The Truth about MoveOn.org's Social Security "Myths"

I have taken a special interest in the future of Social Security, in part because I worked for the Social Security Administration for 38 ½ years before retiring on January 2, 2009. So, when I ran across an article on the MoveOn.org website (not a site I frequently visit, but occasionally I like to spy on the enemy) entitled Top Five Social Security Myths, I read it carefully, thought about it, realized that it is mostly nonsense, and decided to explain to readers of this blog (both of them) why it is mostly nonsense. I encourage you to read the same thing I read buy opening the article in a new window or tab on your browser and follow along.


The first alleged myth is "Social Security is going broke." The article state that by 2023, Social Security will have a $4.3 trillion surplus and can pay schedule benefits with no changes and after 2037, will be still be able to pay 75% of scheduled benefits. The trust fund deserves its own discussion, which I will get to shortly, buy think about that business about being able to pay 75% of scheduled benefits. That is meeting 75% of an obligation. Would any of the people that you have to make regular payments to, like your utility companies or your the financial institution that holds your mortgage (if you own your home) or your landlord (if you rent) be happy if you told them that you cannot make the full amount of your payments in the future but you can make 75% of them? Of course not, and anyone who expects to receive Social Security benefits after 2037 would not be very happy either. If being headed in the direction being able to pay only 75% of what it obligated to pay is not going broke, then what is?


The second alleged myth is "We have to raise the retirement age because people are living longer." The article says that this is a myth because the reason life expectancy is going up is because many fewer people die as children than they did 70 years ago. The article makes reference to a June 2010 study by the Center for Economic and Policy Research entitled Social Security and the Age of Retirement. I read the study. It does indeed make a very good case that most of the increase in life expectancy in the United States over the last several decades has been because of decreased death rates of people who have not reached retirement age. However, some of the increase is because on average people of retirement age are living longer, which is a case made by the the bipartisan Social Security Advisory Board in its September 2008 report, Working for Retirement Security, in which a case is made that to improve income security of older Americans, they should be encouraged to lengthen the number of years in which they work. MoveOn.org also points out that higher income workers live longer on average than lower income workers and so raising the retirement age discriminates against people with lower income. Raising the retirement age is not the only way to address the solvency of Social Security and it may not be the best way, but it is one option.


The third alleged myth is "Benefit cuts are the only way to fix Social Security." First the article says that Social Security does not need to be fixed, which is nonsense. Then they suggest that a better way to strengthen Social Security is to raise the maximum income from which payroll taxes are assessed. For 2010, no taxes are assessed from the employer or employee for earned income in excess of $106,800. Raising the cap would indeed increase revenue. It would also increase the eventual Social Security benefits of those high income workers because the amount of Social Security benefits is computed based on a formula that considers average income. However, the formula is weighted to favor lower income workers, so raising the cap may raise more than enough revenue than needed to pay the higher income workers their Social Security benefits once they retire. I'll concede this point to MoveOn.org; benefit cuts are not the only way to fix Social Security. There are other ways. However, saying that it does not need to be fixed is still nonsense.


I am going to combine my comments about myths four and five because the arguments that the MoveOn.org article makes that them contradict each other. Myth four is "The Social Security Trust Fund has been raided and is full of IOUs" and myth five is "Social Security adds to the deficit." There argument regarding myth four is that the Social Security trust fund is made composed of U.S. Treasury bonds that are backed by the full faith and credit of the United States. The argument regarding myth five is that by law Social Security funds are separate from the budget and therefore Social Security cannot add a penny to the deficit. Both arguments can easily be refuted in one short sentence: "Those Treasury securities are not going to pay themselves." Lets say that this year a hypothetical worker, lets call him William Worker, earns an income such that he and his employer each pay a payroll tax of $1000. Lets also assume the Social Security system is taking in more money than it is paying out and all of the $2000 goes into the trust fund. What does the government do with the money? It does two things. One thing it does is spend the money. The other thing it does is issue securities to the trust fund that represent a promise to pay the money back with interest. Years later, when the Social Security system has reached the point that it is paying out more in benefits than it is receiving in payroll taxes, William has retired and has applied for his Social Security benefits. Lets say that the money to pay for them for his first year of retirement comes from that same $2000 in treasury bonds plus interest. So, the bonds are redeemed. Since they don't pay themselves and the government has already spend the money to pay them, it has to raise more money. There is just no other way to look at this. The government has spent the money and has increased its debt by issuing a securities that promise to pay the debt with interest. Saying that a Treasury security is not an IOU not saying anything that changes the situation. Saying that Social Security does not increase the deficit because it is not part of the budget is like saying that if you close your eyes you can't see it and therefore it isn't really there. When management officers at Enron kept transactions that put its shareholders off its books to hide them, it was eventually recognized as accounting fraud and people went to prison for it. When the government does it, no one goes to prison, because it is the government that puts people in prison. It is legal, but only because it is the government that is playing this game that makes the laws. What they cannot do is make it ethical. The scams that Charles Ponzi and Bernie Madoff ran were small potatoes compared to this one.


Recommended reading for those who want to understand the financing of Social Security include the 2010 Social Security Trustees Report on The Status of the Social Security and Medicare Programs (click here for PDF version) and any of several publications that the Cato Institute has published. The advantage of the Trustees Report is that it is politically neutral and written by the actuaries whose job it is to manage the Social Security and Medicare trust funds. The advantage of the Cato Institute publications is that they are written by people who have some good ideas for how to deal with the problem.

You don't have to be crazy to want the job, but it doesn't hurt.

I have often joked that a person would have to be crazy to want to be President of the United States and therefore anyone who wants the job should not be allowed to have it. I am currently taking a graduate school course entitled Legislatures and Legislative Behavior. From what I am learning in that course added to what I already knew, I think my observation about the job of President applies also, though maybe not as much, to the job of member of Congress. Who can observe the work product of the politicians in the federal government and conclude that those people are sane? The work product includes laws whose pages measure in the thousands and are too complex for anyone but an attorney to understand and even they have to go to court to argue among themselves what it all means. If we expect people to obey the law, is it too much to ask that the laws be understandable and not unreasonably complex?

In the first place, think about what it takes just to be considered for the job. You have to beg people to give you money to finance your campaign. During the most recent election cycle, the average winning Senate race cost $5.6 million and the average winning House race cost $1.1 million. Then, you have to travel all over your state or your district and convince people that you are a really nice guy who has their best interests at heart. You tailor you message to your audience and say things that contradict each other, hoping that no one will notice. You have to have your competition for the job and the people who support them saying things about you that are nasty and often not true. You have to spend time away from your family and give up leisure time. If you get elected to the Senate, you get a little break, but if you get elected to the House of Representatives you have to begin running for reelection almost as soon as the election is over. In effect, you have to reapply for the job every two or six years and prove yourself all over again. Once you get elected, what is the job like? The salary is not bad, about three times that of the typical American family, but well below that of top corporate executives, whose jobs involve no more responsibility or hard work. Considering that most people who run for Congress come from a background with high status and earnings potential, few politicians (at least the honest ones) are in it for the money; they could usually find ways to make more money. Each member of Congress serves on several committees and subcommittees, with meetings whose schedules often conflict. Committees are where the real work gets done, but what kind of job is it that involves attending committee meetings all the time? They have to understand and know how to take advantage of arcane procedural rules. Members of Congress typically put in long days and travel frequently between the Capitol and their states or districts. They attend events of constituents and interest groups. They have to answer questions that they would rather not answer and deal with hostile people.

Who would want such a job? Unfortunately, the answer is that the person who usually wants such a job is a person who wants to pass laws to change things, whether they need changing or not. It is a person who thinks that working ridiculous hours and trying to please everybody is a rational thing to do. It was a mistake to call these people legislators or lawmakers. We should have called them something like code maintainers. What we do not need is more laws; we have plenty. All we really need is a code of laws that needs to be maintained, so that laws that have become obsolete or never worked to begin with are repealed or amended. Introducing laws that are entirely new should be a rare event, and less common than laws that amend or repeal a law that is on the books. Some states, Texas for example, have part-time legislators that meet for a few months every two years. If it is not necessary for the job of a state legislator to be full-time, it is not necessary for the job of a member of Congress to be full-time. In fact, it would be good for members of Congress to spend much more time outside the Beltway, living a life that resembles more the life that a normal person would live and understanding the problems that normal people have. I have learned that the approximate time that being a member of Congress became a full-time job was when air conditioning was installed in the Capitol building. Letting them install that air conditioning probably ranks among the the biggest mistakes that the United States has made.

I'm a Yankee Doodle Teabagger

Yankee Doodle is now the state song of Connecticut, but it was created by the British during the French and Indian War to make fun of American soldiers. I don't know how the word “Yankee” came to refer to Americans in general or New Englanders in particular, but I did find out that the word “Doodle” came from the low German word “dudel,” which means fool or simpleton. In the first verse of the song, Yankee Doodle sticks a feather in his hat and calls it macaroni. Macaroni does not refer to a kind of pasta, but to a kind of wig that was considered highly fashionable. The unsophisticated Yankees were being made fun of for pretending to be high society. So, a song that was intended to make fun of and possibly to intimidate Americans is now sung proudly as a patriotic song. As Eleanor Roosevelt is quoted as saying, “No one can make you feel inferior without your consent.”

The modern equivalent of the British singing Yankee Doodle is making fun of members of the Tea Party movement, accusing them of racism or even violence, or calling them “teabaggers.” In a column in Nation magazine dated May 3, 2010, Richard Dreyfus says that the recent bungled car bombing attempt in Times Square was likely the work of either a “... lone nut job or a member of some squirrely branch of the Tea Party, anti-government far right.” I for one am not even mildly intimidated by such an outrageous mischaracterization of the Tea Party movement. I have a bumper sticker on my car that proclaims me to be a Tea Party Patriot and have considered buying a tea-shirt from Cafe Press that says “Teabagger and proud.” I think I will not buy the tea-shirt, however, for the very reason why members of the Tea Party movement have been called teabaggers – because “teabagging” is a slang term for a particular sexual practice. If you are unfamiliar with it, you can consult the Wikipedia article, “tea bag (sexual act).” I don't mind being called a teabagger, but I don't want to have some dudel read a tea-shirt I am wearing and think that it refers to anything other than my political beliefs. I have other tea-shirts and bumper stickers to make it clear what kind of teabagger I am.

The accusations that the Tea Party movement is racist, anti-government, and having violent tendencies are completely off base. I forget where I saw it, but a survey found that 79 percent of members of the Tea Party movement are non-Hispanic caucasians, which is not far from the 75 percent of the general population that is non-Hispanic caucasian. I have been to several Tea Party events and have not yet heard a racial slur, although there is a particular President of the United States that is not totally caucasian that many at these events are not particularly happy with. They are also unhappy with non-Hispanic caucasians who share his political philosophy, such as Harry Reid, Nancy Pelosi, Christopher Dodd, and Barney Frank. What these upsets Tea Party members about these people is their political philosophy. Race has nothing to do with it. Neither does Nancy Pelosi's gender or Barney Frank's sexual orientation. The accusation about having violent tendencies is backwards. The only violence I have heard of associated with a Tea Party was when Kenneth Gladney was physically assaulted at a Tea Party in St. Louis and called a “nigger” by some thugs wearing SEIU tea-shirts. Note that it was the people attacking a Tea Party member that were the violent racists. The charge that Tea Party members are anti-government is partially true. We are not anti-government; what we are against is big, bloated government. I, for one, fear that if the federal government doesn't get its debt under control, the time will come within a decade or two that nearly the entire budget will be composed of entitlement payments and payments and interest on the debt. When that happens, the government will not be able to function effectively. I am not anti-government and I don't know anyone who is. I am for government that is sustainable. and does things that only governments can do.

As in any large group of people, the Tea Party movement does contain some kooks. There have been some people who oppose the Tea Party movement who have advocated infiltrating it and exhibiting extreme behavior in order to discredit it. We shouldn't be judged by the fringe and by whatever moles there may be, but we have been and will be again.  Critics don't have our consent to make us feel inferior.

Broken Promises

Do you tell the truth? Do you keep your promises? Both questions are asking pretty much the same thing, because a promise is a statement that you will do something or that you will not do something; if you don't keep your promise, then you didn't tell the truth. The usual punishment for not telling the truth and for not keeping a promise is the same – you lose credibility and people tend not to believe you. Every official of the government of the United States and every official of each of the states is required to by Article VI of the Constitution of the United States to promise by oath or affirmation to support the Constitution. However, many government officials at the federal and state level behave as if they have never read the Constitution that they have promised to support, have forgotten what it says, or never had any intention to keep their promise. When they have no respect for the truth or for promises, they should not be surprised when people hold them in low regard. A journalist recently asked a prominent member of Congress where in the Constitution the Congress finds the authority for some of the provisions in the health care reform legislation that recently became law. His response was that there is no authority in the Constitution for most of the things that Congress does. I find such arrogance and contempt despicable, but unfortunately not surprising. A man that could make such a statement without seeing the contradiction between that and the fact that all members of Congress have taking an oath to support the constitution has no morals and no honor. The health care reform legislation is being challenged by the attorneys general of several states because several provisions of it are unconstitutional, but that is the subject of a different discussion.

Speaking of promises, Congress has repeatedly created entitlement programs in which it has made promises to make payments in the future or to pay for services without making sure that the government will have the money to keep those promises. Across the country, state and local governments have done the same thing with the pension funds of government workers. It is easy to make promises; it is not so easy to keep them. It is especially easy for a politician to make a promise that will not have to be kept until after the politician is retired or otherwise out of office, in effect trying to commit someone else to keep the promise. Some states (California being the most prominent example) are on the verge of bankruptcy. If being unable to keep its financial commitments is the definition of bankruptcy, then the United States is already bankrupt. The credit rating agency Moody's has warned that the United States may soon lose its triple-A credit rating if it doesn't get its debt under control. If Moody's and other credit rating agencies took their jobs seriously, the United States would have lost it triple-A credit rating years ago. Social Security began paying out more money this year than it took in this year. As more baby boomers retire, Social Security will become a bigger and bigger drain on the treasury. Medicare is even a bigger threat to the budget. Congress has shown no restraint in creating even more entitlements. Entitlements and interest on the debt are growing so fast that if nothing is done to stop from growing at their present rate, entitlement and interest on the debt will consume the entire federal budget within a decade or two. That means that there will be no money for vital government functions such as defending us from criminals, terrorists, and foreign governments that mean to do us harm. The functions of the government will be reduced to doing nothing more than writing checks. The government will be forced either to break some of the promises it has made – to pay for such entitlements as Social Security and Medicare or to pay the interest on its debt or to inflate the currency so that it makes these payments with worthless money. Either alternative will lead to major social unrest.

Much of the financial problems of the federal government came from its assumption of powers that it does not have under the Constitution. The powers of the federal government are listed (or as lawyers say, “enumerated”) in section 8 of Article I of the Constitution. Actually the powers of Congress are listed there, and the power of the Executive and Judicial branches are listed elsewhere, but the point is that the Constitution attempted to define and limit the powers of the federal government. To hammer home the point, the Tenth Amendment in the Bill of Rights 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.” If the federal government had kept itself within the confines of the boundaries set out for it in the Constitution, it would be much smaller, less expensive, and more effective in doing those tasks that the Constitution delegated to it.

What can we do to reverse or lessen the damage? It may already be too late to reverse it, but we can make the damage less severe by electing honorable people who will do more to keep promises already made and make new ones than cannot be kept, people who will actually keep the oath that they are required to make to support the Constitution. We can use the amendment process in the Constitution to strengthen the Constitution and to shrink the federal government back down to a manageable size. Since the Congress has historically shown little restraint and since members of Congress are not likely to propose amendments that will diminish their own authority, I think we need to think seriously of asking our state governments to propose a constitutional convention. Article V of the Constitution provides two methods by which amendments to the Constitution may be proposed. Only one of them has been used for all the amendments so far, and that is a vote of two-thirds of each house of Congress. The other method is a convention that the Congress must call upon application of the legislatures of two-thirds of the states. Possible amendments that might be proposed by such a convention might include an amendment to provide term limits for members of Congress. They might include an amendment requiring the federal government to balance its budget each years unless there is an emergency as declared by three-fourths (or some other supermajority) of the Congress, or one that limits government spending to 20 percent of Gross Domestic Product. An amendment might be proposed to require Congress to state in each piece of legislation where in the Constitution it finds the power to do what it is attempting to do. Proposed amendments might clarify how many of the current parts of the Constitution are to be interpreted to frustrate the attempts of government officials to use vagueness of language to abuse their power. Amendments might be proposed to begin the orderly winding down of government programs that have grown “too big to fail.” Many people are fearful of a constitutional convention because there are no limits to what a convention might propose and it might propose bad things, like repealing the Bill of Rights. However, to become effective any amendment must be ratified either by the legislatures of three-fourths of the states or by conventions in three-fourths of the states. Any amendment proposed by a constitutional convention that was extreme or harmful would not be likely to be ratified in three-fourths of the states. We may need a constitutional convention to take our country back from the promise breakers and make it healthier, more durable, and a better place for our children to live.

Peter Schiff for Senate

Yesterday, I shook hands with a candidate for public office for whom I actually look forward to voting for. Usually, I don't so much vote for a candidate as I do vote against his opponents. Peter Schiff is running to become the Republican candidate for United States Senate from Connecticut. This is the seat for which Christopher Dodd decided not to run for reelection. Schiff and Dodd are nearly polar opposites. Dodd is a career politician, having served in the U.S. Senate since 1981 and before that the House of Representatives since 1975. His father was also a U.S. Senator. This is the first time Schiff has run for public office, and he credibly asserts that he doesn't want to be a politician, but no one else will step up to the plate to do the things that need to be done, and that it would not bother him at all if he served only one term. His father is in prison as a federal income tax protester. Schiff is a money manager, president of Euro Pacific Capital, and jokes that part of his job is to rat people out to the IRS, a chore that he does, but does not relish. As chairman of the Senate Banking Committee, Dodd pursued policies that cause the housing bubble and its subsequent collapse. Schiff had warned everyone who would listen that a housing bubble was developing and that the United States would have a severe recession. Instead of going into detail about Schiff''s policies, I refer the reader to YouTube, which is full of videos by and about Schiff and to his website, Schiff for Senate. For anyone familiar with Congressman Ron Paul, I would say a quick and dirty way of thinking of Schiff's policies is that he would take pretty much the same stand on any issue that Ron Paul would. His main message is that the debt the the government has accumulated is more than it will be able to pay and even with the current low level of interest rates that a serious crisis will arise when interest rates go up, as they inevitably must. For reasons of financial responsibility and Constitutional principles, he advocates a drastic reduction in the size of the federal government. Does Peter Schiff stand much of a chance? I doubt it. After all, this is Connecticut we are talking about here. However, Scott Brown surprised a lot of people by becoming a Republican Senator from Massachusetts. The most likely Democrat candidate for the position is Connecticut's present Attorney General, Richard Blumenthal, who is leading all of his potential opponents in the polls by at least 20 points. I have donated money to Peter Schiff's campaign and have volunteered my services to help. Now that the weather has gotten much better, I am going to go outside to peal the “Dump Dodd” bumper sticker off my car and replace it with one that says “Schiff for Senate”. Then, I will put up the yard sign.

Inefficiency - Not a Bug, but a Feature of the Constitution

A filibuster is a means of slowing down or preventing a vote on legislation in the U.S. Senate by refusing to end debate. The rules of the Senate allow a filibuster to be stopped by cloture, which is a procedure to end debate on a bill, but cloture requires a vote of 60 percent of the Senate. Some of the same people in Congress who argued in support of filibustering judicial nominees of President Bush in 2005 are now arguing that filibustering health insurance reform legislation in the Senate is unconstitutional and are arguing for the reconciliation process to avoid the need to have 60 votes to stop a filibuster from preventing its passage in the Senate. A filibuster, they say, in anti-democratic because it blocks the will of the majority. A filibuster certainly does frustrate the will of a majority in the Senate and, even if the filibuster ultimately fails to stop legislation, it creates inefficiency by slowing the process down. However, neither frustrating the will of the majority nor slowing down the process makes a filibuster unconstitutional. In fact, the Constitution is all about making it difficult for a majority to prevail and about slowing down the process of making new laws. If the people who created the Constitution had wanted to create a quick and efficient process of turning the will of the majority into legislation, there would not even be a United States Senate, which is not very democratic, since states with widely different populations are each represented by two Senators. Instead, there would just be a House of Representatives and a bill would become law by a simple majority vote. The President would not have the power to veto legislation, because that would frustrate the will of the majority. Instead, the Constitution requires that in order to become law, the same version of a bill must be passed by both the House of Representatives by majority vote and it must signed by the President (or it becomes law without his signature if he does not sign or veto it within ten days and Congress is still in session at the end of the ten-day period. If the President vetoes the bill (by returning it to Congress or by doing nothing while Congress adjourns within ten days after the bill is presented to him), then the bill must again be passed by both houses of Congress, but this time by a two-thirds vote in each house. Even then, the Supreme Court can frustrate the will of the majority of Congress by declaring legislation unconstitutional. The Constitution is all about slowing down the process and making it difficult for the will of the majority to prevail. If the goal of the Constitution was to efficiently implement the will of the majority, it could have just created the House of Representatives and had given it the power to create the rest of the government and to change the rules whenever it pleased, with no separation of powers, checks and balances, requirements of supermajorities, or any of the other “inefficient” and “undemocratic” features. The founders of the United States were not opposed to majority will, but they were aware that majorities can be very temporary and can base decisions on emotion rather than careful thought and planning. In other words, they preferred that legislation be passed by a slow process that makes it unlikely that legislation gets passed without broad support. The process of passing laws was intended to be inefficient. The process of amending the Constitution even more strongly indicates the purpose of slowing down the process and making more difficult for the will of a simple majority to prevail. An amendment to the Constitution needs a vote of two-thirds of both houses of Congress to be proposed and needs to be ratified by the legislatures of three-fourths of the states to be ratified – hardly an efficient process. Actually an amendment can be proposed by a convention call by Congress on the application by the legislatures of two-thirds of the states and an amendment can be ratified by conventions in three-fourths of the States, but these methods are not commonly used. The inefficiencies in creating laws and Constitutional amendments were features of the system, and not bugs.

The filibuster itself has an interesting history, which is stated briefly on the website of the United States Senate at http://www.senate.gov/artandhistory/history/common/briefing/Filibuster_Cloture.htm. Originally, a bill could be debated endlessly in both houses of Congress. Unlimited debate became impractical in the House of Representatives because of it had more members than the Senate, so the rules of the House of Representatives no longer allow for unlimited debate. The first limitation on unlimited debate in the Senate came with a change in the Senate rules in 1917, when debate could be ended by a cloture vote of two-thirds of the Senate. The number of votes needed for cloture was changed from two-thirds to 60 percent in 1975. If endless debate in the Senate was consistent with the Constitution even without the possibility of a cloture vote to stop it before 1917, it must still be consistent with the Constitution when it can now be stopped with a cloture vote.

In short, the inefficiency of lawmaking in the United States is not such a bad thing. However, while we can tolerate inefficiency, why do we need to tolerate the enormous expense?

State of the Union Address: ... and the Ugly

The last two posts were about the “good” (parts I agree with) and the “bad” (parts I disagree with) in the State of the Union address. This is about the “ugly”, the parts that just don't work at all.

When President Obama, announced his spending freeze of about 17 percent of the Federal Budget, he said that the freeze would not start for a year and said that is how budgeting works. At that point there was laughter from the audience. No, Mr. President, that is not how budgeting works – that is how my ex-wife thought that budgeting works. The way budgets work (outside the Beltway, anyway) is that you control your spending so that it does not outstrip your income. Most businesses and families can tell that you can borrow for emergencies, or borrow in order to take advantage of an opportunity to increase income, but you avoid it otherwise. After you have increased discretionary spending to unsustainable levels, you do not freeze the spending at those levels, you lower the spending. That is how budgeting works. When voters divorce the politicians that are supposed to represent them in Washington in 2010 and 2012, the out of control spending will be one of the reasons. He did advocate that Congress establish a bipartisan commission to come up with ideas to cut the deficit, but his motivation appeared to be to get political cover by getting Republicans on a commission that advocates raising taxes as a way of decreasing the deficit. If I thought revenue from increasing taxes would actually be applied to reducing the deficit, raising taxes wouldn't bother me that much, but it never works that way. In fact I think that paying for expenditures with taxes is better than paying for them with borrowing, which just kicks the can down the road, but taxes are a relatively minor issue compared to spending. When the proposal to create a bipartisan deficit reduction commission died in the Senate, the President said that he was establishing such a commission by executive order, which I think shows at least a mild disrespect for the separation of powers. My main objection, however, it is that a commission is just a distraction, a way to appear to be doing something about reducing the deficit without really doing it.

The ugliest part of the speech was near then end when after saying that with “all due respect for separation of powers,” the recent decision of the Supreme Court that a law limiting expenditure of corporations and other organizations (including non-profit organizations and labor unions) overturned a century of law and would open the floodgates for influence by special interests including foreign corporations. He went on to emphasize that foreign organizations should not be able to influence elections in the United States. This was ugly on many levels. The President has as much right as anyone to criticize the Supreme Court and its decisions, but doing it in a State of the Union address with the members of the Supreme Court seated just a few feet in front of him and unable to respond was totally inappropriate and lacking in class. Justice Alito could not contain himself and shook his head and muttered under his breath what appeared to be “not true”. What was not true was that the decision had any effect at all on foreign corporations. Foreign corporations and foreign governments continue to be forbidden to influence elections in the United States. One would expect the President and his speech writers to do some fact-checking before such a major speech, especially about a court decision, since President Obama is a graduate of Harvard Law School and a former instructor of constitutional law at the University of Chicago. I downloaded the decision, Citizens United vs. Federal Election Commission and began to read it, but it is very long (giving the impression that Supreme Court justices think that they get paid by the word), so I skimmed over it to get the gist. I didn't see anything that remotely suggested that it lifted any restrictions on foreign corporations. To paraphrase the late Senator Daniel Patrick Moynihan, the President is entitled to his own opinion, but he is not entitled to his own facts. If he keeps making up facts to support his rhetoric, some day he may face a whole chorus of people chanting, “You lie, you lie.” He is lucky that the people in his audience had enough respect for decorum not to shout out what many of them were thinking. I know I find myself shouting a lot at the television lately.

State of the Union Address: ... the Bad ...

In my most recent post I talked about the “good”, or the parts of the State of the Union address in which I like what President Obama said, even though I doubt that what he says and what he means are always the same. This time, my focus is on the “bad,” what he said that I don't like. Next will come the “ugly.” Early in his speech, President Obama proposed a “fee” (euphemism for tax) on the largest banks in order to recover the money that was lent to some large banks in the TARP program, otherwise known as the bank bailout. What is bad about his proposed fee is that it isn't aimed at the banks that still owe the government money, but it is a tax on large banks in general. Extracting repayment from banks who haven't paid their debts is one thing and is good; punishing banks just for being big is wrong. It is just taking political advantage of the fact that large banks are unpopular. Not that the large banks are going to get hurt much; they will pass the extra cost on to their customers.

The President claimed that two million workers who would otherwise be unemployed have jobs because of the American Recovery and Reinvestment Act. His allegation is based on what the recipients of the stimulus money told him about jobs that were “saved or created” by the money paid out so far. There is a strong conflict of interest here – the recipients are motivated to claim that they created or saved jobs in order to continue to receive funds. I don't believe that there is any serious verification of the numbers of jobs actually saved or created, again because of a conflict of interest; the administration wants to claim great success for the Recovery Act and verifying the numbers might make them lower and less supportive of claims of success. While it is clear that the Recovery Act has been expensive, it is far less clear that it has saved or created any jobs when you consider the jobs lost because businesses hesitate to hire when government policies make the future of business so uncertain. The President proposed in his speech more of the same, except this time he calls it a “jobs bill,” in part because, the American Recovery and Reinvestment Act came to be called the “stimulus bill” and acquired a reputation for being expensive and ineffective. Doing the same thing again, but changing the name will not improve the results.

The President wants an energy and climate bill to “make clean energy profitable”. He was apparently referring to the cap and trade bill that had already passed the House of Representatives. What cap and trade will do is make most kinds of energy that people actually use much more expensive and decrease supply by making energy production less profitable or unprofitable, which will be devastating for the economy and would make hardly a dent in whatever global warming may be occurring. If clean energy requires subsidies from taxpayers for the companies that supply it to make a profit, then the clean energy isn't really profitable; what is profitable is getting favors from the government. If getting favors from the government is profitable, then that increases the influence of lobbyists, which is something that the President claimed he opposes. Despite the President's assertion that there is overwhelming evidence of climate change caused by greenhouse gas emissions, much of the “overwhelming evidence” is overwhelming only because data that didn't support the notion of global warming has been suppressed. Then he said that the nation that leads with a clean energy economy will lead the global economy. Not if Spain is any example. Spain spent much money subsidizing a “clean energy” economy only to see its debt and unemployment rates climb as a result.

The President said that he plans to end subsidies to banks for student loans. I like that idea because I am generally opposed to subsidies, but what he really meant is that he plans for the government to completely take over the business of making student loans. That does not represent an improvement. Taxpayer money is still spent to subsidize student loans but the people administering them will be government employees instead of bank employees. The improvement is – what? The President proposed that no student would be required to pay more than ten percent of his or her income to repay a student loan and the balance would be forgiven after 20 years, or after 10 years if the former student enters “public service.” Pardon me, but even though I have spent a career in the federal government and am presently employed part-time by the State of Connecticut, I reject the idea that people who are working in the private sector are serving the public any less than those who have government jobs; nearly all provide a valuable service and some in the private sector are serving the public more than those in the public sector because their compensation and even the existence of their jobs is more closely tied to performance.

The worst part of the speech was President Obama's continued support for “his” health reform plan. It changed from a health care plan to a health insurance plan when it occurred to him that health insurance companies were unpopular and could be demonized. Also, he has never really laid out what “his” health insurance reform bill is. The versions that passed the House and the Senate have several major differences between them. Is one of them his and the other not? Is his plan something that differs in some way from both? What exactly is his plan? His claim that Americans opposed the health insurance reform bills because he didn't explain them well enough is arrogant and untrue. He has made televised speeches, many containing health reform in the subject matter, on a regular basis. It hardly seems likely that he hasn't made enough speeches! Also, the more time the public has had to learn the contents of the proposed legislation (in either the House or Senate version), the less popular it becomes. It isn't because the public does not understand the proposed health insurance reform legislation that it is unpopular, it is because the public does understand it. President Obama then repeated his mantra that if anyone has ideas to bring down the cost of health care without reducing quality and without increasing the deficit, he would like to hear them. No, he wouldn't! The ideas are out there, but he is deaf to any proposal that does not increase the government's role in health care. I can't go into to much detail about better ideas for reforming health care without making this post unreasonably long, but I will mention some briefly. Tort reform would reduce the cost of health care by reducing what doctors have to pay for malpractice insurance. Insurance plans with coverage for only catastrophic medical conditions combined with health savings accounts for more routine care would reduce the cost of insurance by making patients more aware of costs and reducing administrative expenses. Shifting the tax advantages of buying insurance from employers to insured persons would make give consumers more control of the costs of health insurance and health care. Allowing insurance companies to sell each insurance policy in all states instead of individual states would give consumers more choices and reduce the cost of insurance premiums by promoting competition between insurance companies. Instead the health insurance reform bills passed by each house of congress give consumers less choice and less control and drive up costs of providing insurance while doing little or nothing to decrease the cost of providing health care. I intend to write more about health reform later. For now, it is enough to say that the proposals that the President supports are almost entirely backwards from what would provide the best health care to the most people at the least cost.

State of the Union Address: The Good ...

I looked forward to the State of the Union address this year because I was curious about what the President was going to say after the Democrats' loss of a Senate seat in Massachusetts marked the death, or at least a significant delay, of the health care reform legislation that President Obama had been pushing so hard for the last year. He had wanted the legislation to pass before the State of the Union address. Now, what would he talk about?

I found that President Obama said some things that I like, some that I didn't, and some things that were inappropriate. Therefore, I was going to write about the good, the bad, and the ugly, but I found out that saying everything I wanted to say about all three could lead to a blog post nearly as long as the speech itself, so I will just talk about the good this time.

Barack Obama is excellent at delivering speeches and as a politician is also excellent at saying things that people like to hear, including people that disagree with his policies. There are some things he has said over and over again that I agree with, but about which you have to doubt his sincerity because he says one thing and does another. Examples of things I keep hearing him say that I like but are contradicted by his actions are that he wants to be a “post-partisan” President and bring the parties together, that he wants to reduce the influence of lobbyists and special interests in government, and that he is willing to consider all ideas from whatever source.

President Obama has taken a step toward bipartisanship, but it wasn't until after the State of the Union address, and of course after he had been President for a little more than a year. He recently met with Republican members of the House of Representatives in Baltimore. Before that, he had rarely talked with anyone outside his own party. Apparently, he didn't see the need, considering that his party had a significant majority in the House and a “supermajority” of 60 Senators in the Senate. Because of a Senate rule that has existed nearly as long as the Senate itself, it takes a vote of 60 Senators to stop debate on a bill. Without the 60 votes, a minority can filibuster, which means to debate the bill endlessly so it never comes up for a vote. Technically, this means that if he can get all the Democrats to agree on a bill, the Republicans have no power whatsoever. That may work in theory, but in the real world, major legislation is rarely passed without bipartisan support. What the President didn't count on is that not all Democrats think exactly the same and that even without the need to compromise with Republicans, there remained the need to compromise among Democrats. President Obama originally wanted health care reform legislation to pass before the end of July. However, the process of compromising to get bills that got enough Democratic votes to pass delayed the process until Christmas Eve, when the Senate passed a bill similar to, but not identical with the one that the House had previously passed. Since the bills that the House and Senate pass have to be identical before they can become law, more compromise was needed to make them identical. More compromise meant more delay and the delay extended beyond the date of the special election in Massachusetts that deprived the Democrats of the filibuster-proof supermajority in the Senate. So now, to get any major legislation through Congress, the President is forced to do what he should have done voluntarily all along and negotiate with Republicans. If he or the Democratic leadership in Congress had negotiated with enough Republicans to get some of their votes, they probably would have health care reform legislation. Instead they played an all-or-nothing game and, at least so far, have gotten nothing.

As for reducing the influence of lobbyists and special interests, the President has placed several people who had been lobbyists in his cabinet and White House staff. Don't like lobbyists, Mr. President? Then why surround yourself with them? He also made a big deal about accepting ideas from whatever source. Specifically, regarding health care reform, he said that if anyone had any ideas that would make high quality health care more affordable and more available to more Americans without increasing deficits, he is ready to listen. No, he isn't! Several Republicans have suggested ideas that could do exactly that – make high quality health care more affordable and more available to more Americans without raising the deficit. Such ideas include (but are not limited to) tort reform (putting a limit on punitive damages that can be awarded in a medical malpractice suit) and allowing purchase of health insurance across state lines to promote competition and make more kinds of policies available to consumers. Tort reform is not going to happen in legislation that is passed only by Democrats because trial attorneys are one to the biggest sources of campaign contributions to the Democratic party. The President and others in his party may not agree with those ideas, but instead of saying so and arguing against them, they claim that the Republicans offer no ideas and are “the party of no.” I have a lot more to say about health care reform, but I will save that for the future and stay closer to the State of the Union address for now.

President Obama said other things in the State of the Union address that I liked and that surprised me because I had not heard him say them before. They included support for a new generation of safe, clean nuclear power plants, development of gas and oil offshore, and clean coal technology. He also supported biofuels, but I am undecided whether biofuels, such as ethanol and biodiesel, are a good thing or not. I have too much to say about energy to include in this post, so I will save that for the future. In any event, I would like to see some evidence that his unexpected support for nuclear energy, offshore drilling, and clean coal are serious or just words to appease independents. He also mentioned increasing trade with South Korea, Canada, and Colombia. Since the Congress has refused to ratify free trade agreements with South Korea and Colombia that were negotiated during the Bush administration, I'd say ratifying those free trade agreements is long overdue – and still not likely to happen. Since I work part-time for a community college, his support for revitalizing community colleges is in my personal best interest. However, I don't assume that what is in my best interest is also in the best interest of the American people. A lot depends on the details.

The President talked about cutting taxes on business to stimulate the economy and about tax cuts for the middle class. He would eliminate capital gains taxes on small businesses and providing tax incentives to businesses of all sizes for investments that would lead to hiring more employees or increasing wages. He talked about having tax cuts for the middle class, but when he started talking about specifics he talked about tax credits for raising children, going to college, buying a home, saving energy etc. It is good for taxes to go down, but lowering taxes by tax credits is using the tax code to influence people to behave in ways that the government wants them to behave rather than to raise revenue. It is one of the things that makes preparing tax returns such a chore and waste of time. If the government wants to lower taxes, it should just lower the rates. The tax code needs to made less complicated, not more complicated. Still, I suppose that a complicated plan for reducing taxes is better than none, so on balance I would say that his plan to reduce taxes on individuals and businesses so that businesses can employ more people and individuals have more money to live on is a good thing. However, compared with spending, taxes are a minor and short-term issue, because money that is spent has to be paid with either taxes or borrowing. Borrowing only postpone taxes; it does not replace them. That is the lead-in for the next discussion, the parts of the State of the Union address that were bad.

Serendipity

Serendipity is running across something good that you weren't looking for.  For those of us whose political perspective tends to be conservative or libertarian, who would have thought that that would describe the election of Barack Obama as President of the United States, with the election at the same time of a House of Representatives that is overwhelmingly Democrat, and followed (since the election of Senator Al Franken was delayed for so long) with a filibuster-proof Senate majority?  As it turns out, it seems like the far left of the Democratic party has been unwittingly hanging themselves and the American voters had been furnishing them the rope to do it with.  A couple of months ago, Glenn Beck drew heat for remarking that it may have been a good thing for Barack Obama to be elected because the sudden lurch to the left woke Americans up as the slower drift to the left by electing John McCain would not have.  Now it appears that the substantial majorities that the Democrats had in both houses of Congress under the leftist leadership of Nancy Pelosi and Harry Reid has had a similar effect.  Both houses of Congress passed health care reform legislation that came within a hair's breadth of being foisted upon an American public that for the most part didn't really want it.  Even the voters of Massachusetts (hardly the most conservative lot in the country) woke up to what was happening and effectively killed the health care reform legislation by given a convincing victory to Scott Brown as their newest Senator in a special election to fill the seat held so long by Ted Kennedy.  That was a sign that the American public has heard the wakeup call.

Think about what would have happened if Al Franken had not been elected to give the Democrats their 60th vote in the Senate.  Obama, Pelosi, and Reid would still be determined to pass health care reform that slanted as far left as they could get away with.  However, lacking the 60 votes needed to break a filibuster in the Senate, they would have had to compromise to get a bipartisan bill and instead of having an atrocious bill that failed to become law, they would have had one nearly as bad that did become law.  The Democrats would also not have had to take complete ownership of terrible legislation and could share the blame.  As it turns out (for the period before Scott Brown's election in Massachusetts) by getting what they wanted from the voters, the left wing of the Democratic Party failed to get what it needed.  For everyone else, serendipity.

We Are Becoming Lawless Because of Too Many Laws

 Over 2300 years ago, Plato pointed out that not only are societies that have no laws lawless, but societies in which there are no limits on the laws that a government can establish are also lawless. In other words, a constitution that limits the government from passing arbitrary laws is necessary to prevent a country from degenerating into chaos or tyranny. The purpose of law is to punish behavior that a society considers bad and sometimes to reward good behavior. For law to be effective, citizens need to be able to understand what the law is. That is only possible if the law is relatively simple, slow to change, and any changes that occur are based on principles that are widely known and reasonably predictable. To the extent that laws are many, complex, subject to rapid change, and changes are arbitrary and unpredictable, it becomes more and more difficult to obey the law. What real difference is there between a society that is lawless because there are no laws to obey and a society that is lawless because the laws have become too arbitrary, unpredictable, complicated, and subject to rapid change to obey?

The economy suffers under either kind of lawlessness. Businesses will not invest and will not hire new workers when the future is impossible to predict. I think the fact that laws have become unpredictable is a major reason why the economy of the United States is as bad as it is today. Businesses both large and small are in shock and don't know what the future holds because many things that could not have predicted have happened in a very short period of time. Who could have predicted a couple of years ago that the government would own a controlling interest in two of the three American automobile companies? Who could have predicted that the government would ignore the bankruptcy laws that give bondholders preference when companies go bankrupt, as it did in the bankruptcies of General Motors and Chrysler? Who would want to buy corporate bonds or extend credit to companies when the government treats creditors as if they have no rights? The health care reform bill that may or may not soon be passed by Congress and signed by the President may have a substantial effect on how much it costs to hire a worker and provide health benefits. The cap and trade bill, which also may or not pass, could dramatically affect energy costs. Businesses need to know what their costs are. I predict that if it becomes clear that either the the health care reform bill or the cap and trade bill will not pass, the stock market indices will go up and the unemployment rate will go down, at least temporarily. That much is obvious, but I also predict that the stock market indices will go up and the unemployment rate will go down if either the health care reform bill or the cap and trade bill pass. Businesses may not like bad news, but they can handle it. What they can't handle is uncertainty. They are used to taking calculated risks, but when they can't calculate the risks, then they don't want to take them.

We and the people who represent us in the Congress and in state legislatures make the mistake of thinking of legislators as law makers. That means that they focus only on making new laws, which adds to the complexity of the laws and makes understanding the law almost impossible. They give very little attention to the laws that have already been passed. They need to be thought of not only as makers of new laws but as maintainers of a code of laws. In addition to making new laws, they should be repealing or modifying laws that have outlived their usefulness or never worked to begin with. They need to follow up on laws after they have been passed to see if the actual consequences of the laws match their intent. We need to understand what there role should be and try to encourage them to simplify things instead of making them more complicated. Since this Congress seriously considers passing laws that are over a thousand or two thousand pages long, it is obvious that they have not gotten that message. They need to avoid passing laws that can't be enforced because that promotes disrespect for the law, and they need to realize that the only law that enforces itself is the law of unintended consequences.

Reactivating blog

Much has happened since the last year that convinces me that the United States of America is being transformed into something its founders would not recognize and that its current citizens may not recognize in a couple of decades.  For one thing, the levels of spending and debt are on an unsustainable course, as can been seen by examining the "debt clock at http://usdebtclock.org.  What is really scary is not only the absolute debt, but how much debt there is per person.  The unfunded liabilities are even bigger than the official debt.  They represent the promises (such as for Social Security payments and Medicare coverage) that the government has made to spend money in the future that it has not collected money for.  This course cannot be sustained; something has to give.  I am worried about the future of our children and grandchildren who will be asked to pay for all the spending and borrowing and may not be able to.  I am also worried about the liberties that are being lost that citizens used to be able to take for granted.  There will be more about that in future posts.  What I hope to accomplish with this blog is to stimulate discussion about whether the United States can be saved and, if not, how to pick up the pieces and start again once the house of cards comes crashing down.  I am worried that the Constitution of the United States is losing its effectiveness because all three branches of government have been showing it little respect and because most American citizens are unaware of its contents and its importance.

Although readers of this post are encouraged to comment, the comments will not show up immediately because I have the blog set up so that comments are posted only after I moderate them.  I have set the blog up this way because of a prior experience in which inappropriate material appeared in a comment.  I will not bar a comment because the commenter disagrees with me, but I will bar it if is obscene, disrespectful, or otherwise inappropriate.