Tuesday, January 28, 2020

How Rich Folks Explain the Explosion in Our National Debt

A Forbes Magazine article questioning the sustainability of our ongoing deficits and rising debt popped up on my News Feed on January 27 2020.  Forbes is a magazine whose core editorial mission seems to be to celebrate the gathering of excessive wealth as the penultimate human virtue.  But I read part of the article anyway, glad to see someone was concerned about the National debt.

I quit reading when it became apparent they were focusing the blame for our high National debt on President Nixon's decision to take the dollar off the Gold Standard in 1972 and were pointedly avoiding any mention of the reduction of the top income tax rates to below 40% initiated by President Reagan in the early 1980's.  This despite the fact in the decade after we dumped the Gold Standard in 1972 the National debt actually shrunk.  It wasn't until President Reagan start cutting taxes on the wealthy in the early 1980's that the National debt reversed course and began its inexorable rise.

I have no issue with the criticism of dumping the Gold Standard in 1972.  When the dollar was on the gold standard governments could not just pile up debt because excessive debt caused the value of the dollar to deteriorate against other more fiscally responsible countries.  Taking the dollar off the gold standard sent us off into uncharted territory - the Fed maintaining permanent low interest rates by printing money resulting in continuously rising levels of debt by government, business and consumers.  Today every kind of debt is at historically high levels. 

These days when there is a hint of a possible economic downturn, the  Fed just prints more money to keep interest rates low,.  We don't know how this ever rising debt scenario will play out.  It is hard to imagine it will be good, but the permanent low interest rates also inhibits the traditional reality checks on excess - depressions and recessions.  Japan provides a possible model, 40+ years of low interest rates, ever increasing national debt, and weak economic growth.  A nation stuck in economic stagnation.  

But leaving the gold standard is not the cause for out debt explosion since 1983.

From 1933 to 1983 the very wealthy faced much higher tax rates on excessive income - the highest rate averaged 70% on the income far above what the middle class earned.  During that period the National debt ended where it began, at 30% of GDP, and we enjoyed unprecedented prosperity at all levels of society.   

Since the mid 1980's the top tax rate has always been below 40% and the National debt exploded even as GDP growth has been mediocre, homelessness has exploded, home ownership has shrunk - virtually every economic measure documents a less powerful and inclusive economy.

I guess the folks that subscribe to Forbes who celebrate the accumulation of vast wealth as the highest human virtue probably don't want to hear that concentrating wealth in the hands of a few actually impoverishes society.

Wednesday, January 15, 2020

Balancing Timely with Wise in Military Actions

The drone strike that killed Quasem Soleimani has rekindled the decades long argument about the President's powers to unilaterally order military attacks.

Currently the guideline is the War Powers Act which requires the President consult with Congress before engaging in hostilities.  It was enacted in response to the unilateral escalation of our involvement in Viet-nam.  

In the half a century since the War Powers Act was enacted situations have developed every few years where a President wants to take military action against some foe but fears if he tells Congress word will leak out and undermine the opportunity to accomplish the mission.  So Presidents have often acted unilaterally.  Each time it sparks a fight that sucks up lots of time and energy and nothing gets resolved.  The War Powers Act clearly needs some tweaks.

Presidents ordering military strikes unilaterally is an uncomfortably close step beyond a President using the military to protect his/her own political interest.  Even if the Presidents sole motivation is to act in the countries interest a President usually surrounds himself with like minded people.  So the decision making process is prone to infection by group think that allows an administration to convince themselves to take a certain course of action without really vetting all the consequences.  Who can forget our invasion of Iraq based on the administrations conviction Iraq was building nuclear bombs, which turned out to be completely false.

On the other hand, democracy is like a bureaucracy, it has great difficulty making quick decisions and is lousy at keeping secrets.

As voters we need to demand Congress work out a process that requires the President to consult with Congress that can produce quick, but secret decisions.  That probably means the entire Congress cannot be involved.

Here is one possible approach.  Set up a protocol for regular meetings between the administration and the small group representing Congress.  Those meetings should happen periodically even if no imminent action is planned in order to pre-authorize action by the President for specific types of anticipated possible events.

The meetings should be top secret, they should be recorded and it should be a Federal crime for anyone to say anything about the meeting before any specific military action that requires surprise contemplated at the meeting has occurred or is determined to be no longer feasible.  

This is the highest form of national security so any journalist who learns information about the meeting and publishes that information in any form while the action contemplated has yet to be completed can be required by law to reveal the source of their information, and be subject to criminal penalties.  

If a leak does occur an independent commission to investigate the leak should automatically be convened, perhaps composed of the members of the intelligence committees of both the house and the Senate, or a panel of Federal Judges.

This needs to be something everyone in Government acknowledges is beyond partisanship.  So, to provide public accountability the recordings and transcriptions of the meetings should be publicly disclosed within two years, absent temporary continuance from the Supreme Court based on ongoing, immediate security needs. 

Monday, January 13, 2020

Comparing Impeachments - Nixon, Clinton, Trump

Those of my generation have now witnessed three Presidential impeachment proceedings in our lifetime.  Presidents Nixon, Clinton and Trump.

Republicans are now trying to deflect calls for witness testimony in the Senate impeachment trial of Donald Trump by arguing no witnesses were called by the Senate in the Impeachment of Bill Clinton.  Is that a legitimate comparison?  

First, the alleged crimes:

Nixon and Trump both were accused of actions that undermine the democratic process.  The Nixon administration authorized a burglary of the Democratic National Committee offices to try to gain a political advantage, and worked desperately to cover it up.  President Trump sought to withhold military aide Ukraine needed to counter the military threat to their democracy from Russia.  Witnesses in the House impeachment trial from within the Trump administration understood the goal was simply to pressure Ukraine to investigate the alleged activities in Ukraine of the son of Joe Biden in the hope the investigation would harm Biden politically.

Bill Clinton was subject to an evolving series of investigations by House Republicans.  First they investigated alleged improprieties in a land deal in Arkansas (Whitewater) prior to his election.  That investigation was expanded to cover a sexual harassment lawsuit filed by a former Arkansas state employee (Paula Jones) against Clinton.  Later allegations of a sexual act with a consenting adult (Monica Lewinsky) in the White House were included in the investigation.  

Although the Whitewater matter was investigated for over a decade by State and Federal authorities and no prosecuting authority ever found evidence of legal improprieties by the Clinton's sufficient to support charges.  The Paula Jones lawsuit was dismissed as without merit, then after an appeal settled by the parties.  But during the Jones lawsuit Clinton had testified in a deposition he did not have sex with Monica Lewinsky, which became a perjury issue when Clinton later admitted to a "sexual relationship" with Lewinsky.  Clinton claimed he did not have intercourse with Lewinsky therefore his testimony was not perjury.

House Republicans impeached Clinton for lying under oath and obstruction of justice, both charges rooted in the recorded deposition testimony in the sexual harassment lawsuit in which he attempted to hide sexual activities with a woman not his wife.  The charges were pertinent to his character but not related to illegal political activities.

Second, the Judges:

Nixon faced a Democratic House and Senate, so he resigned when it became clear he would be impeached, in part because the House public hearings had demonstrated to the public that the burglary was authorized at the highest levels, and that the administration went to great lengths to cover up the crime.

Clinton, a Democratic President, faced a Republican House and Senate.  After the hearings leading to impeachment in the Republican House, the Republican Senate did not call witnesses and Clinton was acquitted on both counts by a bi-partisan vote (the Senate consisted of 55 Republicans and 45 Democrats at that time). 

Trump has been impeached by a Democratic House after extensive testimony alleging he was trying to use the military aide package as leverage to gain a personal political advantage.  The House also subpoenaed many members of the administration who could have provided testimony to clarify what happened but the Trump White House ordered the potential witnesses to not obey subpoena's - arguably obstructing justice.

Now President Trump is be judged by the Senate.  Mitch McConnell says there will be no witnesses, citing the Clinton impeachment as precedent.  But the Clinton impeachment was based on testimony in a lawsuit that was already on public record.  There was no point in having other witnesses, there was nothing they could add.  

Quite different from the impeachment of President Trump.  His alleged conduct goes to matters central to his duties as President, and what happened is peculiarly within the knowledge of the folks in the White House, many of whom the President would not allow to testify in the House proceeding.

If the Senate hears all the witnesses and the votes on a party line vote to exonerate President Trump, I will not complain.  The public will have had access to all the facts and can decide for themselves at the next election what they think.  

But by all appearances the Senate Republicans are ready to act as soon as possible to exonerate President Trump to avoid harm to the Republican parties chances in the coming election.  To me that would be corruption of the sort I have always identified with the fake democracies around the world, not with the supposed beacon of democracy in which we live.  

If you want to help preserve our rule of law based democracy, don't just like this post, share it with others.  Voter outrage is the only thing that will push Mitch McConnell to proceed with a real examination of President Trump's conduct so he can be legitimately impeached, or exonerated.


Sunday, January 12, 2020

High Taxes - Fox News Stands Reality on its Head

Fox News manages to interject the phrase " high tax" as a caustic modifier almost every time it mentions the city of San Francisco, the State of California, or Democrats in general. 

Facts about State "high taxes."  

The wealthiest and most economically diverse states in the union that have high taxes and provide a lot of services and are mostly blue states that contribute more money in taxes to the Federal Government than they get back  from the Federal Government.

The poorest, least economically diverse states all have low taxes and provide few service, are virtually all Red States, and generally get more money back from the Federal Government than they contribute in taxes.

Facts about high taxes Fox News never talks about.  

For the Federal government the Republican low tax policies Fox news promotes have been in effect about 50 of the last 100 years.  During those years the top income tax rate on rich folks has been 40% or below.   During the years Republican low tax policies have dominated the National debt has grown faster than GDP - as a country our net wealth has gone backwards averaging a net loss of about -.5% of GDP per year.

The other half century when Democratic high tax polices dominated the top income tax rate averaged about 70% on the top income of the wealthiest taxpayers.  Those years of control by "tax and spend" Democrats saw no net increase in the National debt, and we averaged GDP growth of about 2.7% per year.  In other words we got 2.7% wealthier per year as a country.

The history of the last 100 years is pretty clear that high taxes on the wealthy make us a richer, stabler country.  Low taxes are a penny wise - pound foolish option that, while it makes the rich feel relatively richer, in fact makes even the rich poorer and the rest of us a lot poorer.  The the red states that buy into the ideologically driven representations on Fox News and elect low tax Republicans are undercutting this countries potential, and their own economic vitality.

Friday, January 10, 2020

Fox News and San Francisco

Fox News has been putting a lot of emphasis lately on painting San Francisco as a city run by incompetent liberals - I presume hoping some of the paint will spill onto Nancy Pelosi.  

Yes San Francisco has major problems.  No, the "liberal" government of San Francisco is not the reason.

San Francisco is being buffeted by forces that no other city in the America faces.  San Francisco sits in a spectacularly beautiful setting with a marvelous climate.  In the winter the low temperature never gets much below 40 degrees, in the summer the daytime high temperature is almost always in the 60 to 80 degree range.

Since it's founding it has been a place lots of people want to live and are loath to leave.  But the city sits on 7 square miles of steep hills, landfill and sand dunes, surrounded by water on three sides, and riddled with earthquake faults.  Locations within the city where it is safe to build multi-story buildings are limited.  The building limitations have limited the the population of the city to under 800,000 people.

The tech industry that started in Silicon Valley loves San Francisco and much of it has moved north to San Francisco in the last two decades, pushing San Francisco to the point of being one of the most expensive cities in the world.  Tens of thousands of the residents of San Francisco can no longer afford to live a normal life in a place where they grew up or chose to move to.  Some left, many have tried to stay, disgruntled and feeling abused.

To understand Prop 47, which your article cites as the source of San Francisco's petty crime problem, some back story is necessary.  From the late 1970's through the early 2000's Republicans, with financial support from the prison guards union, controlled California.  Their main policy goals were cutting taxes and getting tough on crime.  As a result California's prison population exploded and thousands of young people ended up with criminal records limiting their future options.  The tax cuts usually cut social programs that helped socially disadvantaged and mentally ill folks, contributing to the explosion in homelessness.

In the mid-2000's California voters tossed out the last vestige of Republican control of the state, but the problems from 30 years of Republican exclusive focus on tax cuts and being tough on crime still haunt the state.  The imbalance is demonstrated by a simple statistic.  

In 2010, about 14 employees of the State of California were paid more than $500,000.  One was an educator, the president of the University of California.  The rest were all employees of the Department of Corrections.

The single event that was emblematic of the problem that sparked Prop 47 was a 25 year prison sentence handed down for stealing a piece of pizza.  

Many prosecutors always opposed Prop 47 but a 2018 University of California study that compared the changes in crime rates in California under Prop 47 with other states found trends in California matched trends in other states.

But even though Prop 47 has worked at reducing prison populations and been good for most of California, in San Francisco the combination of a large, disgruntled population displaced by the tech industry living in the midst of vast wealth has created a culture of disrespect for the law.  But Prop 47 is a state law, San Francisco does not have the power to change it and must comply with it.

Private police?  High taxes or not, how many new police officers can the city afford when to lure new officers it has to offer a salary to live in or near a city where a one bedroom apartment costs around $4000 a month, and the median home price is $1.6 million?

It is going to take many years to continue to unwind all the narrow minded policies pushed by Republicans for 30 years, and the problems with wealth taking over San Francisco.  As a lifelong resident of California, who spent many years registered and voting as a Republican, I know California's problems have more to do with the Republican anti-tax and tough on crime views that Fox News thrives on than with anything the left has ever done.





Wednesday, January 8, 2020

Conflict in the Middle East - Who Pays for it?

In the last couple days President Trump has authorized a drone strike killing a prominent Iranian general.  Iran followed up with missile attacks on Iraqi bases where US forces were stationed.

Although his administrations vague intelligence justifications remind me off the justifications for the Bush administration invading Iraq to destroy what turned out to be a non-existent nuclear weapons program I don't feel like at this point I am in a position to second guess the President on whether his first strike was wise or foolish as policy.

What I do fault President Trump for is escalating our presence in the area after adding a trillion dollars a year to our national debt with his 2017 tax cuts. 

For 40 years Republican administrations have relentlessly cut taxes on the wealthy, effectively pushing more and more of the tax burden onto the middle class.  At the same time they have continuously increased "Defense" spending.  As a result our National debt has grown from 30% of GDP to around 110% or GDP.  As a country we owe more than we produce in a year.  After 40 years of tax cuts the richest of the rich have so many tax perks and deductions they often end up paying almost no tax.

Much of the increase in "Defense" spending over the last 40 years has been to support ongoing interventions in the Middle East.  This is a curious definition of "Defense".  The notion of a middle eastern country invading the United States is laughable.  Even the terrorist attacks spawned out of the middle east were in response to our constant meddling in their neighborhood.  

We regular folks may benefit a little from our constant Middle East meddling to keep the oil flowing.  But most of the benefit flows to rich folks who have business interests in the Middle East.  Their investment interests have driven most of our interventions in the Middle East.  

I can live with our government protecting rich folks investments half a world away.  What I find indefensible is government paying vastly more for "defense" to protect rich folks Middle East investments, while the rich folks pay ever tinier fractions of their wealth as taxes, even as the National debt our kids and grand kids are going to be left with piles up.  Particularly since it is mostly the not so rich that serve in the military, and die for our country in Middle East conflicts half a world way. 

Monday, January 6, 2020

Middle East Policy - Costs & Benefits

The Middle East has been one of our primary foreign policy problems since the end of the Vietnam War.  We have had troops in a combat environment in Afghanistan for almost two decades, twice invaded Iraq, and actively engaged in hostilities in Syria, Libya, and a number of smaller states. 

The Middle East is a tangled mass of ethnic, religious and tribal groups with grudges that go back hundreds of years.   It is a region full of dictatorships or fake democracies controlled by the powerful who fix elections to provide cover for their right to line their pockets and deny basic human rights.  It is literally half a world away from our borders and most of the region represents the antithesis of the ideals we strive for in our Democracy. 

We scarcely lift a finger for conflicts or even genocide in Africa, Asia or Eastern Europe.  But the middle east is abundantly endowed with oil, which we want for our cars, factories and industry.  Our economic wealth has been rooted in cheap oil since back when European colonial empires dominated the region.  But in the first part of the last century lots of new countries emerged as colonial empires collapsed.  The new states wanted to control and profit from the oil within their boundaries.  

70 years ago we orchestrated the overthrow of a socialist leaning democratically elected government in Iran to install a dictator friendly to our business goals.  We have since used our military muscle regularly to protect our access to oil even if that meant supporting dictators or overthrowing elected governments.  No surprise we are not popular.

Benefits of our interventionist policies:  

We may still pay a little bit less to drive our cars, heat our homes and fuel our factories but much of the rest of the world now produces oil.  Natural gas has become abundant and cheap.  Solar and wind power are moving closer to becoming cheaper than extracting and burning oil.  King oil is shaky on its throne.

Burdens of our interventionist policies:

1.  We have lost thousands of young men in Middle East wars, and hundreds of thousands of veterans are physically, emotionally or mentally disabled by their service. 

2.  Our meddling has made us the target for Middle East based terrorists who have killed thousands of innocent civilians.  Trying to protect ourselves we have made it tediously complex to get on a plane to fly anywhere.  

3.  Within our country some of us have lashed out at other innocent neighbors with middle eastern backgrounds.

4.  Probably about 10 Trillion dollars of our National debt can be tied directly to our military operations in the Middle East over the last 30 years.  

5.  Our meddling has exacerbated religious and cultural tensions in the Middle East far more often than it has improved them.

6.  We have undermined the development of democracy in the region.  Our ham-handed efforts to impose our will allows corrupt regimes to blame us for their countries problems as they line the pockets of the rich, deny basic rights to the poor, and set ethnic and religious groups against one another.  

7.  As we have seen with Syria, our lack of commitment to countries without significant oil reserves allows fake Democracies to build a power base for themselves in the region by supporting the worst kind of dictators, who accept the support because they see our activities in the region as a looming threat.

8.  Our polices have enabled the denial of global warming by using cheap oil as a crutch to avoid committing to develop cleaner ways of meeting our power and heating needs. 

The Hippocratic oath seems to me instructive about an intelligent and realistic foreign policy - first do no harm.  Our interventionist policies in the Middle East seem to be consistently doing more harm than good.  Maybe it is time we just bought oil on the open market and let the Middle East solve their own problems.