Economic Propaganda

I will be the first to admit that my knowledge of economics is incredibly superficial. (Perhaps I’m being defensive, but I suspect that “superficial”–or even “non-existent” also describes the technical economic expertise of most of my fellow Americans.)

As I previously explained, my recent reading about Modern Monetary Theory was prompted by the gift of a book on the subject; that book then triggered some additional research. (Calling my google searches “research” might be a misnomer…) At any rate, I found an essay from The American Prospect to be both interesting and “on point.”

The article was authored by Nick Hanauer, whose ability to explain matters in accessible and understandable terms has made him one of my favorite economic pundits.

If the basic foundation of Modern Monetary Theory (MMT) is that it is most closely based upon reality–upon the way that American monetary and fiscal systems actually work–the Prospect article provides additional evidence that far too many pundits and economists continue to assess policy using economic frameworks that are no longer accurate.

As the subhead says, “The alleged science doesn’t match up to the real world.”

The article focuses upon six myths that continue to muddy the waters of economic analysis.

Americans have been hammered for decades with an economic message that amounts to this: When wealthy people like me gain even more wealth through tax cuts, deregulation, and policies that keep wages low, that leads to economic growth and benefits for everyone else in the economy. And equally, that investing in you, raising your wages, forgiving your debt, or helping your family would be bad—for you! This is the trickle-down way of thinking about economic cause and effect, and there can be no doubt that it has substantially contributed to the greatest upward transfer of wealth in the history of the world.

You would think that trying to sell such a disastrous outcome for the broad mass of citizens would be incredibly unpopular. No politician would outright say they want to shrink the middle class, make it harder to get by, or reward hard work less. No politician would outright say that rich people should get richer, while everyone else struggles to make a decent life.

But this message has been hidden under the confusing, technical-sounding, and often impenetrable language of economics. Many academic economists do important work trying to understand and improve the world. But most citizens’ experience of economics comes from hearing a story—a narrative that rationalizes who gets what and why. The people who benefit from trickle-down policy the most have deployed economists to work their magic to tell this story, and explain why there is no alternative to its scientific certitude.

Hanauer points out that no economic model can fully reflect the “extraordinary complexity of human markets.” Models are intended to provide decision-makers with a sense–an overview– of the likely impacts of a particular policy proposal. But the assumptions upon which these models are based will determine their predictions. In other words, if the assumptions are wrong, the models will also be wrong.

And these models are deeply and consistently wrong…The problem is that few people take the time to explain what these faulty assumptions are, why they all promote the worldview of the rich and powerful, and why they shouldn’t be treated as science but as a trickle-down fantasyland.

Hanauer proceeds to explain–at length, and in language that non-experts can understand– what is wrong with six of those underlying assumptions:

  • public investments will “crowd out” private investment, and are by definition less productive than private investments.
  • workers’ wages are a direct reflection of their productivity.
  • higher taxes on corporations and high-income people reduce growth and investment.
  • investing in poor people reduces economic activity, and that immigrants are less productive than domestic American workers.
  • ten-year budget horizons are adequate for analysis.
  • performance is measured by looking at GDP and revenue– rather than overall well-being.

As Hanauer concludes:

Until we build models that reflect how the economy really grows, our leaders and the media should eye models from mainstream economists with skepticism. Models trying to convey the effects of policy should reflect the basic understanding that when more people have more money, that’s good for business. We need models that understand the basic principle that when the economy grows from the middle out, that’s good for everyone, and when more people participate in the economy, their consumer demand drives job creation and sparks innovation. In other words, our economic models must reflect the world as it really is—not as it was portrayed in the trickle-down Econ 101 classrooms of the 20th century.

All available evidence supports living in the world as it really is.

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Testing Economic Theory

A couple of weeks ago, after speaking to a group at North United Methodist Church, I was approached by a couple who handed me a book and accompanying materials on Modern Monetary Theory. I explained that economics is definitely not one of my strong suits–far, far from it– but they insisted that the book, a New York Times bestseller titled The Deficit Myth, written by economist Stephanie Kelton–was clear and accessible.

So I took the book, and I read it. All the way through. And I found it very persuasive.

Modern Monetary Theory (MMT) begins with an undeniable fact: government budgets in countries with sovereign control over their currencies are very different from household budgets.  Not all countries have “sovereign control”–in the EU, for example, countries that have adopted the Euro cannot issue currency. They are “users” not issuers, and thus are constrained in much the same way as our household budgets are.

The United States, however, is not. Our government is not revenue-constrained in the same way as our households or our businesses. That doesn’t mean there are no constraints; it just means the constraints are different. As the book persuasively argued, budget hawks and public officials wringing their hands over the size of the budget deficit are still operating under economic paradigms that were appropriate when we were on the gold standard (and/or Bretton Woods), but the country today operates within a very different fiscal reality, one that requires that we change our previous assumptions.

MMT doesn’t dispense with fiscal responsibility; it redefines what responsible behavior looks like.

MMT advocates argue that the government can use its currency-issuing power to guarantee full employment, as it can fund necessary public sector jobs during economic downturns without worrying about running out of money. Governments can use fiscal policy more effectively to stimulate demand and support economic growth. MMT emphasizes the importance of managing real resources (labor, materials, technology) rather than focusing on budgetary ones.

The real constraint on government spending, according to MMT, is inflation.

If government creates too much money, it can fuel a speculative bubble; if it creates too little, it promotes stagnation. Taxation thus becomes an important tool–both for controlling aggregate spending and for altering the distribution of wealth and income–i.e., addressing and reducing the gap between the rich and the rest. (As the author notes, it’s important to determine when taxes should be raised or lowered, and especially which ones and on whom.)

I obviously cannot reduce the book’s lengthy and lucid explanations to a blog post. I strongly encourage you to read the book, or other explanations of MMT. I will note, however, that there are a growing number of economists, many cited in the text, who have adopted MMT because it is based upon an accurate description of the way our current economy functions.

Something that wasn’t in the text, but occurred to me as I was reading, was that both FDR’s New Deal and Joe Biden’s “Bidenomics” appear to have adopted some of the major tenets of MMT, by using government spending to boost wages and employment. I know that many people attribute FDR’s economic successes to wartime anomalies, but the data on Biden’s flourishing economy cannot be so easily dismissed.

As Heather Cox Richardson recently reported:

Data from the Bureau of Economic Analysis released today showed inflation continuing to come down. In November the Personal Consumption Expenditures (PCE) price index was 2.6% over the previous November, down from 2.9% in October. The Federal Reserve aims for 2%. Falling gas prices meant that overall, prices actually dropped in November for the first time since April 2020.

In a statement, President Joe Biden reminded Americans that “[a] year ago, most forecasters predicted it would require a spike in joblessness and a slowdown to get inflation down. I never believed that. I never gave up on the hard work, grit, and resilience of millions of Americans.” In addition to the falling inflation rate, he noted that “the unemployment rate has stayed below 4 percent for 22 months in a row, and wages, wealth, and the share of working-age Americans with jobs are higher now than they were before the pandemic began.” …

The administration is highlighting economic numbers not just because they are good—and they are: real gross domestic product (GDP) grew by an astonishing annual rate of 4.9% in the third quarter of 2023; under Trump it was 2.5% before the pandemic knocked the bottom out of everything—but also because they illustrate the administration’s return to an economic theory under which the U.S. government operated from 1933 to 1981.

Unfortunately, we have too many lawmakers and pundits who cling to outmoded paradigms even more fiercely in the face of empirical evidence to the contrary.

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When People Tell You Who They Are…

Let me begin a very distressing post by affirming my belief that there are still some Republicans who are good people, although their percentage is clearly dwindling. (Why good people remain Republican is something I have trouble understanding, but that’s a different issue.)

What has become very clear, however, is the descent of what was once a traditional right-of-center political party into a rabid, hateful, and thoroughly unAmerican cult. That descent is playing out right now in Iowa.

Permit Jake Tapper to share the evidence.

CNN anchor Jake Tapper was stunned by a poll published this month showing former President Donald Trump’s Nazi-echoing speeches about “poisoning the blood” and eliminating “vermin” from the U.S. overwhelmingly help him with Republicans in Iowa.

Trump is under fire once again — including from Tapper — after he delivered another Hitler-echoing rant at a rally in Durham, New Hampshire, on Saturday in which he accused several groups of non-White immigrants of “poisoning the blood of our country.”

But newly-released results from an NBC News/Des Moines Register/Mediacom poll — taken December 2-7, before the most recent speech — show those Hitler-esque speeches help him with Iowa GOP voters by nearly two-to-one.

The Des Moines Register polled Iowa voters, asking those it identified as likely Republican caucus-goers for their opinions about a candidate who said that immigrants “poison the blood of America.” Forty-two percent of Iowa Republicans said it would make them more likely to support that candidate. Only twenty-eight percent said it would make them less likely, and the remaining twenty-nice percent indicated that it would not matter to them.

So–forty-two percent of Iowa Republicans agreed with a message lifted verbatim from Hitler, and another twenty-nine percent did not find the message troubling, let alone disqualifying. Seventy-one percent of the Republican respondents either endorsed that vile message or were untroubled by it.

As one of the panel members on Tapper’s show put it,

Republican or Democrat, anybody who spent time in Iowa around the caucus knows the term Iowa nice. Iowa voters are the nicest people in the world. But what we’ve seen in the Trump era is that part of the Republican base is not so nice. And another part of the base, so you combine these two, anything that Donald Trump says they’ll just say, yes, give me more of that, whether they think about it or not. And what troubles me isn’t just the language that Trump uses, but if he’s using it and then wins, what is he going to do within that rhetoric?

What are the actions that follow the rhetoric? And that’s what gets us to a very, very un-American place.

Political scientists and pundits have traced the “sorting” of Americans into various categories: fundamentalists versus more mainstream religious folks, religious versus secular, urban versus rural, educated versus not, blue versus red…Perhaps a more relevant set of categories would be humane versus execrable.

What sorts of people think it is perfectly appropriate to refer to other human beings as “vermin”? What kind of person looks at would-be immigrants–often people enduring dangerous travels and trusting treacherous companions in an effort to flee intolerable situations so they can give their children a chance for a better life–and sees someone “poisoning the blood” of the “real Americans” whose ancestors, more often than not, made similar treks.

For that matter, what sort of  performative “Christian” posts a lengthy rant purported to be his  “Christmas message” focusing on “Crooked Joe Biden,” “Deranged Jack Smith,” and those who are “looking to destroy our once great USA” and ending with “MAY THEY ROT IN HELL.” (Caps in original.)

And a Merry Christmas to you, too.

Reasonable people of good will can disagree about immigration law. They can draw different conclusions about how to handle the mess at the nation’s southern border. People of good will can debate the optimum number of people to be admitted to this country, and the proper bases for admitting them or turning them away.

But Republicans who agree that these desperate people are “vermin,” who think it is appropriate to accuse them of “poisoning the blood of Americans” are most definitely not people of good will. They are the raw material from which Storm Troopers are fashioned.

A week or so ago, a reader reminded me that it was Maya Angelou who counseled “when someone tells you who they are, believe them.”

The GOP is telling us who they are, and what that once “Grand Old Party” has become. Believe them.

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Evidently, Not All History Is Written By The Victors…

A recent article from the Washington Post challenged my belief in the old adage that history is written by the victors. (It would also appear that Faux News didn’t invent propaganda. Who knew?) Apparently, successfully resisting Reconstruction wasn’t the only tactic employed by pro-slavery Southerners. 

They were also able to suppress “inconvenient” history. 

As Howell Raines, the author of the essay, noted, “Until a few years ago, I was among the thousands of Southerners who never knew they had kin buried under Union Army headstones.” It appears that a regiment of 2,066 fighters and spies who came from the mountain South were chosen by Gen. William Tecumseh Sherman as his personal escort on the March to the Sea. Raines wondered how their history got erased, and found that “the explanation reaches back to Columbia University, whose pro-Confederate Dunning School of Reconstruction History at the start of the 20th century spread a false narrative of Lost Cause heroism and suffering among aristocratic plantation owners.”

As a 10-year-old I stood in the presence of Marie Bankhead Owen, who showed me and my all-White elementary-school classmates the bullet holes in Confederate battle flags carried by “our boys.” She and her husband, Thomas McAdory Owen, reigned from 1901 to 1955 as directors of the archives in a monolithic alabaster building across from the Alabama State Capitol. They made the decision not to collect the service records of an estimated 3,000 White Alabamians who enlisted in the Union Army after it occupied Huntsville, Ala., in 1862. The early loss of this crucial Tennessee River town was a stab to the heart from which the Confederacy never recovered. Neither did the writing of accurate history in Alabama.

The Owens were not alone in what was a national academic movement to play down the sins of enslavers. In the files in Montgomery, I found the century-old correspondence between Thomas Owen and Columbia University historian William Archibald Dunning about their mission to give a pro-Southern slant to the American Historical Association. 

The essay documents the effort to sanitize the “War Between the States,” by claiming that  Southerners had been solidly behind the Confederacy; that the war had been fought about “states’ rights,” not slavery; and–most pernicious of all–that African Americans were “scientifically proven to be a servile race” that brought down Reconstruction because they were incapable of governing.

The fact that few Americans have ever heard of the 1st Alabama Cavalry and the defiant anti-secession activist who led to its founding, Charles Christopher Sheats, documents how such historiographic trickery produced what the Mellon Foundation calls “a woefully incomplete story” of the American past. The foundation’s Monuments Program is spending $500 million to erect accurate memorials to political dissidents, women and minorities who are underrepresented in many best-selling history books.

Recent research has traced the ways in which an “alternate” Southern history became the predominant story of the Civil War.

Dunning was the son of a wealthy New Jersey industrialist who taught him that Southern plantation masters were unfairly punished during Reconstruction. The younger Dunning installed a white-supremacist curriculum at Columbia and, after 1900, started dispatching his doctoral students to set up pro-Confederate history departments at Southern universities. The most influential of these was Walter Lynwood Fleming, whose students at Vanderbilt University produced “I’ll Take My Stand,” a celebration of plantation culture written by 12 brilliant conservative “Agrarian” writers including Robert Penn Warren, Allen Tate and Andrew Nelson Lytle…Fleming, who was born on an Alabama plantation, reigned as the director of graduate education at Vanderbilt and peopled Southern history departments with PhDs schooled in the pro-Confederate views he learned from Dunning at Columbia.

It turns out that there were some 100,000 Union volunteers from the South. They were, Howell tells us, “Jacksonian Democrats who hewed to Old Hickory’s 1830 dictum that the Union must be preserved.” Lost Cause historians who had been schooled by Dunning and Fleming glossed over the fact that “White volunteers from the Confederate states made up almost 5 percent of Lincoln’s army.”

Howell concludes by considering how this history was lost.

How then did the Civil War become the only conflict in which, as filmmaker Ken Burns told me, the losers got to write the history, erecting statues of Johnny Reb outside seemingly every courthouse in Alabama? Long story short, after the Compromise of 1877 ended Reconstruction, plantation oligarchs regained control of Southern legislatures and state universities started churning out history books that ignored Black people and poor Whites. When national historians set about writing widescreen histories of the war, they relied on these tainted histories.

The essay is lengthy, and filled with fascinating details documenting both accurate history and the dishonest machinations of those whose devotion to Confederate ideology suppressed it.

It made me wonder how often losers have become victors by simply rewriting history…

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Holiday Hiatus

I’m taking the day off, along with most of you. I hope you are all having a holiday filled with love, family and friendship.

See you all tomorrow.

Merry  Christmas to those who celebrate.

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