TIRESOME TIRADES

"Suppose you were an idiot, and suppose you were a member of Congress;

but I repeat myself." ~ Mark Twain

As President-for-Life of the Creston Economics Club, I've gotten increasingly tired with the media's daily grind of reporting on the "impending" debt issue facing our fine federal government. Fortunately, for the past several weeks we have been touring Europe and thankfully been out of touch from the hourly rants of politicians, lobbyists, financial moguls and smiling media personalities regarding the ever-growing "what if" economic/social/political scenarios about the Aug 2nd drop-dead deadline for financing our government. But now we're back in the good ol' USofA. Oh well. [I've secretly contemplated securing seats on some airline flight to some fairly isolated locale just to manage my fiscal blood pressure. Maybe Cody, Wyoming; Port Moresby, Papua New Guinea; Las Palmas, Canary Is., Hobart, Tasmania; or  Bridgetown, Barbados. Suggestions remain welcome.]

Despite no one's asking me, I'll share what I've gleaned so far in handy bullet-point format.

1.    No one knows what's going happen when Aug 2nd comes and goes without some sort of meaningful Congressional/White House fiscal agreement. Everything we've been hearing is pure speculation, unfounded by fact - and stated to bolster someone's position not to enable a resolution.

2.    The agreement will be founded on politics, not economics (see below).

3.    No one's wearing a white hat. We're all responsible for our nation's fiscal imbalance. We've individually and collectively been spending beyond our means forever – hence our fiscal debt. In this sense our politicians are just like the rest of us – we don't want to admit responsibility and cut our spending to more closely match our available revenues.

4.    Self-righteousness rules. We all want someone else to take the hit.

5.    Our politicians have been dancing around this "issue" for a very long time - it's been caused by many factors (some of which are actually under someone's control, others are not) – meaning it hasn't been in anyone's interest to resolve it until (perhaps) the very last moment – say on Aug 2^nd if we're watching the ticking clock. So, reading and listening to the media's replay of the latest goings-on is decidedly premature before Aug 2^nd (see #1 above).

6.    Given the continuing state of politics, it's entirely probable (I'd give it a 95% likelihood ±5%) that the political "solution" will not at all resolve the real economic imbalances underlying our government's fiscal situation. It will be temporary and inadequate. And the markets will immediately understand this (see #8, below).

7.    Unsurprisingly, unreality rules on every side of the political fences so far. No one believes anyone else's position. The tribal nature of humans is being all too amply demonstrated in Washington DC and other centers of political decision-making. Compromise is as deadly as Bubonic Plague, especially for the Taliban (aka tea-party) Republicans.

8.    So, what will happen? Here's my prediction, not burdened by any insiders' knowledge.

8.1.   The anonymous, fiscally powerful international bond markets will ultimately exercise their influence on the world's "safest" investment – the 10-year US Treasury note – by forcing Treasury yields up, just like they have on Greek, Irish and Portuguese bonds. Remarkably, Treasury notes' yields haven't risen much so far (reflecting in my mind the bond markets' understanding that before Aug 2^nd all talk about US debt issues is irrelevant – again, see #1 above). Today's 10-year Treasury notes' yield is 2.95%. How much these yields will rise after Aug 2^nd is anyone's guess, but they will rise.

8.2.  The federal government will begin exercising payment prioritization, in order to deal with the Treasury's inability to raise adequate funds to cover all its obligations. Who will get shafted? That's the $64 billion question. I tend to agree with others' assessments that folks who won't be getting timely payments from the federal government would include federal employees (although with the ultimate irony, not Congress people), government contractors, welfare recipients (who are always first to suffer), grants to the states, and possibly military personnel. US sovereign debt would be downgraded, other public and private bonds' values would fall, money-market and mutual funds would be adversely affected spreading the fiscal pain to many more folks. Is it time to sell short? Quite probably.

8.3.  After Aug 2^nd the Law of Unintended Consequences will quickly exert its commanding influence in unpredictable ways that could unveil recessionary forces (and rising unemployment) across the economy in time for the middle rounds of the 2012 election season. Wonderful.

Onward towards uncertainty…



THE UNDEVELOPED UNITED STATES

Money is like manure; it's not worth a thing unless it's spread around

encouraging young things to grow. ~ Thornton Wilder

Towards the end of the school year, the SF bay area high school economics classes I work with have a project where 2-person teams of students pick a "lesser-developed country" (LDC), gather a fair amount of information about this nation, and design a specific project to further the nation's development. Each team prepares a class presentation/proposal for funding their project by the World Bank. I think this process is pretty clever in that the students get to apply their development economics knowledge by creating a particular project that best addresses their country's development needs. In the jargon of consultants, they craft a "best and final" presentation for the teacher and several of their classmates to judge whether it's worthy of the World Bank money they've requested.

The students' projects have included a wide variety of smart ideas and approaches. This spring the development projects included building power plants in Vietnam, mobile phone systems in Sierra Leone, distributing medicines and health services in The Congo, modernizing port facilities in the Union of the Comoros, building roads in Honduras and installing irrigation systems in Mozambique.

To give the students a sense of what their presentations should include, I show to them a development project I've designed. During the past several years, I've done one assisting Liberia. For my presentation next year I plan to go "outside the box" by creating a development project inside the US, in several counties that typify the undeveloped areas of the USA. What, there are undeveloped areas here in the USA? Unfortunately, yes.

Over at least the last decade we have witnessed personal economic standing in the USA becoming much more uneven, depending in large part where on the income and wealth scale you fall. An executive summary description of this trend is: as the rich get richer, the poorer get the (empty) bag.

Essentially, the USA encompasses two (2) nations. The first is one we know best (USA-1), a most successful post-industrial society and a world-leader in many economic, cultural and social arenas. It's the USA we live in. This USA needs no World Bank assistance. In fact, this USA makes the largest single contribution to the World Bank's budget (about 17%). When you and I think of our country, we see the image of USA-1.

The other (USA-2) is comprised of chronically undeveloped, usually unspoken-about areas suffering from unremitting under-investment in human capital, infrastructure and citizens’ welfare. USA-2 needs substantive development assistance. USA-2 is the undeveloped USA; in effect, a domestic LDC.

Recognizing this, I examined several undeveloped areas of USA-2 for my next project/presentation. It’s these people and the areas they live in – including rural and inner-city areas, the de-developed, or more likely undeveloped areas of within the USA – that need generous development assistance.

More than most nations, the USA’s recent history has demonstrated an increasing trend of bifurcation in the economic and social status of its citizens. A small number of citizens have continued to dramatically increase their economic well-being from living in the world’s leading economy – I’ll call this group the “Top 1%ers.” Their income, wealth and position have steadily and significantly grown. Today, the Top 1% of income-earners (folks who average $1 million per year) now receives 20% of total USA income and account for 33% of total USA wealth. The “Bottom 50%ers” – folks making on average less than $25,000 per year (that's about $12/hr) – account for 13% of all income. These people have found their economic standing at best stagnated, if not deteriorated over the recent past (median real USA income has declined since 2002). The Bottom 50%ers – including working class, lower middle-class, urban and rural poor, dropouts, unemployed and homeless people – have become increasingly unsupported through their own actions or by federal, state, and local government programs.

The plight of these USA-2 dwellers confirms that "trickle down" economics exists only in textbooks and speeches, not in reality. If the dyspeptic, plutocratic Republicans have their way, the Bottom 50%ers will suffer even more from the severe consequences of disappearing government, becoming more isolated from USA-1, as well as facing ever-smaller prospects of getting even a part-time minimum-wage job (if they're lucky).

So, my development project focuses on a sliver of undeveloped USA-2: two (2) counties in South Dakota and one (1) county in Texas. These three (3) counties have the lowest per-capita income in the nation and typify USA-2. The table below presents characteristics of Buffalo County, SD; Shannon County, SD; and Starr County, TX. These counties' characteristics are contrasted with those of Alameda County, CA – my local standard of USA-1.

Characteristic	1. Buffalo County, SD	2. Shannon County, SD	3. Starr County, TX	Alameda County, CA
Per Capita Income	$5,213 Dominican Republic (84th)	$6,286 Columbia (75th)	$7,069 Suriname (72nd)	$33,831 New Zealand (24th)
Population	1,912 (2010); 2,032 (2000)	13,586 (2010); 12,466 (2000)	60,968 (2010); 53,600 (2000)	1,491,482 (2009)
Median Age	23 yrs.	21 yrs.	26 yrs.	34.5
Largest Ethnic Group (% pop.)	Native American (81.6%)	Native American (94.2%)	Hispanic (97.5%)	White, non-Hispanic (37.1%)
Unemployment Rate	57%	15%	17.9%	10.8%
Pop. Below Poverty Line	56.9%	52.3%	50.9%	10.7%

Sources: U.S. Census Bureau, Wikipedia

The national per-capita income is $47,200. In the table, the nations cited after each county's per-capita income are countries whose per capita income is equivalent to each of these counties, together with the rankings by the International Monetary Fund of these nations' per-capita income (shown in parentheses) out of 183 nations. Thus, Buffalo County’s per-capita income of $5,213 is equivalent to that of the Dominican Republic, ranked 84^th in the world.

The project will target educational development in Buffalo, Shannon and Starr counties. As shown, each of them is small and has a very young, very ethnic demographic. You easily see these areas suffer from significant undevelopment; the majority of each county's population lives below the poverty line; their unemployment rates are all elevated above the US national rate of 9.1% (May 2011).

It is virtually certain USA-2 areas will further deteriorate over the next year or two when federal, state and local funding contracts. For example, Texas will reduce its education expenditures by $4 billion. Unfortunately other fiscally-challenged states, like California, are doing the same thing due to fiscal imbalances. California's just-enacted budget includes $2.8 billion in deferrals to K-12 schools and community colleges, $150 million cuts to the University of California and $150 million reductions to California State University. USA-2 will continue to be at the very end of the long line when funding requests are pleaded.

USA-2 covers many parts of the nation. The 100 poorest counties in the USA include 17 in Texas; 16 in Kentucky; 14 in Mississippi; 10 in South Dakota; 4 in Montana; and 4 in New Mexico. At the other end of the scale, New York (Manhattan) county’s per capita income is $147,000, the highest in the USA. That's over 28 times Buffalo county’s. From the table it's obvious these 3 counties are much different from (most of) Alameda County. And yet they are all part of the USA – prime examples of the undeveloped USA-2.

The most dynamic resource of our nation, the one that forms the strongest basis for our nation's economic and social potential, is our people. But USA-2’s indigenous labor remains unskilled and outmoded compared to USA-1 – hence the characteristic high unemployment. In my opinion the greatest impediment for development in USA-2 is something we all mostly take for granted: an effective and capable formal education system. My development project thus focuses on education because USA-2’s human capital desperately needs to be considerably strengthened and advanced.

My proposed development project will improve educational capabilities and performance in Buffalo, Shannon and Starr counties (BSS). How will this happen? I propose 3 mechanisms for success:

1.       Strengthen BSS’s primary and secondary educational infrastructure. Repair & construct K-8 & High Schools. Nine (9) new schools will be built;

2.       Enhance BSS’s teacher training, skills, recruitment and retention; and

3.       Create and implement suitable curricula for BSS schools that focus on developing marketable, employable skills.

My 4-year project would receive funding both from the World Bank and USA-1 (principally from the Department of Education). Will this project eradicate these counties' educational and economic deficits? No; but hopefully it can provide a needed initial step towards more secure and sustainable development.

What's the likelihood that such a project would actually get started? Zero. As I've said in other posts, the Republicans have bowled over the timid, spineless Democrats to define now as a time of government shrinkage. Federal Education Dept. expenditures will likely shrivel, not expand to help undeveloped areas in USA-2. And, given Congress's growing international isolation – thanks mostly to xenophobic Republicans – it would take a very brave group of politicians (Do they exist anymore? I think not.) to consider receiving World Bank funding for a domestic project, even if it's fully justified and worthy.

With these prospects, my project will remain only an idea for a small number of high school economics students – not a real project helping needful children and youth in USA-2. USA-1 helps fund World Bank projects throughout the world of under-developed nations, but not within its borders. That's a tragedy for today and many tomorrows.

BESTIAL POLITICS AND AMERICAN DREAMERS

The avoidance of taxes is the only intellectual pursuit

that carries any reward. ~ John Maynard Keynes

The Democrats will never ever be able to convince voters that increasing their taxes will lead to their or the public's benefit. The Republicans' decades-long push to lower taxes has simply been too successful and too resonant. Despite their public bitching, moaning, and unseemly whining, the Dems' logic-based arguments to promote tax increases (pretty much exclusively focused on taxing rich folks) as a necessary item in the public sector's fiscal relief, is a doomed cause. Why? Because of the American Dream and the underlying motivations of many non-rich voters.

The disappearing "middle-class" voter may possibly understand that raising taxes on the rich could help him/her (by providing more government funding for programs that they benefit from), but these same voters hold more dear their strong belief/faith that they are part of the "American Dream," and in due course they themselves can become "rich" if only allowed to by getting the government off their backs. They don't want tax increases because they eventually would have to pay them when they become rich and because all government programs are wastes of money.

The Dems have never bothered to mount an effective counter to this underlying, powerful motivator of the anti-tax movement. The Dems rightly argue that in general government programs are needed, necessary and are in the public interest, and these programs require funding from tax revenues. That's quite true. But the Repubs' on-going "starve the beast" tirade (with specific, but in reality exceptional, examples of waste and mismanagement) against Big Government is far more emotionally stirring – the Repubs exceptional examples prove the rule for why a faithful American Dream voter should always vote against tax increases, even if it's not in the voter's current self-interest. Other than emotion, how else can you explain the illogic of proto-typical American Dreamers shouting, "Get the government out of my Social Security?"

When it comes to a political third-rail of asking people to pay more taxes, specificity (and emotion) always trumps generality (and logic). Is the Repub argument duplicitous and hypocritical? Absolutely. Oh well, but anti-tax voting remains emotionally satisfying to folks who desperately wish they too will somehow, sometime achieve the American Dream and become rich – just like The Donald. Unless the Dems come up with a simple, unified, emotionally-resonant counter-argument against "starve the beast," they will never overcome the anti-taxers' broad appeal.

What could the Dems do? They could be as extreme as the Repubs by taking long, deep breath, swallow hard and say, OK we "see the light," let's agree to starve the beast, and publicly give the Republicans absolutely 100% of the credit for undertaking sweepingly harsh cuts to government expenditures and see how popular that really will be. This dramatic approach is mentioned in Adam Nagourney's New York Times Magazine article about California Gov. Jerry Brown; "… the only way a majority of Americans might reconsider [increased] taxes is if they experience the full brunt of spending cuts, not only in California but also in Washington.'People have never experienced cutting like that before,' Brown told me. 'That will create turbulence.' What Brown is proposing is to demonstrate just how disruptive a radically smaller government would be.”

I believe fully implementing the Repubs' all-cuts, "beast" strategy would not only be turbulent; it also would be painfully disruptive. The pain would have to be felt by citizens over an extended time period (not just 1 or 2 years) to cause significant change in voting patterns.

And pain would be felt because of the "We'll show those ungrateful voters something…" response by public decision-makers. When faced with voter disapproval about existing govt budget priorities (e.g., refusals to increase taxes), each and every govt "decision-maker" and/or bureaucrat always follows up and creates the most pain by making cuts to "vital" services (e.g., library hours, police and fire services on the local level, education spending on the state level, or health program spending – including the pittance spent on Planned Parenthood - on the federal level) rather than undertake a small amount of thinking and actually reduce waste and bureaucracy connected with non-vital public payrolls and programs that account for far more money than the "vital" ones they're all too ready to cut.

The Dems would have to uncharacteristically espouse a completely unified message that the affected voters' personal hurt (principally the so-called "lower 90" – meaning families outside of the top 10% of income/wealth holders) is completely due to the Repubs. This could be a challenge, since the Repubs are quite experienced at being deceitful and would surely portray the public tumult as being caused by the Dems.

Would the tumult be worth it for the Dems? Impossible to say, but based on the unyielding fiscal intransience of the Repubs (and Dems to a lesser extent), it may be worth serious consideration. If raising taxes is impossible, change the political game by declaring a victory and see what happens.

DOD RE-SIZING

When I think about improving the effectiveness of federal government spending, I first think about the Department of Expense, er, Defense (DOD). DOD expenditures accounted for 21% of total Federal government spending (and 53% of "discretionary" Federal spending) in FY2010. In addition, US defense expenditures represented 43% of total global military spending in 2009; in 2011 US DOD spending will be greater than the combined sum of the next 6 largest nations' defense expenditures (China, India, Russia, Saudi Arabia, France and the UK). In 2011, DOD's total budget is $741.2 billion. [By design, this number isn't completely "transparent", unlike other federal agencies. Wikipedia cites the DOD budget as $663.7B, others state it as high as I've cited above – what's $77.5B among friends.] That's an astonishing amount in both absolute and relative terms.

Who's kidding whom, this astounding sum can surely be cut by at least 10-15% without much real consequence – say in 4 ways: by stopping all vainglorious weapons' development and purchase to conduct future wars against past enemies that no longer exist, e.g., the USSR; by reducing 10-15% of all active-duty and reserve military personnel – including top brass – (across each of the services); by eliminating 10-15% of all active military bases; and by unifying the Army, Navy, Marines and Air Force into a single force (just like Canada successfully did years ago). Such re-sizing will undoubtedly produce huge howling by people with much brass and ribbons on their chests. Oh well, if they didn't howl, I'd assume the re-sizing wasn't big enough.

Do I think we should get rid of the DOD? No; a properly-functioning, responsive, non-omnipotent, non-omnipresent DOD is an essential part of our government.

However, I believe that the astronomical size of DOD spending is ultimately not in our nation's interest. Because of its size, the US has effectively (almost necessarily) adopted an all-war all the time foreign policy – how else to justify this huge expenditure. Why, because the DOD is large enough to do it. Like sheep, the public passively consents when the generals and admirals (G&As) say, "OMG, here's another pre-eminent threat we now need to destroy (the latest being Libya's madman president) to preserve our national security; and not to worry, we'll get it done quickly. By the way, since we're now fighting 3 (count 'em) wars, we need more money, not just the $700+ billion we got this year." Of course, that "quickly" will turn out to be just as quick as Iraq and Afghanistan.

The only way to stop this damaging, not-so-pseudo imperialism is to meaningfully cut the DOD's resources – by that I mean cut not only its budget and the number of worldwide bases, but more importantly also reduce the number of men and women (and G&As) in uniform; there are 2,278,895 people (including reserves) in the US armed forces. These cuts will have the benefit that we can't even feasibly contemplate fighting multiple wars at the same time all the time, which is a national policy strategy that endangers our international relations, reputation and political and fiscal future.

The military-industrial complex isn't really so complex. Our top-to-bottom increasingly disconnected all-volunteer professional military (as contrasted to a military mostly comprised of draftee citizens that was the norm until post-Vietnam) sees unending fighting as its only viable and natural function (other than defending its political position and budget) and its justification for existence. Thus, that's what the G&As do with increasing impunity – they advocate for continuous armed conflict. As Jonathan Stevenson in the May issue of Harper's puts it, "The United States has moved toward a quasi-imperial model of security, whereby open-ended military deployments keep the homeland [allegedly] safe by effectively pushing its boarders outward." Stevenson contends that because of its size and influence, the military has in effect co-opted President (and Commander in Chief) Obama's power to exercise civilian control over strategic/military policy. His article is entitled, "Owned by the Army."

Should this re-sizing of DOD resources be undertaken? Absolutely, if for no other reason than to benefit the 99.3% of US citizens who aren't wearing a military uniform. Realistically however, can the DOD budget and seemingly unlimited mission be significantly reduced and narrowed? Regrettably, it's very unlikely, mostly because DOD has emerged over the years since its costly Vietnam fiasco as the core determinant of US international policy, despite what the Secretary of State might say. [The State Dept's FY2010 budget was less than 8% of DODs.] Somehow the costly Iraq and Afghanistan fiascos don't yet count as negatives (for those of us who live in the 50 US states anyway). Very few politicians want to be labeled as an anti-American coward whose interest is in weakening the USofA. Tragic, because the DOD is unjustifiably big, and failing in its principal mission of defending our nation from real foes by continuing to conjure up more-or-less phantom ones (e.g., the Russian "missile gap") they need to confront to justify the military's too large existence.

GO AHEAD, SHUT IT DOWN

Time is an illusion, lunchtime doubly so. ~ Douglas Adams

Reality is merely an illusion, albeit a very persistent one. ~ Albert Einstein

So here we are edging ever-closer to yet another fiscal confrontation for the Federal government. You remember, a week ago we were told that unless the Republicans and Democrats agreed to a budget for the current fiscal year (that started on Oct 1^st, 2010) the government would stop functioning at midnight Mar 4^th. Well, that date has come and gone with no shutdown because the politicians unsurprisingly agreed to a temporary postponement in the form of a continuing Federal budget for the next two weeks. This agreement was labeled by the media as a "win" for the Republicans for reasons obscure to those of us who live beyond the Washington, D.C. beltway. Are we supposed to be happy the politicos managed to keep the government operating for all of two more weeks? I think not.

It's not a win at all. It's an all too solid example of how NOT to run a government. Here we are 19 weeks into the government's fiscal year, and Congress still hasn't passed a budget. [President Obama recently submitted his proposed budget on schedule for the next fiscal year, starting Oct 1^st, 2011 for Congress' consideration.] Given the level of fiscal malfeasance that Republicans, Democrats and every other form of politician (at every level of government) have perpetrated over the past decades, it's a wonder why we public citizens let them keep playing us as pawns while at the same time hugely benefiting the kings and queens of narrow, private interests.

The wonder might be explained as a five-star example of fiscal illusion, a macroeconomic term that describes people being not as "aware" of government tax revenues as they are of government expenditures, since many voters visibly benefit from government expenditure programs (funded by "hidden" revenues). People don't (or can't) link these benefits to the taxes they pay. Thus, fiscal illusion makes the cost of government appear less expensive, especially when financed by deficits, than it actually is. This has provided incentives to politicians of both parties to expand government expenditures but not raise revenues to pay for them. In this sense, we citizens share in the responsibility for our nation's fiscal calamities. In a general sense we continue to want a level and range of government-funded programs that we're not willing to completely pay for. "Shared sacrifice" is an alien concept that doesn't need to apply to me, only others.

These folks who we've voted into office have so often kicked the fiscal can down the road and played off competing interests by saying that someone else wants your piece of the remaining economic pie, they really have no sense of adopting an alternative approach. That's as outrageous as it is depressing. And these familiar fiscal tactics – tactics that got us into this mess – are now again being displayed and discussed in Washington and elsewhere. An apt characterization of them is attributed to Jennifer Brunner, a former Ohio secretary of state: "A dozen cookies are put down in front of a CEO, a union member and a tea-partier. The CEO takes 11, and then says to the tea-partier, 'That union guy wants yours.' "

Given that politicians are going to use only politics not rational thought to decide what programs should be cut and what taxes should be increased, what should we do? Begin by recognizing that neither party has any incentive to truly put all options on the negotiating table that actually could resolve much fiscal difficulty. Considering entitlement reductions (a heresy for Democrats), tax increases (an apostasy for Republicans) and defense cuts (similar for both Republicans and many Democrats) pale in political importance when compared to promising cuts in public broadcasting, planned parenthood and faith-based programs. Next, we should acknowledge that neither political party will be willing to seek and support meaningful fiscal solutions as long as political campaigning is happening – and there is always campaigning occurring. Sub-standard, short-term solutions from conventional fiscal politics have shackled the nation and thus require us to seek other answers.

Given that politics cannot be cast aside, I'm now in favor of moving "out of the fiscal box" and just shut down the government and end the charade that a meaningful fiscal resolution will be enacted by politicians. Fiscal illusion rests on the presumption that government expenditures/programs are more visible than the taxes that finance them. Let's see what happens when government programs disappear. Perhaps naively, a shutdown might be scandalous enough to clear the mindset of both Congress and the President so they can start using reason and logic. Better late than never, but given what happened on Mar 4^th, the Democrats more likely will simply fall on their shrinking sword and let the Republicans define the terms. As shocking as shutting the government down might be, it will pale in comparison to what the US will need to do if our politicians can't soundly resolve our longer-term fiscal problems. When (not if) this happens, global bond markets will start telling the Treasury Dept that US government bonds will need to carry a much higher yield –not has high as Greek 10-yr bonds' 12% yield today (after Moody's downgraded Greek debt), but likely higher than the current Treasury Note yield of 3.4% This avoidable eventuality will ultimately cost every citizen more fiscal pain, even if it's illusory to most.

THE REPUBLICANS DESERVE 2 OSCARS or THE CASE OF POLITICAL AND SOCIETAL SCHIZOPHRENIA ON THE RISE

Penny-wise is often pound-foolish ~ 17^th century English proverb



The Republicans deserve 2 special-category Oscars at tonight's Academy Awards show. One for patently false proselytizing (aka, acting) and the second for fully-erroneous (screen) writing. To some degree all politicians are impostors, but the Republicans' continuing charade qualifies them for this rare, double Oscar award. The Academy Awards would thus expose the Republicans for what they are, political and economic charlatans.

I had a breakthrough today. As you've seen if you've read my blog, I've been increasingly dismayed at the growing disconnect between economic reality (at least as I interpret it) and how others, especially those of a politically conservative nature see it (including those who now have the authority to change economic policy). Republicans are closet plutocrats. How can such a fundamental disconnect have occurred and can anything be done about it?

My insight is we are suffering from an oozing, collective case of schizophrenia. Not medical schizophrenia, but a percolating spread of economic and political schizophrenia. [The Mayo Clinic states schizophrenia is a group of severe brain disorders in which people interpret reality abnormally. And that Schizophrenia may result in some combination of hallucinations, delusions and disordered thinking and behavior.]

I think this diagnosis fits the Republican view of what is "reality" to a T. The Republicans' perception of reality is definitely "abnormal", "delusional", and "disordered" to say the least. They propose to fix our economic problems with policies that are either misguided, have failed in the past, or will cause significant future damage.

Republicans in Congress and state/local governments haven't gotten to this elevated state of schizophrenia (and plutocracy) without help. No, many others have assisted, including the much-ballyhooed "grass-roots" tea-partiers. The TP'ers are just as schizoid as their leaders. In spite of the tea-party's alleged "populist" aims, Republican economic policy has been laser-like in focusing on benefiting broad corporate interests and those of the top one to two percent of income-earners and wealth-holders. Republicans' latest fights against unions' collective-bargaining rights are yet another example in a long line of narrow, self-serving policy proscriptions. This all too successful false acting and writing merits the Republicans' Oscars tonight.

This really isn't "news" since corporate and Republican interests have gone hand-in-glove for decades. The surprise is that so many small-timers (including TP'ers) seem to mistakenly believe the Republicans will help them out. How these folks actually believe their economic lives will be improved after the Republicans privatize Social Security and Medicare, eliminate regulatory oversight and decimate "wasteful" government programs can only be explained medically, not rationally. Republicans have been saying they want to do this since Regan, but to date have only managed to vastly increase the public deficit and benefit the rich.

What can we do about this? This is a problem because it's unlikely Republicans would knowingly agree to a regime of antipsychotic drugs such as Thorozine, Clozapine or Ativan that medical doctors can proscribe for schizophrenics. Without such drugs, I think we can only hope the more rational, non-schizophrenic Democrats will more actively and effectively fight for the well-being of the "bottom 99%" of the public. Unfortunately, it's a faint hope. And this means the Democrats can't give away the store before the political negotiations commence.

You remember the "checks and balances" we dutifully learned in school that serve as a keystone to our democratic form of government. Where is it when we need it? Because the Democrats have time and again proven too timid and unfocused, we've become all too unchecked and unbalanced. Here's but one example. I just read Jeffrey Toobin's book about our Supreme Court, The Nine. He documents the clear shift over the past six years to a conservative majority on the Court that will have legal, economic and political implications for years to come. (Chief Justice John Roberts is 56 years old.) To regain effective checks and balances, we need the Democrats to stop being shrinking violets and uniformly and publicly protect our national strengths such as a vibrant middle class and educational infrastructure.

Given the Democrats recent track record, I'm not overly confident this will happen. Ultimately, the Democrats need to reassert their role as active, united checkers and balancers against the Republican onslaught. I'm dismayed that President Obama's tactics to get something done have made him stray way too far from the hopes he engendered during his campaign. After all, he told us he would create "Change We Can Believe In." When I voted for him, I thought I was voting for responsible progress for more than the top 1% of Americans. So far, the change he's created is mere pennies on the dollar.

THE TIN CUP HALF EMPTY

We've now seen the President's FY2012 proposed budget and heard the Republican's misguided response. It's thoroughly depressing. Why? Because the political blather from the Republicans and Democrats who will be making fiscal decisions on next year's budget (and this year's, since the Congress ineptly hasn't even passed a budget for this fiscal year that began Oct 1^st, 2010) have vacuously promised to "reduce the deficit" without continuing to deal with the simple fact there's 9% unemployment or taking any consequential action on the main causes of the long-term (structural) deficit – the relentless growth of entitlements like Social Security, Medicare, Medicaid and of defense spending.

How can they get away with it? Because US citizens are too unknowing (a polite way of saying too dim) about what really ails us fiscally speaking. We may say we want the government to cut expenditures and to get "more efficient," but we really don't know what benefit this will produce or why it matters at all – except facetiously expecting our taxes to be reduced. We seem to think that cutting foreign aid or community development grants (which together account for about a tenth of 1% of total spending) will somehow make a momentous difference for our Federal deficit. It won't.

Realistically, the US public doesn't want the Federal deficit reduced. We want to continue enjoying the personal advantages of receiving our Social Security, our Medicare and other deficit-financed benefits without worrying about the tomorrows, especially if those tomorrows involve making any sort of financial sacrifice personally or collectively. In this sense, we're too selfish to care about the future. We want our government's largesse to continue, but don't want to pay for much of it. We talk about the future meaning something, but we don't act that way at all. We want our government to continue living beyond its means, and instead let our kids pay for our deficits.

As usual, and with the public's encouragement, politicians are aiming their fiscal guns at the wrong targets. The only way to meaningfully reduce our long-term deficit is to significantly cut mandated entitlements spending and security-defense spending that the military-industrial complex has all too successfully made most of us believe is "required" spending (which together account for an astonishing 80% of Federal government expenditures; and over 100% of government revenues). Security-defense spending has roughly doubled in real terms since 2001, to over $870 billion in FY2011. Has any politician walked the political plank and said we need to meaningfully reduce mandated spending? No; because they see no benefit in making such truthful statements; they want to stay in office. They only feel safe talking about cutting really minor amounts of discretionary spending that will have no effect in remedying our long-term structural deficit or focusing on ancillary issues like public pensions (a state or local issue, not a federal one).

As a consequence we, the allegedly strongest nation on Earth, will continue to pass our fiscal tin cup around the world's capital markets in search of investors to finance our ever-increasing deficits. The Chinese and others have been obliging in the recent past. Will they in the future? Hard to say, but just like Greece and Ireland, sooner or later such investors will demand more return (higher interest rates on US bonds) from a nation that does not have its longer-term fiscal house in order. When they do, overdue painful changes will be required.