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Tuesday, June 2, 2015

INEQUALITY: POLITICS VS. REALITY



“Inequality” is the most recent of the “social injustices” which politicians, pundits and academics have adopted as a movement.  “Inequality”, meaning “economic” inequality, expressed as widely divergent access to wealth and income among individuals and groups is a fertile field for advocates of economic restructuring, usually based on broader ideological or philosophical beliefs.  Thus, despite its objectively defined flaws as a national economic condition, it has become a subjective expression couched in terms of “fairness”, used by those individuals commonly associated with the political Left. 

This of course is not new in terms of social/political history.  The socialist movements of the mid-Nineteenth Century were born in the nurseries of the Industrial Revolution and the resulting unfettered system of early capitalism.  This of course was an era of significant social and economic inequality, stimulated by rapidly advancing technological changes and bolstered by the remnants of landed aristocracies and political oligarchies in Europe.  But as capitalism matured, it became subject to the growth of organized labor and government regulation, and its benefits as an economic system have since been proven by the spread of wealth and the attendant widespread improvement in the more broadly measured standards of living.  

Industrial expansion, cleansed of its early exploitive characteristics such as child labor, unsafe working conditions and lack of any kind of associated economic security, now commonly included as health care and retirement benefits, did indeed “spread the wealth” through massive job expansion and the creation of a true “middle class”.  In combination with the creation of widespread public education, American society became characterized by the opportunity for individual improvement or “upward mobility” and its expressions as the “American Dream” and the “self-made man”. 

The post-WWII years with their unprecedented industrial expansion in a world faced with the issues of rebuilding economic infrastructure, gave both American capitalism and the American labor movement enormous opportunities and thus the opportunity for American workers to achieve financial security.  The “wealth” of the nation was more evenly divided in these post-war growth years because the large and growing industrial sector made it so. 

But the world doesn’t stand still.  Developing nations found ways to utilize their built in economic assets, foremost among them being a large semi-skilled labor force, which for decades was concentrated in agricultural sectors, but now willing to work for wages that were largely unacceptable to workers in the industrialized economies of the West.  Rapid advances in communication, information processing and transportation made the utilization of these workers for the labor intensive industries in the developed world, a profitable business model which was rapidly reinforced by world-wide competition. 

The effect on U.S. assembly line workers in low value-added jobs was inevitable.  The transition in the economies of industrialized nations was supported by the spread of trade liberalization in the form of bi-lateral and multi-lateral trade agreements which allowed the re-importation of goods manufactured abroad by domestic companies.  It became common for raw materials, components and points of sale for products owned by the same company to be located in different locations. 
The lost manufacturing jobs in the U.S. were replaced with high tech manufacturing jobs requiring a more educated work force, and with the rapidly expanding service economy jobs in the financial and information sectors.  In both cases these jobs provided higher wages but by their nature were characterized by technology supported higher productivity with the use of automation and information technology which allowed for enormous market expansion.  Job opportunities for high school graduates with minimal job skills became a smaller part of the economy and commanded a relatively low level of compensation. 

The financial sector which greatly benefited from the technological revolution by allowing instant transfers of money, mass marketing of world-wide investment opportunities and the creation of whole new categories of derivative investments, created  more wealth for those who already had enough wealth to invest and for managers and executives who initiated and operated the enterprises in the this sector. 

Thus increased gaps in the distribution of wealth in the national economy was inevitable as the workers formerly employed in low end manufacturing jobs were left behind in the rapidly changing economy. Fortunes were made and lost in the so called “dot-com” global  internet bubble of the ‘90s and new fortunes were made as lessons were learned and young entrepreneurs entered the information and new social media markets. 

Economists are virtually unanimous in their opinion that extreme concentrations of wealth in the hands of a very small segment of society are bad for the economy as a whole because it retards demand and thus slows economic expansion.  A negative social dimension also results if the wealth concentration is seen to be a cause rather than a statistical result of income stagnation in the middle class and poverty in lower socio-economic groups.

But the political Left continues to see the problem as a “fairness” issue and seeks to imply a conspiracy theory-like cause.  The entire financial sector is collectively, and derisively labeled “Wall Street” and lumped together with “big corporations” as villains in a conspiracy to “buy” politicians to keep from paying their “fair share” of taxes.   These unpaid taxes would supposedly deal with the problem of economic inequality by funding more social programs like free child care, government subsidized job training, and higher income supplements for the poor.

But the conspiracy theory meme as a cause of inequality doesn’t hold up to even minimal scrutiny.  The beneficiaries of wealth accumulation have achieved their wealth for a variety of reasons which do not include the exploitation of the poor or middle class.  National wealth is not a zero sum based entity.  Aggregate wealth does not transfer between groups in a democratic capitalist society.  The new wealth was created by new opportunities, innovation, new technology, skill and of course plain luck.

Young entrepreneurs like Bill Gates and Microsoft and Facebook founder Mark Zuckerburg offered new products to the world and were rewarded with the benefits of mass marketing.  Handsomely paid hedge fund managers take no money from the poor and middle class.  Executives of large corporations make commensurately large salaries and bonuses based on large profits which are derived from products and services that benefit consumers and millions of stockholders which include labor union pension funds, liberal university endowment funds and millions of ordinary citizens who invest savings in mutual funds for retirement and income.

Corporate and individual income taxes may or may not be judged “fair” but while changing them may put more money into government coffers and will reduce income levels and wealth accumulation at the top, it will not significantly increase these two factors at the middle and bottom even while providing more financial comfort to individuals who may be the beneficiaries of government social services.
 
Still, significant concentrations of wealth in an economy reflect lost opportunities at the lower end.  They also reflect a level of social dysfunction at the very bottom of the socio-economic scale.  Simple government mandated transfers treat only symptoms and ignore cures.
The process needed to increase income and the related accumulation of wealth in the bottom half of the work force is a long term enterprise.  It will require education, adaptation, and the support of government to promote economic expansion in the new economy. 

Senator Bernie Sanders (I-VT), now a candidate for the Democratic presidential nomination, emphasizes the conditions of “inequality” more than offering practical solutions, a tactic that approaches simple political demagoguery exemplified by his pronouncement that “inequality is immoral”.  His focus on higher taxes for “the rich” ignores some important facts. 

According to the Tax Foundation the “top 1 percent of taxpayers pay more in federal income taxes than the bottom 90 percent.”  “Since the early 1980s, the share of taxes paid by the bottom 90 percent has steadily declined.”

“In 1980, the bottom 90 percent of taxpayers paid 50.72 percent of income taxes. In 2011 (the most recent year the data is available), the bottom 90 percent paid 31.74 percent of taxes. On the flip side, the top 1 percent paid 19.05 percent of taxes in 1980 and now pay 35.06 percent of taxes. “  Stated a bit differently, the National Tax Foundation reports that in 2011 the top 10% of income earners paid 68.26% of income taxes although they made 45% of all income.  The bottom 50% of earners paid just 2.78% of all taxes.

According to the Tax Policy Center at Syracuse University (2013): “Because of the refundable tax credits, individual income tax burdens are actually negative for the lowest-income households, averaging minus 6.9% of income, meaning that the average household gets a refund in excess of taxes paid.”

The very label of financial “inequality” is calculated to inflame, shame and rationalize the problem of the poor as simply a matter of greed on the part of the successful and victimization on the part of the poor.  There of course, can never be “equality” in a free market economy.  The variables which lead to economic security are numerous but like those mentioned above, they inevitably include such things beyond government control as intelligence, motivation, innate skill sets, and family stability and support during childhood.  

This of course is not a problem for Sanders who is a self-described “democratic socialist”; too far Left for even the current Democratic Party and hence an “Independent” in the Congress. The remedies which Sanders and other “progressives” offer are more of the types of existing income subsidies which have been in place for decades.  These include, the Earned Income Tax benefit, food stamps, Aid to Dependent Children, school lunch and breakfast programs, Social Security, Medicaid, and direct welfare payments.  Sanders would support paid leave for new parents and paid sick leave.  But many of employed individuals working above entry level jobs already have these support benefits. 

Raising the aggregated wealth of the poorest groups is a long process in which the fundamental factor is employment in sectors with opportunities for advancement.  Concentrations of high unemployment are most visible in urban districts of the nation’s larger cities.  This fact has been identified as an underlying cause of racial unrest in recent confrontations with police.  But the “race analysts” simply state the fact of low employment without citing the causes or the solutions, as if governments at the local, state, and federal level could simply wave a magic wand an create meaningful employment for the disaffected in these areas.  

But as stated above, the requirements for “good jobs” with advancement opportunities and benefits are increasing while the basic education standards in areas of high unemployment are either being ignored or lowered for purposes of “social promotion”. 
The unemployment rates in the racially segregated areas of like Ferguson, MO,  Baltimore, MD, Cleveland, OH and Philadelphia, PA are reflective of large cities across the nation.  The inescapable, but rarely mentioned fact is that the high school graduation rate among black males is only 59% nation-wide with even higher rates in inner city urban areas. The graduation rate for Hispanic males is only 65% with thousands more under educated Hispanic immigrants joining the potential work force each year.  

Together blacks and Hispanics represent 30% if the total U.S. population. While it is certainly true that not all members of these groups are statistically poor, the low average high school graduation rates which are not a new reality, obviously exacerbate the income/wealth distribution problem and will continue to do so as these populations continue to grow.  

So how would Sanders solution of  increased tax revenue from higher rates on the “rich”, impact the larger problem?


The fall-back recommendation of the Left seems to be increased federal spending for “infrastructure” i.e. bridges, roads, waterways, (but not oil or natural gas pipelines). Transportation infrastructure is of course important in any modern industrialized country and represents an on-going need for maintenance.  But the labeling of basic construction needs as a cure for economic disparities among groups is simplistic.  The semi-permanent underclass, the urban poor, are not construction workers and the supply of actual and potential construction workers keeps growing with the continued flow of legal and illegal immigrants from Mexico and Central America.  

The path out of concentrations of wealth is education and training for professions which offer upward mobility.  Simple transfers of wealth through government sponsored temporary jobs and subsidies perpetuate the current socio-economic disparities.

Monday, May 4, 2015

DEMOCRATS DIVIDED: OBAMA AND THE TRANSPACIFICPARTNERSHIP


In spite of the sensationalist news media’s on going fascination with the chaos in Baltimore and Bruce Jenner’s new bra size, there are events of genuine importance which need more coverage and more detailed examination.  One of these is the negotiation process, both external and domestic of the proposed TransPacificPartnership.  

The external process i.e. the actual negotiated terms of the agreement, are obviously important with respect to the functionality of the finished product.  The domestic negotiating process in the U.S. between the Obama Administration and the Congress is vital to the success of the treaty itself and will cast a large shadow over the 2016 federal elections including not only the presidential race but the House and Senate components.

Essentially, the TPP is multi-national trade agreement between twelve Pacific nations including the Western  Hemisphere nations, United States, Mexico Canada, Chile and Peru.  The other seven participants are Japan, Australia, Brunei, Malaysia, New Zealand, Singapore, and Vietnam.  Taiwan and South Korea are possible additions. These twelve nations currently represent 40 percent of the world economy and one third of global trade.

The broad purpose of the TPP, like all trade agreements, is to lower or eliminate barriers to trade which come in many forms, the most obvious being tariffs (taxes) on imported goods, numerical quotas (limits) on the importation of specific good, and regulatory barriers i.e. licenses, administrative blocks, and domestic laws. 

The Obama Administration which represents the largest economy in the world is thus a key player without which the agreement would, if implemented, become a far less significant multi- regional treaty. However, without U.S. participation the treaty itself would be far less attractive to the other prospective members and might well fail.

Much progress has been made among the parties but because of the importance of U.S. participation, the role of the Congress for U.S. approval must be settled for the negotiations to go forward.   The President has asks Congress for Trade Promotion Authority, informally known as “fast track authority”.  If granted by the Congress, this would allow the Obama Administration to negotiate the terms of the treaty without Congressional participation and then require a simple up or down vote in both the House and the Senate without any amendments or by either, or filibusters in the Senate.
This is vital to the success of the international negotiations since the foreign participants don’t want to see a hard fought final version subjected numerous parochial changes that would inevitably be produced by the 535 members of Congress.
 
Since the votes on granting “fast track approval” essentially reflect the subsequent votes on approval of the agreement itself, the political battle over  this approval is currently being fought as a proxy to the up or down vote on the treaty, should it come. Members of the Republican Party in Congress have generally been In favor of “free trade, although this is a widely used misnomer since all trade is managed to a large degree.  Democrats, as a group, but with important individual exceptions, have historically been mostly opposed to trade liberalization and the TPP is no exception.

Republicans see trade liberalization as a stimulus for economic growth and lower consumer prices.  This is in accord with the long standing general acceptance of the theory of comparative advantage (David Ricardo, 1817) which in its simplest formulation advocates that each nation produce those goods for export in which it has an advantage in terms of costs of production i.e. economic efficiency in terms of the imputation of value.  This can be a reflection of low cost labor, highly trained labor, natural resources, transportation and manufacturing infrastructure, advanced research and technical capabilities and many other factors.  We see this already in the concentration of labor intensive clothing manufacturing in less developed nations especially in Asia, and consumer electronics in China and Taiwan.  Industrial job loss in these sectors has been replaced in the U.S. by emphasis on commercial and military aircraft, computer chips and software, pharmaceuticals and service industries. 
 
All of this falls under the rubric of “globalization” which depending on one’s political ideology is a positive evolution towards efficiency and cost benefits for consumers, or a social scourge involving corporate power and concentrations of wealth.

U.S. Presidents of both parties have supported the pursuit of trade liberalization agreements.  President Clinton successfully passed the North American Free Trade Association (NAFTA) agreement in 1993 and President George W. Bush initiated the TPP in 2008, but the acceptance of the value of such agreements has a long history, going back to the General Agreement on Tariffs and Trade (GATT, 1948) and its successor, the World Trade Organization, (1995) which has 161 members including all of the proposed members of the TPP.

Trade agreements are very complicated and difficult to negotiate.  While the basic issues have been tariffs, quotas and regulations, the prolonged WTO negotiations have struggled with issues such as intellectual property protection i.e. patents and copyrights, government purchases, environmental protection, labor laws,  government subsidies, especially in the agricultural , and the issue of currency manipulation i.e. devaluation of a nation’s currency in order to make its products cheaper and thus more competitive in world markets while making imports more expensive. All of these issues are part of the agenda for the TPP which both enhances its importance but provide fodder for opponents who can allege worst case scenarios with respect to each.

However, in spite of what is almost universal government support for trade regulation and liberalization in the world community, strong opposition has been a fact of life.  In the U.S., opposition has historically come from the far Left and from organized labor.  In the current debate over TPP “fast track authority”,  this movement includes the recently announced presidential candidate, Senator Bernie Sanders (I-VT).  His opposition is no surprise as he is a self-described “democratic socialist” whose is mind locked on the alleged abuses of “corporate power”.  But wider opposition comes from the Congressional Progressive Caucus of seventy members of the House of Representatives, who as its name implies, include the most liberal members of the House. 

There is of course overlap in the opposition of many of the liberal members of Congress and organized labor which supports their candidacies in each election.  While organized labor has greatly diminished in the private sector, it still is a powerful tool in elections, providing millions of dollars, call centers and advertising for chosen candidates.

The major talking points in the debate are these:

Opponents of the agreement claim that the TPP, like all “free trade” agreements create job loss as industries move operations to low wage nations and then export their products back into the U.S. free of tariffs
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Environmental activists like the Sierra Club, the Natural Resources Defense Fun and Public Citizen, believe that trade agreements stimulate industrial production in nations with lax environmental standards which are thus an attraction for American industries anxious to behave irresponsibly to save money. This traditional Leftist anti-corporatist viewpoint is also used to claim that the combination of job loss and corporate growth will increase income inequality.

Then there are the usual unsubstantiated array of claims of impending harm: the importation of “unsafe” food products; increased costs of medicines resulting from patent protection; the “rollback” of Wall Street reforms; and the prohibition of “buy American” policies needed for “green jobs”.  Opponents also claim that all of these negative effects came about as a result of the 1993 NAFTA agreement with Canada and Mexico.

Supporters believe that trade liberalization opens foreign markets to U.S. production and innovation, thus creating jobs and stimulating economic expansion.  The U.S. has significant advantages with its educated work force, research and development capabilities and vast natural resource base and large modernized agricultural sector.

The Peterson Institute for International Economics has estimated that the TPP agreement alone would bring about an increase in U.S. gross domestic product of .4 percent by 2015.  This seemingly small percentage becomes a huge number when it is expressed as a percentage of the current (2015) U.S. GDP of $17.710 trillion.

Supporters also point out that low tariffs already exist as a result of NAFTA and the WTO agreements so the TPP will stimulate little job loss in remaining labor intensive industries but will provide large gains in agricultural exports, high tech products and financial services.  The Wall Street Journal reports that the impact of increased imports will be relatively small because currently over 70 percent of imports to the U.S. are already duty free and the average import tariff is less than 1.5 percent.  The result is of course cheaper prices for an enormous amount of consumer products.
Economic studies of the effects of NAFTA are essentially inconclusive with respect to job loss but the facts are that since 1994 Mexican exports to the U.S. have increased nearly 500 percent and U.S. exports to Mexico have increased nearly 400 percent, representing a benefit to both economies without significant harm.

The politics of the TPP are interesting for several reasons.  First, President Obama has taken a strong stand in support of the agreement.  He is the head of Democratic Party and the fiercest opposition is from the Democratic Left, both in interest groups and in the Congress.  Thus the Democrats in Congress find themselves in a dilemma of divided loyalties and the prospect of left wing activist groups withdrawing their support in future elections.

There is also a certain irony in the political struggle as President Obama finds that his strongest allies in support of both the “fast track procedure” and the TPP agreement itself are the Republicans in Congress. The Republican leadership in both the House and Senate and most of the rank and file in both houses support the agreement.
 
But a further irony has evolved by the fact that a group of conservatives in Congress mostly associated with the Tea Party, are opposed to the TPP and thus have split with the Republican leadership and majority and joined with the far Left of the Democratic Party.  The motivation of these Republican dissidents does not match that of the anti-TPP activists.  The issue for the conservatives is that they mistrust the President with regards to negotiating a sound trade agreement and they believe that granting him “fast track authority” gives him too much power and denies the power of Congress to participate in such an important economic initiative. 

The battle is approaching the full test as recently the two committees in the House and Senate respectively that have jurisdiction over “fast track authority” have passed legislation to grant it which now will go to the floors of both houses for consideration.  The challenge for the Republican leadership is to gain the support of as many moderate Democrats and/or Obama loyalists while at the same time keeping Republican/Tea Party opposition to a minimum.  The prospects are good but not assured as the main opposition interest groups on the Left apply fierce pressure on the Democratic law makers.

An additional aspect of the whole debate is its implications for the 2016 presidential race.  Hillary Clinton is the presumptive Democratic nominee and whether “fast track” is granted or not she will have to explain her support or opposition prior to the final vote on the agreement.  As a member of the Obama Administration for four years as Secretary of State can she try to separate herself from his foreign policy?  Also, one of the main arguments against the TPP is the alleged damage done to workers by the 1993 NAFTA trade agreement which was supported and signed into law by then President Bill Clinton.  Is it realistic that Hillary can be expected to agree with this assessment to appease the far Left of her party?

As is her habit, she has a mixed record on trade liberalization agreements depending on her job position and immediate political goals.
 
In her 2014  book  “Hard Choices”, referring to the TPP she said:
                “It would link markets throughout Asia and the Americas, lowering trade barriers while raising standards on labor, the environment and intellectual property.”
It also would be “. . .a strategic initiative that would strengthen the position of the United States in Asia”

With respect to NAFTA, she said it was “proving its worth.”

However, when running for the Democratic nomination for president in 2007-08 and apparently sensitive to the far Left’s negative opinions of trade agreements, she opposed the trade pacts with Columbia, Panama and South Korea.  But then after losing the nomination to Obama and assuming the role of Secretary of State in 2008 she changed her opinion to conform to that of President Obama and supported the pacts with Columbia and South Korea.

With challenges from the Left in the nomination battle now coming from Senator Bernie Sanders and form Maryland Governor Martin O’Malley, she will be tempted to “evolve” her position once again, at least until she secures the nomination and state her opposition to the TPP, or more likely, try to be both “for it” and “against it” by claiming it is flawed as written but could be changed to be acceptable.  This approach however would be unlikely to satisfy Richard Trumka, the President of the AFL-CIO, labor’s umbrella organization and fierce opponent who has minced no words with respect to Hillary’s inconsistency and labor’s support for her and sitting members of the Democratic Party in the upcoming 2016 election.

                “Candidates can’t hedge their bets any longer and expect workers to rush to the polls in excitement, to run and door knock and phone bank and leaflet, only to have their candidate of choice turn a back towards the policies.”


President Obama has seemingly adopted the TransPacificPartnership as another “legacy” issue for his tenure as President and he is working hard to convince the Democratic opponents in Congress that their fears are unfounded.  His position with both the Democrat Left and the Republican Right are however, complicated by the fact that for tactical reasons the current draft of the agreement which is still being negotiated, has been kept secret (with the inevitable exception of leaks), to avoid political pressure and input in all the participating nations which could delay the successful negotiation by national administrations, potentially killing the project.  Once a final agreement is reached the Congress will have the opportunity to know and debate its contents, or as House Democratic Minority Leader Nancy Pelosi recommends (i.e. ObamaCare), they could just “pass it to find out what’s in it.”

Tuesday, March 17, 2015

IRAN: LEGACY, POLICY AND PETULANCE

As the nation limps into the final two years of the Obama experiment in the “style over substance” presidency, much is being made of the Obama “legacy”.  While this means different things to different people, it basically reflects how presidential historians will judge the President’s achievements in the context of political events and challenges both domestic and world-wide.  There will be the inevitable comparisons with previous presidents and “rankings” will be offered and revised over time.

Unfortunately, Obama himself seems to be attempting to govern at this late date in an effort to enhance his list of accomplishments and thus establish a positive legacy.  It is unfortunate because the challenges facing the nation need strong leadership that makes hard choices with the best hope of long term success, not public relations victories for the short term.  His “signature” policy, the Affordable Healthcare Act (ObamaCare), had it been popular, actually “affordable”, and easily accessible, would have been a major part of his legacy.  However, it has none of these attributes, a fact that has created the possibility of more of a Carter-like than Reaganesque  legacy.  

Carter is most remembered for a period of prolonged stagflation and his weak response to both the capture and 444 day imprisonment of the American embassy staff in Iran, and the Soviet invasion of Afghanistan.  Reagan has done somewhat better with his policies of strength towards the Soviet Union and its subsequent collapse. 
With ObamaCare  off the table as a candidate for part of a positive legacy, Obama has turned, almost with some desperation,  towards “executive action” rather than the more difficult demands of leadership and negotiation with the new and recalcitrant Republican Congress. 

These initiatives have a definite liberal orientation which Obama is apparently betting will have the best chance of being evaluated as historically important and positive by presidential historians who ar mostly college professors.  This has some risks however as his use of an Executive Order to create a major change to immigration policy without the inconvenience of Congress being involved in passing the necessary legislation may ultimately be seen as an unconstitutional abuse of presidential power. 

His veto of a bipartisan bill to allow the construction of the Canadian sponsored Keystone pipeline to deliver crude oil form Western Canada to refineries in Oklahoma and the Gulf Coast is an obvious pander to environmental extremists who oppose all fossil fuel development.  While Obama may want to be remembered as the “environmental President”, this decision is also politically unpopular  and largely symbolic since it will not have any impact on the production of oil in the regions in question.  So a political position that is both unpopular and ineffective is highly problematic as a legacy factor.
 
Obama however is also stubbornly hanging on to the hope that the prolonged negotiations with the Iranian government to prevent it from developing a nuclear weapons capability will be the kind of breakthrough that will do the legacy trick. 

It’s not going well.  No one, officially or otherwise, including the UN’s nuclear watch dog agency, the International Atomic Energy Agency (IAEA) believes the Iranian government’s claim that they are only pursuing research for medical and energy reasons.  Iran’s vast uranium enrichment infrastructure, much of which is conveniently buried in “hardened” sites, is not necessary for either of these peaceful enterprises.  Iran is engaging in nuclear weapons research and development and has been for over a decade.

The current negotiations with Iran are being conducted by the five permanent members of the UN Security Council, (U.S., UK, France, Russia, China) and  Germany, known as the P5+1.  These  attempts at a diplomatic solution to removing the threat during the Obama Administration’s two terms has followed the same track as the prior negotiations.  The Iranians consider talks and then stall.  Then they agree to talks but not to anything substantive and stall, all the while refusing to allow full inspections of their facilities by the IAEA.

Economic sanctions have been imposed by UN Security Council resolutions numerous times, as well as by individual nations including the U. S.  Combined with the effects of the world recession which began in 2008, the Iranian economy suffered substantial negative effects.  However, in January, 2014 the U.S. and the EU commenced a series of sanction relief measures pursuant to a prior agreement with Iran to suspend nuclear fuel enrichment processes and renew formal negotiations for a permanent solution to the enrichment question. This had the short term desired effect of bringing Iran back to the negotiating table.  But the sanctions imposing states made substantial concessions just to get the Iranians to negotiate without requiring anything substantive with respect to the enrichment process or enhanced inspections. 

Now a so called “framework” for specific agreements is supposedly “close” to being approved, although the time frame keeps getting set back.  Obama has threatened to “walk away” if the Iranians don’t agree to the proposed terms, a far cry from his earlier stance that Iran would not be allowed to develop a nuclear weapon, and his oft repeated, but not recent, statement that “all options are on the table”. This is diplomatic jargon which implies the threat of the use of military action as a last resort.  However, Obama has not inspired much confidence with “red line” threats in the past, as his blunders over the Syrian government’s use of chemical weapons on its own civilian populace demonstrated, and it is doubtful that the Iranian leadership takes it seriously.

But the quest for an Iranian component in this awkward legacy pursuit still dominates the process.  Unfortunately the proposed agreement that the Iranians are considering is flawed in several respects and has become a domestic political football.  

The problems with the proposed agreement are the provisions that allow Iran to keep their vast enrichment infrastructure, even though they would agree to deactivate it. Inspections are included but details are lacking and Iran has a history of non-compliance with previous inspections agreements.  Also, the entire agreement has a “sunset” clause that would make it inoperative in ten years.  This may seem like a long time to Obama whose term of office ends in less than two years, but to the Israelis it represents a clicking clock similar to that of the of “Doomsday Clock” maintained by the “Bulletin of Atomic Scientists which measures the proximity of global nuclear catastrophe.

 Iran’s development of long range ballistic missiles, the delivery system for nuclear weapons, has been ignored and there are also no political requirements with respect to Iran’s support of international terrorism or their overt hostility to Israel.

Sensing political opposition to the agreement and in line with his announced strategy of ignoring the Constitutional role of Congress in the creation of public policy, Obama has determined to make any agreement a matter of Executive fiat.  The President has much authority in the conduct of foreign policy but it is not exclusive.  The President’s treaty making authority is shared by the Senate which must approve by a two thirds majority and as a matter of political reality, significant agreements with foreign nations involving U.S. security interests need to have popular support as best defined by the people’s representatives in both houses of Congress. That is why Obama has asked the Congress for a joint authorization for the use of force against the terrorist Islamic State in Iraq and Syria.

Obama could agree to the Iran proposal as a form of executive agreement and he has broad powers to impose and remove economic sanctions but he needs a similar Congressional Resolution of approval at least to put an end to what would be a continuing  and debilitating political controversy.

The Iranian negotiations and proposed agreement have serious opposition in the Republican controlled Congress and the issue was dramatically elevated by the recent address to the Congress by Prime Minister Benjamin Netanyahu of Israel at the invitation of Speaker of the House John Boehner.

The Speaker did not seek President Obama’s approval prior to the invitation, which Obama condemned as a breach of protocol and a sign of disrespect. In a fit of petulance Obama refused to meet with the Prime Minister on his trip to Washington and the Administration’s supporters asked the Democrats in the Congress to boycott the speech.  This affront to the head of state of America’s only democratic ally in the Middle East is both personal and unprecedented.  Cooperation with Israel is essential in many areas of U.S. interests in the region and a failed personal relationship between the leaders over “protocol” is inexcusable.

The Prime Minister is not concerned with Obama’s “legacy” and has stated that “No deal is better than a bad deal” when it comes to Israel’s survival.
Netanyahu, who is not a party to the negotiations with Iran, made the point that Israel has the most at stake in the international effort to deny Iran a nuclear weapons capability.  He correctly pointed out that while the U.S. and the rest of the P5+1  nations which are conducting the negotiations have national security concerns with respect to nuclear weapons proliferation and regional instability in the Middle East, Israel’s concerns are the very survival of the Jewish state which Iran has vowed to “wipe from the map”.  Unfortunately, Obama has demonstrated a marked disdain for the positions of the Israeli government with respect to its security policies involving the conflict with the Palestinian Authority, the terrorist government  in Gaza and the on -going nuclear issues with Iran.

Another complicating factor has been the unusual act of 47 Republican Senators in writing a letter to the Iranian government making it clear that any agreement signed by the President without the approval of the Congress would last only as long as the President remained in office.  The implication was that a Republican President who might succeed Obama in 2017 would be free, and likely, to revoke U.S. participation and any obligations there in. 

This was an unfortunate and virtually unprecedented intrusion into the diplomatic process which is the proper domain of the Executive branch.  The letter, if it was to be written, should have been addressed to President Obama as a reminder of the importance of gaining Congressional input and approval for what has become a matter of vital U.S. security interests. 


It remains to be seen what the final agreement will look like, or if there is a final agreement.  Unfortunately, it appears that Obama and the other P+5 negotiators are more interested in getting an agreement than in getting an agreement that addresses all the major issues in an effective and permanent way.

Wednesday, February 25, 2015

REPUBLICAN PRESIDENTIAL RACE

With twelve or more “potential” presidential candidates and counting, the Republican effort is taking on the aspect of Yogi’s famous quote, “It’s déjà vu all over again”.  A dozen is plenty to form another circular firing squad to produce “The son of 2012”.
 
Granted, the ratio of credible candidates in terms of background and qualifications to the status seeking fringe dwellers is better this time but attempts by the Republican National Committee to avoid the chaos of the ridiculous number of primary debates in 2012 will be undermined by the sheer number of candidates.  “Debates”, which are really hyped group interviews and which are hijacked by publicity seeking moderators, simply can’t be organized around twelve or more candidates.  A two hour format with breaks, would allow less than four two and a half minute questions and answers per candidate.  

Even avoiding the Gong Show nonsense perpetrated by moderators in the past, the expectation of any serious discussions on policy positions would be very low.  The post-debate panels of “theater critics” focus on style over substance and alleged gaffes, to decide the “winners” and “losers”.

But that’s just the stylistic issue with this crowded field.  The more serious problem as exhibited in the 2012 primary election season was the fratricidal demonizing of the front runners even before the Democrats took their shots.

The primary campaign is a competition and it should demonstrate the differences in approach to important national issues.  The problem is that the inflated multi-candidate competition can become a desperate campaign of personal and hyper-ideological attacks to attract narrow interest group support which divide and disgust the broader conservative voting constituency and which provide fodder for the same kind of demonization by the Democratic candidate and “her” Greek chorus in the media and blogosphere.

Some conservative columnists have lauded the fact that there are “fresh faces” in this season’s stable of candidates, and indeed there are.  But fresh isn’t the same thing as credible or electable and “old” faces whose political shelf life is near their expiration  dates clutter up the landscape. 

Among the newer possibilities, some do stand out in a positive way.  However, it would be a mistake to take the response at Iowa’s recent “first in the nation” political event, the Iowa Freedom Summit, as a reliable measure of electibility on a national scale.

That the Iowa  caucuses to be held in January, 2016 are important because they are “first” is a media inflated assertion and they say little about competence.  Iowa voters are not  representative  of the national electorate nor reflective of Republicans and conservative leaning Independents nation-wide. This is easily demonstrated by the winners and runner ups in previous Iowa caucuses.

In 2008 the Iowa Republican Caucus winner in January, was Mike Huckabee who dropped out of the race in March after winning only 278 delegates in several primaries. The actual Republican nominee was John McCain who came in 4th in the Iowa caucuses. 
In 2012 the Republican Iowa Caucus winner was Rick Santorum who dropped out in April after accumulating only 250 delegates;  the Republican nominee was Mitt Romney.
 
Huckabee and Santorum are back.  It remains to be seen if their messages are different this time around but the narrow, faith based political orientation of Iowa’s mostly evangelical Christian Republican voters is likely to remain the same.

Huckabee, the former Baptist minister and Arkansas governor, already seems to be trying to repeat his caucus winning appeal to religious conservatives by criticizing gay marriage and sexuality of  all sorts.  These positions might get him some votes in socially conservative states as personal opinions  but  they don’t represent any  viable legal or public policy positions and stand in opposition to majorities in public opinion polls.

Santorum ran in 2012 as the anti-abortion, anti-birth control candidate which drowned out his other positions on economic and security matters.  If he follows Huckabee’s lead and tries to repeat a social issues victory in the non-representative Iowa caucuses in 2016, he will split the religious conservative vote with Huckabee and both will become  early second time historical footnotes.
 
Rick Perry, quasi-“fresh face” former governor of Texas and brief Republican candidate in 2012 is looking like he’s giving it another try.  If so, he can be expected to combine traditional southern conservatism with emphasis on the vibrant Texas economy in comparison with the slower and struggling economies of other states.  It remains to be seen if the recent slump in oil prices and attendant lay-offs in the heavily energy dependent Texas economy will harm this message.  He lasted only four months in 2012 and dropped out after saying in a televised debate that he would cut several federal cabinet departments if elected President but then couldn’t remember which ones.  

He is not an exciting speaker but if he can remember his positions this time he might last at least past the Iowa Caucuses in January but it is hard to see that he would have much appeal in the second primary in New Hampshire where Texas drawls and social issues don’t excite the voters as much as economic issues.

Sarah Palin showed up at the Iowa Freedom Summit after saying she was “interested” in running  for President.  She isn’t.  She is just trying to keep her name in the media discussion to support  her dwindling  speaking fees.  She has no personal money raising ability, no competent staff, and no desire to do the hard work to become conversant with the important issues. That is a good thing since she would be embarrassing side show as she was when she gave a cringe inducing, head shaking and incredibly incoherent speech to the befuddled conservatives at the Summit. 

 Since her similarly rambling speech while resigning from the governorship of Alaska in 2009, Palin has demonstrated the same remarkable empty headedness and lack of intellectual curiosity that contributed to the failed McCain/Palin campaign in 2008. She has has since limited her public political pronouncements to ideological platitudes, semi-comical attacks on the “lame stream media” and anti-liberal bumper sticker quality slogans.  It is unlikely that she would again subject herself to a public test of thoughtfulness in a televised debate.

But what  about  the  “new faces” for 2016?   At this point are there is much talk about Wisconsin Governor Scott Walker who made his reputation by taking on public employee unions, surviving a union inspired recall election, and then going on to win a second term in the next general election, all in the “blue” state of Wisconsin. 

That history certainly has appeal to Republicans and will keep Walker in the news, and the race  unless he fails to formulate a broader vision and specific policies that recommend him to a wide segment of voters.  As the current threat to Hillary by virtue of positive poll numbers, his lack of a four year college degree has been hyped by liberal foot soldiers in the media but is over stated.  He finished three years and quit to go to work , and his lack of a diploma might not hurt him with the 74% of the population who also do not have college degrees.   

His success will depend on his intellectual acumen and grasp of public policy issues which will determine his fitness for office, but that is to come. Recently however, he has been tempted to try for an early win by  emphasizing  the positions  on abortion and gay marriage that appear to be litmus tests for Republican voters in Iowa.  Once stated those positions become embedded in a candidate’s  public perception of him and will harden opposition among  more centrist voters.

Chris Christy, the Republican governor of “bright blue” New Jersey is indeed a “fresh face” with a fresh “say it like it is” personality which has a certain appeal to those who see most politicians  as double talking and unassertive.  His early popularity in polls vs. Hillary brought immediate attacks from the threatened liberal punditry but proved ineffective.  He is not the rigid social conservative that Iowa voters like but he is emphasizing other issues and could be a surprise player.

Rand Paul, the Republican Senator from Kentucky is an interesting candidate since as a libertarian he doesn’t represent the typical conservative politician who accepts certain levels of government as inevitable and/or  necessary, as well as greater levels of foreign policy and military involvement.  Paul has been trying to move to the middle some, as well as adopting some positions traditionally found on the Left such as criticizing the “security state” with regard to surveillance and privacy.  But an isolationist foreign and trade policy is difficult to sell in a world immersed in globalization and beset by economic challenges, instability, and terrorist threats.  Still, Paul offers an interesting counter point to international activism and appeals to voters who want the rest of the world to solve their own problems.

Marko Rubio, Republican Senator from Florida comes across as intelligent, articulate and compatible with traditional conservative positions.  He is also “Hispanic” in the Cuban immigrant sense of the word, and has a political base in Florida which is a very  important  electoral college state.  He is also young (43) and may seem to some voters as still relatively inexperienced and untested.

Ted Cruz is the junior senator from Texas.  While a “new face” and an unrepentant social and ideological conservative, he often appears strident and unrealistically uncompromising, as his willingness to deny passing a continuing resolution to fund federal government operations and avoid another politically disastrous government shutdown has shown.  

His focus on repealing Obamacare has made him a popular  figure  among  those who see this program as Obama’s biggest failure, but Cruz will have to broaden his appeal. He is a first term Senator and at 44 also relatively young.  He sports an Hispanic name but while his father is Cuban born, his mother, a natural born American citizen, is not and he was born in Canada, thus his appeal to the mostly Mexican and Central American Hispanic voters based simply on ethnicity is questionable.

That leaves the rest of the “fresh faces” with the exception of Jeb Bush, which as a group fall into a category best described as “clutter”.  “Dark horses” have occasionally emerged in U.S. national politics but the reality of the need for huge financial support, experienced staff and the ability to capture a defining  issue  makes  these  candidates real underdogs.

Ben Carson is a soft spoken values candidate.  His background, and only expertise  as a neurosurgeon detracts from his credibility as the potential “leader of the free world”.  Following  a President who entered office with little on his resume’ to recommend him as a competent candidate and then proving over and over that he wasn’t, will be a tough sell for the surgeon.

He currently seems to be adopting the role as the “conscience of the conservative” movement and he will have to address the need for specific policies which he can explain and justify if he wants to attract financial support and progress past the social issue primaries in Iowa and mostly southern states, which seems highly unlikely.

Carly Fiarino is this year’s “female Republican candidate”, maybe.  In 2012 it was former Representative Michele Bachmann .  Being female  wasn’t  enough for Bachmann and won’t be enough for Fiarino.  While Bachmann suffered from terminal goofiness, Fiarino enters the race, if she does, suffering   from a complete lack of political experience.  

Nonetheless, there is a quasi-strategy among some of the candidates who are governors or former governors which touts their “non-Washington” background.  Whether Fiarino could use this to her advantage remains to be seen.  What is known about her is that she made a successful career in technology, rising from an administrative trainee at AT&T in 1980  to CEO of tech giant Hewlett-Packard in 1997.  Much was made of her being a “first female CEO”, “most powerful female in business” etc. which could be a slight asset in a presidential race but not a defining one.  The downside of her background is the fact that she was fired from Hewlett-Packard in 2005 after a dispute with its Board of Directors.  

Since then she has herself made a career out of serving on numerous other corporate and non-profit boards.  Her one foray into electoral politics was a failed 2010 attempt to unseat Democratic California Senator Barbara Boxer in an election which she lost badly.  All in all, besides being female and having a strong private sector and executive background there is not much that separates her from most of the other potential candidates and it will be a difficult task to excite and inspire a political following sufficient for the job.


That leaves Jeb Bush who is either the “elephant in the room” or the dark shadow of the former president, his brother George W. Bush.  He is smart, articulate, and was a popular governor of Florida.  He has been cast as a “moderate” by both his supporters and his adversaries.  Hard core conservatives denounce his public stands on immigration and the “Common Core” education initiative.  Independents and center Left voters might like him but dedicated liberals see him as the heir to George W.’s presidency which they condemn as incompetent and dominated by a “failed” war in Iraq. For some voters three Bush’s in the White House might just seem to be “too much”.  However, compared to two Clintons it might not seem too bad.  

The Republican “establishment” i.e. big donors, seem to be coalescing  around his candidacy  but it is very early in the process and he will have to withstand  the “too moderate” criticisms from the Republican Right and the “too Bush” criticisms  from the Democratic punditry  for the long haul.

For Jeb, being a “moderate” isn’t good in the early Republican primaries of Iowa and South Carolina which pundits like to characterize as make or break contests.  New Hampshire which follows Iowa is conservative but less dominated by social issues and that primary might be a launching pad or a “flame out”  for Jeb. Mitt Romney was attacked for the same lack of ideological rigidity but overcame it by simply appearing to be the most electable, in no small part because voters outside the doctrinaire Right saw him as more moderate.  So far Bush’s early poll numbers show him to be withstanding the “too moderate” narrative but the primary season hasn’t yet formally begun and all the candidates will eventually have to show that they have actual answers to the nation’s problems.  Unfortunately, this effort will be clouded by exaggerated ideological and personal  attacks  as the candidates try to separate themselves from their opponents.  Hopefully,  this herd  of candidates will dwindle to a number insufficient to form the circular firing squad and the target will switch to Hillary.




Thursday, February 5, 2015

GREECE: ADVANCED WELFARE STATE MEETS REALITY



The recent election in Greece of a far Left government presents a challenge to decades of thinking in the halls of European Union and the 19 nation Eurozone group.  Always oriented to the Left in spite of the usual “conservative/democratic socialist” pendulum swings among the governments in the member nations, the treaty based organizations now find themselves dealing with a revolt against fiscal discipline in a small nation that ironically is “too entrenched in the system to fail”. 

New Prime Minister Alexis Tsipras led his Syriza party to a parliamentary plurality with the appeal of his defiance of a punishing austerity program imposed on the Greek economy by its bail out saviors, the European Central Bank and the International Monetary Fund. 

Years of corruption, tax evasion and profligate government spending to support the never ending demands of a huge and highly unionized public labor force and the purchase of voters support through the unsupportable expenditures of an advanced welfare state, brought about the inevitable reality of economic crisis.

The crisis is not new but the tipping point was the 2009 world-wide recession.  In 2010, when Greece faced the possibility of not being able to pay its international debts the EU and IMF extended two “bailouts” in the form of $140 billion and $165 billion.  Private sector investors (banks) wrote off three quarters of the value of their Greek government bond purchases and recast the remaining balances to longer maturity dates and lower interest rates.

These actions did not represent “gifts”.  Conditions were attached which included significant government spending cuts, tax increases and major “labor market and government pension reforms” (cuts).  However, so  dependent by the government on the injection of liquidity into the economy by its spending patterns that the “austerity” reforms had the effect of drastically reducing government tax revenue.   The result was a kind of circular and self -reinforcing crisis. The crisis also led to potential bond purchasers to demand significantly higher rates of return which also heightened the burden of future repayment of interest and principle.

In spite of the hardships and contradictory outcomes of the austerity conditions ECB officials, led by Germany and IMF officials held fast to their determination that any relief demanded that the Greek government bring about future financial stability and live up to their repayment obligations for the loans already paid out.  That resolve remains today as tax payers (and voters) in financially stable Eurozone nations object to bailing out what they see as irresponsible excesses by former Greek governments.

Eurozone finance ministers in 2012 gave Greece until  2016  to meet the required deficit reduction requirements.  This is a huge problem as Greek debt and the interest payments it produces amounted to $407 billion or 175 % of GDP.  With   government tax revenue, already low because of rampant evasion, it was, and remains,  grossly inadequate.

The politics of the crisis represent a seemingly impossible conundrum.  From the point of view of the ECB,  private sector investors and the IMF, loan forgiveness, new loans and below market interest rate concessions without the necessary cuts in spending which demand cuts in public services, public employment, and tax reform, creates a permanent black hole of international support. 

However, without support in the short term the Greek government is in danger of default on its sovereign debt.  This debt is issued in the Eurozone currency, the Euro.  Default would result in the devaluation of the Euro across the zone and would probably require Greece to drop out of the Eurozone.  That in itself would exacerbate the crisis since a return to the Greek drachma currency would immediately result in a major devaluation of that currency since Greek debt would no longer be propped up by the Euro.  This would make it almost impossible for Greece to borrow in international financial markets as well as cause hyper-inflation in Greece as everything imported would be much more costly.  The prospect of a nation essentially going bankrupt would loom on the horizon.  EU leaders want to avoid such a scenario if at all possible.

This would seem to point to tough negotiations to achieve some sort of compromise which afforded new bail out monies and a continuation of,  if somewhat less stringent, austerity measures. 

Now the context of negotiations has changed with the new Greek government.  The hardships of the situation on the Greek people have produced a reaction which focuses on relief from the austerity program without concern for the longer term prospects of a lack of reform.  This should not be a surprise given the growing strength of the political Left in Greece and in other southern European nations hard hit by the recent financial crisis, especially Spain and Portugal.

The victor in the January, 2015 Greek election, the Syriza party is led by Alex Tsipras.  Syriza is actually an acronym for the group named the Radical Coalition of the Left, itself an umbrella group of leftist parties.  Mr. Tsipras, a forty year old activist and now Prime Minister, came from the youth wing of the Greek Communist Party, and was a candidate for mayor of Athens in 2006.

He campaigned on a vow to reject the austerity program required by the extenders of the billions of bail out money and to demand a renegotiation of all terms.  That such a promise was politically popular is no surprise.  What is a bit unusual and reflective of the widespread unhappiness with the conditions is the creation of the “strange bedfellow” of Right wing party New Democracy with which Tsipras formed a coalition government in order to create a parliamentary majority.

It remains to be seen how long this “marriage of convenience” will last.  What they have in common is a strong anti-austerity position.  New Democracy leader Panos Kammenos has described the nation’s creditors as “foreign conquerors” but unlike the Sryiza Party’s current position which endorses continued membership in the Eurozone,  New Democracy feels that Greek sovereignty has been diminished by the EU and IMF.

The prospects for a workable negotiated compromise are daunting.  Market factors which are not controlled by either side are having a dramatic impact on the problem.   In response to the new Left wing government’s election,  concerned investors drove Greek stock prices down  and borrowing costs up.  Bank shares lost 27% after the election.

In simple terms the short term Greek situation is as follows:

The bail out in progress by the ECB, the European Commission and the IMF is scheduled to end on February 28, 2015.  Under prior agreement an additional 1.8 billion Euros could be provided in the form of loans if the new Greek government fulfilled the “austerity” conditions previously required.  However estimates of the amount Greece will need to meet its obligations in the first quarter of 2015 run as high as 4.3 billion Euros leaving the Greek government  little leverage in negotiations to renegotiate debt already outstanding.

The Greek Prime Minister and Finance Minister are traveling the capitals of Europe  (2-4-15) for meetings with top political and European Union officials in an attempt to negotiate the required terms to keep the Greek economy afloat.  Early reports indicate that the Greek officials have “blinked” with regard to their domestic assertions that Eurozone held debt would have to be “written down” i.e. forgiven at least partially.  Resistance by Germany and EU officials made this a non-starter in negotiations .  However, there have also been some conciliatory remarks from the President Hollande  of France with respect to the need to find some compromise. 

However the political situation which results from Prime Minister Tsipras victory has made his ability to negotiate much more difficult even if he wanted to, which is dubious given his background and ideological orientation.  He promised to increase government spending,  not reduce it.  Included in this effort was to be forgiveness of electrical bills, expansion of food stamps and an apparent abandonment of a proposal to raise revenue by privatizing government owned entities, as well as the more general promise to seriously diminish the austerity program through renegotiation.  Failure to live up to these election promises could create significant political problems for his government coalition.

The political stakes are also significant for the Eurozone since major concessions to Greece will not be lost on Leftist and populist movements in other struggling countries such as Spain.  Germany and the EU Commission which is executive branch of the entire European Union, are very concerned that such a turn of events could destroy the cohesiveness of the Union and drastically affect the value of the Euro.  Nonetheless,  a failure of Greece to take the necessary steps to stabilize its economy and default on its debt could bring about a voluntary or mandatory withdrawal from the Eurozone which Germany and the Commission also want to avoid.

The multiple causes of the Greek crisis may offer lessons for other EU and Eurozone nations which are already known and may come too late to avoid .  A fundamental flaw in the structure of the Eurozone contributed and remains.  The European Central Bank, a rough equivalent of the U.S. Federal Reserve Bank was charged with managing monetary policy for the Eurozone nations.  The difficulty of imposing a single policy on nineteen different political economies and political cultures was clearly underestimated.  Inflation, employment, export vs. domestic industrial prospects and the ability of the central banks of the individual countries in the zone to issue debt denominated in the shared currency all represent a weakness in the system.

 Also in Greece as in most of the EU nations, the ideological orientation which informs the creation of advanced welfare states lays at the foundation of the crisis.  A bloated public employee sector designed to provide political patronage and prop up employment produces nothing to contribute to economic growth and demands constant increases in expenditures in the form of wages, benefits and retirement. 

Tax evasion was tolerated and public services and ever growing entitlements expanded as deficits were funded by debt creation.  The reality check imposed by the 2009 world recession brought an end to the cycle of debt creation, interest obligations and unchecked social program expansion.  The  debt service to revenue ratio simply became unsupportable.  This is basic economics but the demands of domestic politics turned the heads of the political leadership and the crisis imploded.

Now citizens of Greece and other southern European nations blame their governments for the harsh remedies imposed by international lenders without much concern about the failed underlying policies from which they benefitted.  The so called array of “populist” movements will try to defy the dynamics of the self- correcting capitalist systems but will inevitably fail.

The results of the Greek crisis do not apply equally to the U.S. but the symptoms are relevant.  The U.S. economy is huge and diversified and it enjoys the benefits of the U.S. dollar being the foremost international reserve currency.  But the constant expansion of advanced welfare state characteristics, especially uncontrolled federal debt to pay for associated excessive spending will have consequences.  Higher interest rates to renew such debt and the growing diversion of national income to service the debt, at some point will put pressures for devaluation of the dollar against other currencies and will be inflationary by making foreign imports more expensive.  The Federal Reserve’s response to inflationary pressures will be to reduce the money supply by selling government bonds and raising short term interest rates. It is a delicate balance and the current deficit/debt growth and the ideologically based expansion of government demands similar attention as that being applied to Greece.