The Debt Ceiling Debate

The total distraction of the last several weeks in Washington makes me think of a time before I retired. Back at the beginning of the century, as the dot.com bubble burst our business was collapsing. We laid-off half of our staff, froze pay for the entire company, cut pay for the senior management, delayed paying bills, and met with the bank almost weekly. It was a very difficult time and we were struggling to stay alive. Everyone was under more stress than usual and on edge. There was a young woman who was accused of not pulling her weight and getting away with it because she was romantically involved with one of the managers. With all that was going on I wanted to stay focused on staying alive and did not want to deal with issues unrelated to survival.

We had been having monthly meeting of the entire staff for some time where I presented the financials and talked about where we are and what we are doing to try to weather the storm. At a meeting during the height of the clamor I broached the subject of the young woman with a metaphor.

Imagine I am driving a bus with you as a passenger and we are traveling down a steep, curvy road on a stormy night. There is an annoying person in the back of the bus and people are yelling for me to do something about them. Now, if the yelling continues I will get progressively more distracted and will need to do something. However, if I were a passenger on this bus, given the circumstances, I would want the driver to absolutely focus on the road and would put up with the annoying passenger until we got down to the bottom of the mountain. The yelling stopped and the issue resolved itself before the bus reached the bottom. We survived.

I think the above analogy may hold true today. Our country, and the world for that matter, is in the throws of recovering from a deep recession with a number of world events slowing the recovery. Third word countries are advancing faster than the western countries potentially changing the balance of power and whenever there is a threat to the balance the world is in a precarious position. With this critical phase we find ourselves in, the right wing decided to raise a ruckus in the form of a balanced budget debate and held the debt-ceiling hostage. Unfortunately, unlike the annoying passenger on my bus, the debt ceiling could run us off the cliff. The issue of the debt ceiling has resolved itself. However we are left with potentially negative consequences and much valuable time, energy and credibility has been lost in the process. The scary thing is that we are not down from the mountain yet.

Uninformed and Misinformed Revisited

Talking points are simple phrases that PR people develop for an organization to forward their agenda. The “communications” specialist study what combination of words will have a desired affect on the chosen audience, massage and polish them and then issue them to the members of the organization. Thus are born phrases like “job killing health care”, Medicare killing proposal”, etc. The idea is to inject them into the conversation whenever possible whether totally appropriate or not. So following an event, all of a sudden one hears the exact same phrase coming out of the mouths of many. Some politicians use talking points sparingly and only if they fit very well into the discussion. Others just throw them around without regard for fact or context.

Today I heard an interview of Eric Cantor (I am only 90% sure it was him since I didn’t hear the introduction but heard him referred to as the Republican Whip) in which he made a couple statements that vividly illustrate the idiotic use of “talking points”. In reference to something Harry Reed voted against, he said that the reason Harry voted against it was because the “people wanted” it. The talking point he was injecting was “the people want” which is something often used by Republicans since the 2010 elections. If you stop and think about it, this is totally ridiculous. To think that any politician would go against something that the “people” want just because they want it is ludicrous. There is no benefit whatsoever to them in doing so. They want to be reelected. Cantor could have accused him of voting against something because he didn’t understand what people want (not hearing or understanding what the people want is a common accusation of Democrats) or that it was ideologically inconsistent or that it would offend his contributors or he thought wrongly that it is not good for the country or that he was ignorant or any number of other reasons, though one may disagree with them, that could make sense. But to say that he voted against or, for that matter, for something, just to go against what the “people wanted”, is plain dumb.

In the same interview Eric also said that he has been a businessman since he was twenty and unlike people who sell labor, businessmen try to create jobs. Here the talking point is “businessmen create jobs”. This also is ludicrous. Had he left out the word “try”, though I would disagree with him, it is a point we could debate. Success in business is making a profit. One can increase profit by cutting costs through improvements in efficiency. (read eliminate jobs) or by eliminating competition (also read eliminate jobs). That is what they “try” to do. There is nothing wrong with this. That is how the system works. Jobs are an unintended byproduct of businesses as a whole trying to maximize their individual profits. There is nothing in any business metric that treats increased number of jobs as a positive. Jobs are coincidental. So when Eric Cantor (or whoever) says businessmen try to create jobs he either doesn’t understand or just sees an opportunity to inject the talking point with impunity.

I think in both instances the truth probably is that he is just spouting “talking points” without really thinking about them because his followers on the extreme right will like the sound of these words and really not even consider their merits and as to the others, he just plain doesn’t care. Unfortunately this is the way many, if not most, on both sides of the isle operate. With ‘talking points’ used as broadly as they are today, it is very difficult to hear an intelligent conversation in the popular media. To make matters worse the talking points are picked up by the media favoring one or the other side to support their cause or by neutral media to increase ratings. As a result we the people really don’t get to hear many legitimate discussions and therefore are misinformed or at best uninformed. However, ultimately, in the case of politicians, the blame is with us. We allow, if not encourage, our politicians to continue this nonsense by reelecting them.

Comments on Adam Smith’s Opinion on Policies Supported by “Merchants and Manufacturers”

Adam Smith (1723-1790) oft cited writer on Free Markets, in the Wealth of Nations (the quotes come from the conclusion of the last chapter of Book I) breaks society into three primary “orders” and discusses their relationship with the prosperity of a society. “…the whole price of the annual produce, naturally divides itself, it has already been observed, into three parts; the rent of land, the wages of labor, and the profit of stock; and constitutes a revenue to three different orders of people;…” To put it more into the context of our time, I would add to the renters of land those that earn their keep through interest and dividends. Investors and traders easily fall into the definition of those earning their keep from profits.

The point Smith makes is that the well being of the first order, those living from rent, rises and falls with the prosperity of the society as a whole. “The interest of the first of those three great orders, it appears from what has just been said, is strictly and inseparably connected with the general interest of the society.” Therefore policies they sponsor to benefit themselves invariably also benefit society.

“The interest of the second order, that of those who live by wages, is as strictly connected with the interest of the society as that of the first.” The wages rise as a society advances and fall as it stagnates, with catastrophic results when it declines. “The order of proprietors may, perhaps, gain more by prosperity of the society, than that of labourers: but there is no order that suffers so cruelly from its decline.” Smith states that because of their condition and education they tend to either not have access to information or the ability to analyze it and “In deliberation, therefore, his voice is little heard and less regarded, except upon some particular occasion, when his clamor is animated, set on, and supported by his employers, not for his, but for their own particular purpose.” Today the “order” may be better educated and informed but still have relatively little clout with only unions arguing for policies that improve their lot.

Smith devotes a larger portion of this discussion to the ‘order” that lives on profits. Whereas the well being of the first two “orders” is directly tied into the success of a society, that is not the case with the third. “But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension, of the society.” (We saw this during this last recession where the income of the wealthy rose by 20%, while a large segment of wage earners lost jobs) “Merchants and master manufacturers are, in this order, therefore, the two classes of people who commonly employ the largest capital, and who by their wealth draw to themselves the greatest share of the public consideration.” “The interest of the dealers, however, in any particular branch of trade or manufacturers, is always in some respect different from, and even opposite to, that of the public.” “As their thoughts, however, are commonly exercised about the interest of their own particular branch of business, than about that of society, their judgment, even when given with great candor (which it has not been upon every occasion), is much more to be depended on with regards to the former of the two objects, than with regard to the latter,” (This was part of my argument discussed in another post, for why businessmen should not be politicians.)

He concludes Book I saying: “The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

This is not a condemnation of free markets but simply a reiteration that the benefit derived by society from market activities is coincidental. The role of a good government is to ensure that all three “orders” are considered, and not yield to the most powerful voice but to hear them all and be suspicious of the voice of the “order” driven by profit. Having heard all the voices set policy and regulate markets to insure that their activities lead to the prosperity of the entire society.

Undoing 80 years of Liberal Policies

Yesterday I heard a comment made by Newt Gingrich that precipitated an “aha moment”. He said something to the effect that this upcoming election was an opportunity for America to undo all the Left’s social policies of the last 80 years. Newt openly and loudly said something that has been talked about in conservative circles for decades. So if indeed that is the Republican, or at least their extreme end’s strategy, then in that context, many of the tactics employed today make sense.

· Holding steadfast to the notion of “no tax increases” forces the government to cut spending and not allowing those cuts to occur in areas like defense and business subsidies, forces cuts of social services.
· The zeal for balancing the budget I believe, is also in reality a move to reduce spending on social services. This is demonstrated by the fact that the Republicans are allowing no revenue increases and are willing to chance a deep recession here and global economic turmoil
· The movement to make impotent or eliminate public service unions, the last bastions of organizations representing labor. (I wonder to what extent the labor disputes initiated by owners of the NFL and NBA teams are influenced by this broad agenda?)
· Eliminating public education by privatizing it under the guise of education reform. I believe that the movement, Students First, initiated by Michelle Rhee, may be more about ideology than education.
· The recent proposal to privatizing Medicare
· Past attempts to privatize Social Security
· Constant attempts to prevent the formation of, undermine or eliminate regulatory agencies focused on protecting the consumer or labor.

The Republican’s intransigence, in this context makes total sense. The cry for job creation is only a ruse to placate the public. Their real aim is to rid the country of as much “socialist” programs now, just in case they cannot win the next election or better yet to destroy Obama’s chances for reelection by whatever means and short term consequences be damned.

The Right tends to be more xenophobic and often speaks of our exceptionalism. Over the last eighty years we have become the strongest economy with the strongest military, have sent a man to the moon, bankrupted the Soviet Union, and developed a standard of living that continues to attract many to our shores. Though not perfect, our government must have done something right over those 80 years. I wonder what we would look like were it not for the “social” programs Newt rails against?

Punishing Job Creators

Among my least favorite things are the term “job creators” used by conservatives when talking about the wealthy and the notion that taxes are a punishment. From the right you often hear increasing taxes on the rich is punishing the job creators. Though I personally feel the job creators are buyers of stuff and therefore anyone with money in their pockets prepared to spend it (even unemployment insurance recipients) create or maintain jobs.

Setting all that aside, to not “punish the job creators” I propose the following compromise. Not all wealthy people create jobs. Actors, athletes, traders, writers, hedge fund managers etc. probably do not except perhaps in a very obtuse way if one wants to really argue the point. My suggestion is that we raise taxes on anyone earning over some amount. If they can demonstrate that within the tax period they have indeed created jobs, their taxes will be refunded to the extent of the salaries for the newly employed. (Loopholes such as hiring a family member as administrative assistants need to be studied and eliminated.) This will separate the “job creators” from just ordinary wealthy people and allow us to raise some revenues without “punishing” them if indeed that is what we do. Taxes, in this case may, not only not inhibit job growth, but actually accelerate it.

Civil Unions

There is much debate on gay marriage these days. The other day I saw a clip from the Republican Presidential debate from New Hampshire. Ron Paul, when asked about gay marriage, responded by saying that marriage is a religious and cultural custom and of no concern of government. I tend to agree with this position.

Where it becomes a government issue is when there are certain rights granted to married individuals by virtue of the fact they are married. I believe these issues can be and are addressed in civil unions. The argument I have heard are not about these rights but about the morality of homosexuality. In insisting on the right to marry, I believe the gay community is looking for the government to resolve the moral issue that it cannot. Morality is very subjective and not a purview of government. Civil union, on the other hand is a legal matter in which government has a very legitimate role.

I would like to propose the following. Extricate the term “marriage” from legal documents and cede it to religious organizations, allowing them to assign whatever definitions and moral judgments they want as long as they do so within the discrimination statutes. Expand the civil union concept and benefits to include mating couples (current married couples) and gay couples along with arrangements beyond two individuals living as lovers. We had friends where a mother shared a home with her daughter and a son’s son. There are other cases where older brothers or sisters live together or for that matter, just friends who are not sexually involved. They share chores and expenses. There could be identified a “sharing arrangement” (or a family, though that term so broadly applied, will ruffle lots of feathers) whereby consenting adults sign a document agreeing to share their assets and costs and through this agreement legally gain the advantages of a family. Part of the agreement would also be the disposition of assets upon termination of such an arrangement. Children could not enter into such arrangements. However, they could participate as long as their legal guardians have entered into the arrangement. There could be a limit set on the number of participants. This would also address some issues of polygamy facing some Mormon sects.

Such an act gets the government completely out of the bedroom and morality. (In an interview Ahmedinajad, the president of Iran, responded when his statement that there are no homosexuals in Iran was questioned, that since he doesn’t go into people’s bedrooms, as far as he knows there is no homosexual activity.) All the arrangements described above now exist and are expanding. I believe people living in families by whatever name or legal definition benefit society. This should be encouraged. There are others to share the burdens and responsibilities when there is illness or in the case of rearing a child. These burdens might otherwise fall on societies shoulders. We should recognize these benefits by bestowing some advantages to all families as we do now to the so-called “traditional” family.

Pakistanis Arrested for Aiding US

Last week there was a lot of news about the arrest of Pakistanis working for the US and assisting with the location of Osama Bin Laden. Many in Congress were questioning Pakistan as a friend and ally because of the arrests. Counties, friends and enemies alike, spy on each other all the time. When the espionage is uncovered, if the spies are from a foreign government, they get deported. If the spies are citizens of the country being spied upon, they are arrested and charged with espionage. Case in point, a number of years ago Jonathan Pollard, a US citizen, was tried and sentenced for spying for Israel, our special friend and ally. His arrest was proper and did not impact the relationship.

The arrested Pakistanis were on the CIA’s payroll. They were working under the direction of foreign agent handlers and if they were doing so without the blessing of Pakistan they were spies and therefore properly arrested. (Though their arrest may be for local consumption, a way of covering up for the fact that their government collaborated with us, a very unpopular thing.) One can argue whether and what kind of an ally Pakistan is but this arrest really should not sway the argument one way or the other.