Religion, Politics, and Same-Sex Marriage

Minnesota currently faces a proposed change to its Constitution that would prohibit the legalization or recognition of marriage for same-sex couples. The foundation for the support for this amendment comes from various religious groups in spite of the fact that many who oppose the amendment are also people of faith. The disconnect between these two groups and the use of the Constitution as the battle ground illustrates why religion has no place in politics.

In the United States, the foundation of our political lives are our federal and state Constitutions. No federal or state law may violate the United States Constitution, and no state law may violate the state Constitution of that state. The proposed amendment would add the following:

Only a union of one man and one woman shall be valid or recognized as a marriage in Minnesota.

Like all language, the language of the Constitution is subject to interpretation and may be interpreted differently by different individuals. The above language may seem crystal clear, but it leaves open a number of questions, including:

• Can the state eliminate marriage in MN and create a new kind of union available to all?
• What is it to “recognize” a marriage?
• Is it illegal for my business to recognize the marriage of a same-sex couple married in a state where it’s legal?

I’m not trying to launch an argument about the meaning of this amendment, but instead to illustrate how any such arguments might be resolved. One of the beauties of the United States system is that we have an entity to serve as the arbiter of what the language in our Constitutions and laws means. It’s the judicial branch with the Supreme Courts serving as the ultimate authority. When we disagree about what the Constitution means on any subject, we bring it to the courts and they tell us. Once it gets to the Supreme Court, that decision is final unless we amend the Constitution to change the meaning.

Religion, on the other hand, has no such unquestioned universal authority. When people disagree about the Bible as they do with the issue of same-sex marriage, who is the interpreter?

The idea that the Bible is the “word of God” is often the foundation of this problem. The reality is that the Bible was written in human language by human beings and translated many times over many centuries by many humans. Many of these humans held very human, very political agendas when perform their translations. Compare any two Bibles, and their words in English are often materially different. Humans are imperfect. Human language is imperfect. Any attempt by humans to communicate the word of God will be inherently imperfect. In fact, any attempt by humans to understand the word of God will be inherently imperfect.

So who interprets the Bible for society? The United States Constitution was born of a world waging constant wars in Europe over different interpretations of the Bible. There can be no interpreter of the Bible or any other religious document for society, only for members of that religion. The Pope is the final authority of the Bible for Catholics. Non-Catholics would be very, very wary of accepting Papal authority of interpreting the Bible. Similarly, most people of Western faiths would be wary of a secular state interpreting the Bible as the Communist Party does in China.

The Bible can have no single authority to which we can appeal for interpretation and, as a result, cannot form the basis of our Constitution and our laws. It has no place in our politics.

The LA Riots as They Happened: 4/30/1992

So far, over 300 fires to buildings have been set, and more than 1700 fire incidents so far reported. All of Los Angeles is a war zone, even the valley. We have a dawn to dusk curfew set for tonight, and there has been talk of martial law. Riots have been reported in North Hollywood and Panorama City, both just blocks from here. I heard that fire has been set to the mall in Panorama City, but I have heard no confirmation of it. There were also reports of rioting two blocks from here. Buildings in Hollywood and West Los Angeles are burning. The company I work for, the Wherehouse, has so far lost 3 stores that have been burnt to the ground. How can hundreds of people be running around this city unchecked destroying everything in their paths? The scene is so incomprehensible. It is like a hurricane, but even eerier. It is like we are waiting for the world to end.

I just went outside. It is like someone dropped a neutron bomb on the city (note: notice how I didn’t use contractions then, even in an informal setting like a journal? very odd!). No cars, no people. The city around here is dead.

Earlier today, I went to the Wherehouse to check on the situation there. We were getting reports of riots in the area, so we shut down the store at 4:00pm. Chitra and Rich (note: two of my co-workers at the Wherehouse) ended up coming over for a sort of war slumber party. While we were sitting around talking at about seven, we smelled smoke. Thick smoke. We still smell it, but the glow to the event we saw earlier has disappeared. The smoke is still causing me to cough.

The police have come by, saying on their loudspeakers that everyone should get inside and stay inside.
We have had reports that the 7-11 store one block away has been sacked and looted. On the news, we see a place in Panorama City burning to the ground.

The LA Riots as They Happened: 4/29/1992

Note: The following entry comes from a journal I kept of the Los Angeles Riots that occurred from April 29, 1992 until May 3, 1992. The words are actual words from when I was 23 years old and living in Van Nuys, CA. I have also packaged the whole thing into tweets under the Twitter handle @GR_LARiots.


Does civil war begin today? As I wrote this (note: how goofy of me to use the past tense in a journal entry?), the news just reported another earthquake in Hot Springs, 3.4. Late last week there was a 6.0 earthquake in Northern California with several strong aftershocks. This is weird.

Anyway, Los Angeles is beginning to feel more and more like a war zone.

Just a few hours...

Within the last 20 minutes, we have had 2 riots break out (violent), an earthquake, and a police helicopter making an emergency landing on TV.

Back to where I was...

Just a few hours ago, the verdicts in the Rodney King beating trial were given. They were not guilty. In spite of the video. In spite of the testimony of the officer who wrote the book on the use of force. The officers who beat Rodney King were found not guilty. The only thing I can say is that the prosecution did not know what it was doing. The trial was fair, but the officers were guilty. I know that sounds contradictory, but there was nothing fishy about the trial except maybe the change of venue from Los Angeles to Simi Valley. But the video speaks for itself. There is no explanation those officers can give for their actions. They used excessive force without reason.

So then the trouble began...

Since my telephone was disconnected, I have had to go to pay phones to call Kim. So today, like other days...

They are stopping cars, pulling people out, and beating them.

...I went to a pay phone (note: I think this was at a store somewhere on Oxnard, perhaps Woodman and Oxnard?) to call her. While I was talking to her, a black man, about my age, yelled at me, “Homeboy, get off the phone.” He started yelling things at me then he hung up the phone. After that, he began pushing me, getting in my face, and threatening to beat the hell out of me. He was yelling racial slurs at me among other things. He clearly wanted me to start something. But I only argued with him, calling him a racist. I also said that he was acting like a member of the KKK. One of his friends across the street was throwing rocks at me. But they left after 10 minutes without any violence. But they wanted an excuse, I just did not give it to them (note: this event was occurring at the same time as the Reginald Denny beating in South Central Los Angeles).

All at the same time, the black people on the street would whisper to other complete strangers who were also black about something. I finally heard one of them mention some plans for some gathering. The black man on the phone next to me was saying something similar (note: interestingly, I don’t remember the events of this paragraph, even after reading it again 20 years later).

But I would like to mention  that of all the black people around me during this 1/2 hour to 1 hour period, only two were doing anything wrong. Those two, of course, harrassed me.

When I got back to my room, I turned on the television set to find reports of violence breaking out in at least two places. Automatic gunfire (sporadic) everywhere. People pulling other people out of cars and beating them. We have seen at least five fires set. Looting. And it has just begun. This is all just 3 hours after the verdict was announced.

This is very sad. Everyone, not just black people, should be outraged by this verdict. But at the same time, nothing wrong has been done except what those officers did. There was no cover-up. No conspiracy. No attempt to hide the truth. I simply think it was a combination of poor prosecution mixed with the extended jury deliberations. Mix that with a bit of the underlying prejudice in one or two jurors. But there was no oppression or blatant racism.

But South Central Los Angeles has been a war zone. It did not just become one today.

The previous stuff was written at 7:00pm. It is now 8:30pm. Blocks of South Central Los Angeles are burning. Parker Center, Los Angeles Police Department headquarters, is being stormed by protesters. I have been hearing sirens and helicopters around here all night (note: keep in mind, again, that at this time I lived in Van Nuys, many worlds and miles away from South Central Los Angeles).

9:30 - A fleet of helicopters and police cars just went racing by here. I promised Kim and my mom that  I would lock the door and stay inside, so I do not know what is going on. Sirens sounding everywhere. Gunshots at Foothill station. Blocks and blocks of South Central are on fire.

11:30 Mayor Tom Bradly and Governor Pete Wilson have declared a state of emergency for the city of Los Angeles. Over 50 major fires have been reported all over the city. Riots all over South Central, riots in downtown, and in Pacoima. 2 people so far have died. A fire fighter is currently at the hospital being treated for a gunshot wound to the face. The National guard is being called in to be deployed in Los Angeles. A woman nurse in one hospital emergency room said that the activity is worse than any she experienced during her duty in the Gulf War.

Personally, I have been staying inside like I promised. Every few minutes, though, I hear either a helicopter or a bunch of police cars go by. But so far I have heard nothing dangerous going on around here.

It is important to note that all of this rioting is actually being done by very few people. Most of them seem to be people who are just using the verdict as an excuse to do violence. Everyone is angry, and in fact, most community leaders have been encouraging peaceful expression of this anger. But the gang members, criminals, and general thugs just figure that this gives them some sort of permission to go all out with their destructive behavior. None of this is an honest reaction of any section of the community to the verdict.

This is not Civil War.

The Lessons of Czar Nicholas II

Critics of the "Occupy Wall Street" (OWS) protests and similar actions around the country and around the world use the term "class warfare" to describe the objectives of the protesters. These critics use terms such as "socialist", "communist", and "anarchist" to dismiss the protesters and their concerns. Supporters of OWS spend too much time is spent arguing against these irrelevant points—it just doesn't matter whether their characterizations are true or false.

Let's then grant the following premise (which aren't actually true): OWS is nothing more than a bunch of communists intent on class warfare against the established power structures of the West. Does this premise mean their concerns should be readily dismissed?

Whether or not you want to grant those assumptions, communism is bad for many reasons not worth discussing in this blog. Any idea that you will address society's current ills by implementing Communism is, at best, misguided and, at worst, a recipe for the Soviet States of America. So, if we grant the absurd premise that the OWS protesters all are trying to overthrow American capitalism for Soviet communism, we're also granting that the protesters' solutions to our ills might be as bad or worse than the disease.

The Russian Revolution (the short version)

Nearly 100 years ago, Russia faced a real class war between real communists and a real ruling elite in the form of the feudalist Russian monarchy led by Czar Nicholas II. The world of early 20th century Russia was a political system based on a largely absolute monarchy with a feudalist economic system. Under feudalism, the "means of production" are controlled by land owners who make up a hereditary aristocracy. If you did not own land, you were at the mercy of your landlord for your economic well being. You essentially worked his land in exchange for protection, housing, and basic sustenance.

It's worth noting that Marx really didn't see communism as a replacement for feudalism. He believed societies needed to go through a progression from feudalism to capitalism to socialism and finally to communism. He also believed that these changes did not occur naturally—they required revolutions.

In other words, the status quo in Russia was a really bad thing with horrible injustices in place. Furthermore, that society did not provide any means for the disadvantaged to alter those injustices. A number of groups nevertheless attempted to make things better, including the Bolsheviks* (aka the Communists). The Bolsheviks were governed by an ideology based on the writings of Karl Marx—Communism. Communism sounds like a great idea in theory. It is an economic system that distributes goods and services based on need. Who wouldn't want a utopia in which everyone gets what they need?

Well, I don't. But that's beside the point and an argument for another time. The point is that Marx painted a very compelling picture to a people abused by a corrupt and unfair economic and political reality. Regardless of how silly or dangerous that picture was, it didn't change the reality that the people of Russia were being harmed daily by an unjust system.

Would anyone today seriously defend feudalism because some of the people protesting it were misguided in the solace they sought from communism?

Even if you would, there's no denying they were seriously pissed off and the result was the Soviet Union.

Having the Wrong Solution Doesn't Mean There's No Problem

We can learn two lessons from Czar Nicholas II and the Russian Revolution:

1. Because the people who see a problem have the wrong answer to a problem doesn't imply that there's no problem.
2. If the people capable of providing a just answer don't provide one, then the people with the wrong answers will ultimately force those wrong answers on everyone else.

The second lesson is much more dire than the first. Russia suffered through 70 years of authoritarian communist rule because the people who solved the problems of czarist feudalism were the Bolsheviks.

The voices of OWS are growing louder because there is a real problem. We've created false democracy in which political speech is equated with wealth and corporations are treated as persons. The result of this situation is the appearance of democracy when in reality only corporations and the people who govern them have any voice in how we are governed. The way Wall Street has behaved since the de-regulation of the late 90's has helped it do serious damage to the world economy and the companies that make up Wall Street have been immunized from those with political power from the capitalist forces that have traditionally make the US economy such a significant success.

The United States is no longer a capitalist democracy. It's a corporatist oligarchy with shades of democracy.

Some of the loudest people among the "Occupy Wall Street" crowd have the wrong solutions to this unsustainable situation. Some of them, however, might have the right answers. Ignoring all of them and pretending they are all Bolsheviks only increases the chances of real class conflict and, perhaps, real class warfare.

A Proposed Solution

I have a simple proposal for a solution that should address the valid objectives of the various OWS interests in the United States while not damage the fundamental values of our capitalist democracy. It's a Constitutional amendment that restructures the way campaigns are financed in the USA.

When you listen to the different voices of OWS, one theme emerges: People are tired of a nation in which wealth determines political voice. When spending money is considered free speech, those with more money will always have more speech. When corporations are considered persons, the considerations of large businesses will always outweigh the concerns of the small business or the individual. Let's end the idea of money as speech and corporate personhood through a Constitutional amendment that restructures the financing of political campaigns.

That means the public financing of all campaigns and elections. All candidates of significance should have equal amounts to spend on elections for public office. All entities with licenses to broadcast over public airwaves (radio, television) must be required to grant candidates equal time to make their case for election. Congress could be allowed to define what "candidates of significance" means, but it should be sufficiently lower to allow for multi-party elections.

Perhaps something like (I am not a lawyer, so this is obviously not bullet-proof legal wording):

The Campaign Finance Reform Amendment

1. Public funding. Elections for public office shall be funded entirely through public funds with the level of such funding determined from time-to-time by actions of Congress for federal elections and the States for state and local elections. All candidates of significance for public office shall have access to equal funds where "candidates of significance" may be determined by acts of Congress and the States. Definitions of "candidates of significance" must include at least three candidates for any office unless there are fewer than three candidates running for the office in question.

2. Independent groups. Congress may establish laws allowing for private citizens to form political groups that may act independent of candidates, but funding for those political groups must come from individuals and not many other kind of entity. Any monies in excess of $100 to a political group must be made public.

3. Use of public airwaves. All entities granted specific licenses over public airwaves must provide access to at least 5% of their total airtime to candidates free of cost in a manner equal in quality and quantity.

* Fun fact: The term Bolshevik comes from the Russian word for majority (the 99%?).

 

Economics, Not Ideology

The battle cry of the Tea Party and so-called "fiscal conservatives" is "Households balance their budgets, why can't the federal government?" It's a nice slogan designed to support a strong anti-government ideology, but it has no basis in economics.

Let's do a simple thought experiment.

Imagine a government with a $100B/year revenues from various taxes and spending appropriations of $100B/year to match. This is a government with a balanced budget. The spending equals the revenues and no debt is created. In addition, no free cash is created.

The problem with this scenario is the nature of the revenues. The revenues are directly dependent on the overall health of the macro economy. If the economy grows, revenues grow and we get excess cash (surplus). If the economy shrinks, revenues drop and we either a) fail to pay the bills for our appropriations or b) borrow money to cover the shortfall (deficit).

Obviously, with a growing economy, this isn't so bad. We have a surplus and don't have all of these discussions about deficits and bond ratings. With a legislated balanced budget, we either give that money back to the tax payers or increase spending (or, possibly, simply make an appropriations for a "rain day" fund).

The problem is the shrinking economy. In a shrinking economy, you have a private sector that is pulling back from investing in growth to a more defensive strategy oriented around cutting costs and gaining efficiencies. Companies stop cutting costs when the economy hits rock-bottom and they are operating at maximum efficiency. They begin hiring again when they see predictability in the economy and feel they safely can begin investing in growth.

When the government cuts spending to match lost tax revenues, it does two things:

1. It creates greater recessionary pressure on the economy because government spending is part of the economy. When you remove that spending, you by definition shrink the economy.
2. It adds to economic uncertainty. Under this scenario, forcing a balance budget means that government spending is no longer a fixed, predictable part of the economy. It instead becomes another downward trending point of uncertainty.

When government cuts spending (or raises taxes) during a weak economy, it takes money out of the economy and creates economic uncertainty. It makes the problem worse.

To be fair, running a deficit doesn't come without cost. Every dollar the government borrows today is a potential tax increase tomorrow of $1 plus interest. Let's continue the thought experiment.

Our $100B tax base drops to $75B in the recession. It lasts one year, and then we recover to normal levels. Our spending is now $100B plus debt service on the $25B from the recession. We have to raise taxes at this point to get the money for debt service or hope the economy grows to match.

In short, it's just not as simple as "balance the budget". Running a deficit is bad for long-term economic growth. Cutting spending and raising taxes address the deficit, but they are bad for short-term economic growth. Increasing spending and cutting taxes are good for short-term economic growth, but they create a deficit.

The narrow-minded focus on the deficit as the problem facing the US is causing us to ignore the real problem: jobs. The reason this recovery is so weak is because companies just aren't hiring right now. They aren't hiring because there's so much uncertainty from the government right now. And the uncertainty from the government is almost entirely a result of the bickering in Washington right now because no one really knows what way Washington is going to go on August 2 and even beyond.

Policy certainty is what we need from Washington right now, not balanced budgets or spending programs or tax cuts or tax increases or spending cuts.

Spending as a Stimulus

It's very hard for conservatives to consider the possibility that government spending can stimulate the economy. Any Economics 101 text will illustrate that spending pushes the economy forward no matter who does the spending. The reason we debate tax cuts versus spending is not because one is inherently better than the other (if that were true, we should either stop taxing completely or let government do all spending), but instead because of the long-term impact of the spending versus the long-term impact of the tax cuts on a case-by-case basis.

If you gave each member of Congress $1B to go to their local casino and put it all on a single hand of blackjack, that would stimulate the economy. The problem with that approach is that we likely would not see much of an impact beyond the initial spend—it would be close to pure consumption. Similarly, we could give a 10% tax cut to every person in the country, but if all anyone is going to do is save that money, it will be completely wasted. 

All spending is not equal. When you spend money building a new transportation that enables workers from an area with excess capacity to an area requiring labor, you do a lot more for the economy than if you were to spend that money studying cow farts. When you drive tax cuts to small businesses who tend to re-invest excess cash as opposed to big companies who tend to pocket that cash, you do a lot more for the economy.

When comparing a tax cut versus a spending increase, you need to look at the big picture impact of the tax cut versus the spending increase. 

The best way to judge the impact of spending is on the macro-economic impact. Is the thing being spent on something that has limited or negative ROI for an individual business yet has a significant impact across society? Any program fitting this description is a good program for government to spend money on (and thus tax the populace OR borrow money).

The best way to judge the impact of a tax cut is to understand what the beneficiaries of a tax cut are likely to do with the money. If the tax cut is likely to go directly into investment vehicles, it's a good candidate for a targeted tax cut. To pay for a tax cut, you either need to cut spending OR borrow money.

The worst time to increase taxes or cut spending is during an economic downturn. During a recovery period, cutting taxes tends to be most effective in fueling a recovery because the recipients tend to be most interested in investing their windfalls. On the other hand, spending is much more effective in the middle of a pronounced downturn since individuals and businesses are shy about investing any excess cash during a downturn.

In fact, the current economic crisis is a perfect example of why tax cuts don't help as much during an economic downturn. There is plenty of capital to loan and invest in the market, but no one is doing it. There is too much fear and it is impacting investment. If we give a 10% tax cut right now to anyone, they will almost certainly pocket that savings. If, on the other hand, we spend $500M on a roads project, that will create a demand for capital from construction which will free up investment from banks and inject money into businesses serving the project and create jobs. That will in turn create confidence in the market and make it possible for capital to flow more freely.

For the long-term, hopefully the roads project is on a road we actually need and that will fuel long-term economic growth. Even if it is on a "Bridge to Nowhere", however, it will create a short-term stimulus that can hopefully create enough market confidence to free up capital and enable the free market to do its job.

The impact on the current debate on the stimulus plan is simply this: under the current circumstances, all else being equal, $1 in government spending will have a greater short-term economic impact than $1 in tax cuts. If spent on the right things, those spending increases should also have a greater long-term economic impact. Furthermore, the best place to cut taxes right now is on small and medium-sized businesses who are likely to re-invest whatever the economic circumstances. The closest thing we have to this mix is the Senate bill. It's not perfect. It has a lot of "sending Congressmen to the casino" crap in it, but it also has a lot of critical infrastructure spending in it. Under the current circumstances, almost anything is better than nothing.

Reign in the House Democrats

We all know that Republicans don't get the concept that you need to spend money on infrastructure and that spending facilitates economic growth.

What we have learned in the past two weeks is just how incompetent Democrats in the House are. I have always felt that Nancy Pelosi is the worst House speaker of my lifetime. Both in her failure to exercise the rights of Congress as an equal branch of government when she led the opposition party and now in her petty attempts to further liberal pet projects under the guise of a stimulus bill now that she is leading the majority party.

In the big picture, I think it's time for Democrats to kick her out of a leadership role. For today, however, it's time for the House Democrats to take their leadership from the Senate and pass the Senate bill as is. The objective right now is to kick into gear programs that will increase economic growth in the short term (now through 24 months), not to take care of all the problems we have in a single bill.

Let's look at the education component that has been removed from the Senate bill. House Democrats are all up in arms about this. If we were talking about an education bill, I would be upset. We're not. We're talking about a stimulus bill. Education is one of the most important things we can spend money on, and it's long-term ROI is unmatchable by any other spending or tax cut.

But it is very long-term. The only reason you try to force it into an economic stimulus plan is because the specific education spending you are proposing is questionable and cannot withstand scrutiny in an education bill. I fear that's what House Democrats are doing with many of these non-stimulus items.

The Rev. Warren Fiasco

For eight years, the United States has been ruled on ideological grounds by a President who promised to be "a uniter, not a divider". Instead of being a uniter, he consistently put ideologues in positions of power and actively sidelined anyone with divergent views. President Bush was not the President of the United States of America—he was the President of NeoConservative Americans and left the rest of us without any leadership at all.

President-elect Obama has chosen a man with views I cannot stand to perform the invocation at his inauguration. Many on the left are outraged at this selection. I think it's a great selection. President Obama is showing that he will be a Democratic President of America, not a President of Democratic Americans.

This inauguration does not belong to Obama or those who voted for Obama. It belongs to every single American, from progressives like myself to fundamentalist evangelicals like Rev. Warren. Everyone has a place at this inauguration.

Liberals who are outraged at the selection are no better than George Bush and Dick Cheney.

Proposal for GM

So I am against a bailout. What's the solution to the problem?

Those supporting a bailout are right about one thing: GM is too big to fail.

The bailout is wrong because it is not a mechanism for keeping GM from failing, only for putting off the failure and dragging out the pain of failure.

GM is a bad company run by incompetent management and burdened by absurd union contracts. It needs to shed its management, rip up its union contracts, and be broken into smaller pieces to succeed.

Bankruptcy won't make that happen. This situation is not the kind of situation in which a company enters bankruptcy, reorganizes, and comes out leaner. This situation is a liquidation event. Either way, good companies that have been serving GM will be put out of business because they won't see a dime of money that GM honestly owes them.

A bailout, however, has two equally bad paths:

1. It will perpetuate bad management practices and leave in place labor contracts that make no market sense. 
2. The government will put strings on the bailout. You know what's worse than bad businesses people managing a company? Government managing a company. 

There is an alternative. A bailout of the workers and vendors that have done nothing wrong while throwing out the management and bad corporate structure that made this situation possible. Here's how we do this:

1. Let GM enter Chapter 11 or Chapter 7. 
2. Any vendor or other creditor who is validly owed money at the time of bankruptcy will receive a government backed loan for all amounts owed by GM to them.
3. Any GM worker laid off will receive 6 months severance from the government.
4. Any GM worker without a college education or who has worked for GM more than 10 years will receive government paid education to re-skill themselves.

As a result, vendors and workers will receive reasonable protections against the bankruptcy, but the company itself will be broken up and its assets restructured in accordance with the market. The market-based restructuring will enable new companies to emerge than can make the US automative industry competitive again.

Let the Big Three Die

All of the consequences of GMs failure that proponents of a bailout use to argue support the bailout idea are true. If GM fails, people are out of jobs, good companies that have done nothing worse than offer services to GM will suddenly be saddled with bad receivables and the prospect of not making payrolls, and the state of Michigan will plummet in despair. 

But those arguments do not justify a bailout. Ford, GM, and Chrysler are poorly run companies with bad products. They have not continued to operate over the last 20 years by innovating and meeting consumer demand; they have remained in business by chaining the state of Michigan to their well-buying and spending money lobbying the US government for regulations that favor the folly of their product offerings.

Few industries have the luxury of seeing a trend coming for 30 years. The auto industry has had that luxury. We have all known that the price of gas would eventually go through the roof (and it will again). Japan, Germany, and the other auto-making countries recognized this and have a number of different products on the road today to match that need.

But not Detroit. 

In the past election, we had a number of silly discussions about "socialism" and "capitalism"—as if a 4% difference in tax rates on the highest 5% of income earners was somehow that dividing line. Bailing out the Big Three, however, is actual socialism. The worst of socialism. It says that employing people is more important than the value they add to our society. It also ignores what we know is a failure of socialism: if you save a job today that should not be saved, you will have to save it again tomorrow, and the next day, and the next day. And they will become less and less worthy of having a job as time goes on.

So, the bailout people have clearly illustrated a short-term impact. It's devastating and real.

Here's the long term outlook:

GM fails and sells off its assets, probably to a foreign car marker or a silicon valley company. Ford fails and sells off its assets. Chrysler sneaks by. Michigan goes into a severe depression and hordes of people leave Michigan for good. The auto-makers no longer control Michigan politicians and, amazingly enough, Michigan finally diversifies its economy. It learns how to survive without the auto-makers and eventually starts to see a prosperity that is actually earned prosperity. Detroit is no longer the cesspool of the nation.

On the other hand, if the Big Three are bailed out, we will save some jobs (there will still be a lot of layoffs), executives will get their golden parachutes, and we will be back in this position again in the future. You know why? Because these are bad companies. They must fail.

And if they truly are too big to fail, they must be broken up.

A Solution to the Financial Crisis

I am increasingly certain the proposed bailout is dangerous.

As long as it is the only solution on the table, however, you cannot throw rocks at it. A lot of people are throwing rocks at it without having the guts to propose an alternative.

Here's an alternative:

• Freeze all ARMs at their current interest rate level or 10%, whichever is lower.
• Pay off mortgages that exceed 80% of the current collateral value down to 80% of the current collateral value (if a home is worth $200K and you owe $210K, the government will pay your bank $50K and bring your balance down to $160K).
• Increase tax rate of 2% on anyone making more than $150K/year who benefitted from the mortgage payoff for 25 years. This extends to people who are not making $150K today but make it in 5 or 10 years; and it is dropped for people who have their income drop below $150K during that time frame.
• Refinance at current prime all mortgages under $250K for people making less than $100K/year and a 2-year history of being no more than 30 days behind on payments.
• Convert all interest-only real-estate loans less than $500K to 30-year, prime loans.
• Ban ARMs and interest-only loans.

The problem with the Bush administration solution is that it is very inflationary, it rewards bad decisions on Wall Street, and does nothing about the cancer causing this crisis—the plummeting home values.

My solution rewards no one. Everyone who took on a mortgage will still have their mortgage. Everyone who made a bad loan is still reliant on the people paying the loans to make their payments. However, everyone gets a free pass on the actual extraordinary event (the financial hurricane): the massive drop in home values.

As a result, many people who were in a bad position because they were underwater on their home values are all OK. The financial institutions at risk because of this situation will have an injection of cash and a reduction in risk profile. This injection of cash will create new capital that can go into the markets (the whole point of the Bush bailout).

Now, just buying out mortgages so they are not underwater does not address other nasty problem: risky loan instruments. If you could not pay your loan payments at 120% you home value, you probably still cannot afford them at 80%. The reason is because banks created goofy mortgage products that were once affordable for these people but have become completely unaffordable. So, the rest of my proposal addresses two key culprits: ARMs and interest-only loans. Turn them loans into loans people can afford. Reduce the risk profile of the institution and let people keep their homes.

The thing that kills home values is foreclosures. This proposal results in:

• A significant reduction in foreclosures (thus preserving home values)
• An injection of cash into financial institutions that can be used as future capital for investment
• Minimal regulation that prevents the greedy lending habits that created this crisis
• Everyone still be responsible for their own decisions—both Wall Street and Main Street
• It should be much less expensive for the government, meaning fewer new taxes and a lower risk of inflation (it is still an inflationary solution)

Analysis of the Economic Crisis

This economic crisis is every bit as serious as its being billed. The bottom line: if nothing gets done about this situation, no one will lend money. Period.

I know there is a minority of anti-fiat money people who think that is a good thing; but the reality is that it is a horrible thing.

You know in the good ole days the ads that said, "Bad credit? NO PROBLEM! You're approved." Today, those will read, "Good credit? DOESN'T MATTER! WE WON'T LOAN YOU A DIME!"

Why?

To put it simply, our lending institutions don't have the capacity to lend any more money. All of these "trash debts" on their balance sheet have diminished their reserves and put them at great risk. They just can't lend any more money unless the following things happen:

1. They increase their cash reserves
2. They decrease their risk profile

So what happens? Perhaps the most critical things are that:

• Big businesses don't have the cash to operate properly
• Small businesses can't get loans to make payroll or expand
• Individuals cannot buy houses or cars

Net result: an economic downward spiral

Individuals stop buying houses because they cannot get loans. Housing values decrease. Loan defaults increase as more and more people are upside down on their mortgages.

Small businesses simply go out of business because they cannot make payroll. New businesses cannot start (as an aside, one of the saving graces of a traditional recession is that people losing jobs start businesses that inject economic growth into the economy; that won't happen here because people losing their jobs won't find capital).

Big businesses that normally can borrow their way through economic downturns suddenly find they have no place to find capital. They cut jobs dramatically or go out of business.

HUGE job losses.

In short, we are honestly talking economic catastrophe. And I don't see where we recover. Eventually, I believe in America and believe we would recover. But this is Depression-style badness.

The Proposed Solution?

Any solution must create a health financial system capable of providing capital for economic growth. In other words, that has to be the end objective to deal with the short-term crisis.

Obviously, a long-term solution needs to include checks against lending the protect against over-exuberant lending to high risk customers as well so we don't end up in the same bucket the next time we have a real-estate bubble.

The proposed solution involves having the government buy off these "trash debts" at a fairly absurd price. For whatever reason, Paulson has proposed buying these things out at above the institution's carrying price (the carrying price is what the bank values the debt at on its balance sheet). The market price is well below that rate. For some reason, Paulson claims the market price undervalues these debts. I think that's bullshit. The market price is the right price.

At any rate, the government buys these debt instruments and then collects the payments. In an ideal world, everyone ends up paying back their loans and the government makes a profit. If the rate of return on the profits exceeds the interest the government is paying to borrow all these money, the US government ends up making a net profit.

In the mean time, the financial institutions are relieved of the burden of these risky debts AND they have money to loan into the economy.

Good news?

Well, three problems:

1. As mentioned above, Paulson is currently seriously overvaluing the debt. As a result, the government will overpay for these bad debts. That means more interest the government is paying on the money it is borrowing, and the harder it will be for the taxpayer not to get saddled with higher taxes to pay off this loss.
2. That's a lot of money being injected into the economy outside normal channels. I honestly fear two things:
   1. Inflation will kick in
   2. The Fed will have to hike interest rates a lot, thus making capital hard to get!
3. The proposal as I understand it now lacks important checks and balances. As a result, there is a lot of opportunity for corruption. If you are a Republican and don't care that Paulson has absolute authority over $700B, keep in mind it could be a Democratic appointee in the near future with that control. Either scenario is untenable. Beyond the risk for corruption is simply the risk of incompetence. Even with the best intentions, $700B in the hands of incompetents without any oversight is a bad thing. And finally, without tying any strings to this buyout, we risk these financial institutions turning around and making the same stupid mistakes.

Who is to blame?

Everyone is to blame. Not simply Republicans and Democrats. Managers and home owners, farmers and financial gurus.

It does start with the relaxation regulations governing financial institutions that began in the 1980s. These regulations were put in place in the 1930s in response to the excesses that caused the Great Depression.

Remember, in the 1920's we had a rapidly expanding economy with little regulatory oversight over financial markets. The result of the two things combined helped cause the Great Depression (among many, many, many other causes).

Fast forward to the 1980's. We relax many of the regulations meant to prevent another Depression. That relaxation continues through the end of the 1990's. In the mean time, we have an amazing period of economic growth.

So, what happens? Lots of capital is sitting in our financial markets as a result of rapid economic growth. Low inflation means that the cost of lending is low. And the lack of oversight combined with phenomenal growth in real-estate values makes financial institutions more and more willing to accept inappropriate loans (the real-estate values are key; they create the illusion that the loans are less risky than they really are).

So, now combine lack of regulatory framework with bad business decisions.

And add to that bad personal finance decisions. People are accepting way too much debt because they believe their home values will double in 5 years or something stupid.

So, we have:

• Lack of regulatory framework
• Rapid economic growth
• Rising real-estate values
• Low inflation
• Bad business decisions by financial institutions
• Bad personal finance decision by individuals

Remove 1 from the mix, and things are likely not so bad. Mix up the cocktail, and BOOM!

Drill Drill Drill?

Here's a thought experiment for you...

Let's say there is this natural resource called "shmoil". There is only a limited amount of shmoil in the entire world, and one day it will dry up. Nevertheless, shmoil is critical to the basic function of our economy and our nation would fall back into the dark ages without access to shmoil.

If you were President of this country, would you:

a) Elect to use the shmoil of other nations while shmoil prices were relatively low, in the mean time working hard to identify replacements for shmoil and thus guaranteeing you have shmoil reserves through the very end?

OR

b) Open up full exploitation of domestic shmoil early on, resulting in your nation being the first to run out of shmoil and thus being at the mercy of other nations at a time when shmoil prices are sky high due to the great lack of supply?

I vote for a).

Here's the cold reality. The USA has 3% of the world's known oil. It has 25% of the world appetite for oil. We need to be prepared to drill all 3% if it comes to it, but we don't want to open everything up  and end up having no oil reserves when the real oil crunch hits.

Ideally, we develop alternate energy resources and don't ever need to fully deplete the Earth of its oil. But we can't plan for the best and ignore the possibility of the worst. We need to manage access to our natural resources so we are guaranteed to be the last nation on Earth with oil.

We need the oil companies to drill using the oil leases they have available today and stop whining about getting access to ones they don't need access to right now.

The Problem with Palin

When liberals "attack Palin", they are not attacking Palin. Liberals are attacking McCain's judgment in selecting someone that, by the McCain campaign's own arguments, must be unqualified to be President.

It's possible for honest people to disagree on what qualifies a person to be President. The Constitution says only that one must be 35 years of age, born in America, and without a felony conviction.

Given two honest people, one can honestly believe Obama or McCain (or both) simply is not qualified to be President; the other can believe they both are. A person who believes that experience in government is important may believe that Obama does not have enough experience and McCain does; but an honest person cannot believe that Obama has enough experience and McCain does not. For someone for whom experience in government is the key qualifier for being President, McCain is obviously your choice.

People like me who support Obama do not disagree with the sentiment that McCain is more experienced than Obama. I believe that experience is overrated, that judgment and leadership are the critical qualifications for being President. I believe Obama has better judgment and leadership skills than McCain.

The problem with Palin is this:

Given that the primary qualification for being Vice President (in fact the only qualification) as stated in the Constitution is that you are qualified to be President, an honest person cannot hold that Obama should not be President because of his experience AND that Palin is a good selection for Vice President.

In other words, Palin's selection as Vice President does two things:

• It negates McCain's experience issue
• It re-enforces Obama's judgment issue
  

Put bluntly, selecting someone for Vice President who you do not think is qualified to be President shows monumentally bad judgment. If the McCain campaign honestly believes its own rhetoric about the importance of experience, it has done just that.

Hillary Clinton's Speech

Hillary Clinton delivered a near-perfect speech last night. 

Then the pundits jumped in.

I switched between CNN and Fox last night and, had I not been paying attention, I would have thought they were analyzing two different speeches. Fox News was talking about all the things Clinton did not say; CNN was talking about all the things she did say. The result: Fox News "analysts" universally determined that the speech was good for her, but bad for Obama. CNN, on the other hand, said she did exactly what she needed to do.

Who was right? Well, Fox News was loaded with right wing blowhards like Bill "Always Wrong" Krystal. CNN was loaded with a bunch of old party Democratic Hillary Clinton ass-kissers like James "Jackass" Carville. Obviously different perspectives were in play.

 The Fox pundits were panning the speech because it did not contain language stating that Clinton believed Obama had the experience to be commander-in-chief. The CNN pundits liked the speech because it drove home the point that, if you really believe in the causes Hillary Clinton represents, then you must support Barak Obama because he will bear that torch for you.

When analyzing the success or failure of a speech, you need to know who the audience for the speech is. The right wingers mistakenly believed they were the audience for her speech. The audience for that speech was people who backed Hillary Clinton during the primary and were considering voting for McCain or not voting at all because Clinton lost a primary in which they feel (rightfully) that the media engaged in overtly sexist behavior and (wrongly) that the process was unfair to Hillary.

In the context of her target audience, her speech was magnificent. She believes the same things they believe about the media and the process. Right or wrong, nothing anyone is going to do will fix those issues. But she can remind them of why they wanted her to be President in the first place. And the truth is, if you care about 

• a woman's right to control her own body...
  
• the ability for everyone to have access to basic healthcare...
• the need for America to engage in diplomacy before war...
• the need for America to become a nation to be admired, not feared...

Then you cannot allow John McCain to be elected President, as he stands for the opposite of Hillary Clinton and Barak Obama on all these things. And she made that very clear in her speech tonight.

There will be plenty of time for Hillary to point out what a good Command in Chief Obama will make to the wider public during the campaign.

Energy Proposal

We have a lot of vague platitudes out there... "We should drill for oil offshore"... "We need an Apollo program for alternative energy"... Blah blah blah.

What we need is a specific energy program. Here's one:

1. Reduce foreign oil dependence

• Place a tax on unused oil leases.
• Make drilling available in the arctic and offshore... conditional upon exhausting 50% of existing, unused oil leases.
• Remove all federal gasoline taxes.
• Place a 33% tax on every barrel of oil imported from abroad.
• Create mild incentives for the use of natural gas and "clean" burning coal.
• Provide R&D tax breaks on seeking out new sources of oil in the USA.

These combined options create a huge incentive to sell gasoline from American wells. Quite simply, American gasoline will be cheaper than foreign gasoline and the market will vote with their dollars. We have to be a bit careful, because we don't want to create so deep an incentive that we overly rapidly deplete our own reserves. They need to last at least long enough to get to hydrocarbon-independence.

This policy will also ensure that before we damage our national treasures in the name of removing our dependence on foreign oil, that we exploit the resources we already have in place.

2. Eliminate Hydrocarbon Dependence

• Allow no new power plants based on hydrocarbons.
• Subsidize the development of nuclear, wind, and solar power plants.
• Remove all tax breaks for energy companies related to hydrocarbon R&D (except as it relates to the specific tax breaks listed in part 1).
• Boost tax breaks for R&D spent on alternative energy sources.
• Remove capital gains taxes on investments in proportion to their expenses related to alternative energy R&D (careful how this is setup, can be a nice loophole for jackasses).
• Mandate that all new vehicles sold after 2015 must get 50 miles/gallon. Allow a very high "gas guzzler" tax for exceptions through 2020.
• Mandate that all new vehicles sold after 2030 must not require hydrocarbon energy sources.
• Mandate that all vehicles on the road must be powered by systems that do not require hydrocarbon energy sources by 2050.

Cheaper oil and gas should never be an objective; it just delays the inevitable—our need to not use hydrocarbons at all as sources of energy. Absent of an incentive like high gas prices, we will continue down the path of least resistence—fueling up at the pump.

And the reality is that we don't want the departure from a hydrocarbon system to be based on the free market. It must be mandated, or it simply won't happen unless the pain in the pocket book is severe enough. We therefore need regulations that establish a timetable for the move away from hydrocarbons.

The Alternatives to Diplomacy

Barak Obama suggests we should engage our enemies in diplomacy; John McCain suggests that to engage our enemies in diplomacy is only to embolden them.

But what is our real objective?

The real objectively, ostensibly, is a peace that supports American interests and carries moral authority.

It turns out that there are two paths to peace: diplomacy and genocide. Perhaps, along the way to genocide, you will bomb your enemy into complete submission allowing for diplomacy entirely on your terms. But when was the last time the USA was engaged in a war in which that happened? World War II? What would it look like for us to bomb Iraq into submission?

But the real issue here is what is going to happen with Iran. And Hezbollah. And Hamas.

Iran is a corrupt government run by bad people. However, most Americans don't realize that Iran has the moral high ground (as low as it is) in its confrontation with the USA. The USA helped overthrow Iran's democratically elected government and installed a pro-Western dictator much worse than many of the dictators we refuse to speak with today. Iran engaged in illegal acts against the USA (the hostage crisis, funding terrorists), but for good reason: Iran has no reason to trust the USA and has every reason the USA has illegitimate intentions towards it.

The Iranian people are also one of the most pro-American cultures in the middle-east. It is the closest thing to a functioning democracy in the Middle East outside of Israel and the people tend to think more positively of the USA than any other nation.

So why won't we talk to the Iranians? Because we don't like the megalomaniac Ahmadenijad?

He's a pretty scary individual. He denies the Holocaust. He would pursue a campaign of genocide against Israel if he had the power. In short, there just is nothing good about him.

But that's not relevant. He is, in fact, the "legitimately elected" leader of Iran. And even if you don't like Iran's style of "legitimately elected", he is the leader of Iran.

So, we have three choices:

1. Ignore him and hope he does not develop nuclear weapons while we cover our eyes and ears and say "LA LA LA LA I CAN'T HEAR YOU"...
2. Launch a pre-emptive war against Iran and hope we can bomb them into submission.
3. Engage Iran in diplomacy and follow Ronald Reagan's sage advice: Trust, but verify.

It's hard to tell which approach McCain really supports. It is either #1 or #2. #1 is the naive approach. It suggests that if we don't talk to our enemies, they cannot grow stronger. On the contrary, we have seen Iran and North Korea grow stronger and stronger when we ignore them. And #2 is, of course, war not peace.

There simply is no alternative to diplomacy.