Posts Tagged ‘McCain’

Take a look at the map of states that were won by John McCain and those won by Barack Obama in the 2008 election. It’s pretty clear that Obama won the northeast part of the country and he also won the west coast.  McCain pretty much won the south and the west, except for the coast.  Besides looking at this as just a map of red and blue states, we can also inquire about the nature of these states.  Is there something about the blue states that would inherently indicate that they would lean Democratic while the red states would lean Republican? I think so; it’s the population.

The northeast and the west coast are the most densely populated areas of this country, while the south and the west are farm and ranching areas – generally.  Of course there are exceptions like the cities of Dallas and Phoenix.  However, I think there is something to be inferred from this distribution of red and blue states that spells disaster for the Republican Party down the road.  It’s just like watching an out of control train as it speeds downhill toward a 90 degree turn.  You already know what the result will be.

Today, the population of the United States is a little over 307 million people. The majority of these people live in the heavily populated areas of the country, i.e. the northeast and the west coast, and these areas are growing.  So why are these areas also the most Democratic parts of the country? And why are the more sparsely populated areas primarily Republican? I think it’s because of the underlying philosophical differences between the two parties.  In general the Democratic Party stands for social programs, i.e. people helping people or government helping people.  The people who live in our great cities all know one thing: they are interdependent.  People in these areas are specialized.  They work as doctors or lawyers or breadmakers or car salesmen. Very few, perhaps none of them, can be called self-sufficient and they know it. They know that a complex society can only be successful when all parts of the social system function efficiently. If one part of the system, let’s say the dentists, fall on hard times it will only be a matter of time before a lot of people begin to suffer from tooth aches. Similar problems arise if the bus drivers or the rubbish collectors or the school teachers encounter severe problems – the society needs all of these to function efficiently – and the Democratic Party is oriented towards helping social groups to succeed.

On the other hand, the Republican Party has chosen to make itself the party of the rugged individualist. The rancher, the farmer, the business owner, people who have to be self-sufficient or nearly so are the targets of the Republican Party. People who live far from the centers of society and have no opportunity to partake of the social programs in the cities are drawn to the Republican message of self-sufficiency.  One of the problems the Republican’s face is that this group naturally also contains the lunatic fringe, the self-absorbed, the isolationists, and the paranoid.  It also contains the misanthropes, the extremely greedy, and the ultra-wealthy, self-absorbed, self-appointed aristocracy of America who have little use for the common people or the laws of the land, which are clearly written for the peons to follow and not them.  The Republican Party has become an odd group of followers of  Limbaugh and Beck, O’Reilly and Palin, McCain and Bachmann. But what is their message? Is there anything that this menagerie actually stands for?  Or is it just the Party of “NO!”?

Clearly, the “NO” aspect of the Party is easy to see.  It seems they are routinely against anything the Democrats propose – sight unseen. If it’s a Democratic proposal they don’t want it – period. OK.  So what are they for? It seems that what they want is less government control of everything.  They want to be left alone. They can take care of themselves and they don’t want their taxes raised – they want them lowered, preferably to zero.  The rugged individualists of the Republican Party just want to be left alone.  This, of course, is especially true of those rugged financial individualists who contrived with George Bush (and by the way Bill Clinton bears responsibility for this too) for the dismantling of the financial controls that had been in place since the Great Depression. This great dismantling was a direct contributor to the screaming nose dive our economy took under President Bush.

Today, and day after day, we hear the Republicans say, over and over again, “NO!”  They are against everything President Obama wants to do.  The thing is this: the demographics of this country are changing. Fewer and fewer people are living independently on farms and ranches. Not everyone can own a small business.  Not everyone can be a stock market tycoon or a brain surgeon or a doctor.  Most people are average (by definition, I suppose) and they get average jobs and live in average places – which has become the northeast and the west coast.  In other words, the Republican base is shrinking and will continue to shrink, and as it shrinks it will become more shrill and thus the Republican message will become more shrill – but this shrill message can’t attract converts from the Democratic Party.  There lies the problem. The Republican train is headed for a wreck – anyone can see it if they just open their eyes.  Their message of “leave me alone” appeals to fewer and fewer as our population grows and becomes more and more interdependent.  The real problem for the Republicans is that the Republican train is currently being driven by some very odd people who have no business driving trains and who have no idea they are headed for a glorious wreck.

The crash is coming.  It’s just a matter of time. It’ll be a huge train wreck, just wait and see.

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As the budget makes its way through Congress we now hear the annual outcry from certain politicians about the great evil of Congressional earmarks.  Senator John McCain could probably be called the champion of the crusade to eliminate earmarks.  Hey John, I have an idea.  Why don’t we just eliminate the Senate? Or even better, maybe just eliminate the Senate seats from Arizona? Would that work for you?

The earmark is an old tradition in our governmental process and it serves a good purpose: it represents the voice of the people via their elected representatives in Congress.  Each year our government needs to create a budget for the following year.  Guess who has that responsibility? The President  – not the Congress. But the President doesn’t actually draw up the budget, neither do his White House staff.  They don’t have the time or resources for that.  The initial cut at a budget is delegated to the army of civil servants that work in our many governmental agencies. Basically a request goes out from the President for inputs into the next year’s budget. The request goes to the Department of Defense then to the Departments of the Army, Navy, and Air Force.  The request goes to the Department of Agriculture, the Department of Commerce, and on and on.  Every department gets to send in their wish list to the President for both continuing and new funding.  This is all done by the employees of these departments who are all civil servants, i.e. government employees.  If you ask any one of these government employees who they work for they will immediately say they work for the President – and they do.  Some will tell you that they are the government.  No, really, some of them actually think like that.  Some of these people don’t know the difference between being a government employee and being the government itself.  Does all this sound a little inbred?  You bet it does.

Here’s where Congress comes in.  They get to approve and modify the budget. John McCain, a staunch supporter of the military “chain of command” school of thinking, believes that the only appropriate action for Congress to take is to approve or disapprove the President’s budget. He doesn’t go for that modification thing at all.  After all, John McCain, old soldier that he is, knows full well that the President is the Commander in Chief – so why should anyone else have a say in the budget?  Because we are not a dictatorship, John; that’s why.  Our elected Representatives and Senators are sent to Congress to listen to our local needs and to represent those local needs in Congress – if they don’t do that then who needs them?  That is how our government works and any senator worth his salary should know that.

One way our representatives represent us is by adding items to the budget that the President’s civil servants neglected to include.  These additions that correct the errors and omissions of the President’s budget are called earmarks.  Senataor McCain wants them all banned forever and ever.

For example, Senator McCain recently ridiculed an earmark for North Carolina for “beaver management”. McCain sent out a tweet to his followers (McCain actually knows how to send a tweet? He knows about computers and text messages?) saying, “How does one manage a beaver?”  I can just hear him chuckling now.  Pretty funny – like herding cats, I guess.  Right, Johnny. In actuality, if you bothered to check, Johnny, you would find that you manage them by trapping them and by blowing up their dams.  Why? Because if you don’t you get severe flooding of rivers and streams that causes lots of property damage and the loss of millions and millions of dollars, because the beaver population tends to get too large.  That’s why.  And that’s why earmarks are a necessary part of the process.  The civil servants of this country do not represent us or our interests.  They don’t even know about our needs or interests, and neither, it seems, does John McCain.

The real problem with the earmark process, if John McCain would like to know, is when lobbyists get involved in the process.  Then money starts to change hands and unnecessary earmarks make their way into the budget and a few select companies make a lot of money doing senseless things.  However, this is really a problem with lobbying, not earmarks.  The real problem is that lobbying also affects the President’s budget too.  You know all those civil servants who write up the budget inputs? Lobbyists talk to them.  They also talk to the generals and the admirals. They talk to anyone who has the power to control spending. The result is that the President’s budget is as equally likely to be contaminated with foolish projects as are the Congressional earmarks.  The real problem is not earmarks.  The real problem, which no one seems to complain about, is the lobbyists.  Funny thing though, you never hear McCain complain about lobbyists, do you?  Hmmm, I wonder why?

If you want to learn more about McCain’s relationship with lobbyists, click here.

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There are a couple of interesting sayings about history. One of them is: “History repeats itself”.  Another one, closely related and penned by George Santayana,  is: “Those who do not learn from history are doomed to repeat it.” The economic history of the United States is now in one such process of repetition as our economy and stock market continue to melt.  Ben Bernanke, a student of the Great Depression and Chairman of the Federal Reserve, has taken significant steps to try to avert a repetition of the Great Depression that followed in the wake of the stock market crash of 1929.  He has already drastically reduced interest rates. With rates now close to zero, this is little more that he can do.  Treasury Secretary Paulson has also advocated taking major economic actions and has quickly acted to save the investment banks (which are now bank holding companies). It seems that he has also learned something from history, although probably not nearly enough.

If there is one person who history has blamed for the depression it is the Republican President at the time, Herbert Hoover.  Hoover is blamed, not so much for what he did, but for what he did not do. He sat back and watched as the stock market slid and the banks collapsed, over a period of about three years.  The stock market fell to an eventual value less than 10% of what it had been at its peak, and over 10,000 banks failed.  Unemployment went up to 25%.  Many businesses ceased to exist.  Unemployed people were standing in bread lines to get food.  Hoover did nothing because he believed that the capital markets were self-regulating and that no-rules capitalism would always correct itself.  Despite his own record in his earlier years of being a government interventionist, when he became President he had come to believe that a hands-off policy would be the best for the economy.  History has shown him to tragically wrong, and by the time he left office the United States was deeply mired in economic chaos and hardship.

We are at a point now in our economic history that, in many ways, is similar to where we were in 1931- our stock market is now about halfway to the bottom. We have an ineffectual, conservative, government, steeped in the Republican, feudalistic philosophy of trickle down economics. Our government believes that if we can just repair the damage to our big businesses and banks then everything will be OK.  George Bush and his wealthy advisers stubbornly cling to their self-serving, failed, economic beliefs and have no effective plan to restart the economy that for the past several years had been surviving only by the economic churning of a real estate Ponzi scheme.

Despite the catastrophic failure of Republican feudalism,  John McCain still deeply believes that the correct order of things is for the United States to have a small, ultra-wealthy class from which all things trickle down to the ordinary man (should I say peasant?).  He is a man who, if elected to be President, would do absolutely nothing to correct the imbalance of our tax system that so greatly, and catastrophically, favors the ultra-rich.  He is fundamentally a stingy man who would cut taxes even more for the rich if he could. He would tax the health care benefits of the middle class, and he would drastically cut Medicare which provides the sole source of medical insurance for many of America’s elderly.  A cold and uncaring man, given more to fighting wars than reaching out and helping people in need, he is certainly the Herbert Hoover of today.

On the other hand, Barack Obama has come forward with a new vision – a New Deal, so to speak. He will spend massive amounts of money to create a high technology effort to produce modern forms of energy that will make us self reliant and in the process he will create millions of new jobs for the middle class.  He will provide better health insurance for all and work toward greatly improving our schools – a critical step if America is ever to succeed in today’s economiy. He will pay for this by revising our tax code so that the wealthy and the ultra-wealthy will once again pay their fair share of taxes. He will eliminate wasteful and corrupt spending, (like the Iraq War), and he will impose new regulations on Wall Street that will prevent the greediest of the greedy from ever again recreating a state of economic deregulation such as we have had, that, in the past, resulted in the stock market crash of 1929 and now has resulted in the stock market crash of 2008. Barack Obama is essentially the Franklin Delano Roosevelt of our day.

It now up to us to choose who shall lead this country out of this economic quagmire.  Will we learn history’s harsh economic lesson or ignore it?  Will we choose the ghost of Herbert Hoover or the spirit of FDR to lead us out of economic ruin?  History has already clearly shown which of these is the right man for the task – all we have to do now is vote.

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John McCain is fond of saying that Barack Obama wants to “share the wealth”. By this he means that Barack’s tax plan is unfair and that it will result in taking money from the wealthiest people in America (like John McCain) and giving it to the less wealthy (like you and me).  He and Sarah Hockey Puck then go on to rant about Socialism and Europeans, etc.  There is little doubt that one of the fundamental causes of the current economic meltdown is “no rules” Capitalism – the sort that John McCain, George Bush, Ronald Reagan, and Alan Greenspan have advocated over the past thirty years.  There is, however, a deeper underlying factor that has led to the financial horrors that many Americans are now facing: it is the 401(k) plans that so many of us have come to depend upon.

The term 401 (k) refers to a particular section of the U.S. Internal Revenue Service code.  The groundwork for our present 401 (k) system was initiated in 1978 when the IRS allowed employees to not pay tax on deferred income.  However, it was not until 1981 when Ronald Reagan was President, that the IRS allowed salary deductions to go directly into a 401(k) account without any tax being paid on the contribution. This was the beginning of a massive injection of new funds into the U.S. stock market – investments that were being made by ordinary U.S. citizens, i.e. amateur investors. If you look at a chart of the Dow Jones average for the past hundred years you will see many interesting features. One of these is the spectacular climb in the Dow between 1925 and 1929 – probably something Alan Greenspan would call irrational exuberance. You might also notice that after the stock market crash in 1929 that the Dow did not return to its peak of 380.330 until 1954, twenty five years after the crash.  A strong period of growth begins in the middle of World War II as U.S. factories supply arms to most of the world. This growth continues throughout the recovery period after the war until about 1966.  We then enter an ocillatory period of about fifteen years of essentially no growth in the Dow. Then we come to 1982 and some companies begin providing 401 (k) options to their employees instead of defined benefit pension plans (in defined benefit plans the company guarantees you a specific retirement income, and the company assumes all the risk of providing your pension).  By 1984 there was almost $94 billion in 401(k) funds invested in the stock market. By 1990 there is almost $385 billion of 401 (k) money in the stock market. By 1996 there is about $1.06 trillion of 401 (k) money in the market. In 1998 there is $1.54 trillion. By 2002 there is $1.8 trillion. By 2003 there is $1.9 trillion.  Based upon these numbers we might expect the total value of 401 (k) contributions invested in the stock market today to be about $4 trillion dollars. If we look at the total loss in the U.S. stock market capitalization since the market peaked almost exactly a year ago we see that the market has lost about $7 trillion dollars in value.

This is another way of saying that your 401 (k) wealth has been shared – probably in a way that John McCain approves of.  A lot of the experienced investors bailed a year ago when they saw the meltdown coming. These experienced investors are mostly the wealthy or the analysts who work for the wealthy. They have sold at the top, or near the top, and have pocketed an amount equal to a bit more than the total amount of 401 (k) investments in the market.

Wanna play “share the wealth again”? John McCain has another great idea for you: how about instead of the government providing you a “defined benefit pension plan” i.e. Social Security, you just invest all your Social Security contributions in the stock market – just like a 401 (k)? Pretty good idea, huh?

If you look back at the chart that shows the performance of the Dow for the past hundred years you can see that beginning about 1998 the growth in the market – probably due largely to the injection of funds from 401(k) accounts – has slowed down and we get into a “double bubble” economy. First we have the tech bubble, then the housing bubble as people chase temporary increases in stock value. It looks like the 401 (k) accounts are no longer a big enough annual contribution to continue to automatically propel the economy upward – which of course explains why John McCain wants to put your Social Security money in the stock market and provide another great injection of funds into an otherwise tired stock market. It’s all part of Johnny’s plan for sharing the wealth.

The thing is that neither Johnny nor George Bush give a hoot about why Social Security exists in the first place.  It was created during the Great Depression after people got wiped out in the stock market crash of 1929 and then found that when they reached retirement age they had absolutely no income.  Social Security is there to protect the average person from the avariciousness of the wealthy who would try to entice the innocent worker to gamble their life savings on the stock market. These scrooges have already been successful in doing this with the creation of the 401 (k) plans and now they want to do more of this by privatizing Social Security. John McCain and the rest of his wealthy cronies are not against wealth redistribution, in fact he and they have always been very active proponents of it -it’s just that it is your wealth that they want to share, not theirs.

Come to think of it, they’ve been pretty successful at it too, haven’t they?

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You can see it in the controlled rage of John McCain during the debate with Barack Obama. You can hear it in the desperate rantings of Sarah Palin as she frantically appeals for the drunken support of Joe Six Pack and his redneck friends.  You can sense it in the uncertain voice of George Bush as he tells a very small crowd of supporters that all will be well.  Around the world the stock markets are crashing, governments are desperately trying to shore up their economies, and ordinary citizens sit bewildered, knowing that their life savings have suddenly evaporated as their banks collapse.

It is as America’s poet laureate, Bob Dylan, wrote, “The old order is rapidly fadin’.”

Through many years of Republican rule in the United States, tax laws were passed that always favored the wealthy and burdened the poor.  The outrageous use of our military might was used to raid the wealth of other nations. U.S. multinational corporations exploited of billions of poor workers in foreign countries, even at the expense of our own people’s jobs.  With a blind eye towards those who are suffering – even our own drowning citizens of New Orleans- George Bush and his cohorts implemented a cruel and distorted vision that attempted to take us back centuries in time and create a worldwide feudal empire. His was a vision where a small number of ultra-wealthy businessmen ruled everything, supported by an “undeserving” peasant class in America and abroad.  It was only their extraordinary greed that brought them down as they believed in their own malignant lie that a worldwide “trickle-down” economy could be self sustaining.

This worldwide American Empire – really more of a financial empire than a physical empire of nations, was the ideological successor to the British Empire.  Both fell for the same reason: excessive and unsustainable greed and an unfailing, but wildly errant, belief that there truly is a class of “elect” people in the world who are destined to rule the peasant masses.

George Bush made one of his famous  idiotic gaffes , while he addressed Queen Elizabeth.  He later said that, “She gave me a look that only a mother could give a child.”  I suppose, somewhere in his brain, George Bush somehow really does feel that the Queen of England is, in some sense, his mother and that he is, in some mystical way, a part of the royal family.  Or maybe he just wants it to be so.  I wonder what Freud would say?

Last night’s debate was the end for John McCain, although he may not yet realize it.  His days are over; the people have decided; the voting on November 4th will only be an anticlimax. It is now up to Barack Obama to right the wrongs of the predatory past.  Just as the Republicans pushed through tax legislation that crucified the lower and middle class while giving enormous benefits to the wealthy, the Obama administration must dismantle the old tax codes that embraced the myth of “trickle down economics” and replace them with truly fair taxation.

Barack Obama will need to take steps to rapidly reinvigorate our country by establishing a new engine for our economy. This engine must be based upon technology development because the old manufacturing economy has been outsourced to China, and it’s not coming back.  Barack Obama needs to follow through with his vision that health care is a “right” for all.  This is a right that has been too long neglected by the Republican feudalists.  He also needs to have a vision that a high quality, university-level education is also a “right” for all – it is also a need for our country if we are to compete in the global economy.

There is much work to be done. There is much debris left to clean up from the economic collapse due to the corruption and greed of the Republican feudalists. We have an economy that must be put on track again; we have a military that must come home from its foreign expeditions; we need to regain our country’s preeminence in scientific research and education; and we need to once again become a true champion for human rights in the world.  It is time for the feudalists to realize that their time is over and to step aside.

As Dylan said long ago, “Your old road is rapidly agin’.  Please get out of the new one, if you can’t lend your hand.  For the times they are a-changin”.

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I suppose his standing in class at Annapolis should have been the tip off.  Almost dead last in a class of nearly 900 graduates, you can’t expect him to have too much intellectual horsepower.  Still he presents himself as a man who is sure of his convictions, a man who is unafraid of risks, a man who will go where no man has gone before, and then he changes his mind – all the time. I mean, really, does anyone actually know what John McCain stands for?  Other than making the wealthy people of this country even more wealthy, is there anything else? Anything at all? OK, I suppose a few examples are in order just to make my point.

Let’s take financial regulation. During his long career in the U.S. Senate, McCain has consistently supported deregulation of just about everything on Wall Street. His financial hero and adviser is Phil Gramm who introduced legislation that successfully repealed the financial protections that had been created, during the Great Depression, to protect us from the shenanigans of the big Wall Street banks . Now that our economy is collapsing, due to the Republican-created, elimination of regulations for Wall Street, John McCain is complaining that there isn’t enough regulation and is calling for “tougher rules on Wall Street”!

Let’s talk about Iraq for a minute.  Remember the whole issue about having a timetable to withdraw from Iraq? Remember when he said he was willing to stay in Iraq for 100 years? Then Barack Obama came up with a plan for withdrawal in sixteen months. Remember that? After Iraq officials said they wanted to do something like what Obama was saying, McCain said it sounded like a “pretty good timetable”.

Long ago, John McCain supported the moratorium on offshore drilling.  Almost everyone did because everyone knew that enormous damage had been done to our environment by previous oil spills and that the potential reward for offshore drilling was not worth the potential risk. Then as soon as oil prices go up, he completely changes his tune.  Now his mantra is DRILL NOW! (I’m not 100% sure about this. I haven’t actually heard him say it in the last few days, so it could be that he’s now against drilling.)

There is a long list of McCain’s breathtaking reversals on just about any topic you can imagine at the Carpetbagger Report .  It’s pretty depressing because it indicates that he doesn’t have any clear idea of where he is going, and he doesn’t have any identifiable guiding philosophy in his life. He claims he is a maverick because nobody can count on his allegiance. I guess that’s not too surprising, but I think a more accurate term (and maybe a more nautical one that his buddies in the Navy are more familiar with) is “loose cannon”.

Putting aside, for the moment, that he has tried to co-opt Barack Obama’s slogan of “Change”, recall his slogan of only a few weeks ago, during the Republican Party convention. That slogan “du jour” apparently was “Country First”.  Not a bad slogan, I guess. It certainly sounds patriotic and makes us think that the most important thing for McCain is his country. Right? OK, well, then he goes and chooses Sarah Palin as his running mate.  I don’t think there is any need for me to go into the almost limitless number of reasons why this is a really, really, bad decision, but let me just discuss one. What if McCain were elected and, heaven forbid, he died in office a week later. It could happen – William Henry Harrison, ninth President of the U.S., became ill after giving his inauguration speech and died a month later.  That’s why we have Vice Presidents. They are there, primarily, in case something happens to the President.  So can you imagine Sarah Palin becoming President of the U.S. in February 2009? She would be President for the next four years. Seriously, is that “Country First”?

Just how much does McCain actually care about America to be so utterly irresponsible as to put Sarah Palin in such a position. That decision may be a lot of things, but it is certainly not “Country First”. There are so many reasons that Sarah would be a disaster as President, but they are all summed up in the brilliant Saturday Night Live parody . I suppose almost everyone has seen it, but if you are the one who hasn’t, take a look at it, you’ll see what I mean. What else could I possibly say to prove my point about Sarah?

But this election is not about Sarah, it’s about a choice between John McCain and Barack Obama.  This is a time when our country’s economy is being challenged by an economic meltdown that compares only to the meltdown that preceded the Great Depression, and John McCain has already admitted that he “doesn’t really understand economics“.  This is a time when we face significant challenges in the Middle East, and yet, a couple of weeks ago hot-headed McCain goes looking for trouble with Russia saying “We are all Georgians.” I’m not a Georgian, and I don’t want to be.  I don’t care what happens between the Georgians and the South Ossetians, do you?  Let them settle their own problems.  What is this man thinking? And that is my point. John McCain is an intellectual lightweight. He has, time and again, adopted  any position on any subject for any reason at any moment.

Far from having built his foundation on a rock, he stands on shifting sands, loyal to no one, undependable for more that a moment at a time, mercurial in his alliances, and, in the end, nothing more than a falling leaf, blowing in the wind.

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24 hours ago, John McCain said the fundamentals of our economy are sound. Today he said our economy is in a crisis. Whew! I guess a lot happened in 24 hours!  Johnny now says he wants to set up a commission when he gets to be President, sort of like the 9/11 commission, to try to figure out why the wheels flew off our economy.  I wonder what Sarah would do if she were President? Would she invoke the Bush Doctrine and save us all? The question I have is this: what happened to their answer of just a couple of weeks ago?  Remember their battle cry of DRILL BABY DRILL? How come we don’t hear it anymore? And they were so sure too!  Am I to now assume that “DRILL NOW” isn’t the solution to Wall Street’s catastrophic meltdown after all? I’m truly shattered, Johnny and Sarah.  I…I…I don’t know what to say. I’m so disillusioned!!!

I guess we won’t be hearing any answers from Johnny and Sarah for a while, at least not until they are inaugurated in January; so I thought, meanwhile, I would take a stab at solving the world’s or at least the U.S.’s economic problems while we are waiting for enlightenment from above (meaning Johnny and Sarah, of course).  With apologies to Alan Greenspan and all the other economic professionals who no doubt know tons more than I do about economics and who surely know the answer to our problem but are, for some reason, keeping quiet about it, here goes:

There are two basic types of economies, those that are stable (we’ll call those type 1) and those that are not (we’ll call those type 2).  Guess which type we have? Right. Type 2. By the way type 2 economies are not good because they don’t last and they always end in disaster. Type 1 economies are good because everybody benefits and they just go on and on. That’s the type we should be aiming for. Here’s a real simple example of a type 1 economy: Let’s assume that I have a small farm where I grow peas and you live across the street and you also have a small farm, but you grow corn. I get tired of eating only peas and you get tired of eating only corn, so we agree to trade with each other and before you know it, we’re both eating peas and corn. We could do this for a long time, until, I guess we get tired of just eating peas and corn and we turn to Fred who is a fisherman. You and I both like fish and we decide to trade with Fred for his fish, but Fred only likes spinach. However, he knows this guy who grows spinach who would like to get some peas and corn. Suddenly this starts to get complicated so we invent money. One buck is equal to a bucket of peas, a bucket of corn, or a bucket of fish. (That’s why it’s called a “buck”). Pretty soon we’re all eating whatever we like and money flows around and everybody is happy. We can do this forever. This is a stable type 1 economy and it works because it relies on fair value for goods and people all producing something that the others want and the things they produce are renewable for the foreseeable future. The essence of a type 1 economy is that it is circular and closed. The money and goods all circulate throughout the economy.

Type 2 economies are different. These are non-circular, open loop systems that succeed for short periods of time because they exploit one of the parties in the system. Type 2 systems fail when, for one reason or another, the exploitation cannot be continued or one party winds up with all the resources and doesn’t need the others. For example: take the U.S. economy in the 18th Century. This was fundamentally an economy based upon agriculture. Vast amounts of land were available for farming, but machines, like tractors, hadn’t been invented so a single farmer couldn’t really farm all the land he owned. So, the farmers went out and got slaves from Africa to farm the land. By exploiting the slaves the farmers made lots of money.

Then the industrial revolution came along with all its machines and everyone suddenly realized that slavery was evil and they fought the Civil War to end that injustice. Then the rich people built mills to make textiles and shoes and steel and all sorts of stuff. They hired cheap labor, children, women, anyone who would work for next to nothing to work twelve hours a day in the mills, and the mills turned out tons of stuff that the owners sold to everybody and they got really, really rich.

But those uppity people in the north started wanting to get paid more money for working in the mills so the owners moved the mills to the south where people, especially the children of the former slaves, would work really cheap. And the rich mill owners made lots and lots of money. The people up north had to figure out other ways to make money and began making things that the rich people wanted like cars and televisions. Eventually the people down south wanted more money for working in the mills so the owners shut them down and moved them to Mexico and China and India where they could exploit the cheap labor market and continue making fortunes.

This is sort of where the wheels really started to wobble. That’s because the Americans, who were making money in the industries that still remained here, began buying the stuff they needed from stores like Wal-Mart who sold stuff that was made in China. So, U.S. money flowed to China and shirts and jeans came into the U.S. Next thing you know the same thing was happening with televisions and cars. Pretty soon a trend developed – money left the U.S. and stuff we bought came into the U.S. (Notice how unbalanced the economy had become. In a type 1 economy money and goods flow both ways, but in a type 2 economy it is not a circle and eventually it gets really unbalanced).

Fortunately, someone came up with the great idea of creating a housing pyramid scheme in the U.S.  In this plan you could borrow money to fix up, or even buy, a  house and then flip it. Soon everyone was making money hand over fist buying and selling houses to each other that they didn’t need and the U.S. economy took off in hyperdrive. Until finally it turned out that the banks actually expected to get paid for their toxic mortgages. That’s when the wheels came off, Johnny.  Because nobody could actually pay those obscene interest rates and people didn’t really have real jobs anyway (because all the real jobs had been outsourced to India and China and Costa Rica and Timbuktu). So the banks began imploding, and they turned to the government and cried a lot about it and asked why can’t the U.S. taxpayers pay for their losses?

Well, it’s safe to say it’s a real mess now. Money goes out of the U.S. and manufactured goods come in. Money flows out and stuff flows in. It had to end some time; the housing pyramid scheme just forestalled the inevitable crunching sound on Wall Street by about ten years.

The solution for our broken economy is to create a circular, type 1 economy. If we want to include the rest of the world and make it a global economy, fine, it just has to be a fair system where money and stuff flows both ways, pretty much equally. The thing is this: we can’t go back to our 18th Century agriculture based economy, and we can’t go back to our 19th/20th Century manufacturing economy. We need to create a new foundation for a type 1 American economy that can participate in a global economy without relying on exploitation.

As I see it, our best choice is to create a technological economy. This economy would be based upon the transformation of the U.S., and eventually the world economies, into systems that rely on technology, not machines, to do work. Electricity, probably made from nuclear power and maybe solar or wind too, but not fossil fuels would provide the power to do work.  We need to create a nationwide transportation system, including high speed railways, advanced automobiles, and maybe even aircraft, that are all electrically powered. The development of this electrically powered economy would create millions of high paying jobs, but the good thing is that the people who are creating this capability are also the consumers of the capability, i.e. we will have created a stable, circular, type 1 economy.

In order to take this step we need people of vision to lead the way and we need lots of money to invest in this transformation. The money part has to initially come from the government because businesses are too conservative to take a chance and invest the amount of money needed to get this going. It’s sort of like how the government invested all that money in NASA to go to the moon and in the process created thousands of new products and businesses.  Once the government has primed the pump, so to speak, business could take over, to a large extent, the task of building this new economy.

So, that’s how I see it.  We need to continue our long progression from the old agricultural economy and the old manufacturing economy to a new technological economy. There’s just one little detail I left out. In order to make this technological great leap forward we need really first class public schools. We need the best schools in the world and the smartest students in the world, because technology requires lots of brain power and we can’t begin to go there when our students rank about 20th or 30th in the world in test scores.

We also need to get past the short-sighted,  misguided efforts of Congress to drill our way out of this crisis. That is not the solution. Even John McCain isn’t talking about that anymore.  We need really smart people with vision in our government.  Otherwise, all we’ll be left with is trying to flip our houses to the Chinese.

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