History for Amnesiacs: Our stolen Social Security taxes

In this lesson, I have to ease off my usual how-could-you-forget tone. I had to do a bunch of research to confirm, and in some cases correct, my own memory of events.

Social Security (SS) was born underfunded. Maybe I should have researched why the founders in 1935 thought 1% per year were adequate savings, but I didn't. However, as far back as I can remember, which goes into the 1960's, SS was in trouble and in need of rescue. The employee contribution rate went from 1% in 1935 to 7.65% since 1990.

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I remember the series of SS crises, as collections failed to keep up with current and projected pension demands. The Greenspan Commission in 1983 was supposed to fix SS for good. I guess politicians and voters bought the story, or maybe just felt that the taxes were as high as Americans could stomach, because the rates haven't been raised since the commission set the rate at 7.65%.

One thing that didn't happen was isolating the surpluses and making sure the money was available when the bulge of retirements started to tax the SS fund in the 2020's. This is where my research went off the rails. I expected to find that because there was no "lockbox" for the surpluses, they had been frittered away through tax cuts and deficit spending during the Bush II years. That's the Democratic narrative, anyhow.

The Twist

What I found instead is that the SS trust fund never had a method of securing its surpluses. It always handed them over to the Treasury in return for IOU's. Unlike a normal pension plan, the SS trust fund not only didn't secure its surpluses, but it never invested them. It was always on the road to relying on US federal dollars for its own deficits when the baby boomers retired in droves.

The SS trust fund also funded most of our modest deficit spending for 3 decades. But starting in the 1980's, we ran significant extra deficits beyond that. So not only does the federal government owe the SS trust fund $2.6 trillion, but it owes non-government creditors nearly $10 trillion on top of that.

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One part of the Democratic narrative is correct. The SS payroll taxes were increased and that provided the federal government with ready money to fund extra spending and tax cuts and buy up yearly deficits, so that money was frittered away.

A more important truth is that, despite creating these surpluses, neither party in the 1980's had a plan that allowed the SS trust fund to use these surpluses. When you think of pension funds losing billions in hedge fund collapses, it's reassuring to know the SS trust fund isn't being used that way. But to find out that the money isn't even being stuffed in a mattress, that none of our top economists have ever figured out how to stash or invest or isolate or protect that much money, that is maddening.

All that time that I was being taxed, I was one of the many baby boomers who said "I'm not going to count on Social Security because it's not going to be there when I retire." However, finding out more of the mechanics now, it really hurts. OUUUUCCHH.

Even when the commission declared that the tax increases would keep the SS trust fund solvent in perpetuity, and it increased taxes ON ME and EVERYBODY to create much larger surpluses, THEY NEVER HAD A PLAN. Those surpluses were just thrown down the same rabbit hole. What the hell was that commission for? Why the f**k didn't the commission work on that part of the problem? My respect for Greenspan, which started dropping after he retracted his "irrational exuberance" comment and kept pumping up the bubble, just hit a new low. It's now tunneling its way to China. How appropriate.

Values and Judgment: Judging the values

This is the capstone on my series about values and judgment. It will sum up my philosophy on values, making judgments, and on argumentation. First, a quick review:

• Values aren't absolute.
• There are good values on both sides.
• Both sides can admit that the opponents have some strengths and good qualities, and are not total jerks despite how you feel about them sometimes.

I hope you're staying with me this far, because the meat is coming up. What makes one side's values so different:  A different emphasis. That is, the sense that certain values are much more important than other values. So the key is not that the opponent's values are bad, corrupt, or stupid, but that they're not the right values to emphasize.

The best way absorb this point is through a handy example--the difference between progressive values and conservative, as illustrated by these morsels from the web.

Progressive Values from Progressivevalues.org

• Progressives emphasize values that support the human family, that is, values such as inclusion, compassion, community, and nurturing. Lesser, but still important values are fair markets, active citizenry, and rule of law.

Conservative Values from conservapedia.com

• Conservatives emphasize values that support self-reliance, truth, hard work, and the ability to resist lots of human weaknesses such as addiction, depression, and fear. Lesser, but still important values are humility, open-mindedness, and a tempered respect for authority.

Conservatives can look at the progressive's list and agree that the values are OK (maybe with a few exceptions), but not the most important. Ditto for the progressive looking at the conservative's list.

So, what separates the conservative and the progressive is what values they think are most important. However, this has a huge effect. For example, the ideal conservative world probably looks quite different from the ideal progressive world. (I won't actually engage in considering these ideal worlds because I don't waste my time on politically-tinged fantasy worlds.... gag!)

Another big difference is how to promote or achieve these values, what methods are effective, and what are appropriate spheres for taking action or addressing needs. Even then, you won't find total disagreement. Conservatives think that the federal government is the right vehicle for certain tasks, and so do progressives. It's just the tasks are different, say national defense versus providing healthcare.

So, to recap again:

• There are good values on many sides.
• There is no absolute way to show one set of values is better than another.
• The differences in viewpoint often come down to a different emphasis on what is most important, how to achieve goals, how to provide for needs, and what spheres or methods are most effective.
• None of these can be judged absolutely, so judgment is always subjective.

Nonetheless, people can and do make judgments and choose the most important values to uphold and promote. With consideration, you can weed out the bad ideas. With even more consideration, you can weed out good-but-not-good-enough ideas. This is what I try to do.

Conclusion

1. I'll present my values, but not as dogmatically correct. I'll explain why I think they're best.
2. I'll try to find the best reasons for opposing values and present those too.
3. Usually I'll be able to choose what I think is best, and explain why I think so.
4. I won't expect everyone to agree with me, but they should explain their reasoning as I explained mine.

More progressive values from The Daily Kos. More conservative values from William Buckley and the American Conservative Union.

Non-Candidate-Non-Coverage Pledge

I, ModeratePoli, pledge that I will not write about non-candidates who are already getting too much media attention. That is all.

Well, not quite all. I have no respect for a drawn-out, will-he-or-won't-he media-tease. So I will be ignoring politicians engaging in that behavior.

The Next Tax Fight

Maybe I'm ahead of the curve on the news for a change: There's a fight brewing over a pending increase to the Social Security payroll tax. As part of the December 2010 tax deal, Congress passed a temporary 2% reduction in this payroll tax. It is now set to expire, and the Republicans are ready to wave goodbye to it. Democrats are ready to attack Republicans for tax cut favoritism. The talking points are being prepared, with number of households that don't pay income tax sure to be part of barrage.

Bonus analysis/historic perspective

Update 9/9/11: The House Republicans were sounding more conciliatory on this even before the jobs speech on 9/8. With a matching cut to SS taxes for small employers, I'm not sure how the Republicans can turn it down. Well, maybe they can--it all depends what else is in the package.

Whipping Boy: The Working Poor

 

This talking point makes me really, really angry. But first, let's correct an error--lots of lower income people pay no income tax, but they do pay: social security tax, medicare tax, sales taxes, property taxes, state income taxes, excise taxes, gasoline taxes, thruway tolls, etc. They haven't been given a get-out-of-taxes-free Monopoly card.

The big complaint stems from two aspects:

1. Some people have such low incomes that their deductions (same as your deductions, not different ones) totally wipe out their income tax liability.
2. Some people have such low incomes from working that they benefit from tax credits that reimburse even more than they paid in from income tax payroll deductions. These credits include the Earned Income Tax Credit, Making Work Pay Credit, and Child Tax Credit. In many cases, these credits pay back even more than the person paid in social security tax and Medicare tax.

I don't think critics dislike the standard deduction and exemption amounts, because they are based on estimated costs of subsistence living in this country. So let's focus on the credits.

• Making Work Pay Credit is small, about $400, and is part of the stimulus to get more money in the pockets of most lower and middle class working people. I like it, but it wasn't meant to be long-term, but I'm not going to defend its continuation.

• The Child Tax Credit is a family-friendly support to low and middle income families that support children under age 13. Kids are expensive, and low income families struggle to support them. These tax credits make it a bit easier to stretch your $380 weekly paycheck to help pay your bills and still have some money left to buy your kids new shoes from a store instead of searching vainly for decent shoes that are the right size and not hideous looking from the Salvation Army thrift store. The Child Tax Credit maxes out at $1000 per child, up to $2000. Families making under, say, $25,000 yearly really need this extra help, but the credit has been extended to families making up to $110,000 a year to sweeten it for the middle class. If the credit should go, take it away from the top first, and maybe keep for the under $50,000 a year people. 

• The largest target for the critics is the Earned Income Tax Credit. Here is potted history per Wikipedia: it started under President Ford. The amount paid out increased under Presidents Reagan, Bush 1, and Clinton. Reagan in particular expanded this credit (actually a subsidy) to make low-wage work pay more than welfare. Not because welfare was so generous, but because many low wage jobs pay so little, but require a family to take on more expenses such as transportation, slightly better clothing, child care, etc. The Earned Income Tax Credit maxes out about $5700, but that is only for families with under $50,000 income. 

Critics who are offended by these subsidies are hard-hearted, and perhaps hypocritical. They bash people on welfare, then bash them again when they work. I guess they have no idea how hard it is to be a low-wage worker. These subsidies, particularly the EITC, may be what keeps people in the workforce, contributing their labor to the economy, instead of on welfare or on the street. I personally know workers who put their refunds aside to pay for auto repairs, just to ensure that they can continue to get to work.

Skin in the Game

The outcry arises because these worker don't have "skin in the game" because they don't pay income tax. The argument is that they don't care about income tax rates because they don't pay. There is some logic in this argument, but it isn't strong. Anyone can be accused of caring only about their own tax rate, and not about any other tax rates. Many times this is true. Lots of people want their own rates low, and everyone else's higher. This isn't a vice you can pin only on low-wage workers, because it applies equally to middle class, upper middle class, well-to-do, and the rich.

I suspect that this is a dog-whistle that goes along with the conservative talking point that the Democrats are trying to increase the number of people dependent on the government. However, low-wage workers aren't getting a free ride. They work AND they pay payroll taxes, which are a huge contributor to the federal budget (40% in 2010).

Make Them Pay

If you want to make life harder for the working poor, by all means, protest the EITC. But maybe it should be the last program you try to eliminate since it gives recipients the most control over how they allocate the money. If you want to reduce government spending, you may want to target direct welfare, medical payments, food stamps, rental subsidies, public schooling, social programs, training,  and higher education first.

If you're angry that some people pay less tax than you do, get over it. EITC recipients will never contribute as much to federal revenue as middle-class workers who pay both payroll and income taxes. They just don't earn nearly as much, so they don't have the money to contribute. But what should they do, just disappear? Work 80 hours a week just so that they can pay more? I think only a selfish lout would demand that.

[Original post accidentally deleted, then reconstituted from salvaged bits. What a pain. An instance where one wrong move creates a ton of new work.] 

Update 10/11/11. Read my thoughts on a fairer tax code.

Values and Judgment: What they don't tell you

Values are a difficult topic, requiring more abstract discussion than other topics. Nonetheless, I'll try to make the ideas as clear as I can. Start with this question:

What is the best way to live your life?

If you have a thoughtful nature, you've spend time thinking about what makes for the best life, the fullest, the most meaningful life, the most enjoyable life. Different people come up with different answers and the answers change over time.

Even if you think you have the answer, how do you know for sure? You can't go to Wikipedia for this question. Religious books aren't precise in their answers or we'd have fewer denominations. You can't subject the answer to logic, because classic logic (if A, then B) is too limited and simplistic for this kind of question. When it comes down to it, there isn't a clearcut test, though philosophers and theologians have worked on answers for all of human history.

So the answer is that there will not be a definitive answer. You cannot be sure. You can arbitrarily decide that one test or another (the tenets of a particular religion, the  greatest good from John Stuart Mill, or universality of action from Kant) is the way to determine the best values, but you have to admit that there's an arbitrary choice in selecting which test to use.

When it comes to values, you will never have a guarantee that you're right. That's doesn't absolve you of making decisions, however. It just means that certainty won't be part of process. Have I proven that sufficiently? If so, welcome to my world in shades of gray. I'll remind you, though, that it hasn't prevented me from forming strong opinions. But it has guaranteed that I question everything.

What they don't tell you: 

There are no absolute answers.

Why they don't tell you:  

So you'll stay, keep listening and hoping, and maybe be convinced.
Also, they might have suppressed their doubts and bought the whole story.

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Just for fun, I asked Google, "what is the best way to live your life?" Some of the answers:

• Follow these 7 tips
• Follow these 101 tips
• Find yourself a Jesus-lovin’ grateful man
• Rent this condo in the Caribbean

The Shredded Safety Net

I was thinking about what could loosen the purse-strings and get people spending again. Now, I'm not an advocate of profligate spending at any time (my family will confirm that), so I wouldn't want people to falsely feel safe to overspend.

For some people, having a bonus in their pocket is enough stimulus to spend, but most of us take a longer view. We want to feel sure that we won't regret the expenditure, so we have to believe the money will keep coming in.

It's hard to do that now with the job market as lousy as it is. Being able to count on our jobs or the good chance of getting another job is the safety net for most people. Rather, it was the safety net. No other safety net is going to take the place of a robust job market. Even if we once counted on our home equity or credit lines, no one these days realistically believes they can live on their home equity, credit cards, or savings for very long.

With the job safety net so tenuous, most of us are going to try to bulk up our other safety systems--our savings and any other income streams -- and pare back our obligations so we can live on less if the dreaded event occurs and we lose that job.

The renewed focus on jobs by all political parties is welcome, but I'm not hopeful that we can stimulate job creation by supply-side methods (lowering taxes) or by government programs. Both methods will raise both the deficit and doubts about our future, which isn't good for our job climate. I eagerly await the job proposals by all serious national leaders.

Ron Paul -- Missing in the Media

Poor Ron Paul, the perennial presidential candidate who gets good returns in some Republican caucuses, but never gets the "serious contender treatment."  He is emblematic of frustration of libertarians in this country. They can't make their voices heard, stagnating at 10% or so of the population.

Sure he deserves some mentions in the news. Maybe he doesn't get it because it's the same story every election. He polls OK in a large field, but he never cracks into a 2-way race. This happened in 1988, 2004, 2008, and now 2012. I don't totally blame the media for dozing off on this rerun candidacy, but it is their job to report. I honestly don't know why they don't report on him. So this post will be entirely speculation--nary a fact in sight.

If Jon Stewart is right, the mainstream media is lazy and sensational. Maybe that explains why they don't cover Ron Paul. When it comes to sensational, he has some out-there ideas (good for sensationalism), but they're the same ones every campaign, so the positions would be old news by now. Besides, a reporter would have to look up positions and think about how they would work or not work. That's too difficult for your average lazy reporter. Also, the vibe from Ron Paul is trouble. If you were to start questioning him on some of his policies, how they would be implemented, and their likely effects, you'd have to worry about being hacked by his tech-savvy cult.

What the US needs

It would be hard as a reporter to say a lot of good things about him because he's far out from the mainstream--against social security, medicare, the income tax. But what he stands for is even stranger--the faith that, with a tiny federal government, everything in this country will be better--no problem getting medical care, no problem reining in renegade businesses, cheats, and polluters, no inflation, no deficits. He believes that the US needs a total makeover.

Most of us would think long and hard before undertaking such an extensive makeover of, say, our house. Ron Paul and his supporters don't show any trepidation about redesigning the entire country, as though it's no big deal... we'll  survive the changes and be better for it, like a 12-mile mountain hike. Sorry, but I'm not one of your young, male, in-shape guys, so I'm not sure that I can survive your makeover of America. Maybe that's why your support stays stubbornly at around 10%--those are the people who feel they'll do better in your brave new world. For the rest of us, it's way too scary, and you're not doing a good job talking us into it.

For those Paul supporters who point to a poll showing strong support or a great caucus showing: yeah, I noticed. I noticed Paul wins when well organized enthusiasts can tip the balance, such as at CPAC, caucuses and online polls. I also noticed how poorly he does in a broader election, like a large-state primary. That makes Paul and his supporters look like marginal true-believers, not contestants in the real race. If he wants a place in the real race, he'll have to win more of the qualifiers, and he hasn't, yet again. I'm not holding my breath, and maybe the lazy media doesn't want to either.

Update 9/25/11 
To all the Ron Paul supporters who are reading this post, these are the most important words in this post: "... think about how [his policies] would work or not work." When I question how his policies would work in the real America,  and don't just accept his utopian vision, I conclude that most would lead to worse situations, not better.

Ron Paul fanatics need to start questioning, and not just accept the utopia. I'm sorry, because I know how beautiful and satisfying utopian dreams are. I really do. But this will not work. Start the hard work of questioning now. If you still conclude that he has the best policy solutions, you'll be better able to explain and defend those policies to others.

Their Lies are Worse

The lies on the other side only seem worse--there is no way to prove they are worse. They seem worse because they reflect values that you don't happen to agree with, and that you think are much less important than the values you hold.

If you defend the lies of your side by claiming the other side's lies are worse, does that help bring us any closer to the solutions for our problems? It's usually a bunch of useless, water-under-the-bridge blaming and name-calling.

Instead of countering one lie with a "worse one from the other side," talk about the truth--the truth of the situation and possible ways forward. Don't dwell on the past and lies. Don't defend lies, call them out as lies, then move into positive territory.

Cross of Gold

One of the best things about living in the U.S. is the abundance of economic and political ideas. This is a diverse society of both ethnic groups and ideas, and I wouldn't change either of those. So I won't attack the existence of loony ideas, just their particular merits and demerits. I won't even throw the label "loony idea" around since that would antithetical to my belief that most political ideas have strong reasons behind them.

With that in mind, maybe I shouldn't consider a return to the gold standard a loony idea. It's one of tenets of Ron Paul's long campaign to return the US to the straight-and-narrow of the constitution or die trying. But the drive to reestablish the gold standard is a poster child for the blindness of adherents to the disadvantages and risks of an idea.

Here are the highlights for the advantages of the gold standard:

• Paper currency has no intrinsic value because it isn't gold and isn't convertible to gold.
• Governments, politicians, and central banks often cause massive inflation of the currency.
• A gold standard makes it impossible for politicians or a central bank to inflate currency. The value of our national currency can stay stable for decades or longer.
• A gold standard forces the government to behave soundly, to avoid budget or trade deficits, in order to preserve the country's gold store.
• If there's a gold standard, we can return to using gold coins, which have intrinsic value in the precious metal.

Here are some risks and disadvantages:

• The gold-based currencies are subject to attack by currency speculators. That's why there are no longer any gold-based currencies.
• A gold-based currency doesn't necessarily stop governments from misbehaving. Governments have been known to run deficits and ended up bankrupting their precious metal reserves.
• The gold standard favors one kind of wealth over all others. Gains in non-gold wealth (agriculture, housing, infrastructure, a varied economy) are devalued unless there is also significant growth in gold holdings. That was possible during the mining boom in the 1800's, but not likely now.
• The inflexibility of the gold standard can lead to deflation, which has much worse economic effects than slight inflation rate of 1-2%.
• The history of financial panics in the 19th century doesn't support the idea that the gold standard promotes economic stability.

When I look at these two lists, the disadvantages clearly seem the weightier side of the equation. I don't know how someone supports the gold standard unless they completely ignore the mountain of evidence against it. When supporters embrace the policy as a magic cure to vagaries of financial systems, they look more like an unquestioning cult than a reasonable political movement. No, Paulites, the gold standard will not be our salvation from ourselves.

Update 6/12/23. Blogger flagged this post as having virus-infested links. I removed the links I thought were the most questionable. They were to a Lew Rockwell site. 

Values and Judgment: Why your opponents aren't idiots

If you have a strong sense of where this country should be going, what's wrong, and what needs to change, you are probably quite frustrated that the rest of the population doesn't feel or think the same way. Maybe you've speculated why the other folks just don't get it, like these samples I've collected from today's web page comments:

"I would take the word of a man professed to be bound to ethical laws than a stinking liberal journalist."

"If you had a brain, you'd be dangerous. Fortunately for us all, you don't and you aren't."

The easiest explanation for why your opponents hold different opinions is that they're stupid, corrupt, ignorant, or evil. Such vilification is a reflection of the writer's anger, laziness, or maybe just their failure to acknowledge anything worthwhile on the other side.

So why do your opponents have different views? The most likely explanation is that they have different values. To truly understand why your opponents disagree with you, you have to seek out and understand their strongest reasons for those positions. This is not just a bunch of relativism. Instead, it's respecting that we are dealing in the realm of competing ideas, and ideas deserve due consideration. What are the advantages of position A, disadvantages, possible good outcomes, risks? "A" can be your position, a well-known position of the other side, or something new.

When researching a viewpoint, look for its strongest arguments, not its weakest. No doubt some of your opponents have already published some good explanations somewhere on the web, so seek these strong voices. They aren't necessarily partisans, but thinkers. Have the discussions with those people. Avoid the partisans, the talking pointers, the dogmatists, the bomb-throwers. You won't learn anything from them.

PS. Some of your opponents will be stupid, but don't judge them all by the worst case. That would be no fairer than this picture:

Update: I continue my analysis of different opinions and values in What they don't tell you and Judging the Values.There's discussion of different moral systems here.

Cut-only deficit reduction

In my earlier post about the debt deal, I didn't discuss an issue that's being weighing on me: how important is it to have both spending cuts and tax increases? 

This isn't something that has to be decided all at once. Obviously, we're going to be dealing with deficits and debt for many years. Since we absolutely will be having many iterations on this, we can start with some of approach A, add some more of approach A, add some of approach B, add more of approach B, tweak both A and B, maybe find an approach C that can help. Since a large majority in Congress and the president agree that we must cut spending, let's start there. Requiring tax increases, which many in Congress resist, is a complication we don't need to add into the mix. At least in this iteration.

Another reason to hold off with tax increases is the perception that Congressional Democrats "tax and spend." Part of that perception is outdated: tax revenues have ticked up only a bit in the last 30 years. However, we have been spending much more by running deficits, and it hasn't only been Democrats, since Republicans have had majorities in Congress quite often. Now, however, the calls to fix the deficit primarily or solely through tax increases... er, revenue targets, are coming from progressives who conveniently ignore the projected costs of the programs we already have. I wonder if they are so frightened of the consequences of cuts that they refuse to even look at the math. I've seen this fear before, prior to welfare reform, and the dire predictions didn't pan out. These cuts will probably be more painful, but also more necessary.

A final reason to make the first round of deficit-reduction through cuts is to see how much cutting hurts. We don't have much experience with cutting or its pain, since it's tended to be more spending, more programs, new needs identified that the government feels it should address. If the cuts are too deep and there are painful cries from a sizable majority, that may mean we really do want to pony up more in taxes to get the services we want. But we haven't tested that proposition in this new world where we aren't borrowing a large percentage of a program's cost. We won't know how the cuts hurt until we start actually wielding the scalpel.

The Political Lie Machine

This was going to be a column about political lies, and how there seems to be a well-oiled machine to propagate the lies to practically every corner of our national political conversation. But, really, is this in any doubt? Haven't we all been amazed at some of the lies we've read, and how often they're repeated?

Instead of debunking lies, let's look at how we react to lies:

• If you don't mind the lies of your side, but blast the horribly egregious lies of the other side, that's what we call hypocrisy. All political lies are bad, are evil, are poison. 
• If you respond to the unmasking of lies of your side with a statement like, "but wait, this is what they say...," stop yourself. Be brave and acknowledge the lie on your side. That is what honest people do. Partisans don't do it and won't do it. Be an honest person, not a partisan.
• If you spread lies, shame! on! you!
• If you spread stories that you've read, but you haven't checked whether they're true, you haven't done the minimal necessary homework. That means you're not much better than a knowing, conscious liar. This is the hard truth, and that's what I deal in here.

I will point out new lies when I see them, but no one needs me to disprove all the existing ones. What we need is for enough people to call them what they are: lies.

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For those who want to see some lies debunked, these were some of the numerous political lies I researched for the original column. They'll sound familiar:

1. EPA was considering regulating milk spills like toxic waste.
2. 90% of the procedures Planned Parenthood gives are abortions.
3. The cost of Obamacare is going to be completely covered by savings elsewhere.
4. The Bush tax cuts and Bush wars caused the deficits we have now.

Serious About Deficit Reduction Pledge

"I, ________________, pledge to the American people, including Glover Norquist (are you listening?) that I will: ONE, respect the difficult work of the Congressional super committee on deficit reduction; TWO, encourage all members of the committee to continue working even if negotiations get heated; THREE, carefully consider all reports from the committee, both majority and minority; FOUR, avoid all grandstanding on the recommendations of the committee; FIVE, vote for the recommendations unless SIX, there's a damned good reason AND a better plan available that can pass both House and Senate; and SEVEN, verify within one year that the legislation I voted for actually reduced the deficit a non-trivial amount."

Any member of Congress could and should sign this pledge. Imagine--a bipartisan pledge. Another plus: any American can fulfill provisions 1-4. I wish I had thought of this pledge earlier, because we've already had a perfectly good committee working on this. Maybe there should be an EIGHTH provision: With apologies to Messrs. Bowles and Simpson, I will not squander this opportunity like the last one.

Sacrifice

Are we finally ready to admit that we're in a period of prolonged recession? If so, we will need to adjust our spending accordingly. Families and businesses have already been doing that, starting during the financial crisis of 2008. Businesses in particular have not had the luxury of waiting. 

The federal government, on the other hand, increased spending dramatically in 2008 (with TARP) and 2009 (with the stimulus). This isn't inherently wrong. According to Keynesian economics, the government should spend more in a recession to balance the drop in demand from the private sector.

But a government can't do so year after year without racking up huge debts. At some point, government must recalibrate its spending down to a level that is sustainable in the economy as it stands. I think we are at the point that our budgets have to start reflecting our lower revenue and lower growth prospects. Perhaps we should've started last year, but we didn't: the 2010 budget was almost as high as the 2009 budget.

So, as a nation, what are we going to start sacrificing? With surprising consensus, Congress thinks defense spending is something we don't need so much. We're now considering $950 billion in defense cuts over the next 10 years, roughly 13% of the projected defense budget. Of course, that's just the beginning of the cuts we'll need. I'd like to make a couple suggestions.

First, cut unemployment benefits, which we've been extending, now up to 99 weeks. Normally benefits last 26 weeks, but these are hardly normal times. In most recessions, benefits are extended, sometimes to 39 weeks, sometimes to 52 weeks. I don't think the period of 99 weeks has a precedent, but then this downturn is the worst since the Depression. However, at some point the unemployed person has to finish making the adjustment, retrain, get along on just one salary, or move back in with Mom or Uncle Ted. I think 52-60 weeks should be the cutoff point. Potential savings: I don't know, and I'm not going to research everything.

Another obvious area to trim (to me, at least) is Medicare and Medicaid. Let's be honest here... we all know the healthcare spending in this country has to change, so that means changing Medicare and Medicaid (and the federal employees system, and your health insurance, and everyone's).

Our healthcare system is another beast we've fed way too much, though I don't hear Grover Norquist using those terms. However, that description applies more to the healthcare spending than to any other sector in our economy. Let's knock down the barricades (festooned with signs saying "Hands Off My Medicare") and put this beast on a diet. Potential savings: $12 trillion+ in 10 years depending on how deep we cut. Do we dare?

Our new economic outlook: Austerity

Yesterday the stock market dropped over 500 point, 4.3%. This is more evidence that we aren't going to bounce out of the recession, but we already knew this. As I wrote earlier, our economy isn't responding to the usual medicine.

What is the outlook? It feels strange to be a layman economic forecaster, but I've already been doing it in my own head and for my family, so now I'll go public. We are going to have some relatively hard times.Unemployment is going to hover around 10%, maybe higher. Barely anyone but the lowest will be getting a raise. We'll have a lot of youth unemployment.

The best way to deal with these financially uncertain times is to be careful with your resources. Not just your money, but also your relationships. You shouldn't burn though your money, or burn your bridges at home or at work. Party less, waste not, save more for the rainier days. Enjoy the simple pleasures. It doesn't have a feel awful.

I have a relative who lives in Oklahoma, which was hit especially hard during the Depression. The stories from the old-timers there is that everyone was dirt poor, but didn't know it because all their neighbors lived the same way. Life went on. And so it will for us, but not nearly so impoverished. We are a much richer country than back then, so we can weather a downturn. We will be making sacrifices, but do we need to fear sacrifices? I hope we aren't so incredibly greedy that we can't give up anything.

One problem with my prescription for dealing with the financial aspects of our economy is that it doesn't help lift the country out of recession. It's a valid complaint. However, I keep thinking about Japan and their unsuccessful attempts to spend their way out of their recession. We already have a huge debt. Let's not add to it in vain attempts to escape this fate. As I wrote before, perhaps the best way to grow is slow, organic, small steps. I'm optimistic we can do it.

History for Amnesiacs: How Obama became President.

Pres. Obama's honeymoon with conservatives lasted about 3 weeks past his inauguration, if I remember correctly. After that, conservatives started asking how we ended up with such a crappy person as president. He was a far-left liberal socialist illegitimate anti-American apologist foisted on them by idiot liberal Democrats.

The amnesia has only gotten deeper, with many people again wondering how this happened. This is a reminder.

In the Democratic nomination, the race was between Hillary Clinton vs. Barack Obama. John Edwards was a distant third, so most Democrats (including me) were going to choose between Hillary and Obama. Since  Bush had done such a crappy job on the Iraq war and financial crisis, it was obvious early on that the Democratic candidate was likely to win. If anyone doubts this point, I'll write another installment to help you remember.

I'm not absolutely sure how we chose Obama over Hillary. Partly he was the more inspiring speaker. Partly we sensed that the country didn't want alternating dynastic rule:  Bush-Clinton-Bush-Clinton. Partly Obama gave some false dog whistles to the progressive Nader/Kucinich wing and they bought it. Maybe we favored the underdog versus the Clinton machine.

In my case, I honestly hoped for greater bipartisan cooperation, and thought Obama had the better chance at creating it. After all, the Republicans had been so thoroughly investigating Bill and Hillary for 16 years and sharpening their knives, I thought there would no peace if Hillary was in the White House.

Let's review:

1. We had to choose between Hillary and Obama. 
2. Hillary already had a huge target on her back. 
3. So Democrats picked Obama. 

Conservatives, if you hate Obama so much, you can partly blame yourselves. Maybe you shouldn't have been so shitty to Bill and Hillary, because you helped make Obama the viable candidate he was.

Funny moments in conservative media bias

This is Jon Stewart territory. Anyone who watches Fox News needs to watch Jon Stewart too. Only then can they see the bias so exposed. CNN watchers should check out Jon Stewart too. He does it better than I ever could.

Funny moments in liberal media bias

#1. Terry Gross vs. Bill O'Reilly

Terry Gross invites Bill O'Reilly onto to Fresh Air and, surprisingly, he accepts. She thinks that she's going to be able to pummel him with all these "tough" questions about his perhaps inflated claims of winning journalism awards.

So, she's going in for the kill, and he turns the tables so deftly. He asks her (inexact paraphase), "Is this how you treated Al Franken when he was on your show?" Awkward silence, followed by ums, followed by sheepish concession of the point. Too bad this incident isn't on YouTube for all media hawks to review.

How did Bill O'Reilly do this? Because he's aware of how media bias works. He's a master practitioner. He knows when he's doing it, why he's doing it, how he's doing it, how others do it. Terry Gross, she's blind to her own bias. That's how O'Reilly did it.

#2. Jon Stewart vs. Chris Wallace

Jon Stewart says on Chris Wallace's Fox News Show: "[The New York Times] bias is towards sensationalism and laziness. I wouldn't say it's toward a liberal agenda."

Jon, it is sad for someone, who so exquisitely skewers blatant bias and foolishness, to give a pass to the New York Times. OK, half a pass. Most media in this country is lazy and sensational. That is so absurdly evident I won't even provide proof beyond one name --Lindsay Lohan. But it's also true that the NYT has a liberal bias.

Stewart conceded as much earlier in the interview: "I think they are to a certain extent... Do I think they are relentlessly activist? No." Most of Jon Stewart's criticism is right on target, but that was a miss. However, Chris Wallace had the worst of it when he had to eat crow for accidentally admitting that Fox News told "the other side of the story."  Overall score: Stewart: 80,000; Fox News 1.

The Political Lie Machine: An Artificial Crisis

A talking point for the left has been that Tea Party aligned House member created an artificial crisis over raising the debt ceiling. The argument goes that Congress already voted for the spending, so the borrowing for that spending was implicitly approved at that time.

Well, kinda, sorta, but it's a pretty weak argument. By tedious but realistic analogy, if you've been whipping out your credit card all month, you've promised to pay all those bills. But you'd be a fool not to look at the total and gasp if it's incredibly high. It's not only important to see the big picture on spending, it's critically important. So, I call bullshit on this argument.

(Apologies for not having a better link to illustrate. It's maybe 6 days this I read arguments like this, and I already can't find the article. The internet is a google times worse than my attic.)

The truth about media bias

Media bias is:
A)  a figment of the right's imagination.
B) everywhere but on Fox.
C) in the eye of the beholder.
D) everywhere.

I've been an observer of media bias for 20+ years. It started in the mid 80"s when a co-worker recommended Insight, a newsweekly put out by the Washington Times. I subscribed and noticed something odd-- their profiles of "interesting people" didn't fit the norm I was used to from the NYT magazine or New York magazine. I felt a vague difference, and reread the Insight profiles many times for clues. Finally, I realized what the difference was. NYT and New York did profiles of people who would be heroes to liberals. Insight did profiles of people who fit the conservative hero mold.

It's a big moment when you realize your perfect friend or hero or parent isn't perfect. It was a big moment for me to realize that the supposed objectivity of news was a whitewash. You could shade your reporting so easily by which stories you covered. You never had to be obvious like the communist propaganda we analyzed in 11th grade Civics class. In fact, that exercise was an anti-lesson, reducing the probability that I'd notice bias, instead of increasing awareness.

After this epiphany, I never read news in the same way. I always assume there's bias, and that objectivity is as impossible at completeness. You can never know or report everything, and you can never do it completely objectively. People don't think, write, communicate, or even read that way.

So what can you do as a journalist or as a reader? Give coverage to more opinions, seek many more viewpoints, read more widely. That's only the first step. You need to understand why a story is significant to one group or another, and what values that story reflects. Until you understand that, you haven't moved beyond your own biases.

Everyone should watch Fox News, MSNBC, CNN, network news, and TRY REALLY HARD to understand the message, not as a lie, but as a truth one believer is trying to impart to another believer. Start by thinking it could be true. If so, is there objective supporting evidence? What does it mean to a believer? And what values of the believer does it resonate with? If you can do this well, you can understand other viewpoints, and the world stops seeming quite so impenetrable, people stop being sheeple (or libtards or rethugs).

Luckily, it's just an exercise. You don't have to start believing everything, because a lot is tripe or blaming or demonization. But the exercise allows you to understand other opinions better, and understand other people  better. Hopefully, you'll be more respectful and more open to other ideas. And you'll know why you believe what you believe. That's powerful knowledge.

I stopped reading Insight magazine after a couple years. I realized that I admired many of the people they profiled, and I was more cynical of the the NYT/NY mag profiles. It was a very important step in my political evolution. Yours too, I hope.

Answer to the quiz question: Media bias is D) everywhere. It is often invisible to the reader or the writer, etc., but glaring to an opponent.

** If you like this post, be sure to read the Funny Moments in ___ Media Bias posts.

Bias in identifying bias

Image: mohammed-ali-ben-marcus.blogspot.com

History for Amnesiacs: Obama's recession

It irks me when conservatives say that Obama owns this economic mess. He came into office during the deepest recession since the Great Depression. The job losses were staggering. I don't know how an honest person can forget this. I thought the stimulus was the right thing to do, and I think it prevented an even deeper recession, though we can't be sure.

No one can turn our economy around on a dime. A deep recession like this, with a crisis in our entire financial sector, is not going to be fixed in one year or a couple years. This cancer grew for years, throughout Bush II's presidency, and for a while before that. This rot was characterized by dodgy mortgages and many other financial instruments like credit default swaps. It flared up in Enron's bankruptcy and the manipulation that caused the California power crisis in 2000 and 2001. How Obama could be responsible for all this is beyond me. Consider this: Roosevelt didn't own the Great Depression, even though it stretched through two of his terms.

If anyone owns this recession, it is Bush and the Republicans. They didn't rein in the financial and housing sector. There was plenty of evidence that fraud was permeating the sector years before the crash. I knew it based, amazingly, on reports on NPR and internet news. Anyone could get an income statement for any amount from an internet company, and use that fake statement to get a mortgage. If it's on NPR, why weren't there congressional hearings and congressional committee tightening up regulation and oversight? This is why I'm bitter when diehard Republicans or tea partiers blame Obama for the economy. I know it was screwed before he took office.

What's the fix for this financial dallying that has wreaked so much damage? It takes people with more financial knowledge than me to say. I can't analyze Dodd-Frank, and this blog isn't the place. Analyzing the blame-game, that I can do. So, I call bullshit on "it's Obama's fault."

Why the medicine stopped working

Our economic woes haven't been solved with supply-side tax cuts or Keynesian stimulus, but why? Both cures depend on redirecting money, but lack of money isn't the root of our economic problems. People have buckets of money to invest. Our stock market sloshes around $69 billion every single day. People (including me) have poured $11.8 trillion into mutual funds. Money sloshes into oil futures, CDOs, ETFs, REITs, hedge funds, etc. Everyone is trying to get good return on their bucket of money. Sometimes people are being enticed with slightly higher returns or considerably higher returns to invest with Bernie Madoff or in offshore Icelandic banks or in well-rated but not-so-solid American mortgage-backed securities.

OK, that isn't happening today. But it was happening in the 2000's until about 2008. Some of that money (including some of mine) vaporized in 2008-2009. But much of it was replaced somehow, maybe with quantitative easing (QE) cash, maybe with money we had shipped to China, maybe with money that was sitting on the sidelines. I don't know where all that replacement money came from, but the Dow soared from a low of 6626 in 2009 to a high of 12810 in 2011.

I may not know where all the money came from, but I can guess what it means. Our economy, and economies around the world, are going to be unusually susceptible to financial bubbles. Since around the mid-1990's, we've had a tech bubble, a housing bubble, and an oil bubble. Maybe there's a stock bubble right now. Maybe there's a gold bubble.

With all the available money, why isn't there more investment and growth? Because there aren't strong new ventures to invest in or expansion opportunities, particularly in the US, but also elsewhere in the world where bubbles have popped. Demand is strongly depressed in the US, where people and business are belatedly paying down debt instead of spending and investing. It's not wrong for people and business to do this, because there was too much debt burden. But how can our economy start growing again?

I wish I knew, or wish that old cures (supply-side or Keynesian stimulus) showed signs of working. We might be in for Japan-style economic drift. The only hope I have is that better fiscal management of the federal budget will encourage optimism and new investment. I'd love to see some manufacturing return to the US, new manufacturing that starts small and local with potential to grow, and export-oriented manufacturing based on our natural resources like farming and forests.

To me, this seems like the kind of organic growth that can work... if the environment is right. That means regulation that is light enough to both protect and encourage. We also need taxation rates that don't unduly add to the risk or subtract too much from the reward. However, decreases in taxation need to be measured against the loss of the revenue. Perhaps easing regulation is the more fruitful approach.

Conservatives are saying "Duh!" but that's OK, because this is more a message for liberals. If you want a stronger economy with more jobs available, get over your instinctive distrust of business. What suffocates business suffocates our economy and suffocates our country. The purpose of regulation isn't to tie business up in knots, but to keep people safe. Use it for that purpose only! Abusive regulation is no one's friend.

Medicine for a sick economy

So many of the policy disagreements in our government today center on how to best tend to our economy. Our economy is sick, hampered, weighed down, understimulated, over-regulated....  That's a lot of diagnoses, but which diagnosis is correct, and what is the best treatment?

I haven't ever officially studied economics, so like all of my analysis, this is based on observation conducted over 3 decades. The two main schools of economic policy seem to be Keynesian and supply-siders. In our current doldrums, Keynesians think we need another big stimulus to drive up demand, get money moving again, and spur job creation. Supply-siders focus on barriers to economic growth that diminish the natural impulse to innovate and seek profit-making opportunities.

In the last 30 years, we've seen both the benefits and the limits of supply-side economics. Lowering marginal tax rates from a ridiculously high rate of 70% to the neighborhood of 25% to 40% did encourage growth, as did breaking up the telephone monopoly and computing monopoly. It was great fun in the 80's watching and cheering on the fireworks of economic change. The mothership of Ma Bell (AT&T) was hit with a killing blow, cracked open, gave birth to the 5 Baby Bells, and her death fertilized the ground for the flowering of the telecoms boom. (Yes, it was a modern-day replay of a polynesian creation myth.)

But in the past 10 years, additional tax cuts have given us decreasing-return-on-investment, that dreaded point where the same strategy starts to fail, and you glumly realize you've got a real puzzle on your hands.

Be warned, this doesn't mean it's time to turn back to Keynesian theory, which failed us so badly during the stagflation of the 70's. We've had nearly 3 years of open money-supply spigots. Though it stopped the hemorrhaging of jobs in 2009, it hasn't returned the economy to its norms of the 1990's or 2000's. The cost of this stimulus (perhaps $1.3 trillion over the last 2 years and still high when compared to spending levels of 2007-8) is heaped onto our $14 trillion debt. If stimulus could be done at no cost, it would be wonderful. We'd just wind up the top a bit, and then let it go. But there is a huge cost to a big stimulus. I don't support another one because the jobs situation has stabilized for over a year now, and additional spending since then hasn't bought a significant increase in employment.

If the economy refuses to be cured by Keynesian stimulus, and hasn't responded to supply-side medicine in the past decade, what are we going to do? The electorate and their representatives may demand some kind of medicine, but maybe the economy can only be cured by time and minimally-invasive prudent policy. We may hate it when our doctor tells us to eat right, lose weight, get more sleep, and exercise regularly, because that is the only thing that will cure us of being a fat slob. But that is the best advice from the doctor when medicine K and medicine S/S aren't working. So stop thinking there will be a cure in pill form, and get ready for the slow, gradual, tedious, bumpy recovery.

The Debt Limit Deal

I'm glad the bill passed the House and the Senate. The House vote was 269-161, with 174 Repubs and 95 Democrats voting yes. My own representative voted against, prompting me to email a stern disapproval for his rejection of compromise. The vote in the Senate was 74-26.

The rejectionists seem to fall into two camps: the Tea Partiers who want such deep cuts that default is perhaps the ideal way to get them, and the liberals who don't realize yet that the money train can't continue. The lack of a reasonable sense of fear on both sides amazes me. Tea partiers think that government is so bloated that we can do away with 40% without a crisis bigger than 9-11. The liberals must be math-impaired. There is no way that current trend in social program costs is affordable. I want to sit the liberals down and make them crunch some numbers, and then see if they can justify their beliefs.

Overall I'm happy with the compromise, but I would have preferred a few more cuts early on. The bipartisan commission and the triggers are perhaps the best part of the bill. The last bipartisan commission actually worked pretty well. Its report, which is quite detailed and very solid, should have been the basis for an orderly debate on the issue. I don't understand why it wasn't accepted when it was released. With this crisis (courtesy of the Tea Party), most of the country is finally ready for the discussion, but why should 8 months make such a difference? There hasn't been a huge change in the economy or federal budget, so it must have been that our attention (and balls) were grabbed and squeezed, and we finally looked at the problem. It's too bad that's what it takes, but maybe that's part of being an American--living with so many happy people who don't recognize a problem until it almost swallows them.

I'm sad to see Orrin Hatch among the No votes in the Senate. He used to be someone with solid principles, someone who saw the humanity in his adversaries, someone I might have liked as President. But it's a lot harder now for red state politicians to be that kind of respectful and respectable elected official. In light of that, huge kudos to the red state republicans who voted yes--Murkowski, Kyl, McCain, Boozman, Isakson, Crapo, Risch,  Lugar, Roberts, Cochran, Wicker, Blunt, Johanns, Burr, Hoeven, Portman, Thune, Alexander, Corker, Cornyn, Hutchinson, Barrasso, Enzi. I sincerely hope you don't lose your seats in primary challenges. If that happens, maybe do what Lisa Murkowski did and let the entire state decide.

Finally, it would be a lapse not to thank the freshman Republicans in the House for being such hard-nosed, pain-in-the-ass, difficult, nasty, single-minded pricks who happen to be right to focus on the debt issue and make it stick. We need jerks like you sometimes (like now), but I won't love you for it. Sorry, it's not fair, but this is the way it is, at least until my thinking evolves some more.

Update 11/7/11: I needed a reminder of who negotiated this deal. The New York Times credits Obama, Boehner, and McConnell. Biden and Reid were heavily involved just recently, so they're probably due some credit too.