In the past few weeks there has been a lot of news about North Korea. And it isn't surprising why, as the news loves to ratchet up the fear factor of nuclear war. It's usually accompanied by the claims that Kim Jon Un is insane and wants to end the world.
But is North Korea really crazy? It's certainly different. It is an extreme dictatorship, considered the most authoritarian country in the world. Much of this is due to historical reasons, as the Korean peninsula was divided by occupying Communist and American soldiers into two countries, North and South. The North naturally became a communist country like the Soviet Union and Mao's China, while the South gradually transitioned into a democracy and free-market economy.
But it many ways, North Korea is stuck in 1945. The Soviet Union has long collapsed, with it largely embracing capitalism. China has also changed, being "communist in name only" as it pursues greater integration in global markets and pursuing economic prosperity. But North Korea has largely stayed the same. It is still technically at war with South Korea, with an armistice signed but not formal peace. The dictatorship is fully intact, and North Korea doesn't even produce enough food to feed its citizens (40% are believed to be malnourished).
None of this seems particularly rational from our point of view. But the North Korean government doesn't think it terms like "how do I save Korean lives" or "how can we improve the country?" The most important thing in North Korea is preserving its dictatorial regime. And when it looks at the Soviet Union, it very correctly perceives that free-market expansion can lead to a loss of authority, and eventual toppling of the government.
But the North Korean government is also terrified of South Korea. Their neighbor is far wealthier and is in many ways stronger than the North (it beats even Japan on standard of living and income). For example, North Korea claims that in a war, it would draft every one of their citizens to fight (which is kind of ridiculous, as only a fraction of North Koreans receive military training). But North Korea has a population of 24 million, compared to the South's 48 million. The South's military is also considered the seventh strongest in the world (comparable to France and Germany) as it has some of the best trained and equipped soldiers. But most troubling to the North is the South's alliance with the United States, the most powerful military that also has nuclear weapons.
So the North has tried to defend itself in a similar way to the superpowers of the Cold War, through deterrence. The North has had nuclear reactors for some time, left behind by Soviet scientists. The North has used these to develop nuclear weapons, to create security from ever being threatened by the United States. Although the North has developed these weapons, it lacks the right missile technology to properly launch them at the mainland U.S.
But despite this, North Korea already has a great deal of deterrence in effect. South Korea is highly urbanized and its capital city is not far from its border. The entire country is roughly the size of Pennsylvania. North Korea has an extensive missile system along the border, that if used could level cities and kill hundreds of thousands. This is why South Korean cities have created contingencies to use their underground subway system as bunkers in case of attack. And of course, North Korea could launch nuclear weapons at South Korea or Japan.
Here is where the rationality of North Korea comes in. The creation of these nuclear weapons and this missile system is really more of a defensive action than an offensive one. It sends the message, "If you attack us, we will attack you." Although this threat doesn't really work against the US, which is still out of range of North Korean missiles, it very much applies to South Korea. A primary reason the US does not attempt a preemptive attack is that South Korea would advise against it to protect their own citizens.
Kim Jon Un's goal is simple; attain the missile technology to attack mainland US, and the country will never be under threat from foreign invasion. They don't ever plan on using these weapons, as to ever do so would mean the total destruction of North Korea. If the North ever set off a nuke, the US would try to limit the destruction by launching their own to destroy North Korea entirely.
The US obviously does not want the North to develop the capability to reach the mainland US, and has probably internally decided that it the North ever tests such a missile successfully, then they will preemptively attack the North, without the South's cooperation. The US military will likely not tolerate the North having such a capability, and will trade South Korean lives to stop it.
The other player is China. The Chinese government is not happy with the North's provocations, benefited greatly from peace in Asia. The collapse of the North would also create a refugee crisis on its border, which is why China has recently sent troops on its Korean border (the Russians have as well).
China also subsidizes the North Korean government, and 89% of all North Korean trade is with China. Only they have any leverage over Kim Jong Un. For years, the Chinese have tried to balance North Korea being stable but also at peace.
If the US can successfully lobby China to do more to limit North Korean ambitions, there might be a peaceful solution. It is possible that China will agree to sanction North Korea, in an attempt to drive them to the bargaining table. For ages they have not done so, being afraid such actions would collapse the regime and cause a refugee crisis. But today, China may believe the risk of North Korea is less than that of the US preemptively attacking.
The biggest concern for me is whether the US is capable of forming a diplomatic solution. Obama spent a huge amount of time and effort pushing his controversial nuclear deal with Iran (which actually appears to be working). But today the US state department has shrunk dramatically. Many government workers under Obama have quit, and the Trump administration has been slow to fill these positions. Only 25 Senate-confirmed positions have been filled, and 531 remain empty.
Very few within the Trump administration seem to understand negotiation at all. Trump's main tactic appears to be leading with a dramatic bluff, and hope the other side makes some concessions. For example, Trump recently said he would pull out of the NAFTA agreement with Canada and Mexico. Not only did both countries quickly send out diplomats to both Europe and Asia to show they are willing to diversify trade (which hurts the US), American industry leaders came out against the statement. Trump quickly reversed this position, saying that Trudeau and Pena convinced him against pulling out in a phone call.
This same tactic is not going to work with North Korea. Trump tried to look tough by sending part of the US navy to sit off the Korean peninsula. The North Koreans tested a missile anyway, and a second one not much later.
The US has recently begun deploying the THAAD missile defense system in North Korea, which China has openly complained about. Whether the Trump administration is able to leverage the Chinese concern over further escalation of tensions, and North Korea fear of domination, will be probably upcoming. As Trump has said that North Korea is his number one foreign policy concern, hopefully some diplomatic negotiations can begin before the situation spirals into another war on the peninsula.
Wednesday, May 3, 2017
Thursday, April 27, 2017
How Donald Trump is similar to the original Democrats
I remember a long time ago having an argument with a conservative over the movement Black Lives Matter. One thing that struck me was when he said that the Republican Party cannot be accused of racism, as it was founded by Abraham Lincoln, who of course abolished slavery.
It's interesting to remember now. We talk a lot about the party "identities" of the Republicans and Democrats, as if they are static and immovable, and that to align against them is treason. But in reality, both parties have gone through remarkable changes since their founding.
Now, the two parties disagree on most issues, flip-flopping positions over time, but there are two divides that historically have stood above everything else. They are the role of government (being either more involved in the market or less) and that of social issues, historically being around race.
The Democratic Party was founded in the 1820s, and its first notable POTUS was Andrew Jackson. A retired general who fought the British, he is remembered for fighting against a central bank (which happened later anyway) and forcefully removing Native Americans off their land. Later Democratic presidents went to war with Mexico and ended up annexing Texas, Oregon and California.
The rapid expansion of U.S. territory led to the founding of the second party, the Republicans. Their first president was Abraham Lincoln, who wanted to the new territories to ban slavery, but not the original slave states. Several southern states still declared independence anyway, founding the Confederacy and leading to the Civil War.
After the war ended and Lincoln assassinated, slavery was abolished. The Republican Party became the dominant party nationally, with the Democrats labeled the party of the "traitors," who subtly supported the Confederacy. Even so, the Republican Party became more pro-business and capitalist, and moved away from social issues to remain in power. Although the Democrats were effectively locked out of the presidency, they remained in control of southern states, and implemented racist policies that created systemic racism stopping blacks from voting.
The Republican Party eventually stumbled into its own ideological split that the Democrats took advantage of. Ex-president Teddy Roosevelt, who was more liberal in supporting conservation and health standards policies, challenged sitting president Taft (who was very anti-regulation) for the Republican nomination. After Taft won, Roosevelt founded a third Progressive Party in an attempt to take the Presidency anyway.
Instead, Democrat Woodrow Wilson beat out the split Republican electorate, becoming President just in time to enter World War I. Wilson implemented several liberal policies including the Federal Reserve Act, the very policy Andrew Jackson opposed. He also tried to eliminated the balance of power in international politics, by espousing his Fourteen Points and pushing for the formation of the League of Nations. Funnily enough Congress ended up stopping the U.S. from joining.
Wilson was also a racist and tough nationalist, who implemented endorsed racial segregation, believed the KKK was simply a reaction to a period of lawlessness, and oversaw the first Red Scare against potential communists. Although women were granted the right to vote during his presidency, Wilson was at first opposed to women's suffrage and jailed many protestors.
The Republican Party soon took back the presidency, and again pursued de-regulation of the government. Then the Great Depression hit, and Republican deregulation was blamed for the market downturn and high concentration of wealth among the few. Democrat FDR took control of the Presidency, and his New Deal policies worked to improve the economy, the most notable being Social Security. America then fought in WWII which sealed the American economy's recovery.
But although Wilson and FDR were similar in government policy, FDR's policies helped a great many of non-white Americans. FDR is probably the first iteration of the "modern Democrat" as he was definitively pro-regulation, but also sympathetic to the plight of non-white Americans.
This change became more stark later on, as both parties found it difficult to share the shared values of "melting pot America." The choice finally became clear when President Lyndon B. Johnson publically supported legislation to promote Civil Rights for black Americans. His rival, Barry Goldwater, was so anti-regulation that he opposed such laws, saying that it would give the government too much power. Blacks overwhelmingly supported LBJ over Goldwater, and the Civil Rights Act and Voting Rights Act were later passed.
Later Republican presidents continued this trend, with Nixon famously campaigning on "Law and Order" which has led to much of the institutionalized racism that has lead to extraordinary high imprisonment of blacks. Ronald Reagan continued these policies, and declared single black mothers as "welfare queens."
Reagan is notable also in that his policies of deregulation led to high economic growth, so much so that later Democrats like Bill Clinton were far softer on regulatory policies than previous candidates. But after the Great Recession in the wake of George Bush's excessive deregulation, another Democrat Barack Obama campaigned on ending the wars and improving healthcare.
Which all leads to 2016. Economic growth has been steady, but largely unequal. The most pivotal of the states in the election were Wisconsin, Michigan, Pennsylvania and Ohio, the Rust Belt. This group has largely been hollowed out of manufacturing jobs, partly due to trade but mostly because of automation.
Clinton tried to win on social issues. She was the candidate of inclusion, the first female president who was for against the bigotry of the Republican Party. She tried to support regulatory policies, but was always considered more in line with her husband's presidency that was pro-business.
Donald Trump clearly wasn't that. But at the same time it wasn't clear what his stance on regulation was. He wanted healthcare for everyone that was cheaper, but also wanted to lower taxes. He wanted to boost the military, but fight neighbors on trade.
Faced with these muddled options, the Rust Belt decided that social issues wasn't nearly enough to make them vote Democrat. And the old policies of both the Clintons and Bushes wasn't working for them, so they voted Trump.
For the Rust Belt, they hoped that Trump's Republican Party would be like Woodrow Wilson's. Sure he clearly stood against Latinos, blacks and Muslims. But hopefully he would promote policies that would help the people get back their old jobs, and stop favoring big business over the little guy.
Clearly that hope was unfounded, as Trump has largely embraced and promoted Bush-era policies in his presidency. It remains to be seen whether the Democratic Party is going to stick with the Clinton strategy of fighting mostly on social issues, or is going to take steps closer to LBJ, FDR and Obama.
It's interesting to remember now. We talk a lot about the party "identities" of the Republicans and Democrats, as if they are static and immovable, and that to align against them is treason. But in reality, both parties have gone through remarkable changes since their founding.
Now, the two parties disagree on most issues, flip-flopping positions over time, but there are two divides that historically have stood above everything else. They are the role of government (being either more involved in the market or less) and that of social issues, historically being around race.
The Democratic Party was founded in the 1820s, and its first notable POTUS was Andrew Jackson. A retired general who fought the British, he is remembered for fighting against a central bank (which happened later anyway) and forcefully removing Native Americans off their land. Later Democratic presidents went to war with Mexico and ended up annexing Texas, Oregon and California.
The rapid expansion of U.S. territory led to the founding of the second party, the Republicans. Their first president was Abraham Lincoln, who wanted to the new territories to ban slavery, but not the original slave states. Several southern states still declared independence anyway, founding the Confederacy and leading to the Civil War.
After the war ended and Lincoln assassinated, slavery was abolished. The Republican Party became the dominant party nationally, with the Democrats labeled the party of the "traitors," who subtly supported the Confederacy. Even so, the Republican Party became more pro-business and capitalist, and moved away from social issues to remain in power. Although the Democrats were effectively locked out of the presidency, they remained in control of southern states, and implemented racist policies that created systemic racism stopping blacks from voting.
The Republican Party eventually stumbled into its own ideological split that the Democrats took advantage of. Ex-president Teddy Roosevelt, who was more liberal in supporting conservation and health standards policies, challenged sitting president Taft (who was very anti-regulation) for the Republican nomination. After Taft won, Roosevelt founded a third Progressive Party in an attempt to take the Presidency anyway.
Instead, Democrat Woodrow Wilson beat out the split Republican electorate, becoming President just in time to enter World War I. Wilson implemented several liberal policies including the Federal Reserve Act, the very policy Andrew Jackson opposed. He also tried to eliminated the balance of power in international politics, by espousing his Fourteen Points and pushing for the formation of the League of Nations. Funnily enough Congress ended up stopping the U.S. from joining.
Wilson was also a racist and tough nationalist, who implemented endorsed racial segregation, believed the KKK was simply a reaction to a period of lawlessness, and oversaw the first Red Scare against potential communists. Although women were granted the right to vote during his presidency, Wilson was at first opposed to women's suffrage and jailed many protestors.
The Republican Party soon took back the presidency, and again pursued de-regulation of the government. Then the Great Depression hit, and Republican deregulation was blamed for the market downturn and high concentration of wealth among the few. Democrat FDR took control of the Presidency, and his New Deal policies worked to improve the economy, the most notable being Social Security. America then fought in WWII which sealed the American economy's recovery.
But although Wilson and FDR were similar in government policy, FDR's policies helped a great many of non-white Americans. FDR is probably the first iteration of the "modern Democrat" as he was definitively pro-regulation, but also sympathetic to the plight of non-white Americans.
This change became more stark later on, as both parties found it difficult to share the shared values of "melting pot America." The choice finally became clear when President Lyndon B. Johnson publically supported legislation to promote Civil Rights for black Americans. His rival, Barry Goldwater, was so anti-regulation that he opposed such laws, saying that it would give the government too much power. Blacks overwhelmingly supported LBJ over Goldwater, and the Civil Rights Act and Voting Rights Act were later passed.
Later Republican presidents continued this trend, with Nixon famously campaigning on "Law and Order" which has led to much of the institutionalized racism that has lead to extraordinary high imprisonment of blacks. Ronald Reagan continued these policies, and declared single black mothers as "welfare queens."
Reagan is notable also in that his policies of deregulation led to high economic growth, so much so that later Democrats like Bill Clinton were far softer on regulatory policies than previous candidates. But after the Great Recession in the wake of George Bush's excessive deregulation, another Democrat Barack Obama campaigned on ending the wars and improving healthcare.
Which all leads to 2016. Economic growth has been steady, but largely unequal. The most pivotal of the states in the election were Wisconsin, Michigan, Pennsylvania and Ohio, the Rust Belt. This group has largely been hollowed out of manufacturing jobs, partly due to trade but mostly because of automation.
Clinton tried to win on social issues. She was the candidate of inclusion, the first female president who was for against the bigotry of the Republican Party. She tried to support regulatory policies, but was always considered more in line with her husband's presidency that was pro-business.
Donald Trump clearly wasn't that. But at the same time it wasn't clear what his stance on regulation was. He wanted healthcare for everyone that was cheaper, but also wanted to lower taxes. He wanted to boost the military, but fight neighbors on trade.
Faced with these muddled options, the Rust Belt decided that social issues wasn't nearly enough to make them vote Democrat. And the old policies of both the Clintons and Bushes wasn't working for them, so they voted Trump.
For the Rust Belt, they hoped that Trump's Republican Party would be like Woodrow Wilson's. Sure he clearly stood against Latinos, blacks and Muslims. But hopefully he would promote policies that would help the people get back their old jobs, and stop favoring big business over the little guy.
Clearly that hope was unfounded, as Trump has largely embraced and promoted Bush-era policies in his presidency. It remains to be seen whether the Democratic Party is going to stick with the Clinton strategy of fighting mostly on social issues, or is going to take steps closer to LBJ, FDR and Obama.
Monday, March 27, 2017
Trumpcare strikes out, and Tax Reform is next
So last week the GOP gave up on healthcare reform. That isn't very surprising, as the bill they pushed last week had no hope of being signed into law (in it's current form). It's first draft was refused by the Freedom Caucus, the most conservative Republican representatives. Paul Ryan tried revising the bill to make it more conservative, but only ended up losing more moderate Republicans who thought the revised bill too harsh. Even if the bill somehow passed, it would have to go to the Senate where Republicans only have a two-seat majority.
So it's no surprise that Paul Ryan has declared Obamacare "the law of the land," and Trump vowed on Twitter to pick up healthcare again after Obamacare implodes.
But more important than the failure of Trumpcare is what it showed. It means that the next target on the GOP's platform, tax reform, is going to be a lot more difficult than anyone expected.
First, the numbers. The Obamacare repeal was put first not because of some Republican lapse in judgement, but because repealing all of its taxes would have freed up almost $1 trillion dollars. That money would have been used to finance the sweeping tax cuts that Republicans campaigned on.
So the GOP now has far less leeway in tax cuts. The Republican Party has long complained about the government deficit, but it runs up against the simple electoral fact that cutting spending can be just as unpopular as a tax increase.
The U.S. 2016 budget was as follows; mandatory spending, discretionary spending, and interest payments.
Mandatory spending includes programs that are mandated by law to be funded, and any cuts require a special law beyond an annual budget. This includes Social Security, Medicare, and Medicaid, things that no one realistically wants to cut anyway. Mandatory spending makes up nearly two-thirds of the budget, or $2.4 trillion dollars.
Then there is the interest payments. The U.S. government has been taking out loans to pay for its deficit for a long time, and this is the cost. This is another $241 billion that is non-negotiable.
And finally there is non-discretionary spending, which can be further split into "military" and "non-military." They each make about half of non-discretionary spending, about $600 billion each.
So last year the government spent $3.9 trillion in total, and received revenues (mostly taxes) of $3.3 trillion, a deficit of $600 billion.
The GOP wants to do three things; balance the budget, increase military spending, and cut taxes. Oh, and build a giant wall. This is all probably impossible.
The only thing this leaves open to spending cuts is the non-military and non-discretionary spending of $600 billion. If the budget was balanced this year without tax cuts, this entire segment of the budget would have to be eliminated.
And this segment actually matters. It pays for meals-on-wheels, the Department of Education, the Environmental Protection Agency. Any funding from the federal government that goes to transportation, education, veteran's benefits, and housing assistance is made here.
Trump released a budget draft last week that shows exactly what this means.
Source: http://theweek.com/articles/686331/moral-bankruptcy-president-trumps-budget
It eliminates the below programs;
- The U.S. Interagency Council on Homelessness, which coordinates the federal government's efforts to fight homelessness
- The Community Development Block Grant (which does financial counseling for low-income families, local business development, home repairs for the poor, and foreclosure prevention)
- The Appalachian Regional Commission, which funds job creation in 420 counties
- The Corporation for Public Broadcasting
- The Energy Department's weatherization program that has helped seven million households insulate their homes
- Fifty EPA programs that assist with everything from environmental restoration to industrial waste cleanup
- The Chemical Safety Board
- The National Endowments for the Arts and the Humanities
- The Institute of Museum and Library Services (libraries and museums)
- The Neighborhood Reinvestment Corporation
- The United States Institute of Peace
There's far more programs that receive significant cuts. The budget director Nick Mulvaney said their guiding logic was, "Can we really continue to ask a coal miner in West Virginia or a single mom in Detroit to pay for these programs?" I wonder whether Mr. Mulvaney understands that many of these programs directly aide many of these same people, those with low-incomes.
Now this budget is too extreme to pass Congress. But this exemplifies the problem that the GOP has, because even these spending cuts will fall short of the goal of offsetting the military spending and tax cuts.
So Trump's team has another idea, an import tax. And this is one that the Freedom Caucus will likely try to stamp out, as they recognize an import tax just means Americans paying higher prices on imported goods. Essentially a sales tax on anything foreign.
Tax Reform will run into the same problems Trumpcare did, with moderate Republicans in stark disagreement with the Freedom Caucus. But if this fails, there's a far greater backlash looming.
Part of the reason the stock market has been so bullish in recent months is because the investor class is expecting a big tax cut from this tax reform. They'll probably get one, but if it isn't as substantial as people expect, or tax reform is derailed somehow, this good run the stock market has had might finally end.
I'd like to end this with some optimism, but there is very little to look forward to whatever happens in the coming tax negotiations.
So it's no surprise that Paul Ryan has declared Obamacare "the law of the land," and Trump vowed on Twitter to pick up healthcare again after Obamacare implodes.
But more important than the failure of Trumpcare is what it showed. It means that the next target on the GOP's platform, tax reform, is going to be a lot more difficult than anyone expected.
First, the numbers. The Obamacare repeal was put first not because of some Republican lapse in judgement, but because repealing all of its taxes would have freed up almost $1 trillion dollars. That money would have been used to finance the sweeping tax cuts that Republicans campaigned on.
So the GOP now has far less leeway in tax cuts. The Republican Party has long complained about the government deficit, but it runs up against the simple electoral fact that cutting spending can be just as unpopular as a tax increase.
The U.S. 2016 budget was as follows; mandatory spending, discretionary spending, and interest payments.
Mandatory spending includes programs that are mandated by law to be funded, and any cuts require a special law beyond an annual budget. This includes Social Security, Medicare, and Medicaid, things that no one realistically wants to cut anyway. Mandatory spending makes up nearly two-thirds of the budget, or $2.4 trillion dollars.
Then there is the interest payments. The U.S. government has been taking out loans to pay for its deficit for a long time, and this is the cost. This is another $241 billion that is non-negotiable.
And finally there is non-discretionary spending, which can be further split into "military" and "non-military." They each make about half of non-discretionary spending, about $600 billion each.
So last year the government spent $3.9 trillion in total, and received revenues (mostly taxes) of $3.3 trillion, a deficit of $600 billion.
The GOP wants to do three things; balance the budget, increase military spending, and cut taxes. Oh, and build a giant wall. This is all probably impossible.
The only thing this leaves open to spending cuts is the non-military and non-discretionary spending of $600 billion. If the budget was balanced this year without tax cuts, this entire segment of the budget would have to be eliminated.
And this segment actually matters. It pays for meals-on-wheels, the Department of Education, the Environmental Protection Agency. Any funding from the federal government that goes to transportation, education, veteran's benefits, and housing assistance is made here.
Trump released a budget draft last week that shows exactly what this means.
Source: http://theweek.com/articles/686331/moral-bankruptcy-president-trumps-budget
It eliminates the below programs;
- The U.S. Interagency Council on Homelessness, which coordinates the federal government's efforts to fight homelessness
- The Community Development Block Grant (which does financial counseling for low-income families, local business development, home repairs for the poor, and foreclosure prevention)
- The Appalachian Regional Commission, which funds job creation in 420 counties
- The Corporation for Public Broadcasting
- The Energy Department's weatherization program that has helped seven million households insulate their homes
- Fifty EPA programs that assist with everything from environmental restoration to industrial waste cleanup
- The Chemical Safety Board
- The National Endowments for the Arts and the Humanities
- The Institute of Museum and Library Services (libraries and museums)
- The Neighborhood Reinvestment Corporation
- The United States Institute of Peace
There's far more programs that receive significant cuts. The budget director Nick Mulvaney said their guiding logic was, "Can we really continue to ask a coal miner in West Virginia or a single mom in Detroit to pay for these programs?" I wonder whether Mr. Mulvaney understands that many of these programs directly aide many of these same people, those with low-incomes.
Now this budget is too extreme to pass Congress. But this exemplifies the problem that the GOP has, because even these spending cuts will fall short of the goal of offsetting the military spending and tax cuts.
So Trump's team has another idea, an import tax. And this is one that the Freedom Caucus will likely try to stamp out, as they recognize an import tax just means Americans paying higher prices on imported goods. Essentially a sales tax on anything foreign.
Tax Reform will run into the same problems Trumpcare did, with moderate Republicans in stark disagreement with the Freedom Caucus. But if this fails, there's a far greater backlash looming.
Part of the reason the stock market has been so bullish in recent months is because the investor class is expecting a big tax cut from this tax reform. They'll probably get one, but if it isn't as substantial as people expect, or tax reform is derailed somehow, this good run the stock market has had might finally end.
I'd like to end this with some optimism, but there is very little to look forward to whatever happens in the coming tax negotiations.
Saturday, March 11, 2017
Let's Talk Healthcare
A couple of weeks ago Donald Trump said, "Nobody knew healthcare was so complicated."
It's a weird statement, because most people do know healthcare is complicated, a lot of people have been trying to inform Trump its complicated for the past year, and that Trump is perhaps the last person to finally realize this.
So let's talk about healthcare in the United States. In Western countries its considered one of the worst systems, by liberals and conservatives alike (for different reasons). But I'll try to summarize it.
Note; what I write below isn't exactly what happens, but it's good enough to understand the new GOP healthcare law.
First there is Medicaid. This is healthcare for the poorest Americans, though there isn't a clear line of what defines poor. 70 million Americans, or about 21% of all Americans get insurance through Medicaid. It is funded both through the federal government and through state governments. It's also considered a terrible health insurance plan, with some studies showing uninsured people are healthier than people on Medicaid. I think that it is more correlation rather than causation, as people on Medicaid are obviously the poorest Americans and the least likely to afford healthy lifestyles. This doesn't really dispute that Medicaid is some bad health insurance though. It's still one of the most popular government programs at 66% approval.
Now, Obamacare actually offered to expand Medicaid for more Americans, as long as the state was willing to shoulder 10% of the cost to do so. 31 states agreed to do so, 19 refused. Obviously the 19 that refused are the most conservative areas of the country.
Next is Medicare. This is health insurance for the elderly, specifically 65 and older. Medicare is considered far superior to Medicaid, though is still lackluster to many private plans. This is a big reason why Bernie Sanders was arguing to create "Medicare for all," rather than "Medicaid for all." Medicare has approval of 77%.
Then there is the best off people, those that get insurance through their job. This is often the best deal one can get in the US, with much of the cost on the business and not the individual.
And lastly there is everyone else, which is where it gets really confusing.
You see, healthcare in the US is some of the most expensive in the world. Per capita, Americans spend $9,451 per year on healthcare. Compare that to $5,228 in Sweden, $4,608 in Canada, and $4,003 in the UK. It's difficult to argue that healthcare is twice as good in the US than in these countries.
Health insurance could also be picky with clients. Before Obamacare, companies could refuse service to those with pre-existing conditions. If you were born with an insulin problem for instance, the only way you would get health insurance is if you agreed to extremely expensive plans, and most companies would just refuse to cover you.
Simply put, many Americans find health insurance so expensive they go without it, which is actually costlier to society. Because legally in any emergency situation the hospitals have to fix ER problems and charge you after, people simply add it to their debt that they can never pay.
Obamacare tried to fix this by expanding Medicaid, making denial of healthcare service illegal, and making a new exchange where the government is the middle-man with private insurance. These exchanges are subsidized to lower the normal costs of health insurance. With one key element; if one isn't covered by insurance already, and you don't get any, you pay a fine.
The fine is used to pay for the new subsidies and Medicaid, but is more in place to force healthy people into buying insurance. Because Obamacare essentially allows sick people to get health insurance cheaper than they normally would, but also makes it more expensive for healthy people. In order to health insurance in general to work, healthy people subsidize the sick.
Now the reason people think Obamacare can fail (the "death spiral") is that many people find paying the fine better than getting insurance. This can lead to insurance companies finding the costs of the sick too high and the revenue from the healthy too low to do business profitably.
So... here's what the new GOP plan (Trumpcare) tries to do.
1. Removes the fine
2. Creates new tax credits of $2,000 to $4,000 dependent on age (ends at 60)
3. Creates tax-free savings accounts for health espenditures
4. Phases out Medicaid expansion
5. Allows insurers to charge pre-existing conditions clients 30% more
There's more, but these are they main points. And it's why nobody likes it.
You see, without the fine the "death spiral" actually accelerates because there is no punishment for healthy people to go uninsured. The fine is the least popular part of Obamacare, but necessary to make it all work.
The tax credits and savings accounts are nice, but only for Americans who pay taxes and can afford to save. So not very helpful to poorer people who don't pay taxes and live paycheck to paycheck.
And overall, it's expected to cost more, cover less people, and make health insurance more expensive.
The Democrats don't like it for pretty much all those reasons.
The most conservative Republicans don't like it because they don't really want a replacement at all. They want everything repealed, and then force insurance companies to do direct competition with each other nationwide. And they aren't happy about the added debt.
The most moderate Republicans also don't like it. They tend to come from states that expanded Medicaid whose voters will likely react badly to losing health insurance, or seeing their premiums accelerate in price.
So the Republicans are caught in a Catch 22. If they pass this law, they'll likely drive up turnout of moderates and Democrats against them in 2018. And if they do nothing, Republican voters will stay home in 2018 because they didn't meet their promise.
The Republican leadership is going to try to ram this through, and hope it works out. But whatever happens as a result, the voters are going to know who to blame.
It's a weird statement, because most people do know healthcare is complicated, a lot of people have been trying to inform Trump its complicated for the past year, and that Trump is perhaps the last person to finally realize this.
So let's talk about healthcare in the United States. In Western countries its considered one of the worst systems, by liberals and conservatives alike (for different reasons). But I'll try to summarize it.
Note; what I write below isn't exactly what happens, but it's good enough to understand the new GOP healthcare law.
First there is Medicaid. This is healthcare for the poorest Americans, though there isn't a clear line of what defines poor. 70 million Americans, or about 21% of all Americans get insurance through Medicaid. It is funded both through the federal government and through state governments. It's also considered a terrible health insurance plan, with some studies showing uninsured people are healthier than people on Medicaid. I think that it is more correlation rather than causation, as people on Medicaid are obviously the poorest Americans and the least likely to afford healthy lifestyles. This doesn't really dispute that Medicaid is some bad health insurance though. It's still one of the most popular government programs at 66% approval.
Now, Obamacare actually offered to expand Medicaid for more Americans, as long as the state was willing to shoulder 10% of the cost to do so. 31 states agreed to do so, 19 refused. Obviously the 19 that refused are the most conservative areas of the country.
Next is Medicare. This is health insurance for the elderly, specifically 65 and older. Medicare is considered far superior to Medicaid, though is still lackluster to many private plans. This is a big reason why Bernie Sanders was arguing to create "Medicare for all," rather than "Medicaid for all." Medicare has approval of 77%.
Then there is the best off people, those that get insurance through their job. This is often the best deal one can get in the US, with much of the cost on the business and not the individual.
And lastly there is everyone else, which is where it gets really confusing.
You see, healthcare in the US is some of the most expensive in the world. Per capita, Americans spend $9,451 per year on healthcare. Compare that to $5,228 in Sweden, $4,608 in Canada, and $4,003 in the UK. It's difficult to argue that healthcare is twice as good in the US than in these countries.
Health insurance could also be picky with clients. Before Obamacare, companies could refuse service to those with pre-existing conditions. If you were born with an insulin problem for instance, the only way you would get health insurance is if you agreed to extremely expensive plans, and most companies would just refuse to cover you.
Simply put, many Americans find health insurance so expensive they go without it, which is actually costlier to society. Because legally in any emergency situation the hospitals have to fix ER problems and charge you after, people simply add it to their debt that they can never pay.
Obamacare tried to fix this by expanding Medicaid, making denial of healthcare service illegal, and making a new exchange where the government is the middle-man with private insurance. These exchanges are subsidized to lower the normal costs of health insurance. With one key element; if one isn't covered by insurance already, and you don't get any, you pay a fine.
The fine is used to pay for the new subsidies and Medicaid, but is more in place to force healthy people into buying insurance. Because Obamacare essentially allows sick people to get health insurance cheaper than they normally would, but also makes it more expensive for healthy people. In order to health insurance in general to work, healthy people subsidize the sick.
Now the reason people think Obamacare can fail (the "death spiral") is that many people find paying the fine better than getting insurance. This can lead to insurance companies finding the costs of the sick too high and the revenue from the healthy too low to do business profitably.
So... here's what the new GOP plan (Trumpcare) tries to do.
1. Removes the fine
2. Creates new tax credits of $2,000 to $4,000 dependent on age (ends at 60)
3. Creates tax-free savings accounts for health espenditures
4. Phases out Medicaid expansion
5. Allows insurers to charge pre-existing conditions clients 30% more
There's more, but these are they main points. And it's why nobody likes it.
You see, without the fine the "death spiral" actually accelerates because there is no punishment for healthy people to go uninsured. The fine is the least popular part of Obamacare, but necessary to make it all work.
The tax credits and savings accounts are nice, but only for Americans who pay taxes and can afford to save. So not very helpful to poorer people who don't pay taxes and live paycheck to paycheck.
And overall, it's expected to cost more, cover less people, and make health insurance more expensive.
The Democrats don't like it for pretty much all those reasons.
The most conservative Republicans don't like it because they don't really want a replacement at all. They want everything repealed, and then force insurance companies to do direct competition with each other nationwide. And they aren't happy about the added debt.
The most moderate Republicans also don't like it. They tend to come from states that expanded Medicaid whose voters will likely react badly to losing health insurance, or seeing their premiums accelerate in price.
So the Republicans are caught in a Catch 22. If they pass this law, they'll likely drive up turnout of moderates and Democrats against them in 2018. And if they do nothing, Republican voters will stay home in 2018 because they didn't meet their promise.
The Republican leadership is going to try to ram this through, and hope it works out. But whatever happens as a result, the voters are going to know who to blame.
Wednesday, January 18, 2017
Canada's Donald Trump
In case you didn't notice, Kevin O'Leary has announced his candidacy for the leadership of the Conservative Party in Canada.
If you've ever watched Shark Tank, Kevin is the investor who is always sitting in the middle of the room. Shark Tank was actually developed from the Canadian version (called Dragon's Den) which originally had Kevin on, but when Tank was made he moved to that.
Kevin's getting a lot of comparisons to Donald Trump because they are both very outspoken, made it big on reality TV, and have no government experience. And while I've talked to several Canadians who have mostly laughed off his candidacy ("He would NEVER get elected here!") there are probably a few things people should know.
Can he Win?
Yes. Although I find it doubtful that a majority of Canadians approve of Kevin, they don't have to for him to win. The conservative leadership race is now between a grand total of fourteen people. They all are essentially nobodies to the general public, and the race isn't nearly as publicized as the Republican primaries were. Through name recognition alone, Kevin O'Leary is the favorite.
In polling Kevin consistently breaks 20%, while the candidates do at best 15% (including polls that don't have him listed). The reason is simple; each conservative "brand" is being filled by several people. There are a few reformers, a few traditionalists, and a few radicals. If Kevin gets 25% in a contest of 14 people who split the remaining 75% fairly uniformly, he wins easily.
Another factor is that candidates are elected in a ranked ballot. This means that voters rank their candidates instead of picking one. Although the most politically in-tune may actually figure out how they place the 14 people, it is more likely that Kevin will drift to the top consistently because he's memorable (people tend to remember 7 variables at most at a time).
And although Kevin isn't that popular for PM among general Canadians, he isn't playing for them (yet). To become conservative leader you need a plurality of conservative voters. So it is definitely feasible for Kevin to win 25% of conservative voters.
How are Trump and Kevin alike (or not)?
Apart from the reality TV, Kevin and Trump share some personality quirks. Kevin is the poster-boy for Shark Tanks for his one-liners, put downs and general cruelty to contestants. Kevin also has no government experience, though he has appeared several times on BNN or CBC to comment on how he thinks the government should be run.
https://www.youtube.com/watch?v=PWspMJNgT6w
But apart from crude language, the two are pretty different. Kevin is actually fairly articulate in policy and has nailed his persona as a Gordon Gecko-esque investor in a dog-eat-dog world. Comparatively, Trump can hardly stay focused, constantly contradicts himself, and steps into scandal repeatedly.
There isn't any evidence Kevin is racist or sexist, though he probably lacks a proper amount of empathy (its hard to imagine a genuine photo with a baby). And on policy the two agree on little.
Trump can often appear as populist as it gets, simultaneously promising a ban on Muslims while offering "the best healthcare for everybody." O'Leary has been fairly consistent, though he hasn't truly articulated many of his policies outside of economics.
But on economics he isn't populist at all. On the contrary, he sounds more like a Wall Street broker running to create a capitalist paradise. He has spoken mostly on how he is against government waste, high taxes and a low Canadian dollar, and has said he believes the Liberal government will lead to an economic collapse in Canada. When told that the richest 85 people on Earth were equivalent in wealth to the poorest half of the global population, he replied that such a statistic should be applauded as an inspiration for anyone to work hard to become wealthy as well.
The French Challenge
The biggest challenge Kevin probably faces is uniquely Canadian. He isn't bilingual, and has only started learning the language in the past year. In Canada it is thought a necessity to be bilingual to be a national government figure, for the simple reason that the second biggest province, Quebec, gets royally annoyed when they don't.
This has become a bit of a contention already between the various conservative candidates, as the most experienced members who worked for previous PM Harper tend to be from Alberta, where French is completely unneeded. The others who are fluent try to point out that without being bilingual you cannot lead all Canadians.
But at the end of the day, the next conservative leader isn't going to be chosen because they can speak French. Although Quebec is an important battle-ground in elections, it isn't the conservative heartland. Quebec is ahead of the rest of the country in subsidies, protests, unions and corruption, and is more fertile territory for every party except the conservatives.
The voters who are consistently conservative are from the Midwest provinces of Alberta, Manitoba and Saskatchewan. If new conservatives register it will be from Ontario, where the Liberal premier Kathleen Wynn has plummeted in popularity (she is currently the most unpopular premier in Canadian history in any province).
The bilingual problem becomes more pronounced when the candidates do bilingual debates, but Kevin has waited until the last moment to announce and has therefore avoided this problem so far. But there are still two more debates to go before voting.
So my guess? If Kevin doesn't trip over his own feet in the next coming months, he may be a shoe-in for leader. And then PM Trudeau is going to have a merciless capitalist nipping at his sides right until 2019.
If you've ever watched Shark Tank, Kevin is the investor who is always sitting in the middle of the room. Shark Tank was actually developed from the Canadian version (called Dragon's Den) which originally had Kevin on, but when Tank was made he moved to that.
Kevin's getting a lot of comparisons to Donald Trump because they are both very outspoken, made it big on reality TV, and have no government experience. And while I've talked to several Canadians who have mostly laughed off his candidacy ("He would NEVER get elected here!") there are probably a few things people should know.
Can he Win?
Yes. Although I find it doubtful that a majority of Canadians approve of Kevin, they don't have to for him to win. The conservative leadership race is now between a grand total of fourteen people. They all are essentially nobodies to the general public, and the race isn't nearly as publicized as the Republican primaries were. Through name recognition alone, Kevin O'Leary is the favorite.
In polling Kevin consistently breaks 20%, while the candidates do at best 15% (including polls that don't have him listed). The reason is simple; each conservative "brand" is being filled by several people. There are a few reformers, a few traditionalists, and a few radicals. If Kevin gets 25% in a contest of 14 people who split the remaining 75% fairly uniformly, he wins easily.
Another factor is that candidates are elected in a ranked ballot. This means that voters rank their candidates instead of picking one. Although the most politically in-tune may actually figure out how they place the 14 people, it is more likely that Kevin will drift to the top consistently because he's memorable (people tend to remember 7 variables at most at a time).
And although Kevin isn't that popular for PM among general Canadians, he isn't playing for them (yet). To become conservative leader you need a plurality of conservative voters. So it is definitely feasible for Kevin to win 25% of conservative voters.
How are Trump and Kevin alike (or not)?
Apart from the reality TV, Kevin and Trump share some personality quirks. Kevin is the poster-boy for Shark Tanks for his one-liners, put downs and general cruelty to contestants. Kevin also has no government experience, though he has appeared several times on BNN or CBC to comment on how he thinks the government should be run.
https://www.youtube.com/watch?v=PWspMJNgT6w
But apart from crude language, the two are pretty different. Kevin is actually fairly articulate in policy and has nailed his persona as a Gordon Gecko-esque investor in a dog-eat-dog world. Comparatively, Trump can hardly stay focused, constantly contradicts himself, and steps into scandal repeatedly.
There isn't any evidence Kevin is racist or sexist, though he probably lacks a proper amount of empathy (its hard to imagine a genuine photo with a baby). And on policy the two agree on little.
Trump can often appear as populist as it gets, simultaneously promising a ban on Muslims while offering "the best healthcare for everybody." O'Leary has been fairly consistent, though he hasn't truly articulated many of his policies outside of economics.
But on economics he isn't populist at all. On the contrary, he sounds more like a Wall Street broker running to create a capitalist paradise. He has spoken mostly on how he is against government waste, high taxes and a low Canadian dollar, and has said he believes the Liberal government will lead to an economic collapse in Canada. When told that the richest 85 people on Earth were equivalent in wealth to the poorest half of the global population, he replied that such a statistic should be applauded as an inspiration for anyone to work hard to become wealthy as well.
The French Challenge
The biggest challenge Kevin probably faces is uniquely Canadian. He isn't bilingual, and has only started learning the language in the past year. In Canada it is thought a necessity to be bilingual to be a national government figure, for the simple reason that the second biggest province, Quebec, gets royally annoyed when they don't.
This has become a bit of a contention already between the various conservative candidates, as the most experienced members who worked for previous PM Harper tend to be from Alberta, where French is completely unneeded. The others who are fluent try to point out that without being bilingual you cannot lead all Canadians.
But at the end of the day, the next conservative leader isn't going to be chosen because they can speak French. Although Quebec is an important battle-ground in elections, it isn't the conservative heartland. Quebec is ahead of the rest of the country in subsidies, protests, unions and corruption, and is more fertile territory for every party except the conservatives.
The voters who are consistently conservative are from the Midwest provinces of Alberta, Manitoba and Saskatchewan. If new conservatives register it will be from Ontario, where the Liberal premier Kathleen Wynn has plummeted in popularity (she is currently the most unpopular premier in Canadian history in any province).
The bilingual problem becomes more pronounced when the candidates do bilingual debates, but Kevin has waited until the last moment to announce and has therefore avoided this problem so far. But there are still two more debates to go before voting.
So my guess? If Kevin doesn't trip over his own feet in the next coming months, he may be a shoe-in for leader. And then PM Trudeau is going to have a merciless capitalist nipping at his sides right until 2019.
Thursday, January 12, 2017
The Inevitable Democratic Comeback
Since the 2016 election I've read more than one article or column that has described how the Democratic Party is in disarray. Their chosen candidate was defeated, and the party was thrown into a crisis of identity; is the party neoliberal, or progressive? Will the party ever truly recover from the devastating loss of every branch of government?
But these articles aren't new. Similar ones were made when Obama won in 2008, winning not just the presidency by the Senate and House as well. But instead of the end of the Republican party, it gradually recovered, winning the House in 2010, the Senate in 2014, and now the Presidency in 2016.
That is the interesting (or boring) thing about American politics. Unlike Canada or Europe where there are at least three parties realistically competing for governance, the US has only two. And the tradition has always been when the party in charge states a policy, the opposition plants a competing argument.
Originally, the Republican party was the party of Lincoln, and the Democrats were the party of slavery. Then with FDR the Democrats were firmly pro-government and the Republicans pro-business. Then with Lyndon Johnson the Democrats were for civil rights and the Republicans against.
The last time one of the parties truly dominated the government was in the wake of the civil war, when the Democratic Party was viewed as the "traitors" who wanted to break up the union. It wasn't until vote-splitting between candidates Taft and Teddy Roosevelt that the Democrat Woodrow Wilson claimed victory (an unapologetic racist who also won WWI and tried to establish the League of Nations).
Ever since then the government has flipped back and forth pretty consistently between the two parties. The last time a party had the presidency for three terms was Ronald Reagan for two and Bush Sr. for one more. Ever since it has consistently been two terms for each president and their respective party.
So what can we expect in the Democrats future? Though they all disagree on the future of the country, they all agree to oppose most of what Trump and the Republican party propose. And it is likely they will make gains in the Senate and House in two years when most of the Trump promises remain unmet.
In four years it is difficult to say what will happen. Either the electorate will feel more comfortable with Trump's leadership and he will win reelection by a bigger margin (similar to Bill Clinton and Bush Jr.) or the electorate will feel the president has not met his promises enough and lose votes (just like Obama did). If Trump loses votes a loss is almost guaranteed as his margin of victory in 2016 was so small.
When I bring this up to people they remind me how the Democratic Party is pretty barren of recognizable national candidates. Hillary Clinton is now politically dead (if you can't beat Trump you can't beat anyone), the only other that easily comes to mind is Joe Biden and Bernie Sanders, who will be 78 and 79 respectively in 2020.
But the next Democratic nominee is probably someone no one really knows right now. Some Democrats are going to get a bit more famous by taking dramatic stands against Trump's agenda in the coming years. And there are still many Democratic governors (and there will be more) across the United States. Most noticeably, the Democrats do best in elections for mayors (only 13 of the biggest US cities have Republican mayors, the biggest being San Diego).
So the candidates exist. The only thing one has to do is beat the other no-names to win the Democratic nomination, and once you've done that you are a national candidate. Very few people knew Obama's name before 2008, or Bill Clinton's before 1992. Even Trump was not recognized for politics until he actually announced he wanted to build a wall.
In four years, there will be a Democratic nominee, and he'll get the national platform to take on the President. All this nominee needs to do is hope Trump is as bad a president as every Democrat thinks he'll be, and someone you don't even know will be president in 2020.
But these articles aren't new. Similar ones were made when Obama won in 2008, winning not just the presidency by the Senate and House as well. But instead of the end of the Republican party, it gradually recovered, winning the House in 2010, the Senate in 2014, and now the Presidency in 2016.
That is the interesting (or boring) thing about American politics. Unlike Canada or Europe where there are at least three parties realistically competing for governance, the US has only two. And the tradition has always been when the party in charge states a policy, the opposition plants a competing argument.
Originally, the Republican party was the party of Lincoln, and the Democrats were the party of slavery. Then with FDR the Democrats were firmly pro-government and the Republicans pro-business. Then with Lyndon Johnson the Democrats were for civil rights and the Republicans against.
The last time one of the parties truly dominated the government was in the wake of the civil war, when the Democratic Party was viewed as the "traitors" who wanted to break up the union. It wasn't until vote-splitting between candidates Taft and Teddy Roosevelt that the Democrat Woodrow Wilson claimed victory (an unapologetic racist who also won WWI and tried to establish the League of Nations).
Ever since then the government has flipped back and forth pretty consistently between the two parties. The last time a party had the presidency for three terms was Ronald Reagan for two and Bush Sr. for one more. Ever since it has consistently been two terms for each president and their respective party.
So what can we expect in the Democrats future? Though they all disagree on the future of the country, they all agree to oppose most of what Trump and the Republican party propose. And it is likely they will make gains in the Senate and House in two years when most of the Trump promises remain unmet.
In four years it is difficult to say what will happen. Either the electorate will feel more comfortable with Trump's leadership and he will win reelection by a bigger margin (similar to Bill Clinton and Bush Jr.) or the electorate will feel the president has not met his promises enough and lose votes (just like Obama did). If Trump loses votes a loss is almost guaranteed as his margin of victory in 2016 was so small.
When I bring this up to people they remind me how the Democratic Party is pretty barren of recognizable national candidates. Hillary Clinton is now politically dead (if you can't beat Trump you can't beat anyone), the only other that easily comes to mind is Joe Biden and Bernie Sanders, who will be 78 and 79 respectively in 2020.
But the next Democratic nominee is probably someone no one really knows right now. Some Democrats are going to get a bit more famous by taking dramatic stands against Trump's agenda in the coming years. And there are still many Democratic governors (and there will be more) across the United States. Most noticeably, the Democrats do best in elections for mayors (only 13 of the biggest US cities have Republican mayors, the biggest being San Diego).
So the candidates exist. The only thing one has to do is beat the other no-names to win the Democratic nomination, and once you've done that you are a national candidate. Very few people knew Obama's name before 2008, or Bill Clinton's before 1992. Even Trump was not recognized for politics until he actually announced he wanted to build a wall.
In four years, there will be a Democratic nominee, and he'll get the national platform to take on the President. All this nominee needs to do is hope Trump is as bad a president as every Democrat thinks he'll be, and someone you don't even know will be president in 2020.
Tuesday, November 29, 2016
The Russian Bear isn't so tough
In the past few weeks, a great many writers have said that the Russian star is on the rise. An American election crowned the openly pro-Russian Donald Trump, who has said he would like to collaborate with Russian interests in the Middle East and elsewhere. Other Eastern European nations have elected pro-Russian leaders, and the fate of the two rival organizations, the European Union and even NATO, may have their futures jeopardized.
But one key thing about Russia is often overlooked. It has weaknesses, ones that are not only structural and nearly crippling to the nation, but ones that Russians continue to ignore.
To understand the Russian Federation one needs to know how it became the way it is. Russia was once the core of the Soviet Union, the nation binding that empire together. Once the Soviets tried instituting reforms to match the economic successes of its ideological rivals, unintentionally dissolving the Union in the process, the Russian Federation was formed.
The Russian ruling class then had a choice when facing its new, post-communism fate. Should it try and join the capitalist community gradually, like China had? Or should it dismantle the government control of industry entirely, and jump headlong into this future, much like the Japanese in post-WWII?
The Russians chose the latter to great detriment. When most government organizations were dismantled, much of their workforce was left out of a job and income. The newly privatized corporations did not make up this loss in employment, and most economic gains were made by the very wealthiest of Russian society, now commonly referred to as the "oligarchs."
This led to the rise of Vladimir Putin. The past reforms had been made by President Boris Yeltsin (of both the Soviet Union and Russian Federation), who had become increasingly unpopular. When he decided to resign, his Prime Minister and ex-KGB Lieutenant Colonel Putin was made acting President.
Putin took advantage of his new power to make a deal with the oligarchs. The ones who supported his government were given special privileges with the state in exchange for their cooperation. The ones who resisted Putin were arrested or forced into exile. In the process, since Putin's inauguration corruption in the country has skyrocketed. On the corruption perceptions index Russia is ranked 120 out of 168 nations, more corrupt than China, Mexico, Colombia, and Vietnam.
But Putin did improve the economy. By taking advantage of Russia's newly discovered natural gas reservoirs and by rebuilding the government's state bureaucracy, the economy improved. And Russia remained powerful militarily, having inherited most of the Soviet Union's armed forces. By building a mostly state-run news medium, Russian support for Putin and the Kremlin remains incredibly high.
Now, here is where Russian weaknesses kick in. The past few years have been especially hard on Russian interests, both politically and economically.]
First was Ukraine. A nation that was also integral to the Soviet Union and has many historical ties to Russia diverted from its cousin. In 2014, Ukrainian President Viktor Yanukovich diverted from his promise to pursue ties with the EU to instead work with Russia. The people revolted in the western and central areas of the country, booting Yanukovich from the presidency.
Putin soon responded. It is important to remember why the following happened; Ukraine was (and in Russian minds still is) part of Russia's sphere of influence, and any move away from Russia would inherently weaken it. Not only that, Ukraine was one of the few post-Soviet nations to remain close to Russia, as Poland, the Baltics, Hungary and Romania all turned away from the Federation.
Russian special troops soon entered and seized control of the Crimean peninsula, and rebels began popping up in Eastern Ukraine with Russian support. There is now an uncertain peace, but compared to the firmly pro-Russian Ukraine of the past, Russia now only has pockets of support in the country.
Next is Syria. Since 1956, Syria had received military support from the Soviet Union. It still remains one of the few allies Russia has in the Middle East, an area that is mostly affiliated with the United States, Europe, or has its own agendas.
When Syria began to be embroiled in its own civil war (mostly due to the mismanagement of its dictator), Russia again responded. Any attempt by the US or Europe to intervene through the United Nations was blocked by Russian veto power, and the Kremlin continued to support the Syrian government militarily despite its many humanitarian crimes.
Again, this has not proven very beneficial to Russia. Compared to the stable, reliable military ally of the past, Syria has become a mess. Only some government holdouts remain, while most of the country is controlled by rebels of various kinds, some US supported and others affiliated with ISIS.
Both of these foreign entanglements have been detrimental to Russia's perception abroad. Entanglements in Ukraine have made much of Eastern Europe much more keen on allowing NATO to build up forces to protect them, and has made the military alliance mostly a check against Russian power. NATO, which had been thought irrelevant after the Soviet Union's demise, once again has a purpose. Middle Eastern nations like Turkey and Saudi Arabia have also moved farther from Russian advances, and stepped up their own military spending. And Europe has moved to sanction Russia as punishment for its meddling.
And lastly comes the final Russian weakness; the economy. Although Putin managed to patch up the worst effects of the Soviet Union's dissolution, thing have again worsened. The sanctions hurt the Russian economy, but far worse was the drop in oil prices (due to Saudi Arabian tinkering) which plunged Russia into a recession in 2014 (and is only now tapering off).
This is what reveals the biggest problem Russia has. Its economy is over-reliant on one industry, energy. This is economically very risky. The more diversified a nation is economically, the more likely it can ride out market shocks and jolts. Russia is only successful when energy prices are high. But its long-term future is even worse. Compared to European and North American nations, Russians are not as well-educated and prepared for emerging industries in computing and information. Russia also has a very low-rate for immigration. Immigration is necessary considering the country has a low-birthrate, meaning its workforce will continue to fall and the country will become more unproductive in the future.
And (as mentioned before) much of the economic success of Russia is siphoned off due to corruption. It is estimated that in the 2014 Olympics, a road built to connect Sochi to other Russian cities cost $6.8 billion (for comparison, the entirety of the Canadian Olympics in 2010 cost $1.5 billion). Analysts pointed out that normally road construction is not so astronomical in cost, and that for $6.8 billion another country could have paved such a road with caviar or Louis Vuitton bags. The only rational answer is that the companies hired by the Kremlin to build the road were given some hefty bribes.
Normally these problems alone do not spell disaster. Countries all over the world have these same issues. What is really relevant is that the Kremlin doesn't seem to notice the country's trajectory. Instead, Putin feels more and more pressured to continue to interfere in foreign entanglements that are getting diminishing returns, when the situation at home is spiraling into worsening straits.
The reason it hasn't gotten personally bad for Putin and his oligarchs is that the propaganda machine that is Russian news has been able to spin the economy problems as a Western plot to destroy Russia. Although this is partly true (the sanctions are designed to hurt Russia) most of the problems Russia faces are natural movements of nations turning away from it on their own volition, or are the unstable economic climate collapsing on itself.
Russia continues to see itself as a global power on the rise, when instead it is descending into deeper stagnation. To save it, there needs to be a radical shifting of resources away from military spending to leverage energy revenues into building better education and infrastructure, to spur investment and build a diversified economy that can succeed in the future. Sadly, under current leadership, this will certainly not happen, and it is only a question of when, not if, the Russian people turn on those who have wronged them.
http://www.esquire.com/news-politics/news/a27243/russia-olympics-caviar-road/
But one key thing about Russia is often overlooked. It has weaknesses, ones that are not only structural and nearly crippling to the nation, but ones that Russians continue to ignore.
To understand the Russian Federation one needs to know how it became the way it is. Russia was once the core of the Soviet Union, the nation binding that empire together. Once the Soviets tried instituting reforms to match the economic successes of its ideological rivals, unintentionally dissolving the Union in the process, the Russian Federation was formed.
The Russian ruling class then had a choice when facing its new, post-communism fate. Should it try and join the capitalist community gradually, like China had? Or should it dismantle the government control of industry entirely, and jump headlong into this future, much like the Japanese in post-WWII?
The Russians chose the latter to great detriment. When most government organizations were dismantled, much of their workforce was left out of a job and income. The newly privatized corporations did not make up this loss in employment, and most economic gains were made by the very wealthiest of Russian society, now commonly referred to as the "oligarchs."
This led to the rise of Vladimir Putin. The past reforms had been made by President Boris Yeltsin (of both the Soviet Union and Russian Federation), who had become increasingly unpopular. When he decided to resign, his Prime Minister and ex-KGB Lieutenant Colonel Putin was made acting President.
Putin took advantage of his new power to make a deal with the oligarchs. The ones who supported his government were given special privileges with the state in exchange for their cooperation. The ones who resisted Putin were arrested or forced into exile. In the process, since Putin's inauguration corruption in the country has skyrocketed. On the corruption perceptions index Russia is ranked 120 out of 168 nations, more corrupt than China, Mexico, Colombia, and Vietnam.
But Putin did improve the economy. By taking advantage of Russia's newly discovered natural gas reservoirs and by rebuilding the government's state bureaucracy, the economy improved. And Russia remained powerful militarily, having inherited most of the Soviet Union's armed forces. By building a mostly state-run news medium, Russian support for Putin and the Kremlin remains incredibly high.
Now, here is where Russian weaknesses kick in. The past few years have been especially hard on Russian interests, both politically and economically.]
First was Ukraine. A nation that was also integral to the Soviet Union and has many historical ties to Russia diverted from its cousin. In 2014, Ukrainian President Viktor Yanukovich diverted from his promise to pursue ties with the EU to instead work with Russia. The people revolted in the western and central areas of the country, booting Yanukovich from the presidency.
Putin soon responded. It is important to remember why the following happened; Ukraine was (and in Russian minds still is) part of Russia's sphere of influence, and any move away from Russia would inherently weaken it. Not only that, Ukraine was one of the few post-Soviet nations to remain close to Russia, as Poland, the Baltics, Hungary and Romania all turned away from the Federation.
Russian special troops soon entered and seized control of the Crimean peninsula, and rebels began popping up in Eastern Ukraine with Russian support. There is now an uncertain peace, but compared to the firmly pro-Russian Ukraine of the past, Russia now only has pockets of support in the country.
Next is Syria. Since 1956, Syria had received military support from the Soviet Union. It still remains one of the few allies Russia has in the Middle East, an area that is mostly affiliated with the United States, Europe, or has its own agendas.
When Syria began to be embroiled in its own civil war (mostly due to the mismanagement of its dictator), Russia again responded. Any attempt by the US or Europe to intervene through the United Nations was blocked by Russian veto power, and the Kremlin continued to support the Syrian government militarily despite its many humanitarian crimes.
Again, this has not proven very beneficial to Russia. Compared to the stable, reliable military ally of the past, Syria has become a mess. Only some government holdouts remain, while most of the country is controlled by rebels of various kinds, some US supported and others affiliated with ISIS.
Both of these foreign entanglements have been detrimental to Russia's perception abroad. Entanglements in Ukraine have made much of Eastern Europe much more keen on allowing NATO to build up forces to protect them, and has made the military alliance mostly a check against Russian power. NATO, which had been thought irrelevant after the Soviet Union's demise, once again has a purpose. Middle Eastern nations like Turkey and Saudi Arabia have also moved farther from Russian advances, and stepped up their own military spending. And Europe has moved to sanction Russia as punishment for its meddling.
And lastly comes the final Russian weakness; the economy. Although Putin managed to patch up the worst effects of the Soviet Union's dissolution, thing have again worsened. The sanctions hurt the Russian economy, but far worse was the drop in oil prices (due to Saudi Arabian tinkering) which plunged Russia into a recession in 2014 (and is only now tapering off).
This is what reveals the biggest problem Russia has. Its economy is over-reliant on one industry, energy. This is economically very risky. The more diversified a nation is economically, the more likely it can ride out market shocks and jolts. Russia is only successful when energy prices are high. But its long-term future is even worse. Compared to European and North American nations, Russians are not as well-educated and prepared for emerging industries in computing and information. Russia also has a very low-rate for immigration. Immigration is necessary considering the country has a low-birthrate, meaning its workforce will continue to fall and the country will become more unproductive in the future.
And (as mentioned before) much of the economic success of Russia is siphoned off due to corruption. It is estimated that in the 2014 Olympics, a road built to connect Sochi to other Russian cities cost $6.8 billion (for comparison, the entirety of the Canadian Olympics in 2010 cost $1.5 billion). Analysts pointed out that normally road construction is not so astronomical in cost, and that for $6.8 billion another country could have paved such a road with caviar or Louis Vuitton bags. The only rational answer is that the companies hired by the Kremlin to build the road were given some hefty bribes.
Normally these problems alone do not spell disaster. Countries all over the world have these same issues. What is really relevant is that the Kremlin doesn't seem to notice the country's trajectory. Instead, Putin feels more and more pressured to continue to interfere in foreign entanglements that are getting diminishing returns, when the situation at home is spiraling into worsening straits.
The reason it hasn't gotten personally bad for Putin and his oligarchs is that the propaganda machine that is Russian news has been able to spin the economy problems as a Western plot to destroy Russia. Although this is partly true (the sanctions are designed to hurt Russia) most of the problems Russia faces are natural movements of nations turning away from it on their own volition, or are the unstable economic climate collapsing on itself.
Russia continues to see itself as a global power on the rise, when instead it is descending into deeper stagnation. To save it, there needs to be a radical shifting of resources away from military spending to leverage energy revenues into building better education and infrastructure, to spur investment and build a diversified economy that can succeed in the future. Sadly, under current leadership, this will certainly not happen, and it is only a question of when, not if, the Russian people turn on those who have wronged them.
http://www.esquire.com/news-politics/news/a27243/russia-olympics-caviar-road/
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