The words that people say are seldom considered outside of the context of the speaker who utters them. Speaking at Pasadena City College in California, Senator John Kerry and the former Democratic nominee for President said, You know, education, if you make the most of it, you study hard, you do your homework and you make an effort to be smart, you can do well. If you dont, you get stuck in Iraq. Was Kerry saying that the American military is composed of the least educated among us or suggesting that President Bushs lack of education is the reason he decided to go into Iraq? The plain meaning of the words suggests he was criticizing American troops, but it could have been awkward phraseology.
Part of Kerrys problem is that he has a long history of saying pejorative things about American troops. During Vietnam he claimed that American troops had committed war crimes and that such crimes were wide spread. In 2005, Kerry charged American troops with terrorizing kids and children in Iraq. Moreover, the notion that American GIs come from those who do not do well in school arose during the Vietnam era when college students received draft deferments and others were conscripted. More than a few young men used college as a means of avoiding military service. Of course, this state of affairs has not existed since the decades-old all-volunteer army began. Perhaps Kerrys mind set in firmed stuck in the 1960s.
Of course, Kerry could have, as he said, been making a bad joke about Bushs intelligence and the fact that we are in Iraq. Jokes should not have to be explained, but no one ever claimed that Kerry has a talent for comedy. Ironically, Bushs grades at Yale were at least as good as Kerrys, but Kerrys certainly judges himself Bushs intellectual superior. Certainly, this conviction is what makes Kerry’s loss to Bush in the 2004 presidential election so frustrating to Kerry.
If Kerry is as smart as he believes he would not be making these clumsy statements. Nonetheless, he did manage to worm himself into a world of trouble during his Presidential bid with clumsy or perhaps revealing statements. With regard to a bill to support American troops in Iraq, he told an audience I actually did vote for the $87 billion before I voted against it.
Without looking into his soul, it is not possible to know for certain if Kerry was criticizing the troops or making a joke about Bush. However, it can be said with high confidence that he was probably trying to pander to his audience. That is his real problem.
Microcredit and Megacredit
Sunday, October 15th, 2006Unlike some other Nobel Peace Prize winners, the winner for 2006, Muhammad Yunus, began the work for which he won the prize with his own money. In 1976, while an economics professor at Chittagong University in Bangladesh, he loaned local craftsmen $27 to help finance their businesses. This small generous gesture started a large and ultimately successful experiment in microcredit. Many small enterprises in poor countries fail because of the lack of capitalization. Conventional banks are reluctant to make such small loans, considering the poor to be bad credit risks. Part of Yunuss genius was the use of credit groups where impoverished people would help each other in meeting their payments, in effect all members of the credit group act as guarantors of the loans to the credit group. In addition, Yunus focused most of the loans on women, who appeared generally more responsible in using the loans for the general benefit of the family.
Yunuss success in Bangladesh is remarkable especially in contrast to typical foreign aid. Large-scale loans to impoverished countries generally are squandered in ubiquitous corruption. The inherent problem is that the aid gets filtered by governments, that if they were effective in the first place, there would be less need for foreign aid. Microcredit schemes represent an innovative way to bring the benefits of capitalism to the poor themselves. Credit and borrowing are a necessary component to growth. Yunus earned a Nobel Peace Prize for providing an effective modality for providing credit to the poor.
Both microcredit and megacredit made news in the same week. On the megacredit front, we learned that the annual US budget deficit continues its rapid descent as federal tax receipts grow even faster than government spending. The federal budget deficit for this year fell to $248 billion. Microcredit and megacredit are linked by the fact that liquidity and growth depend upon borrowing, whether for a handful of dollars or billions of dollars. Indeed, just as the use of credit is necessary for individuals to create wealth, it good for the US government to maintain a reasonable level of debt. There are two key factors that many on the Left and the Right do not often remember in assessing public debt:
Consider the current the deficit of $248 billion relative to the total US federal debt of $8.5 trillion. The inflation rate for 2006 is about 3.5%. This means that a nominal deficit of $298 billion would increase the total debt by 3.5%. Hence, for such a deficit there would be no real increase in the debt, or zero real deficit if the nominal deficit were $298 billion. Given the imprecision in computing the inflation rate, it might be too much to claim we are now running a real surplus with a $248 billion deficit, but we are certainly within measurement error of it. The only reason to reduce the deficits further is if we believe the debt load is too high.
The current debt load (the debt-to-gross-national-product ratio) for the United States is about 65%, and should optimally be somewhere between 40% and 80%. Beyond these extremes, economic growth is inhibited. For example, in the 1970s, the debt-to-GDP ratio was lower than 40% and we experienced stagnant growth and high unemployment. Indeed, in the late 1970s, inflation was so high we were really running budget surpluses with nominal deficits and suffered under the twin problems of stagflation.
It would seem that we are now running something close to the optimum yearly federal deficit with the optimum debt load. We should consider further significant reductions in debt carefully. Though we might wish to decrease the federal debt load in anticipation of increase liabilities as baby boomers begin to consume social security and medical benefits, reducing deficits too quickly could ultimately lead to economic stagnation.
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