Paul Ryan's Solution To Poverty Is Just More Of The Same Conservative Malarkey

Paul Ryan three years ago pushing his 'Path To Prosperity'

In his co-authored op-ed in the WSJ ('Republican Solutions for Liberal Failures on Poverty', Jan. 8, p. A10), Paul Ryan comes up with nothing new - only the same recycled, pedestrian mix of conservative codswallop he once offered us in his 'Path to Prosperity' back in 2012.  His main themes or "solutions" can be summarized thus:

-Redirect federal funding to parents of low income families so they can use that money to send their kids to private schools or charter schools. (In other words hollow out pubic education even more)

- Impose a greater work requirement in anti-poverty programs (in other words have all those poor people receiving any food stamps or Medicaid to go out and work at cleaning lavatories or picking up dog poop in parks for their daily bread)

- Scale down federal assistance in favor of much more charity (he cites the House of Help City of Hope in D.C. and Catholic Charities in Janesville, WIS).

 Let's take the last first: Ryan here is obviously looking  at the fact there are now 40 million on food stamps,  up 53%  from 2008 and 54 million on Medicaid, up 21% over the same interval. But what escapes him is that the amount of charity that would be needed to leave government out of the picture is actually some twenty five times more than the actual volume of charitable giving!

For example, to make charity ends meet and fill the gap in the absence of government assistance, those rich Catholic and other lobbyists in DC would need to give about 14.9% of their income, not the usually cited 7.7% Similarly, all the other alleged generous conservo states would need to at least double up on their giving. In the end, with a new recession, even that couldn't be sustained, and we saw how food pantries emptied  their stocks in weeks after the 2008 recession and stock market collapse - and were hard pressed to refill them. 

As for using federal funds for charter school education that has never worked in terms of sustaining success for the affected kids, and certainly not for the public schools from whose funds the "vouchers" are usually extracted.  (Every dollar extracted from taxpayers for vouchers means less to fund public schools.) Instead of pouring millions into voucher systems (which tactics I believe violate the separation of Church and state since most recipient schools are religious) that money could be going toward improvements in our public schools - including more pay for better qualified teachers. What a thought! Just think then, how much difference that $14 million could have made to D.C. public schools, had the money not been squandered for "the DC Opportunity Scholarship Program” which provided tuition vouchers of up to $7,500 per kid in 2011.

Ryan's "educational plan for job training" is also pseudo-nifty except there are simply not enough of the high quality, high paying jobs that would warrant the allocation of such federal money for that particular job training and education.

What most families need, such as here in Colo., is affordable housing and quality public education they can access. But since the gentrification of numerous communities, housing is beyond the reach of most working and even lower middle class people. (House prices in Denver are now up 18% over last year's and one needs a salary of at least $95,000/ year to afford a down payment. )

In most cases people are stretched thin paying more than 40 percent of their incomes on rent alone, which is too much. None of these problems are processed by Ryan who believes all the economic issues facing people in poverty are simply matters of not being educated enough or else not being hard working enough to keep noses to the grindstone.  Those misperceptions are what allows him to make such absurd proposals.

As anyone with more than air between the ears can see, on examining state by state budget deficits now exploding, in every case “re-balancing” is being done on the backs of the poor, the disabled, the elderly and the homeless. The results are predictable: loss of health care, loss of jobs and loss of overall security, as well as increase in drug use, violent criminality and prostitution.

His advocacy of work requirements for federal assistance - say in food stamps - is also daft, given most of those on food stamps are children, and the parents have jobs - just not well paying enough to afford rent, plus utilities and food.  In addition, Ryan would implement "consolidated block grants" not only for the SNAP food stamps program, but also housing vouchers (Sec. 8) and childcare vouchers  In other words, providing states a fixed amount to run all their programs. In the words of WaPo columnist Jared Bernstein:

"The main reason this idea is so destructive is that it undermines the essence of the safety net, or its countercyclical function"

The whole basis of his "solution" in fact, is that it is detached from reality, namely that poverty will always be endemic so long as we harbor vast inequality and the economic philosophy (Pareto distribution) that enables it.  Thus, any nation based on this perversion of economics, e.g.














Cannot escape poverty for more than half its people, for as its creator Vilfredo Pareto put it:

"Assume a collectivity made up of a wolf and a sheep. The happiness of the wolf consists in eating the sheep, that of the sheep in not being eaten. How is this collectivity to be made happy?"

So, if the poor are regarded as "sheep" and the Overclass as the wolf, the only objective is to make the wolf happy, by eating the sheep!

Thus, by Pareto's original example (in quotes): Allowing the wolf in the wolf-sheep combo to EAT the sheep expresses less overall "hurt" or pain on it than permitting the sheep to remain unscathed, merrily prancing away eating its grass while the poor wolf starves.

Yet when one digs beneath the academic veneer of Ryan's tracts that is the society he believes in. That is why he could offer (back in 2012) his "Ryan plan" for health care to replace Medicare. Just give the old guy a voucher for a year- maybe worth $10, 000 if he's lucky - and let him get what he needs with that: medications, operations, cancer treatments, regular physician visits etc. Just hope he doesn't need any more.

The same way a poor kid might get a $7,500 voucher for his charter education - at public school expense- but just hope he doesn't need any more!

No wonder Ryan can write with a straight face:

"Democrats want to take care of the poor. Republicans want to empower them".

Uh, no. Republicans want to empower the "wolf" of Vilfredo Pareto so it can more readily eat the poor!

Meanwhile, millions of citizens who can least afford it, are blowing hundreds of bucks trying to win a Powerball lottery in which the odds are about 292 million to one against them. As finance guru Melanie Hobson put it this morning, "they think with each draw they are getting nearer but in fact the odds against them are worse since more people are playing than when the total was smaller."

But in a way you can't blame them, since they see a Powerball win of $1.3 billion (About $520m after taxes and for a cash payout) as the only way for them to escape Pareto's and Ryan's "wolf"!

How Capital Really Came to Control the Human Populace in the 21st Century- Part II

The evolution of central banking and currencies to the system of globalized Neoliberal capital is predicated on what came before in terms of eliminating multiple local currencies to induce scarcity (See Pt. I). The worth and fluctuation of the selected central currency could then be determined by assorted manipulations, e.g. such as in the present Federal Reserve era in the U.S. with the Fed’s quantitative easing program that has ‘juiced’ the stock market to unheard of highs – while depriving savers of income. In this way the Fed deliberately super-charged the financial landscape in favor of speculation over safe saving.

 Conversely, the Fed has been able to create scarcity when it wants to – say by implementation of deflationary policies. Much of the Fed’s basis and purpose has been discussed at length by James Livingstone in his monograph 'Origins of the Federal Reserve System- Money, Class and Corporate Capitalism’, 1890-1913. As he observes on, p. 233:

 

"...the creation of the Federal Reserve is an episode in, or evidence for, the emergence of a modern ruling class.. "

 

How so? Because all money created - on average $30-40 billion a year- is *brokered* into the system. That is, made available by escalating debt. This is achieved by the Fed using the money created to purchase government bonds, thereby making this (debt-burdened) product available to private banks at greater cost, so they must charge much higher interest than the bonds to secure what they regard as a 'reasonable return'.   This is also why JFK's injection of "U.S. Notes" (created by the Treasury not the Federal Reserve) couldn't be tolerated, because it introduced a non-debt burdened currency that would gradually move the financial edifice away from scarcity and hoarding  - for more on this, see:
http://brane-space.blogspot.com/2012/07/yes-those-us-notes-were-real.html

 

And so while nascent Americans, in their revolutionary fervor, had thrown off the shackles of one monarchy, within 137 years they came under the boots of another. This one devoted to the business and banking classes, who demanded ever more favored treatment vis-a-vis 'ordinary' citizens.

 As Rushkoff points out (op. cit., p. 171):

“To this day, the bias of centralized currency is toward scarcity and hoarding. This slows down the rate at which money circulates, while concentrating wealth at the top.”

 

This is not difficult to figure out. If only a certain species of coinage or currency is accepted as ‘real’ then there will be a natural tendency to hoard it. If it is hoarded then there will be scarcity, so aggregate demand will seize up and de facto fiat money will have to be printed to compensate. In the case of the past six years or so this fiat money has been engendered by the Fed holding down interest rates to absurd levels while doing monthly bond buying to the tune of $85 billion. The hoarding is now all in terms of Wall Street and Banks (as well as billionaires) who are able to exploit the cheap money environment in assorted nefarious ways. These include: inside information, flash trading, hedge fund gaming, credit default swaps and enticing ordinary investors to unwisely buy into the raging market – then collecting the spoils when it collapses – as all Bull markets do.

 

The game, obviously, is rigged so that the rich can get richer and everyone else gets poorer.  In other words, contrary to Neolib propaganda it is zero sum: each extra dollar the wealthy rats get is one less for you. Worse, the Neoliberal imperative dictates that those on the lower rungs be disallowed any economic security, especially via government social insurance programs. In this way it feeds economic inequality while it rewards the speculator and banker class - namely those who benefit from the rigged Neolib capitalist system. It also helps to corrupt the political class via unregulated campaign contributions – which, instead of being equitably distributed to all contenders – is now hoarded by only a few top candidates. When the majority of candidates lose – as they must -  all the donations contributed are lost.

 

Five years after the New World Order dawned,  Jay Bookman aptly noted('The New World Disorder Evident Here, Abroad', in The Baltimore Sun, December 15, 1997):

"The global economy has been constructed on the premise that government guarantees of security and protection must be avoided at all costs, because they discourage personal initiative. In times of crisis, however, that premise cannot be sustained politically. In times of trouble it is human nature to seek security and protection and to be drawn toward those who promise to provide it. That is how men such as Adolf Hitler, and Vladimir Ilyich Lenin came to power, with disastrous consequences."

 

This aspect also has to do with what economists call “Pareto optimality” – which is another reason the rich keep getting richer and well known even before Piketty’s book arrived. This is based on the Pareto distribution, which confers much greater value (in what are called ‘utils’) to the money of the rich, than the money of the non-rich.  See e,g,


Since this difference exists, Vilfredo Pareto argued more power must be given to those higher util dollars. Today this would mean dispensing with government subsidies like food stamps, unemployment insurance or welfare. It also would also mean cuts to Social Security since by Pareto Optimality it wasn’t right for old codgers to simply collect money for breathing every day – as opposed to investing or working for it.

 

One hidden, ugly side of the Neoliberal imperative is that when nations come under its yolk – as at least one part (western) of the Ukraine is likely to do – then all its government  economic and social supports must also be cut. The people are then tossed into the über market just like all others haplessly trapped in the Neolib matrix. This means the same thing that happened to the Russians in the 1990s must befall them: all pensions cut, no more government food or energy subsidies, and wage cuts of 40 to 50 percent (as recently happened with Greece). Oh, and rents increased by 50-70 percent too!

 

An even more ugly side, as noted by Rushkoff  (Ch. 7, ‘From Ecology to Economy’) is that all remaining wealth on the planet must be hoarded and rendered scarce. This means millions of hectares of forest must be removed each year to make palm oil for assorted commercial products, even as millions of acre-feet of water must be wasted and despoiled each year to reap fracking profits. Whether ordinary people have any trees, or clean water left is not an issue that concerns the Neoliberal, only ensuring that they are faced with water scarcity, as well as that of other resources (clean air).

 

If you need some insight into what the Neoliberal global order will look like in the year 2050, check out the first five minutes of the scifi film ‘Elysium’.  Look carefully at the landscape of wasted, rotted out buildings, scruffy people in rags eking out an existence and then look around now – and see the emergence of a similar landscape if the global frackers get their way.

 

Again, Pareto optimality and its perverted economics dictate this: to amass and hoard ever more wealth (in money) so that natural wealth must be destroyed. If ordinary people die by the millions because of the effects of climate change or polluted water, e.g. from cholera or amoebic dysentery, it matters not because those people control less wealth anyway – so in terms of Pareto optimality – aren’t worth that much. This is also why the Neoliberal sees more sense in dispensing massive tons of toxic garbage to the less developed world: the inhabitants of those locales already are facing serious health issues so more toxic waste doesn’t matter in the scheme of things. For the time  being it’s more economically useful than letting it pile up here in the U.S., where it might generate ten times more cancers, and having millions consume Medicare funds to get them treated.

Of course, once the Neolibs can get rid of all “entitlements” that all might be changed.  These so-called entitlements are the main bulwark now standing between a barely surviving Middle Class in the U.S. (which has already been overtaken by Canada's Middle Class, not surprisingly) and one that goes under. In that future all seniors will only receive a "welfare" pittance, and will have to work in some manner if they want to live at a decent level.

 The bottom line is that the Neoliberal imperative as I’ve described it is what’s responsible for generating massive income inequality. While Thomas Piketty’s factors (i.e. inherited wealth)  do enter, they are not as historically cogent as the ones Douglas Rushkoff points out that preceded them – especially the original move to centralized currencies and banking.

See also:

http://www.smirkingchimp.com/thread/gaius-publius/54836/neoliberalism-just-deserts-and-the-post-climate-crisis-economy

 

Walter Block - Another Libertarian Blockhead! ("Slavery wasn't so bad!")

Where in the hell do these economic blockheads come from? What regressive pit of offal breeds them and then disgorges them into the world to posture like madmen, confuse their students, and undermine polity in the name of some misbegotten theory?  I've already expounded on one branch of these cretins, the bunch that pushed Pareto-based economics, e.g.  http://brane-space.blogspot.com/2011/06/modern-economics-its-evil-basis-pareto.html

This was the work of none other than Vilfredo Pareto, who invoked the example of a "collectivity" of a wolf and a sheep - with the wolf only happy unless he could eat the sheep. (Else, only the sheep remains happy grazing on its patch of grass - while poor Wolfie starves)  Thus was born modern economic theory which inverts everything sensible, such as Greenspan arguing back in 2003 that Bush tax cuts were preferable to Social Security benefits. The poor little rich folks would use the money saved from those cuts to invest and help the economy, while Social Security could be collected merely because a guy could breathe.

Pareto's model translated into the argument that the buck is worth more to the rich man, and hence, any transfer from the rich to the poor hurts the rich more than it helps the poor (especially as the 'utils' for the poor man is also rather smaller by comparison).  E.g.     












From this degraded bollocks, it became possible to argue - for example - that it makes more sense to give the prospective patient or person to be screened (say for colon cancer)  $1,499 NOT to get the colonoscopy, than to let her get the test and consume valuable specialist time and resources via $2,000 subsidy. (Bestowed by whatever insurance allows it, say Medicare or Obamacare, or even high flier private) .

In a similar vein, these dregs argued that having 1,000 - 10,000 average Joes and Janes die each year from climatic catastrophes  (or fouled water from pollutants) is more tolerable than having oil speculation losses for the rich, because then they will also pull back on their investments in ETFs (exchange traded funds), hedge funds, and all the rest ....ultimately ending in less investment banking profits and perhaps another financial collapse. 

By a similar line of perverse Pareto reasoning, it made more sense for the impoverished billions in the third world to breathe filthy, polluted air than clean air. The reason is obvious: it is inefficient because if they had to pay for it, they couldn't afford it. By the same token, it makes more sense to dump the toxic wastes from advanced nations in poor nations than vice versa, because the same reasons apply: the 3rd worlders would never be able to afford their own clean up costs, so what's an extra five million gigatonnes of waste in the overall scheme of things?

Hence, from this "Libertarian-ish" style of bunkum it is not surprising that a Prof named Walter Block could spring, though I'm amazed he's at Loyola- where I studied in the 1960s (before transferring to Univ. of South Florida, where I could do astronomy with some of the best names in the discipline - including Heinrich Eichhorn, Sabatino Sofia and James Hunter).

According to a  Jan. 26 New York Times Sunday Review article on the 'Rand Paul Political Brand', Block actually had stated that "slavery wasn't so bad" - taking up the long standing libbie trope that, after all, the blacks were cared for, got their 3 squares a day and some time off (Sundays) and so long as they behaved themselves they weren't flogged by the overseer. (Block ought to be forced like 'Alex' - the character of 'Clockwork Orange' - to be strapped to a seat with his eyelids fixed in place and forced to watch the whipping scenes from '12 Years a Slave' in an endless loop for at least a day)

That may cure him of his delusions, but maybe not. Most hard core libertarians are so detached from reality that they inhabit a land of delusion of their own. (In one argument some three years ago, one actually argued that the gov't had no business interfering to interject civil rights legislation, and if the blacks really wanted it they ought to have struggled on their own to achieve it.)

In a similar kind of vein, Block - in an interview response to the author of the Times piece (p.21) observed that in the 1960s:

"Woolworth's had lunchroom counters and no blacks were allowed. Did they have a right to do that? Yes, they did! No one is compelled to associate with people against their will."

But consider the consequences if this bat shit crazy meme was extended willy-nilly so that anyone could apply it. Pharmacies could refuse serving people they regarded as 'misfits'  - say denying birth control pills to young, single women or not even permitting blacks to cross the doorway.

Owners of football teams could decide that they want no Jews, blacks, or gays entering their stadiums and they might put that into place. Private hospitals -operating as businesses - might decide that they want no blacks, Jews or gays on their premises either. Restaurants would feel free to bar anyone they think is marginal, including those who look like 'thugs' - or  whoever doesn't fit flitty criteria like hair length, or quality of dress.

In other words, you'd invite a society bordering on chaos, and don't think for a moment that  the millions of excluded folk would just sit there and take it! It is no wonder that Block describes himself as an "anarcho-capitalist".    No surprise that Block's ideas were hatched from the "Austrian School" of Friedrich von Hayek. See below:


















Recall that von Hayek's austerity solutions led to the collapse of the Weimar Republic and the rise of Nazism.  The Wehrmacht soldiers I met in May, 1985, all agreed that Hitler would have had little chance to attain the Chancellorship had austerity measures not been implemented in the late 1920s - such that most people had to beg, borrow or steal just to get bread or feed their infants. Hitler offered a promise of plenty for all, via his concept of  Lebensraum - or expanded living space. Of course, these riches would come at the expense of other nations taken over by the Nazi expansion of the Third Reich!

Today, the seeds of this aberrant thinking remain, as voting rights laws are gutted state by state and even portions of the civil rights bill are placed in peril. Meanwhile, billionaires like Peter G. Peterson want to impose austerity via cuts to Social Security and Medicare, so he and his wealthy pals - like Tim Perkins -  can live high off the hog, buying up 18 giant yachts instead of 2 and fifty giant residences from Curacao to Monaco while homeless citizens have nada.

To the extent we let these fools succeed, we will all regret it, and the decline of our nation will be accelerated.

To read some of the reactions of the Loyola community to Block's bollocks, go to:
http://www.loyolamaroon.com/search-1.2265630?q=%22Walter+Block%22

Yes! The Repubs' 'Fiscal Cliff' Position is Based on the Pareto!

"Assume a collectivity made up of a wolf and a sheep. The happiness of the wolf consists in eating the sheep, that of the sheep in not being eaten. How is this collectivity to be made happy?"

- Vilfredo Pareto


I've been asked repeatedly lately what over-arching paradigm might underpin the Republican position in regards to the dealing over the "fiscal cliff". To bring readers up to speed (especially after the DOW dumped nearly 90 points yesterday) let me summarize:
The Repukes have proclaimed that they are still interested in "raising revenues" as part of a "Grand Bargain". After teasing Obama with the possibility of real increases in tax RATES - as opposed to closing ambiguous loopholes, the Reeps are now dug in and maintain that "revenues would be raised through later tax reform" - and this, btw, is with NO 'trigger' in place to enforce it. And in return for that vague, ambiguous promise of fiscal rectitude they demand:

- The upcoming defense sequestration be cancelled, i.e. no cuts for the Big D

- The age for Medicare eligibility increase to 67, or 68

- And changes be made to Social Security, namely by way of re-calculating its benefits via a lower COLA - to cut them.

Are they fuckin' nuts? Or haven't they seen the results of the just finished election? Do they not see they were the LOSERS? So how can they insinuate that THEIR plans to carve out social insurance benefits are the ones the voters chose?

As a separate issue, these fuckers want to address the debt ceiling issue separately, or translation: they want to have the power - as they did last year- to send this country hurtling over a REAL cliff of default! This time, however, Obama appears to possess the stones to not let these knuckle-dragging morons roll him in a back alley - like he did last year. Sometimes it takes time for Dems to grow a spine, what can I say?

Okay, now where does this come from? Some may say partly from adhering to Grover Norquist's no tax increase "pledge" and they may be right. But a more fundamental basis is to impose the Pareto Distribution of resources across the land. To refresh readers' minds, Vilfredo Pareto is the one who basically put forward the Pareto distribution, and also the form of economic efficiency known as Pareto efficiency.

The basic insights may be derived from the Cumulative form of the Pareto distribution which is shown in the graphic. Basically, we are graphing "utils" or nominal units of "utility" on the vertical axis, vs. value of dollars used or consumed along the horizontal. The curves are displayed for two populations, one "rich" (say earning in the top 1% or $340,000/yr.) and the other "poor" (earning about $14,000/yr.). The key aspect to note is the width corresponding to the "delta x" portion of the gradient (delta U over delta x) which translates into the net dollar's worth for each population. As readers can see from inspection, the width of $1 for the rich is significantly longer than the one for the poor. This translates into the argument that the buck is worth more to the rich man, and hence, any transfer from the rich to the poor hurts the rich more than it helps the poor (especially as the 'utils' for the poor man is also rather smaller by comparison).


Thus, by Pareto's original example (in quotes): Allowing the wolf in the wolf-sheep collective to EAT the sheep expresses less overall "hurt" or pain on it than permitting the sheep to remain unscathed, thereby merrily prancing away eating its grass while the poor wolf starves. Of course, let me hasten to add here, that nowhere is Pareto's original quote on the wolf-sheep combo given in any standard university economics texts. God forbid any students draw the wrong conclusion and infer that modern economics is consigning the poor to be sheep for the rich wolves. But, as a matter of fact, that's fairly close to the truth!

To sum things up in a crude nutshell: Applying the Pareto model for efficiency ensures that money will be circulated and spent by the highest quality producers and generators. This was subsequently imbibed by Arch Capitalist Milton Friedman of the "Chicago School" of economics as Naomi Klein notes in her book, The Shock Doctrine. As she notes (p. 68), Friedman asserted (in his book  ‘Capitalism and Freedom’ ) that "everything went wrong with the New Deal".

To Friedman all government social protections that were unearned, either from speculation in the markets or protracted hard work, had to be negated. Also, any gov't based medical programs like Medicare needed to be outsourced to corporations or the private sector. No one could have any "handouts" ...whatsoever, and oh, by the way, the minimum wage had to be abolished as well! (Workers could then individually compete for the best wages based on innate talents) As Klein further noted (p. 70): Friedman's tracts "though cloaked in the language of math and science" were in fact being passed on from multinationals and corporate interests with a lot at stake. Hello, serfs, meet the new Overlords!

Social Security payments? They pour more money into the economy, but not via real time productive labor or market indices, returns. People receive their checks merely by existing and breathing day to day, and having paid into the system with FICA deductions. Even then, they receive far more in benefits than actually paid in, making a total mess of "utils" earned. In a way, the Social security recipient (in the eyes of this Pareto-riguer bunch) are like the rent subsidized couple with their "consumer surplus". Worse, the S.S. COLAs increase the non-productive payments each year, one reason why – back in 1997 –  Alan Greenspan demanded an artificially much lower COLA increase than had originally been proposed.


No surprise that this COLA is exactly what the Reeps are proposing now. It is also fueled by propaganda put out by assheads and morons like Lloyd Blankfein, who on CSB news recently made the remark we "can't afford people living off of entitlements for 30 plus years." This slimey bankster rat lied and fortunately Ed Schultz corrected the slimeball on a subsequent show, noting the average American worker lives roughly 16.3 years depending on Social Security!  This during a period when medical costs are likely to explode, as well as the likelihood of being in a nursing home.

So what alternative does the Pareto Distribution demand and which Repukes are secretly pushing? Easy! Removing the money allotted from Social Security will force oldsters to gamble in a risky stock market casino in which we now know flash trading and fractional stock taking dominates (subject of a future blog) and the little guy suffers. Even as Boehner and McConnell wheel and deal, Maul Street's unscrupulous money managers salivate like Pavlovian dogs over reaping major rewards for themselves via deceptive fees. With a growing population of elderly Americans afflicted by Alzheimer’s, the fine-print artists peddling deceptive retirement products will have a field day. THIS is what the Reeps are bargaining for!

Make no mistake here that though the well-funded campaign to partly privatize Social Security under George W. Bush (in 2005)  failed, the same forces are at it again using the "fiscal cliff" BS as a leverage point. Now, they want to achieve the same result indirectly, by getting Obama and enough conservative Democrats in Congress (kowns as DINOS) , along with the GOP, to cut Social Security. Their manifest objective is to comply with every Fed Chairman's wet dream and compel Americans to try to make up the losses in public benefits by gambling more with their savings in mutual funds ( from which hefty profits will be skimmed by overpaid money managers.)  Wall Street will then become even richer than it now is relative to Main Street, as the Pareto Pirates gloat.

This we cannot allow! Every sensate being in the nation needs to keep on his reps' butts and make sure they do the right thing. If you have a weakling or wavering wimp, be sure to tell it like it is and assert that (far from cutting anything) we need to expand the stable, efficient, low-overhead public part of America’s retirement security system — Social Security. 

Meanwhile, we pare back on the risky alternatives like 401ks wherein workers must fend for themselves. (The other alternative is to provide a government "match" - for every dollar saved, i.e. in a money market or fixed income fund,  and not lost in a 401k via speculating).

Meanwhile, any reinforcements or added steps we do have to make to Social Security and Medicare, to ensure their integrity,  can be made independently next year. This would be after the fiscal cliff hysteria has passed and the Reepos can no longer exploit it for their own ends. Let us not be held hostage to the Reeps' alleged guns now, as we were last year with their disreputable debt ceiling brinksmanship!

One last point: I disagree with Obama barnstorming around the country and asking the Middle class to complain to reps about losing up to $2200 a year or more if the fiscal cliff is hit without Repups cooperating. To me this plays into the Reeps' hands and uses unnecessary scare-mongering. Hence, I agree with Robert Reich's take in salon.com today:

"So rather than stoking middle-class fears about this, the White House ought to be doing the opposite – reassuring most Americans they can survive the fall. In fact, to use his trump card effectively, Obama needs to convince Republicans that the middle class is willing to jump over the cliff."

Indeed, and for my money, the fact Americans could afford to splurge to the tune of some $55 BILLION on 'Black Friday' and "Cyber Monday" shows me they have disposable income to survive the "fall". In addition, the scare mongering sets liberals nerves on edge because it implies Obama & Co. might teeter over if the standoff is protracted. Keep the stiff upper lip, Mr. Prez. And understand that if going over this "cliff" is what we must do to finally get actual tax rate hikes on the rich, they we do it. And we LOVE doing it! Why? Because it'll make the Repukes (and that turd Grover Norquist) puke!

Is the U.S. Economic System Pareto-Compromised?

In previous blogs I have shown the basis for how and why our economic system has been perverted, e.g.


http://brane-space.blogspot.com/2011/06/modern-economics-its-evil-basis-pareto.html

and
http://brane-space.blogspot.com/2011/06/modern-economics-its-evil-basis-pareto_13.html
and

http://brane-space.blogspot.com/2011/09/economic-lies-distortions-and.html

Most of this (note the content from the first two links especially) is based on the "Pareto Distribution" which mandates the objective of economic "efficiency" over all else. This efficiency is gauged in "utils" an abstract measure formulated by Wilfredo Pareto, and now adopted as the sine qua non of modern economics by most of the high priests who practice that trade.

For example, having people get colonoscopies is "Pareto inefficient" because the person getting them is usually not paying the full cost, to hire the professional talent, resources to carry them out. If half or more of the cost is being defrayed by an insurance company, then it makes more sense to pay the person just under that half NOT to go for the screening than to go and tie up resources that could otherwise be allocated to a person who could afford the full price on his own.

In the same way, rent -subsidized apartments are "Pareto inefficient" because the government is paying for or subsidizing rents what might easily be paid in toto by those who can actually afford the apartments.

Ditto, with Social Security, which is why Alan Greenspan in a well-known (2003) appearance before the Senate Banking Committee, suggested that "Social Security benefits need to be cut to pay for Bush’s tax cuts."   Greenspan surmised-  in terms of Pareto Efficiency – that the Bush tax cuts poured more money into the hands of the better off each year,  and would use those higher -valued ("util-wise") dollars to invest or purchase high end goods.   Greenspan obviously reasoned, that it made more fiscal sense to let these wealthy keep their ill-gotten gains from the tax cuts, than to preserve Social Security and reward the unproductive (and mostly non-investors) with unearned compensation- wherein people reeived income merely for breathing and not doing anything productive.

Now, evidence suggests that the toxic memes from Pareto efficiency have dramatically degraded our morals, ethics as well as our financial system. Michael J. Sandel's book, What Money Can't Buy, shows the hell we are in for if we don't soon check the insidious growth of Pareto-ism and its fetish for economic efficiency over almost all other values. What most worries Sandel, is that during the past 30 years (effectively from the time of the Reagan administration) economic "imperatives" have begun displacing all other national values. While Republicans often raise their moral clarion calls and pointed to class-based moral deficiencies (e.g. in Charles Murray's new book, Coming Apart) they have failed to perceive that the paramountcy of their own "market efficiency" has been the primary eroder of national moral vision.  As Sandel observes in his book: we are steadily seeing our moral ideals pushed aside in favor of the view that economic efficiency must always prevail.

In other words, such efficiency in the engrained, perverted Pareto -Capitalist system has become a pseudo-moral value in its own right - as well as trumping all others.Author Charles Reich poignantly describes the perversity of this system in his book, Opposing the System, Crown Books, p. 103:


"When society itself comes to be modeled on economic and organizational principles, all of the forces that bind people together are torn apart in the struggle for survival.

Community is destroyed because we are no longer 'in this together' because everyone is a threat to everyone else. "

This quote summarizes all that is wrong with capitalist-Pareto efficiency economics. Examples, apart from those I already gave,  of how traditional mores have shifted toward a market "morality" are abundant:

- Flyers can purchase their way out of having to stand in line for TSA screenings at select airports

- More cash flush customers can purchase their way out of waiting in line at many amusement parks.

- Many schools now "incentivize" student performance by paying students if they read books, or do well in courses.

- Cities routinely sell advertising space on public property, ranging from parks and municipal buildings to police cars.

- Many large sports stadiums have now been "corporatized" with their original names removed in place of corporate names or logos. (Even sport performance in many places has been reduced to corporatist bunkum, i.e. announcers for the Arizona Diamondbacks baseball team are required to refer to any home runs by the team as "Bank One Boomers")

In nearly all of these, as Sandel documents, long held concepts of ownership and inherent worth have been subjugated to the simple "morality" of the market, except the market has no morality. It operates within an amoral vacuum and the only guide is efficiency. Thus, to the Pareto-based market, it is more "moral" to allow people who can't afford decent apartments to remain homeless, rather than remove the apartments from market share competition. It is also more  "moral" to allow children to starve or go to bed hungry each night, than to provide a family with food stamps to cover food costs they can't meet with their meager income. The reason? Food stamps remove purchase power from the purview of "free" market choices.

None of these moral imbeciles appears to have ever heard of FDR's famous words:

"Necessitous men cannot be free men".

The above is not the extent of how marketism -Pareto-ism has wrecked true American moral values. Sandel recounts, for example, how life insurance was once used as a safety net for families, in case the main bread winner died. It has now mutated, under Pareto imperatives, to become a ghoulish investment vehicle. Thus, life insurance policies can now be bundled or sold separately as "viaticals" from the "life settlement industry"  and then converted into bonds to be sold to investors. The payoff depends on how soon the policy holder croaks. Hence, there is an unspoken pressure for the aged insurance holders to kick the bucket sooner rather than later, to maximize returns.

Beyond this, there is the "dead peasants' insurance" market- wherein companies (nearly 90% of them now) take out life insurance policies on their employees, in most cases without informing them. They do so because Pareto efficiency economics dictates it. The policies then provide an excellent side revenue stream (especially usseful when sales are falling) whether traded or held until collection, when the worker croaks from too many overtime hours (only paid at the regular wage rates).  Companies basically can't lose. And there are always ten or more workers standing in line waiting for the same overworked jobs, to replace the ones that die early.

Sandel's look into market amorality is chilling. What becomes more obvious on reading it is the very slippery slope that can go from paying to cut in line, to betting on an oldster's premature death to collect more money from a death bond. Most horrific is how the market efficiency meme can intrude into our politics and even history to attempt to either reshape them, or exclude other competitors from the idea marketplace. Application of such efficiencies to historical tragedies, such as the Kennedy assassination, can even lead to the dominance of simplistic propaganda ("Oswald don' it") because it is more "efficient" to articulate or explain than a putatively complex conspiracy. In a similar fashion, the U.S. incursions into Afghanistan and Iraq are simplified (in the name of efficiency) to "wars" when they are in fact extended military occupations which haven't been paid for by taxes as other wars (WWII).

The preceding perversions of history via market efficiency also dictate market -money advantages to some projects, media vehicles for instance, over others. Thus, it is almost an axiom of corporate media now, that a simplistic retelling of history will get preference over a more complex thoughtful one. Hence, Tom Hanks 'Playtone' PR propaganda piece likely trumped any alternative proposals on the Kennedy assassination, which might have portrayed the conspiracy side. (Even Oliver Stone's 'Secret History of the U.S.' Showtime series seems to have been put on hold).

The point here is we need to appreciate how far and wide Pareto efficiency- market incursions have reshaped not only our ideals, and morals, but the way we think of our primary historical events too.

Is "Moral Hazard" a Myth?

This was actually addressed (and answered in the affirmative) in a 2005 piece in The New Yorker, titled “The Moral Hazard Myth,” in which author Malcolm Gladwell noted that people with health insurance don't go into hospitals for their enjoyment (unless maybe they are One percenters in the "amenities units"), and that people without medical insurance often forgo preventive care that could save thousands of dollars. So how is that "moral hazard"?

Conveniently, when the pundits and elites bloviate about moral hazard, they overlook the noneconomic costs of risky actions like smoking, e.g. costs from lung cancer, the attendant suffering and death. Nor is gobbling giant burgers and fries every day (or even once every week) at Mickey D's deemed a "moral hazard". We are informed instead by the pundits that to try to regulate such behaviors is tantamount to intrusion by a "Nanny state", never mind our costs from obesity and diabetes will soon bannkrupt us if our military overstretch doesn't!

One law professor at the University of Pennsylvania, a Tom Baker, once wrote a historical account (1996) entitled On the Genealogy of Moral Hazard,” that: “Moral hazard signifies the perverse consequences of well-intentioned efforts to share the burdens of life, and it also helps deny that refusing to share those burdens is mean-spirited or self-interested.”

Again, convenient. But the question that occurs is why is this attribution and designation so selective? Tending to focus on the missteps, benefits or foibles of ordinary people as opposed to those of hedge funds, giant banks or bankers? Notably here, Baker also adds (ibid.):

"The economics of moral hazard work to convince us that, however well intentioned, social responsibility is a bad thing,”

Now where have we seen this before? Give up? It is in Vilfredo Pareto's Pareto distribution. See, e.g.

http://brane-space.blogspot.com/2011/06/modern-economics-its-evil-basis-pareto.html

and

http://brane-space.blogspot.com/2011/06/modern-economics-its-evil-basis-pareto_13.html

As noted in the top-linked blog, at the heart of "Pareto efficiency" is what's called the reservation price for a given object or service. This is just the maximum price a person is willing to pay. (Or more often, can pay....given financial circumstances!)

Example: say a new apartment complex opens up and is selling apts. (1-3 bedrooms) ranging from $1,500/month (for single Bdr) to $2,400 for 2 Bdr, to $3,600, and people want to buy. Obviously, a relatively poorer couple will have a reservation price probably lower (e.g. $1,000) than any of the apartments, and hence need a Section 8 HUD rental subsidy to offset costs, while the rich couples or families can move into any of them.

But, according to modern economics and the Pareto distribution, offering a rent subsidy on the order of $1,000 (for the single Bdr apt.) effectivly removes it from the actual competitive market . Because this exerts a price below reservation, though offering the apt IS sociall responsible, the Pareto economist regards it as "moral hazard".

This is exactly where and how the discussion was evolved to reject any economic actions that confer such social responsibility, because it is believed the recipients will not then exercise self- initiative and instead become dependent on "government handouts". The same arguments are often used against providing food stamps for any length of time. People - never mind jobs are unavailable- become too dependent on them and get "addicted" to handouts.

Thus, to these economists, "moral hazard" came to be equated with "Pareto inefficient".

Obviously, this was also the basis for Fed Chairman Alan Greenspan going on record in an appearance before congress (in 2003) and asserting that "Social Security benefits need to be cut to pay for Bush’s tax cuts." Social Security payments, especially with COLAs, do everything the Fed Chairman detested. They poured more money into the economy, but not via productive labor or market indices, or investment returns. People received their checks on the basis of a social insurtance contract....thus, merely by existing and breathing day to day, and having paid into the system with FICA deductions.

In effect, providing Social Security benefits, especially with COLAs that kept pace with inflation, was a "moral hazard". Socially responsible, yes, okay. But a hazard morally because those elderly people were now making haste to collect on the government dime (often as soon as they hit 62) instead of getting their butts out there and working longer ....earning on their own. (Never mind most employers won't hire them ...other than maybe as Walmart greeters!)

What about health insurance? Let's say the productive cost of the typical primary care physician's visit is $150. This is what she charges, or what her Affiliated Primary Care center does. The non-wealthy person (having shelled out $250 for an insurance deductible) is then happy to pay only $15 for a co-pay. But this "skews the system" and makes it Pareto INEFFICIENT while introducing "moral hazard" - because the patient will then likely come to underestimate ongoing real medical expenses.

If one therefore takes the difference ($150 - $15 = $135) it makes more sense to just give the unwealthy person say $134 NOT to visit the doctor and consume resources. This then, also avoids feeding the moral hazard. With Medicare and Medicaid it's even worse, because the moral hazard -Pareto poppets argue that medical services are even more undervalued by those government-served populations.

I noted as a special example getting a preventive test, like a colonoscopy which normally would run $3,500. But there's no way the insured regular patient can afford that total cost, most of which his or her insurance picks up. Meanwhile, calculations- based on Pareto Efficiency- show if the insurance paid part is $2,000 (while the patient's reservation price is $1.500) it makes more sense to give the prospective testee $1,499 NOT to get the colonoscopy, than to let her get the test and consume valuable specialist time and resources via $2,000 subsidy.

Their argument is that not getting the colonoscopy avoids moral hazard! (Never mind that if the patient then gets colon cancer much larger health costs will be imposed on the system)

In effect, to grasp the reasons for selective assignment of "moral hazard" in our society it is important to grasp the perverted basis of our economic system which rests on Pareto's distribution. This basis will always disfavor social benefit or social responsibility, when lined up against economic advantage.

The obverse is that the true villains who unjustly profit and display real moral hazard, get away with murder. Thus with the S&L crisis in 1989, massive public bailouts were made. Private entities collected massive public rewards. Same with the bailout of Long Term Capital Management in 1997, and more recently, AIG and the banks in 2008. The latter, especially, were guilty of using public money - put into the banks on trust - to speculate in the securities markets via credit default swaps. (See the movie, 'Inside Job', if you haven't already!)

According to Elyse D. Cherry, the C.E.O. of a community development group, Boston Community Capital, "moral hazard is hogwash.” Why would she say such a thing given her company is putatively a live laboratory for active moral hazard? (It buys homes that have gone into foreclosure, then sells them back to the original owner at a price they can afford).

Her response is insightful and discloses she can see through the moral hazard smokescreen and rubbish of the Elites and realize that people aren't just toddling toward endless and limitless benefits! Thus, the ruined credit of milliions - say who declare personal bankruptcy- makes it harder to borrow money, or get an apartment. Moreover, given nosy employers are increasingly doing credit checks on prospective hires, it makes it damnably difficult to find a job to escape their existing economic morass. Meanwhile, to even search for a job in greener pastures far away is hard on families because they may not be able to get the selling price they need for a home ...and moving is often a logistical and timing nightmare. Then there are the larger social costs when desperate people - like the subprime mortgage purchasers in 2007-08 - aren't assisted: pockmarked neighborhoods and declining property values.

So, in effect, while using the moral hazard PR weapon may temporarily save some economic costs it exacts profound social costs. This, of course, is for the average person in our society, not the big hotshot investment banker who maybe used millions in public money but lost it all in the risky credit derivatives markets. He can usually expect to get bailed out in some way with the usual modus operandi: "private rewards- public costs".

Meanwhile, the "moral hazard" evoked by the Pareto optimality fetishists always ensures the public square, the common good and the little guys.....inevitably get screwed.

Ben Bernanke Says You're Not Really Seeing Higher Prices

It must be nice to be one of the Elites, and to inhabit such a rarefied, nosebleed ozone that such things as exploding prices have no meaning other than "made up numbers" and "statistics". But there it is! When one partakes of the Pareto Distribution nonsense and mistakes that for reality in terms of "optimization" and "efficiency" then one will witness such inverse reality sideshows as the wealthiest 1% now owning 1/3 of all resources, while the top 1% of income earners have 25% of all income in the nation, even while more than 13 million remain unemployed.

But in the world of the Elite, the Political Elite - like the world of Ben Bernanke - real prices have zero meaning and all that matters is whether a biased statistical measure, weighted toward Vilfredo Pareto's confection.....errr....creation.....makes sense.

Pork chops now $4.95 a pound? The cheapest hamburger at $5.50? Even veggies' prices going up through the roof? Gasoline at $3.50 a gallon? What about the rent which just got raised by another $100 a month? How about the meds like I have to take that just went from $210 for 90 to $480?

Hey folks, are you gonna believe your lying eyes or Ben Bernanke?

According to Ben (WSJ, today, p. B1, 'Consumers Price in Real Cost of Living'), all such costs as food, housing - even exploding rent, as well as meds - which are referred to as "shelter costs" are - get this:"essentially made up numbers" to quote Mr. Bernanke. Well, here's an easy question: if all those shelter costs including groceries are "made up" numbers, how about we pay the costs of them in "made up money"? Maybe I will just present an ideational, invisible "made up" $50 bill next time I go to the check out counter. "Here, Mr. Clerk, see this fifty ....no, no you CAN see it if you try! It's not just in my head! But see, I am using this made up entity to purchase goods which have prices that - according to our Federal Reserve Chairman, constitute "made up numbers"!

Now, anyone care to speculate how far that gig would get me? How about either a fast trip to the funny farm, or more likely, getting booted out of the grocery mart one time.

Bottom line, according to Bernanke's statistics, higher costs of gasoline, groceries, rent and so forth - while not directly in our heads- are of no concern to him as regards inflation. After all, the CPI or consumer price index, is gamed to lowball the impact of these shelter costs so that even if inflation is really going up by about 2% a month, to Bernanke and his Pareto-stats it is really ZERO since his statistics (like the 'owner's equivalent rent") don't show up anything worth fretting over. Thus, he can jolly well continue to keep interest rates near zero - giving all the stock investors major Joneses - while savers and ordinary mortals who have to pay costs in the real world suck salt.

Of course, this is one reason why inequality reigns, and why - according to an article in the current Playboy, the US of A is an "inequality-generating machine". How could it not be when high rollers are granted such tax breaks that now CEOs earn 300 times the average worker, when it was barely 30 times in 1960? Or when ordinary folks must scrunch and scramble to even scrape together enough to buy a measly Burger while the 1% (who would teach us all morals - according to Charlie Murray) are busily enjoying their nightly repastes of foie gras and lobster thermidor ....with 5 magnums of champagne on the side.

If the country was not an inequality -generating machine then Bernanke would have his head examined by the nearest real world shrink who'd inform him he's suffering from a species of statistical delusion. And then....as therapy....force him to grab $500 and take it to Hialeah, FL or Grand Junction, CO, or Henderson, NV to live for a month. Then see how far that dough stretches!

Of course, the investor and trader entourage are like on steroids with the news that despite these spikes in cost Ben is determined to keep interest rates near zero. And hey....if little guys or pedestrian savers don't like it...they can either get into the stock market.....or go suck salt! As the author of the WSJ piece so aptly put it:

"Unfortunately, average Americans have to pay their bills in the real world, not the statistical one."

Bingo! And especially not the Pareto statistical one!