Economic Stimulus Needs Rescuing

dogma n., 1 arrogant assertion of opinion …

The country needs your help. Little effort is required, but you must act now!

In his inaugural address, President Obama said he planned to end the “worn-out dogmas that for far too long have strangled our politics.” Nevertheless, at a time when our nation is swimming in a sea of economic woe, our new president is wrapping chains of Republican dogma around our nation’s neck. He does so because he’s ethical—he’s adhering to his own dogma.

Candidate and Author Obama vowed again and again to reach out to Republicans, to respect their viewpoint, and tailor policy to incorporate their wishes when those desires did not conflict with the common good. Keeping his promise, President Obama introduced an economic stimulus proposal containing $300 billion in tax cuts—tax relief he promised on the campaign trail—even though two-thirds of those cuts will sink our economy deeper. Next, the president powwowed with Republicans and, at their urging, removed some of the infrastructure spending from his proposal while increasing the tax cuts. Both changes are a mistake.

Both will be recessionary. Our country can no longer afford to have its policy shaped by people who formed their economic dogmas to fit their political and religious beliefs. We must have economic policy based on thoughtful adherence to evidence. Nobel laureate economist Paul Krugman says we need about $1 trillion in spending, none of which should be in the form of tax cuts for people who are unlikely to spend the money. The stimulus bill passed by the U.S. House of Representatives, with zero votes from Republicans, should succeed in creating or saving about 3.75 million jobs. Unfortunately, the U.S. economy is on pace to lose 10 million jobs during the next two years. That’s a net loss of 6.25 million jobs, yielding an unemployment rate of about 11.4%(1)

That rate reflects a depression, not a recession. Worse, we’re blowing our last opportunity to borrow deeply to reverse this decline. In my opinion, we must take exactly the right action now in order to avoid a decade-long depression.

If Congress fixes this bill—and hope still lies in the Senate—we could get a stimulus package that succeeds. E-mail your Senators. Ask them to change the bill. Here’s what we need:

= Remove $200 billion of tax cuts from the bill. Keep tax cuts for the poor and lower-middle-income earners. Yes, many of them don’t pay income tax. Doesn’t matter. This is not about socialism vs. capitalism. This is about avoiding the next great depression. This should prevent our nation from losing an additional 1.5 million jobs.

= Raise taxes on people who earn more than $200,000 a year, even small businesses. Taxes are levied against net income, not gross revenues. Despite recent rhetoric, no small business will lay off workers at the expense of earning greater profit.

= Increase infrastructure spending in the bill by $400 billion. This will yield another 4.8 million jobs.

With these changes, the stimulus bill should create or save 10 million jobs—the same number of jobs we are likely to lose on our current path. Two years down the road we’ll be in the same place we are today, with one significant change in landscape: Most of the homeowners currently or soon to be facing foreclosures will have refinanced or lost their homes. The supply of bank-owned properties should start to diminish. Then consumer confidence would return, which would truly stimulate economic growth again. By the way, even those foreclosures could be avoided with a carefully crafted interest rate subsidy policy.

We have about one week to change the course of Congress. Please, send links to this column to everyone you know. E-mail your Senators. Don’t let this week go without taking action.

Copyright 2009 by Todd Lederman. Feel free to copy and use this information, but please give me credit for authorship.

1. Bendull, Bruce F. (2009). Historical Labor Force/Unemployment Data for
UNITED STATES. Research and Analysis Unit, Indiana Dept. of Workforce Development. Retrieved 1/31/2009 from http://www.nidataplus.com/lfeus1.htm

Inauguration: A New Thanksgiving

Today, when President in-effect Obama is sworn in as the 44th president of the United States of America, we will have much for which we should be thankful and much for which we might hope.

First, let’s give thanks that the mere election of Barrack Hussein Obama II seems to be almost enough to wipe the tarnish off our nation’s image as seen by the countries whom we number as our friends and allies. Next, we should hope for a speedy withdrawal from Iraq. We must hope our new president keeps his promise to abide by the Geneva Conventions with regard to prisoners of war—two measures that could boost our image even among critics, skeptics and would-be enemies.

Let’s give thanks for the recent upswelling of Europeans who are re-examining prejudices against what Salman Rushdie calls in The Satanic Verses ‘black people’—by which he means all non-Caucasians.

Let’s give thanks for those wealthy people and nations around the world who still look at the United States as a safe haven for their money. Ironically, our housing-market plummet is taking the rest of the world’s economies down with our own. Nevertheless, China, India, Saudi Arabia, Kuwait and investors from those countries keep buying U.S. Treasury debt. So we can still hope we will have a last chance to borrow and spend our way out of depression.

Let’s give thanks to voters in the United States who decided there is an advantage to being led by a guy who graduated with high honors (magna cum laude), instead of a guy who ranked unashamedly near the bottom of his class. We can hope for a president who is intelligent instead of “decisive” and who follows where universal evidence leads, rather than a president intent on forcing the country to follow his personal faith.

Let’s give thanks to Republican voters who chose to put forth John McCain as their candidate for president. Of the Republican hopefuls, McCain was, in spite of his own campaign’s appearances to the contrary (e.g. Sarah Palin), the most centrist, most reasonable, most pragmatic candidate—the one most likely to ‘reach across the aisle’ to find solutions. Let’s hope this is a sign that a majority of Republican voters are ready to move toward the center. Perhaps we can dare to hope the whole country is ready to re-embrace the Constitutionally guaranteed principle of maintaining separation of church and state—an ideal to be preserved, rather than an obstacle to be overcome.

I’m so overcome with gratitude and hope, I can hardly wait for 10 a.m. (Mountain Standard Time), January 20, 2009.

Copyright by Todd Lederman 2009

Tax gasoline: More is better!

We aren’t paying enough for gasoline.

If we continue to buy gas in the range of $1.40 to $1.90 a gallon, we’ll go back to our frivolous ways of consuming with abundant pleasure. I think we can do better, but we need government intervention.

I accept the theory that a free market is the economic model most likely to provide the best possible standard of living. Even the staunchest Republicans would acknowledge, however, that a free market often fails to provide big-ticket items that benefit us all—infrastructure, for example. So government builds roads, and subsidizes the construction of railways, electric grids and so on.

Similarly, we rely on our government to protect us—from foreign invaders, terrorists, and sometimes, from ourselves. Without government protection, bald eagles, condors and ocelots probably would be extinct in the continental United States.

Now we need the government to step in and protect us from ourselves again. We really were better off when gas prices spiked to $4 per gallon. The whole country woke up.

We started debating whether we should be drilling off shore. We debated whether we should continue to spend $700 billion per year buying oil from countries whose subjects and citizens apparently hate us (see Al Qaeda). We started debating whether we were offering enough support to companies that pursue alternative energy production. We debated whether our government had been providing enough incentive to auto makers to design and build energy-efficient vehicles.

These debates, although acrimonious at times, have led to constructive ideas. With gas prices plummeting, I’m afraid all the good intentions will come to naught. We need to get gasoline prices back over $3.50 per gallon. If we raised federal taxes to push prices up, we would become the recipients of several benefits.

We’d raise $21 billion (1) the first month—enough money to keep GM and Chrysler in business for another quarter. Demand for their products would stay low, except for extraordinarily fuel-efficient vehicles. Industry would invest more resources in developing vehicles with better fuel efficiency and alternative energy sources. Demand for gasoline would stay low, keeping world oil prices down. Consumption of gasoline would stay low, reducing greenhouse emissions. We stoke the economy with development of clean energy sources and with production of fuel-efficient cars, while sticking it to extremists by depriving them of money for terror-training madrasas.

All right, I admit household expenses would increase by about $3200 per year in the near term, but that’s a small price to pay for achieving our economic and security goals. The cost would continually decrease as we shifted to ever-more-fuel-efficient vehicles. Put the family in two Toyota Priuses (hybrid sedans) instead of two Toyota 4Runners (gasoline-powered SUVs) and you would save $3400 per year. (2) Until your family does change cars, a little tax is a tiny price to pay for a big nudge toward saving polar bears. This, I think, ought to be the moral imperative felt by every human.

Copyright by Todd Lederman, 2009

If this idea makes sense to you, please click on the links to the left and write your representatives in the U.S. House and Senate.


1. U.S. Energy Information Administration. (2008). Petroleum Basic Statistics. Department of Energy. Retrieved 12/31/2008 from: http://www.eia.doe.gov/basics/quickoil.html
2. http://www.fueleconomy.gov/ (2009). United States Department of Energy. Retrieved 1/12/2009 from: http://www.fueleconomy.gov/feg/findacar.htm

$300 billion tax cut? We must be insane

I’m thrilled Barrack Obama will be our president. He is the first person I’ve voted for who won, and I’ve been voting for 16 years. I read one of his books, The Audacity of Hope, and he had me hooked. Nevertheless, when he says a $300 billion tax cut was always part of his plan, “the centerpiece” of his campaign, I find that to be disingenuous.

His plan, as I understood it, was to keep tax cuts revenue neutral by lowering taxes on “95% of working families” while raising taxes on people earning more than $250,000 per year. Unfortunately, instead of revenue neutral, the proposed plan will cost $300 billion—and Republicans love it.

Nobody should love this plan. Although President-elect Obama promised relief for middle- and low-income families, now that our economy has tanked, we must examine any proposal under one light: How can we best use our money, funds we’re going to borrow, to yield the best possible return for the most number of citizens in our country—especially poor and middle-income families. Under that light, this tax cut proposal is coyote ugly.

Any economist, other than those few discredited, supply-side, trickle-down hypothesizers, knows that tax cuts are among the least effective methods of providing stimulus. Lower taxes can provide a quick boost, but benefits are limited by the psychological mood of consumers.

Right now, the mood in America is justifiably lousy. Most Americans save almost no money. Our national savings rate has declined steadily since a peak in 1975. Back then, we saved 14% of our disposable income. Now we’re saving 1%. (1) The savings rate dropped dramatically during the Clinton years, seemed to have bottomed at 2% for the first 5 years of Bush’s presidency, then dropped even further during the past 3 years.

We seem to have stopped worrying about saving for the future. Most Americans believed they were saving much more than they truly were. Since 1991, average homeowners received an annual boost in wealth equal to a whopping 120% of the their investment in their home! Here’s how I arrived at that: Take a 6% per year increase in the home value, now multiply by 20 because most homeowners have been investing only one-twentieth of the purchase price of the home.

In other words, say I put $10,000 down to buy a $200,000 home. Then the home’s value increases by 6% next year. That’s $12,000, which works out to 120% of my original investment of $10,000. We experienced that kind of growth in personal wealth from 1991 through 2005. So most of us spent our paychecks as if consumerism was going out of style. Well, it is.

Conspicuous consumers are dead. They have no retirement savings. They don’t trust Social Security to be solvent by the time they retire. And the $100,000 equity they thought they had in their houses? Gone, and not coming back any time soon. A new wave of foreclosures is due to overwhelm the real estate market from middle 2009 through the end of 2010.

So Mr. Obama, I have bad news: If the government lets me keep $1,000 more of my income this year, I’m not spending it. I’m saving it. And that will not stimulate our economy. I have more news: Families earning $250,000 this year? They aren’t changing their consumer habits one bit. They aren’t depriving themselves of anything they want to buy, and they won’t change their habits when they get a tax cut. Giving them tax relief won’t stimulate the economy either.

To provide true relief from our economic woes, we need to re-establish the market for houses. For details on a modest proposal to rescue home prices, see my blog entry from December 30, 2008.

To stimulate the economy now, the government must invent jobs, but they have to be meaningful jobs, not make-work nonsense. We need to repair roads, bridges and schools. We desperately need a new electricity grid, one that uses superconductivity to eliminate power loss over great distances. We need nuclear power plants, wind, solar and geothermal energy generation. We can put millions of people to work building the infrastructure necessary to replace a carbon economy with a clean future.

By the way, improving these technologies will eventually take power, figuratively and literally, away from Russia, Venezuela, Saudi Arabia, Iraq and Iran. Personally, I think that would be good for everyone on Earth.

Copyright by Todd Lederman, 2009

1. U.S. Department of Commerce: Bureau of Economic Analysis. (2008). Retrieved 1/8/08 from: http://www.bea.gov/national/nipaweb/Nipa-Frb.asp

Ali, boma ye (kill him)! What the U.S. and George Foreman have in common

By Todd Lederman

George Foreman may have been the most powerful boxer ever. At over six feet three inches, 220 pounds of nearly solid muscle, he dominated inferior opponents. Had he been from a different era, many boxing enthusiasts believe he would have defeated Jack Johnson, Joe Louis, Evander Hollyfield, or Rocky Marciano. He would have annihilated “Iron” Mike Tyson. Foreman shocked with overwhelming force. He was a giant. Awe inspiring. On October 29, 1974 he was the undisputed heavyweight champion of the world. Unbeatable.

On October 30, Muhammad Ali knocked him out in the 8th round. The African crowd shouted “Ali, boma ye!”

Ali, the greatest heavyweight boxer ever, but not the most powerful, defeated Foreman with asymmetric tactics. He later called it “rope-a-dope.” In the first round, Muhammad Ali headed straight for the champion and scored with a right hand lead, clearly surprising Foreman, but failing to knock him out. Most boxing enthusiasts expected Foreman’s brutal retaliation would quickly dispatch the contender. Ali had different plans. He employed a strategy that enabled him to take advantage of the young champion’s weakness: staying power, or lack thereof. Foreman had won 37 of his 40 bouts by knockout, most within three rounds. He had become so dominating that his most recent eight battles had all lasted less then two rounds. Ali believed he could outlast Foreman.

In the second round, the contender retreated to the ropes. He invited Foreman to hit him repeatedly, while counterpunching and verbally taunting the champ. He enraged Foreman, but absorbed the champ’s best blows. Through six rounds, Ali took hundreds of punches, but few to the head, and none were able to deliver the knockout Foreman needed. By the seventh round, Foreman had wasted his strength. He threw lifeless, wide shots to Ali's body, while Ali countered with stinging punches straight to Foreman’s head. In the eighth round, Ali dropped Foreman with combination punches at center ring. Foreman failed to make the count. Against all odds, Ali had knocked out the most powerful heavyweight boxer of all time. His tactic of leaning on the ropes, covering up, and absorbing ineffective body shots had worn out the champ. Ali had roped the dope.

Our nation, the United States of America, the most powerful country in history, a republic empowered with the military and technological capability of snuffing the life out of every human on Earth, is locked in a struggle with an inferior foe: Al Qaeda. And we have our enemies on the ropes.

In the first round, Mohamed Atta and eighteen other thugs hijacked four jets. They flew two planes into the World Trade Center in New York City. One jet smashed into the Pentagon and the last plunged into a field in rural Pennsylvania. Al Qaeda murdered nearly three thousand people that day. These people came from all demographic groups: men, women, children, Caucasian, African, European, Asian, atheists, Buddhists, Christians, Jews, and Muslims. These acts, of course, horrified people all over the world. Our country enjoyed the sympathy of billions. Few people or countries were surprised when United States forces invaded Afghanistan. Most nations supported our right to use military force, and many people, including President George W. Bush, expected his troops would quickly dispatch with Al-Qaeda. Our enemies had different plans.

Those of us opposed to Al-Qaeda would do well to always keep in mind that our enemies expected us to retaliate. They probably hoped, even prayed the United States would respond with all its might.

In the second round, after failing to completely knock out Al-Qaeda or Osama Bin Laden—the man our president identified as our number-one enemy—we have merely managed to force them into caves. They wait, taking blows to the body, but never to the head, while we waste our resources: human, natural, and financial.

President Bush convinced U.S. citizens and Congress that Al-Qaeda had been supported by Iraq and Saddam Hussein, who was developing weapons of mass destruction: “nucular” (sic), chemical, and biological. The bell rang for round three. We invaded Iraq, aiming widely misguided blows to the body of Al-Qaeda while the head rested and regrouped in caves--in Pakistan, not Iraq.

Or to use a different simile, the methods our country has been using to fight terror are like putting out fire with gasoline—and we keep buying the fuel from our enemies. From oil profits, Saudi royal family members send billions of dollars annually to finance madrasas, schools in which the next generation of terrorists are taught that the greatest achievement in life is to kill infidels (1). A still-greater aspiration is to die in the process, thereby assuring an eternal afterlife spent in paradise with ‘black-eyed’ maidens.

Daily headlines of Al Jazeera fuel terrorist recruitment. Every damaging report—of U.S. soldiers killing Muslims, contractors such as Blackwater USA allegedly murdering Muslim civilians, or allegations that President Bush lied to justify the invasion of Iraq (2)—rallies new terrorists to jihad.

Of course, the Qur’an does not truly state, or even imply, that suicide-murderers will be rewarded in paradise with 72 virgins (3). Unfortunately, truth is a casualty of faith. September 11 hijackers carried a copy of a letter instructing them to “Be joyful, happy, open of heart, and at peace because you are carrying out an act that God loves, an act that pleases Him. And therefore there will be a day, by God’s leave, when you will be with the bright-eyed maidens of Paradise.” (4)

Imams and scholars instruct millions of little children to hate, just as they taught those 19 terrorists to murder infidels. They fail to teach critical thinking skills. Many do not even teach their students to read or write.

Imagine students debating the meaning of a religious passage they cannot read. Granted, many westerners learned everything they know about Moses from Charlton Heston. Nevertheless, if we wanted to know more, we could read the Old Testament ourselves. A generation of illiterate Muslims is growing up filled with complete faith in the knowledge that they’ll eternally frolic with maidens after a life of killing non believers.

Worse still, the definition of non believers has inflated to include those Muslims who disagree with the notion of suicide-murdering, putting fear into the hearts of Islamists who would be our friends and allies. Islamic leaders are befuddled. If they denounce terrorist activities—such as Hamas firing rockets into Israeli cities—they risk uprisings against their own governments. So they denounce Israel’s military response instead.

Meanwhile, behind the scenes in Pakistan, Egypt, Saudi Arabia, Indonesia and elsewhere, Islamic leaders continue to investigate terrorists clandestinely, as they should—as we should.

In our need for dramatic rhetoric, our country seems to miss the mark frequently. We send troops to Vietnam and call that a ‘police action’, but we wage a ‘war on drugs’ and a ‘war on terrorism’. Military action, at best, only served to make us feel better. At worst, which is what we’ve experienced in the past six years, war has succeeded in aiding our enemies. War has advanced their recruiting efforts, paid to indoctrinate the next generation of terrorists, while nearly bankrupting our country. This is ‘Rope a dope’, and our country is the dope.

Imagine what we could do with the $1 trillion we’ve already spent on two wars. That’s almost enough money to rescue the credit markets. Analysts estimate the efforts we’ve already spent in Iraq and Afghanistan will cost another $1 trillion in veteran’s benefits. That money would indeed be enough to finish bailing out banks.

Alas, when Barack Obama becomes president, he says he plans to divert troops from Iraq to Afghanistan. I agree we need a presence in Afghanistan. However, that presence should be invisible, removing from Al-Qaeda’s recruiting posters, and web sites, the image of U.S. armored carriers rolling through the streets of middle eastern cities. Our presence should be covert, employing the type of operations that used to be carried out by the CIA in the days when they relied on people, not just technology, to provide information about our enemies.

In Afghanistan, Pakistan and elsewhere, we also should employ the type of investigative techniques used by the FBI. Secretly, silently, invisibly, we should be looking for any and all terrorists who would be enemies of the United States. We should find them, apprehend them, and give them fair trials. In other words, we should be waging a police action against terrorists. Then we should take the money we’re saving by not waging war and, well, borrow a little less from China and Saudi Arabia.

By the way, back in September of 2001, why do you suppose we gave Osama Bin Laden a 26-day head start?

Note: My apology to Muhammad Ali for using an analogy that puts him in the same position as Al Qaeda. I have the greatest admiration for Ali, have been a huge fan throughout his career, and mean no disrespect. I simply could not ignore the similarity between ‘rope a dope’ and the way in which an almost powerless Al Qaeda so deftly provoked a ridiculous overreaction from the United States.

Copyright by Todd Lederman, 2008

1. Mortenson, G. and Relin, D. O. (2006). Three Cups of Tea. Viking Press: USA. ISBN 978-0670034826.
2. Suskind, R. (2008). The Way of the World: A Story of Truth and Hope in an Age of Extremism. HarperCollins: USA. ISBN 978-0061430626.
3. Feldner, Y. (October 30, 2001). ‘72 Black Eyed Virgins’: A Muslim Debate on the Rewards of Martyrs. The Middle East Media Research Institute: Washington , D.C. Retrieved online 12/31/2008: http://www.memri.org/bin/articles.cgi?Area=ia&ID=IA7401#_edn25.
4. Mueller, E. (2001). Translation of the letter believed to have been written by Mohammed Atta. David Irving’s Action Report. Retrieved online 12/31/2008: http://www.fpp.co.uk/online/01/11/WTC_Atta_Letter.html