Thursday, November 24, 2011

A quick thought on OWS and the Tea Party

I think peoples' mistake in criticizing the Tea Party was in thinking they were somehow cheering on crony capitalists.

I think peoples' mistake in criticizing OWS is in acting like OWS is against capitalism.

I think the mistake of both the Tea Party and OWS is in acting antagonistically to the rest of the population - as if nobody outside the movement wants a free society or as if nobody outside the movement is frustrated with Wall Street. And I think both movements are lacking in concrete ideas.


  1. 1. I don't think OWS is hostile to the rest of the population. The we are the 99% thing is taken pretty seriously.

    2. There is no need for concrete ideas. Even given that, there is a very clear critique coming out of OWS on issues of inequality and problems with the wall street/corporate business/government partnership.

    Anyway, there is no need for concrete ideas. The success of OWS so far has been to highlight a couple of basic facts that are now part of the national dialogue. For OWS on the ground OWS is more about creating a network moving forward than it is about a simple "meet our demands and we will go away" protest.

    This is an awesome blog post on that second topic, put into economistese:

  2. There is a sense in which anyone embracing what is perceived to be a "neoliberal" policy is antagonistic towards the interests of the movement.

    Let me clarify on the "concreteness" point. Certainly movements can have general goals - there's nothing wrong with not being concrete. I should say that I think OWS could benefit from more concrete demands and they could get the job done better if they had more concrete ideas. There's no need for them, but it would be smart to develop.

  3. What I rather find wrong about them is that anyone who disagrees with them is a member of the plutocracy elite.

    The "grassroots" and "take our country back" nonsense from the Tea Party, and the "99%" rhetoric from OWS proves it.

    You can not be a supporter of stimulus without being an elite. You can not be a supporter of even a Swedish style bank bailout without being an elite. You can not support lower tax rates without being an elite. You can not support continuation of government programs without being an elite.

    I mean, if I ever stood on a podium and said that 1.77% p.a. interest rates mean that the government can raise spending while still lowering tax rates, I'd get fruits and vegetables thrown at me my both of these faux-populist movements.

    I dislike their claim to populism, because they don't believe a member of the masses can have sober, rational analysis that leads to same conclusions as "elite" policymakers.

  4. I kind of sounds like you guys are complaining because both these movements have taken an ideological stance outside the "neoliberal" consensus that's currently running the country into the ground. In that sense, yes, the neoliberal way of doing business is, in fact, antagonistic to the interest of the movement.

    I dunno, I just think it's just as weird and unfair a position to take that you are simply presenting the "rational" and "sober" analysis while the outside ideological position should be dismissed because they are too "passionate" and have a intolerance for what they rightfully identify as the competing utopian construct of neoliberalism.

    I dunno, this whole idea that you somehow have first, reached a dispassionate, technocratic conclusion and second, that because it is "dispassionate" and "technocratic" it is true is kind of absurd.

    Also, Prateek, I don't even disagree with the prescription here, just the silly idea that it is somehow isn't ideologically motivated. However, you comment makes it pretty clear that you've ever talked to anyone from the occupy movement because I think broadly speaking among those of us that have a background in economics that is exactly the solution we would pose with the soberly and rationally reached caveat that lowering taxes on the rich will not generate any additional economic activity.

  5. Also on the concreteness point. Someone once described Zoccoti Park as a "church of dissent" which I think captures the idea of whats going on with OWS. OWS is a movement, not a protest, and as such is a point of contact for people and issues, not just a place to make demands that nobody is going to listen to anyway.

  6. Andrew, all I said was that it's possible to keep tax rates very low when bond rates are less than 2% p.a. It was a purely a matter of what is possible, not what should or should not be done.

    The purpose is not so much to justify a tax rate reduction, so much as to see whether any given tax rate is adequate for revenues. Taxes are, but a tool of government solvency. When the government is capable of remaining solvent without raising additional tax revenues (due to low bond rates), there remains not much justification for keep tax rates at the same level in that year.

    Except for political posturing.

    It's not about whether lower tax rates generate more activity.

    Also, I didn't say anything about lowering taxes "on the rich". Don't put words in my mouth. Remember that US government remains solvent even with half the population not paying taxes. And let's remember that even Democrats have proposed lower middle class tax rates for the recession as a part of stimulus. It's about tax rates in general.

  7. I assume you don't think the debt/gdp ratio matters. If you believe that then, yes, it is not about what generates economic activity since lowering taxes has no cost. However, if you do think that the debt/gpd ratio matters then you need to justify raising the debt/gdp and you can only do that by invoking a multiplier. In other words, it is about whether raising the debt/gpd by lowering taxes generates more activity.

    I did not say you said anything about the rich. I simply pointed out that there is no simple, neutral "lower all taxes" claim to be made and that I am in favor (sort of) of lowering taxes, but only insofar as it increases consumption and/or rights the housing market. That policy is dispassionate and technocratic and also discriminates against the rich.

    Also, it is not true that "half the population pays no taxes".

  8. Maybe I misunderstood. It kinds of sounds like you are arguing a supply-side Laffer curve for taxes. In which case, the Laffer curve is only meaningful if you are talking about maximizing economic activity.

  9. Debt to GDP ratio is not the most useful indicator.

    Debt is a stock figure, and GDP is a flow figure.

    Governments often keep a lot of assets in their own name. The Norwegian government, for example, has a pension fund with investments that are valued 1.5 times the GDP. Its debt is 0.5 times the GDP. So take all that together, and you have a very solvent government.

    Same with United States government. As a large landowner and an owner of state government bonds and municipal bonds, it can always liquidate those claims to repay its debt.

    Other than that, governments can obviously print money in the worst case scenario to pay off bonds, and since bondholders are always assured a nominal return, they have high demand for government bonds. All in all, a government such as that of United States can pursue high social spending without any high tax rates at all.

  10. Thanks for the basic economics lesson. Not sure what it has to do with the point I was making.

  11. I read it again. So, you are saying that the government should cut taxes and increase borrowing becuase they can always sell off the national parks later?

    I mean, in practice, that is actually soberly and rationally designed neoliberal public finance (from Greece to Arizona) so I guess I'm not surprised you are advocating it.

  12. Sorry to interrupt the conversation, but if you don't mind me asking, Andrew Bossie, did you get my e-mail?

  13. I sent it to you on the morning of 25/November/2011. (I'm currently in the UK). Perhaps I should try again...

  14. Not sure about the Tea Party but OWS, which I support, errs when they refer to the 99%. For it isn't the top 1% who are at odds with them but the top .01%, the 10,000 wealthiest families in America roughly speaking. They make up the "donor class," as NYT financial reporter David Kay Johnston has dubbed them: the uber-rich who bankroll both political parties and control the political agenda. What's more, as Sen. Sanders makes clear, even this top .01% is not uniformly opposed to the interests of the 99%, though no doubt a solid, influential majority of them are.

    Why is this important? Do not multiply your enemies unnecessarily. The million wealthiest Americans are essentially the petit bourgeosie. They are your Main Street merchants, local bankers, small factory owners. If you come after them they will oppose you with every fiber of their being and, if history is any guide, will likely prevail.


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