MPJ) — Did you know America is

 We’re completely bankrupt!  The coffers at

Security are empty!  And, in case you didn’t click on those links, they’re to PolitiFact articles showing

statements to be nonsense.

That’s not to say America doesn’t face financial challenge.  We’re spending significantly more money than we’re receiving in tax revenue.  Expenditures in the long-term are also going to rise, and rise significantly, while tax revenues in this economic climate are going to suffer until further notice.  This means two things:  1.  We must increase overall revenue by both raising taxes and increasing the efficiency of our spending and  2.  We must grow the tax base by growing the overall economy.

Unfortunately, Republicans refuse to raise taxes to a level that can actually sustain the government, and Democrats are unwilling to stand up and make sure our resources are allocated in the most beneficial way possible.  Although I think MSNBC’s Dylan Ratigan hit the point more succinctly in a rant this week on this show, saying Republicans refuse to do anything, and Democrats refuse to do anything beyond their own term in office.  We cannot continue this ridiculous trend, and we must put forward a new strategy.  And here it is in three (not so easy) steps.

1.  Use taxes exclusively as a means to fund the government, and stop using it as a political football disguised as a “job creator/killer.”

Taxes are going to have to go up, folks.  This is simply because the government is not bringing in enough revenue.  Making things worse, the favorite mantra of Republicans in Congress, that America doesn’t have a “taxing problem,” it has a “spending problem,”  completely ignores the fact that we, in fact, have both.

Here’s the thing.  As you can see by this graph, we had budget surpluses set to end out the 1990s under Bill Clinton’s economic policies.  However, once we entered the Bush era, with his massive tax cuts in 2001 and 2003, the deficits immediately returned.  And this flies in the face of what we call “prevailing wisdom.”

Back in April, Rep. Dennis Kucinich (D-Ohio) said that the biggest cause of current deficits were the Bush tax cuts.  PolitiFact said that was true.  This was around the same time, two of Kucinich’s Midwestern colleagues took up the opposite end of the argument, and got knocked around for it.  Rep. Joe Walsh (R-Illinois) said that every time we’ve cut taxes, revenues have increased and the economy has grown.  That’s false.  While in November of last year, Rep. Mike Pence (R-Indiana) said that raising taxes actually reduces revenue.  False again.

It’s time we cast aside these fiduciary fallacies where less is more, and more is less (literally), and get back to reality.  A reality even President Ronald Reagan understood, despite the fact his legacy is that of a tax cutter, and not a hiker.  Though Reagan is most famous for his big tax cut in his first term, Reagan overall raised various taxes 11 times.

So let’s stop all this tax demagoguery, and get back to responsibly funding the government.  We’re all going to have to pay the bill in the end.  So lets get to paying it now instead of the bill plus extra interest later.

2.  Spending is going to increase anyway, so we may as well get the most possible out of each dollar.

Spending is going to increase.  This is guaranteed.  It doesn’t matter what Republicans or Democrats do because the spending that’s going to truly increase isn’t up to them.  It’s up to Social Security, Medicare, Medicaid, and the flood of retiring baby boomers that just started reaching that magic age of 65 (my mother being among the first) this year, and becoming eligible for those programs.

The biggest population boom in our nation’s history is reaching retirement age at a time when health care costs are skyrocketing, and after decades of raiding the Social Security fund purposes other than Social Security.  This doesn’t mean we should kill these programs in manners like those proposed by our very own Rep. Paul Ryan (R-Wisconsin).  The solution is to get health care spending, across the board (not just for seniors) down.  That’s going to be tackled in further depth in the next How to Fix America.  But it needs to be done, and that’s going to take some doing.

But the spending we can control needs to be streamlined, and each dollar needs to be maximized.  That means less spending on defense, where the benefits of that spending end up heavily overseas (by means of both overseas-based contractors and the overseas nature of military conflict), and less spending on incarceration (specifically for minor offenses, that just takes otherwise productive people out of the workforce, and locks them up at next to no benefit for the rest of us).

That means less spending on administration and bureaucracy, and instead focusing on streamlining administration.  Some areas of the government are far ahead of  the private sector when it comes to administration costs, for example (oddly), Medicare.  But the federal government is also far behind the private sector in administration costs in some areas, like theUS Postal Service.

I’m not proposing a Six Sigma approach to government (largely because this is a fatally flawed methodology that has destroyed a number of private employers, such as Circuit City and Sears, and even its founding corporation, Motorola).  However, a “lean” approach to spending must be employed.

And there’s a second side to that coin.  Increasing spending on the most effective sectors of government expenditures.  One of the most cost-effective areas to increase spending in the US is on infrastructure (which will be tackled in the fourth installment of How to Fix America) and education (which was tackled in the first installment).

3.  Switch from a supply-side focused economic policy to a demand-focused policy.

If you really want to fix the government’s balance sheet, fix the economy.

For the last thirty years, we have focused most of our effort on the “supply” side of the supply-demand dichotomy.  Here’s the problem with that…supply doesn’t drive the economy.  Demand does.  And that’s what we’re having a problem understanding now, despite this being a core teaching in pretty much any Economics 101 course in college.

What we’re seeing right now is corporations doing extremely well on paper.  They’re sitting on a pile of cash while their P&L sheets show their continued profitability, and yet we wonder why they’re not hiring.  I’ll tell you why they’re not hiring.  They have no reason to.

With demand as low as it is right now, and continuing to decrease, corporations don’t have any incentive to increase supply.  So they’re just going to sit there and horde their cash (also in part due to their reluctance to invest further in the financial markets due to increasing market volatility) and wait for people to start wanting to buy their products again.  Yet, if you increase demand, the supply will follow.  If there’s one thing we’ve learned over the past couple hundred years of our capitalist system, it’s that if there’s a buck to be made, nobody’s going to leave it on the table.

This is a case for more direct government spending, even going so far as another Works Progress Administration style program.  These programs will fix the demand problem that we have.  When we invest taxpayer money in putting people to work (specifically doing productive things, not digging holes to fill back up, mind you), it has a demonstrated trickle-up effect.

The companies that are put to work see the first benefit.  Road construction companies, engineering firms, etc get the money first.  They then spend it on raw materials and equipment such as concrete, rebar, cable, computers, backhoes, cranes, etc.  They also spend it on labor.  The people they hire also need things and now have the ability to purchase them.  They can now make purchases from the basic (housing, groceries, utilities) to the common (televisions, computers, chairs, couches).  That money then moves to the next step, as those televisions, backhoes, concrete, and groceries get produced, and that money keeps moving, effectively, through the economy.

No, it can’t go on forever.  But it’s not supposed to.  Just like your car’s engine can’t run on its starter motor forever, but it requires it to get the thing started.  And that’s how this should be viewed, as a starter motor for our economy.  Use government spending to force the engine of our economy to turn until it can fire and run on its own.  It’s worked before, and it will work again.

That’s, honestly, the only thing that will dig us out of the economic morass we find ourselves in.  And that’s going to be the best way to fix our nation’s finances.  Fix the economy, fix our fiscal priorities, fix our government’s balance sheets.  Plain and simple.

Related:

How to Fix America Part I: The Crumbling Education System

The post How to Fix America Part II: Fix Our Nation’s Finances appeared first on The Midwest Guy.

or not,

more importantly, expanding America’s education system is the first thing we need to do to get America back in the lead.  I can already guess what you’re thinking, though.  Shouldn’t we work on jobs first?  Or whittle down the deficit?  Or fix healthcare?

No.  And I’ll tell you why.

Compared to everything else on the list, fixing education is going to be both one of the easiest, and most cost-effective efforts we can undertake.  And once we get it fixed, it will go a long way to getting the rest of our problems taken care of.  And we can get at least half of the job done with one simple word.

Preschool.

A fascinating study conducted in Ypsilanti, MI found that providing underprivileged children access to a quality preschool education will have a profound effect on their lives well into adulthood.  Children who attend preschool get arrested less, earn more, graduate high school more, show greater levels of scholastic achievement, and score higher on IQ tests than children who do not attend preschool.  And this is after controlling for family involvement and other outside factors.

The reason is this:  Children who attend preschool do so at the main age where humans learn how to navigate social situations.  Sharing may be caring, but it’s also key to social interaction.  Learning give-and-take, learning how to interact and navigate conflict, learning how to just be somewhere on time and to show up clean and prepared are skills people learn primarily between the ages of 3 and 4.  And when you’re kept at home, or with a babysitter, you miss out on the opportunity to learn these skills.  By the time you enter kindergarten…it’s literally too late.

Economic studies have found that providing preschool education to underprivileged youth would cost…get this…just over $14 billion dollars.  To put that in perspective, the War in Afghanistan alone is projected to cost us $122 billion in fiscal year 2011.  That means, for the cost of just over 43 days in Afghanistan, we could pay to send the nation’s most at-risk youth to preschool.  What’s more, a University of Wisconsin study finds that for every dollar spent on sending kids to preschool, society at large reaps a benefit of $7.10 (in 1998 dollars).  Adjusting for inflation to 2010 dollars, that’s $9.45.

So what we’re looking at, is an investment of $14.5 billion (roughly) generating a net societal benefit of just over $137 billion in 20 years.  If you subtract the benefits that the individual student gets and just look at what society at large gets (that means YOU), that comes out to an inflation-adjusted $5.10, or nearly $74 billion.

Personally, I would argue for making preschool part of the required school attendance schedule for all children.  This is because what we’re seeing is people who didn’t attend preschool, and end up falling into the pit of disadvantage, cannot acquire the skills to climb out.  That’s what we’re finding with job re-training programs.  This is born out in a pair of Planet Money reports (from NPR).

Simply stated, job training programs not only don’t help people that don’t have these social navigation skills to begin with, in many cases, they harm them.

But our problems don’t end there.

It used to be, back in the 1950s, 60s, and even 70s that a person could simply graduate from high school, enter the workforce, and find a job where they could make a sufficient wage to get married, buy a house, a car, and raise a family.  That’s because there were two routes to middle-class stability: your brain and your back.

People didn’t necessarily need to be smart to bolt a fender onto a car, attach a beater bar to a vacuum cleaner, or pour molten aluminum into a casting.  Yes, they needed their wits about them (for safety’s sake), but the process itself didn’t require an “education” per se.  But there’s a problem with this approach these days.

People don’t bolt fenders onto cars.  People don’t attach beater bars to vacuum cleaners, nor to they pour aluminum into castings anymore.  Machines do.  Computer controlled robots and other devices make these things happen.  These machines still require human guidance, however, that does require some form of education.  So does manufacturing many of the more complex devices and doing many of the more complex tasks we need done today.

It takes some form of education to run a CNC machining center.  It takes some form of education to both build and install solar panels and wind turbines.  It takes some form of education to manufacture semiconductors, handheld devices, as well as the other machines that are now doing a lot of our previously back-breaking work.  The days of showing up, punching the clock, and mindlessly doing one task for eight hours are almost gone, if not already.  As an example, under Henry Ford’s one-person-one-task system of manufacturing (which revolutionized manufacturing worldwide), Ford’s largest plant (Dearborn’s River Rouge plant) employed roughly 100,000 workers at its height in the 1930s.  Today, Ford Motor Company, worldwide, in its entirety, employs about 164,000 people.

The reason I mention all this is because we now need to revamp our K-12 education system so that, when our children graduate, they’re prepared for their next step in life, whatever that may be.  Colleges and universities report the students they’re taking in are less and less prepared for the rigors of higher education.  Employers nationwide report around 3 million job openings, but cannot find people with the skill sets needed to fill them.

So how do we fix this?  First step is to revamp the schedule of K-12 education.  School years need to run longer than the current 180 day minimum (200 would be preferable), and summer breaks need to be eliminated and replaced with more intermittent breaks.  The current school calendar is an anachronism dating back to America’s agrarian past which, by and large, doesn’t exist anymore.  Even in rural areas.  Kids are no longer needed at home to tend the farm.  Mom and Dad, along with their mechanized implements can take care of that by themselves, assuming they aren’t living in the suburbs working in an office.

Studies have shown that low-income and disadvantaged youths, once again, are the biggest victim of this old-timey system.  One study showed that by the end of elementary school, low-income students learned about as much as their better-off counterparts, but lost much more during the summer to the point that they were 3 grade levels behind by the time they went to middle school.  By the time freshman year rolls around, about two-thirds of the achievement gap existing between income classes could be explained through summer learning loss.

Our kids need to learn more and retain more.  Longer school years coupled with shorter (in duration) breaks will allow teachers to cover more material per school year, and will allow students to maintain more of that learning from year to year.  If we can align our K-12 education system so that students are, once again, ready to enter some form of sustainable work upon graduation from high school, we’ll be serving all sectors of life better.  Major companies will have to import (or outsource) less labor.  More people will be able to make a proper living.  More and better work could be done in the US.  And college-bound students will be better prepared to achieve, and do better work, during their post-secondary years.

There’s going to have to be efficiencies realized in this realm as well, though.  Automatic yearly pay raises and degree-based pay raises cannot remain the norm, nor can overinflated school administration bureaucracies.  Teacher pay should be based more on merit than on experience, and seniority being the ultimate arbiter of who stays and who goes during funding cuts should be tossed out.  At the same time, administrations need to be streamlined.  Fewer mid-level administrators, fewer fringe benefits (like cars) for administration, and smarter allocation of resources.

A restructuring of funding should also be included.  Rich kids in a rich neighborhood or suburb shouldn’t be at an automatic advantage because property values (which school districts rely on for tax levies) are higher than they are in rural and inner-city areas.  Each state should have a single  “price per head” across the entire state.  That means schools in more affluent areas are going to lose money if overall funding remains the same.  Which means they’re going to have to be willing to pay more into the pot.  Fair is fair.  They’ll see the benefits overall.

But what about when college-bound students make it to college?  Students are not out of the woods yet.

Funding for higher education needs to get back to an upward trajectory.  We continue to complain about the skyrocketing cost of tuition and fees, and question whether our students are receiving an increased value for the extra money they’re paying.  In large part, the answer is “no.”

One study shows that, while tuition rises, the cost of providing that higher education has changed little over the past 50 years.  (In the interest of fairness to this site’s guiding principles, yes, the study was conducted by the overtly libertarian Cato Institute, but it cites US Dept. of Education figures)  What makes things worse is that employers, once again, are saying they’re finding the recent college graduates they either hire or interview to be less and less fully prepared for the jobs which they are applying for.

There are two main reasons for this.

1.  States and the federal government continue using education funds as their favorite go-to to cut spending.  This is largely because higher education is one of the very few places funded by government that can make up the funding difference on their own…through tuition and fee hikes.  So while the cost of a college education remains barely changed, students themselves are baring more and more of the actual cost of it.

Libertarians believe this is a good thing since the students that are receiving the benefit of the education they’re receiving should also pay the costs.  However, those same libertarians don’t realize the benefits they themselves see when other people get educated.

2.  Less and less money from each university’s budget is being spent on actual education, while more and more goes to research and other ventures (like administration) that don’t do much to benefit students.  One study published in the Chronicle of Higher Education found, for instance, reporting discrepancies at private, Ivy League Dartmouth College.

Students there pay around $50,000 per year in tuition.  Dartmouth says, however, this cost is justified since the school spends more than $100,000 per student per year.  However, further examination into the school’s spending finds very little of that money goes into actual cost of providing an education.  A PBS documentary, “Declining by Degrees,” found more and more classes are being taught by either graduate students or itinerant/part-time professors, while the rest of the professors are busy doing the published research required of them to keep their jobs.

So, in the end, this is what we need to do to prime the economic pump of our nation in a long-term fashion.  Universal preschool, longer school years with shorter breaks spaced more evenly through the year, streamlined administration, and restoring funding for higher education while re-prioritizing teaching over research.

If we can do this, it will go a long way to fixing America.  But it’s not the only screw we need to tighten.  However, it should be the first.

The post How to Fix America Part I: The Crumbling Education System appeared first on The Midwest Guy.