View From DC

Putting all of the Mainstream Media’s bumbling bobbleheads aside, I’m pretty sure that most of us can agree that in the case of the USA, cuts have to happen.  If we’re actually planning NOT to default on our debt, we’ve GOT to stop running up deficits.  To do this—correct me if I’m wrong—we’ve gotta either find trillions in new income and growth (har-har), or cut some wasteful and expensive programs, so that our burden to grow is not so heavy.

As a libertarian (at least in the US Constitutionalist sense), It’s pretty obvious to me that cuts can and should be made in many areas.  Ultimately though, to come out of a debt and deficits this large, we as an entire nation have got to undergo more fundamental change in character and thinking— we, and consequently our government, need to undergo some kind of paradigm shift.

What is a paradigm shift?  Dictionary.com defines it as “a radical change in underlying beliefs or theories”, and also as “a radical change in approach and assumptions.”  First, let’s look at a few of America’s current beliefs and theories, according to what the policies and bureaucrats tell us.

Foreign Policy —

• We are a country of freedom and democracy.
• We are intensely focused on “bringing freedom and democracy” (through drone strikes and private defense organizations like blackwater) to other “less fortunate” nations around the globe.
• We do this either through foreign aid (most of which is wasted on making the country’s rich richer) or direct foreign intervention (God help you if this happens).

Domestic Policy —

• We can control who you can marry,
• We control what you put into your body (Food and Drug Administration, Department of Agriculture),
• We control what information you “need” to learn (Department of Education),
• We control most of your business practices (Environmental Protection Agency, FDA).
• We can spy on virtually everything you do (Patriot Act)
• and strip search or even KILL you when you are deemed a “terrorist” (TSA, National Defense Authorization Act). 

If you haven’t seen the FBI’s list of “suspected terrorist behavior”, I suggest you look it up!  It actually includes paying for coffee in cash as a terrorist activity…

Moving on.  The next question, then, is “which paradigms need to be shifted?”  This is obviously open for discussion, but the two primary shifts I see as necessary (and perhaps ripe for change) are the two ridiculous examples highlighted above— our government’s interventionist foreign policy, and our domestic policy, concerning civil liberties and personal choices that people make.

#1. Foreign Policies— Cutting our foreign entanglements and bringing the troops home would save us a pretty penny, not to mention that these troops have money and skills they bring back, to help grow our country back to health.  IMO, we should shift from an interventionist to a non-interventionist paradigm, which I feel is, currently, a pretty easy sell.  We should set the example for other countries to follow, instead of just marching into their house and telling them what to do.  Arguably, we’d also be safer, because our military is defending our land, guns facing out, instead of guns killing innocent foreign people and creating more terrorists (google “Blowback”).

#2 Domestic Policy— This is where our paradigm shift will really come in, because in order to save money at home, the government will need to relinquish control over a number of things, and thus put the power (and the responsibility) in the hands of the people.  In short, control costs money.  It costs the government in terms of more bureaucrats, and the people in the ways these bureaucrats enforce the rules (which can be hefty and have far-reaching economic consequences for Main Street). 

More specifically, the EPA needs to loosen their grip on what people can/can’t do in terms of business practice, and the FDA needs to loosen their grip on what is illegal to put in one’s body.  If we scaled the FDA back and allowed the marketing and wholesale of more holistic and natural medicine (that is currently fought against tooth and nail by the FDA), we’d see costs of medical supplies go down considerably, as cheaper competition is legalized.

Secondly, and a bit more radically, if we legalized voluntary, victimless actions (i.e. “crimes” such as drugs and prostitution), we’d be spending a LOT less on the prisons and court proceedings, although perhaps a (very) little bit more on education and rehabilitation.  Here, IMO, the government should step back from playing the nanny paradigm, and allow the people to do what they wish, as long as it’s non-violent and victimless.  People will learn how to use these things responsibly, and in the end these services will develop to be more professional, less dangerous, and a new source of taxable revenue!  To put forth a historical example, just look at all of the crime that alcohol prohibition created in the early 1900s.  To put forth an empirical one, check out the progress of Portugal since their 2001 decriminalization of all drugs.

I know these should be relatively short, so I’ll stop here.  Please, feel free to put forth your own diagnoses and cures to America’s Ailments, and to question me where you think I may be wrong.  The one thing I ask—don’t forget cutting the wasteful and foolish programs!  It will make the growth all that much easier!  We should take lessons from Europe, but we should also recognize the MANY ways that we are different from Europe (our empire, for example)!

-Nick Moutinho (writing from Changsha, Hunan, P.R.C.)

Still reeling from a deep recession compounded by disunity amongst Europe’s leadership, it appears that Angela Merkel’s push for strict austerity measures has begun to fall apart. On Monday, Nicolas Kulish at The New York Times wrote that “from trading floors to polling stations to the streets of cities across Europe, the message appears increasingly to be that countries cannot cut their way to fiscal health.” And why should they? A growing body of evidence now suggests that these same austerity measures, designed to address sovereign debt, have actually compounded matters in the form of reduced tax revenues, rising unemployment, and spiking bond yields in Spain, Italy, and Portugal. What can we learn from this Austerity Fail here at home?

GOP leadership and their bobbleheads on Faux News have been arguing since the passage of the Stimulus Bill (the American Recovery and Reinvestment Act of 2009) that deficits should take priority over job-creating investments in infrastructure, energy, education, and the sciences. But since that time, and in spite of Republican efforts to strangle President Obama’s legislative agenda, the US economy has improved significantly, with unemployment falling to 8.2% as of March of this year, down from a peak of around 10% in October of 2009. We’ve had 25 straight months of job growth. Since February 2010, the nation’s private employers have added more than 3.9 million jobs, or roughly 164,000 per month. Over the same period, however, some 485,000 government jobs were lost. If Republicans had had their way, and we had prioritized deficits over stimulus as Angela Merkel did in the Eurozone, these numbers would be far worse. Where would we find ourselves today? 

Our nation’s long-term fiscal outlook is still untenable, with over $61.6 trillion in unfunded liabilities. Yet just last week, the GOP House budget proposed cuts which didn’t do a single thing to address these liabilities, and they were promptly skewered by Catholic Bishops for cuts that would disproportionately affect the poor and the disabled. Meanwhile, they are proposing more tax cuts for millionaires and billionaires - the same failed policies of the past that cost our government $750 billion dollars in revenue since 2001 for just the top 1% of earners. This trickle down nonsense is not only a major driver of our deficits but the evidence overwhelmingly shows that tax cuts for the rich do not create jobs. Period. So why, then, if as John Boehner said today in response to the Catholic opposition, “touch choices must be made”, do the GOP continue to vilify the poor and the underprivileged when they know full well that their corporate welfare policies are costing taxpayers so much money and not delivering any promised job growth?

It’s past time we close tax loopholes for millionaires and billionaires, level the playing field amongst corporations by broadening the base and lowering the corporate tax rate, and enact sweeping reforms of our nation’s entitlement system. But kicking the economic beast when it’s down, as Republicans keep trying to do, is simply bad economic medicine. The GOP likes to stoke up fear and nationalism to win elections. Their central message, driven by a strategy of divide and conquer, is based on the obvious fact that America’s Long term fiscal path is unsustainable. This may be true. But that doesn’t mean we should follow the Eurozone into economic purgatory. Our nation is robust and wealthy enough to use stimulus vehicles during recessions to save and create jobs. It should be the policy of the United States to do so.

-Seth Halpern (@sdhalpern; Washington, DC)

JOBS Act: Good or Bad?

This morning I woke up to an email from NPR’s Ari Shapiro, linking me to Rolling Stone’s latest piece on the JOBS Act. As a DC tech entrepreneur, my thoughts on the newly signed law are pretty positive. But there exists a particular provision in the law I’m not a fan of: exemption from independent accounting requirements for a company’s first 5 years as a publicly traded entity. This is in my view fairly irresponsible and reeks of the Wild West attitude prevalent during the Bush Administration. But in spite of this major fault, I’m still pleased with this legislation, and here’s why:

Projections are all bunk in the startup world (look at Groupon). The bottom line is smart money invests in teams, products, and vision - in that order. Financials are almost always an aside because no one expects a technology venture to be profitable. Growth metrics and scalability trump financials. The JOBS Act allows good folks like me to sell private equity via crowdfunding online. Given that between 1992 - 2006, startups were responsible for all net job growth - almost 3,000,000 jobs a year, making it easier for startups to raise private capital can only be a good thing for the US economy.

As for the accounting requirements, let’s try to remember that if a company is willing to go public one must assume its financials are in good enough shape to make that incredibly grueling jump. Leaving private markets surrenders control of your firm and your team to the wills of speculators, big money, cyclical market forces - all things smart founders would avoid unless they really expect they can deliver on their promises to their shareholders. 

We will have to see how this plays out over the next few years. I’m guessing we will see a handful of companies get in big trouble with regulators for fraudulent reporting, but overall I think this law will create many jobs at new startups launching really cool products.

-Seth Halpern (@sdhalpern; Washington, DC)