Responsibility

It is hard to imagine a time when the Congress of the United States has been held in greater contempt than it is presently.  Of course, I can only judge by the period I'm familiar with and I'm sure it has always contained scalawags and cads, but as a group they seem to have reached a new low.

What is odd about this is that they are elected by us.  So in each congressional district, our fellow Americans decided that the person they elected was the best possible representative they could find to help shape the Government.  Yet these very same people, the electorate, hold the institution in contempt.

Part of the problem is that we often elect people on a single issue.  So we had an influx of Tea Party candidates who are determined to stop spending and reduce taxes.  This of course has implications, such as less money ofr both Defense and Social Services. but the popularity of less taxes and less spending was enough.  The fact that the agenda that goes with that has potentially dire consequences for even the people who voted for that representative is ignored.

The rhetoric has become such that even the media, at least some of the media, simply go along with the concept that the Democrats are the "spending" party and the Republicans are the "no tax" party.  Of course both parties advocte some spending, it just depends on who is benefitting.  Many Republicans signed the no tax pledge, but they are perfectly willing to raise some taxes by eliminating deductons and credits.  There is really no difference if taxes go up via the front door or the back door, they still go up.

It is impossible in the current political climate to really determine if we spend too much or tax too little.  In some cases the demographics have created a problem, not enough young worker to support the boomer population, and in some cases we have made odd policy decisions, reduce taxes and have two major conflicts right before the boomer generation becomes eligible for many social programs.

Clearly, in a rational society we would debate the resonsiblitity of the Federal Government to provide services and if the majority decides it should, we need to pay for it.

Why is that so hard?

It has been a while since my last post, and since I never actually know if anyone looks at these, they are basically a way for me to capture thoughts, and record how I feel and think about events.  The election has come and gone and we have much the same conflict between the two parties that we had before.

I guess its too much to ask that a coalition of the middle form and eliminate extreme views from both sides. It seems so logical, but I guess party loyalty overrides the need to govern well.  We have real problems and the current scenario doesn't seem capable of solving them, but most Americans are in agreement that we need to do certain things.  Adjust taxes to raise some more revenue while reducing spending.  I guess the disagreements are in which taxes to raise and what spending to cut.

We have had Sandy hit the Northeast and unprecedented damage from the water surge in New York.  It doesn't really matter if the climate change is all man caused or only partly man caused.  We need to face reality and reduce carbon emissions, much like we stopped a lot of the other pollutants we were spewing into the air.  We simply have to make everything a political argument in this country, including one of the most horrific events in my lifetime, the Sandy Hook killings.

It is tragic and the result of one clearly deranged individual with access to extremely lethal weapons.  We can't fix the derangement part easily, but we can restrict access to the lethal weapons.  Certainly, there are many people in this country that want and desire guns, but they also have to take responsibility for them.  If you own a gun, you should be responsible for whatever happens with that gun, even if it is stolen from you.  It is lethal and deadly and you need to treat it as such.  If you sell a gun to someone, you should also share some responsibility.  We make people get licenses for many things in this country, and the fact that guns are mentioned in the constitution does not override the right to life, liberty and the pursuit of happiness the country was founded on.

Responsibility, governance, common sense, everyone I talk to agrees we need them.  We then get lost in arguing about what party has the "right" position.  George Washington warned us about this but we have lost sight of that.  We need to change something in the congress, maybe much shorter bills and more votes.  I think some politicians hide behind complex legislation so they can find something in it to vote against without looking like they voted against what the people want.  Also, when you accept public office, you need to be unencumbered.  Taking a pledge, such as a no tax pledge, encumbers you.  It equates to a pledge to refuse to govern if you ask me.

Labor

There was an interesting op-ed piece in the New York Times talking about how Henry Ford, followed by most of American industry, considered labor a stakeholder in their enterprise and felt an obligation to pay them a large enough salary to help them be good consumers.  This was a change from the robber baron mentality that preceded Ford and which we have now returned to.

Labor is simply an expense and an asset that has to be acquired as cheaply as possible.  Corporate obligations are only to the shareholders and maximising profit the only mantra.  Of course many companies like to say that their employees are their greates asset, and they most likely are, but they want that asset cheap.

There is a trend that develops in all societies that leads to a separation between wealthy people and everyone else.  As F. Scott Fitzgeral noted in the Great Gatsby, the wealthy are not like you and me.  They feel entitled and believe that they earned there place, even if that was an inherited place.

I recently read a quote from an heiress in Australia who opined that poor people should drink less beer and work harder.  Since she had inherited something like $30 billion dollars, it is unlikely that she ever really worked a day in her life or tried to find a job.  She probably doesn't drink beer, by choice and outside of being incredible insensitive (see Marie Antoinette) may actually mean well or believe that everyone can become rich if they justj work at it.

This being labor day, it would be nice to see a debate about how we treat labor in the future.  The Op-Ed piece points out that in Germany labor occupies a much higher rung of society than in this country and they remain both competitive and prosperous.

Whither

You hear talk about a "new normal" and how the world of the future isn't going to look like the world we became used to in the last 40 years or so where rampant consumerism was the rule. This is the world that really started during the period depicted on the AMC series "Mad Men" where the post WW2 dominance by America, the great number of children born and the seemingly endless expansion into the suburbs created a tremendous amount of wealth and prosperity.

This period seems to be over. We found places to build houses that had no reason to have houses, except to house the people building the houses. Further, the tremendous increase in the Western Standard of living led to a worldwide disequilibrium that will ultimately fix itself. Americans have no intrinsic right to be wealthier than anyone else. Yes the country has great resources and has been a bastion to capitalism, leading to some tremendous growth, but really, once we built the suburbs, the highways, the endless malls and saturated the automotive market, where is the next great expansion? Probably not here.

To some extent we are exporting the American way of life to the rest of the world. We see countries that were poor, such as China and India starting to become, if not wealth, less poor. This expansion has come, to some extent at the cost of American jobs, as cheaper labor and less stringent oversight makes it more economical to open factories or enter into partnerships with manufacturers and service providers there.

So what does it mean? Millions of American jobs are gone. Further, trillions of dollars of perceived wealth has vanished in the housing collapse. The people who have suffered the most from this are the factory workers and the construction workers. There is plenty of opportunities for American companies to sell and expand in the new markets. However, without the equity that was tapped so frequently over the last 20 years, Americans have less disposable income. Worse, a lot of the disposable income has become tied to Government payments in the form of unemployment, social security, welfare etc.

We are seeing the birth of a two class society, where those with certain skills will thrive and those without those skills will not. We have seen this before. In this country we saw great prosperity driven by the drive west and the settlement of our virgin farmlands. Then we saw the small family farms give way to a great expansion in industrialization. That period is ending, but of course just like we still have farms, we still have industry, its just not expanding like it once was. Where is the next expansion?

This is still unclear, although we have seen a tremendous shift to service jobs already. Unfortunately, many of the service jobs simply do not provide the level of income we have come to expect.

Common Sense

Every so often I see or hear someone talk about how a little common sense would go a long way to solving our problems.

The problem with common sense, is as I believe Will Rogers put it, it isn't very common.

It also contradicts itself.

Common sense tells you that if the Government keeps running up debt, we will eventually go bankrupt.

Common sense also tells us that reduceing spending or raising taxes in a weak will lead to economic contraction and lower tax revenues, driving up the debt.

Without actually lookng at the details, a lot of people talk about the wasteful Government spending that we need to stop.

In realitiy, the vast majority of spending is on defense or entitilements.  Sending a check to a social security recipient isn't wasteful spending.  Paying our military isn't wasteful spending.

Not to say there isn't waste in Government spending, inevitably, there is some waste in every human endeavor.  It's just that reducing spending won't get rid of the waste, we don't know how it got there and can't find it most of the time.

If we could find it, we would get rid of it, no one is for waste

Capitalism and Christianity

There is a basic decision that has confronted humanity for ages and has never been resolved. It is simply, do we let the strong dominate the week and accumulate wealth and comfort while others struggle just to exist, or do we allow all to benefit from the goods produced.

Capitalism is largely based on the premise that human avarice will result in greater innovation and production resulting in a larger overall level of wealth and theoretically benefiting everyone. Some refer to this as the trickle down theory, where those who accumulate the wealth will spend it on goods and services provided by others. The theory makes no pretense about trying to equalize wealth and in fact openly allows for some to fall below the subsistence level. The Western version of capitalism has attempted to provide a "safety net" for those who are unable to survive on their own. Of course now some are arguing that the safety net is being abused and has led to an increase in "lazy" people who don't want to work since we "take care of them". What is the primary inequality of this system and has always been is that we may all enter this world naked and screaming but we don't enter it on an equal basis. Born into the right situation your chances of success are often not related to your relative level of effort as much as the fact that wealth opens many doors for you. Yes, some born into poverty manage to overcome their background and some born into wealth descend into abject poverty, but these examples are generally the exception, not the rule and most do not end their lives in significantly different social circumstances then they were born into.

The other concept, which has become associated with communism to many but is really more an early christian concept as well as a concept of many other religions, simply put to love thy neighbor and share the good things of this world. This concept condemns avarice and rewards compassion. However you view it, those who accumulate more are expected to help the needy.

Many in our society claim to embrace both of these concepts, ignoring the economic implications of Christianity and also ignoring the moral implications of capitalism. This is a rationalization that cannot stand up to scrutiny.

Ignoring History

History ignore tends to repeat itself. In 1937, the Depression ended up being extended when we decided that we needed to cut back on Government spending. This stopped a nascent recovery in its tracks and led to another round of misery that only ended when the second world war broke out.

During that same period, Germany got out of its depression by some massive Government spending on infrastructure and military buildup.

Now, the best way to reduce the deficit is to grow the economy. When the economy grows, we create jobs. People with jobs pay taxes while people without jobs consume taxes. This is an extremely simple equation. Of course the best outcome is for the jobs to be generated by private industry, but in order of precedence a private job is best, a public job is second and no job is last.

Economics can be extremely complex but it is also extremely simple. Assuming that we can produce enough goods and services to supply the needs of the population, the issue becomes providing a means for the population to consume those goods and services. So, we can produce cars, but if no one buys a car there is no reason to. This is a basic function of supply and demand. Increased demand leads to increased economic activity which leads to increased jobs.

The idea of Government stimulus is to prime the pump. It has been doing that, but the country is faced with a number of structural issues that have to work themselves out. So while the stimulus has stopped the decline in GDP and started some growth, we are not yet at the point where private demand is so great that the withdrawal of Government stimulus will not have a devastating impact.

The deficit is certainly a problem, primarily because the interest on it is an expense that must be paid. However, until the economy has passed the tipping point, where demand and jobs are self sustaining, focus on the deficit is misplaced.

Lets not ignore history.