When
Thelma and Louise went off that cliff there wasn’t any question what happened
to them. There were questions, like “Why?” but not, “What?”
In that
sense this is no cliff.
It is a
speed bump. If we hit it too fast it will cause damage but it will not kill us
or the country.
A speed
bump is supposed to slow you down and our fiscal path is wrong and we are far
too fast headed for far too much debt. This speed bump was supposed to slow our
descent and give us time to map a new path at a safe speed.
It hasn’t
worked out that way has it?
Put
partisanship aside. The politicians placed this crucial speed bump too close to
a flat out trap putting it after THEIR election and leaving little time for its
issues to be dealt with and then to be handled in a lame-duck session at that.
The bump was placed there for their convenience and now they are incapable of
dealing with its demands.
This is
selfishness; it is the only bipartisan act I can detect so far.
Put aside
the public opinion polls: Boehner is being vilified because he has an unruly
faction to try to corral. The President,
from whom we might have expected some leadership, got the ball rolling by
asking for the bump to be smoothed by given him the things HE wanted.
The President’s leadership
Obama
claimed a mandate. Let’s look at this. He was elected with a popular vote
margin that exceeded the margins of victory in 23 historic presidential
elections but fell short of the margins in 26. His electoral vote count was large,
but by popular vote he was only re-elected by a modest margin. The voter
turnout was a disappointment meaning he did not inspire people to vote.
Compared to his first term he has lost his mojo. His only mandate that I can
see is to do his job just like the mandate for the Senate and House
members. Since no one party is in power,
the situation calls for compromise. That is the only mandate and both sides are
resisting it.
Obama’s
saying he had a mandate for his views was sham. Calling for capitulation by
Republicans was brash and over-stepped the bounds of reality. The President got
this ball rolling down the wrong side of the hill. Now it’s way too hard to get
it back and to start again.
The
Republicans took up the President’s ‘challenge’ and asserted that THEY had a
mandate too; a mandate from their constituents not to raise taxes and suddenly
there we were right smack dab in the middle of political grid lock.
We are
right where the President led us.
So he may
get good grades and maybe it is the 47% talking, but who in America realizes
that this tangled ball of string is of the President’s doing? Harry Reid’s
saying Social Security was off the table did not help either. After the
elections Boehner did say that ObamaCare was now the law of the land.
Republicans were not obstreperous. Yet the view seemed to be that the
Republicans were supposed to roll over like a submissive dog and show their
belly to the sharp Democrat teeth and give in.
They have
not done that and for that they are vilified?
How did
that happen?
Don’t
Americans realize that putting a greater burden on the 53% that pay Federal
Income Taxes (FIT) is not a solution but only an expedient? Interestingly even
in France the mantra of ‘tax the rich’ is running into trouble. French courts
have thrown OUT the 75% top rate change that socialist Hollande instituted
calling it unfair. Even France has
fairness rules
The Real Solution
The real
solution is to get incomes UP so the ranks of the 47% will shrink. If America
is not a land of opportunity then it is nothing. Without opportunity there will
be no freedom. People have to be able to afford their freedom. Freedom has a decided
- if somewhat oblique - economic element. America is not a land of equal
outcomes as the President seems to be trying to make it (that by the way is
socialism/communism etc: from each according to his ability, to each according
to his ‘need’). But it has not been a land of equal opportunity either and that
is what must be fixed more than to arrange handouts designated by income
cohort.
Inequality
of outcome is a great motivator. Equality of opportunity is what makes unequal
outcomes ‘fair.’
And there
we are.
I do not
see these principles being reflected in our political debate. What I see is
each party taking America’s flaws and trying to make them the result of the
other side’s ideology. There is no sense of looking at our problems and trying
to create some short term help while putting the economy on a more sustainable
long term path with improved opportunity. There is ideology, gamesmanship, and
political posturing to try and make the ‘other side’ seem responsible when
things go awry.
Democrats
are winning this game largely because the press REALLY IS so liberal. By any
objective measure what is most wrong with the economy looking into the future
is spending - way too much spending- it will consume a growing share of GDP as
we look into the future and evaluate the responsibilities of government under
our current array of promises. The tax revenue shortfall is a product of a
lingering recession.
Class
warfare is not the solution. But Obama and the Democrats have found a
discordant note that the press has echoed and Republicans have been unable get
a fair hearing although they really occupy the high ground in this debate. They
have ‘cleverly’ fumbled the ball by making their pledge of ‘’no tax rate hikes’
the center piece of their debate instead of focusing on excessive government
spending and promises.
Obama is
making Republicans look bad by offering to shave the cliff by giving them
everything HE wants and nothing THEY want AND because the middle class also
wants these things. Obama’s power grab makes Republicans look bad. But
bargaining is a two-way street not the one way street that the President would
make it.
Another way to think about government
spending
The more
of our GDP that will require tax revenue that is going to be spent on government
programs be they military spending, Medicare, Medicaid, ObamaCare, Social
Security, or whatever, the less if left over to finance the America that used
to be characterized as rugged individualism. That means the less choice and the
less freedom we all will have since each family will retain less of its income.
Obama is
from Illinois. It is an extremely indebted state. We should guard against him
wanting to impose on the nation what has been his own experience in Illinois.
Illinois is no role model. Democrats there that have controlled that state have
not turned it a model we should emulate. Illinois
has the fourth-highest debt in the nation, with liabilities totaling $271
billion. Only California, New York and Texas are carrying more debt.
But this situation
is not just about starry-eyed tax hike loving (even if P-R savvy) Democrats.
Republicans should realize that the nation has been much more prosperous even
with higher tax rates. Democrats need to realize that the tax system and its
network of deductions work together. Fairness is an issue here. Even France has
overstepped its own liberal socialistic bounds in simply soaking the rich as
its courts have rescinded the 75% top marginal rate branding it as unfair.
Counties with much higher progressive tax rates than ours are countries that
are socialistic and that do not espouse a doctrine of unequal outcomes. This is
not and never has been America. America has always been the land of
opportunity. The trick is to make opportunity more equal.
If we are
transitioning to a more socialistic country we should find a way to get a
consensus. This sneak attack of socialism is a bit like what the EMU is doing
by changing its provisions bit by bit and never letting the people vote on what
the leaders (leaders?) are doing. If,
however, the desire for more transfer payments is a result of our horrific
recession and our inability to get the economy on track and is more the result
of temporarily reduced tax receipts, we would not want our temporary situation
to send the economy permanently down a path it will soon regret.
The real nature of the Cliff debate:
Yet none
of this is part of the national discussion. It is all Hatfields Vs McCoys and there
is no discussion just a lot of shootin’... mostly each side shootin’ its mouth
off: Mouth open! Ears shut! Mind Closed!
Ready! Set! Go!
We can
look back and see things that are wrong or at least that have turned out wrong.
While thousands were prosecuted in the 1980s after the S&L crisis only two
(not two-thousand only TWO PEOPLE!) have been indicted in this financial crisis
and they got off scot-free. And this was a much more damaging financial crisis.
Let’s remember that Obama runs the Justice Department! He is President! Justice
reports to him! If you like to call ‘bankers’
‘banksters’ Obama is the guy who has NOT prosecuted them (has not directed the
Justice Department to prosecute them). Yet the anti-Wall Street crowd is also
anti-Republican and anti-1%. It’s all very curious, isn’t it?
They used
to talk about President Reagan as the Teflon™ president. Obama is at least as
lucky.
What’s really wrong (not class warfare)
Both
Republican and Democrat administrations have been happy to sit by and watch our
international (current account) deficit plunge into larger and larger red
numbers. There is nothing remotely like free trade that would let this happen,
yet both parties seem to be the in grips of multinational corporations that
have used cheap foreign labor and the lack of foreign exchange rules to exploit
that cheap labor abroad, keep it cheap, kill jobs and income at home while
driving the middle class into poverty and busting unions. (Of course the
government’s role in trying to get more people into houses they could not
afford using Fannie Mae and Freddie Mac sort of speeded things up.)
Under any
reasonable market-determined exchange rate regime the US would not have been
able to run such increasing deficits. Academics would tell you that this
economic result is not one predicted under a free-float model of exchange rate
determination. America did not run persistent and expanding deficits to finance
investment but to finance consumption! Under a gold standard the US would have
staunched its deficits along ago under the pain of gold transfers from the US
to China and to other persistently surplus countries to settle its deficit
accounts. That would have proved too painful to endure.
Anyone
that does not admit that China’s development has not been at the cost of the US
is just not paying attention. Why does the country with more ‘poor’ people than
any other place on the face of the earth have over $3trillion in foreign
exchange reserves? Couldn’t it find a use for that wealth? Yes it could, but since
needs to buy dollars (and to accumulate FX reserves) to keep the dollar strong
and the yuan weak so it can continue export to the US and keep its low labor
costs and keep US firms investing more in China to exploit those low labor
costs, it chooses to accumulate more ‘wealth.’
Over the
years as China has developed it has suppressed its consumption, once up to 50%
of GDP it has slipped back to 35% of GDP an extremely low level. Instead, of
letting standards of living rise, China has restrained them. So China’s workers
have worked their fingers to the bone for little gain while the ‘profits’ in
this Communist country went to pile-up as FX reserves. Had China allowed more
of a middle class to develop its imports would have risen and its wages would
have risen and its need to grow by penetrating the US market would have been reduced.
Instead,
China did not let its currency adjust and did not set those forces in motion.
And the end result was that it ‘lent’ more money to the US so we could go into
debt to buy the things we wanted (from China) but we became uncompetitive and unable
to pay our own way. Republican and Democrat administrations engineered this
outcome.
So in the
US we have developed a view of class warfare of rich against poor because that
keeps us from looking at the real problem. It keeps Democrats and Republicans
fighting one another. If keeps policy from looking at how the world trading
system is siphoning off US wealth and making us all poorer and poorer so that
even the rich feel the sting of their losses.
The middle
class has been sacrificed to the multinational ambitions of US corporations by
BOTH PARTIES! Now, we are out of touch with who we are and what we stand for.
We are devolving into class warfare
In place
of a national identity and real leadership we have a cartoon show run by a
group of fools called Republicans and Idiots called Democrats and each squirts
its seltzer bottle at the other one saying it is the problem. And no matter who
we elect things get worse because no one is looking at the real issues.
Politicians
are too focused on results (unequal outcomes!) and not enough focused on why
the process has broken down.
And you
thought the fiscal cliff was a big deal? The fiscal cliff is nothing. We are
alive and not well and living in the Republican-Democrat view of THE MATRIX. We
are the batteries that run their system. We exist for them; they do not serve
us. Our model has become totally dysfunctional. No wonder we have turned to
class warfare.
Is it too
late to change it?
