Old Well: UNC Chapel Hill Campus

Thursday, July 28, 2011

The Constitution option?

As I write, we face an unbelievable, yet possible deadlock scenario in reaching compromise on lifting the debt ceiling as both political parties hunker down, unable to reach compromise on spending cuts. At this point, you're hearing a lot about the Constitution option by which the President would simply raise the debt ceiling on his own. Former President Clinton said this is what he'd do and let the courts sort it out later. Many Democrats now concur. At the moment, the President has said he doesn't think it applicable. Nor do I. Besides, it's a very bad idea.

1. What is the Constitution option?

We're talking about the 14th Amendment, Article 4, adopted in 1868. It says,

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

2. Why it doesn't apply to our present debt crisis:

The Article is part of the 14th Amendment pushed by radical Republicans in the post-Civil War era to extend their political power by ensuring the citizenship and voting rights of Negroes. One might think of the Amendment as the beginning of the Reconstruction era, since it sanctioned the dividing of the South into five military districts. Article 4 ironically disallows Southern, or Confederacy debt (e.g., reimbursement for the loss of slaves, etc.), while allowing for the legitimacy of the Federal debt. The Article became law in 1868 after its ratification by the States. At best, it recognizes the legitimacy of the national debt. The post-war government needed revenue sources after fighting an expensive conflict. It wanted to be paid. The Article doesn't allot the right to increase that debt. I have yet to find any proponents of implementing this Article quoting beyond its first sentence. Reading the Article in its entirety clearly establishes its post-Civil War context and limitations.

3. Why it would be bad policy to invoke Article 4 of the 14th Amendment:

Resorting to this solution would set dangerous precedent, giving future presidents a blank check on spending without Congressional approval. The Constitution is clear on its mandate for a check-and-balance system of the Congressional, Judicial, and Executive branches of government. Besides, we want a solution to our overspending, and not its perpetuation.

In the short run, it would likely incite an impeachment attempt even though it would fail in the Senate, where Democrats hold a slight majority. At the very least, it would add to the fractiousness between the two parties and heat the political temperature still further as we head into an election year.

It's sound policy, whether at the personal or government level, to always weigh the possible consequences of any decision. Decisions are like stones cast into the water. They make ripples.

Wednesday, July 27, 2011

A letter to Congress

The other night, President Obama asked Americans to contact their reps in Congress and urge them to pass a responsible deficit cutting bill. Many of you did that, resulting in a mammoth switchboard overload. My wife resorted to email, writing the following message:

Senator McConnell,

Please, please, please use your unparalleled power to limit cuts to Social Security, Medicare, Medicaid, etc., in the proposed budget. It is utter nonsense that we of the middle class get trampled on every time there is a financial crisis in this country.

My husband (retired) and I (close to retirement) have worked hard and, as millions of others in our tax bracket, deserve some consideration here. The GOP, mainly that damned Tea Party faction, is more than likely forcing us to look outside this once great nation for more comfortable living. Funny--I love my country; it's getting so I just can't afford it.

Please help put a stop to this foolishness. If our government fails in this crisis, we will have lost all hope.

Tuesday, July 26, 2011

More baloney

Last night, the President finally appealed to Americans to support deficit reduction, urging them to contact their representatives in Congress. Problem is that it's not going to get the job done, as even Americans are divided as to the best approach.

Polls indicate that what Americans fear even more than the government defaulting on its loans are cuts in Medicare funding, and with good reason. It's no secret Obama has been touting slicing some $600 billion dollars out of Medicare, largely by cutting back 30% on payments to doctors and hospitals. Finally, the AARP, usually in lock step with the Obama administration, is vociferously protesting and running spirited ads.

I just don't see how it's going to fly. Yesterday I had to visit my ophthalmologist. In the course of office banter, the deficit crisis came up, and I mentioned the proposal being kicked around in DC to cut back 30% on Medicare outlays. He shared that he didn't know how he could absorb it. He might have to refuse Medicare clients. His current expenses were running so high it was possible that he couldn't retire. This from a doctor!

Curiously, when I walked into the doctor's office, virtually all of us were gray panthers, or getting there in a hurry. It's reassuring that there are some 50 million of us and we do vote.

I'm not sure Americans remember that one of the President's carrots for getting his Health Reform Bill passed was a promise to cut some $500 billion from Medicare by eliminating waste. Yeah some waste, but $500 billion's worth? Hey, am I missing something here? Do the Dodgers still play in Brooklyn?

To play fair, I'm equally chagrined at the Republicans, intimidated by their purist Tea Party colleagues, resisting an increase in tax revenue. As I've pointed out in an earlier blog, it would solve our budget deficit problems in short order over a space of several years. You just can't have your cake and eat it, too. We need a mix of cutting spending and raising revenue.

By the way, where are the cuts in benefit outlays for members of Congress? Oh, I forgot--they're not under Medicare!

Monday, July 25, 2011

The psychology behind Obama's decision making

It's Monday and a new day begins for troubled markets as party chiefs once again try to resolve the deficit impasse that threatens a financial meltdown with global implications. Nevertheless, I remain optimistic that cooler heads will prevail and a deal will be struck, though perhaps to no one's liking. Whatever we do, it's probable our credit rating will drop from triple to double A, resulting in higher borrowing interest for everybody.

In this post, however, my focus is on the psychological dynamics at work in our President's seeming inability to provide firm, creative, leadership across the board. Quite frankly, he lacks leadership spunk, the resourcefulness of occasionally putting up his dukes, or more bluntly, becoming a just plain son-of-a-bitch, Harry Truman style if you will. Mind you, we're in a war, economically speaking, with high stakes. We can't afford taking the wrong options. As on a real battlefield, leaders must develop a strategy and prove decisive in its execution. Our president, however, a kind man, lacks the killing instinct to get the job done. It's never a straight path for him. He'd rather waddle. In my previous post, I spoke loud and clear on the President's tendency to put up the white flag prematurely, undermining his promises, and in the process, giving strength to the opposition, who increasingly perceive him as vulnerable.

Why is he this way? With the increasing advances in neurobiology comes a possible answer. Medical researchers can now map and measure the brain's capacity to respond to our emotions. Frankly, some of us are wired to be hot, or emotionally sensitive; conversely, there are the cold types, or those said to have "ice in their veins." I suspect good relief pitchers in baseball belong to this tribe. The worst of the cold types, of course, are the sociopaths, who can shoot 76 teens in a Norwegian camp and argue afterwards how it was necessary. Neurology has grown so advanced that we can even detect who the sociopaths are.

In the realm of finance, an offshoot of neurology has been the development of neuroeconomics, or the study of the cognitive processes at work behind financial decision-making. Let's take a case scenario: Investors in Wall Street who consistently earn little tend to be markedly conservative, with little appetite for risk. A few losses and they quickly panic. Often they'll opt for investing in bonds rather than equities, even though over a sustained period, and despite market downturns, the latter out perform bonds. This conservatism, rampant among the hot types, has given rise to what's known as "myopic loss aversion." As British psychologist Kevin Dutton remarks, "Emotion, it would seem, is so oriented toward risk aversion that even when the benefits outweigh the losses it henpecks our brains into erring on the side of caution" (Split Second Persuasion, 20011, p. 208).

Our president, surely one of the more cautious and feeling presidents we've known, unfortunately mirrors the hot-wired grouping of those undermined by an excessive capacity for empathy. He can see, or better, feel both sides. The result: consensus or compromise, whittling down previous commitment.

In the business model, you may not like it, but the ruthless prove the most successful entrepreneurs, whether Bill Gates or Steve Jobs. In his now classic studies, Harvard's Stanley Rachman studied bomb disposal experts with 10-years or more experience, specifically those decorated and undecorated. What separates the great ones from the merely good? Rachman made a startling find: the heart rate of the undecorated remained stable, even though subject to high stress. However, here's the thumper, the heart rate of the decorated proved unstable. It went down!

Rachman discovered something else: not only did successful risk-taking have a physiological basis, but something additional was in the mix--confidence (Stanley Rachman, "Fear and Courage: A Psychological Perspective," Social Research 71(1) (2004),14976).

Obama is fond of Abraham Lincoln, perhaps intuitively in seeking a mentor of what he would like in himself. While we obviously aren't able to map Lincoln's brain via an fMRI, we can presume he had the necessary prerequisite of confidence to make the crucial, hard decisions necessary to preserving the Union, whether in opposing the expansion of slavery, declaring war, changing generals, or issuing the Emancipation Proclamation. In the previous century, three presidents again demonstrated this confidence factor, the Roosevelts, and Ronald Reagan. Regardless of your politics, they inspired a nation with their own confidence and took us from the dark places into the light.

Unfortuately, Obama, a hot type, isn't wired this way. In truth, he's more Carteresque than vintage Lincoln. Compassion and equity surely have a place, but not when their offspring is paralysis.

Sunday, July 24, 2011

Keeping the faith

In a recent riveting analysis of decision making by President Obama, Praising the Hostage Takers, liberal Paul Leob painfully laments the President’s overweening zeal for compromise.  

Will Obama ever hold the Republicans accountable for their reckless and destructive actions? No matter how outrageous their demands, he keeps giving them legitimacy, first resisting, then compromising, then praising the result as bipartisanship. He's forgotten the basic lesson of negotiation -- you don't hand everything over before you start, particularly to people who have utter contempt for your values and goals. He's also forgotten the importance of fighting for your principles, so people have a reason to support you.

As I write, top brass from both parties are scrambling to come up with something feasible by Monday morning.  Ultimately, the parties will strike an agreement on easing the deficit crisis, though it’s likely to be bad news for most of us, with options for changing the cost-of living formula for social security, applying a means test to both, and eliminating the mortgage deduction among those on the table.  Meanwhile, no tax increase on incomes above $250, 000.  It’s no secret there’s been a massive transfer of wealth going on to the upper class for some time, ultimately creating something like what you have in South America: you’re basically poor or well off.  The upcoming scenario simply expedites that trend.

In my own case, a retired prof with a still working spouse, my own income from social security and a retirement annuity invested in over the years has been declining even as inflation heats up and Medicare premiums and deductibles soar.  Meanwhile, I’ve not received any cost-of-living payout in social security due to inflation in the last two years. That doesn’t stop the Feds from taxing my social security heavily, as they count my wife’s income as total family income.  It’s worse for others.

The scandal is that fifty percent of Americans pay no tax at all.  Family size, mortgage exemptions, low wages, etc., contribute to this scenario.  Unlike South America, in our country, the poor get attended to and the wealthy get their loopholes.  Wall Street and the banks get their bailouts.  You and I, the middle class, we’re the pack mules

But I want to get back to Obama.  In campaigning for the presidency, he posed as the people’s protector.  On the other hand, he hasn’t walked the talk since getting elected. Loeb, gives us a disturbing litany of what the President has “compromised” away:

Obama's almost pathological devotion to compromise started early in his presidency. Republicans and a handful of corporate-funded Democrats used the Senate filibuster to block action on issue after critical issue. Instead of calling them to account and marshalling public pressure against them, Obama responded as if their intransigence was reasonable, giving them instant political cover. He did this on health care, financial regulation, and attempts to pass a sufficiently large economic stimulus. On climate change, he tried to prove his reasonableness by allowing offshore oil drilling (just before the BP oil disaster) while securing not a single vote in return. Republican Lindsay Graham was planning to offer precisely this enticement to convince borderline Senators to support at least some price on carbon, and said Obama effectively killed the bill by leaving him with nothing to offer people Obama similarly refused to take a firm stand on ending the Bush tax cuts, which he could have simply let expire. He's now retreating on the debt ceiling battle, saying he might have to sign off on a deal that cuts spending now a the vague promise of reforming taxes later.

Anything to get the deficit ceiling raised:  erosion of social security, betrayal of the environment, continuation of the Bush tax cuts, perpetuation of corporate loopholes, et cetera ad infinitem! Obama might take a lesson from Ronald Reagan, who raised the deficit several times during his presidency.  Up against it on several occasions, the Great Communicator would take his case to the American people.  And he always won.

Mr. President, call the Tea Party bluff.  No deficit agreement?  So be it! We’ll get through, but the Tea Party won’t.

Mr. President, if nothing else, exercise your Constitution option.  Raise the deficit!  Pay the bills!

We don’t need a Chamberlain buying peace for now, mindless of tomorrow. You don’t betray the American people to placate the opposition.

You want to be liked?  I tell you this: Keep your promises and to paraphrase Carole King, “they’ll come running.”