Dysfunction of America article

I received this from a friend and thought you might be interested in it. -ed

I received the following article from a Canadian friend of mine.  It is from the Montreal Gazette.  Written by a former leader of the Progressive Conservative party in Canada.  I found his analysis of the current state of the US to be very well written and thought out.  Let me know what you think.
[mk]

---

The Dysfunction of America (1): The rule of greed

MONTREAL - The U.S. economy remains the most powerful, creative and dynamic in the world, but it faces major difficulties. No longer is it a true capitalist free-market system. It has become a gigantic welfare state whose prime beneficiaries are the rich and major corporations.

Think of the legions of millionaire lobbyists in Washington; the shuttle-bus-type ferrying of people back and forth between senior Washington positions and executive suites in the business world; the enormous subsidies paid to myriad industries, including agriculture; the complex loopholes that render the tax code incomprehensible to all but the beneficiaries; the deregulation of the financial system that led to the crisis of 2007 and 2008, followed by the trillion-dollar bailouts; and that’s to say nothing of the dramatically increasing inequality of income distribution.

Greed may be good, as Gordon Gekko famously declared in Wall Street, but it is good only for the rich.

Notwithstanding the fatuous blathering of the current Republican candidates for the presidency, to say nothing of the Tea Party movement, Americans do not really want smaller government and serious cuts to government spending. During the presidencies of those alleged fiscal conservatives Ronald Reagan and George W. Bush, government and, more especially, deficits and debt grew dramatically.

Almost without exception, independent experts and analysts (a group that, sadly, excludes all active politicians), know that to put America’s financial house in order requires both tax increases and spending cuts. President Barack Obama’s proposed tax increase for Americans earning $1 million a year, which will never become law, is an almost invisible drop in the deficit bucket. The chances of anyone who advocates serious tax increases, in whatever form, being elected are not merely slim; they are zero.

The same is true for any politician advocating significant cuts to defence spending, social security, and Medicare and Medicaid.

What Americans want are more services for which they do not pay. They want the banquet table to be set, at the cost of others, for themselves alone. The most recent agreement to raise America’s debt ceiling did not actually reduce government spending; it merely slowed its rate of growth.

Tax rates in the United States – whether income, capital gains or corporate tax – are the lowest they have been in decades. In the 1950s and 1960s, the top 1 per cent of the population earned between 8 and 9 per cent of the nation’s income. Today that figure is approaching 25 per cent. Middle-class income, in real terms, has been at best stagnant for the last decade or more. Last year the average income of the top 25 hedge-fund managers in the U.S. was $1 billion. To put that figure in perspective: assuming a working year of 250 days, it represents $4 million per day, more than an overwhelming majority of people will earn in a lifetime.

How much is enough? Apparently there is no limit. Ergo, Occupy Wall Street.
The usual justification for these enormous incomes and this devastating inequality is that these high earners are the creators of jobs. With some exceptions, that is rubbish. In almost the same breath, the Republican candidates argue (correctly) that the leading creators of jobs are small businesses. The two positions are in almost complete contradiction. No economic research has ever established a direct causal link between tax rates and economic growth and job creation.

In recent years an overwhelming proportion of America’s national income has been generated by its financial industries. It was paper-shufflers (see Margin Call, the movie) – whose creations, however ingenious, were collateralized debt obligations, credit-default swaps and other forms of derivatives, and not jobs – who took home obscene amounts of money. The very highly paid CEOs of Fortune 500 companies were not only not creating jobs, they were eliminating them, and hollowing out America’s manufacturing industries by outsourcing.
Generally speaking, it is not the true entrepreneurs – those who start and build companies, thereby creating real jobs and deserving every dollar they earn – who are among the obscenely paid. Nor do true entrepreneurs earn millions while simultaneously losing their clients’ money in stock-market “corrections.” Obviously a properly functioning economy needs strong and effective financial institutions (Canada being a reasonably good example), not casinos operating giant Ponzi schemes. For true entrepreneurs, money is merely a by-product of their passion; for Wall Street, it is the only passion.

With the necessary political will, it would be relatively easy – although painful – to eliminate the U.S.’s deficit and debt problems. The Simpson-Bowles Commission – set up by President Obama and tasked with finding ways to achieve long-term fiscal sustainability for the U.S. – and many others have made practical suggestions, including closing tax loopholes, modestly increasing tax on the well-off, instituting a national sales tax and a gasoline tax, reducing defence spending, and limiting entitlements to those who really need assistance. However, as the saying goes: “It ain’t gonna happen.”

Can America recover its prominence and world leadership in areas other than military strength? Of course it can, but only if, as a nation, it ceases being in denial; only if it recovers its moral and ethical compass; only if its political leaders see their role as true service to their country; only if steps are taken to reduce the devastating inequality of income.

Peter Blaikie is a founding partner of the Montreal law firm Heenan Blaikie. He was president of the Progressive Conservative Party of Canada from 1981 to 1983.

The dysfunction of America (II): Political gridlock and beyond

Leo Tolstoy famously wrote that "each unhappy family is unhappy in its own way." To adapt that somewhat: it is almost certainly true that all families, in different ways and to a greater or lesser extent, are dysfunctional. The same is true of nations. The rub lies in "to a greater or lesser extent."

To the extent that Canada is dysfunctional - and it is - it matters very little, if at all, at a global level. Think about it like Greece: were that county the only one of the nations of Europe to be in so many ways chaotic, it would be material for comedians, not an item on the daily news.

But when the United States is massively dysfunctional - well, to borrow the line of Crocodile Dundee as he flashes his blade before some New York City punks: "That's a problem."
Because of the unique role that the United States plays in the world, we all, and particularly we Canadians, need it to function well, and we all share the dramatic consequences when it does not. (The same is true, to a lesser extent, of dysfunctional Europe.) The world needs America to become once again the "shining city on a hill."

At its best, whether it be in science, innovation, business, medicine, philanthropy, education or the arts, to name but a few, America's genius is unrivalled.

Furthermore, to their own and their country's credit, there are tens of millions of Americans who lament their country's failures. For evidence of that, in addition to the "Occupations" of Wall St. and beyond, one need only stay aware of commentary and analysis by independent experts, observers and, more importantly, informed U.S. citizens.

But right now there is a massive failure in America's political system - the most consequential kind of dysfunction. "Gridlock," the usual description, is inadequate, because it creates the impression of a temporary problem. The real difficulties are far more systemic.

The U.S. president is frequently described as "the most powerful individual in the world," but the actual powers constitutionally attributed to the office are remarkably limited. In the British parliamentary system, a prime minister with a majority is far more able to make his or her wishes reality. In most European systems, presidential powers are far greater than those the American head of state wields. When, in addition, the president is weak and inexperienced, as is currently the case, the impasse is exaggerated. With the art of compromise having been drowned in extremism and zealotry, the constitutionally ordered system of checks and balances in the U.S. legislative system (for example, the need for Congress and the president to approve major spending decisions, raising the national debt ceiling or changing tax rates), the goal of which has always been to prevent excessive concentration and possible abuse of power, has been derailed so as to cause a gigantic seizure in the machinery of government.

Surfers speak of the "endless summer." The United States lives the endless political campaign, especially for the presidency. From the day after inauguration, the incumbent begins the next election campaign - as do his or her opponents. Nothing could be more obvious right now than that the strategy of the Republican Party, expressed through its leaders and presidential candidates, has nothing to do with solving America's enormous economic difficulties, and everything to do with the 2012 presidential election. Obviously they see a weak economy as the yellow brick road to the White House. Obstructing every proposal of the administration, without a single positive suggestion, is the strategy.

Since too many people's political attention span is measured in nanoseconds, this is the age of pure image politics. It is also the age of unlimited spending on political campaigns, brutally negative television ads, and slogans replacing serious discussion. With the occasional exception of a televised debate, campaigns consist of highly structured appearances before committed supporters, carefully staged photo opportunities and nine-second clips on the nightly news.

Another problem: in essence, only the very rich, or those supported by the very rich, need apply for legislative positions, especially the Senate. Does anyone truly expect that a government made up of such people will actually pass laws, particularly with respect to taxation, against their apparent interests and those of their financiers (Warren Buffett excepted)? Abraham Lincoln's ringing words at the end of the Gettysburg Address, "government of the people, by the people, for the people," are being, before our eyes, transformed into "government of the rich, by the rich, for the rich." "Sir Charles" Barkley, the iconic former National Basketball Association star, put it beautifully: "I'm sad to see an America with rich people screwing poor people."

Another area of dysfunction in the U.S. is education. America's best schools and universities are without peer. That said, every independent assessment of America's overall world ranking on education illustrates enormous difficulties.

The schools are producing students whose test scores in reading, science and mathematics rank far behind those of the world's leaders. America's universities are not graduating nearly enough scientists and engineers to meet the country's needs. At all levels, and notwithstanding enormously high fees at the best schools and universities, the overall system is underfunded. Across the country, and particularly within the Democratic Party, teachers' unions wield massive power and influence, and resist all change.

And then there is health care. While their reasons may be dramatically different, even diametrically opposed, there can hardly be a single American who believes the nation's health-care system is functioning properly. Now, concerns about health care arise, for varying reasons, in almost every country in the world. But the United States spends far more of its national income on health care than does any other country, yet it has nowhere close to the best health-care results. Obesity and its attendant health consequences, while a growing problem elsewhere, are an epidemic in America. (Lands' End, a Wisconsin-based online retailer, has men's sizes up to XXXXXL!) It is hard to imagine how the system can be restored to good health when every attempt to innovate leads to ideological warfare and court challenges. Obamacare will almost certainly be a major issue in this coming year's presidential campaign.

There are many other areas of dysfunction in America: the judicial systems, both criminal (ask Conrad Black) and civil; the question of immigration, where reasonable compromise seems impossible; the glaring absence of rational gun control; the complete failure of attempts to control drug use, and the export of its attendant violence to Mexico and Central America; and last but not least, the refusal to have a reasonable debate on the issues surrounding climate change.

Perhaps this is merely the rant of a curmudgeon. If it is, it is more in sorrow than in anger.
However, as we in Canada tend to be rather smug and complacent when we compare ourselves to our American neighbours, we should keep in mind that the rant began with the expression "to a greater or lesser extent" qualifying national dysfunctionality. With exceptions - some of them admittedly important - the only real difference between the two countries is the extent of the dysfunction. Throughout history, Canada has tended to arrive in the same place as the United States, only more slowly and less dramatically. We should remember that our house is made of glass.