I picked up an issue of the Gulf News while in Dubai in January, and I found an article that was of interest related to China’s economy and the trade position of that country. It was in the January 25, 2011 issue, and was entitled “Higher Costs in China Filtering into the Global Economy,” and was authored by Alan Wheatley.
Among the most salient points were:
So here is a conundrum: As we observe the standard of living in China continuing to rise, we can almost simultaneously see the opposite effect here in the United States. (See my blog entitled: “Are Your Children Being Impacted by the Economic Downturn?”) Asserting that the US always comes out ahead in international buying and selling just doesn’t pass the sniff test.
As the standard of living – especially as it relates to manufacturing and other traditionally middle class jobs – in China continues to improve, prices rise for Chinese goods – causing inflation for the Americans who are buying those goods. At the same time, Americans who lost their jobs as manufacturing work moved from the US to China are clearly taking a substantial hit in their income levels. So the US worker is taking it on the chin twice, squeezed between escalating prices for the products they buy, and lower income levels resulting form job loss and subsequent income depletion. Got it? Prices are going up, and wages are going down in the US at the same time. Now, on the other side of things, I think it’s only fair to point out that the last time I was in China (a few years ago), the hourly wage for skilled factory workers with the rough equivalent of a bachelor’s degree was running about $2.50 US, and a Ph.D. level employee commanded about $5.00 US. So we are still seeing a pretty significant disparity between average US wage and Chinese wage levels.
With all these things in mind, what steps do you think the US should take? One option would, of course, be to do nothing and allow the economic course to continue unabated. Another would be for the US to require American work content in all products sold within the United States’ borders. (Other countries do this all the time, and US companies comply – which, of course, is one of the reasons that US manufacturing jobs move offshore – so that they are allowed to sell their products in that national market.)
Does it seem farfetched to you that the US would impose such a measure? Actually there was an interesting article in Bloomberg Businessweek’s January 3-9 issue pertaining to this very matter.
It turns out that in some cases, Chinese companies are investing in the US to circumvent trade barriers and take advantage of other new US legislation such as clean energy requirements. The article was entitled: “Chinese Plants Grow Up on US Turf”. As the article points out, “Buy American” requirements that are part of some US Government contracts are a compelling reason for companies from other countries, in some cases to stand up operations on US soil. Among the companies described are China’s Suntech Power Holdings, (who manufactures solar power cells in Goodyear, Arizona), Wanxiang America (an auto parts company in Elgin, Illinois), and others such as Tianjin Pipe, Pacific Century Motors, and Nexteer Automotive.
Here is an excerpt from the article that I was especially intrigued by: “Suntech is using more advanced manufacturing equipment in its Goodyear plant than in Wuxi [China}, allowing 30 Arizonans to produce the same number of solar modules as 100 Chinese (US production costs are still about 10 percent higher.) “If it works very well, we can integrate the same manufacturing technology in China”, Guo says. “This would help Suntech China make a manpower reduction.” Jobs for Americans and pink slips for the Chinese just one more turnabout in the US – China relationship.” Fascinating, right? Several things about this intrigue me. First of all, the Chinese are now beginning to make small US manufacturing investments. Secondly, China’s investments are resulting in advanced manufacturing technologies continued migration to China, making Chinese producers still more efficient, and thirdly these efficiencies are now projected to impact the labor requirements in China. Still, these investments – in the scheme of overall US business, and more importantly in the scheme of overall Chinese business – are very small, and will take in indeterminate number of years to substantively impact our national economy.
How should the US address the growing pressure on middle class Americans resulting from all these factors, or should we just allow nature to take its course, and bow to an inevitable decline in the standard of living of Americans as it levels out to match the middle class standards of living in other countries?
What do you think?
“We are slowly dying here.” The message, which was part of a Facebook exchange with my friend Riccardo in Italy, gave me cause for real concern. Riccardo is normally a very upbeat guy – ebullient, in fact. A resident of Turin, he lives in one of the most beautiful places in the world and as a young, intelligent, enthusiastic guy, he has a world of opportunity before him. But the recent influx of refugees from Tunisia and the aftermath of refugee camps and embittered politicians have him profoundly worried.
Thousands of people, displaced as a result of the demonstrations and rioting in places like Tunisia, are flooding Europe. More than 5,000 refugees landed on the small Italian island of Lampedusa, which only has a population of 6,500. The Italians have been moving the new arrivals to refugee centers, but are finding they have far more refugees than space – several times more, in fact. Most of them appear to be gaining temporary visas as refugees, and then – because of the treaty among several European countries called the Schengen Agreement – utilizing those visas to travel into other treaty-bound countries including France and Germany. “Why would people leave Tunisia after a democracy-oriented revolution has occurred?” one might ask. In an interview with one of the young men involved, EU Observer was told: “I didn’t think Europe would be so unwelcoming. I will not stay in Italy, once on the mainland, I will leave in 24 hours.” This young Tunisian endured a 16-hour trip on a boat filled with 125 other people. He paid €1,000 for the trip and left because “there is no liberty, no democracy – it’s still Ben Ali’s old guard ruling the country.”
Refugees are coming not only from Tunisia, of course, but also Libya. According to some reports, more than 400,000 such refugees have passed through Libyan borders into Niger, Chad, Sudan, Algeria, and Egypt. With Egypt also on a very shaky footing following the recent ouster of Hosni Mubarak, it’s difficult to imagine a lasting sanctuary there.
The flight of displaced refugees through Italy into other European nations has caused a growing rift between the leaders of those countries. On April 17 2011, ten trains carrying Tunisian refugees were stopped at the border by French officials, citing reasons of “public order”, fearing demonstrations inside their country. An April 17 Yahoo news article said: “Italy has been giving temporary residence permits to many of the roughly 26,000 Tunisians who have gone to Italy to escape unrest in northern Africa in recent weeks.” “France says it will honor the permits only if the migrants prove they can financially support themselves and it has instituted patrols on the Italian border – unprecedented since the introduction of the Schengen travel-free zone – bringing in about 80 riot police last week. Germany has said it would do the same.” (http://ca.news.yahoo.com/france-blocks-train-italy-activists-illegal-tunisian-migrants-20110417-052355-689.html) In addition, it is now being reported that France and Italy have agreed to joint sea-and-air patrols to block any new North African migrants from sailing to Italy, including the Italian island of Lampedusa. In light of the state of Europe’s economy, the ebb and flow of tens of thousands of people between these countries places acute and unexpected pressure on an already strained political and economic infrastructure. Thus far, according to the EU Observer: “the EU and the Member States have mobilized around € 71 million and more aid is being considered.”
Bribery hasn’t worked, either. According to the EU Observer: “European Commission chief José Manuel Barroso on 13 April promised Tunisia €140 million of extra EU aid if the new government takes “strong and clear action” to prevent its citizens from leaving for Europe and take back the thousands that have already made it to Italy – which Tunisia has so far already made it to Italy – which Tunisia has so far refused.” (http://centurean2.wordpress.com/2011/04/13/after-arab-“revolutions”-ii-immigration-explosion-eu-members-protesting-wasted-tax-money-eu-war-threats-to-“closed-societies”/)
An “us” (Europeans) vs. “them” (Muslims) situation is developing. It was foreseen as early as last summer. Andrew Brons, MEP from the British National Party, addressing the European Union Parliament on June 20, 2010 said: “The problem is that the EU hasn’t faced up to globalization; it’s embraced it,” he said. “It’s allowed a flood of imports from developing economies with wage rates a fraction of those in Europe. The only way in which we could possibly regain competitiveness would be to drive wage rates down to their levels.” “However, my message is also for Europhiles: Europe, either as a whole, or separately, will fail to protect its manufacturing and it agriculture from Third World competition at its peril. Globalization must be resisted individually or collectively or it will destroy us all,” Mr. Brons said. “Replacing Europeans with people from the Third World will mean that Europe will be replaced by the Third World. Europe is slowly but steadily being ethnically cleansed of Europeans.” (http://centurean2.wordpress.com/2010/06/21/europe-is-being-ethnically-cleansed-of-europeans-andrew-brons-mep-warns/)
I sympathized with my friend Riccardo, mentioning the challenges we have been faced with in the United States with a seemingly unfettered flow of undocumented immigration across our southern border. He was quick to point out, though, that Mexicans illegally crossing into the United States are predominantly Roman Catholic. “They don’t blow themselves and others up with suicide vests,” he pointed out. “If Europe will not change, 40 years from now we will be the next battle field against terrorism. We are slowly dying.”
As the demonstrations across North Africa turn into riots and government overthrows, things continue to devolve in the adjacent countries, and the repercussions are increasingly sweeping across Europe. Like American politicians who refuse to deal aggressively with the illegal immigration problem along our southern border, Riccardo says, European politicians are reluctant to take action to protect their own sovereignty. “Politicians are the same everywhere”, he says, “they don’t want to take responsibility. They plan and plan and never make a decision. It is the same all over the world except in China. When they decide to do something they do it quickly.”
I think there’s a lot of truth in what Riccardo is saying here.
What do you think?
Everyone knows that objects look bigger when you are standing right next to them. The same is true of events. Usually the events of day-to-day life, when examined after some time has passed, turn out to be somewhat less meaningful or at least less dramatic. The recent shootings in Arizona that severely injured a legislator, and killed other innocent civilians were tragic; no question about it. I don’t know a single person who doesn’t wish they could have intervened somehow to prevent the tragic loss of life. While all of the deaths and injuries are abhorrent, I think most of us are especially impacted by the death of an innocent 9 year old girl whose only offense was standing close to the congresswoman targeted by the deranged assailant. Nothing will ever diminish the terrible impact of that event, and grieving for the losses of the families involved was not only appropriate, it was a natural and required part of the healing process.
So in light of the terrible tragedy that is the Arizona shootings, here is another avenue of thought related to the context of this event: How many Americans have been lost to murderous insurgents in Iraq since the beginning of the conflict there? Without googling it, can you estimate that number within – say – 1,000? Any idea how many civilians have been killed? Again, you don’t have to be exact here; can you estimate within 1,000 people? According to a front-page story in USA Today January 12, 2011, “Insurgents in Iraq killed more than 21,000 civilians and wounded another 68,000 people with homemade bombs over the past five years, according to newly released data from the Pentagon. The highest number of casualties came in 2007, coinciding with the worst sectarian violence and the surge in U.S. Military forces to quell it. In that year, 7,295 people died – nearly 20 a day – from improvised explosive devices, says the Pentagon. Another 21,970 Iraqis were wounded.” Later in the article, a U.S. Official is quoted when he said: “The enemy put civilians purposely at great risk by its tactics and actions.”
I can vouch for that. I flew into Iraq for the first time in December of 2006, and stayed through most of 2007. The violence was everywhere, and it was indiscriminate. It seemed to me that I could at least hear a car bomb going off about every 45 minutes, and many shook the ground. Small arms fire was everywhere, and in the early days of 2007, it was almost continuous. No amount of time passing me by will ever blunt the stark terror of those rides in Hummers through Baghdad, waiting for an IED to blow my legs off – or worse. And at 2AM, when rockets and mortars came in and literally sprayed my little office with dirt and shrapnel, it became extremely clear to me that being the only structure around with lights still showing through the windows just wasn’t worth getting a little more work done that night.
It was interesting for me to follow the flowing river of written and verbal rhetoric running through the internet, the airwaves following the tragedy. The debate around gun ownership split open again, and it took only a few hours for opportunists on the liberal side of the aisle to launch attacks on conservative figureheads like Sarah Palin and Rush Limbaugh for “contributing to the environment” that spawned this horrific attack. The President personally led moments of silence, traveled to Arizona to deliver speeches, and paid his respects to the grief-stricken families in several public venues. One article by Richard Wolf in the January 12 Wall Street Journal that was especially interesting to me entitled: “Amid Troubles, Presidents Inspire and Heal” laid out the words and actions of FDR following Pearl Harbor, LBJ following the Kennedy assassination, Ronald Reagan following the Challenger explosion, Bill Clinton following the Oklahoma City bombing, and George W. Bush following the 9/11 terrorist attacks.
As I mentioned in the opening paragraph, any loss of innocent human life is totally unacceptable, and we need to do everything we can to prevent it and appropriately respond to it when it occurs. But looking at this event – terrible tragedy though it is – in the cold, gray light of dawn, it is interesting to try to achieve some perspective. Pearl Harbor was a sneak attack that killed hundreds – primarily military, but some civilians as well. The 9/11 terrorist attack was an attack on civilians and cost the lives of about 3,000 Americans. Adolph Hitler’s inconceivable reign of terror killed 6 million Jews. The vast majority were innocent men, women, and children. The world has seen unbelievable atrocity and murder on genocidal scales. Even now, in the course of a single month at just one U.S. Marine installation in Afghanistan, we have “Ramp Ceremonies” (also called “Dignified Transfers”) for more true American heroes than we lost in the Arizona shooting spree.
So as we experience the real and undeniable grief and heartache of the friends and families of these eight victims in the Arizona tragedy, I am hoping that observers will remember that for years now, every single week families and friends receive the shattering news that they will never see their son, daughter, father, mother, or close friend alive again on this earth.
Because we don’t know them, and we don’t have their faces and their personal stories broadcast into our homes all day and all night for days afterward, and because they are usually not respected court judges, congressional representatives, or beautiful little girls, somehow we don’t feel those losses so deeply. We aren’t moved by them to set our flags at half mast or hold an official moment of silence at the White House, or even mention many of their names on a national news broadcast. And while the men and women whose lives are sacrificed in the line of duty – whether that duty is on the battlefield in Afghanistan or on a police patrol in some major U.S. city – are people you don’t know through a media blitz, they are every bit as important. Every bit as deserving of our pity, our grief, and our prayers.
The same is true of the murder victims in Detroit and East St. Louis and Watts. The victims of traffic accidents, airplane crashes, and natural disasters like Katrina. There is no outpouring of national grief and mourning when the victim is a homeless man, or that most helpless and innocent of victims, an unborn child. Scores of murders and tragic accidents occur around us every day. The scope and grandeur of the public outcry around this one terrible event does cause me to wonder how much of what I am saw was theatrics, how much was opportunistic politics, and how much was genuine sorrow – especially on the part of our political leaders and our mainstream media.
What do you think?
I am in my mid-fifties. My first memories of politics are black-and-white images of Richard Nixon and John F. Kennedy debating on national television. I am not a politician of any stripe, and like most Americans, my enthusiasm for politics and for political issues waxes and wanes – typically around national election cycles. But nationalizing health care holds a somewhat higher level of interest for me than most national policy debates in recent memory.
For more than three decades, I have been involved in American business. I started out working in retail stores like Sears and K-Mart when I was in high school, poured molten grey iron in a foundry in college, worked in a factory making paint, worked for a couple of years as a psychiatric aid in a hospital that handled kids with special needs, and from there went into management positions at companies like John Deere, McDonnell Douglas, Boeing, and Computer Sciences Corporation. So I have seen and experienced a fairly broad spectrum of business issues and the plight of American business and American employees.
The broad national health care issue first really came into focus for me while I was Director of Materials Management at McDonnell Douglas back in the early 1990s. My boss, the Vice President of Production Operations, visited my staff meeting and addressed me and my staff jointly about McDonnell Douglas’ decision to discontinue providing life-long health insurance coverage for the company’s retirees. He said that this was the right time to implement such a change, because: “Hillary is going to implement nationalized health care anyway, so McDonnell Douglas can save a ton of money here without impacting our retirees.” I immediately asked: “So if Hillary is not successful, and we don’t get nationalized health care, then the Company will reinstate their plan for retirees?” My boss just looked at me and said: “Riiiiiiiiight.” We all knew what that meant, and the rest, as they say, is history. The cost of health insurance over 60 years of age is not insignificant, and it shifted from a company burden to a burden shouldered by retirees.
As a business leader, I have worked with profit & loss for a long time. I understand how difficult it is to wring additional profit out of the revenue from products and services just to survive in an extremely competitive business environment. I have seen how ruthless executives often become in pursuit of corporate profits, not only for survival, but also simply out of greed. Perhaps it is because I spent some years at the bottom end of the ladder in big manufacturing companies doing things like pouring iron, but whatever the reason, I detest shifting additional burden to the employees who earn the least and – from a physical perspective, at least – work the hardest. I feel as though it violates the partnership between the employer and the employee in many cases. I know that it damages morale, and often hurts the quality of the company’s goods and services. So as I have watched the cost of health care benefits rise over the last 35 years, I have had to work through how those costs were addressed and mitigated (to some extent) through the introduction of Health Maintenance Organizations, Health Savings Plans, and a broad array of other similar initiatives.
Now, as the baby boomers move like the proverbial pig through a snake, the costs of programs such as health care and social security have become critical for retirees. We are into a more-people-taking-out-than-people-paying-in situation. In addition, the off-shoring and outsourcing of much of the middle class work in the US has diminished the power of labor unions to negotiate substantive health care benefits for their membership among current work force. So not only retirees are at risk here; so are our current and future work forces. One solution that continues to come forward is – broadly stated – nationalized health care.
I have a little experience with nationalized health care. I actually lived and worked in Canada for a few years, and was part of the Canadian health care system. (I genuinely enjoyed my time up north; I found Canadians to be friendly, intelligent, and industrious. I made some life-long friends in Canada.) One day while working up there, I noticed that one of my colleagues was limping in a more and more pronounced way. I didn’t say anything at first, but weeks and months went by and he only seemed to get worse. When I finally asked him about it, he said, “I have to have my knee replaced.” I asked him when that was scheduled, and he told me it wasn’t scheduled yet. He was on a waiting list. At the time I asked him, he had been on that waiting list for 18 months. This guy was in pain, and it made me wince just seeing him walking around like that. Whenever I think of nationalized health care, I think of my former colleague.
And then there are the statistics. Unfortunately, over the course of the debate, some conservatives – especially the right wing of the right wing – have made claims about Canadian and UK health care differences that are untrue. I am very impressed with an analytical piece published in the UK recently that debunks some of these claims, entitled “Is public healthcare in the UK as sick as rightwing America claims?” authored by Denis Campbell and Girish Gupta.
However, even in this very even-handed article, the authors have to admit things like: “Breast cancer does claim more lives, proportionally, here [in the UK] than in the US. According to the 2002 Globocan database run by the World Health Organisation’s cancer advisers, 19.2 of every 100,000 Americans die of the disease, but 24.3 per 100,000 here die. On prostate cancer, a Lancet Oncology global study last year found that 91.9% of Americans with the disease were still alive after five years compared to just 51.1% in the UK. With heart attacks, 40% of Britons who suffer one die from it compared to 38% in the States”, and “Breakthrough Breast Cancer cite two recent studies from Lancet Oncology. One says that 83.9% of women in the US diagnosed with breast cancer between 1990-94 lived for at least five years compared to 69.7% in the UK – a 14.2% difference. The second showed that, among women diagnosed with the disease in 2000-02, 90.1% in the States survived for at least five years whereas in England it was 77.8% – a 12.3% gap.” The performance of nationalized health care systems is simply not as good as private systems like the US system – and that difference translates into higher mortality rates.
America does spend a great deal on health care, which intuitively explains why the health care available in the United States is world class. Looking at expenditures for health care per capita, the NHS posted the following numbers on annual per capita Health Care spending:
And in the spirit of objectivity, it’s useful to note that this world-class health care has not necessarily resulted in longer average life spans in the US. Due to our rich diets, poor exercise, and general propensity for obesity, we actually lag many other countries by 2 to 5 years. However, Obamacare is very likely to make it much worse.
Nationalized health care in its current manifestation, known among the citizenry as “Obamacare”, has traveled a byzantine route to gain passage. It almost certainly would not have made it through a full vote of citizens as a referendum. I have never seen anything quite like it. Former Speaker Nancy Pelosi actually said, “We have to pass it so that we can see what’s in it.” No kidding, I actually SAW her saying those words on national television! What always fascinates me is how these people keep getting re-elected; but I digress. After watching the debate, the Corn Husker Kickback, the Louisiana Purchase, and the other brass knuckles shenanigans surrounding the passage of this bill, it seems to me that anyone who did not foresee an effort to repeal it at the first opportunity must be blind.
So what’s actually in the new 1,000+ page Obama Health Care bill? Among the specific items that many of us are concerned about:
At this point, of course, Congress has passed it (along party lines of course, with Democrats pushing it across the top) and the new Republican-led Congress has voted to repeal it. But there are not enough votes to over-ride the presidential veto, so there will be an enormous amount of time, energy, and taxpayer money spent to modify, de-fund, or otherwise mitigate the damage done by this legislation.
The bottom line then, from my perspective is this: Should Obamacare be repealed? Yes. It should never have been passed in the first place. The fact that this legislation got passed with all the back room deals fully exposed in the press says a lot about the rotting, putrid condition of our current legislative process, and the moronic condition of the citizens who re-elect these criminals to represent them in Congress. Will it be repealed? No. I don’t think the Republicans will garner the Democrat’s support in this issue any time sooner than the next Republican presidency. In the mean time, as I said earlier, there will be an enormous amount of time, energy, and taxpayer money spent to modify, de-fund, or otherwise mitigate the damage done by this legislation. Your tax dollars at work – wasted once again.
What do you think?
In a Recent blog on Dating and Desirability, I noted a number of patterns that had been observed in one brief study that related to the impact of income and physical attractivemness on dating and mate selection. Some respondents noted – and I noted as well – that the population in that study was potentially skewed by virtue of the fact that the entire study population was comprised of students at Columbia University. I recently came across another study, the results of which were published in the American Economic Review in 2010, which is much more thorough, much more academically rigorous, and is based on a much larger sample. It appears to have yielded very similar results. (See American Economic Review 2010, 100:1, pages 130–163 http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.130 )
Here, paraphrased slightly, are the essential elements of their findings:
As I mentioned earlier, this study is pretty thorough, and it appears to me to be completely sound from an academic perspective; I invite the reader to click the hyperlink and take a look. I think most of these findings are pretty intuitive, and the rest made pretty good sense to me when I reflected on them. Do you find any of them surprising?
What do you think?
Several years ago, while I was in management consulting, I remember pointing out to the CEO of a St. Louis-based chemical manufacturing company that he was losing many millions of dollars each year simply because his company, while growing through acquiring other smaller companies, had failed to integrate the various businesses. I showed him one example in detail, where the company was literally allowing their most expensive product component to expire on storage shelves in some locations, while continuing the purchase more in other locations, and at increasingly high prices. This occurred simply because the various company locations did not use the same part number, description, or other identification schemas for the same chemical from site to site. So no one at any site was aware of available inventories at their sister sites. The CEO waved his hand dismissively and said, essentially, that several millions of dollars a year wasn’t worth worrying about. As it turns out, the board of directors fired that particular CEO within just a few months following the meeting. But the aspect of the discussion that struck home with me is that it is far easier to be critical of the work and the ideas of others than it is to produce alternative work and alternative ideas.
With each new election season, the party seeking to oust their opponents to gain control in the White House, Congress, or the United States Senate goes through a very similar process. They focus largely on criticizing the failures and policies of the existing administration, and rarely offer better proposals. And in those rare cases where ideas are brought forward, they rarely survive the election cycle and come into practice.
Recently, in a column called “Why Not a Negative Income Tax” authored by Guy Sorman, the following statement is made: “ Republicans have been winning races again, but with a few important exceptions—Wisconsin congressman Paul Ryan comes to mind—they have done so mostly by running against proposals by liberals in power, rather than by suggesting a coherent alternative agenda. This essentially critical approach contrasts markedly with the 1980s, when the Reagan Revolution worked to implement a rich body of policy ideas developed in advance by many thinkers, including, prominently, the free-market economist Milton Friedman.”
Personally, I am not a big fan of Friedman’s negative income tax” idea. But the point he makes about being critical without being helpful or outlining specifics about how things should be changed has the ring of truth. We need some good ideas, and ideas that survive the election cycle and actually make it into implementation. Simply saying “Those guys don’t know how to govern, so elect me instead” shouldn’t be enough. Yet elections are often determined – not by how much the electorate likes the challenger, but rather by how much they dislike the incumbent. That said, I will fall into that same category to the extent that I feel compelled to point out these examples among the existing proposals made by the Obama Administration for US Federal budget changes:
In aggregate, according to the Summary tables provided with the Obama Administration’s budget proposal, the overall US budget deficit – which stood at $459 billion in 2009, would rise to $712 billion by 2019, with debt held by the public increasing from the already dangerous level of 41% of our national Gross Domestic Product (GDP) in 2009 to more than 67% of GDP by 2019. This path is not just dangerous, it is reckless, and exposes a wanton disregard for the future of our nation. So what are some of the “New Ideas” that might be proposed? Here are some – some old “new” ideas, and some new “new “ ideas that we might consider:
The consolidations and eliminations listed previously would generate something in the neighborhood of $500 billion in annual savings (see spreadsheet listed below.) The cost of the department funding increases and other investments listed above would be much less than $500 billion. In fact, in the Obama Administration’s 2010 budget proposal, the section describing Department of Transportation requirements says: “To provide Americans a 21st Century transportation system, the Administration proposes a five-year $5 billion high-speed rail State grant program. Building on the $8 billion down payment in the American recovery and reinvestment Act of 2009, the President’s proposal marks a new Federal commitment to give the traveling public a practical and environmentally sustainable alternative to flying or driving. Directed by the States, this investment will lead to the creation of several high-speed rail corridors across the country linking regional population centers.” Even if the savings generated from implementing some subset of these recommendations generated half the projected savings, the mere $250 billion should still do the job.
What do you think?
A study on dating preferences and desirability was recently conducted over a period of 2 years, and included observations of more than 400 daters among Columbia University’s various graduate and professional schools. The study involved “speed dating”, with each couple rating their “date” at the end of each 4 minute encounter. The results were interesting in many respects.
Among the findings citied by Ray Fisman (http://www.slate.com/id/2177637/nav/tap3/) were:
A number of elements about this study and its findings are of interest to me:
First of all, the population studied here is “daters among Columbia University’s various graduate and professional schools.” I think it’s likely that this skews the findings, particularly in the areas related to racial preference, for two reasons: 1) I believe that Columbia students are a more generally liberal group than a random sample of the population of the United States. I have no evidence of this, but I have a pretty high level of confidence that it’s true. 2) This segment of the population is generally younger than the rest of the adult US population which, again, I believe would skew the results because younger people tend to be more liberal and more color-blind (in a racial sense) that the general population of older generations (which reflects social progress, in my view.)
Secondly, I think we need to be careful about making generalizations from these findings. For example, in a very thorough study by anthropologist Helen Fisher, published a few years back in book form and entitled “Why We Love”, it was demonstrated that women as well as men are attracted to specific physical body characteristics. It’s impossible to prove that that the specific characteristics represent “beauty”, simply because beauty is, indeed, in the eye of the beholder. However, there are certain physical characteristics that are more appealing to the general population than others, speaking in terms of physical characteristics. If my memory serves me correctly, Fisher’s work demonstrated that clear physiological changes occur in the chemistry of the brain of the observer when presented with those characteristics. Long legs were, as I recall, one of those characteristics. Therefore, I am not at all surprised that “Women got more dates when they won high marks for looks from research assistants.” Certainly, widely publicized beauty pageants have focused on these types of physical characteristics consistently for many decades. So while I understand that men are probably more inclined to rely principally on physical beauty, that is certainly not an exclusively male practice.
Thirdly, I find it interesting that men appear to be too intimidated by superior intelligence, ambition, and earning power to pursue women that possess those characteristics – when they possess them in greater quantities than the men themselves. I have long held that most men end up marrying women who are smarter than they are. But of course, there are many dimensions of intelligence, and many ways to measure it. My admittedly cynical view is that whichever spouse convinces the other spouse to be the primary breadwinner is probably the smarter of the two.
What do you think?
According to a recent Washington Post article entitled: “Beyond the tea party; What Americans really think of government,” authors John Cohen and Dan Balz point out that: “Nearly six in 10 say they want their congressional representatives to fight for additional government spending in their districts to spur job creation; fewer (39 percent) want their member of Congress to cut spending, even if that means not as many local jobs. This is a turnabout from September 1994, when 53 percent said they wanted their representative to battle against spending and 42 percent were on the other side. Despite evident public dissatisfaction with the growth of the federal deficit, 50 percent of those polled say they would prefer more government spending to try to boost the economy. Forty-six percent say avoiding an increase in the deficit should take precedence.”
When it comes to specifics about what to cut if cuts are made, the differences between Republicans and Democrats remain stark, but frankly so do the differences of perspective even within the two parties. Generally, the greatest consensus seems to be around spending more on veterans’ benefits, combating crime, defending against terrorism, and public schools. The only reasonably broad consensus today on an area to cut spending seems to be aid to the world’s needy.
The American people have always wanted it both ways. As my grandmother would often say, we “want to have our cake, and eat it too.” We want more services and benefits for our local communities, and ourselves but think that the ”other guy” should cut back on his spending. In that sense, we’re all liberals, I guess; Take from the rich and give to the poor – we just substitute the word “me” for the words “the poor”. But can we have it both ways? Can we have better and more government services and benefits, and reduce Federal spending at the same time? On this nice clear pie chart reflecting 2011 US Government spending, you will see that the macro level distribution of spending breaks down as follows:
In the “All Other” category, the single largest expenditure – by quite a stretch – is interest. At $250 billion a year, the US Government is spending about 6.5% of our annual spend on Interest. That’s almost twice as much as we spend on Education, and well over twice as much as we spend on Transportation.
In 1970, at the height of the Viet Nam War, the breakdown looked like this:
Welfare represents 16% of the “All Other” category, and only 4.6% of the total annual spend.
So looking at the change between the Viet Nam War era and today, when we have a war in Afghanistan going forward after many years, we see that Defense Spending as a percent of our total spend has been reduced by half, and our spending on Welfare has dropped by almost two thirds. Interest payments on Federal debt have actually diminished slightly. However, Pensions have grown from 15% of total spend to 21%. And that infamous “All Other” Category, which includes things like “General Government Spend” and “Protection” has decreased markedly (from 30% of annual spend to 20%), even though selected items such as “Protection” have nearly tripled (from ½ % to 1½% in that interval.) As spenders, the United States has shifted its spending pattern far more toward domestic programs (Welfare and Retirement) and far less toward military spending even in this era of Afghanistan and Iraq military engagement.
But let’s assume the position of the “I want more” side for a moment. Let’s say that we want to double the amount of Welfare benefits made available; $557.3 billion in this case. (By the way, Welfare in this context breaks down as follows for 2010: Family & Children Services – 18%, Unemployment Benefits – 35%, Housing Programs – 14%, and Social Exclusion (Foster Care, etc. including Earned Income Tax Credits, which represents $49 billion) – 33%. So we want the US Government to do more for us – provide additional benefits and service at a level of 24% of our spend rather than 12%. Where would that come from? The favorite target of the liberal side of the aisle in Congress is, of course, Defense spending – until it becomes clear that programs like BRAC which consolidates and closes military bases reduces employment and commerce in the districts of the Congressional representatives involved. Well, what about those big weapons programs then – you know, the fighter jets and tanks and missiles; can’t we just cut back on those? I remember a discussion I had with a Liberal friend on Facebook not long ago about this. His position was that we already have enough airplanes, and don’t need any more. As a former A&D guy myself, I pointed out that it’s not enough to say you have “enough airplanes”. They aren’t interchangeable for the most part. Long range interdiction fighters like the F-15 perform a different mission than slow-moving ground support aircraft like the A-10, and they both perform different missions than the refueling aircraft, and still different is the mission of the carrier-based F/A-18. They have different weapons systems, armament, avionics, and payloads to accomplish those different missions, and you can’t just send a refueling tanker in to take the place of a fighter jet for air born “dog fights” in hostile territory over the middle of the ocean. The GAO, DCMA, and other government agencies have worked together to cancel a number of poorly performing programs over many years (ATF and FCS are two examples that come to mind), and so there is scrutiny of the efficiency and effectiveness of these programs. So while there undoubtedly more efficiencies to be wrung out, my perspective is that there isn’t a $557.3 billion opportunity here; that would represent over 60% of total Defense spending. So we see that – as a percentage of total spend, US Defense spending is already down to half of what it was during the Viet Nam era, it seems unlikely that we can get to less than half of half, and remain even marginally safe in a world of terrorist threats.
What about the other obvious area, then? Let’s consider Pensions; after all, this spending category represents 15% (or $774.3 billion) of total annual Federal spending. Hmm. If we took $557.3 billion out of the $774.3 billion Pension spend, Pension funding would be reduced by 72%. $721.5 billion of that $774.3 billion is Social Security. How likely do you think it is that we will simply eliminate all Social Security benefits as we move into the peak of the baby boom retirement years? Not very likely.
So what do we do? We don’t seem to be able to pare enough money out of existing spending to fund a substantial increase in social programs, so the only recourse is, of course, to…. RAISE TAXES. Ah yes. If you can’t afford your spending habit at home, that’s what you always do, right? You go and get a second job. Right. Let’s take it from the rich, and give to the poor! Hmm, this sounds vaguely familiar. Doesn’t it?
In 1970, there were 203.3 million people in the United States, and the US Income Tax brought in revenues of $123.2 billion. That’s $606 per person (remember this includes all household members, including children), or 1.8% of their household income per person. Today, with 308.7 million people generating $1,092.5 billion in Federal income taxes, that’s an average of $3,539 per person in income taxes, or an average of 8.2% per person. That means average Federal income taxes per person in the United States have risen 8 fold (800%+) since 1970, when expressed as the percent of household income paid in taxes. (One other important note here is that in 1970, only about 17% of all families were dual-income earning families. Today that number is about 42%. So we now have a much higher percent of the population with twice as many people working to earn a not-much-greater standard of living.)
But what about those rich people? Can’t the very wealthy pay more so that the rest of us can get more services and benefits from the government? According to recent tax distribution records, the top 1% of income earners (those with annual incomes over $380,000) in the United States paid 38% of all Federal income taxes in 2008. The top 10% of income earners (those with incomes over $113,000) paid 45.7% of all Federal income taxes. The top 25% (those with annual incomes over $67,000) paid 86.3% of all Federal income taxes paid. So how much more would we take from the wealthy, when “wealthy” is defined in these terms? Is $67,000 a year in household income to be considered “wealthy”? People with $67,000 per year in income already bear more than 86% of the tax burden. How much of the other 14% that is spread across the rest of the tax paying population should they be responsible to bear?
No. The answer is not additional taxes – not even on the wealthy. So if the answer is not dramatically reduced spending in some categories to fund others at a dramatically higher level, and the answer is not additional tax burdens for those of us who have already seen incredible tax increases over the last few decades, and the answer is not to add income earners within each household (which would basically put the kids to work) then what is to be done?
Are you ready? Here is the answer – or at least one answer, so brace yourself.
These three changes would amount to a combined positive impact to the Federal budget of $414 billion. It would enable us to get 80% of the way toward our stated goal of doubling the services and benefits provided by the Federal government. We spent $557.3 billion annually on Welfare of various kinds, and here is an added $414 billion to distribute. Not bad, right? So there you are – for all you “This is just too hard, too complicated, too big a problem” types. It is hard, because it’s radical change and that involves making people angry and frightened – change always does. But it doesn’t have to be nearly as complicated as politicians often portray it to be.
However, this is where my personal philosophy enters in. What if the answer really isn’t a bigger Federal government? What if the better answer is really a diffusion of wealth and power to states – or better still, to local communities? What if we took the $414 billion and distributed it to states on the basis of their population, or better still to cities based on their population, allowing them to decide what to do with it? $414 billion divided by the population of the United States (308,700,000 people) equals $1,341.11 per person. Now just as an example, let’s take the city of Moline, Illinois. Population: 43,000. Let’s say the city council in Moline, Illinois just received their first annual dispensation of $1,341 per resident, or $57,667,730. And they know it’s going to keep coming in every year. Their normal annual operating income of $115.6 million, so this would amount to a roughly 50% increase. I would expect some civic improvements from an infusion like this, wouldn’t you? (Perhaps the city would repave it’s roads, which have been in horrendous shape for years! Sorry – pet peeve.) Or build a new hospital or work out a deal with Bettendorf, Iowa to replace the I-74 bridge over the Mississippi River. Whatever the city fathers did, they would probably create jobs – a lot of jobs – and restart the engines of commerce in Moline. Now imagine all the “Moline”s all over the United States, suddenly starting to invest again – in their infrastructures their medical facilities, their institutions of higher learning, their neighborhood renovations, and so on. Imagine the surge in employment, the improvements in local (not Federal, but local) services and benefits. Imagine what could be done by using that money at home where local leaders actually know what’s needed in their communities, rather than by Washington bureaucrats.
So there you have it. We cannot raise taxes or cut spending in “wasteful programs” enough to get us out of this situation, and we will not (and of course should not) put kids to work to improve average household income. But of we take the three steps listed above, we will reduce the size of the federal government, increase the funds available, shift the responsibility for disbursing funds to the lowest possible levels of government, and put control back in the hands of the people closest to community needs. Isn’t it about time we started looking at the world this way?
What do you think?
In March 2011, the US General Accounting Office (GAO) released a report to Congress entitled: “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue”. (www.gao.gov/new.items/d11474r.pdf) This report outlines many of the biggest opportunities that the GAO identified for eliminating redundancies and duplications of effort among agencies, departments, and programs of the United States Government. Many billions of dollars in annual expenditures in waste are identified – some more specifically than others. Some examples from the report include:
While the report is unable to provide a meaningful estimate of the combined savings achievable here, it does point out that the savings from individual recommendations can range from millions to billions of dollars. Without doubt, the savings achievable would amount – in total – to hundreds of billions of dollars. It would move the United States solidly back toward a position of financial solvency and strength, and by doing so, stabilize world markets to a large degree. And yet it is not done. Election cycles come and go, and no meaningful reform occurs despite the promises of individual Presidential and Congressional candidates. Once in office, they are never held to account for their earlier campaign promises. How do they get away with that? For the most part, they simply blame the lack of action on their opposition – Democrats blame Republicans, Republicans blame Democrats, and they individually prosper while I aggregate our nation’s economy continues to swirl deeper and deeper into a proverbial toilet bowl of deficit spending and debt.
The recommendations of this latest GAO report will not be followed either, for three broad reasons:
In a future Blog entitled: “Where are All the New Ideas?” I will outline a superior approach that really does have an opportunity to be successful if it is implemented – much less “inch-at-a-time”, and much more “eliminate the entire department”. However, before undertaking the steps outlined in that missive, the first two problems must be resolved.
I believe the first two problems cannot be resolved; they must be circumvented. Based on decades of observation, I do not believe that the self-interest and general myopia of US congressional leaders can be overcome in a way that brings about the sweeping consolidation and efficiency required by the United States Government. If Thomas Jefferson were alive today, he would likely recommend another American Revolution, overthrowing the current system and replacing it with a more responsible one. Personally, I don’t know whether the United States could survive such a cataclysm but I am reasonably certain that the chaos that would ensue around the world as a result would be devastating on a global scale, at least among 1st World economies and countries. And so setting that alternative aside, how could the United States centralize enough power to make these types of sweeping changes irrespective of individual or party-based agendas?
The way in which these two problems may be circumvented is the establishment of a temporary committee (Notice that I said a TEMPORARY committee) for that purpose. The staff members of the committee would be drawn principally from the GAO, but committee leadership would be comprised of 3 members, with all decisions made by simple majority. The committee would exist for 18 months, and aside from administrative support, would be comprised of no more than 30 members. It would present its final report directly to the President of the United States, and act with complete independence and impunity. During the first 6 months, instructions for consolidation (and resulting elimination of duplication) of Government agencies would be developed and documented by the committee. The final template for change is to be voted on by the 3 members of the leadership committee. I would expect that the steps outlined in the template would be similar to those outlined in my forthcoming bolg entitled: “Where are All the New Ideas?” The committee would use the remaining 12 months of its life to implement the changes as outlined in the previous six months. Because these consolidations will be sweeping in nature, the committee will be granted authority to revise or set aside whatever legislation exists that is contradictory, except of course, the US Constitution and its amendments. (I perceive that there will be a challenge or two there, since the Constitution provides the authority for the establishment of entities such as a Navy and a militia, so consolidation among the US Armed Forces will be tricky from a legislative perspective.) So, for example, if the committee decides that as a part of their consolidation they will dissolve the US Department of Transportation, the legislation that authorized the establishment of that organization back in the 1960s would become null and void.
With these first two problems (Congressional myopia / self-interest and lack of centralized authority) circumvented, and an independent and honest effort made at US Government consolidation, the hundreds of billions of dollars in annual savings realized through the implementation of these changes would reset the course of the American economy. It would, of course, have a near-term displacement affect on thousands of US Government employees, but considering the current US unemployment rate, it would be a drop in the proverbial bucket. The benefits would last for at least a decade or two – perhaps as many as five, until government bureaucracy once again exhibited a level of gluttony and self-absorption as to require another push on the “reset” button.
What do you think?
In a previous blog, I laid out the case for avoiding the potential “sticky wicket” of US involvement in internal Libyan strife. But recent actions by the United States have deployed cruise missiles and CIA “boots on the ground” there. So now that the US is involved, what are our options? The truth is, it depends almost entirely on Muammar Gadhafi. If Gadhafi steps down, and agrees to go into exile, much of the immediate problem goes away. Not necessarily (or even probably) the mid-to-long range challenges, but the short-term potential for significant loss of life, and spillover of conflicts outside of Libya’s borders.
At this point, broadly speaking, three things can happen:
In the event that Gadhafi resigns, the US will likely take the following actions: Arrange for a host for Gadhafi and his family in exile, secure amnesty for him from world courts (as a deal sweetener to get his voluntary resignation), terminate our participation in the “No Fly Zone” and other military engagement, enlist other benefactors from the same hemisphere (Asia and Africa) to perform any military mop-up work and staff civilian aid projects.
If Gadhafi “wins”, and remains in power in Libya, the US needs to find a way to back out of our leadership – and to the extent possible, even our participation – in the “No Fly Zone” and any other existing or future military operations in Libya, until such time as Libya becomes a threat to the United States or it’s interests. All further actions in these areas need to be picked up by European and/or Asian countries with an interest in doing so. The US may, of course, continue to back insurgency and/or civilian aid for humanitarian purposes through the use of 3rd party providers.
In the event that Gadhafi decides to continue to resist the US, NATO and the rebels within his own country and fights on, the United States should still terminate our financial and military support of the “No Fly Zone” and all other military involvement, and allow that activity to fall on the shoulders of countries like France who appear to have the deepest interest in the country (and who failed to support the US in our War on Terror following 9-11.) This course of events becomes more costly and less likely to be successful as time drags on, since funding insurgencies and/or humanitarian relief over long periods of time is a substantial economic burden when many countries (including the United States) are already saddled with massive and growing levels of debt.
There are three broad sets of potential outcomes from the current situation. They are:
Second Set of Potential Outcomes is Listed Above
Third Set (3a and 3b) of Potential Outcomes is Listed Above
I have a friend who frequently tells me that the best course of action for the United States in these situations is simply to assassinate the leader of the foreign country involved, citing the savings in lives and treasure to the United States and the civilian population of both warring countries. I did not analyze that option here because the United States does not engage in it; I’m not saying it’s necessarily the wrong answer, I’m just saying that as far as I can tell it’s never an option that’s ever officially on the table.
Based on the way this looks to me then (and I am no foreign policy expert), the only attractive course of action is to take whatever steps are required to secure Gadhafi’s agreement to step down and retire somewhere.
What do you think?