It’s the economy, stupid!

The core theme of Clinton’s 1992 presidential campaign was the slogan “It’s the economy, stupid”.   It was true then, and it remains just as true now.  While the administration fusses and fumes about various liberal ideological goals, and fumbles around in our foreign policy, and while Congress dithers, the core thing that matters before all else, and the core thing they all ought to be focused on (but are not), is the state of the American economy.

Why the economy?  Because it is the economy that makes everything else possible. Want a strong military? Only a robust economy can fund it.  Want more social services and health care?  Only a strong economy can fund them. Want more soft power in the world?  It takes a strong economy to produce that.  Want a better standard of living for America workers?  That only comes with a stronger economy.  There is no free lunch – all those things liberals and/or conservatives want cost money, and that money in the end can only come from taxes and payrolls and reinvested profits in a robust economy.  It’s not rocket science!

So what would a rational administration and Congress be focused on if they really wanted to insure a strong America economy in the long run?  Here is my own top 3  list:

Revitalizing the nation’s infrastructure.  A strong economy is built on, and requires, an effective, reliable and efficient infrastructure; roads, bridges, rail lines, airports, seaports, electric grids, communication systems, water systems and the like.   We once had the best in the world, but decades of neglect at the state and federal level have taken their toll. The last major infrastructure investment in this nation was under the Eisenhower administration when the Interstate Highway system was started. Since then our national infrastructure has deteriorated significantly. For example:

·         Engineering societies (who study these things) give our bridges and roads nationwide about a D average, and we have even had a few spectacular failures recently to remind us (eg – the I-35W Mississippi River Bridge collapse in Minneapolis). The Federal Highway Administration estimates that a capital investment of about $170 billion per year would be required to (eventually) bring our roads and bridges back just to an acceptable level of performance and safety. Annual federal, state and local investments are currently running at about half that level.

·         Despite the central importance of electric power to EVERYTHING in this nation, expansion and modernization of our electric grid system has not kept up with demand, and it is now straining at its limits, and moreover is highly vulnerable to failure from natural disasters and/or terrorist attacks. The American Society of Civil Engineers has estimated that an additional investment of at least $107 billion is needed by 2020 just to keep the current electric grid operating relatively reliably, and that doesn’t include any investment in modernization.

·         We invented the internet, yet according to The World Economic Forum the United States ranks 35th out of 148 countries in Internet bandwidth, a measure of available capacity in a country. Other studies rank the United States anywhere from 14th to 31st in average connection speed. And more than that, broadband connectivity costs about twice as much in America as in Europe. Things are pretty bad when broadband speed in Riga, Latvia is two and a half times faster than in San Antonio, Texas, and costs only one-fourth as much.

·         The US has built only two new major airports in the past 40 years, Dallas-Fort Worth and Denver International. (China, by contrast, is adding 56 new airports over the next 5 years.) The World Economic Forum ranks US aviation infrastructure 32nd in the world, behind that of Panama, Chile, and Malaysia. The FAA currently estimates that about $52 billion in investment in airport capacity expansion is needed just to manage the predicted passenger load by 2020, and that investment is not being made.  Beyond that, the US air traffic control system is woefully inadequate to handle even the current load, as frequent flight delays and periodic computer crashes demonstrate, and needs a complete redesign.  The FAA has talked about a Next Generation Air Traffic Control System for a decade now, and had just started to implement minor portions of it, but then Congress cut the funds even for that as part of the budget sequester.

Improving workforce education and training.  The world is increasingly dependent on technology, and that means more and more of the well-paying jobs in this country require technology training.  Whether it is a secretary using a word processor, a machinist running a numerical control milling machine, a medical technician running an EKG, an auto mechanic reading the problem codes from the on-board auto computer, a stock broker entering on-line orders, a webmaster building web pages, a mechanic servicing or programming an assembly-line robot, or a pilot flying a plane, more and more of the good jobs require significant technical training.

A 2013 Oxford University paper entitled The Future of Employment  estimates that up to 47% of current jobs can soon be automated.  These are the jobs that a computer can do, and do faster, more reliably, and at less cost (since a computer doesn’t need health care, sick leave, a pension, or vacations, and doesn’t belong to a union).  The jobs that are left are those that require initiative, creative and flexible thinking, interpersonal skills, complex assessments, and the like.  To maintain a robust economy we need to keep a high proportion of our labor force employed in well-paying jobs, which means we have to invest heavily in training or retraining that workforce and providing them with the skills needed for the best jobs available.

At the college and postgraduate level the US does just fine, though the costs of higher education are excessively high.  But that is even now in the process of correcting itself, as free or inexpensive on-line courses are bringing competitive market pressures to bear to drive costs down again.  But at the elementary and high school level we need to do better, and in particular we need to establish the sort of alternate track hands-on technical or trade school training route that some European countries have for those youngsters who have neither the need nor the interest in traditional academic training. In America we tend to look down at trade schools, because we have this idealized cultural myth that everyone ought to be able to go to college, but that is a mistake we need to change. Lots of youngsters have neither the aptitude nor the interest in traditional academic studies, but are fine, even sometimes brilliant, at hands-on technical work.  We need to capture that talent and put it to good, well-paying work.

Reducing the regulatory burden on small businesses and new start-ups. Here is the problem: bureaucracies tend to produce more regulations than are really needed. There are natural reasons for this. First, bureaucracies tend to make work to justify their existence and budgets. Second, bureaucracies tend to “cover their butt”, meaning they don’t want to be accused of missing something, so they over-regulate.  The public is part of this; if people get sick because of a batch of bad meat, they will promptly blame whatever food safety bureaucracy they think should have prevented the problem, and that bureaucracy will promptly add a mass more layers of regulations to protect itself in the future. Finally, big companies will sometimes press for onerous regulations to be added that help keep competitors at bay.  Big companies can afford teams of lawyers to fill out masses of regulatory paperwork, while small new start-ups can’t.

Now the problem is that despite the publicity that big corporations get, in fact small businesses make up most of the economy.  According to 2011 US Census data, small businesses with less than 500 employees make up 99.7% of all US businesses, and in fact 98% of all US businesses have less than 20 employees. And these small businesses generate about 46% of the Gross National Product, and create about 60% of new jobs.  So any time the government places a regulatory burden on a business sector, they disproportionately disadvantage small businesses and potential new start-ups, who have far less resources than large corporations to comply.  Yet it is these very small businesses and start-up who are the life blood of the economy. Just ask a local small business owner about the regulatory burden they bear. It can be enlightening.

According to a recent report from the Competitive Enterprise Institute, at this point in the Obama admiration (which has continued to expand federal regulations at an unprecedented rate) the cost to businesses of federal regulations, at an estimated $1.8 trillion per year, is now bigger than the entire economies of all but nine countries in the world. For small businesses, federal regulations cost almost $11,000 per employee.

And some of these regulations are just ludicrous.  As The Economist recently reported

A Florida law requires vending-machine labels to urge the public to file a report if the label is not there. The Federal Railroad Administration insists that all trains must be painted with an “F” at the front, so you can tell which end is which. Bureaucratic busybodies in Bethesda, Maryland, have shut down children's lemonade stands because the enterprising young moppets did not have trading licenses. The list goes hilariously on.

and

Dodd-Frank is part of a wider trend. Governments of both parties keep adding stacks of rules, few of which are ever rescinded. Republicans write rules to thwart terrorists, which make flying in America an ordeal and prompt legions of brainy migrants to move to Canada instead. Democrats write rules to expand the welfare state. Barack Obama's health-care reform of 2010 had many virtues, especially its attempt to make health insurance universal. But it does little to reduce the system's staggering and increasing complexity. Every hour spent treating a patient in America creates at least 30 minutes of paperwork, and often a whole hour. Next year the number of federally mandated categories of illness and injury for which hospitals may claim reimbursement will rise from 18,000 to 140,000. There are nine codes relating to injuries caused by parrots, and three relating to burns from flaming water-skis.

Certainly we need regulations.  The problem is that we don’t need nearly as many as we now have, and that these excess regulations are a significant drag on the economy and a strong disincentive to start new businesses in America.

Another perspective on Republican obstructionism

There is no question that the Republican party in Congress, and especially in the House, has tried to obstruct President Obama’s legislative initiatives at almost every turn.  Some of this is just hardball politics, some of it is pandering to Republican politician’s voter base, and some may even be driven by racism against our first black president. But there is another perspective to this steadfast opposition one might consider.

In general, a democratic government like ours ought not to implement major social policies, or major policies of any sort, without a national consensus.  Not a complete consensus of course, because there will always be those who oppose any new idea, however rational it is.  But at least a healthy majority of the nation ought to support any proposed new major government initiative before it is implemented.

The establishment of Social Security in 1935, in the depths of the depression, had overwhelming support from both parties at the time.  When President Johnson signed Medicare into law in 1965, there was overwhelming public support for it.  These were expensive programs that had a significant impact on America life, and so it was important that there be widespread support for them.

Look, by contrast, at passage of the Patient Protection and Affordable Care Act (aka Obamacare). At its passage less than half the country supported it, and at no time since, up to today, has its public support (measured by periodic polls) risen above the low 40% mark.  It is no wonder it continues to be a source of such political friction. Aside from the fact that almost no one in Congress read the entire 2000+ page bill before they voted on it, and that it contained a poorly-thought out and unrealistic funding plan, it simply didn’t have the public backing that such a disruptive change ought to have had.

Or look at the current stalemate in immigration.  Liberals want to give many illegal immigrants a path to citizenship. Conservatives wonder (a) why we should reward illegal behavior with citizenship, and (b) why illegal immigrants should get citizenship ahead of the millions who have waited patiently for legal citizenship through the quota system.  These are hard questions, and it is by no means clear to anyone yet what the right answer would be, so it makes sense for the government to do nothing if it can’t yet figure out the right thing to do.

So I would propose another perspective to the current Congressional stalemate. President Obama keeps proposing liberal ideas that don’t (yet) have a national consensus behind them. Maybe they should have, but they don’t. So in fact perhaps the government is working exactly the way it should when it blocks such initiatives. Republicans are a majority in the House, and may soon be a majority in the Senate as well. They are a majority because, for better or worse, a lot of the nation’s voters elected them.  That means they more or less represent the will of a large portion of the nation, and perhaps it is right that no major legislative initiative, however rational or “right” it is, ought to be passed over the opposition of a large portion of the nation.

If a right-wing President were in office and a Democratically-controlled Congress blocked his minority right-wing initiatives, liberals would think Congress was just doing its job (and indeed, that is exactly what they thought during much of the last Bush administration).  So perhaps exactly the same logic applies here – the nation as a whole is not yet ready (and may never be) for some of the things President Obama is proposing, and until the nation is ready for them, they ought not to become law.

What to do about the Middle East?

The Middle East is a problem. Most people in the Middle East just want to live their lives in peace, but enough young, unemployed and unemployable men have been radicalized by now that there is a substantial class of “professional jihadists” happy to go anywhere they can fight for a cause and give some purpose to their otherwise meaningless lives, and there has never been a shortage of ruthless, charismatic leaders willing to recruit such people to advance their own power.

There was a time when we in the Western world really didn’t care if all these Middle Easterners killed each other, as for example in Shia-Sunni conflicts such as the eight year Iran-Iraq war.  It was similar to many people’s current views about gang wars – let them kill each other as long as they don’t bother us – good riddance!   But the discovery of vast reserves of oil in the Middle East made it worthwhile for European and American governments to meddle in their affairs at least enough to ensure stability on the oil markets, but that meddling only increased the resentment and fueled the revolutionaries.

Now the problem is that we can no longer contain these dangerous radicalized thugs just to the Middle East. As we have learned to our cost on 9/11 and in the many suicide bombings in Europe in the past decade, in the modern world this violence can spread like a wildfire. Not only can many of these thugs (and thugs they are!) travel freely in the Western world, but the internet allows them to find and radicalize new recruits already in place in Western nations, such as the Boston bombers.

The time has passed when we can simply ignore this issue the way we still ignore most of the ethnic violence in Africa. Modern Western civilization is too fragile and too vulnerable. We have been lucky so far that jihadists have generally picked their targets for their symbolic and publicity value. Soon enough a few smart ones will begin to pick targets instead for maximum disruption of the nation’s infrastructure, and then we will be in real trouble.

It wouldn’t take much, for example, to bring down the electric grid in much of the nation for weeks or months (think about urban life without electricity – no refrigeration, no lights, no heat, no power to pump gas, etc, etc – it is sobering). The biochemistry required to produce a significant pandemic is within reach of anyone with a little postgraduate biology training and a few hundred dollar’s worth of equipment, as the Japanese Aum Shinrikyo cult showed years ago. And of course if jihadists ever get their hands on a portable nuclear weapon, or even the radioactive materials required to build a “dirty bomb” (a conventional explosive used to disperse radioactive material over a wide area) it would cause chaos in major Western cities.

Thus far, besides fruitlessly trying to suppress the jihadists by military means in their own lands,  the American government has focused mostly on trying to keep terrorists and potential terrorist weapons out of the nation, or locate them if they are already in the nation.  That is a losing game in the long run, because missing even one cell could have devastation consequences. We need instead a far more proactive approach that attempts to address the root cause – the massive malaise that afflicts so many young Middle Eastern men and makes them ripe for recruiting into these movements (and fighting wars in those lands is not the sort proactive approach that will work!)

It is too bad that America seems to be swinging back to its periodic isolationist mood, though it is understandable after the long, expensive yet thoroughly inconclusive wars in Iraq and Afghanistan. Nonetheless, intelligent America policy would focus on changing the economic structure in the Middle East to eventually eliminate the huge pool of unemployed and disaffected young men that feeds and sustains these jihadist movements. That won’t be easy, because there are significant cultural issues involved and we in the West are not very good at thinking outside of our own cultural assumptions.  Nonetheless, it needs to be done if we are to safeguard our nation.

Recommended: The Illusion of Chinese Power

The June issue of The National Interest has an informative article by David Shambaugh: The Illusion of Chinese Power. Shambaugh argues that the current fad of portraying China as the new rising superpower is overblown, and that on closer examination the nation looks much less impressive. Yes indeed, it does have the largest population, the largest army, the second largest economy, etc, etc.  But for a variety of reasons these do not translate into as much global power as many pundits assume.

It is an article worth reading to put some perspective on the China hype of some other authors.

The current Sunni-Shia war

It hard for us as comfortable middle class people in a stable, relatively peaceful first world nation to come to grips with the unreasoning depths of religious hatred that are driving the Sunni-Shia war currently going on across the Middle East.  But of course we too lived through this in the centuries of European Catholic-Protestant purges and civil wars that spilled all the way into the last century in places like Northern Ireland.

For all the desperate pleas from the Iraqi government, there is little effective we can really do.  A few drone strikes and a few bombing runs by US planes are not going to make much difference in the long run.  This is a whirlwind that has been sown for years, not only by sectarian government in Iraq  but by wealthy backers of the Sunni and Shia causes in other nations, from Iran to Saudi Arabia, and by well-funded passionate preachers on both sides who have raised a generation of hate-filled fighters. And now the devil has turned, and these nations are right to fear the hatreds they have unleashed.

Frankly, I think about all we can really do is try to keep these religious thugs from spilling their terror into European and American cities. And thugs they are, whatever religious banner they fight under. We too have our religious bigots and thugs in this country, though thankfully not as many.  But it ought to be a lesson to us: religions that are sure they are right and everyone else is wrong are always a potential danger to national unity in the long run.

Recommended: The Crony Capital

Jim DeMint, Senator from South Carolina from 2005 to 2013, when he quite the Senate in disgust over Washington's political gridlock, has written a very good piece in The Weekly Standard with Mike Needham : The Crony Capital.  DeMint and Needham make the persuasive point that the reason conservatives aren't winning elections is not that they don't have an agenda that could appeal to voter, but that they don't actually do much effective about their agenda.

DeMint and Needham argue that most of the country, left, right and center, are fed up with the government's tendency to favor well-connected big businesses at the expense of everyone else, and if conservatives would actually DO SOMETHING effective about this they could win elections again.  It is a well-written argument, and though from conservative writers the point is really relevant to the whole political spectrum.

Recommended: China in Ten Words

Yu Hua is one of China's leading writers these days.  His book China in Ten Words, translated from

the Chinese by Allan Barr, is a wonderful and quite readable look at life in China these days, framed around ten popular Chinese words. Hua grew up in Mao's China, and his book puts China's current culture in the context of the events that shaped it.  Well worth reading.