Socialist Jesus

KEEPER: Biblical vs. Deistic Economics

Scot McKnight point us to this article...

Biblical vs. Deistic Economics

I’m not sure I’d push this onto deism; but what David Dunn says in response to Dave Ramsey is worth consideration and conversation. Much of what Dunn says here was said years back by Ron Sider. The issue even for a Christian libertarian, as I see it, is two-fold: (1) all that we have is not “mine!” but “God’s” and what God has given us, and (2) the fundamental idea of taxation, which runs right through Israel’s laws, is not theft by the government but support for the people.

I’m for a good solid reading of the Bible, but one has to be careful about thinking levitical laws are for today; one has to see what the law was driving at (care for the marginalized); one has to think these things into the NT teachings and the radical attitude of Jesus and the early church toward possessions and even property; and one has to baptize it all into changing times, including a vastly different economy in our world, and how best to live this out in our world. Yet, even after all those moves have been made … well, there’s too much to say here. Here’s Dunn’s response to Ramsey.

Even though the Christian financial “guru” Dave Ramsey claims not to understand Occupy Wall Street, he does know why protesters (and by extension most Americans) want to raise taxes on the wealthy: We are sinners. “At the core of this demand [to raise taxes],” he says, “is envy.”
This judgment is not just offensive and wrong (see my last post) but sadly ironic: Dave Ramsey tells people to bring the Bible to their personal finances, so he should know that God’s economy is all about (what he scornfully calls) “wealth redistribution.”
Being a theologian, I could talk about how sharing in the life of the Trinity obligates us to share our lives with others, but another excuse to “spiritualize” our wallets is the last thing we need. I am also tempted to “tear apart” Ramsey’s caricature of the “Occupy” movement (it may truly be one of the finest examples of a “straw man fallacy” I have ever seen). But I respect Dave Ramsey as a fellow Christian and a person who has helped free thousands of families from crushing debt. (He does “God’s work.”) Therefore I will focus on the practical, theological root of his economic “heresy.”…

If we are truly the possessions of a loving God (Leviticus 25:23), then rights must be regulated by needs. In contrast to the deistic view Leviticus 25 (the closest thing the Bible offers to a clear economic “policy”) presents a more “open” theology of people and property. That is why this chapter gives more rights to the poor than the rich, saying that a person who falls into poverty, and sells his property to survive, has the right to buy it back at any time (with some exceptions). Or a relative may but it back for him.

This “policy” does not exactly qualify as what Ramsey calls “theft” (yet) but it does not support his deistic concept of exclusionary property, either. If Ramsey says nobody has a right to take his “stuff,” then I assume he believes nobody has a right to make him sellit, either. Though he agrees that everything we have comes from God, which is why he rightly stresses private giving, he sadly fails to let that belief get in the way of his laissez faire economics. Otherwise he might not be so quick to condemn progressive tax reform.
What Ramsey calls “wealth redistribution” the Bible calls “Jubilee.”

Ramsey says, “When someone takes my money and gives me no say in the matter, that’s called theft — whether they’re using a gun or the government.” Though this statement begs the question and shows a desperate need to Google “social contract,” it is most troublesome because of its exclusionary theology of property. Or as toddlers say, “Mine!” This doctrine does not come from Ramsey’s Christian faith.
Exclusionary property rights require Deism.

For the Department of "Do as I say, not as I do" files

Just read this over on Naked Capitalism:

Friedrich Hayek Joins Ayn Rand as a Hypocritical User of Medicare

We’ve been a bit hard on the left of late, so we figured we’d take some steps to balance our programming. Mark Ames, who has been doggedly on the trail of the Koch brothers, found a delicious failure to live up to his oft-repeated standard of conduct by a god in the libertarian pantheon, Friedrich Hayek. And this fall from grace was encouraged one of the chief promoters of extreme right wing ideas in the US, Charles Koch.

Bear in mind that Charles Koch has not merely promoted libertarian ideas generally but in particular founded the Cato Institute, which has done more than any other single organization to wage war on Social Security. Koch wanted Hayek to come to the US in 1973 to become a “distinguished senior scholar” at the Institute for Human Studies, which Koch quickly made into a libertarian citadel. Hayek initially turned the opportunity down, saying he had just had an operation, which made him particularly aware of the dangers of falling ill abroad. Austria had close to universal health care; Hayek’s comment strongly suggests he took advantage of it.

Per Yasha Levine and Ames in the Nation:

IHS vice president George Pearson (who later became a top Koch Industries executive) responded three weeks later, conceding that it was all but impossible to arrange affordable private medical insurance for Hayek in the United States. However, thanks to research by Yale Brozen, a libertarian economist at the University of Chicago, Pearson happily reported that “social security was passed at the University of Chicago while you [Hayek] were there in 1951. You had an option of being in the program. If you so elected at that time, you may be entitled to coverage now.”

A few weeks later, the institute reported the good news: Professor Hayek had indeed opted into Social Security while he was teaching at Chicago and had paid into the program for ten years. He was eligible for benefits. On August 10, 1973, Koch wrote a letter appealing to Hayek to accept a shorter stay at the IHS, hard-selling Hayek on Social Security’s retirement benefits, which Koch encouraged Hayek to draw on even outside America.

                (go here to see a copy of Charles Koch's letter  to Friedrich Hayak)

This should put Hayek in some sort of libertariam circle of hell, along with Ayn Rand, who took Medicare and Social Security payments when she was diagnosed with lung cancer.

To quote Blue Texan at FireDogLake:

And before any glibertarians come back with “but…but…she paid into it so there’s no hypocrisy” in comments, Rand herself wrote,

There can be no compromise on basic principles. There can be no compromise on moral issues. There can be no compromise on matters of knowledge, of truth, of rational conviction.

Adding an extra layer of crow to the deliciousness, the Ayn Rand Center for the Center for F*ck You I Got Mine Individual Rights has an article on its website right now titled, “Social Security is Immoral“.

Five Facts about the Wealthiest 1%

5 Facts You Should Know About the Wealthiest One Percent of Americans

1. The Top 1 Percent of Americans Owns 40 Percent of the Nation’s Wealth
2. The Top 1 Percent of Americans Take Home 24 Percent of National Income
3. The Top 1 Percent Of Americans Own Half of the Country’s Stocks, Bonds and Mutual Funds
4. The Top 1 Percent Of Americans Have Only 5 Percent of the Nation’s Personal Debt
5. The Top 1 Percent are Taking In More of the Nation’s Income Than at Any Other Time Since the 1920s

(see the article for helpful charts) 

Is Social Security a Ponzi Scheme?

 This, from The Economist, shows why it isn't. 

Social Security: A monstrous truth

Sep 9th 2011, 18:22 by M.S.

NO PONZI scheme in the history of the world has ever lasted 75 years. Ponzi schemes depend on garnering an ever-increasing pool of new investors to pay out returns to prior investors. When the potential pool of new investors runs dry, they collapse. This will occur when the scheme runs up against the natural limits of its recruitment strategy; in the ultimate case, it can't keep going past the point where the entire population is already subscribed.

This should provide us with a hint as to why, as Kevin Drum writes (rebutting Shikha Dalmia), Social Security is not a Ponzi scheme. The entire population of working Americans has already been subscribed to Social Security for decades, yet the system continues to pay out benefits on time. That is because the actuarial calculations underlying its revenues and benefits are sound. Rick Perry may consider Social Security "a monstrous lie", but my parents and one surviving grandparent keep getting checks in the mail, year after year. Social Security does face a shortfall in the coming decades, because of the population bulge of retiring baby boomers. Those costs are limited and, measured as a percentage of GDP, will flatten out. They can be absorbed through a modest, gradual increase in Social Security taxes and modest reductions in benefits for wealthier recipients. As my colleague notes, this is what a graph of Social Security's finances looks like:

This, meanwhile, is what a graph of a Ponzi scheme's finances looks like:

The difference is clear.

If you wanted to call Social Security an investment, you would say it is a play on the proposition that America's GDP will continue to grow over the long term. This is the safest play one can imagine making, which is why the returns are so modest. Like any investment, it could go bad. But if it goes bad, if the economy of the United States ceases to grow over the long term, it is inconceivable that any other investment large enough to feed a pension plan covering the entire working population could do better.

My colleague's partial defence of Rick Perry's attacks on Social Security construes them not as a call to scrap the system, but as a warning about its long-term problems. "Mr Perry is targeting Social Security because the current system taxes workers under an explicit commitment to provide described benefits that, as it stands, it cannot meet," she writes. If Mr Perry were in fact calling for limited changes to ensure Social Security can meet promised benefits past 2036, that would be fine. I disagree that this is what he's doing. You don't call something a "monstrous lie" when you want to tinker with it. What Mr Perry is doing is part of a consistent decades-long habit across much of the conservative right of attacking the foundations of Social Security. Up until about 2007, the goal of such attacks was clear: conservatives wanted to replace it with a Chilean-style defined-contribution plan that would be invested in securities. Within its own assumptions, that programme did at least make sense; but since the financial crisis, and with average returns from Wall Street now sharply negative over an entire decade, both the logic and the political support for any such programme have evaporated. If Mr Perry is no longer arguing for the dubious concept of turning Social Security over to the states, then it's not clear what he proposes as an alternative to the current system. The Washington Post's Jennifer Rubin, generally a reliable voice for mainstream Republican views, has had no luck getting Mr Perry to clarify what he thinks, and warns that he "can’t afford to offer half-baked ideas and allow his past, troublesome statements to float around."

Perhaps opposition to Social Security has become a runaway train, a rhetorical and intellectual commitment too strong to give up even after it has lost its connection to an actual policy programme. But the effect of continued inaccurate attacks on the foundations of Social Security is to deepen most people's confusion about the actual soundness of the concept, and to reinforce young people's scepticism that they will ever benefit from it. I've been hearing such scepticism from my own cohort for almost 20 years now. It doesn't make any sense. If my generation does in fact fail to receive our Social Security checks, it will only be because we inexplicably decided to vote ourselves out of them.

My grandmother cast her first presidential vote for FDR, in 1936. He had passed the Social Security Act one year earlier. She began receiving Social Security checks in the year Jimmy Carter was elected president. She turns 100 in December, and the checks are still coming in. She has since been joined on the rolls by her two daughters. There is every reason to believe that their children, who have been paying taxes into the Social Security system for decades now, will also enjoy its benefits when they retire. Unless, of course, conservative politicians succeed in convincing working Americans that the whole thing is a "monstrous lie".

Seasteading: Government as Industry, Citizens as Customers.

Here's how Wikipedia describes "seasteading:"

The Seasteading Institute, founded by Wayne Gramlich and Patri Friedman on April 15, 2008, is an organization formed to facilitate the establishment of autonomous, mobile communities on seaborne platforms operating in international waters. Gramlich’s 1998 article "SeaSteading – Homesteading on the High Seas" outlined the notion of affordable steading, and attracted the attention of Friedman with his proposal for a small-scale project. The two began working together and posted their first collaborative book online in 2001, which explored aspects of seasteading from waste disposal to flags of convenience.

The project picked up mainstream exposure in 2008 after having been brought to the attention of PayPal founder Peter Thiel, who invested $500,000 in the institute and has since spoken out on behalf of its viability, most recently in his essay "The Education of a Libertarian," published online by Cato Unbound. TSI has received widespread and diverse media attention, from sources such as CNN, Wired Magazine, and Prospect Magazine. American journalist and commentator John Stossel wrote an article about seasteading and the Seasteading Institute in February of 2011 and invited Patri Friedman onto his show on the Fox Business Network.

"Let's forget about left and right...and instead, put our entrepreneur hats on. Let's think of government as an industry, where countries are firms and citizens are customers. Now this is not just any industry, this is the world's BIGGEST industry.....a start up country could be the world's first trillion-dollar business....What we need is a new frontier, an open space for political experiments, and the next frontier is the ocean."
-- Patri Friedman, grandson of Milton Friedman,  The Seasteading Institute

I think this is a splendid idea for all those libertarians who want freedom from territorial government. I hope the Cato Institute finds a nice oil rig out in the middle of the brine and settles in. Can't you just see it now?

"I pledge allegiance to the flag, and to the United Corporation of the Pacific for which it stands, one seastead under Rand, voluntarily joined, with liberty and profit for each shareholder."

Choose this day whom you will serve: Ayn Rand or.Jesus?

Christians Must Choose: Ayn Rand or Jesus

GOP leaders and conservative pundits have brought upon themselves a crisis of values. Many who for years have been the loudest voices invoking the language of faith and moral values are now praising the atheist philosopher Ayn Rand whose teachings stand in direct contradiction to the Bible. Rand advocates a law of selfishness over love and commands her followers to think only of themselves, not others. She said her followers had to choose between Jesus and her teachings.

GOP leaders want to argue that they are defending Christian principles. But, at the same time, Rep. Paul Ryan (author of the GOP budget) is posting facebook videos praising Rand’s morality and saying hers is the “kind of thinking that is sorely needed right now.” Simply put, Paul Ryan can’t have it both ways, and neither can Christians. As conservative evangelical icon Chuck Colson recently stated, Christians can not support Rand’s philosophy and Christ’s teachings. The choice is simple: Ayn Rand or Jesus Christ. We must choose one and forsake the other.

Look here for the links below:

Ayn Rand: The GOP’s Favorite Bonkers Demagogue- The Daily Beast

Is Ayn Rand A Political Liability?- The New Republic

Heightening The Republican Contradictions- The Daily Beast

Paul Ryan’s Ayn Rand Problem- Time

Budget Battle Pits Atheist Ayn Rand vs. Jesus- Religion News Service

Column: You can’t reconcile Ayn Rand and Jesus- USA Today

Letters: We have strayed too far from Christian values- East Valley Tribune

Ayn Rand, the GOP and Libertarian’s Foundation, and Jesus- Unsettled Christianity

The GOP Must Decide: Ayn Rand or Jesus- Huffington Post

Choosing Ayn Rand or Jesus- The American Spectator

Must Christian Voters Choose Between Ayn Rand and Jesus?- The Atlantic

Ayn Rand ‘Atheists’ vs. Liberal Christians; A Battle of Dogma- The Examiner

Rand Paul, other Republicans can’t have it both ways on Ayn Rand – Courier-Journal

Ayn Rand: The GOP’s Godless Philospher – Time

Billion-Dollar-o-Gram

David McCandless,at his website, Information is Beautiful, presents"The Billion-Dollar-o-Gram."

Did you know that the U.S. defense budget is equal to more than four times the combined amount of China, the U.K., India and Saudi Arabia budgets? Did you guess that amount is only about a quarter of the Afghanistan/Iraq wars' total estimated cost?  Compare BP's revenue to the fine they were assessed for their "mishap" in the Gulf. Finally, compare the worldwide cost of the financial crisis to everything else.

P.S. Don't miss Color in Culture

Meditation for Good Friday: Invisible Hands Don't Bleed

Adam Smith wrote about the invisible hand of the market, created by the conjunction of the forces of self-interest, competition, and supply and demand.  However, some Christians seem to view the invisible hand as the very hand of God.  Others are idolatrous in a different way: they worship the invisible hand instead of God, trusting it to miraculously produce a better world for all. Jim Wallis' comments at the 2009 World Economic Forum in Davos are as relevant today as they were then:

We have trusted in “the invisible hand” to make everything turn out all right, believing that it wasn’t necessary for us to bring virtue to bear on our decisions. But things haven’t turned out all right and the invisible hand has let go of some things, such as “the common good.” The common good hasn’t been very common in our economic decision-making for some time now. And things have spun out of control....


...Gandhi’s seven deadly social sins seem an accurate diagnosis for some of the causes of this crisis:  “politics without principle, wealth without work, commerce without morality, pleasure without conscience, education without character, science without humanity, and worship without sacrifice.”

On Friday, we will remember the Lamb of God, who was not an invisible hand, but the very Word and Image of God, incarnate.  He took on the sins of individuals, and societies, sacrificing Himself to redeem us, and forgiving us for trusting and worshipping false gods. An invisible hand doesn't itself bleed; it  bleeds others. However, Christ's hands bled, bled for our greed and pride and envy.

After His resurrection, his hands still bore the marks of that sacrifice. He invites us to be transformed: to replace our self-interest with love for God and neighbor; to quit competing and find agreement and cooperation through His Spirit; to trust him to supply our needs.

When I survey the wondrous cross

On which the Prince of glory died,

My richest gain I count but loss,

And pour contempt on all my pride.

Forbid it, Lord, that I should boast,

Save in the death of Christ my God!

All the vain things that charm me most,

I sacrifice them to His blood.

See from His head, His hands, His feet,

Sorrow and love flow mingled down!

Did e’er such love and sorrow meet,

Or thorns compose so rich a crown?

His dying crimson, like a robe,

Spreads o’er His body on the tree;

Then I am dead to all the globe,

And all the globe is dead to me.

Were the whole realm of nature mine,

That were a present far too small;

Love so amazing, so divine,

Demands my soul, my life, my all.

Americans see Christianity, capitalism clash

By Nicole Neroulias

Are Christianity and capitalism a marriage made in heaven, as some conservatives believe, or more of a strained relationship in need of some serious couples' counseling?

A new poll released Thursday found that more Americans (44 %) see the free market system at odds with Christian values than those who don't (36 %), whether they are white evangelicals, mainline Protestants, Catholics or minority Christians.

But in other demographic breakdowns, several categories lean the other way: Republicans and Tea Party members, college graduates and members of high-income households view the systems as more compatible than not.

The poll, conducted by Public Religion Research Institute in partnership with Religion News Service, found that although conservative Christians and evangelicals tend to want their clergy to speak out on issues like abortion and homosexuality, they also tend to hold left-of-center views on some economic issues.

"Throughout the Bible, we see numerous passages about being our brother's keeper, welcoming the stranger, feeding the hungry, clothing the naked, and healing the sick," said Andrew Walsh, author of Religion, Economics and Public Policy and a religion professor at Culver-Stockton College.

"The idea that we are autonomous individuals competing for limited resources without concern for the welfare of others is a philosophy that is totally alien to the Bible, and in my view, antithetical to genuine Christianity."

The findings add a new wrinkle to national debates over the size and role of government, and raise questions about the impact of the Tea Party's cut-the-budget pressure on the GOP and its traditional base of religious conservatives.

The poll found stronger religious distinctions over the question of businesses acting ethically without government regulation, and whether faith leaders should speak out about economic concerns such as the budget deficit and the minimum wage.

White evangelicals (44 %) are more likely than other Christians or the general population to believe that unregulated businesses would still behave ethically, and they place a higher priority on religious leaders speaking out about social issues over economic concerns.

Minority Christians, in contrast, believe clergy should be vocal about both areas — particularly on the economic issue of home foreclosures, which 76 % considered important, compared to 46 % of the general population.

"Minority Christians have a deep theological tradition of connecting faith and economic justice, and we see that link in the survey," said Robert P. Jones, CEO of Public Religion Research Institute. "Because minorities in the U.S. generally continue to have lower incomes than whites, economic issues are also more salient in these congregations."

In other findings:

•Half of women believe that capitalism and Christian values are at odds, compared to 37 % of men.

•A majority (53 %) of Democrats believe capitalism and Christian values are at odds, compared to 37 % of Republicans and 41 % of independents. A majority (56 %) of Tea Party members say capitalism is consistent with Christian values.

•Nearly half (46 %) of Americans with household incomes of $100,000 a year or more believe that capitalism is consistent with Christian values, compared to just 23 % of those with household incomes of $30,000 a year or less.

• Most Americans (61 %) disagree that businesses would act ethically on their own without regulation from the government. White evangelicals (44 %) are more likely than Catholics (36 %), white mainline (33 %) or minority Christians (34 %) to say unregulated businesses would act ethically.

"The most idolatrous claim of the Christian right is that the invisible hand of the free market ... is none other than the hand of God," Walsh said, "and any attempt to regulate the free market, according to this theology, belies a lack of faith in God."


The Rev. Jennifer Butler, executive director of the Washington-based group Faith in Public Life, said the fact that religious values seem to trump political or class differences can help groups like hers advocate for the poor.

And in ongoing debates in Washington over the budget and cuts to domestic spending, that means "making the wealthiest Americans and corporations pay their fair share in taxes" she said.

"People of faith have a unique ability to show political leaders that the economy is a moral issue," she said. "Even some members of Congress are beginning to echo our argument that protecting the most vulnerable as we get out of debt is a moral duty."

The PRRI/RNS Religion News Poll was based on telephone interviews of 1,010 U.S. adults between April 14 and 17. The poll has a margin of error of plus or minus 3 percentage points.

Income Inequality: Towards a Banana Republic?

Slate has an important series about income inequality in the U.S.  If you go to the article, you can launch a helpful slide show that gives a visual guide to this matter.

What will the Great Divergence mean for the Church? What sort of virtues will we need as Christians to meet this challenge? Is it a matter of justice for Christians to work for income equality? Or should we accept it and direct our energies toward ministering to individuals? Do any of the popular finance programs evangelicals host address the connection between income inequality and consumer debt?

From the first installment in the series:

...[In 1915, ] the richest 1 percent accounted for 18 percent of the nation's income. Today, the richest 1 percent account for 24 percent of the nation's income. What caused this to happen? ...
Income inequality in the United States has not worsened steadily since 1915. It dropped a bit in the late teens, then started climbing again in the 1920s, reaching its peak just before the 1929 crash. The trend then reversed itself. Incomes started to become more equal in the 1930s and then became dramatically more equal in the 1940s. (During the 1930s the richest 1 percent’s share of the nation’s income dropped. Overall, the income-equality trend of the Great Depression was somewhat equivocal. On the one hand, the rich lost income. On the other hand, middle-class incomes stagnated and a high level of unemployment (which peaked at 25 percent) hit those at the bottom of the income scale especially hard. I note all this to emphasize that it is neither necessary nor desirable to achieve equality through economic catastrophe.)  Income distribution remained roughly stable through the postwar economic boom of the 1950s and 1960s. Economic historians Claudia Goldin and Robert Margo have termed this midcentury era the "Great Compression." The deep nostalgia for that period felt by the World War II generation­the era of Life magazine and the bowling league­reflects something more than mere sentimentality. Assuming you were white, not of draft age, and Christian, there probably was no better time to belong to America's middle class.

The Great Compression ended in the 1970s. Wages stagnated, inflation raged, and by the decade's end, income inequality had started to rise. Income inequality grew through the 1980s, slackened briefly at the end of the 1990s, and then resumed with a vengeance in the aughts. In his 2007 book The Conscience of a Liberal, the Nobel laureate, Princeton economist and New York Times columnist Paul Krugman labeled the post-1979 epoch the "Great Divergence."

It's generally understood that we live in a time of growing income inequality, but "the ordinary person is not really aware of how big it is," Krugman told me. During the late 1980s and the late 1990s, the United States experienced two unprecedentedly long periods of sustained economic growth: ­ the "seven fat years" and the " long boom." Yet from 1980 to 2005, more than 80 percent of total increase in Americans' income went to the top 1 percent. Economic growth was more sluggish in the aughts, but the decade saw productivity increase by about 20 percent. Yet virtually none of the increase translated into wage growth at middle and lower incomes, an outcome that left many economists scratching their heads.

Here is a snapshot of income distribution during the past 100 years:

Chart of the Top Ten Percent Income Share, 1917 - 2008.

All my life I've heard Latin America described as a failed society (or collection of failed societies) because of its grotesque maldistribution of wealth. Peasants in rags beg for food outside the high walls of opulent villas, and so on. But according to the Central Intelligence Agency (whose patriotism I hesitate to question), income distribution in the United States is more unequal than in Guyana, Nicaragua, and Venezuela, and roughly on par with Uruguay, Argentina, and Ecuador. Income inequality is actually declining in Latin America even as it continues to increase in the United States. Economically speaking, the richest nation on earth is starting to resemble a banana republic. The main difference is that the United States is big enough to maintain geographic distance between the villa-dweller and the beggar. As Ralston Thorpe tells his St. Paul's classmate, the investment banker Sherman McCoy, in Tom Wolfe's 1987 novel The Bonfire of the Vanities: "You've got to insulate, insulate, insulate."

But income inequality is a topic of huge importance to American society and therefore a subject of large and growing interest to a host of economists, political scientists, and other wonky types. Except for a few Libertarian outliers (whose views we'll examine later), these experts agree that the country's growing income inequality is deeply worrying. Even Alan Greenspan, the former Federal Reserve Board chairman and onetime Ayn Rand acolyte, has registered concern. "This is not the type of thing which a democratic society­a capitalist democratic society­can really accept without addressing," Greenspan said in 2005. Greenspan's Republican-appointed successor, Ben Bernanke, has also fretted about income inequality.

Yet few of these experts have much idea how to reverse the trend. That's because almost no one can agree about what's causing it. This week and next, I will detail and weigh the strengths and weaknesses of various prominent theories as to what has brought about the income inequality boom of the last three decades. At the same time, I'll try to convey the magnitude of its effects on American life. The Great Divergence may represent the most significant change in American society in your lifetime­ and it's not a change for the better. Let's see if we can figure out what got us here.

------

(from the final installment in the series: )

The United States' economy is currently struggling to emerge from a severe recession brought on by the financial crisis of 2008. Was that crisis brought about by income inequality? Some economists are starting to think it may have been. David Moss of Harvard Business School has produced an intriguing chart that shows bank failures tend to coincide with periods of growing income inequality. "I could hardly believe how tight the fit was," he told the New York Times. Princeton's Paul Krugman has similarly been considering whether the Great Divergence helped cause the recession by pushing middle-income Americans into debt. The growth of household debt has followed a pattern strikingly similar to the growth in income inequality (see the final graph). Raghuram G. Rajan, a business school professor at the University of Chicago, recently argued on the New Republic's Web site that "let them eat credit" was "the mantra of the political establishment in the go-go years before the crisis." Christopher Brown, an economist at Arkansas State University, wrote a paper in 2004 affirming that "inequality can exert a significant drag on effective demand." Reducing inequality, he argued, would also reduce consumer debt. Today, Brown's paper looks prescient.

Heightened partisanship in Washington and declining trust in government have many causes (and the latter slide predates the Great Divergence). But surely the growing income chasm between the poor and middle class and the rich, between the Sort of Rich and the Rich, and even between the Rich and the Stinking Rich, make it especially difficult to reestablish any spirit of e pluribus unum. Republicans and Democrats compete to show which party more fervently opposes the elite, with each side battling to define what "elite" means. In a more equal society, the elite would still be resented. But I doubt that opposing it would be an organizing principle of politics to the same extent that it is today.
I find myself returning to the gut-level feeling expressed at the start of this series: I do not wish to live in a banana republic. There is a reason why, in years past, Americans scorned societies starkly divided into the privileged and the destitute. They were repellent. Is it my imagination, or do we hear less criticism of such societies today in the United States? Might it be harder for Americans to sustain in such discussions the necessary sense of moral superiority?
What is the ideal distribution of income in society? I couldn't tell you, and historically much mischief has been accomplished by addressing this question too precisely. But I can tell you this: We've been headed in the wrong direction for far too long.

Can tithing trigger an IRS audit?

Apparently so...


5 tax moves that may trigger an audit

by Kelly Phillips Erb

Disproportionately high charitable deductions. Charitable deductions are one of the most common deductions claimed on a personal income tax return. In fact, more than 90% of taxpayers who opt to itemize claim charitable deductions.

But just because everyone takes the deduction doesn't mean the IRS won't take a second look. The IRS will review returns that include charitable donations that appear disproportionately high as a percentage of income.

What qualifies as high? Taxpayers who claim the charitable deduction donate, on average, about 3% of their income. Anything above that may start raising some eyebrows.

So if you start climbing too far above that number, you might turn some heads. Does that mean taxpayers who donate more are automatically in trouble? Of course not. Many taxpayers routinely donate higher percentages due to religious or other charitable reasons. Just be sure and document your donations properly -- and make sure the values of non-cash donations make sense.

My Response to Richard Mouw

Richard Mouw's "Two Cheers for Capitalism" prompted me to once again refer to Jonathan Sacks.


Lord Rabbi Jonathan Sacks wrote an excellent article in First Things entitled “Markets and Morals” that deals with the reason why capitalism doesn’t get that third cheer. Those interested can read it here.

Sacks contrasts the “this-worldliness” of Judaism with the “other-worldliness” of Christianity. He then discusses five features of Jewish life that oppose the market ethic, and, if observed, keep it from being viewed in messianic terms:

1) Sabbath
2) Marriage and family
3) education
4)the concept of property
5) the Law

“Socialism is not the only enemy of the market economy. Another enemy, all the more powerful for its recent global triumph, is the market economy itself. When everything that matters can be bought and sold, when commitments can be broken because they are no longer to our advantage, when shopping becomes salvation and advertising slogans become our litany, when our worth is measured by how much we earn and spend, then the market is destroying the very virtues on which in the long run it depends. That, not the return of socialism, is the danger that advanced economies now face. And in these times, when markets seem to hold out the promise of uninterrupted growth in our satisfaction of desires, the voice of our great religious traditions needs to be heard, warning us of the gods that devour their own children, and of the temples that stand today as relics of civilizations that once seemed invincible.”

Sacks wrote this a decade ago, when the Market was idolized and Alan Greenspan was its Prophet. Perhaps our current economic recession is God’s way of reminding us He alone is God.

"Bubbles" or "Abscesses?"

If Minsky is right, we are due for another "bubble" soon. (You've gotta love the lingo. Bubbles sound so non-threatening! What Minsky really should have called them are "burps," "pustules" or "abscesses").

Here's some snippets from an interesting article about a Post-Keynesian conference held at Buffalo State College:

Whalen...was among those arguing that an economy that no longer invests in the manufacture of tangible goods finds itself inventing other, much more mysterious things in which to invest and, hopefully, make money.

But, they said, exotic instruments such as securitized mortgage certificates and credit default swaps not only don't provide the industrial infrastructure -- and the jobs -- that the old manufacturing economy built up, they also aren't fully understood by those who create them, those who buy them and those who regulate them. Or those who would regulate them if the law hadn't been changed to allow those financial processes to operate beyond the reach of government.

Eric Tymoigne, an economics professor from Lewis and Clark College in Portland, Ore., argued that new financial instruments should be regulated in the same manner as medicines, tested and approved before they are allowed on the market.

"If the side effects kill you," Tymoigne said, "it probably wasn't a good innovation."

----------
Participants said the deregulatory trend ignores the lessons of history as well as the precepts of noted economists such as the namesake of their conference, John Maynard Keynes, and the post-Keynes scholar that most of them cite in their work, Hyman Minsky.

Both taught that governments need to be more aggressive than they usually are in regulating financial markets and in stepping in with such things as public works spending during economic downturns. But, while Keynes is often cited (wrongly, these scholars contend) as arguing that government intervention is needed only rarely, Minsky was more explicit in claiming that markets are inherently unstable and run the risk of frequent global crashes without outside supervision and, as needed, intervention.

Whalen lamented that it is only in times of financial crisis that government leaders, and even most mainstream economists, heed Keynes or even hear tell of Minsky. The rest of the time, they said, both government and academia hew to the belief, which he called seriously mistaken, that markets are rational and self-regulating.

Buffalo State professor William T. Ganley quoted 19th century journalist Charles McKay to make his point: "Men think in herds and go mad in herds. They only recover their senses slowly, and one by one."

The Economic Insulin Pump

Why do I keep seeing the market in terms of a brittle diabetic? We've been gorging on "foods" with high financial glycemic levels and going without our insulin for too long. No wonder we crashed.

Now we've gotten a continuous insulin pump to regulate our financial glucose levels; but having to wear that unit and tube is pretty uncomfortable and many resent the limitations it places on their activities. No more swimming in the deep waters of derivatives!

Yet, if we refuse to monitor our sugars we will wind up dead.

No wonder economics is called the dismal science.

Minsky Moments and Ponzi Propensities

There's a lot of interest in an obscure fellow named Hyman Minsky these days. Witness the provocative article from the Boston Globe: "Why Capitalism Fails," and this one from The Economist:

STABLE economies sow the seeds of their own destruction. That sounds like Karl Marx but it is the basic insight of Hyman Minsky, an economist of the mid-20th century whose reputation is being revived. Minsky argued that the financial system played a big role in exaggerating the economic cycle, one that was understated by conventional theory.

Investors, banks, companies and consumers all tend to be guilty of the sin of extrapolation; they assume the future will be like the recent past. After several years of steadily growing output and low inflation, people develop a misguided confidence that such benign conditions will continue. They are thus happy to borrow, and lend, more. As they do, the riskiness of the system steadily increases.

Minsky divided the process into three phases. In the first, investors take on little enough debt that they have no trouble meeting their capital and interest payments. In the second, they stretch their finances so they can only afford the interest. In the third, or Ponzi, phase they take on debt levels that require rising prices to be safely financed; the homebuyers who took on 125% mortgages at the peak of the property boom were a classic example.

When markets reach this fantasy land, a small change in the fundamentals or in investor attitudes can be enough to cause the system to unravel. Once prices start to drop, borrowers start to default on their loans, or seek to sell their assets, causing prices to fall further.

The cost of capitalism, to use the title of a new book* that draws heavily on Minsky’s work, is first, that financial bubbles are created and second, that governments are forced to rescue the sector when those bubbles pop. Those who believe blindly in free markets are thus mistaken, in the view of Bob Barbera, a Wall Street economist and the book’s author.

Government action is inevitable. In conventional industries, the demise of companies leads to “creative destruction” with capital being reallocated to more productive areas. But in banking and finance, a crisis leads to “deflationary destruction” as capital is eliminated. Businesses, investors and consumers lose confidence; borrowers are unable to repay their lenders, who suffer as well.

But by stepping in to rescue markets when they wobble, central bankers create asymmetric risk. Hence Mr Barbera rejects the idea, popular in the era of Alan Greenspan, that central banks should do nothing to burst asset bubbles.

Instead, he suggests that central banks should build the level of corporate-bond spreads into their models. When spreads are low, risk appetites are high, as they were in 2005-06. That should lead central banks to tighten monetary policy. When spreads are high, they should ease.

Whether that would have stopped the housing bubble is open to question. The Federal Reserve did indeed raise rates in 2005-06, albeit in a steady and unthreatening manner. Nevertheless, the current crisis suggests that monetary and fiscal policy cannot be driven exclusively by economic fundamentals such as inflation and unemployment. When interest rates are low, consumers and businesses do not just borrow money; they borrow money to buy assets, setting up a feedback loop that can eventually lead to a bubble. When such a bubble is inflating, government revenues (in the form of taxes on capital gains, bonuses, corporate profits and property sales) tend to be strong. As governments are now discovering, such revenues collapse very quickly when the bubble bursts.

But it is easy to get carried away during a boom; the strength of financial markets tends to be seen as a signal that the economy is soundly based. Those who work in the financial system are assumed to be the best and the brightest. Even the government seems to be in their thrall.

In a recent article, Simon Johnson, a former chief economist of the IMF, points out the parallels between emerging markets, where governments are dominated by the economic elite, and America, where officials glide easily between Wall Street and the Treasury. What is good for Goldman Sachs might turn out to be good for America, but it might be best if the government could make an independent judgment. If we accept Minsky’s idea that financial markets are not always right, then we might be willing occasionally to act against Wall Street’s interests, however loudly bankers would complain.

Here's an even more succinct statement of Minsky's thought. Brian Chin at the Seattle PI blog explains the concept of a "Minsky moment: "

At its core, the Minsky view was straightforward: When times are good, investors take on risk; the longer times stay good, the more risk they take on, until they've taken on too much. Eventually, they reach a point where the cash generated by their assets no longer is sufficient to pay off the mountains of debt they took on to acquire them. Losses on such speculative assets prompt lenders to call in their loans. "This is likely to lead to a collapse of asset values," Mr. Minsky wrote.

When investors are forced to sell even their less-speculative positions to make good on their loans, markets spiral lower and create a severe demand for cash [that can force central bankers to lend a hand]. At that point, the Minsky moment has arrived.

The Psalmist admonishes us, "Don't put your trust in horses." Minsky might be seen as adding this postscript: "And don't put your trust in the market, either." Neither Moloch nor Baal are God.

Medical Bankruptcies: Don't get sick

Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills.

Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.

[Himmelstein, D, E., et al, “Medical Bankruptcy in the United States, 2007: Results of a National Study, American Journal of Medicine, May 2009.]

I know there are statistics, and then there are #(*#% statistics. I'd be interested in hearing from someone if these might be unreliable, and if so, what might be more accurate information.

Greed is NOT Good: The MBA Oath

M.B.A.'s at Harvard and Columbia are now taking an oath "to 'create value responsibly and ethically.'” The meaning of "ethically" is not as clear as I'd like, but at least there's this line:

"I promise... I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves."

According to the New York Times,

"In the post-Enron and post-Madoff era, the issue of ethics and corporate social responsibility has taken on greater urgency among students about to graduate. While this might easily be dismissed as a passing fancy — or simply a defensive reaction to the current business environment — business school professors say that is not the case. Rather, they say, they are seeing a generational shift away from viewing an M.B.A. as simply an on-ramp to the road to riches.

Those graduating today, they say, are far more concerned about how corporations affect the community, the lives of its workers and the environment. And business schools are responding with more courses, new centers specializing in business ethics and, in the case of Harvard, student-lead efforts to bring about a professional code of conduct for M.B.A.’s, not unlike oaths that are taken by lawyers and doctors."

While no one has any illusions that the oath will make business a more ethical undertaking, it does offer a measure of comfort to know that there is at least a challenge to the famous "Greed is good" philosophy that has ruled for so long, and that has had such disastrous results.

I agree with the YouTube commentator who wrote, "the United States shouldn't be thought of as, or run like, a corporation. It's a country - with people. The moneyed interests are just a slice of the pie, there's more that makes up a nation and a company." Maybe this oath is a step toward acknowledging that.




Michael Douglas, as Gordon Gecko in Oliver Stone's Wall Street.

The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.

QUOTES: John Maynard Keynes

If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.

--As quoted in The Economist (13 February 1982), p. 11

It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges.

--The General Theory of Employment, Interest and Money (1935)p. 159

The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems — the problems of life and of human relations, of creation and behaviour and religion.

--First Annual Report of the Arts Council (1945-1946)

The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.

--A Tract on Monetary Reform (1923) Ch. 3; many have thought this meant Keynes supported short terms gains against long term economic performance, but he was actually criticizing the belief that inflation would acceptably control itself without government intervention.

The decadent international but individualistic capitalism in the hands of which we found ourselves after the war is not a success. It is not intelligent. It is not beautiful. It is not just. It is not virtuous. And it doesn't deliver the goods.

--National self-sufficiency (1933) Section 3, republished in Collected Works Vol. 11 (1982).

It is ideas, not vested interests, which are dangerous for good or evil.

--The General Theory of Employment, Interest and Money (1935)Ch. 24 "Concluding Notes"

"To make sure the economy doesn't collapse, I've abandoned free market principles to save the free market system."

--George W. Bush, CNN interview, December 16, 2008 http://www.youtube.com/watch?v=MI53fHNygpI

Just Wondering...about economics and history

Transition of Virgin into a Bride/Le Passage de la Vierge à la Mariée by Marcel Duchamp

The Second Coming

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight; somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

--William Butler Yeats

It's better to be a dog in a peaceful time than be a man in a chaotic period"

(寧為太平犬，不做亂世人; pinyin: níng wéi tàipíng quan, bù zuò luànshì rén)

One of the marks of the end of the middle ages (premodernism) is the end of feudalism and the beginning of capitalism.

One of the features of modernism is capitalism, and its doppelganger, Marxism.

Marxism has faded.
Is capitalism fading, as well?

If so, are we living in a time of transition, as modernism takes its last gasps?

And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

Even more exciting: if we are living in a time of economic, historical and philosophical transition, how can we Christians witness to the hope that is within us, bringing harmony and joy as we are ambassadors of Christ, the Center?

We live in interesting times.

Why Wall Street Always Blows It

Collin has alerted me to an excellent article in Atlantic, Why Wall Street Always Blows It,by Henry Blodget. Here are some keepers:

"...But most bubbles are the product of more than just bad faith, or incompetence, or rank stupidity; the interaction of human psychology with a market economy practically ensures that they will form. In this sense, bubbles are perfectly rational—or at least they’re a rational and unavoidable by-product of capitalism (which, as Winston Churchill might have said, is the worst economic system on the planet except for all the others). Technology and circumstances change, but the human animal doesn’t. And markets are ultimately about people."

***************

"...So what can we learn from all this? In the words of the great investor Jeremy Grantham, who saw this collapse coming and has seen just about everything else in his four-decade career: “We will learn an enormous amount in a very short time, quite a bit in the medium term, and absolutely nothing in the long term.” Of course, to paraphrase Keynes, in the long term, you and I will be dead. Until that time comes, here are three thoughts I hope we all can keep in mind.

First, bubbles are to free-market capitalism as hurricanes are to weather: regular, natural, and unavoidable. They have happened since the dawn of economic history, and they’ll keep happening for as long as humans walk the Earth, no matter how we try to stop them. We can’t legislate away the business cycle, just as we can’t eliminate the self-interest that makes the whole capitalist system work. We would do ourselves a favor if we stopped pretending we can.

Second, bubbles and their aftermaths aren’t all bad: the tech and Internet bubble, for example, helped fund the development of a global medium that will eventually be as central to society as electricity. Likewise, the latest bust will almost certainly lead to a smaller, poorer financial industry, meaning that many talented workers will go instead into other careers—that’s probably a healthy rebalancing for the economy as a whole. The current bust will also lead to at least some regulatory improvements that endure; the carnage of 1933, for example, gave rise to many of our securities laws and to the SEC, without which this bust would have been worse.

Lastly, we who have had the misfortune of learning firsthand from this experience—and in a bust this big, that group includes just about everyone—can take pains to make sure that we, personally, never make similar mistakes again. Specifically, we can save more, spend less, diversify our investments, and avoid buying things we can’t afford. Most of all, a few decades down the road, we can raise an eyebrow when our children explain that we really should get in on the new new new thing because, yes, it’s different this time.