Monthly Archives: September 2012

A dialogue on ‘Romney reveals class war’

This is a discussion surrounding Romney Reveals Class War, which ran in The Daily on Sunday. This email seems to summarize some of the complaints I received.

Dear Eric: (Open Letter)

I am sorry to see that you have finally drunk enough of the Daily’s Kool-Aid that you parrot their agenda. That agenda, revealed in every issue contains (1) We are smarter than anyone else in the room. The Daily’s readers are too stupid to realize this; so its okay if we insult them..(2) Republicans are mean-spirited, anti-poor and anti-disadvantaged, so any accusation that might be made of them is warranted. (3) The election of Obama justifies repetition of every half-truth, fact-twist, and current Democrat party line that supports that effort. (4) The people of Alabama act against their own interests. The Daily must lead these benighted to change their ways.

You ignore the context of Romney’s 47% remarks to demonstrate your belief that he actually does consider the 47% as moochers. Either you have added dishonesty to duplicity, or you have not viewed the Romney videotape. First you ignore the fact that two minutes of his speech immediately after the 47% per cent were either edited out or “accidentally” omitted. “Do da Nixon tapes mean anathing to ya, Andy.” Secondly, if you listen to the tape without a pre-disposed opinion, you quickly see that Romney is talking campaign strategy rather than personal belief. He is at a fund-raiser. He is explaining how he will use their money. He rightfully states that people who do not pay income taxes and receive welfare will not respond to a campaign message primarily based on cutting taxes or reforming welfare. DUH!

From your educational background you surely know that from De Toqueville on, poltical philosophers have stated that democracy is in peril when voters find they can simply vote themselves benefits. Perhaps that is why you try to hang an albatross around Romney’s neck. You’ve only got 47% now and some of these can’t be counted on. We musn’t let Romney wake the 53% up.

My response:

Thanks for the email.

I both watched the entire videotape and read the transcript. Unless the first two minutes were something like, “Everything I say after this is a parody,” I find their omission insignificant.

I’m not all that worried about Romney. He’ll either win or lose; certainly nothing I write will have any impact on the result. The hatred I see in Alabama for Obama is so intense that I cannot imagine a candidate losing to him.

I am very worried about the corrupting influence of campaign financing. The interests of the very wealthy are not identical to the interests of the rest of America. Indeed, their interests tend to support the preservation of a status quo that limits income mobility. That does not make them evil; it’s just common sense.

The problem is that they are quickly obtaining complete control over the political system. Both parties want to win elections, and — as Romney accurately explained — they can only do so with huge amounts of money. That level of financing cannot come from the poor or middle class. Indeed, over the long term, I think we can assume that the heaviest financing will come from those who see the investment opportunity in campaign contributions. There are plenty of wealthy people who want to see a more progressive tax system and more opportunity for the poor, but they get no financial return on their contributions.

And to reiterate, I don’t see this as a partisan issue. Both parties are becoming pawns of those who can afford to help them win elections.



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Filed under Campaign finance, Democracy, Election 2012

Time for state to look at revenue

Alabama’s taxes are too low to operate a state, even with the minimal services to which Alabamians have become accustomed.
For many, the wake-up call came with the Sept. 18 referendum transferring $437 million over three years from the Alabama Trust Fund to the General Fund. Voters approved the amendment — with considerable frustration — because they recognized elected officials could not cover the most basic obligations of the state without the money.
While some streamlining already has taken place and more may be possible, there is a massive gap between state revenue and expenses. This should come as no surprise, as Alabama’s per-capita tax burden is the next-to-the-lowest in the nation.
It maintains this ranking while having the eighth-highest state and local sales tax rates, which disproportionately burden the poor. The total tax burden is low, even though Alabama is one of only two states that offers no tax breaks on groceries.
This $437 million gap, however, tells only part of the story. Alabama maintains its low tax rate in part by relying on the federal government. The latest data from the Tax Foundation shows Alabama received $1.66 from the federal government for every $1 it sent to Washington. The residents of other states are paying more so we can keep our taxes low.
Many of our hospitals and doctors are staying in business only because the state receives $2 in federal money for every $1 it spends on Medicaid. Our Medicaid expenditures are high not because the state is lavish — the state program barely meets minimum standards and is among the worst-funded in the nation — but because many Alabamians are poor. The state’s median household income is 46th in the nation.
Using Mitt Romney’s gauge of worth, Alabama fails miserably. The state has the third-highest percentage of citizens whose income is so low they owe no federal income tax.
The answer is not to squeeze more taxes from the politically impotent poor. Low- and middle-income Alabamians pay more than twice as much of their income in state and local taxes as do those with the highest incomes.
The Legislature instead needs to evaluate the tax code with an eye to raising revenue from those corporations and individuals who can best afford it.
Since many tax breaks have been maintained through generous political contributions, legislators will be in the awkward position of having to place the interests of the state over the interests of their generous financial supporters.
Responsible leadership is tough.

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Filed under Alabama politics, Poverty, Tax reform

The class war is raging

President Barack Obama warned of it, and he was castigated.

Rag-tag Occupy Wall Street protestors complained of it, and they were laughed off the streets.
It took Mitt Romney to articulate the truth in a way that Americans could understand it: A class war is in progress.
“There are 47 percent,” Romney said in a covertly videotaped meeting of contributors who attended a $50,000-a-plate fund raiser, “who are dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe they are entitled to health care, to food, to housing, to you-name-it. … These are people who pay no income tax; 47 percent of Americans pay no income tax.”
“And so,” he continued, “my job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”
And in another part of his spiel, Romney even explained part of his strategy:
“I wind up talking about how the thing which I find most disappointing in this president is his attack of one America against another America, the division of America based on going after those who have been successful.”
It’s an incredible admission. After classifying as moochers the 47 percent whose income is too low to pay income tax, Romney reveals that his campaign strategy is to accuse Obama of class warfare.
Whether Romney actually believes what he said is not that important. What is more frightening is that he was saying what his contributors wanted to hear. Those contributors, and others like them, increasingly control both political parties and therefore the nation.
In the world of these contributors, the scorecard for human value is wealth.
They correctly recognize that the masses are dependent on them, both for their capital and their talent. They have lost sight of their dependence on the masses, on people who are consumers and laborers and — provided half a chance — future entrepreneurs.
The contributors are acutely aware, however, that the masses have latent political power. Through their votes, Americans control the laws that allow the contributors to accumulate their wealth. Americans, in theory, control the institutions and tax dollars that determine whether the poor and middle class have an opportunity to compete for market success.
Whether or not Romney buys into his contributors’ philosophy, his clumsy campaign has revealed it to the masses. He hinted at it in Israel, when — to the horror of Israelis and Palestinians alike — he attributed Israel’s comparative wealth to cultural superiority. He spotlighted the philosophy by choosing as a running mate a devotee of Ayn Rand, who preached the same class-superiority message relentlessly.
Forty percent of Alabamians have such low incomes that they pay no income tax. Most of the other 60 percent are busy convincing themselves that Romney’s words were about someone else. The fact is, though, that Alabama’s median wage is $22,711 per year, less than half the amount each contributor paid for one evening with Romney.
In a democracy, elitism is vulnerability. Accumulated wealth is subject to the whims of the far-more-numerous voters without significant wealth.
Romney alluded to the threat as he stood in the multimillion-dollar mansion owned by one of his supporters:
“I mean, there won’t be any houses like this if we stay on the road we’re on.”
There are remarkably few “houses like this” in Alabama, and the vast majority of Alabamians have no hope of obtaining one. The contributors are waging a class war, and they hope to seal their victory before opponents notice.
How can a tiny sliver of the population control the policies of a democratic nation filled with less successful people?
Romney explained.
One of the contributors asked why he did not talk to voters more about the issues. Romney said voters could read about the issues in his book, but he did not believe the policy views expressed there would matter.
“A discussion of a whole series of important topics typically doesn’t win elections,” Romney said. “But advertising makes a difference. … And that’ll take money.”
This truism by Romney applies to both parties. Whatever their rhetoric, candidates increasingly will answer to those who can win them elections. They will answer to a financial elite that includes some who, comfortable in their cultural superiority, are happy to wage a class war.
And the poor people of Alabama will help them win it.


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Filed under Alabama politics, Class warfare, Election 2012, Occupy Wall Street

Health law repeal a bad idea

The Affordable Care Act represents a major overhaul of U.S. health care and, like any such change, it will have problems.
While there is plenty to criticize in the law, it should be clear that merely repealing it is not the answer. It substitutes a system that may work for a system that is broken.
Morgan County has 21,000 people with no public or private insurance, according to Census results released last week. Limestone County has 9,000 uninsured people. The Census Bureau did not compile the statistics for Lawrence County.
Under the current system, this means that more than 30,000 people in the area have essentially no access to any health care but emergency rooms.
As Decatur residents should understand, this is a disastrous system.
Decatur General Hospital nearly collapsed under the weight of its uninsured patients. Even as it lost money, it shifted costs to other patients and to insurance companies, raising health-care costs for everyone.
Emergency rooms are not designed for preventive care or the treatment of disease. Thus, under the current system, minor ailments go untreated until they are both life-threatening and expensive. This is inefficient for the community and dangerous for those who cannot afford insurance or who choose not to purchase it.
The Affordable Care Act requires everybody who can afford insurance to purchase it, a basic requirement that protects the rest of us from getting stuck with their medical bills. By expanding the pool, the law makes it possible to require insurance companies to cover pre-existing conditions. It also should result in affordable individual policies, a critical step in making people less dependent on employers for their health needs.
As more and more employers eliminate health insurance as a benefit, the significance of affordable individual policies will become more important.
GOP presidential candidate Mitt Romney implemented a good plan in Massachusetts, demonstrating he understands the deficiencies of the health-care system. Instead of parroting ill-advised calls for repeal of the Affordable Care Act, as he did Sunday, we wish he would propose changes that would improve the law while retaining the dramatic advantages it offers to hospitals, employers and citizens.

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Filed under Health care, Obamacare, Romney

A framework for compromise on deficit

For all the partisan squabbling about the U.S. deficit, the path forward is remarkably clear.

A survey of the economists who are members of the National Association for Business Economics found broad agreement on how Washington should deal with the issues of a sluggish economy and a high deficit.

The country needs more fiscal stimulus until 2014, at which time it should throttle back. This will help the economy recover from the recession, thus increasing anemic tax revenue and reducing recession-triggered welfare expenses.

Congress should then deal with the deficit by reducing expenditures and increasing tax revenue. A majority of the economists surveyed said taxes — including payroll taxes, top marginal income taxes and capital gains taxes — should not be increased until 2014. In other words, they felt it was counterproductive to increase revenue until the economy is in better shape.

Democrats won’t like the economists’ suggestions because of the call for leaving the Bush tax cuts in place for another year. Republicans won’t like the suggestions because they acknowledge a need, after 2013, for raising some taxes to reduce the deficit.

The survey, in short, provides a solid framework for a compromise that would shake the nation’s post-recession lethargy and begin the process of reducing the deficit.

Such a compromise would also address what the economists viewed as the economy’s most urgent problem, the lack of certainty resulting from Washington gridlock.

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Filed under stimulus, Tax reform

Quest for a one-term president

The problem former President George W. Bush and his successor, Barack Obama, faced was major but well understood.

A massive drop in consumer demand was causing a downward economic spiral. The drop in demand caused manufacturers to reduce production. The drop in production caused layoffs, further reducing demand. Lower demand caused manufacturers to cut even more jobs.
Both presidents did the right thing, just not enough of it. Like every president confronted with a recession since the Great Depression, they implemented stimulus plans. The theory behind stimulus is to reverse the spiral. Government demand gives manufacturers a reason to increase production. As they increase production, they hire employees. Those employees have money, and they increase consumer demand. Eventually, consumer demand replaces the short-term jump in government demand.
The stimulus plans pushed through by the two presidents and approved by Congress worked. Unemployment would be higher today had the expenditures not been made. They were insufficient, however, to reverse the spiral. Both presidents underestimated the extent of the collapse in consumer demand.
If politicians were working for the people, not against them, that would not have been a major mistake. Obama tried to increase the stimulus several times, most dramatically with the American Jobs Act, which he unsuccessfully introduced in a joint session of Congress in September 2011.
Obama lost any ability to implement a stimulus plan after January 2010, when Massachusetts elected GOP Sen. Scott Brown to replace Democrat Ted Kennedy after his death. A combination of Kennedy’s illness and a delay in the swearing-in of Sen. Al Franken, D-Minn., meant that Democrats only had an effective filibuster-proof majority for about 14 weeks of Obama’s term.
Why did Republicans block efforts at a stimulus? There are two possibilities.
One was referenced by Senate Minority Leader Mitch McConnell, R-Ky., in November 2010: “The single most important thing we want to achieve is for President Obama to be a one-term president.”
Incumbents who preside over poor economies generally lose reelection. Stimulus was the best tool for improving the economy, and the GOP prevented Obama from using it.
The other reason the GOP might have blocked Obama’s efforts to expand the stimulus is the deficit.
While economist John Maynard Keynes recommended government spending — and an increase in the deficit — to escape a recession, he also recommended surpluses in times of prosperity. With good results, our government has followed his instructions on spending our way out of recessions. It has not, however, followed his advice on reducing the deficit in times of prosperity. Thus the U.S. deficit is at unprecedented levels.
This creates a dilemma. On the one hand, the most effective way to reduce the deficit is to stimulate the economy, thus increasing tax revenue and reducing welfare expenditures. On the other hand, some fear that raising the deficit any higher will cause its own problems.
The GOP has, of course, presented the deficit as its explanation for blocking Obama’s stimulus measures.
Recent evidence suggests that McConnell’s one-term explanation is the driving force.
When the federal government does not use stimulus spending to reverse a recessionary spiral, it also has the tool of quantitative easing by the Federal Reserve. It’s a less effective tool than stimulus, but it helps. Yet the GOP howled in protest last week when the Fed announced it would increase quantitative easing in an effort to reduce unemployment. If their goal was to improve the economy, but to do so without increasing the deficit, the GOP should have welcomed the Fed’s move.
The Congressional Research Service suggested another way out of the economic mess last week. What if there was a way to increase spending — thus stimulating the economy — without increasing the deficit?
For good reason, raising taxes is not viewed as a good way to finance stimulus measures. Higher taxes tend to reduce economic activity, mainly because they reduce disposable income.
What the CRS concluded, however, is that over the last 65 years, there has been no correlation between the top marginal tax rate and economic growth. This is vitally important because today’s top marginal tax rate — due to the Bush tax cuts — is 35 percent. During the years studied by the CRS, the rate had been as high as 90 percent. Nobody wants to raise rates anywhere close to 90 percent, but the study suggests a modest increase on the wealthiest Americans — to the pre-Bush 39.6 percent level — would not hurt the economy.
This should be great news for the GOP. We can stimulate the economy and reduce unemployment, and we can do so without increasing the deficit. We simply finance the stimulus with a modest increase in the top marginal tax rate. The GOP response, however, is that returning rates to pre-Bush levels would hurt “job creators.”
The indication is that McConnell’s plan is on track. The U.S. economy is hurting, and the GOP hopes Americans will blame it on Obama in November. Except for the detail of 12 million unemployed Americans, it was a brilliant strategy.

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Filed under Election 2012, Federal deficit, stimulus

Victory was sign of failure

Congratulations to the elected officials who roared into office in 2010 with promises of fiscal responsibility.
Not only did you fail to avert a budget shortfall that has been inevitable for at least two years, you convinced the people to drain the Alabama Trust Fund, an important source of General Fund revenue.
The Alabama Trust Fund was created by voters in 1985 not as a rainy day account, but as an “irrevocable, permanent” endowment that would provide revenue to the General Fund in perpetuity.
How did you convince voters to endorse a solution that damages the state? It was not through reasoned arguments. You did so by convincing the people that you were incapable of exhibiting the political courage necessary to balance the budget.
Instead of confronting the budgetary challenge, you distracted voters with social issues. You needed an external enemy to galvanize voters, and you chose the federal government. Whatever side individual voters take on such issues as immigration or abortion or health care or the plethora of other anti-federal bills you embraced in the last two years, the people now understand that it was a diversion.
You were scoring cheap political points to avoid the difficult task of leadership.
You were the victors Tuesday because people believed that you would release prisoners. They accepted that, rather than taking the opportunity to expand Medicaid and provide the poor with an escape route from dependency, you would snip away at the thread-bare safety net.
So what comes next? Our guess is you will quickly pass legislation promising to refund the Alabama Trust Fund. You should do this, but voters will recognize it as mere show. Few of you will be in office when the obligation comes due, and future legislators will blame you when they amend or repeal the legislation.
You should then take the difficult steps necessary to streamline state government. We are a poor state, and every tax dollar needs to be used efficiently.
You then need to look at revenue. Maybe you can work miracles in cutting costs, but the fact that the average tax burden on Alabama citizens is 49th in the nation suggests otherwise.
The fact that the poor and middle class bear the brunt of this tax burden suggests the revenue needs to come not from them, but from the wealthy power brokers that have controlled you and your predecessors since the state Constitution was drafted in 1901. They have bought low tax rates with political contributions, and Alabama has suffered from your complicity.
Voters expected more from you. Now is the time to quit the political games and get at the hard work of leadership.


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Filed under Alabama politics, Health care, States' rights