When I moved my family to the NYC metro area 8 years ago, this seemed like the perfect neighborhood. Housing was relatively inexpensive, the neighborhood mix in terms of blue-collar and white-collar types, and a true representation of the American melting pot. Crime was low, the schools were better than average. In short, my town (and my neighborhood, especially) are about as representative of as you can find, with one glaring exception: this place is as solidly Democratic as anywhere in the country. The Republican party is virtually non-existent in the county and there is no local Republican organization.
I got to thinking about this yesterday after seeing one of my neighbors put a Mitt Romney sign in his yard and reflecting on recent conversations with others. There is palpable anger and despair with the current administration – anger and despair that emanates from the economic morass that Kearny, like so many other towns, finds itself stuck in. There’s a well-worn adage, coined by former House speaker Tip O’Neill, that “all politics is local.” There’s another equally well-known political saying, created by political consultant James Carville, that says “it’s the economy, stupid.” And after listening to my friends and neighbors, I found myself wondering just how exactly President Obama can win re-election. In a town where he holds an irrefutable edge in organization, he’s losing the local citizenry. And he’s losing that edge for one simple reason: the economy.
There’s the guy who owns the local bodega. He scrimped and saved to send his son to Columbia Law School. Despite graduating with honors and clerking at the Bronx DA’s office, his son cannot find permanent work. And thanks to the fact that nearly half of my neighbors are unemployed, his business is foundering. Where once he used to hire one or two local kids to help stock shelves, he hasn’t hired anyone. Instead, he has his cousin – an out-of-work software engineer – doing those tasks.
There’s a guy on my block who lost his job a month ago, because the company he worked for hasn’t had any new business in over a year. Despite more than 20 years working as a master stonemason, he is collecting unemployment for the first time in his life. He can’t find work. He’s falling behind on his mortgage. And he’s worried.
Around the corner, there’s a Brazilian restaurant that has cut back on their hours of operation and laid off half the staff. The woman who owns the place is in shock – three years ago she had a booming business ( you couldn’t even get a table without an hour wait) and even opened a second restaurant. Last week, she had to borrow money from her son just to turn the lights back on. She fully expects to have to shutter her business by September if conditions don’t improve.
Two doors up is a guy who owns a bakery. Every night, he leaves for work around 9pm. Last summer, he laid off his delivery driver and took to doing the deliveries himself. This summer, he’s been handing out free bread throughout the neighborhood – because orders are getting canceled at the last minute. While I’m grateful for the free bread, I wonder how much longer he can keep his ovens fired up at this pace. So does he.
After being vacant for two years, the house next door to me finally sold in May. The previous owner paid $378,000 for the property. The bank initially offered it at $290,000. The final selling price: $118,000. The new owners are excited. The rest of us looked at that selling price and weren’t quite so happy.
Down the street is an accountant I know. He got laid off in the bloodbath that was the Fall of 2009 and hasn’t found permanent employment since then. He’s surviving by taking much lower paying, no-benefit contract positions – a far cry form his former $100K salary. Where once he dreamed of sending his daughter to Princeton, the recent graduate is now headed to Hudson County Community College. And without a car – they had to sell her 17th birthday present back to the dealer, since they couldn’t make the payments.
These are just a few of the stories from my neighborhood. And as the anger seethes and despair grows, I can’t help but wonder if the President realizes he’s on a path to be remembered in the same vein as Jimmy Carter and Herbert Hoover. All because he forgot that all politics is local, and it’s the economy, stupid.
Yesterday, I documented how the nation’s fixation with “soaking the rich” is not only bad economics but bad public policy. To recap briefly, those who are better off are already providing the federal treasury with far more than their share. The top 400 earners comprise less than 1% of the population, yet their taxes provide more than 2% of total take – while some 45% of Americans don’t pay any income tax. The best way to improve the revenue side of the fiscal equation is to get those 45% to start paying their taxes again.
Of course, we all know that we can’t tax our way out of the debt hole. It’s too deep and deepening every second; even if we close all the tax loopholes and get those 45% to ante up we still won’t close the projected budget deficits for any year over the next ten. Spending needs cutting, although liberals are typically offended by that notion. But it’s the 800 pound gorilla in the room and finally people are noticing.
While the Washingtonians had their fun earlier with whittling away at discretionary spending, the fact is that chopping away at 12% of the annual budget isn’t going to make enough of a difference. (And the reality is, they chopped very little – about $352 million according to CBO). To really tackle our deficit – which needs to be done before we get to paying down the debt – we have to tackle entitlements.
The President’s seriousness about tackling entitlement spending was summed up by this line from his April 13th speech:
“We don’t have to choose between a future of spiraling debt and one where we forfeit investments in our people and our country. To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I’m President, we won’t.“
Gee, Mr. President. Sure glad you reiterated for us your commitment to maintaining the status quo.
The small part of the speech he did dedicate to his Medicare reformation plan was filled with smoke and mirrors. There weren’t any concrete details, only a pledge to reduce Medicare costs by $500 billion over the next 12 years. In case you’re wondering, that is less than $45 billion per year – or less than the budget cuts enacted this year. Talk about fiddling while Rome burns! To accomplish that meager goal, the administration proposes to focus on cutting waste and fraud – laudable goals and an admission that the government is doing a terrible job at administering the program. If there is $45 billion in abuse, somebody needs to be fired. The rest is the smoke and mirrors part – relying on the IPAB to force reductions in payments. Grandma will certainly be happy when her doctor tells he can’t see her anymore because the government won’t pay him enough to make it worth his while.
The Republican plan put forth by Paul Ryan kicks the can down the road for another 10 years, then applies an indexed government co-payment to a private plan. While that does provide some cost certainty in the future, it does nothing to address the spiraling debt created today by the program. It also does absolutely nothing to address the cost inflation in health care. In short, it’s more smoke and mirrors accounting.
So if both plans are nothing more than speaking points and fall well short of actually tackling the problem of entitlements, where do we go from here?
The answer is to address the very idea of government entitlements. The very word “entitlement” means that a right to a specific benefit is granted by…somebody. What’s more, expectation of entitlements are often tied to narcissistic attitudes. If you don’t think the two are related, consider what your visceral reaction is to the idea that entitlements need to be cut: odds are that like most people in the Western world, you recoiled at the thought. What, take away my benefits?
The President danced around this very issue in his speech. Namely, what kind of society do we want to be and where do we to place our priorities? The President, along with most liberals, envision a society in which regardless of circumstance you will always be taken care of. To enable this vision, they propose that the productive members of society take care of the unproductive – the misfortunate, as the termed it. Most Republicans also think entitlements are just dandy, although they would prefer the private sector pony up to those responsibilities. In other words, they’re perfectly happy to let businesses handle society’s ills. Anyone who has ever read Dickens can tell you what kind of world that is.
It seems like a horrible quandary, doesn’t it? On the one hand, we’re faced with the prospect of a federal takeover of society; on the other, a return to Merry Olde England of the 1850’s. But there is another way – one that Americans throughout our history relied upon.
Tune in on Saturday to find out what that might be. J
A positive development in our politics is that attention is finally turning to the debt and the annual deficit. In case you aren’t aware of the raw numbers, the deficit for the past two years has ballooned to more than an aggregated $3 trillion. That has raised the national debt to more than $14 trillion – or, about $123,000 for every household in the United States. I give President Obama credit for finally listening to the nation and recognizing the seriousness of the problem. It marks a dramatic turn for him, seeing as how he spent more in his first two years in office than his predecessor did in eight.
In his speech last week, the President didn’t mince words: he expects the “wealthy” to pay substantially more than they currently do while he continues to spend like a drunken sailor on things only a drunken politician would consider necessary. Lo, the blogosphere and networks have focused on the President’s new Medicare proposal (more on that tomorrow) and how yes, the “rich” should pay more. After all, the argument goes, the middle class is paying higher rates than the wealthy and that is just unfair. It certainly seems a winning political argument; after all, who isn’t for soaking the rich?
This makes for good sound bites and good politics, but bad policy. I realize that in some regions the Democrats definition of “wealthy” (a family earning $250,000/year) might make sense. But in others, $250,000 per year is simply middle class. Upper middle class, to be sure, but hardly wealthy. In the New York metro area, a family easily achieves a combined $250,000 in income with two public sector workers. It is even easier to reach if one person sells cars and the other works in the local bodega. The same holds true for San Francisco, Los Angeles and other major metro areas around the country. This is really a call to arms in class warfare, the destructive political game played by Andrew Jackson and Teddy Roosevelt, with disastrous effects for the nation – though those effects weren’t felt until decades later. Even liberal icon FDR understood the dangers of the game and generally shied away from playing it.
Fortunately, the IRS keeps records on the truly wealthy and the rest of us. The latest data they have is from 2007; but since the one tax policy liberals love to hate – the “Bush Tax Cuts” were already in effect – it makes a good statistical reference point. You can find it here. In it, the IRS keeps tabs on the 400 wealthiest taxpayers in the country and compares their rates to the rest of the taxpaying public. They began tracking the data in 1992, so we have a 15 year window in the way tax policy evolved through both the Bush and Clinton eras.
At first blush, it seems as though liberals may be on to something. The IRS calculated the effective tax rate on the top 400 earners as 26.38% in 1992, rising to a high of 29.93% by 1995, and then steadily dropping to 16.62% by 2007. But statistics are wonderful things; anyone can quote a number out of context to prove an argument and this is exactly what the liberal media is doing.
First, I give credit to the IRS for doing what nobody to the left of center has bothered doing in their arguments. Their numbers reflect 1990 dollars ,thereby accounting for inflation (in mathematical terms, they normalized values). So, if the truly wealthy were paying lower effective rates, then the government should have been taking in less money from them, right? Not so fast: in 1992, the IRS collected about $4.5 trillion; by 2007 that figure rose to $14.5 trillion. Why? Well, in 1992 not a single one of those 400 returns reflected an effective tax rate over 31%. By 2007, even with the hated “Bush Tax Cuts”, 55% of the top 400 had an effective tax rate of at least 35%. The lower overall tax rate for these taxpayers is reflected in the fact that 35 of them paid no tax – an effective rate of 0%.
Overall, the truly wealthy combined to pay 2.05% of the taxes in 2007, nearly double the 1.04% they contributed in 1992. In actual dollars, they contributed nearly $23 billion of the government’s total tax take of $1.1 trillion. Those who make up this class are certainly already paying their share and the administrations attempts to paint them as sore winners can only result in flat out class warfare.
We do have a revenue problem, since we’re spending more than 4 times what the government is taking in. A better focus would be on the 45% of Americans who currently do not pay any income tax. Certainly, if you’re gross income is below the poverty line for your region, you shouldn’t be expected to pay, but I doubt 45% of Americans are living in poverty. That certainly seems much fairer and also guarantees that those currently benefiting from living here also gain equity in the system.
However, I doubt we’re going to find $1.6 trillion in revenue by asking everyone to pay their taxes. We still need deep spending cuts just to get the 2012 budget balanced. Tune in as I tackle those issues throughout the week.
There are numerous reports circulating on the web that Fidel Castro has seen the light. According to Jeffrey Goldberg of The Atlantic, Castro told him “The Cuban model doesn’t even work for us anymore.”
Huh? What? The leader of the Western Hemisphere’s oldest communist dictatorship admitting communism doesn’t work?
Shock value aside, you have to wonder if (a) Fidel is losing his mind or (b) he’s finally seen the light.
Here’s guessing (b). A little later in the article, Goldberg reports his interpreter said, “I took it to be an acknowledgment that under ‘the Cuban model’ the state has much too big a role in the economic life of the country.”
That’s a WHOA moment if ever there was one. One of the last communist dictators on earth acknowledging government control of the economy doesn’t work. In case you’re wondering, even though Cuba has instituted some economic reforms the country is hardly a bastion of capitalsim. The typical worker earns $20 a month. In the same article, Goldberg describes how the Havana Aquarium was opened especially for Fidel. Just so he could watch a dolphin show. Oh, and all the employees “volunteered” to work on their day off, including the aquarium’s director (who happens to be a – hold onto your hat – nuclear physicist.) You can’t make this stuff up.
The question that went unasked in the article is, if the leader of the Cuban revolution realizes that the socialist model failed, why hasn’t the Democratic Party here in the USA? For that matter, why hasn’t our President? This report came out on the same day that President Obama looked to Trotsky and Lenin for political inspiration. He invoked class warfare (tax hikes on the wealthy) and suggested stronger government intervention in key industries is needed to get America back to work. It’s kind of sad, actually, that the last great communist dictator understands what the leader of the free world fails to grasp.
Of course, if Obama and the Democrats get their way, we could wind up with the one thing Cuba can lord over us Americans economically: full employment. Of course, we’ll all earn $20 a month. Oh, and we’ll all have to “voluntarily” give up our days off whenever the President wants to watch a dolphin show.
Besides, who doesn’t want a 1958 Chevrolet in the driveway?
New Jersey’s 9th Congressional District, which covers most of Bergen County and in Hudson County, parts of Kearny and Jersey City as well as Secaucus, is currently represented by Steven Rothman. It’s time to change that and elect Michael Agosta to Congress this November.
Steve Rothman is a likeable person. Anyone who doubts that he is doing what he believes is best for the citizens of his district, the state and the nation in general are seriously deluded. Unfortunately for the rest of us, Rothman’s views of what’s best too closely follow the ideas of Karl Marx. That is, Rothman is an unabashed socialist. He honestly thinks every problem we face is best solved by a huge dose of government intervention and wealth redistribution. He doesn’t call himself a socialist, of course; but his voting record speaks for itself. He is ranked as a far-left liberal, having voted for nearly every proposed tax increase and government program that’s been introduced since he took his seat in 1997. Perhaps the best thing to be said about Rothman is that unlike his predecessor, Robert Torricelli, nobody suspects Rothman of undue corruption.
Michael Agosta, unlike Rothman, is a political neophyte who espouses the ideals of smaller government and personal responsibility. He is a man of good standing, although the Democratic Party has certainly tried to impugn his character over the past two weeks. A former Federal Air Marshall and soldier, Mr. Agosta’s national security credentials are born of the front-lines, not of a government-sponsored think tank. And on economic issues, Michael Agosta understands that the only way to revive the economy is to get people back to work – and to do that, we need to reduce taxes and hold the government accountable for their actions.
This November, vote for Michael Agosta. Vote to return America to Americans, not politicians.
Once every two years, Labor Day signals the opening of the “Silly Season.” What is this “Silly Season” you ask?
In a nutshell, the “Silly Season” is when the general populace joins political junkies in paying attention to the politicians running for office in November. And the politicians, on cue, begin campaigning in earnest. But what it makes the season silly is the way the politicians act. Suddenly, Democrats begin espousing conservative ideals. Ordinarily, they’re joined by Republicans discovering their love of liberal programs.
But this year promise to be sillier than most. With an unsettled economy, unemployment rising and public dissatisfaction in both political parties rising to all-time highs, Democrats are in serious trouble heading into the
campaign season. Many Congressional seats once considered safe for the Donkey Party are now in play; seats once considered as being in-play or toss-up’s are now leaning Republican. As reported in yesterday’s New York Times, the DNC is cutting loose many candidates, hoping to minimize losses in the November mid-terms.
In short, what many Democrats are discovering is that the positions they’ve spent the past four years carving out are not exactly what the country wanted. The reason they won most of their seats – including the Presidency – was national dissatisfaction with the Bush administration. The initiatives the current administration have pushed through have proven even more unpopular than the ones proposed by GWB. How bad is it? 56% of Americans want the abomination that passed as health care reform repealed. Republicans now lead Democrats in all ten of the major issues polls.
Not surprisingly, in light of these developments many Democrats are running as far from their own party as possible. It’s amazing how many Democrats are now against the very health care package they passed earlier this year. (Remember when Nancy Pelosi declared that once we knew what was in the bill, we would love it? Oops.) Even President Obama is finding his conservative voice, as reports suggest he will ask Congress to pass “targeted” tax breaks on Wednesday. To add to the sense of desperation from the Democrats, many are hoping to cast their opponents as extremists who would destroy the fabric of American life.
Of course, Republicans are tempted to equally join in the insanity, but so far have held the line on leaning left. They fully understand that the nation has peeked behind the Progressive curtain and been repulsed by the view. This is turning into one of the strangest elections ever seen, where the minority party is the one fending off negative attacks. Normally the reverse is true, but Republicans don’t need to go on the attack in this cycle. The news, even left-leaning organizations like MSNBC and the NY Times, can’t help but report the dismal employment numbers. So Republicans are remaining more or less silent, except to point out that the news hasn’t been good since the Obama administration took over. That’s attack ad enough. Besides, the left is self-immolating itself well enough that the Republicans don’t need to join in.
So kick back and enjoy the Road to November. It promises to be a fun – if bumpy – ride.
One thing is becoming painfully obvious: the way we, as Americans, view economic opportunity is out of step with the way the world operates today. It is time that we recognize this and address it in a positive manner, without the political fire-bombing that is hurled daily on both the left and the right.
The left is stuck with an early 20th century Keyensian view of economics. I’d argue that particular view didn’t really work then and won’t work today. Massive infusions of government capital during the 1930’s into public works projects did build some marvelous edifices, such as the Hoover Dam, but did not absolutely nothing to end the Great Depression. America didn’t return to full employment until the advent of World War 2 – the result of increased war production and more than 10 million men entering military service. Once the war ended, the economy again returned to near-Depression era levels of unemployment. What finally proved the cure for the economic ills of the 1st half of the 20th century was that in the post-war period, only the US remained capable of providing the goods and services needed by the world. It was an export economy, fueled by international demand, which put America back to work.
The right seems permanently wed to supply-side economics. Strict adherence to that model might have worked, but we’ll never know. While government receipts during the supply-side era (1981-2008) outpaced inflation by (See fig. 1), government spending at all levels increased at an even more dramatic pace, leaving us with unsustainable levels of debt and continuing government deficits – and a seemingly insatiable public demand for services that we cannot afford.
The current model being followed is a strange amalgam of the two diametrically opposed economic philosophies, with government interventions and expanded spending coupled with “targeted” tax breaks. In one sense, this new model has worked: businesses are sitting on a virtual mountain of cash. But in a much larger sense, these haven’t worked to stoke the economy – and for one simple reason, the demand needed by businesses to invest that capital doesn’t exist now. Employment data continues to remain bleak, representative of the fact that businesses are not investing in human capital. Part of the reason is undoubtedly tied to regulatory uncertainty, since anyone running a business needs to properly plan and account for the funds allocated for human resources. But that uncertainty alone cannot account for the downward pressure July’s economic data displayed on employment.
What is needed is recognition by both those on the right and the left that a new demand model is required for our current age. Modern technologies have made many labor-intensive occupations of the late 20th century redundant. Cloud computing and SaaS technology reduce the need for office and technical staffing, closing off two of the high-growth industries of the past 30 years. Manufacturing tasks that once required dozens of people can now be fully automated, with only one operator required. (Just last night I watched a documentary on Zippo lighters – the entire assembly line only needs 5 people to run it; a perfect example). Even many low-wage jobs have been replaced – the other day I went food shopping. No cashiers were available; the entire checkout line was self-service with two people running 20 checkout lanes.
In other words, there are two possibilities now facing the country:
- Current unemployment levels are now the “new normal” and a return to sub-5% unemployment is unlikely. In this event, the current social services are inadequate and need serious revamping. Unemployment insurance as currently exists needs to be discarded, replaced by a system that is more proactive in returning the unemployable to the workforce while ensuring that people are not discarded like yesterdays news. Such a program needs to be structured so that chronic unemployment and other abuses are not permitted. In short, in such a world, unemployment services should not be a state duty, they should very much be a federal-corporate symbiosis. It is impossible – and against a state’s interests – to train somebody for employment opportunities in another state, but it is in a company’s best interest to do so.
- Current unemployment levels are an aberration; a temporary result of career displacement due to a technology upheaval. Such upheavals have occurred before and the nation weathered those storms, most recently in the late-1970’s as the nation shifted from a manufacturing base to a services based economy. In this case, the government needn’t do much of anything, except make career retraining available and mandatory, in order to continue receiving unemployment insurance payments. Once, that is, the new employment needs are identified.
I’m not going to pretend I’m smart enough to know which of the two scenarios is correct. What I do know is that until we begin to honestly discuss them, no action can be planned or undertaken. But as I mentioned at the top of this post, neither side seems ready to abandon decades-old dogma. I doubt either will over the next 90 days, as we begin a new national election cycle and both sides seem to only care about scoring political points by feeding raw meat to their adherents.
It’s up to the American people to put aside our natural inclination to fear in uncertain times and force our political leaders to engage in an honest discussion of the situation. And if they won’t?
Then it’s up to us to replace them this November with people who will.
I’m certain many of you have been watching the unfolding – seemingly in slow-motion – debate on extending unemployment benefits. Then again, I’m also certain that quite a few of my fellow citizens haven’t given it more thought than which sunscreen to bring to the beach. After all, it is July. This is hardly the time of year when political juices get flowing for most of the electorate.
However, I have two strikes against me when thinking about this: for one, I am an admitted political junkie and two; I am one of those approximately 6,800,000 Americans who has been officially unemployed for longer than 6 months. (That’s a pretty dismal number, but it’s actually rosy when compared to the long-term underemployment number and the actual numbers of Americans who have been unemployed so long that the feds stopped counting them. But I digress.) So, I’ve been watching and listening with keen interest.
Being fiscally conservative (ok, ϋber-conservative) and also unable to secure new, permanent employment, I find myself torn between the two very real issues at play. Those two issues are, to put it simply, how do we reconcile a real need to prevent utter destitution for the millions like myself – and at the same time, do it in a way that doesn’t further bankrupt the country? It seems to most reasonable Americans that the proposal put forth by the Republican caucus – paying for the cost of extending unemployment benefits by using some of the remaining funds from last year’s gargantuan stimulus package – is a good compromise. Why the Democratic caucus is so opposed to the idea has been beyond me. After all, even that most liberal of economists, Paul Krugman has said repeatedly that unemployment benefits are “a highly effective form of stimulus.” Congress loves “earmarks,” or setting aside money for pet projects. In an election year when there are likely upwards of 20 million voters who face the prospect of losing everything on a daily basis, it seems logical that Congress would earmark $38 billion of pre-existing expenditures on a pretty popular program. It would be a win-win, something that almost never happens for a politician: they could claim both the labels of “caring liberal” and “fiscal conservative” with one vote. So why won’t they?
The answer (as with almost everything Congress does these days) lies in the details. The program is part of H.R. 4213, a 412 page megalith that deals with a whole of stuff not at all related to employment or economic stimulus. In fact, the section dealing with the benefit extensions is Title V, subtitle A of the bill. It incorporates all of 9 ½ pages of the bill.
I’m sure you’re asking yourself what could be in the other 402 pages of the bill. Well, here are a few highlights. Feel free to hit the link and read it for yourself:
*Provisions to build sewer systems
*Alternative fuels vehicle credits
*Energy efficient appliance tax credits
*New standards for windows and doors (You can’t make this up, folks)
*Railroad track maintenance credits
*Rum excise tax relief for Puerto Rico and the US Virgin Islands. Hey, even if we’re all broke, at least we should be able to swig cheap rum, get drunk and forget this mess!
The list goes on and on. There are over 500 individual line items in this bill. Not only have our congressmen been busy putting earmarks into this thing, it seems they’ve taken special care to pack it with more pork than a Jimmy Dean breakfast sausage. No wonder they couldn’t find the $38 billion! (By the way, by the Obama administrations own estimates, there should be nearly $340 billion left from last year’s budget buster.)
Oh, and one final note regarding the supposed disincentive of providing unemployment benefits: In ordinary times, I agree that extending unemployment benefits can be a disincentive to finding gainful employment. But these are not ordinary times; not when estimates range from five to eight people for every available job opening. And speaking from personal experience, I can assure you that getting 30% of my prior earnings in an unemployment check doesn’t exactly meet my monthly commitments. Here’s hoping Sen. Jon Kyl and Senatorial candidate Sharron Angle, who have publicly espoused this thought, take a good look around their respective states and come to their senses. They are not properly representing their constituents, their party or the nation as long as they hold that view.