Saturday, July 24, 2010

Fiscal Reality

The conventional wisdom is that one of the most important planks in the Republican platform is 'Fiscal Conservatism'. In other words, the idea is keeping the government's purse strings pulled tight whenever possible and limit spending for non essential items.  Sounds like a good idea, doesn't it? I would have to say that I like the sentiment. I'm sure I wouldn't agree with everyone else on what's essential, but that's its own issue. The point is that Republicans and Conservatives in general are always harping on about fiscal restraint. Conversely, we are also told that Democrats like to spend and spend freely. Ask just about anyone and they'll tell you that Democrats are the spenders and Republicans are the party of fiscal restraint. What makes it so inconvenient is that it's not true.

First let's look at history. The previous five Presidential Administrations all increased the national debt, which probably surprises no one. But you might be surprised by how much each Administration contributed to our current debt. The Republicans' mythological hero, Ronald Reagan ballooned the national debt by 189% in his eight years in office, making him by far the biggest spender. Next on the list is another Republican, George W. Bush who increased the debt by 89% in his eight years. You're probably thinking that Clinton must be next, as the only other eight year Administration, right? Well, as a matter of fact, you would be wrong. George H. W. Bush takes the number three spot with a 55% increase in his four years in the White House. Number four is Jimmy Carter having added 42% in four years. That's right, William Jefferson Clinton, after eight years only added 36% to the national debt. He even managed to run a budget surplus towards the end of his second term. So here we have five Presidential Administrations and all three Republicans outspent the two Democratic Administrations. On top of that, the Clinton White House presided over the most fiscally responsible spending despite being reviled by Republicans. I realize that this simplifies the financial details of these administrations, yet it's hard not to see a fundamental hypocrisy from the 'Fiscal Conservatives' on the right.

Today the deficit is a major issue to the country, but has become the very raison d'ĂȘtre for the Conservative movement. In fact, since March of this year it has been a grueling fight to get unemployment extensions passed in the Senate as Republicans thump their chests and demand that they be paid for in the budget before they can be passed. On the surface this sounds somewhat reasonable. But as far as I can tell, emergency measures like these have historically never been paid for up front. That's probably because they are needed due to an . . . emergency. Another thing to realize, despite several prominent Republicans' moralistic babbling, is that unemployment benefits in a deep recession like we have now are just about the most direct form of economic stimulus possible. You are putting desperately needed money into the hands of people who will spend just about all of it back into the economy immediately. This prevents even more foreclosures, car repossessions and loan defaults by people on the edge. You keep people in their apartments rather than pushing them onto the streets to become an even bigger issue for the nation. But the steady thrum of Republicans chanting 'deficit, deficit, deficit' drowns out these obvious facts. What is really infuriating is that during lulls in the unemployment extension arguments, the same Conservatives who decried unpaid for benefits are calling for extending Bush era tax cuts for those who are least affected by the recession. Incidentally, both rounds of tax cuts pushed through by the Bush Administration and Republicans in Congress were, wait for it . . . UN-paid for. I wish I was surprised by the hypocrisy but for good or ill I'm getting a little numb to it after the last decade. The logic, if you'll allow me to demean the term for a moment, given is that tax cuts will pay for themselves. I'm serious, that's the idea. Worse yet, some people with functioning brains actually believe it. Oh, I'm not saying that in the long term the cuts may not have some positive effects that could make back a percentage of the original cuts. But tax cuts that pay for themselves are about as viable as the mythic perpetual motion machine. It might make sense four hours into a Friday night bar crawl, but in the sober light of day it's complete drivel.

The reality is that, based on past performance, Republicans seem incapable of walking the walk once they get power. They will talk up fiscal responsibility all day long and deep into the night, but their actions continually underscore a complete lack of interest in the subject. It's a hollow, empty charade for most of them. They are on full volume now because the debt is an issue after the 8 years of wars and tax cuts under Bush and the necessity of heavy spending to try and stabilize the economy immediately after Obama took office. I won't deny that the debt is a major issue. In fact I posted a piece about the need to deal with the national debt back around the end of Bush's first term. The complicating factor is that now, in the midst of a dodgy recovery from the biggest financial disaster in 80 years, is not the time to start slashing and cutting spending. Why? Because the economy is teetering on the edge and right now the Federal government is the only entity ready and willing to pump money into the economy.  The banks have somewhat recovered but are sitting tight on their cash until the economy revives. Kind of a Catch-22 for them. Banks won't lend until the economy stabilizes but the economy is having trouble stabilizing due to a lack of credit available. You see if we cut now then the States, who are already struggling to find money just to pay school teachers, will be thrown to the sharks, not to mention most any cuts of significance would result in adding more names to the already endless seeming unemployment lists. Here's where a healthy sense of irony comes in. The best time to make strides on the national debt is when the economy is doing well. That's when States are making ends meet and have some leeway in how they manage their budgets. That's when tax revenues are high because individuals and companies are buying and spending freely. That's when foreclosure and bankruptcy rates are low. That's when the banking system is flush with cash and eager to lend. That's also when politicians are least likely to cut programs and trim fiscal fat. It's when the American public is blissfully unconcerned about the debt because everything is going so darn well.

I have never claimed, and never will, that I'm a financial expert. But the most important item on the nation's agenda at this moment is stimulating the economy to spur new job creation. That's job numero uno. And that's not going to be accomplished by renewing tax cuts for the wealthiest Americans or by the Republicans' myopic plan of 'tax cuts fix everything'. No single thing is going to magically resurrect the economy. It will take targeted tax incentives, aggressive, focused spending, loosened credit markets and consumer confidence to get the nation back on its feet. This includes extended unemployment, in the short term, to provide some minimal support for those who are the most obvious victims of the collapse. Let me remind you that to be eligible for unemployment benefits a person had to have lost their job through no fault of their own. These people are not dead-beats as some pathetic politicians and pundits like to portray them. They were laid off because the economy tanked and business dried up, not because they quit or were fired. We can't ignore the ballooning debt, but we can't let it paralyze us from doing what's needed to restart the economy either. Unfortunately no single thing will get the national debt under control. Dealing with debt is like losing weight. It can't be done overnight and it's going to require long term changes and willpower.  Where it gets tough is when the recovery is complete, the storm clouds part and the sun returns. That's when we need that fervor to attack the problem because it's always more difficult to focus on cuts and and spending reductions when the cash is flowing. America must be ready and willing to demand action on the debt when we have the resources to do so and not fall back into spending it as fast as we get it. As a nation we are so fond of declaring wars on things, so why not a War on Debt? Not only would that be a winnable war, but one with concrete benefits for Americas future. When we've climbed out of this recession, let's focus on reducing government spending through cuts and changing the way we do things. For one thing, let's reduce our military commitments overseas. I'm not just talking about Iraq and Afghanistan, though to be sure both of these wars are costing us dearly. We don't need 50,000 troops in Germany anymore. We don't need tens of thousands in Japan or most of the other countries where we continue to maintain huge active duty forces. Most of these Cold War era military commitments are no longer needed. I'm not saying we should pull out everyone from everywhere, but there is no reason for the manpower commitments we currently maintain. America is capable of dealing with the financial crisis and then paying down the debt. What we have, up to this moment, been sorely lacking is the will to do so.

Friday, July 9, 2010

The Hot Potato

As much as some politicians hoped fervently to avoid it, there are signs that the immigration issue will rear its politically dangerous head prior to the mid-term elections. It's dangerous because no one is really sure how it will affect voters. The flap over Arizona's recent immigration law has sparked a lot of debate, and lawsuits, both for and against the law and has kept immigration in the public's consciousness. This seems to be forcing the issue into the political spotlight. President Obama essentially conceded this point with last week's speech on the need for comprehensive immigration reform.

As the President pointed out, we seem frozen between the two poles of this issue. On one side are those who say that anyone here illegally must go and go now. They say that we need to fence off our borders and bolster our border security so that we can seal the borders up tight. This is unwise, unworkable and unlikely to actually work. Logistically it is all but impossible to deport the 11 million plus who are in the US illegally. Financially it would cost immense sums of money to attempt and stress the economy dearly in a time when we cannot afford more instability. Nationalistically it is absurd to attempt to turn America into a walled citadel. That sort of thing has been attempted in the past by ancient China and Rome with little lasting effect. For a nation that was built by immigrants, it seems awfully arrogant to stand up now and say it was fine when our grandparents did it, but it's somehow different now.

On the other side are those who call for a blanket amnesty for all who are in this country illegally. They say that it's the moral thing to do. But this ignores two major facts that the President noted in his speech. The first is that those here illegally are, quite literally, here in violation of US law. This can't just be ignored. The second point is that a great many immigrants are right now going through all the dance steps and jumping through all the hoops required to become a citizen. To grant amnesty to all of those who live here illegally would spit in the face of all who are doing it legally. And it tells those considering crossing the border, be it land or sea, that there is no real punishment if they come to America and get caught. In other words, why go through the work and cost of doing it legally when you can get the same result by just sneaking over the border and hiding out for a while?

So that leaves us with the need to compromise. I oppose a blanket amnesty for the reasons I stated above, but I do think a path to citizenship makes sense. Of course there must be required steps to get there and individuals here illegally must not be allowed to 'jump the line' ahead of those who have done everything right. Among the hurdles I've seen that make sense is some sort of background check to look for any criminal activity. Another is a requirement to learn English. Learning the language seems like a small requirement for someone who, presumably, wants to become an American. It's not about abandoning your heritage, it's about adapting to your new country and not expecting that country to adapt to you. This does also bring up the fact that America does not have an official language. This is something I believe needs to be rectified. Some may say that making English the official language is exclusionary, but that's ridiculous. I think it's more exclusionary to leave it as a free for all. As things stand now English already is the de facto standard, however the lack of a national code or amendment leaves too much ambiguity. In fact, in one case I stumbled upon when looking at this subject a Texas border town actually voted to make Spanish the official language due to the high Hispanic population. While I understand why they did it, this is the sort of thing that shows how the issue needs to be settled on a national scale. An official language should not be a State or town issue, it's clearly something that falls under the Federal government. Besides, is it a problem for Italy to make Italian the official language or Germany to make German the official language? I think it behooves us to make this vague area clear on a national level.

I believe that immigration is generally a good thing. Some of the more strident voices I've heard against immigration seem to view them all as nothing but a drain on society. This is preposterous. Even if immigrants are payed in cash, under the table, they are still part of the economy. Every tank of gas they buy is taxed. Every bag of groceries they buy is taxed. Every piece of furniture? Taxed. And every time they patronize a store or restaurant they are supporting the economy. So while illegal immigrants may be contributing less than those here legally, they are far from leeches sucking the life out of the country. Like most things, this controversy would do well with some level headed, logical compromise and a lot less emotional rhetoric. Of course in an election year that's about as likely as Limbaugh voting Democrat.