Bomb Afghanistan, buy reverse mortgage, slash payroll tax: the weekend saw a lot of stupid ideas

Is it something in the water?

Or maybe it’s a weird side effect of Fukushima radiation hitting the American shore?

Or maybe it’s because our political and policy-making classes have all been drinking the same free market Kool-Aid? Lapped up, as we know, from the troughs of large multinational corporations, banks and the ultra wealthy.

Whatever, doesn’t it seem as if a lot of so-called experts had a case of the “stupids” this past weekend?  That, at least, is the impression one would get from reading The New York Times.

Here are three stupid ideas proposed by experts in New York Times articles each wrote this past weekend.  All use a convoluted logic that would drive Friar William of Occam to seek a sharp object.

Let’s start with the most grotesque idea, and it comes from Gideon Rose, the editor of the beltway periodical Foreign Affairs.   In his Sunday Times opinion piece, Rose raises the fear that the drawdown of troops that President Obama plans for Afghanistan will lead to a rout.  He never defines what he means by a rout, but it must be something more than the confused fleeing that took place when the U.S. evacuated Saigon in 1975.

And yet, Rose proposes that to exit Afghanistan Obama follow Nixon’s strategy for winding down the Viet Nam War.  Rose speaks of that strategy in a generalized and squeamish manner, describing Nixon and Kissinger as “masking their withdrawal with deliberate deception and aggression.”  He doesn’t define what that phrase means exactly, so I will: What Nixon did was to institute massive bombing of North Viet Nam including civilian zones.  

Rose employs a tautology in his lame attempt to prove that escalating aggression—oh, heck, let’s just call it massive bombing—is the best way to exit Afghanistan: His proof that you should not announce troop withdrawals and that you should escalate aggression is his claim that these are the first two rules of withdrawal.  It’s a classic tautology: A equals B because A equals B.  His other proof is the Viet Nam War’s ending, which most histories portray as lengthy, bloody, shameful and unsatisfactory to American interests. 

Rose’s tautological complexity misses a simple common sense point: No matter what you do, you can’t hide massive troop withdrawals for very long.

FYI: To my mind, the 33,000 soldiers out of a total of 100,000 now stationed in Afghanistan whom President Obama says will be coming home in 15 months is the troop draw-down equivalent of cold molasses.

Let’s turn now to the most deceptive of the “stupidities” advocated this past weekend.  In the business section of the Sunday Times, Robert Frank, a Cornell economic professor, proposes that for the next 18 months we declare a payroll tax holiday for employees and exempt employers from paying payroll taxes for new hires.  Payroll taxes, by the way, are what employers and employees pay to support Social Security and Medicare. He also insists that we don’t lift the cap of $106,800 a year in income, above which people don’t pay Social Security payroll taxes.

The good professor Frank claims that giving these temporary tax breaks will lead to the creation of 6.2 million jobs. 

Now here comes the deceptive part:  How does Frank propose to pay Social Security benefits during the payroll tax holiday (he never mentions Medicare!)? “The Treasury would have to issue new bonds to cover those payments in the short term.”  

In other words, we lower taxes on businesses and borrow money from the wealthy to pay for the tax breaks.  It’s an old game he’s playing: instead of taxing people, and in particular the wealthy, to pay for government services, we fund deficit spending by giving them a safe investment.

Why not just raise taxes and invest the money in job-producing programs such as adding teachers to public schools, rebuilding our infrastructure and supporting commercialization of alternative energy technologies?  The net result will be more permanent job gains and a more equitable distribution of wealth, because government job-creation programs will funnel funds from the wealthy to the middle class and the poor.  As those who have followed OpEdge for any period of time know, the last 30 years have seen the flow of money in the opposite direction, from the poor and middle class to the wealthy.

Let’s close with the most laughable idea to come out of the weekend, that “Reverse mortgages will help millions of people stay in their homes and pay for a variety of retirement expenses in the coming decades.”  It comes from Ron Lieber, the Saturday Times “Your Money” columnist, whom I have chided before for advocating, albeit sometimes in a subtle way, a “spend first and worry later” mentality in his column.

A reverse mortgage is when the bank pays you from the equity in your house and you don’t have to pay it back until you die (when the heirs pay it back, from your estate, with their own cash or by selling the house).

In his column, Lieber defends reverse mortgages and tries to explain why Bank of America and Wells Fargo won’t write them anymore.  Here’s his reasoning: “Making a mortgage payment is one of the best forms of forced savings we have. So for people who don’t want to sell their homes and downsize to free up money for living expenses (or can’t, for practical reasons), a reverse mortgage may be their best hope for continued solvency.”

Huh, and double huh??!

Lieber’s argument is completely without sense: First of all, making a mortgage payment on a primary residence is a terrible way to enforce savings, because it comes at such a high interest rate.  You make a mortgage because you want to buy a house and it’s very tough to accumulate the cash needed without a loan.  Secondly, even if making a mortgage payment were a good way to enforce savings, that fact would have nothing to do with borrowing equity on your house at high rates to live beyond what Social Security and your retirement savings and pension can afford you.

By the way, Lieber destroys his own case for the reverse mortgage by telling us why the big banks are running from this financial product like rats from a sinking dinghy: They are afraid of bad publicity when they have to foreclose and kick a lot of senior citizens out of their homes because, despite getting the reverse mortgage, they can’t pay their taxes and home insurance.  They’re afraid that like sub-prime loans, the reverse mortgage will lead to another banking fiasco in which millions of people see their lives turned upside down.

Maybe instead of pushing reverse mortgages, Lieber should be giving seniors and those planning to be seniors one day tips about living within their means. 


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