January 06, 2011

The Republicans & Their Glorious Loyalty Oath Crusade

"Almost overnight the Glorious Loyalty Oath Crusade was in full flower, and Captain Black was enraptured to discover himself spearheading it. He had really hit on something. All the enlisted men and officers on combat duty had to sign a loyalty oath to get their map cases from the intelligence tent, a second loyalty oath to receive their flak suits and parachutes from the parachute tent, a third loyalty oath for Lieutenant Balkington, the motor vehicle officer, to be allowed to ride from the squadron to the airfield in one of the trucks. Every time they turned around there was another loyalty oath to be signed. They signed a loyalty oath to get their pay from the finance officer, to obtain their PX supplies, to have their hair cut by the Italian barbers. ...When other officers had followed his urging and introduced loyalty oaths of their own, he went them one better by making every son of a bitch who came to his intelligence tent sign two loyalty oaths, then three, then four; then he introduced the pledge of allegiance, and after that “The Star-Spangled Banner,” one chorus, two choruses, three choruses, four choruses. ..To Captain Piltchard and Captain Wren, the Glorious Loyalty Oath Crusade was a glorious pain in the ass, since it complicated their task of organizing the crews for each combat mission. Men were tied up all over the squadron signing, pledging and singing, and the missions took hours longer to get under way. Effective emergency action became impossible, but Captain Piltchard and Captain Wren were both too timid to raise any outcry against Captain Black, who scrupulously enforced each day the doctrine of “Continual Reaffirmation” that he had originated, a doctrine designed to trap all those men who had become disloyal since the last time they had signed a loyalty oath the day before. It was Captain Black who came with advice to Captain Piltchard and Captain Wren as they pitched about in their bewildering predicament. He came with a delegation and advised them bluntly to make each man sign a loyalty oath before allowing him to fly on a combat mission."

Any excuse, after all, to quote from Joseph Heller's Catch-22. I thought of that incomparable novel (I've often thought that Joseph Heller was the closest that modern America has come to Jonathan Swift and Gulliver's Travels) when I heard about the newly empowered Republicans in the House and their idea that any bill introduced must cite its Constitutional authority. There's just something about Republicans....the clannishness, the sense of wanting to belong to a club, the way they revel in conformity and groupthink. They love flag lapel pins, monolithic voting, yielding to authority, unthinking solidarity, dumb little rules that identify them as members of a clan, such as citing Constitutional authority for anything you bring up in the House.

I'm okay with it all. The new House will be fun. They are absolutely full of terrible new ideas, ideas that make no sense, that are wildly impracticable, but since the USA has passed that point of complexity that Joseph Tainter, among others, pointed out as the zone of diminishing returns, where each new accretion of complexity only causes the system to break down further, it really doesn't matter. Which makes me think of Catch-22's Captain Dunbar, Yossarian's foil and philosophical buddy, who sought out the company of extraordinarily dull and tedious people, because they made time go more slowly and thus gave the illusion of a longer life. While the United States swirls down the toilet, we will have the spectacle of that supreme corporatist, President Barack Obama, attempting to differentiate himself from the moiling Tea Party dunderheads by bleating "progressive" sounds from time to time, while the Republicans lurch farther and farther to the Right in an effort to draw clear distinctions between themselves and the ever Rightward-leaning President. Obama will chase their Conservatism, in other words, but he will never overtake them, because the capacity of the Right for truly loony ideas is insatiable, protean and inexhaustible.

It should be fun to watch for a couple of years. I don't think many rational people believe at all anymore that the political class in Washington, D.C. is capable of any kind of ameliorative action. Any economic relief for the peasantry is strictly an unavoidable by-product of the Power Elite's main focus and preoccupation, which is concentrating power and wealth in Washington and Wall Street.

Congress Dances Up Against the Ceiling

Afflicted as I am with the common cold (rhinovirus? coronavirus? I know not), I find myself with a few more morning hours of wakefulness than I would choose to have under other, more healthful circumstances. To wit, I'm under the weather. Let us call this Day 4 of the Cold, the first (Monday) being largely symptom-free until later in the day, when a peculiar taste of almonds took up residence in the back of my sore throat. Then general malaise, that useful French word for which the English equivalent is "malaise," sneezing, as the viruses began using the cells of my upper respiratory tract to be fruitful and multiply. By the millions and millions. Day 2 marked the development of post-nasal drip and clear congestion in the nose, fatigue, and a subnormal temperature (pathognonomic for cold versus flu, except for H1N1, but there's no way I could have that; I mean, all those blackbirds falling out of the sky worldwide are simply auditioning for Birds II: This Time It's Over). Day 3 (Wednesday) introduced me to a chartreuse form of mucosal discharge (TMI, I know), a dry cough, more sneezing, a headache, a slight rise in temperature (the white blood cells at last mounting a counter-attack), and a curious euphoria that made me think I was better already, except I wasn't. Today (Thursday) is like a mature form of Tuesday. It's said a cold will last 14 days if you treat it, two weeks if you ignore it, but the symptoms are only aggravating for the first 6 to 9 days, depending on the severity. One thing about living alone is that there is virtually no secondary gain from illness, so I'm motivated to forget about this annoying cold as soon as possible, and I promise never to mention it again.

Now, a word from Frank Sinatra:

This is the classic "Dancing on the Ceiling" by Jule Styne and Betty Comden; I'm sorry, but I just can't get myself to take Lionel Richie seriously about anything, although I'm sure Richie made more money than Jule Styne with one song ("All Night Long") than Jule did writing what I consider the greatest standard ever written ("Just In Time"). I think Lionel was kind of rubbing it in by writing a cheesy disco tune with the same "Dancing on the Ceiling" title as Jule and Betty's great song, but such are the ways of progress and the relentless debasement of popular culture.

Yet it is Congress which now dances up against the ceiling, the debt ceiling in this case. Off to your right you can watch the National Debt Clock whirl away. The Klowns only gave themselves leeway up to $14.3 trillion last time they raised it. After that, the federal government supposedly loses its "authority" to spend money and must "shut down." Here's the key point on the National Debt Ceiling: it's utterly meaningless. Many of the Tea Party Reps and Senators made a big issue of the debt ceiling when they were elected (Rand Paul being one of the more vociferous), but they're caught in a strange version of Catch-22: if they seriously tried to stop the government from borrowing more money to stay in business, then their own salaries, those of their staffs, the whole apparatus of Congress, would also close down and terminate, and the very oxygen which sustains them (publicity) would also disappear. This leaves them in a rather obvious contradiction now, because they did make such a huge deal of the National Debt Ceiling when they were shucking and jiving their way to Washington. Hell, even Barack Obama voted against raising the National Debt Ceiling in 2006, when he was briefly a senator, once Barry was absolutely certain there were enough votes in the Senate to ensure that the ceiling would be raised anyway.

As I said the other day, Congress absolutely depends on you, me and every other American never paying any attention to the hard numbers involved in the "budget debate." If we really analyzed this freely-available data, published monthly by the Treasury Department with lots of details and lots of forecasts for the coming year, we would immediately see the absurdity of all this talk about a "balanced budget." The United States has never been farther away from a balanced budget. This year Congress will spend about $3.8 trillion, and about $1 trillion will be for various forms of defense and "security." There has never been a time in the history of the American Republic when the U.S. Treasury ever received even three trillion dollars in taxes and receipts.

So how will Orangeman and the Tea Party (maybe the GOP could stand for "Grand Orange Pekoe") learn to live on about $2.4 trillion per year, which is what the government plans to take in for fiscal 2011? (I don't think it will make that much, now that it's given away about $400 billion in tax revenues with its end-of-the-year "bipartisan compromise.") That's a good one, huh? What's the point of reducing federal spending to $3.7 trillion per year except as Kabuki theater for the rubes in the cheap seats? That's what I mean about how completely these dorks count on us falling asleep in civics class.

So hell yeah, Rand, I'll take what you said to Judge Napolitano recently on TV seriously: you think we ought to live within our means, within that roughly $200 billion per month, and I'll give you credit for actually using a realistic number for your calculations. Here's one idea: leave Social Security alone. It has a free-standing funding mechanism, the FICA tax, which would require only raising the cap above the present $100,000 limitation to put it back in the black (and doing away with that suicidal reduction in the employee's share of FICA). So that's okay, and that's about $790 billion per year. The Department of Health and Human Services, which adminsters Medicare, has a budget of about $900 billion per year. Listen up, Rand: do you think you're going to turn all those over-65 people loose to take their chances with private insurers? Here's a clue: I pay $718 per month to Blue Shield with a $5000 deductible, and Blue Shield just announced it plans a 59% rate hike. Using my 1950's-era grade school math skills, that tells me I'm looking at $1,141 per month, and being out of pocket $18,692 per year before I draw my first dollar of benefits. That's not a lot less than I made as an annual salary at my first lawyer job out of law school. How many seniors do you think might wind up uninsured, especially since they would be rated at higher premiums? When their medical premiums exceed 100% of the Social Security they receive?

Are you beginning to feel the room heat up a little, Rand? We're coming very close to the Tea Party's Golden Fleece: the defense budget. As a benchmark, Russia, our perennial nemesis, our death-struggle foe, the Mutual in Mutual Assured Destruction, spends about $40 billion per year (http://www.globalsecurity.org/military/world/russia/mo-budget.htm). China, our new nemesis and rival for world domination, spends about $77 billion. How about this approach? We'll add these two together = $117 billion, and spend that. I know, ridiculous. Okay, how about we double that figure and spend $234 billion per year, and reduce the defense budget by about $800 billion? We're living on our income now. We still have about half a tril to cover the rest of the federal government's basic services, and that will be enough. The old folks are secure, the country's safe, the courts are functioning, the national parks are open for business, and Congress can meet about two or three times a year to conduct what little business will be left.

Works for me. Let's balance that sucker. Otherwise, just cave in now and shut the hell up.

January 05, 2011

And just outside the Capitol, the Real World

I came across this video from The Nation posted on Dmitry Orlov's site. A reminder that there are issues far more important than John Boehner's search for a superfluous $100 billion (which I understand the Republicans have now abandoned anyway - there's just nothing that can be reduced).

The always provocative Noam Chomsky brilliantly outlines the dilemma the human species faces as it awaits action from corporate America: the fiduciary duty of corporate CEO's at big oil companies, coal companies and other polluters is to maximize short-term profits for shareholders, and anything less than this result, for whatever reasons of conscience or concern that the planet is doomed if we don't change our ways, will result in the ouster of management. With the House of Representatives now overrun by climate change deniers, it's difficult to see what combination of corporate or governmental action will bring this country around to a sane adaptation, short of literally having no choice, at which point the choice may be completely illusory.

I knew that Chomsky's description reminded me of something earlier in American history, and then it struck me that what he was describing was essentially identical to the deceit and immorality of Big Tobacco. The execs at the big smoke shops all knew, to a moral certainty, that they were manufacturing death-by-the-pack, and yet for as long as possible they hid the results of their own research and deliberately lied to Congress and to the American people. For the sake of the bottom line, they killed (and continue to kill) people by the millions. So too now does upper management at Exxon, BP, Royal Dutch Shell and the rest know that anthropogenic climate change is real, yet they fund specious research to discredit legitimate climate science, hire trolls to undermine criticism of their industry, and buy off Congressmen by the busload.

It is difficult not to share the pessimism of the phlegmatic Dr. Chomsky. On the other hand, what we can't accomplish volitionally, a collapse of the U.S. may deliver to us willy-nilly. As Mom used to say, God never closes a door without opening a window somewhere.

January 04, 2011

A Citizen's Guide to the Upcoming Budget Debate

First of all, it's important to remember when pondering the august proceedings of the Kongressional Klown Kollege that nothing is as it seems. While the IQs of the 535 members of Congress are definitely shifted to the left under the standard bell curve, even these mouthbreathers are aware that there is no earthly way for them to come close to balancing the budget. It is, as they say, to laugh. That is why The Man From Planet Orange (although he looks more cordovan in some light), John Boehner of Ohio, the incoming House Speaker, talks about cutting "$100 billion from discretionary domestic spending." There are two ways of reading this statement of intention:

1. It's a joke.
2. Orangeman believes that the American people are even stupider than his colleagues.

Thus, to level the playing field for those of us outside the rotunda...

The Kongress Klowns are probably dimly aware they are running the largest Ponzi scheme in the history of the civilized world. The federal income is wholly inadequate to keep the doors open and the suckers buying Treasury bonds. To illustrate this point, we can refer to the the U.S. Treasury Department, which publishes its income on a monthly basis. Its website is here: http://www.fms.treas.gov/mts/index.html One valuable act of citizenry, in my opinion, would be for all literate, voting Americans to bookmark this site and check it once a month. It can really open your eyes to the reality of the American fiscal situation. The White House and Congress count on your ignorance in saying the stupid things they say, such as Boehner's statement above.

For example, in October of 2010, the first month of the current fiscal year, the United States received in income taxes, inclusive of Social Security (FICA) taxes, $146 billion. In November, 2010, the figure was $149 billion. The outlays (expenses) for these two months were, respectively, $286 billion and $299 billion, for a net deficit, in two months, of $290 billion, or approximately the same as the total income for the two months. We're talking here about two months. Now I will grant that the months of October and November are not necessarily the best months for federal income. If one were to extrapolate the approximately $300 billion received during these two months, total income for the fiscal year would only reach $1.8 trillion. The Treasury's "forecast," however, estimates total income of at least $2.4 trillion. So what I did was, I looked at the last fiscal year and noted that in three months (heavy taxpaying months), the Treasury received about $100 billion more per month than in the usual month. Thus, if we gross up the $1.8 trillion by these bonanza months, we should reach a number like $2.1 trillion.

This indeed was about what America made last year in taxes. The $2.4 trillion figure is a Hopium-enhanced number, although since the unemployment rate has not improved at all, and wages are flat, how is this supposed to be accomplished? Add to this dismal picture the recently passed FICA reduction of 2% on the employment side, which should affect the last 9 months of the fiscal year in a very negative way, and we begin to depart the Reality Station and head down the Track of Deep Denial altogether.

What happens if we multiply the outlay side by 6 (2 mos. x 6 = 12)? Well, the $600 billion spent in the first two reported months of the 2011 fiscal year extrapolates out to about $3.6 trillion, which again is fairly close to the actual budget number, although America has not in fact had an actual, passed budget lately. Just sort of a gentlemen's agreement (continuing resolution, they call it) to spend a helluva lot of money.

Chalmers Johnson, before his lamented death, made the point over and over that the Military-Industrial Complex in the United States, honestly accounted for, spends about $1 trillion per year. Never mind the official budget number of $660 billion or so. This does not count "supplemental" war appropriations (as if Congress is not aware that these tragically expensive follies are going on), expenses for caring for the wounded and maimed veterans we're mass producing, the nuclear bomb budget in the Department of Energy, Homeland Security, the various paramilitary outfits attached to the intelligence agencies, nor the debt service on that part of the national debt attributable to defense costs (about half, or close to $250 billion per year at present). When you add all of these up, you come very close (or over) Chalmers's number.

Do you hear anyone, anywhere, demand that the defense budget be reduced to some sane level of expenditure that we can actually afford on our somewhat pitiful income? The actual income of the U.S. Treasury is only enough to pay the existing defense budget (fully accounted for), Social Security and interest expense on the national debt. That's it. And it's very likely, at the current rate of debasement of the dollar and the addition of approximately $2 trillion per year to the national debt, that the interest expense is going to crowd out its two rivals for attention in future years.

Against this picture, I would ask you: what the hell does $100 billion in "domestic discretionary spending" have to do with anything? Leaving only the question: what are these mountebanks actually up to?

January 02, 2011

The Historical Arc of American Real Estate Fantasies

One curious feature from the late 1970's, as I recall among the hominid subgroup technically known as Yuppus Californicus (the thirty something, sub/urban professional milieu in which, always somewhat uncomfortably, I found myself immersed), was the real estate conversation. These discussions followed a predictable course. Someone mentioned they had bought their house for $140,000; however, they believed they could now sell it for $180,000. After only 3 years! Well, that was nothing, someone else would say; a friend bought their house in Mill Valley for $160,000, and now it was worth well over $200,000, and that was after one year!

And so these dreary, boring, vaguely sickening conversations went, all the time, everywhere. Californians of that period were absolutely obsessed with real estate, home ownership, and the rapid, accelerating appreciation thereof. It's what life was about. You might be thinking of the fugue movement from Bach's Lute Suite in E Minor you were learning on classical guitar. Didn't matter, that's nothing to talk about; shut up and listen to how much cash I just pulled out of this killer re-fi I'm about to close!

Yet another curious feature of the same historical epoch was this: it was generally conceded that the actual income of most people was insufficient to explain this meteoric rise in real estate prices. Which is another way of saying that the general economy did not seem to have anything to do with what was going on with property values. Meanwhile, one could see the deleterious effects of this phantasmal wealth. Well-to-do enclaves (the East Bay hills, the west side of the Peninsula, southern Marin County) were becoming ghettos infested by only two types of (white) people: "legacy" owners, ordinary people who had been in their houses a long time and were aging along with the house; and the YUPs who were invading these enclaves with their high salaries (doctors, lawyers, investment bankers). The ad valorem basis of real property taxes in these pre-Prop 13 days meant that the escalating prices were hammering the older, fixed-income people, which led to the "1% rule" of Prop 13, which led to the death of California's once-proud public education system. To a large extent, "ordinary life" disappeared from the Bay Area's upscale suburban areas in favor of real estate speculation and the devotion of ever-increasing amounts of one's income to keeping a roof over your head. The artists, the Bohemian or "genteel" poor, the people who just didn't want to focus their lives on working for a huge mortgage payment, were first marginalized and then driven from the scene altogether, along with all the mom-'n-pop stores and the other charming features of what we used to think of as real life.

The past is prologue. It was interesting to me to read a recent analysis by the brilliant, always useful Robert Shiller of Yale University (an economist who can see, unlike the confused and erratic Paul Krugman, the big picture and see it whole) about the actual historical trends in American real estate prices, from 1900 to the present. What he found was that real estate, except in aberrational periods, has tended to appreciate about 3.5% per year, year in and year out. It obviously declined heavily during the (first) Depression, and grew at ridiculous rates (about 19% per year) during the period 1998 to 2007 (although, as I said, the absurd was happening much sooner in California, as is often the case - The Golden Canary in the Coal Mine of American Life). 3.5% is essentially savings passbook return, or used to be, before we became so wealthy our banks could no longer afford to pay us interest. That's normal life. A house is actually a shelter from the elements, when you get right down to it. It's Vital Heat Maintenance Factor #1, in Thoreauvian terms, food being #2. Houses should appreciate along with general rates of low inflation, not substitute for a hot stock tip or a Ponzi scheme you've dreamed up.

So what is really going on in the "real estate crash?" A reversion to the trend line, as the water in housing prices is inexorably squeezed and wrung out. Peter Schiff, another brilliant Cal man (I don't mean me, I was thinking of Michael Milken), who never met a dismal economic fact he didn't like, has taken Shiller's analysis and run with it (into the ground). If housing prices have lost about 30% so far (and this is already a Depression-level number), they need to drop another 23% from present levels in order to fall back in line with the gently sloping upward line of Shiller's graph. In so doing, the slope would rejoin the essentially flat trend line of American earnings among the hoi polloi, that is to say, everyone outside about a ten square block area in Lower Manhattan. Americans have gotten essentially nowhere in their earning capacity since about 1973, which is why we substituted house appreciation for saved earnings as a way of building wealth.

So how far back will this regression need to go in order to regain congruence with Reality? You might think of prices in the late 1980's, early 1990's as your guide. Schiff, who has a kind of genius for making the blood redder in the water, predicts that the move downward will "overshoot" the trend line because of the general dislocation caused by Americans realizing they're dirt poor instead of real estate magnates. Thus, the move away from discretionary spending will be given another impetus once this reality sets in. The more general category of U.S.A. hominid, Americanus Consumerus, will pull in their horns.

I find this all intensely interesting, reflecting as it does the economic reality of my time on Earth, as an American. I think I'll write some more about it, especially the futile, insane attempts of Washington, D.C. and The Ben Bernank to fight these essential Laws of Economic Gravity by madly injecting trillions of dollars of notional "money" into the system in an effort to re-levitate the housing market. All because it has become a form of political suicide ever to admit that the last forty years of American economic history have, in essence, been a complete hoax.