Saturday, November 24, 2012

The Myth of the Generous Rich

The latest myth the right wing is trying to spread is the justification that, far from being selfish-bastards, the rich are wonderful benefactors of humanity.  Their favorite statistic they like to pull out is this one:

See, they say?  We give a higher percentage of our GDP in charity then anyone else.  We're generous!
Furthermore,  those countries with higher taxes give less, therefor we'd be less generous if we had higher taxes!

Mark Twain said that there are three kinds of lies, "Lies, damn lies and statistics" and this argument certainly qualifies as a statistical lie.

Imagine for a moment, that there are two people in the economy.  Joe Richer and Jay Poorer.  It takes 30% of the total pie for Joe Richer or Jay Poorer to have everything they need or want.  How much is available to give away without feeling the effects if they each have 50%.  The answer is 40%, right? each has 20% surplus.

Now, lets suppose Joe has 90% and Jay has 10%?  How much can Jay give away? Obviously nothing, he's below the poverty line.  But Joe can give away 60% without feeling it.  Thats more then the 40% above. A lot more.

The fact of the matter is, the more uneven the distribution of wealth, the more surplus the rich have to give away.  But they get that surplus at the expense of the poor.  If this analysis is correct, you would expect the US to also have a very high poverty rate to go along with that charitable giving number above, and we do.  The worst in the developed world.

The Poor in Developed Countries - The United States(

If the rich were really generous, they would do something about this. Instead, they and their representatives fight for an ever increasing part of the pie in terms of lower taxes.  A few do fight that trend,  the true patriots who want to help their fellow Americans in a meaningful way.  But alas the Bill Gates' and Warren Buffet's of the world are few and far between.

The final part of this lie of course is the statistic that those developed countries with higher taxes have lower charitable giving.  What it does not do is correlate that to the actual *need* in those countries.  They all have far lower poverty levels and far lower need for charity.

When we were kids, if we bought a candy bar with a friend, and he said "give me the whole bar so I can be generous and give you back what I don't want" we wouldn't take that deal.  Its amazing how easy it is to confuse many people into exactly that deal once they have grown up.

Tuesday, November 13, 2012

Queue the theme from Exodus

Hidden in an article about Ubisoft possibly buying THQ and their Wii U play, I found this nugget from the head of Ubi...

"We've had more difficulty with Facebook in the past couple of years," he says. "It was a good business, but it has shrunk a bit. And it became a more complex and expensive business to run. We had opportunities with other areas, so we said we should concentrate on those that are growing faster."

Mark Ubisoft as the first major publisher to formally announce a retreat from the Facebook/F2P model now that the true revenues are becoming apparent.  I am sure they won't be the last.

Monday, November 5, 2012

What's wrong with Bush/Romney economics

Less then  hours before the polls open, I want to take a moment to address the most prevalent myth in American  politics today:  that cutting government deficit spending is somehow good for job creation and the average American's wallet.

The fallacy generally employed in this argument is the seeming common sense rule,"we as a society are hurting so we as a society must tighten our belts."  If there is one thing I have seen in life it is that common sense, while often common, is seldom actually sensical.  This is no exception.

The problem with this logic is that it confuses two totally opposite sides of the economic system; the private sector and the public sector.  The private sector includes all the money you and I spend.  The public sector is government spending.  And they aren't the same, not unless you force a balanced governmental budget, which is precisely the wrong thing to do because it eliminates all the power of the public sector to help the private sector.

The clearest explanation I have seen is this:

Imagine for a moment an economy of just two people-- Joe Public and Jane Private.  Joe Public takes money from Jane Private and spends money on Jane Private.

What happens, then, if Joe Public takes more money from Jane Private then he spends  on her?  Jane has less money to spend on herself.  Thats pretty obvious right?  Thats what our government does to us when it taxes more then it spends, it takes money out of our pockets.

What about the reverse?  What happens when Joe Public takes less money from Jane Private then he spends on her?  The answer should also be plain and obvious, Jane has more money to spend then before.  Thats what our government does when it deficit spends, it puts money into our pockets.  Its effectively a large interest-free loan from the government directly to the private sector in the form of government jobs and purchased goods and services.

Now, the government cannot deficit spend forever.  It must make that money up eventually, but the time to do that is when the people can afford to have some extra money come out of their pockets-- not when they can't.

Deficit spending does have one other effect-- it stimulates inflation.  Inflation however, is not necessarily a bad thing for the American people.  Inflation is only bad for the working class when it rises faster then income, and the whole point of this exercise is that it will create job growth and raise income.

Inflation IS bad for people who are sitting on piles of cash doing nothing-- which currently describes major corporations and the so called 1%.   This is one of the big reasons they are against anything that might be inflationary.  But, again, that inflation is actually good for the working and middle class because it forces those large money reserve holders to put their reserves back to work into the general money supply creating jobs and again raising salaries.

So, when you go to the polls, ask yourself how more massive cutting of government spending will really help any of us?  Its not like there isn't already a practical example.  We've seen how much it has "helped" Greece...