We're Number -- 16?

Americans are still number one in one thing -- our capacity for denial and disbelief.  That we may be the most superstitious nation amongst the worlds 'developed' countries makes it all the stranger, but about half us of seem to believe that in the beginning there was something other than the expansion of the universe from an infinitesimal singularity and more of us angrily assert that only our God can change the weather. We're as likely to hold to a superstitious idea of our place in the community of nations as our place in the cosmos.  To very many Americans not only is the universe about Man, the Earth and its history is about the United States of America.

Michael Porter appeared on Fareed Zacharia's GPS the other day.  That's the Michael Porter who is a professor at the Harvard Business School and Director at the Institute for Strategy and Competitiveness, and as Zacharia introduced him:

"a hard core capitalist, a registered Republican.  He is said to be the most cited scholar in economics and business in the world." 

Porter will inevitably be dismissed as a Liberal and probably as a Socialist simply because there is no other way to explain away the results of “The Social Progress Index”, a new report that ranks countries on how well their citizens live.  We're number 16, far too low on the scale for there to be a descriptive hand gesture.  Of course he's anything but a Liberal whereas the countries at the top of  the heap; the countries where people live the best, the longest, the healthiest and perhaps the happiest seem to be just that.  Is it too much of a stretch to look for a correlation between hide bound commitment to unfettered, unrestrained, unregulated Capitalism with massive political power and nearly full 'personhood' for corporations with a quality of life and level of opportunity that barely rivals Iraq and puts us at number 70 in terms of health and wellness?  Where does that put those who snark and mock and snicker and make up lies about Canada and it's "Socialist" health care sucking the life out of their economy when we're told the Canadian Middle class is expanding as ours is shrinking and that middle class Canadians are richer then we are?  It puts us in a locked room, sucking our thumbs, listening to Fox News and whining.

Perhaps if we weren't number one in self delusion and gullibility there might be some major changes coming in short order, but we are and there probably aren't going to be. In our own minds, if I can use that term without irony, we're always number one.

Right but wrong

You could fault Ron Paul for stating the obvious, but hey, somebody has to do it. Should the country try to save it's triple A rating with Moody's? Why bother when those helium-filled bond ratings proved to be based on politics and greed and by giving investors false confidence, helped precipitate the market collapse of 2008?

“I always wonder about this ratings, the bond ratings before the crash three years ago wasn’t helpful, so sometimes I wonder if it’s political theater to build up the fear.”

said Dr. Paul on Bloomberg TV yesterday. Of course it is, but is he doing the same thing?

But I'm not sure that I agree with the rest of his assessment: that the country is insolvent and bankrupt and got that way by excessive spending on the health and welfare of Americans. It's a bit like telling your spouse that the family could go to Disneyland more often if they weren't saddled with life insurance and a retirement savings plan, but I don't think one can rightly compare the financial problems of an individual or a family with the problems of a country in such a simplistic fashion.

One becomes insolvent and enters bankruptcy because one's income is insufficient to be able to manage one's debt. An individual does not always have control over how much money he makes; can't always find a job, can't always be healthy enough to work, can't always pay medical bills.

That's not so with a government. Our revenue shortfall is in some large part voluntary; an effort to "starve the beast" by thwarting its ability to run programs that the electorate voted for. That attempt is also a bit of political theater with a lot of smokey pyrotechnics and a bit of dramatic hand waving involved so as to obscure the fact that very low taxes on large incomes do not raise revenue, by magic transfer from the people who put much of their incomes into hedge funds and equities to the people who spend most of their incomes on food and shelter.

So yes, Social Security, a government program that did much to create the Middle class and take tens of millions of older people out of abject poverty, is going to run out of funds eventually because they're going to make it run out of funds so that they can do away with it. So yes, it's also political theater designed to create fear and panic, but perhaps the word 'theater' isn't quite strong enough. I'd call it a scam.

Saving our way to penury

many years ago, I worked for a 120 year old company producing industrial boilers. At it's apogee, it had over an 80% market share and a reputation for quality products.

Then came the accountants.

During the storm of leveraged buyouts in the late 1970's the profitable old company was bought by an accounting firm along with several related businesses by leveraging its assets. Within a very few years, it had a rapidly declining market share of 2% and a mountain of debt. In another few, it was gone and sold for scrap. Yes, I'm going to make a comparison between the fate of the boiler company and the fate of our nation.

Having been stripped of its reserves, the first of the fatal cost cutting practices so dear to the hearts of conservative accountants was maintenance of the aging production equipment. Soon, quality began to suffer. Advertising was curtailed: "we have to cut costs." The quality control department became overburdened with fixing problems caused by shabby construction caused by failing equipment. "We can't afford them. We need to be a 'leaner' company."

Bad welds, a dangerous thing, began to show up as welding inspectors, which for a short time I was, were eliminated. "we can't afford them." The problem of declining quality and the rising cost of redoing bad construction was blamed on the union although they were willing to bend over backwards to fix the problem and even volunteered for a wage freeze. Necessary design changes that had formerly been made in the quality control department in secret, were deemed "too expensive" although the dedicated guys in QC had been doing them by hand with parts bought at the hardware store and hand tools with their own money.

The quality control department was eliminated. "We can't afford them." We began shipping products that would not work. Field warranty repair costs skyrocketed. Our reputation nosedived.

People just short of retirement were fired to save on insurance and pension expenses "we couldn't afford." Management held the hard line on pricing. "People will spend more for our product because of the quality." Middle management was warned they'd be fired for showing that lower pricing would increase revenue.

Professional cost cutters and business school graduates with no knowledge of the equipment, its manufacture, its uses or the nature of the market were hired to fill the shoes of people who had led the company to its former heights. We had continuing optimistic reports from the new owners predicting that the cost cutting would soon turn things around.

Then came the bankruptcy, the sale, the quick demise, the economic collapse of the town surrounding the plant.

When I watch the antics of the far right, insisting, for instance, that we can't afford to stand up for equal pay for women, I can't help remembering. When we're given endless arguments about cost cutting and austerity being the way to prosperity, I remember. When we can't afford oversight, maintenance, pensions and health care and we deliberately neglect to do anything to improve revenue because it costs money, I remember.

Proving the pudding.

Warren G. Harding; if you listen to the Cato Institute he may have been the greatest president ever, because he's responsible for the great prosperity bubble of the "Roaring Twenties." Of course he was corrupt; his fingers found in the Teapot Dome scandal (proving that government involvement is always bad) and was noted for taking the presidential yacht down to Stuart Florida to fill it up with illegal booze run in the inlet at night from West End in the Bahamas. ( you wonder why these people hate government "intrusiveness?")

Bubble or prosperity? I'll leave it to the guys with the degrees to fight it out, but Cato Institute writer Jim Powell's assertion that the Depression originated in "too much government involvement in Business" is too slippery -- too oily ( to tease you with a metaphor) to let pass without comment.

The weasel word here is "involvement" and to make my discomfort with it shorter and easier to read, let me ask whether referees corrupt the game simply by enforcing the rules -- and whether having rules is necessary to differentiate between Football and Assault and Battery. See what I'm getting at? I hope so, because if I agree with the non-Cato premise that having slashed taxes for the very rich and permitted unregulated markets, a bubble was created in the late 1920's and because Wall Street was more like the wild west than it's been until recently, the bubble inflated and blew up, then you'll understand my confusion. Banks failed, businesses failed lives were ruined and books like The Grapes of Wrath attempted to get the message through to Cato types that these "cycles" and the unwillingness of Americans to suffer any aid given to anyone, created unconscionable suffering for millions and millions and set back our country by more than a decade.

Then as now, that suffering was blamed on the intrinsic laziness of the "inferior classes:" black people, immigrants, people who willingly are ill or injured or incapacitated. It's a premise somehow supported even by those who have now lost their jobs and are collecting unemployment much to the angry chagrin of conservatives calling themselves Libertarians.

But I digress. Can we talk about government involvement in business as though there were only one kind and all kinds are bad? No, I don't think so, but that's what they do. I think Cato is simply indulging in the fallacies of simplification, albeit more articulately than the average T-Party bozo who thinks his taxes have gone up and his guns snatched and people who control hedge funds, brokerage houses, insurance companies and banks, caused the credit crunch only because of "too much government." The kind of bozo who thinks safety regulations and honest regulators cause oil spills. Can it be that too much business involvement in government starts that vicious circle of corruption? Can it be that too much business involvement in government is a core value of the GOP?

Cato libertarianism assumes, and I think maliciously, that a playing field will not only exist but be level and remain level all by itself and it expresses that with a studied pose of innocence. After all a car or an airplane will self correct and remain more or less on course without a pilot. Pilots are bad because most accidents are the result of pilot error.

It assumes incorrectly that large concentrations of wealth that tip that playing field in their favored direction will not occur because entrepreneurs will always be able to compete with huge multinationals and break up their monopolies. It assumes, worst of all, that companies like Enron will be persuaded by competition to act honestly, their books smelling like roses and that the crimes of Arthur Anderson simply won't happen unless, of course, someone demands an audit and thereby corrupts their moral altruism.

No, the Great Depression wasn't ended, wasn't eased, but was perpetuated by things like the TVA and WPA and CCC that built infrastructure and kept many people working. Despite the statistics that show GDP and employment rising and falling with FDR's spending, it was ended only by the draft, says the Cato Institute's Powell to great applause from conservatives. Yet, somehow, the Vietnam and Korean War draft didn't have a similar effect, but not to be distracted, didn't the economic expansion continue after the troops came home looking for jobs, taking advantage of government housing loans, going to school on the GI bill, starting businesses and taking advantage of all that government spending? Maybe I'm off base, but the Cato scenario is set on a very bare stage and seems to need a few more props to be convincing. Could it be that all that government borrowing and spending on huge plants to make trucks, tanks, cars, airplanes, ships had a positive effect? could it be that massive government involvement in the electronics business and aviation technology and nuclear science and rocketry extending through the Cold War made the US the world leader? Can we speculate that the GI bill created the middle class we'd never really had before? I think we can and with more factual support than the other side with its austere and simplistic assertions.

After all, the First World War was followed by recession and perhaps because the troops got no support from Warren G. Harding who vetoed the whole idea that we owed them a damned thing because after all, "government involvement" is a bad thing and really, what have they done for us recently? No work, no food -- no handouts you lazy bum! ( now shut up while I buy booze at your expense and sell your property to the oil men.)

Ok, so I don't have degrees in all this stuff and nobody pays me to write -- especially not the people who pump the Cato Institute's output with all those corporate bucks, but I do have a simple question nobody seems to want to answer in a serious manner. If, there will be no crime in the absence of law; no crime in the absence of oversight and enforcement, why do we have a government at all? Assertions that we don't need one are not an answer, but an evasion. To be more specific, if oil companies can drill on our common property without having any safety rules imposed on them and if we must automatically grant the rights to do so without regard to when and where and how without "government involvement" why then don't we stop requiring airlines to inspect and maintain their planes, stop requiring prescriptions for drugs, close the schools, disband the police and fire departments, open the jails and let freedom ring? I really want to know.

I really want to know why if the Reagan and Bush tax cuts stimulated revenue growth and created jobs, don't the statistics show it? Why there were no new private sector jobs created during Bush's eight years? I want to know why public and private debt soared while private capital pumped the markets up to the bursting point and corruption spread like cancer. I want to know why the biggest and fastest growth of government size, expense and intrusiveness have occurred by preachers of the "government is always bad" gospel. I want to know why this pie of prosperity a la laissez faire mode has remained in the sky for nearly a century now and as the proofs of failure pile up over and over and over again, it's obscured by excuses, by repetition of doctrine, by scapegoating, stereotyping and creative slander.

Borrow and buy and blame it on the other guy

I hope I'm not hammering on this issue too hard, but as I keep hearing the argument that our growing debt is an isolated and dangerous problem only now to be addressed because we have a Democratic president and Democratic is another word for Communist insurgent, I can't be accused of beating a dead horse. No matter how smelly, the horse is still running and in fact, may be moving into first place.



I hope the data shown above will dispel some of the smoke clouds from our cold civil war. Of course data is data and interpretations will vary, but can't we tell that the steepest declines in debt Vs. GDP occurred, like economic expansion, during years when top marginal brackets were over 50% and as high as 90%? Doesn't it appear that the alleged expansion during Reagan's years was really only a manifestation of surging debt ratios? Doesn't it also look like anything one might call growth during W's terms was simply exploding debt which caused so much liquidity, so many dollars flowing into hot air derivatives and overpriced real estate and unregulated, over valued securities that the worst boom/bust cycle since the 1920's blew up in our face? Isn't it obvious that any apparent prosperity under Reagan fell hopelessly short of offsetting his profligacy in running up the debt? Isn't it obvious that the market boom under W. was the result of people like me having more money than they know what to do with and pumping up the markets to the point of the biggest bang in 14.7 billion years?

Isn't it hard, seeing the upward momentum to expect anything the current president could do would cause a 180 degree reversal in the time he's been in office?