Poverty is too PROFITABLE to end

[undergroundpanther]

Investments at the Bottom of the Social Pyramid Produce Results
Market Watch
Posted on October 27, 2008
Turns out that the best return on investment lies with the poor, not the rich.

A Moody's analysis earlier this year shows the government gets the biggest bang for its buck by spending increases. A whopping $1.73 increase in gross domestic product is returned for every dollar the Treasury spends by increasing food stamps, for example. This compares with a $1.02 return by a nonrefundable lump-sum tax rebate and a $1.26 return on a refundable lump-sum tax rebate, according to Moody's. Turns out that the best return on investment lies with the poor, not the rich.


http://www.nextbillion.net/news/investments-at-the-american-bop-produce-results

[Believing Is Art]

1. Meanwhile, Ronald Reagan is spinning in his grave with his middle finger extended n/t

[ColbertWatcher]

2. Now, that's a bumper sticker even the most hardcore GOPer could understand! k+r, n/t

[JeffR]

3. Thanks for posting this.

K & R and hoping everyone will read it.

This part stood out:

"We can and should start to embolden our society through the literal base of all constituencies: the poor and underprivileged. After all, when you build something -- and make no mistake we are nation building right here at home -- you start with the foundation, not the roof."

It should be self-evident to anyone who gives it some thought, but it isn't.

[Oregone]

4. I don't really get the "Poverty is too PROFITABLE to end" line

The Moody study is more about the efficiency of different forms of stimulus spending. Its general thesis is that spending that demands/requires production/consumption (infrastructure, food stamps) generate the most economic stimulus, dollar for dollar. It compares and contrasts this to spending (or revenue cuts from tax reduction) that *hopes* private investors will generate stimulus.

Its a simply concept to understand, no matter what ones political philosophy is.

But I think the line I cited extrapolates too much from the intention/results of the Moody study.

An example of the underlying concept being dealt with is: I (as a teacher) could collect 50 cents from all the children in a classroom, and pool it to buy materials for a party, OR, I can hope each one of them spends it accordingly to make the party great. In the end, knowing best how to allocate the funds and actually ensure they are spent, I would do a much better job getting the most bang for my buck and spreading it out to make the party the best. 30 kids with 15 bucks between them all would do a poor job independently with no organization; they would probably all just buy themselves a gum ball or save for their favorite toy from China. Forced spending from a central authority, in a targeted manner, and in ways that stimulate a long production chain is better than hoping a large independent mass of people spends as wisely guided by the magic mojo of the free market in a time of deficient demand.

[Two Americas]

12. depends

Depends upon whether you are seeing this from the ruling class point of view or the working class point of view.

From the ruling class point of view, yes, this a matter of return on investment - for the investing class.

From the working class point of view, the OP's title is accurate and supported by the Moody study. It is more profitable for those at the top to keep people impoverished.

All depends upon whom the speaker means when they say "we." Many here betray where their sympathies are, with whom they identify, in that way.


...

[Oregone]

14. You really should look at this study from an economic policy point of view,

Rather than a "ruling class" or a "working class" point of view.

I'm not disagreeing that it is profitable to keep people poor. I am disagreeing that that theory has any relevance to the Moody study cited, whatsoever.

Moody points out that government spending in direct, targeted ways that ensure the money will quickly enter the economic system and stimulate long production lines are superior forms of economic stimulus. Beyond that, its unfounded extrapolation.

[Two Americas]

15. that is the ruling class point of view

Seeing this as "an economic policy point of view" that has nothing to do with politics IS the ruling class point of view.

[Oregone]

19. Whatever...

Ive taken a break from Kookyville for a bit. Maybe that helps me call a spade a spade.

[Naturyl]

5. Off to Greatest.

Glad to be rec #5. :)

[leftstreet]

6. Excellent!

snip

The rich and businesses can afford to horde (look at the government pleading with banks now to loosen their coffers). The poor cannot afford to save. They spend. And when they do spend they don't waste. They practice basic consumption, not overconsumption. This is where we must take a look at the fundamental approach at how this country is going to deal with the two biggest crises facing us today: economic change and climate change.

K&R

[Norquist Nemesis]

7. The Rent to Own guys have known this for decades

That's how they made $1500 off $300 TVs.

[ejpoeta]

30. yeah, incredible mark up!! we got a tv, stereo, vcr with a tv stand....

bob had to fix the vcr which was supposedly 'brand new'. We had it for a couple weeks maybe a month. but we did the math and figured it would have cost us $5000 for this set up if we kept it. so we took our tax refund and went to best buy and got a tv, vcr, stereo and an awesome beautiful entertainment center AND a camcorder for $1000. a lot of money for us, but compared to $5000 for used stuff... i don't think there even is a comparison. the only thing rent a center is good for is if you want something temporarily. it was worth it for us to get a small fridge to use while we were staying at a motel. the stay was temporary and we didn't want to buy a new one to keep forever for a temporary situation. but these guys prey on the folks that aren't credit worthy.

[dkf]

8. Which goes back to the principle that this country relies on spending, not on saving.

The poor spend every dollar they have, and that makes them a better bet for a stimulus.

I'm kind of sad they don't save it though.

[Oregone]

10. "that makes them a better bet for a stimulus"

Look, that is not the point at all, whatsoever here.

The point is that issuing a voucher for a specific good/service to *anyone* is a better bet for a stimulus than hoping its magically spent right by a non-homogeneous group of private citizens in a scary economic time. You can give the same type of service/good vouchers to rich people to stimulate production in applicable areas too (which would stimulate long lines of production). After all, the voucher is only government spending once it gets used and requires no additional private market capital to be used (therefore, it reduces any potential for private people to save/ignore the stimulus, or rather, restrict it from entering the market system). Food Stamps are merely the perfect example of a service/good voucher that stimulates the economy, and it just so happens that poor people use them. This does not mean that other such vouchers could not be thought of that would be equally used by middle class and rich alike. It is the inherent value a voucher itself that ensures it will enter the economic system immediately in a manner consistent with the wishes of a central authority.

The point is NOT that it is better to essentially shuttle funds to poor people to spend. Rather, the point is that it is better for the government to dictate exactly how it is spent, wherever they shuttle it, in a manner they judge most effective to stimulating the economy as a whole. A great way to do this is service/good vouchers (Food Stamps). Another great way to dictate spending is infrastructure spending (roads and bridges).

And yes, of course the problem in these times is that deficient demand is caused by all classes (especially investors) to not spend and hoard (due to fear of a negative ROI). And of course the rich are not required, by the pain of life to spend as much. But the type of stimulus being referred to, by nature, is actually designed to combat those problems amongst all classes.

[dkf]

11. Oh, vouchers vs. tax rebates. Yeah that makes complete

sense.

Actually anybody would use a voucher for food, though that would mean they could save the money they usually spend on food.

[Oregone]

13. Well I didn't mean food vouchers for everyone...

I meant other types of vouchers could be thought of. Construction vouchers perhaps (to stimulate jobs for local contractors, lumber yards, mills, tool supplies, the shippers, etc) or other types. Food vouchers also serve a moral purpose too (beyond fiscal stimulus) that helps justify them enough for political viability. Its tougher to justify vouchers for construction for private people, but the reality is, there is an economy to "save", more or less. Ive also seen the area I hinted on, construction, rather addressed with zero interest loans, paid only upon the time of selling the improved property (therefore the money is recouped later from the construction).

And yes, money would be saved if people used service/goods vouchers instead of paying for them. But money is being saved. That is the point of deficient demand. Its a never-ending spiral. People aren't spending their own money so you provide a seed to the economy that generates a larger production chain and injects more money dollar for dollar into the system. Eventually, conditions improve and private spending restarts.

But are you worried about the government giving money to private people while they save their own? Easy answer....increase taxes. I mentioned an example above about a teacher who is better off collecting the money for a party from students and spending it himself, than hoping they spend it on their own. The reality is that in a depression, contrary to popular cliches, it is not a horrible idea to increase taxes. If the government can scoop up the money being hoarded (the money that is not being used, causing a GDP drop), and ensure that it is spent (vouchers and direct spending) to compensate for the GDP decline, it gives the economy a chance to heal. In that scenario, demand is sustained, people retain employment, and everyone gets a paycheck. Eventually, they start spending that paycheck.

Unfortunately, no one wants to grow up and talk seriously about taxes yet. Its still the 3rd grade, and the teacher asking kids for 50 cents will be lynched by the PTA.

[dkf]

16. When people are hoarding because they are scared and the Government decides

to tax it away instead, wouldn't that increase the fear?

Also, higher taxes lessen after tax returns on investment, and the collapse of investment in loans is the reason for the decline in available credit.

Right now the Government is begging hedged funds and private money to invest again. Providing disincentives won't help out in this endeavor.

[Oregone]

18. Any increase in fear, and GDP decline, is compensated by government spending

And eventually, the dog will catch his tail, because how much fear can there really be if the government taxes and spends its way back into an acceptable level of unemployment and ensures everyone is still getting a paycheck from their jobs?

If the investor class has fear, thats irrelevant. The government becomes the investor class. The working class, as long as they have a job, paycheck, and food from government stimulus, will not continue to fear. And when that point it reached, the healing can begin.

Incentives are not enough. Moody points it out clearly. Incentives require private capital (not going to happen) and cooperation. The government begging is pitiful. If they want the job done, they need to do it themselves. That is the sad fact. Providing incentives is among the least effective methods of stimulation according to this study. If you must take incentives away to stimulate in an actually effective way, the math is on your side.

[dkf]

21. Except investor class fear means most people nowadays.

Besides, Government can only spend money on certain parts of the economy. I don't see how it would ever be justified for the Government to spend money on clothes, TVs, cars or much of the stuff where consumption is falling.

[Oregone]

23. The Government doesn't need to spend money on the entire economy

It needs to spend it on the sectors the will impact the most amount of tangential sectors. The government definitely shouldn't spend it on consumer goods, as most are not domestically made (hence, it doesn't stimulate much of a production chain outside shipping an item to the store from a dock).

Rather, the government needs to spend on public works projects that will impact people in many secondary sectors (supplies, trucking/freight, lumber, quarries, steel workers, etc). Such a paycheck derived by the workers can then be used by the private citizens, when comfortable, to spend it on consumer goods (which helps out the economy little anyway). Food spending also stimulates a variety of sectors (farm, processing, packaging, shipping, etc). Green energy spending will also hit many middle class workers in the supporting sectors that produce the technology, research and materials.

Investor fear becomes irrelevant if unemployment drops and people can get money and food on their table. When the investor class is failing (currently, but who would spend in such times?), it requires the government to step in and replace them temporarily. If you can re-establish production and demand, investments will show a positive ROI again and balance can be restored.

You do realize the US did quite well for decades with a 70% top marginal rate, right? Its not the end of the world.

[dkf]

24. Yes, but credit didn't depend on them back then.

I don't see the point in expecting the banking system to lend when it isn't the collapse in bank lending that caused the credit crunch. That was due to collapse in purchases of loans from the banks.

Of course if you don't think the credit crunch is a problem, then we probably aren't going to agree anyway.

I just think Obama is babying the investor class lately because he realizes that Government spending will take too long to trickle to the economy, while making the investor class a little less nervous would let them chill from the spending freeze they are in.

[Oregone]

26. The credit crunch is a problem

But it has some solutions in the mean time. 1) have the government compensate for the GDP drop by injecting an equivelent amount of money into the economy in the form of targeted spending (so the economic activity depending on credit is replaced with government spending), and 2) offer direct-to-consumer credit from the government. Believe it or not, if the government can stimulate the economy, it will make banks more likely to see loans as a positive investment. No matter how much incentive you give banks now, why would they loans when they have massive liabilities (and no liquidity) and current economic conditions don't even appear likely they will get their money back? Obama must address the liquidity issue, but by making it actually profitable for a bank to loan money (by improving the economy), that will help the credit crunch immensely (now we are offering incentives for banks to, as they see it, put their money into black holes). There are so many inter-related concepts here, and one of the main anchors is deficient demand. If you can eliminate that, many sectors repair themselves (the zombie banks, of course, cannot).

Im not sure Obama is doing any such thing as babysitting the investor class. I see him more as playing in the middle of the stream. To afraid to jump into the deep end but not about to wait it out on the shore. Effectively, doing a little more than nothing, and nothing more than little.

[dkf]

27. But don't you see it isn't a collapse in bank lending which is causing the credit crunch?

I swear I read that bank lending is at the same level, but it is all the other sources of funds that have dried up. No auction rate loans, difficulty in the commercial paper market, difficulty floating muni bonds, much more expensive rates for corporate issues (unless its FDIC insured). Everyone is using their lines of credit instead, so that ties up the banks.

Much of that is due to investors being unwilling to tolerate the smallest amount of risk as they flock to Treasuries.

[Oregone]

28. But you don't need investors tolerating risk (and to be honest, I wouldn't expect them to)....

Because the government becomes the investor temporarily. It must improve the economic conditions so the investor class will be comfortable tolerating risk.

Who the hell will open a restaurant in a small town where there are lots of hungry people, but no one with a job to pay for the food? If the government can stimulate the economy, such that those people have a paycheck, it looks much more profitable for an investor.

We are at a point where, in a self-sustaining cycle, where despite what we do to coddle investors, we are stuck in a long-term period of deflation or stagflation. No amount of coaxing, tax cuts, incentives, deregulation, blow jobs, and reach arounds for investors will change that (it is not in their best interests to invest, as they see it). The model I am suggesting (the more liberal model, which was tried in the Great Depression and was the standard economic model until the Regan Abortion), is that occasionally only the government can stimulate production and create demand when there is none.

[Two Americas]

37. no it isn't

I work in agriculture. At the last big farm show, I stopped by the Farm Credit booth and talked with the folks there for a couple of hours. They are not experiencing any crunch, any crisis. That is because finance in farming, since the New Deal, is regulated and supports the producers - the farmers - not the investors and speculators and Wall Street.

Good thing that FDR didn't "play the middle of the stream" and give the investors equal consideration with the producers - the working farmers.

Lincoln spoke about this with great clarity, and all progressive and left wing political thinking ever since has seen the need to place labor over capital, the producers over the investors, the people over profits. This is foundational to any and all politics other than the politics of the extreme right wing.

Here are Lincoln's thoughts:

"Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

It is not needed nor fitting here that a general argument should be made in favor of popular institutions, but there is one point, with its connections, not so hackneyed as most others, to which I ask a brief attention. It is the effort to place capital on an equal footing with, if not above, labor in the structure of government. It is assumed that labor is available only in connection with capital; that nobody labors unless somebody else, owning capital, somehow by the use of it induces him to labor. This assumed, it is next considered whether it is best that capital shall hire laborers, and thus induce them to work by their own consent, or buy them and drive them to it without their consent. Having proceeded so far, it is naturally concluded that all laborers are either hired laborers or what we call slaves. And further, it is assumed that whoever is once a hired laborer is fixed in that condition for life.

Now there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.

Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital producing mutual benefits. The error is in assuming that the whole labor of community exists within that relation. A few men own capital, and that few avoid labor themselves, and with their capital hire or buy another few to labor for them. A large majority belong to neither class——neither work for others nor have others working for them. In most of the Southern States a majority of the whole people of all colors are neither slaves nor masters, while in the Northern a large majority are neither hirers nor hired. Men, with their families——wives, sons, and daughters——work for themselves on their farms, in their houses, and in their shops, taking the whole product to themselves, and asking no favors of capital on the one hand nor of hired laborers or slaves on the other. It is not forgotten that a considerable number of persons mingle their own labor with capital; that is, they labor with their own hands and also buy or hire others to labor for them; but this is only a mixed and not a distinct class. No principle stated is disturbed by the existence of this mixed class.

Annual Message to Congress
Abraham Lincoln
December 3, 1861

http://teachingamericanhistory.org/library/index.asp?document=1064

[Oregone]

38. So, to get this straight, the lack of credit isn't a problem because farming financing is different?

Who knew?!? Hurray farmers!


Who gives a shit about Lincoln's quote? I certainly don't, and its not really applicable to this crisis. We are in a situation where if all the capital is withdrawn from the economic system, there will be no labor. If the owners of the means of production take their ball and go home, there are no jobs for the workers (without a massive systematic revolution). It is now the job of the government to replace the withdraw of private capital with government expenditure. That is the bottom line. Not everything is ran like the farm.

Im not saying this is right or wrong. This is just how it is. The rich own the factories, businesses, and everything else under the sun that employs the poor. If they are closing down shops and saving, there will not be jobs. The government must address that problem (and that is what stimulus bills are for).

[Two Americas]

40. hurray New Deal

It is about eaters, not farmers.

My example is precisely and perfectly applicable to the this crisis, as are Lincoln's thoughts.

You say that "if all the capital is withdrawn there will be no labor." Were any 200 hundred of us here cut off from society completely, we would get to work - labor - and we would prosper - create wealth. One only needs to look at the history of the pioneers and settlers in this country to see the truth of that, not to mention almost all human societies and communities throughout tine v=before the rise of capitalism. That is the opposite position from the position that Lincoln took and to the New Deal, in opposition to organized Labor and to any and all left wing political thought.

The truth is, that when capital leaves people alone they get to work and get more accomplished. That was true in farming, and that is why your access to food has not gone the away of your 401K and your home equity today. Yes, capital - Wall Street and the financial industry - is holding us all hostage right now, but that is no excuse for surrendering.

The right wingers are hammering on your theme now - we must bail out finance or else we will all starve and be out of work. That is extortion. We have had 30 plus years now of this idiotic theory - give to the wealthy and it will trickle down to the rest of us. The public has overwhelmingly and utterly rejected Reaganomics now. It is high time that all who call themselves Democrats do the same.


...

[Oregone]

41. Facepalm....

I'm actually advocating New Deal policies here due to many of the same conditions (deficient demand). Please read:
http://www.google.ca/search?hl=en&rlz=1C1CHMC_enCA305CA305&q=Keynes+and+the+New+Deal&btnG=Search&meta=


"The truth is, that when capital leaves people alone they get to work and get more accomplished"

Ive never seen, nor do I think I ever will, this thesis substantiated anywhere. As capital fled out of Michigan the last few decades, people living there became much less productive (as they were unemployed without opportunities). When jobs are outsourced and factories are shut down across the country, it is not a boon to the people there. As the investor capital leaves, it leaves the workers (who become dependent on this system) out in the cold.


"The right wingers are hammering on your theme now - we must bail out finance or else we will all starve and be out of work."

I doubt any right-winger will touch anything I say with a 10 foot pole (many Friedman, trickle-down based economic theories are diametrically opposed to what I am saying). Further, I have never suggested we bail out finance. I do not think that whatsoever. I think that for every dime the US puts into the banking sector, they should be retaining ownership shares of the banks (which they are doing the opposite of, while they practice lemon socialism).

Rather, I am saying the government should bail out the economy (read "people" if you must) by stimulating it with public works and targeted spending (in form of good/service vouchers, mentioned in the OP). To keep employment stable, the government must compensate for the fleeing of private capital by injecting that amount into the economy to replace it until conditions improve (and private capital returns). You do not give to the wealthy, but rather, you give to the economy, and those doing the labor are paid accordingly (and it trickles around everywhere as it multiplies across tangential sectors).

This is not supply-side economics I am talking about. I am fundamentally opposed to *hoping* the magic of a free market trickles to everyone in these times. Rather, you must inject such money directly into the economy with government spending, and if need be, pry such funds through taxation from the investor class that isn't doing its job (which is accomplished with a higher top marginal rate).

I'm just thinking you clearly haven't read a post Ive made. Confused.

[Two Americas]

43. ok

Your message is not clear to me. If what you are saying here is what you mean, then you should have no problems with anything I said.

I don't know how you can be promoting and supporting New Deal ideas, and be so contemptuously dismissive of the example of regulating finance in agriculture.


...

[Oregone]

44. Im dismissive of you example, because it is an exception, and not the current economic rule

Despite what is happening in the farming sector, this country is being rocked by deficient demand. Your mention of the farming sector was an example of how we aren't being effected, but the country as a whole, is in a stranglehold *now*. That is why I am dismissive, because it is irrelevant to the current general conditions causing this recession.

The unfortunate economic rule of this system is that the rich investor class owns all the means of production and the working (ownerless) class is entirely dependent upon such means to not only generate capital, but to express their labor. Its the unfortunate reality of our current environment. What is happening now, just as what happened during the Great Depression, is that the owner class see a negative ROI in the economic storm, and they are closing down their operations and shifting assets to areas they see as stable or profitable. The result is thousands of stores and factories closing, leaving the working class jobless with no alternatives (other than a systematic revolution, which is not happening). This creates a chain reaction that leads to a self-sustaining cycle of stagflation or deflation and prolonged high unemployment. This is a mechanism referred to at:
http://books.google.ca/books?id=dQD9o31F1N4C&dq=A+General+Theory+of+Employment,+Interest,+and+Money&printsec=frontcover

This book was general used as a guide book during the Great Depression to re-capitalize the nation and stimulate production everywhere through programs such as public works. It is a trickle-up approach that injects money into the lower and middle class by creating demand, until conditions improve such that investments become lucritive again. With this approach, the defunct investor class is replaced temporarily by the government until production is picked up. This approach relies on the government becoming the main driver of the economy to combat deficient demand.

This is what I have been posting here. In addition, I was also pointed out the Moody study wasn't about rich vs poor. It rather points out the efficiencies of Friedman/Supply side economics vs Keynesian economics, and suggests the latter (direct government spending) is more efficient at economic stimulus.

[Two Americas]

45. sorry

Just not following what you are trying to say. You keep repeating the same points over and over again. I don't know that I disagree with you, and I am not sure what you are fighting against.

[Oregone]

47. You don't know why I am arguing?

I stated that the credit crisis is a problem and you replied "no it isn't".

Tell that to the hundreds and thousands of unemployed who would of had jobs if credit still flowed that normally funded the operation they worked at. Credit is restricted and capital is being directed to passive investments like treasury bills.

This is a very big, self-sustaining problem, despite any exceptions. The only solution is do, as they did during the depression, spend, spend, and spend some more in intelligent ways to ensure production increases (which foods stamps for the poor do, just as a construction voucher for the rich would).

Maybe the problem is the entire thread was started on a fleeting and tangential thought that had little to do with the study in question, so what I am stating is a bit obfuscated by the debris.

[Two Americas]

48. I do now

I posted that before I saw another post of yours below.

I am saying that the credit crisis is not the root cause, and is a symptom.

You are arguing the same position over and over again - that capital creates labor and need to be the priority and given more consideration than labor. We do not agree on that.

You are also arguing that we should shoot for the New Deal to get the New Deal. The New Deal could never have happened without there being powerful pressure from Labor and the Left. You cannot start out asking for that which you would settle for. Using the New Deal as a weapon against the Left is self-defeating.


...

[Oregone]

51. Despite it being a symptom, it is contributing to the a problem in itself

And you can address it by direct government to consumer loaning (which is socialistic) and government spending (which it anti-supply side action) to re-inspire investment.


"that capital creates labor and need to be the priority and given more consideration than labor."

In our current economic system, yes, capital creates labor and is needed first for labor to be expressed. But you are wrong, in that you suggest I give it priority. I give stimulating the economy via infrastructure and goods vouchers priority, which firstly addresses labor by creating/sustaining jobs. After you maintain labor, through government stimulus, and only after, will capital return to the economy via the investor class. This is a trickle-up approach, where you ignore the investors and let their activity self correct, after the government intervenes and stimulates production (labor).

"Using the New Deal as a weapon against the Left is self-defeating."

Im not sure what you mean by this...who is using this as a weapon? I am saying, that just as we did during the New Deal, and according the Keynesian economics, we need to stimulate the economy from the ground up directly. You don't "ask" for it. You just start injecting the money via public works programs (like the WPA) and ensuring goods and services are demanded at every level in the economy (by directly paying for them if you have to). There is no weapon here.

[Two Americas]

53. ok

Thanks. We have a misunderstanding here, maybe.

[Two Americas]

17. whose problem?

For whom is the problem "deficient demand?"

The problem for most people is insufficient income.

We could have taken that "stimulus money" and hired all 20 million unemployed people at $50,000 a year. That would revive the economy in a big hurry.

As I said, it all depends upon whether you are looking at this from the top down, or from the bottom up.


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[Oregone]

20. Deficient Demand is a problem for everyone

It causes insufficient income for everyone, which causes more deficient demand, which causes.......a death spiral to the economy. When no one is will to spend money, no money will be generated.

Its a fundamental concept in Keynesian economics.

You address it with direct government spending in areas such as public works.

And no, you could not have magically just hired everyone and revived the economy with a big wand. You actually have to have to people do something, produce something, stimulate more production, etc. Its a bit more complicated than that.

Another problem is looking at it from the bottom or top, rather than from outside.

[Hannah Bell]

22. not complicated. spending = demand.

[Two Americas]

36. complicating it

Of course it is just as complicated as we want to make it.

Yes for long term prosperity we need to be making things, producing.

Of course if we hired all of the unemployed people we would set them to producing something.

Our job is not to do esoteric academic studies on this, it is to develop a coherent and powerful political narrative. This is about what we should be advocating, not about writing a doctoral thesis.

Saying there is insufficient demand is going at the problem backward. There is insufficient income. People still need things - there is still demand in that sense - they just can't afford anything anymore. In a political context, that is a problem of wages not demand.

The right wingers are saying that if people would just get happy and positive and start spending that the economy would be just fine. The people are suffering - that is the problem. The well being of the working people is the proper measurement of how the economy is doing, not the well being of the investors.

You make some good points, and I don't have any serious disagreements with what you are saying. I just want to make sure that once in a long while some sort of vaguely left wing point of view at least gets included in the discussion.


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[Oregone]

39. "Our job is not to do esoteric academic studies on this, it is to develop a coherent and powerful"

I think it is to do just the opposite. Fuck the pretty political language and figure out how to actually fix things. People have studied this at great lengths. Now is the time to brush the dust off our Keynes books and get to work. Now is not the time to just spout out flowery "powerful political narrative" to magically fix things.

By the way, in current times, what I am talking about is a left wing point of view. I am advocating a liberal economic approach to this crisis. That being, using a central authority to stimulate the economy (and in fact, tax progressively upon the defunct investor class to fund it). This will provide relief for those suffering. But you do not act in this manner with senses of morality guiding your hand. Rather, you act with sense. The positive spending types in paper that Moody suggests have the side-effect of helping the poor. But their main intention is to help the economy. If you want to help the poor, right now you need to ensure they have a positive environment to work and grow in.

[Two Americas]

46. we disagree

We disagree profoundly in a few areas: the value of advocacy, the best approach for reaching the goals of advancing the interests of the working class, and the nature of politics.

Yes, you are advocating "a liberal economic approach" - and at this point, you are doing that in opposition to the Left. We will be seeing a lot of that in the coming days. Many Democrats are fighting a desperate rear guard action as things move to the Left, afraid that things will go too far to the Left. We will work together, or not. we will reach understanding, or we will not. I don't hope to convert you to socialism, but rather merely to get you to not see us as the enemy or to misrepresent us.


...

[Oregone]

49. "you are doing that in opposition to the Left"

I really think you are clueless on this here. I don't oppose the left. I am speaking from it, as this economic theory supports it. I am advocating, as supported by the Moody study, direct government spending/programs/vouchers to stimulate the economy. I think that, where applicable, the government should own every program it starts, and every business it must bail out. In other words, when the government owns the means of production, that is, by definition, socialism.

"I don't hope to convert you to socialism, but rather merely to get you to not see us as the enemy or to misrepresent us."

Ive got to be the biggest mixed-market American proponent I know. I believe so much in the value of socialism (among other reasons), I moved to Canada to get away from the free-market lunacy of the United States (among other forms of lunacy). I don't see socialism as the enemy (nor the ultimate solution); the only enemy I fight against is ignorance.

[Two Americas]

50. ok

Well I am confused again, then, as to what you are arguing about.

[Oregone]

52. I guess in this sub-thread Im arguing that Im not some right-wing, free-marketer enemy of the left.

Which I think you are accusing me of being. I don't think there is a damn thing Ive said along those lines. My entire approach couldn't be more from a Keynesian point of view. I go further to want the government to own any enterprise it must create while it does that (socialism). Im just trying to be sensible and see the Moody study as an economic study, not a dogmatic manifesto.

The problem is this entire thread was started because someone mis-interpreted the study and I pointed it out. Its not that I disagree with their premise (I agree the poor spend more of what they have), but I disagree as to why that makes food stamps effective. Any targeted voucher at any class would be an effective stimulus (and is an anti-free market approach). You can give vouchers to the rich for things they may not be doing (like home renovations), and they would be equally effective (though in that case, the government should retain a share of the improvement). This thread discounted the "value" of a goods/service voucher and attributed to the fact that poor people spend more. The value is that this money will be spent regardless on FOOD (only) because it is pre-paid and has no value in saving it like currency.

That makes the whole poverty is profitable line a bit out of place considering this study. I don't disagree with that line, its just sort of tangential and contrived.

[Two Americas]

54. sorry

Don't mean to be making accusations.

[Hello_Kitty]

25. I agree with you, and this is why my crazy stimulus idea is to give food stamps to everyone

No means testing. Give every single American a monthly stipend that they can only spend on food. It would immediately be felt in the economy, since food production is still largely domestic, and it would ease a large percentage of the average American's living expenses. It's a win-win, actually. People would use the food stamps/allowance/coupons/whatever method of delivery to buy food and would actually have money leftover at the end of the month to save or buy discretionary items.

[Lyric]

33. Do you mean on top of what poor people already get?

Let's say the government issues Food Stamps to everyone--no means-testing--of $100 a month. Will the poor get $100 *more* than what they are already struggling to live on?

If so, then I'd be all for it. If not, then no way, because that would amount to a giveaway to those who don't have as much *need* with no increased compensation for the neediest of all. We're all willing to accept SOME level of "unfair," but not to THAT level.

Other considerations: homeless people often can't get Food Stamps because they don't have an address. How would we distribute the Food Stamp stipend to them? What about people who are currently under "sanction" because they broke one of the gajillion Food Stamp program red-tape "rules:" would they get the stipend too?

These are all things I'd want to know more about before supporting a plan like this. I'm all for saving the economy, but not if the middle and upper classes are the only ones we save. Contrary to popular belief, increasing the standard of living for the middle class does NOT automatically increase the standard of living for the poorer class. If you start handing out Food Stamps to McMansion dwellers while coal miners and their kids are surviving on ramen and rice, you're going to increase class hostility to the point of violence, robbery, and property damage committed by resentful and enraged working-class people. Having to pay to replace shop windows, cars, and to repair home and business damage caused by rioting would pretty much completely negate any financial "benefit" that the middle class would have otherwise had.

[Oregone]

42. The problem is, that would make the mob angry

:)

Another great idea that my old county did (in Oregon, liberal county) is offered zero interest home improvement loans. It was only for those in need, but this idea could work for the entire country.

They handed out $10 K for people to do insulation, roofing, windows, stoves, siding, etc (that sort of stuff which was needed). The people would of course get estimates and contracts so the work had to be done (paid for directly by the county). So it was essentially a repayable service voucher that could be used immediately and required to capital up front (like a food stamp with a few more hoops). For the homeowner, they improve their property value and get needed improvements for living. For the county, the improve the property values in the area and tax revenue. They also get their money back when the home sells or if the owner feels like paying it off early. So the county lost nothing on it, and the homeowner gains quite a bit. Further, economically, it stimulates construction.

I had a friend who was an employee of the contracting company he got to work on his home. He got paid by the county to improve his own property, in the end. But work was performed, values rose, he ends up paying more taxes, the economy was stimulated, everyone wins. Eventually he will pay that loan off when the property sells.

Giving programs that allow people to get goods and services immediately (without putting their own money up, which they may not have) is a great way to stimulate the economy in targeted ways. Yes, its always tough to justify it to the mob though who may not see the bigger picture (which is, the better the economy gets, the less hungry they get).

[earcandle]

9. buying food stamps can't be considered an uplifting event

for one coming into or out of poverty, nor does buying them change the life of the poor.

This sounds like speculating to keep people in unemployment and foodstamps.

Social Pyramid?



I''ll be listening to the radio.


"everybody's got to live, and everybody's gonna die"

good night.

[Wednesdays]

31. You'll be listening to the radio?

Which talking head are you going to turn to, Rush or Glen Beck?

:shrug:

[ejpoeta]

29. well when you don't have two nickels to rub together.... then any extra

simply must be spent. when we were at our poorest, things were pretty bad. mostly because my husband made 40k in wages, which after his expenses turned into 8k. imagine living on 8k for the year!! with a small child in the house!!! but when you go to try to get help they want to look at the 40k for your income which would make you over the limit for any help. but my husband had to drive his own vehicle all over western new york an the southern tier right almost to pennsylvania on his own dime. any money we got went right back out the door. we were behind in our bills and couldn't even afford the gas for two weeks for him to work. it was insane!! he would do things like junk vehicles and things like that to get extra money. everything went right out the door. any money we got back in tax refund paid bills to get us caught up again. it was crazy. poor folks don't have even the expectation of saving money. you don't have enough to even pay the bills and feed yourself... that's good for the company. as long as you are just short of breaking even every week, they've got you. and how.

[ShortnFiery]

32. There's soon going to be ONLY two classes of people 1) Filthy-Stinking Rich; & 2) Poverty Pyramid.

[asteroid2003QQ47]

34. The Uses of Poverty: The Poor Pay All--Herbert J. Gans

Everyone on the bottom rung of the ladder would better understand their plight if they became familiar with Gan's work.
--------------------------
http://www.clas.ufl.edu/users/che725/teaching/poorpayall.htm
. . . >
from the observation that the poor are always present in society he concludes that this is because they perform vital services (functions) for society. (An essential assumption of functionalism, one of the theoretical schools in sociology, is that conditions persist in society only if they benefit—perform functions for—society or some of its parts.)
<.>
Sociologists have documented that the poor confront social conditions so damaging that their marriages are more likely to break up, they are sicker than others, their children are more likely to drop out of school and get in trouble with the law, they are more likely to be victimized by crime, and, on average, they die younger than most.
<>
(An essential assumption of functionalism, one of the theoretical schools in sociology, is that conditions persist in society only if they benefit—perform functions for—society or some of its parts.)
< . . .
. . . poverty and the poor may well satisfy a number of positive functions for many nonpoor groups in American society. I shall describe 13 such functions—economic, social, and political—that seem to me most significant.

FIRST, the existence of poverty ensures that society's "dirty work" will be done. Every society has such work: physically dirty or dangerous, temporary, deadend and underpaid, undignified, and menial jobs. Society can fill these jobs by . . .

SECOND, because the poor are required to work at low wages, they subsidize a variety of economic activities that benefit the affluent. For example, domestics subsidize the upper-middle and upper classes, making life easier for their employers and freeing affluent women for a variety of professional, cultural, civic, and partying activities. Similarly, because the poor pay . . .

THIRD, poverty creates jobs for a number of occupations and professions that serve or "service" the poor, or protect the rest of society from them. As already noted, penology would be minuscule without the poor, as would . . .

FOURTH, the poor buy goods others do not want and thus prolong the economic usefulness of such goods—day-old bread, fruit and vegetables that would otherwise have to be thrown out, secondhand clothes, and deteriorating . . .
<>
They also provide incomes for doctors, lawyers, teachers, and others who are too old, poorly trained, or incompetent to attract more affluent clients.

FIFTH, the poor can be identified and punished as alleged or real deviants in order to uphold the legitimacy of conventional norms. To justify the desirability of hard work, thrift, honesty, and monogamy, for example, the defenders of these norms must be able to find people who can be accused of being lazy, spendthrift, dishonest, and promiscuous. Although there is some evidence . . .

SIXTH, and conversely, the poor offer vicarious participation to the rest of the population in the uninhibited sexual, alcoholic, and narcotic behavior in which they are alleged to participate and which, being freed from the constraints of affluence, they are often thought to enjoy more than the middle . . .
<>
. . . whether the poor actually have more sex and enjoy it more is irrelevant; so long as middle-class people believe this to be true, they can participate in it vicariously when instances are reported in factual or fictional form.

SEVENTH, the poor also serve a direct cultural function when culture created by or for them is adopted by the more affluent. The rich often collect artifacts from extinct folk cultures of poor people; and almost all Americans listen to the blues, Negro spirituals, and . . .

EIGHTH, poverty helps to guarantee the status of those who are not poor. In every hierarchical society someone has to be at the bottom; . . .

NINTH, the poor also aid the upward mobility of groups just above them in the class hierarchy. Thus a goodly number of Americans have entered the middle class through the profits earned from the provision of goods and services in the slums . . .

TENTH, the poor help to keep the aristocracy busy, thus justifying its continued existence. "Society" uses the poor as clients of settlement houses and beneficiaries of charity . . .

ELEVENTH, the poor, being powerless, can be made to absorb the costs of change and growth in American society. During the nineteenth century, they did the backbreaking work that built the cities; today, they are pushed out of their neighborhoods to make room for "progress." Urban renewal projects to hold middle-class taxpayers in the city and expressways to enable suburbanites to commute downtown have typically been located in poor neighborhoods,
since no . . .
<>
The major costs of the industrialization of agriculture have been borne by the poor, who are pushed off the land without recompense; and they have paid a large share of the human cost of the growth of American power overseas, for they have provided many of the foot soldiers for Vietnam and . . .

TWELFTH, the poor facilitate and stabilize the American political process. Because they vote and participate in politics less than other groups, the political system is often free to ignore . . .

THIRTEENTH, the role of the poor in upholding conventional norms
<>
. . . socialist alternatives can be made to look quite unattractive if those who will benefit most from them can be described as lazy, spendthrift, dishonest, and promiscuous.

The Alternatives

I have described 13 of the more important functions that poverty and the poor satisfy in American society, enough to support the functionalist thesis that poverty, like any other social phenomenon, survives in part because it is useful to society or some of its parts. This analysis is not intended to suggest that because it is often functional, poverty should exist, or that it must exist. For one thing, poverty has many more dysfunctions than functions; for another, it is possible to suggest functional alternatives.

For example . . .

[undergroundpanther]

35. Damn good post

I will look into Gan's work.

The most obvious thing that is overlooked about our society is it's destructive social hierarchy based belief systems...
Hierarchy comes at a cost,always to those lower and more to lowest in the social hierarchy,the ones of least means pay for a few to live like kings.And for this reason I HATE hierarchies.

For some to have it all,many must go without any at all.

For some to dominate others they must be taught to believe they are entitled to take anything they want away from others and demand others do what the dominator's demand or else(bullies).

To endure being dominated and taken from for their whole life the people must be taught to submit to people higher up in the social hierarchy and there are many means to 'break people'.( some get broken as children)and the submissive people have to believe their bad lot in life is all they will ever achieve.The ruling classes does everything it can to foster that belief in the poor on a psycho-social and emotional level.

Social hierarchy is a wildly tolerated and arbitrary form of evil.