Complex, Very Complex

It seems that Democrats in Congress are feeling a bit insecure because the voting polls are predicting Republican gains in both the Senate and House of Representatives in the November 2010 election. If the people who voted in 2008 for the Democrats would all vote in 2010, I don’t think they would lose any seats, in fact they might gain some.

There are two reasons why they are vulnerable. One is because the Republican leadership (sic!) is claiming the Democrats have created the federal budget deficit (which is not true, the last Republican president created it) and also because there are so many very strange people (who even scare most Republicans) whose names may appear on the ballot as Republican candidates in November.

There is no point in addressing the second issue anymore, I’m really tired of writing about it. See for example Iraqi Finis elsewhere on this blog. Why there is such a huge deficit is in some ways more complex but if one narrows the timeline to the events of the 21^st Century, it is really simple to understand. If you missed it, this is what happened.

After the 2000 Presidential election the federal government was operating with a surplus. One can thank Democrat Bill Clinton for leaving a prosperous economy and balanced budget for Republican George W. Bush when he took office in January 2001. Did he mess it up? Yeah, you could say that. One wonders how anyone could have possibly thought this guy was ready for the job.

The fundamental points though are these:

The U.S. economy was prosperous, unemployment was low and some people made a lot of money in the 1990s.

The Federal Budget was balanced; in fact it was running in the black.

Then by the end of the year things considered impossible happened and the United States found its national security under threat. Wars and draconian domestic policies followed. Once more, no need for details, everyone knows what I’m writing about. You can send me an email if you don’t.

Wars cost lots of money even if they are contracted out and if taxes are drastically cut at the same time, the federal budget goes into the red.

Essentially that’s what happened. I would add that 2003 through the early fall of 2008 were some of the most terrible years for the United States and its population that I can remember. I was born after World War II ended, so I can’t personally say anything regarding how things were before that.

The short version for the 21^st Century problems are that the wars were terrible and without any redeeming qualities. Then in 2008, the economy collapsed.

These are a very few references on the economy situation:

The Already Wealthy

Living on the Edge of Madness

Forgetting the Past and Its Consequences

What I mean by the title of the last reference is forgetting that the past has consequences. Ok so far?

For the wars I would recommend the documentary available on DVD No End in Sight.

The points of importance though are that even if there were no blatant Republican opportunism which may cost the Democrats votes in Congress and the economy was in better condition, some things would still be bad and others not so bad.

The Democratic Administration and Democratic Congress have really accomplished a lot, saved the economy from a much more disastrous fate and enacted historically important legislation. See for example:

Xenophobia: Fear-Mongering for American Votes

President Obama's winning streak

It’s Witch-Hunt Season

As I see it however even if the Republicans do well in the 2010 Congressional election, I would not be overly concerned. First, as mentioned, the accomplishments made by Democrats in less than two years are historically important. And regarding Republicans, they are so incompetent and advocate such extreme ideology, they are going to become easy targets in 2012.

The issue that is hurting Democrats is the high levels of unemployment. Essentially what they thought would create jobs wasn’t of sufficient scale. More needs to be done and the condition the U.S. economy is in really needs to be understood. Let me summarize my thinking on the U.S. economy.

The problem is that the U.S. is an example of a post-Keynesian economy where there is a complex relationship between public and private sector indices with no known direct cause and effect relationships. So every attempt to achieve something relatively straight forward in a less complex model, like creating job growth, is kind of an experiment to determine what works. Probably a large and sustained stimulus would yield job growth but it would have to be first directed in creating a new economic infrastructure. A“clean energy” economic sector for example. In general, the U.S. economy is heavily leveraged in defense industry and aerospace corporations where there is no real demand and no real customers. Does anyone want to buy an F35? If so, the deal is you’d have to pay for it. This relationship is a result of the United States fighting the Cold War with the USSR alone and now it is not going to be easy to revert to a more direct economic model where cause and effect are clearly defined.

I made these comments in the Washington Post Democrats add fiscal austerity as a campaign issue and someone remarked:

BarryOR:
I don't dispute what you wrote but challenge the whole underpinning logic/ontology of your analysis.
It's thinking like yours that got us into this mess in the beginning. In the end it's a rationalization to ignore reality and spend the nation’s wealth on "eye candy" rather than doing what is needed.

BarryOR is me, needless to say.

Well if the person making the comment agrees with the analysis, which amounts to 90% of my statement, the only non-analytical thing I said was prefaced with “Probably”. The important point was that the economy is so complex and intertwined with variables that a specific policy to create job growth will not be something one can grab off the shelf. Actually if one looks at it closely, there simply aren’t that many options available and I don’t think the present economic infrastructure will survive much longer. I don’t know if this person is a reality denier or not but by any measure fossil fuel energy sources are not a good long term investment. And I didn’t say anything about climate change.

I know from my experience as a software designer and systems analyst that when cause and effect are not easily discernable, the best thing to do is to SIMPLIFY THE MODEL.

Suggested ideas to explore:

What happens on Wall Street and in banking is far too complicated to maintain legality over; determining how to tax and regulate their activities is more complex. The relationships need to be simplified and adequately regulated to prevent continued scams and disasters carried out, intentionally or otherwise, by such loosely controlled entities.

In general, federal, state and local tax structure should be dramatically simplified.

The defense sector is still a far greater component of the economy than is reasonably justified by potential threats.

Taxes from working class and middle class income pay for a far greater percentage of what government spends than it should. It logically follows that taxes do need to be lowered and government spending does need to be reduced provisionally. For example, tax cuts should focus on families with incomes less than $200,000 a year. Elsewhere taxes should be targeted at obtaining a sustainable balanced federal budget within a decade.

Federal government spending in the private sector should focus on inducing job growth and infrastructure creation that generates sustainable global markets in which the U.S. economy is a leading force.

Most importantly, government programs should protect working and middle class individuals and families from catastrophic events they can neither predict nor influence.

Toleration of government and corporate malfeasance must immediately end.

Many still object to the Wall Street and Bank bailouts that Henry Paulson sold to Congress. Paulson scared so many people. I would recommend another documentary also available on DVD called Plunder: the Crime of Our Time.

It should be clear that I’m somewhat busy right now and others are going to have to start thinking differently about problem solving as well. Basically it is your country and you've broken it though greed and negligence. You treat it the same way you treat everything else. Why don't you do something differently for once and get it fixed.