Dismal Science Blues - Whose Economy Do We Want?

Written by: Eric Weis on Oct 22, 2008 3:10 PM EDT

Economics, also known as the “dismal science” is a subject of consternation to many.  The word economy conjures up notions of a grand financial scheme, or some idea of thrift, cheapness or efficiency of action.  My very first economics course (40 years ago) defined economics as the study of the allocation of scarce resources to the satisfaction of infinite demands.

For example, there is an infinite demand for health because human beings wish to live as long as possible.  Some even dream of immortality through cloning, cryogenics or other means.  But the resources are finite.  Our bodies wear out and our life-spans are not limitless.  Medical science resources allocated to satisfying this infinite demand are also not infinite.  There are a certain number of doctors, nurses and healthcare professionals, and a limited number of clinics, hospitals and drugs.  So, ultimately, healthcare must be allocated.  The entire healthcare debate can thus be viewed as a subset of economics.

In the setting of this definition, our current Presidential choices offer very different views.  One pretty much parrots the old “supply-side” school of economics based on the Laffer curve (google it) and the disciples of Milton Friedman.  The emphasis is placed on monetary (not fiscal) policy, and goodness trickles down from the wealthy to the rest of us.  Among a growing number of economists, who have been studying mountains of data, this approach has largely been discredited.

The other fellow is focused on the distribution of income, how it has become skewed towards (tilted in favor of) the wealthiest segments of society.  History has shown, time and again, that horrible imbalances in wealth tend to unglue civilizations.  At some point, the more numerous have-nots rise up and re-balance the scales of wealth in some manner.  Often, violence and revolution is involved.  Ask the House of Romanov, if you can find anyone left these days.

If you cannot tell which candidate reflects the old way of thinking, and which one points to a true change in economic policy which returns power to the middle class, then just click the link below to see Barack Obama addressing an audience in Florida on the economy yesterday.

http://news.bbc.co.uk/1/hi/world/americas/us_elections_2008/7682664.stm

Meanwhile, John McCain has been out beating the bushes (sorry, correction on that, he pals around with Bushes) about the economy.  He says that it is not the economy which has dented his candidacy.  He claims that he is the candidate who is right on the economy.  Sure.  After all, he certainly had a lot of exposure to the S&L problems some years back. What a great learning experience!  Or was it an EARNING experience?  Only the Keating 5 know for sure. 

McCain says that Obama will tax us.  Meaning you and me, in the middle class.  Go ahead John, make my day and tell me where in Obama’s proposals it says that there will be tax rate increases which affect any of us under $250,000 in adjusted gross income.  Joe - I mean Mr. Plumber - if your business, the one you want to own, is large enough to throw off $250,000 in AGI, well man can I have a job?  Please?

It may well be that conditions foisted upon the American people by its inept government will force the next President to change tax policies.  But at the moment, the proposals developed prior to our meltdown were pretty clear.  Obama wants to close the floodgates which have transferred wealth from the bottom and middle to the top.  Look at any economic measure of income distribution and you will find that it is more skewed towards the wealthy upper crust than at any time in the past 50 years (or longer, I forget the real time period, but it is very long).

John McCain would have you believe that Obama plans some sort of evil spreading of the wealth.  Damn right he does, right back the spread that was enjoyed in the Reagan years.  That is the extent of Obama's tax policy.  It does not go far enough, but one thing is clear.  Wealthy Americans will not be impoverished by an Obama administration.  And besides, the banks have already been socialized by the Bush administration.  So where’s the beef, John?

Meanwhile, what does Mr. McCain plan to do with the economy?  His healthcare policy (remember that it is merely a subset of economics) will TAX EMPLOYER HEALTH CARE BENEFITS.  That is aimed right at the middle class.  It will force one of two outcomes.  We will either pay more tax on a larger income base, or else employers may be motivated to drop health insurance benefits.  Either way, the middle class takes it on the chin.

McCain's plan is an unadulterated tax increase.  It sucks money away from the middle class and is collected by the IRS.  So who is raising taxes on us?  You betcha, the guy who is pointing the finger at Obama!  Talk about the fox in the hen house!  The average increase will be $3000 for those of us who have these plans (using a national average of $12,000 benefit and 25% tax bracket).  On the east coast, in the NY metro area, the increase is likely to be $4000 or more (28% x $15,000).

Well, all of this seems obvious to me.  One of these guys is on my side. The other one is saying things that ain't so.  And his initials don't rhyme with B.O.  But if he says it often enough and loud enough, it seems that some Americans come to believe that night is day and day is night.  Somebody, please, tell Joe the Plumber to take those dark glasses off and look at his watch.  At midnight EDT, it is day in China and night in America. The darkness is in the sky above the battleground states, and the sun is shining in India.

John McCain is spreading the economics fog as fast as he can.  Send the Obama video clip on the economy and maybe we can sail right on through to the other side.  Here is the link again:

http://news.bbc.co.uk/1/hi/world/americas/us_elections_2008/7682664.stm

 - Arctic Eric

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