deficits, delusions, and deification

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Dean Baker's observation that the deficit hawks are furious that the deficit is dropping is interesting:

Last week, the Congressional Budget Office reported that the deficit for the 2014 fiscal year that just ended was $460 billion, considerably lower than they had previously projected. This puts the deficit at 2.7 percent of GDP. At that level, the size of the debt relative to the economy is actually falling.

Not only is the deficit down sharply from its levels of 2009 and 2010, when it was near 10 percent of GDP, it is below the levels that even the deficit hawks had targeted back in those years. In other words, even if we had followed the lead of deficit crusaders like Erskine Bowles and Alan Simpson, the deficit would be no lower today.

If anyone thought this would make the deficit hawks happy, they are badly mistaken. They are furious.

He then notes that "the deficit hawks have a bigger agenda:"

As just about everyone now knows, the major story in the economy over the last three decades has been the massive increase in inequality. The share of income going to the top one percent has roughly doubled since the 1970s, from 10 percent to 20 percent. As a result, most workers have seen almost none of the gains from economic growth over this period.

There are many people who would like to see this upward redistribution reversed, or at least not see the income gaps get still larger. A range of policies, from raising the minimum wage and more union friendly labor policies, to taxing Wall Street and full employment trade and Federal Reserve Board policy have been pushed to ensure that workers get their share of the economy's growth.

By contrast, the deficit hawk gang is perfectly happy to see this upward redistribution continue. After all, they and their patrons have been the beneficiaries.

What remains largely unsaid is that "the deficit hawks' agenda...is about getting people to obsess on the cost of their own retirement and to ignore the rich people who are stealing them blind." Paul Krugman explains how righteousness killed the world economy, observing that it "appears to be stumbling" and wondering "Why does this keep happening?"

After all, the events that brought on the Great Recession -- the housing bust, the banking crisis -- took place a long time ago. Why can't we escape their legacy?

The proximate answer lies in a series of policy mistakes: Austerity when economies needed stimulus, paranoia about inflation when the real risk is deflation, and so on. But why do governments keep making these mistakes? In particular, why do they keep making the same mistakes, year after year?

The answer, I'd suggest, is an excess of virtue. Righteousness is killing the world economy.

The punitive obsession that ignores debt relief has its roots in this righteousness:

In America, the famous Rick Santelli rant that gave birth to the Tea Party wasn't about taxes or spending -- it was a furious denunciation of proposals to help troubled homeowners. In Europe, austerity policies have been driven less by economic analysis than by Germany's moral indignation over the notion that irresponsible borrowers might not face the full consequences of their actions.

So the policy response to a crisis of excessive debt has, in effect, been a demand that debtors pay off their debts in full. What does history say about that strategy? That's easy: It doesn't work. Whatever progress debtors make through suffering and saving is more than offset through depression and deflation.

Sean McElwee looks at your brain on money and examines the psychosis of plutocracy:

The Internet is replete with apologias for the rich. They are thinly sourced and even less well thought. The goal is simple: to justify the unjustifiable chasm between the rich and poor, globally and within our nation. But the irony is that, rather than being better than the rest of us, in many ways the rich are worse.

Paul Piff and his co-authors, who have done extended research on the behaviors of the wealthy, find that lower class individuals are more generous, charitable, trusting and helpful than upper class individuals. In another study, they find individuals with expensive cars were more likely to cut off other drivers and pedestrians. Further, in laboratory experiments, wealthy participants were more likely to take valued goods, cheat, lie and endorse such behavior. These studies have support from other sources. For instance, the wealthy actually donate less to charity as a share of their income than the middle class. Their giving is more dependent on the economic climate than the middle class.

The trouble is that "in a society that worships wealth, those with wealth are worshipped as well:"

Many defenders of the rich argue that the rich are special and therefore merit special treatment. (Charles Murray has gone as far as to argue that the rich should preach their virtues to the poor.) Americans overwhelmingly believe that the wealthy have individually earned their place in society. But this is unlikely. Numerous studies find that financiers are vastly overpaid, and hedge fund managers, even the best, rarely beat the market. CEOs are also vastly overpaid, and largely benefit from a shift in tax policy that allows rent-seeking to flourish.

A famous economist once wrote,

"This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments."

News flash: It was Adam Smith. [This is yet another example of the Right not being familiar with their own venerated books.]

All humans all delusional. It is only the rich who have that delusion fostered. All humans are, to some extent, assholes. But only rich people can get away with it.

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This page contains a single entry by cognitivedissident published on October 13, 2014 12:49 PM.

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