Monday, November 5, 2012

On the Issues, November 2012

Below is a partial summary of the issues facing this country, and some predictions about what will occur after the election. It is hoped that the reader will be encouraged by this to vote for a third party candidate. But the problems this country faces will continue after tomorrow’s election, and the New Independent Whig will continue to seek answers on how to bring reform to this country that will advance the cause of liberty, so cherished by our Founders.  

Social Programs

Of the two major party candidates, President Obama is evidently more favorably disposed to protecting social programs such as Medicare, Medicaid, and Social Security. Neither candidate is willing to address the structural problems in the U.S. economy that have led to unemployment and loss of government revenue. As long as these structural problems are not addressed, it will become increasingly difficult for the federal government to pay for these programs. Thus, ten or twenty years from now, if the economy remains weak, Republicans will have a stronger case to make for cutting social programs, and Democrats will have given them the power to do so.

Although it is true the Social Security “pays for itself” through worker contributions, Social Security is similar to state and city pension funds: even though the pension funds were paid for by employees, state and local governments have made it a practice to “borrow” money from these funds. States and cities are now reneging on its contractual obligations to retired employees, and a similar experience may await Americans who expect to receive Social Security benefits.

Both candidates have advocated economic austerity programs as a means of reducing the national debt. Austerity programs will not reduce the national debt. Austerity programs reduce services and cut jobs, thus, any savings that are realized in the form of reduced expenditures will manifest as higher unemployment, larger numbers of Americans who are dependent on government assistance, and higher numbers of Americans who are too poor to pay taxes. Austerity programs do not address the root cause of the loss of government revenue, namely, the trade deficit.

Income Taxes

President Obama proposes to raise taxes on the wealthiest Americans. This plan did not succeed during his first term, so there is no guarantee that it will succeed during his second term, should he be elected. Mr. Romney’s tax plan is veiled in secrecy, although there is every reason to expect that he will seek to reduce taxes on the wealthiest Americans, who are so-called “job creators.” Increasing taxes will not reduce the national debt. Lowering taxes will not create jobs and it will not reduce the national debt.

Corporate Taxes

Both candidates have pledged to reduce the corporate tax rate which, in real terms, is already the lowest tax rate among western industrialized nations (source). When corporate tax rates are reduced, the government seeks to make up the loss of revenue by increasing taxes on individuals. The reduction in corporate tax rates is not accompanied by a provision ensuring that the corporations desist from sending American jobs overseas.

When taxes on corporations go down, taxes on individuals go up.

Import Taxes

Neither Obama nor Romney dares to suggest that taxes be raised on imports. Currently, the tax on Chinese imports is zero. However, China taxes the import of American goods, and that is one of the reasons why the Chinese do not buy American goods, and it is an incentive for American companies to build production facilities in China. It should be obvious to all that an import tax would encourage Americans to buy American goods, and put more Americans to work. Such a tax is just, because it negate the effect of the Chinese import tax on the trade between the United States and China. The Americans who would suffer the most from an import tax are those who have decided to send their manufacturing overseas, but they are also among the most influential Americans. 

Foreign Trade and the Trade Deficit

Both candidates promote so-called “free trade” agreements with other countries. The public is told that free trade agreements lead to larger numbers of American jobs, but our experience with NAFTA proves that this is incorrect. Candidate Obama promised to renegotiate NAFTA, President Obama has chosen not to, and has instead signed new trade agreements with South Korea, Panama, and Colombia. Candidate Obama professed concern with human rights and worker safety, but these concerns are ignored with respect to Colombia, where union leaders are regularly murdered. 

So-called “free trade” agreements benefit a small number of multinational corporations that produce on a large scale in several countries. Heads of multinational corporations regularly contribute to both the Democratic and Republican parties, and these trade deals are what they receive in exchange for their contributions. When corporations send jobs overseas, they increase their profit margins, which results in a windfall for financial firms such as Goldman Sachs. That is why financial firms are also generous contributors to both Democrats and Republicans.

At the cafeteria, in China
When President Obama asked Steve Jobs about the thousands of jobs he sent to China, his reply was simply, “they’re not coming back.” When President Obama sought a “jobs czar,” he chose Jeff Immelt, the head of GE, who has single-handedly sent thousands of American jobs overseas. 

Mr. Romney has indicated that he will label China a “currency manipulator,” in recognition of the fact that China’s program of artificially lowering the value of its currency gives it an advantage in trade with the U.S. However, this is a deliberate distraction aimed at confusing voters. Mr. Romney supports the expansion of so-called “free trade” deals around the globe. Obviously, when jobs leave America, the trade deficit grows.

Perhaps it is karma, punishing us for not being more concerned about the dignity and basic human rights of working people around the world. The remedy for our lack of concern is to provide an example to the world, and care for workers at home, and give them the opportunity to work.

Economic Fundamentals

The American people have forgotten that the economy was faltering well before the Great Recession of 2007. Governors were desperately competing against one another to attract industries to their states. It is, however, nearly impossible to convince a company to set up shop in an American state as long as the situation in China continues to be ignored. Glass-Steagal legislation has not been reinstated since President Clinton did away with it, and there is nothing to prevent the financial industry from becoming besotted in another speculative frenzy, and bringing the country to near-ruin once again.

Habeas Corpus

Habeas corpus – the principle that an American citizen cannot be detained or imprisoned without just cause – is a bulwark erected by free countries against the advance of tyranny. Thomas Jefferson said, “Freedom of the person under the protection of the habeas corpus [is among] … the essential principles of our government.” William Blackstone, the British jurist who influenced the thinking of the Founders, said “To bereave a man of life, or by violence to confiscate his estate, without accusation or trial, would be so gross and notorious an act of despotism, as must at once convey the alarm of tyranny throughout the whole kingdom; but confinement of the person, by secretly hurrying him to jail, where his sufferings are unknown or forgotten, is a less public, a less striking, and therefore a more dangerous engine of arbitrary government.”

Under NDAA, President George W. Bush suspended habeas corpus. President Obama has also suspended it. Mr. Romney, if he is elected, will undoubtedly do the same.


According to the United States Constitution, in matters involving citizens of foreign states as well as American citizens, it is the responsibility of the judiciary to uphold the Bill of Rights, and among the basic human liberties contained therein is protection against cruel and unusual punishment. Opposition to torture -- not even torture, but cruelty in the treatment of human beings -- was stated in The Declaration of Independence. There is not even the slightest equivocation among the Founders: torture is immoral, it promotes tyranny, and it is inimical to the principles of this country. Neither President Obama nor Mr. Romney can be relied on to punish Americans who condoned torture during the war with Iraq. Americans have no reason whatsoever to believe that government-sponsored acts of torture are not still taking place.

Spying on Citizens

As stated in the Fourth Amendment, "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized." NDAA negates Americans' Fourth Amendment protection against warrantless spying by government agents. Neither Obama nor Romney stand in opposition to this tyrannical practice.

As noted by a scholar studying the former Soviet Union,

Almost all secret services – whether in communist one-party systems or democratic societies – employ formidable armies of informants to infiltrate and monitor their [own] populations.
Yet what has made an organization such as the KGB so invasive – and ultimately so deadly for thousands of people – was that it sought more than just passive conformity to the law. When KGB agents wanted to "get to know you," ... they wanted more than your address, your occupation, your hobbies or the names of your friends.
They wanted to know what and how people were thinking. And, in almost all cases, they wanted to fundamentally change that way of thinking (source).

Does the comparison to the former Soviet Union strike you as extreme?  The Founders urged Americans to be zealous in defense of our freedoms. Why allow that first step down a slippery slope of excess government power? We have not seen the last of the Stop Online Piracy Act.

Campaign Finance Reform

Neither candidate will address this issue. We cannot expect that politicians who become fabulously wealthy as a result of the status quo will be willing to change the situation as it stands today. The only hope for campaign finance reform is to start at a grassroots level, building new political parties and creating opportunities for new parties to compete effectively against the two major parties. This will require national popular elections, an end to “first past the post” or “winner take all” elections, and public financing of political campaigns. 

National Defense

Shortly after this election, the issue of war with Iran and/or Syria will re-emerge as a pressing issue. If re-elected, President Obama will be drawn into the situation. If elected, Mr. Romney will pursue the opportunity for war with gusto. America’s almost inevitable involvement in Middle East conflicts is partly a result of the influence that Israel holds over American leaders, partly the result of the circle of corruption that allows defense contractors to make campaign contributions and reward faithful political allies, and partly the result of America’s abject dependence on foreign oil. Drone strikes will continue to kill innocent civilians and inflame Arab hostility to America.

Health Care

In 1993, the Republicans devised a scheme whereby the United States government would funnel public money into the hands of for-profit private insurance companies. They claimed that this would provide health care to a greater number of Americans at a lower cost. The American people soundly rejected this plan at the time. Since then, Mr. Romney put this scheme into effect when governor of Massachusetts. President Obama has implemented the Republican plan at the federal level.

It is easy to sympathize with Americans who support the president’s health care plan. Given a choice between health care that they cannot hope to afford and healthcare that is barely affordable (but will still consume a large portion of many Americans’ monthly household budgets) there are people who will choose the latter.

To understand why the Affordable Care Act is problematic, it is necessary to introduce the idea of rent-seeking. This is not the kind of rent that tenants pay landlords. In the language of economists, a “rent” is money received simply by virtue of possession. If a pharmaceutical company holds a patent for a certain drug, it collects rent on that patent by holding out for a higher price on the patented drug. So, certain life-saving drugs are not produced at all, because the profit margin is too small to satisfy the Chief Financial Officer at the pharmaceutical company. Other drugs are sold at inflated prices, because the patent-holder needn’t worry about lower-priced competition. And doctors receive money from pharmaceutical industry reps each time the prescribe their product.

The same drug is sold at different prices in different countries.

Physicians obtain rent because they hold a scarce resource: medical care. This gives them leverage to charge more for their services than the services cost, or submit false claims to insurance companies. Private insurance companies obtain rent by offering special discounted rates to hospitals in exchange for certain considerations, and the hospitals make up the difference by charging higher rates to other insurance companies and charging higher rates to the “individual market” consisting of people who don’t have private insurance, who under the Affordable Care Act fall into the “high risk pool.” 
To make a long story short, private insurance companies command bloated profits but they also command bloated revenue: that is, the money insurance companies have to pay out is spent on over-priced pharmaceuticals, over –priced medical equipment, over-priced medical care, and bloated salaries of insurance executives.  Thus, taxpayers and people who pay monthly premiums under the Affordable Care Act will be squeezed. Countries that have efficient health care systems contain the cost of drugs, devices, salaries, and procedures before asking taxpayers to pay for health care. American politicians, beholden to corporate oligarchs, dare not follow this example. This is not merely a matter of cost. The more expensive health care is, inevitably, the less health care there will be to go around. In one form or another, health care will be rationed or its quality reduced, to make up for its inflated cost.

Maybe I am over-complicating the issue. Private insurance is nearly twice as expensive per patient as Medicare. So why choose private insurance over Medicare for all?

Medicare vs. private insurance (source)

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