Sunday, July 31, 2011

Calm, back off, relent, soothe, soften, cooperate, relaxxxxxxx.........

My dear friend Lazaris read the tea leaves in 1997 and said that there were many things being worried about at the time that weren't real threats to the world.  However, there were three things that would need our attention:  world wide financial meltdown, worldwide terrorist wars, and Civil War in the U.S. Furthermore, any one of the three could trigger all three, and the world could be plunged into a catastrophic chaos. 

He went on to say, by the way, that these futures were not going to happen, but these are the areas of concern for us to focus our energies of visualization, energy healing, and prayer.  Clearly, all three of these energies have emerged for our attention.

I expect that D.C. will find a way to raise the debt ceiling and allow the U.S. to pay its bills.  I expect that D.C. will find a way to lower the deficit.  I think that the way forward was laid out be the Simpson Bowles report that cuts spending and raises revenues at a ratio of three to one on the cutting side.  I send my energies to our leaders to rise to the occasion and do what they know is needed to keep our country from reneging on over 40% of its bills.

So, I think it is time for all of us to back off, to unclench our jaws and fists, to soften our eyes, to loosen our necks, to walk away from the cliff that has worldwide financial ruin and American civil war in the abyss.  It is time to relaxxxxxxxxx........

Saturday, July 30, 2011

Does WWI show us where the debt crisis is taking us?

There is a fascinating and disturbing parallel between the politics happening in July of 2011 the U.S. today over the debt crisis and the politics in July of 1914 over the European crisis caused by the assassination of Archduke Ferdinand of Austria in Sarajevo.  That crisis, ninety seven years ago, led to WWI which changed Europe and the world forever.  It ended the rule by aristocracy in Europe and elevated the United States to become a significant world power.

WWI was probably a war that could have been avoided, and everyone thought at the time that they would be able to find compromises and be able to negotiate their way out of the crisis.  When that failed, they thought it would only be a brief skirmish and be over quickly.  How wrong they were.

As I understand it, the problem in 1914 was there were webs of alliances and promises between the European powers that the various countries pledged unfailing allegiance to.  These promises kept pushing the parties into greater and greater commitments to each other and, much to everyone's surprise, they ended up going over the cliff into an unimaginable horror of a war that killed or wounded almost 40 million men, ended unsatisfactorily by overly punishing the Germans, and sowed the seeds of WWII which killed over 50 million people, continued throughout the Cold War and didn't end until the Soviet Empire finally was defeated in 1991.

So, how is this like today?  Today, like in 1914, there are uncompromising commitments on the parts of those in power in the United States to alliances that the parties are totally unwilling to renege on.  

The Tea Party Republicans have sworn to lower taxes, so as to stimulate the economy per their undying belief, and to cut spending, so as to reduce the control of the government of the people and thus set the people free to create their own prosperity.  

The Pelosi Democrats have sworn to protect the entitlement programs that they have spent their whole lives creating against what they see as uncaring reactionary corporate forces who put profits and personal greed above the welfare of the people.  

The Far Right see themselves promoting prosperity and freedom; the Far Left see themselves protecting compassion and justice for the people.  They have no imagination within themselves that can see any value in the positions of the people that they consider to be their deadly enemies.  

So, are we arriving at an Assassination of the Archduke moment?  Are our leaders, blinded by their ideological commitments, pledges, and alliances, about to take us all over the cliff?  Let's pray not.

As psychologist Ira Rososfsky says:

"If Russia broke faith with Serbia, there may have been no war at all.

If the British broke faith with the French, then Germany may have won the war, and quickly, and if they had won World War I, there may have been no World War II, and its even greater devastation.

If some Republicans broke their promise of no new taxes, my neighbor's social security check will be in the mail.

Breaking a promise is a profile in courage."

It is time for our leaders to break their undying promises to their hard core constituency, or they they are going to take us all over the cliff.  And, by the way, the Republican Party will be take the blame for it and might well destroy itself, and in their attempt to save themselves they may even be able to take the Democratic Party down as well.  

We may end up with either or both political parties ended in this ideological war.

Monday, July 25, 2011

Why are they doing it?

Obama and Boehner both addressed the nation about the ongoing fight between the Republicans and the Democrats over raising the debt ceiling and how to cut the deficit.  Rather than get too involved in the content of their arguments, I think it is good to review what the Republicans are up to and why.

Refusing to raise the debt ceiling is a totally arbitrary act on the part of the Republicans.  Both parties have raised the debt ceiling as a matter of bureaucratic course numerous times.  So, why are the Republicans refusing to do so this time?  

I believe they have seized upon a strategy that can force real cuts to federal spending.  By refusing to authorize the raising of the debt ceiling unless there are real cuts, cuts beyond window dressing of "discretionary spending", cutting where the real spending is happening and growing far too rapidly, i.e. entitlement spending, they actually have a lever to force the Democrats to face up to the problem of out of control government growth of the entitlement state.  They see the U.S. as on the path of Greece, Portugal, Spain, Italy, Ireland, etc where the entitlement state took over the government and the country and killed the goose that laid the golden eggs of economic prosperity - the economy.

And I agree that the Democrats have been, and to some degree still are, in denial about the need to cut back on entitlement spending, and to do so pretty dramatically.  If we don't, the deficit, the amount we are spending beyond what we are taking in, the amount we have to borrow to pay for the government that we have chosen, will continue to explode and we will end up losing our credit rating, interest rates will skyrocket, costs of mortgages, business loans, and private loans will also skyrocket, and the economy will be crushed by the weight of entitlement spending.  Indeed, entitlement spending and debt payment will take over most of the government expenditures, and our country will decline into a shell of its former self, struggling to do the most basic functions of government with nothing left to help build for the future.  

The real problem, I believe, is that it is not only the Democratic Party, but also the voters are in deep denial about the limits of the government's ability to keep the gravy train going.  The Republicans are trying to make a splash large and dramatic enough to wake up the country to this very real problem.  

There is another, less ideological force at work here too, I believe - politics. The politics of the upcoming 2012 election.  

The Republicans want a temporary solution, with some cost cutting now, and the guarantee that this issue is revisited again during the 2012 election.  They think that they can ride this issue to victory in 2012 for victories in the House, the Senate, and the White House.

Obama and the Democrats, on the other hand, want very much to have a long term solution to resolve the issue now so that they can get it beyond the 2012 election and not have to look at it again until 2013.  I guess they agree with the Republicans that it is a losing issue for them, although I'm not sure why they think so.  I think the Republicans are deeply mistaken if they think that we are living in a Tea Party nation that is nearly Libertarian in attitude that wants government significantly out of people's lives.

The problem, the danger, it seems to me, is that the Republican tactic of being totally intransigent and thus proving to its right wing Tea Party base how serious they are could take them over the cliff by accident.  Or, should I say, it could take us over the cliff by accident, and they could end up having boxed themselves into their own rhetoric, unable to finally declare victory, get big cuts, and raise the debt ceiling, saving us from financial catastrophe.  

As I have said over and over again, it is obvious to me that the deficit is so massive that we need both cost cutting and revenue increases, and I think that will happen, ultimately, but meanwhile the Republicans are making as big a splash as possible in an effort to awaken the voting public to the need to change the contract between the government and the people, and provide less cradle to grave care for the people.  In the Republicans' minds, this is a moral cause, it reduces dependence on Big Brother and encourages more self sufficiency in the people.  In truth, we just can't afford it any more because we are out of money, regardless of the goodness or evil of the argument

I really am actually pretty hopeful that Boehner in the House and McConnell in the Senate will call the game at the last minute and raise the debt ceiling and consolidate whatever gains they have been able to attain.  And, I send some prayers in that direction.

Saturday, July 16, 2011

The belief in Reaganomics doesn't make sense

Back in my Republican era, I believed that lower taxes unleashed the mighty economy and created jobs.  I thought the benefits of Reaganomics were obvious to all but the ideologically blind. 

Reagan cut taxes.  Here were the tremendous numbers that proved the economy boosting power of Reaganomics:

REAGAN'S economy from 1980 to 1988:

  • After 4 years 
    • 6.3 million new jobs
    • 6.8% increase in jobs
  • After 8 years
    • 16.5 million new jobs
    • 18% increase in jobs
    • 12% rise in the median family income
What more proof was needed? Reagan lowered taxes and reduced regulation, and look at the tremendous economic growth and prosperity!


Clinton raised taxes.  And the economic numbers were even better:

CLINTON'S economy from 1992 to 2000:
  • After 4 years
    • 11.8 million new jobs
    • 11% increase in jobs
  • After 8 years
    • 20.6 million new jobs
    • 18.6% increase in jobs
    • 12% rise in the median family income
And, oh yes, George W Bush lowered taxes, just like his model Reagan did.  And reduced regulation.  What was the tremendous increase in new jobs? 

BUSH'S economy from 2000 to 2008:
  • After 8 years
    • 1.6 million fewer jobs
    • 2.7% decline in median family income

So, what does all of this prove?  That tax levels don't have much to do with job creation or economic growth and prosperity.  

I'm sure that we could find the same kind of data that show the contradictory effects of Keynesian stimulus spending.  Obama's stimulus package, where he spent more on liberal pet projects than was spent on national defense, produced ... not much actually.

Other factors have tremendous influences on the economy. Tax cutting and stimulus spending probably have a little bit of an effect, but compared to other things (inflation rates, development or lack thereof of new industries, wars, attacks on cities, the growth of toxic bubbles like the .com and housing bubbles, rising competition of third world countries, globalization of labor markets, etc., etc.) these government actions aren't all that influential.

The theology of the right wing Reaganite tax cutters is simply a fantasy.  I think the same can be said of the theology of the left wing Keynesian stimulus spenders.  The economy is way too complex for government action to control. 

The government needs to do many things to make sure the economy is healthy and competitive, but the theologies of tax cutting and stimulus spending are false promises.  Or so it seems to me. 

Thursday, July 14, 2011

Gerrymandering - the root cause?

The moderates of both parties seem to be captive of the extremists of both parties in the budget impasse.  The Tea Party right wing refuses to raise the debt limit if there are any revenue increases, and the Pelosi left wing refuses to allow any of the real spending problems to be cut - entitlements.  

One of the biggest problems facing the country today is gerrymandering of congressional districts.  It is no surprise that the Senate is more moderate than the House of Representatives in Washington.  You can't gerrymander a state.  The political boundaries are already drawn and can't be redrawn.  But within each state the political parties draw the districts to assure safe seats for both Republicans and Democrats.  As a result, the safer the seat, the more radical those who are elected.  You can't have a safer liberal seat than San Francisco, and you are hard pressed to find a more left wing ideologue than Nancy Pelosi.  The same on the right wing, for example Darryl Issa of Riverside County.

As a result, members of the House of Representatives are in safe districts, so the automatic tendency is for candidates to be more ideologically pure than their same party challengers.  If candidates had to run in districts that were politically moderate, the more centrist candidates would win and the extremists would not be able to attract the center, which would decide the victors in more balanced districts, similar to how the presidency is usually decided by the political center rather than the extremist true believers of either party.

The House of Representatives, these days, is always extreme.  It operated far left of center after the Obama victory of 2008, passed health care and gave massive giveaways to pet liberal projects under the guise of Stimulus spending.  And now the House is operating far right of center as it is being held hostage by the Tea Party tax cutting extremes threatening to cause the government to default rather than allow increased revenues to help reduce our enormous deficit.

As a side note, this is why I am totally opposed to the idea of trying to change the relative powers in the Senate.  Ideologues are upset that Wyoming has the same number of Senators as California, even though each state has vastly different populations.  But, their attempts to change this is just another way to try to gerrymander the states in the Senate the same as they have gerrymandered the states in the House of Representatives.  What a terrible, extremist producing idea that is.

Ideology makes smart people stupid.  Everything ideologues see proves to them the rightness of their black and white ideological view of the world.  Pelosi Democrats against Tea Party Republicans - and no chance that either side will ever drop their hatred of the other.

It is up to Obama and Boehner to lead the center to just say no to the drug of ideological extremist absolutism.  

I send my hopes and prayers.

Wednesday, July 13, 2011

How the International Criminal Court keeps despots in power

George Friedman, of, points out the unintended consequence of setting up the International Criminal Court in the Hague, Netherlands.  By prosecuting despots for war crimes, they pretty much guarantee that despots will do anything to cling to power when their people rise up to overthrow them rather than negotiate a transfer of power for the guarantee of a safe and comfortable exile. 

For example, Qaddafi has already been indicted for war crimes against his people.  As a result, he cannot accept a political settlement with those trying to drive him from power.  They are powerless to guarantee his safety.  The ICC will try him and find him guilty of obvious crimes against humanity.  The same has to be said for those who surround Qaddafi.  They are also undoubtedly guilty of heinous crimes and would also be sent to the Hague for prosecution. 

So, the tyrants who we want to abdicate and turn over power of their countries to the democracy movements of the Arab Awakening … can’t.  Not without being tried and executed by the Righteous in Europe.

Yugoslavia’s Milosevic died during a five year trial in the Hague.  Karadzic was sent to the Hague despite negotiations between him and the U.S. that if he ceded power he would be granted safety.   South Africa was fortunate enough to make a political transfer of power from the white leadership to Mandela and were granted forgiveness and safety as a result, but that wouldn’t have been possible if the ICC had been in place at the time.

So, the war in Libya drags on and people continue to die.

Is revenge in the ICC sufficient reason to prolong wars against tyrants that kill thousands of people?  I think not.  The ICC was probably not a very good idea, and it may be time to close it down.

Tuesday, July 12, 2011

The arrogance of being in control

David Brooks writes an insightful column about the underlying problem of the economic crisis.  He points out that three groups decided that they could control the future.

First came the genius banker quants who thought that their mathematical models would take the risk out of investing and thus they would control the future and make fortunes.  Of course, many of them made huge fortunes but that was by selling toxic securities to suckers who were conned into thinking that the quants knew what they were doing, while these banker quants almost destroyed their banks, the financial industry, and the economy of the U.S. and the world - but that is a different discussion.

Second came the true believer Democrat Keynesian economists and politicians who thought that massive stimulus spending would employ people by providing government demand and thus stimulating an economic recovery.  It may have helped a bit, but certainly not as the Keynesians predicted, and I don’t think it helped very much at all, but it certainly did add to the deficit and the debt.

Third, now comes the tax cutting true believers who think that the way to reduce the deficit is to stimulate the economy by cutting taxes and government regulation and thus allowing the always powerful and ready to rumble economy to take off and generate millions of jobs and prosperity for all.  These folks are looking at Reaganomics and overvaluing the effect of untrammeled markets and undervaluing the necessity of government regulation of those markets - which is needed to keep them competitive rather than letting them become forms of theft, corruption, and plunder.

Brooks’ recommendation is a cautious, conservative one:  control both debt and entitlements and “keep tax levels reasonable and the tax code simple.”  Most of all, he cautions against the arrogance of thinking that we have figured out how to control the uncontrollable: the future.

I think that what is happening is that the world is in a state of chaos, and is now obviously uncontrollable.  It is always uncontrollable, of course, but maybe it takes chaos from time to time to remind us of that fact.  And the way people who are afraid of the chaos react to the chaos is to revert to some form of fundamentalism as an attempt to control it.  The right wing goes for tax cuts, the left wing goes for Keynesian government spending, the fundamentalist religious believers, whether Christian or Muslim, look to apocalyptic visions and calls for purity, etc. 

The idea is to try to find a simple formula to control the explosive complexity of chaos.  It never works.

Friday, July 8, 2011

The deficit is the size of national defense and social security combined

Just to point out the obvious, the reason that the debt ceiling must be raised is because the government is operating at a deficit.  The only way the debt ceiling doesn’t get raised is if the government brings in more revenue that it spends, then the government doesn’t have to borrow to pay its bills.  If the government can’t borrow, it can’t pay its bills.  The debt ceiling doesn’t govern expenditures, Congress writes the laws that mandate and authorize spending.  The debt ceiling allows the country to pay its bills. 

How much is $1.6 trillion?  That is the estimate of our deficit; that is about how much more we are spending than we are taking in.

The New York Times has a nice rectangular chart that shows how much money the government spends.

Interestingly enough, the federal government spends the same on National Defense as it does on Social Security:  $738 billion for each.  Add these together and you have a little under $1.6 trillion.  So, to balance the budget by cutting spending, the federal government would have to eliminate all spending on both national defense and social security - which, of course, can’t happen.

We can thank the unholy alliance between the government and the financial industry for creating the housing bubble and the resulting financial collapse that created this monstrous deficit and recession.  Maybe we can legitimately hope that government can get out of the grips of ideology long enough to cut spending and raise revenues to shrink the deficit, and bring government spending and government revenues back together. 

It needs very courageous leadership by the president and the leaders of congress to do this.  Now is the time for them to elevate beyond being mere re-election functionaries and lead the country out of looming financial collapse. 

I have hopes that this is starting to happen.

Thursday, July 7, 2011

Have the grownups finally arrived?

President Obama has finally made a big move to do what is needed in the Great Budget Battle.  He is proposing entitlement cuts, including Medicare and Social Security, in exchange for tax reform that raises revenues. This has always what has been needed: a way to raise revenue by lowering tax rates and closing tax loopholes, and real spending cuts in the areas that actually need to be reduced - entitlements.  

Apparently, Speaker of the House John Boehner visited the White House on Sunday and said he was open to raising revenues if he was offered tax reform and spending cuts in return.  Good for him.  Good for Obama for responding with just that.

It has always been necessary to both raise revenue and cut spending since we are borrowing more than forty cents of every dollar the government spends.  The partisans can be expected to lay out unbending non-negotiable demands, but we may finally be on the course to the obvious solution whereby both sides find a way to compromise for the benefit of the health of the nation, rather than obsessively pandering to the extremist wings of their parties.

It will be interesting to see how Democrats will react to the proposed compromise (we know that the Tea Party Wing of the Republicans will thump their chests in outrage at any suggestion of compromise).  I expect a violent Democrat opposition to their president for abandoning their extremist and obsessive protections of their precious entitlement programs.  

Both extremist wings must lose these battles.  Compromise is necessary.   Cut spending and raise revenues.

Have the grownups finally arrived?

Tuesday, July 5, 2011

Political Party death wish?

The “negotiations” between the Democrats and Republicans on raising the debt limit continues, with appropriate declamations about the intransigency of the others at the table.  This is a predicted Kabuki dance wherein each party is in the process of proving to its respective bases that they are really, really tough and are going to get the best possible deal from the other.

The trouble is, if they aren’t careful, they will go over the cliff by accident, the cost of government borrowing will explode, and the interest on the debt will swallow the government.

If the Republicans think that they can push the country into default and blame the Democrats, they are even more idiotic than they pretend to be.  It is an obvious fact that the Democrats have offered substantial cuts in government spending, and the Republicans have offered zero revenue increases.  The ones who  are refusing to negotiate are the Republicans, and they will be blamed for the consequences of not allowing an automatic raising of the debt ceiling.

The Tea Party sent anti-tax extremists into the government to insist on reducing the size of government, and those true believers are doing what they believe in.  But, the country is not becoming a Tea Party nation, and if the Republican leaders allow actual default, they will be complicit with the death of the Republican Party.

Meanwhile, where are Obama and the Democrats on the necessary proposal for tax reform that will create revenue increases while lowering tax rates and thus bringing in both needed government income and allowing the market and the lagging recovery to breathe?  Are they playing their own political high-risk stratagem of allowing the Republican Party to destroy itself while they pretend to be innocent bystanders? 

Playing politics can be dangerous - to the health of the nation, and to the survival of political parties.