Monday, February 28, 2011

The Deficit

A recent New York Times editorial is rather breathtaking in it's dismissal of the deficit and its alarm over the Republicans' proposed cuts.

In defense of their bill to slash federal spending by $61 billion over the next seven months, House Republicans claim they are trying to make the economy grow and create jobs. In truth, such deep and sudden cuts could derail the recovery, without ever addressing the real sources of budget deficits — mainly explosive health care costs and incessant high-end tax cuts.

First, $61 billion is a big number but it is dwarfed by the size of the deficit. It will take a much deeper cuts than that to trim the deficit to manageable size.

More important is their explanation that the deficit is nothing but high-end tax cuts and health care costs. "High-end tax cuts" is another way of saying "tax cuts for the rich" which in turn reflects the idea that everyone who makes less than $250,000 deserves a tax cut but those making more deserve higher taxes. This boils down to "soak the rich". So, is our failure to soak the rich the root of the deficit? Of course not. The deficit through 2007 was a fraction of the current deficit but the tax cuts were in place long before then.

After a 14-month fight over Obamacare which was supposed to tame health care costs, the Times is now admitting (indirectly) that it failed completely. Regardless, this is not the cause of the deficit, either.

The real cause is simple mathematics. Deficits happen when the government spends more than it takes in. Revenue is down because of the recession and it is not likely to recover in the near future. Unemployment and underemployment are still sky-high which translates to people not being taxed as much. At the same time, government spending jumped. It started with Bush's bailouts but those were on-time expenditures and some, like the TARP, were repaid. The Stimulus was sort of a one-time jump except for the way that government works. Once you increase someone's budget, even as part of a one-time bump, and reduction counts as a cut. Many agencies saw a permanent increase in their budget because of the one-time stimulus.

While the government can justify running a big deficit during a recession, that officially ended nearly two years ago. The government has to adjust to new fiscal realities - it's revenues have been reduced on a long-term basis. We have to adjust to this by cutting services. It may sound cruel but there is no alternative that does not lead to financial collapse.

The Times must know this but it is fighting a holding action for big government. If cutting $61 billion is spending would hurt the economy, so would raising taxes by that much. But they want to perpetuate the fiction that the solution to the deficit is nothing more than taxing the rich. That way government can continue to grow.

This is only the opening skirmish. The real fight will come when entitlement reform is finally discussed.

Friday, February 25, 2011

Obama and Events

Remember the ad that Hillary Clinton ran during the primaries three years ago, the one where the phone is ringing in the White House? It is ringing for real on Libya and other parts of the world. The Obama administration seems content to let it go to voicemail.

In Libya, a dictator is using unacceptable force to try to quell a revolt. Things like this happened during the last three administrations. The usual response was a quick United Nations resolution establishing a no-fly zone enforced by the US. Why didn't that happen days ago?


When George W. Bush made a signing statement the left acted as though the Constitution itself was in danger. Obama's announcement on support of the DOMA amounts to an after-the-fact signing statement. BTW, who remembers that this passed and was signed into law by Bill Clinton?


A couple of days ago a wrote that Obama had become irrelevant because of the protests in Wisconsin. Later it came out that the White House and the Obama campaign organization Organizing for America were major organizers in these protests. They urged the unions to protest and the Wisconsin Democratic senators to flee the state. That means that he shot himself in the foot. The order of the headlines the last several days has put Libya first and Wisconsin second with other events following.

The government is on the verge of shutting down for want of a budget compromise and no one is watching. This was supposed to the the turning point in Obama's reelection but someone has to know it is happening before it can help him.


What happened to the new civility and all of the condemnation of violent political rhetoric? The Wisconsin protesters are as vile (and white) as any protesters in recent history.

Tuesday, February 22, 2011

It's Official - Obama is not Transformative

Three years ago candidate Barack Obama openly speculated on which transformative president he would model himself on with FDR and Reagan at the top of the list. With Monday's column by E. J. Dionne, it became official - Obama is not a transformative president at all. Dionne admits:

No matter how much liberals may poke fun at them, Tea Party partisans can claim victory in fundamentally altering the country's dialogue.

President Obama was supposed to have altered the country's dialogue, tipping it from the days of Reagan-limited government and back to FDR-big government. As Dionne admits, that didn't happen. Instead the dialogue is where to cut government. Worse for Obama, the country's attention has moved from Washington, DC to Madison, WI and other states where budget crises are being met head-on. It is hard to be transformative when no one is paying any attention to you.

Obama brought this on himself by creating multiple budget crises in two different ways. The obvious one is the way he has "kicked the can" on the national deficit. Instead he increased spending and cut taxes. He continues to promise that the deficit will be addressed eventually. Speculation is that he will put it off until after the 2012 election. While Obama is content to ignore the deficit, a good part of the rest of the country is worried about the deficit, especially the Tea Party. That gives them the initiative.

Obama's other problem is more subtle, it is the states. Two years ago many states were experiencing budget shortfalls. They required hard choices. These were postponed by the stimulus which bailed out the states for two years. The bailouts have ended and several states changed from Democrat to Republican. In fact, Republicans control more statehouses than they have in decades. That means that they are controlling the dialogue at the state level (where the press's attention is). These governors have much more power to make sweeping changes than the President and Congress and they do not have the luxury of running deficits so they have opened a new dialogue on the relationship of government and public service unions.

Can Obama shift attention back to expanding government? Probably not. Republicans control the House of Representatives so no new big programs will come from there and Democrats in the Senate have a tiny majority and can no longer ignore the Republicans. All that Obama can do is try to put his own mark on current trends but his most recent budget failed that completely. His proposed cuts were so inconsequential that even his supporters complained.

Obama might salvage things if he wins reelection and the Democrats regain control of both houses of Congress. That would take an unprecedented number shift in seats. Without that, his best chance at a legacy rests on the constitutional challenge to Obamacare. If it is declared unconstitutional then a quarter of his first term will have been wasted.

So much for transforming America.

Monday, February 21, 2011

The Union Protests

Wisconsin is getting the biggest protests and most of the coverage but the same issues are being fought out in Ohio. The issue is complex but very little of the complexity is making the news.

The excuse for the bills reducing union rights is budget problems. This is a real issue. Wages, medical coverage, and pensions for unions are big expenses. There is also a measure of pay-back. Unions in general and public service unions in particular have been increasingly important in elections. In Ohio, attack ads against Kasich and paid for by public service unions started running in early Summer last year. The unions spent a lot of money and said some pretty nasty things about Kasich including that he only wanted to be governor so that he could outsource jobs. There is no love lost between the two.

One issue being addressed in Wisconsin is the withholding of union dues. Since millions in union dues have been spent on political campaigns, that means that the states are paying for ads for Democrats.

Former Governor Strickland has been making statements and getting a lot of coverage but no one is pointing out his conflicts of interest. While he was governor the unions had free reign. The Governor put a hold on new (non-unionized) charter schools. Non-union construction jobs were re-bid and Strickland had someone working full-time twisting arms to force local officials to use union workers. As I mentioned, unions spent millions trying to get Strickland reelected.

So, Strickland's statements on behalf of unions is a colossal conflict of interest. Despite having been vote out of office and this conflict, he is still being given face time on the news.

Listening to the protesters, you would think that working without a union was alien. In fact, only a small percentage of regular people are union members and they manage just fine.

Teachers may find themselves on the wrong side of public opinion as the schools are closed day after day. Also, the public perception of teachers as being underpaid is decades out of date. Teacher salaries being made public and, when combined with benefits, put teacher pay well above the median.

Tuesday, February 15, 2011

The Birther Trap

The press continues to ask prominent Republicans if President Obama was born in the US and if he is a Christian. This is a trap. No honest answer will be sufficient. On Meet the Press, Speaker Boehner was asked these questions. His answer on Obama's country of birth was: "The state of Hawaii has said that he was born there. That's good enough for me." That answer was not good enough for Slate's William Saletan who wrote "For me, lest anyone feel that the speaker was imposing his personal beliefs." Saletan went on to complain that Boehner had not stifled members of the Republican Caucus who have asked that the President instruct the State of Hawaii to release the long form of his birth certificate.

When asked about Obama's religion, Boehner said, "The president says he's a Christian," Boehner said. "I accept him at his word." That one set off Washington Post's Jonathan Capehart who said, "The obvious implication is that there's a possibility the president might be lying. This is offensive and an insult."

Obama's supporters have been using statements like this as a club for the last three years. During the primaries, Secretary of State Clinton received nationwide scorn after saying that Obama was a Christian "as far as I know."

The issue is what Capehart calls "weasel words." The various politicians add them because they don't want to be caught making a false statement about something that they have no direct knowledge of. That is why these questions are traps. The people being asked have no special knowledge. They are relying on others - the State of Hawaii or Obama himself - and they say so.

There are some outstanding questions. The President has released the short form of his birth certificate but not the long form. There is enough supporting evidence to show that the short form is a valid document but it is puzzling why Obama does not release the long form and silence the skeptics? The only difference is that the long form has the signatures of the mother, delivering physician, and witnesses. Can there be anything there that Obama does not want released? The only thing that I can think of is that his mother signed the form with her maiden name which would imply that he was born illegitimately. This is pure speculation and does not affect his qualifications to be president. The only other possibility that I can think of is that he sees this as a personal insult and refuses to release the form out of stubbornness.

Obama's religion is a trickier question. Boehner was not asked if Obama was a Muslim. He was asked if Obama is a Christian? Keep in mind that Obama was raised by an atheist and a lapsed Muslim. He was an adult before "finding Jesus" through the Reverend Wright. I'm a little hazy on the chronology. I don't know if Obama somehow had enough contact with Wright to convert him before joining Wright's church or if he joined the church first. That raises more questions. Did Obama actually have an adult conversion to Christianity or did he simply go through the motions for political reasons? In Chicago politics, being a member of a prominent church is almost a requisite.

Obama's knowledge of Christianity is poor, at best. He has misquoted the bible and confused the old and new testaments. Since dropping out of Wright's church he has not associated himself with a new church.

So there is a very good chance that the President is an agnostic or atheist who is just going through the motions. Speaker Boehner barely knows Obama so all he can do is take the President at his word. For him to go further would be a lie.

That is what makes the question, "Is President Obama a Christian?" such a sneaky trap. The person being asked does not know for certain but the slightest hint of uncertainty is taken as code for "Obama is a Muslim."

Saletan and Capehart manage whip themselves into a frenzy over what they see as insufficient responses but they overlook the real culprit - the reporters asking the questions. Why even ask unless there is some question about the truth? It does not matter how forceful the response, the question itself lingers. If Saletan and Capehart really worried about stopping these rumors they would condemn the reporters for keeping the issues alive. They do not because the questions give them a chance to hammer the Republicans.

Monday, February 14, 2011

Evils of the 20th Century

Slate has a column inspired by a new book on Hitler and Stalin. Part way through the column the author wonders why we remember Hitler's evil but overlook Stalin's? After all, Stalin killed several times as many people as Hitler (Stalin killed 100 million while Hitler killed 25 million). I can think of several factors.

It is important to remember that neither came from a vacuum. During the 1930s both had their supporters among American intellectuals. Fascism was promoted as the third way, half-way between communism and capitalism. Both Hitler and Stalin were providing direct support to their followers in the US. Hitler got support from unexpected sources. W.E.B. Dubois visited Nazi Germany and came away impressed with how efficiently the government was run (while shocked by their anti-Semitism). He was also a huge supporter of Imperial Japan.

Hitler's genocide was the dark side of the eugenics movement which was also popular among the intellectuals. Margaret Sanger, the founder of Planned Parenthood, was a believer in the softer side of eugenics - where Hitler wanted to eliminate the undesirables, she simply wanted to keep them from breeding.

The big difference is that we went to war with the fascists - a total war where most of the nation was mobilized and nearly everyone had friends and relatives in the fight. This discredited fascism. Once the bombs dropped on Pearl Harbor, no one wanted to be associated with it any longer. It went from mainstream to fringe overnight. Further, once we won the war we saw the concentration camps full of skeletal survivors and we got our hands on the records showing how many were gassed and incinerated. We were properly horrified.

This never happened with Stalin. He was an ally during WWII so the US government had an interest in suppressing stories about communist atrocities. The wars we had with communist countries were all smaller and never shocked the nation the way that WWII had. There was no mass conversion of communists the way that we had with fascists.

We never invaded the USSR and saw the results of Stalin's brutality with our own eyes. Stalin was good at suppressing information and there were plenty of communists and communist sympathizers in the US who were sure that nothing bad could possibly happen in the worker's paradise. They dismissed reports of mass starvation as propaganda.

Stalin was dead for decades before the truth came out. Even now there are apologists who say that Stalin was trying to accomplish a greater good so the deaths of 100 million were justified by his goals.

In the decades since Hitler's death, our image of him has changed. I have seen that over my lifetime. Our image of him has gone from being the worst of a crop of evil dictators to being the epitome of evil.

A few years ago some color movies of Hitler came to light. Some of them were taken by his wife. They show Hitler at ease, smiling and joking. There was real concern about showing these because they conflicted with our image of him as evil personified. Similar arguments have been raised about evaluating Stalin's evil. There are suggestions that this is really an attempt at rehabilitating Hitler.

There are important lessons to be learned here. The most important is that Hitler was not unique. Other leaders have risen to power and killed millions in the name of an ideology. A related lesson is that ideology does not excuse evil. Stalin killed tens of millions. Pol Pot "only" killed a million or two but it was still one out of every five in Cambodia. Deaths under Chairman Mao were somewhere between 20 and 70 million. All of these people were killed in the name of ideologies. If they died of starvation it is because the food was forcibly taken from them.

The final lesson is that many of the ideas that gave rise to these evils are still present in our culture today. They came about because the intellectuals of the early 20th century decided that they knew better ways of structuring society. If the were just given control they would solve the problems of the world. To paraphrase Mao, if half the country had to die to achieve these goals it would be worth it.

Inflation is Good?

Here is a sign that uncontrollable inflation is on the horizon - an article originally from the Guardian and picked up by Huffington insisting that inflation helps the common worker.

In other words, controlling inflation is about making sure that the wages of less-educated workers don't rise relative to the wages of more educated workers. And, the central banks have a license to push as hard as they like in this direction.

This is an incredible thing for someone with a doctorate in economics to say. Inflation hits the people at the bottom the worst. They have the least ability to handle rising prices in staples and the least ability to demand higher wages.

In the classic wage/price spiral, prices rise for whatever reason. Workers demand higher wages in order to stay even. This causes the cost of production to rise which leads to further price hikes which lead to higher wages, etc. Workers tend to come out behind on this because their request for wage increases are a reaction to inflation that has already happened. Worse, wage increases are usually, at best, annual. Trying to make up for a year's worth of inflation in a losing proposition.

At the same time, savings accounts are hit hardest. During periods of high inflation, banks never pay enough interest for accounts to stay even. The rich have alternatives, lots of them, and have no trouble staying ahead of inflation.

Anyone who was an adult in the late 1970s knows how hard inflation is on the lower-class. One reason that Reagan is so well-regarded is that he tamed it. Inflation it 13.5 percent in Carter's last year as president. That means that, for every dollar you made in 1979, you had to make $1.14 to try to stay even (the income tax was not indexed to inflation then so keeping up with inflation was not enough, you had to stay ahead of it in order to stay even). If you were lucky your bank might pay 6% interest so your savings would only decline by 7.5%.

By the end of Reagan's first term, inflation had dropped to 4.3 percent and the income tax was indexed to inflation.

During the 1970s, people gave up on savings accounts. People invested gold, collectibles, and real estate as hedges against inflation. Most of these were poor investments. Everyday people suddenly knew the current rate that money market certificates paid but those tied up your money for months at a time.

Times of high unemployment are the worst to have high inflation because it gives workers to little leverage in trying to negotiate pay raises.

Why would anyone want to bring those days back? I don't think that he does. I think that the left sees inflation increasing and is trying to convince us that it is a good thing.

Saturday, February 12, 2011

Where Was Hillary?

It was obvious for the last several days that Egyptian President Mubarak's days in office were numbered. So why wasn't Secretary of State over there negotiating his resignation? Instead she was in Washington meeting with members of the House of Representatives who control the State Department's budget.

When protests erupted in the Philippines during the 1980s, President Reagan's administration was in the middle of it. They negotiated President Marcos's resignation and offered him asylum in the US in exchange for a quick and orderly transition. The US looked like heroes.

In Egypt we were reduced to spectators. The head of national security got his assessment of the situation from TV.

The Obama administration could have strong-armed its way in. We send a billion and a half dollars a year to Egypt and supply them with US arms. That gives us a lot of leverage. Why didn't we use it?

One possibility is President Obama's sensitivity to colonialism. He didn't want to be the big superpower forcing its will on an African country. But this was his chance to do good and to help put the US on the side of good. Instead he is on the sidelines and is unlikely to apply any leverage to the new Egyptian government.

Friday, February 11, 2011

Redistribution, Gays, Unions, and Trump

In a pre-Super Bowl interview, President Obama said that he is not trying to redistribute people's money and that he has not raised anyone's taxes and he has actually cut taxes.

How did anyone get the idea that he is a redistributionist in the first place? Maybe it came from an interview he gave before the election where he said that the Bill of Rights does not go far enough in allowing the government to redistribute wealth and that we need a second Bill of Rights. Or it could be from his answer to Joe the Plumber when he talked about taking more from the well-off in order to give others a leg up. Or it might be from his campaign promise to repeal the Bush tax cuts, but only for people making more than $200,000.

What about the other parts? Has he raised taxes? Yes. One of his first official acts was to sign into law an increase in cigarette taxes. More important, the President insisted that Obamacare would help cut the deficit. How? By raising taxes more than it raises spending. That's hundreds of billions of dollars of tax increases that the President forgot about.

Has he lowered taxes? Yes, a bit, temporarily. Part of the stimulus created a tax credit of up to $400 on individuals ($800 on couples). It phased out starting at incomes of $75,000 ($150,000 for couples) and it was only in effect for 2009 and 2010.

Also, the Bush tax cuts were extended for everyone. By Washington standards, not raising someone's taxes is a tax cut. Obama was against this, referring to the Republicans as "hostage-takers" for forcing the deal on him.

So, President Obama is a redistributionist but he is a very poor one.


There is some debate about the inclusion of gays at this year's CPAC (conservative) convention. Conservatives need to pay more attention to Sarah Palin, Dick Cheney and Barbara Bush (George W. Bush's daughter). The country is becoming increasingly more accepting of gays. Democrats realized that being anti-gun cost them elections. The Republicans need to figure this out about gays. When the economy improves and social issues start becoming more important, being anti-gay could knock the Republicans back to minority status.


In Ohio, John Kasich is promoting some anti-union legislation. Some of this is aimed at helping the state and cities balance their budgets. Some of it is probably pay-back for a nasty election campaign. The unions should not be surprised. They spent months running ads that claimed that Kasich only wanted to become governor so that he could outsource more jobs.


Donald Trump is considering running for president as a Republican. Can we give him to the Democrats?

Tuesday, February 08, 2011

The Individual Mandate and the Constitution

Laurence Tribe has a new column spouting old ideas in the New York Times justifying ObamaCare in general and the individual mandate in particular. I've written about this before in general but he places his arguments in a nice row, just begging for them to be knocked down.

He starts his arguments with this rhetoric question: Does anyone doubt that the multitrillion-dollar health insurance industry is an interstate market that Congress has the power to regulate?

The answer is, of course, "no" but ObamaCare goes much further than just regulating the insurance industry as we can see in his next paragraph:

Many new provisions in the law, like the ban on discrimination based on pre-existing conditions, are also undeniably permissible. But they would be undermined if healthy or risk-prone individuals could opt out of insurance, which could lead to unacceptably high premiums for those remaining in the pool. For the system to work, all individuals — healthy and sick, risk-prone and risk-averse — must participate to the extent of their economic ability.

The logic here is that Congress has written regulations but the only way for them to work is to expand their authority in an unprecedented manner. This is quite a reach, probably an overreach which is where the whole argument comes from - can Congress regulate an industry in such a way as to extend its power in ways not directly permitted by the Constitution?

Tribes sidesteps this question. He points out that the Court upheld Social Security in 1982 but ignores the fact that this is a requirement to participate in a federal program, not a mandate to buy a commercial product. One of the great ironies of ObamaCare is that Canadian-style or British-style socialized medicine would be easier to reconcile with the Constitution but is politically unworkable.

He then offers this argument:

Individuals who don't purchase insurance they can afford have made a choice to take a free ride on the health care system. They know that if they need emergency-room care that they can't pay for, the public will pick up the tab. This conscious choice carries serious economic consequences for the national health care market, which makes it a proper subject for federal regulation.

This contradicts his earlier argument. The whole point of the individual mandate is to force people who are unlikely to need insurance to buy it anyway. With insurance premiums, even under Obamacare, running hundreds of dollars a month, the money that individuals in this group save by not belonging to ObamaCare will pay for quite a bit of emergency care. Hospitals are obligated to offer free emergency room care to the poor but we are not talking about them. We are talking about healthy people who are gainfully employed but do not have the level of coverage mandated by ObamaCare. If they need treatment then they will be billed. It is also possible that they are carrying catastrophic care insurance which would cover them in case of a major expense but is not considered sufficient for ObamaCare.

Tribe pulls out his trump card:

Even if the interstate commerce clause did not suffice to uphold mandatory insurance, the even broader power of Congress to impose taxes would surely do so. After all, the individual mandate is enforced through taxation, even if supporters have been reluctant to point that out.

Is ObamaCare a tax or isn't it? While it was being debated in Congress, supporters insisted that it was not. Now that it is law, they say that it is. Regardless, the tax argument has a few of its own problems. The Constitution gives Congress the right to impose taxes but states that "Duties, Imposts and Excises shall be uniform throughout the United States." Is a tax that is levied only on people who did not participate in a commercial transaction uniform? Just as with interstate commerce, this would be the first tax levied on people for inactivity.

Tribe goes on to dissect the individual justices and why he is sure that they will "do their constitutional duty". Most of this is wishful thinking. The only interesting part is the statement, "It would be asking a lot to expect conservative jurists to smuggle into the commerce clause an unenumerated federal "right" to opt out of the social contract."

Tribe is correct. It would be asking a lot. There is no reason to think that the justices would allow the law to stand but add in an exception. That is why the Florida judge ruled that the entire law is void.

Monday, February 07, 2011

Reagan's Mistakes

In the flurry of praise form both sides on the 100th anniversary of Ronald Reagan's birth, no one has reminded us that not everything went well. There were some huge blunders during the Reagan administration.

The illegal immigrant amnesty was one of them. It was supposed to be a package deal - we stop new illegal immigrants from coming in and we allow the ones already here to become citizens. Conceived as a one-shot deal, it has become the model for new amnesty proposals covering two or three times as many people as the original. In the meantime, increased border security never happened.

The Iran-Contra Affair was the biggest blemish on Reagan's administration although it had the least long-term affect. it was also extremely complicated. Around the time of Reagan's election, communists took control of Nicaragua. Reagan wanted to help the anti-communists (Contras) but many in Congress were afraid that it would turn into a new Viet Nam. Congress passed a law over Reagan's veto forbidding the US to aid the Contras. In addition, the communists had some sympathizers in the US. At the same time, Iran was in a terrible war with Iraq and six US businessmen had been taken hostage in Lebanon by Iran-funded Hezbollah. What happened was that we sold arms to Israel which sold them to Iran for a profit. The profit was sent to the Contras. This clearly flouted the law that Congress had passed. This was further complicated because there was considerable question about Congress's authority to dictate how the President conducts foreign affairs.

Oliver North who worked in the White House at the time took the blame for the operation and insisted that Reagan had no idea what had happened. Reagan told some outright lies about the scope of the arms sale. Later North admitted that Reagan had been part of the operation all along and went so far as to lecture Congress about his duty to protect the President.

The two mistakes that we are still paying for today both involve Islamic terrorism. The Soviet Union invaded Afghanistan during the Carter administration. Carter did very little in response to this. The Reagan administration armed the rebels with advanced weaponry and eventually the Soviets withdrew. Instead of staying and helping the Afghans to rebuild, the US also withdrew. This created a power vacuum that led to the creation of the Taliban. There are rumors that Osama bin Laudin was trained by the CIA while he was in Afghanistan but this is solely based on both having been in Afghanistan in the 1980s.

During the 1980s, the PLO took over part of Lebanon and began shelling Israel. Israel retaliated. The UN intervened and a peacekeeping force largely made up of Americans was sent to Lebanon to keep the two sides separated. In one of the first large suicide-bombings, a truck of explosives ran some roadblocks and blew up a building housing hundreds of Marines. 241 Marines were killed and the peacekeeping force was quietly withdrawn. This was one of the events that convinced Osama bin Lauden that it would be easy to drive the US out of the Mid-East (Viet Nam and Clinton's withdrawal from Somalia were the other two events.)

These last two contributed to the rise of Islamic terrorism. About the best thing that you can say for Reagan is that this was still over the horizon while communism was a current danger during his administration.

Sunday, February 06, 2011

Reagan and Today's Republicans

For the last few years the Democrats have insisted that the Republican Party has drifted so far to the right that even Reagan would not be welcome. This is on the basis of two main issues - taxes and immigration. How true is this?

Reagan is well-known for his cuts in the income tax rate. One of the first pieces of legislation passed under his administration was a cut in the tax rates which was phased in over three years. In 1986 he presided over the biggest overhaul of the tax code in decades. The number of tax brackets was cut and the nominal tax rate was reduced for most people. This was also the basis for the charge that he raised taxes. What happened?

The big goal of the 1986 tax overhaul was to simplify the taxes. Many wealthy were able to use loopholes and escape paying taxes. These loopholes had been enacted over decades and the reason for most had long since passed. Reagan made it clear that the tax simplification was to reduce tax rates while being revenue neutral. That meant eliminating most loopholes. Depending on how you look at it, eliminating these loopholes amounted to one of the largest peace-time tax increases in history. Regardless, the overhaul was popular. The existence of the loopholes meant that people were not being taxed evenly and that was a source of discontent. So, some people saw their taxes go down and some people saw their loopholes eliminated. It all evened out.

Since 1986 many loopholes have been added back into the tax code and some Republicans are calling for a new overhaul comparable to the 1986 one rather than continuing to fight over the Bush tax cuts. These calls include Tea Party members. That places Reagan well within the current Republican values.

What about amnesty for illegal immigrants? Reagan championed it but since then it has shifted from a conservative position to a liberal one, one that President Obama refuses to take a position on.

It is harder to say what Reagan would do now. The deal during his administration was that amnesty would be accompanied with increased border control. The Mexicans already here could choose to stay but we would stop more from joining them.

In the decades since the Reagan amnesty, border patrol has become a joke. Simply building a big fence has been called cruel. Border agents have been pulled back from the border. Cities have become "sanctuary cities" with orders to the police to stop illegal aliens from being deported. Arizona is being boycotted because of a law calling for tough enforcement.

So, the deal under Reagan was a giant failure. The number of illegal immigrants currently in the country is several times the number under Reagan and there is no progress on controlling the border. For all intents and purposes, the Democrats are calling for an open border with Mexico. Reagan was against this so he would probably side with the current anti-amnesty forces.

So, Reagan would still be welcome in today's Republican Party. What about JFK? Kennedy cut taxes and was pro-military. Would he be welcome among the today's Democrats?

Friday, February 04, 2011

A Sputnik Moment?

In his State of the Union speech, President Obama said that we are having a Sputnik Moment. What does that mean?

For most people alive today, Sputnik is history. The launch happened before Obama was even born. I was about two and a half at the time so I certainly don't remember it. That means that it needs to be put in context.

America ended World War II feeling pretty good about itself. We defeated Germany and Japan. We were also the world's only nuclear power. That changed in 1949 when the Soviet Union exploded its first nuclear weapon. Still, we were convinced of our technological superiority.

When Sputnik was launched in 1957, it shocked the world for several reasons. One was that we assumed that our missile program was more advanced than the Soviets. During WWII, the Germans had the best rocket scientists and we had the best of them working for us.

Another shock was that it meant that the US was potentially in range of Soviet nuclear missiles. We had depended on a Fortress America where our distance from Europe would protect us from the brunt of any conflicts. This worked well in WWII. We escaped the devastating bombing that leveled Japan and most of Europe. But now we were vulnerable to weapons that were more powerful than anything used in WWII (by that time both sides had hydrogen bombs which were much more powerful than the atom bombs dropped on Japan).

The final shock was that we had not seen this coming. We had no idea that the Soviets were so advanced. What other secrets wre they hiding.

Remember, at that time we were in a state of low-level war with the USSR. This was fought through proxies such as Korea, Viet Nam, Cuba, and China but it was a real shooting war which threatened to turn into WWIII if the Soviets gained a significant advantage. The USSR had enough troops and tanks to overrun western Europe if they wanted. We had to show that we were their equal.

Sputnik launched the Space Race. This consisted of massive spending on both sides for both military and civilian uses. The military part was simple - to be able to survive a first strike and retain the capacity to annihilate the enemy. This lead to the concept of Mutually Assured Destruction (MAD) where each side knew that both would perish regardless of who started a nuclear exchange. While it sounds extreme, MAD kept the peace through the end of the USSR.

The civilian side of the space race was also important. It gave the nations a chance to show their capabilities without being belligerent. It also acted a public relations, showing what each side could accomplish.

But we were at a huge disadvantage. The Soviets were years ahead of us and they always knew how to build more powerful booster rockets than we did. President Kennedy knew that we could never catch up as long as the goals were low-earth orbit so he raised the stakes - we would go to the moon. Both sides needed new technologies for this so we started on an even footing.

The race to the moon was a real race. There was an urgency because we knew that if we did not do it, the Soviets would.

Obviously, we won. The Soviets gave up on the space race and we lost interest soon after that. The number of lunar mission was cut and both sides turned their eyes back on low-earth orbit.

So, our Sputnik Moment galvanized the nation into a 12-year effort that ended in a moon landing.

Contrast that with today. China has built more windmills than we have and they have the world's largest super computer. Neither accomplishment is significant. They signal a lack of will rather than a lack of ability on our part. Windmills are still a young technology and there is considerable question about the current generation's ability to generate more power than was used in making the windmills in the first place. Massively parallel supercomputers are easy to build (using technology developed in the US). A few years ago a group of volunteers built a supercomputer over a weekend using Linux notebooks and WiFi, just to prove how simple it is.

No country in the world has demonstrated that it is so advanced in a field that it will take most of a generation for the US to catch up. Similarly, we are not in a hostile competition with anyone. Relations with China are infinitely better than they were with the USSR during the Cold War. The closest thing to the Cold War today is the struggle against Muslim extremism and that is purely ideological.

The biggest thing about a Sputnik Moment is that no one needs to tell us that we have had one. In fact, if the President feels the need to tell us that one has happened then almost by definition it has not happened.

Thursday, February 03, 2011

Reagan at 100

The Founding Fathers knew a government can't control the economy without controlling people. And they knew when a government sets out to do that, it must use force and coercion to achieve its purpose. So we have come to a time for choosing. (October 27, 1964)

I'm sure that President Obama would agree with this quote. The difference is that he sees nothing wrong in controlling people. That is what the progressive movement is still about. That is what the nanny state is all about, too. The people at the top are sure that they know what is best for people and they want everyone to conform. Obamacare makes sure that you have to carry a minimum amount of insurance. Trains control where you go and when. The EPA has issued orders that will force smaller cars and more expensive power.

Obama wants to raise taxes on the rich because he thinks that government can make better use of their money than they will.

Reagan understood that no single solution works for everyone and freedom includes the option to make the wrong choice. He also wanted an America that is strong enough to protect these freedoms.

When Reagan spoke these words we were in a decades-long competition with communism which tries to eliminate all choice. When Reagan became president he made it his goal to eliminate communism. He was successful. Much of the world lived under communist rule in 1980 and it was expanding across Africa and South America. The principle exporter of communism, the USSR collapsed a few years after Reagan's presidency ended and only a handful of true communist countries remain. China can no longer be called communist and even Cuba is loosening its grip on people.

Very few presidents leave such a mark on the world. President Obama does not have a chance of accomplishing as much for the simple reason that he does not have the vision for it. Neither did Clinton or either Bush. George W. Bush tried to with his democracy initiative but he failed on the follow-through.

People did remember Kennedy's inauguration speech on its 50th anniversary but the Kennedy administration actually amounted to very little. His biggest achievement was setting the goal of landing a man on the moon. Johnson's centennial came and went without note even though he gave us our modern welfare state. Nixon may be remembered but not in a good way. Ford was barely remembered at his death. People think of Clinton fondly now but by the end of his term he had turned his presidency into an SNL punch-line ("What did you expect? We're the Clintons.")

It is scary to think of how different this country would be if Jimmy Carter had won a second term or George H. W. Bush had won the primaries.

Tuesday, February 01, 2011

The Strange Justification for the Individual Mandate

Yesterday Federal Judge Roger Vinson ruled in a Florida court that the individual mandate in Obamacare is unconstitutional. His reasoning is the same as most critics of the law - that nearly any economic choice has economic consequences so this opens the door to unlimited Congressional power.

It would be a radical departure from existing case law to hold that Congress can regulate inactivity under the Commerce Clause. If it has the power to compel an otherwise passive individual into a commercial transaction with a third party merely by asserting -- as was done in the Act -- that compelling the actual transaction is itself 'commercial and economic in nature, and substantially affects interstate commerce,' it is not hyperbolizing to suggest that
Congress could do almost anything it wanted.

The response, which was echoed against yesterday, is interesting.

The justification says that the individual mandate is needed in order to assure enough new, healthy people to offset the cost of the other provisions, especially the prohibition against preexisting conditions. Without the influx of new insurance subscribers, the whole structure falls apart.

If you look carefully at this, the Commerce Clause is being invoked to assure that companies providing health insurance will be profitable at the expense of young, healthy people who would be justified in only carrying catastrophic care insurance. In exchange for this new influx of cash, the insurance companies will be required to carry everyone and will be subject to tight limits on their rate structure and the percentage of their income can be taken as profits.

The people defending the law never point out the role of insurance company profits but they are central to the argument.

In a way, this law was designed to be a back-door nationalization of health care. Instead of seizing the insurance companies and replacing premiums with taxes, the law keeps things in private hands. The result is the same except for the overhead that will go to the insurance companies.

But all of this dodges the question of Constitutional authority. Was Congress within its rights when passing this law? Proponents of the law sure as former Majority Leader Pelosi seemed to think that the result was so important that Constitutional issues should be brushed aside. Possibly they think that health care should be evaluated as a unique issue.

Is it unique? Are there any other situations where a goal for the common good might be subsidized by forcing people to subscribe? How about high speed trains? They are a goal of the Obama Administration but passenger train service in the US loses money. What if everyone was required to buy a train pass? Total ridership would climb some but revenue would increase more because trains do not meet most people's needs. How is this different from the individual mandate?

Of course, passenger rail is already tax-subsidized. It would make more sense to raise taxes in order to provide more subsidies. But that is the point. Congress could levy a tax on the population with credits for health policies already in place and use the revenue to subsidize coverage. Why didn't that take this approach? Because they could never sell it. Instead they disguised it.

Judge Vinson was the 4th judge to rule on health care and the second to rule against it but his ruling is the most important to date. His ruling was on the suit filed by 26 states so it affects the most people. Also, he struck down the entire law, although he delayed implementation pending appeal.

It seems that most laws include a small disclaimer that says that if part of the law is found to be unconstitutional, the remainder will remain in effect. That clause was included in early drafts of Obamacare but dropped from the final version. This makes it an all-or-nothing ruling. If any part of the law is found to be unconstitutional then the entire law is nullified.

How did this happen? I suspect that the insurance companies had it taken out. They have no intention of offering coverage on demand unless the individual mandate is in effect. That makes the fight over the mandate a very high-stakes battle.