Archive for the ‘Economy’ Category

Men (and Women) for Others

Wednesday, January 8th, 2014

First a little bit of disclosure. I graduated from an all-boys Jesuit prep school in Omaha called Creighton Prep. Among other things, they taught me to be a man for others.

This term represents the basic educational philosophy of the Catholic Jesuit order. What it means is that those who attend Jesuit schools are taught that love of God includes love for the poor. You can’t have one without the other. They are also taught that this love is best expressed in action rather than talk. That action is characterized by the term “Social Justice”. What that means is that Jesuit philosophy regards ANY system that oppresses the poor as unjust. That includes both political and economic oppression.

The term “Social Justice” was coined by Jesuit Priest Luigi Taparelli in the 1840’s. It refers to the ability people have to realize their potential in their particular country or society. In broader terms those who advocate for Social Justice are encouraging the creation of institutions which ensure fair distribution of wealth and equality of opportunity. Those institutions typically include education, health care, social security, labor rights, as well as a broader system of public services, progressive taxation, and regulation of markets.

Gross income inequality is an example of a condition which exists in a society which lacks Social Justice. Racial discrimination, political oppression, and religious persecution also occur in some societies which lack Social Justice.

This brings us around to the discussion of Pope Francis and Social Justice.

Pope Francis is a Jesuit. He is the first Jesuit to ever be elected Pope. This is a big deal in the politics of the Catholic Church. The basic reason is that the Jesuits, in simplest terms, are fearless take-no-prisoners warriors. They are beloved because of their willingness to go anywhere and do anything to advance the cause of Christ and the poor. Jesuits have typically recruited the best and brightest in Catholic clergy because of this “no hold barred” attitude. These sorts of people are also attracted to the Jesuit order because Jesuits believe in education and scholarship. They believe that you can better understand God through academic study of His creation. Since the Jesuits operate some of the best colleges in the world, those who go through the Jesuit system have access to the institutions which prepare them to be intellectual “shock troops”. This commitment to a fact-based life of action as well as a faith-based life of prayer regularly put the Jesuits at loggerheads with the Vatican. The most recent example of deep disagreement between Jesuits and the Vatican was the emergence of Jesuit Liberation Theology in Latin America in the ‘70’s.

The fact that the Catholic Church has finally embraced a philosophy that as little as 50 years ago they condemned as radical is truly breath taking. It also speaks to the Catholic Church’s recognition that they need to be leading the charge for Social Justice.

In the finest tradition of the Jesuits, Pope Francis “walks the talk” and as a result is a fearless man on a mission. It is no accident that this man chose the patron saint of the poor, St. Francis as his namesake. In Brazil he visited the poorest most dangerous sections of Rio on foot by himself almost daily. He took public transportation rather than a chauffeured car. He lived in a modest apartment a short walk from the grand Cathedral rather than in the opulent archdiocese residence next to it. He has continued that policy in Rome where he lives in a simple guest house rather than the opulent papal palace.

His economic message regarding the poor is also simple, direct, and undeniable. It’s based on what Jesus told the righteous man in Matthew 25. If we care about our own salvation, we should welcome the stranger, clothe the naked, visit the sick and imprisoned, feed the hungry, and provide water to the thirsty. We are supposed to do these things without reservation or concern about need, worthiness, or consequence. God will take care of that.

He criticized “trickle down” economics as an ““opinion, which has never been confirmed by the facts, [that] expresses a crude and naïve trust in the goodness of those wielding economic power.” He also criticized the “idolatry of money” and unbridled capitalism as “a new tyranny.” As far as the benefits that supposedly were going to accrue to the poor from de-regulation and free markets, Pope Francis observed that the poor are “still waiting”.

Clearly this populist message flies in the face of anti-spending, anti-big government conservative Republicans who appear more concerned about fraud than hunger and dependency than poverty.

Here’s how some of representatives of conservatism responded to Pope Francis’ call for generosity and compassion.

Rush Limbaugh said the Pope’s comments were “pure Marxism”.

Fox News’ Adam Shaw called him the “Catholic Church’s Obama.”

Worst of all, Sarah Palin called him a “liberal”.

Others took another common conservative tack. People that disagree with them must either be confused, ill informed, or the victim of some liberal media distortion.

Rep. Peter King, a devout Catholic, said of the Pope’s use of the term “trickle-down” that a “liberal speechwriter stuck it in.”

Sen. Pat Toomey, who is also Catholic, said “It’s easy to draw I think what could be mistaken, superficial conclusions from some of the things that he said. I think he’s a wonderful leader for the church.”

Finally, Paul Ryan, also a devout Catholic simply suggested that Pope is confused. “The guy is from Argentina, they haven’t had real capitalism in Argentina,” Ryan said. “They have crony capitalism in Argentina. They don’t have a true free enterprise system.”

The Pope isn’t confused, misinterpreted, uneducated, or being manipulated by his speech writers.

One example is his response to being accused of being a Marxist. Pope Francis said, “The Marxist ideology is wrong, but I have met many Marxists in my life who are good people, so I don’t feel offended.”

The Pope is simply commenting on the facts. We are now three decades into a failed experiment in this country with unregulated capitalism. The results shouldn’t surprise anyone. There has been a massive transfer of wealth from the poor and middle class to the wealthy.

In the future, I’ll discuss some of the underlying moral structures which support these points of view. We’ll also examine the economic consequences of some of these choices.

Functionally Irrational

Tuesday, December 17th, 2013

Before we dig into the respective political positions on unemployment, let’s revisit this concept of moral intuitionism.

This is the condition experienced when people confront something that they consider objectionable from an emotional point of view. Their primitive emotional brain passes judgment and then hands that decision off to the rational brain. The rational brain then constructs a logical argument to defend what otherwise was an emotional decision.

Here’s an example drawn from social psychologist Johnathan Haidt’s book “Righteous Mind”.

The person conducting the experiment places a paper in front of the subject. The paper says, “I the undersigned, agree to sell my soul to the individual designated as the buyer for the sum of (blank) dollars.” Next to the paper is a crisp $100 bill. The question is will you sign it?

For those who say no, the person conducting the experiment adds several additional clauses. One says that this agreement is strictly for experimental purposes and is not binding in any theological sense. Will you sign now?

Then they also add that once the agreement is signed and the money paid, the signer can have the agreement back. They can keep the money and do whatever they want with the agreement. Will you sign now?

Do you have a dollar amount that would change your mind?

What about if the agreement includes a similar amount of money donated to the signer’s church? Would you sign then?

There are some (roughly 17%) who simply refuse under all circumstances. That’s because their emotional brain has already decided that this is wrong and under no circumstances are they going to participate. It doesn’t matter what anyone else says.

We are dealing with a similar circumstance in the Republican Party with regard to long term unemployment insurance.

Before some reader suggests that I only pick on conservatives, yes it is true that EVERYONE has some sort of social taboo that can trigger an attack of moral intuition. Conservatives, however, appear more susceptible than liberals because conservatives care more about rules while liberals care more about people.

The challenge in today’s political climate is that we have to make sound financial decisions to deal with issues like debt, unemployment, and economic growth. Because of moral intuition, conservative Republicans continue to find themselves on the wrong side of the data when it comes to their emotional responses to these issues.

Unemployment insurance is just one example. Republicans believe that unemployment insurance INCREASES unemployment because it removes the incentive to go find a job.

In their defense, there is some research that suggests during times of high EMPLOYMENT, unemployment insurance does increase the unemployment rate slightly.

Unfortunately that’s not the case right now.

There are still three times more people looking for work than there are available jobs.

As researchers at the Federal Reserve Bank of San Francisco recently concluded, “Our estimates suggest that extending unemployment insurance benefits in weak labor markets has virtually no effect on the rate of job finding.”

But let’s go ahead, just like with the soul-selling experiment, and discuss some of the other reasons Republican rational brains have come up with to support this emotional position.

There is the free market argument. That one suggests that intensifying the competition for the available jobs will drive down the cost of labor. Driving down the cost of labor will encourage businesses to hire more, which will result in a virtuous economic recovery.

The problem is that in at least this economy, growth is driven by consumption. If we drive down the cost of labor, that affects both the employed as well as the unemployed. When wages stagnate, consumption stagnates, and growth slows. That’s because businesses don’t hire because labor costs are low. They hire because demand for their goods exceeds their ability to supply those goods/services.

The only groups who benefit in this scenario of flat demand and decreasing labor costs are businesses, their investors, and their CEO’s. That’s because they are able to cut costs, demand higher productivity, and keep the profits for themselves.

The economic truth is that long term unemployment benefits act as an economic stimulus. They keep people in their homes, keep families together, and pump money into the consumer economy. Unemployment benefits PRESERVE jobs by propping up consumption during times of economic downturn. Moody’s estimates that every dollar of unemployment benefits delivers $1.55 dollars in economic benefit. Cutting $25B in benefits results in an estimated $39B economic loss. Next year when another 3.9M unemployed will qualify for long term unemployment benefits that are no longer there, the economic loss will be closer to $100B. The CBO recently estimated that extending the benefits through the end of 2014 would increase GBP by .2% and DECREASE unemployment by the same amount. In other words, long term unemployment benefits CREATE jobs.

The problem is that when you mention unemployment benefits to a conservative Republican, their moral intuition goes directly to the scenario of the government paying people NOT to work. That leads to the moral outrage of conservatives over any form of government assistance because it creates a culture of dependency.

It doesn’t matter that statistics show that of the 4.1M long term unemployed, only 1.3M are still receiving benefits. So for those 2.8M unemployed who have already lost benefits, that loss doesn’t appear to have made any difference in their ability to find a job.

Also 20% of the long term unemployed had at least a bachelor’s degree and 40% had household incomes between $30K and $75K. These are clearly not people whose previous history suggests dependency. What it does suggest is that the longer you are unemployed, the harder it is to re-enter the workforce.

From a political perspective, we then find ourselves in the position where moral intuitionism can’t be argued. The facts honestly don’t matter. All that matters is that we as a country refrain from doing whatever set of things causes the moral intuition of a conservative to fire off. That’s what is important in today’s politics. That’s the political challenge that we face as a country. How can a democracy function effectively when 30% of the voters are fundamentally irrational?

Merry Christmas

The Road Not Taken

Friday, December 6th, 2013

We’ve just gone through how the Great Recession caused a predictable populist uprising and how that uprising was hijacked by conservative Republicans and became the Tea Party.

In the interests of full disclosure, the Democrats had something to do with this too.

Here’s a short summary of how the Democrats missed the opportunity of a lifetime to make the case for government as the protector of the working man and the middle class. By failing to engage in a vigorous defense of the New Deal, Democrats lost an opportunity to re-educate another generation of voters on why free markets can’t be trusted to regulate themselves.

Background

After 8 years of Bush’s version of trickle-down economics, two wars, Halliburton, Black Water, Abu Grebe, an unfunded expansion of Medicare, Enron, torture, wiretapping, outing of CIA agents, a politically motivated purge of the justice department, Katrina, the housing bubble, and the inevitable burst of that bubble, ballooning deficits, dramatic job loss, the resultant rash of foreclosures, the collapse of the housing market, and the collapse of the domestic auto industry; the country was ready for a change. The collapse of the global financial markets only put an exclamation point to the cry for CHANGE!

The country selected a young bright Ivy League-educated African American who promised change. He promised to end the wars in Iraq and Afghanistan. He promised to expand healthcare. He promised immigration reform. He promised a new era of political cooperation and focus on rebuilding the middle class. More than anything else, he promised that a vote for him was a vote AGAINST everything that the Bush administration stood for. Shortly after his election, however, he was handed a global financial crisis.

Bad Optics

His reaction was to retain many of the people that Bush had put in place to deal with the crisis and pass the basic recovery package that had been crafted by that team. From a financial point of view, you can’t argue with the results. The plan worked. The global financial system stabilized. Bad financial institutions were consumed by good ones. The domestic auto industry was restructured. Five years later the stock market is setting records and job growth is finally hitting numbers that will reliably reduce unemployment.

The optics, however, were bad. You had Larry Summers and Tim Geithner leading the charge. Summers was the guy under Clinton who had championed the repeal of the Depression-era Glass-Steagall law which prohibited financial institutions from mixing securities trading and FDIC-insured banking. Geithner was a disciple of Alan Greenspan who had famously believed that the captains of Wall Street could regulate themselves. The focus of this team was on restoring confidence in the markets.

The collapse of the mortgage derivative market had left many financial institutions holding assets of questionable value as collateral for loans that they weren’t sure were collectible. In self-defense most banks stopped lending and started hoarding cash to protect against having their own loans called. That caused the economy to essentially seize-up as we transformed overnight from a credit economy to a cash economy. Getting the credit economy going again while avoiding the panic bank runs we’ve seen in the past was a masterful accomplishment.

The team completely ignored the need to also restore voters’ confidence. This opened the door for movement conservatism to put their own spin on events.

The AIG Moment

The stage was set when the news broke that AIG planned to pay out $165M in exec bonuses, and company-wide bonuses that could exceed $1.2B. This after the government provided AIG a huge bailout (a credit line from the Fed and Treasury of up to $182B). The President and Congress expressed outrage, but the die was already cast.

It didn’t matter that the AIG bailout turned out to be a ridiculously good deal for taxpayers netting almost $23B dollars in two years.

It also didn’t matter that AIG was the lynch-pin in the financial structure supporting the derivative trading market that was at the core of this collapse. If AIG was allowed to collapse, the financial meltdown could have easily become a depression. That’s because virtually every financial institution holding mortgage-backed derivatives in their portfolio also had an insurance policy from AIG to hedge against the performance of those derivatives. If AIG failed to pay their insurance claims, ALL of those institutions would be forced to unravel the value of their holdings to determine what they were worth. In the meantime, no one would lend to them; and they wouldn’t lend to anyone else.

While the Obama team of financial all-stars worked feverishly behind the scenes to keep the fragile interconnected network of international financial institutions from collapsing, the public saw something very different. They didn’t see all of the deals and personal promises required to keep the all the leaks in the dike from becoming a flood that would drown the world. Instead they saw what appeared to be obvious evidence that those who had caused the financial meltdown had successfully gamed the bailout too. They saw a system that was still rigged to benefit the wealthy at the expense of everyone else.

What mattered to them was not that President Obama and his team of Wall Street insiders had masterfully kept the whole system afloat by propping up AIG. They saw a “crony” deal that ALLOWED AIG to reward themselves when they should have been punished.

The right were able to capture this sense of anger with “let it burn” irrationalism.

The Democrats were caught flat footed because they had lost their ability to speak to or empathize with the working man.

President Obama in Audacity of Hope describes the “modern” Democrats that he has met on the fund-raising trail.

As a rule they were smart, interesting people, knowledgeable about public policy, liberal in their politics, expecting nothing more than a hearing . . . in exchange for their checks. But they reflected, almost uniformly, the perspectives of their class. . . . They believed in the free market and an educational meritocracy. . . . They had no patience with protectionism, found unions troublesome and were not particularly sympathetic to those whose lives were upended by the movements of global capital. Most were adamantly pro-choice and anti-gun and were vaguely suspicious of deep religious sentiment.

The financial meltdown frightened these people too, but they did not lose their jobs or their homes. They had a deep and sophisticated understanding of the financial markets because they are generally well educated and well off. They knew why you couldn’t simply “let it burn”. They could probably even empathize with those who were losing their jobs and their homes, but they could not appreciate the abject terror, vulnerability, and rage that comes from having your future stolen. These Democrats simply could not understand why so many people were obsessed with finding and punishing the criminals when first priority had to be stabilizing the financial system.

Herbert Hoover or FDR

History has lost track of the fact that Herbert Hoover used bailouts extensively to try to jump start the economy after the 1929 stock market crash. They were massively unpopular because of blatant cronyism. FDR won the presidency in 1932 because he campaigned against them. It was FDR’s genius that he understood the plight of the working man even though he himself never experienced it. He was able to gain their confidence because he laid the blame for the Great Depression squarely on the shoulders of greedy business men and the unregulated free market.

His actions supported his words.

He used government to get money flowing again rather than working through financial institutions. He closed corrupt banks and regulated the rest. He created new investment regulations and imposed wage and cost controls. He supported the growth of unions. When that wasn’t enough to put everyone back to work, he printed money and hired the unemployed himself to build roads, develop parks, write books, record songs, and create public art. He was able to create the grand New Deal bargain between business and the workers because workers believed in him.

Instead, Obama and his team trusted their own expertise and intelligence. Their message to the public was that we’ve got the best economic minds in the world engaged in the managing this recovery. The recovery plan is based on solid Keynesian economic principles, so trust us. It’s going to work. It may take some time, but it’s going to work.

They were right. It did work.

They were wrong in assuming that people who were terrified, would feel better knowing that smart people were in charge. For many it was exactly the opposite.

What people were hungry for was a leader who not only told them that everything was going to be OK, but who also demonstrated by his actions that he understood their righteous wrath. They needed someone to take out after Wall Street, punish those who misbehaved, regulate the industries that couldn’t regulate themselves, and place the blame squarely on the failed philosophy of unregulated free markets. Democrats should have been promoting the role that government plays in times like this. Instead they found themselves protecting Wall Street from a larger collapse that could have plunged the world into depression. The recovery plan required cooperation from the insiders who helped cause the problem. The Obama administration secured that cooperation by reassuring insiders that the government’s primary concern was recovery rather than prosecution.

Instead of FDR, Obama became Hoover.

Elites

Movement conservatism took advantage of the opportunity that they helped create. Just as a segment of the population in the 1930’s turned to communism as the utopian alternative to capitalism, movement conservatism began promoting utopian market populism as the cure of our economic ills today. Market populism is the answer for everything and a potent defense against relativism. Whatever shortcoming conservatives confront, whether it be math, or science, or political reality can be explained away through the fiction of a “Randian” free economy.

The challenge that this presents for Democrats is, just as Republicans are becoming more fictional and conservative, Democrats have become more professional and pragmatic. Democrats live in the world of facts. Republicans live in the world of ideology. The world of ideology will trump the world of facts every day because ideology is about religion. You can’t argue religion.

The emergence of the cult of utopian market populism also made it much easier for Democrats to dismiss right wing zealotry as hysterical and illogical. That’s because Democrats themselves were becoming the equivalent of political atheists. Democratic political positions were grounded in fact rather than belief. Democrats trust and self-identify with academia and subject matter experts because that’s where facts come from.

Republicans identify with the conservative meme of revolting against the ruling elite class who are imposing an ideology (the world of facts) on them. They see themselves as heroic revolutionaries storming the barricades of conventional wisdom.

It doesn’t matter that overturning the status quo, as represented by the scientific method, is a the heart of virtually all academic research.

It also doesn’t matter that holding up the free market as the example of a revolt against the ruling class is completely backwards. The free market CREATES the ruling class. The ruling class use their wealth and power to warp the free market and preserve their position. The dramatic growth in a fabulously wealthy ruling class in this country is only the most obvious result of our willingness to give them free reign. The fact that Republicans chose a poster child for the ruling class as their nominee in 2012 was no accident. The religion of the right, however, tramples these facts with the free market fantasy that EVERY man could achieve the wealth of Mitt Romney if the market were simply allowed to function without limit.

What matters to movement conservatives is that there is an elite in this country who dare to question their religious beliefs in a free market utopia. They ASSOCIATE this elitism with academia. In a fit of moral intuitionism, they reject science and research that contradicts their views as part of a vast conspiracy to hide the truth and brainwash the unconverted. They attribute cronyism and self-serving classism to any political influence gained by those who live a fact-based life. They infer from that that the great ills in the economy today flow from the attempts by the elite to control and manipulate the otherwise pure and dependable free market to their own ends. These elites engage in this behavior because they fear what would happen to them in a truly free market utopia.

Healthcare Reform

Obama made a fateful choice when he decided to pivot from financial recovery to healthcare reform. Rather than engage in a battle to promote fundamental Democratic beliefs about the role of government to protect the little guy against the excesses of the market, Obama chose to fulfill his campaign promise of universal healthcare. Unfortunately this played right into the hands of movement conservatism. The government that was already guilty of cronyism on a massive scale, and racking up debt of historic proportion in the process, was now planning to take over the largest segment of the economy. What started as a populist backlash to the financial meltdown turned into a political movement called the Tea Party. That movement recaptured the House in 2010.

If healthcare reform does come close to its enrollment targets, significantly reduce the rolls of the uninsured, and sign up enough young healthy people to support its business model – the politics in this country will change again.

That political change will weaken Republicans, strengthen Democrats, and relegate the Tea Party into a fringe opposition group. That’s because a majority of voters will realize that just as the Republicans were wrong about the free market’s ability to regulate itself, they were wrong about healthcare reform. It did not kill people. It did not destroy jobs. It did not add to the debt. The Republicans, because they have invested so much into Obamacare opposition, will get punished at the polls until they find another issue. The Tea Party because they are likely to continue in their obsessive opposition to a program that they are not going to be able to repeal, will lose their ability to influence the Republican Party.

While the Tea Party figures out how to move forward, Republicans and Democrats will engage in the next big ideological fight. That will be the unfinished business from Obama’s first term – Economic Justice and Income Inequality.

Villain of Choice

Saturday, November 30th, 2013

Let no man deceive you by any means: II Thessalonians 2:3

This is the final installment in our attempt to answer how the biggest financial collapse since the Great Depression fueled by decades of financial deregulation turned into a full-throated defense by the Tea Party of the free market economy.

Capitalism

Capitalism can be a wonderful economic system. One of its weaknesses, however, is the boom and bust cycle. If you look at the economic history of this country, we have had boom and bust cycles since the beginning of our democracy. Some blame the cycles on the Fed, but the modern Federal Reserve Banking system was created in 1913 in response to the Financial Panic of 1907. Before the creation of the Fed, the country experienced 25 depressions. Since then, we’ve only had one. So the Fed must be doing something right. We DO continue to experience periods of expansion and contraction (recession) – 40 in all since 1940. Some recessions are mild and some, like the financial collapse of 2008, are catastrophic.

These cyclic economic periods are primarily triggered by private sector investment. As the economy grows there are natural pressures on prices, wages, and capital. Those inevitably lead to inflation and rising interest rates as demand exceeds supply. That increases the costs to expand as well as making it more expensive for consumers and businesses to purchase goods. As demand and expansion slow in reaction to increased prices, investor and consumer confidence wanes until expansion stops. Businesses cut back, individuals spend less and contraction begins. Businesses reduce their labor force. Prices, labor costs, and interest rates come down as supply exceeds demand. The contraction continues until costs become so low that new investment and a new cycle of growth starts. Recessions driven by contraction in the financial sector take longer to recover from because access to capital is a key factor in our investment driven economy.

Democracy and Capitalism

The problem that capitalism presents for a Democracy is that these cycles of expansion and contraction in an unregulated market can be extreme. Expansions can turn into economic bubbles. Economic bubbles are highly speculative periods where expansion is being driven by trading activity rather than production or consumption. When these bubbles inevitably burst, as was the case in the housing bubble, many innocent people can find themselves out of a job for no fault of their own. There is also an understandable outrage that the unregulated and sometimes illegal activities of a few greedy speculators end up hurting the much larger number of hard working people who WERE playing by the rules.

The normal reaction in a democracy is that the injured demand that the government do a better job preventing the sorts of excesses that lead to these severe economic downturns. The New Deal is a perfect example of this trade off. In return for preserving the basic tenants of capitalism after it ran amok in the 1920’s, FDR promised workers a social safety net. He also created a set of banking and investment regulations that until the 2000’s effectively prevented speculative bubbles to grow to a size that would threaten the economy.

The Great Recession

The financial collapse of 2008 was the result of a deregulated financial industry that created a bubble in the mortgage market. Financial deregulation started with Reagan, but continued in every subsequent administration through Bush II.

The 2008 financial collapse was broad, deep, and terrifying. The expected response from those who lost their jobs and their homes would have been a populist uprising against the free market economy in general and the deregulated financial industry in particular. Those individual traders whose irresponsible actions caused banks to stop lending would also have been in the line of fire. If it had followed the arc of the Great Depression, there would have been universal agreement that the free market was not able to regulate itself. People would have looked to government to step in and make sure something like this never happened again. Even Alan Greenspan who famously ignored all of the warning signs of the impending collapse because of his belief in the self-regulating forces of the free market, had to apologize to the American people.

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

The populist outrage did occur. It began with the election of Barack Obama, but it got hijacked by movement conservatism and became the Tea Party.

The Wrong Villain

In the 2008 Presidential election, the Republican Party and the whole politics of free markets and deregulation were rejected by the voting public. The Republicans were famously the party that drove the economy into the ditch and had the temerity to ask for another turn behind the wheel. There were many who said that it would take decades for the party to earn back the trust of the voters. It was so bad that even the reliable Southern Strategy and wedge politics failed to prevent an African American liberal from Illinois from winning.

In the aftermath, the Republicans had a choice. They could move more to the center and remake themselves as a more moderate party, or they could double down on the methods that had worked so well for them in the past and become even more conservative.

They chose to double down on their old strategies. Minority leader Mitch McConnell said that his goal was to make Barack Obama a one term President. This appealed to his base on both racial and political terms.

Republicans thought they could use the government’s recovery legislation to accomplish that goal but they also needed someone to blame. They found the villain in all of those victims who lost their homes.

The famous Rick Santelli rant from the floor of the Chicago Board and Trade was the spark that lit this particular fire. He didn’t mention the mega-billion dollar entities that had conspired with government to rig the system in their favor at the expense of ordinary Americans. Instead the Santelli rant was directed against a (quite modest) government program to help distressed mortgage holders and against the so-called “losers” who couldn’t pay their mortgages. In Santelli’s self-serving logic, the traders on the floor who helped create this mess were the real victims.

This was a triumph of the old Big Tobacco PR tactic and the tried and true “Willie Horton” strategy. When your side is unpopular seek to redirect public ire toward other villains. Reagan’s fictitious welfare queens reappeared as poor black people who were sold “liar” loans.

Even though the TARP and other financial recovery methods were originally crafted by the Bush White House, Obama was held responsible because he implemented these policies in the first few months following his election.

Even though it was unscrupulous predatory mortgage lenders like Morgan Stanley who broke the law, lied to their customers, and recruited people who clearly could not afford mortgages with the promise of home ownership – conservative ire was redirected. It was focused squarely on greedy neighbors, buying too much house; or on the liberal state, which according to myth forced banks to hand out bad loans to poor people; or on society generally for tolerating debt at every level.

As Thomas Franks summarized:

The (conservative) movement succeeded by capturing completely the one part of the story that was very clear: the bank bailouts, which instantly eclipsed the financial crisis proper when they happened and which immediately got people out of their armchairs sputtering with rage. The bailouts were not confusing. They were very clearly the deed of the federal government, apparently being operated by cronies of Wall Street. It was a spectacle of almost unbelievable corruption, the kind of thing that crushes the faith of a nation. What the public craved at that moment was a form of idealism that would allow us to scream a convincing “no” at the whole thing, and the free-market people—spotting the opportunity like any good entrepreneur—immediately stepped in and delivered exactly such an idealism. (Because, in a pure free-market system, they said, government would never rescue or bail out anyone. The market would decide who prospered and who failed.)

It didn’t matter that the bailout strategy actually worked. The global financial market melt-down did not become a depression. Trust WAS restored relatively quickly. The insolvent institutions were merged with the remaining stable institutions. The domestic auto industry was saved. The restructured companies led the country back out of recession. Five years later the stock market is hitting record highs. The government has fully divested itself of the remaining GM stock. The net cost to the taxpayers was a remarkably low $60B. In comparison, Reagan’s S&L crisis which was significantly less damaging to the economy cost six times as much to clean up.

But it didn’t matter. The Tea Party rage over the financial bailouts spilled over into deep opposition to the Affordable Care Act and the debt that the country was piling up as a result of high unemployment, low taxes, two wars, and an unfunded expansion of Medicare.

It also didn’t matter that the real financial risk was the 3x GDP growth rate in the cost of healthcare. The Affordable Care Act was the only option on the table to reduce this rate of growth and as a result reduce our potential long term unfunded liabilities. The Tea Party viewed it as another irresponsible expansion of government even though it actually saved $109B in its first decade.

It also didn’t matter that this administration committed to ending the wars that were putting a huge strain on our military and on the budget.

The Tea Party was focused on the poor and big government as the villains of the financial meltdown. The fantasy of a utopian free market promised equity, justice, and prosperity for those who played by the rules. The fact that we weren’t seeing this utopia emerge was the fault of government. Worse yet, our exploding debt was at least in part due to the burden that the poor and unemployed were placing on the social safety net.

Tea Party Irony

What should have started out as a populist backlash to the failure of our decades-long experiment in free market deregulation was transformed into a protest movement demanding MORE of the free market that caused the problem and even LESS of the government that is the only solution.

Rather than complain that the government failed to keep the FDR’s promise to workers, this protest movement rejected whole premise. It wasn’t that the social contract the FDR made with the prosperous to support a social safety net wasn’t working. It was that the prosperous were able to convince those who benefited most from the social safety net, that it wasn’t fair to continue to expect the “winners” in our economy to pay for it.

Movement conservatism was able to convince small business owners that they were the backbone of a sort of free market populism instead of in a life and death struggle with larger and better funded competitors. In this conservative scenario, it’s the heroic small business person pitted against the parasitic elites who acquire their power through education or unfair government influence. It was the elites that were making it difficult for all businesses, large and small, to enjoy the fruits of their labors. The practical effects of this free-market idealism, however, is to bolster the power of big business. Big business is the real beneficiary of small business’s long war on organized labor and government regulation. It is big business that regularly feeds at the trough of government contracts, subsidies, and tax breaks that the rest of us including small business pay for. It is also big business that seeks to create monopolies which make it impossible for small business to compete.

The ultimate irony is that the Tea Party’s drive for fiscal responsibility has hurt the very people who support that movement. The states with the greatest concentration of Tea Party participation are the states that get the most money from federal programs. These are the states that have the highest numbers of people receiving Social Security and Medicare. These are the states with the largest amounts of people dependent on defense spending. These are the states that send the least amount of federal taxes to Washington and get the most amount of money coming back into their economies. These are the states where according to Thomas Frank, voters to struck a blow against elitism and received in return a social order in which wealth is more concentrated than ever before in our lifetimes, in which workers have been stripped of power and CEOs are rewarded in a manner beyond imagining.

The ultimate irony is that in the Tea Party’s eyes, CEO’s are the heroes and government is the villain. The reality is that the majority of the unprecedented growth in wealth that has occurred over the last 25 years has been in CEO pay. That pay came from a direct transfer of wealth from working people into CEO salaries combined with historically low taxes on the wealthiest people in this country. Those statistics are not an accident. This is the direct result of government policy. Government has in fact done exactly what the Tea Party has requested. It allowed the free market to operate without limit. That free market methodically suppressed middle class wage growth even though productivity, working hours, and profits hit all time highs. Under free market rules, CEO’s decided to keep all of those gains for themselves because they could.

Summary

The Tea Party is the construct of the same political operatives and tactics that gave us decades of tobacco company products that both those companies and the government knew were addictive and deadly. It is the same political operatives who promised from Reagan to Bush that showering tax breaks on the rich would result in economic gains for everyone else.

The Tea Party professes a deeply flawed looking-glass ideology that is ultimately the product of big business self-interest. That agenda is a continuation of the same unregulated free market capitalism that caused the Great Recession, unprecedented growth in wealth, and the largest income inequality in our history.

This agenda includes policies which have lead to an economy where only the very rich prosper, yet those supporting the Tea Party continue to insist that government is the problem.

Government is not the problem

Government is the solution. It is the only power left in this economy to oppose the influence of corporations and the wealthy. You don’t get to vote for how a corporation operates. Yet the agenda of the Tea Party trusts these corporations more than the only organization that they CAN influence – our government.

They portray government as the big evil, when in fact, government is us. It is teachers, first responders, and any number of middle class people trying to do the best job that they can. None of those who make up our government even come close to the 100 million dollar salaries of our top CEO’s.

Instead the Tea Party has allowed themselves to be manipulated by the same forces which caused government to relax regulations and implement a policy of allowing the free market to govern itself.

The ultimate irony is that Karl Rove, who helped create the Tea Party, no longer has use for them. While libertarian Koch money continues to support Tea Party causes, Tea Party shutdown and default tactics have terrified business leaders. As a result, Rove’s Crossroads fundraising juggernaut has announced that they will support moderate Republican candidates to oppose Tea Party incumbents in the 2014 and 2016 elections. It appears that at least Republican business interests have found a new villain.

The uncomfortable truth is that, though Republicans had both the motive and the means to hijack the populist uprising caused by the 2008 financial meltdown, the Democrats deserve some credit for the birth of the Tea Party too. Next up, how the Democrats fumbled what should have been a golden moment to reassert the basic tenants of Democratic Populism. In other words, we have met the enemy and he is us.

John Birch, Big Tobacco, Young Republicans and the Birth of the Tea Party

Wednesday, November 27th, 2013

The John Birch Society

The John Birch Society was founded in 1958 in Indianapolis, IN. One of the founding members was Fred Koch, founder of Koch Industries and father of David and Charles Koch. The Birch Society was viewed as a radical right wing organization because it espoused fundamental changes in government, eliminating institutions that they felt threatened their values or economic interests, and prosecution of those people who disagreed with them.

They opposed civil rights movement and subsequent legislation calling it communist. They opposed the United Nations calling it “one world government”. They opposed immigration reform and all free trade agreements. They accused both Eisenhower and Kennedy of being communist agents. They espoused a particular form of “frontier mentality” which incubated a virulent strain of reactionary thought.

Now, fifty years later, the Koch brothers are still the major funders of conservative and libertarian political movements including the Tea Party. The difference is that these organizations, who continue to advocate for smaller government, elimination of civil rights legislation, opposition to the UN, opposition to immigration reform, elimination of free trade agreements, and support of an unregulated free market; are now regarded as part of the mainstream political fabric. When they call a democratically elected President a socialist, a fascist (not sure how you can be both), or an illegal alien; it’s now accepted as part of normal political discourse.

What happened?

Big Tobacco

One of the lobbying strategies of the Big Tobacco in the 70’s was to assert that big corporations should have more political power. This strategy is reflected in the “market fundamentalism” that is one of the major pillars of Tea Party philosophy – unfettered capitalism is the best economic philosophy. This libertarian philosophy was embraced by Big Tobacco in an effort to prevent the sort of regulations that eventually limited their right to promote an addictive drug that kills people. One of the groups supporting this position and the Tobacco industry was Citizens for a Sound Economy founded by the Koch brothers in 1984. The primary funders of the Tea Party include FreedomWorks which is a spin-off of Citizens for a Sound Economy and Americans for Prosperity founded by David Koch.

Young Republicans

Karl Rove rose to fame in the Republican Party because of his reputation as a master of dirty tricks. Among other things his campaign for chairman of the College Republicans is legendary. It was during this period of time that he because friends with both the Bush family and Lee Atwater. Lee Atwater was an expert in the Southern Strategy that was the bulwark of successful national Republican campaigns starting with Nixon. That strategy was in stark display in the 1988 Bush election when Atwater said he would defeat Dukakis by making “Willie Horton his running mate”. Late is life, Atwater apologized and asked forgiveness.

In 1991 Rove began to work for Big Tobacco. In that role, he spearheaded a tort reform movement to weaken the ability for states attorney generals to litigate against the Tobacco industry. It was these legal cases that eventually brought down Big Tobacco. Rove’s activities included setting up state chapters of a tobacco industry funded astroturfing organization called Citizens Against Lawsuit Abuse. The Texas chapter of this group under the direction of Tom Delay was particularly effective in getting conservative judges elected and ultimately pushing through the gerrymandering that supported the 2010 Republican Congressional landslide.

The CALA blueprint honed in Texas included running TV and radio ads warning that the legal system was out of control, affecting the economy and the pocketbooks of average people. This blue print included generous funding from the Texas Chamber of Commerce and corporations seeking protection from consumer law suits. The Chamber of Commerce was running ads supporting Big Tobacco as late as 2002. This followed classic Tobacco Industry public relations rules – When your side is unpopular, as the tobacco industry is, seek to redirect public ire toward other villains – in this case, trial lawyers, taxes and big government. When the words “trial lawyers” are spoken in a spot aired by the U.S. Chamber of Commerce, the screen shows a black stretch limousine passing by the Capitol.

Finally Rove was also credited as the architect of the wedge politics that propelled George W. Bush into the White House. Thomas Frank, author of What’s the Matter with Kansas, summarized those politics.

Vote to stop abortion; receive a rollback in capital gains taxes. Vote to make our country strong again; receive deindustrialization. Vote to screw those politically correct college professors; receive electricity deregulation. Vote to get government off our backs; receive conglomeration and monopoly everywhere from media to meatpacking. Vote to stand tall against terrorists; receive Social Security privatization. Vote to strike a blow against elitism; receive a social order in which wealth is more concentrated than ever before in our lifetimes, in which workers have been stripped of power and CEOs are rewarded in a manner beyond imagining.

It was this policy of “deceive, divide, and conquer” that also sowed the seeds which later grew into the Tea Party.

Summary

The Tea Party and to a large degree the dysfunctional politics that the Tea Party represents were a long time coming.

It started with Big Tobacco’s desperate attempt to save themselves from the inevitable outcome of selling an addictive drug that kills people. They developed many of the political techniques now in common use particularly by movement conservatism. Those include Partners in Crime, Astroturfing, Junk Science, and Lobbying.

Radical conservatism in the form of the John Birch Society eventually joined forces with the Tobacco Industry. The common interest here was a particularly twisted form of libertarianism called free market capitalism. This appealed to the Tobacco Industry because they wanted to be able to continue to sell their products even though they were addictive and deadly. The libertarian capitalists liked the money that the Big Tobacco brought with them. They and organizations like the Chamber of Commerce were happy to make a deal with Big Tobacco if it meant advancing their own cause of smaller government and fewer regulations.

The Koch family has been underwriting libertarian and conservative causes for two generations. They are really the invisible hand manipulating this whole political movement. Fred Koch was a founding member of the John Birch Society. David and Charles Koch have become the bankers of the Tea Party movement, major funders of the movement to oppose climate science, and promoters of libertarian free market philosophy. Their fortune is closely tied to the fossil fuel industry.

Karl Rove became the chief apparatchik of this new philosophy of politics. He refined the political use of the tools that Big Tobacco created. He added Lee Atwater’s racial politics and expanded it with social issues which appealed to the evangelical right. He wrapped it all up in the flag and the Bible (even though he himself is an admitted agnostic) and used it to win two national elections for George W. Bush. In response to Obama’s election in 2008, Rove went to work for Fox News and helped start the astroturfing opposition movement that later grew into the Tea Party.

Next up, we’ll try to connect the dots to show how these historical forces have twisted an otherwise completely predictable populist uprising into what has become radical conservatism and the Tea Party.

Madman Theory

Tuesday, October 1st, 2013

This is actually the name for a foreign policy that Nixon tried to use to bring the Viet Nam war to an end.

In his case, the setup was that Nixon was obsessed about communism and also under great pressure to end the war. As a result, the threat was that he might simply lose patience and nuke North Vietnam back to the Stone Age if the North Vietnamese didn’t come to the negotiating table.

The same strategy is in play right now in the showdown over defunding Obamacare.

Republicans have admitted that this is a political strategy.

Even though they failed to gain the White House or a majority in the Senate in the last election, the fact that they did retain a majority in the House (they feel) entitles them to use whatever means are available to them to advance the agenda of the people who elected them.

That’s where the Madman enters the room. Republicans are willing to shut down the government in order to get some portion of their agenda passed by the Democratic Senate majority and signed by the Democrat in the White House.

“People have to recognize there’s never any compromise until the stakes are high,” said Representative Dana Rohrabacher, Republican of California. “In our society, that’s the nature of democratic government.”

The compromise in this case is that the Republicans agree to allow the government to continue to operate in return for significant legislative concessions by the Democrats.

AND they don’t seem to care whether or not it harms the economy.

“Economists, what have they been doing? They make all sorts of predictions,” said Representative John Fleming, Republican of Louisiana. “Many times they’re wrong, so I don’t think we should run government based on economists’ predictions.”

Nixon faced this same problem in Viet Nam. If your opponent is afraid of dying, and they believe that you are crazy, they will likely negotiate. If your opponent doesn’t care about dying, or at least is willing to call your bluff, you are forced to do something crazy or lose future bargaining power. That crazy act, in Nixon’s case, was invading Cambodia. The Republican crazy act is damaging the US economy in order to bring about legislative change that they couldn’t achieve through the ballot box.

The problem with this Republican strategy is that they are INDEED crazy, but not for the reasons that you might think.

They are crazy because they allowed the Democrats to BAIT them into picking a fight over the continuing operation of the government rather than the government default.

Government default is the BIG DEAL. It is one that Obama might have been willing to give up a year of Obamacare to prevent.

The Democrats, however, don’t care if the Republicans shut down the government. In fact, they prefer it to the other alternatives on the table.

The reason is that the country will survive a government shutdown, but the Republicans won’t.

By the time the REAL battle comes up, which is the debt ceiling, the country will have dealt with several weeks of the government being shut down, will be convinced the Republicans are indeed Madmen, and will demand an end to the lunacy. That end will be passing the CR to get the government running again AND passing a resolution to raise the debt ceiling. The voting public will NOT be willing to listen to Republicans talking about debt, or future generations, or irresponsible Democrats. They will have lost their patience with Republican tactics and it will all be over but the shouting. That’s because the voting public will vote in sufficient numbers in 2014 to make sure this doesn’t happen again.

So in essence, the Republican Madman Strategy was to put a gun to their own head and threaten to pull the trigger. Democrats jumped up and yelled, “Stop. Please don’t do that. Give the gun to me.” Once they were sure the gun was loaded, they handed it back to the Republicans and said, “I believe this is yours.” Last night the Republicans pulled the trigger.

Personal Responsibility

Tuesday, September 3rd, 2013

When the Son of man shall come in his glory, and all the holy angels with him, then shall he sit upon the throne of his glory: and before him shall be gathered all nations: and he shall separate them one from another, as a shepherd divideth his sheep from the goats: and he shall set the sheep on his right hand, but the goats on the left.  Then shall the King say unto them on his right hand, Come, ye blessed of my Father, inherit the kingdom prepared for you from the foundation of the world: for I was an hungered, and ye gave me meat: I was thirsty, and ye gave me drink: I was a stranger, and ye took me in: naked, and ye clothed me: I was sick, and ye visited me: I was in prison, and ye came unto me.  Then shall the righteous answer him, saying, Lord, when saw we thee an hungered, and fed thee? or thirsty, and gave thee drink?  When saw we thee a stranger, and took thee in? or naked, and clothed thee?  Or when saw we thee sick, or in prison, and came unto thee?  And the King shall answer and say unto them, Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.
Matt 25:31-40

For Christians, I don’t know how the message could be any clearer.  This is about salvation.  In my reading, those that provide for the poor, the hungry, the stranger, the sick, and those in prison will be welcomed into heaven.

It is also instructive that Jesus directed this advice specifically at those he called “the righteous”.  These are the people who aspire to perfection, go to church, and keep the commandments.

During Jesus time, many pious Jews thought that bad things happened to bad people.  So they felt no compassion for those that Jesus described.  Instead most blamed the poor, the sick, the hungry, the homeless, and those in prison for their plight.  The self-righteous Jews figured that these people were being punished by God for something.  And clearly who are they to question God.

Jesus was very clear in what he said.  He didn’t qualify those in need in any way.  Instead he said that their NEED is the only relevant qualification.  It doesn’t matter why someone was hungry or sick or homeless or in jail.  Our response is all that is important.  That response will determine how we are judged in the afterlife.

We find ourselves in a very similar situation today when we attempt to have a conversation about race, poverty, and crime.

First a few facts.

According to the Census Bureau, fully 38% of African-American children under 18 now live in poverty.

67% of African-American children live in single parent households, and nearly all of those doing the actual parenting are women.  The courts, according to HHS, have awarded child support to 45% of these African-American mothers, but less than half actually get any money.   Doing the math, that means that 80% of those custodial mothers get no funds from the fathers of those children.  About half of white women actually receive the support the courts have awarded.

This raises the obvious question of where the African-American men are.

A million of them are in prison.  That’s 43% of our prison population even though they represent only 13% of the population.  One out six African American men have at some time been incarcerated.  Even that is a decrease from the past decade.

Maybe because they commit more crimes?

Not exactly.

African-American defendants are more likely to be given jail or prison time for the same or similar offenses for which white folks are given probation. African-American men also receive longer sentences than white men sentenced for the same or similar offenses.

This is, in part, the sorry legacy of our failed war on drugs.  In the 80’s, “ghetto” drugs like crack cocaine carried penalties up to 100 times more severe than a similar offense for a similar amount of the “yuppie” powder version of cocaine.  When these drug laws were originally passed in 1986, the thought was that crack was more potent and addictive.  Studies have since disproven that claim.  The U.S. Supreme Court finally ruled the sentencing disparities unconstitutional.

On the employment front, only 52% of African-American students graduate from high school and the rate for African-American boys is even worse according to the Department of Education. The economic consequences of that lack of formal education are well known – lousy jobs with lousier pay and a downward economic spiral from which there is no escape.  The economic consequences of an arrest record are also severe.  70% of employers run criminal background checks and 50% won’t hire those with a criminal record.

New research also suggests that children raised in poverty actually suffer physician damage to their brains which impair their cognitive abilities as adults.  Testing has already discovered that rich kids perform better than poor kids at a number of standardized cognitive tests.  Researchers have now discovered at least one cause.  During the first couple of years of life, our brains “wire” themselves based in part on the stimulation that we receive from our environment.  Stressful environments inhibit the full development of this wiring.  Even the tone, language, and vocabulary that a young child experiences during the first weeks and months of life can have a profound effect on later academic success.

It’s a statistical avalanche of negativity – grinding poverty, early developmental deficits, poor educational opportunities, failing schools, few jobs, and way too much interaction with the criminal justice system.

We cannot and should not ignore that some of this is self-inflicted even while we acknowledge the historical and socio-economic hurdles faced by African-Americans. Whether or not you respect the women trying to raise you and the young women around you, or if you stay in school, or take responsibility for your own children are all choices that can be made regardless of external pressures.

But it most certainly is not all self-inflicted.

There has to be some other reason why, for example, if a white man and African-American man with the same educational credentials apply for the same job the white man is twice as likely to get the job. Or why, when both African-American and white little girls were given a choice between a white doll or one of color, even the African-American girls preferred the white doll. Or why we still have such a profound ignorance of Africa and African-American history.

There also has to be a reason why race and poverty have become so politicized.  Why African American voters, for example, voted in higher rates than whites in the last two elections.  One opinion is encapsulated in a Romney quote that became a pivotal moment in the 2012 election.

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it — that that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. … These are people who pay no income tax. … [M]y job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.

Romney was correct in suggesting that 47% of those who file income tax forms pay no net income tax, though that doesn’t mean that they aren’t tax payers.  Two thirds of those paying no income tax did pay payroll taxes (FICA and Medicaid) and virtually everyone pays some state and local taxes/fees.   He was also wrong in suggesting that this cohort votes primarily democratic.  55% of the “47%” are elderly.  They voted 56% to 44% for Romney.  Roughly 60% of the “47%” had incomes above $50,000 a year.  They supported Romney 52% to 46% and those with incomes above $90K supported Romney 54% to 44%. 

So what segments are left that voted for the president no matter what?

The voter segment that gave Obama the largest margin of victory was African Americans (93% – 6%).

Even though Obama won two elections, this open issue has not been resolved.  It remains the most difficult one that I think our democracy faces.  One only need look at the range of responses to the Treyvon Martin killing to understand the depth of the division.

What do we do as a country to deal with the stark realities of institutional poverty, crime, and violence in the African American community?

One choice is to blame African Americans for their condition.

This view was summarized by Ted Nugent in his comment about problems of crime and violence in the African American community.  He said African Americans could “fix the black problem tonight,” if they would put their “heart and soul into being honest, law-abiding, [and] delivering excellence at every move in your life.”

And

“racism against blacks was gone by the time I started touring the nation in the late [19]60s” and by the 1970s, “nothing of consequence existed to deter or compromise a black American’s dream if they got an alarm clock, if they set it, if they took good care of themselves, they remained clean and sober, if they spoke clearly, and they demanded excellence of themselves and provided excellence to their employers.”

There is great risk, at least for Christians, in this choice as Jesus explained.

The other choice is to follow Jesus recommendations.  Feed the hungry.  Help the stranger.  Clothe and shelter the homeless.  Heal the sick. Care for those that are in prison.

That’s not to say that these aren’t complex issues.  They are.

This is also not to say that all people need to develop individual responsibility.  They do.

But Jesus said clearly that the individual responsibility He is concerned about is that of the righteous.  THAT responsibility is to care for the less fortunate regardless of how they got there.

Jesus never said this would be easy.  But he did promise that the reward for those willing to take on this task would be great.

He provided every righteous Christian a choice.

Just like any other issue of personal responsibility, how you respond is up to you.

Sequester the Sequel

Thursday, August 22nd, 2013

While many are suggesting that the first year sequester cuts weren’t that bad, they are generally unaware that the sequester bill included five years of scheduled across the board spending reductions.

So let’s take a look at what has happened already and then what is coming.

According to the U.S. Bureau of Economic Analysis, over the first half of 2013, the federal government has subtracted 0.8 percentage point from GDP growth—this as the economy grew a paltry 1.1 percent in the first quarter and 1.7 percent in the second.

The CBO has projected that if the next round of sequester cuts were canceled, we would see another .7% in GDP growth and add another 900,000 jobs by Q3 2014.

As Business Week says, this isn’t rocket science.  “We’re living through the biggest contraction in federal spending in 60 years, and this is one of the weakest recoveries on record. Coincidence?”

Conservatives counter that every dollar that isn’t spent by the government goes back into the pockets of taxpayers.  The implications are that individuals will spend that money in the same ways that the government will, we will see the same growth, and we will be better for it because the government is inefficient and political.  The problem with this simplistic view is that in uncertain times like this individuals DO NOT spend their money.  Instead they reduce their debt and increase their savings.  Businesses respond to reduced demand by doing the same thing.  So we end up with a lot of cash sitting on the sidelines and economic growth slows, which is where we are today.

The CBO says we are operating 6% below our capacity right now.  That is $1T in economic capacity that is sitting idle because of lack of demand.  The problem, for anyone willing to take a look, is clearly NOT too much government spending.  It is too little consumer demand.

Here are a few more quotes if you remain unconvinced.

“The idea that spending cuts generate growth in a demand-constrained economy is nonsense,” says Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities.

“To say the sequester is good for the economy is wrong on a scale that’s impressive,” says Neil Dutta, chief U.S. economist at Renaissance Macro Research.

“I don’t know how you can make that claim,” says Stuart Hoffman, chief economist at PNC Financial Services Group, who estimates that the sequester has stolen about 30,000 jobs from each month’s payrolls total since it was enacted in March.

If there is good news in this story, the economy appears to have survived the assault with a blunt instrument that the first sequester administered.  We are now in a position where the GDP can grow faster than the debt.  That means simple focus on short term economic growth will likely complete the recovery and put us back in a situation where debt as percentage of GDP is going down even though the debt in absolute terms may be going up.

So what is the Republican agenda?

First, threaten to shut down the government if Obama doesn’t repeal Obamacare.

Second, threaten to throw the government into default, if the Obama administration doesn’t agree to ANOTHER round of spending cuts in addition to what is already on the books.

So it doesn’t sound as though there is much political appetite at the moment to replace the sequester with something more constructive and there is certainly the possibility that it will get worse before it will get better.

That said, here’s a short list of the impacts we’re dealing with beyond those already mentioned.

States

This next round is going to impact states even more than the previous cut.  States will see $4.2B less in federal funding.  Targeted programs include public housing assistance, money for schools with low-income students, food inspection, scientific research grants, and environmental protection programs.  While states absorbed a $4.6B cut last year through reductions is staff in reductions in programs, this year they will be forced to start eliminating programs completely.

The other state complication is that most states are required by law to balance their budgets and the 2014 budgets have already been passed.  If the next round of sequestration is implemented, most states will start their fall legislative terms with significant budget shortfalls.

From a USA today article

“They are already in a difficult spot because they already have imposed major cuts to their schools and other public services,” Leachman said. “If they enter those legislative sessions having to deal with additional cuts in federal funding for schools or law enforcement or clean water or programs that help low-income families, that makes their job even more difficult.”

Pennsylvania budget secretary Charles Zogby said his state managed to get through the first round of sequestration budget cuts without massive cuts in personnel—but that may change. “Thus far, that hasn’t been part of the challenge. It may be in round two,” he said.

Headstart

Headstart, one of the most successful programs we have to alter the future of poor kids, is going to have to cut fall enrollment by 57K because of sequestration cuts.

Public Defenders

The federal public defender system has been decimated by the sequester cuts.  According to the WSJ, this ends up costing tax payers more than what has been saved through the cuts because our constitution guarantees that those who cannot afford an attorney will have one appointed for them.  When public defenders are not available, court dates are delayed and courts ultimately hire private attorneys.  We pay for all that.

Overburdened defenders also make mistakes and miss evidence that could have cleared their clients.  These mistakes create more appeals.  As Supreme Court Justice Stephen Breyer noted in March in congressional testimony about the effects in general of the sequester, it is “cheaper to have a decent lawyer in the first place.”

Medical Research

Even George Will decries the effects of reductions in basic medical research caused by the sequester.

For Francis Collins, being the NIH’s director is a daily experience of exhilaration and dismay. In the past 40 years, he says, heart attacks and strokes have declined 60 percent and 70 percent, respectively. Cancer deaths are down 15 percent in 15 years. An AIDS diagnosis is no longer a death sentence. Researchers are on the trail of a universal flu vaccine, based on new understandings of the influenza virus and the human immune system. Chemotherapy was invented here — and it is being replaced by treatments developed here. Yet the pace of public health advances, Collins says, is being slowed by the sequester.

This will be, Collins believes, “the century of biology.” Other countries have “read our playbook,” seeing how biomedical research can reduce health costs, produce jobs and enhance competitiveness. Meanwhile, America’s great research universities award advanced degrees to young scientists from abroad, and then irrational immigration policy compels them to leave and add value to other countries. And now the sequester discourages and disperses scientific talent.

Forest Management

The sequester has also reduced our ability to manage our forests which has contributed to the unprecedented scale of wildfires that we’ve had to fight.

The Hazardous Fuels Reduction Program was $500 million last year, went down to $419 million this year under the automatic budget cuts, and has been proposed to go to $292 million next year.

“The fires that are ripping through Oregon and Idaho and California and the West are just proof that the fire prevention policy is broke,” Sen. Ron Wyden, D-Ore., chairman of the Senate Natural Resources Committee, said from Lincoln City.

“There are years of neglect. The fuel load builds up and it gets hotter and hotter on the forest floor. Then you get something like a lightning strike and a big inferno. Then the bureaucracy takes money from the prevention fund to put the fires out and the problem gets worse. The cycle just repeats itself again and again.”

This brings us to the basic question of why.

The only answer I can come up with is that Republicans have lost touch with reality.  They have won the war against debt.  Rather than take a victory lap and set themselves up for a potential change in control in the senate, they are determined to pump another bullet into the wounded economic recovery.

Their fantasy that cutting government spending would stimulate economic activity has failed.  We can now document the damage it did to the economy.  With the second round of sequester cuts looming, we have an opportunity to reduce the damage.  Just stopping the austerity program will have a positive economic effect.  But we can’t seem to even have a rational discussion on how to do that simple thing because of ideology and politics.

Since it is unlikely that Republicans will unilaterally abandon the ideology that is driving their actions, the only other possible solution is a political one.  If Republicans suffer another defeat in 2014 similar to what they experienced in 2012, maybe then the survivors will finally realize that there are real political consequences to imposing a minority agenda on an unwilling majority.

A More Perfect Union

Sunday, August 4th, 2013

A More Perfect Union

But I say unto you, Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you, and persecute you; That ye may be the children of your Father which is in heaven: for he maketh his sun to rise on the evil and on the good, and sendeth rain on the just and on the unjust.

For if ye love them which love you, what reward have ye? do not even the publicans the same?

And if ye salute your brethren only, what do ye more than others? do not even the publicans so?

Be ye therefore perfect, even as your Father which is in heaven is perfect.  Matthew 5:43-48 

Jesus was pretty clear here.

God loves everyone.  His Son Jesus advises us, for our own good, to do the same.  He was also pretty clear about who that “everyone” included.  Not just those that agree with us, but all those who treat us badly, make us mad, and may even persecute us.

The political situation in this country is pretty good evidence that people aren’t taking that advise.

CBS released a poll which shows that there are very few people left in the middle of our political spectrum.  The rancor of the past 13 years or so has forced most people to take a side.  The result is that everyone thinks that the other guy is crazy.

Is-the-other-party-too-extreme

 

Compared to partisans, independents actually don’t appear stuck in the middle: just 29 percent of them see both parties as too extreme. Independents instead tend to pick only one of the parties as too extreme, so this isn’t really a case of an alienated center watching both parties move further away. (And it also squares with the fact that many people who call themselves independent do in fact lean to one side.)

Here’s how that affects our politics.

Americans want deals and compromises in principle, and from both sides -eight in ten say they’d like to see more of it. But when those Republican voters back home see congressional Democrats as too extreme, and vice versa for Democratic voters, then members to who cut deals across the aisle are bound to face suspicion: has that extreme other side really changed its stripes? Did our side really get more than we gave? And it’s easy to see why activists on both sides are turned off by the very thought of cooperation with another party that’s so (seemingly) out of touch.

The result is that voters have given their representatives an impossible task.  They dislike deadlock, but they are so skeptical of the motives of the other side, that they question any concessions that necessarily have to be made in order to reach a compromise.  In other words, voters say that they want compromise, but they punish the politicians who in fact attempt to make a deal and reward those who, in principle, refuse to support anything but the party line.

Because the extremes appear to outnumber the middle, our government has lost the ability to compromise.  Instead it is all about maneuvering for power and counting the “scalps” that can be accumulated along the way.  We have replaced practical reality with political gamesmanship and obsessive ideology.

Here are a few recent examples.

Obamacare Obsession

The House recently voted for the 40th time to repeal Obamacare.  It passed on a strict party line vote, but will have no practical effect on the law.  The only value of this vote is to provide Republican members of the House a “scalp” to take home with them and show to their supporters.  The vote may help Republicans build the case for electing more Republican Senators in 2014, but Senator Tom Coburn summarized reality when he said, “The only way you get rid of Obamacare is winning the 2016 election.”

Republican Senators Lee and Rand Paul have been circulating a letter threatening to shut down the government in the fall if President Obama doesn’t stop the Obamacare rollout.  This is another activity, like the previous one, that is perilous for Republicans.  The last time Republicans shut down the government, they paid a dear price at the polls and single-handedly rescued Bill Clinton’s Presidency from the Lewinsky scandal.

Sen. Richard Burr, R-N.C., called it the “dumbest idea” he had ever heard, while Sen. John McCain, R-Ariz., warned against more shutdown “shenanigans.” Some senators who initially backed the idea, like Sen. John Cornyn, R-Texas, have rescinded their support for it.

Even if House Republicans WERE successful in shutting down the government, that action, like the votes in the House, would only be symbolic.   The Congressional Research Service has reported that a government shutdown would not slow the Obamacare rollout.  That’s because Obamacare has other sources funding that are beyond the reach of the sorts of annual appropriations controlled by the House.

So why try?  According to Senator Ted Cruz, who is backing the government shutdown gambit, “No major entitlement, once it has been implemented, has ever been unwound,” he said. “If we don’t do it now, in all likelihood we never will.”

The reality about Obamacare is that the game is over.  By 2016, the law will be fully implemented.  State exchanges will be up and running.  Somewhere around 20M people who previously couldn’t afford to purchase insurance themselves, will be insured.  Those people are not going to vote for anyone who promises to take away their health insurance.  The margin of victory in 2012 was 5M.  It will be political suicide for any candidate for national office to start the race with a 20M deficit.  The 2012 election was the best opportunity for Republicans to repeal Obamacare, and they failed.   Their base, however, won’t allow them to admit defeat.  Instead they may inflict some very real economic damage to the country.

Scandal Obsession

Republicans are convinced that there must be a scandal somewhere.  The harder they look, however, the less they find.  Yet they continue to dig, because the digging itself supports the conservative partisan view that Democrats are corrupt.  So we have the spectacle of Rep Issa issuing subpoenas for more documents from the IRS, the state Department, and the Justice Department while the information that they are supplying only continues to support the administrations original claims.  Issa claims that the agencies involved are holding back valuable information, but that is also more political grandstanding.  The IRA has 170 people including 70 lawyers working on delivering the documents that Issa has requested.   His demands deliberately exceed their ability to respond.

Here’s what the documents that have been delivered so far have shown.

There was no executive branch involvement in the methods the IRS created to screen applications for non-profit status.  In fact, both liberal and conservative groups were subjected to the same types of screens.

While mistakes were made in Benghazi, there was no conspiracy to misrepresent the information shared with the public.

The failed attempt to trace guns being traded across the Mexican border was just that.  There was no attempt by the White House to cover up what was a poorly designed operation from the start.

The failures in each case were bureaucratic, not political.

Republicans aren’t particularly interested in what has the potential to be a real scandal – domestic spying.

Debt

We’re going to see this spin up again this fall when there is another discussion about spending.

The reality is that the sequester has cost both jobs and economic growth, but it has slowed the growth in debt to the point where it is possible with additional economic stimulus that we could grow our economy faster than our debt.

This should be good news.  Instead we are going to see more attempts to cut spending rather than stimulate growth because it was never about the debt.  It was always about reducing the size of government and weakening the traditional Democratic base.

Immigration Reform

Republicans of almost all stripes have admitted that if they are to have any hope of competing in future national elections, they have to repair their dismal image with immigrants.  The Senate in a brief moment of clarity managed to pass an immigration reform bill, but only after committing to spend $30B to build more fences and hire more border control agents.  Some have estimated that this cost works out to $40K per immigrant and may only serve to redirect the flow of immigrants from the border to other coastal locations.

The CBO estimated that the Senate bill would reduce the debt over the next decade by $135B and cut the flow of illegal immigrants by 50%.  Because of the path to citizenship, it would also reduce the number of undocumented workers living in this country over the next decade to 5M.

Yet it was not enough for House Republicans who rejected the whole thing.  They want to focus on questionable enforcement measures first.  Some reject the whole notion of a path to citizenship.

Why?

Because they have a base that has been supporting candidates with xenophobic positions against all immigration.  This even though President Bush proposed a similar plan in his administration and Reagan signed the Immigration Reform Act in 1986 which legalized 3M undocumented workers.

Summary

For those interested in history, what we are seeing in politics today is fascinating.  Ideas that Republicans created and promoted for decades are no longer recognizable to that party.  Obamacare was a Republican alternative to single-payor healthcare reform and was actually successfully implemented by Mitt Romney in MA.  Cap and Trade, monetary stimulus, tax reform, and entitlement reform were ALL originally Republican ideas.  The have ALL been proposed at one point or another by this administration as “common sense” approaches to solve problems.  They have ALL been rejected by today’s Republican Party.  This used to be the party promoting the intelligence of the free market.  It has become the party of opposed-to-whatever-the-Democrats- support.

There is a solution coming because demographics are running in the direction of Democrats.

The problem is that even this doesn’t resolve the underlying erosion in democracy as an effective method to resolve differences between political extremes.  Instead we appear to be drifting towards more of a parliamentary democracy where the only times things get done is when one party controls the government.

While I would prefer that Democratic ideas prevail, I would not want that to happen as a result of the death of the Republican party.  If that’s what occurs, it will be a dark legacy for our troubled time.

Budget Fantasy

Thursday, June 20th, 2013

It wasn’t all that long ago that Republicans in the House and Senate were claiming that the Obama administration was irresponsible because they hadn’t proposed a budget.

“President Obama missed a great opportunity today to help our economy.  This was supposed to be the day he submitted his budget to the Congress.  But it’s not coming.  It’s going to be late.  Some reports say it could be a month late,” Speaker John Boehner (R-Ohio) said on the House floor.

Then both the White House AND the Senate Democrats put budgets on the table.

What has happened since is a fascinating political turn from Republicans.

The first was the claim that no progress would occur on budget talks until President Obama was willing to support cuts to retirement programs.  Then Obama DID publically outline his willingness to make adjustments to retirement programs in return for more revenue through tax reform and subsidy cuts.  The Republican response was to deny that Obama ever said anything.  Boehner said, “there’s no plan from Senate Democrats or the White House to replace the sequester.”

When confronted by reporters that Obama had not only produced a budget, but that it also included concessions on retirement plans, Boehner responded, “If he had a plan, why wouldn’t Senate Democrats go ahead and pass it?”

The facts again, however, are at odds with that position.

The reason the Senate Democrats have been unable to pass a budget to replace the sequester cuts is that the Senate Republicans have blocked a vote with a filibuster.  The Senate Republicans are filibustering the bill because they know if they allowed a simple up or down vote, the budget would pass.

This is consistent with the Republican message that the sequester is not only Obama’s fault, but his preference.  At the same time as they are criticizing Obama for failing to compromise (which in Republican speak means accept our position), they are taking credit for the whole effort.  “I don’t think taking 2 percent off the top in a $14 trillion economy is going to be a big drag on growth,” said House Budget Committee Chairman Rep. Paul Ryan, R-Wis.  For an economy that is struggling to grow faster than 2%, that is a curious statement – but then math has historically been a challenge for him.

Both Obama, the Democrats, and Republicans proposed alternatives to the sequester.  Yet the sequester cuts still took effect.  Here’s how Boenher explained it.

Well, no, he didn’t want the cuts, but we have the sequester as a result of his demands. And I, told my colleagues in the House that the sequester will stay in effect until there’s an agreement that will include cuts and reforms that will put us on a path to balance the budget over the next ten years.

This path to a balanced budget is a reference to the Republican Paul Ryan budget which was rejected by voters less than a year ago. That’s the budget that also includes repealing Obamacare which the CBO says will ADD to the debt. But the Ryan budget keeps the “job killing” taxes contained in the Obamacare bill in order to balance the budget in ten years.

What about the deal that Obama put on the table to “trade” reductions in retirement programs for tax reform?

Boehner said, “Listen. I have worked with the president for two years to try to come to an agreement. Unfortunately, we’ve not been able to do so.”

Right! Obama has a deficit plan, but Boehner couldn’t come to an agreement on it because Eric Cantor told him the House Republicans wouldn’t approve it. Cantor has said this himself. That’s not a supporting point for Boehner’s contention that Obama has no deficit proposal that includes spending cuts. It’s, if anything, a refutation.

When pushed on this point, Boehner has said, “The president got $650 billion of higher taxes on the American people on January the first. How much more does he want? When is the president going to address the spending side of this?”

And so the circular part of this illogical argument starts over again.

Republicans claim that Obama doesn’t have a plan to replace the sequester (which he does) because the Senate can’t pass it.  The Senate has the votes to pass it but Republicans are preventing the Senate from taking a vote.  The House Republicans discount Obama’s offer to cut spending AND raise taxes because they oppose tax increases even though their own budget includes tax increases.

So why don’t we have a deal?

Boehner can’t make a deal because if it did, it wouldn’t pass the House and would likely also cost him his job.  Instead of pointing the finger at the Tea Party section of the house, he has simply created this Big Lie regarding the President and his intentions.

He figures if he and other Republicans continue to repeat this Big Lie, perhaps it will stick.

“The president has to go first with plans for Medicare and Social Security,” Maine Senator Collins said. “Then I think you will see more receptivity on the Republican side to an overhaul of the tax code” that raises more revenue.

Or

“It’s still not clear he’s willing to actually cut spending,” said another House aide.  “And that’s what is necessary.”

“I’m not so sure he has given up on raising taxes entirely,” says yet another aide.  “He will try to raise net tax revenue through tax reform.”  GOP Congressional aids quoted by Byron York.

Yet this is EXACTLY what Obama has been offering for months.  He has gone first, as Senator Collins recommended, and nothing has happened.  He has offered to trade tax increases through tax reform for cuts in Medicare and Society Security.  Republicans are rejecting this offer because, apparently, THEY are the only ones who can be trusted to raise taxes.

So why aren’t we getting a deal done?

Ezra Klein from the Washington Post documented this maddening circular logic with GOP Strategists Mike Murphy.

Murphy began by opining that Republicans might cut a deal with Obama if only Obama would endorse means-testing Medicare. Reporter John Harwood tweeted to him that Obama has supported this. Murphy replied that it’s a “good start but not enough” — Obama should also support “chained CPI,” or using a stingier formula to calculate cost of living increases for Social Security. Many people pointed this out to him. Murphy then called chained CPI a “small-beans gimmick.”

Instead we have sequester cuts which are causing real hardships to real people.  The cuts are slowing economic growth and putting people out of work.  That is making even the International Monetary Fund uncomfortable.  They have already expressed their concern that the US cutting spending TOO quickly.  It wasn’t all that long ago that Republicans were using the IMF as the boogeyman.  If the US didn’t cut spending, they predicted, the IMF would impose harsh penalties similar to what they did to Greece.  Now the IMF is warning us, just like it warned Greece, but the warning is that the Republican plan to dramatically shrink government is too aggressive.

“The nature of the recovery appears to be changing,” the IMF staff wrote in its mid-year review of the world’s largest economy. “The automatic spending cuts not only exert a heavy toll on growth in the short term but the indiscriminate reductions in education, science and infrastructure spending could also reduce medium-term potential growth.”

What do they recommend?

The same deal the President has offered.   Increase taxes to fund investments in education, science and infrastructure and reduce longer term spending through retirement program reform.

So why don’t we have a deal?

Because the Republicans are unwilling to make ANY deal with Obama.  This has nothing to do with entitlement reform.  This has nothing to do with taxes.  This has nothing to do with economics.

Republicans would rather prevent REAL economic recovery, blame the continuing hardship on Obama, continue to tell the Big Lie that he’s the one who is unwilling to compromise, and take their chances with voters in 2014.  That’s been the Republican strategy ever since Obama and his new progressive majority took over the White House.  It was a strategy that worked in 2010.

Fortunately the Democrats already have plans to hold Republicans accountable for this strategy in 2014.

Sen. Brian Schatz (D-Hawaii) said in speaking with constituents that the budget has become a common topic and people are receptive to the approach Democrats have outlined.

“People want a budget,” Schatz said. “There is anxiety because we’ve been on a [continuing resolution] for so long and sequester is hurting our local economy.”

Hopefully there will be some accountability at the ballot box.  That is the best way to punish those who choose the interests of their party over the interests of the country.