PLAYING WITH THE NUMBERS

How So-called Experts Mislead Us About the Economy

by Richard Stimson

 Some thoughts on wealth and who controls it, (reflections on Stimson’s book), by David A. Woodbury

Back in the 1960s Jay and the Americans sang: “Only in America, can a kid without a cent get a break and maybe grow up to be President...”  I find this an interesting juxtaposition of time, money, and aspiration.

Interesting because, in the 1960s, President Kennedy inaugurated the series of events that, ironically, would place his own image on the last silver coinage of the realm, and with it, the last in the world; the 1960s concluded the march of thousands of years during which precious metals served as the standard medium of exchange in every nation of the world and between nations.  This debasement paved the way for the shift to paper wealth and, now, the phenomenon of digital wealth.

When you could weigh it in your hand you could measure it.  When you could see it on a certificate, you could at least count it.  When it takes the form of a stream of electrons or a certain alignment of molecules in the coating on a disk, wealth has become invisible.  And I don’t trust it.

As a paperboy in the early 1960s I learned a lot about money.  I could go to the local branch of any bank and exchange silver certificates for heavy, round dollars minted as early as 1878.  I took Indian head pennies and other 19th-century coins in change, as many of my older customers, some them children of freed slaves, had apparently saved for retirement by hoarding.  An otherwise impoverished-appearing old man in my neighborhood, for whom I sometimes shoveled snow and coal, had a small drawer in a hutch in his dining room, the drawer filled with gold and silver coins and gold and silver certificates, his life savings.  I understood wealth in these terms.  Confirming my real-life impressions, I had also seen Scrooge McDuck counting money in his vault.  Somehow I could readily perceive intrinsic value in certain scarce and useful metals.  If you had the cash, you had the wealth.

Stocks and bonds were around.  I understood these, too, as promises to pay.  I knew about promises, good intentions, someone’s good word; I had also seen what happened when certain relatives bounced checks, (their promises to pay).  Even then, before my teens, I preferred my wealth, however meager, in a form that would weigh heavily in a small canvas bag.

To a modern government, wealth in any intrinsic form presents the problem of control.  The person who holds or hides gold and silver has control of it.  With paper or digital money, control of one’s wealth can be asserted, assigned, and assumed.

Richard Stimson doesn’t concern himself with the metallic composition of our tangible, every-day medium of exchange.  Rather, he exposes the Erector Set nature of our vast U.S. economic policy.  I’m confident that he appreciates my simplistic thoughts.  His appreciation for the inter-related phenomena of wealth, economics, taxation, politics, and markets makes me realize how naive I am, and yet also makes me trust all the more in that which I can hold in my hand.

In Playing with the Numbers – How So-called Experts Mislead Us About the Economy, Stimson takes us on a tour through the double-speak of economic policy and politics.  He pries loose some bricks in the wall of the IRS and lets us peer at the dimly-lit, duct-taped machinery beyond the wall.  (He reminds us as well that it’s not the IRS but “Congress [which] tends to complicate rather than simplify the tax code.”)  He shows us just how inept all our leaders have been, and perforce must continue to be, at dismantling that which everyone knows doesn’t serve the public good – subsidies, budgets, welfare, the tax code, and regulation – that which exists where it isn’t needed and doesn’t exist where it is probably vital.

As I began this disturbing tour I found myself taking early issue with Stimson from the sideline that has always defined my political perspective – that the federal government has the responsibility to regulate interstate commerce and provide for the national defense, period.  It is especially abhorrent to me that the federal fingers should touch any individual’s wealth or means of attaining it.  I believe in capitalism – the right to profit AND LOSE greatly from one’s investment and risk.  I believe a capitalist has a right to be efficient or whimsical, philanthropic or self-indulgent.  I believe it is the customer, (the public), who must hold the capitalist accountable and inevitably make or break him.

I see, also, that I have been clinging to what may be – and I hate to admit it – a vain ideal.

Our federal government has asserted, assigned, and assumed for itself the responsibility for a great deal more than the Constitution permits – so far a sort of benign corruption.  And as with any government that usurps for itself too much power, who has the power to resist it?

Nevertheless, we, the people, still have the liberty to apprise ourselves, educate others, and protest, and that is the nature of Stimson’s work.

It was Stimson’s challenge, with me, to demonstrate that the capitalist ideal has been supplanted by an intractable system of corporate supports and guarantees; moreover, that this, then, casts the old image of the free-wheeling, win-or-lose capitalist in the light of the modern, win-win CEO.  The rules have been changed by a federal bureaucracy that caters with special obeisance to a corporate elite that resembles a new American aristocracy.  And neither Republicans nor Democrats are more to blame than the other, now or in the past.

Fundamentally, I still defend the right of any individual or independent group of individuals to become ridiculously wealthy by any benign means possible, to dispose of that wealth in any way one sees fit, and to lose it all in a heartbeat by the exercise of poor judgment or bad luck – and damn the consequences.  I believe the country is resilient enough to withstand occasional regional upsets when a certain business fails or a certain industry becomes irrelevant.  When the federal government goes into partnership with an individual or group, (call it a corporation – it’s still an individual or group of people), in order to prevent failure, define market share, fix prices, erect tariffs, and guarantee executive wealth – when the federal government makes these things its business, it makes them my business.  It was Stimson’s challenge to persuade me of this, and he has succeeded.

Nancy Oden, a candidate for public office in Maine, recently contributed a guest column to the Bangor Daily News proclaiming that it is time to declare our independence from the tyranny of corporations.  Arguing from an alarmist/environmentalist perspective, she writes: In the spirit of the first [note the innuendo that there must surely be a second] American Revolution, we can start by demanding the right... to control the corporations...” in order to preserve our freedom as consumers.  This flies in the face of my entire political philosophy, and yet her frustration and sense of powerlessness is not unfounded.  As Stimson points out, quoting Donald Kaul of the Des Moines Register, “We are now engaged in an experiment in government of the corporation, by the corporation and for the corporation.”

Well, from the evidence Stimson has assembled, he has made his point.  Corporate lobbies and those sounding like public-interest groups but which are fronts for corporations are deep into the pockets of the federal government.  I have a business myself, but I can’t afford to spend my time in my state or federal Capitol glad-handing politicians.  I will never see grand-scale government largesse to assure my operation’s success.

Nevertheless, I remain cling stubbornly to that original American ideal of individual self-determination and defend anyone’s freedom to make it really big.  I still vigorously resist a politic that imposes more government control over any legitimate, enterprise that is willing to risk prosperity or failure without government (my) support.  Rather, I will advocate that the hands filching the government’s pockets be cut off at the wrist and the ones gathering the small change that hits the pavement be trampled.  For any proposal that the federal government ante up in order to keep one corporation or an entire industry viable, logically called corporate welfare, the answer should simply be No.  Not more regulation.  Not higher taxes.  Just, No; no handout.  Sink or swim.  That’s the American way.

The consequences, if such handouts continue, must certainly be fatal to capitalism, free enterprise, and freedom itself.  It is the crowning principle of American free enterprise that anyone should have the unfettered opportunity to prosper without limits.  But anyone who wants to be afforded that freedom must also accept the risk of failure without assurances.  The list of industries, not to mention individual corporations, which have not accepted that risk as the price of opportunity is sickening.  If the politics should prevail that would foster ever more and more government regulation of business – if the balance tips toward the corporation-haters and away from the corporation benefactors in (especially) Congress, let me submit that business has done it to itself.

Those who are organized to hate corporations and who see them as greedy, multi-national Bambi-killers have still other reasons for their rage, and I share their scorn on this score while decrying their crushing political solutions.  When I consider that in 1993, (Stimson’s example), Disney CEO Michael Eisner’s total compensation package equaled 68% of the company’s $300,000,000 (three hundred million, for the zero-impaired) in profits for that year, and by 1997 it reached $565,000,000, I believe I have a right to be furious about the hundred-dollar-plus gate fee at its premier theme park.  Nobody, but nobody, works hard enough to earn $300 million in a year.  But I work hard enough to take umbrage at such exorbitant charges for the company’s products and services when that gate fee, or the $38 for a shirt in the Disney store, serve so directly to keep one member of American royalty ridiculously, nay, insanely wealthy.

About the only individuals I can imagine being worthy to accumulate such absurd wealth are the original pioneers who set us on one new course or another and who continue to hold the reins of their enterprises, the obvious modern example being Bill Gates.  Since his is a publicly-traded company, let him profit from it as his stockholders may tolerate.  And then let those who succeed him at the helm resolve to carry on the business in exchange for salaries that reflect the worth of their labor, not some regal succession.  And, ideally, let the stockholders of all corporations be the ones to demand responsibility in compensation.  Can anyone really believe that the company will get a substantially better CEO for $100,000,000 a year than it can get for, say, $1,000,000?

The government has no business propping up a company that turns around and confers a prince’s salary on its managers or its directors, nor in rescuing one that has wasted its resources by creating an aristocracy to its ultimate detriment.  Then again, maybe those royal stipends and golden parachutes following mergers are not of such great consequence to the bottom line.  Maybe executive compensation has had no significant impact on a particular company’s hard times.  The damage, then, is symbolic.  Neither should a company which has squandered such resources on its heads be eligible for my (did I say “my”? – I meant to say “federal”) assistance, nor should one which has received such assistance return to the practice of bankrolling princes.

I would not impose a solution of government control, though, but would promote, as a first measure, withdrawal of government support for industry, and, second, spontaneous or organized public refusal to buy the products of a company that won’t return to a rational compensation scheme.  If the public is truly upset on a mass scale, as the organized corporation haters insist we are, and makes its disgust known through its power in the marketplace, a government “solution” is not needed.

And yet, when the Disney company shows up at the federal government’s doorstep, as I imagine it will one day, asking for a chance to siphon from the federal pockets into which I’ve been trickling my pennies, because tough times or bad investments or public boycotts or stupid levels of executive compensation in the 1980s and 1990s are about to shut down an American institution, I may at last join the forces ready to impose a political solution as a first measure and last resort at the same time.

Don’t misunderstand.  I cherish what Walt Disney created.  It is neither his imaginary world, nor the workers in his company, nor the products it now sells which offend me.  Nor could I have begrudged Walt any sum he desired from product of his own genius.  It is only the practices of any such company’s current administration, namely in compensation and lobbying for government favors, that angers me.  I am angered both for what it does to my wallet, and for what, in its corruptness, it is doing to the very concept of free enterprise.  I have supported the concept of capitalism and have been betrayed by its practitioners.

Is it envy?  No.  If a hundred-million-a-year executive salary has no significant impact on a large company’s bottom line, then it may also have no such influence on prices of its products and theoretically no conceivable impact on me.  Defenders of the practice may argue that such a salary actually saves me money by attracting executive talent whose leadership best serves not only stockholders, but also employees and customers.  Yeah, right.

It’s not envy.  Absurd compensation represents a corporate mindset that supposes there are people out there who, if you can lure them to the head office, are worth that kind of money.  Which supposes that the rest of us are hundreds of millions of dollars more stupid.  I worked for a Fortune 500 company, and that’s the way it felt, by the way.

And yet, it isn’t only business that is feeding at the government trough.  Business is in the halls of Congress in large measure to counter the attack forces of perpetually-indignant front organizations with carefully-crafted, charitable-sounding names like the real or imagined National Wildlife Federation, Societies for Cultural Diversity, and the National Endowment for the Preservation of Rural Scenery.  These, along with the American Federation of Labor – CIO, exist chiefly to preserve nothing so much as to destroy anything that resembles or includes in its name or charter the word “corporation” – that is, anything that exists in order to deliver a product and return to its shareholders a competitive profit.

Since when did the taking of a profit become evil?  Since it is not just preserving the freedom for anyone to create wealth but the assurance of the same for the few became a principle enterprise of our federal government.  I too resent it.

Even so, everyone hates the rich man, while everyone still wants to be one.  Stimson doesn’t begrudge the honest entrepreneur a right and opportunity to become fabulously rich.  Rather, in a book that generally lets the numbers speak for themselves and takes few opportunities to influence the reader’s thinking, he reserves his harshest judgment not for those who lie to us or steal from us outright, but for those who exploit us – who would become rich at the expense of innocent, trusting, powerless little people such as would save at a savings & loan or pay for non-existent insurance coverage.  Those who gamble and lose at a casino have done so with full appreciation (whether they acknowledge it or not) of their stupidity.  Others, though. lay their money down in a place of public trust, only to be screwed by the keepers of that trust, like children molested by a babysitter.  It is the inept and corrupt keepers of the trust – the bankers, CEOs, legislators, and bureaucrats, who are ruining it for rich and poor alike.  Here, as in most ways, I agree with him.

Stimson succeeds, as well in demonstrating that money buys access which means money has power.  Here, too, those without the access are exploited.  The analogy to royalty, while not a theme that Stimson uses, is unavoidable.

Where Stimson had a task in educating me about corporations, it took no persuading to convince me that politicians, bureaucrats, and nebulously-defined economists both in and out of government are both patsies and enablers.  These are the so-called experts.  These are the ones whose special interests are served by playing with the numbers.  These are the ones who want your wealth and mine to exist in conveniently-accessible, digital form.  These are the ones who cannot profit if their personal corporate backing were taken away and if your wealth and mine were measured in pounds of precious metal kept in a home safe.

In Playing With the Numbers, Richard Stimson has endeavored to expose the manipulation of numbers that has reached a disturbing, if not a dangerous, level of sophistication in our nation’s capital as well as the capital of every state.  We are lied to by the experts and their staffers – by people who, in their almost disarming innocence, have lived so far apart from the truth they can no longer tell what the truth would look like.  It’s not that Stimson has set out to skewer anyone or any group or any era.  He has set before us, with methodical precision, a stupendously-researched work on the origins of these lies and our inevitable fate for their continued acceptance.

There is a story attributed to Che Guevera, unusually candid for its origins, that in the aftermath of Fidel Castro’s revolution in Cuba, “Castro asked which one of us was an economist.  I thought he’d said ‘Communist,’ so I immediately said, ‘I am.’  ‘Okay,’ said Castro, ‘you handle the economy.’”  Whether Guevera did so or not is immaterial – Cuba’s economy was eventually destroyed under Russia’s control.  The explanation here in the USA is not that simple.  Our leaders are for sale.  The economists who are most highly prized are not those who can forecast accurately, but those who can play with the numbers and make them support a fiction.

It is a wake-up call.  And, unlike a politician who dusts his hands after passage of The Clean Air Act and says, “There, I’ve cleaned up our air [because the title of the Act says so],” Stimson has actually done something, has delivered his message, and can stand before the Judgment one day and say, “I really tried.”  I’ll show up on Judgment Day with a tattered canvas bag containing a smattering of worn gold and silver coins, which I’ll hope to deposit at the Maker’s feet.  I would that I could have pulled off Stimson’s feat of upsetting the money-changers once again.  At least I can say I helped disseminate the product of his labor.