Monday, May 18, 2009

Ruminations, May 17, 2009

Economic actions to save an industry
The newspaper industry is in dire straits. It has given pause to the Democrats in Congress, notably Max Backus (D, MT) and John Kerry (D, MA). How can they save this important American industry?

Their thinking goes that the industry, as well as accompanying jobs, can be saved by reducing the taxes that these industries have to pay.

Hey! Just a thought but do you think that the Democrats are on to something? Maybe they're right: tax cuts can stimulate the economy and save jobs. What if they were to apply that thinking to the rest of the economy?

Just a thought.

Barack Obama, capitalist
Is it possible that Barack Obama is a capitalist? We have pointed out that some of his policies seem close to the fascist economic policies of Benito Mussolini and others seem to follow along with Fabian Socialists. Does that make him a fascist or a socialist? Although American presidents may lean one way or another, seldom, because of political, legislative and judicial pressures, can they be overly doctrinaire. Their economic policies tend to be somewhat pragmatic and borrow from many theories.

So, assuming Obama is true to presidential form and all over the lot, let's look at his capitalist side: does he have one? It appears that he does. In his 2006 book, The Audacity of Hope, Obama had this to say about the American economic system: "We should be asking ourselves what mix of policies will lead to a dynamic free market and widespread economic security, entrepreneurial innovation and upward mobility." Hmmm. That almost sounds like Milton Friedman.

Since the Republican Party is thought to be mostly pro-capitalist, we might ask: has Obama embraced any Republican principles? As we have pointed out before, one of the principles of the Republican Party since its founding in 1856 has been that of "free labor:" the idea that those who supply labor should be free to use their labor to become entrepreneurs or to sell their labor to others. In Audacity, Obama went on to comment on one of his favorite Americans, Republican Abraham Lincoln: "For Lincoln, the essence of America was opportunity, the ability of 'free labor' to advance in life. Lincoln considered capitalism the best means of creating such opportunity."

But Lincoln isn't Obama's only role model. He also admires Democrat Franklin Delano Roosevelt. Although some disagree, Obama and others believe that Roosevelt saved capitalism. Obama says that "FDR also understood that capitalism in a democracy required the consent of the people, and that by giving workers a larger share of the economic pie, his reforms would undercut the potential appeal of government-managed, command-and-control systems – whether fascist, socialist, or communist."

That's good capitalist theory but, one may ask, what specific actions has Obama taken in support of these theories? Let's try to relate some of his policies to his stated convictions on capitalism.

One thing we know that capitalism requires is open competition. But, as enterprises become more powerful, they have a tendency to try to close out the competition and establish monopolies. Republican President (1900-1908) Theodore Roosevelt countered this trend toward monopolies (trusts) by promoting antitrust legislation and then using his justice department to force the breakup of large monopolies. In today's world economy, breaking up monopolies is far more complex than it was during TR's day. And what has Obama done about antitrust? He appointed Christine Varney to head antitrust enforcement with a commitment to vigilantly enforce anti-trust laws; last week, Varney said, "I believe that greater coordination with the [Federal Trade Commission] and foreign antitrust authorities is in the best interests of America's business community and consumers." It sounds like she will push for more open competition.

Obama has placed a great deal of emphasis on revising the American healthcare system. The system, as it exists today, has rapidly evolved to one that is effective, expensive and considered by many, as a right. Healthcare became a component of jobs when, during World War II, FDR created the Office of Price Administration to control prices and wages in an effort to hold down inflationary fiscal policies of fighting a war. With workers in short supply and unable to offer higher wages, fringe benefits (such as health insurance) were offered by employers. This method of tying healthcare to employment has evolved and stimulated the healthcare industry to the point where expensive and high technology medical care is now considered to be a component of any good job. With most jobs created by the private sector by small business, healthcare has become heavy burden on small business. If a way can be found to alleviate that burden, entrepreneurs and small businesses will grow more rapidly and provide more opportunities for free labor.

One of the more controversial ideas that the Obama Administration has floated has been trying to restrict pay of executives in automotive and financial industries. Typically, we look at government interference in setting salaries as a fascist economic idea. But to put it in context, when the gap between those near the top of the economic pyramid grows wider, those near the bottom feel slighted and demand a closing of that gap. There is no doubt that the economic policies of the United States since the 1980s have increased everyone's wealth but those near the top have seen their wealth increase faster than those at the bottom. While there will always be gaps, there is no economic model I know of that prescribes the optimum gap; so is the gap too big, too small or just right? To Obama's way of thinking, shrinking the gap and "giving workers a larger share of the economic pie" is an important tool for saving capitalism.

So, Obama apparently thinks that he is a capitalist and he wants to save capitalism. Does this mean that all his policies and proposals are right and should be supported? Hardly. What it means is that labeling him a socialist or Marxist is counterproductive and will be thought to be the hysterical rantings of the right wing. We need instead to be pragmatic. Where his policies will work, they should be supported. Where his policies will cause more harm than good, they should be resisted and opposed. As he said in Audacity: "we should be guided by what works."

Marijuana poll
According to Jay Leno on the Tonight Show, a recent poll, showed that half of Los Angeles thinks that marijuana should be legalized. The other half thought that it was legalized.

Quote without comment
The Washington Post in a May 17 editorial entitled, Mr. Obama's War?: "What's discouraging is how quickly many Americans seem to forget the peril of half-finishing wars... too many politicians lapse into the wishful-thinking school of making policy. We worry that there remains a touch of that in Mr. Obama's Iraq timetables and lean defense budget. But for the most part, having accepted the responsibility of keeping America safe, he has recognized that America can't always choose its enemies or its battlefields. His realism deserves support."

Robert J. Kulak
West Hartford, Connecticut

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