July 30, 2011

Going all to pieces

John M., whose comments I always value, recently asked me if I had lost my marbles completely. (He added the honorific "sir," so I know it was all in good fun.) In point of fact, yes. At one time I had them all in a kind of rawhide bag - the steelies, the purees (some made of real amber - what opulent times, the 1950's!), the boulders, the cat eyes, and of course the small, generic "marbles," which looked like they were made of, well, marble, because they were. We played two kinds of game. One was played in the gutter where we shot the marbles along the street, using the up slope of the gutter to allow a kind of parabolic trajectory to get at marbles beyond those in our way. And the other the usual circle game, maybe marked out by string, where the object was to use one marble (maybe a fierce ball bearing) to knock an opponent's marble out of the circle. Maybe winning it (temporarily), if we were playing for keeps. But I didn't lose my marbles playing for keeps, because I was actually pretty good at the games. I just lost them, the way you lose most of your toys. One day you move on to something else and forget all about them.

John's question had to do with some comments I was making about the possible breakup of the United States into its constituent parts. Now, I have no idea whether such a thing is really likely to come to pass. The main things favoring the integrity of the USA are, at this point, (a) inertia, and (b) the dependence of the Red States, particularly in the Deep South, on central government largess, since they are the net beneficiaries of all that money flowing into Washington, 40% of which comes from five large, populous, mostly Blue states, California, New York and Illinois prominent among them. The Red States, of course, are the bastions of the anti-government Tea Party, and I would imagine that if 22% of all "income" these days is the result of federal "transfer payments" (Social Security, food stamps, unemployment), which it is, that the percentage is even higher in the states complaining the most about "big government."

But who ever said that American citizens weren't stupid? Wasn't me. Anyway, in this morning's San Francisco Chronicle, a lead article lamented the reduction of California's federal funding. With the budget problems in Washington and all this belt tightening, the Golden State might lose about 10% of its fed money, and the feds send California bout 1/3rd of California's total annual funding. So that's about 3.3% of the total budget, on top of the other problems we're having out here. It should be remarked that about 1/10th of everyone in the United States lives in California. California's return on taxes paid equals about 87 cents on the dollar, a bad ratio, though not as bad as states such as New Jersey and Connecticut. New Mexico, on the other hand, receives about two bucks for every dollar it sends in, Mississippi a buck eighty, Alabama a buck and a half, Kentucky (Mitch McConnell's home!) a buck forty-eight, Oklahoma (power base for James "Global Warming is a Hoax" Inhofe), about the same as Kentucky.

Incomes tend to be higher in the Blue States, where many of the citizens have read science books which look favorably on Darwin's Origin of Species, first published in 1859, and since these states also tend to be more populous and urban, and the federal income tax is progressive, it is perhaps natural that Big Blue States would send a lot of tax money to D.C. In exchange for this tribute, the Big Blue States are held hostage to the obscurantism and pure ignorance of the Bible Belt. If 53% of the entire American populace believe in literal Creationism (which they do), then one can surmise that in the humid precincts where the mega-churches provide most of the instruction on cosmology and the ascent of Man (as in plop! - he was just there!), this would be a very conservative number.

Well, Barack Obama never believed in this "Blue State, Red State" stuff. Remember that thrilling passage in one of his stump speeches on the campaign trail? "There's no Blue America or Red America," he intoned, "there's just the United States of America." To which I would ask the O Man in all candor these days: How's that workin' out for ya?

Oh, the divide is there all right. Now, there are advantages to a united nationality. Freedom to cross borders, for one thing, with only completely unmanned vegetation check points on the California line to force your speed down from about 80 miles per hour to 60 as you shoot the booths. Okay, that's the only advantage I can think of right now, but that's not negligible. I'm up in the air about the federal government's program of killing Muslims more or less at random in countries halfway around the world. Does that make me safer? I tend to doubt it, actually. I note ruefully that the same edition of the Chronicle reports that Iraq is descending into complete chaos again, with the violence approaching levels last seen in 2007. Were you aware that 15 American soldiers were killed in Iraq in June, in other words, last month? Of course you weren't. Why would anyone talk about that? Shiite insurgents are upping their activity in order to "force the United States to withdraw" according to the Status of Forces timeline, at the end of this year, but the Ungrateful Nouri, a Shiite, is not certain that's advisable. Al-Maliki thinks that it may be necessary to maintain a larger U.S. presence to quell the Shiite violence that is apparently the result of having a large U.S. presence in Iraq.

It's good to know that things in Iraq make as much sense as ever. It would certainly be difficult, if the dissolution of the U.S.A. should ever happen, to leave all that behind. Although I must say again: one can't predict what will happen over the next decade or so. I suppose if I were trying to sound intellectual about it, I would say that future developments belong to the realm of chaos theory. Who's to say how all the various competing forces of unity vs. dissolution will play out against each other, how desperate financial matters might become, how fractious the national discourse might get. We do have our own version of James Buchanan as President right now. What we don't have, anywhere on the horizon, is our own Abraham Lincoln.

July 28, 2011

Thinking Outside the American Box

I think there are two basic reasons that the United States has budgetary problems: (1) The USA spends way too much on defense; and (2) It doesn't collect enough in income taxes. One would never guess that these are the actual problems based on Congressional and Presidential soundbites in the general vicinity of the issue.

I spent an unedifying hour this evening watching the House debate on the so-called Boehner plan. I'm not sure why they're having this debate; the whole thing was an ill-tempered exercise in bad faith and posturing. If it passes in the House, the Senate will vote it down. Then what? No matter. What is striking is that the political process in Washington, D.C. is now so completely dysfunctional that the obvious solutions cannot even be mentioned.

The simple charts up above are a graphic depiction of where America's income taxes come from, who pays them and how much. The top chart is from 2007, the bottom the most recent tax year. They afford a picture of the radical skewing of wealth in the United States. Essentially, the bottom 50% of earners in the USA contribute virtually nothing to the approximately $1 trillion in income taxes collected by the IRS. On the other hand, the top 1/5th of earners pay in nearly two-thirds of all such taxes. These are the people who were most helped by the so-called "Bush tax cuts," who were exposed under Clinton's regime to marginal rates of 39.6%, but gained "relief" through the legislation of 2001 and 2003 and now pay 35% on such marginal income.

The big earners, of course, such as the Wall Street playuhs, have a great deal of "marginal income" exposed to such rates, and the nearly 5% reduction means a lot of additional take-home. If $1 million of your income is paid at the highest marginal rate, you can save $46,000 under Bush that you used to pay Uncle Sam under Bubba. That's a lot of additional cocaine and Ukrainian whores. Another way of thinking about our absurdly imbalanced society is to reflect that the saving alone is higher than the average national income for the rest of the plebes here in our increasingly Louis the Sixteenth wannabe times.

So the top 20% are paying about $640 billion per year in income taxes. Since restoration of the top marginal rate would imply an increase of about 14% in such rate, as a first approximation we might guess that the $640 billion would increase by a similar amount, or about $89 billion, if only this rate were changed and the rates of the lower earners (which were also reduced by the Bush legislation) were left alone, as they probably should be. Alternatively, a steeper progression could be applied to the top 40% of all earners, who pay nearly 85% of all tax, in an effort to close the budget gap. You get the sense, however, that such measures are seriously inadequate. Even if this raised an additional $200 billion (dubious), the actual budget deficit this year (a year without extraordinary stimulus spending) is about $1.7 trillion, or 1,700 billion.

It's funny, in a sickening way, when you think about how profligate the Bush Administration was with war spending. How many times did we hear about supplemental appropriations for the Iraq War where Bush would demand another $140 billion, or $115 billion, or whatever the number of the day was in order "not to abandon the troops?" And his obedient Republican Congress would play along until they were unseated in 2006, and then the Pelosi-led House took their turn writing blank checks. Look how hard it is to come by such sums of money! Squandered, wasted, thrown away, by an Idiot-in-Chief who knew absolutely nothing, as in zero, about how to run a business or balance a budget.

Still, the goal now has to be to find some midpoint between feasible revenue and sensible expenditures. The entitlement programs, if their surplus payments since 1983 are counted as they should be, are not the source of the problem. (The problem was Congressional stealing of the surplus for use in defense contracting and fighting superfluous wars.) The problem is how to raise enough money to support a $3 trillion budget in today's dollars, with defense and security expenses reduced from their current $1 trillion to about $300 billion. At this level, the expenditure would still be about three times larger than our mortal enemy and business partner, the People's Republic of China. Realistically, this is the only country which offers any serious threat of taking us on.

Most of the military budget could be funneled into the nuclear umbrella. I wish, for many reasons, that we still had public intellectuals of the stature of Carl Sagan and Richard Feynman who could guide this debate and remind us of the stark realities of nuclear winter and the unwinnability of a worldwide nuclear holocaust. Big wars between big countries are no longer possible, yet we maintain a force and weaponry structure appropriate to re-fighting World War II, but with no conceivable relevance to the world we live in. World War II is no longer possible because it would immediately escalate to World War III, the one that Tom Lehrer's singing pilot told us would be over "an hour and a half from now." Our current military force has nothing to do with fighting terrorism, either, unless the fact that Osama bin Laden's body was dumped from a warship counts as "use of the Navy." Iran, Iraq (at one time), North Korea, Pakistan, Israel -- all of these countries have acquired nuclear weapons, or are trying to acquire them, so that other countries will not invade them. That is their "best" and only sane use. The same goes for us, and we're still the Big Dogs in the nuclear weapons world. But maintaining a nuclear umbrella requires a very small fraction of what we now spend on defense.

So we could actually operate with a budget of $3 trillion, with a combination of somewhat higher tax revenue (from the current $2.2 trillion to, say, $2.6 trillion as we finally recover and as we raise taxes at the marginal rate), with the safety net intact. Borrowing $400 billion a year is certainly manageable. We could institute a single payer system so that we don't pay double what the rest of the Western world pays while achieving inferior results, thus controlling the explosive cost of health care. The defense budget would still be the world's largest by a factor of three, but all 750 international forts, bases and installations would be shut down worldwide and the troops demobilized.

Watching the morons on TV tonight, I know that such rationality never enters their minds. Yet it's right there. It's not that difficult. If we once began doing rational things, it might even become a habit.

July 27, 2011

Waiting for things to pick up

I suppose one upside of the debt ceiling fiasco is that more Americans have become aware of the fine-grained details of the federal budget. It is oddly telling, however, in this day of PowerPoint and desktop publishing, that the President, when repetitively addressing the nation about the dangers of not raising the debt ceiling, never once uses any form of visual aid or chart. Thus, our leaders want us to be aware that there is a problem but not to the point of being fully informed about how bad it is. Being fully informed can lead to unwanted reactions, such as totally freaking out.

There appear to be two forms of denial in operation these days, as the good ol' U.S. of A. comes to terms with its new, penurious reality. One approach, favored by liberal economists such as Paul Krugman, Brad DeLong of Berkeley and Dean Baker, is to assign most of the current problems to the financial shock delivered by the fall of one medium-sized investment bank in late 2008, Lehman Brothers. This approach has the merit of allowing such wishful thinkers to use a straight edge to graph a GDP-growth trend line from 2003 through 2007 - and then to extend such a line into 2011. Under this approach, the liberal economists can then laugh and snicker at the feckless policy makers who fail to see that federal spending, always in some vague, unspecified amount, would restore the nation quickly to such hypothesized trend line, and voila! the bad times would be over. Krugman often laments that the failure of the government to take his advice has "gratuituously" consigned America to economic recession. I really think that Krugman's ego should be designated a National Monument, if indeed not a National Park.

The other approach, now taken by the Sturmabteilung wing of the Republican Party (the Tea Bag contingent), is to believe that America's greatness can be restored simply by identifying federal government "waste," such as the Department of Education and the EPA, eliminate it, and America will then gain "confidence," and small businesses, freed from the yoke of intolerable "regulation," will go on a hiring binge which will fill the nation's coffers with overflowing tax dollars.

These are the competing fantasies of our political leaders. The sad truth is that the early years of the Aughts decade (2000-2007) were an illusion and an aberration. Taking office with a small surplus bequeathed to the Republicans by Bill Clinton, George W. Bush and Tom DeLay pushed relentlessly to lower the top marginal tax rate while simultaneously massively increasing military spending, both as a Pentagon baseline and for the "supplemental" costs of fighting wars in Afghanistan and Iraq, neither of which was remotely necessary for the nation's safety or defense. Because, however, the housing bubble was in its most robust expansionary phase, the tax revenues (resulting from all that consumer activity made possible with borrowed money) kept fairly close pace with the federal budget, although Bush, as with all Presidents since Reagan, cheated by subtracting the money stolen from the Social Security fund from the true yearly deficits. Measured as the growth of the national debt, Bush ran deficits of about $500 billion per year, even in the midst of the housing boom and with total tax revenues nearing $2.7 trillion, or at least half a trillion more than today, four years later.

What the lib econ guys miss, such as Dean Baker, is that the boom times cannot be extrapolated forward to the present. (I don't know how they miss it, but they do.) They're gone. However, thanks to the mania for compromise which characterizes our current Chief Executive, the tax reductions, which would have expired on December 31, 2010, remain with us (along with a poorly conceived reduction in the Social Security tax). Further, Barack decided to be Just Like George on the war front as well, expanding the war in Afghanistan and starting brand new ones in Yemen, Libya and Somalia while making no reductions whatsoever in the Pentagon baseline budget.

We thus have a Triple Witching Hour placing enormous pressure on the federal budget: an aging work force trying to retire, but with too few active workers to support their Social Security payments; an inadequate tax base with marginal tax rates too low and unemployment too high, but with a plutocracy in control which will not allow any increase; and an obsolete "consumerist" economy, hollowed-out by offshoring and ruinous free trade agreements, with no housing equity to keep the buying bonanza in motion.

Despite the above, indisputable realities, the country keeps trying to spend about $1 trillion per year on defense and homeland security in its maintenance of an international empire. Every day we unleash more Predator missiles to defend ourselves against Muslim insurgents, terrorists and surprised members of wedding parties, all of them in countries thousands of miles from the United States but in some undisclosed fashion posing an imminent threat to our safety. (We're unclear whether we "almost never" kill innocent civilians, as John Brennan, the National Something-or-Other claims, or we kill about 14 civilians for every "terrorist" we take out, as a just completed British study contends. One or the other; doesn't matter, as long as we're winning.)

We will certainly raise the debt ceiling. The Republicans are simply looking for a way to do so while fooling their cadres of overweight, white, religified government dependents that they're not doing precisely that. Remembering that the government runs a deficit of about 12% of our entire GDP, and that GDP is calculated by adding C+I+G+(Ex-Im), where C is consumer spending, I is certain types of capital investment, G is government spending and Ex-Im is the net of exports over imports (this one's always negative here in Walmartland), one can deduce that if the government suddenly loses 42% of its "funding" (borrowing) equal to about 12% of GDP, the gross domestic product is going to take a massive hit. Those in power from either party will not want to preside over that, because telling the Tea Baggers, "This is what you wanted," will not do the solons any good while the tar pots are being fired up.

It will be good when the fiasco is behind us, simply because it's too demoralizing to think about and hear about all the time. We will then go back into Godot Mode, as in Waiting For. Waiting for the economy to recover, for jobs to appear, for seniors to unretire, for the sick on Medicare to get well, and for candy-shitting unicorns to reproduce at a prodigious rate. This has been the "strategy," one way or the other, for about five years, from that occasion when W told us, in his one moment of felicitous description, that "this sucker could go down." He might very well have been right.