When not to kick a Congressman

 

                            Does this man understand public finance?  Photo source: Snopes.com 

Bad ideas have a way of coming back. In July 2011, when Congress was struggling with a legal limit to the debt, investor Warren Buffett quipped to CNBC that he could end the deficit in five minutes by passing "a law that says anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.”

There is, in fact, a proposal on social media for a 28^th Amendment to the US Constitution to do just that.  It has been making the rounds since 2009 but now is viral again.

Explanations are in order.  The deficit is government spending minus tax revenues received in that year. For example, suppose that the government collects $1 trillion in taxes but spends $1.5 trillion. Then the deficit is $500 billion, or half a trillion dollars.  

The deficit is just a loan to the government by its creditors, mainly taxpayers. It's like the charge that you just made on your credit card: Visa lent you $40 for a ramen dinner for two on Valentine’s Day, and you will pay it back at the end of the month.  The debt is like your outstanding balance on your Visa card, say, $10,000. It’s the amount that you would have to pay today to settle your full debt, that is, to pay off all your loans. On Valentine’s Day, your debt rose by $40 to $10,040.

The proposal to cap the deficit at 3% of gross domestic product (GDP, the market value of production on US soil -- a measure of the size of the economy, almost $30 trillion now) probably stems from a guideline for members of the European Union, in the Growth and Stability Pact. The guideline is honored in the breach: In the euro area, the deficit ratio in 2023 was 3.6%. Why can't we stick to a 3% ratio?  

Well, like any loan, the deficit can be good or bad. Consider the deficit of 15% of gross domestic product (GDP, a measure of the size of the economy) in 2020, when Donald Trump was President the first time. The government was spending to replace private spending lost in the pandemic shutdowns. Without the deficit, more firms would have had to lay off workers, and fewer of those laid off would have received money to tide them over until they found new jobs in a recovery. I would argue that the 2020 deficit was a good loan.

Likewise, the deficit of 10% of GDP in 2008, when a global financial crisis blew up, may have kept a severe recession in the United States from becoming a depression.

Benefits and deficit benders

But usually the deficit occurs because the government does not receive enough in income tax revenues to pay all Social Security and Medicare benefits. As the system works, current workers pay for current benefits. People think that they receive their benefits out of some savings account consisting of their past tax payments for Social Security and Medicare, but that isn’t the case. When workers retire, as the Baby Boomers (like me!) did, the number of workers supporting a typical retiree shrinks, and the benefits become harder for the government to pay. Congress then borrows from the grandchildren, by forcing them to pay off the loan when they become working adults.

Whether this is good or bad depends on your point of view. On one hand, the grandchildren don't have a vote today, so they have no say in the matter. On the other hand, they are likely to be richer than we are today, so they can more easily pay off the loan than we can.

In short, the question is not whether the deficit is too large relative to GDP. The deficit may need to run high for a while to address temporary problems like economic crises. The question is whether the debt is too large relative to GDP. The debt consists of all unpaid loans, not just this year's (that's the deficit). If the debt/GDP ratio rises over time, then the investments financed by loans to the government do not generate enough income (and thus income tax revenue) to pay off all its debts, and we have a long-run problem. For example, Congress may borrow $200 million to build a new Interstate. Does the new highway save so much time in production that it generates enough income to pay off the $200 million loan plus interest? 

Unfortunately, the debt/GDP ratio is indeed rising. It is 120% of GDP, almost quadruple the ratio in 1981. The EU guideline is 60%.

But to cap the deficit at 3% of GDP would prevent the government from responding to recessions. Hard times would become harder. As the graph below shows, Congress has usually responded to economic crises by borrowing a lot more than 3% of GDP. The gray vertical lines denote recessions.  You can see that the federal budget usually dips deeper into red ink in those periods. 

The 3% cap on the deficit is a “solution” that does not address the real problem: For better or worse, Americans want more benefits from the government than they can now afford.  Buffett's bromides won't change that. -- Leon Taylor, Seymour, Indiana USA tayloralmaty@gmail.com

  https://fred.stlouisfed.org/series/FYFSDFYGDP

 

Notes

For useful comments, I thank but do not implicate Annabel Benson.

 

References

Eurostat. Statistics explained: Government finance statistics.  Government finance statistics - Statistics Explained .  October 22, 2024. 

Barbara Mikkelson. https://www.snopes.com/fact-check/hometown-buffett/   Did Warren Buffett Suggest This Plan That Could Fix the Budget Deficit? | Snopes.com . October 23, 2011.

 

Let's mess with Syria

                                            Celebrating in the Golan Heights: For how long?

                                           Photo credit: Mathias Delacroix, AP.  

The US should intervene in Syria now. Central Command, the Tampa-based unit that oversees the US military in the Middle East and Central Asia, organized and still controls the Syrian Defense Forces, the Kurdish-led army in northeast Syria. Officially, this army fights the remnants of the Islamic State in northeast Syria. That’s why the US set it up in 2015. But it really has fought President Bashar al-Assad for a decade, preventing the Syrian National Army from conquering the northeast.  Assad has fled to his main patron, Russia.

The rebels now in Damascus need the Kurds. They are tenacious and skillful fighters; they are not strangers to the Russian arms that the rebels have captured; and they get along with the Druze and other southern Syrians who had led the democratic opposition to Assad since civil war broke out in 2011. The southerners, not Hayat Tahrir al-Sham, know enough about Syria to keep the government running. Assad lost control because he had lost touch with Syrians more than 15 years ago. The typical Syrian is angry because he lives on $2.07 a day, according to World Bank data for 2021. And he faces rampant inflation, with prices doubling every year according to my estimates.  The Syrian National Bank, the country's central bank, stokes inflation by printing Syrian pounds, to obtain dollars cheaply.  Health care is miserable: The infant mortality rate is 15.5 per 1,000 live births, estimated Worldometer.

To stabilize the nation, the new government must control the pound supply and obtain foreign aid for Syrians, the majority of whom cannot afford a decent meal, according to the United Nations World Food Programme.  In a population of 25 million, nearly 13 million are hungry. On top of this, the Programme estimates, the HTS attacks of the past week will displace 1.5 million Syrians.

Democracy or doomsday?

Because of their practical experience, the southern democrats are better positioned to feed, house, and care medically for Syrians than are the conservative Sunnis of Hayat Tahrir al-Sham. The US can accomplish humanitarian goals by steering the new government back to the democratic purposes of the Arab Spring of 2011 that launched the civil war, and by providing economic expertise, especially in monetary policy.

The HTS leader, Abu Mohammed al-Jawlani, indicates that he is open to democracy. Observers are rightly suspicious, because he had belonged to al-Qaeda. But al-Jawlani’s roots may be more Syrian than fundamentalist Sunni. He is from Golan and indeed became a terrorist by fighting in the second intifada against the Israelis. He may be willing to break with al-Qaeda for real, and not just in rhetoric, if this will strengthen his popular support in the Syrian leadership. This is particularly the case because al-Jawlani faces internal opposition from fundamentalist Sunnis; so why not break from them now, with US help?

In addition, the US can aid the traditional opposition to Assad, including Dima Moussa, a vice president of the National Coalition for Syrian Revolutionary and Opposition Forces. She is an American-educated lawyer specializing in women's rights, a pressing issue in this patriarchal society that accepts wife-beating as par for the course. Indeed, rapists can obtain lightened sentences by marrying their victims. Women, who are half of the country's population, can form a critical contingent of the new democracy's political base. They have shown their clout in Iran by protesting the death of Mahsa Amini, 22, in the custody of the Guidance Patrol in Tehran in 2022. Amini's crime was to wear her hijab incorrectly. 

Does fight make right?

President-elect Donald Trump writes: "Syria is a mess, but is not our friend, & THE UNITED STATES SHOULD HAVE NOTHING TO DO WITH IT. THIS IS NOT OUR FIGHT. LET IT PLAY OUT. DO NOT GET INVOLVED!"

This is most definitely our fight. Shouting in capital letters won't change that. First, a democratic Syria would provide a buffer for Israel against Iran, which is dedicated to destroying the only democracy in the Middle East. Second, it would strengthen democratic impulses in Iraq, which are weakened by the influence of Iranian militia. Third, it would enable the US and Israel to control the supply of arms between the Syrian coast and Lebanon that has supplied the terrorist group Hezbollah that is bombarding Israel. Fourth, it would restore American influence in the Middle East, at the expense of Iran and Russia. This influence is not only political. It can also stabilize the supply and price of US imports of oil, which historically have come from the Middle East.

Mark Kennet raises vital points.  "I suspect you may be overly optimistic about Syrian propensity toward democracy. Syrians have no memory - ever - of democracy. Like neighboring Jordan, the best we can hope for is a tough but progressive-minded autocracy kept tightly under the ruler's thumb. I share your doubts that al-Jawlani, or al-Golani, is that ruler.

Touche. But I would note that Japan had no memory of democracy, either. It took a cataclysm to make it happen. Syria's is here. And the spirit of the Arab Spring has survived in the south for 14 years.

The usual roadblock to democracy in a country is the army -- which, in Syria, no longer exists.
Jordan is an interesting comparison, but it had to cope with a huge influx of Palestinians in the Fifties and Sixties, accompanied by the PLO. In contrast, the main immigration into Syria will be of Syrians.

US air support along with Israel's, especially over the Russian bases on the coast, is a good idea although it may provoke Russia and Iran, as Annabel Benson points out.

Why should Syria succeed?  

Mark responds to me that "other models of incipient democracy which did not do as well as Japan are more common, and include Russia itself. I note that the only functioning Arab democracy is Tunisia. Why would Syria be different?"

It's a good question. Democracy didn't flourish in Egypt, either, after 2011. The issue, I think, is whether a failed state is more likely to be reborn as a democracy than other states. I would argue that the failed state subjects people to such miserable conditions that they are more likely than other peoples to participate in the new government to keep those conditions from recurring. Also, revolution in the failed state can sweep away interest groups that dominated the old government and economy, that prevented broad participation. Postwar Japan and Germany may be rough examples, although Japan has a rather overbearing industrial policy. Mine is basically speculation based on "The logic of collective action," by Mancur Olson.

Mark is rightly skeptical.  "A lot depends on culture and institutions."

A lot sure does. The English legacy of the American colonists might have enabled them to develop democratic institutions faster than, say, the Spanish colonists. But the desire for democracy might also matter. One thinks of the French Revolution and the 1848 revolts in Germany.

How far to go?

Mark notes, "What the US can do is encourage HTS to take the Russian port facilities and offer air support. I doubt it can productively do more."

US air support along with Israel's, especially over the Russian bases on the coast, is a good idea although it may provoke Russia and Iran, as Annabel Benson points out. Air cover could cut off the transport of arms from the Mediterranean to Hezbollah in Lebanon via the east-west highway from Damascus to Baghdad.

Paul Higgins makes a practical point.  "All of the American commentariat who hit the Sunday talk shows noted that the US can't (officially) even talk to HTS right now, because it's listed on our terrorist watchlist (or whatever the correct term is). Beginning the process of removing them would seem like a necessary first step towards any substantial communications."

Indeed, the UN has documented recent cases of torture and execution of prisoners by Hayat Tahrir al-Salam in northwest Syria. https://www.ohchr.org/.../un-commission-warns-syrian-war... I don't know if it might be possible to lift sanctions on al-Jawlani.

This problem is common. In 2020, President Trump said he would think about meeting with Nicolas Maduro although the Venezuelan President was under sanctions for narcoterrorism.  Trump open to meeting with Venezuela’s Maduro  But probably the Office of Foreign Assets Control, of the Treasury Department, will not balk at licensing the President to meet someone red-hot because of a sanction.  OFAC Consolidated Frequently Asked Questions | Office of Foreign Assets Control

Yes, Mister President-Elect, Syria is a mess. That's why it's not our friend. Maybe it's time to offer a hand.  -- Leon Taylor, Seymour, Indiana tayloralmaty@gmail.com

Notes

For valuable comments, I thank but do not implicate Annabel Benson, Paul Higgins, and Mark Kennet.

References

The New York Times.  Syria Live Updates: Rebels Who Toppled Assad Face Stark Challenges - The New York Times .  December 9, 2024.

Trading Economics.  Syria GDP per capita .  Accessed December 9, 2024.

United Nations Syria Country Team Report.  https://uprdoc.ohchr.org/uprweb/downloadfile.aspx?filename=9689&file=EnglishTranslation  Accessed December 9, 2024.

United Nations World Food Programme.  GENEVA / MIDDLE EAST HUMANITARIAN PRESSER | UNifeed . December 6, 2024.

Wikipedia.  Dima Moussa - Wikipedia  Updated December 8, 2024.

Wikipedia. Death of Mahsa Amini - Wikipedia Updated December 1, 2024.

Worldometer. https://www.worldometers.info/world-population/syria-population/  Accessed December 9, 2024.

 

Honk if you love taxes

                                           Must congestion be as common as the common cold? 

                                    Photo credit: Adobe stock

 

With the New Year will come a new idea for New York City -- paying $9 to drive bravely into the maw of Manhattan. While grumbling. As The New York Times notes, two thirds of respondents in a Siena College survey of New York State opposed congestion pricing. US President-elect Donald Trump, in the ignorance to which he has become accustomed, called the congestion price “the most regressive tax known to womankind.”  Almaty residents may ask themselves whether they would back congestion pricing themselves.  Snow and high winds just two weeks ago snarled streets throughout the city of 3 million.   

Most New Yorkers oppose the congestion price because The New York Times has never explained it. The idea is that time is money. When I drive into New York at rush hour, I delay other motorists. I keep them from getting to work or dinner on time. If I would have to pay a toll for delaying them, I will probably go to the Big Apple instead before or after rush hour. Other motorists will thus get to the office or the turkey dinner on time. Congestion will disappear.

I will drive at rush hour only if I would benefit even after paying the toll. Ideally, the toll equals the cost that I impose on other drivers. If I am willing to pay the toll, then my own need must justify the rare congestion that I cause. Perhaps I was driving my pregnant wife to the hospital.

And, of course, the toll revenues pay for improvements that decongest.

In short, the congestion price benefits motorists in the short run and the long run. It's a reviled idea whose time has come.

But what about Trump's charge that the congestion price is a "regressive" tax on women? The President-elect, who managed to major in economics at Penn without learning anything, is fond of technical terms he doesn't understand. A tax is regressive if it claims a larger share of income or wealth of the poor than of the rich. (Income is what you make this year. Wealth is what you're worth.) The opposite is true of the congestion price. On average in the US, women are poorer than men. The median household headed by a woman has 55 cents of wealth for every dollar of wealth in the median household headed by a man. (The median household is the one that separates the richer half from the poorer half.) Women are more likely than men to ride the bus to work than to buy an expensive car and drive. Because they take the bus, they avoid the congestion toll. That tax is progressive: It claims a larger share of income or wealth of the rich than of the poor. Other things being the same as before, if we must have a tax, we'd surely prefer a progressive one.

A better example of a regressive tax on women would be a tariff of at least 20% on cheap Chinese toys that single mothers buy for their kids because they can't afford anything else. A tariff is a tax on foreign goods. The primary advocate of this tariff is the President-Elect. -- Leon Taylor, Seymour, Indiana tayloralmaty@gmail.com

References

Ana Hernandez Kent. Gender Wealth Gaps in the U.S. | St. Louis Fed . September 29, 2021.

Ana Ley.  NYC Congestion Pricing Plan Gets Federal Approval With Jan. 5 Start Date - The New York Times .  November 22, 2024.

Tengrinews.  Snowfall and heavy traffic jams: road situation in Almaty: 08 November 2024, 20:47 - news on Tengrinews.kz

The man in the mirror

 

                                           Turkey President Erdogan: Who's manipulating whom? 

                                                                 Photo credit: Wikipedia

Donald Trump's return to the White House will have, shall we say, interesting implications for the Middle East. Consider Trump's track record.

In October 2019, after a phone call with Turkey President Recep Tayyip Erdogan, then-President Trump pulled out US troops from northwestern and north central Syria so quickly that they didn't have time to destroy their assets. So the Russians moved into the US fort at Manbij free of rent.

The US was in the area to fight ISIS, largely through the Kurds, who are among the most effective military allies that the US has had in the Middle East. When Trump withdrew troops from this part of Syria, the Kurds were left without protection against Daesh (Arabic for ISIS) and Turkey. Istanbul was the enemy of Kurds because they had long agitated for independence in southern Turkey, notably through the terrorist Kurdistan Worker's Party (PKK). The Kurds in northern Syria deny links to the PKK, but the Turks are skeptical. For protection, the Kurds in northeast and north central Syria turned to Syrian President Bashar Assad, who had been fighting a civil war in the area since 2011. The US thus lost brave allies to one of its most implacable enemies.

Also because of the thoughtless American withdrawal, nearly 800 ISIS fighters and supporters escaped from detention at Ein Eissa.

The US still has roughly 300 troops in northeastern Syria, because an aide pointed out to Trump that they could secure Syrian oilfields in the area. Partly due to the reduced American presence in northern Syria, those troops were attacked nearly 100 times by Iranian-linked militias from October 2023 to the following February.

And ISIS has doubled its murderous attacks in Syria and Iraq, probably to show that it's still a terrorist outfit worthy of funding.

The Trump withdrawal had wider repercussions. Trump also cut back on resistance to Boko Harum, which enslaves children, in west Africa, and to Al Qaeda in the Islamic Maghreb in the Sahel region. And the Europeans will certainly distance themselves from the not-so-new American President, whom they regard as impulsive, if not repulsive

There are indeed serious questions about Central Command in the Middle East. To what extent does the US wish to continue to fight terrorist groups there, most of them much reduced since 2022, rather than prepare for long-run confrontation with Russia and China?

But in light of what happened after one phone call in October 2019 with a manipulative deal-maker, one must ask whether Trump is capable of the subtle and complex analysis that the Middle East demands. -- Leon Taylor, Seymour, Indiana USA, tayloralmaty@gmail.com

Notes

For useful comments, I thank but do not implicate Mark Kennet and Barry Lenk.

References

https://thehill.com/.../465952-five-unintended.../

https://www.chathamhouse.org/.../trump-withdraws-troops...

Polls and trolls

 

                                            Does this man get a vote?  Photo credit: Getty Images

With 19 electoral votes, 7% of the 270 needed for victory, Pennsylvania may be the key to today's Presidential election. Polls indicate that neither candidate -- former President Donald Trump for the Republicans, or Vice President Kamala Harris for the Democrats -- has a lead in the poll sample exceeding 1% or 2%, well within the statistical margin of error. The race is a dead heat. Moreover, national polls suggest that the percentage of likely voters who have yet to make up their minds about the candidates may be as low as 2%.

The Russians have good reason to try to influence undecided Pennsylvania voters. Trump has said repeatedly that if elected he could end the war between Russia and Ukraine in 24 hours. The only way that he could do so would be to threaten to cut off aid to Ukraine if it does not immediately concede Kremlin demands. At minimum, these demands would include a surrender of eastern Ukraine to the Russians and probably a decisive role in Ukrainian governance like the one enjoyed under President Victor Yanukovich before 2014. The Maidan Revolution then brought pro-Western leaders to Kiev. For Russian President Vladimir Putin, purchasing these concessions at the low cost of a sudden surge of social media disinformation in Pennsylvania, rather than through the prolonged expense of Iranian drones and of training North Korean troops, not to mention Russian draftees, would be like rubles from heaven.

The Russians have already launched this campaign. Last week, the FBI verified that a video purporting to show a poll worker destroying mail-in ballots for Trump was a Russian fake. The FBI wrote: "This Russian activity is part of Moscow’s broader effort to raise unfounded questions about the integrity of the US election and stoke divisions among Americans, as detailed in prior ODNI election updates." ODNI is the Office of the Director of National Intelligence. The Cybersecurity and Infrastructure Security Agency also affirms this position.

Without a counter-attack, the Russian blitz may well succeed. Suppose that Harris leads in Pennsylvania by 1%. Flipping the vote could be done cheaply by convincing Harris voters to go for Trump in about a half of a percentage point of the turnout. The 2020 Pennsylvania turnout in the Presidential election was 7 million. So .5% of this works out to 35,000 votes. Assume that 4% of the turnout is willing to vote for Trump rather than Harris if persuaded: This would include the 2% of undecided voters and a like amount of soft Harris voters. Then the election could be flipped if disinformation persuades one-eighth of the target voters, presumably young males with no college degree ( .005/,04 = .125). This sounds feasible to me. Of course, my calculations are crude.

Fake videos in the Russian Storm-1516 campaign have also appeared in Georgia, a swing state with 16 electoral votes. The state secretary of Georgia, Brad Raffensberger, asked Elon Musk, owner of X and a Trump supporter, a few days ago to remove fake Russian videos. Musk's response has not been reported. https://thehill.com/.../4965272-raffensperger-asks-x.../ After the 2020 election, Trump demanded that Raffensberger "find 11,780 votes" to enable him to claim victory in the Georgia electoral election. https://www.axios.com/.../trump-georgia-election... . Georgia indicted Trump in this matter.

A few hours ago, the FBI reported bomb threats to polling sites in several states, including Georgia, that “appear to originate from Russian email domains.” https://www.usatoday.com/.../georgia-bomb.../76068592007/ The FBI said the threats were not credible. The Russians may have been trying to suppress the last-minute vote, which tends to be poor and Democrat.

Another possibility: Storm-1516 targets not the casting of votes but the counting of them. Hence the fake video in Georgia of a poll worker destroying Trump ballots. Suspicions of vote miscounting may touch off calls for recounts and decertifications. Federal agencies say Russia and Iran are ramping up influence campaigns targeting US voters - The Washington Post This backtracking could make it hard for states to meet the Constitutional deadline for submitting the electoral vote to Congress. It could also spur violence in the days and weeks following the election if Trump does not concede. -- Leon Taylor, Seymour, Indiana USA, tayloralmaty@gmail.com

Notes

For useful comments, I thank but do not implicate Annabel Benson.

References

BBC Verify and BBC News. Olga Robinson, Shayan Sardarizadeh, and Mike Wendling.

FBI issues warning over two fake election videos . November 2, 2024.

After the endgame

                                      A repeat performance?  Photo credit: Stephanie Keith, Reuters 

The "little secret" that former President Donald Trump shares with House Speaker Mike Johnson is probably a second insurrection. Under Article 2, Section 1, of the Constitution, if the electoral Presidential vote November 5 is a tie, the election will go to the House of Representatives, where each state will have a vote. https://constitution.congress.gov/constitution/article-2/ A simple majority will win. At the moment, by my count on my fingers and toes, 28 states are Republican and 22 are Democrat, although that could change after Tuesday. https://www.270towin.com/ The second highest vote-getter will become Vice President. Kamala Harris could stay in that job, but under Trump!

An electoral tie of 269-269 is highly unlikely. Recalling January 6, 2021, I suspect that Trump has in mind popular pressure on the Senate to refuse the electoral results submitted by the states, if they favor Harris. But the Constitution clearly says the President of the Senate must count and accept the electoral votes from the states. She has no discretion in this duty. The last vice president understood that, at almost the expense of his neck. https://www.washingtonpost.com/.../94bd9478-9740-11ef... 

--Leon Taylor, Seymour, Indiana, tayloralmaty@gmail.com

Notes

This update corrects the calculation of an electoral tie, to 269-269.

A little pleasure reading

 

                      Louisiana's Mike Johnson: From the swamps and into The Swamps

                                          Photo credit: Jabin Botsford, The Washington Post
                                          

The Washington Post writes: "...[Former President Donald] Trump praised [House Speaker Mike] Johnson and suggested the two of them have a 'little secret' that will have 'a big impact' in House races.

"The comment renewed concern that Johnson would not certify the 2024 election results next year, a claim he has repeatedly denied in interviews, saying, elliptically, that he would certify any free and fair election."

It would be nice if national political reporters and, who knows, maybe even the Speaker of the United States House of Representatives, could get acquainted with the Constitution. The President of the Senate, not the Speaker of the House, presides over the certification of the electoral Presidential votes received from the states, in the presence of the Senate and House. Article 2, Section 1, Clause 3.

And I have a question. Every story that I read in The Post about the Fall national elections draws heavily on the Cook Political Report. Why shouldn't I cancel my Post subscription and just read the Cook Report? -- Leon Taylor, Seymour, Indiana tayloralmaty@gmail.com

Notes

For useful comments, I thank but do not implicate Nicholas Baigent.

References

Marianna Sotomayor. Mike Johnson, who shares ‘secret’ with Trump, fights to keep the House - The Washington Post . November 1, 2024.