Friday, February 5, 2010
"We Didn't Start the Fire"
Republicans are like arsonists who set a building ablaze and then complain about the fire department wasting water.
Wednesday, February 3, 2010
"VOODOO ECONOMICS" STILL CASTS ITS SPELL
In his opinion piece "How to Destroy American Jobs: Obama's proposals for increasing the tax burden on U.S.-based multinationals would harm our most dynamic companies" (Wall Street Journal, February 3, 2010) Prof. Matthew J. Slaughter, of Dartmouth's Tuck Graduate School of Business, succumbs to the supply-side myth that higher tax rates discourage economic activity and lower rates stimulate it. The facts say otherwise.
Real economic growth during the Reagan and Bush II years, when personal and corporate tax rates were cut, was significantly slower than during the Clinton years, when tax rates were raised. ("The largest tax increase in history," according to horrified supply-side critics.) This outcome is the exact opposite of what supply siders predict.
The supply-side myth is based on a flawed understanding of human behavior in the aggregate:
Reagan's supply-siders believe if the tax hurdle is lowered, taxpayers (both corporate and individual) will work harder because they get to keep more of what they earn, stimulating economic growth. Conversely, if tax rates are lowered, they will work less because they get to keep less and economic growth will suffer. In short, they believe greed is the overarching human motivator. They mistake in projecting their own predilections upon the population at large.
The relatively higher growth experienced during the Clinton years reveals a strikingly different pattern of collective human behavior:
Lower the tax hurdle (as Reagan did) and the government makes it easier for individuals, including corporate executives, to achieve their (after-tax) goals, so they opt for more leisure, don’t work as hard, take fewer risks and the economy slows. Raise the tax hurdle, (as Clinton did) and the government makes it harder for taxpayers to achieve their (after-tax) goals, so they work harder, take more risks, so as to achieve their goals, and the economy grows faster.
The comparatively faster growth in the Clinton years, relative to the Reagan and Bush years, tells us that achieving near-term goals and the enjoyment of leisure trumps greed as the dominant human motivator.
Moreover, the huge federal budget deficits of the Reagan and Bush years and the budget surpluses during the Clinton years, tell us that if you want to raise more government revenue, raise tax rates moderately. That's what Obama is proposing to do by raising taxes on overseas corporate profits.
Supply-siders have a real problem in that the world just doesn’t work as they say it does. Not only do the data confirm their misperception of human nature, as revealed above, but also none of the Reaganomics forecasts based on supply-side theory came to pass.
Reagan promised an end to deficits, faster long-term growth in revenues than would be the case if tax rates were left as they were, and, according to the “trickle-down” theory, more income and wealth for everyone.
Reaganomics produced just the opposite: the largest deficits in the history of the nation to that time, a slowdown in revenue growth and greater inequality of wealth (the rich got richer, the poor got poorer, and the middle class marked time and sustained a rising standard of living with debt which has now come back to bite us). In the bargain, during the Reagan years, the U.S. went from being the world's largest creditor to the world's largest debtor nation. The same occurred during Bush II, to the point where the U.S. now exhibits the greatest inequality of wealth of all advanced nations and is more deeply in debt to foreigners than ever before in our history.
Supply-siders try to blame the deficits on “spendthrift” Congress. But anyone with a modicum of Washington savvy will tell you that it’s much easier to cut taxes than it is to cut spending. Recognizing that, responsible fiscal conservatives should have demanded the spending cuts before they cut taxes. Had they done so, they would have discovered that every dollar of Federal spending has a constituency behind it resisting the cuts. They would have found it impossible to reduce spending enough to pay for their tax cuts, and, therefore, would have foregone them.
How any fiscal conservative could support the Reagan and Bush II tax cuts (other than for selfish reasons or sheer ideological obstinacy) in view of the facts, defies logic. G.H.W. Bush was right when he dubbed Reagan's supply-side theories as "Voodoo economics."
When asked why he had “switched sides” in the realm of economic theory, John Maynard Keynes replied: “When the facts change, I change my opinion. What do you do, sir?”
The question for supply siders is how much more data refuting their theories do they need before they change their opinion?
What do you do, Prof. Slaughter?
David L. Smith
Dartmouth 1962
Real economic growth during the Reagan and Bush II years, when personal and corporate tax rates were cut, was significantly slower than during the Clinton years, when tax rates were raised. ("The largest tax increase in history," according to horrified supply-side critics.) This outcome is the exact opposite of what supply siders predict.
The supply-side myth is based on a flawed understanding of human behavior in the aggregate:
Reagan's supply-siders believe if the tax hurdle is lowered, taxpayers (both corporate and individual) will work harder because they get to keep more of what they earn, stimulating economic growth. Conversely, if tax rates are lowered, they will work less because they get to keep less and economic growth will suffer. In short, they believe greed is the overarching human motivator. They mistake in projecting their own predilections upon the population at large.
The relatively higher growth experienced during the Clinton years reveals a strikingly different pattern of collective human behavior:
Lower the tax hurdle (as Reagan did) and the government makes it easier for individuals, including corporate executives, to achieve their (after-tax) goals, so they opt for more leisure, don’t work as hard, take fewer risks and the economy slows. Raise the tax hurdle, (as Clinton did) and the government makes it harder for taxpayers to achieve their (after-tax) goals, so they work harder, take more risks, so as to achieve their goals, and the economy grows faster.
The comparatively faster growth in the Clinton years, relative to the Reagan and Bush years, tells us that achieving near-term goals and the enjoyment of leisure trumps greed as the dominant human motivator.
Moreover, the huge federal budget deficits of the Reagan and Bush years and the budget surpluses during the Clinton years, tell us that if you want to raise more government revenue, raise tax rates moderately. That's what Obama is proposing to do by raising taxes on overseas corporate profits.
Supply-siders have a real problem in that the world just doesn’t work as they say it does. Not only do the data confirm their misperception of human nature, as revealed above, but also none of the Reaganomics forecasts based on supply-side theory came to pass.
Reagan promised an end to deficits, faster long-term growth in revenues than would be the case if tax rates were left as they were, and, according to the “trickle-down” theory, more income and wealth for everyone.
Reaganomics produced just the opposite: the largest deficits in the history of the nation to that time, a slowdown in revenue growth and greater inequality of wealth (the rich got richer, the poor got poorer, and the middle class marked time and sustained a rising standard of living with debt which has now come back to bite us). In the bargain, during the Reagan years, the U.S. went from being the world's largest creditor to the world's largest debtor nation. The same occurred during Bush II, to the point where the U.S. now exhibits the greatest inequality of wealth of all advanced nations and is more deeply in debt to foreigners than ever before in our history.
Supply-siders try to blame the deficits on “spendthrift” Congress. But anyone with a modicum of Washington savvy will tell you that it’s much easier to cut taxes than it is to cut spending. Recognizing that, responsible fiscal conservatives should have demanded the spending cuts before they cut taxes. Had they done so, they would have discovered that every dollar of Federal spending has a constituency behind it resisting the cuts. They would have found it impossible to reduce spending enough to pay for their tax cuts, and, therefore, would have foregone them.
How any fiscal conservative could support the Reagan and Bush II tax cuts (other than for selfish reasons or sheer ideological obstinacy) in view of the facts, defies logic. G.H.W. Bush was right when he dubbed Reagan's supply-side theories as "Voodoo economics."
When asked why he had “switched sides” in the realm of economic theory, John Maynard Keynes replied: “When the facts change, I change my opinion. What do you do, sir?”
The question for supply siders is how much more data refuting their theories do they need before they change their opinion?
What do you do, Prof. Slaughter?
David L. Smith
Dartmouth 1962
Tuesday, January 19, 2010
SENATE 60-VOTE RULE UNCONSTITUTIONAL?
Here's a Northwestern law professor's defense of the constitutionality of the Senate's 60-vote cloture rule (reproduced below from the Wall Street Journal).
While the issue is arguable, I find Thomas Geoghehan’s case against the supermajority rule more compelling:
http://www.nytimes.com/2010/01/11/opinion/11geoghegan.html
While Article 1 of the Constitution allows each house of Congress to make its own rules, it does not give them latitude to make rules that are unconstitutional. (For example, the Senate could not make a rule refusing to seat Blacks.) So it is not enough to argue the 60-vote rule is constitutional because Article 1 allows the Senate to make its own rules.
The issue should be decided not on the basis of whether the Senate has a right to make its own rules under Article 1, but rather whether the rules the Senate makes are themselves constitutional. The idea of a permanent supermajority requirement clearly goes against the fundamental Constitutional principle of “majority rule” except in the cases where the Constitution specifically requires a supermajority.
Here are some of the highlights of Geoghehan’s argument:
Finally, Geoghehan summarizes the situation well with his parting shot:
Read his article about what can be done to remedy the situation.
To the Editor:
Thomas Geoghegan argues that the filibuster rule, which requires 60 senators to end debate, is inconsistent with the Constitution, because the Constitution expressly provides for supermajority rules in specific cases and because the vice president is given a casting vote in cases of a tie. Both arguments are wrong.
Each house of Congress has the right under Article I to make rules for its own proceedings. That the Constitution sometimes requires a supermajority rule does not negate a house’s authority to impose such a voting rule at other times any more than the requirement that the president report to Congress about the “State of the Union” precludes the president’s legislative communications on other matters.
The casting provision tells how to resolve ties, but does not suggest that all votes in the Senate must be capable of being equally divided, particularly because the Constitution itself, as in cases of impeachment, contemplates votes that cannot be so resolved.
John O. McGinnis
Chicago, Jan. 11, 2010
The writer is a professor at Northwestern Law School.
While the issue is arguable, I find Thomas Geoghehan’s case against the supermajority rule more compelling:
http://www.nytimes.com/2010/01/11/opinion/11geoghegan.html
While Article 1 of the Constitution allows each house of Congress to make its own rules, it does not give them latitude to make rules that are unconstitutional. (For example, the Senate could not make a rule refusing to seat Blacks.) So it is not enough to argue the 60-vote rule is constitutional because Article 1 allows the Senate to make its own rules.
The issue should be decided not on the basis of whether the Senate has a right to make its own rules under Article 1, but rather whether the rules the Senate makes are themselves constitutional. The idea of a permanent supermajority requirement clearly goes against the fundamental Constitutional principle of “majority rule” except in the cases where the Constitution specifically requires a supermajority.
Here are some of the highlights of Geoghehan’s argument:
As revised in 1975, Senate Rule 22 seemed to be an improvement: it required 60 senators, not 67, to stop floor debate. But there also came a significant change in de facto Senate practice: to maintain a filibuster, senators no longer had to keep talking. Nowadays, they don’t even have to start; they just say they will, and that’s enough. Senators need not be on the floor at all. They can be at home watching Jimmy Stewart on cable. Senate Rule 22 now exists to cut off what are ghost filibusters, disembodied debates.I am confident the founding fathers never intended that 10% of the population should have veto power over all legislation.
As a result, the supermajority vote no longer deserves any protection under Article I, Section 5 — if it ever did at all. It is instead a revision of Article I itself: not used to cut off debate, but to decide in effect whether to enact a law. The filibuster votes, which once occurred perhaps seven or eight times a whole Congressional session, now happen more than 100 times a term. But this routine use of supermajority voting is, at worst, unconstitutional and, at best, at odds with the founders’ intent.
(Emphasis mine.)And later:
So on the health care bill, as on so many other things, we now have to take what a minority of an inherently unrepresentative body will give us. Forty-one senators from our 21 smallest states — just over 10 percent of our population — can block bills dealing not just with health care but with global warming and hazards that threaten the whole planet.
Finally, Geoghehan summarizes the situation well with his parting shot:
In Federalist No. 75, Hamilton denounced the use of supermajority rule in these prophetic words: “The history of every political establishment in which this principle has prevailed is a history of impotence, perplexity and disorder.” That is a suitable epitaph for what has happened to the Senate.
Read his article about what can be done to remedy the situation.
Tuesday, December 29, 2009
REPUBLICANS MISINTERPRETING POLLS ON HEALTH CARE BILL
Right-wing commentator Fred Barnes (of the Weekly Standard and Fox News) published an OP-Ed piece in the Wall Street Journal on December 28,2009, titled "The Tyranny of the Majority Party" with a tag line "If Democrats insist on passing unpopular laws, they won't control Congress for long."
I replied with a comment: "Have you considered that if the Republicans continue to oppose popular and necessary legislation they will remain out of power for a long time?"
A WSJ reader, John Pound, promptly replied: "Which legislation would that be? Health Insurance Reform, opposed by 57% and unconstitutional (individual mandate)? Cap and trade, a shameless giveaway to the financial sector that will do nothing to control CO2 emissions? The $787B deficit enhancing payoff to the Dem supporters? Please help me here."
I replied: "What you fail to understand is that the majority opposing the present health care bill is comprised of intransigent Republicans, who want to do nothing, and Democrats, disappointed that the bill doesn't go far enough. A mid-December CNN poll showed 42% favoring the bill, with another 13% opposing the bill because it wasn't liberal enough. Accordingly, 55% favor health care reform that is equally or more liberal than the proposed bill, substantially more than the 39% who oppose the bill because it is too liberal. The NBC News/Wall Street Journal poll has a headline approval/disapproval ratio of 32%/47%, with more respondents (45%) saying they disapprove of the removal of the public option than approve of removing it (42%). A CBS poll taken in June showed 72% favoring a public option. A November poll by the Robert Wood Johnson Foundations shows that 77% think an overhaul of the nation's health care system is important for recharging the economy."
"The message is clear: a majority of Americans want meaningful health care reform. Moreover, the 13% opposing the bill because it wasn't liberal enough are not going to vote Republican. So, as I stated, Republicans continuing to run on an obstructionsit, "do-nothing" platform opposing popular and necessary health care reform will be outvoted by the majority of Americans who want reform."
"I happen to agree with you on Cap-and-Trade. A stiff carbon tax would be better, reducing pollution, greenhouse gasses, dependence on foreign oil, trade deficits and dependence on foreign capital."
"As for Republican outrage at the deficits being run up by Obama, that's rich! Spare me your righteous indignation. The largest deficits in history were rung up by Reagan and the two Bushes. Dick Cheney informed us "Deficits don't matter." Now all of a sudden Republicans have gotten religion on fiscal policy? I don't think so. The first tranche of bailout money, exceeding $700 billion, was requested by G.W. Bush and his Secretary of the Treasury, Hank Paulsen, who saw the necessity of federal intervention to prevent the economy from melting down into another Great Depression. Obama is simply doing what has to be done to keep the economy afloat by filling in the void in demand created by shell-shocked consumers and businesses, until exports take up the slack. It is the height of hypocrisy for Republicans to whine about the unpleasant but necessary measures Obama is forced to take to clean up the mess created during the Republicans' watch. Does that help?"
I replied with a comment: "Have you considered that if the Republicans continue to oppose popular and necessary legislation they will remain out of power for a long time?"
A WSJ reader, John Pound, promptly replied: "Which legislation would that be? Health Insurance Reform, opposed by 57% and unconstitutional (individual mandate)? Cap and trade, a shameless giveaway to the financial sector that will do nothing to control CO2 emissions? The $787B deficit enhancing payoff to the Dem supporters? Please help me here."
I replied: "What you fail to understand is that the majority opposing the present health care bill is comprised of intransigent Republicans, who want to do nothing, and Democrats, disappointed that the bill doesn't go far enough. A mid-December CNN poll showed 42% favoring the bill, with another 13% opposing the bill because it wasn't liberal enough. Accordingly, 55% favor health care reform that is equally or more liberal than the proposed bill, substantially more than the 39% who oppose the bill because it is too liberal. The NBC News/Wall Street Journal poll has a headline approval/disapproval ratio of 32%/47%, with more respondents (45%) saying they disapprove of the removal of the public option than approve of removing it (42%). A CBS poll taken in June showed 72% favoring a public option. A November poll by the Robert Wood Johnson Foundations shows that 77% think an overhaul of the nation's health care system is important for recharging the economy."
"The message is clear: a majority of Americans want meaningful health care reform. Moreover, the 13% opposing the bill because it wasn't liberal enough are not going to vote Republican. So, as I stated, Republicans continuing to run on an obstructionsit, "do-nothing" platform opposing popular and necessary health care reform will be outvoted by the majority of Americans who want reform."
"I happen to agree with you on Cap-and-Trade. A stiff carbon tax would be better, reducing pollution, greenhouse gasses, dependence on foreign oil, trade deficits and dependence on foreign capital."
"As for Republican outrage at the deficits being run up by Obama, that's rich! Spare me your righteous indignation. The largest deficits in history were rung up by Reagan and the two Bushes. Dick Cheney informed us "Deficits don't matter." Now all of a sudden Republicans have gotten religion on fiscal policy? I don't think so. The first tranche of bailout money, exceeding $700 billion, was requested by G.W. Bush and his Secretary of the Treasury, Hank Paulsen, who saw the necessity of federal intervention to prevent the economy from melting down into another Great Depression. Obama is simply doing what has to be done to keep the economy afloat by filling in the void in demand created by shell-shocked consumers and businesses, until exports take up the slack. It is the height of hypocrisy for Republicans to whine about the unpleasant but necessary measures Obama is forced to take to clean up the mess created during the Republicans' watch. Does that help?"
Thursday, November 26, 2009
HOPE FADES
The Reuters headline of November 25 reads: "U.S. Will Be Out Of Afghanistan By 2017 -- White House." 2017?? This is the change, the hope for peace Obama promised? By 2017 we will have occupied Afghanistan for 16 pointless years.As Obama prepares to commit the U.S. to more lives and countless billions of dollars wasted (reportedly $1 million per pair of 'boots on the ground') for up to 8 more years in Afghanistan, what do we tell the millions of Americans bankrupted, unemployed, homeless and the one American household in seven having difficulty feeding themselves? Thanksgiving turkey this year comes seasoned with bitter herbs indeed.
Monday, November 23, 2009
DONE IN BY DIVERSITY: THROWING ANN COULTER UNDER THE BUS, GOING FORWARD
Poor Ann Coulter. She is in such deep doo-doo with America.
First she assails the chief of staff of the United States Army, Gen. George Casey, during time of war. Not cool.
She takes Gen. Casey to task for affirming what she terms a 'lunatic cliche': "Our diversity . . . is a strength," following the Ft. Hood 'massacre of 13 Americans in which the suspect is a Muslim.'[1]
"Never in recorded history has diversity been anything but a problem," comes the throaty rebuke, citing numerous instances of cultural conflicts -- Northern Ireland, Canada, Israel, for example. Oh-kay. We know diversity can be a problem; but 'never in recorded history has diversity been anything but a problem'? Really? Never? Aren't we forgetting something?
There's a place called America -- the great exception to the Coulter dictum.
To state an obvious example of the dividends of diversity: Where would America be without the blacks? For starters, no gospel music, no Joplin ragtime, no Louie Armstrong jazz, no Ella Fitzgerald, no Duke Ellington or Count Basie. No Charlie Parker, no Monk, no Dizzy. No (Canadian) Oscar Peterson. No Herbie Hancock. No Bobbie McFerrin. No Joe Sample. And no white musicians who derived their inspiration from these virtuosi.
Can you imagine the NBA without Michael Jordan, Magic Johnson, Shaquille O’Neill, Kobe Bryant? Or football without Walter Payton, or baseball without Jackie Robinson or Willie Mays? Tennis without Arthur Ashe and the Williams sisters? Golf without Tiger Woods?
Diversity always and everywhere a problem? Tell it to all those white bomber crews in World War II requesting flawless fighter cover from the Tuskegee Airmen. Or to Dwight Eisenhower’s Army in Europe supplied with food, fuel and ammo by the Red Ball Express.
I could call a similar roll of honor for the Irish and other Europeans, Hispanics, Jews, Asians, Gays, yes, Muslims and . . . however else you slice up America. Although by twisted Coulter logic such categorizations are ‘superficial’ and, therefore, presumably not worthy of mention.
Au contraire, Cherie, everything extraordinary done by an American was done by someone belonging to a diverse part of the melting pot that is America. Every group has made its noteworthy contribution, surmounting its special challenges and drawing upon its unique resources in a country ever-growing in its support of diversity. The sum total adds up to a remarkable tally of human achievement.
How, then, is it ‘nonsense’ to celebrate diversity in America as a strength?
Dissing the contribution of our diverse cultures puts Coulter at odds with just about everyone in America. Poor Ann Coulter.
If "’diversity" is a difficulty to be overcome, not an advantage to be sought,’ how to overcome diversity in Coulter’s homogeneous wonderland? Deportation? Prisons? Concentration Camps? Extermination? Not far fetched for the fair Ms. Coulter, who once said "We should invade their countries, kill their leaders, and convert them to Christianity." Nice.
What would America look like without diversity? Would Timothy McVey make it into Coulter’s land of un-diversified purity? Or would such a land be populated only by blonde bitch-goddesses in Little Black Dresses and the homogenized men who worship them?
Poor Ann Coulter, most of all, because as an iconic proponent of American exceptionalism she fails to recognize that America is an, if not the exception to her prejudice that diversity is always and everywhere a problem.
This exception is what makes America exceptional.
Monday, November 2, 2009
Open Letter to President Barack Obama
September 22, 2009
President Barack H. Obama
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear President Obama:
Please, Mr. President, do not continue the war in Afghanistan.
History will say your response to General McChrystal's recent request for more troops was the defining moment of your presidency. Send in more troops and Afghanistan becomes your war and your presidency will be forever tainted by tragic failure; more blood and treasure will be squandered; our enemies will continue to gain strength while our strength is sapped; and our nation’s security will be further imperiled.
As a Vietnam vet, I recognize a “Westmoreland moment” when I see one. Every time General Westmoreland requested more troops, he presented a false choice between “victory” and “cut-and-run.” Your military commanders cannot promise victory, or even ill-defined success. Accordingly, you have the opportunity to say, as only you can, that you have reviewed Gen. McChrystal’s proposals and have concluded that the uncertain returns from continued occupation are persuasively outweighed by the certain costs in blood, treasure, national security and esteem in which our country is held, both at home and abroad. It is time to bring the troops home. Do not let this “Westmoreland moment” morph into a “McNamara moment.”
There is no possibility of “victory” in a country known as ‘the graveyard of empires.” Just ask the British and the Russians. There will never be a moment when the Taliban will say: “We give up. You win.” Nor will they be exterminated or subdued. The Taliban are driven by unyielding religious fanaticism in a fratricidal war dating back thirteen centuries to the struggle to succeed the Prophet, and will continue as long as Islam remains divided between Sunni and Shia. Interposing a hated “Crusader” armed force between these warring factions cannot reconcile them. Such interference serves only to stiffen the Taliban’s resolve and, with every report of civilian casualties, to persuade more moderate Muslims to join the jihad against us. Better that they should expend their energies against each other than against us. The Taliban are there for the duration. We are not, and will depart when public opinion demands it. Time, therefore, is on the Taliban’s side, just as it was on the side of Ho Chi Minh, and they know it.
Reduced to fundamentals, the conflict meets none of the criteria for war gleaned by General Powell from the hard lessons learned in Vietnam:
Order Gen. McChrystal to respond to each of these and the underpinnings of his request for more troops will implode. Remind him “those who fail to remember the past are condemned to repeat it.” Ask him to give full weight to the wellbeing of his troops and their families, who alone bear the entire burden of sacrifices required to prosecute this pointless war.
Our European allies are already edging for the door with calls to turn the war over to Afghan security forces, which are a year or two away from being ready and always will be. “Afghanization” of the war is “Vietnamization” redux, serving only to provide a face-saving smoke screen to cover a strategic withdrawal in a hopeless situation. When Britain, Germany and France pull out, others will soon follow, leaving you holding the bag.
It is folly to attempt to deny al-Qaida a base of operations by occupying an entire country adjoining their present base in Pakistan. Al-Qaida will always find a patch of ground from which to operate. “Success” in Afghanistan, however improbable, is no guarantee of success against al-Qaida. We would be better off creating a vacuum in Afghanistan for them to fill, isolating them in a remote, primitive and barren environment rather than operating in the more accessible, modern state one coup away from supplying al-Qaida with nuclear weaponry.
In global politics the Newtonian principle of action producing an equal and opposite reaction applies. Al-Qaida chose their adversary well, knowing President Bush would push back hard in response to 9/11, which served only to empower al-Qaida and others who wish us ill. Disengagement accompanied by diligent, low-profile, well-funded international law enforcement and special-ops campaigns, therefore, are the surest means of undermining the threat posed by al-Qaida. Imagine where we would be if instead of invading the Middle East, we had dedicated a significant portion of the billions spent on the war to hunt down al-Qaida with such campaigns. We still can.
Strip away all the rhetoric, and all that remains as underlying pretexts for war, besides the desire to support big oil’s ambitions in the Middle East, are George W. Bush’s thirst to avenge 9/11 with blunt force; his lack of imagination to find unglamorous yet effective alternate ways to confront al-Qaida; his Oedipal desire to one-up his father; his need to be seen (in view of his dubious military service) as an heroic wartime commander-in-chief, swaggering aboard the Abraham Lincoln in a flight suit to declare “Mission Accomplished;” and his delusional instructions from God to wage a eschatological Biblical war between Gog and Magog in the Middle East. Continue the war and you become possessed by Bush’s inner demons. I urge you to exorcise them from our nation’s consciousness by bringing the wars in the Middle East to a swift conclusion.
Republicans will attempt to tar you with the “cut-and-run” brush. So what? Republicans long ago gave up any pretense of serving the national interest in favor of their unprincipled pursuit of power at any cost. While I admire your statesmanlike quest for bipartisanship, as we are learning from the fight for health-care reform, Republicans will dangle the enticing carrot of bipartisanship only to whack you with the stick of self-serving partisanship. Fool you once, shame on them. Fool you twice, shame on you. Your challenge will be to reframe the discourse according to Matthew 5:9. [Blessed are the peacemakers. . . ]
Dance with those who brung you. We voted for you because you promised constructive change, prosperity and peace. We are counting on you to deliver, and are dismayed and disheartened by any willingness to perpetuate the flawed policies of the Bush II administration. You will never gain support from the Republican Right; don’t forfeit the support from the majority left-of-Center trying vainly to appease them or the military-industrial complex.
This is one decision you do not need congressional approval to implement. As Commander-in-Chief you can order the military to withdraw and none can gainsay you.
I wish you every success in finding the inner resources to give the order, secure in the knowledge that untold millions at home and abroad will hail the decision. It is altogether fitting and proper that you should return Mr. Lincoln the favor.
Best wishes,
David L. Smith
Click here for link to Michael Moore's open letter to President Obama.
President Barack H. Obama
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear President Obama:
Please, Mr. President, do not continue the war in Afghanistan.
History will say your response to General McChrystal's recent request for more troops was the defining moment of your presidency. Send in more troops and Afghanistan becomes your war and your presidency will be forever tainted by tragic failure; more blood and treasure will be squandered; our enemies will continue to gain strength while our strength is sapped; and our nation’s security will be further imperiled.
As a Vietnam vet, I recognize a “Westmoreland moment” when I see one. Every time General Westmoreland requested more troops, he presented a false choice between “victory” and “cut-and-run.” Your military commanders cannot promise victory, or even ill-defined success. Accordingly, you have the opportunity to say, as only you can, that you have reviewed Gen. McChrystal’s proposals and have concluded that the uncertain returns from continued occupation are persuasively outweighed by the certain costs in blood, treasure, national security and esteem in which our country is held, both at home and abroad. It is time to bring the troops home. Do not let this “Westmoreland moment” morph into a “McNamara moment.”
There is no possibility of “victory” in a country known as ‘the graveyard of empires.” Just ask the British and the Russians. There will never be a moment when the Taliban will say: “We give up. You win.” Nor will they be exterminated or subdued. The Taliban are driven by unyielding religious fanaticism in a fratricidal war dating back thirteen centuries to the struggle to succeed the Prophet, and will continue as long as Islam remains divided between Sunni and Shia. Interposing a hated “Crusader” armed force between these warring factions cannot reconcile them. Such interference serves only to stiffen the Taliban’s resolve and, with every report of civilian casualties, to persuade more moderate Muslims to join the jihad against us. Better that they should expend their energies against each other than against us. The Taliban are there for the duration. We are not, and will depart when public opinion demands it. Time, therefore, is on the Taliban’s side, just as it was on the side of Ho Chi Minh, and they know it.
Reduced to fundamentals, the conflict meets none of the criteria for war gleaned by General Powell from the hard lessons learned in Vietnam:
- Military action should be used only as a last resort and
- Only if there is a clear risk to national security by the intended target
- Force, when used, should be overwhelming and disproportionate to the force used by the enemy
- There must be strong support for the campaign by the general public
- There must be a clear exit strategy from the conflict in which the military is engaged
Order Gen. McChrystal to respond to each of these and the underpinnings of his request for more troops will implode. Remind him “those who fail to remember the past are condemned to repeat it.” Ask him to give full weight to the wellbeing of his troops and their families, who alone bear the entire burden of sacrifices required to prosecute this pointless war.
Our European allies are already edging for the door with calls to turn the war over to Afghan security forces, which are a year or two away from being ready and always will be. “Afghanization” of the war is “Vietnamization” redux, serving only to provide a face-saving smoke screen to cover a strategic withdrawal in a hopeless situation. When Britain, Germany and France pull out, others will soon follow, leaving you holding the bag.
It is folly to attempt to deny al-Qaida a base of operations by occupying an entire country adjoining their present base in Pakistan. Al-Qaida will always find a patch of ground from which to operate. “Success” in Afghanistan, however improbable, is no guarantee of success against al-Qaida. We would be better off creating a vacuum in Afghanistan for them to fill, isolating them in a remote, primitive and barren environment rather than operating in the more accessible, modern state one coup away from supplying al-Qaida with nuclear weaponry.
In global politics the Newtonian principle of action producing an equal and opposite reaction applies. Al-Qaida chose their adversary well, knowing President Bush would push back hard in response to 9/11, which served only to empower al-Qaida and others who wish us ill. Disengagement accompanied by diligent, low-profile, well-funded international law enforcement and special-ops campaigns, therefore, are the surest means of undermining the threat posed by al-Qaida. Imagine where we would be if instead of invading the Middle East, we had dedicated a significant portion of the billions spent on the war to hunt down al-Qaida with such campaigns. We still can.
Strip away all the rhetoric, and all that remains as underlying pretexts for war, besides the desire to support big oil’s ambitions in the Middle East, are George W. Bush’s thirst to avenge 9/11 with blunt force; his lack of imagination to find unglamorous yet effective alternate ways to confront al-Qaida; his Oedipal desire to one-up his father; his need to be seen (in view of his dubious military service) as an heroic wartime commander-in-chief, swaggering aboard the Abraham Lincoln in a flight suit to declare “Mission Accomplished;” and his delusional instructions from God to wage a eschatological Biblical war between Gog and Magog in the Middle East. Continue the war and you become possessed by Bush’s inner demons. I urge you to exorcise them from our nation’s consciousness by bringing the wars in the Middle East to a swift conclusion.
Republicans will attempt to tar you with the “cut-and-run” brush. So what? Republicans long ago gave up any pretense of serving the national interest in favor of their unprincipled pursuit of power at any cost. While I admire your statesmanlike quest for bipartisanship, as we are learning from the fight for health-care reform, Republicans will dangle the enticing carrot of bipartisanship only to whack you with the stick of self-serving partisanship. Fool you once, shame on them. Fool you twice, shame on you. Your challenge will be to reframe the discourse according to Matthew 5:9. [Blessed are the peacemakers. . . ]
Dance with those who brung you. We voted for you because you promised constructive change, prosperity and peace. We are counting on you to deliver, and are dismayed and disheartened by any willingness to perpetuate the flawed policies of the Bush II administration. You will never gain support from the Republican Right; don’t forfeit the support from the majority left-of-Center trying vainly to appease them or the military-industrial complex.
This is one decision you do not need congressional approval to implement. As Commander-in-Chief you can order the military to withdraw and none can gainsay you.
I wish you every success in finding the inner resources to give the order, secure in the knowledge that untold millions at home and abroad will hail the decision. It is altogether fitting and proper that you should return Mr. Lincoln the favor.
Best wishes,
David L. Smith
Click here for link to Michael Moore's open letter to President Obama.
Thursday, October 22, 2009
Behind the Nobel Peace Prize for President Obama
He got the prize for what he has done," committee chairman Thorbjorn Jagland told The Associated Press. Jagland singled out Obama's efforts to heal the divide between the West and the Muslim world and scale down a Bush-era proposal for an anti-missile shield in Europe."All these things have contributed to - I wouldn't say a safer world - but a world with less tension," he said.
What the two examples cited by the Nobel Peace Prize committee chairman have in common is DE-ESCALATION of the present growing polarization, confrontation and conflict between the Muslim world and the West. "Healing the divide" is no mean task, given the impetus to escalate driven by religious antagonism dating back 13 centuries.
The committee doubtlessly realizes that the world is treading along the perilous path of irreversible escalation to all-out war, the same calamitous path which led antagonists in the previous century to wage World Wars I and II. The lesson of these two wars is that once the point of no return is crossed (in this instance, the decisions to mobilize following the assassination of Archduke Ferdinand in Sarajevo), the combatants will irrationally escalate irreversibly, pouring into the fray all available resources and weapons, including nuclear bombs.
The committee also knows that all-out war in the present century means nukes -- now possessed by both Muslims and the West -- and the annihilation of the human species.
Humanity has a choice: to continue escalating past the point of no return -- irreversible escalation to all-out war and human annihilation -- or to begin the process of de-escalation to avoid the extinction of the human species and most life on earth.
I think the prize, then, was intended both as a reward for and encouragement of what may be the single-most important policy initiative a Western leader can undertake: de-escalation and rapprochement between Islam and the West.
For those who would reflexively cry out "Munich!" I would reply "Detente, Rapprochement and the end of the Cold War." What remains to be seen is whether 9/11 was the point of no return, or whether, as the committee hopes, such a milestone has not been reached.
Last week I was in Egypt, enjoying the hospitality of that Muslim country, including the services of polite, friendly and attentive tour guides and staffs of the various hospitality services, and the good-natured haggling with smiling, boisterous vendors in the markets adjoining the awe-inspiring monuments of a civilization predating ours by some three millennia. This interaction between our two cultures betrayed no hint of murderous antagonism that would unleash the destructive power of the atom against one another. The decisions underlying such a tragic outcome remains the exclusive purview of our respective leaders.
I also visited the home of a dirt-poor farmer working his two hectares on the banks of the Nile near Luxor, I broke bread with him and his 10-member family crammed into a wretched hovel on the walls of which were displayed two crude grafitti of the Ka'aba and a ship, proudly commemorating his pilgrimage to Mecca and two photographs of Barack Obama.
Pax vobiscum. Salaam aleikum.
What the two examples cited by the Nobel Peace Prize committee chairman have in common is DE-ESCALATION of the present growing polarization, confrontation and conflict between the Muslim world and the West. "Healing the divide" is no mean task, given the impetus to escalate driven by religious antagonism dating back 13 centuries.
The committee doubtlessly realizes that the world is treading along the perilous path of irreversible escalation to all-out war, the same calamitous path which led antagonists in the previous century to wage World Wars I and II. The lesson of these two wars is that once the point of no return is crossed (in this instance, the decisions to mobilize following the assassination of Archduke Ferdinand in Sarajevo), the combatants will irrationally escalate irreversibly, pouring into the fray all available resources and weapons, including nuclear bombs.
The committee also knows that all-out war in the present century means nukes -- now possessed by both Muslims and the West -- and the annihilation of the human species.
Humanity has a choice: to continue escalating past the point of no return -- irreversible escalation to all-out war and human annihilation -- or to begin the process of de-escalation to avoid the extinction of the human species and most life on earth.
I think the prize, then, was intended both as a reward for and encouragement of what may be the single-most important policy initiative a Western leader can undertake: de-escalation and rapprochement between Islam and the West.
For those who would reflexively cry out "Munich!" I would reply "Detente, Rapprochement and the end of the Cold War." What remains to be seen is whether 9/11 was the point of no return, or whether, as the committee hopes, such a milestone has not been reached.
Last week I was in Egypt, enjoying the hospitality of that Muslim country, including the services of polite, friendly and attentive tour guides and staffs of the various hospitality services, and the good-natured haggling with smiling, boisterous vendors in the markets adjoining the awe-inspiring monuments of a civilization predating ours by some three millennia. This interaction between our two cultures betrayed no hint of murderous antagonism that would unleash the destructive power of the atom against one another. The decisions underlying such a tragic outcome remains the exclusive purview of our respective leaders.
I also visited the home of a dirt-poor farmer working his two hectares on the banks of the Nile near Luxor, I broke bread with him and his 10-member family crammed into a wretched hovel on the walls of which were displayed two crude grafitti of the Ka'aba and a ship, proudly commemorating his pilgrimage to Mecca and two photographs of Barack Obama.
Pax vobiscum. Salaam aleikum.
Sunday, September 20, 2009
Irving Kristol, the man who put the con into conservatism
Yesterday's Wall Street Journal's hagiographic editorial limns the life and times of the late Irving Kristol, longstanding contributor to the Journal's editorial page. ("Irving Kristol. The man who put neo into conservativism.")
Some excerpts:
Some excerpts:
Perhaps the greatest gift of the gifted Irving Kristol, who died yesterday at 89, was prescience. This does not mean predicting the future. Prescience, a more useful gift, is seeing the direction in which the future is headed.
In his early years, Kristol saw that the Marxism which fascinated him and many others at mid-century had no future, and he embraced the ideals of the West, holding them tight for a lifetime. Later as a Democrat, he saw that many of the social welfare policies of the 1960s would fail, and so he undertook a long, unsparing critique of his own party's most cherished ideas. Later still, as a Republican, Kristol realized that his party's economic ideas were moribund, and he turned his energies to leading the pro-growth, "supply-side" revolution that culminated in the historic Reagan Presidency.
Irving Kristol is most often credited with leading the movement in American politics that came to be called neoconservatism. Begun in the 1970s, it may be counted as a testament to its enduring strength that as recently as the administration of George W. Bush, critics were bursting blood vessels screaming, again, that the government had fallen into the hands of "the neocons." Nothing more made Irving break into his familiar wide smile than the intensity of his opposition. . .
The Kristol critique helped shape the basis for many opposition ideas to the modern political left, in both domestic and foreign policy. . .
To the extent that American politics today consists of two sides—one insisting that the state guide the country forward, the other that the private economy drive the country forward—it is in large part Irving Kristol and his thinkers who defined the order of battle.
Where the next turn in history lies is beside the point. Irving Kristol's life and career are a compass for anyone who wants to know how ideas and honest inquiry can shape American politics.
----
You have to wonder, is it arrogance or stupidity impelling the author of this editorial to compose a soppy-eyed paean to an ideology discredited by its consequences at every turn? The signature trait of neocons is their ability to remain impervious to the reality of their folly. They seem afflicted by a terminal inability to connect the dots.
- Supply-side tax cuts followed by tidal waves of red ink? No connection.
- Unbridled laissez faire and ‘perpetual prosperity’ monetary policies followed by the worst financial meltdown and recession since the Great Depression? Who, moi?
- Invasion of the Middle East followed by quagmires of insurgency? What, me worry?
The telling myopia of the piece, however, lies in the author’s inability to synthesize the false dichotomy between the state guiding and the private sector driving the country forward. Try a sports analogy. The state writes the rulebook and fields the umpires, the private sector plays the game. Simple. However, it works only if the rules are sound and the players abide by them. In the world of the neocons, the players blindfold the umpires and make up the rules as they go along.
Monday, September 7, 2009
Europe Backing Out of Afghanistan
The Times they are a-changing. The headline in today's New York Times announced "Europeans Seek to Shift Security Role to Afghan Government." The article by Judy Dempsey, head of the Berlin bureau of the Times affiliate, the International Herald Tribune states: " BERLIN. The leaders of France, Germany and Britain called Sunday night for an international conference to work out a plan to shift responsibility for security in Afghanistan to the Afghan government."
Those of you who remember "Vietnamization" of the war in Vietnam know what that means: time to bug out. The Afghan government, roiled by a disputed election this past week, accused of being ineffective and corrupt with little ability to project power beyond the capital, is in no position to assume "responsibility for security in Afghanistan." Any such shift under the aegis of an international conference would simply represent a transparent fig leaf to cover a strategic withdrawal by European governments beset by rising discontent at home over rising casualties in the futile attempt at nation building.
Paradoxically, the Financial Times of London reported the same calls for an international conference without a hint of its true purpose. According to the Financial Times, the purpose of the conference is to "co-ordinate support and resources for the U.S.-led mission there." The article continues with more misleading journalistic pablum: "The conference is designed to bring together a newly elected Afghan government with Nato, the United Nations and 'other key allies' to agree a detailed strategy (sic) for 2010, a UK government insider said last night. 'The aim is about ensuring strong international backing [for the war] with a key focus on resources.'"
Who are they kidding? Only an oleagenous Brit could keep a straight face while converting "backing out" into "strong backing for the war." No question about who will be left holding the bag when Britain, Germany and France pull their disappearing act.
No word yet from the White House in response to the Europeans' call for a conference. Stay tuned
Those of you who remember "Vietnamization" of the war in Vietnam know what that means: time to bug out. The Afghan government, roiled by a disputed election this past week, accused of being ineffective and corrupt with little ability to project power beyond the capital, is in no position to assume "responsibility for security in Afghanistan." Any such shift under the aegis of an international conference would simply represent a transparent fig leaf to cover a strategic withdrawal by European governments beset by rising discontent at home over rising casualties in the futile attempt at nation building.
Paradoxically, the Financial Times of London reported the same calls for an international conference without a hint of its true purpose. According to the Financial Times, the purpose of the conference is to "co-ordinate support and resources for the U.S.-led mission there." The article continues with more misleading journalistic pablum: "The conference is designed to bring together a newly elected Afghan government with Nato, the United Nations and 'other key allies' to agree a detailed strategy (sic) for 2010, a UK government insider said last night. 'The aim is about ensuring strong international backing [for the war] with a key focus on resources.'"
Who are they kidding? Only an oleagenous Brit could keep a straight face while converting "backing out" into "strong backing for the war." No question about who will be left holding the bag when Britain, Germany and France pull their disappearing act.
No word yet from the White House in response to the Europeans' call for a conference. Stay tuned
Monday, August 24, 2009
KRUGMAN ON HEALTH CARE: "Missing the turn"
Paul Krugman knocked it out of the park in his NY Times column "All the President's Zombies" of August 23, 2009 summarizing the current status of the 'public option' for health care: "It's hard to avoid the sense that a crucial opportunity is being missed, that we're at what should be a turning point but we're missing the turn."
Why? Because despite its manifest failure to "deliver what it promised," the "zombie doctrine of Reaganism" -- mindless, misplaced faith in faith in free markets and disdain for government intervention -- is alive and well in Washington. "Why won't these zombie ideas die?" asks Krugman. "...there's a lot of money behind them, 'It is difficult to get a man to understand something,' said Upton Sinclair, 'when his salary' -- or, I would add, his campaign contributions -- 'depend on his not understanding it.' In particular, vast amounts of insurance industry money have been flowing to obstructionist Democrats like [Senator] Nelson and Senator Max Baucus, whose Gang of Six negotiations have been a crucial roadblock to legislation."
My own favorite quote on this point comes from Mark Twain: "Tell me whar a man gits his corn pone en I'll tell you what his 'pinions is."
As long as money buys 'pinions in Washington, Americans will be held captive to the moneyed special interests. If you want reform, any kind of reform, start with public funding of national political campaigns to the exclusion of all other funding. Any other alternative to campaign finance reform is like cutting the White House lawn with nail clippers.
Why? Because despite its manifest failure to "deliver what it promised," the "zombie doctrine of Reaganism" -- mindless, misplaced faith in faith in free markets and disdain for government intervention -- is alive and well in Washington. "Why won't these zombie ideas die?" asks Krugman. "...there's a lot of money behind them, 'It is difficult to get a man to understand something,' said Upton Sinclair, 'when his salary' -- or, I would add, his campaign contributions -- 'depend on his not understanding it.' In particular, vast amounts of insurance industry money have been flowing to obstructionist Democrats like [Senator] Nelson and Senator Max Baucus, whose Gang of Six negotiations have been a crucial roadblock to legislation."
My own favorite quote on this point comes from Mark Twain: "Tell me whar a man gits his corn pone en I'll tell you what his 'pinions is."
As long as money buys 'pinions in Washington, Americans will be held captive to the moneyed special interests. If you want reform, any kind of reform, start with public funding of national political campaigns to the exclusion of all other funding. Any other alternative to campaign finance reform is like cutting the White House lawn with nail clippers.
Friday, August 21, 2009
"WE VALUE YOUR PRIVACY" Famous last words
Dear Chase Credit Card:
I'm confused.
I received this nice letter from Deb Walden, your Executive Vice president, Customer Experience saying "Customer privacy has never been more important. . . Your privacy concerns are important to us." I was so relieved.
Until I read the Chase privacy Policy which says: you may "share information about me within our family and with outside companies that work for us, including firms that assist in marketing our products, retailers, auto dealers, auto makers, direct marketers, membership clubs and publishers, credit bureaus, law authorities and sever others." Maybe it would be shorter for you to tell me whom you do not share my information with. I began to worry.
But then I read that I had choices limiting "sharing and use" of my private, personal information. I was so relieved.
The Chase Privacy Policy went on to say I could tell you not to share information about me with "non-financial companies outside and within our family of companies." Yet another wave of relief swept over me.
Until I read "Even if you do tell us not to share we may do so as permitted by law," without explaining what the law permits.
I'm confused. Is you is, or is you ain't gonna share my information if I tell you not to?
Am I being paranoid, or is Chase really saying you will share my private, personal information with virtually anyone who will pay for the information, even if I tell you not to, and that I have no privacy at all?
Please explain again how "Customer privacy has never been more important" and how "Your privacy concerns are important to us."
Sincerely,
David L. Smith
I'm confused.
I received this nice letter from Deb Walden, your Executive Vice president, Customer Experience saying "Customer privacy has never been more important. . . Your privacy concerns are important to us." I was so relieved.
Until I read the Chase privacy Policy which says: you may "share information about me within our family and with outside companies that work for us, including firms that assist in marketing our products, retailers, auto dealers, auto makers, direct marketers, membership clubs and publishers, credit bureaus, law authorities and sever others." Maybe it would be shorter for you to tell me whom you do not share my information with. I began to worry.
But then I read that I had choices limiting "sharing and use" of my private, personal information. I was so relieved.
The Chase Privacy Policy went on to say I could tell you not to share information about me with "non-financial companies outside and within our family of companies." Yet another wave of relief swept over me.
Until I read "Even if you do tell us not to share we may do so as permitted by law," without explaining what the law permits.
I'm confused. Is you is, or is you ain't gonna share my information if I tell you not to?
Am I being paranoid, or is Chase really saying you will share my private, personal information with virtually anyone who will pay for the information, even if I tell you not to, and that I have no privacy at all?
Please explain again how "Customer privacy has never been more important" and how "Your privacy concerns are important to us."
Sincerely,
David L. Smith
Tuesday, August 18, 2009
HEALTH CARE: Pulling the Plug on Grandma
According to the U.S. Census Bureau, 72.2% of the American population is left to fend for itself when it comes to health care. There are 202 million covered by private health insurance and about 47-50 million uninsured, roughly one in five of those not covered by the government.
Why are so many citizens left out in the cold? Very simple. An unholy alliance of insurance companies, doctors, lawyers has a enormous vested interest in keeping most of the health care system private: huge shareholder profits, outlandish compensation for top management and many doctors, gargantuan contingency fees for the plaintiffs’ bar in medical malpractice and reliable defense attorneys’ fees on the other side. To preserve their sinecures they bribe legislators (they call it “campaign contributions” but I defy you to explain the difference) to vote against measures that might provide universal coverage or in any way diminish their share of the health-care pie. Millions in “campaign contributions” yield billions in remuneration to the private healthcare system. Some have suggested that legislators wear patches, like NASCAR drivers, with the logos of the companies who underwrite their election campaigns. One of the fringe benefits of this cozy relationship is that the health care industry managed to wrangle an exemption from anti-trust laws (the McCarran-Ferguson Act of 1945), thereby allowing 2 companies – Wellpoint, Inc. and UnitedHealth Group -- to garner control of 36% of the industry mainly by acquiring competitors.
American corporations and other institutions constantly measure themselves against their competitors, seeking to adopt “best practices” within their industry in order to remain competitive. Yet when it comes to healthcare, they studiously avoid measuring themselves against the best practices in other countries, simply because such best practices involve more government control of the system and, if adopted, would diminish the generous remuneration the private health-care system now enjoys. Bought-and-paid-for legislators parrot the industry’s party line for “choice of doctors,” the presumed benefits of free-market competition and against the alleged delays and rationing of much-demonized “socialized medicine” (despite the fact that already half the annual health care expenditures already run through a ‘single-payer’ government system no one seems inclined to give up).
The private health-care industry, digging in to support the status quo, essentially shrugs its shoulders at the obvious shortcomings of the current system. For example:
In 2002, the Institute of Medicine (IOM) estimated that 18,000 Americans died in 2000 because they were uninsured, many simply because they had pre-existing conditions or lost their jobs. Since then, the number of uninsured has grown. Based on the IOM’s methodology and subsequent Census Bureau estimates of insurance coverage, 137,000 people died from 2000 through 2006 because they lacked health insurance, including 22,000 people in 2006. How’s that for “pulling the plug on Grandma?”
Because of the McCarran-Ferguson exemption from anti-trust legislation, many markets are dominated by relatively few health-insurance providers. According to the Center for American Progress (an organization with a declared progressive bias) “The result of this market concentration is that health insurance interests come before Americans’ health care needs. Where markets are dominated by only a few firms, health insurers revenues are growing faster than health inflation as insurers maximize rates they charge employers and families and create barriers to care. Employers are then unable to afford meaningful health insurance options for their employees or, in the case of small businesses, are unable to offer their employees insurance at all, while most Americans seeking health insurance in the individual market never purchase coverage.” (“Insurance Market Domination Leads to Fewer Choices by Ben Furnas, Rebecca Buckwalter-Poza June 16, 2009 http://www.americanprogress.org/issues/2009/06/health_competition_map.html) The American Medical Association agrees: “It is clear that patients—the ultimate consumers of health care—are not benefiting from these mergers. The AMA is concerned that the United States is heading toward a system dominated by a few publicly traded companies that operate in the interest of shareholders and not primarily in the interest of patients.
A clinical research study published in the American Journal of Medicine revealed the following results:
Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well-educated, owned homes, and had middle-class occupations. Three quarters had health insurance! Using identical definitions in 2001 and 2007, the share of bankruptcies attributable
to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.
CONCLUSIONS: Illness and medical bills contribute to a large and increasing share of US bankruptcies. (“Medical Bankruptcy in the United States, 2007: Results of a National Study” by David U. Himmelstein, MD et al. http://pnhp.or/Bankrutcy-2009.pdf )
See the previous post for additional sobering statistics regarding the price Americans pay for allowing health insurers to underwrite Washington’s election campaigns.
HEALTH CARE: France Does It Best
Everybody tuning into the health care debate knows the U.S. is the only wealthy, industrialized nation that does not ensure that all citizens have medical coverage, and by no coincidence, ranks below all the other advanced nations in overall performance and level of health. What is not so well known is that France, ranked as the number 1 health system by the World Health Organization (WHO) in 2000 (the last time they issued such rankings), spent $3,554 per person on health care in 2006, compared with $6,714 in the United States, the highest in the world, according to WHO.
Saturday, August 15, 2009
"Jesus Wants Health Care"
This morning I drove down to Fremont hoping to sit in on Democrat Congressman Pete Stark’s town hall meeting (one of three held in 1 1/2 hour intervals, the other two in Alameda and San Leandro). Stark has been in Congress since 1973 representing the East Bay. His bio states:
Sadly, the Senior Citizens’ Center chosen as the venue for this town meeting could accommodate only about 340 people, leaving several hundred, including me, outside. No outside loudspeakers. I peered inside through a tinted window and could discern no ruckus or commotion. Have heard nothing about how the meeting went, but understood the Congressman would be not taking any questions. Smart. Not really in the spirit of a town hall meeting, but smart, given what’s been going on elsewhere. Grouping the meetings tightly, about 15 miles apart was smart too, preventing protesters intent on disrupting the meetings from attending more than one.
As it turns out, the show was really outside. I caught the highlights on my video camera. If I can figure out the editing software, I’ll attempt a modest documentary of the event.
In all, I was quite proud of how my fellow citizens comported themselves. I witnessed many knots of people debating the health care issue earnestly, vociferously in some cases, but with civility, disagreeing without being disagreeable for the most part. Democracy in action.
The signs were about 70:30 pro and con health care reform. The pro signs tended to be straightforward (“Health Care Reform Now” “Public Health Care Now” ) whereas the con signs tended toward the vituperative (Obama with a Hitler mustache “Cut the Moustache, not health care, Larouche PAC” “ObamaCare Will Make You Sick” “Government Medicare, Government Social Security, Government Post Office, Government Health Care” I don’t Think So!” For them it was what they were against, not what they were for.
The main discordant note was struck by a handful of “true believers,” sporting T-shirts proclaiming “Jesus Saves From Hell,” “Turn to Jesus or Burn — Trust Jesus,” “Repent or Perish” carrying signs like “Warning to all Fornicators, Unbelievers, Homosexuals, Adulterers, Thieves Sodomites, Greedy, Drunkards, -- JUDGMENT” and “Jesus Forgives Sin” (but apparently not Fornicators, Unbelievers, Homosexuals, Adulterers, Thieves Sodomites, Greedy, Drunkards).
Unfortunately my videocam was on “Standby” when I thought it was on “Rec” so I failed to video the most precious exchange of the day between a buzz-cut, GI-Joe bull of a man sporting the “Turn to Jesus or Burn --Trust Jesus” T-shirt, and a delicate, waif-like woman carrying a sign “CA. Got Health Care?” GI-Joe was in the woman’s face shouting like a drill instructor about how ObamaCare was a step on the road to perdition and eternal damnation, and Jesus was the answer, to which the woman replied plaintively:
“I love Jesus too. But he was gentle and kind. He healed the sick. Jesus was for the poor. Jesus wants health care.”
Without a word GI-Joe turned and walked away.
Priceless.
”In January of 1985, Stark became the Chairman of the Ways and Means Health Subcommittee. As Chairman, he presided over major reforms to the Medicare system. While cutting billions of dollars in waste, fraud, and abuse, Stark expanded benefits for tens of millions of Medicare beneficiaries, provided COBRA health continuation benefits to workers, and made numerous improvements in the quality of our nation's health care. Stark champions universal health care, and speaks out for peace, freedom of choice, and protecting our environment. He is a tireless advocate for children, families, senior citizens, and people with disabilities, as well as the residents of the 13th Congressional District.”
Sadly, the Senior Citizens’ Center chosen as the venue for this town meeting could accommodate only about 340 people, leaving several hundred, including me, outside. No outside loudspeakers. I peered inside through a tinted window and could discern no ruckus or commotion. Have heard nothing about how the meeting went, but understood the Congressman would be not taking any questions. Smart. Not really in the spirit of a town hall meeting, but smart, given what’s been going on elsewhere. Grouping the meetings tightly, about 15 miles apart was smart too, preventing protesters intent on disrupting the meetings from attending more than one.
As it turns out, the show was really outside. I caught the highlights on my video camera. If I can figure out the editing software, I’ll attempt a modest documentary of the event.
In all, I was quite proud of how my fellow citizens comported themselves. I witnessed many knots of people debating the health care issue earnestly, vociferously in some cases, but with civility, disagreeing without being disagreeable for the most part. Democracy in action.
The signs were about 70:30 pro and con health care reform. The pro signs tended to be straightforward (“Health Care Reform Now” “Public Health Care Now” ) whereas the con signs tended toward the vituperative (Obama with a Hitler mustache “Cut the Moustache, not health care, Larouche PAC” “ObamaCare Will Make You Sick” “Government Medicare, Government Social Security, Government Post Office, Government Health Care” I don’t Think So!” For them it was what they were against, not what they were for.
The main discordant note was struck by a handful of “true believers,” sporting T-shirts proclaiming “Jesus Saves From Hell,” “Turn to Jesus or Burn — Trust Jesus,” “Repent or Perish” carrying signs like “Warning to all Fornicators, Unbelievers, Homosexuals, Adulterers, Thieves Sodomites, Greedy, Drunkards, -- JUDGMENT” and “Jesus Forgives Sin” (but apparently not Fornicators, Unbelievers, Homosexuals, Adulterers, Thieves Sodomites, Greedy, Drunkards).
Unfortunately my videocam was on “Standby” when I thought it was on “Rec” so I failed to video the most precious exchange of the day between a buzz-cut, GI-Joe bull of a man sporting the “Turn to Jesus or Burn --Trust Jesus” T-shirt, and a delicate, waif-like woman carrying a sign “CA. Got Health Care?” GI-Joe was in the woman’s face shouting like a drill instructor about how ObamaCare was a step on the road to perdition and eternal damnation, and Jesus was the answer, to which the woman replied plaintively:
“I love Jesus too. But he was gentle and kind. He healed the sick. Jesus was for the poor. Jesus wants health care.”
Without a word GI-Joe turned and walked away.
Priceless.
Wednesday, August 5, 2009
CASH-FOR-CLUNKERS: COUNTERPRODUCTIVE
Nearly everyone is over-the-moon about Cash-for-Clunkers. Car buyers love the inflated trade-in value for their clunker as an excuse to buy a new car. The car industry loves the business. Unions love the jobs preserved in building new cars. The Obama administration and Congress love the appearance of having breathed some life into the economy. The environmentalists love the reduction in pollution, however minimal, achieved by trading old gas-guzzlers in for new fuel-efficient cars. Hope-addicted investors love the prospects of improved corporate earnings. What’s not to like?
Understandably, the Automotive Aftermarket Industry Association and automotive engine rebuilders don’t like the program because it eats into their business of maintaining clunkers; so their opposition is suspect. However, the main opposition comes from grouchy, opportunistically born-again Republican fiscal conservatives, protesting what they perceive as an unwelcome addition to intolerable deficits.
Strangely, the Republicans got it right for a change, though not for the right reason. Sure, an extra three billion added to the deficit will add to our children’s burden; and that’s unfortunate. But with this year’s deficit projected at about $1,800 billion, and trillions more to come, what’s an additional $3 billion among friends? The deficits are a necessary temporary expedient to fill in the demand gap left by shell-shocked consumers and businesses until they regain their financial footing. Moreover, applying such deficits to fund long-lived assets, like infrastructure and children’s education, is not only constructive, providing jobs and contributing to the nation’s productivity and future growth, but also equitable in the sense of providing value to the children who will eventually have to service and/or repay the national debt.
I submit that Cash-for-Clunkers is counterproductive for altogether different reasons. Follow me through on this. The U.S. is in trouble because consumers took on too much debt, much of it supplied from the huge trade surpluses built up by Asia and OPEC over the past decade. The obvious solution to America’s economic malaise is for consumers to spend less and apply the resulting savings to the repayment of debt – i.e. deleverage. Moreover, since much of our debt is owed to foreigners, the most promising way of repaying them is by exporting more, importing less, and applying the resulting trade surpluses to debt repayment. (See various previous postings below.)
Cash-for-Clunkers accomplishes just the opposite. By trading in old debt-free clunkers for financed new cars, consumers are piling on more debt rather than deleveraging. This delays the day when American consumers can sustain economic vitality by spending within their means. Worse yet, about half the new cars sold under Cash-for-Clunkers are foreign-made. So American taxpayers are underwriting foreign rather than domestic jobs, and in the process adversely affecting the U.S. balance of payments, thereby delaying the process of reducing our foreign debt. Consequently, Cash-for-Clunkers is inimical to the process of deleveraging essential for sustainable recovery.
Bottom line: Cash-for-Clunkers is the equivalent of providing a drug abuser with another ‘fix’ – it feels good for a while, but provides no lasting relief and prolongs the misery.
Understandably, the Automotive Aftermarket Industry Association and automotive engine rebuilders don’t like the program because it eats into their business of maintaining clunkers; so their opposition is suspect. However, the main opposition comes from grouchy, opportunistically born-again Republican fiscal conservatives, protesting what they perceive as an unwelcome addition to intolerable deficits.
Strangely, the Republicans got it right for a change, though not for the right reason. Sure, an extra three billion added to the deficit will add to our children’s burden; and that’s unfortunate. But with this year’s deficit projected at about $1,800 billion, and trillions more to come, what’s an additional $3 billion among friends? The deficits are a necessary temporary expedient to fill in the demand gap left by shell-shocked consumers and businesses until they regain their financial footing. Moreover, applying such deficits to fund long-lived assets, like infrastructure and children’s education, is not only constructive, providing jobs and contributing to the nation’s productivity and future growth, but also equitable in the sense of providing value to the children who will eventually have to service and/or repay the national debt.
I submit that Cash-for-Clunkers is counterproductive for altogether different reasons. Follow me through on this. The U.S. is in trouble because consumers took on too much debt, much of it supplied from the huge trade surpluses built up by Asia and OPEC over the past decade. The obvious solution to America’s economic malaise is for consumers to spend less and apply the resulting savings to the repayment of debt – i.e. deleverage. Moreover, since much of our debt is owed to foreigners, the most promising way of repaying them is by exporting more, importing less, and applying the resulting trade surpluses to debt repayment. (See various previous postings below.)
Cash-for-Clunkers accomplishes just the opposite. By trading in old debt-free clunkers for financed new cars, consumers are piling on more debt rather than deleveraging. This delays the day when American consumers can sustain economic vitality by spending within their means. Worse yet, about half the new cars sold under Cash-for-Clunkers are foreign-made. So American taxpayers are underwriting foreign rather than domestic jobs, and in the process adversely affecting the U.S. balance of payments, thereby delaying the process of reducing our foreign debt. Consequently, Cash-for-Clunkers is inimical to the process of deleveraging essential for sustainable recovery.
Bottom line: Cash-for-Clunkers is the equivalent of providing a drug abuser with another ‘fix’ – it feels good for a while, but provides no lasting relief and prolongs the misery.
Saturday, August 1, 2009
The Unrepentant Boomer's Last Stand
In his recent rant against the ungrateful children of the Baby Boomers, (“This Boomer Isn’t Going to Apologize” Wall Street Journal June 19, 2009) Stephen Moore, the Journal’s senior economics writer, repudiates the “guilt and grief” expressed by repentant Baby Boomer commencement speakers, and attacks the sense of entitlement ascribed to recent graduates he dismisses as the “echo generation.”
Methinks Moore doth protest too much and repent too little. In extolling the legacy of the Baby Boom generation and chastening their children, Moore tacks along the economists’ lee shore with “lies, damn lies and statistics.” As Mark Twain observed: “Facts are stubborn things, but statistics are more pliable.” Mr. Moore’s takes full advantage of that pliability, selectively citing small waves of statistics favorable to his argument while ignoring statistical tsunamis that would swamp it.
Laughably, Mr. Moore’s view of the younger generation of Americans is formed by personal class and race blinders. For him, the echo generation is comprised of iPod-designer-cell-phone-laptop-toting, Beverly Hills 90210 “trust-fund babies” rather than children of the mean streets of South Central L.A., Harlem, Houston’s 3rd Ward, Southside Chicago or Boston. (How many of them have trust funds?) Class-tinted glasses may explain his lopsided perception of ‘increasing affluence’ for children and benign view of childhood hardship today.
For example, he states: “This is a generation that has come to regard rising affluence as a basic human right, because that is all it has ever known -- until now.” Rising affluence? According to the National Center for Children in Poverty: “Over 13 million children in the United States—18% of all children—live in families with incomes below the federal poverty level—$22,050 a year for a family of four. Research shows that, on average, families need an income of about twice that level to cover basic expenses. Using this standard, 39% of children live in low-income families. . . . The number of children living in poverty increased by 15 percent between 2000 and 2007. There are 1.7 million more children living in poverty today than in 2000.” Facts are stubborn things.
He trivializes “this generation's notion of hardship” as “the TiVo breaking down.” No mention of getting shot in the streets or in school, or winding up in jail, an outcome five times more likely for blacks than a whites, according to the Department of Justice.
Moore’s most egregious howler is dismissing the national debt the younger generations will inherit. He says: “The echo boomers complain, rightly, that we have left them holding the federal government's $8 trillion national IOU.” In point of fact, the national debt in the hands of the public is closer to $6 trillion; but who’s counting? Certainly not Moore -- or he would have had to fess up to the fact that $6 trillion represents an $80,000 debt burden for every one of the 75 million young men and women who will soon have to shoulder the national debt. (Other than that, Mrs. Lincoln, how did you enjoy the play?) Rather than admitting that the national debt was created by his and his parent’s generation skipping out on taxes needed to pay for current government services, Moore instead resorts to the magician’s staple, misdirection: “But try to cut government aid to colleges or raise tuitions and they act as if they have been forced to actually work for a living.” A classic case of ‘blame the victim.’
Here’s where Moore becomes bizarrely self-contradictory: “Yes, the members of this generation will inherit a lot of debts, but a much bigger storehouse of wealth will be theirs in the coming years. When I graduated from college in 1982, the net worth of America -- all our nation's assets minus all our liabilities -- was $16 trillion, according to the Federal Reserve. Today, even after the meltdown in housing and stocks, the net worth of the country is $45 trillion -- a doubling after inflation. The boomers' children and their children will inherit more wealth and assets than any other in the history of the planet -- that is, unless Mr. Obama taxes it all away.”
Brave words, along the lines of “Patience, my children, someday all this will be yours.” However, that’s a strange remark coming from someone railing against the ingratitude of the younger generations. With all the antipathy he bears toward them, one wonders why the conservative Mr. Moore would not prefer Mr. Obama to restore financial stability to the U.S. government, rather than pass along this unparalleled “storehouse of wealth” to a pampered generation of “ingrates.”
Moreover, with American’s net worth falling 18% in 2008 alone, the vast “storehouse of wealth” may not be so formidable after the rich Boomers get through screwing up the economy and spending their fortunes liberally on gold-plated retirement. With the $6 trillion national debt skyrocketing and national wealth plunging, the younger generations can be excused for feeling uneasy about their inheritance, most of which will go to the children of the obscenely rich.
In fairness, the can of worms being handed to younger generations isn’t all the Baby Boomers’ doing. The “Greatest Generation” did their bit, during the Johnson and Nixon years by sending 55,000 Baby Boomers off to Vietnam to be slaughtered for no good reason and bringing the U.S. to the verge of civil war. Despite the warnings of two Oil Shocks in the 1970s, the Greatest Generation did nothing to end our addiction to oil, the price of which we are paying for in the aftermath of the Third Oil Shock today. Whereas in 1973 we imported about 1/3 of our oil we now import well over half, with much of the money finding its ways into the coffers of those who mean us harm. During the Reagan years the Greatest Generation also introduced us to “Voodoo Economics” – the cockamamie notion that lowering tax rates would increase government revenues – launching the era of government mega-deficits expanded under Bush II’s neo-Reaganomics to bring us to the $6 trillion national debt today and Dick Cheney’s pearl of wisdom: “Deficits don’t matter.” So it’s no wonder, that Moore and his generation “cursed our parents,” as he says. It was they who set us on the path to financial ruin by instilling the tax-cut, favor-the-rich, borrow-and-spend, stay-addicted-to-oil mindset we labor under today.
Moore asks: “How bad can the legacy of the baby boomers really be? Let's see: We're the generation that spawned Microsoft, Intel, Apple, Google, ATMs and Gatorade. We defeated the evils of communism and delivered the world from the brink of global thermonuclear war. . . . Do they expect us to apologize for winning the Cold War next?” Thanks. But what happened to the ‘Peace Dividend’? And why am I more afraid of enemy attack now, after 9/11, than I was during the Cold War?
What Moore isn’t telling is that the risk of thermonuclear exchange during the Cold War was ameliorated by rational instincts for self-preservation on both sides underlying the policy of Mutually Assured Destruction (MAD). Under George W. Bush, the Baby Boomers bequeathed future generations a more probable threat of thermonuclear war with a suicidal adversary sublimating rational instincts for self-preservation to the call of religious jihad, fueled by ill-conceived, poorly-executed U.S. invasions of their “holy ground.” We have replaced MAD with just plain mad. The Doomsday Clock has been moved forward from midnight minus 17 minutes after the Cold War ended to midnight minus 5 minutes today, which is nearly as bad as it was during the Cold War at its chilliest. That’s a legacy for which the Baby Boomers might consider apologizing.
Moore rants on: “Now youngsters are telling pollsters that they think socialism may be better than capitalism after all.” Well, at least the countries Moore might call “socialist” have universal, affordable health care with far greater cost efficiency than ours, and better outcomes too, instead of class-based healthcare leaving 47 million lacking health insurance, one major disease away from bankruptcy.
Undeterred, by such damning facts, Moore calls criticism of the U.S. health system as “the most absurd complaint of all.” He falls back on pliable statistics: “Thanks to massive medical progress in the past 30 years, the chances of dying from heart disease and many types of cancer have been cut in half. We found effective treatments for AIDS within a decade. Life expectancy has risen and infant mortality fallen.” What Moore does not mention is that measured by such objective standards as life expectancy and infant mortality, the U.S. ranks 37th in the world, right between Costa Rica and Slovenia, and well behind all our “socialist”-leaning European counterparts, according to the World Health Organization. Facts are stubborn things.
Moreover, upbeat U.S. health care statistics are cold comfort to the 47 million Americans denied access to a private health care by a system which routinely excludes the poor, the unemployed and those with pre-existing conditions, and employs fewer care givers than administrators whose function in life is to “delay, deny and deceive.” Nor does Moore mention the plague of obesity and related health-care expense associated with a food system dedicated to pushing fat, salt and sugar like dope.
Moore concludes: “My generation is accused of being environmental criminals -- of having polluted the water and air and ruined the climate. But no generation in history has done more to clean the environment than mine. Since 1970 pollutants in the air and water have fallen sharply. Since 1960, Chicago, Houston, Los Angeles and Pittsburgh have cut in half the number of days with unsafe levels of smog. The number of Americans who get sick or die from contaminants in our drinking water has plunged for 50 years straight.”
Maybe so, but in another “Other-than-that-Mrs.-Lincoln…” moment, Moore dismisses the environmental threat of global warming with a mind-bending non-sequitur: “Whenever kids ask me why we didn't do more to combat global warming, I explain that when I was young the "scientific consensus" warned of global cooling.” So what? When the facts change, sensible people change their minds. One need only look at the alarming satellite photographs of the disappearing polar ice caps to know global warming is real. Yet once again, Moore resorts to misdirection, blaming the victims: “Today's teenagers drive around in cars more than any previous generation. My kids have never once handed back the car keys because of some moral problem with their carbon footprint -- and I think they are fairly typical.” What this demonstrates is that youngsters don’t yet know the scope of the environmental disaster being handed to them because the Baby Boomers and WWII generations keep concealing it from them with endless calls for ‘further study’ rather than action.
To the Boomer who won’t apologize for his generation’s legacy, I would simply quote the unknown author who said: “An apology is a good way to have the last word.” Or Tryon Edwards’ admonition: “Right actions in the future are the best apologies for bad actions in the past.”
Methinks Moore doth protest too much and repent too little. In extolling the legacy of the Baby Boom generation and chastening their children, Moore tacks along the economists’ lee shore with “lies, damn lies and statistics.” As Mark Twain observed: “Facts are stubborn things, but statistics are more pliable.” Mr. Moore’s takes full advantage of that pliability, selectively citing small waves of statistics favorable to his argument while ignoring statistical tsunamis that would swamp it.
Laughably, Mr. Moore’s view of the younger generation of Americans is formed by personal class and race blinders. For him, the echo generation is comprised of iPod-designer-cell-phone-laptop-toting, Beverly Hills 90210 “trust-fund babies” rather than children of the mean streets of South Central L.A., Harlem, Houston’s 3rd Ward, Southside Chicago or Boston. (How many of them have trust funds?) Class-tinted glasses may explain his lopsided perception of ‘increasing affluence’ for children and benign view of childhood hardship today.
For example, he states: “This is a generation that has come to regard rising affluence as a basic human right, because that is all it has ever known -- until now.” Rising affluence? According to the National Center for Children in Poverty: “Over 13 million children in the United States—18% of all children—live in families with incomes below the federal poverty level—$22,050 a year for a family of four. Research shows that, on average, families need an income of about twice that level to cover basic expenses. Using this standard, 39% of children live in low-income families. . . . The number of children living in poverty increased by 15 percent between 2000 and 2007. There are 1.7 million more children living in poverty today than in 2000.” Facts are stubborn things.
He trivializes “this generation's notion of hardship” as “the TiVo breaking down.” No mention of getting shot in the streets or in school, or winding up in jail, an outcome five times more likely for blacks than a whites, according to the Department of Justice.
Moore’s most egregious howler is dismissing the national debt the younger generations will inherit. He says: “The echo boomers complain, rightly, that we have left them holding the federal government's $8 trillion national IOU.” In point of fact, the national debt in the hands of the public is closer to $6 trillion; but who’s counting? Certainly not Moore -- or he would have had to fess up to the fact that $6 trillion represents an $80,000 debt burden for every one of the 75 million young men and women who will soon have to shoulder the national debt. (Other than that, Mrs. Lincoln, how did you enjoy the play?) Rather than admitting that the national debt was created by his and his parent’s generation skipping out on taxes needed to pay for current government services, Moore instead resorts to the magician’s staple, misdirection: “But try to cut government aid to colleges or raise tuitions and they act as if they have been forced to actually work for a living.” A classic case of ‘blame the victim.’
Here’s where Moore becomes bizarrely self-contradictory: “Yes, the members of this generation will inherit a lot of debts, but a much bigger storehouse of wealth will be theirs in the coming years. When I graduated from college in 1982, the net worth of America -- all our nation's assets minus all our liabilities -- was $16 trillion, according to the Federal Reserve. Today, even after the meltdown in housing and stocks, the net worth of the country is $45 trillion -- a doubling after inflation. The boomers' children and their children will inherit more wealth and assets than any other in the history of the planet -- that is, unless Mr. Obama taxes it all away.”
Brave words, along the lines of “Patience, my children, someday all this will be yours.” However, that’s a strange remark coming from someone railing against the ingratitude of the younger generations. With all the antipathy he bears toward them, one wonders why the conservative Mr. Moore would not prefer Mr. Obama to restore financial stability to the U.S. government, rather than pass along this unparalleled “storehouse of wealth” to a pampered generation of “ingrates.”
Moreover, with American’s net worth falling 18% in 2008 alone, the vast “storehouse of wealth” may not be so formidable after the rich Boomers get through screwing up the economy and spending their fortunes liberally on gold-plated retirement. With the $6 trillion national debt skyrocketing and national wealth plunging, the younger generations can be excused for feeling uneasy about their inheritance, most of which will go to the children of the obscenely rich.
In fairness, the can of worms being handed to younger generations isn’t all the Baby Boomers’ doing. The “Greatest Generation” did their bit, during the Johnson and Nixon years by sending 55,000 Baby Boomers off to Vietnam to be slaughtered for no good reason and bringing the U.S. to the verge of civil war. Despite the warnings of two Oil Shocks in the 1970s, the Greatest Generation did nothing to end our addiction to oil, the price of which we are paying for in the aftermath of the Third Oil Shock today. Whereas in 1973 we imported about 1/3 of our oil we now import well over half, with much of the money finding its ways into the coffers of those who mean us harm. During the Reagan years the Greatest Generation also introduced us to “Voodoo Economics” – the cockamamie notion that lowering tax rates would increase government revenues – launching the era of government mega-deficits expanded under Bush II’s neo-Reaganomics to bring us to the $6 trillion national debt today and Dick Cheney’s pearl of wisdom: “Deficits don’t matter.” So it’s no wonder, that Moore and his generation “cursed our parents,” as he says. It was they who set us on the path to financial ruin by instilling the tax-cut, favor-the-rich, borrow-and-spend, stay-addicted-to-oil mindset we labor under today.
Moore asks: “How bad can the legacy of the baby boomers really be? Let's see: We're the generation that spawned Microsoft, Intel, Apple, Google, ATMs and Gatorade. We defeated the evils of communism and delivered the world from the brink of global thermonuclear war. . . . Do they expect us to apologize for winning the Cold War next?” Thanks. But what happened to the ‘Peace Dividend’? And why am I more afraid of enemy attack now, after 9/11, than I was during the Cold War?
What Moore isn’t telling is that the risk of thermonuclear exchange during the Cold War was ameliorated by rational instincts for self-preservation on both sides underlying the policy of Mutually Assured Destruction (MAD). Under George W. Bush, the Baby Boomers bequeathed future generations a more probable threat of thermonuclear war with a suicidal adversary sublimating rational instincts for self-preservation to the call of religious jihad, fueled by ill-conceived, poorly-executed U.S. invasions of their “holy ground.” We have replaced MAD with just plain mad. The Doomsday Clock has been moved forward from midnight minus 17 minutes after the Cold War ended to midnight minus 5 minutes today, which is nearly as bad as it was during the Cold War at its chilliest. That’s a legacy for which the Baby Boomers might consider apologizing.
Moore rants on: “Now youngsters are telling pollsters that they think socialism may be better than capitalism after all.” Well, at least the countries Moore might call “socialist” have universal, affordable health care with far greater cost efficiency than ours, and better outcomes too, instead of class-based healthcare leaving 47 million lacking health insurance, one major disease away from bankruptcy.
Undeterred, by such damning facts, Moore calls criticism of the U.S. health system as “the most absurd complaint of all.” He falls back on pliable statistics: “Thanks to massive medical progress in the past 30 years, the chances of dying from heart disease and many types of cancer have been cut in half. We found effective treatments for AIDS within a decade. Life expectancy has risen and infant mortality fallen.” What Moore does not mention is that measured by such objective standards as life expectancy and infant mortality, the U.S. ranks 37th in the world, right between Costa Rica and Slovenia, and well behind all our “socialist”-leaning European counterparts, according to the World Health Organization. Facts are stubborn things.
Moreover, upbeat U.S. health care statistics are cold comfort to the 47 million Americans denied access to a private health care by a system which routinely excludes the poor, the unemployed and those with pre-existing conditions, and employs fewer care givers than administrators whose function in life is to “delay, deny and deceive.” Nor does Moore mention the plague of obesity and related health-care expense associated with a food system dedicated to pushing fat, salt and sugar like dope.
Moore concludes: “My generation is accused of being environmental criminals -- of having polluted the water and air and ruined the climate. But no generation in history has done more to clean the environment than mine. Since 1970 pollutants in the air and water have fallen sharply. Since 1960, Chicago, Houston, Los Angeles and Pittsburgh have cut in half the number of days with unsafe levels of smog. The number of Americans who get sick or die from contaminants in our drinking water has plunged for 50 years straight.”
Maybe so, but in another “Other-than-that-Mrs.-Lincoln…” moment, Moore dismisses the environmental threat of global warming with a mind-bending non-sequitur: “Whenever kids ask me why we didn't do more to combat global warming, I explain that when I was young the "scientific consensus" warned of global cooling.” So what? When the facts change, sensible people change their minds. One need only look at the alarming satellite photographs of the disappearing polar ice caps to know global warming is real. Yet once again, Moore resorts to misdirection, blaming the victims: “Today's teenagers drive around in cars more than any previous generation. My kids have never once handed back the car keys because of some moral problem with their carbon footprint -- and I think they are fairly typical.” What this demonstrates is that youngsters don’t yet know the scope of the environmental disaster being handed to them because the Baby Boomers and WWII generations keep concealing it from them with endless calls for ‘further study’ rather than action.
To the Boomer who won’t apologize for his generation’s legacy, I would simply quote the unknown author who said: “An apology is a good way to have the last word.” Or Tryon Edwards’ admonition: “Right actions in the future are the best apologies for bad actions in the past.”
Saturday, July 11, 2009
It's Exports, Stupid!
In his recent blog "When will recovery begin? Never" former Secretary of Labor, Robert Reich correctly pointed out that "consumers won't start spending until they have money in their pockets and feel reasonably secure." That won't happen, he says, because the old economy is broken and "cannot be sustained." Hence, the "Never" in his title. He looks for a "new economy" to emerge. "What will the new economy look like?" he asks. "Nobody knows."
Well, I do. The new U.S. economy will be driven by exports and increasingly owned by foreigners.
The U.S. economy is in crisis due mainly to three interrelated factors: too much household debt creating a crisis within lending institutions and a lack of aggregate demand from over-extended consumers. Measures taken by Washington to date have attempted to shore-up undercapitalized lending institutions and to supplement sagging consumer demand. These are appropriate, yet necessarily temporary, measures intended to keep the economy functioning until sustained private-sector demand is restored and household debt is reduced to sustainable levels.
Accordingly, the recovery will gain traction when those with money begin spending aggressively enabling those in debt to begin paying it back. Those with money today are mainly foreigners (Asians and OPEC) who also happen to be our largest creditors. Those in debt are American consumers, who won't be a force for economic growth until they pay down debt to reasonable levels.
This, then, is the surest road to recovery: As foreigners face up to the fact that they can no longer rely on over-extended, frightened, increasingly unemployed Americans to drive their economies, they will repatriate some of their dollar holdings to stimulate investment and consumption at home. Such repatriation is already underway according to Treasury’s latest TIC reports showing average net monthly TIC outflows of $65 billion during the 4 months ending in May, compared to monthly inflows averaging $52 billion in 2007 and 2008 -- a swing of $117 billion a month! Repatriation will drive the dollar down relative to creditor currencies making U.S. exports more competitive, imports more expensive. The yen is already soaring and the Dollar Index is off 11% from its March 2009 peak. The renminbi will rise when China so decides; moreover China is taking steps to internationalize the renminbi as an alternative to the dollar for trade settlements. The U.S. trade deficit, already narrowing sharply, will swing to surplus as foreigners buy bargain-priced American goods and services. (Yes, we have lots to sell: the U.S. is tied with Germany as the world's largest exporters. And, yes, exports are only 12% of U.S. GDP, yet, for example, 20% growth of a 12% sector adds 2.4% to GDP growth.) Vigorous U.S. exports will provide stimulus for U.S. employment, and trade surpluses will provide Americans a means of paying down foreign debt.
The U.S. foreign debt will be further reduced by foreigners converting their dollar-denominated debt into dollar-denominated assets (stocks, real estate) at bargain prices. Such foreign purchases will help sagging stock and real estate markets to rebound.
In one fell swoop, the devalued dollar will re-invigorate the American economy through increased exports (offsetting the negative effects of a flight from the dollar) and revived stock and real estate markets, while providing the wherewithal to pay down our foreign debt, restoring the U.S. economy to sustainable growth. This is nothing more than the usual, market-driven ebb and flow of international trade, an outcome our trading partners should be encouraged to embrace.
To be sure, such an outcome will pose challenges to fiscal and monetary policy by pushing up interest rates. However, as demonstrated by Asia following the "Asian 'Flu" of 1997-98, the advantages of a low-valued currency in stimulating exports ultimately outweigh the drawbacks of higher interest rates due to capital flight. We need to borrow a page from their playbook. The sooner exports take up the slack in the U.S. economy, the quicker Washington can stop pumping up the deficits with emergency spending.
The common mistake made by mainstream economists today is to overlook foreign demand as the primary source of sustainable U.S. economic growth, simply because international trade has plunged due to the financial crisis and the value of the dollar has been supported as a “safe haven.” However, the crisis and ‘flight to quality’ are abating, U.S. exports are bottoming and will strengthen as the dollar devalues further and foreigners rev up their domestic economies, becoming the new “engines of world economic growth.”
What Washington must do is stand aside let the market mechanism do its work — i.e. promote U.S. exports and avoid jingoistic "strong dollar" and protectionist policies or xenophobic restrictions on foreign purchases of U.S. assets other than for national security reasons.
Well, I do. The new U.S. economy will be driven by exports and increasingly owned by foreigners.
The U.S. economy is in crisis due mainly to three interrelated factors: too much household debt creating a crisis within lending institutions and a lack of aggregate demand from over-extended consumers. Measures taken by Washington to date have attempted to shore-up undercapitalized lending institutions and to supplement sagging consumer demand. These are appropriate, yet necessarily temporary, measures intended to keep the economy functioning until sustained private-sector demand is restored and household debt is reduced to sustainable levels.
Accordingly, the recovery will gain traction when those with money begin spending aggressively enabling those in debt to begin paying it back. Those with money today are mainly foreigners (Asians and OPEC) who also happen to be our largest creditors. Those in debt are American consumers, who won't be a force for economic growth until they pay down debt to reasonable levels.
This, then, is the surest road to recovery: As foreigners face up to the fact that they can no longer rely on over-extended, frightened, increasingly unemployed Americans to drive their economies, they will repatriate some of their dollar holdings to stimulate investment and consumption at home. Such repatriation is already underway according to Treasury’s latest TIC reports showing average net monthly TIC outflows of $65 billion during the 4 months ending in May, compared to monthly inflows averaging $52 billion in 2007 and 2008 -- a swing of $117 billion a month! Repatriation will drive the dollar down relative to creditor currencies making U.S. exports more competitive, imports more expensive. The yen is already soaring and the Dollar Index is off 11% from its March 2009 peak. The renminbi will rise when China so decides; moreover China is taking steps to internationalize the renminbi as an alternative to the dollar for trade settlements. The U.S. trade deficit, already narrowing sharply, will swing to surplus as foreigners buy bargain-priced American goods and services. (Yes, we have lots to sell: the U.S. is tied with Germany as the world's largest exporters. And, yes, exports are only 12% of U.S. GDP, yet, for example, 20% growth of a 12% sector adds 2.4% to GDP growth.) Vigorous U.S. exports will provide stimulus for U.S. employment, and trade surpluses will provide Americans a means of paying down foreign debt.
The U.S. foreign debt will be further reduced by foreigners converting their dollar-denominated debt into dollar-denominated assets (stocks, real estate) at bargain prices. Such foreign purchases will help sagging stock and real estate markets to rebound.
In one fell swoop, the devalued dollar will re-invigorate the American economy through increased exports (offsetting the negative effects of a flight from the dollar) and revived stock and real estate markets, while providing the wherewithal to pay down our foreign debt, restoring the U.S. economy to sustainable growth. This is nothing more than the usual, market-driven ebb and flow of international trade, an outcome our trading partners should be encouraged to embrace.
To be sure, such an outcome will pose challenges to fiscal and monetary policy by pushing up interest rates. However, as demonstrated by Asia following the "Asian 'Flu" of 1997-98, the advantages of a low-valued currency in stimulating exports ultimately outweigh the drawbacks of higher interest rates due to capital flight. We need to borrow a page from their playbook. The sooner exports take up the slack in the U.S. economy, the quicker Washington can stop pumping up the deficits with emergency spending.
The common mistake made by mainstream economists today is to overlook foreign demand as the primary source of sustainable U.S. economic growth, simply because international trade has plunged due to the financial crisis and the value of the dollar has been supported as a “safe haven.” However, the crisis and ‘flight to quality’ are abating, U.S. exports are bottoming and will strengthen as the dollar devalues further and foreigners rev up their domestic economies, becoming the new “engines of world economic growth.”
What Washington must do is stand aside let the market mechanism do its work — i.e. promote U.S. exports and avoid jingoistic "strong dollar" and protectionist policies or xenophobic restrictions on foreign purchases of U.S. assets other than for national security reasons.
Thursday, July 2, 2009
A Conversation with Janet Yellen
I had the opportunity to chat with San Francisco Federal Reserve Bank President, Dr. Janet Yellen after her presentation June 30 to the Commonwealth Club. In her remarks she had not mentioned exports as a stimulus for the recovery.
“Willie Sutton said he robbed banks because ‘that’s where the money is,’” I began. “Why wouldn’t you expect foreign lenders to be the source of demand to re-stimulate the U.S. economy, since they’re the ones with the money these days?” I asked.
“We’ve tried for years to get them to buy more of our goods and services,” she replied, “However, the Chinese won’t allow Chinese consumers to replace American consumers as drivers of their economy.”
“That was when the U.S. economy was strong,” I noted “Things have changed. Besides, it need not be Chinese consumers,” I continued, “It could be investment in China’s infrastructure. They have, after all, announced a domestic stimulus package in excess of $500 billion dollars. They’ll have to repatriate some of their dollars to fund it, which will drive the dollar down. That would make our exports more competitive, providing a source of demand to drive the American economy.”
“Yes, that would drive the dollar down,” she agreed, “But China will have no trouble borrowing the money.” She went on to state that she thought the Chinese would rather borrow than repatriate in order to continue undervaluing the yuan so as to sustain their export economy.
Others were lining up to speak to her, so I felt obliged to cut our conversation short, despite many unresolved related issues. So I took my leave with a parting thought: “The Machiavellian scenario,” I added “would be for China to repatriate dollars, drive the dollar down, and then buy up American corporations on the cheap with their remaining dollars.” She smiled. “I hope you will agree to receive a small white paper from me on the subject,” I concluded. “I’d be happy to,” she replied. (I'm sending her the most recent Chronicle: "The Surest Road to Recovery" available to all subscribers.)
EPILOGUE: I’m troubled by reticence among mainstream economists to visualize the reconfiguration of international trade and corresponding currency revaluations as the best solution to the present global economic and financial crisis. Three weeks ago I had the opportunity to ask Christina Romer, Chair of the President’s Council of Economic Advisers, if she saw the devaluation of the dollar and concomitant stimulus for U.S. exports and sales of U.S. assets to foreigners as a promising way out of the present downturn. While responding that exports were important, she basically ducked the question, doubtlessly to avoid tagging the Obama administration as being in favor of a weak dollar and foreign purchases of U.S. assets. I have previously written about similar blind spots exhibited in recent articles by New York Times columnists Paul Krugman and David Brooks (see below).
This reticence seems to be driven by “Demon Extrapolation” – projecting the recent past into the indefinite future – leading mainstream pundits and policymakers to fail to see the inevitable cyclical turns in the road ahead. Consequently, they remain fixed in their assumptions – e.g. Asians won’t allow their currencies to appreciate, or their economies to become domestically rather than export-driven. What is needed is a forward-looking, inverse variant of “dynamic scoring” whereby changes in the economic situation are factored into revisions of policy on both sides of the Pacific.
It should be obvious that at a time when the U.S. and Europe are in crisis because of too much debt incurred largely as a result of trade deficits with Asia and OPEC, that the way out of the morass is by reversing the dynamics of international trade. One arrives at this conclusion by process of elimination: the U.S. consumer, laden with too much debt and needing to save, will not be a source of demand growth any time soon. Any policies calculated to revive the economy by propping up credit-fueled consumer spending or investment in housing will fail, simply by compounding the core problem of too much debt. (Tax-cutting Republicans take note.) Presently, the government is attempting to fill in the demand void left by consumers. However, government can't continue doing so indefinitely by taking on ever-more debt, or it will become insolvent or, if it prints its way out of debt, will produce runaway inflation. Nowhere is there much appetite for increasing taxes. Business can't be the source of its own demand without an ultimate purchaser of its product. That would be like business pulling itself up by its bootstraps. Additions to inventory are temporary and variable, not long-term sources of demand growth. That leaves U.S. exports as the sole remaining possible source of demand to fuel a robust, sustained recovery.
Reversing the dynamics of international trade means shifting the role of “engine of world economic growth” from over-extended, demoralized and frightened U.S. and European consumers to the domestic economies of creditor nations in some combination of investment and consumption. In seeking a source of sustainable robust demand, it makes sense to “go where the money is” i.e. Asia and OPEC.
Such a shift in the net balance of international trade necessarily requires a downward revaluation of the currencies of debtor nations relative to those of creditor nations. Without it, things will remain as they are, with Asia and OPEC unsuccessfully trying to remain export-driven by flogging the moribund markets of their U.S. and European customers with artificially low-priced goods and services. World trade will eventually come to a grinding halt, and without a new, sustainable source of robust global aggregate demand, creditor nations will have no alternative but to default or resort to the printing presses to repay their international debt. Didn’t Einstein define insanity as “repeating the same behavior and expecting a different result”?
Since, as net creditors, Asia and OPEC are in the driver’s seat, I suppose these suggestions for major shifts in policy vis-à-vis capital flows, currency revaluation and trade balances should be properly addressed to them. I suspect Asian and OPEC governments are aware of the present impasse and, since it’s in their best interests to do so, will make the necessary policy adjustments once they lay the groundwork to stimulate domestic investment and consumption. At least I trust they will, or they will suffer the consequences of default by or debasement of the currencies of their debtors. All American policymakers need do is stay out of their way by not supporting jingoistic “King Dollar” policies or xenophobic policies prohibiting foreigners from acquiring U.S. assets. That may be a tall order; but then again, Mr. Obama is a tall man.
“Willie Sutton said he robbed banks because ‘that’s where the money is,’” I began. “Why wouldn’t you expect foreign lenders to be the source of demand to re-stimulate the U.S. economy, since they’re the ones with the money these days?” I asked.
“We’ve tried for years to get them to buy more of our goods and services,” she replied, “However, the Chinese won’t allow Chinese consumers to replace American consumers as drivers of their economy.”
“That was when the U.S. economy was strong,” I noted “Things have changed. Besides, it need not be Chinese consumers,” I continued, “It could be investment in China’s infrastructure. They have, after all, announced a domestic stimulus package in excess of $500 billion dollars. They’ll have to repatriate some of their dollars to fund it, which will drive the dollar down. That would make our exports more competitive, providing a source of demand to drive the American economy.”
“Yes, that would drive the dollar down,” she agreed, “But China will have no trouble borrowing the money.” She went on to state that she thought the Chinese would rather borrow than repatriate in order to continue undervaluing the yuan so as to sustain their export economy.
Others were lining up to speak to her, so I felt obliged to cut our conversation short, despite many unresolved related issues. So I took my leave with a parting thought: “The Machiavellian scenario,” I added “would be for China to repatriate dollars, drive the dollar down, and then buy up American corporations on the cheap with their remaining dollars.” She smiled. “I hope you will agree to receive a small white paper from me on the subject,” I concluded. “I’d be happy to,” she replied. (I'm sending her the most recent Chronicle: "The Surest Road to Recovery" available to all subscribers.)
EPILOGUE: I’m troubled by reticence among mainstream economists to visualize the reconfiguration of international trade and corresponding currency revaluations as the best solution to the present global economic and financial crisis. Three weeks ago I had the opportunity to ask Christina Romer, Chair of the President’s Council of Economic Advisers, if she saw the devaluation of the dollar and concomitant stimulus for U.S. exports and sales of U.S. assets to foreigners as a promising way out of the present downturn. While responding that exports were important, she basically ducked the question, doubtlessly to avoid tagging the Obama administration as being in favor of a weak dollar and foreign purchases of U.S. assets. I have previously written about similar blind spots exhibited in recent articles by New York Times columnists Paul Krugman and David Brooks (see below).
This reticence seems to be driven by “Demon Extrapolation” – projecting the recent past into the indefinite future – leading mainstream pundits and policymakers to fail to see the inevitable cyclical turns in the road ahead. Consequently, they remain fixed in their assumptions – e.g. Asians won’t allow their currencies to appreciate, or their economies to become domestically rather than export-driven. What is needed is a forward-looking, inverse variant of “dynamic scoring” whereby changes in the economic situation are factored into revisions of policy on both sides of the Pacific.
It should be obvious that at a time when the U.S. and Europe are in crisis because of too much debt incurred largely as a result of trade deficits with Asia and OPEC, that the way out of the morass is by reversing the dynamics of international trade. One arrives at this conclusion by process of elimination: the U.S. consumer, laden with too much debt and needing to save, will not be a source of demand growth any time soon. Any policies calculated to revive the economy by propping up credit-fueled consumer spending or investment in housing will fail, simply by compounding the core problem of too much debt. (Tax-cutting Republicans take note.) Presently, the government is attempting to fill in the demand void left by consumers. However, government can't continue doing so indefinitely by taking on ever-more debt, or it will become insolvent or, if it prints its way out of debt, will produce runaway inflation. Nowhere is there much appetite for increasing taxes. Business can't be the source of its own demand without an ultimate purchaser of its product. That would be like business pulling itself up by its bootstraps. Additions to inventory are temporary and variable, not long-term sources of demand growth. That leaves U.S. exports as the sole remaining possible source of demand to fuel a robust, sustained recovery.
Reversing the dynamics of international trade means shifting the role of “engine of world economic growth” from over-extended, demoralized and frightened U.S. and European consumers to the domestic economies of creditor nations in some combination of investment and consumption. In seeking a source of sustainable robust demand, it makes sense to “go where the money is” i.e. Asia and OPEC.
Such a shift in the net balance of international trade necessarily requires a downward revaluation of the currencies of debtor nations relative to those of creditor nations. Without it, things will remain as they are, with Asia and OPEC unsuccessfully trying to remain export-driven by flogging the moribund markets of their U.S. and European customers with artificially low-priced goods and services. World trade will eventually come to a grinding halt, and without a new, sustainable source of robust global aggregate demand, creditor nations will have no alternative but to default or resort to the printing presses to repay their international debt. Didn’t Einstein define insanity as “repeating the same behavior and expecting a different result”?
Since, as net creditors, Asia and OPEC are in the driver’s seat, I suppose these suggestions for major shifts in policy vis-à-vis capital flows, currency revaluation and trade balances should be properly addressed to them. I suspect Asian and OPEC governments are aware of the present impasse and, since it’s in their best interests to do so, will make the necessary policy adjustments once they lay the groundwork to stimulate domestic investment and consumption. At least I trust they will, or they will suffer the consequences of default by or debasement of the currencies of their debtors. All American policymakers need do is stay out of their way by not supporting jingoistic “King Dollar” policies or xenophobic policies prohibiting foreigners from acquiring U.S. assets. That may be a tall order; but then again, Mr. Obama is a tall man.
Friday, June 12, 2009
REWINDING "THE GREAT UNWINDING"
David Brooks wrote a nice piece in today's New York Times titled "The Great Unwinding." He wrote of the need for over-leveraged American consumers to tighten their belts and save, and for the American economy to transform itself, with more emphasis on business investment and production. Read his article (click on the link above) and then read my response below:
Nice piece, "The Great Unwinding," generally insightful and accurate. However, you set everything up nicely and then drop the ball on the most critical part of the prescription to cure what ails America.
You say: "The American economy will have to transition from an economy based on consumption and imports to an economy with a greater balance of business investment and production." And then go on to say that "finding a political strategy to accomplish this" is difficult, if not impossible.
You’re missing a critical point. Where's the demand going to come from to fuel U.S. business investment and production?
To move to an "investment economy" requires a source of strong demand. As you properly point out, the U.S. consumer, with too much debt and need to save, will not be a source of demand growth any time soon. The government is attempting to fill in the demand void left by consumers, but can't continue doing so indefinitely for reasons you well understand. Business can't be the source of its own demand without an ultimate purchaser of its product. That would be like business pulling itself up by its bootstraps. Additions to inventory are not long-term sources of demand growth. That leaves U.S. exports as the sole remaining possible source of demand to fuel the transformation you propose. Yet nowhere in your piece do you mention exports.
It was the surfeit of U.S. imports and recycling of surplus dollars into the U.S. economy by our trading partners that got us into this mess. Reversing the process -- deleveraging through exports -- is the way out.
Your sentence should have read: The American economy will have to transition from an economy based on consumption and imports to an economy based on exports and the accompanying build-up in investment and production.
And such an economy requires no political will at all! The market mechanism will do the work, just as it did for the Asians following the "Asian 'Flu" in '97-'98.
Dollars will flow out of the U.S. because Asians, worried about their oversupply of shaky dollar-denominated debt and needing to underwrite stimulus for their flagging domestic economies, will repatriate a chunk of their surplus, driving the value of the dollar down relative to creditor currencies. That will make U.S. exports more competitive, spurring the export sector, and will discourage Americans from buying foreign goods. The resulting U.S. trade surpluses will be a principal source of funds to repay our foreign debt.
Makes sense, doesn't it? When looking for a source of demand, you have to look to those who have money, and right now, Asians and oil exporters are the ones with spendable cash. It is logical, therefore, to look to them to be the new "engines of world economic growth," and not frightened, over-extended American consumers.
Another source of repayment of debt, both foreign and domestic, will be the sale of assets (corporate stock and real estate) to foreign and domestic creditors -- in effect, swapping debt for equity.
Corporate stocks and real estate, already cheap, are very likely to get cheaper if, as I suggest, there is a significant flight from the dollar (which seems to have begun, according to the Treasury's latest TIC reports. That's because interest rates will go up (remember Mexico in '94, Asia in '97-'98), inhibiting domestic economic growth and driving down stock and real estate prices further. So, to foreigners, U.S. assets will be doubly cheap: low prices, low dollar -- an irresistible opportunity to buy control of America's corporate crown jewels and move into some prime U.S. real estate.
All this is market-driven, requiring no political will other than for government to stay out of the markets' way -- i.e. don't follow Larry Kudlow's jingoistic call for "King Dollar," or resort to xenophobic prohibitions of foreign purchases of American stocks or real estate.
If you don't like the idea of a weaker dollar or foreign ownership of U.S. assets, consider this: the only remaining alternative to exports and asset sales as the source of debt repayment is default.
I've written all of this up in a Cassandra Chronicle you can view by clicking on the title: "The Asian Caper Part II, The Golden Trap"
I also have a fascinating Chronicle backing up your call for a consumption tax: "Prohibition's Hangover."
Both well worth your time to read. Please let me know if you do.
Nice piece, "The Great Unwinding," generally insightful and accurate. However, you set everything up nicely and then drop the ball on the most critical part of the prescription to cure what ails America.
You say: "The American economy will have to transition from an economy based on consumption and imports to an economy with a greater balance of business investment and production." And then go on to say that "finding a political strategy to accomplish this" is difficult, if not impossible.
You’re missing a critical point. Where's the demand going to come from to fuel U.S. business investment and production?
To move to an "investment economy" requires a source of strong demand. As you properly point out, the U.S. consumer, with too much debt and need to save, will not be a source of demand growth any time soon. The government is attempting to fill in the demand void left by consumers, but can't continue doing so indefinitely for reasons you well understand. Business can't be the source of its own demand without an ultimate purchaser of its product. That would be like business pulling itself up by its bootstraps. Additions to inventory are not long-term sources of demand growth. That leaves U.S. exports as the sole remaining possible source of demand to fuel the transformation you propose. Yet nowhere in your piece do you mention exports.
It was the surfeit of U.S. imports and recycling of surplus dollars into the U.S. economy by our trading partners that got us into this mess. Reversing the process -- deleveraging through exports -- is the way out.
Your sentence should have read: The American economy will have to transition from an economy based on consumption and imports to an economy based on exports and the accompanying build-up in investment and production.
And such an economy requires no political will at all! The market mechanism will do the work, just as it did for the Asians following the "Asian 'Flu" in '97-'98.
Dollars will flow out of the U.S. because Asians, worried about their oversupply of shaky dollar-denominated debt and needing to underwrite stimulus for their flagging domestic economies, will repatriate a chunk of their surplus, driving the value of the dollar down relative to creditor currencies. That will make U.S. exports more competitive, spurring the export sector, and will discourage Americans from buying foreign goods. The resulting U.S. trade surpluses will be a principal source of funds to repay our foreign debt.
Makes sense, doesn't it? When looking for a source of demand, you have to look to those who have money, and right now, Asians and oil exporters are the ones with spendable cash. It is logical, therefore, to look to them to be the new "engines of world economic growth," and not frightened, over-extended American consumers.
Another source of repayment of debt, both foreign and domestic, will be the sale of assets (corporate stock and real estate) to foreign and domestic creditors -- in effect, swapping debt for equity.
Corporate stocks and real estate, already cheap, are very likely to get cheaper if, as I suggest, there is a significant flight from the dollar (which seems to have begun, according to the Treasury's latest TIC reports. That's because interest rates will go up (remember Mexico in '94, Asia in '97-'98), inhibiting domestic economic growth and driving down stock and real estate prices further. So, to foreigners, U.S. assets will be doubly cheap: low prices, low dollar -- an irresistible opportunity to buy control of America's corporate crown jewels and move into some prime U.S. real estate.
All this is market-driven, requiring no political will other than for government to stay out of the markets' way -- i.e. don't follow Larry Kudlow's jingoistic call for "King Dollar," or resort to xenophobic prohibitions of foreign purchases of American stocks or real estate.
If you don't like the idea of a weaker dollar or foreign ownership of U.S. assets, consider this: the only remaining alternative to exports and asset sales as the source of debt repayment is default.
I've written all of this up in a Cassandra Chronicle you can view by clicking on the title: "The Asian Caper Part II, The Golden Trap"
I also have a fascinating Chronicle backing up your call for a consumption tax: "Prohibition's Hangover."
Both well worth your time to read. Please let me know if you do.
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