moneypolitics & government

Why the shit don’t work

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Some pertinent facts seem to have been subsumed behind the New York Times pay wall, one wall I shall never breach, but my memory has not yet been degraded by the internets as badly as our ability to catch birds in flight has been dulled by the poultry industry. SkyNet Jr (Google) will not disgorge a story from 2004 about a team of mathematicians, two I recall, either at MIT or BU who eagerly participated in the race to develop statistical models that could predict elections. This is vital work as the one innovation that could solve all our problems; taking the citizen OUT of the electoral process, hangs on its perfection. These fellows had some pretty serious success as their program, held in utter secret, could reliably predict the two-party vote within two percent. At the time the question was, Will the fine, enlightened war hero, John Kerry, replace the drooling hand-puppet from Enroniburton? Sadly for the Timesie, the answer was no. That nameless scribbler was forced to ask the question that certainly no one ever asked these academicians before, Are you now or have you ever been a Bush backer? In surprise and bemusement they replied, No, we are Kerry supporters. Dang. Figures don’t lie, as the saying goes, but liars choose their figures with great care. Even more common than conscious lying is a malign bit of discrimination, self-reference and puffery called Conventional Wisdom; often in error but ne’er in doubt is the fair and forthright cliche. I will call neither the Obies or the Bushies or their predecessors liars today. Not on this subject. Let’s say they (and we) were led astray by the CW.

Our number crunchers here were really at the top of their game. I’m not sure how time has treated their record but somehow I think if they were solidly predicting an Obama victory we would have heard about it. In any case back in ’04 the record was good, delivering an answer within two percent of the result in all of modern history. More amazing still, their inputs consisted of only two metrics: the unemployment rate and the inflation rate. The only other key punched was Incumbency. Either you were The New Hotness or The Old-busted Joint. That’s it; no surveys, no registration numbers, no other financial indicators; none of the produce of the poll-dancers, the gunslingers or the big talkers. How the numbers were whirled about was not disclosed. It never is by these guys as a trade practice, but the known facts; that they only put in two numbers and one qualifier to get their results suggest a few very important things. For one, it seems that collectively, the electorate knows, or perhaps better, internalizes these two numbers to a high level of accuracy. Sure, almost anyone could guess these days that unemployment is just a skoosh under ten percent. The fact is covered ad nauseum as bad, bad, bad but still short of double-digits. Keeping a plausible distance between Obama and double-digit unemployment (which is to say, Carter) is the imperative driving many a foolish maneuver. But you knew that. What you might not know, as Team Obama claims they do not, is that these numbers most assuredly DO reflect the facts on the ground. We mean here, the electoral ground which is the only real estate these guys are worried about. Many an outlet is reviving an even older application of the two-headed snake of Unemployment/Inflation. Those who survived the Carter years recall the Misery Index. Simply adding the two percentage figures together gets you the Misery Index. This looks pretty arbitrary. We might not be talking apples and oranges here, maybe it is apples and crabapples, but the resulting product has proven useful indeed as a leading indicator of many important things including elections, Presidential or otherwise.

So the numbers matter. And they matter with high precision. Plouffe, Carney and Obama know this; the disdain for the figures is a PR gambit to calm their own dray horses. Inflation, they like to remind people, is nominally quiescent so the only progress on the Misery Index must come from improvements in Unemployment. Nearly any domestic move must be understood as either an attack on Unemployment to drive it down or a firm hand preventing it going up. That is almost never mentioned, is it? The possibility that Unemployment could increase? You had better believe the gunslingers on the Obama Ranch discuss it. They live in shrieking terror of it. Other than firm belief in the moral and practical superiority of the government in all spheres, it is the apprehension of double-digit Unemployment that keeps serious budget cuts from being enacted. Sure Barack loves his EPA and Federal Farm Bureau as much as the counties love their firemen and food inspectors but their jobs are relatively secure because any large scale reduction in government payrolls is initially going to INCREASE unemployment. Everyone knows this. It is also the secret reason the Republican party men can not be counted on for cuts even to the other guys’ programs. Yes, these are literally and statistically “job killing cuts” as Harry Reid describes them. The fact that the jobs cut may well need cutting regardless of fiscal demands is likewise a bi-partisan taboo. This is a large part of the reason, friends, why the shit don’t work.

The shit doesn’t need explication, does it? The shit is what has been going on, and not merely on Obama’s watch. The shit was best described as Tax and Spend by the New Dealers though now we have a modern improvement which is Borrow and Spend, keeping the tax rates plausibly low while a more or less invisible debt accrues. But borrowing is just delayed taxing (and with the interest added in) so the distinction is not important for us here. What is important is the central conceit that lets the inundation continue even now when everyone admits we are in the shit up to our nostrils. You remember the Stimuli. Explicit Stimuli passed in early ’09 adds up to nearly $2t. We know that, contrary to statements at the time, this did not go to filling potholes or restoring bridges. We know because that is what they propose to do today, two years later. Instead the funds, (still not exhausted) went to shore up the finances of States, Counties and Cities to prevent layoffs that would not only spike unemployment but, given the public and rare nature of the events, harm national confidence catastrophically. Other beneficiaries were either heavily unionized industries or simply unions. Rump elements of the Democratic coalition also came in for large dollops of cash and the association is so plain that we can well put these recipients (like ACORN and the alt-energy biz) of either money or cash-like tax breaks into the realm of the government job.

Now we are getting to the crux of it. Here the Conventionally Wise do not simply compare apples to oranges but are frankly comparing apples to road-apples when they make an equivalence between a government job and a job. The principle distinction is that a job PAYS taxes. A government job consumes them. Oh we pay taxes! the gub grubs will say, and certainly they do. Do they pay MORE in taxes than it costs to employ them? If so they are truly put upon and deserve a modern Emancipation Proclamation, sometimes known as quitting. But until we find such an imbalance we must face the fact that government jobs consume, and do not produce, tax revenues. Philosophical Tax and Spend does not admit this. Actually they take a nakedly opposite position. To speak in strictly federal terms, what those who would spend our way to prosperity assume is that government spending delivers as much positive force to the overall happiness of the nation as your spending does. They add this to the growth, predict job growth from that and project the result as improved metrics. This is why each day’s predictable disaster is reported as “unexpected”. In other words, the feds will take money from your pocket via taxation, borrowing or printing, process it through the costly and yet error-ridden accountants, dispense it to a Cabinet Secretary who will hear the applications of Governors and Mayors to have it returned to your County where it will hire a new health inspector. And this is going to improve your life, perceptibly, in greater measure than if the money had been left where it was found, spent on lunch and therefore hired the six good cooks you could have had for that one health inspector. Their statistical habits assume the effect is FAR superior! This is not to say we don’t need health inspectors but there is no point in hiring MORE health inspectors when the number of professional cooks employed is not expanding. Even less when that number is horribly contracting.

But as you can see,  we are in the most vicious of cycles. What is needed is a broad-spectrum pruning of government at all levels and in all spheres. Doing this will spike unemployment. Unemployment may not be spiked. Yet if it merely continues at sub-10%, the revenues to government crumble (regardless of the tax rates), either forcing cuts or yet more debt. We can’t have the cuts so, what happens? Yeah, more massive borrowing and the currency goes bye-bye. The Debt Ceiling will be struck again, long before the next election. I predict, before next Christmas. But we could walk out of this at any time provided we have had a general collapse that strikes government and real jobs indifferently. When the health inspector’s check bounces, cutting his job will not be a great additional insult. So spiked Unemployment as a figure is a crucial precursor to our inevitable rebound. From that point on both business and government can hire and retain rationally, which is what should have been happening all along. The real scary bit is that as global finances implode (and this is indeed a global phenomenon) growth investments that bet on a prosperous future tank and the refugee money rushes into the safest harbor; US Treasuries, meaning there will be  temptingly low rates for government borrowing, right up until there is functionally no money left. So we are in the shit to stay, friends, and no, simply shitting faster will not help.

 

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