Politics

Author: Richard R. Tryon and others

Rebuttal to Paul Krugman editorial of 3-9-13
By Richard R. Tryon

Thank you Paul Krugman! It is your best writing ever, for you contend as you write about people “who have been feeding those fears and peddling those prejudices don’t have a clue about how the economy actually works.” You are certain that your opponents do not think or understand the rational behind your idealistic opinions lacking in the real world understanding that is often lacking in ‘ivory towers’ of academia, and plush newspapers, of the past, that are trying to ignore their coming demise.

The immodest inference is that you actually do know how the economy actually works. Its easy to assert from the power of your words that other tenses of the word ‘work’ are equally understood, and well managed by a politically directed system of controls. Their purpose is to maintain the stable and useful authority that plans, decides and manages all the myriad variables to insure that the Keynesian political-economic theory works. Not only from a historical perspective to advise us of the impact of ‘quantitative easing’ scam to hide multiple dispensations of printed paper money that is only worth less on the way to being just worthless!

Modern economists in their anal or backwards search, looking for answers to a historical question find data for years of churning of it, what does it prove of importance? At best it may explain in a way consistent with Keynesian theory the way to advise that for the economic period studied, considering the beginning and ending balances of global, national, state, city, town and individual beings macro-economic considerations, it turns out that the ‘multiplier effect’ was 5.0001, does it prove that Keynes was right!

What it does not prove is that from any past test period, it is not possible to predict with greater accuracy what political-economic action plan will generate the same result. Or as all would wish, an improved result as measured by some economic numbers, perhaps adjusted for perceived possible connections of some of them having improved the score about the far more important matters of civilization. Those dealing not with simple right-vs wrong interpretation of law, but the endless array of forms of use of the word justice when a prefix is added to consider its more narrow constituent parts involving social, economic, human rights measurements of justice, bring ‘grist’ to the Economist’s mill.

There are several key elements of such prodigious proportion as to make it impossible to translate this backwards looking anal perspective into one that works in real time in a forward looking manner. One with its goals correctly hooked together as to create a societal acceptance of the need to eliminate individual contributions and actions in ways that distort the vast, unyielding goal of making all people achieve the same level of living standards. These, of course, are adjusted for the fact that each individual lives in a non-standard location on the land or water surfaces of the Earth, and happens to be at each given moment of their living at one stage of life or another, with different interpersonal needs and aspirations as driven by their unpredictable mental and physical capacities to respond to the swirling around them of unplanned events of nature, man and beast or plants.

It is this failure in humankind that must disturb Mr. Krugman. How can government learn how to manage the DNA of each person to not only be the same, but to keep all those bits that are built with a way to act like preference switches in many computer programs. He must also realize that either God or a mindless form of Evolution has created a globe that is out of step with the needs of human, other animal and all of plant kinds.

1. Because the world is not flat or equally blessed with identical soils, it is difficult to make all days be the same in all lands and political sub-divisions. Hence, adjustments in Keynesian control theory have to be arranged to accommodate each variant from the norm caused by longitude and latitude with reference to unpredictable weather patterns that bring an endless variety of conditions that have unwanted economic impact.
2. Because the same creative process was not started and finished in some past age, epoch or other distinctive period of time, but is on-going and perpetually being changed by the chaotic interactive mechanisms developed at random to fit the accidental controlling areas of human individual conduct, it is necessary to look to a future time when all babies will be genetically fabricated at least for the initial step in production of new so-called human beings so as to make all perform in the same manner and respond with equal alacrity to the demands of the state leaders who somehow maintain a higher level of planning skills than that produced by the mass of others allowed to exist.

Once these two problems are solved by simple allocation of current resources so as to build the infrastructure needed to achieve the ultimate end, then Mr. Krugman will be able to say that He not only knows how the economy worked in the past, He will be able to make Keynesian theory actually be able to control the future!

I only see one other problem for his giant mind to solve. How does he get a means to ensure that He will never die and that all of the leadership class will also survive so as to insure that the planning process can continue to be adjusted to fit the changing circumstances around us….or will that not be needed? Will instead all live happily ever after fixed as an ideal perpetually maintained political-economy always at peace with all-satisfied that human justice is perpetual and evil ceases to exist?

Perhaps one day Mr. Krugman will discover that it is better to have millions of short, intermediate, and long range planners making good and bad choices that yield only half a loaf of bread to be far better than the mistake of just one dictator that accidentally kills “the goose that lays the golden eggs”.

Here is his original text:

The Market Speaks
By PAUL KRUGMAN

Four years ago, as a newly elected president began his efforts to rescue the economy and strengthen the social safety net, conservative economic pundits — people who claimed to understand markets and know how to satisfy them — warned of imminent financial disaster. Stocks, they declared, would plunge, while interest rates would soar.

Even a casual trawl through the headlines of the time turns up one dire pronouncement after another. “Obama’s radicalism is killing the Dow,” warned an op-ed article by Michael Boskin, an economic adviser to both Presidents Bush. “The disciplinarians of U.S. policy makers return,” declared The Wall Street Journal, warning that the “bond vigilantes” would soon push Treasury yields to destructive heights.
Sure enough, this week the Dow Jones industrial average has been hitting all-time highs, while the current yield on 10-year U.S. government bonds is roughly half what it was when The Journal published that screed.
O.K., everyone makes a bad prediction now and then. But these predictions have special significance, and not just because the people who made them have had such a remarkable track record of error these past several years.
No, the important point about these particular bad predictions is that they came from people who constantly invoke the potential wrath of the markets as a reason we must follow their policy advice. Don’t try to cover America’s uninsured, they told us; if you do, you will undermine business confidence and the stock market will tank. Don’t try to reform Wall Street, or even criticize its abuses; you’ll hurt the plutocrats’ feelings, and that will lead to plunging markets. Don’t try to fight unemployment with higher government spending; if you do, interest rates will skyrocket.
And, of course, do slash Social Security, Medicare and Medicaid right away, or the markets will punish you for your presumption.
By the way, I’m not just talking about the hard right; a fair number of self-proclaimed centrists play the same game. For example, two years ago, Erskine Bowles and Alan Simpson warned us to expect an attack of the bond vigilantes within, um, two years unless we adopted, you guessed it, Simpson-Bowles.
So what the bad predictions tell us is that we are, in effect, dealing with priests who demand human sacrifices to appease their angry gods — but who actually have no insight whatsoever into what those gods actually want, and are simply projecting their own preferences onto the alleged mind of the market.
What, then, are the markets actually telling us?
I wish I could say that it’s all good news, but it isn’t. Those low interest rates are the sign of an economy that is nowhere near to a full recovery from the financial crisis of 2008, while the high level of stock prices shouldn’t be cause for celebration; it is, in large part, a reflection of the growing disconnect between productivity and wages.
The interest-rate story is fairly simple. As some of us have been trying to explain for four years and more, the financial crisis and the bursting of the housing bubble created a situation in which almost all of the economy’s major players are simultaneously trying to pay down debt by spending less than their income. Since my spending is your income and your spending is my income, this means a deeply depressed economy. It also means low interest rates, because another way to look at our situation is, to put it loosely, that right now everyone wants to save and nobody wants to invest. So we’re awash in desired savings with no place to go, and those excess savings are driving down borrowing costs.
Under these conditions, of course, the government should ignore its short-run deficit and ramp up spending to support the economy. Unfortunately, policy makers have been intimidated by those false priests, who have convinced them that they must pursue austerity or face the wrath of the invisible market gods.
Meanwhile, about the stock market: Stocks are high, in part, because bond yields are so low, and investors have to put their money somewhere. It’s also true, however, that while the economy remains deeply depressed, corporate profits have staged a strong recovery. And that’s a bad thing! Not only are workers failing to share in the fruits of their own rising productivity, hundreds of billions of dollars are piling up in the treasuries of corporations that, facing weak consumer demand, see no reason to put those dollars to work.
So the message from the markets is by no means a happy one. What the markets are clearly saying, however, is that the fears and prejudices that have dominated Washington discussion for years are entirely misguided. And they’re also telling us that the people who have been feeding those fears and peddling those prejudices don’t have a clue about how the economy actually works.

How do we achieve social, economic, class, and educational justice? Men of my generation in the Public Grade schools of the 1930-40s when I managed to go to six in four states before receiving my third diploma and a chance to go to high school in Princeton, NJ learned a lot more about life if they also learned how to survive in a hostile world. As the new kid on the block, I was constantly confronted to see if I could fight? I was good with words, but not fists. Only my secret weapon saved me. I could have a nose bleed just from the heat! Touch my nose with a light punch and you were going to get bloody in a clinch!

It was not surprising to me to discover that if I wanted to spend five cents, I would have to find a way to earn it. So I learned to cut grass, sell church bazaar tickets, magazines, and by age nine I became an employee of the U.S. Post Office in Harrington Park, NJ about 20 miles from mid Manhattan in NYC. There apparently was no child labor law or minimum wage consideration and since I could also deliver Western Union telegrams from their office at the train station on the other side of the street from the P.O., I was actually able to do three jobs at the same time! The third had me dropping first class letters at several homes on the way to my 4th grade classes.

The wage negotiated at the P.O. mirrored the Western Union- ten, no eleven cents for each delivery by my bike was paid when I brought back the signature of the person to whom the message was intended. I don't recall ever failing to make a delivery on the first try anywhere within about two miles of the starting point. The extra five cents a week from homeowners for their first and second class mail was a fee set by me!

Did I ever think about minimum wage? Vacation or pension contributions or even sick pay? No, I don't recall ever missing a day either except when the PO was closed on Sundays and six national holidays.

Now 72 years later, I am amazed to read of Senator Warren, Democrat of Massachusetts....who wondered out loud why the nation’s minimum wage isn’t at $22 an hour, during a Senate Committee hearing on Health, Education, Labor and Pensions last week.
“If we started in 1960, and we said that, as productivity goes up — that is, as workers are producing more — then the minimum wage is going to go up the same. And, if that were the case, the minimum wage today would be about $22 an hour. So, my question, Mr. Dube, is what happened to the other $14.75?”

I could not resist having to write:

The answer Senator lies in the fallacy of thinking that a minimum wage is an essential policy and that the relationship in 1960, driven by what was then current practices in various states, since the Constitution never stipulated that all Americans, regardless of economic, political or other conditions of living in hot or cold, wet or dry, seasonal or non-seasonal differences should all be protected by the same universal notion that regardless of age, prior experience, education, or other condition or qualification, ALL should be paid in accordance with a National standard as was sort of accomplished in WWII when millions of workers and would be workers were drafted into the US Army and sent to fight in foreign settings.

To a government that believes that planning is the key to prosperity and now that has to be interpreted as in compliance with not justice as a concept of being fair, but in step with what some call social, economic, fiscal, or any other adjective before the word justice.

This is complicated over time by changes in the kinds of work available to new or young workers vs older ones dislodged from high wage positions relating to a post WWII period of Union power and virtual monopoly of global markets. Come forward to an age of technical shifting with robots and many computer assists as well as loss of competitive capacity to deal with the rest of the world now able to ship containers from China or anywhere to be unloaded not by stevedores carrying boxes but by giant cranes moving entire containers of boxes.

All of industry that has survived is now so far along in automation as to leave the government a far different set of conditions. Make the minimum wage be $22 per hour and you immediately increase the sale of automation that is cheaper.

Only the mindless English utopians of the tool haters or Luddites type can give the Senator the right answer. Make all people like her fellows in the Senate, that is pay all the same regardless of service or skill to output value and watch the jobs disappear as they have and then watch the President and Treasurer print trillions to stimulate and soon you will find the need to add zeros behind each job class and rate.

In a sense it is more important to ask a larger question for the Senator: Not about minimum wage but about having any wage? Will our failure that echoes so many before us, to understand why people get paid, ever be answered so that all can choose how to live?

Nobody forces anyone to work in the U.S. although it is true that most everyone in the world has discovered, unless born into slavery, that making oneself available to do work for others or for yourself can produce a payment to you of something as simple as food, experience, money or some combination of the above.

What should that exchange require to Sen. Elizabeth Warren is convinced that it is one of her main responsibilities as a servant of the people to help define what a law should require to enable someone to work for another or an invented entity called a company as represented by its directing leadership. Why does she feel compelled to try to determine labor laws?

Her first level of response, I am certain, is to declare that without protection provided by the law, all whom choose to work for others would be at great disadvantage because the job provider is almost always able to force workers to compete to give the employer the one willing to work for the least cost be hired! In her opinion this is not a way to achieve 'social' or 'economic' justice.

She can't imagine it improper that an employer should have anyone refuse his/her offer;but she is certain that she should make it an offense to offer anyone a job for less than a minimum wage! To her its a matter of standard of living and a way to set the floor for all other jobs that require skills of a higher level to pay more.

Should the government also set maximum wage or salary levels? How can she be a Keynesian planner and not need to control not only minimum, but maximum and all different levels in-be-tween, sort of like the Civil Service System tries to work to insure fair, and equitable treatment.

Of course, to make it easier to maintain the system, it is very important to either control prices of all goods and services or figure a way to stay in step with them. The second approach gets messy because all prices respond to supply and demand and often this is seasonal or subject to changing preferences. But, this doesn't stop a committed bureaucrat.

Invent a cost of living formula, but don't put into it the items like food and energy, which fluctuate faster than items of low demand and infrequent need to change in the formula. This 'smoothing' makes administration easier as the Russians found out before we did and it ultimately led to the time when people I saw, standing in line for hours, hoping to convert Russian rubles into something- anything- to take home and try to trade in the world of barter exchange, because the printed money value was falling so rapidly from overprinting the amount available relative to the goods not yet sold.

We are now in 2013 very close to the time of last possible decision over which system makes sense- the one advocated by Sen. Warren wants where all is controlled in hopes of achieving fair or social justice? Or what is the alternative?

Unfortunately, we are close to the point where no alternative exists, because we have built an electoral structure that pays a majority of voters more to not work but depend upon welfare, now called by a more acceptable word 'entitlements' so as to remove the stigma associated with the word 'welfare'. Once we have given Pres. Obama and his supporters another two years with a Congress ready to do his call for action first, read the bill later, we will have passed the point of no return until the system fails of its own dead weight as I witnessed in Leningrad and Moscow in 1991.

But, if we somehow refuse Sen. Warren and Pres. Obama, what is different? Can we substitute a system of supply and demand and let wages and prices vary on their own? Will we have jobs in greater numbers? Will we survive better?

That is the key question for the next chapter: Can we create jobs and a fair distribution of income result without central government control of a planning function?