THE WISDOM OF KENNY ROGERS

Kenny Rogers put it this way: ". . . you gotta know when to fold 'em." It is with regret that this blog is folding. It started as a way to write some 50-year later postings based on John Steinbeck"s l962 book, TRAVELS WITH CHARLEY. But it very quickly evolved into fact/opinion pieces on events here and abroad, with a liberal tilt.

Lately I found myself increasingly cynical about where we are at politically and policywise and what to me the future portended. And, increasingly, I was writing about the Republican mantra on taxes and spending while also hearing what seemed like an evolving Democratic mantra on the same subjects. It got to the point where I was creating my own hypercynical mantra on these and other subjects like the setbacks for U.S. policy in the post-Arab Spring world.

So, because of the self-created mantra combined with the intellectual fatigue that accompanies chronological aging, the time seemed right to shut up, fold my cards, and silently slip away.

I'd like to thank my readers and those who felt there was enough said in some postings to warrant a comment in agreement or disagreement. I'd particularly like to thank my daughter who set up the blogsite and performed a variety of techie tasks as needed.

So thank you all and best wishes.

Charlie

"CLASS WARFARE" -- "BRING 'EM ON"

The Republicans call it "class warfare". That is their reaction to any proposals to increase the taxes on the wealthy in any way, shape, or form. "Class warfare" is also their smokescreen for greed and a shield used by the GOP as political protection when the party sides with the wealthy and large corporations on any issue. The political corollary for "class warfare" is cut the spending for everybody else's programs.

So let it be called "class warfare" and let's get on with it.

President Obama has proposed several ideas for increasing taxes on the wealthy, particularly ending the Bush tax cuts at the end of 2012 for upper income earners and cutting off tax gifts for the oil industry and other large corporations. These presidential proposals have been around since Obama took office in 2009 but have gotten nowhere because of GOP intransigence on any tax increases. To that basic proposal has now been added the so-called Buffet rule (after financier Warren Buffet) which would be some form of calculation to make sure that those with annual income over $1 milliion pay something at least equivalent to taxes paid by the middle class.

To me a central feature of Obama's most recent ideas is capping itemized deductions of the wealthy at 28 percent, 11 percentage points below what would be the top tax rate if the Bush cuts for the wealthy were allowed to expire. Capping deductions gets at the sensitive problem of what to do about so-called tax loopholes such as deductions for property taxes, interest on mortgage payments, and charitable contributions. These deductions are very popular with the middle class as well as the wealthy and proposals for outright elimination is virtually impossible politically, short of a whole new flat tax rate scheme. So capping deductions for the wealthy alleviates that problem. A recent posting gave an example of how the capping would work on a mortgage interest deduction for a large, luxury home:

If a person in the top 39 percent tax rate bracket pays a mortgage interest of $20,000 per year, he saves $7,800 on his itemized deduction, but by limiting total itemized deductions to 28 percent, the return to the rich homeowner is reduced to $5,600. Thus, increasing the taxes of the wealthy is not solely reliant on the tax rate itself, but also ending the large revenue leakage that occurs by the rich using the itemized deductions as a means of getting richer.

All of this still leaves the problem of defining the income of the wealthy. The Buffet Rule proposal allows Obama to set millionaires as a specific target. But in my view, expressed several times previously, defining "wealthy" as $200,000 income for a single person and $250,000 for a married couple filing jointly sets the threshhold much too low. With high living costs in some areas, and with kids in college as pointed out by a reader, these levels don't realistically reflect "wealth". If Obama is to have any prospects for ending the upper end Bush tax cuts, the President and his Democratic congressional colleagues will have to change these levels upward. This would mean less revenue but give the Democrats a better, but still not good, chance of ending some of the Bush tax cuts.

This brings me back to the GOP assertion about "class warfare". I'm not given to quoting George Bush but in this case it would be in order to use his injudicious comment made early in the Iraq war -- "Bring 'em on". If the "class warfare" charge is taken into the larger public realm, the term "class warfare" will soon be seen for what it really is. It is not, as originally conceived, the upper and middle classes versus the lower income groups, but the upper class enriching itself at the expense of both the middle and lower income groups.

AT HOME AND ABROAD (ISRAEL)

To me it sounds like we're still sitting on square one. As noted in the last posting, President Obama proposes to have some tax increases as part of his plan to pay for his jobs program. And perhaps even bigger changes in the tax code to fund a long term plan for deficit reduction.


That having been said, GOP House Speaker Boehner said a few days ago that he would accept no tax increase proposals from the Super Committee set up about 7 weeks ago to reduce current deficit spending by $1.2-1.5 trillion and permit an equal increase in the national debt ceiling. To that amount Obama has proposed adding the $450 billion cost of his jobs program, pushing the Super Committee's target up to close to $2 trillion. The Committee is to send its plan to Congress by Thanksgiving. Boehner apparently has no problem with this as long as the Committee rejects any new spending and meets the target through cuts in expenditures only.


So it sounds like we are back to where we were in August, and before, when Congress was dealing with funding the federal government for the remainder of fiscal 2011 and then struggling with raising the debt ceiling to avoid a national fiscal default. In short, we can expect a rerun of the same deficit/debt/new revenues arguments that we heard all summer. The latest poll gave Congress a 12 percent approval rating. Can it go lower? And what about Obama's approval rating?


0-0-0-0-0-0


If the above combination of fact and opinion isn't depressing enough, what seems to be lying ahead in the United Nations may be equally discouraging for U.S. policy and Israeli political isolation. The U.S. image in the Muslim world may suffer another downward slide when Palestinian President Abbas asks the U.N. Security Council to grant full U.N. membership to the Palestinians. That is certain to draw a U.S. veto and bring with it new denunciations from the Muslim world and some others about U.S. policy in the Middle East. That pro-Israeli policy has been a huge problem for the U.S. since Israel was established through a U.N. vote in l948.


The Palestinians plan to backup the certainty of a U.S. veto in the Security Council by going to the General Assembly for a majority vote there to upgrade its observer status. The change would permit it to participate in various U.N. organs and possibly bring legal action against Israel. Whatever action the U.N. may take, it involves the status of the Palestinians within the international organization. It does not involve establishment of Palestine as an independent state.

Adding to the sensitivity of the problem is Israeli Foreign Minister Lieberman, a far right member of the governing coalition, who threatened that the Palestinian U.N. strategy could lead to "dire consequences". What these consequences might be were undefined but formal annexation of Israeli settlements on Palestinian territory into the state of Israel is one possibility. Whatever the "dire consequences" may be, the end result of all of this will be some form of international condemnation by many countries of Israel and add further to the political isolation of that country.

The growing isolation was evidenced most recently by Turkey, a one time close ally of Israel, booting out Israel's top diplomats. The degrading of Turkish-Israeli relations is rooted in the killing of nine Turks during an effort by an international group to break the Israeli blockade of Gaza by trying to bring in a shipload of relief supplies. Others have suggested that the deterioration of relations is a sign that Turkey, governed by a Mulim based party, is sliding toward closer relations with Islamic fundamentalists.

Adding to the increasing isolation of Israel was the recent incident on the Egyptian-Israeli border when people from both sides were killed by gunfire. That was followed by an attack on the Israeli embassy in Cairo and Israel's withdrawing its diplomats. Israel has expressed regret for the border incident and is investigating but no apology has been made. The lack of an apology to Turkey for the blockade-running incident is the ostensible reason for the breakdown in those relations.



And just last week Turkish Prime Minister Erdogan visited Cairo, along with Tunisia and Libya, to demonstrate Turkey's growing role in that part of the Arab world. The Cairo meeting might also fortell further problems between Israel and both Egypt and Turkey. Israel's relations with Egypt were already in trouble following the ouster of President Mubarak who supported Israel in a variety of ways and stood by the peace treaty between the two countries.


So at home and in the Middle East, there seems to be more more clouds gathering.

AND NOW THE PAYING-FOR-IT PLAN

Having served up his lite job creation program, President Obama has now turned his attention to paying for it, a very touchy political subject because of GOP intransigence on no tax increases. The core piece of Obama's paying-for-it plan is to allow the so-called "temporary" (now about 10 years old) Bush tax cuts to expire at the end of next year. A few things are immediately to be noticed.


1. Allowing the tax cuts for the wealthy to expire and revert to the 36 and 39 percent rates would bring in future revenues far greater than needed for the under $500 billion jobs program. That would be a big plus for dealing with the long term problem of reducing deficit spending and slowing down the accumulation of debt.


2. One big problem beyond the GOP no-tax-increase-for-anyone mantra is that Obama continues to define the wealthy as a single earner with income above $200,000 and a married couple earning over $250,000. Hardly levels of wealth if you live in one of the high cost areas of the country such as New York, Boston, or San Francisco. There are many, including myself, who regard these levels as too low. The ideal might be a $1 million level as the definition of wealthy so you could say you are going after the millionaires. On the other hand, the $1 million level would reduce the amount of new revenues so badly needed. So somewhere between $250,000 and $1 million might make a good compromise point for concerned Democrats; there is little or nothing that can be done about the GOP opposition on new revenues from tax increases.


3. The new revenues proposed by Obama also extend to altering some of the innards of the tax code. He would limit itemized deductions of the $200,000-$250,000 "wealthy" to 28 percent of taxable income. For example, if the itemized deductions were left untouched, a person in the 39 percent bracket paying a mortgage interest of $20,000 in 2014 on his/her very large luxury home would have a $7,800 deduction on that interest. By limiting itemized deductions to 28 percent, the tax deduction would be limited to $5,600.


Other changes in the tax code would tax hedge fund managers income at the ordinary income rate, say 39 percent, rather than the 15 percent capital gains rate now used. And tax subsidies of $40 billion to the oil industry would be eliminated, as well as some other tax benefits for large corporations.


4. All of this means an immediate replay of the politics of yesteryear when Obama made very similar proposals and failed even with Congress under Democratic control. Thus, with the House now controlled by the GOP, his prospects for success are not exactly encouraging.


What is puzzling, however, is that he is willing to make the big tax increase push despite its dim political prospects, while he apparently was not willing to step forward and be equally bold on his job creation program. Like the covert operations of the CIA, we can only hope he knows something we don't know. But I doubt it.

COOKING LITE

Much has already been written and/or said about President Obama's job creation speech before Congress on Thursday night. So this posting is my random observations on his various proposals.

1. It is certainly a job-creation lite or ultra lite proposal. I don't like lite beer and it is difficult to be enthusiastic about his lite offering. With a total cost of under $500 billion it certainly seems too anemic to deal meaningfully with the severity of the nation's unemployment and underemployment problem. And almost half of what he did propose was in the form of another reduction of the payroll/social security tax for employees and to a lesser extent for employers.

The larger payroll tax cut for another year has the same goal as the smaller current reduction of 2 percentage points, due to expire at the end of this year. The cut for the next year would be 3.1 percentage points, half of the tax. The argument for the reduction is that the added money on the paycheck will increase consumer spending and thus give the economy a boost. Adding to that supposed spending power is Obama's request for another extension of unemployment assistance, estimated to cost $49 billion. To the extent that there would be any boost by these two proposals, it would certainly be a small one given the size of the American economy. Also, much of the added spending will be diverted toward paying off credit cards or helping with the mortgage or car payment, none of which will help boost consumer spending and create jobs.

As to the rest of the package, it is broken up into so many small parts, it is difficult to imagine any significant impact. Gone is the idea of a huge job creation stimulus in the form of a large infrastructure building and repair program. Instead there is a $10 billion request to set up a revolving loan fund for private sector borrowing for infrastructure, plus $50 for surface transportatiion projects, and another $25 billion to modernize schools and vacant properties.


In short, where's the beef?

2. Having said the above and giving a much too-lite slant to the Obama plan, that perspective must be matched by the view that even some of the smaller pieces of the package will run into the standard GOP opposition to any new spending. Most Republicans have set their feet in concrete when it comes to adding any new spending programs. That intransigence may partly explain why Obama didn't have a beefier proposal. Except for any value in political posturing a huge infrastructure proposal may have entailed, the political futility of offering such was obvious. If you anticipate big trouble with getting less than $100 billion in new spending past the GOP, what's the point in going for $500-600 billion? Which brings up another observation.

3. Obama has proposed that his under $500 billion program be incorporated into the work of the Super Committee in Congress which is madated to produce $1.2-1.5 trillion in spending cuts by the end of November to allow an equal amount to be added to the national debt ceiling. If the Super Committee goes with the Obama request, it will mean the cuts and/or possible revenue increases would have to total close to $2 trillion, thus adding to the already considerable political problems of the bipartisan House and Senate group. But the complications don't stop there.

4. Obama has said he would have his own plan ready for the Super Committee on September 19, a plan that is almost certain to include revenue-producing tax reform and perhaps modest concessions on medicare and medicaid funding. Such tax reforms are likely to be interpreted immediately as tax increases by the GOP, and thus be greeted with an absolute no, no. Continuing on.

Before the bipartisan committee has had a chance to confront its instant task, $1.2-1.5 trillion in cuts, it now totals about $2 trillion if Obama's latest program is included in the deliberations. And there is already talk, once again, that perhaps this is a new opportunity for a "grand bargain" in the spending/tax/debt battle. Such a "grand bargain" would involve about $4 trillion that would include large spending cuts, increased revenues through tax reform, and changes to the health care programs which many Democrats are committed to protect but which are the biggest drivers of the deficit/debt problem.

To close, all of this sounds like the basis for a rerun of the same partisan politics and political posturing we have had for the last two and a half years. And with the 2012 elections just over a year away, there is little reason to believe we are on the threshhold of a new political togetherness mood in Washington. Congress will do the easy stuff like cutting the payroll tax, but the tough stuff will go back on the shelf.

ISRAEL AND THE PALESTINIANS: WHITHER?

Having dumped a bit of my chronic pessimism and cynicism on Washington politics in the previous posting, it is time to spread a bit of gloom abroad. A good place to start is, as usual, Israel and the endless, seemingly intractable problem of Israel reaching agreement with the Palestinians on establishment of an independent Palestinian state.

The issue may come once again to a head later this month if the Palestinians, in the person of Palestinian Authority head Mahmoud Abbas, go ahead with plans to bypass the moribund peace talks and go directly to the United Nations to gain recognition as a state. Needless to say, that move is frought with political dangers for Israel, the Palestinians, the U.S., and, to a lesser degree, a number of interested parties such as the European Union and Russia who have been pressing for some kind of renewed peace talks.


Right now the U.S. is scrambling to get negotiations resumed on some basis before the U.N. General Assembly meets on September 20. The Palestinians have two options and could choose both. First is to go to the Security Council and ask for U.N. membership, a move certain to draw a U.S. veto and thus the wrath of the Muslim world which sees the U.S. as the spear carrier for Israel, a role it has played since the U.N. created Israel in l948. The Arab world has long viewed the U.S. relationship with Israel as anti-Muslim, politically driven because of the large role played by Jewish votes and money in U.S. elections.

The other option is to go to the General Assembly where the U.S. has no veto power and seek recognition as a "nonmember" state like, for example, Taiwan and The Vatican. The U.S. efforts in behalf of Israel in the General Assembly is to lobby to reduce the number of countries voting for the Palestinians. Beyond these two options which have negative implications for U.S. policy in the Middle East, the U.S. already has enough troubles in the Arab world with its diminished image resulting from the demonstrations and revolutions of the Arab Spring.

The Israelis are equally interested in getting the Palestinians to call off its U.N. quest and return to some kind of negotiations. But there are serious limitations on what Israel can do about the problem since any return to the peace table is likely to be preceded by a renewed Palestinian demand for halting the building of Jewish settlements on land envisioned to be included in a new Palestinian state. The Palestinians also see the pre-l967 war boundaries as the starting point for delineating the borders of a new state. Israeli Prime Minister Netanyahu , even if he is personally willing to be flexible on these points, will run into the firm opposition of the extreme right wing members of his governing coalition. Ignoring the opposition of the settlement extremists within and outside of the government would likely mean the fall of the Netanyahu coalition.

For their part the Israelis will be pushing for Palestinian and world recognition of Israel as a Jewish state. Neither the Palestinians nor most countries can accept this because so many Palestinians still live within Israel and have been subjected to a variety of discriminatory actions that favor the Jewish citizens against the Palestinians. Recognition of Israel as a Jewish state would likely exacerbate that problem. These are to suggest only a few of the issues that can derail negotiations.


As to Abbas and "his" Palestinians, there is the thorny problem of the reconciliation of Abbas' Fatah faction of the Palestine Liberation Organization (PLO) with Hamas which controls the Gaza strip and has been branded a terrorist organization by both Israel and the U.S. If Abbas wants to present himself as the legitimate Palestinian leader, he has to come to terms with Hamas. A reconciliation process, sponsored by Egypt, got underway a few months ago but implementing a deal to share governance has stalled, in part because a full reconciliation could mean the end of the $400 million annual subsidy of the Abbas government from the U.S. The
European Union is also a major contributor to Abbas.

But the real problem for Abbas in seeking to maintain his governing legitimacy is that he somehow has to show the Palestinians on the street that he can advance the cause of creation of an independent country. Lost in the Arab Spring headlines from Tunisia, Egypt, Yemen, Bahrain, etc., were the demonstrations among Palestinians on the West Bank for political and economic progress in their part of the Arab world. With nothing to show for years of talks within the so-called peace process, Abbas came forth with the U.N. strategy to gain recognition at least as a participating state in the General Assembly and thus able to be represented on various U.N. committees.

So while the major players are moving pieces around on the international chessboard, the real problem for each is their own domestic politics which is the real stage and audience for all of the maneuvering. Right now it is difficult to see how the U.S. can avoid a further negative impact in the Arab world.

A SPITTING CONTEST WHEN EVERYONE GETS WET

Whenever I sit down to write a posting, I look for a glass half-full item. Unfortunately, and maybe its my own Cassandra view of the world, all I found were glasses half empty or almost entirely empty. This posting is about an empty glass.

Congress reconvenes this week after a month plus of unearned vacation. It would be difficult to read more depressing "news" than the story and granular media analysis of the Obama-Boehner spitting contest over what night, Wednesday or Thursday, the President could use the House chamber for a speech on the need for new job-creation programs. The inner details are really inconsequential and, except for the media's eagnerness to latch on to time- and space-filling "news", the bickering might have received little attention in bygone days when time and space were so important that only real news was used.

Guess the real news is how this dust up between a President and House Speaker of the opposite party signals bad days ahead on issues of real substance, such as creating new jobs which both parties keep talking about but doing nothing about. Before Congress went home in early August the nation was treated to some very ugly partisan, posturing politics over the linked issues of reduced spending and raising the national debt limit. Partisan politics has always been with us. Raising the debt ceiling has occurred many times in the past during both Democratic and Republican administrations and was dealt with with little or no political fanfare.

Sadly, what was different this time was the election last year of tea party (TP) fiscal hawks, joined by very conservative Republican freshmen fellow travelers who hold the spending/debt issue as a fundamental piece of their ideology. Such ideological fundamentalism, mixed with cultural and social values, is not unique to our politics. Remember civil rights and southern resistence to racial equality from the Civil War to the mid-l960s. But the crippling ingredient brought to the spending/debt bargaining table was the TP belief there should be no bargaining; the TP view was "our way or the highway". The second unfortunate ingredient was that during the 2009-10 election campaign, the TP, although a patched-together collection of dissident groups funded by well-heeled arch conservatives, emerged as the voice of the disgruntled center and right and was able to shift much of the Republican Party to the extreme right.

A spending/debt settlement was reached before the vacation but it was a short term arrangment to head off what even some influential GOP leaders feared would be a collapse of our fiscal structure at home with dire consequences also for the international fiscal markets.

So now, given the Obama-Boehner spitting contest over the timing of the job-creation speech, how can we be anything but depressed about the prospects for both job creation and the next round of the spending/debt issue. The return of the latter issue is set legislatively for Thanksgiving when the Super Committee, Super Congress, or Super Whatever is required to come forth with a bipartisan plan that will mandate spending cuts and possibly new revenues to clear the way for another needed increase in the debt ceiling. The preliminary politics to the bipartisan plan is certain to be a replay of the GOP mantra that the problem is excessive spending by a government that's too big and Republican intransigence on any new revenues which to them is synonomous with tax increases. For the Democrats it will be a replay of demands for new revenues and defense of entitlement programs, particularly health care.

The really scarey thing is that whatever is decided and ultimately clears Congress will still be just another short term band-aid solution to fix the immediate partisan political problem of both sides, the 2012 presidential/congressional elections.

In sum, Congress, the broken branch of government, will remain broken. The politics and political posturing this fall and through early November 2012, will be very ugly and get even uglier over the next 14 months. Politics will be alive and well; the many national problems will be rhetorically addressed but likely remain unresolved. That's the real significance of the petty bickering over when the House chamber could be reserved for the Obama speech.