Showing posts with label Republican. Show all posts
Showing posts with label Republican. Show all posts

Sunday, August 19, 2012

Will America Become Detroit, Part 3: Paul Ryan, Rambo, and J. Alfred Prufrock

"We fail far more often by timidity than by over-daring."
- Ray Stannard Baker
"Do I dare eat a peach?"
- From "The Love Song of J. Alfred Prufrock" by T. S. Eliot
The most controversial deficit reduction plan was put forward by Wisconsin Representative and Vice Presidential candidate Paul Ryan. In 2008, he introduced H. R. 6110, entitled "Roadmap for America's Future Act of 2008", as a plan to balance the budget and create jobs. This proposal has garnered both high praise and scathing condemnation.
  • Democratic co-chair of President Obama's National Commission on Fiscal Responsibility and Reform called the Ryan plan “sensible, serious . . , and honest”.
  • In April at an Associated Press Luncheon, President Obama denounced Ryan's plan as "nothing but thinly-veiled Social Darwinism."
  • New York Times columnist David Brooks wrote "Today, Paul Ryan, the Republican chairman of the House Budget Committee, is scheduled to release the most comprehensive and most courageous budget reform proposal any of us have seen in our lifetimes"
  • Even the U.S. Conference of Catholic Bishops have blasted the Ryan plan, writing that it fails to meet a basic moral test.
As is often the case, the truth lies between the extremes. Paul Ryan's plan would not produce a future ripped from the pages of Oliver Twist. On the other hand, the plan would also not succeed in its primary mission of eliminating the deficit. The reason why the Ryan proposal would fail is that, contrary to what both his supporters and critics contend, this plan is actually too timid to be effective. Contrary to popular rhetoric, the senator who is likened to Rambo is much closer to J. Alfred Prufrock. 

Bill Clinton, Social Darwinist?

One of the more popular attacks on the Ryan plan is that it would cut spending much too quickly, threatening our fragile economic recovery. President Obama even went so far as to call the plan a "prescription for decline". Everyone agrees that spending cuts are inevitable, but Obama asserts that these cuts must be done more gradually to preserve both the safety net for the poor and this nation's greatness.

This argument focuses its line of attack on the notion that Ryan's plan spends considerably less than recent federal budgets, a major talking point for the plan's proponents. So how does the Ryan plan compare to federal spending levels, or for that matter, how does it compare to Obama's proposal? An analysis of the numbers shows how Washington's definition of a cut differs from the rest of the nation: the only sense in which Ryan's budget for the next 10 years can be considered a "cut" is in the sense that spending will not increase a fast as politicians originally planned:
  • Even after adjusting for inflation, Ryan's plan for the each of the next ten years would be 46% higher than Bill Clinton's last budget; and
  • In this 10 year period Ryan plan spends only 5% less than Obama's proposed budget.
If Paul Ryan is a Social Darwinist, wouldn't that make Bill Clinton one as well? And if we are to believe that the Ryan plan would put us on the path to decline, why should we have any confidence in a plan that only differs from the Ryan by only 5%?

Voting for the Party That Will Throw Granny Off a Cliff

The most contentious issue with the Ryan Plan is the entitlement program reforms. As an alternative to the current defined benefit program, Ryan proposed block granting the program, and an opt-out for younger people who wish to vest in private retirement plans instead of Social Security and Medicare.

The imminent debt crisis has finally forced a senator to touch the "third rail" of American politics. And predictably, his opponents have played upon the public's fear of changes in these popular programs. The Agenda Project produced an infamous ad depicting Paul Ryan throwing an old woman off a cliff. The Romney campaign responded by producing its own ad, attacking Obama's plans to divert Medicare "savings" to pay for Obamacare. So which party will really preserve Medicare as we know it?

The honest answer is neither party: no matter who wins the elections here and in the next few decades, our entitlement programs as we know them will come to an end, period. These programs are completely and utterly unsustainable. As early as 2008, the trustees reports for Social Security and Medicare place their unfunded liability (that is, what they are obligated to pay out minus anticipated revenue) at $101 trillion. Given that our annual GDP is around $14 trillion, this is a hole that even a 100% tax rate cannot fill. A health care economist put the Medicare situation in far stronger language (warning: possibly NSFW) here.

Ryan's plan is probably insufficient to fix the entitlement crisis, but it is better than the current administrations' non-plan. In reality, the most likely outcome for the entitlement programs is that they will become means tested. But saying that is not politically popular (ask Ron Paul and Gary Johnson), so the two major party candidates will continue to argue over which one will push granny off the cliff.

Watching the Glaciers Speed By

For all the hoopla about the rapidity of the Paul Ryan's cuts, what is amazing is how agonizingly slow this plan is in terms of solving the debt crisis. CBO projections show that the plan won't even produce a balanced budget until 2040. Even this is based on optimistic assumptions, such as that no other national crises will arise in the next 28 years, and that congress will remain committed to this plan for nearly three decades. Part of the problem is that Senator Ryan has his own sacred cows: he leaves the budgets for defense and the war on terror untouched. Given the severity of the debt problem, everything should be on the table. The Pentagon and the Office of Homeland Security both have a lot of waste that could be eliminated.

To really fix the debt crisis, what is needed is a plan far more bold than the Ryan plan. But since Washington views this plan as reckless, what will actually be implemented is something weaker, and therefore even more inadequate, than the Ryan plan. This is the strongest evidence yet that no serious remedy will be attempted until it is too late, i.e. in financial terms, America will become Detroit.

What we are facing is nothing short of default of our nation. Granted, the consequences of this will be terrible: treasury bonds are frequently purchased because of their reputation for stability. Many who are depending on these bonds, including some who were dependent on them for their retirement, will be devastated. But there will be a few upsides to this crisis, as will be detailed in the next installments.

Sunday, July 15, 2012

Will America Become Detroit, Part 2: Popular Solutions That Are Bound to Fail


"For every complex problem there is an answer that is clear, simple, and wrong."
- H. L. Mencken
"In the book of life, the answers aren't in the back."
- Charlie Brown, from Peanuts by Charles M. Schulz
The U.S. government debt crisis has garnered enough attention that pundits from across the political spectrum have weighed in on the issue by proposed solutions that are pleasing to their core constituencies. As we look at these proposals, it is easy to see why they are crowd pleasers, but they all have one serious defect: they won't solve the problem.

Don't Worry, Be Happy: S&P Says We're OK

One popular solution to America's debt crisis is to contend that the problem does not really exist. CNN anchor Fareed Zakaria summarized this point of view as "America is not Greece". Debt crisis skeptics content that America is prosperous, competitive, and has a high bond rating, hence she should have no problem borrowing money at reasonable rates for the foreseeable future.

The problem with debt crisis denial should have become clear with the financial crisis of  4 years ago: bond ratings, along with other measures of credit worthiness, can change blindingly fast. Standard & Poor's rated Lehman Brothers AAA 72 hours before they filed for bankruptcy. And as late as December of 2009, Moody's rated Greek bonds a high A, only to drop that rating to Junk level in the following months. So three years ago, we could have argued that "Greece is not Greece"!

The ratings from firms such Moody's, Fitch, and S&P are merely numerical measures of human trust in the institutions being rated, hence they can change just as quickly as our emotions change. If creditors change their opinion of American credit worthiness, the ratings may change even faster than they did for Lehman Brothers and Greece, due to one disquieting fact in the back of investors' minds: the U.S. government is too big to be bailed out by anyone.

Denial of the debt problem is a temporarily comforting, but ultimately dangerous, solution. One needs to look at the Motor City to see how it plays out. America may not be Greece, but it may very well be Detroit.

Eat the Rich!

Michael Moore, among others, want us to balance the budget by raising taxes on the rich. This method has tremendous appeal, for everyone assumes that "rich" means "people who make more money than me". Wouldn't it be great if the debt could be paid off purely by stereotypical Thurston Howell III millionaires who need only sacrifice a few yachts and mansions?

Michael Moore's "Eat the Rich" solution plays well, but would it actually fix the problem? Michael Moore doesn't run the numbers, but Veronique De Rugy at George Mason university has. Her study of historical U.S. revenue data, from 1930 to 2010, shows that the government has generally has been unable to raise more than 19% of the GDP in taxes. The few times we have been able to raise 20% of the GDP in taxes has been a few years at the peaks of boom cycles. This data include the Halcyon days of the 1950's, when the highest federal tax bracket was over 90%. In short, our government is already raising close to the maximal amount of money it can raise, no matter what we do with rates.

Upping the tax rates on the highest earners can have some rather nasty negative consequences. The rich are not all Thurston Howell III clones; they also include some of the world's best developers and entrepreneurs. Excessive taxes might encourage these people to move elsewhere, and the economic activity that they would generate will move with them. This happened in 1960's Britain, where 95% tax rates caused the "brain drain", where the best British minds went overseas to protect their wealth. The "brain drain" phenomenon even inspired a Beatles song.

Well, desperate times call for desperate measures. Maybe we need to be even tougher on the rich than America was in the 1950's or Britain was in the 1960's in order to raise the money we need. Again, this scenario does not hold up once you run the numbers. Fellow blogger iowahawk computes what we could raise by the most extreme "Eat the Rich" tax schemes, including taxing 100% of all income above $250K, confiscation all the wealth of America's richest families, and all the profits of our largest companies; he finds that even these most extreme measures will just barely cover this year's budget, with no hope of covering next year's.
When you do the math, it turns out that the only way we could possibly maintain our current level of spending would be to tax the middle class so much that they would be forced to lower their standard of living. Don't hold your breath waiting for a politician to tell you that.

Next Time

In the next FatherBrain post, we look at the controversial Paul Ryan plan (I think Sen. Ryan had his first name legally changed to "controversial"). The usual complaint is that this plan cuts spending too sharply. This post will make the case that the real problem with the Ryan plan is that it does not cut enough.

Thursday, July 12, 2012

Will America Become Detroit?

"Neither a borrower nor a lender be"
- Hamlet Act 1, scene 3
"You load sixteen tons, what do you get
Another day older and deeper in debt

Saint Peter don't you call me 'cause I can't go

I owe my soul to the company store"
- From "Sixteen Tons" by Merle Travis
Detroit News editorial writer











We have general agreement that our current spending is unsustainable. Secretary of State Hillary Clinton went so far as to identify the debt crisis as the greatest threat to our nation's future. My next post will look at both party's (wholly inadequate) proposed solutions. But at this point, it is safe to say that, irrespective of who wins in November, this crisis will be dealt with the same way it was in Detroit: at the very last minute, using desperate measures. But cheer up: the impending U.S. default may be very painful in the short run, but it will force some very positive changes in our governance. Follow up posts will explain why the coming storm will be followed by brighter days. Watch this space.

Sunday, July 24, 2011

Solving the Budget Crisis Through Theft


"If you steal from one author, it's plagiarism. If you steal from two, it's research."
- John Burke
"PlagiarizeLet no one else's work evade your eyes
Remember why the good Lord made your eyes
So don't shade your eyes
But plagiarize, plagiarize, plagiarize
Only be sure always to call it please 'research'"
- From "Lobachevsky" by Tom Lehrer.
The federal budget fight has been unusually acrimonious. On July 14, Obama walked out of the budget talks. On July 22, Boehner walked out of the budget talks. And throughout these talks, the American public has been walking out from both parties, and for good reason: neither party has been serious about tackling the debt crisis. Sure, both sides crow about how they have proposed drastic cuts, but these spending proposals are "cuts" only in a sense that is accepted no where else than Washington. What they mean by cuts is that they propose spending less than projected 2011 spending. Neither the "Cut, Cap, and Trade" proposal nor the president's most recent proposal would reduce 2011 spending to less than the previous year, even after adjusting last year's spending for inflation and population growth. The Republicans have been reluctant to really address the looming entitlement crisis. Congressional Democrats are even worse on this issue, threatening to block any entitlement program changes, while hypocritically complaining that the Republicans are too inflexible about taxes.

We need not worry the August 2 deadline, however. For starters, the default deadline is bogus anyways: the government need not default nor miss sending Social Security checks if the debt ceiling is not raised by August 2. But now that both sides have propped up this phony crisis, they will have to save face by coming up with some compromise before the "deadline". The bigger problem is that the compromise that the president and congress will likely fall far short of what is needed to reassure the rating services such as Standard and Poor's. They want to see creditable deficit reduction if U.S. government bonds are to retain their AAA ratings. If U.S. bonds are downgraded,
  1. Bond holders will be hurt; and
  2. The costs of U.S. borrowing will balloon.
So we may dodge the August 2 bullet, only to be hit with the S&P bond downgrade.

Dramatic action is required to prevent our bond rating dropping to AA. We need a deficit reduction plan, and fast. One effective approach would be to find a previous successful budget, and steal it. In short, we can solve our money problem by theft - not of money, but ideas.

I propose that the 2011 budget be based on the U.S. budget from 2000, one of the last budgets assembled before the 2 recent spendthrift administrations. This budget covered the basic government functions while spending less than the revenues collected. This budget was put together by a Democratic president working with a Republican congress - if they could do it, why can't we? When you adjust the 2000 budget for inflation and population growth, it comes out to $1,965,999 million. This would allow us to meet the S&P deficit reduction limits without taking the perilous action of raising taxes in a troubled economy. So one simple approach would be to adopt the 2000 budget, adjusted for inflation and population growth. This is the one sequel that we would all welcome.

Critics will immediately point out how the world has changed since 2000. We are now fighting 3 simultaneous wars, we have a slew of new agencies that have cropped up to fight the "War on Terror", a bunch of new Czars, not to mention ambitious new programs such as designing and building a whole new rail system. How could the 2000 budget cover these programs that did not exist 10 years ago? To this argument, I would reply that a large part of the reason we are in this mess is that we adopted expensive new programs without figuring out how to pay for them. We simply cannot afford all of them, so we need to prioritize. Given that we almost certainly cannot do both, should we engage in nation building in 3 middle east countries, or should we rebuild our own nation? Do we really need all these agencies that we were able to get along without for two centuries, and if so, could we pay for them by making cuts elsewhere in the 2000 prototype budget? If we really need the TSA, could we pay for it by eliminating the Import-Export bank or by cutting farm subsidies paid to millionaire farmers?

Real budget reform is possible. In fact, it is inevitable: the only real question is whether we fix the budget ourselves now or let our creditors decide how to fix it in the future. With the 200 budget austerity program, we can avoid default, avoid a credit downgrade, pay down the deficit, revive the economy, and then we can party like it's 1999.

Friday, June 18, 2010

2010: The Year of Voters Behaving Badly


"If the ruler is upright, the people will do things without being ordered; if the ruler is not upright, even though he orders people to do something they will not comply."
- Analects of Confucius
"There's something wild about you child
That's so contagious

Let's be outrageous
--let's misbehave!!!"

- "Let's Misbehave" by Cole Porter.
The June 8th South Carolina Democratic senatorial primary is an important harbinger of the fall elections. Vic Rawl, the candidate supported by most of the Democratic party leaders, was expected to handily win the nomination. In a stunning upset, Rawl lost in a landslide to Alvin Greene, an unemployed veteran who did no fund raising, virtually no conventional campaigning, and whose campaign had neither a twitter account nor even a website. How could this happen?

Greene insists that he won with old fashioned stumping, driving across the state and meeting with the voters. As appealing as this explanation is, Greene does not appear to have the charisma to pull this off in his post-primary interviews. Some S.C. Democrats speculate that Greene is a Republican plant. This seems unlikely for a number of reasons. Pollsters agree that Senator Jim DeMint will almost certainly win re-election. Why would the S.C. Republicans take the risk of cheating when they can win honestly? Also, the only outside support that Greene allegedly received was the payment of his filing fee. If some conspirators came up with that fee, why didn't they back up their investment with some campaign funds? But more importantly, even if Alvin Greene were a plant, why did nearly 60% of S.C. Democratic voters pull the lever for him?

The answer is as simple as it is troubling for the major political parties. South Carolina voters resented the idea of anointing the Democratic leadership pick of Vic Rawl, and they resented it so much that they were willing to pick any other name on the ballot, even if it was someone they never heard of. This is part of a trend this year: voters in this year's primaries and special elections are refusing to follow the unwritten rules of behavior.
  • The special election to fill late Senator Ted Kennedy's seat was widely expected to be over with the Democratic party primary. Conventional wisdom said that solidly Democratic Massachusetts would never replace the late senator with a Republican. Conventional wisdom was wrong; Republican Scott Brown won that race.
  • In the Utah Republican senate primary, the party leaders lined up behind the incumbent Senator Bob Bennett. The Republican voters of Utah disagreed, deciding that they preferred a newcomer over their sitting senator.
  • Much of the Democratic establishment, including the President, welcomed Senator Arlen Spector into their ranks and endorsed his bid to be the Pennsylvania Democratic nominee. A group of liberal Democrats disagreed, and successfully defeated Spector's nomination.
  • In Arkansas, local labor groups ignored pleas from the national party and President Obama and campaigned against the re-nomination of Rep. Blanche Lincoln. Lincoln just barely won the nomination, but the aggressive primary fight has made her defeat in the general election an almost certainty.
This trend cuts across both party and ideological lines. Voters of all stripes are refusing to obey the unwritten rules. What has made this year's voters so ornery?

Maybe the problem could be traced to our leaders. After all, they also have unwritten rules. How good have they been at following them? Let's take a look at the Republicans. The rules say that the Republicans will avoid foreign entanglements, support free markets, cut excessive regulation and reduce deficits. For six years under the previous administration, Republicans held the presidency and a majority in both houses, and in those years:
  • We entered two wars that have no clear end date;
  • Congress enacted the most strongly protectionist policies since the Hoover administration, including high steel tariffs and farm subsidies;
  • From 2001 to 2007, our supposed de-regulators actually added another 13,652 pages of regulations to the Federal registry; and
  • By any measure, the federal deficit rose to a historic high.
It is interesting to note that on several of these issues (free trade, deregulation, balancing the budget), the Clinton administration had a better record of following the Republican rules than the Republicans did!

Now let us take a look at the Democrats. The rules say that Democrats will bring the troops home, counter corporate influence over our government, reign in executive power, and protect our civil liberties. Well, let's look at the record:
Given the Obama record, it is no surprise that Daniel Ellsberg, the man behind the Pentagon Papers, said in a recent Der Spiegel interview
"I think Obama is continuing the worst of the Bush administration in terms of civil liberties, violations of the constitution and the wars in the Middle East."
The question is not why voters are so contrarian this year. The real mystery is why voters have been so obedient for so long. As Confucius taught us more than two thousand years ago, politicians will see better behavior only after they model better behavior themselves. In the mean time, voters will continue to reason that "If our leader won't follow the rules, why should we?"

Saturday, June 5, 2010

The Nomi Song Will Set You Free

"I CELEBRATE myself, and sing myself,
And what I assume you shall assume,
For every atom belonging to me as good belongs to you."
- "Song of Myself" by Walt Whitman

"I'm young and I love to be young
I'm free and I love to be free
To live my life the way I want
To say and do whatever I please"
- "You Don't Own Me" by Leslie Gore
Klaus Nomi was one of the most talented Rock vocalists of all time, and certainly the one of most eccentric. His career was remarkably brief: he died on August 6, 1983, only two years after the release of his debut album. But the impact of his short tenure on the world stage nearly 27 years ago can still be seen in current culture and society.

Klaus was a leading light of the new wave movement in the late 1970's / early 1980's. This was an era when rock music was big business, and recorded music was the most profitable sector of the entertainment industry. But many artists felt that the obvious commercial success of the music industry was masking a serious problem: rock music was becoming standardized, dull, and formulaic. The rock genre needed new, fresh ideas in order to survive. In 1978, some young artists in New York devised a way to develop these new ideas by reviving an old idea: vaudeville. They staged a review called "New Wave Vaudeville" where performing artists of all stripes could try out their innovations before a live audience.

Enter Klaus Sperber, a West German counter tenor who had done some performing in Avant Garde theater. For the New Wave Vaudeville, he put together a rock act under the name Klaus Nomi. The act portrayed him as an visitor from another planet. He appeared on stage with a costume and make-up inspired by 1920's Dadaist theater, and with a hairstyle that actually emphasized that he was going bald. His set consisted of New Wave songs, classic rock songs, old standards like "Falling in Love Again", and his first love, opera. His stage persona was openly gay at a time when that was still controversial. Well, they said they were looking for something different, and Klaus Nomi definitely delivered. Nobody could mistake him for Eddie Money. As a vaudeville insider put it, "He was the wrong man, doing the wrong thing, at the wrong time". So naturally, he was the hit of the show.

His unusual background actually served him well in his role of rock singer. His opera training gave his voice phenomenal range and control. He also imparted a certain emotional intensity to every song he did, and his unique approach to his music provided us with a fresh look to even the most familiar of songs.

For example, Nomi did a cover of Leslie Gore's 1964 hit, "You Don't Own Me". Hailed as a feminist anthem, this song's lyrics are a girl's declaration of independence from a domineering boyfriend. Typically, when a man sings a song written for a woman, the gender references are swapped. Klaus sang the original lyrics, including the lyric "Don't say I can't go with other boys". In fact, when he gets to that line, he defiantly emphasized the word "boys". In short, he turned this feminist anthem into a gay pride anthem.

This song was seen as quite liberating by straight audiences as well as gay. This is in part because all of us, at some time or another, are burdened by social pressure. Nobody is a perfect match for societal norms, and hence everybody can sympathize with a square peg being hammered into a round hole. And that is what makes Nomi's cover of "You Don't Own Me" so joyous: in a world where this ultimate non-conformist can proclaim his freedom is a world where we can all be free.

After the New Wave Vaudeville, Klaus developed a devoted following in New York, and was very well received in Europe. He signed a contract with RCA. His debut album may be the only record that has both a song written by Chubby Checker and an aria written by Camille Saint-Saƫns. He seemed well on his way to making it big when he contracted AIDS. He became one of the first celebrities to die of the disease, passing away years before either Liberace or Rock Hudson.

In spite of his tragically early demise, Nomi continues to attract new generations of fans through some appropriately unconventional channels. The hipsters who produce the Adult Swim show "The Venture Brothers" included Klaus as a supporting character. More surprisingly, Nomi got a boost from conservative icon Rush Limbaugh. Rush uses Nomi's "You Don't Own Me" as one of his update themes, and this has spiked interest (and sales) among conservative republicans.

It may seem strange the same political movement that gave us the infamously anti-gay 1992 Family Values convention is now listening to the music of Klaus Nomi. I would argue that Klaus Nomi actually represents what the Republican party is supposed to be about far better than the 1992 convention did. After all, if the Republicans are serious about the principles of promoting limited government and individual liberty, what better spokesman could they have than Nomi?

The 2004 documentary of Klaus Nomi's life and career, "The Nomi Song" is now available online, and I heartily recommend it. If nothing else, catch the end of the film. The film makers have a very clever, almost magical and surprisingly upbeat way to wrap up his life story.