The 0.002446443 Percent

There is something about a widespread and largely spontaneous protest movement that appeals to idealists and the young.

Much of the coverage of the Occupy Wall Street movement has reflected this. Most of what I have read has been studiously non-judgmental, if not tacitly supportive. It was a different story with the Tea Party protests of a couple years ago. Many of those people were middle-aged or elderly. The OSW protestors include lots of young people, and that fits in better with romantic notions of protest. They don’t get hit with questions about whether their movement is diverse enough or if they’re just being greedy and selfish.

But if I had protestors camped out on my lawn, I think I would rather have the Tea Party. By all accounts they took all their rubbish with them when they left and did no damage to the places they gathered.

Politically, what the Tea Party had going for it was that the participants were united around a fairly simple idea: limit the size and power of the government. With backing from the Koch brothers, this translated into an effective exercise of political power that changed the actual results of primary and general elections. You may or may not agree with the Tea Party message, but at least there is little doubt about what it wants—or doesn’t want.

Occupy Wall Street has a fairly simple message as well, but it is more of a whinge than a prescription for action. The We Are the 99 Percent web page is full of heartbreaking testimonials to the pain caused by the recession and the achingly slow and weak recovery. The OSW message is that things are not fair and people are hurting. But there is no single message coming out of the movement, that I can discern anyway, suggesting what to do to fix things.

In my previous post, I mentioned my friend Chuck, who was certain that it was only a matter of time until the collapse of the capitalist system would usher in a socialist utopia. I lost touch with Chuck many years ago, so I don’t know if he eventually settled into bourgeois life or if he is still out there laying groundwork for the revolution. Maybe he’s even moved into a tent in one of the OSW encampments. But whether he is there or not, it seems clear that many of the most passionate OSW participants are Chuck’s kindred spirits. They keep waiting for things to get bad enough so that hordes of people from all walks of life will join them in the streets and, at least tacitly, support the radical changes they have always wanted to see.

Their problem, though, is that once they start talking about concrete steps to effect their changes, most Americans will step back. Elections have consistently shown the U.S. to be a center-right country. Mainstream liberal politicians would love to harness the energy of the movement, but that only works if the politicians offer solutions to the problems being protested. And any realistic solutions will necessarily be painful and therefore not popular.

The OSW movement has gotten a lot of traction with the media because of its claim to speak on behalf of the “99 percent.” As far as I can determine, the largest OSW demonstration in New York had a maximum of 20,000 people, by the organizers’ own estimate. (Media estimates were lower.) That’s an impressive number for a demonstration, but it works out to less than 0.3 percent of the population of New York City. It may be true that 99 percent of Americans own only 65.4 percent of the country’s wealth, but in New York less than a third of one percent, at the very most, are out in the streets.

This highlights a paradox of street protests. In countries where citizens have few or no political rights, demonstrations are inherently democratic because they are the only way for people to make their voices heard. But in democratic countries where people elect their government, demonstrations are actually undemocratic because a minority are trying to exert influence out of proportion to their actual numbers.

The problems highlighted by the Occupy Wall Street movement are real and grave. Unfortunately, there is no easy or painless solution to those problems. Even more unfortunately, the movement doesn’t seem likely to coalesce around any viable solution, easy or hard.

End of the World as We Know It?

Back in the 1980s I had a friend named Chuck, who was convinced that the corrupt, illegitimate capitalist system would inevitably and certainly collapse under its own squalid weight by the end of the 20th century.


I never was quite convinced that Chuck was right, but he spooked me enough that I stayed well away from the stock market during that decade, thereby missing many opportunities to make a lot of money. I did my best not to make the same mistake in the 1990s.

Although Chuck’s prediction did not come true by the end of the 20th century, one might well wonder if it might not be coming true now, belatedly. In the United States, the budget deficit is on a track for disaster, and the government seems incapable of doing anything to correct things. Unemployment is stuck at a high level, and protestors have ensconced themselves in many urban centers to protest income inequality. In the European Union, the inability of a number of countries to get their books in order looks as though it may eventually bring down the economy of the whole continent. Even an economy as solid as Germany’s looks as though it could conceivably be brought down by its interconnectedness with its neighbors.

So is this it? Is the whole system going to come crashing down? If so, will it lead to a socialist utopia run by Chuck and his brethren? Or will it lead to a breakdown in civilization, as we have seen in movies like The Road Warrior? I cannot claim to have any particular insight, but my gut tells me that we are not at the dawn of a new glorious socialist age, but there are quite likely to be major, disruptive political and economic changes in our lives in the near to mid-term. The U.S. and E.U. are both getting to the point where things will either inevitably fall apart or radical changes in government policy will be instituted. Both places face looming binary choices.


The E.U.’s choice is between 1) dismantling the euro zone by kicking the weaker countries out or abandoning the euro altogether and 2) accelerate political integration so that most countries surrender all meaningful national sovereignty to Berlin and Paris. The U.S.’s choice, ironically, is to 1) move more in the direction of the current European model, which as we can see is working really great, or 2) attempt to seriously prune the size of the federal government. In other words, both places have been on journeys that have gotten them to a bad place. Now their choice is to move forward or to move backward.

In the American case, moving “forward” might look like this. Confiscatory taxes would attempt to narrow the deficit and shrink the income gap that the Occupy Wall Street crowds are protesting. These taxes would affect only the top earners because the government will have voter support only if most people continue to pay low or no taxes. This will ensure that unemployment stays high, so the government will try to manage a permanent low-growth economy by providing job security for a majority but with no prospects for ever having jobs for a minority. Given that even confiscatory taxes will not erase the defict, inflation will become a permanent fixture, as the Federal Reserve has no choice but to monetize the debt.

Moving “backward” would inevitably involve much pain in the short term, as large numbers of public employees are laid off and the social safety net shrinks. But past experience suggests that eventually a robust economy would return, as more of the nation’s wealth is released from the government and put to work by the private sector. Eventually, unemployment would drop to more acceptable levels.

I honestly don’t know which way Europe is going to go. In the end, the decision will probably be made by German voters, who have to be getting fed up seeing their own economy put at risk by factors beyond their country’s control.

Likewise, the U.S.’s direction will certainly be determined by next year’s election. If the Republicans win the White House and majorities in Congress, we can expect the sort of rolling back that has happened in Wisconsin and was attempted in Ohio. If the Democrats—against all odds—win big, it’s hard to know what will happen. It’s difficult to imagine even a reelected President Obama and Speaker Pelosi moving the country further to the left in the face of the Democratic Party’s moderate faction, let alone Republican obstructionism. And those two have already demonstrated that they are incapable stewards of the American economy. The worst possible outcome will be a mixed result with continued split government and more gridlock.

The hard fact is that we are left in the position of no realistic hope for a good outcome. All we can do is hope for the least bad outcome. Otherwise, Chuck’s vision of the future may yet come to pass.

Math Lesson

Let's be clear. There are three kinds of people in the world: those who are good at math and those who aren't.

Unfortunately, politicians as a rule don't fall into the category of those who are good at it. At least that is the impression most of them give when they open their mouths.

So it was refreshing last month when President Obama invoked mathematics when answering criticism of his proposed so-called "Buffett rule." Said the president, "This is not class warfare; it's math." Nothing quickens my heart more than a political leader invoking the unambiguous certainty of verifiable arithmetic. But, as he usually does when talking about economic matters, the president disappointed. There is nothing at all wrong with the "Buffett rule" or increasing taxes on the super-wealthy and, in fact, it's basically a good idea. They already pay the bulk of the taxes, but they can afford to pay more. And tax rates on individuals in America are at historically low levels. (Taxes on corporations are another matter.) But the problem is that the tax bracket that takes in many wealthy individuals also takes in individuals who are operating businesses and who are not necessarily wealthy themselves.

But in trying to solve the fundamental problem of the government spending much more money than it takes in, neither the "Buffett rule" nor anything in the president's so-called jobs plan does anything about that problem. There's no point arguing over what the role or scope of government should be if a huge portion of the government's spending has to be borrowed in the first place. There's your math, Mr. President. If you take the number of taxpayers who would be affected by the president's proposed taxes on the wealthy and multiply it by the amount of additional tax each would pay, it amounts to what pundits like to call a rounding error in the federal budget. You would raise significantly more money by taking one single dollar from every man, woman and child in the country than you would by confiscating all the income from the super-wealthy. That is because the super-wealthy are such a small group. The Occupy Wall Street protestors keep chanting, with a bit of hyperbole, that the ratio of super-wealthy to everyone else is 99-to-1. No matter how much money you take from that one percent (the proposal actually targets around the top two percent), it's not enough to solve the problem. And, incidentally, if the protestors are truly distressed by the profits of brokers and banks, then the deficit should be their main issue. Look at how much of everyone's tax money goes not to programs that help people but to bankers and brokers servicing the debt.

In fairness, the president did not actually claim that his proposed tax increases would solve the deficit problem. They are meant only to pay for the new stimulus he wants. The president continues to focus on the next few weeks or months instead of on the looming disaster that is threatening the very viability of government.

One politician who does not shy away from mathematics is House Budget Chairman Paul Ryan. He has proposed a very specific plan for aligning federal revenue and spending over several years. There is much to criticize in his plan, but the reason it is easy to criticize is because it is full of specifics. If the president has crunched his own numbers to solve the structural deficit problem, he has not shared them with the public. Instead, he diverts attention from the problem by criticizing the opposition, for not supporting one more stop-gap stimulus proposal that even much of his own party doesn't support--and by talking of raising taxes on the wealthy. The Washington press corps doesn't help much because it is quite willing to follow each distraction the same way a dog follows a tossed ball. It is more interested in figuring out who is "up" and who is "down" in the political battle than dealing with the economic substance.

The reality is that, at some point, some leader is going to have to deliver some very bad news to the American people. The problem with talking about raising taxes on the wealthy is that it gives people who are only causally paying attention the impression that this will solve the problem. It won't. No one can blame the president for not wanting to be a buzz kill with the election season already underway. Assuming he understands the problem, however, he will stand a much better chance at re-election if he can talk about the economic situation in terms that people can understand and demonstrate leadership in confronting it.

Instead, he seems to be pinning his hopes on putting short-term blame on a party that, during his term, has held only one house of Congress for only one year. (He seems to have realized that too much time has gone by to keep blaming the previous administration, although his surrogates continue to do so.) That will be a neat trick if he can pull it off. But even if it does, the country won't be any better off. He seems to be hoping that, if he looks after his re-election, maybe the economy will fix itself.