Restatement of principles

Prescript:  Please see Chris’ comment at the end of this post for a highly valuable critique and worthwhile alternatives to these specific recommendations.

This will probably make most of my loyal and patient readers angry, but this debate just goes around in circles and we’re not getting anywhere.  How do we get the federal budget back into something like balance (without relying on bubble prosperity)?  These are my positions, hate me if you will.  But until convinced otherwise, this is what I believe:

A) All reductions in federal spending and/or tax increases will initially be depressive to the economy;

B) We cannot possibly continue the way we are going;

C) It’s not just about cutting fat and building muscle, it’s about building the right muscle;

D) Efficiency and integrity are important, but the nature of government is such that fixing our fiscal problems through efficiency or reducing waste, fraud, and abuse is just not feasible;

E) It won’t get any easier by delaying and derailing.

So, here are my major positions:

1)  Cut defense spending by 50% over 10 years.  Preserve and enhance the most useful expeditionary, strategic, and special forces, and intelligence & surveillance..  Concentrate cuts in heavy conventional forces and overseas bases.  Consolidate common functions across services: R&D, intelligence, acquisition and logistics, medical and dental, civil engineering, legal, food service.  Anything that’s not green or blue should be purple.  Close almost all overseas bases, negotiate hosting arrangements with strategic and theater partners (so they pay the freight, while we supply the capabilities).  Put NATO and the UN on a per capita basis, time for the rest of the world to pay their own way;

2)  Means test Social Security and Medicare.  Americans who have 2X the median income from private sources do not need the full entitlement benefits these programs offer.  Benefits to be phased out entirely as the citizen’s independent income reaches 3-5X the median income.  The alternative offered by Big Government advocates is to reject means testing (ie; protect the programs as they currently exist at all cost) and raise the withholdings ceiling (grow government).  I reject that, just as I reject the “I paid for it and I want it” claims of prosperous seniors;

3)  Leave federal income tax rates as they are, eliminate almost all deductions except a modest personal residence interest deduction (private home ownership is a common good).  Establish new tax rates for incomes above $1,000,000 per year (~45%) and income above $10,000,000 per year (~70%).  It is utterly insane to tax a mid-career OB/GYN at the same rate as a hedge fund manager.  One objective is to move 500,000 tax practitioners (lawyers, accountants, lobbyists, etc) to gainful employment in the tradable sector.

4)  Send 70% of American high school grads to vocational training programs or apprenticeships.  Based on objective criteria, select 30% of high school grads for college, with at least half going into STEM degree programs.

5)  Amend the Constitution to require a balanced budget over each rolling three year cycle, with a provision to suspend the requirement: a) if the nation is in a state of declared war, or b) for one year, on a two-thirds vote of the House.

As I write this, I am absolutely confident that the above would be a great start toward putting America back on a path to sustainable prosperity.  I also know that it would be political suicide for any candidate to propose this program, although some courageous soul may try.  That’s why I enjoy being a blogger.  Without a campaign to attend to, I can say what I believe.  And this is what I believe.

G’day all, and may God continue to bless America!

My best pasta ”EVAR”!

Special note: I swear, this is the best pasta sauce I have EVAR had, bar none.  Serve on a wide pasta to embrace the chunky sauce.  A red wine might be nice, but my wife and I had the white wine leftover from the recipe.

A meat sauce for pasta.  This is an addition to my “feeding your family and/or friends for cheap” series, soon to be out on DVD and BluRay (not really, but it sounds good, eh?).  The pork for this recipe cost $6, the can of tomatoes cost $1.25, the box of pasta cost $1, the bottle of wine cost $2 (Trader Joe’s), the mushrooms cost $2.  Okay, call it $20 to feed four, and that’s with a glass of wine each (milk for the kids).

Regarding the salt, depending on how salty the beef base or bouillon is, you can reduce the added seasoning salt, or possibly eliminate it altogether.

This recipe feeds four as a main course.

Ingredients:
1.5-2 cups finely chopped (1/4”) mirepoix
2 tbsp tomato paste
1 tbsp minced garlic
1.5 cups dry white wine
1 tbsp cornstarch + 3 tbsp dry white wine
1 cup milk (2%, or your choice)
1.25 lb coarse ground extra lean pork
½ lb mushrooms, diced ½”
4 tbsp EVOO
1 14.5oz can petite diced no-salt added tomatoes
1 tsp beef base or one beef bouillon cube
1 pat of butter
large bay leaf
sprinkle red pepper flakes
2 tsp Italian herb blend
1 tsp Kosher or sea salt (adjust to taste)
½ tsp ground black pepper

Heat a 5-6 qt enameled Dutch oven to med or med-hi, add one tbsp EVOO and half the ground pork.  Let the pork cook till lightly browned on one side, flip it over and begin gently breaking it up.  You want to end up with pieces that are smaller than bite sized, but not “crumbled to dust”.  When done, remove to a separate bowl and repeat with the second half of the ground pork.  When all the pork is browned and set aside, let the remaining oil cook a bit to cook off any liquid released by the pork.

Add enough EVOO to the Dutch oven to lightly coat the entire bottom, then add mirepoix.  Cook and stir as you normally would to release liquid and soften vegetables.  When nearly done, add the 2tbsp tomato paste, the red pepper flakes, and most of the salt and blackpepper (reserve some to adjust seasoning at the end), stir vigorously to combine, and cook/stir until the tomato paste begins to darken.  Add the minced garlic and cook/stir until fragrant.  Add the tomatoes, stirring and using the tomato juice to deglaze the Dutch oven.  Add the wine, beef base/bouillon, and Italian herb, returning to a simmer.  Add the milk and mushrooms, again return to a simmer.

Now here’s the hard work of this recipe.  In a shaker-mixer thingy, make a slurry of the cornstarch and 3 tbsp dry white wine.  Using a slotted spoon or a strainer, remove all the meat/vegetable solids to a separate bowl, leaving the sauce liquid behind.  Bring the sauce liquid to a boil, stirring to loosen any stuck bits, and estimate the volume of liquid needed to form a sauce with the meat and vegetables.  Reduce by boiling and thicken with the cornstarch slurry to achieve the right volume and consistency of sauce liquid.  Add the pat of butter and melt into the sauce.

Now, return the meat/vegetable mixture to the sauce liquid, stirring to combine.  Return to a simmer, taste for seasoning and adjust as necessary.  Cover the Dutch oven and put in a 250F oven for 0.5-4 hours.  Serve on a wide pasta like fettuccine, pappardelle, or torn lasagna.

Slavery in the United States

I’m highly apprehensive in taking on this topic, but I must.  I am drug into addressing this issue by the current, and otherwise completely unrelated, debate raging in America regarding the future of this nation.  On one side, Progressives and some liberals argue in favor of an expanded role for the federal government, with a growth in federal government (and a need for additional revenue) an inevitable result.  On the other side, Conservatives argue for a Constitutionally limited role for the federal government.  This battle is epitomized by the impending Supreme Court battle over the constitutionality of the “individual mandate” of the Affordable Care Act.  The Progressives hold that the federal government has unlimited power to do whatever it wants, the Conservatives argue that the Constitution imposes specific limitation on the power of the federal government.

So what does slavery have to do with this?

When confronted with a reasoned and articulate argument in favor of the original intent of the Founders to limit the scope, function, and size of the federal government, the first and last resort of Progressives is to play the “so you want to bring back slavery!” riff.  Other than pure blind hatred of anyone who disagrees with them, the thinking seems to be that if an American supports the original intent of the Founders in a limited federal government, that equates to a desire to reinstate slavery.  Kind of like, a person believes in state-provided single payer healthcare, they must support Cuban Communism.

So let’s look at the issues.  Does the original intent of the Constitution require or expect the existence of slavery, or support the continuation of slavery?

Great Britain established chattel slavery of Africans throughout their New World colonies long before the United States of America existed.  Slavery in America began as a British institution, codified in law and vigorously supported by the British government.

Slavery existed widely throughout the world in the context of that time.  It was not restricted to the Americas or America.

When the American colonies rebelled and achieved independence, chattel slavery of Africans came as an unwelcome inheritance.  It was an inheritance that could not be held onto, but could not easily be let go of.  A century and three quarters later, John F Kennedy, in his inaugural address, referred to the man who would ride the tiger, and the likely result.  If anyone alive today thinks that the Founding Fathers were at ease with slavery, they don’t know what they’re thinking.

Article I, Section 9, first clause, of the Constitution clearly foresees an end to chattel slavery in America.  This, and the “three-fifths” clause, are an ugly and ineradicable scar on America, but one without which there would be no America.  If any self-righteous observer today thinks they could do better than the Founders did, good luck with that.

The reasonable and almost inevitable conclusion is that the Founders knew that although they hadn’t put themselves there, they were atop a tiger.  The question was how to dismount without being consumed.  While chattel slavery of Africans continued in other British colonies in the New World, the young nation grappled with a multitude of problems and challenges, slavery among them.  It took about 80 years to bring chattel slavery to  an end in America, but our forbearers did it.

So where do accusations linking Constitutionalism to slavery stand?

To the self-righteous and impatient, this history may serve to indict the Founders, and the original intent of the Constitution they crafted.  To those who live in a world beyond their own selfish motivations, the story is far different.  Those Progressives who accuse supporters of the Constitution of supporting slavery are doing so for a single reason: the Constitution stands between the Progressive desire for an all-powerful federal government that can give free unlimited lifetime benefits to everyone who can’t afford to provide for themselves, and an all-powerful federal government that can convert the failures of those who make bad life decisions into victories.  The definitive characteristics of Progressivism are a) all interests are self-interest, and b) the first reaction when challenged with facts and logic is to launch the most vicious possible personal counter-attack.

The Progressive movement in America has become a cancer on the body politic, it serves no purpose other than to raid the public treasury, and to drag down those who strive to excel and reject the Progressive dogma.  The sophistry of counter-Constitutional slavery accusations is just one rock that Progressives hurl each time a stoning is called for.  I think there are good-hearted Progressives, but each of those good hearts is accompanied by a soggy mind.

G’day all, and may God continue to bless America!

Keynes may have been right, but the Keynesians are wrong … again.

Keynes proposed government intervention during times of falling economic activity to create demand in the marketplace, to mitigate the effects of a downturn in the business cycle.  Okay, fair enough.  If wise and true leaders were to implement that policy evenhandedly, to create demand when it’s needed and where it would do the most good, there would be no objection.  Those same wise and true leaders would then need to run a budget surplus during boom years to reduce the deficit so that come the next down turn, the fiscal headroom would be available to stimulate.

That would be the idealized cycle of Keynesian manipulation of the marketplace, and if done as I’ve described, it would sorta work, most of the time.  But that’s not what’s being proposed by the Keynesians, it’s not what been done by the Keynesians, and it’s not the situation that the United States of America confronts in 2011.

The United States is not in a cyclical downturn.  I have been saying that we are in structural decline, but now come to realize that we are also in structural collapse.  James Galbraith opened my eyes to this, and I am grateful for that.  We’re actually in both structural decline (as our desire to consume continues to pull away from our ability to produce).  And we are now simultaneously in structural collapse as our banking and financial institutions continue to fail to perform their intended functions, with nothing approaching robustness, reliability, transparency, or the overall prosperity of the nation on display.

Now, add to that the slow motion collapse of the European financial system, and we have structural collapse heaped atop structural decline.

I’ll repeat myself from previous posts: you cannot stimulate your way out of a situation like this.  It is impossible even under the best of circumstances, and the United States is far from that.  Keynesian government intervention is intended to run alternate deficits and surpluses, so as not to threaten the sustainability of the underlying economy.  Overcoming this combination decline and collapse is going to take decades.  Since we are starting at unprecedented debt levels, never before seen during peacetime, here is the simple hard fact: the nation would collapse under the weight of the debt before the economy could ever hope to generate self-sustaining prosperity sufficient to run a surplus.

What needs to be done?  Clearly, the two issues must be addressed.  Since our structural decline is happening out in the real economy (Main St) and our structural collapse occurred in the financial sector (Wall St), we probably need two answers.  First answer: rebuild the financial industry so it is robust, efficient, reliable, transparent, and operates in the overall best interest of the nation.  Second answer: I haven’t a clue.  How does one go about creating sustainable employment for tens of millions of people from thin air?  In the absence of a systematic answer, I am pursuing a policy of “Buy American”.  I invite you to help me create jobs for our fellow Americans, one micro-hire at a time.

But to return to Keynesian government intervention in the marketplace, there are a few final points to raise.  Supposing we do, against all logic and reason, try to stimulate our way out of this mess.  What are the conditions or constraints that have to be satisfied to achieve success?  The IMF has identified three conditions for success:

a)  The economy must not be leaky, stimulus spending must create demand within the host economy and not go toward purchasing imports;

b)  There must be a propensity for additional consumption, so that the money doesn’t get used to pay down debt, go into savings, or otherwise not get circulated;

c)  If deficit spending is used, it must not undermine the long term sustainability of the host economy.

On prerequisite ‘a’, the United States FAILS.  Stimulus spending might create jobs, but it will create them in Germany or China, because too many Americans reflexively refuse to g out of their way to buy American products.  On prerequisite ‘b’, at this point it’s a wash.  Those at the very bottom of the socioeconomic scale, some of whom are victims of circumstances but most of whom got there through bad decision making skills, will bolt and spend.  But the vast bulk in the middle will pay down debt or save.  On prerequisite ‘c’, continued massive growth in the debt absolutely will destroy the long term sustainability of our economy.  At the moment, with the lowest interest rates in history, we pay 12% of federal revenues toward interest on the debt.

Finally, the IMF has identified an interesting, yet disturbing impact on the ‘multiplier’  effect.  For those who think they know what the ‘multiplier’ is, and for those who admit they don’t but are curious about it, the multiplier is the ratio of change in output from a system to the change in exogenous input to the system.  Choose whatever fancy symbols you want,  the economists (who try mightily to present themselves as ever bit as scientific as, say, physicists) use that delta symbol, as in ‘Delta G’ divided by ‘Delta T’.

Well, come to find out, the multiplier is only very rarely even as high as 1.0, which is a break even point.  Normally, an exogenous input of 1 produces an increase in systemic output of some fraction, around 0.2-0.6.  So for every $1.00 poured into the system, the economy produces an additional $0.20 – $0.60 of output.  This is the price in inefficiency that we pay in order to mitigate a downturn in the business cycle.

Obviously, if the multiplier were greater than 1.0, then nobody would ever have  to work again.  Borrowing money and injecting it into the system would produce more output than input … the definition of an economic perpetual motion machine.  We would have created a financial Fountain of Youth.

But can the multiplier become negative?  According to the IMF, it can become negative, so that additional exogenous inputs result in a reduction in systemic output.  This occurs if the investing class (the top 2/3rds of Americans) sees additional stimulus spending as first, an ineffectual approach that will create debt with no benefit, and second, a sign of panic by the government.  In that case, additional stimulus will result in hording (the price of gold will shoot up), useful flows of capital will dry up (corporations will sit on piles of cash), and the output of the system will drop in spite of continued deficit spending.

We are in the age of negative multipliers, folks.  It’s time to rethink this whole thing.  If we want a Depression, keep stimulating.  If we want an eventual recovery, fix the banks and brokerages, and Buy American (until we can figure out a new paradigm for wealth creation).

G’day, all, and may God continue to bless America.

An actual expert finally gets it right

If you’ve been following this blog, you probably know that I’ve been harping on the fact that stimulus can’t help the US economy recover from its current depressed state.  This is logic: the guts have been ripped out of the economy, there’s nothing to ‘stimulate’, and any stimulus effect will largely flow to China, like a doctor pouring blood into a patient who’s bleeding out through an open wound.  And it’s based on Keynesian policy advice.  Keynes advocated deficit stimulus spending to address cyclical downturns, what we face is a structural decline.  Stimulus to help the US economy is like trying to use penicillin to cure cancer.

Nor am I an advocate for austerity.  It is our responsibility to set a course toward a balanced budget.  That course needs to get us to that objective, even assuming worst case scenarios, before the US Dollar is worthless.  But rushing headlong for a balanced budget for its own sake would be as destructive as continued, mindless, zombie stimulus.

As a bastion of conventional Progressive thought, emotion, anger, and outrage, the Huffington Post is doing a very great disservice to the nation with their one sided editorial slant on this topic.  The rest of their drivel is a kind of  ”Mehhhh”, who cares?, it’s all too touchy-feely anyway kind of waste of pixels.  But on this topic, Huffington Post’s relentless pimping of Progressive, big-government, top down, centralized, federal bureaucracy-driven stimulus solutions, with sensational headlines that would make William Randolph Hearst blush, is a blight on society.   From Huffington Post, this Robert Reich regurgitation.

Now, from a real newspaper, this James Galbraith analysis.  As you can see, the Huffington Post/Robert Reich combo continue to bang their drum for the big-government, stimulus spending goodness as the solution to what ails us.  Instead of regurgitating the passe and clinging to the past, Professor Galbraith provides wisdom and insight, although precious few solutions.  His basic message, “we got it wrong, we need a new approach” is what resonates most strongly with me.  Nothing gets better until people face up to that reality.

If Professor Galbraith has removed the first brick from the wall, then please let the revolution continue.  He may not have gotten everything right, but at least he has given us that first glimpse of what things can look like if we overcome our entrenched positions.  Things might finally be looking up for America.

G’day all, and may God continue to bless America.

What the S&P downgrade means

Well, quite obviously, it first means that Standard and Poors are a couple of turds.  They totally botched the ratings on those mortgage bundles, which was the proximate cause of the housing bubble, the housing bubble burst, and the collapse of the financial industry.  Both Standard AND Poors should be apologizing to America and the world for that one.  And now by downgrading the credit rating of the United States, probably the one nation on Earth where there is ZERO risk of an actual default, they’ve only frosted that particularly special place they occupy in the pantheon of financial incompetence.

Now and forever, S&P should be considered a commune of political commentators, like the Nobel Committee in Oslo, both of which now make decisions that are only peripherally related to the stated standards.

Now that I have that off my chest, what’s the downgrade of US long term debt from AAA to AA+ mean?  One of two things.  Either it means that we are going to enter an approximately decade long period of painful debt unwinding with associated zero to negative growth in GDP.  Or it means that the political establishment in Washington will do the usual: wring their hands, shrug their shoulders, adjust to the new normal, and go back to business as usual (but now with an AA+, and eventually an AA, and then an AA- rating).

The way this nation heads, back toward greatness or stumbling forward toward a diminishing future, depends on how the American people respond.  President Obama has repeatedly invoked the great accomplishments of America past to inspire America present toward some goal or another.  Are we the equal of America past?  Or are we really who we appear to be … an increasingly weaker, less self-reliant, more dependent, a people shriveled by jealousy rather than inspired to opportunity?

The future of America will be one where the federal government is smaller and spends fewer resources to provide direct benefits to individual citizens.  That is already writ.  The question is, will this be a voluntary decision, dedicated to rebuilding America’s financial well being?  Or will it be an involuntary decision, made for us by those whose interest is in their own welfare?  I think that the American people are going to surprise the politicians and I believe that 10% of the American population will be up in arms by what happens.  Because somewhere inside us, I trust, there still lives just an echo, but a strong echo, of what America is capable of.

G’day all, and may God continue to bless America!

What’s different about poverty today?

I had a conversation with a fellow I grew up with, during which I mentioned that poverty today is different from poverty in the past.  This fellow and I have real different world views.  He’s very down-to-Earth, practical, in-the-present, and first person about things.  I’m lofty, theoretical, in the future, and third person about things.  This leads to disagreements that aren’t necessarily disagreements over facts so much as they’re disagreements stemming from “point of view”.  So I’ll explain what I meant when I said that poverty today is different than poverty in the past.

Poverty today stems from different causes than poverty in the past.  Today, there area a number of factors that have driven to extinction former employment opportunities for the bottom socioeconomic class.  It used to be that a husband could support his family as a milkman.  Or a shoe salesman.  Or a small businessman distributing office equipment.  Millions and millions of opportunities, vanished by changed socioeconomic conditions.

Then there is automation, oh boy, is there ever automation.  It used to be that if a fellow was a handy wire-twister and good with a screwdriver, he could support his family by “working for the phone company”.  Not so much any more, it’s all mostly automated.  Computers, you know?  It used to be that General Motors employed 300,000 hourly union workers to build cars; today they build about the same number of cars with 60,000 tiered union workers.  It’s commonplace for one human auto worker to supervise ten robot ‘employees’.

The jobs that got shipped to China?  Those were the leftovers, the remnants, mostly hollow jobs.  The most menial assembly work, viable only at $3/hr because at any higher pay rate, it would be cheaper to use robots and eliminate humans entirely.

So those are the factors that have changed poverty today.  In addition, though, the federal government has contributed to the problem in the special way that only they can.

First, failure to enforce immigration laws has created a permanent class of unresident aliens who will work for less than union scale, they’ll work for less than it takes to raise a family, they’ll work for less than it takes to support oneself at a US standard of living.  Worse yet, by this permanent class of unresident aliens establishing a predominant presence in certain employment fields (fields that used to provide employment to poor Americans), these jobs have become stigmatized, as in “That’s not work that an American would do.”

Now I’m not talking about semi-skilled and skilled, intermittently unemployed, Americans.  There are union journeymen all over the country checking in at union halls, waiting for the job call.  Those are not the Americans who would have mowed lawns or washed dishes, or whose wives would have cleaned hotel rooms in the past.  So if you’re an unemployed union journeyman, registered at the hall and waiting for a job to come up, don’t get all spun up.  You never were, and won’t now be, that guy who’s unemployed because a there are no jobs for Americans washing cars.  Nobody expects a certified high pressure welder to take a job washing cars, that’s just stupid talk.

Second, government programs originating at the federal level have turbocharged the growth of dysfunctional cultures which are becoming permanently embedded features of the American demographic.  If a person wants to be self-sufficient and comfortable, the pattern is well known.  Graduate from high school.  Maintain a clean police record.  Be a reliable employee.  Get married, have children, stay married.  And parent your children through the preceding steps, even if you weren’t fortunate enough to go through those steps yourself.  By providing support and sustenance that, whether it’s comfortable to say or not, makes fatherhood entirely optional and not too cool, the federal government has contributed to the unraveling of the lower 1/3rd of American society.

I am not talking about specific instances of welfare fraud, those simply don’t matter.  It’s not the individual, especially egregious abuses that make the federal government’s social welfare safety net so pernicious.  It’s the endemic, institutional decay of  the most basic social unit, the family, that results from federal government attempts to wage a “War on Poverty”.  Untold trillions spent trying to eradicate poverty, no jobs, and tens of trillions in debt … it’s impossible to continue rationalizing these events and results away.

So I guess that just about sums up the difference between poverty today and poverty in former times.  Many low-skilled but decent jobs have disappeared.  Huge numbers of agricultural and industrial production jobs have been automated out of existence.  So there is now a class of semi-permanently unemployables, and there’s no obvious solution what to do with them other than maintain them on a permanent government dole.   This has been greatly exacerbated by the federal government’s failure to enforce immigration laws, the debasement of pay for job classes associated with unresident aliens, and the social stigmatization of those jobs.  And federal programs to fight poverty, for entire communities of Americans, have instead wrecked the family, neighborhoods, communities, cultures.

Finally, there is a social phenomenon that bears watching.  Someone did the research and the results were this.  In the past, the middle class looked to the upper class for their manners, aspirations, and opinions.  Today, the middle class looks to the lower class for their manners, aspirations, and opinions.  As with most sociology type stuff, this is certainly not universal.  But if that is a trend, it will be interesting to see where it leads us.

And in case you’re having this thought right now, then “No, I don’t feel any need to return to the past, or make things like the past, or any such thing.”  I am an observer, I am happy to let history be the judge.  But I’m certainly not going to sit by silently while others beat a drum in favor of “more of the same, we just haven’t done enough.”  When people say that, I will hold up this mirror for them to look into.

These are the things that make poverty today different from poverty in the past.

G’day all, and may God continue to bless America!

A quick note to the Tea Party

Shut the front door and get in line behind the bill that Speaker Boehner brokered with President Obama and Leader Reid.  This is your defining moment, and it won’t bring any glory (and probably will bring destruction both to you and a bright future for America) to you if this bill doesn’t pass out of the House with flying colors.

Think about it.  Do you really want Speaker Boehner to have to rely on the Democrats for maturity and reason and keeping the best interests of America foremost?

If any of you are worried about “explaining this to the folks back home”, I have this to say.  This is what you are paid for, this is what brings you the privilege and prestige of your position.  Doing the right thing, even when the people back home might not understand.

You have two options.  Either be part of the solution and help pass this bill.  Or watch America look to the Progressives for solutions.  Whoever, anyone, and everyone who gets this done will have done a service of patriotism to America, and will reap the respect of Americans.

G’night, and may God continue to bless America!