Occupy Wall Street?

View 695 Sunday, October 09, 2011

I can’t say I really blame the “Occupy Wall Street” groups. If I were their age I’d be thinking of joining them. They don’t really know what they want, but they really don’t want more of what they’re getting.

One radio commentator says “They want the damned bailout money back.”

When I was young I was the first in my family to go to a real college; my mother had a two year normal school degree and had been a first grade teacher. My father had matriculated in a Baptist College and was thrown out for reading James Harvey Robinson’s Mind In The Making, which was a pretty radical book back in those days. It actually accepted evolution… Anyway, in my time you could go to a state college without going into debt. My wife was the first in her family ever to get to college, and she worked her way through at the University of Washington; she graduated without debts. So did I. In my case I had the Korean GI Bill to help through most of it. I also worked at Reich’s Café in Iowa City, where I had a “board job”: an hour’s work as a waiter earned me a meal off the menu, and I kept any tips. With the GI Bill to pay tuition and rent, and at least one meal a day guaranteed by Reich’s, I was set.

Neither Roberta nor I even considered borrowing money to go to college, and neither of us had any problem finding a job when we got out. When I met Roberta she was a school teacher, and I was a Boeing aerospace engineer.

It’s different now. The US has poured so much money into the universities and colleges that it has built an education bubble. The costs of college degrees soared. Now you either start rich or you borrow money; very few can work their way through college, and that gets harder all the time. Indeed it’s very hard to get into a state college now: they want to bring in out of state students who will pay full price in order to support the insane cost structure. There’s no room for outsiders with reasonable but not outstanding records. Neither Roberta nor I would be able to get into the University of Washington now.

The first thing they teach in economics is that when too much money chases goods, the price of those goods goes up. Inject more money into a system, make it easier for more people to buy the product, the demand rises, the prices rise. It doesn’t take an economics degree to understand that; so when you make it possible for more people to buy a house, the price of a house will go up. And when you inject more and more money into the higher education market, then the costs will go up. We keep running that experiment in the hopes that this time it will come out different. And here we are. It costs an increasing amount to go to college, it’s increasingly easier to get loans, and the costs keep going up. Meanwhile the supply of people with college credentials goes up. Increase the supply of something and what happens to the demand? Particularly the demand for those with degrees in social sciences and the like. But maybe next year it will be different?

So they’re out protesting. The government spends enormous sums on – well, on anything. Bailouts. Bunny inspectors. Higher and higher pay pensions and benefits for government employees including college staff, administrators, and faculty. Money pours out of Washington every minute, but somehow after four years of education one has a lifetime of debt and no job.

Every person in the United States owes $47,000 that will have to be paid by someone. Add to that another $50,000 to $100,000 in college loans. Neither of those debts can be escaped by bankruptcy or anything short of disability and perhaps poverty. To get out of paying you have to get out of having much of an income. At least that’s how many see the situation.

Three years ago we were promised that things would be different. Hope and Change. We’re the one’s you have been waiting for. And now – well, now it’s worse. The spending goes on. Our masters – government employees – continue to get more and more. Pension costs go up and up (that’s part of that $47,000 each of us owes). Spending costs go up. And now those who would be the middle class find they are bondsmen. A few come out of college without debts – mostly those from rich families. We can be sure that Steve Jobs’ children will not be lifelong bondsmen – but that much of the prospective middle class will indeed enter life as debtors. Bondsmen. Not free.

I hear on the radio that the Occupy Wall Street people are moving toward Washington Square Park. I recall that one very well: I was once wanted on a misdemeanor charge of inciting civil disruption for a speech I made in Washington Square back about 1952. But that’s another story.

Of course protesting in the public parks is no way out of this mess. Neither is soak the rich taxation. I understand the temptation to denounce “greed” as the cause of America’s problems. I understand the strong temptation to respond by punishing the greedy. I am willing to discuss taxation schemes that have the intent of leveling the society. I am certainly willing to discuss resumption of the anti-cartel trust busting activities to prevent enormous concentrations of wealth. There are serious economic costs involved in doing that sort of thing, and if you confiscate all the wealth you will seriously distort the allocation of resources. If you succumb to the temptations of envy – they have this money, and we want it. You don’t need that much money – it’s not fair – you may find that covetousness has no boundary.

There really isn’t enough money to pay our debts by soaking the rich. As the Brits found out long ago, the problem with insisting on near equal divisions of the economic pie is that the pie stops growing, and after a while gets smaller and smaller. Envy and covetousness, such as I am hearing from Lisa Ann Walter on KFI as I write this, are powerful temptations, and succumbing to them can make you feel good. How dare you have that big party when I can’t find anything on sale at K-Mart! How dare you take ten million dollars for that movie performance. You don’t need that much! Take a million and be grateful! The list of things we can resent will never end.

FAUSTUS. Thou art a proud knave, indeed.–What art thou, the second?

COVETOUSNESS. I am Covetousness, begotten of an old churl, in a leather bag: and, might I now obtain my wish, this house, you, and all, should turn to gold, that I might lock you safe into my chest: O my sweet gold!

FAUSTUS. And what art thou, the third?

ENVY. I am Envy, begotten of a chimney-sweeper and an oyster-wife. I cannot read, and therefore wish all books burned. I am lean with seeing others eat. O, that there would come a famine over all the world, that all might die, and I live alone! then thou shouldst see how fat I’d be. But must thou sit, and I stand? come down, with a vengeance!

FAUSTUS. Out, envious wretch!–But what art thou, the fourth?

WRATH. I am Wrath. I had neither father nor mother: I leapt out of a lion’s mouth when I was scarce an hour old; and ever since have run up and down the world with this case of rapiers, wounding myself when I could get none to fight withal. I was born in hell; and look to it, for some of you shall be my father.

FAUSTUS. And what art thou, the fifth?

GLUTTONY. I am Gluttony. My parents are all dead, and the devil a penny they have left me, but a small pension, and that buys me thirty meals a-day and ten bevers,–a small trifle to suffice nature. I come of a royal pedigree: my father was a Gammon of Bacon, my mother was a Hogshead of Claret-wine; my godfathers were these, Peter Pickled-herring and Martin Martlemas-beef; but my godmother, O, she was an ancient gentlewoman; her name was Margery March-beer. Now, Faustus, thou hast heard all my progeny; wilt thou bid me to supper?

Thou shalt not covet thy neighbor’s (goods)
house or fields, nor his male or female slaves, nor his ox or ass, or anything that belongs to him.

Which turns out to be fairly good advice; spending your time in envious covetousness is not any way to be happy. Of course “what is my neighbors’ goods” is a fair question. Where did the wealth come from? Robbery? Theft? But then if property is theft, it’s easy to justify any action you like. If I am to be enriched by despoiling you, it’s easy enough to think of good reasons why I ought to get out the axe.

Taking someone else’s property to settle your own debts is a powerful temptation and it leads to powerful feelings of self-justification. But we all know that. If we wish to restructure the distribution of wealth, it is important to think carefully, not merely seize in anger out of jealousy. There really are optimum limits on fortunes, and organizations too big to fail are probably too big to be allowed to exist; but confiscation out of envy is not the remedy to that. Yes there are institutions that ought to be broken up. But not to enrich me or you. Not to pay my college tuition. Or yours.

The real objection to soak the rich taxation is that it feeds the beast. There is no way to sustain the 7% exponential growth in government spending that we presently enjoy, and any soak the rich taxation scheme that gives us the illusion that this spending growth can continue is far more dangerous and will do far more harm than any good we can gain from taking the money.

There may come a time when we need to debate the distribution of income – but not while we continue a 7% exponential growth in spending.

Cut the spending. Stop the exponential. Once that is done we can debate income structures. But not until then. Every week that goes by adds to that $47,000 each of us owes. There isn’t enough money to be taken from the rich to pay that. The only way out of this hole is to stop spending, then cut back the regulations until we have economic growth again. We can grow our way out of this. We can’t solve our problems with envy.

Edmund Burke noted:

As long as our Sovereign Lord the King, and his faithful subjects, the Lords and Commons of this Realm— the triple cord which no man can break—the solemn, sworn, constitutional frank-pledge of this nation—the firm guarantees of each other’s being and each other’s rights—the joint and several securities, each in its place and order, for every kind and every quality of property and of dignity—as long as these endure, so long the Duke of Bedford is safe, and we are all safe together—the high from the blights of envy and the spoliations of rapacity, the low from the iron hand of oppression and the insolent spurn of contempt. Amen! and so be it! and so it will be—

Have we come to a time when the insolence of the rich is too much to endure? Or is it from the rich that our troubles rise? Would despoiling the rich make us safer?

For those interested, I recommend Russell Kirk’s essay on the subject.

I don’t blame the Occupy Wall Street people. I do caution them to think about what they are doing. What is it you want? And be careful what you wish for.