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.

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.

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 Shikha Dalmia has written a sobering op-ed about my former home town's financial crisis. Detroit's leaders seem to be in a state of denial about the severity of the problem. This Op-Ed argues that bankruptcy may be the best option for Detroit, since it would force the changes needed to get the city's debt under control.

It is sad to see what has happened to this once great city, but it is hardly surprising. The city has been spending far beyond either current or projected revenue for many years now. Bowing to political pressure, the city council has been kicking the can down the road for as long as possible. But now, they have run out of road.

But those from other American cities should neither scorn nor pity the city of Detroit. The nation as a whole are following the same trajectory that Detroit followed years ago. So what prevents our country from meeting the same fate as this tragic city? Neither party has offered a serious plan for getting government debt under control. We hear a lot about climate change denialism, but this nation's undoing may well turn out to be deficit denialism.

Wait a Minute! Didn't We Fix This in the 90's?

As late as the last years of the Clinton administration, our government was not running up the deficit. Today, a third of all federal spending is borrowed. How did this our nation go so far wrong in the last 12 years? To answer this question, let us compare the year 2000 budget to this year's budget. Adjusting for inflation (2012 dollars) and population growth,

• In 2000, the government took in $2.5 trillion dollars and spent $2.0 trillion; and
• In 2012, our nation will take in $2.4 trillion dollars and spend $3.8 trillion. 

Revenue is down from 2000, but given how much weaker the economy is now, what is really surprising is that the revenue is not down even further. Spending, on the other hand, has gone out of control. Even after adjusting for population and inflation, spending has nearly doubled. If our government spent at year 2000 levels, we would still have a budget surplus.

In short, the problem is spending, not revenue. But spending cuts are more popular in the abstract than they are in practice, hence neither major party has put out serious proposals for reigning in the red ink.

Is Our Situation That Bad? No, It's Even Worse!

As the national debt clock so vividly displays, the U.S. federal deficit is rapidly approaching $16 trillion. But as stunning as that figure is, it is only a small part of our shared indebtedness. This figure does not include the unfunded liabilities of entitlement programs such as Medicare and Social Security. The unfunded liabilities of these two programs dwarf the $16 trillion figure. The 2012 Medicare trustees report estimates a shortfall of $27 trillion, and the 2012 Social Security trustees report places its unfunded liability at $8.6 trillion. And these trustees reports estimates are on the conservative side!

Another debt problem that U.S. governments, at all levels, have woefully underfunded their pension plans.We have seen the trouble this creates in California, Wisconsin, New Jersey, as well as Detroit. As the baby boom start retiring in droves, this problem will trigger more municipal bankruptcies. And the feds will not have the money to bail them out.

The Lighter Side of Default

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.

Speaking for the Left-Handed Majority

"But when you do your giving, do not let your left hand know what your right hand is doing"
- Matthew 6:3

"Some people are right-handed. Some people are left-handed. There are other people who are able to use both hands with equal ease. Such people are called Handbidextrous."
- Sally Brown in "Peanuts" by Charles M. Schulz

Of all the traits that evolution bestowed on humans, our dexterity is one of the most valuable. Yes, human intelligence and communication are quite essential to our species success, allowing us to create thoughts that can be shared widely and passed down through generations. But we would not be able to readily turn those thoughts into tools without the imposable thumb. Due to the value of our dexterity, one of the more important differences between humans is handedness. The majority of humans primarily use their right hands, and this is reflected throughout our culture and technology. The vast majority of languages are written from left to right. In most countries, traffic travels on the right side of the road, drivers are seated on left, and hence the gear shift is operated with the driver's right hand. Most desks, computer mice, scissors and watches are designed for the right handed. Most cameras are ridiculously right-handed.

The left-handed live in a world not designed for them, and yet many of them become quite accomplished:

• Southpaws that have excelled in the arts include Michelangelo, Da Vinci, Toulouse Lautrec, and M.C. Escher;
  
• The music world has benefited from left-handed artists such as Beethoven, Prokofiev, Mozart, Cole Porter, Judy Garland, David Bowie, and the two surviving Beatles;
  
• Scientists Albert Einstein, Marie Curie, Albert Schweitzer, and Alan Turing were left handed; and
  
• U.S. Presidents Harry Truman, Gerald Ford, Ronald Reagan, George H. W. Bush, Bill Clinton, and Barack Obama all won elections from a largely right-handed electorate.

So what percentage of the population is left-handed? This is a hard question, complicated by factors such as how to count the ambidextrous or those who have trained themselves to use the other hand. Depending on how you them, 10% to 20% of the population is left-handed. But in a more general sense, one could make the case that the vast majority of us are left handed. Each individual has some characteristics that differs from the majority, and these differences often have the downside of making it hard for said individual to "fit in". In this sense, virtually all of us are all left-handed.

The simple concept of the left-handed majority provides a pragmatic justification for tolerance. Every time you accommodate someone else's differences, you strengthen the social contract and hence advance acceptance of your own differences.

I am an unlikely spokesman for the left-handed majority. For one thing, I am right-handed. I am also a white heterosexual male and married with two offspring. On the other hand (pardon the expression), I am a member of a political minority (libertarians) and a religious minority (Unitarian-Universalism). This may seem like an odd combination. There is the common perception that libertarians are just conservatives who smoke marijuana. There is also the perception and that Unitarian-Universalist churches are the last refuge for Woodstock hippies. So how can an ersatz conservative join a granola church?

In part, I would answer this question by pointing out that these common perceptions are wrong. For the record, I am not a conservative, and the last time I smoked marijuana was back when disco music was not retro. But for the most part, I am a member of both these organizations due to some common themes. Libertarianism emphasizes freedom as the core political value of modern society. Unitarian-Universalists promote freedom of thought as a core religious value. Moreover, both groups celebrate our individuality, libertarians in the political sphere, Unitarian-Universalists in the religious realm. This is why I am a libertarian Unitarian-Universalist: I am doing it for the left-handed majority.

Update: check this Facebook page for more libertarian Unitarian-Universalists.

Hitchens and Kim Jong-il prove: "Screw 'em If They Can't Take a Joke!"

"And whoever exalts himself will be humbled, and whoever humbles himself will be exalted."
- Matthew 23:12

"Be a clown, be a clown,
All the world loves a clown
Be a poor silly ass
And you'll always travel first-class"
- From "Be A Clown", lyrics by Cole Porter

The year 2011 ended with two notable celebrity deaths:

1. British-American journalist and gadfly Christopher Hitchens died of pneumonia on December 15; and
2. Kim Jong-il, the man who held the title of North Korean Supreme Leader (along with many other titles) died of a heart attack on December 17.

To put the lives of these men in perspective, I correct a theory of Hitchens, and apply this corrected theory to the late "Beloved Leader" of North Korea. Hitchens placed the blame for much of the world's evils on religion, but a closer examination reveals that the blame more accurately belongs to the ancient vice of vanity.

For centuries, religious leaders have attacked atheism as promoting unethical behavior. These leaders argued that without the reward of Heaven or the threat of Hell, what incentive is there for an atheist to behave morally? Hitchens, along with many atheists authors, have correctly pointed out that this argument is erroneous and unfair. There are many good reasons for practicing morality besides the afterlife, and there are many atheists who lead ethical lives. Hitchens is right on this point, but then he advanced his own variant on this attack. As he said in a debate with Mark Roberts:

"There’s a great deal of wickedness that’s attributable purely to religious belief. Morally normal people wouldn’t do these things if they didn’t think God was desiring them to do so."

So instead of arguing that ethics require a belief in God, Hitchens argues that one should not believe in order to live an ethical life. Hitchens' position has many of the same mistakes as the anti-atheist position he attacked. There are plenty of rationalizations for bad behavior besides the "God made me do it" excuse. Moreover, some of the greatest moral outrages of the twentieth century (the Soviet Gulags, the Cultural Revolution, the East German Stasi) were carried out by Marxists who opposed religion.

Hitchens frequently encountered the issue of Marxist immorality in debates, and he had a novel response to this issue. He argued that the Soviet, Maoist, and North Korean regimes, in spite of their official atheist positions, were really religions! Christopher posits that the founding members of these failed states are viewed as gods or prophets, and hence these Marxist atrocities are yet more examples of holy terror. Now granted, some communist states have rituals that are reminiscent of cult religions, such as the Soviet's extraordinary efforts to preserve Lenin's body. But the square peg of communism simply does not fit into the round hole of religion, at least as how Hitchens and Marx defined it. Consider Engals' eulogy for Marx, taught in all the major communist countries: "On the 14th of March, at a quarter to three in the afternoon, the greatest living thinker ceased to think." Such a statement makes it clear that Engals did not believe that Marx had an afterlife. Now if the communists are going to accept anyone as god, they would certainly regard Karl Marx as divine. And if they were to do so, they must conclude that their god is dead!

Christopher Hitchens is not here to defend his theory that religion is the root of most of the world's atrocities, but we can do the next best thing by fixing this theory's flaws. The real common factor to the most repressive states is a belief that their leadership is incapable of error, and therefore should be exempt for criticism. Now if your state's leadership is claiming to be God's exclusive agent on planet Earth, fostering this belief is that much easier. But as the cults of Fidel Castro and Kim Jung-il demonstrate, one can obtain such blind devotion without religion.

What these repressive regimes really lack is humility, that is, a good-natured admission that they have faults, just like the rest of us. In other words, they lack a sense of humor. Consider Kim Jung-il. He has read many a somber, scholarly criticisms of his rule. As an avid film buff, he has seen dramas and action pictures with North Korean villains. But there is only one Western work that so offended Kim Jung-il that he had North Korean embassies request that the work be banned: the film "Team America: World Police", the marionette picture made by the creators of "South Park". He realized that other critiques would do him no lasting harm, but that anyone who laughs at the Kim Jung-il puppet is unlikely to accept the real Kim as an infallible ruler. For similar reasons, Adolph Hitler was distressed by the Chaplin film "The Great Dictator". One wonders what Hitler would have thought of the many YouTube "Downfall" videos.

For this reason, we should be grateful for the current trend where our politicians appear on comedy shows, such as Jay Leno. There are now several shows ("The Daily Show", "Red Eye") that combine politics and humor. Political humor does more than provide us with some much needed laughs; it helps us keep our leaders in perspective, and by doing so, it protects our freedom.

Occupy Boston Versus What Occupies Mayor Menino's Soul

"Men at some time are masters of their fates:
The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings."
- From "The Life and Death of Julies Caesar", Act I Scene II

"Take a step outside yourself
Then you turn around
Take a look at who you are
It's pretty scary"
- From "Turn Around" (1980) lyrics by Mark Mothersbaugh and Gerald Casale

The "Occupy Wall Street" movement has spread to many big cities, including Boston. Recently Boston Mayor Thomas Menino has ordered the arrests of "Occupy Boston" protesters. On the surface, the Mayor has some valid charges: the protest was spilling over onto the Rose Kennedy Greenway, in violation of zoning rules. The protests have disrupted commercial activity. In particular, a lucrative food festival was cancelled because the protesters had taken over the space where the event would have taken place. Yes, we have the irony that an event that would have provided a lot of temp jobs was cancelled so that people could protest unemployment.

But cry no tears for the his honor the Mayor. The blame for the current lawlessness goes beyond the young people he is arresting. The true cause of the "Occupy Boston" controversy can best be explained by the following facts about Massachusetts politics:

1. Massachusetts is basically a one-party state, so much so that almost all elections are considered over after the Democratic primary;
2. This lack of any political challenge has created unusually powerful and long tenured public officials; and
3. Perhaps because of facts 1 and 2, the commonwealth of Massachusetts has suffered more than her fair share of government corruption (the last three House Speakers are all convicted felons).

Mayor Menino is the archetypical Massachusetts politician. First elected in 1993, Menino has rarely encountered more than token opposition in subsequent elections. He is popular for taking a no-holds-barred approach to the challenges of the office, often at the expense of our constitutional rights.

In 2005, there was a popular line of tee shirts emblazoned with the words "Stop Snitchen'". Menino condemned these shirts as discouraging cooperation with the police. When some Boston stores wanted to sell these shirts, the Mayor vowed to send officers into the stores to seize the shirts. Menino was advised that such a seizure would raise free speech issues, so he tried another tact. City inspectors discovered (who knew?) that the clothing stores that wanted to carry the shirts (and only those stores) had code violations. And once the orders for "Stop Snitchen'" shirts were cancelled, the inspectors found that these stores were up to code after all! Score 1 for Mayor Menino, 0 for the first amendment.

In January of 2007, the Mayor was rightly concerned that after an AFC playoff game, Patriot fans might engage in violence. The Mayor felt that TV news coverage of sports bars might inflame the fans. Lesser men might have urged TV newscasters to be cautious, but not our Honor the Mayor. With all the boldness of a honey badger, he told the Boston bar and tavern owners, a group that is even more under the city's thumb than clothing stores, to not allow TV crews into their establishments. With the fear of losing their precious liquor licenses, TV journalists were shut out of Boston bars. So much for an independent fourth estate; it's good to be the king.

When the Tea Party demonstration (the recent one, not the 1773 party) took place in Boston, the Mayor insisted that they needed permits and that they need to pay a substantial fee to cover expenses that Boston might incur. The idea that we have to get permits and pay fees in order to exercise our constitutional right to assemble is problematic, but there is an even more disturbing aspect to the Boston protest permit and fees system. Before "Occupy Boston", Mayor Menino enthused over the ideas that the protestors would be advancing. So unlike the Tea Party, no permits or fees were required of the Occupy Boston organizers. Civil rights attorney Harvey Silverglate, founder of the campus free speech organization F.I.R.E., is appalled that these fees and red tape are applied at the whims of the Mayor, even though he sympathizes with "Occupy Boston". This is not about protecting city finances: in police overtime alone, "Occupy Boston" has far exceeded all expenses related to the Tea Party event. This is about directing the city's finances to the political causes that the Mayor favors. These arbitrary fees and permits represent a new low in the abuse of power, even by Bay State standards.

So even after giving the "Occupy Boston" people a pass, his honor the Mayor is miffed that the demonstrators circumvent or ignore the laws that they don't like. Sorry Mayor, you do not have my sympathy. If you want Bostonians to show more respect for the law, you should model that behavior by showing some respect for the most important set of laws for our government officials: the U.S. constitution. The constitution asserts that all of us, as part of our basic nature, have certain inalienable rights, including the right to free speech and to assemble. Mayor Menino, could your persistent violations of the spirit, if not the letter, of the first amendment be viewed by the young men and women protesting that the law is not worth taking seriously? If the Mayor were to ask the arrested protestors where they learned to disrespect the law, they could justifiably respond with the 1980's Ad line, "I learned it from watching you!".

For the lighter side of Thomas Menino, check out the Official Mumbles Menino web site. The mayor speeches are filled with many inadvertent malaprops, spoonerisms, and novel phrasing, so the news commentators that cover them often have to do double duty as cryptographers. It appears that he has as much trouble with his own speech as he has with others. The "Mumbles Menino" site includes the funniest and / or most WTF Menino utterances.

On the heavier side of Tom Menino, in recent years he has suffered from significant weight gain. Imagine an overweight autocratic leader who speaks in a way that many people find hard to understand. That image seems familiar; I think I remember where I've seen it:

The New Industrial State is Not Too Big to Fail

"There is no remembrance of former things; neither shall there be any remembrance of things that are to come with those that shall come after."
- Ecclesiastes 1:12

"Your castles may tumble (that's fate after all)
Life's really funny that way
No use to grumble, smile as they fall
Weren't you king for a day?"
- From "Wrap Your Troubles in Dreams" (1931), lyrics by Ted Koehler and Billy Moll

The news coverage of Steve Jobs' retirement from Apple predictably discussed his greatest successes: the iMac, the iPod, the iPhone, and the iPad. But many articles about this event also covered his failed projects: the Apple III, the Apple Lisa, and the NeXT workstation. This is commendable, for Jobs' clunkers are an important part of the story. We learn more from failure than we do from success. If Jobs did not learn from his blunders, he might never have come up with the iPhone.

There is a failed project that can teach us a lot about our current financial crisis: the book "The New Industrial State" by famed economist John Kenneth Galbraith, based on a lecture series broadcast by the BBC. The main theme of this book is that the large corporations are no longer subject to market forces. Galbraith contends that the big industry leaders can use a combination of leverage, advertizing, and consolidation to squash any competitor that threatens them. The book focuses on several large corporations that J.K. Galbraith contends will always dominate their industry.

So what's the problem with this book? Well, it was first published in 1967, and as fans of Mad Men can tell you, the markets have changed quite a lot since the 1960's. Back then, General Motors made more than half of the cars sold in the U.S., as well as a significant share of some foreign markets. So naturally "The New Industrial State" assures us that GM is one of the companies that need not worry about competition. When it comes to computers, whether we are talking about hardware or software, the book asserts that the one company that matters will always be IBM. And what about retail? Remember, 1967 is before Walmart or even Kmart made it big, so the book's examples of the forever dominant retailers are Sears (currently on the ropes) and Montgomery Ward (went bankrupt in 2000, although recently revived as an online store). These 1960's corporate giants lost their market dominance to new companies whose innovations won over the customers. The history of the last few decades provides the definitive rebuttal to "The New Industrial State": even the largest corporations must remain competitive to stay alive.

The basic premise of "The New Industrial State" is widely believed today. If only I had a dime for each prediction that the internet will no longer be a venue of free speech because soon one company will take over the internet. Funny thing is, the company that is predicted to take over the internet keeps changing: Netscape, Microsoft, AOL, Google, and Facebook have all been projected to be our future on-line overlord. In 5 years, there will probably be some company not in this list that will be viewed as the future emperor of the internet.

Some very important insights in our current economy can be learned from the failure of "The New Industrial State".

• There is no corporation that is "Too Big to Fail". When a corporation falters, there are plenty of other companies that will pick up the slack. In the 1970's, A&P went from the largest grocery chain in the country to a chain that operated in a handful of east coast states. The closures of all those A&P stores did not cause mass starvation, for these closures were matched by openings of other grocery stores.
• The 2008 bailouts of failed large corporations were therefore unnecessary and counterproductive. At a time when the federal government could ill afford it, taxpayer dollars were wasted to reward poor corporate decisions at the expense of those companies that served their customers better.
• The government should not be in the business of picking market leaders. Keep in mind that John Kenneth Galbraith was an award winning economist who advised presidents FDR and JFK. If Galbraith could not predict which companies would prevail, what chance do we have that our current experts can safely invest our tax dollars in future winning companies? This is the sort of hubris that lead to the Solyndra debacle.

Like the Apple III, "The New Industrial State" is a flawed work, but we can learn a lot from its errors. One wonders if the president's economic team understand where Galbraith went wrong, so that they can avoid repeating his mistakes.