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What Small Government Really Looks Like: Not a Pretty Picture!

Once upon a time, America had a small government.

Before World War I, government spending was less than 10 percent of the economy. During the Great Depression, it reached 20 percent. By 1960, it hit 30 percent. And so, for the past fifty years, one in every three dollars spent in America were spent by Uncle Sam.

In 2012, the Republican presidential candidates have staked their campaigns on a promise to reverse this trend. Many Republicans openly pine for the good old days of rugged individualism — the days before Social Security and Medicare, before the FDA and the EPA, before income taxes and government-backed mortgages.

You might think that such an extreme position belongs to rabble-rousers like Glenn Beck but not mainstream pragmatists like Mitt Romney. You’d be wrong.

Candidate Romney has proposed cutting taxes annually by $180 billion, mostly for the top 1 percent of income earners. At the same time, he has pledged to balance the budget without cutting defense spending. According to the Center on Budget and Policy Priorities, the only way to fulfill all these promises is to cut nondefense programs by 50 percent.

In other words, Romney wants to get rid of half of everything the government does, except Social Security and the military.

Half of our schools. Half of our national parks. Half of our federal law enforcement. Half of our food safety. Half of our clean air. Half of our veterans’ health care. Gone. Forever.

And Romney is no exception. If anything, his proposal is tame in comparison. Newt Gingrich’s proposal, for example, would cut taxes by $850 billion. You can just imagine the carnage.

In Tuesday night’s State of the Union address, President Obama staked out the opposite position, asking Congress to raise taxes slightly on millionaires and to use half the savings from ending the wars in Iraq and Afghanistan to reduce the budget deficit. The other half he pledged to public infrastructure projects.

And not a moment too soon.

Over the last fifty years, infrastructure spending has steadily fallen as a share of the economy. We now spend 2.4 percent of GDP on transport and water infrastructure, compared to 5 percent in Europe and 9 percent in China.

According to government reports, one in four bridges need significant repairs or are bearing more traffic than they were designed for. 700 water pipes burst every day because they’ve worn out. One in three roads are in substandard condition, increasing traffic fatalities, congestion, and gas emissions. 1,300 dams have been designated “high-hazard,” meaning they could fail and result in fatalities. We spend $50.6 billion every year just to clean up spills from old sewage systems.

In recent years, state and local governments, which contribute the vast majority of infrastructure spending, have shrunk significantly in the wake of unprecedented budget shortfalls. The federal government needs to step up, but the Republican candidates would rather scale down.

There will never be a better time to rebuild our infrastructure. Millions of Americans desperately need jobs. The government can borrow at near-zero interest rates.

We’ve been here before.

In 1935, with unemployment at 20 percent, the government created the Works Progress Administration. Over the next eight years, the WPA provided eight million jobs. It built or renovated 560,000 miles of roads, 20,000 miles of water pipes, 417 dams, 2,700 firehouses, 5,000 schools, 1,800 hospitals, 2,000 stadiums, 1,800 runways, and 6,000 fire and forest trails. By 1941, before the United States entered World War II, unemployment had fallen to 6 percent.

We can do it again.

Or we can go back to the nineteenth century. We can go back to a world without paved roads or bridges or clean water, with one-room schoolhouses spaced many miles apart and hospitals that took hours to reach. We can go back to the days when sewage was untreated and floods overwhelmed many towns, when recessions were more frequent and unemployment rose more sharply.

We can go back to small government, if we’re willing to give up our way of life.

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This op-ed was published in today’s South Florida Sun-Sentinel.

Posted in From the Editor's Desk.

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Quote of the Day: Kevin Carey

For a growing number of students, entering the lucrative college-educated realms of the economy is like being smuggled across the border — you can get to the promised land if you try hard enough, but you arrive in a state of indentured servitude to the shady operators who overcharged you for the trip.

– Kevin Carey (Education Sector)

Posted in Witty Ditty.

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Screw the FCC… Bring Back the Antitrust Division!

by Norman Horowitz

If a part of our media seems good to me,
It’s the radio, the newspapers, and free TV.
Cable would be better without Fox, you see,
‘Cause I just need CNN and MSNBC.
CBS and Comcast still have a ball
‘Cause the FCC allows them to have it all.
Disney and Viacom, they want it too,
As long as the FCC lets them screw
The public sector that moans and cries
When all they get from NewsCorp are great big lies.
Warner Brothers want more of it too,
While Americans like me and you
Suffer from the power of all of them.
They want it all and they says amen
To rules and regs; they got their way.
Too bad about the public; they can always pray
To a God who is not with us, not here, not now
It’s with money and power that they all know how
To con the system, and they always want more,
And the politics of it all are just a bore.
What you watch and what you see
In the movies and on TV
Comes from a system that got that way
‘Cause money wants company and will always hold sway.

FCC Chairman Julius Genachowski wants to change federal rules that limit companies from owning TV and radio stations in the same market. For a bonus, he also wants to do the same for TV stations and newspapers. He’s circulating a Notice of Proposed Rulemaking that would eliminate the TV/newspaper restriction in the 20 largest markets. Genachowski’s proposal is similar to what the former FCC Chairman Kevin Martin pushed through in 2008.

I say: Bring back competition, diversity, and localism!

Posted in Hollywood Insider.

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It’s the Housing Bubble, Stupid!

A few years ago, we had a housing bubble. Have you heard? Apparently, many writers haven’t.

Check the major newspapers. Everyone is writing about the economy. For almost five years now, they’ve been predicting strong economic growth just around the corner. And for almost five years, they’ve been wrong. Stumped. Surprised.

The recession ended three years ago, they say. How can unemployment still be so high? How can growth be so slow?

So they make up explanations, usually political. Their economic models failed. Their credibility is in doubt. They must blame someone else. So they blame the government.

Taxes are too high, they say, even though taxes are lower than they were before the recession. Regulations are too strict, they say, even though corporations are making record profits. The stimulus slowed growth, they say, even though it created or saved over 3 million jobs.

And they never mention the housing bubble. Even though everyone and their dog knows that the collapse of the housing bubble caused the recession.

From the end of World War II to the late 1990s, housing prices tracked inflation. There were booms and busts in the 1970s and 1980s, but they always came back to the same long-run average. Then, from 1998 to 2006, they rose approximately 90 percent, after adjusting for inflation. They’ve been falling ever since.

Real housing prices are now about 10 percent above their long-run average, as is the price-to-rent ratio. Which means they still have further to fall, but we can finally see the light at the end of the tunnel.

If you’ve taken Econ 101, you’ve probably heard of the “housing wealth effect.” It says that, for every dollar that housing wealth declines, consumption shrinks by 5 to 7 cents. Since the peak of the housing bubble, we’ve lost almost $8 trillion in housing wealth. That’s $400 to $560 billion less consumption. And that doesn’t include indirect effects, like the resulting stock market decline, which lost another $4 trillion in wealth.

It takes an even bigger chunk out of overall output when you add residential investment, which fell 24 percent in 2008, 22 percent in 2009, and 4 percent in 2010.

Given that knowledge, it’s hard to imagine anyone predicting a strong economic recovery while housing prices still have further to fall.

But the housing market is improving. Residential investment has started to grow again, as has construction employment. Whereas there was a huge glut of unsold homes in 2009, that inventory is almost back to normal levels. Existing home sales have been increasing for the last six months, though new home sales are still stuck near their post-recession low.

The decrease in unemployment is what everyone is talking about, but it’s mostly due to people dropping out of the workforce — being so discouraged that they stop looking for work — rather than a significant increase in jobs. The number of job openings was unchanged in November. 200,000 new jobs in December may sound like a lot, but it would take 100 more months just like it – that’s 8 years — to return to full employment.

A lot is riding on a turnaround in the housing market, including Barack Obama’s re-election. If the administration wants to increase its odds of staying in the White House, it’s not taxes or regulations or government spending that need easing. It’s struggling homeowners.

They can start by appointing an FHFA director who will encourage borrowers with government-backed loans to refinance at lower interest rates. And they need to be more aggressive in investigating widespread mortgage servicing fraud at major lenders.

We are nearing the end of the Great Housing Bubble. It has gone up, and now it’s almost done coming down. Let’s hope we learned our lesson…at least for a little while.

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This op-ed was published in yesterday’s South Florida Sun-Sentinel.

Posted in From the Editor's Desk.

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Doggies

by Norman Horowitz

When I was about three or four years old, my parents got a wire hair terrier that we named Daisy.

Daisy was the smartest dog I’ve ever come across, but to balance out the brilliance of the dog, she was very high strung…or just plain crazy.

My first experience of paranoia (but certainly not my last) was my being convinced that Daisy hated me. I still believe that, whenever my Mother wasn’t around, Daisy would try to bite me. When I took her for a walk, if I wanted her to go right, I needed to pretend that I wanted to go left.

In later life, my Father and I wanted a dog. We purchased a Welch terrier that we named…Daisy. This Daisy was less smart but less nuts than Daisy #1.

Years later, when our son Steve was born, he was “the second child” in our family — Daisy was the first — and he was so enchanted with the dog that he wanted to help her by removing an ear or her tail. As you can imagine, Daisy wasn’t thrilled by this activity. Ergo, Daisy had to go.

In the late ’60s, I met and fell in love with a Maltese named Chatty who belonged to Pat and Ken Page. Chatty was a tiny, bright, and pretty dog, but I was most impressed that Chatty would hump everything he possibly could.

After a begrudging approval from my wife, I went to see the breeder who had sold Chatty to the Page’s.

I fell in love with a two-pound ball of white fluff named, would you believe, Floriana Annabelle. I forgot the Florianna, and she became just Annabelle, a name that suited her — even though my children quickly renamed her Anna, or at times Annear’s.

Annabelle traveled to New York from London on Pan American Airlines sitting in the empty first class seat next to me. She was a great chick magnet. Almost all of the passengers came to pay her a visit.

Everyone loved Annabelle, and she became a major part of our family. When Eileen would go to sleep, Annabelle would jump up on her bed and sleep on her pillow, above her head. When Steve would go to sleep, Annabelle would repeat the activity.

It seemed to take only a moment or two for my children to go off to college, for my wife and I to get divorced, and for my beloved Annabelle to die.

Then one day I met and fell in love with Valerie.

Valerie had recently returned to California from Steamboat Springs, Colorado, along with her two doggies, Pearl, an eight-year-old black lab, and Jerry, a six-month-old golden doodle. Jerry was smart, playful, crazy, clever, stupid, brilliant, and incredibly, incredibly adorable.

When Valerie died two years ago, the two loves of my life went away, as Jerry moved back to Colorado.

I remain dog-less.

I’m one of the few people in the world who doesn’t have a dog and keeps two boxes of dog biscuits in the cupboard and one box in my car.

I have a wonderful five-year-old granddaughter, Josie, in New York. Josie’s family has two cats. She and I have developed the following routine:

GRANDPA: Josie, what is grandpa going to get for you?

JOSIE:  An ENOURMOUS doggie.

GRANDPA: Josie, what will the ENOURMOUS doggie have?

JOSIE: Gigantic sharp teeth.

GRANDPA: And what will this ENOURMOUS doggie with the gigantic sharp teeth do?

JOSIE: Eat the kitties.

I know, I know, what a terrible thing for me to do, but we all know it’s all in fun, and Josie and I laugh when we do the routine.

We also laugh because I hardly ever use the word “dog” or “dogs.” I’ve chosen to call them “doggies.”

Posted in Hollywood Insider.

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