Archive for June 2010

Is Hope Gone?

June 12, 2010

The artist who created the Obama campaign poster that sold “hope” has now said he is about to give up on the President. This seems like a naive thought given any type of comparison with the previous administration. But then, hope and change were offered by candidate Barack Obama is large doses during the run up to the election.

In hind sight, you must be impressed at how many people voted for Obama because they believed he would be a change agent and return hope to the hearts of Americans that Government cared about them and could actually do things that help the average person.

President Obama certainly has tried to bring about legislation that has a bi-partisan component. His efforts have not born much fruit. Critics also point out that to get bi-partisan support, the President has had to resort to doing politics the old way, making horse trades. In addition to encouragements, the President has had to drop key provisions that his idealistic supporters had “hoped” for (like the public option).

So it is not such a surprise that Obama’s more progressive and more liberal supporters are becoming disenchanted. Their dreams of major changes do not appear realizable in the short term.

I just don’t understand why this “hope” filled constituency do not also see how much different the Obama Administration is from the past. We do have important health reforms. He has nominated two women for appointment to the Supreme Court. He has reached out to all nations and has tried to play the honest broker in the Middle East. He has put dollars behind improving educational outputs.

It is hard to imagine any other Democrat of national standing that has or could do as much.

Unions’ Difficult Road

June 10, 2010

When Blanch Lincoln was successful Tuesday in retaining the Democratic nomination for US Senate against an opponent highly supported and funded by organized labor, the pundits claimed a victory for the White House and the opening of a rift between Democrats and Unions. This is simply too easy a conclusion to draw and its import is worrisome.

The road for Unions today is difficult. Generally people are employed in reasonable ways and the social safety nets that exist are night and day different from when Unions sprung to popularity. It is just difficult for a Union to make a case for why someone should join.

Unions are political organizations where people run for leadership positions and then try to hold onto that position as time goes on. It looks very much like those who run for Congress or other elected office. Union leadership is a profession and not an act of public service. From that arises the opportunity for Unions to form policies that do little to help the worker and do a lot to help enrich the leadership. I am not talking about corruption (although there has been plenty), I am talking about human nature where preservation of the organization demands preservation of the people in power. Somewhere in this mess, the purpose of Unions gets lost.

This is not a blue collar issue. Teachers Unions represent some of the most compromised unions that exist. In order to combat errors introduced by weak or ineffective supervision, teachers unions have consolidated immense power and they wield it freely over contract, performance, and seniority issues. Lost in their rhetoric is the quality of education their students are receiving. Principles and Administrators often self injure themselves with poor decisions and for a brief moment, unions can say, “see I told you so”.

At the national level, what should be the relationship between organized labor and any political party? Often the relationship is financial and promises of voter turn out. But what should the quid pro quo be?

The President has to be the President of all the people. As a result, he is not likely able to support the most sweeping changes sought by organized labor (or for that matter, the Chamber of Commerce too). The best a President can do is act in a way that is generally supportive. For teachers, White House support of health care reform along with strong support for better quality schools are directionally favorable. The Union, however, is disappointed that the public option was not included and that there could be such a thing as merit pay or teacher selection based upon performance.

I think organized labor has got to wake up and see the larger picture. Growth in the US is going to be moderate to slow for the future and every aspect of the economy has to work well together. Communities are finding it difficult to fund schools yet the Country desperately needs better quality education to remain competitive. Unions supporting manufacture have seen a vanishing of jobs through globalization. Yet the goods made overseas are quite acceptable for quality and cost much less that when they were made in the US. Labor needs to be a partner in how to change the US work environment in order to become more competitive, and as part of that process demand the proper pay and dignity that should go with success.

I wonder whether these discussions are taking place behind closed doors?

Reality Check II

June 9, 2010

A reduction in the Department of Defense budget to the $ 100 billion level would free up about $ 600 billion to help close the deficit gap. This would be a mighty effort by still would fall short. And unfortunately, such a sharp reduction would necessitate deep employment cut backs in industries serving the military as well as significant reductions in our armed forces themselves. Where would these people get jobs?

Let’s understand that there are probably not enough lawns to be cut (if we kicked out all the undocumented workers), and the pay displaced defense industry workers would receive cutting lawns would simply not be enough to live on. Without an economic engine such as industries that make things and export some of what they make, service jobs, especially good ones, have no one who can afford their service. America must make things.

So, for other reasons we would have to reduce defense spending gradually and allow part of our economy to transition from war to peace uses.

In 2007, it was estimated that 30% of all corporate profit was made by the Financial sector. Hmmm. Forgetting for a moment the implosion and near ruin of this sector in 2008-9, I wonder whether there is some gold to be mined in those hills.

Since the founding of America, the wise use of public funds has built the “common wealth” of roads, rivers, rails, harbors, education, health care, and security. It has long been recognized that a flat tax does not work because those earning less would end up with too little to live on after paying their flat tax (read, and still be able to buy goods and services from those wealthier). Our political system has accepted a progressive tax with one hand, and with the other, instituted one loop hole after another. It is time to revisit the tax code and look for some gold.

1. Allowing all the Bush tax cuts to lapse is a necessary first step. This will increase everyone’s tax but will tax the wealthy more. The deficit is everyone’s problem and the rich benefit more from the common wealth.

2. A second step could be to impose a “transaction” tax on each stock, bond, and derivative sale.  The financial sector hills are in essence no different than corporate taxes on manufactured goods.

3. The third step is to separate totally the taxing, investing, and disbursements for Medicare, Medicaid, and Social Security from the general funds. Co-mingling of funds as currently practiced by the government is not allowed in the commercial world (for good reasons).  Government should be managing the “entitlement” funds more as an insurance policy, and investing other tax dollars in building the common wealth.

4. The fourth and last step, pay as you go legislation for all routine government operations.  Once the horses are back in the barn, we need to close the door.

So, which of the candidates running this November do you expect to espouse policies such as these?

Reality Check

June 8, 2010

It is hard to hear a political pundit speak of the coming fall elections and not hear “its about jobs, stupid”. I wonder who the stupid one is?

The Country has a huge deficit and unbalanced budgets as far as the eye can see. So, jobs sound like a great idea since there would be the chance for increased tax revenues. And, we cannot overlook the people currently out of work who would find a job a simply great possibility. But, where are those jobs going to come from?

Another stimulus program, pundits say.

Let me think. The funding for the stimulus comes from the government and at least initially cannot be off set by increased taxes. That sounds like bigger deficits (when we can’t cover the cost for healthcare or social security now). Is that the solution we are looking for?

America used to be a manufacturing and agriculturally driven country. We grew things and made things and exported enough to be a very wealthy country. For the last 30 years, these strengths have diminished almost in lock step with the rise of globalization.

American companies have found it is more profitable to export their manufacturing jobs, import their goods, and market them as American.  Companies like Wall Mart just import the cheapest products they can find regardless of who makes it.  While admiral in the sense of profit motive, it is actually the route to a slow death for the country.

American companies must increase the value of the goods ultimately sold in the US that is “American content”.  They could begin by importing American made raw materials and intermediates into the foreign countries where they have exported their manufacturing (read assemble their products using (some or most) American materials). This would allow America to regain part of the value of goods we ultimately import while still leaving some value in countries like China. Should countries like China object (and they will), the US should slap import duties on these imports (reflecting China’s restriction on American raw material imports).

American companies are unlikely to be sympathetic to this approach. For them life is just fine right now. To get their attention, the US should dramatically reduce its military budget, maybe to $100 billion per year and simply withdraw from the role of “world policeman and protecting American businesses overseas. Strangely, even at $100 billion, the US defense budget would still be the largest in the world.

Jobs and our economy must be reconstructed on a sound basis, not as a result of temporary stimulus.

Flaws or Strengths?

June 7, 2010

The news media is having a field day listing President Obama’s flaws. Jobs have not returned fast enough. Banks are still acting poorly. Healthcare costs too much. Our troops are still in Iraq and Afghanistan. And, the BP oil leak is still leaking. What’s more, Obama is not mad enough.

Some pundits think that President Obama should show his feelings much more visibly. They connect this coolness to lack of performance on the part of his cabinet. If Obama kicked ass, we would see some results, or so the story goes.

There is also an opposing but not very well publicized.  It says that President Obama is actually showing America how the office should be run. They would say we don’t need heros as Presidents.  What we need is leadership that prevents (or minimizes) the occurrence of big problems.

The roots of the problems President Obama has had to deal with predate his coming into office by at least 8 years (some may have started even before George W Bush’s watch). What is clear is that for the entire 8 years of “W” time, nothing at all was done to try and mitigate any of these pressing issues. It can be argued rationally that instead a lot was done to acerbate them and set the stage for much bigger problems. And why?

The Bush Administration was all about “right now” with decisions and policy driven by ideology and the next election. Reform of health care that would have fixed it financially would have meant raising taxes or reducing benefits. Both actions were deemed risky verses election hopes. This was cowardly and short sighted.

On the contrary, the Obama Administration has attempted to put in place policies that have longer term horizons (although so far, Obama has not addressed the cost of health care). The steady, in control approach to the Gulf oil leak raises another Obama characteristic. He listens to professional advice and takes measured steps that will resolve the problem but not necessarily as quickly as the public might erroneously be lead to expect.

So the answer to the question “are these Obama characteristics, flaws or strengths” will have to wait a bit longer. If the economy rebuilds on a solid foundation, or the wars in Iraq and Afghanistan are wound down smoothly, or BP oil lead is stopped (and BP is held properly liable), it will be much more apparent that the Obama style has much more substance to it than a shoot first, think later one.

Great Questions

June 5, 2010

The LA Times lead headlines today, aside from John Wooden’s passing, was that the stock market was continuing to fall in June. The reason was investors fears that jobs were not recovering as quickly as had been expected. Give me a break.

A few days ago, the market declined because investors were worried about the Euro and whether the debt situation with Greece, Italy, and Spain would cause a recession in Europe. Then all sorts of money flowed to US treasuries, and home mortgage interest rates dropped. I would have thought this was a sign of confidence in the US. But what do I know.

I suspect the cause of the stock market’s decline will never be know for sure, and newspapers will continue to make up explanations. With the ability to short the market, my guess is that sophisticated investors are quite happy to see the market drop. They made money on the way up and now will make money on the way down.

And just maybe these sharpies will feed the news media a line or two to explain why the market is doing what it is doing, which in turn will give a little more momentum to what ever direction the wind is blowing.

Gulf Blues

June 4, 2010

How does one make a bad situation good? The Obama Administration is learning about that right now. The BP Gulf oil spill is the teacher. The American public, if they are wise, can also learn. The question is will either party learn?

Drilling a mile down and then another two under the sea bed, the BP drilling was truely in “unchartered waters”. Experience, science, and preparation are all working against a prompt sealing of the leaking well head. Never the less, with ecological damage mounting, the call for Presidential action is deafening.

It is strange and somewhat humorous that many of these same people calling for more Presidential action, and in a sense almost blaming President Obama, not so long ago called for smaller government and less regulation. This is a lesson in the facts of life, a coin has two sides.

This Gulf disaster could not be a clearer testimony that there is a critical role for government in a highly developed economy. The financial sector melt down in 2008 was a loud signal which, to this day, many people refuse to acknowledge as a call to action.

Regulation to be sure can be over done. On the other hand, so can “free enterprise”. The role of government is to place reasonable bounds on the “invisible hand” so that it does not unduly take from the public more than it gives back.