Just Who Do They Work For?

The Drudge Report headline read "Obama: $3 billion aid for Unemployed." I followed the link to the AP release titled "Obama Administration to Provide $3 billion in Housing Aid."  The story detailed how the Treasury will use bailout money from the $700 billion TARP to provide interest free loans up to $50,000 targeted for unemployed, underwater homeowners. The jobless homeowners fall deeper into debt as a result of the loans, but the cash layout would enable them to stay put for two years.
What the story does not do is address the reason for the $3 billion taxpayer program. Look, nobody in power gives a damn about any of these people. Its the banks that are being bailed out. Yes, the healed, well-capitalized banks that passed the stress tests will suffer losses once the homeowner defaults.  Once again, Geithner delivers for the big banks by taking taxpayer money to save their bacon. As a bonus point, perhaps the President will retain votes from the disgruntled, unemployed constituents who are the recipients of $50,000 in new debt, allowing them to stay in their house for a few more years.

Banks 1, Public 0.

On to the next story. The online magazine, Information Week, posted a story titled U.S. To Train 3,000 Offshore IT Workers.  The article tells how a hand-picked Obama appointee is overseeing a joint project between the US Government and corporate partners. The Government is chipping in $10 million taxpayer dollars. The idea is to train foreigners in IT positions so that American companies may offshore  domestic jobs in exchange for lower-paying foreign skilled labor in order to cut costs. That's right. Americans are paying taxes in order to subsidize the corporate training of foreigners.  The goal is that the foreign trainees will make suitable replacements for the more costly Americans who are paying taxes to outsource their own jobs.

Corporations 1, Public 0

Just a few months ago, the President went before the American people and announced that his goal would be to double American exports within 5 years. Little did I realize he meant the exportation of jobs, not products. Congress and the Executive Branch of Government clearly represent large corporations, and mega-banks. You can throw in the Judicial Branch for that matter, as the Supreme Court removed monetary restrictions on corporations in the name of free speech. I suppose the logic is that, since money talks, contributions must be considered speech. And banks and corporations are letting their money do the talking. Clearly, DC is listening.

From the Cat Bird's Seat

On a public message board, I posted some thoughts about the enormous expenditures on homeland security and the military.  The catalyst for making the post was the Washington Post's recent report titled Top Secret America.  The larger point gleaned from the data is that the continued growth and expenditures is unsustainable and inevitably the nation's economy and wealth will collapse under crushing debt. Another poster responded with the following retort:

It is great to be in the cat bird's seat, what is your solution?

I'm not sure if the question was specifically addressed to fighting terror or to the sustainability and/or survival of the United States of America as a viable economic and military superpower, but I'll attempt to address the latter concern. My short answer is that there is no solution in terms of reforming the current structure and simultaneously continue the high standard of living this country has known for the last 60-65 years or so. Below, I've numerically listed some of the systemic structural problems we face and the implications.

1. Globalization and Income - With the emergence of developing nation economies and an infinite supply of labor, corporations continue to close shop in America in order take advantage of lower costs overseas. Just last week, India announced the development of a $35 touch screen laptop computer. Such an innovation is great for consumers, and certainly such a breakthrough will allow corporations to purchase equipment at lower costs and operate more efficiently. The example I chose, actually makes some good arguments for globalization. Even so, there is a down side. IT personnel will be let go (it's easier to purchase new $35 computers than retain employees at $50/hour wages and benefits to make repairs), computer repair shops would close (much like electronic repair shops in the past when the cost of new appliances made overseas became cheaper), and manufacturers like Dell and Hewlett-Packard would probably shut down any domestic assembly structures still in operation. You simply cannot produce low cost items without low cost labor. The dollars used to purchase goods wind up primarily in the accounts of multinational corporations and to the foreign laborers which make the goods.

As growing number of Americans are removed from the business of creating goods, how will these Americans attain the income to continue purchasing goods and products? Debt levels have been maxed out for many, and government subsidies in the form of EIC, welfare, food stamps, housing credits, unemployment compensation, etc. depend on tax revenue from gainfully employed citizens. 

Globalism has made American corporations wealthier as a result of morphing into multinational corporations. This has lowered consumer prices for Americans, but in general, the result has left the greater population with lower wages. The differential has been masked through borrowing (credit), and a paper wealth as a result of the real estate bubble. Now that the bubble has popped and credit limits have been reached, lower wages will begin to be reflected by lower wealth levels and living standards.

2. Demographics and Entitlements - Approximately two-thirds of Americans nearing retirement age have not saved adequately to maintain the standard of living they have been accustomed to. Social Security is a safety net designed to provide a minimum source of income in old age. Years ago, multiple workers supported one retiree. As the baby boom generation reaches old age, the ratio becomes 3 to 1 and then 2 to 1. Without changing the formula (lowering benefits and/or upping the age), tax increases on the productive class is inevitable. If the government chooses the first option - reduction of benefits and raising the age requirement - the large elderly demographic will spend less money (vacations, entertainment, etc.) causing a contraction in the economy. If the second option of raising taxes follows, less income will flow to working citizens resulting in less spending and hence, a contraction in the economy. The final option would be to neither raise taxes nor curb benefits. The result here would mean higher deficits as the expenditures on social security and medicare rises.

3. Military and Defense Spending - You really must include the new component of Homeland Security when talking about military and defense spending. Not only does the United States military employ bases in over 100 countries throughout the world in order to maintain stability and protect American interests, but now domestic e-mails and communications are monitored to protect American interests in the event that their are internal enemies of the state (see Top Secret America report). The dollar cost is incredible and growing at a much faster rate than the real economic production (which is hardly growing at all when you use tax revenue as the criteria). Much of the money is unaccountable and a large percentage of the mined data is irrelevant, lost, or simply too voluminous to get to.

4. The Tendency for Bureaucracies to Remain in Inertia - As the central state continues to grow and expand, each agency takes on a survival instinct. Literally tens of millions of Americans now make their livelihood serving the state. Any hint from the public that a component of government face elimination or even shrink is faced with swift and strong resistance. There were some closing of military bases (within the United States, not overseas) a few years ago, but that was an exception. Shrinking the department of defense would mean cuts to companies such as Boeing, Ratheon, and General Dynamics. Congressmen are determined not to allow cuts within their respective fiefdoms. The Department of Education is deemed essential by the elite. The Department of Labor, OSHA, and various other agencies will never be rolled back. The Democrat party has traditionally been all about the expansion of domestic programs, yet George Bush showed that Republicans would match their efforts. Even reformer advocates like conservative Paul Ryan, to my knowledge, has never spoken about the elimination or reduction of government agencies.
 

In conclusion, the growth of government combined with the structure of entitlement and the rise of globalization has morphed an increasingly complex system destined for systemic failure. My recommendation is not to find remedies to make the system better as the system is in its death throes, but rather to individually prepare for hard times in the future so that we may come out safely at the other end when a restructuring after collapse takes place. What the collapse will look like, I have no idea. It could be a prolonged period of peaceful, but difficult circumstances, or it may resemble anarchy and social upheaval. I believe that people have the capacity to adjust and remain happy and productive so long as they don't marry themselves to the necessity that survival of the state is the all important goal. It should not be - at least from where I sit at the cat bird's seat.