Bush and the National Interest

Bush's State of the Union speech in 2005 outmatched his inaugural speech of that year. It embraced necessary domestic reforms in tort law, the tax code, health costs, etc., though it neglected the trade deficit and the implications of a lower dollar. In contrast to what the President stated, Social Security will not be bankrupt by 2040 or so, but does need reform, and the President proposed many.

Liberty and freedom assumed unusual prominence in both speeches. In fact, they assumed mystical auras in domestic events and even more mystical qualities in relation to foreign policy. While the inaugural speech made no reference to terrorism and only used the term "tyranny," terrorism and tyranny were both mentioned in the last speech. To remove them and to enact freedom, so Bush assures us, will bring peace and prosperity.

The inaugural speech placed the priority on foreign policy over domestic policy. In the State of the Union speech, this was reversed. In a strange but subtle way, both speeches, though, continued what the pundits have missed, namely: the process of eroding citizenship based on a nation. Though the President is no fan of the French, his speeches, ironically, continued what was begun by the French in 1830. To assure imperial control over Algeria, France created the French Foreign Legion. It accepted foreigners, without questions, as long as they were willing to fight for France's colonial interests. For those who joined, loyalty to one's country of origin, of which one was a citizen, was overshadowed by loyalty to a military bureaucracy. What was implied was the erosion of citizenship based on a nation.

The Nazi elite fighting force, the "Waffen SS," picked up what the French had started and expanded the dismantling of citizenship of a nation when, by the end of World War II, more than half of its 450,000 members were foreigners, including many thousands from Norway and Holland and, oddly enough, even 600 from neutral Switzerland. Racism and ideology assumed priority. Those who joined voluntarily violated their citizenships and replaced loyalty to and citizenship of their nation with loyalty to an ideology and a foreign military bureaucracy.

The process of eroding citizenship is also implied, if not increasingly expanded, not only in Bush's speeches but also in such diverse actions as coaches recruiting abroad as well as bureaucracies engaging in global hiring and marketing. In a microfashion, it even surfaced in a recent speech given by Thomas Barnett, a professor at the Naval War College, when he showed little concern for illegal immigrants breaking the law, i.e. laws designed to serve the citizens of a nation, since many of them, so he stated, would join the Navy anyway. Loyalty to a military bureaucracy takes precedence to serving the national interest. It resembles somewhat Bush's indifference to protecting the borders and actually tolerating, if not encouraging, what is happening at America's borders. Bureaucratic and political interests prevail here, and they also prevail when it comes to recruiting, marketing and shifting employees globally without any restraint of national citizenship and laws that apply to a national territory. While globalization has some advantages, it does clash notably with national interests. Loyalty to a military, corporate, religious, sports bureaucracy, etc. takes precedence over citizenship of a nation, its laws and the national interests. Cynics could advocate an American Foreign Legion to do the work that Bush has in mind. It would be far cheaper.

Besides this, Bush's speeches also grafted tremendously on Wilsonian principles. They recall Wilson's justification of entering World War I to make the world safe for democracy and to end all wars. In fact, they revitalize, update and expand Wilsonian notions in order to rid the world of terrorism and to bring liberty and democracy to every country around the globe and, in particular, the Mideast. In many ways, this is a commendable objective. Wilson stated that we did not just create the nation to serve us, but we created it to serve mankind, i.e. everyone. By its very nature, this subordinated the national interest to global idealism. In the 1960s, Kennedy added his own twist to Wilsonism when he stated that we will bear any burden, pay any price to assure liberty around the world.

Such grandiose notions beg the question of how high a cost the country is willing to bear and to what extent such policies and costs will deprive Americans of their liberty in order to assure the uncertain success of a fanciful notion around the globe. In compliance with Wilson's desire, democracy did spread and females received the vote in many nations, just as they did recently in Iraq and Afghanistan. But those post-World War I democracies too often moved democratically toward one party authoritarian governments. This fact could show up again when the democratic elections in Iraq and other nations could favor fundamentalist religious factions and/or anti-American policies. If so, Bush's foreign policy may become tarnished by a modified repeat of post-World War I historical ironies.

Bush and Kerry on the Economy

Bush Equals Kerry On the Economy and War Costs

Economically, the most important issue in this election year is to convert the vast resources of the U.S. into a much higher living standard for everyone. Regrettably, Bush and Kerry do not focus on this.

Some economic statistics indicate a weakening in the economy, while others show some improvement. Each candidate selects from the vast stream of economic statistics whatever suits his purposes. Many statistics that reflect overall economic development are either neglected or not taken seriously. In Des Moines, for example, real estate tax forfeiture sales recently jumped in one year by 25 percent to above 5000. In sharp contrast, in other economies, they are negligible or do not exist at all.

Beyond this, a recent Minneapolis Federal Reserve District Bank publication, revealingly entitled "Community Dividend," applauds, in its front page article, the presumed economic virtues of reverse mortgages for Senior Citizens. These are growing significantly but are almost unknown abroad. Add to this the rising rate of home equity loans, liens on used cars, growing college, credit card and other debt, and one begins to wonder if policy makers believe that everyone dying penniless is a worthy goal and everyone dying heavily in debt is even better and, indeed, the ultimate economic goal of the presumed wealthiest economy of the globe. Mix in the fact that the average American worker labors up to a stunning two-and-a-half months more each year than foreign counterparts, while his net worth does not increase and his savings rate is the lowest of all advanced economies. Then consider that the U.S. has the highest percentage of adult labor force participation, the highest female participation, while it reverses--ever so gingerly and as the only modern economy to do so--protective child labor laws which were introduced generations ago, to allow teenagers to work more while in high school or college! After all, so it seems, to maximize again the inclusion of teenagers in the workforce means to maximize stimulating aggregate demand.

What is going on here? The answer resides, largely, in the fact that both candidates still adhere to the falsely conceptualized economic theory of John Maynard Keynes. Starting in the 1930s, he persuaded most politicians that stimulating aggregate demand is the route to everlasting economic progress. His theory was eagerly embraced by producers who confuse maximizing the selling of their products with a healthy economy, though, if driven to the ultimate conclusion, it may indeed cause all consumers to die not just penniless but also heavily indebted.

In other economic matters, too, both candidates are barking up the wrong tree. Both call for more jobs, and both are wrong, for more jobs have already materialized for many decades while family and household income and/or net worth frequently did not rise acceptably or actually declined for many decades relative to inflation! Both should focus on increasing family and household net worth so that genuine economic progress resides in working less while getting wealthier--a development from which America has not benefited for generations.

Myths or untruths about taxation or tax reduction also envelop both Bush and Kerry. Bush endlessly sells himself for having reduced tax rates while Kerry advocates restoring them. Yet, neither one grasps the fact that total taxation is what the federal government spends, regardless of revenues. Bush increased spending substantially, in fact, for a while at a rate three times faster than LBJ. Kerry also approves the increased spending. Since total federal spending is identical to total taxation, both candidates, in effect, have increased taxes and are advocating increased taxation. Both are for expanding military spending, and both approved the war in Iraq, which will burden workers and taxpayers with additional hundreds of billions. Yet, neither one has ever mentioned the fact that the U.S. is the world's largest debtor economy and, for this reason, cannot sustain global imperialism while it has to borrow huge amounts from abroad to finance the trade and budget deficits!

Both should remember the fact that the 60 to 70 billion dollar cost of the first Gulf War was totally paid by foreign governments. This is not the case with the current war. It will be paid by Americans, and it has not just direct costs that are many times higher but also indirect costs which neither Bush nor Kerry have mentioned. These reside in lower demand for U.S. products abroad resulting from spreading global boycotts of U.S. made products, but also in one of the most neglected but revealing economic statistics, namely: Foreign Direct Investment (FDI). In 2000, it was $ 321 billion. This dropped to about half to 167 billion in 2001, then dropped again to about half in 2002 and was again cut in half in 2003. So far in 2004, FDI in Russia, on the other hand, grew by 35 percent and favorable statistics showed up in many other economies. A global redirection of money and wealth is occurring. It appears that Bush and Kerry have given a generous boost to foreign economies.

While FDI was drying up in the America, U.S. corporations, through outsourcing, etc., substantially increased their investments in foreign economies. What it all means is that Bush and Kerry should disengage from the usual electioneering foibles and focus on those economic policies which serve all Americans.

Social Security Reform

Posted March 2, 2005


What Needs To Be Done BEFORE Reforming Social Security?



The Republicans and Democrats are both partially correct in their respective positions on the Social Security system. Both have important and valid arguments that are persuasive. The problem, though, which neither side is addressing, is the fact that major reforms OUTSIDE of the Social Security system have to be enacted BEFORE reforming it. Unless that is done, any reforms will cause more problems.

Bush wants to privatize part of the system and allow individuals to invest in Wall Street. In itself, this is a commendable idea. But it raises the question whether or not the tens of millions, who have already been active on Wall Street since Merrill, Lynch, more than 50 years ago, took Wall Street to Main Street, have actually benefited. Historical comparative statistics on family and household net worth cast some doubts on this. In spite of it, Bush's "ownership society" is a worthy goal if it increases family and individual net worth under private and not captive control, beyond political manipulation.

To achieve this, the following are necessary prerequisites and reforms prior to changing the system:

l. Fiscal and monetary policies must absolutely guarantee no long-term institutionalized inflation and must allow price flexibility so that prices and the consumer price index, generally, decline, commensurate with increases in productivity. This would dismantle the horrible and ravaging inflationary era of the last 60 years or so and restore normal price fluctuation necessary for effective economic processes that preserve purchasing power and encourage saving and investing.

2. Strict and rigorous enforcement of existing laws to eliminate corruption and mischief on Wall Street and to provide absolute transparency so that true and reliable information is readily accessible to investors. Asymmetric knowledge and insider trading in the markets allow exploitation and profiteering that deny maximum benefits to the masses. Bush has been noticeably quiet on this element as if the personal and institutionalized theft that characterized the markets during the so-called roaring nineties never existed. In short, ethics is necessary to restore trust and assure investors' confidence.

3. Maintain current contractual obligations to all who contributed to, relied on and trusted the Social Security system. One cannot change the rules of the game while the game is being played, and contracts, for reasons of ethics and efficiency, are sacred. This requires a transitional temporary use of general revenues to fulfill actuarial obligations and adjustments so that no one will be injured, left feeling cheated or neglected by the reforms.

4. Current rates of military spending, which Bush already wants to increase by 4.8 percent on top of the additional 80 billion added to the already 220 billion dollar war costs, will not allow transitional financing necessary for the reforms. For this reason, a rapid resolution of the Mideast conflicts is required. Considerable attention must be given to the history and causes of terrorism in order to effect a speedy resolution as well as to assure prevention.

5. Sizable reduction in residential real estate taxes is necessary. Home equity constitutes by far the largest part of household net worth, in particular for senior citizens relying on Social Security. In severe contrast to other economies, U.S. real estate carries the highest tax load of any advanced economy. In some cases, it is 10 to 25 times higher! This presents a horrible burden to Bush's vision of reforming the Social Security system and facilitating the "ownership society" of self-reliant individuals. It also accounts for a large part of the causes of what could be called "slumerica" that stretches from coast to coast. The state governments, in cooperation with the Federal government, must massively shift real estate taxes onto other elements such as consumption.

Unless these major reforms are addressed and solved prior to changing the Social Security system, a massive inflow of money into Wall Street may satisfy Bush and his supporters in the financial sector, but it will not provide economic security when the next generation retires. Inflation, loss of purchasing power, fraudulent accounting procedures, insider knowledge, and other forms of corruption will have taken their toll. Thereafter, the masses will turn again to politicians as they did in the 19th century and after 1929. Once more, they will demand change and rescue from economic entrapment, if not exploitation. In turn, this is likely to create another obliquely conceptualized national program like FICA, the Federal Insurance Contribution Act of 1935 which created the Social Security system.