Archive for December, 2010

Last Words Worth Acting Upon

Last words say a lot about the people who speak them.  Final utterances can range from regrets for a life not fully lived or satisfaction for a job well-done.  Some shed light on the true nature of the individual.  The consummate entrepreneur/entertainer P.T. Barnum’s last gasp asked, “How were the receipts today at Madison Square Garden?”  Comedian Lou Costello said, “That was the best ice-cream soda I ever tasted”, before breathing his last.

Sometimes last words are worth acting upon.  So are the last words of Richard Holbrooke, the American diplomat, who died in December.  Holbrooke was in the middle of a mission to pave the way for America’s military withdraw from Afghanistan when a torn aorta brought about his demise.  According to his family, just before being wheeled into surgery to attempt a repair to his heart, Holbrooke told his doctors, “You’ve got to stop this war in Afghanistan”.  Of course, within hours of his last words becoming public, official Washington rebutted Holbrooke’s deathbed request as mere “painful banter just before surgery.  In other words, he didn’t mean it – it was simply the words of a man who was out of his mind in pain.

Now, I would not be so arrogant as to interpret for the rest of us the meaning of Holbrooke’s last words.  I’ll leave that to the know-it-alls in our nation’s capital.  What is important is that Holbrooke’s final plea should be acted upon.    Clearly, nine years later fighting this protracted war in Afghanistan has apparently not made us any safer.  If it did we wouldn’t be constantly reminded by Uncle Sam that the next Al Qaeda attack is just around the corner.  We wouldn’t be told that full body scanners and sexual assaults by TSA agents at the airport are necessary to keep our airways safe.  Look, on my way back to the United States from Qatar for Christmas, my family and I had to endure additional security searches at the airport in Doha all because we were traveling directly to the U.S..  Travelers flying between other countries don’t have to submit to longer lines and more intimate searches of bags and person.  When we flew to Egypt and Jordan earlier in the year we were not subject to these added security measures.  Let’s consider that the difference is that our government is not doing enough to keep us safe – and that includes ending wars that produce resentment and hatred of Americans.

But, our Military Industrial Complex”, “Security” agencies, and their accompanying apparatchik are not interested in ending the wars.  They care nothing about getting at the root causes of terrorism.  All they want to do is continue to take our liberties away, deploy more agents of death on the ground and launch more weapons of human destruction in an effort to eradicate terrorism.  Take Homeland Security Advisory Board member Frances Townsend for instance.  When asked by Texas Congressman Ron Paul, “Why do they (terrorists) want to come after us?” on CNN’s Situation Room, Townsend abruptly answered, “I don’t really care why, if I am flying on a plane, I want to be safe.”  The problem is that folks like Townsend have it both ways.  They fly on airplanes safely and make a living out of scaring the rest of us, violating our constitutional rights, and perpetrating wars and imprisonments indefinitely.

And according to retired Admiral Dennis Blair and more recently President Obama, our detention of “enemy combatants” at Guantanamo Bay is a “rallying cry for terrorist recruitment”.  So, why don’t we expedite a solution to the problem of closing Guantanamo and take a bite out of terrorism?

The actions of the Homeland Security Industry are similar to those of the parent who repeatedly punishes their child for the same misbehavior without ever attempting to find out what is causing the misbehavior in the first place.  A reasonable parent would try to get at the root causes of the problem to save themselves and their child a lot of agony.

The problem is that Homeland Security is like every other federal agency that mooches off the federal treasury.  It receives ever larger budgets over its lifespan and never fulfills its mission.  Why should it?  Its gravy train would come to an end.

And that brings us back to the last words of Richard Holbrooke and the twisting of what he meant by official Washington.  Knowing that he faced the grim reaper, Holbrooke was likely expressing his true feelings that ending the war in Afghanistan would make America safer.  So the question is, who do we believe – an intelligent man with intimate knowledge of the issues who was on the brink of death or an industry that has a vested financial interest in the status quo?  I believe the former and that is why his last words are worth acting upon.

Article first published as Last Words Worth Acting Upon on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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It is Always Something for Nothing in Washington

Our political leaders in Washington are the biggest bunch of cowards.  At every opportunity they weasel out of making any tough decisions.  Now, you might be thinking that everybody knows that running away from hard choices is what politicians are especially good at, but ours have made it an art form.

Take the whole debate over extending the Bush-era tax cuts for instance.  It has turned into a complete joke.  In the first place, renewing current tax rates is not a new reduction in taxes for anybody.  Only in Washington, is extending tax rates at current levels considered a tax cut.

Then we have Larry Summers, Obama’s chief economic advisor, coming out warning that if the tax cuts don’t go through we will have a double-dip recession.  Then why didn’t the Administration extend tax rates a long time ago?  They had the entire federal government under their control and could have done it.

Other Washington economists are making outrageous claims that the compromise package between the President and congressional Republicans will actually produce millions of jobs and add 1 percent onto our yearly GDP.  This could be believed if Washington was actually cutting income tax rates.  But, it’s not.  The bill would actually cut employees’ portion of the Social Security tax from 6.2 percent to 4.2 percent.  But, to finance the rate cut Uncle Scam will borrow over $100 billion.  This borrowing will be inflationary and will limit the supply of capital available for American business to expand and begin hiring workers again.  Thus, any positive effects of the rate cut will be negated by the consequences of government borrowing.

Make no mistake about it, this whole debate on extending the Bush-era tax rates is the epitome of what is wrong with the federal government.  It’s all about making easy choices and stretching the truth about how those choices are great for the country.  In essence, it boils down to another something for nothing failed economic policy.

Look, the Bush-era tax rates should have been renewed a long time ago.  This would have eliminated any uncertainty facing business and allowed them to plan long term and perhaps hire workers.  Instead, Congress and the President have waited due to political expediency until the 11th hour to act.

The vote should also have been a straight up or down vote with no other measures like extending unemployment benefits and cutting Social Security rates attached.  The political games that are played by attaching multiple measures to bills serve no good purpose.  It only increases the budget deficit and provides the allusion that Washington can provide everything to all people without costs.

And that is exactly what this entire package is: something for everyone with no worries about the costs.  Republicans get tax rate retention for all.  They also get a reduction in the Social Security tax rate.  Democrats get an extension of unemployment benefits for another 13 months to folks who have already been collecting for close to two years.  Of course, both sides will also get dozens of earmarks just to sweeten the pot.  How any of this will be paid for has naturally not been discussed.  And don’t look for the mainstream media to bring up that question.  The report of the President’s debt commission is not even dry and Congress is contemplating spending an additional $800 billion.  One commentator had it right when they labeled the compromise package nothing more than a backdoor stimulus package.  Given how unsuccessful the trillions in stimulus money we have already spent has been don’t look for this one to produce new jobs or economic growth either.

In terms of the additional measures attached to the tax rate retention bill, namely the cut in Social Security tax rates and extension of unemployment benefits, one should be done with corresponding cuts in spending while the other shouldn’t be done on the grounds it will do more harm than good to the prospects of the unemployed finding a job.  To cut funding for a program that faces tens of trillions of dollars in future unfunded obligations is incredibly irresponsible.  What’s even more irresponsible is to cut funding and not make any alterations to outlays.  Given that average life expectancy has risen by ten years since the inception of Social Security Congress could reasonably raise the retirement age for recipients to at least 70 from 65.  I mean Americans are going to have to give up some things in order for our financial ruin to be avoided.  If Congress and the President don’t even have that little bit of courage then we are far worse off than can be imagined.

Perhaps the Republicans and Democrats are fearful that any interruption of federal largess to any one group of Americans could produce riots that have been seen in Greece and more recently in Great Britain.  Perhaps they are fearful of doing something to jeopardize their own reelections.  Whatever the reason, it doesn’t matter.  The bipartisan bill to extend the Bush-era tax rates is hardly a compromise.  Neither side had to really give up anything.  It is the epitome of how the federal government works and why our nation is bankrupt – you can always get something for nothing in Washington.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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Logic not Emotions Should Rule the Day

Washington is an emotional basket case right now.  Besides the looming partisan all out war that will come with divided government, in its lame-duck session, Congress is currently struggling with the heartrending issue of whether to extend unemployment payments for over 2 million Americans that have been on that dole for close to two years.  On the one hand is the difficulty of denying federal largess to people in a horrendous economy.  On the other hand is the need to rein in federal spending and stop disastrous policies that are making economic recovery impossible.  What is needed by Congress to make a good decision on this issue is logical thinking not the super charged emotional sound bites, diatribes, and appeals to our vulnerable human sensitivities

The problem with our current economy is that we just experienced the popping of the mother of all economic/financial bubbles and the reaction of our government to it has been to attempt to re-inflate it with stimulus spending, bailouts, and quantitative easing.  Common sense alone would indicate to any reasonable person that more of the spending and cheap credit that got us into this mess is not going to get us out of it.

Thus, since it was a housing bubble in particular, housing prices nationally have experienced deep drops in value.  You see, all the cheap cash and credit the Federal Reserve and Uncle Scam provided between 2001 and 2007 was mal-invested into too many homes at prices that too many borrowers could not normally afford.  When interest rates were raised by the Fed, and this always happens in boom and bust cycles, millions of Americans could no longer live beyond their means.  They defaulted on their mortgages.  A cavalcade of foreclosures transpired and home prices dropped.  At the beginning of the housing collapse, the federal government should have let the market liquidate the mal-investment and allow the artificially high housing prices to drop.  By now, the housing market would be recovered.  Instead, Washington attempted to “stabilize” the housing market by instituting programs to prop up unrealistic values and here we are over two years later with no signs of recovery in sight for the housing market.

The same is true of the labor market.  A person’s labor is bought on the open market just like houses, except payment is called wages instead of prices.  During the Fed induced boom, companies hired too many workers and wages rose too high.  The excessive hiring and wage hikes were based on the phony wealth that Fed policies were producing.  No one believed the spending binge of the American consumer, fueled by all that cheap credit and “equity” in their homes would ever end.  Well, it did end with the depletion of all that “equity”.  Workers got laid-off and millions began collecting unemployment.

Now, there is no question that we have been and are currently in a financial depression exactly like the one experienced in the 1930s.  Real unemployment rates of between 17 and 22 percent attest to that fact.  In the 1920s the Fed’s easy credit policies, primarily low interest rates and margin buying of equities, caused a huge stock market bubble.  When that bubble popped in 1929, loans were called in, and it became apparent that Americans were broke.  Instead of letting the market sort things out, both Hoover and Roosevelt spent lavishly and intervened on a scale never seen before in American history.  The result was more than a decade of economic depression.

Fast forward to the first decade of the 21st Century and it is déjà vu all over again.  Both Bush and Obama have attempted to “stimulate” the economy out of depression with lavish spending.  Once again the technique has failed.  There is no doubt that much of the money, specifically unemployment payments, has been a humane attempt to deal with the personal hardships of those who have lost jobs.  But, it can also be argued that sustaining unemployment benefits indefinitely has an even larger negative effect on recipients – the perpetuation of high unemployment rates.

As was mentioned earlier, during the phony Fed induced boom of 2001-2007 companies hired and wages rose too much.  In order for recovery to take place in the labor market, wages must come down in the same way that home values have come down in the housing market.  Unemployment benefits prevent that from happening because the government provides a floor for wages.  In other words, if a person is receiving $400 a week in unemployment benefits why would they accept a job that pays less?  They wouldn’t.  Thus, employers are faced with either raising wages – a proposition fraught with peril and one they can’t afford in this economy or not hiring at all.  Many are obviously choosing to not hire at all as is evident from the new unemployment figures released yesterday.

So, yes, it is hard to cut off those millions of Americans who have been collecting unemployment for close to two years now, but it is necessary to help those same people in the long run.  Essentially, unemployment payments set a minimum wage that most employers cannot meet right now.  If we clear away the emotional hyperbole and demagoguery of those that foolishly want to sustain unemployment benefits indefinitely we can begin to address high unemployment in America.  The Great Depression ended only after Washington cut spending in 1946.  This is a lesson we can ill afford to ignore.  Logic not emotions should rule the day.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

Article first published as Logic Not Emotions Should Rule the Day on Blogcritics.

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