Sunday, September 26, 2010

Has the Republican Party Really Represented the Social Conservative?

Before I begin, I just want to let the reader know that I do not support the political view commonly held by evangelical Christians or social conservatives. My political views will come out over the course of time.  Because I do not agree with a political ideology doesn’t mean that I don’t see flaws in the way in which these groups of people are being represented.  This blog specifically asks and addresses the question:

“Why, if the Republican Party represents the social conservative, have they accomplished so little, relative to the leaps and bounds the Democratic Party has accomplished for social liberals?”
 
PULLING A FAST ONE
  • Engel v. Vitale in 1962 found that it was unconstitutional for a state official to write an official school prayer and require it to be recited in public schools.
  • Abington School District v. Schempp in 1963 found that it was illegal to have school-sponsored Bible-reading in public schools.
  • In 2000, the decisions surrounding the case of Santa Fe Independent School District v. Doe found that student-led, student initiated prayer at football games is illegal.
  • On January 22nd, 1973 Roe v. Wade established the right for women to abort unborn children up to the 28th week.  This decision was led by a team of lawyers that were sympathetic to the Women’s Equity Action League which supported the Feminist movement of the 1960s and 1970s.  Norma McCorvey is the ‘Jane Roe’ in the Roe v. Wade case and claimed in the 1980s that she was a pawn of two young and ambitious lawyers who sought a plaintiff to use so they could challenge the Texas state law that prohibited abortion.
  • In 1992, the case Planned Parenthood v. Casey went to the Supreme Court that boasted eight of nine justices appointed by Republican Administrations.  The validity of this case could have been upheld or dissented by a majority vote of support or opposition of Roe v. Wade.  And although all of the members on the Supreme Court, except one, were appointed by a Republican Administration, the judges, in their entirety, upheld and supported, at the least, a portion of the Roe v. Wade case.
  • On September 21st, 1996, United States President William Jefferson Clinton, a Democrat, signed a public law which said that no state needs to treat a relationship of the same sex as a marriage – denying federally recognition of same-sex marriage.  More importantly to the conservative, this law defined marriage as a civil union between one man and one woman.  This was the most significant measure achieved for the social conservative, but it was accomplished under a liberal administration.

These cases are proof of how well the Democratic Party has represented social liberalism.  But what proof is there that shows the Republican Party has been a productive representative of the social conservative?  Are they abusing their resources and power in order to use those that support social conservatism?  Is their sole objective to get votes?  If we look at the Republican Party’s historical record, it is clear that the Republican candidate is more likely to run on a social conservative campaign agenda and then later ignore the promises made to social conservatives about legislation to focus on the economic conservative.  If the conservative is the same person, they switch the focus from civil issues to economic issues. 
So, how long has this manipulation of the social conservative been happening?  In a 1970 New York Times interview, Richard Nixon’s political strategist, Kevin Phillips, revealed the administration’s strategy to capture the social conservative vote:
“From now on, the Republicans are never going to get more than 10 to 20 percent of the [black] vote and they don't need any more than that... but Republicans would be shortsighted if they [softened their] enforcement of the Voting Rights Act. The more [blacks] who register [in the South as Democrat], the sooner the Negro-phobic whites will quit the [Democrats] and [join us on the Republican side]. That's where the votes are. Without…prodding…the blacks, the whites will backslide into their…arrangement with the local Democrats.”
The majority of the social conservatives in America, at this time in history, were Southern Democrats. The Republican Party’s decision to allow African Americans to register and vote freely set into play an ingenious political strategy.  This strategy was one that depended on the newly allowed African American voters to go to the Democrat side.  This necessarily forced the Southern Democrats, who were against giving African Americans freedom, to gravitate to the Republican side.  This, of course, was the party with the least amount of African Americans.  In order to gain support for the newly disenfranchised Southern Democrats, the new Republican Party, not yet considered “the conservatives,” ran on a platform that boasted its support for a small federal government and a large portion of power to be given to the state.  This, in turn, would pave the way for the Southern Democrats to establish the highly sought after disintegrated state.  Nixon’s strategy was to woo them with the possibility of establishing a state that would have enough power to legalize segregation and minimize the civil liberties that the minorities and alternative lifestyles begin to receive.
So what does the beginning of conservatism have to do with the social conservative today?  It’s probably no surprise that the politicians you vote for today are far from concerned with issues like prayer in school or the reading of scripture before class.  As cliché as it sounds, it is truly because they are primarily concerned with passing laws that put money in their pockets and votes on the ballots. The strongest evidence of this can be simply seen in the lack of headway that has been made for the social conservative.
So, what’s the answer? How can those who are being ignored be heard?  Because votes are the life of a politician, the greatest impact would come from a united front of the social conservatives. In order to speak up there must be an effort consisting of a majority of supporters who stay home during a mid-term and presidential election.  The message, formally sent by representatives of the movement, should let the Republican Party know that unless leaps and bounds are made which support the views of the social conservative, they will lose your vote.   If they do not listen then it won’t be any different than normal.   That is, a milk job by the Republican Party which tells everyone what they want to hear.  Then they’ll pass Mickey Mouse legislation that they’ll brag about only to make it look like they’re kind of doing what they said they would, but in all reality, they’re just focusing on and concerned with the economic side of conservatism. After all, economic conservatism keeps the Republicans in office and their wallets full.

Let's Kick 'em While They're Down

The idea of a policy which mandates welfare recipients to pass a urine test in order to receive their monthly check is becoming an ever increasing view. In short, the argument says that because many people on government assistance use their benefits to obtain and abuse illegal or prescription drugs they should be mandated to take urine screens before receiving their check. The primary concern is with the use and allocation of US tax dollars in a way that allows those on assistance to obtain and abuse illegal drugs. Moreover, the solution proposed by the supporters of this view, mandating urinalyses for those who are on assistance, is based on a false assumption that says a problematic proportion of the people who receive welfare benefits are drug users. There has yet to be a reliable source that shows that a substantial amount of welfare beneficiaries are drug users or drug abusers. Moreover, the explanation of "I deal with it and see it every day" is a common justification, but it only highlights a certain environmental or geographical locale within the United States and therefore does nothing but block the path to a better understanding of the problem.

In this analysis, it is shown that the majority of the people in the US who abuse drugs, in fact, do not receive any type of government assistance. Moreover, the misallocation of tax funds this view’s group is concerned with would best be addressed by increasing the intensity of investigations and police action within the population not on assistance. Furthermore, targeting the population on government assistance would lead to monetary inefficiency, an increase in class stigmatization, and ultimately an overall decrease in moral hazard.

CASH VERSUS COUPONS

Modern economic theory shows that awarding cash to the poor is better than awarding coupons mandating what they can buy. If the cash is given, then the consumer can buy a wider variety of products. If they are given a coupon for only food or only a jacket, they can only buy what the coupons mandate them to buy.

So, in modern economic theory (that's the right-wing, republican, conservative economic theory), giving the poor cash is more efficient than giving them food stamps / coupon mandates. If they weren't given cash, then coupons would be distributed. Once coupons are distributed, there needs to be more subsidies to support both the printing of the coupons and the products for which the coupons are used. That just means higher taxes

Now, we get into good ole left-wing, democratic, liberal economic theory - which is (in its extreme) the poor receive no money, only coupons for the products they are mandated to use / buy. This would allow them to not buy drugs, but only what the government mandates them to buy. Most economists go with the all cash theory because, well, no one wants to support a communistic idea. Today the US supports both, although there aren't actual food stamps anymore.

According to this view presented, and the reasoning behind it, there needs to be an equaling. If the purpose is to stamp out those who can, theoretically, sit around and soak up the benefits of our tax dollars, then it must also be mandated that all beneficiaries of government payouts which come from taxes also need to take drug screens. Therefore, those who receive checks for unemployment, those who are government bond holders - both domestic and foreign investors, anyone receiving an economic stimulus package, anyone adult choosing to go back to school and not work, all non-active church members - not clergy because they work (assuming the church is a non-profit), all government employees on their payed vacation should be screened on each payday, my tax dollars are paying for it - they are not working during this time and there is no absolute right to a paid vacation.

 WHAT'S THE REAL QUESTION?

The point I'm trying to make is that many people make this argument, but when the same exact situation is put into a different context it sounds absurd. All of the examples given might be working on something else, but didn't explicitly "earn" per se the tax dollars allotted to them. Just as the welfare beneficiaries may not be working at a job, but they may be working by looking for a job. But the poor seeking a job isn't implied - the poor receiving government assistance are always - always - portrayed as lazy and good for nothing. So, I agree that there are a few bad apples - there always is, but I have to disagree that those bad apples are the identity of the majority of the people on assistance.

At the end of this note is the most up to date, peer-reviewed study published so far on recipients of tax-derived transfer payments and drug use/abuse. One thing to note, the issue doesn't lie in illegal drug abuse, the largest problem within the beneficiary 'community' is with alcohol. Also, the numbers derived from the study streamline (are about the same) the percentage of abusers in the general population. By a process of elimination we can logically infer that those abusers who work and are not on assistance, on average, have more money to spend on illegal substances.

This brings up a few questions:

1) What is the primary concern of mandating drug tests?

2) Why should those who spend less money overall on illegal drug use be the target, why not target those who behave the same way as those on assistance do (the study shows that), but have more money, overall, to spend on illegal drugs?

3) If tax dollars supporting an 'immoral act' are the primary concern, then why not target one rich person, like a political figure instead of trying to target an entire population? I have a whole slew of examples that exemplify one person squandering US tax dollars away for an immoral cause - an amount superseding the aggregate of welfare benefits. That in itself would curb immoral acts as much as drug testing would. It would also save more on taxes than mandating a drug test for welfare recipients, which might (IMO 'will') put more of a stigma on receiving assistance - demeaning those who apply and/or receive.

4) If the reason behind mandating drug tests for recipients isn't because of curbing drug abuse (or alcoholism if you wanted to make the greatest impact) and it isn't because US tax dollars are supporting a societal moral hazard, then what is it?



This study was performed throughout the US and should not reflect anomalies in specific geographical locations.


http://www.niaaa.nih.gov/NewsEvents/NewsReleases/welfare.htm


SUMMARY OF MY FEELINGS

I just think that this problem can be better solved (spending the less money) by targeting a smaller population that is the foundation of the problem. For example, if you target the doctors who are known to provide prescriptions illegally, then the total number of people you are 'catching' decreases drastically - thus saving more money, and in my opinion getting to the root of the problem. If the Doctors who do this are targeted, then you slowly eliminate the places that can provide prescriptions for abuse. Moreover, you get around adding to the negative stigma that those using government funds are 'needy drug dealers abusing our tax dollars.' Additionally, you would also be targeting more of the people who actually contribute to the problem. This would also simplify - as much as it can be simplified - the problem.

This not only targets drug users on state benefits, but it also targets those who are not on assistance and spending their money on illegal drug use - bringing down a larger portion of the population. So, I disagree with those who think the issue is and can be solved with the targeting of everyone on state assistance. I believe in targeting those who are the closest to the source, like doctors, and regulating materials like Claritin that are used to make illegal drugs domestically.  This would prove to be more efficient and 'morally right' than mandating drug tests for those who, on the most part, are innocent. Additionally, I think that targeting the sources or those closest to the sources of the illegal action has a larger impact and covers a larger portion of the US population - breaking down geographical barriers and anomalies that might exist, ultimately allocating our tax dollars more efficiently and not stigmatizing an entire population.

I guess I just I see this issue in a different way. It just seems to me that taking the stance to only target the drug use of welfare beneficiaries and not the largest contributing population - those not on assistance - is like saying "it's okay to do drugs, just not with tax dollars," which to me is absurd because it oppresses a group with a tendency of being generationally poor (which is a sociological phenomena and not because they're lazy), it makes the entire issue of drug abuse about whose money goes where and not about the welfare of the people wrapped up in it.  Not only that, it targets a minority of the "problem" population. Therefore, leaving no concern for the public's perception of those on assistance.

It's demeaning in the sense that only a portion (around 5%) of those on assistance are buying and using illegal drugs. The same percentage of those not on assistance are drug users. Focusing on the population that do not use assistance would make a larger impact without making the 95% who don't use drugs feel like criminals. I think that it comes down to the simple fact that people are more worried about where their tax money is being spent than they are about nipping the problem in the bud. The fact is, a greater proportion of illegal drug users are in the population that aren't on assistance. With that said, because the greatest amount of activity is in this population the greatest focus should remain there.  Moreover, because a greater portion of the population that abuses drugs are not on assistance, it is actually inefficient to mandate urinalyses for all beneficiaries.

So why target the population that contributes the least of the two?

I think those who hold to this view think that the allocation of their tax dollars are more important than increasing the general health of society. Is Adam Smith's "Invisible Hand" the Democrats of society? Possibly.

I think it is ironic because if the majority of the population that abuses drugs are in fact not on assistance and there needs to be an increase in law enforcement to support the fight against illegal drug use, where does the money come from to do this? Taxes. So shifting your focus to the people on assistance in order to better allocate tax dollars is not the best approach. The best way to efficiently allocate your tax dollars is to combat illegal drug abuse within the general population.

So, I think we should continue to combat illegal drugs by increasing the intensity of what we're already doing. Taxes will increase relative to how much of the stuff we want to get off of the streets - the magnitude of the increase depends on the person paying the taxes. But, there is always a cost and fighting illegal drugs isn't cheap, so taxes will more than likely increase. Unless you make all drugs legal, then the dealers would be choked out from extremely low prices for high grade drugs. But that's too radical of an idea for the conservative American to even entertain.

Saturday, September 25, 2010

Theory, The Meltown, The Fed, Minimum Wage, The Value of a Dollar and Taxes

The Financial Meltdown Using Economic Theory


I am assuming that whoever is reading this has limited to no knowledge of economic theory, it's not meant to be intellectually degrading only to clarify what I'm trying to say.

By definition the money supply, M, is equal to:

the price level, P, at time t, multiplied by the output, Q, at time t, divided by the frequency in which money is spent, V, in time t.

--or--

M =PQ/V. 

Now, considering an entire economy, the sum of all the products' price multiplied by the quantity at which they sold in time t, that is, ∑ (P x Q), is just the Real GDP multiplied by the price level, PL, in time t, (RGP*PL), which is the definition of the Nominal GDP in time t.

Therefore if:

M=PQ/V
and

P*Q=NGDP

Then it also must be that:

M=NGDP/V


Or in words, the money supply in an economy is equal to the total units of money produced from selling those products divided by the velocity, V, or the number of times a dollar is spent in time t.

Don't worry, it looks like a lot, but it will all come together.

Okay, the Nominal GDP (the GDP in current dollars) or NGDP is equal to G (Government expenditures)  plus I (Business Investment) plus C (Consumer expenditures) plus NX (Net Exports)

--or--

NGDP=G+I+C+NX

This accounts for all transactions in an economy.

The value of a dollar is a relative measure of the price level.  That means that it is dependent on the price level.  Since the value of the dollar is explicitly dependent upon the price level and the price level is dependent on the economy's output, the nominal GDP in time t, then the value of a dollar is dependent upon the level of GDP at any arbitrary period of time.

This can also be seen using calculus: 

P*L(NGDP,...)

Where L is the aggregate work effort of the economy and the "..." of the function is the substitution and wealth effects during period t -- the error term if you're doing a regression analysis. 

To clarify:

MV=PQ

PQ=NDGP

NGDP= G+I+C+NX

M = PL (NGDP,...)= M/L(NGDP,...) = P

The reason for the financial meltdown was due to the derivatives the investment industry built their portfolios on.  The hot topic starting during the late nineties was mathematical finance.  Math wizards would develop these elaborate quantitative equations for risk. Investment banks trusted the math and took on much more risk than the SEC would ever allow. The SEC didn't know how deep these firms were vested because they would use smaller companies they owned to to divert their debt before an audit, thus giving them or allowing them to keep a higher rating, which meant continual or more credit to make more money.

Most of these hedge funds were in high risk households, thus the name sub-prime. A large portion of the high risk borrowers began to stop paying their mortgages because the interest rates, floating or balloon interest rates, jumped 15 or 20 percent. This caused the firms that owned the mortgages to lose money. That meant that there would be a decrease in the supply of money.

So, using calculus we can see that the percentage change in the money supply growth plus the percentage change in the Velocity of money is equal to the percentage change in the price level (which is inflation), plus the percentage change in output.

--or--

%ΔM+% ΔV=% ΔP+% ΔNGDP

If M decreases, NGDP decreases, if NGDP decreases, then P increases, thus increasing the demand for money. 

At the moment the Fed knew what was going to happen, they had to ask themselves an important, but difficult question: Do we stick with the free market approach, don't move forward on any type of regulation and let the businesses crash and burn. Note, if this were to be the option chosen, then, they would be, essentially, eliminating the private investment of the NGDP (the "I" of the G+I+NX+C equation). But the portion of the private investment they were dealing with was a large part of the US economy. So, electing a free market approach could have lead us to another depression. What other option did they have? 
 
The one they chose: subsidize the debunked companies that have ginormous amounts of toxic investments. Particularly, save the ones that would be able to get back on there feet and pay the funds they received promptly. Although this was the idea chosen, it isn't any surprise that with the increase in the money supply there is the likelihood that these same banks could unload their excess reserves at the same time sending the price level crashing.  

Given the empirical fact that this was the worst recession since the Great Depression, it is hard to believe that if we would have just let the free market reign and reallocate market controls everything would have been fine.  Most free market economists would agree that we would be in deeper than we could handle right now if we would have just let the market correct itself and the decision the Fed made to buy the toxic assets, mandate an interest rate on bank reserves and give out interest free loans was our best choice.  It's just now that we're out of this recession, the Fed has to deal with everything: inflation, deflation, unemployment and money supply.

The Value of the Dollar and Taxes

There was a concern that the value of the dollar would decrease. But a decreasing currency isn't a bad thing during certain times, like in a recession; it is actually something you want to happen. A cheaper dollar means cheaper prices on exports, which essentially increases output (NGDP), which is a function of work effort, therefore increasing the demand for labor and helping the economy return back to a safe state. The only issue with this, now, is that China's Yuan is keeping the dollar from rebounding (increasing in value). The Fed hasn't been shy at letting China know that they need that to go back up here soon.

I can foresee taxes increasing sometime soon.  It's not hard to guess with a Democratic president, the Bush tax cuts expiring, and the new Health Care reform. But, the cost of a small increase in taxes relative to the benefit of not going into another depression in itself seems to be a fairly good trade off, for myself and my future generations.

Free Markets and Increasing Minimum Wage

Being both a supporter of free markets and an increase in minimum wage is counter-intuitive.  The free market fixes itself by lowering the minimum wage to decrease the supply of labor. As soon as the government or a labor union steps in, it's not a free market economy anymore. My point is that an economy that isn't regulated by a governing body is doomed to fail the efficient individual. And conversely, an economy completely regulated by a government is doomed to fail the efficient individual. Just look into the articles on Fidel claiming that the "Cuban Model Economy is Dead."

In economics there is a theory called learning by doing.  It just says the more that someone does something the better they get at it.  There are many companies that pay their factory workers over twenty dollars an hour.  Intuitively and historically this makes sense. The higher wage a person is paid the less likely it is that they will rent seek, or in other words, look for another job. Therefore, job retention at these higher paying jobs are, on average, higher than in other areas of the labor market. The higher wages are more than likely  caused by Labor Unions. Labor unions restrict the amount of labor a firm can hire, therefore decreasing the supply of labor. This increases the firm's demand for labor. Since the firm is short on labor and the union legally prevents the company from hiring additional workers to decrease the average wage per worker, the wage of labor increases dramatically.

In general, Democrats and other pro-government parties support labor unions. Republicans should not support labor unions because it goes against their political ideology. Normally, they usually don't support increases in the minimum wage. This is a supported belief though, empirical economic facts debunk the widely held belief that a lower minimum wage impedes the working poor from attaining higher earnings. A prominent labor economist, Dr. William Even, finds that the majority of the workers making minimum wage are 16-18. And that as people get older the more their wages increase above minimum wage. Therefore, we would be better off to invest in training, education, or other ways of increasing the adult wage. Yes there are some in the labor force making minimum wage that are considered the "working poor," but the percentage relative to the aggregate is so low that there are a lot of other pertinent issues that must be dealt with. You can find Dr. Even's article summary here:

http://www.epionline.org/study_detail.cfm?sid=16

On the Abolition of the Fed

The idea of not having a central bank isn't a new idea.  It's been questioned ever since its inception.  The Fed regulates and maintains the general health of the economy very well. I might add, relative to its complexity.  They are experts, where as our representatives and congress people are not. There have been less bank panics since the fed has been in charge, which seems to suggest that they also play the part of a sort of psychological factor. Although I agree that the Fed's power is outrageous, I do not believe that it should be abolished.  They play too much of a useful role in our economy.  This doesn't mean that I think they should be allowed to do as they wish. There needs to be a way of complete and total transparency with a watchdog that is accountable to other balances of power.  But then again, they would probably pay everyone off to pass a law that would give them an equivalent of executive privilege. Although the stunt they played during the melt down - pressuring congress into passing a bill for trillions of dollars four days after the meltdown began - wasn't too far off of it.