Tuesday, November 12, 2013

Slavery? Beholden to a foreign master? Seriously, Sarah?

Correct me if I am wrong but didn't we have an election about 5 years ago in which the country told Sarah Palin to pack her bags and go back to Alaska?  I seem to recall her and her running mate losing by more than 7 million votes in 2008.  But hey, I'm getting older so my memory could be slipping.


So let's get this straight...Sarah Palin believes that the United States' $17 trillion dollar debt is the moral equivalent of slavery?  It is, in her mind, the equivalent of one person being able to own another and deny him/her basic human rights.  It gives our 'foreign masters' the right to whip us at will, sell us to any other party, or kill us without repercussion?  Is that what you're saying, Sarah?  I just want to make sure I understand before I proceed.

Okay, so what's wrong with Palin's analogy?  So much that I don't know where to begin.  I guess the beginning is as good a place as any.  Palin says,
"Our free stuff today is being paid for by taking money from our children and borrowing from China..."
What 'free stuff' would that be?  Government services aren't free and they never have been.  Fighting two wars in the middle east wasn't free.  Building a 21st century infrastructure of roads, bridges, rail networks, and schools is not free.  Caring for the weakest among us is not free.  Keeping 25% of the world's prison population locked up is not free.  All this 'stuff' costs money.  We, as a society, have chosen together to do these things, regardless of what you and your merry band of naysayers want to believe.  You and people of your ilk have engaged in obstruction, refused to allow the appropriate level of taxation to pay for the things WE have chosen to do together, leading us to the $17 trillion in debt we have racked up...most of which accumulated under Republican leadership.  The following graph shows the change in the debt as a percentage of GDP since WWII.


What we see in the above graph is that debt began to grow during the Reagan Administration and but for a few short years during the Clinton Administration has continued to grow ever since.  There are several reasons for that, including repeated tax cuts, increased spending commitments, and slow economic growth (except 1997-2000) when compared to the period from 1945-1980.  Another way to look at it is in terms of total dollars added to the debt, as the chart below shows.


Using this scenario, both President George W. Bush and President Obama have added a lot to our debt, though Reagan is still the debt king in terms of the percentage by which the debt increased while Clinton and Obama have increased it by the smallest percentages.  Perhaps this is due to Republicans rediscovering their fiscal conservatism whenever a Democrat is in the White House?  

What about Palin's primary claim that we are 'taking money from our children and borrowing from China'?  Is this true?  Yes and no.  We aren't literally robbing our children's piggy banks any more than a parent who buys his/her kids' Christmas presents with a credit card is taking money from them.  Only, we are not buying presents, we are investing in our future as a nation.  Yes, someone has to pay for that, whether it is the current generation, the next generation, or the one after that.  Unless economic growth returns to the 4-5% annual rate it was in the 1950's we won't have the money to pay for all our commitments without substantial tax increases.  I would, of course, argue that some tax increases are in order as we are currently paying the lowest rate of federal taxes in over 60 years and nearly half of all Americans pay no income tax at all (I'd rather abolish the income tax but that is for another day).  To move those individuals into tax paying status requires economic growth that includes substantial growth in wages for lower middle class workers, which have been stagnant for 35 years.  

Okay, so what about our 'foreign masters'?  Does China really own us?  Not really.  It is a fundamental misunderstanding on the part of lazy people like Sarah Palin to believe that.  Here are the facts:

The United States is currently a little over $17 trillion in debt, though that is somewhat misleading since we have $200 trillion in assets (oil, gas, land, buildings, etc...).  Of that debt, about 1/3 is owned by government agencies.  The single largest creditor for the U.S. government?  The Social Security Administration (SSA).  As of August 30, 2013 the SSA owns $2.764 trillion in government treasuries.  This is because for nearly 80 years Social Security has collected more in revenue than it has paid out in benefits.  The excess money is invested in US treasury bills, allowing the SSA to collect interest on the excess.  Someday, those T-bills will come due and the government will either have to raise taxes to pay them off or issue more T-bills and pay the old ones off with the proceeds from the sale of the new T-bills.  That is essentially what the government has been doing for 35 years.  The rest of this part of the debt is held by pension funds for the government, FDIC, and some other federal agencies.  

What about the other 2/3 of the debt?  Isn't that owned by China?  Well, no.  About $12 trillion of our national debt is what we call 'debt held by the public', which includes foreign held debt.  As of March 2013 almost half of the debt held by the public was held by the central banks of foreign governments.  Why?  Because America pays her bills and is viewed as a solid investment.  Or at least we were until Sarah Palin and the Tea Party started threatening to default on the debt.  Overall, $5.7 trillion of our public debt is held by foreigners.  China is the largest single holder of that debt at $1.27 trillion (August 2013), or roughly 10% of the total of public debt.  Japan's central bank is second at about $1.1 trillion.  But the largest holder of U.S. public debt?  The Federal Reserve Bank of the United States ($1.74 trillion).  

The fact is, most of our debt is money we owe not to China or other foreign interests but to ourselves.  We're in no danger of being whipped or hogtied by our 'foreign masters' because of the national debt. The debt is concerning for other reasons but fear of being a slave to our Chinese masters is not one of them.  

Full details on the debt can be found here.


Saturday, November 9, 2013

Strange Bedfellows: The Tea Party and Karl Marx

Karl Marx died 130 years ago in London, yet his legacy lives on through America's latest populist uprising.  No, I don't mean the flame out that was Occupy Wall Street, though that group certainly shared some of Marx's ideological heritage as well.  The populists I speak of are America's own Marxists, aka the Tea Party.  To be sure, many who associate themselves with the tea party will take umbrage with the veracity of my analysis.  I don't care...if it acts and thinks like a Marxist it must be a Marxist.

I began thinking about this subject after a conversation with a gentleman who said Bill O'Reilly was too 'left of center' for him and that Van Jones was further to the left than Karl Marx.  When Bill O'Reilly is left of center I'm no longer certain where the center is.  Nevertheless, let's explore a little of the core beliefs of Karl Marx and the Tea Party.  I'll begin with Marx.

First and foremost, Marx was a philosopher writing about the political economy that existed in mid 19th century Europe.  What he saw everyday was hordes of workers shuffling off to the factories and fields, exchanging their labor for minuscule wages so they might continue to subsist.  Not thrive mind you but just continue to breathe.  This exchange of labor for pay was not voluntary, it was a form of forced servitude that removed the individual's freedom to be his own master.  Unlike modern neo-Marxists, Marx himself was not an egalitarian.  His primary concern was how the unbridled capitalism of his day restricted the individual from achieving his full potential.  Capitalism did this through the alliance of the bourgeoisie and the state.  Compare that with the Tea Party rhetoric opposing crony capitalism and the loss of individual freedom at the hands of the statists, of whom Barack Obama is supposedly the chief.

The free market, Tea Partiers argue, should choose winners and losers, not the government.  Perhaps, but it is now and always has been a myth that there is a truly 'free' market.  A truly free market would be based upon the free exchange of something of value for something of equivalent value.  That would leave neither party worse off nor better off than they were upon entering the market.  When a laborer exchanges his labor for a wage that allows him to survive does he enter that transaction freely and upon equal standing with the one who has a job that needs to be performed?  Only in an economy where there are exactly the number of workers needed to for every available job.  In any other situation, one side or the other is disadvantaged.  Usually, it is the laborer.  Additionally, the laborer is not free to abstain from the marketplace and open his own business because the cost of entry into many areas of commerce are enormous.  Suppose one wants to begin a railroad to deliver goods from a port to warehouses more efficiently than another.  The capital needed to create the infrastructure to compete in that market is prohibitive.  The effect is a monopoly that is usually supported by the state. Sure, the costs of entry may be lower and less prohibitive in some other markets but so too is the risk of market over saturation, which may lead to the collapse of some businesses and the falling into destitution Marx envisioned as stronger competitors eat up weaker ones.

Further, in order for the capitalist to survive, he must realize a profit from the exchange he has made with the one who labors.  If I sell eight hours of my time to an employer for $100 I must produce something valued at much more than $100 if the employer is to remain in business.  In this, Marx recognized how capitalism in his day had abandoned the Lockean principle of private property that meant the laborer had a right to keep what he produced or created.  Marx referred to this as the exploitation of the laboring class.  The greater the difference between the amount the laborer received for his work and what the capitalist could reap from it was the level of exploitation experienced by the worker.  This becomes important when discussing the Tea Party because it ostensibly opposes the oppression it perceives to come from the crony capitalists such as bankers and the political elites, or those who benefit from their affiliation with the state they oppose.  The irony is, of course, that the Tea Party by and large are white, male, and over 45.  They also largely support the Republican Party, which is every bit as state oriented as the Democrats.  Therein lay the roots of the civil war being waged within the modern GOP.

The Tea Party, like Marx, had he been alive today, opposes the modern welfare state, though for very different reasons than Marx would have.  For the Tea Party, the welfare state takes what they have earned from them by force and gives it to those who have not earned it.  Yet, much of the Tea Party opposes any changes to Medicare or Social Security, the two largest entitlement programs.  The Tea Party also largely supports the military industrial complex, the ones who carry the guns for the state they so deplore.  Rather, Tea Partiers oppose 'welfare' programs for the poor, who they see as lazy slackers.

Marx, on the other hand, would likely oppose the welfare state because it interferes with the rise of the proletariat by mitigating the effects of capitalism.  By providing a level of sustenance to the poorest and propping up many low wage earners with programs like SNAP and Medicaid, the impetus to organize and overthrow their oppressors is largely removed.  This why Franklin Roosevelt, in the midst of the creation of the welfare state, could say that he was 'The best friend capitalism ever had.'  Apart from the welfare state, it is likely America might have seen some uprisings such as have occurred in many poorer nations in South and Central America.

In sum, the Tea Party and Karl Marx share much in common.  The Libertarians in the Tea Party hate the state and see it as a coercive force that steals their God given liberty.  Marx saw the state as stealing individual liberty from the proletariat through its alignment with the capitalists.  Marx's hatred of the state drove his vision of a communist utopia that emerged from the wreckage of not only capitalism, but its successor, socialism.  Far from being anti-capitalism, Marx saw it as a necessary stage in the development of communism.  Ironically, the anti-welfare state mentality of the Tea Party, if made reality by gaining power, could very well be the catalyst that awakens the proletariat that has been lulled to sleep by the statists on the left and the right.  The very thing the Tea Party fears most may be what it ultimately creates.