Thursday, August 21, 2014

Progressivism, What Is It? What Has It Done?

Progressivism is a broad political philosophy based on the Idea of Progress, which asserts that advances in science, technology, economic development, and social organization can improve the human condition. It emerged from the vast social changes brought about by industrialization in the Western world in the late 19th century, particularly out of the view that progress was being stifled by vast economic inequality between the rich and the poor, minimally regulated laissez-faire capitalism with out-of-control monopolistic corporations, intense and often violent conflict between workers and capitalists, and a need for measures to address these problems.

Progressivism has been the sweetheart dream of American Presidents, mostly Democrats, for more than 100 years, beginning with Theodore Roosevelt and Woodrow Wilson, and culminating with the most progressive of all presidents, Barack Obama. Progressive presidents have cherished the idea that more and more government control over the culture, economy, and society is just the prescription our country needs to develop to the apex of its good accomplishments.

Progressivism entered the vocabulary of Barack Obama through the teachings of Saul Alinsky, in Obama’s younger years in Chicago, when he and wife Michelle worked in Alinsky’s organizations promoting what was called “community organization. “ Present day conservatives call this kind of governmental thinking and policy-making, socialism. Let’s see what Progressivism has done to America, these days.

President Obama and Congressional Democrats have implemented the most massive expansion of federal regulatory authority since the Great Depression, manifested mainly by the Dodd-Frank bill, which regulates financial institutions and the Affordable Care Act, which regulates 1/6 of the economy through the health care system. Every Senate Democrat voted for each of those bills. No Republicans in either house voted for the ACA.

As is well known, the Obama recovery from the 2008 recession is the weakest in postwar WW II history. If the Obama recovery had been as strong as the average of the previous 10 postwar recoveries, 13.9 million more Americans would be working today and the average real per capita income of every man, woman and child in America would be $6,308 higher.

Since the Senate Democratic Class of 2008 took control, the average real income of the poorest one-fifth of American families has declined every year, falling to $15,534 in 2012 from $16,962 in 2008 (the 2013 data will be released Sept. 16). The average real income of the lowest quintile of Americans is now below the level it was in 1968, the year when the War on Poverty began its spending surge under Lyndon Johnson.

The next-highest income quintile, often referred to as the working class, has also experienced a continuous decline in real income since January 2009. The average income of these Americans has fallen 6.5% and is now $1,182 lower than it was when President Reagan left office.

The third quintile—America's middle class—has seen its average income decline to $62,464 from $65,672. More than half of this decline has occurred since the recovery officially began in the second quarter of 2009.

In Alaska, household income in 2012 was 7.2% lower than it was at the end of 2008, falling back to its 1988 level. In Arkansas, household income has dropped 8.2%. Colorado households have 13.5% less income than they did before the Democratic Congress and President Obama transformed America. The same is true in Louisiana, where household income has fallen 7.9%. And in North Carolina, household income has declined 10.2%—falling to the lowest level in the 28 years the Census Bureau has provided state-by-state income data.

Census data also show the progressive program has failed women and minorities. Married women, unmarried women and women living alone all saw their incomes fall. Under the Obama administration, the median income of women has fallen more during the recovery than it did during the recession, an unprecedented economic failure in postwar America.

The real median income of African-American households has fallen by 9.5%, more than any other major census classification. Hispanic income has fallen, especially for middle-income Hispanic families, whose income has declined every year since 2008.

The Democratic Party's great political victory in 2008 led to the realization of a progressive agenda in the making for a century. That agenda has resulted in economic failure for working Americans. It failed as it has always failed: Progressive policies buy votes but destroy prosperity. The entire Obama program is now endangered because their program has hurt the very people it was supposed to benefit.

(Much of this blog post was redacted from the Wall Street Journal of 8/17/14, an op-ed by Phil Gramm and Michael Solon.)

Saturday, August 9, 2014

Which Nation Belongs in the Land of Israel?

“That all men are by nature equally free and independent and have certain inherent rights, of which, when they enter into a state of society, they cannot by any compact deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property….” Virginia Bill of Rights 1776

During World War I, the Arab states had fought alongside of the Western Allies against the Central Powers, i.e., Germany, Austria-Hungary, Bulgaria, and especially against the Ottoman Empire. In return for their help, the Allies had promised the Arabs independence. Instead, at the Paris peace conference after the war, the Allies carved up the Arab lands formerly controlled by the Ottomans and gave it over to the administration of the French and British. Present day Iraq, Trans-Jordan, and Palestine/Israel were given to the British. The areas of present day Syria and Lebanon were given to the French. This outraged the Arabs.

When the British took over Palestine, their Foreign Secretary, Arthur Balfour issued the famous Balfour Declaration which specified that Palestine should be set up to house Jews and thereby win political support of European Jews. The Declaration stated, “Nothing shall be done which may prejudice the civil and religious rights of existing not-Jewish communities in Palestine.” Those “non-Jewish communities” were Arabs. The Declaration aggravated conflict between Arabs and Jewish nationalists. 

Since Roman times, Jews had dreamed of returning to Palestine; and, indeed, a small Jewish population had stayed in the area for all those hundreds of years, even after World War I. As anti-Semitism spread in Germany and Eastern Europe after that war, increasing numbers of Jews immigrated into the land of Palestine, bringing with them money and technical expertise. They bought farmland and established businesses and industries. All of this activity offended the much poorer Arab residents, because the Arabs were pushed out of their homes and jobs.

In 1948, Britain and the United States agreed that the land of Israel should be established as a Jewish state; Israel was designated an independent nation. This action stimulated mass migration of Jews from Arab states, Europe, and the United States. It also escalated the conflict between the Israeli Jews and their Arab neighbors. Since then, Israel has been continuously mobilized for war; and it has actually been involved in defending itself against aggressive Arab neighbors in seven shooting wars.

Despite all the adversity facing the nation of Israel, the country has prospered. The Israeli culture has produced a vibrant literature, pace-setting arts and six of the world's leading universities. A huge program of reforestation has been accomplished and is still developing. The philosophy and religion of Zionism in Israel has reinstituted the ancient language of Hebrew. The family values that Zionism has fostered have produced the fastest natural population growth rate in the modernized world and history's largest Jewish community. The average secular couple in Israel has at least three children, each a reaffirmation of confidence in Zionism's future. The population is annually rated among the happiest, healthiest and most educated in the world. Life expectancy in Israel, reflecting its superb universal health-care system, significantly exceeds America's and that of most European countries. Unemployment is low, the economy robust. A global leader in innovation, Israel is home to research and development centers of some 300 high-tech companies, including Apple, Intel and Motorola. The beaches are teeming, the rock music is awesome, and the food is of excellent quality.

Jews and Christians recognize a centuries’ long principle of Jewish hegemony over the land of Israel. It is attested to in the 12th Chapter of Genesis and in subsequent chapters. Abraham, the father of the Jews was promised this land by God, himself. The nation is named after one of the Patriarchs (Jacob). Jews strongly identify with this 4,000-year-long bond between themselves and their historic homeland. They have sustained this belief throughout 20 centuries of exile.

We return to our previous question, i.e., to whom does this land belong? For my part, I think Israel belongs to the Jews. It has belonged to the Jews through many centuries of exile. They have returned and converted the land into a prospering democratic republic, honoring the rule of law, property rights, and the dignity of individuals. All this accomplishment in contrast to the outright poverty and squalor of the Palestinian culture across the Jordan River.

(Some of this blog post was gleaned from an op-ed in the Wall Street Journal by Michael B. Oren, a former ambassador to the United States, written 1 August 2014.)

Sunday, August 3, 2014

85 People Own Half of the World’s Wealth!

"Princes or lords may flourish, or may fade;
A breath can make them, as a breath has made;
But a bold peasantry, their country's pride,
When once destroy'd, can never be supplied."
             Oliver Goldsmith 1728-1774 The Deserted Village

There has been great concern among lots of Americans that the government’s present course of redistribution of wealth, intended to reduce inequality in the country, will harm our nation’s financial status and growth direction. The fear is that taking money away from the rich will impair their ability to invest money and will impede real job creation. To a considerable extent, this fear has some truth to it.

On the one hand, it is common knowledge that inequality in world wealth is at an all-time high. There is also a fear that inequality is bad for our society.

Nicholas Kristof writing in the New York Times on 7/23/14 (An Idiot’s Guide to Inequality) (control+click) reports that the top 1% of people in the income distribution of our country now own more wealth than the bottom 90 percent. As a result of this maldistribution of wealth, it was found that in 2010, 93% of the increased wealth created in the United States went to the top 1% of our population who live in the upper economic levels of society.

 Oxfam estimates that 85 world citizens own as much as the bottom half of the world’s population! (Oxfam is an international confederation of 17 organizations working in approximately 94 countries worldwide to find solutions to poverty.)

There is a tentative agreement in the literature written by economists about growth that inequality can undermine progress in health and education, causing investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of major shocks, and thus that it tends to reduce the pace and durability of growth. Markedly unequal distribution of wealth also causes the wealthy class to seek rents instead of actually contributing to real growth (“Rent-seeking” is the practice of using wealth to create more wealth, without actually contributing to the stock of goods and services in the country.) This practice diminishes economic growth in the country.
It has long been known that lower levels of economic inequality are correlated with faster and more durable growth. So…governmental gurus who run the Treasury Department and the Federal Reserve always seek ways to redistribute wealth through fiscal and monetary means.

Modern-day politicians with a “progressive” viewpoint think that redistributing wealth by increasing taxes and government spending on roads, dams, and other infrastructure will help the underclass by giving them more money and, thus, stimulate growth. The problem with this idea is that the jobs created by government spending on such things do not last; and, in the end, they do not help with national economic growth. Only jobs created in the private sector will give long-term economic growth.

Writers at the International Monetary Fund point out that inequality may impede growth at least in part because it calls forth efforts to redistribute through the fiscal system, efforts that themselves may undermine growth. In such a situation, even if inequality is bad for growth, taxes and transfers may be precisely the wrong remedy. (control+click)

So much for the bad news. What is the answer to the inequality/slow-growth problem? The answer to this is very hard to say; and economists have wrestled with this question for a long time. It is the considered opinion of several that the answer does not lie in more governmental redistribution through the monetary and fiscal system. The answer probably lies in efforts to equalize opportunity rather than income.

Rather than dumping money into more roads and dams, I believe that the United States would do better to put more money into equalizing educational opportunities for our people. It is a fact that in America, the sharper edge of public funding for education still goes to the rich rather than to the poor. If our people would have less inequality in financial affairs, they must have less inequality in opportunity to advance themselves.  (control+click) That means they must be able to compete better as a result of better education.

Thursday, July 31, 2014

Ebola—A Hemorrhagic Fever of West Africa

The whole world is worried these days about the possible spread of a West African disease, Ebola fever. That fear is justified; many of the victims of the disease have died—about 50% of them in Sierra Leone and Liberia, at last count.

The disease is communicable from person to person. It is transmitted by touching, coughing, and eating contaminated foods. There is no specific treatment—only good nursing care. Careful means of avoiding direct contact with patients can prevent person-to-person contact and spread of the infection.

So far, in the present spread of Ebola in West Africa, three doctors working in the infection have contracted the disease.

The disease is one of 12 known hemorrhagic diseases. In West Africa, the ones that cause problems are yellow fever, Marburg fever, Ebola fever, and Lassa fever.

Ebola fever has five strains of the virus that is causing the problem. The one from Liberia and Sierra Leone is the most deadly of the five.

It is significant in looking at disease epidemics to realize several things: In the early stages when a society is dealing with a relatively new disease, the disease appears to have a much higher mortality rate than it subsequently proves to have. (Ebola is not exactly a new disease; it has been known since 1976 when it was first described in Sudan and Zaire. However, it has not been a large threat until very recently.) This is because only the most severe cases come to the attention of the public and the medical community initially—many of the new infections cause death; but later, the disease is discovered in patients who are only mildly ill or who might not even have any symptoms (They are carriers of the infection.)

 The other reason for the declining mortality from a new disease is that the virus evolves into a less dangerous infectious agent. From the disease agent’s (the virus’s) point of view, it is not advantageous for that virus or infectious agent to kill its victims. It is better from the point of view of the virus to infect victims and have them live to spread the infection to other people.  So…as a result of this evolution, less dangerous forms of the virus survive while the more deadly forms die out, themselves.

The last point to remember in the understanding of epidemics is that they have all mostly ended for no known reason. This has happened repeatedly in the history of the world’s epidemics, e.g., plague of the 15th Century. No effective cure for that disease was known then; but the disease quit causing epidemics, anyway; nobody knows why.

Friday, July 25, 2014

The Creeping Socialist State

Property rights and the rule of law are essential foundations for a vibrant economy. When they are threatened, or uncertain, the result is inefficiency, a larger underground economy, capital flight, and rent-seeking (the process of using one’s assets and resources to increase one’s share of existing wealth without actually creating new wealth).

In today’s creeping socialist state, individual rights to capital, land and the fruits of one's labor are threatened—in many cases redistributed from creditors to debtors, from those who don’t have political power (owner/managers) to those increasing in power (voters who do not own anything), and especially from young to old. And a much larger battle is looming.

Nine years ago the Supreme Court gutted the Constitution's "public use" restriction on eminent domain (Kelo v. City of New London, 2005), allowing local governments to take the property of some individuals for the benefit of others, especially private developers. So much for property rights!

The biggest future threat will be to the fruits of one's labor. The unfunded liabilities of Social Security and Medicare are now several times the national debt; the unfunded liabilities of state and local governments for pensions and other benefits are in the trillions of dollars and mounting. The panoply of other government programs nonetheless continues to expand. The result, according to Congressional Budget Office projections, is that federal spending will reach 36% of GDP in a generation. This implies that taxes will have to double from the current, near-historic average, 18% of GDP. All federal taxes will increase—on income, capital gains, dividends, corporate earnings, employer and employee payrolls.

As economic growth has slowed and the population has aged, the ratio of people receiving government benefits to those paying taxes has been rising rapidly. Social Security and Medicare are the two big government wealth-transfer programs. Spending on these two and other entitlement programs will gobble up bigger and bigger chunks of the federal budget. They are already crowding out defense.

There is a widespread belief that Social Security payments are due to the people in a legal, contractual sense. In other words, many Americans believe that the money they have put into Social Security will be paid back to them when they retire; and the government is obliged by law to pay them that money. Politicians feed this belief to the people; but it is false. As far back as 1960 the Supreme Court (Flemming v. Nestor) ruled that benefits can be changed by Congress at any time—and they have been. In the recent past, the age for collection of full Social Security payments has been raised from 65 to 67 years of age. Payments are coming later and less. The growth of retirement benefits will have to be slowed. The notion that people not yet born "own" Social Security benefits in the future is a fairy tale.

It seems likely that benefits for the more affluent among us will be reduced first by our government in an attempt to bring Social Security benefits into a situation where they are payable. To bureaucrats, it makes no sense to diminish the income of wealthy people through taxation in their most productive years, only to subsidize them heavily a few years later by paying them Social Security benefits. The government would like to simply keep the incoming tax money and diminish the pay-out of Social Security benefits. On the other hand, it seems unjust to the workers to take money away from them with the promise that that money will be used for their retirement and then deny those payments later when the worker needs the money.

Despite the recent hikes in taxes on income, dividends and capital gains, many on the left are clamoring for more: an 80% top income-tax rate and even a progressive global wealth tax with rates as high as 10%. This is exactly the wrong road to take. Such taxes will only discourage production, encourage black markets, raise far less revenue than proponents claim and—by curtailing capital accumulation—lower future wages and living standards. Over time, such rates would expropriate a sizable fraction of wealth.

Ultimately, behind this and other attacks on property rights is the notion that the government owns all income, leaving to you only what it doesn't demand. But as President Reagan said in July 1987, "working people need to know their jobs, take-home pay, homes, and pensions are not vulnerable to the threat of a grandiose, inefficient, and overbearing government." In particular, taxation "beyond a certain level becomes servitude. And in America, it is the Government that works for the people and not the other way around."

Someone has said, “A democracy will last only until the people learn that they can vote themselves benefits.” I greatly fear that the progressive philosophy being trumpeted by President Obama and the Democrat Party will sink this nation under the waves.

(This blog post was redacted from an op-ed by Michael Boskin, Wall Street Journal 7/16/14.)







Wednesday, July 16, 2014

How To Get Rich--Gradually

Nancy and I live in an “upscale” retirement community, i.e., a community that is somewhat more luxurious than most. As one might imagine, it is populated by people with more money than the general American population. As the national economy languishes in the sluggish recovery, the people here have noticed their net worth increasing steadily. Why is this? Why should rich people be getting richer while the average American is struggling economically? (There is something wrong with this scenario.) I will try to answer these questions in the following. But…for now, understand that the effect is basically because of faulty monetary and fiscal policies of our federal government.

Elderly people have always controlled an inordinate amount of the nation’s wealth; but the extent to which they are doing so at this time is ridiculous! Nevertheless, these people had nothing to do with the policies that caused this maldistribution of money. All they have done is to follow the admonitions of common sense personal money management, which I will outline below. These admonitions have been available to Americans for decades; and there is nothing new or innovative about them. Here is the clue to having more money as time goes on:

1)     Start early to save as much money as you can. Utilize individual retirement accounts (IRA’s) or 401(k) plans as recommended by a reliable financial manager. Someone has said that the greatest miracle in the world is compound interest. For instance, $1000 invested at age 20 at 4% interest compounded monthly will amount to $156,978.54 at age 65!

2)     Arrange to have automatic payroll deductions made from your paycheck. After you get accustomed to these regular deductions and accommodate your standard of living to your resultant money income, you will never miss the deducted money.

3)     Carry no credit card balances; pay off your credit card completely every month. Credit card interest is very high—often about 18%/year. Remember, interest should be to collect, not to pay.

4)     Live as if you are poor. Do not indulge yourself in luxury items, e.g., extra houses, boats, expensive vacations. You do not need them.

5)     Stay away from the mall. There are too many temptations there. And…do not ever respond to e-mail solicitations to buy anything you have not requested. You do not need them if you have not asked for them.

6)     Borrow only for a house, an education, or for a modest business investment. If you are borrowing money for an education, be sure that the resultant education can be applied to making a reasonably sure income. Borrowing money to study anthropology, music, history, or Bible studies, will never result in enough income to justify the investment needed. Never borrow to buy a car—if you cannot pay cash for a car, you do not need that car. Buy a house rather than rent, and do not finance it for more than 15 years. Pay off that mortgage soon, as a priority. 

7)     Take a course in retirement planning at the local community college.

8)     Start saving money for your children’s education very early in their lives. Be careful about locking money into plans that will not allow flexibility in subsequent use. It is very worthwhile to maintain absolute flexibility in all money you save.

9)     When your children go to college, be sure that they declare a major by the end of their first year in school; and do not let them change after that. Changing majors will waste valuable investment in college classes. Do not let your children vibrate around taking college classes for fun. Be sure they mean business in school. In addition, do not finance a student who is making less than a 3.0 grade point average or who is taking less than 15 credit hours per term. Do not let them waste time in college. Explore educational opportunities for your children that are less expensive than state universities, e.g., online learning or community colleges.

10)  Avail yourself of the services of a reliable and reputable financial counselor early in your life. Do not go to a counselor who sells securities or insurance. Pay him up front for his advice, but do not buy anything from him. Make that clear before you do business with any counselor.

11)  Do not buy nursing home insurance. Insurance plans for that potential need will tie up your money so that it cannot be used for anything else in emergencies. If you happen to be one of the lucky persons who never need nursing home services, all the money you have saved will go to the insurance company.

I believe that if the government would taper off the printing of money to pump into the pockets of the wealthy through Federal Reserve Bank bond purchases and let up on regulations to businesses, then the poorer parts of our population would be able to catch up to the gains being made by the rich among us.







Sunday, June 29, 2014

The Middle-East Problem—A World War I Legacy

I have been reading a fascinating book, Catastrophe 1914—Europe Goes to War by Max Hastings. This accurate and complete account of the First World War is worth reading for anyone interested in its history; I strongly recommend it all my readers.

The Wall Street Journal has published online in its monthly update for June 2014 a series of events, economic effects, personalities, and much more that have become the legacy of that terrible war. Below I have copied one, short article from that collection of essays, because it has such importance to us, today, i.e., the legacy that war has had on our present day problems in the Middle East. These problems began and are still being aggravated by the British “Balfour Declaration” of 1917.

“On Nov. 2, 1917, British Foreign Secretary Arthur Balfour sent a letter to Baron Walter Rothschild, a leader of the British Jewish community. Published in the Times (of London) newspaper one week later, the letter said: ‘His Majesty’s government views with favor the establishment in Palestine of a national home for the Jewish people, and will use their best endeavors to facilitate the achievement of this object.’

“The manner in which the nascent Jewish state was created by the British has had far-reaching consequences.

 "Confronted with the collapse of the Ottoman Empire as a result of the war, Britain and France signed an agreement to divide up the territories. This deal contradicted promises to local Arabs of self-government should they successfully rebel against the Ottomans.

“Realizing that the U.S., which had recently entered the war, didn’t look kindly on colonial land grabs, the British made a commitment to support a Jewish homeland in Palestine, something for which leading Jewish groups had been campaigning for since the 1890’s. The British hoped the declaration would get American Jews to pressure their government to allow Britain to keep control of Palestine after the war, valuable to Britain because it could secure the east bank of the Suez Canal, a waterway of strategic importance to its empire.

“After the war, Jewish immigration proceeded apace. Land was a major bone of contention. Settlers bought it, sometimes from absentee landlords living in Syria or Lebanon liquidating foreign assets, sometimes from local Arabs. Many of these owners, according to the British high commissioner in Palestine, John Chancellor, were so mired in debt to moneylenders that they had little choice but to sell.

“The settlers, wanting to farm the land they bought, then relied on British authorities to evict Arab farmers who would not leave. Evictions produced resentment, then attacks. The settlers created their own militia; Arabs responded in kind.

 “By 1930, Chancellor was calling the Balfour Declaration ‘a colossal blunder’ as the British found themselves trying to keep the peace between two increasingly bellicose communities. Eventually an Arab revolt broke out in 1935, which persuaded the British to try to restrict Jewish immigration.

“The end result was a Jewish revolt, secretly backed by the French, which led directly to the foundation of the state of Israel in 1948, and numerous Arab attempts to destroy it thereafter. Much of the animosity that has roiled this region for almost a century can be traced back to the policy-making and colonial rivalry immediately after the end of World War I.”