Retitled Repost, with new introduction
This was originally published under another title, Termites, on August 17. I think its title might have limited its readership. Fewer people than usual read it but more than usual rated it - it may be the best ratio I've ever gotten.
My Negative Muse is an old friend from when I used to be on AOL Jewish chat (with Jonathan Wolfman, who is actually my link to this extended blogging community). She is conservative and hangs out with other conservatives. As such, she forwards me the same political e-mails she forwards to the rest of her friends. A lot of them piss me off. On the upside, a lot of my best posts, including the one that persuaded me that I could blog, consist of answers to her e-mails.
This is the latest of my answers. Collect them all.
My Negative Muse strikes again. (She's relatively affluent, retired, and lives in Florida, which helps to understand when you're reading this.) She sent me an issues quiz to figure out which candidate was closest to my views. The closest viable candidate was Obama, with eighty something percent agreement. My agreement with Romney was 2%. So I asked her how she came out. For Romney. "I love Paul Ryan." Uh-oh. I can't let that sit, can I? So, as usual, I wrote her an e-mail and, as often happens, I'm using that e-mail as a post. She gets her own personal commentator, even if it is me. Lucky her.
And you get another lengthy political post on OS.
The country appears to be going to Hell in a handbasket. Why?
Most Republicans are looking for easy scapegoats. Scapegoats may afford some satisfaction, but they won’t come close to explaining why we have a problem. It isn’t illegal immigrants – even collectively, they don’t account for enough money to be why we’re in trouble. The same is true of welfare recipients and, by the way, whoever is complaining about sixth generation welfare recipients should learn arithmetic: the welfare system hasn’t been around for that many generations. Both of these populations may make you angry but the contention that they really matter to the overall health of the country is wishful thinking. Mosquitoes can’t make you bleed to death and these don’t carry malaria.
Next on the list is unions, but hardly any jobs left the United States as a direct result of organized labor. They’re mainly being demonized because they tend to support Democratic candidates, not because they hurt the economy. In Wisconsin, the Governor defanged the public sector unions even though they gave him nearly every concession he asked for – this was political, not economic. In that respect, it’s similar to the whole voter identification movement. The Republican Trial Lawyers Association looked into voter fraud and concluded that, in terms of fraud cases that would be addressed by identification, over the last ten years we’ve averaged far less than a single case per state per year, and yet Red States are spending millions on this. Who spends millions on a functionally insignificant problem? People who understand that those who won’t be able to vote under the new system are overwhelmingly people who vote Democratic, so millions are being spent, not to protect the public, but to disenfranchise opponents with public money.
So, we’ve got illegal immigrants, welfare recipients, unions, and fraudulent voters to demonize. Who else? Oh yeah, Socialists. Which major American politicians – people who actually have power and influence – do you know of who have suggested nationalizing a single industry? I’m in my late fifties and I can’t name One. If someone talking to you accuses a mainstream American politician of being a Socialist, you might as well pull out a Sharpie, walk over and write IDIOT on their forehead in capital letters. In this context, the Only use for the term Socialist is to scare gullible people.
There are other canards out there, of course. The biggest one is that Government is inherently evil and is to blame for all of America’s worst inefficiencies and all of our financial problems. Let’s please remember that the biggest reason we’re in such trouble is because of a bailout of investment banks. The crisis that almost killed us came from the Private Sector, not Government. The main thing the Government did wrong was to Underregulate the financial industry, which is to say we’d have been better off in that case if the Government were bigger, not smaller.
It’s one thing to want to correct the Government’s inefficiencies. It’s quite another to oppose Government on ideological grounds. When dismantling as much of the Government as possible moves from being a means to being an end – when we care more about dismantling Government than we do about helping or protecting Americans – we’ve taken our eye off the ball. Our job is to help and protect Americans, not just assume that the Government is evil by nature, which it isn’t. If you look at the Republican agenda, getting rid of Government is where their main focus is. Calling the Government the problem shouldn’t be a matter of dogma, but it’s being treated like religious conviction.
I’m not going to get into social issues here. Those issues aren’t why Romney selected Paul Ryan.
The next question is the Deficit. It’s huge, it’s scary, and people want to pay it down. What’s the best way to do that and, conversely, what isn’t?
There are two things the Government can do to reduce the deficit: spend less and earn more. However, each gets in the way of the other, and so we have to examine where our priorities should be and why. Incidentally, there are two ways to earn more, and this is important: raise taxes and create new taxpayers.
Let’s look at Greece for a minute, a country where tax evasion is rampant but, unlike you’d think from their reputation, workers put in more hours per week than in most of the rest of Europe. Laziness is treated as the issue but that’s another canard. The central banks of Europe are lending money to Greece in exchange for severe austerity measures. Here’s the problem: Austerity measures means eliminating jobs, and eliminating jobs means eliminating taxpayers, so the end result is that the central banks are lending Greece money on condition that Greece dismantles the mechanism to earn money to repay the loan. That’s a formula for failure. That’s launching the Titanic with the gashes already in the side. We know how this ends.
Europe works differently than the United States. Here, when a state gets in trouble, as has happened to Florida, the Federal Government continues to pay Social Security, Medicare, and God knows what else that are Federal functions. In Europe, when Greece got in trouble, the Greeks were responsible for all those functions themselves while they ran out of money. And, because they’re on the Euro, they can’t do the logical thing and devalue their currency. Florida can’t either, but Florida doesn’t have to. (Thanks to Paul Krugman for this analysis.)
The Republican Party, particularly Paul Ryan, wants to treat Americans like the European central banks treat Greece. It will backfire for the same reasons. If we go down that path, you will live in a gated community and outside those gates will be the Third World country known as the United States of America.
Not that Obama is on the right track. He’s just closer to the right track. Not nearly close enough, but closer.
What’s the alternative? Raise taxes on those of us who actually have money and build our ability to pay taxes because that’s how you get rich as a country. In other words, concentrate on jobs, not spending. We keep hearing about the One Percent. That’s in part because taxes on the very wealthy and on major corporations are at historically low levels. Given that that’s where most of America’s money is, we can’t afford that. Countries like Germany who are currently doing way better than we are are limiting the differences between how much people earn at the top of a company and at the bottom. Germany still produces lots of rich people but also has kept its manufacturing base pretty much intact. It’s not just people at the bottom who understand that we can’t afford to tax the wealthy too little, it’s people at the top, particularly Warren Buffet, who has complained that taxes on the extremely rich are too low to make sense, his being lower than his secretary’s.
When I say “that’s where most of America’s money is,” I’m not kidding. As of five years ago, 80% of the population had 15% of the wealth. The top 5% had way more than that. Actually, so did the top 1%. We can’t afford to tax where the money isn’t and expect results.
I talked about building jobs. The Republicans will say: “That’s why we have low taxes on the wealthy, so they can create jobs. That’s what we call them now: Job Creators.”
Except, unfortunately, they don’t and they aren’t. We just tried that. Bush slashed taxes on them. What we got was a Jobless Recovery. In other words, they got richer and pocketed the money without creating jobs. This isn’t an ideological point, it’s a practical one. If they would create jobs I’d say More power to them. But giving them more money didn’t work, it just made our deficit grow.
Now let’s talk about Entitlement spending. I’m sure you’ve heard that we can’t afford it. You spend X number of dollars on, say, Social Security, and it’s gone. Vanished down a huge hole in the ground. Landing in the pockets of people who aren’t earning.
There’s only one thing missing from this analysis:
Where does the money go from those pockets?
Unlike the very wealthy, all these people on Government programs can’t afford to sock their money away. They have no choice but to spend it. Where?
With businesses, of course. As with a tremendous amount of public spending, including huge Government contracts for major corporations, that money ends up in the Private Sector.
There’s a very important distinction to be made here. Wall Street also puts a lot of money into the private sector, but that’s in the form of loans. That’s what investment is: borrowed money. Even if you self-invest, it’s with the expectation that you will be paid back with interest, otherwise why invest? Aside from to the banking industry, invested money isn’t income and isn’t profits. For that you need sales. Investment without sales is the equivalent of building a megastore on a desert island. Why is that a bad idea? Because for sales, you need customers with money, and that, in a nutshell, is the most important thing to understand about this election.
So let’s get back to that Social Security check. It gets spent with local businesses. Those businesses profit from the sales and presumably pay taxes on the profits. At least as importantly, those businesses employ people who pay income tax.
If enough people spend money with these businesses, what do they do with the money? If they think they aren’t big enough to handle the business coming in, they expand. They hire more people, buy more inventory, perhaps expand physical plant or add locations, which entails both construction and the purchasing of equipment. The businesses from which they buy inventory or equipment and those who build for them all make more profits and are faced with the same issues that the first business is: As business increases, do they hire and expand to deal with it?
And, in addition, we not only have to take into account the spending of these businesses, we have to take into account the spending of their employees. They have to eat, pay for transportation, clothing, housing, recreation, etc. Their spending also creates profits for businesses.
What does all this mean for the Government? More taxpayers. Actually, more taxpayers creating even more taxpayers as the effect spreads. In other words, entitlement spending doesn’t just mean money going Out of the Government, it means substantial amounts of money coming back In.
What happens on the flip side? What happens if we embrace austerity? The exact opposite. Businesses contract as business decreases. They lay off people, who stop spending money with other businesses, who in turn make less profit, who in turn spend less, etc. We spend less, but while slashing spending, we slash our ability to generate revenue. Just like when we increase spending it isn’t anything like the loss it appears to be, when we decrease spending it isn’t anything like the gain it appears to be. We don’t save all the money we don’t spend because it costs us the ability to earn tax money. What’s the net result? We cut spending but the deficit stays high because we also inadvertently cut our ability to earn. We’re still in trouble, only now we’re in trouble with more poor people.
Welcome to the world of Mitt Romney and Paul Ryan. This is exactly where they’ll take us and why, if they get elected.
First and foremost, we need the ability to generate money. We aren’t investing enough in schools and education in general, so we’re growing less competitive with the rest of the world. You know, when college kids generate all sorts of debt, they do it with the understanding that the ability to earn is the most critical part of the equation, which is why they go to college, a point the Republican party apparently doesn’t understand writ large. Or small, for that matter: Mitt Romney and Paul Ryan want to cut Pell Grants, making college education less accessible to our young people and insuring that in the future we’ll import what we need because we won’t have enough properly educated kids to compete.
Here’s my own parable:
A Republican and a Democrat are each told: “I’m sorry to inform you that your house has termites.”
The Republican replies: “I can’t afford to hire an exterminator.”
The Democrat replies: “I can’t afford not to hire an exterminator.”
In a year, the Democrat is broke. In five years, the Republican is homeless.
I can’t make the choice any clearer than that.