Tuesday, July 14, 2015

Hillary Clinton's Messed-up Economics

Ever since the days of the Pharoahs, government has been expected to deliver prosperity, and woe betide the government that delivers Seven Lean Years from 2009-2015 instead of the required Seven Fat Years that obtained in the good old days of 1993-2001.

The truth is, of course, that there is very little that governments can do to make the economy better. There is a lot that they can do, and do do, to make things worse. That's because all governments take monies from productive economic actors and give it to their supporters.

Governments can't make it all better. They can't even command the tide to turn.

So Hillary Clinton's recent economic speech, labeled as "growth and fairness," delivered on Monday July 13, 2015 at the New School in New York City, points up the eternal problem of governments and the economy. Clinton is quick to complain about "an economy that still isn’t delivering" and about Wall Street and "short-termism." And she has the usual half-baked ideas to paper over the cracks. But she is pretty light on what government might be doing to make things worse. That is what ruling classes and their governments always do. They respond to every economic problem with more laws, more regulations, and more subsidies. They seldom worry about what government already does to screw things up.

Of course, the first thing to do is to blame Republicans.
For 35 years, Republicans have argued that if we give more wealth to those at top by cutting their taxes and letting big corporations write their own rules, it will trickle down, it will trickle down to everyone else. Yet every time they have a chance to try that approach, it explodes the national debt, concentrates wealth even more and does practically nothing to help hard-working Americans.

Twice now in the past 20 years, a Democratic president has had to come in and clean up the mess left behind.
Notice what she gets flat wrong here. Republicans don't argue that "we give more wealth to those at the top." Republicans argue that we reduce the top rate of taxes on income so that successful business owners will have more money to plow back into their businesses.

I'm sure that Hillary Clinton understands the difference between wealth and income. But the trouble is that she and her minions will end up believing the lie.  So after extolling the glories of the Clinton 1990s, she says:
Now today — today, as the shadow of crisis recedes and longer- term challenges come into focus, I believe we have to build a growth and fairness economy. You can’t have one without the other. We can’t create enough jobs and new businesses without more growth, and we can’t build strong families and support our consumer economy without more fairness. We need both.
Probably, as far as we can know anything about the mysteries of the economy and the market system, Clinton is dead wrong.

Probably the only thing that matters is growth. Once you have growth then everything else takes care of itself. When you don't have growth then everyone starts fighting over the crumbs. See Greece.

What happens when you get growth? First, the new successful businesses start hiring. So wages go up. Then the the successful business owners convert their capital gains into new enterprises. Which means more hiring, more jobs, a strong middle class with "strong families" and more "fairness."

Right now the hot growth sector is the "sharing" or "gig" sector from Uber to AirBnB and TaskRabbit. But Clinton doesn't like that because it threatens the old full-time job with benefits economy that center-left politicians have spent the last century manipulating and decorating for the benefit of their political supporters.

So Hillary Clinton gets out her two-handed economist.
This on-demand, or so-called gig economy is creating exciting economies and unleashing innovation.

But it is also raising hard questions about work-place protections and what a good job will look like in the future.

So, all of these trends are real and none, none is going away. But they do not determine our destiny.
Exactly. The new gig economy is going to smash all the pretty little entitlements and benefits that politicians have worked into the old industrial economy to buy votes.

And, contra Clinton, the "trends" do indeed determine our destiny. There is nothing a Hillary Clinton is likely to do about it except get in the way and support rich established interests against the nimble new technologies and techniques. Just like politicians did in response to all the other economic revolutions of the last two hundred years, from textiles, to steam, to electricity to information.

Just like President Obama is doing by turning the internet into a regulated-utility Obamanet.

The real problem with innovation is that it devalues the contribution of the once-dominant industries and their workers. They must adapt to the new situation. Only they don't want to; humans never do.

What politicians could do would be to make it easier for workers to respond to the changes and get with the new changes. Supposedly government already does that with its training programs and assistance to displaced workers. But then government makes it hard and expensive for workers to change career because of its stultifying regulations on occupational licensing and credentialism and its subsidies for education that make it more expensive.
We also have to invest in our students and our teachers at every level, and in the coming weeks and months, I will lay out specific steps to improve our schools, make college truly affordable and help Americans refinance their student debt.

And let’s embrace –

(APPLAUSE)

– let’s embrace the idea of lifelong learning. In an age of technological change, we need to provide pathways to get skills and credentials for new occupations and create online platforms to connect workers to jobs.

There are exciting efforts underway and I want to support and scale the ones that show results.
Earth to Clinton. We have been "invest[ing] in our students and our teachers at every level" for decades, and I'm here to tell you that "we" have mostly been making things worse.

But you wonder. What in the world could government "invest in" that isn't going to involve big expensive bureaucratic organizations like our current educational blob.

Because maybe the really "exciting efforts underway" involve the gig economy where students can go to school and work at the same time. Or take time off from school to earn some money and then finish their schooling after they've built up some cash.

Maybe what the government could really do to help is to get out of education and cut all its regulations so that education could be lean and responsive and cheap.

It must be obvious even to second-rate minds that whenever government gets in to help with something then lean and responsive turns into bloated and slow, and ruinously expensive.

Look, I get Hillary Clinton's problem. She's got to sound upbeat and forward-looking, because voters are in a Time for a Change mood. But she's also got to take care of the Democratic Party's supporters. And almost every one of them is part of the problem.

Clinton's problem pulls her in two different directions. And the result is a mess.

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