Jared Bernstein recently wrote about one of my favorite issue, People on Third Base Claiming They Hit a Triple, or Marginal Product Theory at Work… Not! The idea of marginal product theory is that everyone is paid what they are worth. It goes something like this: if I start working at a factory and as a result, it’s productivity goes up $50,000 per year, then that is more or less what I am worth and more or less what I will get paid.

There’s just one problem with the theory: it isn’t true. Bernstein offered up the case study of Jeb Bush. After leaving the governor’s mansion, Bush and his family made a whole lot of money. Now, in our cynical society, we don’t tend to blink an eye at this kind of thing. In fact, to a lot of people, it just makes sense that ex-politicians ought to be able to cash out. But here we aren’t really talking about Eric Cantor getting a lobbying job, where he most certainly is worth all the money that he is paid. (Such lobbying is ultimately bad for the economy, but that’s a different matter.)

Bernstein put it exactly right:

But I think there is an easier way to think about it. Consider the fact that in the 1950s, CEOs tended to make 30-40 times as much as the average employee at their firms. Now, they make 300-400 times as much as the average employee at their firms. If anything, the films were more profitable then. Yet they are making ten times as much now. Either the “free market” then was greatly underestimating how much they were worth or it is greatly overestimating how much they are worth now. Regardless, the “free market” is nothing like infallible.

I understand that a single example doesn’t disprove the theory. The marginal product theory is something that is used in models. Clearly, in individual cases, people will get more or less than their marginal product. But very clearly, when we are talking about a class of workers (CEOs), there is something besides their value to the company that is controlling their pay. And that thing is power. CEOs have the power now to demand more money. Similarly, when unions had any degree of power, they could demand a greater share of profits for workers.

This reminds me of a great difference of opinion that I had with the vast majority of libertarians when I was still a fellow traveler. Most libertarians are aggressively anti-union. But it was clear to me, even as a libertarian (because I wasn’t a total idiot), that the ability of workers to organize was necessary for the “libertarian utopia” to function. You couldn’t have a situation where management was able to organize itself but workers were left with “every man for himself.”

What’s ridiculous about the marginal product theory is that it constructs a world apart from everything but economics. What’s more, it assumes a “free market.” But there is no such thing. The “free market” is defined as a system that gives excessive power to the owners of capital. But even that doesn’t exist in the real world. People get extra economic benefits for things like their fathers being president. And it goes right down the line from there. People who are good looking make more money, even though there is no marginal product for looking great on the assembly line.

In general, economics is not a real science. There are certainly scientific aspects to it. And there are economists who do good work that provides insight into how the economy works. But by and large, economics is just a specialized form of apologetics for the power elite. And that’s not just sad; it is incredibly harmful to our society.

I was listening to a little bit of Majority Report on Monday, when Sam Sader was interviewing Georgios Giannakopoulos about Sunday’s vote in Greece. It was all quite interesting. But there were two things that Seder brought up that I thought were worth discussing a little bit.

The first thing was a common analogy that anti-Greece people in Europe say, “How would you like it if the people of New York had to bail out Texas?!” As Seder noted, we already do. That’s what a real union does. It isn’t every state for itself. California pays a lot more in taxes per capita to the federal government than it gets back in benefits. Part of that is just that we have a relatively young population, but that’s just part of our general system that money goes to where it is needed. The argument that people are making in Europe is a big part of the problem. They want a united Europe, but not if it has to cost their particular country any money.

Associated with this kind of thinking is something that has been bugging me for years about rhetoric against Greece. That is this idea that the European countries are bailing out Greece. To begin with, that isn’t even true. All that the loans from the EU have done is to cause Greece to sink slower than it normally would have. It’s kind of a slow motion torture. But regardless, almost none of the money has gone to Greece. Instead, it has gone to the reckless banks that loaned Greece money in the past. It drives me crazy that everyone focuses on borrowers, when borrowers are not expected to be conservative. The bankers are supposed to be the “adults” in a lending situation. But it is always the bankers who are portrayed as the wounded party, as if we don’t all pay more in interest to make up for precisely these kind of bad bets that the banks know they sometimes make.

That leads us to Seder’s other comment. He noted that rather than “New York bailing out Texas,” the better analogy is the bailout of the banks in 2008. In that case, the government could have bailed out homeowners. After all, if it had stopped all the foreclosures, that would have indirectly saved the banks. But instead, the banks were saved. Now I understand: from a practical standpoint, there might not have been the time to do that. But the truth is that after the banks were saved, almost nothing was done for homeowners.

The government’s position seemed to be that it could give hundreds of billions of dollars to the banks without much thought. The banks were, in other words, the “right” kind of people. But when it came to helping out homeowners, the government saw them as the “wrong” kind of people. Troubled homeowners had to go through all kinds of contortions to get relief, which meant that most of them never got any. But it wasn’t just the government. To a large extent, the people agreed. I’m constantly amazed how the people in mass identify with institutions that on an individual basis are their tormentors.

The best example of this, of course, is the Tea Party. It started, for the umpteenth time, as a reaction to the idea of bailing out troubled homeowners. The actual bailout of the banks was not what got the Tea Party started. Sure: they complained a lot about the bank bailouts. But that was long after the hundreds of billions had been given out. Where were they when that was happening? I don’t know. Partly, it was just that Fox News and the Koch brothers weren’t around to fund their outrage. But it was more that they just didn’t care when bankers were getting bailed out.

It’s the same thing in the EU now. Greek would have been best to just default on its debt. I’ve been saying that since 2010. Everyone knows that at the very least, the bankers will have to write off some of Greek’s debt. And it may end up a full default. So what have the last five years been all about other than giving hundreds of billions of euros to the bankers? The people of the EU should be angry at the Troika for wasting their money on rich German banks; Greece has only been harmed because of these bailouts.

Update (Before Publication)

Paul Krugman addressed that “New York bailing out Texas” analogy:

I got the graph above from Mark Thoma, Austerity: The Public-Sector Jobs Gap. I was aware of the basic information, but I’ve never seen it displayed in such a startling way. What it shows is the total number of people employed by the government at all levels. But let me go over it in a little detail, because it is important stuff.

The first thing that comes into my mind when seeing this graph is that conservatives will think, “Great! The government shouldn’t be growing!” But the government should be growing. The extrapolated number of government workers in 2015, is roughly 14% higher than it was in 2000. It just so happens that the US total population is also 14% higher than it was in 2000. People can argue about which government programs should exist, but that is a different issue. The government is doing exactly what it was doing 15 years ago. It just doesn’t have nearly as many people to do it.

Another thing to note here is the timing. If you go back through Bush, Clinton, Bush, Reagan, and on and on, you will see that after recessions, we increase spending. As Keynes said, “The boom, not the slump, is the right time for austerity at the Treasury.” And everyone learned that lesson — right up to this crisis. And as a result, we have had a very sluggish recovery. And the Republicans blame Obama, because they thought that even more austerity would have solved all our problems. To see how ridiculous that claim is, just look at Spain, which has had an unemployment rate over 20% for years because of misguided austerity policies.

Even if austerity had been called for, what we should have seen is the rate of growth of government workers decline. We shouldn’t have see growth stop and then actually go into reverse. These numbers are shocking: 1.3 million jobs that should have been created weren’t; and almost a half million jobs cut. That’s almost two million jobs lost. Using a reasonable 1.5 multiplier for the economy, that means our economy has three million jobs less than it should have. This is like someone taking a frying pan and hitting themselves over the head. Of course, in this case, the people who decided on this policy were not the same people who suffered from this policy.

Another conservative criticism would be that these jobs created by the government would have been offset by jobs in the private sector. According to this theory, the money to pay the people has to come from somewhere, so the money collected in taxes wouldn’t have been available to the private sector to create jobs. I hate this criticism because it is based on one thing that is true: when the economy is booming, government spending really does take money out of the private sector and slows the economy. But that is only true under that circumstance. And that hasn’t been true for years. This is why interest rates are so low: there is loads of private money swimming around looking for investment opportunities. Private sector money is not going to create jobs. Therefore, the government should have used that money to employ people. As it is, the government has been able to borrow money almost since the beginning of the crisis nearly for free (sometimes, people are actually paying the government to take money).

If the bad economy is hurting you, all you need to know about why can be found in that graph above. Notice that when Bush took over the presidency, the hiring actually went up at a faster rate. That’s because there was a recession. That was the right thing to do. I can’t help but think that if a Republican had become president in 2009, we would have seen the same thing. But when a Democrat is in the White House, the Republicans have to do everything they can to harm the economy and the nation. Because they are “patriots.”

This graph should be the shame of Congress, and even Obama, because he was definitely pushing austerity too.

Monday, a Saudi-led and US backed coalition air strike hit a livestock market in a suburb of Aden in southern Yemen, killing at least 45 people. This is all part of the Yemeni Civil War. There are three parties fighting: the Revolutionary Committee (led by the Houthis) and the Hadi government — both of which claim to be the Yemeni government — and Ansar al-Sharia. The United States supports the Hadi government, which I suppose is as good a choice as any. Being against Ansar al-Sharia, is a no-brainer, because they are allied with the Islamic State. But Aden is controlled by the Revolutionary Committee. And why exactly we attacked a livestock market is unclear.

I’m sure Saudi and US officials will say it is a mistake and war is messy and collateral damage blah, blah, blah. But The Guardian reported that Amnesty International and Human Rights Watch (HRW) say that “the Saudi-led coalition was failing to adhere to international law and was not taking the necessary precautions to prevent civilian casualties.” Donatella Rovera of Amnesty International released a statement that said, “The cases we have analysed point to a pattern of attacks destroying civilian homes and resulting in scores of civilian deaths and injuries.” Sarah Leah Whitson of HRW said, “These attacks appear to be serious laws-of-war violations that need to be properly investigated.”

In addition to being killed outright, there are currently 20 million Yemenis without access to clear drinking water. That maybe doesn’t sound too bad, but Yemen only has a population of 26 million. So we are talking about the vast majority of the people in the country. What’s more, over a million have had to flee their homes. According to Reuters, “The United Nations last week designated the war in Yemen as a Level 3 humanitarian crisis, its most severe category, and the United States and the European Union have endorsed calls for a humanitarian suspension of hostilities.” We would hope.

But the American involvement in this is typical shortsighted and juvenile policy. Basically, this is a proxy war between Saudi Arabia and Iran. So, without any thought to what is best, we just go with Saudi Arabia because they are our “ally” and they are fighting against our “enemy” Iran. Meanwhile, the instability in the region allows the Islamic State to get a very good foothold in Yemen. There is a very good case to be made for supporting the stable governments of the Middle East — especially after our spectacular move to destabilize the region with the Iraq War. But we don’t. America still can’t get over 4 November 1979.

In the mean time, civilians die. I was really struck by an eye-witness of Monday’s bombing who said there was “blood from people mixed with that of the sheep and other livestock at the market.” So the United States is calling for a humanitarian suspension of hostilities. But for three and a half months, we’ve been providing support for the bombing of civilians. According to The Wall Street Journal back in April, US Widens Role in Saudi-led Campaign Against Houthi Rebels in Yemen. Part of that widened roles was “vetting military targets.” Well, we did a great job on Monday.

We could have used the last few months to push for a peaceful settlement to this. But that isn’t the way we operate. It’s all about our supposed strategic interests. Humanity be damned.

Despite my tutoring, even managing to inspire my father to a full Democratic vote in the 2014 general election, he continues to watch Fox News one hour every weekday. It is Special Report with Bret Baier, and I know why he watches it: Charles Krauthammer. My father is a sucker for soft spoken, apparently thoughtful people. He is, interesting, also fond of Noam Chomsky. My father has never been that good with consistency of thought. Regardless, last night he asked me about Americans who run off to join ISIS. He wanted to know if they were crazy. I try to respond to such questions with sensitivity towards him.

You see, my problem is with the question itself. So I want to respond with something like, “Why do people engage in autocannibalism?” Because I’m pretty such that more Americans are explicitly eating parts of their bodies than are flying off to the Middle East to join ISIS. Back in February, US intelligence officials estimated that a whopping 150 people may have gone to Syria or attempted to do so. That’s less than 0.00005% of the population. There are about 16,000 homicides in the United States each year. Over half of those were committed with guns. Are these people crazy? Some percentage of them certainly are. If just 1% of them are crazy, then that’s more than all the Americans who have tried to fight for ISIS.

The problem is not just Fox News, of course. Every time I see some mainstream news, I’m horrified. Did you notice that we got through Independence Day without a terror attack? This should be big news after last week, when television news was filled with warnings about a threat focused on the holiday. Of course, those reports always came with a disclaimer at the end, “Government officials say they have no actual evidence of any plots.” In other words: there was no reason to be reporting about these concerns. I’m sure that government officials are worried every day that there will be a terrorist attack.

But there is no doubt that Fox News is the king of this kind of fear mongering. Eric Boehlert of Media Matters wrote an article for Salon over the weekend, Fox News Can’t Bear the Truth: Right-Wing Terror Groups Are America’s Gravest Threat. He noted something that relates to this directly, “Media Matters has also been shining a spotlight on the fact that not only does Fox News downplay homegrown acts of right-wing, anti-government and white supremacist violence, treating them as rogue, isolated events (if covering the events at all), they also hype beyond proportion and common sense attacks by Muslims in America.”

There are roughly three million Muslims in the United States. So if we assume that only Muslims are going over to Syria to fight for the Islamic State, that represents 0.005% of all Muslims. If anything ought to be dismissed as isolated events, it should be young Muslim men heading off to the Middle East to fight for… Actually, I don’t know what they go over to fight. It is a war between different Muslim groups, so it isn’t even a “Muslim versus the world” thing.

I don’t especially care that Dylann Roof is a bigot. Even without a well organized white supremacy subculture, angry young men like him will find a casus belli. But what’s important is that no one really questions that running off to join the global jihad is something that appeals to certain young Muslim men. It is not in any important way different from young socialists and fascists in the 1930s, running off to fight in the Spanish Civil War. The problem with Fox News — and to a lesser extent the whole of mainstream news — is that it doesn’t want to admit Dylann Roof is also part of a long standing narrative in the United States. Roof didn’t have a race war he could run away and join. So he tried to start his own here at home.

So are men who run off to fight wars crazy? From my perspective, they look like it. But in a country like the United States that is so warlike and that so fetishizes the military, the impulse itself can’t be considered crazy. It must be considered rational, given the assumptions of the young man. Those assumptions can noble or vile. But the act itself is not outside what we think of as acceptable behavior, as long as we agree with the cause. As a nation, we do not agree with the jihad cause. But we are more ambivalent about the white supremacy cause. And that’s what should really concern us.

One of the first things that the Republicans did during this term of Congress was to change the way that the Congressional Budget Office (CBO) “scored” proposed changes to the budget. The Republicans have long been upset that the CBO does not use “dynamic scoring.” This is when stimulative effects are taken into account. An example will help to explain it.

If you ask a Republican, she will very likely tell you that tax cuts pay for themselves. The proposed mechanism works as follows. If you cut taxes, the government will have less money coming in as a direct result — no one questions that. But given that people will have more money, they will spend it. This will stimulate the economy. The increased economic activity will increase tax revenues. There is no question that this does, in fact, happen: if you cut taxes by $100, it will hurt the budget by something less than $100. But no reasonable person thinks that the stimulative effect will end up with the full $100 in taxes being replaced. And the reason no reasonable person thinks this is because we have lots of experience with Republicans cutting taxes, saying it will pay for itself, and ending up with a big gaping hole in the budget.

But I’m not against dynamic scoring — as long as it is done reasonably. Part of the problem with introducing dynamic scoring in the CBO estimates is that it is hard to say exactly how much of this indirect effect will be produced. And that means that the whole thing can be politicized. But it doesn’t look like the CBO is turning into some kind of crank outfit that is going to say that cutting the top marginal tax rate to 25% would be a-okay because of stimulative effects.

But the Republicans have stacked the deck. That is clear from the CBO’s recently released report, Answers to Questions About Dynamic Analysis. You might be wondering, “If tax cuts partially pay for themselves, doesn’t government spending partially pay for itself because of its stimulative effect?” Yes it does! In fact, the mechanism is more direct. If you give out food stamps, they must be used. A tax break could just be hoarded. And in fact, some percentage of it will be. So anyone arguing for dynamic scoring who is being the least bit intellectually honest would call for the process on both taxing and spending sides of the ledger. But of course, that is not what the Republicans have instructed the CBO to do.

The CBO gives a special stimulus for tax cuts but not for extra spending. In an e-mail, Dean Baker told me that the base CBO model does include “some very modest productivity impact of public investment” — but that limited form of spending is “certainly on the low end of what research indicates.” The whole point of it is to weight the debate so that things like welfare programs look extra costly and tax cuts look extra thrifty. The whole thing is so frustrating. I really don’t mind that conservatives have different ideas on how best to create a booming economy. But this is just pure deception. And I don’t know of any liberals doing the same thing. In fact, liberals tend to under-sell their policy ideas.

But of course you won’t be hearing about any of this on the mainstream news. And I understand: it is too technical for most people. But CBO budget projections will continue to be quoted in mainstream news, as though they are the same as ever. And they won’t be the same as ever. There will now be a conservative thumb on the scale. And will be there at least as long as the Republicans control Congress.

There has been a lot of attention paid to the Maggie Haberman and Jonathan Martin article in The New York Times, Scott Walker’s Hard Right Turn in Iowa May Hurt Him Elsewhere. It’s about how a “growing number of party leaders” are unhappy with Scott Walker highlighting his extreme social conservative views. When I first saw it, I smelled a rat. But it would seem that most commentators are buying it. At No More Mister Nice Blog, Steve M wrote, Scott Walker Finds a Horse’s Head in His Bed. And Jonathan Chait wrote, Obama Picks a Labor Fight With Scott Walker.

Who Scott Walker is has never been a mystery — most especially for “party leaders.” Walker’s political problem — in both the primary and the general election — is that he looks very much like the candidate bought and paid for by the oligarchs. Remember back in April when David Koch said that he and his brothers supported Walker? This was immediately walked back, but no one doubts that Walker is the Kochs’ boy. And this is not just a problem among liberals. Remember: the Republican base goes along with the economic policy, but its focus is on social policy — most especially hating fags, spics, and welfare queens. Although easily manipulated by the power elite, the Republican base doesn’t like to see itself as the plaything of the rich.

So I see the Haberman and Martin article as part of an establishment campaign for Scott Walker, not a warning to him. This is a way for them help what looks day by day to be a flagging campaign. Walker has seen his polling drop from roughly 22% in April to less than 18% today. And given that Wisconsin boarders Iowa, it is expected that Walker will win big in the state. If he doesn’t, it means real problems for his campaign. Meanwhile, Ted Cruz — the man who Walker is supposedly chasing — has 6% in Iowa now — the same he had back in February. In addition, Mike Huckabee has seen his support go way down.

What this all means is that Walker is not catching on. Slipping support for other candidates — most especially social conservatives — are not benefiting Walker. Since Walker being very clear that he too hates immigrants and loves Jesus isn’t doing the trick, the power elite have stepped up their faux attacks, “He’s too much of a social conservative! This won’t play in a general election!” I’m sure they are just sad that Walker doesn’t star on a television show so that they could fire him to make him seem all the more authentic.

One of my biggest complaints about the Republican base is not that it is vile, because to a large extent it really isn’t. My complaint — similar to Thomas Frank’s — is that it is easily manipulated. No one understands this better than the Republican establishment. They understand what it takes to win elections. And they know that once in office, Walker will do just what they want him to — cut their taxes, savage the social safety net, destroy regulations. As much as Scott Walker’s hateful personality is a problem in a general election (and it really isn’t all that much), they know it can be whitewashed with a nice narrative about his being the son of a Baptist minister.

Maybe Haberman and Martin and Steve M and Jonathan Chait are right about the donor class freaking out about Walker. But I think this is naive. It seems much more likely that the oligarchs are trying to create a narrative about him being independent of themselves. And that’s exactly the kind of message the oligarchs would want to push about a politician who is absolutely a servant of the oligarchs.