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Phil-osophically Speaking: March 1, 2012

The Other America

Fifty years ago, the eloquent political activist Michael Harrington published a book called The Other America. It was a powerful indictment of America’s capitalist culture that Harrington claimed left 25 percent of its population in poverty. A rhetoritician with few peers, Harrington was an enormously influential thinker. The Other America is said to have inspired Lyndon Johnson’s Great Society and the erection of its twin pillars: Medicare and Medicaid.

In 2012, the “Other America” still exists but in a guise that was neither expected nor desired when Harrington’s book was published in 1962. In modern America, subsidies are dispensed freely and happily as if they were the holy sacraments handed down by the high priests of progressive politics. More than one in every five Americans, some 67 million are dependent on federal aid for housing, food, income, health care and education.

A recent, exhaustive study by the Heritage Foundation has irrefutably documented what has been a way of life for large segments of the population with no indication that this alarming trend will be arrested. Over the last two years, the number of recipients receiving aid grew 7.5 percent with federal dollars being doled out to those recipients in ever larger and more copious portions. Indeed, the average recipient now collects benefits in the range of $33,000. That’s greater than the average per capita disposable income in America — the first time that has ever happened. By the look of things, it won’t be the last.

While the acceleration of benefits was, in part, fueled by the great recession triggered in September 2008, William Beach, the lead author of the study, states that only a fifth of the increase is reflective of the economic downturn. The other increases are mostly due to policy changes in Washington, which make government bigger and more people dependent on it. As Beech points out, pre-existing entitlement programs via Congress expanded Medicare to cover prescription drugs and, in another instance, Medicaid, initially designed to provide health care for the poor, is now expanded to cover even the more affluent portions of the middle class.

This tableau becomes even more troubling when we consider the depth and pervasiveness of perpetual dependency. From 1980 to 2000, years of robust economic growth, federal aid grew by 79 percent. In that period, the dependency average index was rising at an average of 3.6 percent per year. Nevertheless, this pales in comparison to future years. From 2000 – 2008, the rate of dependency had grown to 4.25 percent per year and in 2010 (the last year data is available) it had soared to a mind-blowing 11 percent per year.

Can there be any doubt that this number has grown in 2011? The very nature of these programs, so acutely attuned to downturns, guarantees that its dispensary capacity goes into overdrive when economic conditions deteriorate. When the New Deal created provision for hardship and security, it did not visualize the staggering dimensions of a future social welfare society or the inimical effect welfare would have on individual initiative. Dependency related programs now cost us $2.5 trillion annually, which translates into roughly 70 percent of the budget. With virtually half the population paying no income tax, but believing that the other half should pay more to sustain the burgeoning entitlement programs they’re feeding off of, is nothing less than an invitation for civil strife, pitting Americans against Americans.

Recently, I read a quote from prominent Russian sociologist Natalia Zubarevich, stating that Vladimer Putin’s days are numbered because as Russia’s economy grows, more people will join the ranks of the middle class and become financially independent by pulling themselves up by their boot straps. Wait a minute, I thought, isn’t that supposed to be the American dream! So how bad is it if the Kremlin is embracing the American dream more than we are?

America needs to do what everyone knows it needs to do: Grow the economy and cut spending. This mantra is not a platitudinous shibboleth; nor a sheath of scriptural apocrypha written by some dead economist in service of an antiquated, ersatz doctrine; nor a sorcerer’s incantation divining secret, unseen powers —- this is pure and unmistakable homespun commonsense. Even Obama, the most left of center political figure ever elected president, is now advocating a cut in the corporate tax to 28 percent, even as many of his myopic epigones, forever wandering in the vaporous mist of invincible ignorance, encourage ever steeper corporate rates. You don’t have to be psychologically savvy to realize that capital investment (a risky business) begs for stability and a modicum of certainty. The world isn’t providing it with a crippled Euro, a potentially closed Strait of Hormuz, and rumors of war circulating the globe. These ominous signs aren’t vanishing anytime soon, so we must do what we can to reassure business on the domestic front — steps which I have taken the liberty of outlining:

Cut the Corporate tax: Obama’s proposed 28 percent is not low enough. We need a clear signal inviting corporations to invest in plants and jobs here in the U.S, rather than searching elsewhere for more fertile ground and a less oppressive business climate. “Build —and they will come” should be changed to “Reduce (taxes) — and they will come — and with plenty of lucre.”

Stabilize the Banks: This was FDR’s greatest achievement in his first “Hundred Days” in office. The five largest banks today have more control than when Lehman Brothers imploded just over three years ago. If the banks are too big to fail then, darn it, they’re too big! Break them up into more manageable entities.

Repeal Dodd – Frank: Congress should call for a moratorium on regulation. Chris Dodd and Barney Frank, the two sponsors of this egregious bill are the economic equivalent of war criminals, carpet bombing any hope of a full recovery with highly explosive and incendiary regulations. Moreover, the punitive charges leveled at the banks for reckless lending policies are counterproductive, compelling them to only squeeze the borrowers more tightly, while more regulations lead to more lawyers and accountants to deal with the growing number of regulations —something smaller banks can’t afford. The upshot is a greater concentration of resources in America’s biggest banks — the very thing we should be trying to avoid.

Reducing Foreign Oil Dependency: Rising energy prices can kill an economic recovery, especially one as feeble as this one. Rejecting the Keystone XL pipeline from Canada to Texas was an appalling mistake. It would have created jobs (perhaps 20,000) and it would have ultimately lessened our dependence on foreign oil. With the Mideast in turmoil, national security alone dictates that we need to drill for oil. Green energy sounds great and pleases the environmental lobby; but it won’t cut it when it comes to meeting our enormous energy needs.

Reduce spending: When it comes to the orthodoxies of supply side economics, I’m not a purist. Three words in economics make me tremble: Deficits, deficits and more deficits. In the 1980s, tax cuts worked because our indebtedness was not nearly as great as it is today. While deficits soared during those green years, as a percentage of our GNP, the debt was less than the previous decade because the economy grew so rapidly.  Now, we’re literally drowning in debt. That we should defang Obamacare before it sucks the life-blood out of the American economy is a self-evident truth. Meanwhile, tax cuts combined with changing the dynamics of Social Security while requiring recipients of Medicare and Medicaid to pay more out of their pockets is unavoidable if we are to avert another economic cataclysm.  

This is, as they say, easier said than done. The biologist Richard Dawkins once caustically said about religion what could be more aptly said about government largesse: It’s more contagious than smallpox and much harder to eradicate. The doves, naturally, see the Pentagon as a big, juicy target. No doubt we spend many billions on the military. I long for the knife; but the Madisonian apothegm … “If men were angels,” deter me. Anyone reading the newspapers, and if you’re reading this you’re reading the newspapers, knows that men are anything but angels. Enough said.