Donald Trump enters the Oscar De LA Renta Fash...

The Weiner Component, Volume 2 – Economics in the 21st Century: #1: Change & the 21st Century: Part I Introduction

 

Prenote: I find myself getting bored with Donald J. Trump and his machinations.  He, as President-Elect is setting up a government which seems that it will wipe out any progress made in the 20th Century on.  Will it?  We’ll have to wait and see. 

Meanwhile the stock market is rising to new heights.  Is that because of President-Elect Donald J. Trump or in spite of him?  Again we’ll have to wait and see.  Basically the issue with Trump is that we, the public, will have to wait and see what he does after January 20, 2017, when he becomes President of the United States.

Meanwhile I will begin a new version of my book, “Economics in the 21st Century.

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Volume 2 #1 – The Purpose of Government in the 21st Century:                                                            Introduction: Part 1

 

The past is always safe, particularly if it is mostly imagined.  It is a known when balanced against the future which is always unknown and therefore unsafe.  In the presidential election of 2016, Donald J. Trump was elected by a minority of voters who were fearful of the changes that were occurring in society.  Trump promised to bring back the past.  He would bring back the values and conditions that supposedly were while Clinton would continue forward to a changing society.

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 With the election of Donald J. Trump, as President of the United States by a majority of people from the smaller states the country choose the candidate that got the minority of popular votes but the majority of electoral votes.  Hillary Clinton actually won the election with nearly three million more votes than Trump received.  The voters who choose Trump actually choose to stay with what they believed would be a return of the past, to the supposed happy days when there were jobs for all the low skilled workers.  Trump would, he said, “stay the course” and continue the process of lowering taxes.  He would continue the war effort in the Middle East and the War against Terror.  He would bring back all the jobs that had moved overseas and take the country back to its happy days, whenever they were.  He would reform our society, making it as it had been in the past.

 

Of course “reform” historically was a euphuism for change or raising taxes among the ordinary citizens of the country.  Trump has promised to lower taxes for the wealthy.  Ordinary people would object to a tax raise but how can they be unhappy about reform, semantical games.  The problem is that the government is spending billions of dollars daily above what it collects in taxes pushing the National Debt (which President Clinton had begun to reduce) to new astronomical levels.  Trump will lower taxes for the wealthy and the corporations.  He will have to make up the difference somehow.

 

There is currently one vacancy on the Supreme Court and one Justice in her eighties.  From what I understand Trump should be able during his tenure as President to probably make two appointments to the Court.  This should make the Court 6 to 3 in favor of the conservatives.  The significance of a solid conservative balance on the Supreme Court is that it might, among other things like individual rights, finish striking down Roe vs. Wade; and thus take away the right of choice from slightly over fifty percent of the population.  The majority of women, according to the surveys taken, are overwhelmingly in favor of choice.  It would be a decision imposed by a minority upon the majority.

 

 This seems to be Trump’s version of the “good old days.”

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But despite what is currently happening with Donald J. Trump as the new President-Elect no one really knows what he will do as President.  Still the Twenty-first Century holds the promise of all sorts of social and economic changes for the people of the United States, the other Industrial Nations, and even for the emerging non-industrial countries of this world.  The question, of course, is whether these changes will be positive or will they be otherwise.  Our traditional economic model will no longer function (if it ever did properly beyond the theoretical stage).  Technological change, particularly that of the Computer Revolution is moving forward at a rapid pace.  The changes are speeding up. 

 

     With these changes the concept of employment (What is work?) is/will also undergo evolution.  Low skilled jobs are and have been disappearing in the United States; some highly technological occupations are and have been coming into being.  A large number of factory and many white collar jobs are moving overseas where they can be performed at a much lower cost.  The economy today is a world-wide one with the individual nations still being essentially nationalistic.

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     For the last three to four thousand years the concept of work has been fairly constant.  It has essentially been effort related to survival: production of food, shelter, clothing, and gradually entities needed for recreation.  Up until the Industrial Revolution it took ten or more people working full time (sunrise to sunset) to provide the fundamentals needed for one individual to have the leisure time to be a priest, government official, artist, or someone not having to work for survival.  With the change over from a hand-craft society to a machine- operated one the ratio has changed and continues to decrease.  From ten to one we gradually went to one person supplying everything for one hundred people.  With the coming and continuance of the Computer Revolution the ratio has gone from one supplying everything for one hundred people to one supplying what’s needed for a thousand individuals, with the possibilities of eventually going well beyond that number.

 

     What then happens to both the concept of work and the need to work when all the rudiments can easily and almost effortlessly be supplied?  Traditionally man (and woman) have earned their bread like Adam (after being expelled from the Garden of Eden) by the sweat of his (her) brow.  Now, ironically, we have returned to garden conditions.  Can we handle them?

 

     Today, at the Second decade of the Twenty-first Century, we seem to be well into the Computer Revolution; but, I suspect, we are only seeing its initial stage. 

 

The government constantly monitors and publishes the unemployment percentage of the working population.  They are thrilled when it decreases by one or several tenths of a percent.  Politicians like Donald Trump, are constantly promising to decrease unemployment.  The President will proudly proclaim and take credit for any tenth of a percent decrease.  The goal, as far as the government and public are concerned, seems to be a healthy economy with full employment in an era when computers are rapidly increasing the rates of productivity and many corporations are downsizing while increasing their output.  We seem to be squarely and hopefully looking historically backward.

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Many thousands of years ago a man-like creature first picked up a rock or piece of wood and used it as a tool or weapon for the first time.  From that time on the concept was passed to others and they did the same, eventually discovering that they could chip the rock into a specific shape and sharpness and sharpen the wood, fire-hardening a point.  Over the multitude of years types of tools were developed.  Mankind developed more and better means of increasing his productivity, of making life easier for himself.  In fact his conscious or unconscious goal during all the years of his existence has been to produce more with less effort.

 

During the 19th Century the emerging handicraft society began to change in England and then Europe and the United States with the gradual development of machines; this became known as the Industrial Revolution, when manufacturing changed from hand-production to machine production.

 

The early machines were mostly made of wood and were operated by water-power, and shortly thereafter by steam power.  With the invention of the electric motor and development in metallurgy the machines became metal and also more highly efficient, multitudinously increasing their productive capacities.  Where in the Eighteenth Century it took ten people to produce enough to free one from labor, now gradually one person could produce enough to supply ten individuals with all their basic needs.  Life and the concept of work changed.  A percentage of the handicraft people were displaced becoming superfluous; these were the luggites.  Machines did their work a hundred times faster than they could by hand.  The level of productivity brought about by the Industrial Society achieved by the middle of the Twentieth Century a level of supply of goods and services in the Industrial Nations that had been inconceivable earlier.  It also brought about the Business Cycle — prosperity, recession, depression, and recovery — in a never ending pattern erratically coming about in shorter or longer periods of time.

 

Recession and depression, presumably caused by overproduction, brought about a situation in which there was fair to large scale unemployment, reduced consumption of goods and services in an economy where the overall workforce strongly desired to work and consume but could not.  The economy had broken down, ceased to smoothly function.  The willingness to work was there but the economy could not utilize it.  For one reason or another the basic rudiments that caused the economy to smoothly flow no longer worked. 

 

The question here is why?  There is a ready and willing workforce anxious to labor and consume the goods and services produced but there is no work for them and very little for them and their families to consume.  WHY?

 

The grease that allows the economy to function is money.  The distribution of that entity throughout an economy, the amounts that each family unit earns or has determines who will get how much of the goods and services produced.

 

How then is money distributed within a society?  The different occupations receive different levels of remuneration.  Unskilled labor, which is mostly grunt type work requiring generally brute strength only would be the lowest paid earnings.  In many cases, not enough is earned to provide for the basic needs of an individual or family.  Skilled labor, on the other hand, can go from a fair standard of living to a level where the amount of money earned cannot possibly be spent because of its vastness in the millions.

 

Money can also be stored, not used for consumption, but put into banks or other financial institutions where it earns interest.  In addition it can be used as a commodity where it can earn profit.  Used this way it tends to increase the productive capacity of a nation; but this has nothing to do with the distribution of goods and services.

 

Money, in the form of profit (Adam Smith’s “invisible hand”) becomes the motivating force behind production of both goods and services.  Profit, from the sale of goods or the charge for services and the accumulation of money is the motivation for production.  This accumulation allows a small percentage of the population to amass large amounts but again, has nothing to do with a reasonable distribution of the specie.

 

It can be argued that Adam Smith’s “invisible hand” works on every level of the economy.  Given a choice the laborer, white collar worker, executive, entrepreneur will take that position which pays the greatest amount or has the best advantages.  Therefore each entity within the society is functioning where he/she can in their own interest; doing the best for themselves and their family unit.  But, again, what has this to do with a fair distribution of the National Income?

 

Several interesting questions arise here: Is money really related to the production of goods and services?  And if it is not then in what way would distribution be accomplished?  Since volume of production is tied directly to volume of consumption how, if we are to avoid upturns and downturns (constant recovery and recession), can we maintain a steady course of production and distribution of goods and services? 

 

The economic model (capitalism) was stated in 1776 by Adam Smith in his book “An Inquiry into the Wealth of Nations,” which was published that year.  Smith designed his model for a pre-industrial nation, for a time when production could not meet the overall needs of everybody in the society.  We are now almost into a postindustrial society moving rapidly through and into the computer Revolution.  We are still prone to the vicissitudes of the Business Cycle.  Can we afford this kind of continual economic up and down turn?

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The Twenty-first Century promises to be a time of intense change.  If we continue to adhere to what we have now then the economic upheavals can be catastrophic.  The Great Depression of 1929 could be mild compared to what we may face. In 2008 we faced such a situation.  It was avoided by massive spending by Presidents Bush and Obama.  

 

Donald Trump seems to be pointing toward the pre-2008 period.  He could, during his four year presidency, bring us back to an economic situation as bad as or far worse than the potential 2008 Depression. 

 

To avoid the possibility of negative economic change within our economy the country needs a new economic model or it has to make massive changes within our present system.

 

 

The Weiner Component #154 – President Obama & the Republican Party

Official photographic portrait of US President...

Traditionally the Republicans stand for smaller government and the Democrats for a system responsible for the welfare of it citizens.  This means that the Republicans want more individual freedom and choice for the citizens, including the right to starve or go without proper medical care through a lack of funds.  The Democrats are more socially responsible and feel a need to take care of those who cannot take care of themselves.

 

Perhaps one of the most ardent Republicans was President Ronald Reagan who continually talked about “government being the problem.”  He voiced a desire for less government but left Washington at the end of his two terms in office with a far larger government than that with which he had begun eight years earlier.

 

In line with their desire to lower federal costs and weaken or do away with Obamacare, which was based upon a Republican model, the Republicans have recently won a pyrrhic victory against the 2010 law, Affordable Health Care.  Around May 12, 2016 a Federal Judge, initially appointed by a Republican President, found the practice of the Federal Government of helping to subsidize premium payments for those who cannot afford to make them, illegal since it was not specifically mentioned in the law.  The 38 page decision by the judge who reasoned that since the law did not specifically state this practice, the act of doing so was illegal.  The judge, however, did not put her decision into immediate operation.  Instead she allowed the practice to continue until after her decision is appealed.  Way to go Republicans, attempting to balance the budget on the backs of the poor who may lose their medical coverage!

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Watching the progress of Congress by both the Republicans and the Democrats one gets the impression that nothing ever gets done.  No necessary laws ever get passed.  The House of Representatives has given itself a 110 day legislating year; they are working a three day week, not including holidays.  The Senate will meet for a somewhat longer period.

 

The two political parties began the preliminary process of choosing their presidential candidates early in 2016.  In the Republican state preliminary elections and caucuses the initial debate between the possible candidates dealt with how bad the present administration is and how a Republican president would make the country great again.  It’s as though nothing has happened since 2009 when Barack Obama was elected to the presidency.  It would seem, according to the Republican candidates that there is no history behind the present campaign.  This, of course, is not true.  The history has been ignored or edited, particularly by the Republican Party.

 

The Great Recession, which could easily have been the Greatest Depression in our history, began under the reign of the Republican President, George W. Bush toward the end of 2008, his last year as president.  He took some action but mainly left the problem for the next President, Barack Obama.

 

During his first two years in office, 2009 and 2010, President Obama changed a potential massive depression into a recession, restored the major banking houses in the United States and the automobile industry from bankruptcy by massive government loans and signed the Affordable Health Care Bill into law.

 

At the time both the House of Representatives and the Senate had Democratic majorities.  In the 2010 Midterm Election a large number of Democrats did not bother to vote and the Republicans achieved a majority in the House of Representatives, actually killing any chance for further reform since the Republican philosophy of government tends to be the opposite of that of the Democrats .  In addition since 2010 was a Census Year, the Republicans gerrymandered the states where they controlled the governorships and the legislatures making it easier for them to keep control of the House of Representatives.  In the 2012 Presidential Election the Democrats cast a million-and-a-quarter more votes were cast for Democratic candidates than for the Republican members of the House of Representatives but the Republicans still retained control of the House.  The same thing is likely to happen in the 2016 Presidential Election.

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In the 2016 Primary Elections the Republicans are quite vociferous in stating what President Obama didn’t do.  What they don’t state is that most of the things he is blamed for not doing are functions of Congress.  Congress passes the laws in the United States.  The President can sign or veto a law.  If he vetoes a law Congress can still pass it with a 2/3 majority in both Houses.

 

Basically the current Congress, which has a Republican majority in both Houses, has done virtually nothing since they achieved a Republican majority in 2014 or since the Republicans won control of the House of Representatives in 2011.  Today we have the Tea Party which is an extremely conservative section of the conservative Republican Party that is totally against Big Government and sees all economics as Micro, small economics.  Unfortunately they represent a number of seats in the House and Senate.

 

Economists today understand depressions and recessions and how to properly deal with them.  Economics exists upon two major levels: one is called Microeconomics, which deals with household finances, city, state, and business funding.  The other is Macroeconomics which deals with the Federal Government, which owns the printing presses that print and issue money.  They are two totally different entities.  Except the Republicans do not understand or accept the concept of Macroeconomics.

 

Money today has nothing behind it except the word of the government that printed it.  There is no gold or other precious metal that today stands behind any currency.  The amount in circulation is supposed to be regulated so that there is enough to easily carry out all the business functions within the nation and between nations.  Unfortunately this does not always happen and inflation or deflation can occur.  In the United States the Federal Reserve controls the amount of cash in circulation.  In most other nations there is generally a National Bank that does this.  This process is Macroeconomics.

 

The National Debt, of which the Federal Government owns over 50% of its own debt and will, at times, use it to control the amount of currency in circulation.  This was done recently by the former Chairman of the Federal Reserve, Ben Bernanke, for over a two year period adding 85 billion dollars a month to the National Cash Flow.  It was gradually ended by the current Chairperson, Janet Yellen.

 

The members of the Republican Party do not appreciate or understand any of this.  From statements made by various Congressional members of the Tea Party and other Republicans their understanding of economics is based upon raising a family, Microeconomics.  They see everything in those terms.  One has an income, taxes, and one can spend it.  If an individual or country wants to spend more he has to borrow money which, in turn, has to be paid back with interest.

 

That seems to be the limit of their understanding.  It can lead to recessions and depressions.  Donald Trump has added another level to this misunderstanding.  He seems to think the government can renege on part of its debt as he has done in business with three bankruptcies.   Statements like that can destroy the value of the dollar, particularly if he were to be elected president.

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To say that the Republicans have done nothing is to give them positive credit.  Instead they were able to get through the Budget Control Act of 2011 which began on March 1, 2013.  This was the sequester, automatic cuts across the board on all government programs with the exception of Social Security, Medicaid, federal pensions, and veteran’s benefits.  These would cover all other military and discretionary programs every year until the year 2021.  Medicare rates were reduced 2%.  Sequestration also resulted in unpaid time off to many federal government workers, this was known as furloughs.

 

These cuts during a recession tended to shrink the economy and slow recovery.  Interestingly by 2015 the military was complaining that with the sequester cuts their effectiveness was significantly decreasing.  From that time on Congress tended to pass yearly bills ignoring the effects of sequestration upon the military.

 

Also in 2013 the House of Representatives, with hefty leadership by Senator Ted Cruz who is not even a member of the House, shut down the Federal Government from October 1st through the 16th.  Government operations resumed on October 17, 2013.  800,000 government employees were indefinitely furloughed.  1.3 million other government employees were required to report for work without a known payment date.  The Republican led House wanted to defund the Patient Protection and Affordable Care Act.  They attached this to the Government Funding Bill.  The Democratic led Senate removed it from their version of the Bill before they passed it.  The Conference Committee, which consisted of representatives from both Houses of Congress, reached an impasse.  The cost of this shutdown is estimated at $20 billion.  So much for Republican frugalness!

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It should be noted that our understanding of economics has come a long way since 1929 and the Great Depression.  We understand the root causes for the economic waves that bring about these changes and we understand how to deal with them when they occur to lessen or mitigate their effects upon society.  But in order to do this we need both the President and Congress acting together as a cooperating unit.  This we have not had since 2011.

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By 2008 the Real Estate Hedge Fund industry crashed in the United States.  Properties like individual homes dropped almost overnight to a fraction of their inflated values.  Millions of people, who had been encouraged by the financial institutions to use their homes like bank accounts by continually remortgaging them, were suddenly underwater on their loans, owing more on the property than it was then worth.  Employment also phenomenally decreased.  Most banking houses were over-extended and on the point of bankruptcy.  The Bush Administration in its last year in office lent public funds to some of the banks to keep them afloat.

 

In 2009 and 2010 there were both a Democratic President and a Democratic Congress.  The massive depression that would have been greater than that of 1929 was avoided by further public loans to the banking industry.  Patient Protection and Affordable Health Care or Obamacare, which incidentally was based upon a Republican plan, came into existence.  It was passed strictly on a party basis; no Republican voted for it in either House of Congress.  The American auto industry was also saved from bankruptcy by public loans.  Incidentally it should be noted that all these loans were eventually repaid with interest.

 

From 2011 on the Republicans achieved a majority in the House of Representatives.  Thereafter no bill was passed by the House that would lessen what was then the Great Recession.  In fact the bills passed by the House tended to exacerbate the unemployment by not only shrinking the Federal Government but also curtailing the amounts of monies that went to the individual states, forcing them to reduce            some of their programs and lessoning their levels of employment.

 

Mitch McConnell, the then minority leader in the Senate, stated that the Republican goal was to make Barack Obama a one term president.  The Republican attitude from that time on was to support absolutely nothing that President Obama supported.  Economic conditions in the country became secondary next to this goal.  The House Republicans did nothing that might reflect positively upon President Obama.  When he proposed a bill to create jobs by improving the outdated infrastructure of the U.S. the bill never even came to the floor of the House of Representatives for consideration; it was totally ignored.

 

President Obama continued to attempt to work with the Republicans for the next two years with no success.  By 2012, when he ran for a second term, it would seem that he understood that there was no cooperating with the Republicans.

 

President Obama and the Chairman of the Federal Reserve, Ben Bernanke, were able to use Creative Monetary Policy to improve economic conditions in the country.  The Federal Reserve added $85 billion a month for over two years to the National Cash Flow.  They did this by spending $45 billion a month buying up mortgage paper and also by purchasing back $40 billion in government bonds monthly for over two years.  The program was finally reduced by 10 billion a month until it was completely withdrawn.

 

The effect of this action was to buy back millions of pieces of mortgages in all fifty states, each one of which had been split into hundreds of pieces.  In essence these properties belonged to no one, as no one owned over 50% of the mortgages.  Without this action by the Federal Reserve these properties would have been lingering throughout the economy for the next decade or more before they were sold for back property taxes by the local governments.  This act gave the people who had not walked away from their underwater properties and still lived in these homes the ability to continue living in them without the possibility of foreclosure.  There was no way the government could have matched up all the pieces of all the properties in all 50 states to claim ownership of any of them.  Generally the money that would have been used in paying off the loans was spent in the overall economy creating more employment.  It was a giveaway by the Federal Government which was probably more than returned in local, state, and federal taxes.

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With the upcoming Presidential Election the Republicans are blaming President Obama and the Democrats for not doing anything to run the country properly.  They seem to have forgotten the Real Estate Crash of 2008 which took off during the Reagan Administration and continued from there until the 2008 crash.  They seem to have forgotten President George W. Bush’s unnecessary war with Iraq which destabilized the Middle East and began the situation which exists there at present.  Actually they have forgotten everything negative that can be attributed to them.  And all of these things have been blamed upon President Obama and the Democrats.

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The actual Presidential Election should be interesting.  If Donald Trump is elected president he has practically promised to get rid of ISIS quickly and make America Great Again.  He seems to feel that he can solve all major international problems, whether he understands them or not, within the first 100 days or less.

 

If Hillary Clinton is elected and she has a Democratic Congress she can be expected to move successfully in the direction of solving many of America’s domestic and international problems.  If, however, the House of Representatives retains its Republican majority then the country will probably experience the same gridlock it has under President Barack Obama.

Congress & the Problems of the United States: Are We Getting Our Money’s Worth?

English: Breakdown of political party represen...

English: Breakdown of political party representation in the United States House of Representatives during the 112th Congress. Blue: Democrat Red: Republican This SVG file was originally hand-written. It contains comments suggesting how to amend it to reflect future changes in Congress. Inkscape reads this file as corrupted, thus changes must be made with a text editor or other program and checked with a browser. (Photo credit: Wikipedia)

There are 435 members of the House of Representatives.  Their combined salaries, taken together is $73,950,000 taxpayer dollars per year.  Of these 247 currently are Republicans.  They receive $41,990,000 taxpayer dollars in compensation for serving in the House of Representatives.  Of these 247 House members 40 belong to the Freedom Caucus.  They make up the ultra-conservative far right end of the party.  These people understand compromise as the other side coming to their position; to them anything else in largely unacceptable.

 

On the issue of passing a bill to continue to fund the government the Freedom Caucus, which is made up of Tea Partiers, plus a number of other Republicans had refused to act until funding Planned Parenthood was removed from the bill.  If Planned Parenthood were removed from the bill President Barak Obama stated he would veto the proposed new law.  This brought about the resignation of the Speaker of the House, John Boehner, at the end of September, effective October 31st.  A bill was brought through the Senate and later, the House, continuing the funding of the government through December.  In each case with heavy Democratic participation.  There were not enough Republicans supporting it in either House for the bill to pass without Democratic support.

 

As an aside, the evidence presumably proving Planned Parenthood was guilty of breaking the law in performing abortions and selling fetus tissue for research was highly edited video tapes that were the equivalent of a man entering a house, then in the next scene he or someone entered an apartment, greeted a woman, the camera would switch to an image of a bedroom, and finally the man would exit the house, presumably in the morning.  This was the level of the edited video evidence presented against Planned Parenthood, which the anti-abortion groups took as absolute proof.  In addition some of the video were made by paid actors, hired by an anti-abortion group, discussing the sale of fetus parts.   Planned Parenthood has been investigated numerous times by Congressional Standing Committees and others and has never been legally proven of doing anything illegal.

 

To get back to our primary subject, what we spend on Congress and what we are now getting in return.  If we include the Senate in the cost we are adding an additional $170,000 one hundred times, that’s 17 million dollars.  This does not include the fact that each congressperson in either House has a staff in Washington that can employ up to eighteen permanent members and have an office in their home state.  We are spending well in excess of ½ billion dollars annually upon our law-makers.  For this, especially since they take an oath to uphold the Constitution, we should be able to expect them to do their jobs.  Are they passing laws that help the country develop and prosper?  Are they doing things to lower unemployment?  Is the country moving forward to a better tomorrow?  Are they repaying the taxpayers for electing them to office or are they serving their large contributors who have funded their political campaigns or are many carrying out their own specific agendas?

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My impression is that most, if not all, of the Republicans elected to Congress have no real understanding of what makes up economics; that they think of the Federal Government functioning on the same level as their households, that so much money comes in every month and once that’s gone the government has to borrow money to spend more, and that additional money has to eventually be paid back.  That is how Microeconomics (small economics) works but that is not how the Federal Government works.

 

The Federal Government, all national governments for that matter, operate under the principles of Macroeconomics (Big Economics).  There is today nothing behind the dollar but the word of the National Government; they own the printing presses.  Money has no intrinsic value today; the government can print any amount it wishes.  They do this by legislating the amount that can be printed and the Federal Reserve determines when, if, and how much to release to the banks.  Money to the Federal Government is a tool that is supposed to be used to enhance productivity within the country.  Its expenditure has nothing to do with its taxable income.  The true value or wealth of the country is the goods and services produced within a fiscal year determined in terms of dollars and cents.

 

If the members of Congress do not understand this concept then they are working against the welfare of the nation.  They are not doing what they were elected to do, run the country positively.  What has existed since the House of Representatives achieved a Republican majority in 2011 has essentially been inaction, or when legislation occurred it has been mainly to hamper economic recovery.

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From the year 2008 on the major banks, first in the United States and then throughout most of the Industrial world, were suddenly on the point of collapse.  In the U.S. one trillion dollars of real estate value disappeared virtually overnight.  The major banking houses were suddenly facing ruin, were ready to go under.  They had speculated in real estate from the 1980s on to the point of insanity in late 2008.  Overnight there was massive unemployment; many people’s homes had larger mortgages than they were then worth.  The country was on the brink of a massive depression.  Banking in the U.S. could conceivably diminish to a trickle.

 

First in 2008, when this madness, brought about by the large banks, both commercial and investment banks occurred, George W. Bush and his Treasury Secretary, Hank Paulson, made massive loans to the banking houses; then this was continued by President Barak Obama in 2009.  Some investment and commercial banks were allowed to go under, their loans and deposits taken over by other big banking houses; but most were saved with additional loans.  (If you’re interested in the specifics of what happened Ben Bernanke the former chairman of the Federal Reserve, has just published a book dealing with all of this.)

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What have the Republicans achieved?  In 2011, through a process known as gerrymandering, favorably setting up voting districts in states they controlled politically, based upon the party registration of the voters, they were able to gain control of the House of Representatives, and they have kept it ever since.  In the Senate they gained control in 2014.  They could conceivably lose it in 2016 when 1/3d of the Senate will run for reelection.

 

The Republican prospective in dealing with the Real Estate Disaster has been to ignore it.  Mitt Romney, when he ran as the Republican Candidate in 2012, spoke about doing away with the banking reform bills passed after the 2008 Crash.  It seems that one of his goals was to bring America back to where it was before the 2008 Disaster.  Fortunately he didn’t get elected or we might be back to the Crash now with the major banking houses again destroying the economy.

 

Since they gained control of the House of Representatives in 2011 the Republicans in the House of Representatives and, for that matter, also in the Senate have strictly followed a policy of Microeconomics (small economics), attempting to run the country as they each run their own households.  The result of this from 2011 on has been to exacerbate the recession, costing additional hundreds of thousands of jobs lost throughout the United States in the federal and state governments and in the general population from monies not spent by these unemployed former government employees.  They have done everything possible to worsen the overall situation.  Luckily the President and the Federal Reserve, despite the Republican actions, have been able to generally put the country well in the direction of economic reform.  The cost of this has been a 53% increase in the National Debt spent by President Barak Obama during his first six years in office.  This included an economic stimulus package, both cutting taxes and extending unemployment benefits to avoid another Great Depression.  He has also increased defense spending and brought about the Parent Protection and Affordable Care Act (Obamacare).

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The National Debt is now 18.4 trillion dollars.  If we go back to the Republican Presidency of Ronald Reagan we get a good idea of why it is so high now.  When Reagan became President in 1981 the National Debt was just under one trillion dollars.  His great fear was that the Soviet Union was militarily ahead of the United States.  He wanted to militarily catch up to them and possibly get ahead of them.  In eight years he added 1.86 trillion dollars, over 100% to the 998 billion debt level bringing it up to well over 2 trillion dollars.

 

In point of fact we actually were well ahead of the Soviet Union in our military preparedness.  The Soviet Union bankrupted itself trying to keep up with the United States.  The problem with the U.S. was that the leadership instinctively knew how well armed the Soviets were and that the contrary information that the government intelligence agencies could provide was supposedly inaccurate and ignored.

 

Under George H.W. Bush, through faulty or stupid use of diplomats, the President of Iraq, Saddam Hussein, got the impression that he could invade Kuwait and the United States would ignore the incident.  After the invasion we had operation Desert Storm.  This war could have been avoided with proper use of diplomacy.  Bush Sr. added 1.554 trillion dollars to the National Debt, an addition 54% in just 4 years as president.

 

Interestingly, I would suspect in reprisal, Saddam Hussein attempted to have George H.W.  Bush assassinated.  The attempt failed.  But apparently his oldest son never forgot this fact.

 

The National Debt increased under Bill Clinton but during the last year of his second term he not only balanced the budget he also reduced the Debt slightly.

 

Shortly after George W. Bush became President he got the U.S. involved in two wars: one in Afghanistan as a result of the destruction of the Twin Towers in New York City and another one in Iraq because, I would suspect, to get even with Saddam Hussein for attempting to kill his “daddy.”  The intelligence agencies in the U.S. felt, I understand, that the “weapons of mass destruction” theory or belief was pure fantasy.  Bush Jr. in eight years added 5.849 trillion to the National Debt increasing the National Debt 101% during his eight year period as president.  A good part of this money was spent fighting a pointless war which destabilized the Middle East and brought into existence such groups as ISIS and what seems hopeless confusion and endless civil war that we are stuck with today in the Middle East.

 

While Obama increased the Debt another 53%, 6.167 trillion dollars, during his first six years in office he did so to keep the country from falling into a deep depression, which had been gradually brought about by doing away with banking restriction laws that had been passed from 1933 on, during the years of the Reagan Presidency.  Reagan and his group apparently believed in a Free Market economy; with all economic decisions being made by the actions of the market.  He allowed the big banking houses, with no Government controls to create a maelstrom.

 

Despite all the Microeconomic moves of the Republican House of Representatives during the first six years of the Obama Presidency he has largely worked the nation toward economic recovery.  Had the Republicans understood basic economics the country could now be undergoing a period of full employment with a much higher tax base that might even be high enough to start reducing the National Debt.

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Other questions loom up here: What exactly is the National Debt?  How does it affect the nation?

 

According to a member of the Freedom Caucus who was interviewed on MSNBC he would vote for Paul Ryan as the new Speaker of the House of Representatives when the current one, John Boehner, leaves at the end of October 2015 if he would acknowledge the seriousness of the National Debt, over 18 trillion dollars, and work to reduce it rather than allow the country to continue to move toward bankruptcy.

 

This seems to be a basic value of most Republicans.  They don’t acknowledge that their party was mainly responsible in raising the National Debt to where it is today.  They seem to blame it on the Democrats and want to reduce Federal Government nonessential spending, particularly spending on the poor and aged.

 

This attitude keeps the country on the edge of disaster seemingly going from legislative crisis to legislative crisis.  The Debt Limit bill that was passed with strong Democratic help after the Speaker, John Boehner resigned from the House of Representatives.  In it Congress had to raise the current Debt Limit or face default by legally running out of money with which to pay its bills.  The Treasury Department had stated that Congress must raise the debt limit beyond 18.1 trillion dollars or not be able to meet all its bills by November 3, 2015.  That crisis was resolved in both Houses of Congress with help from the Democrats.  Also in both Houses of Congress funding the Federal Government will come up again in December.  Will Planned Parenthood again create a crisis there?

 

Former Speaker Boehner was able to get such a bill raising the National Debt through Congress before his Speakership ended and only with Democratic help.  The same holds true with the Senate.  The bill was for two years.  President Obama had stated that he will veto any short term bills.

 

The National Debt consists of two parts, one public and one private.  The public part of the Debt is owned in various ways by the Federal Government and is held by the Federal Reserve and such entities as Social Security that currently holds probably over 3 trillion dollars’ worth of these securities, Medicare, the Federal Savings and Loan Corporation Resolution Fund, as well as a number of other government agencies.  These debts held by governmental accounts represent cumulative surpluses, including interest earnings of these accounts.  In 2012 there were at least two direct transfers of 89 billion dollars from the FED to the Treasury that constituted interest paid on the National Debt.

 

The Federal Government admits to owning 40% of its own debt.  The probability is that it is more like 50% or 60% of the money it owes.  For example, besides massive unemployment and the loss of value of the dollar in the 2008 Real Estate Crash there was an intense mortgage problem: since a very large percentage of the mortgages issued had been broken up into microscopic size and the pieces issued by innumerable Hedge Funds into countless securities, the question that arose was who owned all that mortgage paper?

 

At first the bank computers generated documents and most of the banks foreclosed upon homes they did not own.  After this was discovered the banks stopped the foreclosures.  Then the question arose: Who did own these properties?  The answer was no one.  Each property could have been divided into hundreds of pieces, each issued to a different Hedge Fund.  It should have taken twenty of more years to straighten out this mess.  The housing industry, both old and newly constructed homes, would have been in a state of practical nonexistence.  Many older homes whose mortgages were far above their actual value had been deserted by their former owners and stayed empty, and construction companies would have found it nearly impossible to fund their projects.

 

By the Federal Reserve stepping into this problem and dealing with it they were able to largely resolve it in a period of just a few years.  I would guess that the price of resolving this problem cost the Federal Government well over ½ trillion dollars.  What the FED bought was trillions of fractional pieces of mortgage paper that the banks had created over a thirty year period.  Sorting them out would have been unbelievably expensive and probably totally impracticable.

 

Using imaginative monetary policy Ben Bernanke, the Chairman of the Federal Reserve, over a period of several years, solved this problem by pumping billions of dollars into the economy.  For a period of well over two years.  The Fed pumped 85 billion dollars into the economy monthly.  Forty billion bought back Government loans and Forty-five billion bought mortgage paper from all 50 states, literally trillions of mortgage pieces each month.   What happened to all this mortgage paper?  The probability is nothing.  It would have been prohibitive to sort all these microscopic pieces of mortgages.  An even then it would have required over 50% of the pieces for any action to be legally taken against the homeowner.  The banks had been in such a rush to continually refinance these properties that record keeping became farcical.

 

I would suspect that after two or three years most, if not all, of the deserted homes were sold for back unpaid taxes.  As for the people who stayed in their homes and couldn’t afford the continued payments, they probably waited for foreclosure that never came.  These people could no longer legally deduct their home interest from their income taxes but they still had quite a bit of extra income which they freely spent adding to the National Cash Flow, and encouraging more employment, within the United States.

 

The private section of the National Debt, the forty billion spent monthly, is money previously borrowed for short to long periods of time by the Federal Government from individuals, both in the United States and foreign countries, by foreign nations, and by numerous other entities.  By this action the Federal Government both allowed long term purchasers of this government paper to purchase long term paper at higher rates of interest and cash them out almost at will.  This process allowed the Federal Government to add all this money to the National Cash Flow continuously for this period.

 

The amount of money available to the public grew at an expediential rate.  Interestingly there was no inflationary increase with all these billions of dollars added to public spending.  Instead this Creative Monetary Policy of the Federal Reserve largely solved the bank mortgage disaster of 2008, made more cash available for economic growth, and moved the nation well into the direction of economic recovery by 2015 from the Real Estate Disaster.

 

It is also well to keep in mind that pretty much the same result could have been achieved, probably at a lower cost, by Congress passing fiscal policy as was requested by President Obama during the third year of his presidency, 2011.  This bill and others that could have been passed later would also have modernized much of our infrastructure and moved this country into the 21st Century.  But the Republicans in Congress have done nothing to really help the country or the bulk of its population.  If anything they have been penny wise and dollar stupid.

 

If the question were raised: Have we as a nation gotten our money’s worth from the ½ billion or so we spend to keep Congress functioning?  The answer is definitely negative.  In fact the situation seems to continually get worse.  With the retirement of the current Speaker of the House of Representatives will the new Speaker, Paul Ryan, be able to get positive legislation passed?  Being a very conservative Republican will he want to do this?

 

The question is currently up in the air.  The Republicans have 247 representatives out of 435.  But 40 of them belong to the Freedom Caucus.  The majority of them presumably support Ryan.  But they are far more conservative than the very conservative 207 other conservative Republicans.  In order to elect a new Speaker 218 affirmative votes were needed.  Ryan was willing to be Speaker if the Freedom Caucus  backed him as Speaker.  The majority of them have voted for him.  What will happen?

 

Meanwhile what about the bill funding the government that has to be passed before the middle of December?  The Treasury will not be able to legally pay the Governments bills unless the funding bill is passed by December of 2015.  It has been kicked down the road for three months.  If the Republicans insist that funding Planned Parenthood be removed from the bill President Obama will veto it.  Also if it is again a short term bill the President will also veto it. What will Ryan do?  What will he want to do?  It was Ryan who originally proposed using the leverage of necessary bills to force its agenda upon the President.