Republicans Spent Much More on Iraq War Than Obama Wants for Stimulus Package

After the American Century

Those who thought I was too hard on the Republican Party yesterday might want to read Paul Krugman's column today. He also feels that their proposal to substitute tax cuts for spending is a failed Bush policy.

Elsewhere in today's New York Times there is an interesting story about the Japanese economy during the 1990s, when it went into deflation. Then the Japanese government spent a great deal of money on economic stimulus, and there is considerable debate about whether this was successful or not. But one thing is clear. Not all stimulus money is equally effective. Money spent on infrastructure gave the least bang for the yen, while money spent on education was the most beneficial. The test should be whether spending will develop new skills (education), new capacities (spreading broadband more widely), or renew the population (e.g. preventive health care). Such things make the economy more resilient. The least effective way to stimulate the economy is to build more weapons. A row of tanks worth a billion dollars for the most part just sits there, and never creates any new wealth.

However, if you a Republican, then a row of tanks represents a chance to wreck not just one economy, but two, as the economic cost of the Iraq war comes to mind. According to an article in the Washington Post last March, the total cost of that conflict will be more than $1.5 trillion, perhaps even as high as $3 trillion. Thus the Republican Party gladly spent at least twice as much on that war as the Democrats want to use to stimulate the American economy. Is there any logic to Republican thinking? The Republicans have destroyed billions in resources in the deserts of the Middle East, but they will not invest in the future of their own country. They have used billions to defend access to foreign oil, but they will not spend money on green energy which could free the US from dependence on that oil.

A paranoid on the far right might think that subversives (call them economic terrorsits) who hate the United States have infiltrated the Republican Party and twisted its thinking so it will embrace policies that are destructive to the United States. Not being anywhere near that paranoid, I can only conclude that the Republicans are illogical and that they choose badly.

The Republican Desire for Disaster

After the American Century

In the last month it has become clear: Republicans want disaster. They want the economy to get so much worse that the public will forget who got them into this economic mess. They are willing to let millions of people lose their jobs and their homes, if only it will take the heat off them and make Obama look like the culprit. How else can one explain the fact that all Republican members of the House of Representatives voted against the stimulus package, even as virtually all economists, regardless of party affiliation, agree that the stimulus package is needed immediately? How else explain that the Senate Republicans seem ready to block the stimulus bill if they can?

The Republican Party may have become irrelevant, and it may be time for Americans to ask themselves if such a party really ought to survive. The death of major political parties is a rare event in US politics, and one has to go back to pre-Civil War times to find an example, when the Whig Party foundered and died rather suddenly, because it could not deal with the sectional crisis. The Republicans emerged as their replacement, and this very year we are celebrating the bicentennial of the birth of the first Republican president, Abraham Lincoln. But as noted earlier in this space, Lincoln would not recognize his party today. He had no Southern support at all, and won what are now called the blue states. Today's Republicans are not the heirs of Lincoln, and conceivably the public will realize this.

The Republicans have moved from irresponsible leadership to irresponsible opposition, and they are quickly losing any meaningful relationship to the emerging majority of the American public. They have lost more than two thirds of the support of Blacks, Hispanics, scientists, and humanists. Even those who used to support them such as doctors and even many stockbrokers are deserting the party. They need to change, or they ought to die, and do so quickly, so another party can take their place. I know, it will probably never happen. Yet at present they are a ball and chain tied to the body politic. They are a useless mass of backward thinkers, with nasty political practices, and they have strong tendencies to xenophobia and red-baiting. Their ranks are rotten with anti-evolutionary and anti-science neanderthals. Indeed, their very persistence as a party may be a kind of proof that human evolution has not taken place. More than half of them actually thought Sarah Palin was qualified. Doubtless, they will long survive because so many of them are so narrow and ill-educated that they cannot change. But can the US remain a world power chained to such a throwback party?

Hiding University Reform inside Tax Reform

After the American Century

The traditional tax problem for Danes is how to reduce the world's highest taxes while keeping the welfare state. A Tax Commission has just proposed 35 billion kroner (a bit less than 7 billion dollars) in income tax reductions, to be financed by changes in the tax structure. I want to focus on just one area, reductions in student grants, because this is far more than it appears to be, amounting to a major reversal of government policy on higher education.

The proposal is that student study grants be reduced so that they cover four years. To people outside Denmark, this still sounds wonderful. Not only do no university students pay tuition, but all students qualify for a scholarship worth about 55,000 kroner ($10,500) each year, after taxes. These grants have made it possible for children of working class parents to make their way into the professions. More than just about any other nation, Denmark has made its education system egalitarian. I have had many students who were the first in their families to attend university, and some of them have gone on to quite distinguished careers.

By comparison, in the United States taxes are considerably lower, but parents start saving early to send their children to college. It can easily cost $150,000 (c. 800,000 kroner) to send just one child to university, when tuition, room, board, transport, health insurance, computers, and books are all taken into account. The hardest economic years for American parents are those when children are in college. In contrast, Danish parents may pay huge taxes, but the year a child begins at university creates no hardship, because of the generous "SU," or student grant. In effect, Danish parents have been forced to save for their child's education, and reap the benefits if a child goes to university. But the Tax Commission in effect wants to steal the money middle-aged couples have saved through taxation for the last twenty years. They have paid in with the expectation that their children will receive student aid. But the Tax Commission will divert that money to income tax reductions, and these parents will have to pay a second time if they want their children to get an advanced education.

In theory, it takes a Dane a minimum of five years to complete a BA and MA. In practice, the average student needs six years or more. Reducing the student grant to 4 years means that it will be impossible to get an MA without taking sizable loans, which supposedly will be made available to all who apply, though one wonders if this will really be so. A great many students will likely stop after the BA degree, because they do not want to saddle themselves with large loans.

The Tax Commission surely understands that Denmark will produce fewer MA students as a result. Indeed, I assume that this is their goal, in this way forcing more people to start working full time at a younger age. When the same political coalition was in power during the 1980s and early 1990s it forced changes in Danish education with the professed goal of making the BA a terminal degree for most students. They also cheapened the BA+MA education by cutting it one full year, from six to five. The notion then was that too many people were getting advanced degrees. The then Minister of Education was Bertel Haarder, and people joked that BA stood for Bertel's Academics.

Students see the BA as a second-rate degree and most of them still want to go on for the MA. Yet that earlier reform did save money by reducing the BA+MA combination to five years. This meant that there was a full year less time to really learn a foreign language such as Russian, and it meant that students were less ready to write an MA thesis. For faculty, students losing a year of education meant a reduction of almost 20% in how many people there were to teach. For the gymnasiums, it meant that new teachers were less educated.

The Tax Commission's proposed reduction in student aid extends this earlier downsizing. Once again, the goal is to get more students to stop after their BA, and to reduce the numbers at the graduate level. Once again, the universities will have fewer to teach and suffer cutbacks in staff. The loss of entire departments may follow in some cases.

It is disingenuous to claim that the government's goal is to reform taxes. The amount spent on the extra year of SU is 750 million kroner a year, or a little more than 2% of the proposed savings on personal income taxes. The real goal is to further reduce graduate programs and eliminate some MA programs. One very real result will be a decline in the number of faculty positions, saving half a million kroner or more per eliminated position.

The Tax Commission ignores these larger consequences because they would be unacceptable to many Danes. Indeed, cutting down graduate studies is the exact opposite of the government's own professed desire to invest more in research, raise the education level, and prepare for a future where a highly-educated workforce is the key to success. But this new tax proposal will shrink the pool of highly qualified graduates, eliminate faculty positions, close some MA programs, and undermine the efforts of Danish universities to remain competitive with other nations. It will further demoralize faculties (especially in the humanities) that have been suffering cutbacks for years already. One likely result could be a brain drain, as many of the very best graduates go to work in better financed universities abroad.

As far as education is concerned, this is not a tax reform but a reversal of the government's supposed program.

Stimulus Package, or Stimulus Interruptus?

After the American Century

Politics is the art of the possible, and a good politician can parlay one success into widened possibilities. Surely the desire to widen his consensus is what has Obama going to visit the Republicans, seeking their support for the $825 billion stimulus package. The Republicans, having learned nothing much from the failure of the Bush approach to the economy, want more tax cuts, while the Democrats point out that if you don't have a job, a tax cut is useless. The Obama plan does include tax cuts of $275 billion, so that is part of the package, but the majority of the money would be spent on projects. Since a staggering 75,000 layoffs were announced yesterday alone, the need for direct government spending, priming the pump, seems obvious, though not to Republicans, evidently. Most economists agree on this.

But where is the 800 billion going to be spent? The particular projects the Democrats support are in line with Obama's call for a greener society with a comprehensive Internet that reaches all parts of the United States. In effect, he wants to create the equivalent of a Rural Electrification program to link up all parts of the US with cyberspace. This idea has real merit, because studies have shown that better communications reduces the need for as much physical movement, increasing energy intensity. The obvious example would be the shipment of documents as email attachments rather than as special delivery or FED-EX packages. A comprehensive information system will improve productivity and put the entire nation into contact with cyberspace.

Other spending would improve the electrical transmission system, which has not been growing much at all. In fact, deregulation slowed down the building on transmission lines, for reasons that would require a long Blog - actually that required about 3,000 words in chapter five of my new book. But leaving aside the mistakes of the past, the present need is to replace old equipment and expand capacity, because the connections are simply not robust enough.

The Democratic plan does have some pork in it, however, and perhaps Obama can use the Republican complaints to cut out some of that fat. But one man's useless pork is someone else's bacon. Or, in this case, condom. For some of the stimulus plan was originally intended to go to family planning, which included purchase of large numbers of condoms. I call that recontaining the stimulus. Obama has apparently agreed to drop the condoms. (Sarah Palin and her oldest daughter could only agree). After all, a baby boom would stimulate the economy both immediately and in the long run.

Now that the condoms are off, as it were, let us hope the Republicans get more excited. Without their support, we might have a filibuster, or stimulus interruptus.

The Honeymoon

After the American Century

New presidents have a honeymoon with the public that lasts a few months in most cases. Obama certainly is having a good honeymoon, with an approval rating of 73%, with only 14% disapproving. Another way to look at this is to recall that Bush's rating fell to around 25%, with some fluctuations. So there is one quarter of the public that supported Bush no matter what he did, and presumably this same group does not like Obama much. He has probably achieved the highest rating possible in the wake of the Republican debacle.

Furthermore, the public is not equally enamoured of Congress, which therefore is in a weak position to oppose his agenda. The chance to achieve real change exists, but the opportunity will not outlast the spring - at least if history is any guide. Were these normal times, Obama could move immediately on creating a new medical system. Instead, he has to use this precious time to fix the Bush economy, and one can only hope that some innovative programs are part of the stimulus package.

Look on the right column of this Blog, and each day you can see precisely how much of Obama's first hundred days remains. That is roughly the honeymoon's length, though the term 100 days comes from Roosevelt's New Deal. FDR accomplished an incredible amount in 1933, in good part because the Depression had already lasted for more than three years, and Congress felt a great urgency to repond. This suggests that, paradoxically, Obama may benefit, in the short term,. if the economy remains weak for a few more months, forcing Congress to act.

Obama: The Change is Real

After the American Century

I must admit that I wondered if the inauguration of Obama would make a visible mark on daily life. But landing in Boston yesterday and talking to people, the random encounters of an ordinary day, strongly suggest that Americans really do sense a major change. At least in New England, George Bush was experienced as a burden that has dropped away, even a nightmare from which they now have awakened.

President Obama's first acts underline the sense of change. His staff, should they leave the White House before he does, will be prohibited from lobbying so long as Obama remains president. This is a much higher ethical standard than before.

Obama has also insisted that government be more open, and that the federal officials should obey the spirit of the Freedom of Information Act. That is, they should give out information in all cases unless there is a clear and definite reason not to. Not incidentally. this may reveal some less than noble activities of the Bush Administration. But as time goes on, this openness will become a constant pressure on Obama's appointees as well.

Most significantly, Obama has ordered that the Guantanamo Prison be closed and its inmates either released or placed in American prisons where they will have the protection of the Constitution. He is returning the nation to the rule of law, including a repudiation of any form of torture - which the Bush Administration pursued both in Cuba and through other nations outside the United States.

Finally, Obama has set an example by freezing the salaries of those on his staff who make more than $100,000. Counterpointing this gesture and making its symbolism all the more necessary, it came out today that literally days before Merrill Lynch was purchased by Bank of America, the virtually bankrupt Merrill Lynch gave selected executives huge bonuses - several billion dollars in bonuses. With one hand they were begging for and getting a Federal bailout and with the other they were lining their own pockets. Quite possibly this was not a crime, legally, but ethically it stinks. That was the end of the Bush era, the wage freeze is the ethical beginning of an Obama era that stands for fair play, the rule of law, the abolition of torture, and the end of cozy relations between lobbying and governing.

Not bad for just two days work.

Americans Are Reading More

After the American Century

A new Census study revealed that more Americans are reading fiction and poetry than they were in 2002, the first time that number has gone up in decades. Slightly more than half of all adults read a literary work last year, though unfortunately the study did not differentiate between those who read just a single short story and those who read for several hours every day.

Men still read considerably less than women, but even they were reading a bit more. Given the competition with TV, film, computing, and the vast leisure industry, any gain is worth celebrating. As an author, I have worried that this might be the last generation that really reads books.

But the celebrating should be muted. The Association of American Publishers reported sales down more than 3% for 2008, wiping out a corresponding gain from 2007. If people are reading more, they may be borrowing books from libraries or friends rather than buying them. Compared to the huge losses in many industries, the bankruptcies, the foreclosures, and the rising unemployment rate, however, a 3% fall seems like nothing at all.

E-books still are a tiny segment of the market, less than 1%, though Amazon has made an effort to develop this area, selling its own special reader, The Kindle. Waiting lists are long for that device, however Meanwhile, many classic texts are available on-line for free, and to the extent that people go to sites like Bartleby and get their literature there, they will not be counted.

Overall, publishing is doing better than the music industry, which has seen sales of CDs decline drastically, by 45% since 2000. On-line sales have increased, but not as rapidly, so there is shortfall that is hurting the big music companies. Overall, the book publishers seem to be in a more stable situation. Thus it turns out my decision not to seek stardom in rock star back in the 1960s has finally been vindicated.

Are There Any Good Investments Left?

After the American Century

In 2008 no matter where you lived, chances are you lost money. Houses lost value, stock markets fell most places by a third or more, and if you were unlucky enough to hold many British pounds or Swedish kroner then you lost an extra 20% compared to everyone else.

Perhaps the natural thing to do in 2009 is to put any of the money that is left in a savings bank and wait for the economy to stabilize. But most assets are not liquid. For example, few are eager to covert their homes into cash, as they are worth less now than a year ago, and they have to live somewhere. Likewise, people who have money tied up in pensions typically have to keep putting money in and they cannot take it out until they retire. In other words, most feel they have few options, other than holding on to their shrinking pension and their deflating house and hope for better economic weather. Many people I know are playing the lottery, just a couple of tickets, here and there. hoping to hit it big. They lose maybe $20 or $30 a month that way.

But the options are not all bad. For years I had trouble getting skilled workers to the house to put new tiles in the bathroom or make repairs, because there was so much other work to be had. When the economy cools off, these guys may actually show up, as they have promised to do several times over the last two years. This is a good investment, because I get to enjoy it, and the house keeps its value.

By a similar logic, people should buy art in troubled times. In part this is to help artists, but also I realized some years ago that by the time you purchase a good reproduction of a famous work of art and have it suitably framed, the cost is almost always more than $100. Yet after a year or two, I find myself tired of most such prints, and so replace it and find myself out another $100. Eventually, you have a closet full of nicely framed, somewhat faded copies of famous paintings. Worthless clutter that may easily have cost $500.

Instead, spend a bit more for a lithograph or painting that is authentic. I bought a lithograph on an impulse last week, for less than $200 (framed, too). It's better than lottery tickets, that usually lose all their allure in a couple of days. OK, the litthograph is not that large, but I once met the artist, so it feels a bit personal, and he has regular exhibitions. It is interesting to look at, and I am not likely to get tired of it, at least not soon. Also, there is a chance that it will still be worth something years from now. I am not saying go and buy art as an investment, because that is hardly a sure thing. But buy art rather than posters, and you get to enjoy it., and you will have more closet space. After a couple years, an art dealer may trade you for somethingh you are tired of, for something else.

There is a small hidden agenda in these two suggestions. If we all used a bit of money on home repairs and on art, it would help the local economy,. Why give the money to some charlatans who claim they know which stocks are going to rise in Asia or Eastern Europe or New York? Maybe you can frame stock certificates and put them on the wall, but will you really enjoy that?

For us small fry without fortunes, there are still good investments, things right in front of us, things we can enjoy for years. And I don't mean lottery tickets.

Precision Bombing? Nonsense

After the American Century

Once again, official spokesmen are chanting a technological hymn. The words have been much the same for more than half a century. A serious, well-groomed person wearing nice clothing, who seems like a good middle-class person, tells us that the military must defend its civilian population. But not to worry, s/he continues, because with the fabulous new accurate weapons being used, the bombing is precise. Sometimes they say "surgically precise."

This is nonsense. The religion of accuracy was preached in Vietnam and again in every war since then, and in every case many more civilians die than enemy soldiers. In fact, the twentieth century was a disaster for civilians in warfare. During World War I civilians accounted for one out of every seven deaths. But then weapons got far more powerful (and accurate of course), and in World War II civilians accounted for two out of every three deaths - 67%. With each subsequent conflict the proportion rises further. In Iraq it appears that more than 90% of the dead are civilians.

I certainly hope that the weapons do not get any more accurate and precise, or we will no doubt reach that perfect state where the bombs always go where they are intended to go, and 100% of those killed are bystanders. We have almost reached this point now.

Some will read this column as a criticism of Israel, for invading the Gaza Strip, and for the "accurate attack" on a target which turned out to be a UN school. But my point is that all the world's powerful military establishments use these "accuracy" arguments. It is a comforting thought that shooting the bad guys resembles a video arcade game, and there is a nice euphemism for civilian deaths - "collateral damage."

Extremists on both sides are happy when the missiles start to fly and the heavy artillery wheels into place. Neither side can bomb its way to peace. But the arts of peace are more difficult and less glamorous in this action-film fantasy world than the martial art of war. Indeed, the New York Times recently reported that the US military is now using arcade games as a recruiting technique. The nice thing about video games is there is no blood on the floor, no matter how many precision shots are squeezed off.