There is an interesting economics column in the Wall Street Journal on the similarities between the Greek meltdown and our own fiscal policies. I have long been a critic of the wild spending of both Congress and President Obama, including the recent proposal to simply pay for an over $200 million short-range missile program for Israel (here). This article discusses the possible disaster awaiting the United States as our leaders blissfully assume that a recovering economy will pay for their various programs and pet projects.
The column questions the logic of being able to tax their way out of this deficit. While I am socially liberal, I tend to be fiscally conservative and I find the current situation extremely alarming.
This article is interesting for its proposition that higher taxes are not able to close such a gap:
The feds assume a relationship between the economy and tax revenue that is divorced from reality. Six decades of history have established one far-reaching fact that needs to be built into fiscal calculations: Increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth.
This is a different take on the problem. I have always been skeptical of the “spend out way out of the crisis” approach — which is an awfully convenient theory for members who are always inclined to spend more and put off payments to the future. Once back in power, the Democrats seemed to immediately fulfill a stereotype of higher spending and immediately turning to higher taxes as the solution. This is precisely the course that led to the last Republican takeover of Congress. In their defense, Democrats faced a crisis left to them by the Republicans and particularly George Bush who was one of the greatest spendthrifts in our history. However, they have shown no serious commitment to tackle these dire economic forecasts — gushing money in Iraq and Afghanistan while watching cities and states shutting down basic programs. Our debt is now growing at a record pace — roughly $5 billion a day (here).
This is not to excuse the Republicans who, under Bush, showed no restraint and left Obama with a massive debt. I simply have little faith in our current economic policies or a sense that leaders are seriously addressing the growing threat to the nation from our growing debt. Various countries have raised alarm over our debt and the similarities to the Greek meltdown, here.
For the column, click here.
@Byron:
Is your mind so disorganized and entrapped by cliches that you REALLY cannot understand the simple facts?
China does not have labor laws. It has no laws against exploiting workers, firing them for getting sick or injured, no minimum wage laws, no fair employment laws, no laws against endangering the lives or health of workers.
China (and India, which is a representative Democracy with a similar dearth of employee protections) is about as close as one can get to the “free market” ideals. And the situation produced in those countries is appalling.
How does their form of government being “communist” have a single thing to do with it? They don’t provide health care, or food, or shelter to these workers. Do you even know what it means, or are you just panicked at the very word “Communist”? In China, “communist” means nothing. There is a dictatorial ruling class in China but the underlying economy is (now) free market capitalism with virtually no restrictions.
It is entirely plausible (and implemented in China) to have a capitalistic economy without democracy. I honestly don’t think you understand shit. We DON’T have relatively free markets, we have literally THOUSANDS of laws on employment, termination, compensation, sexual harassment, discrimination, hiring, required paid leave, and on and on. We actually need more, but China has NONE OF THAT. Which is a freer market?
Chinese and Indian forms of government have nothing to do with anything, the question is whether IN PRACTICE the markets are free, and they are as free as it gets. And the result? The same thing that happened when OUR markets were free at the turn of the century — Child labor, slave wages, disease-causing work conditions, frequently lethal and crippling machinery, chemical usage without protection, 14 hour work days seven days a week, sexual harassment with no recourse for women, firing without cause, beatings of female employees by male bosses (still frequent in China), and on and on.
Employers faced with cutting their costs or losing their business do not hesitate to abuse their employees to the limit of what they are allowed to do, and if there is no limit, as in China, they will abuse their employees until they are suicidal. I mean that literally, if you look at the Chinese Foxconn suicides just recently. Do you think those employees actually have any choice left to them besides suicide? Do you think they could have shopped around for a better job? NO. They were trapped, and they felt trapped, and in despair they gave up and killed themselves.
THAT is what “free markets” do to employees. It is the job of the government to stop exploitation and abuse, and the only way to do that is by law.
Free Markets DO produce slavery. Well controlled markets can produce freedom. Freedom from exploitation, freedom from bullying and fraud and getting ripped off or abused by egotistical power mad employers, freedom from deception by vendors, freedom from getting ripped off. Well controlled markets will produce actual competition on products, prices, safety and quality, because a well controlled market will make that competition the ONLY way for entrepreneurs to get ahead in the market. Well controlled markets could stop monopoly rent, and bogus lawsuits, and bogus patent claims, and false advertising, and predatory pricing, and monopoly rents.
We don’t have a well controlled market, but we are, at least, light years ahead of China and India. Those are the countries implementing your ideal of “free markets,” and the result is misery, despair, slavery, and hopelessness.
Tony C:
most third world countries are not free countries and China is not a free country.
So what is your point? That companies use cheap labor to produce goods and services, that is a big surprise. If you dont like it then dont buy goods made in China and dont purchase from companies that do work in China.
You vilify free markets when the country that is doing all of this is a communist country. That makes sense to me. We have relatively free markets here in the US, I dont see much slavery going on.
Free markets do not produce slavery, controlled markets produce slavery or a variation thereof.
Marx is wrong on a very many different levels.
@Byron:
You miss the point. Why am I surprised? The point is that the workers in Chinese factories (and I know from watching direct filmed interviews with them) are typically healthy young people capable of supporting themselves by working in shops, their local villages, doing laundry or cooking or farm labor in return for food. The ones I saw interviewed were not working in the factory for a personal income, they were there to support SOMEONE ELSE.
The factories treat them (especially women) like slaves. They must live in the factory dormitory; they must eat while they work, a “mistress” wakes them up with a whistle at 5:00 AM, they get dressed and are herded to the factory floor where they work at sewing until 9 PM. Lunch and dinner is rice served at your station. For the women pay is kept, and an allowance is mailed to the girl’s husband, father or brother. Girls without a man to pay are not hired. She never sees it. If she becomes ill or injured she is fired, her belongings are put on the street and so is she — Broken arm and all. If she has pay in her account, it is mailed to her male master. This is slave labor.
If we demanded (by law) that our goods be produced humanely, these problems would be addressed. The factories would just pass the costs along in their charges. We do not do that, so they treat workers like slaves, because that is the only way they can compete with OTHER factories that treat workers like slaves.
Without regulation or some other hard boundary, the low cost is always the boss most willing to crush human lives for profit. Free marketers like to think the workers will just refuse the job. Easy to say when getting a job is easy, a little tougher when your life, or the lives of people you love, are literally on the line. Desperate people agree to slave work conditions when the alternative is death or disaster or heartbreak. There are not an infinite number of jobs or complete mobility to go where jobs are better. When the sociopathic are running even a few of the factories and the only feature clients care about is price, the other factories cannot compete on price if they spend a penny more on labor than the competitors. So they have to treat their labor the same way, with complete disregard for their health or any idea of fairness.
Free markets produce virtual slavery.
Byron,
$100 bucks a month worth of stuff at wholesale, the rest at 10% off, which right now puts most things at what they cost in other stores (did I mention we’re too expensive?)
Gyges:
do you get a discount? Always place a case of the good stuff under a shelf and “forget” about it :).
Gyges:
is the little one okay? that really sucks, was it a bad break? They heal pretty quick at that age so he/she should be up and around pretty quickly.
I hope the recovery is uneventful and the wee one isn’t too uncomfortable while the leg mends.
Tony C:
“This is a false choice; as if the only option is to enslave people or let them starve. This is your problem; you see everything in extremes of black and white, and it is a false choice.”
Why don’t you talk to a buddy of mine from Africa, he can fill you in on my “false choice”.
The reason most companies go overseas is the inexpensive labor. If labor is too expensive it doesn’t make economic sense. Personally I would pay a little more but then I am not in charge and we don’t know what their books look like do we? So both of us are speculating on the cost of labor and the outcome to the local population. But if the company doesn’t employee people they will survive by foraging or some other means. Survival is black and white.
Buddha,
Yeah, he’ll survive, but it made for a busy weekend. The Port barrel aged Lee’s was better, (probably the best beer I’ve had since I managed to get a hold of some Westvleteren 12), but I pushed it a little to hard with the customers, so we sold out before I could buy myself a second bottle.
@Byron:
>> I am a free market guy, you live or die by your ability to serve your customer/client.
No, that is a competing on PRODUCT, not a free market. Jesus Christ you are dense. If companies ACTUALLY lived or died on their ability to serve their customers and clients WITHOUT exploiting their workers and WITHOUT polluting the environment and WITHOUT secretly endangering others, we would be in agreement.
The problem is that a “free market” ALLOWS exploitation, pollution, and secret endangerment. By definition! Everything goes! The only thing that PREVENTS those things is REGULATION.
What you are saying is equivalent to a dieter saying she wants to lose weight without giving up eating 6000 calories of sweet chocolates every day. There is nothing wrong with the construction of the sentence, but it is inherently contradictory and impossible to put into practice.
If you have a “free market” that INHERENTLY means companies will NOT compete just on their products, they will compete in ways we find criminal. That is why we have the laws we do, because even when people had much more of a “tough luck” attitude, they found the actions of companies toward employees and customers to be reprehensible and DESERVING of criminalization.
You may as well agitate for unicorns, garden gnomes and Santa Claus to come save us. If you want want you CLAIM to want, you are NOT a “free market guy” in the least.
Gyges,
Best of luck in re broken leg. At least he’s (?) young enough to heal completely. And that Harvest ale sounds good enough to merit the trip to Denver alone. 😉
Buddha,
The two of you make to Denver at the same time and the second beer’s on me. Heck, I’ll even break out a bottle or two of J.W. Lee’s Harvest ale aged in Sherry Casks (2007), and we’ll REALLY make a night of it.
Tony C and Byron,
Good discussion, a welcome break from watching people using Tootie for target practice.
Byron,
Sorry I missed most of this discussion; thanks to a freak accident the world’s happiest toddler is now the world’s happiest toddler with a broken leg.
As way of clarification:
The graph I linked to was set up to display the Fed. Deficit, the amount they were short for that year. Gross Debt, the total amount the U.S. Government owes to various institutions, is a different option, and is higher than the total income. Think of the Federal Deficit as the derivative of the Gross Public Debt.
As far as I can tell whoever set up that site gets their numbers (up until about 2007) from here:
http://www.gpoaccess.gov/usbudget/index.html
which seems a reliable source.
I chose the Fed. Deficit because it’s easier to see the cause and effect relationship between increased taxes (and revenue) and decreased budget shortfalls that way.
I just get a little twitchy when people call for balancing a budget on the one hand, but want to cut the income more than the costs. I know the standard line is that in the long run tax cuts increase revenues, but the numbers don’t back that up, which is what I was showing with the graph.
Coincidentally, I get the same facial tic when the owner of the store I work at tries to make up for the loss of income due too a loss of customers to stores with cheaper prices by raising our prices. Right now, I get told from a customer that they’re not coming back because of the price increases about once per shift.
>> You think making $2/day is worse than making $0.50 per day or having to rummage in a dump for something to eat or chop down all the trees and kill all the animals in a particular area?
This is a false choice; as if the only option is to enslave people or let them starve. This is your problem; you see everything in extremes of black and white, and it is a false choice.
The question is really whether sacrificing one’s life and health to make $2 per 16 hour day is worse than earning $10 for an eight hour day in a safe and healthy environment. Yes, it is. The former is exploitive, the latter (in China) is not. $10 a day can pay for food and shelter and have some discretionary income left over.
Chinese and Indian factory workers are essentially blackmailed labor with no choice in the matter. They leave their villages and farms to sacrifice their lives to pay the cost of saving their sick parents or children that will die or starve without income.
They get paid $2 per sixteen hour day of breathing toxic chemicals, dust and fibers because it is a free and unregulated market, and the factory owners prey upon them and pay the absolute minimum amount that lets the desperate provide any relief to their family. It is serfdom, it is exploitation and causing human misery, pure and simple.
Your claim that their alternative is rooting in the dumps is a myth perpetrated by libertarians that you have bought. It is a lie. The individuals can typically “work for food” on farms or for local businesses with no problem. They need money because their alternative is not personal starvation, it is to watch their disabled parents that *cannot* work for food starve and die, or to watch their sick child die without medical care, and the factory owners know this. They are not required to pay a fixed wage or a fair price, the owners gear their wages to trap workers. For as long as their desperation exists; they will never get even one penny ahead. They don’t even GET their wages, the owners keep it and distribute it as they see fit.
That is what a “free market” will get you. Virtual Slavery.
P.S. You must be kidding; “word of mouth is far more deleterious to a bad business than government regulators”?
A government regulator can shutter a restaurant in 10 seconds, and send whatever patrons are in it away. Can “word of mouth” do that? You truly must be joking. A government regulator can try and convict a restaurant owner of violating laws, strip them of their licenses and prevent them from serving people ever again.
Word of mouth only works if people hear it, and quite a few businesses do not rely heavily on repeat business at all. That includes airport-based businesses and online businesses and jewelry stores and roofing services and tourist-based businesses and Interstate highway restaurants, not to mention critical things like ambulance services. All of these businesses really never expect to see you again, and the chances are excellent you don’t know a single person that has ever been a customer of theirs.
Whether you are a libertarian or not, you share their deeply flawed view of the infinite availability of information and their idiotic view that it takes zero effort to separate good intel from bad. I know in the USA that ambulance drivers are trained and tested, that doctors are certified, that food and restaurants are relatively sanitary, that buildings are usually up to code, and virtually all the drivers I am likely to encounter at least passed their driving test.
I would not rely on word of mouth for any of these things.
tONY C:
take a look at where your shirt is made, Bangladesh, Malaysia, Hong Kong, China. You think that $30 dollar Polo you buy from Nordstroms is any different than the $12 polo you purchase at a discount store? Nordstroms just makes $26 dollars per shirt rather than $8. The labor is the same.
By your argument we should all quit buying anything made overseas. You think making $2/day is worse than making $0.50 per day or having to rummage in a dump for something to eat or chop down all the trees and kill all the animals in a particular area?
Scratch the surface of a capitalist and you always find an environmentalist, maybe not intentional but that’s what happens. John D. saved the whales and Henry Ford saved horses.
Well as far as Madoff goes your government regulation worked really well, stopped him in his tracks 10 years ago when the SEC first heard bad things.
“You were talking about cause and effect above and then your hometown of Winnsboro, could it be that Wal-Mart was not the culprit but maybe the change in the number of small farms or some other economic change?”
No, it was Wal-Mart.
The fact that small family farms were being impacted by the rise of BigAg is coincidence, not causal. Big Ag didn’t displace jobs, it just changed the boss from Mr. Small Farmer to Mr. Corporate Weasel. Farms still require X number of people to operate. The smaller merchants would have survived that change but for Wal-Mart’s presence. The mom and pops had survived all kinds of Ag market fluctuations in the past, but they couldn’t withstand the Wal-Mart onslaught due to disparities in leverage as bulk industrial/retail purchasers.
@Byron:
It sounds like you agree with me; do not try to compete with McDonald’s on price. Wendy’s and Burger King and Sonic are not dumb enough to do that because their businessmen understand they can’t win that fight.
Nordstrom’s doesn’t compete with Walmart on price, they are famous for their service and quality. Walmart is more *infamous* on service and quality. No sane person would compete with Walmart on price, and you seem to agree with that.
The fact that Walmart’s Chinese and India factory operations (I say that because they exist ONLY to serve Walmart) are unsafe, inhumane, exploitive, polluting, and border on human slavery does not seem to bother you at all. As long as you get the $2 shirt, I guess and don’t have to know about it. As long as you get the $1 burger and don’t have to know any details on HOW that diseased cow was processed or how many bug parts are ground into those fries, it is all okey-doke.
Word of mouth is pointless if all restaurants are equally bad. Word of mouth doesn’t tell you the restaurant food is polluted with lead, or mercury, or pesticides or harmful cleaning agents that build up to make you sick. Plus, I suppose you are saying that only socially connected people deserve to be protected, that I must pay the “social tax” of making and keeping 100 friends so if I want to visit a restaurant, hopefully a few of them will be able to tell me if the food makes me sick. Otherwise, I suppose I have to be the sacrificial lamb and try it.
I am being sarcastic, word of mouth is a ridiculous approach. People have to get sick and possibly die in order to identify bad actors.
Plus it can backfire. How do you stop someone like Bernie Madoff? Word of mouth is what made him rich. How do you stop restaurants from spreading bad word of mouth about their competitors, claiming the competitors make people sick? They are just passin’ along what they heard, will be their excuse.
Give me an independent health inspection regime ANY DAY. I will happily pay the tax and demand the restaurants, food suppliers and farmers must pass it to sell their food.
Buddha:
I agree that Wal-Mart has some problems and I also agree that the best way to remedy those problems is for the consumer to do the spanking with his check book.
You were talking about cause and effect above and then your hometown of Winnsboro, could it be that Wal-Mart was not the culprit but maybe the change in the number of small farms or some other economic change?
I grew up in St. Louis but my great grandmother lived in Hillsboro, Mo and very small town south of St. Louis, I spent a good deal of time down there as a kid and learned that the only ones that had money were the small business owners. The rest of the area worked on farms and got fucked by the Mom and Pops. So now you all vilifying Wal-Mart for fucking the Mom and Pops while the Mom and Pops were fucking everyone else in the town by high prices and the service wasn’t much better. I have shopped at many mom and pops and I will take Costco any day all day or any other discount chain, you cant beat Bass Proshops for fishing equipment.
Bass ProShops started as a small discount store in Springfield, Mo. I should have applied to work there right out of school, I would be rich and it would have been a fun career as I love to fish.
I am a free market guy, you live or die by your ability to serve your customer/client. the ones who serve their patrons the best are usually the ones that win. Better service, lower prices, better ideas, etc. It is better for everyone. When Wal-Mart is no longer at the cutting edge they will have their throats cut. Look at Woolworths.
Byron,
In Tony’s defense, you do sound economically exactly like a Libertarian.
Different business models and target audiences. And to see how anti-competitive Wal-Mart is all you have to do is go to any small town in America. I grew up near a small town in Louisiana called Winnsboro. Winnsboro used to be a small town with a diverse and vibrant economy of locally owned shops. Now? It’s mostly shuttered except for Wal-Mart. Wal-Mart will drive out mom and pop the first chance they get. Diversity in an economic system is as important to systemic health as it is to the biosphere.
And as to their service? I’m not sure what planet you’ve been shopping on, but Wal-Mart sucks. That wind like noise you are hearing? That’s Wal-Mart sucking out loud. Or have you forgotten tales like these 87 pages of customer horror stories?
I won’t even mention the way they treat their employees.
Wal-Mart is a bad corporate actor and no one should shop there. I don’t care if they are giving their junk away. Rewarding bad behavior only encourages more bad behavior.