As I mentioned earlier in the week, Republicans Call for Most Oppressive Government, I’ve been listening to the audio version of Matt Taibbi’s 2010 book, Griftopia. And although I think it is a great book, there were two things in it that really stood out as being totally wrong. It’s five years later, and I would guess that Taibbi has since been educated on the topics. They are both bits of conventional wisdom that usually get taken as fact without any thought. As a result, it is a good idea to go over them and discuss them. Taibbi is very much a liberal, and if he thinks these things are true, there are doubtless a lot of other liberals who don’t even think to question them.

Social Security Trust Fund

At one point in the book, he was talking about the rise in the payroll tax. It touches on one of my own favorite articles, Reagan’s Legacy: Tax Cuts for Rich, Tax Hikes for the Rest. Taibbi was talking about how Alan Greenspan headed the commission that recommended raising the payroll tax. But then the extra money didn’t go to social security. It was just loaned out to the federal government for deficit spending. Well, yeah; so what?!

I hear people make this argument all the time: there is no trust fund! It’s just a bunch of worthless paper! This just isn’t true. No one would say such a ridiculous thing about an investor who had a lot of money invested in treasury bills. They would say such a person was a prudent investor. They would call someone who stored cash under their bed a loon, yet that is what they are expecting with Social Security. The extra money that the Social Security Administration (SSA) was taking in had to be stored somehow. What were they supposed to do?

The payroll taxes went up in 1984, as a result of the Social Security Reform Act of 1983. If the SSA had invested the money in gold, it would have done well that year because gold was at an all time low. But for the money taken in in 2012, the trust fund would have lost almost 40% of its value. Looking at the long view, if all the trust fund were invested in 1980, it would now be worth 37% less. The Social Security trust fund is invested in a mix of treasury securities. But if you just look at 30-year securities, you see that they have done much better than gold.

And clearly: the SSA wouldn’t have been holding actual gold. It would have been holding “worthless” paper that said that it owned gold. It could have been holding on to actual cash, but there are two problems with this. First, it is worth a whole lot less now because of inflation. And second, there isn’t enough cash to do this. In 2011, there was $2.6 trillion in the trust fund. There is only $1.2 trillion in circulation. You can’t just have trillions of dollars sitting around because there aren’t trillions of dollars in existence. And if there were, it would be very bad. Money is supposed to be moving around. If it isn’t, it is indeed “useless.”

Strong Dollar

Taibbi also claimed that Greenspan was wrong to say that it didn’t matter if the international value of US currency went down. Okay, on this one, Taibbi is half right. It does matter because we live in a global economy. Just the same, the vast majority of what we spend our money on is stuff that is right here in the US: houses, food, healthcare. There is a downside when the value of the dollar goes down. But there is also an upside. Taibbi doesn’t talk about this at all. And that is a very big problem.

What most people need are jobs. When the dollar is too valuable, it makes imports too competitive. That means that Americans are put out of work because the things they make cost too much. There is obviously a balance that we want to achieve. But certainly over the last several decades, the problem has been that the American dollar is worth too much, not that it is worth too little.

What’s especially bad about this is that Taibbi is making the argument for the rich. If you have a lot of money, the more each dollar is worth, the better. But most people do not have a lot of money. In fact, most people live paycheck to paycheck. Their biggest concern is that they will lose their jobs. Making our steel and lumber and cars more expensive to export is not good for such people.

Sobering Conclusion

Matt Taibbi is a really smart and knowledgeable guy. If, after researching the 2008 financial crisis, he still manages to push two very tired, very wrong conservative talking points, what hope has the average American of understanding what’s really going on? Both of these points are commonly made on Fox News and the crazy editorial page of The Wall Street Journal. The decades long conservative disinformation campaign has been highly effective. We really need to push back against it — hard. I think Matt Taibbi needs to write a book about both these things to atone for his sins.

In the mean time, you might read The End of Loser Liberalism (Free!) and Social Security: the Phony Crisis.

The Sociologist Lane Kenworthy wrote a very interesting article a few months back (via Mark Thoma), America Is Exceptional… and Ordinary. He framed it interestingly, “To some, ‘exceptional’ doesn’t just mean different; it means best. To others it means worst. As we’ll see, America is both.” But I do think that’s where he gets the idea wrong. “American exceptionalism” is not about how we compare to other countries. The point is that America should never be compared to other countries. And this is why in general, the idea of American exceptionalism is not used by those complaining about the country. They are interested in comparing so the whole conception of exceptionalism gets in the way of seeing America clearly.

But Kenworthy presents a lot of data. It all compares the US to the other advanced economies that we normally think of ourselves as being comparable to: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, South Korea, Spain, Sweden, and Switzerland. And much of the data is damned sobering. Americans like to make a big deal of us being the richest country — but that’s mostly due to our size. We aren’t even the richest per capita — that title goes to Norway.

When you look at per capita GDP growth, you see that over the last 35 years, we’ve done pretty much exactly as well as other countries that haven’t seen their workers’ rights savaged and who haven’t seen their income inequality skyrocket. These are also countries that manage to provide healthcare to all their citizens. Perhaps the most amazing thing at the last Republican debate was that Donald Trump said what is only too clear that Republican elites believe: that in order for America to be competitive, the middle class must see its standard of living drop: “wages too high.”

Our poor are worse off that most of the other countries: Norway, Switzerland, Austria, Denmark, Canada, Finland, the Netherlands, Australia, Germany, Belgium, France, Ireland, and Sweden. Our incomes are by far the most unequal. And interestingly, ours is the only one that has seen that inequality go up substantially since the 2008 financial crisis. In 1980, we were by far the best educated country, but now eight countries beat us. And they beat us not because we are doing worse, but because they have continued to improve while we’ve allowed ourselves to stagnate. Because you know what we learned at that time: “Government is not the solution to our problem; government is the problem.”

We spend roughly twice what all the other countries do on healthcare. And we manage to do this without even covering all of our people. In 1980, we spent the most on healthcare, but we were still part of the pack. At that time, we were in the middle of the pack in terms of life expectancies. Now that we are spending vastly more on healthcare, but our life expectancy has dropped to dead last. That doesn’t mean our life expectancies haven’t gone up. It is just that the other countries have seen theirs go up a lot more. Those countries, it would seem, do not think that government “is the problem.”

When you look at what percentage of us work (between the ages of 25 and 64), we are in the bottom half. Those other countries generally make it easier to be unemployed. According to conservative dogma, they should have a lot more people unemployed. But they don’t. We tax (and spend) very little, yet this hasn’t caused companies to go crazy hiring people. So much for supply side economics! I assume our poor employment numbers have something to do with a lack of demand. The middle class isn’t getting its fair share of the economy, so it can’t buy stuff that others would make. And the reason the middle class isn’t getting its fair share has a lot to do with the abysmal shape of our labor unions — only Korea is worse.

We’re the most religious country by a wide margin, but that is going down. We are the most punitive, and that is still going up (but at a reduced rate). In this land of immigrants, we are only in the middle of the pack when it comes to the foreign-born share of the population. And listening to the Republican presidential debates, you don’t get the impression that we are moving in a positive direction. And don’t believe what Republicans sometimes say about just being against illegal immigration; the truth is, Conservatives Hate All Immigrants.

Although Lane Kenworthy started his article saying that the US was exceptional in both good and bad ways, almost all of the data indicate that it is exceptional in bad ways. But as I said: it doesn’t matter. When people talk about “American exceptionalism” they use it in the same way they use “support the troops.” It is a way of stopping people from talking about the issues involved. The true “American exceptionalism” that they are pushing is the idea that America is the best by definition. And that is pretty much the only way that America can be the best. In almost every other way, we look pretty bad.