Ironically, Trickle Down Economics Trickled Down America’s Future

America is a land of irony. We are filled with capitalists whose intent is to accumulate all the wealth the world has to offer, and at the same time, we also have an altruistic nature that tears at our capitalistic infrastructure. We defend our great society and fund outreach to other nations through our tax dollars. We support our dreams of a united earth through a funding of the United Nations and fund our version of world peace through 1,000 military bases dispersed throughout the world. To grow our middle class, for the past thirty years we have supplied enrichment to our upper class to have it trickle down.

Supply side economics is an irony of political invention as well. Its invention of thought intended to provide extra capital to America’s private sector, the sector that creates taxpaying, productive jobs that extends America’s know how, innovation, skills, and gross domestic product. In our world’s current economic system, when a venture is started, some seed capital that has been accumulated by the world’s elite is then combined with borrowed money created from thin air by banks through the venture’s promise to repay. This devised modern structure of government and banking thus provides the investment needed to fund the venture’s infrastructure and start up expenses, including the financial support for job creation.

The wealthier of our country are those that have traditionally been able to accumulate more money than they need to fund their daily expenses, and thus they have provided the seed capital for ventures through their investments. Instead of the entrepreneurs that risk all to build real wealth and create the jobs, Supply Side economics instead provides tax incentives to the wealthy, ironically giving credit to the capital providers for producing America’s jobs. However, capitalism knows no patriotic allegiance. Investment capital will flow to the highest risk adjusted returns regardless of national borders.

After America’s obsessive military buildup made international investments safer, international business became safer investments in the sixties. Opportunities grew wildly after China opened its borders to investment in 1978, creating a gold rush that attracted loose investment capital from the entire world, building tens of thousands of factories that enriched international investors dearly.

So when Reagan Supply Sider legislators passed tax breaks to the “rich”, their trickledown theory wasn’t wrong, it was just decades late in adjusting to the realities of risk adjusted investment opportunity. Ironically, instead of trickle down, America’s tax policy resulted in pouring out, not a trickle but a fire hose gushing toward foreign shores. Trillions of dollars, created by burdening our middle class with excessive debt, left our economy and were converted into factories and other infrastructure such as roadways, bridges, and cargo ships to enhance China’s economy and to increase their employment base.

It appeared at least temporarily that America profited from our supply side doctrine. An entire industry was born to find ways to collect the extra capital and distribute it to the East. America surely got interim jobs in the financial sector to support this fire hose of foreign directed money flow. Yet, decreasing taxes for the “rich” created much fewer permanent jobs in America than it could have, passing the greater load of jobs to the East. It provided America interim financial and deal flow processing while accomplishing the opposite effect than was hoped for to America’s real economic future.

Ironically, Trickle Down Economics Trickled Down America’s Future…page 2 of 2….Worse, when those permanent jobs left our shores, so did decades of investment in our schools and education that every American has paid for through our contract with America. Each of us has voted to contribute thousands of dollars to our school systems to educate our youth. We do not publicly fund our educational system out of altruism. Americans understand that in educating our youth, they will learn the lessons provided by educated Americans before them. They will carry forward the knowledge that grows in our businesses to learn new theories and methods and to discover new scientific breakthroughs that will extend American technical capabilities. We invest in our children to grow our country’s GDP and to support both those that have come before in their turn at retirement and those that will come after who will raise their families in freedom and who will extend our great country’s experiment in democracy.

Ironically, beyond those trade secrets and innovations that are deemed highly responsible for national security, America does not have a policy about those innovations created in America that have been funded by at least 12 years of public schooling if not more through Pell grants, student loans, state school subsidies and other methods. America has an equity stake in every innovation created by Americans and yet we let them go as freely as we let our commodities be dug up from our patch of earth and be sold out from under us through private, foreign country based businesses operating mines on our public lands today.

However, the greatest irony is yet to come. In letting our capital be funneled to China, in letting our jobs transfer to her, in freely handing over our trade secrets, our innovations, and our scientific breakthroughs, we have transferred decades of core skill and national wealth building capability that will now build in China and not in America. The tax base that would have supported our great society social needs will now support those of China. The extra funds that could have supported our government’s international outreach will now support hers. Our altruistic capability will diminish purely from our trickle down tax policies.

And the great investments that our capitalists hope will provide gold rush returns from the trillions of dollars of investment extracted from the debts of all Americans, turns out they may be the greatest Ponzi of the 20th century. Those trillions of dollars now rest on China’s soil as hard assets. They cannot be dug up from the earth and planted back in America. The financial returns that investors hope for count on China remaining strong to honor her commitments. If China defaults, no one will travel to China and take a piece of the infrastructure back home. There is no international bankruptcy court that can enforce repossessment or repayment.

China’s ability to produce repayments of direct foreign investments depends on America’s ability to stay solvent and to continue buying Chinese goods, yet our solvency rests close to the precipice. If our current economic crisis is thrust off the cliff by short sided, self seeking politicians, America’s default will lead to China’s default and all the profits that our investors dreamed of receiving will disappear in the crash. The underlying assets and intellectual capital that transferred to China in the 20th century gold rush will remain there for China’s eventual rapid recovery while the trickle down and fire hosed out financial capital that left America’s shores will have ironically vanished with our gold strike dreams.

America’s Future – Building Block #1: U.S. Debt – Do we increase, decrease or default?

One of a few critical building blocks of American policy that will be required to right our ship of state is stabilization of America’s debt. The seeming annual deadline to vote on raising the debt ceiling is set for August 2nd. While the Republicans have threatened to default unless the ceiling increase has corresponding cuts to the budget, and while the world anticipates corrective action, we may only see hollow political chatter without material cuts because it is not yet America’s season for freefall from treasuries default.

However, it should be the season for reason. Some economists tell us that recent fear of historic deficits comes only from those ignorant of economics. They say we can print money at will without retaliation because of our sovereignty and world reserve currency status, that we owe this debt to ourselves, and that we can inflate the debt away. They surmise that we are nowhere near an insurmountable debt maximum. But how can they be so confident that America’s ballooning debt is not an issue?

Learned pontifications have confounded us through continued clamoring of countering arguments since 1990, when the debt ceiling was raised 33% to 4.1 trillion to contain our previous housing bubble, the savings and loan crisis. We have just exceeded our latest federal debt ceiling of $14.29 trillion dollars. Total American obligations of all public and private debtors are over $55 trillion, and including government’s unfunded liabilities, we owe $168 trillion. Even if we could balance the budget today, each working American is already obligated in some form to pay the world one million dollars. Who is right? How much American debt is too much debt?

In placing their faith in the pseudoscience of modern economics, our scholars fail to mention that the majority of currencies in history no longer exist. Hyperinflations do occur with regularity, 21 countries in the last 25 years. Debt levels do collapse governments, small (Zimbabwe) and large (USSR). Unfortunately, by the time societies recognize they have reached the beginnings of hyper-inflation, their currencies are already on a glide path to extinction. How close are we?

Prior to WWII, America paid down its debt between wars but our perception of debt changed in 1945. Backed by 70% of the world’s gold, the dollar was the world’s hope for rebuilding, and hence became its reserve currency. In 1944, the architects of Bretton Woods envisioned the dollar as the lynchpin to a system in which central banks maintained stable exchange rates to support balanced trade between industrialized countries, with minimal international indebtedness. They did not foresee the corrupting power they entrusted to the United States that would later subjugate the emerging world to a devaluing dollar.

Control of the world’s reserve currency proved too powerful an elixir for America. Perhaps we convinced ourselves that exporting inflation was a fair trade for granting Europe and Japan seed capital, and for our supplying our trading partners with military security. Nonetheless, for the past six decades the U.S. taxed the world $15 trillion through devaluation, and borrowed another $14 trillion, diverting substantial growth capital from emerging countries to fund America’s sustenance.

Without a realistic alternative, the world reluctantly accepted losses of their reserve currencies, but devaluation has not been without cost to America. The collapse of Bretton Woods spurred the growth of a $300 trillion FX market that has quickened the demise of the dollar’s reserve currency role. FX arbitrage and speculative volatility also precipitated the Asian crisis, causing the Asian monetary zone to closely align, lessening a need for dollar reserves. Including Europe’s drive to a common currency and China’s rise, all reduced the dollar’s power and made the possibility of an alternate monetary system possible. And America’s choice to drastically export dollar devaluation to provide investment banks buffer for unwinding of credit default swaps has brought the world to the brink.

While largely diminished, the dollar still yet dominates but for how much longer? After $2.6 billion of quantitatively eased dilution, Bernanke has fatefully claimed an end to QE, but only after President Obama announced a decade long expansion of trillion dollar budget deficits, replacing QE in name only. Is there no limit? If a limit is reached and the world fully rejects the dollar, history has shown that its fall will be too rapid to save. We now have imminent signs of that moment’s approach:

• China rejecting the dollar – For eight years, China purchased 20% of the U.S.’s deficit, buying 50% in 2006. However, for the last year, China has been a net seller of U.S. debt, reducing its total holdings 30%, and dropping its treasuries 97%. China has signaled that its risk of holding U.S. debt is greater than its risk of causing U.S. interest rates to rise, which will limit our investment in China, and will cause us to purchase less Chinese goods. Their risk equation has pivoted.

• Fed’s acquisition of treasuries – In 2011, the Fed has been the chief buyer of U.S. treasuries, purchasing over 70%, as opposed to 10 % during the last decade.

• Private investment shies away from the dollar – Investment firm Pimco, managing the largest bond fund in the world, cut its holdings of US government-related paper from $237 billion to zero for the first time in the history of the firm, stating the U.S’s problem is worse than Greece’s.

• Regionalization of reserve currencies – Asian, European, and Middle Eastern trading blocs all are all moving away from dollar denominated trades. As an example, China’s and India’s central banks agreed to direct currency exchange as of 2011.

• Commodity inflation – While the U.S. government quoted core inflation is up a mere 0.4 percent, Americans have felt the results of a real 12% inflation and much higher commodity inflation.

• Debt rating concerns – As of June, 2011, Moody’s has threatened to reduce the U.S.’s debt rating unless imminent progress is made on reducing America’s deficit

• American public losing faith – Most telling is the behavior of the American people. With 28% of home prices lower than the underlying mortgages, record numbers of Americans have chosen strategic foreclosures. 25% of foreclosures are from those that have chosen to walk away from debt obligations even though they still have the wherewithal to pay them. Feeling betrayed by America’s financial institutions’ “contract” with Americans for stable money, stable employment, and stable pricing, Americans increasingly no longer feel compelled to honor their financial contracts. The underpinnings of the dollar are on shaky grounds.

Our political and financial leadership now have choices to make. The Fed has signaled no more QE and the President has signaled a decade of continued historic deficits, but those announcements are political balloons that have been lofted toward their constituents. What should America’s true strategy be for our mounting debt?

We have but limited choices. 1) Debt can continue to increase at historic rates, perhaps preserving our banking system in its zombie state, but risking the loss of world credit, a spike in interest rates, crowding out of government services, and the march toward hyperinflation. 2) The rate of increasing debt can be reduced by either budget cuts or tax increases, but either measure may precipitate a return to America’s recession, increasing unemployment, decreasing GDP, and without substantially austere measures, continuing down a path toward loss of world reserve currency status. Or 3) America can take drastic measures to eliminate the deficit and to begin reducing the debt, most likely causing a rapid downward spiral of GDP which, similar to Greece’s predicament, will create an imploding cycle of further austerity measures and GDP reduction.

Considering that credit agencies have already fired lowered debt rating shots hair-raisingly close to America’s bow, the first option of continuing down our current path of printing money to fund our federal deficit is daring fate to draw us into the abyss. The world is quickly shutting off America’s Fed spigot of money printing. If we continue printing money, we risk paying higher interest on existing debt, crowding out needed government services and shocking America back into recession. The EU’s prescription for Greece has enlightened us that the third option of severe austerity is a prescription for thrusting America into obscurity with little hope of return. Therefore, we must now immediately embark down the second path of significant but directed deficit reduction. Sound choices of which reductions to make is a topic for a near future building block post and would be an interesting response from readers.

While the middle choice of materially lowering the rate of increase in our debt and over time reaching balance is our hope of recovery, it risks sending America into a double dip recession. If we reduce public spending without subsequently increasing private spending, demand will decrease, most certainly causing a downturn. Increasing taxes, without correspondingly increasing earnings of those paying them, will crowd out private spending, also decreasing demand. To successfully navigate our debt hazards, any decrease in government spending must be accompanied by a similar increase in private spending.

To increase private spending, either consumer demand must be increased with corresponding availability to credit, or private business spending must be increased with a corresponding potential for demand for its goods or services and a corresponding availability of credit. To keep this post to a reasonable limit, these issues are items for a future building block post.

Consumer credit is maxed out. Historic consumer debt combined with loss of housing and stock market equity and lowered prospects for employment have dried up any chances of a consumer led recovery. Loosening of credit without a corresponding increased demand for employees is unwarranted and spurring demand for employees is unfortunately another building block topic.

State and local governments are operating outside of constitutional authority in the red, and foreign governments have reduced credit to the federal government. Therefore, deficit reduction must initially be accompanied by increased domestic business spending if we are to avoid a recession. Increased spending must have the potential for successful creation of new profits. Sources of new spending must come from private providers of debt and capital, bank debt in combination with private business equity. America can no longer allow our banks to set the agenda for the path forward. The current prescription of repairing bank balance sheets while limiting credit is no longer feasible. These issues are also a subject for another building block discussion.

Some in Congress suggest we have a fourth option, that of initially maintaining the deficit by cutting taxes to spur growth while reducing government spending accordingly, eventually growing tax revenue through increased growth of the economy. While the idea has much conceptual merit, its implementation in previous Congresses was spurious. Private capital from lowered taxes was siphoned into overseas investments with little if any net benefit to the domestic economy. Much work from Congress, the courts, our executive branch, including trade negotiators and national strategists, business and labor must be done together as a community if we are to establish the real environment that can actually benefit from reduced taxes. (yet another building block discussion)

Initial prescription: Material reductions in government spending with corresponding highly incentivized, private investment that directs spending to domestic projects and increases domestic employment. Ultimately, in a timeframe considered realistic by world markets, the deficit must be eliminated through combination of reduced spending and increased GDP that strategically grows the domestic economy, creates full employment, and retains innovation. (More meat in future building block discussions)

QE2 Has Precipitated the End of Post-Bretton Woods Money

The worldwide economy runs on a Post-Bretton Woods concept of money. Central banks create enough new currency out of thin air to provide adequate money velocity. This new money is then inserted into the banking system that then lends it out according to the public’s credit potential to pay it back with interest. The public then multiplies money through purchases of goods and services that create economic output and that redistribute currency back into banks for relending to other members of the public who demonstrate a viable ability to repay.

When an economic shock stalls the money engine, it must be restarted while the economy is on a glide path prior to freefall. When money supply is temporarily pulled from the economy, loan creation that multiplies money is temporarily halted, shrinking the supply of money required to pay back existing loans. When this occurs, although the public still has the skills required to create value to pay back loans, it loses access to money to repay the loans.

If temporary money supply disruption is allowed to fester, enough unpaid debt cycles accumulate to create collapsing credit, toxic debt, shrinking money supply and deteriorating markets. When the economy stalls, one of two government interventions must occur to reverse the trend and right the world’s money growth. Either credit limits must be loosened to allow for borrowing to cover unpaid debt plus future growth, or demand must be increased to create enough credit under existing credit conditions to cover unpaid debt plus future growth. Which process is most viable depends on the extent to which the markets have been allowed to fester.

In the first days of the Great Recession, banks knee jerked in response to collapsing real estate and slammed the credit market shut. Worldwide central banks quickly responded by attempting the first of two interventionist tools. By infusing currency from thin air, they hoped to provide cover for free-falling real estate prices, and to re-establish credit into the market. Had banks re-established loose credit, businesses would have bet on an increasing economy and would have used the new credit to increase production, thereby maintaining employment and multiplying money. However, the toxic asset load from the housing Ponzi was of such historic proportions that central bank loans did not repair bank balance sheets enough to incentivize re-establishment of credit. Without forgiving insolvent bank debts that would have correspondingly collapsed the world’s money supply and depressed world markets, governments indefinitely stalled the traditional banking engine of money growth.

Each month that banks remained functionally insolvent, increased business risk. As money supply collapsed, demand decreased correspondingly decreasing the willingness of businesses to bet on producing supply before demand. When the risk chasm became too great, the economy stalled and then collapsed.

Government Keynesian central planners then attempted a correction through the second of their interventionist tools. However, the stimulus packages they devised to attempt to bridge the demand gap created artificial demand in too concentrated pockets of industry and created too small an artificial demand to restart an economic engine that requires the credit and faith of every able consumer, worker and business in the world pulling on the ropes of credit derived money multiplication.

Both traditional methods of reversing money collapse, central Keynesian planning and central bank capital infusion, proved ineffective. Without effective worldwide government and central banking tools, festering turned parts of the world’s economy gangrene. No single government had the ability to re-start the world’s engine, and no worldwide consensus of political will existed to simultaneously and aggressively create the size of artificial stimulus required.

In desperation, the United States Federal Reserve has embarked on an unrealistic attempt to float the entire world’s money collapse by inflating the world’s Post-Bretton Woods reserve currency through what it coined “Quantitative Easing”. However, any attempt by one country, even the United States, to singlehandedly recover the world’s economy, even with an untried policy as aggressive as quantitative easing, has fluidly dissipated to fill the world’s credit gap without the desired stimulus effect. The temporary momentum created through massive QE creation of dollars out of thin air allowed for a temporary, mild upward glide of the economy, but anticipating the June, 2011 end of QE2, the world adjusted its glide path and its real economy is beginning another freefall.

The Post-Bretton Woods system of worldwide money supply being introduced through fiat currency backed by the simultaneous introduction of credit enhanced value creation has, in effect, been severed. Now that the United States has raced ahead of the world’s traditional money supply, the Fed must either continue down the slippery slope of additional quantitative easing leading ultimately to the collapse of the dollar, or revert to an alternative, non-traditional, never before tried fiscal or monetary tool, to escape from its trap. Any alternative tool will invariably destroy the world’s faith in the dollar as the reserve currency, and will mark the end of the Post-Bretton Woods concept of money.

Sincere Politics May Force Walton’s Mountain For America To Recover

Our leadership has been steering the ship for the last forty years on the premise that we will choose  fiscal and social priorities, acquiesce to the political realities of not raising taxes, and print money to make up the difference.  Our country must now act upon a different order.  We must set a budget maximum and then set highest priorities to reach that budget.  

This budgeting process is completed collegiately every year by all private sector businesses without gnashing of teeth.  Each year we set budgets and debate which items on our wish list must wait another year to be implemented.  The painful truth is that some items will be slashed.  

When times were good, I took my entire company and our families to Disney for a Christmas Weekend with gifts and visits to dinner from Mickey himself.  In tough times, the lavishness has been replaced with a subdued dinner.  This year we are talking about working together at the salvation army breakfast.  Our mentality of teaming together for survival is the mentality yet to surface fully in Washington, but it must.

As disheartening as it may be, tough debates must begin to reach consensus on how to slash  the federal budget holistically.  Noone gains when Republicans play idiotic games cutting pet budget items to beat their war drums for their political base or when Democrats clamor that no cuts can be made to sacred cows.

If Steven Tyler and J Lo can slash and burn Idol pets to keep the top 24 out of over 150 singers in a week  at Hollywood then our nation’s brightest leaders ought to be able to mull over the top 60 cents of every dollar we spend to keep the very highest priorities.  

What happens to the rest of our critical priorities?  They get pushed to the states and then the cities, each that have no money and that will be forced by crisis to slash even further.

Critical priorities and charities will go unfunded and families and communities will have to take up the slack.  Scenes from Walton’s mountain will play out again in America.

We will have orderly retreat from the high water social mark we set in the previous baby boomer generation, remembering our path so that we may return.  The alternative will be a full scale chaotic retreat into reckless abandonment of our duties to society as our economy collapses for want of disciplined retraction.

America Must Lead the International Regulation of Multinational Corporations

In every world empire, there has been a concentration of state wealth and a transfer of that wealth from one great empire to the next e.g. Egypt to Rome; but it wasn’t until the emergence of the industrial revolution and the invention of the Charter Company that private entities gained wealth comparable to nation states. Now with the revolution of the MNC, the power of Corporate Nations has surpassed that of most States. Neither Hayek nor Friedman adequately addressed how classic liberalism would optimize a world where states bow to corporations and MNCs increasingly become international oligarchs.

Jump forward a hundred years and what role will states have? In the beginnings of the industrial revolution, charter companies had standing mercenary armies comparable and sometimes larger than the states that authorized their charters. In the Iraq war, Blackwater seemed to silently engulf Iraq with its private mercenary activities. How will the mercenary forces of the oligarchs compare on an international scale 100 years from now with the mercenary forces of the charter companies a hundred years ago?

It is true that America’s Federal Reserve has significant culpability in its role of allowing our Congress to irresponsibly expand the debt, but much of that debt was driven by and inextricably tied to a trade deficit caused by an emerging international wave of MNCs and a lack of understanding by industrialized nations’ trade negotiators of their eventual encompassing impact on nations. Given our macroeconomic naiveté, we had the choice to continue borrowing or to accept a slow but real decline in average home purchasing power. For some reason, the Fed was happy to support the former option.

Some conspiracists point to forces external to the U.S. as having responsibility for and benefit from the Fed’s irresponsibility. These central banking forces are more tightly controlled in a state financed imperial China and must continue to be if China is to rise as perhaps one of only a handful of states possible of maintaining parity with the MNC empires of tomorrow. For its 4000 year social isolationist protection, China will eventually seek policies to repel MNC dominance. If western industrialized nations are to survive, we must also collectively seek a strategy for containing MNCs within an international boundary of regulation.

Whether Hot or Cold Governance, Middle America Seeks Change

Ah the pleasure of food that is either cold or hot! Place ice in coffee and it becomes lukewarm, and neither hot nor cold, to be spit out of the mouth. Since the time that Barry Goldwater and Mao Zedong coexisted, perhaps the world’s economic and political systems have globalized into a lukewarm concoction, unappealing to the senses, pulled headlong by a decentralized mass of multinational corporations.

As America’s current leadership struggles to redistribute wealth, some in the administration, have reflected admiringly on the ideals of Mao. From Anita Dunn, who said that Mao was her favorite philosopher to President Obama, who was influenced by Saul Alinsky’s Rules for Radicals, the American administration points its ship in the direction of a distant socialist star. In stark contrast, elected Tea Partiers in Congress, repulsed by the mire of Washington’s lukewarm beauracracy, are waving the libertarian flags of Goldwater’s limited government.

Meanwhile, as America’s governance continues to linger in lukewarm languidness, China’s political class is struggling to keep ahead of mass entitlement implied by a move toward socialist capitalism. While a mildly heated temperature can still be felt in China’s economic success, as the acceleration of the Chinese economic miracle begins to fade, the vast middle of China will feel the lukewarm effects of unfulfilled promises as well.

As the great middle of each in our societies is impacted by our own brands of lukewarm politics, some will yearn to spit them out in favor of a fond memory for hot and cold.

Why Does the 14th Amendment Protect Multinational Corporations Who Do Not Consider America as a Stakeholder?

I want to understand why America does not expect more of its corporate citizens. It appears we allow multinational corporations to exists as foxes in the henhouse, plucking out the ripest chickens while the farmer, our United States government stands idly by. We must begin to question why this is the case.
If our constitution were to allow such a process to take place without recourse it would seem ultimately flawed in the protection of America. I therefore will begin to examine this important question. Does the Constitution of the United States contain provisions that if exercised by our government could protect our citizens. I began by looking at a seeming non-applicable amendment, the 14th.

Looking at the 14th Amendment alone, which extended certain rights to the state level, there are oodles of issues of importance to future paradigm shift of interpretation toward MNCs:

Due process clause:
Federal corporate personhood rights established by 5th amendment were extended to the states. As it pertains to trade laws that give value to MNCs and take value from existing businesses, I question why the due process clause does not apply: where an individual is facing a (1) deprivation of (2) life, liberty, or property, (3) procedural due process mandates that he or she is entitled to adequate notice, a hearing, and a neutral judge

Equal Protection clause:
“no state shall … deny to any person …the equal protection of the laws”.
Yet our trade treaties clearly protect MNCs at the expense of other domestic corporations.

Rebellion clause:
“No person shall …hold any office, civil or military, under the United States, or under any State, who shall have engaged in insurrection or rebellion”
Rebellion includes non-overt attempts at sabotaging a government. MNCs could be considered subversive if their sole pursuit of profit could be shown to sabotage the financial goals of the U.S. government.

Public debt clause:
“neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States.”
Certainly subsidies to MNCs might be challenged under the public debt clause of the 14th amendment. In addition, the clause might be used to cause MNCs to recompense the United States for losses due to unfair trade practices.

Citizenship Clause:
“All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.”
Assumes that one who is born in the U.S. and not subject to any foreign power will be by his very nature loyal to the U.S., and therefore given birthright citizenship,. Yet it requires naturalized citizens to take an oath that obligates them to loyalty.

If corporations are assumed birthright citizens, the assumption of loyalty is erroneous. If corporations are assumed naturalized citizens, why then are they not required to take the same loyalty oath as other naturalized citizens. The oath requires that they must:

Entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty

Support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic

Bear arms on behalf of the United States when required by the law

Perform noncombatant service in the Armed Forces of the United States when required by the law

Perform work of national importance under civilian direction when required by the law

Take this obligation freely without any mental reservation or purpose of evasion

The 14th amendment as a start seems to provide ample protection clauses that if correctly interpreted could cause a paradigm shift to allow protection of our financial system, our economy, and Americans’ well being.

Multinational Corporations Have Broken Their Social Contract with America

As children, we learn the game of declaring things so; “I called the front seat”. This seems a trait of humankind. Throughout history, men have declared land theirs and it was so. Their descendants declared themselves to be kings by divine right and it was so. They sent conquerors to declare ownership of lands inhabited by others with lesser technologies, and it was so.

European Kings sent tiny sailing vessels to North America to touch the edges of a great continent, and to declare ownership of entire swaths of land reaching from sea to sea by virtue of calling it so. They declared kinsmen as lords over America, granting them ownership of massive estates in return for tribute, and it was so.

American lords granted settlers tiny tracts of their lands in return for tribute. Settlers moved west, displacing Native Americans, declaring Manifest Destiny, and it was so. Settlers moved further west, taking Mexican land by declaration and war. To profitably till barren soil, southern capitalists declared a right to buy “unsaved souls” to force profit out of the land, and it was so. In Hawaii, missionaries came to bring salvation to islanders, but within two generations, their descendents declared ownership of all the lands once subjugated by Hawaiian kings and relegated generations of Hawaiians to servitude. A majority of the lands of Hawaii are still owned in trusts by missionary descendents.

These were the birthrights of globalization; war, conquest, declarations, slavery and servitude. By these early movements of people, the world divided into capitalists and workers, reconnected through social contracts. Workers leased capitalists’ land to improve their lives. In exchange, workers provided tribute for their use of capital. Throughout the centuries, capital has transferred to successive generations of capitalists with new capitalists added and others dying out as capital returns dictated opportunities for further ventures.

However, when in history the symbiosis between governors and governed has broken from excessive taking of capital, bourgeois has risen up in defiance of humankind’s declaring it so. Whether by revolutions, socialist and communist movements, unions, demonstrations or votes, those governed have redistributed capitalist wealth by declaring it so.

We now have a new generation of capitalists who have declared it so, including multinational corporations and their financiers. Unlike others before, this generation of capitalists has managed a “Landless Manifest Destiny”. MNCs are displacing jobs and wealth of a generation of Americans by declaring their right to do so. Instead of declaring Manifest Destiny to march Emerging countries across America, MNCs are instead drawing the fruits of the American continent to emerging and developing markets in exchange for tribute from those countries.

MNCs are ignoring the social contract that has been observed for centuries between a nation’s capitalists and workers. In fact, they have in many cases, simply exchanged their original socially contracted workers in favor of offshore social contracts. By so doing, they are now calculatingly taking excessive value that will ultimately cause a social disruption, as has all other excessive imbalances in history.

A full three quarters of all Americans have been losing economic ground during the past two score years. If America’s economic crisis deepens the divide much further, history will repeat as the symbiosis between MNCs and working Americans ruptures. Unfortunately for Middle America, in wars, those with superior technologies usually win. Just as the first Native Americans fought and lost against European warring technologies, this generation of Americans is losing its voice by raising mere bows and arrows against the far superior legal and financial weapons of MNCs. It seems that as MNCs continue to exacerbate America’s failing social contract, they are betting on it.

The Wisconsin Battalion Fired the Loudest Shots in the Battle of the Bulging Government

Our country will soon be jolted by successive economic shockwaves that will ratchet down consumer confidence as our states and local governments are constitutionally forced to remedy historic revenue short falls.  With public opposition rapidly mounting against tax increases, most governments will be faced with the monumental task of slashing budgets.  The state of Wisconsin fired one of the first nationally heard shots across the bow of this newest American crisis.

In the state of Wisconsin, senators are attempting to bring to the floor a bill to give maximum flexibility for crafting a workable budget.  One line item of the bill caused half the senate to walk out, and sparked a teacher rally that filled the senate floor.  Public primary education teachers in Wisconsin make approximately $100,000 compensation, including salary and benefits. They can retire after 25 years service and receive a one time payment of $950,000, plus approximately $100,000 each year for life after that.

The Wisconsin state senate has 19 Republican senators who have vowed to reduce this budget line item.   However senate rules require 20 out of 33 senators to be physically present for a quorum to vote. All Democrat state senators staged a walk out and left the state for Illinois to avoid wounding the state teachers union. However, they must physically step onto the Senate floor to collect their checks. If even one Democrat defects, a vote will occur. Makes interesting politics.

In Sarasota, Florida where I live, the county’s tax revenue will not cover public employee retirement benefits this year. How did Sarasota, Wisconsin, and the rest of the country reach this seemingly overnight crisis?  During the economic bubble decades from 1980 until recently, government spending grossly outpaced our population and grew to spend revenues that had been inflated by economic bubbles and consumer borrowing. 

When the Great Recession hit, state revenues from most sources shrank, including federal transfer, sales, and income taxes.  All these sources had been artificially buoyed by successive bubbles, and now popped simultaneously along with our latest and greatest housing bubble.  With shrinking housing prices, plunging ad valorem revenues just added to the fray.  When tax revenues shrank to fit our sustainable private industry job base, decades of excessive government spending left an overwhelming shortfall that exposed both our governments’ lack of understanding of bubble risks, and their willingness over thirty years to spend increasing tax windfalls rather than reduce tax rates.

As an example, our local and state governments escalated public employee ranks and pay scales to match escalating revenues; increases that well outpaced our population increase.  During the last three decades, the U.S. population increased 37 percent, but our local government employment increased 56 percent, and state government employment increased 68 percent. 

State and local budget line items increased well beyond our population growth as well.  As an example, while an increasingly older and poorer population could partially explain a 100 percent increase in health/welfare spending in real dollars, the vast majority was spent to increas staffing, compensation, and programs.  Also, educational spending increased 50 percent in real terms when the school age population only increased 11 percent. In the last five years of the great housing bubble, total state spending increased 30 percent in an attempt to keep pace with accelerating home prices. 

Because of 30 years of escalating state and local government spending during the boom years, we now face yet more waves of economic crises, the first of which will be successive slashing of state and local budgets that will cause economic backlash and social unrest as a poorer public is forced to adjust to fewer government services.  Governments will have little choice but to reduce public employee ranks by 20 percent to right size government to our population size.  To balance budgets, remaining public employees will be forced to take 20 percent compensation cuts to match resulting sustainable GDP.  When the suds clear from this latest bubble burst, 4 million public servants will lose their jobs and an additional multiplier of parasitic jobs will be lost as well, exposing America’s latest of its coming destructive waves.

For the Sake of America’s Health and Jobs, Congress Must Debate Healthcare Again

As the courts decide the fate of Obamacare, the hard work of congress regarding a comprehensive healthcare policy must begin again.  America cannot afford for Congress to wait when America’s health is at stake.  And waiting also has the foreboding consequence of continuiing our downward economic spiral and loss of jobs.

As a result, Congress must first decide how much of our budget can support healthcare. No more than 10% of GDP is needed for government to support America’s economic growth. Today, we tax America 28% of GDP and borrow an additional 13% of GDP. The additional 31% goes to military, interest, and the redistribution of America’s wealth to improve the lives of Americans.

A consequence of spending more than 10% of GDP is that supplying today’s needs reduces the economic output and social spending of future generations. Our budget now demonstrates both the overwhelming desire of Americans to care for our own, and our inability to pay for our altruism. For every dollar our government spends, we borrow 40 cents from future Americans that will also want to meet the social needs of their citizens. Before we resolve healthcare, we must agree on a sustainable social care budget, the priority of our causes, and the amount available for healthcare. This amount combined with private contributions must meet our healthcare needs.

Then we must set about reducing costs to meet revenues. For instance, government has placed restrictions on revenue aggregation that are unnecessary burdens. Both political parties have advanced methods to reduce these costs. Compromise should float best ideas to the top.

Prevention must be on the legislative table. America’s habits promote peculiarly western major disease processes. Sugar, corn syrup, and processed fats industries promote an epidemic of obesity, diabetes, heart and vascular disease and strokes. Cigarettes help a quarter of our country to die extended, painful COPD deaths. Our dependence on pharmaceuticals precipitates growth of resistant bacteria.

Cultural decisions should not necessarily be a burden to all Americans and need prioritizing in the healthcare budget. Our disconnection with our elderly has escalated institutional costs. Our striving to extend lifespan has led us to spend a majority of healthcare costs on the last few years of life.

Competition must be allowed to drive costs down. Americans are rightly skeptical that capitalism will lead to corporate profits at the expense of our health. We have too many examples such as insurers culling unhealthy persons from the pool of insured, leaving the very people who need insurance without the ability to pay for their care. Much more competition balanced with thoughtful regulations is required. The alternative is a healthcare system marred by cost controls, leading to shortages of quality care.

American healthcare is dominated by a medical cartel that limits supply of doctors, limits procedures that can be performed by lesser educated personnel, and limits information needed for the average American to make good financial decisions regarding their health. To truly have competition, doctors must loosen their grip on access to medical schools, and permit more procedures to be performed by others. In the process, our medical professionals must be protected from our litigious society’s need to blame inaccurate medical science for the natural course of life.

Information must become transparent. We need knowledge of physicians’ capability to manage the health of their constituents just as we need knowledge of school teachers’ ability to teach. Our fractured healthcare industry also needs to aggregate information to increase up front spending that will decrease long term costs and to reward industry participants for achieving this outcome. 

These problems are certainly looming but not insurmountable. However, both parties must subordinate the interrelated goals of their special interests to America’s goal of providing all Americans access to a healthy life, and must work together to put the best ideas of both sides of the aisle to work on behalf of all of us.