What is socialism? This is an important question since it is a buzz word used by some critics of the new administration. By definition, socialism is an economic/political theory advocating collective or governmental ownership and administration of the means of production and distribution of goods. In its extreme, it includes a system of society or groups living in which there is no private property.
Karl Marx viewed socialism as a transitional system which would occur as the world moved from capitalism to communism. We all should be confident that Karl Marx and communism have been clearly discredited as a viable economic/political system.
On the other hand, capitalism is an economic system characterized by private and corporate ownership of capital goods, by investments that are determined by private decision rather than state control, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.
Every adult in this country should have read or take the time to read the Scottish scholar Adam Smith’s book, The Wealth of Nations, written in 1776. It is credited with being the founding work of modern economics and describes the capitalistic system. But most importantly, it is the system that comes closest to describing our present, much revered economic system. One thing that is clear is that it is well written and has much to say that is applicable to our economic system today. But, it is also clear that what we have today is much different than what Smith intended, which is not surprising since it was written 233 years ago in a much different economic climate. It shares the same position as the Declaration of Independence and U.S. Constitution in this regard.
The fact of the matter is that none of these systems are working the way their founders envisioned them to. All advanced countries in the world use a mixture of capitalism and socialism with a few having remnants of communism. The most accurate description of what exists out there is a “mixed economy”. What that mix is, varies with each country and is in a constant state of flux. Capitalism, being so strongly ingrained in our minds and culture, will undoubtedly maintain a favored position in our mix despite the rhetoric to the contrary. We will resist, sometimes to our detriment but often to our credit, attempts to abandon it.
We began moving away from “pure capitalism” in the late 1900’s as we moved from an agrarian/small business economy to an industrial one. The 20th century saw even further movement towards a “mixed economic system.” And, it happened because we had wise Republican and Democrats in Washington who recognized that our biggest risk is that we were on a tract to a plutocracy – government by the wealthy and/or a controlling class of the wealthy. Republican Theodore Roosevelt, the “Great Trust Buster”, was one of the first to step up to begin limiting the huge corporate conglomerates that were abusive and unfair in dealings with their customers, workers, and society in general by vertically consolidating their power which eliminated competition. Then, throughout the 20th century we gradually and reluctantly added other protections from the potentially abusive capitalistic system. A progressive income tax was established, labor unions were recognized and legalized, regulations from SEC, Federal Reserve, and Treasury Department were instituted, environmental regulations came on board, the entitlement programs like Social Security and Medicare were put in place, etc.
Rest assured that all of these government programs became law only after years and years of strife and struggle. They came about only when it became overwhelmingly obvious that a totally “free market system” failed to provide and in fact denied a fair and equitable system for the majority of the people.
That we have been able to somewhat forestall the drift to a plutocracy is amazing to me. In fact, these regulatory actions, laws, rules limiting the consolidation of wealth and power in fewer and fewer hands has preserved capitalism. If we are going to remain a free people, if we are going to have a healthy middle class, if we are going to have a “level playing field” for entrepreneurs to pursue their dream of starting up a small business and working to make it grow, if we are going to have a society where people through hard work can earn a decent living to provide for their families, then we are going to have to insist that the government become involved in helping to create that environment. A totally “free market economy”, despite what many people of wealth and advantage would like us to believe, will not do it. The last eight years of greed and unchecked self interest should have taught us that.
Our imperfect government has worked quite well in the past. It has saved us from excesses of capitalism, socialism, fascism, communism, and a plutocracy while we became the strongest and wealthiest nation in the world. Our government is a republic, and against all odds, still listens to the wishes of the people eventually. It has provided an economic and political environment where the people still have the rights and freedoms to do their own thing within reason. We are at risk again with this huge economic crisis and the other laundry list of problems. I liked President Obama’s line in his sober, let’s get to work inaugural address when he said, “The question we ask today is not whether our government is too big or too small, but whether it works ….” That our imperfect government has constantly adjusted to deal differently with each new generation’s problems is one of the reasons we have been so resilient and it is challenged to do it all over again. As a people, we need to be patient, alert, knowledgeable, involved, and insist that our elected representatives do their job courageously and wisely. Since we are breaking new ground, both of us need to be persistent while being flexible enough to pursue a multitude of changing solutions without abandoning our roots. It should be a great debate hopefully devoid as much as possible from partisanship and demagoguery.
Thursday, February 19, 2009
Wednesday, February 11, 2009
Tax Cuts as a Way of Stimulating the Economy
In the 1960’s, if tax cuts to businesses, cuts on capital gains taxes, cuts on higher income tax rates, and credits to provide incentives to businesses had been offered as a solution to correct a recession, I would have been open to it. And, if it could be offered now, strictly for small business, I would support it as part of a stimulus package. But, the last 40 years of watching how big business operates has soured me on that approach for them.
We have a big bank crisis that in large measure came about because of sub-prime lending practices in the real estate sector. This foolish, ill advised practice developed partly because of over-zealous self-interest and the willingness to take risk to satisfy greed. Both political parties should share in the blame; but, it became a serious crisis over the last 8 years when deregulation was encouraged, regulators were unwilling to enforce the rules that remained, and government failed to keep up with new ways invented by hedge fund managers and big banks to make huge profits by taking unacceptable risks with other peoples money.
In response to the banking crisis, a bail-out was devised to get money moving again - some $350B worth. What did the big banks do with this money? Most sat on it, gave bonuses with it, bought other banks with it, had extravagant conferences and still refused to get money moving once again. In addition, they have been using a foreign visa loophole to bring foreign employees in, while laying off their American employees. So much for the good will and willingness of the big banks to do their part in correcting the crisis.
American manufacturing sector didn’t do us any favors either. For years there has been a major exodus of manufacturing to foreign countries which has resulted in turning the Upper Midwest into a “Rust Belt”. This has resulted in a loss of American jobs, a declining real income level for American workers added to a serious negative trade balance. But, it was a win-win program for these corporations because they were exempt from paying taxes on the profits they gained from these ventures.
Then, we have the example of the big three auto manufacturers. They took a seemingly entrenched competitive advantage of only a few years ago and squandered it with poor management while blaming it on their workers who had no choice but to build what they were told to build even if it didn’t sell. Then, they came flying into Washington in their private jets to ask for bail-out money.
We’ve had years and years of farm programs that provide subsidies of all shapes and types to ostensibly save the family farm and improve production in agriculture. The result is that big farmers (many of which aren’t even farmers) get huge checks from the government while true family farmers struggle to stay viable by supplementing their income with jobs in town.
We’ve had producers and distributors selling knowingly sub-standard and unsafe products like the recent peanut butter crisis, tainted beef that Far Eastern countries like Japan refused to buy, toys with lead paint, and even substandard military hardware for our own troops in Iraq and Afghanistan to name a few.
We have oil companies making record profits – Exon Mobile made $45B in one year – under conditions that appear to be manipulative rather than supply and demand. Then, when the move is underfoot to seek alternative sources of energy they turn their lobbyists loose to follow a multi-faceted PR campaign of obstruction on one hand and on the other hand a plea to the government for subsidies and tax breaks for research and capital expenditures to build these alternative sources.
When money dried up and demand for products went “South”, what is the first thing these “benevolent” corporate leaders do – they lay off workers by the millions. Are these corporate leaders sharing in the pain? I don’t think so! We could still support a long running TV program on the “rich and famous” using these corporate leaders as the basis. The title might have to be “Former head" of Lehman Brothers, General Motors, etc.
When the government steps in to relieve the pain with a stimulus package to help get the economy going again, what is Republican Party's and big business response? They object to it by complaining that it is only a spending program. Well, no duh! That’s what a stimulus package is – spending money to try and pump up the economy. If we follow their alternative plan of giving tax breaks to the wealthy, cut business taxes, cut capital gains taxes, and provide tax credits to business the end result will be the same as a stimulus package – large deficits and increased national debt. It is simply a different pocket for money to go into. They’ve even suggested temporarily suspending the payroll tax. Do they really think that people saddled with massive consumer debt are going to go out and spend, spend? People are going to treat it just like they did the rebate a while back – they are going to save it for a “rainy day” if they can and more likely pay down debt, which will help them personally along with those that hold that debt, but it won’t stimulate the economy. If they do spend some of it, it will probably be spent on manufactured goods from foreign countries like China. Who else manufactures consumer products anymore?
At some point these wealthy “fat cats” and their elected representatives will have to realize that they suffer from a credibility gap. They don’t pass the “giggle test” when they say, "trust us, we will use these tax cuts to invest in our businesses which will “trickle down” to job creation." I realize that the above diatribe paints American business with too broad a brush. There are many responsible large corporations who do it right and have the best interest of their customers, their employees, and the country as a whole in mind. But, for many of the public, it is hard “seeing the fire through the smoke.” There is a general lack of confidence in the business community. The last election proves that. Much of the American public does not deal with and may not understand high finance and government economic policy – they are too busy working and raising their families. But, they aren’t stupid, and you can only “kick them in the teeth” so many times and they are going to say enough is enough. We might be there.
We have a big bank crisis that in large measure came about because of sub-prime lending practices in the real estate sector. This foolish, ill advised practice developed partly because of over-zealous self-interest and the willingness to take risk to satisfy greed. Both political parties should share in the blame; but, it became a serious crisis over the last 8 years when deregulation was encouraged, regulators were unwilling to enforce the rules that remained, and government failed to keep up with new ways invented by hedge fund managers and big banks to make huge profits by taking unacceptable risks with other peoples money.
In response to the banking crisis, a bail-out was devised to get money moving again - some $350B worth. What did the big banks do with this money? Most sat on it, gave bonuses with it, bought other banks with it, had extravagant conferences and still refused to get money moving once again. In addition, they have been using a foreign visa loophole to bring foreign employees in, while laying off their American employees. So much for the good will and willingness of the big banks to do their part in correcting the crisis.
American manufacturing sector didn’t do us any favors either. For years there has been a major exodus of manufacturing to foreign countries which has resulted in turning the Upper Midwest into a “Rust Belt”. This has resulted in a loss of American jobs, a declining real income level for American workers added to a serious negative trade balance. But, it was a win-win program for these corporations because they were exempt from paying taxes on the profits they gained from these ventures.
Then, we have the example of the big three auto manufacturers. They took a seemingly entrenched competitive advantage of only a few years ago and squandered it with poor management while blaming it on their workers who had no choice but to build what they were told to build even if it didn’t sell. Then, they came flying into Washington in their private jets to ask for bail-out money.
We’ve had years and years of farm programs that provide subsidies of all shapes and types to ostensibly save the family farm and improve production in agriculture. The result is that big farmers (many of which aren’t even farmers) get huge checks from the government while true family farmers struggle to stay viable by supplementing their income with jobs in town.
We’ve had producers and distributors selling knowingly sub-standard and unsafe products like the recent peanut butter crisis, tainted beef that Far Eastern countries like Japan refused to buy, toys with lead paint, and even substandard military hardware for our own troops in Iraq and Afghanistan to name a few.
We have oil companies making record profits – Exon Mobile made $45B in one year – under conditions that appear to be manipulative rather than supply and demand. Then, when the move is underfoot to seek alternative sources of energy they turn their lobbyists loose to follow a multi-faceted PR campaign of obstruction on one hand and on the other hand a plea to the government for subsidies and tax breaks for research and capital expenditures to build these alternative sources.
When money dried up and demand for products went “South”, what is the first thing these “benevolent” corporate leaders do – they lay off workers by the millions. Are these corporate leaders sharing in the pain? I don’t think so! We could still support a long running TV program on the “rich and famous” using these corporate leaders as the basis. The title might have to be “Former head" of Lehman Brothers, General Motors, etc.
When the government steps in to relieve the pain with a stimulus package to help get the economy going again, what is Republican Party's and big business response? They object to it by complaining that it is only a spending program. Well, no duh! That’s what a stimulus package is – spending money to try and pump up the economy. If we follow their alternative plan of giving tax breaks to the wealthy, cut business taxes, cut capital gains taxes, and provide tax credits to business the end result will be the same as a stimulus package – large deficits and increased national debt. It is simply a different pocket for money to go into. They’ve even suggested temporarily suspending the payroll tax. Do they really think that people saddled with massive consumer debt are going to go out and spend, spend? People are going to treat it just like they did the rebate a while back – they are going to save it for a “rainy day” if they can and more likely pay down debt, which will help them personally along with those that hold that debt, but it won’t stimulate the economy. If they do spend some of it, it will probably be spent on manufactured goods from foreign countries like China. Who else manufactures consumer products anymore?
At some point these wealthy “fat cats” and their elected representatives will have to realize that they suffer from a credibility gap. They don’t pass the “giggle test” when they say, "trust us, we will use these tax cuts to invest in our businesses which will “trickle down” to job creation." I realize that the above diatribe paints American business with too broad a brush. There are many responsible large corporations who do it right and have the best interest of their customers, their employees, and the country as a whole in mind. But, for many of the public, it is hard “seeing the fire through the smoke.” There is a general lack of confidence in the business community. The last election proves that. Much of the American public does not deal with and may not understand high finance and government economic policy – they are too busy working and raising their families. But, they aren’t stupid, and you can only “kick them in the teeth” so many times and they are going to say enough is enough. We might be there.
Thursday, February 5, 2009
What a Difference a Week Makes
Last week I was pretty discouraged with the way things were proceeding in Washington. This week things are much more encouraging. I’m beginning to suspect that we might often be riding a roller coaster with this administration and this Congress when one considers the mountain of issues they have to deal with.
With Congress we went from passing the stimulus bill in the House with a proud 100% opposition from the Republicans – not good. This week, the Senate has taken it up and it appears, at least initially, they are going to handle it the way it should be handled. Although, there is still way too much partisan posturing out there and the wheels might yet fall off with things going from posturing to partisan bickering and dead-lock. For instance, we are still hearing the “Reagan Myth”, that tax cuts and less government spending is what we need – a proven failure over the last 25 years. Won’t this ever go away?
Historically, it has often been said that the Senate is a more deliberative body than the House and hopefully they will once again live up to that reputation. There actually seems to be some meaningful dialogue on the stimulus package and alternative options are being presented in some cases in a bipartisan way, as with moderate Senators Ben Nelson (D) of Nebraska and Susan Collins (R) of Maine suggesting cuts to package of around $50 B.
The bill as presented may be too much of a pent-up Democratic wish list. Some of the items many be too far reaching and not fine tuned for a stimulus package. There needs to be some criteria to meet such as: actually creating/saving jobs; encouraging corporations to step up by investing and even taking some risk to actually continue to make product in America; making sure that some help is offered for people whose lives have been devastated with unemployment through no fault of their own; re-training programs to help people whose jobs may never come back; re-building of infrastructure that has been neglected for years; greening of America with programs to build and refurbish structures to make them more energy efficient; making schools better so our work force can compete technologically; developing alternative energy sources; etc.- mostly long term improvements.
I’ve been encouraged by a few Republicans, our Kansas Senators being noticeably silent, who admit that some sort of stimulus package is needed. I find it refreshing that Senators from both sides of the aisle are admitting that they don’t know for absolute, “drop dead” certain that this particular bill will bring us immediately out of a Recession; but, something needs to be done to relieve some of the pain. Hopefully, Republicans won’t be so calloused that they will vote no and sit back, hoping the plan fails, to gain a political advantage in 2010. Both sides begrudgingly agree with the idea that legislation passed after only two or three weeks into an administration may not be perfect and there are parts of bill that may have to be modified or even dropped if it fails to accomplish what they hope.
The administration has taken some tough hits this week. I hate it that Daschle has withdrawn, because I thought he was uniquely qualified to be Secretary of Health and Human Services. But, Obama has lived up to his word on insisting on higher standards than we’ve had in the past, even if it costs him some needed expertise. I didn’t think I would ever live long enough to hear a sitting President come out and say, “I screwed up,” especially when he didn’t. It was Daschle’s fault and those who vetted him. But, Obama stepped up to make it clear that “The Buck Stops Here.”
Also, it’s encouraging to see our new President talking with both parties and being willing to listen. They may only agree to disagree; but, he is open to and invites reasonable criticism and alternative plans which does represent a change.
I like it that he takes a strong stand on the majority of the bill. He has let it be known that there are certain areas he will not compromise on – why should he, he won. He will not allow the bill to be gutted; but, he will compromise on some significant issues. This is especially interesting in view of the fact that he probably has the votes if they force him to “play the party card.” Also, he took a lot of criticism on earmarks in his campaign. But, he is the only President I can remember who has had the courage to say that he wants an earmark free bill. Hopefully, the Democratic leadership will deliver on that.
How long has it been since we’ve had a President look the watching public in the eye and talk about his legacy before the fact? Everyone knows Presidents are concerned about that, but few have had the courage to come out and say that he expects his presidency will be judged in large part by whether he can help get this economy going. He is setting a dangerous and maybe even unattainable standard. But, I for one went away with the feeling that this guy is serious, he’s tough, and he’s not going to make excuses. There doesn’t appear to be any quit in him. Maybe that’s what voters saw in him and I hope they are rewarded.
With Congress we went from passing the stimulus bill in the House with a proud 100% opposition from the Republicans – not good. This week, the Senate has taken it up and it appears, at least initially, they are going to handle it the way it should be handled. Although, there is still way too much partisan posturing out there and the wheels might yet fall off with things going from posturing to partisan bickering and dead-lock. For instance, we are still hearing the “Reagan Myth”, that tax cuts and less government spending is what we need – a proven failure over the last 25 years. Won’t this ever go away?
Historically, it has often been said that the Senate is a more deliberative body than the House and hopefully they will once again live up to that reputation. There actually seems to be some meaningful dialogue on the stimulus package and alternative options are being presented in some cases in a bipartisan way, as with moderate Senators Ben Nelson (D) of Nebraska and Susan Collins (R) of Maine suggesting cuts to package of around $50 B.
The bill as presented may be too much of a pent-up Democratic wish list. Some of the items many be too far reaching and not fine tuned for a stimulus package. There needs to be some criteria to meet such as: actually creating/saving jobs; encouraging corporations to step up by investing and even taking some risk to actually continue to make product in America; making sure that some help is offered for people whose lives have been devastated with unemployment through no fault of their own; re-training programs to help people whose jobs may never come back; re-building of infrastructure that has been neglected for years; greening of America with programs to build and refurbish structures to make them more energy efficient; making schools better so our work force can compete technologically; developing alternative energy sources; etc.- mostly long term improvements.
I’ve been encouraged by a few Republicans, our Kansas Senators being noticeably silent, who admit that some sort of stimulus package is needed. I find it refreshing that Senators from both sides of the aisle are admitting that they don’t know for absolute, “drop dead” certain that this particular bill will bring us immediately out of a Recession; but, something needs to be done to relieve some of the pain. Hopefully, Republicans won’t be so calloused that they will vote no and sit back, hoping the plan fails, to gain a political advantage in 2010. Both sides begrudgingly agree with the idea that legislation passed after only two or three weeks into an administration may not be perfect and there are parts of bill that may have to be modified or even dropped if it fails to accomplish what they hope.
The administration has taken some tough hits this week. I hate it that Daschle has withdrawn, because I thought he was uniquely qualified to be Secretary of Health and Human Services. But, Obama has lived up to his word on insisting on higher standards than we’ve had in the past, even if it costs him some needed expertise. I didn’t think I would ever live long enough to hear a sitting President come out and say, “I screwed up,” especially when he didn’t. It was Daschle’s fault and those who vetted him. But, Obama stepped up to make it clear that “The Buck Stops Here.”
Also, it’s encouraging to see our new President talking with both parties and being willing to listen. They may only agree to disagree; but, he is open to and invites reasonable criticism and alternative plans which does represent a change.
I like it that he takes a strong stand on the majority of the bill. He has let it be known that there are certain areas he will not compromise on – why should he, he won. He will not allow the bill to be gutted; but, he will compromise on some significant issues. This is especially interesting in view of the fact that he probably has the votes if they force him to “play the party card.” Also, he took a lot of criticism on earmarks in his campaign. But, he is the only President I can remember who has had the courage to say that he wants an earmark free bill. Hopefully, the Democratic leadership will deliver on that.
How long has it been since we’ve had a President look the watching public in the eye and talk about his legacy before the fact? Everyone knows Presidents are concerned about that, but few have had the courage to come out and say that he expects his presidency will be judged in large part by whether he can help get this economy going. He is setting a dangerous and maybe even unattainable standard. But, I for one went away with the feeling that this guy is serious, he’s tough, and he’s not going to make excuses. There doesn’t appear to be any quit in him. Maybe that’s what voters saw in him and I hope they are rewarded.
Friday, January 30, 2009
Where is Bipartisanship and the Need to Move Forward Together?
I am truly disappointed with the Republican minority in Congress regarding the stimulus package being proposed by the Obama Administration. 100% opposition in the House and being proud of it is not a good sign of things to come.
With Republican Party leadership not yet clearly established (Bush is gone and McCain doesn’t seem able to assume that role), we have a fractured Republican Party whose only agreement is to disagree with everything being offered by the new administration - so much for bipartisanship. With the news media’s attempt to present both sides to the stimulus story, it has given media savvy Conservative Republicans their opportunity to individually step out and offer their own version of criticism of the proposal so that they can “beat their chest” with their “base” back home. One has to remember that Republicans in recent years have shown that they have a natural ability for the role of the “loyal opposition.” Their problem comes to the forefront when they win elections and must move from criticizing to governing. They are once again back in their comfort zone – offering constant criticism with no alternative solutions to solve problems.
Part of the problem is their archaic, over-simplified, and naive view of our economic system. It is like they read Ayn Rand’s great novels – Atlas Shrugged, The Fountainhead, etc.- back in 50’s and 60’s and forgot they were fiction. It helps them that their sound bites always include fears of higher taxes, more government spending, and government involvement somehow limiting individual initiative. These are always popular themes with some people and if they can figure out how to incorporate the big, bad bug-a-boo of “socialism” in their few seconds of fame on TV, they have a sure-fire way to raise big dollars for their next election.
Many of them do have a problem, they voted for the previous administration’s bail-out program which gave billions of dollars to big banks, powerful real estate corporations, insurance companies, and auto industry. Hopefully, these congressmen got thank you notes from these people for the undeserved bonuses they received last year. But, when the present administration starts talking about creating jobs, money for schools, money to support state service programs, investment in alternative energy programs, providing funds to move towards some sort of universal health care, re-building infrastructure, etc., they are opposed. Government money distributed to the people is unpalatable, whereas money to “well-healed” corporate America is OK!
I would love to see the Republicans put together a leadership team that would be willing to work in a bipartisan fashion where possible; and, if they disagree, provide well thought-out, reasonable, constructive criticism. This team should be prepared to offer alternative recommendations of how we can deal with massive unemployment, 2 wars, global economic crisis, collapsing infrastructure, declining middle class, deteriorating schools, inequality in medical care, reduction in dependence on foreign energy, etc.
I am fully aware that what Obama is doing holds a great risk. It will need to be modified and adjusted as we move forward. I am convinced that the only suggestion I’ve heard from Republican’s, significant reduction in taxes for businesses and the wealthy, is not a viable alternative – even though it has voter appeal. Most economists reject it as a bad idea, just as it was in 2001. Tax reduction and smaller government is not a cure-all for what ails us.
I have my own concerns with the stimulus package. For example, I’m not thrilled with the idea that the federal government might increase control over education through funding of “no-child-left-behind.” Although Obama has asked for an “earmark free” stimulus package, I don’t want to see special interest groups and a few powerful Congressmen/women getting questionable projects for their districts and states by “back dooring” the legislative process. I’m less than thrilled with massive amounts of money being spent on new roads (rebuilding of existing deteriorating ones excepted), when it is becoming clear that the time has come for a new generation of light rail and railroads to move people and goods.
I want the stimulus package to be just that – a short term boost to the economy not a permanent establishment of broadened government bureaucracy with an exception or two. Obama has promised that. In fact, he has promised a “house cleaning” of unneeded, over funded, ineffective programs. Unfortunately, it is Congress that controls the purse strings and I have been less than thrilled with the Congressional Democratic leadership up to this point. Hopefully, they will rise to the occasion.
As a private citizen, I really have little clout, just a small voice amongst many others. That is why I would like to see the development of a responsible opposition party that will work together in a bipartisan fashion where possible and offer well thought-out, reasonable alternatives when they disagree. If the Republican Party can’t accomplish that, they do not deserve much respect or support and certainly not the opportunity to govern in the future. If all they can accomplish is negative demagoguery, they are no better than their loud, obnoxious talk radio star – Rush Limbaugh.
With Republican Party leadership not yet clearly established (Bush is gone and McCain doesn’t seem able to assume that role), we have a fractured Republican Party whose only agreement is to disagree with everything being offered by the new administration - so much for bipartisanship. With the news media’s attempt to present both sides to the stimulus story, it has given media savvy Conservative Republicans their opportunity to individually step out and offer their own version of criticism of the proposal so that they can “beat their chest” with their “base” back home. One has to remember that Republicans in recent years have shown that they have a natural ability for the role of the “loyal opposition.” Their problem comes to the forefront when they win elections and must move from criticizing to governing. They are once again back in their comfort zone – offering constant criticism with no alternative solutions to solve problems.
Part of the problem is their archaic, over-simplified, and naive view of our economic system. It is like they read Ayn Rand’s great novels – Atlas Shrugged, The Fountainhead, etc.- back in 50’s and 60’s and forgot they were fiction. It helps them that their sound bites always include fears of higher taxes, more government spending, and government involvement somehow limiting individual initiative. These are always popular themes with some people and if they can figure out how to incorporate the big, bad bug-a-boo of “socialism” in their few seconds of fame on TV, they have a sure-fire way to raise big dollars for their next election.
Many of them do have a problem, they voted for the previous administration’s bail-out program which gave billions of dollars to big banks, powerful real estate corporations, insurance companies, and auto industry. Hopefully, these congressmen got thank you notes from these people for the undeserved bonuses they received last year. But, when the present administration starts talking about creating jobs, money for schools, money to support state service programs, investment in alternative energy programs, providing funds to move towards some sort of universal health care, re-building infrastructure, etc., they are opposed. Government money distributed to the people is unpalatable, whereas money to “well-healed” corporate America is OK!
I would love to see the Republicans put together a leadership team that would be willing to work in a bipartisan fashion where possible; and, if they disagree, provide well thought-out, reasonable, constructive criticism. This team should be prepared to offer alternative recommendations of how we can deal with massive unemployment, 2 wars, global economic crisis, collapsing infrastructure, declining middle class, deteriorating schools, inequality in medical care, reduction in dependence on foreign energy, etc.
I am fully aware that what Obama is doing holds a great risk. It will need to be modified and adjusted as we move forward. I am convinced that the only suggestion I’ve heard from Republican’s, significant reduction in taxes for businesses and the wealthy, is not a viable alternative – even though it has voter appeal. Most economists reject it as a bad idea, just as it was in 2001. Tax reduction and smaller government is not a cure-all for what ails us.
I have my own concerns with the stimulus package. For example, I’m not thrilled with the idea that the federal government might increase control over education through funding of “no-child-left-behind.” Although Obama has asked for an “earmark free” stimulus package, I don’t want to see special interest groups and a few powerful Congressmen/women getting questionable projects for their districts and states by “back dooring” the legislative process. I’m less than thrilled with massive amounts of money being spent on new roads (rebuilding of existing deteriorating ones excepted), when it is becoming clear that the time has come for a new generation of light rail and railroads to move people and goods.
I want the stimulus package to be just that – a short term boost to the economy not a permanent establishment of broadened government bureaucracy with an exception or two. Obama has promised that. In fact, he has promised a “house cleaning” of unneeded, over funded, ineffective programs. Unfortunately, it is Congress that controls the purse strings and I have been less than thrilled with the Congressional Democratic leadership up to this point. Hopefully, they will rise to the occasion.
As a private citizen, I really have little clout, just a small voice amongst many others. That is why I would like to see the development of a responsible opposition party that will work together in a bipartisan fashion where possible and offer well thought-out, reasonable alternatives when they disagree. If the Republican Party can’t accomplish that, they do not deserve much respect or support and certainly not the opportunity to govern in the future. If all they can accomplish is negative demagoguery, they are no better than their loud, obnoxious talk radio star – Rush Limbaugh.
Saturday, January 10, 2009
Less Frequent Posting in the Future
Not that it represents any significant loss to the world of political, economic, or educational writing, but I will be posting to this blog less frequently in the future. I have truly enjoyed it; but, I had hoped to stimulate more discussion on these issues than what has resulted. Thanks to those who have taken the time to read them and thanks to those who have commented orally that they have enjoyed reading them. I’m amazed that there haven’t been any who have taken issue with some of what was said. There undoubtedly are and maybe they are just being kind.
I’ve decided to take on another hopefully meaningful, creative, and certainly time consuming job of helping to home school our granddaughter. That is the advantage of retirement – doing what one wants to within reason. I taught school and coached at the secondary level for about 15 years some 30 years ago so I should have known what I was getting myself into – plus she is only a 2nd grader for crying out loud! However, it has been an eye opening experience already. Teaching is a tough job requiring all kinds of prep work, background educational reading, and serious thought. I have been truly amazed at the volume of information out there for education of young people. There are K-12 computer programs, supplemental computer programs, many studies on educational practices I’ve not been exposed to over the last 30 years, plus a wealth of curriculum information, exercises, games, etc. to peruse and/or include in one’s instruction.
You take a bright young girl and add in “a little” ADHD and you have a challenging experience that offers an interesting mix of joyful exhilaration in one lesson with a humbling one of failure in the next lesson. It is a roller coaster ride of emotion for both of us. I love it, so I intend to spend a disproportionate amount of time working one-on-one with this little girl I love so much and do my best to remain sane.
I’ve made it very clear to her that I will do my best to help her do well in math and, more importantly, she will learn to enjoy the problem solving challenges of the subject. And, I will do my best to study history with her so that she gains an appreciation and knowledge for a subject she already enjoys. I’ve signed on for as long as her parents want to pursue this educational option and want my involvement. Please wish both of us luck.
I’ve decided to take on another hopefully meaningful, creative, and certainly time consuming job of helping to home school our granddaughter. That is the advantage of retirement – doing what one wants to within reason. I taught school and coached at the secondary level for about 15 years some 30 years ago so I should have known what I was getting myself into – plus she is only a 2nd grader for crying out loud! However, it has been an eye opening experience already. Teaching is a tough job requiring all kinds of prep work, background educational reading, and serious thought. I have been truly amazed at the volume of information out there for education of young people. There are K-12 computer programs, supplemental computer programs, many studies on educational practices I’ve not been exposed to over the last 30 years, plus a wealth of curriculum information, exercises, games, etc. to peruse and/or include in one’s instruction.
You take a bright young girl and add in “a little” ADHD and you have a challenging experience that offers an interesting mix of joyful exhilaration in one lesson with a humbling one of failure in the next lesson. It is a roller coaster ride of emotion for both of us. I love it, so I intend to spend a disproportionate amount of time working one-on-one with this little girl I love so much and do my best to remain sane.
I’ve made it very clear to her that I will do my best to help her do well in math and, more importantly, she will learn to enjoy the problem solving challenges of the subject. And, I will do my best to study history with her so that she gains an appreciation and knowledge for a subject she already enjoys. I’ve signed on for as long as her parents want to pursue this educational option and want my involvement. Please wish both of us luck.
Sunday, January 4, 2009
What's up with Our Country's Financial Leaders?
Something that has always bothered me about the investment world is that it is run by a group of well-educated, intelligent people who seem too often to make terrible investment decisions. As I understand it, a good share of the “market” is controlled by a fairly small group usually identified as institutional money managers, mutual fund managers, investment brokers, corporate leaders, insurance company money managers, big bankers, etc. These are people who handle huge sums of money day-in-and-day-out and seemingly not too well sometimes – as in 2008. In addition to the above, we have well-educated, intelligent government financial people at Treasury Dep’t and Federal Reserve who have been seemingly caught by surprise and who appear to be stumbling around trying to belatedly correct the most recent recession by throwing money to some big banks, insurance companies, and corporations.
It is more than a little scary for lay people, having only a rudimentary understanding of “markets”, to see their life savings (like 401K’s) depreciate 20 to 40% in a few months, see family and friends suddenly unemployed (at 6.7% maybe heading to 10%), see property values decreasing rapidly (resulting in record mortgage defaults and up-side-down mortgage positions), reduction in government services (that many in our society rely on), etc.
Then we get the explanation for the recession. They tell us it started with sub-prime mortgages and the bundling of this paper to be sold around the world. Why would well-educated, smart people trade in these things when it is so obvious that it is a “house of cards” ready to fall apart? Also, we learn that huge, historical icons of American Corporations, like “Big Three Auto Companies”, are poorly managed, surviving on “smoke and mirrors” and are only a few weeks from being broke. We see large, highly respected investment houses like Bear Stearns and Lehman Brothers go under. We see big banks that have existed for generations going broke, being sold at auction, or being bailed out with infusion of massive amounts of government money.
Then, you add to this the rather cavalier attitude that many financial people have regarding these market swings. It is like, “Sure we are going to have these from time to time, it will correct itself, and we’ll be up and running in no time. Just hang on, don’t panic and cash in, maybe carefully move some money around to reposition yourself; but mostly, just relax.” I’m sitting here thinking, why is this normal, why is it so readily acceptable, and why does it happen at all with well-educated, intelligent people managing these financial affairs and these corporations?
Then the real kicker is that if one questions the functionality of our “free-market/capitalistic” system it is like you are committing blasphemy! Suggestions of regulations for the financial/corporate world is a really big, “NO-NO”. These people who have been responsible in large measure for this mess have never seen a regulation they like; and given the choice, they will applaud most deregulation. They insist that regulations will stifle the “free-market/capitalistic” system and its wonderfully self-regulating ability to create wealth for us all. The amazing thing is that they can say this with a straight face while “bellying up to the bar” with their open palm extended for government bail-outs. Then when it is suggested that they be held accountable for it, they are aghast, “What do you mean we have to tell you how we spend the money, how unreasonable. We know how to run our businesses and the worst thing that can be done is to get the government involved. And, by the way, if this isn’t enough money, we’ll be back to you when we need more.” Why do they hold to the archaic view of preserving a “pure capitalistic/free-market” economy? We haven’t had this system, other than in name, for about a century. We have a “mixed economy” with heavy government involvement that experience has shown us is needed to prevent illegal, unethical, ill-conceived, and abusive practices. Unfortunately, we evidently don’t have it quite right yet.
I’m sorry that I have no definitive answers to the questions I’ve asked throughout this column. I think they are worth some contemplation. But, in the mean time, our best choice might be to rely on carefully crafted government regulations that establish a delicate balance between freedom and controls that don’t unreasonably hinder the market system. That is the challenge moving forward with our “mixed economy”. We will have to constantly adjust the ‘rules-of-the-game”. Our aim should not be to eliminate risk, without risk you stifle innovation, creativity, and growth. But, maybe we can curtail the “lemminglike psychology” that overwhelms the entire market too frequently.
It is more than a little scary for lay people, having only a rudimentary understanding of “markets”, to see their life savings (like 401K’s) depreciate 20 to 40% in a few months, see family and friends suddenly unemployed (at 6.7% maybe heading to 10%), see property values decreasing rapidly (resulting in record mortgage defaults and up-side-down mortgage positions), reduction in government services (that many in our society rely on), etc.
Then we get the explanation for the recession. They tell us it started with sub-prime mortgages and the bundling of this paper to be sold around the world. Why would well-educated, smart people trade in these things when it is so obvious that it is a “house of cards” ready to fall apart? Also, we learn that huge, historical icons of American Corporations, like “Big Three Auto Companies”, are poorly managed, surviving on “smoke and mirrors” and are only a few weeks from being broke. We see large, highly respected investment houses like Bear Stearns and Lehman Brothers go under. We see big banks that have existed for generations going broke, being sold at auction, or being bailed out with infusion of massive amounts of government money.
Then, you add to this the rather cavalier attitude that many financial people have regarding these market swings. It is like, “Sure we are going to have these from time to time, it will correct itself, and we’ll be up and running in no time. Just hang on, don’t panic and cash in, maybe carefully move some money around to reposition yourself; but mostly, just relax.” I’m sitting here thinking, why is this normal, why is it so readily acceptable, and why does it happen at all with well-educated, intelligent people managing these financial affairs and these corporations?
Then the real kicker is that if one questions the functionality of our “free-market/capitalistic” system it is like you are committing blasphemy! Suggestions of regulations for the financial/corporate world is a really big, “NO-NO”. These people who have been responsible in large measure for this mess have never seen a regulation they like; and given the choice, they will applaud most deregulation. They insist that regulations will stifle the “free-market/capitalistic” system and its wonderfully self-regulating ability to create wealth for us all. The amazing thing is that they can say this with a straight face while “bellying up to the bar” with their open palm extended for government bail-outs. Then when it is suggested that they be held accountable for it, they are aghast, “What do you mean we have to tell you how we spend the money, how unreasonable. We know how to run our businesses and the worst thing that can be done is to get the government involved. And, by the way, if this isn’t enough money, we’ll be back to you when we need more.” Why do they hold to the archaic view of preserving a “pure capitalistic/free-market” economy? We haven’t had this system, other than in name, for about a century. We have a “mixed economy” with heavy government involvement that experience has shown us is needed to prevent illegal, unethical, ill-conceived, and abusive practices. Unfortunately, we evidently don’t have it quite right yet.
I’m sorry that I have no definitive answers to the questions I’ve asked throughout this column. I think they are worth some contemplation. But, in the mean time, our best choice might be to rely on carefully crafted government regulations that establish a delicate balance between freedom and controls that don’t unreasonably hinder the market system. That is the challenge moving forward with our “mixed economy”. We will have to constantly adjust the ‘rules-of-the-game”. Our aim should not be to eliminate risk, without risk you stifle innovation, creativity, and growth. But, maybe we can curtail the “lemminglike psychology” that overwhelms the entire market too frequently.
What History Teaches Us
History has always fascinated me. I think a deep understanding of history is a pre-requisite for success in many areas including business, local/state/national government, and foreign affairs, just to mention a few. I think what history does, is to teach us what mistakes not to repeat in making current and future decisions. However, it should not dictate what course of action to take with these decisions.
The War in Afghanistan might be a good example. We had good reason to militarily go after al-Qaeda – 9-11. But, history from the time of Alexander the Great, through British occupation, and the most recent Russian debacle in Afghanistan should have taught us not to make the mistake of moving into this country with what they would perceive as an occupying force. History clearly shows that they have the willingness to fight, even against what most would think are insurmountable odds, to resist that perception. They won’t accept defeat – they will choose death; they won’t welcome “nation building” – they will hold to their tribal system; they will not accept “puppet” governments set up by an occupier – they will bide their time and eradicate them as soon as possible; they will stay faithful to their religion and culture – in fact, the more pressure exerted to alter it will simply radicalize it even more. We should have known these things from history.
Understanding these things could have kept us from making the mistakes we made and are still making. A “surge” of more troops will result in having more control of Afghanistan. If you put more “feet on the ground” and more sophisticated military muscle in the country, you will kill more people and destroy more infrastructure; and for the time being, curtail insurgency and opposition because you will simply over-power them. We did it in Iraq. But, will it accomplish any long term goals like: establish a democracy, a peaceful and settled nation, promote human rights (for example, equality of women), create an appreciative ally for us in the region, etc.? I don’t think so!
That doesn’t mean we back away from confrontation with enemies dedicated in destroying us. My choice would have been to punish al-Qaeda with quick, overwhelming, devastating destruction and then get out – no occupation, no nation building, and no rebuilding. True “shock and awe” with no apologies; but, a promise that we will be back if need be. But, the time has passed for this. The Taliban has experienced a resurgence, al-Qaeda is linked closer than ever to them, and the conflict has broadened beyond the tribal areas in Pakistan to possible instability in all of Pakistan which is much more dangerous and complicated. I have confidence that the new administration has the necessary knowledge of history to avoid past mistakes; but, the solution is not to be found in history. It will take an innovative approach which may in the short run cost us more in lives lost and expenditure of money not readily available. In the end, our ego-defense may have to “take a hit” as it did in Korean War, Vietnam War, failed Iran Crisis Rescue Mission Attempt, and Mogadishu (of the tragic Black Hawk Down incident). The only consolation is that history has shown us that backing away from an ill-conceived and conducted military action doesn’t permanently damage our nation, just our ego. It does teach us that we do have limitations.
Another example is our recent economic crisis. Why are we caught by surprise and appalled by the newest “boom and bust?” They aren’t new, history has documented quite well one after another going back to our country’s beginning. We’ve had land speculation busts several times; technological inspired booms and busts like railroads, oil, and the 2001 “.com” one; numerous bank panics; investment speculation bubbles bursting like in 1929 and again in 2008, etc. How much evidence do we have to compile that a “free market” system, left to run amuck on its own, will create yet another “correction”, “down cycle”, recession”, and maybe a “depression”?
We should have learned enough from history to maturely accept the need for our government to balance responsible regulation with economic freedom to make our markets work. We certainly should have learned from history that we can’t expect anything but dire consequences if we retract regulations that were intended to protect us from obviously careless and/or unethical practices. Regulation needs to be carefully crafted and constantly adjusted to meet our needs, but seldom should we even consider deregulation. In addition to the above needed balance, there needs to be the acceptance of the necessity of maintaining a strong middle class which is required for prosperity and successful democracy.
However, history can’t teach us how to handle the most recent crisis. That has to be day-and-age specific problem solving. Hopefully, it will come as a result of much well thought-out public debate on a reasonably level playing field. This is where a democracy becomes so important - where large numbers of a wide variety of citizens take it upon themselves to offer their views. This is why it is so important that our government is not controlled by a few powerful special interest groups.
So, let’s learn and use our history to avoid mistakes of the past; but, let’s use our knowledge, intuition, and creativity to deal with current and future issues.
The War in Afghanistan might be a good example. We had good reason to militarily go after al-Qaeda – 9-11. But, history from the time of Alexander the Great, through British occupation, and the most recent Russian debacle in Afghanistan should have taught us not to make the mistake of moving into this country with what they would perceive as an occupying force. History clearly shows that they have the willingness to fight, even against what most would think are insurmountable odds, to resist that perception. They won’t accept defeat – they will choose death; they won’t welcome “nation building” – they will hold to their tribal system; they will not accept “puppet” governments set up by an occupier – they will bide their time and eradicate them as soon as possible; they will stay faithful to their religion and culture – in fact, the more pressure exerted to alter it will simply radicalize it even more. We should have known these things from history.
Understanding these things could have kept us from making the mistakes we made and are still making. A “surge” of more troops will result in having more control of Afghanistan. If you put more “feet on the ground” and more sophisticated military muscle in the country, you will kill more people and destroy more infrastructure; and for the time being, curtail insurgency and opposition because you will simply over-power them. We did it in Iraq. But, will it accomplish any long term goals like: establish a democracy, a peaceful and settled nation, promote human rights (for example, equality of women), create an appreciative ally for us in the region, etc.? I don’t think so!
That doesn’t mean we back away from confrontation with enemies dedicated in destroying us. My choice would have been to punish al-Qaeda with quick, overwhelming, devastating destruction and then get out – no occupation, no nation building, and no rebuilding. True “shock and awe” with no apologies; but, a promise that we will be back if need be. But, the time has passed for this. The Taliban has experienced a resurgence, al-Qaeda is linked closer than ever to them, and the conflict has broadened beyond the tribal areas in Pakistan to possible instability in all of Pakistan which is much more dangerous and complicated. I have confidence that the new administration has the necessary knowledge of history to avoid past mistakes; but, the solution is not to be found in history. It will take an innovative approach which may in the short run cost us more in lives lost and expenditure of money not readily available. In the end, our ego-defense may have to “take a hit” as it did in Korean War, Vietnam War, failed Iran Crisis Rescue Mission Attempt, and Mogadishu (of the tragic Black Hawk Down incident). The only consolation is that history has shown us that backing away from an ill-conceived and conducted military action doesn’t permanently damage our nation, just our ego. It does teach us that we do have limitations.
Another example is our recent economic crisis. Why are we caught by surprise and appalled by the newest “boom and bust?” They aren’t new, history has documented quite well one after another going back to our country’s beginning. We’ve had land speculation busts several times; technological inspired booms and busts like railroads, oil, and the 2001 “.com” one; numerous bank panics; investment speculation bubbles bursting like in 1929 and again in 2008, etc. How much evidence do we have to compile that a “free market” system, left to run amuck on its own, will create yet another “correction”, “down cycle”, recession”, and maybe a “depression”?
We should have learned enough from history to maturely accept the need for our government to balance responsible regulation with economic freedom to make our markets work. We certainly should have learned from history that we can’t expect anything but dire consequences if we retract regulations that were intended to protect us from obviously careless and/or unethical practices. Regulation needs to be carefully crafted and constantly adjusted to meet our needs, but seldom should we even consider deregulation. In addition to the above needed balance, there needs to be the acceptance of the necessity of maintaining a strong middle class which is required for prosperity and successful democracy.
However, history can’t teach us how to handle the most recent crisis. That has to be day-and-age specific problem solving. Hopefully, it will come as a result of much well thought-out public debate on a reasonably level playing field. This is where a democracy becomes so important - where large numbers of a wide variety of citizens take it upon themselves to offer their views. This is why it is so important that our government is not controlled by a few powerful special interest groups.
So, let’s learn and use our history to avoid mistakes of the past; but, let’s use our knowledge, intuition, and creativity to deal with current and future issues.
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