October 7, 2004
From the desk of Jane Galt:Is Bush bad for Business?
Sigh. Here's the latest thing for Democrats to make much of: 200 business school professors signed a letter saying Bush's economic policies are bad! This proves that Bush is, like, the worst president ever!
C'mon. Look at the list and you'll see that the only top business school with significant representation is Harvard, which is also, unsurprisingly, a huge, and hugely liberal school. There's a smattering of Harvard friends from down the road at MIT, and then one or two professors each from other schools (none at all from my alma mater, perhaps predictibly.) On business school faculties, as with any other group, you can find one or two people to sign just about anything. This is hardly a ringing denunciation: aside from the Harvard profs, whom one assumes decided to do this as a group (and whom one can also assume share fairly similar political beliefs), for every business professor who signed this, there were at least fifty other business professors on their faculty who didn't. (For Wharton and MIT, I concede, the proportion may be as low as 10-to-1.) Does that "prove" that the accusations in these letters are a load of [expletive deleted]?
A better guess is that what it proves is that the temptation, for economists, to fudge ones facts to lend the imprimatur of economics to largely non-economic value judgements is bound to be irresistable to some. Take the first paragraph of their letter:
As professors of economics and business, we are concerned that U.S. economic policy has taken a dangerous turn under your stewardship. Nearly every major economic indicator has deteriorated since you took office in January 2001. Real GDP growth during your term is the lowest of any presidential term in recent memory. Total non-farm employment has contracted and the unemployment rate has increased. Bankruptcies are up sharply, as is our dependence on foreign capital to finance an exploding current account deficit. All three major stock indexes are lower now than at the time of your inauguration. The percentage of Americans in poverty has increased, real median income has declined, and income inequality has grown.
These professors are connecting legitimate concerns about the budget and current account deficits to low GDP growth, bankruptcies, income declines, and so on. But any causal link between budget deficits and growth (and many argue that there is none) is much weaker than the causal link between all of the things they cite, and the recession of 2001, which they somehow neglect to mention. Now, one may argue that the tax cuts were not structured ideally. But no one who is entitled to an opinion on the matter that I have spoken with believes that differently structured tax cuts would have raised the pace of growth by more than a tenth of a percent, optimistically.
Citing poverty and unemployment is particularly odd, considering that the amazing story of this recession has been how little poverty increased and employment decreased, relative to earlier recessions. One of the exciting developments is that low-wage employment stayed relatively steady. This was not exciting for me, when I was a laid-off management consultant, but it meant that the most marginal members of our economy were able to keep putting food on the table, while I moved back home with mom and dad.
In general, the things they cite are true, but blaming Bush, by implication, for these woes is in most cases unsupportable. He certainly isn't responsible for the bubble popping (are these professors trying to argue that the Dow should be at 12,000, or the Nasdaq at 6,000? Would they dare to say as much to their students or colleagues?) A quick look at the Census Bureau's income page will reveal that the Gini coefficient, which measures income inequality, has been rising steadily for thirty years, through Democratic and Republican administrations alike. Bankruptcies and declines in real median income are, like unemployment and higher poverty, what we'd expect in a recession: real national income declined too. What is salutary is how little these shifts have been, compared to what we'd expect after the Clinton administration oversaw a speculative bubble of a magnitude unseen since the 1920's. (For the record, I don't think that bubble was Clinton's or congress's fault, any more than I think the resulting recession was Bush's fault. What was Clinton supposed to do: lock the nation in its room until it stopped gambling on Webvan?)
The letter goes on to excoriate Bush for the deficit:
he fiscal reversal that has taken place under your leadership is so extreme that it would have been unimaginable just a few years ago. The federal budget surplus of over $200 billion that we enjoyed in the year 2000 has disappeared, and we are now facing a massive annual deficit of over $400 billion. In fact, if transfers from the Social Security trust fund are excluded, the federal deficit is even worse – well in excess of a half a trillion dollars this year alone. Although some members of your administration have suggested that the mountain of new debt accumulated on your watch is mainly the consequence of 9-11 and the war on terror, budget experts know that this is simply false. Your economic policies have played a significant role in driving this fiscal collapse. And the economic proposals you have suggested for a potential second term – from diverting Social Security contributions into private accounts to making the recent tax cuts permanent – only promise to exacerbate the crisis by further narrowing the federal revenue base.
Now, I too hate the deficit. But I don't hate it for economic reasons; I hate it because I don't think that we should commit our children to pay for our spending, except in an emergency, which we aren't in. (Yes, conservatives, I know: The War on Terror. But we don't need to run a deficit to pay for it; it's well within the range of a modest tax increase. Which is what we should do, if we think the War on Terror is worth spending the money for. World War II, on the other hand, really couldn't be financed any other way except deficit spending: at its height, it was consuming more than half of GDP.)
Bush is undoubtedly responsble for a large portion of the deficit; nearly half of it is the result of either his tax cuts, or his spending increases. (The other half is due to recession and "technical change", i.e. it turns out that the late-1990's spike in tax revenues was due to bubble gains, not real improvements in tax collection.) But even if Bush had changed not one thing from the Clinton years, there would still be a large budget deficit, on the order of $200 billion. If you remove social security income from the picture, it becomes clear that even the Clinton administration never ran a surplus on an accounting basis, since all that revenue was accruing liabilities from the moment it came in.
I hardly need point out that the spectacle of business school professors advocating that the government should continue operating what is, in effect, an unfunded pension plan, rather than switching over to a property-based system, because running the government books on an accounting basis rather than a cash basis would reveal that the organisation is insolvent is . . . well . . . a tad surprising.
Moreover, any business school professor should surely agree that the proper question in such a document is not whether the candidate meets some platonic ideal, but "compared to what". Mr Kerry's fiscal plans are, at this point, more deficit-ridden than Mr Bush's by a small margin. (A large margin, if you look at non-campaign cost estimates for his health plan.)
If you read down, you'll see that indeed, non-economic value judgements seem to be driving the letter:
We also urge you to consider the distributional consequences of your policies. Under your administration, the income gap between the most affluent Americans and everyone else has widened. Although the latest data reveal that real household incomes have dropped across the board since you took office, low and middle income households have experienced steeper declines than upper income households. To be sure, the general phenomenon of mounting inequality preceded your administration, but it has continued (and, by some accounts, intensified) over the past three and a half years.Some degree of inequality is inherent in any free market economy, creating positive incentives for economic and technological advancement. But when inequality becomes extreme, it can be socially corrosive and economically dysfunctional. Problems of this sort are visible throughout much of the developing world. At the moment, the most commonly accepted measure of inequality – the so-called Gini coefficient – is far higher in the United States than in any other developed country and is continuing to move upward. We don’t know where the breakpoint is for the U.S., but we would rather not find out. With all due respect, we believe your tax policy has exacerbated the problem of inequality in the United States, which has worrisome implications for the economy as a whole. We very much hope you will take this threat to our nation into account as you consider new fiscal approaches to address the nation’s most pressing economic problems.
It is perfectly legitimate to rail against income inequality, and seek political outcomes to fix it. But that's not a business or economic judgement; it's a value judgement, about the tradeoff between things like property rights and economic freedom, and things like economic security and equality. Their judgement as business school professors is no better nor worse about such things than the judgement of the rest of the country.
The bottom line: these professors seem to be Democrats. They thus prefer Democratic policies, and Democratic politicians. They are perfectly entitled to their opinions. But they ought to make it clear to their audience that these judgements are personal, not professional.
Unfortunately, that doesn't seem to be the sort of intellectual honesty we can expect from many people on either side of the debate.
Update But what about the current account deficit? My readers cry. The current account deficit is, to my mind, a very bad thing. But it has a lot of causes, only a few of which are related to George Bush's policies. I think that the current account deficit has the potential to be a very destabilising force for our economy. But John Kerry's tax cut repeal, for example, would have only a trivial impact on the current account deficit, even if he weren't planning to immediately spend any extra revenue on new programmes.
Update II Why am I talking about John Kerry? My (liberal) readers cry. The letter was about George Bush. My children, this is going to come as quite a shock to you, but when letter like this are released close to the election, the intent is not to engender a Come-to-Jesus moment in the administration, but (brace yourselves) to get people to vote for whoever they did not write the letter to.
Update III William Sjostrom has Technorati inbound links
If the War on Terror is successful, aren't the ensuing generations the beneficiaries? Why should our generation 1) bear the direct costs of the terrorism itself; and 2) bear the costs of the war? If we pay for it now, the next generation will have to pay for it later while supporting us anyway.
That's a valid point. But we benefit from it too, and the magnitude of the spending is not such that I see a pressing need to borrow rather than tax to raise it. It's a slippery slope; concede the War on Terror, and we'll end up conceding borrowing for farm subsidies, corporate welfare, and self-esteem programmes for debutantes, all of whose advocates will be able to find someone to argue that their programme benefits future generations.
...for every business professor who signed this, there were at least fifty other business professors on their faculty who didn't.
Indeed. Kind of like when Kerry lists retired generals who support his cause. As one pundit noted, that's an arms race Kerry just cannot win.
Well, self-esteem programs for debutants should contribute ot the creation of future generations...
For me, I think deficit spending depends a LOT on what its spent ON. Some of the debt (i.e. a good portion of defense spending) could be floated by foreign investment in bonds, because well, they are the primary beneficiaries.
Some of the cost of government is just "cost of doing business"...we could trim that a lot, but in subtler ways than truning off the lights, etc (Clinton went about about this circa 1994, I doubt Kerry could get any more blood out of that turnip)
Most of it is transfering wealth from productice sectors of the economy to non-productive sectors. In teh case of teh elderly, this is kind of like paying dividends...question is, do they get dividendds equal to their investment? structurally at this point with SS vis a vis life spans, I'd say NO.
i.e. needs fixing
Some of it ought to be in the hope of transfering non-producers to producers...here I think we've surrendered too readily.
A lot of government spending (esp military) is basically an investment. as long as we get a decent ROI, deficits arent bad.
I think we have some bad investments, but the WOT is a pretty good one, as long as we spend wisely.
I think others may need a re-look.
but then, I'm not a phd economist..but it seems to me spend money to make money = good, spend money because it makes you feel good about yourself, sure, as long as you dont build in an unsustainable structural debt while doing it.
MY gut feel is that , in general, Reagan was much smarter about real investment than either Clinton OR Bush, relative size of respective deficits aside.
I don't think that we should commit our children to pay for our spendingWorry about your children and I will worry about mine. If you don't want your descendants to be strapped with government debt, buy them treasury bonds that they can use to pay for their increased tax liability down the road.
"you'll see that the only top business school with significant representation is Harvard"
Curious to know how you define "considerable" or "top b school?" Certainly bound to offend some folks. By my quick count, MIT had 15 signers; Wharton 10, Darden 5, Stern 5, Fuqua 4, Stanford 4. Sad to see my alma mater Anderson with only 2. Perhaps the 5 signers from UT at Austin make up for this.
Jane:
Interesting post. I'm not aware of any contrary letter claiming Bush as our own personal economic godsend (may be a job for you there), but interesting post.
I had a few questions:
1. I take it that one might read, "one may argue that the tax cuts were not structured ideally," as "the structure of the tax cuts was willfully stupid." Why would we want to return to office someone who was willfully stupid?
2. Leaving aside the issue of whom you have spoken with, is the .1% of GDP growth that we've lost an annual figure, or a total for the Bush presidency to date? Is there a back-of-envelope conversion figure for jobs per GDP growth; that is, might we argue that $10 bil. might yield 100,000 jobs?
3. If the pains of the recession were not as great as one would expect, might we reasonably argue that the limits to the pains were a result of the structuring of the economy that took place during the Clinton presidency?
3. Just to be clear - you admit that half of the annual deficit is a result of Bush's policies? And do those spending increases of his that you reference include the cost of the WOT?
4. When you score Bush's fiscal plan (to compare it to Kerry's), does that include Bush's desire to make the tax cuts permanent? (We can leave aside whether we should include the costs for yet another pointless war in second Bush term (Iran, anyone) or whether the restructuring of some part of the economy towards military ends will be … less useful to the economy in the long run). Is there any room in there to inflate the Bush plan, to adjust for credibility concerns about an Administration that threatened to fire the head HCFA actuary if he provided accurate information to Congress about costs for a new Medicare benefit, or that dramatically understated the cost of the war?
5. Aren't the professors connecting (whether accurately or not) non-economic concerns like income inequality to economic concerns by pointing out that other comparable economies don't have such inequality? And wondering whether there might be a point (which they acknowledge they can't pinpoint) at which such income inequalities have a negative structural effect on the economy?
The current account deficit started ballooning during the Clinton administration. I will argue that this was a result of Clinton's handling of the Asian financial crisis. The dollar appreciated signficantly, leading to a massive influx of investment funds going into the US markets that continued to push the markets higher and higher and the dollar even higher which attracted more foreign funds and encouraged Americans to invest foolishly. The end result was a loss of competitiveness that allowed a variety foreign competitors to get themselves established during the late 90s and early 00s. Sure consumers benefited from low prices, but it has put a lot of pressure on US businesses that export or who are subject to competition from importers. Of course the Asian financial crisis probably would not have happened if China hadn't devalued their currency in Clinton's first term and become more competitive when compared to other Asian countries. I think the best approach to solving the dual problems of the current account deficit and budget deficit is to instate consumption taxes on nonessential consumer goods that are dominated by foreign imports. Targetted sales taxes would not be regressive, and different rates for different types of goods would make them less so. The only problem with this idea is that it will hurt retailers and their employees, but let's face it, these types of businesses are fundamentally wealth exporters not wealth creators. Some of the funds from consumption taxes should be used to offset a corporate income tax rate lowered to somewhere between 10-15%, which would greatly ease the burden imposed by nonterritorial corporate income taxes and help with the removal of FSC that have been ruled illegal.
1) No, one might not reasonably read that. One might read that some people, mostly liberals, argue that a different structure would have had a very slightly better outcome, while other people, mostly conservatives, argue that there would either be no difference, or that the Bush tax cuts were better, because they stimulated savings in an investment-led recession. In other words, there is reasonable disagreement, with the most vehement arguers on both sides generally being those who were most vehemently opposed to, or in favour of, the tax cuts for non-economic reasons. As Cass Sunstein pointed out in Florida 2000, it was truly amazing how closely one's expert legal opinion on the outcome correlated with whom one had voted for.
2) Total. The fiscal policy cycle, like the monetary cycle, is generally believed to last about eighteen months; thus any stimulative effect from any sort of tax cuts would have passed long ago, leaving only the supply-side effects.
3) No. At least, no one has proposed any reasonable model by which the Clinton administration might have made things better; the ease of the landing is generally attributed to a mixture of monetary and fiscal stimulus. Fiscal stimulus being the hated tax cuts. The Clinton administration didn't "restructure" the economy; it didn't do much of anything except NAFTA and repealing Glass-Steagall, which though both salutary developments, were hardly enough to engineer a soft landing.
3b) Yes, those figures include the WOT.
4) Yes, that figure includes permanentisation of the tax cuts. There's no point in "inflating" the Bush numbers, as anything that Bush has promised to spend on the WOT and Medicare, Kerry has promised to spend, and then some. Plus, while I am second to none in my desire for Bush's ridiculously undercosted Medicare plan to be repealed, somehow I don't think that's what these professors are agitating for.
5) There's no empirical data to back up any assertion that widening inequality is bad for the economy. The economy grew by leaps and bounds in the 19th century, when inequality was widening rapidly; slowed in the 30's, when it was getting narrower; grew again in the 40's, 50's, and 60's as it continued to narrow; slowed down in the 70's when it started to widen again; and then grew like wildfire in the 80's and 90's, as it was getting wider. We may dislike inequality for all sorts of reasons, but solid empirical evidence about its negative economic effects is not one of them.
Inequality in income doesn't mean very much when everyone's buying power has improved more because of techological and productivity gains.
Jane,
Could you point out where you are getting your comparisons of the balance of the Kerry and Bush plans?
Thanks.
As much as it is unfair to paint with too broad a brush, I'm starting to despise economists as much as I do United States Senators, whom I despise as much as any non-genocidal group of people on the planet.
Jane:
1. I've never understood this argument: " people...argue that there would either be no difference, or that the Bush tax cuts were better, because they stimulated savings in an investment-led recession."
If there was no difference (b/c you don't believe stimulus works, right?), then aren't the tax cuts a bad idea if only b/c they increase the deficit? (Assuming you aren't a supply-sider). And if you want stimulus, wouldn't the structure of the tax cuts make sense only if money wasn't cheap? I mean, the problem wasn't that there was no money to lend, it was that everyone was sitting on their hands no matter what, no?
2. I wasn't asking about a Clinton re-structuring of the economy, but suggesting that if there are people out there blaming him for the bubble, then shouldn't those people also credit him with a fairly benign bubble?
3. I'll second theCoach; if you could point me towards the scoring of the two plans, it would be much appreciated.
Thanks.
I wonder if this letter, dated Oct. 4 was at all influenced by a recent economist poll of bush vs. kerry. the economist published the poll results online dated 10/7/04. it seems this poll was in favor of Kerry also, with fiscal discipline (did i read this article right?!?) being kerry's strong suit.
http://www.economist.com/world/na/displayStory.cfm?story_id=3262965
incidently, and I'd love to hear others' opinions, in light of all the quickly forgotten worries of deflation more or less during the time of fiscal and monetary stimulus, wasn't the proverbial spending binge by greenspan&bush/congress a good way to prevent deflating of the economy?
Tim:
One can indeed equate "not structured ideally" with "willfully stupid." One can also equate 1 plus 1 with 3.
However, neither is correct.
Jonathan:
By your logic, a person whose house is on fire should not bother to put it out, as his/her children will ultimately inherit it - and will have to pay for its upkeep anyway, as well as pay to care for him/her in old age.
To me it makes more sense to put the fire out first and worry about less pressing issues later.
Bush is bad for business because people around the globe are turning away from brands associated with U.S. based multinational. For example : Coca-Cola (which cited "increased competition" during their most recent disappointing quarter).
The Bush tax cuts should have never happened for anyone from top to bottom. The expense of 911, the expense of the wars in Afganistan and Iraq, the expense of the dept of Homeland Defense make the tax cuts a ridiculous luxury. Their not showing the caskets of the soldiers on TV anymore, but theres suppose to be a sense that the nation is sharing in the sacrafice when your at war. Bush actually told Oneil "Reagan proved debt doesn't matter", yet another example of Bush confusing stupid with optimistic.
You know what I think Bushs best move would be now? Accept responsibility for something. People are real tired with the blame Clinton and 911 for the economy and terrorism, and liberals for everything else. This administration doesnt understand accountability, they call 911 the greatest intelligence failure in US history, fire noone, not Tenant, not Rice, and somehow deflect another failure to the intell community again. Never mind Bush fired noone and created the intell office that oversaw the Iraq intell and filtered out every antiwar on Iraq pov.
Hondo:
So what was the point of the structure - to increase available capital for investment? Was money not cheap enough?
for every business professor who signed this, there were at least fifty other business professors on their faculty who didn't.
A statement probably true for any document that doesn't directly relate to the income or working conditions of business professors, so hardly a telling point.
Inequality in income doesn't mean very much when everyone's buying power has improved more because of techological and productivity gains.
This is simply wrong. The fact that people aren't starving doesn't mean they don't envy the very wealthy. Remember that very few people are "poor" in America, measured by world standards. It doesn't stop them wanting more.
The letter states that "when inequality becomes extreme, it can be socially corrosive and economically dysfunctional." This is true. And the more (perceived) inequality there is, the more true it is, if only because fewer people believe that they will ever be able to attain wealth. When the Bush administration passes tax policies that effectively shift the tax burden to wage-earners (by eliminating taxes on investment income), it doesn't seem to most people that he's encouraging an "ownership society", because they don't own much, and don't see much of a chance that they ever will.
I think the tax cuts were a bad idea, because I agree with Jane that stimulus does little, and there was infrastructure maintenance and improvement that could have been done. Not to mention a little debt reduction. And the immediate push to eliminate the inheritance tax (whatever one thinks of the inheritance tax) was divisive, which we really didn't need after the election fiasco.
And part of that divisiveness was a perception that the Bush administration was totally unconcerned with the less-than-wealthy.
But I'm neither a politician nor an economist. There may have been economic reasons for the tax cuts. There were certainly political reasons for them, or at least ideological reasons. But I think that the perception, by an awful lot of people, was that the reasons were purely mercenary.
I think we're a long way from serious, wide-spread social unrest. But the policies, or at least the perception of them, of the administration aren't helping.
Alan Greenspan is the only public official in Washington with the integrity to address today's most important economic issue. This is the impending bankruptcy of Medicare.
Neither Bush nor Kerry, nor anyone in Congress, is willing to face the fact that Medicare will go out of business in the next decade without significant restructuring.
Greenspan's testimony to the Congress broached the issue, but none of our politicians has the courage to address it. They seem content to wait until disaster strikes, much as they did before September 11.
"This is simply wrong. The fact that people aren't starving doesn't mean they don't envy the very wealthy."
But it does stop them from having a valid claim for aid. Envy doesn't justify aid the way that actual misery does.
"Remember that very few people are "poor" in America, measured by world standards. It doesn't stop them wanting more."
Everybody wants more. Good economic systems let people get more by producing more for others. Such systems have a way of making everybody rich over time. And individuals who try to take more by force ought to be answered with force, not appeasement.
"The Bush tax cuts should have never happened for anyone from top to bottom. The expense of 911, the expense of the wars in Afganistan and Iraq, the expense of the dept of Homeland Defense make the tax cuts a ridiculous luxury. Their not showing the caskets of the soldiers on TV anymore, but theres suppose to be a sense that the nation is sharing in the sacrafice when your at war."
But taxpayers have been sacrificing for years. How about some of the tax recipients take a little less as part of their "shared sacrifice"? (Not that Bush has proposed that either...)
This is simply wrong. The fact that people aren't starving doesn't mean they don't envy the very wealthy. Remember that very few people are "poor" in America, measured by world standards. It doesn't stop them wanting more.
The fact that people aren't starving to death plausibly means that they have greater opportunities to increase their wealth, if they so choose, because basic needs have been addressed.
A person's potential to adopt a card-carrying member of The Se7en in response to the wealth of others is hardly a strong argument for policy making. If someone with less is inclined to focus more on other-deprecation rather than self-improvement, then neither an increase in personal wealth nor a decrease in someone else's can truly provide any happiness for that person.
The letter states that "when inequality becomes extreme, it can be socially corrosive and economically dysfunctional." This is true. And the more (perceived) inequality there is, the more true it is, if only because fewer people believe that they will ever be able to attain wealth.
Well yes, that's quite plausible in the vague, tuatological sense. But how will you quantify it empirically, and will you make reasonable distinctions for wealth aquired by labor and fortune versus wealth pillaged and looted? Also, if inequality IS demonstrably a problem, what policy changes do you propose, and will those changes be feasible, or merely socialism by some other name?
If the reason why the learned professors are worried about income inequality is really the prospect that "fewer people believe that they will ever be able to attain wealth", then they'd be well advised to find something more realistic to worry about-- maybe a giant meteor or something. Americans have long had, if anything, a grossly exaggerated estimate of their chances of striking it rich.
We could, following Tim, look at the experience of "comparable economies" that have less inequality. But we can do that only by stretching the definition of "comparable" to the point where the Bush economy (even in the trough of the recession) is comparable to the Clinton economy (even at the height of the bubble). That is to say, the social democracies who are beating us on equality have also been, for more than two decades now, lagging us quite badly on most of the indicators the professors use to criticize Bush.
It's an interesting thought experiment to imagine that, instead of following the course it actually took, the economy of the US had been transformed into a carbon copy of, say, the western EU with respect to per-capita income, inequality, unemployment and job growth, long-term fiscal health, etc. What would be the effect on the election? (My answer: Kerry, 538-0.)
Having spent so much time wringing their hands over long-term interest rates, you'd think the professors could have found room to mention that these rates are still lower than they were at any time during the Clinton administration. Of course this shouldn't be expected to persist as the recovery continues... but then, neither should most of the other problems for which they blame Bush. Having decided to do their analysis as if the business cycle didn't exist, they should have to live with the consequences.
Tim, for estimates, you need only check John Kerry's website. Every penny of revenue raised from tax increases is promised multiple times for new spending. Any reasonable estimate of his health care plan alone would eat far more the revenue he's raising from repealing tax cuts on those making over $200,000.
Paul Zrimsek notes:
Americans have long had, if anything, a grossly exaggerated estimate of their chances of striking it rich.
Yes indeed. And this has been put forward as an explanation of why they tolerate high levels of inequality. My point is that if this belief falters, it will be, as the learned professors note, socially corrosive.
I can no longer recall the precise reference, but I recall reading that many Americans favored keeping taxes on the wealthy fairly low because they felt they had a good chance of becoming wealthy themselves. So long as this is true for a vast majority, the social difficulties of structural inequity will be avoided.
anony-mouse writes:
The fact that people aren't starving to death plausibly means that they have greater opportunities to increase their wealth, if they so choose, because basic needs have been addressed.
No argument. And I know people who spend all day at a fairly low-wage job and spend their evenings trying to some up with the business idea that will make them rich. Which they can do because their basic needs have been addressed.
But it's the belief that they can in fact become rich, or at least that their children can, that is necessary.
In this last recession, unemployment stayed below historical averages. Almost everybody has a job. But how many believe that their job is secure? How many have taken pay cuts, or been laid off and accepted lower-paying positions? How many people believe that if they play by the rules (go to school, work hard, et cetera), they will be rewarded with a pleasant place to live and a comfortable retirement? How many resent that while they struggle to maintain what they think of as normal, or even minimal (a relative, not absolute term), they read of CEO's raking in tens of millions? How many people believe that the owners of their firms are threatening them with outsourcing and forcing them to accept limited benefits, while voting themselves huge bonuses for reducing costs?
None of this, I emphasize, has to do with reality. It has to do with perception. As long as people believe that they can improve their lot through work and education, I believe that most will do so. When the majority of people start to believe that all they will accomplish through their hard work is the further enrichment of some other class of people, I think trouble is near at hand.
And, I should repeat, I am not claiming that it is.
anony-mouse continues to ask:
Also, if inequality IS demonstrably a problem, what policy changes do you propose, and will those changes be feasible, or merely socialism by some other name?
Inequality is not demonstrably a problem. Some level of inequality is necessary. Extreme inequality, with no belief on the part of the majority of the population that they can improve their lot, is a problem.
As to policy changes, I don't know. As I said, I'm neither a politician nor an economist; I have no vested interest in pretending to fully understand the difficulties, or to be able to describe their solution in fifty words or less.
Some small changes: When creating a national education policy, actually fund the required programs. This gives the impression that you actually care about giving people a chance to do well. When getting in office, try not to have your first big push be for something that benefits you personally to the tune of tens of millions of dollars, and does nothing for 98 percent of the population other than reduce available funding for programs.
I can state the obvious: Socialism (in any guise) is hardly the answer. R.A. Heinlein said that any economic system dedicated to the allocation rather than the creation of wealth is doomed to fail, and I believe him.
Can you talk about the reality of what a surplus in the budget actually means? I don't have the terminology to speak on the subject with authority but I do know that our economy is largely based on debt. Without deficit and debt the value of the dollar is arbitrary... is this correct? In addition the Clinton era 'projections' of surplus could never come to be as the budget would simply be adjusted to account for said surplus so in reality either spending would increase or taxation would decrease... historically taxation has never really decreased.. only been re-distributed. Surplus would therefore mean that the current administration would be able to redirect said revenue to programs of arbitrary importance while still claiming a 'balanced budget'.
Personally I prefer a deficit wherein every dollar spent need be accounted for and acquires a relative importance in scrutiny to it's allocation. Much like when an individual has limited funds, they will spend with thrift, possibly overdrawing temporarily but will make sure that every penny spent is for a very good reason.
Those with too much excess capital spend it frivolously... think trust fund kids and their toys and vices... with a budget surplus you would see the same sort of spending happening in the government.
C'mon. Look at the list and you'll see that the only top business school with significant representation is Harvard, which is also, unsurprisingly, a huge, and hugely liberal school. There's a smattering of Harvard friends from down the road at MIT, and then one or two professors each from other schools (none at all from my alma mater, perhaps predictibly.) On business school faculties, as with any other group, you can find one or two people to sign just about anything.
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this is about the weakest argument ive ever read, so i didnt bother to read the rest. first of all, business schools tend to be conservative and interested in business and the best way to conduct business. you may note that the "obviously liberal" is bush's alma mater. which doesnt say much for bush because he looks very undereducated standing next to kerry.
amazing the idiots people will support just because the capitol r is after there name. if bush were the democrats candidate, surely you would realize the mountain of failures.
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