Archive for the ‘deficit’ category

Worrisome People, Worrisome Proposal

June 23, 2017

On June 21, 2017, Dick and Liz Cheney penned an op-ed article in the Wall Street Journal. The subject, “Congress and Obama Depleted the Military”. Catch your breath, the Cheney’s are back and just as sure they are right again.

The article points to 8 years of President Obama and 6 years of Congress’ Budget Control Act as the prime culprit behind a “sagging” US military. One might think there has been a time warp or a cerebral malfunction since the Cheney’s seem unable to recall relevant history and Republican involvement. I wonder why?

The Budget Control Act stems from a partisan budget and deficit standoff. Congress’ inability to pass any budget and facing a Government shut down, prompted Congress to pass legislation which said in the event of budget cuts, these cuts must be done proportionally across all budget items including Defense. Noteably this Act only applied to “discretionary” items omitting Medicare, Medicaid, or Social Security. Conservatives have howled about this agreement for the past 6 years.

We should recognize that US Defense spending amounts to almost $600 billion each year, several multiples of any other country and roughly 1/3rd of the worlds total. Recognize also countries such as China and Russia, combined are only a third of the US expenditure. So assume for a moment, the Cheneys are correct in pointing out deficiencies in the US Defense position, one ought to first ask how is that possible with so much total spending?

The Cheney’s appear conveniently forgetful that it was none other than Vice President Dick Cheney who got the US into nation building in Afghanistan and into a failed invasion and occupation of Iraq.  Most estimates put both of these endeavors’ cost in the trillions of dollars level.  Both of these ventures have yielded none of the promised goals.

The Bush Vice President, more than anyone else is responsible for the wheels coming off the Middle East wagon and creating a power vacuum which is consuming our military’s time and resources. But sometimes people forget those things that don’t support their current agenda.

Today’s world is a different place from 2004 when the US invaded and occupied Iraq. China has become a formidable military force and shows little signs of ceasing its military growth. Russia, also a nuclear country, is stronger and more focused under Vladimir Putin than it was in 2004.

The US should rightly be concerned about security concerning both of these countries. But the answer can’t be simply to rebuild the traditional armory (ships, planes, troops) and think China and Russia will be intimidated.  What about cyber and space warfare? The US must get smarter and while maintaining strength, must use foreign policy, economic influence, and diplomacy to greater degree.

And I wonder if the Cheney’s are aware that the Trump Administration has proposed sharp cuts in State Department funding? Do the Cheney’s realize that the Trump White House has threatened more than once to use trade as a negative foreign policy tool? Trade restrictions, historically, has been one of the fastest ways to generate armed conflict.

The Cheney “op-ed” piece is a thinly veiled attempt to promote Ms Cheney as a tough conservative who needs to be considered for future positions of greater responsibility.

Hmmm.

If this happens, Americans should expect Dick Cheney 2.0 and advance Ms Cheney at their own peril.

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Trump’s Budget

May 24, 2017

Yesterday, the White House released its official budget proposal. While there is little chance the budget proposal will get accepted as written, the publication writes into history how cruel and short sighted an Administration can be.

From taking away meals on wheels and “food stamps” for qualifying families to deep cuts for the EPA, State Department, and most other agencies, budget telegraphs no concern for the needy, and no strategic recognition for the importance of diplomacy or climate change. This budget proposal is a flat earth document.

Budget Director Mick Mulvany offered a spirited double speak defense of cuts to social programs claiming, in effect, that cutting off support to poor families would hasten their return to the “dignity” of the work force. Hmmm.

IMO, there are systemic problems with most if not all of American’s current social programs. For example, the cycle of poverty seems as healthy today as it was when Lyndon Johnson declared war on poverty. Providing meals to grammar school children (in order for them to study better), while compassionate, does not seem to have improved education levels or graduation rates. So does President Trump have a point?

Maybe, but…

The old adage “don’t fix it if it’s not broken” does not translate well into “if it’s broken, just wait, it will get better”.  Dealing with poverty and education are important subjects.

And, to be sure, there are a lot of aspects of the American economy which are not working well. The notion that those currently receiving food stamps will be motivated to go out and get a “good” job is ridiculous. Minimum wage is simply too low to provide new workers a chance for upward mobility. So cutting benefits without an alternative program is tantamount to gross insensitivity to the social welfare of the country. The cuts may be inviting those “without” to take to the streets.

Breaking the poverty cycle, to be sure, is no easy problem to solve. In this regard, neither Democrats nor moderate Republicans have tabled any ideas to improve the current status quo. So with the absence of other plans, does that justify this budget proposal?

Maybe, but…

Conservatives and Libertarians have long championed this type of a budget. No surprise. This budget proposal, however, is not designed to solve social inequities, it is designed to make it easier (in the minds of President Trump and his close advisors) to enact huge tax cuts.

Their thinking goes that these sweeping budget cuts will allow equally sweeping tax cuts without increasing the debt. Conservatives and Libertarians surprisingly do not want to see the debt grow and would prefer to see it shrink. Given the option of a lower debt level and no tax cuts, or tax cuts and no change to the debt, these “real” Americans will choose tax cuts for themselves.

Cutting any welfare assistance programs without an alternative proposal is cruel. Cutting welfare and cutting taxes at the same time is cruel, greedy, and short sighted.

The Tourniquet Syndrome

April 25, 2016

What policy positions do you associate with Republicans and with Democrats. The Republicans might be “tax cuts” and Democrats might be “entitlements”. For sure there are other policies each party pursues but taxes and entitlements separate the parties, one is for, and the other against.

The tax issue is socially complex. Most everyone, members of both parties, would prefer to pay no taxes at all if that were possible. Yet most people know that government services require a source of revenue to cover the expenditures. Hence, taxes are necessary. So when Republicans call for tax cuts, they are in fact seeking to shift the tax burden to be carried more and more by lower income individuals. Conversely, when Democrats seek tax increases, they are happiest when the “progressive” tax formula shifts the burden upstream to the very rich. Both parties agree the “other guy” should pay more, whether it is an increase or a cut.

Entitlements, however, represent a real conundrum.  The government is obligated to make entitlement payments even if it has to borrow money to over the costs.

Here is a list

  • 529 or Coverdell
  • Home Mortgage Interest Deduction
  • Hope or Lifetime Learning Tax Credit
  • Student Loans
  • Child and Dependent Care Tax Credit
  • Earned Income Tax Credit
  • Social Security–Retirement & Survivors
  • Pell Grants
  • Unemployment Insurance
  • Veterans Benefits
  • G.I. Bill
  • Medicare
  • Head Start
  • Social Security Disability
  • SSI–Supplemental Security Income
  • Medicaid
  • Welfare/Public Assistance
  • Government Subsidized Housing
  • Food Stamps

(Source – http://www.answers.com/Q/List_of_government_entitlement_programs)

Each of the entitlements was once justified as an emergency fix to a social problem, sort of like applying a tourniquet. Hmmm.

Looking at this list, one must first remove Social Security – Retirement and Survivors. The entitlement is designed to provide supplemental retirement income and is funded from wage taxes workers pay during their working lives. There is no reason that this form of Social Security should represent an on-going drain on the Federal Budget since revenues received can easily be adjusted to match future liabilities.

Medicare also should be removed. Medicare is healthcare insurance also supported by wage taxes and the rate of these taxes could be set to match payouts.

For the remainder, some social situation was deemed an emergency and a government payment (including tax credits, exemptions, or deferments) were thought necessary.

So, Republicans seek to cut entitlements are in effect seeking to remove the “tourniquet” and do nothing. In real life this almost always results in a serious deterioration in health and often death. Democrats seem just as content to leave the “tourniquet” in place and continue the status quo. Removing a “tourniquet” in real life must be accompanied with some other medical action of health deteriorates. Doing nothing, that is leaving the “tourniquet” in place does nothing to alleviate the underlying conditions which made the entitlement necessary in the first place, and maintains the long term “at risk” status of those receiving the benefit. Hmmm.

Candidates or political parties which advocate for tax cuts must be called out quickly and asked (1) who specifically would receive the cuts, and (2) how would the cuts be offset (especially now that there are already deficit budgets) The answer will reveal a naked attempt at lowering income taxes for the wealthy (even if it also lowers middle or low income tax rates), or the tax cut is advertised as a result of reducing entitlements (without any review of the underlying problems which lead to the entitlement in the first place).

Candidates who are content with the “entitlement status quo” or rise to fight the first hint of “entitlement reform” or “entitlement reduction” are guilty of a different but almost as cynical sin. Emergencies by definition cannot be allowed to go on forever, otherwise they wouldn’t be an emergency. Even more significant, the conditions which lead to an entitlement in the first place will almost certainly evolve over time. Sometimes the social situation can get even worse (like with Medicaid for those who cannot afford health insurance). Other times the need for an entitlement might be better served by an entirely different method of government assistance. One might suspect the “don’t touch entitlement” politician is someone more interested in a constituent’s vote than their wellbeing.

At first it probably seems discouraging that the all too familiar political rhetoric “I’m for cutting taxes” and “I’m against cutting entitlements” are words from someone only interested in attracting a voter’s preference. Political speeches are highly crafted, purposed to attract money and votes, that it often never occurs that there is more to taxes and entitlements than cutting or raising.

The candidacies of Donald Trump and Bernie Sanders have attracted a significant number of voters who for various reasons are rejecting the mainstream political message. These candidacies will have been successful if voters who once having rejected the “establishment” rhetoric, begin to ask questions of the “anti-establishment” about how and why their policies are wise and appropriate.

Will Americans find a way end the Tourniquet Syndrome?

Should The Progressives Speak Now?

March 25, 2015

Republicans in both the Senate and the House have issued budget proposal outlines. While slightly different, the GOP proposals share the belief that Government expenditures should shrink, the Affordable Care Act should be repealed, and in the House version, Medicare spending should be capped with the introduction of vouchers. Both proposals predict that magically the economy will boom and life will become better for everyone. Hmmm.

Regrettably, it is no clearer than with these budget proposal that everyone is entitled to their own opinion but not to their own facts. There are serious problems in the American economy and the GOP ideas do not deal with them.

Income inequality data shows that average wage earners’ income has been stagnated (for 30 years or so) while the income of the top 2% has grown handsomely. Without more even income distribution, the average earner will not be able to purchase as many goods and services from business as they do now. In time following the GOP script, our economy will shrink, not grow.

Bridges and roads, the backbone of business, are woefully in need of repair and maintenance. Without substantial investment, getting goods to market or for consumers to easily travel to services will become much more difficult. Undertaking the massive investment to prevent this will require substantial expenditures, something the GOP is reluctant to fund due to their “no new tax” pledge.

Standardized tests continue to show American K-12 education lagging over 15 other modern industrial countries. While the path to improving our students’ performance is not agreed upon, abandoning the “Common Core” curriculum and instead following the paths of Alabama, Mississippi, and South Carolina sounds more like a race to the bottom.

And whether we want to recognize it or not, the cost of healthcare services is beyond the reach of all Americans but the top1/2 of 1%. Without the aid of health insurance, normally provided by employers, few Americans could afford any healthcare at all. So the notion of repealing the Affordable Care Act, without an equally affordable alternative appears wrong headed at best and cruel at the worst.

So the question is, should Progressives speak now?

I guess the answer is “it depends”.

It will serve of little value for Progressives to only point out the obvious, the GOP plans are grossly unfair and will almost certainly not deliver their promises. Progressives, if they choose to speak, must address the facts.  Progressives must offer remediation ideas that provide a pathway to a fairer and more stable future state. Here’s why.

The business world has changed.  American no longer lives in the world of the wild frontier, the gilded age, or post World War II. Globalization and wide spread use of qualify principles insures that goods (and many services) can be produced anyplace in the world where the economics dictate. In and of itself, this will continue to drive down wages. Simply paying workers more (without commensurate productivity gains) will only lead to inflation. Sharing productivity gains liberally with workers, however, will have a very positive impact upon real average wages.

The “average” wage earner must acquire new skills and training in order to fill better paying jobs of the 21st century. Without the new skills and training, workers will be relegated to “minimum” wages, part time hours, and a world of few benefits.

Conservatives may choose to think it helpful to remove entitlements like Medicaid, Medicare, or social network expenditures thinking these reductions would motivate Americans to “pull themselves up by the boot straps” (the way it was done in the past). The GOP, however, will see their hopes fail. The world has changed.

Progressives, on the other hand, who call for these programs to be left alone and even new programs added for training and skill development are just as off base… unless funding is addressed. Tax code reform (a GOP recommendation) offers a route to increasing the tax revenue flow even while lowering certain tax rates.

Probably the biggest opportunity to reduce Government spending and eliminating the deficit lies in reducing the reasons Medicare and Medicaid cost so much. The GOP method appears to be based upon capping the Government’s portion and forcing those without generous business supplied health insurance to pay more. Over time, much more.

The GOP’s budget proposals call for no action to control and reduce the actual healthcare cost. With over two dozen other modern industrial countries experiencing health care delivery at half the cost per capita and equal or better outcomes as the US, there is clearly food for thought in a fairer approach to dealing with our deficit.

Maybe that will come up in a future Ted Cruz speech?

One Must Wonder

October 5, 2014

The newspaper headlines are subdued. The television and radio waves lack the virulent negative commercials. Billboard advertisements reflect nothing about an impending disaster. Has President Obama’s term suddenly won over its opponents?

Betting money says otherwise. So why no voices of negativity?

Betting money again suggests that the GOP is very close to capturing both branches of Congress, and quite frankly, the GOP does not want its rhetoric to snatch defeat from the jaws of victory. Following the November elections, all bets are off. I wonder whether Americans will recognize the implicit hypocrisy?

You see that

  • Deficit has not brought the nation to its knees. The US economy and the strength of the dollar both are fairing slightly better than comparative economies.  The US economy is still other countries envy.   Even so, the deficit is a real problem but not for its size. The deficit represents a paralysis in the country’s governance processes. The US cannot decide on what it can afford and is unwilling to pay for what services it chooses to use.
  • Jobs and the economy have not bankrupted the nation. Without the aid of GOP demanded across the board tax cuts, the US economy has continued to expand under President Obama. The unemployment rate has now dropped to 5.9% and no GOP politician wants to campaign against that. Ironically, the lack of a second stimulus program has required that the nation slowly reallocate resources in order to regain jobs. This slow process has resulted in a much sounder economic footing and bodes well for a sustained period of growth.
  • Healthcare has not become a disaster with the Affordable Care Act. The cries for “repeal Obamacare” while still popular in some quarters have not been borne out by real life evidence. Even worse for the GOP, repeal and a return to pre-ACA coverage, will be very unpopular with Americas. Repealing and retaining the politically popular portions (like children on parent’s insurance, no cancellation or denial of coverage, and donut hole assistance) will present the GOP with an even larger problem of how to fund the program at all. I wonder whether they would consider a single payer, universal healthcare program on their watch?

Each of these previous “scourge of the earth” issues have with time have not turned out as the GOP predicted.  These issues are not stagnant, howver. Post 2014 (and post 2016) life will have moved on and policies and laws will need to evolve too. I wonder whether governance responsibility will motivate the GOP to offer positive options and stand ready to be accounted for their success of failure?

Katrina, Iraq, and the great mortgage and financial implosion are not that distant in our memories.

Labels Are Everywhere But Mean Little

September 25, 2014

It is particularly quiet in Washington these days. Most Congressional members are in their home districts wooing their constituents before the November election. The stakes for this election are high for Republicans because unbelievably the GOP has a very good chance of getting control of both houses. Their strategy is “say nothing now” or “don’t break into jail”. Hmmm.

In individual local elections, however, each candidate must differentiate themselves so that voters can choose. In some places, “I’m conservative” is enough. For others, “I’m fiscally conservative but moderate on social issues” is more daring. And of course there are one issue candidates who bet their chances on immigration, abortion, or lower taxes, for example.

Labels… they are the short hand of the political world.

Little has changed from the last election (2014) with respect to labels and real problems. The Federal budget is still unbalanced (although at a much lower level) and the underlying problem of reconciling tax revenues with Federal spending is still hopelessly deadlocked.

Political rhetoric continues to speak past the underlying spending causes (Defense, Medicare, Medicaid) and the tax revenue generation necessary to afford these programs.“Conservative”, “Fiscally conservative and social issue moderate”, or labels such as “progressive”, “liberal, or “economic growth” proponents do not predict how to resolve this imbalance. Hmmm.

The “defense budget ($600 billion)” presents an open ended spending opportunity and begs the question of what global role the US should play, and whether that role should be proactive or reactive. Given a proactive or reactive choice, the cost can be determined and appropriate taxes enacted.

Medicare and Medicaid budgets combine for about $800 billion in expenditures which are offset by $300 billion in direct tax support. These health related expenditures contribute about $500 billion to the deficit. Solve this imbalance and the deficit practically disappears.

In theory, one might think that a “conservative” ought to favor more direct taxes (revenue that could only be spent of these two programs. Surprisingly, “conservatives” tend to want to cut these benefits instead of paying for them. The fiscally conservative, socially moderate really gets compromised. What other spending could be cut?

Consequently, these politicians usually end up, along with progressives and liberals, desiring to “grow” the economy and generate more tax revenue without raising taxes. Hmmm.

With an aging population and national medical spending which is 2x the rest of the modern industrial world, Medicare and Medicaid cost excesses are not going to go away. Any serious politician knows that.

Conservatives, fiscal conservatives/socially moderates, and Progressives/liberals ought drop their labels and distracting rhetoric. Focus needs to be placed upon fundamental healthcare costs and putting in place tax policies which will cover the costs of Medicare and Medicaid generated by future recipients.

If you hear “repeal Obamacare”, you will be hearing a “dog whistle” for cutting benefits for those who can least afford the healthcare cuts.

The path, regardless of party, for balancing the budget, drives directly through US healthcare delivery. If I hear any candidate with this message, I will pay attention.