Supply-side economics explained

I wrote this post four years ago on kuro5hin. The picture has just gotten worse since then. I sure am glad I’m learning to grow food in the backyard.

George W. Bush’s economic policy is based on trickle-down economics, also known as supply-side stimulus. Reagan was a big fan of this idea also. Simply described, supply siders argue that the best way to stimulate the economy to grow is to cut taxes on the wealthy. When their tax rates fall, the rich will increase their investments. For example, a restaurant owner might decide to build a larger kitchen if she gets a big refund check. Then, she’ll have to hire more workers to staff that kitchen, and so employment goes up, indirectly because of that original tax cut.

It’s an appealing idea. Reagan argued that it even makes sense for the government to cut taxes to below current spending and take on debt because in the long run, the economy would grow back so that eventually the tax cut would pay for itself. This approach is called “supply-side” because the stimulus (the tax cut) are applied to the suppliers of goods and services (the business sector).

The common objection to supply-side economics is that there’s absolutely no guarantee that if you cut taxes on the wealthy, then they will use that money to invest in new business. In fact, since these tax cuts happen in bad economic times, investors might decide that their money is safer if they save it rather than invest it. Going back to the restaurant example, if the restaurant owner decides to just stuff that tax refund into a savings account, or just keep it in her mattress, then no job growth occurs.

Also, if the government did what Reagan (and George W. Bush) recommended and went into deficits to finance one of these tax cuts, and no economic growth occurs, then the government is in a really bad spot. They have to raise taxes back to sustainable levels, and then raise taxes again in order to get the money to pay for the debt, and then raise taxes even higher to pay for the interest on the debt. Or, they can do what Reagan did, and just roll the debt over by issuing more debt. This is sort of like paying off the Master Card bill with the Visa. It works great as long as you can always get another credit card to lend you more money. When the last credit card company decides not to give you a card, then you are in trouble.

George Herbert Walker Bush called supply-side economics “voodoo economics” because all of supply-side theory was based on a hope that the rich would invest those tax cuts and not just stick them in the bank. George W. Bush ignores his father’s opinions about the wisdom of his economic policy, however, and is a big supporter of supply-side economics.

Third-world countries do the Visa-Master Card swap trick all the time. They run up huge debts by spending more than they tax, and keep borrowing money from private investors in their country and abroad. When it becomes obvious that the country is so far in debt that they will never be able to pay it back, investors start selling off their debt, even if they sell them at steeply-discounted amounts. This is really, really bad for the country still trying to pay its bills by borrowing more. When investors start dumping your IOUs on the market, then your country’s currency quickly loses value. This is called hyper-inflation.

In 1997, investors all around the world had lots of money invested in east Asia. Then, people lost confidence in certain countries, and so investors all started selling off like mad. The investors sold debt denominated in Asian currency to buy dollars. This pushed down the value of Asian currencies relative to $US. In short, families in these countries found out that their life savings (which were stored in their home-country currency, like the Thai baht, or the Indonesian rupiah, not in $US) lost all of its value because of inflation. It was as if these people woke up, went to the store, and discovered that all the prices had doubled, and were probably going to double every day after that. That’s when the riots broke out, which scared away more investors, and the downward spiral continued.

The same thing happened recently in Argentina. Investors all started selling off Argentinian debt, so the value of the Argentinian currency plummeted, and people were wiped out. Also, when you have high, high inflation, goods imported from other countries become much more expensive.

What happened in the 1980s is like a big Rorschach test. Some economists see all the signs that supply-side economics worked, and others see the same period as the beginning of severe fiscal irresponsibility (“fiscal” means how the government manages spending). There’s no doubt the economy grew after the Reagan tax cuts, but it never grew enough to pay back the debt Reagan racked up. We’re stilling paying interest today on that debt. We’re also now adding to it because each year that the government spends more than it taxes, it creates a deficit, so that gets added to the debt, and we’ve been in a deficit ever since the George W. Bush tax cuts. Also, in some other recessions, the government has chosen to just wait it out, and most recessions end in about 11 months. Based on previous experience, the recession probably would have taken care of itself eventually, and we wouldn’t have all this debt hanging over us today from twenty years ago that we still haven’t paid off.

In 1991, part of the reason why George H. W. Bush had to break his “read my lips: no new taxes” pledge was because he was forced with the choice of either raising taxes, or putting the country further in debt. He made the politically painful move in order to protect the long-term interests of the country, even though he knew he was just about guaranteeing he would lose the 1992 election.

Clinton saw an opportunity to steal an issue from the Republicans in 1992. Since they were no longer the party of being fiscally responsible, Clinton made that his mantra. He balanced the budget early, by cutting spending and raising taxes. Then of course, the public didn’t like that, so in 1994, the Democrats lost control of Congress. Still, thanks to Clinton, we got out of deficits by the end of 1990s and in 2000 Gore wanted to start paying down the debt, but then George W. Bush won the election, and instead of paying down the $7 trillion that we owe (about $24,000 per US citizen, and growing every day), he pushed through his tax cuts instead.

The US debt is at an all-time high, and the financial world is starting to worry about the long-term stability of the US economy. The International Monetary Fund, in a release a few weeks ago, recently warned that the US debt was increasing to the size where it could threaten the world economy. The Bush administration almost entirely ignored the report and the mainstream US media didn’t make the report into a big story.

Meanwhile, the US dollar has lost about 30% of its value versus the EU Euro in the last 12 months. A weak currency in the short run may help our exports, but in the long run, it pushes up interest rates and frightens foreign investors. Since most of our debt is held by non-US investors, the US government’s ability to borrow depends on maintaining confidence that our currency will maintain value in the long-term.

One economist described debt as more like termites in the walls, rather than a tornado outside. Both will eventually destroy the house, but it is a lot easier to pretend that the termite problem isn’t so bad.

The Brookings Institute, a think tank in Washington, DC, just finished a paper that describes some long-term consequences of ignoring the budget deficits. Alice Rivlin, former vice-Chair of the Federal Reserve Board of Governors co-authored the paper. It is written for the interested outsider, rather than the professional economist. In short, allowing the government to run deficits indefinitely raise interest rates for all of us, risks inflation of US currency, and limits long-term economic growth.

Total employment (the number of people with jobs) has fallen by about 3 million jobs since the economy peaked in March of 2001. George W. Bush promoted the tax cut as a tool to create jobs, and by that standard, it hasn’t worked at all.

GTA Vice City is right-wing propaganda.

This is another post from when I had a job that was smart enough to let me write blogs all day. The original post, along with comments from the k5 community, can be seen here.

First, let me list the good things in this game:

  • All the radio stations are wonderful. I drove around aimlessly on the vespa scooter for nearly an hour just to see how much material they recorded for the KCHAT channel.
  • All the voice tracks are excellent.
  • The physics for car-driving were great fun. I especially liked getting a dump truck up to top speed and smashing into police cruisers.

However, I returned the game 3 days before the due date. Maybe the rest of you were entertained by the opportunity to beat cops and prostitutes, but the fun in that wore out pretty quick.

List of everything I didn’t like:

  • The character animation was awful. Most of the dialogue scenes reminded me of Jack from Tekken (may his blocky soul rest in peace).
  • At its core, the game consists of taking orders from bosses and running errands. That’s essentially my real life; how is this truly escapist?
  • The hand-to-hand fighting is clunky and uninteresting. I lost plenty of fights because I would punch and kick in the wrong direction. The designers should steal some ideas from recent games like Onimusha or Mark of Kri that have done hand-to-hand combat right. And give me a chance to do combos!
  • After a while, playing this game gets downright creepy. Do most ps2 owners really fantasize about this stuff?

I stopped playing at around the point where I was supposed to kill the Mob boss’s wife and make it look like an accident. You can call me whatever emasculating, effeminate names you want to, but I didn’t enjoy the fact that the game designers actually had the wife beg for help during that “mission”. Really bad taste. But not the good kind of bad taste, like what you get in early Jon Waters movies. I love that kind of bad taste. This was more like puerile misogynist bad taste from junior high study hall.

For those that are unaware, the gimmick with all the Grand Theft Auto games is that the player becomes a low-level criminal and interacts with other underworld denizens. In Vice City, players do stuff like kill mob bosses, blow up buildings, intimidate juries, etc.

When the first Grand Theft Auto 3 game hit stores, pundits argued that this first-person perspective glamorized crime. After playing for several hours myself, I don’t buy that argument.

Nobody that finishes this game will want to carjack a minivan and steal illegal microchips from a French courier.

Instead, if you’re willing to entertain the idea that the player is getting subconsciously programmed, Vice City is more likely to foster reactionary ideas about undeserving poor, the working class’s lack of morality, the futility of the welfare state, and the need for a brutally effective police force to keep the underclass in its place.

After spending the dozens and dozens of hours necessary to finish this game, the conclusion to be reached is that criminals deserve no mercy. You’re more likely to walk away from playing this game thinking like Pat Buchannan than wanting to be Tony Soprano.

There’s even weird pro-fascist themes: if you attack a cop, more cops come after you. If you kill those cops, police helicopters show up, followed by super-effective FBI agents. Contrast this with the consequences of using a meat cleaver on a prostitute and then taking her money. The message is that you can prey on the weak all you want, but you better not make a move against the establishment, or they will crush you.

Most of the characters that the player meets in the game are prostitutes, mafia members, crooked businessmen, drug dealers, thieves, etc; a panoply of suburban stereotypes about the inner city. These are the people that Tony Salvetti (the player’s identity) has to beat up or kill. The message here is that victims of violent crime are often criminals themselves. Or, if they’re not actually criminals, they’re still people of low character.

Instead of being thought-provoking, Grand Theft Auto Vice City pumps out an oversimplified, social-Darwinist, Reaganite view of the world. Perhaps that’s why the designers chose the 1980s setting.

Pre-employment drug screens ate my balls

This is a really old k5 diary that I’m proud of. The original post is here. I made some minor edits.

The bratty and unhelpful HR troglodyte just called and said she forgot to mention earlier that I’ve gotta take a pre-employment drug screening.

Now I gotta go and piss in a goddamn cup.

She’s unhelpful because so far, she’s been unable to answer even one of my questions about vacation, benefits, health insurance or retirement without putting me on hold and asking somebody else first. She’s bratty because she doesn’t like how I ask her to explain the nonsensical corporate jargon she throws out; I think she’d prefer that I just trust her judgement about my options rather than try to comprehend them myself.

Anyway, she should have told me about the drug test two weeks ago when I got the offer. Now I gotta get to the new city a few days ahead of my original time so I can excrete urine for these fuckers.

Dogs urinate as a sign of submission. Maybe that’s how this drug-testing thing got started; it’s just a way to break the worker’s spirit right off the bat.

I tend to glaze over when libertarians fuss about stuff like grocery store club cards, or Radio Shack asking for my address. I agree with them, but I don’t really get upset about it.

But pre-employment drug tests really make me mad. It’s not what you’re thinking. I’m clean, man. Just like our president, I can pass the FBI background check that examines the last seven years.

And I doubt these tests really accomplish anything, anyway. It’s not as if American productivity shot up after employers started screening new hires. Almost any of the tests can be easily circumvented. They’re just another sign that we’re slowly giving our dignity away.

I’m not mad because I think drugs ought to be legal. I don’t really care anymore about whether they should or shouldn’t be illegal; they are illegal, and most likely, they’re going to be illegal for a really long time. People might as well rant about bad weather. Furthermore, I wouldn’t touch them anyway.

I don’t like being treated like a criminal. Drug screening places are always shitty hellhole offices, with employees that are unhappy at the fact that they handle piss all day, so they take it out on the poor saps that need work bad enough to submit to this degradation.

This job didn’t perform a credit check (well, at least not to my knowledge) but I’ve been asked to grant permission for those for other jobs.

My sister had to take a lie detector test in order to get a promotion at one job. Where does it fucking end? Will firms send out investigators to root around houses of job applicants and look for anything that might mark them as a bad employee? Why not profile family members and find out if any of them indicate a family predisposition towards deviance? Maybe future junior partners at PricewaterhouseCoopers will have to go out and kill some nameless victim in order to make it to full partner; that way, the company always has something on them.

It’s days like this that make me want to cash out my retirement and head out of town, buy a farm, and live off the grid. But that’s not really very safe anymore either, right? A bunch of bored ATF assholes would probably come after me.

A friend warned me not to eat any poppy-seed muffins before the test. That got me thinking. In some other parallel universe, I’m gonna look up every drug analog possible and eat all of them: poppy seeds, cough syrup, cranberry juice, etc, and try to grand-slam that drug test. I want a goddamn siren to go off because of everything I (falsely) test positive for. Based on the results, doctors will want to know how I can remain standing.

But in this universe, I figured out what I’m gonna do. I’m going on an all-asparagus diet the week before my test. My piss is gonna stink so bad, lab techs will have to wear masks or risk losing consciousness. They’ll have to close the place down to fumigate.

Oryx and Crake by Margaret Atwood

Summary: a good book about the downfall of civilization written by an author that doesn’t normally write science fiction.

Oryx and Crake is highbrow science-fiction. It’s not hard science fiction, like something written by Clarke or Sagan, where you’ll learn plenty of physics along the way. I mean it’s written by an author with literary credentials. Mainstream critics tend to all say the same thing about this book: “It’s sci-fi, but it’s good,” which is more than a little insulting to the rest of us. That put aside, this is a good book.

Most of the book reads sort of like what you would expect from everything else Atwood writes, despite the futuristic setting: children lose their innocence and discover their parents aren’t saints; love turns to jealousy; admiration turns to hate and fear and people do things they previously never could have imagined. In the end, which is usually where the book starts, the characters try to piece together some meaning out of it all, and grieve their loss.

If I didn’t like this book, I would say it’s sort of like A Separate Peace meets The Omega Man. But I did like this book. However, it’s still some seriously emotional stuff.

Margaret Atwood’s style by this point is well established: her characters change names when their situations change. The book starts off at the end, and the reader discovers what happened when the characters reflect on their lives in thoughts and conversations. Margaret Atwood loves writing about male-female and parent-child dynamics, and the subconscious forces that drive us, and Oryx and Crake is no exception.

I’m not going to run through the entire plot, but the book begins with somebody named Snowman picking through the detritus of western civilization. The plot unwinds while Snowman reflects on his life from childhood until the present. Along the way, we get the story of how the little boy named Jimmy grows up in a world that looks sort of like our near future, and becomes Snowman right after that civilization comes crashing down around him.

In Jimmy/Snowman’s childhood, the world looks vaguely like a more privatized, slightly more technically advanced version of today. As an adult, civilization has collapsed, Snowman is all alone, and he spends his time picking through the wreckage looking for snacks.

I’d wager that at least half of the books on the shelves in the sci-fi section in any bookstore revolve around some sort end-of-the-world scenario, leaving one or a few survivors to make sense out of it all. Atwood dodges the rookie mistake of trying to make her scenario seem plausible, or even worse, mentioning certain years, or real-life politicians. Instead, she goes in the opposite direction. We piece together a picture of the world in the future from snippets of conversation, consumer products, and advertising. We don’t get a detailed roadmap of how we got to a world where corporations run most everything, and their employees live in combination housing developments/office parks/shopping malls.

Crake is Jimmy’s childhood friend; they grow up together in the same private compound where their parents work. They play computer games together, they get high, they watch inordinate amounts of porn (no word on whether Atwood lurked on slashdot to research).

Like a lot of the little aspects of life in this future world, the computer games that Jimmy and Crake play are fleshed out almost to the point that it’s hard to believe these aren’t real games. “War of the Roses” is one game; it seems sort of like Magic The Gathering, or Pokemon, except the mythical monsters are replaced with the highs and lows of humanity. One player can play the Holocaust card, and another player can play the Sistine Chapel card” to negate it. Crake actually gets his name from another game, “Extinctathon”, where the players take turns wiping out species.

The boys grow apart. While Jimmy becomes more aware that he has none of his parents’ aptitude for science, Crake takes off in school. Jimmy goes to a crappy art school and Crake goes to a top science university where student research is sponsored by corporations.

Later, they come back together when Crake hires Jimmy to write marketing copy for the Crake’s corporation. Jimmy becomes possessive of Oryx, a woman who previously worked as a not entirely consensual prostitute in some unknown third-world region. Now, Crake employs her at his company, and they have some nebulous relationship that drives Jimmy away from Crake.

I liked this book because Atwood made the characters seem real. She really captures the alienated teenage boy vibe in Jimmy. The highlights of the book are Jimmy’s adolescence. Besides that, Atwood creates a fascinating view of a possible future, with pigs that are genetically engineered to provide compatible organs to humans, chickens that are refactored without sense organs, brains, or anything extraneous to the purpose of getting fat enough to harvest as quickly as possible, and popular revolts battling with corporatization. Inside all that clever scenery, there’s some pretty good characterization of children abandoned by their mothers that grow into alienated adults.

The next paragraphs could be construed as spoilers, so stop reading if that sort of thing bothers you.

Besides all the good things I mentioned above, I gotta say that the ending of Oryx and Crake left me dissapointed. We never get an explanation for why Crake wiped out humanity. We spend the whole book wondering about how civilization gets destroyed, and we eventually find out how, but we never get to the more important issue of why Crake destroyed it. Crake has been a cypher throughout the plot, so it’s not out-of-character, but, like I said above, the ending is a little dissapointing.

Maybe Atwood is trying to make some point about humanity in general: people do crazy stuff and the rest of us are stuck trying to pick up the pieces and figure out why; but, to borrow a line from Marge,

“That’s a pretty lousy lesson.”