National Income Accounting

National Income AccountingAbout a year and a half ago, Dean Baker posted an article about national income accounting. It sounds boring, but it isn’t. It’s a little bit mathematical, however, so if you want, just skip down to What This Means.

Let’s look at the nation’s total income, which we will represent as Y. It is equal to all of the money that is spent on consumption (C), on investment (I), by the government (G), and on net exports: total exports (X) minus total imports (M). Thus, the following equation is true by definition:

C + I + G + (X-M) = Y(1)

Note: investment means something different in economics than it generally means to people. Investment is spending on infrastructure. So if a construction company buys hammers, that’s investment. If it purchases nails, that is consumption.

Now total income (Y) is equal is disposable income (D) plus taxes (T): Y = D + T. And disposable income is equal to savings (S) plus consumption (C): D = S + C. We can combine these two equations and get: Y = S + C + T. We can substitute this equation into equation (1) above:

C + I + G + (X-M) = S + C + T(2)

Consumption is on both sides of the equation, so it cancels out:

I + G + (X-M) = S + T(3)

This equation doesn’t clarify anything. So we need to arrange the terms. First, we want to combine government spending (G) and taxes (T). Second, we combine non-governmental savings (S) and investment (I). Once we do this, we get:

(X-M) = (S-I) + (T-G)(4)

What this says is: net exports equals net (non-governmental) savings plus the government’s budget surplus.

What This Means

Baker notes that most people who fret about budget deficits want something that is impossible. We currently import more than we export. This means that we either have to save less than we export or the government must spend more than it taxes or both. But look at what we hear all the time: we must balance the budget so that consumers will feel more confident and start spending! For that to happen, we would need to to export more than we import. Okay, we could do that. But the only way we can is by weakening the dollar compared to other currencies. And the same people who want a balanced budget generally want a strong dollar. We simply cannot have both.

I’ve write before that the balanced budget people are just liars. What they want is what they think is good for their class—the rentier class. They want a strong dollar with no inflation because that’s great if you already have piles of cash. They want to destroy entitlement programs because they fear their taxes might someday go up, but also because more desperate poor makes finding cheap labor easier.

But notice how if we really want to fix the federal deficit, we should be working on weakening the dollar. This would necessarily improve the budget deficit. But we don’t talk about this because the rentier class doesn’t want a weak dollar and their media lapdogs aren’t going to contradict them. In fact, the media by and large don’t even seem to understand that there is an issue. Strong dollar, fuck yeah! We’re number one!

Aaron Swartz

Aaron SwartzAaron Swartz killed himself on Friday. For those of you who don’t know, he was a good guy: a technology savant who co-developed RSS when he was still a teenager. But most of all, he was an activist against our broken and evil intellectual property system. At 26, he was facing up to 35 years in jail for “intending” to release copyrighted documents to the public. That’s right: our federal government was threatening him with over twice the maximum federal punishment for rape using a drug.

Certainly, this had something to do with his suicide.

Chris Hayes discussed him on Up today. Check out the video below. But I thought that Dean Baker summed up what I think about all of this:

I have no special insight into the events surrounding his suicide. He had in the past had problems with depression, but there can be little doubt that he was very troubled by the prosecution hanging over his head. The Justice Department was pressing charges after he had been caught trying to download a huge number of academic articles through the M.I.T. computer system. The point was to make this work freely available to the public at large. While both M.I.T. and JSTOR, the system he was alleged to be hacking, asked to have the charges dropped, the Justice Department insisted on pressing the case, threatening Aaron with a lengthy prison sentence.

It is difficult not to be outraged by this part of the story. Here is an administration that could find nothing to prosecute at the Wall Street banks who enriched themselves by passing on hundreds of billions of dollars of fraudulent mortgages in mortgage backed securities and complex derivative instruments, but found the time and resources to prosecute a young man who wanted to make academic research freely available to the world.

That’s the liberal administration. Remember that.

Here’s Chris Hayes:

I like what Hayes read from Swartz’s article on depression. I only want to add that Hayes is wrong: there really isn’t any help, as far as I’ve ever been able to tell. But certainly, great stress (like having the entire federal prosecution machine attack you) only makes it worse. Sometimes, tragically, unbearably worse.

Republicans Have Nothing to Fear

John SidesThis morning, John Sides wrote a guest article over at Wonk Blog. It had a very cheerful sounding title, How Congressional Dysfunction Could Hurt House Republicans. I was looking for something to raise my spirits, because I’m pretty down about the Republicans in Washington. In fact, today I described them as terrorists, and I do not think this is the least bit hyperbolic.

Boy, did Dr. Sides disappoint! I think a better title for the article would have been, “How Congressional Dysfunction Will Not Hurt House Republicans.” But I can’t complain too much, because I already knew that. Especially after the new heights reaching in gerrymandering in 2010, there is little that will change. In fact, it would not surprise me if the Republicans gained seats in the House, after they greatly damaged the world economy by causing a United States government default.

So what’s up with that cheery title? Well, it turns out that some political science research shows that the electorate punishes whichever party is in control when the House is dysfunctional. Or more accurately: if House approval goes down, so does approval for the majority party’s incumbents. Sides quotes Rahm Emanuel regarding the details of governance, “Voters don’t give a [expletive] about that stuff.” And indeed they don’t. If the government defaults next month, I’m not sure if my sister Mary will have any idea it was a Republican decision.

I’ll tell you where I’m at. I just hope that for the next eight years we can avoid any catastrophes in Washington. And I hope that the Democratic Party will make a big push to control state legislatures in 2020. And if that can happen, maybe we can make some actual progress in the decade after that. Until them, I don’t think the Republicans have a God damned thing to worry about for destroying the United States. In fact, I expect them to be rewarded if just refrain from doing anything too damaging.

This is what you call “cognitive dissonance”: the ability to be hopeful and hopeless at the same exact time. Yeah psychology!

Afterword

This is the song I was listening to while I wrote this:

Saddam Hussein and the Debt Ceiling

Saddam HusseinI had a thought about the Debt Ceiling crisis. But first, let’s think about Iraq. After Saddam Hussein was deposed and Iraq got a new government, they still owed all the money that Hussein borrowed when he was in power. Many nations forgave some or all of that debt, but there was never any doubt that it was owed. It doesn’t matter if a ruler borrows lots of money just to abuse all the people in that country, after he’s gone those abused people owe that money.

Got that?

Because I’m not sure that the Republicans in Washington understand this. Their manufactured Debt Ceiling crisis is exactly the same. The 112th Congress voted to spend a certain amount of money. President Obama, as the head of the executive branch, is constitutionally required to spend that money. Now, the 113th Congress is suggesting that they don’t want to pay for roughly 40% of what the last congress voted for.

I am starting to lose my patience with this discussion. Platinum coins? Moral obligation bonds? Do we really need to live in this fantasy world created by the Republican Party? The Congress has mandated spending. The spending must be done. If they don’t want to mandate spending going forward, then cut the budget. The Debt Ceiling is ridiculous and it makes our country look even more foolish than usual.

But I’m not a fool. I know why the Republicans don’t want to fight over the budget and are instead trying to blackmail the president over the Debt Ceiling. They don’t want to be held accountable for budget cuts. Hell, they don’t even know what they want to cut! They know that the government is too damned big and they are going to continue knowing that until the government doesn’t exist. Because their knowledge is not based on any facts whatsoever.

If I had any faith in the American electorate, I would say, “Fine! Let the Republicans destroy the economy!” But I feel certain that on 5 November 2014, we would find that at best, all that had happened was that the Republicans had lost a couple of seats in the House. A great country like the United States, does not get a revolutionary party like the Republicans without a dysfunctional electorate—without 40% of its (mostly liberal) members not voting.

Unfortunately, unlike Iraq, there will be no one eager to cancel out our debt if we default. People in the military will not be able to go without pay. Seniors will die without their benefits. Oh yeah, and bond holders will not sit idly by while their investments disintegrate. But there will be a big up side for conservatives. The government will have to pay far more for its debt going forward and so will use this as an excuse to reduce benefits. Shock doctrine USA!

I have a new definition for the word “patriot”: someone who hates—Really hates—the United States. Or we could all just agree to call the Republicans what they are: terrorists.

Downton Abbey

Downton AbbeyI almost never use the word “romantic” to describe sexual attraction and relationships. I generally mean it to indicate that something involves heroic archetypes. Sadly, I’m afraid that I got this way reading Ayn Rand. However, it is a far more useful word when used this way. I think it is a mistake to cloak sexual love in airy words.

This comes to mind because I just watched the first season of a very romantic television show: Downton Abbey. My sister Kim has been bugging me to watch it because she likes it and thought it would appeal to me. I checked and noticed that it was created by Julian Fellowes, whose script for Gosford Park is as great as anything ever created for a film. So I got very excited for about a minute, before forgetting that Fellowes had anything to do with the series. But yesterday, I finally sat down and watched the show. And I swear I am not making this up, I though, “Oh! Julian Fellowes create this!” It was only after talking with my sister that I was helped to remember that, in fact, I already knew it was by Fellowes.

The series is very good and I find it deeply affecting. This is mostly because the vast majority of the characters are so noble. And, of course, the characters are rather familiar. Bates seems very much like Parks from Gosford Park, for example. But Fellowes does a good job of mixing up things that it all feels comfortable without being stale. It also shares about the same mix of up and downstairs plot, with the downstairs getting a bit more of the focus.

The first episode works the best. As the series progresses, it gets more and more far fetched. Even apart from this, there is the continuing problem of Thomas and O’Brien, the male and female Iagos[1] of the series. It would be one thing if they, like Iago in Othello, were critical to the plot. But they are nothing but working in the alleys—mostly making trouble for Bates. Add to this that Downton Abbey is a modern drama with otherwise fairly well developed characters, and these two create problems that are much bigger than any of their evil machinations. Namely: they add an unwelcome melodrama to an otherwise fairly sophisticated modern drama.

There is a theme that is everywhere in Fellowes’ work: the responsibility of rank. I am deeply divided on this point. On the one hand it is true: the rich have traditionally had responsibilities that went with their positions. On the other: it is much easier to be rich, and today the rich have no such obligations. So I wonder why we talk about this. The idea that the rich have responsibilities continues on today, of course. But it now manifests itself in the myth of the Job Creator where the rich flatter themselves they are doing good moral work when all they’re really doing is getting richer. But in Downton Abbey we see a very clueless young man learn that his valet needs a sense of self-worth as much as he does. It is a nice sequence.

Overall, Downton Abbey is a very good series. It does have its problems. Sometimes, I think the directors try too hard; there is too much Steadicam work and artistic touches that pull me out of the story. There are character problems, as I’ve noted. And I don’t think that Fellowes does a good enough job as Executive Producer—there is not enough subplot resolution; I feel that the series is nothing but loose ends going forward. But all of this is transcended. I have enjoyed spending time with these characters and I want to spend more time with them.

Afterword

I really liked this bit of dialog by Violet Crawley (Maggie Smith), “When something bad happens, there’s no point in wishing it had not happened. The only option is to minimize the damage.” Alas.


[1] I am going to try to be a little more understandable. Iago is the villain in Othello. He is the one who, through insinuation and other machinations, convinces Othello that his new bride is unfaithful to him. This causes Othello to kill her and then when he learns the truth to kill himself. Whenever I talk about Iago, what I’m getting at is not so much that he is evil. It is rather that there would be no story without Iago. Truly, Iago is a pathetic plot device. Basically, because he is evil he causes trouble that the plot depends upon. A modern drama generally provides much more motivation for an “evil” character. In Othello, Iago does have some motivation: Othello passed him over for a promotion. Is that enough of a motivation? I don’t think so. Similarly, Thomas doesn’t like Bates because Bates has the job he had temporarily. Is this enough for him to still be plotting years later? Again: I don’t think so.

Little Britain

Little BritainAndrea suggested that I check out the BBC sketch comedy series Little Britain. She said it was funny, but also crude. She had no examples to delight me with how amusing it was, but she went to some length to gross me out. She’s like that. I don’t have much tolerance for this; I’m still freaking out over the 5 seconds of “two girls one cup” that some coworkers tricked me into seeing. (I have been told it gets much worse, but defecating into a cup is more than enough for me.) Little Britain has nothing this disgusting, although it does have, for example, painting with feces.

I got bored and checked out the series. I found it quite amusing and there was really nothing offensive in it. But it doesn’t stay that way, which I want to discuss. Matt Lucas and David Walliams create an amazing array of characters. In fact, for the first couple of episodes, I thought there were four actors. Matt Lucas is so convincing as a woman that when he plays a transvestite, they put a mustache on him. One of his impressive female characters is Marjorie Dawes, a woman who runs a “Fat Fighters” meeting. She uses her position to belittle the members, mostly for being fat even though Marjorie is too, but also an Indian woman, Meera, who speaks perfect English but who Marjorie claims she can’t understand. The following video is a good example of how Little Britain uses the same joke over and over but still manages to be funny; this is a compilation of interactions between Marjorie and Meera:

As awful as Marjorie is, there is a distinct difference in her character starting in the second season. She becomes so mean that, for me anyway, it stops being funny. The second season pushes the comedy to a new (and for me lower) level. Quite suddenly, Little Britain is filled with crude humor. Suddenly, every episode has at least two vomiting scenes. We get to see an adult man breast feeding from his mother and grandmother. A very lazy romance novelist in the first season, Dame Sally Markham, turns into Bubbles DeVere, an obese woman who uses her sexual “charms” to avoid paying for time at the Hill Grange Health Spa. All of these bits are funny at times, but there is far too much gross for my tastes.

My understanding is that the series only got more popular as it got more harsh and disgusting. I don’t claim to speak for the masses. But I do think the first season is well worth checking out.

Drugs for Us and Guns for Them

Other than the fact that I don’t like the comment about how many troops died, because modern warfare normally kills a lot more civilians than troops, this is a very good cartoon. It explains the economics of our relationship with Mexico: they send us drugs and we send them guns. We get the better of that deal.

Plutocrats

PlutocratsI just read Chrystia Freeland’s new book Plutocrats. I know her from her repeated appearances on Up with Chris Hayes. And I have to say, my reaction to the book is the same as it is to her: what a muddle. Plutocrats really isn’t clear what it is trying to say. Intellectually, it can see that the rise of the super rich is a bad thing, but it is simultaneously almost worshipful of these people. But that might be okay all by itself. I do not have a problem with the vagaries of the human soul. But there is little in the way of new information. Inequality is more extreme the further you go up in income; many of the super rich are “self made” and yet are working to make it harder for others to achieve similarly; the super rich have a separate world in which they life. These are well established facts.

She is strangely sympathetic to these people. She notes their high stress and hard working lives. This is really too much and seems designed to keep open her access to all the plutocrats who took to time to talk to her about their very difficult lives. But please! It is ridiculous to think that a rich man’s self-imposed work life is anything like the very real problems faced by a poor man who has no choice. Unfortunately, this kind of thinking and apologizing for the super rich does not belong in any book that wants to be taken seriously as a study of income inequality.

There are parts of the book that work, although even they don’t have the snap that one would get from Jeremy Scahill or Michael Hastings—two men unafraid of offending their subjects. In the last chapter of Plutocrats, Freeland discusses the rise of La Serrata in 14th century Venice, which she compares to our current system where after the super rich rise, they pull up the ladder from those above. This is a big problem, but it is hardly the worst. Our system is set up so that the poor do far worse than their abilities and work justify while the rich do far (almost unimaginably) better than their abilities and work justify. This is not an issue that Freeland seems to be much interested in.

But she does know the basics. I do like that she understands that there really is no difference between the supposedly good plutocrats like Steve Jobs and the supposedly bad plutocrats like Lloyd Blankfein. She writes:

More important, the difference between the good guys and the bad guys is smaller than we might like to think. Inclusive and extrative societies are very different, but the economic elites within them are driven by the same imperative to make money and win competitive advantages for themselves and their companies. Trying to slant the rules of the game in your favor isn’t an aberration, it is what all businesses seek to do. The difference isn’t between having virtuous and villainous businesspeople, it is about whether your society has the right rules and policing able to enforce them.

In other words, Jobs and Blankfein are doing exactly the same thing and if you changed them around there would be no difference. I would go further. I find it constantly aggravating that people hold Steve Jobs and Bill Gates in such high regard. The (wrong) idea is that these are men created great things that we all benefit from. The truth is that the little good these men did is swamped by the things they did that harmed progress. And the things they did to harm progress are what made them “great men” and what made them household words. Certainly Richard Stallman and Linus Torvalds did far more to improve all of our lives than either Gates or Jobs. And yet, only the computer geeks will have even heard their names before. And why is that? Because they didn’t make any money and they certainly aren’t plutocrats.

Plutocrats is a lively and even fun read. Chrystia Freeland is a good writer. But like many writers, she is a bit too in love with her subject.

Cone of Silence

Buck HenryThe Cone of Silence was a recurring comedic idea used in the Get Smart comedy series of my youth. It is ostensibly a device that lowers over two people so that they can have a private conversation. The joke is that it completely doesn’t work: the couple inside cannot hear each other but those outside can. The standard performance (as seen in the video below) involves someone on the outside relaying messages between the pair inside who cannot hear the other. This is silly stuff. And about the funniest thing I’ve ever seen. Even after all these years.

The gag was invented by series co-creator Buck Henry. It is comic genius, but there were many writers who did a lot of stuff with the idea. In one episode, Chief asks Smart what he found out about KAOS headquarters. Smart insists that Chief lower the Cone of Silence. This is something that Chief is always reluctant about doing because it never works. Anyway, he does so. The Chief again asks what Smart learned. “Nothing,” Smart tells him. Good thing that information didn’t get out!

In the end, my favorite take on the Cone of Silence is the simplest as in the following clip:

Jerry Brown’s Liberal Bona Fides

Jerry BrownYesterday, Reuters reported the next California budget will be in surplus. The article goes out of its way to make Jerry Brown into a hero. Not only has he balanced the budget, but he is fighting those spendthrifts in the legislature who want to to bring spending back up as much as possible. Now, the obvious reaction to this is to applaud him. But not so fast!

I have been a big supporter of Brown over the years. But he isn’t perfect. What’s more, he suffers from what I am coming to think of as “Democrat’s Disease”: the desire to be remembered as a politician who was “above politics” and “responsible.” But is running a budget surplus in the middle of the worst economic recession since the Great Depression really the responsible thing to do? Now is the time when the California government should be doing all it can to stimulate the economy. Normally, state governments don’t have that much power in this way. When they do, they should use it.

Digby has a slightly different take than I do, but it is equally valid:

So, what we have is a typical Democratic chump who sees his “legacy” as being the wonderful leader who left a surplus when he left office. We’ve seen that movie before. It came out only a little over a decade ago. And what’s the plot? The Democrats preside over the creation of a recovery and surplus and burnish their “fiscally responsible” bonafides by cutting vital programs and emphasizing “saving” their surplus rather than restoring those services. The Republicans then ride into power on the promise that they would hand out hundred dollar bills like candy in the form of tax cuts. (“It’s yer Muneeeeee!) And the next thing you know we’re back in deficit and it’s time to start cutting even more. The Republicans usually let the Democrats do this dirty work because well … cuts are unpopular. Tax cuts aren’t.

She goes on to point out that in the end, the Republicans will still tar Brown as a “tax and spend liberal” because he did, after all, raise taxes. It is amazing that Democrats do this kind of thing over and over and over again. But I think this comes from the fact that Democrats who make it to high office aren’t all that liberal when it comes to economics. And this is why I think more and more that we liberals really need a new party. Because I for one, care first and foremost about economic issues. The social issues can sort themselves out after we get a slightly more egalitarian society.

So overall, I’m pleased with Brown’s management of California. And after Schwarzenegger’s governorship, it should be clear to all that governing really is a skill and we really do want professional politicians. One would think this would be obvious. You would never prefer to hire a plumber who has neither experience nor education. But now that Brown has shown that he is a great governor, maybe its time to brandish his liberal bona fides.

Dog School

I don’t see how this video has not gone viral. It is of a 6 month old lab mix teaching an 8 week old puppy how to walk down the stairs. At least, I think that’s what’s going on. It is very inspiring:

H/T Sarah Kliff