Morning Fog

National Debt

"The National Debt and Washington's Deficit of Will" by Joel Achenbach is a pretty good look at issues surrounding our perennial national debt problem - how it develops, and the factors that make it so difficult to solve.  It's well worth reading.

As this article correctly points out, the real problem is more a political than economic one (politicians shy away from raising taxes); the long-term moral dilemma is burdening future generations; but the greatest danger of our failure to trim our profligate spending is that foreign governments and individuals may lose confidence in the solidity of our economy and stop investing in it.  All true, and worrisome.

To Achenbach's summary I would add three considerations he seems to have omitted.

First, although the problem clearly involves politicians who lack political will, there is good reason for their reticence.  That would be the voters, who by and large appear to believe that more and more government services can be had by paying less and less for them.  How can that fairy-tale mindset be altered?  Possibly through political leadership, as Achenbach hints, including better information efforts about what's at stake.  

Second, our political system for years has been dysfunctional when it comes to dealing with tough issues.  This has led us toward a lower standard of living and decreasing real incomes for a lot (let's say, a majority) of our citizens.  But the reality is that we won't deal with a problem until it gets into crisis mode.  That's why, for example, I have supported the changes President Obama has sought in health care reform, even while recognizing that much more needs to be done on the cost-control side.  Only a shock to the system is likely to jar it into action.

Last, Achenbach notes fears that foreign investors may quail at our failure to make difficult decisions.  That's possible, though wiser ones may rely, per my preceding paragraph, on our dealing with the problem just in the nick of time.  More to the point, the article ignores that for many investors, the political stability of the U.S. makes it an attractive place to invest even when there's noticeable turbulence on the economic waters.  This may give us a bit more margin than doomsayers predict.

The Commission headed by Erskine Bowles and Alan Simpson, which has been charged with making recommendations on the debt by December 1, has its work cut out for it, but it's not at all certain even its best suggestions will have any impact.  Those weak-willed politicians who created it adamantly refused to accept any binding commitment to implement its ideas. 

Why Zealots Seldom Help Their Causes (The Women's Equality Version)

In a "letter to the editor" of the Washington Post yesterday, Lynette Long, identified as President of Equal Visibility Everywhere (EVE) (q.v.), laments that "in this era of supposed gender equality, not one of the seven denominations of paper currency in circulation commemorates the achievements of a woman."

I think of myself as a pretty strong supporter of women's equality (enough so that I'm willing to cooperate in EVE's attempt to publicize itself a bit after its recent founding only last month), but I find this statement nonsensical.  A lot of people would take it as pettifogging pedantry.

Let's look at the context:  U.S. bills have indeed followed a very conservative path.  The existing denominations have all been around for years, and regardless of how we've changed them in small matters of design, each of them to my knowledge has portrayed the same historical figure since that denomination's inception.  Each of these personages steps right out of the decade when our country was formed, even if the importance of some of them might now puzzle some (Alexander Hamilton was the first Secretary of the Treasury).  So, there is a certain tradition here.

In that context, as my wife (herself a career woman, now retired) observed, "Who, exactly, would [Ms. Long] propose?"  Who indeed?  Should we put Molly Pitcher -- whose historical importance could hardly be compared to Franklin's -- on a bill, or is Ms. Long thinking in terms of modern figures, perhaps an Eleanor Roosevelt, a Margaret Chase Smith, or a Tina Turner -- all of whom would certainly appear more than a little out of place among those colonial-era guys with their powdered wigs. Either way, it projects a risible image -- I'm reminded of another woman I knew some years ago, a strong femininist who even in the workplace, would interrupt policy discussions to frown verbally on such usage as "mankind" and "manpower," then wondered why she wasn't taken seriously as a professional.

Could we alter our approach to our currency, and issue a new series entirely, with a whole new set of portraits?  Yes, we could, and in that context, certainly, we could consider what woman (or women) might be so honored; also what African-American, what blind person, what gay person, what Hispanic, and so on.  The possibilities are endless, and unfortunately so are the possibilities for disagreement, rancor, and divisive controversy.  It's something we don't need just now but in the long term, it may provide an answer.  What if we decided to ussue a new series of currency every 25 years, so that more people could be represented, but no one's presence on a bill would be taken as eternal?  Maybe our first woman President, who will be elected in about six years, could take this up.

Meanwhile, though, I have to note with sorrow Ms. Long's careful wording regarding "paper" currency.  Obviously, she wishes to avoid the subject of coins, but that's really too bad for her cause, for two reasons.  First, coins have exhibited more flexibility regarding their design; we've had the Eisenhower half-dollar, the Kennedy half-dollar, and now the no half-dollar; coins also were the first to depict a woman (Lady Liberty?).  Second, as Ms. Long must be aware, women have been represented on the nation's money in the form of Susan B. Anthony and Sacajawea, both on dollar coins.  Neither was a big success, but no one (except perhaps a fanatic) could argue their failure depended on whose picture was on them.

In fact, those failed dollar coins represent something Equal Visibility Everywhere ought to be celebrating -- that efforts have been made, as chances arise, to place a female portrait on U.S. currency.  To me this reflects an important historical reality that is a far better lesson for our sons and daughters than seeing an anachronistic likeness of Helen Keller on a dollar bill would be -- that over time, things can and do change for the better.  Thanks to the efforts of many generations, women really do have far more equality than they once did.  That's a message of hope and human spirit that would be lost if we boot old Ben Franklin out of his coveted spot on the hundred-dollar bill.  

Financial Reform Ahead

Some random observations on the recent news about "financial reform:"

Here as in health care, reform is needed. New news of excess and shadiness continues to bubble up daily.  Only the banks themselves (or some of them) fail to acknowledge this. 

Perhaps it is true, as analyst Steven Pearlstein asserts, that the whole structure of the market has changed from a focus on "raising and efficiently allocating capital for businesses and households" to reaping profits from high-frequency trading and sales of purely speculative instruments.  Bankers have said that if the profits so realized are taken out of the financial system, there will be hell to pay.  But those profits represent no real growth of the value of anything; building a nation's financial system on them is like constructing your house on a foundation of those airbags shipping companies use to fill empty space in a box. 

The politics of the situation can't be ignored.  It's tantalizing to watch nervous Republicans, with one eye on the Democratic initiative and the other on the "tea party" movement, charging one way and then another on the issue, like a bunch of sheep or cattle being driven into a corral and finding no way out.  Unlike their opposition to health care reform, in this case they haven't yet found the right hook on which to hang a tissue of semi-truths and outright lies that would appear convincing.  Talk of "bailouts" hasn't caught on; apparently the public isn't dumb enough to be led down that path.  Could this become the issue, the one we've been waiting for, on which Republicans and Democrats vote together, if not work together, to produce legislation that will be popular all around?

More politics:  Is it purely coincidental that the Obama administration decided to break this issue into the public domain, rather than continuing to work behind the scenes out of court to pursue some type of arrangement with Goldman Sachs and other big banks?  Almost certainly not; clearly the opportunity to whip up some public outrage to get new regulations in place was overwhelming.  It matters not whether the government wins or loses its case; that decision could be years away but the effect occurs now.  Like the GOP, big banks may have thought they could stonewall against reforms they don't like, but they may have even outdone the Republican Party in the degree of their failure to read the tea leaves correctly.

Whatever bill is passed will almost certainly have some of the drawbacks of which bankers and financial professionals are warning:  unintended consequences, loopholes, some loss of traction among the big financial powerhouses, declines in their stocks.  Not just banks, but some investors, "little people" who have bank accounts or pensions, may be hurt in various ways.  That unfortunately is the nature of our political dynamic; Newton might say that every excessive action has an even more excessive and opposite reaction.  It could be avoided is the excesses were avoided in the first place.  In any event, setbacks to banks will be temporary, until they figure out how to game the new rules. 

Finally, speaking of the legal soundness of the government case, reports yesterday noted that a couple of SEC officers had counseled against proceeding, on the grounds that the evidence of lawbreaking wasn't strong enough.  My question:  Were these the ones who were spending hours at work watching pornography, or were they the ones who weren't?  Maybe they just weren't paying attention.  

Oklahoma City Then and Now

This week marked the 15th anniversary of the Oklahoma City bombing, which can be "credited," if that's the right word, with truly imprinting the horror of terrorism on the American consciousness.  Nine-eleven, as we now call it, was worse, but Oklahoma City came first, and its effect was magnified because it occurred in the heartland, and maybe even because it wasn't the work of some foreign-born religious fanatic wearing a turban, but of a home-grown anti-government fanatic wearing a baseball cap.

Perhaps the event's domestic origins are the reason that it has become a touchstone and even, perversely, an occasion for celebration by groups of some political persuasions.  Former President Clinton's remarks about the dangers of incendiary language were an apt expression of concern about our current political edginess. 

Radio anger-peddler Limbaugh exaggerated his own importance by pretending to believe those remarks were aimed at him; he resorted to childish inanity (it was Clinton who was fomenting violence!).  He appeared reluctant to acknowledge that Timothy McVeigh, had he not been executed in 2001, would likely be a Limbaugh fan today (in fact Limbaugh's outraged response is understandable - he's been broadcasting nationally since 1988, so it's entirely possible that McVeigh was a listener before he decided to go bomb a building full of people.

McVeigh was in thrall to one of those wacko militia groups, and his bomb created a strong concern about the potential of those groups for violence.  In 1995, such groups were secretive, low-key paramilitary organizations playing their games in remote forests and plains.  One measure of the pernicious influence of talk radio and the willful fear-mongering of conservative politicians over the past decade and more is that many of the militia groups now seem emboldened to go public.  They (as well as more mainstream gun-rights organizations) were much in evidence in demonstrations this week around Washington DC which sought, apparently, in a climate in which the Supreme Court is busy ensuring that every American can carry a gun wherever he goes, to expand guntoting even more and to resist "government inferference." 

If they are ready to go public, they're obviously not afraid of retaliation or persecution, so the question arises:  what's all the shouting about?  Clearly, about something else - maybe shaping a political dialogue?  Maybe it's a good thing that they're out demonstrating rather than home cooking up plots, but some of these folks are the psychological heirs of McVeigh, and it only takes one or two.

Old King Coal

The latest West Virginia mining disaster has evoked the usual outcry about citations of the mine for safety violations, why isn't more being done to correct problems, calls to shut down the mine, and the like. 

Most of these protestations seem to me to miss an important point:  Mining is dangerous work.  Yes, no doubt a better safety regime -- laws with real teeth, more expensive technology, a stronger commitment from management -- could improve matters and save lives.  Why doesn't that happen?  How is it that the CEO of Massey can remain essentially unperturbed about the loss of 25, possibly more, lives, or about the company's moral responsibility to do more on safety?

It's a matter of economic assumptions:  Too many industries and power plants still run on coal; local miners and their families depend on the mines for their livelihood (and the wages apparently are pretty good); shutting down a mine for safety violations can disrupt large swathes of the economy both nationally and locally; and most important, coal's cost advantage as an energy source could disappear if too much were invested in safety, in environmental protections, and in making the mining and burning of coal really "clean." 

These are not matters that concern only coal-company executives, though.  Politicians from coal mining regions have, in my view, been too timid in pushing for changes -- for the same "economic" reasons stated above.  Do we hear Congressmen from those regions boldly calling for reforms except when there's an accident?  Not to my recollection. Do Congressmen from other areas push for changes and safety improvements as a matter of equity?  I haven't noticed that they do.  Both of them seem to fear that the repercussions of action could be worse than the loss of a couple dozen miners' lives.  The assumptions - some of them fostered by the coal companies - need to be challenged by those most directly involved; until that happens, change isn't likely.

A Taxing Experience

I finished up my taxes a few days ago and sent them in "electrocutionally."  What a long, complex process it can be, even if you don't have anything particularly complicated in your income picture.  I still do my own taxes (with the help of a tax program).  Some people think CPAs and tax lawyers are a big help, but a lot of the work is just in collecting and organizing the data, which your tax expert will mostly expect you to do for him.  The one year I took my taxes to one of these "pros" a couple of decades ago, he just took the numbers I gave him and plugged them into Turbotax.  Along the way, he made three errors in data entry, one transposing a $3,000 interest deduction into 300;  if I hadn't caught them, no one would have.  So I went back to doing my own taxes.

Every year at this time, millions of taxpayers think, why can't this all be made simpler?  It can.  And if it were, I'm sure the IRS would be happy -- less work, less paper, easier to detect fraud, and probably overall, greater revenue with less fuss.  But we all know it won't happen; Congress is not going to stop tinkering with the tax code as a way to influence behavior, provide benefits to specific industries or areas, and the like.

Politically, I doubt that it could happen, even if every Congressperson swore an oath to simplify tax laws.  Certain interest groups, industries, regions, all now have a stake in keeping the code the way it is, with all its little arcane, difficult-to-track bennies for them.  Another group has a different motivation to resist change:  A simplified tax code would put all those tax lawyers and accountants on the bread line; the empires of Turbotax and similar taxpayer programs would collapse.  

I use Turbotax myself; it seems accurate and saves a lot of calculation.  But I hit the wrong radio button to print out a copy of my forms and the program shot out 165 pages of thinly sliced tree ... which is where it comes to light that Turbotax itself may be part of the problem.  It seems that for nearly every IRS form, there's also a Turbotax worksheet, and some of them are pretty inane.  For each different charity you gave cash to during the year, the program will spit out, if you allow it, a three-page "worksheet" - a dozen charities means nearly 50 pages, none of which contain more than one number - the amount you gave.  Then there are the forms that print out with nothing but zeros - a depreciation schedule, when I don't have any depreciation (well, OK, at my age I do have depreciation, but not in my assets). 

This is just an effort to make the complicated look even more complicated, but it's one reason that the people and software companies that "help" you with your taxes will oppose tax simplification.

Rebels With A Cause

Virginia Governor Bob McDonnell has proclaimed April as "Confederate History Month" in Virginia.  As if the state really needed a month dedicated to the Confederacy.  Actually, in much of Virginia, including some of the western suburbs of Washington DC, every day is Confederacy Day.  As I've mentioned before in this blog, if you check into a hotel in the Richmond area, that little binder on the table highlighting "local attractions" is going to be full of the one thing notable about Richmond -- the Confederacy, the Civil.. er, "War Between the States," Jeff Davis - and literally nothing progressive has happened there since.

It's possible to argue, of course, that the Confederacy is a part of our history and shouldn't be ignored.  That's true in theory, but I think we all know that historians won't be trooping to the library this month to advance their understanding of the period.  What we'll get instead is parades, reenactments, and rallies seeking to stir up the "spirit" of the Confederacy and all it stood for - a kind of Rednecks in Revue.

McDonnell knows this.  But he's governing the way George Bush did, by promising bipartisanship right up to election day, and abandoning all pretense of it the day after.  And, as a Republican, he's reaching out in a subtle but absolutely calculated way to those least savory elements of the Republican base to whom the GOP has pandered for at least the past four decades.  Our last two Governors, both Democrats, refused to proclaim a Confederacy Month; the previous two, both Republicans, were happy to do so.

So maybe it's not such a serious development, just a harmless political game?  Maybe.  But when McDonnell also condones his Attorney-General's maniacal suicide attack on the U.S. Constitution (he passed a law declaring it illegal for Virginians to be required to buy health insurance, and now is pursuing this challenge in court), a Confederate History Month begins to look like part of a trend.  We can only hope that McDonnell and AG Cuccinelli spend April actually studying the lessons of the Confederacy and the Civil War, lessons they obviously missed in their schooling.

An Interesting Political Season

From all appearances, it's time to focus the political spotlight on electoral contests at the local level.  Indeed, there a number of interesting factors at work which promise to make Election 2010 both fascinating and unpredictable.  The key in each case is that incumbent candidates of both parties face challenges in primaries, or in the general election - usually for being too "centrist."   How those races shape up will tell us a lot about whether voters are really fed up with deadlock or not. 

In Colorado, Democrat Betsy Markey, a Democrat in a largely Republican district, is under fire after voting for the health care bill.  The Republicans are licking their chops at the prospect of winning the District back this fall, yet evidence that they can or will do so, at this point, is lacking - the outcome is anybody's guess.  In Arkansas, incumbent Senator Blanche Lincoln is challenged by the Lt. Governor, who campaigns on the idea that Lincoln is not liberal enough. 

And there are many other examples now, particularly of an incumbent being challenged in the primary by a member of his own party who -- unlike in "normal" times -- seems to have some chance of prevailing.   There's plenty enough ferment that some of the conventional wisdom may not prevail this time around:  the suggestion, for example, that fundraising success consistently determines winners strikes me as rather weak this time. 

Meanwhile, Robert Samuelson, who too often injects his political views into his economic analysis, has written an insightful consideration on the current state of politics with no economic angle at all.  The bottom line:  "The ultimate danger is that the poisonous polarization of elites spreads to the country at large."  Yes.

The Politics of Conscience

Time is short for writing today but this obituary of Jerald terHorst , former White House Press Secretary, is worth a look.  terHorst worked for President Ford and resigned when the latter pardoned Richard Nixon.  Dean Acheson is quoted here saying that the group of public figures who have resigned over matters of conscience is "the most exclusive club" in America.  Dean hadn't seen some of the things that we've seen since his time, but it's nevertheless true that such resignations are relatively rare. 

I don't count the juniors (typically some State Department desk officer) who resign because they disagree with a policy; they're often mere egotists, and in their youth they have little to lose - they might quit quietly, or they might quit very publicly, but they would have quit in any case. 

So, I refer to senior officials when I say "rare." It's also ironic that even when they do make news by bowing out, these men of conscience aren't always well remembered.  Does anyone remember terHorst?  No?  Well, maybe it's because he had only been in his job for one month when this occurred, so he had not had time to become a household name.  But even more prominent objectors can tend to fade into oblivion; I suspect that most people born in the 1970s or after won't recall the much more famous case from the same era, that of Attorney General Elliott Richardson, and the so-called "Saturday Night Massacre."  

The Tyranny Of A Bad Headcount

The U.S. Constitution mandates a census of the population every ten years.  At the time this idea was cooked up, our incipient government was probably hoping to document the nation's growth, while in today's world, many minds turn toward the billions of dollars in federal government funding that flows to states and other jurisdictions based on their populations as defined by the census results. 

However, one important result of the Senate is equally important in both in the 18th and 21st centuries -- the allocation of seats in the House of Representatives.  As populations in different areas ebb and surge, every ten years some states may hit the jackpot with an extra representative in Congress, while others will get hit with a reminder of their decreasing importance in the world.

A good theory.  The population shifts, but its representation in the country's political debates follows it in rough proportion. 

But does it really work as advertised?  As the current census progresses, without any real way of enforcing the warning that everyone's participation is "required by law," differences emerge.  As of this writing, the Chicago area is reporting 36% return of the census forms; Atlanta, 40%; while in states like Nebraska and Minnesota, returns are 60+%.  It will be interesting to see what final reporting percentages will be.  It's not surprising that, for a variety of reasons, urban areas are less likely to reported fully than rural ones.  The government is engaged in a full-fledged campaign to encourage people to fill out and return their forms, and in the end, adjustments will be made based on other factors too. 

Yet it seems inevitable to me that to some degree, rural areas will be better and more accurately counted than urban ones.  People in cities and in more densely populated areas need to consider the effects their failure to participate may have - but they don't.  Resource allocations are affected - perhaps that's why in Virginia, our urban areas can wait for years to get a stoplight installed at a busy intersection, while less populous ones seem to lack for nothing.

In political representation, the inequities of underreporting by the census are less pronounced.  It's a fairly blunt instrument, and one or two percent underreporting isn't likely to shift a Congressional seat.  (Meanwhile gerrymandering politicians are seeking to skew the allocation of seats on a different axis.)   

That works for the House of Representatives, perhaps, but in the Senate, the rigid allocation of two seats per state more than counterbalances the effects of the census in the House. Of course, this was the intended effect as the founders designed the system, but in their agrarian world, I doubt they ever anticipated the extremes that might evolve between, say a Wyoming and a California or Texas.  

with dwindling populations not only maintain but increase their relative power as population imbalances occur.  It was noteworthy that in the recent health care fight, the key Senators, both Democratic and Republican, who were in a position to hold up progress, demand special deals, and the like, often just happen to be from states with minimal populations:  Mitch McConnell's Kentucky, Bart Stupak's Michigan, Kent Conrad's North Dakota.  The majority is hostage to a minority. 

If we were to engage in an exercise to update our Constitution, the census would likely bite the dust as a relic of a different era.  I'm positive that in the age of Google there are better ways.