May 30, 2017

Grover Norquist is the author of the “no tax” increase pledge (under any circumstances). He has persuaded 90% of Republicans to sign. I argue that he is a danger to the US and his legacy is doomed.

David Axelrod interviewed Grover Norquist on May 25 on The Axe Files. Axelrod did an excellent job of teasing out the basic assumptions of Norquist’s doctrine, challenging  Norquist at the extremes.

99% of Americans will surely agree with Norquist’s starting position–that there is much waste in government. Just cut the waste and we won’t even need future tax increases, he says. His plot is to hold tax increases hostage to reform and reduction in government spending. The existence of waste is indisputable. The elimination of it is not.

A second precept is Libertarian: He has been quoted as saying, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” His view of necessary government expenditures would stop with national security, prisons, rule of law, and property rights.  Infrastructure, basic science research, and health care wouldn’t be covered. Leave those to the private market, he says.

There is a huge flaw in Norquist’s doctrine. The whole discussion of cutting government waste is academic, regardless of where you’d focus. It’s simple. We can’t reduce government spending. Those savings are not available to fund our government needs.

I offer one relevant fact and two major obstacles: The fact is that the size of the US government (including federal, state, and local) in terms of percentage of GDP is less than that of the Euro Zone–about 16% less. Large highly developed countries apparently require a lot of expensive institutions to make them function well.

The first major obstacle is that there has been historically little focus on reducing government waste, under any previous administration. No administration has ever developed a plan for government reform. Perhaps a major reason is that agreement cannot be reached on what is waste. Noquist and I would certainly never agree.

Second, we simply do not have the governance structure necessary to conduct such a cleanup. For example, Ben Carson, a neurosurgeon, is going to reform the HUD $40 Billion budget?  Rick Perry will do that for Energy? In China, heads of agencies are chosen in large part based on merit. In Singapore, private sector executives rotate in and out of government agencies and continue to be paid as they would in the private sector–in seven figures. Singapore is efficient. Maybe we should reform our governance as a first step.

Like Trump, Norquist makes his math work without further tax cuts by promising unrealistic GDP growth. He thinks 4% is likely–Reagan did it, is his economic justification. Actually Reagan fell short. Lyndon Johnson and Bill Clinton did it, both Democrats, but times have changed, and I don’t know of any respected economist who expects even 3% under Trump. First quarter 2017 was 1.2%.

In summary, (1) other smaller developed countries spend more than we do, indicating that reduction is certainly hard; (2) there never has been a US political commitment to prioritize government reform and cost reduction; and, (3) we simply do not have the governance structure to accomplish it. Norquist started the “pledge” of no tax increases in 1986. Has there been any significant reform or reduction in government in the thirty years since? Not even under the Republican icon Ronald Reagan. I rest my case.

If Norquist is as smart as he seems, he understands reforming government and reducing its cost is appealing to talk about, but just abut impossible to do. If that’s the case, then what is Norquist’s real agenda in further cutting taxes…? It seems to come down to enriching the wealthy.

With slow growth and almost the entire Republic party committed to no tax increases, we cannot fix our infrastructure or our schools, much less restore starved social programs.

Grover Norquist’s position on government and taxes is totally flawed and is damaging our country. It’s a danger to the advancement of our commitment to culture, community, and progress as a nation.

I expect the legacy of Grover Norquist will be that of an obstructionist who only weakened the USA. He sold the Republicans based on false assumptions. Shame on them for buying it.

May 26, 2017

Around the globe, things are changing. The US is no longer the best at everything. China is the contender for global leadership. Perhaps we can improve by considering some of China’s advantages:

1.  Leadership. China has an experienced leader who came up through the ranks. He doesn’t shoot from the hip. He is not a laughingstock. China has a meritocratic system of choosing leaders in its federalist system.
2. China has a governance structure which gets things done–fast. Infrastructure, cities, commerce, the new Belt & Road Initiative.
3. China’s economic growth rate will continue to outdistance ours for the foreseeable future. As a result, the Chinese have a better opportunity to enable upward mobility and to moderate inequality. Growth alone is insufficient to enable these, but it is certainly necessary, short of strong interventions, which the US dedication to free markets prohibits. And while some have questioned China’s ability to compete with the US in innovation, it is increasingly clear they can. Just take look at what is happening in the Pearl River Delta.
4. China has more than $3 Trillion in foreign reserves. The US has only a little over $100 Billion. China has a trade surplus of around $500 Billion. Our President says he can’t find one country with which we have a trade surplus.
5. China’s heterogenous institutional and financial management across 30 years has avoided every single one of the world’s financial crises across that period, while ours has has exposed us to many, notwithstanding our complex and costly regulatory system. We have also initiated many crises, impacting the world. We increasingly seem to resent and starve government, while the Chinese maintain a strong balance between government and business. The Chinese government invests in key research to the benefit of Chinese business.
6. China does not engage in foreign wars, does not meddle, and does not try to proselytize or impose its values on other nations.
7. Chinese citizens do not carry guns. Murders are rare in China.
8. China is not a focus of external terrorism. One might surmise that there is something working poorly in Western foreign relations, resulting in enmity toward the US and other nations.

Say what you will about dictatorship. Say it will never survive the long term. Say it inevitably leads to corruption at the top. Say Chinese leadership is currently harshly eliminating those who threaten the Party.

Then consider our President’s attempt to surround himself with only those who pledge allegiance to him. Then consider that we currently have an investigation going in regard to possible campaign collaboration with Russia and our election. Consider the Supreme Court’s disapproval of districting in NC and Texas. Is there a difference between us an China? Perhaps, but only by degree.

I could easily make a different list of things we still have over China, starting with democracy and human rights. But our prized democracy is functioning very poorly now. Our human rights are nothing to brag about, considering our incarceration rates, our attitude toward Muslims and Mexicans, and our still lacking full acceptance of race, gender, and sexual preferences.

There are three generally agreed factors determining world power: Economic, soft power (reputation globally), and military.  It’s easy to see we can no longer command the first two. Military might alone won’t do it, Mr. President. We’re already spending more than the next eight countries combined.

Pew Research reports that 49% surveyed globally believe China will surpass the US as global leader. Only 34% disagree. This view is also widely held by many of our strongest European allies. This doesn’t bother me–not at all.

It would behoove us to consider China’s advantages, welcome China to the world leadership table, and maybe even learn from China.

I don’t recommend we emulate China. China is far from perfect. We are different. But, I don’t recommend we strive to be #1 in the world in global power. That time is past. It’s past partly because of our failures, but mostly because of the natural ascendence of other strong nations. I don’t recommend we try to make America great at the expense of others globally.

I recommend we try to fix our own shortcomings, be the best possible government for all our citizens, and set a gold standard of global citizenship. This is what I want our new President to focus on. If we can be better than China at these things, I will be satisfied, and a very proud American.

May 22, 2017

I’m hardly an expert on foreign policy, not even a serious student, more interested in global economic inequality (a related subject). So I hope you’ll pardon a brief sojourn into this complex arena. With the privilege of participating in the 2017 Harvard Advanced Leadership Institute, I have been deluged with seminars and speeches on foreign relations  from true experts.

While listening, I have started to wonder–why shouldn’t the primary focus of foreign policy be the betterment of the world, while seeking to identify and correct (to the extent possible) the behaviors of our country which might be contributing to the enmity of others. And then only secondarily to realistically providing our strategic and military protection.

Wikipedia (admittedly hardly a scholarly source) says: “A country’s foreign policy…consists of self-interest strategies chosen by the state to safeguard its national interests….”

“Self-interest?” Maybe the problem starts there. I’ve been wondering why we seem to focus only on how to advance our own interests. I think this might result in others behaving the same out of necessity, while increasingly resenting our selfishness.

I’ve been wondering why so little is said about what we’re doing to create jealousy, resentment, pain, and difficulty in the world: Some of us live in opulence, which we do not even seek to minimally limit, while others starve–both abroad and also in our own cities; we incarcerate huge numbers and still support the death penalty in many states; in some states it is lawful to wear guns into restaurants and churches; we try to impose our form of democracy across the globe; we tell other countries how human rights and other American conventions must be observed abroad; we dominate world governance organizations, refusing to share more broadly the major directional world decisions; we often unilaterally act as the world policeman, seen often as the world bully; we conduct failed wars, shedding blood across the globe; and much more.

It’s long past the time when the US (only for a decade or so after 1989) could indisputably call itself the unipolar world power. Not only is our economic power now matched by China, but the “soft power” (aka respect) which we once enjoyed is now in the gutter, for the above reasons. The citizens of China tell Pew Research that they are happier with their government than we are with ours.

Do we think Americans are the only peace loving people in the world? I find people around the world much the same, with only a few rotten leaders. The Christian God whom the majority of Americans worship is not the only representation of the One God of the universe. Do we think God shines down only on the USA, but not on N. Korea or Russia?

Of course it is necessary in the present to also focus on how to protect ourselves–from radical islamist terrorists, from Iran, from N. Korea, from Russia, maybe even from China. We can’t just repeatedly “turn the other cheek.” It’s true that a foreign power might take advantage of our vulnerability. So, I don’t disagree with Lindsay Graham, John McCain and others far more expert than I, in arguing that we must do some of the things they recommend to protect ourselves.

But, what if we started now to move toward an objective of devoting as much time, attention, and money to helping other countries, to sharing our wealth, to a more welcoming immigration policy, and to correcting some our own troublesome ailments, as we do to defending ourselves and advancing our interests over others? We could hold our military expenditures at present level and offer to reduce them in concert with others doing so. We could fashion these kinds of objectives into a 10 year plan and boldly declare it to the world, invite others to follow, then provide transparency and measure our progress on these objectives.

A good parent wants to teach a child how to defend himself if threatened, but a good parent will devote more attention to teaching care and respect for others. The latter will enable good relationships. The former alone will result in a lot of bloody noses.

Perhaps the thousands of books on foreign policy do acknowledge something more benevolent than self-interest, but Wikipedia’s answer seems consistent with 99% of what I hear from US “experts” on foreign policy–“self-interest.”

I’m just a normal American citizen, proud of my country, but disappointed in us at the same time, seeing the Trump agenda of “America First” as enhanced provocation, increased tension, and animosity, doubling down our failed foreign relations. Let’s take the extra $54 billion planned for military and apply it to this kind of new attitude toward global citizenship.

What if we stopped ending speeches with “God bless [only] America?” How about something like this:

“God bless the meek, the merciful, the pure of heart, and the peacemakers–of the world”

May 21, 2017

Since reading Thomas Piketty’s Capital in the Twenty-First Century,” (C21) I have been waiting for a good rebuttal to these realities described in his 2014 book:

• We are experiencing high inequality in the US and elsewhere.
• There is no evidence for the foreseeable future that a return to somewhat greater equality will develop, without intervention.
• The development of inequality is not a natural phenomenon. To quote Piketty:”…it took violent political shocks, wars, and revolutions in order to force Western elites, and particularly the French, German, and British elites, to accept fiscal and social reforms that they largely refused until WWI, and that finally led to a prolonged compression of inequality in the postwar period.” This comment is in regard to the relatively egalitarian period introduced by government policy, between WWII and the late 1970s.
• Finally, rising inequality is not a necessary phenomenon. There is a wide spectrum between total equality and total inequality. We are steadily advancing into the realm of extremely high inequality. Some adjustment, using a few of the many interventions available to us, is a good thing. Continued undeterred advancement toward even higher inequality is a very bad thing.

I read a flurry of critical responses to C21. None of them answered the questions I repeat above. I read arguments quibbling with the economic model or the math, or the data, but never arguing that inequality has not increased or is not a problem. I have seen arguments that we need sufficient incentive for creative individuals to enrich themselves. I have seen arguments that government should not intervene in the free market. I have seen arguments that almost every form of intervention suggested will bring undesired side effects. Possible interventions including funding education, infrastructure, health, and certainly any form of greater tax on high incomes or wealth–there are objections specific to each. I haven’t yet seen any arguments squarely addressing the above questions. Whether one agrees with Piketty’s explanation or his emphasis, or has a different explanation, I am still waiting for dispute of the above which I consider realities.

Honestly, I believe there is just as much bias and jealousy in the economics profession as we find in business or politics. Economists are often skilled at “damning with faint praise.” Marshall Steinbaum makes this case rather well in the Boston Review of May 12, 2017.

Today, I am reading After Piketty, a compilation of essays edited by Boushey, Delong, and Steinbaum, just released. I thought Piketty’s 800 page Capital in the Twenty-First Century (“C21”) was so good that I read it twice.  That was 2014. Three years later, I feel  certain that the essence of what Piketty explained (and forewarned) is all the more correct and relevant.

This volume includes 21 current focused critiques on the 2014 volume, plus a response from Piketty to the observations of the writers.

Let me describe the attitude taken by Piketty, both in the 2014 book and in his essay here, in reply to others. He does not present himself as having all the answers. He invites others to show where he is wrong. He makes multiple admissions that his earlier work fell short of sufficiently considering many factors mentioned by the other distinguished economists and authors in this book. The very fact that he encouraged this kind of collective set of constructive criticisms speaks to his integrity. Yet, he holds (rightly in my opinion) to the powerful essence what he described in C21. This is truly the mark of a great scholar.

I’m stopping part way into reading this captivating book because I must share a few passages.

Piketty: “…the main reason capital values and capital shares are both relatively high in the late twentieth and early twenty-first centuries is that institutional and legal systems have gradually become more favorable to capital owners (both owners of real estate capital and owners of corporate capital) and less favorable to tenants and workers in recent decades.”

Piketty: “…I note the gaping hypocrisy of contemporary meritocratic discourses. For example, the average income of parents and students at Harvard University currently corresponds to the average income of the wealthiest 2 percent of Americans.”

He notes the hypocrisy of countries like Germany and France, which never repaid their debts from the World Wars, demanding full repayment of debt with interest from Greece and others today. This is among a multitude of examples of political actions which affect inequality somewhere in the world.

As to the future, Piketty recommends: “Democratic institutions must be continually reinvented.” Forms of ownership must be altered. There must be full accounting and financial transparency, but that alone is not sufficient: “…the concrete institutions in which democracy and capitalism are imbedded  need to be reinvented again and again.”

I will end with a comment by Arthur Goldhammer in the book: “…Piketty’s analytical political-economic case looks to us to have been greatly strengthened by Trump’s presidential election victory.”

Regarding my questions at the top of this post–I am waiting for cogent arguments refuting any of the above assertions which are made by Piketty and agreed to, in only different words, by Krugman, Solow, Milanovic, Saez and others in this book. If you have seen such, I will greatly appreciate being directed to them.

I’m not finished. I return now to read other chapters of this excellent volume, which I recommend to all.

May 2, 2017

Economists are puzzled. Why don’t those who are being hurt by the rise of inequality vote to change it? Imagine those being hurt by inequality rising up and voting for higher taxes on corporations.  Isn’t that what a democracy is for? In a democracy, the people have the opportunity to vote for what is in their personal best interest.

But this is not happening in America. Voters are not coming out to vote for the return of benefits which have been eroded across the last 30 years. They don’t vote for redistribution. On the surface, it appears they do not care about rising inequality.

One possibility comes from studies showing the public often fails to see the impact of proposed legislation on their personal interests, and when they see it, they vote differently. For example, a tax cut seems appealing to everyone at first–until they are informed that the tax cut will result in a reduction in funding for the school their children attend. If they know that, they often make a different choice. They may prefer the school funding over the additional disposable income from the tax cut. It follows that better communication of the impact of legislation might draw those of lower incomes to vote in a way that more logically follows the expectation of democracy. And, we all know how campaign strategists cleverly pair tax cuts with sometimes false issues such as gun rights. No wonder voters can’t see the the clear impact on their lives.

There are also hourly jobs, child care, logistics, and other things that are greater obstacles to voting for the working class than for salaried of higher income. Another reason is that many people just don’t vote. Maybe they don’t think their vote will matter. One clear obstacle is the feeling that big money controls politics, so my vote is unimportant. Economists debate whether the big money is greater from the Right or the Left. But regardless of the answer to that question, 84% of Americans say money has too much influence in politics.

A third argument is that Americans remain fiercely independent in nature. Americans still believe the Horatio Alger fable. The truth is that Horatio Alger didn’t really pull himself up by his bootstraps as alleged–look it up. The idea is that I don’t want to vote to increase taxes on the wealthy because I expect to be among the wealthy in the near future. Maybe even if my income as a blue collar worker is only $30,000, I hold to this belief. But the reality is that the chances of “making it” have been dramatically eroded over the last 80 years. A 2016 study by Raj Chetty of Stanford University and colleagues showed that the chances for a child to earn more than his father were 80% for children born in 1940, but only 50% for children born in the 1980s. Yet, the belief is very slow to die. And this study is just about exceeding your father, so “making it” to the top is far, far less likely.

Chetty and colleagues went even further with the study. Through analysis keeping certain variables constant, they found that a more equal income distribution like the 1940s for the 1980s kids would reverse more than 71% of the decline in mobility, while assuming the higher GDP of 1940s for the 1980 cohort would only close 29% of the gap. This provides further robust evidence that an economic proposal based solely on GDP growth is weak in restoring mobility, while a proposal focused on equalizing can be highly restorative. As one would expect, Chetty’s studies showed wide variations from the average reported here. Wealthier communities with stable parents have much higher mobility, so it’s even worse for the poor communities with unstable parental situations.

How could this anomaly be improved? How could we enable our underprivileged to come out and vote for what is best for them? Some have proposed that we should have automatic registration for voting at age 16, and/or mandatory voting, as some nations do. Another suggestion is that the budget office of the city, state, or federal government could be required to provide a study of all major legislation or finalist electoral proposals, detailing impact on schools, on infrastructure, on jobs and inequality. Then, networks could be required to provide free prime time before elections to air these findings. Would a better communication of the predicted outcomes of Trump’s proposals have changed the vote? I’m just not sure.

Of course, if the underprivileged really don’t care that they are underprivileged, and don’t want laws and economic programs to better benefit them, that’s OK. But it’s certainly counterintuitive.