David L. Smith's Cassandra Chronicles

HOW (AND WHY) REPUBLICAN KINGMAKERS THREW THE 2008 ELECTION

2012-02-28T11:43:00.013-08:00

Robert Reich makes a compelling case for why the "the loony right is a clear and present danger," in his recent piece: "As Santorum and Romney Battle for the Loony Right, the Rest of Us Should Not Gloat."

With respect, Dr. Reich errs in supposing "[The Republicans] were not pleased to have a Democrat back in the White House in 2008, let alone a black one." It makes much more sense to suppose Republican kingmakers decided to throw the 2008 election to the Democrats so they would have to take the heat for the mess Bush bequeathed us, leaving the Republicans free to gloat and carp about the "failures" of Keynesian economics and Democrat efforts to contain the damage.

It was within the kingmakers' power to throw the 2008 election by nominating a couple of inept goofballs to head the Republican ticket. Moreover, I wouldn't be surprised if the kingmakers contributed to Obama's campaign, inasmuch as, being black, inexperienced, liberal, with foreign roots, suspect religious ties and a Muslim name, Obama was seen as the candidate most likely to unite conservatives in opposition in 2010 and 2012. Far from being displeased, Republicans were surely delighted Obama and not Hillary Clinton won the Democrat nomination in 2008.

The kingmakers' strategy worked in 2010. However, whether it will work in 2012 is questionable, given the whack jobs who have stepped forward to claim the Republican nomination for president.

THE LOONY RIGHT IN FULL FLIGHT

2012-02-28T10:36:00.005-08:00

Last night Jon Stewart skewered Rick Santorum, revealing the Loony Right in full flight.

Rick Santorum derides Kennedy’s landmark speech opening the way for Catholics’ (including Santorum) public service as President of the United States (by declaring an ‘absolute’ wall of separation between Church and State) on the grounds that it meant that “people of faith have no role in the public square.” and that “only people of non-faith can come into the public square and make their case.” Oboy. . .

I wonder how Santorum will respond when asked which “law” takes precedence, the Bible or the U.S. Constitution.

Then he says: “’All men are created equal' -- that's a Christian value, but it's an American value.” That’s odd, because both the Bible and the Constitution sanction slavery.

Santorum: "The idea that the Crusades and the fight of Christendom against Islam is somehow an aggression on our part is absolutely anti-historical." Call me crazy, but isn’t invading a foreign country without provocation, slaughtering its inhabitants and occupying their territory the very definition of aggression?

Educators will be distressed to learn that Satan has taken over academia: “He [Satan] attacks all of us and he attacks all of our institutions. The place where he was, in my mind, the most successful and first successful was in academia. He understood pride of smart people. He attacked them at their weakest, that they were, in fact, smarter than everybody else and could come up with something new and different. Pursue new truths, deny the existence of truth, play with it because they're smart. And so academia, a long time ago, fell.” What does this guy want, a return to the Dark Ages? Educators, are you ready for your exorcism?

THE MYTH OF SOCIAL SECURITY/MEDICARE TRUST FUNDS

2012-02-23T11:36:00.004-08:00

A popular myth, circulated by members of Congress and others, seeks to reassure retirees of the solvency of the Social Security Trust Funds, claiming that surplus funds collected in Social Security and Medicare payroll taxes has been set aside as reserves to pay for anticipated retirement needs of the large Baby Boom generations in the coming years. This claim is patently false and misleading as will be explained below.

Pre–funding Social Security?

Prior to being appointed Fed Chairman, in 1983 Alan Greenspan and his Commission documented the need for raising a surplus to meet the anticipated Social Security and Medicare needs of the large Baby-Boom Generation. Congress went along, boosting the payroll tax rate (employer/employee contribution), from 8.1% in 1980 to 15.3% an increase of 88%.

However, Congress completely undermines the whole idea of pre-funding predictable increases in future needs by raiding the surpluses accumulated in the various trust funds to pay for current, non-related, questionable outlays, like “long wars” and tax cuts for the rich. Since payroll taxes weigh most heavily on the lower-tier wage earners, the diversion of trust fund monies to non-related purposes illustrates how the rich and powerful elite set the principle of progressive taxation on its head, shifting the burden of government from the rich to the rest. Billionaire Warren Buffet asks why should his secretary pay a higher rate of tax than he does.

Having emptied the trust funds, Congress engages in the fiction of investing the surpluses in newly minted government bonds. But what’s the point? It’s the national equivalent of you funding your retirement plan with personal IOUs.

It is worth a brief detour to understand this misleading bit of fiscal legerdemain:

It would be acceptable if, instead of spending the surplus each year on non-trust-related expenses, the government saved the money, using it to repurchase existing U.S. Government bonds from the public and holding those bonds in the trust as a reserve against future Trust obligations. In so doing the Government would temporarily reduce the national debt held by the public while holding the repurchased bonds as a reserve within the trust to be re-sold to the public when the money is needed. In effect, the purchase of existing bonds creates unused debt capacity to be tapped later when the need arises. Accordingly, (other things being equal) when the Government eventually re-sold these bonds back to the public to meet the trust fund’s needs, the net effect on the national debt would be a wash; the Government would pay for trust needs without having increased the national debt over what it was before the purchase of existing bonds, as the Greenspan Commission intended.

The problem arises when, instead of using the surplus to buy existing government bonds, the Government spends the surplus on non-related government expenses – wars, defense contracts, tax cuts and routine government bills. Therefore, there is no money left for the purchase of existing government bonds from the public and thereby reduce the national debt temporarily so as to create unused debt capacity. Instead, having spent the surplus, the Government simply inserts un-issued new bonds into the trust funds, creating the illusion of a pre-funded trust surplus. When the Government later sells these newly-issued bonds to meet the trust fund’s obligations, the debt in the hands of the public will rise by the same amount, rather than breaking even as would have been the case if existing bonds were purchased with the surplus. At the end of the day, the net effect on the national debt is the same as if the government simply borrowed the money at the time of need -- money the younger generations will have to come up with. Consequently, the government bonds held in the trust funds are simply an indication of the money the Government intends to borrow when the need arises.

If you are still confused about the difference between the Trust Funds investing the surplus to buy existing bonds, and spending the surplus and inserting new, un-issued bonds into the Trust Funds, perhaps a simplified example will help:

Let’s posit a government with 1 billion in debt (bonds) in the hands of the public, and taxes bringing in $400 million over and above current Social Security needs in a year.

Government saves the surplus, and buys $400 million of the $1 billion of existing (previously issued) bonds in the hands of the public, reducing the national debt in the hands of the public to $600 million, and placing $400 million of existing bonds in the trust funds.

Baby boomers retire the next year creating a Social Security deficit of $400 billion, so to cover the deficit the Social Security Trust Fund sells its $400 of previously issued bonds to fill in the gap. The debt in the hands of the public returns to $1 billion.

Government spends the surplus, leaving the national debt at $1 billion and puts $400 billion of new, un-issued bonds in the Trust Funds.

Baby Boomers retire the next year creating a Social Security deficit of $400 million, so the Social Security Trust Fund sells its $400 billion of new un-issued bonds to the public, raising the national debt in the hands of the public to $1.4 billion.

In the private sector the second type of transaction would be accounted for as “unfunded pension liability.”

Accordingly, the trust fund surpluses funded with new, un-issued debt, therefore, are fictions. In perpetrating this fraud, Washington relies on the public’s inability to distinguish between the purchases of existing government bonds and the insertion of new, unissued bonds in the trust funds. There are bonds in the Trust Funds in both instances, with vastly different consequences for the national debt.

Bottom line: The Social Security and Medicare Trust Funds are not solvent. (One wag quipped: “The Trust Funds are neither funded nor can they be trusted.”) The benefits payable to the retiring Baby Boom generation will soon vastly exceed the current revenues collected, so the ability of the Trust Funds to meet their obligations will depend entirely on the government’s ability to borrow the additional funds needed to make up the difference. At a time when the national debt is soaring, the nation’s credit rating has been downgraded and the Republicans are seeking to reduce “entitlements” and balk at raising the national debt limit, the ability of Social Security and Medicare to fulfill the promises made to retirees is open to question.

In effect, Washington squanders monies set aside by the Baby Boom generation for their government pensions and health care expenses on tax cuts for the rich and pointless ‘long wars,’ among other things, expecting younger generations to make up the shortfall when the Boomers retire. Today’s tax cuts become tomorrow’s tax increases and/or benefit reductions. Such “kick-the-can-down-the-road” policies, fostered by the rich and powerful elite, sets up eventual generational conflict and economic/financial instability.

Wealth Inequality Caused the Great Recession

2012-01-20T16:07:00.000-08:00

In his OP-ED piece titled “The GOP’s Suicide March” (WaPo, January 19, 2012) Charles Krauthammer says: “Now, economic inequality is an important issue, but the idea that it is the cause of America's current economic troubles is absurd.” Oh?

Krauthammer labors under the same misapprehension and shallow economic thinking afflicting most of the mainstream press. They just don’t know how to connect the dots between wealth inequality and America’s economic troubles. Allow me.

The rich skew the game in their favor so they wind up with 87% of national income gains during Reagan, 98% during Bush 43 (compared to 35% before Reaganomics). How?
- Start with cutting the top income tax bracket from 70% to 28% during Reagan’s watch. The cuts more than double the take-home pay of the CEO earning $10 million per year. (At 70%, the CEO gets to keep $3 million, at 28% he gets to keep $7.2 million, 2.4 times as much as before without without lifting a finger. Presently the rate is 35%, meaning the CEO’s take-home pay merely doubled with no increase in his compensation.) The percentage reduction diminishes as you move down the income scale until at the lowest tax bracket you actually get a tax-rate increase from 14% to 15%. So much for the “fairness” of “across-the-board” tax cuts.
- To add insult to injury, Reagan increases FICA and Medicare taxes by 61%, ostensibly creating a surplus to pre-fund anticipated increases in baby-boomer Social Security and Medicare costs. Such increases are borne primarily by working class Americans who pay 15% (employer/employee contribution) FICA and Medicare taxes on all their pay (up to $106,800 currently), compared to the relatively few C-Suiters for whom the tax is a minor annoyance since they stop paying FICA after $106,800, meaning for our $10-million-a-year CEO the tax represents something like 0.18% of his pay.

Instead of setting the FICA/Medicare surpluses aside to pay for the anticipated surge in Baby-Boomer retirement benefits, reprehensibly Washington spends it on wars, offsets to tax cuts for the rich and routine expenses. Whereas had they set the money aside they would have bought government bonds on the open market, creating unused debt capacity, or, in the best of circumstances, actual surpluses, instead the government spent it all and inserted unissued new bonds into the Trust Funds, which merely signals the government’s intent to borrow and add to the national debt to pay for the Boomers’ increased retirement benefits when they become due.
Next, cut taxes on capital gains from ordinary income rates to 28% under Reagan, 20% under Clinton (at the insistence of Republicans) and 15% under Bush 43. Since most of the income for the super-rich is derived from capital gains (see Mitt Romney), they wind up paying an effective federal tax rate of around 18% compared to around 27% for median-income taxpayers. Hence Warren Buffet’s comment about the unfairness of his secretary paying a higher tax rate than he does.
Next, allow all manner of tax dodges to corporations, especially on foreign income and tax-haven corporate HQ’s, so as to steadily diminish the corporate share of total federal taxes, including excise taxes which are mostly corporate. (See graph below.)
The net effect of all this chicanery (falsely presented as “job creation” for the working class) is to steadily shift the tax burden from the rich to working-class taxpayers. In the graph below, notice how the corporate share (including excise taxes) is steadily diminishing, leaving more room for boosts in C-Suite compensation.

2. Reduce regulation to as to plump up the corporate bottom line by eliminating pesky costs of observing regulations intended to prevent pollution, enhance worker safety and deal fairly with customers and investors.
Fatter corporate profits mean more pay for C-Suite executives and more dividends for investors (who are mostly wealthy), but no gains for working-class employees who haven’t had a real pay increase in more than 30 years. See graphs below. Notice how corporate profits are rising as a percent of National Income, whereas employee compensation is going down. So much for “Trickle-Down Economics.”

3. Engage in Long Wars, which serve little purpose other than to provide defense contractors with long, lucrative contracts, again fattening corporate profits, C-Suite compensation and dividends mostly for the rich.

Tax cuts, less regulation, Long Wars. That is how the rich game the system so as to scoop up the vast bulk of newly created wealth. The net effect of Reaganomics? The rich get fabulously richer, the poor get desperately poorer and the middle class marks time.

Here’s where Krauthammer and others fail to connect the dots:

Wanting to keep the American Dream alive, the stagnant middle class and as many of the poor as are able, make up the shortfall between their aspirations for consumption and their dismal incomes with debt. And where do they obtain credit? From the rich, who, after all are the ones with money to lend. (Foreigners and the Fed are also sources of credit, but for purposes of simplicity and illustration I will concentrate on wealthy American lenders.)

A. The excessive debt owed by middle- and lower-class to rich Americans is both produced by and evidence of income inequality.

In short, distribution of income overwhelmingly favoring the rich at the expense of the middle and lower classes is what produced the excessive debt that is at the heart of America’s financial and economic problems. It was the over-extension of mortgage credit (extended by the rich who had to put their money to work, along with foreign creditors and an over-accommodative Fed) that created the housing bubble. In addition, the superabundance of lendable funds stemming largely from wealth inequality, eventually resulted in the lowering of lending standards and, with regulators asleep, the over-extension of credit to un-creditworthy borrowers. ”Sub-prime” borrowers, in Wall Street-speak, were inveigled by unscrupulous mortgage brokers into taking out variable-rate mortgages at a time of unusually low mortgage rates. When mortgage rates returned to normal, borrowers could not make the payments, defaulted and started a cascade of foreclosures which brought down the housing market, creating the Panic of 2008 and the ensuing Great Recession.

B. Further, the means by which inequality of wealth is produced -- namely tax cuts favoring the rich, reduced regulation and Long Wars favoring corporations acting as funnels of income to the rich — contribute to huge federal deficits, starting with Reagan:

The deficits building ever since Reagan, coupled by Republican intransigency in raising taxes (and, indeed, calls for yet further tax cuts), have undermined the ability of the Obama administration to revive the economy with emergency spending, due to legitimate fears of overburdening future generations with debt. Such emergency spending is needed to supplant flagging consumer demand so as to provide incentives for business to hire. In the absence of adequate emergency spending, recovery has been lackluster and reductions in the unemployment rate have been sluggish, again tying back to the means by which inequality of wealth is engineered by wealthy political benefactors: low taxes, less regulation and Long Wars.

Bottom line: Reaganomics got us into this mess and is preventing us from extricating ourselves from it.

So, Mr. Krauthammer, far from being absurd, growing economic inequality is, in fact, the cause of America's current economic troubles.

LIVING EISENHOWER'S AND ORWELL'S NIGHTMARES

2012-01-06T22:01:00.000-08:00

The first decade of the New Millennium – the G. W. Bush years – embodied in every detail Eisenhower’s warning of “grave implications” associated with “lack of balance” and “unwarranted influence” not only of the often-cited “Military-Industrial Complex,” but also the less-mentioned “Scientific-Technological Elite.” Here is part of what Ike said January 17, 1961, three days before leaving office:

Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations. (Emphasis added.)

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades.

In this revolution, research has become central, it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government. . . .

The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.

Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.
Dwight David Eisenhower, Farewell Address, January 17, 1961 (emphasis added).

1984-2008:

Twenty-three years later, many of us noted the year 1984 came and went with little fanfare, tempting some to ponder whether George Orwell had overstated his case. Orwell derived “1984” simply by reversing the last two digits of the year the book was written, 1948, meaning, in effect, don’t take the date literally, I mean sometime in the future. Orwell’s 1984 future arrived a couple of decades later, during G.W. Bush’s administration (2001-2009) characterized by:
Widespread poverty amidst unparalleled privilege and prosperity for the ruling elite
Fear of a constant external existentialist threat
Perpetual war
Pervasive government surveillance and interrogation
Incessant public mind control accomplished through media by a repressive state dominated by a privileged elite

If Orwell were writing today, Winston Smith would be working for Fox News.

Since Eisenhower’s day, America has waged 3 “Long Wars” – Vietnam, Afghanistan and Iraq. As a U.S. Navy Vietnam vet, it distresses me to point out three hard truths about these wars:
Each war was entered into under false pretenses, with inadequate force, nebulous and constantly changing goals, un-analyzed risks, limited public support at home and abroad, and no exit strategy.
Each war was un-winnable because:
The enemy, having nowhere to go, showed resolve and resourcefulness and – dare we say it? – courage.
The terrain was cruelly inhospitable, negating much of the American military’s technological advantages, reducing combat to mano-a-mano, where it is numbers that count.
The situation remained hopelessly mired in ancient local blood feuds and historic ideological and/or religious antagonisms.
Both wars in the Middle East have been funded on both sides by American taxpayers and users of oil and illegal narcotics, thereby extending their duration.
These are all textbook preconditions for strategically un-winnable Long Wars.

Having “been compelled to create a permanent armaments industry of vast proportions,” U.S. policymakers committed to sustain it with defense industry buildups and “wars of choice,” providing endless streams of government contracts; swollen corporate profits and dividends; inflated C-suite salaries; and bounteous campaign contributions within what has become the Military-Industrial-Technological-Political Complex (MITP Complex).

In choosing wars in Vietnam, Afghanistan and Iraq, the MITP Complex was either incredibly stupid or, more likely, crafty as hell in seeking out resolute adversaries engaged in civil war in inhospitable terrain at such a times as to assure U.S. tactical victories but strategic defeat. Having thus willingly stepped into quagmires, the MITP Complex then confidently relied on Americans’ pride, patriotism and/or disengagement to drag out long and very profitable, if pointless, wars.

It strains credulity to think the frequent episodes of U.S. military crash spending are coincidental, random or entirely exogenous. With wars, long and short, and military buildups occurring during most of the past 45 years, logic would suggest these episodes are planned, in much the same way as the automobile industry plans obsolescence, and for the same reason.

Reviewing President Eisenhower’s list of “grave implications” today, we find all have been realized:
The U.S. military reportedly spends not only more than the net income of all U.S. corporations, but also more than the militaries of all the other nations combined.
The total influence of the MITP Complex continues to be felt in every city, every statehouse, every office of the Federal government. Military offices of procurement routinely farm out work on major projects to virtually every state in the Union, thus ensuring their continuing local support.
The councils of government are awash in campaign contributions from corporations and wealthy individuals buying “unwarranted influence.” With “Citizens United vs. FEC” the floodgates have been opened for the rich and powerful elite to continue underwriting governments of their liking.
Power has been misplaced. For the last three decades, power has been dedicated not to the interests of “We The People,” but rather to the enrichment of the political sector’s wealthy “base” of contributors, to the detriment of the middle and lower classes suffering from stagnating real wages, high unemployment, plunging housing prices, foreclosures and bankruptcies.
The share of national income growth going to the top 10% of income earners, averaging 35% in the post-war period before Reagan, jumped to 87% during his administration, most of that going to the top 1% of income earners who now take in nearly a quarter of the nation’s income every year and control 40 percent of the nation’s wealth. Chopping the top tax rate from 70 percent to 28 percent on Reagan’s watch certainly contributed to the shift. The CEO earning $10 million a year, who had to scrape by on $3 million before Reagan, got to keep $7.2 million by the time Regan left office in 1989.
Astoundingly, during the first 7 years of George W. Bush’s administration (before the wheels came off the wagon in 2008), fully 98% (!) of the growth in national income was scooped up by the top 10% of income earners, leaving 2% for the rest of us. Hello? ( http://www.stateofworkingamerica.org/pages/interactive#/?start=1917&end=2007)
This lack of balance has polarized the United States economically and politically, creating the greatest domestic inequality of wealth among all advanced nations while producing legislative gridlock between those seeking to protect the interests of their wealthy benefactors and those committed to a broader distribution of the fruits of prosperity.
Power has also been misplaced militarily by invading Afghanistan and Iraq, soil regarded as holy by Islam. These un-winnable wars of choice create little beyond discord, death and destruction, providing Radical Islam with its most effective recruiting tool. Most importantly, such wars perpetuate the escalation of conflict between Muslims and the U.S. with potentially catastrophic consequences. Such wars appear to be playing into the hands of al-Qaida whose strategy is to “Spread them thin and bleed them into bankruptcy.” (Al-Qaida’s investment in the range of $250,000-$500,000 in 9/11 panicked the U.S. into spending at least a couple of trillion dollars in response. Today the U.S. is in difficult economic and financial straits. Credit downgraded by Standard and Poors credit-rating agency, the U.S. is courting bankruptcy.)
The Scientific-Technological Elite have teamed up with the Military-Industrial complex to produce ever-more technologically sophisticated (and expensive) weapons the political sector willingly underwrites apparently for much the same reason as Mallory climbed Everest: “Because it’s there.”
Policymakers, misled as to the accuracy and reliability of “smart” bombs and missiles, order so-called “surgical” strikes in Iraq and Afghanistan, resulting in tragic civilian casualties dismissed as “collateral damage,” a Newspeak phrase if ever there was one.
Agent Orange – the toxic defoliant used in Vietnam, another misbegotten contribution of the Scientific-Technological Elite.
Liberties enshrined in the Constitution and Bill of Rights have been seriously undermined by the Patriot Acts, enacted as a response to the attack on 9/11, around which conspiracy theories rage.
Suspects have been abducted and transferred to countries (“extraordinary rendition,” more Newspeak) where “harsh interrogation” techniques, (usually “waterboarding,” a technique hearkening back to the Spanish Inquisition) have been employed, as they reportedly have been in Guantanamo.
Extra-constitutional wiretapping, record searches and “lone wolf” surveillance have been practiced in ways reminiscent of “Big Brother.”
An “enemy combatant,” for whom especially harsh rules apply, is whomever the President of the United States so designates, without explanation or trial. Kafka, anyone?
Peaceful “Occupy” protesters, exercising their First Amendment rights “peaceably to assemble, and to petition the government for a redress of grievances,” have been nonchalantly pepper sprayed while quietly seated in orderly rows, heads bowed.
The democratic processes, while ostensibly still functioning, have been severely compromised by priorities distorted by campaign funding, irregularities in tallying votes, gerrymandering, and state-legislated impediments to voter registration. Lest we forget, the pivotal 2000 election was decided by a single vote in the Supreme Court.

In foreign policy, the United States seems to have adopted the very qualities U. S. statesmen deplored about the Soviets during the Cold War, namely:
Regarding international tensions as a normal – indeed a desirable – state of affairs and a precondition to change under an “unfettered capitalist” dialectic.
Fomenting agitation, revolutions, conspiracies subversion, infiltration and so-called wars of liberation, while never ceasing to proclaim that it is peace-loving – think U.S. in Iran in the 1953, Guatemala in 1954, the Congo in 1960, Cuba 1961, Brazil 1964, Ghana 1966, Iraq 1968, Chile 1973, Afghanistan 1973-74 and again in 1978 and the 1980s, Nicaragua 1981-1990, Panama 1989, Haiti 2004, Somalia 2006-2007, in addition to the three aforementioned Long Wars.
Bottom line: Americans today are living the worst fears of President Eisenhower and author George Orwell.

Not by chance did Doonesbury creator, Gary Trudeau, choose a battered Roman legionnaire’s helmet to symbolize President George W. Bush – America has morphed into the modern Roman Empire.

How did it come to this? Stay tuned.
© 2012 D. L. Smith

TIME FOR A NEW "NEW DEAL"

2011-12-21T17:20:00.000-08:00

Those of us arguing for a reshuffling of the deck for a new "New Deal" don’t argue for equality of outcome (although that’s the shibboleth the Right tries to pin on liberals) but rather a fair distribution of the fruits of prosperity — something we haven’t seen since Reagan bamboozled the electorate with the fantasies of Reaganomics.

I submit, maldistribution is self evident when the richest 10% of income earners garner 87% of the growth in national income, as they did during Reagan’s term in office, and 98% during the first 7 years of Bush’s (before the wheels came off the wagon in 2008), not to mention when there is appalling poverty, hunger, homelessness, lack of medical care in a country that brags endlessly about its “exceptionalism.” The fairness to which liberals appeal implies a change of rules regarding fairness of opportunity, taxation, education, employment, access to health care, etc.

Here’s the point the extreme Right misses about changing the rules to stop the ineluctable campaign by the rich to gather up all the marbles: It’s not just fair, but also good business for them to “spread the wealth.” Concentration of wealth has three undesirable side effects for rich people:

The middle class, which has been marking time with no real pay increases in over three decades, tends to borrow beyond their means to repay, just to keep up with what has become the chimera of the American Dream. To the extent that the middle class defaults, the rich suffer, since they are the main ones doing the lending. (Of course, those paragons of free-market/government-is-the-problem virtue are first in line for government handouts when the defaults begin cascading.)
The lack of growth in income for the middle and lower classes, particularly when combined with the deleveraging that follows a credit meltdown, means a lack of growth in consumer spending, in turn meaning a lack of growth in corporate sales, income and investment, producing a corresponding damper on the prices of stocks mostly owned by the rich.
If "the rest" are economically oppressed beyond endurance, they will revolt and redistribute wealth by either ballots or bullets, depending on their options.

Henry Ford had the foresight to pay his workers well because he wanted them to be able to afford to buy the cars they were making. The rich and powerful elite today show no such enlightened self-interest.

Cain Punks America ... Brilliantly!

2011-11-05T12:27:00.000-07:00

Last night Rachel Maddow knocked it out of the park, laying out a compelling case that Herman Cain’s presidential bid is essentially “Performance Art,” revealing the shallowness of American politics by satirizing the U.S. political process by subtly using phrases and ideas from Pop Culture.

Here’s what she demonstrated:

Cain’s closing remarks in the Republican Presidential Debate was lifted verbatim from “Pokemon” theme: Citing “a poet,” Cain says: “Life can be a challenge; life can be impossible; it’s never easy.”
999 is the operating tax structure from SIM City
Chapter 9 of his book is titled simply “45” (4+5=9)
Says he’s Hagen Dazs “Black Walnut” because it is “not your flavor of the month,”has “staying power,” “doesn’t go away,” according to Cain. Irony. Hagen Dazs has discontinued the flavor.
Cain volunteered that if asked who the president of “Uzbeki-Beki Stan-Stan” was, he would answer “I don’t know. Do you?” The “Uzbeki-Beki Stan-Stan” is no accident, but rather genius parody.
The quirky artsy-fartsy campaign videos not only satirize American campaign ads, but are so off-the-wall as to get media attention and countless replays.
Cain proudly says he’s “a Koch brothers' brother from another mother,” lifted verbatim from a Jackie Chan movie, “Rush Hour 3” in which Chris Tucker says “[I’m] his brother from another mother.”

As additional proof that Cain’s run for the Republican presidential nomination is performance art, and not politics as usual, Rachel shows a couple of clips in which Cain show’s total lack of political acumen and knowledge: a) Garbles pro-life and pro-choice re: abortion and b) Hasn’t a clue about what “The Palestinian 'right of return'” means. Moreover, he has not created anything approximating political organization in the key primary states, and spends his campaign time on a book tour, rather than the usual political events.

Brilliant exercise in performance stagecraft on Cain’s part! Excellent bit of insight by Rachel.

See it http://www.msnbc.msn.com/id/26315908/vp/45171907#45171907

I would add a couple of observations to Rachel’s analysis:

Cain is to politics what Andy Warhol is to art. Both gain attention by referencing popular cultural icons.
The ad with the campaign manager smoking is saying “We’re blowing smoke (up your ass)” and Cain’s slow, knowing smile is saying “Get it?”
Cain’s 999 is taunting the religious right for whom 999, the inverse of 666 the “mark of the beast” has special meaning — this from a guy named Cain, no less. See my “Is Cain Able?” below.
“Black walnut” is also another way of saying “I’m a black man with balls.”
With his “Uzbecki-Becki Stan-Stan” Cain riffs on candidate George W. Bush’s gaffe when asked if he knew who Pervez Musharraf was (“I don’t know? Do you?”). Cain volunteered that if asked who the president of “Uzbeki-Beki Stan-Stan” was, he would answer “I don’t know. Do you?”

Bottom line: Cain is punking us all brilliantly, especially Republicans.

The question is, will Cain pull it off all the way to the top?

EL-ERIAN SAYS "LISTEN TO OCCUPY WALL STREET"

2011-10-15T02:44:00.000-07:00

To the question "Should we pay attention to Occupy Wall Street?" PIMCO's Mohamed El-Erian responds with an unqualified "yes."

Having watched Mohamed El-Erian on CNBC for many years, I would venture to say he is the most intelligent and perspicacious commentator on Wall Street. Even the know-it-all anchors and pundits on CNBC pay him enormous respect and deference when he is on. I have found his analyses to be well-reasoned, balanced, calm, unbiased, accurate, possessing well-grounded global and historical perspective, eloquently expressed. So when he says "pay attention" to the OWS movement, I would encourage others to listen.

For those questioning whether the OWS movement is accomplishing anything, the answer is very simple: the OWS movement is simply an expression of voter discontent with the present course and a cri de coeur for much-needed, radical change. What OWS is saying both forcefully and with the symbolic eloquence of people who are willing to put their bodies on the line in the streets (as opposed to those who grumble from their Barcaloungers while downing beer and pretzels in front of the TV) is "Here we are, Washington, large numbers of voters ready to give power through the ballot box to candidates willing to represent our values." The Tea Party did much the same and managed to transform Republican politics.

The OWS movement is simply the political manifestation Newton's third law of motion (every action produces an equal and opposite reaction), and consequently can be expected to breathe needed energy into Democrats, cowed and dispirited by the volume of Tea Party rhetoric. We saw this phenomenon at work in Wisconsin earlier in the year. Recall that the demonstrations in Madison quickly spread across the nation, encouraging Wisconsin demonstrators to perservere in their protest, eventually resulting in successful recall elections (alas, one vote short of a majority) electing candidates in favor of reversing Gov. Walker's union-busting initiatives. (See my Youtube video of the demonstration in San Francisco: Wisconsin Rally SF City Hall February 26, 2011)

The emergence of a tangible presence in the streets of a large, peaceful, vocal Left should inspire hope for liberals while prompting a sense of unease and caution for observers with a sense of history. The hope for liberals lies in the possibility of restraining and, perhaps reversing the damaging extreme rightward swing of the political pendulum, prompting Washington to produce jobs for the unemployed, more healthcare for those lacking it and funds for infrastructure repair and other left-leaning causes. At the same time, the emergence of OWS as a counterweight to the Tea Party prompts a sense of unease and caution due to the historically demonstrated consequences of political polarization.

As we have seen in California, when the center abandons their respective parties, it leaves control of the parties in the hands of the extremes of Left and Right which are too far apart to reach common ground, leaving the state essentially ungovernable. A polity that once resembled a ball is reshaped into a dumbbell. The ensuing paralysis results in rising discontent on both sides eventually finding expression in the streets, sometimes violently.

I summarized this phenomenon in my blog, shortly after the demonstrations began in Wisconsin:

Saturday, February 19, 2011

THIS IS HOW IT BEGINS

For a while there, it looked as if the Angry Right was the only political mindset willing to “take to the streets” to advance their cause. Now the Angry Left has shown up in Wisconsin to make their point prompting the N.Y. Times to ask: “Is Wisconsin the Tunisia of collective bargaining rights?”

It’s just a matter of time before the Tea Party starts staging counter-demonstrations, setting the stage for open confrontation on the streets between left and right seeking “2nd Amendment Solutions.” Governor Walker is talking about sending in the National Guard.

This is how it begins. . .

Welcome to Weimar Germany, ca. 1920’s.

GLOBAL PROTESTS IN 2011 REPRISE REVOLUTIONS OF 1848

2011-10-10T03:05:00.000-07:00

Mark Twain once said: "History does not repeat itself but it rhymes." The present worldwide demonstrations throughout Europe and the United States, and the "Arab Spring" of 2011 rhyme with the European Revolutions of 1848.

Both were liberal political uprisings impelled by the displacement of middle-class workers by what I call "Megacycles" (the transformation in the human enterprise wrought by technology). Then it was the Industrial Revolution displacing the artisans, today it is the Electronic/Automation Revolution displacing white- and blue-collar workers. In both cases these urban, middle-class and student revolutionaries protested against an entrenched aristocracy (monarchy then, plutocracy now) which had managed to rig the game so they scooped up most of the fruits of economic growth, resulting in great inequality of wealth, in large part stemming from the shift in the tax burden from the rich to the rest. Both took place within the context of financial turmoil and severe economic contractions producing high unemployment. Both occurred in cities where workers and students could join together in protest. In both instances, the aggrieved workers were being undersold by foreign laborers (immigrants and overseas labor). In both cases protesters/revolutionaries sought to diminish the control of the ruling classes and expand the participation of the disaffected people in the political process. The term "Spring" was used to describe the events ("Springtime of Nations"/"Springtime of Peoples" in 1848; "Arab Spring" in 2011).

You will recall that the Revolutions of 1848 turned out badly for the revolutionaries in the short run -- within a year, reactionary forces regained control in most of the affected areas, Then as now, the protesters were essentially leaderless without a coherent statement of purpose -- although Marx and Engels supplied "The Communist Manifesto that year at the behest of the Communist Party in 1847. (It would take over half a century for Marx's vision to be realized in what he would have thought the unlikeliest of places, Russia, which was insufficiently developed to participate in the 1848 Revolutions.) However, over time, most of the demands of the revolutionaries (democracy and an end to totalitarian monarchy, liberal reforms, nationalism) were fulfilled.

I would venture to predict the current protest movement would meet the same fate if Republicans were to win the elections in 2012, followed by a resurgence of the Left not long thereafter as the Republicans reprise their disastrous, self-serving policies which gave us the Panic of 2008 and the Great Recession. If, on the other hand, the protesters get their act together and unite behind effective leadership and common purpose, they might succeed in achieving sufficient success in the 2012 elections to implement liberal reforms -- starting with public funding of national elections.

I'd say the time is ripe for a revival of "Les Miserables."

Monitor this space for "The Liberal Manifesto."

IS CAIN ABLE?

2011-09-29T13:37:00.000-07:00

Suddenly Herman Cain is hot. Today’s Wall Street Journal article by Daniel Hennigner (“Taking Cain Seriously”) wonders aloud: “Why isn’t a successful business résumé presidential material?” The article goes on to cite Mr. Cain’s accomplishments in turning around various subsidiaries of the Pillsbury Corporation, cites his “9-9-9” plan and, despite his never having served in elective office, pronounces Mr. Cain “a credible candidate” who deserves “a serious look.”

Let’s see, the last businessman elected president without having served in elective office was, um . . . Herbert Hoover. Hoover was a mining engineer and a Republican, who as president presided over the worst of the Great Depression, believed in public works projects (think Hoover Dam), signed the Smoot-Hawley Tariff and raised the top income tax bracket from 25 percent to 63 percent, none of which produced economic recovery during his term – hardly the sort of model appealing to today’s Republicans.

Nevertheless, we should not be surprised by the Wall Street Journal’s sudden warmth toward Mr. Cain. He mouths the usual Republican pieties on energy, the economy, national security, immigration, health care. However, it is Mr. Cain’s “9-9-9” tax plan that has Republican campaign donors slavering, despite the unsavory connotations of “999” to the Religious right – “mark of the beast” and all, especially coming from someone named Cain.

How does Mr. Cain’s “9-9-9” plan pencil out? The plan proposes a 9 percent flat income tax, 9 percent flat corporate income tax and 9 percent sales tax, replacing all other federal taxes. According to the Bureau of Economic Analysis personal income is running at an annual rate of about $12 trillion, 9 percent of which yields revenues of about $1.1 trillion. Corporate profits before tax are running at an annual rate of about $1.4 trillion, adding another $126 billion. And personal consumption expenditures are running at about $10.7 trillion, yielding another $963 billion. The grand total comes to $2,189 billion. That’s slightly more to last year’s revenues or $2.163 billion cited by the Congressional Budget Offic e . So Mr. Cain seems to be correct in saying his plan would be revenue neutral. Mr. Norquist and his fellow pledge signers in Congress doubtlessly approve.

However, that still leaves unanswered the knotty problem of a deficit of $1.4 trillion when Mr. Cain’s projected revenues are subtracted from next year’s projected outlays of $3.6 trillion. It would seem Mr. Cain has some “’splainin’ to do,” to quote Ricky Ricardo.

The voluble Mr. Cain is uncharacteristically demure about what he would cut, beyond saying (<http://www.hermaincain.com> ) “government spending is out of control,” (surprise!) “entitlements create dependency,” “the federal government has imposed expensive and often counter-productive social and welfare programs on the states and the people” and “It is time to admit the mistakes and get the federal government out of the way,” leaving “states, cities, churches, charities and businesses to offer a helping hand instead of a handout where they live.” Mangled syntax aside, Mr. Cain’s faith in these non-federal actors is touching, but hardly confidence-inspiring, given their past record. Maybe he’s planning on reviving the “thousand points of light” that worked so well during G.H.W. Bush’s presidency.

Look under the hood of the 9-9-9 plan, however, and you readily see why it is so appealing to wealthy Republican kingmakers, furthering the shift in the tax burden, initiated by Ronald Reagan, from the super-rich to working Americans.

Take your run-of-the-mill corporate CEO earning $10 million a year and spending, say, $1 million. He would pay $900,000 income tax and $90,000 in sales taxes, for a combined total of $990,000, or 9.9 percent of his total income, way, way, way below today’s 35% top income tax bracket and even way below the effective tax rate of just over 18.11 percent in 2008 for the 400 highest income earners, most of whose income is taxed at the 15% capital gains rate, according to the IRS. He doesn’t specify whether capital gains would be taxed as income, but even if they are, 9 percent sure beats the current 15%. And no estate tax. Cool.

On the other hand, take the average American household earning about $50,000, and spending virtually all of it. That’s $4,500 (9 percent) income tax and $4,500 (9 percent) sales tax for a combined total of 18%, nearly double the rate of our CEO under Mr. Cain’s get-you-coming-and-going plan.

And did you notice the teeny-tiny $126 billion tax on corporate income compared to the annualized rate of $340 billion in the second quarter of 2011 according to the BEA?

Cut federal government programs mainly benefiting working Americans and make them pay higher tax rates than the wealthy while reducing the effective tax rates paid by the super-rich and chop corporate taxes by 63%. Sounds like a plan made in a Republican heaven.

IS LAFFER THE BEST MEDICINE?

2011-09-12T12:10:00.000-07:00

If you want to see Republican supply-siders squirm, ask them this simple question about the Laffer curve: at what marginal tax rate does the “backward bend” (higher tax rates produce less revenue) begin? Even Laffer himself has not ventured an answer. Nor has anyone else.

Examine the depictions of the Laffer curve drawn by Laffer and you find the graph shows only two tax-rate numbers 0% and 100% at which the government collects no revenues — at 0% because their is no tax levied and 100% because there is no incentive to produce.

In between, Laffer draws the curve symmetrically with the backward bend into the “Prohibitive range” occurring neatly in the middle, suggesting 50% is the magical rate of taxation above which tax revenues decline because of the disincentive to work and invest. And yet, nowhere on the vertical axis does 50% or any other number than 0 and 100 appear. Instead Laffer dodges this critical issue, saying “Figure 1 is a graphic illustration of the concept of the Laffer Curve — not the exact levels of taxation corresponding to specific levels of revenues.” How convenient. Like Einstein saying “e=mc?”.

You would think an academic would jump at the chance to provide policymakers with empirically verified, useful guidelines for setting tax rates to optimize revenues and maximize economic activity. But no. Laffer would rather wax on about the intuitively obvious notion that confiscatory taxes discourage economic activity without identifying the tax rate at which this phenomenon kicks in. This leaves him free to harness a concept everyone can agree on — the notion of confiscatory taxes discouraging economic activity — and misapply it indiscriminately, as Republicans do, at all times: no matter the current level of taxation, supply-side dogma claims that raising taxes discourages economic activity, increases unemployment and decreases government revenue, and lowering taxes does just the opposite. In short, the backward bend in the Laffer curve occurs at all levels of taxation, according to die-hard supply siders freed from the constraints of evidence. Ergo the pathological aversion to raising tax rates and doctrinaire endorsement of tax cuts during every election season. Laffer then attempts to prove the validity of this thesis by citing instances in which tax cuts have been followed by economic surges.

This academically unsound approach is fraught with problems. There is the unaddressed potential fallacy of post hoc ergo propter hoc, in which false causality is derived from sequential chronology — the crowing rooster taking credit for the sunrise. Then there are inconvenient counterfactuals: a) high top tax rates in the ‘50s and ‘60s (70%-90%) for example, coexisted with strong economic growth and rising revenues and b) following Clinton’s 1993 tax-rate increases, economic and revenue growth outstripped that of Reagan’s and G. W. Bush’s low-tax regimes, to the point of producing budget surpluses 4 out of Clinton’s 8 budget years. This is the result promised, but never delivered by either Reagan or Bush II.

The demonstrable consequences of Laffer’s flawed theorizing, eagerly embraced by Republicans, are recurring mega-deficits burdening our children, growing inequality of wealth eventually producing the financial and economic meltdowns seen in 2008, and the inability (because of previously-incurred national debt) to rescue the economy with adequate government emergency spending.

Bottom line: Laffer is an amiable charlatan. His seductive, yet misleading little curve has seriously undermined the economic and political wellbeing of this country and continued adherence to this flawed thesis could well engender generational and class warfare that could prove fatal to the survival of the republic.

Since your supply-side friend will be unable to answer the original question, then pose another: Why does smart cookie like you continue to subscribe to this intellectually bankrupt exercise producing demonstrably counter-productive consequences?

REPUBLICAN HYPOCRISY EXPOSED: 13 EXAMPLES

2011-09-04T19:42:00.000-07:00

Recommended reading. See: “Goodbye to All That: Reflections of a GOP Operative Who Left the Cult.”

Two particularly disturbing attributes of today’s Republican Party are its flagrant, brazen hypocrisy and shameless pandering to their rich “base.” Republicans seem to be borrowing a script from the Vietnam era: “We have to destroy the country in order to save it.”

Regarding the Obama stimulus program, Republicans behave like arsonists who set the building ablaze and then deride the fire department for wasting water.
Regarding fiscal remedies to the current high unemployment rate, Republicans are quick to claim enduring high unemployment proves Keynesian stimulus “doesn’t work,” (based on a one-shot stimulus totaling 4.6% of 1 year GDP, enough to stop the bleeding but not cure the patient), but ignore the fact that their employment cure-all, the Bush tax cuts in effect for the past decade, didn’t produce many jobs during the Bush II administration and have failed to reduce unemployment during the Obama administration.
Regarding income taxes, Republicans claimed to cut taxes “across the board” in the interests of fairness, yet the richest taxpayers saw their top tax rate plummet from 70% to 28% (a 60% reduction), while the poorest taxpayers saw their rate increase from 14% to 15% during the Reagan administration. And to add insult to injury, Reagan raised payroll taxes, borne primarily by the non-rich, from 9.3% (employer/employee contribution) to 15%, a 61% increase.
Regarding personal taxes, Republicans howl that the rich are overtaxed and bear a disproportionate share of the tax burden, yet according to the IRS, the top 400 income earners pay an effective federal tax rate of only 16.62%, whereas the average taxpayer pays around 27% (15.3% payroll and 12% income tax).
Regarding the current dysfunction of Congress, they assert “Government is the problem,” and then toss a spanner in the works to prove their point. But when a natural disaster hits, guess who Republican governors come crying to for help.
Regarding financial regulation, Republican financial CEOs passionately decry government regulation of the private sector, but when the lack of regulatory supervision creates a financial meltdown, they come hat-in-hand for a government bailout.
Regarding budget deficits, Republicans (Cheney) said, “Reagan taught us deficits don’t matter” as they piled trillions on to the national debt; now suddenly they wail about a “debt crisis,” and want to pass a balanced budget amendment with a no-tax-rate-increase proviso.
Regarding generational equity, Republicans profess deep concern about the welfare of future generations, yet showed no reluctance in burdening our kids with a huge national debt during Republican administrations, and putting our kids’ education in jeopardy in the name of ‘fiscal responsibility,’ once they were no longer in power.
Regarding the war in Afghanistan, Republicans went to war to kill or capture bin Laden and his top lieutenants, yet when they had the chance to do so at Tora Bora, they let them get away (lest their ‘long war’ be shortened), and when the Democrats finally did kill bin Laden, captured and killed many of the top leaders, Republicans insisted that the war continue anyway.
Regarding the war in Iraq, Republicans went to war to destroy Iraq’s “weapons of mass destruction,” and when none were found, Republicans decided we had to remain “downrange” for another 8 years (and counting) to bring democracy to the freedom-loving people of Iraq.
Regarding the Constitution, Republicans claim to venerate it, yet Republicans passed the Patriot Acts essentially gutting the Bill of Rights, and by abusing Senate rules regarding filibusters, undermine the Constitutional principle of majority rule.
Regarding the distribution of the fruits of economic growth, Republicans claim their policies produce a rising tide that lifts all boats, yet are unmoved by the reality of the incontrovertible results of their policies over the better part of three decades, namely, the rich get fabulously richer, the poor get desperately poorer, and the middle class marks time, keeping the American Dream alive by taking on destabilizing amounts of debt.
When Democrats cite this inequality of income distribution, Republicans are quick to deprecate them for engaging in “class warfare,” oblivious to Warren Buffet’s quip: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

To liberals: How many more such instances can you think of?
To the Republicans in the group, how do you defend such lack of principled behavior?

Equally disturbing is the Democrats’ inability to effectively expose Republican hypocrisy and to persuade non-wealthy voters that in voting Republican they are voting against their own interests.

PERRY DROPS THE OTHER BOOT ON BERNANKE

2011-08-18T13:04:00.000-07:00

Today’s Wall Street Journal editorial — “Perry’s Public Service, Behold a hard-money Texas politician” -- praises the substance, if not the form, of Gov. Perry’s fulmination against Fed Chairman Bernanke. Claiming the printing of money by the Fed would be a "political act" he considered "almost treacherous, treasonous," Perry said Texans would treat the Chairman "pretty ugly" if he ventured into the Lone Star state.

MY COMMENT

Perry's rant against the Fed is just the sound of the other boot dropping. In their single-minded pursuit of their first priority, making Obama a one-term president, the Republicans are committed to thwarting economic recovery any way they can. By hyping a "debt crisis" they stymie the fiscal policy option; now Perry is attempting to thwart the monetary policy alternative by dubbing any rescue attempt by the Fed as "a treasonous political act." These guys are dead serious about regaining power, and are willing to take the economy down in the process. The new Republican slogan: "We had to destroy the country in order to save it."

FUZZY MATH

2011-07-25T16:11:00.000-07:00

In an article titled "Who Owns U.S. Debt" (Global Post, July 20, 2011) Global Post editor Thomas Mucha states:

Truth is elusive. But it's a good thing we have math. Here's the big idea:

Many people — politicians and pundits alike — prattle on that China and, to a lesser extent Japan, own most of America's $14.3 trillion in government debt.

But there's one little problem with that conventional wisdom: it's just not true. While the Chinese, Japanese and plenty of other foreigners own substantial amounts, it's really Americans who hold most of America's debt.

Citing figures from Business Insider Mucha concludes: "So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion."

It is, indeed a "good thing we have math." Now if only Mucha knew how to use it. The figures cited in Mucha’s article are fallacious and misleading:

“So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion.”

Nonsense. By Mucha’s own calculation $4.3 trillion is money the government owes itself:

The U.S. Treasury: $1.63 trillion
Social Security trust fund: $2.67 trillion

In both cases, the government is both borrower and lender, consequently, these figures should not be counted as government debt and should be excluded from the calculation. (Do you list money you owe yourself as a debt?).

If we exclude the government debt owned by the government itself, the corrected statement should read:

“So America owes foreigners about $4.5 trillion in debt and America owes Americans $5.5 trillion." (45% foreigners, Americans 55%)

Moreover Mucha assumes that no foreigners own mutual funds, money market funds or interests in U.S. commercial banks, which is clearly not the case. He further assumes that no foreigners living in this country have private pension plans, again, not the case. In fact, by counting all U.S. households as “American” Mucha further assumes no foreigners live in this country. Here are his numbers (taken from Business Insider) fallaciously listed as totally "American-owned":

Commercial banks: $301.8 billion
Money market mutual funds: $337.7 billion
Mutual funds: $300.5 billion
U.S. households: $959.4 billion
Private pension funds: $504.7 billion

If foreigners own more than 500 billion (20.8%) of the $2.4 trillion included in these categories, then the politicians and pundits are correct that foreigners own more than half the government’s debt.

Even if foreigners own less than 20.8%, but nonetheless own a significant portion of these categories, the notion that foreigners own a disturbingly high proportion of the U.S. government debt is a valid cause for alarm. Uncle Sam, in effect, is surrendering financial sovereignty to foreigners, a process begun on Ronald Reagan's watch, when America went from being the world's largest creditor nation to becoming the worlds largest debtor.

Until Mucha issues a correcting article, "the truth will remain elusive."

BREAKING THE IMPASSE ON THE DEBT LIMIT

2011-07-03T10:01:00.000-07:00

There's some chatter among the punditocracy to the effect that the Obama administration could invoke article 4 of the 14th amendment to break the impasse over the debt limit.

"Article 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void."

I seem to recall Dan Rather on Rachel Maddow’s show Friday state that the requirement for Congress to raise the debt limit was in a bill passed by Congress and, therefore, subordinate to the constitutional requirement that “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

If so, that would seem to give Obama some leverage at least with regard to the existing debt, though maybe not new debt, since it would not have been “authorized by law.”

Here’s where it gets interesting. There’s about $5 trillion in existing, authorized but unissued (to the public) debt sitting in the Social Security and Medicare trust funds. These government bonds went straight from the Treasury into the trust funds to replace the surpluses the government previously spent on non-trust related matters. If (big if) by executive order the government could strip those bonds from the trust funds and issue them to the public, it could then use the proceeds to pay for the current deficits while at the same time rolling over other maturing debt in the hands of the public. Alternatively, the Fed could buy the bonds (although that could pose an inflationary risk). The government continues to function without an increase in the national debt -- simply a change of ownership of the bonds from the trusts to the public or the Fed. The $5 trillion is enough to underwrite 3 or 4 years worth of deficits at the current rate. The government could later replace the trust’s bonds when Congress finally gets its act together and raises the debt limit.

Since, as I recall, it was the Reagan Republicans who began the practice of raiding the trust funds (established by the Greenspan Commission in the mid-’80s) to spend the Social Security and Medicare surpluses on things like wars and tax cuts for the rich, and replacing the plundered funds with unissued bonds, the Republicans may find themselves hoisted by their own petard.

Should be interesting.

RESCUING AMERICA

2011-06-13T11:26:00.000-07:00

Many pundits advocate the return of more manufacturing jobs to the US by whatever means necessary, even if that includes our renouncing commitment to free trade and returning to targeted import restrictions.

There are several drawbacks to this prescription:

Now, as in the 1930s, the imposition of import restrictions would trigger retaliatory trade sanctions elsewhere, resulting in the diminution of global trade. Such measures would be highly counterproductive, denying the U.S. access to a vigorous export market, the ultimate source of a sustainable U.S. economic recovery.
Those who say it will take another decade for the U.S. to return to economic health overlook the obvious solution to our predicament: exports. We need only look at what Asia did in response to the “Asian ‘flu” in the late 1990s to see what must be done: depress the relative value of the dollar (by continuing to “print” more of them and keep U.S. interest rates low until foreigners are overloaded with low-yielding dollars and dump or spend them) so as to make U.S. exports irresistible bargains for Asians and OPEC members, who have accumulated large spendable trade surpluses. In the process, we would reduce the propensity of Americans to buy foreign goods and services, the net result being a U.S. trade surplus that would generate export-related jobs and supply the funds with which we repay our foreign debt — two essential components to a long-term sustainable recovery. To understand the merit of this remedy, one needs to understand two fundamental realities of modern economic life:
1. The U.S. is a formidable exporter. We rank just behind China and Germany in the global ranking of exporters. The assertion that “the U.S. is a ‘hollow economy’ that doesn’t make anything” is a misperception, garnered from trips to Walmart where the vast majority of trinkets are made in China. Most American exports — things like aircraft, heavy machinery, chemicals, timber, raw materials, and high-end services (medical, higher education, finance, insurance, management consulting, high-tech) are not purchased at Walmart. In addition, most folks are unaware of the exportable component of our formidable tourist, service and entertainment industries where we enjoy a consistent, comfortable surplus in our balance of trade.
2. The fact that exports account for only about 10% of U.S. GDP does not mean exports are incapable of being the engine of American economic growth. A vigorous 20% rate of growth within the 10% export sector translates into a respectable 2% addition to U.S. GDP growth. With only a modest 2% contribution to GDP growth from the domestic side we’d have a robust 4% overall growth rate, enough to reduce U.S. unemployment. These kinds of numbers are eminently achievable if the dollar becomes cheap enough. The good news is that the dollar has is getting cheaper, a longstanding favorable economic trend interrupted from time to time when global financial instability causes capital to flock to the “safe haven” of the dollar.
The notion that manufacturing is the source of “the good-paying jobs” is obsolete and misleading. Most widget manufacturing jobs are no longer “good-paying” inasmuch as they can be performed by Asian peasants with a modicum of re-training, willing to work for very low wages. We should not be endeavoring to compete with Asians for wages. Good-paying manufacturing jobs exist only in highly automated, capital intensive industries, where the U.S. is already well-positioned, and which would benefit from further devaluation of the dollar. Labor-intensive, widget-making industries are the equivalent of farm jobs in the days of “forty acres and a mule.” When the industrial revolution mechanized agriculture, societies employing 80%-90% of the workforce in rural, agricultural-related jobs found they could produce all the food they needed with 2% of the labor force. Automation has produced the same effect in industry: we produce nearly the same proportion of manufactured goods with only a fraction of the labor force previously required. So advocating the expansion or even preservation of widget-making manufacturing jobs in the U.S. is a retrograde solution analogous to trying to salvage 40-acres-and-a-mule jobs. What we should be doing instead is fomenting those industries — highly automated/capital intensive/high-tech and high-end services (where we consistently generate trade surpluses), requiring a well-trained, highly educated labor force. That is not to say there won’t be jobs for unskilled, poorly educated workers. They will still find jobs, albeit low paying, serving the needs of the skilled, educated labor force.
The formula for long-term sustainable growth, as any basic economic text states, is the growth of the labor force times the growth in productivity. The growth in the labor force will be what it is (low among highly educated, high-achievers in the advanced economy; high among immigrants and others more closely tied to the agricultural birth ethic when children were an asset rather than a liability). Where policy can make a difference is in the productivity of the labor force, which comes back to education and capital investment. Republican policies undermining both basic and higher education (including children of undocumented workers) in the name of fiscal austerity, are highly detrimental to productivity, and therefore, to the long-term prospects of the United States. So are policies inhibiting the immigration and retention of highly educated foreigners. Capital investment will follow aggregate demand, which, as I have stated, exists in Asia and OPEC, and is accessible through aggressive exports fomented by a low-valued dollar.
A corollary to the basic principle of GDP growth= growth in population X productivity is the need for a stable, sustainable credit structure within which the growth in population and productivity can thrive. Given three decades of policies undermining financial stability (with low taxes, indiscriminate deregulation and the prosecution of pointless wars we are unwilling to pay for), such a credit structure requires two things:
1. Fiscal stability at the government level, requiring a willingness to tax ourselves sufficiently to pay for the government services we demand — in short, abandoning the supply-siders self-serving “Voodoo Economics,” which, despite clear evidence to the contrary, maintains that more revenues will be collected in the long run if we chop tax rates. Raising taxes on those able to afford it is a far surer way of achieving government fiscal stability than attempting to slash government expenditures (which have highly recalcitrant, entrenched constituencies). Much could be achieved simply by withdrawing from the Middle East and reducing military expenditures commensurately; but that would mean overcoming the recalcitrance of the entrenched war lobby. Nevertheless, that alternative has a better chance of success within the electorate than trying to cut Social Security and Medicare. Taxing ourselves adequately would mean reducing our dependence on foreign capital to pay our government bills.
2. Financial equilibrium within the household sector, achievable by providing export-related jobs and reducing household spending on imported goods by continuing to devalue the dollar. By fomenting income and dampening expenses, households will have the wherewithal to pay down their debt to sustainable levels, with the collateral benefit of reducing our foreign debt.

Restoring strong, sustainable American prosperity basically will require a radical reversal of the demagogic, highly counterproductive Reagan-inspired policies and priorities:

Low taxes, especially on the rich
Freewheeling military expenditures, morphing into “long wars”
Militant anti-drug enforcement
Indiscriminate deregulation and lax enforcement of existing regulation, especially within the financial sector
Slashes in vital government services (education, law enforcement, firefighting, regulation)
Private health-insurance
Petroleum-centered energy policy and
Jingoistic “strong dollar” policy.

The evidence of 30 years of hindsight demonstrates that such policies produce calamitous results:

Consistent, huge deficits (leading to dependence on foreign capital, loss of financial sovereignty and inability to respond in a fiscally responsible manner to emergency spending needs in a severe recession or natural catastrophe)
Diminished international esteem (based on our violence-prone foreign and globally destabilizing credit policies)
Unsound financial practices (leading to financial panics and economic meltdowns)
Growing inequality of wealth and income (leading to social and fiscal/economic destabilization)
Inadequate labor force training and crime prevention (leading to reduced growth in productivity and loss of security)
Poor health and expensive health care (with corresponding loss of productivity, financial instability and increase in human suffering)
Dependence on foreign sources of highly polluting energy (to the detriment of the environment, our balance of payments and our foreign policy (prompting us to send troops in the Middle East to protect our energy lifeline))
Overvalued dollar (resulting in continuing deficits in our balance of payments and loss of financial sovereignty)

Sadly, longstanding, demonstrably counterproductive policies are unlikely to be changed as long as Washington serves the needs of their wealthy individual and corporate paymasters, to the detriment of the common weal, disguising their ultimate purpose behind misappropriated, demagogic slogans like “freedom,” “get the government off our backs” (or “government is not the solution, it's the problem”), “free enterprise,” “free markets,” “fiscal responsibility,” “drill, baby, drill,” and “king dollar.” These slogans all sound good in theory, and consequently, have great popular appeal; but when put into practice in the service of the rich and powerful elite, produce the calamitous results previously enumerated. Only when these calamities come crashing down on our heads are we likely to embrace the policy changes necessary to right the seriously listing ship of state, first among these is public funding of political campaigns to sever the umbilical cord between wealth and politics. Hopefully this reformation will occur before it capsizes, or maybe not.

In short, the way out of our present predicament includes the following policy reforms:

Prohibit all private campaign funding of Federal elections, replacing the present system with public funding. None of the reforms that follow can be instituted without this essential precondition.
Raise taxes, especially on the rich, by rescinding the Bush II tax cuts. Recognize that "individual responsibility" includes paying taxes sufficient to cover government expenses and generate surpluses for emergency spending.
Ultimately, replace the Federal Income Tax with a Graduated National Sales Tax exempting essentials, surtaxing luxuries (to make up for revenue lost to the exemption of essentials), and tax everything else at a standard 27%, enough to close the deficit gap and generate a modest surplus as a source of future emergency spending when unemployment exceeds 6% or 7%.
Enact a stiff, no-nonsense-no-deductions inheritance gift tax on estates over $3 million, totally dedicated to paying off the national debt, remaining in effect until it is fully paid off, then rededicate the proceeds to paying off student loans, thereby restoring generational equity.
Trim the fat but not the muscle in government spending, line by line using zero-based budgeting. Maintain spending on education, law enforcement, fire fighting. Reinstitute PayGo budget discipline.
Decriminalize street drugs so as to rededicate funds presently spent on enforcement and incarceration to education and rehabilitation, and end the Drug War on both sides of the border and defund organized drug-related crime.
Withdraw all U.S. troops from the Middle East, Korea and Europe and cut DoD expenditures commensurately, so as to help balance the budget, restore America’s tarnished standing in world opinion, short-circuit the mechanism driving recruitment for extremist Islam and de-escalate the present “Clash of Civilizations” in order to arrive at a modus vivendi between Islam and the West.
Institute and enforce simple yet effective regulations curbing the excesses of the free market mechanism, especially within the financial sector. For example, require all homeowners to put down 25% equity to obtain a mortgage, obviating the need for regulatory second-guessing of the underwriters on detailed lending standards and procedures.
Institute Medicare for all, thereby assuring universal coverage without the odious mandate and eliminating the unproductive overhead of private health insurers.
Aggressively develop clean, renewable sources of energy to replace carbon, reduce dependence on unreliable foreign sources, and provide needed jobs
Encourage a “level playing field” in international trade and support continued devaluation of the dollar to foment exports (and related jobs) and reduce imports, so as to provide the wherewithal to repay foreign debt

YET FURTHER THOUGHTS ON RESTREPO

2011-06-01T15:10:00.000-07:00

Another classmate of mine, Frank Kehl, contributes further thoughts on "Restrepo," following those of Ted Beal on January 5, 2011, below.

I'm just back from hearing Sebastian Junger at the Carnegie Council, "The Voice for Ethics in International Policy." Junger is the author of War, and the co-producer, director of Restrepo about a year in the life of US soldiers in the Korengal Valley of Afghanistan. This listserv had a lively discussion of Restrepo the documentary, about the operations base in the Valley named after a Columbian-American medic killed in combat. That discussion was before Junger's co-producer and friend, Tim Hetherington, was killed in Misrata, Libya, six weeks ago when a bomb exploded in the midst of a small group of war correspondents.

Those who've read the book or seen the documentary know that Junger's intent was to reflect war the way war is experienced by combat troops in a zone of nearly constant combat: the emotion of knowing your base could be attacked at any time; the terror as you wait and try to catch a little sleep before a 24 hour patrol that will begin at 2 AM; carrying over 100 pounds on that patrol; the discomfort of not showering for a month at a time, etc.

Yet all but one person in that unit that he followed re-upped for another hitch.

Junger explored the "adrenaline high" hypothesis (my word) of why 19 and 20 year-olds would do that. Yeah, that's a part of it he acknowledges. But it leaves out two other elements. As a thoroughly trained, and fit and equipped combat soldier, you are at the top of the food chain (his phrase). The statistic: 3% of the military sustain 80% of the casualties; these young men were among the 3%. You are respected by other military and by civilians back in the world. Take away your weapon and your uniform, and back in the world you are a 19 or 20 year old at the bottom of the food chain. So, along with the danger there is this respect.

But also there is brotherhood. (All the soldiers at OB Restrepo were men.) Brotherhood is different from friendship. Yeah, a few of the soldiers were friends, but ALL were brothers. What does that mean? In the Q & A he referred to a couple of Hollywood war films. Band of Brothers was one. The other, The Hurt Locker, was the counter example. It got the "adrenaline high" half of war right -- the bomb demolition expert certainly gets off on risk and danger -- but the other half, the brotherhood, was missing: he's a cowboy who disregards the safety of the men in his unit. Junger pointed out that your life depends on your brothers, and their lives depend on you. Life and death. That covenant (my word) trumps all else. If you're under attack behind one rock and run out of ammo, and the guy behind a nearby rock has ammo to spare, is he going to risk his life to run it over to you? Junger noted that it does happen in war that a soldier will fall on a grenade to save his brothers.

I thought, the Three Musketeers' "One for all, all for one," kind of sums up that aspect. Junger put it like this: it doesn't matter if you had an argument with the guy the day before; it doesn't matter if he's American-born or not, black or white, North or South, gay or straight; you are brothers in the brotherhood of the ultimate, life or death.

In the Q & A, I asked Junger to explore more deeply a previous question. Junger has been a war correspondent in Bosnia, Liberia, Afghanistan among other places. What were his thoughts about his own mortality when he put himself repeatedly in those situations. His friend and partner Tim had been killed covering Libya. I had recently seen the exhibit on Spanish Civil War photography at the International Center of Photography. The featured photographer was Frank Capa, but Capa worked with two other fine photographers. One, a man, survived. The other, his girlfriend, was killed in that war. Capa himself was later killed in Vietnam at the end of the French occupation in 1954. Those odds were not particularly reassuring.

He answered that when he started covering war, he was young and bored -- with the journalism he was doing. And in denial. Denial will take you a long way, he stressed to audience laughter. Also, in fact, most war correspondents don't get killed. And, he said, emotionally he had more or less come to terms with the risks he was taking and was OK with them.

Then his tone shifted.

When he learned of Tim Hetherington's death, at first he was surprised that he hadn't taken it harder. Then, in subsequent days and weeks the gravity, the finality of that event, weighed on him.

During that period, he got an email from one of the soldiers he had known. The soldier told him: you got pretty close to understanding what war is (referring to his book and documentary). But not all the way. Now you really understand. When you are in combat, you don't know if you will survive or not. But for sure, not all of your brothers will survive. That you know. That you come back with. That you can never forget.

So, added Junger, I had come to terms with the risks I was taking. But I had never asked my wife, or my parents, or my friends. They had not come to terms with the risks I had taken on. They had not signed off on them.

I'm older now, in my 40s -- 49. When I first went to cover war, I was in my 20s. After Tim died I began to think about war differently. In his last email Tim said he was with other correspondents in a bombed-out building. The buildings on both sides of the street were also bombed out. On each side of that street Libyans were firing on each other. I realized that those young men were not there by choice or desire. A "machine" had put them there. It's that machine of war that interests me now.

After the talk was over, I went up and shook his hand, told him I had been so impressed by his Perfect Storm that the following summer I took the whole family up to Gloucester, looked up the brother of the captain who went down with the Andrea Gail, found he was working at a restaurant and went there only to discover it was his night off. So I left a short condolence note.

Junger graciously said, "That's a good story."

I added, "And a tribute to your skill."

Frank Kehl

GINGRICH MELTDOWN EXPOSES REPUBLICAN OVERREACH

2011-05-18T10:08:00.000-07:00

Rachel Maddow recently made some telling points about the Gingrich meltdown and about-face. Quite correctly, she analyzed the situation in terms of the two stages a candidate must traverse in order to get elected. He (could be she) must first persuade the party to back him by advocating positions calculated to appeal to the Party base, and then, having garnered the nomination, must persuade the national electorate to elect him by advocating more centrist positions with broader appeal. In Gingrich’s case, he immediately resorted to a moderate, centrist position on Medicare and Social Security eschewing extreme “social engineering” from both right and left. In so doing he contradicted the extreme right position advocated by Paul Ryan and subscribed to by Republicans in the house, thereby igniting a firestorm of opposition within the Republican ranks.

What Gingrich overlooked was the requirement to first deliver the narrower position to secure the nomination from the Republican base before espousing the centrist position appealing to the national electorate. Or, perhaps he thought there were enough Republican moderates to override the extreme-right within the party. There weren’t, as he quickly learned (hence his prompt about-face). The Party is firmly in the grip of extreme-right ideologues, who will accept nothing less than total obeisance to their catechism as a litmus test for the nomination.

The predicament for Republicans, Maddow correctly points out, is that the extreme-right position (dismantle Medicare and cut back Social Security benefits) needed to secure the nomination, won’t get them elected in the national elections. Republicans forgot that, paradoxically, even as the Tea Partiers railed against “socialist medicine” they shouted “Don’t mess with my Medicare.” And messing with Social Security remains the “third rail of politics.”

What this says to me is that the Republicans misread the meaning of their triumph in the 2010 mid-terms. They thought it was a mandate in favor of their extreme-right policies, when in fact it was simply an expression of discontent with the way things had progressed under the Democrats for two years in the aftermath of the Bush II catastrophe. In other words, it wasn’t so much pro-Republican as anti-status quo, ironically caused by Republicans yet thoughtlessly attributed to hapless Democrat incumbents. Consequently, Republicans, first in Wisconsin, and now Washington, have overreached, ramming through votes for draconian right-wing policies far beyond what the general electorate will tolerate. Having swallowed the Paul Ryan Kool Aid, now the Republicans will be struggling to find an antidote before November 2012.

The Republican predicament has elated Democrats, inasmuch as l’affaire Gingrich has demonstrated that centrist positions needed to win the national election won’t garner the Republican nomination. Conversely, the overreaching extreme-right policies any Republican candidate must embrace to get the nomination in the Republican primaries will ensure his defeat in the national elections. From Rachel’s mouth to God’s ear.

CLASS WARFARE -- Lessons of History

2011-04-17T11:51:00.000-07:00

Did you notice how the Republicans responded to Obama’s recent speech with an immediate outcry of “class warfare”? They are desperate to stigmatize and stifle any outbreak of class warfare rhetoric because it would expose their dirty little secret, namely that ever since Reagan, the Republicans have successfully waged class warfare sub rosa. Recall my previous posts on how the top 10% have scooped up 85% of the growth in income since Reagan introduced us to “Voodoo Economics” (compared to 35% previously), and, more specifically, 98% during the first 7 years of W’s administration.
See: http://www.stateofworkingamerica.org/pages/interactive#/?start=1917&end=2007

How will it end? The Lessons of History are clear:

As the rich and powerful elite persist in their unbridled quest to gather up all the marbles, they will leave in their wake a destitute, debt-laden population with insufficient purchasing power to keep the economy functioning, leading to another financial/economic meltdown. At this point, with an economy in shambles, it can go one of two ways (or one way and then the other):

With nothing left to lose, the desperate population will confiscate and redistribute the accumulated wealth of the elite either through taxation, if we are lucky (think FDR), or otherwise through violence (think French and Russian Revolutions).
With everything to lose, the rich and powerful elite will close ranks behind a right-wing dictator (think Nazi Germany) (“When fascism comes to America, it will be wrapped in a flag and carrying a cross.” Sinclair Lewis)

The fusion of economic chaos and political upheaval will inevitably lead to dictatorship in America (think Napoleon, Stalin and Hitler) -- the seeds of which have already been planted by Junior Bush (and not repealed by Obama) in the Patriot Acts.

As to “when,” hard to say. However, the signs will be there for all to see: a stock market meltdown, another “panic” like 2008 — the difference being the next rescue plan, superimposed on previous massive accumulation of national debt, will force the Fed to monetize the debt, producing rampant inflation and the dethronement of the dollar as the premier reserve currency (think Weimar Germany).

Overlay this scenario on top of the developing Clash of Civilizations between Islam and the West, further polarized by the distribution of oil reserves at a time when oil production is peaking globally, and you have the makings of Armageddon.

And on that cheerful note, I remain, yours truly,

David L. Smith

REX LEX VEX

2011-03-08T11:56:00.000-08:00

Thumbing through quotes on the law is an interesting exercise.

For example, I discovered that Nixon was simply paraphrasing a longstanding legal maxim:

The King can do no wrong.
Legal maxim
From the Latin 'Rex non potest peccare'.

When the President does it, that means that it is not illegal.
Richard Nixon

Something that has always puzzled me is the injustice of punishing people for breaking complex and convoluted laws, which ordinary individuals could not possibly know or understand, based on the following principle:

Ignorance of the law, which everybody is supposed to know, does not constitute an excuse.
Legal maxim
From the Latin 'Ignorantia juris quod quisque scire tenetur non excusat'.

17th Century jurist, John Selden explains why:

Ignorance of the law excuses no man; not that all men know the law, but because it is an excuse every man will plead, and no man can tell how to confute him.
John Selden

This expediency then, should prompt us, if justice be served, to make few, simple, comprehensible laws, and to institute some form of acquaintanceship of the law in the educational curriculum, so they become, indeed, “something everybody is supposed to know.”

A state is better governed which has few laws, and those laws strictly observed.
Rene Descartes

The prospect of fewer, simpler laws is unlikely as long as lawyers dominate the three branches of government, prevailing, as they do, in Congress, the White House and the Judiciary. (So much for separation of powers.) Lawyers dominating politics will tend to fulfill a Parkinsonian-style dictum: “Laws expand to fill the time of those making them.” All of which leads us back to Shakespeare:

The first thing we do, let's kill all the lawyers.
William Shakespeare
King Henry VI Part 2.

Perhaps a less draconian solution would be to popularize a new political slogan: “Elect No Lawyers.”

But even that would not completely solve the injustices inherent in the law:
Laws grind the poor, and rich men rule the law.
Oliver Goldsmith

An argument, therefore, for: “Public funding of political campaigns.”

And finally a somber warning from two who should know:

Arms and laws do not flourish together.
Julius Caesar
The laws are silent in the midst of arms.
Cicero

THE PRIVILEGED ARE REVOLTING IN WISCONSIN

2011-02-22T22:17:00.000-08:00

Writing for the Wall Street Journal today, James Taranto edifies the faithful about recent events in Wisconsin. The piece is titled “The Means of Coercion” and, clueless to the double entendre, he ads the tag line “The privileged are revolting in Wisconsin.” True. How True.

Taranto:

To make sense of what's going on in Wisconsin, it helps to understand that the left in America lives in an ideological fantasy world. . . . First, to talk of America in terms of "class" is to speak a foreign language. Outside of university faculties and Marxist fringe groups (but we repeat our self) [sic], Americans do not divide ourselves up by class; rather, "We hold these truths to be self-evident, that all men are created equal. . . ."

(And if Taranto’s a good boy, the tooth fairy will leave a dollar under his pillow.)

Talk about living in a fantasy world.

Outside the right-wing’s self-serving, impenetrable info-bubble, the language of class division is native.

Class has always been a recurring theme in rap. But then rap is too low-class to command attention in certain quarters, is it not?

Ask a rapper from the projects, facing daunting odds of being killed or imprisoned before he’s 21, whether he understands class division.

Or ask the middle-class family if they understand class after being evicted from the family home by bonus-stuffed bankers whose greed-driven folly created the crisis in the first place.

“All men are created equal . . .”

The only people eager to perpetrate this myth of a classless America, are the upper class and their flacks, desperate to conceal their true Orwellian credo: “All men are created equal, and some are more equal than others.”

It is not for nothing that America exhibits the greatest inequality of wealth among major advanced nations.

In the postwar period before Reagan came along, average incomes in the U.S. grew by $18,605 (2007 dollars).

The richest 10% got 35% of that growth
The bottom 90% shared 65%. OK, we can live with that.

http://www.stateofworkingamerica.org/pages/interactive#/?start=1999&end=2007

However, that all changed with Reagan. From the beginning of the Reagan era in 1981 to 2007 (before the bottom fell out in the Panic of 2008), average incomes grew by $18,159.

Instead of a 35% share, the richest 10% captured a whopping 85% of that growth!
The bottom 90% shared just 15% . . . not 65%.

Why?

Did the 10% upper-class suddenly become so much smarter? Work so much harder? Become so much more deserving? I mean, aren’t those the reasons we reward people in classless, merit-based, laissez-faire America? Right?

Or did it have something to do with the upper class contributing millions to the campaign coffers of Washington politicians who then gave billions in tax cuts to their benefactors, their ‘base’?

It gets curiouser and curiouser: separate out the first 7 years of the G.W. Bush era, and you find the richest 10% scooped up 98% (98%!) of the growth in income, leaving 2% for the remaining 90% to divvy up! Keep the change.

How truly smart, hardworking and deserving the upper-class must have become to be entitled to such handsome rewards.

But wait. . . didn’t those smart, hardworking, deserving upper-class worthies run the economy into a ditch in 2008?

And didn’t they bail themselves out first?

In Taranto’s classless, equal-opportunity America, no bad deed goes unrewarded.

The fantasy ends on a reassuring note:

Actual middle-class Americans don't feel put upon by "corporate power" or "the business community," because by and large, they own the means of production: They run businesses; they hold shares in corporations through their investment and retirement accounts. . . .

Well, how comforting.

[NTS: Seriously. Do these guys ever read what they write? Do they engage the clutch?]

So how dumb these actual middle-class owners must be to:

Give top managers huge pay hikes and bonuses, but
Fail to give themselves a real pay increase for 4 decades, despite doubling productivity.
In 1965, CEOs were paid on average 51 times the compensation of the lowest-paid worker (according to the Economic Policy Institute http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20060627/)
By 2005, CEO compensation had shot up to 821 times that of the lowest-paid worker. That’s 16 times what it was. Have CEOs gotten 16 times smarter? 16 times more hardworking? 16 times more deserving than they were 46 years ago?
Meanwhile ABC News reported: “For millions of working Americans, the phenomenon economists call "median wage stagnation" has become a way of life. For decades, their annual incomes have remained virtually the same, leaving many just a paycheck or two from the street.”

And. . . of course, being the good citizens that they are, these actual middle-class Americans “don't feel put upon by ‘corporate power’ or ‘the business community,’ because by and large, they own the means of production.”

[NTS: Is that faux naivetee, plain out-of-touch, or just kissing the soft, fleshy parts?]

Taranto:

“In any case, it seems to have escaped Krugman's and Drum's notice that the Wisconsin dispute has nothing to do with corporations. The unions' antagonist is the state government.”

Ah, the siren song of the tooth fairy.

Anyone who believes it’s about the state budget has all the political acumen of a two-year-old.

The unions have already conceded their willingness to make sacrifices to help solve the budget crisis in Wisconsin. Which, by the way, didn’t become a crisis until Walker gave businesses a nice tax break. Jobs, don’t you know.

Governor Walker wants something infinitely more precious to the workers and valuable to the Republican establishment: the unions’ collective bargaining rights.

He’s demanding this from workers in a state we have to thank for:

The weekend: 5-day workweek, 8-hour day
Unemployment compensation and
Workers’ compensation for job-related injury

In eviscerating the unions, Walker wants to crush the one remaining major source of Democratic-favoring organized money and manpower capable of opposing the Republican corporate juggernaut at election time. If Walker succeeds in Wisconsin, a proud bastion of labor, Republican governors around the country will be jumping on the crush-the-unions bandwagon. Democrats would suffer at the polls.

Make no mistake “It’s not about the budget; it’s about the power,” as Krugman says.

Republicans are repeating in Wisconsin the same revolting stunt they just pulled in Washington: Cut taxes for the rich to widen the deficit, then demand “sacrifice” from the working classes to close the deficit gap. Whatever happened to “We The People”?

Where will it end?

Krugman says the Republicans are moving us toward a “third-world oligarchy.”

Republicans might profitably look in on the Middle East to learn what happens these days to third-world oligarchies.

"ON, WISCONSIN!"

2011-02-21T13:40:00.000-08:00

Good piece by Paul Krugman yesterday about the confrontation between Wisconsin's Republicans and teachers' union.

“It’s not about the budget; it’s about the power.”

Republicans are repeating in Wisconsin the same ploy they are practicing in Washington: Cut taxes for the rich to widen the deficit, then demand “sacrifice” from the working classes to close the deficit gap. (There was no prospect for a deficit in Wisconsin until Walker cut taxes.)

Where will it end? Krugman says the Republicans are moving us toward a “third-world oligarchy.”

Republicans might profitably pay attention to the Middle East to learn what happens these days to third-world oligarchies.

“On, Wisconsin!”

THIS IS HOW IT BEGINS

2011-02-19T09:58:00.000-08:00

For a while there, it looked as if the Angry Right was the only political mindset willing to “take to the streets” to advance their cause. Now the Angry Left has shown up in Wisconsin to make their point prompting the N.Y. Times to ask: “Is Wisconsin the Tunisia of collective bargaining rights?”

It’s just a matter of time before the Tea Party starts staging counter-demonstrations, setting the stage for open confrontation on the streets between left and right seeking “2nd Amendment Solutions.” Governor Walker is talking about sending in the National Guard.

This is how it begins. . .

Welcome to Weimar Germany, ca. 1920’s.

CAN WE ALL GET ALONG?

2011-02-10T07:00:00.000-08:00

Considerable alarm has been raised in recent days about the dangers from the Muslim Brotherhood's influence over Egypt in the wake of the current revolution. For example, in his book "Jihad Is The Way," the former leader of the Brotherhood, Mustafa Mashhur explains the organization's goals of establishing an Islamic state, world domination under Islam and the public and personal religious duty of military jihad.

The Islamic Brotherhood’s rhetoric mirrors that of fundamentalist/evangelical Christians, does it not? (“We should invade their countries, kill their leaders and convert them to Christianity.” Ann Coulter) This desire to see the world united under the banner of a common faith seems to be embedded in Christian and Muslim DNA, explaining why the two faiths have been at each other’s throats for the better part of 13 centuries.

Before we go off on a tear about the Muslim Brotherhood, we'd do well to reflect on the fact that Islam has as much, if not more, reason to be alarmed by the re-emergence of evangelical Christianity in the U.S. — particularly since one of their number ascended to the presidency of and invaded not one but two Muslim countries acting on eschatological instructions from above. So far, Islam has not resorted to comparable provocation.

Judaism, for its part, while not a proselytizing religion, has nonetheless, contributed to interfaith hostility by twice occupying the Levant (yeah, yeah, God promised it to the Jews, I know), once during biblical times and again in 1948 et seq., followed by ethnic cleansing, and all manner of subsequent barbarisms -- think white phosphorus in Gaza -- in response to provocations by former residents understandably discomfited by their displacement.

Give the history of antagonism between the three faiths, I submit that reversing the escalating algorithm of provocation and retaliation to arrive at a modus vivendi trumps all other concerns in the world today, since failure to do so could well result in irreversible escalation to all-out war and annihilation.

So before we behold the mote in the eye of Islam, I suggest we consider the beam in our own eye.

The Egyptian Solution

2011-02-03T19:55:00.000-08:00

Writing about the current Egyptian crisis, former Clinton adviser-turned-critic, Dick Morris, advises President Obama to back Mubarak. (“Obama is losing Egypt” thehill.com, February 1, 2011)

If Egypt falls, Obama will have permanently damaged America’s vital interests. Look at what Carter’s abandonment of the shah has already cost the world and is likely to cost it in the future. We now face the possibility that a radicalized Egypt could be Obama’s gift to the globe.

Morris seems to be writing with Israel’s best interests in mind, rather than those of the U.S.. I’m sure Israel would rather back Mubarak, the devil we know, with whom Israel has reached a stable, working accommodation, rather than take a chance on replacing him with a more fundamentalist regime on Israel’s flank. So Morris raises the specter of a fundamentalist Egypt ruled by the Muslim Brotherhood as a threat to Obama’s re-election hopes and to American interests. He leaves unspoken the more compelling argument in favor of Israel’s interests other than to state darkly: “If Egypt and Iran were to work in tandem, they could control the region.”

If Mubarak were to fall, a fundamentalist Egypt is by no means certain. Correct me if I’m wrong, but my impression of Egyptians is that, on the whole, they are considerably more liberal than, say, Iranian Shia, Saudi Wahabi and Afghan Taliban. When I toured Egypt a couple of years ago, I sensed no hostility toward Americans on the street, in the bazaars and markets, in the home of the upper-middle class Egyptian family with whom we dined or from the Egyptian farmer whose mud-brick home we visited, the walls of which displayed crude paintings of the Ka’aba and a ship (signifying his pilgrimage to Mecca) alongside a picture of Barack Obama above the depiction of his wife at prayer. Moreover, Egypt can ill-afford confrontation with the West, dependent, as they are, on Western tourism as their primary source of income. Nor can the Egyptian military afford to alienate its Western patrons. (Egypt is the second-largest recipient of U.S. foreign aid, after Israel, well north of $1.3 billion annually, of which 70% reportedly goes to support the Egyptian military.)

Backing the 82-year old dictator, who has announced he will not seek re-election in September, seems short-sighted, clinging to the expiring, tainted old order, rather than investing political capital in the Arab future, embodied in the liberal younger generation now in revolt, not just in Egypt, but throughout the Arab world, including Iran. Moreover, effectively backing Mubarak now would simply postpone the inevitable day of reckoning when he is off the ballot in September.

So let us consider the other side of the story. What if the revolution produces a functioning liberal democracy after Obama had backed Mubarak, as Morris advises? Obama and the U.S. would be seen ‘on the wrong side of history’ and, what is worse, hypocritical in failing to back liberal democracy, the very principle for which the U.S. has purportedly invaded Afghanistan and Iraq.

In January 2009 I spoke with Jewish playwright David Mamet after his presentation at the Jewish Community Center in San Francisco:

“You say Israel wants only peace within its borders. You are a writer with a great imagination. How do you imagine Israel attaining such a peace?” I asked. His first response was “I don’t know,” but quickly added: “I think the Islamic world will undergo a reformation – not unlike the Catholic reformation that began in the 16th century – but it will probably take a long, long time.” He paused and then continued: “Much as I dislike Bush, in a hundred years the world may look back at the establishment of a democracy in Iraq as the seed of that reformation.”

Prescient? In a strange twist of history, Obama may have the opportunity to fulfill a Bush legacy. Perhaps if he were to frame it that way, Obama might achieve that elusive bi-partisan support he seeks. Curiouser and curiouser.

Given the Egyptian military’s decisive swing vote in the current crisis, the U.S., by threatening to cut off military aid, may possess the leverage to make the Egyptian revolution succeed with the military’s help. Moreover, what downside for the U.S. is there in backing the anti-Mubarak protesters even if Mubarak clings to power? Dependent as Egypt is on transit fees from the Suez Canal, American tourists and foreign aid, Mubarak could do little more than pout and return to business as usual. There are no Soviets with whom Mubarak could threaten to side, as did Nasser.

At some point the U.S. has to take a stand in favor not only of liberal democracy, but also, more importantly, of de-escalation of conflict and confrontation with Muslims to achieve a modus vivendi with Islam, just as the West did with the Soviet Union. Backing the anti-Mubarak protesters and pulling Western troops out of the Middle East are essential steps toward a solution to America’s predicament in the region. Both steps are within Obama’s powers to command as C-I-C. Otherwise, given human nature, amply demonstrated throughout history, we can expect ‘provocation’ will be met with ‘retaliation’ in an unending algorithm escalating irreversibly to all-out war between the West and Islam in which all weapons will be unlimbered, risking annihilation.

No doubt the extreme right will cry “Munich!” and “Cut-and-run!” to which I would reply “Détente” and “Rapprochement.”

A TALE OF TWO MORALITIES

2011-01-16T23:17:00.000-08:00

Paul Krugman recently wrote a profound piece pinpointing a critical difference between the morality of conservatives and liberals. The core of his message is that there are two moral conceptions:

"One side of American politics considers the modern welfare state — a private-enterprise economy, but one in which society’s winners are taxed to pay for a social safety net — morally superior to the capitalism red in tooth and claw we had before the New Deal. It’s only right, this side believes, for the affluent to help the less fortunate."

"The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft. That’s what lies behind the modern right’s fondness for violent rhetoric: many activists on the right really do see taxes and regulation as tyrannical impositions on their liberty."

I have often thought in similar terms of the divide between conservatives and liberals:

Conservatives are wedded to the rules — an ideological Master Narrative propounding (at least in theory) unfettered capitalism; free markets; low taxes; minimum government; strong military; willingness to use military force, if perceived to be necessary; and representative democracy — and approve of whatever outcome the rules produce. In the conservative mind, the rules are morally justified, paramount and, therefore, unchangeable and unassailable. Accordingly, with simple, if flawed logic, conservatives claim the results their moral rules produce must necessarily be moral.

Over the past 3 decades, conservative rules have produced results favoring the rich, undermining the poor and causing the middle class to mark time economically. If the rich get richer, the theory goes, it is because they are worthy (hard-working, filled with initiative, persevering, intelligent, etc.); and if the poor get poorer, it is because they are not (i.e. they are slothful, indolent, uneducated, etc); so for the ‘unworthy,’ poverty is a fitting result, in the conservative mindset.

Overarching reverence for the rules explains why on the subject of healthcare, conservatives are unmoved by statistics showing that the rules produce 50 million uninsured, millions of bankruptcies, thousands of avoidable deaths. That same rule-reverence also explains why on the subject of abortion, conservatives are unmoved by evidence of thousands of ‘deaths by coat hanger,’ and on the subject of narcotics, conservatives give little, if any, weight to the violence stemming from continued criminalization of drugs.

Liberals, on the other hand, focus on the results produced by the rules, and if the results are morally or practically objectionable, liberals believe in changing the rules to produce a more morally and practically desirable result (the political equivalent of ‘managing by results’). Therefore, liberals tend to be unmoved by conservative arguments based primarily on the morality of the rules.

Unlike the conservatives, united by a common, unchanging creed, liberals tend to squabble a lot about just how the rules ought to be changed, simply because of the myriad combinations and permutations of possible results and developing socio-economic conditions their rule changes must address. Consequently, the lack of a pat Master Narrative tends to weaken cohesiveness within the liberal ranks. (Someone once asked me why the liberals seem to have such difficulty uniting behind a common platform, to which I replied: “Because they think, or more accurately, continually rethink their positions to adapt the rules to constantly evolving conditions and results, unlike conservatives who, having accepted the conservative rules, unite behind an unchanging, conservative Master Narrative, be it Reaganomics or the Bible.”)

That said, in the U.S., the closest thing to a liberal Master Narrative includes counterweights to the conservative platform: sensible regulation of both capitalism and markets to curb excesses, progressive taxes high enough to cover government expenses, balanced military spending accompanied by greater reluctance to wage war, and greater control by the government of the purse strings, particularly as relates to Social Security and health insurance and care, to provide at least minimum necessary sustenance and medical care. They also favor righting the disequilibria of wealth and income which might otherwise lead to civil unrest and war.

Notably, the American left is essentially the opposite wing of the same bird. Consequently, both sides agree on certain core principles: capitalism and the market mechanism for the allocation of scarce resources, the need for a standing army for defense, and democracy for obtaining the consent of the governed. Where they differ is the extent of the government’s involvement in the implementation of these principles.

Bottom line: Both conservatives and liberals, then, are driven by morality — conservatives by the morality of the rules, liberals by the morality of the results.

As whenever morality is engaged, both sides tend to be intransigent. Debates between conservatives and liberals, therefore, tend to be unavailing because neither side is willing to abandon what are to them moral principles nor are they willing to give weight to the other’s arguments.

That is why it takes a calamity, like the Great Depression, to prompt radical change of the rules, as occurred in the 1930s. Only when the results of the existing rules are so unquestionably bad, unjust, dysfunctional, will the swing vote in the center re-prioritize, raising up the importance of results over rules, and join a more coherent Left in agreeing to change the rules radically.

President Obama’s problem is that the emergency monetary and fiscal measures were reasonably effective in preventing the Great Recession from degenerating into a Great Depression, dampening the leftward shift. Consequently, only modest reforms were enacted during Obama’s first two years.

FURTHER THOUGHTS ON "RESTREPO"

2011-01-05T10:06:00.000-08:00

Following my posting on “Restrepo,” my classmate, Ted Beal, a psychiatrist replied with the following profound insight:

‘As I assume you know this movie is based on the book, WAR by Sebastian Junger, author of The Perfect Storm. I think it should be required reading by the 99% of American citizens who are not involved in the war which touches only 1% of our citizens.

'I have been working as a psychiatrist at Walter Reed for about a year. I see each week about 20 returning soldiers from the war. The description of their experiences is just like those described in the book and I assume the movie. Buddies are vaporized by IEDs right next to them. They are left to pick up body parts and place them in bags. Nightmares are horrific. The intensity of prolonged conflict leaves many to be fearful of the "silence of American civilian life". The adaptation to "normal life" is difficult and many long to return to battle.

'Although soldiers do fight for each other as much as anything, they also speak of the addiction to battle. The book demonstrates and soldiers confirm that the adrénaline "high" of intense combat is better than a cocaine high and lasts longer. The author ably notes the biological and evolutionary roots of this addiction supported by society and amply reinforced by "older men", past their prime, making decisions to send in younger men in proxy battles.

'Although David ably outlines the apparent futility of the current strategy of this war, I think both these wars and the current and future effect it will have on our society is a far more complex problem. We need to ask ourselves what will thousands of young men addicted to fighting do when they return to a "normal " society. Some describe the irony of their inability to participate in a simple July 4th "Independence Day" celebration because the noise of fire crackers exploding "startles them into battle." The book and the movie are good places to begin thinking about these issues.'

My comment: There are costs to this war not included in the “Defense” Department’s budget.

David L. Smith
www.DavidLSmith.com
Reproduced with permission

"RESTREPO"

2011-01-03T11:09:00.000-08:00

“Restrepo” is a fascinating documentary aired on the National Geographic channel last night and available on DVD. It tells the story of a platoon deployed in a hornet’s nest in Afghanistan. Aside from the human-interest story of the traumatization of boys sent into harm’s way, the movie illustrates the dysfunctionality of the present strategy in Afghanistan.

The mission of the platoon in manning an outpost overlooking the Korengal Valley is to provide security for Afghans to build a road through the valley. The road is intended to make travel through the valley more efficient, thereby enhancing the prosperity of the villages along the way, presumably contributing to the “winning of hearts and minds” of the local citizenry. That’s the theory.

In practice, however, the platoon is under virtually continuous fire from the local Taliban, and barely able to defend itself, let alone provide adequate security for road builders on the floor of the valley. Moreover, the Taliban the platoon is fighting are relatives of the villagers whose hearts and minds this operation is supposed to be winning. Consequently, the mission is doomed to failure. Soldiers will die.

This microcosm of the war, therefore, demonstrates the fatal flaws in the strategy now being implemented in Afghanistan. The U.S. can’t win the hearts and minds of the population by shooting their relatives or attempting to build infrastructure in the middle of a hot war zone. Moreover, even in the unlikely event the U.S. is successful in winning the population’s hearts and minds and building a self-sustaining democratic central government within a culture with a centuries-old tradition of non-democratic theocracy and warlordism, what benefit does such an outcome provide the United States?

The stated benefit is supposedly to deny al-Qaeda sanctuary and a base of operations from which to attack the U.S. and Europe. However, al-Qaeda doesn’t need a whole country to perform its mischief, and in any event, can do so from remote bases in Pakistan, Sudan and Yemen even if sanctuary in Afghanistan is denied them. Does the U.S. government propose to invade these countries too?

In the end, the platoon abandons the Restrepo observation post without having accomplished the mission -- a fitting metaphor for the war itself.

Who will be Walter Cronkite today and say, in effect:

“To say that we are closer to victory today is to believe, in the face of the evidence, the optimists who have been wrong in the past. To suggest we are on the edge of defeat is to yield to unreasonable pessimism. To say that we are mired in stalemate seems the only realistic, yet unsatisfactory, conclusion.”

“And that’s the way it is.”

CONSERVATIVES: LIVING IN FANTASY WHILE BEING MUGGED BY REALITY

2010-12-04T05:28:00.000-08:00

In his triumphalist Op-Ed piece in today’s Wall Street Journal, R. Emmett Tyrell Jr., founder and editor-in-chief of The American Spectator, gloats about the demise of Liberalism (“Liberalism: An autopsy. The heirs of the New Deal are down to 20% of the electorate.” Dec. 4, 2010)

Tracing the political fortunes of liberals and conservatives, Tyrell borrows a quip:

“Jeane Kirkpatrick, Irving Kristol and, for a time, Daniel Patrick Moynihan, were in Kristol's words liberals "who were mugged by reality." . . .

Talk about being 'mugged by reality' . . . look where that mugging has gotten us under conservative policies during 20 of the last 30 years.

The rich have gotten superrich, the poor have become poorer and the middle classes have marked time, pursuing the American dream by piling up mountains of debt. The 'rising tide' that was supposed to 'lift all boats' has succeeded only in lifting the yachts of the wealthy. The middle classes are bailing out their leaking sloops while the poor are stranded in sinking dinghies.

Does the fact that the U.S. now has the greatest inequality of wealth among major advanced nations register?

Apparently not. Unfazed, Tyrell waxes sentimental:

"During his eight years in office, Reagan changed the political center for years to come. As the Old Cowboy headed back to California, the political center was center-right: vigilance about big government, balanced budgets, low taxes and peace through strength.” . . .

Surely he jests. Reagan and "vigilance about big government and balanced budgets" in the same sentence?" Time for a reality check:

Reagan made big government bigger, he never submitted a balanced budget, and his deficits piled up more government debt than in all the United States' prior history, due precisely to low taxes and the bloated defense budgets underpinning "peace through strength." Bottom line: conservatives' combination of "low taxes" and "strong defense" during the Reagan and Bush II administrations produced huge fiscal deficits to be passed on to future generations. And will they ever be pissed when they find out all those Reaganomics tax cuts were, in fact, future tax increases on them. To add insult to injury, the revenue hole left by the Reagan tax cuts was filled by loans from Asia and OPEC, suddenly prosperous thanks to huge trade surpluses. During Reagan's watch, therefore, the United States swung from being the world's largest creditor to the world's largest debtor nation, undermining America's financial sovereignty. "Other than that, Mrs. Lincoln, how did you enjoy the play?"

The only budget surpluses we've had in 30 years were Clinton's last four years, after he raised taxes early in his presidency, much to the horror of Reagan's supply-siders. But I digress. Tyrell takes a victory lap:

“The rest of Clinton's presidency was defined by his pronouncement that 'The era of big government is over.' The Reagan revolution was secured. In 2000, Clinton's vice president lost to the governor of Texas despite prosperity and peace.” . . . Conservatism has steadily spread through the country since its larval days in the 1950s, and the reason is that the vast majority of Americans favor free enterprise and personal liberty. Note the tea party movement.” . . .

Why all the crowing? Connect the dots: The collapse of the house of cards built with debt during the conservative era created a financial meltdown in the final days of Junior Bush's watch, requiring hundreds of billions of taxpayer dollars in bank bailouts (signed by Bush, lest we forget). The financial meltdown, in turn, created a deep recession causing soaring unemployment, plunging housing and stock prices, skyrocketing bankruptcies and foreclosures.

But, silly me, these are just facts, and in the alternate reality of conservatives facts don't matter. It's the fantasy of "free-enterprise" "personal freedom" that count -- never mind that personal freedoms were trashed by Bush's Patriot Acts, and Bush's version of free enterprise consisted of privatizing bank profits and socializing their losses.

Undeterred, Tyrell really rubs it in:

“Over the past two years the Democrats showed their true colors. Faced with an entitlement crisis, they rang up trillion dollar deficits. We now face an entitlement crisis and a budget crisis—and liberals have no answer for it beyond tax and spend.”

That's rich -- claiming that Obama “ran up trillion-dollar deficits” in response to an “entitlement crisis” when in fact the deficits were incurred to rescue the economy from the financial and economic crises George W. Bush bequeathed us. None of it went to ‘entitlements.’ Au contraire, the Social Security and Medicare trust funds presently generate large surpluses conservatives insist on raiding to pay for their tax cuts and wars. The sudden epiphany about deficits from conservatives who bequeathed us the Panic of 2008 is akin to arsonists setting a building ablaze then deriding the fire department for wasting water.

Conservative policies are gifts that keep on giving: We are up to our eyeballs in pointless, costly, destructive wars in the Middle East that simply breed terrorist hostility toward us and mounting deficits. The wars serve only to fill the coffers of defense contractors whose plush existence depends on sending our young men and women into harm's way in unwinnable "Long Wars," playing into bin Laden's strategy to "spread them thin and bleed them into bankruptcy." "Peace through strength” seems to have morphed into “weakness through war.”

Tyrell's parting shot:

“As a political movement liberalism is dead. They do not have the numbers. They do not have the policies. . . . Liberalism R.I.P.”

Well, if that's true, and conservatives regain full power if 2012, hang on to your hats. If you liked the Panic of 2008, you're gonna love the return to crony capitalism, corporations run wild, widening gap between the rich and the rest, systemic deficits, financial instability, economic calamity and endless war. Reports of the death of liberalism will prove to be 'highly exaggerated' when middle-class conservatives finally wake up to the fact that they are being played for dupes, tricked into voting against their own best interests by the rich and powerful elite selling snake oil in the guise of high-minded principles like "free enterprise," "personal freedom" and "fiscal responsibility" while delivering precisely the opposite.

THE REPUBLICAN MASTER NARRATIVE

2010-12-01T07:32:00.000-08:00

Republican gains in the 2010 election were bolstered significantly by the Republicans' discipline in hewing to the Party Line aka The Master Narrative. The Master Narrative invariably comprises two parts: 1) Homespun populist ‘truths’ calculated to stoke anti-government ire of a beleaguered, right-leaning middle class and inspire chest-thumping patriotism in support of war and 2) Unspoken, generally unrecognized benefits for the ruling class (shown below in parenthesis). To wit:

Government is the problem, not the solution, therefore diminish the role of government (thereby enhancing the power of the rich and powerful masters of the private sector). Variations on this theme include:
Taxes are too high, inhibiting private sector growth, therefore cut taxes (thereby enhancing the fortunes of the rich and powerful elite, who receive the lion’s share of the tax cuts). The corollaries of this theme (for which there is no compelling supporting evidence) are:
The Long War in the Middle East is necessary to fight Islamic terrorism and enhance domestic security (despite all evidence to the contrary), and, therefore must be supported unquestioningly (thereby assuring continued defense contracts, military prominence and promotions, and continuing contributions from defense contractors to politicians who support the war).

In short, the Master Narrative -- diminish government, de-regulate, cut taxes and support war -- is simple, easy to communicate and understand. It comes wrapped in the flag, cloaked in Christian garb, and ornamented with appeals to reflexive American hot buttons: freedom, right to bear arms, and traditional family values. Consequently, the Master Narrative is inordinately powerful, persuading naïve, gullible supporters to vote consistently against their own best interests. The Angry Right can shout out their feel-good ideology until they are blue in the face, but they cannot overcome the rebuttal contained in the dysfunctional outcome produced since the Master Narrative was first instigated by President Reagan.

The experience of the past 3 decades has clearly demonstrated that the Master Narrative:

Serves primarily the interests of the stupendously rich ruling class to the detriment of most of the rest of the population in terms of economic and financial progress, health, education, environment and virtually every other measure of wellbeing you care to examine
Creates massive national debt burdening future generations and compromising U.S. financial independence through increasing dependency on foreign lenders
Produces calamitous financial and economic instability
Engenders dangerous social discord and polarization
Degrades the environment and
Imperils national security and domestic tranquility

Other than that, Mrs. Lincoln, how did you enjoy the play?

The inescapable fact remains that in the long run the Master Narrative is fundamentally flawed and ultimately dysfunctional, as the history of the past 3 decades demonstrates. Returning to the Master Narrative is prescription for disaster. If you liked the Panic of 2008, you’re gonna love a Republican victory in 2012.

MID-TERM ELECTION POST-MORTEM

2010-12-01T07:26:00.000-08:00

Here’s my take on what will happen.

Control of the House and enough votes to filibuster any legislation to death in the Senate effectively gives Republicans the ability to jam a stick in the spokes of the Obama administration’s wheels. As John Stewart pointed out, Republicans were quick to characterize their victories as a “tidal wave” and equally quick to disavow any responsibility such a tidal wave might portend for future legislation. “A tsunami of nothing,” Stewart called it.

From these two postures, the Republican strategy should be perfectly obvious: proposing legislation popular with their base (like repealing Obamacare and Financial Regulation) but with no chance of passage or presidential signature, and kyboshing anything the Obama administration and/or the Democrats might put forward unless the Democrats are willing to give in to major Republican demands. Accordingly, the Republicans will be content to produce legislative gridlock and blame the Obama administration for the consequences of the resulting paralysis or demand and get major concessions in exchange for modest Democrat legislative goals. Either way, Republicans benefit.

We can only hope that the dollar sinks fast enough to spur exports as the new (and only logical) engine of economic and job growth. Much will depend on whether China allows the yuan to appreciate. If exports fail to revive the U.S. economy, the U.S. economy will stagger along with no job growth, creating yet more misplaced anger toward Obama and happiness among Republican contenders for 2012.

The Republicans will trot out their one-note samba: restore the Bush tax cuts for everyone, especially their rich and powerful elite paymasters. If Obama acquiesces, the deficits will soar yet more, heightening the prospects of a hyper-inflationary future and generational warfare.

Frankly, the best thing for Obama and the country would be to hang tough and let all the Bush tax cuts expire for everyone. The fear that a tax increase at this stage would “abort the recovery” is, in my view, overblown, based on a typically shallow understanding of macro economics. While on the one hand, moderately higher tax rates would cut into personal consumption, dampening growth, on the other, it would stimulate economic activity when the government spends it. Narrowing the deficit gap with higher taxes would also promote recovery in housing and bolster economic growth by keeping long-term interest rates low in two ways: 1) By reducing the government’s need to crowd the capital markets to underwrite the deficits that would otherwise result from tax-rate cuts, and 2) By reassuring nervous lenders of the administration’s resolve not to let the deficit spiral into hyper-inflationary territory. Low interest rates offer the additional attraction of further depressing the dollar, aiding U.S. net exports as engine of economic growth. Republicans understand only the part about taxes cutting into personal consumption, and ignore or are oblivious about the rest. They don’t understand that money is just as much removed from the private sector in taxes as it is by government borrowing, so the economic effect of raising tax rates moderately or borrowing should be a wash. The main difference is whether current or future generations will foot the bill for today’s government.

The Republicans will also attempt to disassemble “Obamacare” and financial regulation (under the guise of shrinking an intrusive government and preserving “freedom” and individual choice), to no avail, as I stated previously. But it will give them a platform on which to run in 2012. And if the Democrats are as inept and fearful about selling the benefits of health-insurance and financial reform as they were in 2010, the strategy might well pay off for Republican presidential hopefuls in 2012. If they are then successful in dismantling the Obama health-insurance and financial reforms, we’re in for Bush II redux.

In short, if you liked the Panic of 2008, you’re gonna love a divided Congress now and a Republican administration in 2012.

What this election demonstrated, was that the electorate can be expected to vote their pocketbooks, and do little more than express their present discontent by voting for the opposition, with little regard for or understanding of the consequences of opposition policies.

SAME OLD SAME OLD ON ILLEGAL DRUGS

2010-10-20T05:23:00.000-07:00

Walter Russell Mead writing last week at the American Interest website and excerpted in the Wall Street Journal as “Notable and Quotable”:

There is no commercial product widely consumed in the United States whose production, sale and distribution does more harm than the illegal drug industry. I am not referring to the harm that drug users do to themselves, or even the harm that the drug dependencies that so often grow from the use of illegal drugs do to the family and friends of the drug user.

I am referring to the social devastation that the illegal drug industry does in countries like Colombia, Mexico and Afghanistan. I am talking about the consequences of putting money into the hands of murderers and thugs whose greed and unscrupulous behavior makes your standard multinational oil company look like Mother Theresa. I am talking about the violence and the culture of violence that wreaks such terrible havoc in urban areas all around the world. . . .

And the blood is only part of the cost. The corruption that the illegal drug trade causes erodes the credibility and capability of government in dozens of countries today. . . . Why would any good and decent person want to have anything to do with the world's most horrible industry?

There is probably nothing that the average young person could do that would make a bigger positive difference in the world than to fight the illegal drug industry out of solidarity with the Third World victims of the violence.

MY COMMENT:

Walter Russell Meade’s exhortation to “fight the illegal drug industry” embodies the definition of insanity: repeating the same behavior and expecting a different result. Fighting the illegal drug industry for decades has failed abysmally to stop the illegal drug trade and, by adding a substantial risk premium to the value of illegal drugs, has empowered the drug underworld to escalate the very predations Meade bemoans in Colombia, Mexico and Afghanistan.

If you really want to show “solidarity with the Third World victims” and end drug-related violence, havoc, corruption and social devastation, legalize the damn stuff and be done with it. Restrain abuse the same way we do alcohol, by punishing intoxicated behavior in public and the workplace. Handle the consequences of drug use with education and rehabilitation.

In fairness to Meade, he made the following comment about legalization (duly omitted by the Wall Street Journal, ever eager to promote the corporate interests supplying the law enforcement and penal systems):

"I am not sure what I think about drug legalization. It’s clear that what we are doing now gets us the worst of both worlds: we have high levels of drug use and dependency and the curse of an organized illegal drug industry. It is also clear that draconian drug laws condemn an unconscionable number of young people to long prison terms where in too many cases they are raped and brutalized in ways that cast serious doubt on our society’s commitment to basic legal and moral values. This is wrong, and it needs to change."

OTHER INSIGHTFUL COMMENTS TAKEN FROM MEADE'S BLOG:

(http://blogs.the-american-interest.com/wrm/2010/10/11/the-boycott-we-need/#comments)

Thoughtful, moral people already do boycott illegal drugs and their dealers. It’s not enough, and never will be. The problem is not with the drugs nor the addicts, it’s with the immense amounts of money generated by the illicit drug trade. There is one clear way to get the money out. This is a lesson we have learned before but refuse now to recall. What lesson? Alcohol prohibition managed by repeal of the 17th Amendment. Legalizing, regulating, taxing drugs will not make addiction disappear. But, it will take the profit out of the business and reduce the threat to civil order. (Comment by Bobclyde)

“The free man owns himself. He can damage himself with either eating or drinking; he can ruin himself with gambling. If he does he is certainly a damn fool, and he might possibly be a damned soul; but if he may not, he is not a free man any more than a dog.” – Broadcast talk 6-11-35 G. K. Chesterton (Comment by RKV)

After 4 to 5 decades of “boycotting” certain drugs with legal prohibition, we could reduce the US to a police state and not eradicate the use of these drugs.

We’re already living with the militarization of local police departments, no-knock raids that kill innocents every year, and the state’s seizure of cash and property without being found guilty of any crime.

Prohibition has been so successful, smart well intentioned folks like Mr. Mead are reduced to begging for a boycott. Sad.

It is time to try something else. (Comment by Tim Gee)

Boycott the laws penalizing those who choose their own lives. You are chasing second-order issues. Sure users choose to traffic with the dealer, but it’s John Law who made the sale illegal, thus driving moral nice people from the supply side of the market.

Remember, it’s not ‘legalize it’, it’s RE-legalize it. your great-grandparents got along fine with all those nasty drugs – laudanum (opium), coca-cola (cocaine), marihuana (early spelling) – even alcohol! Are we not men? We need no nanny. (Comment by Bill Johnson)

There is no perfect solution. Stop pretending that there may be one, somewhere, somehow. Human nature makes certain that we will always have problems.

The challenge is not to make them worse than they need to be. The war on drugs makes this problem worse than it needs to be. So does the demonizing of drug users by ordinary people.

Everything we consume is a drug. Our foods, beverages, even the air we breathe — all drugs. Everything that grows in the earth or seas has evolved to produce drugs of one type or another, including micro-organisms.

Time for humans to grow up. (Comment by Alice Finkel)

Democrats: Sell the accomplishments of the Stimulus Program

2010-09-06T16:33:00.000-07:00

Republicans have been characteristically successful in framing the Stimulus negatively as a waste of money inflating the deficit with nothing to show for it, because in their frame the only criterion of success is a significant reduction in the unemployment rate.

Democrats need to come out swinging and sell the Stimulus' contributions to the betterment of life for Americans.

Consider the following article from Time Magazine: How the Stimulus is Changing America.
Among the accomplishments:

More than 100,000 projects to upgrade roads, subways, schools, airports, military bases and more
$90 billion into clean energy, including a smart grid, energy efficiency, electric cars, renewable power, cleaner coal, advanced biofuels and factories to manufacture green stuff in the U.S.
$11 billion for a smart grid to distribute renewable power
Triple the number of smart electric meters
Financed three of the world's first electric-car plants
30 new U.S. factories to build advanced batteries for electric vehicles
Boost the number of U.S. batter-charging stations by 3,200 percent
Expansion funding for scores of manufacturers of wind and solar electricity-generating facilities
Finance far-out energy research
Tenfold increase in funding to expand access to broadband
$8 billion for high-speed passenger rail
$4.3 billiion in Race to the Top grants to promote accountability in public schools
$20 billion to computerize health records
Millions of jobs saved and created that would otherwise have dragged us into another Great Depression
Rebates for weatherizing 250,000 homes and countless energy-efficient appliances
Financing for super-efficient lighting, windows and machinery
Retrofitting 3 in 4 federal buildings for energy efficiency. (Government is the nation's largest energy consumer.)

The Recovery Act's Four Investment Goals

Lower solar power's cost 50% by 2015, to put it on par with the retail cost of power from the existing grid
Cut the cost of batteries for electric vehicles 50% by 2013 and eventually reduce the sticker price of an electric car to match that of its gasoline-powered counterpart
Double the U.S.'s renewable-energy-generation capacity (wind, solar and geothermal) as well as its renewable-manufacturing capacity, by 2012
Lower the cost of sequencing an individual human genome to $1,000, enabling scientists to map 50 genomes for the same price as mapping just one today

Democrats need to make videos of these accomplishments and flood the Internet, TV, town meetings, campaign literature, etc. with them.

In short, they need to reframe the Stimulus away from the Republicans’ self-serving and single-minded focus on jobs (which, ironically, they caused to be lost), and toward the very real accomplishments, advantages and benefits provided by the Stimulus.

RAHN REFUTED

2010-08-17T19:32:00.000-07:00

I hardly know how to begin expressing my astonishment at The Washington Times’ publication on August 9, 2010 of the ludicrous The Cato article by Richard W. Rahn: “An Inconvenient Economic History.” One is hard pressed to say whether it is ignorance or deception driving this laughable bit of propaganda masquerading as economics. To take this piece seriously is to abandon whatever claim economics has to science.

Reading the piece I am reminded of the story about a guy who comes upon another fellow in the middle of the night crawling on all fours under a street lamp.
“What are you doing?” the guy asks.
“Looking for my keys” comes the reply.
“Where did you lose them?”
“Over there,” says the man, pointing halfway down the block.
“Then why are you looking here?”
“The light’s better.”

The central premise of Rahn’s piece is that “there is no historical evidence to show that big increases in government spending as a percentage of GDP leads to faster economic growth and more job creation.” Even Paul Krugman can’t find any, Rahn says, because “there isn’t any.”

Oh? How’s this for “Historical Evidence”?

The graph above shows Federal government current expenditures and real GDP plotted on semi-logarithmic scale from 1929 to the present, as supplied by the Federal Reserve Bank of St. Louis. We use semi-log vertical axis so that the slopes of the data in different timeframes can be legitimately compared.

What do the data show?

1. (On the graph) Nowhere in the relatively benign period between 1983 to 2010 chosen by Rahn to make his case do you find evidence of “big increases in government spending” because Hayek, not Keynes was in vogue (at least until the economy cratered in 2008). Government spending was not then used as a tool to manipulate economic growth nor was there a need for it until recently. Tax cuts, deregulation and monetary policy were the chosen tools to stimulate economic and job growth. So in using the 1983-2010 interval to make his case, it’s not surprising that Rahn should find no evidence that “big increases in governments spending leads to faster growth and more jobs.” If you look for it where it ain’t, you’re sure not to find it. He’s basically looking for keys under the street lamp.

2. (On the graph) Where “the keys were lost” and, therefore, where we ought to look, is during the Great Depression of the 1930s and the war years in the early 1940s – essentially the Roosevelt years -- when “big increases in government spending” were the primary means employed to revive the severely depressed economy. Keynes, not Hayek, was then the man. Unlike Rahn’s relatively unperturbed 1983-2010 interval, the 1930s and 1940s show not only significant variability in both government spending and GDP (essential in establishing meaningful correlation), but also an undeniable positive correlation between the two – something Rahn does not want to acknowledge because it totally refutes his thesis.

How does Rahn get around the real “inconvenient historical evidence” from the Roosevelt era? Rahn dismisses the data from the 1930s and 1940s with a howler of a non sequitur, in parenthesis, no less: (“The big spending by Presidents Hoover and Franklin D. Roosevelt just prolonged the Great Depression.”) He implies the prolonged lack of “prosperity” (i.e. the high unemployment) during the Great Depression somehow nullifies data from that period. Say what??

Nonsense. There can be significant increases in GDP and jobs without producing full-employment prosperity for a long time if you start, as FDR did, from a deep enough trough of depression. Rahn wants us to look under the street light rather than where the keys are. Among magicians, this tactic is known as “misdirection.”

What do the data show about the co-variance (synchronous movement) between government spending and GDP growth during the 1930s and 1940s? Were “big increases in government spending” followed by corresponding increases in GDP and jobs? Yes! And were cutbacks in government spending followed by dips in GDP and jobs? Yes! Look at the graph.

In short, the data from the 1930s and 1940s Rahn is so eager for us not to examine, flatly refute his basic contention that “there is no historical evidence to show that big increases in government spending . . . leads to faster economic growth and more job creation.” You don’t even need to digest the numbers: the correlation between government spending and economic growth is obvious just by looking at the graph.

For those fond of numbers, here’s the bottom line: During the Roosevelt years between the trough of the recession in early 1933 and the peak of the wartime boom in early 1945, government spending skyrocketed from $3.4 billion to $70 billion, a compound annual rate of 28.7%. During the same period, real GDP nearly tripled, expanding at a 9% compound annual rate, much faster than anything we’ve experienced in the post-war era. From a peak of 25%, unemployment virtually disappeared as 14 million jobs were created, boosting employment 36% from 38.8 million to 52.8 million.

The data from Roosevelt’s period are so overwhelmingly persuasive and Rahn’s logic for excluding them so transparently false, we must conclude deception rather than ignorance motivates this intellectually bankrupt exercise in right-wing propaganda.

And here’s a caboose to the numbers from the Roosevelt years Rahn and his supply-side sidekicks don’t want you to know: The unprecedented growth produced during Roosevelt’s tenure in office was accompanied by a boost in the top tax rate from 63% to 94% and the income level to which the top bracket applied was cut from $1 million to $200,000 during the war years. According to supply-side dogma, that’s not supposed to happen.

But that’s another story.

What Would Voltaire Do?

2010-08-17T18:35:00.000-07:00

CNN's Ed Hornick's August 17, 2010 piece "Critics say Obama's message becoming 'incoherent'" states:

"Obama has faced a torrent of criticism for what was called mixed messages on the controversial plan. On Friday, Obama said Muslims 'have the same right to practice their religion as anyone else in this country ... That includes the right to build a place of worship and a community center on private property in Lower Manhattan, in accordance with local laws and ordinances.'"
"The following day, Obama told Ed Henry, CNN's senior White House correspondent, that he was "not commenting on the wisdom" of the project, just the broader principle that the government should treat "everyone equal, regardless" of religion."

"The danger here is an incoherent presidency," said David Morey, vice chairman of the Core Strategy Group, who provided communications advice to Obama's 2008 campaign.

This criticism is total blather -- a tempest in a teacup whipped up by the Tea Party-ers.

One can say with complete, coherent logic, that one supports the Muslims’ first amendment right to build the mosque while at the same time opining that they would be ill advised to do so (or withholding opinion as Obama did). Think Voltaire: “I disapprove of what you say, but I will defend to the death your right to say it.”

As long as opposition is expressed through suasion and not state coercion, both the freedom of religion and speech provisions of the first amendment will be preserved.

McChrystal the New MacArthur?

2010-06-22T20:07:00.000-07:00

On the subject of General McChrystal’s summons to the carpet of the Oval Office:

The general and his staff surely must have known their unguarded, derogatory comments about senior members of the administration made to a free-lancer writing for Rolling Stone would create a firestorm. The question, then, is why did they do it?

The only answer I could come up with was that McChrystal is bucking for the Republican presidential nomination in 2012, in much the same way as Douglas MacArthur did (unsuccessfully) when he took on Harry Truman. Getting fired by Obama would be seen by Republican war-hawks as a Red Badge of Courage at a time when Obama will probably decide to withdraw from the Middle East. A distinguished military commander would be the logical political antithesis to an incumbent tarred by Republicans as ‘an appeaser’ or worse for having ‘lost the war’ in Afghanistan.

The timing is right. If Obama fires him, McChrystal would have two years to travel around the country speechifying and building a constituency among Republican donors.

He would also steal the march on his boss, Gen. Petraeus, whose name is being bandied about as a presidential contender .

THE 'SUPPLY-SIDE' MYTH LIVES ON

2010-04-12T10:14:00.000-07:00

The Wall Street Journal will publish anything with a tax-cut angle, no matter how preposterous. See, for example "Did FDR End the Depression? The economy took off after the post-war Congress cut taxes." (WSJ Editorial, April 12, 2010) Mr. Folsom's piece is riddled with factual errors and spurious conclusions.

For example, unemployment in 1939 was nowhere near 20%, as Folsom alleges in his attempt to discredit the New Deal, but rather closer to 10% according to The Historical Statistics of the United States. (Some data sources exclude "emergency employment" in government projects to arrive at an unemployment figure around 15%. Yet those who were employed by the government during the Depression had jobs just as surely as those working for defense contractors today.) So yes, the new Deal had an enormous positive impact on employment and economic growth. And so did the war.

Folsom states: "Ten million to 12 million soldiers and another 10 million to 15 million people making tanks, bullets and war materiel do not a lasting recovery make. The country essentially traded temporary jobs for a skyrocketing national debt. Many of those jobs had little or no value after the war."

What rot. Soldiers overseas and workers making war materiel make for a successful war; nobody argues otherwise. However, in the process, the industrial capacity of the country was vastly expanded, so while the wartime jobs may have little or no value after the war, the industrial infrastructure created during the war became the foundation for the post-war economic boom. Defense contractors shifted from making tanks and bullets to making cars and a vast array of consumer goods. Couple that with the huge accumulation of forced household savings during the war and you get ideal conditions -- productive capacity matched with effective demand -- for the boom after the war. To suggest that the relatively minuscule tax cuts were responsible for the boom is like the rooster taking credit for the dawn. It's the classic post hoc ergo propter hoc fallacy.

The myth of "supply-side economics' lives on -- only in the minds of its deluded proponents.

If tax cuts were the one-stop solution for all our economic woes, why then was economic growth slower during the Reagan and Junior Bush administrations, when tax rates were cut, compared to the faster growth during the Clinton administration, when tax rates were raised?

Krugman Draws Wrong Lesson From History

2010-04-09T10:18:00.000-07:00

Paul Krugman, like many others, cites the U.S. experience after WW II as illustrative of how proportionately large amounts of government debt can be reduced as a percentage of GDP without major trauma (Click here to view "Learning from Greece" NY Times April 8, 2010).

For example, in 1946, the United States, having just emerged from World War II, had federal debt equal to 122 percent of G.D.P. Yet investors were relaxed, and rightly so: Over the next decade the ratio of U.S. debt to G.D.P. was cut nearly in half, easing any concerns people might have had about our ability to pay what we owed. And debt as a percentage of G.D.P. continued to fall in the decades that followed, hitting a low of 33 percent in 1981.

Drawing comfort from this analogy, I contend, is misleading.

What the gross numbers fail to reveal is the distribution of ownership U.S. government debt in the post-war period. Because consumer spending was rationed during the war, and Armed Forces personnel didn’t have much opportunity or need to spend their pay, American households had little alternative but to buy war bonds. Wealthy individuals, subject to confiscatory wartime taxes in excess of 90% were constrained from accumulating disproportionate amounts of government debt. Foreigners in those days were net borrowers due to the need to underwrite their costs of the war, leaving America in the enviable position of net creditor. Therefore, war’s end found the average American household with large savings, little debt, and huge pent-up demand.

Accordingly, American industrial capacity was reorganized to produce consumer goods to meet a broad-based consumer spending spree funded by widely held government bonds. Every sector benefited: households stocked up on previously rationed consumer goods; industry kept busy supplying those needs and employing the returning vets; government serviced the debt with taxes on the incomes thus generated. The widespread fear of a post-war return of the Great Depression quickly evaporated and the U.S. economy doubled in size in the course of a decade, as Krugman states.

The situation today is much different. While the ratio of government debt to GDP is much lower today compared to the post-war period, ownership of that debt is wildly skewed in favor of the wealthy and of foreigners, thanks to the upward-redistribution of wealth commencing with Reagan and the accumulation of vast surpluses by foreigners with deliberately undervalued currencies. The average American household has scant savings (and even scanter government bonds) and a much larger debt load thanks to the ubiquity of mortgages and credit cards.

Consequently, the post-war dynamic of a consumer-driven economic boom does not exist in the U.S. presently. With over-leveraged households intent on trimming spending, increasing savings and paying down debt, domestic consumer spending cannot be counted on as the engine of economic growth. Consumer spending by the wealthy — even with their tendency toward conspicuous consumption — isn’t enough to drive the economy. The absence of robust consumer demand dampens the need for business investment to serve domestic needs, so we can’t look to domestic business investment as an economic driver. The wealthy, who hold the bulk of government debt not owned by foreigners have little alternative (in the absence of a vigorous business investment sector) but to leave their savings idle in government obligations earning less than 1 percent on the short end of the yield curve, and around 4%-4.5% at the long end. From a strictly domestic standpoint, therefore, we lack the broad-based distribution of savings we had after WW II, needed to gin up the economy with robust domestic consumer spending fueling vigorous business investment and employment growth. Accordingly, expectations of lowering government debt as a percentage of GDP through robust domestically driven growth, as in the post-war period, are misguided.

The best hope for a sustained, robust economic recovery lies with foreigners, who are the modern-day equivalent of post-war American households in that they hold vast amounts of savings in the form of U.S. government (and corporate) debt and have pent-up demand for American exports. All foreigners need to unleash a spending spree on American exports is the inducement of lower prices to be achieved by further devaluation of the dollar. Such devaluation can be expected to occur over time through the interaction of supply and demand in the marketplace. The vast supply of dollars in the hands of foreigners, combined with their need to repatriate chunks of their surpluses to sustain their own economies, should bring about a resumption of the dollar devaluation commenced in 2002, once international investors stop taking refuge in the dollar as a ‘safe haven.’ The obvious sticking point in the process is China, which has pegged its currency to the dollar since mid-2008 in hopes of sustaining their export sector. However, there are rumblings of a sea change in China’s foreign exchange policy, which should break the logjam, helping the U.S. export sector to become the driving force for the U.S. economy.

Unless or until that happens, the growing accumulation of debt by the U.S. government poses a serious risk of runaway inflation, if the debt is monetized, or depression/deflation if it is not. Even with a robust U.S. export sector, there is no guarantee that we will avoid these risks if the government continues to overspend and under-tax.

GOD TRULY HAS AN IRONIC SENSE OF HUMOR

2010-03-29T08:28:00.000-07:00

A spot-on piece --”The Rage is Not About Health Care” -- from Frank Rich in this morning’s NY Times tells it like it is:

http://www.nytimes.com/2010/03/28/opinion/28rich.html?src=me&ref=homepage

Basically “the rage” is about once-dominant whites — males particularly -- resenting their loss of unchallenged position, preeminence and power.

Some highlights:

The conjunction of a black president and a female speaker of the House — topped off by a wise Latina on the Supreme Court and a powerful gay Congressional committee chairman — would sow fears of disenfranchisement among a dwindling and threatened minority in the country no matter what policies were in play. It’s not happenstance that Frank, Lewis and Cleaver — none of them major Democratic players in the health care push — received a major share of last weekend’s abuse. When you hear demonstrators chant the slogan “Take our country back!,” these are the people they want to take the country back from.

No Republican or conservative leader of stature has taken on Palin, Perry, Boehner or any of the others who have been stoking these fires for a good 17 months now. Last week McCain even endorsed Palin’s “reload” rhetoric.

Are these politicians so frightened of offending anyone in the Tea Party-Glenn Beck base that they would rather fall silent than call out its extremist elements and their enablers? Seemingly so, and if G.O.P. leaders of all stripes, from Romney to Mitch McConnell to Olympia Snowe to Lindsey Graham, are afraid of these forces, that’s the strongest possible indicator that the rest of us have reason to fear them too.

All of which brings to mind the warning attributed to Edmund Burke: “All that is needed for the forces of evil to succeed is for enough good men to remain silent.”

Rich makes a chilling analogy:

How curious that a mob fond of likening President Obama to Hitler knows so little about history that it doesn’t recognize its own small-scale mimicry of Kristallnacht. The weapon of choice for vigilante violence at Congressional offices has been a brick hurled through a window. So far.

To which I would add:

The scary part is that, like the Nazis in Germany (which level-headed Germans regarded as an embarrassing fringe group in the 1920s), the Angry Right in the U.S. may someday acquire mainstream political legitimacy and power through demagoguery, violence and intimidation. This possibility is heightened by economic hard times, which, as in Weimar Germany, brings demagogues and rowdies out of the woodwork.

To those who say: “It can’t happen here” consider this: High culture, education, sophistication and wealth provide no antidotes for collective insanity within advanced civilizations. Germans were not unreasoning, primitive barbarians, but rather exemplars of the heights to which human culture and intelligence could aspire. Germany prior to the World Wars stood at the apex of civilization: a formidable industrial economic power; a paragon of culture, literature, philosophy, history, archaeology, music, art, architecture, science, engineering; a people of refined manners, delicate sensibilities, passion for order and irrepressible energy, imbued with the high moral principles of the Protestant Reformation.

At present, Sarah Palin is the closest thing to the Angry Right’s charismatic, national leader. Who’da thunk the next incarnation of Hitler would be a sexy hockey mom? Well, who’da thunk the supreme Führer of Germany would be a Bavarian corporal? Such are the foibles of democracy.

God truly has an ironic sense of humor.

LEGALIZE NARCOTICS

2010-03-21T14:43:00.000-07:00

In order “not to trample the livelihoods of those we are trying to win over” the U.S. military “no longer eradicates” opium-producing poppies in Afghanistan, according to the N.Y. Times. In effect, then, the U.S. government is safeguarding the supply of opiates for American narcotics users (at least until it reaches U.S. shores) and underwriting a significant portion of the expenses — guns, ammo, victuals, soldiers’ pay -- of its adversaries in the field, the Taliban.

Am I crazy or is the U.S. government sipping tea with the Mad Hatter?

If we’re willing to go this far in compromising our prohibitionist principles to the detriment of our national interests, why not go all the way and legalize narcotics? In one fell swoop, such a policy would:

Undercut funding for the Taliban, reducing the enemy’s will and ability to fight
Undercut financing for organized crime around the world, reducing drug-related violence and corruption
Reduce the costs and overcrowding of the penal system and discourage the manufacture of criminals from the pool of incarcerated drug offenders
Unclog the legal system
Free up law enforcement resources to fight non-drug-related crime
Redirect funds from enforcement to education and rehabilitation, dampening the abuse of narcotics
Provide a new source of taxes
Provide a new source of employment (taxes, employment and the reduction of crime were the main reasons cited by the Roosevelt administration in repealing Prohibition).
Control the purity and dosage of drugs for those who choose to use them, reducing the incidence of death from impurities and overdosing
Reduce antagonism, mistrust and violence between the government and the people

By allowing employers and schools the right to maintain drug-free workplaces/study places (with corresponding rights to test, fire and expel), an enlightened drug policy would help keep a lid on the use of drugs. This would be similar to the banning of alcohol in schools and proscriptions against the abuse of alcohol in the workplace, making drug control a local, private, personal matter, rather than an impersonal, national or state government responsibility backed up by the use of deadly force and incarceration.
As for the Afghan farmers, they would have no incentive to grow poppies, and instead would be forced to produce food to the benefit of the country. If the need was seen to subsidize their livelihood in order to maintain their loyalty to the central government, this could be accomplished by building schools, health clinics and infrastructure.

"THIS IS THE DIRECTION WE ARE TAKING WITH GREECE"

2010-03-15T16:01:00.000-07:00

The Bloomberg photographer said it all when capturing the ambiguous body language of Christine Lagard, French finance minister in heated debate with her EU colleagues over what to do about Greece's precarious finances.

Caption it: "This is the direction we are taking with Greece."

"We Didn't Start the Fire"

2010-02-05T19:45:00.000-08:00

Republicans are like arsonists who set a building ablaze and then complain about the fire department wasting water.

"VOODOO ECONOMICS" STILL CASTS ITS SPELL

2010-02-03T04:56:00.000-08:00

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

SENATE 60-VOTE RULE UNCONSTITUTIONAL?

2010-01-19T10:07:00.000-08:00

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).

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.

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.

I am confident the founding fathers never intended that 10% of the population should have veto power over all legislation.

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.

REPUBLICANS MISINTERPRETING POLLS ON HEALTH CARE BILL

2009-12-29T14:32:00.000-08:00

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?"

HOPE FADES

2009-11-26T09:46:00.000-08:00

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.

DONE IN BY DIVERSITY: THROWING ANN COULTER UNDER THE BUS, GOING FORWARD

2009-11-23T20:06:00.000-08:00

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.

[1] “AT THE END OF THE DAY, DIVERSITY JUMPED THE SHARK, HORRIFFICALLY” November 19, 2009

Open Letter to President Barack Obama

2009-11-02T01:30:00.000-08:00

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:

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.

Behind the Nobel Peace Prize for President Obama

2009-10-22T00:39:00.000-07:00

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.

Irving Kristol, the man who put the con into conservatism

2009-09-20T05:01:00.000-07:00

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:

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?

Too bad all that prescience is for naught. Regrettably, the binnacle housing Kristol’s compass lacks the corrective magnets needed to make it point to true north. It would be more accurate to say Kristol put the con in conservatism.

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.

Europe Backing Out of Afghanistan

2009-09-07T00:34:00.000-07:00

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

KRUGMAN ON HEALTH CARE: "Missing the turn"

2009-08-24T08:25:00.000-07:00

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.

"WE VALUE YOUR PRIVACY" Famous last words

2009-08-21T13:40:00.000-07:00

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

HEALTH CARE: Pulling the Plug on Grandma

2009-08-18T13:50:00.000-07:00

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

2009-08-18T12:54:00.000-07:00

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.

For all the money the U.S. spends on healthcare, it only manages to rank 37^th in the world (between Costa Rica and Slovenia) in overall performance, and 72nd by overall level of health (among 191 member nations included in the WHO study). France spends 11.2% of GDP on health care, far less than the 15.2% spent in the U.S.. Yet Frenchmen live on average two years longer than American men do, and Frenchwomen live four years longer. The adult mortality rate in 2006 (probability of dying between 15 to 60 years) was 9.1% in France, 10.9% in the U.S. in 2006, a difference of nearly 20%. The infant mortality rate in France is 43 percent lower than in the United States, which has the highest rate of all developed countries. The U.S. has 26 physicians for every 10,000 people, France has 34, proportionately 30% more.

I’m willing to bet that if the same end-result comparisons were made between the French population, all of whom are covered by national health service, and the segment of the U.S. population covered by adequate health insurance, the results would be much closer. Whether the U.S. would come out ahead is still unlikely, given the French system's greater emphasis on preventive care and the largely unproductive allocation of 31% of U.S. health care expenditures to administrative costs (compared to about 3% for Medicare). I understand that within the U.S. health care system there are more workers providing administrative services than are providing health care. (Does anyone have the statistics on this?) The main function of administrators in private insurance companies seems oriented toward boosting the company’s bottom line through policies calculated to “delay, deny and deceive.” If profit and, not incidentally, outsized compensation of top insurance company executives, are the organization’s driving motivations, then these objectives are most readily achieved by maximizing the price of coverage and minimizing the claims paid. Hmm. What's wrong with this picture? Check out http://www.brasschecktv.com/page/321.html for a sobering assessment of the U.S. health-care insurance industry.

The major difference between the French and the U.S. health care systems, of course, is that the French provide universal, government-run (horrors ‘socialized’) health care whereas the U.S. offers government paid care only to individuals over the age of 65 or disabled through Medicare, to qualified military veterans through the Veterans Administration, to Native Americans from recognized tribes through the Indian Health Services, and to indigents through Medicaid and companion state programs. In France, the national healthcare system accounts for 80% of total health care expenditures, with the remaining 20% expended on private medical services. Health care paid for by the government in the U.S. accounts for nearly half the country’s medical expenses covering 83 million individuals, 27.8% of the population, in 2007, mostly about equally divided between Medicare and Medicaid, according to the Census Bureau (http://www.census.gov/hhes/www/hlthins/hlthin07/hlth07asc.html). Medicare and Medicaid are “single payer” (the Government) and not “socialized medicine” inasmuch as the care providers are private, rather than government employees, as in France.

The remaining 72.2% of the American population is left to fend for itself, including 202 million covered by private health insurance and about 47-50 million uninsured, roughly one in five of those not covered by the government.

With Americans always ready to adopt “best industry practices” in order to maintain their competitiveness, why don’t they do so in health care and borrow from the French?

"Jesus Wants Health Care"

2009-08-15T19:39:00.000-07:00

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:

”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.

CASH-FOR-CLUNKERS: COUNTERPRODUCTIVE

2009-08-05T10:14:00.000-07:00

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.

The Unrepentant Boomer's Last Stand

2009-08-01T00:18:00.000-07:00

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.”

It's Exports, Stupid!

2009-07-11T07:02:00.000-07:00

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.