Learning Blog

Lesson I

1/10/2016

The Bottom Line:
Any middle class person who votes for a Republican candidate is committing economic suicide.

     This is because both the economic and political policies of the Republican Party have been destroying the middle class for the last forty years. Democratic presidents have contributed to this process by pursuing Republican type policies in order to attract campaign contributions from corporations. In spite of a situation where both Republican and Democratic Party establishments are more concerned about the well being of corporations than human beings, there is a major difference for voters.

     The Democratic Party still has a large left-wing, anti-corporate faction as well as moderate and conservative factions. The Republican Party has no left-wing faction any more. In the past it existed and its members were called “liberal Republicans.” There are still moderate Republicans but they are a shrinking group and generally must go along with their right-wing and ultra right-wing colleagues and party leadership.

     Republicans state that their policy goals are: 1) Lower taxes 2) Less regulations, and 3) Smaller government. They claim that these policies will result in a strong growing economy. On the surface they don't sound bad. But when you analyze what they mean in practice they don't hold water.

This is why:

1) The bulk of lower taxes are intended for large corporations and rich individuals. The middle class voter is thrown some crumbs in the form of slightly reduced taxes paid for in the form of reduced services at some point in the future. Reality is that voters demand a certain level of government services. In a state like Minnesota the level is high compared to low income states. Somebody has to pay for these services. Republicans avoid specifics about how to avoid reducing services if taxes are cut. The old standby of “Eliminating waste, fraud and abuse.” is an old joke in politics. In a fairly well run state like Minnesota, the amount of waste, fraud and abuse is tiny. There are no significant savings in this area.

     The Republican Party in Minnesota, when it has been in control of state government, has closed the gap between inadequate revenues and not cutting services by using various accounting tricks. This just kicks the can down the road. Republican politicians promise a “Free Lunch.” There is no such thing as a “Free Lunch.”

2) Businesses in general don't like regulations because they cost money. But regulations protect consumers and public welfare in general. It is not possible to just cut regulations across the board. There has to be an ongoing process of reviewing regulations to see if they need to be modified or eliminated or replaced or expanded. Here again there are no specifics from Republican politicians.

3) Smaller government is a fantasy. As political units grow in size and complexity, their governments must also grow in size and complexity. Minnesota can't have the same size government in 2015 that it had in 1915 or in 2000. Just adjusting each year to a larger population and changing demographics of the population like a rapidly growing K thru 12 student population forces the government to expand. Minnesota has a rapidly aging population. This means more services/money for the elderly. Can Republican politicians stop people from growing old or having babies?

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Lesson II

9/27/2015

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Party versus Personality

Government starts with the making of laws. Laws are born and sent to the respective chambers for vote or are killed in committees. This is the major reason party is more important than personality. Most voters don't understand this. Committees control what bills wind up being voted on in the respective chambers, House or Senate.

Control of committees is determined by which party has the majority in each chamber. The party which controls the committees controls what bills get voted on. Therefore, what party controls the committees decides what laws get passed. If a bill is never voted on, it can never become a law. To make the process even more difficult, many proposed laws are sent to more than one committee which multiplies the chances that it will be killed or modified beyond recognition by its original supporters if the opposing party controls all the committees. This is why it is really, really, important to vote for the village idiot of your preferred party instead of the super great candidate of the other party.
If a voter prefers the governmental vision of Party A but votes for the candidate of Party B and the election of the Party B candidate gives it the majority in the chamber, the result will be that most or all the laws sent out of the committee for vote on the floor will reflect the vision of Party B. If one side refuses to compromise, which is currently the case in both our congress and state house, Party A will accomplish little or nothing to advance its agenda. This is not the result the Party A leaning voter wanted.

Currently, in our Congress, the Republicans have a majority in both the Senate and the House of Representatives. In the Senate the Democrats are not completely helpless because they can use the rules of filibuster and threat of filibuster, and other procedural rules unique to the Senate, to block or water down greatly what the Republican senators want. The Republicans successfully did this when they were in the minority. In the House, the rules are different. With a Republican majority, the Republicans can do whatever they want and the Democrats are effectively helpless. The only things they can agree to vote on together are such non-controversial issues as resolutions naming Federal post offices in local districts or increased funding for programs that help military veterans.

Currently in Minnesota, the DFL controls the Senate and the Republicans the House.

The result of this is:

1) Because the modern Republican party is so far-right and out of touch with reality it is almost impossible to reach compromise on anything important with the DFL (Democratic-Farmer-Labor party) which is a center-left to centrist party. Prior to 1980 the Republican Party was a normal center-right party, but after the election of Ronald Reagan it began moving steadily to the right at both the national and state levels. With the birth of its Tea Party wing it has gone into outer space. It is truly a case of the lunatics running the asylum. The establishment Republican Party leadership and donors are losing control and they are very worried.

2) Because in our system the President/Governor is elected separately from the legislature and both houses need to agree to pass a law, we can have government gridlock in two ways:

One is when the executive branch and one or both houses are controlled by different parties who can't agree on anything. (With the parliamentary system this normally can't happen because the executive is chosen by the legislature so both sides are generally on the same wave length)

The second way is when the two houses are controlled by different parties which are very far apart with respect to political vision and goals. This is the present situation in Minnesota. When there is gridlock, not only is it impossible to pass important laws but in the recent past we have suffered government shutdowns at both the national and state level as a result. This is a major flaw in our presidential system of government.

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Lesson III

9/16/2015

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Political Parties:

In all functioning democracies, there is a minority who are wealthy and a majority who are not. Human nature being what it is, the wealthy minority does not want a government which will take its wealth and give it to the non-wealthy. They therefore form a political party to protect their interests. This is known as a conservative party. It goes by different names. In Australia it is called, oddly enough, the "Liberal Party". To represent the interests of the non-wealthy, specifically non-management employees, there is a large socialist party. Even in a multi-party system, these two party types dominate a nation's politics.

In America, our conservative party is the Republican Party. We are unique in that we don't have a major socialist party. The Republicans' opponent is the Democratic Party which is a capitalist party that is a combination of left-wing, centrist and right leaning elements. If economics were the only political issue, the conservatives would never win any elections. However most voters are concerned about many issues. Especially in America, where for many voters social values and other non-economic issues are as important or more important than economic issues. Since the base of each party is a minority, it is necessary to appeal to centrist voters to win elections. The normal result is one main party is center-right and the other is center-left.

Until 1980 the Republican party was a normal center-right party. With the election of Ronald Reagan it began moving steadily to the right. Today it is a far-right party that is not connected with reality. This has produced an internal crisis in the party at the national level. There is a split between the establishment Republicans who are practical politicians and the Tea Party fanatics. There is also growing tension with the religious right base which is losing patience with the party establishment.

The Democratic Party has also moved to the right, starting with Jimmy Carter who was socially and politically liberal but economically conservative. He believed that the free market was better than a regulated market. He deregulated the trucking and airline industries. Bill Clinton continued the process by pushing through NAFTA (the North American Free Trade Act), deregulating the banking industry (he repealed the Glass-Steagall Act of 1932) and preventing the regulation of exotic new types of derivative financial instruments. Many financial experts warned that they were dangerous. Billionaire investor Warren Buffet called them "financial weapons of mass destruction." The repeal of Glass-Steagall and massive sales worldwide of the new type derivatives were the main reason for the global financial collapse in 2008- not the widespread granting of high-risk subprime mortgages as most people believe. (In spite of the devastation of the Great Recession/Global Financial Crisis, derivatives are still not regulated. No one even knows how many trillions of dollars in uncollateralized derivatives are floating around in the global financial system.)

The modern Democratic party is not the party of Franklin D. Roosevelt and the New Deal when it comes to economics.

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Lesson IV

9/13/2015

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Common Sense is Nonsense:

Republican politicians know as much about Economics as medieval peasants knew about germs. Unfortunately many Democratic politicians are just as ignorant.

Politicians, especially Republicans, in their stump speeches love to compare government finances with household and business finances. They appeal to the common sense of their audience who generally nod their heads in agreement. The politician says: "When a household/business sees that its expenses are more than its income, it must decide how much to reduce its expenses. Government is no different. We must learn to live within our means."

This is not valid thinking. In logic it is known as "the fallacy of composition". This is the false conclusion that because two things are similar in part, they are completely similar. For example: a motor boat and an automobile both have engines therefore they are functionally the same thing. This is obviously wrong.

The finances of a government, especially at the national level are totally different from the finances of a household or a private business. To quote the brilliant economics and political writer Matt Taibbi on this idiocy, "The only thing the budget of the US government is similar to is the budget of the US government."

There are many reasons why government finances are different from those of the private sector. Here are some of them:

1) Starting at the national level, the Federal Government can pay its bills by printing money. Households and businesses can't do this. Technically it doesn't actually print the money, it creates it out of thin air.

2) Both the Federal government and states that have large economies and good credit ratings, like Minnesota, can borrow virtually unlimited amounts of money at the lowest possible interest rates. Households and businesses don't have unlimited credit lines and they must pay higher interest rates than governments.
When Minnesota sold five year bonds to get immediate cash from its share of the National Tobacco Settlement, (a completely irresponsible and very costly move- another example of Republican bad and deceptive fiscal management) it paid an interest rate less than the rate of inflation. In effect, investors were paying Minnesota a fee to hold their money for five years. (The real interest rate is the nominal rate less the rate of inflation)

3) Governments have legal income producing powers that households and businesses do not have. They can raise taxes or impose new taxes. They can confiscate property and put people in jail for not paying their taxes.

4) Governments are not profit seeking businesses. They exist to provide services to the general public. The standard they must meet is whether they satisfy voters, not how profitable their operation is.

5) Governments often must think very long term when making spending decisions. Infrastructure projects take years to plan and are expected to last for 50 or more years. The Brooklyn Bridge, still in use, was completed in 1883.

6) Governments spend money to benefit some people that was collected from people who receive no benefit from that money. That people who have no children are required to pay taxes to support public schools is an obvious example.

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Lesson I

Lesson II

Lesson III

Lesson IV

Purpose

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