Friday, October 28, 2011

The bogus issue of wealth and income disparity

Income disparity has grown in America over the last few decades.


So what?

Obviously some people have more wealth and make more income than others. That is not in dispute. Here is the real question. So what? What exactly are we to do about it? Should we do anything about it at all? Why do some people think that the government has the right and obligation to even the playing field or redistribute income from those who earned it to those who did not? The government has no obligation and frankly no right under the Constitution to mandate a certain acceptable level of wealth or the appropriate difference between the richest 1% and any other citizen.

This is an important issue because I can already see that President Obama is clinging to class warfare and appeals to envy like a drowning man. When all else fails, the Left always pulls out the class card and whispers of the unfairness that the guy over there makes a dollar a year more than you do. With one exception there is always someone in America who earns more, who has more, than any other given person and appealing to entitlement and envy has been a political winner for the Left forever. The “Occupy Wall Street” hordes are playing right into this by publically protesting against “greed”, an easy target, while their so-called solutions are toxic to most Americans. The irony of the middle and upper class children of a privileged upbringing protesting against the very system that has provided them with easy and comfy lives for most of their existence, the entertainment they demand and the ridiculously overpriced educations that they borrowed enormous sums to finance is lost on most of them, so caught up are they in their own self-righteous indignation.

The truth is that in any free society there will be disparity. In fact that is true even in controlled economies and totalitarian societies. In the Soviet Union the party bosses were at the top of the food chain and lived lives of privilege unimaginable and unattainable by the rest of their comrades. There will always be a “1%” that is better off than the other “99%”. The question is what determines the population that makes up that 1%: hard work and success or government bureaucracy and totalitarianism.

The other issue is that people who are the wealthiest have also created an enormous amount of economic benefit for those on the bottom rungs of society. Let’s look at an example. Bill Gates founded Microsoft in 1975 and through the decades since he has become one of the wealthiest men in the world. He is one of the “1%”. He might be in the top 1% of the top 1%! Of course he also gives away enormous sums in charitable giving but that is irrelevant to this conversation.

The company gates co-founded, Microsoft, also employs 90,000 people. 90,000. Many of those jobs are low skilled jobs but an awful lot of them are very high paying, great benefit jobs. Microsoft has created hundreds of billions in wealth via profits. Much of that wealth has gone to Mr. Gates but a lot of it has also gone to the employees and shareholders of Microsoft. Most people with a 401k plan probably hold a number of mutual funds that invest in Microsoft and have reaped the benefits of its profits. Companies like Microsoft, created by an entrepreneur and growing into an enormous company that in spite of the various flaws of Windows have made personal computing available to virtually everyone in America and billions of people around the world. The entire personal computer industry as it exists today can be traced back to Bill Gates and he has reaped the profits. Should Bill Gates be punished because of his success? Would we rather that people like Bill Gates just worked in a factory rather than being innovative risk takers? What about the Walton familty? In the 80’s and 90’s Wal-mart exploded in size and the Walton family reaped enormous benefits. Sure the Walton heirs are incredibly wealthy and Sam Walton was the richest man in America for many years but Wal-Mart also not only provides low cost products to hundreds of millions of consumers, it also employs 2.1 million employees worldwide. Think about that, over 2,000,000 employees, most of whom are low or no skilled service industry employees, that can trace their jobs back to the hard work and risk taking of a man, Sam Walton, who became supremely wealthy and rightfully so.

Even if we assume that rectifying income disparity is a legitimate function of the government, which it is not under any rational reading of the Constitution, there are two ways to address the issue. One is to seize, under threat of imprisonment, the generally hard earned income of the most successful among us, those who have often taken enormous risks to start a business or invest in an education. This method punishes the achiever and rewards the non-producers and the risk averse among us. This method is designed to encourage “fairness” but instead is more likely to reduce the overall wealth in our society by punishing achievers and quashing risk taking.

The other option is to take steps to encourage risk taking (real risk taking, where failure has consequences and the government is not going to bail you out) and investment. A strategy designed to facilitate the expansion of wealth so that more people have an opportunity to achieve. This strategy makes sense and has proven successful in the past but it is unpopular because it means that ultimately people are responsible for themselves and some people will end up being more successful than others.

We will be faced with two visions next November. On the one hand is a vision we see on display already in America, a vision of punishing achievement and rewarding failure, both on an individual level and an institutional level. A vision that has dominated our political discourse for decades, under Republican control and Democratic alike. The alternate vision, the vision I believe set in place the foundations for our prosperity that we have been trying to undermine for a long time and is in the spirit intended by the Founders of a system of limited government, would create an environment where hard work, risk taking and entrepreneurial spirit is permitted to flourish. The government cannot make people entrepreneurial, it can only hamper that spirit. The government cannot create wealth, it can only shuffle existing wealth from one person to another. The government cannot create jobs, it merely replaces private sector jobs with public sector ones. For far too long we have turned over our lives, our economy, our daily bread even, to the government and with each passing year it becomes more obvious that the government is not the solution, it is the problem. Our greatest challenge, the number one factor that is endangering our economic future, has nothing to do with the richest 1%, it has everything to do with the size and scope of the government, a government that creates crippling regulations, convoluted tax codes to reward favored industries and companies, borrows money and makes untenable economic promises with the intent of letting future generations pay the bill and generally makes individual Americans into members of a dependent class that is capable of little other than holding out our collective hands.

Is there income disparity in America. Of course there is, just as there is in every civilization that has ever existed or that will ever exist this side of eternity. Is the gap getting worse? Yes. The solution has nothing to do income redistribution but instead is centered on shrinking the size and scope of the Federal government, empowering up the free market by staying out of its way, encouraging investment and reasonable risk taking and making people responsible for their own prosperity. Unless we are willing to do that we are headed for a mess that will make the current European crisis look like the proverbial walk in the park.

Monday, October 24, 2011

Ironic

Many Republican voters won't support Ron Paul because they say he is an isolationist, unwilling to commit U.S. troops to foreign conflicts. Then you read something like this from the Wall Street Journal...
Mr. Paul draws a large share of his support from the military. The top three employers listed by his third-quarter campaign contributors are the Air Force, Navy and Army.
So apparently the people who actually have to fight in the wars other Republicans are so eager to engage in make up a large share of Ron Paul's supporters. Maybe that should tell us something.....

Tuesday, October 18, 2011

I can has jobz?

For all of the talk that comes out of Washington on both sides, the reality remains the same. There are too few jobs for the people who want work, at least too few full-time, permanent jobs. Worse, there is no plan to fix it and I suspect there is not really a plan being proposed that will work. This is especially true among men without college degrees. Why do young men without a college degree have such a hard time finding career type work (as opposed to transitory jobs, i.e. working in a factory rather than working in fast food)? Is the problem a lack of government spending? Or is it a wage environment that makes hiring these men to do what amounts to unskilled work too expensive? Is the underlying problem that we have priced unskilled labor, the kind of work young men right out of high school used to transition into that has now disappeared, out of competitiveness? American consumers, the vast majority of whom are precisely the sort of middle- and lower-class Americans who have a hard time finding a job, demand cheap and plentiful consumer goods. To produce those goods in the quantities and at the prices demanded by consumers usually means that the products must be produced overseas. We have created a vicious circle where the very consumers who demand constant, cheap consumption cannot find work that provides a sufficient wage to satisfy their demand.

Americans are victims of our own affluence. Our demand for cheap goods and services coupled with our expectation of a certain wage level has driven many unskilled jobs that formerly were in America to locations overseas. It is easy to rail against evil and greedy corporations for doing this but what drives them to move jobs overseas is the demand for cheap consumer goods. Making consumer goods in America requires paying more and it just is not the case that American consumers by and large have shown a willingness to pay a premium for “Made In America”. Sure we talk a big game about it but look at a Wal-Mart parking lot and you will see that talk is cheap until you have to swipe your debit card. The combination of minimum wage levels that artificially inflate the wages of the least qualified workers, unionization which has dramatically escalated the cost of hiring blue collar workers and the flooding of women into the workforce that dilutes the demand for labor has led to a situation.

The result is found in the inevitable situation we are in. As the world shrinks and it becomes easier to mass produce in low labor cost countries and transport those goods to the more affluent market, it was inevitable that we would arrive at this situation.

Thus we have the foolishness and hubris of the “Occupy Wall Street” folks. What is happening here, and in pitiful assemblies in cities around America, is not a representative demonstration of the “99%” but rather a very small, very radical fringe on the Left. They have succeeded thus far in framing the “protests” as an uprising of 99% of Americans against the evil and greedy successful people when in reality they not only do not represent “99%” of Americans, they don’t represent even a majority of Americans but rather a very small, radical fringe. The Wall Street Journal reported on an informal survey of the protestors and the findings are about what I expected.
The protesters have a distinct ideology and are bound by a deep commitment to radical left-wing policies. On Oct. 10 and 11, Arielle Alter Confino, a senior researcher at my polling firm, interviewed nearly 200 protesters in New York's Zuccotti Park. Our findings probably represent the first systematic random sample of Occupy Wall Street opinion.

Our research shows clearly that the movement doesn't represent unemployed America and is not ideologically diverse. Rather, it comprises an unrepresentative segment of the electorate that believes in radical redistribution of wealth, civil disobedience and, in some instances, violence. Half (52%) have participated in a political movement before, virtually all (98%) say they would support civil disobedience to achieve their goals, and nearly one-third (31%) would support violence to advance their agenda.
Perhaps most disturbing was the stat that almost 1/3 of those informally polled were OK with the use of violence to achieve their “goals”. The gentlemen I have seen look perfectly capable of hooligan violence, i.e. tossing a garbage can through a store widow, but just as likely to wet themselves in the face of actually violence. The rumblings of this have been building for some time in the far Left violence at the meeting of various world economic conferences (like the G-8) and in some places in Europe as a reaction to the austerity measures being forced upon the most indebted nations. We are standing on the precipice of a very dangerous cliff but the various left wing causes being championed by the Occupy Wall Street crowd are likely to exacerbate the problems rather than alleviate them.

There are really only two ways to approach this economy with its utter lack of job creation. One is for the Federal government to tax and borrow enormous sums of money that will be used to “create” or more likely retain jobs, most of which will be in the public sector. The canard that Federal spending will go toward “shovel ready” jobs in the private sector has been shown to be false. The stimulus spending we already tried went largely to unionized public sector workers, in essence a tax payer funded payback to the public sector unions that overwhelmingly support Democrats who in turn seek to increase the number of public sector union worker who pay union dues….you get the picture. The other is for the country to swallow hard, prepare for some lean years and do everything possible to make the environment for hiring, investing and expanding as attractive as possible. There are no quick fixes here. Writing yet another check being cashed against the tax dollars of future generations is not a solution. We need genuine leadership and it is pretty clear we are not going to get that from the current inhabitant of the White House.

Tuesday, October 11, 2011

America's Unhealthy Love Affair With The Military

America was founded by people who had a healthy suspicion of a standing military. Many of the articles in the Bill of Rights had their genesis in the tendency toward corrupt rule by a government with a standing army, including mention of civilian militias in the Second Amendment (the best protection against a tyrant is an armed citizenry) and a specific article outlawing the quartering of troops in private homes in the Third Amendment. It is almost unthinkable today that the Third Article of the Bill of Rights, right after the protecting of freedom of speech, religion and assembly and the protection of the right of private citizens to be armed, is a protection against the excesses of a standing army. Of course we don't have soldiers being quartered in the homes of private citizens anymore. We just have hundreds of military bases around the world housing hundreds of thousands of soldiers at enormous expense paid for by the seizing of tax money from...private citizens.

Prior to the start of World War II, the United States military was barely a blip on the radar, smaller than many minor players in Europe. Some may argue that our relatively weak standing military was a provocation for Japan to attack what perhaps they saw as a toothless tiger. They quickly learned, as did Nazi Germany and fascist Italy, that poking the sleeping giant gets you stomped. The huge military build-up in the years leading to Pearl Harbor and then in the post Pearl Harbor entrance of the United States is remarkable. America at that time was uniquely suited with industrial capacity, a large population and a self-sufficient food supply to go from a military also-ran to an unstoppable fighting force. Furthermore we don’t face that sort of wide scale pitched warfare anymore. Who would we go to war with? China, our largest lender (and we are their largest consumer)? India? Russia? There is not a realistic scenario where we would face the sort of massive mobilization on the horizon. Suggest that maybe we can afford to cut back on military spending and you will find yourself accused of undermining the troops and outright “un-Americanism”.

Our current love affair with the military goes back oddly enough to the end of the Vietnam War and the popular culture that surrounds the treatment of returning Vietnam veterans. The well known events of people screaming at, spitting on and otherwise mistreating soldiers who by and large had been drafted into the war against their will is an ugly stain on our cultural history. I don’t know of anyone who is proud of those events outside of a few relics of the hippie era on the campus of some universities. Even if they are proud of that behavior they generally have the common sense to keep their mouths shut.

Today and really since the first Gulf War (perhaps even back to the Reagan Presidency) the attitude in America has changed. Today the military is revered above almost any other public institution by most Americans. “Support our troops” is assumed by most people. Citizens thank uniformed serviceman in public for their service. In an age when most public institutions are looked at with suspicion if not outright hostility (governments, schools, churches, sports, doctors), the military sits alone on a pedestal. Along with that comes with political cover that prevents any discussion of reducing the size and scope of our military or restraining military spending. In an era of record setting crippling deficits, cutting military spending is virtually off the board. Mitt Romney even called for increased military spending in a speech last week without a hint of where the money would come from.

The reverence for the military is understandable. With the death of the “Greatest Generation” of World War II vets and the near constant service of so many men and women in the years following September 11th, it is little wonder that the military holds a unique place of reverence in America in a time when few of our cultural pillars are unstained. How can one not see the young men and women in uniform in an airport, coming from or going to a new base or perhaps Afghanistan or Iraq and not be touched? However, this reverence has the potential for some serious problems.

First, the military budget. National defense is one of the few legitimate functions of the Federal government as something that is not realistically able to be handled by the states. That Constitutional function does not provide a blank check for military interventions and nation building. I have a hard time believing that the Founders would approve of a ten year war in Afghanistan. Given our trillions upon trillions of dollars in national debt that shows no sign of shrinking, we need to be willing to cut defense spending in a meaningful way. We can do so without putting our nation at risk and it is high time that the rest of our allies step up and shoulder some of the burden.

Second, a skewing of opinion when our troops are “in harms way”. When the military is in the field, we are supposed to rally around the flag and support them, no matter what. Questions about whether or not we should be engaged in a theater of operation is virtually forbidden and suggestions to that effect invariably lead to charges of “not supporting the troops”. This attitude quashes legitimate questions. A decision to put American troops into combat is by far the most critical decision a President can make and that decision needs to be open to discussion. That means that neither blind support nor blind opposition to any military action is a sign of a health republic.

Finally, although this seems unlikely, it should worry us that we have a huge and often politicized standing army in our midst. Too often around the world the government has seized power beyond its mandate by using the military. Of course that wouldn’t happen here, right? Almost certainly not but we are also facing a great deal of social unrest, discontentment, extended unemployment and almost certainly huge cuts to entitlements and benefits people expect from the Federal government. Never underestimate what fear and uncertainty can do to a populace and never underestimate what steps those in power will take to stay in power.

Americans should absolutely respect the service of those who serve in the military and remember the sacrifices they have made. We should also remember where we came from and remember that the military is for our national defense, a mandate that it has been called to exceed for my entire life. Likewise we should recall that the military is part of the government and that we should always pay attention to how it is run, where it is sent and how it is funded. The military is not and must not be above reproach or examination and we need to keep that in mind. Honor the troops but be realistic about the military.

Friday, October 7, 2011

Enormous deficits? Unending wars? Spend MORE on defense!

I am gradually coming to terms with the reality that Romney is likely to be the nominee. The way Rick Perry fizzled means he is virtually out of contention a month after he got into the race as the instant front-runner. Ron Paul gets ignored consistently by the media and is not enough of an interventionist for the rank and file GOP voter. The rest of the field is fading fast. The fact that Herman Cain, who is a solid conservative but not likely to win the nomination, is getting so much attention tells you that the GOP base is looking for someone other than Romney but in the end I think he is going to end up being the nominee. Today he gave another speech, this time in front of a crowd at the Citadel where he called for additional defense spending...
Mr. Romney proposed a big increase in naval shipbuilding, to as many as 15 new ships a year from the current rate of nine, as well as the deployment of a full national ballistic-missile-defense system.
How exactly are we going to pay for that? Borrowing money from China?

Here we see Romney's biggest flaw. He is a chameleon. In front of a pro-military audience he is a defense hawk. Unlike Ron Paul (Air Force, 1963 to 1968) and Rick Perry (also Air Force, 1972-1977) who actually served in the military, Romney has no uniformed service experience but when faced with a military audience he is all about spending more on the armed forces, especially the Navy (where we already hold an unbelievable advantage over the rest of the world, see here ). This was clearly a speech that was as much about drawing a contrast with his rivals, chiefly Ron Paul who is not mentioned by name but clearly in view, as much as about contrasting himself with President Obama.
He also appeared to take swipes at some of his GOP rivals, who have argued that the U.S. should concentrate above all on controlling spending and rebuilding the U.S. economy.

"We should embrace the challenge, not shrink from it, not crawl into an isolationist shell, not wave the white flag of surrender, nor give in to those who assert America's moment has passed," Mr. Romney said. "That is utter nonsense. An eloquently justified surrender of world leadership is still surrender."

Mr. Romney said that, if elected, he would "reverse President Obama's massive defense cuts" on his first day in office, even though significant cuts in defense spending haven't taken effect under Mr. Obama. Romney aides said the governor was referring to projected defense cuts, most of which were part of the debt-ceiling negations that both parties agreed to in August.
The bogeyman of isolationism. The favorite slur of "conservatives" when confronted with even the suggestion of cuts to defense, as if modest cuts in defense spending would cripple the American military. As I pointed out in a prior post, The Most Sacred of Conservative Cows, many conservatives are all about cutting spending excpet when it comes to the military.

If we are going to have a serious conversation about reducing the national debt, military spending must be on the table. America can no longer afford (and honestlynever really could) to be the world's policeman, spending hundreds of billions a year on a military that does very little that is national defense oriented. It would be nice if the media gave more air time to Ron Paul who is alone in the major candidates in talking about this issue. We clearly are not going to get a serious conversation from either Obama or Romney....

Monday, October 3, 2011

We're not sure what we are protesting but by golly we are awful mad about it!

In the "empty and futile gesture" category we have the knuckleheads "occupying Wall Street", a motley crowd that doesn't seem to know what exactly they are protesting against or what they want. "We're mad as heck about...about...well about something Important and we are Protesting!", even if protesting looks a lot like "squatting" or hanging around instead of looking for gainful employment. Look at this pic, you can tell these people are being repressed by The MAN, just look at these brave protesters. They are reduced to updating Facebook OUTSIDE!

Here is one "protester" making known her...um, demands?
Erin Larkins, a Columbia University graduate student at who says she and her boyfriend have significant student loan debt, was among the thousands of protesters on the bridge. She said a friend persuaded her to join the march and she's glad she did.

"I don't think we're asking for much, just to wake up every morning not worrying whether we can pay the rent, or whether our next meal will be rice and beans again," Larkins wrote in an email to The Associated Press. "No one is expecting immediate change. I think everyone is just hopeful that people will wake up a bit and realize that the more we speak up, the more the people that do have the authority to make changes in this world listen."
Boy, you would think someone working on a graduate degree at Columbia would be, oh I don't know, studying? Or at least be able to articulate just what they are protesting against because from the news report she apparently wants someone to provide more groceries and is not keen on paying back her substantial student loans. Forced to eat rice and beans? She is just like a Haitian orphan. You know except for the part about being a grad student at Columbia. Other than that she is just like a Haitian orphan! Good thing she is not going to school in an insanely expensive city like...New York...oh.

It is hard to take seriously someone in grad school at Columbia talking about economic justice. Oh the humanity that she is living frugally in college! That has never happened to any college student until just recently! We used to think that struggling by, eating cheap pizza and ramen noodles, was a part of the college experience and character forming. Now? Looks like those meanies on Wall Street are making college students eat rice and beans! This whole thing smacks of a bunch of spoiled children of privilege having a fit because the rest of the country isn't interested in funding whatever it is that they want them to fund. You know like Justice and stuff.

In Greece, a country up to its eyeballs in debt, mass protests including some violent ones greet any attempt to rein in spending as demanded by other nations that kind of would like to get their money back. You know, 'cause that is what you are supposed to do with loans. Pay them back. Anyway Greece is suffering through the effects of decades of unsustainable social programs and like most of the rest of Europe is finding out that you can't provide incentives to the population to not work without eventually having some consequences. Thanks to the instability of Greece and other European nations, coupled with the cruddy economy in America and worldwide, the markets are in turmoil and the job picture is muddled because companies don't like uncertainty.

So in America we are seeing the start of same thing. Groups of young pseudo-intellectuals talking about anarchy and fighting the power while posting status updates on the iPad they bought on credit they don't want to repay. State workers in Wisconsin and elsewhere demanding that tax payers fund their ridiculous benefit packages no matter what the cost. We have been riding high on borrowed money, at the Federal, state and household level for a long time and now that has dried up. That in turn has put the economy, job market, housing market, etc. in the tank.Can violence in the streets and general uprisings be far away? Few things are more dangerous than a violent crowd and almost nothing is more dangerous that an violent mob that has no idea what they are rioting about.

Only in America.

For some reason the "protestors" in New York remind me of this video...