Don’t Attack Big Government Until You’ve Done the Math

“We have to get rid of Big Government,” said a friend of mine recently, as if it was obvious. I looked around the table and saw only nodding heads.

So I asked my friend: What exactly do you want to get rid of? Social Security? Oh no, she said.

Medicare? No. Medicaid? No. The Children’s Health Insurance Program? No. The Defense Department? No.

Then you don’t want to get rid of Big Government.

Those five programs make up two-thirds of the federal budget. They are Big Government, and the American people love them — even most of the people who say, “We have to get rid of Big Government.”

Of course, that’s not what she meant. When she said “Big Government,” she wasn’t talking about those programs.

She was talking about Obamacare, which will account for 3 percent of the federal budget in the coming decade. She was talking about food stamps, which comprise another 2 percent of the budget. She was talking about welfare, which takes up a whopping 0.4 percent.

I hope she wasn’t talking about the Department of Education, but even if she was, its budget is roughly the same as the amount allocated to food stamps.

So anyone who thinks they can “get rid of Big Government” by attacking these programs is either uninformed, lying, or very bad at math.

It’s exactly this kind of misunderstanding that allows politicians to foist their radical agendas on an unwilling public.

Witness the “sequester” debate. Why is the government planning to cut its spending by $1 trillion over the next decade, starting with an $85 billion cut to this year’s budget that takes effect on March 1? Because people are somehow under the impression that it has grown too big.

It’s hard to square that belief with this week’s report from the Congressional Budget Office. It shows the size of our federal government relative to the overall economy, and believe it or not, it’s been shrinking for many years!

This year, the federal government will spend 22 percent of our nation’s income, the same as it did in 1981. In fact, throughout most of Ronald Reagan’s two terms in office, federal spending was higher, as a percent of our nation’s income, than it is today.

It wasn’t until Bill Clinton came into office that our government made a consistent effort to shrink the size of government. Remember Clinton’s 1996 State of the Union? “The era of big government is over.” It sure was. By the end of his term, the federal government spent less money, relative to the size of the overall economy, than at any time since the mid-1960s.

George W. Bush reversed that trend, but even Bush’s government paled in comparison to Reagan’s. In 2007, federal spending was 19.7 percent of our nation’s income, a far cry from the peak of 23.5 percent in 1983.

That’s a quarter of a century during which our federal government was smaller than it used to be.

That ended with the Great Recession, of course. When Bush left office, he handed over the reins to 24.4 percent of our nation’s spending.

But most of that increase was temporary. Just as economists predicted, that number has fallen, and it will continue to fall as the economy improves and grows faster than the government.

And that’s why the sequester is a misguided attempt to fix an illusory problem. The federal government has not gotten bigger in the last three decades, and it’s only getting smaller.

There is one part of the budget that’s been growing, however, and that’s health care. As medical costs grow faster than inflation, so do the budgets of Medicare, Medicaid, and CHIP. If you want to slow the long-term growth of the government, that’s the problem you have to solve.

But don’t take it out on innocent programs that have nothing to do with the budget deficit and even less to do with so-called “Big Government.”

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

The Great “Fiscal Responsibility” Hoax

You’re probably worried about the federal budget deficit. Seven out of every ten American voters say the deficit plays a “very important” role in deciding whom to vote for.

And you probably think that Mitt Romney is the candidate who would do a better job of reducing the deficit. In this category, voters favor him over Obama, 51 to 37. That’s a big gap, considering the national polls are a statistical tie.

Even the South Florida Sun-Sentinel believes the hype. One of the reasons they gave for endorsing Romney was to “exercise…fiscal discipline” and “get government spending under control.”

They’ve been had. You all have.

The belief that Republicans are more fiscally conservative than Democrats is an old one. It’s so deeply ingrained in the American myth that it’s hard to know where it started. But it’s completely, factually, undeniably wrong — and has been so for awhile.

In their book Presimetrics: What the Facts Tell Us About How the Presidents Measure Up On the Issues We Care About, economist Mike Kimel and journalist Michael E. Kanell calculate the change in government spending under every president from Dwight Eisenhower to George W. Bush.

They found that government spending, relative to the size of the economy, increased much faster under Republican administrations than under Democratic ones. George W. Bush presided over a greater increase in government spending than any president since Lyndon Johnson, and George H.W. Bush wasn’t far behind. Bill Clinton, in contrast, was the only president since Eisenhower to actually reduce government spending. Even Reagan didn’t do that.

Since Mitt Romney has promised to increase the Pentagon budget by $2 trillion over the next decade, I find it hard to believe that he would be any different from his Republican forebears.

Kimel and Kanell also report how the budget deficit fared under each president. Here’s where the “fiscal responsibility” myth really falls apart: The Republicans increased the deficit, while the Democrats reduced it!

The least “fiscally responsible” administrations were Bush Jr., Bush Sr., Ford, and Nixon. The most deficit reduction came under Clinton and — believe it or not — Jimmy Carter.

In fact, the only presidents in this group who added to our national debt burden were Reagan and the two Bush’s. Everyone else presided over a decline in government debt, relative to the size of the economy.

For goodness sake, they said so straight to your face.

“I am not worried about the deficit,” said Reagan. “It is big enough to take care of itself.”

“Deficits don’t matter,” said Dick Cheney.

So, when economists complain over and over and over that Romney’s math doesn’t add up, they’re not just making an academic point. When Obama asks him how he’d pay for a $5 trillion tax cut, the fact that he can’t answer — the fact that every fact-checker in the known universe has said that his tax plan will blow up the budget deficit — is a flashing red warning sign that he will do what Republican presidents have been doing for half a century.

Which brings me to his opponent, Barack Obama.

On January 7, 2009, two weeks before Obama was sworn into office, the Congressional Budget Office reported that George W. Bush was bequeathing a budget deficit of $1.2 trillion. This year, the deficit is $1.3 trillion.

In other words, 92 percent of the deficit that everyone blames on Obama was actually inherited from his predecessor.

Here are the facts: In Reagan’s first term, government spending grew 8.7 percent per year. In his second term, it grew 4.9 percent per year. Under Bush Sr., 5.4 percent per year. Under Clinton’s two terms, 3.2 percent and 3.9 percent. Under Bush Jr., 7.3 percent and 8.1 percent.

Got all those numbers? Okay. Brace yourself. Under Obama: 1.4 percent.

Our current budget deficit has nothing to do with out-of-control Democratic spending and everything to do with a massive recession, tax cuts, two wars, and a scare campaign that Republicans have been successfully waging for decades to cover up their serial fiscal irresponsibility. Whether you let them fool you again is entirely up to you.

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

The Charming Republicans: Issa, Ryan, and Cantor

by Norman Horowitz

In 1960, at Screen Gems International, I met a “tall, dark, and handsome” man named Larry Hilford.

Larry was very smart and very charming when he wanted to be. He was a Yale graduate, as well as a Harvard MBA, all of which I could tolerate. But I will never forgive him for his “movie star” good looks.

Larry and I both worked for Lloyd Burns, a South African/Canadian who was the personification of “two faced.” Lloyd had a farbissina punim, which, loosely translated from Yiddish, means that he was sourpuss. He saved his farbissina punim for people like me and other junior staff people. He was at his charming best when with our major customers and senior management.

Yes, he was smart, but to me smart is not enough for an executive (or politician) to function as effectively as possible.

Larry and Lloyd were a study in contrasts. Larry would cringe when anyone called him a salesman, but that’s what he was: a well educated man of vision who could sell what he believed.

I have noticed in my career that people like Larry, an actual operating executive and salesman, were not then, nor are they today, respected as they should be. America has bought into the notion that MBAs and lawyers are somehow qualified to run operating divisions or companies. Nowadays, it seems that senior management executives are mostly operationally inexperienced and sport their farbissina punims as a badge of honor.

The combination of intellect and charm and operating experience matters, and to me the political poster child for this would be Bill Clinton.

Antithetical to this would be Congressmen Eric Cantor, Paul Ryan, and Darrell Issa.

While I never agreed with the policies of the Bush boys or Ronald Reagan, none of them could be referred to as having a farbissina punim. The same cannot be said of these three infantile Republican Congressmen who, not too long ago, were setting sail for a witch hunt against Eric Holder, while a good deal of the world is falling apart.

Much to the chagrin of many of my Republican friends, our President Barack Obama is bright, charming, and ingratiating, and I would ask those who might be open to it to compare the countenance of Barack Obama to our three resident farbissina punim champions, Darrell Issa, Paul Ryan and Eric Cantor.

I’m reminded of my days at MGM, where I was accused of being a bad manager because I was “too nice.”

Welcome to America.

The Myth of the Lazy Poor

On his recent trip to Israel, Mitt Romney attributed the poverty of the Palestinians to their “culture,” citing the work of economic historians David Landes and Jared Diamond. Middle East experts have rightly denounced Romney’s remarks as racist, ignorant, and untrue. Jared Diamond himself took to the op-ed page of the New York Times to set the record straight: “That is so different from what my book actually says that I have to doubt whether Mr. Romney read it.”

This kind of claim is common among our political elite. We regularly hear accusations against the “culture of poverty” on our own shores, ranging from the famous Moynihan Report in 1965 to the so-called “welfare queen” that Ronald Reagan created to get elected. The inverse is equally common. Peruse your local bookstore, and you’re bound to find half a dozen authors attributing the rapid growth of China (or, a few years ago, Japan) to their unique Eastern brand of capitalism.

But these stereotypes — good and bad — are hardly ever true, as proven by this excerpt from Cambridge development economist Ha-Joon Chang’s eye-opening book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism:*

Having toured lots of factories in a developing country, an Australian management consultant told the government officials who had invited him: “My impression as to your cheap labor was soon disillusioned when I saw your people at work. No doubt they are lowly paid, but the return is equally so; to see your men at work made me feel that you are a very satisfied easy-going race who reckon time is no object. When I spoke to some managers they informed me that it was impossible to change the habits of national heritage.”

This Australian consultant was understandably worried that the workers of the country he was visiting did not have the right work eithic. In fact, he was being quite polite. He could have been blunt and just called them lazy. No wonder the country was poor — not dirt poor, but with an income level that was less than a quarter of Australia’s.

The country in question…was Japan in 1915. It doesn’t feel quite right that someone from Australia (a nation known today for its ability to have a good time) could call the Japanese lazy. But this is how most westerners saw Japan a century ago.

In his 1903 book, Evolution of the Japanese, the American missionary Sidney Gulick observed that many Japanese “give an impression…of being lazy and utterly indifferent to the passage of time.” Gulick was no casual observer. He lived in Japan for 25 years (1888-1913), fully mastered the Japanese language, and taught in Japanese university. After his return to the US, he was known for his campaign for racial equality on behalf of Asian Americans. Nevertheless, he saw ample confirmation of the cultural stereotype of the Japanese as an “easy-going” and “emotional” people who possessed qualities like “lightness of heart, freedom from all anxiety for the future, living chiefly for the present.” The similarity between this observation and that of today’s Africa, in this case by an African himself — Daniel Etounga-Manguelle, a Cameroonian engineer and writer — is striking: “The African, anchored in his ancestral culture, is so convinced that the past can only repeat itself that he worries only superficially about the future. However, without a dynamic perception of the future, there is no planning, no future, no scenario building; in other words, no policy to affect the course of events.”

After her tour of Asia in 1911-1912, Beatrice Webb, the famous leader of British Fabian socialism, described the Japanese as having “objectionable notions of leisure and a quite intolerable personal independence.” She said that, in Japan, “there is evidently no desire to teach people to think.” She was even more scathing about my ancestors. She described the Koreans as “12 millions of dirty, degraded, lazy, and religionless savages who slouch about in dirty white garments of the most inept kind and who live in filthy mudhuts.”

This was not just a western prejudice against eastern peoples. The British used to say similar things about the Germans. Before their economic take-off in the mid-19th century, the Germans were typically described by the British as “a dull and heavy people.” “Indolence” was a word that was frequently associated with the Germanic nature. Mary Shelley, the author of Frankenstein, wrote in exasperation after a particularly frustrating altercation with her German coach-driver: “the Germans never hurry.” It wasn’t just the British. A French manufacturer who employed German workers complained that they “work as and when they please.”

The British also considered the Germans to be slow-witted. According to John Russell, a travel writer of the 1820s, the Germans were a “plodding, easily contented people…endowed neither with great acuteness of perception nor quickness of feeling.” In particular, according to Russell, they were not open to new ideas; “it is long before [a German] can be brought to comprehend the bearings of what is new to him, and it is difficult to rouse him to ardor in its pursuit.” No wonder that they were “not distinguished by enterprise or activity,” as another mid-19th century British traveler remarked.

Germans were also deemed to be too individualistic and unable to cooperate with each other. Once again, compare this with a comment by the African observer that I quoted above: “African societies are like a football team in which, as a result of personal rivalries and a lack of team spirit, one player will not pass the ball to another out of fear that the latter might score a goal.”

British travelers in the early 19th century also found the Germans dishonest — “the tradesman and the shopkeeper take advantage of you wherever they can, and to the smallest imaginable amount rather than not take advantage of you at all… This knavery is universal,” observed Sir Arthur Brooke Faulkner, a physician serving in the British army.

Ever since the East Asian economic “miracle,” it has become very popular to argue that it was Confucian culture that was responsible, at least partly, for the region’s economic successes. Confucian culture, it was pointed out, emphasizes hard work, education, frugality, cooperation, and obedience to authority.

But, before the East Asian economic “miracle,” people used to blame Confucianism for the region’s underdevelopment. For Confucianism does have a lot of aspects that are inimical to economic development.

Confucianism discourages people from taking up professions like business and engineering that are necessary for economic development. At least in theory, individual peasants could gain entry into the ruling class if they passed the competitive civil service examination (and they occasionally did). Artisans and merchants, however, were not even allowed to sit for the examination.

To make matters worse, the civil service examination only tested people for their scholastic knowledge of the Confucian classics, which made the ruling class scornful of practical knowledge. Scholar-bureaucrats were supposed to live in “clean poverty”…and thus they actively looked down upon money-making.

Confucianism also discourages creativity and entrepreneurship. It has a rigid social hierarchy and, as I have noted, prevents certain segments of society (artisans, merchants) from moving upwards. This rigid hierarchy is sustained by an emphasis on loyalty to superiors and deference to authority, which breeds conformism and stifles creativity.

We can perform the same exercise with any culture’s belief system. Take the case of Islam.

Muslim culture is today considered by many to hold back economic development.

Alternatively, we could say that, unlike many other cultures, Muslim culture does not have a fixed social hierarchy… Therefore, people who work hard and creatively are rewarded. Moreover, unlike in the Confucian hierarchy, there is no disdain for industrial or business activities. Muhammad, the Prophet, was a merchant himself. And being a merchant’s religion, Islam has a highly developed sense of contracts… This orientation encourages the rule of law and justice — Muslim countries had trained judges hundreds of years before Christian countries. There is also an emphasis on rational thinking and learning — the Prophet notably said that “the ink of the scholar is more sacred than the blood of the martyr.” This is one of the reasons why the Arab world once led the world in mathematics, science, and medicine.

All this is not to deny that how people behave makes a difference to economic development. But the point is that people’s behavior is not determined by culture.

People from rich countries routinely believe that poor countries are poor because their people are lazy. But many people in poor countries actually work long hours in backbreaking conditions. What makes them appear lazy is often their lack of an “industrial” sense of time. When you work with basic tools or simple machinery, you don’t have to keep time strictly. If you are working in an automated factory, it’s essential. People from rich countries often interpret this difference in sense of time as laziness.

It is true that there are a lot more people “lazing around” in poor countries. But is it because those people culturally prefer lounging about to working hard? Usually not. It is mainly because poor countries have a lot of people who are unemployed or underemployed (i.e., people may have jobs but do not have enough work to occupy them fully). This is the result of economic conditions rather than culture. The fact that immigrants from poor countries with “lazy” cultures work much harder than the locals when they more to rich countries proves the point.

As for the once much-vaunted “dishonesty” of the Germans in the past, when a country is poor, people often resort to unethical, or even illegal, means to make a living. Poverty also means weak law enforcement, which lets people get away with illegal behavior, and makes breaking the law more “culturally” acceptable.

“Living for today” or being “easy-going” — words that many people associate with Africa and Latin America nowadays — are also the consequences of economic conditions. In a slowly changing economy, there is not much need to plan for the future; people plan for the future only when they anticipate new opportunities (e.g., new careers) or unexpected shocks (e.g., a sudden inflow of new imports). Moreover, poor economies offer few devices with which people can plan for the future (e.g., credit, insurance, contracts).

In other words, culture changes with economic development. It would be far more accurate to say that countries become “hardworking” and “disciplined” (and acquire other “good” cultural traits) because of economic development, rather than the other way around.

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*This excerpt has been lightly edited to accommodate American spellings and this blog’s punctuation style.