Johnson’s Lost War on Poverty

Lyndon Johnson declared an unconditional “War on Poverty” in his 1964 State of the Union address as part of his Great Society – the utopian delusion that, among its other government wealth transfer schemes, brought us Medicare and Medicaid.

In the intervening 46 years, state and federal governments have burned through more than $15 trillion fighting a losing war on poverty, which never fell below 10.5% of the population during those years and in fact has oscillated between 11% and 15% since 1966. Nevertheless, last week’s announcement by the Census Bureau that the number of people living below the poverty line – $10,830 for one person and $22,050 for a family of four – had risen to 14.3% last year from 13.2% (year over year), set off a cavalcade of liberal op-ed essays decrying the fact that state and federal governments weren’t doing enough.

The “spend more” crowd should ask itself how does a family of four live on $22,050 a year or less? It doesn’t. The federal government's poverty stats count only income. That fails to take into account the public programs that help low-income Americans such as food stamps, housing subsidies, child care expense, and government health insurance plans.

The federal government now has 122 separate anti-poverty programs that spent nearly $600 billion last year. That amounts to almost $15,000 for every poor man, woman and child in America. Given the poverty line thresholds above, it would have been cheaper just to mail every poor person a check for $11,000, making sure all were above the poverty line.

Also ignored by the “spend more” crowd is that poverty today means something different than poverty a generation ago. By the standards of 30 years ago, many of today’s poor families would be considered members of the middle class. A federal government survey in 2001 determined that 91% of the households classified as poor owned color televisions, 74% had microwave ovens, 55% VCRs, and 47% dishwashers. When Johnson declared war on poverty there were rural poor who had no electricity, no running water, and no primary school education. Now most rural towns have access to satellite TV, and even the worst of public housing have solid roofs and indoor plumbing.

The poor have also been helped by our market-based economy – despised as it is by liberals, chief among whom is the current president. In Johnson’s day a 21-inch B/W tabletop TV cost about $1,800 in today's dollars and could receive only a handful of channels, a refrigerator with freezer cost the equivalent of $1,510 in today’s dollars, and a two-speed automatic washing machine, primitive by today's standards, cost the equivalent of $1,100. Only 12% of homes had air-conditioning versus over 88% today.

Liberals want welfare spending to increase without regard to its failures. If the job of the welfare state is to alleviate poverty, what does that mean? The average income of an American taxpayer in 1929, using today’s dollars, was about $16,000 a year. The entire middle class, in other words, was poor by modern standards.

I’m not railing against helping the poor. When someone in the crowd asked Jesus, “Who is my neighbor?” he answered by telling the story of the good Samaritan. As a society grows richer, it not only obtains a greater ability to help the poor, but it also can afford an expanded definition of what it means to be poor – someone who needs and deserves public assistance – although my personal opinion is that individuals, churches, and private organizations should be the chief sources of charity, not the government.

What bugs me is that we have 70 different federal bureaucracies in at least six agencies to help feed hungry people without any metrics to measure their success. If helping the poor is a legitimate federal role and a good use of 650 billions of taxpayer dollars, why not have one or two programs to perform that role instead of 122?

As a taxpayer, I am disgusted by the cavalier manner that government programs are launched without any accountability to measure their success or any sunset date to shut them down unless they can justify re-funding them. Predictably, government programs take on a life of their own even when it’s obvious that they are failing to achieve their goals or stay within the projected future costs, as is the case with both Medicare and Medicaid. Equally aggravatimg is the willingness of federal law-makers and presidents to spend billions based on bad science, junk science, or no science.

Here is some context.

The Orshansky Poverty Thresholds are the basis for the current measures of poverty. Mollie Orshansky was a statistician working first for the Agriculture Department and later the Social Security Administration in the 1950s and 1960s. Orshansky worked out a series of diets designed to provide poor families with adequate nutrition at minimal cost. In painstaking detail, her food plans determined the amount of meat, bread, potatoes, and other staples that families needed in order to eat healthily. These were “by no means subsistence diets,” Orshansky later wrote. “But they do assume that the housewife will be a careful shopper, a skillful cook, and a good manager who will prepare all the family’s meals at home.”

For a mother and father with two children, Orshansky estimated the expense of a “low cost” plan at $3.60 a day, and an even more frugal “economy plan” at $2.80 a day in the mid-1960s. Rather than trying to calculate the price of other items in the family budget, such as rent, heat, and clothing, Orshansky relied on a survey by the Agriculture Department, which showed that the typical American family spent about a third of its income on food. On that basis she simply multiplied the annual cost of the food plans by three. Families on the low-cost plan therefore needed to earn at least $3,955 a year to have a lifestyle in which one-third of the income is devoted to food; families on the economy plan needed to earn $3,165.

Orshansky’s method became the basis for determining eligibility for Johnson’s “War on Poverty” programs. Those original Orshansky Thresholds are still in use despite the fact that falling food prices since the thresholds were conceived have reduced the percentage of family spending that food consumes and food stamps reduce food spending even more. The thresholds are updated annually for inflation using the Consumer Price Index, which is slow to incorporate new consumer lifestyle products (it took 15 years to include cell phones), it doesn’t account for improvements in the quality of goods, and doesn't fully reflect the low prices available to shoppers at big-box stores such as Wal-Mart. Lower prices enable people to get out of actual poverty, so their absence from the CPI causes the Census Bureau to overstate inflation and that and the other defects of the Orshansky percentages keep official poverty thresholds higher than they should be.

Professors Bruce D. Meyer and James X. Sullivan of the University of Chicago and Notre Dame respectively have developed an inflation index that overcomes the flaws of the Orshansky method and CPI. In an opinion piece that came out a few days after the Census announcement on the increase in poverty, “How Census Gets It Wrong on Poverty,” they argue that spending, not income, should be the basis for determining who is poor:

“Since 1980, the poverty rate according to our calculations -- based on a more comprehensive measure of income, that uses a more accurate price index and that includes the Earned Income Tax Credit, food stamps, and other benefits -- has fallen by 3 percentage points more than the official measure. And poverty based on consumption fell by more than 5 percentage points during this same period, which translates into more than 15 million people moved out of poverty.”

Imagine a politician reading the Census announcement with an anti-poverty activist shouting in his ear that the government isn’t spending enough while blissfully ignorant of the work of Meyer and Sullivan.

Instead of the hand wringing that followed the Census poverty announcement, the liberal pundits should have asked the “dog that didn’t bark” question: Why has the poverty rate been so intractable after four and a half decades of depriving taxpayers of $15 trillion they could have spent more wisely? Even if the current recession pushed some people into poverty, which is unlikely, this recession can’t explain the long term poverty rate. My own modest work attempting to understand poverty in Honduras convinced me years ago that there is a cultural adaptation to poverty among poor people. Not having been born or lived in poverty myself, if I became impoverished I would work hard to get out of it. A person born and raised in poverty with few non-poor acquaintances, however, is more familiar with poverty than with its absence, and is more likely to regard his situation as an inevitable part of the human condition – not a problem that he can or should solve.

Studies of the working poor seem to corroborate this. Last year when the unemployment rate doubled to 10% why didn’t the poverty rate go up much more than the 1.1% increase that Census claims? Because of the work behaviors of the poor. Slightly more than 35% of the poor adults over 16 worked in 2009 compared to about 65% of the general population, and less than 10% of poor adults worked full time for the entire year compared to 42% of the general population.

Blaming the current recession doesn’t square with the fact that fewer than 45% of poor adults worked during the boom times of the 1990s. Only 12% attributed their non-work in 2009 to an inability to find a job – slightly more than the 10% in the general population.

Those who fear unemployment are people like me who have a middle class life style to support which requires a middle class job that is not easily replaced. Because sustaining a middle class life style requires a steady income, people in that class work most of the time, and therefore are seldom poor, whereas poor people seldom work, and therefore don’t fear unemployment.

Joblessness isn’t the cause of poverty. Not working most of the time causes poverty. There are and will always be ample jobs for working poor as our immigration problem demonstrates. A poor person who works most of the time will escape poverty just by stint of the federal minimum wage. While those jobs do not pay particularly well, that is due to inadequate education and qualifications of the worker, not inadequate job availability.

The problem that Johnson’s “war” and the anti-poverty activists ought to have tried to solve is how to get the poor to work often enough that they fear the pain of unemployment as much as the middle class. Tying public assistance to private sector employment would bring down the cost of Johnson’s war AND solve the illegal immigration problem.

A Fool’s Errand

“Living backwards!” Alice repeated in great astonishment. “I never heard of such a thing!”

“-- but there's one great advantage in it,” said the Queen, “that one's memory works both ways.”

“I'm sure mine only works one way,” Alice remarked. “I can't remember things before they happen.”

“It's a poor sort of memory that only works backwards,” the Queen remarked.

“What sort of things do you remember best?” Alice ventured to ask.

“Oh, things that happened the week after next,” the Queen replied in a careless tone.

One of the benefits of studying history is that it equips one to “live backwards” and thus to “remember” in both directions. Students of history see in unfolding events the seeds of events that have already happened. History recycles itself because mankind is, well, still mankind.

This month, with much hoopla, Obama kicked off another attempt to negotiate peace between Israel and the Palestinians apparently ignorant of (or choosing to ignore) all of the previous attempts and why they foundered. As has happened in past repetitions of this charade, Benjamin Netanyahu, Prime Minister of Israel, will be pushed by the US to make unreasonable concessions, vilified when he doesn’t, and asked to risk Israel’s national security by swapping the tangible reality of a land buffer for the intangible promise that its Palestinian neighbor will behave. The border that now resides along Jordan on the far side of the West Bank will move to the near side along Israel. The Russians understood how valuable land buffers were when first Napoleon and then Hitler exhausted themselves trying to cross it.

Students of history will also recall Hitler’s threat in 1938 to invade Czechoslovakia if it did not give its Sudetenland territory to the Reich. The great appeasers, British Prime Minister Neville Chamberlain and French President Edouard Daladier, pressured Czech President Eduard Beneš to agree to the German annexation. In return, Hitler promised not to make any further territorial demands in Europe. The Czechs balked but under pressure from its allies ultimately conceded. Back home Chamberlain waved the Munich Agreement and made his famous “peace in our time” speech. Six months later, Hitler invaded Czechoslovakia. Six months after that, Hitler invaded Poland.

Is there a lesson here? Certainly there is. No agreement can succeed if the parties to it don’t have intersecting interests. Beneš wanted peaceful co-existence with an enemy. Hitler wanted to expand the borders and terrorism of Germany. There was no intersection of interests. Today, Israel wants peace with its neighbors. Palestine, in the person of Mahmoud Abbas, wants the state of Israel to cease and the Jews to be scattered. Once again, no intersecting interests.

Nevertheless, Obama exhorts Netanyahu to take “the risks for peace.” Easy for an ex-community organizer to say to an Israeli war hero. Anwar Sadat took the risks for peace by signing the Camp David Accords with Menachem Begin and was assassinated for it. Itzak Rabin signed the Oslo Peace Accords with Yasser Arafat and he was assassinated. Like the chicken that invited the pig to a breakfast of ham and eggs and was reminded that a chicken made a contribution but a pig made a commitment to that breakfast, the world that Netanyahu and Abbas live in settles disagreements with guns and bombs, not words like Obama’s world.

Did Obama consider on whom Israel would rely to make and enforce the binding agreements contemplated in these “peace” talks? Palestine, unlike Israel, is not a political state nor has it been one since the days of the Romans. Mahmoud Abbas is the President of the Palestinian Authority (PA), which is an interim government. Abbas may want peace with Israel, but he lacks the political support of the Palestinians to negotiate a peace deal. Moreover, officials of the PA don’t represent Hamas, a terrorist organization that controls the Gaza Strip and whose purpose is to destroy Israel.

Hamas sent its sentiments to the leaders in the peace talks by killing four Israelis, two men and two women, one of them nine months pregnant, near the West Bank city of Hebron. Seven orphans were created in this heinous act. News of it caused 3,000 Palestinians in the Gaza Strip to take to the streets in celebration. While the PA issued a muted condemnation of the killings because it “went against Palestinian interests,” keep in mind that the predecessor of the PA was the PLO – which invented Palestinian mayhem and murder. In recent months the PA named a square and a children’s summer camp after a terrorist who murdered 37 Israelis on a bus, and the PA gave a hero’s funeral to one of the thugs who killed the eleven Israeli athletes at the Munich Olympics. Abbas attended the funeral.

Before leaving for his meeting with Netanyahu and Obama to start peace talks, Abbas told a reporter for the leading Palestinian newspaper, al-Quds, “We won’t recognize Israel as a Jewish state.” Well, that’s one way to get the negotiations started.

Negotiations with the Palestinians have been going on for 17 years. Twice the Palestinians have been offered an independent state and twice they have turned it down – in 1947 and in 2000. In 1947 the UN offered the Palestinian leaders a partition of Palestine by which they could achieve statehood. This was a remarkable offer considering the fact that Palestinian leaders actively collaborated with the Nazis during World War II. Usually the losing side gets nothing, let alone the offer of its own state.

Again in 2000, then President Clinton called for a peace summit between Palestinian President Yasser Arafat and Israeli Prime Minister Ehud Barak. Negotiations were secret but Barak reportedly offered Arafat approximately 95% of the West Bank and the entire Gaza Strip, as well as Palestinian sovereignty over East Jerusalem, if 69 Jewish settlements (which comprise 85% of the West Bank's Jewish settlers) were ceded to Israel. Arafat rejected the offer and did not make a counter-offer. Two months later he launched the terror war known as the Second Intifada.

In the current talks, the so-called two-state solution would require the return of the West Bank in order to make up most of the independent Palestinian state. The exact borders would be drawn at the peace table. Israeli and Palestinian negotiators in past peace talks have agreed to land swaps, allowing the borders of Israel to include certain settlement blocs around the city of Jerusalem where most of Israel's 300,000 West Bank settlers live. Getting to that point again will be the easy part.

But the Gaza Strip, which is a non-contiguous part of the Palestinian territory, remains the wild card. After it won Palestinian legislative elections in 2006, Hamas joined with the PLO’s Fatah party to form the Palestinian Authority National Unity government in 2007 – i.e. the PA. Hamas is the local franchisee for The Muslim Brotherhood, a really bad boy organization throughout the world. In June 2007 Hamas took control of the Gaza Strip after Israel pulled its army and settlers out and threw out Fatah officials in a coup against the Abbas government. It’s hard to understand, therefore, how Hamas’ interests will be represented in these peace talks. They won’t abide by any agreement that Abbas makes because he doesn’t speak for them, and they don’t want peace with Israel. It’s questionable that they even want statehood with all of its implied responsibilities for the welfare of its citizens.

There are four issues to negotiate: (i) who controls what territory independently, (ii) how Israel will be assured security from attacks from Palestinian territory, (iii) how Jerusalem is to be partitioned between the claims of the Israelis and Palestinians, and (iv) the right of the Palestinians and/or their descendents who were displaced in the 1947-1948 war and the 1967 war to return to their homes. Any one of these issues faces almost impossible odds for successful resolution. To achieve success in all four seems hopeless.

Take the last one, for example, the so-called “right of return” provision. Many Palestinian refugee families have kept keys to their 1947 homes in what is now Israel, even though the homes no longer exist. Return of Palestinian refugees and their descendants, including all those who claim the status of Palestinian refugee, would create an Arab majority in Israel. This would mean the end of Israel as a Jewish state, because Israel is a democracy in which Jews and Arabs can be elected to Parliament and sit on its Supreme Court.

Why the urgency for peace talks now since the last serious attempt at face-to-face discussions was ten years ago? One reason, admittedly a cynical one, is that Obama, having achieved his pièce de résistance on the domestic front with Obamacare, which eluded previous Democrat presidents, wants to keep his streak going on the international front by achieving the Middle East peace which eluded Clinton in 2000. After 17 years of wrestling with this issue, Obama wants Israel and the Palestinians to reach a peace agreement within a year. Yeah, sure. “These talks aren't quite ready for prime time yet,” former U.S. Middle East peace negotiator Aaron David Miller said in a recent interview, “and everyone should be slow-walking the process.”

A more likely reason for the current urgency is that Israel agreed to a 10-month partial moratorium on building new settlement construction in the West Bank and that moratorium ends on September 26. Therefore, look for Obama to press Israel to extend the moratorium, which for Netanyahu would be politically difficult, if not political suicide. The coalition of political seats in the Knesset that put him in power wants the moratorium to end and could topple the Netanyahu government if the coalition implodes.

Abbas, on the other hand, has said he will walk out if the moratorium isn’t extended. Israeli concessions on West Bank construction is a subject for negotiations, not a precondition of negotiations. Either Obama is so far over his head in this arena that he doesn’t understand this, or else Abbas, realizing that he doesn’t have the support of the Palestinian people or Hamas in negotiating a peace agreement, has found a way to justify walking out and blaming it on Israel.

Former U.S. Ambassador to Israel Martin Indyk observed in an op-ed piece this week that "The Palestinians are the weak player in this negotiation. Since Israel controls the territory – including Jerusalem – on which a deal will have to be made, it necessarily holds all the high cards. The only real card Abbas wields is his ability to refuse a deal that does not serve the interests of his people."

It’s worse than that. The Palestinians are unable to stand on their own feet. The United Nations Relief and Works Agency (UNRWA) provides a half billion dollars annually to the support of the Palestinians. Financial support is also provided by the US, the EU, and even the hated Israelis. The Abbas security forces, formerly thugs and gangs during the Yasser Arafat regime, are being trained as a legitimate police force by the US in Jordan. Still, Abbas cannot fully provide security for his country, as the murders of the four settlers last week demonstrated, and he has to rely on the Israeli army to help provide security. The fact that the murders were committed by Hamas in the West Bank – not Gaza – show how perilous security is.

It would make sense to delay peace talks until Abbas, a 75-year old man, is able to legitimize his government, if that’s possible. Otherwise, both Abbas and Netanyahu have to worry about Hamas sensing a weak Abbas government if/when it took over full control of the West Bank. Hamas would likely send Abbas and his team packing, literally running for their lives – probably into exile – while a blood bath breaks out on the West Bank. With Hamas in control of the West Bank, the Israeli capital of Tel Aviv and all of central Israel is within range of the tens of thousands of missiles in the Hamas arsenal, and Iran would have a forward base to add to the havoc.

A peace at any price rarely produces peace, as Hitler demonstrated in 1938. Israel pulled out of Lebanon and today gets rocket attacks as thanks. It pulled out of the Gaza Strip and gets more rocket attacks. The tools for violence are smuggled in through tunnels from Egypt, from Iran through Syria, and from Turkey by sea, which Israel intercepted. It’s amazing that this tiny nation – which can be traversed in 30 minutes by car and which represents one-sixth of 1% of the land mass of the so-called “Arab world” – can draw so much venom.

The Jews have been under siege since their Spanish expulsion the month Columbus set sail to discover the New World. While he was in Jerusalem this summer, George Will posted his column noting that if the Jewish percentage of the world's population were today what it was when the Romans ruled Palestine, there would be 200 million Jews. “After a uniquely hazardous passage through two millennia without a homeland,” Will wrote, “there are 13 million Jews.”

Given the lack of intersecting interests, it is difficult to expect the current resumption of peace talks will produce anything more than another failed attempt to do what may be impossible. History predicts the outcome. In forcing these two parties back to the bargaining table after 10 years, Obama’s bush league diplomacy fails to recognize the devil is not in the details; it’s in Palestinian society itself which reaffirmed in its general congress last year: “This struggle will not stop until the Zionist entity is eliminated and Palestine is liberated.”

Let the negotiations begin.

Place your bets.

Inventing the Middle East

In a second century treatise, How to Write History, Lucian of Samosata appeals that the ideal historian is impartial, detached, rigorously devoted to the truth. "The historian's one task,” wrote Lucian, “is to tell the thing as it happened.” Nevertheless, we know that history, however objective its writers claim to be, is always written with a motivation, even though a noble one. The historian may report facts accurately, but he chooses the facts to report. Wittingly or otherwise the perception of his reader is thus shaped.

That said, two excellently researched books were released this summer just in time for the umpteenth attempt to negotiate peace in the Middle East. The Balfour Declaration: The Origins of the Arab-Israeli Conflict, was written by Jonathan Schneer, a professor at Georgia Tech’s School of History, Technology and Society. Palestine Betrayed was written by Efraim Karsh, Professor of Middle East and Mediterranean studies at King's College London. While dealing with the same subject, each author takes a different approach to explain today’s cauldron of conflict in the Middle East between the Israelis and Palestinians.

Those with little knowledge of Middle East history should understand that, heading into World War I, Palestine was a backwater, sparsely populated, and vaguely defined area of the Ottoman Empire. It had been ruled by sultans for centuries. But after Turkey became allied with Germany, Britain used Palestine and other parts of the decrepit 400-year old Ottoman Empire as bait for the Arabs, French, and Russians to win their help for the war effort .

Out of this intrigue in 1916 came the Sykes-Picot Agreement between France and Britain. This secret document – named after the two diplomats who hatched it, Mark Sykes and François Georges-Picot – contained the plan for carving up the Middle East after the war and the presumptive victory of the allies. Britain would be allocated control of Jordan, Iraq and a small area around Haifa. France would be allocated control of Southeastern Turkey, Northern Iraq, Syria and Lebanon. Initially, Palestine was under joint control but ultimately it came under British control. France and Britain were left free to decide on state boundaries within their allocations. The map of the Middle East today is the legacy of Sykes-Picot with the borders matching the lines drawn using a ruler over the former lands of the Muslim Caliphate.

Naively, Sykes and Picot ignored the fact that the Middle East was a place of intense local tribal hatreds, suspicions, and rivalries, and thus unlikely to care a whit about the countries invented by drawing lines on a map and the state flags Sykes designed. That is not the way countries develop the identity that makes them countries. But this was the age of empire when diplomats suffered few insecurities about their abilities and governments thought little about how they dismembered distant lands. One of Sykes’ colleagues, Gertrude Bell, wrote home in 1916 describing a delightful afternoon spent being pulled across the desert in a donkey cart, trailing a stick behind her to create a line in the sand on which compliant Arab boys erected little piles of stones. To this day, that line is the boundary between Saudi Arabia and Iraq.

Zionism arose in the late 19th century as the expression of Jewish nationalism and the desire for sovereignty in a homeland. It was especially driven by anti-Semitic persecution throughout Europe and England. The Balfour Declaration was an official statement of British policy regarding the Jewish Diaspora’s return to Palestine as contained in a November 1917 letter from the British Foreign Minister, Lord Balfour, to the leader of the British Zionist community, Lord Rothschild. It stated:

"His Majesty's government views with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine, or the rights and political status enjoyed by Jews in any other country."

The Balfour Declaration was somewhat motivated by British hope that the European Jews would help finance World War I and it might further influence American Jews to press the Wilson administration to enter the war.

Now to the books.

Schneer’s book traces the anfractuous path that led to the Balfour Declaration. In an effortless storytelling style reminiscent of Barbara Tuchman, he tells a tale of plotting, perfidy, backstabbing, secret meetings, and shifting alliances, with a cast of characters fit for an Agatha Christie mystery: Turkish sultans, arms dealers, tribal leaders, emirs and sharifs, emissaries – even Lawrence of Arabia – each of whom had an agenda.

Britain's Zionists, according to Schneer, were "inspired opportunists" who saw the war against the Turks as their chance to win support for a homeland in Palestine, where 85,000 resident Jews comprised one-ninth of the prewar population. An important figure arose as Zionist leader in Chaim Weizmann, a Russian-born chemist whose discovery of a fermentation method for a key ingredient in explosives was important to the war effort and helped win him contact with David Lloyd George, before he became prime minister, and Lord Balfour.

As Schneer tells it, the Balfour Declaration was conceived “as much by deceit and chance as by vision and diplomacy,” and its impact has been felt ever since. It is hailed as a milestone by the Zionists, and mourned by the Arabs as the Nakba, the Arabic word for "catastrophe," because it was the first step toward the founding of the state of Israel. “Britain and her allies slew the Ottoman dragon in the Middle East,” Schneer concludes; “By their policies they sowed dragon’s teeth. Armed men rose up from the ground. They are rising still.”

The Balfour declaration thus finds its place among a multitude of fruitless diplomatic schemes in the World War I era of the Middle East, except that in this case, surprisingly, the British by and large kept their word. For at least two decades they allowed the Zionist movement to bring hundreds of thousands of Jewish immigrants into Palestine, and these new arrivals set up hundreds of settlements including several towns, as well as the political, economic, military and cultural infrastructure of the future state of Israel.

To write Palestine Betrayed, Karsh gained access to masses of recently declassified Western, Soviet, Arabic, and UN documents from the period of British rule and the period of the first Arab-Israeli war, spanning the years from 1917 to 1949. Karsh argues: "Far from being the hapless victims of a predatory Zionist assault, it was Palestinian Arab leaders who, from the early 1920s onward, and very much against the wishes of their own constituents, launched a relentless campaign to obliterate the Jewish national revival which culminated in the violent attempt to abort the U.N. partition resolution." He continues, "There was nothing inevitable about the Palestinian-Jewish confrontation, let alone the Arab-Israeli conflict."

Karsh avoids his own judgments, using instead quotes of others – Palestinians, British, and Zionists who had strong opinions. As the book opens, Karsh quotes David Ben-Gurion and other Zionist leaders who proclaimed that, although the Jews in Palestine wanted their own state, they did not want to abridge the freedom of their Arab neighbors. He uses quote after quote, from Herzl to Jabotinsky to Ben Gurion, to show that the ethnic cleansing arguments used by Arabs today was untrue from the outset, going into detail about the Arab-Jewish cooperation immediately after the Balfour Declaration and before a British governor inexplicably appointed Amin Husseini as the Jerusalem Mufti over the objections of the Arabs.

Karsh blames Hajj Amin Husseini for the deterioration of the relationship between the Arabs and Jews. Husseini almost single-handedly led the Palestinian Arabs to disaster as Mufti of Jerusalem, as president of the Supreme Muslim Council, and as president of the Arab Higher Committee. He was pathologically anti-Semitic, a Nazi sympathizer, and uncompromising in nature. If anyone is responsible for the initiation of Jewish-Palestinian conflict, it is Husseini. Karsh shows that Husseini had his eye on a pan-Arabic nation uniting Syria, Jordan, and Palestine, and apart from his hatred of Jews, Jewish statehood stood in the way of his plan.

The majority of the book is devoted to the fighting and Arab flight during the War of Independence. Fighting began within hours following the UN vote to partition Palestine on Nov. 29, 1947, and lasted till the eve of the British evacuation on May 14, 1948. The international conflict began on May 15 (the day after Israel came into being), when five Arab state armies invaded, and continued until January 1949. Over half (between 300,000 and 340,000) of the 600,000 Arab refugees fled before the British evacuation – most of them in the final month. Karsh argues that the majority of Arabs fled their homes as a result of fear, and often in spite of Jewish entreaties to stay in their homes and businesses.

Refugee camps were set up and managed by the U.N. in an effort to deal with the Palestinian exodus. These camps still exist, still supported by the U.N., but because of natural increase, the refugees have about tripled in number, living unnecessarily hopeless, unproductive lives. In contrast, the India-Pakistan confrontation dislodged more than a million people and spawned considerable violence in which thousands were killed. Yet today the grandchildren of these one-time refugees lead normal lives and some have achieved considerable success. There is no reason, other than the stubbornness of their leaders, that the Palestinians cannot do the same.

Taken together The Balfour Declaration and Palestine Betrayed provide 768 pages of thoughtful writing for anyone seeking an understanding of the intractable Middle East conflict and the almost futile pursuit of peace.

In a 2002 interview, British Foreign Secretary Jack Straw observed "A lot of the problems we are having to deal with now, I have to deal with now, are a consequence of our colonial past … The Balfour Declaration and the contradictory assurances which were being given to Palestinians in private at the same time as they were being given to the Israelis – again, an interesting history for us but not an entirely honourable one." British deviousness no doubt contributed to the original conflict between the Palestinian Arabs and the Zionist Jews. But that generation has been long in their graves. Today’s conflict is not between the Palestinians and the Israelis, but rather between the peace camps on both sides and their rejectionist opponents.

The peace camp seems to have won out in Israel. The ball is now in the Palestinian court.

The Seen and the Unseen

One hundred and sixty years ago an obscure French economist, Frederic Bastiat, published an essay entitled “What is Seen and What is Not Seen.” In it he argued that government spending always has consequences – often unseen consequences. To illustrate his point, he tells a parable wherein a boy breaks a windowpane in the family house which must be repaired by a glazier. Since the glazier would otherwise have been unemployed, the broken window produces an economic benefit – the seen thing. The unseen thing is that the homeowner is no better off with the new windowpane than the old, but he is now deprived of the money spent on the repair which he could have used to replace his worn out shoes or added a book to his library.

To put the seen and unseen in a modern context, the federal government intervened as the lender of last resort to provide liquidity to the financial and auto industries in 2008, allegedly so they could meet their obligations. I say allegedly because the government has refused to release its analysis of the "systemic risks" that justified its unprecedented intervention into the financial system with taxpayer money. It won’t even define what “systemic risk” means for those empowered to intervene. Arguably, some of the interventions were unnecessary if the auto industry had been allowed to go through the bankruptcy process and banks had used their mortgage loss remedies. The “unseen” thing is the precedent set for government interference in the private sector in the future.

More troubling than the lender of last resort, however, has been the government’s recent role as the spender of last resort. The motive for government spending has always been to produce a host of “seen” projects that so bedazzle voters smitten by the politician’s Keynesian magic that they forget they are also taxpayers. The “unseen” is the future taxes that must be paid for these projects and the alternative personal consumption that would have been possible absent those future taxes.

The latest orgy of government spending – Obama’s reckless $862 billion “stimulus” – is conspicuously absent of “seen” benefits whereas the “unseen” consequences of deficits, debt, and rising taxes are embarrassingly obvious. Obama’s sales pitch that stimulus was needed to prevent unemployment from rising above 8% has been disproven, and last week Bloomberg reported, "The bad news confirmed what conservative economists have been saying for some time: The biggest Keynesian stimulus in U.S. history was a bust." Poll after poll shows the alarm the public is feeling that a double dip recession, if not a depression, is headed this way when it comes time to pay the bill. Democrat talk about a second stimulus is not helping matters.

Like the homeowner in Bastiat’s parable, American society is no better off after the stimulus “repair” than before it, but after paying for it, the loss of spending on personal consumption impoverishes both taxpayers and the economy.

In addition to the failed stimulus, Obama concurrently inflicted a $1.2 trillion healthcare expense on future generations. When Medicare and Medicaid were launched, government estimates of their future costs turned out to be woefully low and it would be naïve to not expect the same will happen with ObamaCare. The cost of cap and trade, assuming Obama can get it through the next Congress, will make almost everything produced in this country more expensive. Realizing the likely loss of the House and seven or more Senate seats in November, the Democrats are talking about trying to pass cap and trade and other unpopular legislation in the lame duck session.

Sometime in the next week the national debt will exceed $13 trillion and rise to $20 trillion in the next 10 years. To put that in perspective, the average debt per American is $43,000. Per taxpayer it is $120,000. At a 3% interest rate, the annual cost to service a $20 trillion debt is $6,000 per taxpayer, assuming half of the workforce pays taxes as is currently the case. That’s $12,000 per middle class working couple in addition to the taxes paid for other government services.

Congress will spend $3.5 trillion this year, which will grow to over $6 trillion by 2020 as baby boomers retire and begin to receive social benefits. Realistic economic models – not the kind Congress games the CBO with – show that a deficit of $1 trillion dollars, the shortfall between spending and tax receipts, will continue to occur every year for the next 10 years, adding to the national debt to the point that the debt service cost per taxpayer will grow beyond the capacity of the tax base to pay it. None other than Mort Zukerman, a card-carrying Democrat op-ed writer for US News & World Report, called this the most fiscally irresponsible government in US history in an article last week. And China’s largest credit rating agency, Dagong Global Credit, showed what it thought of America’s lack of fiscal discipline by lowering the US credit rating to AA from AAA recently.

A federal debt of $20 trillion (and more than $20 trillion after 2020) could very well bring about the economic collapse of the US. If the debt continues to soar, and under Obama, it will, the dollar would implode and prices for foreign goods -- which now make up 15% of our economy -- would skyrocket. Private investment would shrink, and along with it, private-sector GDP.

Thus, items we customarily purchase, i.e., shoes, clothes, cars would become too expensive to buy. The American standard of living, which is the envy of the world, would then decrease and the next generation will be saddled with insurmountable debt, not of their making. American financial woes would spill over into the global marketplace contributing to its financial decline.

If we stay on this course, the US is on a track to default its debt. In 2011, the U.S. national debt will exceed GDP for the first time in our history. At this point nations lose control over their finances because debt in excess of GDP becomes increasingly difficult to service. Rather than raise taxes, politicians succumb to the temptation to simply shift interest payments to long-term debt, setting off a vicious cycle of ever-rising interest payments. At some point, GDP no longer generates enough wealth to service the debt, and the only option is default.

A growing level of federal debt also increases the probability of a sudden fiscal crisis, during which debt holders lose confidence that the government can manage its budget, in which case the US loses its ability to borrow at affordable rates. It’s possible that interest rates would rise gradually as investors’ confidence declined, but the more likely scenario, which has played out in countries like Greece and Argentina, is that a sudden psychological tipping point is reached where the loss of confidence sharply drives up interest rates on government debt. The point at which that might happen is anyone’s guess, because the US debt-to-GDP ratio is climbing into territory it’s not seen before.

If we reach a tipping point at which debt holders essentially panic, fearing that the US might default on its debt or that it might print money deflating the economic value of outstanding debt, interest rates could jump multiple points quickly. In the recent Greek financial crisis, rates jumped two points above the German bond rate (which is considered to be a stable and reliable euro-denominated peg), then it jumped to a four-point premium, then an eight-point premium. A significant increase in interest would reduce the market value of outstanding US bonds and inflict terrible losses on their owners.

This could trigger a broader financial crisis by causing losses for mutual funds, pension funds, insurance companies, banks, and other holders of federal debt—losses that might be large enough to cause some financial institutions to fail. Foreign investors, who have recently owned nearly half of U.S. debt (or about $4.0 trillion, $1.7 trillion of which was held by Japan and China alone), would also face substantial losses, making them decidedly less friendly in bankrolling future US debt.

Dessert anyone?

Helped by the online media and cable news, voters understand what the Democrat Congress has done to the American economy perhaps better than they have in any previous election, and will likely make them pay dearly in November. Unfortunately, the Republicans have shown that they are not much better in managing the national purse. The loss of the House and the end of Democrat supremacy in the Senate, if not its loss, will set the stage for a replay of the standoff between Congress and the White House as happened in the second half of Clinton’s first term. Obama is not the politician that Clinton is, but if the Republicans are not careful, they will become Obama’s foil, improving his chances for reelection in 2012. The Republicans in the next session of Congress would do well to remember that Newt Gingrich and the Republican landslide of 1994 overplayed its hand and made it possible for Clinton to be reelected in 1996.

Rather than raise taxes, as the Democrats are saying must be done, the sensible thing to do is to reverse the things that make tax increases necessary – i.e. repeal ObamaCare and unwind the reckless spending that the Democrats have committed this country to over the past two years. About a third of the TARP money is unspent. That should be returned to the Treasury, not converted into a piggy bank for pet projects of the White House and Congress.

Repealing the excesses of the last two years is not possible with Obama in the White House unless he is willing to cooperate with Republicans in 2011. As Michael Boskin observed in an editorial last week, that’s not unheard of. Clinton made a major move back to the political center – to his own and the nation's benefit – when Republicans won control of Congress in 1994. In partnership, they balanced the budget and reformed welfare. For Obama to get to a similar place after the midterm elections, Boskin says, he would have to partner in "repealing and replacing" his signature initiatives. Even if he believed his policies have made matters worse, I don’t believe his ego will allow him to repeal them.

De-funding his programs is possible without Obama’s cooperation, since appropriations are made in the House and the House will likely be in Republican hands after November. But Obama is shrewd enough to vilify them as obstructionists if the Republicans can’t win the hearts and minds of voters and convince them that de-funding and stopping the Obama Express is in the country’s interest.

Obama and his Democrat tag team partners in Congress have driven their approval ratings to historic lows because there was no one else to blame for the current mess. When the Republicans control the congressional agenda, there will be someone else to blame. Republicans will have two years to show they have a better direction for the country and that we can’t afford an Obama second term. Two years. Not a lot of time, but look at what the Democrats accomplished in their two years.