Tuesday, November 1, 2011
Wednesday, September 28, 2011
Tuesday, September 20, 2011
I think the story is a reasonably apt analogy of what we have been doing in the United States for the last 20 years or so. After World War II, the United States used its resources to build a powerful economy by investing in its educational system, in its infrastructure and in lots of public and privately funded research and development. We also encouraged immigration, thus regularly leavening society with ambitious new citizens.
In those days, we had – for whatever reason – a collective understanding that investing for the future would create continuing opportunities for future generations. These days we cannot seem to distinguish between investing and spending, seem focused on consumption rather than production and appear unwilling to recognize that failing to invest will leave future generations without the capabilities required to succeed in an ever more competitive world.
In the early 1950’s, we were spending nearly 5% of our GDP on infrastructure, while simultaneously laying other foundations for the success of future generations. We built the best educational system on the planet, created world class communication capabilities, encouraged research and development by both government and industry, urged businesses to increase manufacturing and distribution productivity, and built transportation systems able to move goods into, out of and within the country quickly and efficiently. These days, we spend less than 2% of GDP on infrastructure, and would need to spend $2 trillion just to repair what we have allowed to deteriorate. Since we have never created an adequate funding structure, there seems little hope we will find the money needed. Moreover, we have no effective mechanism to plan for the additional roads, bridges, water and septic systems, airports, mass transit systems, electrical distribution capabilities, and other things our kids and grandkids will need in future years.
Hardly a day goes by in which we are not reminded, in one way or another, of the growing consequences of our myopia. Our schools are turning out students unable to compete with students from other countries. Our electrical distribution grid is so heavily loaded that whole sections of the country go dark in response to minor problems at single facilities. We remain dependent on other countries, many of them actively hostile, for major portions of our energy. Our prisons hold a larger percentage of our population than do the prisons of any other country. Ever larger traffic jams rob industry and individuals of thousands of productive hours. The inflation adjusted median income of our workers is lower than it was 20 years ago. 46 million citizens live below the preposterous poverty line of $22,314 for a family of four. 50 million citizens lack health insurance. 15 million people are unemployed. Our debt is out of hand, our annual deficits are enormous and our future obligations exceed the nation’s net worth.
Despite these awful realities, we seem unable to grasp the reality of our situation. We continue to choose leaders who talk in ideological generalities instead of specific solutions. We insist on injecting irrelevant social issues into a political dialogue that should be focused on our economic future and we seem determined to drown out any voice that offers solutions alien to our own beliefs.
As I write this, the airways are alive with talking heads denouncing the president’s jobs bill, which incorporates provisions for higher taxes on the wealthiest Americans. Does any serious person doubt that the government needs more revenue? Can serious people dispute the reality that in the early 1990’s, when the wealthy paid higher taxes, we had a more productive and more successful society?
I think the answer to those questions is no. Does that mean we can solve all our problems with higher taxes? Of course not. But to solve our problems, we cannot eliminate government, which can do things individual citizens cannot do. Only government can regulate food safety. Only government can build infrastructure. Only government can provide public education. Only government can provide for the national defense. Only government can regulate commerce. And all those things, and many others, need to be done.
Right now, because the economy is in very bad shape, there is a particular need for government. We have 15 million unemployed Americans, and a sadly lacking infrastructure. Back in 1933, when Franklin Roosevelt confronted a similar situation, he put people to work in federal agencies whose works endure to this day. Is there some reason we can’t put our people back to work rebuilding what has slipped away? If there is, I don’t know what it is. The talking heads would call it a socialist idea – I call it common sense.
But government can become too big – and too expensive – and it is both today. We cannot pay public employees more than taxpayers in the private sector earn for similar work. We cannot assuage every politician’s desire to accommodate every constituent and lobbyist. We cannot spend multiples of what others do on defense, and we cannot be the world’s policeman. We cannot assure everyone in America of a good life – only a chance at a good life. We cannot cure every disease, perform every procedure, and provide every drug that anyone may want. There are limits.
We must limit the reach and scope of government, but we must do so without depriving it of the resources needed to perform its essential functions. To make sensible choices, citizens must gather knowledge, and to do that, we must do more than listen to the talking heads. We must study newspapers, read books, attend seminars, listen to our neighbors and be open to alternative opinions. We must use the web to dig for facts. We must write to and talk with those we elect to every level of government, and we must be willing to devote a lot of time and attention to these important issues. In short, we must be lots more involved than we are.
If enough of us are willing to do those things, we’ll find a way out of the current morass. If we aren’t willing, things will continue as they have, to the detriment of our kids and grandkids.
I hope we’ll choose to fix the problem rather than follow failed leaders towards the unhappy future their performance promises.
Sunday, September 11, 2011
I remember delivering newspapers when I was 12 or 13, and generally admiring whoever was Mayor, Governor or President and agreeing with most of what they were doing. I remember being proud of our victories in World War II and of what we had collectively accomplished by becoming “the arsenal of democracy”, being embarrassed when others got into orbit first and proud when we were first to the moon, being awed by all the new roads, dams, buildings and technology being developed and built, being a bit star struck when I first saw New York. I remember traveling in various parts of the world and being proud that America was a country trusted and admired by most of those we met.
I remember political arguments too – Dewey and Truman, Kennedy and Nixon, Reagan and Carter, and other memorable contests. There were always conflicting opinions within the family and among friends, and there were lots of heated arguments – but politics was something widely and often discussed. Almost everyone read the newspapers, it wasn’t considered rude to bring up politics at a dinner party and everyone was expected to have an opinion – and some facts to support it. And though everyone felt strongly, most people wanted to be – and were -- polite.
I went to work when I was 15, and there were plenty of jobs for any kid willing to work. And most kids did want to work, since there weren’t many families passing out big allowances or new cars in that America. Most people had enough money, but very few had lots and everyone was awestruck when it came out that some big shot had made a million dollars in a single year. Almost everyone I knew, except a very few rich kids, went to public schools and if the school didn’t do a good job, the parents were all over the principal and the teachers to get things fixed.
The America I grew up in is gone, and won’t ever come back. As nostalgic as I am from time to time, I also remember that we didn’t have Novocain in those days and I know full well that the politicians of my youth were not inherently better than those who lead today. But there are important aspects of that old America we should all be loath to do without – particularly its ability to build facilities that were the envy of the world, to offer its citizens a best in the world education, to offer abundant jobs and opportunities, and to inspire collective action by an involved citizenry.
But if we want to reclaim those abilities, we are going to have to stop behaving like morons and begin to speak up about the many and obvious lies we hear from our present and aspiring leaders.
Only morons continue to accept statements that are clearly not true. Our politicians – already engaged in another round of the seemingly endless Presidential campaign – this time for an election still 14 months in the future – continue to say things that few if any believe:
• We are told that recovery is around the corner when it is clear that we are either in or about to enter yet another recession and that real prosperity won’t return for many years – and only then if we make major changes soon.
• We are told that jobs can be created by further tax cuts despite the clear reality that our problem is insufficient demand, not a lack of supply. Lenders and companies have ample funds but too few customers – jobs, not lower taxes, build consumer confidence and capability.
• We are told that regulations are strangling our producers, and there are doubtless some excess regulations and some over-zealous regulators. Overall, however, there is clear evidence that ineffective and inadequate regulation empowered those who caused the financial crisis, and that effective regulation is needed to assure safe food, clean water and clean air.
• We are told that Medicare costs must be cut, but our government continues to deny Medicare the right to demand that U. S. drug companies sell it their products at the same prices they charge foreign health care providers or to build a system and staff of quality inspectors to stamp out the billions of dollars of fraud perpetrated against the system.
• We are told we cannot afford to maintain the nation’s infrastructure – our roads, bridges, airports, water and sewer systems, electrical grid, etc. – despite the fact that allowing it to disintegrate will make it impossible for us to compete successfully with other, better equipped countries in the years ahead and doom future generations to an ever lower standard of living.
• We are told that we must spend less on education and must not impose a national educational curriculum despite clear evidence that our children are learning less well than children in other countries.
• We are told that taxes must be cut still further, despite the fact that our government is spending more than it has on services we collectively demand and despite the fact that income inequality is greater than it has been since 1929 and is steadily getting worse.
• We are told that our tax code is too complex – who would not agree – but we lack the will to simplify by eliminating the thousands of pages of regulations that define the many special interest deductions, exemptions and credits.
• We are told that Social Security benefits will exceed Social Security tax receipts sometime soon, but lack the will to increase taxes and adjust benefits to safeguard the nation’s most fundamental safety net.
We all know that what the politicians are saying simply isn’t so. Yet we are increasingly unwilling to talk to one another about our problems, preferring instead to mimic the ideological incantations of the talking heads, whether liberal or conservative. It hasn’t occurred to most of us, apparently, that the words have little meaning and less import. We don’t need labels, we need solutions. Some of those solutions will be “liberal” while others will be “conservative”, and it really doesn’t matter what we call them. To find answers, we need to climb down from our ideological bandwagons and engage one another in real conversations about middle ground solutions that will solve our problems.
We can create a better America, but only if we start tuning out the false messages and focus on the fact that if we want our country to do better, it’s going to take a huge collective effort.
The first step should be to recognize that there is no easy way out of our present problem. We have dug a deep ditch, and to get out, we are going to have to stop digging, and change our ways.
For some time, until we recapture the vitality that has always characterized our country, everyone is going sacrifice something and we will have to coalesce to insist on some major changes:
• Most will pay higher taxes. Like it or not, our government cannot provide the package of services we collectively want without more revenue. Hopefully, we will simplify the tax code, chop out all the loopholes and deductions, and adjust rates to produce the funds we need while simultaneously reducing the enormous inequality that has crept into our country. We’ll raise more money, improve productivity by saving millions of man hours now devoted to filling out tax forms and have some modest impact on equality.
• Some will sacrifice leisure, and either go back to work or seek a second job. Many will sacrifice the larger car, the larger house, or the second home they covet. Some will eat at home more often and many will have to spend more time working to improve the performance of their local school than they would prefer. Everyone will have to either use less or pay more for energy.
• We need to move fast to get America back up to speed. We’re about $2 trillion behind in maintaining our infrastructure, and the very first thing we should do is create a big public/private infrastructure bank and use it to put several million Americans back to work fixing and building the facilities we will need to make America #1 again.
• We need to get our kids back in the game by teaching them more intensively than we have been doing. We need a national educational curriculum administered by attentive local authorities. We need more mathematics and more science, more demanding vocational training programs, longer school days and years, and better teachers. It will cost more – but is there a better investment than our kids?
• We need a national energy program to free the country from dependence on others. We need to use the Infrastructure Bank to build a better electrical distribution grid. We need legislation to require more intensive use of natural gas, higher gasoline taxes to discourage excess gasoline use and better public transportation options.
• We need to fix Medicare. Requiring drug makers to offer Medicare their lowest prices and stamping out fraud are both easy to do – and both will yield enormous savings. To take advantage of Medicare’s low administrative costs, we should offer every citizen the option of joining. While some may choose private insurers, I think most will opt into the public system.
• We need to fix Social Security – and this is one we know how to deal with. Lots of studies have established that a combination of tax increases and benefit adjustments, including means testing for our wealthier citizens, can promptly put Social Security on the path to a solid future.
• And finally, we need to re-create the middle class by restoring the link between productivity and compensation. It’s a sad fact that average per hour compensation has not increased, in real terms, since the late 1970s. Productivity has risen dramatically, but the returns on that productivity have gone almost exclusively to either capital or the highest earners in our society. The result is a higher level of income and wealth inequality than we have had since 1929. Whether that discrepancy gets fixed through revisions in the tax code, by reforming corporate governance or by strengthening the union movement, we all need to face the fact that equality matters, and that we can have neither a dynamic economy nor a politically cohesive citizenry if a small percentage of the people have most of the money.
To accomplish any of this, we’re all going to have to do a better job of educating ourselves, of listening carefully to the other guy’s point of view and talking to one another about how to get America’s mojo back.
I hope we will.
Monday, August 22, 2011
On September 30, unless Congress acts to extend it, the 18.4 cent Federal gasoline tax will expire. It’s hard to imagine an overt act more immediately damaging to our economy or more inconsistent with our long term economic needs.
The tax, which has not been raised since 1983, is clearly inadequate. In 2008, the Highway Trust fund – which is the fund intended to support transportation improvements in the U. S. – ran out of money. Spending from the Trust Fund has exceeded revenues since 2002. Although Congress has plugged the gap with revenues from the General fund, it has failed to come up with an integrated plan – and a funding program –to assure adequate maintenance of our existing assets and provide the improvements needed to assure competitive capabilities in the years ahead.
Allowing the gasoline tax to lapse would, among other things:
· Encourage people to drive more, thus worsening the already severe congestion that irritates us all – and costs more than $100 billion annually in extra fuel costs.
· Increase our negative trade gap, and increase our energy dependence
· Cost lots of jobs. $1billion in infrastructure spending supports about 25,000 jobs; if the tax lapses and we stop spending, hundreds of thousands of jobs will be in immediate jeopardy.
· Accelerate the already severe deterioration of existing bridges and highways
It’s hard to understand why anyone would even consider allowing the tax to lapse. Americans pay far less for gasoline than driver’s in other countries, and much less in fuel taxes as well. The recent Simpson-Bowles Commission recommended an immediate 15 cent per gallon increase in the tax; others have suggested more substantial increases. Everyone except politicians seeking votes seems to agree that our infrastructure needs immediate and substantial help.
It is clear that it does – and that the needed help will cost lots more than another 15 cents a gallon at the pump. In 2008 the national Surface Transportation Policy and Revenue Study Commission – a Congressional creation – recommended spending at least $225 billion annually, far more than we now spend. Various estimates put the bill for deferred maintenance of our highways and bridges in the neighborhood of $2 trillion.
In addition to needing lots more maintenance on our roads and bridges, we also need an integrated plan to upgrade and expand our capabilities in many areas. We need a plan that measures the adequacy of our highways, mass transit capabilities, airports, ports, communication systems, energy transmission systems, waste facilities, water systems, hospitals, law enforcement facilities and educational assets against those of other countries – and that provides for the many and substantial improvements needed to put the U. S. back in a position of leadership.
Around the world, our competitors are spending far larger shares of GDP on infrastructure improvements than the U. S. Brazil, India and China, are reportedly spending more than $1trillion annually! And we are clearly falling behind.
In 2005, the World Economic Forum rated the U. S. # 1 in economic competitiveness; today, we are ranked #15. Unless we fix the problem, we’ll rank even lower in the years ahead.
Solving the problem is a necessity if we want the country and our kids to have a satisfactory future– and stepping up to that necessity also represents an opportunity to solve one of today’s major problems. If Congress and the President were to come up with a national infrastructure plan this fall, and fund it at just $200 billion annually for the next ten years, we’d generate about 5 million new jobs.
Although it is clear that $200 billion will not be sufficient to meet the competitive challenge being mounted by others, it will be enough to provide a big chunk of the roughly 12 million jobs we’ll need during those ten years to put the currently unemployed back to work and provide opportunities for new workers. Moreover, the economic activity created and facilitated by that infrastructure investment will drive GDP growth, create lots of additional employment opportunities and – hopefully – provide the resources needed to build the capabilities not included in the initial plan.
Some will doubtless say we can’t afford it. In my view, these are investments we cannot afford to forego. Moreover, since we have spent or committed between $3 and $5 trillion during the last ten years in Iraq, Afghanistan and other military adventures – spending which has produced nothing and has yielded neither assets nor infrastructure to support our future growth – I just don’t buy the argument that we can’t find a way to finance the assets and capabilities needed to assure a decent future for our kids and grandkids.
Those interested in a more comprehensive examination of our infrastructure problem can find an excellent recent report here: