A History of the American Economy - Part 2

"I believe that every individual is naturally entitled to do as he pleases with himself and the fruits of his labor, so far as it in no way interferes with any other men's rights." – Abraham Lincoln

...continued from "A History, Part 1"

Back to our discussion of comparisons of the middle class in the 1930's and 2010...

It seems that most Americans consider themselves "Middle Class", and it would appear to me that it is our collective sense that this was always so - that America was always a "Middle Class" ("MC") kind of place.

What does it mean to be MC? Are you defined by who you go to school with? Or who you vacation with? Or by education, income, or net worth? The fact is that the concept is an abstract which rests in eye of the beholder and is continually marketed and manipulated in the Mainstream Media ("MSM").

(Here is a link to Wikipedia's article on Social Class in the U.S. I tend to reject the 3 class pitch from the Media given my experience coming from a working class family living in a gritty industrial town 1o miles north of New York City. Speaking from my experience Metro New York has quite a few more than 3 Social Classes. My family, and a large portion of our community, were working class Catholics - there were no vacations, new cars, gadgets, etc... and we never, ever dined out of the home (my poor mother had to cook for 9! 3 meals a day, every day for decades... and at nearly 87 she still parties like a rock star) but there were violin lessons and little league and I used to feel sorry for my wealthy friends that did not have a couple of brothers to share a room with.)

So who is MC in 2010? Can you be MC with little or negative net worth as long as you have a MC income? Are wage slaves MC? (Read that link. While I am an unrepentant capitalist and Libertarian I am NO CORPORATIST... more on this latter in the series.)

Speaking of wage and debt slaves... most Americans are unfamiliar with these concepts and how much angst these concepts produced during the early industrialization of America. Prior to Industrialization America was primarily employed in Agriculture and as Artisans. The great HOPE was that people would be able to move up from "wage slavery" to become self employed (think about that in today's context in which the vast majority would prefer death to the loss of their corporate or government job; were self-employment, unless one is a "professional", is a last resort). None other than Abraham Lincoln famously mused:

“The greatest fine art of the future will be the making of a comfortable living from a small piece of land.”

And then came the Stockholder Corporation and the infamous trusts. But I am getting ahead of myself... I want to leave the 1930's behind and get to the post Civil war period and the Long Depression (or the Panic of 1873) beginning in 1873.

to be continued...

A History of the American Economy - Part 1

Today's Quote:

"Never interrupt someone doing what you said couldn't be done." - Amelia Earhart, disappeared on this day, 1937.

I read with fascination the continued flow of B.S. coming from Wall Street, the MainStream Media ("MSMS"), and Washington in their debate over how to describe the current economic circumstances. I have been noodling this for a while and reading through the economic history of the U.S. (and hence the world) for the post civil war period.

One of the hardest things to do when considering this is to "compare apples to apples". For instance, is a house a house? Or should it be described as a square foot of residence per capita? Are we wealthier because we are better nourished? Or poorer because we are so very overweight? Is life more fair or less? Are we "freer"? And who, exactly, is "we"?

The comparisons in the media of this period to the 1930's accomplishes little - except in what it is meant to accomplish: To sway elections with an economically under informed and under educated electorate that seems incapable of comparing "apples to apples". An electorate that simply does not know its history, because all it knows is "what it reads in the newspapers" - material written by folks that have taken some serious poetic license with history.

I am going to jump around a bit on the time line in order to make comparisons of apples to apples but mostly I am going to compare today to various periods and walk through the series of events that got us from there to HERE.

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The First Installment

So here we are in July, 2010 America, a time by which a constant comparison to the 1930's is made in the media (primarily to gain advantage in the next election and not to accomplish a damn thing). There is in fact a great deal in common. Today, 25% of men between the ages of 25 and 75 DO NOT have a full time job (the headline unemployment number we see every month is merely propaganda) and through much of the 1930's 25-30% of men in this age group did not have a full time job. From an employment perspective, the circumstances are more similar than not (with the exception of "unemployment insurance"). However, there is vast difference in CAPITAL. No, not just corporate capital - capital investments and stock. We have more houses than we need, more cars than we can use, closets filled with enough clothes to last the life time of a denizen of the '30s, and the ability of the government to spend far more than it takes in WITHOUT having the currency collapse in a bout of hyper-inflation (a very bizarre set of circumstances). This has enabled the continued expansion of "unemployment insurance" payments (though some in the Senate are threatening reality as I write this). When and how this ends is up for debate.

The singular image burned into the minds of those that came after were photos of soup lines in New York City in the winter of 1933. In fact, documented cases of people starving are few and far between (other than Alcoholic residents of the Bowery). Politics ALWAYS rears its ugly head. While starvation in the modern "third world" is almost always as a result of politics, throughout history the simple fact of the matter is that hunger and starvation were ALWAYS ASSOCIATED with weather and natural disaster (and to a much lesser extent due to war. Many argue that this will change drastically in any serious fuel shortage and I tend to agree). In much of the 30's between 10% and 20% of the population experienced food shortages on a regular basis. In 2010, nearly 12% of the population receives "food assistance" from the Federal government.

A major difference is that the markings of middle class - cell phones, cars, certain apparel - is attainable by the "poor". In fact, many of the "poor" don't know they are "poor". They merely consider themselves "broke", and I think that that is a much better state of mind.

(I am being summoned by She Who Must Be Obeyed for some emergency furniture repair.)

To Be Continued...

"Fix Social Security by Hiking Retirement Age"

Today's quote:

"One of the greatest delusions in the world is the hope that the evils in this world are to be cured by legislation." – Thomas B. Reed

I will continue the "economic history of the U.S." thing shortly... But this article really screamed out for commentary.

As I have been saying for years, the government will absolutely, positively default on Social Security by raising the age to receive benefits. We have arrived in the Land of the Philistines.

Social Security collections were not considered a "tax", but a system of forced savings via a Government sponsored insurance program with forced participation that got out of hand (in fact there is no "Social Security", its proper name is the "Old-Age, Survivors, and Disability Insurance (OASDI) program"). People of a certain age (45-59) paid the absolute most in and will get the least out relative to their contributions. Yes Social Security is underwater. Not because people of a certain age (like me) have not been overpaying into it, but because Washington pols bought the good will of the elderly by over benefiting them for the past 30 years all the while increasing the extraction of the people born after 1955. Social Security collections have, in fact, peaked ("Peak Social Security" has a nice ring to it). The government can increase the percentage take all it wants, this will only further drain M1 at a time of deflation... which only exacerbate's the situation.

Now Washington wants your sympathy for stealing from you via robbing Peter to pay Paul.

Of course Congressman Boehner is correct. We will have to move the retirement age to 70 (and then 73) or cut monthly benefits drastically (I like this better, it has more truth to it). Take a good whiff of this Bull SH*T. Social Security was a HORRIBLE idea. It was and is nothing more than a Ponzi/Madoff scheme that, by mathematical necessity, MUST collapse of its own weight at some point... but before doing so it so addicts people to false promises and exaggerated claims that they begin to believe that it is some kind of Right.

Here's the clincher in the article:

There are those who say older workers won't be employable past age 65.

"But this is all, as an economist says, 'endogenous,'" said Mitchell. "That is, if you know that your work life will last till age 70, you'll be likely to continue to invest in your skills later in life, which will help make you more employable. And the fact that jobs today are much less physically demanding than they were 30 years ago helps make a longer work life feasible."

Then again, if you really don't want to keep working till 70, Mitchell said you could save so as to "buy your own early retirement."

Is Professor Mitchell really suggesting that people take responsibility for themselves and save for their own retirement? How Libertarian of her and I could NOT agree more... but funny, coming from a Tenured professor.

Oh, well... another do-gooder social program out to make Life fair is in its last throws before it bite's the big one.

In its death throws this is likely to cause some unbelievable angst. How are the over 60 folks that spent $400,000 on cigarettes (with interest) over a lifetime going to work? Are they going to carry the O2 tank with them? And the over 60 morbidly obese? With their fallen arches, diabetes, and bad backs I am concerned that they might be that reliable. We addicted them and we took away their incentive to FEAR old age and provide for it.

Why is it that someone who worked 20 years gets the same benefit as someone who worked 40? The system was so poorly conceived for the real world that it is hard to get your head around.

But there is some good news. We have too many houses and too many cars and too many EVERYTHING.... we will figure it out... but not if we continue to insist that $20,000 or $30,000 per year in property taxes is supportable by senior citizens (amongst other things).