Klinging To The Money

Hip middle-aged libertarians do not support racism. They merely support people who support ideas that support racism. Arnold Kling:

I think that President Obama set the bar ridiculously low when he said that 75 percent of the stimulus should kick in within by the end of 2010, but the House bill did not even get over that bar. Why is the stimulus bill so filled with non-stimulus while it omits real stimulus measures, such as cutting payroll taxes? 

I think the answer is that it is a reparations bill, not a stimulus bill. People who pay income taxes tend to vote Republican. People who live off taxes tend to vote Democratic. To the Democrats, the Bush tax cuts were a heinous evil, comparable to Germany's violation of Belgian neutrality in World War I. Now, they are demanding reparations, with hundreds of billions of dollars to be paid into teachers unions and other members of the coalition that won the election. 

Most of the bill makes no sense from a stimulus perspective. But all of it makes sense from a reparations perspective. 

[UPDATE: comments have been turned off. Apparently, some other blogger decided that my reference to "reparations" was a reference to reparations from slavery and hence a reference to the color of President Obama's skin. That had not occurred to me. I really was thinking about the Treaty of Versailles. But the comments were getting ugly.]

Kling thought he was being clever by using Germany's violation of Belgian rights as an example of reparations. Sure, he was using a loaded word but he was not loading the word with meaning, right? His meaning was perfectly clear: Obama was trying to pass an economic stimulus bill because he wanted to give money to Democratic voters to punish Republicans who gave tax cuts to themselves.  This is, of course, nonsensical, but if you believe that the economy did not need stimulus after the crash it makes perfect sense. And Kling has a basic philosophical dislike of government spending, not a racist dislike, right?

Kling begins somberly: “I think about what’s going on as an economist but I feel it as a father. My wife and I have three daughters between the ages of 19 and 25. And when I see what’s being done to their future I’m really angry. Back in September when they were talking about taking $700 billion dollars to unclog the financial system I wanted to yank Henry Paulson out of the TV screen and say to him: “Keep your hands off my daughter’s future.” But he got away with it. For me it felt like sitting there watching my home being ransacked by a gang of thugs. And now we’ve got a new gang of thugs and they are doing the same thing. So that’s how I feel, now back to how I think.” 

Kling says this is a big bill, but not a big stimulus. There is nothing timely, targeted, or temporary about it. It is a simple transfer of money from one set of people to favored interest groups of the Democratic Party.

Actually, Kling was a lot more nuanced at the time. He said some banks should be bailed out and some (maybe as few as 5) should be allowed to go under and worried that his view would not give enough support to foreign banks. He did not clutch his daughters and threaten Henry Paulson. Why pretend he did? Why did he feel the need to exaggerate his dislike of the stimulus when it was very clear that he disliked any government spending? Why did he discuss the bank bailouts rationally (for him) but use highly racially charged words for Obama's stimulus?--unless he thought playing on the racism of others would help him win his losing argument.

When Kling thought of favored interest groups of the Democratic Party, surely he was not just thinking of  African-American members of the Democratic Party. No doubt he was just as upset at the thought of stimulus going to women or gays or immigrants, who are all too poor to pay taxes and all vote Democrat.  It did not even occur to him that Obama was African-American, America was discussing reparations for slavery, and some Democratic voters are African-American, right?

We have three issues here: (1)Kling says he is not racist while using racially charged words. (2)All of Kling's proposals will hurt the poor and African-Americans are disproportionately poor. (3)We have not yet proven that Kling wants African-Americans to suffer merely because they are a different race.

What we are seeing is a contempt for the poor and powerless that is so profound it almost transcends race. It's possible that Kling is racist-he gives no proof otherwise-but any racism is almost secondary. It's the poor whom Kling despises. It is not true that "People who pay income taxes tend to vote Republican. People who live off taxes tend to vote Democratic."

Soylent writes:

"That point is very powerful rhetorically. But is it true?"
Not only no, but hell no!
http://www.taxfoundation.org/research/show/266.html
With few exceptions the states that recieve more federal spending than they pay in federal taxes are red states; Colorado and Nevada being the only notable exceptions that I can see. 

Kling is attempting to manipulate his readers using their greed as well as racism to win. Kling might or might not be racist but it is his overt dismissal of the 99% is 100% clear.

Rob:  So in this new adaptive economy, will we see like we've seen over the past two years with the recent recession, that some attribute to lax regulation and maybe some reckless business practices, in this new adaptive economy will there be the standards to keep that from happening?  

Arnold:  Ah, no!  Failure is going to happen in an adaptive economy.  Joseph Schumpeter used the term creative construction.  What we say in our book is that there's been this...at an economic 1.0 level, there's this conflict of, you know, people say, well markets work, let's use markets and other people say, no, markets fail, we need government and what we say is that markets fail and that's why we need markets.  That is, yes, markets fail a lot, there's individual failure, sometimes there's a collective failure as we saw with the financial crisis but the best way for the economy to adapt to the market failures is for markets to sort of pick themselves up and start over.  So new innovators are really what, people are wondering where the next jobs are going to come from, well they'll come from innovations.  Maybe the iPad will create an ecology of innovation around it.  People developing applications for it or more likely it will be something else; some innovation that we haven't thought of.  People still hope for great innovations in biotechnology or innovations in energy and so on.  

Rob:  How do we resist what we've done in recent times of privatizing profits then socializing the losses like we've seen in the past years.  What I'm speaking of is the financial bailout.    

Arnold:  My concern there is that what we have in Wall Street and in Washington is sort of the equivalent of the country club.  Where the country club members are very supportive of one another and don't recognize people on the outside.  Because the people who say the financial crisis coming were real outsiders.  These were people who didn't have the right ability to get along at places like Goldman-Sacs and so on.  It's interesting as you read the books that are coming out about the hedge fund managers who bet against the bad mortgages, these were people who just were not part of the this country club.  And some how we've got to break this country club control over finance and government so that we really benefit from points of view that are outside this sort of this insider country club point of view.  

So far so good, right? Mr. Kling is such a reasonable person, isn't he? Who doesn't want corporate/political control to decrease?

Rob:  I'd like to hear what you think about a recent comment by former presidential candidate, Ron Paul, when he said that there's really not a dimes worth of difference between Republications and Democrats and he lumped them all into a group called, corporatists.  

Arnold:  Well that phrase, corporatists, is, I think it's the biggest concern that I have right now about where the economy is headed and where Washington is headed.  That is a real focus on just the few large financial firms and central control from government and I think that term is an apt term.  I hope that there will turn out to be differences between Democrats and Republicans but one of the new books that I have, sort of assumes that that will be a problem that neither party really has, ultimately, a solution.  That what we really need is to think about ways to decentralize government and create, and this is kind of a far out idea, it may almost sound like science fiction, but forms of competitive government.  And ideas I have along those lines would be letting people allocate their own tax money to the charitable causes of their choice as opposed to having it allocated by Congress for them.  So these are kind of far out ideas to sort of make government a more competitive process.  Make it easier for people to opt into different governments, different regulatory structures and to sort of make use of what Detokville called the American tendency to form private associations.  We're a great country for forming private associations to solve problems.  We don't necessarily need a central government trying to solve every problem.  In fact, the, I see the central government as being very clumsy in it's attempt to solve problems.

Most unfortunately it appears the respectable Mr. Kling is an idiot. That is utterly illogical. Kling has a PhD in economics from MIT. He is not stupid but as we very well know, libertarians are often forced to look stupid in the service of their masters.  As we can see with Kling's race problem, it doesn't matter if he actually believes what he says. What matters is how much economic damage he can create for his employers, the Koch-created Cato Institute.

  Rob:  While politically unpopular, and certainly immeasurable tragedy on a personal level, have there been too many home foreclosures or maybe not enough home foreclosures?  

Arnold:  My view is that we need more.  That's actually what I said at the hearing is that by trying to mitigate the crisis, they're actually keeping the crisis in front of us when we really need it to be behind us.  You know, obviously, foreclosure is a painful process for individuals, but people can move on and there are so many people who stand to benefit from having the crisis behind us.  I mean, above all there are people who could buy homes and here the government is trying to do it's best to sort of keep home prices up so that home buyers in some sense are being cheated.  It's as if the only people that the government cares about are people who, right now, want to sell.  But for everyone who wants to sell right now, there are people who want to buy and you're not making them better off by trying to keep home prices up.  And I think people in general will be in better shape when there's a natural balance of supply and demand and people don't have to think about well how many houses in this neighborhood have people who are just on the borderline between foreclosure and not.  And one of the things that these loan modifications do is they keep them right on the borderline.  A lot of these people are going to default again and they're just being set up to fail.  That's not a productive situation.  

The homeowners who were victimized or unlucky or foolish or greedy are utterly unimportant. We need to move on and focus on the people with money who want to buy houses. Everyone will be better off if the poorer homeowners lost their homes in forclosure and got out of the way of the rich's profits.

Rob:  Like many states, Oklahoma is facing a fairly significant budget gap and as severe as it is, it would almost be three times as large if it wasn't for the stimulus dollars that are coming in to all the states and here in Oklahoma.  While the stimulus package has been criticized for not creating jobs has it in fact saved a lot of jobs certainly in the public sector?  

Arnold: Well, my concern with that is that there's another way to save jobs in the public sector and of course this never gets me any popularity when I say it, but you could cut salaries in the public sector, right.  If you have to cut your budget by ten percent, cut salaries by ten percent.  You're not going to lose workers and people will be unhappy and I'm not saying that public sector workers have done something to deserve it, but this is the economy we're in.  If you're in the private sector, you know, people haven't been earning as much.  People are losing jobs.  So if you're company is losing money, as a worker, you're going to hurt sooner or later and if your state government is losing money, as a worker, you know, you probably ought to expect to be hurting sooner or later.   

Rob: Thank you for your insights.

If the private sector is suffering, make sure that the public sector is suffering as well. That'll solve the problem of dramatically curtailed spending in a consumer-spending-based economy. Again, Kling is not stupid. He is merely an employee doing his job. Kling's personal racism or lack of it is very secondary to his role as a servant of the elite, doing his best to create economic hardships for the poor no matter what their identity is. He makes many reasonable arguments against the collusion of the powerful but his libertarian policies would benefit only the very wealthy. Someone who wanted to end the collusion between finance and government does not advise the dissolution of government for the betterment of the people. It takes a Koch employee to do that.