The System Is Rigged

[Gumby]

Gumby, I thought you were saying that you thought that it was good to have all of this deficit spending and also that it was important not to have inflationary increases in disposable income. Isn't that exactly the same thing as saying  "a system where the government pumps out more and more money but a smaller and smaller proportion of that goes to the middle class" ?

First of all, I never said that deficit spending is always a good idea. Never ever said that. But, I don't believe we need to do away with capitalism as we know it to fix things.

All I've ever said is that deficit spending is a good idea when unemployment is high (and therefore disposable income is low). As full employment is reached, the population would maximize its productive capacity, and then the middle class would start to have rising levels of disposable income — which would obviously start to cause inflation. So, at that point you simply cut back government spending and tax more to make sure everyone doesn't have rising levels of disposable income to cause inflation.

In other words, deficit spending does matter when unemployment is low.

Full employment isn't likely to happen any time soon, so deficits are a good idea right now. But, if I were going to advocate anything, it would be for deficit spending to put the middle class back to work: by spending on infrastructure, education, technology and anything else that makes us all more productive. If building a moon base were to somehow make our lives more productive, and cause a technology boom, and investment in education, then I'd be all for it. The middle class would have more money and once full employment was reached, I'd cut back spending and use taxes as necessary to regulate any increases in disposable income.

But, if the spending is reckless and only goes to the top 1%, then that would be bad, because it would not be solving anything. And it certainly wouldn't maximize our productive capacity. Politicians still need to make smart choices (investing in education, infrastructure, and technology) for any economic model to work properly.

[Gumby]

Gumby, I think allowing deficit money to accumulate with the 0.1% does nothing to reduce unemployment. That money gets deployed in ways that create unemployment IMO. It is used to fund leveraged buy outs that lead to firms going bust or if everything goes well merely failing to invest in research and development. It is used for commodity price manipulation that cripples the real economy. Excess paper wealth cripples  the economy rather than lubricating it IMO.

Stone, I really don't understand why you think I'm advocating any money going to the top 1%. Where have I ever said that?? This has nothing to do with the top 1%, and everything to do with the middle class.

[moda0306]

stone,

Just because more $$'s enter the economy through deficit spending and, and more wealth later ends up in the hands of the .1%, doesn't mean the deficit spending CAUSED the transfer of wealth.

If an additional $1 Billion is spent to simply send out stimulus checks to everybody, very little of that is going directly to the .1%... any flow of wealth towards them afterwards probably would have happened anyway.

I don't think Gumby and I understand why you think the distribution of wealth is a result of deficit spending... so many other factors play a role.  In fact, deficit spending in depressions & recessions is often a great tool to bring up the lower class (see post '30's depression... too bad we spent it on war...).

[stone]

Gumby, sorry, just as you replied to that I pulled it because I thought I was being incoherent.

To me the point is that even if the government spends money on say state schools or whatever, if it doesn't mop that money up with taxation then the money eventually finds its way to the 0.1% and stays with them because they already have so much wealth that they will not consume with it but instead use it to gather more.

[moda0306]

stone,

The affect you describe, I believe, would happen under a fixed currency as well... like Gold.

Wealth, at this point, would continue to climb to the top, since they are the most informed and powerful players in the market... they can actually MANIPULATE the market, not just participate in it.

This isn't a result of deficit spending, but simple macroeconomics. 

[Gumby]

Everyone should have a right to be employed if they are willing to work. Governments should provide that productive work if the private sector can't or won't.

The top 1% should also have a right to be wealthy and have the freedom to store their wealth if they choose. We don't punish people for being wealthy in America. But, it's also important to realize that not everyone can be rich. Making everyone rich would cause inflation. So, the best we can do is get everyone in the middle class a job — so they can pay their bills and be productive — and constantly improve everyone's standard of living. It really doesn't matter if the top 1% is living large or not.

[stone]

moda, you have hit the nail on the head about the point that I am trying to make. Do you not agree that the MMT idea is that deficits amount to net saving by the non-government sector? Do you not agree that the vast bulk of the net saving that gets done gets done by the 0.1%? The government could put deficit money in as food stamps. That could get spent in discount grocers and show up as profits for discount grocers. That would then fall in the lap of the 0.1% and after it had fallen in their lap they would use it to earn a 10% or whatever annual return just as we try to do with our savings.

[stone]

Gumby, how the top 0.1% live it large is by dominating everyone else ensuring their self importance and consolidating their power and so creating an impoverished overall economy IMO.

[Gumby]

moda, you have hit the nail on the head about the point that I am trying to make. Do you not agree that the MMT idea is that deficits amount to net saving by the non-government sector? Do you not agree that the vast bulk of the net saving that gets done gets done by the 0.1%? The government could put deficit money in as food stamps. That could get spent in discount grocers and show up as profits for discount grocers. That would then fall in the lap of the 0.1% and after it had fallen in their lap they would use it to earn a 10% or whatever annual return just as we try to do with our savings.

Stone, who cares if the money winds up in the pockets of the top 1% as long as the middle class has full employment, has enough money to pay its bills and is slowly improving its standard of living?

Why do you want to punish the wealthy for being wealthy?

Gumby, how the top 0.1% live it large is by dominating everyone else ensuring their self importance and consolidating their power and so creating an impoverished overall economy IMO.

This is true in any capitalist society. I don't believe the alternatives to capitalism are any more appealing.

[stone]

Gumby, I don't want to punish anyone. I just think it is important to face up to the fact that money is power and that the government (indirectly) transferring a huge amount of (in effect) power to the 0.1% does inevitably mean that their desires prevail over those of everyone else.

[moda0306]

stone,

If the money ends up in the hands of the 1%, then that's a seperate problem, since we've acknowledged wealth would move that way, anyway.

Through proper taxation, spending, and safety nets, this can be avoided, but by no means do we need to quit running deficits for fear that we'll have happen what would have happened anyway in terms of wealth redistribution.

[stone]

Gumby, my whole point is that what we have is NOT capitalism. The deficits amount to government mediated transfers to the 0.1% that would not happen if it were not for the deficits. Perhaps the Austrian School ideas would cause a depression and that would be worse but they wouldn't have created the current crop of deficit beneficary billionaires.

[moda0306]

Gumby, my whole point is that what we have is NOT capitalism. The deficits amount to government mediated transfers to the 0.1% that would not happen if it were not for the deficits. Perhaps the Austrian School ideas would cause a depression and that would be worse but they wouldn't have created the current crop of deficit beneficary billionaires.

stone,

The gov't doesn't transfer wealth to the 1% via deficits, at least not most of the time.... this would happen anyway... you already agreed with me on this.  You have to look at where deficit spending is going first before attributing the maldistribution of wealth to it.

[stone]

moda, I think "proper" taxation such as to just leave people with what they had earned from productive investment or paid labour would amount to matching government spending $ for $.

[stone]

moda, money gathers money - we agree on that.

That can only go on for a very limited time without deficits. Otherwise all the money gets gathered together and it all grinds to a halt.

Deficits greatly extend what would happen initially anyway. Rather than having a three year boom and then a depression, you get a thirty year "great moderation" and then what we have now.

[doodle]

Has anyone ever thought that if the system is a rigged game then maybe the solution is to just stop playing? Like when you were a kid and someone disagreed with the rules and would just pick up the ball and say "I'm going home" thus ending the game for everyone involved?

By continuing to play the game we are all tacitly agreeing to get wrapped up in something where the outcome inevitably involves sacrificing our life force and time for useless baubles and shiny trinkets.

[moda0306]

stone,

What about the "proper taxation?"  We can tax the wealthy more and still run high enough deficits to keep enough base money in the economy to allow for maximizing our capacity.

If deficits don't cause distribution of wealth problems (they don't), then why not stick to a more general view of money having to expand with the needs of an economy, as opposed to administering some insane asset tax?

Also, wealth gathers wealth, not simply money gathers money.  We've both agreed in the past that our dollars aren't really an increase in wealth so much as a claim on real wealth.  Therefore, all the tools are already in the economy for the wealthy to get wealthier before the first fiat dollar enters the system.  We agree on this, I believe.  Deficits don't do anything that wouldn't have happened anyway.

[stone]

doodle, I think even if consumer spending crashed, the process would still continue.

[Gumby]

Stone, I still don't see how you could do better than a fully employed middle class. You seem to think that the top 0.1% would magically disappear under a different tax plan. The top 0.1% will always exist in any society. They will always be influencing the system. At least having full employment would improve the standard of living for the middle class.

[moda0306]

doodle,

The problem with what you mention is that there is wealth in this country in the form of natural resources and land that was never "earned" by anyone, but is being treated as such.  So basically, many people are put in a position of having to trade their services and time for the fruits of the earth that were partially theirs to begin with, but they never got credit for.

Here's a quote by Tom Morello that clarifies the difficulty of "not playing the game."

America touts itself as the land of the free, but the number one freedom that you and I have is the freedom to enter into a subservient role in the workplace. Once you exercise this freedom you’ve lost all control over what you do, what is produced, and how it is produced. And in the end, the product doesn’t belong to you. The only way you can avoid bosses and jobs is if you don’t care about making a living. Which leads to the second freedom: the freedom to starve.

Not something I totally agree with, but it makes a pretty keen observation about where certain members of our society enter this whole equation.  Sometimes you have to play the game to simply live.

[stone]

Gumby, I am all for full employment. I think the way to get there is to use an "insane asset tax" (as moda puts it) so as to prevent the deficits that otherwise would (in disagreement with moda) transfer REAL wealth to the 0.1%. That would allow the general population to be "heard" as customers -and catering for them would create the jobs that would give full employment.

[Gumby]

Sorry, but the asset tax is insane. It would be an invasion of privacy since the government would need to constantly audit people's wealth to see if they were cheating or not. People should have the freedom to have wealth, and store it for safe keeping, without the government taxing it (annually). No one wants to live in a society where every trinket is tracked and taxed every year.

I think if you put your mind to it, you can find ways to achieve your goals in the system we have — without radically uprooting the entire system and converting it into a mythical island that no one will ever live on.

[doodle]

I'm still trying to figure out why humans are still working as hard as they are considering the MASSIVE increases in productivity that we have experienced over the last 200 years.

200 years ago 95% of Americans were farmers. They farmed the soil to provide the food they needed to live. Today we can provide enough for everyone to eat (and throw 50% of our food away) with 2% of the population working in farming.

The same productivity increases can be seen in the clothing industry as well.

So there we have two of the three basic necessities of life (food and clothing) that can be satisfied by 4% of the population.

If we add housing into the mix and say it will take 6% of the population working in construction to provide houses for everyone then we can provide all the necessities of life with 10% of the population.

This is the fundamental issue I think. We can produce more than we can or should ever consume. Capitalism, economic growth, and the need for full employment are devouring this world.

My solution is to extricate myself from the rat race by learning to enjoy everything that is free in life and thereby applying a minute braking force on the system.

[doodle]

Moda,

America touts itself as the land of the free, but the number one freedom that you and I have is the freedom to enter into a subservient role in the workplace. Once you exercise this freedom you’ve lost all control over what you do, what is produced, and how it is produced. And in the end, the product doesn’t belong to you. The only way you can avoid bosses and jobs is if you don’t care about making a living. Which leads to the second freedom: the freedom to starve.

How about just working 1/4 as much and consuming 1/4 as much? By historical standards 1/4 the consumption at todays levels compared to that of 200 years ago would still be excessive. I have friends with 50 pairs of shoes in their closets and enough clothing to put a shirt on the backs of an entire refugee camp full of people. Of course they feel enslaved!!! They have exchanged their lives for CRAP!

[moda0306]

doodle,

I totally agree with what you said... Totally.

Many people enslave themselves.