Saturday, February 07, 2009

Are We Impoverishing The US Anti-Poverty Effort?

My concern, now that we have earmarked multiple trillions of the public purse to bailing out banks and building bridges, is that we will have squeezed the money available to meet the goal established by Barack's new Domestic Policy Council Director, Melody Barnes, to cut poverty in the US in half within 10 years.

In my opinion, that goal will require not only new resources, but a totally new way of approaching the task, both of which may now be in jeopardy.

When Barack's economic stimulus package was first touted, my concern was that there would be so much money floating around that it would require a blunderbuss approach to distributing the money, and that blunderbuss approach would upset the delicate and intricate networks of support that are already doing such amazing work at the grassroots with at risk communities.

That was when I began talking about Offices of Direct Venture Development (, to act as a buffer between well-meaning but over-powerful national and state government efforts and those well-balanced community initiatives.

I saw the Offices not only helping to target and distribute sensitively resources downwards, but also acting as focal points for translating upwards the actual needs of the troops on the ground and their successful experiences, so that policy-makers would be as much informed by community experience as by the input received from Washington think tanks.

Now my worry is that there may be too little money available from the Obama Administration to fund anti-poverty programs - new and existing. So it is that my focus has shifted to finding ways to use what little money there may be, whether from private or public sources, to fund both existing and new programs (government and non-profit), all of which suffer from their own paucity of funding. I have posted a couple of articles about this on the same blog.

Whatever may be the eventual outcome with the availability of resources for the anti-poverty effort, there are other issues which I see complicating any successful effort to achieve the Half in Ten goal.

First, the main emphasis of the mainstream anti-poverty movement has generally been about addressing the causes of poverty. I welcome all the initiatives that are proposed, whether it be improving education, affordable housing or the availability of union membership. But my personal emphasis is on addressing the immediate consequences of poverty.

I have a separate blog which deals with this in more detail: The bottom line is that I want Barack, along with Half in Ten, to commit his Administration to the proposition that every man, woman and child in the US deserves access to adequate food, clothing, housing and healthcare.

By all means, let's do what we can about cause. It may take ten years, it may take thirty. But all it takes is willpower to commit to allowing everybody below the poverty line to have access to adequate food, clothing housing and healthcare - tomorrow.

And money. My four part radio series calculated about $200 billion a year. And that's why I'm worried that we have mortgaged so much of the public purse to bailing out banks and building bridges.

The next wrinkle is that many of the most at risk communities are located in rabidly conservative (both religious and political) parts of the country. It will require enormous delicacy and respect to go into those communities and negotiate with their pride and independence to help them be empowered to help themselves - under a liberal President, most of them despise.

And make no mistake, we let ourselves down as true progressives if we do not meet that challenge, and allow these neighbors of ours the same opportunity to help themselves - on their terms - as we would rabidly liberal communities.

It's precisely these sorts of challenges I relish having the opportunity to meet. I'll be honest. I am actively looking to find or create a role for myself that allows me to help in this fashion. If any reader has any suggestions, please do not be shy about contacting me or passing the message around your own networks.

But whether it is me or someone else, whether it is supported by Barack, his administration, a set of non-profits or private sources, I hope that we take the opportunity of this truly progressive administration to realize the vision of Robert Kennedy and Martin Luther King, and eradicate poverty once and for all in this, the richest country the world has ever known.

And I genuinely pray that I am proven wrong, and that the money we have allocated elsewhere does not impoverish the anti-poverty effort in the US.

Friday, February 06, 2009

Are We Over-Stimulating The US Economy?

I believe that we are where we are because governments around the world have been over-stimulating their economies since the late Eighties. Every time it has come time to pay the piper, we have put off the day of reckoning by literally printing more money.

I’m going to spend a quick moment wondering whether we in the US are about to do the same thing again, with this currently much over-stimulated economic stimulus package.

Now, don’t get me wrong. I’m tickled beyond pink that Obama is our President. But he’s one man, dealing with some 750 congress people. And no one man is always right – as even he has conceded.

But we have a couple of economic rescue packages (bank bail-out and economic stimulus) that, last year, were pegged at the low hundreds of billions, and are now edging multiple trillions.

It’s a sensible time to pause and double-check we’re doing the right thing. My doubts are both general and specific.

Generally speaking, as an avowed social economic libertarian, I believe that there is always a price to pay for artificially stimulating the economy.

Provided the price does not outweigh the short-term benefit, and provided those who are less able to fend for themselves do not get left behind, I’m not always closed to the concept.

So long as everyone sees it as a short-term bridge to getting back to the natural economy.

What bothers me is when we start talking about economic stimulus as being a long-term tool. For example, when we say that short-term tax-cuts (Bush) should be made permanent, or ‘government is creating jobs’ (Obama).

Government does not create jobs. What it can do is provide a temporary moment when the economy is in transition, when industry is in transition, and use that breathing space to help people re-locate, re-train – whatever it is that needs to be done to empower people to adjust to a new economic reality.

But when government pretends that there is no new economic reality, and simply encourages people to carry on as before, then government does its people a disservice. And governments, of all political persuasions, around the world, have been doing just that since the late Eighties.

Imagine the wealth of a country is a solid wooden table. That table represents all the products that its people create – their actual value. The actual value of property (not the speculative value).

You can’t drag the table around the world as you try to import goods and services. So, you have currency, with which to exchange.

If you don’t have enough money to buy those goods, you can be sensible and wait until you have created enough of your own products, so that you have enough actual wealth to be able to print more money. Or, you can be reckless, and just go ahead and print more money, and buy the bauble today.

We’ve been doing the latter since 1987. Every time there was an event which reduced the value of our property (Stock Market crashes, economic recessions), instead of waiting until the natural wealth of our economy got back on course, we’ve simply printed more money.

But, we’ve done worse that that. We’ve printed the money in a way that hides the fact that we’ve been doing it. We haven’t printed new dollar bills as such. We’ve increased the amount of digital money. By increasing the amount of electronic credit that is available.

We do that primarily by artificially reducing interest rates. And when that option is no longer available (because our interest rates are close to zero), we come up with other measures, which we grandly entitle ‘encouraging banks to lend’ – sound familiar?

What this does is reduce the value of our currency. We have the same amount of actual wealth, but we’re just telling the rest of the world that it is represented by more money.

Naturally, the rest of the world wants more money to sell its goods and services to us, and so the price of their goods and services goes up. That’s called inflation. And that’s what we had, in rampant version, back in the Seventies.

Nowadays we get around inflation by borrowing from the Chinese and the Arabs. We say to foreigners: here, we’ll give you more money for the same goods, but the extra won’t be coming from us, it will be covered by this nice Chinese gentleman instead.

That way, we Americans are not footing our bill with inflation, we’re getting the Chinese to foot the bill for us, instead. A little over-simplified, but it will do.

The problem is, there is still a price to pay. Interest payments. And the size of those payments had become so large that we don’t have enough money to do the things we want to do, like fix roads and build new schools.

So now we come up with that money by introducing an economic stimulus package. Which will be paid for with more borrowing. Which will put us deeper in debt.

And so the cycle continues. And so it is that I’m generally not in favor of artificial economic stimulus.

Instead, it’s time to get off the train as it hurtles towards the precipice, let the economy heal itself, and focus our efforts on empowering our people to meet the new realities properly prepared, and to ensure that everyone has an equal opportunity to engage in those new realities, and to set in place a genuinely respectful safety net which cares for those in our society, who are unable to care for themselves, in a truly dignified fashion.

It is time to stop acting like children, with a never-ending candy jar. Or better still, it’s time to stop treating our fragile economy like an over-stimulated child.

We wonder why the child will not go to bed, why it engages in behavior which is unhealthy for us, and we don’t realize it’s because we keep on stimulating the child.

Stop feeding Little Joe-Boy caffeine and sugar up the wazoo, and letting him watch action movies at 9.00pm at night, and you’ll find that Little Joe-Boy will simply return to normal child behavior. Same with our economy.

But leaving aside the nauseating metaphors, and my general doubts about economic stimulus, what about the specific packages before us?

Well, cast your mind back to the summer of last year, and the original chatter about bank bail-outs. We were talking then about a measured response in the financial sector, to stop the sector completely collapsing, and a package to help home-owners.

We are now a hiccup away from a slew of nationalized American banks, and the latest piece of candy is a proposal to give a $15,000 tax break to people who buy houses in 2009.

I’m not going to spend much time on banks. There are people out there who know more about banks than me. Besides, it’s no secret that we’re all sick and tired of executives paying themselves huge bonuses out of the bail-out money, and not making that money available to ordinary people. And Obama is doing something about that.

But let’s look at the $15,000 proposal as one which may not be necessary, or not necessary in its current form.

First thing. Why on earth are we encouraging anyone to spend money they do not naturally possess, when that is what caused this problem in the first place?

Ok. I might be persuaded by the argument that we’re in such a stagnant mess, if we don’t do something, it might all become a depression. And that is the only reason I support any kind of economic stimulus/bank bail-out at all.

But I’d be more persuaded by this latest measure if it was qualified by saying, for example, it is only available to buy a primary residence, and the tax break has to be repaid with interest if the house is sold within, say, five years, to prevent speculation.

It’s that same sort of reasonable restraint that I see lacking from the now burgeoning economic stimulus package.

In the early autumn, we were talking about a couple of hundred billion dollars, to put a bit of money in the hands of the hard-pressed middle class, and increasing entitlements to those in poverty, to help them through these particularly difficult times.

Now, we have a trillion dollar pork barrel that makes Sarah Palin and her Bridge to Nowhere look like Scrooge. Whoa. Time to put the brakes on.

The bottom line is that this package should not be, and never should have been, about designing a whole new pseudo-economic paradigm, where the state becomes owner, businessman and capitalist.

Governments do not make good business people. I know. I lived through it in the UK. And Brits have spent the last 30 years trying to wean themselves away from a nanny state, which cuts people off at the knees, rather than empowering or serving them. I do not want to see the same thing happen in the US.

In my opinion, this economic stimulus package will best serve Americans if it limits itself to what it should be – a one-off measure to put some money temporarily in peoples’ hands, to see them through the transition of this horrible recession, and prepare them for taking advantage of what will await us all on the other side.

So yes, let’s give the middle class a break. And I’m delighted we’re doing it by $20 a paycheck. It’s supposed to be a helping hand. Not another opportunity to buy something we don’t need.

I’m delighted that there are measures to increase entitlements to those who are not able currently to fend for themselves.

By all means, let’s create a limited number of temporary jobs, to help those in areas worst hit by the changes underway in our economy – for example, in Detroit.

And yes, let’s invest a measured amount in the future of our country and its economy. In green technology, in schools, in a certain amount of infrastructure.

But beyond that, let’s get back to reality. Let’s reduce this economic stimulus package to something in the order of maybe $600-$700 billion.

Government has no business promising to ‘create’ 3-4 million jobs. That’s the business of business.

This package should not be an excuse for state governments to balance their budgets, for congressmen to offload every pork barrel project they’re been hoarding the last couple of years, and it should stand for more than a dozen more Bridges to Nowhere.

Barack Obama promised us a new way to govern. To do that, he will need eventually to wield a full pen when it comes to executing line-item veto. He can begin with his own economic stimulus package. A package which Congress is merrily turning into next year’s overstuffed Christmas turkey.

I say all of this not to undermine Barack Obama, but to support him. Like him, I want a grassroots administration that listens to its people, and then serves them. I want policies that genuinely reflect the needs of those who are in receipt of the benefits. [see -]

And I want a government that recognizes that there is no such thing as ‘government investment.’

What government invests is taxpayers’ dollars. It’s our money. The peoples’ money. And what I want, and I know that Barack wants it too, is for that tax money to be invested wisely, and on our behalf. Not on behalf of Congressman and their lobbyists. And not on behalf of company executives, financial speculators and foreign bankers.

I’m not sure this economic stimulus package, in its current form, is wise. I hope it will see many changes in the coming weeks. And I care not a fig that those changes may, initially, be proposed by Republicans or Red-Dog Democrats.

One of the most promising features of Barack Obama is that he has shown that he is not afraid to accept advice from any quarter, and he is equally then not afraid to change course if it ensures that the outcome is the one that best serves the American people. It is why I am so encouraged we have him at the helm in these challenging times.

It’s why I supported him last year, and it’s why I will continue to support him. Even when I don’t necessarily agree with every ‘i’ that he dots and ‘t’ that he crosses.

I hope that he will demonstrate that same courage and cool temperament with the bank bail-out and economic stimulus packages, and openly welcome honest debate and bi-partisan amendment. 

I hope he uses this unique opportunity to enable the passage of historic measures that truly break with Washington’s normal ways, and genuinely serve the ordinary people of our country.