Saturday, December 25, 2004

Wake Up America, Part Two - The Second Term

This is the second part of of a three part series entitled "Wake Up America", subtitled "The Second Term". The first part of the series, subtitled "Worse than Incompetent", can be found here. After reviewing the dismal record of the Bush Administration during their first term, it is hard to imagine that anything worse could come from the second. Unfortunately, this is a naive view. With no worries about re-election, along with a republican house and senate, the Bush administration will have free reign over the next four years. This is a very frightening situation. In this part of the series, I will examine some of the issues that the Bush administration has claimed they will address over their next term. The checks and balances of the democratic process have failed us - if you do not already agree with that statement, you will by the end of this series. In any sane reality, George W. Bush would never have been re-elected. Our only hope now is to fight the administration every step of the way over the next for years.

On November 4th, days after he was unofficially re-elected, President Bush held a press conference, where used the following phrase: "I earned capital in the campaign, political capital, and now I intend to spend it". I don't know about you, but that phrase sent a chill down my spine. For starters, over 57 million people voted against you. That number of votes is larger than previous elected official has ever received. We have witnessed unprecedented worldwide protests demonstrating against the president's actions. The worldwide opinion of the United States is at an all time low thanks to you, Mr. President. And now you tell us that you have political capitol that you intend to spend. During the same press conference, the president, calling for unity, stated that he would "reach out to everyone who shares our goals". Doesn't really sound like he is going to do much reaching.

On to the issues...First and foremost on everyone's minds these days is the issue of Social Security. During a recent press conference, the president pretty much outlined verbatim the official party gameplan and talking points:

"The first issue is to explain to Congress and the American people the size of the problem," Bush said at the White House meeting. "We will send a message not only to the American people that we're here for the right reason, but we'll send a message to the financial markets that we recognize we have an issue with both short-term deficits and the long-term deficits of unfunded liabilities to the entitlement programs."

Over and over again, you will hear the Bush administration tiresomely repeat this mantra: Social Security is in a crisis. The problem with this statement is that Social Security does not have a problem. Current estimates show that Social Security will no longer be able to be fully funded sometime around 2042-2052, depending on economic conditions. Sound like a crisis to you? Not really...with a few minor tweaks and corrections over the next few years, this crisis can easily be fully avoided.

So, why does this Bush administration want to convince congress and the general public that there is an issue with Social Security? Simply because they have a vested interest. Privatizing Social Security is the worst idea I have heard in years. I'll respond here with the liberal talking point: Social Security is an insurance policy for the general public.

Given that Social Security is an insurance policy, why would we want to risk gambling the guaranteed returns of social security on the stock market? What happens to somebody who retires during a stock market recession or depression. Suddenly, their lifelong investment is reduced to rubbish as the stock market crumbles. Does that sound like a good idea?

Did you know that, currently, only 1% of social security costs go to administration. Do you think that will continue to be the case after fund managers and money managers get their grubby hands on the 1.4 trillion dollars currently held in the Social Security Fund. This is why the Bush Administration is pushing for this. Their idea is that investing this money throughout the US economy will help spur productivity and economic growth for years to come. This is a shallow and short-sighted idea. First of all, we are putting the 65% of elderly people currently relying on Social Security for at least half their income at risk to losing their guaranteed source of income.

Secondly, privatizing social security will dramatically increase the load of administrative costs on the fund. Based on past experiences of privatizing Social Security in Chile and England, administrative costs will skyrockets to 20 to 30 times the current 1% of all current funds. This money will go directly into the pockets of the fund managers and money managers appointed to oversee the social security trust fund.

How about the actual investment process? The average American pays in about $1,800 a year into social security. Do you really think the government will allow you to pick whatever stocks you want in your investment fund. Of course not. It isn't worth the fund managers time of day to spend enormous amounts of time fiddling with individual investment accounts of less than $2,000 a year. What will most likely happen is that the government will allow you to select your investment from a few different mutual fund choices. So, who is going to decide which stocks go into these mutual funds? Most likely, a government-appointed fund manager. With a Republican President, House and Senate, can you guess which companies are going to end up getting funded by this enormous 1.4 Trillion windfall. I don't know about you, but I'm guessing we'll see Halliburton (HAL) and Diebold Inc (DBD) somewhere on the list.

The second major issue that Bush has mentioned he would like to address during his second term in office is tax reform. There are two variations on this issue that the Bush administration has pushed: A Flat Tax, and an expenditure Based Tax. Both of these reforms are very bad ideas. The Bush Administration has been trying to sell the idea of tax reform based on the idea of simplifying the tax code. This does sound like a reasonable idea, since the tax code is fairly complex. Unfortunately, neither of these proposals does anything to address the idea of tax code complexity. As Al Franken has recently put it: "You can fix all of the different tax rates on the back of an index card." The reason the tax code is complex has nothing to do with the different tax rates, and everything to do with the vast myriad of tax breaks, deductions and loopholes. If they want to simplify the tax code, they should discuss the idea of eliminating the vast majority of deductions and loopholes. This idea hasn't even been mentioned.

Let's start by looking at a flat tax. The Bush Tax cuts have already unfairly shifted the tax burden onto the poor, and away from the rich. Currently, we have what you could describe as a progressive tax system, where the rich pay a greater proportion of their income to taxes than the poor.

The Republicans argue that this unfairly punishes the rich for having too much money. This difference highlights the core fundamental difference in philosophy between a liberal and a republican. The Republican argues that the rich have worked hard for their money, and unfairly taxing their earnings reduces the incentive to work hard and get rich. The argue that if left untaxed, a rich man will re-invest his earnings into the market, which will spur the economy to continue growing.

The liberal argue the rich man has stood on the shoulders of those before him, who in turn stood on the shoulders of those before him. There are occasionally those that rise from the most direst of circumstances to make a successful living. The ol' rags to riches story. The foundation of the American Dream. Unfortunately, the modern American Dream is primarily a work of fiction. The American rich and elite now primarily have inherited their wealth, rather than working hard. For the average middle or lower class citizen, the reality of the life is living paycheck to paycheck, scraping by with just enough income to pay for the rent or mortgage, the car payment, to put food on the table, and possibly put their child into the local soccer league in the summer. The idea of making the jump from lower-to-middle or middle-to-upper class is known as upward mobility, but, unfortunately, their is precious little upward mobility that takes place in reality.

The real issue is that their is an ever increasing wage gap between the haves and the have nots. If we are not careful, we may suddenly find ourselves in a two-class society. We are already dangerously close to that stage. As Chomksy has stated, the middle class in America is primarily a manufactured entity. If we remove the progressive tax system, we are one step closer to eliminating the middle class American citizen from existence. We simply cannot allow America to switch to a flat tax system. Their is simply no benefit to doing so. This change will not simplify the tax code in any meaningful way. It may take you a minute or two less to complete your income tax form each year, but is it really worth the risk of become a two class society?

The idea of a expenditure based income tax is also foolhardy. As a rule, the poor expend almost all of their income on each paycheck. Meanwhile, the rich spend very little of their income, while investing the majority. An expenditure based income tax will again increase the burden of taxes on the poor, while at the same time, increasing the incentive for the rich to invest their income, rather than spending it. The only possible side benefit of this change is that it will force our country to become slightly more environmentally friendly, as expenditure based taxes will increase the incentive to reuse items, rather than purchasing disposable products.

Finally, I would like to address the issue of drilling for oil in the Alaskan Wildlife Refuge. The more I consider the actions and points issued by the Bush Administration, the more I find myself describing the administration as short-sighted. The Bush Administration contends that drilling for oil in Alaska will help eliminate our "dependence on foreign oil". At heart, the primary issue is not dependence on foreign oil, but, simply, dependence on oil or any other non-renewable energy source. This is really the greatest issue facing our nation and world -- we have developed a gigantic economic system based on finite energy resources that will eventually run out.

The Bush Administration contends that it is simply too expensive to switch to renewable resources, such as wind, solar, and ethanol. They would most likely argue that economic forces will naturally take care of this transition. As the cost of oil, gas, and coal goes up, economic forces will eventually force our nation to begin using renewable resources such as wind, coal, and ethanol at a greater rate.

Unfortunately, this is a fundamentally flawed argument. The economic model is not a true representation of reality, based on the assumption of unlimited natural resources. It is simply a means to an ends. The free market economic model does not properly take into account the finite world oil reserves, and the environmental impact of carbon-based emissions, global warming, ozone layer degradation, environmental devastation, rainforest clearcutting, etc. The government has attempted to simulate this affect by issuing large corporate fines for ignoring environmental regulations, but the affect has been minimal. It is easier for a corporation to just pay these fines, and continue ignoring environmental concerns, than it is to switch the entire production model to an environmentally friendly production model.

How incredibly short sited can the Bush Administration really be? So, what happens in another 15-20 years when the oil in Alaska begins to dry up? The fact is that their is no new energy production technology just around the corner that will save us from this impending crisis. The government likes to pretend that they are working on alternative energy resources, such as the hydrogen fuel cell. The hydrogen fuel cell is not an energy resource, but rather an energy conversion process that converts hydrogen into electricity. This is good news because it will finally realize the dream of 0-emission cars, but it will definitely not solve our impending energy crisis. In effect, this will push the burden of energy production from oil and gas, to another energy source, but even that is unclear. You cannot store hydrogen in a car, because it is highly reactive, and would explode in an accident.

The issue at heart is that the Bush Administration would rather drill the oil out of Alaska and keep oil prices low, which, in theory at least, keeps the economy in motion. In effect, Bush is simply pushing the energy crisis issue onto our children by refusing to deal with it now. It may be that one day, we will need to drill in Alaska, but I feel that this should be a last resort.

I believe that it has been said that it would require an area roughly the size of the state of Arizona to be covered completely in solar panels in order to meet the total current energy requirements of the United States, but I could not find a source. As the economic cost of solar power is rather expensive, this at first seems like a poor solution. I found one source at GAIAM that states that an area roughly 12% of the total size of Nevada covered in photovoltaic cells could reproduce our entire electric production capacity. That sound like a more reasonable goal.

When you consider the alternative, which is pushing the problem onto our children, and waiting for a pending global energy crisis, you begin to realize that it really isn't a bad idea to begin switching to renewable energies at a faster rate, despite the economic cost. Remember that the free market economy is not a true reflection of reality -- it is simply an approximation designed to encourage production and consumption. In actually, a reduction of production and consumption is really the goal we want to focus on when we begin to deal with the pending energy crisis.

When you look at modern society compared to society 200 years ago, there is a remarkable illusion of progress. We have made almost inconceivable strides in every imaginable way, thanks in large part to the industrial revolution. When you factor in the idea that in a short span of 200 years, we will soon have almost depleted the world of non-renewable carbon-based resources, while inflicting massive scales of environmental damage to our planet, the illusion of progress becomes a little less clearly defined. Sure, our lives have benefited in almost every imaginable way, but consider the fact that this progress is not sustainable, at least in the current form.

I think that this is the fundamental flaw with modern American politics. We are ill-equipped to make the difficult decisions. The election is essentially a popularity contest. There is no way a president that runs on environmental reform messages can possibly win in the current political climate. Imagine John Kerry stating the following messages:
  • We are consuming too many resources. If I am elected president, I will force everybody to sell their SUVs and large trucks. You will be able to rent an SUV or truck on a need to use basis, but will no longer be able to drive such a vehicle on a day-to-day basis
  • All US automobile manufacturers must completely stop the production and sale of all vehicles that are not hybrid or electric-driven by the year 2008. The import of non-hybrid/electric cars will also be forbidden. All US Consumers must rid themselves of any remaining non-hybrid/electric cars by the year 2014.
  • I will encourage the use of mass-transportation at all times. Starting in 2007, Gasoline will now include a $4/gallon consumption tax to encourage the migration to mass transit. We will also introduce a $800 billion that will aid in the construction of better mass transit systems nationwide. A unified mass transit system of electric buses, trains and subways will allow you to travel from any point in the United States to any other point in the United States in a quick and economically reliable fashion.
  • In an effort to reduce energy consumption, we will add an energy consumption surcharge tax of 10 cents per kilowatt hour.
  • We will introduce a new Clean Energy Infrastructure act into congress which will earmark $2 trillion into a fund for developing a massive solar and wind energy infrastructure

These may seem like ridiculous propositions. Of course, the average voter would laugh this guy right out of the country. Do you see the Green Party getting any press? Of course not, because the message that we need to change the way we live is extremely unpopular. I would vote for this guy in a heartbeat -- if I thought he had any chance of getting elected. I wonder how many other people would have voted for Cobb or Nader if they new there was any point to the action. Probably not very many, given the extremely limited press coverage of third party candidates.

The real problem facing our nation is not a social security crisis. In truth, that is the least of our concerns. The real issues facing our nation include an impending energy crisis, the possibility of global warming crisis, the increasing threat of the disappearance of the middle class in the United States, and the impending threats of globalization, including outshoring/outsourcing and third world exploitation. In short, the real issues facing our nation are the exact opposite of everything the Bush Administration stands for.