Perhaps you’ve heard people complain of the government being too big. It isn’t just that they think smaller government works better. Most express a hatred for the government – their government.

They are fortunate not to get their wishes granted. Here is the word of the day for them.

dystopia (noun)

1. A vision of a future that is a corrupted (usually beyond recognition) utopian society.
2. State in which the condition of life is extremely bad as from deprivation or oppression or terror.

Dystopian is one of those words you rarely see after graduation. It’s easy to remember the meaning. It’s simply the opposite of utopia.

Let’s imagine a society that meets with the approval of libertarians and other middle school idealists. They really enjoy the fantasy of the Mad Max movies. They might be less enthusiastic about the reality of Somalia. Can you imagine grownups with Mel Gibson as their hero?

Their laments become tiresome very quickly. Why do I think of one of my spoiled grandchildren intent on crying until they get their way?

Don’t try to visit that Somalian paradise by sea. Remember, that’s where all of the pirate activity is. Your arrival may be delayed. Personally, I would experience some trepidation about their ability to provide safe aircraft. Of course we would be better off with less government, just as Somalia.

Back home the power of these backward people looking people has given us some of the pleasures of small government. That philosophy kept the FDA from actually regulating those egg producers in Iowa. Would you like them over easy, scrambled or poached, with or without salmonella? That’s what we need, smaller government.

We would be oh so fortunate if eggs were the only food whose safety was questionable. What was the last scare? Hamburgers? How about a tomato on that burger? Does smaller government save you money so you can buy more hamburgers?

Growing up there was a local grocery chain owned by the same guy that owned the largest local newspaper. He was a rabid government hater. He was going to do what he wanted to do. His stores put formaldehyde in the hamburger meat. Why? It kept it red longer.

Formaldehyde is not usually thought of as a food coloring. It caused what was called hardening of the arteries. Sometimes it caused death. That pesky government told him to stop. He didn’t. They fined him, again and again.

Frank had enough. If memory serves (this was in the 1950s) he didn’t sell the business. He just closed it down. Boy does that burger taste better with small government.

The Chinese put melamine in our pet food. They put it in their baby formula. Don’t feel safe too quickly. That company’s NASDAQ-listed stock went down so much there was talk of it being acquired by Nestle or H.J. Heinz, as a cheaper supplier of their baby formula. Trust Nestle’s and Heinz’s judgment. They both prefer small government.

Okay, so you don’t eat. Are you one of those people who travels? That terrible government built the roads, the bridges, the tunnels, the airports, etc. Without the government interference you probably wouldn’t need a car. We would starve local governments by eliminating their revenue from parking meters.

And we wouldn’t want the government to help with the severe shortage of horses that would be necessary to replace cars. At least we wouldn’t have to listen to those people criticizing the government for not solving the Gulf oil spill. With small government we needn’t worry about $4 per gallon for gasoline.

Isn’t it awful that your kids are required to have shots? Whatever happened to those cute iron lungs? Just one more thing that big government helped take away from us.

Who would show up if you could call 911? The kid with the rocket? If the government was small enough, we wouldn’t have phones, or 911.

Prior to the implementation of “healthcare reform” the government pays for 45% of all healthcare in the US. That doesn’t even count the tax subsidies corporations get for providing health insurance. There would have to be lots and lots of doctors and nurses applying to cook fries at McDonald’s if the government got out. What would we do with all of those big empty hospitals? They would probably seem like good shelters to the homeless. Another problem solved by small government.

You love your kids. Do you love them enough to spend all day every day with them? You could teach them your version of history. You could teach them your version of English and economics and physics and calculus. The government is too big when it babysits your kids part of the time.

Because of the influence of these people and the money from the corporate world we already enjoy some of the benefits of small government. I know the miners in West Virginia appreciate that the government has insufficient staff and authority to bother their bosses.

We can’t help but applaud that less than half of our combatants in Afghanistan are a part of the government. The others have freedom to ignore our silly laws and treaties and chain of command.

Have you done the math? Letting everyone have a gun would save lots of money that we presently waste on judges, courts, lawyers, police, jails and prisons. Do it yourself can also relieve your stress.

Smaller government? I’m convinved.

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©2010 The Couth Hillbilly. All Rights Reserved.

Simon Johnson last week wrote a piece for the New York Times. His contention is that the fiscal conservatives, Republicans, Blue Dog Democrats and others, cannot, in his words, be taken seriously.

I share that sentiment. I also share his fear that they will define the debate.

Fiscal Austerity and America’s Future

By Simon Johnson

There are three main views of the financial crisis and the most recent recession. In the first two views, the debate over the fiscal deficit is quite separate from what happened in the crisis.  But in the third view, the financial crisis and likelihood of fiscal austerity are closely linked.

The first is that something went wrong with the financial plumbing central to the world’s economy. Failed plumbing is a serious business, of course — great real estate can be ruined by a burst pipe. But it’s a technical issue; nothing deeper is at stake.

The Dodd-Frank financial reform legislation ended up addressing a myriad of technical issues. Clearly, “fix the plumbing” is Treasury Secretary Timothy Geithner’s interpretation of what we need to do – he insists that making the system safer just requires “capital, capital, capital.” Note, however, that the leading global experts on capital think that the Treasury’s specific approach is wrong-headed, not making progress and likely to lead us into great danger.

The second view is that the financial system is more deeply broken.

Opinions vary in terms of the relative importance of various elements, including too-big-to-fail incentive problems that encourage banks to take on excessive risks — and to be supported by the credit markets when they do take on these excessive risks.

Both focus primarily on the nature of the financial system, somewhat in isolation from the rest of the economy.  But a third view is increasingly emerging that implies both the first two views are too narrow.

The first and second views are mutually exclusive – either our financial system is badly broken, or it is not and technical fixes will suffice. But a third view increasingly challenges the first view even more deeply, and may end up incorporating or subsuming the second view.

This deeper critique is posed probably in its sharpest form by Arianna Huffington in her new book, Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream (in the spirit of disclosure, let me note that I am a contributing business editor at The Huffington Post). Her point is that we should not think of the last financial crisis in isolation, but rather as the outcome of a longer-run pattern of behavior.

Excessive consumer debt is an outcome of prolonged inequality – in trying to remain middle class, too many people borrowed too much, while unscrupulous lenders were only too willing to take advantage of such people.

Raghu Rajan, the former chief economist at the International Monetary Fund, and Robert Reich, the former Labor Secretary, also have new books with related themes that link persistent inequality of income to the onset of financial crisis through various mechanisms. Mr. Rajan’s Fault Lines: How Hidden Fractures Still Threaten the World Economy is more about the global economy (and overspending at the level of the American economy); Mr. Reich’s Aftershock: The Next Economy and America’s Future focuses on the social and political impact of the crisis (and why, without addressing inequality, our financial problems will recur).

The distribution of income in the United States is undoubtedly becoming more unequal. Specifically, over recent decades, it has become harder for people with only a high-school education to build a secure middle-class future for their families.

We can argue about proximate causes, including the relative roles of new technology and globalization, but there is no question that unionized jobs, well-paying assembly-line work and prosperous small-business niches have all tended to disappear.

The financial crisis may be behind us, but the link to the likely intense debate this fall regarding fiscal policy is direct. We are told that fiscal austerity requires outright and immediate further cuts in the benefits previously promised to people at the federal, state and local level.

Never mind that this is simply not true — at least in the form currently presented. A vocal class of people — including some at the upper end of the income distribution – incessantly insist that entitlements must be cut while refusing to address the real causes of both our recent surge in government debt (the financial crisis, caused by perverse incentives in the financial system) and the genuine longer-term issues we face (which are about controlling the future increase in health care costs, not cutting the level of benefits today).

Editor’s Note: Here is one example. Does it seem a bit convenient that all “conservative” solutions boil down to two strategies? One is to cut taxes, heavily tilted toward the wealthy. The other is to cut benefits, tilted exclusively toward the poor and middle class.

The poor and middle class pay a higher percentage of their incomes for Social Security and they pay an overwhelming percentage of the total amount. Somehow, something that the poor and middle class pays for gets translated into welfare. It becomes a target for cutting of benefits.

Scaremongers speak of Social Security as though it is in imminent danger of total collapse. The facts are otherwise. It will continue to generate a surplus until 2027. That surplus will pay full benefits until about 2070. The only adjustment needed to extend that indefinitely is to eliminate the break that the wealthy presently enjoy by not paying the full FICA tax.

The self-described fiscal conservatives really cannot be taken seriously. In the financial reform debate, they either didn’t show up or preferred to keep the existing system in place, and they refuse to put serious health cost control measures on the table.

If the “conservatives” don’t really want to reduce the shocks that have caused government debt to explode recently — or to deal with the underlying, longstanding health care cost issues in a reasonable fashion — what exactly is going on?

That’s a question they should answer for themselves, and hopefully they will be pressed on this in public debates during the campaign for November’s elections. But there is a striking similarity between the longstanding stated intention to “starve the beast” (meaning to press for reduction in government by creating binding constraints, like a perceived crisis) and what we are seeing play out today.

And there is very real danger that this strategy will work, in the sense that the contours of a coming “fiscal crisis” — what will be discussed and how the issues are framed — will largely be structured by scaremongers who wish to cut pensions and health care benefits for middle Americans in the years ahead and who will work hard to keep meaningful tax reform off the table.

People who push for this view are not being fiscally responsible, and they are well down the road to exacerbating developing world-type problems in the United States – and to creating the conditions for another financial crisis.

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of 13 Bankers.

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©2010 The Couth Hillbilly. All Rights Reserved.

Alright. I oversold it a little. You won’t know it all but you will be way ahead of the game.

Seventy percent of the American populace doesn’t read even one book a year. Ya think that might explain Little George getting elected twice, Sarah Palin, Big Orange Boehner, et al?

Unless you count the Great Depression, WWII, the atom bomb, the fall of the Soviet Union and Paula’s departure from American Idol, you are living in the midst of the most important international event in your lifetime. That might warrant finding out who and what caused it. It really is interesting to learn how it happened.

Do you want it to happen again? Although Harry Truman and Winston Churchill usually get credited, we have George Santayana to thank for reminding us that, “Those who cannot learn from history are doomed to repeat it.”

I wish to bring to your attention some suggested works to provide what I feel is a necessary background for appreciating just how deep the do-do is that we are slogging through. A short comment or two accompanies each selection. They are not presented in any order of preference.

None of these books provide the entire picture. I do not find myself in full agreement with any of these books but that does not lessen their value. If they do fail to agree with something I’ve told you, you know who loves ya, baby.

The Big Short

Michael Lewis isn’t new to this subject. Twenty years ago he wrote the best-selling Liar’s Poker. The subtitle, Inside the Doomsday Machine, might give you a hint that the story is told from the points of view of the vultures. Fair warning: you may not feel real good about yourself if you find yourself identifying  with these criminals. Many reviewers are using the descriptive unputdownable.

Freefall

Does Stiglitz know what he’s talking about? He should. As the former chief economist for the World Bank, he understands the big picture. His subtitle reflects that: Free Markets and the Sinking of the Global Economy.

No one would accuse him of favoring a system other than capitalism but he has long recognized the dangers of a lack of meaningful regulation. He attacks the financial industry, the politicians and the regulators mercilessly. He shows that the problem has not been fixed. The selfsame bankers are still in charge.

Crisis Economics

Nouriel Roubini is often called Dr. Doom. Such a terrible sobriquet. He earned it in large part for his prediction of this current meltdown. He predicted the international aspects of it as well.

Here, he gives you an historical perspective, the causes of the present mess, the extreme remedies required and the dangers of not doing what needs to be done.

Via his subtitle, he calls it A Crash Course in the Future of Finance. Given his record, it would be unwise to ignore him.

13 Bankers

Is it possible to combine impressive credentials with readability? Let’s see. Simon Johnson is a professor at MIT’s Sloan School of Management and former chief economist at the International Monetary Fund.

Why did I miss out on intelligent economics professors when I was doing my graduate studies in international economics. I wondered why there were none.

The author subtitles it, The Wall Street Takeover and the Next Financial Meltdown. Think about that subtitle. It suggests there will be another meltdown. Publishers Weekly uses the term blistering to describe this it.

It pulls no punches while being nuanced. I wish I could do that.

For those of you willing to put in the effort to take different tacks, I offer two more.

A Week in December

Is truth stranger than fiction? Perhaps. Perhaps not. Fiction can be used to bring a power that nonfiction usually strains to provide.

From across The Pond, Sebastian Faulks weaves a couple of plotlines to keep your attention. Both are very current: financial misdeeds and terrorism. Each illuminates itself and the other.

The Way We Live Now (Oxford World’s Classics)

To provide a better grasp of what brought on this crisis we need to explore morality and values. Actually, there is no need to reinvent the wheel. Anthony Trollope did it for us in his 1875 classic.

This is a book we all should have read long ago. Guilty. I missed it back when (no, not when it was first published). It is very high on my to do list.

There is a prize for those reading all six works. That would be an understanding of economics greater than eighty percent of economists (I’m being generous), ninety-nine percent of the public and all but a couple of Obama’s economic team (those he ignores).

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©2010 The Couth Hillbilly. All Rights Reserved.

Every time I try to get to other issues inherent in The American Dream the financial aspects keep intruding.

Even though I was on the road on a genealogical trip, the talk of a double dip has been unavoidable these few days past. I feel compelled to respond.

Once again, most of the commentary you’ve been hearing makes as much sense as gibberish. Need I say why?

Is this in any way related to The American Dream? You can bet your bottom and your dollar.

Let’s just quickly remind ourselves that our all-time favorite double-dip was in 1937. After using a watered-down form of Keynesian Economics to almost pull us out of the recession, FDR was convinced by the scaredy-cats to balance the budget. Just look at the graph.

Here it is in a capsule: In bad times the economy suffers from a lack of cash flow. You can’t supply it. The banks (presently sitting on $2 trillion) refuse to supply it and business either can’t get a loan or is afraid to supply it until the economy recovers (hurray for the capitalist risk-takers).

That means government goes into debt during the bad times. The Republicans’ and Blue Dog Democrats’ economic ignorance insists on a balanced budget, as they did in 1937. No one who believes what they profess to believe belongs in a responsible position in government or the private sector. Take one daily, or as needed.

Anyway, this time, that is only a part of the problem. Japanese refer to the 1990s as the “Lost Decade.” They went into a recession that lasted for about 10 years. We seem destined to do the same, but only in a small part for the same reasons.

I just couldn’t resist the juxtaposition of the expected economic results of a major party responsible for it with his identifying initial.

The fact that a graph of the actual results of his incompetence won’t really match his initial doesn’t detract from the humor. We can’t afford to let any chance to smile pass us by, even if it comes from a sort of gallows humor. Well, back to predicting the future.

While there continues to be the very real danger from the Neanderthals, what should be seen as our major problem is The American Dream. What is everyone saying is our primary priority? Jobs.

This week’s stumble in the stock market is based on the latest housing report. Last month saw the biggest decline in housing since we moved out of caves. It isn’t just the number of people working in the housing sector, as noted in a previous part, it holds the biggest part of our financial system hostage.

Until the housing market rebounds, or slowly crawls back up on its walker, the economy can’t recover; at least recover the way we prefer.

Obama made a major mistake. He compromised on the stimulus and cooperated with his predecessor on crafting the bailout. He should have held out for a rational stimulus program. The $250 rebate was not stimulative. Every compromise he made to get votes for the bill weakened its ability to stimulate.

If he had stood his ground and let the professional simpletons block the stimulus we would have seen, have experienced the results of the block-heads. It would have been a great object lesson. He would not be bothered any longer by the little pests snipping at his heels. He could have actually increased his majorities in the House and Senate.

But, you say, it would have caused great pain to the general population. True. The fact is that we have luxuriated in the debt economy for 30 years. We have to pay the bill. It is way past due. Pain will accompany the necessary corrections. The pain can come quickly or slowly. It can come now or later. Whatever, whenever, it must come. The devil wants his due.

I was just trying to express the point that by letting the people whose bizarro economic nonsense got us into this mess try to get us out, the point would be made so clearly only the 18% that doesn’t hate Congress would fail to be disabused of these irrational, perverted verities. It would be painful but help us avoid so much more pain in the future.

The odds are that you know someone who wants or needs to sell their house but can’t in the present market. You may know or know of someone who has lost their job. There have been millions of foreclosures. There are millions more in the pipeline. Each one was The American Dream. Each one represents a dream lost, a dream replaced by a nightmare.

The dream is so deeply ingrained in us that it is entangled with our psyche. It is tied to our perception of our own worth. We lose the dream, we see ourselves as a failure.

Others see us as a failure; even our loved ones. Moving into a rental or an apartment that better suits our needs cannot assuage the hurt, the loss.

But, let’s return to those millions and millions of houses flooding the market. There aren’t enough buyers. Qualified buyers with access to mortgages are even rarer.

This being the case, how do prices rise to boost our economy? They don’t; at least not for a long time. Remember Japan. The government can allay some of the worse aspects of this mess. The government can eventually get us back to what can be described as a recovery but not today, not tomorrow, not in time for the next election.

The American Dream had, indeed still has, its appeal but that appeal comes at a steep price. Our mistake was in only looking at one side of the coin, the shiny side. The housing market has become not the engine that drives our economy, rather the drag.

As a supertanker may take miles to make a U-turn, size similarly bars any degree of agility to the housing market. Our economy is not sufficiently diversified. There are no other sectors that can readily compensate.

We used to have a large manufacturing base. We starved it, then shipped it overseas. I often wonder why those who saw industry moved from the rust belt to the bible belt never realized just how movable our jobs were.

As an aside, the latest surveys show that American-made cars are in the lead for quality. That may be temporary or not. The lesson to be learned is that no one stole manufacturing from us. We gave it away.

Actually, that particular we should be defined as all of the greedy, self-congratulating, overly well-remunerated idiots in charge of our corporations and their toadies inside the Beltway. Manufacturing, on a base as broad as this country, was so diversified as to avoid the concentration of the financial engine that we have with housing.

How we accomplish the blood-letting necessary in our real estate market to rid ourselves of that burden I don’t know, beyond patience. At some point we will need to refocus the economy to metropolitan centers and rural towns.

We will need to develop more urban transit. We will need to address other needs of infrastructure. We will need to change the face of America. We will need to change The American Dream.

Forget all of the talk about a double dip. That may happen. It may not. Either way the recovery will be long. Think in terms of a decade, not in quarters.

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©2010 The Couth Hillbilly. All Rights Reserved.

I had been thinking in terms of a home in the suburbs being the American Dream. At the YMCA this morning, a friend said the automobile should be added, or included, as a part of that dream.

It’s difficult to imagine living in the ‘burbs without a horseless carriage. They represent a major part of the problem.

Don’t forget that, despite what logic, observation and projections tell me, my comfort level out here in Dreamland is relatively high. That is, I am certain, a feeling understood and shared by most Americans.

Part 1 covered some, not all, of the of the most obvious financial considerations of our overemphasis on the detached, suburban house as the focus of our savings. The damage done is, of course, not limited to the financial.

How about your health? Could the American Dream be partially responsible for us having shorter lifespans than people living under conditions that don’t fit into our dream?

There are those pesky cars. Sucking their tailpipes for an hour or two five days a week is not quite as good for your health as hiking the Appalachian Trail, except perhaps politically.

Everyone who enjoys commuting in populated areas raise your hands. That time may be productive for the Arabs and Japanese but probably not for you. You just can’t get away from the financial aspects here. The money diverted to unproductive energy usage is immense and immensely stupid.

The houses themselves are also villains. Since we waste so much energy commuting from our dream home to the place that underpays us, we look for savings elsewhere. Oh, yeah. Let’s see if we can save some energy in our homes.

Well, we can’t save all that much when we have to have that 70-inch diagonal flat screen with the 17 speaker sound system requiring a couple of thousand watts of amplification. But, we can slap on some more insulation.

Don’t forget to stop any warm air escaping via the doors or windows. Make that little box airtight.

Oops, that means breathing bad air. Although it varies considerably from place to place, if you have a problem with radon, you have a choice of a slow death from it or freezing to death, which I have been assured is usually quicker. And then there is always the possibility of other gasses seeping into the house from the landfill on which your house was built.

Oh, no. Your house might make you ill and you think about all of that money directed to the American Dream leaves a little less for healthcare.

You own the American Dream, or do you? I would posit that the reality is that your home owns you. How many couples are delaying a divorce because they can’t sell the house and neither party can afford it on their own?

Your career requires a change of location but your house keeps you where you don’t want to be. The employment situation is not as stable as it once was. You have to be more flexible now in many different ways than your parents even considered. Can you take that pay cut and still afford that hour commute, the gasoline, if it jumps back to $4 a gallon, the parking fees, the high insurance costs that accompany all those miles?

Back in the 1960s, while living in Los Angeles, I read the story of five aircraft engineers whose jobs left town. They found new jobs . . . in San Diego. I think that was 125 miles or so away. They couldn’t sell their homes. They couldn’t uproot the children from their lives. They just could not afford to move. But, clever as they were, they found a solution.

They pitched in together and bought a customized van. There were four captain’s chairs surrounding a table. While they took turns driving, the others would play cards, read, sleep, eat or whatever. Their answer still forced each one to spend about 25 hours a week unproductively, away from family, away from their American Dream. That answer probably wouldn’t fill the needs of every employee in the ‘rust belt’ who was replaced by a teenage slave laborer in China.

Could we increase our investment in mass transit? Could we live just a little closer together? Could we get by without a car?

While in training in the Army after basic, I was stationed at Ft. Monmouth, New Jersey. I met a guy there to whom it was difficult to relate. He was 25 years old. He was born in Manhattan. Until he was drafted, he had never left Manhattan.

He took his basic training at Ft. Dix, New Jersey. His advanced training was at Ft. Monmouth. He did so well there that they put him on staff. He had to finally leave Manhattan but still never strayed more than an hour or so from home.

He had just about satisfied his military service requirement. He had a college degree. How could he do all of that and never own a car or live in a detached, single-family dwelling? How could he have been so nice, so well-adjusted, so happy without ever experiencing the American Dream? Maybe he was un-American. He had never had a driver’s license.

And just remember, this method of savings is based on borrowed money, 30-year commitments, betting that you can foretell the future and having that dream job that can’t be shipped over to Bangladesh.

This is just skimming the subject. However, so far, it seems evident that the more one looks at it, the less sense it all makes.

Stay tuned for Part 3.

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©2010 The Couth Hillbilly. All Rights Reserved.

The American Dream touches many aspects of our lives. It does so in ways that may not be readily apparent.

This is to be the first of a series, addressing those various aspects.

I promise to hold your interest; at least intermittently. It affects your billfold, your lifestyle, your present, your future, your dream.

If memory serves, I have been an apartment dweller on 4 different occasions, for a total of perhaps five years, or so. I presently live in a suburb on little more than a postage stamp lot.

I prefer such a detached house. That may be an actual preference or simply a factor of being far more accustomed to it. What ever the reason, I felt such a disclosure to be called for. I trust it doesn’t color my sentiments as expressed in these few pages. If you think it might have, let me know.

First, we need to understand that anything the government does, or indeed, doesn’t do, has ramifications throughout the country. Even those who strongly advocate for small government should appreciate that government cannot help having an effect on our society. It may be expressed as an effect in the social realm, or education, or any number of ways or combinations.

In most cases the primary effect or one of the collateral effects will be financial. It’s just the name of the game.

Governments, all governments, use the tax code to mold the society in a particular way. Sometimes that is good. Sometimes it is bad. Sometimes it achieves its intended purpose. Sometimes it doesn’t.

Taxing some areas more heavily will divert resources away form those areas. That’s the theory, at least. It tends to work that way but taxes are not usually the sole factor involved. Likewise, with the same caveat, tax incentives are used to direct resources to one or more specific area.

Remember, sometimes this is good. Sometimes it isn’t.

We often hear that this country has the smallest rate of savings of any mature economy. Well, that depends on how you rekkon that number.

To say that we are at the bottom in savings means that whoever calculated that rate omitted our largest mode of saving. Housing. Many people are in trouble because they put their savings in the purchase of a home and used their equity (savings) as an automated teller. They spent their savings. Now, their house is worth less than what they owe.

Adding the money we put into housing to the other modes of savings could put us at or near the top.

Why do we channel so much of our wealth into housing? There are many reasons. One major reason is the power of the American Dream. Almost every American wants to realize that dream simply because it has been ingrained in us, perhaps even, prenatally.

Another reason is because we have bought into the myth that real estate always goes up. That may not be too common a belief at the present. However, the dream of having your house work for you has been a powerful element. Rent is considered wasted money and we don’t want to waste.

Then there are the tax advantages of home ownership. You can deduct the interest you pay. How many other investments share that advantage. Capital gains? The first half million dollars is exempt for couples. Oh, and your local real estate taxes are deductible. improvements are deductible. Basically, everything about real estate is deductible.

Given just the tax code advantages, most people have considered putting a substantial chunk of your income into real estate a slam-dunk option.

So, other than putting large numbers into financial difficulty and making the loss of their home through foreclosure, or at least facing that threat, what have our tax codes wrought? It has brought on a mess that we fail to recognize, despite it being in our face.

Money that other nations use to invest in the manufacture of numerous goods, exports, infrastructure; the beat goes on. Sure, home construction creates jobs, but at the cost of starving every other sector of our economy.

Those jobs created by housing may not be the jobs you want. When my house was being built six years ago, i noticed that the carpet installers were Mexican, as were the roofers, as were others. The siding crew was Mostly Mexican, led by a Russian.

The present situation means we lead the world in home ownership but lag in almost every other financial measure. It isn’t necessarily a bad way to invest some of our savings but it will not for many more decades sustain our lifestyle or our position in the world.

So, the question is: where should we direct our savings? There is also the question of how or whether we want to use the government, through the tax code or otherwise, to direct those funds to areas identified as providing the greatest benefits.

Just so you know that I am not completely naive about the politics involved, let me address that issue. I am fully cognizant of the hazards for any politician trying to take away the incentives the government has piled upon us over the past several decades. It may not be possible to wean us off of these benefits for a couple of generations, if then. We are too happy every year to see our tax liability drop dramatically when we factor in the real estate perks. We have become spoiled. We have lost sight of the alternatives. We do not appreciate the benefits of those alternatives. America will slip in the special standing it has had for a century or more but Americans will continue mowing their lawns.

Stay tuned for the further adventures of John Q. Public’s love affair with the American Dream.

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©2010 The Couth Hillbilly. All Rights Reserved.

Here is an article that you really need to read. I could have done a better job of writing it but I thought I shouldn’t hog the spotlight.

I cover some of this ground in my book but only as it relates to medicines prescribed for mental illness. As shown in this article, the problem is much wider in scope. It isn’t just Thalidomide or Vioxx or Phen-phen. It could be simply an aspirin.

Leo Galland is a practicing physician in New York City, a winner of the Linus Pauling Award. The title of his article is,

Why Medicine Can Be Dangerous To Your Health.

August 7, 2010

Did you know that the majority of FDA approved drugs have serious potential side effects that were not detected before marketing approval? ⁽¹⁾

That about three quarters of a million people a year are rushed to emergency rooms in the U.S. because of adverse drug reactions, according to the CDC? ⁽²⁾

That the number of medication-related deaths in the U.S. is estimated at over 200,000 a year, making medications the third or fourth leading cause of death in this country? ⁽³⁾

That even common pain relievers called NSAIDs, examples of which include Advil, Motrin, Aleve and aspirin, account for an estimated 7,600 deaths and 76,000 hospitalizations in the U. S. every year? ⁽⁴⁾

It sounds like the cure could be worse than the disease in far too many cases.

Thankfully, there is an option, an innovative approach to healing that seeks to restore balance and healthy function, instead of simply treating symptoms with drugs and suffering the side effects. I call it integrated medicine, and it is a powerful and effective way to address chronic illness . . . more on that in a moment.

Inhibiting Vital Functions

But first, let me explain in brief why the everyday medications Americans rely upon can be hazardous to your health.

The reason is simple and based upon the basic nature of modern drug therapy.

Most drugs used today are intended to act like biochemical strait jackets. They suppress cellular functions that appear to be overactive.

You can see this by looking at the names given to categories or classes of drugs. Almost all include “blocker,” “inhibitor,” or “anti-” in the description: beta-blockers, calcium blockers, ACE inhibitors, proton pump inhibitors, anti-histamines and anti-inflammatory drugs. These drugs are developed to treat disease by interfering with the biochemical processes involved in illness.

But they also interfere with the natural and healthy functions of the body.

It’s like throwing a wrench into a sophisticated machine in an effort to fix it.

ed: This is an example of the simple-minded approach that that is endemic in the pharmaceutical industry.

Furthermore, the biochemical processes they inhibit are rarely the cause of the illness. They are just part of the many changes in the body that accompany disease. Outside the setting of disease these biochemical processes all play important roles in normal cellular function.

It’s no wonder that many of these drugs have side effects that are a direct extension of their therapeutic actions. ⁽⁵⁾ They are not restoring normal cellular function; they are merely inhibiting cellular hyperactivity.

Pitfalls of Pain Relief

NSAIDs (nonsteroidal anti-inflammatory drugs) are an excellent example and include common over the counter drugs such as aspirin (Bayer, Bufferin and Excedrin), ibuprofen (Advil, Motrin and Nuprin), and naproxen (Aleve). They relieve pain and inflammation by blocking an enzyme called cyclo-oxygenase (COX).

Although COX activity contributes to pain and inflammation, this enzyme also performs important functions such as:

• protecting the stomach from the corrosive effects of its own acid,
• regulating circulation of blood to the kidneys,
• modulating the activity of the immune system.

It naturally follows that NSAID use can have severe side effects, which are a direct result of COX enzyme inhibition. The side effects of chronic NSAID use have been well documented in the scientific literature, for example in the American Medical Association’s journal Archives of Internal Medicine.

Side effects of chronic NSAID use include:

• stomach ulcers, ⁽⁶⁾
• intestinal bleeding, ⁽⁷⁾
• kidney failure, ⁽⁸⁾
• high blood pressure, ⁽⁹⁾
• aggravation of immune system disorders like asthma, ⁽¹⁰⁾ psoriasis, ⁽¹¹⁾ and colitis. ⁽¹²⁾

So if you take an NSAID, let’s say for a headache, you could just be trading one problem for another.

The search for a safer type of NSAID led to the development of drugs called selective COX inhibitors. As their name suggests, they’re selective in their effect, designed to inhibit only the so-called “bad” COX enzyme, without inhibiting the so-called “good” COX enzyme.

ed: This epitomizes their problem. They are trying to grasp a greater complexity but they fail to realize that going further when headed in the wrong direction means you are still headed in the wrong direction, but just further away from where you need to be.

This approach created one of the most highly anticipated drug releases in the history of medicine: Vioxx.

ed: This is just one of the results.

Vioxx was a disaster; it increased the death rate from heart attacks and strokes and was withdrawn from the market.

What the scientists behind Vioxx failed to recognize is that all forms of the COX enzyme are important for health. ⁽¹³⁾

So instead of giving us a safer drug therapy, it was like tossing a different type of wrench into the machine.

The idea that there are “bad” enzymes and “good” enzymes or “bad” hormones and “good” hormones is a total misrepresentation of how the body works.

But the pharmacology underlying conventional medical treatments is based upon that misrepresentation.

Working in Harmony with the Body is the Solution

Fortunately there is another way of looking at health and healthcare that addresses the underlying causes of illness: integrated medicine

The great value of integrated medicine is that it provides alternative strategies for healing, based upon enhancing normal physiological balance instead of merely attempting to suppress the hyperactive biochemistry involved in disease.

A powerful strategy in integrated medicine is the therapeutic use of nutrition. Nutritional therapy, when properly used, can achieve results that drugs cannot, because nutrients are essential components of the cellular information network. An excellent example is omega-3 fatty acids.

Omega-3 fatty acids are found in fish, flax seed, walnuts, sea vegetables and leafy greens. The most potent omega-3′s, EPA (eicosapentaenoic acid) and DHA (docosahexaenoic acid) are used by the cells of your body to make powerful chemicals that help to maintain normal cell function under conditions of stress. ⁽¹⁴⁾ The so-called “bad” COX enzyme, in fact, converts DHA to substances called resolvins and neuroprotectins, which play a vital role in controlling inflammation ⁽¹⁵⁾ and helping brain cells survive injury. ⁽¹⁶⁾ This is one reason the inhibition of any of the COX enzymes can be bad for your health.

A Natural Approach to Reducing Inflammation

Knowledge of the benefits of omega-3 fats provides an alternative strategy for controlling inflammation that is both natural and potent. The basic idea is to increase your body’s levels of DHA, the omega-3 fatty acid your body uses to make these beneficial chemicals.

Remarkable results in reducing inflammation can be accomplished by dietary changes and nutritional supplementation. Increase consumption of foods that contain omega-3 fats (mentioned above) and decrease consumption of foods that interfere with the anti-inflammatory effects of omega-3 fats, such meat, and oils, spreads and dressings made from corn, sunflower, soybean, safflower or cottonseed oil, substituting olive oil and flax oil instead. This simple approach had allowed people in research studies with severe rheumatoid arthritis to decrease their use of anti-inflammatory drugs. ^(17,18) For more information about fighting inflammation with nutrition, and free recipes, visit my website fatresistancediet.com

A vast amount of scientific research has been published in prestigious medical journals on the therapeutic use of nutrition. Now it is time to put all of that essential knowledge to work.

Making nutrition a cornerstone of everyone’s healthcare has been my longstanding goal and is the first step in real healthcare reform. Moving from a system based on treating symptoms to a system for achieving optimal health will enable healthcare to achieve its true potential.

The solution is integrated medicine–the future of healthcare, today.

Now, I’d like to hear from you:

Have you experienced medication side effects?

What was done about them?

How does your doctor feel about nutritional supplements, either as alternatives to drugs or as a way to decrease drug side effects?

Best Health,

Leo Galland, MD

Leo Galland, M.D. is the Director of the Foundation for Integrated Medicine and founder of pilladvised.com, an online resource for learning about medications, supplements and food.

References:

1) Manag Care Interface. 2005 Oct;18(10):49-52 “Preventing adverse drug reactions in the general population” Pezalla E.

2) JAMA. 2006 Oct 18;296(15):1858-66. “National surveillance of emergency department visits for outpatient adverse drug events.” Budnitz DS, Pollock DA, Weidenbach KN, Mendelsohn AB, Schroeder TJ, Annest JL

3) Pezzalla E., Manag Care Interface. 2005 Oct;18(10):49-52

4) Annals of Internal Medicine, 1997, 127:429-438. “Unnecessary Prescribing of NSAIDs and the Management of NSAID-Related Gastropathy in Medical Practice.” R Tamblyn, L Berkson, WD Jauphinee, D Gayton, R Grad, A Huang, L Isaac, P McLeod, L Snell

5) JAMA 1991; volume 266: pp 2847-2851 “Computerized surveillance of adverse drug events in hospitalized patients.” Lassen DC, Pestotnick SL, Evans RS, Burke JP.

6) Annals of Internal Medicine. 1988; pp 359-363.. “Nonsteroidal anti-inflammatory drug use and death from peptic ulcer in elderly persons.” Griffin MR, Ray WA, Schaffner W

7) Gastroenterology. 1987; 93: 480-489. “NSAID induced intestinal inflammation in humans.” Bjarnasson I, Zanelli G, Smith T, et al.

8) Archives of Internal Medicine. 1992; 986-990. “Acute renal failure and glomerulopathy caused by nonsteroidal anti-inflammatory drugs.” Shankel SW, Johnson DC, Clark PS, Shankel TL, O’Neill WM.

9) Archives of Internal Medicine. 1993; 153: 477-484. “A meta-analysis of the effects of non-steroidal anti-inflammatory drugs on blood pressure.” Pope JE, Anderson JJ, Felson DT

10) Clin Chest Med. 1990; 11:163-175. “Drug-induced bronchospasm.” Meeker DP, Wiedemann HP.

11) J Dermatol. 1981; 8: 323-337. “Exacerbation of psoriasis induced by indomethacin.” Katayama H, Kawada A.

12) Annals of Internal Medicine. 1987; 107: 513-516. “Nonsteroidal anti-inflammatory drugs activate quiescent inflammatory bowel disease.” Kaufmann HJ, Taubin HL.

13) Cardiovascular & Haematological Disorders-Drug Targets, 2006, 6, 83-98. “Cyclooxygenase-2 Inhibitors: A Painful Lesson.” S Sanghi, EJ MacLaughlin, CW Jewell, S Chaffer, PJ Naus, LE Watson, DE Dosta.

14) Curr Mol Med. 2009;9:565-79. “Role of lipoxins and resolvins as anti-inflammatory and proresolving mediators in colon cancer.” Janakiram NB, Rao CV.

15) Proc Nutr Soc. 2010, 28:1-8 “Fish oil and rheumatoid arthritis: past, present and future.” James M, Proudman S, Cleland L.

16) J Lipid Res. 2009: 50 Suppl:S400-405. “Neuroprotectin D1-mediated anti-inflammatory and survival signaling in stroke, retinal degenerations, and Alzheimer’s disease.” Bazan NG.

17) Drugs 2003; 63: 845-53. “The role of fish oils in the treatment of rheumatoid arthritis.” Cleland et al.

18) Rheumatol Int. 2003; 23: 27-36. “Anti-inflammatory effects of a low arachidonic acid diet and fish oil in patients with rheumatoid arthritis.” Adam et al,

ed: A major change in our approach to treatment would be the real healthcare reform.

To your good health,

.

©2010 The Couth Hillbilly. All Rights Reserved.

I have often wondered if the FBI and the Keystone Cops share the same parentage. I will explain my lack of regard for this august body in just a bit.

The FBI was brought to mind by an article I read. It reported that Wikipedia had been threatened if they did not discontinue displaying the FBI’s logo on their site’s article devoted to the agency.

Silly me. I thought the Feebies were busy catching communists terrorists; saving all of us innocents from what’s-his-name.

The legal office of the FBI opened with:

“Unauthorized reproduction or use of the FBI Seal is prohibited by 18 United States Code, Section 701, which provides:

One would hope that we had put the messianic personality of JEHoover behind us. It has been 40 years and more since I was involved to the extent that I felt I had a realistic take on the tragicomedy that was the FBI. When I was involved, there were eleven investigative agencies in the federal government. The last count I heard was sixteen.

The agency with the best conviction rate was Customs. That was likely because, the way they worked, they almost always secured the evidence at the time of the apprehension.

The FBI had the lowest conviction rate. I lay that to incompetence, sloppiness and hubris. They tended to believe their press clippings.

Have you been watching reruns of The FBI Story, I Led Three Lives or any other series based on that agency? No? You would bust a gut at how consistently cornball those shows were. Hoover’s office demanded and got editorial control of essentially anything portraying the agency. Though several presidents wanted to get rid of Hoover, no one had the guts to upset him.

The majority of cases that the FBI handled, when I was paying attention, were stolen cars. You didn’t know that, did you? When a car was stolen, it was assumed that after 24 hours it had crossed a state line. This caused the local law enforcement to notify the FBI. They, in turn, issued a regional (not all-points) bulletin. Yep. That’s what they did.

When the car was eventually found by a local police or sheriff’s department, they notified the FBI. The FBI fetched the vehicle and returned it to the original jurisdiction. That counted as a successful case for the Bureau. Padding their statistics thusly, they still had the worst record of any agency.

At a Washington party, Hoover once refused to shake hands with the Soviet Union’s ambassador and pretended to ignore him. His obsession with communism caused him, and therefore the Bureau, to see them everywhere. It was said that he could see communists under the bed who weren’t there but couldn’t see a real, live communist standing in front of him.

His devotion of resources to ferreting out communists caused him to flood the Communist Party USA with spies. While there  were only about 9,000 members of the Party, 1,500 were FBI agents. It was truly comic with so many agents stepping on each others toes.

There was a directive sent out to all 1,500 of these agents not to pay their dues on time. They were afraid it would be a giveaway that they were FBI and could afford dues. The average member of the Party was rarely successful enough to be able to afford to pay their dues on time. This is what Hoover feared so much and, by his efforts, brought the public to an irrational level of fear of a takeover of the country.

Did the FBI discover the Shoe Bomber? The Bloomers Bomber? I think ordinary citizens discovered them. The FBI did find a bunch of kids who intended to blow up the Sears Tower, despite not knowing how to construct a bomb and not having enough for bus fare to Chicago. I think they did know that the Tower was in Chicago.

The Brits discovered a plot over there and told the Yanks. They regretted it. It seems Bush needed to boost his image and the Americans forced the operation to be closed down before the British could round up the entire group of plotters. Public relations trumps national security and relations with competent members of friendly foreign agencies.

Please don’t turn me in for posting their badge. If I were eating when they came a-calling, I might choke during my hysterical reaction.

It would not get me in trouble to post the logo of the CIA. It’s likely no one there would recognize it.

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©2010 The Couth Hillbilly. All Rights Reserved.

Is it a miracle or just a coincidence? In my last article I made mention of David Stockman. The very next day he shows up with an Op-Ed piece in the New York Times.

For any of you who either were not old enough or not interested enough to pay attention at the time, David was Reagan’s Director of the Office of Management and Budget. More than that, he was that administration’s economics guru.

For those of you with little faith in my mastery of the joke known as economics, here comes a Republican trying to catch up. Not just any Republican, mind you. This is Ronny’s own personal point man; the Superman of Supply-Side; the Titan of Trickle-Down.

Below I have provided his opinion piece in its entirety. He has come a long way but has yet to complete his journey to reality. Therefore, I have interspersed a few of my own observations for your elucidation.

July 31, 2010
Four Deformations of the Apocalypse

By DAVID STOCKMAN
How my Republican Party destroyed the American economy.

If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.

Today’s, older but wiser, David fails to point out that the increase is the result of Bush’s tactics, represents the same rate as under Clinton and is lower than the Reagan and Bush I rates.

More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.

He blames it on Republican policymakers “for decades now.” Presumably, that includes his tenure of 1981-1985. He played a key role in developing and promoting the myths he now decries. As for his use of the word Keynesianism, we must give him some latitude, as, for much of his career it has been one of a conservative’s favorite profanities. That has apparently kept him from understanding just what Keynes meant. To oversimplify, old John Maynard meant that when the economy was in need of help that it was acceptable to incur debt for purposes of stimulus. He did not expect Reagan, Stockman and the entire Republican hierarchy to use debt to buy votes, even during the economic ups.

This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.

The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. Now, since we have lived beyond our means as a nation for nearly 40 years, our cumulative current-account deficit — the combined shortfall on our trade in goods, services and income — has reached nearly $8 trillion. That’s borrowed prosperity on an epic scale.

That period of 40 years of which he speaks puts him in the center of all of this economic misbehavior. As for Nixon’s ad hoc expedient of letting the Dollar float, it was in part a necessary move but, as Stockman implies, left room for considerable shenanigans. As shown by the graphs in my last article, Lie To Me, they filled that room.

It is also an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves. Just let the free market set currency exchange rates, he said, and trade deficits will self-correct.

Oh, Milton, Milton, Milton, that demigod of economics, the one most responsible for foisting the hallucinations of the Chicago School of Economics onto our already overburdened shoulders. They forgot, if they ever knew, just what criteria must be met to have a free market. There was no free market in currency exchanges. The kindest words we could offer is that they were so encumbered by their ideological cocoon, so protected from reality, that they really thought a free market existed.

It may be true that governments, because they intervene in foreign exchange markets, have never completely allowed their currencies to float freely. But that does not absolve Friedman’s $8 trillion error. Once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors.

In fact, since chronic current-account deficits result from a nation spending more than it earns, stringent domestic belt-tightening is the only cure. Stockman continues to be so tied to the ideology that he thinks austerity is the answer even when the economy is down. FDR learned that lesson in 1937 when backing off of a Keynesian stimulus put the economy into a recession inside the depression. When the dollar was tied to fixed exchange rates, politicians were willing to administer the needed castor oil, because the alternative was to make up for the trade shortfall by paying out reserves, and this would cause immediate economic pain — from high interest rates, for example. But now there is no discipline, only global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve.

The second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40 percent of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970. This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.

Remember, the bulk of this debt was incurred during the economic ups. Also, the 3 decades ago puts it at the beginning of his tenure.

In 1981, traditional Republicans supported tax cuts, matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration’s hastily prepared fiscal blueprint, however, was no match for the primordial forces — the welfare state and the warfare state — that drive the federal spending machine.

The traditional Republicans wanted matching spending cuts but not the Reagan Republicans. That’s why it was referred to as the Reagan Revolution. Remember who was the economic general during Reagan’s first term. Once again, David is trying to deflect the blame to others. Also, he has to get in a few licks on entitlements, even though he elsewhere speaks of deficits caused by tax cutting. It reminds me of Reagan blaming the Chicago welfare queen who picked up her check in a Cadillac but never really existed. The 80s were vintage years for political fiction.

Soon, the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget — entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans’ fiscal religion.

I can’t fault him on that paragraph.

Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.

I find it interesting that, although the true believers give credit to Reagan for bringing inflation under control and enabling a solid rebound, the primary insider credits Paul Volcker, you know, the one Geithner and Summers are trying to push out of Obama’s line of sight.

By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too — signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy.

True.

The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. Here, Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. As a result, the combined assets of conventional banks and the so-called shadow banking system (including investment banks and finance companies) grew from a mere $500 billion in 1970 to $30 trillion by September 2008.

But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. They could never have survived, much less thrived, if their deposits had not been government-guaranteed and if they hadn’t been able to obtain virtually free money from the Fed’s discount window to cover their bad bets.

I get the distinct impression that he shares my concern that this is the area of greatest danger. He fails, however, to note that most of the new “money” being circulated is not printed. It is “created” by banks loaning money they do not actually have. They used to loan 5, then 10, dollars for every dollar they actually had. It is hard to accurately measure but appears now to be north of 50 to one for the biggest players.

The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore. In the past decade, the number of high-value jobs in goods production and in service categories like trade, transportation, information technology and the professions has shrunk by 12 percent, to 68 million from 77 million. The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes.

This is probably the area most resistant to reversal.

It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street’s shrinking economy — got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.

The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing — as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach — balanced budgets, sound money and financial discipline — is needed more than ever.

First, I notice he sees the Wall Street institutions as casinos, as I have for so long. His improved vision, vis-a-vis the Reagan Republican economic ideology, despite his failure to admit to his role, should have given him some level of acceptance of Keynes. However, you’ve come a long way baby . . . it’s just that he was so far on the wrong track that he still has a long way to go.

David Stockman, a director of the Office of Management and Budget under President Ronald Reagan, is working on a book about the financial crisis.

The book is certain to be interesting to economists and psychologists but you will get a better understanding of the subject from this blog, and it’s free. Anyway, if David can move that far in the “right” direction, there continues to be a modicum of hope for our survival.

Please note that the pre-Reagan conservatives are in many regards far closer to my so-called progressive position than to those who today claim to be conservative. Although he tried to shift to Nixon more blame than is probably deserved, when thinking of what conservative means, remember that Nixon hung the portrait of his favorite president in a prominent place in the Oval Office. Who would ever guess that it was Woodrow Wilson, a Democrat.

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©2010 The Couth Hillbilly. All Rights Reserved.

Believe. Regardless of what the facts are, believe.

Have you heard about the Democratic tax increase? Or, maybe they called it the Obama tax increase.

What, exactly, are they talking about? They are talking about George W. Bush’s tax increase. Bush’s? How can that be?

Bush said that, as a result of the downturn attributed to 9-11, we needed to stimulate the economy; create more jobs.

His solution? Tax cuts. Surprise. Surprise.

When Bush and his Republican Senate and House passed the tax cut they knew that there would be a tax increase on January 1^st of 2011. That makes it their tax increase, no one else’s.

Probably the most offensive aspect of the effort to extend Bush’s tax cuts is the hypocrisy of its supporters. Many congressmen are claiming that the reason they voted against an extension of unemployment benefits is because the bill contained no budget cuts to offset the cost. What were the costs? About $30 billion.

Sure, $30 billion is a lot of money but the human costs of cutting the lifeline of the unemployed is impossible to tally. Well, surely these fiscal conservatives also want budget cuts to offset the loss of revenue. I’m sorry. They don’t. After all, the tax cuts will only come to about $1.7 trillion by 2014. You probably should also include interest payments. That puts the costs at about $2 trillion. Of course, there is no guarantee that the tax cuts would end in 2014.

I’ve said this before and I will continue saying it until everyone understands: there are no such things as tax cuts if they create debt. They are merely deferments. They shift the burden to others. Because of interest, they cost more than stated, as in the last paragraph.

The consensus among economists is that there are far more effective ways to stimulate the economy. So, Bush said we will give the significant cuts to the top two percent. Why? Because everyone knows that they are the ones who create jobs. I’m sorry. For some reason I got left out of that “everyone.” I think the reason for my absence can be attributed to my familiarity with the facts.

Stimulating the economy is most effective when the funds are targeted at the areas most in need of attention and where the return is greatest. Where did those $250 refunds go from the last stimulus? The biggest slice went to paying down credit card debt. Paying down your debt is commendable but hardly stimulative. Most the the rest did go for consumption. Admittedly, that helped stimulate the economy. The problem is that the economy that was most stimulated was China’s.

The aspects of the tax cuts that are the points of contention are the marginal tax rates in the two top brackets: over $209,250 and over $373,650. At the point of the first, the rate would be 3% for everything between those two amounts. Above the later, the increase would be 3.6%. Those increases are only on taxable income. No one pays tax on their entire income. The wealthier you are, the greater the likelihood of being able to take advantage of a mass of deductions.

In fact, the reality is that few making as little as half a million a year will pay as much as $5,000, if any in extra taxes. In terms of what those congressmen consider wealthy you need to be considerably above that piddling amount. Just being in the top two percent doesn’t make you attractive enough to be a real friend.

Eighty percent of stock is owned by the top one percent. That makes you attractive.

If giving the plutocrats a tax break at your expense doesn’t benefit you by stimulating the economy, why would you support it? Because they tell you it creates jobs? It doesn’t.

Yeah, I know. Outgoing Senator Kay Bailey Hutchison and others told a big enough lie that many believed it. The numbers they put out differed but Kay’s claim was that it created 8.1 million jobs. Maybe in China, but not here.

Even with the supposed jobs resulting from the tax cut, Bush, according to the Wall Street Journal, only managed about 3 million jobs created during his first 7 years. The number was 23 million during Clinton’s 8 years, without a stimulating tax cut. Bush’s final year saw an actual loss. The mess he left caused a loss of 8 million jobs over the last months of his administration and the first year of his successor.

But, you say, I’ve always heard that the wealthy are the ones who create jobs and the more money they have the more jobs they create. It sounds nice, doesn’t it? It seems to make sense, doesn’t it? Only if you think the economy is that simple and every wealthy person’s every waking moment is how to benefit those less financially fortunate.

No president since Herbert Hoover has created so few jobs as Junior while everyone since WWII has done it with higher tax rates on the top end. If a low tax rate on the wealthy is the key, how did presidents out-perform Bush when his top rate was 36% and theirs was 91%? In several comparisons, the higher the top marginal tax rate the greater the job creation. I don’t care if that is counter to the received truth that Junior read on those stone tablets or not.

Put the tax rates in perspective. Allowing the increases called for in Bush’s tax bill will put them back to where they were during the Clinton administration. They will still be less than they were under Reagan. Show me any proof that reducing taxes on the uber-wealthy creates jobs and I will let you borrow the Holy Grail that I possess. The Holy Grail may exist. I don’t know. But, I know the other doesn’t.

It may be a shock to some that, if you reduce revenue while you are in debt and running a deficit, you will have a larger debt. Look at this chart.

Okay, class. What do we see? The presidents responsible for the largest increases in our debt gave us the largest tax cuts deferments. They also created the fewest jobs.

Let’s review the claims of the fiscal conservatives. They say tax cuts for the wealthy creates jobs. Wrong. They say tax cuts generate more revenue than they cut. They say that tax cuts more than pay for themselves. Wrong. Not only do they not pay for themselves, they don’t even pay for the increased interest on the debt.

Do you remember David Stockman? He was Reagan’s economic guru. Remember Supply-side economics? Remember Trickle-down? Did you read David’s book – the one he wrote after he left the White House? He admitted that he and the other advisers knew at the time that it was all a sham. I think we have more than sufficient data now to support his contention.

The question is not why the fiscal conservatives continue to spout such nonsense. They are just trying to serve their masters. The real question is why is so much of the public still so gullible?

I have some partial answers. First, they don’t understand the issues. They think they do. But, that’s not quite the same. They say that it’s the philosophy on which this country was founded. Emphatically not true. They say it works. I’m going to tear out my hair. They think those saying it are telling the truth and share their values. I’m going to tear out your hair. No. No. No. No.

They lied. They are lying. They will continue to lie. It’s their job.

Do they care about you? You don’t have to be unemployed to grasp that they routinely vote against your interest. You just have to know the facts. Facts to them are like sunshine to a vampire. They are far more closely related to Kim Jong Il than to you and me.

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