What the Republican Budget Cuts Would Mean

After the American Century

According to MoveOn, the political action group, the cuts that Republicans have proposed to the Federal budget would have devastating effects on health and education. I have found their analysis to be generally correct in the past. Their proposals are many, but here are the ten worst ones:

1. Destroy 700,000 jobs, according to an independent economic analysis.

2. Eliminate all federal funding for National Public Radio and public television.

3. Cut $1.3 billion from community health centers—which will deprive more than 3 million low-income people of health care over the next few months.

4. Cut nearly a billion dollars in food and health care assistance to pregnant women, new mothers, and children.

5. Cut funds for Head Start, which would drive more than 200,000 poor children out of pre-school programs that for decades have proven an effective way to improve their chances to do well in school.

6. Cut educational funds, which will force states to fire 65,000 teachers and aides, dramatically increasing class sizes.

7. Cut some or all financial aid for 9.4 million low- and middle-income college students.

8. Slash $1.6 billion from the National Institutes of Health, which would affect investigations into many diseases and force some researchers to stop their work.

9. End the only federal family planning program, including cutting all federal funding that goes to Planned Parenthood to support cancer screenings and other women's health care.

10. Send 10,000 low-income veterans into homelessness, cutting in half the number  who get housing vouchers this year.

The same Republicans, notably John McCain, are calling on President Obama to get involved in Libya, which would further drain the US Treasury and create more veterans.

Danish Politics: The Ministers Have No Clothes

After the American Century

The gap between Danish political rhetoric and Danish lived reality is reaching epic proportions. Assuming the national character has not changed too much, it is no wonder Hans Christian Andersen wrote a famous story called "The Emperor's New Clothes." Readers will no doubt recall that the Emperor thought he was being arrayed in extremely fine clothing, but actually was putting on nothing at all. Even his subjects (or the public) went along with the fantasy, until finally a child pointed out that the King was in fact naked.

Most of the Ministers in Denmark are now similarly naked. The Minister in charge of finance cannot come close to balancing the budget, and yet keeps claiming that the tax reductions for the wealthy put through just two years ago, cannot be the cause of the problem. Rather, he argues, everyone should work longer hours, many public employees should be fired, libraries closed, and retirement laws be changed, so people will work longer. Meanwhile, everyone knows that the nation has a huge problem with black market labor (typically labor in people's homes such as plumbing and electrical work), which the government has not been able to deal with. 

But the finance minister actually has fewer problems than most of the others. The government has continually insisted that its policies will raise the level of the schools and universities, but now everyone can see that in fact schools are closing, faculty are being fired, and the number of hours of teaching received by students has been in decline for years. The Ministry involved now is trying to put the blame on the schools and universities, as if they had cut their own budgets. These politicians are nakedly fools.

Then there is the pathetic figure of the Minister in charge of allowing (well, mostly preventing) immigrants and refugees into the country. She and her predecessors in the post have, for more than a decade, broken the UN guarantees to stateless persons. A whole line of Ministers from this government have consistently misinformed people who had a right to Danish citizenship, people who were born in Denmark, educated in Denmark, and are now adults working in Denmark. These people have been denied citizenship, over and over, illegally. This would seem to be a serious breach of law and call for an investigation. But the same people who broke the law will now "investigate" themselves. A few right-wing politicians are now complaining about the UN, as if it were the problem!

Then there is the pathetic government organization that is supposed to ensure that the banks in Denmark are solvent. This institution decided that the Amager Bank was credit worthy, though in trouble, and lent that bank more than two billion dollars. Given this apparent certificate of good health, many kept their money in that bank, including several local governments. One quarter of a year later, Amager Bank lies in ruins, and those who owned stock in it, and those who had deposits larger than those insured by the  government, have lost their money. The loss is the equivalent of $200 for every man, woman, and child living in Denmark. The failure also weakens the Danish kroner, forcing up interest rates. A fine government, indeed! One mistakenly had thought that a conservative government could at least manage the business side of things.

The list is by no means complete, but how much naked incompetence and mismanagement should one put into a single blog? Suffice it to say that the current Foreign Minister performed so badly that her own party forced her to resign as their leader. But she is still in office.  

Then there is the former Minister in charge of research who intervened, illegally, and leaked confidential documents, in an attempt to help a researcher whom he liked, though it is now clear that her "results" were cooked up, based on non-existent rats in a non-existent Spanish research lab.  So he, too, is naked. But will there be a real investigation?

The list could go on, but how many naked Ministers can one stand to look at?

Governemnt is not a Business, and it should not be allowed to claim bankruptcy

After the American Century

In the US there is suddenly talk of lettering state governments declare themselves insolvent, and go through some form of bankruptcy. This is a very bad idea, and not just, as several people immediately pointed out, because such talk will immediately raise fears on the bond market. States will start to pay a premium in interest to get anyone to buy their bonds, as the New York Times has noted. Such bonds have long been thought to be the epitome of what is safe to invest in. Not much profit, but not much danger either. Take away the security of state bonds, and the markets are going to become restless.

But that is not my main argument against this idea. The chief problem is that allowing states to declare bankruptcy allows them to become irresponsible. It allows legislators to start things they cannot finish. It invites them to pass bills, to make promises, to offer pensions to state employees, that are not funded through sufficient taxation. This is the modern form of Greek democracy, and it has been tried already in Greece, and found wanting.

The American people are among the richest per capita on earth. If they do not have enough money in their state budgets, it is because they have resisted paying taxes sufficient to meet their obligations. California is the most obvious example, as its population voted to cap taxation at an unreasonably low level. Their tax revolt in the late 1970s was irresponsible then, it was irresponsible since, and it remains so.

If the Republican Party were really a party of fiscal responsibility, it would oppose this idea with every ounce of its collective energy. Instead, it seems to be part of the problem. Members of both parties are exploring this idea. If it comes to fruition, the United States will have taken a step toward self-destruction. The US will be correctly judged a more dangerous place to invest money. State employees will live with the threat that their pensions may never be paid out. And all citizens will find that the cost of government rises, in the form of higher borrowing rates, while the money available to provide services correspondingly falls.

This may be the worst idea to come along since the courts decided that corporations were "persons." Government is not a business that can periodically fail. It is the foundation of society. It is a contract between the citizens that cannot be broken, not a corporation that can be reconstructed by and for bankers. Talk of letting government fail financially cannot be separated from a more general failure of trust between the citizens. Government is about mutual obligation. It is not an investment that one pulls out of.

Americans have lived with a stable system so long that they have no historical experience of the disasters that come with fiscal irresponsibility. Undermine the state government, and you undermine the dollar itself. I am not talking about the dollar losing a few percentage points against the Euro. I am talking about the Japanese and the Chinese deciding not to buy dollar debt anymore, because it is too risky. For a taste of what that might mean, look at Greece, right now, with the difference that the EU has come along to bail out Greece. But no economy is big enough to bail out the United States.

Merry Christmas, after all

After the American Century

There is, objectively speaking, not so much to be merry about. The weather here in Denmark has been unrelentingly cold and the snow has blocked roads and even made it hard for me to get out of my own street. The Danish government promises endless cutbacks, and makes ill considered reforms. And my mother in law is here for six days, pretending that she is not smoking cigars in the basement, wearing suffocating perfume, and insisting on hearing elevator music on the radio.

Nevertheless, there are reasons to be happy, even if merry is a bit over the top. The US and Russia are reducing their nuclear arsenals. The German and US economies are reviving, and the Chinese and Indians never really faltered in the first place. The Danish stock market went up a whopping 35% in the last year, wiping out the losses of the previous year. 

And on a professional level, I have enjoyed teaching this fall, been invited to more places to lecture than I could accept, and managed to steer a new BA curriculum through four stages of a six stage process needed to get it approved. I have seldom written much here about my personal life - it isn't that sort of column - but I will say that things are good there, too.

So, on the whole, I can say Merry Christmas, too, and hope that 2011 will be an improvement.