Friday, September 20, 2013

Defund Republicare

Republicans in the United States House of Representatives are using the federal deficit and national debt, and coming need to authorize a higher ceiling for the debt, as an excuse to try to defund Obamacare (Affordable Care Act).

How about a little fight from the Democratic Party side? How about a little offense, instead of the usual half-hearted defense?

How about defunding Republicare, the vast system of federal spending and tax breaks that is the millionaires' equivalent of the Food Stamp program?

How about refusing to fund the debt ceiling unless the military budget and homeland security budgets are cut by, say, 75%? How about a mean, lean, U.S. force that just defends U.S. territory and leaves the rest of the world to mind its own business?

How about defunding the capital gains tax break. Rich people, truly rich people, get almost all of their money through inheritances and capital gains. When they can't evade capital gains taxes altogether, they only pay 15%. Is that fair? Is that right, when working people making $50,000 per year pay 30%, and families making between $50,000 and $100,000 per year pay a much higher tax rate?

Why do the Democrats always fail to stand up to the rich bully boys who fund the Tea Party and even the mainstream Republican politicians? You know why. Democratic Party politicians use rhetoric to get working class and middle class votes, but they are almost all on the business lobby payroll.

How about defunding the agriculture programs that were set up to help Depression Era small farmers and now funnel hundreds of billions of dollars to corporate farmers, many of whom actually just sit in urban penthouses, collecting government welfare checks?

How about defunding DEA anti-marijuana operations? They just drive up the price of marijuana, creating black market profits, a sliver of which are sufficient to bribe Republicans and Democrats alike to keep Marijuana Prohibition on the law books.

How about defunding Israel? Why are American taxpayers sending vast sums of money to a weathy nation that abuses women, subsidizes a vast welfare scheme for ultraconservative cults, takes the private property of Palestinians without due process of law, and generally causes about a billion people in the world to hate the U.S. government?

There are a lot of other smaller programs that waste money subsidizing America's richest citizens, and even foreigners. Each program should be looked at. And no matter how loud the campaign donors scream, the subsidies should be eliminated. In many cases, like the federal transportation program, the same dollars could alternatively go much further if the profits of contractors were limited to a fair rate.

But Democratic Party politicians are as bad as Republicans when it comes to protecting their own rivers of corruption. Democrats like to call something a program to help the poor, then use it to subsidize giant construction and real estate companies that kick back to urban Democratic Party machines. So while we're in liposuction mode, let's eliminate all but the regulatory functions of the Department of Housing and Urban Development.

Unlike most Democrats, I believe the nearly 17 trillion dollar federal debt is a serious problem, and is going to be more of a problem going forward. History shows that nations that overburden themselves with debt eventually fail. [See Bankruptcy and Beyond]

But don't expect Democrats to show any backbone. The Democrats have used their backbone to help ordinary citizens for only 8 years of the 200 year history: 1932 to 1936 and 1964 to 1968. Barack Obama and most of his faithful are politically to the right of Richard Nixon and Dwight Eisenhower. The main use of Democratic Party backbone between 1824 and 1964 was to protect slavery and then segregation.

But the real problem, perhaps, is not the politicians. Like thieves, they mostly just get away with whatever the citizens leave laying around loose and unguarded. The American working class is lame. The high hopes of the Marxists for the class came to naught. A surprising number of working class people spout Tea Party nonsense, often because their minds are rotted out by Christian doctrines. But even those who see the problems won't fight for their rights, and are mostly afraid to speak out. They are afraid to unionize, they are afraid to vote for better democrats in primaries or leftist parties when the Democratic candidate is useless.

And what of the middle class? Normally a reservoir of energy and intelligence, the American middle class was corrupted by easy living during the golden age of American imperialism. People expect to inherit a middle class lifestyle. That isn't going to happen much anymore. You are going to have to fight for your living, and not just in the economic arena, or by getting a college education. And if the middle class does not learn to fight in the political arena, and fight the right people (the robber barons, not the working folk) this nation's historical descent will be even more rapid than its rise.

Defund Republicare!

Tuesday, September 17, 2013

Bankruptcy and Beyond, Federal Style

The federal government of the United States is bankrupt. Only the irrational willingness of investors to lend money by buying federal bonds and treasury notes is preventing the recognition of bankruptcy.

So, bankruptcy will happen, even if they try to call it by another name. In a bankruptcy creditors do not get paid in full. But even in a normal corporate bankruptcy there is a struggle about who gets shafted the worst. In the federal case there will be many options. Most likely the federal government will muddle on, in a greatly weakened form. Sadly, the negative effects on people will spiral outward far beyond those most at risk, long-term federal bond holders.

While there are many historical precedents for the bankruptcy of nations, including the recent Greek writedown of public debt, the closest historical example was the situation in the British Empire after World War II.

The British Empire was the largest, most brutal empire in the history of the world. Over a half billion people and a quarter of the world's landmass suffered under the British jackboot by the outbreak of World War I in 1914. The British in their home island were filthy rich from centuries of looting. They had a powerfor military and a large industrial establishment. Even the working classes in England enjoyed a high standard of living. But the cost of two World Wars, largely financed by loans from the United States, left the Brits in a fix in 1946.

The Empire was in revolt, and Britain could not afford to keep it in chains. The American Empire, which governed through puppets and business relationships, muscled in on the British colonies. Food and other necessities were rationed in Britain until 1950. While the British economy (in Britain itself, not the Empire as a whole) recovered slowly during the 1950s and 1960s, Britain has never been able to regain its global dominance.

The United States is the only major industrialized nation that did not have its factories maimed by bombing in World War II. This led to the Golden Age of the American economy, which lasted roughly from 1940 until the 1973 oil crisis. Americans of all classes grew lazy and (both literally and figuratively) fat.

During most years since World War II the U.S. national debt has grown. In other words, despite the prosperity up until 1973, the federal government spent more money than it collected in taxes. According to Keynesian economic theory, this was not a problem, as long as the growth in debt did not greatly outpace the growth in economic output.

But the growth in debt has greatly outpaced the growth in economic output. As I write the national debt is approaching $17.0 trillion. A trillion dollars is a thousand billion dollars. A billion dollars is a thousand million dollars.

Nothing to worry about, according to (mostly Democratic Party) politicians. Why that is only $53,500 per citizen. [But it is twice that per person in the work force, and the median wealth of people in the work force is near zero] Why, once we get the economy revved up again (despite the efforts of the Republican Party), we will reduce the annual federal budget deficit to a tolerable level. Anyway, it's just money we owe ourselves, right?

A U.S. bond is a promise to pay interest and principle on a given date. If the government does not pay, it is admitting to bankruptcy. The interest rate on the debt is set in auctions. Since 2008 interest paid on bonds and bills has been very low compared to historic levels. On federal securities issued for under 2 years, the interest paid is near zero. If interest rates go up the interest on the debt will put the U.S. in a death spiral.

U.S. federal spending is running at an annual rate of about $3.5 trillion. Interest on the debt is currently running at only a quarter of a trillion dollars. If the overall interest on the current debt increased to 5% per year, (not a record) the interest would be $0.85 trillion per year. The current run rate of the federal deficit is about $0.8 trillion per year, though that is trending down as the economy improves. A fair guess is that the national debt would continue to expand at about a trillion a year.

Aside from a magically booming economy that somehow did not coincide with high interest rates, the only way to even put a cap on the debt would be to raise taxes substantially or cut spending substantially, or some combination of both. Politicians talk about that, but they always put actually doing it three to five years in the future.

In reality we are not going to see any further major tax increases or spending reductions. The higher interest rates will be financed by issuing even more debt.

The music will continue until enough investors refuse to get stuck holding federal debt.

The other practical solution to the problem is engineering a high rate of inflation. While that would make new debt expensive to issue (high interest rates) it would allow increased tax collections to (perhaps) balance the deficit and even pay off the old debt. It probably would not work, however, because Social Security payments are indexed to inflation.

No one knows when, but the end of debt expansion will cause an economic crash. No one knows how bad of a crash, but probably at least as bad as the one in 2008. Which of course makes it even harder to pay the national debt. The government will have to either repudiate the national debt or dissolve itself. My guess is it will repudiate the debt. It will continue to collect taxes, and it will continue to spend money to keep people (particularly rich people) from rioting too much, but bond holders will be left with paper of dubious value. There will be promises that payments will resume, some day. Some day will never come. The only alternative would be crushing tax hikes. Even crushing the rich with a 90% tax on millionaires would not do the trick.

For the majority of American citizens who have no economic or political power the best thing to do is to get as economically prepared as possible. Pay off your debts and keep them paid off. Be very careful where you keep your savings (I don't believe gold or silver will hold value during a meltdown, but that is another whole essay). Strengthen your private infrastructure, and keep on good terms with your community. People survived the Great Depression, and you can survive what is coming, if you are prepared.

Like Britain without the British Empire, America will somehow muddle through the transition. We may have to sell Alaska to the Chinese to pay our debt to them. We may have to give promissory notes to Yosemite and Yellowstone and some Aircraft Carriers to American bond holders to keep them calm until they realize there is nothing they can do put accept whatever scraps the politicians throw them. But we will still grow food and make things and engage in commerce. Eventually, when enough politicians have been hanged ... out to dry ... things will pick up again, with a smaller, more efficient federal government and a vastly lowered set of economic expectations.

Unless people really freak out and start shooting at each other. Then all bets are off.

Tuesday, September 10, 2013

Free Will, Genes, and Environment

I have concluded that while both genes and the environment (cultural and physical) are major determinants of human behavior, every human still has, at least in certain circumstances, what is traditionally called free will. I reject the totally deterministic, and especially the atomic-deterministic interpretation of reality. My rejection of the deterministic hypothesis is not because I find it repugnant, but because I find it to be (partially) misleading and counterproductive.

I am not rejecting causality. My understanding of causality is complicated, not simplistic. To the extent that human decisions are subject to free will, they would also become part of the chain of causality.

Our typical modern picture of the deterministic universe comes from classical, Newtonian physics. In the simplified version of this causality is like a well-constructed set of falling dominoes: once set in motion, it never veers off course. Atoms crashing into atoms form the air, and their micro-movements form the local weather: everything happens because of strict rules of mass, momentum, electricity and other forces.

I do not base my rejection of strict determinism on quantum physics. Causality in quantum physics (the kind studied by scientists, not the new age pseudoscience, pop culture version) is more complicated than classical causality. In some situations the causality is probabilistic. This is related to my free will argument not because it shows Newton was wrong, but because it shows you have to be careful about thinking about our complicated universe. Generally speaking, quantum causality only is an issue in the sub-nano end of the size spectrum.

The common, mistaken view of decision making posits that atoms, molecules and larger structures of the brain are deterministic from the atomic level up. It follows that "making a decision" is simply a name humans give to the compulsions that come from their atomic programming. Unlike mystics and spiritualists, I do believe this atomic viewpoint has some explanatory value. The brain is made up of atoms, molecules, neurons and other cells, and importantly the synapses between the neurons. Sometimes human activity can be attributed to causes from below, as when a clogged blood vessel leads to neural malfunction or death and the kind of strange behaviors sometime seen in people suffering from a stroke.

But causality also comes from outside the brain. It mostly comes from outside the brain. Without sensory experience the brain would learn nothing and do little. Without cultural input the behavior of humans would be the behavior of animals.

Cultural input from other human beings is (almost always) the main driver of behavior of any particular human being. Put two genetically identical babies in two different cultures (whether two families, or two nations) and they will grow up to reflect their cultural background. There are vast chains of transmission in human cultures, both horizontally in the present time and going back in time to the dawn of language and differentiation from the apes.

Humans make such a wide variety of decisions that lumping them all together can be uninformative. I want to focus on decisions that illustrate free will, even though those are also a large, diverse group of different kinds of decisions.

The (pre-Newtonian) classic exercise of free will was characterized as the decision to commit or not commit a specific sin. I am not concerned with divine punishment, but a religious person making such a choice could be. Religion is a learned culture. Drop a baby among the Islamic faithful, and (in traditional cultures were no other choice was available) the adult would be Islamic. Drop the identical baby into a Hindu culture and an adult Hindu would emerge. In diverse cultures like the United States, where children are almost always, at some point, exposed to other religions, free will might be exercised by the choice of another religion, or of no religion.

Suppose a person needs to make a decision, and that there are two clear choices. One involves a clear personal advantage, say not being hungry. The other involves a sin (or ethical breech), say taking food that belongs to someone else, the loss of which could cause them to go hungry.

We know that in this situation some people will steal and eat the food, and others will go hungry, perhaps even to the point of starving to death. The cultural restraint will have been imprinted in the brain from outside, over a period of years. If it is followed, it makes sense to say that behind the atoms in the neural synapses correspond to causation that can fairly be described as a system of culture. On the other side, of the person who steals and eats, we could say that hunger, which is some sort of impulse to eat arising in the neurons, overcame the fear of breaking the taboo against stealing. But excepting for the impulsive case, where little thinking is involved, in most cases there will be a weighing (by the person, the brain, or if you prefer, the synapses) of factors that determines the outcome. This weighing relates cultural inputs to the feeling of hunger, and may involve some amount of thinking, conscious or unconscious. Fear of punishment by gods or by legal authorities may be met with rationalization (say, "but a good God would want me to eat, and has provided this opportunity to eat. It is just food, it is not like robbing a bank or stealing an automobile.")

To say this complicated process is determined by atoms and electrical forces instead of culture, including language, rules of ethics, and metaphysical beliefs, is itself a culturally determined opinion.

A strict determinist (of the simplistic type) would argue that whatever cultural experience the individual had, the resulting structure of the brain atoms would still determine the outcome. But suppose someone else steps into the scene: the owner of the food, or a policeman, or a former schoolteacher, or a hungry, dying son or daughter, or a stranger who may or may not care about what happens. Behavior may change in that case. Perhaps the potential thief no longer feels that free will can be exercised. But in any case it is clearer that atoms, as atoms, are not the sole causal factor in the decision. Something very complex has become part of the chain of causation. Only the most obstinate, idiotic strict atomic determinist can claim that complex objects or humans cannot affect a human decision in such a situation.

Free will derives from the fact that the decision making process takes place. Decisions are not always about ethics. An artisan might have trouble deciding between two tools or approaches that could be used to achieve a goal. A writer might choose between two ways of expressing an idea or describing an event. Choices, thinking, and decisions are everyday human activities.

It is arguable that free will, or decisions made using free will, can cause material objects, or at least human muscles, lips and limbs, to move. A riot may start, and a kingdom may crumble, when one member of a crowd decides to throw a stone, turning the crowd into a mob, and unrest into a revolution.

Determinism is (or should be) a complex idea, and free will can be part of it. Our free will determines the future, usually in small ways, but sometimes in large ways.

The early Newtonian view was not about atoms. In Newton's universe planets, which can be idealized as masses, hurled around the greater mass we call the sun. The parts of the planet, including the atoms and atomic particles and subatomic particles, were just along for the ride.

The key here is to not let one metaphor blind you to the complications of reality. In some cases it makes more sense to say the planets and the force of gravity determine the future. In other cases it is fair to say DNA or cell structures, atoms or quarks determine the future. But for most cultural interactions, culture determines the future, and free will is there to make the call when choices need to be made.

Nature and nurture are both important, but what makes us truly human is free will.