Tour at US Embassy in Rome

My short tour as head of the Science Section at the American Embassy in Rome was not very pleasant.

My previous tour as Science Counselor at the embassy in Warsaw was under a cloud because Washington under the Gingrich Republican Congress had cut off funding for science cooperation that was supposed to go on for several more years.  An unexpected call from Washington offered me the job in Rome.

When I arrived in Rome, the State Department was being sued by several environmental groups upset at how the Italians were fishing for swordfish.  The United Nations had put a limit on how long Italian driftnets could be, and these groups sued the State Department to force it to enforce the UN mandate.  The Justice Department argued the case that the State Department did not need court oversight, but lost.  At the time I was not clear what leverage the environmental groups had on the State Department, but as this court decision shows, the leverage was Italian exports to the US.  The environmental groups would force the Commerce Department to withdraw its certification of Italian exports of fish to the US unless Italy was in compliance with the UN resolution.  As a result, a Federal judge ended up in charge of US fishery policy in Italy.

Who really ended up in charge of American fishery policy toward Italy was Greenpeace Italy.  The environmental groups could decide whether any US agreement with Italy on driftnets warranted allowing the Commerce Department decision to stand.  Any US proposal would be run by the US environmental groups; they would then ask Greenpeace Italy for its recommendation before replying to the court.  The Greenpeace Italy swordfish staff was basically one person who spent full time monitoring swordfish fishing boat, and who always smelled strongly of fish when we met with him.  The court decision cites Greenpeace reports in several places in its decision. 

We had a huge meeting in Rome with many representatives of interested parties in the US and Italy.  They came to a resolution, negotiated mainly by my assistant, who had handled fishery matters during a previous tour in Venezuela, and a staff assistant to the Italian director of the fishery office of the Italian Agriculture Ministry.  Under the agreement, the Italian Agriculture Ministry agreed to toughen up its enforcement practices.  A few months later, however, the Agriculture Minister requested a meeting with the Ambassador on the matter.  He said that because his ministry's enforcement officers had stepped up their efforts against illegal driftnet use, the Italian fishermen in Sicily, where most of them were located, had taken out hit contracts with the Mafia on the ministry's enforcement personnel.  The Minister felt that some of his employees were in genuine danger and requested that the agreement be watered down somewhat.  Meanwhile, other fishermen were demonstrating outside the Agriculture Ministry in downtown Rome and creating huge traffic jams.  My assistant who had negotiated the agreement was sick, and I had to go with the Ambassador to meet with the Minister.  The Ambassador was very upset when I told him that he did not have much negotiating room because any change would have to be approved by a federal judge, which meant essentially that it would have to be approved by Greenpeace Italy.  As a result, my last full day on the job in the Foreign Service was spent on the telephone negotiating some "happy-to-glad" changes in the language of the agreement and getting preliminary approval from Washington . 

I had forgotten the terms of the agreement, but they were summarized in the court opinion as:

First, Italy announced its intention to submit a voluntary rationalization and conversion plan to provide for the cancellation of all driftnet fishing licenses, accompanied by a surrender of the driftnets, between 1997 and 1999.

Second, Italy committed to introduce a ban on the use of Sardinian ports by driftnet vessels from other ports. The Sardinian port ban subsequently passed.

Third, Italy announced its intention to pass a law with an escalation of sanctions for fishing with illegal driftnets.

This appears to be one of the decisions that affected our office's work; however, the date of the decision is well after I had already retired from the Foreign Service.

A 2008 study of the driftnet problem showed that not much had changed over the 10 years following my retirement.

Punishing America for Fareed's Mistake

I saw on the CNN summary for Fareed Zakaria's GPS show last Sunday that he had planned to have Gen. Colin Powell talk about Syria and other international issues.  The NRA and the Republicans succeeded in muffling a reasonable voice on foreign policy by putting Fareed off the air for one paragraph that may have accidentally been plagiarized.  The show was dropped and apparently will be off the air for at least a month.  Cancelling his show is sort of like cutting off your nose to spite your face.  Candy Crowley is not bad, but by focusing on politics, she is caught up in a bunch of nasty people calling each other nasty names, while important stuff is going on overseas -- Syria, Iran, the Euro crisis -- but is not being covered by anybody, now that Fareed is barred from TV.  I hope CNN gets whatever it was they wanted from Karl Rove, maybe $100 million more in campaign ads for the Republicans.  Is Time-Warner's grovelling to the Republican establishment less culpable than Fareed's paragraph? 

Swift Boats Are Back

The Republicans have a new anti-Obama attack group, the Special Operations Opsec Education Fund, according to Reuters and the New York Times.  This is basically the same idea as the Swift Boat campaign waged by George W. Bush against Sen. John Kerry during his Presidential campaign.  The Swift Boat campaign vilified all Vietnam veterans by vilifying Kerry's military service, while the new Opsec campaign is aimed more specifically at Obama as Commander-in-Chief because he managed to kill Osama bin Laden, which the incompetent, cowardly Republicans had failed to do while George W. Bush was Commander-in-Chief. 

If the Republicans wanted to make sure that I, a Vietnam veteran, do not support Romney (or any other Republican) this is the way to do it.  It's probably coincidental, but both groups are primarily Navy veterans, the Swift boat veterans from Vietnam, and now the Navy seals from the bin Laden attack.  It makes me inclined to think that Navy officers are less patriotic than officers from other services, although that is probably not justified on the basis of the political actions of a handful of Navy personnel.  However, Chief of Staff General George C. Marshall set the standard during World War II and the years following it when he served as Secretary of State and Secretary of Defense, when he would not vote for any candidate because it might make it more difficult for him to serve the man he had not supported if he was elected.  Certainly soldiers should be allowed to vote, and retired officers should be allowed to campaign, but I think it is questionable when they attack the leadership of the country for being unpatriotic.  I think that makes them unpatriotic.  It's okay to attack the policies, but not to attack the Commander-in-Chief for disloyalty.  Do they want to try him for treason? 

The Republicans pursued two disastrous wars, Iraq and Afghanistan, during which they failed to capture or kill bin Laden.  Now they try to turn Obama's success in doing what they failed to do, against him.  Go back and look at what George W. Bush said and did when we found Saddam Hussein, who was not nearly as important an enemy of the United States as Osama bin Laden.  Republicans can brag, too.  What about "Mission Accomplished" blazoned across an aircraft carrier when the real Iraq war was just starting.  Was George W. Bush a traitor?  I think not; he was trying his best, but as a cowardly Vietnam draft dodger, he just didn't have it in him to fight a war well. 

Sorry for Fareed

I am so sorry that Fareed Zakaria plagiarized something from the New Yorker, according to Politico, and then got caught by the NRA.  The NRA is an unscrupulous, mean-spirited organization that lords itself over our political establishment.  That they got an intelligent liberal like Fareed will scare the less brave liberals in government.  It's like Parade Magazine's report of Grover Norquist fighting with a good man like George H.W. Bush because he went back on his pledge to not raise taxes. 

I hope that Fareed will continue to fight the good fight against the NRA and for intelligent, liberal policies to be pursued by the US Government. 

After comparing what is supposed to be plagiarized, I'm less concerned about Fareed.  Technically they got him, but in fact he gave credit to the real source of the information, a book by Adam Winkler.  The New York Times has a comparison of the texts.  He pretty much copied Ms. Lepore's summary of Winkler's book, but he didn't really copy any of her original ideas.  He could have read the book and come up with more or less the same summary.  This is sort of like "plagiarism lite," but it will be a stain on Fareed's reputation, and the NRA will be happy about that. 

In any case I will miss him in Time and on CNN. 

Did Jews Fight in Iraq?

In my opinion, the Iraq war was largely started by American and Israeli Jews who wanted to kill Saddam Hussein.  Deputy Secretary of Defense Paul Wolfowitz led the charge aided by many Jewish colleagues at Defense and other parts of the foreign policy and defense establishment, such as Doug Feith, and Dov Zakheim. Senator Joe Leiberman was a big supporter.  Of course, President Bush II was interested in showing up or avenging his father, Bush I, and played into their hands.  Dick Cheney just wanted a war to throw some money to his defense industry buddies, but he had his own influential Jew to help him, Scooter Libby.  

So, Iraq was at least in part a war for Jews and Israel.  My question is, "Did Jews fight in it?"  I think not, although my evidence is not very scientific.  I looked up a list of the names of those buried in Section 60 of Arlington Cemetery, who were killed in Iraq.  I hoped there would be some listing of how many tombstones have stars of David on them, but I could not find out.  Looking at the names, it's hard to tell.  There are a lot of Polish and other Slavic names that could be Jewish, or could be Christians of Eastern European ancestry.  However, when I searched the list for "gold" or "stein," which appear in many Jewish names, I found no hits.  If it were an Asian war started by a Christian, e.g., Korea or Vietnam, I could understand, but this was a war in the Middle East pushed strongly by Jews.  

ObamaCare Should Have Been Single Payer

To control health care costs, we need single, public payer system.  The HCA takeover of Denver non-profit hospitals shows how profitable health care is.  Republicans kept it that way by blocking single payer and leaving insurance companies, huge medical companies, and doctors are in control.  Many doctors are working for hospitals or corporations rather than private practice because of the financial incentives.  

The obvious solution to the health care problem was Medicare for everybody, and then cost controls on what Medicare funds.  Obvious problems are the last six months of life for older people who incur huge costs that don't produce better quality of life, just longer life, as well as younger people with hugely expensive diseases, and of course the multiple unnecessary tests.  

High Speed Trading Takes Over Stock Market

This chart from Technology Review shows the growth of high speed trading over the last few years.  As the article says, at some point somebody other than insiders like Knight Capital is going to get burned, perhaps just some average investors.

You can thank 401(k)s and IRAs for a lot of this.  In many cases these are just money that is not actively managed by the people it belongs to, allowing the stock market to play with it.  They have just anted up and put a huge pot of money on the table for the hedge funds and big investors.  As this money gets churned, the big guys probably get rich (unless their computer program blows up) and the little guys get fleeced.  It's virtually (no pun intended) impossible for the SEC to police, because it's so big, so fast, and so complicated.

Al-Qaeda Still Alive

It looks like al-Qaeda is still alive.  They are somewhat active in Iraq, Syria, and Mali.  Al-Qaeda is is a radical Sunni group; most of the 9/11 hijackers came from Sunni Saudi Arabia.  Now they are one of the groups terrorizing the current Shiite government of Iraq, and one of the groups undermining the Alawite/Shiite  government of Assad in Syria.  Meanwhile they are taking over the government of Mali in central Africa.  So, the US is opposing al-Qaeda in Iraq in order for us to support the Maliki government we have set up, although Maliki is very close to Iran, our declared enemy.  We are supporting the goal of al-Qaeda in Syria of overthrowing Assad, even if we so not support al-Qaeda explicitly.  The Syrian rebels deny that they work with al-Qaeda, which may be true, but only because al-Qaeda works in Syria without identifying itself overtly.  Finally, in Mali al-Qaeda makes no bones about openly taking over the government, leading to concerns that it may become a new base of operations for al-Qaeda, as Afghanistan was before 9/11, according to CNN's Erin Burnett.

Is Ameica Still a Great Nation? 2

All the talk about the European atom smasher finding the Higgs boson adds to the perception of the decline of America.  The US was supposed to have a particle accelerator in Texas, the Superconducting Super Collider, to rival CERN's in France and Switzerland, but we decided in 1993 that we couldn't afford it.  Maybe the world doesn't need two huge accelerators, but the fact is that today Europe has one and the US doesn't.  Two generations ago, the US would have been in the lead.

Today, the US has no manned access to space.  Ironically, we have the International Space Station, but no American way to get people to or from it.  We are dependent on the Russians to transport the crew.  When I was doing science work at American embassies overseas, one of the best selling points we had was NASA.  NASA had a wonderful reputation, mainly build on manned missions like the moon landing and the Shuttle, but also on scientific missions, particular the Hubble space telescope.  The moon landing is now several generations ago, the Shuttle is in museums, and we have no way to service the Hubble, which will eventually die in orbit.  You could see how important manned space activities were when the Shuttles were flown to the various museums that will house them.  People stopped whatever they were doing to watch the Shuttles fly over on the 747 transport.  That greatness is gone.  NASA 20 years ago was what Apple was like before Steve Jobs died.  It was a world leader that caught everyone's imagination.  America has lost its Apple.

After the fall of Berlin wall, the US instituted a number of programs to help the Eastern European nations coming out of Communism.  I went to Poland to run the Maria Sklodowski Curie Fund to help Polish scientists by financing small scientific cooperative projects between American and Polish scientists.  We signed an agreement to maintain the cooperation for five years.  After two years, the Republicans took over Congress in the Newt Gingrich revolution, and cancelled funding for the cooperation years earlier than specified in the agreement.  The US did it under terms of the agreement that were put in for the Poles in case they ran out of funds, saying that the agreement could be cancelled if either party found it impossible to fund it.  The only reason it was impossible for the US was that Congress refused to do so.  It was an enormous contrast to the Marshall Plan that the US funded after World War II.  The US had relatively much more debt, still had some rationing as a result of the war, but we sacrificed to help the Europeans.  The Republican revolution was not that generous.  In large measure, the European Union stepped in where the US failed, and is largely responsible for the current day success of the Poles and other Eastern Europeans.  The contrast between the "greatest generation's" Marshall Plan, and the Gingrich Revolutions selfishness could hardly be starker.

The continual growth of a huge national debt and budget deficit is another sign of decline.  There is nothing wrong with going somewhat into debt sometimes,but going hugely into debt all the time is bad.  Although they agree there is a problem, the US is badly divided on this issue, with Democrats saying that taxes must be raised, while Republicans say expenses must be cut.  The Democrats are in general more willing to put up with debt, but responsible Democrats less so.  The US grew its social welfare programs, like Medicare and Social Security, when its economy was strong.  Now we can't afford as much social welfare as we could a generation ago, but we can't have a civilized debate about how to reduce it, or pay for it.  When you cut benefits, you hurt people.  Today, Republicans, unlike Reagan, are unconcerned about who gets hurt; the taxpayers just want their money back.  So, there is no discussion of how to reduce programs in a way that creates the least harm.  There is more discussion of how to raise taxes, but only because the huge Bush tax cuts that were limited in time have been continued long past their intended expiration date.  The "fiscal cliff" in theory will focus minds on taxes and budget cuts, but in fact Congress will probably muddle through without making a real decision.  That is not the mark of a great nation.

A personal bugaboo for me has been America's hatred of its military since Vietnam.  It's okay to hate the military as long as the nation is not threatened, but when it is, it may be hard to overcome.  A good military requires good people to serve in it.  Currently very few of the best Americans will serve.  The service academies still turn out pretty good officers, but their perspective is somewhat limited.  The military also needs outsiders who will bring a different outlook.  This means you need some good people from Harvard and Stanford, as well a more graduates of good state universities.  But today's generation grew up with parents or grandparents who avoided service in Vietnam, and who often pilloried veterans as psychotic baby killers, rather than praising them as defenders of the nation.  Vietnam veterans probably share the homecoming experiences of Confederate veterans or low-ranking German soldiers who served under Hitler. The 9/11 attack began changing this attitude, because America really was attacked, but it was not a traditional military attack.  Terrorists don't wear uniforms; The 9/11 attack was carried out by a handful of people who all died in the attack, except for Osama bin Laden and a few of his associates.  Thus, it didn't really call for a military response, although that is how we responded.  The resulting mess, getting rid of Saddam Hussein but strengthening the Iraqi regime, has not done a great deal to strengthen respect for the military, although it has helped.  The Afghan war has at best been a wash, with no clear positive result from years of fighting.  The fact that some many troops come home with mental problems has to some extend reinforced the perception that soldiers are psychotic killers, further discouraging people from joining the military.  Without a strong military, the US position in the world is weakened, because it will be less able to respond if it is threatened by another country.

Barclays Adds to Bankers' Poor Image

The revelation that Barclays Bank manipulated the LIBOR interest rate is another example of corruption among world class bankers.  Although Barclays is the only bank which has admitted guilt so far, it seems clear from emails and other documents that the manipulation was widespread among the other world class banks that Barclays did business with, probably including such big names a JP Morgan Chase and Citibank. Jamie Dimon was just on Capitol Hill testifying about loosing billions of dollars in bad investments, but the Senators and Congressmen basically gave him a pass.  With few exceptions they praised him and asked for his advice on banking regulation and the economy.  I was ashamed of my Senator, Michael Bennet, for kowtowing to Dimon by throwing him softball questions.  Now Jamie Dimon's similarly named colleague at Barclays, Robert Diamond, has resigned under pressure for rate fixing.

It is clear why the banking community, and Jamie Dimon in particular, were so opposed to Elizabeth Warren's taking over the Consumer Financial Protection Bureau.  They were afraid that she would be a real police woman, and they knew that they were dirty.  They may not be criminals, but they are dishonest and corrupt.  They have just manipulated the Congress to make it legal to do the unscrupulous things that they do.  Their actions are often so complicated and involve such obscure financial instruments that it is very difficult to specify them as crimes, but Elizabeth Warren, as a Harvard law professor, could probably have done it.  So, Jamie Dimon and his fellow big-shot bankers paid lobbyists and congressmen and senators directly to keep her out.  He obviously got to President Obama, too, which is why I am not voting for Obama.  He sold out America for something -- money, Jamie Dimon's love?  I don't know what, but I don't like it.  It was not good for the country.

Is America Still a Great Nation?

Morning Joe on MSNBC had an excellent discussion of the Presidency this morning with several historians.  It mainly focused on recent Presidents, but they were compared to the really great Presidents of history.  Unfortunately, the recent Presidents don't measure up to Washington, Jefferson and Lincoln, except perhaps for FDR.

There was a lot of praise for Reagan, JFK, Truman, Eisenhower and some others.  The best justification for Reagan was that he inspired a new conservative, Republican attitude which has continued to this day.  I think Reagan was a decent guy, but for some reason today's Republicans fail to see the full scope of his presidency.  First, his tax cuts created budget deficits which bedevil the US up to today.  He was actually too nice for many Republicans.  He surrounded himself with conservative, true believers who cut taxes drastically in anticipation of his cutting government expenditures.  However, when Reagan found that the draconian budget cuts his staffers had proposed would actually lead to widespread hardship in the US, perhaps including starvation, deaths from easily cured diseases, etc., he backed off, under pressure from Democrats.  The result was that we got the tax cuts without the budget cuts and budget deficits into the distant future.  Only Clinton eventually returned the nation to a surplus, ant then only for a few years.  To Reagan's credit, when he realized the damage his tax cuts were doing to the country, he raised taxes, a fact today's Republicans seem to overlook when they lionize him.  He was President when we won the Cold War, but that was in large part due to the containment policy that the US had instituted long before Reagan was President.

Of all the recent Presidents, I think George H.W. Bush (#41) was probably the best, but he doesn't compare to the pantheon of earlier greats.  He won the first Iraq war, handling it much better than his son, Bush 43, did the second Iraq war.  Additionally, after Bush 41 pledged not to raise taxes, he did raise them when he believed it was the best thing for the country, although he knew it would undermine his chances for re-election.  He put the country ahead of his own personal career.

The Morning Joe historians commented about how important it was to have a war in order to have a memorable presidency.  But to have a war be a positive for a president's legacy, they thought it had to be a war which the US fought all in.  World Wars I and II are the only ones that fall into that category, and Wilson's handling of the World War I aftermath, partially due to his poor health, did not help his legacy.  On the other hand, Franklin Roosevelt's handling of WW II secured his place in history.  The Vietnam War besmirched all the presidents it touched, and Bush 43's mishandling of the Afghan War and the second Iraq war only sealed his reputation as a horrible, failed President.

Clinton and Carter did not get wars.  Nobody much likes Carter, but grudgingly mentions his successful Middle East peace negotiations, which no one since him has been able to replicate, or even approximate.  Clinton had Bosnia, which I don't remember anyone mentioning.  It was a mixed bag for him; on one hand there was a lot of genocide before he did anything, on the other the Balkans have been relatively stable since the Dayton Accords.

There was a lot of sympathy for the largely ignored presidencies of Truman and Eisenhower, but they didn't rise to greatness.  Truman basically took over from FDR at the end of WW II without messing up too badly.  Eisenhower mainly presided over good times as the country recovered from WW II but fought the largely forgotten Korean War.  The historians gave Eisenhower kudos for his handling of the Korean War, but I think it was more the precursor of the recent unsuccessful wars like Vietnam and Afghanistan.  The US did not "win," and there is still no peace treaty ending it.  I think the real hero of the post-World War II decade was Gen. George Marshall. He was probably more responsible for the Allied military victory than any other American military man.  He was Eisenhower's mentor and boss.  After the war he served as Secretary of State and Secretary of Defense, but he would not seek public office, despite his enormous popularity at the end of the war.  He lent his name and prestige to the Marshall Plan, which was largely responsible for the prosperous Europe we have today (despite its current troubles with the Euro).  Marshall never voted because he did not want political loyalties to get in the way of his service to his country.  Eisenhower was not quite so willing to put his country ahead of his own personal career.

On the subject of military service, I am very disheartened that it has become such a badge of dishonor for political service.  No recent President has been a veteran, although a number of veterans have run for President.  Obama did not serve; he defeated McCain who was a prisoner of war in Vietnam.  Bush was a coward who evaded service in Vietnam by joining a National Guard unit in Alabama for which he rarely did anything.  His Vice-President Cheney was also a coward who evaded service in the military altogether, although he was draft age during the Vietnam War.  Bush ran against Al Gore, who served in Vietnam despite his father's being a Senator.  The Gore family, unlike the Bushes, had a tradition of military service to the country.  Then Bush ran against Senator Kerry, whom he viciously attacked through the Swift Boat Veterans group, for being a Vietnam veteran.  I find it disgraceful that Bush did it, and sad that this country despises veterans so deeply that the attack worked.  Clinton, of course, ran against Bush 41, who was a decorated World War II pilot, and Bob Dole, another decorated World War II veteran who was badly wounded in Italy.  Reagan served in the military during World War II, but sort of like Bush 43 did.  Reagan stayed in California and made movies for the Army.  Jimmy Carter was a Navy officer who graduated from Annapolis, and many of the earlier presidents had some military service.

Gun Walking v. Gun Sales

The debate over the Congressional contempt citation for Attorney General Holder has obscured the debate about supplying weapons to Mexican drug gangs.  The gun lobby has done a great job of obscuring the fact that the US is supplying many weapons to the gangs without the ill-advised "Fast and Furious" operation.  This Huffington Post article about the Mexican Ambassador to the US's testimony before Congress lays out the damage that the US sale of weapons has done to Mexico.  In most cases the weapons are supplied by Americans who profit by selling them the weapons -- gun dealers and American buyers serving as shills for Mexican gang buyers.  Most of the newly supplied weapons are assault weapons.

End Filibusters

The Republicans have managed to stop the wheels of government by using the Senate filibuster process on all kinds of bills that they don't like.  According to Bloomberg, Common Cause is suing to stop the uncontrolled use of the filibuster.  Since the Democrats took over the Senate and the Republicans lost their majority there, the use of the filibuster has gone up to 276 times in 2007-10 from 130 in 2003-06.  84 filibuster motions had been used in this Congress up until May 2012.  This has effectively instituted a governing process that requires a super-majority in the Senate, and has made it difficult to the US government to function.  Currently it is blocking any progress on the budget process that is leading up to the "fiscal cliff" at the end of the year, when many programs will automatically end or begin unless the Congress takes some action that is currently blocked by the filibuster rule.

Mortgage Deduction vs. Capital Gains Tax

I am in favor of passing Bowles-Simpson, and I would defer to them how to revise tthe tax system, but the tax system is badly out of whack and needs revising quickly and thoroughly.  If people don't respect the tax code, if they perceive it as unfair, they won't pay.  Everybody will be a tax cheat, as they are in many southern European countries, like Greece and Italy.  That said, I wonder if it would be better to eliminate the mortgage deduction, which affects a broad portion or the population, or the capital gains tax rate, which lowers taxes mainly for the rich.

In 2006, the mortgage interest deduction cost the US $76 billion.  Although it affects a broad population, most of the benefit went to the moderately or conspicuously rich.  Half of the benefit went to 12% of the taxpayers, those making more than $100,000 per year.  If it was eliminated, house prices would fall probably 10-15%.  This article says it promoted the then-housing bubble.  

http://www.nytimes.com/2006/03/05/magazine/305deduction.1.htm

Bowles-Simpson proposed replacing the current deduction with a 12% tax credit (so you don't have to itemize to benefit, since usually only the wealthy itemize).  A 15% credit proposed by a GW Bush panel would have produced $388 billion from 2013 to 2019, i.e., about $65 billion/year additional revenue.  

http://www.bloomberg.com/news/2011-10-17/a-taxing-debate-the-mortgage-interest-deduction.html

A CBO analysis points out that the capital gains tax includes a tax on any change in value due to inflation, which is not real income, but is similar to any tax on interest which does not account for inflation.  On the other hand, capital gains tax is not imposed until the item is sold, which may delay taxes for years.  Capital gains over time have produced between 4-7% of revenues for individuals, although they were over 10% for the latter half of the 1990s.  Changes in tax rates affect behavior, but usually for a short time, a few years.  If capital gains taxes are going up, people will sell assets sooner to be taxed at the lower rate, but once they are sold, the spike in selling is over.  In general it is hard to predict capital gains revenues.  

http://www.cbo.gov/publication/14077

The conservative Heritage Foundation position is that raising capital gains will stifle the economy.  It implies that rich entrepreneurs will not work if they have to pay the same taxes as plumbers or engineers.  They just won't get out of bed in the morning.

A Wall Street Journal article has some specific numbers for capital gains tax receipts in fairly recent years.  In 2003, receipts were $51.3 billion.  In 2007 they were $137.1 billion.  A rough estimate is that if these rich people (and they are almost all rich) paid at the regular tax level (35%) rather than the current capital gains level (15%) the receipts would roughly double, i.e., to $100 billion in 2003 and $250 billion in 2007.  This is very rough, because rich people hold some assets for a long time, and only sell them when the capital gains tax is relatively low.  If there were no special capital gains tax, sales of assets would smooth out; with they special, lower tax they tend to bunch up either just before the rate goes up, or just after it comes down.  But it seems like you could estimate that the lower capital gains rate cost the US treasury about $100 billion per year during the first decade of the 2000s, or about $1 trillion over the last 10 years.  

Means Testing Social Security

I am interested in the extent to which Social Security is reduced by means testing, since I am a retired US government employee who also qualifies for Social Security because of years spent working in the private sector.  Because of my government retirement, my Social Security is severely reduced, by something like 2/3 or 3/4.  I get less than $50 per month, which every month when I get it seems more like a joke or an insult than social "security."  I will have to live a long time just to get back the money I have paid into Social Security, much less any "government money."

So, what about older rich people like Warren Buffett or T. Boone Pickens?  Do they face limits on the Social Security they can collect?  The Arizona Republic says Buffett collects $32,000 per year, or about $2,600 more per month than I do.  I presume the government has determined that he need the "security" more than I do.  Rep. Ron Paul admitted on Morning Joe that he gets Social Security, although he did not say how much he gets; I think he probably gets more than I do.  In 2007 Sen. John McCain reported that he collected $23,160 in Social Security, or about $1,900 per month more than I do.  It is harder to find out what Boone Pickens collects from Social Security, but this article says he and fellow Texan Ross Perot do collect it.

The main means test that rich people face now seems to be that they have to pay income tax on their Social Security.  Payments are also reduced if you continue to work after you start collecting Social Security, but the limits are reduced as you get older.  So, there are probably no limits on Buffett or Pickens, who are both over 80.

One article in the Huffington Post makes the argument that instead of means testing Social Security payments, the government should remove the limit on the amount of income that is subject to the payroll tax for Social Security, currently $110,100.  Since the payroll tax rate is almost as high as the capital gains tax that most rich people pay on their income, eliminating the limit would substantially increase the income of the Social Security trust fund and do a lot to make Social Security self-sustaining.

For me personally, however, the lesson is that as a retired US government employee, I am subject to a much stricted means test than the richest people in America.  Once again the 1% gets welfare paid by the 99%.

Bin Laden and Drones

I am not entirely happy with the way the Obama administration has handled the bin Laden killing and the frequent drone killings.  I think it was okay to kill bin Laden, but it would have been better to capture him and try him, in the US or in some international court.  If he had resisted arrest, the Seals could certainly have killed him.  I think he was killed because the US did not know what to do with him legally.  The cowardly Republicans are scared to death of bringing any terrorists in the continental US, although the chance of their escaping and harming anyone is practically nil.  The only way they could get out is if they were found not guilty of terrorism, and in that case there is no justification for holding them.

I do not like the idea of executing terrorists by drone attack.  I think it should be used very sparingly, only when there is evidence of a genuine, immediate threat to the US, and the US has to act to save lives.  On the other hand, I do not want to risk the lives of American troops unnecessarily.  The drone attacks certainly save the lives of some American troops.  But we are fighting to preserve American values of justice, honor, and the rule of law.  Destroying these values also has a significant cost.  Presumably we would not kill people willy-nilly, just because they looked suspicious.  So, somewhere there is a trade-off between saving the lives of American troops and destroying American values.  I believe Obama has erred on the side of destroying American values in order to save troops lives.

Supreme Court Coup

Americans and Egyptians have been upset at what they call a coup by the Egyptian Supreme Court in ruling on presidential candidates, etc.  They forget that we had our own coup in the US by our Supreme Court in deciding Bush v. Gore, and appointing George W. Bush President of the US regardless of what the actual vote was in Florida. The US survived this coup, although poorly, since Bush was one of the worst Presidents in American history.  Egypt may survive its little coup, but it is much more unstable than the US was.  The big issue is Islamic fundamentalism, which has been given a huge boost by America's ill-advised war in Iraq, which hugely strengthened the hand of Islamic fundamentalists in the Middle East.

Fed Still Alone

Today's announcement by the Fed that it will continue the "twist" to lower long term interest rates, since it can't reduce short term interest rates below zero, shows how isolated the Fed is because the Congress can't or won't do anything.  We still have no fiscal policy, only a monetary policy.  Monetary policy can't do everything.  The Republicans complain that the Fed should not have an employment mandate in its duties, but Congress is doing nothing about unemployment.

The Republicans complain that the US looks like Greece in terms of incurring too much debt, and they have a point, but the US also looks like Greece because it has a dysfunctional government, in that our Parliament, Congress, does nothing.

One of the main reasons for a do-nothing Congress has been the introduction of the requirement of a 60% majority to pass any legislation, rather than 51%.  I don't think the founders of the United States anticipated this outcome, although when talking about the Supreme Court, the Republicans always say we should adhere to what the founders were thinking in the 1700s.  Until recently, the 60 vote requirement for cloture was only used for very important legislation where there was an actual filibuster.  The Democrats are partly to blame for not forcing the Republicans to conduct an actual filibuster speaking for hours like Jimmy Steward in "Mr. Smith Goes to Washington," not just saying they are conducting a virtual filibuster.

I don't think the Fed should take actions to prop up the stock market unless there is a crisis.  I guess there could be debate about whether we are currently in a crisis, but I don't think we are.  Bernanke could let the Dow drop at least 1,000 points before acting as if there were a crisis.  There is a crisis in Europe, but to some extent that is a good thing for US markets.  The Fed should work with the IMF and its European counterparts to assure liquidity, minimize bank failures, etc., but that doesn't necessarily include propping up the stock market.

Iraq and Iran

Arianna Huffington is right in her blog about the Iraq-Iran partnership made in America. The US war in Iraq vastly strengthened Iran's role in the Middle East.  The strengthened Iran already has consequences in today's Middle East because of its support for Syria's President Assad in addition to other trouble-making groups such as Hezbollah.  

Polish Death Camps

Poland has objected to Obama's reference to a "Polish death camp" while honoring a Pole who helped make the world aware of the Holocaust taking place in Nazi death camps in Poland.  The Polish objection shows their sensitivity on this issue, but certainly what Obama meant was that this was a death camp in Poland, not a death camp run by the Polish government.

Nevertheless, when I lived in Poland I was struck by the fact that they almost always referred to atrocities of the the World War II era as having been carried out by the Nazis, not by the Germans.  The Germans are still here and still next door neighbors of Poland, but the Nazi government is long gone.  So, the Poles live up to the standard that they are demanding from Obama.