Tuesday, April 27, 2010

Reduce the Federal Deficit by Cutting the Military Budget

I can't believe it but someone in the federal government actually has the guts to discuss cutting the military budget! Not surprisingly, that brave someone is Representative Barney Frank (D-Mass.). Frank has put together his own commission to recommend steps to reduce the federal deficit, and the group will look at specific ways to cut military spending. Frank estimates that $100 billion a year could be trimmed easily.

Have you ever looked at graphs of where your federal tax dollars go? It is astonishing how little money goes to departments such as Education or Health and Human Services, and how much goes to the military. Most information you see about the federal budget includes the moneys spent on Social Security and Medicare which is completely misleading; these are in actuality separate from the federal budget, completely financed through payroll taxes.

The War Resisters League has a pie chart that will shock you: according to their calculations, 54% of our tax dollars go to military spending, both past and present.

‘Current military’ spending amounts to $965 billion (2009 budget), which includes Dept. of Defense ($653 billion), the military portion from other departments such as the nuclear weapons program of the Department of Energy ($150 billion), and an additional $162 billion to supplement the "misleading and vast underestimate" for the ‘war on terror’ of only $38 billion. ‘Past military’ represents veterans’ benefits plus 80% of the interest on the debt. [If the government does not have enough money to finance a war (or spending for its hefty military budgets), they borrow through loans, savings bonds, and so forth. This borrowing (done heavily during World War II and the Vietnam War) comes back in later years as ‘hidden’ military spending through interest payments on the national debt.

The story about Rep. Frank's commission was reported by Dan Froomkin in the Huffington Post, "Deficit Group formed by Barney Frank Looks Where Others Dare Not—At Defense Budget":

Defense cuts seems to be politically off-limits these days, but the group convened by the outspoken liberal congressman from Massachusetts shares a belief that America is "overextended and overcommitted" and that there should be a "substantial reduction in the reach of American military commitments," Frank told HuffPost.

He expects the group to propose reducing the number of overseas bases, especially in the rich countries of Western Europe and Japan. "There's a big debate right now about where 3,000 Marines in Okinawa should go. My suggestion is Nebraska," he said. And he expects it will propose cutting weapons systems that don't meet any plausible need.. "No matter how good a weapon is technically, we shouldn't buy it unless it has an enemy," he said.

Frank despairs that the deficit-reduction debate plays out in Washington as if there are only two choices: raise taxes or cut entitlements, such as Social Security and Medicare.

Even President Obama's proposed freeze on discretionary spending explicitly rules out any defense cuts, which Frank describes as "my biggest difference" with the president since he came into office.

...[S]pending has increased completely out of proportion with the need, he said. "During the Cold War, 26 percent of military spending in the world was American; now it's 41 percent. So we have fewer enemies and we're spending more money."

The key to defense budget cutting, Frank said, is to attack the notion that the U.S. military needs to be everywhere in the world militarily. "If you let them insist that there is a need for worldwide military engagement, we will be at a disadvantage when we fight the specific fights" to cut programs, he said.

Once you drop that notion, he said, "I believe we would save over $100 billion a year over what's been proposed."

The F-35 fighter program alone may end up costing $338 billion or more. And according to author Chalmers Johnson, the U.S. military currently spends as much as $250 billion a year maintaining approximately 865 facilities in more than 40 countries and overseas U.S. territories.

Frank is particularly critical of the proposed missile defense shield in Eastern Europe -- a Bush idea that Obama has adopted. "Defending Poland, the Czech Republic and I think it's Bulgaria against Iranian missile attack? I think what happened is the software from a video game escaped" and got into the Pentagon's computers, he said.

Wednesday, April 21, 2010

Wall Street Makes Stealing an Art

This week Citigroup announced that it had earned a profit of $4.4 billion in the first quarter of this year, joining Bank of America ($3.2 billion) and JPMorgan Chase ($3.3 billion) in bouncing back quite spectacularly from the catastrophic crash of 2008.

How is it possible that with the economy still so abysmal for most Americans, Wall Street and the bankers are back to rolling in the dough?

One explanation is that the Federal Reserve is giving the bankers a continuing bailout by keeping interest rates at rock-bottom levels. In a New York Times blog (“You’re Welcome, Wall Street”), William Cohan writes that these current profits are obscene:

Mostly, though, Wall Street is making money by taking advantage of its rock-bottom cost of capital, provided courtesy of the Federal Reserve — now that the big Wall Street firms are all bank holding companies — and then turning around and lending it at much higher rates.

The easiest and most profitable risk-adjusted trade available for the banks is to borrow billions from the Fed — at a cost of around half a percentage point — and then to lend the money back to the U.S. Treasury at yields of around 3 percent, or higher, a moment later. The imbedded profit — of some 2.5 percentage points — is an outright and ongoing gift from American taxpayers to Wall Street.

You’re welcome.

And now for the truly obscene part. By keeping interest rates so stubbornly low — and by remaining committed to doing so — the Fed is crushing the rest of us, especially senior citizens on fixed incomes and those who have rediscovered saving in order to have some peace of mind.

For instance, despite my bank calling it a “premier platinum savings” account, I am getting a measly 0.15 percent interest rate. On my “premier platinum checking” account, the interest rate is 0.01 percent. In an essay in The Wall Street Journal recently, Charles Schwab pointed out that there is more than $7.5 trillion in American household wealth stored in short-term, interest-bearing checking, savings and CD accounts. (The average interest rate for a one-year CD is 1.3 percent.)

Our savings is another source of virtually free capital for banks to use to lend out at much higher rates.

But Wall Street is stealing from us in so many other ways. In his column in today’s Washington Post, Harold Meyerson discusses the improving prospects of financial reform now that the Republicans have realized that they can’t play the party of No on this issue. Maybe what was most encouraging was the fact that large businesses are demanding reform of derivatives because the Wall Street casino is hurting their bottom line.

On Tuesday, leaders of industries that actually need to lock in prices on real commodities -- in particular, oil -- went to the Senate to endorse Lincoln's bill. "In 2008," said James May, president of the Air Transport Association of America, "we burned the same amount of fuel we burned in 2003, but we paid $42 billion more." The difference, he said, was the result of the vast increase in oil speculation carried on through derivatives. Over the past half-decade, for instance, the largest holder of home heating oil often has not been an energy company but, rather, Morgan Stanley. Such speculation, estimated Sean Cota of the Petroleum Marketers Association of America, has increased the cost of gas at the pump by about a dollar a gallon.

"We need predictability in prices," Cota said Tuesday. "The banks want volatility. . . . Old-fashioned bonds built Hoover Dam, but they were paid off over many years. The banks are only interested in trades that pay off in the next 30 seconds. . . . They have no concern for the future of the larger economy."

Friday, April 16, 2010

Krugman uses Fire Department Analogy

A couple of posts down while discussing socialism I use fire departments as an example of socialism in action. In today's New York Times column, "The Fire Next Time," Paul Krugman brings in fire departments to skewer Mitch McConnell's position on financial reform:

On Tuesday, Mitch McConnell, the Senate minority leader, called for the abolition of municipal fire departments.

Firefighters, he declared, “won’t solve the problems that led to recent fires. They will make them worse.” The existence of fire departments, he went on, “not only allows for taxpayer-funded bailouts of burning buildings; it institutionalizes them.” He concluded, “The way to solve this problem is to let the people who make the mistakes that lead to fires pay for them. We won’t solve this problem until the biggest buildings are allowed to burn.”

O.K., I fibbed a bit. Mr. McConnell said almost everything I attributed to him, but he was talking about financial reform, not fire reform. In particular, he was objecting not to the existence of fire departments, but to legislation that would give the government the power to seize and restructure failing financial institutions.

But it amounts to the same thing.

Krugman then goes on to claim that McConnell is "pretending to stand up for taxpayers against Wall Street while in fact doing just the opposite."

The financial industry is going to pull out all the stops to avoid regulation, and the Republicans are their willing lapdogs. The Democrats aren't much better, unfortunately. We'll get some lukewarm reforms that will give the Democrats something to brag about in this fall's election, but in a few years we'll be suffering from the next market failure.

[T]he financial industry wants to avoid serious regulation; it wants to be left free to engage in the same behavior that created this crisis. It’s worth remembering that between the 1930s and the 1980s, there weren’t any really big financial bailouts, because strong regulation kept most banks out of trouble. It was only with Reagan-era deregulation that big bank disasters re-emerged. In fact, relative to the size of the economy, the taxpayer costs of the savings and loan disaster, which unfolded in the Reagan years, were much higher than anything likely to happen under President Obama.

Sunday, April 11, 2010

On the Subject of Whiteness

One of my earliest posts in this blog was on the subject of race and the U.S. Census; that had to do with the controversy about the inclusion of the word “negro” in the question about race. My recommendation was that everyone choose “other” for their race and write in “human.” (The Census information page warns you that if you write in “human” your race will not be counted; I ended up marking “white”).

When I got my census form I was amazed at the number of categories for people of Asian and Pacific Island extraction—Korean, Filipino, and Samoan all had individual categories—but there were no individualizing categories for “White.”

What does “white” mean anyway? The absence of any trace of all the other categories? Some kind of negative race, where everything else is subtracted out?

The April 12, 2010 issue of The New Yorker has a review by Kelefa Sanneh (“Beyond the Pale”) of some recent books about race and in particular, the White race. I capitalize it, even though that seems strange to me, after reading some articles in a Black women’s magazine I picked up at a doctor’s office—it had never occurred to me before seeing it there that White should be capitalized like Black or Hispanic.

The article quotes labor historian David Roediger’s 1994 book “Towards the Abolition of Whiteness”: “Whiteness describes, from Little Big Horn to Simi Valley, not a culture but precisely the absence of culture. It is the empty and therefore terrifying attempt to build an identity based on what one isn’t and on whom one can hold back.”

The United States was founded on the one-drop rule—if there is the slightest amount of “colored” blood in a person they cannot be considered white. Our current President proves that rule is still in effect—why is he called Black when he is half White? (see my article “Dreaming of a Post-Racial Future”)

The New Yorker article chronicles the history of whiteness and shows that the definition has shifted over the years. In eighteenth century America, “white” meant Anglo-Saxons from Great Britain. Eastern and Southern Europeans—Poles, Russians, Italians—were not included in the category of “white.” White indicated the people who could have political power. To be white meant you were part of the dominant culture.

Over time, as more and more immigrants from many nations landed on these shores, the definition of whiteness grew to include more Europeans. However, as Sanneh writes, “There remains something particularly fraught about the whiteness of Italian-Americans, which has been contested for centuries. Roediger notes that ‘Guineas,’ an old marker for African-Americans originally signaling their origins on the West African slaving coast, came to be applied widely and pejoratively to Italian-Americans.”

And now the question is being asked, are Hispanics White? The 2010 Census asks about Hispanic origin in the question before the race question, as if the designers of the Census were confused. Yesterday I saw a protest by Latinos over racial profiling, and they were yelling out, “Hispanics are white, and brown, and black, and yellow.” They were advocating the end of the concept of races.

Sanneh ends the article by encouraging the idea of a “white” people and culture, which seems odd to me. “But,” he concludes, “if the old race theory was brutally reductive, there is something reductive, too, about the idea that whiteness, for all its paradoxes, isn’t real. The history of human culture is the history of forgeries that become genuine, categories that people make and cannot simply unmake. So we should probably stop thinking of whiteness as an error, and start thinking of it, instead, as a work in progress. Historians have sometimes framed the treacherous history of whiteness as the slow death of an idea. Perhaps it’s time we start viewing it, instead, as the slow birth of a people.”

It’s too bad Sanneh hadn’t heard of Martin Mull’s hilarious spoof on whiteness, called “The History of White People in America” (published 1985). Mull’s book portrays whiteness as the middle-class WASP America of the 1950s. One of the memorable chapters is about a White Thanksgiving, with the turkey so dry from overcooking it requires one tureen of gravy per diner, served alongside the jello salad.

I think American life has gotten much more interesting and exciting as the whiteness of our culture has declined. Let’s do away with this politically-motivated racial construct.

Thursday, April 1, 2010

Karl Marx Will Have the Last Laugh

Recently I watched Michael Moore's latest film “Capitalism: A Love Story.” I think it was his best film; the only one that compares is his first, “Roger and Me.” In particular he did a good job laying out the history of the last 75 years, how the regulations and policies of the New Deal era brought about a golden era of middle-class prosperity which was then eviscerated by Reagan-era (and later) deregulation.

In one of the special features Moore speculates about what economic system will follow capitalism. I have often pondered that myself, and my conclusion is that Karl Marx had it right: socialism will succeed capitalism, and then communism will replace socialism.

I think Marx has been greatly misunderstood, including by people like Lenin and Stalin. Marx’s theory held that socialist revolutions would occur only in the most advanced capitalist countries; he envisioned it happening first in his home country of Germany. Russia would have been one of the last countries Marx would have thought ready for socialism: at the time of their 1917 revolution they had barely progressed past feudalism. Russia was not the capitalist, industrialized nation that Marx theorized was required for the advance to socialism.

Lately I have been thinking that Karl Marx will ultimately have the last laugh. In the 1990’s it must have been very difficult for Marxist scholars as triumphant conservatives proclaimed the “end of history”: supposedly capitalist democracy had triumphed over evil totalitarian socialism.

But now the financial crisis of 2008 showed the inherent weakness in unregulated capitalism. The financial system required a huge influx of government money to keep it from collapsing. What most of us don’t know is that similar government rescues have happened many times since the late 1970s, when the dismantling of New-Deal-era financial industry regulations began. I’ve just read Robert Kuttner’s “The Squandering of America,” published before this latest crisis in 2007, and he wrote: “In fact, the Federal Reserve System since the early 1980s, under Volcker and Greenspan, aggressively intervened in the economy more than a dozen times to countermand catastrophic market-driven disasters that could have caused repeats of the Great Depression.”

In his book Kuttner advocates a managed form of capitalism as a way to bring wide-spread prosperity.

What do I mean when I use the word “socialism”? An aggressively managed capitalism. One of the misconceptions about socialism is people think it equates with Marxism, and the “ownership of the means of production by the proletariat.” That is incorrect. The word “socialism” was coined in the early 1800s, before Marx, to describe the ideas of many early critics of industrial capitalism.

The American Heritage New Dictionary of Cultural Literacy defines socialism as “An economic system in which the production and distribution of goods are controlled substantially by the government rather than by private enterprise, and in which cooperation rather than competition guides economic activity.”

In the United States today we have a system in which there is quite a bit of “government control of the production of goods.” The minimum wage, health and safety laws, and pollution regulations are all examples of the way our government controls the way goods are produced in this country.

There was a period of time in this country when capitalism was much more unrestrained; it was known as the Gilded Age. This was the latter half of the nineteenth century. If you’d like to know a little about what life looked like under this rawer form of capitalism, read The Jungle, by Upton Sinclair (life without worker protections), or Terrors of the Table: The Curious History of Nutrition, by Walter Gratzer (life without food inspections).

One chapter of Gratzer’s book is entitled “Cheats and Poisoners,” and I recommend it to anyone who doesn’t believe in government regulation, because here is portrayed what the food supply looked like in those happy days before government started meddling in business. One example: watering-down of milk was extremely common, and something had to be done to conceal the dilution: “So flour, sugar, chalk, plaster of Paris, or ground rice, or a mixture of several of these, could be added, and a little pulped calves’ brains were found highly effective, especially to simulate cream. Another repellant stratagem was to throw snails into watered milk to thicken it with their mucous and lend an attractive froth.” Who needs the FDA, right?

A great example of socialism that we all participate in is insurance: many people pool their money to cover the few who suffer disasters.

We pool our resources when we pay taxes, and purchase such items as police and fire protection which protect everyone in the society (ideally). Your house may never burn down, and you may never have need of the police department, but do you begrudge them your tax dollars?

A free market fundamentalist would actually argue against the existence of these socialist protections. Fire-extinguishing could be a lucrative private business—why not have every householder contract with a private business for fire protection? Actually, this was how it was done for most of history. One of the richest men who ever lived was a Roman general and politician named Marcus Licinius Crassus. He owned much of Rome, and he built this empire through fire. When a fire had broken out Crassus would travel to the scene and purchase the burning building and the imperiled surrounding buildings at a steep discount. His small army of slaves would then put out the fire and rebuild.

Another form of socialism is the protection of the well-being of citizens: Social Security, Medicaid, and unemployment insurance for example. Of course the United States lags behind most advanced industrialized nations in this area, but the point remains, the United States does currently have socialist programs.

The truth is, our country has been moving away from capitalism in the direction of socialism for more than a hundred years now, and, no matter how loud the teabaggers yell, there is no turning back.