Saturday, April 28, 2012

An Interesting Idea From a Dubious Source

Much of the talk on the econ blogs I follow revolves around the idea of a Job Guarantee (JG). This is an idea deeply imbedded into the MMT macro view. Some say its a necessary component and that "You are not an MMTer if you dont endorse the idea". Others are less dogmatic about it but it cant be denied that full employment, defined as anyone who wishes to earn an income is able to, is a primary goal of the MMT macro view. The other part of the trick is price stability though and the macroeconomists within the MMT school argue that price stability is best achieved by a wage anchor. The design of a JG can run anywhere from a fully federally controlled "make work" type program to a subsidy of private businesses at whatever level is necessary to "hire" everyone.  The common denominator in both ends of the spectrum is recognizing the reality that the govt, as currency issuer, can fully fund a full employment economy. There are tradeoffs in every system but there is no saying "we dont have the money to do this". Thats a huge hurdle for a large portion of the population. Many believe the govt would run out of money if such a venture were tried.

 One idea that has been offered involves an income guarantee, payable through a paypal debit card account. Here is the originator of the idea (as far as we know, the originator) Morgan Warstler;

  Using a clone of Paypal and Ebay platforms, the US govt. should establish a Guaranteed Wage of $240 per week. Anyone who wants to work registers, receives a Debit Card,and each Friday has their GI deposited. All recipients have their labor weeks auctioned online. Bidding begins at $40 per week ($1 per hour). Bid increases by .50 cents per hour ($20 increments). Recipients keep 50% of the top bid, if they take it. If they opt for a lesser bid outside certain boundaries there are penalties (fraud measure). Recipients cannot be made to work outside a radius of a couple miles. Bidders must deposit money into system before they bid. They must accurately describe the job. Feedback will be given both ways. If you are familiar with Ebay, you understand what this accomplishes. There are no taxes paid, there are basic workplace protection requirments. Umbrella insurance is sold on site for folks bringing labor into their home. Expect 30M to register so approx $345B is our cost assuming 30M are auctioned at $1 (The govt. is picking up $5.50 and bidders are in for $1) At an avg. bid of $4 per hour, avg. worker is making $8, and the govt. is spending $250B a year. There is no more UI. There is no more minimum wage. That’s why there are 30M in program.

I would have to say that normally I would be 75-100% behind the idea. Its simple, it allows choices, there is a lot of bottom up thinking to it, the framework for it is in place already and I do think many people on both sides of the spectrum could get behind it. My primary reservation is knowing who came up with it. Not that I really KNOW Mr Warstler. He's as anonymous to me as Arthur Shipman or Mike Sax, guys on the internet I talk to with my keyboard. I wouldnt know any of these three if they walked in my house but I have read a lot of what they have to say on the sites I visit. I feel like I know them and know what kind of people they are. Mr Warstler is NOT good people, as they say.

First off Morgan is a fan of and I think a contributor to the late (yea!!) Andrew Breitbarts site. I'm not sure who is (was) a more despicable person, Breitbart or Limbaugh. Its close. So anyone who contributes to anything that guy did is only making the world worse. Not that bad people cant come up with good ideas, and vice versa, but in general I prefer ideas that come from people who at least seem to not be psychopaths.

 Turns out Im not the only one who thinks Morgan Warstler reads like a toxic personality. Here is Raul Groom at "The Vanishing Dollar":

  As many who read this blog (if any section of this blog's readership can be usefully called "many") probably already know, there is a person out in Internet-land who calls himself Morgan Warstler. He's a blogger for the odd, ugly, and mostly useless righty politics site Big Government (full name: "Andrew Breitbart presents Big Government featuring editor in chief Mike Flynn," and no I am not making that up). He's a gadfly on several well-known economics blogs including Scott Sumner's The Money Illusion, but most of my dealings with him have been at Yglesias' place over at ThinkProgress. All in all, the guy is a nutcase, and I really don't recommend listening to him, reading him, or talking to him at all. It will just make you angry and confused. That said, the Warstler may well be a genius. He's fallen in with the wrong people and has couched his policy recommendations in politically toxic, morally bankrupt packages. But the man is onto something. I know, I know. Forty-two loyal Yglesias fans (the entire readership of this blog, sadly) just threw up a little in their mouths. But Morgan's Guaranteed Income plan is sort of on to something. I'll explain later. Just wanted to warn you, sort of an econ version of the "trigger warnings" on sites that focus on social issues. I will be taking up a lukewarm defense of Warstler this week. Consider yourself on notice.

Dan Kervick, one of my favorite posters of late says; "I call Morgan Warstler a "Darth Vadar Marxist". Those are folks who seem to accept a whole bunch of Marx's theorizing about class warfare, but who then try to encourage everyone to join the dark side of the greedy capitalists"

 Obviously Ive made the point that I think he's a terrible guy, but he's also afflicted with some really poor economic thinking. He thinks the whole problem with our unemployment problem is simply too high of wages (Yes if we all made even less more of us would default at the debt levels we've achieved..... making the banks really happy then). He views the economy as a zero sum game where the only way someone who doesnt have something can get it is by depriving someone else of that thing (which would mean in his world the only way the "haves" got it was by getting it at the expense of the "have nots"....... try making the argument that the US is rich only because theyve made Africa, Mexico and Central America poor... I dare ya!). He also in one of his comments at someones site made the statement that consumption was "bad".  Bad? Tell that to the worlds manufacturers who are just looking for someone to consume their  product  How can something which is the other side of the coin from production be bad?  Putting a label on an economic variable like that strikes me as religious zealotry. Puritanic.

 Now all of this, again,is not to say that he hasnt hit on something quite good. He may very well have. I dont have large objections to it but whenever someone who thinks like an Austrian economist, is friendly to the likes of Andrew Breitbart and is smart (cunning may be a more appropriate description) I think one should look real hard at ANYTHING he proposes.

 Im pretty sure that over 90% of the time if Morgan Warstler likes it........ I wont.

Monday, April 16, 2012

Two Grinches

Politics is all about keeping your base supporters energized and ready to go to the polls for your party. You use the media to get out easy to digest messages, you have pundits who articulate these messages in various ways so they appeal to as many people as possible and then there are the think tanks that spend billions learning how to further manipulate people to achieve an end. Part of what you do is spend time pushing the positives of your team and part of the time its pushing the negatives of the other team. Its a back and forth and both parties in our system have enjoyed periods of rather sustained success due to their ideas being adapted at just the right time in history.

Democrats enjoyed success for most of my early life and it mostly started with Roosevelt and WWII. Our responses to the depression, a period of great pain for many that was seen as the end result of high finance run amok, were the cornerstone of democratic policies for decades. Protecting people by insuring their deposits (FDIC), making housing affordable via 30 yr mortgages (Fannie) and guaranteeing an income in old age (SS), were just a few of the important ways that average Americans were spared destitution if economic times turned real bad.

Republicans have enjoyed success from my college days onward. Mostly because they had the presidency when we fought off the inflation of the 70's and it was their policies which have been given credit. One of the strategies they have successfully used since that time centers around an idea by Jude Wanniski, a journalist/economist/author of that day, called the Two Santa Claus' theory.
It is described this way in Wikipedia;

"The Two Santa Claus Theory

The Two Santa Claus Theory is a political theory and strategy published by Wanniski in 1976, which he promoted within the United States Republican Party.
According to Wanniski, the theory is simple. In 1976, he wrote that the Two-Santa Claus Theory suggests that "the Republicans should concentrate on tax-rate reduction. As they succeed in expanding incentives to produce, they will move the economy back to full employment and thereby reduce social pressures for public spending. Just as an increase in Government spending inevitably means taxes must be raised, a cut in tax rates—by expanding the private sector—will diminish the relative size of the public sector". Wanniski suggested this position, as Thom Hartmann has clarified, so that the Democrats would "have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections"
The theory states that, in democratic elections, if one party appeals to voters by proposing more spending, then a competing party cannot gain broader appeal by proposing less spending. The first "Santa Claus" of the theory title refers to the political party that promises spending. Instead, "Two Santa Claus Theory" recommends that the competing party must assume the role of a second Santa Claus by not arguing to cut spending but rather offering the more appealing and publicly sellable option of cutting taxes.
This theory is a response to the belief of monetarists, and especially Milton Friedman[citation needed], that the government must be starved of revenue in order to control the growth of spending (since, in the view of the monetarists, spending cannot be reduced by elected bodies as the political pressure to spend is too great)[citation needed]. See also Starve the beast.
The "Two Santa Claus Theory" does not argue against this belief but holds that such arguments cannot be espoused to try to win democratic elections. In Wanniski's view, the Laffer curve and supply-side economics provide an attractive alternative rationale for revenue reduction: that under reduced taxation the economy will grow, not merely that the beast of the government will be starved of revenue, and that that growth is an attractive option to present to the voters. Wanniski argued that Republicans must become the tax-cutting Santa Claus to the Democrats' spending Santa Claus."

Interesting stuff. It seems to me that this strategy is blowing up for both parties. Now they are locked in a race to take away the least from their electorate. Both agree that something must be taken away but the what and the amounts differ. Now instead of being the "Two Santa Claus'" they are becoming the "Two Grinches". Whos brand of cutting will be most effective and appealing?

One of the things that may favor democrats is that they are more sincere in their beliefs that we must cut stuff. I disagree vehemently with austerity measures, knowing they are wrongheaded and based on a completely flawed paradigm of how govt financing works, but the democrats are more likely to be seen as sincere in their efforts to make things better. Republicans have shown that they are just about slashing and burning everyone elses stuff and keeping their stuff safe from harm. Unfortunately our politicians keep reenforcing the idea the populace has that the only choice we have is the least bad one.