Some examples of how to control the outcome by controlling the selection of the facts or options.

Posted on by Marc Jampole

This weekend brought two classic examples of controlling the outcome by controlling what facts are selected for consideration or what options are available for action.

The first example began a week ago, when The New York Times presented readers with the opportunity to develop plans to eradicate the deficit.  In its “Week in Review” section, it gave readers about 40 options, some of which raised more revenues, others of which cut spending.  In all cases, the Times told us the financial impact of each option and asked readers to devise plans to cut at least $1.345 trillion from the deficit.

Yesterday the Times published a chart that told the percentage of the nearly 7,000 people who put plans together recommending each of the options.  The Times also broke out what those who prefer tax increases wanted versus what those who preferred spending cuts wanted.

The problem is that the Times cooked the books beforehand by the options it selected.  The Times never explains why it proposes the options it does, but an analysis of the only two deficit-fixing choices in the healthcare arena suggest that the editors were trying to move the country rightward:

  • Cap Medicare growth starting in 2013.
  • Enact medical malpractice reform.

FYI, enacting malpractice reform means putting a cap on the money someone who has been physically harmed by a physician or hospital can get.

Funny the Times should mention something that will help physicians get richer while doing little to cut medical costs, but it did not mention the following other options to stem Medicare costs:

  • Raise the Medicare tax a half percent on people making more than $100,000 per year.
  • Institute a “best practices” project that determines and then mandates “best practices” for treating illnesses based on analyzing the medical evidence.
  • Force nicotine-addicted, diabetic and obese Medicare recipients into wellness programs if they want to maintain benefits.

All of these options drive the conversation to the left, and so would never occur to any of the mainstream news media.  The Times selects the options that keep us moving towards the right.

No surprise, there.

But who would have thunk that the left-leaning New York Review of Books would also use selection to move the political conversation to the right.  In the latest issue, the venerable NY Review of Books, which has long been our nation’s de facto intellectual and academic publication of record, included these two articles:

  • Janet Malcomb’s Maileresque I-was-there narrative about attending the Comedy Central rally on the Washington, D. C. Mall.
  • Mark Lilla’s review of three books by Glenn Beck and two books about Beck, which Lilla anchors by focusing to a large degree on the significance in Beck’s career of his “Restoring Honor” rally, also on the Mall during the past election season.

Do any of my dear readers recognize what’s missing?

Answer is…the rally of labor unions and progressives, also on the Mall during the last election season. 

The progressive rally is missing from this issue of the New York Review of Books, which to a large degree is dedicated to analyzing the past election.  Missing, just as it was missing in mainstream news media coverage for the most part, despite the fact that according to the consensus of reputable estimates, about the same number of people attended all three of these rallies.

Despite the fact that far fewer than half a million people read The New York Review of Books, its pages are among the most influential when it comes to writing the political and economic history of any election, era or decade.  What that means is that when the history of this time in American politics is written, one more sign that progressives actually have as many adherents as the Tea Party phalange will likely go unnoted.  By selection, the editorial board of the New York Review of Books has voted to join the mainstream media and move the country rightwards.

Study shows that Americans vote against their basic beliefs but no one cares because no one finds out.

Posted on by Marc Jampole

Professors from Duke and Harvard recently completed a study of Americans’ knowledge of and attitudes towards the unequal distribution of wealth that has developed in the United States since about 1980.

Professors Michael I. Norton and Dan Ariely find that Americans are not aware of how bad the distribution of wealth is in the United States, as demonstrated by the fact that the typical respondent in their survey thought that the richest 20% of the population own 60% of the wealth.  The correct answer is 85%, according to a recent analysis by Edward Wolff, another professor, this one at NYU. 

The Duke-Harvard guys report that people think that the bottom 40% own 10% of total wealth.  In fact, Wolff finds that the bottom two-fifths have a negative net worth.

But what is truly amazing given the results of the recent elections is the fact that most people—be they rich, poor or in the middle—want the distribution of wealth to be more equitable than either what they think it is or what it actually is.  Weird as it may seem, people want the top 20% to own a mere 30% of the wealth and the bottom 40% to own about 25% of the wealth.

Then why did they vote for people who want to lower the tax rate on the wealthy?  Why did they vote for people who want to end the redistribution of wealth that comes when the government provides benefits to the poor, the elderly, students and the ill?  Why do they vote for the party against universal health care and good public schools? Why do they vote for people who want to pass more laws that make unions weaker and thereby suppress the wages of the working class?

It’s completely bizarre.

Perhaps the answer lies in the fact that people never gain easy access to the information that would teach them what actions will lead to the society and economy they want and what actions won’t. Perhaps we are too bombarded daily by news media propaganda about free markets and small government to analyze the actual ramifications of actions such as lowering taxes on the wealthy, mandating universal healthcare insurance coverage or taking money from public schools to give to non-unionized charter schools.

For example, I bet most people would be surprised to know how many of their fellow citizens want to take 50% of the total wealth of the country, now in the hands of the very richest, and spread it around to the rest of us to make a fairer, more equitable society.  They don’t know because the Norton-Ariely study received virtually no coverage in the news media.  The esteemed profs were able to get an opinion piece about their study picked up by the Los Angeles Times.   But a Google News search revealed a miniscule five articles or blog entries about the study in total.  In other words, all media outlets, regardless of their political propensities, ignored the news that most Americans want a society with an equitable distribution of wealth in which no one is too poor or too rich.

Parade Magazine asks 3 celebrity chefs to plan a Sunday dinner that raises cholesterol and pads tummies.

Posted on by Marc Jampole

In its latest issue, Parade Magazine features an interview of three female celebrity chefs, Daisy Martinez, Lidia Bastianich and Paula Deen, on how to make Sunday dinner more meaningful for the family.  Just in case we didn’t notice, the article starts by pointing out that the chefs represent three of the most popular cuisines in America: Latin, Italian and Southern.

The interview presents the mass media’s usual equation for happiness: The chefs’ comments focus not on nutrition or food preparation, but on the emotional value of a family eating together—a chance to air family issues, a way to make family members feel better or feel loved, the fact that kids who eat meals with their parents are more likely to grow up right and not get into trouble.  The culinary genii have many examples of bad food being an okay option and only one suggestion on how to foster healthy eating habits.  “Food is love,” as one of them says.  All true…

But in focusing on enhancing the emotional value of food, Parade and it celebrity chefs forget all about nutrition.   Here is the Sunday meal that Parade created with the chefs:

  • Linguine with mozzarella, tomatoes and basil.
  • Puerto Rican roast pork
  • Spicy black-eyed peas.

To get the recipes, you have to text message or go to the website, which makes sense now that Parade’s dimensions size out a little larger than a commemorative postage stamp.  Being an old-fashioned kind of guy who uses his cell phone only for telephone calls, I selected the later option. 

At the web site we learn that:

  • The pork dish is 100% all meat, no vegetable garnish.
  • There is bacon in the black-eyed peas and only just a little green in the form of canned chili peppers. 
  • The pasta is a healthy entry in the right context, with a little green and lots of tomatoes.  But given the fat content of the entire meal, maybe Lidia should have left out the cheese this time.

Would you consider this meal to be nutritious?  Will it help people eat five or more fruits and vegetables a day?  Is it low in animal fats?  Lots of complex carbohydrates? Any fish? Where is a green vegetable dish, maybe kale, spinach or cabbage?  How about a nice spicy Mexican salad? Or some guacamole without cheese served with raw veggies? 

Well, no, not nutritious. It has lots of fat, more protein than needed, a mere one serving of vegetable or fruit, just a sprinkling of green.  Probably laden with too many calories, but we’ll never know since Parade doesn’t publish the calories or fat content for a serving of any of these dishes.

How hard would it have been for Parade to present a nutritional role model for families?  Why didn’t Parade ask the chefs to work together to plan a meal that would be healthy for the family, which means three servings of vegetables or fruit, lots of complex carbs and only one fatty source of protein?

Remember that Parade is without a doubt the most well-read print periodical in the country by virtue of landing inside the ad circulars of hundreds of Sunday newspapers.  So in a sense, Parade is among the largest of all mass media role models and conveyors of the American ideology.

Having created a greater need for food by injecting it with more emotional value and at the same time mystifying food preparaon by making it the purview of “experts,” Parade decides not to offer the American public a healthy meal, but instead to present a calorie- and fat-laden groaning board as the answer to the meal-planning conundrum.  The result: people will eat more, which means they will buy more food (and unfortunately collectively gain more weight, contract more diabetes, heart problems and cancer, and die younger). 

Debt panel more interested in cutting the taxes of the wealthy than in balancing the budget.

Posted on by Marc Jampole

Last Friday, I analyzed the tax proposals that the National Commission on Fiscal Responsibility and Reform put in the outline of the plan it presented last week.  As it turns out, I was among the first but not the only observer to notice the subtle shift in the tax burden that the National Commission proposes, making the middle class pay more and the wealthy pay less.

Today I want to take a look at the National Commission’s proposal to cut government spending.  The theme of the cuts that the National Commission proposes is that we must learn to live with less government. The result will still be a deficit, but much less of one than we have now.

My question is: if deficit reduction is so important to long-term economic well-being, why not reduce the entire deficit by raising the maximum tax rate to more than the proposed 21%? 

Behind that question is another: The National Commission wants the government to help fewer people and businesses who suffer damages from disasters such as Hurricane Katrina or the BP Gulf oil spill.  It wants the government to spend less on transportation and cut all spending to support commercial space flight.  Wouldn’t the country be better off if we keep those programs at current levels and instead raise taxes on the wealthy, which are historically low for both the United States and for all other western democracies since the establishment of income taxes? Amazingly, the commission to deal with our debt couldn’t figure out a way to take care of all of it, but did figure out a way to lower taxes more for a group already enjoying very low taxes. 

I have the same type of questions about what the National Commission proposes to do to “save” Social Security.  Why this particular trade-off?   The National Commission proposes eventually raising the retirement age to 69 and raising the cap on income assessed by the Social Security tax to $170,000.  The age of 69 seems pretty old for retirement from most jobs. Why couldn’t the National Commission have knocked a few years off that number and taken the cap off the income to be taxed for Social Security?

One of the most specious arguments made by those who say that it’s not in the best interest in the country to tax wealthy people too much is that the government does not create jobs while the private sector does.  

By isolating a single decision between “tax-and-spend” or “let the free market do what it does best,” we can see what a steamy crock this argument is:  Let’s imagine the choice is between raising taxes by $1.0 trillion to support a job-producing program, say in alternative fuels, repairing bridges or mass transit OR keeping the highest tax rate low, which means that wealthy people pay less in taxes and have more money, which we all hope they invest in businesses and technologies to create more jobs:

  • If the government has the money, 100% will go to creating jobs either through direct purchases from the private sector; grants, tax abatements or other financial support for private businesses which will therefore be able to hire more employees; or more government jobs to administer and manage the private sector companies getting the aid. 
  • If the wealthy keep the money, they could do one of many things with it, including:
    • Invest in paintings, sculpture, baseball cards, old movie posters, coins and other real assets that create very few jobs and take a lot of money out of the economy.
    • Put money in existing stocks and bonds, which creates no additional wealth, because the companies who floated the stocks and bonds already raised all the money they have through the initial offerings.
    • Invest in financial machinations, such as options and other hedging, which create no additional companies or jobs beyond a relatively few highly-paid financial whizzes.

The “tax-and-spend” scenario must almost by definition create more jobs because the government is going to put 100% of the money right back into the economy and the private individual will not.  One thing is for sure, especially over the past 15 years—the wealthy will invest less of their money into job-creating ventures than the government will.

Now the answer is not so clear when we’re talking about funding a government jobs creation program by taxing the middle class and the poor, mainly because these groups, especially the poor, tend to spend a much higher percentage of their income on goods and services than the wealthy do.  Spending on goods and services in and of itself will create jobs, which is why many economists are proposing to keep the temporary Bush tax cuts for everyone but the wealthy.

Debt Commission plan: Everyone gets less, middle class pay more, wealthy pay less, poor come out even.

Posted on by Marc Jampole

I’ve taken a look at the plan outline that the National Commission on Fiscal Responsibility and Reform released yesterday.  The final plan will include a lot of details that may change my view of it, but the plan looks to me to be a very subtle shell game that results in smaller government for which the wealthy pay less, the middle class pay more and the poor neither gain nor lose.

The National Commission is proposing to cut federal spending two dollars for every dollar it proposes in new taxes.  In this blog, I want to take a look at the taxation side, because that’s where the shell game is.  Next week, I’ll give a bird’s-eye analysis of the impact of the spending cuts the National Commission proposes and discuss its approach to Social Security funding and benefits.

The Commission proposes that we cut the federal tax rate to 21% and get rid of a bunch of deductions, the most important of which are capital gains, employee healthcare insurance and mortgage interest.  The idea of creating a simpler tax structure with fewer deductions is very attractive, although technically outside the purview of the debt commission.   

Let’s analyze the potential impact of ending these deductions, one at a time:

  • Most of the wealthy would gladly pay an additional 6% on capital gains if it means that the tax on most of their income would be cut by a whopping 14%.  So while capital gains tax is up when you sell investment assets, the compensating decrease in the income tax rate (which applies to income, interest and most dividends) probably will leave rich people with more money.
  • You don’t pay healthcare insurance based on what you earn. As expensive as health insurance is, the most expensive plan is still not a large amount of money to someone earning more than $250,000 a year, while the cheapest plan is a hardship for someone earning a low wage.  In other words, ending the deduction for healthcare insurance really raises the taxes significantly for those in the middle class and those poor who do not qualify for free healthcare.
  • The bulk of the benefits of being able to deduct interest on a mortgage go to the middle class, and they will pay the bulk of the additional taxes if and when this deduction is phased out.  The wealthier someone is, the lower the percent of their wealth is represented by their primary residence, so the less important the income tax deduction is for mortgage interest.  (One should note that if we end the mortgage deduction, the housing market will likely collapse again and interest rates on mortgages will probably decline as well.  I think it’s a good idea to end the deduction, but doing so will roil the U.S. economy over the short-term until we get used to not depending so much on housing to create individual wealth and overall economic growth.)

Thus, the simpler system that the National Commission proposes will probably increase the taxes of the middle class but reduce the taxes of the wealthy, while leaving the taxes of the very poor about the same.  We won’t know if my analysis is true until we see the complete proposal and someone does a line-by-line analysis of who’s paying more or less and by how much.

I wrote this blog yesterday afternoon for posting this morning.  This morning I read Paul Krugman’s opinion piece in the New York Times.   Krugman makes the same point, that the probably cash flow from the tinkering with the tax system proposed by the National Commission on Fiscal Responsibility and Reform will be from the middle class upwards to the wealthy.  Bravo to Krugman for doing the conceptual math.  And yet, my competitive nature tells me that next time I should post my blog as soon as it is written.

American Express steps into the deep fertilizer big-time by making outrageous claims for a savings account.

Posted on by Marc Jampole

Yesterday, I analyzed an ad in which, by selecting the value to attach to its product, Home Depot communicates the ideological American imperative of mindless over-consumption.

Let’s turn now to a print ad by American Express that tries to fit the round peg of a set of values into the square hole of its product/service.  The product/service is a savings account that American Express advertised in the national edition of the New York Times earlier this week, which means that there is a good chance that it was also in the Wall Street Journal, and perhaps USA Today as well.

In this full-page ad, American Express digs deeply into the world of symbols, using gardening as a metaphor for growing net assets for the future.  The top half of the ad is a photo of a person’s lower legs and feet, probably a woman judging from the stylish boots and workpants that cover what we see of the person.  The person stands in a little patch of dirt surrounded by what looks like a field of young ground cover: a crowded bunch of small plants each consisting of five or six small but very vibrant-looking green leaves.   The headline over the boot tops reads: “My reason for saving: To help my dreams take root.”

Doesn’t the image carry you into a pleasant daydream of future happiness? 

American Express hammers home the message with a terse but poignant bit of copy: “EVERYONE HAS A REASON. SAVE FOR YOURS. Earning your money takes work.  But helping it grow for the future doesn’t have to.  Take advantage of our High-Yield Savings account and ensure that your future has a strong foundation to build on.”

In the current environment, we’re all worried about having enough money for future goals, typically retirement and paying for our children’s post-secondary education.  We all want to do a little digging in the garden today and have the confidence that with time, we’ll have a nice big harvest. 

We would all like to “ensure that your future has a strong foundation.”

One big catch, though.  According to the ad, the American Express high-yield savings account currently earns 1.3%.  This ridiculously low amount may be the best you can get in the current market for simple savings accounts (or maybe not, I didn’t check), but it most certainly is not a foundation for future growth.

To show you how absurd it is for American Express to try to attach the metaphor of mending your garden to ensure a plentiful future harvest to a 1.3% interest payment, let’s take a look at Yahoo’s retirement planning calculator.

I plugged the following middle-of-the-road assumptions into the calculator: Married couple; age 35 with zero current savings; retiring at age 65; wanting 20 years of retirement income equal to 75% of their current $100,000 in combined income; assume 3% inflation.  I ran the calculations twice, and here’s the results:

  • Earn 1.3% on your savings and assume you get no Social Security: Must save 75.4% of income every year until turning 65.
  • Earn 1.3% on your savings and assume Social Security at current benefit levels: Must save 30.5% of income every year until turning 65.

In other words, earning 1.3 % just doesn’t hack it.  American Express knows it.  Anyone who has had a savings account knows it.  Anyone who can do simple math knows it.

In simple fact, American Express embarrasses itself because it tries to connect 1.3% with building a future.  Better it should take another approach, e.g., earn as much as you can on the money that you have to keep liquid.

Whether it was in the age when savings accounts made 4% or 5%, or the current no-interest environment, most people have always opened a simple savings account where they currently have other accounts or close to their home or business, or they comparison shop for rates.  American Express might win the comparison with other savings accounts, but because it has connected its product/service to future growth, it now has to compete with corporate bonds, municipal bonds, mutual funds, exchange traded funds, common stocks, preferred stock and a bunch of other investments that all tend to do a lot better than 1.3% over a long time frame.

In other words, except to the completely inexperienced rube, instead of building a case for opening its so-called high yield savings account, American Express has actually hurt its cause in this ad.  Somebody misread or misapplied the research big time.  

 

Advertisements try to sell values that enhance products, but do they reflect the market’s values or shape them?

Posted on by Marc Jampole

Most advertising, no matter what the medium, tries to attach a value beyond the inherent value of the product or service being shilled.  According to standard ad theory, you do research to find out what values are of importance to the target market and work on connecting one or a few important ones to the product/service.

But as is often the case, the real world often works the other way.  Often the advertiser has to create the need for the value in the target market.  And sometimes it seems as if the advertiser has the choice of values—and which one it selects says more about its own needs and belief system than it does about the target market’s.

Take, as example, a current Home Depot radio ad.  Let me preface the impending diatribe by saying that Home Depot came into East Liberty, a poor minority neighborhood in Pittsburgh, several years after Sears had abandoned the neighborhood, and has revitalized the entire area by bringing consumers in and giving a lot of jobs to the local residents.  I always go to my inner city Home Depot instead of the Lowe’s in the new suburban lifestyle center.

Now to the radio ad:  A professionally friendly male announcer tells us that we can buy LED Christmas lights, which use much less energy than traditional lights.  The announcer then makes the connection to an important value to the consumer.

And is the connection to value that the LED lights let you save money? No, Home Depot doesn’t play on the frugality of Joe and Jane Sixpack during a recession.

Or, is it the fact that buying LED lights help you make the Holiday celebration more energy efficient? No. Home Depot doesn’t talk about green values either.

What Home Depot’s friendly announcer says is now you can keep your lights on longer for the same cost.

Of course!  It’s America!  When the cost of consumption goes down, consume more!  

So Home Depot misses an opportunity to distill the values of frugality and/or green consciousness, the very two values that we all need to cultivate to address the mess in which the human race finds itself, thanks to our massive over-consumption. 

Instead the “old-fashioned hardware store in an airplane hangar“ encourages the public to consume more.

Shame on Home Depot, but it’s to be expected.  To sell more of its consumer products, Home Depot wants to influence the buying public to consume more, even if what the public will be consuming is a) not for sale at Home Depot; and b) something of which our society really should be using a lot less.  Thus it imbues the product with the ideological imperative to consume more.

Is 11% of maybes that important to drug manufacturers, or can they just lower prices and give more away?

Posted on by Marc Jampole

The latest issue of AARP Bulletin has a survey on the awareness by consumers of advertising for prescription drugs.  The poll contrasts the percentage of peoples 18-49 and 50+ who experience different types of advertising for prescription drugs.   

Although supposedly focused on the concerns of those more than 50 years of age, AARP Bulletin once again shows that it may have taken over as the magazine of cultural issues and trends for Middle America now that Parade is little more than a postage stamp.  The survey touches on many hot button issues, including health care, the cost of prescription drugs and the use of media by both businesses and the public.

The survey, conducted by Social Science Research Solutions, a private research firm, shows hardly any difference in the rate at which those two age groups, younger and older, see ads for prescription drugs (sometimes squeamishly called “ethical pharmaceuticals”) on/in TV, magazines, radio, newspapers, Internet, pharmacies and email.

The most interesting finding, though, is that only 11% of younger people and 9% of older people have ever asked their physician for a prescription of a drug they saw in an ad.

How many times do we see ads on TV for prescription drugs to cure or ameliorate erectile dysfunction, obesity, diabetes, depression, high blood pressure, high cholesterol and chronic pain?  I think you’ll find that whatever the time of day and whatever the magazine, the objective of a large percentage of all ads is to sell directly to the public those drugs that only a doctor can order.

It seems so unethical, and now we see that it doesn’t even do much good. 

Drug companies are pouring hundreds of millions of dollars a year into advertising to reach a mere 9-11% of any market.  Pfizer, maker of Lipitor for high cholesterol and Viagra for low you-know-what, spent $1.2 billion on advertising all by itself in 2007, the latest year I could find online.  

All that money is only affecting 9-11% of the total market for each of its drugs! An absolute waste of money!

Perhaps the drug companies would be better off if they did not advertise to the public at all, but limited their marketing to physicians.  I’m not saying that drug companies should not have websites and brochures that explain in lay terms the benefits and side effects of their drugs.  I’m talking about the obtrusive and sanctimoniously obnoxious outreach in TV, email, magazine and other advertising.

Better that the drug companies not spend these enormous sums on advertising and instead lower their prices to consumers and hospitals.

Voters reject Tea Party extremists but embrace mainstream media’s glorification of Republicans.

Posted on by Marc Jampole

I am dismayed by the number of house seats that fell to Republicans in yesterday’s election, and a little surprised.  Although I study the impact of propaganda every day, it still befuddles me whenever I see people falling for a line of hooey, even if it is fed to them in large doses day after day, by the news media.

And make no mistake about it: the single largest factor contributing to Republicans recapturing the House of Representatives so emphatically is the mainstream news media, which for the past 18 months have told the story of national issues and the election campaign completely from the Republican point of view. 

Here are some specific actions that the mainstream news media took to help Republicans, all of them documented in the OpEdge entries over the past year and a half:

  • Reported on health care reform and other issues from the Republican point of view.  Let’s take healthcare reform as an example: the news media did not clearly explain what the legislation would do; reported false information about death panels and loss of benefits; highlighted side shows such as covering abortions; defined the terms of the debate in ways that would help the Republicans; and did not educate citizens on the degree of private sector involvement in current government healthcare programs.
  • Gave more coverage to right-wing rallies and widely reported the outlandish estimates for these affairs, while providing minimum coverage to rallies of progressives and Democrats. 
  • Focused coverage on right-wing anger, e.g., at healthcare reform, and not on left-wing anger, e.g., that reform did not go far enough.
  • Played into the short-term thinking that gave Republicans a free pass for 8 years of destructive policies, but blamed our economic woes on less than 2 years of Obama rule.
  • Covered only the Republican primaries in national news, virtually ignoring all Democratic races.  For some reason, national media could find not one Democratic primary race that had any national significance or unusual angle.
  • Gave much more extensive coverage to the Republican candidates during the election season, especially in human interest stories. 

What the news media couldn’t do is prettify the extremist statements of the most prominent Tea Party candidates.  I have identified 10 Tea partiers who received extensive coverage in national news media and strong backing from Sarah Palin. Their record: 3-7, with all the women going down to defeat.  For Republicans, though, it’s a little better, since one of the Tea Party’s “Big 10” lost to a Republican.

Here’s the tally:

Angle/Senator Nevada – LOSE

Fiorina/Senator California – LOSE

McMahon/Senator Connecticut – LOSE

Miller/Senator Alaska – LOSE to Republican Murkowski

O’Donnell/Senator Maryland – LOSE

Paladino/Governor New York – LOSE

Paul/Senator Kentucky – WIN

Rubio/Senator Florida – WIN

Toomey/Senator Pennsylvania – WIN

Whitman/Governor California – LOSE

The less extremist Republicans who did win are still to the right of where most voters stand on particular issues, such as specific clauses in healthcare reform, the need to provide continuing unemployment benefits and the role of government in repairing our frayed infrastructure.  But the Republicans did not win on issues; they won on a big-picture message: The Democrats made the recession worse than it could have been by expanding government interference in the economy.

For those who are blaming the Democrats for failure to make their basic messages—and there are many on both sides of the aisle making that claim—I respond: isn’t it the mainstream news media that rejected the Democrats’ basic messages?  Of course it is.  The messages that the recession would have been worse without government intervention and that we need more financial regulation were fine and accurate.  They would have resonated with voters if allowed to get through to them.  Instead, the news media preferred to present unmitigated anger and frustration, proposing in the commentary that these emotions were only bubbling up on the right.

LA Times blames continued recession on the honest people paying off their underwater mortgages.

Posted on by Marc Jampole

Yesterday the Los Angeles Times identified the true culprit in our continued recession.  All this time I thought it was Congress to blame for not passing a larger stimulus bill that would have included more aid to those out of work and more spending on our basic infrastructure of roads, bridges, mass transit and public schools.

Turns out I was wrong (thinly veiled sarcasm).  Turns out, at least according to La-La’s Land’s newspaper of record, that the recession would be over a lot sooner if all those honest people who continue to pay off their mortgage even though the mortgage is now worth more than the house would just stop it.  According to the article titled “Millions of homeowners keep paying on underwater mortgages,” those committed to meeting their contractual obligations are keeping money out of the economy that would otherwise be spent on consumer goods.  

Here’s how reporter Don Lee puts it:

“Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending — a drag on family finances, the housing market and the overall economy.”

In simple English, the LA Times wants people to stop paying their mortgages so that they’ll have more money to spend on new cars, refrigerators, phones, flat-screen TVs, vacations and clothes, hopefully leveraging their new-found funds, which means not only spending the difference but also borrowing more.

Like most economists and economic reporters of all persuasions, Lee and the experts he quotes can only fathom one way to get out of the recession: spend more.  They fail to see that spending more only works out in the very short term, for two reasons:

  1. Sooner or later you have two choices only: either pay back the money, which will cripple a spending-induced economy or screw your creditors (meaning the American public, since the banks who loan the money will no doubt receive bailout assistance again).
  2. In the long run, an economy based on ever greater spending will consume resources and pollute the earth.

Some of my readers will remember the word “potlatch” from a college introductory course on anthropology.  It comes from the native American tribes in the Pacific Northwest.  According to Merriam-Webster’s, it means “a ceremonial feast or festival of the Indians of the northwest coast given for the display of wealth to validate or advance individual tribal position or social status and marked by the host’s lavish destruction of personal property and an ostentatious distribution of gifts that entails elaborate reciprocation.”  A potlatch is thus a mindless celebration of wastefully conspicuous consumption.  Preparing for these potlatches was a major economic driver in Indian societies.

We’ll never know for sure when potlatches would have depleted the resources of the Northwest tribes, because before it happened, European settlers arrived with diseases that reduced the population by 75%.  We do know that a potlatch of monumental building depleted the resources on the Pacific island of Rapa Nui and led directly to the total eradication of the population there.

We in the United States have developed a potlatch society and the only economic advice that most experts can offer for exiting the economic doldrums is to go on another potlatch.  But it just won’t work anymore.