Reading “The Predator State” by James K. Galbraith.
I’m not quite done with this book yet, folks, but I have to say the ideas in this book bear much closer scrutiny.
In “The Predator State,” James K. Galbraith shows that even most of the hard-line conservatives (almost always Republicans) in the United States of America have given up on the old Reagan-era “supply-side economics” that they, unfortunately, campaigned on during the 2010 election. These ideas have been proven to be unworkable and perhaps unattainable, including the idea that tax cuts for the extremely wealthy will stimulate economic growth. (It doesn’t. Instead, all it tends to do is give the incredibly wealthy person more money to put in a Swiss bank account, or invest — usually overseas — and even investing here in the United States is problematic because of how companies are now run to maximize “shareholder value” rather than actually create good products and get them out before the marketplace and thus do some good for society.)
The American electorate was volatile and angry in 2010; I get that.
But to now have a bunch of Republicans in there saying stuff they don’t even mean — at least, I hope they don’t because if they do, that means they know less about the economy than I do (perilous thought, that) — really bothers me. And that one of those who should know better is now the new Governor of the state of Wisconsin, Scott Walker, is incredibly upsetting.
In addition, the recent “tax cut” bill that was passed actually raises taxes on those making under $20,000 a year. What sense does this make?
So, taxes have been lowered for the incredibly wealthy — or in this case, the low taxes for the very wealthy have been extended. And taxes have been raised for the poorest of the poor, those below the poverty level.
And this is supposed to be the “best country in the world?”
How can this happen in a country that’s supposed to represent fairness (i.e., “liberty and justice for all”) for all, including economic fairness?
How is this right? How is this just? How is this understandable, or make any sort of economic sense?
I mean, the old phrase “you can’t get blood from a stone” comes to mind, here; those of us who make under $20,000 a year don’t have anything extra to give the government, and those who make over a million a year obviously do except in rare cases. So if you up their percentage, say, by 2%, you’re not hurting them very much, where you’re really hurting someone who’s at the poverty level or below. (Poverty level, right now, is around $21,000 United States dollars for one person if I recall correctly.)
Unless the real strategy to keep illegal aliens out is to persuade the rest of us poor people to leave, too . . . and I think Germany, in the 1940s, proved that the strategy of kicking people out for any reason (in that case, it was due to racism/genocide) is an unproductive, losing strategy indeed.
And since that makes no sense, either, all I can conclude is that this is yet again another exercise in “framing the narrative,” trying to make what’s really going on in this country — many good people being unemployed through no fault of theirs, all of those unemployed people being unable to pay all their bills through no fault of theirs, and very little being done about actual job creation — seem the problem solely of the Democrats, rather than what it really is: a failure of leadership from both political parties.
Barb Caffrey's Blog 
Not to mention we have a 14 trillion dollar debt that just keeps going up and up and up…
Ben Hoffman
January 3, 2011 at 6:14 pm
Agreed, Ben. I added that in before I saw your comment, but you are absolutely, positively right.
Raising the taxes on the poor doesn’t do anything to help the deficit, while raising the taxes on the wealthiest among us would obviously do something constructive. And any “solution” to getting the deficit lowered _must_ include raising the taxes on the wealthy or it is not only irresponsible — it is immoral. Period.
Barb Caffrey
January 3, 2011 at 6:40 pm
I had to come back, elaborate, and fix this. Because I just don’t get this — raise the taxes on the poorest, and refuse to raise the taxes on the richest, then claim that something must be done about the terrible deficit the United States has as a justification for raising the taxes of the poorest?
How about raising the taxes on the wealthy back to the pre-George W. Bush era and saving steps? Because that can do some actual good, whereas raising taxes on the poorest do no good whatsoever and are highly counterproductive; they actually _hurt_ the economy.
And to think the Republicans know this, and are cynically exploiting the mass populace who just want change, any change, so something will be visibly done about unemployment that might work, and might create jobs?
Not just stunningly disgusting, but absolutely sickening, is my on-the-spot judgment of the matter. Which is why I hit “send” a little faster than usual, and why I was grateful I came back to look this over, add, and fix. (Though that’s what writers tend to do. They write a first draft, then add to it or get rid of stuff, then fix the grammatical errors that seem to creep in regardless of how competent you are at understanding grammar. Maybe I shouldn’t be so mad at myself over that, too, but I fall woefully short of perfection on this — and every other — matter.)
Barb Caffrey
January 3, 2011 at 6:33 pm
Barb,
I don’t remember anything in the formation in our nation about economic fairness. This is a relative new concept which has grown since the Great Depression.
Granted, I’d love to see some form of economic fairness, but to do this should not include preemptively attacking other financial classes. They say that “the rich get richer, but the poor get poorer”, but if anything, standard of living in the US is 99% better than the rest of the world. I doubt you’ll ever see a nation like ours when the lower 20% income earners can afford cable TV, internet, smartphone, etc. If you want to raise the “lower class” income to a fair amount, then you need to make the productivity, which prevents inflation, grow as well. Otherwise we’d be a Zimbabwe, where everyone is a trillionaire…
warpcordova
January 3, 2011 at 6:56 pm
Jason, I’m not saying it’s bad for wealthy people to be wealthy — far from it. (That’s what “class warfare” truly is. To summarize, wealthy people are supposed to be evil, venal people due to their wealth. I don’t agree with this.)
And I agree with you that there are certainly advantages to living in this country. No argument there.
What I’m frustrated about are that the bottom 20% of this country are actually getting a tax increase in the guise of a “tax cut” — that’s really awful. I dislike the cynical nature of calling something a “tax cut” when it isn’t, at least not for the bottom 20%.
Plus, the wealth of the country _as a whole_, sad to say, is not in the hands of the bottom 20% or even in the bottom 60%. So taxing the bottom 20% (or in this case, it’s closer to the bottom 8%, unless my rough numbers are way off, which they could be) doesn’t make any sense because economically it’s not viable — it’s mere spitting in the wind.
Now, if you tax _everyone_ a little bit, or you go for a flat tax — which is economically beneficial to the wealthy but also isn’t terrible to most other economic groups — that would be a different story entirely.
But simply taxing the folks who make under $20,000 really doesn’t make any economic sense.
(And yes, I know there’s nothing in the Constitution about economic fairness. But one reason the American colonies rebelled, as you know, is ’cause they didn’t like “taxation without representation.”
(At this point, who is representing the poor in Congress? At all?
(Isn’t this, too, “taxation without representation?” Or is the remote possibility that someone like me, who has no money whatsoever, can get elected to the US Cnogress to tell ’em all off enough to say that we _might_ once again be represented, as we have been in the past by folks like Shirley Chisholm, who rose from abject poverty to become a two-term Congresswoman from New York?)
Barb Caffrey
January 3, 2011 at 8:08 pm
Oh, btw, Jason — I’m definitely in the lowest 20% income earners, which doesn’t look to be changing too soon (if ever). And I don’t have a “Smartphone” (can’t afford that; I have the cell phone I do because of my mother’s generosity, nothing more). I do have the Internet. I am fortunate enough that my Mom has cable TV.
At any rate, the problem isn’t that the wealthy people have money. That’s absurd and insane. We’ve always had wealthy people, so if wealthy people were “inherently bad,” which is also absurd and insane, our country wouldn’t have any Gross Domestic Product (formerly Gross National Product) worth worrying about.
The problem here is the lack of sense regarding economic policy. Galbraith ably argues that the real problem is the lack of planning, not to mention the cynicism in both political parties regarding the way markets work — or don’t.
Galbraith isn’t saying that we shouldn’t have economic “freedom” — that is, as he calls it, “the freedom to shop” or spend our money any way we want. But he’s saying that’s not enough to form a sensible economic policy.
And indeed, it isn’t.
As for what I said about economic fairness — I wish I had a better way to describe it. You’re right that the Bill of Rights does not include this, only arose out of the whole “taxation without representation” thing I already covered in my other comment.
I appreciate your comment, though; well-reasoned arguments are always welcome. Especially among friends. (Dear me, if all my friends thought as I do, wouldn’t the world be a boring place? ;))
Barb Caffrey
January 3, 2011 at 8:13 pm
The thing we should be asking, but seems to be absent from most debates, is what is best for our country?
There’s no way anyone could defend the extension of tax cuts for the wealthy as being good for our country. It comes at a high cost and only benefits a few people.
The rest of the tax cuts, even for the middle class, also come at a high cost and will do little to create jobs, which should be the number one concern. The number two concern is fiscal responsibility. Cutting taxes is a highly inefficient way to stimulate the economy.
There are a few things the Obama administration could do. The first doesn’t cost a penny. He should get on TV and radio and promote an “America first” policy to try to get companies to hire domestically as well as to buy products made in America. That also doesn’t require any bipartisanship. Or partisanship, for that matter, although Limbaugh and O’Reilly would figure out some reason to complain.
The second, which Democrats have tried to do, is penalize companies that ship jobs overseas and reward the ones that create jobs here. The Republicans blocked that. They could also impose tariffs on goods made in countries that allow slave wages, but that has about as much chance of passing as Fox “news” saying something good about Obama.
Ben Hoffman
January 4, 2011 at 12:43 am
I agree with you regarding Obama getting on TV and talking up America and how hard people work here. I think that’s been wholly absent from the debate.
I agree with you also that “what’s best for America” is getting short shrift. The rhetoric always makes it sound like whatever is best for America is whatever the political party of choice is promoting today — and that’s ridiculous, because America’s good doesn’t change overnight, nor does it change regardless of which political party you think is closer to right (as we have only a two-party system here, but neither of them seems to be properly representing most people, which is why elections swing one way or another, while the politicians continue to do whatever the Hell they want).
I think Fox News is fine for some things. I like Greta Van Susteran’s program; she seems fair and is honestly disgusted about the state of the economy. I think the actual news hours, with Brit Hume or Brett whatever his name is, are fine. It’s the morning show that gets me — though they do some of that for ratings, similar to ABC’s “The View” or MSNBC’s “Morning Joe,” no doubt — and of course Hannity and O’Reilly often have to be taken with a huge grain of salt (though O’Reilly, once again, can be trusted in general with regards to his observations on the economy, and I think he’s much more fair than Hannity).
I agree with you wholeheartedly that if we had something in place to help companies who actually create jobs here it would be a start. I think giving tax breaks _to those companies_ makes good sense and would be excellent incentive for the rest of them, and mgiht be something that could pass on a bipartisan basis in a non-election year. (In the odd years, in other words.)
Barb Caffrey
January 4, 2011 at 1:28 am
You forget that Virginia has elections in the “odd” years. 😉
The reason that companies ship jobs overseas is because of cheap labor. In order to combat that and have far more “Made in America” labels, you have to do one of two things:
1) Raise prices on your goods to reflect the “quality” of American goods. In the day of Wal-Mart, Target and Amazon, that’s not going to sit well with your customer base. When people look at high-end items, they’re (oddly enough) associating it with foreign quality. You hear “BMW” and “Mercedes” and you think “German luxury”. You hear Chevy and you think “average” or “classic muscle car”. You hear Lada and you think “What?”. So there is a catch-22 here with economics of pricing versus reputation and quality. Cadillac tried going this route of “quality name” and damn near killed themselves after everyone turned on their best seller, the Escalade.
2) Destroy the base and get back to cheaper made goods. In order to do this, you have to get rid of the minimum wage and go back to the pre-union days of manufacturing. That, again, isn’t going to happen. That would lead to many disastrous events, one of which was the actual reason that unions were created in the first place. This would definitely make for some cheaper goods, which would increase our exports and lessen our dependence on cheaper imports, like steel.
One of the main problems with that is, for some reason, China has better quality steel than we do.
Oh, their refinement sucks and they’re working out the kinks in their production levels still, no question about that. But their overall grade of steel? Better. Plus, they have the distinct advantage of having millions of people willing to work for two bucks a day and a handful of rice to produce steel in their factories. You wouldn’t get a unionized worker here in the states to set his alarm clock for anything less than thirty bucks an hour because working in a steel refinery is a dangerous job. We put the individual safety of the worker above the good of the company and nation, which is the exact opposite of China and how their government runs things.
BTW, I’m sick of economists saying that China’s model is the model of the future. If that’s the case, I’m glad I’m in America, because I don’t like rice.
Okay… that went a little longer than I thought. Sorry.
warpcordova
January 4, 2011 at 9:30 am
Good points, Jason. The economy is *not* easy to fix.
I’ve read all of Galbraith’s book now and am now re-reading, very slowly, to digest the ideas. I think some of what he’s saying is incendiary just to stir up “watercooler talk.” But the idea that we need economic planning is sound.
Also, this book was written in ’06, proofed in ’07, and has a quick addendum written during very early ’08, published later in ’08. Most of the Republicans that Galbraith was condemning are now out of office (like Tom DeLay, who’s been convicted of crimes) or have changed some of their ideas.
The economists I’ve studied mostly know that markets don’t always work well. They don’t know why this is, but sometimes we need regulations — especially on new things, like derivatives — in order to keep people from losing their shirts while they get up to speed. And I’m not sure Adam Smith really foresaw the day where “shareholder value” from day to day, or even minute to minute, would trump the overall arch of how businesses are run at a profit on a yearly basis, or more.
That’s where we’re starting to get into trouble. The American investor is fickle. That is not surprising. But what is surprising is that there’s so little long-term planning going on, in the governments (federal, state, local, you name it), out of the government, there’s just not much planning going on, and that’s wrong.
If knowledge is power, we must use our brains to come up with at least a slightly better solution.
And your points about China are very well-taken, Jason. The main reason Galbraith dislikes “Free Trade” so much is because of how China has been devaluing its own currency for its short-term economic benefit. (Granted, that short-term has been in years, not months or weeks or what-have-you. But very short compared to China as a country, or as world history would have it.)
How we get onto a more level playing field when we are handicapped by China, and India and the Third World countries under them (now being called by the kinder and gentler name of “emerging economies,” which, while true, really misses the point), is something I’m not sure how to do. I just know that without planning, it’s not going to happen at all.
The current crop of small-c conservatives, Jason, are right when they discuss various issues going on with the marketplace. The main problem Galbraith has with it, and that I share with Galbraith, is that politicians of _whatever_ stripe will make hay while the sun shines. They’ve always been this way, it’ll never change, and that means that the good information academics give them will be twisted to serve its own ends.
It’s Machiavellian, but unfortunately is the truth, and it’s one I don’t know how to get around without a better, and less deceitful, crop of politicians.
Barb Caffrey
January 4, 2011 at 4:48 pm
I’d rather live in Australia than the United States. It has survived this financial crisis and the previous one as well with barely a scratch. It has a more equitable distribution of income than the US of A too.
The fear about deficits and debts is unfounded but it is a little too broad to go into here and set in a snappy comment.
It’s pretty obvious to most that take note that trickle down economics is a dismal failure so tax cuts for the “rich” don’t work as intended. As if they ever would check out the CEOs paychecks vs. employees wage.
Sorry I digressed a little too far. Theoretically the orthodox (wrongheaded) reasoning for upping the tax on those earning around $20k is there are more of them then there are the rich so they have a broader base.
What this ignores is, this is the group likely to spend which means increased tax receipts and the deficit will fall. The “incredibly wealthy” are unlikely to spend and if they do it is unlikely to be in a meaningful way.
P.S. I do live in Australia.
P.P.S If you don’t all ready know it, check out Mosler Economics.
AusMMT
January 7, 2011 at 2:22 am
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