Friday, May 18, 2018

Conservatives, liberals issue joint warning: extreme populists threaten majority rule

When leading conservatives and liberals agree on what’s wrong in the country, it’s worth paying attention.

The American Enterprise Institute, which produces conservative policy proposals, and the Center for American Progress, which plays the same role for liberals, announce they “disagree vigorously” on policy, but have agreed on a jointly published report on American society.    

They find we’re in serious trouble.  The problem is the threat of what they call “authoritarian populism.” 

Populism has a long history of average people standing up to the elites, who try to run the country.  But when populists believe they have the right to ignore democracy’s majority rule, they become “authoritarian.” 

People claiming to be “the true voice of the people” assert they can overrule the majority, threatening the “domestic tranquility” that the Constitution promises.

The report identifies three causes of the country’s populism problem:  (1) political division and unresponsive government, (2) economic inequality and (3) cultural differences and racism.

Many people find that government does not produce the change they want and many candidates have promised.  Trust in government has declined. Younger and low-income people vote much less than do older people who retain some confidence in government.

Elites dominate the political process through their campaign and lobbying spending.  Organizations representing business account for 72 percent of lobbying spending, while labor unions spend one percent of the total.  The benefits to business come at a cost to average people, the report notes.

Politicians play to their core constituencies, meaning they are less likely to compromise with those on the other side.  Politics is more about getting re-elected than about good government.  The result is that government produces fewer results, disappointing hopes for change and building distrust. 

On the economy, the report suggests that discontent arises more from belief that the system is rigged against average people than from the wealth gap between the top managers and their employees.

For example, after the Great Recession a decade ago, banks got big bailouts rather than average people.  And few bankers were punished for contributing to the economic crisis. 

Increased productivity and outsourcing to lower income countries cost jobs.  These days, the federal government tries to counter these trends by trying to go backwards.  Better trained workers are needed, but good programs are often lacking.  At the same time, the best educations go to the children of the elite. 

The effects of this real gap between need for skilled workers and the lack of adequate training can be seen in the number of men of prime working age who are unemployed.  The level is about the same as in 1940, at the end of the Great Depression.  This leads to “anger and frustration.”

Militant populism sees the elites favoring African-Americans, immigrants and Muslims.   By the middle of this century, the majority of Americans will not be white.  Politicians, including Donald Trump, “exploit anxieties related to such demographic change.”  
To be fair, some may feel that change is taking place more rapidly than they can accept, but mistakenly believe it can be halted or reversed.

“The Trump campaign took advantage of anxieties around immigration, race, and Islam, leaning into white identity politics with explicitly racist appeals,” according to the report. Though the issues are not identical, the same sentiments have arisen in Europe.  Dissident views on race and culture are troublesome when linked with political and economic discontent.

The two organizations want solutions, not just “a tepid middle-of-the-road agreement.” 

The political parties must undergo realignment.  Their present and future supporters expect them to become more responsive to today’s issues and less tied to their traditional and sometimes outmoded or irrelevant platforms.

That means politics should accept some of the arguments of traditional populism.  Average people have some reasonable concerns about political control by affluent elites, promoting their own interests.  The “establishment” will have to give some ground to “outsiders.”   See Bernie Sanders.

One form of “radicalism” that’s justified is more vigorous pursuit of corruption, nailing politicians and corporate cheaters.  When people see strong action, it satisfies some of their populist instincts.

Finally, the two organizations urge a “new affirmative patriotism.”   It could appeal to both conservatives and liberals who share “deep suspicion of America’s overseas military actions; alarm about the rise of a surveillance state; mistrust of major institutions; and suspicion of global elites.”

As chief of state, the president of the United States should provide unifying patriotic leadership.  So long as President Trump limits his role only to leading his own political movement, he allows and encourages the wrong kind of populism.

Friday, May 11, 2018

Does Billionaire Buffett put profit over principle?

When you’re called “the Oracle of Omaha,” ranked as one of the wealthiest people in the world, and speak with a kind of folksy directness, people listen.

That’s Warren Buffett, the head of Berkshire Hathaway, the huge investment company that seems to operate as a personal extension of the man.

Last week, the firm held its annual shareholders’ meeting in Nebraska, where it is headquartered, and tens of thousands of people attended. The meeting, recalling the hippy gathering decades earlier, is known as the “Woodstock of Capitalism.”

They listened to Buffett answer questions for about five hours, an appearance unlike that of any other corporate leader.

He was asked about his attitude to the tax cuts passed by Congress. He is well known for opposing tax reduction, especially for the wealthy. He complains that his tax rate is less than his secretary’s and generally supports Democrats.

But Buffett had warm words for the Republican tax overhaul. Why? It’s aimed at helping corporations and Berkshire Hathaway more than most.

He said that he does not mix his personal and professional views. He willingly discusses his thoughts on tax cuts, but as the keeper of shareholder interests, he supports tax measures that boost profits, in his company’s case by tens of billions of dollars.

Under the U.S. free enterprise system, profits are the reward investors receive for the risk they take in backing corporations. If the outfit is well run – Buffett is a star at Berkshire – they may expect to see profits boom. His investors are well rewarded.

Buffett made clear that he sees his responsibility as gaining profits for today’s investors. Thanks to his success, investors expect more of the same in the future. But that means Buffett won’t endanger their investment return for his view of taxes, even if he believes tax cutting is contrary to the national interest.

His views echo much of the Trump administration’s economic policy. Across the government, from taxes to the environment to banking, the administration favors corporate interests over policies to fight poverty or climate change or to protect borrowers.

Take environmental policy. President Trump pulled the U.S. out of the Paris climate accord because American participation might limit the use of fossil fuels, especially coal. Companies engaged in extracting and processing these fuels are the chief beneficiaries of his move. Their short-term interest is profits.

When a shareholder raised environmental issues at the Berkshire meeting, Charlie Munger, Buffett’s sidekick, feigned falling asleep. You cannot produce good profits, it seems, if you worry too much about air quality.

Any harmful effects of Trump’s environmental policy are simply denied or delayed, while profit gains may come before the next election. If your constituents are corporate operators, you favor them now and don’t allow views of the long-term effect of climate change to influence your policies.

Though Buffett buys and holds his investments in the belief they will remain profitable for years, Trump does not take the long view. It matters little that coal is fading as it gives way to natural gas and renewable energy, if it can provide an immediate and politically profitable boost.

At least one analyst has pointed out that the Trump policy is not market oriented so much as business oriented. Promoting coal undercuts increased economic efficiency, which is what the market should produce. Helping coal is only about immediate profit and the false promise of retaining jobs in a dying industry.

The effort to promote business over the individual’s interest runs through Trump policy. The tax bill has given the false impression of cuts for average taxpayers. Their withholding has been lowered in hopes of influencing their votes in November.

But next April, when the expected tax refunds for many don’t materialize, they will learn the hard way about short-term fixes. Far greater corporate tax benefits will continue.

The soundness of the banking system, the level playing field of the Internet, and the protection of the shoreline are all being sacrificed to business interests. That’s all right, in theory, because booming business should add jobs, though unemployment is now about as low as it can get.

Buffett is a chronic optimist. He believes the U.S. will survive and flourish, because it always has. He notes the country survived the Civil War. Tell that to people who suffered under Jim Crow laws for another century after the war ended.

Buffett divorces his personal integrity from investment decisions. For a man who invests for the long run, that approach seems to be short-sighted.

Friday, May 4, 2018

Privacy, security, truth vulnerable -- but here’s an answer

You leave your home, get in your car and drive off to shop, go to the bank and say hello to a friend.

As usual, in the rear view mirror, you see a car following you.  It’s not the same car every day, but one’s always there.  The vehicle never comes close, and the driver never tries to talk with you.  But, when you stop, he or she stops, always taking notes.  It’s a bit unnerving.

That really doesn’t happen, at least that you’re aware of.  Not in the world you can see.  But in the invisible world, it is happening all the time.  You are being followed, and some people know almost everything about you. 

What you read, what you write and what you buy, even your political views, can be accessed by corporate and political data collectors or lone hackers.

The explosion of the Internet to allow for massive, personal communication and greater commerce has transformed the world.  Believing in the anonymity provided by huge numbers using social media, many have abandoned their privacy.  Undisciplined use of social media destroys privacy.

While this cannot be undone, it can be slowed. The best way to protect privacy and prevent misuse of the Internet is for individuals to actively protect as much of their privacy as they would like to keep. 

A single tool can increase privacy and also improve security and drastically reduce “fake news.”  Paper.

Privacy begins with communication.  A snail-mail letter goes only to the intended recipient not as a “Reply to All” message.  Because it takes more effort than email or texting, we can think more carefully as we write.  Usually, nobody, except law enforcement, can know what’s in the envelope.

Right now, many people blindly trust billing.  Instead of refusing printed receipts, we should ask for them and review monthly statements from banks and credit card companies.  Look at the Central Maine Power billing investigation, though it only occurred when bills skyrocketed.

Along the same lines, people would do well to obtain and keep bills, statements and tax returns.  They are hard-copy records of their financial lives, not entirely dependent on data stored on remote computers and accessible only through the Internet.

The ‘cloud” in which one can store personal data on a distant computer is a useful idea, but can anyone say with absolute certainty that their information is secure from prying eyes or tampering?  At least, we should print out the most essential records.

Some people remember paper’s value.  While checks are giving way to electronic wallets and transfers, their rate of decline has markedly slowed.

Using checks could even affect retail prices.  Merchants don’t pay for accepting checks, but their credit card charges involve bank fees.  If their costs are lower, some merchants might share the savings. 

How vulnerable is your electric service?  The federal government has reported that Russian hackers have already been able to penetrate some parts of the electric grid.  They could greatly disrupt the economy if they closed down a major part of it.

The electric transmission system was operated for decades using printed manuals.  While it did not work as well as it does today, it still could be operated by people flipping switches.  The problem is that operating manuals have been discarded. Bring back the paper manuals and test operations by the book once a year.

But there’s an even bigger role for paper.  Your vote, even if counted electronically, should be cast on a hand-marked paper ballot. If the Russians undermined electronic tabulation, printed ballots that could be counted manually as a backup. 

By the way, when outsiders try to influence an election by false reports spread over social media, there’s even a paper solution for that.  The newspaper you may now be holding or the verifiable electronic version of it cannot be used by a hacker in China or Russia to lead voters astray.

Russian tampering in the 2016 elections depended mainly on use of the social media, which were never intended to be reliable news sources.  Newspaper reports, subject to review by editors, and clearly identified opinion, like this column, can block freelancing by foreigners. Fact-checking, done by some papers to rebut fake news, also helps.

The electronic age is like the rising tide.  It cannot and should not be stopped.  But it is not a replacement for old-fashioned paper.

The hard copy in our own possession is the best way to maintain privacy, promote security and keep informed.   That’s worth some extra effort on our part.

Friday, April 27, 2018

Media promotes partisan wars: “Let’s you and him fight.”

In a 1930s comic strip, Popeye the Sailor argued heatedly with Bluto, his enormous nemesis. “Let’s you and him fight,” Wimpy urged Popeye. That’s the first known use of the phrase.

Like Wimpy, the national media goads opposing sides into a fight, because a good dispute attracts viewers or readers.

Of course, bitter divisiveness exists between some conservatives and liberals, Republicans and Democrats. Differences run deep, and opinions may cause some to believe their opponents are not only wrong, but bad. Why make it worse?

Here’s a recent story that makes the point. It’s about a U.S. Supreme Court decision that attracted editorial attention last week, because it suggested that a conservative justice had flipped sides.

The decision came on a 5-to-4 vote of the justices. There are supposedly four liberals and four conservatives and possibly one swing justice on the Court.

The big news was Neil Gorsuch, the conservative judge put on the Court by President Trump, had voted with the four liberals. His appointment is one of Trump’s proudest accomplishments, so the implication in some reports was that Gorsuch had surprisingly betrayed Trump.

All of this added up to major news in the conservative-liberal wars. “Gorsuch Sides With Liberal Justices,” trumpeted a Wall Street Journal headline.

The only problem is the case had little to do with ideology. The Supreme Court was struggling, as usual, to determine what the law is.

In 2015, the Court voted 8-1 that a catchall federal law defining a violent felony was so vague that it could not be used in criminal sentencing. In that case, merely carrying an illegal weapon did not necessarily threaten violence. Courts could not interpret the law to make it a violent act.

The decision was written by Justice Antonin Scalia, the conservative hero whose sudden death opened the way to Gorsuch’s appointment as his successor on the Court. All the liberal justices and all the conservatives but one agreed with Scalia.

A week ago, the Court had a similar case. But this time, the language of the law was slightly different, and it did not relate to criminal punishment. The defendant could be thrown out of the country if he had threatened violence.

The four liberals found the law in this case was just about as unclear as in the previous case and the definition of violence too vague to apply. The sole dissenter in the first case kept to his view that neither wording was vague.

The minority in last week’s case thought the catchall language differed enough that this version was not unduly vague. The government argued that expulsion is not the same as being convicted of a crime, so the new language was good enough. One justice thought vagueness only mattered in criminal cases.

Gorsuch agreed with Scalia’s reasoning and said it should apply to civil as well as criminal matters. In other words, the new justice took the same position on vagueness as the conservative idol he replaced. He ended up agreeing with the liberals who stuck to Scalia’s previous decision.

If you find all this either confusing or boring, you can understand why the Supreme Court should be composed of people able to think in depth about the law. But you may also see how, never mind the media coverage, this case had little to do with liberals versus conservatives.

Gorsuch was just doing his job, not fighting an ideological war. But it seemed newsworthy to imply that his decision was an unexpected switch to the left. That beats remarking that the liberals, along with Gorsuch, adopted a conservative position for individual rights against government power.

The media has taken to identifying all federal judges by whether they were appointed by a Republican or Democratic president. The false assumption is that they make decisions based on their political affiliation, though their job is to decide based on the law.

Recently, three judges on a federal appeals courts ruled that the Attorney-General could not cut off some funding for Chicago after he had determined it was a “sanctuary” city. The court found the Constitution’s separation of powers allowed only Congress, not an executive branch official, to make such a decision

The Republican Attorney-General was following directions from a Republican president. All three judges had been appointed by Republican presidents. But their loyalty was to the Constitution not to a political party.

In “Let’s You and Him Fight,” a cartoon film based on the comic strip, Popeye and Bluto fought to a draw.

The media should quit promoting more Popeye-Bluto bouts.

Friday, April 20, 2018

Federal debt out of control, crisis looms

Last week, the U.S. got news of an impending national disaster, a situation that could have “serious negative consequences for the budget and the nation.”

The warning came from the Congressional Budget Office, a rare, nonpartisan federal agency. Almost nobody paid attention.

The threat comes from ever-increasing deficits and an exploding national debt. It is not a bill that will be paid by our grandchildren, as is often said, but one that we will have to begin paying soon.
The national debt will soon be the same size as the value of the country’s entire annual economy.

While the U.S. usually runs deficits, two recent congressional actions have taken the unbalanced budget to a whole new level.

First came the tax cut bill. New breaks were added to the tax code, mainly to benefit the wealthy and corporations. In theory, they would use their added funds to invest. Everybody knew the argument was flimsy that such investment would spur new tax revenues.

The CBO says that effect will last about a year, then melt. The tax cut will never pay for itself.

Without cutting spending, the result is a growing deficit each year.

While revenues were cut, spending was not touched. Then came the spending bill. Congress decided to spend more on almost all government programs.

For the Republicans to gain votes they needed for their expanded defense spending, they agreed to let the Democrats have more funding for their favorite programs. Previously agreed spending caps, applying to both sides, became historic relics.

The Republicans traditionally charged the Democrats with seeking a “tax and spend” economy. The Dems would add more government programs and propose raising taxes to pay for them. Nobody likes higher taxes, so the GOP would be “deficit hawks” and oppose them.

When President Obama proposed more economic stimulus spending, the Republicans opposed it because of increased deficits. Now, the deficit hawks have flown away, though they could reappear just as soon as there’s a Democratic president.

What’s more, technology will reduce payrolls. The economy will take a break from its continuous growth. The effect will be even less tax revenues.

How does the U.S. pay for the growing annual deficit? It borrows the money. It can borrow because the U.S. dollar is the world’s standard, based on the belief that the country always pays its debts.

Spending on “mandatory” programs like Social Security and Medicare now accounts for 62 percent of all outlays. “Discretionary” programs take 30 percent with half of that going to defense. The fastest growing portion is interest on the national debt, now amounting to 8 percent.

Because the size of the debt will soon come to equal all national output, the CBO warns of a “fiscal crisis,” a situation in which the government can’t pay its bills. The effect of this crisis would quickly spread across the entire economy.

Annual shortfalls in the federal budget must be cut to keep the national debt from bringing on this crisis. How can the yearly deficit be reduced?

The government could cut spending. Departing House Speaker Paul Ryan targeted major programs like Social Security and Medicare. Social Security could be made financially healthier without affecting benefits for those who need them. But it’s not realistic to propose across-the-board cuts.

Could we keep borrowing? Debt service costs less than paying the full price. But the CBO says more borrowing will suck money out of the economy, raising interest rates for both the government and the people. That leaves less money for saving and an even bigger federal debt.

The government could simply print more money, almost magically giving itself the ability to pay off its debt. But that would devalue everybody’s dollar, making what people and the government buys more expensive. That amounts to a hidden tax. It would also reduce the world’s confidence in the dollar as the standard currency.

Finally, the government could raise taxes, using the philosophy “there’s no free lunch.” If the people need or want government programs, they should pay for them and not try to pass the cost on to later generations. And it’s not possible to pay only for programs you like.

The alarming CBO report warns that we can no longer pile on the debt and expect future taxpayers to cover the deficit. We must recognize that refusing to increase taxes as spending grows is beginning to fail.

As the report shows, the future is now and the next ten years will only be worse.

The real bottom line? A tax increase becomes inevitable.