO.

Hmmm.
posted by monju_bosatsu at 7:24 AM on August 13, 2002

Rents are rising faster than incomes [...]
Tuitions are going up faster than scholarships or grants.
Children are going to more crowded classrooms [...]

These, and other, points from the article are all worthy points of discussion. However, without any hard numbers to back them up, who's to say it's not the other way around? Where I live, anecdotal evidence suggests rents are crashing down and salaries are gently correcting downwards or remaining constant.
posted by Triplanetary at 7:39 AM on August 13, 2002

The sky is not falling, it has already fallen for millions who can't find jobs while the wealthiest can take summer vacations and also get huge tax breaks. The sky has already fallen. One needs to know a laid off friend to understand that.
posted by adnanbwp at 7:39 AM on August 13, 2002

This is such a sham...like when the first Bush said, "Message: I care"

They didn't invite democrats or anyone who wasn't either a republican donor or a handy "living backdrop" for the cameras....watch the market go down as W's face appears on TV...ugh!
posted by amberglow at 7:39 AM on August 13, 2002

For those with a retirement plan, fully half now think they must work longer because of the stock market decline.


Sorry, not much sympathy there. Armchair investors with little or no concept of how financial markets work don't seem to realize that the stock market is a volatile place where value can decrease as well as increase.
posted by dr_dank at 7:42 AM on August 13, 2002

The Sky is Falling!
right on your head, one hopes...

Hmmm.
yeaaaaaas?

everything bush does in a photo op or soundbite. witness those stupid background displays everywhere he goes. oh, sure, he moves his mouth about economic malfeasance, making appropriate but meaningless noises. i look around and see the facts to be pretty much as the union wonk states them in his article. got any response to the reality of the situation, you two? or just conservative snark?
posted by quonsar at 7:42 AM on August 13, 2002

The writer is president of the AFL-CIO...

... and his credibility went right out the window.

You could have linked to maybe a story describing the 'dog and pony show' and not just one op/ed piece. Context, people!

There are 11.5 million children in poverty

I would like to see how a union boss defines 'poverty' in America. Anyone not getting a union wage? I'd just love to see his statistics on this.

We've heard a lot about $7 trillion in "paper money" lost in the stock market. But for older workers, the losses are real. Half of all workers have no retirement plan at work. With little in savings, they will rely on Social Security. For those with a retirement plan, fully half now think they must work longer because of the stock market decline.

7 trillion dollars lost? What? Where the hell did he get that number? I love the next part though. Basically, "the poor workers are too stupid to take care of themselves and Bush is somehow to blame". If you base your retirement purely on your investments, you have to be willing to take that risk. If you don't have any savings, who's fault is that?
posted by insomnyuk at 7:58 AM on August 13, 2002

The ironic thing is, the high cost of dealing with unions is probably the main reason the cost of living is so high where I live in Philadelphia.

At any rate, W should dump Harvey Pitt (SEC) and that retard from the treasury department, Paul O'Neal. Both of those guys have done a terrible job.

Sure, they may be largely symbolic sacrifices, but even that would be a step forward for Bush.
posted by ph00dz at 7:59 AM on August 13, 2002

Another missing stat is wages for the currently employed. A friend of mines company just cut wages by 20% across the board to 'avoid layoffs'. These folks don't show up on the unemployment numbers, but are all dipping into savings now (if they have them) to meet their monthly commitments. And whether it is class envy bullshit or not, their CEO just bought a $2m new vacation home, something that the newly broke in his company are all talking about at the water cooler.
posted by tellmenow at 8:02 AM on August 13, 2002

If you base your retirement purely on your investments, you have to be willing to take that risk.

That's hysterical, insomnyuk--That's what we've all been taught to do to ensure enough retirement money. If there are no more private pensions and Social Security's going to disappear...what do you suggest?
posted by amberglow at 8:11 AM on August 13, 2002

mostly, what the bushies call "leadership" is just a confidence game. and over time, that kind of leadership will get its butt kicked by reality every time.
posted by quonsar at 8:13 AM on August 13, 2002

what do you suggest?

I don't know, invest for the long term and diversify by buying bonds and maybe gold as a hedge against risk? There are other options, although the dogma is that over thirty years you will get a 10% average rate of return on your investments. That doesn't mean you can just sit back and watch it happen, you have to manage things carefully. Why don't you ask a financial advisor? Maybe its not wise to put everything in stocks and just hope for the best.
posted by insomnyuk at 8:21 AM on August 13, 2002

I'd love to have a financial advisor--I can't afford one! Are there any pro-bono ones?

I predict Ralston-Purina stock will be going way way up in 30 years though
posted by amberglow at 8:30 AM on August 13, 2002

7 trillion dollars lost? What? Where the hell did he get that number?

insomnyuk, all you have to do is look at the market capitalization for all stocks from a couple years ago and then compare it to today's total market cap and you'll see the trillions lost.
posted by zoopraxiscope at 8:36 AM on August 13, 2002

amberglow, save your money since financial advisors in the years 1998-2000 would have advised you to put your money into Internet and biotechnology stocks. After all, those industries had already grown so much that they were practically blue-chip investments. Believe it or not, those guys and the financial press were the ones advising people to put their life savings in the stock market since the long term performance of stocks was such a sure thing.
posted by rks404 at 8:36 AM on August 13, 2002

got any response to the reality of the situation, you two? or just conservative snark?

Classifying my "snark" as conservative both misses the point and is largely incorrect. My point is twofold. First, the president of the largest union presence in the United States and one of the largest lobbying groups on capital hill is not any less partisan or more objective than the group of businessmen Bush has assembled for his summit. Second, the group of assertions made by Mr. Sweeney are largely unsubstantiated and oversimplify a complex economic situation.

However, I will say that that the one redeeming feature of the article is, ironically, that it doesn't propose a particular solution. If it did, that solution would predictibly be based around stretghening union bargaining power and limiting the economic freedom of corporations and those that run them. Rather, Mr. Sweeney merely points out that there are problems with the economy that he predicts will not be discussed at the forum.

Mr. Sweeney's article, however, is largely distracting and shifting the focus away from the "summit." Mr. Sweeeny asserts that the forum is designed to reassure Americans that the fundamentals of the economy are sound. However, another article in the Washington Post suggests that this is not the case. Rather, "[c]onfronting increasing signs of a dimming recovery, President Bush will use the campaign-style forum he is staging tomorrow to try to convey concern for people who are hurting and impart a sense of urgency about the economy, his aides said. That marks a shift of emphasis from his usual argument that the economy's fundamentals are sound." (emphasis added)

Further, Sweeney implies that the issues he discusses will not be addressed at the forum. However, he shows no reason to think that this will be the case. In fact, the same article linked above states that the Bush Administration is rolling out a new approach to finding an economic recovery based on a four-pronged "mantra": "The president's economic agenda invests in individuals by creating jobs, expanding opportunities to save and invest, providing a good education, and helping each American own part of the American dream." It seems to me that the forum is intended to address unemployment, education and savings, all issues that Sweeney says will not be addressed.

Sweeney's article is an attempt to distract from the forum and criticize the President for what he sees as complicitly in our current economic woes. However, without any substantive argument, the article is just more partisan blustering. I don't care for Bush, but I certainly wouldn't want to be under the thumb of an entrenched union leader, either.
posted by monju_bosatsu at 8:36 AM on August 13, 2002

The writer is president of the AFL-CIO...
... and his credibility went right out the window.
... and his credibility went right through the roof!
But thanks for sharing your bias anyway. Care to explain such ad hominem slander and invective towards a respected leader?

So, now that those "points" have been made, I have some questions that perhaps ( I hope) could promote the dialogue toward more beneficial ends:

Would some real discussion of these issues have been so bad?

Isn't public discussion and consensus how our form of government is supposed to work?

Isn't the keynote speaker a prime example of what is wrong in corporate America today?
posted by nofundy at 8:36 AM on August 13, 2002

dr_dank: Then why is the Bush administration still pushing for partially privatizing Social Security? Why is the market still sold as the solution to all problems by certain politicians and their business friends? Why were almost all secure pension programs replaced with far less certain 401Ks, etc., regardless of what the average American with little market knowledge thought? You get a "sorry, no sympathy there" when things don't quite goes as planned or, more accurately, sold by elites and leadership? What a deal.
posted by raysmj at 8:38 AM on August 13, 2002

thanks rks--You said exactly what I meant...I'll send you a check...

Would it have been hard for Bush to invite maybe one democrat to this forum?
posted by amberglow at 8:41 AM on August 13, 2002

Believe it or not, those guys and the financial press were the ones advising people to put their life savings in the stock market since the long term performance of stocks was such a sure thing.

believe it or not, long-term means a lot longer than just a couple years.
posted by zoopraxiscope at 8:44 AM on August 13, 2002

... and his credibility went right through the roof!
But thanks for sharing your bias anyway.

Ditto. Cheers. At least its interesting to see how different our perspectives are.

Isn't public discussion and consensus how our form of government is supposed to work?

Well, it's a democratic republic, so I would agree that public discussion is important. This summit is public, not behind closed committee doors in Congress. The media will be there. People can discuss it in their local and national media outlets, including print, tv, and web-based, where a huge variety of opinions are aired. Look, Bush is first and foremost a politician, what did you expect him to do, invite Castro's chief economist to the party? Of course he is going to control who goes. The goal of citizens is to spark discussion about the issues (as you have done), not just Bush. He designed it more as a cheerleading session than anything else, methinks.

As for 'consensus' being the way government works, well, our system was based on a little more than simply 'majority' rules, at least before 1865 and Jacksonian democracy before that. So you are right, that seems to be the way things work today, but I don't think thats how it ought to be. Minority opinions are certainly not well respected when things are based on a democratic system of consensus, IMO.
posted by insomnyuk at 8:54 AM on August 13, 2002

zoo, I never said that long-term was only a couple of years. I was repeating an argument used by financial advisors and the financial press to talk people into investing their life-savings in the stock market. I believe that the fact is correct that over thirty years there has been an annual growth around ten percent. My point is that this fact was not relevant to people who are retiring soon and will not be in the market for the next thirty years. To put it bluntly, a lot of people were given bad advice and now we have an attitude that the current economic troubles are their own fault despite the fact that they worked hard and saved and invested according to advice they were given.
posted by rks404 at 8:56 AM on August 13, 2002

Would some real discussion of these issues have been so bad?

I fail to see why there couldn't have been discussion at this forum. Sure, it might be slanted towards the conservatives, but then again, we do have a conservative administration. Perhaps this forum can spur smaller forums in your own community to see what can be done at a local level to protect community assets and local businesses. Why does Bush have to roll out a complete solution all at once?

Isn't public discussion and consensus how our form of government is supposed to work?

How is the forum circumventing that? I'd like to think that this forum, however skewed, is better than Cheney sitting with Enron officials behind closed doors determining energy policy.

Isn't the keynote speaker a prime example of what is wrong in corporate America today?

Who's the keynote speaker? If you mean Bush, then probably. Unfortunately, he's the President we've got to deal with, so at least listen to what he has to say, and thoughtfully suggest changes. Railing that he has made some shady and/or poor business decisions in the past doesn't mean that we can demand that he sit this one out. He is the President, after all. We can, however, demand accountability. Shouting about how he's a crook, however, is just going to further polarize the political camps and decrease the likelihood of a meaningful solution.
posted by monju_bosatsu at 8:56 AM on August 13, 2002

rks, i'll certainly agree that the advisors and the press were complicit in doling out some bad advice to some people. but i also believe that individuals need to take some responsibility of their own for decisions they make. a couple hours worth of independent reading on how markets work should be enough to teach anyone close to retirement that being heavily in stocks at that point in your life is a bad idea. but those double digit annualized gains looked so tasty.....
posted by zoopraxiscope at 9:02 AM on August 13, 2002

and monju, i think the keynote speaker referred to is Cisco's John Chambers, the poster boy for not expensing stock options....
posted by zoopraxiscope at 9:03 AM on August 13, 2002

Thanks zoopraxiscope. I managed to miss that in the article that was linked to. I think the comment I made above regarding Bush is just as applicable in this context. So what if the keynote speaker is a doorknob. Sure, it would be nice to have someone a little more objective speaking, but what do you expect from what is largely a partisan event? My point is that even if you don't like what is being said at the summit, make a substantive response. Pointing at Bush and yelling "Partisan!" at the top of your lungs doesn't help anybody. This summit should spark discussion among communities and help create "a sense of urgency," as the Bush adminstration put it, about the economy.
posted by monju_bosatsu at 9:20 AM on August 13, 2002

I predict Ralston-Purina stock will be going way way up in 30 years though.

Just a little bit of cat food each day and when you retire
it won't be such a shock.
posted by larry_darrell at 9:24 AM on August 13, 2002

zoo, I agree - personal responsiblity is what our country is all about. But no amount of reading and research can shield you from a massive downturn. Very smart people have lost sizable amounts of money, there simply are no guarantees.

For me, the biggest problem is that we were lied to, not only by the financial press, but the companies themselves, as in the book keeping of Enron and WorldCom. What good is doing your research when all the data is false? My cousin did a financial analysis of Enron in India and his conclusion was that there was no way that Enron's operations could fail. He stands by this decision, based on the information he was working with at the time. Of course, now we know that that information was completely false.

The problem is that, on a fundamental level, if people cannot trust the companies or the markets, than they will not invest. Right now, there is a massive distrust in our leaders and personally, I don't think we are seeing anything that will restore that trust.

Monju, as you suggested, I'll be making a "substantive response." In 2004, I'll be voting Democrat.
posted by rks404 at 9:26 AM on August 13, 2002

rks404: Don't wait! It'll feel good in 2002 too!
posted by hackly_fracture at 9:28 AM on August 13, 2002

Monju, as you suggested, I'll be making a "substantive response." In 2004, I'll be voting Democrat.

rks, I don't blame you, and depending on the candidate, I may be doing the same thing. You have to take it one step further. You can't just vote Democrat because you don't like Bush, there has to be a reason. Bush is the scapegoat now because he's in office, but are the Democrats any less to blame, or any more clean? I submit that the Dem's aren't interested in corporate responsibility because of any good reasons, they're interested because they beat Bush around the head and neck with it. Where are the counter proposals?
posted by monju_bosatsu at 9:31 AM on August 13, 2002

Would it have been hard for Bush to invite maybe one democrat to this forum?

Appearantly it wasn't.
posted by revbrian at 9:32 AM on August 13, 2002

Why vote at all? It might not matter. I'm not voting unless I'm here.
posted by insomnyuk at 9:37 AM on August 13, 2002

Okay, allow me to make several points. First, I think most people will concede that O'Neill was a better CEO than a Secretary of the Treasury. Second, the bias of the writer is not a problem as long as you understand it is there. It's an editorial for crying out loud! Nobody ever presented this as objective news! Third, the author merely asks whether these issues will be addressed: "But will it focus on the fundamentals that working families live with every day?" Finally, there are as many viewpoints on asset allocation ("diversifying your investments", if you prefer) as there are financial advisors. Not that long ago, Charles Schwab's book on managing investments said that the majority of your holdings should be stocks, and there were few reasons to buy bonds. My, have times changed! Simply "saving" has never been considered enough by anybody who has thought about it more than ten minutes, inasmuch as the interest rate on a savings account almost never keeps up with inflation. Yes, there are people who made imprudent investments. There have always been such people, some say they have always been the majority, and this is why Social Security exists.
posted by ilsa at 9:38 AM on August 13, 2002

rks, i'll grant you that certain companies did misrepresent their numbers, and the losses in these areas are unconscionable (and those who caused the damage should be held accountable). but enron and worldcom are not the market--there are plenty of companies out there that are run quite right and are still getting carved up. i myself have lost plenty of money in the markets of late, but for the most part i don't believe that the losses are anything but a standard retrenchment that follows a long running bull market. the confidence problems now are very real, but i feel like they'll work themselves out in the long run. but then again, my time horizon when i started investing during the 90's was 30+ years, and i don't really pay that much heed to these swings as they happen on a day to day basis. *shrug*
posted by zoopraxiscope at 9:40 AM on August 13, 2002

who pays for this crap? (as if i didn't know.) the entire bush presidency is a set piece. the guy is out to lunch. so is anyone who supports him. (IMNSHO).
posted by quonsar at 9:53 AM on August 13, 2002

Clueless in Crawford. "The Waco economic forum proves that the Bush administraion still doesn't get it."
posted by muckster at 10:09 AM on August 13, 2002

"There are 11.5 million children in poverty"

I would like to see how a union boss defines 'poverty' in America. Anyone not getting a union wage? I'd just love to see his statistics on this.

Only somebody who's never been poor, never really known poor people, and is not paying attention to what's happened to the bottom third of Americans over the last 30 years could drop such a snide, uninformed comment.

The official definition of poverty - and this figure more-or-less accurately represents the number of kids who fall into it - is an extremely poor life by the standards of anyone on this list. I have no problem with you and I disagreeing about how best to lift up the prospects of poor people, but denying their existance is wrong and, frankly, assinine.

As far as seeing the statistics, DHHS, HUD and the DoC all have this info posted online, or you could check out the Economic Policy Institute's info. but I'd recommend taking a glance at the work of journalists like Barbara Ehrenreich or Katherine Boo if you want to really understand what being poor in America is like these days.
posted by AlexSteffen at 10:10 AM on August 13, 2002

never really known poor people

This is the typical liberal statist assumption about anyone who disagrees regarding the problem of poverty, that anyone who objects to their line of dogma 'doesn't really know poor people'. For me, that is not true. Your argument reeks of trying to claim the moral high ground and automatically restricting it to only people who agree with you.

I recognize that there are poor people, even in America (though compared to the rest of the world they are doing fairly well). I'm merely trying to determine exactly what is the definition of 'poverty' that the union boss is using. Of course it would seem extremely poor to someone who hasn't lived it, but I have seen many poor families below the official poverty line receiving food stamps and welfare who have plenty of food and television, for example. I would like a concrete definition. When is a child poor? Why just the children? Aren't most of them in families? What about the families? This is as silly way to measure poverty. Won't somebody think of the children!

Running short-term deficits over the next couple of years, however, can help to stimulate the economy and create more jobs. - Economic Policy Institute

Sorry, I have to simply discard their Keynesian Macroeconomic theories out of hand.
posted by insomnyuk at 10:21 AM on August 13, 2002

You can't just vote Democrat because you don't like Bush, there has to be a reason. Bush is the scapegoat now because he's in office, but are the Democrats any less to blame, or any more clean?

Actually, it seems pretty reasonable to vote Democrat simply as a vote against Bush. It is reasonable to assume that if the Democrats are elected with a mandate to reform corporate practices, then they will need to follow through in order to be re-elected. Discussing who is clean and who is to blame is entertaining, but ultimately pointless.

I submit that the Dem's aren't interested in corporate responsibility because of any good reasons, they're interested because they beat Bush around the head and neck with it.
I honestly don't care if their hearts are into it as long as they do a good job of working the issue because it is an issue that I care about. I do find it interesting that you are criticizing them for a lack of moral purity in their purposes - it seems a little odd to me since you seem so pragmatic about everything else.

zoo, yes Enron and Worldcom aren't the market, but when you add Adelphia and Tyco and the current furor over accounting standards it does seem a bit much. I think that some part of the current downturn is due to the fact that there is a great deal of uncertainty and doubt as to where the next investigation in book-cooking is going to take place. It is in the interests of American capitalism to squelch these types of shady practices as quickly as possible so that investors can have confidence in the market. I agree that the market will recover and confidence will return, but only because there will be strong actions against these companies.
posted by rks404 at 10:21 AM on August 13, 2002

Guys, zoopraxiscope is right. Nothing, but nothing beats the stock market over the long term, which means more than ten years. Even if you had bought the DJIA at the worst possible moment in the past 100 years, at its highest point just before the 1929 crash (which was far worse than anything we're going through today), your investment still would have been profitable by shortly after 1940, little more than 10 years. And very, very profitable if you had held it until retirement 20 years later. Over a person's working lifetime, common stocks do better than gold, better than bonds, far, far better than Social Security. But you have to buy and hold, and diversify. Don't put 100% of your retirement capital in one company, for god's sake, no matter how good you think Enron is. Buy indices, they do better than 90% of all managed mutual funds. Buy some more with every paycheck. Don't try to time the market, unless you work in the securities industry and that's your life's work.

This stuff is not difficult to understand, and it's very well known. The tough thing is the discipline to carry it out over a lifetime, and not follow the siren song of the latest hot mutual fund or advisor or technical trading scheme.

And as long as I'm ranting: Sweeney is just demagoging this. 'corporate crime wave'? How many companies fudged their books during the Roaring Nineties? A handful of failing telecoms and Martha Stewart? Out of 30,000 traded companies, and tens of thousands of more privately held companies and small businesses?

Why is everyone dismissive of Sweeney? Because this piece is just special pleading. Because Sweeney runs a business, the AFL/CIO, bigger and more powerful than any other in the country, and like every other businessman, he's always looking for some way to get the government to pass regulations that favor his business and hurt his enemies, non-union workers and businesses that aren't unionized. This opinion piece is yet another attempt to spin public opinion his way.

You want crime wave, Mr. Sweeney? Take the Teamsters, please. Take the Philadelphia roofers, who bribe judges to let their thugs off when they beat up non-union roofers. Take the Carpenters, the Laborers, and the Electricians who are currently killing the new Pennsylvania Convention Center in Philadelphia. Sorry, Kettle, can't hear you, Mr. Pot is yelling too loudly.
posted by Slithy_Tove at 10:39 AM on August 13, 2002

Sorry, I have to simply discard their Keynesian Macroeconomic theories out of hand.

Can you elaborate or was this an intentional troll?

It appears to me that Keynesian economics is making a very strong comeback today what with supply siders "deregulation is good" theories taking a beating for not including the natural greed of those who have wealth. The old trickled down upon theory is the one that should be discarded "out of hand" I would think.
posted by nofundy at 10:49 AM on August 13, 2002

Silthy-Tove: He is the leader an umbrella organization of unions. A union is not a business, unless we're now living in a parallel universe or something.
posted by raysmj at 11:01 AM on August 13, 2002

"While no one bats a thousand in politics, it's actually difficult to think of one thing the vice president has been responsible for that has not ended in muddle or disaster. Yet his reputation for competence has survived." - see Quonsar's link above

You know, I've been asking this question for a while about Bush. I think the answer is that Bush and Cheney are deemed competent because they are achieving their goals which are: a) returning favors to major industries (oil, weapons, pharmaceuticals, and cars), b) stalling/sweeping issues under the rug (see Enron, Halliburton, the deficit, Bush family ties to the Bin Ladens, alternative motives in Afghanistan and Saudi Arabia (OIL, OIL, OIL!) Florida - and I mean the police forces harassing black neighborhoods, the private screening companies throwing out a few thousand black votes, etc., NOT the supreme court, which is lame but fair in our system, as is the fact that his brother is governor) and finally c) keeping the system that allows the rich to get richer and the poor to remain poor in place.

How can you say that they are incompetent when all of these goals are being met with flying colors? I, for one, knew that Bush and co didn't give a shit about the state of the nation since long before he became president, and I think a lot of the people that voted for him or helped him pay for poor votes with advertising were more interested in their own financial situation than the well-being of the United States. In fact, I have spoken with quite a few rich people who told me exactly that.

It's really not much different than any of the governments which we condemn as tyrannical; you just have to get the rich and powerful on your side by paying them off, and the rest of the country can fuck off
posted by zekinskia at 11:10 AM on August 13, 2002

I don't think the AFL/CIO and its member unions are a business, they're much more like a mafia type crime syndicate.
posted by insomnyuk at 11:14 AM on August 13, 2002

"Running short-term deficits over the next couple of years, however, can help to stimulate the economy and create more jobs. - Economic Policy Institute

Sorry, I have to simply discard their Keynesian Macroeconomic theories out of hand."

insomnyuk

Um, if you want to disregard reality feel free ...

Or, you might think following this macroeconomic advice is bad policy because although it creates jobs in the short-term, it crowds out investment, etc., and raises infaltionary pressures. (Not that I would necessarily agree, but that would be the argument)

In the latter case, sorry for the misunderstanding.
posted by JKevinKing at 11:25 AM on August 13, 2002

I don't think the AFL/CIO and its member unions are a business, they're much more like a mafia type crime syndicate.
simple parity with the big corps, my friend!
posted by quonsar at 11:36 AM on August 13, 2002

I said: I submit that the Dem's aren't interested in corporate responsibility because of any good reasons, they're interested because they beat Bush around the head and neck with it.

rks said: I honestly don't care if their hearts are into it as long as they do a good job of working the issue because it is an issue that I care about. I do find it interesting that you are criticizing them for a lack of moral purity in their purposes - it seems a little odd to me since you seem so pragmatic about everything else.

I'm not criticizing their moral purity, although perhaps I could do that as well. I'm saying that we reflexively vote for the opposing party when the previous party screws up, assuming that the opposing party will do something about our particular issue. My point is that I don't think that's the case. Rather, Dem's will run on the corporate accountability platform, get elected, and then do absolutely nothing.
posted by monju_bosatsu at 11:37 AM on August 13, 2002

Or, you might think following this macroeconomic advice is bad policy because although it creates jobs in the short-term, it crowds out investment, etc., and raises infaltionary pressures.

That's just part of my problem with Keynesian macroeconomic theory.

Lord John Maynard Keynes’ posited the idea that the intersection of the aggregate supply and the aggregate demand curves is where the resources of an economy are fully employed. His entire theory is based on the assumption that Gross Domestic Product can be accurately measured (using the Consumer Price Index) and then used to ‘fine tune’ the economy through a central government authority. If the output level (aggregate supply curve) does not meet the aggregate demand curve¹ then there is unemployment, which is how Keynes explained the continued Great Depression: the economy’s equilibrium GDP was simply not meeting a level of output which would achieve full employment. His solution was to somehow raise the aggregate demand curve, which is composed of four elements: consumption, investment, government spending, and exports minus imports. While the effect of exports minus imports on aggregate demand is negligible, consumption makes up about 70% of an economies aggregate demand. Consumption is simply the demand for consumer goods, anything bought and used by an end user. Investment demand is the demand for capital goods, things used to produce other goods. This accounts for such things as machines, equipment, property, buildings, and inventories. The last part of aggregate demand is the demand for government goods, meaning any goods or services demanded by the government, anything from school supplies to sensitivity training to nuclear missiles. If you can increase any of the three main forms of demand, then the aggregate demand will increase, leading to a rise in the equilibrium GDP, according to Keynes.

Keynesian economists believe that fine-tuning can be used to bring an economy out of a recession, and this entails using government to manipulate and change monetary and fiscal policy. In the case of fiscal policy, increasing government spending or lowering taxes(yes, Bush is a Keynesian) are the two primary options. The goal of each policy method is to increase aggregate demand. The idea behind increasing government spending is simple, if you accept the aggregate demand model: increase government spending on literally anything, and you will increase government demand, which will in turn raise aggregate demand, helping to increase the equilibrium GDP. In the case of taxes, if the government lowers taxes, then people have more money, which they can spend, raising consumer demand, leading to an increase in overall aggregate demand. Of course, Keynes is assuming that if the government gives people their money back, they will not save it but spend it immediately (an activity he promoted).

The problem with his theory is that the GDP cannot be accurately measured with only the consumer price index, the best we have are estimates. I also don't understand how true full employment (the goal of Keynes' ideas) is possible, especially because the number of unemployed is only measured by those actively seeking jobs (which makes unemployment statistics problematic).

The problem with putting it into practice is that it does artificially increase demand for a short time, leading to a quick boom, because the sudden increase in spending by the gov't. or private citizens leads firms to believe there is more money in the market to be had as indicated by this false, increased demand. They invest more, spend more, and then when the demand goes back down to normal, they are stuck with an excess in supply. Prices drop to meet the normal demand, and the market trips (see the dot com crash for an example of how inflated demand led to foolish investment in useless capital by lots of people) and falls. The net result? Less employment. Ironic, isn't it?

Keynes is really promoting a boom and bust cycle of economics which eschews any savings and promotes only spending. Now if you look at American economic policies over the last 50 years, you will recognize most politicians (liberal or conservative) are Keynesians. Its easier to get elected in the midst of a boom, and then blame your opponents when the bust inevitably hits. Plus, printing free money is always fun.
posted by insomnyuk at 11:58 AM on August 13, 2002

(Oh, and please bear with the simplified explanation, I just hope its the easiest way to explain an economic theory without any numbers or equations, which I do despise)
posted by insomnyuk at 12:00 PM on August 13, 2002

Monju, I'm not quite sure what you are saying. My point is that I will be voting on the issue and not the people. I don't identify with either party and care more about issues than party ideologies.

Why do you assume the Dems will do absolutely nothing? If they are elected with a mandate for corporate reform, then they will be motivated to do something sheer self interest. If they don't follow through, then I'll vote for someone else in the following elections.

I'm not blaming Bush. I don't care whose fault this is. All I want is someone who will bring about serious reform. As far as I can tell, Bush is not the man to do that so I ought to vote for someone else.
posted by rks404 at 12:01 PM on August 13, 2002

Insomnyuk,

You must have gotten an A+ in Macroeconomics 101! I'm so impressed that you have it all figured out!

Since, according to your post, American economic policy has promoted boom and bust cycles for the past 50 years through Keynsian policy, which you have covered in so much depth, the economy must have suffered incredible boom periods followed by deep depressions.

I mean, surely, before the current economic policies the economy must have run relatively smoothly, with periods of economic growth followed by relatively shallow recessions, especially compared to the last 50 years or so. I mean, back in the day we had "recessions"; now, we have "panics" and "depressions."

But, damn it, now that the government absorbs the shock of the business cycle through running deficits, we go through severe business cycle downturns every 10-15 years or so!

Oh, wait, um ...
posted by JKevinKing at 12:10 PM on August 13, 2002

Oops, sorry to blast a simplified explanation before seeing the disclaimer.
posted by JKevinKing at 12:14 PM on August 13, 2002

That's ok. Also, obviously we aren't purely on a keynesian economic system, the market has been stable enough to sustain a generally upward trend for the last 50 years, and the changes in the market aren't always related to government policy.
posted by insomnyuk at 12:20 PM on August 13, 2002

And I've never taken Macroeconomics 101, though I plan to...
posted by insomnyuk at 12:24 PM on August 13, 2002

When is a child poor? Why just the children? Aren't most of them in families? What about the families? This is as silly way to measure poverty. Won't somebody think of the children!

Well, childhood poverty is measured because it's crippling. Children born in poor families are less likely to survive to adulthood, much more likely to wind up in jail, more likely to have lifelong health problems, much more likely to attend terrible schools (and less likely to be able to read well, much less graduate), more likely to be abused (and thus more likely to become abusers in turn), more likely to get addicted to drugs or alcohol, more likely to be the victims of crimes, and increasingly less and less likely to make it into the middle class as we traditionally understand the concept. And I think no intelligent, fair person would describe their terrible situation as their fault. Most would agree that simply on moral grounds it's indefensible to let kids grow up facing odds like these.

But even many people who can't find it in their hearts to care about what happens to poor people - hell, even most of that small minority who think it's clever to make comments like "Won't somebody think of the children!" about the plight of desperately poor kids - understand that letting children grow up poor is a terrible investment from a public-policy standpoint, as all of these problems are vastly more expensive to deal with after the fact.

That's why childhood poverty is measured. It's the least common denominator of intelligent social policy.
posted by AlexSteffen at 12:29 PM on August 13, 2002

Actually, Insomnyuk, market changes are almost never related to govt policy, IMHO. Also, I don't think it's a good idea to lower taxes or increase "spending" as a macroeconomic fine tuning device, at least through legislation. These are too blunt to apply, take too long to enact, and, as you pointed out, economic indicators are not exact enough to enable policy makers to enact the correct stimuli.

However, I do believe that the theory is valid in general, on a theoretical level. Fiscal stimuli can have a powerful effect on the economy. The problem is that such policies would be almost impossible to correctly pursue in real life the way they are portrayed in "Economics 101."

What I think is the right policy in this regard is what's called "automatic stabilizers." For those of you who might not know what I'm talking about, these are fiscal stimuli that require to action to move government spending & tax receipts in the right direction. For example, when economic output decreases, in general, more people become unemployed and receive unemployment insurance. This ameliorates the effects of lower incomes and pumps money into the economy that would not have been there.

On the other side of the tax/spending equation, progressive taxes have the same effect. As the economy slows down, individuals' incomes decrease, and they fall into lower tax brackets, lowering tax receipts. (Actually, this works for any taxing scheme, even a flat tax, but the effects are increased as taxes become more progressive.)

Automatic stabilizers don't stop the business cycle; they just make the downturns less severe. And, yes, I do believe that the general government entrance into the macroeconomy has led to a slight drag on long term GDP. However, I'm willing to pay that price for the greater general stability that the economy has shown. This stability allows the great majority of people to better weather the "storm."
posted by JKevinKing at 12:44 PM on August 13, 2002

Actually, I meant to write that they require NO action to move government spending and tax receipts, not they they require TO action to move government spending and tax receipts.

Also, as a footnote, another difficulty with fiscal policy is that whenever there is a period of growth, usually, tax receipts increase such that there is a surplus. Unfortunately, when we encounter a surplus, as we have seen, it is very difficult to pay down the debt instead of increasing spending or lowering taxes.
posted by JKevinKing at 12:51 PM on August 13, 2002

Another missing stat is wages for the currently employed.

And I would include benefits in this, since I personally know more and more people who are working without benefits like insurance and for fewer vacation days, etc.
posted by maura at 12:55 PM on August 13, 2002

"the system is just fine, it's just a few people that have done things wrong"

that was a quote on cspan from dick grasso, NY stock exchange chairman and ceo.

what exactly is their idea of the system? can the system not preclude people from doing things like this by making it non-super-profitable? why can't people see this as crap? let's have some root-cause analysis and see if we can actually avert problems in the future...
posted by rhyax at 1:00 PM on August 13, 2002

One more BTW: in the policy I have described above, which is implied and which I'll state explicitely here, when the government encounters a period of surplus, it should be applied to paying down the debt, not increasing prescription drug benefits in Medicare or lowering taxes. these decisions should be decided on their merits (keeping in mind their costs) and paid for accordingly.

If we decide that there should be prescription drug benefits in Medicare or an increase in military spending, we should increase taxes to pay for it, and if we decide there should be less taxes, we should cut what government spending somewhere.
posted by JKevinKing at 1:01 PM on August 13, 2002

Thank you for your posts jkevinking! It appears obvious to me that you truly know of where you speak. Perhaps I can condense this down now that I've read LOTS of input.

Running a country's budget should be a lot like running a family budget. Don't spend it if you ain't got it. Pay down debt first. Increased income should not necessarily translate to increased spending. Don't spend money on that new rifle if you have to borrow to do it. Base your budget on solid numbers. Benefits are good (personally I like ice cream with the kids at night) when you can afford them.

How's that?
posted by nofundy at 1:22 PM on August 13, 2002

Now if only you could get Congress to agree with you about spending money that way, many problems would be solved.
posted by insomnyuk at 1:36 PM on August 13, 2002

"Now if only you could get Congress to agree with you about spending money that way, many problems would be solved.
posted by insomnyuk at 1:36 PM PST on August 13 "

Amen!
posted by JKevinKing at 1:51 PM on August 13, 2002

A while back I quoted Gore Vidal to the effect that politics is all about collecting & spending money, and a whole bunch of you jumped down my throat (he didn't say anything on the how). Seems like you arrived at the same conclusion now. I like the family analogy. Seems like in our case, the family is run by a drunkard who spends it all at Moe's tavern, throwing rounds for his buddies Dick and Kenny, and what's left is claimed by the doddering uncle with the gun fetish who can't stand the new neighbors. Mom's groceries, the sick brother, and the kid's lunch money get short thrift.
posted by muckster at 2:01 PM on August 13, 2002

insomnyuk: Enjoyed your explanation of Keynesian economic theory. I do think that you left out the significant effect of monetary policy on the consumer spending habits in the equation. (Although perhaps Keynes also did not consider it.....I am not an economist.)

We know that the main control and throttle on the economy in the last 15 years has been with respect to monetary policy. All the talk of tax cuts and government spending is fine, but money supply I think is the bigger factor. People will save their money if the risk is better than an investment, will invest if the risk is better than saving.

I would also note that productivity is a key component of GDP that cannot be ignored.
posted by Odi et Amo at 2:06 PM on August 13, 2002

Possibly a little off-topic, but strongly related to the economy, the Bush administration, and most of all to corporate power, how many people realize the implications of the Free Trade Agreement of the Americas (FTAA), shortly to be signed into law? It will allow corporations to sue states for enacting legislation that impacts (in their words, "expropriates") corporate profits. Any local or state law that impedes profit maximization will be open to challenge as a "trade restriction".

To me, there seems to be so many things wrong with this it's dizzying. Why isn't this all over the news?

I'd love to submit this as a front page post, but alas, I'm still a newbie. MeFi-ites, take up the cause!
posted by ticktockman at 5:40 AM on August 14, 2002

Odi et Amo: you're absolutely right that monetary policy is the biggest club the government uses to try and affect the economy.

While the Fed, in an arcane sort of way (I don't know exactly how it works), can suggest interest rates from Greenspan's office, the preferred way is by tightening or expanding the money supply. If they want to increase the money supply, they just buy more bonds from banks, who then lend out more cash, increasing short term demand (like in the example I provided above). To decrease the money supply, they sell bonds. Money is a commodity just like anything else, and interests rates correspond quite well as prices. The more money on the market, the lower the interest rates, and vice versa, or so the Keynesian theory goes (it's been a while since I looked at this). But in reality, when the government throws more money out there, it makes existing cash less valuable, and causes havoc in the market (inflation), especially by destroying peoples' savings.

It's analagous to the story of Jack and the Golden Goose. Every family in the village has one golden egg, and they use part of it to buy groceries every week. But Jack and his mother have a gold laying goose, so they lay dozens of golden eggs, and start spending them at the grocery store. The store sees all this extra cash on the market and responds by raising money. This isn't a problem for Jack though, he can just get his goose to lay more gold. He does. Now all the shops in the village raise their prices accordingly. Soon enough, Jack is the only one who can buy anything, because gold is now relatively worthless. This is the problem with the government being able to print money and buy bonds at will. Everyone else lives off of a fixed or relatively stable amount of cash, but not the State.
posted by insomnyuk at 7:26 AM on August 14, 2002