Chapter three, in which the Piper takes a terrible analogy to a logical extension

Amidst this year’s fake debt/deficit crisis, political actors of many stripes compared the federal government’s budget to the budget of the average American family. (Because, of course, in order for the average American to understand complicated political and economic issues, said issues must be dumbed down and be made relatable.)

Politicos from President Obama to congressional leaders to Tea Party back benchers to people who are famous for being famous have made the case that when times get tough for average Americans, families cut back their expenditures. Our leaders have made the case that when mom loses her job or when dad’s hours get cut back, and family income falls, family spending gets cut back, too.

(Except that’s not how things work for families in this country. When enough money isn’t coming in from week-to-week, American families borrow--through home equity loans, credit cards, or payday lenders. American families have mortgage and car payments to make, along with child care, groceries, clothing, and transportation. These costs are pretty static; unless a person is intent on defaulting on her mortgage, one can’t very well cut back on one’s mortgage budget from month to month. It’s the average family’s equivalent to the federal government’s mandatory spending programs. Are this country’s political leaders really so far removed from average people, or statistics about average people, not to know that?)

President Obama, Speaker Boehner, and countless others claimed that the federal government needs to behave like an American family, and “tighten its belt” by cutting government expenditures in the face of a large budget deficit. Congressional Republicans, particularly Tea Party-backed House members, have stridently opposed raising extra revenues (read: increasing taxes) in order to close the deficit and avoid further federal debt and advocate cuts only.

Now, of course, opinion makers on both the left and the right have pushed back at this absolutely inane analogy. But, what if we were, for the sake of argument, to extend the family-government analogy a little further?

First, if banks and governments around the world were willing to lend your family money for a real interest rate of around--oh say, zero percent for ten years, wouldn’t your family take the money and use it for useful things?

Second, if your family could print its own fiat money, and use it to buy real goods and services, perhaps even getting other people back to work, wouldn’t your family do that?

Third, (and this one is for the Tea Partiers), if someone offered your family more income (or if the government sought to increase revenues), say for a raise or a new job, would you really turn it down? “No, thank you, I’d prefer to cut my family’s expenditures on milk, eggs, and diapers, rather than take the extra income. Austerity is the only way for my family to grow in these tough times.”

Could it possibly be that a combination of revenue-killing regressive tax cuts, unfunded wars, and a persistent economic downturn has created the federal government’s current deficit/debt situation? No? It’s that we’re spending too much money on helping feed poor children, making sure prescription drugs are safe, and investing in future infrastructure? Oh!

What a wonderful world we’d live in if only everyone saw the logic of austerity as clearly as the Tea Partiers do!

Rick Perry's Anti-Youth Republican Party

(Taking “youth” to mean anyone younger than forty-five; if you can remember Ike, you’re safe!)

Over at the Wall Street Journal’s Washington Wire blog, Neil King Jr. reports that Rick Perry (or the very wise people running his campaign) has backed away from several of the provocative claims he made in his recent book, Fed Up!, particularly that Social Security is unconstitutional.

Today, Perry’s communication director, Ray Sullivan, clarified Perry’s position, saying,

The governor wants to see the benefits for existing retirees and those close to Social Security be strongly protected. [Beyond that], he believes a full review and discussion of entitlement reforms need to be had, aimed at seeing that programs like Social Security and Medicare are fiscally responsible and actuarially sound.  (quote credit to King)

Allow me a moment to parse this statement by Governor Perry’s point man on media relations. In essence, what Mr. Sullivan’s carefully constructed answer is saying is, if we win the presidency, (1) we’re going to preserve Social Security and Medicare for older people, because they reliably vote Republican, and (2) we’re going to dismantle said programs for everyone else because they’re just too goshdarned expensive!

Shall I paraphrase Mr. Sullivan’s thinking further? I think I can boil it down to three words. Fuck young people.

Almost every entitlement reform proposal floated in recent times has called for a significant cut in Social Security benefits for people currently entering the workforce. The youngest members of today’s workforce, already hamstrung by persistent unemployment, will probably face sharp cuts in entitlement benefits to cover debts accumulated by yesterday’s wars and tax cuts.

Those of us Millennials lucky enough to have steady employment are now paying into a system which many of our elders, like Governor Perry, have no intent of preserving for us.

Given the content of Perry’s book, which labels Social Security “an illegal Ponzi scheme,” I doubt very highly that Millennials can count on the governor to reform entitlements in good faith.

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Also, I have to admit, I somewhat doubt that Governor Rick "graduated with a 2.2 GPA in animal science at Texas A&M" Perry actually could have written that book.  I bet someone at ALEC ghostwrote it for him.

Go ahead, do it already!

I’ll be the first to admit it, sometimes I can be a bit of an elitist.  I read the elite hipster press and scholarly journals, I like fancy cheeses, and I look down my nose at people who like to go four-wheelin’ and huntin’ on the weekend.  And yet, I’d like to think of myself as a man of the people.

So, you can’t blame me that my daily ritual includes a stop on the Yahoo! front page to see what the hoi polloi are reading about.  (I’m not alone apparently; according to data compiled by the Pew Research Center’s Project for Excellence in Journalism, Yahoo! News is the most visited online news provider.)

One of this morning’s top headlines, pulled from Yahoo! News’ blogger corps, “Silicon Valley billionaire funding creation of artificial libertarian islands,” stuck out to me.  Libertarians, and ideologues of all stripes, have been complaining for years that if only they had their own country to run, they’d do it their way.  Their ideal libertarian homeland would be free of taxation and regulation, and ruled by the guiding hand of the market.  Some libertarian groups have even floated the idea of moving collectively to one state, taking over state government, and implementing libertarian policies.

I say, go for it!  But, really, shit or get off the pot. People have been threatening to do this for years; it's time to ante up or go home.

I mean, there are other billionaires out there who sympathize with your cause.  Why doesn’t an enterprising libertarian round up some capital from his co-ideologues, both rich and super-rich, and buy a country?  Let’s say, Kyrgyzstan.

The Kyrgyz Libertarian Confederation, that has a good ring to it, right?  They could establish a libertarian homeland for the world’s free market devotees and end their suffering once and for all.

What’s that, you say?  Libertarians don’t want to go to Kyrgyzstan?  They quietly reap the benefits from a system with an interventionist federal government and a mixed economy?  They would rather complain from their comfortable, entrenched positions in our current system than start something new?

Probably.

And why do I want to see this happen so bad?  Surely, I must want reason to triumph over ideology?  Well, for one, I want to see what a mess they make.  Sometimes I just enjoy observing a spectacle.  And two, it would make for some really exciting social science research.  (That is if they don’t ban social science research in Kyrgyzstan.  On the other hand, libertarians LOVE numbers, just look at the Cato Institute.)

That way, when the Kyrgyz Libertarian Confederation finally gets off the ground, I can read about it in the latest editions of my favorite elitist academic journals.

People are people everywhere

Last Monday, the S&P (Standard and Poor’s!) 500, a broad market index of America’s largest companies, fell 6.7 percent.  The Los Angeles Times reported that $1 trillion dollars of equity value was wiped out on that day alone; other news outlets reported this sell off as a “flight to security”.

Also last week, England was in the throes of civil unrest in the aftermath of the police shooting of Mark Duggan.  Maruading bands of youth destroyed property, disrupted business, and instilled a sense of panic and fear in society.   

It was fairly evident, even at the time, that those fomenting unrest were not really up in arms about Duggan’s death.

One might look at these events as being disparate; if one was being charitable, one might say that perhaps stock market volatility and civil unrest are loosely related.

But, if you look closely, you’ll find that Wall Street traders and rioting hooligans have so much in common.  Both groups are reactionary (in the loosest sense of the term), looking to maximize their plunder before anyone stops them, and engaging in a herd mentality, while relying on the latest technology to coordinate their actions. In the end, the actions of both groups are transitory; no major changes will be made as a result.

The only major difference is that one groups activity is quasi-legal.  Traders and looters have both destroyed significant quantities of assets, although the traders in orders of magnitudes more.  A stock market crash, while viewed by some as the bloodless machinations of an efficient market, represents just as much or more human suffering, as measure by economic utility, as have the rioting youths in cities across the United Kingdom.

To sum up, marauding bands of equities traders have destroyed property, disrupted business, and instilled a sense of panic and fear in society.

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It was suggested to me by a friend that, “it’s a bit of an insult to the hooligans to be compared to Wall Street traders.”

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How ironic(?) is it that on the first trading day after Standard and Poor’s downgraded U.S. government debt more money flooded into the U.S. Treasury bond market?  Flight to safety!

Add credit rating agencies (particularly S&P) to the list of things in this world doomed to a slow, painful slide into irrelevance.

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Just to add insult to injury, the S&P 500 has recovered almost all of its pre-August 8th value.  This should solidify the notion that traders last Monday were just out to smash windows and take what they could.