Obama and Boehner: Lies and Truths

Crossposted from Democratic Convention Watch

Well, well…did you watch the speeches last night? PURE Kabuki theater. Obama did a nice job of explaining how we came to this point, but his train left the rails when he was presenting the “solution” without mentioning that there were no increases to revenues. Boehner lied when he said there was bipartisan support for cut, cap and balance. Oh hell, he lied about everything except his name.

These two speeches were designed out of desperation. It's pretty obvious that the votes don't exist in either chamber to pass anything. Sadly, the Rethuglicans decimated the Gephardt Rule, which worked well for decades: it basically allowed for automatic-ish raises to the debt ceiling. Obama won't invoke the 14th. So all that's left is for the president to go on television and ask people who didn't even vote to figure out who their reps are and call them. Even that was a little half-baked: you'd think he would have said “If you need to find your Rep's or Senator's contact information, we're now listing it on whitehouse.gov.” I list that info all the time, it's easy to get and post. (Senate link, House link. Total time: less than 30 seconds.)

So where are we? Fundamentally, screwed. It takes time to get legislation through Congress, and we're close to out of time. The last hope is that after Harry's Wednesday vote, it goes over to the House, Boehner agrees to schedule a vote, and it passes this weekend. If you think that will all happen successfully, you are probably also a fan of the scene in Woody Allen's Sleeper where the scientists of the future point out that hot fudge sundaes, steak and cigarettes are good for you and carrots will kill you. 

The real truth is that America is simmering not just in outrageously hot weather (yes, teabaggers, there IS global warming) but in even hotter anger at a government which has become completely dysfunctional. Obama's right – call your reps — tell them to pass a raise in the debt ceiling, talk about shared sacrifice, and tell them you vote. Then figure out how quickly you can learn to fiddle. 

Pulling the Football, and Why it Keeps Happening

Crossposted from DemConwatch

Boehner said no to the Obama “compromise.” Boehner caved to pressure from the far right. You shouldn't be surprised. Obama shouldn't be surprised. Then again, Charlie Brown shouldn't have been surprised after the first 50 times.

The reason this keeps happening is NOT because the president is stupid. But because he, and the rest of the Democratic Party are seemingly oblivious to the cognitive dissonance that affects America. That is, most people do not come close to understanding what the truth is, nor what the potential ramifications of certain proposals can be. 

To wit: most people who receive government money don't know that they receive money from a government program. Here's the chart:


Now, that chart is from a 2008 study, but it's unlikely the percentages have changed much. Face it, people can't value something they don't know they have. Further, the higher up on the income ladder a taxpayer is, the more likely he/she has received a tax subsidy of some sort. If you want to read the full, fascinating report, it's after the jump.

And there's something else that people don't know: if you add together the TOTAL cost of early childhood programs, low income housing programs, WIC funds, teacher training and afterschool programs, job training for the unemployed, LIHEAP, community health centers, homeless assistance grants, legal services for the poor, and Title X family planning, you get $44 billion dollars.  Want to guess how much it costs each year for extending the Bush tax cuts for JUST the top brackets? $42 billion. Full breakout in chart form here, which includes some other eye-popping dollar amounts only for the rich.

The next time you're out driving in real traffic, watch the people who only see what's ahead of them, never on the side, nor behind them. Most people don't have a sense of what's around them. They can only look right in front of their noses. The Democrats, and ESPECIALLY the president, need to put these sorts of data right in front of people, as many times as it takes, until they understand.

Deficit Reduction by Philosophy

Crossposted from DemConWatch

Scott lays out all the numbers. And numerically, he's certainly correct. We'll have to do a number of things to get the deficit under control. And if you want to see what you'd like to cut, click here for the Budget Calculator which shows what is saved, program by program, based on the choices you make.

But the determination of how to measure out the ingredients in the recipe is based 100% on philosophy. Whether the recipe sells is predicated on politics and message control, but at base, it's philosophical.

The Ryan plan, and other privatization plans are based on the philosophy that people should stand on their own two feet and accept no government help. And we can all take blame for the rise of someone like Paul. Years ago, when Medicare and Social Security were a gangrenous foot, no one would modify the programs, they were considered the third rail. Thus, no cutting off the foot to save the leg. There were modifications that could have been made decades ago, but now we've got gangrene up into the thigh. We can still save part of the leg, but Ryan and his ilk want to cut off the whole leg. And as Scott's numbers show, it won't be enough. Not only that, but there is a set of numbers he doesn't present: what happens if the elderly have no Social Security and no health care?

First, the number of homeless rises. Then, the number of sick brought to the hospital (generally by ambulance after they collapse on the street) greatly rises. Talk about an unfunded mandate on every hospital in America. And the food banks. And every charity: none of which have enough money to care for the number of people currently asking for help. 

Do we have to recalculate how we care for our sick and elderly? Sure. The Economist, in the 7 April edition, has a great special section on that. (Sadly, you need a subscription to read it online, I greatly advise you either buy a copy or read one in the local library. You can see some of it online, but not enough of it.) They point out that across the developed nations, retirement age needs to rise, and with that, how companies treat their employees needs to change also. That is, the current system says that seniority equals power, but for people in their 60's, most people want less “power” and more ability to mentor, share knowledge, and have personal flexibility. It's a little different here in the US as people change jobs far more often than those in Europe and Asia, but still there are great ways to use skills and talents. The section also points out that not all jobs are created equal: someone sitting at a computer into his 70's is doing easier work than digging ditches, and thus there needs to be a scaled response of retirement ages pegged to the type of work. They do not mention, but it is certainly a given, that the longer people work not only do they collect later, but they pay in longer, thus affecting the balance of input and outgo. 

Philosophically, I'm in favour of raising retirement ages, while instituting programs that keep people working who want to work longer, and even doing away with early retirement at 62, with exceptions for physical limitations. I'm in favour of revamping Medicare and Medicaid as part of an overall Single Payer system which solves the financial problems of both programs, and lowers costs across the board once certain cost controls are put in place. (Um, they're actually there now, they're just not transparent.)

Then, I'd like to see the military budget cut and have us cease being the world's policeman. Imagine if each “send the troops” piece of legislation were debated publicly like other aspects of the budget. Fewer would support paying.

Finally, I say raise taxes. And yes, start with me. I'd be glad to pay 10% more than I pay now for the improvements I want. I think we've become so tax-averse that we fail to see that taxes are nothing more than a payment for services. 

So, play with the budget. If it looks familiar, yes, we've linked to it before. Then come back with what YOU want to cut, and what YOU are willing to pay for. It's not just the dollars, it's the belief system, too. 

Every Economic Cloud Has a Silver Lining

National Geographic argues the need for balance across the world population in this motion graphic video.

Or at least a green one…

Dan Loeb

America is slowly coming out of a recession. That is good news.

Or is it?

Officially, the U.S. economy is in a recession when our Gross Domestic Product as measured by the U.S. Department of Commerce declines for two consecutive quarters. In other words, our economy has “failed” when we stop producing quite as much stuff as we used to. Apparantly, we Americans are not living up to our patriotic duties and through our consumption encouraging manufacturers to produce quite as much stuff.

Part of the problem with this analysis is that we are not including the depletion of our natural resources in our calculations. If we produce consumer products but deplete our national treasure of irreplaceable resources, consume natural resources at an unsustainable rate and ruin the environment for generations to come, are we really better off?

Some politicians would like a more robust recovery. However, if we keep the GDP growing at 5% per year, year after year, then the economy is growing exponentially.  This growth can only be supported so long in a finite world. At some point, the growth can no longer be sustained, and with a global population of over seven billion people can that day of reckoning be that far away,.

All publically traded companies aspire to build value for their shareholders. They try to maximize the discounted present value of their future revenue.

For example, suppose I own a piece of wooded land, I could clear cut the land, sell the wood to a lumber mill and the land to a real estate developer for an immediate payment of one million dollars. Alternatively, I could harvest only the maximum sustainable yield annual tree growth and thus produce, in a sustainable manner, a permanent revenue of, say fifty thousand dollars per year.

Anne Leonard’s Story of Stuff is a provocative tour of our consumer-driven culture – from resource extraction to iPod incineration – exposing the real cost of our use-it and lose-it approach to stuff.

Which is better?

If the million dollars in sales are invested at an interest rate of 7%, they produce permanent revenue of seventy thousand dollars per year, so a corporation mindful of their shareholders will cover the forest with asphalt as soon as they can.

If the country is in a recession and interest rates go down to 3%, the million dollars only return thirty thousand dollars per year, so a smart corporation will engage in sustainable development preserving the forest for future generations.

By this logic, people do not plan as carefully for the future if interest rates are high. However, should our stewardship of our resources and indeed this planet truly depend on interest rates? The stakes are quite high. This logic applies not only to timberland in the Northwest United States but to the Amazon rain forest as well.

Deficit hawks tells us that by running a deficit and running up a debt which future our children and grandchildren will have to pay, we are stealing from future generations. If so, then we can make an even stronger argument about our environment. Non-renewable resources such as petroleum are like bank accounts from which we are withdrawing assets but never make any deposits. The oil we withdraw from our proven reserves are gone forever and will not be available to future generations. Similarly, when we pollute, we are saddling future generations with an environmental debt, depreciating the value of our oceans and our atmosphere to our children and grandchildren.

The Gross Domestic Product should not the be-all and end-all of our society.

  • In this calculation, we fail to address the cost to the environment of removing the carbon dioxide producing forest, and burning the trees.
  • Reusing consumer goods by repairing them or reselling them on Ebay does not contribute to the GDP, but it does just as much to maintain our American standard of living without as heavy a toll on the environment.
  • If a company pollutes the environment producing a product and then spends money partially cleaning up their own mess, the GDP is increased not only by the cost of the product but also by the cost of the cleanup. Focusing on the GDP literally encourages the creation of new “Superfund” sites.

We should act as if the interest rate were truly zero. By valuing future generations – our children and our children’s children – at the same level as current generations, we may slightly reduce our gross domestic product, but we ensure adequate supplies for future generations and protect the environment.

Daniel E. Loeb publishes the Philadelphia Jewish Voice. He is also a mathematician working in mathematical finance.

It’s Still the Economy, Stupid

Author's Note: Dan has offered that I can crosspost from DemConWatch, so you'll be seeing some of my articles. I'll also be writing some posts on local politics. This article is from DemConWatch, and the companion article cited at the end can be viewed here

Obama's Debt Commission is due to report in November, albeit after the election. Theoretically, “everything” is on the table: debt reduction via raising the retirement age, a VAT tax, changes to the monies spent to support home ownership. All the stuff you read about. But somehow, they don't seem to include the things that I'd personally like to see. The “sacred cows” that don't even get mentioned. So here are a few things I'd like to see the Debt Commission consider:

Dock Congressional salaries. Each Senator and Representative makes $174,000 exclusive of benefits. or $3,346/week. The IIE wants to do away with the lame duck session. They give themselves a good 10 weeks a year to go home and see the folks. Well, I say, give these guys and gals 4 weeks a year for vacation, junkets, home trips, and then start docking their salaries for not being in Washington doing the jobs they are paid with out tax dollars to do. Plus, they seem to only work 3 days each week so they can go home on weekends. I'd let them have a travel day each week, and then cut the salaries 20% for the other day. I'm not joking. They're paid to work. Golf doesn't count. 

Raise the Federal gas tax. It's currently 18.4 cents/gallon and hasn't been raised since the early 1990's. Do you know anything else that hasn't been raised in close to 20 years? No, you don't. It costs money to repair roads, bridges and tunnels, and that's what the gas tax is for. We all howl about energy independence: raise the gas tax, even just to 20 cents/gallon, with escalator clauses of one penny a gallon each year for the next five years. It's a negligible cost at the pump, but would help the economy, help fix our infrastructure and encourage people to drive smarter.

Let the Bush tax cuts expire for the rich. People are generally against this for some reason. I'm pretty sure that it's because they can't do math. I can do math. Old math. You can play with tax rates here. For a single person, the top rate of 35% begins at $373,650 AGI. Returning that to 39% would mean an additional tax of $287/week. A lot of money if you earn $20,000/year. NOT a lot at close to $400,000/year.

Abolish ethanol subsidies. The cost and pollution and damage to waterways (and the Gulf) from chemical runoff isn't worth it. Sugar cane is better than corn as a gasoline additive in terms of yield, cost, and less pollution. 

End the wars in Afghanistan and Iraq. Today. Just plain bring the troops home. This would save trillions. 

Make it illegal for an individual to retire on Friday, and work as a contractor in the same job on Monday. This happens all the time: the military being the greatest offender, although it happens in all levels of government. You retire, collect a pension, and then also keep your job at a higher salary with no benefits (which you get with your pension.) It's called double-dipping, and it's just plain wrong. Want to retire at 53 with 25 years? Fine. Retire. Just don't keep working AND collecting pension and benefits. 

Make the retirement age 65. While I'm opposed to raising the age to receive Social Security from 65 to 70, I think it's perfectly reasonable to disallow people from collecting beginning at age 62 for straight retirement. There are people who cannot work due to disability at all ages, and the number of disabled people rises with age. If people cannot work due to disability, they can collect SSI/Disability until they turn 65.

Cut corporate welfare. Right now, the tax codes allows a company to be based in the United States, have plants/outlets here, but also produce goods or provide services overseas. They can shelter corporate income from US taxes by paying the other countries (at a lower rate) and then deducting the percentage value (not the dollar value) from their taxable income. The right is against changing the percentage charged for these companies because they say it would cause more off-shoring. So, change the structure. Set up the system so that corporations are taxes on 100% of income for goods and services sold in the US, but allow them credits for the amount spent on payroll in the US, and pay a penalty for monies spent on goods procured, and salaries paid, in other countries. For example, GM produces cars here and in South America, Canada and Asia. GM shelters the portion of income based on the cars manufactured elsewhere, but sold here. They would now pay taxes on the value of the income for the cars sold here, but would get a discount on the rate for the cars produced using American raw materials, parts, and assembled here, and would pay a penalty for every car that they import. Side effect: more cars produced here, more people employed, more people who can afford new cars. Go figure.

Change housing policy. Right now, home owners get a tax benefit for the interest paid on mortgages. Renters get nothing. Home ownership is a value that the government has been supporting since the end of WW2. They have done this not only by underwriting the cost of mortgages via the tax code, but also by backing the mortgages via Fannie Mae and Freddie Mac, who now hold about 90% of all mortgages. This led to mortgages being resold as derivatives, and we all know how well that turned out. The thing is, a 30-year, fixed rate mortgage is a bad deal for a bank. If interest rates rise, they're paying more for deposit accounts, but receiving less (relatively) from their mortgages. If rates fall, people refinance. Therefore, the only way the banks would sell these mortgages was with government backing. Before WW2, most mortgages had a term of 5 – 6 years, and required 50% down. 

The idea after WW2 was to build stable communities (think Levittown) and nuclear families. That worked well when people held the same job for 40 years and then retired with a corporate pension. But now, with people changing jobs every two years (up until the recession), people move more to go where the jobs are. It's easier to move when it means getting out of lease, as compared to selling a house. The house-selling problem only exacerbated in a down-spiral market. 

Those are my ideas. Please use the comments to list your choices for ways to reduce the national debt, or to say why you think my ideas are wrong. Later today, I'll be posting my idea on what we should be spending money on