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September 22, 2011

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Nice one, Al. In times of tight money the states are unable to fight off the imposition of the Federal moves to take control. Even unemployment benefits eat the states cofers and require more federal help. When a state rebels and cuts the unemployment benefits or even welfare the media complains. Cold hearted politicians the leaders are called.Look at the animosity in New Jersey and worse in Wisconsin when we elect someone to change things and they try. Look at the evil Tea Party members just trying to do what they were elected to do. And, then there is the failure of the feds to act as we see in Texas and Arizona on border security. The minute the states say "we'll do it ourselves" the feds are there with their legal guns blazing to knock down the states efforts. And now we have 29 or 30 states banding together to fight the Feds on Healthcare. It seems that when a nation has become politically balanced 50-50 we no longer debate an issue and then compromise but rather we block AND then litigate if blocking doesn't work. I think I'm beginning to see how leadership fiddled while Rome burned. But it is fun to watch Europe model our behavior. Economists say a country is not likely to survive once debt exceeds 100% of GDP--we are almost there. Hopefully, a leader will emerge soon. An epic struggle is underway not just between the feds and the states but between the generations of today and tomorrow.

The acrimonious debate being played out in Washington seems to be a rehashing of the Federalist Papers: what are the respective roles of the state and federal governments? The battle cry of the States Rights folks is “starve the beast” to keep it in check, while advocates for the Federalist Side have an insatiable appetite to expand power in Washington. Underlying beliefs cause the faithful from both sides to say some very stupid things, and take bizarre positions, when specific issues are thrown into the grinder.

Stepping back, it seems that states generally are required to adopt balanced budgets (albeit gimmickry is frequently enlisted to do so). At least the budget process places politicians under pressure to squarely face competing demands for scarce money. Advocates for most causes predict dire consequences unless their demands are met. Bureaucrats demand more money year to year or their agency cannot successfully perform its task. Add in the tendency for human nature to easily expend “other people’s money” to satisfy any perceived need. At least state/ local elections act as a brake when the electorate disagrees with the balancing decisions.

Increasingly, however, Federal agencies are taking over roles heretofore managed by the states. This is done through regulations, mandates and grants. For several years there has been no discipline at the federal level to reconcile all the competing demands for money—just grant them all, print more money, and monetize the debt. Cash strapped states do not object. Indeed, politicians brag about their ability to bring home the pork. The net result is transfer of responsibilities from the state to federal government under Republican President Bush being greatly accelerated under President Obama. Some people (myself included) have a few issues with this shift that we wish were openly debated:

(1) As the number of federal employees continuously increases, the number of state/localemployees does not shrink, but also seems to increase because of the need to coordinate/implement mandates coming from their federal counterparts. So, the net cost of government seems to be expanding much more rapidly than the economy. How much government can the USA afford before the economy cannot support it? Look at Greece.

(2) The shift of policy-making from local/state agencies to faceless Washington bureaucrats is a cause for alarm. Each intrusion is championed as being “good “, but no one is tallying up the net impact. And, the needs/solutions may vary by state, with Washington required to treat (impose?) its medicine uniformly upon the states.

Our Founding Fathers were very specific to enumerate powers extended to the federal government, reserving the remainder for the states and individuals. If the logic no longer applies, let’s have an honest and civil debate and recalibrate the roles accordingly.

Let’s look to the current FEMA financial “crisis” as an example. FEMA originally was formed to respond to major events, such as Hurricane Katrina, when state/local resources were overwhelmed. But FEMA now is asked to become involved every time a stream overflows or a tornado touches down. Do state and local authorities still have a role? What about charities, such as the Red Cross, that historically stepped forward in these situations? Are we comfortable that Washington bureaucrats can efficiently manage crisis intervention? Can anyone point to a “success story” that withstands close scrutiny? The billions of dollars flushed down the drain by FEMA in the aftermath of Hurricane Katrina? One thing is for certain—scoundrels will get most of the “federal money” thrown at a “crisis”.

In a recent editorial, Steve Forbes noted that the tension between state and federal government has always been raucous and riddled by personal attacks. Forbes observes that the "heat" may be necessary to set the stage for compromises led by pragmatists. Let's hope that Forbes is right. I doubt that anyone, left or right, really wants our great Republic to crash and burn in a massive depression.

Harrycat--in response to your direct question I referred to Senator Reid's main complaint about GWB that after he got bipartisan agreement to invade Iraq including Senator Reid's vote that he went from a bipartisan leader to one focused soley on fighting the terrorists and stopped including the Democrats in the process of decisions about the war. As to what GWB's record will be historically and what those of you on the left blame him for that remains to be seen. The temporary tax cuts were in response to an economic slowdown that started before he took office under Clinton and were supported by Democrats. So far they have been extended by Democrats. The argument between the parties is whether all the tax cuts are eliminated or just those on the rich. It is the targeted discrimination of liberals against the wealthy that clouds the issue although Obama has done a good job of making it an issue against the rich. If you read Senator Reid's autobiography you will understand how the two men came to such a competative stalemate.

As for the booing of anyone who has honorably served this country in uniform I have no tolerance for such behavior. It is not reflective of my values nor those of most Republicans. Both parties have idiots among the crowd.

If GWB's wars were not worth finishing then why has Obama not pulled out? Why did he support war in Libya? Why is he giving speeches at the UN taking credit for the new Democracies in the Middle east? Now that Pakistan has been outted as a supporter of terror against the US operations the pressure will build on Obama to stay the course in Afghanistan and if the Liberals manage to get him elected once again he may be even more hawkish than GWB as a lame duck. He has done nothing to deal with Iran and he faces an increasingly aggressive Isreal with more and more dangerous nations on their borders. Having proclaimed Assad a great reformist he now excuses the killing of 2000 of his people as 'unacceptable'. That was his precursor to attacks on Libya.

As for the great financial calamity, that one is an argument we can have all day. Democrats gained control of congress in 2006 and began their spending campaigns. Despite continued alams from the White House Dodd and Franks pushed risky loans for house owners. As to who ulimately is responsible for the failed oversight of Wall Street on the derivatives scandal will take time to tell. However, neither party did it's job well and the result was a breakdown in our mortgage business and the real estate market. Unfortunately, the nature of US developers when coupled with cooperative bankers is to over build until a recession a occurs. Look at 1991 and 1981 and 1971--all overbuilt real estate markets. Unfortunately, this time it was compunded by the retirement of the baby boomers and the subsequent sale of their primary properties--still waiting in the wings. This resultant inability of them to retire and sell their houses resulted in a drop dead market in Nevada, Arizona and Florida for retirment houses. Thus the horrible situation in those markets for the past 4 years. And, having a presidential election year at the same time further compunded the mood of the country's consumers and managers. It was GWB that signed the TARP bill along with the aggreement of Obama--to both men's credit.

Bill M - do you believe that the complaint about GWB was that he campaigned too much? How about two unfinished wars, a disastrous tax cut, and the worst economic collapse since the Great Depression?

Doesn't it bother you when at televised Rep party gatherings that the crowd will cheer the execution of a prisoner or that, not only was a war vet not thanked for his service, but was booed because he is gay? Is this the current Rep party?

THE EIGHT YEAR CAMPAIGN----

It would be interesting for someone to figure out how much time the President has actually spent working at being President rather than campaigning to be President. If he were actually focusing on getting us to agreement and bipartisan solutions would he not spend some time in the states where the people are questionong his policies in order to meet with the opposition and see if he could find some common ground? Instead he flies off to Illinois, Michigan, California and tries to convince people who already agree with him that he is right and the opponents are wrong. Not only are they wrong but they are "bad for the country" because they have other ideas about how to solve problems. It's beginning to look as though we've elected a fundraiser who simply leaves Washington DC where his political partners on the other side of the aisle work and goes off on trips to raise money and tell sympathetic people how right he is. Then asks them for their checks. No leader reaches bipartisan agreements without discussion and compromise. Isn't that what he said was wrong with GWB?

EMPLOYERS HIDE OUT ONCE AGAIN---

The past three weeks data on employer interviews reflect the exact levels that preceeded the November 2010 elections while politicians argued policy. Interviews have dropped 33% in three weeks and hires are down about 40%. If this trend holds and the parties continue their argument based governemnt we could a dark cloud over the economy once again by next year's elections. Perhaps the only glimmer of hope is that the deficit commission is required to act by Thanksgiving. If they deadlock then we could see an unprecedented blame game of chicken begin. Let us hope that cooler heads prevail.

SOME LIBERALS FACING REALITY----

Barney Franks went further in his comments this week when he commented that in 2010 we saw the voters send a large group of conservatives to Congress with message and "we cannot oignore the will of the voters". Bingo--Barney knows that to go against the will of the voter is to ignore reality. So Obama's blame everything on the Tea Party strategy is to 'blame everthing on the voters.' Not likely a winner.

Then there is Bill Clinton who not only disagreed with the millionares tax but also disagrees with the jobs bill by saying " we should not raise any taxes or cut any spending until we get out of this recession. The key is to get economic growth to raise revenue."

So there you have two key Democratic liberals who are seeing reality and offering advice to the President. will he listen?

ANYONE LISTEN TO JACK WELCH?----

Asked this morning what he would do if he were President his response was: treat the government as if it were a corporation. Cut the expenses 25% by letting managers allocate the resources and cut people from the payroll until government is lean and efficient (giving short term severence packages to employees to soften the blow.). Freeze all regulations and let businesses do what they want for a while to get them stimulated, declare a tax holiday on capital gains to develop capital spending/investment,increase the age for eligibilty of social security and medicare benefits. etc. Any corporation in trouble uses this strategy to lower their overhead, he said, and a nation needs to do the same thing. Our country's overhead is too large.

Having just returned from China he commented that Chinese businesses are afraid they are entering the next phase of indusrialization: rising wages and increased competition from Vietnam. The same phase as Japan in the 8-0's and South Korea in the 90's and the same fear America has of jobs to asia. His advice to China-- stop copying and innovate. America, Japan, South Korea and now China cannot win the lowest cost labor war. Innovation and new product development is the key. Stimulating private capital to innovate is necessary. Not governemnt regulation and interference.
Nice outline of the Federal versus States responsibilities in this regard, Bill. Central planning can only take you so far and then private enterprise takes over. What is driving China is not the big government subsidized industries, it's the millions of small independent companies rising up in China producing unbranded products. Welch predicts they will soon innivate as have the Japanese in cars and the South Koreans in construction equipment.

State's Rights Revisited; Re. 'Obamacare'and the Enumeration of Powers Act. In 1911 The Supreme Court used the following language.
"Among the powers of the State not surrendered - which power therefoe remains with the State - is the power to so regulate the relative rights and duties of all within it's jurisdiction and to guard the public morals, the public safety, and THE PUBLIC HEALTH, as well as to promote the public convenience and the common good."

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