Friday, December 30, 2011

Happy New Year?

A week ago a bank in the building my wife works in posted a sign "We will be closed for the winter holiday". Now their sign reads, "We will be closed for New Year's Day". If naming Christmas is unacceptable in today's multicultural world then why is New Years acceptable? It is not the Chinese new year nor the Jewish new year nor the Islamic new year. They all have their own calendars and numbering systems.

Until recently we expressed the date as AD for "amno domini" which is Latin for "year of our lord" based on a calculation of when Christ was born. Dates less than zero were "BC" for Before Christ. This has been relabeled "common era" so tomorrow night we will celebrate the start of 2012 CE.

The modern calendar has a lot of the same heritage as Christmas. The date for each came from Roman holidays. It and the Catholic Church are the two main Roman institutions continuing in the modern world. The current calendar was created by Pope Gregory XIII. Because it was seen as a Catholic calendar it was not adopted for centuries by protestant countries (England adopted the Gregorian calendar in the 18th century, Russia and Greece in the 20th century).

The Gregorian calendar is the most accurate in general use which is why it is the unofficial standard for the world but it is still tied to Christianity and Europe. You would think that it would be just as culturally insensitive as Christmas which is celebrated in many non-Christian countries (China and Japan to name two).

Maybe I shouldn't be pointing this out. I could start a war on New Years.

Thursday, December 29, 2011

Waiting for Reagan

Republicans still seem to be waiting for the next Reagan to appear. It isn't going to happen this election. Politicians like Reagan appear rarely - once in one or two generations and it takes far more than wanting to be Reagan to actually accomplish it. Barack Obama proved this. He expected to be a transitional president like Reagan or FDR. At best he has been an LBJ, creating an expensive new entitlement while polarizing the country.

If there is a new Reagan on the horizon he is probably a first-term governor of a large state. I can think of a half-dozen likely candidates but none of them have the experience or accomplishments for a presidential run. That is 4-8 years off.

In the meantime, I'd like to point out how hard it might be to recognize the next Reagan. The original one did not have a cake-walk to the White House.

California was a bit of a national joke while Reagan was governor. The idea of an actor running a state seemed preposterous. He was not really taken seriously until he bought airtime and addressed the nation during his run in 1976. He lost. The party was not going to force a sitting president out of office, even if he was unelected (Ford became Vice-President after Agnew resigned and President after Nixon resigned. 1976 was his first time on a national ballot). The high point for Reagan came at the Republican convention when he was nominated. A few minutes were set aside for a demonstration by his supporters. It exceeded the time allotted by an hour. Reagan's supporters were dedicated even if his candidacy was doomed.

Reagan's 1976 run caused some hard feelings. Ford dying believing that he would have won the election if Reagan had supported him.

While Reagan did win the nomination in 1980, George H. W. Bush made him work for it. Many Republicans worried that Reagan was too conservative and preferred the more moderate Bush. Plus the Ford supporters were still angry about 1976.

Polls taken during the Summer showed that voters were dissatisfied with both candidates. A theoretical challenger polled higher than either Reagan or Carter. John Anderson took advantage of that and ran as an independent. Anderson was the last liberal Republican and hoped to capture the dissatisfied voters. He probably did not affect the election - even if everyone who voted for Anderson had voted for Carter, Reagan still would have won.

The final polls before the election showed Reagan and Carter tied with a large block still undecided. Voters were still dissatisfied with both candidates. Several political cartoons that ran the day of the election showed the voters flipping coins to decide who to vote for.

It turned out that most of the undecided voters broke for Reagan. This was unusual. Undecideds usually break for the incumbent. Reagan always had a large percentage of closet voters - people who would not admit to voting for him, even to a stranger taking a poll.

Reagan had deep coattails and the Republicans took the Senate. This did not last. The economy entered a double-dip recession and unemployment hit a post-depression high. In 1982 the Democrats ran against Reagan and made huge gains in Congress and in state governments. The only Republican to challenge an incumbent Democrat and win was John Kasich and he was aided by redistricting.

The reason we remember Reagan so fondly is that he was able to work with a Democrat-controlled Congress and still pass a conservative agenda. Also, unlike the current recovery, the recovery in 1983 was robust. Unemployment was still high in 1984 but it was dropping fast and people felt good about their country and its future. Reagan also realigned the electoral map. The south went from being a stronghold for conservative Democrats to one for Republicans. Reagan was not able to reverse the growth of government but he slowed it.

None of the current group of candidates is likely to be able to match Reagan's successes. Even Reagan could not. There are no tools left to use. Taxes have already been cut, interest rates lowered and the deficit run up to unsustainable levels. Massive deregulation might help but it is hard to believe that Romney or Gingrich would want to shrink government enough to help and Ron Paul has no chance of winning (or getting anything passed if he won).

That leaves that group of governors. Several are charismatic and dedicated to reshaping government. One of them might be able to take up where Reagan left off. But they need a success on the state level to run on.

In the meantime we need to settle for the most electable candidate to prevent the Obama administration from permanently messing up the economy.

Tuesday, December 27, 2011

Our Non-functional Congress

The mess surrounding the payroll tax cut (technically a Social Security tax holiday) shows once and for all that Congress is dysfunctional. The Democrats' great triumph was to kick the can down the road - and not very far. The extension that was passes was just long enough for Congress to go on break and start bickering again. A two month extension will not stimulate the economy. Neither will a ten month extension beyond that. The amount of the cut (around $20/week) is too small to do any real stimulating.

The tax cut was originally sold as an economic stimulus but the economy continued to languish so it should have been allowed to expire. Yes, that would have raised taxes on most workers but consider the consequences of continuing it. This tax funds Social Security. Cutting it turned a small surplus into a deficit. The country cannot stop writing Social Security checks so the Treasury has to make up the difference by borrowing so this tax cut adds to the deficit.

The Democrats' solution to this was to make up the difference by taxing millionaires. That would probably be the first step in turning Social Security from a self-funded entitlement (albeit, one with a demographic time bomb) into an income transfer from the rich to the elderly.

There is the source of the deadlocks. The Democrats want to reshape tax policy to redistribute income. The Republicans simply want to raise the money needed to run government. The Democrats see the growing divide between the rich and poor as a problem that needs an immediate solution. The Republicans see government policy as an impediment to growth which will benefit everyone.

In addition to genuine disagreements about the role of government, the Democrats have decided that the path to success at the polls is to allow the Republicans to offer solutions for Medicare, Medicaid, and Social Security. Once the Republicans' plans are on the table, the Democrats can pretend that there is no problem and accuse the Republicans of trying to end these programs. The Democrats' insistence that the Republicans are trying to end Medicare was labeled the "Lie of the year" by Politifact. Politifact points out that the Democrats would be on solid ground if they said that the Republicans were trying to privatize Medicare. Instead, the Democrats use the description "end", accompanied by video of a Republican literally throwing an old woman over a cliff.

According to the book Confidence Men, the Obama administration began health care reform with the intention of controlling costs. After switching their focus to insurance reform, their plan for controlling costs evolved. It now consists of doing nothing as long as possible in the hope that the eventual imminent disaster will break the deadlock.

So, how did we end up at this point?

Congress has always been divided but for most of the 20th century both parties had liberal and conservative members.That changed in the late 1970s. Ronald Reagan established a new Republican coalition of conservatives, Christian fundamentalists (including anti-abortion activists), and libertarians. The party ejected liberals and welcomed conservative Democrats, especially ones from the south who felt that the Democratic Party had left them behind.

The Democrats controlled the House for generations. With the retirement of Speaker Tip O'Neall, the Democrats began using parliamentary tricks to stop Republicans from offering amendments. This lead to a more confrontational Republican party. Newt Gingrich won the position of Minority Whip by promising to be more aggressive. He lived up to this, going so far as to undercut President George H. W. Bush's tax compromise (to this day, Bush still thinks of Gingrich as a "bomb thrower").

In 1992 the Democrats won the Presidency and both houses of Congress. New Democratic members of the House were asked to swear that they would not work with the Republicans. Two years later the Republicans won control of both houses of Congress with Newt as Speaker.

While President Clinton took the "third way" as a moderate, the liberal wing of the Democrats fumed. Enough of them defected to Ralph Nader's 3rd party run in 2000 to elect George W. Bush.

Just as Clinton was a center-left Democrat, Bush was a center-right Republican. The Left fumed over such things as the war in Iraq and the Patriot Act. The fact that the Democrats did nothing to end these when they retook Congress in 2006 just made the Left more angry.

Just as eight years of Clinton's center-left policies revitalized the far left, eight years of Bush's center-right (plus a couple of months of Obama's far left government) revitalized the far right. Moderates from both parties have been targeted by their own party. The most prominent of these was Joe Lieberman whose lifetime voting records was 90% liberal but was pro-Iraq war.

Which brings us to today. Neither party allows moderates to chair powerful committees. Thanks to Gingrich, the Republicans are against any tax increases. The Democrats are against any changes that do not raise the tax rate paid by the rich. During the Super-committee meetings the Republicans offered a package that would have lowered the marginal tax rates while eliminating deductions with the result of raising revenue. The Democrats rejected this and anything else that did not include $1 trillion in new taxes on the rich.

Neither side has any room left for negotiation and, with an election approaching, each is afraid of making any serious proposals.

So, where does that leave us? At best, Congress will be deadlocked until the next election. Possibly one side of the other will win big enough to crush the opposition. The other possibility is that a less-polarizing Republican will win and be able to work with the Democrats. President Obama has already shown that he has no desire to work with the Republicans so a status-quo election would result in 2-4 more years of deadlock while the country's financial problems continue to grow.

Friday, December 23, 2011

The Economics of Scrooge

Slate recently published an article entitled "What I like about Scrooge" by Steven E. Landsburg. It offers up various of Scrooge's pre-redemption traits as admirable and worthy of emulation. If this article is to be believed, the spirits of Christmas did Scrooge and the world a disservice by reforming Scrooge. He was a better man as a miser.

Landsburg lays out his case:

Here's what I like about Ebenezer Scrooge: His meager lodgings were dark because darkness is cheap, and barely heated because coal is not free. His dinner was gruel, which he prepared himself. Scrooge paid no man to wait on him.

Scrooge has been called ungenerous. I say that's a bum rap. What could be more generous than keeping your lamps unlit and your plate unfilled, leaving more fuel for others to burn and more food for others to eat? Who is a more benevolent neighbor than the man who employs no servants, freeing them to wait on someone else?

We can see from this that Landsburg views the world as a zero-sum system. There is a fixed amount of everything and the only way that anyone can have more is if someone else has less. He expands on this:

Oh, it might be slightly more complicated than that. Maybe when Scrooge demands less coal for his fire, less coal ends up being mined. But that's fine, too. Instead of digging coal for Scrooge, some would-be miner is now free to perform some other service for himself or someone else.

{...} In this whole world, there is nobody more generous than the miser—the man who could deplete the world's resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largess far and wide.

All of this puts Landsburg at odds with leading economic theory. The whole idea of economic stimulus is that money, once earned, is spent again. The speed that people earn and spend money determines economic growth. When this slows then the economy contracts causing a recession or a depression. For the last four years, economic policy has been centered on encouraging people to spend more money. Economists devote their careers to calculating how to get the most benefit from spending. While they disagree on how money should be spent, they are unanimous that taking money out of circulation is the worst thing that can happen.

Landsburg even gives examples of this. His hypothetical coal miner could have made more money if Scrooge expanded the market. Instead he either has to look for alternate sources of income or just live without (which Landsburg would probably applaud). One wonders if Landsburg would appreciate the freedom of selling fewer articles?

Ironically, Scrooge's income depends on people behaving differently than Scrooge himself. Dickens never specifies what Scrooge does. He is often portrayed as a money lender but Dickens describes his business as being in a warehouse and Scrooge is familiar with the exchanges. Possibly he is a speculator, buying and selling commodities for a profit. Regardless, his income depends on demand for something - money, commodities, etc.

It should also be pointed out that Scrooge's behavior goes beyond simple miserliness. If Scrooge was solely interested in money then he would never pass up a free meal at his nephew's expense. A better explanation is that Scrooge was punishing himself for choices made in his youth. It was only after facing those choices and the eventual resolution that he comes out of his shell and becomes a friend to his nephew and employee.

So why did Landsburg write such an article? Possibly he is a devoted follower of Al Gore and sincerely wants everyone to live like Scrooge in an effort to conserve the planet's resources (a sacrifice that Gore himself is unwilling to make). More likely this was just an attempt to fit Slate's format of justifying counter-intuitive titles.

Merry Christmas

Tuesday, December 20, 2011

War on Christmas or on Christians?

A few years ago many (most) large retailers stopped using the word "Christmas". Instead they simply suggested that you might want to buy presents for some unnamed occasion. Even Christmas trees were relabeled "holiday trees" or "family trees". A search for Christmas merchandise on Walmart's web site helpfully corrected suggested "did you mean Holiday?". This was labeled the War on Christmas and pressure was put on retailers to go back to referring to December 25th as Christmas instead of the Winter Holiday.

This year I have seen a number of people on the left insist that there never was a war on Christmas. It was all an invention by Fox News. People who avoided the word "Christmas" only did it out of sensitivity to the many non-Christians among us who might feel oppressed by hearing the name of an important Christian holiday.

In prior years some of the more honest on the left have said that they have no problem with Christians celebrating Christmas as long as they do it in their own homes.

A recent column by Linda Chavez put this in perspective. Strangely, the column had nothing to do with Christmas. It was about the reaction to football player Tim Tebow who is known for praying in public. Chavez quotes Connecticut Rabbi Joshua Hammerman who wrote in Jewish Week:

If Tebow wins the Super Bowl, against all odds, it will buoy his faithful, and emboldened faithful can do insane things, like burning mosques, bashing gays and indiscriminately banishing immigrants.

I had forgotten that the left thinks like this.

Here is the background on Hammerman's column. Sometime in the last few decades a group of intellectuals decided that Christianity is an intolerant and destructive religion and, if left unchecked, it will inevitably lead to another Holocaust. Accordingly, public expressions of Christianity must be suppressed. Further, politicians with strong religious beliefs are to be feared.

Once you know that the left thinks this way then the war on Christmas and the attacks on Tebow are easily understood.

The strange thing about this belief is how strongly it is rooted in the left's consciousness. It colors their views of everything else.

The TV show All American Muslims is an example. This shows on TLC and is designed to convince Americans that Muslims are just like everyone else. Since a show about normal people doing normal things is boring, the ratings for the show are dismal. Sponsors have dropped the show which has caused an uproar from the left (which does not watch the show, either).

But here's the thing - world-wide, there is much more violence being done in the name of Islam than Christ but it is ingrained into the left that only Christianity is violent. That world-view leaves them unable to see anyone else as violent or intolerant. Any attempts to point out flaws in Islam or elsewhere are taken as examples of Christian intolerance.

Which leaves us with a group that actually is trying to suppress any public mention of Christianity including Christmas. Right now they are failing so their fallback solution is to insist that this was never more than an invention by Fox News. But every now and then someone lets their real feeling slip in public.

Thursday, December 15, 2011


A big recent political issue has been the XP pipeline. If this is ever approved, it will bring oil from Canadian tar sands to Texas for refining. Environmentalists have made several objections to the pipeline but most of them are hollow. The most commonly heard objection is the consequences of a leak. What is not mentioned is how many pipelines already carry crude oil and refined gasoline across the country. This would be one of many and would not represent a new hazard.

The real objection comes from James Hansen of NASA's Jet Propulsion Laboratory and the father of global warming theory. His followers want to keep this resource untapped forever. This will not happen. Canada has made it clear that China will take the oil if we do not.

The arguments in favor of the pipeline are that it will create jobs and that it would reduce the US's reliance on oil from dictatorships. Some supporters have taken to calling the pipeline "ethical oil".

All that is needed to start work is an ok from the White House.

Rather than offend either constituency, President Obama has put the decision off until after the election. This allows him to convince both camps that he will eventually side with them.

The House of Representatives has talked about forcing the issue by tying the approval to an extension in the Social Security Payroll Tax cuts. President Obama has indicated that he would veto such a bill. This gives you a clear idea of the President's priorities.

A similar controversy has erupted around fracking (injecting water and chemicals at high pressure into a well to increase production). This has been used for decades in shallow gas and oil wells. New technology makes it possible to drill into deposits far deeper than before. When combined with fracking, this opens up huge quantities of gas and oil.

Again, the main arguments against fracking are weak, especially since it is not new. Few people admit it but the real objection is, again, to ever recovering a hydrocarbon-based fuel and is driven by fears of global warming.

The White House has stayed out of this controversy but many Democrats have jumped on board with calls for an indefinite moratorium on fracking.

During his run in 2008, Obama said that he wanted to see energy prices increase. The easiest way of doing this is to cut the US off from domestic (or near-domestic) sources of energy. Imported energy is always more expensive.

But Obama has an election to win so he can't come out and say this. But, he and the Democratic leadership cannot hide their actions. If allowed, America will resume being an exporter of gas and refined oil (but still an importer of crude oil). The Democratic leadership is trying to keep this from happening.

Wednesday, December 07, 2011

Pearl Harbor 70 years later

Pearl Harbor changed my life. In fact, without it I would never have been born.

My father was the son of a Missouri farmer living in St. Lewis when the attack happened. He enlisted the next day and volunteered to be a fighter pilot. In the US military, you had to be an officer to be a pilot so they sent the pilot volunteers to college for an intensive degree program. My father was sent to Macalester in Minnesota. While he was there he met my mother who was also a student there.

As the war progressed, the Army (The Air Force was still the Army Air Corps) decided that it had more pilots than it needed. My father's medical status was reevaluated according to new standards and he was transferred out of pilot training and sent to California to be trained as a radio operator and waist gunner. My mother accompanied him and they were married there.

My father survived the war without injury despite a close call when his plane was hit by anti-aircraft fire and had to ditch at an emergency air strip.

After the war, my father used the GI Bill to finish the degree he started in the military and to become a physician. He wanted to practice in a small city and saw an advertizement for Zanesville, Ohio in a medical journal. It was just what he was looking for and they moved there in 1952. I was born a couple of years later.

So, a chain of events that began with the bombing of Pearl Harbor led to my birth.

I am not unique in this. The entire Baby Boom generation is a result of the disruption of WWII that began with Pearl Harbor. The war and the GI Bill probably did more than any other event to change America from an agrarian nation to an urban one.

It is hard to say what the world would be like if the Japanese had not attacked 70 years ago. FDR wanted to enter the war against Hitler but most of the nation was strongly isolationist. Japan was the closer enemy but Hitler was the greater threat. If Japan had not attacked us when it did, we might have entered the war too late. We might have ended up with a Europe dominated by Germany and the USSR or even just the USSR.

Considering the alternatives, Japan might have done us a favor by forcing us into the war. Not that this excuses the attack. It was an act of incomprehensible savagery and because of Pearl Harbor, the US embraced the war instead of being dragged into it.

Monday, December 05, 2011

Obama and Social Security

President Obama is trying to make incremental changes in Social Security that will eventually change it in fundamental ways. It started last year in the deal over extending the Bush tax cuts. Part of the deal included a cut in the "payroll tax". This is the term that the Obama administration uses for the tax that funds Social Security.

FDR's grand bargain worked like this - everyone who works pays into Social Security* and everyone can collect when they retire based on what they paid into the system. This gives the impression that Social Security is a retirement account which accounts for a lot of its popularity. Retirees feel that they earned their benefits by paying into the system their entire working life.

Social Security is actually a pay as you go system. For most of its existence it has run a surplus which is immediately lent to the general fund at interest and spent. Demographics say that soon, Social Security will start running a deficit and have to redeem the loans. Eventually it will run out of money and only be able to cover 70-some percent of its expenses.

By cutting the payroll tax, Obama pushed Social Security into deficit years early. It has survived the year by redeeming its loans (known as special bonds).

The payroll tax cut has not helped the economy much. Like the Making Work Pay Act, it's effect on the average paycheck is small enough to go unnoticed. Regardless, the Obama administration is making two efforts. One is to extend the tax cut and offset it with a surcharge on the rich (this time defined as people making at least $1,000,000 instead of $200,000). The other effort is the jobs bill. This would provide further cuts to Social Security and would cut the employer's share as well. This did not name any off-setting taxes but the bill calls for a tax increase on the wealthy.

If Obama is reelected and especially if he gets a Democratic majority in Congress then I expect to see this trend continue - shifting Social Security taxes from lower-wage workers to the rich. The reason for this is that many liberals consider the Social Security tax to be regressive. It is the same rate for everyone and it is only paid on the first $200,000. Anyone who makes more that that amount will pay a smaller portion of his income in Social Security taxes.

The outcome of this will be to remake Social Security into an income transfer system taking money from the rich and giving it to retirees. It will break FDR's grand bargain. The good news for conservatives is that this will make Social Security easier to reform. The current argument that "I paid into it so I earned my benefits," will be eliminated as it is turned into welfare for the elderly.

A change of this magnitude should be openly discussed instead of hidden behind the euphemism "payroll tax cuts".

* Note - under FDR's original system a lot of people including government and farm did not pay into the system. It was later expanded to include almost everyone although government workers still have their own retirement systems.