Weiner's Wiener

You know how when you're in a locker room, and there's some guy who is totally naked, with his dick flopping everywhere, you just pretend that the penis doesn't exist and concentrate on how much back hair the guy has?  Why don't we just do this with politicians?  Why not ignore their sexual indiscretions?  I'm pretty sure that paying attention to them just encourages that sort of behavior, and in any case, unless someone is actually rubbing their genitals against me, I don't care about them.  

The Republican Presidential Debate, Part II: The State of Things

One of my friends wondered the other day why I "seem very angrily, if not obsessively, partisan lately."  I was perplexed, because I don't feel particularly partisan.  If anything, I would describe my political views as "hating everyone and everything," or possibly "wishing that we lived in a system that made sense."  Accordingly, the goal of this blog is to identify and criticize the enemies of reason and various common fallacies that are widely accepted.  Ideally, I'd like to show another option that makes more sense, but I don't know if I always succeed at that and will gladly settle for just asking questions about things.  That being said, the Republican party at the moments offers some tantalizing low-hanging fruit in this quest.  


Let's take as our starting point this statement by Tim Pawlenty: "This president is a declinist."  This is a variation of a common theme that the Republicans having been touting: Obama is a declinist, a defeatist, he doesn't believe in American Exceptionalism.  Personally, I don't think that Obama is particularly declinist, but I do think that he has no problem admitting that America, like anything else, has flaws and weaknesses that need to be addressed.  I'd also argue that the inevitable decline of America has become popular in certain circles of the intelligentsia.  Inasmuch as the latest manifestation of the Republican party, and especially the Tea Party, are defined by their common-sense, everyman attitude (as opposed to the pretentious liberals who are removed from the common American experience), arguing that Obama is a defeatist is likely to earn them political capital, and makes a certain sort of rhetorical sense.  It's a catchphrase likely to win them some votes, because no one likes to think their nation is on a downward spiral.  


The unfortunate part of this rhetorically sound tagline is that it distracts the American people from actual systemic problems that need to be addressed at this crucial point in our nation's history.  Mitt Romney talked about how Obamacare takes $500 billion from Medicare, ignoring the fact that Medicare costs are projected to increase 4 percent annually until 2019, at which point they're projected to increase 6 percent annually.  Medicare costs, if left unchecked, were projected to equal 10 percent of our GDP, or a slightly higher portion of the GDP than was represented by the financial industry in 2007.  As far as I can tell, the Republicans have no credible plan to reduce Medicare costs that even covers the number of people currently covered by Medicare, much less expanding insurance coverage to 95 percent of the population.  


Take a few points noted by Clyde Prestowitz in the blog post linked above:

 The challenge of Japan in the 1980s was thought to have been turned aside in the 1990s by a combination of the collapse of Japan's great asset bubble and the dot.com revolution emanating from , where else, the United States. By the same token, the collapse of what was eventually revealed to have been the dot.com bubble, was understood to have been overcome by the dynamic U.S. real estate and services economy led by the rapidly expanding and sophisticated banks of, where else, Wall Street.

What he is describing is hubris, plain and simple, and most dangerously, hubris that prevents a realistic analysis of circumstances as they actually are (or, to be epistemologically correct, circumstances to the closest approximation possible of how they actually are).  What about this: 

our statistical data gathering and analysis have not kept up with the evolution of global supply chains, outsourcing, labor arbitrage, and other key elements of globalization. As a result, we have been overestimating our GDP and productivity growth and underestimating the depth of the recent economic crisis and the extent of our economic decline.  

More hubris.  Or read this article by Fareed Zakaria.  Gratifyingly enough, he comes to conclusions similar to my own, specifically that fiscal austerity on the part of the government is likely to deepen and prolong the recession, and that we should begin emphasis on the manufacture of high-end technology.  His specific recommendation is to borrow Germany's extensive system of vocational schools to provide a skilled workforce, but  our current educational system is badly underfunded and produces a generally poor product.  


The most important point in Zakaria's article is that short-term debt reduction, currently in vogue among the Republicans, will lead to long-term fiscal problems for the country.  We need fiscal responsibility, not simply fiscal austerity.  This is not to say that there are not spending cuts that need to be made; the Department of Defense is an obvious place to start, but government spending as a whole is loaded with pork and unnecessary waste (for which all politicians are equally to blame).  Rather, the solution to the problem is that government spending needs to be reprioritized.  Some areas need deep cuts, some areas need significant expansion.  Most importantly, there needs to be an effort to increase federal revenue so that we can spend responsibly.  Below are my bullet points for success.  


1)  Invest significantly in developing infrastructure.  It has been noted in a number of places that the long term unemployed tend to fall out of the job market completely, which will have long term negative impacts on the economy.  Construction and engineering jobs to replace our aging roads, ports, airports, bridges, etc. will be an excellent stopgap to prevent a large number of workers from being lost forever.  Moreover, this effort should include efforts to make our infrastructure more green.  When the Democrats talk about green jobs, the assumption is that they involve wearing Birkenstocks, smoking a lot of pot, and counting owls, but in reality green jobs are primarily construction and engineering jobs.  Zakaria notes proposals by Congressmen that would allow private industry to partly finance these improvements, which is an excellent idea.  But we shouldn't let the fact that these expenses will increase the debt dissuade us:  they set us up for a larger tax base down the line, and in any case Japan's national debt is 200 percent of its GDP, with limited ill effects.  


2)  Reform the corporate tax code.  I've talked about this before, but it's probably time that we actually took the CBO's suggestion and simplified and lowered the corporate tax rate.  Counterintuitively, this will increase federal tax revenue by encouraging foreign businesses to invest in America while simultaneously forcing American companies to actually pay taxes.  As the system currently stand, the corporate tax code essentially subsidizes American businesses while taxing businesses that haven't influenced several decades of legislation through campaign contributions and lobbyists at a prohibitively high rate.  


3)  Raise taxes on the rich.  This will also broaden our tax base, with few to no negative effects for the population at large.  


4)  Rethink our agricultural subsidies and reform the process by which we charge other countries with dumping.  According to Stiglitz, we spend $3 billion to $4 billion annually on subsidies to the cotton industry, without which our cotton industry could not compete globally.  That's money taken out of the pockets of other programs so that we can export a raw good that is largely processed in foreign countries.  The largest profits are in the finished goods.  Land devoted to cotton could be devoted to another cash crop, or smaller farms that will employ a larger number of people.  Similarly, international anti-dumping cases should be required to meet the same standards as domestic anti-dumping laws.  There are several crops that can be imported at lower prices than they can be domestically produced, which lowers costs to consumers, and they can be replaced with more profitable cash crops.  


5)  Reform the federal procurement process, including the pertinent regulations.  The amount of waste involved in procurement throughout the federal government is spectacular.  Mandatory sources of supply remove vendors from free market competition, which leads them to raise prices.  The contracting process is bloated and inefficient.  There have been billions of dollars of waste on both foreign and domestic contracts associated with the global war on terror.  Development of new systems is absurdly expensive.  The Marine Corps' new logistics software system cost $700 million to develop, despite the fact that it is a modification of a commercially available system.  


6) Reduce defense spending.  Reform of the federal procurement process and a sensible manpower policy will maximize savings while maximizing the capabilities retained.  If the contracting process was streamlined, the logistics and supply chain aspects of the military could be streamlined to a significant extent, reducing the total manpower required without negative impacts on capability.  There are a number of large companies who perform logistical feats as impressive as those accomplished by the military, but private corporations are much more efficient.  A revised procurement system will also cut operational costs by at least a third by allowing the military to purchase required goods at market price, rather than the current inflated prices.  Simply holding contractors accountable for their budgets and their failures during research and development will also reduce costs.  Even beyond procurement reform, simply giving the military less money will increase efficiency.  The Marine Corps receives significantly less money per capita than the Army without negative effects on mission capability (it could easily be argued that the Marine Corps is more effective) while creating a culture of thrift that leads to more cost-efficient policies for the organization as a whole.  The crowning example of this is the difference between the two branches' personnel policies:  thrift has forced a more competitive promotion and retention policy on the Marine Corps, which raises the quality of the average individual while creating long term savings (because a higher percentage of Marines get out after their first contract expires, and retirees are a lower rank on average, while the active duty force as a whole averages a lower rank).  


7) Invest in small business through subsidies, tax exemptions, grants, loans, etc.  Zakaria noted that job growth is driven by new business and small business.  Remove the subsidies, tax exemptions, grants, and loans that insulate large corporations and stifle small businesses.  


8)  Control health care costs and expand coverage.  Obamacare doesn't have to be the solution, but the problem needs to be solved somehow.  This ties into investing in small business, because forcing adequate coverage upon corporations like Wal-Mart will cut into their profit margins and give local businesses breathing room, but won't negatively impact large corporations enough to put them out of business.  Moreover, universal health insurance improves quality of life, and although it seems like mostly a feel good about our humanity issue, it actually has broad economic effects.  CBO projected that in some cases it will reduce the number of hours worked, influence individual's decisions to retire earlier, and keep some spouses in the home, and remove disincentives for low-income families to work.  Because the projected reduction of 800,000 jobs is a supply-side reduction, it frees 800,000 jobs for people who want to work.  Because people will work less, they'll have more time to exercise, make their kids do homework, etc. and these choices will benefit the economy as a whole.  


9)  Invest seriously in education, especially math and science.  Zakaria's vocational school idea isn't bad, either.  This is our future that we're underfunding, and moreover the university system arguably tends to saddle students with a large amount of debt while failing to qualify them for jobs.  Vocational school provides an opportunity for all those superfluous psychology and marketing majors who are going to college because they were told that it's the key to success to learn a useful trade, expand our manufacturing base, and be gainfully employed without being saddled with crippling debt instead of binge drinking and sleeping through class.  


10) Manufacture, manufacture, manufacture.  This will be aided by better education, and also by increased federal revenue and revised spending priorities that give more to research and development.  


This list isn't being declinist so much as identifying the problem areas that, if unaddressed, will lead to an actual decline.  This is proactively being engaged in creating an exceptional America, and publicly addressing the need to improve ourselves for our future welfare.  Tempting though it might be to rest on our laurels, American Exceptionalism is ultimately nothing more than complacency and laziness.  

Sometimes the Comments are the Most Interesting Part

I recommend that you read this.  The argument itself isn't particularly mind-blowing, but the many comments include an interesting discussion, and in any case the legality of our off-and-on bombing campaign in Libya doesn't seem like it's been a big issue to many people.  Personally, I think that with regards to Libya, the choice was between blowing shit up and hoping for the best or not blowing shit up and hoping for the best, and given that there's an actual international coalition involved and we had assets in the area, blowing shit up wasn't a terrible choice.  That being said, our commitment should be pretty limited, partly because Libya is likely to turn into a nightmare of sectarian violence, and partly because Qaddafi seems to be running out of money because the West froze his assets.  As far as the argument itself goes, it's a bit of tilting at windmills, but more productive than most of the quixotic causes adopted by college juniors, and it certainly isn't hurting anyone.  


I also recommend that you read this and this, including the comments.  Given that 99 percent of the country isn't in the military, I get the feeling that a lot of people are a little lost when it comes to what service members are actually doing.  Both links include significant discussion on leadership in the military, some of the comments including specific examples, and they'll give you an idea of some of the things that are important to us, a few of the challenges, and most importantly, how passionately we care about our jobs.  Leadership, nebulous though the term may be, is the most important part of my job, and also the most satisfying and frustrating.  

The Sad State of News Today

I read this today, and it made me a little sad.  Not for necessarily for the obvious reasons, either.  As one of my friends said, "Every president, and many other elected officials, do the same thing. Sad, but true." His grim resignation to a corrupt polity aside, the Politico article was mostly a waste of time, effort, and space in the political dialogue.  The conclusions reached:  Obama has appointed a bunch of people into government positions who were major campaign contributors.  Just when they had me convinced of the insidious nature of this habit of his, it turns out that many of the people appointed were long time friends who were actually well-qualified for the jobs to which they were appointed.  Some of the appointments were for things like ambassador to Canada (not the most demanding post), director of Presidential Commission of White House Fellows, or executive director of the President's Commission on the Arts and Humanities.  


Personally, I think that it makes sense for the President to appoint a long-time friend who actively and substantially supported his candidacy to a position for which that friend is well-qualifed.  It certainly makes more sense than putting Paul Wolfowitz at the World Bank.  The only really troublesome allegation was that campaign contributions influenced the award of stimulus money, but consider this, courtesy of Joseph Stiglitz:

Forty-one companies (including General Electric, Microsoft, and Disney), which invested--"contributed"--$150 million to political parties and campaigns for U.S. federal candidates between 1991 and 2001, enjoyed $55 billion in tax breaks in three tax years alone.  Pharmaceutical companies spent $759 million to influence 1,400 congressional bills between 1998 and 2004...under the new Medicare drug benefit the government is proscribed from bargaining for lower prices--a provision worth billions of dollars just by itself.  

Stiglitz is referring to Medicare prior Obamacare.  Under Obamacare, pharmaceutical companies are awarded substantial rebates, presumably with similar effects.  


Essentially, the article describes the tiniest tip of a massive iceberg of legalized corruption, and describes what appears to be a relative benign piece of the whole.  It should be noted that the government actually owed GE several billion dollars in tax refunds for fiscal year 2010, even after GE paid a total sum of $0 in taxes.  


Presumably a piece insinuating nepotism within the Obama administration is marketable.  Some things that are less marketable:  an explanation of Obamacare, refutation of the profligate lies told by politicians of all stripes, an examination of the broader role campaign contributions play in legislation, an explanation of regulations that apply to the financial sector and the estimated costs and benefits, coverage of the financial crisis in the Eurozone, coverage of naval tensions between China and Vietnam, significant coverage of Afghanistan, Iraq, Pakistan, Syria, Libya, Lebanon, Jordan, Saudi Arabia, Yemen, the United Arab Emirates, Israel, Palestine, Egypt, Tunisia, anywhere in Sub-Saharan Africa, Brazil, Chile, Venezuela, Mexico, Colombia, the rest of South and Central America, the rest of Central Asia, most of Eastern Europe, and Russia.  There's little coverage of domestic policy, especially regarding economics and education, the discussion of foreign policy is minimal, and even when things are covered, there is almost no serious analysis.  


The role of journalism should be to hold politicians and other civil servants accountable for their actions and to educate the population about the things that are currently happening.  Instead, journalism panders to the baser impulses of the masses  and chases profits by blaring the same four or five stories on repeat.  We all know that Osama bin Laden was killed, but how many people knew that there was a raid on the Pakistani naval base in Lahore by insurgents who destroyed three American aircraft?  Did you know that Pakistan successfully tested ballistic missiles capable of delivering nuclear warheads at a range of over 300 miles?  What can you tell me about the bailout of Greece?  What about the economies of Portugal, Ireland, and Spain?  And does it seem like these things might be important?

Mitt Romney on Disaster Relief

KING: What else, Governor Romney? You've been a chief executive of a state. I was just in Joplin, Missouri. I've been in Mississippi and Louisiana and Tennessee and other communities dealing with whether it's the tornadoes, the flooding, and worse. FEMA is about to run out of money, and there are some people who say do it on a case-by-case basis and some people who say, you know, maybe we're learning a lesson here that the states should take on more of this role. How do you deal with something like that?

ROMNEY: Absolutely. Every time you have an occasion to take something from the federal government and send it back to the states, that's the right direction. And if you can go even further and send it back to the private sector, that's even better.

Instead of thinking in the federal budget, what we should cut -- we should ask ourselves the opposite question. What should we keep? We should take all of what we're doing at the federal level and say, what are the things we're doing that we don't have to do? And those things we've got to stop doing, because we're borrowing $1.6 trillion more this year than we're taking in. We cannot...

KING: Including disaster relief, though?

ROMNEY: We cannot -- we cannot afford to do those things without jeopardizing the future for our kids. It is simply immoral, in my view, for us to continue to rack up larger and larger debts and pass them on to our kids, knowing full well that we'll all be dead and gone before it's paid off. It makes no sense at all.




That's right, boys and girls.  We can't afford disaster relief without jeopardizing the future of our kids.  

Obamacare: The Great Satan

While I'm of the opinion that Republican party appears to have fielded some spectacularly asinine presidential candidates, they raised some points about Obamacare that I could not refute in yesterday's post due to my own ignorance.  So I did some research.  Medicare is in fact insolvent.  The Congressional Budget Office did estimate that Obamacare will remove 800,000 jobs (more on that later).  


In terms of basic effects, CBO estimates that the number of insured non-elderly will increase from the current 83 percent to 95 percent, or 32 million people in 2016 or 34 million in 2021.  They estimate that 6 million people will take replace direct insurance purchased directly from the insurer with subsidized insurance through their employer, and 1 million will replace insurance through their employer with Medicaid.  They further estimate that between 2012 and 2021, Obamacare will reduce the deficit by $210 billion.  Somehow I expected socialism to be more insidious...


The $210 billion in deficit reduction will occur in entitlement spending (mandatory recurring costs that Congress cannot defund):  this will occur because revenue gaining mechanisms are included in the legislation in the form of fines to employers who don't provide healthcare and taxes on health insurance with high premiums.  There will be an additional discretionary (spending funded by annual Congressional appropriations) cost of $5 to $10 billion annually to accommodate the additional workload required of the IRS and Health and Human Services.  The total discretionary administrative costs for the period of 2012-2021 is estimated at $100 billion, with $85 billion of that sum representing in the operating costs of the cognizant organizations regardless of whether Obamacare was enacted.  For the period between 2022 and 2031, Obamacare is (tentatively) estimated to reduce the budget by  0.5 percent GDP annually.  


In terms of revenue, net outlays for Obamacare are estimated at $1.04 trillion for 2012-2021, of which $732 billion will be funded through reduced Medicare expenses (because Obamacare replaces those portions of Medicare) and $510 billion through increased revenues.  


The impact on businesses is estimated to be minimal.  Employer-paid insurance premiums are tax exempt.  Premiums purchased by the individual are subsidized on a sliding scale, with fewer subsidies the wealthier the individual.  Insurance policies with high premiums are punitively taxed.  Any business with more than 50 employees that does not offer health insurance will be fined $2,000 per employee beyond the first 30.  Part-time employees do not count in this calculation, however.  Firms with fewer than 25 employees and with average salaries of less than $50,000 are eligible for subsidized insurance premiums.  The smallest businesses are eligible for up to 35 percent subsidies.  


Medicaid will be expanded to anyone earning 138 percent of poverty level income; Medicare enrollment is expected to be reduced to 60 percent of what it would have been without Obamacare.  


The 800,000 decrease in jobs cited by Michelle Bachmann is a correct figure, however, it was the estimated reduction for 2021 and the decrease will be on the supply side of things rather than the demand side:  

The net reduction in the supply of labor is largely attributable to the substantial
expansion of Medicaid and the provision of subsidies that will reduce the cost of
insurance obtained through the insurance exchanges. Those changes in law will effectively increase individuals' financial resources, which will encourage some people to work fewer hours or to withdraw from the labor market. In addition, the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work. But because most workers who are offered insurance through their job will be ineligible for the subsidies and because most people will have income that is too high to be eligible for Medicaid, those effects on financial resources and marginal tax rates will apply to only a small segment of the population.

Or, in more detail:  

Changes to the insurance market, including provisions that prohibit insurers from denying coverage to people because of preexisting conditions and that restrict how much premiums can vary with an individual's age or health status will increase the appeal that health insurance plans offered outside the workplace have for older workers. As a result, some older workers will choose to retire earlier than they otherwise would.

In contrast, another feature of the Medicaid expansion removes an existing disincentive to work for many low-income individuals. People currently become ineligible for Medicaid if their income rises above a certain level; for working parents, the median income threshold for eligibility among states was 64 percent of the federal poverty level in 2009. The health care legislation will allow parents to work and still qualify for Medicaid until their income exceeds 138 percent of the poverty level. Moreover, parents whose income exceeds the new threshold may be able to work and receive the subsidies for insurance purchased through the exchanges.

Employers' decisions to hire workers will also be affected in some cases by the health care legislation. Employers with 50 or more employees will be required to pay a penalty if they do not offer insurance or if the insurance they offer does not meet certain criteria and at least one of their workers receives a subsidy from an exchange. Those penalties, whose amounts are based on the number of full-time workers in the firm, will, over time, generally be passed on to workers through reductions in wages or other forms of compensation. However, firms generally can not reduce workers' wages below the minimum wage, which will probably cause some employers to respond by hiring fewer low-wage workers. Alternatively, because firms are penalized only if their full-time employees receive subsidies from exchanges, some firms may instead hire more part-time or seasonal employees. 

The conclusion to be drawn from the CBO's analysis is that Obamacare expands coverage, decreases the deficit, increases business for insurance companies (by subsidizing the insurance for people who would otherwise be unable to afford it), decreases the number of people on Medicare (by replacing it with subsidized private insurance), makes the job market less competitive by removing 800,000 people from it (because they retire earlier, or spouses don't work because they don't need the additional revenue to pay for health insurance), and improves the standard of living.  


The downside is that the average cost of premiums is likely to go up (although this will be balanced by lower health care costs due to an increase in preventative medicine), and some of the brunt of costs are shouldered by businesses (although this is mitigated through tax incentives and subsidies, and will most likely be reflected, in the long run, in lower wages for the employee).  


To me, it seems like the benefits outweigh the costs.  I'm going to read the actual legislation over the next few days to get a better idea of exactly where revenue is coming from; what subsidies, tax exemptions, and penalties will look like in more detail; and also to make sure that the legislation doesn't just shift costs from insolvent Medicare to Obamacare without ensuring that they're funded.  The CBO analysis also mentioned in passing cost reduction through increased efficiency in terms of bundling expenses and some other measures, and I'd definitely curious to see what is planned for that.  


Also, has anyone read or seen anything in the news that outlined Obamacare?  It definitely seems like information that the media should be providing, given that it will doubtless be a major issue in the upcoming presidential campaign, and somehow I don't feel like the voting populace should be left to judge the issue solely on the unsubstantiated partisan ranting of Bachmann, Pawlenty, Santorum, and Ron Paul.  

While You Were All Distracted by the Republicans...

I'm certainly a firm believer in the merits of the democratic process, rule of law, and many of the other fruits of this fine nation.  However, probably the most important thing going on lately has been happening in Europe, and has nothing to do with the somewhat laughable lineup that the Republicans have put forth as presidents-in-waiting.  In case you haven't been paying attention, Greece's economy went tits-up, with Ireland, Portugal, and possibly Spain waiting to follow suit.  Chaos within the Eurozone seems boring and unimportant, I know, but please remember that the Eurozone is currently the largest economy in the world, and debtor nations with languishing economies are threatening to drag the rest of Europe down with them.  The impression that I get is that the failure of the Euro will make the mortgage bubble look like opening your piggy bank and realizing that your parents have been stealing from you.  


Oh, also, Vietnam apparently staged live-fire naval exercises and published a list of people exempt from conscription as a result of escalating tensions between Vietnam and China over maritime trade routes or something.  

The Republican Presidential Debate

You can read the transcripts here.  I haven't gotten all the way through the debate, but a few thoughts have struck me so far.  


First, let's begin with Herman Cain's terrible train metaphor, which led into "That means lower taxes, lower the capital gains tax rate to zero, suspend taxes on repatriated profits, then make them permanent. "  To unpack this a little, I sort of agree with his first two points: I, and the Congressional Budget Office and a number of economists, think that we should absolutely lower our corporate tax rate.  While doing so, we should just go ahead a simplify the corporate tax code.  The CBO noted that by so doing, we would actually broaden our revenue base while encouraging foreign investment.  As our tax code currently stands, the government ended up owing GE money because GE had successfully lobbied for a number of subsidies, tax breaks, and similar fiscal shennanigans, whereas foreign businesses (who have not spent years lobbying Congress to defend their interests) are repulsed by our prohibitively high corporate tax rates.  Similarly, a more effective corporate tax policy would reduce the need for a corporate capital gains and dividends tax, which encourages business.  As far as the refusal to tax repatriated profits, I agree conditionally.  As it currently stands, businesses are allowed to count foreign expenses as deductions:  if this continues to be the case, then repatriated income should be taxed.  No deductions, then don't tax them.  Simple enough.  


The next item on the agenda:  Tim Pawlenty's projections of consistent 5 percent GDP increases.  Mr. Pawlenty is kidding himself.  Historically, 3 percent growth has been the average for the US this century.  Boom years have been 4 percent growth.    Pawlenty's claim that if China or Brazil can do it, we can do it is insubstantiable.  China and Brazil are developing economies that are rapidly growing due to large-scale increases in economic inputs like education, capital investment, and infrastructure.  This means that they will have decreasing returns over time.  The US economy grows because of increased efficiency, or increased output per unit of input.  Economic growth based on innovation or increased efficiency seems to average about 3 percent.  Ron Paul's claim that 5, 10, or 15 percent annual growth is possible in a true free market economy is similarly ridiculous.  Assuming that Mr. Paul was just pulling numbers out of the air to make a rhetorical point, his idolatry of the free market is justifiable only if the free market also has perfectly developed markets, perfect distribution of information, and perfect competition (which has never happened and never will).  


Moving on, we'll notice that Mr. Pawlenty says, "my plan involves a whole plan, not just cutting taxes. We're proposing to cut taxes, reduce regulation, speed up this pace of government, and to make sure that we have a pro-growth agenda. "  So we have cutting taxes, reducing regulation, and...the nebulous promise of a pro-growth agenda.  Reduced taxation and deregulation are staple Republican policies lately, but judging by the economic performance of the Bush administration, tax cuts and deregulation are the key to 2.4 percent growth (less than half of the promised 5 percent), negative median wage growth, and a stagnant job market.  The "speed up this pace of government, and to make sure that we have a pro-growth agenda" bit of his answer sounds a whole lot the wheels in Mr. Pawlenty's head turning and coming to the conclusion that he can't just promise tax cuts and deregulation because everyone knows that's what Bush did and it clearly didn't work.  


The most ridiculous part of the debate was the discussion of bringing manufacturing jobs back home.  First of all, it's safe to assume that every single person in the debate is campaigning on the promise of reduced government spending, also known as fiscal austerity, which is widely acknowledged to prolong and deepen recessions/depression.  Second of all, manufacturing jobs have left the country because other countries can manufacture things more cheaply.  The cost of labor in Taiwan, Singapore, China, Brazil, et cetera ad infinitum is simply lower than the cost of labor in the United States.  It is simply more profitable to manufacture things in developing countries.  This will not change any time soon.  Moreover, there's a large, untapped supply of cheap labor throughout Asia, Africa, and South America (the majority of the world's population, actually), so the playing field is unlikely to level any time soon.  To be competitive in manufacturing the things that were staples of the American economy, we would have to lower wages for employees to an unacceptable level.  


Accordingly, it's a fools errand to try to recapture the sort of manufacturing base that we used to have.  We need to look seriously at the world around us, and look at our own strengths to determine the course that we take.  Japan and Germany, both countries with strong, successful economies, make their manufacturing bread and butter selling microprocessors, quality automobiles, and other high end goods.  Given the rapid growth in China, India, Singapore, South Korea, and elsewhere, there are expanding markets for high end goods.  Moreover, the production of such goods is capital intensive (you have to buy lots of expensive machines to manufacture that sort of thing) which works in our advantage (we're the wealthiest nation in the world) and require an educated workforce (which we have).  GE is the largest employer in the nation precisely because it manufactures high-end, capital-intensive goods.  To remain competitive in this arena, we need to ensure that we continue to produce well-educated human capital, especially individuals who are proficient at math, science, and engineering.  


Similarly, GE has a large foothold in the market for green equipment like waste processing facilities, biodiesel manufacturing, windmills, etc.  Given the increasingly large number of people competing for a finite amount of fossil fuels, especially in over-crowded developing countries, green technology will play a prominent role in the future, simply because it allows for the efficient use of scarce resources.  Implementation of green technology can begin domestically:  our aging infrastructure can use a renovation.  Moreover, the majority of so-called green jobs are in fact construction jobs.  They involve replacing aged pipes, replacing sewer systems, laying the foundation for windmills, etc.  The obvious argument against this sort of endeavor is the prohibitive cost to the taxpayer in an age of austerity, but it could easily be financed by an expanded revenue base (in the form of corporate tax reform mentioned above) and a large decrease in military expenditures (which is very easily accomplished, given the byzantine nature of the military bureaucracy).  


The other side of this coin is that we need to continue encouraging the growth of developing economies.  Richer citizens in Asia, Africa, and South America mean more people who can by the sort of goods that America produces.  Stronger foreign economies are good for everyone.  


These are just some initial thoughts:  there will be more to come in the days ahead, especially about evil Obamacare (which I need to research before I can comment intelligently).  

Human Capital

I was reading this today, which discussed the political ramifications of extended ground wars as well as the failure of the theory that fancy toys can lead to quick, decisive wars.  While the article is certainly worth reading, it misses the real moral of US wars from Korea to present day.  The lesson to be learned from the last fifty or so years of history is that there are significant flaws to our strategic thought, particularly regarding the decision to go to war and the broad policies concerning the conduct of war once begun.  Korea is a lesser example of this tendency:  inadequate thought was put into the force required to enact the preferred outcome and reactions within the region, but MacArthur also disobeyed orders  by pushing the North Koreans into China and over-extended his troops in his drive northward.  In Vietnam, the decision was made to prop up a weak and unpopular government against a battle-hardened enemy, the conduct of war relied on an ineffective strategy of attrition that played into the enemy's hands, and strategic bombing campaigns that could have significantly hampered enemy logistics were enacted much too late.  In Afghanistan, our initial troop footprint was too small, policies were put into place that encouraged sectarian violence, feudalism, and corruption, and the few resources that we had committed were soon diverted to invade Iraq.  We invaded Iraq for no reason, disbanded the Baathist party and the Iraqi Army which led to inadequate social infrastructure to run the country and 500,000 unemployed men who had both the motivation and the means to engage in insurgency, and generally conducted ourselves poorly.  


All of these failings occurred at the strategic level, which is to say that the failures were the province of elected officials, their cabinets, and high-ranking generals.  The military has by and large acquitted itself well. A few war crimes, or potential war crimes (Haditha, the Kill Squad) occurred as a result of poor leadership at the lowest levels, but the rest (Abu Ghraib) were the result of inadequate manpower that was poorly trained, and the result of policy decisions made at the highest level (George W. Bush, Dick Cheney, Donald Rumsfeld).  


The far greater tragedy, the waste of blood and treasure both foreign and domestic, is entirely the fault of flawed strategic thinking.  Moreover, the potent tragedies occurring on a smaller scale happened only because of the decision to go to war, which was certainly not a decision made my a Lance Corporal machine gunner.  The highest level of national leadership has failed us.  It has failed us in every major war since WWII.  Frankly, the blame for this failure rests squarely on the shoulders of America's citizenry.  Politicians are by nature stupid, corrupt, horrible creatures who will pursue ill-fated adventures ad infinitum if they aren't held accountable (Weiner's wiener being a microcosm of this phenomena).  


We simply have not been holding them accountable.  There's a strong argument to be made that the all-volunteer force insulates the population from the costs of war.  When less than one percent of the country is fighting the war, it certainly incurs less popular wrath.  And while reinstating the draft will certainly make it much harder to invade countries indefinitely with inadequate justification, the larger problem (which affects more than just the conduct of war) is that we have inadequately developed the human capital of our nation.  


Our citizens have trouble finding Iraq or Afghanistan on a map.  The debate about the merits of counterinsurgency is lost on them.  Heaven forbid we start talking about how the contracting process breeds corruption in Afghanistan, the counterproductive support for warlords, or anything complicated at all. They (including Congress, members of whom are also concerned about the possibility of islands capsizing) were convinced that Iraq had  weapons of mass destruction and connections to Al Qaeda (which, in case you haven't been paying attention, turned out not to be true).  


The simple fact of the matter is that our citizenry, generally speaking, is composed of stupid, bleating sheep.  They cannot understand the conduct of the government normally, much less in a time of war, and certainly cannot be depended upon to adequately restrain the hubris of politicians.  


Maybe it's time that we started funding education instead of superfluous carrier battle groups...

Bigotry and Religious Extremism

Earlier today, Facebook pointed me in the direction of thinking about gay marriage, and then slacking off at work pointed me in the direction of this.  While Slate admittedly has a bit of a liberal slant, their bias is in this instance irrelevant.  Why, you might ask?  Easy.  There is literally no good, rational, critically thought out reason for gay marriage to be illegal.  The continued ban on gay marriage is discrimination, pure and simple.  Let us consider the arguments against gay marriage:  


1) The gays will destroy family values.  First of all, the divorce rate is indicative of the fact that family values were on the decline, without any help from the insidious gays.  The divorce rate keeps climbing because the family values to which the  Republican party so frequently refers never really existed, Leave it to Beaver notwithstanding.  They are an idealized version of a nuclear family that was based entirely on the fact that women had few options besides sticking with their man, cooking, and cleaning.  Given the fact that the Greatest Generation, as well as subsequent generations who fought in Korea and Vietnam, was composed largely of war veterans who had seen horrible, horrible things, PTSD was probably a defining aspect of quite a few marriages.  What are the most common symptoms of PTSD?  Insomnia, alcoholism, and domestic abuse.  Even in the military today, which is actively attempting to diagnose and provide treatment for PTSD, alcoholism and domestic abuse are significant problems.  In 1950, without any recourse for treatment, I guarantee that they were significant aspects of the social fabric that were never mentioned.  Child abuse in the physical sense was significantly more socially acceptable than it currently is, and in the sexual sense most likely was undiscussed and unaddressed due to the stigma surrounding it.  It was, of course, just as prevalent as it is today, because pedophilia has been a common theme throughout human history (just ask the Ancient Greeks).  Adultery was largely unaddressed, because boys will be boys and women had no power to address the affront to their dignity.  And don't forget how racist we used to be.  


Accordingly, the family values that the gays are allegedly destroying were alcoholism, domestic abuse, pedophilia, sexism, racism, and rampant adultery.  These are not family values that are worth defending.  


2) God Hates the Gays.  Quite a few people argue this point, as if religious belief should be the underpinning for all legislation.  To get a general feeling for what I think about the idea of religious belief underpinning the government, read this, this, and this.  As far as I know, Christian hatred of the gays is based on the story of Sodom and Gomorra (a bunch of people try to rape an angel, Lot offers to let them rape his daughter instead.  Seriously.  Look it up), a passage from Romans (Paul basically say, "If people want to fuck dudes, having a dick in their ass is punishment enough."  Also, the verse is in the perpetual context of Paul defining Christianity as an opposition to conventional pagan morality so that it can develop an identity of its own, instead of just revising the Jewish identity, and all the scriptures around that verse are about forgiveness, compassion, and being nonjudgemental), and a couple other passages here and there.  The thing is, in just the Gospels, there's probably a stronger argument that Jesus was a socialist who supports universal healthcare than there is "God hates fags."  In the Pauline epistles, there are more references to the Second Coming of Christ occurring in Paul's lifetime than there are condemnations of homosexuality, and a much stronger argument that women should cover their hair and stay in the kitchen than that God hates fags.  In the Bible as a whole, there's certainly a better argument that Saturday is the Sabbath, we should have periodic jubilee years during which all debts are forgiven, and we shouldn't eat pork or shellfish.  People who say God hates fags are picking a very small number of verses to interpret much more strictly than their context warrants, and saying, "SEE!  SEE!  FAGGOTS ARE AN ABOMINATION IN THE EYES OF GOD!"  


If you'll notice, the point about family values doesn't stand in the face of rational examination, and the religious argument, always a good fallback when reason fails you, isn't scripturally consistent.  This is because the decision to prohibit gay marriage is based entirely on prejudice.  The real reason is that they think that GAYS ARE ICKY.  I don't know about you, but "Gay people are icky," doesn't seem like much of a legal argument to me.  


So as it stands, the gays don't enjoy the same tax benefits or visitation privileges to hospitalized love ones as straights.  DADT was repealed, which means that they can fight and die for our country, but the Defense of Marriage Act means that even if they get married in a state where gay marriage is legal, the federal government won't recognize the marriage.  Their spouse won't be eligible for health care or housing, and unless they have a child together, the homosexual service member will be required to live in the barracks.  If they have a child together, the servicemember and the child can live in base housing, but the spouse is not allowed because the spouse is not recognized as a dependent.  This applies to all federal employees:  legally married homosexuals cannot cover their spouse under their government health insurance if they are a federal employee.


Taxpayers are funding the systematic discrimination of homosexual civil servants, people who voluntarily work for the government to provide for the common good of America's citizens.  


What the fuck, America.  

Agricultural Subsidies

I'm still reading Making Globalization Work, and have reached the point at which Stiglitz discussion the role of agricultural subsidies in stymying development and continued poverty.  

...more than two-thirds of farm income in Norway and Switzerland came from subsidies, more than half in Japan, and one-third in the EU.  For some crops, like sugar and rice, the subsidies amounted to as much as 80 percent of farm income.  The aggregate agricultural subsides of the United States, EU, and Japan (including hidden subsidies, such as water), if they do not actually exceed the total income of sub-Saharan Africa, amount to at least 75 percent of that region's income, making it almost impossible for African farmers to compete in the world markets.  The average European cow gets a subsidy of $2 a day (the World Bank measure of poverty); more than half of the people in the developing world live on less than that...The Burkina Faso cotton farmer lives in a country with an average annual income of just over $250.  He ekes out a living on small plots of semi-arid land; there is no irrigation, and he is too poor to afford fertilizer, a tractor, or high-quality seeds.  Meanwhile a cotton farmer in California farms a huge tract of hundreds of acres, using all the technology of modern farming:  tractors, high-grade seeds, fertilizers, herbicides, insecticides.  THe most striking difference is irrigation-and the water he uses to irrigate the land is in effect highly subsidized.  He pays far less for it than he would in a competitive market.  But even with the water subsidy, even with all of his other advantages, the California farmer simply couldn't compete in a fair global marketplace were it not for further direct government subsidies that provide half or more of his income.  Without these subsidies, it would not pay for the United States to produce cotton; with them, the United States is, as we have noted, the world's largest cotton exporter. Some 25,000 very rich American cotton farmers get to divide $3 billion to $4 billion in subsidies among themselves, which encourages them to produce even more.  

Stiglitz proceeds to note, that like the Bush tax cuts, subsidies predominantly benefit the wealthy and industrial farms, rather than the family farm.  

Looking across all crops, some 30,000 farms (1 percent of the total) receive almost 25 percent of the amount spent, with an average of more than $1 million per farm.  Eighty-seven percent of the money goes to the top 20 percent of the farmers, each of whom receives on average almost $200,000.  By contrast, the 2,440,184 small farmers at the bottom-the true family farmers-get 13 percent of the total, less than $7,000 each.  The huge subsidies-including the allegedly non-trade distorting ones-actually drive out the small farmer.  When farming becomes more lucrative because of the subsidies, the demand for land is increased, driving up the price.  With the price of land so high, farming has to become capital-intensive.

Stiglitz notes that doing away with agricultural subsidies will have significant benefits to farmers in developing countries (aka, the majority of people in developing countries), although urban workers will be hurt by higher food prices.  His solution?  "The way to solve this transitional problem would be for industrial countries to provide assitance to help the developing countries through the adjust period-even a fraction of what they no spend on agricultural subsidies would do." [emphasis added).  


In short, removing agricultural subsidies would save us a ton of money, which could be invested in research, education, infrastructure, medical care, or any number of the areas in which the United States could use some work.  The downside is that industrial farming will be negatively impacted, which could lead to a decrease in jobs, higher food prices, etc.  The thing is, people still need to eat.  The decline of industrial farming means the rise of smaller family farms.  As Stiglitz noted, subsidies to industrial farms raise the price of land to the point where industrial farming is actually necessary to turn a profit, which discourages small farmers.  The removal of those subsidies will lower the price of land, and make labor-intensive rather than capital-intensive farming profitable.  This equals job creation, especially for unskilled laborers, who have been hit the hardest by our decline in economic fortune, and who are troublesomely numerous due to our decrepit public education system.  


Moreover, there is a built-in market for food from smaller, local farms because of the rise of the idea of organic food.  A while ago, I was having a conversation with someone who irrationally hated the Pacific Northwest's snobbery about organic, locally produced food.  I pointed out to her that industrial farming was a less viable option due to the geography of the region, but that there was still plenty of arable land available for farming, which led to a proliferation of smaller, local farms that produced organic, pesticide/herbicide/genetic modification free food that tasted better and was healthier, but still remained relatively affordable.  I asked, "Why wouldn't you eat food that tasted better and was better for you if it was available at a relatively equitable price?"  


Removing agricultural subsidies simply expands the areas in which it's feasible to grow locally produced, healthy food so that the rest of the country can enjoy the fruits of tomatoes that don't taste like durable pulp.  It could be argued that the second and third order effects of the decline of factory farming would negatively impact, say, tractor manufacturers, etc.  My argument would be that a more level playing field will allow for wealthier farmers in developing countries, who in turn can invest capital in tractors, irrigation, etc.  The market for those goods and services will expand significantly, leading to increasingly efficient agricultural practices world-wide and increased crop yields.  Moreover, the increased market share of smaller farms will make it more feasible for smaller farmers to invest capital in tractors, etc.  


These are just the economic reasons to do away with agricultural subsidies.  It doesn't even touch the increased environmental benefits of decreased use of pesticide, herbicides, and industrial farming generally speaking.  

 

Speculative Capital and Investment Banking

So lately I've been on a quest to develop at least a rudimentary knowledge of economics, and as part of that quest I've been reading this book by Joseph Stiglitz.  While discussing the economic miracle of East Asia, he noted the following:

Even as they have opened up their markets for long-term investment, the two Asian giants-India and China-have restricted short-term capital glows.  They recognized that you cannot build factories and create jobs with money that can move in and out overnight.  They had seen the record of instability that accompanied these flows, risk that came without evident reward.

He proceeds to explain that market liberalization, with its accompanying influx of speculative capital, was related to stagnant growth that was built on borrowing, the sale of national assets,  and ultimately a recession.  He also noted that growth went disproportionately to the rich.  Even more significantly, he discussed the rapid market liberalization of former Soviet bloc countries.  Specifically,  average life expectancy in Russia decreased by four years in the period from 1990 to 2000.  It also led to hyperinflation ( with prices in Ukraine increasing by 3,300 percent per year), recessions, depressions, etc, ad nauseum.  


If speculative capital destroys the economies of developing countries, why is it a boon to the economies of developed countries?  Or is it a boon?

Michael Lewis notes that flaws in the Black-Scholes options-pricing model, which is intended to significantly mitigate risk, has contributed to a number of stock market crashes since 1987, the most recent being the mortgage bubble crisis of 2008, the effects of which are still being felt.  Take a look at this. Then read this. (If you're feeling really ballsy, read this).  To me, it seems that the probably isn't simply the Black-Scholes model, but rather a divergence between the utility of the financial industry (which absolutely exists) and the aims of investment bankers, which are driven by greed rather than utility.  


Take the housing bubble as an example.  The housing bubble was driven by derivatives traders who were making immense profits off the increased value of houses.  Banks were making increasingly risky loans to finance these homes, because there was a lot of money to be made doing complicated financial things with derivatives (which they inevitably had their hand in).  This led to a continued increase in housing prices, which led to increased profits, which led to increased risk taking.  Which led to the inevitable conclusion of the drama, which came when it turned out that people couldn't actually afford to pay their mortgages, and it turned out that significant portions of the financial industry had lost a massive bet that housing prices would continue to increase.  Because the Black Scholes model underestimates the likelihood and effects of a mass panic on market prices, but was used anyway on the assumption that it would nullify risk, the global economy collapsed.  


The point of all this amateur discussion of economics and markets and derivatives is this:  Speculative capital is dangerous.  It can really fuck up the economy.  It can really fuck up people's lives.  (Seriously, a four year decrease in life expectancy in Russia over the course of a decade).  The people who monkey around with speculative capital for a living stand to make immense profits if they take appropriate risks, and have very little to lose personally if those risks don't pay off.  There should probably be effective laws and regulations in place to curb their willingness to take those risks.  

Some Thoughts on Counterinsurgency

I was having an argument on the internet and wrote this, which I thought I'd share here as well:  

Counterinsurgency is predicated on the idea that an insurgent's greatest strength is the population, inasmuch as an insurgent can hide in, receives logistical support from, and is able to recruit from the population. The objective, then is to separate the insurgent from his greatest strength so that you can assert your will over him through force (which is why it's war, not diplomacy). This does not necessarily imply removing "the underlying cause of ill content," and indeed, removing the underlying cause of ill content might be counterproductive if, say, the underlying cause of discontent is an ideological opposition to infidel Americans (which is true of at least a percentage of the insurgents in the last two wars), or a desire to take control of the local, regional, or national government (true for a majority of counterinsurgents, some of whom are very adamant about taking over).

But specifically, successful counterinsurgency involves removing a counterinsurgent's ability to hide among, receive logistical support from, and recruit from the population. The first two of those things can be accomplished entirely by military means, provided you're respectful to civilians, aren't killing innocents, are providing locals effective opportunities to provide intelligence, and are proactively patrolling, etc. The third can be accomplished to a significant extent through solely military means, inasmuch as the majority of insurgents are insurgents of opportunity who aren't particularly ideologically committed, and if the opportunity cost becomes too high, they'll play nice. The ideological fanatics absolutely must die, which leaves only ideologues who are committed because of the societal injustices that you were talking about. Those are the only sort of regenerating insurgents.

In both Iraq and Afghanistan, the idea was to provide a stable security environment to allow the host nation to develop its own functional government (with US help, which was theoretically supposed to come primarily from the State Department) to address those injustices. In Iraq, I'd argue that there were significant failures at the place where the operational and strategic meet that neutered the ability of civilian agencies to provide effective support to the local populace when the Iraqi government was in its infancy and prevented the effective distribution of civilian resources throughout the war which, when exacerbated by policy decisions at the highest levels that led to a significant erosion of security throughout the country and decimated Iraq's bureaucratic infrastructure, caused mission creep and a military takeover of nation-building functions. In Afghanistan, I'd argue that policy decisions exacerbated corruption and feudalism, which combined with a security vacuum to give insurgency a second life.

All of the decisions with long-lasting negative systemic impacts on the redress of societal injustice occurred at a higher level than even an infantry division, and is fundamentally beyond the scope of the mission given to the military. More importantly, an infantry battalion or regimental combat team simply doesn't have the capabilities required to effect the systemic change required to address the major societal injustices that lead to the constant replacement of insurgents motivated by those injustices. It would be a fool's errand to try. An infantry battalion does, however, have the capabilities to provide physical security, conduct a census, field local complaints, interact with sheiks, and all the other tools that counterinsurgency provides to help them kill insurgents. I'm not saying that the majority of our time should be spent doing kinetic operations, but rather that to look at the tools counterinsurgency gives us to kill insurgents as the mission itself rather than the means by which to accomplish the mission is a mistake.

If we had been given the mission of using military governors to improve security, develop infrastructure, recruits locals into the government, turn control of the province over to (coalition) civilian governors once certain criteria had been met, and ultimately replace the civilian government with native government like we were when we occupied the Philippines, it'd be a different story, but that wasn't the mission that we were given.