A Social Contract for America

Maybe The Republicans Plan Would Work Better

            President Obama has made a claim that the Republicans, through Representative Ryan’s Budget, are trying to undo the Social Contract the US government has with its seniors and those that use Medicare.  On its surface, this claim seems to have some merit, since Social Security and Medicare have become an entitlement to which many Americans have come to count upon for day-to-day living.  However, when one examines the genesis of the Social Contract, it becomes clear that any action taken which will provide a segment of the population with the resources it needs to bring the disadvantaged segment of the population up to the standard of the rest of the population. 

            By most definitions, a social contract is an agreement by a population to be governed and an expectation for that government to provide for the life, liberty, security and justice within the agreed limitations of the society.  In return, the governed individuals willingly give up some of their rights with respect to life, liberty, security and justice.  While this may be a simplistic view of a social contract, it does provide an adequate point from which to examine President Obama’s claim and the Republican intent towards the social contract.

            President Obama’s position of wanting to keep Social Security and Medicare as the preeminent components of the safety net for our elderly and poor is admirable, though short-sighted.  There is no doubt that Social Security and Medicare, as currently funded and run, will become insolvent within a decade or two.  To argue that no change is required implies that a future correction in funding will come from either more borrowing or higher taxes on those that are in the workforce.  No gimmicks or creative bookkeeping can overcome the facts of a greater elderly population and a smaller younger population providing funding to these programs.  As President Obama argues for no changes to these two entitlement programs he tacitly ignores the theories of social contract while demanding that the social contract not change.  By default, if a program will become unavailable to a segment of the population, then the social contract is broken.  Therefore, President Obama’s position of maintaining the status quo on entitlement programs is the position which will deny seniors their social security and the poor their Medicare.  This logical outcome of President Obama’s position violates the social contract which he holds so dear.

            On the other side of the issue is Representative Ryan’s budget which doesn’t end Social Security and Medicare programs, but rather restructures them in order to maintain the fiscal viability of both programs.  Taken in totality of the impact  of the Ryan budget upon the economic engine of the United States, it seems very plausible that Social Security and Medicare would become more robust for those not yet ready to retire and those not able to provide medical support to their families.  As such, the impact of the Ryan budget would meet the requirement of providing Social Security and Medicare for the entire society and not just the elderly and poor.  Therefore, using the social contract theory, Representative Ryan’s budgetary plan better meets the social contract with American society than the plan of President Obama.

            The observation that President Obama, the Liberal Democrat, has a plan that does not meet the Social Contract as well as Representative Ryan’s Budget seems counter-intuitive.  However, Social Contract theory is clear on the issue of providing for the society as a whole.  If the greater good is met by a decreasing of an entitlement so that more of the society can take part of the entitlement, and by that decrease in the entitlement improves society as a whole, then a decrease is mandated until all in society are equally served.  It seems difficult to dismiss that Representative Ryan’s Budget would not create the aforementioned conditions.  On the contrary, a basic understanding of Austrian model economics would predict a growth in revenues, an increase in the standard of living, and a lowering of borrowing rates.

            To date, the argument shall continue, along with the political misinformation provided by both sides of the debate.  What is important to note is that a discussion of Social Contract must be looked at in the short and long view.  In the short view, Social Security and Medicare must change in order to meet future obligations.  In the long view, no change to these two programs, along with additional borrowing by the US Government, will lead to the ending of those programs through either default of debt or radical debt reduction measures.  That said, the Social Contract that we Americans now expect, which is different from when the Constitution was adopted, can only be kept by redefining the entitlements and reducing the overall debt of the nation.  Hence, the Republican plan is more likely to maintain the 20^th century social contract between Americans and the American government.

INTERNATIONALISM AND NATIONAL INTEREST

The Obama Choice

President Obama’s decision to intervene in the Libyan civil crisis has come down a choice between to two schools of thought that have, in the past, been on opposite poles of foreign policy: Internationalism and National Interest.  The former can be interpreted as that the United States has a responsibility to be a partner in international events as required by international organizations and international situations.  The latter is the self-interest of the United States, ranging from the security of our people, our economy to our form of government.  It has been on rare occasion that for the United States, both Internationalism and National Interest have been in coincidence, such as during both World Wars.  Since World War II, however, U.S. interventions on the international stage have been, for the most part, nakedly in the National Interest of the United States.   President Obama’s decision to intervene in Libya is a decision of an internationalist rather than one which maintains the preeminence of National Interest.

The National Interests, at its most basic understanding includes the safety and security of our people, our government, our economy, and our territory.  Protection of these interests requires risk to lives and treasures of the United States to ensure the continuity of our Nation.  One can go about the globe and find U.S. National Interests, which coincide with the geographical Unified Commands of the U.S. Armed Forces, along with the size, budgetary and manning, of those Commands.  Along with the Unified Commands, one should also consider the size of the U.S. embassies in the countries within the geographical areas as to whether that region has a U.S. National Interest.  In the case of the Libyan intervention, the Unified Command is Africa Command (AfriCom), a new and very sparsely manned command under the command of US General Carter Ham, a former Armor Officer, which is ill-equipped to direct combat actions in and around Libya.  The size of the former U.S. Embassy in Tripoli was modest and not considered a prime posting.  Therefore, on the surface, it would seem the United States has interest in Libya. 

This begs the question of “What is the interest of the United States in Libya?”  Is the interest economic, military, related to a natural resource, or bulwark to an enemy of the United States?  Or perhaps there is a combination of these interests?  The Libyan economy has little impact on the economy of the United States.  Militarily, the Libyan Armed Forces, less mercenaries, were not considered a threat to any country in the region, used mostly to maintain control of Libyan territory for Colonel Al-Qaddafi’s government.  Although, one must note that the Security Services of Colonel Al-Qaddafi continued to be a threat in clandestine operations against critics both in and out of Libya.  The natural resource upon which the Libyan economy is based upon is oil.  Libya’s oil exports, however, do not come to the United States, but rather go to Europe and Asia.  This is an ancillary argument to be made that Libyan oil exports that affect our European and Asian allies could, in a secondary-level effect, affect our economy.  I find this argument to be week and not meeting the necessary requirements to be a National Interest.  Finally, our history with Libya goes back to the days of the Barbary Pirates, the Great White Fleet, and the U.S. Marines marching to Tripoli.  Since the coup d’état by Colonel Al-Qaddafi, and his alignment with the then Soviet Union, Libya has been on the opposite side of the friendly nation spectrum.  Attacks on the Berlin discotheque, the murder of Libyan dissidents in London, and the bombing of Pan Am Flight 103 are the most glaring examples of anti-U.S. actions.  There are other examples that have placed Libya, under the Colonel, on the side of Al-Qaida, IRA terrorist, and providing safe-haven to groups that are anti-U.S.  However, since 2006, most of these actions have been minimal, with the exception of support for Al-Qaida in Iraq, and not raising to the level of threat to the U.S., as evidenced by military sales approved prior to the current crisis.  Therefore, one can surmise that as of mid-February 2011, the United States did not have a National Interest in Libya that would require an expenditure of U.S. lives or treasure.

If not because of National Interest, then is there any other reason to expend U.S. lives and treasure in Libya?  The answer to this question lies in the belief that if an international crisis arises, the United States has a duty under international agreement to act on behalf of the international community.  In Libya, with demonstrations breaking out throughout the country, the government, that is, Colonel Al-Qaddafi, did not take rebellion as well as the leaders of Tunisia or Egypt.  Rather than fade quietly into oblivion, Colonel Al-Qaddafi proceed to ruthlessly put down the rebellion with the military might of his Armed Forces.  More specifically, Colonel Al-Qaddafi attacked rebellious civilians indiscriminately that were either unarmed or lightly armed in comparison to the weapons used by the Libyan Armed Forces.  This disproportionate use of force within the sovereign borders of Libya is the lynchpin upon which other sovereign nations have decided to base their actions against the Libyan Armed Forces.  The inhumane use of force to keep control of Libya by Col Al-Qaddafi has resulted in sanctions by the United Nations’ Security Council Resolution 1973.

International crisis, international coalitions, international decisions, international organizations, and international human rights are the basis of internationalism.  Libyan civilians killed, NATO, International Law and the Geneva Conventions, UN Security Council, and the International Criminal Court with crimes against humanity are the basis of intervention in Libya.  An international consensus that Col Al-Qaddafi has committed crimes against humanity and should not use disproportionate force to retain control of Libya is the outcome of this internationalism.  Morally sound and appealing to the better conscious of civilized people, UN Resolution 1973 is a call to arms, a call for the greater nations to support the Libyan people threatened by Col Al-Qaddafi.  An international call to solve a national problem in a country that has no strategic value to the United States, while having strategic value to U.S. allies, seems an unlikely event in which to dedicate U.S. lives and treasure.  Internationalism provides the rationale reason for President Obama to order the U.S. military into action.

Internationalism, however, is a slippery slope upon which to base a foreign policy.  Internationalism is more subjective than National Interests.  Internationalism can be in direct opposition to National Interests and places the national leadership in a position of moral hazard.  The question which a U.S. leader must answer when considering internationalism and the use of military force surrounds the constitutionality of such an act.  In the case of Libya, there is a question of constitutionality since Congress has not declared war, the chaos in Libya does not directly threaten the United States, nor is UN Resolution 1973 an obligation upon the United States.  Internationalism boils down to the ability of a nation to persuade another that an incident in a third country is a threat to humanity in or out of the sovereign borders of that third country.  In the current case of Libya, the U.S. has been persuaded that Col Al-Qaddafi’s attempts to hold onto power within the sovereign borders of Libya are a threat to the humanity of Libya.  There are no safeguards in the use of internationalism.  In the case of the United States, Internationalism is left to our Chief Executive, President Obama.

The Government "Shut Down"

So, how many Democrats does it take to shut down the US Government?  Conversely, how many Republicans does it take to shut down the US Government?  The answer to both of these questions lies in whether or not Democrats are serious about keeping our country solvent and Republicans keeping a safety net for the poorest of the poor.  In either case, there are cuts that can do both, if the hyperbole would be put aside and both sides listen to the American People.

Democrats defend their position of no cuts in spending whatsoever on the ideological grounds of "it's all for the people" and the social justice behind the expenditures.  These Democrats are still fighting the good fight of the early 1900s, when robber barons ruled, work conditions were more dangerous than a battlefield in Europe, and corruption was the rule rather than the exception.  That good fight brought about legislation that protected workers, workers rights, child workers, limits on environmental impacts, and a safety net for our elderly.  These times also brought about social change that was sorely needed (Civil Rights Acts of 1964 and 1965), but also attempted to bring about social justice programs whose purposes were to redistribute wealth in a more fair manner (Johnson's Great Society, Medicare, Medicaid, et al).  Great and worthy causes ... but at what price.

The politicians of that time never expected that our debt would be so large as to affect the foundations of the nation.  The paradigm of government spending leads to government borrowing to meet that spending which leads to wealth creation never materialized. The politicians of today that continue to advocate the government's central role in creating wealth through distribution of wealth are as misguided as their predecessors. The price of such folly is our national treasure.  That is to say, not the money that can be printed or destroyed, but the faith of our citizens in our government.  That is our national treasure and that is the cost of a Government "Shut Down."

Government leaders, beware!  There are consequences to elections, as our President so adeptly chastened the Republicans during the 111th Congress.  This election cycle about our national treasure - that faith we citizens have in our government.  If the current set of elected officials do not address our fiscal challenges in a meaningful way, in a manner that strengthens the economy, then there will be a cost, a consequence.  Let us hope that this current threat of Government "Shut Down" is enough to bring to the negotiation table those who understand what really is at risk: our National Treasure.

Just Say "No" to Public Unions

Do unionized government employees prefer union representation over civil service laws? If asked, I'm sure they would like to keep both. Unions in the private sector have had a hand in creating the 40-hour work week, elimination of sweat shops, safe working environments, and a multitude other worker benefits that have been codified into law. Good them, good for us. But what have public sector unions provided? Is there a particular good that has come from collective bargaining of public unions with government (local, state, and federal)? How has this collective bargaining been better than civil service and adherence to labor laws?

Let's look at this from another point of view. Private unions use collective bargaining to gain concessions from the profit margin of private companies or corporations. Good for them since every worker should have a better cost-benefit for his/her time spent at work if the profit margin can sustain such an increase. However, when this simple model of collective bargaining is applied to public sector unions, the concessions must come from the government's revenue, since government does not produce a profit. Public sector unions look to increase their cost-benefit for his/her time spent working for the government at the expense of the government revenues. These governmental revenues are based upon a tax base collected from taxpayers, from us. Therefore, public unions look to gain concessions from the taxpayers, through our representatives, of our duly paid taxes, or if there's not enough revenue, the government will issue bonds (take a loan) to meet the obligations.

However, there is one more facet to public unions. Public unions have political clout through the campaign contributions to political candidates. So, public unions, through the political process, elect political leaders that will be on the opposite side of the collective bargaining process. Franklin Roosevelt, George Meany, and many others that are very pro-union did not believe in public unions. A union organizer once said that the beauty of have a public union is that the union gets to elect it's own boss.

Government unions should be busted, but not private unions. Government unions take and do not provide a general good for the work environment while private unions have and shall continue to provide a general good for the work environment. No more Government (public) unions. It's both immoral and irrelevant.

Economic Recovery - Not So Fast

There are many significant challenges to our economic recovery:  Deficit Spending, Over Regulation, Obama Care,and Trade Balance.  First and foremost we must overcome the $2 trillion spending spree left to the United States by 111th Congress and President Obama.  Second, we must focus reduce the burden of Over Regulation that is choking the life out of so many businesses. Thirdly, replace Obama Care with common sense legislation that uses the free-market system to find better care to the customer, innovate new procedures and medications, and reduce the cost to allow all Americans to have world class medical care.  Finally, we must have a competitive trade balance with those countries that want to trade with the United States.

Deficit Spending - The small-minded Keynesian view that the government must spend inordinate amounts of dollars in order to overcome the economic recession has resulted in a mountain of debt that cannot easily be wiped away and has not reversed, in a significant manner, our economic situation.  Without getting into the technicalities of Keynesian or Austrian Models of economics, suffice it to say that the Keynesian model is based upon the belief that economic equilibrium is not derived from supply and demand, but rather by lack of spending and animal spirits.  In contrast, the Austrian Model is based upon the belief that the economic equilibrium is a balance between supply and demand, influenced by customer satisfaction.

President Obama and the 111th Congress, along with the Federal Reserve, are firm believers in the Keynesian model and have used the good faith and credit of the United States to borrow over $2 trillion and flood the market with over $1 trillion worth of securities (known as quantitative easing).  Two years and $3 trillion later, there is an economic recovery that is comparable to the recovery from the Great Depression -- that took over 10 years.  The current path the Administration has for the recovery will take at least seven years (Bernake's testimony), and could result in a lowering of the credit rating of the United States. 

Solving this complex problem requires a complex solution.  That is to say, we must look at the solution to the  problem in a manner that is neither conventional or easy.  The solution includes addressing the current debt ceiling along with spending only what current revenues allow.  A difficult pill to swallow, but one that must be swallowed.  Governor Pawlenty eloquently put forth a plan which pays our creditors first, then required entitlements, then defense, and finally everything else.  This provides a sound way-ahead though I caveat his plan with a fixed debt ceiling that does not exceed the current limit.  This is draconian, but necessary.  Just as families must tighten their belts, our government must do the same.

Over-Regulation:  The Financial Reform legislation tries to make financial transactions fair, a lofty goal, but unrealistic in a market economy.  Take the ability of an investor (individual or corporate) to deduce or induce information that leads to a sound investment. Is it fair or just?  In this Administration's view, it would not be fair because not everyone has the same information.  This is absolutely wrong, so long as the information was not obtained through espionage or other illegal means.  It is just, however, because the person or corporation  invested resources to deduce the information.  To make a  profit, one must gain the information first, then decide to act upon that information.  Requiring all information to be distributed before acting upon that information will not allow for wealth creation, but rather it rations the wealth to make it fair.  Absolutely wrong!  Current regulatory reform imposes restrictions in order to ration wealth building and make it fair.

Obama Care:  This topic is also related to being fair.  It attempts to answer the question, "Is it fair that most Americans have health insurance while some do not?"  It's not that almost every American can receive the best health care in the world, but rather it's an attempt to make it fair for every American to receive health care.  The US health care system is one that is based upon insurance companies that receive premiums and make decisions on what is affordable to maintain a profit.  However, insurance companies do not have to compete on a national basis, just on a statewide basis.  This allows insurance companies to corner the market in their states.  Allow interstate competition, much like auto insurance, and let the market and consumers decided which companies should survive and make a profit for the company investors.

How do people that cannot afford health insurance get medical care?  This is where the government can subsidize some form of basic coverage, e.g. Medicare and Medicaid.  However, these are tied to a universal social net, such as unemployment insurance or welfare.  The combination of opening markets and limiting government insurance should allow more people to join private insurance, expand opportunities for private health care, and increase government revenues due to increased use taxes and fees.

Trade Balance:  Easier written than done.  Fair trade and free trade are not synonymous.  Fair trade is government intervention into trade between nations that attempts to negate another nation's competitive advantage through regulation.  Fair trade attempts to ration the supply of goods traded between the two nations so that there's a fair balance of goods imported and exported.  Free trade allows the competitive advantage of the industries within the nations to build trade based upon consumer demand and consumer satisfaction, thus creating wealth on both sides of the trade.

This Administration is overly focused on fair trade, thus negating the competitive advantage of the United States.  The success of Free Trade Agreements, and they are successful when no political policies are attached, require faith in the competitive advantage of one's Labor, Capital, and natural resources.  Clearly, this Administration does not have that faith.  Nor does it have faith in the ability of the entrepreneurs to innovate in a manner to increase the competitive advantage.  The Administration would rather place its faith in restricted trade, organized labor, and rationed capital.

When this Administration begins to accept the basic principles of the points so far noted, then the economy will begin to truly recover from the worst recession since the Great Depression.  Most pundits will call this acceptance a move to the political center and a big step towards reelection.  Perhaps, but the United States can ill afford a repeat of the last two years.