A RISING TIDE FAILING TO LIFT ALL BOATS

Reuters online recently began a series it calls The Unequal State of America. http://www.reuters.com/subjects/income-inequality/washington The first article in the series asserts that an increase in government spending has increased income inequality by enriching Washington’s government contractors without reducing poverty levels in DC.

The article fails to zero in on the true causes of inequality and the remedies implied. The causes boil down to failure in two arenas: education, and entrepreneurship.

Naturally a booming industry in any economy will make some people wealthy. In our economic system those people will be business owners, and the skilled, educated workers who command relatively high salaries. Why has a booming contracting industry not resulted in better jobs for the worker bees? Because many of them do not have the skills or training to get the high paying jobs and are stuck on low level clerical positions.

The interim steps that enable one to work their way up the ladder are not there, largely because technology has made many of these jobs unnecessary. Some of the low level work is probably being done overseas though overseas outsourcing is not the main culprit in this case and is barely mentioned in the Reuters piece. No, the problem here is that too many workers do not have the skills that employers need. That is a failure of education. Our schools have failed to train students for the jobs that are in demand.

The article also does not say much about the people at the top. Who are they and how did they get there? These are people who through some combination of their family background, education, career networks, and their own internal drive were in position to see an unmet need, and start (or buy) a company to fill it. Why can’t some of the people mentioned in the article scratching and clawing to make $9 an hour start companies to get some of the contracting pie—or sell to someone getting a piece of the pie. They would build wealth for themselves and jobs for others in their community, but they need to be shown a way in.

Two things need to happen for this economy to work for more people than it currently does: First, on the education front, school systems need to tailor their curriculum to teach the skills that employers want. But that’s not all. What employers want will change over time and we cannot predict how or when they will change. We must therefore teach not only skills, but how to acquire skills—i.e. how to adapt to changing demand in the labor market.

Second, the path to business ownership has to be made a lot clearer to a lot more people than it currently is. Necessary steps include the obvious such as access to capital, and technical assistance to teach management basics like accounting and budgeting. What may not be so obvious to some, is the need to instill the possibility of owning a business at an early age. The good news is that we have a robust infrastructure well positioned to tackle the problem, from the Kaufman Foundation to the National Minority Supplier Development Council to a variety of local and national small business assistance organizations, it’s simply a matter of having them reach a wider audience.

While both the education and the entrepreneurial fronts are fairly obvious, making them true poverty reduction strategies has been difficult. The incentives do not always point us in the right direction. However, if we do not take action, we will continue to see significant number of our fellow citizens left behind, and one way or another, we’ll all feel the effects.

 

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Gun Control after Newtown

The United States has too many guns. Guns are too easy to get. There are guns for sale to the public that have no other purpose other than homicide.

While we cannot say definitively that making deadly weapons a bit more difficult to acquire (at least more difficult than a car!) would put a stop to tragedies like the one in Connecticut, they can at least make them a bit more difficult to plan and less lethal when they do occur.

If the killer had to work a little harder to buy the guns or steal them maybe there would have been time for someone to notice something. If a mental health professional could officially determine that he is potentially dangerous, he would at least have to get the guns illegally which would involve greater expense and more risk. If the guns held less ammunition there likely would have been less killing.

None of these measures remove the need to make mental health treatment more available. Nor do they deter legitimate gun owners from exercising their 2nd Amendment rights.

The point is we can take significant steps to minimize this kind of violence. What is required is the political will and a public willing to stand up for politicians who do the right thing, and against the gun lobby.

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The Non-Case Against Susan Rice

Why were republicans so intent on keeping Susan Rice from becoming Secretary of State? She never showed any sign of going off-script. She always supported standard American Establishment foreign policy. Never went off the rails toward anything radical, never scared Israel like Andy Young did in the 70s. When she went on television to explain what happened in Benghazi she was little more than a messenger. Diplomatic security is not her responsibility.

Was it to derail the Obama agenda in some way? I hope that our politics hasn’t become so divisive that the opposition would make weakening the president’s hand such a priority.

Dare we wonder if it was because she’s a Black woman? John Kerry, the new front runner for the nomination—also a good choice, would be the first White guy in that job in 16 years since Warren Christopher. Are there folks on the right—the same characters who question President Obama’s legitimacy who would like to restore what they perceive as the natural order?

The other question is why Obama and his allies in Congress did not fight for her. The President himself strongly defended Amb. Rice, but we did not hear much from fellow Democrats in Congress or from the executive branch. After today’s announcements from the independent inquiry on the Benghazi attack, one wonders if someone feels a need to divert blame away from Hilary Clinton.

These questions remain unanswered and will continue to be the subject of much speculation. What does seem clear is that if you want to stop a political appointment by this administration all it takes is a little resistance.

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The UN Vote on Palestinian Status – Why it Does Not Matter

Well it happened as expected. The UN General Assembly voted to grant the Palestinian Authority Non-Member Observer status, a step toward UN recognition of a Palestinian state. Not surprisingly there was much celebration at the UN, and among Palestinians and their supporters. In fact however, nothing has changed.

It is already well known that most of the world, particularly the developing world sides with the Palestinians and that voting record of the UN General Assemble demonstrates that Israel is wildly unpopular in the UN. This vote is simply another example.

The restrictions on basic liberties that make Palestinian’s lives so difficult remain. The checkpoints in the West Bank and the military ring around Gaza are still there. The small everyday insults that go unreported in the global press will not stop.

Last Thursday’s vote will not reduce the level of fear among Israelis that causes them to impose draconian measures against the Palestinians and to elect the most hard-line, violence prone factions in Israeli politics.

The vote does not legitimize Hamas‘ violence against Israel, nor does it make any less foolish the Hamas tactics which do nothing to change Israeli policy while strengthening the violence-prone government still in power and weakening anyone in Israel prone to negotiation or sympathetic to the Palestinian plight.

Settlements in the West Bank continue. It was reported Friday Nov. 30 that Israel is planning to build housing for 3000 settler families in the West Bank. Yes, one day the Palestinians might maneuver to have them declared illegal by the International Criminal Court, but that will not end the settlements. Only a negotiated agreement between the two parties—with the encouragement/pressure from the international community (this means you US, Quartet, Arab League!) will make a meaningful difference on the ground.

The vote does not change the fact that peace will not come to the region until Palestinians and Israelis figure out how to share that little piece of land that they both have a good case for calling home.

We actually like the tone and substance of Ambassador Rice’s statement explaining the US vote. http://usun.state.gov/briefing/statements/201226.htm

We however believe that the US should have abstained. Abstention would emphasize how little the vote matters to the reality on the ground and at the same time implies the even handed posture we should maintain toward the region.

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An open letter to President Obama

 

 

Dear Mr. President:

 

Congratulations on your decisive re-election victory last week. I am pleased at the nation’s affirmation of your approach to governing. I am also glad that your victory was made possible by such a broad, multicultural cross section of grass-roots America.

 

This is the first of an occasional series of notes in which I respectfully suggest approaches in dealing with some of the key issues facing the nation.

 

With the so-called fiscal cliff looming the budget is the most immediate issue and therefore the subject of this first message.

 

My view is that while it is critical that we address our nation’s fiscal situation, it is not an immediate crisis. Getting the economy growing and creating jobs is the most immediate concern. Not only is job creation and economic growth the most immediate priority, success in that issue would make it easier to control spending. Thus I favor a grand strategy that focuses on job creation now and then pivots to a determined deficit reduction mode that would make the Concord Coalition proud.

 

The pivot to deficit reduction should occur upon the achievement of a significant growth milestone. What that milestone is would be subject to debate and negotiation. Examples:

  • 3 consecutive quarters of real economic growth exceeding 2.5%.
  • 3 consecutive months of unemployment below 7 percent with at least 200,000 net new jobs per month.

 

You get the picture. When the time comes to pivot I suggest that you

1) Follow the money. Deal with Social Security, Medicare/Medicaid, and defense in that order. Significant progress on these would reduce the need for cuts in discretionary social spending that have little budgetary impact but big social impact.

2) Use Bowles-Simpson as the starting point for beginning negotiations. You’ll have the spirit of compromise built in. Rep Schakowski will pull in one direction, Rep. Ryan in the other. Hopefully we’ll end up with something sensible.

 

I would like to offer one approach, based on the broad recommendation in Bowles-Simpson and some possible deficit reduction measures listed by the Congressional Budget Office.

 

Bowles-Simpson proposes $200 billion in spending cuts including a 15% reduction in defense spending and a 10% reduction in the federal workforce. Bowles-Simpson also adds $100 billion in revenue by imposing a $.15/gallon fuel tax and eliminates several deductions including mortgage interest. Thus Bowles-Simpson results in about $300billion in deficit reduction.

 

The CBO presents a long list of potential deficit reduction measures, some of which are quite drastic in my view and take a lot of money out of average workers’ pockets. I have selected several which have significant budget impact:

 

 

 

SPENDING REDUCTIONS
Mandatory Spending
Raise Medicare eligibility to 67 30
Reduce Floor on Medicaid Fed matching 20
Add Public Plan to exchanges 15
Link Social Sec to prices instead of earnings 30
Raise full retirement age in Social Security 30
Raise earliest eligibility age of Social Sec. 30
Total Mandatory Spending 155
   
Discretionary Spending
Defense appropriation per Bud. Control Act 75
   
Spending Reductions 230

 

REVENUE ADDITIONS
High income tax cuts expire, keep estate tax 110
Increase fuel tax 25 cents a gallon 30
Repeal domestic production deduction 20
   
Revenue Additions 160
   
Total Deficit Reduction 390

 

That’s almost $400 million in deficit reduction. If you really want to make positive change and reduce the deficit even further you could more aggressively cut defense spending. Bowles-Simpson’s 15% would be larger than the CBO number. You could phase out wasteful market distorting subsidies in energy and the farm sector. Finally—and this needs to happen for a number of reasons—please finish what you started in the 1st term’s dramatic reform of healthcare. We must bring down the cost. I know you’ve all read Gawande and understand the damage done by the fee for service model. If you can reduce healthcare’s share of GDP, you can reduce Medicare even further and perhaps preserve benefits for recipients.

 

These are tough choices to make and I don’t envy you having to make them. But the approach and significant measures I’ve put forth will take a bi slice out of the deficit, with a minimum of economic pain. Yet there are plenty of places to split differences and compromise where necessary. It shows the world and the financial markets that we’re serious while leaving room for you to implement your other policy priorities.

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About Folks on the Hill

Folks on the Hill are here to share thoughts opinions and information about global, national, and local issues that affect our lives. Folks in the Hill are citizens of the United States and of the world. We value interaction and engagement with people of all cultures and all nations. We regard global trade as a benefit to humankind that should be encouraged at every opportunity. We regard war as human behavior at its lowest, and a sign of failure.

We welcome comment, constructive criticism and dialogue.

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