What we Fear in Syria already happening in Egypt?

Posted by PITHOCRATES - April 30th, 2011

The Islamist Muslim Brotherhood Ascendant in Egypt

The death toll in Syria has exceeded 500.  But we’re not calling for Assad to step down.  And we’re not bombing Syria.  Even though Syria is very friendly with Iran.  And supports Hezbollah and Hamas.  No.  We’re acting cautiously with Syria.  Because Assad is a man the Obama administration is banking on to reform Syria.  He’s the moderate.  Friend of the Christian community in Syria.  Holding the Muslim Brotherhood and their Islamism at bay.  Because Iran is bad.  Hezbollah is bad.  Hamas is bad.  And the Muslim Brotherhood is especially bad.  So we’re going to tread lightly in Syria. 

This is exactly the kind of caution the Obama Administration did NOT exercise in Egypt.  Pity, because everything the world is worried about in Syria may be happening in Egypt (see Muslim Brotherhood to contest half of Egypt parliament by Reuters posted 4/30/2011 on The Jerusalem Post).

The Muslim Brotherhood said on Saturday it will contest up to half of Egypt’s parliamentary seats in elections scheduled for September.

But the group said it will not field a candidate for the position of president in an election due to held after the parliamentary vote.

The Muslim Brotherhood was no secret in Egypt.  Or their ties to Iran and Hamas.  But the Muslim Brotherhood wasn’t involved with the democracy protests.  Sure, they were the only organized, albeit illegal, opposition party.  But that was nothing to worry about.  Because this was an outpouring of young people and their yearning for democracy.  Much like those young people who yearned in Iran in 1979.

The Muslim Brotherhood is regarded as the most organized political force in Egypt after the ouster of Hosni Mubarak in February and the dissolution of his National Democratic Party…

The Brotherhood is an Islamist group founded in the 1920s and has deep roots in Egypt’s conservative Muslim society.

So what is there to worry about?  This spontaneous yearning for democracy by the young will no doubt triumph.  Unlike a well organized movement that goes back to 1920.  And that has deep roots in Egypt’s conservative Muslim society.  There is no reason that the Egypt revolution will be just like the 1979 Iranian Revolution.  Just because it parallels the Iranian Revolution doesn’t mean it will end up like the Iranian Revolution.  In theocracy.

The Islamist Muslim Brotherhood denies being Islamist

As if to assuage this very concern, the Muslim Brotherhood is telling their critics that their Islamist party is not a theocratic one.  That they will gladly cooperate with the secular powers (see Egypt: Muslim Brotherhood sets up new party posted 4/30/2011 on the BBC).

It has sought to allay fears of an Islamist parliamentary majority, and said it would be willing to co-operate with secular parties.

Mohammed al-Mursi, the head of the new Freedom and Justice Party, told reporters in Cairo: “It is not an Islamist party in the old understanding, it is not theocratic.”

Just like Ayatollah Khomeini assured the young revolutionaries in Iran not to worry.  Their government would be a secular government.  And it was.  Until it became a theocratic one.  You see, he lied.  He told everyone what they wanted to hear.  All the while making Iran a theocracy.

But that won’t happen in Egypt.  Because the people who want to turn Egypt into a theocracy are telling us they don’t want to turn Egypt into a theocracy.  So there’s nothing to worry about.

Egypt Reopens Gaza Border Crossing, Hamas Cheers

Or is there?  The Muslim Brotherhood is not exactly what one would call fans of the state of Israel.  No.  They would fall more into the anti-Israel camp.  Like Iran.  And Hamas.  With Gaza bordering both Israel and Egypt, and with Hamas in power in Gaza, what happens in Gaza vis-à-vis Egypt would be a good indicator of things to come.  So let’s take a look at what’s happening in Gaza (see Egypt intends to reopen Gaza crossing by Michael Birnbaum posted 4/29/2011 on The Washington Post).

Egypt plans to reopen a border crossing with the Gaza Strip as soon as possible, a spokeswoman for the Egyptian Foreign Ministry said Friday, worrying Israel and bringing an end to a blockade of the territory that had been deeply unpopular inside Egypt…

Access to Gaza from Egypt had been severely restricted at Israel’s request after the Islamic movement Hamas took control of the territory in 2007. Israel and the United States consider Hamas a terrorist organization, and Israel imposed a blockade on the territory because officials said they were concerned about weapons and explosives being transported across the border.

If one didn’t know any better, one would think that Egypt may be moving away from Israel and towards Iran/Hamas.  Because their action will help weapons get into Gaza where Hamas can fire them on Israel.  Which is sort of their thing.  Launching weapons into Israel.  So maybe there’s something to worry about here with this new Egyptian direction.

Egypt has moved in recent days to bolster its relationship with Hamas, an offshoot of the Muslim Brotherhood, which was banned in Egypt during Mubarak’s reign. The change reflected popular sentiment and helped Egyptian diplomats broker a deal this week between Fatah and Hamas that will unify the two main factions in the Palestinian territories. Egyptian diplomats have also announced their intention to increase ties with Iran.

Okay, so they’re throwing open the border crossing between Gaza and Egypt.  They’re improving relations with Hamas.  And Iran.  I think we’re past ‘maybe’.  I think it may be time for someone to start worrying.  For despite all of their denials about their theocratic intentions, their actions speak louder than their words.  It’s beginning to look a lot like Poland in 1939.  A country surrounded.  Flanks secured.  Good propaganda.  And a burning desire to launch a war of annihilation.  I’d be surprised if Israel wasn’t worried.

Israel isn’t Feeling the Love

Oh, come on, you say.  That’s just ridiculous.  The Palestinians are just a peace loving people.  And Hamas is just a political party.  Comparing them to Nazi Germany is a bit extreme to say the least.  Besides, what have they ever done to suggest that they want to annihilate the state of Israel (see Barak to UN chief: Hamas must recognize Israel by Haaretz Service and Reuters posted 4/30/2011 on Haaretz)?

Defense Minister Ehud Barak spoke with United Nations Secretary-General Ban Ki-moon on Saturday and expressed concerns about the unity agreement that was recently reached between Fatah and Hamas.

“Hamas is a terrorist organization that fires rockets at Israeli towns and recently used an anti-tank missile against a school bus,” Barak said.

“Therefore, we expect that world leaders, including, of course, the head of the UN, to make cooperation with such a joint government, if it is established, conditional on the government accepting the Quartet’s conditions, which are the recognition of Israel, the abandonment of the path of terror and the acceptance of all previous agreements with Israel,” Barak continued.

Well, yeah, there’s all of that.  A long history of violence towards Israel.  And the refusal to recognize them as a sovereign state.  But other than that, what has Hamas ever done to suggest that they want to annihilate Israel?

One thing for sure, Israel isn’t feeling the love these days.

Democracy Losing in Egypt 

Democracy may lose in Egypt.  Just as it did in Iran following the 1979 Revolution.  Which will empower Hamas.  And that open border crossing between Egypt and Gaza will greatly help Hamas in their struggle against Israel.  With an able assist from the Muslim Brotherhood in Egypt.  Pity we didn’t think this through better before saying Mubarak had to go.

Things are so bad with an ascendant Muslim Brotherhood in Egypt that we’re backing off on the crimes against humanity in Syria.  There the price of innocent civilians killed is an acceptable cost to keep the Muslim Brotherhood at bay.  But not in Egypt.  And Mubarak didn’t even set the army on his people.  But he had to go.  No ifs, ands or buts about it.  But Assad is okay.  He just needs to tone it down a little.  Kill a few less people.

All the while Israel sits and waits.  Their world is changing.  And there’s little they can do about it.  They hope for the best.  And no doubt plan for the worse.  Like in 1973 during the Yom Kippur War.  When the tide of war was going against them and defeat looked imminent.  They had suffered great losses and desperately needed U.S. aid.  Which was not forthcoming.  So Israel began preparing some nuclear weapons to stave off defeat.  This got the attention of the U.S.  Who replaced Israeli’s material losses.  Which kept them in the war.  Kept them from going nuclear.  And allowed them to win a favorable peace.  And the Arab world has hated the U.S. ever since.

So much hatred in the Middle East.  And so many old scores to settle.  It’ll probably get worse before it gets better.  And all I can say is that I’d sure hate to be in our shoes.

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The Obama Reelection Strategy: Increase Gas Prices to Crash Economy to Lower Gas Prices

Posted by PITHOCRATES - April 29th, 2011

The 2nd Largest Oil Reserves in the World

Saudi Arabia has the largest oil reserves in the world.  Take a guess who has the 2nd largest oil reserves in the world.  Kuwait?  Iraq?  Iran?  Libya?  Nigeria?  Venezuela?  Qatar?  Angola?  Algeria?  Ecuador?  United Arab Emirates?  No.  No.  No.  No.  No.  Uh…um, no.  No.  No.  No.  No.  No.  Could it be the United States?  It could be.  But it’s not.  With so much U.S. land off limits to drilling who knows how much oil they have.  So who has the second largest oil reserves in the world?  Here’s a hint.  Think Wayne Gretzky.  Who used to play on a team called the Oilers.  In the city of Edmonton.  In the province of Alberta.  In, of course, Canada.

Yes, Canada has the second largest oil reserves in the world.  But this oil reserve isn’t in pools underground waiting for someone to pump it up.  It’s in the Athabasca oil sands.  Think of hot oil spilled into sand which then cools into a thick tar.  Once upon a time this type of oil was worthless.  Because you just couldn’t drill for it and pump it.  You have to process this tar into useful oil.  And the cost to do this used to be prohibitive.  But with the price of oil today, this once worthless tar is now a very valuable form of crude oil.

America, the world’s largest economy, imports the majority of her oil from Canada.  In fact, the Canadians export more oil to the U.S. than they consume themselves.  Which is rather interesting when you consider Canadian gas prices are higher than American gas prices.  Now oil is oil.  And one would assume that the Canadians make their gasoline from the same oil we make our gasoline from.  Canadian oil.  Yet their gas prices are higher than in the U.S.  Why?  Because when it comes to their gasoline, they’re a lot like the Europeans.  They tax the bejesus out of it.  Taxes average about a third of the price at pump.

Even with all that Oil Canadian Gas Prices are High

With the world’s second largest oil reserves, one can’t blame the lack of supply for high prices.  They have supply.  So much that they export more than they use.  Could they have a refinery shortage?  If they did, they could fix that easily by building more refineries.  I mean, with the domestic oil reserves, the Canadians are in the driver’s seat when it comes to their gasoline prices.  It would be pretty darn hard for their gas prices to be ‘too high’ to affect their economy.  So how are the little guys doing in Canada?  The small business owners (see Rising fuel costs hit small businesses by Anita Elash posted 4/29/2011 on The Globe and Mail)?

Steak is off the menu, comfort food is in and prices are up by as much as 20 per cent at the Yellow Belly Brewery in St. John’s, Nfld., this spring, partly because of rising fuel costs.

Owner Brenda O’Reilly says her expenses have increased steadily since she opened her micro-brewery and gastro pub three years ago, but the sudden price hike at the gas pumps this year has been “the straw that broke the camel’s back.”

In addition to coping with higher labour costs and escalating commodity prices, her main supplier has slapped a steadily rising fuel surcharge, now up to $3.50, on every delivery – a cost that significantly cuts into profits.

I guess the price of Canadian gas can be ‘too high’. 

Forced menu changes and higher restaurant prices are just one of the ways record-high fuel costs are affecting small business this spring. Surveys for the Canadian Federation of Independent Business show that fuel costs are now the biggest concern for small business owners. Seventy-five per cent of members said they’re worried about rising fuel prices, compared to 50 per cent who were worried two years ago.

CFIB chief economist Ted Mallett said wide fluctuations in fuel prices over the past few years have created a lot of uncertainty for business owners and make planning especially difficult. Many have signed contracts or service agreements based on costs several months ago, and “if they guessed wrong about fuel prices, it comes out of their bottom line.”

These are the kind of problems they’re having in the U.S.  Because the Americans have no control over gas prices.  They are at the mercy of the oil exporters.  Exporters like Canada.  Which begs the question.  How can both the United States and Canada have such high gas prices?  If the Canadians are getting rich off of the Americans, they should be able to lower their own gas prices.  If they’re giving the oil away, then the Americans should be able to lower their gas prices.  It’s hard to imagine how the second largest oil reserves in the world results in high prices in both the U.S. and Canada.  Unless they’re both taxing the bejesus out of their gasoline.

High Gas Prices Kill Anemic Economic Recovery

The Canadian consumer is making things hard for Canadian small business.  And it’s no different in the U.S. (see Gas costs siphon off much of March rise in incomes by Martin Crutsinger, Associated Press, posted 4/29/2011 on USA Today).

Consumer spending had been expected to post solid gains this year, helped by stronger employment growth and a two percentage-point cut in Social Security payroll taxes. But Americans are paying more for gas, prompting economists to scale back their growth forecasts…

“The increase in prices is absorbing pretty much all of the windfall from the payroll tax cut,” said Paul Dales, an economist with Capital Economics. “If gasoline prices were to stop rising, real consumption could bounce back in the second quarter. But even then, jobs growth and wage growth are not strong enough to result in a significant and sustained acceleration in consumption growth. This economic recovery is going to continue to disappoint both this year and next.”

Consumers are spending more.  But they’re getting less.  Any extra disposable income is just paying for the higher cost of gasoline.  Which means consumer spending is flat.  And will remain flat.  For another two years.  Or more.  Because of the cost of gasoline.  The environmentalists may be happy.  But high gas prices are making the rest of us make a lot of sacrifices we’d rather not.  And it’s killing off what anemic economic recovery there was.

The Weak U.S. Dollar Increases World Oil Prices

There is a reason gasoline prices are soaring.  And it’s just not demand outpacing supply.  Though that is a huge part of it.  But it’s another government policy that is compounding the supply problem (see Oil edges up, but choppy, as weak dollar supports by Robert Gibbons posted 4/29/2011 on Reuters).

“Oil is reacting to the dollar…,” said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.

Higher interest rates in Europe compared to the U.S. have undermined support for the U.S. dollar, pushing up the euro by 11 percent so far this year.

The weak dollar also helped push spot gold to a new record as investors continued to seek alternative assets to hedge against inflation.

Thursday’s report that growth in the U.S. gross domestic product slowed more than expected to an annual rate of 1.8 percent in the first quarter from a fourth-quarter pace of 3.1 percent, reinforced the perception that the U.S. central bank will continue with its loose monetary policy.

It’s not the greedy oil companies.  Or their record profits driving up prices.  It’s Federal Reserve policy.  All that quantitative easing.  Printing money.  They just increased the money supply so much that they devalued the dollar.  Which gives us price inflation.  Where everything costs more because our money is worth less.  And we price oil in U.S. dollars in the international markets.  Which means American monetary policy is increasing world oil prices.  Not the oil companies.  Their getting obscenely rich is just a byproduct of loose U.S. monetary policy.

Oil’s price rise could be tempered by increasing evidence that high prices will erode demand.

U.S. consumer spending rose as households stretched to cover the higher cost for food and gasoline as inflation posted its biggest year-on-year rise in 10 months.

But all is not lost.  Oil prices will come down.  Like they did in 2008.  Because that’s what recessions do.  They lower prices.  When people don’t have jobs they don’t buy gas.  Which lowers demand.  And this lower demand will bring down gasoline prices.

If you Like Stagflation and Misery, Vote Obama

Perhaps this is the Obama reelection strategy.  Ramp up inflation to crash the economy.  Thus lowering gas prices.  It may work.  If people don’t mind another ‘worst recession’ since the Great Depression.  As long as gas is more affordable.  It’s a risky plan.  And it hasn’t had a successful track record.  It made Jimmy Carter a one-term president.  But perhaps Obama can succeed where Jimmy Carter failed. 

Interestingly, stagflation and economic misery are not the only things these presidents have in common.  Both were/are engaged in the Middle East, too.  Carter brought peace between Israel and Egypt while Obama has…

Perhaps they should consider another reelection strategy.

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LESSONS LEARNED #63: “There is no such thing as a monopoly in free market capitalism.” -Old Pithy

Posted by PITHOCRATES - April 28th, 2011

Even the mighty Coke-Pepsi Duopoly can’t stop People from Drinking Tap Water

Coke and Pepsi have a near monopoly in the cola market.  Or a duopoly.  They dominate.  And they’re bitter enemies.  Few brands are locked in such a bitter struggle that we call it war.  The Cola Wars.  They are archenemies.  Even though they may cooperate by alternating their discounting to limit their losses.  One month Coke may be on sale.  The following month, Pepsi.  They’re big and their powerful and when you ask for a Coke at a restaurant you’ll either get a Coke.  Or they’ll ask you if Pepsi is okay.  Or vice versa.  Because they own the market.

But do they?  There’s always another choice.  At a restaurant, we can order ice tea.  Hot tea.  Coffee.  Orange drink.  Beer.  Wine.  A cocktail.  Or even water.  Ditto at the grocery store.  Walk down an aisle and there’s more to choose than Coke or Pepsi.  RC Cola, for one.  And then there’s the un-cola (7-Up).  VernorsA&W Root BeerSquirtDr. PepperCrushSnapple.  And other name brands that aren’t owned by the Dr. Pepper Snapple Group.  Not to mention all the store brands.  And, of course, tap water.  Which I personally drink with most of my meals.  Even though there’s nothing finer than a Coke or Pepsi to wash down a greasy pizza.

Try as they might Coke and Pepsi can’t limit entry into the beverage market.  The barriers they can erect are minimal.  They can offer a special price to a store or restaurant in exchange for keeping out their hated rival, but they can’t prevent people from asking for tap water.  Or from people simply going elsewhere to get the Coke or Pepsi product they want.  Or the million other options out there.  And if they raise their prices in their ‘duopoly’, people will just seek out those other options.  Yes, they may be able to tell the difference between Coke and Pepsi in blind taste tests.  But if the price isn’t right, they’ll enjoy RC Cola just fine.  Or even the store brand cola.

Go ahead and Tax our Tea.  We’ll just drink Coffee Instead.

You see, to keep out the competition, you need the power of government.  Just ask the sugar importers.  Who would love to sell to the cola companies.  But don’t.  Because government has erected a barrier to that market.  Now, we don’t know what their highly guarded secret recipes are, but we do know that they each use the same sweetener.  High fructose corn syrup (HFCS).  They don’t use sugar.  Why?  Because Big Ag lobbied Congress to slap high tariffs on imported sugar.  Which they have.  Now the price of sugar is so high the cola companies use HFCS instead.  Though that may be changing as of late with a new round of health concerns about HFSC.  But that’s a whole other story.

To limit consumer choice, you need government to step in.  Because only government can write laws to erect market barriers.  For example, the last straw of British oppression before America’s Declaration of Independence was about a British law that erected a market barrier.  British Americans, being of British stock, liked their tea.  But they didn’t like paying the high price of East Indian Company tea.  In the Mercantile economics of the day, everything bought and sold in the British Empire shipped on British ships through British ports.  Indian opium shipped on British ships to China (via Calcutta).  The British than used the proceeds from those sales to purchase tea.  Which they shipped on British ships back to London.  Where they paid a duty on it.  And then on to America.  Where the colonists paid a tax on it.  All these markups made their tea pretty expensive.

Famine and recession caused financial problems for the East India Company.  To help alleviate their problems, British Parliament stepped in.  Said they could ship their tea directly to British North America (without going through London).  And sell it tax-free in the colonies.  Which made all other tea more expensive.  Which did not go over well with the American tea merchants.  Or the colonists in general.  This led to the Boston Tea Party.  American Independence.  And the switch from drinking tea to drinking coffee in America.  Because even when there is only one tea that is legal to drink, there is always another choice.

Rockefeller benefited Consumers.  The ICC did not.

People love Teddy Roosevelt for his trust busting.  Attacking the big robber barons.  To help the little guy.  And one of the big guys the little guys loved to hate was John D. Rockefeller.  Of Standard Oil fame.  Rockefeller was richer than most nations.  And some people just hated that.  He made his wealth by making refined oil products affordable to the consumer.  And he was a great environmentalist.  He saved the whales by replacing whale oil with kerosene.  And his relentless research and development made every bit of refined oil into a useful product.  While his competitors dumped most of their waste back into the environment.  Not Rockefeller.  He hated waste.  He even experimented in finding the least number of welds it would take to hold an oil barrel together.  He invented vertical integration (controlling industries up and down the product pipeline from the collection of raw resources to the sale of a finished product).  He not only made refined oil products cheap.  He made them plentiful.  Which made America the world’s leading economic power.  Successful corporations follow his example today.

Sure, he put a lot of his competitors out of business.  But it wasn’t because he was a monopoly.  It was because he was just that much better.  He produced refined products better and cheaper than his competition.  By the time the trust busters busted up Standard Oil, competition was coming into being on the Standard Oil model.  Which ultimately produced more refined products at lower costs.  He forced the competition to step up to his level which benefited consumers.  While the trust busters tried to bring Rockefeller down to his competitor’s level which benefited his competitors.  Not the consumers.  No, consumers did very well by John D. Rockefeller.  He created and produced at a relentless rate.  He didn’t ask for government help.  Unlike his competitors.  Who complained to the government.  (It is never a consumer that complains about predatory pricing).  Because when you can’t compete legitimately, you petition government for special favors.  Much like some of the railroads did.

Building a railroad is costly.  And takes a lot of friends in government.  At all levels.  Because you have to lay track through federal land, state land, county land as well as through cities.  Of course, everyone wanted that track to go through their land because the railroad was the way to ship goods.  And people.  So the system was ripe for corruption.  And it often was.  Once built some shippers complained about unfair shipping rates compare to what others got.  Rockefeller, for example, was highly criticized for getting better rates by far than any of his competitors.  Of course, he shipped by far more product than any of his competitors.  Which probably had a lot to do with his rates.  But the government saw that things were unfair in the railroad business.  So they stepped in.  And created the Interstate Commerce Commission (ICC).  Which was to right all the wrongs.  Which, of course, it didn’t.  It just made it easier for the big companies to fix things in their favor.  For they now had a single governing body to buy.  Which made it easier to buy political influence.

But none of this made a difference to save the railroads.  They started to die in the Fifties.  Of arrogance.  When people asked the big railroad executives what business they were in, they replied, “The railroad business.”  But they weren’t.  They were in the transportation business.  What’s the difference?  The ‘railroad’ business had only other railroads for competition.  The transportation business had cars, trucks and, eventually, planes, as competition.  So even though those who used the power of government to restrict other railroads from entering their markets, there was still competition.  The interstate highways and the automobile killed passenger rail.  And the trucking industry almost killed the freight railroads.  What saved them was realigning their operations into the transportation business.  Intermodal transportation combined container ships, railroads and trucks into a seamless and cost efficient transportation system.  Roadrailers took that concept to a higher level.  These are truck trailers that can be pulled by a locomotive without the need of a rail flatcar.  Trucks deliver these trailers to a rail yard.  They add a train bogey to the trailer.  Put it on the track.  Couple them together.  And attach them to a single locomotive.  Very little non-revenue weight.  Making it very efficient.  John D. Rockefeller would be impressed.

In a Free Market there is always a Choice

Wherever there is a market there is competition.  For any market where a profit can be made will attract others to that market.  Companies can try to restrict competitors.  But that’s all they can do.  Try.  Because if it’s a free market, it’s open to competition.  There are no barriers that a competitor can’t overcome.  Except one legislated by government.  And competitors can even crack that barrier.

And this is what it takes to make a monopoly.  Government.  Railroads had monopolies for awhile.  But creative business people found a way to crack their government-imposed monopoly.  Truckers came in and shipped at rates lower than the ICC said was fair.  Of course, fair is a relative term.  What’s fair to the railroad is not fair to the shipper.  Or the consumer.  But a trucker shipping at rate that he can cover his expenses and support his family is fair to everyone.  Except the railroad who depended on government instead of innovation for their business profits.

Coke and Pepsi can fight their cola wars but they can’t keep out competition.  There’s always root beer, ginger ale, orange drink, beer, wine, liquor, water, coffee or tea.  And even when government uses their full weight and power to create and maintain a tea monopoly, tea drinkers can simply become coffee drinkers.  For in a free market there is always a choice.  Always.

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It’s Entitlement Reform or Bust. Literally.

Posted by PITHOCRATES - April 27th, 2011

Boehner not Wedded to Ryan’s plan to Reform Medicare

Just when you thought someone was getting serious about addressing the 800 pound gorilla in the room.  That thing that is driving this car into the ditch.  Entitlement spending.  Unsustainable entitlement spending.  The young guns laid down a bold plan.  But the old guard is now backing away from it (see Boehner: ‘Not Wedded’ to Ryan Plan for Medicare by Danny Yadron posted 4/26/2011 on The Wall Street Journal).

House Speaker John Boehner (R., Ohio) said he is “not wedded” to Mr. Ryan’s plan to redo Medicare. “Paul Ryan has an idea that’s certainly worth consideration,” Mr. Boehner said in an interview with ABC News. “I’m for it. It’s our idea. It’s Paul [Ryan]’s idea. Now other people have other ideas. I’m not wedded to one single idea.”

For crying out loud, who do you gotta sleep with to get some entitlement reform around here?

This is why the Founding Fathers did not include Entitlements in the Constitution

Somebody needs to do something with Medicare and fast.  Because the current entitlement spending (the biggest chunk of which is Medicare) is going to bankrupt the United States.  The Heritage Foundation has published a new book chock full of charts (some of which they crunched from 2008 tax data).  If you’re looking for a good book to curl up with on a rainy night, this isn’t it.  But if you want to make some sense out of all these numbers being thrown around out there, this is a must read. 

Based on current projections, by 2049 spending on Social Security, Medicaid, Obama Subsidy Program and Medicare will consume all tax receipts, leaving nothing else to pay for military spending or interest on the debt (see Entitlements Will Consume All Tax Revenues by 2049 from The Heritage Foundation 2011 Budget Chart Book).

If the average historical level of tax revenue is extended, spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security will consume all revenues by 2049. Because entitlement spending is funded on autopilot, no revenue will be left to pay for other government spending, including constitutional functions such as defense.

Sure, some may not care that the military will be completely defunded.  But at the rate of growth of this entitlement spending on ‘autopilot’, we won’t be able to pay that other great expense.  Interest on the federal debt.  And that’s a big deal.  For it’s what everyone is talking about right now.  Now that we’re fast approaching the legal debt ceiling.  If we don’t raise it, the Obama administration claims, we’ll destroy the credit worthiness of the nation (see Treasury quietly plans for failure to raise debt ceiling by Lori Montgomery and Brady Dennis posted 4/26/2011 on The Washington Post).

The White House is warning that catastrophe will strike if Congress fails to raise the limit on the national debt: With too little cash to pay creditors, the U.S. government would default. Interest rates would skyrocket. And the economic recovery would collapse.

So, yeah, this entitlement spending is pretty serious.  If unchecked, its growth will make it impossible to pay for defense and interest on our debt.  And continuous deficit spending adds more and more to the debt.  Other than a spike during World War II, the national debt as a percentage of GDP was at or below 50%.  Obama has taken that above 50% for the first time since FDR.  And then it just soars after that.  By 2050 they project it to be 344% of GDP (see National Debt Set to Skyrocket from The Heritage Foundation 2011 Budget Chart Book).

In the past, wars and the Great Depression contributed to rapid but temporary increases in the national debt. Over the next few decades, runaway spending on Medicare, Medicaid, and Social Security will drive the debt to unsustainable levels.

Of course, a trillion dollar stimulus or two and a national health care program only compounds the problem.  Even Obama is now saying we can’t spend more than we have, implying that we’re just not taxing the people enough for the current level of spending.  But it’s not a lack of taxing that caused the problem.  It’s the orgy of spending that is (see Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits from The Heritage Foundation 2011 Budget Chart Book).

The main driver behind long-term deficits is government spending[,] not low revenues. While revenue will surpass its historical average of 18.0 percent of GDP by 2021, spending will shoot past its historical average of 20.3 percent, reaching 26.4 percent in the same year.

But didn’t we cause the deficit by letting the rich not pay their fair share of taxes?  George W. Bush gave the rich unfair tax breaks.  And President Obama renewed the tax breaks for the rich.  It seems to me that if we would only stop the free ride of the rich we could solve a lot of our fiscal problems.  I mean, just how much are these cheap bastards paying anyway? 

Well, funny you should ask.  Because they’re paying a lot.  The top 1%, the richest of the rich (those earning $380,354+ annually)?  These cheap bastards are paying 38.02% of all federal income taxes.  The top 10% (those earning $113,799+ annually)?  These cheap bastards pay 69.94% of all federal income taxes.  It appears that these cheap bastards aren’t all that cheap after all.  The rich are paying the lion’s share of all federal income taxes.  While the bottom 50% (those earning $33,048 or less annually) are only paying 2.7% of all federal income taxes (see The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes from The Heritage Foundation 2011 Budget Chart Book).

Top earners are the target for new tax increases, but the U.S. tax system is already highly progressive. The top 1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percent paid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all.

It’s the entitlements, stupid.  They’re breaking the bank.  When the Founding Fathers wrote the Constitution there wasn’t any entitlement spending in it.  Why?  Because they didn’t want them in the Constitution.  It wasn’t in their plan for the federal government.  Why?  Because they all feared what would happen when people started voting themselves money from the federal treasury.  Franklin warned that it would be the end of the republic.  You see, he said if we started doing that we would eventually end up exactly where we are.  Wise man, that Franklin.  As were all the Founding Fathers.  They knew better than to give us a democracy.  They wanted people who knew better (or should know better) between the people and the treasury.  So that some demagogue couldn’t come along and promise federal benefits in exchange for votes.  Like they do today.  And plan to do until the country spends itself into the ground.  Obama’s 2012 budget calls for entitlement spending that consume 58% of the entire budget (see More Than Half of the President’s Budget Would Be Spent on Entitlement Programs from The Heritage Foundation 2011 Budget Chart Book).

In combination with other entitlements, Medicare, Medicaid, and Social Security constitute the lion’s share of President Obama’s 2012 budget. In contrast, spending on foreign aid represents 2 percent.

That’s an infinity percent increase ((58%-0%)/0%) since 1787.   For something the Founding Fathers didn’t want the federal government to do.  And trying to pay for this is forcing the nation into a “catastrophe.”  If they were alive today they’d probably say, “See, I told you so, you stupid sons of bitches.  And, by the way, thanks for taking our gift to you and destroying it in a little over 200 years.  Makes those 8 years of the Revolution all the more worth it.  You should have listened to us.  But no!  What do we know?  The English Civil War, the Enlightenment, the Magna Carta…what are these?  Sure, they influenced us.  But what do they mean to you?  Probably about as much as our constitution.  Whatever the hell you want it to mean.  Because it’s a ‘living document’.  “Sure, the Founding Fathers wrote this but they meant something completely different.”  Oh, did we?  How interesting.  We were so stupid we didn’t even know how stupid we were.  Gee, thanks for pointing that out to us.  You ungrateful sons of bitches.”

Or something like that.

American Civil War II

Everyone knows we have a problem with entitlement spending.  It will eventually bankrupt the United States.  We all know it has to be reformed.  But no one wants to because it may cost votes.  You see, you don’t buy votes by taking money back.  You buy votes by giving money away.  So everyone just kicks the can down the road.  All the while the cost of reform grows ever higher.  Much like it did in the first half of the 19th century.  When we kept kicking another can down the road.  Always trying to find a compromise to fix things for today.  And letting someone else worry about tomorrow.  I’m sure you know what I’m talking about.  If you don’t, here’s a hint.  That problem ended about 150 years ago.  At the conclusion of the American Civil War.

We have a growing underclass that pays no income taxes that is now half of the population.  We have a small middle class/rich that is paying most of the taxes.  And a ruling elite.  Kind of reminds me of another civil war.  The French Revolution.  So it is not inconceivable that our class warfare could turn into actual warfare.  There was civil strife in Greece when they went bankrupt.  But the European Union bailed them out.  The question here is who will bail out the United States?  Or, rather, who can bail out the United States?  For, at the moment, it doesn’t look like anyone can.

Speaking in worst case scenarios, it may become necessary to rewrite our history books.  We will have to revise the American Civil War to the American Civil War I (1861-1865).  To differentiate it from the American Civil War II.  Whose start and end dates have yet to be determined.

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FUNDAMENTAL TRUTH #63: “There is no such thing as a monopoly in free market capitalism.” -Old Pithy

Posted by PITHOCRATES - April 26th, 2011

There is always Competition

Once upon a time, back in my youth, I sat in a seminar on venture capital.  I learned that venture capitalists are very wise.  And very careful about where they invest their money.  For them it’s not so much as making a return on an investment.  They could do that easier by just buying stocks and bonds.  No, the venture capitalist wants more.  They’re often people who went from rags to riches on a great idea.  And they want to recapture that feeling.  By taking big risks with their money.  On something that could be the next big thing.  And if you got the next big thing, they have that important seed capital you need.  But you have to sell them first.  Really sell them.

All these years later, I still remember this one example about a small startup company that had the next big thing in security systems.  Or so they thought.  Theirs took advantage of the latest in technology.  Motion sensors.  Glass-break sensors.  Sound sensors.  You name it.  If anything happened that shouldn’t be happening, the system would detect it.  But it did more.  It made noises. Flashed lights.  To scare off would be thieves.  Because thieves like to break into quiet, empty places.  Not places where lights went on and off.  And sounds moved around.  It was a pretty impressive system.  And costly.  It would set a business owner back quite a bit to install such a system.  But it would be worth it.  They knew they could sell it.  And, best of all, they would have a monopoly.  For no one else had anything close to what their system could do.  This was brand new.  And there was no competition.

 The venture capitalist smiled and thanked them for their presentation.  But he would not invest.  For they did have competition.  He said there is always competition.  They just failed to identify it.  They were sure there wasn’t.  They did their homework.  No security company out there had a system remotely close to theirs.  Then the venture capitalist smiled and said politely, “Perhaps not.  But I could buy a dog to do the same for less.”

High Gas Prices keep Gas Available

There is always competition in a free market.  If there is a market sector that is making high profits, other businesses will try to enter that sector.  To get a share of those high profits.  And when they do, there’s competition.  And prices come down.  That’s why gasoline prices are so close to each other at gas stations in the same geographical location.  One could raise their selling price by a dollar.  But if they did, their customers would just go to their competitors.  That’s what competition does.  Keeps prices down.  And makes people figure out how to sell the same thing for less.  Because if they can, they gain customers.  While their competitors lose customers.

Even oil companies feel the heat of competition.  High gas prices may hurt the wallet at the gas pump, but they are an incentive to them.  When the demand of oil grows greater than its supply, prices soar.  Why?  Because oil is becoming a more scarce commodity.  And the scarcer a commodity is the higher its price.  Simple supply and demand of economics.  These higher oil prices allow the oil companies to go after oil in the ground that was before too costly to bring to market.  Deep water drilling is more expensive than conventional drilling.  It simply wasn’t cost feasible before.  As was extracting oil from oil sands.  But high oil prices allow this extraction.  Bringing more oil to market.  Which ultimately will reduce the price of gasoline.  Or at least reducing the increase in the price of gas.  Simply by increasing the supply of oil to more closely meet the demand.  More importantly, even though prices may go up, gasoline will be available.  Unlike it was during the 1973 Oil Crisis.  Where OPEC cut oil deliveries to the U.S.  Instead of letting market prices rise to match the supply to the demand, the Nixon administration implemented price controls and rationing.  It seemed the kind thing to do for the consumer.  But by selling below the market price a lot of gas stations simply ran out of gasoline.  Resulting in further rationing.  Long lines at gas stations.  And scenes of people pushing their out-of-gas cars to the gas pump.

So, yes, even high gas prices can be a good thing.  It’s simply the market setting the price to make sure gas is available to buy.  We may not like the price.  And think the oil companies are gouging us at the pump.  But they’re not.  Even when they have record profits.  Though it is tempting to hate them after they post some of those record profits.  They sound huge.  And unfair.  But are they any bigger than other corporate profits?  Not really.  Oil companies have huge revenues.  So their profits are huge.  But as a percentage of sales revenue, they’re actually not that huge.  Here are some examples of net profit averaged over five years.  Chevron (8.22%).  BP (4.94%).  ExxonMobil (8.79%).  And how does that compare to other corporations?  Here are some from various sectors.  Home Depot (4.86%).  Sony (0.82%).  General Electric (9.93%).  Apple (17.60%).  Microsoft (28.20%).  If you look at net profit, the oil companies aren’t really making more profits than other corporations.  (For source of net profit information see YCharts.)

The Federal Government is a Monopoly

Of course, when gas prices go up we tend to feel that more than other commodities.  Because we use a lot of gas in our daily lives.  Which leaves us less money in the wallet to buy those other commodities.  Which are more expensive because of the higher energy costs to bring these other commodities to market.  Few things affect prices like energy.  And oil is the big player in the energy market because it is the energy of choice in transportation.  Ships, planes, trains and trucks all use oil-based fuels.  And no matter how green we get this isn’t going to change.  Because there is no other portable fuel with such a large energy content available.  And won’t be in the conceivable future.  You just aren’t going to replace any of these with electric versions.  And that’s just not in the U.S.  It’s in all of the advanced and emerging economies in the world.

This is why oil prices are going up.  It’s not the greed of a small cartel of oil producers.  It’s the exploding demand.  And the high oil prices are allowing these companies to bring oil to market that was simply impossible a decade or two go.  And there’s more oil out there.  But we have to get it out of the ground.  And we need to be doing this some 5 years before we need it.  Because it takes about 5 years to bring new oil onto the market.  And they would be drilling exploratory wells like there is no tomorrow in the U.S.  If it wasn’t for the hurdles they have to jump through to get a permit from the government.  An oil company can spend 5 years or more in the permitting process.  They can spend millions of dollars in the process.  And yet the government can still deny them the permit.  Without any compensation for their investment to date.

This isn’t unique to any one oil company.  They all go through this.  It is very difficult indeed to start drilling a new well in the U.S.  Which means it costs more to drill a well in the U.S.  So some oil companies eventually give up and go elsewhere to look for oil.  Taking with them good oil jobs.  Which reduces domestic oil supplies.  Making us more dependent on foreign sources of oil.  Which increases the cost of oil-based fuels in the U.S.   But it’s not any oil cartel doing this.  Although it is a monopoly.  It’s the federal government.  The oil companies will still go out there and find oil and bring it to market.  It’s what they do.  They just don’t do it here.  Because the U.S. government just makes it too difficult to do this in the U.S.

Getting Oil out of the Ground is not Easy

Only the power of government can interfere with the free market.  Because it takes legislative authority to restrict the free market.  Create cartels.  And monopolies.  It’s not one big oil company keeping the others out of the U.S. market.  It’s federal regulation keeping all of the oil companies out of the U.S. market.  And this is what is increasing the price at the gas pump.  And in commodity prices across the board.  Because the high oil prices are just begging for them to come in and find oil and bring it to market.  Even in sources once considered too costly (oil sands, deep wells, arctic climates, etc.). 

And just like every business has competition, so do markets.  Getting oil out of the ground is not easy.  It is a very costly and speculative industry.  And as oil becomes more costly to bring to market, fewer are able to do it.  You need deep pockets.  And deep experience.  Those who can and do so at a profit are in great demand.  So if they can’t drill in the U.S. they can drill someplace else.  And do.  Because of the big U.S. monopoly, the federal government, has shut them out of the U.S. market. 

But as people look forward to the summer driving season, they will curse Big Oil.  Not the federal government.  Even though the former fights to bring oil to market.  While the latter fights against it.

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China to Eclipse the American Empire?

Posted by PITHOCRATES - April 25th, 2011

Detroit is a Microcosm of American Decline

If you want to see a potential future of the United States, take a look at one of our big cities.  Say Detroit, for example (see Motor City finds labor clout weakened amid spending cuts, new legislation by Michael A. Fletcher posted 4/25/2011 on The Washington Post).

Bold action by Republican governors to rein in government spending and labor power by curtailing collective bargaining rights have been met with raucous, if ultimately unsuccessful, protests from union leaders and their allies in places including Wisconsin and Ohio.

But [Mayor] Bing’s move to extract new concessions from Detroit’s 12,000 municipal workers has been met with no such outpouring…

First of all, let’s get are arms around the size of 12,000 municipal workers.  On average let’s say each worker grosses $35,000 annually.  That is just under half a billion dollars in wages.  Now add in their benefits and it approaches a billion a year.  Just for wage and benefits for city workers.  It doesn’t count the cost of light bulbs, electricity, toilet paper, road salt, buildings, vehicles, etc.  That’s just the cost of people.  And that’s a lot of money.  For an impoverished city with a declining population.  And a declining tax base.

By the way, Mayor Bing is a Democrat.  He is not alone.  The sinking weight of the big city budget deficits transcends political party.

The absence of any large protest highlights the conundrum facing labor and its progressive allies as more states, cities and towns run by their putative Democratic allies are confronted with staggering debt and budget problems…

In New York and California, Democratic governors have not attacked collective bargaining, but they have also demanded major concessions from workers to help close yawning budget deficits.

In Wisconsin and Ohio, new Republican governors have significantly curtailed or eliminated collective bargaining rights for public employees, moves they said were made to give themselves as well as local leaders a freer hand to make badly needed cuts.

Michigan’s new Gov. Rick Snyder (R) signed legislation last month empowering his appointed emergency financial managers to void municipal union contracts in distressed municipalities across the state.

Of course, we got here for a couple of reasons.  People are living longer.  Living retirees consume pensions and health care.  And these benefits are generous.  Created at a time when they could be generous.  Following World War II, the United States rebuilt war-torn countries.  Everyone worked.  And bought a car.  Some bought a couple.  From Detroit.  The Motor City could charge what they wanted.  For where else were people going to buy a car?  UAW line workers lived like kings.  Worked hard.  Retired early.  And doctors kept them alive with ever improving health care.  Some lived longer into retirement than they actually worked.  And all of these costs began to build up in the pipeline.  Waiting to burst out at the other end on some future generation.

And that’s what happened.  War-torn countries eventually rebuilt their manufacturing.  They began to provide for themselves.  Some even provided for others.  They started building quality products at affordable prices.  Long story short, Toyota surpassed General Motors (GM) as the number one car manufacturer.  And GM, saddled with those legacy costs from what proved to be a too generous time, went belly up, bailed out by the government.  And as went the U.S. automotive industry, so did the Motor City.

Decades ago, when Detroit earned the proud moniker Motor City, it was home to a thriving and decidedly blue-collar middle class built largely by the clout of organized labor. Detroit is now renowned as a national symbol of urban dysfunction, and as Bing tries desperately to change that reputation, he often finds himself at odds with the city’s labor unions…

Even as the city is shrinking, Bing calls the current state of city services unacceptable. And he says they are not going to improve unless he can reduce the city’s personnel costs, which are overwhelming the budget. This year, the city paid $200 million in pension benefits, which Bing said was $25 million more than the city paid for fire department and ambulance services last year.

“The old days when getting a good city job meant that you put in your 20 years with the expectation that city government could take care of you for the next 40 is no longer a realistic or viable option,” Bing said.

Generous automotive jobs could pay a lot of taxes.  And did.  The city government grew right alongside the U.S. automotive industry.   But with those auto jobs went the city’s tax base.  And now the municipal workers are going through the same thing the auto workers did.  Only worse.  Because their benefits were even more generous.

Now he wants workers to take on an additional 20 percent of their health insurance premiums. He also wants them to take smaller pensions, and to eliminate defined-benefit pensions for all new employees.

Bing said he has no choice. “If we do nothing, by 2015, fringe benefits are on pace to consume half of our entire general fund revenue,” Bing said. “That is not sustainable. We can’t afford benefit packages so rich.”

Supporters of the public sector will argue they aren’t getting rich.  They’ll argue that they could earn more in the private sector.  True, some could.  But most couldn’t.  Because if they could they would go to the private sector to make more money.  No one chooses to stay somewhere to earn less.  There’s a reason they stay.  And it’s not the wage or salary.  It’s the benefits.

That’s how it was for [a retiree], who went to work for the city as a typist in the health department in 1968. She retired as a 911 operator in 1998 at age 48, and the city is obligated to pay her $24,000 a year for life.

The current Social Security retirement age is 67 for anyone born after 1959.  And there’s talk about raising it still because people aren’t dying soon enough into retirement.  Improvements in health care are keeping people alive longer to consume ever more retirement benefits.  It’s busting the federal treasury.  As well as the treasuries in the big cities.  You just cannot have people retire at 48 years of age these days.  Not if you expect to remain solvent.

This kind of generosity is just not sustainable.  Retirees are consuming more than they ever contributed to their retirement and health care.  And the working young are paying more and more to support them while cutting into their own retirement savings.  Something’s gotta give.  To reverse the American decline.

China the new Japan of the Eighties?

What, you may ask?  What may give?  Perhaps the United States (see IMF bombshell: Age of America nears end by Brett Arends posted 4/25/2011 on MarketWatch).

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now…

We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else. America overtook Great Britain as the world’s leading economic power in the 1890s and never looked back.

And both those countries live under very similar rules of constitutional government, respect for civil liberties and the rights of property. China has none of those. The Age of China will feel very different.

China is still communist.  Like the Soviet Union was.  So the Age of China may feel more like the Cold War.  Only without us being a superpower.  So how will that feel in America?  Possibly like it felt to live in Eastern Europe behind the Iron Curtain.  Economically dependent on your overlord.  And wholly at their mercy.

“There are two systems in collision,” said Ralph Gomory, research professor at NYU’s Stern business school. “They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”

This sounds like what they were saying during the Nineties about Japan Inc.  Just before they entered a devastating deflationary spiral.  Before that, though, some were saying here that we needed to do what the Japanese were doing.  Business and government were working together.  It wasn’t that laissez-faire capitalism nonsense we were clinging to in the United States.  Japan Inc. was a juggernaut.  They got so rich that they were buying up landmark U.S. properties.  A National Lampoon cover showed a Japanese CEO sitting at his desk with a sign saying the United States was a wholly own subsidiary of his company.  It was the end of America as we knew it.

Well, it wasn’t.  The government built a huge asset bubble.  And the thing about bubbles is that they eventually burst.  And when it did, the Japanese economy tanked.  For a decade.  Or two.  The Japanese called the Nineties the Lost Decade.  The lesson the Japanese learned?  A “state-guided form of capitalism” doesn’t work.  It may in the short term.  But not in the long term. 

China may be surging now like the Japanese were in the Eighties.  Will they be able to avoid Japan’s fate, though?

The Difference between China and the United States is Labor Costs

The MarketWatch article misses one salient fact.  First of all, let’s consider the Soviet Union.  If the state was good at ‘guiding’ an economy, why did the Soviet Union fail?  I mean, they had a prosperous manufacturing industry.  Lots of people were building things.  The problem was, they were building things that no one wanted to buy.  Whereas the things they did want to buy (soap, toilet paper, etc.) were always in short supply.  You waited in line to buy those things.  Look at Cuba.  And North Korea.  These are all state-guided.  And they all suffer from abject poverty.  And, at times, famine.  Clearly, the ‘state-guided’ is not the reason why China is doing so well.  It’s that other thing.  The capitalism.  Which the Soviet Union, Cuba and North Korea did not/do not have.

Now we have capitalism.  As did Great Britain.  And at one time, we each had the world’s largest economy.  But we surpassed Great Britain.  And China is about to surpass us.  So is there anything we can draw from this.  Something the British and the Americans have that the Chinese don’t?  I’ll give you a hint.  Think about Detroit.

How many times do we hear about unions striking Chinese industry?  Not many.  For one, there is only one Chinese trade union.  All-China Federation of Trade Unions (ACFTU).  It’s not exactly what you would think of when you think of a union in the UK or the USA.  Some would say that the ACFTU represents the government’s interests more than the workers.  And that’s the difference.  China doesn’t have the high labor costs we have (or the British).  Or the generous benefits.  And they have no legacy costs.  For their industrial workers.  (Or their municipalities.)  And this is why manufacturing jobs left the U.S. and went to China.  They could make things cheaper.  And as we pay more of our income in taxes to support an ever growing public sector, the less we have to spend on material goods. 

It’s just simple arithmetic.  It’s not a matter of greed on the consumer.  Just like union workers want higher pay and benefits, so do they.  So they can buy more stuff.  And if they can’t have the higher pay and benefits like they have in the unions, they at least want low taxes.  Or low prices.  But their paychecks aren’t as generous.  And their taxes are high.  Which leaves them with less disposable income than their union brothers and sisters.  Making them the ideal market for those low-priced Chinese imports.  And as long as the ACFTU holds Chinese wages down, they’ll keep buying those imports.

But can they?  Will the Chinese workers rise up one day?  They have nothing to lose but their chains.  As Karl Marx would say.  Will they overthrow the ‘capitalism’ in ‘state-guided capitalism’?   Making it a more pure form of communism?  More like in the former Soviet Union?  It may be the only thing that can stop this Chinese juggernaut.  A workers revolt.  An authentic communist revolution.  In already communist China.

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What would Jesus think about the Assault on Christianity?

Posted by PITHOCRATES - April 24th, 2011

Who would Jesus Vote For?

One thing I learned about demons and vampires from watching Buffy the Vampire Slayer is that they lay low on Halloween.  Except for the few that like to bother the Scooby Gang, that is.  But for the most part, the evil beings don’t like Halloween.  It’s just a bit silly for them.  So the evil and undead stand down on this day.  When the non-evil dress up and pretend to be evil.  A bit of professional demon/vampire courtesy.  They let the people play their scary games.  Then resume their bloodlust the following day.

You’d think those on the Left would extend the same courtesy to Christians on Easter Sunday, the most holy day on the Christian calendar.  Let up on their Christian disdain for this one day.  So Christians can worship this special day in peace.  But no.  Someone has to invoke Jesus Christ in the budget debate (see The Democrats’ secret budget weapon: Jesus by Brad Martin posted 4/24/2011 on Salon).

There are signs that the 2010s could be a fertile ground for using Christian ideals to pursue goals of social justice…

If the moral test of a society is how it treats its most vulnerable, the emergence of What Would Jesus Cut? may be the flashlight leading us out of the dark cave of budgetary wrangling. But it should also provide progressives with a model for marrying religion to politics in a way that reinvigorates their agenda, rather than simply leaving the field wide open to often intolerant evangelicals and social conservatives.

Why, this is a fascinating concept.  And practical.  Especially at Easter.  The day of the Resurrection.  When Christ rose from the grave He was sent to after dying for our sins.  Yes, what a fine day it is to politicize Jesus Christ.  But I’m game.  Hmmm.  Let me think. 

What would Jesus cut?  The defense budget?  Well, if we did that we couldn’t stop the genocide Muammar Gaddafi is perpetrating against the Libyan people.  That’s bad.  So bad that liberals who champion social justice sent our military to Libya to stop that genocide.  Cutting defense spending will leave us little more than an observer of these crimes against humanity.  Much like the rest of the world that isn’t a superpower.  So I don’t know if Jesus would cut defense spending.  Not when we’re using it for humanitarian reasons.  So, could there be something else to cut?

Would He cut programs like Fannie Mae and Freddie Mac?  These programs are very kind to those who can’t afford to buy a house.  By putting them into a house that they can’t afford.  Hmm.  That didn’t end too well in 2008, what with the subprime mortgage crisis and all.  No, putting people into houses they can’t afford turned out to be a bad thing.  It gave us the worst recession since the Great Depression.  And this hit art and charitable foundations especially hard.  With record unemployment, no one has any money to donate to the needy.  So, yes, I think Jesus would cut programs like Fannie Mae and Freddie Mac.  Anything else?

Oh, here’s a no brainer.  Planned Parenthood.  Because I’m pretty sure Jesus Christ would oppose anything remotely connected to abortion.

How could no one on the Left see this coming?  What would Jesus cut?  Number one on the hit parade would be abortion.  And any public spending that could provide ‘aid and comfort’ to the abortion providers.  This is Jesus we’re talking about.  And I just don’t see Him being pro-choice.  Sure, Planned Parenthood’s abortion unit is only a small part of their business (3%).  But government funding pays the overhead where they provide their real services.  Breast exams.  Pap smears.  Pelvic exams.  AIDS screening.  Birth control.  Etc.  That’s why they don’t have stand alone abortion clinics.  Doing so few abortions makes the unit cost per abortion too high to recover the overhead.  But if the overhead is already being paid by Uncle Sam, why, then that’s a different story.

The Left should stop talking about Jesus.  For they’re going to hurt themselves with the political contortions necessary to make their case.  Besides, if you asked who would Jesus vote for, I’m guessing he or she would have an ‘r’ after their name.  The bitter God-clingers they are.  So why even bother?  They should just take a lesson from the evil/undead and show a little magnanimity on this day.  If they had it in them.  Like the evil/undead do at Halloween.

Syria and Egypt, Similar yet Different

Egypt and Syria are very similar countries.  Both are in the Middle East.  Both are secular nations with Christian minorities.  And both outlawed the Muslim Brotherhood.  The main difference between the two is that one is an ally of the United States.  The other is an enemy.  Another difference is U.S. foreign policy.  They abandoned the ally.  And showed patience with the enemy.

Some are urging caution in Syria.  Worried about what may replace the current regime should it fall.  The Israelis for one.  And possibly the Obama administration.  For now, at least.  Interesting, because they had no such reservations with our ally.  And how are things in Egypt?  Suffice it to say there is cause for concern (see Crowds protest Christian governor in south Egypt by Maggie Michael, Associated Press, posted 4/22/2011 on MSNBC).

Since President Hosni Mubarak’s ouster in February after an 18-day popular uprising, ultraconservative Islamist groups have been flexing their muscles and vowing to take a more active political role as Egypt charts its transition to democracy…

Coptic Christians make up an estimated 10 percent of Egypt’s population of nearly 80 million and complain of discrimination. Relations between the two faiths plunged to new lows after a suicide bomber blew himself up outside a Coptic church in Alexandria on Jan. 1, killing 21 people and injuring 100 others.

Salafis, who seek to emulate the lifestyle of Islam’s early days in the seventh century, have for the past year played a key role in fueling sectarian tensions, spearheading protests against the Orthodox Christian church.

Salafis?  One of their Islamic theologians was Muhammad ibn Abd al-Wahhab.  As in Wahhabi.  As in Saudi Arabia.  As in al Qaeda.  As in Osama bin Laden.  Yes, bin Laden is a Wahhabi.  This is old school Islam.  The way it was mean to be.  In Salafi eyes.  As the Taliban thought, too, the world should be.

The only upside to this is that the Salafis are Sunnis.  Who don’t much care for the Shiites.  Which is what the Iranians are.  So, to recap, the Salafis are not Shiites.  Which may place them out of the Iranian orbit.  Which is good.  The bad news is this.  It was the Wahhabi that attacked us on 9/11.

So maybe we should have encouraged more reform in Egypt and less ‘Mubarak has to go’.  Perhaps we learned our lesson.  Perhaps that’s why we’re not pushing our enemy in Syria (see For Syrian Christians, protests are cause for fear by The Washington Post posted 4/23/2011 on The Washington Post).

For decades, the government of President Bashar al-Assad has protected Christian interests by enforcing its strictly secular program and by curbing the influence of the Muslim Brotherhood. In recent years, Assad has visited the town of Maaloula and other Christian communities to pray and pass on messages of goodwill. At Christmas, he addresses Syria’s Christians, carrying similar tidings. Assad is himself from the minority Alawite sect, a branch of Shia Islam, and many Christians feel they can relate to him…

Many Christians interviewed said their biggest fear was the growth of the Muslim Brotherhood, which is banned in Syria. About half as many worshipers as usual attended Good Friday church services this year because people are afraid to leave their homes.

Maybe these ruthless despots know something we don’t.  Maybe their tyrannical and oppressive rule is the only way to keep things secular in the Middle East.  And peaceful.  At least, under them, the few Christians in their countries could live in relative peace.  Whereas it’s looking a bit harder these days.

Happy Easter

So on this Easter Day, we can reflect on Jesus Christ and His message.  Such as judge not lest ye be judged.  Pity we rushed to pass judgment on Hosni Mubarak.  Perhaps that wasn’t the Christian thing to do.  But we did.  And now Christians in Egypt are getting worried.  And Christians are nervously sitting out the protests in Syria.  Afraid of what their future may hold.  But instead of showing genuine concern for the oppressed (and possibly the soon to be oppressed), some instead think of politicizing Jesus Christ to advance a political agenda.

I wonder what Jesus would think about that.

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Obama’s Incoherent Policy on Egypt, Libya and Syria

Posted by PITHOCRATES - April 23rd, 2011

Syrians not as worthy to Save as Libyans?

President Assad is killing innocent Syrians in the streets.  In an effort to squelch their yearning for liberty.  A contagion spreading through the Arab world.  TunisiaEgyptBahrainYemen.  Libya.  And now Syria.  The international community is shocked at Assad’s brutality.  And they issued a stern ‘you better stop doing that or we may tell you to stop a second time’.  Whereas we demanded Mubarak to step down in Egypt.  And bombed Libya.  But in Syria all we got is a wag of the finger (see Obama’s Middle East Head Spin by Christopher Dickey posted 4/22/2011 on The Daily Beast).

From Washington’s vantage, every Friday is becoming Black Friday in the Middle East… This Friday, the shock came in Syria, where President Bashar al-Assad runs one of the Middle East’s most repressive regimes. Across the country, protesters have grown ever more emboldened in recent weeks, and on Friday they poured into the streets by the tens of thousands to face the deadly fusillades of Assad’s security forces. More than 70 died. What did the White House have to say? From Air Force One: “We call on all sides to cease and desist from the use of violence.”

Pity the president didn’t add, “Don’t make me turn this car around.”  For children know it’s serious when Dad threatens to turn that car around.  Of course, Obama isn’t their dad.  But he expects everyone to listen to him as if he were.  And if that’s all we got going for our foreign policy, I say use it.  Can’t hurt.

Then again, perhaps the president just doesn’t know what to do.  He had no governing experience before running for president.  He never had a real job.  It’s rather baffling why so many championed the guy when he was in fact so utterly unqualified.  But they did.  And here he is.  What was it that Rush Limbaugh called him?  Man child?  Pretty strong criticism.  But is it true?

The drama—the tragedy—increasingly apparent at the White House is of a brilliant intellect who is nonetheless confounded by events, a strategist whose strategies are thwarted and who is left with almost no strategy at all, a persuasive politician and diplomat who gets others to crawl out on limbs, has them take big risks to break through to a new future, and then turns around and walks away from them when the political winds in the United States threaten to shift. It’s not enough to say the Cabinet is divided about what to do. Maybe the simplest and in many ways the most disturbing explanation for all the flailing is offered by veteran journalist and diplomat Leslie H. Gelb: “There is one man in this administration who debates himself.” President Obama.

A brilliant intellect who is not allowed to think brilliantly.  Because of all this stuff going on in the world.  This isn’t what he signed on for.  He wanted to pontificate great things.  Not govern.  It’s not fair.  He wanted to provide a laser-like focus on job creation.  Build a stronger economy.  Lower the sea levels.  Instead he failed.  Everywhere.  As he is failing in his foreign policy.  Or, rather, flailing.  With a policy that is utterly incoherent.

At the Pentagon, which bears the brunt of much of this hesitation and vacillation, the mood is one of not-so-quiet desperation. Said one longtime friend of Joint Chiefs of Staff Chairman Adm. Michael Mullen and Defense Secretary Robert Gates: “They think it [the Libyan operation] is just nuts. We are destroying our credibility with this situation, and there is really no answer to it.”

This is what happens when you have people who hate the military (i.e., liberals) use the military.  The military has a constitutional role.  To defend the United States.  And protect vital national security interests.  There is no constitutional clause that says, oh, and by the way, if a sovereign nation is being mean to her people we should commit U.S. military force without a clear objective or exit strategy.  Just to feel good.  But we can’t do that.  For feeling good is a poor national strategy. 

So Vice President Joe Biden has been left to handle the file, and he’s seemed none too happy about it. In an interview with the Financial Times, he argued that America’s real strategic interests were elsewhere, notably in helping to stabilize Egypt, while continuing to try to deal with Iran, Afghanistan, Pakistan, and North Korea. “We can’t do it all,” said Biden. NATO and the Europeans should do more, he insisted. But NATO is run by consensus, and when its most powerful member refuses to lead, hard decisions are hard to come by. France and Britain, for their part, have taken the initiative in Libya from the beginning and crossed a new threshold last week by announcing publicly that they would send military advisers into Libya to help the rebels organize. (One firm decision by the U.S.: It will not put its troops on the ground in Libya under any circumstances.)

Of course when we say ‘by consensus’ we mean ‘by the United States’.  For any international effort is weak and ineffective without the full weight and force of the United States.  It goes with being a superpower.  But we have to pick and choose our fights.  For even a superpower’s might is finite.  There are national security interests (Iran, Afghanistan, Pakistan, and North Korea, for example).  And there are non-national security interests.  Such as Libya.  And look where we are.  The non-national security interest.  Why? 

The United States got involved “because of the worry that Gaddafi could destabilize the fledgling revolutions in both Tunisia and Egypt, with Egypt being central to the future of the region; and, second, to prevent a humanitarian disaster.” Then the clincher: “A third reason was that, while it was not a vital interest for us, our allies considered it a vital interest. And just as they have helped us in Afghanistan, we thought it was important, the president thought it was important, to help them in Libya.”

All right, let me see if I understand this right.  Our allies joined us in the fight against international terrorism.  Because international terrorism is international.  It’s not only America at risk.  Everyone is.  So they helped us in Afghanistan.  Where we’ve taken the lead role.  Because it was in our national security interest.  As it was in theirs.  So, to thank them for joining the fight against international terrorism, we joined their fight to keep their supply of oil cheap and plentiful.  Got it.

There is no question, for instance, that what happens in Syria is of vital interest to Israel, which is America’s strategic partner; nor is there any question that Assad is watching Gaddafi’s brutal tactics for precedents that will serve the Syrian’s own savage regime…

The fundamentally important American alliance with Saudi Arabia, which holds the keys to the global oil market, was shaken badly by what King Abdullah saw as Obama’s betrayal of Hosni Mubarak. Add to that the king’s bitter disappointment with American course corrections, and reversals, on the Israeli-Palestinian peace initiative. A European envoy who met with Abdullah in early March described him as “incandescent” with rage at Obama. Yet the Saudis backed the intervention in Libya—only to see the Americans fumble their leadership once again.

As for Iran, ever since the regime there confronted and crushed huge pro-democracy protests in 2009, nothing threatens it more than successful revolutions in the Arab world. And nothing gratifies Iran’s leaders more than to see the United States dithering about whether Arab democracy is in American interests. The ripple effects are felt even in East Asia, where a former U.S. ambassador says he’s heard that the North Koreans are telling the Chinese “if this is the best the Americans can do in Libya, we’ve got nothing to worry about.”

Well, if Obama’s foreign policy strategy is to placate our enemies and infuriate our allies, he’s succeeded.  If that wasn’t the strategy you’d then have to say those in charge of foreign policy are in over their heads.  Or just incompetent.

Israel Looks at Syria and sees Hezbollah, Hamas and Iran

The world’s superpower can suffer bouts of incompetence.  Because it takes time to bring down a superpower.  We have the world’s largest economy.  And the most powerful military.  It takes a lot to disrupt our daily lives.  So people don’t really fear the outside world.  Except the occasional terrorist attack.  And when something like that happens, people rally around the grownups.  George W. BushRudy Giuliani.  But can you imagine if it was that way all of the time?  To be under attack all the time?  To be in a perpetual state of war?  The Israelis can.  They can’t afford the luxury of incompetence.  There, the grownups are in charge.  And they’re looking at all the developments in the Middle East a little differently than the Obama Administration (see Israel in a quandary over turmoil in Syria by Joel Greenberg posted 4/22/2011 on The Washington Post).

Syria has long been a bitter enemy of Israel’s, a key player in a regional alliance with Iran, a backer of the militant Hezbollah group in Lebanon and host to the political leadership of the Palestinian Islamist group Hamas. Yet it has also been a reliable foe, keeping its cease-fire lines with Israel quiet for decades through periods of war and confrontation in Lebanon and Gaza, and it has participated in U.S.-mediated peace talks.

A power shift in Damascus could alter those dynamics. But there is no clear sense in Israel of where that might lead, and there are a range of views here on the most preferable scenario. Experts speculate that Syria could dissolve into anarchy and civil war, Libya-style, or that a new authoritarian leadership could emerge, backed by the army and security forces, or a government dominated by the long-banned Muslim Brotherhood.

So Syria is a lot like Egypt in a sense.  Peaceful and secular.  The only difference is that they’re in tight with Iran.  And Hezbollah and Hamas.  Who have a penchant for killing Jews in Israel.  And share a common objective with Iran.  The destruction of Israel.  But it could be worse.  They’re not Islamist.  They may be the client of an Islamist state (Iran).  But they’re not Islamist.

“We prefer the devil we know,” said Ephraim Sneh, a former deputy defense minister, referring to Assad. “Although the Islamist forces are not the majority in the opposition, they are better organized and politically competent. And if we fantasize today that one day we’ll be able to take the secular regime in Syria outside the Iranian orbit, it may be more difficult, if not impossible, if the regime is an Islamist one.”

Dore Gold, a former foreign policy adviser to Netanyahu who heads the Jerusalem Center for Public Affairs, also emphasized the importance to Israel of monitoring “who the opposition is” in Syria to see whether “what looks like a sincere desire for freedom ends up being hijacked by the Muslim Brotherhood.”

“Israel views a lot of the current developments through the prism of the Iranian threat,” Gold added. “It would be unfortunate if Iran becomes the beneficiary of the developments across the Middle East. Iran could face a tremendous strategic loss if the Syrian regime falls and is replaced by a more Western-oriented leadership.”

How wise.  If only Obama viewed developments through the prism of the Iranian threat.  Perhaps he would have moved slower on Egypt.  Until we knew who the opposition was.  And whether the Muslim Brotherhood would hijack their democracy movement.  Maybe we could have persuaded Mubarak to implement reforms.  Like the Israelis are willing to do with Assad.  Because sometimes the known devil is easier to deal with than the unknown one. 

Still, a change of leadership in Syria or a weakened Assad regime could present opportunities that the United States and Israel should explore when the dust settles, according to Uri Sagi, a former chief of military intelligence who headed the Israeli negotiating team in talks with the Syrians from 1999 to 2000.

“I would suggest that the Americans take advantage of this crisis in order to change the balance here, namely to get the Syrians out of their intimate relationship with Hezbollah on the one hand and the Iranians on the other,” Sagi said.

The Syrian policy would probably be a little less complicated had it not followed the collapse of our ally in Egypt.  Had the Syrian uprising happened first, there would have been more room for risk taking in Syria.  We would have had the opportunity to shut down Hezbollah and Hamas.  By severing the link to Iran via Syria.  But Egypt happened first.  And the great unknown now is the Muslim Brotherhood.  They’re there.  Lurking in the background.  In Egypt.  And in Syria. 

Egypt is our ally.  Syria is not.  If we’re hesitating to act in Syria, then we should have hesitated in Egypt.  This may prove to have been a big mistake.  Forcing Mubarak out.  We’re sending mixed messages to our allies and enemies.  And losing all credibility by flailing about in Libya sure doesn’t help matters either.

Obama Looks at Syria and sees the 2012 Election

Yes, American foreign policy has not been President Obama’s shining moment.  But I’m sure there’s a good reason for that.  After all, he’s president.  He must have a lot of things to worry about.  Important things.  More important than turmoil in the Middle East.  I mean, how can that compare to his reelection campaign (see Obama’s 2012 Campaign: What’s the Strategy? by Daniel Stone posted 4/22/2011 on The Daily Beast)?

Staffers declined to disclose how many people are currently working for Obama in Chicago, and how fast the operation has been taking in money. But so far, campaign events hosted by the president himself have had high yields. At several fundraisers this week in San Francisco and Los Angeles, some supporters donated up $35,800 per couple, the maximum allowed by federal election laws.

Sure they’re shooting Syrians down in the street.  But it’s not all bad news for Obama.  His fund raising is doing very well.

Despite the clear advantage of having all the trappings of the presidency—Air Force One, a support staff of hundreds, guaranteed press coverage—Obama’s challenges may be new and unique. “Last time he was an underdog and outsider and really led a movement,” says Tad Devine, a senior adviser to Al Gore’s 2000 and John Kerry’s 2004 campaigns. “This time is different. He’s the president. His campaign will have to take advantage of all the things they did last time, coordinating and using technology. It’s hard not to be institutional.”

You can say many things about Obama.  Criticize him for his disastrous economic policies.  The lack of transparency in his administration.  His abysmal foreign policy.  But one thing for sure.  He’s a man that his priorities in order.  Reelection first.  Everything else is a distant second.

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Peace in the Middle East Depends on Egypt once Again

Posted by PITHOCRATES - April 22nd, 2011

Roman Barbarism begets Christian Charity

This is Good Friday.  The day Jesus Christ, a Jew, was crucified by the Romans.  In the land of the Jews.  Palestine.  Then occupied by the Romans.  Which came after the Egyptian occupation.  But before the Byzantine occupation.  Yes, there was always a power struggle there.  And Jesus was a part of it.  Though His struggle against the powers that be was not to gain their earthly powers.  But to usher in the Kingdom of Heaven.  Despite their earthly powers.  Starting in Judea

Things went from bad to worse on the temporal side.  On the spiritual side, though, things went pretty much according to plan.  Jesus endured great suffering.  For death by crucifixion is about as bad as it gets.  Which is quite the testament of the man Jesus was.  For He suffered as a man.  Not a god.  His pain was real.  And it lasted a long time.  Then He died.  Ascended to heaven.  And ushered in the Kingdom of Heaven on earth.  Where His words and deeds became the greatest force for peace the civilized world has ever known.

Now this is the Christian view of history.  Not everyone agrees with it.  But it is impossible to refute the role of Christianity in civilizing the barbaric lands of Europe during the Middle Ages.  It was a civilizing force that transcended the warring tribes.  And ultimately brought peace, the rule of law and civil society to Europe.  And the Western world.  It was the one force in the world that restrained the arbitrary power of kings.  And the phrase ‘Christian charity’ entered the lexicon as people chose to live in peace and love their neighbor.  To live by the Golden Rule.  And this all goes back to southern Palestine.  To Judea.  Where one man once walked among us.

Assad worse than Mubarak but gets better U.S. Treatment

The Arab world is ablaze.  Tunisia and Egypt saw regime change.  Libya is embroiled in civil war.  The UN passed a resolution to help Libya.  So we started bombing Libya.  There’s been further unrest in the Arab world.  But nothing rising to the level of a Libya, though.  Not serious enough for the international community to step in (see Shameful U.S. inaction on Syria’s massacres posted 4/22/2011 on The Washington Post).

FOR THE PAST five weeks, growing numbers of Syrians have been gathering in cities and towns across the country to demand political freedom — and the security forces of dictator Bashar al-Assad have been responding by opening fire on them…

Massacres on this scale usually prompt a strong response from Western democracies, as they should. Ambassadors are withdrawn; resolutions are introduced at the U.N. Security Council; international investigations are mounted and sanctions applied. In Syria’s case, none of this has happened. The Obama administration has denounced the violence — the White House said it “deplored” Friday’s slaughter — but otherwise remained passive. Even the ambassador it dispatched to Damascus during a congressional recess last year remains on post.

This is very interesting.  For Colonel Qaddafi was killing his people, too.  And we bombed him for that.  In Egypt, Mubarak wasn’t killing his protestors but the Obama administration said he had to go.  Even though he was a strong U.S. ally.  And a strong force for peace in the Middle East.  Egypt has recognized Israel.  And remained at peace with them.   Allowing free transit of the Sinai for Jew and Arab alike.  But he had to go.  As does Qaddafi.  But Syria can kill their own people.  Why?  Is Syria a better force for peace than Egypt?

The administration has sat on its hands despite the fact that the Assad regime is one of the most implacable U.S. adversaries in the Middle East. It is Iran’s closest ally; it supplies Iranian weapons to Hezbollah in Lebanon and Hamas in the Gaza Strip for use against Israel. Since 2003 it has helped thousands of jihadists from across the Arab world travel to Iraq to attack American soldiers. It sought to build a secret nuclear reactor with the help of North Korea and destabilized the pro-Western government of neighboring Lebanon by sponsoring a series of assassinations.

No.  They are not a better force for peace in the Middle East.  In fact, they’re the exact opposite of that.  You couldn’t find a bigger enemy to peace.  Or the United States.  Well, except for Iran, of course.  Who we’ve handled in the same way when their people protest their totalitarian rule.

Yet the Obama administration has effectively sided with the regime against the protesters. Rather than repudiate Mr. Assad, it has proposed that his government introduce reforms. As The Post’s Karen DeYoung and Scott Wilson reported Friday, the administration, which made the “engagement” of Syria a key part of its Middle East policy, still clings to the belief that Mr. Assad could be part of a Middle East peace process; and it would rather not trade “a known quantity in Assad for an unknown future.”

An unknown future?  Syria and Iran are at the top of our enemies list.  We worry about radical Islam taking hold in Egypt as that democracy movement looks less and less democratic and more theocratic.  But it’s already there in Iran and Syria.  What ‘unknown’ are we worried about?  That the Syrians may convert to Christianity?  To Judaism?  That they may stop killing Jews and Christians?  That they may stop killing Americans?

If we were going to practice restraint anywhere, it should have been in Egypt.  We probably should have considered long and hard what may happen in Egypt before throwing Mubarak under the bus.  We should have asked him to introduce reforms.  We were already engaged with him.  And he wasn’t killing Americans.  As far as peace partners go, that’s a pretty big plus in my book.

The Sinai Peninsula – A Great Crossroads of the Middle East

Do you know where the Sinai Peninsula is?  It’s between Israel and Egypt.  On the other side of Israel is Jordan.  Above Jordan is Syria.  Above Israel is Lebanon.  Also bordering Israel and Egypt on the Mediterranean is the Gaza Strip.  And who is the ruling power in the Gaza Strip?  Hamas.  And who do they hate?  Israel.  Who else hates Israel?  Hezbollah.  In southern Lebanon. 

Israel has fought a lot of wars to stabilize their borders where they currently are.  They still deal with the occasional rocket attacks.  But there has been an uneasy peace along the eastern coast of the Mediterranean.  They still hate each other.  And they’re still trying to kill each other.  But it hasn’t blown up into a full scale war.  Partly because of the stabilizing force of Egypt.  Under the steady rule of Hosni Mubarak. 

Of course, the Obama administration threw Mubarak under the bus.  And the future of Egypt is unsure.  If it falls to the Iran-friendly Muslim Brotherhood, that will empower Hamas to make a whole lot of mischief in the Gaza Strip.  Which may encourage a little mischief from Hezbollah in southern Lebanon.  Which Syria no doubt will exploit.  And if all of this happens, Iran will swoop in and be the major power in the eastern Mediterranean.  Putting Israel in a very difficult position.  Fighting for her existence.  Which could plunge the region into war.  And the world into war.  And the flashpoint for all of this may be in the Sinai Peninsula.  A great crossroads of the Middle East. 

U.S. Boots on the Ground in…the Sinai Peninsula

President Obama promised the American people that there would be no ‘boots on the ground’ in Libya.  That we would only use air power to protect civilians from Colonel Qaddafi.  And maybe advisors.  Because the rebel forces, though filled with the spirit of liberty, lacked a certain military discipline.  But no combat troops on the ground in Libya.  Of course, that didn’t mean there wouldn’t be boots on the ground elsewhere (see Md. National Guard Members Prep For Egypt Deployment posted 4/22/2011 on WBAL TV).

More than 400 soldiers from the Maryland National Guard will spend the next 10 month in Egypt. 11 News reporter Sheldon Dutes looks at how they’re preparing.

And guess where in Egypt these troops will deploy?  Here’s a hint.  Think of the worst possible place.  Are you thinking the Sinai Peninsula?  The potential tinder box for World War Three?  If so, you thought right.

If Egypt goes Iran’s way, there will be a lot of traffic through the Sinai.  And not the good kind.  People with guns.  And bombs.  Going into the Gaza Strip.  To kill Jews.  And anyone that supports the Jews.  Like Americans.  Who are now about to deploy to the Sinai Peninsula.

Palestine’s Elusive Peace

Egypt and Israel go a long way back.  Two of the world’s oldest kingdoms.  Three, if you count the Kingdom of Judah.  And they haven’t always been the best of friends.  But they made their peace.  Thanks to Jimmy Carter‘s diplomacy.  And billions of dollars of U.S. aid.  The Camp David Accords brought some peace to the Middle East.  Despite hostile feelings that simmered throughout the region.  So hostile that they did boil over in Egypt.  When those unhappy with the Israeli peace assassinated the Egyptian president who made that peace.  Anwar Sadat.  The world held its breath.  Would Egypt collapse into anarchy.  And break the Israeli peace?  No.  Because of one man.  Hosni Mubarak.  Who we just recently threw under the bus.

Some in the world hold their breath again.  Mostly grownups who remember what happened in Iran in 1979.  What will happen in Egypt this time?  Will it continue to honor its peace with Israel?  Or will there be world war?  Hard to say now.  It could go either way.

Some things never change in the Middle East.  Especially in Palestine.  Where happiness is as elusive there as it was during the Roman occupation.

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LESSONS LEARNED #62: “The government’s great dilemma is that the middle class has both the money and the votes.” -Old Pithy

Posted by PITHOCRATES - April 21st, 2011

We’re Moving on Up

Those on the Left see the world through zero-sum eyes.  Especially taxes.  For example, let’s look at the taxes of a group of 100 people.  These one hundred can be broken down into three groups.  Poor (20), middle class (79) and rich (1).  With the following annual salaries.  Poor ($15,000), middle class ($50,000) and rich ($1,000,000).  Based on the 2008 tax tables (with a top marginal tax rate of 35%), they each pay $4,600, $17,000 and $454,000, respectfully.  The total each group pays, then, is $91,000 (poor), $1,342,000 (middle class) and $454,000 (rich).  Which is 4.8%, 71% and 24%, respectfully, of the total tax paid.  The largest group of people pays the largest percentage of the total tax burden.  The middle class.  (All numbers are approximate.)

Now, let’s do a little zero-sum analysis.  And figure out how to make the rich pay a larger share of the taxes.  Hmmm.  How about we raise the tax rate on the rich?  If we raise the top marginal tax rate to 45%, the taxes the one rich person pays goes from 24% to 28%.  And the taxes the middle class pay goes from 71% to 68%.  So, to reduce the tax burden on the middle class, we simply have to raise the top marginal tax rates.  Simple, right?  Wrong.  Because what happens in reality is the opposite of what most would think.  As you raise the tax rate on the rich, the total tax burden shifts from the rich to the poor and middle class.  Why?  Because of one fundamental flaw in their analysis.  Which is this.

http://www.youtube.com/watch?v=p9y4iXAso4I

Life is not zero-sum.  People don’t always stay in the same economic class.  They work hard.  Earn money through the years.  Some even save enough money to open a business.  And some of these do become rich.  And when they do, they pay a lot more taxes than they did when they were poor or middle class.  And this is the very thing that high marginal tax rates discourage.  Upward economic movement.  As the poor move into the middle class.  And the middle class move into the rich class.  This is why low, not high, tax rates shifts the tax burden from the poor and middle class to the rich.  Because low tax rates make more rich people to tax.

The Roaring Twenties were Kicked off by Tax Cuts

Andrew Mellon was a rich banker.  Who understood business.  Warren G. Harding tapped him to be his Secretary of the Treasury.  World War I was over.  And there was a huge war debt to pay off.  Taxes were high.  And the progressives wanted to raise them higher.  But Mellon was a conservative.  And he knew that you just didn’t stimulate economic activity with high taxes.  And that’s what paid the bills.  Economic activity.  People gainfully employed and paying taxes.  So he cut taxes.  They cut the top marginal tax rate from 77% to 25% (a cut of 68%).  Which gave us the Roaring Twenties.  Electricity, appliances, radio, you name it, the modern age had come.  Everyone was working.  And buying stuff.  Times were good.

Sure, you’re saying, but at what cost?  The economy took off into the stratosphere but the rich got a free ride.  With their tax rate cut of 200%, the poor and middle class must have been stuck with the tax bill.  Right?  Wrong.  With the lower tax rates, the rich found it cheaper and easier to pay taxes than to shelter it.  Also, the lower rates encouraged innovation (i.e., the modern age).  Lots of people got rich.  There was a lot of upward movement through the economic classes.  So there were more rich people paying taxes.  In 1920, the very rich paid approximately 30% of all federal income taxes.  That number jumped up to 62% by 1929.  That’s an increase of 108%. 

If the name of the game is funding government, you got to like what happened in the Twenties.  Because the government got fat on tax receipts.  And the richest of the rich were paying about twice the amount of taxes they were at the beginning of the decade.  That is a huge transfer of the tax burden from the poor/middle class to the rich.  And the federal debt?  It fell from about $26 billion to $17 billion.  That’s a decrease of about 35%.  Lower tax rates, tax burden transferred to the rich and a lower debt.  Wow.  Mellon was right.  Cutting tax rates on the rich works.  And it works very well.

The Eighties Economic Boom was Kicked off by Tax Cuts

Ronald Reagan was another conservative who understood business.  He defeated Jimmy Carter who was trying to win a second term.  But the malaise and stagflation of the Jimmy Carter years made him a one-term president.  To lift the nation out of recession, Reagan did like Andrew Mellon.  And cut taxes.  The top marginal rate dropped from 70% to 28% (a 60% cut).  And economic activity exploded.  Especially in Silicon Valley.  And the world went high-tech.  Electronics and computers entered our lives.  A new modern age had come.  Everyone was working.  And buying stuff.  Times were good.  Again.

At the beginning of the Reagan years the top 1% paid about 19% of all income taxes.  At the end of his second term they were paying about 27.5%.  That’s an increase of 44%.  Once again, tax cutsfor the rich transferred the tax burden from the poor/middle class to the rich.  As in the Twenties, the rich found it easier to pay their taxes rather than trying to shelter it.  Also, the lower rates encouraged a lot of entrepreneurial innovation.  We used the first cell phones and personal computers in the Eighties.  A lot of this innovation started small in someone’s garage.  And ended in an IPO on Wall Street as they took their companies public.  Lots of people got rich.  Creating a surge of upward movement through the economic classes.  Making many more rich people to tax. 

The Reagan years were an economic juggernaut.  A lot of people got rich.  But at what cost?  The debt exploded under Reagan.  So those on the Left jumped on this.  They say his tax cuts mortgaged our future.  Impoverished our children.  By not paying our bills along the way.  To that I say, “Nice try.”  That debt had nothing to do with the Reagan tax cuts.  It was a spending problem.  Federal tax receipts in 1980 were $517 billion.  After Reagan’s tax rate cuts, they jumped to $909 billion in 1988.  That’s an increase of about 76%.  Lower tax rates, tax burden transferred to the rich and a 75% increase in federal tax receipts?  Wow.  Reagan was right.  Cutting tax rates on the rich works.  And it works very well.

Conservative Policies Favor the Poor and Middle Class

So there are two great economic booms created by tax cuts.  Both periods lifted the country to a new modern age.  People’s standard of living improved across all economic classes.  And a lot people moved up through the economic classes.  Which is key to the success of tax cuts.  And the reason why those on the Left ignore this and focus instead on zero-sum policies.  Why?

Because the Left knows their economic policies don’t work.  But that’s okay with them.  For their policies aren’t about the economy.  Or your well being.  They are about political power.  There are more poor and middle class people than rich.  No matter how far you slash the top marginal tax rate.  So that’s where the votes are.  And a good way to get those votes is with class warfare.  The rich have an unfair advantage.  And with your vote, they will right that wrong.  Sounds good.  Especially if you’re not rich.  Or don’t know the history of high marginal tax rates.  Of how they transfer the tax burden from the rich to the poor and middle class.

Of course, there’s a problem with this strategy.  It transfers more and more of the tax burden to the people you need votes from.  And the more you choke off economic activity by taxing the rich, the more you starve the treasury of tax dollars from the rich.  Which means you have to come up with more and more clever ways to bleed the middle class.  And they don’t have a problem with this either.  What they have a problem with is that the middle class may figure this out one day.  And vote conservative.  Whose policies actually favor the poor/middle class.

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