Uncommon Sense

politics and society are, unfortunately, much the same thing

How a committed socialist gave up the faith

original article: The Bolivarian God That Failed
February 1, 2019 by Clifton Ross

The day after Venezuela’s National Assembly voted to declare its president, Juan Guaidó, interim President of the Republic, I received a text from a former friend. “If the U.S. topples Vz [Venezuela],” he wrote, “I will hold you responsible.” I would have been happy to accept this responsibility had I done anything important enough to deserve it. But the idea was absurd and he knew it. If the Venezuelan regime falls—and I hope that it does—it won’t even be possible to credit (or blame) the United States. It is the Venezuelan people who finally are taking their destiny in hand and rejecting an intolerable status quo.

The message was not a serious attempt to apportion responsibility for Venezuela’s current upheaval; it was an attempt to shame me for my treacherous betrayal of the Bolivarian cause. An early supporter of the Revolution, I had traveled to Venezuela in 2013 to cover the April presidential elections. By the time I returned to the US, I was disillusioned and depressed. I decided I needed to start writing and speaking about what I had seen there. In an article I wrote for the radical magazine Counterpunch around that time, I argued that “the so-called ‘Bolivarian Revolution’ is bankrupt: morally, ideologically, and economically,” and I asked what we, as leftist solidarity activists, should do in response. “Should we continue to make excuses for incompetence, corruption, and irresponsibility and thereby make ourselves accomplices?” I asked. “Or should we tell the truth?”

I had resolved to tell the truth. Having been so wrong about something so consequential, I felt it was the least I could do. By then, Venezuela was already in a terrible mess. Many of those I had helped to convince of the possibilities offered by Bolivarian socialism were deeply suspicious of the mainstream media and deserved to hear what was going on from a writer they trusted. But, as it turned out, the people I wanted to reach didn’t want to hear such things. And the people I asked to publish my articles didn’t much want me to write about them either. As a result of my voltafaccia, former comrades and friends contacted my editors and publishers in (occasionally successful) attempts to have my articles spiked. I was denounced and slandered online and in print. Phone calls and emails to people I had thought of as friends now went unanswered. On those occasions when I encountered one of them in public, they looked the other way. Abruptly, I found myself excommunicated, and people I’d known for 30 or 40 years made it clear that they no longer wanted to be part of my life.

*     *     *

I’d originally come to California from the Bible Belt in the mid-’70s in search of enlightened neighbors. I knew what it was to live an isolated life. It had been lonely on my father’s farm in Southern Oklahoma. I had endured farm life for five years but, having grown up in the military, I longed for the company of diverse, worldly-wise people one often found among military brats. Having become a Christian a few years before, I hoped Berkeley would offer a deeper faith than I’d found in fundamentalist churches.

I hitchhiked west and in Berkeley I joined the “radical Christian” community of the House Church of Berkeley that had grown out of Christian World Liberation Front (CWLF). From the margins of that community I gradually found my way, through liberation theology, into the secular Left. For nearly a decade I did solidarity work with the Sandinista Revolution until that process came to a halt when its “vanguard” Sandinista National Liberation Front (FSLN) was removed from power in the elections of 1990.

Following the collapse of communism, I ended up with the other “dead-enders” in Berkeley, scratching around in the depleted soil of radical politics for any worm of hope that might emerge. Those were desperate years. I soon hitched a ride on the Redwood Summer bandwagon, the joint IWW (Industrial Workers of the World, “Wobblies”) and Earth First! project to protect the last stands of old growth redwoods in Northern California from logging companies. I played a very minor role in that campaign, printing the flyers announcing the actions, but I was quickly drawn into working in the IWW. I was briefly an editor for the Bay Area Branch Bulletin and a co-editor of the Industrial Worker, and then I spent ten years in an IWW union job shop (New Earth Press) where my partner and I did a lot of ecological printing for local community organizations.

After we sold the business, I went to graduate school at San Francisco State University for a couple of very dismal years in academia. Then, after graduation, I spent the summer of 2004 in Nicaragua interviewing ex-Sandinistas who were now in opposition to the FSLN, the “glorious revolutionary vanguard,” which had been reduced over time to the status of a populist party serving the caudillo (strongman) Daniel Ortega. During the years of the Nicaraguan Revolution (1979-1990), I had translated and published the revolutionary poetry and writings of Sandinista militants—mostly farmers, low-ranking militia members, and even young children. As I was a poet, it seemed appropriate work to help spread the word about a process I found hopeful, and endangered by the hostile policies of the Reagan administration. I knew very little at the time of the Sandinistas’ responsibility for generating the war that would eventually tear their country apart. Most of us on the radical Left distrusted the media, and it was only recently that I returned to that period (in Chapter 11 of my 2016 memoir) to uncover details I had ignored during the years of that brutal civil conflict.

Foremost among the poets I’d translated during the years of the Sandinista Revolution was Ernesto Cardenal, a revolutionary priest and the Sandinista Minister of Culture. Cardenal and other “liberation theologians” were preaching a synthesis of Marxist revolutionary ideology and Christian theology, and they were my inspiration back then. By 2004, I no longer identified with Christianity, and my faith in Marxism was also in doubt. Nevertheless, I still considered myself some kind of socialist, and I thought Cardenal might be able to reassure me that there were embers of socialism still burning somewhere in Latin America. He duly obliged. Towards the end of our interview, when I asked him to name the projects in Latin America today which gave him hope, he didn’t mention (as I thought he would) the Zapatistas. “The Bolivarian Revolution,” he announced. President Hugo Chávez was doing some very interesting things down in Venezuela, he thought, and he encouraged me to visit and see for myself.

So, that December, eager to learn more, I flew down to Venezuela on Christmas break from Berkeley City College where I had been working as an adjunct English instructor. I immediately fell in with like-minded leftists in the small Andrean city of Mérida, who introduced me to a good part of the Bolivarian community there. I was so inspired by what I found that I decided to take a year off from teaching so I could follow the Bolivarian process first-hand.

It is as difficult as it is uncomfortable to enter into a previous state of mind from a later, more “evolved” or developed state. I don’t like to admit that I once believed Jesus rose from the dead, but I did. I also believed that socialism would make everyone brothers and sisters and end what my comrades and I called “capitalist oppression.”1 The available scientific and statistical evidence (not to mention common sense) weighs strongly against belief in bodily resurrection from the dead. History has delivered a verdict of comparable finality about socialism. This verdict is routinely dismissed on the grounds that only corrupted iterations of socialism have been tried; if socialism is designed to unite mankind, but all previous versions of socialism have failed to do so, then it follows that true socialism has yet to be successfully attempted.

Rarely do true believers stop to consider that there may be something wrong with the logic of socialism itself. In his 1993 book Post-Liberalism: Studies in Political Thought, the English philosopher John Gray wrote that Soviet socialism forced its subjects into a “vast Prisoner’s Dilemma, with each being constrained to act against his own interest and, thereby, directly or indirectly, to reproduce the order (or chaos) in which he is imprisoned. Thus Soviet subjects are compelled to compete with each other in climbing the rungs of the nomenklatura, pursuing the ordinary goods of life by party activism or, in extremis, by informing or denouncing one another, and so renewing daily the system that keeps them all captive.” These are not exactly optimal conditions for building community.

By 2004, I was already well aware of what Marxist-Leninist socialism had done to the twentieth century. So why did I fall for the socialism that Hugo Chávez proposed in Venezuela? The reasons were part push, part pull. The push came from the American invasion of Iraq less than two years earlier. After a rapid battlefield victory, the news from the Middle East seemed to be growing more dire by the day. A little over a month before I left for Venezuela, allegations began to emerge that the US military were committing war crimes in Fallujah. Surely a better way than this remained possible? As I wandered around Venezuela that December I was desperate for an alternative I could believe in, no matter how fragile.

The pull was what Hugo Chávez was proposing. He acknowledged the problems of  twentieth century socialism, and claimed to be offering something different—the Bolivarian version of “twenty-first century socialism.” This would be the “socialism with a human face” and quite unlike the repressive, totalitarian bureaucratic behemoth of Marxist-Leninism. As Chavista Gregory Wilpert insisted in his 2007 book Changing Venezuela by Taking Power, under Bolivarian socialism “ownership and control of the means of production must be collective and democratic.” Cooperatives were to play a large part in this and, after 2006, so would the local communal councils.

The money from the 2004 oil boom had saved Chávez from a recall referendum as he distributed the revenue flooding into the country among his followers. In this way, Chávez was able to fund his “revolution” from 2005 onwards. He ensured that the oil wealth would bypass the government, which he characterized as “corrupt” and (naturally) “counter-revolutionary.” Instead, money would be funnelled directly into a non-state-controlled corporate entity known as Fonden, the National Development Fund, over which, of course, Chávez personally presided. Fonden then parceled money out to cooperatives and the so-called “Missions” to the poor. During the oil boom, petroleum prices went from $10 a barrel to $100 and peaked at around $150 over the course of a decade. Given the astonishing amount of wealth generated, Chávez had a lot of money to throw at his pet projects. And, predictably, as the wealth trickled down, corruption increased since everyone had to get his or her piece of the patronage.

The cooperatives and community councils were among the many promising and inspiring initiatives dreamed up by Chávez in the early years of the boom. I witnessed these developments and documented them in my feature film, Venezuela: Revolution from the Inside Out. There really did appear to be great enthusiasm for these initiatives at the grassroots, especially as Hugo Chávez pushed them forward with massive funding. I quickly joined the chorus of supporters, first as invited poet to the Second World Poetry Festival of Venezuela in July 2005, then as a freelance (that is, unpaid) journalist for various left-leaning websites. When Chávez appeared on the scene, there were under 2000 cooperatives in the country. Once he came to power, that number skyrocketed to nearly 200,000, and I was there to document their ups and downs. I attended a few community council meetings and “political formation” training sessions, as well as a number of oil-funded projects like community kitchens, cultural events, and community development programs. It felt like something was really happening and that a fairer society was being built.

After the year I spent living in Venezuela (2005-2006), I returned as frequently as my schedule would allow, sometimes twice a year. Between 2008 and 2011, however, I became preoccupied with traveling across Latin America and conducting interviews with social movement activists for a book entitled Until the Rulers Obey that would be published in 2014. During that time, I was forced to become a “generalist” and didn’t have much time available to keep a close eye on what was happening in Venezuela. Nevertheless, from people who were watching, and from what I saw on my two visits there in 2011, I gathered that the situation was taking a bad turn. As even supporters were pointing out a few years later, by 2007 only about 15 percent of the 184,000 remaining cooperatives were active. If the distinction between earlier socialism and the Bolivarian version was that in the latter the “ownership and control of the means of production must be collective and democratic,” the new version wasn’t faring well at all.

Big questions began to arise about the financing of the community councils. Critics charged that these organizations were simply instruments that Chávez (and then Maduro) used to fund their supporters while denying access to the opposition. It was classic populism in the style of the Mexican PRI, which Mario Vargas Llosa once called “the perfect dictatorship.” By 2008, Chávez had suffered his first electoral defeat in a referendum that he had hoped would drive his socialist agenda forward. In response, he adopted a new approach to building twenty-first century socialism, and it looked very much like the twentieth century variety: nationalization of industries followed by the expropriation and redistribution of wealth and property. The “Bolivarian Revolution” was starting to look like any other rentier or petro-state—burgeoning corruption, a politics of clientelism, and a growing gap between the elite in control of the state (and, of course, the oil revenues) and the increasingly desperate mass of people at the bottom.

When the Arab Spring swept Gaddafi from power, I argued with my Venezuelan friends and felt the beginnings of a great divide opening up between us. I didn’t like the company Chávez was keeping—Gaddafi, Putin, Hezbollah, etc.—but neither was I ready to denounce him and his project as a fraud. Meanwhile, as my wife and I compiled the interviews with the social movement activists in Latin America, we began to notice themes and threads that confirmed what Raul Zibechi had told us when we visited him in Montevideo, Uruguay in the spring of 2012.

Zibechi was an astute analyst of Latin American politics with a focus on social movements. He explained that the so-called “Pink Tide” of leftwing governments that had risen to power on the wave of the commodities boom were in fact following the prescription of Robert McNamara, the former president of the World Bank and architect of the Vietnam War under Lyndon Johnson. In this scenario, moderately progressive governments were far more useful than their rightwing homologues to the world elite, because they provided a buffer between the transnational corporations and the social movements protesting the impact of resource extraction on communities and the environment. The testimony of our interviewees seemed to bear out Zibechi’s thesis. But surely this couldn’t be true of the more “radical” processes, like the one unfolding in Venezuela?

As I was writing the introductions to the Nicaraguan and Venezuelan chapters of our book, I investigated further, and what I discovered in the academic literature and reports by investigative journalists on both countries confirmed my doubts. By the mid-1990s, I’d already given up on the FSLN reforming itself. When I met Ernesto Cardenal again in 2004, he argued that there was no hope of any positive change from the “Ortega dictatorship.” My introduction to the Nicaragua chapter of our book was therefore fairly easy to write, since the direction the country was going under the Ortega mafia seemed clear. I quoted Dennis Rogers’s description of the Somoza dictatorship the FSLN had overthrown and remarked that it also described the present Ortega regime quite well: “A venal oligarchy run by a small elite satisfied to promote a form of what might be termed ‘hacienda feudalism.’” But Venezuela? Chávez? I had grown more critical, but I still believed in Chávez. As so many Chavistas in Venezuela had reassured me, “Chávez is clean, but all those surrounding him are corrupt.” This was a cult of personality—a One Man faith.

*     *     *

On the afternoon of March 5, 2013, I’d just finished another draft of my introduction to the Venezuela chapter when the phone rang and a friend told me that Hugo Chávez had died. I wrote a eulogy for Counterpunch that now, nearly six years later, I find embarrassing. I then decided to go back down to Venezuela for the elections. On the flight I caught up on my reading, including a fascinating biography of Hugo Chávez written by two well-known Venezuelan journalists, and some analyses of the massive problems in the Venezuelan economy, including the missing $29 billion dollars from the Fonden budget over which Chávez had presided.

Chávez, in the style of Latin American autocrats from time immemorial, had hand-picked his successor, Nicolás Maduro. Maduro was a fairly hard-core Leninist with a soft spot in his heart for Sai Baba, the Hindu guru-huckster accused of child molestation before he died in 2011. Compared to Chávez, Maduro is wooden and utterly lacking in the warmth and charm of his political “father.” But he had close relations with Cuba and was part of Chávez’s trusted inner circle and, most importantly, he was Chávez’s choice. Y punto, end of discussion.

Of the difficulties I faced over the next few days attempting to enter the country and cover the April 2013 presidential election between Maduro and Henrique Capriles, I have written elsewhere. Suffice it to say that I wasn’t granted entry until the day after the elections. Even then, due to the massive nationwide protests, I only managed to get to Mérida thanks to the generosity of oppositionists who gave me a ride. Over the course of the trip, they filled me in on the details of why Maduro had only won the elections by only slightly more than a single percentage point. This was despite using all the state resources at his disposal to (illegally) pay for and promote his campaign, including the state oil company PDVSA’s buses which drove state employees to the polls to vote for him. Chavistas simply hadn’t come out in large numbers to vote for him, and clearly many of the faithful had already gone over to the opposition.

Over the next few days and weeks, as I traveled through Venezuela, I began talking to the “counter-revolutionaries” and they offered evidence of their country’s deep problems to which my Chavista friends could only respond with rhetoric. In the industrial region of Guayana in the state of Bolívar, I interviewed union workers in the nationalized industries about the collapse of those industries. I was able to confirm their claims with secret footage shot for me by a worker using my own video camera, which showed the ruined interior of an enormous state factory where not a soul was to be seen on this particular work day.

In Caracas, I met with opposition human rights activists, union leaders, and leftwing academics for interviews. As the missing pieces of the puzzle began to fall into place, the reality of the Bolivarian catastrophe overwhelmed my resistance. Emilio Campos, then Secretary General of Carbonorca, the nationalized industrial coke plant, described the Bolivarian Revolution as nothing more than “a media show.” He called himself “a revolutionary for a plurality of ideas where a country seeks balance, not just for a party, or one sector of society. I believe in freedom of thought, in a diversity of ideas. But the hegemony of power makes you narrow-minded.”

The real turning point for me, however, was the interview I conducted with labor journalist Damian Prat, whose extraordinary book Guayana: El milagro al revés (Guayana: The Reversed Miracle) I had read over the two or three days it took me to get to Guayana from Merida by bus. The interview took place within a day or two of the shocking beatings of several prominent opposition National Assembly deputies by Chavista deputies during an official session. The state television cameras were turned off during the violence and afterwards, as the wounded were taken to the hospital. I was still shaken by the footage some brave parliamentarians had captured on their cell phones and leaked to the press.

I met Prat at his office at the Correo del Caroní, the Guayanesa daily paper. As I turned on my video camera, Prat smiled wryly. “Some of you in the critical, intellectual circles of Europe and the United States seem to think it’s fine that in the countries of our Latin America there are arbitrary governments and processes full of abuses that in your countries you wouldn’t consider allowing for a minute. No, in your own country you’d militantly reject the same things you seem to feel are perfectly fine to take place down here, so far away, where it’s exotic and interesting…” I felt my face redden with shame, and I suddenly felt my whole world capsize.

It would be months before I was able to return to Guayana to interview Rubén González, the former Chavista and Secretary General of Iron Mine Workers Union of the Orinoco (Sintra Ferrominera del Orinoco) about his own experience of imprisonment without trial “just for doing my job in the union and defending the rights of workers.” Referring to the claims of “sabotage” as the reason the industries were failing in the country, González told me that those in government “never thought of governing, but rather of enriching their little group in power. They never invested in these businesses, but totally bled them dry. They themselves are the saboteurs.” At the time of this writing, González is back in jail for organizing on behalf of workers in the state ironworks.

*     *     *

All of a sudden, I found myself in a strange world. I had drifted—at first gradually, but then definitively—into the camp of my former “enemies,” persuaded by their narrative and by the evidence before my own eyes. And, as I did so, I discovered that the editors of the news sites where I’d published my passionate defenses of the Bolivarian project for the past few years no longer responded to my pitches or my queries or my emails. As Venezuela disintegrated, I was lost and confused and alone.

And then, while I was grieving the loss of my innocent old life and its many friendships, something curious and unexpected began to happen. I discovered a great sense of excitement as I investigated “new” ideas for which I’d previously had nothing but contempt. I found myself reminded of Herbert Spencer’s quote at the end of the Alcoholics Anonymous Big Book: “There is a principle which is a bar against all information, which is proof against all arguments, and which cannot fail to keep a man in everlasting ignorance—that principle is contempt prior to investigation.”

For the next two years, I delved into the literature on Venezuela with renewed interest. Javier Corrales and Michael Penfold’s book, A Dragon in the Tropics, it turned out, was particularly well-researched and compelling. Since I could no longer get my writing published in any of the outlets for which I’d previously written, I redirected my energies into making a new film entitled In the Shadow of the Revolution with the help of a Venezuelan filmmaker and friend, Arturo Albarrán, and I wrote my political memoir for an adventurous anarchist publisher. But what preoccupied me more and more were the larger questions of socialism versus capitalism, and the meaning of liberalism.

I’d visited Cuba twice—in 1994 and again in 2010—and now, with my experience of Venezuela, I felt I’d seen the best socialism could offer. Not only was that offering pathetically meagre, but it had been disastrously destructive. It became increasingly clear to me that nothing that went under that rubric functioned nearly as well on any level as the system under which I had been fortunate enough to live in the US. Why then, did so many decent people, whose ethics and intelligence and good intentions I greatly respected, continue to insist that the capitalist system needed to be eliminated and replaced with what had historically proven to be the inferior system of socialism?

The strongest argument against state control of the means of production and distribution is that it simply didn’t—and doesn’t—work. The proof, as they say, is in the pudding—and in this case, there was no pudding at all. In my own lifetime, I’ve seen socialism fail in China, fail in the Soviet Union, fail in Eastern Europe, fail on the island of Cuba, and fail in Nicaragua under the Sandinistas. And now the world is watching it fail in Venezuela, where it burned through billions of petro-dollars of financing, only to leave the nation worse off than it was before. And still people like me had insisted on this supposed alternative to capitalism, stubbornly refusing to recognize that it is based on a faulty premise and a false epistemology.

As long ago as the early 1940s, F.A. Hayek had identified the impossibility of centralized social planning and its catastrophic consequences in his classic The Road to Serfdom. Hayek’s writings convinced the Hungarian economist, János Kornai, to dedicate an entire volume entitled The Socialist System to demonstrating the validity of his claims. The “synoptic delusion”—the belief that any small group of people could hold and manage all the information spread out over millions of actors in a market economy—Kornai argued, leads the nomenklatura to make disastrous decisions that disrupt production and distribution. Attempts to “correct” these errors only exacerbate the problems for the same reasons, leading to a whole series of disasters that result, at last, in a completely dysfunctional economy, and then gulags, torture chambers, and mass executions as the nomenklatura hunt for “saboteurs” and scapegoats.

The synoptic delusion—compounded by immense waste, runaway corruption, and populist authoritarianism—is what led to the mayhem engulfing Venezuela today, just as it explains why socialism is no longer a viable ideology to anyone but the kind of true believer I used to be. For such people, utopian ideologies might bring happiness into their own lives, and even into the lives of those around them who also delight in their dreams and fantasies. But when they gain control over nations and peoples, their harmless dreams become the nightmares of multitudes.

Capitalism, meanwhile, has dramatically raised the standard of living wherever it has been allowed to arise over the past two centuries. It is not, however, anything like a perfect or flawless system. Globalization has left many behind, even if their lives are far better than those of their ancestors just two hundred years ago, and vast wealth creation has produced vast inequalities which have, in turn, bred resentment. Here in California, the city of Los Angeles, “with a population of four million, has 53,000 homeless.” Foreign policy misadventures and the economic crash of 2008 opened the door to demagogues of the Left and the Right eager to exploit people’s hopes and fears so that they could offer themselves as the solution their troubled nations sought to the dystopian woe into which liberal societies had fallen. In his fascinating recent jeremiad Why Liberalism Failed, Patrick Deneen itemizes liberal democracy’s many shortcomings and, whether or not one accepts his stark prognosis, his criticisms merit careful thought and attention.

Nevertheless, markets do work for the majority, and so does liberal democracy, as dysfunctional as it often is. That is because capitalism provides the space for ingenuity and innovation, while liberal democracy provides room for free inquiry and self-correction. Progress and reform can seem maddeningly sluggish under such circumstances, particularly when attempting to redress grave injustice or to meet slow-moving existential threats like climate change. But I have learned to be wary of those who insist that the perfect must be the enemy of the good, and who appeal to our impatience with extravagant promises of utopia. If, as Deneen contends, liberalism has become a victim of its own success, it should be noted that socialism has no successes to which it can fall victim. Liberalism’s foundations may be capable of being shored up, but socialism is built on sand, and from sand. Failures, most sensible people realize, should be abandoned.

That is probably why Karl Popper advocated cautious, piecemeal reform of markets and societies because, like any other experiment, one can only accurately isolate problems and make corrections by changing one variable at a time. As Popper observed in his essay “Utopia and Violence”:

The appeal of Utopianism arises from the failure to realize that we cannot make heaven on earth. What I believe we can do instead is to make life a little less terrible and a little less unjust in each generation. A good deal can be achieved in this way. Much has been achieved in the last hundred years. More could be achieved by our own generation. There are many pressing problems which we might solve, at least partially, such as helping the weak and the sick, and those who suffer under oppression and injustice; stamping out unemployment; equalizing opportunities; and preventing international crime, such as blackmail and war instigated by men like gods, by omnipotent and omniscient leaders. All this we might achieve if only we could give up dreaming about distant ideals and fighting over our Utopian blueprints for a new world and a new man.

Losing faith in a belief system that once gave my life meaning was extremely painful. But the experience also reawakened my dormant intellectual curiosity and allowed me to think about the world anew, unencumbered by the circumscriptions of doctrine. I have met new people, read new writers and thinkers, and explored new ideas I had previously taken care to avoid. After reading an interview I had given to one of my publishers a year ago, I was forwarded an email by the poet David Chorlton. What I’d said in that interview, he wrote, “goes beyond our current disease of taking sides and inflexible non-thinking. I’m reading Havel speeches again, all in the light of the collective failure to live up to the post-communist opportunities. We’re suffering from a lack of objectivity—is that because everyone wants an identity more than a solution to problems?”

 

economics, foreign affairs, government, history, ideology, liberalism, poverty, public policy, reform, socialism

Filed under: economics, foreign affairs, government, history, ideology, liberalism, poverty, public policy, reform, socialism

Capitalism and Morality: Walter Williams vs. Pope Francis

original article: Capitalism and Morality: Walter Williams vs. Pope Francis
September 22, 2015 by Daniel J. Mitchell

The biggest mistake of well-meaning leftists is that they place too much value on good intentions and don’t seem to care nearly as much about good results.

Pope Francis is an example of this unfortunate tendency. His concern for the poor presumably is genuine, but he puts ideology above evidence when he argues against capitalism and in favor of coercive government.

Here are some passages from a CNN report on the Pope’s bias.

Pope Francis makes his first official visit to the United States this week. There’s a lot of angst about what he might say, especially when he addresses Congress Thursday morning. …He’ll probably discuss American capitalism’s flaws, a theme he has hit on since the 1990s. Pope Francis wrote a book in 1998 with an entire chapter focused on “the limits of capitalism.” …Francis argued that…capitalism lacks morals and promotes selfish behavior. …He has been especially critical of how capitalism has increased inequality… He’s tweeted: “inequality is the root of all evil.” …he’s a major critic of greed and excessive wealth. …”Capitalism has been the cause of many sufferings…”

Wow, I almost don’t know how to respond. So many bad ideas crammed in so few words.

If you want to know why Pope Francis is wrong about capitalism and human well-being, these videos narrated by Don Boudreaux and Deirdre McCloskey will explain how free markets have generated unimaginable prosperity for ordinary people.

But the Pope isn’t just wrong on facts. He’s also wrong on morality. This video by Walter Williams explains why voluntary exchange in a free-market system is far more ethical than a regime based on government coercion.

Very well stated. And I especially like how Walter explains that markets are a positive-sum game, whereas government-coerced redistribution is a zero-sum game (actually a negative-sum game when you include the negative economic impact of taxes and spending).

Professor Williams wasn’t specifically seeking to counter the muddled economic views of Pope Francis, but others have taken up that challenge.

Writing for the Washington Post, George Will specifically addresses the Pope’s moral preening.

Pope Francis embodies sanctity but comes trailing clouds of sanctimony. With a convert’s indiscriminate zeal, he embraces ideas impeccably fashionable, demonstrably false and deeply reactionary. They would devastate the poor on whose behalf he purports to speak… Francis deplores “compulsive consumerism,” a sin to which the 1.3 billion persons without even electricity can only aspire.

He specifically explains that people with genuine concern for the poor should celebrate industrialization and utilization of natural resources.

Poverty has probably decreased more in the past two centuries than in the preceding three millennia because of industrialization powered by fossil fuels. Only economic growth has ever produced broad amelioration of poverty, and since growth began in the late 18th century, it has depended on such fuels. …The capitalist commerce that Francis disdains is the reason the portion of the planet’s population living in “absolute poverty” ($1.25 a day) declined from 53 percent to 17 percent in three decades after 1981.

So why doesn’t Pope Francis understand economics?

Perhaps because he learned the wrong lesson from his nation’s disastrous experiment with an especially corrupt and cronyist version of statism.

Francis grew up around the rancid political culture of Peronist populism, the sterile redistributionism that has reduced his Argentina from the world’s 14th highest per-capita gross domestic product in 1900 to 63rd today. Francis’s agenda for the planet — “global regulatory norms” — would globalize Argentina’s downward mobility.

Amen (no pun intended).

George Will is right that Argentina is not a good role model.

And he’s even more right about the dangers of “global norms” that inevitably would pressure all nations to impose equally bad levels of taxation and regulation.

Returning to the economic views of Pope Francis, the BBC asked for my thoughts back in 2013 and everything I said still applies today.

bias, capitalism, crisis, cronyism, economics, economy, ethics, ideology, nanny state, poverty, reform, video

Filed under: bias, capitalism, crisis, cronyism, economics, economy, ethics, ideology, nanny state, poverty, reform, video

Federal watchdogs accused of stealing lunch money from needy kids

Federal watchdogs accused of stealing lunch money from needy kids
August 12, 2015 by Fox News

Five employees who work at a federal watchdog agency tasked with rooting out fraud and abuse were indicted Tuesday after investigators say they concocted a plan that stole lunch money from needy children.

Prosecutors say the employees, all working with the Government Accountability Office, as well as the spouse of a separate GAO worker, tried to illegally obtain reduced-price school lunches for their children. They did so by falsely reporting their incomes in order to qualify for the discounted government meals.

“There is no excuse for stealing funds intended to go to children whose parents cannot afford the school lunches,” Maryland’s Prince George’s County State’s Attorney Angela Alsobrooks said in a written statement announcing the news. “Their actions are made even worse by the fact that some of them claimed to have not just low income, but no income at all, even though they were working full-time jobs at the GAO.”

One of the accused is Lynette Mundey, a Prince George’s County school board member. Mundey, along with Barbara Rowley, Jamilah Reid, Tracy Williams, Charlene Savoy and James Pinkney, the spouse of a GAO employee, were charged with filing false applications, fraud and theft.

Federal officials say the group bilked the program designed to benefit needy children out of $13,000 over the course of five years. They did so by either under-reporting their income or in some cases, reporting that they had no income even though their actual salaries ranged from $55,000 to $78,000.

Children who are legally eligible for the reduced-cost lunch program must come from households with incomes at or below 130 percent of the poverty level – or about $30,615 for a family of four.

A reduced-price lunch costs an elementary child 40 cents compared to $2.75 for a full-price meal, according to the Prince George’s County Public Schools Food and Nutrition Services.

“This is a program for people who can’t afford it, but these are people who can,” John Erzen, a spokesman for the Prince George’s County State’s Attorney’s Office told The Washington Post in a statement.

Calls to Mundey as well as the Prince George’s County Board of Education were not immediately returned.

abuse, bureaucracy, children, corruption, criminal, ethics, fraud, funding, government, greed, nanny state, poverty, scandal, spending

Filed under: abuse, bureaucracy, children, corruption, criminal, ethics, fraud, funding, government, greed, nanny state, poverty, scandal, spending

Seattle sees fallout from $15 minimum wage, as other cities follow suit

original article: Seattle sees fallout from $15 minimum wage, as other cities follow suit
July 22, 2015 by Dan Springer

Seattle’s $15 minimum wage law is supposed to lift workers out of poverty and move them off public assistance. But there may be a hitch in the plan.

Evidence is surfacing that some workers are asking their bosses for fewer hours as their wages rise – in a bid to keep overall income down so they don’t lose public subsidies for things like food, child care and rent.

Full Life Care, a home nursing nonprofit, told KIRO-TV in Seattle that several workers want to work less.

“If they cut down their hours to stay on those subsidies because the $15 per hour minimum wage didn’t actually help get them out of poverty, all you’ve done is put a burden on the business and given false hope to a lot of people,” said Jason Rantz, host of the Jason Rantz show on 97.3 KIRO-FM.

The twist is just one apparent side effect of the controversial — yet trendsetting — minimum wage law in Seattle, which is being copied in several other cities despite concerns over prices rising and businesses struggling to keep up.

The notion that employees are intentionally working less to preserve their welfare has been a hot topic on talk radio. While the claims are difficult to track, state stats indeed suggest few are moving off welfare programs under the new wage.

Despite a booming economy throughout western Washington, the state’s welfare caseload has dropped very little since the higher wage phase began in Seattle in April. In March 130,851 people were enrolled in the Basic Food program. In April, the caseload dropped to 130,376.

At the same time, prices appear to be going up on just about everything.

Some restaurants have tacked on a 15 percent surcharge to cover the higher wages. And some managers are no longer encouraging customers to tip, leading to a redistribution of income. Workers in the back of the kitchen, such as dishwashers and cooks, are getting paid more, but servers who rely on tips are seeing a pay cut.

Some long-time Seattle restaurants have closed altogether, though none of the owners publicly blamed the minimum wage law.

“It’s what happens when the government imposes a restriction on the labor market that normally wouldn’t be there, and marginal businesses get hit the hardest, and usually those are small, neighborhood businesses,” said Paul Guppy, of the Washington Policy Center.

Seattle was followed by San Francisco and Los Angeles in passing a $15 minimum wage law. The wage is being phased in over several years to give businesses time to adjust. The current minimum wage in Seattle is $11. In San Francisco, it’s $12.25.

And it is spreading. Beyond the city of Los Angeles, the Los Angeles County Board of Supervisors this week also approved a $15 minimum wage.

New York state could be next, with the state Wage Board on Wednesday backing a $15 wage for fast-food workers, something Gov. Andrew Cuomo has supported.

Already, though, there are unintended consequences in other cities.

Comix Experience, a small book store in downtown San Francisco, has begun selling graphic novel club subscriptions in order to meet payroll. The owner, Brian Hibbs, admits members are not getting all that much for their $25 per month dues, but their “donation” is keeping him in business.

“I was looking at potentially having to close the store down and then how would I make my living?” Hibbs asked.

To date, he’s sold 228 subscriptions. He says he needs 334 to reach his goal of the $80,000 income required to cover higher labor costs. He doesn’t blame San Francisco voters for approving the $15 minimum wage, but he doesn’t think they had all the information needed to make a good decision.

corruption, culture, economics, economy, entitlements, funding, government, nanny state, politics, poverty, progressive, public policy, reform, regulation, socialism, unintended consequences

Filed under: corruption, culture, economics, economy, entitlements, funding, government, nanny state, politics, poverty, progressive, public policy, reform, regulation, socialism, unintended consequences

Unraveling the Poverty Myths Obama Is Promoting

original article: Unraveling the Poverty Myths Obama Is Promoting
May 18, 2015 by Stephen Moore

Our class warrior in chief was at it again last week complaining about our “ideological divides that have prevented us from making progress” in solving problems like poverty. Just when you thought you’d heard it all.

Our most ideological president perhaps ever is arguing that there is too much ideology in Washington. Wow. Apparently an ideology is a firmly held belief that is held by other people—especially those on the right.

In a discussion on poverty at Georgetown University, the president managed to blame the slow-growth economy and stagnant wages on everything from Ayn Rand (who promoted “cold hearted policies” and classified everyone as a “moocher”) to California’s Proposition 13 (which is responsible for the Golden State’s dreadful schools). Everything has contributed to our current malaise except for his own failed policies.

Here’s a brief truth squad examination of Obama’s mythologies and misstatements of fact.

President Obama: “The stereotype is that you’ve got folks on the left who just want to pour more money into social programs, and don’t care anything about culture or parenting or family structures … ”

After more than $22 trillion spent on the War on Poverty since 1964 (in inflation adjusted dollars)—how is it a stereotype to say the left only wants to pour money at programs?

Just a few weeks ago the president blamed the Baltimore riots on Republicans for not spending and borrowing even more money on his social programs. He sounded like a parody of himself.

If the left really wants to advance cultural values like work, why do they oppose reforms to a welfare system that requires able-bodied adult Americans to work in exchange for receiving welfare benefits like food stamps?

Obama: “It is a mistake for us to suggest that somehow every effort we make has failed and we are powerless to address poverty. That’s just not true. First of all, just in absolute terms, the poverty rate when you take into account tax and transfer programs, has been reduced about 40 percent since 1967.”

There are two problems with this defense of the welfare state. First, the official poverty was falling before 1965 and at a faster rate than after the Great Society got rolling in the mid-1960s. This official poverty rate has remained virtually stagnant since the War on Poverty began.

Second, the decline in poverty that Obama is boasting about is only after taking into account tax credits and government handouts and welfare benefits. When excluding these programs there has been little progress at all.

Redistribution may have raised the material living standards of some of the poor. But it has not increased self-sufficiency.

The original purpose of the welfare state was to lift people into self-sufficiency, not to create a permanent underclass dependent on taxpayers. Lyndon Johnson told us when he started these programs that “the days of the dole are numbered.” We have passed day 18,000.

Obama also wants it both ways. He says over and over, even in this speech, that the biggest problem with the economy is income inequality because the rich are getting richer and the poor poorer. So if the poor are getting poorer, how have his social programs worked to reduce poverty?

Obama: “In some ways, rather than soften the edges of the market, we’ve turbocharged it.”

Wait, we’ve turbo-charged the free market? When? Where?

Obama: “There are programs that work to provide ladders of opportunity … but we just haven’t figured out how to scale them up.”

Hold on. One of the few programs that has proven to provide “a ladder of opportunity” is the Washington D.C. Opportunity Scholarship Program for roughly 1,500 kids each year to attend private schools. They are all poor and almost all black. The graduation rates for these kids have improved in some cases markedly.

But guess who doesn’t want to “scale up” this successful program (which is, by the way, one of the few programs that would actually be appropriate for the federal government to scale up)? In every budget Obama has submitted, he has proposed eliminating the program.

It’s more than a little hypocritical for a president who sends his own daughters to private schools that cost $30,000 a year to prevent poor children in Washington, D.C., from attending those same schools.

Obama: “And so over time, families frayed. Men who could not get jobs left. Mothers who are single are not able to read as much to their kids.”

The president acts as though “families frayed” by accident. No, there were major cultural shifts that contributed to the major decline in marriage and rise in unwed births, not to mention the introduction of a massive government welfare system that financially took the place of the father.

In 1960, not even one in four black children were born without a father in the home. By 2013 that number had soared, tragically, to nearly three of every four black children being born outside of marriage. As economist Thomas Sowellhas put it: “the black family survived centuries of slavery and generations of Jim Crow, but it disintegrated in the wake of the liberals’ expansion of the welfare state.”

Obama: “You look at state budgets, you look at city budgets, and you look at federal budgets, and we don’t make those same common investments that we used to. … And there’s been a very specific ideological push not to make those investments.”

In 1950 total state, local and federal government spending was just over $500 billion (in constant 2015 dollars) and 22.2 percent of our GDP. Today it is nearly $6 trillion and 33 percent of our GDP. Under Obama federal spending will reach $4 trillion next year and borrowing to finance these “common investments” will have risen by $8 trillion over his tenure.

The only thing that has been underfunded over the last decade is middle-class family incomes, which have stagnated.

Obama: “We don’t dispute that the free market is the greatest producer of wealth in history—it has lifted billions of people out of poverty. We believe in property rights, rule of law, so forth.”

No, you don’t. And that’s the whole problem.

bias, Democrats, economics, economy, elitism, family, government, hypocrisy, ideology, indoctrination, left wing, liberalism, lies, marxism, nanny state, pandering, philosophy, political correctness, politics, poverty, president, progressive, propaganda, spending, welfare

Filed under: bias, Democrats, economics, economy, elitism, family, government, hypocrisy, ideology, indoctrination, left wing, liberalism, lies, marxism, nanny state, pandering, philosophy, political correctness, politics, poverty, president, progressive, propaganda, spending, welfare

If you want to help the poor take an honest look at the data instead of cherry picking it

So you think you know how the world works? The very popular push to raise the minimum wage to $15/hour is in full swing and gaining ground. But there are many false assumptions at work in this movement. I realize some of you already are aware employees get their paychecks from their employers, the businesses who’ve hired them. But not everyone knows this. And many people don’t realize where businesses get their money; many think all businesses have millions in cash resting safely in the bank, and the only reason workers are paid low wages is because of corporate greed. That’s the sort of enlightened ignorance that governs not only the popular movement for a $15/hr minimum wage, but also the political one.

So instead of reading (or rather listening to someone else talk about) only the things $15/hr advocates want to hear, someone needs to explain how the world really works. These two articles address the flawed studies used to support the high minimum wage.

A $15 minimum wage is a terrible idea
June 22, 2013 by Dylan Matthews

Raising minimum wage won’t lower poverty
September 16, 2011 by Michael Saltsman

The Congressional Budget Office has looked at a higher minimum wage as well, and that office says something very different from what President Obama is saying.

Minimum Wage Hike Could Cost 500K Jobs, CBO Reports
February 18, 2014 by JOHN PARKINSON

Of course, if you’re really a nut job who wants to actually look at a real study instead of just reading news articles journalists have written about the data, you can find one here:
Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?
January 2013 by David Neumark, J.M. Ian Salas, William Wascher

I also recommend considering some dangerously explicit common sense on the matter.

Fast Food Workers: You Don’t Deserve $15 an Hour to Flip Burgers, and That’s OK

culture, economics, economy, government, ideology, left wing, liberalism, nanny state, philosophy, political correctness, poverty, progressive, propaganda, public policy, recession, reform, regulation, socialism, spending, study, unintended consequences

Filed under: culture, economics, economy, government, ideology, left wing, liberalism, nanny state, philosophy, political correctness, poverty, progressive, propaganda, public policy, recession, reform, regulation, socialism, spending, study, unintended consequences

School Choice As a Matter of Social Justice

original article: School Choice As a Matter of Social Justice
April 14, 2015 by Joe Carter

Social justice is a term and concept frequently associated with the political Left, and too often used to champion views that are destructive for society and antithetical to justice. Yet for Christians the term is too valuable to be abandoned. Conservatives need to rescue it from the Left and restore it’s true meaning. True social justice is obtained, as my colleagueDylan Pahman has helpfully explained, “when each member, group, and sphere of society gives to every other what is due.”

A key sphere of society in which social justice is in desperate need of restoration is education. The poor deserve the same freedom to obtain a quality education that is too often reserved for those wealthy enough to rescue their children from failing schools. For this reason school choice should be considered a matter of social justice.

As Archbishop Charles J. Chaput says, lack of a quality education is a common thread among persons in severe poverty. And once stuck in deep poverty it’s very hard for anyone to escape due to the lack of skills needed to secure and hold employment:

Poor parents, like parents everywhere, desire to give their children a quality, safe education; a chance at a fruitful life. They want their children to grow strong and pursue their dreams, to let their talents and interests take them as far as they can go. But without a quality education the dreams will remain unfulfilled and another generation of deep poverty will persist. This is painfully ironic, because at the moment, thousands of seats sit empty in safe, high quality Catholic and private schools throughout the region. Life lines to a good education do exist to help poor families, but, as so often happens, political conflicts stand in the way.

Catholic social teaching is built on a commitment to the poor. Few things are more important to people in poverty than ensuring their children’s education as a path to a better life. If the future of Philadelphia and Pennsylvania depends on an educated, productive public – and it obviously does – then providing every means to ensure a good education system becomes a matter of social justice. Prudent lawmakers from both major parties have understood this for years. They need to feel our support in the voting booth and throughout their public service.

The point is this: Proper funding for public schools is clearly important. But experience has already shown that this can’t be the only strategy because it doesn’t work for many of the students who most urgently need a good education. It’s therefore vital that our elected officials serve the real education needs of the poor by supporting school choice.

Another reason to separate school and state.

bureaucracy, children, conservative, education, freedom, justice, poverty, reform, right wing

Filed under: bureaucracy, children, conservative, education, freedom, justice, poverty, reform, right wing

Raising The Minimum Wage Hurts The Most Vulnerable

November 13,2014 by Elise Hilton

If you’re blessed, your job is more than just a paycheck. It’s a structure for your life, it’s a place of friendship and camaraderie, and a sense of purpose. At least, it was for Stacy Osborn.

Osborn had been working at Tastes of Life, a Hillsdale, MI restaurant that also supported a residential program, Life Challenge of Michigan. The restaurant was owned by Pastor Jack Mosley and his wife, Linda.

Mosley explained that, unlike a typical business that might fire a chef with a hot temper “who breaks dishes,” Tastes of Life managers were more long-suffering and wanted to help employees polish their life skills.

“Life has issues,” Mosley said. “This was a place to shore them up, and help them cope and get through.”

So why isn’t Osborn working there anymore? Because Tastes of Life couldn’t afford to stay open after the state of Michigan raised its minimum wage. Mosley said he figured he’d have to bring in 200 more customers a week in order to stay open.

Michigan unions threatened they’d sponsor a ballot initiative to raise the minimum wage to $10.10 an hour. To keep the question off the ballot, the Republican-controlled legislature passed a compromise. Before September 1, 2014, the minimum wage in Michigan for regular employees was $7.40 and for tipped workers was $2.65. The new law raised the wage to $8.15 and $3.10, respectively. It will increase incrementally until 2018, when it will be $9.25 and $3.52.

“I did the math and realized I would need 200 more customers a week to stay open,” Mosley said.

That, accompanied by the fact that many of their customers go south for the winter and food prices have risen dramatically, forced Mosley to close doors. Twelve people lost their jobs.

Other businesses in the area have put a freeze on hiring and have raised prices in order to compensate for the minimum wage hike. Some, like the Mosleys, simply can’t compete. And that means those with the most to lose are left with fewer options. Some lose their jobs. Those who keep their jobs have a pay increase, but may have their hours cut. They also have to deal with the increase in the cost of consumer goods that comes along with the minimum wage hike.

Tell us again, who was the minimum wage hike supposed to help?

original article: In Michigan, Raising The Minimum Wage Hurts The Most Vulnerable

Read “Low-Income Workers: Raising The Minimum Wage Ruined Our Lives” at The Federalist.

bureaucracy, capitalism, economics, economy, government, left wing, liberalism, nanny state, poverty, progressive, public policy, regulation, socialism, tragedy, unintended consequences

Filed under: bureaucracy, capitalism, economics, economy, government, left wing, liberalism, nanny state, poverty, progressive, public policy, regulation, socialism, tragedy, unintended consequences

How Much Does Poverty Drive Crime?

August 22, 2014 by JOE CARTER

I’m about to make a prediction that is incontrovertible — a claim that cannot be controverted because (a) I am absolutely right in my prediction, and (b) because I will be long dead before my rightness can be proven.

Here’s what I predict: By the year 2114 social scientists will have established with 90 percent confidence that the “root cause” of the majority of the social maladies we experienced in the early twenty-first century (i.e., right now) were attributable to family structure, family dynamics, or family culture.

A trend in that direction appears to already be underway. Consider, for example, research recently published in the British Journal of Psychiatry that studied more than half a million children born in Sweden between 1989 and 1993. The results of the study showed that children of parents in the lowest income quintile experienced an increased risk of being convicted of violent criminality and substance abuse compared with peers in the highest quintile. No real surprise there. What was unexpected was the conclusion: “There were no associations between childhood family income and subsequent violent criminality and substance misuse once we had adjusted for unobserved familial risk factors.”

As The Economist explains, for “families which had started poor and got richer, the younger children—those born into relative affluence—were just as likely to misbehave when they were teenagers as their elder siblings had been. Family income was not, per se, the determining factor.”

This finding shouldn’t be all that surprising for anyone who has spent much time around people in poverty. Lack of money is certainly a problem for those on the lower rungs of the economic ladder, but it’s rarely the cause of people engaging in criminal behavior. All poor people share a common trait — they lack sufficient income and/or wealth — but they don’t all share a propensity for criminality. Why then is crime more prevalent in poverty-stricken areas?

The reason is that people in areas of high poverty tend to lack access to strong institutions that can compensate for broken family structures, dysfunctional family dynamics, or pathological family cultures. Overcoming the effects of a having a messed up family are difficult enough when you have both money and institutional resources, like functioning school systems and locally-engaging churches. But if you have nothing else to rely on but family and that fails, you are likely to fail too.

While I’m generally a believer in self-determination, I believe family is the one factor that is more likely than any other to determine whether an individual flourishes or fails. It’ll likely take another hundred years before social science confirms my conviction. But I’m hoping by then our society — or at least the subset who consider themselves to be conservatives — will finally recognize that the most important institution in need of conservation is the family.

original article: How Much Does Poverty Drive Crime?

children, criminal, crisis, culture, demographics, economics, education, ethics, family, ideology, poverty, study, victimization

Filed under: children, criminal, crisis, culture, demographics, economics, education, ethics, family, ideology, poverty, study, victimization

The Democrats embrace trickle-down economics

August 26, 2014 by Kevin D. Williamson

Approximately 99.44 percent of the time, it is a safe assumption that when you disagree with Thomas Sowell, you are wrong. But on the issue of the “trickle-down” theory of economics, Professor Sowell is in fact wrong to claim that “trickle-down” is a nonexistent theory, absent from “even the most voluminous and learned histories of economic theories.” Trickle-down is there — just not where its critics are looking for it.

Getting to the bottom of this will require a little background.

Professor Sowell is correct that trickle-down functions in our current discourse mainly as a caricature of certain conservative, supply-side, and/or free-market economic ideas, mostly pertaining to taxes: “Repeatedly, over the years,” he writes,

the arguments of the proponents and opponents of tax rate reductions have been arguments about two fundamentally different things. Proponents of tax rate cuts base their arguments on anticipated changes in behavior by investors in response to reduced income tax rates. Opponents of tax cuts attribute to the proponents a desire to see higher income taxpayers have more after-tax income, so that their prosperity will somehow “trickle down” to others, which opponents of tax cuts deny will happen. One side is talking about behavioral changes that can change the total output of the economy, while the other side is talking about changing the direction of existing after-tax income flows among people of differing income levels at existing levels of output. These have been arguments about very different things, and the two arguments have largely gone past each other untouched.

What sort of “behavioral changes” do the tax-cutters expect? In Andrew Mellon’s day, tax cuts were intended to lure wealthy investors out of tax-free government securities, which Mellon had proposed abolishing, into more-productive private-sector investments, which he believed would raise overall economic output. As Professor Sowell points out, the aggregate reported income of those earning $300,000 a year or more in 1916, back when three hundred grand meant something, was cut in half by 1918, and it probably was not because Scrooge McMoneybags actually was earning less: The consensus is that the very rich shifted their investments into tax-free securities as taxes went up and tax shelters became more attractive. Most of a century later, billionaire presidential candidate Ross Perot would be criticized for keeping his copious loot in tax-free munis. The more things change . . .

President Woodrow Wilson and others argued at the time that the combination of high taxes on income and zero taxes on certain government securities created a situation that discouraged private investment and encouraged profligate government spending, while lowering the tax burden on the wealthy and thus necessarily increasing the burden on everybody else. Presidents Calvin Coolidge and John Kennedy would make similar arguments.

The cartoon version of conservative economic thinking — that we should subsidize gazillionaires in order to create work opportunities for yacht painters, monocle polishers, and truffle graters — is fundamentally at odds with the facts. The supply-siders may have wrong economic ideas, but they do not have those wrong economic ideas. President Ronald Reagan, for example, loved to boast of the number of poor and modestly-off Americans his policies had removed from the federal tax rolls entirely. George W. Bush promised that he’d take the poorest fifth of taxpaying U.S. households off the federal tax rolls; Heritage estimates that he succeeded in doing so for about 10 million low-income households.

One of the perverse consequences of conservatives’ success in lowering the federal income-tax burdens of those on the left half of the earnings bell curve is that we have finally arrived at the point where our critics are partly correct: Most conservative plans for tax cuts at this point in history do disproportionately favor the wealthy and the high-income, for the mathematically unavoidable reason that they pay a steeply disproportionate share of federal income taxes, making it very difficult to design a tax-cut plan that does not disproportionately benefit them. It’s hard to cut taxes without cutting them for the taxpayers.

I myself am mostly neutral on the question of tax cuts, on the grounds that cutting taxes while the government is running significant deficits is not inadvisable but impossible — in that situation, taxes are not cut but merely deferred. All accounts must in the end be settled, so the real rate of taxation is the rate of spending.

The point of rehearsing this history is not to determine whether traditional supply-side thinking on economic policy is true or false, but rather to show that it is something fundamentallydifferent from the trickle-down caricature offered by the progressives and others generally hostile to the idea of a smaller federal financial footprint. But that is not to say that “trickle-down” is an idea without adherents, a banner without partisans marching under it. Perversely, those advancing trickle-down ideas are mostly the same ideologues who denounce “trickle-down.” But they do not call it trickle-down — they call it “stimulus.”

There are three main ways in which the federal government goes about trying to stimulate the economy. Traditionally, the most popular and most bipartisan method has been tax cuts. The popular if intellectually dodgy Keynesian analysis holds that during periods of economic weakness, there is a glut of underutilized productive capacity — capital and labor both — and that government can help clear it by increasing “aggregate demand,” i.e., stimulating consumption. As President Obama put it, “For businesses across the country, it would mean customers with more money in their pockets.” If you want Republicans on board, then the easiest way to put money in consumers’ pockets is with tax cuts, but you can achieve much the same thing with various kinds of welfare spending, the second form of stimulus, as seen with the bump in food-stamp and unemployment spending under President Obama’s American Recovery and Reinvestment Act. You can also sometimes forcibly deputize others to do some spending for you — in the speech above, President Obama was talking about raising the minimum wage.

The president and congressional Democrats treat tax cuts and spending as though they were the same thing, and from a federal accounting point of view, they are not entirely wrong: Cutting a $50,000-a-year household’s taxes by $1,000 a year is functionally identical to cutting them a check for $1,000 every year. Cutting an unemployed worker’s taxes by $1,000 a year is functionally the same thing as giving him an extra $1,000 in unemployment benefits. On the question of economic stimulus through tax cuts vs. through targeted social-welfare spending, the real dispute is about the method of targeting those distributions — and that’s about nothing but politics. Democrats do not want to do too much to establish the precedent that tax cuts might be good for the economy in some circumstances, lest it come back to bite them, and Republicans do not want to establish the precedent that some welfare spending might be good for the economy.

For what it’s worth, I’m not convinced that either approach does much more than provide a short-term sugar rush at the expense of the economy’s long-term health, and the Congressional Budget Office shares that suspicion, estimating that in the long run the Recovery Act will decrease economic output for reasons that would have been familiar to Andrew Mellon back in his day:

To the extent that people hold their wealth in government securities rather than in a form that can be used to finance private investment, the increased debt tends to reduce the stock of productive private capital. In the long run, each dollar of additional debt crowds out about a third of a dollar’s worth of private domestic capital, CBO estimates.

One of the problems with the traditional Keynesian view of stimulus is that it assumes that the increased aggregate demand in the economy will be matched by a mirror image of underutilized productive capacity. But we know from experience that this is not always the case. For example, we spent years around the turn of the century stimulating the economy with lower interest rates, tax cuts, and welfare spending, and the result wasn’t general prosperity — it was a housing bubble. These things tend to be unpredictable, and it is as likely that such efforts will deepen the misalignment between production and consumption as it is that they will mitigate it.

The third way that government attempts to stimulate the economy is through project spending, i.e. the so-called infrastructure investments that politicians always are nattering on about. From the politicians’ point of view, infrastructure spending has one important advantage over tax cuts or welfare outlays: They get to control what the money is spent on and where. Cut somebody’s taxes, and he might put the money toward his children’s college tuition — or he might put it toward a few lines of cocaine. Additional welfare dollars might find their way to the grocery store — or a casino. But if you spend a billion dollars on a bridge, you can be pretty sure that you’re going to get a bridge out of the deal, and a bridge right where you wanted one.

Needless to say, that’s not the same as building a bridge where a bridge is needed — but if we buy the traditional model of stimulus, that shouldn’t matter. Through the magic of the multiplier effect, $1 spent on a bridge works its way through the economy, creating $1.25, or $2, or $22 in value, depending on whom you ask. (All of which assumes that the multiplier generally is greater than 1, rather than less than 1, which has not been established, but never you mind. And if this looks to you like nothing other than the contemporary supply-siders’ self-financing tax cut in drag, then you’re on the right track.)

The important point here is this: The argument that the government should spend on infrastructure because a certain piece of infrastructure is needed is one kind of argument; the argument that government should spend on infrastructure because doing so is good for the economy is a different kind of argument — specifically, it is a trickle-down argument.

If you doubt that, ask yourself: What kind of firms get federal contracts? Do you think any of those unhappy people in Ferguson, Mo., own firms that are in line for Department of Defense or Department of Energy contracts? Do you think impoverished Appalachian pillbillies are in the running for upgrading Treasury’s computer networks? If so, I have a bridge I’d like to build you at a very reasonable price.

Federal contracting is dominated, as one would expect, by large firms, often the dreaded multinational corporations of angsty soy-latte-liberal legend. Call the roll: In first place, we have Lockheed Martin, followed by those poor, Dickensian waifs at Boeing, who would be bereft without the support of the Export-Import Bank. Then we have the plucky upstarts at Northrop Grumman, General Dynamics, and Raytheon. And, lest Wall Street feel left out, Cerberus Capital Management comes in at No. 11. Deloitte, Rolls-Royce, and our friends at the Kuwait Petroleum Corporation all make the list — because federal spending is all about Main Street, albeit Main Street in Abu Dhabi, where the national oil company does nearly $2 billion a year in business as a federal contractor.

That’s a non-issue if your argument is that Uncle Stupid needs to build a spur on I-35 because it is having trouble getting trucks to Fort Sam Houston, or if you believe that it should buy its oil from whoever has the best price. Jim Bob’s Mom-and-Pop Interstate Highways, Aircraft Carriers, and Bait Shop (“No Job Too Small!”) is not a thing that exists.

But that is a big, hairy Gordian knot of an issue if your argument is that infrastructure spending, and other federal project outlays, are a desirable form of economic stimulus in and of themselves. If the latter is your argument, then you have to believe something far stronger than even the cartoon trickle-down version of supply-side tax cuts: You have to believe that having the federal government literally write enormous checks to gigantic international conglomerates and the rich guys who own and operate them will create prosperity by, forgive me for noticing, trickling down through the economy to the guys who spread asphalt and the guys who sell those guys work boots and burritos and bass boats. “Deep voodoo,” as Paul Krugman would put it in another context.

Inevitably, there are federal rules setting aside a portion of contracts and subcontracts — 23 percent, in fact — for small businesses. This works about as well as you’d expect: Large firms simply organize subsidiaries or make other arrangements to meet small-business ruleswhich are pretty flexible to begin with — or they fraudulently misrepresent themselves. And so “small business” awards to go firms with 150 employees and $400 million a year in revenue — or, in some cases, a hell of a lot more. By the American Small Business League’s count, 16 of the top 100 small-business contractors in 2013 were actually small businesses. It finds that many small-business contracts are in effect awarded to Apple, Bank of America, PepsiCo, General Electric, and all the usual suspects, through arrangements that made small businesses the names on the contracts while the majority of the revenues went to Fortune 500 companies.

But still, might this stimulate the economy, create jobs, raise wages? There is reason to be skeptical about that proposition. Under the Recovery Act, stimulus spending went to doomed firms such as Solyndra, Evergreen Solar, and SpectraWatt, all of which took the money and ran into bankruptcy. The Export-Import Bank’s defenders make a very conventional case that its subsidies stimulate the economy, but there is no evidence that they do. Even hard infrastructure projects are not always obviously good ideas: roads to nowhere, bridges to nowhere. Such projects likely are net losses for the economy once everything is accounted for: the opportunity cost of the labor and capital that went into them, their effect on the debt and interest expenses, long-term maintenance costs, etc.

If the federal government needs a nuclear submarine or an upgraded computer system, so be it. (Although maybe not the kind of information technology that the stimulus bill bought for the Veterans Administration.) But if you think that dumping another billion dollars into the pockets of General Electric or Raytheon is going to produce trickle-down prosperity for the general public, you’re subscribing to an economic theory that makes Arthur Laffer look like Chairman Mao.

original article: Blue Voodoo

bias, budget, bureaucracy, cronyism, Democrats, economics, economy, funding, government, ideology, left wing, liberalism, nanny state, philosophy, politics, poverty, propaganda, public policy, reaganomics, socialism, spending, taxes, wealthy, welfare

Filed under: bias, budget, bureaucracy, cronyism, Democrats, economics, economy, funding, government, ideology, left wing, liberalism, nanny state, philosophy, politics, poverty, propaganda, public policy, socialism, spending, taxes, wealthy, welfare

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