Let’s not get too excited

Well, here we are in the dog days of summer of an election year, and the political world seems to be in the throws of desperate appeals to save the country from utter and total ruin if the wrong people get elected.  I’m getting pretty tired of it all.

That is, those on the left are screaming that the those on the right are out to steal the election, destroy the society, dismantle the government, and round up all the non-white and weak population and put them in concentration camps (well, maybe they are really saying those things, but those on the left know what those on the right really mean).

And, those on the right are screaming that those on the left are out to steal the election, destroy society, cripple the free market, and round up all the business and productive people and put them into government re-education camps (well, maybe they aren’t really saying those things, but those on the right know what those on the left really mean).

But, you know, look at what happened four years ago.  Barak Obama ran on Hope and Change.  He was seen to be, by his voters and by himself, a transformative historical figure.  He was going to change the county and change the world.  What happened?  The world changed, you bet, and he helped.  But it certainly hasn’t changed the way he predicted he would make it change, has it?  The world changes with or without our presidents or congresses. 

It is always so nice to pretend to believe during the big elections that our politicians have the power to rule the world.  But, the country, and the world, are so much more powerful than our politicians.  I think that what happens, mostly, is that those in power end up doing what they can’t avoid doing, which is reacting to reality rather than being able to keep campaign promises that make sense ideologically but don’t really make much sense in the real world.

For example, Candidate Obama was going to dramatically change the foreign policy of the United States – be nicer, more accommodating, lift negotiation and compromise back to the top of the agenda, have the world love us once again.  And I think he did a good job of changing the tone of Washington, but President Obama did what he discovered he had to do - he pretty much has maintained President G.W. Bush’s foreign policies in the wars of Iraq and Afghanistan, kept Guantanamo in operation, is tightening the sanction screws on the refuse-to-negotiate Iran, demonstrating U.S. power in the China seas, etc.  Much the same as Bush had done, or probably would have done.

Domestically, despite some of the most contentious and libelous battles I have ever seen in Congress, the debt ceiling actually was raised, the Keynesian stimulus package was actually passed, a nationalized health care package actually squeaked through congress and the president, the financial system was saved from collapse, a world wide depression was averted even though we are still in a pretty deep recession still, etc.  The world goes on despite the howls of the ideologues on both sides about how it is all coming to an end any minute now.

The pundits are aflame, the impassioned bases on the left and right are livid with fear and righteousness, the engaged middle is trying to calm the issues just a bit, the disengaged middle are trying their best to ignore the partisan hysterics, and in the end, we will elect a new government. 

And it will be a fine government after all, and the country will not be ruined. 

Let’s just not get too excited by the process, and realize that the process is very carefully designed to get us really, really afraid that it is all going to go to hell if we don’t vote for the right candidates. 

They are just trying to get your money, your time, and your vote. 

We should each pick a side, and be engaged, and care, and vote; let’s just pull away from the demonization of each other a bit, if we can.  We’re all in this together, and the day after the election we’re all going to be here still.  We need to live together, and it is so much better when we are not at each other’s throats.

Obesity - a government-industry policy

There is no doubting the obvious fact that the country is in the midst of an obesity crisis.  Why? 

The main reason is that people are eating a diet of what I call drug-foods rather than a diet of actual foods.  A drug food is something that has been invented by the food industry.  They are carefully engineered to produce cravings for more.  Unfortunately, they act like drugs and create addiction.  They are loaded with fat, sugars, and salt.  They are quick and convenient.  They are produced by today’s huge agribusinesses, industrial farms, fast food outlets, and highly processed foods found in most of the supermarket (almost everything in the middle of supermarkets are highly processed drug-foods, whereas you can find real foods on the perimeters – produce and meats especially) 

A couple of good sources of info about this are a wonderful book “The End of Overeating” by Dr David Kessler, and the movie “Food, Inc.”  The good thing is that neither of these is an angry polemic, but they do a good job of explaining why the average weight of Americans has gone up by over 30 pounds in the last few decades.

So, how did this happen to our country? 

First, I want to congratulate the food industry for feeding billions.  The Reverend Malthus in the early 1800s predicted that human population would grow exponentially, but tillable land would only grow linearly, and as a result the human race would face endless cycles of famine and war as ways to keep the population down to the number that could be fed.  But, the agriculture adopted the approaches of industry to grow food production exponentially, and thus has been able to feed an exponentially growing U.S. population.  The same can be said around the industrialized world.  Good for them.  Famine is not a good thing.

Next, it is necessary to recognize that there is a major adjustment that the food industry needs to make now that the quantity problem has been solved in the industrialized world.  Now it is time to focus on quality.  That is, it is time for the agriculture to find ways to produce enough food which is actual food rather than drug-food.

Or, more to the point, it is time for us, the eaters, to turn away from the drug-foods and turn to real food.  Where there is demand, there will be supply.  It’s the nature of free markets.

Which brings me to the point of this long post – the distortions of the free markets by the food industry and government.  Charles Lane of the Washington Post writes and interesting article labeled “The Government wants you to eat cheese”.  He points to one item, cheese, that our country has more than doubled the consumption of because of U.S. Agricultural policy.  The policy is not one designed to nurture the health of Americans, it is a policy designed to help “farmers’, or more to the point, to help the huge industrialized agri-businesses that have replaced farmers.  One portion of our government agricultural policy is to support dairy "farmers" by distorting the market to produce too much milk, which ends up being used to make much more cheese, which increases cheese consumption because of artificially low cost and government assisted promotion of cheese (think pizzas). 

Those on the left of the political spectrum will naturally blame agri-businesses for their capture and control of government policies so as to benefit these giant corporate farming and distribution industries.  And they would be correct.

Those on the right of the political spectrum would naturally blame an ever expanding and ever too powerful government doing the only thing it knows how to do, which is to try to direct and control through centralized government power every aspect of the lives of Americans, which inevitably results in consequences that are unforeseen, damaging to the people, and benefitting only the special interests who have their ear, and contribute to their re-elections.  And they would also be correct.

It is an unholy, and at least partially harmful, alliance of government and the corporate agribusinesses of America.  The “small” example of how these two teamed up to dramatically increase the consumption of a highly saturated fat food, cheese, is but one instance.  I am sure you can find the same story over and over again when looking at the overproduction of corn, grain feed beef, pork, chicken, and fish, etc. 

The American diet is abundant, but it is becoming more and more unhealthy.  It is the cause of the dramatic, unhealthy, costly, and tragic rise in obesity in America, and it is the result of government policy … no, it is the result of agribusinesses business model … actually it is the cause of government-industry joint policy.  And, just as I don’t expect the Mexican drug cartels to stop trying to sell Meth into America, I don’t expect the agribusinesses or the government to stop promoting their own self interests for the benefit of the health of the nation.

But, of course, there is a cure for this disease.  It is to recognize our addiction to food-drugs and to wean ourselves off of them and return to eating food.  The industry and government will follow.

Or, as I am told, a hand written sign said at a local farmers’ market – “Organic food, or as your grandparents used to call it – food”.

High speed rail or schools?

I usually try very hard to avoid paying attention to California politics because I find it too discouraging to know about.  But, Sacramento has managed to penetrate my zone of ignorance with an amazing bit of nonsense.

Apparently, the California legislature has approved roughly $6 billion funding of a high-speed rail project being started in central California, the “bullet train.”  The total price for this train is estimated to be about $69 billion, but that will increase dramatically I am sure before it is all over. 

This is some kind of ideological dream of some on the left.  Why it is important to them has always eluded me since it is obvious to me that it will just be a faster version of Amtrak.  That is to say, it will be a huge expense to build, will go to places few will want to go to, will likely be mismanaged and inefficient when in operation, and will attract not nearly enough riders to allow it to be profitable.  But, it gets funds from the Dems in Sacramento, who are apparently in bed with the unions pushing the project.

At the same time, California is deeply in the red.  Indeed, if the voters don’t vote for a proposed tax increase proposed by Governor Brown there will be an automatic trigger to cut…here’s the fun part… roughly $6 billion dollars from the budget. 

And, of course, the train won’t be cut, something much less (?) important will be cut… education.   Apparently, most of the cuts will come from public education by reducing the school year from 175 days to 160 days.  Maybe the politicians are just admitting that the California public school system is pathetic anyway (teachers’ unions protecting bad teachers and bad schools?), so why bother to prolong the charade?

And, oh yes, apparently the California legislature rejected Governor Gerry Brown’s pension overhaul plan, and substituted some toothless thing that they can pretend to be a reform. 

Good grief, if even a long time Democrat and liberal Gerry Brown can’t convince the unions and his own party to be fiscally responsible, who can? 

I had been ready to bite the bullet and vote for a tax increase because it has been apparent to me that the state of California really is out of money:  they are defunding parks, laying off police, firemen, and teachers, cutting back on libraries, releasing prisoners, dramatically raising college tuitions, cutting funds to cities (resulting in some city bankruptcies), and other things that I don’t even know about (except the roads seem to be in pretty bad shape too). 

But when these politicians decide to spend approximately $6 billion on an ideologically driven waste of money (the bullet train), and then threaten to cut school funding by about that same $6 billion, I despair for the future of the most beautiful state in the country. 

I have been trying very hard over the last few years to see both sides of an argument, and to see people I disagree with as having good intentions.  OK, so unions want jobs and Democrats need union support to get elected.  So, the Dems are hoping that the Reps will allow them to raise taxes rather than cut funding to the schools.  Fine, until you put the $6 billion into the train.  There, you have totally lost me.  A pox on Sacramento is what I say.


I will now go back to hiding my head in the sand regarding California politics.  It's bad for my emotional health to pay too close attention to it.

Time for jail for some bankers?

When conservative business commentator, Charles Gasparino, of the New York Post says that Wall Street and London bankers are in danger of being sent to jail, I take that as a serious observation rather than just wishful thinking by more liberal commentators.  


The issue is criminal fraud and collusion to lie about the rates that banks were using for interbank loans during the financial crisis, which kept the London Interbank Offered Rate (LIBOR) falsely low.  This allowed the super-banks to make money (greed again, of course).  And it altered the borrowing rates of the entire world.  The tip of the iceberg is Barclays.  More to follow.


It always seemed to me that the unethical things that these behemoths were doing - like deliberately selling toxic assets to unsuspecting investors, placing enormous bets in the derivatives markets that could make themselves fortunes but stick the taxpayers with the losses, etc. - should have been illegal rather than just morally appalling.  Somehow, these financial giants all escaped jail, continue to make private fortunes, managed to make their giant financial institutions even bigger, and increased their power and influence over government by gutting the government's efforts to regulate them and reduce their size and influence.


That run of arrogant domination may be coming to an end.  We may finally have come up with something that they did that was more than just disgusting.  They may have done something that actually is illegal.


And their campaign contributions may not be able to save them from losing their job, and even their freedoms.


More important than the satisfaction of seeing the greedy be punished, however, is the chance that this might finally create the culture change needed in London and on Wall Street.  The country, and the world, may get the financial system back into balance, where the people running these institutions actually are there to be a service to the economy rather than little more than super-casinos designed to create uber-wealth for themselves at the expense of the economy and the tax payer.


One can certainly hope.

Judge Robert's brilliance

I just read an explanation of Robert's move, and I am even more impressed.  My first thought is that it is very good news that he did not legislate from the bench.  But, even better is how he did it.


Those arguing for the constitutionality of Obamacare argued that it was allowed under the Commerce Clause.  But, if Congress can force people to buy something, that is not a good thing.  That is too much power for Congress to have.  So, the argument against Obamacare, when looking at it from the point of view of the commerce clause, was very persuasive. As argued by Randy Barnett, a strong voice against the law:


"The Framers knew the difference between doing something and doing nothing. They gave Congress the power to regulate commerce, not to compel it. Ignoring that distinction would undermine the principle that the Federal Government is a government of limited and enumerated powers"


But Roberts changed the argument.  He allowed the constitutionality of Obamacare and, at the same time, limited the reach of the commerce clause. He said, in effect: "Mandate? What mandate to buy insurance? There's no mandate, anyone can refuse to buy insurance, they will just have to pay a fine, which is nothing more than a tax.  Same as a tax on cigarettes to discourage smoking, this is a tax to fund Obamacare, not a mandate to purchase insurance."  


So, the law stands -which makes liberals happy, but the commerce clause is restricted and cannot include a mandate from Congress to buy something - which should make conservatives happy, if they pause long enough to think about it. In other words, Congress is not allowed to force us to buy broccoli.


The best lawyer in the room changed the basis of the argument and achieved two results: he limited the power of Congress in their use of the Commerce Clause to force people to engage in economic activity, and he restrained the power of the Supreme Court keeping it from legislating from the bench.  


Bravo.

Chief Justice Roberts decides not to legislate from the bench

On March 27 of this year I had written on this blogsite that I hoped that the Supreme Court would not legislate from the bench and overturn one of the biggest and most consequential laws passed by the legislature in decades.  My hope was realized today as the Supreme Court Chief Justice, John Roberts, sided with the four "liberal justices" and upheld Obamacare (Affordable Care Act).  


As I understand it, Chief Roberts' main argument is that the charge that it was unconstitutional to have the "individual mandate" force people to buy health insurance is a false one because there actually is no mandate, only a penalty for those who refuse to buy insurance, which is nothing more than a tax, which Congress has the constitutional right to impose.


If the country doesn't like Obamacare, the proper remedy is at the ballot box. If the Republicans want to base their November campaigns on overturning the health care law, that is up to them.  But to my mind, there are much more important issues confronting the country:  the economy, the deficit, the still too reckless financial system, the Eurozone crisis, and the Arab Awakening and the changes it is causing in the middle east, for example.  


I thought that Obama wasted a precious year and a half at the start of his presidency focusing on health care rather than concentrating on the terrible Great Recession.  I hope that the Republicans don't make the same mistake now.  There are more important issues to deal with than this ideological obsessions of the right wing.  

Can Morsi govern over a legitimate democracy in Egypt?

By all accounts, Egypt is the leader of the Arab world.  So, when the Arab awakening happened in Egypt, there was much reason for celebration.  They had overthrown a brutal dictator, Mubarak.  Other Arab nations were likely to follow.  Certainly Libya did follow, and Syria is trying, but it is more complicated there.


Next, Egypt held elections and have elected a new president.  The West had certainly hoped that the results would be a secular, pluralistic government.  But, the Arab world is very much Islamic.  So, I suppose it is not all that big a surprise that the Muslim Brotherhood won the election.  And it can be no surprise that Egypt and the Arab world will become more Islamic in the future.  


The question that Thomas Friedman wonders about is whether the new president, Morsi, will rule as a leader of the half of the country which is Islamic, or will he create safety and outreach to the other half of the country - secular, liberal, Salafist, and Christian.  


There was a reason to hope for the latter today, because Morsi appointed a woman and a Christian as his Vice Presidents, and these are apparently positions of actual power rather than just ceremonial.  He has declared that women have the same rights as men, even though he had earlier declared that women should be banned from the presidency, and had also said during the campaign that the Quran would be the Egyptian constitution.


So, if Egypt is creating a mold, perhaps this is the direction the Arab world is going, more Islamic (but not Islamist) and also sincere in its efforts to create a society that is inclusive of the large minorities that are not Muslim.


One can certainly hope.

Moody's cuts the ratings of big banks

After the financial crisis of 2008, it became apparent that pretty much everyone involved in the financial industry had seriously screwed up - from the  financial institutions themselves, to the regulators, to Fannie Mae and Freddie Mac, to almost everyone in Congress, to a series of presidents, and to the ratings agencies. 


Today, Moody's is trying to do its job in a more responsible way, and they have downgraded 15 large financial institutions. According to the New York Times:


"Two United States banks that were hit hard in the financial crisis emerged with the lowest ratings. Citigroup and Bank of America are now rated only two notches above junk. While Morgan Stanley avoided a worst-case scenario of a three-notch downgrade, its rating slipped by two levels."

I am encouraged that Moody's seems to be more on the job.  Their reasoning seems pretty straightforward to me:  

"All of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities," Moody's global banking managing director Greg Bauer, said in a statement."

It has seemed to me that the financial giants have done everything they could to keep their basic business model of taking huge risks on the assumption that if they win they make personal fortunes, and if they lose, tax dollars would be used to bail them out and keep them from failing.  This downgrade could be a wake-up call for the financial industry to actually make some real, substantive changes to the way they do business.  

I would like to see banks become boring places to work once again, where their business is to lend money to actual businesses creating actual jobs and building the economy.  I would like to see M.I.T. and Harvard graduates go on to get jobs in their fields of study rather than go to Wall Street to strike it rich - by taking risks with taxpayer's money by placing gambling bets in zero sum game markets that don't do anything to grow the economy.

The Greek elections settled nothing

As best as I can make out, the elections in Greece settled nothing.  The Greek electorate are divided, but at least voted against leaving the Eurozone, however the divided results could likely result in the "winning" New Democratic Party not being able to form a coalition government.  


The voters are divided: some agree that austerity is needed, some think less austerity and more government stimulus is needed.  Either way, they want the Germans to pay, and how long the German voters will go along with that notion is anybody's guess.


The primary symbol of the division, I think, is the division between Germany and France's new socialist president, Hollande.  Germany wants austerity and accountability as a condition of loans, whereas Hollande wants Keynesian government stimulus, but, of course, the source of the stimulus funds will ultimately be Germany.


The financial industry seems to hold to the belief that clever tinkering will keep it all afloat.  It gets so tangled, but I don't see how one of the two endpoints doesn't eventually happen: the Eurozone breaks up so that sovereign nations can have their own currency as well as their own fiscal policies and keep their sovereignty, or they all cede their sovereignty to an appointed aristocratic entity that dictates the fiscal policies of them all.  Both seem impossible, but the forces of ever continuing financial crises may eventually push them into one of those end games.  


I think there may be a deep, centuries old acceptance within the European mind that looks to and accepts rule by aristocracy.  A faceless, unelected bureaucracy in Brussels setting fiscal policy for all of the Eurozone may be how it ends up.

Republicans don't have an illness, they have a viewpoint

My favorite editorialist is the center-right David Brooks of the New York Times.  He writes an illuminating editorial in Friday's paper.  Many Democrats explain the Republicans' positions as being extremist and the result of some kind of mental illness.  David Brooks tries to explain Republicans to Democrats by saying:


"I guess I'd say that Republicans don't have an illness; they have a viewpoint...many Republicans have now come to the conclusion that the welfare-state model is in its death throes".


Democrats see Republicans trying to dismantle the gigantic entitlement state that liberals have spent many decades building and can see it only as insensitive and cruel lack of caring about and for people.  They explain it as insensitivity for people, as dancing to the tunes of the super-wealthy (who are  seen as essentially greedy and uncaring), as greedily keeping money for themselves and disregarding the needs of the people, or as psychological imbalances resulting from bad parenting or fear of change.


But, Republicans see it quite differently. To them it is obvious that the money has run out.  To them, Margaret Thatcher summed up the fatal flaw of the welfare-state:


"The problem with Socialism is that you eventually run out of other people's money."

It may not be totally fair to call Democrats socialists, but the Republican view of the vast welfare state in Europe (and to a slightly lesser degree in America) is that it has run out of money and cannot be saved, and it's best to abandon it before it sinks and takes the entire country down in its whirlpool of destruction.

Greece is the first massive collapse of that governing philosophy, and it looks like Spain, Italy, Portugal, and maybe others are all teetering on the brink.  

And to Republicans, how far behind is the U.S.?  When 40% of every government dollar spent is borrowed, how viable is the U.S. welfare-state?  And the Obama and Democrat claim that this can be solved by taxing the "rich" is silly, it seems to them, as the revenue raised by that would be nice, but wouldn't come close to ending the deficit.

I can certainly understand that Republican view.  And I share it, as far as it goes.  

But, I would add that it is not only the entitlement welfare-state that is unsustainable, but the military-industrial state that is unsustainable as well.  It was all nice and good that America emerged from WWII as the dominant economic and military power.  But, to be reminded of Eisenhower, we need to curb the growing military industrial complex, which drains huge amounts of tax dollars to support it.  It was developed to fight a potential WWIII with the Russian and Chinese communists.  And, indeed, those totalitarian regimes were intent on world domination and needed to be stopped.  

But, we won.  And even though a revival of fundamentalist Islamism resulted in the terrible attack against us on 9/11, I think that much of our military and defense budgets can be reduced.  We have just run out of money.  We no longer have the money to be the military hegemon that we once did.

We can't afford the welfare-state, nor the military-state of the past.  There is a new America being born, as well as a new Europe and a new Middle East.  And I think living within our means as a nation is just as necessary as it is necessary to live within our means as individuals.

Reduce government spending (with reasonable entitlement reforms as well as cutting the military), reform the tax system (that includes raising taxes overall while lowering marginal rates so as to encourage innovation) and a new world can be born.

It is going to happen anyway, because, you know, we're runnning out of money.

Europe, United they fall?

I am not sure that the Euro will survive, nor the Eurozone itself. 


Economists Simon Johnson and Peter Boone write that it is nearly inevitable that the Eurozone is over, and it is just a matter of time for people to admit to it.  Greece, of course, will be the first to go.  Their point seems to be that the European Central Bank, the International Monetary Fund, and the European Commission keep finding ways to loan money to Greece and the other weak periphery European countries, but all that is happening is that the eventual need for the breakup gets pushed down the road with the consequences of that breakup becoming bigger as time passes.  They foresee capital flight from the sovereign banks and governments of the periphery Euro countries.  


I'm not a financial guy, and I think people in the financial industries continue to believe that the European Project can be rescued by more and more clever ways to get loans to the failing financial institutions and the failing sovereign nations.  


But I wonder.


It looks to me like the eventual outcome is going to have to be one of two things:  either the Eurozone breaks up and an idealistic notion - that was unrealistic - reluctantly fails, or the Eurozone unites into some form of a European United States.  Both outcomes seem impossible now, but I think the forces pushing Europe into one of those outcomes are too strong to be changed with clever ways to transfer more and more money from Germany to the failing nations and banks.


One currency without one fiscal policy is proving to be disastrous.


If the Eurozone is to unite fiscally, it might be able to do so by having a central fiscal authority govern all of the Eurozone nations without needing to have all of Europe unite under one government, but how nations with centuries of sovereignty with their own cultures, histories, and languages voluntarily turn over their sovereignty to a central power is very hard to imagine.  Necessity, however, may force the issue in the end.  


If you look at the United States, we faced many of the same issues after the Revolutionary War.  The cultures of each sovereign state was very different from the rest, but we managed to make it work.  Indeed, the cultures across the various parts of the U.S. are still radically different - compare Texas and South Carolina to Massachusetts and New York.  But we manage to make it work.  


Or at least we have up until now.  Time for some prayers for harmony, hope, understanding, negotiation, and compromise, on both sides of the Atlantic.

Walker wins and FDR is vindicated

Wisconsin governor Scott Walker won handily in the recall election on Tuesday.  The unions tried to have him thrown out of office because he dared defy their powers.  


As I understand it, he cut government workers benefits, and when the unions tried to demonize him for it they discovered that the public wasn't too enamored with the extraordinary benefits of the union workers, and had at least some sympathy for Walker's claim that the benefits were bankrupting the state.  As a matter of fact, since the new rules on the government unions went into effect the state went from a massive deficit to a surplus.  


So, the unions decided to change the issue to Walker's denying the unions the right to collective bargaining, which Walker was hindering.  But, at the heart of the unions' complaint was that Walker was changing the rules on the unions' ability to collect union dues.  That is, the dues would no longer be automatically collected, and union membership would become voluntary.  As I understand it, once these new rules were enacted, union membership dropped by about half.  The result?  Loss of union power, which is what the recall effort was all about, union power.


The unions tried to wield their power, but lost power instead.  That is what happens in power plays - either you win or you lose, and the governmental unions lost.


The most interesting thing, to my mind, is to revisit the grandfather of modern liberalism's views on the role of collective bargaining of governmental unions - that of Franklin D Roosevelt himself.  In a letter to the National Federation of Federal Employees, written August 16, 1937, FDR made it very clear that collective bargaining had no place in public service of governmental employees. 


A couple of excerpts from this short letter:


"All government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service.... Particularly, I want to emphasize my conviction that militant tactics have no place in the function of any organization of Government employees... a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied.  Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable an intolerable."


Pretty clear - "unthinkable and intolerable."  


I'm not sure that the public employee unions have done much in the way of threatening strikes in Wisconsin or elsewhere, but they have been negotiating with politicians, Democrats especially, who have an incentive to give them what they want.  This is because the Government unions are the biggest supporters of pro-union politicians, i.e. Democrat politicians.  They give them both money and lots and lots of free labor to man phones and help them campaign in many ways.  


So, it is no wonder that the unions got so much of their demands on pensions.  Had they demanded large wage increases, those kinds of numbers could be publicized and used effectively as a tool to deny the government unions' demands.  But, pension improvements were just too arcane to be able to be turned into headlines or bumper stickers, so the unions got what they wanted. 


The problem is that the big pensions, granted to younger and younger retirees, are eating up the other government services in a time of recession like today.  Voters are seeing that libraries, parks, education, and public safety are suffering while the pensions sail along keeping middle class, middle aged people on the public dole for decades to come, at nearly the same wages as when they worked.


So, Wisconsin said no to the recall.  How did government unions stray so far away from FDR's vision? I don't see this so much as a victory for Republicans against Democrats or Republicans against unions.  I see this more as a needed balancing of something that was out of balance.

Activating our imaginations to understand our political opposites

I have been focusing on trying to understand the political tribes in America - what they believe and why.  More to the point, I am trying to see the goodness and morality that each tribe represents.  I think that one of the biggest toxins in America today is the inability of those in each tribe to be able to use their imaginations and see the goodness in the people of the other tribe. 

I just finished a very insightful book on this issue:  "The Righteous Mind:  Why Good People are Divided by Politics and Religion" by Dr. Jonathan Haidt, moral psychologist at the University of Virginia. 

His basic presentation is that liberals, conservatives, and libertarians each view the world in the light of six moral yardsticks:

1. Care/harm - the ability to empathize with the pain of others, to care, and react to react against those who do harm to others;
2. Fairness/cheating - wanting things to be fair, and react against those who cheat;
3. Liberty/oppression - wanting liberty, and react against oppression;
4. Loyalty/betrayal - wanting loyalty to your own "tribe", and reacting against those who betray it;
5. Authority/subversion - wanting to honor authority, and reacting against those who subvert it;
6. Sanctity/degradation - wanting to live in a world that is sanctified and pure in a spiritual sense, and reacting against the degradation of life and the spirituality of the world.

An interesting side note is that to liberals, the fairness/cheating yardstick is about equality, whereas to conservatives it is about proportionality - i.e. people should be rewarded in proportion to their contribution, even if it produces unequal outcomes.

One of his basic points is that our sense of right and wrong is not based upon our rational, explaining mind, but rather is based upon our subconscious, unconscious, intuitive mind.  We can consciously make changes, but our psychologies that infuence our morals are deep and usually unexamined.  And, more to the point, our judgments of others' morality is instinctive, intuitional, and not based upon our rationality.  It is a gut reaction to those who disagree with us as being immoral.  This is the toxin in today's political climate, in my opinion.

Another point that he makes is that the tribes cannot change each other's points of view by combatting them.  It takes empathy and human connection to be able to get past the rational part of the mind which functions as a rationalizer of our moral commitments.  Once we can see each other as real people that we can identify with on basic human terms, we can start to see the goodness in the moral values that they hold, even though they are different than our own. 

He cautions against "confirmatory thought" which just confirms and justifies our own moral view of the world, and encourages "exploratory thought" which explores other points of view.  When we want to confirm a belief, we ask ourselves if we "can" believe it, and the answer is almost always yes.  When we want to discredit someone else's belief, we ask if we "must" believe it, and the answer is almost always no.  So, we just live inside the bubble of our own tribes, judging others as evil who must be destroyed.  Such is the nature of our political world today.

As to how this works in our political thinking, he demonstrates, through experimentation, that Liberals focus almost exclusively on the Caring and Fairness (equality fairness) values; Libertarians focus almost exclusively on the Liberty value; and conservatives focus fairly evenly on all six of the moral values.  Dr. Haidt started his journey into the study of moral psychology as a liberal trying to find ways for liberals to persuade conservatives.  He ended up having a much greater respect for conservatives, much to his surprise apparently, and became more conservative himself as he recognized the value of the yardsticks other than just caring and fairness/equality.

Haidt concludes by chosing positive contributions to society by both liberals and conservatives that he thinks can be a starting point to help understanding. 

He sees two indisputable contributions from liberals:

1. Governments can and should restrain corporate superorganisms, who would otherwise operate only in the interest of profit and have no incentive to care about their impacts on people or society;
2. Some problems really can be solved by regulation, for example the defiling of the environment or harming the health of people.

He sees an indisputable contributions from libertarians:

1. Markets are miraculous, and they set prices, establish efficiencies, and foster creativity and innovation that a controlled, planned economy never can.

He sees an indisputable contribution from conservatives:

1. You can't help the bees by destroying the hive, i.e. by weakening cohesive groups you destroy the moral capital that binds them and the people withing them are diminished.

By respecting each other's moral values, by respecting each other's human value, we can differ with each other without demonizing each other, and we can create  political climate that is not kill or be killed, but rather is one that allows and encourages disagreement that can lead to negotiation, compromise, and a functional political system that is not stuck in the gridlock of extremist ideologies bent on the destruction of The Other, who is Evil

List the Calories, don't ban the drinks

One final thought about Bloomberg's New York law banning huge sodas.  I think the most persuasive thing he can do would be to list the calories of the drinks, on the cups or on the menu boards in the establishments, prominently and easily seen.  Banning them is government coercion, which I don't like.  But showing the calories is education, and will have an effect, probably more of an effect than the other.

The Puritanical heart of liberalism

New York Mayor Bloomberg's outlawing the selling of sodas over 12 ounces does  one major thing, in my mind, it reveals the Puritanical core of liberalism.  


The wonderful book that I have written about previously, "American Nations: a history of the Eleven Rival Regional Cultures of North America" by Colin Woodard, made the very interesting observation that modern liberalism was descended from the Puritan Massachusetts founders, and that although the content of the Puritanism has changed a bit, the basic energy is still there, to improve society for its own good, and to do so with dictatorial certainty and righteousness.


There is no doubt about the fact that people harm themselves dramatically by drinking over-sized sugar drinks, but it is a belief in government coercion for the benefit of humankind that lies at the heart of liberalism.  And many find it oppressive and dictatorial.  


The knee-jerk reaction of conservatives is to tell an overly powerful government to take their good intentions, and their belief in the right of government to control every aspect of people's lives -- and shove it.


I think I agree.  


(And I hope people start addressing the terrible health habits that are causing the obesity epidemic in America, on their own, as a result of persuasion rather than force)

The heart of the American dream still lives

I just came back from a trip to our nation's capitol, Washington D.C., where I spent some wonderful, inspiring, and thought provoking time with dear friends. It is quite a stunning experience to go as deeply into the heart of the monuments and memorials of our country as I could and try to feel the essence of the United States.  And it seems fitting on this Memorial Day to try to summarize my notions of what the essence of our country is.

I believe at the heart of America is the overthrow of rule by aristocracy.  

When George Washington and the founding fathers of our country rose up and created our nation, it wasn't just the rule of England that they said "no" to, it was the rule by an aristocracy that they said "no" to.  It was an amazing revolution because it was the elite of the American colonies who led the revolution rather than the masses.  One of its wonderful characteristics, it seems to me, was that it was so deeply rooted in deep understandings of political history and philosophy.  They understood the virtues and failings of previous democracies and set out to establish system where the people would rule themselves rather than be ruled by an aristocracy.

So, what happened in next couple of centuries?  We have done a pretty good job, I believe, in doing just that - ruling ourselves in a country "of the people, by the people, and for the people" to quote President Lincoln.  But to fend off newly forming aristocracies has always been the challenge of our country.  Teddy Roosevelt struck a blow against the over-control of the oligarchies and monopolies of his era and became the trust buster.  Reagan struck a blow against the impersonal bureaucracies of overly controlling governments in the state and federal governments.

So, in an odd way, it seems to me that the Tea Party and the Occupy movements, one on the right and one on the left, at their heart, in their essence, are extraordinarily similar.  

The Tea Party extremists of the right wing see the liberal government headed by President Obama as becoming tyrannically controlling more and more of people's lives and rebel against it.  They are impervious to arguments that the government is taking over more and more of society for our own good, and reject the righteous puritanical tyranny of the "do-gooders" as meddling tyrants.  They see the left wing as a new "aristocracy" of the highly educated by the elite schools trained to become the philosopher kings dreamed of by Plato.  And they reject them as puritanical scolds who force the country to conform to more and more trendy intellectual fads that the intelligentsia become enamored with. They see the aristocracy of the intelligentsia as being impractical, idealistic, hopelessly out of touch with reality, and dictatorial.  

The Occupy Wall Street movement extremists of the left wing see the financial industry and industry in general becoming more and more tyrannical as they control more and more of the electoral and governing processes with their enormous wealth for the purposes of feeding their own greed for huge wealth and political power.  They are impervious to arguments that Wall Street and industry are the gooses the lay the golden eggs for all, and see wealth creation as a function of the greedy at the top with no concern for the rest of us.  

In other words, the extremes on both the right and the left are wanting a new revolution, patterned on the original American Revolution - they want to overthrow the tyranny of the ruling aristocracy.  But for the right, the ruling aristocracy are the intelligentsia who dominate the government and the media, and for the left, the ruling aristocracy are the business leaders of Wall Street and industry.

The both have a pretty good point, it seems to me.  

The biggest problem with both extremes is that they see their opponents as devils who must be destroyed.  Kind of strange that they don't see themselves as allies united in rebirthing a new version of the America dream, a dream where the people are able to rule themselves, and create a government "of the people, by the people, and for the people" - the original dream of America - and of the world.

Even the right is calling for the breakup of the too big to fail banks

I have read two articles now by conservatives calling for the break up of the too big to fail banks - Charlie Gasparino of the New York Post, and Arnold Kling of the National Review.  In the past, almost all of the calls to break them up have come from the left side of the isle, so this is interesting to me that the right is joining in as a result of the massive losses of Jamie Dimon's JPMorgan Chase.


I think the most persuasive argument for breaking up these behemoth banks is that if even Jamie Dimon can't catch his own company in the act of taking excessive risks in the derivatives markets, then there is no chance of regulators catching them - they aren't as smart as Dimon and don't have his resources. 


The point is that these organizations are way too big to regulate, but beyond that they are even too big to manage.  If the much admired Dimon can't do it, it can't be done.  


And, we all know what happens if one of these Titanic financial institutions go down, they are too big to fail and have to be bailed out by our taxpayer dollars.


Regulation will be inadequate to the task of protecting the financial industry and our tax dollars.  They won't be able to see what these labyrinthine giants  don't want them to see.  For goodness sake, the very management of these institutions aren't able to see what others in the organization don't want to be seen.  


Maybe the time has finally come to actually do it - break up the too big to fail financial institutions.  

JPMorgan Chase looses $2 billion on excessively risky derivatives trading

The giants of Wall Street continue in their pattern of pushing their risks to the edge and beyond, or so it appears to me.  Jamie Dimon of JPMorgan Chase was considered the golden boy of Wall Street after the terrible crash of 2008 since he and his institution escaped some of the more dire consequences of that crisis.  Unfortunately for him, his firm, and America Mr Dimon apparently led the charge to carve out a loophole in the "Volker Rule" of the Dodd-Frank financial regulation bill that was passed as a result of the crisis.  


As I understand it, the Volker Rule forbade the financial institutions from trading in their own money in the derivatives market.  But there was an exception that was granted as a result of the intense lobbying led by Dimon - hedging was allowed.  But the hedging was to be a hedge against a specific, individual trading position.  JPMorgan Chase's hedging looks like it was a violation of the law, as it was a "portfolio hedge" rather than a targeted hedge.  


Edward Wyatt of the New York Times explains:


The loophole is known as portfolio hedging, a strategy that essentially allows banks to view an investment portfolio as a whole and take actions to offset the risks of the entire portfolio. That contrasts with the traditional definition of hedging, which matches an individual security or trading position with an inversely related investment — so when one goes up, the other goes down.

The way the loophole was justified was that it was supposed to mitigate risk by hedging against failure.  But once the hedging was expanded to the entire portfolio it became a risk again rather than a conservative insurance type position.

I hope that these trades were a violation of law.  I hope that JPMorgan Chase and its management, including Dimon, are found guilty of violation of that law and that they pay real consequences for those violations.  

As far as I can tell, the overall zeitgeist of Wall Street has not really changed.  It looks to me like they are still in the grip of their traders' mentality, which seems to be bet the farm on riskier and riskier investment schemes, and if they win they make huge fortunes for themselves (without any substantial benefit to the economy as these derivatives are zero sum gambling games rather than investments in the economy or businesses), and if they lose they don't pay much of a price, and if they lose big enough they can count on Uncle Sam to bail them out with our taxpayer money.

I am not enough of a financial expert to know the details; I am just reading and trying to figure it out, but this event looks like it is more of the same greedy overly risky behavior that is still the guiding principle of Wall Street.  

Can you see the goodness of your political opponents, or do you see them as demons to be destroyed?

New York Times writer Paul Krugman wrote an editorial declaring that the problem in the country and the world is the Republicans.  Not a surprise for him to think that, of course, as he is a cheerleader for the Left wing of the Democratic Party.  I often read him, but I usually find him to be part of the problem in our politics rather than part of the solution.  By that I mean that he is firmly in the camp that sees the political world as split between the good people and the bad people.  He seems to me to have a very limited sense of imagination when it comes to putting himself in the shoes of his political opponents, and can only see them as enemies that must be destroyed, or at least defeated very very soundly.  

I am sure that there are millions and millions of conservatives who would take angry exception to Krugman's notion that their political beliefs are a result of being bought by the .01%.  Somehow, in Mr Krugman's world, Republicans are dim-witted pawns of the super-humanly persuasive .01% who apparently can buy the opinions of scores of millions of people with their supernaturally powerful lobbying.  That notion says that conservatives are stupid, naive, sheep, unable to reason for themselves.  


Needless to say, Krugman will have no chance of ever persuading any of them to see the light that he is so certain of.  Of course, those who see the world the same way that Krugman sees it will think that he has once again made a brilliant analysis showing how those who agree with Krugman are smart and good, and those who disagree are dumb and/or bad.

And of course, the same situation is on the other side of the political spectrum.  Conservatives are always thrilled by the partisan arguments of George Will and Rush Limbaugh, and are convinced that if they could just get the other side to pay attention to the great wisdoms that they utter, everyone would eventually agree with them.

What is missing, I think, is understanding.  It seems to be so very difficult to use our imaginations when it comes to political debates.  That is to say, it seems almost impossible to imagine the goodness of our political opponents.  To get our minds inside the mindsets and moral values of those we oppose.

To one of Krugman's points, it is certainly true that greed and almost pathological indifference to the suffering that many on Wall Street caused is there.  But there are very positive effects of the financial and corporate world as well.  And just seeing those who support conservative ideas as pawns of the greedy enemy is a lack of imagination, it seems to me. If we aren't at least a little confused and uncertain, I think that may be a sign that we are trying to calm ourselves with the certainly of ideology as the world swirls scarily around us.  


If we can see our political opponents as human, respectable, and good, then  from there politics can actually happen, that is, negotiation, compromise, solutions that are free from the iron grips of the True Believers on both the Right and the Left.  And politics can stop being about doing anything and everything necessary to keep from losing to the evil demons on the other side of the isle.


Guess what?  Our political opponents are not going to go away.  Both extremes seem to think that finally in this, this, this election they are going to vanquish the opposition to the point where they disappear.  Never happens.  They always come back.  


It seems to me that there is a simple test to tell if you are able to see both sides of an issue.  If you can't argue persuasively, intelligently, and emotionally for both sides of a issue, you don't really have an opinion about it, you aren't at choice about it, you are just reacting. If you can't see and feel the emotions underneath the positions of your political opponents, I don't think you can really make any claim to making a real choice rather than just being a knee-jerk liberal or knee-jerk conservative.  I have been on both sides of the political spectrum, with passion and study in both cases, and I know that there are good people on both sides, and of course there are scoundrels as well.  

I guess my main point is that you can't persuade someone to change their minds if you think that they are evil or stupid.  You have to start with respect and understanding.  And I don't mean the kind of understanding that psychoanalyzes them and concludes that the reason they believe what they believe is because there is something wrong with them.

All that being said, I think the Republicans are more intolerant and divisive than the Democrats now, but the Dems are completely entrenched in the protection of their patiently built up entitlement systems and social agendas, every bit as much as the Republicans are entrenched in trying to dismantle the entitlement mentality of the nation and their own conservative social agendas. 


 Result?  Demonizations all around.  Which I regret.

What we can learn from comparing the U.S. and European economies

One of the biggest issues of this campaign should be how to grow the economy.  Both candidates will likely speak in small terms, using symbols to send their messages, but it would be nice if they actually went to the heart of the matter and discussed their very different macro views of the role of government and the economy.


At the heart of the Republican view is the idea that the U.S. needs to cut spending and reduce regulations and let the economy grow as a result of the freedom it is given if left to do so by a government that just stays out of the way.   


At the heart of the Democrat view is that the federal government needs to inject stimulus spending into a depressed economy to provide temporary demand that will keep the economy going, and create jobs, so that the economy can recover and start to grow on its own without the extra stimulus from the government.


Of course, the conversation devolves immediately into accusation and demonization because the hard right sees government spending and regulation as attempts by the intelligentsia to take over the country with massive socialist endeavors that empower themselves and steal power from the entrepreneurs and business. 


And, of course, the hard left devolves just as quickly into accusation and demonization because it sees cutting spending and reducing regulation as nothing more than ideological cover for heartless exploitation and greed of the few (the 1%) at the expense of the many (the 99%).


Interestingly, Fareed Zakaria on his Global Public Square show last Sunday tried to inject some objective data into the debate.  His point is that these two approaches are currently being tried: one in Europe and one in the U.S.


In Europe, the austerity approach is being tried, and the results are terrible.  Governments are cutting spending, rather draconianly, in Brittain, Greece, etc.  The results are the tiny growth of about 0.8% for the EU, with the economies most subject to austerity actually shrinking.  Why? because austerity shrinks the economy and lays off people, reducing demand, which ends up with not only a worsening economy but also an ever increasing deficit.  It doesn't look like austerity is working in Europe, and there is no reason to think it will work in the U.S., other than to those whose secular religion is the ideology of tax cutting, spending cutting, and austerity.


In the U.S. the stimulus approach was tried, and the results are moderately good.  The growth rate is about 2.2%, not as good as we would like, but quite a bit better than those countries following the austerity mantras of the Right. Of course, Republican outrage has stopped any future Keynesian stimulus, but  I think that Obama and the Democrats are correct when they say that it has helped.  Plus, I firmly believe that much stronger regulation of the financial industries is necessary because Wall Street has proven to me that they cannot be trusted to run their businesses in any way other than to take ever greater risks to make huge personal fortunes, while they know that the federal government will absorb their losses and keep them from failing, and will keep them out of jail if they do.


So, I am in the process of changing my mind.  Up to now I have thought it was obvious that with our huge deficits and debt we needed to both cut spending and raise taxes.  I still think that is largely true, but I am thinking that the spending cuts can be moderate and should focus largely on the military superstructure as well as entitlement reform, the tax raising is best in the form of a major tax reform that takes away the government giveaways to interest groups, and active government stimulus and regulation are vital to the creation of a newly robust economy.  


So, raise taxes, increase regulation, Keynesian stimulus spending, and spending reform (entitlement and military cuts leaving room for infrastructure, education, and research support) - the four pillars of economic growth.  My new mantra.  So far.

Tribal politics

We think we choose our politics based upon dispassionate reason, or at least some of us like to think so.  However, market researchers have a different view of the electorate:  we are members of cultural tribes.


If you read the NY Times or Washington Post, drink congnac, brandy, gin, or Heinekin, drive a hybrid, Suburu, or Audi, browse the internet for personal ads or dating, or do job searches, eat at Popyes, White Castle, or Church's Chicken, watch Lifetime, Bravo, CNN, or MSNBC - you are in the tribal demographics more likely to vote Democrat in elections.  And you will likely be targeted by Democrats to get your vote.


If you read the Washington Times or the Wall Street Journal, drink Amstel Light,  Michelob Ultra, or Canadian whiskey, drive a Land Rover, Isuzu, or Lexus, browse the internet for sports updates, financial services, or weather, eat at Cracker Barrel, Macaroni Grill, or Schlotsky's Deli, watch Fox News, the Golf Channel, or the History channel - you are in the tribal demographics more likely to vote Republican in elections.  And you will likely be targeted by Republicans to get your vote.


Here are some fascinating results of this kind of marketing research:








One of the things I find interesting in the above data is that Republicans apparently use the internet more than Democrats.  Who knew?


So, where does that leave the upcoming election?  There is an interesting thought that the opening of the campaign financing to superpac money will have the odd result of moving the campaigns more to the center.  The idea is that when campaign money is tight, both Democrats and Republicans need to focus almost all of their money on their base - to hybrid buyers or Land Rover buyers, for example.  But, now that Citizens-United opened up the money coffers, there may be so much money available for campaigns that each side might go after venues that are populated by those in the middle - those who watch ESPN, read USA today, drink Bud Light or scotch, drive Chevrolets or Fords, browse the internet for movie listings, use email, eat at McDonald's, Wendy's and Subway, and watch TNT and the Animal Planet.


There is hope for us after all.

Is the negotiation with Iran working?

Don't look now, but there is a pretty good chance that increasingly severe economic sanctions on Iran are actually doing a good job of moving that country into a workable negotiation on their nuclear program.  


It looks like a big moment came when Iran's Supreme Leader Ali Khamenei swore not to commit the "grave sin" of building a nuclear weapon.  I took that at the time as normal stalling tactics to give them time to finish the job, but David Ignatius of the Washington Post points out that both sides are finding ways to create face saving moves to avoid confrontation over Iran's nuclear program, with Iran forgoing the building of nuclear weapons.


The key to negotiations is how the moves are framed.  


Iran can perform "confidence-building" measures to demonstrate how serious a moral issue it is to Khamenei not to build nukes.  These measures require "reciprocity" from the West.  If this step by step negotiating process can proceed quietly a deal may really end up happening.


"Confidence building" by Iran would be to ship Iran's low-enriched uranium abroad and receive back 20% enriched fuel, for "isotopes" for "medical research."  In addition, Iran would stop working on their underground enrichment facility near Qom, which would no longer be needed.  This would be acceptable, one hopes, to Khamenei as long as the West accepts Iran's right to peaceful nuclear energy.  Viola, Iran backs down but saves face under the umbrella of Khamenei's moral declaration that nukes are a "grave sin."


"Reciprocity" by the West would be to accept Iran's right to nuclear power and an easing of the sanctions.  The key date is apparently the beginning of July when the U.S. and Europe's sanctions are to take full effect.


Another key to this seems to be that the U.N. Security Council, meaning China and Russia, has "signaled" that Iran's nuclear program aimed toward building nuclear weapons is too dangerous.


I think that Obama's foreign policy, aided by the apparently very skilled Secretary of State Hillary Clinton, is working pretty well around the world.  And keeping Iran from building nukes, and keeping Israel from attacking Iran, is a huge accomplishment, and is best achieved at the levels of diplomacy and statesmanship rather than grandiose and bellicose showmanship wanted by some.


It's worth a prayer or two that they, no ... that we, succeed.

What is it about Massachusetts' governors?

Now that even Rick Santorum concedes that Romney will be the Republican nominee for president, I notice an odd thing:  Romney reminds me of another former governor of Massachusetts governor, Democratic presidential nominee Michael Dukakis.  Both seem to be cold, calculating, data oriented analysts, but seem to be missing the warmth factor.  

Dukakis famously made a pretty big mistake in a presidential debate by telling CNN debate moderator, Bernard Shaw, that he would not favor the death penalty if his wife, Kitty, had been raped and murdered.  He answered as an ideologue, as an analyst, about how the data showed that the death sentence does not deter violent crime.  There was no human response to the abhorrent suggestion that his own wife had been subjected to such a degrading death.  He seemed to be a robot, a man with only a brain and without a heart.  He didn't have to change his position on the death penalty, but he could have shown a beating heart if he had said he would want to find the bastard and kill him himself, and then reaffirmed his principles.  But, he was just a cold fish policy wonk and it hurt him pretty badly in the election, which he lost, of course to Bush I.  

Patricia Murphy of the Daily Beast, makes the same kind of observation about Mitt Romney:  that he lacks a certain sense of humanity.  

Dukakis spoke in ideological terms about the government policy, rather than about people.  Romney speaks as a CEO about the economy in abstract data driven arguments and doesn't speak in terms of people's lives.

Of course, Romney's good luck is that he is not running against Mr. Warmth.  Obama has the same remote, cool, data oriented temperament.  One of the things I find so fascinating about this election is the likeness of the two candidates on a temperamental level - cool, remote, analytic, dispassionate.  Two Dukakises running for president, odd actually.