The Predator Nation

Read My Lips: Single-Payer Systems Work

2011-04-14T13:29:00.004-04:00

My opinion regarding public health care is not popular among Republicans. This is understandable. It's true that public health care will displace a good chunk of the health insurance industry, specifically the chunk that provides minimal coverage. It's true that this will cause layoffs in the health insurance business at a time when jobs are scarce.

Think on that for just a moment, though. Why will there be layoffs? Yes, there will be less money poured into the massive insurance pools. Yes, this will cut into insurance company profits. But there will also be less money tied up in those pools, and less profit in the hands of company executives, who have no worries regarding layoffs. The layoffs will, instead, hit the administrative wings of those insurers -- the adjusters, the examiners, and fraud investigators.

It is a statistical and arguably-empirical fact that public health care has fewer administrative costs than private insurers. This makes sense: when there is one system that pays, and that system is bound by law to pay, then you need fewer people making sure a patient isn't committing fraud. The sick and dying are treated without question. Those in need get the care they need, and they get it without worrying about if they forgot to disclose a medication in an application form. So, public health care has fewer administrative costs.

It is a statistical and arguably-empirical fact that public health care has greater market power than private insurers. This makes sense: public health care is, by operation, a public monopoly, and monopolies are defined by the overwhelming market power they possess. Public health care can demand drugs, equipment, or services at set prices. Private insurers compete with one another to do so, but they are not half as effective as a public system. Ask doctors in Japan or Germany about how the public system operates to keep their wages low and manageable. Ask about the troubles those doctors have had to make ends meet. Imagine a system where the doctors and health care providers are not making hand-over-fist money; that's what a public system can demand. So, public health care can lower costs within the health care industry.

It is a statistical and arguably-empirical fact that the movement against public health care is funded by pharmaceutical companies, and other companies that benefit enormously from the United States' "free market." Yet, for whatever reason, these companies still operate in countries with public health care. Why would a company operate in an area where it cannot make a profit, or cannot conduct business? The truth is that health care companies can, and do, make profits in a public health care system. Hell, there are private insurers in Canada that provide coverage above and beyond what the public system provides So, public health care does not completely stifle the free market; rather, it changes the rules significantly, and forces companies in the industry to keep costs low and innovate.

Lower administrative costs. Lower costs for goods and services. Encouraging innovation and discouraging waste. These are capitalist principles. These are principles that exist where there is a public health care system. There is no -- I repeat, no -- cogent argument that is consistent with basic economic theory against the public health care as an institution. The only thing keeping the United States in the Dark Ages is propaganda and fear, two things we condemn the Chinese government for (who, by the way, also has a public health care system).

An Adult Conversation

2011-04-05T12:21:00.003-04:00

Let's have an adult conversation about the U.S. budget and the GOP's proposal, as presented by Rep. Paul Ryan - (R), Wis. (Here: http://www.msnbc.msn.com/id/42420995/ns/politics-capitol_hill) Mr. Ryan is correct on many points. Medicare and Social Security need to be revisited. Programs that seem like entitlements (e.g., TANF) and unnecessary law enforcement agencies (ATF, DEA, etc.) are slashed and cut. This is a good move and a good start because it demonstrates the Republican willingness to do the politically-unpopular thing in order to balance the budget. The unmature part is the steadfast adherence to the Republican mantra of "no new taxes." This did not work for Reagan or Bush, Sr., who both had to increase taxes after promising to keep taxes low, or cutting them. If an adult is comfortable with reality, then the talk of raising taxes or changing tax rates are important to the discussion. Here, the Republicans refuse to "get adult"; at the very least, they are as adult as the Democrats, who refuse to contemplate politically-unpopular cuts. Let's look at some numbers. According to the federal, Office of Management and Budget, the projected tax revenues for the fiscal year of 2012 ("FY2012") is $2.6 trillion. The percentage of contribution breaks down as follows: (1) 45% from income taxes; (2) 35% from payroll taxes; (3) 12% from corporate taxes; and (4) 9% from other taxes, such as excise and estate taxes. Some quick math reveals that, of the $2.6 trillion: (1) $1.170 trillion will come from income taxes; (2) $910 billion will come from payroll taxes; (3) $312 billion from corporate taxes; and (4) $234 billion from other taxes. The Congressional Budget Office points out that most corporate taxes are passed to consumers, so, in effect, the citizens of the United States bear most of the burden. This is probably a fair assumption to make, for the most part. The problem with the tax system is that it bleeds working families of their wages. A wage is what you earn for your labor, and does not include money received from interest, rent, or other sources of income. From basic economics, the more you take from wages, the more a worker must demand for wages to remain at a subsistence level. If you raise wages, you pass the cost of production to the consumer. So, a higher tax on wages means higher costs and prices, and hurts competitiveness. Conservatives take this to mean that higher taxes are bad. This is a fundamentally incorrect assumption because this applies only to taxes on wages. The same cannot be said for income in the form of rent or interest. Taxes on value are what we consider "capital gain" taxes, which apply where an asset gains value, but where no actual labor has been expended to obtain that increase. These taxes apply to land, stocks, and any other kinds of investment vehicles whose value increase and decrease without labor. You can increase and decrease taxes on these commodities and not affect wages. Further, the price of land is relatively inelastic, as it is one of the few remaining commodities with tangible value. By not discussing raising certain taxes, such as non-wage taxes, conservatives are failing to appreciate other ways to make up the deficit that will not hurt the working class. This failure is a failure of leadership. Consider the following. The contiguous United States (not including Alaska and Hawaii) is comprised of 2,959,064 square miles. Assuming that 50% of this is owned privately, then 1,479,532 square miles is owned privately. There are 640 acres in a square mile, which means that 946,900,480 acres of property are owned privately. A tax of $100 per acre would result in $94.7 billion in revenue. Even if only 50% of property owners paid this, that is still $47.35 billion. If you pushed it to $1,000 per acre, that's $473.5 billion. Also consider that only 67.4% of Americans own the home they live in. That mean that 33.6% of Americans do not own land. Land ownership in the United States is disproportionately shifted towards the filthy rich, with Ted Turner owning an estimated 2 million acres of land (about 1/3 of the entire state of Vermont). With all of that land in the hands of the exceedingly rich, it is surprisingly difficult to develop the country without great cost to the public. Passing a tax on land ownership would "encourage" the wealthy to dispossess themselves of vast tracts of land, and open that land to public development. The price of land drops; the price of housing drops; and the average citizen benefits. Raising or lowering estate taxes will not affect wages or the price of goods. Sales taxes on non-essential inelastic commodities like cigarettes and alcohol also do not affect wages. The federal government needs to explore these alternatives to balance the budget. So, let's talk like adults, and discuss what taxes we can raise.

Will a change in tax policy immediately help the economy?

2011-03-25T10:53:00.003-04:00

Why do Americans think that they are taxed heavily? As a Canadian, I did not understand how Americans could come to this conclusion. A friend of mine pointed out that Americans feel over-taxed not relative to other nations, but in general. After all, the United States was formed by rich people who did not want to be taxed without having a voice in its spending. I suppose I should not be surprised.

As an economics student, I thought I would put this observation to the test. To start, let’s take the top 10 countries by GDP (as of 2009):

United States - $14.1 trillion
Japan - $5.07 trillion
China - $4.99 trillion
Germany - $3.33 trillion
France - $2.65 trillion
United Kingdom - $2.17 trillion
Italy - $2.11 trillion
Brazil - $1.57 trillion
Spain - $1.46 trillion
Canada - $1.34 trillion

(GDP Numbers here: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal))

Now, let’s calculate a "tax rate" by finding the ratio of government revenue to GDP, and compare it with the spending of the government, expressed as a percentage (let’s call it the spending rate):

United States - Revenue: $2.09 trillion (14.8%) / Spending: $3.40 trillion (24.1%)
Japan - Revenue: $1.84 trillion (36.3%) / Spending: $2.25 trillion (44.4%)
China - Revenue $1.15 trillion (23.0%) / Spending: $1.27 trillion (25.5%)
Germany - Revenue: $1.40 trillion (42.0%) / Spending: $1.54 trillion (46.2%)
France - Revenue: $1.23 trillion (46.4%) / Spending: $1.44 trillion (54.3%)
United Kingdom - Revenue: $926 million (42.7%) / Spending: $1.15 trillion (53.0%)
Italy - Revenue: $960 million (45.5%) / Spending: $1.07 trillion (50.7%)
Brazil - Revenue: $464 million (29.6%) / Spending: $553 million (35.2%)
Spain - Revenue: $516 million (35.3%) / Spending: $649 million (44.5%)
Canada - Revenue: $606 million (45.2%) / Spending: $678 million (50.6%)

(Government Revenue/Deficit Numbers here: http://en.wikipedia.org/wiki/Government_budget_by_country)

The numbers above show two important facts: (1) the United States taxes its productive sector the least; and (2) the United States spends, as a measure against its productive sectors, the least by percentage. So, this affirms my belief that Americans are taxed less than other top 10 GDP nations. Note that my results conflict with those found by the Heritage Foundation, a conservative lobbying group. (You can find their results on this list: http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP )

So, what might this mean? Let’s look at the economic growth of the nations in 2009 and 2010, as found by the International Monetary Fund and CIA World Fact Book, respectively:

United States: -2.63% / +2.80%
Japan: -5.22% / 3.00%
China: +9.096% / +10.10%
Germany: -4.72% / +3.30%
France: - 2.55% / +1.60%
United Kingdom: -4.90% / +1.60%
Italy: -5.04% / +1.10%
Brazil: -0.19% / +7.50%
Spain: -3.72% / -0.40%
Canada: -2.46% / +3.00%
World: - - - / +4.60%

(Numbers from this site: http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_growth_rate )

There appears to be no correlation between economic growth and disparity between revenues and expenditures of the government. Here’s a comparison of the two differences, expressed as percentage differences, of taxing and spending, and growth, respectively:

United States: -9.30% / +5.43%
Japan: -8.10% / +8.22%
China: -2.50% / +1.00%
Germany: -4.62% / +8.02%
France: -7.90% / +4.15%
United Kingdom: -10.3% / +6.50%
Italy: -5.20% / +6.14%
Brazil: -5.60% / +7.69%
Spain: -9.20% / +4.12%
Canada: -5.40% / +5.46%

The numbers suggest that changes to tax policy have little or no effect on economic growth as a whole. If the difference between the taxing and spending rates shrink, that does not mean that growth will increase. If the difference between the two rates expand, that does not mean growth will decrease. Thus, changing federal taxing and spending policy will not necessarily result in a change in economic growth in the short run.

Even if there is no difference in the short run, this does not mean that it will not affect the economy in time. China has had positive growth for years, and has also ensured that its spending does not grossly exceed revenue. If we are to follow that model, the U.S. needs to think about either cutting spending or raising and enforcing taxes.

Abandon schools!

2011-03-24T13:18:00.002-04:00

Random character: "The PTA is disbanding? Augh!" *jumps out of window*

The people of California, through their government, is attempting to pass a bill that would allow parents to take over a school that has consistently performed well-below standards for the State. The parents of the students could sign a petition, and thereby take over management (including hiring and firing) of the school itself. There seems to be few safeguards, save that the will of the people will directly interfere with the duties of the local school district. Ohio is considering a similar bill.

I like the idea of "power to the people," but there is a distinction between empowering people and allowing unqualified people to take over a professional section of public services. Could you imagine if the same process existed for firefighting departments or police departments? The average person has little to no idea of how public management works, how it differs from private management, and the peculiarities of public administration. On the other hand, there is something appealing to me -- as a conservative -- about allowing the public to disrupt and disband a failing public agency. The part that has me concerned is the idea of parents "taking over" a school, and the anarchy that would erupt.

In Ohio, if a similar measure is proposed, I would recommend the following. First, the parents must obtain the signatures of over 50% of the parents of students in the schools for a petition. Second, the petition must be presented to the local school district, who will then be given the opportunity to present a plan for change to the parents at a public hearing. Third, the plan may be rejected if 50% of the parents who originally signed the petition vote against its acceptance. Finally, if the school district's plan is rejected, then all members of the board of the school district must be put up for re-election.

This process does not disturb the administration of the school, or the teachers employed by it. What it does is disturb the trustees for the school district, who wield a great deal of power when it comes to the management of the schools. Taking over a school doesn't solve problems with budgets or overcompensation to superintendents. Jeopardizing the political lives of public officials will force them to put a little more effort into finding acceptable solutions.

Shutting Doors to Easy Credit

2011-03-18T19:13:00.002-04:00

"Easy credit ripoffs ... good times."

Did you know that the United States still enjoys unprecedentedly low interest rates? That's because the federal lending rate -- the one used by commercial banks to get U.S. dollars from the Federal Reserve -- is near zero. That means that if you want money, you can get it. It also means that Treasury Bonds are near worthless. The Federal Reserve keeps on buying them back, flooding the global economy with U.S. dollars. This, according to Ben Bernanke, is supposed to be a good thing.

Isn't this how inflation starts? Of course it is. The difference is that most other currencies in the world are in free-fall. The Euro is in the toilet thanks to near-universal austerity measures. The Japanese yen is falling thanks to a natural disaster. China pegs its currency to the U.S. dollar, causing it to rise and fall accordingly, thanks to China's government. See, with a floating exchange rate system, like the world uses today, the U.S. dollar can keep flooding the market with fewer consequences than in the past.

(Absurdly, the Canadian dollar is trading above the U.S. dollar -- at least, this is absurd for me, who has been used to a Canadian dollar trading lower than the U.S. since my birth.)

Why is this good? Well, the U.S. is renowned as an importer of goods because of our high standard of living, but the government is keenly aware that if the value of the U.S. dollar is too high, then U.S. exports will drop. This will damage an economy with a weak manufacturing sector, and the U.S. economy is already on life support. The best way to pull out of a recession is to boost production of tangible commodities, and the U.S. has been lucky enough to enjoy these boosts when the economy has been hurt; for the early '90's there were computers, and for the early '00's there was the housing industry. Unfortunately, as pointed out by J.K. Galbraith in The Predator Nation (which is where the title of this blog is from), housing is the last of the commodities that can be used to haul an economy from the dumps (which is what happened in Japan in the early '90's). So, we need to return to production, and this means a return to the manufacturing of exportable goods.

The problem is that no one is buying our exports. The U.S.'s main exports are large capital items used for manufacturin elsewhere (ironically). Most of the U.S.'s GDP occurs within the country itself, which means that the U.S. is not a strong importer, and likely never will be. It's a fool's endeavor to think that the U.S. will regress back to its manufacturing roots, so Uncle Ben's ploy is unlikely to work.

There's no where for the excess money to go. Foreign nations cannot purchase our goods because their economies are depressed, so there's no demand for U.S. dollars out of the country. U.S. citizens are already stretched to the max regarding credit, so there's little hope that demand within the country will increase. With no demand, the volume of money floating within the U.S. economy will expand as the government borrows more and more. Naturally, this means that the price of goods will go up.

What's Uncle Ben up to? He thinks we should keep the rate low to continue to try to will the real estate market back into shape and increase property values. However, this will not assist American consumers because the vast majority have little or no equity in their homes. In short, there's nothing left for us to use as collateral, so unless the banks want to give away money, there is no reason to believe that property values will rise significantly. The flood of money into the market is pointless because, as Judge Richard Posner points out in The Failure of Capitalism, America and its lenders are in a crisis of insolvency, not illiquidity, and no amount of money in the market will turn an insolvent company into a solvent one (absent borrowing money, of course).

The U.S. suffers from a problem of solvency. As is already known, we have stretched our credit to the maximum, and no longer have equity in the country. Savings rates are low, and savings are what help keep banks afloat when their assets cannot cover their debts (also known as solvency). With the interest rates low, no one wants to put their money into savings, which is a problem for banks and credit unions. The only way to fix this is to raise the interest rate, but that is an option Uncle Ben won't consider.

If Americans and their companies become solvent again, they can afford to take more risks. Taking risks is a key behavior for capitalism. Apparently, Uncle Ben and his cohorts have forgotten that uncertainty is very bad for capitalism. Why try to make it into a science if you prefer it to be as chaotic as the arts?

Arise, Chicken!

2011-03-17T13:09:00.002-04:00

For those who are close to me, I have not posted in this blog recently due to a change from the public sector to the private sector. Why now?

Well, why not? Apparently, the conservatives are starting to pull away from Sarah Palin: http://www.huffingtonpost.com/2011/03/16/late-returns-pushing-away-palin_n_836862.html. This is a good sign for American conservatives; that is, for Americans who are truly conservative, not those who insist that Fox News is a bastion of conservative "thought." I know of several of them, hiding as moderate Democrats or Republicans, who vote for third-parties or anonymously. Talking with them, the most popular complaint is that neither party appears to represent their interests. This is wholly true.

Who are they? College-educated people with burgeoning careers. My peers are attorneys, engineers, and accountants. They don't like to talk politics in a large forum because the topic is overwhelming. It is overwhelming not because of the melange of political talking points, but because politics is a complex topic that requires substantial knowledge to understand fully. For instance, many people accept that lower taxes will result in higher employment, but few really appreciate the several presumptions and considerations that must be accepted or argued before the maxim should be accepted. Shifting gears from the common concerns of our daytime jobs to a long, in-depth analysis of policy isn't exactly the most appealing thing to do on a Friday night. So, we don't -- or, many don't -- and we simply step away from politics.

It doesn't help that the figures we could support either do not understand or do not appear to appreciate the complexity of each issue. For instance, in Ohio, Gov. Kasich is prepared to recall the mandate to local schools to create all-day kindergarten classes in elementary schools. There is the obvious cost of the program to school districts, but there is little discussion on the savings on the part of parents and families. There is no analysis regarding whether the increased cost to school would be offset by the potential savings -- in time and daycare costs -- to families. There is little discussion of how full-day kindergarten can positively affect the development of children. In short, there's little discussion regarding the complexity of the issue itself.

We can blame the media for this. The U.S. Today model of breadth over depth is a deplorable shift from Kronkite-like journalism to the inexplicable (and ironic) fascination with blogs as sources of "information." We can blame Fox News for spouting half-truths, or Headline News for projecting a constant stream of surface knowledge that convinces viewers they are experts where they are barely amateurs. But there is truly no one to blame for this. It is the way it is.

Politicians are in a position to change this. Although Gov. Walker of Wisconsin has been maligned for his war against unions and workers' rights, Gov. Walker has never been shy to tell the media exactly why he is doing what he's doing. He declines from using shim-sham rhetoric (like Gov. Kasich did when he defended his assault on public workers' rights as leveling the playing field), which should be applauded. Similarly, the single Republican who voted against Wisconsin's anti-union bill admitted that he voted against his entire party because he felt that his constituents demanded him to do so, rather than attempt to drum up some half-wit concoction so often employed by amateur politicians (or veteran ones, like Sen. Specter of Pennsylvania).

The Huffington Post reports that conservatives, realizing that the widespread voter apathy is likely a product of the excellent education of the general public, are starting to move away from talking heads like Palin, in order to preserve the "quality of conservative thought." It's about bloody time. Maybe now we can talk intelligently about some cost-saving measures, like ending agricultural subsidies and the wasting of produce for non-nutritional purposes. Maybe we can talk intelligently about funding public broadcasting to protect our right to free speech and political expression. Maybe we can talk intelligently about enforcing anti-trust laws against gargantuan banks and insurance companies, or commercial businesses that are choking out small businesses. Maybe we can talk about how single-payer medical insurance is not only feasible in America, but would also decrease the expenses of American taxpayers and companies. Maybe we can talk about repealing the 1980 DIDMCA, and letting states police their lending institutions, or dissolving government-backing entities like Fannie Mae and selling off their assets. Maybe we could talk about truly shrinking the government.

Well, here's to hoping.

Reforming the Bailout

2010-04-26T22:23:00.002-04:00

The current economic rescue for the United States focuses primarily on ensuring the solvency of corporations and providing tax incentives for spending. The problem with this model of economic status is simple: all of the benefits are reaped by corporations, rather than people. If the Obama Administration is trying to distance itself from the non-sensical supply-side economic policies that dominated the Bush Administration, they are doing a piss-poor job.

Economic stimulus that is focused on the financial well-being of corporations has significant risk. This risk has been realized: the payment of patently-unreasonable wages to executives; the reticence in expanding operations and production; and the inability to actually coerce private industry to do anything that isn't in the financial interests of a company. Just because a company is in good condition financially does not mean it will produce over demand; companies are not hiring just because they are solvent -- there has to be some demand for their goods or services for jobs to be created. The best way to create the long-term demand that will encourage the private sector to expand is to create long-term jobs.

Tax incentives for purchasing houses only benefits two groups of people: those who work in the construction, manufacturing, or selling of homes; and those who can afford homes. By freeing up capital for the first, it is true that the housing industry has reached a "floor" for job losses; however, by building new homes, the housing industry is aggravating the problem of overabundance of stock. Old homes aren't getting sold; neighborhoods are still losing housing value; and the nation simply does not need more homes. Plus, lending has not opened up again, and only well-qualified borrowers can secure the loans necessary to purchase the new homes.

As many economists have stated, the best long-term solution is to use stimulus funds to create jobs. This is best accomplished by direct expenditures: the government pays for goods and services for public infrastructure or other projects. The public reaps two benefits: there is the benefit of an increase in the amount of or quality of services, and the benefit of the money for such projects creating jobs or maintaining employment in the labor sector.

By continuing to focus economic efforts on reforming corporate and private industry, the government has failed to realize the potential of the public sector. The money that was funnelled to the banks to bail them out could have been used to hire teachers or educational aides. The money that was used to provide a tax credit for new homebuyers could have been used to improve the delivery of social services for those Americans barely making ends meet. This is the sort of reform that is both conservative and liberal: it ensures that the money is directly applied to the people to aid them. Instead, the government continues to entertain the "supply-side" economic theories that brought the government to where it is today.

Work on making jobs. After that, work on reforming businesses.

I don't like people playin' on mah phone!

2010-04-19T09:13:00.002-04:00

For the last time, people: don't use the cell phone given to you by your employer to text your mistress. (http://www.msnbc.msn.com/id/36602035/ns/business-careers/page/2/) This ought to be a non-issue, but, for some reason, employees still expect to use employer assets inappropriately and without repercussions. Here's a hint: use your own phone.

Here's a synopsis of the facts of the article. An officer is given a pager by his employer, the police department. Said officer uses this pager to send sexually-explicit messages to his wife and mistress. The police department checks the pager, finds the officer's messages, and fires him for using said pager in such a fashion. Officer (and wife and mistress) sues the police department for wrongful termination and intrusion into privacy, arguing that he had a reasonable expectation of privacy because he paid for overusage charges on the pager. Ninth Circuit finds in favor of the officer.

Some quick questions to clarify my own opinion. Is the pager property of the police department? Yes. Was the pager intended to be used primarily for work? Yes. Should the fact that the officer paid for overusage mean that he had a reasonable expectation of privacy? Absolutely not.

Suppose the officer had failed to show up for a required meeting at the precinct after his superior paged him via the pager with regard to said meeting. There would be no question that the superior would be entitled to take back the pager and search it (which belongs to the police department), and check to make sure the message got through, before adverse employment action could be taken. In this case, the police department checked pagers because it had intended to crack down on "excessive texting" at the department. That seems like a pretty reasonable explanation for investigating what all of the employees of the police department were doing with their pagers.

Employers should have the right to inspect their own assets when conducting reasonable investigations into the use of said assets. Here, the employer was checking on a pervasive problem: the use of pagers for excessive, private texting. They happened upon some sordidness that involved employees (the officer, his wife, and his mistress, were all employees of the police department). The Ninth Circuit, however, believed that because the employee paid for overusage, that this created a reasonable expectation of privacy that overrode the employer's reasonable inspection of its own assets. (http://www.ca9.uscourts.gov/datastore/opinions/2008/06/18/0755282.pdf) This is despite the fact that the employer had a clearly defined policy with regard to the use of employer assets, which expressly stated that "[u]sers should have no expectation of privacy or confidentiality when using these resources."

It should be pointed out that the only reason that this is an issue is because the employer in this case is a public body. Had it been a private employer, there would be no Fourth Amendment issue. This decision, if affirmed, would create another substantial difference between public and private employers, something which prevents public agencies and departments from acting effectively as employers.

But really? I'm not sure why the dingbat officer in this case should be rewarded for his stupidity. Seriously.

The End of the Environmental Era?

2010-04-16T08:57:00.002-04:00

Go read this article: http://www.thenation.com/doc/20100503/parenti.

The EPA represents one of the better examples of federal oversight and regulation over a matter of interstate commerce. The federal legislation that creates the EPA permits states, if they so elect, to create their own state-wide environmental protection agencies, and to regulate environmental concerns in their jurisdiction, so long as they standards are equal to or exceed the regulations of the federal EPA. Consequently, the EPA simply sets up benchmarks for state agencies to follow, investigate polluters that may pollute in two states or more, and enforce the laws in areas where a state EPA may decline to do so, or where a state EPA does not exist.

Sounds pretty simple to me. It's a good example of the federal government using its power in a limited fashion. It could have simply regulated every state; instead, the legislation respects the ability of the state to police activities within its own jurisdiction. Imagine if the SEC, the DOC, and the ATF worked in a similar fashion.

Instead, the Democrats (with Republican support) are proposing bills that would consolidate more power into the federal EPA, and strip the ability to regulate greenhouse emission gases from many sources from the state EPAs. If that isn't outrageous enough, the proposal to have all 100% of licenses in the new cap-and-trade system auctioned off has been reduced to only 15%, and the new Kerry-Lieberman-Graham bill may reduce that amount to 0%. The licenses not auctioned off will merely be given away.

I have argued at length with many folks about how the cap-and-trade bill is an utter failure. I've heard many arguments as to its strength: (1) that it will provide revenue to the federal government to enforce laws; (2) that it will allow the market to determine the right to pollute, and provide a hard cap that cannot be exceeded; (3) that it will encourage private industry to innovate and create more environmentally-friendly technology in order to avoid the fine of polluting beyond one's limit.

All of it is bullshit.

(1) The federal government does not to the lion's share of regulating its own EPA's regulations. That would fall to the state EPAs. There's no provision in the legislation provided which forces the federal government to give money raised to the state EPAs.

(2) The market encourages monopolistic behavior, and it will happen again. Larger companies will outbid smaller companies for the right to pollute. Smaller companies will face fines to continue business, and will likely shut down. The larger companies win; the larger companies continue to pollute.

(3) Setting up tighter regulations and enforcement will also force companies to innovate and develop environmentally-friendly technology. The reason why it has not happened as of late is because the EPAs have been collectively stripped of resources. It's hard to enforce the laws when you do not have the money to conduct a proper investigation.

Much like what happened in the lending industry, the environmental protections that were fought for by environmentalists and conservationists before the new generation of politicians are being stripped away. The cap-and-trade system is a monopolistic system that will do far more damage to the environment than it will save. It is a ridiculous premise to believe that private industry will magically make carbon-emission problems a memory when they have consistently taken an adversarial position against past environmental measures. In my opinion, anyone who honestly believes that a cap-and-trade system will work is either unbelievably naive or willfully ignorant.

The federal government should enforce the laws they already have. Make the corporations pay for destroying our environment. Shut them down if they cannot comply with regulations that can be met easily. Stop listening to their bitching and whining. The best and brightest companies will emerge ahead of the pack.

That's how capitalism works.

I love tea parties!

2010-04-15T16:14:00.003-04:00

It seems highly unlikely that a progressive would ever have something in common with a member of the Tea Party movement. However, as Katrina vanden Heuval rightly points out, there's a great deal of common ground that could be reached between the two seemingly-disparate groups.

I think the middle and working classes pay too much of the tax load. I think that the federal government intrudes in our lives a little too much. I also think that the federal and state governments try to seize too much control over the life of the everyday American. Further, I think that our federal debt is getting unwieldy, and I think that the federal government should take more steps to balance out the budget, even in these tough economic times.

The difference is in the implementation of these changes.

Generally, the Tea Partiers demand fewer taxes -- period. There's no differentiation in their rhetoric with regard to whether there ought to be a progressive tax, whether we ought to place more of the tax burden on the wealthy and corporations, or whether we ought to adjust our taxation policies to better serve economic realities. No, the average Tea Party site simply complains of the tax burden. That's all. Their solution: less spending. This is the basis for their argument against federal stimulus activities, which have, from all accounts, helped to slow the disintegration of the over-inflated American economy.

This, of course, is a short-sighted approach to the matter.

The fact is that the economy is spurred by spending. Jobs are not created when spending is tight, and if the American consumer is not spending -- and they are not -- then someone or something is going to have to "spend" in order to keep businesses afloat. This is a simple and unescapable reality: in order for jobs to be created, there must be spending. If the American people cannot afford it -- and they cannot -- then the burden falls on the government.

Obviously, there has to be a way to make up this spending. This has been the trap of Republicans since Reagan, a trap that was avoided by Bush, Jr., by either calculation or stupidity. When Reagan dropped taxes for the wealthy, he discovered that social programs simply could not remain. Medicare and Social Security loomed high in the horizon. So, like a wise conservative, Reagan bit the bullet and raised taxes in the next year. George Bush, Sr., made the promise of no new taxes, but had to raise taxes after a drop in order to secure payment for the increase in spending that was required at the end of the savings-and-loan scandal, and to ensure that the government would continue to float after Desert Storm. However, unlike his Republican predecessors, Bush, Jr., decided that it would be best to make record tax breaks for the wealthy and corporations in the wake of the invasion of Afghanistan and Iraq. He did it when he added benefits to Medicare and reformed bankrtupcy laws. In short, the only President to think it would be a good idea to lower taxes in the face of increased spending was George Bush, Jr. That's it. If you're a Reagan fan, therefore, you have to recognize the fact that you need to raise taxes in order to fund your government projects.

So, you need the stimulus, and you need to raise taxes in order to keep the entitlement programs running. You can't slap the middle class around because they are the hamsters that keep the consumption-machine of the American economy running. What's the harm in taxing the rich folk that benefit from the toil and labor of the weak?

In fact, if we all took a moment to go back to our Capitalism textbooks, we would find that Adam Smith himself proposed that those who benefited the most from capitalism and the protection of laws ought to pay the highest level of taxes. Productive labor should not be taxed because the result would increase production costs; unproductive labor, however, should be taxed because it has less of an effect upon the cost-pricing of goods. The difference between the dollar an investor earns as a dividend from ownership of stock and the dollar earned by the laborer on the job is, therefore, the fact that the investor put neither time nor effort into the production of the good or service provided. Subsequently, the dollar the investor receives has been taken out of the productive economy, and put into his pocket.

If the Tea Party folks and the progressives actually sat down and talked, they would probably find room for negotiation and understanding. There's nothing wrong with wanting to lower taxes for the middle and working classes. They deserve it. However, so long as the Tea Party movement continues to cling to out-dated and incorrect asssumptions about how a capitalist economy works, there will always be a difference that cannot be bridged.

We call that difference "ignorance".

Can the problem of rising post-secondary tuition be fixed?

2010-04-11T22:05:00.006-04:00

I'm one of those lucky fools who have parents affluent enough to put him through the years of college that led him to a comfortable life and career. I'm not going to pretend that I know exactly what my friend is going through. She's got loans, see: lots of them. She has loans for her undergraduate education. She has loans for her graduate degree. Hell, she has loans for costs related to getting her professional certification. Loans, loans, loans.

So, that got me thinking: how much has tuition gone up in the past few years? According to whatever media source you decide to read, the number can range from 30% over three years to 4.3% annually, for private colleges. Apparently, there's some disparity between public and private colleges, and their tuition increases. One news article from the U.S. News and World Report suggests that decreasing public subsidies have resulted in increases in tuition, despite budgets being flat or decreased. Meanwhile, private schools, apparently, have spent more money from endowment funds and other private sources, but have managed to keep tuitions from going through the roof; in fact, some have even lowered their tuition costs.

There are many other reasons, of course. Statistical analysis tends to hide the fact that private schools can hire the best and brightest because they can demand higher tuition from incoming students. Public schools, meanwhile, have a duty to the public as a whole, meaning that they have to cater to a wider range of students, with varying needs, and must also spend funds to support students with special or exceptional needs. The bottom line is that the cost of education is slowly slipping away from more and more students. If per-student subsidies are decreasing -- which makes sense in our economy -- then what the public is beginning to see is the true cost of public post-secondary education.

It's expensive.

Consider the following. Suppose a private university charges $35,000 per student per academic year, and a public university $10,000 per year. Also suppose that the profit per student per year for a private university is $10,000, but the public university enjoys a $10,ooo stipend from the State every year per student. In an economy where subsidies decline, and budgets tighten, a public university is going to struggle to keep tuition low. This is because public universities, by their nature, must already keep a tight budget in order to follow their mission of providing affordable post-secondary education opportunities to the public. Meanwhile, the private university -- who has enjoyed years of profits reinvested into itself -- may decide to willingly take in less profit in the face of rising costs. What's really happening, though, is not a rise in the cost of education for the universities (that is not uniform for all schools providing the same services), but an end of public subsidies that have artificially lowered the cost to the student (and his or her family).

As a result, there's no quick fix to the problem of rising tuition. Public universities are already running on shoe-string budgets, with professors that could easily jump into the private sector and make double their money. Neither downsizing nor decreasing subsidies is a solution to the problem, though those paths are tempting. Perhaps the problem cannot be fixed at all; perhaps the subsidies have all made us accustommed to the thought of being entitled to a good education. The reality is that we are now paying for the expansive opulence of public post-secondary education facilities.

And new stadiums for our beloved Buckeyes.

Why foreclosure relief is a recipe for disaster

2010-04-09T09:00:00.003-04:00

(A quick salute to everyone who still checks in here periodically. Which is no one, I reckon.)

Foreclosures are kind of like sex with Kobe Bryant -- you can fight all you want, but they're going to happen.

The federal government has unveiled a new recipe for failure to tackle the current foreclosure "crisis" in the United States. You can read all about it here: http://makinghomeaffordable.gov/docs/FHA_Refinance_Fact_Sheet_032510%20FINAL2.pdf. It's convenient -- very convenient -- to believe that this is all the fault of the mortgage companies. We'd like to blame them because they were not getting all of the documentation they should have been getting, and we'd like to blame them for giving loans to folks that should not have gotten loans. It's easy to blame the banks, and, surely, the banks have their roll to play in the housing boom and bust.

The buck cannot stop there, however, because it takes two people to tango. There were some unscrupulous mortgage brokers assuring folks that they could get a loan for them -- and then fudging some data in the mean time -- but this pre-supposes that someone wanted to buy a home. This someone would be the homeowner. This homeowner was likely living somewhere before getting their new home, either under the good graces of friends and family or renting on their own. So, I'm going to presume that the average prospect looking for a home isn't rushing out to buy house for a place to live; rather, the average buyer is looking to voluntarily purchase a home.

And then something happens. There's an accident. There's the loss of a job. Suddenly, the purchaser of the home cannot make the mortgage payments. So, there's a few choices: drain your savings to keep paying; ask for a modification; quickly find another job to cover the cost of the house; let the house go; kick and scream on the floor; etc. In this economy, finding another job within a few weeks is nigh impossible, and the other options will likely be temporary fixes (it's hard to make payments under a modified plan if you don't have a job). That leaves only one choice: leaving with some dignity.

Rather than accepting reality, we turn to the government for assistance. The problem with doing so is that the government is full of politicians. We might as well compare them to those snotty, good-looking kids in high school that parading around their titles on student council like they meant something outside of the building walls. It is political capital to support measures that will save a person's house. Nothing is more noble than to defend someone's property, especially someone's home. Yet the difference between a person's car loan and house loan is that most people prefer not to live in their car -- in both cases, the property is collateral to be forfeited or sold to cover the remainder of the loan principal in the amount of a default. So, why aren't government officials clamoring about saving someone's car? Personally, I'd rather rent an apartment than lose my car -- I need my car to get to work every day, which is important to make money.

These measures taken by the political figures in Washington, D.C., are futile unless jobs are created, and the delaying tactics provide time for people to get those jobs. Unfortunately, too little effort has been put into creating those jobs. Plus, these sorts of measures frustrate the lenders, who know that most of their debtors aren't going to be able to make modified payments. Why delay the inevitable?

Why, to pick up some votes, that's why.

Plus, no one talks about the merits of foreclosures. What merits, you ask? Consider the following:

* Private debt in the United States is estimated at $36 trillion. This is almost 300% of the national GDP.
* Foreclosures, when coupled with Chapter 7 bankruptcy proceedings, can eliminate the largest liability many individuals and families may have.
* Since the beginning of 2009, the amount of private debt outstanding has decreased from $36 trillion to $34 trillion, largely due to the large number of defaults, modification of loans, and a slowing of private debt.

How can we make sure that this doesn't happen in the future? I think this is where our country needs to look at the education system very carefully. Here's what is currently required from high school students in Ohio through 2013: English language arts (4 units); Health (1/2 unit); Mathematics (3 units); Physical Education (1/2 units); Science (3 units -- at least 1 of Biology and 1 of Physical Sciences); Social Studies (3 units -- at least 1/2 of American history and 1/2 of American government); Electives (6 units -- at least 1 unit or 2 half-units of Business, Technology, Fine Arts or Foreign language). Maybe if we made Business, Finance, or any course that teaches the management of personal resources over a period of time (actually, the Ohio curriculum includes Economics and Financial Literacy) a requirement to graduate, we might actually have some assurance that future generations will be able to plan and project their financial lives.

Paying employers to employ?

2009-10-07T15:10:00.002-04:00

Check out this article for more details: http://www.nytimes.com/2009/10/07/business/07tax.html?_r=1&partner=rss&emc=rss. In short, there is a proposal gaining traction that would provide a tax credit to employers who choose to employ a person.

Under Keynesian theory, the trick to increases in government spending is not to hand money directly out to people; the trick is to stimulate production, so that the economy comes closer to full employment. A unilateral transfer of money does not necessarily spur increased production; all it does is provide a benefit to the recipient. Government fiscal stimulus should be applied towards the production of goods; it should not be used to provide a tax break to companies.

Why not? If a company gets a tax break, it decreases operating costs (based on decreased wages per worker). This decrease in costs, theoretically, should mean increased investment in capital or employment. However, this is not always the case: as we have seen with the recent bank bailout, the company may retain the stimulus money in order to engage in non-productive behavior, such as purchasing rivals or securing a greater market share. Further, a tax break does not produce anything; it merely lowers the amount of tax revenue collected by the government. Lowering taxes collected has a lower effect on production than direct government consumption through spending.

So, while this is not a bad idea, there are better ideas out there to stimulate the economy. Let's try again, shall we?

Are taxes really too high?

2009-10-01T08:47:00.002-04:00

This post was motivated by this article, linked to by a Facebook fwiend. Thanks, Lea: http://money.cnn.com/2009/09/30/pf/taxes/who_pays_taxes/index.htm.

This is an extremely important statistic. The article itself, however, does not do justice to the real problem, which is linked to the huge disparity between the upper 20% of income-earning families, and the remaining 80%. The article also does not talk about the various major exemptions and credits that exist, which also explains why no taxes are being paid.

First, some terms: (1) a proportional tax is one which affects an entire population evenly; (2) a progressive tax is one which affects those who make a higher income more than those with a lower income; and (3) a regressive tax is one which affects those with a lower income more than those with a higher income. Second, some important concepts: (1) there is a basic "living cost" that is always factored into consumption formulas, which is a minimum cost for living in the country; (2) the income tax code is, in fact, progressive in theory; and (3) the I.R.S. and the Justice Department are under-funded and under-manned for the scope of duties they must fulfill.

This article states that 47% of income-earning families pay no taxes. To this, I say: "Yeah. Your point being?" Raising the tax rate isn't going to solve the problem because there is no problem here. No problem, you say? Yes, no problem, I say, for many, many reasons.

Let's start with the theoretical reasons. Classical economists have said, for a long time, that the wages of workers should not be taxed. This is because taxes on wages mean lower consumption, and, thus, lowered demand. However, if the wages are already at subsistence level, then workers will push for higher wages in order to compensate for the tax rate. This means that prices will rise accordingly. So, for the classical economists, higher taxes on wages will result in a lower real wage. That's bad. This analysis also applies to Keynesians. So, the less taxes on wages, the better. Please note, I'm using the term "wages".

Let's go to the realistic reasons. Many people don't end up paying income taxes because their income is tied up with tax-deductible expenditures. Mortgage interest, mortgage insurance, property taxes (to the local government), medical insurance payments, and education loan interest are some of the biggest deductions from income tax that most young adults can utilize in order to drop their taxable income or amount of taxes. Presuming, for a moment, that a family is able to increase their income over time, and continue to make all of the above payments, income taxes are going to drop on the family when student loans are paid off, and the mortgage insurance is no longer necessary (at around 20% of principal paid). Under the current economic atmosphere, though, many American families are over-burdened with mortgage debt and extended student loans; those loans mean that they will be able to claim the deductions for longer than what was likely intended. And let's not forget the deductions that are possible for 401(k) and IRA contributions, or children. (There are too many children in the United States; another rant for another time.)

Why is this not a problem? Because you can still tax wealth. The wealth held by the 10% of Americans at the top are largely in the form of investments, trust funds, and other forms of capital. The income that is earned from these investments is best described, in economic terms, as rent; it is money "created" from contractual terms that drains income from the economy, and out of the consumption-production cycle. Rent is the sort of thing that ought to be taxed heavily -- progressively, even -- as it sabotages the efficiency of production in the economy. Economists from Smith to George argued heavily for the near-punitive level of taxation of rent, in order to discourage it. Rent can come in many forms, but is generally known in common parlance as "capital gain".

So, how can we make up this "problem" with decreased revenues from income tax? Simply bump up the capital gains taxes. Among the 10% of Americans with 85% of the wealth, the top 10% of those people own nearly 50% of the nation's wealth (which is 1% of all Americans). If we raise the capital gains proportionally, this will discourage these Americans from investing. Instead, in order to balance things, I propose that capital gains be treated independently from income, and that the capital gains tax be progressive, like income tax. Thus, the 1% of Americans that hold 50% of the wealth will be taxed more heavily than those Joe Everydays that only do a handful of stock trades a year. Income from rental properties should also be treated as capital gains; however, mortgage interest and property taxes should be deducted from that income as actual expenditures for the maintenance of the properties.

Of course, the entire situation could be fixed if: (1) universal health care existed, which would eliminate the need for a health insurance deduction; (2) real wages would rise, thus pushing more American families into the "taxed" population; and (3) state universities stopped charging outrageously for an education that is next-to-necessary to get a job that pays reasonably well. In fact, if real wages went up, you could probably lower the cost of social programs, which, in turn, would permit more tax revenue to be put towards retiring existing debt.

But, what would I know?

Capitalism v. Socialism? - Part II

2009-09-30T10:49:00.003-04:00

(Wow. I have finally had some time to put thoughts together. Huh. I hope they come together coherently.)

In order to explain why capitalism and socialism have been placed in opposition to one another, it's important to take a brief look at history.

Socialism came about some time in the mid-1800's, largely due to the fact that the emerging middle class were becoming aware of the presence of a large population of disgruntled workers. As Ricardo's Machinery Problem became reality, capitalists (as opposed to landowners) began to push for reform to either break the workers or assist them; either way, the capitalists just wanted to continue to pursue profits. In order to get the political powers to agree, however, the capitalists had to band together with the landowners -- who were the Lords, Ladies, and politicians -- in order to suppress the working class. Needless to say, there was plenty of class conflict going on at this time.

Robert Owen was a capitalist that believed that strong public planning would create a utopian community that was capitalist in nature -- that is, the property was owned privately -- but subject to strong public laws that would ensure the proper evolution of that society. Owen went to great lengths to prove this theory, and even created his own community. Unfortunately, the planned community, built around working industry, failed to take hold, and the idea collapsed. However, the idea of public planning was agreeable to those workers that could live with that kind of control in exchange for guaranteed wages, a roof over their heads, and steady employment. The first communist ideas thus arose from Owen and his proselytizing.

John Stuart Mill, known for his philosophical writings on liberty, was one of the strongest of the socialists that came out of the 1800's. He believed that social assistance was required for a couple of reasons: first, he believed that gluts -- what we would now call GDP gaps -- existed, as proposed by Malthus (and rejected by Ricardo), and that this would cause unemployment; and, second, he believed that private ownership was essential to the operation of an efficient capitalist nation. In order accommodate those possible gaps, Mill suggested intervention by the government to ensure that the economy remains at full employment. So, you could say that Mill was the father of capitalist-socialism (as opposed to Marx's communist-socialism), with a benevolent government ensuring the well-being of its citizens. Let's just put aside the fact that Smith proposed social programs, such as public education, in order to ensure the proper division of labor (or labor specialization) that would facilitate greater economic wealth for a nation.

Karl Marx would be the one that proposed the "radical" belief that labor, as the ultimate producer in the economy, is the driving factor in the economy, and that labor should take control of the political economy in order to ensure its own interests are met. For Marx, the problem in the political economy was that the laws disfavored labor, for the benefit of capitalists and landowners, and that labor, in a proper representative government, should have stronger participatory rights in the discourse on public policy. Marx's utopia, thus, was one where the government worked for the people: much like Owen, that utopia would be one where labor would be guaranteed shelter and sustenance, and would also be afforded other luxuries normally reserved for the non-productive sectors of the economy.

It is important to move back, now, to a discussion of capitalism and communism. Basic economic courses teach that the fundamental difference between capitalism and communism is the ownership of property. In a capitalist society, property is private; in a communist society, property is public. In a capitalist society, the economy is driven by self-interest, competition, and empathy (according to Smith, a facet which is often left out of most discussions on capitalism); in a communist society, the economy is driven by the government, which has planned out imports, exports, and domestic production to sustain the population. In a capitalist society, everyone is supposed to look out for themselves; in a communist society, the government is supposed to look out for everyone.

And, full stop -- that's where the disconnect is. The concepts of public property and a planned economy does not posit that the government is "looking out for everyone". In fact, communism, to a great extent, is not concerned with the wants or needs of the people; it is primarily concerned with the wants and needs of the nation, for the nation is the sole owner of all property, and the sole determinant of economic production. Meanwhile, capitalism -- as defined by Smith -- is a system which is driven by the motivation of self-interest, regulated by competition, and guided by empathy. In fact, if a capitalist society were to be formed as proposed by Smith, the government would do three things: (1) provide for the protection of the nation; (2) provide a system of laws to protect private property; and (3) ensure proper regulation of the economy by preventing monopolies. Aside from the first tenet, Smith is clearly proposing that the government take an active role in the economy, and that this active role is, in fact, intended to protect the interests of the people, and not the nation.

If the purpose of the government is to protect the interests of the people, then it stands to reason that the form of government that Smith (and others) have proposed is one that is social in nature. Thus, captialism and socialism are not aliens or opposites; in fact, they are closely-related!

When the government proposes a law that may affect the economy, a capitalist ought to examine whether that law meets any of the following interests: (1) the protection of the nation; (2) the protection of private property; and (3) the protection of free competition in the market. For example, the bailout of banks: on the one hand, it could be argued that it was necessary in order to protect the value of private investments controlled by the banks seeking assistance; on the other hand, it could be argued that the intervention distorted competition in the market by keeping certain banks afloat that should have rightly fell. Another example, universal health care: on the one hand, it could be argued that it will destroy free competition in the health industry; on the other hand, it could be argued that it is necessary for the protection of the nation, and that the effect would eliminate the market entirely, thus wringing the question of "free competition" out of the argument.

In either case, it is clear (to me) that capitalism and socialism are not opposites in thought or theory. As stated above, they are, in fact, closely-related. The questions that need to be asked involve the extent to which markets will be destroyed by government intervention, and whether their destruction is in the best interests of a nation.

Capitalism v. Socialism? - Part I

2009-08-26T10:14:00.002-04:00

Are capitalism and socialism opposites of one another? Can one have a capitalist, socialist nation? This series will launch into a discussion as to whether politics can embrace the concept of both capitalism and socialism functioning within the same sphere.

First, there must be some definitions. In economic thought, capitalism is opposed by communism. Capitalism is commonly defined as an economic and social system marked by four features: (1) private ownership of the means of production; (2) goods, labor, and services traded in a market; (3) profits distributed to owners or invested in capital; and (4) wages of production paid to the workers. Socialism is commonly defined as a series of theories of economic organization, usually demarked by what Wikipedia calls "state, worker or public ownership and administration of the means of production and distribution of goods, and a society characterized by free and equal access to resources for all individuals with an egalitarian method of compensation." According to the same source, though: "Socialism is NOT a political system; it is an economic system distinct from capitalism."

On the one hand, I agree; socialism is not a political system. Political regimes are described by terms such as "totalitarian" and "democratic"; the focus of a political system is on who (or what) controls the political power. On the other hand, I disagree; socialism is not an economic system distinct from capitalism. Where political systems focus on the source of political power, economic systems are concerned with source of economic power. Absolute capitalism places economic power with the private individual or company. The opposite of this would be to place economic power with the public, whose primary body of power is the government; that means that absolute communism is on the other end of the scale from absolute capitalism. Where does "socialism" fit on that scale?

Wikipedia moves on to say the following:

"Socialists mainly share the belief that capitalism unfairly concentrates power and wealth among a small segment of society that controls capital through exploitation, creates an unequal society, does not provide equal opportunities for everyone to maximize their potentialities and does not utilize technology and resources to their maximum potential nor in the interests of the public. Therefore socialists advocate the creation of a society that allows for the widespread application of modern technology to rationalize the economy by eliminating the anarchy in production of capitalism, allowing for wealth and power to be distributed more evenly based on the amount of work expended in production, although there is considerable disagreement among socialists over how and to what extent this could be achieved."

Assuming the above to be true, the issue that socialism tries to address is inequality among the members of society. Socialism does not address interests such as the ownership of property, or how goods and services are traded. Rather, socialism is concerned with the third and fourth part of capitalism: the distribution of profits from production, and the wages of production.

Of all the critiques of capitalism, most of the focus is upon the distribution of profits. Smith recognized that income earned from rents or other non-productive sources should be taxed heavily, as the taxes would be placed upon perceived or speculative value, rather than the actual value derived from resources and labor. Smith also mentioned that taxes should be collected proportionally from those who benefit from the protections of government. Nonetheless, laissez-faire economists argue that income earned -- however it is earned -- should be retained by those who have an interest in that income, either through investment or other means. Socialist theories would be those that advocate for the re-distribution of that income; however, it is not true that the opposite theories are "capitalist." This is because capitalism already posits that wages are paid to workers out of production; that means that capitalism recognizes that workers should be paid from the fruits of production, or the profits enjoyed by a corporation. Hence, socialist theories and capitalism can survive in the same breath.

It is important to remember that Smith's treatise on capitalism was written as a critique of mercantilism. Mercantilism was the prevailing economic system during the late-18th Century, where the strength of a nation's economy was based upon the wealth of its treasury. The treasury retained wealth through the taxation of goods produced and traded between nations; government policies, then, acted to protect the wealth of the country through interventionist trade barriers and taxation of foreign interests. The purpose of Smith's The Wealth of Nations was to demonstrate the fallacy of this thinking, and to advocate for a more open economic system. A key tenet of this open system was ensuring that economic wealth remained in the hands of private individuals, rather that a nation's treasury.

The redistribution of wealth is not the same as mercantilism because the latter implies the leeching of wealth from the open market. Socialist theories promote the redistribution of wealth because, within the framework of neoclassical economics, an increase in income will result in an increase in demand for goods and services, which, in turn, creates an increase in price that pushes supply (and production) up. Socialist theories are not the same as mercantilist theories, and are, in fact, consistent with what Smith wrote about capitalism. Consequently, socialism and capitalism are not necessarily enemies.

That being said, why is it that socialism and capitalism are placed as opposites? This has to do more with opinion and politics than it does economics.

(To be continued ... )

Hitting the Reset Button

2009-08-17T09:41:00.002-04:00

In the United States, we are beginning to see what so many pundits have stated in the past: the country's economy is sick and dying. There's just no denying it. The fundamentals are not sound; they are fundamentallyflawed, built upon false premises and illusory market conditions. There was never any boom; there's only a deafening thud.

Back in 2000, Naomi Klein published No Logo, a book that I had the pleasure of picking up and reading back in my youth. In that book, Klein pointed out the transition from manufacturing to service in the American economy, and how that would eventually cause it to falter. It makes sense; a majority of service industry sectors do not lead to large amounts of export income into the country. Retail, restaurants, and financial services primarily benefit the domestic market; they are not in high demand outside of the country.

As manufacturing leaked out of the United States, the economy failed to adapt. Funds were available to re-train workers, but those workers could not find work, even after re-training. It is, and was, patently absurd in the Clinton years to believe that a displaced or laid-off auto-worker could re-train to become a computer programmer or technology developer in two years. The federal government, with all of its spending, provided training to people looking for work that never cropped up.

Unfortunately, unlike an XBox game, we can't just hit the reset button.

What we can do, though, is look backwards to find where the country went wrong, why, and address those issues. There are a multitude of federal Acts that led to the collapse of the financial sector, including the repeal of the Glass-Steagall Act and the DIDMCA. However, rather than entertaining the revival of these regulations, the federal government has chosen instead to expand government, add another layer of bureaucracy, and muddle the system even more. Soon, the bureaucratic infrastructure will rival China's.

Meanwhile, we get mired in rhetorical talk on health care, an issue that is neither novel nor complex from a conservative point of view. The financial sector goes back to business as usual -- the same business that got us into this mess in the first place -- and the various media spin mills proliferate their messages through the Internet and airwaves.

Let's go back to a time when wages matched productivity. When you could not get an A.R.M. When public broadcasting was important. Yeah. That'd be a nice change. Like hitting the reset button.

Aches and Pains

2009-08-14T08:24:00.003-04:00

I have not blogged in a long time due to time constraints. It's been a busy August. This does not mean I haven't been thinking or musing, but, rather, I have not had the time to organize those thoughts into a coherent post. Plus, with all of the news coverage with regard to health care, I was half-worried I'd be drowned out.

This post starts with the following announcement: I have seriously hurt my back. It hurts in a way that I've never hurt before. I can't tell if I've just sprained a joint in my back, or I've torn a lumbar muscle, or I've done something even worse. All I know is that, for the first time in a long time, I could not sleep last night. I'm on painkillers, and the pain still isn't subsiding. So, I'm afraid that this will be a prolonged injury.

If I were back in Canada, I would take the day off and call my doctor. Instead, here in the United States, I elected not to go to my doctor. Why? Because going to the doctor will cost me money. Because I'm pretty sure that the doctor is going to recommend I get some scans done on my back to make sure that I haven't done anything severe. Because I'm afraid that all of this medical treatment will cost me an arm and a leg, and I don't have the cash to throw around. In short, it costs me money; I'm electing not to seek medical treatment because of the potential price. That's not an issue in Canada.

Thus, the rationing argument of government health care falls apart. In the United States, the people elect whether or not to get certain procedures, but self-rationing is a form of rationing nonetheless. The difference, though, is that government health care will still provide a number of options, even if a particular procedure may not be offered; in the case of the private insurance system, the insurance company determines if an operation will be covered, and then the private payor must determine if he can afford it or not.

The folks in Britain are getting upset with the United States, primarily because American politicians are bad-mouthing their National Health Service. As a Canadian, I take offense to the assault on Canada's health care system for similar reasons. While government health care is not perfect -- no system is perfect -- it is an option which is better at providing health care as a public good than the American system is at providing health care as a private good. Further, government health care is more equitable, for it forces all people to pay into the system (through taxes), and cannot discriminate based on pre-existing conditions.

Take away your health care? A better system for more people will follow.

There will be a place for the Cleveland Clinic in the universal health care future, just like there's a Toronto Childrens' Hospital. There will be a place for innovation because there will be a desire to minimize costs. There will be a place for new drugs to be created because there are government contracts to be won.

The opposition is made up of "conservative" political "think"-tanks like the Heritage Foundation, or the Craig Millers of the world (31 czars? really?). Again, the United States' health care system does not stack up well against the rest of the world in life expectancy. Medicare will explode. Seniors are already in jeopardy of losing benefits.

The time to act is now. And I wish I was back in Canada to get my back looked at.

On the road to recovery?

2009-07-30T19:10:00.002-04:00

Recently, the media has been a-buzz about two things: (1) health care reform; and (2) the rebound of the stock market, largely due to improved sales of new and existing homes. I have not posted in a while, but my position on health care has been clear (if you've been paying attention). Here it is again: if it is cheaper for the country as a whole -- both the public sector and the private sector -- to adopt a single-payer system of health care, then it is fiscally-conservative to advocate for that position, even if it means that the government will assume a great deal of the costs. It is not fiscally-conservative to slough off the costs of the system on individuals if it is cheaper for the government to assume the responsibility of running it. Too many politicians forget that they should be thinking of the welfare of the nation, not the welfare of the federal government's budget. Hell, when the rich are beginning to advocate for the end of their tax cuts to fund the system, then it's clear that "fiscal conservatives" in Washington, D.C., don't have their heads on right (go to wealthforcommongood.org, if you don't believe me).

That leads me to the second point: the rise of Wall Street, and of home sales. To sum up what follows: this is more likely a sign of unsustainable economic policy than it is about real recovery. So, there's no reason to be overjoyed; millions of Americans are still without work, and those with jobs are spending beyond their means all over again. There's plenty of suckers to be had, it seems.

First problem: home purchase tax credits. If you buy a house this fiscal year, you can take a significant tax credit. Obviously, this encourages people who are thinking about purchasing a house into taking the plunge. This causes an increase in sales. Under normal conditions, this means that home builders will start building again; however, there is already an over-extension of home builders in their respective developments. Further, there are already plenty of homes on the market due to the foreclosure crisis and the high unemployment. Consequently, the increase in sales does not necessarily mean a corresponding increase in home construction, and this means that there may not be as many jobs created as expected.

Second problem: the Fed rate is artificially low. The federal government cannot continue to permit the Federal Reserve to loan money at interest rates of 0.25% or lower. Eventually, the government will need to raise the interest rate in order to pay off the deficit. Further, the interest rate will need to rise in order to combat inflation, and put value back into the U.S. dollar. Because jobs are not being created by the increase in home sales (in significant amounts), the spending and lending will decrease as the interest rate rises. Consequently, when the interest rate rises -- and it will -- home sales will drop, and the economy will falter again.

Third problem: credit card defaults. More and more consumers are defaulting on their credit card debts, and the debts are becoming uncollectible due to bankruptcy. These assets are quickly becoming valueless, which will decrease the lending leverage that certain lenders will have (depending on the amount of credit card debt they are holding). When these lenders start to fall, the federal government is unlikely to bail them out. This will cause further credit restriction, which will, again, choke the economy. Consequently, when the predicted fall of these card-asset lenders occurs, we will see another economic fall.

The only hope, at this point, is the release of stimulus funds, and the creation of the promised jobs. The Obama Administration needs to put more effort into getting these projects approved, and started. There needs to be some risk accepted by the federal government: recently, the federal government decided to kibosh a uranium-enrichment plant in Piketon due to its failure to demonstrate its financial viability over time. While there is something to be said about having certain returns, the need for employment is so grave in Ohio that the rejection has caused a scale-back of the economy around Piketon. And this is not good at all.

So, we're still on the road ... but not to recovery.

Should the Government Ration Health Care?

2009-07-20T09:31:00.002-04:00

According to this article, "yes": http://www.nytimes.com/2009/07/19/magazine/19healthcare-t.html?_r=1.

I find myself struggling to disagree, but that's probably because the author of the article is about eight-billion-times smarter than I am. As a conservative, though, I have to ask myself the question: is public health care good public policy?

Every single time I ask myself that question, I think "yes".

My thoughts on the matter are simple. I cannot reasonably force a private health insurance company to provide coverage for someone. With time and effort, however, I can try to persuade a politician -- and maybe others -- to go ahead and have a certain treatment added to the list of acceptable treatments under a public health care policy using cost-benefit analysis. The motivation for a private company is profit; the motivation for a public entity is to provide the greatest amount of public goods to the most people.

Health care is out of control in this country. It's one of the reasons that we must constantly borrow money (as a nation) in order to continue operating. The dream of eliminating the United States' debt within my own lifetime is infeasible unless health care costs are introduced. Unfortunately, the private sector has not yet learned how to do that on its own. That means the government must step in to save the nation's economy.

It can, and does, work. The statistics show that socialized medicine can, and does, work for more people, and for less money. I've looked at the numbers myself, and I understand why this is possible. As a fiscal conservative, the decision should be instinctual: if a program can lower costs in the long run for the public and private sectors, then it ought to be implemented. Public health care will cost the average person more money (in taxes), but will likely lower costs for businesses (who no longer have to cover 80 to 90 percent of their employees' premiums) and fulfill important health care goals (covering the young, the elderly, the infirm, etc.). Hospitals may operate without having to worry about whether a private insurance company will bail on the bill because the patient failed to disclose material facts.

What's there not to like?

... and justice for all.

2009-07-17T15:30:00.003-04:00

Go read this short article from the Nation: http://www.thenation.com/doc/20090803/edelman.

In my dream world, there's an institution that the indigent may turn to for legal protection. This body does not just protect their fundamental rights against the deprivation of liberty, but also of property. I see an institution that helps the indigent file for bankruptcy, protect against foreclosure fraud, and assist them in creating and administrating wills. I see an institution that provides guardianship services for the incompetent, at the behest of the Court, and protective services for children.

Unshackling public legal service grants? That sounds like a good start. It's the first step to encouraging states to start public institutions to protect the rights of the poor, minors, incompetents, and the elderly. Having practitioners of law assist people in obtaining social security and disability will go a long way to alleviating poverty in this nation, and protecting them against predatory loan offers by advising them of their rights will also help to prevent a future sub-prime loan crisis.

It's not like this will damage the legal industry. 80% of inquiries I get with regard to the law are simple, one-sentence answers. Most attorneys in a legal consultation would give this away for free (at least, most ethical and reasonable attorneys would do so). And as a public employee, I feel almost compelled to assist people in solving their issues.

Think about it some more. A place where victims of domestic abuse could have civil protection orders filled out for them. A place for indigent wives to escape from abusive husbands through a divorce.

Yeah. It sounds good to me. These days, you need a lawyer to get by unscathed, it seems.

The Health Bill: Coverage for the Providers only

2009-07-15T13:44:00.001-04:00

The Senate Health Committee is ready to unveil a proposal to Congress that would tax the wealthy, create a government-run insurance company, and force employers and employees to get everyone onto a health-care plan. I am all for the spirit of change in this nation, but I prefer it (immensely) to be done thoughtfully, and without the ill-conceived alacrity with which this bill has been pushed. It’s my hope that Democrats and Republicans alike attack this bill and shoot it down, for it is built up on fundamentally-flawed principles, and will only serve the health care providers in the long run.

Oh, sure, I’ve been accused of being cynical. “Desperate times call for desperate measures!” Those who know me (personally) likely know my position with regard to the health care industry. However, that’s not the perspective I want to offer here; what I’d like to offer is the following proposition: by getting everyone onto an insurance plan, the winners will be the health care providers. By ensuring that either an insurance company or the government picks up the bill for U.S. citizens, the health care providers have closed up a (small) gap in their profit-making machine – the dreaded insolvent patient. The scheme proposed by Congress will drastically lower the number of bankruptcy filers who are forced into bankruptcy protection due to medical bills; the scheme will not, however, address the reason why people have to file for bankruptcy in the first place: the excessive costs of health care.

And we all know why health care costs so much. Procedures that people (arguably) do not need. A lack of incentive to engage in preventive health care. Keeping people overnight for minor reasons. Doctors that make exorbitant salaries. Bad diagnoses. It has been estimated that unpaid medical bills only account for 6% of the lost revenue to medical care providers; thus, that, alone, cannot be the reason why costs are through the roof. It’s not unreasonable to look at the factors above as the primary reason why, despite the economic recession, health care premiums will rise 9% (or more) for the next fiscal year (by forecast). It’s not unreasonable, therefore, to look at addressing the problems above, rather than looking at merely reducing bankruptcy filings.

It’s time to take a page out of the public health care system, to see how those Western nations – which spend, on average, less than 50% of what the U.S. spends on administrative costs in the health care industry – address health care costs. So, here’s my proposal:

First, Medicare/Medicaid shall provide coverage to the elderly, dependents, the disabled, and to the indigent, regardless of their infirmity or condition. All must submit proof of their status upon admission to a health care provider. All health care providers must admit the elderly, children, the disabled, and the indigent, and treat them, and shall be responsible for gathering the required information.

Under Medicare/Medicaid, health care providers shall be paid not by the hour or by the procedure, but by the number of patients served. Health care providers shall be paid additionally based on the number of patients successfully treated. Health care providers may be paid above and beyond the numbers served and successfully treated by petition to the government. Upon showing of the reasonableness of a particular choice of procedure, Medicare/Medicaid shall reimburse the health care provider for the reasonable value of the services offered above and beyond the numbers. Abusers of the system, however, shall be punished accordingly.

The point of this system is to incentivize preventive medicine. If the elderly, dependents, the disabled, and the indigent are able to receive regular, preventive medical check-ups, then there is less of a chance that they will require the sort of treatment that can cost thousands of dollars. Naturally, there has to be a cap on how often one can visit a health care provider, but there is a benefit to health care providers to see more patients who are still relatively healthy, to provide appropriate care, and to discharge them. And, of course, there is a detractor to accepting more patients than can reasonably be covered – malpractice.

Second, no health insurance company shall be permitted to offer health coverage unless they are a qualified tax-exempt, non-profit entity. This means that the health insurance company shall be not be permitted to retain profits, and must, instead, expend any profits above and beyond normal growth. Acceptable expenditures should include research and development, as well as donating to hospitals and health care providers. Further, because of the Medicare/Medicaid structure, there will likely be fewer unhealthy adults and children in the health insurance pool, thus reducing the risk to insurance companies. The result: a drop in premiums for care. Plus, if Medicare/Medicaid is setting the bar for payment, insurance companies may adopt a similar system, which should lower costs to the insurance companies.

What do you get from this system?

A system that encourages preventive medicine at a young age.
A system that provides care and coverage for the poor, disabled, and elderly.
A system that discourages unnecessary procedures and spending.
A system that lowers premiums for the insured.
A system that lowers risk for the insurer.
A system that does not involve the government creating its own insurance.
A system that still discourages bankruptcy filing, due to coverage to the indigent.

In short: the health bill proposed, while a step made with the right spirit, is a step in the wrong direction. We must address costs rather than address the losses to providers, which have long been shown to not be a major factor in rising costs. The focus should remain on the exorbitant costs of health care, and on ways we can modify the existing system to address them.

In all fairness?

2009-07-13T12:56:00.000-04:00

There has been much discussion in the Republican camp about implementing a “fair tax” policy in the United States. As a result, I took a look at the website – www.fairtax.org – and searched for information with regard to whether the policy is a good idea. The idea of a single sales tax – 23% -- on everything, and the elimination of income taxes, seems, on the surface, to be the fairest and most equitable way to collect taxes from individuals. On second glance, though, the idea of a single sales tax is progressive (not in the tax sense, but in the political sense), but not necessarily in a good way.

To start, the proposal would only affect the federal taxes. This means that you would not have to pay federal income taxes, either as an individual or as a business. That sounds great, right? Keep in mind, though, that it does not eliminate state income taxes, state sales taxes, state luxury taxes, local property taxes, local income taxes, etc. The measure is only intended to meet the needs of the federal government, so the average taxpayer still has to contend with whatever the state decides to do to him. For the moment, though, let’s set aside these concerns, and focus on the taxes at the federal level only.

When it comes to economics, conservative pundits often turn to the “Father of Economics”, Adam Smith. After all, he was the rule-maker for this crazy-little-thing called capitalist economics. Here’s what Smith had to say about taxes: “[t]he subject of every State ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the State.” Smith’s position is clear: people ought to contribute to a country based on their abilities, which is indicated from the revenue they get while being protected by the State. On the other hand, Smith’s writing is inimical to the idea of taxing wages: “a direct tax upon the wages of [labor] must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from a proper assessment of a sum equal to the produce of the tax, [levied] partly upon the rent of land, and partly upon consumable [commodities]." Thus, you have two positions: (1) people ought to be taxed on the money they make (revenue); but (2) people ought not be taxed on the money that they earn (wages). What’s the difference?

To find consistency within Smith’s arguments, one must simply look at the two words: revenue and wages. From the perspective of a firm, revenue is the money that comes in, and wages are one of the costs of business. For household, earnings are the money that comes in, and expenditures represent the costs leaving the household. If you put these concepts into a cyclical diagram, you get the wealth cycle. According to Smith, what should be taxed is the expenditures/revenue part of the wealth cycle, but not the wages/warnings part. Thus, a tax on consumption is consistent with what Smith has stated. The “fair tax” policy meets this ideology, because it is a tax on consumption. So far, so good.

However, that is not the end of the analysis. Check out this website: http://www.progress.org/banneker/adam.html. Notably, read the following:

“Bearing all these things in mind, there are two types of taxation which obtain Smith's recommendations: a tax on luxury consumables and a tax on ground-rents (the annual value of holding a piece of land).

“On the subject of luxury consumables, he is adamant about the [definition] of 'luxury' and of 'necessary.' By his definition, a 'necessary' may vary from place to place and from time to time. At the time of his writing, linen shirts, leather shoes and a minimum of food and shelter were definitely to be regarded as essential to a [minimum] decent standard of living. Taxes on salt, soap, etc., he harshly criticized as inequitably taking from the poorest elements of society. Taxes on luxuries, which were to include tobacco, he considered excellent in that no one is obliged to contribute to the tax: "Taxes upon luxuries have no tendency to raise the price of any other commodities except that of the commodities taxed ... Taxes upon luxuries are finally paid by the consumers of the commodities taxed, without any retribution."

“More deserving of [praise] is the tax on ground-rents: "Both ground- rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and [labor] of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them."”

So, Smith adds a few quirks to the basic concept of consumption-based taxation. First, taxation of necessities is a bad idea because it “inequitably” taxes the least-fortunate. Second, taxation of luxuries is a good idea because the obligation to pay a luxury tax may be easily avoided by not consuming the luxury. Finally, Smith posits that “revenue which the owner, in many cases, enjoys without any care or attention of his own” should be subjected to taxes; this is revenue from capital gains or investments. Consequently, a basic tax on consumption is not Smith’s answer – rather, it is careful taxation on certain consumables and forms of revenue that should be applied.

Fair tax advocates have the right idea – tax consumption instead of income. However, fair tax advocates have politely dodged issues such as tax incidence and regressive application of taxes based on proportional expenditures. Fair tax advocates, through their policy, would tax necessities as much as they would tax luxuries. The fair tax policy also does not include a taxation upon rents – income not earned directly through labor – which is something that Smith suggested would be an ideal tax.

Thus, I present the following “fair tax” policy, modeled upon the suggestions by Smith:

· A sales tax on luxuries, up to 30% based on value.
· A sales tax on the sale of homes, up to 40% of the amount above the tax-appraised value.
· No sales tax on necessities, such as food, clothing, rent, or fuel.
· A sales tax on rent income, up to 25% based on amount received.
· A tax upon revenue from investments, mutual funds, and other non-labor revenue, up to 35% of gain.
· No income or FICA taxes based on earnings.

But a blanket sales tax? No, thank you. That’s one thing about Canada I didn’t really enjoy.

If I fail to plan, ...

2009-07-07T13:35:00.002-04:00

... then I must plan to fail. Check out this article: http://www.dispatch.com/live/content/local_news/stories/2009/07/04/slots04.ART_ART_07-04-09_A1_2BECHLR.html?type=rss&cat=&sid=101.

The GOP is right here. If $455 million in projected revenues may be retracted when the voters go to the ballot in November on the casino issue, then that amount ought to be removed from the equation. Why? Because you can never count on the voters to go one way or the other.

The proposal kind of stinks. First, it puts the voters in the position of deciding whether to keep the $455 million or to put casinos in Toledo, Cincinnati, Columbus, and Cleveland. Second, it requires the racetracks to take some risk -- the investment of $455 million is nothing to balk at. Mind, I don't think it is appropriate for the government to ask people to invest money in setting up slot machines, only to have them bear the risk of losing that investment when casinos are put in place. So, you can't just remove that provision.

There's no reason you cannot have it both ways, though. Here's an idea: why not raise income the sales tax up to 6%? The 0.5% increase would raise $600 million (because a full 1%, according to statistics, will raise $1.2 billion). At 5.5%, the per capita sales tax collection was $803 in 2006, so, if the numbers hold, each resident would pay an additional $73 per year (at 6.0%, it would be $876 per capita). That extra $600 million would cover the potential loss from the voters' decision, and bring in an extra $145 million as a cushion. And if voters wanted to have casinos, then you'd have that full $600 million.

$73 per year per person. That's under $6.25 per month. You'd need four times that amount to sponsor a child in a third-world country, but it would buy time for the voters to freely decide whether casinos in our major cities would be worth the risk.

The Steroid Policies of the American Economy

2009-07-05T12:30:00.003-04:00

(I'm totally lazy today, so I'm just going to toss up an essay for a class I was taking last quarter.)

“Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure ... than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.” – Theodore Roosevelt, 26th President of the United States

"Oh sure, your guilty conscience might make you vote Democrat. But deep down you know you want a cold-hearted Republican who will lower taxes, brutalize criminals, and rule you like a king! That’s why you need me Springfield: to save you from yourselves!" – Bob Terwilliger, The Simpsons

It has become clear that the experiment of deregulation of the American economy has failed. The American middle class, mislead by empty promises of prosperity to all, have learned and now believe in the dreams and aspirations of a narrow population of already-affluent individuals, to the detriment of their own economic and democratic lives. In his book, The Squandering of America, Robert Kuttner lays the blame for this not only on the anti-social behavior of corporations, but also upon the complicity of the American government[1]. Like McChesney in Rich Media, Poor Democracy[2] and Galbraith in The Predator State[3], Kuttner asserts that the predatory behavior of corporations upon the middle class could not have occurred without the assistance of the American government. As a consequence, the “squandering of America” has occurred: the loss of promise and opportunity at the hands of private interest groups for the benefit of the American “elite”.

Kuttner highlights public policies that helped to create “the golden age of managed capitalism.” Social Security ensured that the aged and disabled were able to continue to live independently after a lifetime of contribution to the American economy or an unfortunate circumstance, respectively. The G.I. Bill, and other similar public education initiatives like Pell Grants, helped to keep tuition costs for public universities low and accessible to a wide range of Americans. Medicare and Medicaid provide health care for Americans in need, such as seniors or the disabled. The Wagner Act provided workers – a group which the vast majority of Americans should describe themselves as – with laws that would protect their right to organize peacefully and unionize. There were also acts regulating Wall Street activity: the Clayton Antitrust Act prevented the collusion of direct competitors; the Glass-Steagall Act prevented commercial banks from underwriting or marketing securities, thus making them more responsible to their investors; and the Securities Exchange Act prevented exploitation of the stock market through insider trading and the issuance of junk stock. The powers and duties of these public policies guaranteed the basic economic liberties enjoyed by Americans during the post-WWII era of prosperity enjoyed by the United States until the mid 1970’s.

The potential of the American economy to continue to thrive and prosper has since been undermined from a number of causes. Unchecked rises in the prices – not necessarily the costs – of health care and higher education have placed a large burden on the federal budget, which must now spend more on programs such as Medicare, Medicaid, and federal education initiatives. The imposition of tax cuts for the wealthy has cut into the liquidity of the American government, and its ability to float bonds to raise capital. The weakening of pro-union laws like the Wagner Act has impacted the power in the American labor market to demand fair wages and benefits. Further, the deregulation of the stock market and lending institutions has allowed speculative investment and other predatory corporate behavior, causing an unstable Wall Street market and undermining the strength of the investment sector. Where the American economy was “a sure thing” when it came to increasing productivity, wages, and spending, the “assault on the good society” has led to overspending into debt, inflation of the price of essential services, and the debilitation of the American working class to demand change.

The undermining of the “good society” has a number of detrimental effects on the American populace. First, the American middle class has effectively lost the ability to demand fair wages from employers; without strong union and labor laws, or a strong union or labor organization, employers – the corporations – are able to dictate terms of employment, or disseminate false information in order to encourage employees to give up their “sure thing” benefits, like pensions, for employer-friendly pension schemes, such as 401(k)’s. Second, fewer members of the American middle class can be assured of a “career” in a particular company; weaker labor laws, uncertain business futures, and an increasingly-educated labor force means that vocal workers may be fired and replaced by companies without risking productivity. Finally, the new American middle class – graduates of high school or higher education – face the ugly prospect of corporate bondage once they emerge into the labor pool; the rising cost of education and health care means that workers are dependent upon their jobs to provide wages for student loans and insurance for health care costs. Good wages and health care coverage are no longer benefits: they have become necessities. This turns an already-competitive work environment into a cutthroat wasteland; this turns voluntary employment for the benefits into involuntary servitude for the necessities. The destruction of the “good society” has turned the average American worker into a serf: living on land he does not own, working in order to subsist, and believing an ideology that he does not benefit from and cannot afford.

The steroid policies of the American economy are simple. First, short-term gains are to be prized more than long-term growth. Second, any attempt to police or regulate is to be shot down and decried. Third, there is to be no dissent among the players: the businesses, the lenders that they rely on, and the politicians that benefit from the hush policy. If business is a sport, then the economy is the playing field, the corporations and firms are the players, and the laws and policies of Congress are the rules. When the rules are such that the sport is no longer enjoyable, the rules change. In many ways, however, the American economy is not a sport: where most players would complain about other players breaking the rules, the players in the American economy practice a baffling sort of silence. There are too many smart people involved in the American economy to say that the recent collapse was unexpected or unanticipated. There are too many smart people involved to say that it was a simple mistake. It is far more accurate to criticize those entrusted with the health of the American economy with having failed in their task willfully and wantonly.

The American people can no longer accept their economy as a game for financiers and economists to play. Unlike a sport, when a player cheats, it has drastic effects upon the life of the American working class. Assets are raided; lives are destroyed. When a business is acquired by another, many American workers are forced out of jobs. When a business is dissolved, the same occurs. Thus, the American people must convert the game into a process: the economy must be regulated, and forced to work for the benefit of the people as a whole; social welfare, which is an integral part of an economy, must be regulated and managed to provide necessities to the people in need; and the violators of the rules of this process must be purged or punished for their transgressions. The rule-makers must crackdown on the steroid users, and reward the players that stick by the rules. Otherwise, the game will continue to be ruled by cheaters.

-----

[1] Kuttner, R. (2007). The Squandering of America: How the failure of our policies undermines our prosperity. New York: Alfred A. Knopf.

[2] McChesney, R.W. (2000). Rich Media Poor Democracy: communication politics in dubious times. New York: The New Press.

[3] Galbraith, J.K. (2008) The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. New York: Free Press.

Still waiting for the stimulus jobs?

2009-07-02T15:59:00.003-04:00

It's still coming.

Oh, sure, we were all promised change immediately. I'm privileged: I have a secure job, a double-income household, and expenses within my ability to pay. I realize that a lot of people are anxious, but the stimulus will come.

So, what's the hold up? Simply put, the federal government does not like to take a shit without checking its bowels two or three times to make sure that it's a good idea. The jobs that were "created" with the $800 billion appropriation commitment are in the process of being made, if only we weren't so critical of turtle crossings, high-speed rail, and bridges in the middle of nowhere.

The trepidation is understandable. The last time Congress acted without proper consideration, millions of dollars fell into the hands of brokers who drove AIG into the ground. The government had to messily clean up that failure. This time around, the government wants to make sure the money is going to the right people, and that the proper approvals are made. This applies even to expenditures made by President Bush: the TARP legislation created the Neighborhood Stabilization Program with $2.3 billion, but none of that money has made it to the cities and counties that need it now. Everyone is so concerned that the money will be spent "appropriately"; no one is concerned about what the delay means to the average citizen.

We have shovel-ready jobs now. Republicans and Democrats alike are stalling on the bill, questioning why the money is going where. No one is talking about what the money is supposed to do -- create jobs, even bullshit jobs, so that the money gets back into the hands of the people. Bandying back and forth about the "appropriateness" of the expenditures is political jockeying that is preventing the jobs from being created.

Just make the jobs happen.

Uhh ... America? Lose some weight.

2009-07-01T13:20:00.002-04:00

Go read this article: http://www.msnbc.msn.com/id/31681795/ns/health-fitness. And this will be a very quick, short post.

First step to lowering health costs: lose some weight.

Seriously.

A majority of the people voted for a change when they decided to vote President Obama into office. They voted for him, expecting a change in health care policy. What no one votes for, though, is to improve one's own health. The evidence shows that the public is partially to blame for the sagging (ha ha ha) state of health care.

Seriously. Lose some weight, America. At least, to the point where we stop considering obesity a "disease".

Maybe we can rid the notion that Republicans are all a bunch of fat guys. I'm sure that some of us would not mind associating with slim women.

Sick. Just plain sick.

2009-06-29T09:24:00.003-04:00

Ugh. Check out this article from MSNBC: http://www.msnbc.msn.com/id/31595921/ns/politics-white_house/. Prepare for (slow-paced) rant in ... 3, 2, ... 1.

I get it. Pay to play. Making sure that we are not adding extra costs on top of the current projections for the deficit. I know it's important because the average American does not realize what macro-deficits mean, or will do to the nation. Yes, most people think that high deficits mean Doomsday. So, I know why Axelrod and the White House is considering taxing health benefits. It's just stupid, pointless, and will place a hardship on those making below $250,000. Here's why:

Health care premiums are a necessity in life in America, so they will be paid. Right now, the premiums are tax-deductible. Those of us with family who are sick have to pay higher health care premiums than others -- and they can sometimes rise into the range that may make them subject to taxes. People under $250,000 can pay premiums in the range of $18,000 per year. If our employers did not pay for the lion's share of the premium cost, then a good portion of people making between $100,000 to $250,000 will be paying premiums above the limit proposed.

Word is that employers will also have to pay for health care premiums paid to employees. Employers are already shelling out large amounts of cash in order to pay for premiums; if this amount becomes taxable, then employers are going to stop offering coverage. That puts all of the costs for health benefits onto the employee, who are likely unable to pay for the entire premium on their own. Thus, many people are going to fall out of private insurance -- specifically, those whose employers have decided to stop offering health insurance.

This will have a two-fold negative effect. First, the people who come off of private health insurance will try to get onto the public plan that the Obama Administration is proposing. This will put a greater burden on the public plan, and potentially push it out of its projected costs -- severely. Second, as people fall out of private insurance, the premiums to cover the risk will go up for those remaining on the plans -- or, in the alternative, some health insurers will simply shut down. Costs will go up for those who want to stay on private insurance, and the remaining insurers -- likely the ones with significant market power -- will stay in business, and charge even more. Consequently, the public plan will be forced to cover more people than expected -- much, much more.

So, the tax policy is a terrible idea.

What the Administration should be focusing on is decreasing health care costs in the industry. Health care in the United States consumes 17% of the GDP, and is projected to be 20% in under ten years. In the U.K., where the system is mostly public, the cost was only 9.4% of the nation's GDP. In France, where you can get daycare for free, the cost was 10.5% of the nation's GDP. Denmark? 9.0 percent. Canada? 10.0%. So much for the argument that private health care is more efficient.

Here's some more statistics to chew on: 31.0% of the costs for health care in the United States are administrative, compared to 16.7% for Canada. (http://www.pnhp.org/publications/nejmadmin.pdf) While it is true that, in sum, Medicaid spends more per patient on administrative costs, ($509 v. $453 for private insurers), the misleading part of the study by the Heritage Foundation (surprised?) is in its presentation: Medicaid patients make more claims due to age, infirmity, and the fact that they do not need to pay for the care; privately-insured people have strong incentives not to see the doctors when they should, to avoid costs, and to stay "out of the system". (http://www.heritage.org/Research/HealthCare/wm2505.cfm) Either way, it's hard to argue with the proof: Americans pay more for their health care than Canadians or Europeans.

And the results -- life expectancy (from CIA World factbook, cited by Wiki -- http://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy): France (5th in U.N.; 8th, World) -- 80.87 years; Canada (10th in U.N.; 14th, World) -- 80.34 years; U.K. (26th; 37th) -- 78.7 years; U.S. (30th; 45th) -- 78.06 years; Denmark (32nd; 47th) -- 77.96 years.

We need to fix health care, but we should be focused on the costs, not the delivery.

What the hell is the national energy tax?

2009-06-25T10:59:00.002-04:00

Seriously. I've been scouring thar Interwebz for some sort of explanation on what "Pelosi's National Energy Tax" is. I've been looking for a proposed bill. I've been looking for some relation between this tax and the potential loss of jobs. I've been looking for some way to understand the claims from an economic point of view.

But it's not there. This is not a national energy tax. This is deliberate spinning, and it offends the shit out of me.

Apparently, everyone is squawking about the proposed environmental cap-and-trade system. For proof, I point to this article: http://www.gopleader.gov/News/DocumentSingle.aspx?DocumentID=133823. Specifically, under Point 1, Rep. John Dingell (R-MI) has said the following: "Nobody in this country realizes that cap and trade is a tax. And it’s a great big one."

Okay, folks: time for the truth. Cap-and-trade is not a tax. Let me repeat: cap-and-trade is not a tax. To my Republican compatriots: stop calling cap-and-trade a tax. Because it is not. It's not even close.

As I stated on Weapons of Mass Discussion (you can go to http://massdiscussion.blogspot.com, and look for the article, or choose this quick link to my comment: http://www.haloscan.com/comments/maestromatt/8025008392814448733/), the cap-and-trade system involves the privatization of the pollution-control system in the United States. At the moment, the EPA runs a regulatory scheme that is aptly-described as a public-rights system. The EPA permits private companies to pollute the United States' air and water, so long as they do so under a prescribed limit based on best current technological standards (which is, in turn, based on cost-benefit analysis). If you fail to meet the standards, you get fined. It's pretty simple.

What the cap-and-trade system would do is divide the country up into regions, and determine regional limits for pollution. Then, the private interests would bid for permits that would allow them to pollute in "X" amount. The cost of this process would put money into the hands of the federal government, which may (or may not) be used to ameliorate externalities caused by the pollution. The theory behind the approach is based on the (heavily-flawed) neoclassical model of environmental economics, and relies upon market forces to place an appropriate value on each permit, and the law to enforce the property rights created by the system.

The big, obvious, glaring issue is the fact that the system effectively pawns one of the most precious public resources available to the American people -- clean air and water. Thanks to the EPA, we have a very clean environment (overall), and it is something that Americans can enjoy for generations. The system does not take into consideration that pollution moves from region to region, and that pollution limits need to be adjusted over time. If the government wants to change pollution standards, it can only make them looser; if it decides to lower limits, then the government will have to buy back a number of permits in order to decrease overall pollution. Further, this program debilitates the ability for the States to modify or further restrict pollution above and beyond federal levels (which they can currently do).

And I have not even touched upon how the system has the potential to squash entrepreneurship in this country, and to limit the ability of small manufacturing firms to be able to compete with bigger ones.

So, two points to bring away from this post:

1. The Energy Bill is bad.
2. It's not a tax.

News-spinning is really stupid when you can just as easily attack the bald-faced truth: that the government is proposing to give to private interests the right to pollute the air and water of the United States.

The Party of Morality?

2009-06-24T22:18:00.002-04:00

This is not intended to be a knock against Republicans in general, or their supporters. However, what is going on with the choices some are making these days?

Here's a list of names, and alleged (kind of) crimes:

Rep. Mark Foley (R- Florida): Sexual messages to teenage interns. Boys, to be precise.
Rep. Bob Ney (R - Ohio): How could you not know that Abramoff was a crook?
Sen. Larry Craig (R - Idaho): Asking for toilet paper ... or something else.
Rep. Duke Cunningham (R - California): Bribery and corruption of the worst kind on the menu.
Rep. Tom DeLay (R - Texas): Money laundering? Really?
Sen. John Ensign (R - Nevada): Can't blame a man from Sin City, right?
Gov. Mark Sanford (R - S.C.): ... but Charleston?

It is really difficult -- exceedingly difficult -- for any person to consider the party to be anti-corruption and pro-morality these days. It's one thing to be caught up in allegations of misconduct, but another entirely to become the centerpiece of media scrutiny. When you become a politician, you will be scrutinized more than any other kind of person. You really have to have a watchdog making sure that you don't crack under the pressure.

But, let's say you do. You crack. The watchdog will make sure that you aren't going anywhere. While I recognize that this might be difficult when hanging out with a large group of other 50-something lonely male politicians, has anyone considered a hobby? Or going to church regularly or taking martial arts lessons? These things are somewhat less objectionable to your constituents.

Bankruptcies, Prof. Warren, and the Trouble with Medical Bills

2009-06-23T13:37:00.006-04:00

Go read this article: http://www.msnbc.msn.com/id/31325093/ns/business-personal_finance.

Here we have an American citizen who has too many credit cards, who refuses to explore bankruptcy as an option, and who does not represent the majority of Americans who find themselves staring at the abyss of unrelenting debt. The constant attention given to these people, though, gives the distinct impression that the average American struggling with debt is someone who could not say "no" to easy credit.

According to Elizabeth Warren, Professor at Harvard and the current chair of the Congressional Oversight Panel created to oversee the banking industry's bailout, here are some statistics with regard to bankruptcy filers:

44% of filers are couples;
30% are women filing alone;
26% are men filing alone;
Slightly better educated than the general population;
Two out of three have lost a job;
Half have experienced a serious health problem;
Fewer than 9% have not suffered a job loss, medical event or divorce

(Source: The Fragile Middle Class: Americans in Debt (2001))

Of course, it's worth noting that Prof. Warren's (more recent) work has been criticized for some glaring mistakes. For instance, Megan McCardle keenly points out that Prof. Warren's recent work ignores the fact that bankruptcies primarily caused by medical bills have decreased in number. (McCardle's article can be found here: http://meganmcardle.theatlantic.com/archives/2009/06/elizabeth_warren_and_the_terri.php)
Then again, just because the number of bankruptcy cases opened has fallen does not mean that the percentage of filings have not increased; according to Warren, the ratio of bankruptcies filed due to medical bills has increased from 50% in 2001 to 70% in 2008. McCardle does not really refute that; her critique is more of a caution against immediately assuming that, due to the ratio, the number of filings has increased.

The point that should be taken from Prof. Warren's work is that, assuming that the numbers of bankruptcies filed for medical costs have not increased or decreased, medical costs still remain a problem spot for Americans. Check out some of the following numbers for non-business bankruptcy filings, taken from the Administrative Office of the Bankruptcy Courts of the United States (as cited here: http://www.bankruptcyaction.com/USbankstats.htm):

2008 - 1,074,225
2007 - 822,950
2006 - 597,965
2005 - 2,039,214
2004 - 1,563,145
2003 - 1,625,208
2002 - 1,539,111

If the ratios claimed by Warren are true, and assuming the ratio of medical-bill-related bankruptcies was 50% in 2002, then we have caught up to ourselves; the number of 2002 medical-bill-related bankruptcies would be 769,555, and the number of 2008 medical-bill-related bankruptcies would be 751,957. Meanwhile, the number of bankruptcies filed that were not primarily caused by medical bills have decreased dramatically, from 769,555 to 322,268. There are several possible interpretations of this data that would be convenient for Prof. Warren's general polemic: medical costs are astronomical, and making bankruptcies the only feasible way to get out; medical bills are resistant to traditional forms of debt compromise; health insurance companies are charging deductibles that are too high or refusing too many claims; etc.

The other possibility if the following: those who can afford to pay the medical bills have insurance, and medical bills are unsecured debts subject to discharge under a Chapter 7 bankruptcy filing. Where mortgages and car loans are debts secured by collateral, medical bills are not. People who own no assets, who are uninsured, and have a low income really only have one choice when faced with large medical bills. Unfortunately for the hospitals and medical providers, this option is exceedingly attractive under the current bankruptcy laws.

This is not to say that we need to tighten up the bankruptcy laws to make it more difficult for debtors to discharge their medical bills. Rather, the rhetoric utilized to promote change in the current health care system in the country needs to charge. Even if costs were cut by half, this would not necessarily mean a corresponding or significant decrease in bankruptcy filings, for the only sure way to eliminate medical-bill-related filings is to institute a social-medical system that would cover the indigent. The focus of the fight for health care reform -- for both sides -- is to decrease the overall costs for the benefit of the employers and employees who pay premiums. Assuming that this is the proper focus for the fight, the Obama Administration's proposal to lift the tax deduction on health premiums is unsupportable.

As the article illustrates, people will get themselves into their own troubles. There's no avoiding it. Even with all of the consumer and worker protections in the 1950's, there were still bankruptcies, and bankruptcies still occur in the most socialist of nations. What we can do, however, is concentrate on where the pinch is felt most -- small businesses and the middle class that are bleeding from the massive hikes in medical premiums. Frankly, the only sound way to do this is to reduce the incentive for rent-seeking behavior on the part of the insurers, either by forcing them into non-profit status or heavily-taxing their above-normal profits.

Going into Reverse -- a bad idea?

2009-06-22T23:29:00.002-04:00

Sen. Voinovich (R-Ohio) is a man whom I have met and admire. However, his office has made the following statement (actually from the Dispatch): http://blog.dispatch.com/dailybriefing/2009/06/voinovich_decries_stricklands.shtml.

As I consider myself quite "liberal" when it comes to civil rights, I think it is a person's right to gamble once they understand the consequences. Although gambling is addictive, gambling is not quite on the level of other addictive activities that we legitimately let others engage in, such as drinking or smoking. Gambling is an activity that is as American as apple pie. After all, what is a 401(k) but a calculated risk?

Putting the gambling machine into horse racing venues seems reasonable to me. Horse racing is a form of gambling in many states; betting on horses is a studious form of gambling, but gambling nonetheless. The voters of Ohio rejected a constitutional amendment to permit a casino near Wilmington, but what if the measure was a mere statute or regulation or permit? Would the voters have been so opposed?

This sort of anti-modern, moral-dictating rhetoric is what drives many young people, moderates, and civil-rights "liberals" from the Republican Party. We ought to leave people well enough alone, and let them make their own educated decisions.

Obama's new plan: to shift responsibility

2009-06-17T13:26:00.004-04:00

Although the details have not been released as of the time of this post, here's an article on President Obama's new plan to address the financial "irregularities" that exist in the United States system: http://www.msnbc.msn.com/id/31403945/ns/business-stocks_and_economy.

There are two main problems to this plan: (1) expanding the power of the Federal Reserve; and (2) enacting a new agency divests the American people of the power to enact strong rules.

It needs to be said: the reason why we are where we are is due to the inordinate amount of influence that the Federal Reserve system has on the lending industry and on the federal government. The Fed is not an agency, and it is not quite private. It is, in the words of Wikipedia, an "independent government institution with private elements". It has its own Board of Governors, largely made up of the most powerful bankers in the country, but it has the power to set regulations and laws that affect the entire lending industry with the muscle of the federal government. Despite the fact that Congress technically has power over the institution, the Federal Reserve is one of those unique government bodies that lacks the accountability of elected officials (because the governors are appointed), yet can wield the sort of power that can cripple the entire country. They are like the Supreme Court, without the robes (and without lifetime terms).

Greenspan believed in the using monetary policy to keep the economy growing. And then, he recanted. Volcker enacted policies that drove inflation down, but also crippled the American economy for a couple of years. An entity such as the Federal Reserve does not need more power: it needs less power. Further, since the governors are bankers, do we really want the people who drove the Titanic into an iceberg to plot the course home?

Setting up another government agency expands on government unnecessarily. There are plenty of government agencies that can oversee the lending industry that already exist: the Department of Commerce, the Federal Trade Commission, the Department of the Treasury, etc. What the proposals fail to address are the gaps in the federal statutes that permit the sort of exploitation that led to the financial crisis. Further, I am concerned that vesting in an agency the sort of authority normally reserved for Congress -- in this case, the setting of reasonable regulations to govern the creation of lending instruments -- usurps the traditional role of the people to determine what is acceptable law. Agencies are headed by appointees, which are subject to the vagaries of politics, something which statutes usually stand up to.

Color me disappointed.

The White House tackles financial regulation

2009-06-17T10:49:00.003-04:00

This entry is based on the following article: http://www.dispatchpolitics.com/live/content/national_world/stories/2009/06/17/arate.html?adsec=politics&sid=101.

I recognize that Rep. John Boehner (R - Ohio) is the minority leader, and it's his job to present an opposition to the proposals by the majority party. Just for a moment, however, let's step back and look at the history of finance in this country, since the Carter years.

When stagflation hit at the advent of Ford's presidency, industry in the United States started down a novel economic path: the path of inequity. Until the '70's, American workers enjoyed real wages that reflected productivity. When productivity went up, real wages went up. This caused some mild inflation in the country, but that was acceptable because wages rose slightly above inflation. But Friedman, and those that followed his monetary economic policy, argued that inflation would soon kill the growth of the American industrial sector, and moved to have the Federal Reserve take a more active role in shaping the direction of the economy. Thus, we have problem number one: the interference of the Federal Reserve into the economic affairs of the United States.

When Carter came into power, he had to deal with a stagnating economy. By this time, unions had become partners to the corporations; employees had less power relative to their employers, and the trend was not going to change. It's no surprise, then, that we see real wages stagnate and hold, while productivity continued to rise. This created an equity gap, where the workers made the same as they always did, but the managers began to make more. So, we have problem number two: the rising equity gap between workers and managers.

Carter lost to Reagan, and Reagan declared war on regulation. He cut taxes enormously, but failed to realize that the Fed had planned to tackle the inflation problem by raising interest rates to record levels. With high interest rates, there were few people who could borrow, and that was a problem. But the banks had a plan, and lobbied for it. If they were allowed to offer a wide-range of "financial products" (a euphemism for lending contracts or schemes), then they would be able to offer loans below prime (sub-prime) or other kinds of lending instruments that would both protect the bank against risk, and provide loans to the average person. To do this, though, they would need to be rid of the patchwork of state regulations that prevented such loans. So, we get problem number three: the DIDMCA, which effectively removed national banks from the control of the myriad states through the Supremacy Clause -- control would now come solely from the federal level.

Then, it was off to the races. Congress approved of other measures intended to increase the level of high-principle lending, including tax deductions for mortgage interest (which even Reagan could not stop), sub-prime lending instruments, adjustible-rate mortgages, and so forth. Congress also loosened up regulatory enforcement by cutting funding to those efforts. Even after the Savings & Loan scandal of the late 80's, Congress still did not learn its lesson. So, we get problem number four: the introduction of non-traditional mortgage instruments, and the failure of Congress to learn from its mistakes.

And, of course, that was not the end of things. The Gramm-Bliley-Leach Act of 1998 repealed one of the most important prohibitions of the 1933 Glass-Steagall Act -- the prohibition of commercial and investment banks merging together. This created a number of "conflicts of interests" between the agents and actors in each sector. Commercial banks, who lent the money, started to pitch their clients -- ordinary folks and businesses -- to invest in the banks they were affiliated with; the investment wings, in turn, made the commercial wings look like geniuses. Various disclosures that investment banks had to make to the SEC and other regulatory bodies were no longer necessary because they were now commercial banks, and vice versa. Shading blurred what was going on, to the point where the average person only knew that they were making more "money" by investing. Thus, the beginning of the investing binge, the selling out of pensions for 401(k)s, and the fly-by-night trading outfits. So, we have problem number five: an entanglement of entities which should have competing interests and loyalties, but which may shield themselves from scrutiny based on the lack of regulation.

And we haven't even talked about how the lack of oversight makes it simple to commit the sort of fraud that can crush the savings of the average, working American.

The people of Ohio have agreed to let their leaders set interest rates on loaning instruments. In November of 2008, the voters of Ohio, by referendum, ratified the Ohio Short-Term Loan Act, which capped the ability of payday lenders to charge more than 28% interest per annum. Ohio suffers from one of the highest foreclosure rates in the nation (1.797% of households, which is just above half of Nevada's mind-boggling 3.376%), which is at least partially due to the proliferation of alternative "financial products" in the lending market. Despite these facts, Rep. Boehner appears to oppose the ability for government to set reasonable rates for loans, or to regulate the kinds of "financial products" that are available to the average American.

I don't think Rep. Boehner is representing the interests of Ohioans very well at the moment. Being wary of excessive intrusion into the finance industry may be warranted, but certain things need to change, namely the five problems I've outlined above.

Gov. Strickland proposes cuts to Medicaid, Passport

2009-06-17T08:31:00.003-04:00

The following article is linked from the Columbus Dispatch: http://www.dispatchpolitics.com/live/content/local_news/stories/2009/06/17/BIG_CUTS.ART_ART_06-17-09_A1_KHE70RC.html?adsec=politics&sid=101

In order to meet the $3.2 billion shortfall, the Governor has proposed cutting funds for programs that benefit low-income adults, the elderly, families with pre-school children, and other social welfare initiatives. This will inevitably lead to cuts in the government and social agencies that depend on these funds to keep operating. These are necessary services that decrease the stress upon these demographics; in the trying times that we are in, it is more important than ever to protect these particular groups of people.

Democrats have publicly stated their opposition, instead proposing to end the tax cuts enjoyed by wealthy Ohioans. This may seem unpalatable to many Republicans, but sacrifices must be made to improve the welfare of Ohioans. The longer that the State assaults the middle and lower classes, the less likely the State will be able to pull out of this economic recession, and begin to re-build. As the tax cuts will only raise the income taxes of the wealthier sections of the population, the majority of Ohioans would not suffer from the end. Rather, the added income will improve the perceived liquidity of Ohio, and will make it easier to float bonds, if the need to raise capital arises.

Reagan, Taxes, and Pragmatic Fiscal Policy

2009-06-16T22:50:00.002-04:00

Bruce Bartlett wrote an article for Forbes.com back in February that is worth a read for all Republicans: http://www.forbes.com/2009/02/26/obama-budget-reagan-clinton-bush-opinions-columnists_higher_taxes.html?partner=links

I don't bring this up because I'm praising the Democratic Party for its decisions to end tax cuts for the wealthy. I bring this up because it aptly demonstrates that Republican and Democratic Presidents have raised taxes in the past, and that it has proven to be the right decision for the economy. This is completely contrary to the typical Republican's mindset, yet both Reagan and Bush, Sr., have shown that raising taxes can, in fact, have a positive effect on the economy.

Why is that? Taxes mean income for the country. When the country is making money, like a business, investors take notice. Foreign nations take note, and the country's bonds are more attractive as investment opportunities. Raising interest rates does the same thing, but that squelches lending and borrowing, which are needed for economic growth. Taxes, though, affect consumer spending habits; if taxes are too high, consumers have less income to purchase with, and aggregate demand falls. With no demand or lending, production decreases, and the country has a problem.

Reagan recognized this. After his historic tax cuts, he realized that he had cut too far, and that his policies, along with the high interest rates of the Fed (under Paul Volcker), made economic growth difficult. Bush, Sr.? With a war coming up, he had no choice but to raise taxes to get revenue to fund the initiative. These two leaders differ from Bush, Jr.: in the face of a massive deficit and low interest rates, he cut taxes, and then added to entitlement spending. Bush, Jr., followed the ideological approach to policies: the abandonment of practical, responsible fiscal policy in favor of pandering to voters and private political interests.

We are facing a crisis of spending. We are facing a crisis of investment. If the United States dollar is going to remain the currency of international exchange, the United States must demonstrate that its currency still means something, and that its bonds still have value. To do this, the United States must show that it will do what it must in order to increase its income (or reduce its deficit). The people of the world see the power elite and leisure class as images of "American" excess -- of over-consumption, over-payment, and over-indulgence. By rolling back the tax cuts to the wealthy, Reagan and Bush reversed the "bad press", and satisfied the worries of the (ironic) international elite and leisure class. Consequently, heading in that same direction is not necessarily irresponsible or undesirable.

The issue is whether this will have a negative impact on the average American. As far as I'm concerned, ending the tax cuts to those with an income of more than $250,000 will not affect the average American. We may even have a tax cut coming.

So why are Republicans up in arms? Methinks we are protesting too much.

Economic development starts at home

2009-06-16T13:49:00.003-04:00

This entry is based upon the following article: http://www.msnbc.msn.com/id/31377055/ns/politics-capitol_hill/.

There are competiting theories with regard to economic development. Macroeconomists tend to look at the bigger picture, and believe that larger projects will help to create the aggregate demand necessary to grow an economy. Microeconomists look at the smaller picture, and believe that fixing the smaller units of the economy is imperative before national improvement will be noticed. The problem with macroeconomics is that it is easy to say "increase aggregate demand", and difficult to go about doing it. For instance, the failed Bush Stimulus Plan: the $600 taxpayers received did little to the overall economic situation.

Sen. Tom Coburn (R - Okla.) has earmarked what he calls "questionable federal spending". As the author of the article points out, the questionable expenditures are "shovel-ready projects" that have an immediate need, and do not require studies or experts to execute. To the macroeconomist, spending for rural bridges that see limited traffic is a waste of money; to the local government who requested the repairs, these are necessary projects that will create construction jobs. The $3.4 million turtle crossing is important to the State of Florida, as it tries to protect its environmental resources as well as reduce traffic accidents caused by motorists trying to dodge turtles at night; $3.4 million is cheap when compared to a head-on collision accident with two casualties.

Republicans need to remember what it means to demand "small government". Republicans accuse the Democratic Party of being the party of "big government", yet the sort of oversight being practiced by the Republicans in their efforts towards fiscal austerity is the same kind of oversight that justifies "big government". Republicans also need to understand the point to this stimulus spending: to create jobs. A turtle crossing may not mean much to a person in Nevada, but, for the local residents in Florida, that turtle crossing means money that will pay for other goods and services. In turn, this is the sort of stimulus -- creation of jobs -- that fuels consumptive behavior; this, in turn, increases the aggregate demand of the nation, and makes macroeconomic theory work. The point is that if the federal government is going to give general stimulus money, it is best left in the hands of local government for specific earmarkings. It is pointless to presume that a federal Senator has any concept of what "appropriate" spending is at a local level.

Ohio Republican Chairman Kevin DeWine talked on Monday (in Greene County, Ohio) about practicing the ideals of the Republican Party. What he did not do, however, is address the sort of contradictory policies that the Republican Party practices. If the Republicans wish to show that it believes in small government, then the federal Republicans need to putting those ideals into action. Political activity starts at the local level, and small government implies that the federal government shall leave it to the local government to determine what it needs funding for.

Freedom of Speech anyone?

2009-06-15T11:24:00.003-04:00

This entry is based upon the following news article: http://www.msnbc.msn.com/id/31176525/ns/us_news-life. Basic summary: States are considering adopting "official languages", and measures to force Congress to do the same.

I have little to say about this that is not already said in the article. The only thing that needs to be pointed out is that "freedom of speech" includes the freedom not to say anything, or not to communicate. I thought this country was about the freedom to express oneself however one wished, in whatever language one wished. Maybe that's why no official language has been adopted.

I don't think the Framers of the Bill of Rights wanted the government to tell people what they can and cannot say, what religion to practice, or what language to use in parlance. It has already been established that there is no fundamental right to receive notices in a person's native language. English is widely-accepted as the language of business and government in the United States. Do we really need to violate the First Amendment to cement that?

A Failed Democracy?

2009-06-13T11:10:00.000-04:00

The following entry was inspired by a blog entry on Richard Engel's MSNBC site: http://worldblog.msnbc.msn.com/archive/2009/06/12/1962913.aspx.

Allegedly, Iran's voter turnout was around 70%. Let us suppose, for a moment, that this is true.

According to the 2008 United States Elections Project (http://elections.gmu.edu/Turnout_2008G.html), voter turnouts for the federal election ranged from 78.2% (MN) to 50.5% (HI), based upon voting for the highest-elected office. The United States total was 61.7% of the voting population. In 2004, the number (for the United States as a whole) was 60.1%; in 2000, the number was 54.2%. However, the turnout has never breached the 65% threshold, since statistics were gathered back in the '50's. This means that the United States, as a nation, has never voted in the numbers that Iran has.

Why is that Iran -- a nation that politicians villify as "backwards" and "anti-democratic" -- can turn out a better voting percentage than a nation that has long been associated with the "ideals" of "democracy"? Democracy is not merely a set of rights and protections for the power; it is the actual exercise of power by the people to effect national or regional policies. A democratic nation in which the people do not exercise their power is a nation that is run by the Power Elite and special interests; idle tools become instruments of mischief when not guided by the proper persons. Our government has failed to protect the American people not because it is inherently evil or unscrupulous, but because the people have failed to use it as it was intended to be used. We do not hold our government as accountable for its actions as it should be; we do not hold our politicians as accountable for their decisions as they should be.

Is it the people's fault? Unequivocably, no. The failures have come from all sides: (1) the failure to properly guard against the spreading of false information; (2) the failure to properly educate our children to intelligently exercise their right to vote; (3) the failure of those entrusted to keep the nation's best interests in mind; (4) the failure to guard against predation by corporate interests; etc. As Robert Kuttner wrote in The Squandering of America, the problem is a failure of agency: the people's agents have failed to work in their best interests -- from the government world to the corporate world. Regulators have failed to regulate; trustees have failed to faithfully protect shareholders against CEOs. The result: a confused people, unsure of who to trust and of what direction our nation should head in.

As much as health care reform is an important issue, so is the issue of direction with regard to the United States. Our duly-elected President has a tough road ahead.

For better or for worse?

2009-06-12T11:11:00.000-04:00

This entry is based upon the following posting on Greg Sargent's blog: http://theplumline.whorunsgov.com/economy/robert-gates-and-hillary-to-republicans-youre-putting-our-security-at-risk/ To sum it up: Secretary of Defense Robert Gates and Secretary of State Hillary Clinton are accusing Congress of putting the country at a security risk by not providing the International Monetary Fund with capital.

The Executive Branch has a point. Failing to contribute to the IMF is a bad political move. Originally born out of the Bretton-Woods convention, the IMF is a global lender created to provide liquidity to nations who are deemed to be "uncreditworthy", but who desperately need money for important social projects. Considering that the IMF is a legacy of Franklin D. Roosevelt's presidency, it would seem to be controversial for the United States to not support an organization that it has helped to establish. Further, the lack of United States support would erode international confidence in the ability of the IMF to provide needed funds to desperate countries. However, the lack of support might actually cause the international community to support the United States, and increase its reputation.

Clearly, neither Secretary Gates nor Secretary Clinton spent time in Seattle in 1999. Neither of them are aware of the global and national unrest with regard to international organizations born out of Bretton-Woods, like the WTO (although that came about later), the IMF, or the World Bank. Neither of them are aware of the general international discontent with regard to the policies pushed by the IMF as conditions of loans. Neither of them are aware that the IMF has, historically, caused greater damage to the international economy than it has healed, and that many countries have learned that the IMF is not to be trusted, the IMF is just an imperialist wing of the United States government, and the IMF is a tool of corporate interests. For more information, you should check out Joseph Stiglitz scathing criticism, Globalization and its Discontents.

Financial hardship breeds global discontent, but that discontent is often directed at the IMF. The Republicans may block it because they think the money may be spent on countries that foster terrorism, and the Democrats may block it because ... well, let's face it, Pelosi and Reid aren't exactly the best spokespeople for the Democratic Party. The funding should be blocked because the United States needs to reverse direction with regard to its imperialistic tendencies if it wishes to continue to repair its international reputation. The IMF has long been an instrument of corporate interests that have ruined economies, and the United States must recognize that the only way to effectuate policy change in the IMF's practices is to cut their supply lines. Or, in a twist of irony, place conditions upon the funds to force the IMF to change its practices.

If you're interested in learning more, you should read Stiglitz's book, or see the documentary This is What Democracy Looks Like.

Where's my handout? Part I

2009-06-12T10:09:00.000-04:00

This entry is inspired by the following article: http://www.counterpunch.org/lindorff06112009.html. The website for CounterPunch is a reliable site for some good, well-thought criticism of government policy.

Unlike Mr. Lindorff, I don't think that Obama's health care plan is a bad idea. However, that is all it is right now: an idea. There's no real plan, aside from a mission statement. It's like announcing plans to colonize Pluto, but not drawing up the blueprints for a ship to get there, or a lander. And, much like a plan to colonize Pluto, there's a better chance that the plan will be a disaster than a success. That does not mean we should not head in that direction, though; many government plans to provide services are imperfect, yet they still provide sufficient quality that Americans realize a net benefit.

Here's a fact: you cannot really control what corporations are going to do with money that you hand to them. You can legislate or regulate, but some lawyer in some law firm is going to try and find a hole to drive the bus through. In the end, the money is gone -- likely to executives and cronies that were responsible for the mess in the first place -- and the American people are left to foot the bill. The lesson to be learned: you cannot effectively control what a private party is going to do with money once you hand it to them.

Now, here's a radical idea: if you cannot control what a private party is going to do with the money, then you should put it into the hands of people who are likely going to do something productive with the cash. The billions of dollars that were given to the banks and the corporations were supposed to make it to the common person; however, much like Reaganomics, the trickle-down effect is a bald-faced lie. Those billions of dollars could have been placed immediately into the hands of state or local governments for the purposes of needed road and bridge re-construction, or to the Department of Transportation to create a working American rail system, or to the Department of Energy to fund alternative energy initiatives. Those billions of dollars could have been given to the Department of Housing and Urban Development to bailout distressed mortgages (which, by the way, would also help the lending situation), or to the Department of Commerce for the purpose of creating a small-business initiative program. Hell, those billions of dollars could have been used to create new jobs in education, thus hitting two birds with one stone.

What will the common person do with the income from a job or from a government grant? Pay off their mortgage. Get out of foreclosure. Buy shit. Or, hell, maybe they'll even start saving money. Politically, this would have been far smarter too, for it would cement Obama's position as a populist President, apply political pressure to Congress to cater to his plans, and let the economy figure out its own destiny without further government interference (isn't that what they wanted in the first place?).

The Real Disaster: The Failure of FEMA

2009-06-12T09:32:00.001-04:00

This entry is based off of this article: http://www.msnbc.msn.com/id/31243608/ns/us_news-life/

It was not too long ago that Hurricane Katrina victims had to wait 7 days for federal emergency aid to arrive. Now, here we are, and people have had to wait for a lot longer for assistance on a smaller scale.

When the Federal Emergency Management Agency was created, it was intended to bring together different pieces of other federal agencies to form a single, cohesive agency with a single purpose. FEMA was an independent agency, for the most part, until 2003, when President Bush decided to throw it under the umbrage of the newly-formed Department of Homeland Security. When this was done, severe changes were made; even its first director, Michael Brown -- you know, the guy that turned out to be the fall-guy for Bush -- warned that the agency would not be able to work as well as before. Funds were drawn away from natural disaster relief and put into counter-terrorism efforts. So, when Hurricane Katrina blasted into the Gulf Coast, the agency was ill-prepared to meet the demand, and was clogged by the bureaucratic machine known as the DHS.

There are many different solutions that could have been applied to the situation in Cedar Rapids. FEMA could have coordinated an effort to buy out the flood-damaged houses, thus relieving home owners of their mortgage obligations. FEMA could have worked with lenders, insurers, and other interest holders to repair the homes. Instead, FEMA's response was to provide a lump sum of money, and expect homeowners to figure out how to stretch it over time and fix their own problems. Naturally, the money ran out.

The people of the United States, by and large, fear government interference in their lives. At least, this is what they fear when they have the luxury to do so. People fear the government until they need the government to help them. In recent history, the banks and auto-makers pushed for de-regulation and the destruction of the traditional economic safeguards that had protected workers and the American people for two generations. Once they began to reap what they sowed, they came crawling back to the government for assistance in the form of bailouts. Thus, you have the American oxymoron: everyone wants what the government can provide, but do not want to the government to interfere with their lives. The American people want the services of the world -- health care subsidies (Medicare), good public education, a strong military -- without having to pay for it. When that kind of dysfunctional mentality enters the government itself, you have FEMA: an agency that has the duty of doing too many things, and funded with too few resources.

This is not intended to be an attack against the United States or its citizenry. Rather, I want to point out that the failure of FEMA is, in fact, a reflection of the failing of the American attitude towards government. Historically, when the government had regulated the economy, it performed beautifully despite competition from abroad. Now, with de-regulation, the United States struggles to compete. If the government such a great impediment to the economy, why is it that, in its absence, the economy failed? The answer is elementary.

We cannot afford to stand against the government, when we, the people, still control the government. This power was evident when the people nominated a junior senator from Illinois over the ailing Clinton Democrat regime, and when the people strongly voted in favor of letting this junior senator lead the nation over the more-senior Republican candidate, Sen. John McCain. The government is the strongest corporation in the market, providing services to the entire nation, and every American citizen has a voting share (unlike with regard to Freddie Mac or GM). And, like any good investor or shareholder, we should make our voices heard, and our opinions known.

And so, it begins

2009-06-12T09:01:00.000-04:00

It has been more than three years since the death of my first blog. Lots of things have changed since then. Details are not necessary.

I became interested in re-starting my blogging "career" because I have come to realize that many of the perspectives I presented in my last blog were too naive. This is not to say that I am no longer an idealist; rather, I mean to add to those ideas, and expand upon them. Now that I am a full-time American citizen, I have come to realize how important it is to not only be political, but to express political views. These include my own, and those of others.

I consider myself neither a Republican nor a Democrat. I do not consider the traditions of the past to be the only answer for the future, and I do not consider the current solutions to be the most ideal, or even "the best we can do for now". I have been accused of being both a socialist and a conservative, a hard-line right-winger and a liberal nut. All of this means one thing to me: very few people are politically-grounded, including myself, and, as a result, the labels that may have had meaning in the past no longer apply to the American condition. As one of my friends and colleagues has told me, it's best just to forget what actual or traditional political terms mean when discussing American politics.

In the end, this blog is being written to criticize -- and debate -- particular perspectives on issues currently facing the United States. For those readers who visit, please feel free to comment or discuss what is presented (as long as I can figure out how to get that option to work properly). I may sometimes make reference to academic figures, books, or studies, so please ask for clarification or connections if I become vague.

And if my humor offends, I will try to make amends.

Now: on with the show!