My kids won't listen to me

My children ask for my advice on economics and job careers. I wonder if I can give valid advice and I am reluctant to speak. As I think about the five generations I have personal knowledge of (my grandfather, my father, myself, my children and now the grandchildren and nieces/nephews), what worked for each generation did not work for the next generation. The strategies of World War 1 failed in World War 2, what worked in World War 2 failed in Vietnam. The strategy for the Gulf War failed in Afghanistan. My grandfather was a soldier and a farmer, for my Dad the best strategy was  to get a good job and stay for your entire career, for me changing companies worked best. With each generation a technical education has become more important.

I certainly don’t wish for the middle ages where if the father was a shoe maker the son will be a shoemaker, if the father was a farmer the son will be a farmer, if the father was a King the son will be a King. The rapid societal changes have been driven by the industrial revolution and scientific advances. Medical advances increased lifespan, financial innovation created consumer debt, theories in quantum physics created the microchip. As a teenager I fixed our home telephone and my father was completely befuddled, today my grandchildren use a cell phone that completely befuddles me. We become obsolete before our time.

We all wish to help the next generation, passing on the wisdom of our years. As an adjunct professor my greatest pleasure is seeing a young mind light up. The fundamentals of physics are the same as when I was a student, Isaac Newton’s equation (1679 AD) can put a satellite in orbit, Maxwell’s equation (1862 AD) explain electrodynamics (why an electric motor or a light bulb works) while for history students the French King Louis XIV still died in 1715 AD. But I cannot give them useful advice on a successful career path or the secret of a good life. The advice my parents gave me was wrong and the advice I give my children is probably wrong. This doesn’t stop me from telling them what to do and they wisely ignore me. At least they are polite about it.

Inequality is bad economics

Inequality is bad economics. When prosperity is not widely shared there is less prosperity. Trickle-up economics work trickle-down economics doesn’t work. As the very rich take larger pieces of the pie, the pie gets smaller. Investing in human capital improves life for all, human capital is the pie. Access to good education helps my children it even helps those without children. If economic growth was 5% there would be no national deficit. While the short-term greed of the financial sector started our current deficit problems the financial deficit is rooted in the human capital deficit. We put Willy Coyote in charge and he keeps dropping the two ton safe on his own foot.

So Willy Coyote is thinking about having the Road Runner for dinner. Well cooked with condiments. The story never allows poor Mr. Coyote a win while in the real world Mr. Coyote has got a couple of my fingers and big chunk out of my backside. Maybe the Willy Coyote metaphor isn’t that good. I need a metaphor were the bad guy wins. I need a fable that ends with “And the evil Queen lived happily ever after”. Disney Company hasn’t produced one of these stories; even their Caribbean pirate has a jolly heart.

Many answer that in the long run good will prevail. To quote John Maynard Keynes “In the long run we are all dead”. Some of us are worried about next month’s bills. I worked hard for 50 years and a little less inequality, just a small share of the great productivity gains I engineered for corporations would make a difference.

In this story the stuff Willy Coyote gets from Acme Corp does work and he eats very well.

The Politics of being rich

Presidential candidates are always rich. The question is whether they made their riches legitimately, are they like Steve Jobs or Gordon Gekko. Americans have never had a problem with rich presidents. George Washington was one of the richest men in America. Senator John Kerry is worth at least $186 million while Senator John McCain is north of $300 million and George W. Bush has at least $30 million. There was very little discussion of their wealth during the presidential campaigns. Wealth is seen as a positive qualification for a president. It speaks of success and we all want our President to be successful. In Governor Mitt Romney’s campaigns it has repeatedly been a topic by his adversaries. Texas Governor Rick Perry said “There’s a real difference between venture capitalism and vulture capitalism” to Fox News in an interview on January 11, 2012. Governor Perry identified the central question.

It takes a thief to catch a thief. Governor Romney could turn all this to a positive with policies that would level the playing field and give the average working stiff an equal opportunity. Current laws and regulation give preferential treatment to the rich. Governor Romney enjoys the substantial benefit of carried interest tax rates. His companies received tax credits for off shoring jobs. He could talk about the corporate rent seeking that cost the middle-class money and opportunity. The challenge would be creating serious policies, not just populist rhetoric. Serious proposals would make him a statesman, a visionary leader.

I have visited Governor Romney’s website (mittromney.com). He states “How will we generate sufficient revenue to balance our budget without discouraging economic activity …”, he wants to “eliminate taxes on interest, dividends, and capital gains”. Most American’s receive their money as wages while Governor Romney receives his money as interest, dividends, and capital gains. This policy will directly benefit Governor Romney but will make no positive difference to me or my children. Reading Governor Romney’s website it appears that the objective of his financial policies is to help Governor Romney. All of this makes the source and method of Governor Romney’s wealth a legitimate political question.

The Dog needs a bath

“Your dog needs a bath.” My wife repeated. When the dog needs medication, a visit to the vet, a bath or poop scooping, it is my dog. When she wants a companion for her neighborhood walk it becomes her dog. Funny how that works. However she is correct, the dog needs a bath. As a lifelong dog aficionado I have gone through a learning curve about dog baths. As a young man I thought that dogs did not like baths and that I had to overpower the animal, giving them a bath using brute force. This didn’t work very well with small dogs, and then I got a female German Sheppard that grew to over a hundred pounds. Forceful bathing did not work at all with her. She was not going along with the brute force approach and I was forced to rethink my dog bathing methods. She enjoyed chasing the water from the backyard water hose, biting at the water. Dog baths became a very wet summer game. This left a problem with cold winter days. One cold winter day I decided to try using the indoor bath tub. I disrobed and climbed into a bath tub with a 100 pound plus German shepherd, I was nervous about this approach, I had a mental image of my ding dong getting removed by sharp dog teeth. I am a confident, and consistent dog master; my dogs have always accepted me as the final voice on any subject. This first indoor bathtub dog bath actually went well. In the three decades since I have got the indoor dog bath process to near perfection. I sing to the dog in our bath, I make the whole affair a pleasant and playful affair. My mental attitude is “you have no choice dog, let's have fun with this”.  I can wash three 50 pound dogs in about 20 minutes. It does take a little longer to clean the bathtub after all the dog baths.

My dog needs a bath. Most of my dogs have been what is called a “rescue” dog, this long hair Chow I got as a puppy and acclimated her to indoor baths as a pup. How I have to select a dog shampoo. I have medicated shampoo that I had to get a veterinarian prescription to purchase. $60 for 16 fluid ounces, ChlorhexiDerm shampoo, plus the standard flea and tick shampoos, oatmeal based shampoo, and a “soothing” aloe dog shampoo. All of these shampoo concoctions are mixes of toxic chemicals and have warning labels. All the choices cost more than my regular guy’s hair shampoo. Not hard to guess which one I’m going to select. I figure my shampoo can be used daily on a hairy feral mammal, me. It should be usable on a dog. I use the specialty shampoos when I have some specific objective, such as fleas or a skin rash. Most of the time I use regular, cheap, man’s shampoo and there have not been any problems.

The final issue is how the dog feels about her own scent. Most dogs after a bath will immediately find something to roll in, preferably something like used baby diapers. I use men’s after shave lotion, sprinkle it on a towel, lay the towel on the ground and let the dog roll in the scent of after shave lotion. I would guess that a women’s perfume would be just as acceptable to the dog but either scent is better than whatever the dog would naturally find.

Now that the dog is clean and acceptable I can finally get back to finding a subject to blog about. Maybe another political rant, or writing about the idiocy of professional economist.

Don't Tax the Rich

Taxes reduce production by the wealthy, the more you tax the less you get. A political article of faith hammered home every day in the print and cable owned by the wealthy. Reading the data analysis by economist there is no support for the idea in factual data. This idea falls into the category of “My mind’s made up, don’t bother me with facts”.

So how about a thought experiment? You are given a pay raise that takes your marginal tax rate to the next level. You currently make $17,400 a year, the raise will take you to $20,000 a year giving you a $217 a month increase. Your new marginal rate will be 25%. Your actual take home increase will be $162.50 a month. Do you refuse the raise? Will you now start slacking on the job? If you answered “no” to either question then you have not followed the law of economics that rules the wealthy. A “job creator” would stop working. I always took the raise and worked harder hoping for another raise. Maybe that explains why I am not a billionaire. At what point would you refuse the raise? 30% or 40% or 60% or any number less than 100%?

I have never seen anyone refuse a raise or promotion that increased their marginal tax rate. Perhaps since the tax rates hikes stop at $388,350 all money above this is taxed the same. Increasing the income of someone making a half million a year to one million a year will not cause a rate increase. You will take home $325,000 of the extra $500,000. The Laffer-Curve Economic theory clearly predicts that you will say “no” and work with less enthusiasm. Above a certain point "P", "all people would choose not to work", when I ran my company I would try to make money first and worry about the taxes later. Apparently I had this backwards.

The "Don't Tax the Rich" idea has a long history. Medieval nobility firmly believed in no taxes on themselves. Serfs paid all taxes, usually everything the serf had. The aristocracy were the ultimate job creators and all wealth trickled down from the King. Too bad Napoleon came along and showed the vast military that a Democracy could field. The morale, the esprit de corps, which could be mustered by people that thought of themselves as free, this of course, ruined everything for the nobility. For the last two centuries the uber rich upper class has been fighting to free us from the curse of Democracy. Capital must be free, not people.

The One World Government

The One World Government, a fear of libertarians, conservatives and the religious right. Those of us in the middle think a One World Government highly improbable, unlikely, maybe even impossible. I may have to change my mind because the people most vocally opposed to the idea are working hard to make it a reality. The major impediment to a One World Government is democracy. The majority of people would not put up with an oppressive dominating One World Government, the leaders would be voted out of office, long before they could achieve their goal. If one wishes to dominate the globe, democracy has to be defeated.

In America we have a low voter turnout, and the Republican Party is working hard to lower the turnout even further. Disenfranchisement of minority vote, directly by various “voter fraud” misinformation programs may be obvious, but getting the general public to lose faith in the democratic process is just as effective. Feeling that your vote doesn’t count will make you less likely to vote. Restricting the ability of government to help the middle class, or even to believe that it will worsen our well being, is just as effective at destroying democracy, or disbanding Congress. Indeed, many I talk with think disbanding Congress is a good idea. We should not disband Congress, we should make it functional.

Who benefits from a reduction of democracy? The rich and powerful, the less power in government the greater the power of this small elite group. Power does not disappear, it just moves around.
We have been compromised by the power of modern brainwashing and propaganda, these words are never used, instead we hear about “framing” and “messaging”, the products of marketing research. The rich now have unlimited “messaging” power, thanks to the Supreme Court’s decision on Citizens United, strongly supported by the political right. I listened to one commentator talking about how future leadership will be from corporations, not from government. Corporations are as democratic as the military.
Shareholder rights have been eroded to the point of nonexistent. No public corporation is even faintly democratic, while private corporations are personal Kingdoms. The corporate CEO’s run the show for their personal benefit. Good performance requires a large performance bonus while bad performance requires a large retention bonus. Of course they are not the elite; they are the “job creators”, more “messaging” by the elite which is faithfully parroted by the right.

On the international scale, the IMF takes away the right of sovereign democratic governments, making the "best" decisions for their population. Treaties for globalization restrict the ability to make decisions by nationally elected officials. All of these are non-democratic institutional policies that favor the 1% at the cost of the 99%. Democracy must be replace by unfretted Capitalism, this would create the new One World Government.

European Politicians pander as needed

I watch a lot of cable shows claiming to be about news or business matters. They are actually entertainment programs fighting for ratings. They try to shock, frighten and tell us what we already believe. Any facts or science in disagreement will be ignored or ridiculed. Currently the script for Europe is that European leaders are oblivious to economic reality, incapable of understanding even the basics of economic theory. I am sure that this polls well in audience studies, with the dysfunction of our American political system we can feel superior to the European’s ignorance.

I am not so sure this is a correct interpretation of the European politician. There are fundamental differences between the American and European political systems. Europeans do not have gerrymandering (they don’t even have a word for gerrymandering), the parliamentary system requires actual one on one debate. The Europeans do not have the echo chamber that insulates a politician from any contrarian data or points of view. Elections in Europe are (in general) funded by public money. A large number of studies have shown that private money distorts democratic out comes, there are no studies showing that private money improves democracy. As a result, these fundamental differences produce fundamentally different politicians.

The European politician has to practice the “Art of the achievable” and must be pragmatic, as leaders in a democracy they must bring along the general population. They are well informed and educated and they have advisers that clearly understand economics. They commission government studies about economic and social issues and then they study the studies. Europe has a much longer history of governance. The Vikings started a parliament in 979 AD and is still functioning today, European leaders think in longer time frames.

The European leaders have a long term vision of a united Europe. This is a remarkable objective and would have enormous worldwide effects. Already the European Union GDP is the world’s largest, the EU is third in population with America fourth. The European political system has already devoted 54 years to the mission of a united Europe. Being politicians in Democracies they have to pander, they have to listen to the majority of the voters, they have to tell their voters something close to what their voters want to hear, for each step toward unity there can be one step back. Remember that there is what politicians say and then there is what they mean. They are not ignorant of economics. They are directing a grand vision in a Democracy. The EU will not be dissolved. The writers for the cable political entertainment shows cannot deal with this level of meaning.