Thursday, December 1, 2011

Do Businessmen Make Good Presidents?

Vote for me!  Unlike those other guys who are politicians, I’m a businessman.  I’ll run the government just like a business.

George W. Bush used his MBA from Harvard to boast of his business prowess.  And more recently there is Mitt Romney who touts his experience at Bain Capital taking over and liquidating companies and not his time as the governor of Massachusetts to boost his qualifications for the presidency.

And then there is Herman Cain who has no experience in elected office running for president based on his experience as the CEO of Godfather’s Pizza.

Is business experience in itself adequate preparation for running a government?  To begin to answer that question, it has to be pointed out that a business and a government are very different. 

A business takes in money to make as much profit as possible.  A government takes in money in the form of taxes to provide services for its citizens.  Of course, it is beneficial to spend the tax receipts as efficiently as possible.  But while a business can and does cut workers to meet the bottom line, a government shouldn’t indiscriminately cut government workers and recipients who rely on the safety net programs just to try and balance a budget.

And then there is Herman Cain’s abysmal ignorance of foreign affairs as shown in his beki beki stan stan quote along with the embarrassing silence when asked a question about Libya.  I believe much of this is the mentality Cain has as a former business CEO.  As the CEO of Godfather’s Pizza, he likely didn’t have to be familiar with all of the details of how the pizza was made.  Other people who worked for him were in charge of that.

So it’s easy for him to say that if he wins the presidency, he will surround himself with advisors to help him so he doesn’t need to know about foreign policy or much of anything else.  But running a government is different.  Especially for a president, decisions on foreign policy can mean the difference between life and death for people.  More importantly, if a presidential candidate is not curious enough to learn about the issues he may face, how will he know enough to intelligently choose who will be advising him?

After 9/11, George W. Bush relied on Donald Rumsfeld who advised him to invade Iraq based on questionable WMD intelligence – a decision that was a disaster.  As bad as that was, can you imagine Herman Cain dealing with a catastrophe the likes of 9/11?

But when questioned about his lack of foreign policy knowledge, Cain responded that “we need a leader, not a reader”, a line he may have gotten from The Simpsons.

Ignorance is not bliss.  We need candidates who have a working knowledge of the issues of the day.  If that means they are politicians and not businessmen, so be it.

But ignorance is not bliss for voters either.  It’s easy to think like Cain and say that one will rely on the experts to make decisions for us.  But experts disagree, sometimes strongly.  While we cannot all expect to become experts, we can at least become critical thinkers by at least acquiring a basic understanding of the issues and expecting no less of those who want to lead us!

Tuesday, November 1, 2011

Taking to the Streets

With the Occupy Wall Street demonstrations gathering momentum spreading from city to city, one cannot help but marvel how remarkable these are.  Unlike in other countries like France where mass demonstrations against the government are routine, many Americans normally display indifference toward the political process.  Even in 2008 when the country was excited over the prospect of electing its first black president, the voter turnout was only about 56%. 

And in off-year elections, turnouts are much smaller. Perhaps there is an attitude here in the US that no matter whom we vote for, it really doesn’t make that much of a difference in our daily lives.  And if voting is too much trouble, certainly demonstrating in the streets is more than most people want to do.  But having said that, it’s hard to forget the demonstrations against the unpopular Vietnam War where unlike for our present wars, people were drafted to serve so indifference was not an option.

Our problems with unemployment and uneven distribution of wealth have been going on for some time now.  But most of the distress has been shared by the older people in the workplace.  After a career earning a decent living, many of these people have been discarded as being useless to the job market.  But while these people have found the road to re-employment to be a rocky one, the young college graduates have had far fewer problems – until about the last couple of years.  Now many of our college graduates are finding that they have no professional employment opportunities in their chosen fields after earning their diplomas.  And now they are on the hook for paying off sometimes massive college loans.   While those at the top of the economic food chain are doing quite well, their path to a middle class lifestyle has been shut off.  So once again indifference is not an option.

And while many compare the Occupy Wall Street movement with the Tea Party protests, there are significant differences.  Most notably, the Tea Party protests have been heavily financed by those on the political right, especially the Koch Brothers.  For more on this, please check out a previous posting The Koch Brothers - The Most Powerful People You've Never Heard Of.  With this financial support, the Tea Party has been able to work the political system to their advantage.

By contrast, the Occupy movement has been about calling to our attention that our political system is broken.  The power being wielded by those with the most money to buy control of our government is overshadowing any control that ordinary citizens have by way of the vote.  It has even led to outside observers such as the German magazine, Der Spiegel to ask Has America Become an Oligarchy?

The Occupy Wall Street movement is just one example of the sudden outbreak of tension between America's super-rich and the "other 99 percent." Experts now say the US has entered a second Gilded Age, but one in which hedge fund managers have replaced oil barons -- and are killing the American dream.

At first, the outraged members of the Occupy Wall Street movement in New York were mainly met with ridicule. They didn't seem to stand a chance and were judged incapable of going up against their adversaries, Wall Street's bankers and financial managers, either intellectually or in terms of economic knowledge.

Indeed, they have given shape to a development in the country that has been growing more acute for decades, one that numerous academics and experts have tried to analyze elsewhere in lengthy books and essays. It's a development so profound and revolutionary that it has shaken the world's most powerful nation to its core.
Just for this alone, we owe a debt of gratitude to the courageous people who are participating in these demonstrations and are in some cases enduring police brutality and pepper spray for a cause they believe in – a cause called democracy!

Saturday, October 1, 2011

Repeal Obamacare?

In watching the Republican debates, one thing sticks with me more than anything else.  When the discussion moves onto the subject of healthcare, the mantra that is repeated over and over by the candidates is “Repeal Obamacare”.

I get it that they do not like the president’s healthcare reform bill that was signed into law.  But the fact is that it passed not only in the House but also in the Senate, not just by a majority but a supermajority of 60 to avoid a filibuster.  Instead of accepting it as the law of the land and trying to make it work, the Republicans, especially the Tea Partiers want to repeal it.  Government does not work well when laws are passed and then are repealed as soon as the other party regains power.  But for people who hate government, this helps to reinforce their narrative that government doesn’t do anything well.

But more importantly, the “Repeal Obamacare” demand begs the question, “And replace it with what?”  It’s a question I have yet to hear from any of the debates’ moderators.

A number of the law’s provisions have already gone into effect, such as the ability of children to have access to health insurance without being denied for preexisting conditions.  And with so many recent college graduates unable to secure jobs that have health benefits, the ability to add them to their parents’ insurance polices up to age 26 means that they are not forced to go without health insurance.  Would they like to repeal these provisions?

One of the big gripes is the individual mandate that requires everybody to buy insurance.  But without it, the whole system collapses.  Starting in 2014, everybody will be able to obtain health insurance without worry about preexisting conditions.  This is a vital part of the law so that everybody can be covered.  But we cannot realistically force insurance companies to accept all of the sick people without adding all of the healthy people to the risk pool.  And with the price of health insurance being too much for many poor people, we cannot make them buy coverage without subsidizing the cost of the insurance for them.

But still there is the question of whether this law will really work once everybody can enroll in 2014.  Many of those on the political left feel that the law may be fatally flawed without the inclusion of a so-called public option where the federal government offers insurance to keep the private insurers honest in their pricing, a provision that the insurance industry successfully fought to keep out of the law.

So what has happened since the passing of the law?  We now have Health Insurers Pushing Premiums Sharply Higher

Major health insurance companies have been charging sharply higher premiums this year, outstripping any growth in workers’ wages and creating more uncertainty for the Obama administration and employers who are struggling to drive down an unrelenting rise in medical costs.

The higher premiums are particularly unwelcome at a time when the economy is sputtering and unemployment is hovering at about 9 percent. Many businesses cite the cost of coverage as a factor in their decision not to hire, and health insurance has become increasingly unaffordable for more Americans. The cost of family coverage has about doubled since 2001, compared with a 34 percent gain in wages.

Consumer advocates contend that the latest requests exceed any documented rise in costs, with some companies enjoying three years of record profits and paying millions of dollars in dividends and executive compensation.

And therein lies the rub when entrusting our system solely to the private insurance market.  Corporations like these exist for one and only one purpose – to make as much profit as possible.  While Medicare has an overhead of about 3-4%, private insurers can have an overhead of over 20%, much of that money going to profits instead of providing healthcare.

If health insurance premiums get any more out of control, we may someday be forced to add the public option that was left out of the original law.  Or better yet, offer Medicare for everybody, otherwise known as single-payer.

But let’s get real.  With the present anti-government zeal of those on the right, trying to improve the present law may well be impossible unless the 2012 elections give control of the Congress along with the White House to Democrats.  And the law doesn’t really kick in for most Americans until 2014 – assuming the law doesn’t get overturned in the meantime by a conservative Supreme Court as unconstitutional because of the requirement that everybody buys insurance.

Meanwhile, we still have about 50 million Americans uninsured, a figure that is inflated according to those on the right but in any event is a huge number of uninsured.  What happens to them if the law gets repealed or overturned?

If that happens, we may have no other workable option to provide universal health insurance coverage at an affordable cost than by eliminating the insurance middle-men with single-payer Medicare for all.

It gives credence to Winston Churchill who once said that 'You can always count on Americans to do the right thing – after they’ve tried everything else!'

Thursday, September 1, 2011

Should We Take Rick Perry Seriously?

Recently, David Brooks, one of the conservative columnists at the New York Times wrote an interesting op-ed President Rick Perry? which concluded:
[Mitt] Romney might be able to beat back the Perry surge. In the meantime, it’s time to take Perry seriously. He could be our next president.
For those of us who are not part of the Tea Party right, Governor Perry is an interesting if not scary curiosity.  He is one who has such an intense dislike of our federal government that he once suggested the secession of Texas from the US.  Now he wants to head that same federal government.

So should we take Rick Perry seriously?  Could he really be our next president?  I say ‘yes’ to the first question and ‘not likely’ to the second one.

Certainly his opponents have to take him seriously.  For right now, he is being given free reign by his opponents, especially former Republican front-runner Mitt Romney in the hopes that he will self-destruct before having to take him on.  That may well happen.  But this passive strategy of underestimating Governor Perry could well backfire, especially if the unemployment rate continues at or near this high rate through the 2012 election as is being forecasted by many economists.  So Romney now and if Perry gets the nomination, President Obama will have to take him seriously enough to call him out on some of his extreme views.  Certainly badmouthing a beloved program like Social Security as a Ponzi scheme is not going to endear him to many people.

At present, Governor Perry has taken a sizeable lead in the polls over his Republican opposition.  Does that mean that he is a shoo-in for the nomination?  Not necessarily.

Perry has certainly created a lot of buzz around his campaign.  That’s nice but it doesn’t necessarily lead to victory.  Sarah Palin created a lot of buzz for John McCain’s floundering campaign when he picked her as his VP running mate.  Everybody wanted to have a chance to interview Sarah.  What outrageous thing would she say next?  But eventually the novelty wore off and her lack of experience and knowledge became a liability to McCain’s campaign.

More recently, Michele Bachmann was the ‘flavor of the month’ after her win in the Iowa Straw Poll.  She was on just about every political interview show as we wondered what would happen to our country under a President Bachmann.  Then Perry came along and she has now been overshadowed in the polls.  If buzz will win the Republican nomination, then he has a clear edge over Romney.  But the mainstream Republicans may well decide that Romney would be more electable in the general election and go with him.

But even if Perry gets the nomination, he has provided a tremendous amount of ammunition that can be used against him in the general election. 

His book Fed Up! published only last November presented a number of controversial (at least to those who are not Tea Partiers) views by someone who at the time had no stated intention of running for president.  But with these views in print, he will eventually have to explain himself in response to the many questions that voters and the media will undoubtedly have waiting for him.

He is running on his record as governor of Texas.  But as detailed in a recent NYT editorial, Gov. Perry's Cash Machine he has taken crony capitalism to a new level.
The exchange of campaign contributions for government contracts, favors or positions is all too common in Washington and around the country. It has been developed to an especially high art — or more to the point, a low art — by Gov. Rick Perry in Texas. For a presidential contender who insists that big government is the country’s biggest problem, it is particularly cynical.

There are nearly 600 boards, commissions, authorities and departments in Texas, many of which are of little use to the public and should have long been shut down or consolidated. They are of great use to the governor, who more than any predecessor has created thousands of potential appointments for beneficent backers and several pro-business funds that have been generous to allies.
So much for the virtues of small government.  And while “pay to play” is considered business as usual by many in Texas, he will have a lot of explaining to do now that he is under the national media spotlight.

But no matter how many disagreeable things we may find out about Gov. Perry during the campaign, if he wins the nomination, President Obama will have to do more than simply ask people to vote for him because of Perry’s negatives.  He must give enough people positive reasons to vote for him — especially on the all-important issue of jobs.

Soon we will hear President Obama’s plan for addressing our job crisis.  And with the economy in such terrible shape and all of the suffering that entails, he needs to present a bold plan that will give us hope that things will get better someday.  Sure, the Republicans in Congress will oppose just about any idea he comes up with.  But if that happens, he must make his plan the centerpiece of his campaign to offer a contrast to the Republican ideas of little more than tax cuts, slashing regulation, and cuts in government spending.

If the president decides to play it safe and offer something less bold in an attempt to compromise with the Republicans, his base supporters may finally throw up their hands in despair and decide to stay home for next year’s election.  And then yes, Rick Perry could very well be our next president.  God help us all! 

Wednesday, August 3, 2011

Taking our Government Hostage

Now we can reflect on the budget cuts that were forced on us in return for not allowing our government to go into default.

It is important to note that every part of our budget is there because enough of our elected representatives voted for it.  You or I may not agree with parts or it but that is the nature of democracy.  If there are parts of the budget that we want reduced or cut altogether, we can always put a bill through Congress to try and do that.   That’s the way the democratic process works.

So if we agree that like it or not, what’s in the budget is legitimate, then it follows that we must try to come up the revenues to pay for it.  This pay as you go method worked well enough in the 90’s under President Clinton to not only balance the budget but also result in a surplus.

But then President Clinton’s successor, George W. Bush did something that was unprecedented.  He dramatically raised spending by choosing to conduct two wars while at the same time cutting taxes, mostly benefiting the wealthy.  Previously, wars were paid by raising the top marginal rate, sometimes to as much as 91%.

So the predictable result was a return to deficits and the resulting borrowing that has greatly added to our debt level that we are trying to address now.  But it also makes it clear how to reverse the process – and that is to not only cut spending but also end the Bush tax cuts since both the overspending and tax cuts clearly contributed to the problem.

But those on the political right have used the Big Lie over and over by saying that “It’s not a revenue problem but is instead a spending problem.”  When in reality, it is both.  The revenue problem is not only because of the reduced tax intake from the Bush tax cuts, but also from so many unemployed who are paying no taxes.

The Bush tax cuts were scheduled to expire at the end of 2010.  President Obama wanted them to continue for the middle class and below and end them for those in the upper 2% of income.  But the Republican Senate in what can only be described as an act of extortion, threatened to filibuster all legislation, including the extension of unemployment benefits unless the tax cuts for wealthiest Americans were extended.  The president gave in to the demand.

The crisis over raising the debt ceiling was nothing more than an extortion attempt to get what the failed Ryan budget plan tried to get through the normal legislative process.  In a previous posting Republicans Backed Into a Corner, I detail how Ryan and other Tea Party Congressmen were booed and heckled when they explained their budget plan making radical changes to Medicare to their constituents at their town hall meetings.

This is because there is a solid majority in polls who have strongly said that they do not want major changes to Medicare.  In addition, most people polled believe that the richest Americans should contribute more in tax revenues as part of a balanced approach to addressing our budget deficits and resulting debt.

But a belligerent minority got their way through the Tea Party’s demand for deep budget cuts including entitlements but without any additional tax revenues whatsoever or let the US go into default by not allowing the debt ceiling to be raised.

Of course we can question the soundness of a philosophy that wants to take a wrecking ball to government and never agree to tax increases under any circumstances.  For example, is there ever a possibility that taxes can be too low?  Is there a possibility that we can ever have an inadequate amount of government to meet the common needs?  Surely they are not asking for no government or taxes.  So the question is how much of each do we need.  And this is what is legitimately worked out in the democratic process which involves compromise.

But this is not about the pros or cons of the Tea Party philosophy.  It is about the way they imposed their views on our public policy in a thoroughly undemocratic way through taking our government hostage.  It is for this reason that they and their other Republican enablers deserve condemnation.  The Democrats must call them out on this in the upcoming elections before the democratic process in this country gets even more poisoned by unethical tactics like this.

And to show that there is no remorse whatsoever over how this was all accomplished, we have this breathtakingly blunt quote in the Washington Post by Senate Minority Leader Mitch McConnell which says it all.

McConnell said he could imagine doing this again.

“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting,” he said. “Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming. And it focuses the Congress on something that must be done.”

Friday, July 1, 2011

Obama the Fighter?

Consider the words in this presidential speech:
We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today.
These words could well have been spoken by President Obama since they are as relevant today as in 1936 when Franklin Delano Roosevelt delivered this campaign speech. While it is easy to think that today’s polarized political atmosphere is worse than it’s ever been, that is hardly so.  In times of economic stress, there is plenty of fear and worry to go around – along with those who would like to exploit these for their own political gain.  And what period in our history had more economic stress than the Great Depression?

Perhaps the biggest battle between those on the political left and political right is over how active the government should be in regulating the economy to make sure that it works well for everybody.  Those on the left usually subscribe to the Keynesian economics school.
Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government and public sector—and served as the economic model during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s. The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought.
On the other side are those on the political right, most notably those in the Austrian School of economics who believe that less government intervention in the economy is better and more government intervention leads to socialism.
Austrian economist Friedrich Hayek criticized Keynesian economic policies for what he called their fundamentally collectivist approach, arguing that such theories encourage centralized planning, which leads to malinvestment of capital, which is the cause of business cycles.
What makes it so difficult to take sides on is that on one hand total government control of the economy doesn’t work as the downfall of many Communist nations has demonstrated. Even China has resorted to some free market economy ideas and its takeover of Hong Kong has not dimmed its free market vigor. But no government control whatsoever of the economy doesn’t work either. Lack of adequate regulation can cause large numbers of people to get hurt as the recent Wall Street meltdown demonstrated. And what about a safety net for those who are in distress through no fault of their own? So there is a middle ground that probably works best. But where is that middle ground? That is where reasonable people disagree.

But back to FDR and the Great Depression. The economy was in massive upheaval with huge numbers (even compared to today) of unemployed approaching 25%. FDR’s Republican predecessor Herbert Hoover’s agenda of letting the free market solve the crisis on its own clearly wasn’t working so FDR decided that the government had to get involved in the form of the New Deal which in effect, was a massive government injection of demand into the economy to get it running again. And while the New Deal certainly helped in those grim times, the country didn’t finally escape the Great Depression until World War II which although it was fought to preserve our liberty, it was in effect a massive government spending program that generated jobs.

But despite the crying need for government help in this dire situation, FDR still ran into bitter opposition from those on the political right. So what does he do? Reasoning and compromise are the first choices. But in the face of such intractable opponents, FDR decided that the only way to make progress was to fight as in these passages from the same speech.

They are unanimous in their hate for me—and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.
But while FDR chose to take the fight to those who were against him, President Obama has chosen to use reasoning and compromise to try and achieve his ends. And normally, this is the way the political process works. But he is dealing with a Republican party whose Minority Leader, Mitch McConnell said that “The single most important thing we want to achieve is for President Obama to be a one-term president.” And the parts of the Republican Party who may well be willing to deal with President Obama do so at their own peril when the even more militant Tea Party activists get done with them.

FDR did much to take his case to the people in the form of his famous fireside chats  back when radio was each household’s principal link to the world.

During his first term as Governor of New York, Roosevelt faced a conservative Republican legislature so during each legislative session he would occasionally address the citizens of New York directly. He appealed to them for help getting his agenda passed. Letters would pour in following each of these "chats," which helped pressure legislators to pass measures Roosevelt had proposed. He began making the informal addresses as President on March 12, 1933, during the Great Depression.
Today President Obama faces an economy that is generally considered to be the worst since the Great Depression. And like FDR he is facing equally bitter opposition, some of those who also hate him whether it is because of his race or otherwise. 

But fighting means occasionally losing and getting ones nose bloodied. However, it seems as though the president’s ego doesn’t allow him to be on the “losing” side of a fight even if it’s only temporarily.

A notable example that comes to mind was the so-called public option during the negotiations on health care reform. In the absence of a single-payer system (which former Illinois State Senator Obama supported but then later deserted as president) the public option was the only way that private insurance companies would have enough competition to keep the system honest. So he supported the public option until it became apparent that there would probably be enough votes in Congress to defeat it. Then he became strangely silent on the issue.

It’s easy to say that whatever President Obama is in favor of, the opposition party will be there to thwart him. But leadership is about fighting for what one thinks is right even if it means being on the losing side once in a while. Yes, he may well be voted down in Congress but the president also has the powerful bully pulpit at his disposal to take his case to the people, just like FDR successfully did with his fireside chats. If he were to get enough people on his side by using his considerable persuasive powers, he could well prevail on a number of important issues.

In addition, presenting his case to the people would have another tremendous benefit. It would engage the average citizen in the political process – something that is sorely lacking in this age of political control by the moneyed and corporate interests.

Right now those moneyed and corporate interests are having it their way. In the last decade, the rich have become much richer while those in the middle and lower classes have struggled. Large corporations have done very well, but those who work for them have struggled. For those on the right, their priority is now cutting government spending presumably to try and cut the deficit that they have largely created over the last 10 years.

But severely cutting government spending during a period of high unemployment only tends to create more unemployment. And make no mistake, unemployment is our most urgent short-term crisis in need of attention. In line with the Keynesian economics that worked for FDR, government has to be the spender of last resort to boost the economy and create more jobs. Simply putting more money into the hands of people at the top with the hopes of it “trickling down” simply hasn’t worked.

But those people at the top have somebody to fight for them. And that is usually those on the political right. Although they obscure things by raising social issues like abortion, gay rights, and gun control, the predictable result of their policies is that those on the top of the economic food chain are the beneficiaries to the detriment of others.

Those in the middle and lower classes need someone to fight for them too! President Obama was elected in 2008 as the man to do that job. But he has disappointed so many on the left who can only wonder if he is really on their side but is unwilling to fight for what he believes in. Or even worse, is he just more of a corporate centrist than the populist fighter for the middle and lower classes he claimed to be during the campaign?

Without a primary challenger, the question becomes irrelevant. For those who feel that electing a Republican president would be a disaster, like it or not, President Obama is the only hope for our economy getting any better.

A couple of crucial tests are coming up.

One is the August 2nd upcoming deadline on raising the debt ceiling. Most observers feel that not raising the debt ceiling by the deadline would place the US in default and have catastrophic consequences on the world economy. While President Obama must agree to some spending cuts, he must also fight to raise taxes on the wealthiest to help give the government the revenues it needs to operate. The Republicans will undoubtedly resist. But the majority of the electorate is in favor of these tax increases and will be on the President’s side.

And if the unemployment numbers do not markedly improve by the 2012 election season, our cool and calculating president may then decide that this may lose him the election and he will then be finally forced to fight for programs that will create jobs.

So we may well make President Obama into a fighter after all whether it is by his choice – or not!

Wednesday, June 1, 2011

Will We Ever Get Our Jobs Back?

This is the time of year when the media likes to do stories on graduation ceremonies to talk about the prospects of these new entrants into the work world.  Although some have struggled from time to time, these younger fresh faces have usually done relatively well in the job market, at least compared to many of the older workers who have been shut out of the job market for being “overqualified”.

But if nothing else, this recent NYT article Outlook Is Bleak Even for Recent College Graduates confirms that if anything, the job market in recent years has gotten even worse.
Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed. Even for college graduates — the people who were most protected from the slings and arrows of recession — the outlook is rather bleak.

Employment rates for new college graduates have fallen sharply in the last two years, as have starting salaries for those who can find work. What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all.
The article goes on to say…
Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007.
Even these figures understate the damage done to these workers’ careers. Many have taken jobs that do not make use of their skills; about only half of recent college graduates said that their first job required a college degree.
Taking a first job that doesn’t require a college degree isn’t the end of the world in itself.  For example, I worked as a bartender for several months after graduation before finding my first professional job.  But I’m sure that many of these current graduates fear that they may be waiting a long, long, time for that first professional job – and for good reason!  Because unlike previous recessions, many of our recent job losses are not cyclical but instead have been permanently lost to offshoring.

Back in August, I posted Our Jobs Crisis which argued that if anything, we are underestimating how serious a threat this present shortage of jobs is for America’s future.  And that it is no longer just low skill jobs that are being offshored but also many professional level jobs that were previously immune to economic downturns.  While each political party is pointing fingers at the other asking where the jobs are, the endless distractions with other issues causes me to fear that neither side really cares or even worse, knows what to do about it. 

Yes, our economy is slowly recovering based on economic output.  Corporations are making handsome profits.  But the jobs are just not there.  They are simply not hiring – at least not here in the US.  Will we ever get our jobs back?  Maybe, but there is plenty of reason to fear the worst.

By now, most of us are aware of how we are losing jobs to offshoring.  More and more companies are deciding to take advantage of cheaper labor rates elsewhere in relocating their factories. It has gotten to where many product categories at our stores are only available as imports.

But if we are to believe software developer and author Martin Ford who wrote The Lights in the Tunnel, offshoring is only the tip of the iceberg next to the far greater threat to our economy from automation.

Economists almost universally believe in something called the "Luddite fallacy" -- which basically says that advancing technology will always create more jobs than it destroys. In other words, any fear that technology will never cause widespread, long term unemployment is a fallacy. This has always been true in the past. Will it hold true indefinitely? Will advanced technologies such as robotics and artificial intelligence (AI) ultimately change the economic rules?
The previous link has not only a way to purchase a hard copy of the book but in the interest of bringing this issue to light also offers a free downloadable PDF version of the book to read and share.  I read it and found it to be compelling and yes, disturbing reading.

Like this passage which should send chills up the spine of a college-educated “knowledge worker”…
For knowledge workers, there is really a double dose of bad news. Not only are their jobs potentially easier to automate than other job types because no investment in mechanical  equipment  is  required;  but  also,  the  financial incentive  for getting  rid of  the  job  is  significantly higher.
As a result, we can expect that, in the future, automation will fall heavily on knowledge workers and in particular on highly paid workers. In cases where technology is not yet sufficient to automate the job, offshoring is likely to be pursued as a interim solution.

So while we lament about our jobs going to other countries with lower wages, if this scenario is correct, the job gains of the low wage countries will be only temporary until they too lose many of these same jobs to automation.

As this trend continues, it is not hard to see massive amounts of unemployment worldwide.  And with fewer people earning a paycheck, the demand for these products decreases which forces manufacturers to cut back on human labor even further to try and cut costs – the classic deflationary spiral which unchecked leads to a depression.

And when manufacturing jobs like this are eliminated, the result is that the upper management and stockholders make more money while the workers suffer economic hardship.  This increasing concentration of wealth at the top not only can create instability (such as what we had in Egypt and Libya) but results in even less overall consumer demand for goods and services.

Imagine  that  your  job  is  to  sell  as  many  $50  cell phones  as  you  can  in  one  hour.  You are offered two doors: Behind door # 1 sit Bill Gates and Warren Buffet, the two richest people in America. Behind door # 2 are a thousand average people.  You may well  be  tempted  to choose  the  first  door  just  so  you’ll  get  to meet  Bill  and Warren, but in terms of getting your job done, you would probably agree that door # 2 is clearly the best choice. This is because the demand for the mass market products that drive our  economy depend much more on  the number of  potential  customers  than  on  the wealth  of  any particular customer.  You  are  not  going  to  be  able  to  sell  40  cell phones to one person, no matter how wealthy they are. 
So is this doomsday scenario really going to come about someday?  Nobody really knows for sure. As noted before, most economists subscribe to the luddite fallacy and thus feel that new technology along with eliminating jobs creates enough new ones that we don’t have to worry.  But Ford’s argument is that with technology now accelerating exponentially, automation instead of helping man to do his job will soon in many instances be able to replace him altogether in the workplace – and in ways that were unforeseen only a short time ago.  Interestingly enough, one of the “Indicators to Watch For” in his book to tell us we are getting into trouble is “Diminishing prospects for college graduates”.

If these predictions come true, our leaders are going to have some very difficult problems to solve if there aren’t enough jobs to support much of our population and along with it, our economy.  One suggestion Ford offers is to tax corporations simply based on profits instead of the present system of payroll taxes which gives companies incentives to reduce headcount by offshoring or automation. This additional tax income can then perhaps be used to support government created jobs to do things that we need such as rebuilding the infrastructure while at the same time creating the demand for products and services our economy needs to survive. But while this solution would appeal to liberals who believe in FDR/New Deal types of programs, conservatives who say they hate big government would never stand for it.  But the conservative solution, which is about allowing the rich to become richer in the hopes of their someday providing more jobs certainly isn’t working. 

Whatever solution we come up with, we have to start taking mass unemployment as the extremely serious problem it is and start to come up with answers now!

Sunday, May 1, 2011

Republicans Backed Into a Corner

The 2010 mid-term elections here in the US were all about how the Republicans were going to improve the economy and create jobs. And balance the budget. How they were going to do this in an economy that was arguably the worst since the Great Depression was anybody’s guess. But enough people were convinced to give them another chance and voted them control of the US House of Representatives along with a number of state governorships.

This lead to my posting right after the election Put Up or Shut Up Time for the Republicans.

[The Republican] plan to balance the budget is to extend the tax cuts to all including the wealthiest 2% along with mostly unspecified “spending cuts”. We don’t know exactly what they have in mind but the most consistent story is that defense, Social Security, and Medicare cuts are not on the table which is the lion’s share of the budget. With precious little else to cut, how do they propose to balance the budget while not only refusing to raise taxes but also swelling the deficit with more tax cuts for the wealthy? The math just doesn’t add up! But then again, they now have a chance to propose their own budget in the House to answer these questions.
But by forcing the extension of the Bush tax cuts for the wealthiest during the Congressional Lame Duck session last year, the Republicans were already starting to back themselves into a corner. The only possible ways out were to make cuts in defense, Social Security, Medicare, or all three.

But Social Security and Medicare are extremely popular programs and recent polls have shown that over 3 out of 4 Americans have rejected the idea of any cuts to these programs.

So by process of elimination, there are only two remaining alternatives for the Republicans to choose from. One is to propose cuts in defense which usually goes against conservative ideology but would mitigate or avoid having to deal with the "third rail" associated with messing with Social Security and Medicare. Or give in to the right and try and sell the public on making all the cuts to Social Security and Medicare without touching defense.

The Republicans chose the latter and apparently felt that Congressman Ryan could sell this to the American public. But the more Americans read the fine print of Ryan’s plan, the less they are buying it.

Here from his "Roadmap" site is Ryan’s proposal for Medicare.
It preserves the existing Medicare program for those currently enrolled or becoming eligible in the next 10 years (those 55 and older today) - So Americans can receive the benefits they planned for throughout their working lives. For those currently under 55 – as they become Medicare-eligible – it creates a Medicare payment, initially averaging $11,000, to be used to purchase a Medicare certified plan. The payment is adjusted to reflect medical inflation, and pegged to income, with low-income individuals receiving greater support. The plan also provides risk adjustment, so those with greater medical needs receive a higher payment.
So instead of the government acting as the insurer as in Medicare, it will offer payments for individuals to shop around for their own private insurance. Just the idea of people in this age group with all of their mental and physical infirmities shopping around for the best deal on their health insurance boggles the mind!

But what happens if (most say when) the premiums for the so-called Medicare certified plans grow faster than what the government is willing and able to pay for? The policyholder must then make up the difference or go without health insurance.

This would be a really tough sell to get present Medicare beneficiaries to accept. But to get around that, this plan is being sold as affecting only those presently under the age 55. As long as it’s someone else getting screwed, that’s not so bad! The plan for Medicaid which insures low-income people leads to a similar problems that may result in some losing coverage.

And here is part of Ryan's proposal for Social Security.
Offers workers under 55 the option of investing over one third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to Federal employees…Makes the program permanently solvent…with an eventual modernization of the retirement age.
Of course the “modernization of the retirement age” means raising it, a position openly advocated by New Jersey Republican Governor Chris Christie. But postponing the retirement age creates an additional hardship for those who do physical labor for a living in addition to those near the present retirement age who have been especially hit hard by unemployment. Raising the maximum taxable earnings for Social Security above $106,800 would likely address any future shortfalls without having to cut benefits. But this goes against the Republican ideology that taxes should never be raised!

Perhaps the most controversial part is Ryan's proposal for Tax Reform.
Simplifies tax rates to 10 percent on income up to $100,000 for joint filers, and $50,000 for single filers; and 25 percent on taxable income above these amounts…Promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax [the Republican epithet for the estate tax].
So instead of the present highest marginal tax rate of 35% for the wealthiest under the present extended Bush tax cuts (compared to about 39% under Bill Clinton when the budget was last balanced), Ryan advocates cutting it even further to 25%. And while those who work for their income would still have to pay taxes, those more well to do who can afford to live on just investment income get a free pass on taxes.

More and more people are starting to see a pattern here. It is difficult to continually advocate governmental policies that are seen to benefit the wealthy at the expense of everybody else. Any while Mr. Ryan is a pretty slick salesman for his budget policies when he appears as a TV talking head, his recent experiences at local town hall meetings have resulted in booing and heckling by some of the attendees.

Rep. Dan Webster (R-FL) along with many other Republicans around the country suffered a similar fate during one of his recent town hall meetings while trying to defend the Ryan plan.

Republican governors adopting policies that have made budget cuts in areas like education while at the same time supporting tax cuts for corporations are also getting some pushback sometimes in the form of recalls from some of its citizens.

Don’t think the Democrats haven’t noticed the turmoil among some Senate Republicans in deciding if they really want to stick their necks out in support of the Ryan budget plan that passed the Republican controlled House. So with no danger of losing and in the spirit of "cooperation"
Senate Majority Leader Harry Reid (D-Nev.) announced on Wednesday that he would host a vote on Rep. Paul Ryan’s (R-Wis.) budget as a means of forcing moderate GOP senators to weigh in on the legislation’s controversial proposals.

While the Tea Party purists may choose to ignore the growing voter dissatisfaction with the Ryan tax and budget proposals, the more moderate Republicans may well feel that they have been backed into a corner trying to defend these proposals that may well lead to some heavy losses in 2012. And what about the promised creation of more jobs? Of course they say that will come along if we agree to even more tax cuts. So how many Republicans will continue to try and defend the Ryan proposals in the face of such strong and emotional opposition? Stay tuned!

Post Script - May 25, 2011

Democrat Captures House Seat in Special Election

The results set off elation among Democrats and soul-searching among Republicans, who questioned whether they should rethink their party’s commitment to the Medicare plan, which appears to have become a liability heading into the 2012 elections.

Two months ago, the Democrat, Kathy Hochul, was considered an all-but-certain loser in the race against the Republican, Jane Corwin. But Ms. Hochul seized on the Republican’s embrace of the proposal from Representative Paul D. Ryan of Wisconsin, to overhaul Medicare, and she never let up.