voodoo economics

Study after study shows the American economy grows faster, and with less volatility, under Democratic leadership. What is the difference?

The difference is the focus on consumption. To a supply-sider, consumption is secondary to supply. They rely on the principal that supply creates its own demand, not necessarily for the supply created, but through the value created (Say's Law). It is only after we produce that we have income to spend on consumption. Therefore, the solution to economic downturns is to stimulate production by increasing incentives and decreasing or eliminating disincentives. Accordingly, supply-side driven solutions to economic problems typically involve lowering taxes on profits and easing regulation (safety, environmental, etc) on production.

The opposite view is that consumption drives supply. A producer will only make supply if motivated by a perceived demand. During times of plenty, producers will take more chances and supply will drive consumption through the increase of overall prosperity. However, when micro-economic miscalculations and external forces combine to create an economic downturn, the decrease in aggregate demand reduces the incentive for producers to supply. Thus, the solution to economic downturns is to stimulate demand by removing obstacles to consumer spending. Accordingly, demand driven solutions to economic problems involve programs that give people jobs (even if with increased inefficiency) and provide for consumer necessities so as to free income otherwise devoted to them.

So which theory is more effective at promoting economic growth? To answer that, look to the ability of the respective economic players to make choices.

Unless very precisely targeted, a supplier has quite a few options as to what to do with windfalls created by tax breaks and decreased regulatory compliance costs. Sure, he can reinvest it in more production. But he can also horde it or invest it in overseas production. And what incentive does he have to produce where demand is tepid?

A poor or middle class family has much fewer options. A family struggling to make ends meet will necessarily spend increased income on necessities and unfulfilled wants. This increased demand gives the producer an incentive to produce. This production then creates more supply through the increased value.

Consider this example: What would be the best way to stimulate growth in the cruise industry?

A supply sider would suggest lowering taxes on cruise operators and allowing cruise operators to operate without having to spend money jumping through regulatory hoops that serve as public safeguards. If the business were on the brink of being profitable, it might work. But if there simply wasn't enough people taking cruises, why would anyone put their money in the cruise business? All you'd do is add to the competition, and unless your entry into the market compelled more people to go on cruises, all you'd be doing in dividing the same small pie into smaller slivers.

A demand sider would ask “why are people not going on cruises?” maybe the cost of paying off a home, paying off an education, or paying off medical bills is consuming too much of their income for people to be able to afford to go on cruises. Or maybe people suspect their jobs are going to sail off to a foreign shore, and therefore are hording their income in preparation . Maybe some of the people who would ordinarily go on a cruise have already lost their jobs. Some demand side solutions might include subsidizing (either directly or through tax breaks) certain necessities such as education and medicine, reducing the hardship associated with job loss (e.g. by increasing unemployment benefits or the time a person can be on unemployment), or creating jobs (either directly or by tying business incentives to job growth). With more available money and more confidence, more people inclined to go on cruises will choose to do so. With the cruise business turning bigger profits, cruise operators will expand their business and new players will enter the game. Each of them will hire people who will, in turn, further stimulate supply with their consumption.

So why did i pick cruises as my example? Because my parents are going on one for the first itme in their lives. They could never afford to before. But their fortunes have risen (unfortunately due to inheritance) and their living costs have declined (due to me and my brothers becoming self reliant), and now they're putting money into the recreational economy. A party that can increase the fortunes and decrease the living costs of people in such a way that it makes them able to consume things previously out of their reach will fuel economic growth. Democratic presidents have tended to do this as a matter of policy.

To me, a bigger question is why is it so hard to convince the business class this despite the overwhelming objective evidence? For at the least the two decades since Reagan, ordinary Americans have been able to comprehend that stimulating supply creates jobs. Why then is it so hard for producers, whom we laud (and entrust our futures with) for their instinct and business acumen, to grasp that stimulating demand creates demand?

The links

Report on a study: stocks perform better, and with less volatility, under democratic presidents – the the surprise of businessmen.

http://money.cnn.com/2004/01/21/markets/election_demsvreps/

Report on a study: “Does the stock market do better when a Republican is president or when a Democrat is? The answer: It's not even close. The stock market does far better under Democrats.”

http://query.nytimes.com/gst/fullpage.html?res=9B07E6DD143BF933A15752C1A9659C8B63

report on two studies: Democratic presidents have consistently higher economic growth and concistently lower unemployment than republican presidents.

http://www.washingtonmonthly.com/archives/individual/2005_05/006282.php

An actual study: Democratic presidents have increased the overall income of poor families, resulting in a modest decrease in overall inequality. On average families at the 20^th percentile of the income distribution have experience more than four times as much economic growth under democrats as they have under republicans.

http://www.princeton.edu/~bartels/income.pdf

Avoid being duped

Apparantly, my brother and fiance have both been the victims of a malicious scheme. i've seen it elsewhere, and it works like this:

you get or see a comment on myspace from a trusted freind with a provocative picture or tagline. it might talk about a girl you know dressing like a skank, appear to be a video of girls making out, or suggest that somebody posted something mean about you. when you click the link to see it, you go to what appears to be the myspace login page saying "you must be logged in to do that." so you sign in, and i don't know what happens from there - but once that website has your name and password, it infiltrates your freinds list and puts the bulletin on their space -from you!!!!! because these people trust you, they click the link, and the cycle perpetuates.

so word of warning: whenever you click a link and it asks you to sign into myspace, beware. go to your address bar an manually type in myspace.com. if you only sign in when you've directed yourself to myspace (as opposed to following a link), you'll be safe.

another old myspace blog: fillibusters

Orriginally posted Wednesday, July 18, 2007

Fillibusters

Right now, there is alot of talk of fillibuster - and on atrios and dailykos, talk of a right wing media bias in terms of reporting on "fillibusters." so let me set the records straight.

fillibuster is a technique used by a minority party in the senate to stop the majority party from passing a bill by making speeches on end. it opperates like this: because more than a simple majority of votes is needed to stop somebody from making a speech, opponents to a bill simply need to make speech after speech in order to stop a bill from coming toa vote. there is no fillibuster in the house of representatives.

fillibuster's can be stoped with a super majority vote of 60. when republicans were in the majority but lacked 60 votes, they threatened to change the rules to so they could stop a democratic fillibuster of judicial nominees with a simple majority. this became known as the nuclear option because it would destroy a long held minority right.

as a matter of convenience, a vote can be taken to see if there is enough support to defeat a fillibuster. when there are not enough votes to beat a fillibuster, and the minority party is threatening one, the debate and the vote usually gets tabled.

republicans have been threatening to fillibuster every measure the senate proposes with regards to the iraq war - essentialy ensuring a blank check is handed to bush to pursue his failed strategies without any oversight.

rather than change the rules and eviscorate minority rights (like the republicans wanted to do), the democrats have called for over night sessions. the media, including a widely watched network morning show, has labled this fillibustering on the part of democrats. this is untrue. it is the democrats challenging the republicans to actually deliver a fillibuster, rather than just threaten one.

personally, i hope reid and the senate democrats keep to it.

An old myspace blog: link to chickenhawk youtubes

Orriginally Monday, August 20, 2007

Link to some chickenhawk youtubes

http://www.dailykos.com/storyonly/2007/8/19/214443/388

FDA Labeling Requirements Are not Censorship

This is written in response to a recent post by a friend of mine regarding an FDA crackdown on a seller of herbal tea for making a health claim on the label. His claim is that punishing a person for such a claim is censorship. I argue that making health claims that have no been sufficiently tested amounts to act against the public interest - much, the way slander is an act against the public interest, and not speech even though words is the form it takes.

The difference between folk remedies and medicine is simple: the scientific method. Through the process of testing chemicals against controls, scientists can determine that something works by determining how it works. Standardized testing allows the recipient of a treatment know that the pill they are taking or the concoction they are drinking is treating the disease and not just its symptoms. Or, on the other hand, testing allows the recipient of a treatment take a pill to alleviate symptoms with full knowledge of whatever side effects are possible.

This wasn’t the case 150 years ago. I those times, people were afflicted by horrible diseases they didn’t understand. Remedies were scarce - they either hadn’t been invented yet, were too expensive, or simply not available in America’s new frontiers. People feared the consequences of diseases, and suffered through the symptoms.

And in that era thrived the snake oil salesman. He’d listen to your sorrows and sell you hope. He’s sell you ground up shark bones or bear claw. He’d sell you a tincture used by centuries in the orient. He’d sell herbs proven effective by the Indians.

Sometimes the medicine worked. Other times it worked in people’s minds. Sometimes the medicine was nothing more than bunch of booze that made people feel less pain. Sometimes the medicine was spiked with an opiate which beat the pain well ugh that pople actual toht they wre beg ed. Sometimes it was jut snake oil.

The result: there were more drug addicts in the19th century than at any other point in America’s history.

Things aren’t all that different today. People are afflicted by horrible diseases they don’t understand. Remedies are scarce - even though many have been invented - because the price is out of the average person’s reach.

And in this era, snake oil has some new names: herbal remedies, natural cures, accupuncture, and chiropractic to name a few.

A person diagnosed with cancer who can’t afford chemo - or for whom there is no effective treatment - is a scared person, willing to spend their children’s inheritance on a dream.

Now, some of these remedies might do something. But what? And how? And how do we know its not just treating the symptoms? And how do we know that the side effects don't outweigh the benefits? And how do we know whether or not it will have the same effect on different people with different make ups?

Most importantly, how do we protect a person yearning for hope from those who would sell them false hope?

Answer: By requiring those who make health claims with regards to their products comply with strict testing requirements.

Of course, the FDA is a terrible agency that’s in bed with the companies. Bad drugs with little benefit are approved (Viox, Olestra), while new cures that would compete with the big patent holders’ products are stymied. Nevertheless, allowing salesmen to make inadequately proven health claims is not the answer.