Tax Policy Questions

I have several questions that I would love to ask President Obama on tax policy:

You have said that the rich need to pay their share and called for repealing the Bush tax cuts for people making over $250,000 per year. Does this mean that you consider the Clinton tax rates to be the optimum fair share?

Follow-up - if so then how did you arrive at those rates? The highest marginal rates have varied enormously over the last century. Why those rates? Does Bush-hatred figure into this calculation?

If you don't think that the Clinton rates are a true fair share then what do you consider fair and why aren't you starting with those figures?

You recently indicated that the way to stabilize Social Security is to raise the Social Security tax rate on the rich. How will this work? Currently Social Security taxes are only paid on the first $100,000. Will you raise taxes on people making between $100,000 and $250,000 or will you have a doughnut hole in the taxes? The current cap goes back to FDR's original compact that both the amount of income that can be taxed and the highest retirement rate are both capped. If you remove the cap on taxes will you also remove the cap on retirement income or are you planning on scrapping FDR's compact?

Do you intend to raise both income tax and Social Security taxes on the rich?

In your speech on the deficit you quoted a CBO report saying that in ten years seniors the Republican plan for Medicare would require seniors to pay over $6,000 per year for insurance to meet current coverage. The same report says that the current level of coverage cannot be continued for ten years without major changes. What changes are you planning to make the system solvent? Will this involve additional taxes on the rich?

Last year at a kick-off event for the "Recovery Summer" you talked about how money spent on a road project would generate future spending as workers spent their wages on other products. This effect also happens when the rich spend their money so, taxing the rich has negative economic consequences that offset the positive effects of government spending. Has your administration calculated the point where taxing the rich will cause more economic harm than is gained through government spending? If so, will your economists make these figures public?

Currently the US has the second-highest corporate tax rate in the developed world. At the same time, the tax code is riddled with tax breaks that allow some corporations to pay little or no tax. Tightening up on tax breaks and loopholes would allow the tax rate to be cut without losing revenue. Failing to do this gives the impression of crony capitalism where lobbyists and friends of the administration like GE can avoid paying taxes while smaller corporations have to pay the full rate. Will you consider revising the corporate tax code?

Which do you consider more important - for the tax code to promote economic growth or for it to promote income parity?

Should We Take Trump Seriously?

Quick answer - no.

Long answer - the election is so far away that any polls taken now have more to do with name recognition than preference. Most of the Republican candidates are governors who are not know outside their state. If Trump is still leading in the polls in ten months, then it is time to take him seriously.

Consider how far away the election is and how much can happen in that amount of time. Howard Dean finished 2003 with the largest campaign treasury and was considered a shoe-in for the candidacy. At this point in 2007 it was assumed that the election would be between Hillary Clinton and Rudy Giuliani. Even in 2008, the Super Tuesday primaries left Clinton ahead. at various points in 1992, Ross Perot was ahead in the polls.

Then there is Trump himself. He has been on all sides of the issues over the years. At times he has praised Obama and criticized Reagan. He was for universal coverage before he was against it. His views on abortion are still confused. There is the fear that the positions he holds now are ones that will impress conservative Republicans and do not represent his real views.

His personal life is a mess.

Many of Obama's problems come from his total lack of experience - he spent half of his four years in the Senate campaigning. Trump has no experience in government.

Obama's arrogance also causes him problems. He was reported to say how difficult it is filling such jobs as chief of staff and political adviser since no one could do these jobs as well as he could. Trump makes Obama seem shy and retiring.

The biggest argument in Trump's favor is that a businessman might handle running the government better than politicians. Ross Perot ran on this argument and lost. What is more, Perot had a better record of success than Trump. Several of Trump's projects turned out badly. His casinos have gone into Chapter 11 twice and at one point Trump was $900 million dollars in debt. He claims to be worth more than $2 billion but other sources have put the figure much lower. The most successful enterprises with Trump's name are ones that he was not involved with beyond licensing his name.

There is nothing in Trump's history to suggest that he would make a competent president and many of his statements on foreign policy are outright scary.

So why are we even talking about him? I am because the Washington Post ran multiple columns on him yesterday. The Post and other news outlets want an early start to election coverage because they think it will sell more papers.

Denying the Debt

The biggest obstacle to expanding the government is the size of the national debt. If we can't afford the government we have now, how can we afford a larger one? There have been various arguments from the left about how to solve this. President Obama's solution mainly boils down to taxing the rich. Others are into deep denial.

Writing in the Huffington Post, Bob Burnett gives an amazing example of denialism. Early on he says "If you and I owed $14,280,782,221,253+ we'd be stressed. But the US isn't an individual, or a corporation, and so there is an imperfect analogy." He then uses household finances as an analogy.

Burnett starts out with some sleight of hand to reduce the debt.

To complicate the analogy, only 67 percent of the US debt is debt held by the public, the other 33 percent is "Intragovernmental Holdings ...securities held by Government trust funds, revolving funds, and special funds," the most important of which is the Social Security Trust Fund -- in other words money we borrow from ourselves. Of course, families don't have "intragovernmental holdings" but many borrow from family members or friends. Suppose that you have a trust fund you can access only in an emergency; if we borrowed from it because I am unemployed that would be analogous to the circumstances that account for one-third of the US national debt.

There are several problems here. Yes, a third of the national debt is money that is owed by one branch of the government to another. It still has to be treated as real debt. In some ways it is worse than public debt. For public debt, the government only has to pay interest. It can keep accumulating debt. Up until recently the Social Security Trust Fund could be ignored because Social Security taxes brought in more revenue than was needed to cover payments. The balance has tipped and Social Security has begun drawing from the trust fund. The left keeps telling us that Social Security will be solvent for decades to come because of the trust fund but that means that our nation has to start honoring those intragovernmental loans. This will eventually convert intragovernmental holdings into public debt and the process has already begun.

Burnett then moves on to the history of the debt

That brings us to the present political situation where we are faced with two similar stark choices: Republicans want to cut back government in order to pay off the debt and Democrats want to invest more in government to increase employment and thereby raise tax revenues. Before we consider the merits of these alternatives -- debt reduction versus public investment -- let's ponder another consideration, how did this debt accumulate?

If you and I amass a debt of $62,000, entirely because I am unemployed for a lengthy period, we might consider selling our house. On the other hand, if much of our debt accumulated for other reasons -- such as paying the legal expenses for your deadbeat brother after he was arrested for a DUI -- then we might look at the debt in a different light.

It turns out that much of the US debt results from decisions made by our own version of the "deadbeat brother." When Bill Clinton left office, the public debt was $5.73 trillion. When George W. Bush left office, the debt was $10.7 trillion. Under Clinton the US ran yearly surpluses and paid down the debt; under Bush the US ran deficits and ran up the debt. [...]

The debt is all Bush's fault so we can ignore it. After all, Bush is gone so we won't be adding any more to the debt, right? Oh boy!

There is a lot of missing data here and it is important. The government has a web site that lets you see the national debt on a week by week basis from any period between 1993 to the present. For most of this period, only the total debt is available with no breakdown by public and private (intragovernmental) debt but I just finished explaining why private debt is important. Using this site we find that the total debt was $4.18 trillion when Clinton took office and $5.72 trillion when he left. While there were some dips in the debt they were never enough to get the debt below what it was when Clinton took office. In fact, the debt increased by just under 40% during Clinton's tenure. It went up by $100 billion just in Clinton's last month in office.

Under Bush, the debt went from $5.7 trillion to $10.6 trillion - an increase of 86%. This was a big increase over Clinton but nothing like Burnett would have you believe. Then there is the increase under Obama. Between January 20, 2009 and April 15, 2011 the debt went from $10.6 trillion to $14.3 trillion. That's an increase of 35% in a bit over two years. Burnett shrugs this off saying "Many Liberals believe that most of the $3.5T in US debt accumulated under President Obama is due to the financial legacy of the failed Bush presidency." My response is that many Conservatives believe that most of the $3.5T (actually $3.7T) debt was the result of overreach by the failed Obama presidency.

Regardless, both parties have racked up considerable debt. The debt accumulated during the Clinton and Obama years nearly matches the Bush debt so we cannot simply blame Bush and move on - which is exactly where Burnett is leading us:

Let's be clear: the US is not broke. The problems the Obama Administration faces are problems caused by the failed Bush presidency.

Sure, the debt is a problem. But it's not the number one problem facing us, which is how to get America back to work. ...

And how does Burnett want us to do this? He gives a clue early on:

That brings us to the present political situation where we are faced with two similar stark choices: Republicans want to cut back government in order to pay off the debt and Democrats want to invest more in government to increase employment and thereby raise tax revenues.

I love the way that he uses the term "invest more in government" as if prosperity depends on hoards of government employees.

If we do that (get America back to work) and return to a commonsense tax system, where corporations and the rich pay their fair share, then we will once again run annual surpluses and begin to pay down the debt.

It all seems so simple. We just soak the rich and use the money to hire more government workers and all our problems will be solved. Just how much is the corporate fair share? We already have one of the highest corporate tax rates in the world (even after figuring in tax breaks). How much is the corporate fair share? As for the rich, you can take all of their money and not have enough. Ever-expanding government is what got us this debt. The only time it declined was when the Republicans controlled Congress under Clinton and the resulting stalemate slowed the growth of government.

Government isn't an investment, it is an overhead. It diverts money from going elsewhere (like hiring more employees) and impedes growth. Burnett doesn't see this. His goal is an ever-expanding government and it blinds him to economic realities.

Potshots from the Post

A couple of the currently most popular columns on the Washington Post deserve comment.

First there is Fred Hiatt, the editorial page editor, conflating climate change and tax-cutting. On global warming, Hiatt says:

The climate change denialism is a newer part of the catechism. Just a few years ago, leading Republicans — John McCain, Sarah Palin, Mitt Romney, Newt Gingrich and Tim Pawlenty among them — not only accepted global warming as real but supported some kind of market-based mechanism to raise the cost of burning fossil fuels.

Climate science is complex, and much remains to be learned. But if you asked 1,000 scientists, 998 of them would say that climate change is real and that human activity — the burning of oil, gas and coal — is a significant contributor.

Here's the thing - peer review is the solver standard in science. The gold standard is falsifiability. You use your best model and make a prediction. If it comes true you proved your model. If it does not happen then you check your original hypothesis and try again. Climate science has been short of this sort of prediction but the UN made a big one in 2005. They said that within five years (that would be last year) the world would have 50 million climate refugees - people displaced from their homes because of warming-induced destruction. They even included a map of areas in danger. So how did this turn out? This article checked it. Guess what? The areas that were supposed to be ruined by global warming show population increases. So, how did climate scientists react? They tried to hide the original projection.

If Republicans are becoming more skeptical about global warming, maybe it is because the predictions are not happening. This is not denialism, it is reality.

Beyond that, Hiatt does a fairly good job of skewering both parties over deficiencies in their budget proposals.

On to the other column. This one is an example of a long line of liberal self-congratulation. Written by community-organizer Sally Kohn, it postulates that liberals are losing the budget battle because they are nice sweet people who value diversity and are being opposed by conservative fear-mongers who don't fight fair. Among other things, she claims that liberals don't hate anyone except people who need hating.

This is not to say that the brand of liberal tolerance that grew from the struggles for civil rights, women's rights and gay rights is to blame for this lack of progressive political bite. For all the mockery of hyper-tolerant political correctness, identity politics is anything but tolerant. It demands that society be more accepting and inclusive of those who are marginalized because of their race, gender or sexual orientation. But it does not go so far as to tolerate intolerance. Those who fight racism and sexism in society do so out of deep moral convictions. They would never say, "Oh, we can co-exist with Fred Phelps and the KKK and find a way to compromise." Creating a society that fully embraces gay people and people of color means creating a society that is intolerant of homophobia and racism.

Go look at a YouTube video of the Wisconsin union protestors and reconcile that with Kohn's rosy description of liberals. Better yet, look at the videos of liberals ringing cowbells and banging drums during this weekend's Tea Party rally. The Tea Party rally was no whiter than the union protests and in no way represented racism or homophobia but the left still wanted to drown them out.

In Kohn's world there is no looming crisis with the national debt. The only problem is that Obama is no longer committed to unrestrained spending.

Now, Obama has proposed reducing the federal debt by $4 trillion over the next 12 years, making "the tough cuts necessary to achieve these savings, including in programs that I care deeply about." But the reason he's even having this conversation is because the tea party handed him the scissors. Had liberals more fiercely fought for the role of government as the spender of last resort in a recession — and for the role of government in general for the past three decades — Congress would instead be debating how to invest public money in the new American economy.

Obama is not making deals with the Republicans out of misplaced tolerance for their positions. He is doing it because his party got thoroughly trounced in the last election and the Republicans now control the House. Also, no matter how much the left may wish otherwise, serious economists say that the deficit continues then within the next twenty years servicing the national debt and paying for entitlements will take up the entire budget. Not a penny will be left for the programs that Kohn loves.

But rather than face that unpleasant reality, she convinces herself that there is no problem, just partisan Republicans who want to steel from the poor and possibly eat their puppies.

Hypocrisy and Politics

So far both the President and the Senate Majority Leader have had to admit that they previously voted against raising the debt ceiling for political reasons and they hope that the Republicans will do the responsible thing and vote for raising the debt ceiling now. In essence their strategy has been to vote against the country's best interests for short-term political gain. At the same time they trusted in the Republicans to do the right thing even if it hurt them politically. Does this remind you of any other issues?

The Democrats have been putting off hard issues on the deficit and on entitlement programs for years. They have gone so far as to block the Republicans from trying to fix these problems. President Bush proposed a partial fix for Social Security only to have it blocked. President Obama went so far as to lie about the effects if it had passed, telling seniors that they wold have lost their investments even though Bush's plan would not have touched them.

This pattern of ignoring problems for political gain has been going on at multiple levels. The states are facing a budget crisis now because they were bailed out for two years as part of the stimulus. The stimulus money is gone leaving hard choices for newly-elected Republicans.

I suspect that this is a national strategy. The Democrats are allowing the Republicans to address festering problems then insisting that the problems either do not exist of that they can be easily solved by taxing someone else (the "rich"). The Democrats are willing to cause long-term national problems for short-term gain.

Budget Reform Postponed

Reporting last November, the President's National Commission on Fiscal Responsibility and Reform known as Simpson-Bowles turned in their report. It was a well-thought out blueprint containing spending cuts and tax reform. It should have been a starting point had the President given it his support. He did not.

That created an opening for the Republican plan. It is far more ambitious and several parts of it are politically unworkable. It would not actually balance the budget but it would keep it within historic limits. Parts such as corporate tax reform seem overdue. Not to be outdone, the Progressive Caucus also released their version. It boils down to soak the rich and ignore structural problems in Social Security, Medicare, and Medicaid.

Normally this would be a good time to address the deficit and long-term debt. The deficit is unsustainable, the national debt is approaching a historic high and interest on the debt threatens all other spending.

This is when the government usually passes controversial legislation. It is an off year for elections and Congress still has a fresh mandate.

But, President Obama made sure that nothing will happen. He has already launched his reelection campaign and yesterday's speech on the budget showed that he is already in campaign mode. He is more concerned with scoring political points than with solving problems. His solution consists largely of blaming everything on the Bush administration and reversing part (but not all) of Bush's tax cuts. He also proposed what might turn into death panels to control medical costs. His goal is to cut spending by $4 trillion over 12 years (that would be 10 years after the end of his current term). It would not actually balance the budget and would add trillions more debt than the Republican plan.

By turning the budget into an election issue more than a year and a half before the election, Obama has assured that no progress can be made until after the 2012 election. Possibly he did that on purpose. Maybe he thinks that he will enter 2013 with a more sympathetic Congress.

Neither side is being totally truthful with the public. The Republicans cannot cut enough to balance the budget and the Democrats will have to tax more than just the rich. Congress needs to make some hard choices quickly - something along the lines of Simpson-Bowles. They still have 2012 to mollify the public over unpopular choices. Instead Congress and the President will spend the next year and a half making political points instead of accomplishing anything.

Obama vs the Republicans

The New York Times has a side-by-side comparison of the Republican plan vs President Obama's. They are too generous so I simplified it a bit:

Medicare

Republicans

For people now under 55, the federal government would contribute a specified amount of money toward the premium for private health insurance, turning Medicare into a voucher program.

Obama

pass

Medicaid

Republicans

Medicaid would be transformed into a block grant, with a lump sum of federal money given to the states to care for low-income people. According the the proposal, federal spending would be $771 billion lower over the next decade, compared with current policy.

Obama

Punt to the governors

Social Security

Republicans

No changes to Social Security are specified, though the proposal would "force policymakers to come to the table and enact common-sense reforms."

Obama

Pass

Military spending

Republicans

Pass

Obama

Military spending would be cut $400 billion over the next 12 years.

Domestic discretionary spending

Republicans

Proposes cutting $1.6 trillion over 10 years.

Obama

Pass ($600 billion over 10 years)

Taxes

Republicans

For both corporations and individuals, the top tax rate would be lower, but tax breaks would be eliminated, offsetting these changes.

Obama

Soak the rich

The Liberal Glossary

You hear a common word or phrase being used and you think you know what it means. This is not the case with President Obama and the current crop of liberals and progressives. There are a few words and phrases that they have redefined. There is probably the making of a drinking game here.

The Rich: "the undeserving rich" except the middle word is silent. This group is defined based on an arbitrary annual income that is well below what is needed to actually live like a rich person. The term "rich" is only used by the left when discussing tax policy. The rich do not deserve to be rich and are not paying their fair share.

Fair Share: Taxes that someone else (the rich) should be paying. 

Give back: to take back, to tax. From the President's speech on deficit relief.

This is not because we begrudge those who've done well — we rightly celebrate their success. Rather, it is a basic reflection of our belief that those who have benefitted most from our way of life can afford to give a bit more back.

Income redistribution: to eliminate income redistribution. If a tax on the rich is eliminated then it is considered income redistribution from the poor to the rich. This relies on the assumptions that 1) The government has first claim on all of your income and 2) the "government" and the "poor" can be used interchangeably. Therefore, a tax cut that allows the rich to keep more of their money becomes an income redistribution from the poor to the rich.

Channeling tax money to support religion: A Supreme Court decision split 5-4 to allow a tax break for money donated to scholarship funds when some of the money might go to religious schools. The minority viewpoint was that this amounted to channeling tax money to support religion. Again, this depends on three assumptions. 1) The government has first claim on your money so any money so taking advantage of a tax break amounts to spending government money. 2) There is no difference between giving money to a school run by a church and directly to the church. 3) Allowing people to support the church of their choice amounts to government support for that church.

Saving Social Security/Medicare/Medicaid: Preventing any action to keep these programs solvent while vilifying anyone who points out that they are approaching insolvency.

Draconian Budget Cuts: Any cut. This can include cuts in prior year increase and reclaiming unspent money from prior years. A cut of 1% in the budget is always draconian.

Spending reductions in the tax code:  Tax breaks. From the President's deficit speech.

Kinetic Military Action: war

Why Progressives Keep on Losing

Writing in the Huffington Post, Richard Eskow asks Why Progressives Keep On Losing and the Right Keeps On Winning? His analysis is interesting in what it reveals about the progressive mindset.

Once again the unpopular views of a minority have been imposed on the majority. Others will rant and rave about the Democratic leadership, and in fact that process has already begun. But progressives in this country should be asking themselves a serious question: Why does the Tea Party seem to be so much more effective than the left as a movement?

Eskow comes up with five causes. The first one is money. The evil Koch brothers and the sinister US Chamber of Commerce spent so much money that the electorate became confused and voted for the evil party whose vision for America, according to Askow, is

one where the environment is despoiled, the poor go unfed, and the middle class faces a lifetime of financial insecurity following by an old age of sickness and penury

Wow! The party of evil must have really buried the Democrats under a mountain of money. How much does it take to sell this vision - 50% more? 100% more? Twice as much? Three times as much? Five times as much? And the Republicans won on every level taking a larger share of state and local government than they have held since the Depression.

Eskow does not supply any figures on donations. He can't because they immediately disprove his assertion. Unions such as the SEIU gave more than the Kochs and the Chamber of Commerce. Campaign spending in 2010 did not overwhelmingly favor Republicans.

If money is the only factor then Eskow does not need to worry. The Obama campaign is already talking about setting new spending records. They have tossed around the figure of $1 trillion dollars.

But if Eskow's assertions about campaign spending are questionable then it is hard to describe the remaining four. According to him, they are:

24-Hour Party People. This boils down to commitment to party over principals. When the Tea Party did this the Progressives said that they were dooming themselves by replacing candidates who would win easily with unelectable radicals. Emphasizing ideology over party is dangerous since it can doom a party to minority status. This may have cost the Republicans control of the Senate in 2010.

If the Democrats were losing because of disunity at the bottom this might be a valid concern.

Premature Exhilaration Eskow seems to think that the Progressives started doing their victory dance before their signature bills were passed. This just didn't happen. Instead of celebrating stalled bills, the Progressives spent their time worrying about why they hadn't passed. He does admit that both health care and financial reform are deeply flawed but is too quick to dismiss the political compromise that was needed to pass them. He does not seem to understand that without the flaws the bills would never have passed at all.

The "XFK" Phenomenon Eskow thinks that Progressives are sitting on their thumbs, waiting for the next JFK to lead them out of the wilderness.

Activists succeed when they stop following leaders and start acting for themselves. The Tea Party is seen as a leaderless movement. By having no alliance to a party or a politician, it holds a credible veto threat over the Republicans and their leadership. There's something to learn from that.

This is a convenient excuse. It is not the Progressive movement that has failed, it is their leaders who failed. It overlooks the fact that even the Tea Party has unofficial leaders.

2021 Vision Oh yes, the "vision thing". This is where Eskow presents his dystopian version of the Tea Party vision then challenges the left to come up with their own vision. He even starts off with his own version which boils down to "break all records on spending then increase".

What he calls vision is basically the party platform - what the party will do if elected. Platforms are easy when you are the party out of power. They get tougher when you are the party in power. Then you have to stop running on promises for the future and start running on your accomplishments.

The reality. The Progressives have been losing because they had their chance and they blew it. They controlled both houses of Congress starting with the 2006 election, They added the White House and increased their majorities in Congress in 2008. They still control the White House and half of Congress. So what is stopping them?

Eskow never questions his base assumptions - that Progressives are morally superior and that they represent the real will of the people. His example of a vision shows that he still does not understand fiscal realities.

The reason that Progressives lost so solidly in the 2010 election was that the voters rejected them. They were elected to create jobs and turn around the economy and end the wars. Instead, joblessness increased, the economy stagnated, and the wars continued. What we got instead were programs that even Eskow admits are deeply flawed and mountains of debt.

When voters rejected the Republicans, they examined themselves and changed their priorities. They cast off the big-government vision of George W. Bush in favor of fiscal responsibility and limited government.

Rather than engage in similar introspection, Eskow starts from the assumption that there is nothing wrong with their priorities. They just need better ways of selling them.

President Obama seems to have adjusted the new realities and has been able to deal with the Republicans, Tea Party and all. For this, Eskow has disowned him.

What GE Teaches Us About Taxes

GE made the news recently when it came out that the corporation did not owe any corporate taxes for 2010 even though it made a tidy profit. What can we learn from this?

First, GE did nothing wrong. They took advantage of legal tax breaks. Google does something similar. By using accounting maneuvers known as the "Double Irish" and the "Dutch Sandwich" they reduced their taxes by more than $3 billion. This too is legal.

Right now the US has the second highest corporate tax rate in the world with a combined rate of 39.2%. Number one, Japan, has a combined rate of 39.5%. They were scheduled to cut this by 5% as of April 1 but this might be delayed because of the earthquake. But the tax rate is only part of the story. The US tax code is riddled with tax breaks. By taking advantage of different tax breaks and loopholes, domestic corporations pay an average of 20% and multinationals pay 30%. This is known as the effective rate.

The effective rate is an average. Some companies, like GE, manage to reduce their taxes to zero but that means that others are paying more than the effective rate and some are paying the full statutory rate. Larger companies are more likely to be able to take advantage of the breaks than smaller companies. Their size and resources allow them the flexibility to do things like set up a shell company in Holland (the Dutch Sandwich). Moreover, these tax breaks made their way into the tax code in the first place because large corporation lobbied for them.

We are overdue for tax simplification. We need to reduce our statutory rates to be competitive with the rest of the world while eliminating the loopholes that help large corporations at the expense of the smaller ones. This is part of the Republicans' budget proposal and should be seriously considered rather than dismissed as tax cuts for the rich.

Republicans acting like Democrats

Note to the Republicans - stop acting like Democrats.

You guys were elected to solve twin problems: the economic slump and government overspending. Those are your top priorities and your chance to prove that you meant it when you said you changed.

That means that you have to put your agenda to one side. Attacking NPR and Planned Parenthood will not balance the budget. Abortion has become less popular over the years but outright attacks on it will likely reverse that trend.

Rather than nibbling away at individual programs with budgets smaller than a rounding error when compared to the budget as a whole, the Republicans need to make wider cuts. They need to push the idea of austerity and shared pain. The public can understand if everything is cut but making partisan cuts makes a mockery of the budget process.

This is exactly the sort of behavior that the Democrats engaged in. The country wanted to see the government focused on jobs and the economy. Instead Obama and the Democrats focused on health care.

On the state level, the attacks on unions are understandable. In many cases unions are providing most of the Democrats' campaign money. Also, states with pay-as-you-go union pension plans are in real financial trouble because of those pension. The Republicans need to make their case against union pensions. They are hobbled by the press. Less than 7% of the population belongs to a union but a lot of reporters are members of the CWA (Communication Workers of America). Some press coverage borders on union cheer-leading. The Republicans need to make their case against pensions without turning anti-union.

And the statehouse Republicans need to back off of abortion. That was not an issue they ran on and attempts to outlaw it will only hurt them.

We took a leap of faith in trusting the Republicans again. They need to show that this was justified.

Social Compacts

Social Security is a pay-as-you-go social compact. The compact says that I will pay taxes to pay retirement and medical expenses for current senior citizens and the next generation will pay for my benefits. There is nothing inherently wrong with this concept as long as the population demographics and costs are stable. If these factors change then you have a serious problem.

Think of it this way - when Social Security passed there were 11 people paying in to the system for every person drawing benefits. Now it is something like five people paying and demographics say that it will be two workers for every retired person in the foreseeable future. That changes the compact. The burden that I bear is less than I am asking the next generation to bear. Another factor - because of increases in longevity, many retirees will get far more out of the system than they put into it. That moves it from social compact to pyramid scheme.

Medicare has similar problems. Obamacare was supposed to address some of the problems by "bending the curve" down. Instead it bent it up.

So something needs to be done. So far the Republicans have made a proposal. Like it or not, they have at least admitted that there is a problem. The Democrats prefer to score political points by ignoring the problems and accusing Republicans of trying to undo a century of progress. This is irresponsible.

Social contracts are all well and good as long as they do not promise more than can be delivered. The President and the Democrats need to admit reality and offer their own solutions.

The Mess in Libya

The more I learn about Libya the less I like it. The New York Times has printed allegations that, far from being taken by surprise by the uprising, the CIA and British intelligence instigated it and that Muslim extremists including Al Qaeda are among the rebels.

It is increasingly clear that the rebels do not have the numbers or the training to overthrow Gadafi*. Our air strikes are not enough to make up for the rebels' shortcomings, even assuming that we really want them to win.

In an effort to isolate Gadafi, the US released the assets of a Libyan defector who is thought to have been behind numerous terrorist acts.

The Obama administration lied us into war on multiple levels. The UN Security Council only authorized a no-fly zone, not an attack on land targets.

Things get stickier in the US Senate. A few days ago the Obama administration announced that the Senate had already approved a resolution calling for a no-fly zone so no further authorization was needed. This came as a surprise to the Senate. What most senators thought had been passed was a non-binding resolution condemning the violence in Libya. This was passed as an after-hours motion without debate. It turns out that, at the last minute, a clause was inserted into the resolution calling for a no-fly zone. No notifications were sent out of the change. It was introduced at 5:30 and passed at 5:31 without debate. If President Bush had used such sleight-of-hand, we would be hearing impeachment talk by now.

Put all of this together and it is easy to understand why the President called Libya a "turd sandwich". It is hard to see any good outcome from the Libyan rebellion or our interference in it.

* There are numerous ways to spell Gadafi's name. I am using the shortest one.

The War on Fox

Media Matters has announced that it has redefined itself. It will no longer pretend to be a general media watchdog exposing right-wing bias in the mainstream news media. Now it is devoted mainly to taking down Fox News. An early shot in their new guerrilla war on Fox is the release of a clip from a Fox executive admitting that he found speculation that Barrack Obama is a socialist "far fetched" but ran it anyway because of pressure from above. That was written up in a Washington Post piece here under the title "Another major blow to Fox's credibility".

This is a story where what you take away from it depends on what you bring to it. If you dismiss any notion that Obama is a socialist then this is confirmation that Fox's top brass was trying to twist the news.

Before we go any further, we need to ask if there was any reason to believe that Obama is a socialist. If there is no evidence then Fox was lying. If there is evidence then the executive in question was wrong and the Fox brass was right.

There is evidence that Obama had strong socialist tendencies and they come from an unimpeachable source - the President himself. His father was a communist and, even though he had no contact with Barry jr, the President looked to his father for his identity. His first book, "Dreams from my Father" is about Barry jr's search for his father and a black identity. Obama refers to Frank Marshall Davis as a mentor. Davis was a long-time member of the Communist Party USA and wrote for a communist paper. In fact, he was notorious enough that Obama did not list Davis's full name in his book. Obama describes his college days thus:

To avoid being mistaken for a sellout,I chose my friends carefully. The more politically active black students. The foreign students. The Chicanos.The Marxist Professors and the structural feminists and punk-rock performance poets.We smoked cigarettes and wore leather jackets. At night,in the dorms,we discussed neocolonialism, [the socialist, anti-colonialist revolutionary] Franz Fanon,Eurocentrism,and patriarchy. When we ground out our cigarettes in the hallway carpet or set our stereos so loud that the walls began to shake, we were resisting bourgeois society's stifling constraints. We weren't indifferent or careless or insecure. We were alienated.

He was a member of communist and socialist organizations in college.

Obama's time as a community organizer is well-known but most people are not aware that the whole concept of community organizers came from Saul Alinsky, another communist.

There is no question that Obama was a communist in his late teens and early 20s. This is all a matter of public record and the President's own words. It is also a matter of record that he soured on Alinsky and community organizing. The big question is how much of that ideology does he still retain?

During the campaign he made an analysis of the Bill of Rights where he called them incomplete because they did not allow for redistribution. His off-the-cuff remarks to "Joe the Plumber" also showed that he was in favor of redistributing wealth.

So when Fox carried speculation that Obama is a socialist, they had good reason to wonder. Media Matters is disseminating some fibs of their own by ignoring Obama's history.

As an opening shot against Fox, this one fell short of the mark. People who already hated Fox will see it as further justification for their feelings. Fox's supporters already know that it was and continues to be a valid question. Neither side is likely to be moved by this revelation.

President Obama and Libya

President Obama's address to the nation on Libya was, at best, disingenuous. He said some things that are questionable and other things that may be true now but are likely to change. For example, he claimed to be taking the middle course between people who did not want the US to be involved and ones who wanted an all-out invasion. I have no idea who the pro-invasion people are and I suspect that Obama made them up in order to make his own actions seem more moderate. Actually, most people who called for a no-fly zone, myself included, expected that it would be just that similar to the no-fly zone established by President Bush (41) in Iraq. The bombs and cruise missiles were a surprise.

Obama talked about turning operations over to NATO. This sounds like we have finished our part. In fact, we will continue to do the heavy lifting in the operation. Remember, we transferred operations in Afghanistan to NATO a decade ago.

The President promises that we will not have any boots on the ground. What will happen if Gadafi's government falls? Will we continue to hold back or will we start supplying peacekeeping forces? The Obama administration has already admitted that we will probably send thousands of troops into Libya to keep the peace and prevent a new Somalia.

The President left the impression that we could expect Gadafi to be overthrown soon. News reports make that seem unlikely. The rebels are literally an armed mob with no military structure. They have no chance against real troops.

So where does that leave us? Will we continue to shield the rebels? Will we broker a peace and get out, allowing the rebels to be slaughtered later? Will we begin arming and training the rebels? Are we sure that they are people we want to be involved with? The Taliban grew out of the Afghan rebels we armed and trained. Could this happen in Libya?

Remember back in the early 1990s we encouraged Saddam's people to rise against him. We implied that we would support them but failed to deliver until their rebellion had been crushed. That is when we established the no-fly zone which we maintained through the Clinton administration until Bush (43) invaded Iraq more than a decade later. Could our current actions in Libya eventually lead to this?

To use the President's favorite verbal tick, "make no mistake," Gadafi is a bad man. He has sponsored terrorism and ruled as a tyrant. Still, this was not enough for five different presidents to do more than drop a few bombs on him. We are only involved in Libya because Gadafi seems vulnerable.

One thing that bothers me. What would Candidate Obama have said if President Bush had taken the same measures under the same circumstances?

Why the Republicans Hate NPR

Last week Robert Creamer had a column in Huffington claiming to explain why Republicans hate NPR. He begins by telling how great NPR is and how many people listen to it (around 11% of the population). Then he lists the reasons that he believes that Republicans hate NPR:

First, they hate any successful public sector -- non-corporate venture. It flies in the face of radical conservative belief that the "private sector" always does things better.

{...} Second, the Republicans hate the idea that NPR is drawing listeners from stations owned by corporations like Clear Channel. They are all about "competition" until private corporations have to compete with public sector ventures that can provide superior services for less money and don't have to pay millions in profits to satisfy their corporate task masters.

{...} Third, Republicans want to kill NPR because it presents high quality, unbiased, factually accurate news. These qualities do not sit well with people who want the Rupert Murdoch's and Fox News's of the world to control what the public has the right to hear. They think unbiased news coverage is subversive.

{...} Fourth, the Republicans in the House wanted to attack NPR to throw some red meat to the Tea Party portion of its base.

I disagree with Creamer on most of these points. Note that he is not writing a dispassionate column, not when he tosses around terms loaded terms like "corporate task masters". The fact that he thinks that any news organization is unbiased let alone NPR shows his own biases. That is why the undercover video of NPR executives saying biased things is important.

This is the real reason that Republicans hate NPR. They hate seeing tax money being used to subsidize liberal viewpoints. This, in turn, is why Creamer loves NPR. He sees the world in terms of right and wrong (where Right = wrong). According to his bio, he is also an extreme progressive. His even borrows the term "corporate task masters" from the Marxists. So, from his point of view, is it the government's duty to fund radio stations that tell the "truth". He hates the existence of other points of view and is revolted by the prospect of having to compete with them.

There are better uses of taxpayer's money than subsidizing one set of viewpoints and the existence of these grant gives NPR a veneer of respectability that is unwarranted.

I will agree that this is throwing red meat to the Tea Party

Libya?

President Obama has managed to craft a policy on Libya that no one likes. Obviously the peace lobby hates it but criticism goes much deeper. Nearly everyone in Congress objects to the President launching an attack without first consulting Congressional leaders. Presidents Bush (41 & 43) and Clinton were careful to get Congressional approval before committing armed forces.

Worse, the Arab League and the African League both supported a no-fly zone but have backed off from Obama's use of cruse missiles.

Part of the problem is that the President did not make his case to the American People, or anyone else. He simply ordered the start of hostilities and left the country. This leaves several questions unanswered:

What is our mission? Are we trying to remove Gadhafi? What happens if we succeed and the country descends into chaos? Are we actually helping a pro-democracy movement or are we just inserting ourselves into a tribal conflict?

The Obama administration has talked about turning the operation over to NATO quickly. Will our involvement be reduced or will this just give political cover? Turkey is already balking at NATO exceeding its mandate. What happens if NATO fails to accept responsibility for the mission?

Why did we delay so long? The revolt has been going on for most of a month but Gadhafi's forces have been winning. If we had waited another few days there would have been no rebellion to aid. As it is, members of the Obama administration admit that Gadhafi may still be in office at the end of hostilities.

In 2007, candidate Obama said, "The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation." Obviously he changed his mind since then. What changed it? How does he justify this change of heart? The President has cited a UN resolution as his justification. Does this mean that he believes that US resolutions trump Congress and the Constitution?

Why didn't the President cancel his South America tour? He canceled trips to Asia because health care reform was bogged down and because of the BP oil spill. Isn't an attack on Libya on par with those?

And finally, how many people who voted for Obama in 2008 thought that he would involve the nation in a third war after expanding operations in Afghanistan and continuing Bush's policies in Iraq?

Getting a Grip

Reactions to the Japanese nuclear reactor breakdowns are out of proportion and, in some cases, irrational. Just as the nuclear industry was getting organized again, this threatens to stop it. Eugene Robinson calls it a bargain with the devil. Anne Applebaum asks If the Japanese can't build a safe reactor, who can?

My answer to Robinson is that all of civilization is a bargain with the devil. The EPA just released a report claiming that emissions from coal-fired power plants cause 17,000 premature deaths a year and 11,000 heart attacks. Natural gas burns clean but there are allegations that fracking to release more gas causes earthquakes and contaminates drinking water. Ecologists want an end to undersea drilling after the Gulf Oil spill. Solar and wind generation required huge quantities of toxic rare earth metals. In countries without reliable electricity, wood-burning cook fires are a leading cause of death among women. We have to weigh our alternatives instead of rejecting one because of a well-publicized disaster.

Applebaum gives the Japanese more credit than they deserve. Yes, they have a long history of building earthquake-resistant buildings but these power plants were not designed for a 9.0 quake followed by a tsunami. They were designed 30 years ago to resist a much less powerful quake. This is a failure of imagination. Also, the Japanese are not infallible. The company operating these plants has a poor safety record.

So far, the nuclear disaster is serious but no one has been killed (except a worked who fell from a crane) and only a few injured. This is only a small part of a much larger disaster that killed tens of thousands, left tens of thousands more homeless, and interrupted services to Japan's most populous island. By the standards being applied to nuclear power, nothing should be rebuilt within miles of the coast.

In fact, after all of the attention lavished on New Orleans after Katrina and Haiti after its own earthquake, the news media is showing a surprising lack of compassion for the suffering of the Japanese. This has become a sidebar to the story about the reactors when the two should be reversed.

The Economics of Michael Moore

Michael Moore has been pushing the idea that we are not broke so we do not need to make government cuts on any level. His proofs are scatter-shot. He points to the cash reserves that businesses are accumulating and that fact that profits are up. He also points out that the 400 richest Americans are worth more than the bottom 50% combined. "The problem is that we are letting the rich keep too much of their money," he says. Let's take a closer look.

Corporate cash reserves are an interesting place to begin because they are easily misunderstood. Right now they are something over $2 trillion. That sounds like they are hoarding huge amounts of cash that other wise could be stimulating the economy. However, the way that cash reserves are calculated is misleading. Let's say that you have $2,000 in your pocket right now and call that your cash reserve. But, your rent is due and you have to make a car payment. Suddenly that cash reserve doesn't look so big. Corporate cash reserves work the same. Their cash on hand has to cover their payroll and other expenses. In addition, they are required by law to keep certain levels of cash on hand to meet emergencies. Subtract all of that and the corporate cash reserves drop by 75%. That still leaves them higher than normal but not high enough to provide a real stimulus.

What about the rich? If they control so much of the nation's wealth then we should take it away from them, right? Again, this is a lot more complicated.

First, why does the bottom half control so little wealth? Part of this is demographics. People under 30 tend to owe more than they own. When I was in my 20s we rented an apartment. We had two cars and some money in the bank and never missed a payment but, between car loans and student loans, we probably owed more than we were worth. We are a lot better off now. Not counting inheritance, we still have savings and a lot of equity in our house.

This is typical. Younger workers have not had time to accumulate much wealth and have a lot of debt. Even Bill Gates had a year or so when he had to live in his Microsoft office because he couldn't afford an apartment. People in the lower half may never reach the top 400 but most of them will cross into the top third at some point in their lives.

But let's assume that the top 400 have accumulated far too much wealth and we should take it away from them. Their total net worth is still less than the current deficit by around $200 billion and we still have next year's deficit to worry about and they year after that.

It gets trickier. Let's look at Bill Gates. He is currently worth around $56 billion. What if we decided that most of it was undeserved and seized $55 billion? What we would get is a pile of investments, mainly Microsoft stock. The government cannot spend stock so it would have to sell it off but it would not get anywhere $55 billion for it. That $55 billion is based on the current price but a massive sell-off would affect the price. When you dump that much stock it causes the price to drop and once it starts going down, it plunges rapidly. That's what caused housing prices to drop so much - too many people had to sell at any price.

Besides, who is going to buy Bill Gate's Microsoft stock if we also seize most of the assets of the other top 399? They will be selling their investments, also. The international markets would collapse.

Michael Moore insists that we do not need to cut government, we just need to soak the rich but $1.6 trillion is a lot of money. The rich don't have that much pocket change and trying to saddle them with the bill will end up hurting the rest of us. It might be indirect but it will happen. An example was the luxury tax levied on expensive yachts under George H. W. Bush. At the time this looked like a pittance on rich people's toys but most expensive boats are bought by the upper-middle class who take out a mortgage to do it. The tax doubled the required down payment and made these boast too expensive for most people. The boat-building industry saw an 80% drop in sales and the tax ended up reducing tax revenue by more than it raised. Eventually it was repealed.

Let's take one more look at Bill Gates and Moore's assertion that we are letting the rich keep too much of their own money. Gates founded Microsoft in the 1970s. Originally it consisted of three people and one product - a BASIC interpreter. After making a deal with IBM to provide an operating system, the company really took off. Most of Gates' wealth came from his stock in Microsoft. If we let him keep too much of his wealth then how would that have worked? Would we have required him to sell off portions of his holdings whenever they reached some limit? How would that have affected Microsoft? Would it have still grown?

None of that matters in the world of Michael Moore. He sees the world with a Marxist lens that says that wealth is bad and the rich are undeserving. I have no idea how he reconciles that with his own personal worth of $50 million. Would he still make movies if we capped his income at $100,000 per movie?

Some Thoughts on Public Service Unions

I have been a government worker for more than 30 years. When I first started I was covered by a union. Later I was promoted into a classification that the union did not cover. Because of some perceived management abuses, a new professional bargaining group was formed. It was not exactly a union but it acted as one. Even later I was promoted out of the classification this group covered.

All of this gives me some insight on public service unions from the inside and from the near-outside.

I don't see a lot of benefits derived from collective bargaining. The biggest advantages to working for the government - pension, civil service, job security - existed long before public service unions could collectively bargain. Public service unions were legalized in the Kennedy administration. OPERS, the pension plan I am under was founded 75 years ago. Civil Service protections go back to the 19th century.

Originally I was covered by AFSCME. This was at the tail end of the high-inflation years of the last-1970s. I remember that we got cost of living raises every few months, which was good, but that the raises were the same for everyone. I think that they were based on average salary which meant that people who made less than the average saw their income go up faster than inflation while people who made more than the average saw their buyign power decrease. That part was bad.

A few lessons I learned from that period was that unions were more concerned with their own members than with City workers as a whole. At one point the non-uniformed and fire unions had agreed to a wage freeze because of a budget crunch. Some money became available and the administration offered to use it to give everyone an increase. The police union was still negotiating and insisted that they get all of the money.

Later, after I was promoted out of the classifications covered by AFSCME, they were trying to justify something and used the argument that management could afford it because they had been giving "top management" the same benefits that AFSCME got. I got a real laugh out of being included in the term "top management". I supervised one or two people and spent at least 90% of my time doing the same work that they did. Since then management has never quite gotten the same benefits as union members. Thanks AFSCME.

One classification had a single pay rate rather than a range meaning that everyone was paid the same regardless of performance. Management wanted to change this so that high-performers could be rewarded. The union refused, insisting that the raises would only be used to reward management's friends.

Years later the City was in a budget crunch and raises of any kind were hard to come by. To save money, the City promoted a few people to a salaried position so that they would not be paid overtime. This caused them to organize the new group CMAGE which represented professional workers. Promises were made - CMAGE would always be an independent group and it would not require a "fair share" payment. Both of these promises were broken rather quickly. Co-workers still covered by CMAGE (which is now part of CWA) would love to take their vote back.

So my personal experience with unions has not been very positive.

On a different but related subject, teacher unions are warning about increased class size if cuts are made to education. I recently found a picture of my 6th grade class. The class size was 34. It did not feel huge and I never felt like the teacher was overwhelmed and had no time for me. In fact, numerous studies have shown that smaller class size does not help the student.

So why the push for smaller classes and the scare stories about larger classes? Because larger classes are more work for the teachers. It is as simple as that.

Remember that unions exist to benefit their members (and the union leaders, possibly not in that order). They do not exist to benefit the public at large. The largest unions use part of their dues to elect candidates that will support them over the general population. This almost exclusively benefits the Democrats.