Archive for June 2011

Is President Obama Naive?

June 30, 2011

I am seeing a number of suggestions and comments that claim President Obama is naive.  I don’t think so, but I can see why some would suggest that.

The President promised that Washington business would not be as usual, and partisan politics were over.  After 2 1/2 years in office, things do not look much different.  Is this because he is naive?

In a dysfunctional relationship, it takes at least two.

The current basis for most all Congressional members to remain in office is, at its heart, only remotely in the interest of American tax payers.  It is very difficult to dine sumptuously from the public troth and still serve the tax payer honestly.

Congress members are about getting reelected and in the process improving their own personal wealth.  This is no different than anyone else in the public sector, except Congress members have been elected to serve first.

It should come as no surprise then that the President is locked hopelessly in a battle with Congressional Republicans (and some liberal Democrats).  Each of these Congress members needs to appease key constituents who hold the means to finance their reelection.  Compromise and, dare I use the words, “personal sacrifice” are not part of this game.

The President is well aware of this situation.  His style is not “in your face”.  As a consequence, he must use committees, commissions, and study teams to vet issues.  These are all doomed to failure but they are building a consistent record of the President trying.

The President’s tactics have also another aspect.  Like a chess master, President Obama has allowed Republicans to cook their own goose.  Representative Paul Ryan put forth the Republican fix for Medicare and Medicaid.  Not content to just push costs onto those with fixed incomes, Ryan proposed tax cuts for the wealthy at the expense of Medicare recipients.  In the debt ceiling debate, Republicans are hanging tough on no tax increases even when presented with tax loop holes that favor only the very wealthy.

The President has cleverly enabled Republicans to define themselves.  Once again they have stepped forward as the party of the rich who view the rest of us as second class.

Barack Obama is anything but naive.

A Failure To Communicate?

June 29, 2011

President Obama met with Senate Minority Leader, Mitch McConnell, and came away with no breakthroughs.  McConnell maintains that tax increases are off the table during the current debate over raising the US debt ceiling.  This is not a new demand, so what part of “no” did President Obama not hear?

When lenders begin to fear they will not get repaid for their loans to a sovereign power, their first action is to raise the interest rate on all new loans.  Suddenly the debt service begins to seriously crowd out other government spending, unless, of course the government does not borrow even more.

So far, lenders have been very willing to loan the US all the money it wants, and at very low interest rates.  This speaks volumes about what other options are available to big time lenders.

Sooner or later, however, some lenders simply say “no more”.  When that happens the borrowing country is between a rock and a hard place.  They cease to have a source to continue their rate of expenditures.  Without a sharp reduction in expenditures or a marked increase in taxes, they are soon in bankruptcy.

Some countries ask for interest “holidays” where they do not pay any interest for some period.  Investors do not like this.  Others ask for “forgiveness” where lenders agree to forfeit some amount of principle they have loaned in return for payments on the rest.  Investors really don’t like this options.

But in bankruptcy, what other options does a lender have?  Consequently, lenders try to pressure governments to impose rapid solutions to their running deficits.

This week we are seeing a modern country struggling with massive debt.  Greeks took to the streets with violent protests over proposed cuts in entitlements, government jobs, and other benefits coupled with tax increases.  “No way”, Greek protesters cried.

The EU has said that without significant cut backs in Greek Government spending along with increases in taxes, they would not extend any more loans (even at the higher interest rates).  No more loans is the death sentence for the Greek economy.

The amazing aspect of these demonstrations is that the cuts in government jobs and benefits will take place whether Greece can qualify for more loans or not.  In fact if Greece defaults, it is arguable that the impact upon Greek citizens will be more severe.  In default, the government will have too little money to maintain the rich entitlements Greeks have come to enjoy.

The US situation has many similarities.  Congress continues to spend more than it brings in taxes.  Congress continues, for political reasons, to avoid dealing with entitlements, defense spending, and tax code loop holes.

Somehow I think that the American public could understand the argument to reduce spending and increase tax revenues if only it would be made.  Greece could have averted their current situation by having discussed their situation openly with Greek citizens several years ago.  (The current Greek crisis is not a new event, it has been brewing for several years.)

The issues in both the US and Greece are similar.  Spending more than a country takes in taxes will eventually bankrupt any country.  Failure to deal both with spending and taxes fairly makes finding a solution extremely difficult.  Electing public officials whose higher priority is maintaining their elected jobs is a country’s death wish.

It is these officials who contribute mightily to the failure to communicate.

The Unintended Losers

June 28, 2011

We are approaching a reality check in Iraq.  The remaining US military presence is scheduled to end in the coming months.  Public hinting by Defense Department personnel that the US would stay if asked has gone unheeded.  This is a blessing although we might not appreciate it now.

Iraq is one of the “make believe” Middle East countries cobbled together by the British.  Their unstated goal was to combine together bits of lands and peoples into a new country.   They would be destine to remain un-united and therefore powerless to pose a threat to British interests.  Afghanistan is another.

After spending the better part of $1 trillion in borrowed money and wasting the lives of over 4000 Americans, the Iraq invasion and occupation is ending.  When it does, the US and the world will see reality.  Kurds, Sunnis, and Shiites cannot live together unless one has a club over the head of the others.

The un-intended loser will be all those American military members who went there with noble and patriotic purposes in mind.  These soldiers cannot be blamed because they thought they were on a purposeful and valuable mission.  This is what the Cheney-Rumsfeld crowd told them.  When the last American leaves, however, another reality will emerge.

Iraq is a dismal failure and a travesty for everyone involved.

Afghanistan will end in the same manner, someday.  There can be all sorts of unpublicized reasons for occupying those countries.  Iran, Middle East peace, Pakistan, and the Taliban will all be quietly whispered as threats to world peace.

A careful assessment, however, will conclude the US’ expeditions in both these countries were a waste of time… except for the munitions makers.

It’s All How You Look At It

June 27, 2011

This past weekend saw celebration in New York’s (and many other States’) gay communities.  With the passage of same sex marriage, New York has made a loud statement about the legitimacy of gays and their right to equal treatment under the law.

It is not that long ago that most of America held that gay life styles were acquired behavior.  In fact many held that gays could “unlearn” and become straight.  Some prayed for this and others within religious communities encouraged this false belief.

Little by little Americans have learned first hand, through a close friend or relative, that gay people are everywhere.  Even more surprising is they are talented and do not seek out straight people to “hit” upon.  Americans, now are realizing that being gay is as normal as being straight.

Under those conditions (that is being gay is normal), then what is the basis to deny gays any rights normally accorded straights?

We are told the bible calls homosexuality an abomination.  Marriage is a union between one man and one woman.  Interestingly, church goers seem to contribute more when their priest or pastor tells them homosexuality is a disease at best, or a chosen and disgusting life style at the worst.  For religions, gays are a perfect target since they are a minority.  To the casual uninvolved observer, however, these religions are a perfect example of ignorance and hypocrisy.

It will be interesting to see how these same sex marriages work out.  Will male-male or female-female unions last longer?  Will these marriages suffer the 50% divorce rate heterosexuals currently enjoy?

In the end, it will make no difference, these marriages or unions are simply legal contracts that can be revoked.

We may need another 10 years before a majority of States grant same sex marriage.  Ignorance and hypocrisy will still be going strong even then.  We are humans after all.  But just as it was a good bet the earth wasn’t flat, denying some committed couples the rights accorded under marriage laws just because they are of the same sex, is not a good long term bet either.

Don’t Flinch This Time, Too

June 26, 2011

The Republican and Democrat debt ceiling limit negotiating team has disbanded.  They were not successful in their attempt to gain a compromise.  Rumors are that talks collapsed because Republicans insisted upon no tax increases.  As the current debt ceiling limit deadline approaches, President Obama has a chance to try again.  Last December, he flinched (sort of) and agreed to allow no tax increases for the wealthiest of Americans.

His compromise to keep in place the Bush tax cuts was short term brilliant.  The compromise package pumped about $600 billion into the economy but of course put the same amount of pressure on the national debt.  There are no free lunches.

There is no route either through straight tax increases or straight budget cuts foreseeable to eliminate the deficit.  One hundred percent of either will cripple the country.

Republican leaders are between a rock and a hard place.  Intellectually they realize there must be tax increases.  A small but financially loaded fanatical minority has hijacked the Republican party on this issue as well as on social conservative ones.  It is with the risk of ones personal political life for any Republican to voice support for tax increases.

Ironically, President Obama has a strong hand.  He needs to make clear to the public that he would support deep cuts.  He must then make clear that tax increases must accompany any budget cuts so that the burden is shared fairly.  Let the Republicans call his hand and let’s see what happens.

There is a small chance that nothing will happen.  In other words, world lenders just sigh and say “ok, we will wait to be paid”.

The far greater prospect is that world capital markets will freeze.  We will see a return to the near financial sector implosion of 2008.  Much of the Republican moneyed base will see their worlds collapsing (as will the rest of us as 401k’s crash again).  The day of reckoning will have arrived.

The silver lining might be that common sense might return to enough of the country.  If so, expect a house cleaning in 2012 with dogmatic Republicans once more denounced as unfit to lead.  While we would expect Tea Party types to try valiantly, I would expect that “Jon Huntsman type” might emerge as the future for both parties.

In the darkest of possible scenarios, the depths of a world depression might take some of the glow off the emergence of a new political movement.


A Voice Still Missing

June 25, 2011

Crossroads GPS announced a new round of political ads this week.  With no election this year, what is Karl Rove thinking?

Rove is a long time proponent of the principle “say it long enough and loud enough” and people will hear it and believe it.  Rove has never worried about whether his messages were true or not.  In fact, most of his messages are carefully designed to spin events in a more favorable direction.  Truth, what is that?

The timing of this latest round of American voters edification begs the question, where is President Obama’s voice?

The President has largely lost or neglected the rhetorical mastery that marked his 2008 campaign.  He has sounded more as a professor at best or an almost disinterested arbiter at his worst.  His messages have lacked a thread of connectivity.  His voice has expressed a pent up frustration “why don’t Americans already know that?”

Looking at the George W Bush years, one can somewhat understand President Obama’s frustration.  In the beginning, Bush praised Enron’s entrepreneurial style, essentially finding ways to make money where others had not.  At the end, Bush turned white at the near total collapse of the world’s banking system resulting from the unregulated US derivative market.  This time American bankers and investment guru’s had found ways to “make” money that no one else had found before.

The most basic lesson in business is that if in the spirit of making things better you decide to put holes in the boat, just do not put any holes below the waterline.

President Obama has been a prudent and careful  leader.  His Administration has pursued sensible although conservative approaches to the nation’s problems.  Yet, hardly anyone has that impression.  In fact opinion polls while favorable to Obama himself, give him poor marks on his leadership and the overall direction of the country.

The President badly needs a progressive Karl Rove.  President Obama needs someone to write his narrative and for the next 18 months he’s got to stick to it.  A return to Republican leadership and the policies that did not work before (and will not work this time) would cement the course to second class status for our country.

The narrative, of course, is written to be understood by average Americans.  It is not a speech just for union workers or one just for bankers.  It is a story about how America can work for everyone.

This is not a pipe dream.  Those who write that America’s reign is over may be speaking prematurely.  Look around and tell me which country has the where with all to replace the US we remember?  Even China has so many severe problems that surpassing the US can only result from one thing.  That one thing is if the US implodes first.

Expanding the gap between the rich and the poor, rationing health care on the basis of who can afford it, discarding the sick and the elderly, abandoning the infrastructure, and ignoring the need to educate are all policies that will lead to self induced implosion.

Why can’t the Obama team write a narrative about that and put their actions and policies in perspective?

Deal or No Deal?

June 24, 2011

The gang of six minus one broke up yesterday when the Republican members walked out.  The gang had been wrestling with finding an agreement on how to raise the federal debt ceiling.  Rumors had it that the gang had agreed upon $4 trillion savings over 10 years but could not agree on tax increases.

Details were not made known but it is safe to say that $400 billion a year will not eliminate the deficit.  The result will be the debt will continue to grow but at a rate lower than otherwise anticipated.  I wonder what the stumbling points were?

First and most obvious would have been the Republican pledge “no tax increases, no way”.  This flies in the face of common sense and demonstrates an example future generations should not learn.  America’s greatest generation in WWII sacrificed everything to fight a war that they did not create but threatened America’s existence.  They did not saddle or pass the problem on to their children and grandchildren.

Today, America has a $14 trillion debt and a slowing economy.  We will not grow our way out of this hole.  Real patriots would do two things.  First they would say “no more”, it will be balanced budgets or nothing.  Second, they would say “let each of us do our part to reduce or eliminate the debt so our children and grandchildren inherit a clean sheet”.

Second, the gang would not have acted like the Medicare/Medicaid crisis did not exist.  This is understandable since the Federal Government cannot fix the Medicare/Medicaid situation without reducing recipient coverage to a meaningless level, or transferring so much of those programs’ costs to the receiving individuals that they would voluntarily cease using those plans because they could no longer afford them.

The gang recognizes (but does not say it) that Medicare and Medicaid are too hot politically to touch, and that any fix begins with a reform of our private health care delivery system.  Until annual health care cost increases become less than the rate of inflation, there can be no fix for Medicare/Medicaid.

It is not over until it is over.  So it is possible that the “walk out” is just part of Washington theatrics.  We will see soon.  The day of debt reckoning is coming soon.