May 2011 Archives

As I have previously noted, I am preoccupied with Social Security and what the Republican conservative complex (Rcc) is trying to do to it. The Social Security Trust Fund contains something on the order of $2.6 trillion--that's trillion with a "t"--but the federal government has borrowed all of it, and the Republicans in congress complain incessantly because now, they have to pay it back as we all might have expected since they played a major role in spending it. The long and short of it is that Social Security is the only federal government program that funds itself and has money on hand for decades of its cost. It is not in any way part of our debt or deficit problem, but the program lent the federal government its money and is now therefore a target because the federal government doesn't want to pay its debt. If we were dealing with a bank, someone would be going to jail for such a scheme, but since we are dealing with Republicans, they seem to have some kind of immunity. Still, we cannot let them get away with this without a fight. So, while I have had to cut back on the frequency with which I write to you by limiting myself to Monday and Friday, I have written to you several times about Social Security, and I feel that comments made about the Republicans and their plans for the program bear repeating. thus, for the foreseeable future, I will reprise those letters on Wednesdays with the thought that someone who missed them might be interested in Social Security too, and in what it means to us as a nation as well. Here is this Wednesday's reprise: my letter of December 3, 2010.

Dear America,

On Wednesday night, Diane Sawyer on ABC's nightly world news program covered the failure of the co-chairmen of the President's debt reduction commission to get the votes of fourteen commissioners endorsing their preliminary report, and thus no consensus has devolved from the months of work put in by the commissioners. In the context of that report, the ABC reporter asked questions of an "expert," among those questions whether reductions in Social Security benefits were necessary to reduce the debt and balance the budget. His response was that they definitely are. That is almost completely wrong. I suppose that if no changes in Social Security were made in a timely fashion, in the year 2037 when the funds on hand in the Social Security Trust Fund will be insufficient to pay full benefits, the federal government could come forward and offer to pay the difference, thus increasing the national debt. But to the best of my knowledge, no such prospect is in the offing. The only consequence of making no changes to the contribution/benefit ratio in the fund that is being discussed anywhere is the reduction of benefits at that time if nothing eventuates between now and then. But something certainly will happen: there have been changes in the past and there will be changes again.

The real problem with the false assertion of ABC's expert is that the Republican conservative complex (Rcc) has been attempting to eliminate Social Security as we know it for decades. And when people like this would-be expert attach Social Security to the debt problem, they give the Rcc ammunition for their fight. As I have said before, I believe that Social Security should be paid out of the country's general fund and the trust fund should be eliminated with commensurate increases in income tax to pay for the change. But the law as it stands separates Social Security from all other federal spending, which is why the federal government borrows our contributions to the fund as soon as they come in; there is no other way they can use the money but to borrow it. And when they do so, they owe it to us and have to pay it back, just like any other loan...just like the trillions they have borrowed from all of us in the form of treasury notes and bonds, or from the Chinese in the same form for that matter. Of course, if the federal government were to default on its debt to the Social Security Trust Fund, that would then decrease the national debt in some sense as what the government owes the fund would be off the books, but that would not be debt reduction; it would be theft...and the end of the United States as we know it.

The experts on other news programs may have made the same mistake, and I recently wrote to you about NPR failing to adequately address the misapprehensions about Social Security funding. So, there is no single outlet for news that can be blamed. But this is a situation that needs correction, or there will be dire consequences for tens of millions of American people. What I don't understand is that, given the gravity of the consequences of the perpetuation of these false ideas regarding Social Security benefits' relationship to the national debt and deficit, no one is talking about it...except the co-chairmen of the President's debt reduction commission. On page 43 of their report (it is on the internet for anyone to download and read) there is a bulleted list of goals for the changes they recommend for Social Security. The final bullet reads "Reform Social Security for its own sake, not for deficit reduction," which begs the question, does anyone read original documents anymore. Perhaps some people do, but apparently the ABC expert on debt reduction is not among them. And for the sake of balance, on Tuesday night's "All Things Considered" on NPR, there was another discussion of the debt commissioners' report, and Social Security was mentioned in the same context: changes in benefits or payments into the fund will have to occur if the national debt and deficit are to be reduced. So even NPR's reporters don't read things anymore, which brings me back to two points that I have made ad nauseam: first, there is a lot of poor quality thinking going on, especially in high places, and second, we all have to think with our own heads, not someone else's. As to the politicians, we can vote them out of office once we do. With regard to the reporters and experts on the nightly news, it isn't going to be that easy.

Your friend,

Mike

MichaelWolf@letters2america.com

Dear America,

I usually feel when I am writing to you that I am the only one saying what I am saying to you, even though I know that it isn't so. But last Friday, when I read the Op-Ed page of the New York Times, I had a reaction to David Brooks' piece that was somewhat unusual for me. It angered me for its one sidedness...for its outright bias. Brooks used to write like a conservative, but now he just writes like a Republican...not a Republican apologist, just a Republican. He sees both politics and the world from their perspective, believing that the only way to fiscal soundness is to cut entitlements, Medicare in particular for the moment, and he never considers increasing revenue by further taxation. He concedes that ultimately there will have to be a compromise and that tax increases will have to be a part of the deal, but he does so almost ruefully, as if the Democrats have had their way with the Republicans as a function of a sort of evil political genius. He has completely lost his ability to horizontally integrate ideas across party and philosophical lines and he now thinks only vertically within the Republican column of ideas. For Brooks, it is now a matter of whether we get more or less of what the Republicans want, and to the extent that we get less it is unfortunate.

But then I read Paul Krugman's column, and I knew that when I wrote you this letter I would not be the only one saying what I am saying. Krugman said it first. It's almost as if I could refer you to that column and just say, yeah...that. Krugman talks about Paul Ryan puling about the Democratic response to his plan to repeal "Medicare as we know it" as the liberal establishment has taken to saying. Ryan calls that phrase Mediscare, though he never says why he believes that. But as Krugman points out, Ryan's budget changes the current plan in which the federal government pays major health costs for the elderly and the disabled into a plan that would give us vouchers with which we would have to provide our own private insurance without any guarantee that such insurance would even exist, much less be affordable even with the vouchers proposed. If changing Medicare from a government plan to a voucher that would at best pay only part of the cost of health insurance for those who may well not be able to find it, is not changing Medicare as we know it, then I don't know what would be. As Krugman points out, Ryan could have proposed changing Medicare to two free aspirin a day and still called it Medicare, but it wouldn't be Medicare as we know it any more than what he's proposing in his budget is.

And as for the scare part, Krugman points out something that I have said before. In 2010, the Republicans pounded the airwaves of Florida with scary forebodings about death panels and the "Obamacare" provisions reducing Medicare by $700 billion over ten years, even though the reductions don't start for some time. But there were no death panels...and the reduction in Medicare was only a diminution of the rate of increase in the amounts of reimbursement that Medicare Advantage plans will get while leaving basic Medicare unscathed. That, which the Republican conservative complex (Rcc) did, was Mediscare. When the Democrats, and everyone else who looks at the figures make note of the fact that the cost of health care for Medicare recipients will be approximately $6,000 per year higher under the Ryan plan, that is not a scare tactic. It is simply a warning of what his plan would mean. Ryan's response to those criticisms is that if you "demagogue" entitlement reform, you're just hastening a debt crisis that will result in Medicare's collapse. And apparently Brooks agrees.

By wresting from everyone else control of the debate on the issue of the debt and the deficit, the Republicans have been able to control the topics discussed, and revenue enhancement-- tax increases-- is never among them. So if you were to see only the expenditure side of the budget as susceptible of change as Ryan and Brooks seem to, maybe Ryan would be right, at least that is the conclusion to which Brooks has been trying to lead us lately, claiming that the American people are too selfish to make sacrifices themselves. But that conclusion is based on a false premise, which makes it in essence a lie. The American people are not refusing to make any sacrifices themselves. They just want the government to come to them in the proper order. It is not selfishness for those who have the least, to say that those who have the most and who have gained it through policies that have failed to provide what they promised should go first. The American people are simply saying that, since all that prosperity that was promised trickled up rather than down, up is where to look first when we need some of it back. That's what I think...and Paul Krugman apparently does too.

Your friend,

Mike

Dear America,

I prefer as a general rule not to write to you about things that happen to me but rather about things that are at least arguably of broad interest or significance. However in this instance, what happened to me this week is of such significance, and that breadth of significance was manifested in recent events that we all read about and heard about in the news: improper practices by banks in their foreclosures on mortgages. In my case, there was no foreclosure, and actually there was not even a transaction, but what I found, quite by chance mind you, alarmed me and demonstrated to my satisfaction that the regulation of banks is not just something required to prevent the banks from misfeasance. It is necessary to protect all of our interests in the most valuable things we have: our homes. And when I say that, I expect you to react with skepticism. But by the time you finish reading this letter, you will almost certainly share my consternation over all of this. Here's what happened.

My wife recently changed her legal name back to her maiden name. For what it's worth, there was not divorce or schism in our relationship to which her doing so was attributable, but that's another story. Her name change is significant here because the process entails certain formalities. One of them is that the person who makes the change must file it in the land records if she owns real estate. That puts the world on notice of the change in who owns the property, which is necessary for a plethora of reasons, not the least of which is to prevent anyone else from making a claim to it. You see, if you buy a house but your lawyer doesn't file on the town's land records the transfer of the title-- that is the deed that the previous owner signed to convey the property to you-- the world is not on notice of your ownership. That could mean that a devious seller could sell the house again to someone else, who would see in the land records that the house still belonged to the seller since your lawyer didn't file the deed transferring the property to you. That second buyer would then own your house, and at least in theory (and you must remember that in the law that is often enough) he could evict you and take possession. Of course, you would have a cause of action against the fraudulent double seller, and certainly a claim against your lawyer because every lawyer knows better than not to promptly-- and usually that means going directly from the closing to the town hall-- record a deed after a conveyance of real property. But that would be of little consolation given the time, effort and emotional distress that you would have to suffer in getting your money back, finding a new house, buying it and then worrying for the rest of your life about the same thing happening again.

The same is the case for any acquisition of a legal interest in real estate. It must be recorded in the land records in order to provide to the party concerned the rights in the property that he or she has now acquired. And that includes the bank that gave you a mortgage on your house. Actually, you gave the bank a mortgage deed and they lent you money in exchange, and the bank's proof of its interest in your property by virtue of that loan is the mortgage deed you signed, which must be recorded in the land records to put the world on notice of their interest in the property in question. If it were not recorded before someone else acquired the property, the bank, like you in the example I gave above, would be out of luck with regard to the house that secured the loan they gave against it. The borrower would still owe the money, but the bank would no longer have the house for security, and if that borrower didn't have the money to pay the loan back, the bank would then have a problem somewhat like you would have in that first example, which brings me to the point.

When I went to the town clerk's office to get the information I needed to complete my wife's name change filing for the land records, I discovered that the last bank to own the mortgage on our house was not the one that we pay every month. Of course we haven't heard from them in years-- since the bank we pay now contacted us in fact-- so there probably isn't a problem. But then there was this. We recently got a form from our home insurer offering us the opportunity to change the deductible for our hurricane and wind damage coverage, and I noticed on the election that our insurance company shows that we have a second mortgage, which we do not. So, I called them up and told them to take the endorsement on our policy to that bank off as we do not owe them anything, and I assume that they are doing so. But now, after going to the town hall on my wife's behalf, I know that that purported second mortgage holder is the bank that held our mortgage before it was sold to our current mortgage holder, assuming that that is what happened, but there is no record of that sale of our mortgage on the land records. That is significant because, like most other mortgagors our bank escrows our home owner's insurance premium and pays it for us twice a year. So, if the insurance company takes them off the policy and they were still paying the premium for us because the people to whom we make our mortgage payments are only servicers and not really the mortgage holders, the premium bill might never reach them, and our insurance might lapse. That could be a problem if a tornado wrecked our house or we got sued by someone who fell, for example. Now, extrapolate from our little problem to the mass foreclosures that occurred over the past two years.

Consider that in all of those mortgages in which assignments of mortgages and releases had not been filed, purchases of those homes could have occurred without paying off those mortgage assignees that were foreclosing because they never filed the assignments of the mortgages in question. But they would still want to be paid, and if you have had any experience with banks you know that if someone is going to take the hit, they are going to do everything they can to ensure that it isn't them. People who couldn't pay those mortgages in the first place could make off with the new buyers' money before the real mortgage holder ever found out and the money would be gone. And if you think that those banks would not try to take the house from the new owners, you have a much more charitable opinion of banks than I do. So, just from these few scenarios you can see what a mess the banks created because they apparently didn't feel it necessary to conform to the laws with regard to real estate ownership that have prevailed for centuries in this country, and probably for a millennium or more in the old world. And the town clerk told me that this is the way things are now. It has been years since I did a title search as a lawyer to confirm ownership and lien holders on a piece of real estate, but the last time I did so...maybe ten years ago...the rules still applied. In just ten years, the banks have undermined a system that preserved every home owner's right to his home throughout our history. That is the power they have...and as it turns out, it is not a power for good. So when the Republican conservative complex (Rcc) solicits your vote by promising to repeal the financial reform that the Democrats passed in the last congress, consider all of this. Be careful what you vote for, for you will surely get it if the Republicans have their way.

Your friend,

Mike

As I have previously noted, I am preoccupied with Social Security and what the Republican conservative complex (Rcc) is trying to do to it. The Social Security Trust Fund contains something on the order of $2.6 trillion--that's trillion with a "t"--but the federal government has borrowed all of it, and the Republicans in congress complain incessantly because now, they have to pay it back as we all might have expected since they played a major role in spending it. The long and short of it is that Social Security is the only federal government program that funds itself and has money on hand for decades of its cost. It is not in any way part of our debt or deficit problem, but the program lent the federal government its money and is now therefore a target because the federal government doesn't want to pay its debt. If we were dealing with a bank, someone would be going to jail for such a scheme, but since we are dealing with Republicans, they seem to have some kind of immunity. Still, we cannot let them get away with this without a fight. So, while I have had to cut back on the frequency with which I write to you by limiting myself to Monday and Friday, I have written to you several times about Social Security, and I feel that comments made about the Republicans and their plans for the program bear repeating. thus, for the foreseeable future, I will reprise those letters on Wednesdays with the thought that someone who missed them might be interested in Social Security too, and in what it means to us as a nation as well. Here is this Wednesday's reprise: my letter of November 19, 2001.

Dear America,

For years, the Republican conservative complex (Rcc) has been crooning to us about certain Rcc articles of faith: the free market is the best market; less regulation is better than more; stimulate the supply side of the economy rather than the demand side to induce growth; lowering taxes because, the Rcc mantra goes, actually mean higher federal revenue; and of course, cut "entitlements." We all know what that means: cutting Social Security and Medicare. Entitlements is just a euphemism they use, sort of like whistling in the dark. If you pretend that the bogey man isn't there, he won't eat you. But lately, an emboldened Rcc has dispensed with the euphemism and come right out and said that Social Security and Medicare must be reduced if we are to balance our budget and begin reducing the federal debt. In fact, since the election the campaign against Social Security and Medicare has intensified as if the Republican Party-- which in campaign ads misrepresented and decried cuts in Medicare enacted by the health insurance reform law of the Democrats-- was given some kind of a mandate to do so. They are in denial as to all of the surveys demonstrating that we don't trust them to do the right thing any more than we do the people they replaced. And now, there are two proposals regarding debt and deficit reduction-- one from the "Bipartisan Policy Center," whatever that is, and the other from the two co-chairmen of the President's debt reduction commission, Bowles and Simpson. And there are several things that are notable about both proposals.

First, both have been produced by people who are no longer holding office, in each case including a former Republican senator and a former Democratic White House "expert" on the budget, and from what I have seen and heard them say about their respective works, their emeritus status is probably for good reason. With so many used-to-be important people involved, the senescence of their ideas is not surprising, probably reflecting why they used to be important, but except for these reports are not any longer. Second, they both mention Social Security benefit reductions even though both proposals are supposed to relate to debt reduction. In other words, as to Social Security, whether it is problematic or not, who asked these people for their opinions.

As to the preliminary report from the President's debt reduction commission, when I read the section on Social Security I saw that it was prefaced with a heading noting that it was not an element of debt or deficit reduction proposal. So, with regard to that plan, while the discussion of Social Security was entirely gratuitous, at least the report so states and it makes no pretense that changes in Social Security will in any way solve the problem that they were charged with solving. They apparently just had a stray idea and thought they would share it with us. However in the report from the Bipartisan Policy Center's Debt Reduction Task Force, that is Rivlin and Domenici, the impact on Social Security is significantly more devious and dastardly. They start with tax policy through which the economic middle and lower classes will bear almost all of the new tax burden necessary to balance the budget and reduce the debt. They propose a 6.5% sales tax on the federal level. In Britain they call it a value added tax. Just to be clear, the reliance on a sales tax has always been regarded as socially regressive as it imposes most on those at the bottom of the economic ladder because it first affects necessities like food, clothing and shelter. Those things utilize much higher proportions of working people's budgets than they do those of the wealthy, who save and invest much of what they earn rather than spending it to keep body and soul together the way the rest of us have to. But here's the devious part. In addition, they propose a "tax holiday" for two years on "payroll taxes," that is, the money that both employer and employee contribute to the Social Security trust fund will not have to be paid for that duration. At first, that sounds good; it costs business less to pay us and we get to keep more of what we earn, but think about it. Social Security has been plagued by a single problem for decades: the impending negative flow of cash. So, if money is not contributed into the trust fund for two years, that means that the turn to cash negativity, that is to spending more on benefits than the fund has, will come that much sooner. Then, cuts in our benefits and increases in payroll taxes will be that much more severe. They want to rob Peter now, and then rob him again later.

The essences of the two proposals are full of holes as they are, and as to the Bowles/Simpson preliminary proposal, it seems to me that it is simplistic, peremptory and conclusory, prescribing cutting this, that and the other thing (mostly the tax decutions that you and I rely on rather than, say, the oil depletion allowance) because they say it should be done without considering the implications of doing so, or even whether it is possible. It may sound like they are doing their job by proposing the hard solutions, but that is only half of it. The solutions also have to work, and they don't. For example, they want to alter or eliminate the home mortgage interest deduction based on the claim that it does nothing to induce home purchases when, if they lived down here on this planet with the rest of us they would realize that it is probably the single most cogent reason to buy a house rather than rent and put more money in the bank. But even if such were not the case, the demand for new housing is crucial to the economy, providing a significant proportion of new jobs, some say the most pivotal segment of the new job market, and it is slumping terribly right now. So if any inducement to buy rather than rent is abolished, how can that possibly have anything but a destructive, perhaps devastating effect on the economy, now when we need such a thing least.

What I have to say about all this is simple. First, Social Security has not been sacrosanct for all these years for no reason. It provides a predictable flow of consumer demand, which is even good for the rich. It feeds and houses people who, before Social Security existed, had no means by which to sustain themselves once they could no longer work and thus it has kept them off the streets all these years. And beyond the practical reasons for it-- and there are many more-- it is the right thing to do. But second, speaking of the right thing to do, the many down here cannot afford to carry the burden created by the avarice of the few at the top any more. Tax rates for the rich are at hundred year lows, and the rate at which they are increasing their share of our nation's treasure is obscene. It is convenient for a few comfortable politicians to propose that we down here do more, but the fact that they call it necessary doesn't make it so. During and after World War II the top tax rate reached 90% and we achieved a level of prosperity this nation had never known before. So let the rich pay just 50% now. That's my proposal. Problem solved.

Your friend,

Mike

Dear America,

The détente between Hamas and Fatah seems to have created something of a panic in Israel and in this country among Israel's allies. But it seems to me that the unification of the two Palestinian movements with the intention that they will go to the UN and ask for recognition of a Palestinian state is a positive development. My presumption is that the UN will respond that the Palestinians can have their state only if they recognize Israel's right not just to exist, but to defend itself, its people and its borders. And if the unified Palestinians agree, they will get the recognition they seek and perhaps a mandate to create the homeland they desire, but once that happens, any attack on Israel will be a violation of an explicit agreement not to do so, and of the condition on which The Palestinians got their long sought after state, as a function of conditions imposed by a broad array of members of the community of nations, which will then condemn them. And that is why it is all a tempest in a teapot: the Palestinians won't agree. But regardless of whether I am right or wrong, it is becoming increasingly apparent that the nations of the world cannot leave the issue of Palestinian sovereignty in flux forever. And thus, leaders like our President have begun to express their perceptions of the exigency of the matter.

As to The President's speech, in particular that part requiring return to approximately the 1967 borders, it was merely a statement of international law regarding occupation of other countries not just by Israel, but by all nations that prevail in war. Colonization is forbidden by the Geneva Accords, the Hague Conventions and probably other codifications and legal opinions on the subject. And further, the Israeli claim that those borders are indefensible is absurd in that they got the territories in question by defending the 1967 borders successfully. With the endorsement of Israel's right to exist by the new Palestinian state, bolstered by an international commitment to defend those borders by which Israel was defined at its inception, Israel should enjoy a kind of security within the 1967 borders that it has never known. Defense of those borders by Israel is an indisputable right as well as an immutable obligation for the nations of the world. But still, the Israelis may have some legitimate concerns about the sanctity of its borders, and those concerns should be expressed, however contrived concerns appear to be nothing but pretexts for resistance to the notion that the Palestinians are entitled to a homeland, and that is what President Netanyahu provided when he met the press with President Obama on Thursday and claimed both that George W. Bush had stated U.S. policy in an informal letter he wrote in April 2004, and further that President Obama was now saying something different. That is the nature of conservative Israeli politics. So it now falls to American politicians to assuage, or even debunk those insecurities with reference to the truth and reassurance of our continuing loyalty to the State of Israel and to the Israeli people. So, in that vein, let me make a few observations.

First, Bush said in his letter of April 14, 2004 that:

This is not a guaranty that new borders will be required, but rather that accommodations will have to be made, and that is exactly what President Obama said when he said that the borders of Israel and the Palestinian state should be based on the 1967 borders with exchanges of territory as agreed upon. So now, the Netanyahu claim of distress over a departure from previous U.S. policy on this issue expressed by former President Bush has been debunked. But apparently Michelle Bachman didn't bother to inform herself on the subject...once again, which brings me to the second point.

Bachman wasted no time in ascending the grand stand to garner what attention she could when on Friday she decried President Obama's purported departure from American policy on Palestine and Israel. Apparently it was too much of a demand on her time to actually read the policy statement that Netanyahu alleged had been reneged upon, just as she is not much for reading history, even when it comes to Lexington and Concord, despite her reliance on The Boston Tea Party as the ideological and historical inspiration for every reactionary utterance of supposed principle she makes. But this is not the time for crass politicking by demagogues and would be rabble rousers. The stakes are too high, not just for Israel but for all of us who live in a world increasingly divided into east and west, Muslim and non-Muslim, rich and poor. I don't care if Ms. Bachman runs for the presidency. She is pretty enough to add something to debates that will feature the likes of Newt Gingrich, the Republican pontiff of the nineties. But she should know her place and stop trying to affect foreign policy. Mistakes as to where the first shot of our revolution was fired are harmless comic relief, and we could use some comic relief in our national politics. But the presumption by the likes of Michelle Bachman that she knows what foreign policy is, much less what it should be, is dangerous. Bachman may be a joke, but the havoc she and her ilk might wreak is not.

Your friend,

Mike

Dear America,

I was reading an interview with Larry Summers in the N.Y. Times last Sunday and his role in the financial crisis was the natural topic of discussion. As might be expected, he viewed his performance as an advisor to two presidents-- the one under whose tenure the crisis began and the one left to deal with it...so far unsuccessfully-- as non-contributory relative to both where we are and how we got here. He admits that derivatives played a central role and that he influenced policy regarding derivatives, but he inexplicably makes no connection between his advice and what eventuated in consequence of the abuse of derivatives. And the reason for his self-exculpating attitude is quite simple-- and prevalent among those who presume to give advice to presidents. All of those guys-- the fat cats cum advisors, cum university professors-- consider themselves beyond reproach because they adhered to dogma and steered us all in that direction. But despite the fact that they regard themselves as "great thinkers," the reality is that they do not think at all. They read what other supposedly great thinkers thought and then do what they read they should do. The problem is that those other great thinkers were the products of other great thinker's writings, so none of them have bothered to actually contemplate the issues in decades. Except for hardcore Keynesians, supply side economic theory remains d' rigueur for economists, even those who tend toward the left of center, and for politicians of all stripes, including presidents, as well. And with those beliefs comes belief in all the complexities that are required to make the supply side even marginally sensible.

But in my estimation, economics in general, and for that matter economic problems, are far simpler than the pseudo-science of economics makes them. There are buyers and there are sellers. When buyers control the economy, nature takes its course. But the only way for sellers to be in control is artificially because commerce is not impelled by production. Rather production is impelled by demand, and thus so is commerce. People do not buy goods because they have been produced, they buy what they want and need, and the evidence to that effect is overwhelming, abundant, commonplace and common sense. So, the only way for production-- the supply side-- to become the controlling force in commerce is through artificial means and contrivance-- in other words, supply side policy. But pressure from natural economic forces are as uncontrollable as the weather builds up and overwhelms all else the same way that tornados, earthquakes and floods do. That's it. We created sub-prime mortgages that were unprofitable in themselves by supporting them in various ways, including acceptance of an inevitable percentage of foreclosures. We created derivatives, which are intended to mitigate losses as if doing so could somehow be free. But the cost of that kind of insurance has to be paid by someone, and in the end almost everyone paid...almost. Among those who did not pay were those who constructed and benefited from that artificial market in derivatives, using them as enormous-scale bets and getting rich like those who have created something though they created nothing at all. However since they created nothing, what they accrued had to come from someone else, and that source of their wealth was all of our pockets, just in such universal, small and diverse ways that no one notices. There are all kinds of ways in which people today can make money by making money as opposed to by making things and performing services. It is the difference between alchemy and chemistry. There are stock options, short sales, and commodities futures for example: all as much the implements of gambling as playing cards and dice, but they have been legitimized by the financial industry as if trading wealth between and among the rich can create new equity. But you cannot make equity from thin air, or by tossing it from one hand to another, which is what that kind of financial alchemy is, and that is the systemic flaw in modern capitalism. These activities, which have supplanted the legitimate kind of finance that existed when the Glass-Steagle Act was in effect, do not create equity. They just transfer it surreptitiously in one direction only: upward. And as equity concentrates at the top of the economy, it becomes sparse at the consumer level, so the opposite of priming a pump occurs. As less equity is owned by the consuming classes, less gets spent on goods, less goods need to be produced, fewer people are required to produce them, those few accrue less equity, consume less goods and the downward spiral is complete, beginning the process of diminishing us all.

That is the harm that the demi-gods of economics do. They posit their theories-- counter-intuitive as they are-- as truths, and because they have accrued so much money through their alchemy, they are believed by those in the halls of power. Regulation of derivatives is not too complex for the layman to understand, it is just inconvenient for those who don't want to work for a living. High finance is not the rarified sanctum of business that businessmen would have us all believe it is. The reality is that goods and services are produced and sold. And anyone who makes more than what he has earned by producing something in one way or another, such as those who do nothing but multiply dollars artificially do not, takes something out of the pocket of everyone else. Economists can elaborate on that notion to make it as complex as they like, but in the end it all comes down to human nature and the fact that two plus two never equals five. It's like that old joke. Horse sense is what keeps horses from betting on people, but unfortunately, financiers and economists like Larry Summers don't seem to have any. In Summers' case, he doesn't seem to even know it exists, and we're all in this ditch together on account of it.

Your friend,

Mike

As I have previously noted, I am preoccupied with Social Security and what the Republican conservative complex (Rcc) is trying to do to it. The Social Security Trust Fund contains something on the order of $2.6 trillion-- that's trillion with a "t"-- but the federal government has borrowed all of it, and the Republicans in congress complain incessantly because now, they have to pay it back and they have no one else to blame as they played a major role in spending it. The long and short of it is that Social Security is the only federal government program that funds itself and has money on hand for decades of its cost. It is not in any way part of our debt or deficit problem, but the program lent the federal government its money and is now therefore a target because the federal government doesn't want to pay its debt. If we were dealing with a bank, someone would be going to jail for such a scheme, but the Republicans seem to have some kind of immunity. Still, we cannot let them get away with this without a fight. So, while I have had to cut back on the frequency with which I write to you by limiting myself to Monday and Friday, I have written to you several times about Social Security, and I feel that comments made about the Republicans and their plans for the program bear repeating. Thus, for the foreseeable future I will reprise those letters on Wednesdays with the thought that someone who missed them might be interested in Social Security too, and in what it means to us as a nation as well. Here is this Wednesday's reprise: my letter of January 28, 2011.  N.B. Before you read on, let me make this note.  You will find posted below several internet pieces taking various positions on the subject of the solvency of the Social Security Trust Fund.  There is even one that claims that there is none because the federal government has borrowed all of the money and thus it is gone, but I would remind you of something I said elsewhere.  If the logic of that argument were valid, every bank account in the country would be a fiction as banks lend out the money we deposit, mostly for mortgages, just as the Social Security Trust Fund Trustee was compelled by statute to lend The Trust Fund's money to the federal government.  Suffice it to say that there is a trust fund, and all you have to do is read the operative statutes to confirm that fact, and I fear no contradiction on that point.

Dear America,

The Republican conservative complex (Rcc) persists in making insinuations about Social Security's role in creating the national debt. But the reality is that the budget cannot be balanced and the national debt cannot be reduced by changing Social Security in any way unless the program is absorbed into the general fund budget and the payroll tax, which is the sole source of Social Security funding and cannot be used for anything else by law, is eliminated-- not just the seven percent we taxpayers pay but the seven percent that our employers pay as well. In other words, if the Rcc wants to address our debt through Social Security benefit reductions, they will have to reduce tax revenues by at least the amount of the reductions: a wash that would serve no purpose but the one they have been trying to achieve since the New Deal. That's right. Reducing Social Security benefits is just the first step toward eliminating the program all together because in reality, reducing Social Security benefits cannot reduce either the national debt or the deficit.

I know how some of you are reacting: it's just another conspiracy theory, or Eric Canter and McBoehnell (Mitch McConnell and especially John Boehner) aren't smart enough to figure out such a scam. But whether they have devised the plan or just intuit that they can get rid of Social Security by attrition and reduce the debt simultaneously, that is what they are intent on doing. Because if they merge both the revenue from Social Security's payroll tax and the benefit payments to Social Security recipients into the general fund, they eliminate a distinct tax-- and you know how the Rcc obsesses about taxes-- and at the same time they eliminate the safe repository of the funds to pay the benefits that they don't want to pay anyway so that they can keep the funds that are already in it, which they have already spent anyway. As an ancillary benefit for the Rcc, by eliminating the Social Security Trust Fund they eliminate the need to repay to the fund the trillions of dollars the federal government has already borrowed from it and hence owes the fund: trillions of dollars of debt disintegrated with nothing but a few strokes of the pen. Then, if the Republicans are in power at the time, they can say that their fiscal responsibility eliminated a massive portion of the debt problem. They think that no one will notice that it is really just a shell game that they are playing and that we, America, are the ones being conned.

What disturbs me most is how few people seem to be onto the Rcc. For example, on several occasions, I have heard David Gregory of Meet the Press talk about reducing entitlements like Social Security to balance the budget. Last Sunday, he tried to get Eric Cantor to admit that he needed to advocate reductions in Social Security if he wanted to balance the budget. And while Cantor was very coy about it then, refusing to give a real comment on the subject, in the end he will reluctantly-- gleefully underneath it all-- acquiesce in what seems to be becoming the mantra even the progressives among us are chanting...cut entitlements, cut entitlements, Om. And Gregory asked the same question of Harry Reid last week, though Reid's response was that reducing Social Security was not necessary: half of the right answer. So, the danger is that those of us who believe that the social awareness and compassion that have spawned what we refer to colloquially as "the social safety net" will unwittingly ask the Rcc to take it away from not just us but our grandparents and our grandchildren as well little by little. We are being duped into being their enablers-- accomplices in building the petard that will hoist us all. I can recall only one commentator who has expressed the reality about Social Security on television and he was one of Rachel Maddow's frequent guests. Almost everyone is ignoring the fact that even the President's debt reduction commission's preliminary report said that strengthening Social Security by changing benefit structure or revenue would not reduce the debt or balance the budget. In bullet number five on page 43 of their report, they recommended that we, "Reform Social Security for its own sake, not for debt reduction." That is an exact quote and the report is on the internet, so you can look it up for yourself, as can the Rcc. I hope you do, but they won't.

So, consider this fair warning. Social Security is in jeopardy, which I for one could accept if it were for good reason, but it isn't. The only reason that it gets mentioned by the Rcc is that they don't like it. Ramesh Ponnuru of the conservative journal National Review in his January 14, 2011 Op-Ed piece for the New York Times wrote that if President Obama does not offer a "good faith proposal for Social Security" in his State of the Union address, "reformers [substitute Republicans here] should blame Mr. Obama for the lack of progress and work to make entitlements a litmus-test in the Republican presidential primaries." The strategy Ponnuru is advocating is the first step in just what I have been describing, and you can count on seeing it unless the fallacy behind the Rcc's intention is exposed on a large scale. So, as usual, it is up to us, America, to help ourselves. Because if we wait for our politicians to figure this all out, we are in for some awfully hard times. The recession of 2008-2011 will look like a day at the beach.

Your friend,

Mike

MichaelWolf@Letters2America.com

Dear America,

It seems to me that even the moderate voices in the Republican conservative complex (Rcc) have lost their bearings. For some time I have considered David Brooks to be the harbinger of pragmatism, not because I agreed with him but because he seemed in touch with reality to the exclusion of dogmatic distortions of it. The Republican ruse of professing to defer to the will of the people while, for example, ignoring their clarion disapproval of the Bush era tax cuts if those cuts would result in deficits since their inception ten years ago (see the Pew Research polls from ten years ago and 2010 just before the lame duck extension of those cuts) was not the kind of hypocrisy to which Brooks would subscribe, I thought. But his recent editorials have made it clear that he is as much the dogmatist as Mitch McConnell, just a lot more coy and a little less unctuous about it. The Republican assault on American values, intended to redirect them toward affluence for its own sake and to vilify those who never manage it, is the same dogma no matter which of those two utters it. Brooks has now demonstrated that there is no moderation on the right side of the political spectrum anymore. But there is no excuse for the credulity of those in America who leave them in power either. The way in which the Rcc has managed the feat of controlling the American political discourse so thoroughly and effortlessly is a polemical trick: they have persistently posited certain assumptions over the years so that they have been transmogrified into axioms. There is a line in the film "Chinatown" that articulates this tactic perfectly. It goes, "Politicians, ugly buildings and whores all get respectable if they last long enough." As to which of those, if any, is the analogue of the Rcc and its creed, I will leave you to make your own choice, but that is the way in which the lucidity and balance that David Brooks used to display was undermined. He has begun to predicate all of his thoughts on those assumptions cum axioms. He has ceased to question.

For example, in his column of May 6, Brooks wrote that the country was founded by a group of "everyman" types (my phrase, not his) on the model of a republic, not a democracy. We all learned that the construction of the government, included checks and balances among the three branches of the federal government. But Brooks adds that The Senate was intended to be a check on, or a balance for, The House of Representatives in the founders' effort to prevent the masses from running political riot in this country. Apparently he has been sitting at Rand Paul's knee lately for, while The Federalist papers, the presumptive source of Paul's "enlightenment" on the subject, make a similar point, it must be remembered that they were written by Madison, Hamilton and Jay: hardly a list of common men, nor a list of poor ones. And they were written not just to proclaim the new political philosophy that The Colonies were to stand for, but to convince those who did not share their view that a central federal government was necessary to ensure "domestic tranquility," in the thesaurus of Brooks and Paul a euphemism for governance by enlightened oligarchy. The fact that "states' rights" is the rallying point from which every conservative movement that works to constrain others gains its legitimacy demonstrates the tension between the federalist views of those three members of the colonial elite and those who opposed federalism even then. And beyond that point is this. Those three founding fathers did not envision a minority of The Senate being able to thwart the other half of their branch of the government and the chief executive as well. That is not republicanism. It is Republicanism. It is the credo that any cheap trick will do when it is the means to a justifiable end, always presuming that their own ends are justified no matter how many others oppose it. The filibuster, which is the Republican tool of choice for thwarting the popular will, is not just non-democratic. It is non-republican as well, so Brooks' faith in that body seems plainly misplaced.

So, when Brooks criticizes the American people in his May 6 column for what he refers to as "solipsism," he not only misuses the term but misunderstands the American political problem as well. It is not the belief on anyone's part that only he and his wants and needs exist...that everyone else may be just a figment of his imagination, which is what the term would connote in that context. It is the belief in the few who have that the privations of those who don't are of no consequence to them. And they can cleave to that belief because of a few self-serving assumptions that have become axioms by virtue of persistence and infuriating repetition: prosperity trickles down from the top; prosperity for all is created on "the supply side;" the poor could be rich if only they would work harder. Relying on those suppositions as axioms, the Rcc has been able to create the conservative consensus that the social safety net is for the dissolute and the parasitic hordes who do not deserve the largess of the rich, who in turn can never be rich enough for the good of all of the rest of us. But in that regard, there is no compromise, which is what Brooks fails to see. There is only reversal of the compassionate humanism that has been three hundred years in the making here in the new world...a thing absent at our inception as a nation in the old world from which we came. People do not spend their lives picking our fruit and cooking our hamburgers because they are lazy. And it does not ennoble us, America, to discard them as unworthy of consideration so that the most well off of us can pay less in taxes.

If supply side, trickle down economics actually worked, we could not have $2 trillion worth of captive profit in the hands of business and 9% unemployment at the same time. The American economic problem is that nothing is trickling down, even though it would if supply side theory were viable. And that is because of the American political problem. The rich and powerful few, like the Republican minority in The Senate that Brooks lauds as the stabilizer in our system, are able to invoke republican principles to justify their usurpation of the power of the majority of the people of the United States on too many occasions. The Pew Research polls prove it. Sometimes The People want the wrong thing: segregation, sub-prime mortgages, jingoistic international policy. But sometimes The People do know best and it is those who think they know best who don't, for example when it comes to tax breaks for the wealthy and for businesses that are already awash in cash. If a reasonable compromise does emerge, it will not come from The Senate as Brooks claims it will, it will get through The Senate as past history shows it will. And calling Republicans republicans won't change that.

Your friend,

Mike

Dear America,

Probably the most pressing crisis we face as a nation is the cost of petroleum and petroleum products. The price of a barrel of oil had risen, prior to a precipitous one day decline on May 5, by 32% since January 1, 2011, and the explanation for that rise has been that world consumption has increased, and at this time in particular, production from Libya has ceased or at least been substantially reduced. As to Libya, various analysts are interviewed on the subject every day, and on one occasion on NPR's Morning Edition, I heard a representative from a commodities investment firm in London, Justin Stewart of Seven Investment Management, state that Libyan production as of February 11 when the interview was done amounted to 7% of the world's production. However, in research and in other interviews, the figure I had heard and read regularly was 2%, and the state of Libyan oil production was that it was reduced by half in consequence of the uprising as the oil fields were in the hands of the rebels and they were operating them as conditions allowed. Thus, the world's daily supply was reduced by something between 3.5% (if you accept Mr. Stewart's figures) and 1% at that time, making the spike in the price of crude oil rather perplexing, so I consulted what I believe to be some more reliable sources of information: OPEC and the U.S. Department of Energy (DOE). As to the percentage of the world's total production that comes from Libya, OPEC and the DOE agree that it is a bit less than 2%. The world produces approximately 87 million barrels of oil per day and Libya produces about 1.5 million barrels, begging the question, how does that translate to a 32% rise in crude oil prices.

Well, the answer from industry insiders-- commodities traders, fund managers and industry experts-- has generally been that world demand is also increasing. In an interview aired on CSPAN last Sunday, Jack Gerard, CEO of the American Petroleum Institute, insisted that one of the causes of high petroleum prices is lack of supply, and further, that the lack of what he and his patrons consider an adequately permissive policy with regard to drilling in the Gulf of Mexico and off the coast of Virginia is a factor, even though those policies have no impact on current supply and won't affect supply one way or the other for eight years or more. And Yesterday on a "town hall" session on CBS's Early Show, President Obama said the same thing. But Mr. Stewart also stated, despite his obvious fealty to the business of making money by trading oil futures, that there is no shortage of oil in the world today, and in fact there is a small surplus. And in other news reports I have read that Russian production is up in an amount that more than offsets the Libyan reduction. In addition, it is regularly reported that motorists in this country are driving less and therefore consuming less, and heating season has just ended. When Mr. Stewart was asked if the reason for the disproportionate rise in prices was speculation, he was somewhat sheepish in admitting that it was to some extent, but again a question is begged: if for the preponderance of the increase in oil and oil based products is not speculation, what is it. And now, on May 5 there was an 8.6% drop in the market price of crude oil. I don't mean to look the gift horse in the mouth, but does that mean that world demand dropped 8.6% last Thursday? And oil futures dropped another 6% the next day, last Friday. What does that mean? It means that, as they used to say in The South, the rattle snakes are starting to bite each other. It means that the high cost of petroleum products these days is entirely due to speculation to the extent that it exceeds reasonable market forces, lack of supply not being among them.

I was stunned to hear President Obama reprise the Republican party line on the subject on CBS yesterday. He essentially threw up his hands and said that the Republicans are right about all of it and we just have to pay more and like it until some time in the distant future, but I don't accept that. My solution to the problem would be nationalization of the oil industry, but I know that will never happen. My next choice would be to regulate the oil industry the way we do any public utility, but on the federal level. But that won't happen as long as the industry has another dollar to give to Republican candidates in congress, and apparently to Mr. Obama as well. So, all that I can think of at this time is for President Obama to release 100 million barrels of oil from the 727 million barrel strategic oil reserve-- a move that even Ronald Reagan and George W. Bush made in similar circumstances-- and to let it be known that if that doesn't work, there'll be another 100 million barrels after that. And he should do it now while they are shaking in their shoes. We need less bully pulpit and more bully...along with a little more loyalty from The President to them that sent him to Washington, that is if he wants to stay. If we'd wanted a Republican president, we would have voted for McCain. Maybe next time.

Your friend,

Mike

As I have previously noted, I am preoccupied with Social Security and what the Republican conservative complex (Rcc) is trying to do to it. The Social Security Trust Fund contains something on the order of $2.6 trillion--that's trillion with a "t"--but the federal government has borrowed all of it, and the Republicans in congress complain incessantly because now, they have to pay it back as we all might have expected since they played a major role in spending it. The long and short of it is that Social Security is the only federal government program that funds itself and has money on hand for decades of its cost. It is not in any way part of our debt or deficit problem, but the program lent the federal government its money and is now therefore a target because the federal government doesn't want to pay its debt. If we were dealing with a bank, someone would be going to jail for such a scheme, but since we are dealing with Republicans, they seem to have some kind of immunity. Still, we cannot let them get away with this without a fight. So, while I have had to cut back on the frequency with which I write to you by limiting myself to Monday and Friday, I have written to you several times about Social Security, and I feel that comments made about the Republicans and their plans for the program bear repeating. thus, for the foreseeable future, I will reprise those letters on Wednesdays with the thought that someone who missed them might be interested in Social Security too, and in what it means to us as a nation as well. Here is this Wednesday's reprise: my letter of December 20, 2010.

Dear America,

Recent surveys on the mood of we American people suggest a kind of ambivalence indicative of fractiousness and division rather than indifference or universal disdain. According to a Washington Post-ABC poll, we are divided on virtually every issue, and often adamantly so, but overall we are more than 60% in favor of the just-passed tax relief plan that purports to be bi-partisan. And while we disapprove of The President's handling of the economy and taxes, and loudly disapprove of the direction in which the country is headed under our present governmental demography, the Republican Party fairs no better when it comes to public confidence in general. We trust The President more when it comes to helping the middle class, but we trust the Republicans more when it comes to handling the deficit, though at the same time we think that The President is more sincere in his desire to reduce it. Neither party gets majority support for its handling of taxes, and while The President is seen as doing more to compromise his positions than are the Republicans, we view the leadership of our nation to be split almost equally between The President and the Republicans. In short, public opinion is diffuse and confused as well as often internally inconsistent. But there are two elements of the new tax plan that enjoy resounding opinions in the American polity: reduction of the payroll tax, which less than 40% of us favor, and extension of unemployment benefits, which over 70% of us favor. It seems that the one thing that Americans understand the same way regardless of party affiliation or location on the political spectrum is that the government has a role in our lives that is essential, which is providing a "safety net" to protect us from the ravages of our lowest financial and economic ebbs.

Funding unemployment compensation fills an acute need. There are people who have been ravaged by our current economic tribulations and they run the risk of falling below that modicum of weal that we apparently accept in our society as a right. But this period of acute need will end when the business establishment stops sitting on almost $2 trillion that it has skimmed off the top of our cycle of commerce. When and how that will happen is a question for another time, but the need for Social Security will never end because there will always be elderly among us, and there will always be need for a system that can keep their bodies and souls together. It belongs to us as it is funded by us based on the ability in the young to pay in contrast with the inability to sustain themselves once their working lives have ended in the elderly. But the balance between funding and need is shifting, which will necessitate a new formulation of the ratio of one to the other; that is a subject that has been under discussion for at least two decades. Assuming that we wish to maintain current benefit levels, more money will have to be contributed by those who still work, but now both The President and the Republicans are telling us that we can afford to take a break from paying even the insufficient amounts we are currently entrusting to the fund so as to stimulate the economy-- in other words, they want us to spend some of our retirement money now so that the business establishment will see enough demand to release some of their hoarded riches. Like almost 60% of us, I am against it.

We have discussed the nature of the Social Security system in the past, and it appears that the substantial majority of the American people understand how the system works as they see that the money they are encouraging us to spend now, they will be taking back when they turn to the task of balancing the program's books in the near future. And they propose this now after we have just suffered profound calamity in consequence of-- among other things-- that spend now, pay later mentality. The President and the Republicans must be at least as knowledgeable on the subject as nearly 60% of us are, so why are they doing this. Well, though I am not a fan of conspiracy theories, I believe that it is an attempt to set us up to accept the government's arrogation of the right to spend Social Security Trust Fund money to pay off the debt that they have created with war, pandering to their wealthy patrons in the tax system and fostering the growth of business prosperity instead of that of the individual. Sounds a lot like fascism, doesn't it.

There is much to dislike in the new tax law. As to which parts you dislike, it depends on who you are. But there is consensus for the notion that those who have been spit out by our businesses and industries must be sustained: they are people in need and we are a compassionate nation. And there is also consensus that we own the Social Security Trust Fund, and it is our right to have the benefits of that fund when we need them. What our politicians do not seem to understand is that Social Security, among all of the programs that serve one constituency or another, is universally regarded as a socially enlightened enterprise that is woven into our social fabric as tightly and irrevocably as is the capitalist system itself. Whether we regard it as socialism or secular humanism, compassion or necessity, we the people of the United States of America consider Social Security to be foundational in our identity as a people. So, if the federal government as a collective entity thinks that it can gradually erode that notion and in the end convince us that it should be able to use our trust fund for its own purposes, it is sadly mistaken. If they persist in blithely undermining the sequestration of Social Security from the vicissitudes wrought by their folly and political ambition-- a sequestration on which, by the way, they have relied so as to avoid supplementing the fund over these past decades-- they will be simultaneously underestimating the venom of the response their efforts will precipitate...from Democrats and Republicans, conservatives and liberals alike.

It may be only paranoia that leads me to think that they are manipulating us when they give us this payroll tax holiday, co-opting our attachment to the birds in the bush with a bird in the hand. It may also be that there will not be more of the same in our future until we are left with nothing, they will tell us, because we spent it already. But if my concern is well founded, our very virtue is in jeopardy, because providing for our fellow Americans in need, which is what the vast majority of us eventually become, is fundamental to our national concept of what we are. And frankly, it is disturbing to think that we may be getting lulled into becoming something else.

Your friend,

Mike

MichaelWolf@letters2america.com

Dear America,

Over the past few days, the Republicans have let it be known that they will not press for the kind of Medicare "reform" that the Ryan budget calls for. Republican leaders acknowledge that the unpopularity of their proposal for the privatization of Medicare amounts to political self-immolation and they will not insist on it in whatever budget compromise may emerge from bipartisan, bicameral negotiations. But they may have closed the barn door after the horse was already gone because their proposal, when viewed in the light of the strategy they pursued on the subject during the 2010 elections, makes clear that they intend to do away with Medicare rather than reform it. It comes to this in the final analysis.

The health insurance reform law that the Republicans have dubbed "Obamacare" reduced Medicare costs by nearly $700 billion over ten years by controlling the increases in the cost of a particular feature of the program: Medicare Advantage. Medicare Advantage is enhanced Medicare coverage purchased from a private insurer. Advantage plans must provide at a minimum the same coverage that Medicare provides, but with coverage over and above that basic minimum, which can be bought and paid for by the Medicare recipient in various ways. The Advantage plan-- often an HMO or other controlled care provision scheme-- pays the medical bills and Medicare in turn pays the Advantage insurer a fixed fee for the recipient's care. But depending on the Advantage coverage elected by the retiree, he may have to pay an additional premium to the private insurer in some amount, usually along with co-pays and deductibles in reduced amounts. During the election, the Republicans struck fear into the hearts of the elderly by suggesting that reduction in the escalation of the cost of Advantage plans was a reduction in Medicare coverage, leaving out the fact that Medicare minimum coverage was not reduced by health insurance reform. And the reason that they took that tack is now apparent. They want to replace that basic Medicare coverage, which protects the elderly not just for routine care but in the event of catastrophic illness as well, with subsidized private insurance that may or may not do both things, in other words, with Advantage like plans run by private insurers. But anyone who has bought insurance in the private market knows that the cost for the same coverage that Medicare provides will be astronomical, and since the Ryan plan is intended to save money by giving only vouchers to the retired instead of coverage, it is abundantly clear that there will be no coverage comparable to Medicare available to the vast majority of senior citizens for the cost that the vouchers will reimburse. In other words, they plan to take two and give us one back, and convince us that we are getting a bargain.

The campaign of 2010 was the bait, and the Ryan plan is the switch. And if that had worked, the next step would have been to privatize Social Security the same way and just absorb the money in the Social Security Trust Fund into the general fund, thus reducing the federal debt by $2.5 trillion at the cost of the ink it takes to sign a legislative bill into law because all the Trust Fund now holds is IOU's from the federal government. It's a scam-- maybe the biggest in history-- and it is being foisted upon us by one of the two official political parties in our government: the Republicans. It is the biggest confidence game ever...the ultimate "long con." In fact, the only reason that the Social Security part of the plan has remained in the background is that when the Republicans, like McBoehnell (McConnell and Boehner) tried to fly it, there was an enormous reaction pointing to the fact that the program is fully funded until 2042. They have taken to insisting that Social Security payments increase the federal deficit each year, but sooner or later the same people who pointed out the solvency of Social Security will point out that Social Security increases the deficit only to the same extent that the federal government paying any of its debts does. I, for one, would sooner see the government try to make its debt to China disappear than its debt to us who have already paid for our retirement under Social Security.

So, consider this a prediction of how the Republican conservative complex is going to proceed. They will first sell us pigs in pokes, and when we see that the pokes are empty they'll claim that there never were any pigs so we shouldn't complain: a lie justified by a lie. And this from the party that wanted us to trust them one more time.

Your friend,

Mike

Dear America,

Many of you will remember David Stockman, Ronald Reagan's nerdy budget director who has largely remained out of sight for the past twenty five years or so. But he has emerged from his private life for reasons of his own to talk about our current fiscal crisis and the systemic reasons for it as well as the logical means by which to address it. His opinions are something of a surprise in that during his tenure in the Reagan White House he was a pariah, if not a villain in the eyes of liberals and progressives because of his arch conservative opinions on the subject of how our nation should spend its money and how revenue should be raised. He was a trickle down guy and an advocate of spending less-- regardless of who got hurt-- so that we could tax less: the conservative paradigm for government then as it is now. In other words, his conservative bona fides are beyond challenge or reproach, which is what makes him so credible now. His opinion these days is that Paul Ryan and the Tea Party are essentially delusional if they think that they can extricate this country from its financial crisis with spending cuts exclusively, especially with those cuts occurring only in the twelve percent of the federal budget known as discretionary spending. And his opinions on the ways in which our system of capitalism as it has come to be constituted is fundamentally flawed are political heresy to the Republican conservative complex (Rcc), which as we all know includes not just the political right, but the plutocracy and others with self-interest to protect as well. He laid it all out in his New York Times Op-Ed piece on April 24, 2011. It was entitled "The Bipartisan March to Fiscal Madness."

In it he raised several startling observations about the way wealth in America has been made and is now distributed, some of which have also been made by those of a much more liberal stripe like Robert Reich, who is as far from conservative as the conservative political eye could see. For example, Stockman states that the share of wealth held by the top 1% of households has risen from 21% to 35% in the past thirty two years, and that their share of income has more than doubled to something on the order of 20%, both figures well below those cited by Robert Reich in his book Aftershock, but shockingly disproportionate none-the-less. However Stockman goes further by explaining the mechanism by which such disparity in our economic society came to pass. He notes that the Federal Reserve has kept interest rates artificially low, thus inspiring incurrence of excessive debt by those less able to afford it and he points out that the tax code has favored capital gains made through speculation rather than encouraging the very kind of economic activity that Republicans say we need: entrepreneurship and innovation. And all of this is a function, he says, of the persistence of tax reduction policies implemented in 1978 to get us out of a dangerous inflationary spiral into a period long after the need for those policies existed: a tax subsidy for the rich in his estimation.

But the gravamen of Stockman's analysis is that both liberal and conservative propositions for reform are fundamentally unsound, and paradoxically, his condemnation of the rationale and motivation of the Ryan budget proposal is the more scalding of the two criticisms. As for President Obama's plan, Stockman notes that the repeal of the Bush era tax cuts for the top 2% in our economy will raise about $70 billion, which along with The President's proposed reductions in defense spending will take about $100 billion in total off the deficit, but that a reduction of that amount is a pittance in contrast with the problem-- too little and too late, he says. But Ryan's plan maintains all of the Bush tax cuts, which Stockman decries in this era of what he calls "casino capitalism" as a blithe, dogma driven effort to capitulate to wealthy patrons while ignoring the fact that our seemingly intractable debt will remain so without what has come to be euphemistically called "revenue enhancement." Further, Stockman condemns the "meat cleaver" reductions to the social safety net that Ryan prefers to increasing taxes for anyone, which in the end does not save us a dime but in fact worsens our debt and deficit problems.

In the final analysis, Stockman counsels that both sides, supply-siders and Keynesians, put dogma aside and acknowledge that we face a dire problem measurable in tens of trillions of dollars, not just the financial inconvenience of the voting public, and that both camps must forsake dogma for awhile. His point is that the accusations of inviting class warfare are aptly leveled at both sides, and that such a clash will provide no relief. He suggests that we do all of the things that have been proposed in some fashion: increase taxes on everyone and cut spending in areas that have been considered sacrosanct until now. That entails means testing for Social Security recipients, reductions in defense spending and tax increases for everyone, not just the rich. He reiterated that proposition last week on ABC's Sunday current affairs program, This Week by confessing that after the Reagan tax cuts of 1981, taxes had to be increased...eleven times according to another arch conservative, Alan Simpson of The President's debt commission. It is a marvel to me that the man that most liberals, including me, considered to be a nerdy, heartless bureaucrat in 1980 turns out to be the only rational adult on our political scene today. What's next, I wonder. I think we should ask Stockman.

Your friend,

Mike

Dear America,

As you know if you read my letters...even occasionally, I write about Social Security pretty regularly lately. And you may be wondering why, so let me explain myself. I recognize that we have a debt/deficit problem in this country, and I also acknowledge that every month, checks drawn on the U.S. Treasury go out to millions of Social Security recipients. The problem as I see it is that despite the ostensible consanguinity of those two problems, they have little to do with each other in principle. The history of Social Security is that the program was created during the depression so that people, especially those who had worked all their lives and couldn't work any longer, would stop starving and dieing of it. So FDR and the U.S. Congress of the day created a legislative framework for the program, the Social Security Act, that included imposing a tax on workers aside from the income tax: what is now known as the "payroll tax." But that tax is actually not a tax but rather a premium payment, just like what you and your current employer (if you are lucky enough to have one) put into your 401(k) plan each pay period. The only difference is that 401(k) money is invested in private equities and bonds while Social Security "premiums," if I can call them that for now, are held by the federal government in trust and invested so as to allow them to grow at a rate that at least keeps pace with inflation, that is, in U.S. Treasury bonds and notes. Thus, despite the fact that the payroll tax is collected by the IRS, it is not tax revenue. In fact, the integrity of the fund along with its sequestration from the federal government's general fund is required by statute, and I would refer you to the Social Security web site where you can review the operative law: Subsections 401-433 of Section II of Chapter 7 in Title 42 of the U.S. Code. It is lengthy and somewhat technical, but you can see it for yourself...no need to take my word for it. The laws have been amended over the decades, but the principles on which Social Security is based remain unaltered: Social Security and its funding are independent of income taxation and the general fund so that there will always be a safety net to keep working people from penury. The money in the Social Security Trust Funds belongs to us, not to the federal government and its sole purpose is to make us secure, hence the name. You would think that Republicans, who constantly bellow the dubious claim that the money paid out of income into the general fund as income taxes dedicated to running our country should be returned to us because it is ours, would understand that money for our retirement paid out of our wages and dedicated to that purpose alone is even more definitely ours, but it seems that when it comes to Social Security, all Republican philosophical bets are off.

As I said in my last letter, if a bank president told all his depositors that their money was gone because the bank had lent it out in bad mortgages and they had all gone into default, the federal government would step in to cover all those deposits, at least up to the amount of the FDIC ceiling for such claims, and in the bargain, that bank president and some of his fellow executives might wind up in jail. But in the case of the Social Security Trust Fund, the money was lent by the fund to the federal government, so there is no one to step in to cover the losses that have occurred by virtue of excessive government spending over the course of more than three decades, and that's my point. The bank president would come to us and plead for our understanding, but the Republicans arrogantly propose to ignore their debt to us by reducing our benefits. They should be asking us to help them rather than telling us that our money is gone and to forget about it, which is the essence of what they are doing. They should stop trying to brow beat us into forgoing what we have a right and title to-- what we have paid and continue to pay for-- and instead show a little contrition. Democrats and Republicans in congress and the administration alike should stop telling us what they are going to do with our money and admit that they drove the nation into penury in order to get elected and that they cannot now afford to pay back their debt to the Social Security Trust Fund. They should come to us with humility...with their collective hat in their hands and ask us for forbearance in collecting for the Fund what is due us rather than trying to call their debt to us by another name: deficit spending. It is no such thing, and it is not austerity for them to renege on their obligations borne of the loans they took from us and cannot now repay. It is deceit, and if a bank did it, it would be criminal. In fact bankers recently did, and it was.

What I think should happen now is that we should knock the Republicans in particular-- for the most part the Democrats admit that Social Security neither created the national debt nor contributes to the deficit-- off their high horse by sending them home again at the first opportunity. We should elect instead representatives and senators who understand that the government is not properly coming to us making demands on our Social Security rights, but should rather be importuning us for patience and understanding. And as supplicants, they should be asking us for forbearance in collecting the debt they owe us rather than scolding us for the problem they created. They should honor our demand that they collect what is due from those who benefited most from all of that deficit spending in the form of national security, government largess toward business and the owners of capital. They should go to the financiers who have all but hijacked the American capitalist system all these years, especially in the past two with loans and derivative schemes that required forgiveness and government provision for the bad investments they made and the obligations they cynically undertook though they knew they could never meet them. It should not be enough that the Republicans cease to dun us as if we owe them. They asked for another term in which to serve us, but they have shown us the same old meretricious loyalties-- they continue to attempt to interdict the enactment of the provisions of the Dodd-Frank Act in the interest of their wealthy patrons-- and disregard for our wellbeing that made us cast them out before. It's time to do it again, and this time for a good, long while.

Your friend,

Mike

Dear America,

As Ulysses S. Grant embarked upon his quest for a third presidential term, Thomas Nast, perhaps the most famous political cartoonist ever, drew a cartoon called "The Third Term Panic" about the Democrats, characterized as a donkey since the era of Andrew Jackson, scaring the Republicans, whom he characterized as a timorous elephant fleeing its much smaller, lion-skin-bedecked foe out of fear. But it has now been more than a century since that cartoon assigned the elephant avatar to the Republicans, and it is time for a change. They are no longer the timid victims of scare tactics and demagoguery. They are now the experts in their use, and I feel that the symbol of their movement should better reflect what they have become. And since the means by which they ply their stock-in-trade is the advocacy of myths, I propose a change of mascots from the elephant to the unicorn. After all, the unicorn is the symbol of fantasy...of suspension of belief in the pursuit of flights of fancy like wealth trickling down and tax cuts generating increased revenue rather than decreases in it, and those are just a couple of the fantasies that the Republican Party stands for and promotes. For example, as of April 21, 2011 nearly half of Republicans still believed that President Barrack Obama was not born in the United States even though he and every responsible official from Hawaii-- which was a state both then and now for all those Republican doubters-- had confirmed that The President was born there. Now, Hawaiian authorities have made an exception to their state law at The President's request and provided a copy of the original Certificate of Live Birth on file in official records there, which has been circulated everywhere in the media. But even with such cold, hard evidence to the contrary, it remains to be seen whether Republican credulity for the "birther" myth will abate. And that is just one demonstration of the fact that Republicans, once they conceive a fantasy that serves to allow them to believe in magical economics and such, will stick by it even when it has been discredited as such. I said "just one demonstration" because there are a few more.

For example, about a week ago, John Boehner, the Republican Speaker of the House of Representatives stated on the record that, given the huge profits being generated by the inflated prices of oil and gasoline now being suffered by the American consumer, the oil companies should not continue to benefit from the enormous tax breaks they have enjoyed for as much as a hundred years, estimated to amount to $4 billion per year now...and we could use that money in these austere times. But then, some Republican-- maybe Mitch McConnell, the chief Republican true believer-- seems to have taken him aside and pointed out that he actually believes that increased taxes on oil companies will result in lower production and higher prices, and that obscenely inflated petroleum prices are a function of demand, not speculation, price gouging or profit taking. They reminded him of the Republican myth in which he actually believes: oil prices are a function of increased consumption-- apparently a 32% increase in four months as that is how much the price of a barrel of oil has gone up since January 1, 2011. And good Republican that he is, Boehner remembered that he believed in the myth and changed his position: he is now against taking those tax breaks away. And of course there is still the Social Security myth.

The Republicans have become somewhat reticent about their claim that Social Security cuts are necessary to address the federal deficit and debt, but it is still clear that they have convinced themselves that such is the case. They have convinced themselves that the Social Security Trust Fund doesn't actually have a credit balance of about $2.5 trillion because they and the Democrats from time to time have borrowed it and spent it. Since the actual cash is not there, they feel free to ignore it and contend that Social Security is a drain on the federal treasury and benefits add to the national debt. They prefer that myth to the more apt analogy to our banks effectively telling their depositors that their money is gone because it has all been lent out for below prime mortgages, and you can understand why. While the federal government under a Republican president helped to cover up the bankers' myth by paying their debts for them, there isn't anyone to pay the federal government's debts, so the myth must prevail...either that or the Republicans are going to have to propose a way to pay the federal government's debts to us, the owners of the Social Security Trust Fund, perhaps in the form of tax increases, and they have no intention of doing that. They never liked Social Security anyway, so if they can find an excuse to reduce it out of existence, they'll do it.

And there is the myth that if you turn Medicare into a voucher program you improve it, which requires that you don't mention the $6,000 per year it will cost each recipient on average, but that is the stuff of which myths are made: omission of the truth and suspension of belief in reality. Hence, the unicorn, which is a mythical animal, believed in mostly by preschool children and preadolescents. It is simple and reassuring, and that is how the Republicans work. Don't worry about the actual cost of health care, they whisper into our innocent ears, the insurance companies to whom we will give the vouchers will bring those costs down in their own best interest. That's how the free market works, they say. Ignore the insurance companies and medical establishment behind the curtain, who haven't managed to do that so far. Just believe in the free market unicorn, and everything will be alright. I would have suggested a wizard as their mascot, but that would have been too obvious.

Your friend,

Mike