Tuesday, September 18, 2012

Romney has a Dependency Crisis; the U.S. does not

Mitt Romney, partying with a crowd of decadent "private equity" rich in Boca Raton, made the novel excuse for his difficulty carrying the election on the fact that "47%" of Americans get some form of government assistance.  Or maybe he was referring to the people who don't pay federal income tax.  Neither oft-quoted 47% number was intelligently derived or factual.  Romney implied that dependency on government would make them vote for Obama and that's why the best he could hope for in an election is 53%.

In fact, Republicans are the clear winners in government largesse, with 40 million seniors receiving social security and Medicare.  It is highly likely more Republicans than Democrats are in that 47% figure.



The political damage will be small, because elderly who live on Social Security and Medicare and also account for the vast majority of Medicaid spending, don't view themselves as government dependents.  How they manage this crazy belief, when it is their entitlements the Republicans have wanted to get rid of for seventy years is a topic for a good psychiatric study, but it appears to be true.  Vice-Presidential candidate Paul Ryan wants to eliminate Medicare and replace it with a voucher system, and Romney has promised to freeze Medicaid payments to the states, which would force them to curtail nursing home services to the elderly.  Yet none of that has alienated the elderly.  It is unlikely they will manage to figure out that Romney was talking about them when he mentioned this dependency crisis.  When they do figure it out, it will be when they have been left abandoned and unassisted in a rat-infested alley to die, and then it will be too late.


To the extent the U.S. is non-taxpaying freeloading nation, it is largely due to Republican policies.  While Reagan tripled the debt, he had time to improve social security benefits and index them to inflation.  While George W. Bush doubled the debt again, he had time to add an entitlement for prescription drugs for the elderly.  However, he let drug companies raise prices at will, so within three years they were back to getting full dollar from the elderly plus the government subsidy. It is only Obama who has moderated their greed.

Meanwhile, relentless Republican tax cutting left much of the country too poor to pay income tax, but they were hammered with payroll tax increases.  Meanwhile, Reagan and Bush made reducing wages through unchecked immigration, union-busting, deregulation, outsourcing, and pension elimination key elements of their regimes.  David Stockman, Reagan's budget director, boldly laid it out: debt service transfers wealth from the taxpaying workers to the rich and banks who lent the government money, and the cost of debt service will make it impossible for the government to keep its entitlements forever.  The Republican objective for three decades has been to bankrupt the government in order that social security and Medicare be removed.

Conservative columnist David Brooks was aghast at this political flub.


Like most conservatives, Brooks had an insane and disgusting view of Unemployment Insurance as a bad thing. Unlike most conservatives, and unlike Romney, Brooks still pays lip service to America's penchant for hard work. But he still pretends there is a dependency crisis.  In fact, the US employs about the same percentage of its people as it did in 1947.  The difference is not in dependency, but in who pays for it.  Back then, families carried the burden.  Today, it is the government.   Partly that is demographic.  Then, as now, parents pay for children but are not legally responsible for the elderly.  Now, however, there are fewer children and many more elderly.  But there are other changes as well.

For thirty years after World War II, wages rose and people got used to living in smaller families.  Then wages fell, and wages no longer enable the worker to care for a crowd of dependents.

We don't have a "dependency crisis" in the United States, we have a crisis of "wages are too low."
Other countries have managed this crisis by raising the percent employed, like in Canada and Scandinavia.  It works for those countries because they have strong middle class consumption to generate demand for goods and services and therefore employment. They have also tried to maintain wage levels. It helps that these countries are aggressive on trade policy, using currency manipulation, tariffs, non-tariff barriers, government support, local content laws, and semi-public ownership to support vital industries and promote foreign investment.

The American fascination for free trade, a nonsense shared by Romney and Obama, has an antique smell of snuff tobacco about it, the arrogance and foolishness of Imperial Britain during the last decades of the nineteenth century, when they were losing their economic position to Germany, which favored the welfare state, and the U.S., which was aggressively protectionist.  British economists back then swore up and down that Free Trade was the future and the nation's greatest security, and justification enough for bloated naval establishment and worldwide empire.  In World War I one third of Britain's foreign investments were confiscated or lost, and her position as the world's leading economic power ended permanently.  It was all the foreseeable result of a brainless ideology of free trade, and the natural progress of the pound sterling as the world's reserve currency.  It's tragic that America's leaders today are just as arrogant and and far more stupid than Palmerston, Disraeli, Gladstone, and their ilk, knowing of their example but not learning from it.

For most of U.S. history, everything the government did was financed by taxing foreign goods.  How unbelievable  it is to pretend that free trade is either a core American value or a prop to American prosperity.  Since all trade is carried on in currency and all currency prices are government determined, whether fixed by governments or traded in markets where governments and central banks are the primary movers, none is free of political influence or economic warfare, and there is no such thing as free trade in the world today. Indeed, there is less of it today than there was in the day Victorian Britain, when it so markedly failed to help British prosperity.  Yes, the economics profession is profoundly sold on the idea of trade at any price as a profound moral good.  No, they are completely wrong about trade. There can be too much trade, and there can be prices that are wrong and coercive.  As with competition, another presumed good that Romney and the rich attack and try to restrict for their private profit while pretending to uphold, manipulating trade barriers for private gain while pretending to support free trade in theory has made many fortunes but has fooled nobody but the American public, who would be picked clean by the vultures Romney would release on us.  For Romney is most emphatically not a good or decent man, as readers of this blog will recognize.

Romney wants more free trade agreements. Obama has signed three.

Romney was not referring to trade or wages in his dependency remark, but his belief that the nation is filled with freeloaders, that half of it is nothing short of evil, requiring a good kick in the pants to get to work and stop malingering.  He defines them as so morally depraved that it would be useless to even try to persuade them of his point of view. This curious belief is so familiar to everyone from decades of Republican propaganda, that it is actually stranger than it first appears.  Romney, after all, says he has not worked at any job except running for president since 2006, so who is he to call anyone in poverty a slacker or "dependent"?

He also has a wife who is not employed and children and grandchildren who are dependent on him for jobs and income.  He is on record as saying that Ann Romney's job as a mother was more important than his even though it paid nothing and yet he would prohibit mothers from getting welfare while not working at this most important job.  As always with Romney, the rules are for other people.  The Romney children have never been kicked out of the nest on their own; indeed, one understands that would not be permitted in the Romney household.   That is where there is a true dependency crisis, and it is one entirely of Romney's own making in his own family.  He must let those boys loose, and let Ann go to work.  That would be the best problem-solving Romney could do.  But he should keep his hands off the United States of America.

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