Barak Obama, as a presidential candidate, is a creation of the media. Outside of Illinois nobody had ever heard of the man prior to his run for the US Senate. While running for the senate, the press started to ask the question that nobody else was asking: “Could this man be the first viable “Black” candidate for president?” I doubt that even Mr. Obama was thinking about this for 2008 until the press suggested it.
Ever since, Mr. Obama has been given extreme latitude by the press. While the media went after Mrs. Clinton for her proposals they neglected to point out that Mr. Obama merely responded with platitudes. Mr. Obama is very likable and Mrs. Clinton can appear to be aloof and hard to talk to. This puts the working press into Mr. Obama’s camp. They may not even realize they are doing it. However, it is easier cast a critical eye on the proposals of someone you don’t like and be forgiving of those you do like.
The mass media needs to take a good look at itself. The last time a situation like this occurred we ended up with positive stories about G. W. Bush and negative ones about Al Gore. Although they deny it, the press’s attitudes about a candidate come through clearly in what is supposed to be pure news coverage. Even though we all want a likable person in the White House we must accept the fact that likable and competent do not always go together. There are times, when a job needs doing, that I’d rather work with someone who I know is good at what they do rather than with a good friend who may not be as capable.
Almost every human endeavor has economic implications. As a result, this blog will be addressing many issues. Some of the issues will obviously be economic in nature. Other issues will have strong economic implications. Either way, the discussions are on topic.
Thursday, February 21, 2008
Wednesday, February 20, 2008
THE ECONOMIC LEGACY OF FINANCING A WAR EXCLUSIVELY WITH DEBT
In the Spring of 1966, Temple University dedicated its new building for the “School of Business and Public Administration”. The dedication speaker was Walter Heller and his subject was “CAN THE US FIGHT THE WARS ON POVERTY AND IN VIETNAM AT HE SAME TIME?” Heller’s answer of yes had a caveat that was ignored by the press. He said that we would need adjustments to revenue in order to avoid economic adjustments when the Vietnam War ended. When it ended we were left with a period of high inflation, low economic growth, and high levels of unemployment. This is the very definition of Stagflation.
This morning, The Bureau of Labor Statistics announced that the inflation rate for January was an annualized 4.91% (the monthly rate was 0.4%). We, also, have had recent indications that the unemployment rate is rising. Combining this with Ben Benake’s prediction, also published this morning, that the country is facing a period of high inflation and low growth, we can see that we are well on the road to another period of Stagflation.
The current Stagflation is a direct result of the “Conservatives” (I call them Regressives) insistence on paying for the Iraq War exclusively with debt. Some how they believe, despite the evidence, that giving tax breaks to the most affluent of us brings about prosperity to all. Given the current economic situation, I can only conclude that support for making all of the Bush tax cuts permanent is based purely upon greed. Let the middle class and the poor pay so that the obscenely wealthy can become even more outlandishly opulent. What we need is a more equitable tax policy.
Tax policy usually relies on either of two principles: The “Ability to Pay Principle” or the “Benefit Principle”. Both of these forget the fact that paying taxes is painful. We would all like to pay as little as possible to the various levels of government. However, as long as we have to support our government we should make sure that when we pay taxes we are “equalizing the pain” to each of us. The problem with “Flat Taxes”, “Value Added Taxes”, and the various consumption taxes is that they tend to distribute the pain to the lowest economic levels in society. To see how this applies we need to look at the satisfaction people get from having income and/or wealth.
It is well known that as people obtain more and more of a good or service the satisfaction they get from the last unit of the good is lower than the satisfaction received from the immediately prior unit. In economics this is known as the Law of Diminishing Marginal Utility. This “law” applies to income and wealth as well as the consumption of goods and services. The more income or wealth you have, the less each additional dollar of income or wealth means to you in terms of your over all satisfaction.
Applying this to tax policy we can see that a 20% flat tax would cost $4,000 to a person with a taxable income of $20,000 per year and $20,000 to a person with a taxable income of $100,000 per year. In terms of the ability to enjoy the fruits of the economic system, the $4,000 to the low income individual is a much greater sacrifice than the $20,000 is to the high income individual. Equalizing the pain of paying taxes would require that the low-income person pays a lower tax rate or the higher income person faces a higher tax rate or some combination of lower and higher rates.
Progressive income taxation is not a “soak the rich” scheme. It is the only system that has the capability of equalizing the pain of supporting government.
This morning, The Bureau of Labor Statistics announced that the inflation rate for January was an annualized 4.91% (the monthly rate was 0.4%). We, also, have had recent indications that the unemployment rate is rising. Combining this with Ben Benake’s prediction, also published this morning, that the country is facing a period of high inflation and low growth, we can see that we are well on the road to another period of Stagflation.
The current Stagflation is a direct result of the “Conservatives” (I call them Regressives) insistence on paying for the Iraq War exclusively with debt. Some how they believe, despite the evidence, that giving tax breaks to the most affluent of us brings about prosperity to all. Given the current economic situation, I can only conclude that support for making all of the Bush tax cuts permanent is based purely upon greed. Let the middle class and the poor pay so that the obscenely wealthy can become even more outlandishly opulent. What we need is a more equitable tax policy.
Tax policy usually relies on either of two principles: The “Ability to Pay Principle” or the “Benefit Principle”. Both of these forget the fact that paying taxes is painful. We would all like to pay as little as possible to the various levels of government. However, as long as we have to support our government we should make sure that when we pay taxes we are “equalizing the pain” to each of us. The problem with “Flat Taxes”, “Value Added Taxes”, and the various consumption taxes is that they tend to distribute the pain to the lowest economic levels in society. To see how this applies we need to look at the satisfaction people get from having income and/or wealth.
It is well known that as people obtain more and more of a good or service the satisfaction they get from the last unit of the good is lower than the satisfaction received from the immediately prior unit. In economics this is known as the Law of Diminishing Marginal Utility. This “law” applies to income and wealth as well as the consumption of goods and services. The more income or wealth you have, the less each additional dollar of income or wealth means to you in terms of your over all satisfaction.
Applying this to tax policy we can see that a 20% flat tax would cost $4,000 to a person with a taxable income of $20,000 per year and $20,000 to a person with a taxable income of $100,000 per year. In terms of the ability to enjoy the fruits of the economic system, the $4,000 to the low income individual is a much greater sacrifice than the $20,000 is to the high income individual. Equalizing the pain of paying taxes would require that the low-income person pays a lower tax rate or the higher income person faces a higher tax rate or some combination of lower and higher rates.
Progressive income taxation is not a “soak the rich” scheme. It is the only system that has the capability of equalizing the pain of supporting government.
Saturday, February 09, 2008
RATIONING MEDICAL CARE
Every Monday night several of my friends and I have a “Boys Night Out.” It usually entails dinner and conversation over a wide range of topics. On a recent evening the subject moved to a discussion of the “US Health Care Crisis”. Several of the participants were also in the health care field. In fact, if we consider my own past employment in the Medical Insurance Industry to be in the field, only one person was not a current or past participant in the health care system.
When all of the discussion was done, it appeared that the main argument against a government plan was that it would lead to rationing. This is the same argument that President Bush has been using for the past seven years. The problem is that people fail to realize that we do have medical care rationing today. It is one of the fundamental principles of economics that the price mechanism serves as a method of rationing goods and services. Those who can afford the goods and services and are willing to pay for them get them.
Health Care, as a service, is subject to this same principle. However, the existence of health insurance changes the underlying rationing to those who can afford the service and those who have adequate health insurance. Those who cannot afford the service or, in this case, who don’t have adequate health insurance do are “Rationed Out” of the health care market.
So when the President and his cronies shout out their war cry: “DO YOU WANT YOUR HEALTH CARE RATIONED”? You can reply: “IT ALREADY IS!”
When all of the discussion was done, it appeared that the main argument against a government plan was that it would lead to rationing. This is the same argument that President Bush has been using for the past seven years. The problem is that people fail to realize that we do have medical care rationing today. It is one of the fundamental principles of economics that the price mechanism serves as a method of rationing goods and services. Those who can afford the goods and services and are willing to pay for them get them.
Health Care, as a service, is subject to this same principle. However, the existence of health insurance changes the underlying rationing to those who can afford the service and those who have adequate health insurance. Those who cannot afford the service or, in this case, who don’t have adequate health insurance do are “Rationed Out” of the health care market.
So when the President and his cronies shout out their war cry: “DO YOU WANT YOUR HEALTH CARE RATIONED”? You can reply: “IT ALREADY IS!”
Wednesday, February 06, 2008
A NIGHTMARE OF THE FUTURE
As I look at the current activity in the two parties, I believe that all progressives, whether Democrat or Republican, need to have grave concern for the future of the republic. There is a real possibility that we can end up with a president who advocates turning the country into a “Theocracy”.
The scenario begins with the outcome of the Democratic Convention:
Either Hillary Clinton or Barak Obama will be the party’s nominee. The candidate with the greatest chance of winning a general election, John Edwards, has dropped out.
If Hillary is nominated, her chances of winning are slim because there are so many Americans who appear to have a visceral dislike for her. When asked, most people with that attitude that I have spoken to cannot express why they feel that way. They just do! Unfortunately, there appear to be an awful lot of them. There may be enough to kill Ms. Clinton’s chances if the Republicans nominate a semi-moderate candidate.
If Obama is nominated it would show that the country has grown-up in the last 50 years. Unfortunately, I am afraid it has not grown up enough to elect him. Although there are few Americans who would state outright that they would not vote for a Black Man, in the privacy of the voting booth there are many who are just not ready to pull that lever for a minority candidate. If the Republicans nominate a semi-moderate candidate the dislike of the current administration may not be sufficient to overcome the deep seeded prejudice of many Americans.
Moving the Republicans, it looks as if John McCain, a semi-moderate, will get the party’s nomination. However, the party’s right wing believes him to be too far to the left. In order to gain the support of the conservative core McCain will have to accept Huckabee as his Vice-Presidential running mate. McCain is 72 years old and has had some health problems. The presidency, for someone who doesn’t delegate everything al la Reagan, is a psychological and physical pressure cooker. As a result there is a good chance that McCain may not survive his first term. This would leave us with President Huckabee.
Huckabee has already expressed his desire to change the constitution so that it reflects the teaching of the Bible. A constitution that expresses a particular religious viewpoint is the definition of a theocracy and is no better than the Iranian constitution that place Sharia as the guiding principle for laws. His stance doesn’t take into account that there are many different translations of the bible and they do not necessarily agree with each other. In addition, there are many non-Christians in the USA. Are we going to ignore them? Also, the bible is contradictory in many of its laws. Making the bible a part of the constitution would require that a particular sectarian approach would need to be adopted and forced upon everyone else. When this happens, American will no longer be the beacon of liberty and diversity that is the standard that the world has looked to.
The scenario begins with the outcome of the Democratic Convention:
Either Hillary Clinton or Barak Obama will be the party’s nominee. The candidate with the greatest chance of winning a general election, John Edwards, has dropped out.
If Hillary is nominated, her chances of winning are slim because there are so many Americans who appear to have a visceral dislike for her. When asked, most people with that attitude that I have spoken to cannot express why they feel that way. They just do! Unfortunately, there appear to be an awful lot of them. There may be enough to kill Ms. Clinton’s chances if the Republicans nominate a semi-moderate candidate.
If Obama is nominated it would show that the country has grown-up in the last 50 years. Unfortunately, I am afraid it has not grown up enough to elect him. Although there are few Americans who would state outright that they would not vote for a Black Man, in the privacy of the voting booth there are many who are just not ready to pull that lever for a minority candidate. If the Republicans nominate a semi-moderate candidate the dislike of the current administration may not be sufficient to overcome the deep seeded prejudice of many Americans.
Moving the Republicans, it looks as if John McCain, a semi-moderate, will get the party’s nomination. However, the party’s right wing believes him to be too far to the left. In order to gain the support of the conservative core McCain will have to accept Huckabee as his Vice-Presidential running mate. McCain is 72 years old and has had some health problems. The presidency, for someone who doesn’t delegate everything al la Reagan, is a psychological and physical pressure cooker. As a result there is a good chance that McCain may not survive his first term. This would leave us with President Huckabee.
Huckabee has already expressed his desire to change the constitution so that it reflects the teaching of the Bible. A constitution that expresses a particular religious viewpoint is the definition of a theocracy and is no better than the Iranian constitution that place Sharia as the guiding principle for laws. His stance doesn’t take into account that there are many different translations of the bible and they do not necessarily agree with each other. In addition, there are many non-Christians in the USA. Are we going to ignore them? Also, the bible is contradictory in many of its laws. Making the bible a part of the constitution would require that a particular sectarian approach would need to be adopted and forced upon everyone else. When this happens, American will no longer be the beacon of liberty and diversity that is the standard that the world has looked to.