So Do Outcomes Matter More than Rhetoric?

Get ready, because I am about to use a concept from Basic Calculus to reveal to you Americans out there a lie that you’ve been taught to believe - almost all of you. No matter which party you support, you “know” one thing about their attitudes and behavior... how Republicans and Democrats differ toward deficit spending. Alas, what you "know" is exactly opposite to what is true.

Let’s start with the fact that the U.S. posted a $130 billion budget deficit in May and the smallest shortfall for the first eight months of a fiscal year since 2008, as a stronger economy and rising employment bolster revenue. This trend reiterates a core difference between the two major U.S. political parties, when it comes to federal budgetary responsibility.

Okay, here it is:

The crucial 2nd derivative of debt… the pace at which the rate-of-change of the federal deficit is itself changing… either moving toward fiscal disaster or away from it… has been positive (toward accelerating debt) during almost every year of every Republican administration since Eisenhower.

In stark and dramatic contrast - that crucial metric is always negative (deceleration) every year of every Democratic administration.

Let that sink in, because it is diametrically opposite to the rhetoric and propaganda and fulminations that have become accepted “truthy” notions in our minds. So? Are you a slave of truisms? Or are you capable of noticing facts that stare you in the face, and are nearly always true?

Why is the 2nd derivative more valid than - say - looking at the simple size of this year’s budget deficit? Because our fiscal situation carries momentum from actions taken three or five years ago, even a decade. Stepping on the brakes does not instantly stop your hurtling car — it decelerates your rush toward that cliff. The 2nd derivative tells you - almost instantly - whether an administration is at least trying to be fiscally responsible.

Let’s examine the 2nd derivative of debt in action. Have a look at this chart of the US federal deficit as a fraction of the nation’s GDP. Wherever the curve is seen to be turning, go ahead and guesstimate a rough CENTER to that stretch of curve. Of course things are bumpy, so a little subjective smoothing is called for, shrugging off blips. But if, across any 3 to five year span, the center point of your curve lies ABOVE, then the nation’s debt is on a worsening track.

If the center of the curve is BELOW, then there's an improving trend, decelerating an arterial hemorrhage, so that it starts to curve back down, or even moving toward surplus. Think convex versus concave.

Now recall that GOP administrations began in 1969, 1981, 1989 and 2001. Democratic administrations began in 1977, 1993 and 2009. Now go draw your curves, find those center points. It truly is amazing!

Let me reiterate. The rate of rate of change of debt is positive (toward reckless debt) during almost every year of every Republican administration (post Eisenhower). It is negative (building momentum toward prudence) in every year of every democratic administration, (post Johnson).

Now add in this bald-faced fact. That Bush Administration accounting tricks deliberately kept the costs of the Afghanistan and Iraq Wars “off the books” for half a decade, letting them finally slam the formal deficit just when economic mismanagement sent the economy into hell, leaving behind a mess that included hyper-velocity debt. In other words, the 2006-2007 “dip” is a lie.

Likewise “Congress controls the purse strings” is a silly excuse. The GOP controlled Congress both for 6 years before Bill Clinton left office and for 6 years after. Yet the 2nd Derivative was negative in the first six and swung sharply positive the very instant a GOP president replaced him, and Clinton could no longer veto the annual Supply Side Voodoo Economics Bill, opening our arteries to the (non) "job-creator caste."

This is not just overwhelming, this rule correlates so perfectly that it seems almost at the level of physical law. Hence, any “fiscal conservative” who supports the GOP - no matter what the rationalization - would have to be either stupid or out of his cotton-pickin’ mind.

== Perspective time ==

I am libertarian enough to want budgets that are relatively balanced. Yes, a small amount of deficit spending is harmless and probably stimulating, especially if spent on national underpinnings like children and infrastructure. A moderate amount can be written off by tipping the scales toward slight inflation. Still, most economists think that a combined national/corporate/personal debt greater than 300% of GDP is in a Problem Zone, and I don't disagree.

On the other hand, we have already seen how bizarre it is for the American right to fetish on debt, when every post-Eisenhower GOP president sent deficits skyrocketing and every demo prez fought them back under control.

But is the United States an especially spendthrift and debtor nation? Look at this chart and you decide. It's possible... just possible... that there are other matters that deserve equal footing on our national agenda. Like problem solving  and becoming a scientific and advanced nation again.

And putting people to work preventing 60,000 defective bridges from falling down.

== The underlying agenda? ==

In fact, the current U.S. budget shortfall would be well in the safe zone, were it not for the lingering Bush tax cuts for the uber-rich (and residual effects from Bushite wars). It would be one thing if Supply Side assurances (“the cuts will pay for themselves as job-creators invest!”) ever came true… even once, in the decades since the Laffer Cult sprouted. But that voodoo never came true. Ever. Not one prediction. Even once. But it is still pushed. Wonder why?

== The oligarchs step up ==

In what might have been a scene taken from the pages of EXISTENCE, 250 individuals flew into London for a conclave of the world's richest people and estates, with the formal agenda of preventing revolution by making capitalist societies more inclusive.  Their combined assets, estimated at $30 trillion — amount to roughly one-third of the total investable wealth in the world. If money is power, then this is the most powerful group of people ever to focus on income inequality.

The titans of commerce and finance didn't necessarily fly to this meeting in London out of a sense of ethics or moral duty, though that may be a motivation for some. For many, says conference organizer Lynn Forester de Rothschild, it's a sense of self-preservation. Capitalism appears to be under siege.  "It's true that the business of business is not to solve society's problems," she says. "But it is really dangerous for business when business is viewed as one of society's problems. And that is where we are today."

Question: were there meetings behind the open meetings, as I depict in fiction? Well?  Do any of YOU out there, reading this, happen to know?

Here’s the deal. These are the good billionaires! Here’s another secret confab, one that is endearingly free of any “help the world” rationalizations: Secret Summit: 24 Hours with the Koch Brothers.

== Ah, statistics… ==

Okay. If you can’t beat em…

Drugs, prostitution and smuggling (ie Hookers & Blow) will be part of Italy’s GDP as of 2014, and prior-year figures will be adjusted to reflect the change in methodology, the Istat national statistics office said today. The revision was made to comply with European Union rules, it said.

== And finally, the Big Lie propaganda about the American Revolution ==

Said Ben Franklin: Note I have removed the Franklin "quotation" of dubious provenance.  Still, the cited article is interesting.

The notion that the American Revolution was somehow against “government” and “taxation” in general, and not - as all the Founders said - against oligarchy and rule by monopolists and feudal lords - is among the most hilarious conflations and orwellian propaganda campaigns of our lifetimes.

Laughing at Laffer

So far, the campaign of distraction has been most impressive.  Especially enlisting armies of libertarians to march against the very same enlightenment institutions that made free markets possible.  By calling government the sole and only enemy of freedom, they manage to serve their masters well.

In fairness, Laffer does make a distinction worthy of some note, between an estate tax and an inheritance tax. The estate tax in effect puts the burden of proof on the IRS to prove that the money isn't in fact going to little Stanton III at Harvard, and if you're very rich you can hire better tax lawyers than the government can, thus giving you an advantage over the middle class woman who owns a small business and wants to leave it to her daughter.  The estate tax can thus be twisted to, in effect, work as a force to help create exactly the kind of dynasties we abhor.

The other kind of leveling is one that Americans find far less viscerally displeasing. Indeed, it has been the American consensus to pursue it, for generations. The very goal of Classic Market Liberalism (as envisioned by Adam Smith himself) was to maximize the feed stock of healthy, knowing and capable competitors that can enter into the mill of market capitalism. A little state intervention, in other words, with the clear goal of increasing the number and capability of competitive players. This is precisely the chief outcome of many liberal and progressive endeavors, from free public education to civil rights, to womens' rights, to the unleashing of the Internet. And many of them have been fantastically successful at pouring millions of new, avid players into the great, creative game of markets and enterprise.

Arthur Laffer is at it again. One of the core rationalizers in the push for a New Feudalism, he weighs in against the Estate Tax (ET), which is scheduled to go back to historically normal levels in 2011, after briefly zeroing out in 2010.

(In the Bush Era's final gift to greedy scions, 2010 is known as the year that Mom and Pop hide from their kids, lest they be tempted to hurry the parents along, for tax reasons.)

Laffer starts with the sly trick of offering up a strawman - claiming that top and only purpose of the Estate Tax is to redress a blatant unfairness of some kids inheriting vast fortunes that they never earned, while others languish in poverty. Yes, that is terribly unfair, and Laffer even concedes it. But then, he says, so is the unfair and unequal distribution of inherited talent, intelligence health, attractiveness. He implies that those who admire the Estate Tax are pure-pinko lefties, who want to level out everything, with inevitable homogenizing effects that lead to ruin, as in Ayn Rand's book "Anthem" or Kurt Vonnegut's story "Harrison Bergeron."

= Two Types of Leveling =

This is a standard neocon stunt, of course. Couch the debate in terms that none of your opponents ever dreamed of suggesting, then portray yourself as arguing sweet reason against a vile phantom. So, before getting to my main point about the Estate Tax, let's first deal with Laffer in his own, rigged playground, by considering the distinction between two types of "leveling."


The kind that right-wingers like Laffer accuse modern liberals of seeking -- confiscating and repressing the fruits of endeavor and successful competition, with the smothering, paternalistic goal of equalizing of all outcomes. Indeed if society ever plunged down that road -- eliminating all inequities and quashing of any natural competitive advantage -- that would, indeed, lead to a "Harrison Bergeon" world...

...and it is not at all what most American Liberals seek. Only a few ditzo, socialist-lefty flakes want that kind of foolishness, and those nuts have been marginalized, ignored by the vast majority of pragmatic liberals and democrats. (A far different situation than the one enjoyed by the nuts and flakes of the far right, who run, rule and dominate the GOP and have for decades. Indeed, the chief difference between Democrats and Republicans has much less to do with fundamentals of philosophy -- Europeans claim to be able to tell the two apart -- than it is simply this; in one party, the inmates have been allowed to run the asylum.)


In other words, "leveling" can be good and loyal to market capitalism, if it helps to increase the overall levels of vivid, vigorous and creative competition. This is the inherent complexity and irony that men like Laffer have deliberately obfuscated for two decades. One would wonder why... if one did not already know.

Think about it. In his article, Laffer deliberately uses his strawman to dodge the obvious question -- won't some of the funds gathered by the Estate Tax go toward helping other children better leverage their health, intelligence, etc? So long as the discussion is about children, helping them get to the starting blocks all together, to run a fair race, Laffer loses, bigtime, and he knows it.

So he strains to turn the question in other directions -- "we should focus on its impact on those who bequeath wealth, not on those who receive wealth."

You see, it is all about polemic. When the issue is kids, then disparities in wealth look unfair. But when you talk about adults, well, now those disparities were (to some degree) earned. And so, any attempt to take any of those earnings away is unfair confiscation of rightful earnings by a brutal state.

= Estate Tax vs Inheritance Tax =

An inheritance tax does the opposite.  Stanton has to prove that he's not getting the money--much harder to evade. All right. I am happy to argue details like that, in good faith.

But in fact, I am still falling for Laffer's strawmen. Because this clever master of distraction has done it again!

For the real issue, when it comes to the Estate/Inheritance Tax, is not about any kind of fairness and "leveling" the playing field, at all. No, those are diversions. Instead, our focus should turn to something else entirely, a matter of utter pragmatism -- the very survival of the Western Enlightenment, and the vibrant market-and-competition system upon which it is based.

For there is a ghost at the banquet. It is a stark and ironic truth... that only liberals want those markets to survive. And conservatives like Laffer are doing everything in their power to ensure that markets fail.

How can I say this? Well, one could start with the recent record. Across all the years since the second World War, almost every economic indicator has done better, on average, under Democrats than under Republicans. If you subtract three years of Reagan and three years of Eisenhower, then the correlation is near perfect.

But no, I want more history than that. A lot more. Will 4,000 years suffice? A historical record that spans every continent and every single civilization that ever had both metals and agriculture?

That long and brutal story shows, as Adam Smith very clearly described, that markets, democracy, science and everything we value has had one terrible enemy. A foe that is relentless, because it rises out of human nature itself, every time an elite forms at the top of any social order. It is an enemy that has ruined far more markets and systems of competitive enterprise than socialism or enlightenment governments ever did. It has been THE major enemy of human progress and freedom.

It is conspiratorial oligarchy. Feudalism. Under which the main and central goal of every aristocracy has always been the darwin-driven compulsion of elites to favor their own kin. To warp public policy in favor of cronies and offspring. To become top lords who are exempt from law and market rules, and then ensure that your children inherit your position, so that they can keep using those advantages, all the cheats that come with privilege, in order to keep augmenting that position, and become kings.

= Evolution in Action =

At one level, this is simple evolution-in-action... we are all descended from the harems of insatiable men, who succeeded at achieving this profoundly biological goal

Every effort of the right has been aimed, for 30 years, at bringing back a feudal-friendly regime.  Rationalizers and court apologists like Laffer cry out "class warfare" whenever anyone raises this overall issue.  Furiously, they distract attention from the blatant horror-story of human history, spanning every continent and every era, where oligarchs routinely shut down all competition, picking and choosing winners with far greater zeal than the most oppressive bureaucrat, ever.


In the short term. But not over the long run. Because they are fools if they think a limit won't be reached. We are starting to hear populist rumblings, and this time they are refusing to be diverted into silly-ass "culture war" distractions. The trick of turning rural folk against urban citizens won't work much longer, when both sets of red and blue middle class Americans start realizing and recognizing the Old Enemy.

Now is the time for Laffer's masters to ease off. To recognize what Franklin Roosevelt -- a man born to the top elite -- knew so well. That FDR's liberal restraints upon neofeudalism weren't "treason to his class."

Rather, they were a social compact that SAVED his caste and made America the safest place in all of history... to be rich.

========

See also: The Economy Past, Present and Future