Sunday, June 26, 2005

Notable Quotes: Bill Moyers on Journalism, Public Broadcasting, and Democracy

The following quotes are from an address given by Bill Moyers at the National Conference for Media Reform in St. Louis on May 15, 2005. The address is insightful, inciteful, and important. You can read it in its entirety on Salon's web site. If you're not a subscriber you'll need to get a free "Site Pass", which is easy and almost painless. Be sure to click on the "Enter Salon" link at the conclusion of the ad.

"A free press is one where it's OK to state the conclusion you're led to by the evidence."

"Those rules [of conventional "Beltway journalism" -mb] divide the world into Democrats and Republicans, liberals and conservatives, and allow journalists to pretend they have done their job if, instead of reporting the truth behind the news, they merely give each side an opportunity to spin the news."
"Objectivity is not satisfied by two opposing people offering competing opinions, leaving the viewer to split the difference."

"An unconscious people, an indoctrinated people, a people fed only on partisan information and opinions that confirm their own bias, a people made morbidly obese in mind and spirit by the junk food of propaganda, is less inclined to put up a fight, to ask questions and be skeptical. That kind of orthodoxy can kill a democracy -- or worse."

"Ideologues don't want you to go beyond the typical labels of left and right. They embrace a worldview that can't be proven wrong because they will admit no evidence to the contrary.

"I've always thought the American eagle needed a left wing and a right wing. The right wing would see to it that economic interests had their legitimate concerns addressed. The left wing would see to it that ordinary people were included in the bargain. Both would keep the great bird on course. But with two right wings or two left wings, it's no longer an eagle and it's going to crash."

Friday, June 24, 2005

Sixty Dollar Oil

Oil hit a record sixty dollars a barrel yesterday, prompting a large sell off on Wall Street. If you haven't already done so, please read my earlier post on "Hubbert's Pimple." After reading it you'll understand why Opec's recent rasing of output quotas haven't made a difference and won't make a difference. Opec's pricing power now only operates in one direction: it can if it chooses create higher oil prices, but it is powerless to lower them. Also see my post on why higher energy prices are necessary, desirable, and inevitable.

Copyright (C) 2005 James Michael Brennan, All Rights Reserved

Musings on Iraq

Each and every day we hear news of multiple bombings in Iraq, with daily civilian casualties in the dozens. Many are suicide bombings.

At the same time, American servicemen continue to be killed and maimed by roadside IEDs (improvised explosive devices), which get ever more sophisticated.

Some time ago American officials proclaimed the upsurge in violence was the last gasp of a desperate insurgency. Yet we can easily imagine they'd be claiming progress if the violence were to subside. This is the kind of doubletalk that gets to have it both ways.

Indeed, Dick Cheney, who is either stupendously self deluded or an accomplished liar, now says the insurgency is in its "last throes". This man spins fables with such a calm, no-nonsense demeanor that one cannot help but be impressed--or horrified. It was Cheney, remember, who was doggedly repeating the Saddam-Al Qaeda connection long after everybody else in the administration--including the president--had abandoned it. It's no wonder that a third of Americans still believe that WMD were found in Iraq.

No matter what the spin, the mayhem continues unabated. General John P. Abizaid said in congressional testimony that foreign fighters continue to stream into Iraq, and that the resistance is as strong as it was half a year ago. An in-theater officer recently said that for every fighter killed, three take his place. Didn't opponents warn at the outset of this dirty little war that it would be a tremendous recruiting cause for the terrorists?

The American armed forces tasked with defending our country have been decisively diverted into Bush's adventure in nation building. Of course, democracy in the Middle East, which is all we hear about now, became the new necessity after WMD turned out to be a bust. Whatever the cause, American armed forces have taken a big hit. A couple of weeks ago joint chiefs chairman Richard Meyers said in a leaked classified document that the Iraq war was burdening the U.S. armed forces in a manner that would make it exceedingly difficult to respond to other military challenges. And lately the news has been full of stories about the military being unable to meet its recruiting goals. We've even heard reports of ethical violations by recruiters desperate to meet their quotas.

Kim Jung Il must be pleased.

It's an understatement to say that things aren't turning out quite like our leaders had hoped. But that's been apparent for a long time. Iraq continues to be an object lesson on how arrogant power can be brought low.

Then there's the story from London--still not widely reported on this side of the pond--of an inside British perspective on American fibbing during the lead up to the war. The so-called Downing Street Memo shows that the Bush administration was privately determined to wage war with Iraq even while publicly claiming to seek a diplomatic solution. And yes, the memo shows an administration intent on making sure that intelligence supported its war aspirations. Published by the Times of London on May 1, 2005, the leaked "memo" is actually the minutes of a meeting between Prime Minister Tony Blair and his top security advisers. You can read it at the Times of London website.

None of this is remotely news to those of us who have been paying attention. Even before the invasion, there were ample reports in the mainstream media about how the Bush claims didn't add up. And there were early, persistent, and credible reports about manipulation of intelligence. In short, there is a large body of work from reputable sources available to anyone who cares enough to learn the truth.

Copyright (C) 2005 James Michael Brennan, All Rights Reserved

Friday, June 17, 2005

Trust Fund Redux: A Parable

Consider this story of two friends, George and John. Every evening after work the two meet at a corner tavern to have a beer, and then each goes home to his family.

But last evening George showed up without his wallet, and so needed to borrow the cost of his beer from John. "I'll pay you back tomorrow," said George. So John lent him the money.

This evening, knowing that George would be repaying his loan, John arrived without his own wallet. But as bad luck would have it, George had once again forgotten his wallet as well. Neither man had any money on hand.

George knew that he had promised to repay last night's loan from John. And he also thought he'd like to enjoy a beer himself this evening. What to do? Luckily, George spied a friend, Dick, across the room. George asked Dick to loan him the money to buy himself a beer. "And John doesn't have any money either," said George. "Could you loan me the money for his beer too?"

Question: What's wrong with this story?

Answer: What's wrong is that George told Dick that he's borrowing money for a beer for himself and a beer for John. That is false. George is actually borrowing the money for his own two beers: the one he wishes to drink tonight, and the one he drank last night. Remember: last night's beer was paid for by borrowing from John. George is actually borrowing from Dick to repay John, as he promised he would, and John will do with the money whatever he wishes. Probably he will buy himself a beer.

Is this an important distinction? You bet it is. George has chosen to engage in a bit of "deficit spending," knowing full well he'd have to repay the loan. When he pays off his debt, he's paying for the beer he chose to drink at a time when he didn't have the funds to pay for it. Of course, in this example George has paid his debt to John by borrowing from Dick, and with tonight's beer George is now in debt for two beers. George's borrowing could continue in this manner for some time, but one presumes that eventually he will need to come up with the funds to pay off all his debts.

This little parable is quite useful in understanding the present situation with the Social Security trust fund. We all know that the U.S. Government has been engaging in deficit spending for a long time. And everybody believes that, one way or another, the government will make good on its debt. (If everybody did not believe that, then the world financial markets would collapse immediately.)

Now it turns out that one of the government's creditors is the Social Security trust fund, which has been running large surpluses for the past couple of decades and thus has money to invest. It has invested that money by loaning it to the government. That is, the government has been borrowing from the trust fund, in addition to borrowing from the public through the sale of bonds*.

Some critics see this government borrowing as a "looting" of Social Security. They say it amounts to the government writing "worthless IOUs" to itself. When it finally comes time to use the trust fund for its intended purpose—to pay Social Security benefits—we will find to our horror that the money has already been spent. So say the critics. At that point we will have two choices: we can default on our obligations to pay Social Security benefits, or we can somehow raise the necessary funds—by borrowing or by taxing—to pay them.

Now here's the important point: critics say when we raise revenue (ultimately through taxation) to pay Social Security benefits, then we're paying for those benefits twice: once through the initial payroll taxes which were supposed to build up the trust fund in the first place, and then again by more taxes when we find the fund has been looted.

The critics are wrong.

Let's be clear. When we finally get around to repaying our obligations to the trust fund, we'll not be raising money to pay Social Security benefits; we'll be raising it to pay for whatever we spent the money on when we borrowed it in the first place.

A useful example is the Iraq war. Since it is very expensive (in the many hundreds of billions of dollars), and since the government is running huge budget deficits, no one can dispute that we're financing the war through deficit spending. That means the war has not yet been paid for. "Settling up" for the war's costs is something that will happen at some point in the future. We may even delay the inevitable somewhat longer by borrowing yet again (as George borrowed from Dick), this time to pay off our initial war creditors. As long as someone is willing to loan us money, such borrowing can go on indefinitely.

As a major creditor to the government, the Social Security trust fund has certainly loaned a lot of money to cover war expenses. When the trust fund is needed to pay benefits, what shall we say? That we need to find the money to pay benefits to retirees? Of course not. The truth is that we need to find the money to pay our war (and other) debts. As those debts are paid, the trust fund will have the assets it needs to pay benefits. It's the same as with George and John: In paying back John, George is actually paying for his own beer that he financed with deficit spending—not buying John's.

*Actually, the government loans money to the trust fund in exactly the same way as it loans to the public: by issuing bonds. As with the government's other creditors, the trust fund holds interest bearing U.S. government bonds. And why not? U.S. government debt is regarded as among the safest investments in the world. With regard to the bonds it holds, there is no material difference between the trust fund and the government's other creditors. Indeed, the trust fund's holdings are listed as part of the overall national debt alongside those of pension plans, sovereign wealth funds, and individual bondholders (all but the trust fund being described as debt held by the "public").

The first part of this article's title follows from the fact that I have previously posted a more expansive discussion of the trust fund. Today's piece focuses on an argument for trust fund solvency which is both simple and intellectually honest, but which nevertheless seems to have been widely overlooked.

Copyright (C) 2005 James Michael Brennan, All Rights Reserved

Friday, June 10, 2005

Thank God for the Japs

Thank God for the Japs.

U.S. auto manufacturers still seem unable to come to grips with the needs of the times, but the Japanese keep rolling right along. Somebody needs to.

General Motors announced a few days ago that it would be laying off 25,000 workers in a restructuring effort aimed at stemming its massive losses of over a billion dollars per year. And GM isn't the only one in trouble. Both GM and Ford recently had their bond ratings downgraded to junk status.

None of the traditional "big three" auto makers inspires. It seems all they know how to do is build a bigger SUV, and with fuel prices on the rise, that's not a winning strategy.

On the other hand, the Japanese have been turning out marvels of quality and economy for decades. My '92 Honda Civic, purchased new for a mere $11,700 (and that includes an overpriced $900 CD player) is still going strong at 430,000 miles. True, it did blow a head gasket at 407,000 miles, but before that it had no engine work whatsoever save for routine maintenance. The mechanic, peering into the engine while the head was off, said the cylinder walls showed no signs of wear. This peppy little car continues to get 40 miles to the gallon.

Over the past few years both Toyota and Honda have been cranking out high quality hybrid cars that have gained rapid acceptance and a devoted following in the marketplace. These amazing little feats of engineering have hit the ground running and have performed remarkably well for such a new technology. Ford is a Johnny-come-lately with its Escape hybrid.

Now comes a review in the New York Times of Honda's FCX, a still experimental but honest-to-god hydrogen fuel cell vehicle. Honda loaned it to the Times reviewer for a week, and he put a few hundred real-world miles on it. Sure, Detroit is working on hydrogen vehicles as well, but why is it that the Japanese are always at the forefront of whatever good is occurring in automotive technology?

And why is it that the U.S. automakers are failing while the Japanese continue to excel? I don't know. But it strikes me that Detroit exemplifies the same kind of "can't do" attitude that I see at the highest levels of U.S. government: refusal to change, an approach to energy planted firmly in the past, head planted firmly in the sand, and little vision or enthusiasm about what can and must be done. Thank God for the Japs.

Copyright (C) 2005 James Michael Brennan, All Rights Reserved