Are America’s better days behind us?

Paddy Ashdown, in a speech given at the 2009 Guardian Hay festival entitled “The end of western hegemony” basically declared America to be “yesterday’s news” among the superpowers ( http://u.tv/News/The-end-of-western-hegemony/21f93f82-c918-4c1f-86a3-36382f2aa00b), but is this the truth? Ashdown’s obvious bias may lie in his professed faith, Islam:

Nezavisne novine. 29 October 2002. (http://www.oscebih.org/public/default.asp?d=6&article=show&id=177. Retrieved on 2007-11-23.)
”I am from Ireland, where society is divided too. In my school children were separated on Catholics and Protestants, but I said that I am a Muslim, because my father was a catholic, my mother a protestant. That’s not a reason why I was so bad student. My teachers told me that knowledge is gaining through whole life, and man is learning all the time. That changed my life. That’s why, this start of education campaign in BiH is the most important, since I came to BiH”, said Ashdown.”

This multiculturalism is a mask for Islamic domination promoted by the Council on American-Islamic Relations (CAIR, founded by a Hamas leader), the American Muslim Council (AMC, funded by the Saudis, whose founder supports Hamas, Hezbollah and Al Qaeda; http://www.military.com/NewContent/0,13190,Defensewatch_100903_Wahhabi,00.html), the Islamic Circle of North America (ICNA, which funds Hamas), the National Coalition to Protect Political Freedom (NCPPF, which funds Palestinian Islamic Jihad terrorist groups), the American Muslim Armed Forces and Veterans Affairs Council (which funds both Hamas and Hezbollah), the Muslim Brotherhood, Islamic Society of North America (ISNA), the Graduate School of Islamic and Social Sciences (GSISS), the International Institute of Islamic Thought (IIIT), and World Assembly of Muslim Youth (WAMY). etc. in many ways, it is far more serious an attack. The goal is to establish Sharia law throughout the nations of the world, which, in effect, establishes a worldwide Caliphate, as Muslims are instructed to do in the Qur’an.

This is frightening on many levels because many extreme left liberals, blinded by their multiculturalist utopia, are suggesting that we “roll over and play dead” rather than commit ourselves to learning from our mistakes AND our successes, then moving forward cognizant of those lessons. We have reached a point in democratic societies where our attempt to be politically correct is infringing our right to freedom of speech. The recent incident with Geert Wilders being refused admission into the U.K. because they feared it would rile the Muslims is very concerning. And our friend Ashdown was very much a part of that effort to keep him out. Other countries in the U.K. are caving to the Muslims’ demands as well. We must find a balance between being respectful of others’ views and speaking our mind freely, without fear of reprisal from any government. But that is a discussion for another day….

On the other hand, we seem to have forgotten over the last eight years that being a world power does not entitle us to be a world bully. Regardless, our place in the world depends on having a strong, stable economy. And we must deal with a two-headed monster: the national debt and our failing industries that produce tangible goods.

So, what should we have learned?

First, we know that deregulation does not work, or, conversely, regulation does work. Whether financial, environmental, social or other, the times when our nation has been most stable is when we had a solid set of enforceable, manageable rules in place, a clear line of authority and agencies empowered with the authority to act. Over the past few decades, “free marketeers” and “free-traders” have been buying their way into the political scene and using their influence to convince politicians of their ideology. It is a siren’s song that we find very seductive, because we Americans are an independent, free-thinking bunch, and anything that has “free” in it sounds like it must be tailor-made for us. But this is not the case.

As for free markets, the laissez-faire (French for “let [the people] do” [for themselves what they know how to do] (http://en.wikipedia.org/wiki/Laissez_faire) theory may work beautifully in a laboratory setting where all factors are easily controlled, but in the real world, it has failed miserably. Why? Because man is foible, and you can’t expect the market (run by greedy, unethical men) to police itself. Every time we tried to deregulate, it ciomes back to bite us in the butt. In the ‘80s, it was the Savings & Loan debacle and Michael Milken’s junk bonds; today it is the investment bankers, corrupt credit rating analysts, junk mortgage bundlers, junk derivatives and Bernie Madoff’s fraudulent Ponzi scheme. Hedge funds and derivatives have turned our stock market into a casino where nobody wins. There is not just one piece of deregulation legislation that acts as the dagger to the heart, but rather a thousand paper cuts that finally caused our economy to bleed to death.

As for free trade, we should have learned by now that there is a happy place between free trade and protectionism called fair trade. We are not yet living in a truly global society. America has been far too generous with our markets, with far too few restrictions, or at least enforceable ones. As a result, we find that foreign goods made cheaply, and often without the consumer protections and quality assurance we need, are nevertheless making their way to a store near you. However, this is not reciprocated in kind with many of our trading partners. This must be changed in a reasonable, rational manner to include enforceable consumer, environmental and labor standards. No more lead in children’s toys and no more poison in pet food. No more of our labor force trying to compete with slave labor and child labor in foreign countries.

But the current financial crisis is not just fixing the mortgage industry and the credit crunch or revising trade agreements, it is deeper than that. The U.S. has moved from a self-sufficient nation that produced tangible goods and services to an economy based on consumer spending, paper wealth and banking products that are parasitic and exploitive in nature. In the IT business, we call the current banking model vaporware, because our investment and commercial banks don’t really exist to provide customers with a needed service anymore, but to create a perception of wealth via derivatives, hedge funds and bundling and reselling paper.

In the ‘90s, with the IT industry in overdrive combating the Y2K problem, we envisioned an information economy, but as is the case with all bubbles, that bubble soon burst, because, in the final analysis, IT work is in large part can be a remote service at which other nations like India, Pakistan, Southeast Asia and Japan can excel and provide greater value due to cheap well-educated and well-trained labor. We have also lost our clothing manufacturing to third-world countries with cheap labor, often slave labor or child labor. We now see even our flagship industry – automobile manufacturing – losing steadily to foreign imports and on the verge of not just bankruptcy, but complete collapse.

Why?

It’s time to set some priorities. First, it is a matter of national security for us to free ourselves of foreign oil. Foreign oil is draining our economy of billions of dollars daily. A politician said during the campaign that we borrow money from China to buy oil from Saudi Arabia. This cannot continue! High-priced oil and petroleum products are the single-most factor that drives up cost of tangible goods. When the items necessary for daily life are more expensive, labor cost goes up, which raises the cost of domestic goods even further. It is a vicious spiral. Big Business and their benefactors, primarily Republicans and conservatives, try to sell us the idea that it’s all union labor’s fault, but logic tells us otherwise. Ask any union members if they would take a lower salary (if it was truly a living wage) if accompanied with corresponding cuts in prices of consumer goods, and you might be surprised to find that they would accept that. Why? Because it’s not how much money you make, it’s what your money’s worth (what you can buy with it)! that counts! And that’s why a weak dollar hits the middle and lower classes far worse than the privileged class.

We must cure our need for immediate gratification and short-term thinking and challenge ourselves to value stability and steady growth over immediate “windfall” or unreasonable profits. We need to wake up and realize that all bubbles burst, and feeding frenzies in the Stock Market generally don’t pan out, certainly not for the companies who are victimized by them. What we need is stable, steady growth, not bursts of profitability with long gaps of decline, which is where we have been since the 1980s and the Reagan Revolution with the supply-side economics and trickle-down theory. The “voodoo economics” of the 1980s that GWB warmed over in the last eight years has not worked for the 21st century thus far. Actually, it didn’t really work in the 1980s either.

How to we fix this?

We all heard in the last campaign that it’s about jobs, jobs, jobs…. Well, guess what! It IS about jobs, Jobs, JOBS! We must create jobs. There are two ways to create jobs:

1. We can borrow more money, increase our national debt, exacerbate inflation and put people to work based on government projects, and/or
2. We can find other ways (i.e., tax breaks and incentives, guaranteed loans) to encourage the private sector to create jobs.

The above is a short-term strategy to stop the bleeding of jobs moving overseas. But we also need a long-term strategy. Every time we increase our national debt, we give away a larger and larger portion of our annual budget to the payment of interest on the national debt: money we might as well be flushing down the toilet. And, normally, I would not support increasing the national debt, but this is a critical moment with a window of opportunity that is quickly closing….

The Green Economy and Energy Independence

The buzz word during the last election was the green economy. Unfortunately, this seems to be the one good idea that has been put on the back burner. It is due, in large part, to special interest groups and undue influence on politicians to maintain the status quo — the influence of Big Oil on our politicians. But the lack of progress and lethargic public support is more likely due to the fear of the unknown — we have lived with an oil-based economy for over a century now. Oil, for us, is much like heroin for a junkie; it may give us the temporary “high”/feeling of security, but the reality is that we are killing our economy with foreign oil. It seems unreasonable and unlikely that the U.S. government should start its own energy company, so it is far more likely that providing tax incentives and guaranteed loans for private energy companies who are willing to commit to creating jobs (as well as providing a green energy product and/or service).

Rebuild Our Infrastructure

The equally important issue where the solution will help solve two problems – our crumbling infrastructure and jobs – is government-funded or subsidized innovative projects that repair roads, bridges, tunnels, sewers, waste disposal and recycling, water pipelines, utility lines, etc. Our energy grid is almost maxed out. We have witnessed the tragedy of collapsing bridges.

In addition to wind energy, solar energy, nuclear energy and biofuels obtained from crops, we could address our nation’s waste disposal problems with innovative energy plants using garbage. Right now, we have barges and floating mountains of trash that are killing sea life and polluting are oceans by design simply because we have nowhere to put all this waste. And that doesn’t even cover the waste illegally disposed of in our lakes, rivers and streams.

The answer to our economic crisis need not be elegant, just doable. The problem is we have to light a fire under our politicians and convince them to grow a pair and get this done.

Pay OFF National Debt

If we regain economic stability, we must then seriously pay off our national debt. An old Tennessee Ernie Williams song was “I owe my soul to the company store.” There is much truth in that. As long as China, Saudi Arabia and other Middle Eastern countries own our debt, they effectively own us. We dare not try to enforce our human rights policies on China unless we want them to call in our loans. Likewise with Saudi Arabia and their human rights issue or their support of Islamic terrorist: should we fall into disfavor with Saudi Arabia, they have the entire Middle Eastern oil cartel at their disposal, and our oil could be cut off overnight if they so chose to exercise that power. Notice that every time we show strength against Muslim nations, particularly Sunni Muslim nations, they cut production. If you doubt that our debt is not an issue of national security, imagine waking up to a world with no electricity in your house and no gasoline to put in your car.

Peace!

Unfortunately, the Beatles song, “All you need is love!” is a utopian, naiive theory that does not work in the time of global jihad . The next component to our economic recovery is to end the war in Iraq and win the war in Afghanistan and Pakistan quickly and efficiently. Conservatives want us to believe that it is “entitlement” programs like welfare, Medicaid and Food Stamps that have bankrupted us. They even include the government-sponsored indivudal retirement investment fund called Social Security as an entitlement. This is a bold-faced lie. The Aghanistan and Iraq wars have almost single-handedly caused our national debt to skyrocket exponentially. We can no longer be policeman for the world. And we must demand that our allies take care of themselves (i.e., Germany, Japan and South Korea, in particular).

Economic Policy and Monetary Policy

The last item of business is regarding currency management. We must have far more transparency in the Federal Reserve System. The idea of creating a hybrid system that would prevent banking panics and balance privatization with government regulation was important. No one would argue that our system needs elastic currency and liquidity, but, Greenspan’s (and the presidents in office during his tenure) reliance on monetary policy to manage the economy (by raising and lowering interest rates) rather than managing the nation’s monetary supply is one of the components of the financial crisis. We have simply not had an effective Treasury Secretary in place to create effective economic policy. Managing the economy by interest rates in place of real economic policy does not work Lance Taylor’s 2004 Reconstructing Macroeconomics maintains that the sources of inflation must be found in the distributional structure of the economy. The Fed was never intended to supplant the Treasury Secretary. And one the Fed’s biggest failures in this current crisis is that it did not “protect the credit rights of consumers” or “contain systemic risk in financial markets” (http://en.wikipedia.org/wiki/Federal_Reserve_System). We need a comprehensive economic plan and policy.

Our Founding Principles

The idea that the U.S. should resign itself to obscurity is neither acceptable nor inevitable. We will have just as much relevance and power as we aspire to have, providing we back up our aspiration with perspiration and determination.

It’s not just a question of dominance that drives America, it is a question of whose values will the world respect and follow. Leadership is not solely dependent on a powerful economy or a powerful military; those are secondary to our founding principles of individual equality, freedom and responsibility, a citizen-run government and political process, well-regulated capitalism where everyone is free to participate and grow wealth, and, lastly, the transparency and integrity of our government and political system, which is the Constitution. Our present failure is due not to the weakness of our values, but our failure to observe them. We cannot allow our recent failure in leadership to cause the world to reject our values, rather, we must “clean up our own back yard” and continue to promote our values.

We have been and must continue to be the shining beacon of light in what is now a very dark world.

The economy, free trade and tax policy

At some point our country has to come face-to-face with the realization that we cannot spend more than we earn.

Giving unconditional tax breaks does not help our economy. The assumption that the wealthy will reinvest their capital gains in our American economy if there is no condition or penalty for taking the profits is a faulty assumption. To assume this level of patriotism from participants in our economy is flawed.  Just as we found out that, given the freedom to do so, corporations will not be good citizens in terms of labor health and safety, consumer protection and environmental protection unless forced to do so. We constantly hear the moans and rants from lobbyists and industrial advocacy groups about how our government regulations are killing their business. The alternative, however, is lack of governmental regulation destroying our environment, harming our labor force and even lowering the health and safety standards and protections for consumers.

Supply-side economics does not work except in the most perfect circumstance of complete market fairness. Unregulated, the markets controlled by the supers will not be fair and open without fraudulent manipulation by definition.

Using tax incentives to shape socioeconomic behavior is a tried and true tactic that has been used in our tax policy for decades. Clinton’s approach to the economy in the ’90s emphasized job creation and opening markets with NAFTA and other free-trade agreements.  The reputation and wisdom of these agreements have suffered from the public’s misunderstanding of the real cause of the perceived deleterious effects of free trade.

The problem is that even free-trade cannot really be free. This is where we have suffered the effects of so-called “free trade” as managed by the Bush administration. These agreements did have conditions and enforcement mechanisms to protect labor, the environment and the consumer.  The problem is that the Bush administration has failed to enforce these conditions properly or consistently.  There must be conditions, remedies and enforcement mechanisms to any agreement that guarantee reciprocity when we open our markets to others. Also, enforceable health and safety labor standards, consumer protection standards and environmental protection standards must be the part of any trade agreement.

Originally, the sociopolitical goal of opening our markets to our political adversaries and competitors, such as Red China, the Soviet bloc and the third world was based on the assumption that we could use our economic relationships to impact their sociopolitical attitudes and governmental policies by taking advantage of their increased addiction to the fruits of capitalism — profit and greed — against their Communist economic and political system. The concept of income redistribution would give way to priorities guided by personal profit and greed.

It worked, sort of. However, just as with the robber barons of the turn of the 19th to 20th century, in the absence of governmental regulations and watchdog groups to control quality, fair labor practices, health and safety issues, consumer protection and environmental protection within these countries and a vigorous CPSC in our own country, we now have lead in the toys shipped to Wal-Mart from China, and contaminated pet foods and even contamination in food and products for human consumption.  Not to mention regional and global environmental impact from China and India alone — poisoned rivers that flow from China to the Indian and Pacific ocean, toxic air and contaminants carried by the jet stream across continents and oceans and an exponential demand for carbon-based energy, impacting the health and safety of entire populations and significantly global warming throughout the world.

With every freedom comes responsibility. And it is important to remind ourselves that access to our markets is not an intrinsic right, it is a privilege that we must protect carefully. Reciprocity and enforcement tools must be the vanguard of any trade agreement we strike. To do otherwise is to end up with the situation we have now under the management of the Bush administration — a disaster for labor, consumers, our country and, ultimately, for our planet.

Likewise with our tax policy. Investors tend to view their access to public trading as an intrinsic right of a capitalist society rather than an earned privilege. Sure, the risks are greater, but so is the reward. This is where the balance of good tax policy between Darwinian capitalism and economic redistribution must find equilibrium. As citizens of this country, we have rights, privileges and responsibilities as such to do what we can for the greater good of society. Finding that balance without excessively punishing the haves or the have-nots is the art of good tax policy.

To dismiss a tax system based on graduated taxes correlative to increased income out-of-hand is rather short-sighted given the fact that any taxes we pay should be considered investments in our society. A society that has no safety net for the poor and the disabled will breed crime and disease exponentially with each generation. The haves will find themselves and their property increasingly under peril of attack and revolt from the have-nots.  If you need an example, look at Brazil or most third-world countries.  The wealthy live in gated communities with guards armed with automatic weapons.  They have to have a team of bodyguards to protect them when traveling outside their gated communities.  This is not the kind of society we want for America.  But it is the society will we get if we keep going in the current direction.

Social programs for public education, job training or re-education and welfare are worthwhile investments from a socioeconomic standpoint, because it increases employability and, by doing so, increases the tax base, assimilating the once unemployed have-nots into the middle class, which decreases the tax burden for all taxpayers and, particularly, individuals at the top of the financial heap.

Herein lies the truth that the ounce of prevention required is far better than the pound of very expensive cure.