I wrote this response for a friend who wanted my perspective on what he's saying.
My response to the above video:
Bear in mind that he is a brilliant man arguing with kids. I’ve seen folks on CNBC argue the other side much more eloquently.
I’ve seen Mr. Schiff a lot on CNBC. He’s a capital & markets purist. So, for instance, when he talks about the fact that true capitalism would have let the banks fail, he’s right. The value judgment we have to make in that regard concerns pain management. When we intervened in the banks, we were making a value judgment that we would incur a chronic, extended pain that was less severe and traumatic, rather than the large and explosive pain that would be much more unpredictable in terms of the result.
If we’d let the banks fail, it might have been a spike in unemployment to 18% - 20%, followed by a rapid recovery back to 4-6%, and we’d already be done with it by now.
OR, it might have been an abyss that we fell into, world markets might have collapsed utterly, and we would now see mass starvation at home and abroad and be well on our way to WWIII. That’s the risk reward scenario. I’ll let you decide whether or not you agree with the approach that was taken, but bear in mind that the only historical precedence we have is the 20’s and 30’s, and that letting the markets work themselves out at that time, as Mr. Schiff proposes, lead to both the great depression and, subsequently, WWII. Lots of prolonged, intense pain.
He’s spot-on about student loans. No argument from me there. It is essentially the same problem we have with health-care. We have this intervening third party with deep pockets who is propping up the costs. We need either true socialism or to allow the free market forces to do what they do well, which is set prices. Either would work well if it’s done well.
Mr. Schiff’s underlying premise in many of his arguments is that markets are efficient and self-regulating, so we don’t need the gov’t mucking around.
In my opinion, whether or not that is true depends on the goals of the markets. Markets are great for setting prices for goods and services and creating wealth for those who have capital to invest. However, markets are A-MORAL. I could give example after example of this, but the easiest is the one sighted in the video, which is the slave market. Mr. Schiff doesn’t seem to grasp that the slave market was a functioning market with capital, goods and services, communications of raw materials, supply, demand, the whole shebang. And, it set cost of goods sold (slaves) and created wealth for slave-traders and plantation owners very efficiently. That was absolutely the free market at work. And it was absolutely evil, and required government intervention.
And that’s really the fundamental point that I should try to communicate. Markets ARE fairly efficient at setting prices for goods and services. However, I cannot find one historical example of a market behaving in a moral fashion. They make money, period, whether it’s on orange fruit from Florida or black people from Africa.
And that’s why we need regulation. To give markets a moral compass. We need government to allow YOU AND ME the power to make markets behave in a moral fashion, through our elected representatives.
And, sometimes, the need for regulation is not moral, but entirely practical. In an example that Mr. Schiff should be familiar with, one of the major factorsfor the recent banking collapse was the deregulation of the industry. (In a rare instance, government and the private sector worked together to make a mess of this. Both are to blame.) The Glass-Steagall act (the laws enacted after the great depression designed to prevent its recurrence) was repealed, and about 10 years later we have what almost amounted to another great depression. You can Google it if you want to learn more, but in essence it created a separation between depository banks and investment banks, making sure that the gamblers (investment banks) aren’t gambling with your deposits or easy federal money they’ve borrowed at low interest.
His point about the 50’s is, at best, a fantastic over-simplification. I frankly think it’s just false. He states that we were fantastically successful in the 50’s because we had more capital, which was because we had lower taxes and fewer regulations. I would point out the following:
- The top marginal tax rate in the 50’s was 91%, as opposed to 35% currently. The capital gains tax rate (which has a great impact on the wealthy) was %25 as opposed to the current 15% . So, not sure why he thinks we had lower taxes.
- I’m sure we currently have more regulation than we did in the 50’s, but do you really want to go back to a time when we were poisoning ourselves with DDT & Mercury, and you could light the Hudson River on fire because it was so polluted?
- I BELIEVE that Unions (ie – labor) were much stronger in the 50’s than they are today. I won’t assert that, though, I just have that impression.
- In the 50’s, we were the only world power left standing after WW2. England was bankrupt, Germany & Japan were in ashes, as was the rest of Europe. Much of the rest of the world was not yet industrialized. We were the only show in town. We were LITERALLY the only county producing anything. So, yeah, we did pretty well.
So, I think that’s crazy-talk.
The “Why don’t they quit” comment in reference to wall mart employees is a common refrain. Again, those arguing against him were inarticulate. This response is getting long, and I think this is one of the less important points, so I’m skipping it ;-)>
The point his opponent is making about apple is a really good one, but again his opponent is inarticulate. We could lower apple’s corporate tax rate to 0, and they would not bring manufacturing of the iphone back to the US. It is a product that they sell at a premium (it’s expensive), making a fantastic profit. When last I checked, Apple actually had more cash reserves than the US Federal gov’t. (that was sometime last year, don’t know if it’s still true). So, what can we see from this?
Apple has the money to create American jobs and still be fantastically profitable, but they don’t. Instead, they amass a huge pile of cash.
What we have to accept is that a worker is a necessary evil to a company or business owner. Job creators don’t create jobs because they have a passion for creating jobs, they create jobs because they have to in order to make their millions. I don’t know a single one that would have workers if they didn’t have to.
Which brings be to the last point I’ll make. You can tell, in several of his comments, that he things that the fact that he’s made a huge pile of money gives him some sort of great credibility. Does it? Is that the goal of our civilization? If so, then guys like him should set the tone. If not, we need to look elsewhere.
And, on last note on the fundamental question of capitalism vs socialism – who should benefit from my labor, the guy who owns the capital, or me, and how much wealth should one person accumulate? Mr. Schiff correctly states that he’s created many jobs, and that he worked very hard. I guarantee that many of his employees also worked very hard (I’ve certainly put in 20 hours days as well, although I control no wealth to speak of), and that he profited disproportionately from their labor. This is a value judgment –who you think should profit most from your labor? In my view, there needs to be a balance. Let people who want to get wealthy get wealthy, but let them do it in an honest way, and let them pay a living wage to their workers.
I couldn’t watch past about the 10 minute mark. Can’t stand to listen to people screaming at each other. J
Hope this helps you see the other side’s perspective a bit better. Sorry it’s so long.
And now, since I’m typing, to pontificate:
It’s all about balance, and in my opinion, we’re way out of balance to the right. This is evidenced in Obama-care. This is the same bill, essentially, that was the republican alternative to Hillary care in the 90’s, and today it’s socialism. Or cap and trade, which Bush 41 was brilliantly successful in using as a free market system to end acid rain. But when Obama proposes this tried and true republican solution, he’s killing jobs and destroying the free markets? We’re so far to the right that the right doesn’t even realize how far to the right the left is. The American people voted for a liberal government and got a 90’s era conservative government, and the 2000’s era conservatives still manage to paint him as a socialist and extremist. That genuinely frightens me, because I really do believe that wisdom will generally lie in balance.