Just Give the Rich What they Want US Economy a Lost Cause?

Some Alternative Solutions

Summary
A new philosophy seems to be emerging - just give the rich whatever they want! Mr. Romney is finally talking about the middle class and tax cuts for the middle class - the same 47% who do not pay taxes now since they do not have sufficient income to reach the threshold to pay taxes! The philosophy of tax cuts for the rich and the corporations, and now treating corporations as people, in place since President Reagan took office, has wrecked the US economy. Another reason for the current mess is the freewheeling military expenditures, without any accompanying tax increases on the rich. Americans need to study what previous Presidents did during World Wars I and II (click here), for example, when military spending increased dramatically. Both these GOP demands (tax cuts for the rich and NO cuts in military spending) must be DENIED forthright and a long term consensus reached IMMEDIATELY regarding the basic philosophy of governance, if necessary, by calling a new Constitutional Convention. This should be the task of the next President, or whoever is elected on November 6, 2012. A five-point plan for outrageous spending, yes truly outrageous spending, of several trillions of dollars is proposed here to lay the groundwork and sow the seeds for long term technological innovations which will lead to prosperity.

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Dear All: I just read an interesting piece by Anthony Mirhaydari (click here) that makes some interesting arguments about the reasons for the current mess that we find ourselves in (more on this shortly). The author is to be commended for this piece of research and thoughtful analysis. Unfortunately, he then essentially throws the towel in with the statement that the US economy is a lost cause and we must just give the rich whatever they want in order to save the middle class. And guess what Mirhaydari thinks the rich want now? 1. New organs to extend their lives 2. Cybernetic servants 3. First class seats for trips to space All these three make me cringe as reasons to give the rich what they want. What we see here is an admission (by a hard core Wall Streeter) that the trickle down philosophy has trickled down as far as it can trickle and there is now nothing more left to trickle or even drip. Tax cuts for the rich and the corporations and increased military spending (and deficits be damned when a GOP President does it) will trickle down as prosperity for the middle class and show the way out of poverty for the really poor this has been the governing philosophy since Reagan took office in the midst of the Iranian hostage crisis. Anyway, putting this bit of partisan outburst aside, Mirhaydari (citing research by the Northwestern University economist Robert Gordon) points out that the lack of any meaningful technological innovation is the fundamental reason for the slowing down in the growth in the productivity and the GDP per capita. Based on extrapolations made for GDP growth from World War II to the 1970s, the GDP per capita should be at around $64 K, or about one-third (33%) more than it is today.

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Innovations today seem to be focused on narrow areas of questionable benefit such as improving entertainment and communication devices. The new economy has essentially become Facebook (struggling in the market place since the IPO), not to mention Google, Apple, Microsoft and the newer wave of companies which launched their IPOs before ever turning a profit (like the struggling Groupon, Zynga, Zillow, Trulia) In his research, Gordon has pointed that the prosperity that we are accustomed to is the result of innovations that were fundamentally transformative. Historically, there have been three such waves of transformation. 1. The advent of the steam engine and thus the railroads (1750s to 1830s). 2. The advances in the theory of electromagnetism, leading to the widespread use of electricity and all other modern forms of communication (radio, TV, radar, cellphones, GPS, etc., until the 1960s) 3. The information technology revolution (extension of no. 2 above). Here it is should be pointed out that Sputnik era space race, which led to the creation of NASA and the moon landing and NASA sponsored (read government spending) R & D played a big part in the IT revolution. What we really need toady is a similar technological revolution to close the gap in the growth of the GDP per capita. I could not agree more up to this point. The solution throwing the towel and letting the rich have whatever they want this is what bothers me. So, we should all let just the rich have their replacement organs to keep living forever, and their slaves (no, it is called cybernetic servants) or jump on to a spaceship for a ride to nowhere! I think we can do better this, even in the absence of a technological revolution. But, it is heartening to see, in the popular press, the recognition that technological innovations are the basic driver for long term prosperity. In other words, we have to recognize that long term investments in R & D will eventually pay off in terms fundamental transformations in society. The authors cites the example of the 2012 Nobel Prizes for:
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 Quantum computing (or being in two places at the same time, as has been suggested --- not sure if this the kind of innovation we need!) and Adult stem cell research (back to those replacement organs for the rich!) Yes, the prosperity gap is entirely due to wrong-headed cuts in government spending, especially for R & D (such as the near total gutting of the space program) and education, which is now again a target of the spending cuts advocated by the GOP on the campaign trail (especially Mr. Paul Ryan). We cannot have more of these types of misguided cuts in government spending, or the misguided increases in military spending (of questionable benefit) if the road to long prosperity lies in continued technological innovations. Heres a list of things that we could do (with government spending, yes, Keynesian intervention is the only way to spur the stagnant economy, except that spending must lead to long term growth) without falling for this Give-the-Rich-Everythingthey-want Strategy to prosperity. 1. A bold program to create a new source of energy to replace the current dependence on fossil fuels which is also the fundamental reason for global warming and/or climate change. We did not know how to put a man on the moon when President Kennedy proposed it. Neither do know how we can create this new source of energy that will free us from fossil fuel dependence. Let the government provide grants, over a period of the next 10 years to the top 10 research universities ($ 10 billion per year times 10 times 10 equals $1 trillion) to explore, innovate, and perfect, in partnership with private industry, this new source of green energy. 2. A complete rebuilding of transportation modes affordable public transportation and reduced dependence on the private automobile (the single important cause of many problems that we face today, from high energy prices, to obesity to global warming), and intercity high speed travel networks. How about another $5 to $ 10 trillion over the next 10 years for this bold transformative venture? Is that too much compared to the debts that we have already incurred since the national debt crossed the $1 trillion mark under President Reagan (in 1981, just after he took office). The ReaganPage 4 of 8

Bush I team got us from $1 trillion to $4 trillion and the Clinton-BushObama years have gotten us to $16 trillion. 3. Renewed Exploration of space missions to moon and Mars and asteroid mining. Just look at what we have been able to learn from the NASA telescopes, like the Hubble (about exoplanets) and that tiny thing called the Mars Rover Curiosity. How about another $10 trillion for something like this over the next 10 years? 4. Spend like crazy on higher education to create the highly skilled labor force of the future to support the programs listed under 1 to 3. Essentially, anyone who is willing to go to college and get a higher education should be able to do this for FREE that is what it means if we want sustained technological innovations which we now recognize as the fundamental reasons for the increase in prosperity. 5. Spend like crazy on health care ok, let the rich have their replacement organs too. Build the best health care system in the world. The burden of affordable health care should become a shared burden of society as a whole, as it is in many advanced European nations and Japan, and increasingly even in countries like India and China where anyone who has a job essentially has access to quality health care. In India, every government employee (and retiree) has access to affordable health care yes, paid for by taxes! There is another five-point plan. Where will the money for all this come from, you ask? Exactly where it come from to fund the disastrous Iraq and Afghanistan wars! This has nothing to do with being a Democrat or a Republican. What we need in the US is less greed and not this Give-the-Rich-Everything-theywant Strategy to prosperity. Sadly, we are lacking today the political will to compromise and put the country first. It is this that needs to change. Certain basic principles of governance and a strategy for long term national debt reduction must be agreed upon, once and for all. We cannot go through the annual bickering over the debt ceiling and endless demands about more tax breaks for the rich and hold all legislation hostage. It is time to call this bluff once and for all. It will just not work and the middle class should say enough is enough.
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This, however, requires a leader with a spine. Such leaders with a spine, who will push their own visions, do exist, in the Republican party. President Reagan was a prime example. Although, I personally, totally disagree with the GOP vision, I admire their conviction. Unfortunately, that vision will NOT lead us to the prosperity that we all seek. What is lacking today is a Democratic leader with a spine. That is where the political revolution needs to begin Democrats who will stand up for the need to support the middle class and lead it on to the road to prosperity. Some of the crazy spending measures, several trillions of dollars, outlined may not seem to be too crazy after all, considering the mess that we are in. And, while we are at it, we must also do two things that are harming the nation in a very fundamental way. 1. The lifetime appointment for Supreme Court Justices must be ended. They should be appointed for two terms starting with the middle of the Presidential cycle. 2. All political offices should be term limited two terms for all Senators and President and a single term, yes, just one single term for the House of Representatives. No elected political office will be a salaried office. It should be a privilege to serve. If President Obama is re-elected, let us hope he knows where he wants to lead us. He seems to lack both the political will to stand up for his own convictions and the ability to get things done to lead the country. This is only a part of the problem. The myth of the US being a post-racial society, which is now fully exposed, is another. Americans need to think hard about the future direction of the country. That too is a question that needs to be answered on November 6 beyond O or R. Very sincerely V. Laxmanan October 18, 2012.
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About the author V. Laxmanan, Sc. D.

Email: vlaxmanan@hotmail.com The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the groundbased experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Plancks ideas to describe the photoelectric effect (by treating light as being composed of particles called
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photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced by Planck, referred to here as the generalized power-exponential law, might actually have many applications far beyond blackbody radiation studies where it was first conceived. Einsteins photoelectric law is a simple linear law, as we see here, and was deduced from Plancks non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton.

Cover page of AirTran 2000 Annual

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