Sunday, October 6, 2013

Hey, Congress! You Are Asking the Wrong Question!


The brinksmanship in Washington has a lot of people upset (including me).  But the reasons differ depending upon where you sit and what relationships you have with the federal government.  Indeed, not everyone is upset.  A client told me he was in the middle of an IRS audit when the government shut down.  He wasn’t upset when the auditors vanished. 

A conservative friend of mine is upset with the direction of the Republican Party.  He quoted Napoleon over lunch.  In his view, Obamacare will collapse of its own weight and Republicans would be wise to let it.  “Never interrupt your enemy while he's making a mistake. That's bad manners,” quipped Napoleon.

However, Wall Street Journal economics editor David Wessel extols the virtues of Obamacare in an Op-Ed piece called “Obamacare – A Game Changer in the Making?” 

The Economist tries to elevate the debate a bit, pointing out “when you are brawling on the edge of a cliff the big question is not ‘Who is right?’ but ‘What the hell are you doing on the edge of a cliff?’ ” 

Meanwhile, Joshua Green asserts that “Republicans Are No Longer the Party of Business” in Bloomberg Businessweek.  Green starts with an anecdote about a Tennessee businessman whose company makes furniture.  He says, “It’s as if House Republicans are playing suicide bomber with the U.S. economy.”  People who make furniture are affected by a slow down in government-funded mortgages. 

None of them are asking the right question. 

Why is the government in the mortgage business?  For that matter, why are they in any business?

One could challenge a lot of things our government does.  The government is the largest landowner in the nation.  By some estimates it owns approximately $128 Trillion of real estate and mineral rights. 

Sell 10% of it and our debt problem vanishes.  Sell another 10% and no one pays taxes for the next three years.

The federal government also distributes between $10 Billion and $30 Billion in farm subsidies each year.  Originally intended to provide support to poor farmers who might again suffer the trials of the Great Depression and the Dustbowl, it now provides support to absentee landowners who are millionaires many times over.  The bottom 80% of recipients gets an average of $587 per year. 

Try to eliminate the subsidies and you’ll run into a buzz saw of mostly Republican congressmen who fight to protect the economic interests who send them back to Washington every two years.

Changing this paradigm doesn’t help to resolve the current budget and debt ceiling crisis.  However, it does go to the core of some foundational principles.

Americans take a lot for granted.  We expect the water from our faucets to be potable, the electric power grid to be reliable and the transportation systems to be safe.  We expect our military to be strong, our economy to be prosperous and our institutions to protect us from ourselves.

We have the luxury of those expectations because of the last 150 years of prosperity.  Yet, we have lost track of what got us here. 

The principles of economic freedom – predictable policy, rule of law, strong incentives, reliance on markets, limited role of government – are no longer on the minds of those who govern.  So, corporate interests have adapted.  In a world where lobbying for favorable tax and regulatory treatment can have a dramatic effect on your bottom line, big businesses benefit by focusing on Washington.  Interrupt that activity and the muddle that is the media somehow draws the conclusion that “Republicans Are No Longer the Party of Business”.

In the lingua franca of today’s political environment, the term economic freedom sounds conservative and Republican.  However, since WW II, the violators have come from both parties.  Starting in the 1960s, Presidents Kennedy, Johnson, Nixon, Ford and Carter approved a succession of laws, regulations and restrictions that violated the core values of the economic system that underpins our economic strength.  Perhaps no violation was more egregious than Nixon’s imposition of wage and price controls in 1971. 

An America that transforms itself from a free market juggernaut to a government that funds its favored interests will not maintain its economic leadership.  Instead, we will continue to be mired in the current slog of low economic growth rates and expansionist monetary policy. 

A reversal of that course will tread on the entrenched interests of big corporations who have benefited from the results of their influence on electoral outcomes.  Yet, that is what’s necessary to restore economic growth, the strength of the middle class and continued American hegemony.  The only question is…

WHO WILL LEAD?

15 comments:

  1. Brilliant, John. (And beautifully written!)

    David Altshuler, M.S.

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  2. Jason G. Ramage, MS, MBA, RBP
    Staff Scientist

    Great article John. If only our politicians cared about the US' future instead of just getting re-elected, most of our problems could easily be solved. Well, maybe not easily, but still solved.

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  3. Louis Partida
    Navy Range Subject Matter Expert at SAIC

    I don't necessarily side with any one party. The latest debacle is a failure of our government that is shared by all parties and players, to include the Supreme Court. What I have issue with is the seeming one-sided coverage of major media. The fact is that the House of Representatives have passed and forwarded Budgets and Bills to the Senate, only to have them stopped or killed, mostly by the Senate Leader, the Honorable(?!?) Mr. Read, who was selected to represent his state at the federal level, not act as the enforcer of a liberal agenda supported by only his party. The Senate has become the defacto "House of NO" and continue to refuse to negotiate, compromise or conference with their fellow legislators on any way ahead. In fact he seems to reject history and constitutional law, claiming that out of all the laws in the land the ACA is safe from any alteration, and he ignores the fact that there are now more elected representatives of the citizenship that would vote to repeal the ACA than voted for it in the first place.

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  4. Well stated John. That it makes so much sense makes the whole mess all the more frustrating.

    Ed

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  5. John;
    This is a good one! I think you are spot on with this analysis...what do we do to get people back on track? I am dealing with a lack of leadership in my own community; why is it so difficult to get our overly spoiled Americans to get out and vote? It's a sin against all of America when we get less than 20% of the registered voters to the polls here in the primary election. They have all the reasons in the world to take advantage of their freedom to vote:
    * a lake that is Mesotrophic and needs to be cleaned up
    * a budget that is in the deficit
    * a "leader/supervisor" who sits in his barber shop and waits for the community to come visit him (and his hunting fishing & buddies)
    Why is it that Americans would rather sit and watch reality TV shows? I don't get it. Linda

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  6. John,

    You couldn't be more spot-on. But so much of the electorate has become so dependent on government that it has become the "self licking ice cream cone" we all fear. The middle-class are the one voting in those that are willing to tolerate, and even cooperate, with government as it becomes more obtrusive and repressive every day. What institutions do we fix first; the media, the courts, academia, political parties, corporations,...? Where is the chink in the armor of the bloated bureaucracy?

    Dennis

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  7. John,

    There is much in your article to agree with. Most of all, the idea of finding root causes for the continued dysfunction we see in our government.

    My vote for a 'root cause' would be the increased strength and effectiveness of lobbyists and lobbying. However, lobbyists are nurtured by a campaign finance system that rewards those most skilled at 'gaming' the system. 'Gaming' being a polite term for buying votes and influence via offers of speaking engagements, 'consulting' assignments, and other thinly disguised payoffs.

    I would also cite gerrymandering as another root cause - where voting districts are distorted so that small numbers of extermists of either party can play fast and loose with our government because they're almost guaranteed re-election by so doing.

    Fix campaign finance, reduce the power of lobbyists, and eliminate gerrymandering and much of the dysfunction will go away, replaced by an incentive to govern from the middle.

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  8. Pete Clarke
    Business Development Director

    Funny you quote, Josh Green. I know him well.. he is not a good reporter he doesn't check and verify his sources. I have personally caught him trying to use unnamed sources for articles without verifying if they were even credible or not..

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  9. @Pete. By funny I would guess you don't mean funny ha-ha. He doesn't seem to have much understanding of capitalism or economics. It's a sad commentary on the state of the media if this guy writes for Businessweek.

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  10. Pete Clarke
    Business Development Director

    he doesnt . I know him pretty well. he is a nice guy, but he is clueless.. he picks some out-liar furniture guy to make his point about the GOP? the government has been shut down only week and already furniture sales are down. LOL.. who cares..

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  11. John W. Stevens, Jr.
    President & Principal at Synergistic Services, Inc.

    John -- Excellent article and a great point to start a new debate. I am sure to Ralph and a few others, my mantra will sound like the proverbial broken record. However, I will continue to tell the truth as I see it.

    I ask myself this question -- what single action by the US Federal Government would have the greatest impact on restoring what once was great about America. I believe that the answer to that question is an easy one. Its the implementation that is the bear.

    Our Federal Government has operated for a very long time, going back at least as far as Woodrow Wilson, far outside the boundaries established by the Constitution in accordance with the enumerated powers. Our Federal Government was not intended to wield unlimited power over the people and the states. To the contrary, the Tenth Amendment clearly states "The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

    The extent to which the Government has exceeded its constitutional powers did not suddenly jump in the course of a single day. The changes have occurred slowly, incrementally over time until today, the Government is a many armed, many mouthed monster with an insatiable appetite for ever greater power and ever increasing resources to feed the monster.

    But there is a far more insidious effect that the growth of the Federal Government has had on the nation. That is, as power has migrated from the local to the state, and finally to the Federal Government, the representation enjoyed by the citizenry has steadily declined.

    While at the time of our nation's founding, it was not all that unusual for many people to personally know or be at least acquainted with their elected Federal representatives and they certainly knew their local and state representatives, today each of us in represented by one US Representative who also represents approximately 625 thousand other citizens in his or her district and each US Senator represents 3.35 million other citizens.

    What this means is that individual citizens on average have NO representation and NO influence over those who legislate our laws. As a result, influence devolves to those who have the means to purchase the greatest influence. For elected representatives who must spend time every single day they are in office raising money to support their next election cycle, those who give the most, gain the greatest influence, whether they are corporations, unions, lobbyists, special interest groups, or the independently wealthy. Furthermore, while many of those who enter elective politics tend to be idealists, too many of them are failed lawyers jumping on the gravy train, or they are corrupted by the Federal election system by the end of their first term in office.

    If our nation ever wishes to recapture the days of our national greatness, we must return to a strictly constitutional government, with powers limited only to those enumerated in the Constitution or the amendments. We must drastically shrink the size of Government, reduce the Government's bottomless appetite, and devolve power back to the lowest level of government capable of providing required services.

    That should mean that your ox gets gored, but so does mine. Any lesser action is highly unlikely to have any effect whatsoever, far less a positive impact.

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  12. Christopher Smith
    Senior Consultant at Deloitte

    @Louis
    We had a course alteration a century ago:
    a. The size of the House froze in 1910, making it a Little Senate => http://www.thirty-thousand.org/
    b. The States were frozen out in 1913 (17th A.) making it a Big House.
    c. The Federal Government has eminent domain over your wallet since 1913, and can fund arbitrary vote-buying schemes via the Federal Reserve (16th A. & Federal Reserve Act)

    We are now a de-facto aristocracy. The system rewards incumbency. The Little Senate doesn't read the multi-ream abridgements of liberty it passes, and the 4th branch of government, the Federal Bureaucracy, does the job that American elected officials won't do (see a. above). Meanwhile, the SCOTUS offers mental gymnastics to cover the creeping tyranny.

    >Mr. Read[sic], who was selected to represent his state at the federal level, not act as the enforcer of a liberal agenda supported by only his party.
    In light of my sketch above, you're offering a nod to a Constitutional order badly in need of restoration. We should all read Mark Levin:
    http://www.amazon.com/Liberty-Amendments-Restoring-American-ebook/dp/B00CO4IP5M/ref=sr_1_1?ie=UTF8&qid=1381315604&sr=8-1&keywords=mark+levin+liberty+amendments

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  13. Christopher Smith
    Senior Consultant at Deloitte

    @Louis
    We had a course alteration a century ago:
    a. The size of the House froze in 1910, making it a Little Senate => http://www.thirty-thousand.org/
    b. The States were frozen out in 1913 (17th A.) making it a Big House.
    c. The Federal Government has eminent domain over your wallet since 1913, and can fund arbitrary vote-buying schemes via the Federal Reserve (16th A. & Federal Reserve Act)

    We are now a de-facto aristocracy. The system rewards incumbency. The Little Senate doesn't read the multi-ream abridgements of liberty it passes, and the 4th branch of government, the Federal Bureaucracy, does the job that American elected officials won't do (see a. above). Meanwhile, the SCOTUS offers mental gymnastics to cover the creeping tyranny.

    >Mr. Read[sic], who was selected to represent his state at the federal level, not act as the enforcer of a liberal agenda supported by only his party.
    In light of my sketch above, you're offering a nod to a Constitutional order badly in need of restoration. We should all read Mark Levin:
    http://www.amazon.com/Liberty-Amendments-Restoring-American-ebook/dp/B00CO4IP5M/ref=sr_1_1?ie=UTF8&qid=1381315604&sr=8-1&keywords=mark+levin+liberty+amendments

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  14. Carl Amiaga
    Owner, Temps Unlimited, Inc

    John...right on target!

    It all boils down to the fact that we need a simple, evenly applied tax code. We also need understandable laws... with no exemptions for government employees, unions, businesses, or any other special interest groups.

    There would then be no use for lobbyists, government administrative jobs could be slashed, the IRS could be downsized dramatically, and US business could get back to being productive.

    Unfortunately, the government has seized so much power from its citizens at this point that there is no way to stand up against the tyranny...Orwell saw it coming.

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  15. Jeffery Pyle
    Consultant at TekSystems

    John, the Republicans went into this conflict without a set of unified goals. No goals means no strategy, either.
    This conflict has been months in the making and the Democrats took their unreasonable, intransigent position early on and have only recently begun to soften their public stance. Meanwhile, the entire Congress (and Obama) took a long summer vacation. The Republicans leadership from both houses should have caucused, decided upon a unified set of achievable goals, devised their strategy, tactics and talking points and then worked for a buy-in from the rank and file. Boehner should have called the House back from vacation early to address the budget and the debt ceiling.

    The idea of using this budget problems as a wedge to repeal or defund the ACA was foolish and futile. It set the wrong tone and played right into the Democrat talking points.

    I like your friend's Napoleon quote, it's highly apropos. The best way to end ObamaCare is to let people have it. It's unworkable, as incomprehensible as the tax code and our government (no matter who is in the White House) lacks the competence to get it right. We had less than two years to prepare for D-Day (the invasion of Normandy in 1944) but more than twice that long to get ready for the ACA. The roll-out is class-three rolling cluster [mess] and the public's initial experience with trying to use the online system will further erode support.

    Remember, the public has never wanted ObamaCare, and it gets less popular as time goes on. (In fairness, some who don't like thinks the law doesn't go far enough. I've not seen a breakdown those who oppose the ACA. How many want it a single-payer system instead?) The Republicans are making a second big mistake by asking for a one-year delay on the individual requirement. Instead, they should insist the law be implemented as written and let the failures fall squarely on the heads of the Democrats.

    What you do need to understand is this crisis didn't happen by accident. We didn't just find ourselves fighting next to a cliff, it was planned. The Democrats have unified goals -- remove any budget constraints and get Nancy Pelosi back as Speaker of the House. The strategy is to manufacture a crisis, demonize the opposition, inflame public sentiment and place all blame on the opposition. They believe the Republican opposition will cave (not without good reason) and the voters will punish the GOP in the 2014 elections.

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