On the Contrary

Sometimes I watch the news and then I just have to turn it off.  I walk outside and into a world far removed from Washington, partisan politics, and strife in general.  I live on about 22 acres in the Sierra Nevada forest, three of which has been cleared and I have planted grapes.  The view from my patio is spectacular as I sit on the top of a hill and overlook most of the valley.  It is deadly quiet up here so you can, in fact, hear yourself think.  And that is my saving grace.  I like to think it gives me perspective on much of the political dialogue taking place.  Instead of getting caught up in it, I can remove myself from it and really think about it.  It is funny, but when you are removed from the constant bickering and strife, things can become fairly simple and clear.

So without any further long-winded pontification on my brilliance, here are what I think are no-duh revelations about current events:

• The Gates affair is much a do about nothing except that people do and say stupid things sometimes when we let our emotions get the best of us.  I am sure the officer involved probably wishes that he could have defused the situation better and I am sure the Professor wishes he wouldn’t have over reacted to the situation.  But we are colored by our backgrounds and we are human and sometimes we don’t do the smart thing.  I bet the President wishes he hadn’t characterize a situation he knew little about.  But he is human too and his own experiences colored his view.  Maybe we can all learn something here instead of trying to turn this into some major racial incident.  Maybe we all just need to take a breath.

• We are going nowhere with health care.  The Senate is full of old, fat, white men who simply are out of touch.  The health care issue is relatively simple, unlike what you hear from these dinosaurs.  The present system is unsustainable and for profit medicine has no workable model in the world.  The profit motive is simply unsuited for providing medical care.  Insurance companies make money by not providing care.  It is as simple as that.  They do it by denying claims or enrolling only healthy people.   See Paul Krugman’s blog for a more in depth analysis.  The only thing that is going to work is a single payer system that WE ALL PAY FOR and endowing that system with the incentives to minimize costs, not pile them on with fee for procedures plans.   And yes there will be rationing.  You can’t have everything and I hate to break to you, but it already exists.  But the reality is that they will pass something token and the truth of the above analysis will finally dawn on the rest of you when the system finally collapses.

• In Afghanistan, we have good intentions, but it is time for the Muslim world to save themselves.  There is no doubt in my mind that we are helping many people, especially women from being victim to 5th century thought.  But the investment necessary to really make a difference would be better spent on our own disasters at home.  Bringing a tribal society into the 20th century is a noble undertaking, but so is providing health care for all our citizens.  My own view is that the Muslim religion and its adherents, except for a very few, live in a world that demeans women and is designed to maintain the status quo of male superiority.  Yeah, Yeah, I know.  You can find verses in the Koran that show women to be equal.  The Koran is much like the Bible in that you can pretty much find whatever you need to justify anything.  The reality is that until they modernize themselves and fight their own battles, we are tilting at windmills.  Governments run by the Taliban have repeatedly failed and are extremely unpopular.  If they harbor Al Qaeda we can do what we did before and set free a few cruise missiles.  Fly away little missiles, fly away.  It is time to take care of our own problems.

• Sadly the economy is not getting better because we have not done anything about the structural problems that are the root of our problem.  Surges in the market are simply a reflection of people wanting to get back to business as usual.  But what was driving our economy before was bundling and selling debt.  Much of that debt is still out there and you have to keep asking yourself, what are we going to bundle and sell to the rest of the world now?  Until that question is answered and we start down that road, what will happen is that the incentives that led to the greed and excessive profit taking are still in place and we will simply repeat our blunders, only bigger.  The issue in this country is unemployment and when we figure how to gainfully employ our nation, all the rest will fall into place.  Green energy anybody?

• Sarah Palin and other like-minded Republicans are intellectually bereft.   Even if you hate “govment”, you have to ask yourself when they babble their fear the government, market place will solve all pabulum, okay, but what is your plan and how will that help?  Even on health care, the Republicans have presented no alternative plan on an obviously failed system and on the economy, they have offered to do nothing as the way forward.  Many Republicans view the Bush Administration as an aberration from Republican governance.  It was anything but.  I look on the Republicans much like I do the Taliban.  Put them back in power and that will be their final undoing.

• Finally compromise among the Democrats on a way forward may be worse than doing nothing.  If by compromise, and I hold as evidence the economic stimulus plan, they mean producing a plan that is so watered down as to be ineffective, they are putting the nails in their own coffin.  It would seem that they have no confidence in their progressive agenda and are doing everything to thwart it.

Okay I will now turn the TV back on and wonder why they can’t see these obvious truths.  I think I am destined to take these ‘truths’ to my grave.

Paul O’Neil, then Secretary of State for George Bush, has told us that when he warned the Bush administration of a looming economic crisis in 2002, Dick Cheney replied, “Ronald Reagan proved that budget deficits don’t matter.” During the Carter years, the federal deficit had averaged $54.5 billion annually.  During the Reagan era, deficits skyrocketed, averaging $210.6 billion over the course of Reagan’s two terms in office.  Overall federal spending nearly doubled, from $590.9 billion in 1980 to $1.14 trillion in 1989. In those eight years, the United States moved from being the world’s largest international creditor to the largest debtor nation.  (Washington Post)

Right now we are in a real economic crisis and we have already authorized over $1 trillion in bailouts ($700 million for the banking crisis, and over $300 million for AIG). What many of us are calling for is a massive investment in infrastructure, alternate energy, R&D, and support of state programs to kick start our economy and get us back on track.  So if we are in such massive debt where is this money going to come from?  The answer is that we are going to borrow it.  Right now, deficits don’t matter.

Now there are a couple of reasons for this.  First it is one thing to create massive deficits so that you can cut taxes while partaking in frivolous foreign adventures, i.e. the Dick Cheney approach.  It is totally another thing to create a large deficit to invest in your future.  One is a free ride that will someday have to be paid for and the other is an investment in our future that should pay the dividends to pay for this investment.  Maybe this example will help.  Some students, especially doctors take out six figure loans to get through school.  For most of them it is a good investment, because in the future their income will allow them to easily pay off that loan and it will secure their future.  As James K. Galbraith, the economist professor at the LBJ School of Public Affairs at The University of Texas, stated in his interview with Bill Moyers last week:

“One of two things can happen. The government can take action and help stabilize the economy in which case we will have more spending but also more employment.  Or the government cannot take action and let the economy collapse in which case we will have much less tax revenue. The deficit is going to be larger either way. There is no way of avoiding that. The only question is do you work to have a good economy or do you accept a terrible economy?”

The second point is that the deficit, although larger than it was in the Bush or Clinton years, is not significantly growing as a percentage of GDP (Gross Domestic Product).  That is kind of like saying when you buy a home if your monthly payment is below a certain percentage of your monthly income, the bank figures you can afford the loan (these were the rules they blew off to create the current housing crunch).  Or as Professor Galbraith pointed out:

“Well, the deficit isn’t beyond sight. The deficits in the Bush administration in relation to the size of the economy were never all that large. They were certainly larger than they were under Clinton, but that was in part necessary because of the changed economic situation, the collapse of the dot-com bubble in 2000.”

And where are going to get that money?  It turns out that the dollar is remaining the anchor currency of the world economy; right now the euro is falling rapidly as the dollar rises.  Again as Professor Galbraith points out:

“Uncle Sam’s credit is excellent. Uncle Sam can borrow short term for practically nothing these days. Everybody wants to have Treasury Bills and bonds because they’re safe. Uncle Sam can borrow for 20 years at 4.3%. That’s the same rate that the United States could borrow at for 20 years in the last month of the Eisenhower administration. So from our point of view, we’re actually well placed, I mean, as the government of the United States is well placed to take the lead in pulling the country and the world out of this crisis.”

The biggest problem is going to have the political courage to stand up and convince America that the way out of our crisis is in the short term to increase the deficit.  Note that in all the debates the moderators all tried to push the question, what are you going to cut so you can afford your spending program.  The right answer is only those programs that do not work or are wasteful but we are not going to worry about the deficit right now.  If either candidate had said that, although exactly what we need to do, there would have been a media circus and attacks from the other side.  I am not the only one who thinks this way. Martin Wolf, the widely read columnist for the “Financial Times,” and the author of a new book, “Fixing Global Finance,” said (Fareed Zakaria GPS):

“ I do actually think that, though governments are heavily indebted, we are going to spend ourselves out of the recession. We’re going to have fiscal deficits in the Western world as a whole, which are going to be, as it were, unimaginable for some years. And the markets will swallow it, because they’ve got no other assets to buy now which they trust.”

It is going to be an uphill battle convincing our citizens and getting Republicans who have been nothing but obstructionist for the last 2 years, to understand this new dynamic and go along with it.  Hopefully Barack understands this and the voters will neuter the Republicans.

“If the Democrats get elected their tax and spend ways will destroy our economy.”  How many times have you heard that?  It is the Republican conventional wisdom that conservative politics are more suited to helping our economy.  “Cutting taxes simulates the economy and the lower the taxes on business, the better our economy hums.”  Of course if you are at all tuned into reality and accept that they have had their way for eight years (twelve in Congress and eight in the White House) you might be questioning those assumption looking at where our economy is today.  But reality doesn’t faze most of these folks so I want to throw something at them and see if they can grasp it.

If low taxes helps business by simulating investment and growth, what does it tell you that two thirds of large business (both domestic and foreign) in the United States pay no taxes at all?  CNN reported that:

“The Government Accountability Office (GAO) examined samples of corporate tax returns filed between 1998 and 2005. In that time period, an annual average of 1.3 million U.S. companies and 39,000 foreign companies doing business in the United States paid no income taxes – despite having a combined $2.5 trillion in revenue.

The study showed that 28% of foreign companies and 25% of U.S. corporations with more than $250 million in assets or $50 million in sales paid no federal income taxes in 2005. Those companies totaled a combined $372 billion in sales for the largest foreign companies and $1.1 trillion in revenue for the biggest U.S. companies.”

So how could taxes get any lower for them?  Do we start paying them out of the treasury to do business here?  That’s called subsidies and if you look at the oil and gas business, we do it all the time.

But here is the clincher:  In an article in the New York Times Business Section entitled, “Is History Siding with Obama’s Economic Plan”, the author of the article, Alan S. Blinder, a professor of economics and public affairs at Princeton and former vice chairman of the Federal Reserve, cites two economic facts “in a brilliantly delineated”  new book, “Unequal Democracy,” by Larry M. Bartels, a professor of political science at Princeton.  These facts when looking at the period from 1948 to 2007 during which Republicans occupied the White House for 34 years and Democrats for 26 show:

➢    First, average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats.  Said another way, the GNP grew at almost twice the rate under Democrats as Republicans

➢    Second, over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all

Said simply, the numbers show that our economy and the welfare of our people have been better served under Democratic administrations than Republican ones.  What Republican administrations have done is continue to widen the income gap between rich and poor, but when you look at the very rich, it also accelerated their accumulation of wealth while retarding the economic growth of those not so fortunate.  One possible explanation for this is that cutting taxes for the rich accelerates their wealth accumulation, while Democrats prefer a more progressive tax distribution, and raising the minimum wage.

Whatever the cause, it would seem that if history is any guide, the economy will grow faster, with less inequality under the Democrats.  Put that in your pipe and smoke it Republicans.  Kind of destroys that whole flow down fantasy you have been gouging us with.  Maybe it is time for a real change.  What is that I hear from my Republican friends?  You say those good numbers were just a result of Democrats reaping the benefits of good Republican policies.  Then why are we where we are today?