Avdat

Mother's Day tributes

• The story of this autistic child's mother is one we can identity with.
• A stay-at-home Mommy's economic value:  $117K!

Pick your poison

Economists know more about gas prices than preachers:

Cuts in gas taxes would not lower gas prices because the supply of gasoline is close to fixed -- the oil industry is already operating its refineries at near maximum capacity (or so they claim). As we teach our econ students, if the supply is fixed, then the price is determined on the demand side. This means that, if the industry produces about 400 million gallons of gas per day, the price will continually adjust to the point where all consumers put together purchase about 400 million gallons of gas per day. Therefore, if the gas tax is reduced or eliminated, as McCain has proposed, the price consumers pay will stay the same, but more money will go to the oil industry.

Wow.  So it's not even a 5% off sale.  It's a 0% off sale.  It's a "Do you want to pay the gubmunt or do you want to pay Big Awl?" sale.

Since my mutual funds shun the energy sector (here is but one example), and since I do have to drive across the rickety Yadkin River bridge from time to time, I choose the gubmunt.

Principled pandering

There are no good arguments for and many great arguments against a gas tax holiday, but one I'd like to mention is that high gas prices actually minimize the impact of cutting the gas tax.  The federal gas tax has stood at $0.184 per gallon since 1993.  Thus, in March of 2005, when North Carolina drivers were paying around $1.80 per gallon, 10% of their bill (a tithe!) went to the government.  But today's average cost of $3.60 per gallon means that only 5% of the cost is tax.  For data citation, see this handy-dandy graph.

Like I said, there are many good arguments against the gas tax holiday, but I wonder if any of them matter.  North Carolina and South Carolina both have sales tax holidays in August, ostensibly to spur back-to-school shopping.  Now sales tax is 6.75% in Rowan County.  Can you imagine consumers responding to a TV ad screaming SALE!  6.75% OFF!  THROUGH SUNDAY ONLY!  But call it a sales tax holiday and people line up like the day after Thanksgiving.  Is this because people don't know how much tax they're paying, or because the psychological value of sticking it to Uncle Sam makes up for the paltry monetary savings? 

The blogosphere is giving McCain and Hillary a good working-over for pandering to voters.  And rightly so.  But pandering works.  People may say that they want a philosopher-king who will keep his own, Solomonic council and not raise a moistened finger to the wind, but when it's their pocketbook, or their congressional district, they want a politician who can bring home the bacon.

So I admire Obama's principled opposition to a gas tax holiday, but I'd rather him win than lose and me keep on admiring him.  He needs to make some news, not just be the subject of all kinds of bad news.  He needs to find a way to pander with integrity.  How about a raise in the minumum wage? 

Ethanol will save us all

All of the sudden the media have noticed how expensive food is.  There are reports about food riots in developing countries.  The cost of rice is up 70%.  Wheat has doubled.  In China, pork, a staple, is outrageously expensive because the corn that's grown to feed swine is being funneled into ethanol production.  Biofuels are competing and winning against poor people's hungry stomachs.  Click here for details.

Who knew that ethanol would cure global warming by starving people to death?  I mean, dead people don't drive, do they?  They don't turn on incandescent light bulbs.  More genius!

A friend of mine from my former call once wrote me a passionate email about how ethanol is an affront to the farmer's sacred obligation to feed people.  Food, not fuel! 

Now there's always been a class of farmers that haven't made a great contribution to ending world hunger.  Tobacco farmers.  Cotton farmers.  But it is a good point, and the world would be a far better place if more of us thought about our work in terms of vocation rather than making a buck, or exploiting new markets and technologies for their own sake.

Holiday

McCain wants to suspend gas taxes during the summer driving season.  What a great idea!  An incentive to put more cars on the road for more miles, burning more fossil fuels, and less money to repair our crumbling transportation infrastructure.

Oh, now I get it!  More cars on buckling bridges means more dead people, and in the long run, fewer cars, and fewer CO2 emissions.  Genius!

Bittergate

If you aren't up to speed on the latest tempest, Senator Obama went to San Francisco and explained to uncomprehending (and presumably very wealthy and very liberal) donors why working class Americans vote Republican (via Andrew Sullivan):

You go into these small towns in Pennsylvania and, like a lot of small towns in the Midwest, the jobs have been gone now for 25 years and nothing's replaced them. And they fell through the Clinton administration, and the Bush administration, and each successive administration has said that somehow these communities are gonna regenerate and they have not.

And it's not surprising then they get bitter, they cling to guns or religion or antipathy toward people who aren't like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.

Naturally, the fecal matter collided with the distribution mechanism.  So Obama explains himself here:

This is pretty good, but I don't think it really gets at why people would be genuinely upset at his remarks, and not just the Sean Hannitys of the world.  In the first quote, Obama basically repeats the liberal conventional wisdom, that Religion is the opiate of the masses.  More to the point, the God, Guns and Gays Religion of the Religious Right is an opiate designed to soothe the heavy hit that GOP policies have laid on working class Americans for a generation.

I've thought this too, but I've been convinced it's not at all the case.  It was member of my congregation who convinced me.  He articulated the reasoning of today's populist conservatives better than anyone I've heard. 

As he sees it, morality is essential to economic success.  You need a strong work ethic.  You need to take pride in your craft.  You need to respect your supervisors and deal fairly with subordinates, business partners, vendors, and everyone else. 

So it's no wonder that times are hard because the moral underpinnings of our society have been knocked out.  Without prayer in schools, and all the other trappings of civil religion, we're raising a generation of lazy employees who do shoddy work.  No wonder America has lost its competitive edge!  No wonder brown skinned workers from more religious countries, even if they aren't Protestant or even Christian, are taking jobs away from native born Americans.

Working class whites will never "see the light" on Gods, Guns and Gays, nor will they begin to vote their pocketbooks, if that means voting Democratic.  As they see it, they are already voting their pocketbooks.  They see the platform of the Religious Right as an economic development strategy. 

Obama, and most liberals simply don't get this.  Obama says the same thing about rust belt whites as a lot of people say about inner city blacks:  "I understand why they're taking that drug," the drug being the Opiate of the Masses, rather than crack cocaine.  But working class whites don't want to be understood, or condescended to.

Someone said somewhere that Obama looks like a sui generis candidate, but with the perspective of time, we'll come to see him as embodying trends that predated him.  If Obama wins the White House and Mike Huckabee wrests control of the GOP away from the current power brokers, then I think the realignment of working class whites that Nixon and Reagan worked so hard for will be complete.  It's hard to imagine the party of the New Deal being emptied out of such people, but the parties have swapped constituencies and even ideologies as long as they've existed.

We are ruled by jerks

Local reaction to Governor Spitzer's resignation:

In (Spitzer's) wide-ranging probe of the mutual fund industry, Charlotte-based Bank of America Corp. and merger partner FleetBoston Financial Corp. in 2004 agreed to a $675 million settlement. The bank declined comment Tuesday. Many at the bank, though, were saying "what comes around, goes around" when the news of the prostitution case surfaced, one source said.

No.  No.  No.  No.  No.

Whatever social wrath and legal penalties Eliot Spitzer must bear is payment for his purchasing sex, not for the legitimate exercise of his oversight authority.  The board room snickering is truly galling--the soundtrack of our decadent Second Gilded Age.

Laugh it up, bankers.  That's Margin calling on line one.

It's like, so 2005

There's a truly awful article about Social Security in the latest Christian Century (sorry, no web link that I know of).  Robin Klay and Todd Steen argue that defined benefit programs create disincentives to save.  What we need, the authors cry, is more individual responsibility.  Hence we need a partial privatization of Social Security that puts more of the onus on workers to provide old-age income. 

Add to that the usual hand-wringing about Social Security's longterm solvency, and the article amounts to a great press release for a presidential visit to some hinterland city circa 2005 to talk up gutting the program.  Problem is, most Americans heard these arguments three years ago and rejected them.  In fact, the more President Bush barnstormed the country, the lower the plan sank in the polls.

You wonder what such an article is doing in the Century in 2008.  The plan is politically dead, and the ideology behind it, a contempt for shared risk and collective solutions, is, well, waning, thanks in no small part to the last seven years of incompetence that it's advocates have demonstrated in the White House.

But indulge me while I beat a dead horse.  Social Security is in perpetual need of actuarial adjustments.  Thus, there is no "crisis."  In the mid-1930s, Frances Perkins, the architect of the plan, predicted some restructuring would be needed around 1980.  Sure enough, in 1982 Congress passed and the President signed a measure "to save Social Security."  Whatever actuarial problems the program faces can be solved by a gradual increase in the amount of income subject to payroll taxes, and/or a gradual increase in the retirement age, to reflect lengthening lifespans.

Demographics provide more good news.  Americans are reproducing at a higher rate than other post-industrial nations.  This means that there will continue to be plenty of workers to provide benefits for retirees. 

The idea that there are people out there failing to save because they're banking on Social Security is ludicrous.  Do you know any such people?  Neither do I.  True, there are plenty of people out there with a grasshopper mentality, but to say that Social Security makes grasshoppers of us is just not true. 

In fact, it's the opposite.  Because at least one leg of the retirement stool is guaranteed (the other legs being pensions/401k, and personal savings), workers are encouraged to take economic risks they might not otherwise take, such as investing in the stock market or starting a business. 

Another bonus:  with Social Security, middle-aged workers aren't forced to choose between their children's education and the health and dignity of their parents.  While some scorn the great transfer of wealth from young to old that Social Security represents, in fact the program enables the in-between generation to solidify their offspring's prospects for the future.

But I think that all you need to know about Klay and Steen's article is to contrast it with this Christian Century article from a decade ago on the moral vision of Social Security's founder, Frances Perkins:

Perkins thought of insurance as a brilliant marriage of religion and science. It was a way to realize the moral ideal of neighbor helping neighbor through actuarial science. In practical terms, insurance translated mercy into money, compassion into financial assistance. The abstract became concrete, just as the Word had been made flesh.

Klay and Steen's clarion call for "individual responsibility" sounds a lot like Cain's question and the lawyer's question to me. 

Klay and Steen further grouse that "retirement is not a right," observe that "retirement" is a recent social phenomenon, and add that it's only possible "through the fruit of productive labor, sacrificial saving, effective investment and responsible budgeting."  Strangely, it doesn't seem to occur to the authors that Social Security might also have some roll in this stage of life called "retirement" that's unique to our modern age. 

Were people just plain lazier before World War II?  Was that why retirement wasn't an option for them?

I'm all for the prudent behaviors that the authors celebrate, but it's nonsense to pit Social Security against these behaviors.  And it's unkind to wield the threat of growing up to become a bag lady as an incentive to budget.  For reasons beyond their control, hardworking, thrifty people can come to the end of their work lives without much savings.  Social Security, like all forms of insurance, is a way of pooling risk, so that we don't add insult to injury by throwing people who no longer can provide for themselves to the wolves.

I'm no economist but...

Yes, I know that consumer spending counts for like a zillion percent of GDP.  But still, the proposal to throw tax rebates at taxpayers to head off a recession seems strange.  First of all, I have yet to meet an American who doesn't spend too much.  Around our church they tell stories about one of the little old ladies who was so scarred by the Great Depression that she used to try to wash and reuse Styrofoam plates at church night suppers.  But such people just don't exist anymore.

Isn't the bigger problem with our economy that people confuse wants and needs and go into debt to feed that voracious beast, and are thus left totally behind the eight ball when they get laid off or their interest rates go up?

I'm aware that there are other problems.  Lack of affordable health care.  Stagnant wages.  Etc.  Etc. 

All this said, it's strange to me that the solution to this looming problem is to throw money at people and hope they'll go to Wal Mart.  This is like pouring a stiff drink for the guy who's horribly hung over in the county lockup after putting a family of four in the hospital while driving drunk.

Yes, I am a liberal and I believe in state intervention to smooth the roiling waters of market capitalism.  But I am conservative in the sense that I believe we're all put here to get a little work done.  Why can't the DOT just hire all the out of work construction workers and set them to the task of repairing or replacing all the other bridges like that one that collapsed in Minneapolis last summer?

Why wouldn't that be a better stimulus?