Tuesday, August 2, 2011

Musing about spending and values

Some readers may find the recent emphasis on economics at Ethical Musings tiresome. However, how a person/group/nation manages their finances and spends those funds generally reveals their true values.

David Leonhardt has covered economics for the New York Times for the last eleven years. He is leaving that job to become the head of the Times’ Washington office. In his last column on the economics beat, “Lessons from Malaise” (New York Times, July 26, 2011), he made a number of important observations:

·         When it comes to economics, we know that a market economy with a significant government role is the only proven model of success. The United States has outgrown Europe partly because of our greater comfort with market forces. China and India boomed after allowing more of a market economy. On the other hand, unencumbered market forces often lead to disaster, as 1929 and 2008 made clear.

·         We also know that ever-rising levels of education are crucial to a country’s success. Not only is the evidence all around us — the college wage premium has been higher than ever lately — but careful studies have found that, on the margin, education itself tends to make people wealthier, healthier and happier. The next time you hear naysayers poormouth college, ask them if they plan to send their own children.

·         We know that the federal government has promised more benefits than it can currently afford. The only way out of this problem involves some combination of tax increases and cuts to Medicare, Social Security and the military. Anyone who won’t get specific about which ones they favor is not a fiscal conservative.

·         We know this country spends vastly more on health care than any other country — about 75 percent more per person than other rich countries — without getting vastly better results. The waste in our medical system offers the best chance to reduce the deficit without harming our living standards.

·         We know the planet is getting hotter. Last year tied for the warmest on record, and the 10 hottest have all occurred since 1998. The resulting risks, economic and otherwise, may be even more serious than the risks from the deficit, but receive far less attention in Washington. (And climate worriers do not need to be so skittish about making the connection between heat waves and the larger trend. The thing about global warming is that it warms the globe.)

·         The bottom 50 percent of households, based on pretax income, make less combined than the top 1 percent. Only three decades ago, the bottom half made more than twice as much. The middle class has also received a much smaller tax cut in recent decades than the affluent.

Leonhardt also comments that anyone who refuses to explain how they would balance the federal budget, given the opportunity to do so, by delineating specific spending cuts and tax increases is not a true conservative. I would add that an apt term for such a person is a demagogue. Unfortunately, all of the evidence suggests that Washington currently has a deficit of conservatives and a surplus of demagogues.

Additionally, the evidence sadly suggests that politicians have more interest in winning their next election than in attempting to do what is right for the nation. If that were not correct, the battle to raise the debt ceiling would have ended long ago and been waged on a radically different basis. People of faith will find some of Leonhardt’s observations especially troubling, e.g., that the top 1% of households earns more than the bottom 50% and that we spend 75% more on healthcare than do other wealthy nations with worse results.

What do your earning, spending, saving, and investing habits say about your values?

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