What You Should Think About Balance

October 18, 2008

“The new integrity of the world, in our view, can only be built upon the principles of freedom of choice and balance of interests.”

–Mikhail Gorbachev

It is fair to characterize the Fox News Channel as a partisan house organ and a degenerate propaganda mill.  However, as a full-fledged cable network, it is too complex a phenomenon to be understood from a perspective that lacks all nuance and subtlety.  For example, the “fair and balanced” slogan plays into a method frequently utilized to create the perception of legitimacy.  From segments passed off as hard news to the most unapologetic of opinion programming, simply presenting some sort of clash between pundits of differing views causes many viewers to believe they have seen a balanced presentation.

In some cases, this perception is completely unjustified.  Across the continuum from subtle to blatant, there are many ways to manipulate a debate through framing the issue, limiting responses, manipulating tone, etc.  Yet there are also instances when debate both lively and legitimate occurs on that channel.  Perhaps the most impressive effort to legitimize the entire venture is a program titled Fox News Watch.  More often than not, this program approaches media analysis from a perspective that is thoughtful or even scholarly.

It was in viewing an episode of that show that I first encountered the phrase “distortion of balance.”  It is a term Neil Gabler of Fairness and Accuracy in Reporting coined in order to describe the trickery involved in legitimizing a bogus position by presenting it as the equivalent of a legitimate position.  The perception of evenhandedness obscures crucial underlying reality.

Imagine if a televised debate were conducted between one advocate for the position that the Moon is is chiefly composed of minerals while another advocate contended the Moon is an enormous mass of cheese.  The second position is unsupported by anything resembling conclusive evidence, but a sufficiently earnest pundit could well cloud the issues and leave ignorant viewers uncertain about the truth (or convinced of a falsehood.)  From Iraqi weapons programs to global climate change — areas where technical ignorance is entirely understandable among those who are not trained experts — many media outlets legitimize an entirely bogus viewpoint in the name of presenting “balanced” content.

This is not always the result of the desire to push a particular agenda.  For example, fact checking after major political debates has become a widespread practice in the media.  Yet few outlets ever dare to critique a larger number of questionable statements from one candidate than the other.  In pursuit of “balance” that comes from presented equal quantity, readers are given the false impression that an equal number of misleading statements were made by each speaker.  Unless the underlying reality actually involves equality on that plane, the end result is coverage that leaves the audience misinformed.

All this involves issues where opinions fit neatly into two mutually exclusive categories.  Especially when it comes to political issues, covering “both sides of the story” tends to be an especially clumsy oversimplification.  Popular rhetoric often falls back on extremism if for no other reason than that moderation tends to be less inspiring.  Nowhere is this more evident than resistance to economic reforms.  While filled with self-delusions of being reasonable, passionate extremists decry every little push toward moderation as a surefire way to transform the U.S.A. into a new incarnation of the U.S.S.R.

Even if one grants the dubious premise that economic planning is an anethema to civil liberties, those extremists deliberately steer discussion away from positions between capitalist and communist extremes.  Few of them could begin to articulate the technical distinctions between communism and socialism.  With that deficit of knowledge, they are able to remain earnest while spouting falsehoods that characterize socialism as an extreme position.  Being loudly mistaken is not as sinister as being loudly dishonest, but civic duty demands any loudness be preceded by a greater degree of thoughtfulness than can be seen among such extremists.

All of this feeds into the disastrous reality that America’s economic titans enjoy ample reward with no real risk.  The same system forces working families to face real risk without appropriate reward.  The structure of the ongoing bailout makes this abundantly clear, though similar public largess has been a fixture of American political history from our nation’s inception.  One of the few sound observations to emerge from popular punditry related to the economic crisis is that we live in a society that practices a very generous variety of socialism for the rich while leaving everyone else to struggle in a particularly harsh capitalist environment.

Because the wealth of this nation is made to flow uphill through systematic corruption on a scale that would make the most nefarious Politburo power broker blush, honest American citizens playing by the rules must compete for pieces of an economic pie that is already largely devoured before the competition begins.  As horrible as that sounds, its modern manifestation could be anticipated from the theories that prop up the status quo.  Trickle down economics is very much a call for the overwhelming majority of this nation’s workforce to content themselves with the scraps that fall from the tables of tycoons.  Never mind that same workforce gathered the ingredients, composed the menus, set the tables, and prepared the feasts.

Perhaps Versailles toward the end of the French monarchy is a soundcomparison.  Under Louis XVI, at times it seemed that no luxury was too excessive.  Nobles competed with one another in increasingly ostentatious displays of wealth.  Today’s gold-infused cheeseburgers and Hummer limousines showcase impractical concentrations of resources with all the enthusiasm of decadent aristocracies past.  It is true that our government does not bestow hereditary titles conveying special privileges, but the absence of those does little to distinguish our economic realities from the sort of aristocratic exploitation that sparked the American revolution.

Modern militant rabble-rousers are do not condemn the growing concentration of wealth.  Though the original American patriots stirred up trouble to undermine a power structure that took from the many too enrich the few, the undercurrent of anger in today’s political dialogue actually perpetuates blatant plutocracy.  Government conceived “of the people, by the people, and for the people,” has become government of the people, by the rich, for the rich.  Apart from predictable vehement slander against reformers, proposed reforms are denounced by deliberately muddling humanitarian social spending with authoritarian tyranny.

There is no reason the United States of America cannot find a true balance.  Of invisible pink unicorns, an economic middle ground, and Saddam Hussein’s 21st century nuclear weapons program, there is one entity that is no myth.  Giving working families a fair deal, pursuing poverty harm reduction, promoting education, and stimulating scientific innovation are all pursuits that have been proven sustainable by many governments, including our own.  U.S. policy has always been a compromise between civic minimalism and policies promoted by those with other aspirations for our nation.

Perhaps a better tomorrow could also come from a new order that ceased funneling astronomical sums of public money into private hands.  Yet no politician has come forth with a credible proposal for a reform that would actually eliminate corruption in big business subsidy.  For that matter, thirty years of Republican promises to reduce government spending have only produced a record of huge spending increases, none greater than those undertaken with the full support of the sitting President.  Yet it is not too late for our nation to address decades of social neglect with bold action to move toward a healthy economic balance.

What You Should Think About Welfare

October 8, 2008

“Children and dogs are as necessary to the welfare of this country as Wall Street and railroads.”

–Harry S. Truman

To date this year, 281 times the Sun has risen over the eastern horizon.  It appears that there are no press reports of widespread dismay about these events.  After all the history and mechanics of the Earth-Sun relationship are largely understood.  When it comes to federal bailouts of major private institutions, there is nothing secret about the mechanisms at work or the history.  Yet again and again and again, this predictable phenomenon is met with disgruntled surprise.

Of course there have been some major failures in the history of U.S. business.  The predictable mechanism at work here is invocation of the domino theory.  Dotcom ventures that did not exist a few years previously are in a poor position to claim that their failure will have devastating ripples throughout the economy.  Yet a wide variety of industries can make just such an appeal.  Industrialists cite their sprawling supply chains as if even the best of their suppliers could not weather the loss of a major buyer.  Financial service providers tally every asset and liability together and paint a picture of total loss should the institution fail.   Firms in the energy or transportation sectors sometimes couple legitimate arguments with hyperbole about theoretical disasters.

Capitalist theories hold that businesses unable to sustain themselves in market competition should cease to be.  Their employees and other assets are thought best utilized by other productive endeavors.  Some idealize those theories to the extent that it is inconceivable any practical considerations might justify intervention to prop up a failing business.  In reality, those practical considerations sometimes exist.  In reality, their absence is often no barrier to federal largess.

In fact, corporate welfare often has nothing to do with corporate distress.  Handouts in the form of tax loopholes custom-designed for a specific industry or even a specific corporation have been routine business on Capitol Hill throughout our history.  Massive subsidies for companies already turning a healthy profit are also part of that history.  Sometimes, it seems like simply having the money and influence to make the appeal is enough to insure the state will provide generous support on demand.

Yet only during confluences of bleak economic news and extraordinary increases in spending on corporate welfare is there much vocal outrage.  Supporters of officials (and the system) behind this spending are often quick to change the subject when there is no ongoing economic crisis.  Many will quietly condemn the spending, but few will take umbrage to the same extent they would if those officials took progressive stances on social issues.  It is as if all that waste and inefficiency were a small price to pay for keeping up the fight against gay marriage and gun commerce regulation.

Since the dawn of the Reagan Revolution, this ideological orthodoxy has created a situation in which big businesses are catered to with wild abandon.  Recent events create the impression that no sum is too large when it comes to spending on corporate bailouts.  Yet public sector efforts to help out individual Americans in economic distress have lost as much ground as has been gained during this time.  The blend of ideology and hypocrisy here is at the heart of the ongoing concentration of the nation’s wealth.

Our de facto aristocracy does not lack state support.  Even if maintaining England’s Civil List was not a self-funding endeavor, the costs would be a molehill compared to the mountain of federal money poured into the coffers of politically connected corporations.  Again, capitalist theory holds that this money will be used to insure optimal productivity, or else competitors will triumph.  Even a cursory survey of trends in private executive over the past thirty years renders that view preposterous.

The astronomically large flows of money from taxpayers to major corporations fund a range of “business operations” that typically include obscene compensation packages for the very executives responsible for failing to sustain their ventures through private means.  The indirect nature of public support for colossal CEO pay levels somehow causes it to have less of a political impact than initiatives that extend public support to needy individuals.  Though much of the nation does support reasonable social spending, millions of Americans continue to have contempt for the very idea of individual welfare.

To the degree that proposed social spending does nothing to make the lives of actual human beings better, it deserves contempt.  Yet to the degree that it extends real opportunity or alleviates real harms, social spending deserves at least as much consideration as that subset of corporate welfare that actually bolsters the overall national economy.  After all, sometimes giving a helping hand to a struggling business really does preserve good jobs, promote a favorable balance of trade, generate more tax revenue, etc.  Far more often, giving a helping hand to a struggling individual really does preserve good health, promote career advancement, generate more tax revenue, etc.

As the Red Scare continues to leave so many voters afflicted with a crippling political phobia, almost nothing worthwhile escapes the “socialist” brand.  The specter of some absolute economic equality far beyond even the Soviet regime’s extremes is offered up as an inevitable consequence of such modest proposals as expanding educational finance spending or raising taxes on personal incomes beyond the first quarter million dollars per year.  By denying the middle ground’s existence, ideological extremists have effectively thwarted the advance of social services for three decades.

The stagnation of purchasing power for 80% of American households during that same thirty year span cannot be pure coincidence.  While the corporate power structure siphons the nation’s wealth uphill, ordinary citizens do not enjoy better protection from danger, greater opportunity to learn, superior infrastructure, rising prestige in the world, cleaner air, safer water, etc.

In the end, this is a profoundly backward approach to acting on the U.S. Constitution’s decree that the government ought see to the general welfare.  The world is full of examples establishing that serious anti-poverty relief, generous educational subsidy, and even universal health care can be implemented to good effect without threatening useful levels of economic inequality.  Virtually no American desires a future social order in which every individual experiences the same economic outcome, but we ought to be able to rally a consensus around the idea that every American deserve a future in which fairness is the principal architect of all economic outcomes.

What You Should Think About Progress

July 21, 2008

“The greatest thing in the world is not so much where we are, but in what direction we are moving.”

–Oliver Wendell Holmes

In dialogue about the war in Iraq, so many terms have been robbed of consensus meaning.  Never mind “mission accomplished.” “Victory,” “success,” “defeat,” and even “war” are officially applied in completely inappropriate contexts.  The pathological abuse of language even extends to the point where demilitarization plans are shaped by “time horizons” and a major diplomatic meeting cannot be labelled as a “negotiation.”

This Orwellian approach to misleading the public can never serve any worthwhile purpose . . . at least, not as well as clear honest communications would.  However, it can prove effective to the degree that confusing the general public is its intent.  “Progress” provides a platform from which to observe this phenomenon.  After years and years, slaughter upon slaughter, there has been a meaningful reduction in the level of violence inside Iraq.  No doubt in some sense this is progress.  Yet it is fair to ask if this is the progression of strategy adapting to achieve improved results or the progression of a fire that is running low on fuel.

Had powerful outsiders equipped with invincible military power occupied the United States of America, a radical and violent insurgency seems like one inevitable consequence.  To some degree there is an rational case to be made for freedom fighters.  The idea that many of us would not simply capitulate and take orders from an invading force may even be a legitimate source of pride.  Yet for how many years would we struggle against the occupying power before the highest levels of violent resistance could no longer be sustained?

Unlike religious fanaticism, the principle of self-government provides an ethical basis for resisting outside invaders.  With that in mind, is it likely that an insurgency containing elements of Al Qaeda would run out of proverbial steam even sooner?  The reduction in violence, like the reduction of polar ice, is a fact established by credible evidence put through extensive scrutiny.  Yet the case for a kinder gentler Iraq caused by the “troop surge” rests on hot air of the figurative variety, whereas a trend of atmospheric warming is subject to measurement and verification.

There is some underlying reality to consider.  For one, the actual escalation in troop numbers went a little beyond a token gesture.  From even before the invasion began, informed experts openly criticized Secretary Rumsfeld’s “lighter, faster, cheaper*” paradigm that saw U.S. forces putting roughly one third as many boots on the ground as would be required for effective control.  The surge of this year was an order of magnitude below what would be required to pursue pacification over such a large and diverse area.  However, something is better than nothing, and it was only one order of magnitude shy of a full-fledged military solution.

Then again, just what about this continued to be a military problem after Saddam Hussein was apprehended?  Even accepting the proposition that regime change in Iraq was a sensible goal to pursue at the time of the invasion, there is no excuse for a total failure to push for demilitarization of U.S.-Iraqi relations after the old Baghdad regime was effectively neutralized and a fledgling state established in its place.  Instead of preparing Iraq to stand on its own, the Coalition Provisional Authority fired everyone in the army and most security services.  If there were ever a case of criminal stupidity, surely adding legions of desperately poor young men with guns to an already unstable and violent mix would be that case.

To what degree this dip in Iraqi violence was inevitable and to what degree it was a result of American policy is not at all clear.  Thus it becomes clear when someone proclaims “the surge is working” that the vocal individual is eager to pass off opinions as facts.  It is hard to imagine the level of gullibility required to take those individuals seriously.  They laud the cleverness of the current Presidency based on this argument after countless evasions of responsibility for nearly everything that went wrong in foreign affairs, counterterrorism policy, and military operations since the first moments “shock and awe” was unleashed on Baghdad.

Even a broken clock is right twice per day.  Pundits who constantly predict economic boom times get it right when there is a boom.  Something parallel is true of more bearish prognosticators.  Official statements regarding the war have taken the concept of rose colored glasses to a much more extreme and much more disturbing place than ever before.  At any point in the years and years this bloodbath has been perpetuated, President Bush and his administration remained poised to take credit for any dip in violence.  As determined as insurgents and terrorists were to drive off the invaders, it appears that even their desire to kill was no match for that of our political right-wing.

Now as the debate about Iraq looks to the future, one candidate will argue that the other “wanted America to lose” and “was wrong about Iraq” regarding the effectiveness of the escalation and new tactics.  Yet this all goes back to the Orwellian trick.  Insofar as winning and losing are applicable concepts, a “win” was extremely unlikely based on the initial plan and not at all possible after Paul Bremmer demonstrated beyond any shadow of doubt that the 21st century is no place for viceroys.  Is it really a “win” to partially rebuild a nation devastated by an invasion and occupation that were predicated on abominable intelligence analysis and perpetuated by even worse executive leadership?

Manipulating language to confuse asymmetrical warfare with conventional warfare may rally support for violence, but only to the extent that violence is misguided.  A straightforward explanation of terrorism and the means of neutralizing terrorist threats can promote support for wise policies and create a kind of genuine strength propaganda never can.  Likewise, those who would trivialize and spin this incredibly complex situation in Iraq by phrasing things in terms of “winning” or “losing” promote a false strength that is really a weakness.  This national weakness has left our nation politically and intellectually hobbled for at least as long as this war has been underway.

Demilitarization of Iraq policy is a measure that is long overdue.  The blood and treasure squandered during years of unjustifiable delay is staggering.  Yet those losses only continue to grow until the time comes that real power is used to rally the kind of real strength that can only come from real progress toward concluding this obscenely long military occupation.

If we are to be constructive in all of this, perhaps the term “progress” can be reclaimed from those who insist American policy in Iraq is the cause of said phenomenon.  Whatever the true cause(s), less violence in Iraq is some form of progress.  More and more people conceiving of a day when that land is not subject to U.S. military occupation is progress as well.  If we as a nation can find common ground about realizing a vision like that, then we can continue to make progress.  Call them “time tables” or “time horizons,” but by all means keep such talk alive.

*Of all the ironies, the notion that a joint Pentagon-Haliburton venture would be part of a “cheaper” approach to war may be the most extreme.  Of all the tragedies, the earnest belief that privatization of the commisary did in fact generate savings for taxpayers is nowhere near the most extreme . . . but it is nonetheless a tragic failure of basic competence.

What You Should Think About Recession

November 28, 2007

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”

–William Arthur Ward

My first experience analyzing the cultural resonance of the word “recession” comes from the media treatment of conditions leading up to the 1992 Presidential election. It is clear that the first President Bush presided over a weakening American economy as the end of his term approached. Yet it is also clear (all the more with hindsight) that a some of this was the inevitable adjustment of indicators and indices tugged away from realities by the fervor of Reaganomics jingoism.

Today, jingoism is almost too soft a term for an institutional predisposition to spin economic news. Anchors with almost every major network tiptoe around the fundamentals and treat “the R word” as if it were a vulgarity that should never be uttered in polite company. In fact, recession is a technical term that should be fluently employed in any applicable discussion of economics. Alas, it is also something of an ambiguous term, made all the more fuzzy by the abuses of journalists, pundits, and politicians themselves.

Perhaps the most sensible definition of “recession” holds that it is a period of time when economic growth across two consecutive quarters does not keep pace with population growth. Yet economic growth is itself a much fuzzier concept than tends to be widely believed. If an expensive and fragile device is replaced by a cheap durable device that fulfills the same need, adopting the innovation registers as a negative on the scorecard of economic growth. Acting promptly to minimize the damage caused by a natural disaster may also compare unfavorably with the activity involved in rebuilding efforts.

Then there is the matter of war. While much of education, child care, resource conservation, domestic toil, etc. is not included in the calculations that shape growth assessments, even the most destructive of military activities registers as economic accomplishment. For years the present Bush Administration has turned out mediocre economic performance — a feat that might be considered more than mediocre in light of the damage the attacks of 9/11 inflicted on key institutions as well as public morale.

Yet it is legitimate, even important, to have some sense of context in these matters. Attributing the economic components of declining public morale to terrorist attacks seems a serious error in judgement. If anything, the United States was energized and mobilized, more than at any other time in recent decades, as a response to the 9/11 attacks. A strong national leader with real vision about how to solve real problems could have accomplished amazing things while marginalizing apathy for the foreseeable future. As our sitting leader chose a different approach to directing the resources of the nation, we have experienced a different outcome.

Insofar as there are problems with public morale today, they have little to do with fears Al Qaeda is about to take the roof off the local Pamida store and more to do with weariness. People have grown weary of the persistent disconnect between the stated purposes and the predictable outcomes of White House initiatives. People have grown weary of the persistent deference to market forces in almost all matters, as if trickle-down thinking was still considered to be a perfect panacea to all social ills. Perhaps most of all, people have grown weary of a horrendously bloody and costly counterterrorism strategy that does at least as much to produce new terrorist recruits as it does to neutralize existing terrorist operatives.

The war in Iraq continues to bleed this nation, both literally and economically, to a significant degree. Yet that significance also registers as a net positive in the Gross Domestic Product. An end to the wartime spending binge would mean less spending to stimulate economic activity (unless policy also called for expensive peaceful initiatives like universal health care, universal access to higher education, and whatever else could be funded with the mountains of money funding the occupation of Iraq.) A short term thinker cannot help but see perpetuating the war as vital from the perspective that it also perpetuates wartime spending.

Yet focusing exclusively on short term thinking is almost never a sound approach to economics. So much spending creates more government debt. More government debt means more difficulty in securing creditors for the Treasury. Other than raising interest rates, there is little legitimate action a government can take to expand support from investors. Yet this all happens against a backdrop of interest rate cuts. Even now, Wall Street svengalis continue to promote loose credit as a way of encouraging business growth.

Somewhat like a balloon, applying hard restraints to the economy in one area at best merely transfers pressure to a different area. If our nation spends more and more while issuing bonds that are less and less rewarding, ultimately the medium of exchange itself takes a hit in value. While this eases debt pressure by reducing the real value of that debt, another inevitable consequence is increased pressure on working class citizens (or really all citizens with ordinary levels of personal income.) Less value in the dollar means more dollars are required to obtain goods or services of value — but the process does not provide more dollars to income recipients until terms of employment change.

On top of this great tangle of fundamental problems, oil speculators have driven energy prices up, and thus by extension made inflation that much more severe. If there is any bright spot in the big picture here, it is that the speculation cannot persist indefinitely. Unless the Bush-Cheney team starts a shooting war with Iran, the climb of oil should be arrested in spite of the continued decline of the American dollar. In fact, a general sense that U.S. belligerence is a declining phenomenon could drive a long-needed correction in the price of that particular commodity.

Still, when President Bush’s chief economic advisor Allan Hubbard declared that the prospect of a recession was more likely now than it seemed one year ago, he was doing so with some awareness of these hard facts. As this moment of frankness was almost immediately followed by a resignation, it is hard to say if many others inside the administration have even tried to wrap their minds around the particularly complex and particularly messy state of the national economy today.

Will the unraveling of Dubyanomics have such a severe impact as to bring about a national recession? This is a difficult question to answer, even if one accepts a concrete technical definition for the term “recession.” It may well be the case that American industriousness will sustain some measure of real growth even as the ongoing series of small shocks continue to reduce the median purchasing power of the American consumer. It may even be the case that a sense of hope brought on by a pending change in national direction could inspire major changes for the better.

Yet there should be no doubt — military aggression and widespread corruption fostered by this President have done no favors to the American economy. If we fail to get out economic house in order relatively quickly, the price we have already paid for his follies will be multiplied as it rests on the shoulders of future Presidents and even future generations of American taxpayers.

What You Should Think About Pork Barrel Spending

November 12, 2007

“The defense budget is more than a piggy bank for people who want to get busy beating swords into pork barrels.”

–George H. W. Bush

Over the past two days, I’ve encountered an assortment of media items related to NASA’s practice of honoring people associated with the Space Shuttle program with receptions, banquets, and a ceremony coinciding with each launch. One television network even went so far as to run down the contents of a recent buffet item by item. As the unremarkable list was illustrated by computer graphics and emphasized with alarmist narration, I was much more disturbed by this sloppy attempt at journalism than by the fact that there was no limit on how much beef, turkey, or shrimp attendees might consume.

It did sound like the event was nice, but I did not feel the term “lavish” was being used properly in various accounts of it. Certainly the event was nowhere near the kind of extreme decadence one tends to see when corporate entertaining goes beyond the bounds responsible oversight should establish. One report holds that NASA may have spent $4 million on the last seven of these events. That amounts to roughly 0.025% of the actual spending involved in NASA operations during that time.

What public good is accomplished by journalists reacting so dramatically to the idea that NASA might actually spend $250 out of every million dollars under their control to give hard-working scientists, technicians, inspectors, et al. a pat on the back? There was plenty of “taxpayers should resent this” nonsense flowing through the coverage, but there was no effort at all to show some sense of proportion about the matter. Frankly, I think NASA could double up on this, spending a whopping 0.05% of their budget for special events to award good technical work on the Shuttle program, and still be considered responsible in their use of taxpayer funds.

There certainly are situations where it is right for citizens to be outraged by government waste. Unfortunately, politicians and journalists tend to spend so much time stimulating outrage about trivial spending and/or perfectly legitimate spending that there is no keen focus on real corruption and the most costly abuses in the system. In my opinion, the spending in this NASA story was both trivial relative to the big picture and legitimate insofar as it was perfectly reasonable for its purpose. Yet I imagine most American citizens inclined to read a daily newspaper or watch a significant amount of television news encountered this misleading and emotionally charged item.

Of course, it is but one of many. Every time there is a legislative pay raise up for debate, some grandstanding nincompoop sets about depicting Congressional salaries as a form of government waste. I believe the nation would see more fiscal discipline and better legislative work product if the job paid $10 million per year. Being a Representative or Senator is surely more consequential than being able to play a sport extremely well. The only reason I hesitate to advocate that approach to drawing a better class of citizen into the realm of politics is that such high salaries would make unseating an incumbent that much more difficult for challengers.

This nation started building costly missile defense installations before inventing the technology to actually defend against long range ballistic missile attacks. Even in the unlikely event all that rocketry infrastructure finds future use as part of a working missile defense shield, billions upon billions of dollars will have been squandered by putting the proverbial cart before the horse. Yet the role Senators Hillary Clinton and Chuck Schumer played in earmarking $1 million for a museum near the site of the Woodstock music festival has generated far more public criticism than the role George W. Bush played in deploying a major military system before developing the hardware essential to making that system function in any useful way.

Another item fluttering about the news in recent days has been the mysterious problem that brought down an F-15 fighter during a routine training flight. I cannot dispute what Air Force officers have to say about that warplane. It is an old design, most of the chassis have seen heavy use for decades, and the time has come to consider retiring them outright. Yet the initiative building up steam on Capitol Hill is not for a simple strike fighter replacement. Instead the plan is to double the build orders for the F-22, a powerful (and powerfully expensive) yet stealthy air superiority warplane.

It may well be the case that the Air Force and the Navy need to go beyond existing plans to modernize their aircraft fleets. The problem is that in the military-industrial complex’s uncompromising pursuit of excellence, there is also no room for compromise in spending. The wealthiest nation in the world cannot manage $35 billion to insure health care for children for the next decade, but we can find a larger sum to avoid losing a single step in the arms race? Considering that no other nation is foolish enough to run that race with us anymore, we have all the more reason to reconsider maintaining this extreme pace.

Widespread public perception holds that the $9 trillion debt accumulated by our federal government is a function of “all that damned waste.” Spending like NASA’s banquets or the Museum at Bethel Woods are not at all the real problem here. Now that museum’s funding has been abandoned, all because of misdirected outrage about government waste. So long as politicians and journalists continue to stir up public outrage about little things, many of which actually are not as ridiculous as they are made to seem by sensationalist media accounts, it becomes more difficult to rally the public behind fiscal restraints that are both non-trivial and reasonable.

George W. Bush, happily in league with strong Congressional majorities for the first six years of his Presidency, never vetoed a single spending measure during that time. While pundits bickered about the “waste” of a million here and a million there for projects like the study of an exotic species or a fact-finding mission to some Hawaiian resort, the President and his allies gave out billions in subsidies to profitable oil and gas companies. Not only was this a useless drain on the treasury — it also serves to place business rivals in fields like alternative energy and nuclear power at a relative disadvantage. It was a deliberate step away from energy independence.

Perhaps it is true that a million dollars saved is a million dollars earned. Yet policymakers must cut a million dollars one thousand times to compensate for squandering one billion dollars. If we do not develop a sense of proportion about these matters, then we cannot hope to have an informed national debate about how to bring government spending under control. While the media continues to focus on everything except the major problem areas in our national budget, that sense of proportion will continue to be elusive. I can only hope that in the mean time NASA is not reduced to rewarding its best engineers with nothing more than a literal pat on the back.

What You Should Think About Interest Rate Cuts

October 28, 2007

“Start with the idea that you cannot repeal the laws of economics, even if they are inconvenient.”

–Larry Summers

Conventional wisdom in some circles holds that lowering interest rates is good for business. This week policymakers with the Federal Reserve will meet to discuss the prospect of a fresh cut. Though this only involves the rates charged to banks borrowing money within the system, it is true that lower rates there translate quickly into greater availability of credit for businesses and homeowners. It also translates into greater availability of credit for speculative investors, though some would call me an economic heretic for suggesting loose credit has any downside.

Yet promoting unsound speculation is not the only downside it possesses. Another is not so much controversial as it is ignored. When credit is loosened by lowering key Federal Reserve rates, supporting the American national debt becomes less rewarding. The long term consequences of cut after cut after cut include lower foreign faith in the traditional reliability of the American dollar’s value along with less willingness to support the ever-growing national debt.

Recently that debt surpassed $9 trillion. To put it another way, our federal government owes individuals, foreign governments and other institutions nine thousand thousand thousand thousand dollars. To put it still another way, the U.S. Treasury is on the brink of being $30,000 in debt for every person living within our borders. It is true that the sitting President inherited most of this debt. It is also true that the archetypical “compassionate conservative” conserved the nation into and beyond a 50% increase in the size of that debt.

So our government needs much more support to remain solvent, yet again and again the investment environment is shifted to lower returns on the most stable varieties of long term investments. Of course, this is precisely what the groupmind on Wall Street desires. The same warped thinking that raises stock values when a company becomes smaller by severing ties with human assets and often lowers corporate valuations in response to expansion of American operations also holds that interest rate cuts are always a good thing.

To get to the heart of this, I’d like to look to the words of John Bogle, founder of The Vanguard Group. In an appearance last month on Bill Moyer’s Journal, the mutual find pioneer explained, “in the first 15 years I was in this business, the average mutual fund held the average stock for seven years. Call that long term investing. Now, the average mutual fund holds the average stock for one year. That’s short term speculation.” Keep in mind, mutual funds are generally considered a slow and steady component of capital markets. A proliferation of online activity and day traders creates much more churn.

Why is it bad that more and more stock transactions take place with an eye toward immediate gains? This kind of behavior takes the focus off of business practices and management initiatives likely to produce sustainable growth. Among other things, the present situation means that architects of “pump and dump” schemes can more easily degrade the integrity of capital markets. Yet it also means that stock exchanges suffer from a general loss of integrity as their useful purpose — to enable investors to profit while supporting the expansion of successful businesses — gives way to a casino mentality that marginalizes shareholder oversight of business operations.

After so many delays, the day of reckoning brought on by rising spending coupled with falling federal interest rates seems to be moving from inevitable to imminent. The longer deliberately optimistic estimates (and in some cases deliberately distorted official reports on present conditions) delay recognition of real inflationary pressures, the stronger those pressures become. Not many Americans understand how much Pollyanna economics induces fundamental weakness. Yet almost all Americans have a sense something huge has happened when told that our greenbacks are no longer as valuable as that funny money Canada prints.

I believe macroeconomic stewardship is a lot like being an old man’s private physician. The human body is full of complex interdependent systems. Attentive diligence is required to get a sense of current trouble spots and determine the correct treatments for maximum health. It is as much an art as a science. Sometimes, it really is best not to meddle at all. Sometimes a very small change can produce a major result. Then sometimes, a condition emerges that requires bold, even drastic, action. Obsession with a single approach tends to be counterproductive in such efforts, as it is no substitute for cultivating awareness of crucial specifics that vary from case to case.

I would not go so far as to predict that drastic action is required right this moment. Unwarranted economic alarmism probably devastates short term growth just as unwarranted economic optimism may devastate long term growth. I suspect few economists would dispute that the key to real long term growth involves sustainability in business practices.

Wall Street and other capital markets lose some of their usefulness if they become insensitive to quarterly profit statements and other short term considerations. Yet Wall Street has lost more than a little of its usefulness by becoming exclusively sensitive to those variables. In the process, the institution has become insensitive to the quality of long term planning, investments in human capital, cultivation of consumer trust, and many other important factors that should influence the value of a business.

Failure to think of growth in sustainable terms also leads to a mismatch of huge national debt and loose domestic credit that only supports the exodus of American wealth. Remember, businesses exploiting access to cheap credit are under no obligation to expand their operations inside the United States. This approach to stimulus may enable the rich to become richer, but whatever wealth actually trickles down from this tends to wind up putting food on tables far from American shores. I have nothing against gainfully employed foreigners. However, I think we all should be unhappy with “job creation” strategies that channel American resources without regard for where new jobs are actually created.

Again this all comes back to sustainability. In the present international climate, further bold expansion of the national debt seems unwise, to say the least. Already our currency has shown a measure of weakness unlike anything most living Americans have ever experienced. This week it is likely the Federal Reserve will cut interest rates out of fear that doing anything else would weaken the performance of capital markets.

Given that the performance of capital markets is actually weakening the broader national economy, is it really wise to act again on this fear? Didn’t this habit of loosening credit as a means to increase growth contribute to some of the problems already at issue? Will the need to promote sustainable economic growth ever be given priority over the need to placate speculative investors? As I see it, there is only one way to prevent harsh realities from forcing our hand. That way demands taking stock of the bigger picture, and responding to what we see before economic myopia sends our nation strolling right off a fiscal cliff.