There are very few things if which I’m certain. One thing of which I fairly sure is that the political mood of the country is one of anger, driven by fear and angst. These emotions feed upon themselves and if not checked, they become self-replicating and self-fulfilling. If unchecked, the societal impact is not hard to measure. In fact, human history is replete with examples of societies that acquiesced to fear – and in the process destroyed themselves. People of my generation witnessed the self-immolation of Communism. Our parents saw the rise and fall of Fascism. Their parents witnessed the end of Absolute Monarchs. Those political systems were often imposed upon the national populations that fell under their thrall, but society in those countries willingly accepted them.
Fascism and Communism rose to prominence on the backs of charismatic leaders who were willing to demonize segments of the population during times when the general population was genuinely afraid of losing their ability to provide the most basic economic needs and afraid of losing their national identity. In Germany, Adolph Hitler castigated the Jewish population and the allies of the Great War – while promising a path to prosperity rooted in the nation’s militaristic past. In Italy, Benito Mussolini promised to curb the “criminal element” and restore the Roman Empire. Lenin inspired the Red Russians by castigating the White Russians as, ironically, agents of oppression to a populace that for centuries had been oppressed.
The United States was not immune to the social upheavals that led to these dictators rise to power. Our one advantage was seemingly being blessed by having leaders rise to dispel the notion of fear, replacing it with a an optimism borne of hope. From the very beginning, our nation has found itself rescued by leaders who believed that whatever the current troubles, our best days were ahead of us. Washington, Jackson, Lincoln, Teddy and Franklin Roosevelt, Kennedy, Reagan and Clinton all shared a vision of a nation whose best days were yet to come – and were able to articulate and communicate that vision to the general population. These men all pursued different policy directions, but delivered similar results. What binds them to one another is optimism and hope; their ability to overcome not only their personal fears but those of the nation.
Now consider the political leadership we have today, and have had for the first 12 years of this century. The actions taken by the political leadership of both major parties in responding to public fears have only worked to enhance those fears by giving them legitimacy. The Patriot Act, the TSA, the Wall Street Bailout, the Stimulus – all were the result of the public fear about the dramatic events that have taken place. But they have done nothing to alleviate those fears. No, if anything, they have only served to exacerbate them – turning a nation that was more unified on September 12, 2001 than at any time in the previous 60 years into one that is more divided than at any time since the Civil War.
This is the current political landscape: the Commander-in-Chief, instead of building on his election themes of “Hope and Change” and “Yes, We Can” now resorts to using the type of language that would make Lenin proud. He has found his scapegoat: the wealthiest among us, whose “greed and corruption brought about the worst economic catastrophe in three generations.” In his latest national address, last week’s State of the Union, he not only exhorted us to follow the type of robotic obedience for which the military is often miscast, but to grant him the level of control over local matters that any dictator needs. Sadly, the opposition party is led by a cast of characters that alternates between demonizing immigrant minorities, Jews, and pretty much any other ethnic group that can generate a few headlines. On the campaign stump, the current crop of presidential hopefuls extolls the virtues of fear and hate, lambasting one another for not being “conservative enough” while forgetting the true meaning of “conservative.” Indeed, our national politics now rely on fear to such a degree the principle argument of each party is to beware what the other party will do toyou.
The reality is that our nation is bereft of leadership. The modern politician, in a clamor to gain the most votes he can, resorts to following rather than leading. President Obama, seeing polling numbers that indicate the majority of his “base” perceive unfettered capital as their enemy, adopts a socialist stance – even though he has amassed a personal fortune, in large part thanks to unfettered capital. His Republican challengers, seeing polls that indicate xenophobia and racism play well in among their base, use coded language to ingratiate themselves. Both sides in Congress read polls that say compromise is the surest way to face a primary challenge – and nothing gets done.
Throughout our history, we have had the good fortune to find leaders who were able to overcome our baser instincts. As mentioned, there have been national movements that preyed upon fear before: the “Know-Nothings,” the KKK, the anarchists, the Communists all came about because the nation feared losing the things that make us exceptional and failed to see a way to preserve them. Each movement was met by a national political leader who overcame that fear by pointing to descriptions of the US like this:
“Our country is a special place, because we Americans have always been sustained, through good times and bad, by a noble vision – a vision not only of what the world around us is today but what we as a free people can make it be tomorrow”
I still believe that our nation’s best days are indeed before us. In speaking with many of my friends, in reading the posts in on-line chat rooms, in seeing the undercurrent of thought and desire among my fellow citizens I know I am not alone. Yet, I also hear the dual fears of economic calamity and loss of national identity espoused on a regular basis. That our political leaders do not share the vision of hope through freedom, but rather a vision of despair and ruin with our only salvation being to turn from our national character, is the great tragedy of our age.
A positive development in our politics is that attention is finally turning to the debt and the annual deficit. In case you aren’t aware of the raw numbers, the deficit for the past two years has ballooned to more than an aggregated $3 trillion. That has raised the national debt to more than $14 trillion – or, about $123,000 for every household in the United States. I give President Obama credit for finally listening to the nation and recognizing the seriousness of the problem. It marks a dramatic turn for him, seeing as how he spent more in his first two years in office than his predecessor did in eight.
In his speech last week, the President didn’t mince words: he expects the “wealthy” to pay substantially more than they currently do while he continues to spend like a drunken sailor on things only a drunken politician would consider necessary. Lo, the blogosphere and networks have focused on the President’s new Medicare proposal (more on that tomorrow) and how yes, the “rich” should pay more. After all, the argument goes, the middle class is paying higher rates than the wealthy and that is just unfair. It certainly seems a winning political argument; after all, who isn’t for soaking the rich?
This makes for good sound bites and good politics, but bad policy. I realize that in some regions the Democrats definition of “wealthy” (a family earning $250,000/year) might make sense. But in others, $250,000 per year is simply middle class. Upper middle class, to be sure, but hardly wealthy. In the New York metro area, a family easily achieves a combined $250,000 in income with two public sector workers. It is even easier to reach if one person sells cars and the other works in the local bodega. The same holds true for San Francisco, Los Angeles and other major metro areas around the country. This is really a call to arms in class warfare, the destructive political game played by Andrew Jackson and Teddy Roosevelt, with disastrous effects for the nation – though those effects weren’t felt until decades later. Even liberal icon FDR understood the dangers of the game and generally shied away from playing it.
Fortunately, the IRS keeps records on the truly wealthy and the rest of us. The latest data they have is from 2007; but since the one tax policy liberals love to hate – the “Bush Tax Cuts” were already in effect – it makes a good statistical reference point. You can find it here. In it, the IRS keeps tabs on the 400 wealthiest taxpayers in the country and compares their rates to the rest of the taxpaying public. They began tracking the data in 1992, so we have a 15 year window in the way tax policy evolved through both the Bush and Clinton eras.
At first blush, it seems as though liberals may be on to something. The IRS calculated the effective tax rate on the top 400 earners as 26.38% in 1992, rising to a high of 29.93% by 1995, and then steadily dropping to 16.62% by 2007. But statistics are wonderful things; anyone can quote a number out of context to prove an argument and this is exactly what the liberal media is doing.
First, I give credit to the IRS for doing what nobody to the left of center has bothered doing in their arguments. Their numbers reflect 1990 dollars ,thereby accounting for inflation (in mathematical terms, they normalized values). So, if the truly wealthy were paying lower effective rates, then the government should have been taking in less money from them, right? Not so fast: in 1992, the IRS collected about $4.5 trillion; by 2007 that figure rose to $14.5 trillion. Why? Well, in 1992 not a single one of those 400 returns reflected an effective tax rate over 31%. By 2007, even with the hated “Bush Tax Cuts”, 55% of the top 400 had an effective tax rate of at least 35%. The lower overall tax rate for these taxpayers is reflected in the fact that 35 of them paid no tax – an effective rate of 0%.
Overall, the truly wealthy combined to pay 2.05% of the taxes in 2007, nearly double the 1.04% they contributed in 1992. In actual dollars, they contributed nearly $23 billion of the government’s total tax take of $1.1 trillion. Those who make up this class are certainly already paying their share and the administrations attempts to paint them as sore winners can only result in flat out class warfare.
We do have a revenue problem, since we’re spending more than 4 times what the government is taking in. A better focus would be on the 45% of Americans who currently do not pay any income tax. Certainly, if you’re gross income is below the poverty line for your region, you shouldn’t be expected to pay, but I doubt 45% of Americans are living in poverty. That certainly seems much fairer and also guarantees that those currently benefiting from living here also gain equity in the system.
However, I doubt we’re going to find $1.6 trillion in revenue by asking everyone to pay their taxes. We still need deep spending cuts just to get the 2012 budget balanced. Tune in as I tackle those issues throughout the week.
Once every two years, Labor Day signals the opening of the “Silly Season.” What is this “Silly Season” you ask?
In a nutshell, the “Silly Season” is when the general populace joins political junkies in paying attention to the politicians running for office in November. And the politicians, on cue, begin campaigning in earnest. But what it makes the season silly is the way the politicians act. Suddenly, Democrats begin espousing conservative ideals. Ordinarily, they’re joined by Republicans discovering their love of liberal programs.
But this year promise to be sillier than most. With an unsettled economy, unemployment rising and public dissatisfaction in both political parties rising to all-time highs, Democrats are in serious trouble heading into the
campaign season. Many Congressional seats once considered safe for the Donkey Party are now in play; seats once considered as being in-play or toss-up’s are now leaning Republican. As reported in yesterday’s New York Times, the DNC is cutting loose many candidates, hoping to minimize losses in the November mid-terms.
In short, what many Democrats are discovering is that the positions they’ve spent the past four years carving out are not exactly what the country wanted. The reason they won most of their seats – including the Presidency – was national dissatisfaction with the Bush administration. The initiatives the current administration have pushed through have proven even more unpopular than the ones proposed by GWB. How bad is it? 56% of Americans want the abomination that passed as health care reform repealed. Republicans now lead Democrats in all ten of the major issues polls.
Not surprisingly, in light of these developments many Democrats are running as far from their own party as possible. It’s amazing how many Democrats are now against the very health care package they passed earlier this year. (Remember when Nancy Pelosi declared that once we knew what was in the bill, we would love it? Oops.) Even President Obama is finding his conservative voice, as reports suggest he will ask Congress to pass “targeted” tax breaks on Wednesday. To add to the sense of desperation from the Democrats, many are hoping to cast their opponents as extremists who would destroy the fabric of American life.
Of course, Republicans are tempted to equally join in the insanity, but so far have held the line on leaning left. They fully understand that the nation has peeked behind the Progressive curtain and been repulsed by the view. This is turning into one of the strangest elections ever seen, where the minority party is the one fending off negative attacks. Normally the reverse is true, but Republicans don’t need to go on the attack in this cycle. The news, even left-leaning organizations like MSNBC and the NY Times, can’t help but report the dismal employment numbers. So Republicans are remaining more or less silent, except to point out that the news hasn’t been good since the Obama administration took over. That’s attack ad enough. Besides, the left is self-immolating itself well enough that the Republicans don’t need to join in.
So kick back and enjoy the Road to November. It promises to be a fun – if bumpy – ride.
There’s been a lot of talk lately, from both the left and the right, that most of the jobs lost in the current recession are lost forever. Robert Reich is a well-respected former Labor Secretary for President Clinton. In his article The Future of American Jobs, he contends that American jobs were permanently lost to a pair of factors: technology and outsourcing. Technology allows companies to increase employee efficiency (more employee productivity at lower labor costs); outsourcing is enabled by technology that enables foreign workers to remain competitive with Americans and can be closely monitored using new technologies. Although philosophically opposed to Reich, James Sherk of the Heritage Foundation reaches the same many of the same conclusions in Reduced Investment and Job Creation to Blame for High Unemployment. The only difference in these two articles is that Reich focuses on job losses, while Sherk focuses on job creation. But in both articles, the authors contend that both near- and long-term unemployment will remain at or near 8%. ( I wrote about the disappearing jobs phenomenon earlier this month)
There are many causes for this, of course, beginning with the fact that United States (and most of the developed world) began moving earnestly away from labor-intensive manufacturing economies towards knowledge-based service economies in the late 1970′s. Although well aware of this, nobody did much to prepare the citizenry for this fundamental economic change. Much as the US experienced a dramatic cultural and demographic shift in the late 19th century as we moved from an agrarian economy to a manufacturing economy, we are experiencing the same now. Policies over the past 30 years at both the federal and state level, rather than focusing on restructuring education and employment policies, were largely concentrated on sparing the status quo. Although the days of a high-school dropout being able to get a well-paying job for life at the local manufacturing plant ended a generation ago, we’ve continued to subsidize both the labor unions (who rely on perpetuating this myth) and the educational systems (whose labor unions and administrators have been resistant to changing the formulas they’ve worked under for 6 generations). As a result, we have a large segment of the population that is ill-suited for the type of work the modern economy provides.
Both liberals and conservatives in this country (and other Western nations) are calling for a return to 20th century economies. Liberals believe that the US can return to a manufacturing-based economy, if only certain policies are enacted. Some of these include: engaging in protectionist trade policy (apply punitive tariffs on goods produced in low-age countries); requiring a percentage of all goods sold in the US to be produced in American factories and tightening labor and banking regulations to “protect” the American worker. Conservatives are championing reduced immigration, business credits and lower taxes as the way to spur manufacturing growth. Both of these approaches – or any combination thereof – is wrong, immoral and ill-conceived. They are intended primarily to appease the 60% of Americans whose jobs will disappear or have disappeared in the past three decades.
First of all, thanks to technologies that were not even conceived a century ago, the modern world is more tightly interwoven than at any time in history. When combined with the fact that the days of imperialism ended with WWII, it is now impossible for any nation that relies on exports for economic vitality to successfully engage in protectionist trade policies. Imposing excessive tariffs or limiting imports in any way will, in the end, prove counter-productive as other nations reciprocate the move. Many persons in what we often derisively refer to as the “developing world” consider the steady income provided by manufacturing economies as a vast improvement in their situations. Despite wages that are considered substandard in the west, the mere fact that workers have a steady source of income – and therefore, food and shelter – provides a sense of security previously unknown. This was, by the way, the same attitude that drove many former tenant farmers to migrate to cities during the late 19th and early 20th centuries, in the US and Europe. This was despite the advance knowledge that most would work in conditions that we find abhorrent and for wages that we can’t countenance today. Combined with the interactive nature of modern economies, no nation can afford to block goods coming from these nations.These types of policies were tried during the heights of the Great Depression – the result was over 50 million human beings killed in the greatest conflagration in history. Secondly, imposing inane limits on immigration will rob the US of a tremendous source of energy and vigor, both of which are priceless commodities in the new economy (and I suspect that very vitality is what many are afraid of). Finally, any restructuring of tax and revenue policies that ignore the modern economic realities in favor of a long passed age robs the emerging job market of strength and future generations of Americans of a sorely needed simplified tax code.
So, if the modern economy in the West will not be based on manufacturing, what will we do in the future? Where will the jobs come from? Well, first of all, not all manufacturing will be permanently off-shored. For several reasons (including national defense), there will always be some sort of manufacturing in the US. However, the reality is that as a percentage of employment and average compensation, American manufacturing will never return to the halcyon days of the 1960′s and 70′s. The new economy will be services based and requires a more educated and more flexible workforce than the one that currently exists. I realize that when I say “services” many people conjure visions of hotel maids and McDonald’s cashiers. Those type of jobs have always existed and will always exist, but nobody should think we’ll become a nation of gas station attendants. What I’m referring to by services are the types of positions that require more brain power than brawn power; fields like medicine, technology, research, aerospace, education and banking are all services. All are creating jobs right now. The problem is, their growth is restricted by a lack of skilled workers. It’s a fact that none of your politicians want to talk about, because they know in large part they’re directly responsible for this fact.
The answers about what to do for the next generation of Americans is pretty obvious and I applaud President Obama for starting education initiatives that may prove fruitful. (I’m no fan of the President, but you have to give credit where it’s due). However, there are 2 generations of Americans now in the workforce and a third about to enter, whose citizens are ill-prepared for the current economy. The big question is what do we do about restoring some semblance of full employment, and at tolerable wages now? The first thing is for the labor unions to understand that the world has changed and they need to get with the times. Once, the antagonistic approach between organized labor and business in the US led to a system that worked well, in the contained system that was the US. Once the US was no longer the dominant player in manufacturing, though, the unions failed to keep up with pace of global economics. It is long past time for them to seriously engage foreign governments and labor markets -by working to raise living standards oversees, they can reinforce those standards back home. Secondly, our own politicians need to work in ways that remove the yoke of debt from our collective shoulders. The projected national debt for 2020 equates to $150,000 for every family in the US – or more than 3x the anticipated per family income for that year. That level of debt is unsustainable and is largely driven by “entitlement” spending – Social Security and the new Health Care package. It is past time to revisit how these programs are funded before they drive the entire nation into bankruptcy. Until debt projections are reduced, funding for projects needed to revitalize the economy cannot be pursued. In the same vein, the political class needs to be honest about the limits of government intervention in economic policy – aside from fiscal and tax policy, there really isn’t anything they can do for immediate and sustainable growth. At the moment, fiscal policy is stagnated -interest rates are at zero. That leaves tax policy – which will not unfreeze capital markets. However, by implementing a strategic tax policy in coordination with a debt reduction plan, lawmakers can relax market tensions by demonstrating long-term fiscal sense.
However, even if the various entrenched factions were to begin immediately putting these ideas in action, the near-term effect would be negligible. We would still need high spending on unemployment compensation and other safety net program to prevent our society from devolving into absolute chaos. I would like to add a caveat to this spending, though. One thing obvious to anyone who’s driven any road in Pennsylvania or watched a manhole explode in New York City knows our infrastructure is aging badly. I would offer those receiving government assistance the option of either attending training in a new field or showing up for manual labor repairing our bridges, schools and the like. This recreation of the WPA would at least prevent the nation from just throwing money down a rat-hole.