Saturday, September 3, 2011

Two Men Arguing Have Much in Common

Listening to the fight and argument over the nation's debt ceiling last month, one cannot help but feel that vast policy differences divide democrats from republicans.  The democrats and republicans seem unrelenting in their shared willingness to fight, name call, and accuse the other side of bad faith.  Given this, it may serve us well to investigate further what else the two men arguing have in common.

To analyze the differences between the democrats and the republicans on the nation's debt, the line chart below defines the spectrum of policy choices available.  On one extreme, we could aggressively reduce the 14.5 trillion (T) in US debt by running surpluses and paying down obligations; on the other extreme, we could aggressively expand the debt by running greater deficits and borrowing more; or, we could pick some happy medium in between.

Using this spectrum, we can now compare President Obama’s Budget (democrat) with the Ryan Plan (republican) to see their differences over the debt.  The Obama budget calls for $5.7 trillion (T) in government spending in 2021, and the Ryan Plan calls for $4.7T in government spending in 2021.  Discounting for an historical inflation rate of 3.21%, Obama’s budget proposes that, in today’s dollars, government spending should top 4.16T, up 15% from where we are today.  In contrast, the Ryan Plan asserts that government spending should ebb to 3.43T, down 4.8% from where we are today. 

While each side believes it can divine and increase economic inflows 10 years from now, it seems a less speculative approach to benchmark each proposal’s spending against the actual inflows of today.  Inflation adjusted, the Obama expenditure of 4.16T yields an annual deficit of 2.14T against today’s inflows, and we would have to borrow $0.55 cents on the dollar to meet his expenditures (the writer notes that if Obama obtained his stated tax increases with no negative effects to the economy, the Obama deficit would only grow to 1.8T, requiring only $0.46 cents on the dollar in borrowing).  Inflation adjusted, the Ryan Plan of 3.43T implies a deficit of 1.41T per annum against today’s inflows, and we would have to borrow $0.39 cents on the dollar to meet Ryan's expenditures. 

Option 1: spend to where we borrow $0.46 to $0.55 cents on the dollar; Option 2: spend to where we borrow $0.39 cents on the dollar.  Option 1: increase the nation’s debt by 12% to 15% EACH YEAR in real terms, or Option 2: increase the nation’s debt by 10% EACH YEAR in real terms.  Each of the next 10 years, both options materially add to the US debt that already stands at 683% of current inflows.  Simply, when built against today’s reality as opposed to tomorrow’s dreams, the Obama Budget and the Ryan Plan are next-door policy neighbors, inhabiting the leftmost segment.  Both plans reside on an extreme outpost, nowhere near the middle of the number line.  In the case of the democrats and the republicans on the matter of the debt, two men arguing have much in common.

 Given the policy proximity, we cannot help but recognize the irony of republicans accusing the democrats of profligacy and of the democrats dubbing the republicans “extremists.”  This reminds us of Charles Anderson, who said, “Observe which side resorts to the most vociferous name-calling and you are likely to have identified the side with the weaker argument and they know it.“  The republicans and democrats share a position and their antics, Anderson would posit, suggest a weak argument on both parts.  It is little wonder they try to confuse the argument even further, labeling left as right, further left as center, and the center--no further debt--as terrorism.  So, the next time you see the "left" and the "right" beating on one another and arguing their lilliputian differences, take a pause, scrutinize the facts, and always remember, two men arguing have much in common.

Tuesday, July 26, 2011

The Long Road Home

Our forefathers thought a man to be free only when he had say in his own governance.  As the British crown continually refused them a say in that governance, the colonists risked blood and treasure to fight the American Revolution.  The drive for self-determination and the affront of "Taxation without Representation" ultimately paved the path to war for our predecessors.

Today, we modern Americans reflexively accept the notion of self-governance and instinctively decry taxation without representation.  The appropriate question is not, however, what we feel about self-determination and taxation without representation (TWR).  In 2011, the appropriate question is, "Has representation without taxation (RWT) suppressed self determination?" 

Absorb that last question for a moment.  RWT, or representation without taxation, describes the divorce of the right to vote from the corresponding responsibility to pay tax.  Severing right from responsibility, RWT absolves certain groups or classes from taxation, and to the extent government has not eliminated those taxes altogether, others remain shackled to them.  In execution, RWT propagates governance that treats people unequally in the eyes of the law.  In assumption, RWT fundamentally defies the equality of all men.   Doing so, it hurls a wrecking ball at the foundational principles of our great nation.

Now, returning to the question of RWT in modern America and whether all of us still live free, start by considering the fact that 47% of Americans currently pay no federal income taxes.  While polemics might point out that the aforementioned 47% pay payroll and sales taxes, that argument fundamentally ignores that 53% of the people must do something to remain free that the other 47% do not need to do to enjoy their freedom.  The 53% are different from the 47% in the eyes of the law.  They are unequal.

Adding to the 47%, scrutiny of some other groups compounds the RWT reality.  Consider the hedge fund manager who realizes most of his income at long-term capital gains rates (15%) even though he has no true risk of investment loss.  Add to the mix those who make their living off of subsidies like ethanol and wrestle far more income from our government than they pay in taxes.  Top off these two examples with a run-amok lobby system, and corporate welfare for companies like GE, which had a profit of $5B and paid no taxes in 2010, and the important question becomes clear.  "Do you think that loopholes and preferential treatment have at least another 3.1% of the people living the RWT-life?"

If your answer to the previous question is, "Yes," and you pay federal income taxes, you may wish to examine your present ability to self determine as an American citizen.  Directionally speaking, if over 50.1% of the citizenry have achieved a significant degree of RWT, it seems reflexively true that you, who have not, may live under some degree of, or absolute, TWR.

Reasonable people might recoil at the notion above and label it extreme.  After all, each person has a vote that is counted, and representatives get elected from those votes.  Unfortunately, for us, that argument breaks down when one examines the origins of our representatives and the word "represent."  To represent means, "to stand or act in the place of."  If those voted to represent can obtain perpetual reelection by enforcing the status quo on behalf of an entitled majority, then true representation cannot, in fact, ever exist for the minority.  The system becomes little more than a kangaroo court in which the election process has the appearance of representation but the ability to be represented never truly takes form for the TWRs.  Unfortunately, the moment RWTs obtain a majority, their very existence gives birth to a permanent underclass of TWRs.

While the case above requires no further clarification, those rightly concerned with social justice occasionally sanction TWR saying, "The 47% are the 'most vulnerable' among us and 'millionaires and billionaires' can afford to pay more and should do what's 'fair'."  To this there is not much more to say other than it defies logic, morality and any known ethical standard to effectuate social justice by perpetrating an equal, if not greater, injustice.  Reasonable people might further consider that the labels "rich," "poor," "vulnerable," "fair," and "can afford" are subjective standards with no foundation in the natural rights of man or in universal truth.  Who is rich?  Who is poor?  The ultimate answer to such questions are the questions, "by what standard, and who defines that standard?"  The answer: those in power.  The RWTs select and define the standards for rich, poor or otherwise as they have the numbers in their voting block.  Again, in a world where others "need to do their fair share," the TWRs find themselves in a kangaroo court where the RWTs decide how much TWRs will pay. 

So this, my friends is where we find ourselves today, and no one person, group or class is to blame.  Through an increasing allocation of breaks, favors and rights and all in the spirit of governance, advancement and just outcomes, we have desecrated our founding principles.  We did the most un-American thing imaginable.  We granted title and station to people like the nobles of the 16th century and now find ourselves overwhelmed by the demands of those entitlements.  Meanwhile, in the course of elevating the entitled, we inadvertently shackled others and robbed them of their fundamental ability to self determine within this good land. 

Understanding that we have come lost as a people, our will must inevitably turn to finding our way home.  The road will be long and arduous, but we need only a resolute intent and a starting point.  And, as providence and the course of human events would have it, our forefathers deeded all we need to posterity.  Now, we must heed their words, take the first step, and petition "for redress in the most humble terms." 

Sunday, July 24, 2011

Intent & Requirements

This blog will probe the pressing political problems presently pushing the United States of America into perdition.  We will petition your common sense in an effort to build common ground, elevate our great nation, and oxygenate the putrid puss passing as parlance in politics.

An honest mind and a steadfast belief that, "all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."