Do Subsidies Work?

Frequently when prices get too high in some sector governments are called upon to provide subsidies to those who can't afford to pay.

In the US there are a large number of these. Heating fuel subsidies, food stamps, housing rental assistance and Medicaid (not Medicare) are aimed at necessities. There are also government subsidies such as Pell Grants to help pay college tuition. With the sudden downturn in the housing market there are proposals to subsidize existing mortgages. So these actions work?

I'm going to keep this brief and not overload the discussion with lots of statistics, so just take this as a working hypothesis. If you are especially interested in one program or another, or in experiences elsewhere, then please feel free to contribute data.

Too Many People - Too Little Work

One of the current problems in the developed world is that there is too little work to go around. As the two biggest areas of traditional enterprise (manufacturing and agriculture) have become increasingly mechanized, the number of people needed has declined.

In much of the industrialized world agriculture now requires under 5% of the workforce. Many industrial firms typically run at 70-80% of capacity. Societies have adapted in two ways, the most commonly considered is the rise of services, the other is the creation of new products of marginal utility. Even these steps have not solved the problem, the unemployment rate is kept at a modest level, but the percentage of people employed continues to decline. The two numbers don't track because official reporting agencies exclude various categories of the non-working from the labor force.

Obama's Economic Advisers

While the political rhetoric spews and folks decide their religion, some of us are looking at the policy beneath. People, it ain't pretty. It appears we have more of the talkin' the talk instead of walkin' the walk rhetoric and the keyword change is now redefined to mean status quo

Obama's Economic Advisers

  • Austan Goolsbee: U. of Chicago neoclassicist and “single payer universal health care critic claiming "it doesn't follow free market principles"
  • David Cutler: Harvard economist who believes that high health costs are good for the economy
  • Jeffrey Liebman: another Harvard economist and former Clinton adviser who favors privatizing social security

From Real Clear Poliitics

Goolsbee, however, says globalization is responsible for "a small fraction" of today's income disparities. He says "60 to 70 percent of the economy faces virtually no international competition." America's 18.5 million government employees have little to fear from free trade; neither do auto mechanics, dentists and many others

So is that to imply that 40% to 30% Americans being negatively affected by globalization is ok? and yes we are offshore outsourcing state and government jobs. Remember Alan Blinder projects that 40M US jobs are vulnerable to global labor arbitrage (offshore outsourcing). I'll assume wage stagnation is being ignored as well in this above quote.

The Nation's article Subprime Obama points out:

"Where Do We Go From Here" Speech of Martin Luther King, Jr, August 16, 1967

Martin Luther King, Jr delivered this speech in Atlanta, Georgia at the Southern Christian Leadership Council. I heard an excerpt of it yesterday on the new Sirius Left radio show of Dave Marsh called The Land of Hope and Dreams. I then went on line and got a copy of it. Well, it's another eye opener and it's another reminder of the paucity of ideas and the lack of eloquence in our politics today.

King talked in terms of philosophy not ideology. He spoke of Engels, Marx and Trotsky and how they got it wrong and then explains it by using the philosopher Hegel and Jesus. Communism forgets the individual and Capitalism forgets the social. God, I love that. I've often used a bit of Hegel on my weekly radio showin Bozeman, Montana; Uncle Thesis, and Auntie Thesis begetting little Syni Thesis. This is for what I hunger and thirst; real discourse and uplifting rhetoric. Not more weasel words and management speak.
This particular passage hit me between the eyes: