Monday, September 18, 2017

"Deficits and Debt Limit Options"

Sydney M. Williams

Thought of the Day
“Deficits and Debt Limit Options”
September 18, 2017

The purpose of government is to enable the people of a nation to live in safety
and happiness. Government exists for the interests of the governed, not for the governors.”
                                                                                                Thomas Jefferson (1743-1826)

A recent front-page article in The New York Times dealt with the fate of yellow-cab drivers in New York. The reporter, Winnie Hu, provided a heart-breaking look at those (mostly immigrants) who bought medallions at high prices before Uber and others entered the market, and who are now suffering from fewer riders and lower prices for medallions. She did not write of the role government played, in limiting the number of medallions, which artificially inflated their price and which helped cause the upsurge in unconventional competition. She did not write of creative destruction, where new technology drives out the old, and without which our economy and productivity would stagnate. And, she did not point out the options consumers now have – more competition and greater flexibility.

Governments are facing financial crises. Debt is high, and growing. Deficits are expanding. Yet, our infrastructure needs repair and/or replacement, and our defense needs are not being met. Eleemosynary institutions that rely on government support are facing hard times. There are many reasons for this situation, but the gist is that unionized government workers, entitlements, and the bureaucracies to support them, limit options. Mandatory spending on welfare programs has risen inexorably. Union demands, especially at the state and local levels are untenable. Revenues have not kept pace. The solution lies not in more taxes, but in more robust economic growth.

Demographics add to the problem. As a nation, we are aging. In 2015, 15% of the population was 65 and older, up about three percentage points from 2000. In 2030, that number, according to the U.S. Census Bureau, is expected to be 21%. At the same time, the working-age population (18 to 64) is expected to decline from 62% to 58%. In other words, demands on government for retirement and health benefits will increase, while the number of working taxpayers decreases.

We can persist along the current path: borrowing more heavily, increasing taxes, and cutting “discretionary” spending, while increasing deficits and debt. Or we can try to extricate ourselves by changing direction: We can rein in mandatory spending (i.e. entitlements), temper union demands and employ tax and regulatory reform to let the economy grow more quickly.

We don’t need so-called “budget-neutral” tax cuts. We need tax cuts that spur economic growth – simplification and lower nominal rates. While The New York Times contemptuously decried Mr. Trump’s tax reform proposal, saying it favors the wealthy, they were disingenuous. He does want to cut corporate tax rates from 35% to 15%. He also does want to cut personal income tax rates, including those for the top brackets. But he has recommended disallowing many deductions, such as state and local income taxes – a favorite of coastal liberals. The Times knows this, and they know that that would negatively impact their wealthy and elitist readership. A million-dollar wage earner in New York City would lose $127,000 in tax deductions. A California resident, with the same income, would lose $133,000 in tax deductions. Their objections have nothing to do with equality or fairness. Their objections are self-serving. There is, though, a hitch on the President’s proposal – ironically, one noted by conservatives, not liberals. What, for example, would prevent the very wealthy from declaring themselves one-person S-Corporations, so to qualify as a corporate taxpayer? Congress needs to ensure that mom-and-pop businesses can benefit, without the system being abused by “big-bucks” earners in high-income-tax state venues – individuals who can afford high-priced lawyers and accountants.

As for regulatory reform, President Trump has made a good start. He has unwound many of the regulations President Obama imposed on the economy through executive actions. But more needs to be done.  We need regulations, but, when they serve the bureaucrats who administer them (providing assured employment at good wages) at the expense of the people and economic growth, they must be removed or relaxed.

Over the past decade, the good news is that we did not go into depression, as some feared in the wake of the credit debacle of 2007-2009. The bad news is that economic growth, coming out of recession, was the slowest in recent history. When President Obama assumed the Presidency in early 2009, one of the first decisions he made was to form a bi-partisan commission to recommend fiscal stimulus. The Simpson-Bowles Commission was formed in 2010 and reported back about a year later. Their recommendations were ignored by the President and Congress. Tax and regulatory reform were not to be. So, the only game in town became the Federal Reserve, which cut Fed Fund rates to zero, and then instituted a program of repurchasing government and agency debt (quantitative easing) – which caused their balance sheet to expand more than four-fold, and which allowed long rates to remain historically low.

In many respects, the Fed’s actions succeeded: The recession did not deepen; in fact, it improved. The stock market went up three-fold from its bottom. Credit spreads tightened and commercial real-estate cap rates fell. But, we were left with double the national debt and artificially low interest rates, which mask debt’s true cost; GDP growth has been one full percentage point below historic levels. Workforce participation is at the lowest levels in forty years. Income inequality has risen. Wages are stagnant. Labor productivity, according to the Bureau of Labor Statistics, is less than one quarter of the average for the past 40 years. Identity politics have created the greatest societal division since the 1960s. And now the Fed must normalize interest rates and unwind its balance sheet. Rising rates will pressure an already extended budget.

Staying on the current glide, the Country faces reduced options. Slow economic growth reduces tax receipts. With mandatory items consuming ever-larger portions of the budget, spending cuts will have to continue to come from infrastructure, housing, science, the arts, foreign aid, the environment, and defense and homeland security. If we want to keep our options open, we will have to restore some semblance of financial order and increase economic growth. Else, deficits and debt will dictate options.

As Thomas Jefferson noted years ago, the purpose of government is to serve the needs of the people, to provide for their security and to ensure their happiness – not to provide cradle to grave care, and not to do those things we can do for ourselves. We are not the youthful nation we were then. We are mature and we are aging. But we are also the sole democratic guarantor of world peace, which means we need a strong military. Our aging population means there will be greater demand for healthcare and pension accounts. Technology and globalization bring enormous rewards, but they also bring competition and the challenge of “creative destruction.” We face risks, not only natural ones, but from terrorists and nations that would do us harm. Governments must be run in a fiscally responsible way, so that we will have options to confront threats and to assess opportunities when and wherever they occur.

Wednesday, September 13, 2017

Burrowing into Books - "Bleak House" by Charles Dickens

Sydney M. Williams

Burrowing into Books
Essays on Selective Readings

                                                                                                                                     October 5, 2017

“Bleak House”
Charles Dickens

Thus, in the midst of the mud and at the heart of the fog,
sits the Lord High Chancellor in his High Court of Chancery.”
                                                                                                Charles Dicken (1812-1870)
                                                                                                Bleak House, 1853

We live in a litigious age. Bleak House is a reminder that many in the legal profession have long put personal interests first. “The one great principal of the English law is, to make business for itself,” Dickens wrote. Things haven’t changed. Last July, The New York Times reported about the artist Paul Klee’s painting “Swamp Legend.” It took twenty-six years for the courts to resolve an ownership law suit, and to reimburse the family from whom the painting had been stolen by the Nazis seventy-five years ago. The lawyers, we can assume, did not work pro bono. In the U.S. – again, exposed by the Times – was the story of a two-year odyssey in in the guardianship system. Susan Garland wrote of a daughter who sought permission to take her father to dinner. Before granting permission, the court-appointed guardian and lawyers racked up an “estimated $2,500 in fees.” Ms. Garland added: “The Government Accountability Office has found that state guardianship systems across the country are rife with exploitation.”

In England, it was the Court of Chancery that had jurisdiction over all matters of equity, trusts, wills and guardianships. In Bleak House, Dickens uses the fictional case of Jarndyce and Jarndyce to make his point, to expose the corruption of the courts and the lawyers who feed off them. In his introduction, he wrote of a case: “…there is a suit before the Court which was commenced nearly twenty years ago; in which from thirty to forty counsel have been known to appear at one time; in which costs have been incurred to the amount of seventy thousand pounds.”  (That would be roughly equal to $10 million today.) His view of lawyers is caustic: “…in those shrunken fragments of its greatness, lawyers lie like maggots in nuts.”

There are plots within plots, and even subplots within subplots. In the first chapter, Dickens sets the wintery scene: “As much mud in the streets, as if the waters had but newly retired from the face of the earth…” “Smoke lowering down from chimneypots, making a soft black drizzle…” “Fog everywhere. Fog up the river, where it flows among green aits[1] and meadows; fog down the river, where it rolls defiled among the tiers of shipping…”.

Bleak House is one of Dickens main novels, a sweeping evocation of England in the 1830s, told through the eyes of the estimable and empathetic Esther Summerson, Dickens only (I believe) female narrator. Ms. Summerson does not know her parents’ identity, only that her birth is “no cause for celebration.” As a young woman, she becomes a guardian of the decent and kind John Jarndyce, along with two other principal characters, Richard Carstone and Ada Clare, both of whom are beneficiaries under the will in question. Through her, the reader is witness to birth and death, apathy and elation, misery and joy. Esther Summerson’s origins are hinted at, but kept from the reader until the novel nears its conclusion, when they are gradually unwrapped, providing answers to questions that had pestered but eluded the reader.

All is not bleak in Bleak House, though. Tragedy and drama are tempered with comic relief. Two such characters: Mrs. Jellyby, “A lady of very remarkable strength of character…devoted to the subject of Africa…the cultivation of the coffee berry…and the happy settlement, on the banks of the African rivers, of our superabundant home population.” Mr. Skimpole: “I turn my silver lining outward, like Milton’s cloud, and it’s more agreeable to both of us. That’s my view of such things, speaking as a child!”

Dickens is read for his characters, his stories, and his fictional depiction of inhumane conditions of the poor and the mean-spirited, demeaning individuals who take advantage of the unfortunate. His novels convey messages of wrongs that need righting. His success could be seen not only in the number of books he sold, but in the passage of reform measures.

Bleak House is one of Dickens’ longer books, but well worth the time.

[1] Small islands found in the Thames.

Monday, September 11, 2017

"Hate Crimes"

Sixteen years ago, nineteen members of al Qaeda, an Islamic terrorist group, boarded four planes in three cities. Within minutes, three thousand people were dead. It was the first act of war by a foreign group on continental U.S. since the burning of Washington, D.C. in August 1814. More people died that bright sunny morning than American servicemen at Pearl Harbor on December 7, 1941, or American soldiers on June 6, 1944.

The war against Islamic militants continues to this day. For anyone who does not believe they pose a threat to western civilization, your naivete is only exceeded by your ignorance. Since 9/11, tens of thousands lie dead in dozens of countries, on every continent except Antarctica, victims of the murderous rampage of Islamic extremists from numerous groups, like ISIS and Boko Haram. Make no mistake; it is religion that drives them. They believe they are serving God. Osama bin Laden is dead, thank goodness, but al Qaeda has quietly rebuilt. It is estimated that they have 20,000 fighters in Syria, 7,000 in Somalia and 4,000 in Yemen.

The end can only come when millions of moderate Muslims rise-up, against those who have hi-jacked their religion. 

But this day is also one my family celebrates, for it was on this day 51 years ago that our first child was born – a son and now husband to a beautiful and talented wife and father to four wonderful grandchildren.

These two events are reminders that in death there is birth, that life moves on. They are reminders that, while the past is all of ours, the future belongs to the young. And the greatest legacy we can leave is a knowledge of history, the willingness to face facts unafraid, and to love all those we hold dear.

Sydney M. Williams

Thought of the Day
“Hate Crimes”
September 11, 2017

A misunderstanding arising from ignorance breeds fear,
and fear remains the greatest enemy of peace.”
                                                                                                Lester Pearson (1897-1972)
                                                                                                Nobel Peace Prize winner and PM of Canada

Social media platforms, when used to foist political views, show little respect for differing views. In that regard, these platforms are distinctly not social. Like most, I enjoy Facebook and Instagram for the opportunities they provide one to stay in touch with family and friends, but they have become vessels for messages of hate. Recently I saw on Instagram a photograph of a roll of stickers, with the logo “F**k Trump.” The photo was presumably in reaction to the President’s decision to abrogate President Obama’s executive order that created DACA (Deferred Action for Childhood Arrivals), and to have Congress determine its future. The mendacious caption under the photograph read: “Ultimately, this is about basic decency.” Really? And who is calling whom indecent?

While hatred is not one of the seven deadly sins, it should be. It is worse than anger, as it is calculated, not spontaneous. It is more intense than envy, and it is not victimless, like pride, gluttony or sloth. Hatred implies an intense loathing. It can be manifested in thought, speech and in criminal acts. While definitions of hate may depend on the accuser, most of us feel, as Justice Potter Stewart did when he was asked, in 1964, to define pornography: “I know it when I see it.”

In the U.S., hate crimes are prosecutable. Two laws apply: The Hate Crime Statistics Act of 1990 and the Hate Crimes Prevention Act of 2009. The laws trace their roots to the Third Force Act (Ku Klux Klan Act) of 1871 and to the Civil Rights Act of 1968. The FBI defines a hate crime as “a criminal offense committed against a person, property, or society that is motivated, in whole or in part, by the offender’s bias against a race, religion, disability, sexual orientation, or ethnicity/national origin.” While all of us would agree that hatred and bias are common to many criminal acts, the concept of a hate crime is riddled with ambiguity. In an August 13th New York Times article “Was the Car Attack a Hate Crime?”, Charlie Savage, writing about Charlottesville, noted that section 245 of Title 18 of the Civil Rights Act of 1968 “makes it a crime to use force to willfully injure or intimidate any citizen because the victim was ‘participating lawfully in speech or peaceful assembly’ opposing the denial of certain civil rights to other people…” Antifa, it would seem, could be prosecuted for the violence they have caused on college campuses across the country.

According to Jack Levin and Jack McDevitt, authors of Hate Crimes: The Rising Tide of Bigotry and Bloodshed, a “hate” crime is not about hate, but about bias or prejudice. They raise questions: What is meant by prejudice? Which prejudices qualify for inclusion under the hate crime umbrella? Which crimes, when attributable to prejudice, become hate crimes? How strong must be the casual link between the perpetrator’s prejudice and the perpetrator’s criminal conduct? Some prejudices are considered good, like the biases of those who say ‘f**k you’ to the President, while others are thought of as harmless, like preferences for tall people over short people, or blonds versus brunettes.

To be a hate crime, intent and motivation should be clear and proven beyond a reasonable doubt. If a white policeman shoots a black man, did he do so because he thought he, or others, were in mortal danger, or did he do so because he hated blacks? If a black policeman shoots a white man, are the same questions asked, or is there an assumption that bias is not probable? Why was the burning of a mosque in Victoria, Texas a hate crime, but the slaughter by an Islamist extremist of thirteen soldiers at Fort Hood workplace violence? Was President Trump’s decision about “Dreamers” racist, and therefore hateful, or was he right that legislation is the purview of Congress?

When society functions with order and a distinct moral sense, such questions are mute. Morality and ethics are understood – we know unethical behavior when we see it, to paraphrase Justice Stewart. In such cases, civil behavior is standard. Laws are obeyed. Civil disobedience is allowed, but destruction of private property is not. But today, Western culture is in decline and multiculturalism is in ascendancy. Questions of right are wrong go unanswered, for fear of offending those whose cultures may be at odds with our Judeo-Christian heritage. Worse, political correctness and identity politics have become de rigueur among the elite. Victimhood is assumed, despite its humiliating implications. The sanctimonious supposition is that victims are unable to fend for themselves.

A government that yields to multicultural demands, but which leaves moral behavior in abeyance, fails its’ constituents. Jay Cost, in a recent Weekly Standard article, noted that James Madison, author of the Bill of Rights, felt government should proceed slowly and cautiously, but public discourse should be vigorous and unfettered. But we now expect government to act vigorously, and dissenters from orthodoxy to shut up. Mr. Cost wrote that, in Madison’s view, “for the people to rule wisely, they have to be able to communicate with one another – freely, without fear of reprisal.”

The irony is that hatred has become ubiquitous, in part, because it is an unintended consequence of identity politics. Its progeny, the concept of hate crimes, amplifies our political dissonance. A free people will disagree and disagreements should be aired without physical or legal retribution. Our country’s government is based on the idea that the people are sovereign – that we are not subject to the wishes of a small number of elites in Washington – and that the diverse and collective wishes of the people should prevail. Hatred of people because of their political or personal views is not mentioned in the law…nor should it be, yet the left-leaning SPLC (Southern Poverty Law Center) has labeled the Alliance Defending Freedom, a “hate group,” because it adheres to traditional views about human sexuality and marriage. But they won’t cite Anifa as a hate group. How do we get this train back on track?

Criminals should be prosecuted. Bad guys should be punished. There is no question in my mind that there are those in our society for whom hate is the principal motivator behind crimes committed, but we must be careful lest the vagueness of what constitutes a hate crime is not defined by those seeking political advantage, and that the actual crime, therefore, goes unpunished.

The study of totalitarian governments, whether on the left or the right, show that granting federal governments police powers can lead to dangerous precedents; consider, for example, the Gestapo and the NKVD. We already have an FBI; do we want another, and more powerful, J. Edgar Hoover? Hate is a motivating factor in many crimes. But, since the definition is imprecise and judgments are subject to interpretation, is it worth the risk to our basic liberties if the wrong person occupies the White House and places the wrong person in charge of a federal police force? Can we not investigate, prosecute and punish those who are guilty of crimes, without adding another layer of bureaucratic, legal higgledy-piggledy?