Wednesday, January 8, 2014

What's the Difference between an Economist and a Politician?

No, it's not a joke, and there's no punch line. It's a serious question.

If economists, government statisticians, media celebrities and politicians tell us that the unemployment rate is 7%, naturally most average people will assume that 7% of the working-age population is out of work — and that this is a "fact", and not just someone's opinion.

They can argue among themselves all they want, until they are blue in the face, as to why so many people are out of work, such as: there aren't enough jobs, the unemployed are lazy, the jobs were offshored, the unemployed want a government hand-out, there's nothing for the unemployed to do, the jobless are drug addicts or alcoholics, automation and robots are better, the unemployed lack education and skills, it's more profitable to fire rather than hire workers, etc. — the reasons are endless, but nothing has been done about it. Why?

And is the unemployment rate really 7%, or is it really more like 23%? Who do most ordinary folks believe, and why should they believe them? Especially when many of the "experts" claim they are non-partisan, when clearly, most "think tanks", researchers, economists, media talking-heads, government statisticians and politicians clearly are. It's only natural that people have opinions and beliefs, especially people who advance and advocate their opinions and beliefs. Although many times, some will either confuse or outright ignore cause and correlation to propagate a belief to alter other people's opinions, just to benefit themselves and other like-minded people to influence public opinion, negating other opinions that would otherwise, be much more beneficial to the masses.

Most Americans believe the real unemployment rate is only 7% today, but not long ago in human history, most people also believed the world was flat, until explorers such as Christopher Columbus, advances in science and technology, and the Age of Enlightenment taught us otherwise. Even the Church perpetuated the myth that the Earth was only 8,000 years old — and "non-believers" were regularly accused of hearsay and subjected to torture and death. It wasn't that long ago that most humans were not only ignorant, but by today's standards, they were also vicious barbarians.

Science and facts have taught most of us many things to advance society and human civilization — although, after hundreds of years, there are still a few misinformed hold-outs who have been deliberately kept "dumbed down" by a few economists, government statisticians, politicians, media pundits and religious leaders — those with their own various agendas in mind. Many preach opinions as "facts", and we all know what opinions are like (well, you know), and we all have one. But shouldn't some people, who greatly affect our daily lives, leave their opinions at home and just stick to the facts? Maybe just a little bit common sense would help as well.

And even if these "experts" got their facts correct, what good are they if they can't articulate them in a way to average folks so that they too could better understand — those who either lack a formal education, have low IQs, or just generally lack the interest to further their knowledge in the "science" of economics?

If no one else but Albert Einstein could have ever comprehended the significance of his theory of relativity, what good could it have been to humanity? So who are "the little people" to believe then, with so many different points of view being pontificated about the economy? And how can average people, who might lack the philosophical depth and understanding of the social sciences (that are also injected into the study of economics, and so prevalent in advancing arguments on public policy), better understand and make decisions when voting for political leaders — so that they are able to vote in their own best interests and to elect honest people to correct an economy that better benefits them, and not just the top 0.01%?

It seems that "science" and debate about economics is just as political, ideological and religious today as astronomy and evolution was (and still is) several hundred years ago when deciding whether the Earth was flat and the center of the Universe, or whether the earth was 4.5 billion years old and just a infinitely tiny microcosm within one of many Universes (meta-universe or multiverse) in God's grand plan.

The economists (with their advanced mathematical analysis and wonkish blog posts) have not been able to agree on why the economy has been so sluggish since the Great Recession; and they can not come to a consensus as to the best way to create jobs — proving over and over again that the field of economics is more of an art form rather than a real science (after all, 2+2 = 4 and is not quantum theory, it's an accepted fact). Otherwise, how can two different economists with PhDs have two totally opposite views on the same subject? — Unless one were not being honest, and just used statistics to fit an ideological argument, or were paid to skew their analysis for nefarious reasons.

And the politicians — with their deep and profoundly moving speeches, or those with their ignorant and unfounded accusations — also have not been able to agree on why the economy has been so sluggish since the recession; and they also don't seem to know the best way to create jobs. But leaders in both political parties also seem to lack either a real understanding and/or a real empathy for the lives of real people who have been trying to survive (and left struggling in this economy) and are totally ignorant on the subject of "supply and demand" (although, it should be "demand and supply" --- like the chicken before the egg, or the horse before the cart).

It appears that in all but a few cases, both groups (economists and politicians alike) have attempted to find honest answers, albeit some have been more concerned about assigning blame, rather than seeking solutions; but even some economists seem more hell-bent in trying to inject ideology into the conservation rather than admitting when they're wrong. (Maybe because of selfish and over-inflated egos — rejecting common sense the way a child rejects authority.)

And the mainstream media, because of their own agenda and ideological slant, has been equally guilty with either deliberate disinformation or sloppy misinformation in their reporting on the economy (among many things) — interchanging facts with fiction (or a combination of both) — or resorting to outright lying (propaganda) to influence public policy (such as taxation) and claiming 2+2 really equals 5.

How can anyone (who's not an economist or politician) have a fair-minded, intelligent discussion about issues of importance to America if people aren't informed with basic, inarguable facts? How can regular people be genuinely informed when some media outlets actually make people stupider? One study showed that people who watch no news at all are more informed than some viewers of a particular news channel. One example would be:

Hurricane Katrina devastated Louisiana 3 years before Obama was elected as President. But when Louisiana Republicans were asked who was responsible for the poor response to Hurricane Katrina (and only given two choices) they responded:

  • George W. Bush -- 28 percent
  • Barack Obama -- 29 percent 
  • Not sure -- 44 percent

Thank goodness for the internet (created by research funded by American taxpayers), because some of the more fortunate among us, if we have 8th grade reading and comprehension skills, we can seek out knowledge on our own if we choose to — meaning, if we choose not to remain ignorant (or at least attempt to be better informed). We don't have to totally rely on the opinion of a radio talk show host or a TV news pundit for all our information — or drive to the library every time we're left in doubt about something. Now people have the ability to cross-reference the reports, helping them to decipher fact from fiction, news from rumors, truth from lies, and distinguishing the Saints from the con artists while exposing their disinformation and misinformation.

The internet has exposed a great many economists, politicians and TV news "personalities" (not journalists) for who they really are. Which brings us to the current state of the economy and jobs.

A lot of recent economic research and thought during this economic "recovery" has focused on the lack of improvement in measures such as the labor force participation rate and the employment to population ratio. But for now, we'll disregard any arguments about an "aging demographics" (such as those with disabilities or early retirees) and focus more attention on the prime working age population — generally defined as those aged 25-54 who either have or want a job. Despite the fanatical and ideological rants and ravings of a few of the most vocal and persistent loudmouths, most Americans aren't lazy slackers — they prefer to improve their lives with greater earnings, not live in abject poverty with meager handouts.

Let's examine the 25-54 age group (those that would be out of college), and because most of the older workers over 54 (if they were laid off during the recession) were never rehired again; but weren't old enough to retire either — and were forced into anti-poverty programs like food stamps. And the labor force participation rate and the employment to population ratio peaked over decade before the first Boomer even became old enough to retire in 2011 with a full Social Security pension.

Besides, since the recession, the "aging population" had been working longer to recoup losses in pension funds and home equity values; and have not contributed significantly to a lower labor participation rate and a lower employment to population ratio — so the biggest problem has been, the U.S. has had more "non-starters" than "quitters" in the labor force.

Since the recession, the U.S. has had about 18 million high school graduates (classes 2008 to 2013), but 18 million jobs weren't created for them.

The New York Times reports that a new study has determined that since the recession, unemployed and "discouraged workers" between the ages of 18 and 34 costs the government about $25 billion a year in uncollected taxes and social welfare spending. The findings have renewed interest in programs that long ago went out of fashion, like apprenticeships and vocational high schools. "Youth work programs went out of style in the 1980s, as the baby boom generation stopped needing them." (That's about the time when offshoring jobs overseas escalated.)

In a 14-page report by Rutgers - John J. Heldrich Center for Workforce Development, they note that only 27% of high school graduates were working full time (twice the level of unemployment 10 years ago -- and earning lower wages as well), while 15% worked part-time jobs (but wanted full-time work). Many were only temporary jobs. A whopping 44% of high school students were unemployed --- meaning, they were either looking or not looking for non-existent jobs.

So more and more people (both young and old), for lack of a means of supporting themselves, have been forced to use government programs.

The poverty rate in 2012 was 16 percent; that’s almost 50 million people, including 13 million children. Social Security reduced the official elderly poverty rate from 44 percent to 9 percent. A recent study from Columbia University shows that absent anti-poverty policies (food stamps, unemployment benefits, the earned-income tax credit, housing subsidies, etc.) the poverty rate in 2012 rate would have been 29 percent. Meaning, those programs lifted 13 percent of the population — 40 million people — out of poverty that year.

The Economic Policy Institute published a revealing decomposition on the relevant roles of these poverty determinants, including inequality — which, by steering any given level of economic growth away from the low-income families, would lead to higher poverty in the U.S. — and their analysis shows that between 1979 and 2007, the increase in inequality was the single most important factor in their analysis, increasing poverty by 5.5 percentage points. (See this related post: The Top 1% in International and Historical Perspective)

Unless we do more to deal with the real underlying problems of the economy, such as structural unemployment and secular stagnation due to the lack of decent paying jobs, a tax code favoring the most wealthy, and incentives for more offshoring through lousy trade policies (and corporate tax incentives for doing so), we’ll have to increasingly ratchet up government support for the unemployed (year after year) or we'll have to start paying the unemployed a permanent income (not 26 weeks) to do nothing at all with a "basic wage". This way, average people, who have no idea what the economists are saying (but who want jobs, yet can't find them), will at least have a means of supporting themselves.

Also beginning in the 1980s --- while although Americans are living longer these days (although, it's mostly the rich who are), the U.S. on the whole has fallen behind other developed nations for median life expectancies, as highlighted in a 2013 Institute of Medicine report.

But even if most of us are living longer, how can we sustain ourselves without enough jobs — and especially if they don't pay a "living" wage? CREATING JOBS (in all and every way possible) should be the #1 topic on every news show every day; and the #1 issue by every politician in every speech, and the #1 concern of all ideological economists — with all their differences aside.

Three indisputable facts:

  1. In modern developed nations (such as America), civilizations are no longer a society of hunter-gatherers; and the overwhelmingly vast majority of people are no longer farmers and now live in urban areas (where it's illegal to pitch a tent and panhandle for food).
  2. So they need "money" to pay for food and shelter, preferably earned by "jobs" to subsist — and a regular paycheck pays about twice as much as temporary unemployment benefits (people also need "certainty" in their lives with jobs, not just the job creators.)
  3. The average Social Security benefit for disabled and retired people is only $1,200 a month — which is barely enough to live on in most American cities without food stamps and Medicare (so most people, if they had a choice and were still able, would prefer to work if they didn't also have another means to supplement their income, such as a union pension.)

VISTA is an anti-poverty program that was created by President Lyndon B. Johnson 50 years ago in the Economic Opportunity Act of 1964 (as the domestic version of the Peace Corps). Their recruitment slogan in 1967 was, "If you're not part of the solution, you're part of the problem." There are many media talking-heads, politicians and economists who should be more solution-orientated, instead of just throwing rocks and heaving Molotov cocktails at the unemployed in their war on the poor. Instead of criticizing and blaming the jobless for their own failures, the media talking-heads, politicians and economists should be part of the solution, and find a way to create jobs that pay a "living" wage — even if that means drastically altering our current "bottom to the top" economic system of capitalism as we know it today.

And now, a word from Albert Einstein:

Albert Einstein quote

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