Dave's Right Side

Reaping What You Sow

2010-10-11T09:00:00.002-04:00

The economic policies that the Obama Administration has implemented through legislation, and countenanced by appointing Timothy "Weak Dollar" Geithner to the position of Treasury Secretary, and re-appointing as Chairman of the Federal Reserve Ben "I'm printing Money til it hurts" Bernanke are having the opposite effect of what this administration and all of their reputable economists had assured would now be happening , and it's not good. What is true in farming is also true in economics: You reap what you sow! When you plant lima beans all the backyard town-halls and campus rallies in the world will not produce a crop of beautiful beefsteak tomatoes. You can blame it on the weather and the soil, you can even blame the Republicans, but come harvest time you are going to be stuck eating lima beans and your words. The stagnant economy that we endure today is what you reap when you have sown an economic policy mix that gets it totally wrong.

What makes this all the more frustrating to people who understand economics (I'm talking about the millions of ordinary Americans giving this Administration’s current policies the thumbs down, not the so-called experts that are now running from Washington as though they were mice being chased down by the farmer's wife,) is that the answer to our current economic malaise is so simple. It boils down to getting only two things kind of right. Not millions of thing perfectly right. Two things kind of right! Is that too much to ask for? It's not, as we are lead to believe, a very complex formula. It doesn't involve having the best and brightest economic minds surrounding the President carefully crafting complicated plans to be painstakingly executed and monitored day and night by the government's financial Czars. It involves getting two things kind of right.

My friend, Nathan Lewis, who understands better than most how tax and monetary policy effect economic output puts it this way: The two and only two things you need for a vibrant, no, booming economy, are low tax rates and stable money. Get those two things right and you are off to the economic races. Get them wrong and you are, well, you are right where we are today, scrapping along the bottom not quite falling behind but certainly not moving ahead.

Many will argue that a third component rolling back unnecessary regulations is required and while that may be true, in reality regulations are just a subset of the low tax proposition. After all, regulations are just additional costs imposed on business by various governments. In other words, they are taxes. Low tax rates will once again realign the incentive structure that has been undermined by the current policies of redistribution, and once again reward hard work.

If a low tax rate is the Burpees Big Boy seed of economic growth, stable money is the spring rain that makes the combination bear fruit. Economies that debase their currency find that attracting capital becomes increasingly difficult. The Plummeting dollar tells investors the game is rigged. Even if you can achieve the nominal returns you seek, at the end of the day you’ll end up a loser, as the falling value of the dollar turns your real returns negative. Without capital, you are just a man leaning on a shovel in the field wishing you could persuade the folks at the bank that the tractor that would make your business boom really is a capital idea!

Why Not A Boom Instead of a Double Dip?

2010-06-08T08:31:00.001-04:00

In 2009 I listened as one Democratic politician after another stepped forward to endorse the Stimulus a bill that was to save us all from what would surely be the next Great Depression. Most of their ill-considered arguments contained copious amounts of economic fallacy seasoned with just a dash of truth to make them palatable. That truth is if you raise tax rates during a recession you simply get a deeper recession to without raising any additional revenue.

Midway through 2010 with what is at best a tenuous recovery under way, and without any evidence that their spending spree is working those same folks eying a reckoning with the voters in November are telling us that even more Stimulus spending is needed. They have now ditched their cover story of not raising taxes in order to fully embrace their Inner Redistributionist Side. What does this portend for you and I? Six months from now we may experience first hand how a nation's economy performs after dramatically increasing tax rates on the incomes and capital that drive economic growth and devaluing it's currency. It ain't going to be pretty folks.

If you want a sneak peak of what is in store for 2011 you'll want to brush up on your economic history. I suggest you start with Herbert Hoovers tax increase in 1932, the one where he was just raising the rates back to where they were under President Wilson. That increase pushed the top marginal rate of tax on personal income back up to 63% from the 25% rate where Harding's tax cuts had left them. Far from producing additional revenue for the treasury it had the opposite effect. Receipts to the treasury from the personal income tax fell from $834 million in 1931 to $427 million in 1932 and $353 million in 1933. In other words, raising the tax rates reduced the amount of revenue the government took in and made the economy worse off in the process. Can any one spell SNAFU? In light of these FACTS, might it be time to rethink the tax increases on income and capital scheduled for next January?

If the Bush Tax Cuts are allowed to expire and tax rates rise next year the economy will falter, resulting in fewer transactions and a reduction in the demand for money. How will the Federal Reserve respond? Can you see this Fed tightening as the economy falls back into recession? Not a chance! That means we'll enjoy the additional negative impact that a weaker dollar and higher interest rates have on an economy recently burdened with higher taxes on capital and income. Can you say stagflation?

The historical revisionists in Congress will trot out their favorite talking heads to tell us how they are only raising rates back to the Clinton levels of the 90's when the economy did just fine. Where have I heard that line before? Of course they will leave out the part where the capital gains tax was cut by 40% in 1997, which just happens to coincide nicely with when the real boom in the economy occurred. They'll also forget that there was some semblance of fiscal sanity back then . You remember back when the government's entire annual budget was only slightly larger than this year's Budget Deficit? Nothing their smooth talking experts can say will be able to sooth the real world pain you're going to experience. How much political hot air does it take to make up for the loss of ones job?

When the incentives to save and invest are reduced investor behavior will change accordingly. Expect less capital to be available to business as the rate of tax on that capital is increased. Less investment will lead to lower production and a lesser need for all things related to production including jobs. I'm just thinking out loud here, but shouldn't we be considering policies that are pro capital accumulation ? Pro investment and pro growth? Hey, throw in a stable dollar and we could have a boom instead. Wouldn't that be nice!

When Something's Wrong in Your Neighborhood Who Ya Gonna Call ? Headbusters!

2010-05-25T09:46:00.010-04:00

While you might expect, no, make that take for granted, the thuggish display put on by the 500 strong SEIU Goon Squad who showed up recently at the home of a Bank of America senior attorney to terrorize his teenage son, shouldn't we at least expect the police to obey and enforce the law?

I've got two questions for the Goon Squad and their protectors in Blue. The first is: Who do you think you are? The second is: Who do you think you're fooling?

Let’s start with the D.C. Police who provided the escort for the 14 bus loads of SEIU Goons beyond the limits of their jurisdiction. Is it possible to escort someone if you don't know where they are going? I don't think so! Are we supposed to believe the Police don't know the boundaries of Washington D.C.? Do you supposed to believe that when the patrolmen reached the city limits they just continued on because they didn't know what to do next? Does anyone to believe they acted on their own? No! Someone in authority gave the DC patrolmen, who were present at the demonstration, an order to escort the Union protesters outside D.C. city limits and their jurisdiction, or else the DC Police department has a rogue unit that acts not on orders from their superiors but instead do the bidding of the SEIU. Either way it’s a problem, and someone needs to get to the truth.

Their actions were wrong, and we need to know who is responsible. What if you find yourself in Montgomery County and have an Emergency don’t you want to know who to call? Do you call the local police, the D.C. police or should you call the guys who are really giving the orders the SEIU?

The DC police who are backpedaling at light speed trying to deny any part in this outrageous behavior, are not putting forth a coherent argument. In an interview yesterday a spokesperson for the D.C. Police said they escorted the SEIU protesters only to the city limits, which they noted were only several blocks from the executives’ home and called the MCPD to meet them there in order to give them the “heads up” about the protest. A Captain from the MCPD says that after meeting with the DC Police at the city line they then responded to the incident at the home but did not witness anyone trespassing or disturbing the peace as the crowd was already dispersing. The Police officer’s story doesn’t add up! Is it possible that 500 union intimidation specialists filed out of 14 busses, marched several blocks, held their protest rally and did it in such short order that by the time the MCPD had completed their own journey of several blocks with their lights flashing and sirens blaring the rally was over and the peaceful union thugs were heading back to the Union Hall for some milk and cookies? Well no, not really, not according to the MCPD’s own 911 tapes which say that the DC police were on the scene and were in fact speaking with the person who had made the 911 call and was still on the line with the operator. Talk about not getting your story straight.

If any other organization, like maybe the Tea Party, had tried to dump 500 protestors in a suburban neighborhood, the MCPD would have been there in advance asking to see their permit and when they couldn’t produce what they didn’t have they would have sent them back to where they came from. Why the special treatment for SEIU? Why don’t the laws apply to them? Thankfully no one was sent to the hospital as a result of this rally. It’s not always the case when these goons show up in public; for some reason beatings seem to break out. Ask Kenneth Gladney, or Ken Hamidi or Dianne Feeley if you don't believe me.

It’s not like this was a spontaneous gathering of folks in the neighborhood, the Union knew well in advance that there would be a protest that day as one SEIU protester had bragged about flying in from California to join the merry band of Social Justice Merchants for the day’s festivities. He told his personal story of woe about how he lost his job and his house is in foreclosure. What was his purpose for being there? What was the Union’s real purpose for being there? What did he expect the general counsel of Bank of America would do for him? The last time I checked the bank was not unionized, so this slug wasn’t there for a job and he couldn’t possibly have been there for another loan, as his foreclosure status provides all the evidence one needs to determine he is a deadbeat when it comes to honoring his debts, and besides everyone knows the loan dept isn’t open on Saturdays.

These modern-day shakedown artists seemed to have taken a page from Willie Sutton, a notorious bank robber from the thirties who is quoted as having said, "You can't rob a bank on charm and personality," as there was certainly none of that on display that day. What we saw was arrogance and the ultimate in chutzpah. The SEIU went to intimidate a bank official from a bank that holds millions of dollars of the Union’s outstanding debt and they brought their own police escorts. That’s extremely rich, don’t you think?

A Good Dollar Bill Makes For A Sound Currency

2010-05-14T09:52:00.015-04:00

It has been nearly 4 decades since President Nixon, in an attempt to win re-election, cut the US dollar loose from it's golden anchor in order to manage the economy towards a higher GDP number. Win he did, but for the rest of us that move has turned out to be a failure of epic proportions. Each market blow up and bust is accompanied by the usual frenzy of Congressional finger pointing that always leaves it's ten regulatory thumb prints on the economy,but never fingers the co-conspirators most responsible for creating the chaos, the current and former Secretaries of the Treasury and the Chairmen of the Federal Reserve.

While Bernie Madoff cools his heels in a jail in Butler, North Carolina for bilking the public out of billions, a much brighter future awaits those men responsible for causing trillions of dollars in damages to both private and public sector balance sheets the world over. They become highly sought after advisers, earning seven and eight figure paydays from banks ( Robert Rubin , Citi Group,) Hedge Funds ( Alan Greenspan, Deutche Bank, PIMCO and Paulson&Co,) and Private Equity firms (John Snow, Cerebus Capital Management,) a strange payoff for the economic havoc they have wrought with their calamitous monetary policies. The media who understand monetary policy even less sing their praise, bestowing upon them monikers like "The Maestro," while ex presidents exalt them, even going as far as calling one former Secretary of the Treasury the "Greatest Secretary of the Treasury since Alexander Hamilton." Comparing any of these monetary undergraduates to Alexander Hamilton, the man who defined the value of the US Dollar, is to slander Hamilton.

The idea that the US Dollar, the reserve currency of the world used in measuring the value of billions of transactions every day, should to rise and fall as erratically as an amusement park theme ride in order to manage economic growth is nonsensical. Those who preach that markets should set the value of the dollar fail to understand that this is not a monetary policy but is instead a lack of a policy. Finally the Pols who endlessly argue that a weaker dollar will make our exports more competitive should go back to washing cars or organizing communities or whatever other brainless endeavor they previously preformed. If they truly wanted to make not only our nations exporters but our entire economy more competitive there are any number of policies they could pursue, including but not limited to the following: reducing corporate tax rates, promoting free trade, reducing unnecessary regulation, oh and lest I forget,the most important of them stabilizing the value of the dollar.

The dollar is but a measuring tool used to determine if transactions make economic sense. The dollar's role is to translate the value of dissimilar products and services into money values called prices in order to enable comparison. Allowing large swings in the value of the dollar (from 35 dollars for an ounce of gold in 1970 to $800 in 1980 back to $250 in the late 90's and the over $1200 dollars needed to purchase a single ounce of the shiny metal in today's market, a five fold increase in the last ten years,) as has been our policy merely adds another level of risk to all but spot transactions. Infusing longer dated contracts, whether they be for goods and services or the use of capital as in bonds or equities with additional risk, serves only to increase the price of those transactions, causing many more of them to fail than would be the case with a stable dollar. This results in fewer transactions, less investment, slower economic growth and fewer jobs.

Congress needs to take back it's responsibility and once again ensure the soundness of the dollar. Congressman Ted Poe from Texas has a bill to make that happen. Read it here and show your support.

GM's Give Back Gimmick ... Happy Talk on the Way to Its Next Bankruptcy

2010-04-30T09:10:00.000-04:00

GM, short for Gubmint Motors, is telling a whopper of a fib in its new advertising campaign. Listen to Ed Whiticare's Happy Talk and you'll be informed that through his Masterful leadership GM has become so successful in the last year that it has paid back the government loans in "FULL" with interest 5 years ahead of schedule.

That would be wonderful news, as a matter of fact it would be the best news I've heard out of Detroit in ages, but nothing could be further from the truth. GM has not come roaring back to life after a successful rescue by the brilliant Pols in Washington. GM was, and is still a basket case, only now they have a bank account that is chock full of our money.

In fact, GM's story is just another in a long line of Bailout success stories to go along with Chrysler, AIG, Fannie and Freddie, all of whom received money from the US Taxpayers and will never pay it back. GM didn't pay back, as much as it gave back a tiny portion of the bailout money it received. I Thought paying something back implied that you had earned the money used to pay off your debt. In GM's case ,they got 60 some billion dollars from US taxpayers and gave 6.7 billion of the money back. GM lost 3.3 billion dollars in the 1st quarter of this year, which means there is no way they "paid back the money". That's a Give Back! Not a Pay Back!

More happy talk is on the way with the good news that GM continues to lose market share and is down to 17.6% versus a year ago number of 18%. That's just a small loss of market share, no need to worry right? No! Not right! Last year the economy and auto sales were in a free fall. This year we are in a recovery, albeit a tepid one, and GM is still losing market share. How can things get better when revenues and market share continue to fall and profits are something that you can only dream about having someday? Answer: It can’t and it won’t!

Maybe even more Happy Talk can turn things around. GM can disclose, as it did several weeks ago ,that its pension plan is massively underfunded and short a couple of billion dollars. Well, actually they are short 27 billion dollars, but Like Ed I'm trying to keep the happy talk going. Is there any question about who is going to get stuck with that bill when it comes due? Then there is the Healthcare VEBA. What happens when that goes bust?

GM didn't go bust last year, but should have and almost certainly will go bust at some point in the near future after proving to be the biggest money pit the US tax payers have ever had the pleasure of funding, no matter what kind of snake oil Ed Whiticare is peddling.

Mass Insanity Healthcare Rationing in the Bay State

2010-04-09T09:47:00.009-04:00

If I told you a story of how one of the bluest of the blue states, Massachusetts, would of it's own accord institute health insurance rationing three months after electing a Republican to the Senate to stop Obamacare, that would normally be considered satire. That is unless the story was true, then we would just call it irony!

Ironically, it is very true that Massachusetts, with what is essentially it's own Obamacare program, has started to ration health insurance. Surely that wasn't Governor Patrick's intent when he rejected the insurance companies' request for premium increases. Like all politicians, he just wanted to get re-elected, and being tough on insurance companies is a very popular stance among Democrats these days. Never the less, that is precisely what the outcome has been. The insurance companies did what any business does when faced with a money losing product: they declined to sell any more of that money losing product. As a result you can't buy health insurance in Massachusetts, even though it is against the law not to! Ain't that a catch 22?

This is always the result when politicians dictate how businesses must operate; they always do what is politically expedient instead of what makes economic sense. Politicians constantly prove that they are checkers players in the chess match of business, unable to see even one move ahead. As a result, they compound their initial mistakes with additional ones, as the unintended consequences of the laws they've just passed undo what they were supposed to have accomplished.

The governor thought that by standing up to the greedy insurance companies he could portray himself as a hero in the fight against the high cost of health insurance. This is an awfully thin argument, considering that three of the four largest insurers in Mass are non profits, as noted by the Wall Street Journal in a recent article. Those high costs, I might add, were imposed by the state on it's residents when it mandated coverage for all , instituted community rating and eliminated the insurance companies' ability to refuse coverage to people with preexisting conditions. I'm sure it came as quite a shock to him that his savvy political skills had instead of making insurance more affordable to his constituents made it unobtainable. After all, who could have possibly foreseen this would be the result of his actions? I'll tell you who! Any businessman worth his salt would have seen that one coming a mile away, but that's because they are in the business of making economic decisions, not political decisions. Business owners understand that they are in business to make a profit and those who don't , don't hang around all that long.

The Mass insanity that is Playing out now in the Bay State is what's in store for the rest of us if Obamacare remains the law of the land. The government will mandate greater coverages for the insurance companies to provide while denying them the ability to recoup their cost though increased premiums. When insurers are prohibited from selling their products at anything but a loss they will be forced to stop selling them. It will then be time for more regulation to fix the problems the previous laws created. On it will go until it reaches it's inevitable conclusion: the government controlling health care cost through by rationing health care. That's when being politically connected will literally be a matter of life or death.

Washington Wants a VAT... What They Need is a Twelve Step Program

2010-03-31T08:46:00.004-04:00

After passing the health care bill that raises taxes on earned income, dividends, suntans, medical devices, capital gains, and pharmaceutical companies, not to mention the cost of health insurance for those of us able to afford it as well as those who can't, you may be asking what Congress plans to do as an encore. Well, just like the drunk who's waking up from a three day bender, they're going to reach for another nip of their favorite hooch, another shot of taxes so to speak. Just so they don't leave anything out this time, their next tax will be on everything. That's right, the same folks who are bringing European style health care to America are beginning to talk up that other European favorite: the Value Added Tax as a way to pay for their unbridled expansion of the welfare state.

What's a Value Added Tax ( VAT) you ask? Well, like I said, it's a Tax on everything.

VAT is a tax assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale/purchase). The seller charges the VAT to the buyer, and the seller pays this VAT to the government. If, however, the purchaser is not an end user, but the goods or services purchased are costs to its business, the tax it has paid for such purchases can be deducted from the tax it charges to its customers. The government only receives the difference, in other words, it is paid tax on the gross margin of each transaction, by each participant in the sales chain.

It's looking like 2010 may yet be the year we try to tax ourselves into prosperity. You can do that, can't you? Just think of how much better off you'll be once this new tax is imposed; think of all the additional revenue your government will be able to squeeze out of you. The proponents of the VAT say it will enable us to once again restore order to our fiscal house and close the gaping trillion + dollar hole that they've created between what the government collects in tax revenue each year and what it spends. Won't that be great? Can't wait till it happens, right? Well, don't hold your breath. The VAT won't even come close to living up to it's advance billing. How do I know this, you ask? Just have a look at the current budget deficits of any of the European governments who already have a VAT Tax.

According to the European Commission, the average budget deficit for 2010 will likely be 7.5% of GDP, a percentage point or two below what the US deficit will be without a VAT. As we've seen, folks drunk with power, just like those overly lubricated with alcohol, can make all kinds of promises that are quickly forgotten as soon as they need their next drink. I'm sure you recall that no one making less than $200,000 would pay a nickel more in taxes and that health care reform would reduce the cost of health care. If eliminating the deficit was really a national priority, the folks who decide what the government is going to spend each year would be in a massive belt tightening mode; but government giving up the sauce just isn't in the cards. Instead, their attitude is why should we cut our budgets, when it is within our power to make you cut yours?

So, if it won't do away with the deficit, and it's as unlikely to restore fiscal discipline in Washington, as one more drink is to sober up the drunk, then what can we expect from the VAT tax, aside from more welfare programs? For starters, you can expect to pay higher prices for everything you purchase, and as a result of increasing the price of everything, you should expect the demand for everything to fall and along with it the volume of all goods and services produced. How many additional employees do you need to produce less? This sounds to me like a recipe for an economy on the rocks, with even higher unemployment than we are currently choking on. Maybe we can make our chronic unemployment rate permanent like our brothers and sisters in Europe have done. They seem to have gotten used to a rate that is two to three times what our unemployment rate has averaged over the past twenty years. Perhaps it's an acquired taste, like scotch or gin?

Don't worry you say, the President's Budget Commission is sure to deal with the deficit. Don't kid yourself! The President's new Budget Commission is just a diversion from reality. It is but a group of stammering, stuttering politicians who will will seek to convince you just how sober they are; whose pretense will be to convince you and me that there is just no way to cut government spending any further, and the only way out of the nation's fiscal troubles is to raise more revenue. After all, everyone knows Obama has frozen the spending on 13% of the budget already; so what else is there left to do?

What our representatives fail to see is that the way out of a spending problem is to stop spending, just like the way out of a drinking problem is to stop drinking. But we all know addictions can be difficult to break, and sometimes you have to hit bottom before you can admit you actually have a problem and seek help. I'm thinking that their political bottom is coming, and they'll be free to spend some much needed time in rehab, come November.

When Congress Commits Malpractice... Can We Sue?

2010-03-25T08:04:00.003-04:00

In order to fix the “Health Care Crisis,” the House passed legislation on Sunday which outlaws sound health insurance underwriting practices; if they don't immediately follow that by repealing the laws of Economics we're all pretty much screwed! Healthcare reform, as passed, will transform the Health Insurance industry from one where companies assess medical risk and price their products based on that assessment into one that merely processes payments, leaving it to collect what will be an ever shrinking pool of premiums while confronting the inevitable explosion in cost that subsidized health care, our newest entitlement program, will lead to.

According to the Democratic Policy Committee's website, as of 2014 the bill does the following:

Implements strong health insurance reforms that prohibit insurance companies from engaging in discriminatory practices that enable them to refuse to sell or renew policies due to an individual’s health status. Insurers can no longer exclude coverage for treatments based on pre-existing health conditions. It also limits the ability of insurance companies to charge higher rates due to heath status, gender, or other factors. Premiums can vary only on age (no more than 3:1), geography, family size, and tobacco use.

Sounds good doesn't it? Yes, but there's just one enormous little problem with it. All insurance has one universal characteristic that defines it as insurance; it is the current pooling of resources to protect against a potential future risk. Absent this characteristic, insurance ceases to be insurance, and is instead merely a pool of money used to pay current medical bills.

Recent articles that suggest that reform will turn Health Insurers into a regulated industry, much like the Electric utilities, miss the mark completely. Is your monthly electric bill the same as your neighbor's regardless of how much power you consume? I'll bet the answer is no. You pay only for the power you currently use, and that's not insurance.

Healthcare reform, as enacted, will force insurers to take all comers while at the same time limiting their ability to charge premiums that are appropriate for the risk involved in providing coverage. This will raise the cost of insurance for healthy premium payers as it has done wherever community rating is the law of the land. If you can buy health insurance after you become ill, why would anyone pay premiums until then? The answer; they wouldn't unless the government fine was higher than their premium. In other words, the government's $695 per year fine for those who don't buy mandated health insurance is a just a sick joke!

When only sick people pay premiums that are less than the cost of their treatment, how long will it be before the bankrupted health insurance companies are added to our growing list of tax payer owned and funded not for profit businesses?

Making health care treatment available to those who can't afford it should be one of our nations priorities but this giant Rube Goldberg of a system they are creating surely isn't the right way to go about it.

The Nuclear Option ... A Neutron Bomb Aimed at the Democratic Majority

2010-03-15T07:35:00.000-04:00

It's looking more and more likely that Nancy Pelosi and Harry Reid will trigger the so called nuclear option to push through their health care legislation for the benefit of the American people; the very same people whom overwhelmingly have rejected it and it's big government solutions to rising medical costs.

Her fanatical desire to pass this legislation has overwhelmed her ability to reason critically, as is evidenced by recent interviews in which she is quoted as saying, "Representatives are not in Washington to self perpetuate their political careers." While Mrs. Pelosi may inhabit a very safe district her words have probably come as quite a surprise to a number of her less safe Democratic colleagues, but hopefully will give them enough advanced warning to begin in earnest the search for a new career.

It has become something of an urban legend among the Democrats that it was their inability to pass health care reform in the first Clinton administration that was responsible for their loss of the Majority in the House. In other words, the American people were deeply upset by the Democrats' inability to deliver on legislation that would greatly increase their taxes and add mountains of new regulations to an already over regulated health care industry.

This is simply a major misread of history on their part. A more plausible reason for their rebuke and loss of Majority in the following Midterm elections were the Clinton tax increases and the arrogance of their members, as exemplified by the check kiting scandals of the house. This same arrogance was last displayed by members of the Republican party shortly before they lost their Majority status in the midterms in 2006.

Their fall back reasoning to vote for this legislation is no better. The idea that voters will seek retribution against the legislators who first cast a yes vote for the bill, and then once it became clear that nobody wanted it voted against it, is just silly. Do they really believe that if you vote for a bill that is hated by the majority of the public twice somehow you are safe? Have they never heard the old saying that “two wrongs don't make a right?”

Before the Democrats trigger their Nuclear option, they should review their college physics text books one last time and realize that at it's essence the Nuclear option, like the bomb it is named after, is an uncontrollable chain reaction. This Nuclear option has all the makings of a Political Neutron Bomb for their party; a tactical nuclear weapon designed to eliminate people but leave buildings intact. The Democratic Leadership should take a deep cleansing breath, remove their ideological 3D health care shades and have a look around. Somehow in the mass confusion that has been characteristic of this torturous process of producing health care legislation they have overlooked the Bright red rings outlining the bulls eye that this monstrosity has imprinted on their political careers.

Mouse Clicks.... The New Brute Force in Politics

2010-02-23T08:01:00.001-05:00

With the election of Scott Brown to the Senate in Massachusetts, internet- enabled voters have given the political parties and their machine politicians the same bruising that a whole host of formerly successful business models have received, while barely lifting a finger in the process. They have bested the legions of campaign workers and party bosses by going straight to the candidate digitally (note: none of these puns are intended;) a political progression that has rendered the power structure of the Political Parties irrelevant. Politicians can no longer count on the machine to protect them. What's in store for Representatives who refuse to represent is going to rock their worlds!

It's no coincidence that the Big City Newspapers have experienced this same digital beat down; they are a glaring example of a industry that has also lost it's focus: reporting news. As a result, their business models and bottom lines that rely on the continuing trust and confidence of their readers have been crushed. More and more, people get their news on line these days, with fewer and fewer of them perusing the offerings of the MSM. Newspaper Editors are left seething in a state of denial as they watch their circulation numbers and ad revenue continue to plummet. So too, the C's as in the ABC, NBC, CBS , CNN and MSNBC who have suffered similar losses in viewership and ad revenue. Why have they fallen so far, so fast? The answer is simple. Their own voters, the readers and viewers who vote daily with their remote controls and pocketbooks, are no longer confident that they are reporting the truth to them. They have been punished in the market place because they stopped representing the truth to their readers.

Scott Brown's victory in the Massachusetts Senate election is just the latest example of the incredible power of the internet to organize and flatten distribution channels. The money-bomb posted on Glen Reynold's Instapundit and elsewhere to solicit campaign contributions first met, then exceeded, then nearly doubled Scott Brown's Campaign fund raising goal as contributions poured in from all over the country. A couple of lines of code had replaced the many hundreds of bodies of the party's machine and nullified two of the biggest advantages of incumbency: name recognition and the ability that comes with it to raise money. This new way to political prominence is brought to you Courtesy of ordinary people and their mouse clicks. Ouch, that's got to sting!

Martha Coakley and the political elites, who were trying to save "Ted Kennedy's seat" by flying to Washington and holding a wine and cheese party for the big Pharma and the Health-care lobbyists ( tell me again, who was she representing?) were no match for the ordinary people who voted first with their visa and debit cards and then when it mattered most: their ballots on election day. Poor Martha, having to go all the way to Washington to scoop up campaign contributions. It just seems so inconvenient.

This new Digital Revolution is being fought by patriots armed not with pitch forks and ax handles but by voters armed with PC's using visa and debit cards as ammunition to defeat those who claim to represent their interests, but instead serve their real masters: the special interest groups and the party. They organize in digital Town Hall meetings, and gather at rallies to show their support for candidates who will truly represent their values.

And so, the latest business that has been forever changed by the power of the internet is Politics, an Industry whose business model had for too long counted on brute force instead of brain power to carry the day. Mouse clicks are the new brute force in this unfamiliar Political paradigm. It's about to get real interesting.

Jobs Created ZERO, Jobs Saved or Imagined Make Up Your Own Number That's What They Do!

2010-02-10T09:30:00.003-05:00

It's time for this administration to fold up their wishful thinking that the country can spend it's way out of economic problems, put it back on the shelf, and get in the game by doing something effective on the Job Creation front. Their singular accomplishment, if you can call it that, since taking office has been to pass a boondoggle of a Stimulus Bill, and that was a year ago. Their gigantic spending bill that was going to keep the economy from going over the cliff has been, by any measure, an abject failure; so much so that they had to invent an unmeasurable new measure in an attempt to quantify how many jobs were saved or imagined. Oh please!

Who cares how many jobs were saved or imagined? Am I really supposed to congratulate them for taxing me to give government employees (employee: one who is employed) who already have a job, a raise. Where I come from that's not creating jobs; but then again, I wasn't one of the folks under the illusion that the so called stimulus bill would actually create any jobs.

Perhaps I'm being to hard on them. Passing the stimulus bill is not their only accomplishment. They have managed to make possible the election of Republican Governors in NJ and VA, and a REPUBLICAN SENATOR to represent the good people of Massachusetts, so I guess they have done some good!

A real Jobs recovery can start tomorrow or not; all that need happen is for the government to give up on their current wish list of job destruction legislation and pursue policies that are pro growth and pro entrepreneur instead. The President can announce that he's ditched his favorite job killing bills like Health-Care Reform, Cap and Tax, the Bank Tax, the 250 thousandaire tax and all the other business choking regulations he wants Congress to enact.

He can instead champion tax reform that rewards the job creators by increasing the return on successful risk taking. Why not cut the corporate tax rate to 25% so that American corporations are not at a competitive disadvantage to foreign firms . Making American firms more competitive means more production and more jobs in America.

While he's at it, he can give give all those evil 250 thousandaires he's been verbally persecuting as though they were the Jihadist a break; a tax break. Many of them are owners of S-Corps who are paying a 35% marginal tax rate that will soon be 39.6% or more. The balance of them are a part of the top 5% that are picking up the tab for his massive government spending spree.

As Jack Kemp was quick to remind us, you can't have Capitalism with out capital.Taxing capital out of the hands of Entrepreneurs who would use it to create more jobs is no different than eating the farmer's seed corn. The next crop of jobs will always be smaller as a result.
Larry Kudlow inadvertantly illustrated the real problem while calling for a cut in the capital gains tax rate on his show the other night. Larry is a Free Market Capitalist to the bone, but he has made the mistake of letting the Democrats frame the debate. He spoke of a study which showed that the optimal rate at which to tax capital to maximize revenue is 10%, and called for a reduction in the rate.

Here is where Larry's went wrong: it's not about the government and it's revenues, it's about the citizens of this country and their well being. The optimal tax rate on capital is 0%, that's the rate at which the most capital is available to finance the most businesses to create the most JOBS. Our Government has lost it's way, it's needs now take priority over those they govern; they are more worried about their budgets and programs, not your well being. To this government, it is all about how much revenue they can squeeze out of you. It's time for you to squeeze back!

White House Hopes for Economic Growth... But Won't Change It's Counterproductive Policies

2010-01-19T08:00:00.002-05:00

Yeah, Well, Good Luck with that! The Irrational Policies coming from this administration couldn't be more wrong if they are truly attempting to promote an economic expansion, they would change them. The tried and true methods to promote economic growth don't include any of the following: tax hikes, a weak dollar, trade wars, additional regulatory burdens, increased energy costs or a takeover of the health-care industry.

Only a year ago Democrats were mouthing phrases denoting the sheer folly of raising taxes in a recession. Having passed their massive public spending free for all they called a stimulus, which I call the Mother of all things pork, and wasting a mountain of taxpayer dollars the results are in and are at best, unimpressive. It has resulted in the creation of a large number of bogus jobs but very few real ones, but has been fairly good at increasing the wages of public sector employees (people who are already employed)and building a few skate parks. Now their sensible tone along with any notion that fixing the economy was job one, is gone, having been thrown under the progressive bus, in favor of their standard class warfare vernacular, an ideology they are much more comfortable articulating. Once again they wrap themselves in the mantle of Public Savior, guarding the poor, the planet and the working men and women of America from evil capitalists and business owners everywhere. Righteous crusaders, who but for the lack of an extra trillion or so more tax dollars can make all of our wildest dreams come true.

It is the focus of their ire, Businesses and the rich whom I call capitalist (you know, the ones with capital)who will lead us out of this economic malaise or not. Whether the time is right for them to lead is dependent solely upon their own very rational assessment of the business climate going forward, and that outlook is not promising. The President and his advisers hope that brow beating bankers will lead to more business borrowing to expand output and create additional jobs. He acts as though CEO's will plow ahead, willy nilly, borrowing and investing no matter how many additional burdens he and his political allies on the hill ask them to bear.

As far as private sector job creation goes, the President has missed the point entirely, quite possibly because very few of his advisers know anything about the private sector, having never worked in it. So I'm going to let him in on the dirty little secret of job creation, one that those of us out here in the real world already know. Businesses borrow money only so that they can earn additional profits, jobs that are created are really incidental to their focus, which is to grow the bottom line. Many of the policies the President promotes serve only to diminish the ability of a business to earn a profit. No Profit! No Growth! No Jobs!

The Business world is totally different than the political world. Companies don't have to expand. Investors don't have to risk their capital. They only do so when the conditions in place enable them to forecast an increased profits. When CEO's look at projections showing a bottom line that is shrinking, their thoughts are not of expansion and job creation, but rather they work nonstop trying to rationalize their cost structures to insure profitability, enabling them to survive the downturn. Labor savings is at the top of the heap when it comes to cutting expenses.

The good news is that an accelerated recovery can get underway any time the administration wants, but it will require them to make that hard pivot they have been talking about. They need to turn away from raising taxes, encourage the production of our domestic energy resources and stabilize the value of the dollar.

Domestic drilling will directly create thousands of real jobs in US oil fields and have the added benefit of reducing energy prices, enabling a more robust economic recovery and the jobs that come along with it.The prospect of lower taxes and a stable dollar will renew the incentive for investors and their Capital who are clearly watching from the sidelines to get back into the game of providing the fuel for economic growth. The nightmare of a health care bill, which seeks to punish healthy people with higher premiums and younger folks with fines for being young needs, to be scrapped in order to promote an economic environment that is, if not Employer friendly, at least not hostile.

Obama's Golden Opportunities an Anchor for the Dollar A Parachute for Bernanke

2010-01-14T07:45:00.013-05:00

President Obama has one opportunity born of this current economic crisis that he shouldn't waste; a crisis that could not have happened but for the mismanagement of monetary policy by the Fed and it's Chairman, Ben Bernanke. The President can right the fiasco that our modern day dalliance with a floating dollar has been. Now is the time to bring back the dollar's Golden anchor, and give Helicopter Ben his Golden Parachute.

Bernanke, like his predecessor at the FED Alan Greenspan, conducts monetary policy by feel and not according to any predictable standard. A “keep them guessing” approach to monetary policy, with it's gyrations in the FED funds rate and the swings it has produced in the dollars value, has been the cause of much of the economic misery that Americans have suffered over the nearly 40 years since Richard Nixon took the US off the gold standard in 1971. The latest fiasco, the housing market blow up and bust, could not have happened on a gold standard, nor would the future inflation that is already baked in the economic cake be a cause for concern.

The dollar's value hasn't always been an ethereal notion. The dollar was defined by Alexander Hamilton as a specific weight of gold in 1792. One ounce of gold was worth $20.67 from the time he initiated this standard until President Roosevelt's devaluation of the dollar in 1931, which changed its value to $35 dollars per ounce, a measurement which held until Nixon took the US off the gold standard in 1971. This protracted period of stable money, and the low interest rate environment it produced in combination with the other economic freedoms enshrined by the founders in our Constitution, are what enabled the US to become the world's economic Superpower.

With the loss of it's golden definition, the value of the dollar has plummeted. The $35 dollars that would have bought you an ounce of gold or a good men's suit in 1971 won't buy you a decent tie today. Today you would need to exchange nearly 1100 dollars for that same ounce of gold. One is hard pressed to see the benefits of our floating dollar!

Mr. Bernanke, who is proclaimed as the world's greatest student of the Great Depression, has taken all the wrong lessons from it. He, like most other Keynesian economists, believe a deflationary monetary policy was the cause of the Great Depression. As a result, he is pursuing a monetary policy designed to avoid a deflation at all cost. There is one very conspicuous problem with his approach. It is a misdiagnosis of both the cause of the Great Depression and our current recession, neither of which are deflationary contractions.

An email exchange that I've have read between Jude Wanniski and Bernanke from 2004 that has been made public clearly demonstrates Bernanke's complete lack of understanding of the stable money a gold standard produces. It is not feasible that he could lead the country back to the hard money policies that played a key part in making the US a safe haven for investors around the globe, enabling us to outpace the world in economic growth and the jobs that come along with it.

The folks who praise Bernanke for getting us past this financial meltdown miss the point that it was his mismanagement of the dollar that was at the very heart of the problem. By giving him the boot and restoring the dollar's golden link, the President will have removed the man who made this financial debacle possible and restored focus to the Fed whose primary mission is to maintain a stable dollar. Relieved of this impossibly conflicting mission of guarding the Dollar's value and keeping unemployment low, the Fed will once again be back to doing what it is supposed to do. Congress can then get busy providing sound fiscal policy and low tax rates, which in combination with the stable dollar, are the surest path to a robust economic expansion and the jobs it will create for Americans and the rest of the world.

Airline Security A Very Dangerous Oxymorn

2010-01-05T09:22:00.012-05:00

All this talk about profiling is just a right-wing knee jerk reaction to the failure of one terrorist who tried to blow up his fellow passengers and couldn't pull it off. Had he accomplished his mission we would now all be celebrating with an Alah Akbarh shout out. Wait one minute, that's right, I'm not actually a terrorist, I'm just treated like one every time I fly. Pardon my confusion while I cancel the celebration.

The first problem with our passenger screening process is that it is run by a one size fits all Politically Correct to the bone government agency, which requires that no one get special treatment, and everyone get the same treatment, lest it offend some special interest group. Islamic Terrorists are threatening our lives, and the recent spectacle in Detroit has made it blatantly apparent that the government's real concern is being Politically Correct. How pathetic is that? Thoroughly searching everyone is not possible, and randomly picking people for enhanced security measures isn't working. That's why grandma gets frisked, but not the terrorist. The TSA is just busy going through the motions.

For an administration that is enamored with law enforcement, and apparently thinks that the Panty Bomber was a criminal (why else would you arrest him on criminal charges?) they should take a tip from the NYPD, who when summoned to the scene of a homicide don't question the dead guy. There is simply no need, he has been excluded because he doesn't fit the profile of the killer. He can't,because he's dead, and as such doesn't have much to say anyway. What the police will do is ask people questions to rule them out as suspects, something I've never been subjected to at the airport. The TSA employees that I've encountered do their best not to talk to you, other than to scold you for not putting your shampoo in a clear zip lock bag, or not emptying your pockets completely. Perhaps this is some kind of an advanced terrorist counter measure and I'm just not aware of it.

The second problem is that they are searching luggage and not screening people to determine if they are terrorists. Those in charge say that they must search everyone because finding the one terrorist among all of the passengers boarding planes each day is like searching for a needle in a haystack. I concede that it is a difficult task, one made more difficult by their lack of profiling, but if you are looking at every piece of hay in the stack you are never going to find the needle. You need to focus on the needle. Unless you are just trying to look busy, in which case a lot of people going through the motions will do the trick.

Necessitating that everyone be subjected to the same level of screening is ridiculous. A simple profile would eliminate as suspected terrorist 90% of the flying public, making a thorough screening of the remaining 10% no longer a daunting task, but a small chore. The reason profiling works is that when you put together an accurate threat assessment profile it tends to make the actions of the people you are looking for stand out from the rest of the crowd. You profile to eliminate suspects, greatly reducing the number of people that need to be searched. It's got nothing to do with racism. There, I said it. As a matter of fact, a blind man could have successfully profiled Omar.

These people never learn, which is why, after taking into account what had happened that day, the TSA implemented new rules to prevent further attacks. One of the new rules is that no one can leave their seat for the last hour of the flight. It's a good thing they had not instituted that rule until after the Flying Dutchman had thwarted the Isolated Jihadist on flight 253, or our hero might have waited patiently in his seat on his way to meeting his maker.

The Panty Bomber....Place Your Knickers on the Conveyor and Step away from the Machine

2009-12-27T14:45:00.008-05:00

Even a hungover, nearsighted, cross-eyed, Spanish Fighting Bull could have seen this guy coming a mile away. Umar the Islamic Jihadist Terrorist, whose actions should have raised more red flags than even the Russian Army owns, tried to blow up a commercial flight to Detroit with a Panty Bomb. The myriad of red flags, any one of which would have been enough to have prevented you or me from ever boarding our flight, didn't even slow him down as he flew from Nigeria to Amsterdam and then on to Detroit .

Why is it that Umar Farouk Abdulmutallab, a last minute, cash paying customer on an international flight, whose only carry on luggage was his Panty Bomb, was not subject to the same level of scrutiny that I received when I flew from Tampa to Newark NJ to attend my uncle's funeral? This, even though his father had called the US Consulate and warned them that his son was dangerous; a phone call that landed Umar on a terror watch list. I, on the other hand checked an overnight bag, wasn't on the terrorist watch list, wore only a pair of gym shorts, a t-shirt and flip flops, ( Where I might ask was I going to hide a bomb in this outfit?) and carried only my wallet and a cell phone. Still it was deemed necessary that I undergo enhanced security measures. The reason? I booked the trip late. So what were Umar's excuses? Oh yeah, that's right, he wanted to blow up the plane!

The Obama Administration's Home Land Security Chief, Janet Napolitano, appearing on a Sunday morning news show looked tough in her leather jacket, but acted like a real wimp, suggesting that the government's watch list of over 500,000 names, one of which is Umar Farouk Abdulmutallab, was just too large to search in an attempt to prevent a terrorist bent on killing all the other passengers on the plane from boarding. Where do they keep this watch list, and why is it so hard to search? Is it written in crayon, perhaps in poor penmanship on index cards and stored in the bottom of a draw of a desk in a little used basement office of an annex at homeland security ? I typed the word terrorist into the Google search engine as I wrote this piece, and it came back with about 37 million entries. How long did it take to perform this search? It took 0.12 seconds . It's not that the list is too long , it's that no one is watching the Watch List. So why do they call it a watch list if they don't watch who is on it?

Our politically correct system of airline screening is a Giant Joke, inconveniencing everyone, yet protecting no one. How can I tell? It's easy. I can't carry sunscreen in my suitcase when I go to Miami, but an Islamic Jihadist from Nigeria on the government's terrorist watch list, a person who's actions should have set off all kinds of alarms, can carry a bomb onto a plane and all they want to know is if he wants the chicken or the vegetarian dinner.

The folks in this administration, whose plan to combat terrorism amounts to a policy of talking nicely to terrorists so they like us, need to wake up and smell the PETN before hundreds more people die needlessly. The PC Crowd in charge, who this year can already take credit for the 13 deaths at FT Hood, narrowly missed another several hundred notches on their belt. If I've got this straight, it's okay to keep the list as long as you don't refer to it. That might be profiling and that is not politically correct. So, instead of targeting the few terrorists for enhanced screening, we are subjecting everyone who flies to an inadequate level of screening, inconveniencing everyone while protecting no one. Not a very bright thing to do, but a very PC approach and that's what counts. Right?

News Flash: that's not what counts. What counts is getting the job done, and the government is failing to provide the flying public the safety they promise . The Last Nut Job Islamic Jihadist who tried to use this type of explosive to blow up an airplane bound for the US had it hidden in his shoes, which is why everyone who now boards a plane is commanded to take off their shoes. Won't flying be fun when the folks at TSA start checking out Grandma's Knickers because of the Panty Bomber! What's next? Body cavity searches?

A Return to Slavery ... One Progressive Step at a Time

2009-12-19T11:12:00.001-05:00

Let's just call it what it is, as one of my favorite Economists Walter E.Williams writes in a recent Town Hall column:

"There is absolutely no moral case, much less constitutional case, for Congress forcibly using one American to serve the purposes of another American, a practice that differs only in degree from slavery, which we all should find morally offensive."

If you strip the health-care debate of it's sugar coated political buzz words such as mandate and public option, aren't we really talking about just another case where the government has decided to force you to labor for the benefit of someone else? At the rate we are going, how long will it be before you'll be spending more of your time working for others rather than yourself. Isn't that so very altruistic of you!

If the Health Care Police ( HCP), I assume they would be the ones in charge of enforcing the governments health care mandate, knocked on your door every other Monday morning and forced your college educated 22 year old daughter to work all day picking up trash on the side of the highway you'd be horrified. You'd want some answers! What dastardly criminal act could she have committed to deserve such a punishment, keeping her out of work all day and thereby depriving her of 10% of her income?

They don't do that in America, you say.Well, not quite yet anyway, but they will soon if the Democrats have their way with health care. She will be forced by the government to spend an equivalent amount of her earnings to purchase something she had decided not to. Is this not also a practice that differs only in degrees?

As a parent, wouldn't you want to talk to the prosecutor to know what crime your daughter had committed that merited she be fined upwards of 10% of her income? Shouldn't there be some kind of a trial to find her guilty before punishment is meted out, even if it is only a show trial like the one KSM is entitled to? Won't you be mortified to learn she has committed the most heinous of acts imaginable in our new Progressive Society? That's righ,t she is Guilty of working for an employer who does not provide health insurance, and has failed to purchase a government approved insurance policy on her own. Oh, the shame of it!

Your representatives in Congress are spinning a yarn that goes like this: legions of hospitalized young adults without medical insurance are the cause of the explosion in health insurance premiums. This in an attempt to justify a morally bankrupt and unconstitutional taking of private property. Their remedy? Mandate ( a pretty word that means to force) that all citizens must buy health insurance. That's what they would like you to believe , but that is not what the facts tell us.

The fact is that they are bullying healthy young people into to subsidizing health care premiums for those in poor health who have medical insurance, those with preexisting conditions who have been denied health insurance coverage and those who are not financially able to purchase health insurance . The Progressive Bullies in Congress always pick on the politically weak in society, in this case it happens to be young people, it's not like they are reliable voters anyway, and their perennial favorites, "The Rich"who will pay the freight to provide an insurance subsidy for the politically favored classes.

Will health insurance reform really be the rallying cry Progressives use to justify re-instituting a modern day version of Slavery in America ?

The Presidents Economic Recovery Board... Are they Smarter than a Fifth Grader?

2009-12-14T12:23:00.000-05:00

You wouldn't think so if you read the transcript from the November 2 meeting of the President's Economic Recovery Advisory Board (PERAB), the group responsible for presenting ideas to promote economic recovery to the President. It was a free for all of Government Interventionists and Central planners who would have made Joe Stalin proud. Fittingly, it was held in the Roosevelt Room, perhaps in honor of that other great believer in free markets, I mean central planning, F.D.R.

His economic wunderkinds put the children at B. Bernice Young Elementary in New Jersey to shame with their own tune whose chorus, “We need a price on carbon, mmm mmm mm, and then we need a cap “ was music to the President's ears. This gathering of mercantile songbirds was less a forum on serious economic ideas, than it was a murder of crows squawking praise of two mutually exclusive economic propositions: increasing manufacturing jobs by making energy green and expensive. This song doesn't work!! It's like singing the words to "Silent Night" to the tune of "No Sleep Till Brooklyn." Artificially raising the price of energy causes recessions and job losses in manufacturing. It doesn't promote economic recovery.

The President's solo first verse was sung while he patted himself and the others in attendance on the back, crooning, " We have pulled the economy back from the brink." No matter how many times I hear him sing this one, it just never gets old!

Jeffrey Imelt of GE recited a self-serving little ditty that only through greater exports will we be prosperous once again. Evidently GE is looking for additional government help in the export markets. A loyal green believer, he then added to this musical round with a verse from that old clean energy standard, Higher Energy Prices are an Economic Stimulus. This guy has pipes!

Songbird and publisher of the Spanish -Language newspaper La Opinion, Monica Lazano treated us with a spicy Latin hit called The Lazano Multiplier. It went like this: "One taxpayer dollar spent to support small business export assistance creates $500 in taxpayer gains." What this song lacks in economic reality it makes up for in it's fascinating rhythm.

John Doerr, Al Gore's dance partner in green deception and Kleiner Perkins added his voice to the chorus: “We agree the most important thing we could do to have America lead in this industry and generate a lot of jobs fast is to put a price on carbon; a price and a cap on carbon.” It's a beautiful little tune of government intervention sung in the key of Green. He implored our leader that by raising up the cost of all forms of carbon-based energy, "... we could create hundreds of thousands, even a million jobs in a year, in a permanent new industry -- high-wage jobs, that are not going to be outsourced." I was spellbound as I waited to hear the next verse in this lovely song of hope and change. What hi-tech cutting edge industry would blossom in this new bright green era? What a letdown; he reached for a note and fell flat with that ridiculous dirge, "Cash for Caulkers," an earthy ballad of a million American workers caulking their way across this great land.

Could Mark Gallogy, investment banker extraordinaire and member of the President's Transition team, rescue this tune? After a hopeful start explaining that there has been little growth in US demand for electricity, he belted out his verse. Expecting a song of setting the free markets loose, I was crushed to hear the same sad sack melody called Put a Price on Carbon.

Paul Volker chirped in with a classic tune from years gone by, reminding Imelt and the rest that we need a more competitive business environment not just subsidies for exports. Ultimately, he too disappoints when he forgets his lines about how that can be done.

The longer it went on, the worse this song kept getting. Richard Trumka's version of God Bless the Recovery Act was worse than anything you could imagine. The balance of the meeting was dominated by Big Labor, whose song, We are the Champions looks good only on paper. Their real life track record in creating new jobs is outdone only by their ability to cripple every manufacturing industry they represent.

After getting to the end of the transcript, I'm convinced that the President would be better off with an advisory team of fifth graders. Why? Because with about a half hour's worth of economics 101 they would understand that the keys to our nation's continued economic success are low taxes, a stable dollar, and less government interference in the private sector. A concept that has eluded the President and his advisers!

A Lesson for Congress: The Only thing Worse than Your Constituents Pink Slip Is Your Own!

2009-11-30T08:58:00.002-05:00

With more than 10% of the workforce now Unemployed, and a greater number underemployed it's seems very odd to me that the Majority party has spent the last 10 months promulgating policies to reform nearly every aspect of the economy with the exception of those that would bolster economic growth and create jobs. Included in their "REFORM" of health care are the very tax policies that will stifle economic growth and Job creation. There is No Bigger Job Killer that I can think of , than their proposal to raise the capital gains tax rate.

The Capital Gains tax is a Success tax, and is only levied on economic actors who have risked their capital and succeeded. There is no federal tax on the loss of capital. The folks from whom these taxes are extracted are the people who have built or enabled others to build successful enterprises by providing the necessary capital. I like to call them the Job Enablers. They enable entrepreneurs to create wealth by creating jobs, a commodity that is in rather short supply lately.

Politicians like to pretend that the damage done by the Success Tax is limited only to the small number of people who actually pay the tax, but it is not. There are three other groups who pay an even greater price as the result of an increase in the Capital Gains tax and they are the very groups Congress pretends to champion. The first are the unemployed who will remain so. Their numbers are rising monthly and are easy to see. The second group are the Entrepreneurs who run small businesses and would provide the additional jobs needed except for the lack of available capital.They are not as noticeable, but are critical in relieving the problems of the first group. At his upcoming "Jobs Summit" the President would do well to understand this fact. It would give him another one of those teachable moments he's so fond of. Perhaps with his formidable skills behind the teleprompter he could persuade his democratic colleagues who are itching to raise this and other tax rates not to deploy this job killer of a tax.

Raising the tax on capital reduces it's supply, increasing the cost and availability of capital at the margin. It really is as simple as that. If there are five red balls on the table representing the total capital available to fund businesses and the jobs that go hand in hand with economic expansion and if the government confiscates two of them through increased taxation, it is clear to everyone that there are fewer red balls left to fund economic growth. Which brave politician wants to step up to the mike and make the argument that another dog park, or retrofitting a government building with green technology is more important than the real economic growth provided by this country's entrepreneurial class? When capital is made scarce through increased taxation it is the small and newer businesses, the country's job creation machines, who are left without capital as the government crowds them out of the market, not the politically well connected GE's and GM's of the country.

In their attempt to support a return to higher tax rates of the past, the Democrats frequently point to the boom years of the Clinton Administration as proof that higher tax rates promote economic growth. That they can make this argument with a straight face indicates how truly ignorant of economics and human behavior they are. It also reveals them to have an advanced degree of selective memory syndrome.

The Clinton Tax hikes came in 1993, and the boom years which they credit to those increased taxes didn't begin until 1997. Why was there a four year lag? If increased taxes are such a potent economic stimulus why didn't the boom years start in '93 or '94 or '95? Why was there only tepid economic growth? Their claim doesn't pass the smell test, especially when you consider the economy was coming out of a recession when growth typically is more pronounced. And Why did the more robust growth of the 90's come at what would normally have been the tail end of an economic expansion, which is usually when growth is more subdued? Finally, if as they claim tax increases are so good for economic growth, why wasn't that their first agenda item? Why wait to let the Bush era tax cuts expire in 2010?

What the few Democrats who understand economics, and apparently there aren't many of them, conveniently forget to mention in their "taxes are good for the economic growth" argument is that it was the significant reduction in the Capital Gains tax rate, from 28% to 20%, that was passed in 1996 and became law in 1997 that was responsible for the boom, not as they like to claim their 1993 tax hike. The last two times the Capital Gains tax was increased it was followed by sub par economic growth. The first increase was in 1969, which along with an inflationary dollar helped usher in the stagflation of the 70's, which is where we seem to be heading now. The second time the rate was increased was as a part of the 1986 Tax Act , which subjected Capital gains to the same tax rates as ordinary income.

Why limit the ability of successful investors to grow the economy by confiscating the capital needed to do so? There are some folks who defend the capital gain tax as a measure of fairness. What's fair about eliminating jobs? These are the people who fund expansions, and you want to slow them down? We can never know how many Microsoft- type enterprises, along with the jobs they produce, died in the lobbies of Venture Capitalist in the 1970's and late 80's, never making it to the board room and the decision makers as a result of dramatic increases in the capital gains tax.

Who is the third group that get's mauled when Capital and the jobs it creates are scarce? Just have a look in the mirror Mr. Congressman. Come next November when a sub par recovery has not produced the needed jobs, it might well be your turn to stand in the unemployment line. Good Luck with that, we'll see you next Fall!

Tracking Obama On The Way To His Own "Little Big Horn"

2009-11-23T08:00:00.000-05:00

Senator Jim Demint earlier this year said that the Health-Care Bill would be Obama's Waterloo. I only partially agree with him. He's right that it will ultimately bring an end to his reign, but the Waterloo analogy doesn't begin to capture the scope of the defeat. At the battle of Waterloo, Napoleon, who like Obama was thought to be a genius, was defeated by conscripts of the combined armies who fought to protect their own nation states. During this era of warfare, armies fought in formations on either side of the "battle field" training their weapons on the opposing army's soldiers, and firing volley after volley until their opponents had either been killed or had broken ranks and fled leaving a bloody battle field strewn with dead and dying men. The Midterm elections in 2010 won't resemble that at all. It won't be near that pretty.

A better analogy might be Custer's annihilation by Sitting Bull at the Little Bighorn. The Democrats, as did Custer, will be fighting against the guerrilla tactics of the indigenous tribes: Custer the Sioux and Cheyenne; the Democrats the Tea Party Patriots and other conservatives who feel as the Indians did that their way of life is being taken from them. Custer and the Democratic Leadership both underestimated the strength of their opponents and overestimated their own resources, counting heavily on reinforcements that in Custer's case didn't and in the Democrat's case won't arrive. The real distinction between the two battles is that when Napoleon and his army were defeated at Waterloo he was merely banished to the isle of Saint Helena, while Custer and his troops were massacred by Sitting Bull and his warrior braves. They weren't given a Political time out. They were wiped off the map, and that is what is in store for the Democrats in 2010.

The big turn out at the polls that wasn't, by Obama's reinforcements, proves that they won't fight for any one but him and he isn't running in 2010. They didn't turn out in the Battle for Virginia and were also no-shows in the fight for the NJ Governorship. That's the problem with troops who are lead by the force of charismatic personality and not motivated by principal. The Democratic warriors fight only for an extra ration, while the Tea Party Patriots and Conservatives are fighting to protect their way of life.

There will be no Decisive Battle as there was at Waterloo and in the National Elections of 2008. Instead there will be, just as in the battle of the Little Big Horn, a series of smaller skirmishes. The battle fields will be the State and Congressional Districts; the battle will be fought by the voters who reside there, many of whom have changed sides in the past year. The voters who had sought hope and change in 2008 have now gotten a taste of that change and found it not to be the sweet taste of liberal progressivism they were promised, but rather the bitter taste of socialism and have lost all hope in The One. They've come to reject the promise of higher taxes on nearly everything and the greater government involvement in almost every aspect of their daily life.

The Democrats who will have been the Majority party for 4 years come next November's election will by then own the economy, along with at least one automaker and it's financial arm, the two mortgage giants Fannie and Freddie, several banks, the insurance company AIG and possibly a newspaper company or two. If they get their way with the health care bill, you can add your doctor's office and the local Hospital to a growing list of wards of the government.

To quote the Democrats very own savage pundit James Carville, “It's the Economy Stupid!” In the mid terms it's always the economy and a recession that was caused by bad government policies to begin with won't be cured by equally bad, but different government polices. With an unemployment rate that tops 10% and is rising, it won't be flesh wounds they'll be tending come November, it will be scalpings. Here's hoping that the government run health-care program they covet has plenty of sutures in the ready.

The Crony Capitalism Cafe..... Yes Senator I'll have the Free Lunch Also!!

2009-11-16T10:31:00.001-05:00

Everyone wants a free lunch these days, and it seems that in the Cafe of Crony Capitalism, sometimes know as Washington, the free lunch special is being handed out as openly as the candy given to children who knock at the door on Halloween. But alas, not everyone gets a treat, because there really is no such thing as a free lunch. Someone has got to pay. That's why you, the taxpayer, are always the one who is tricked into picking up the tab.

Turns out you, the taxpayer, don't qualify for the free lunch. Just how does one qualify for the free lunch? Well, in this bold new era of hope and change "we all have embraced" it's nice to see that the more things change the more they stay the same. You need to be a Crony (one who plys Congressmen with cash) or you're going to go hungry.

How does one become a Crony with benefits? Is it based upon need, as in GE needs their $139 billion debt guaranteed or their profits won't look as good? Or is it based upon some other metric such as literally keeping the Gold in Goldman Sachs? It was the President of the New York FED who intervened in the negotiations between the two parties to a contract to ensure that the taxpayers ponied up enough cash to make sure Goldman Sachs got paid back 100 cents on the dollar on the bets they placed with their bookie AIG, and not just the measly 60 cents they were trying to settle their claim for. No, it's not based on need, it's pretty much just based on cash, it's campaign contributions that matter.

It seems that there are all sorts of companies that qualify for Crony Benefits. If you're an automaker and you run your business off the road and into the ditch you need to just wait patiently for the taxpayer tow truck to pull you out of the ditch, provided that is that your membership in the Crony Capitalist club is up to date and you have ponied up enough for the right campaigns. If you're a banker, it is a little trickier. Of course you need to start out the same way, by lending money to folks who won't ever pay you back, but you need to be very nimble if you want to end up like JPMorgan and not like Lehman Brothers.

If you are a professional Crony Player like the folks at Fannie and Freddie, you get to play by your own personalized set of rules where it doesn't matter how badly you have screwed the pooch, you still get to walk away with $90 million, give or take.

Even if your not a profit making Enterprise you can qualify to be a Crony with benefits. You can have the Attorney General of your state over-look your criminal activity and instead bring charges against the Whistle blowers, especially if that AG is Running for Governor of California and your fraudulent non profit is tight with SEIU .

The list of Cronies gets longer each day. Come to find out most of the jobs saved by the Gargantuan "stimulus" package weren't saved at all. They were there all along, but you got to give them extra credit when it comes to creative math skills, counting cost of living raises for State workers, and funding for undergraduate students to hand out pool cues in the college rec center as jobs created or saved!

Next week in the house you can watch the Democrats in control pay off the AMA with the so called doctors fix for Medicare. They will debate the $210,000,000,0000 bill for 1 hour, with no amendments allowed and then pass it on a purely partisan vote. Want to knkow who is going to pick up the check on this Free Lunch? Why you, the taxpayer are, of course! Not a bad payday for supporting the farce of a health care bill the President is so desperate to pass.

But take heart all you lesser folks who don't qualify for Crony benefits. At least this President and his advisors aren't making the same foolish mistakes that Roosevelt did when he was confronted with his Congressionally induced recession. Oh no, they've learned their lesson! This time there will be no run away spending programs in an attempt to prop up excessive wages, nor increased taxes and price controls. They're a thing of the past. You can also be confident this time they won't let the dollar go to hell. Please someone tell me they won't let that happen .Could you imagine where we would be if they made the same mistakes this time? This time is different, right? Someone please tell me it'll be different this time!

Note to Unions... Don't Drink the Kool-Aid

2009-11-12T13:21:00.001-05:00

In 1978, 913 followers of Jim Jones, the leader of the People's Temple Cult sipped on what they thought were cups of Kool-Aid, and died in a mass suicide. Their deaths were the tragic result of believing so completely in a leader who proclaimed to have their best interest in mind. The recent actions of unions across the country make me wonder if they don't share the same total belief in their leadership as the followers of Jim Jones. Could it be in their DNA?

With unemployment at near record levels in the modern economy, the unions are gulping down the sugary sweet promises of their leaders, not realizing these promises are economic suicide.

Last week, the Transportation Workers in Philadelphia went on strike. It seems they and their leaders wanted more of just about everything. They wanted more than the 11.5% pay increase offered over 5 years. They'd rather have 20% and a $1250.00 signing bonus. A signing bonus? Isn't that precious? Who do they think they are? They wanted bigger pensions than what they were offered and they didn't want to have to contribute any more to their health care insurance payments than they already did, which by the way is 1% of their salary. With an average salary of $52,000.00 per year that's $520.00 per year for healthcare, or $10 bucks a week. Can you understand their outrage now? Neither can I!

With a recently announced unemployment rate of 10.2%, you'd think the union leadership would be smarter, wouldn't you? Their actions betray a sense of privilege, not very much different than that of Marie Antoinette who exhorted her subjects, starving due to a shortage of bread, to "Let them eat cake." With the private sector continuing to hemorrhage jobs, and health insurance premiums increasing by double digits, these folks seem to claim rights once reserved only for Royalty.

The Unions are demanding superior pay for inferior performance, an unfair arrangement in any employment environment, let alone one with better than 10% of the workforce looking for jobs. As more and more unions show their true colors and seek to claim privilege over their private sector counterparts, they run the risk of a public execution, similar to that which befell the former Queen of France.

Their reckoning won't come at the hands of an Executioner and his Guillotine, but rather in secret ballot votes like the one that de-certified the Union at Boeing's North Charleston plant in South Carolina. If you think the 20 point swing in the vote in the recent Virginia elections was sending a message, how about the 199 workers who voted to kick the union out, compared to only 68 members who voted to continue union representation.

It's no coincidence that the announcement to locate the second assembly line to produce Boeing's 787 in that North Charleston plant, and not the Union shop in Seattle, came only 48 day after the vote de-certifying the Union. It aint Kool-Aid guys!

It's a Surreal Day in the Neighborhood ... How Do You Like My New Car?

2009-11-03T09:49:00.002-05:00

It certainly is a surreal day in the neighborhood and I don't think it has got anything to do with Rush Limbaugh criticizing the President, as David Axlerod, one of the President's advisor's would like you to believe. What I find surreal is all the attention being paid to the Public Option as well as Al Sharpton's assertion on This Week with George Stephanopoulos that Liberals are the real conservatives. Yes, he actually said that with a straight face. That line was about as surreal as it gets, boys and girls.

Back to the Public Option. The public option argument is no different and just as silly as me arguing with my wife that the pin-stripping should be gold and double lined on our Ferrari Enzo. What makes these arguments different is my wife and I both know we joking, whereas Al Sharpton's conservative wing of the Democratic party is deadly serious. What makes the argument surreal is that we know we can't afford what we want and so do they, but that is not stopping Al's pals.

It gets even funnier when they begin to explain how they will afford the unaffordable. They want you to believe that they are going to cut Medicare. Let me say that one more time, only slower.

The Democrats in Congress lead by the President are going to cut Medicare.

The idea that this Administration is going to cut spending is laughable. The notion that they will take a meat cleaver to Medicare and hack 50 billion dollars from it's budget each and every year for the next ten years is a side splitter. A solemn pledge of fiscal prudence from the leader of the gang that is projecting Trillion Dollar Deficits for as far as the eye can see isn't all that reassuring. But it's comforting to know that their lack of fiscal discipline has some limits, or does it?

Their spin on the deficit is every bit as surreal as their foolish public option debate. The President says he won't sign a bill that will increase the deficit. That's pretty rich, don't you think? What he means to say is get ready for big tax increases, both the direct and indirect kind.

Forcing, excuse me, mandating (that's more PC) that everyone must purchase health insurance while at the same time imposing a tax on medical device manufacturers is merely a stepped transaction. It is a tax increase disguised as a fee extracted from the medical device manufacturers, which they pass on to the insurance company in the form of higher prices, who then passes it on to you through higher insurance premiums. Raising the top marginal rate by 5% is well, it's just a tax increase. Hey good thing that recession is over and the economy is surging ahead, cause we all know that raising taxes in a recession is a recipe for disaster!

What they want you to believe and what is reality in this debate occupy positions that are polar opposites on the reality continuum!

Reality: government programs always cost more than originally projected. Congress has an abysmal record when it comes to cutting spending and raising tax rates, never produces any where near the amount of tax revenue that Congress believes it will.

Surreality: Congress can provide quality health care for everyone without bankrupting us all along the way.

Congress should do what I did when I realized that I couldn't afford the $1,000,000 Ferrari. I settled for just the pinstripes instead. Now I'll be the first to admit they don't look as good on me as they would on that Ferrari, but they don't look that bad, and on the plus side I won't have to hire a bankruptcy attorney.

When you Shake Hands with the Devil, Healthcare Style

2009-10-13T09:35:00.000-04:00

When they cut their deal with the Administration the insurance companies rolled the dice and came up snake eyes. They traded away proper insurance underwriting practices in order to capture a larger customer base, one that would be guaranteed through government force. Like their auto company brethren who struck their own Faustian bargains before them, they have come away a several fingers shy!

After promising the insurance companies a government mandate that would force young people under penalty of fines to purchase insurance (not very American sounding, is it?) the administration's minions in the Finance Committee said Oops, we lied. They watered down their mandate, delaying it's start date and reducing the penalties enough as to make it ineffective, leaving the insurance industry hanging out to dry.

Don't get me wrong. I'm not going to shed a single tear for the insurance companies. The bargain they sought with the Administration was despicable. They know how insurance works and doesn't work, and have played the go along get along game with the government for far too long, instead of being a force for positive change. This time it came back to bite them, and they're going to need stitches to close the wound.

The Government in it's extremely finite wisdom is doing exactly the wrong things to fix the problem of rising health care costs.

A quick history lesson for those who have forgotten. It was the Government's involvement in health care, subsidizing employer sponsored insurance payments by making them tax deductible, in order to cure other problems it created by imposing wage and price controls during World War II, that started us down the road to health care ruin in the first place. When you subsidize something the demand for it goes up. It's like having a clearance sale! The very same politicians who believe so strongly in incentives when they are handing out $7,500 of your tax dollars so their fellow eco-warriors can drive green in a $40,000 electric vehicle are just undone by the fact that subsidizing health care has lead to an increased demand for it.

The solution to rising health care costs is LESS GOVERNMENT, NOT MORE!

The government needs to let insurance companies get back to selling insurance, which is a protection against a loss that is not economically recoverable from. Insurance is not a payment system designed to take the brain power out of the decision to go see a doctor simply because the cost of that visit is near zero.

The government needs to Stop subsidizing health care via the tax code. When consumers of health care start to pay the real costs of the health care they purchase they will respond, like they do when the price of any other commodity they purchase increases. They will reduce their demand for it.

The Government mandating what procedures need to be included in an individual's policy needs to end. Only the consumer can know what is of real value to them, and what they are willing to freely exchange their hard earned dollars for. When they are able to shop and compare costs and benefits, they will.

We need to let doctors be doctors and practice medicine again, instead of having to practice the bizarre form of health care CYA that an out-of-control trial lawyer lobby has forced upon them through outrageous malpractice awards.

Until we get the Government out health care, no real reform will be possible, and Government will continue to play their game, which is to shift costs onto what ever group happens to occupy their demon of the day spotlight.

Below is a link with the fax number of every senator who is voting on the bill today. Send your senator a note and let him know how you feel.

http://www.grassfire.org/1122/targets.htm

Pump Primining is Nonsense..... Tax Reform is What's Needed

2009-08-05T11:04:00.029-04:00

To hear our Representatives in Washington and their economic guru's talk, the economy works like a pump, which they have been busy priming with large amounts of government spending, courtesy of taxpayer canteens. Their theory is that once they have primed the pump sufficiently business activity will flow and end the current economic drought.

This kind of thinking betrays Congress's ignorance of the working of both pumps and the economy. The mere act of priming a pump does nothing to produce the desired outcome, a greater supply of water. Using a lot of water to prime a pump when only a small amount is necessary is wasteful and does not pay off in an increase in the amount of water produced. What really creates the flow of water is the effort of the individual who forces the pump handle down, then up, and down once more.

Whether pumping water or increasing economic activity, it's really all about the individual and his effort. We should be doing everything we can to encourage this effort, but instead our government is hell bent on doing just the opposite. The return an individual receives from his efforts is his incentive, and is being reduced year after year, with the government taking a greater share of his production. The unwieldy mess that our current tax system has become discourages those who would generate the increased economic activity we need.

The greater the number of buckets an individual pumps from the well, the less he is allowed to keep from each additional bucket. If increased economic activity is the goal then our tax system is backwards. The first bucket or two pumped are the easiest of the day and also have the lowest tax cost to the individual. Our progressive income tax that takes a bigger share of each additional bucket , discourages the individual precisely at the point that an incentive to produce more is needed. The basic premise embodied in the tax code says the harder you work the less you get to keep! If that is not a system rigged to stifle production, what is?

Hiring additional employees to help increase one's output has it's own code of discouragement. Let's start with the sponge of a tax called Social Security; it soaks up 15% or so of each and every bucket you fill. If the Democrats have their way with health care and you're a small business you can count on losing another 8% to pay for the government run health insurance plan. That's almost a quarter of every bucket gone before you've even had a chance to wet your beak.

That's just for starters, if you're not discouraged yet there is still the progressive income tax structure which will sop up another 35+% of what's left in your bucket today, and 40+% after the Bush tax cuts expire in 2010. That is unless the various surtaxes that have been proposed are imposed, draining even more from YOUR BUCKET. That's without considering State, County and local income taxes, which with very few exceptions are on the rise. That will mop up more of what is left from your day at the well .

The biggest problem our Nation faces is the government's never ending thirst for a greater share of your labor and mine. While the rest of the world lowers tax rates making them more competitive, our leaders are constantly finding news ways to make you and I less competitive through higher taxes that discourage production.

We need to scrap the Tax on Labor, that we refer to as the Social Security Tax, all together. The tax money that Washington takes from us is fungible; it doesn't matter what label they put on it. It's no secret that Social Security receipts in excess of Social Security payments are spent as soon as they are collected on other items in the government's budget. There should be only one low, flat rate income tax, spread over the broadest base possible, to encourage a revival of economic activity.

Competing in the global marketplace of the 21st Century will require us to either attract the necessary capital or cut wages to be competitive. Only one of those alternatives produces rising incomes for American workers. Yet the Policies to make the US a country that is capital friendly are nowhere to be found. The anti capital accumulation tax called the capital gains tax should be yanked from the tax code. Doing so will ensure that capital will once again be in greater supply relative to labor, and will result in rising wages and providing the higher standard of living all working people seek.

In order for the US to once again become the low tax, high wage economic juggernaut of the past, something's got to give. That something is run away government spending. Lowering the Tax rate and making the base as broad as possible will give everyone an incentive to help their representatives in government understand what is a good use of taxpayer money and what is not. Just as Congress is now getting an earful from the folks who aren't enamored with the Government Health Care Option. The kind of political push back they are sure to receive, once all working citizens have an interest in how their tax money is being spent, will make it easy to chop a trillion or two from an insanely bloated Federal Budget and then restrain it's growth after that.

Washingtons Newest Game Show "Cash for Clunkers"

2009-08-03T08:07:00.012-04:00

In Washington this week we find our economically illiterate Congress hurriedly working to provide the funding needed to bring you another season of every stimulus junkies favorite program called "Cash for Clunkers".

The Show opens with the announcer asking the studio audience and the millions of unemployed people viewing from home a question by borrowing a line from the old Rolaids commercial.

"How Do You Spell Relief"?

The audience and the voters back home yell out the answer:

C A S H - F O R- C L U N K E R S!

The premise of the show is that everyone will be better off if the price of used cars, the kind bought by folks who can't afford new ones, are more expensive, and new cars for people who can afford to buy them are subsidized by you, the taxpayer. To do this the government will overpay people who can afford to buy new cars, for their used cars, giving them free money to buy a new car while crushing the used cars they bought. See how that works? It's pure Genius . Do you get it?No? I don't either!

The producers of the show can't believe how wildly popular free money has become. After being delayed by three weeks while they tried to work out the kinks, this version of the free money give away show has become a smashing success, no pun intended. Successful to the point that all the money allocated to produce the show through the fall has been used up in just two weekends.

During a commercial break we are reminded just how hard they are working in D.C. to brings us the sequel to our favorite new stimulus show. They point to the speed with which they ran through the budget of "Cash for Clunkers One" as proof of the fact that it's working so well. Go figure. Who would of thunk that so many people would be clamoring for free money?

Some of the show's critics point out that it hurts every taxpayer who is stuck footing the bill in order that a few lucky folks can get a good buy down at the new car dealer. While others point out that the poorer folks who may have wanted to buy one of those inexpensive cars now destined for the scrapper are the ones who will literally pay the price by paying more for a clunker to get around in. But hey, the show has got great ratings, and that's what counts in Washington. Effectiveness? Not so much. In Washington it's all about the ratings.

So, I say why stop at Cash for Clunkers? After all, when you are on this big of a roll, you've got to go for broke! Which apparently we are! It's just not happening fast enough for our Congressional buddies. So, I'd like to suggest they try my all time favorite show called : "Money for Nothing"! Yeah, that's the ticket. Just hand out free money to everyone. Then we'd really be getting somewhere. There's already a catchy theme song we could use for the show, by a band appropriately named Dire Straits. Which is where we are heading as a result of the foolishness that passes for leadership and sound economic policy by this Congress.

Small Business Squarely in the Government's Crosshairs

2009-07-22T11:07:00.009-04:00

The Obama Administration and it's policies have the business community squarely in it's cross hairs and is moving in for the kill. Proposed taxes on energy, increased taxes on businesses to pay for expanding health care coverage, and the rising cost of complying with ever more regulation are serving to choke off profits and restrict growth at the very time our country needs them the most.

Policy makers across the nation choose not to understand a very basic yet simple truth, the more difficult the government makes it for an employer to earn a profit, by confiscating profits through taxation and increasing expenses through regulation, the fewer profitable employers there will be. By extension, corporate and personal income tax revenues will be lower, as will the growth in employment. Thus, government spending on welfare and unemployment must be higher. This seems like pretty basic stuff, don't you think?

Even the economist they love to quote when they want to increase government spending understood this.

“Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.” John Maynard Keynes

Sadly it is the rare Politician who understands the quote above. Raising tax rates to raise tax revenue, and passing regulations that restrain the capacity of entrepreneurs is ultimately the disappointing folly of fools, for it never produces the desired results. When you reduce incentives you restrict growth. When you limit economic growth, you lessen opportunity and eliminate prosperity.

The bell curve also applies to folks who run small businesses, not just college entrance exam scores. Only a relative few business owners are near genius at organizing and running profitable companies. Most of the rest are spread out across the balance of the curve. It's these business owners, at the margin, who are hit hardest by increases in taxation and the cost of more government regulations. They run businesses where profit margins can be razor thin, even in good times. The one other critically important thing that needs to be remembered is that they are the job growth engine of the economy.

A business only grows when the principals responsible for the decision to expand or not conclude that the risks of a proposed expansion are outweighed by the potential for increased profits. When they conclude otherwise, businesses don't expand and jobs are not created. Yet it is these very business owners who find themselves under attack and in the administration's cross hairs. We hear it over and over again from the President and his advisers in a never ending chorus: "We'll take it from the rich," "We will only tax those earning over $250,000 per year because they can afford it." “They need to pay their fair share.” The large majority of these folks are small business owners.

We have heard this all before and tried it with disastrous results, but evidently congressional memories are short. I remember the luxury surtax on boats which came into effect in the early 90's; it too was supposed to raise additional revenue for the government. It would do so by soaking rich boat buyers who could afford to pay the surtax, billions in tax revenue would be made available for the Washington pols, or so the theory went. Did it work ? No, it seems the rich opted not to be taxed more and they stopped buying boats from American manufacturers. The American boat building industry was crushed, and it's hard working employees were forced into unemployment lines. I'm sure that wasn't the intent of the do gooders who passed the legislation. But it was the result, and as always the folks at the margin were the ones who felt the pain of the government's misguided attempts to “soak the rich.”

What politicians fail to understand is that the rich who work hard to earn their wealth in the first place will rightly work just as hard to protect it. The governments new found infatuation with income redistribution, which they hope to accomplish by once again “soaking the rich” will only serve to dig our nation deeper into the hole of diminishing revenues and increased spending on transfer payments.

Business owners will keep their powder dry, delaying their expansion plans until the misguided policies of this administration are replaced by the wisdom of the electorate in the voting booth. The American people instinctively know that the massive increase in government spending accompanied by a reduction in the incentives for productive work and economic expansion is a recipe for disaster soup.

The Public Option ... Only Your Wallet Will Feel the Squeeze!

2009-06-24T08:51:00.007-04:00

In an editorial in the Wall Street Journal on Wednesday, Robert Reich argues that the central idea behind the public option for health care is to squeeze the profits of insurers and push them to make changes to reduce costs. This exposes his seriously infirm grasp of economic reality and points to his near religious belief in the power of "Good Government", a phrase which perhaps defines the word oxymoron. The only squeezing a public option would produce would be the squeezing of additional dollars from your wallet, and the only cost reductions will come from the imposition of health care rationing .

Mr. Reich is living both figuratively and literally in economic La La Land, with Liberally tinted political blinders so large that they block out reality. From his lofty perch at the University of California at Berkely, yes the very same California that is teetering on bankruptcy due to unrestrained "good governance ", a large part of which goes to pay for health care programs for state employees and the poor, he sends down his prognostications for fixing everything that is wrong with capitalism. His usual cure, as you may have guessed, is more spending on more "Good Governance". This time he's fixing health care.

You would think that with his bird's eye view, so to speak, of the destruction wrought by his beloved "Good Governance", he might change his tune. But this song bird of ever more government spending, can only warble for yet ever more government spending to fix the very problems too much government spending has caused. It's a vicious cycle.

That he can't or won't connect the cause (too much government spending) with the effects (a meltdown of his state's budget process) which have his state a mere 30 days from insolvency, and at the same time advocates even further expansion of the government's role in health care is nearly beyond belief.

The government option he promotes doesn't pass the economic smell test. People respond to incentives, even the " good governance" types will admit this when it comes to taxing cigarettes and soda pop, but not when it comes to government run health care. If you want less of something tax it. Want teenagers to drink less soda? Put a surtax on it. Want smokers to cut back? Add another dollar of tax, to the price of a pack of cigarettes. If, on the other hand, you want people to use more of something, lower the cost.

Robert wants to increase the demand for health care by providing it to more people for free, while at the same time reducing the cost. This flies in the face of economic reality. The end result is obvious. If you are buying steak for your family's dinner and your free- loading brother- in- law wants to pop by with his clan for a meal on the house , your options are the same ones the government faces . You can cut everyone's steak in half(rationing) eat hamburger instead (provide an inferior service) or bust the budget and provide steak for everyone.

Here's my prediction: When the same politicians, who only ever make political decisions because they are incapable of making economic decisions design and run your health care program, you'd better get ready to pay dearly. There will be lots of steak for some, a little hamburger for others and a great big tab for the taxpayers.

One Step Forward Two Steps Back... The Governments Strange Dance with GM and Fiysler!

2009-06-08T08:08:00.006-04:00

The logic behind this ill fated rescue attempt of Green Motors and Fiysler (Fiat + Chyrsler = Fiysler, pronounced Fiz-ler) doesn't add up, but the tab that the government expects the taxpayer to pick up is mounting, and continues to add up and up and up! What started out as a $17.4 billion dollar bridge loan from the Treasury Department, via the Mother of all political slush funds, the TARP program, to forestall the inevitable GM and Fiysler bankruptcy has turned into an ongoing corporate welfare scheme whose price tag so far is a whopping $80 billion or so.

Even the No More Corporate Welfare Chorus in Congress has now changed it's tune, and is singing that classic hit by The Car's: "Let the Good Times Roll"! It is a pity these song birds don't know the next several lines of the song which are as follows:

Let the good times roll
Let them knock you around
Let the good times roll
Let them make you a clown

As the Auto Oracles in Washington warned, to let GM, or Fiysler for that matter fall into bankruptcy would mean the end of automobile manufacturing in the US and the collapse of the entire auto supply chain. As the months since it's dire warnings have passed, and the costs of keeping GM and Fiysler out of bankruptcy have skyrocketed, we can now see that it wasn't the sky that was falling, it was GM and Fiysler. The sky is still overhead where it belongs, and now so too are GM and Fiysler where they belong: in bankruptcy.

If the new GM and Fiysler that emerge from bankruptcy as less bloated organizations with greatly reduced liabilities, courtesy of taxpayers, bondholders, auto dealers and the rule of law, can be seen as one step forward, then the continuing militant culture of the UAW, that bought and paid for this egregious display of political favoritism and the government's mandates for smaller greener cars must surely be seen as two steps backward.

For this rescue to work, a smaller GM, with the UAW's two left feet now stepping on toes not only on the assembly line but in the board room as well , will have to dance it's way back into the hearts of the American car buying public and do what the old GM and Fiysler could never do: build small cars that the public will buy in large quantities, and do it profitably. If that is not enough to ensure their next bankruptcy filing, they'll need to do this while the auto oracles in congress call the tune for future design, production and distribution. Good Luck GM and Fiysler! Things are going to get small!

How small is small? As I looked down from the drivers seat of my 96 Jeep Cherokee at the Mini Cooper that had pulled up along side of me at the stop light, I noticed the new car sticker on the window which proclaimed the car's superior gas mileage. I also noticed it did not meet the revised cafe standards of 35.5 mpg's highway that the government has mandated, not that it missed by a mile, it only missed by half a mile, per gallon. I pointed out to my wife and 3 daughters who fit very comfortably in our car that Washington had decreed that this would be the new standard for size and comfort going forward. They pointed out to me that they weren't going to drive in a car like that because they wouldn't fit. Can you imagine that? A family- sized car that your family won't fit in! Only the government could do this with a straight face. When the comedian Steve Martin said to us "Let's get small," we all knew that he was was high. What excuse can Congress give?

When the bailout music stops the next time, I predict that once again it will be the taxpayers who are out of luck, looking for a seat and finding that in the politically charged game of auto industry musical chairs ,the unions having paid the man in charge of the music will get a heads up and grab the only seat left before the government calls "game over".

One last question: Why is there a need for Ford and the other two now bankrupt automakers to give $52,000,000,000 to the UAW's VEBA to fund health care costs if Obama and Co. are going to deliver on Universal Health Care?

Hear Hear for Big Government... Let the Taking Begin!

2009-05-29T10:07:00.006-04:00

" A Government Big Enough to give you everything you want is Strong Enough to take everything you have".

That quote by former president Thomas Jefferson, the author of The Declaration of Independence, was a warning about the danger to our freedom and liberty inherent in Big Government, by a man who was well acquainted with the tyranny of big government. Having disregarded Jefferson's advice, we now bare witness to the very real threat to our liberty that unbridled big government has now become .

The weak Federal government created by the founders, whose primary role was to protect our rights and guarantee our freedoms, has been superseded over the years by a powerful central government that has lost sight of it's raison d'etre . The raw power of big Government was clearly on display in it's handling of the automaker's bankruptcy negotiations. Their actions served to upend bankruptcy law and defraud bondholders of their private property rights. When a private citizen steals another's money and is caught he goes to jail; which is where Bernie Madoff resides for his participation in a scheme to defraud investors. When government officials steal from investors they go to Hollywood to tell their supporters what a great job they are doing, I think the line was "Los Angeles, you ain't seen nothing yet," then they ask for additional campaign contributions.

This is not the sort of behavior one expects from government officials. Just ask the teacher and police unions of Indiana, whose retirement accounts have been pilfered by this same auto task force. I don't think this is the change they voted for, but what the heck, it is change, and as we've been reminded, they did win! As unfortunate as it may be, you expect the administration to demonize Wall Street as merchants of greed and bash the Hedge Funds types, but cheating one group of union employees out of their retirement savings in order to fill up another group of union retiree's accounts? How do you square that one? Has someone's campaign contribution envelope been a little light lately? What else might explain it?

You can't chalk this outcome up to the fact that the task force followed the rules and one group came out on the short end of the stick. They have been breaking the rules right from the start. The TARP legislation doesn't authorize money to be spent on non financial institutions like the automakers in the first place. The rules in bankruptcy court, where Chrysler is now and GM is heading don't allow the judge to show favoritism towards a group of unsecured creditor's claims over another group of secured creditors, even if the Judge is a latina women, which Judge Gonzales is not. In my reading of Article II of the Constitution of the United States, which defines the power of the executive branch , I can't find the power which gives the President the authority to buy an automobile, let alone the whole automobile industry!

Lucky for the UAW that where they are concerned the rules are meant to be broken, and broken they have been. Just ask anyone who's been in the unfortunate position of having to negotiate with them and the political thugs for hire who do their bidding. I don't Blame the UAW; they paid good money for these services, they may be brutish, but they can only talk tough. Besides it's not Uncle Vito who's doing the knee cappings in the auto wars; believe it or not it's Uncle Sam. All these years I've labored under the false impression that Uncle Sam's wrath was reserved for folks like the Nazis, the Commies and the Terrorists. I guess we can add law-abiding retirees, bond holders and car dealers to the list of undesirables .

So, there you have it. After every investor who evaluated an investment in the bankrupt US automakers dismissed the idea, concluding they would not return to profitability, Big Government in its infinite wisdom jumped into the breach with a sack full of your Franklins. Flexing it's muscles in an unprecedented take over of the weak sisters from Detroit, it thumbed it's nose at the wisdom of the investors, instead forcing it's citizens, whom it claims to represent, to fund these unprofitable enterprises through increased government taxation.

"Hear Hear for Big Government. Let the Taking begin!"

"Smarter Government that Focuses on What Works" ...... When's that Going to Start?

2009-05-20T09:51:00.017-04:00

Tuesday, the President announced his new cafe mileage standards and the world rejoiced. Well, maybe not the whole world, not even all of the automakers, but the ones on the government's life support system were wildly enthusiastic. In announcing the new standards for the industry, Dear Leader has shown them the way forward and has divined a new "Path to Prosperity". This "Change that he believes in," is a future where Detroit produces tiny little green cars; the kind you can plug into a wall outlet, get a good night's rest and be ready in the morning for your next trip into town. If this is what he truly believes, I believe he's crazy.

The Detroit Two and a half are in the mess they are in today partly as a result of cafe standards, which forced them to produce domestically small unprofitable cars. How will making these standards more difficult and costly to achieve do anything but make their situation worse, although at this point it's hard to imagine the auto companies in worse shape. The new standards mean the Auto manufacturers will need to produce ever lighter (smaller is lighter) and costlier automobiles (technology is expensive ) than they do now. The great leap forward in autos is here, or is it?

That technology is going to cost big money , which shouldn't be a problem for the Detroit Two and a half who are, after all, flush with profits from a decade of phenomenal sales and record earnings. Only kidding... sorry about that... I mean bankrupt . Where will the money come from to finance the new technologies needed? I think you already know the answer to that question: it will come from you and me. Taxpayers will fund the auto industries next, almost certain to fail government mandated attempt to sell little green econo-boxes that no one wants. This isn't change! This is what they have been doing for years, losing money on little cars people didn't want. The difference is, this time it will be your money they're losing. In my book, that's failure!

So the President, who said he didn't want to run the Auto industry, having dipped his toe into the water, in order to give a beat down to the folks who had previously financed the automakers, and finding he liked it, now stands hip deep in the nationalization pool, wading towards the deep end and a government purchase of GM in a "surgical" bankruptcy proceeding. Making his next big splash with your money, he'll top off GMACs coffers with another $7.5 Billion dollar bailout, without missing a stroke.

This example of smart government is very similar to the tiny little "Smart Car" already available. It's great if you don't want to take too many people very far, but if your ambition is to save the entire US Automobile industry, you're gonna need a big car and a private sector willing to finance profitable automakers. The President's actions of late bode poorly for the future on both counts, and shows that when it comes to autos, he seems to be in over his head.

Grand Theft Auto The Political Version

2009-05-12T08:06:00.015-04:00

The popular video game, Grand Theft Auto, has seemingly exploded off the video screen in recent months, and is being played out in real time by the Obama Administration. Like the video game, it enables "political players" to take on the role of a criminal enterprise, roaming freely around fictional cities knocking over banks and insurance companies, sacking CEO's, intimidating Hedge Fund Managers, threatening Bondholders and anyone else who gets in their way, in order to score political points and win the game.

Just as in the video version, the players have names: the Ring Leader Barry, his number two man and enforcer Rohmie, and the assortment of ethically challenged, tax- dodging cronies Timmy, Tommy, and Katie.

The action in the video game takes place in make-believe cities that represent New York, San Francisco and Miami. In the real life version, the action is mainly centered in make-believe cities like Detroit, the Utopian Labor City on the hill, Washington D.C., the Financial Nerve Center of the World, and New York City, the Penal Colony for Greedy Bankers and Nefarious Wall Streeters.

Points are scored by doing the dirty work of local community organizers and running political protection rackets for liberal groups. In the video game, players steal one car at a time; in the much grander real life version, plundering the entire auto industry for the UAW is done in one fell swoop, scoring countless political points in the process. A new feature of the game is the Boeing 747, available if you want to swing by Lady Liberty and score some additional style points, while taking cool snaps to impress the guys back in Chi-town.

Unlike the video game, the real life version lets you score big by shooting up the health care industry, bullying doctors and roughing up Blue Cross and Blue Shield executives. Points can even be had for stealing vouchers from school children trying to get an education, and shaking down taxpayers to fund all sorts of shovel- ready projects (gamer code for political make- work jobs).

The sound track in the latest version of the game enables you to censor radio stations, so that you can filter out the Limbaughs, Hannitys ,Becks and other radio personalities who don't agree with your vision for America. Instead, a continuous loop of elevator- type background noise emanates from the likes of MSNBC, CNN and NBC.

In an unusual twist, considering the game is mostly played by Liberal types, there are no points awarded for being carbon neutral. It's been reported that grumbling can be heard from inside the little green hybrid/electric cars, as they hurry from issue to issue, dishing out change we can believe in, something about how cramped these little tin boxes are, and couldn't we just one time carjack one of those roomy SUV's? Apparently, a carbon tax is being written into Grand Theft Auto 2.0, assuming that release makes it past the voters.

...As Fed Fights The Last Depression Is It Losing The Inflation Battle?

2009-05-11T09:25:00.000-04:00

General Bernanke and his Federal Reserve now find themselves hip deep in the time honored military tradition of fighting the last war, and as with all armies who fight the last war General Bernanke is in danger of losing his current battle with inflation. While fighting a deflation with an increase in the money supply is a correct policy action, seeing a deflation where there is none, the Fed Chairman reveals that he has read his history of the Great Depression and learned the wrong lessons from it.

This problem of seeing falling prices as deflation and not the result of economic contraction can't be helped as long as he views events through the lens of a Keynesian Economic Model. Keynesians see only inflation and deflation. In their economic world view they don't grasp the differences between contraction and deflation, nor expansion and inflation .

The problem he faces is similar to that of a fireman who doesn't understand the difference between the paper fire in a kitchen trash can and the grease fire on a stove. Dousing both with water, he puts one out but intensifies the other.

Had the economy actually been in a deflation, the extra liquidity the Fed added would have been the correct monetary lever to bring relief . The problem for the Fed was that we were not in a deflation, but a contraction, which can also be marked by falling prices, but will not be fixed by additional monetary ease. As a result, even with the Fed's massive expansion of it's balance sheet, prices continued to fall.

The sharp contraction of the economy, ignited by a breakdown of the loan securitization market, helped to cause falling prices. The financial hardship of falling home and securities prices, while painful to many, was providing the economic cure to the recession by once again rationalizing market prices. This, in turn, would bring private capital back to the markets in search of newly created value. The Fed, in trying to prevent the deflation that wasn't, by injecting additional liquidity into markets that didn't need it, took exactly the wrong course of action. The Fed's misstep is resulting in a fanning of the sparks of a new inflation that, along with the recovery, is just now getting underway.

As the economy slowly continues to show signs of a recovery, the Fed needs to quickly do an about face and withdraw it's monetary surge, or the battle to tame inflation will be long and hard fought, but ultimately a losing one. The Federal Reserve should then play it's part in securing our economic future by once again fixing the value of the dollar,thereby eliminating the risk of inflation and assuring economic actors that the profit negotiated in today's contracts will not be diminished by the hidden tax of inflation. Economic growth and a return to a sound currency would unwind a lot of the negative effects of the increased liquidity the Fed has produced.

What was, and is still needed, are incentives to encourage risk taking by investors and entrepreneurs. Increasing the after tax returns to capital for successful risk takers is the road to an expanding economy that will create real jobs in the private sector. Economic expansion, along with the growing profits it produces, would also provide the additional revenue the Treasury seeks. Instead, we hear talk of higher taxes, closing loopholes, and hiring additional IRS agents to beef up enforcement . None of these are pro-growth policies. Unfortunately, pro-growth incentives will probably not be forthcoming from this Congress, as Government is firmly stuck in the muddied Keynesian view that the economy is suffering from a "shortfall in aggregate demand", which in their construct can only be addressed by additional government spending when the private sector retreats.

My guess is that when the economic history of this period is written, the Feds policy of fighting a contraction with monetary stimulus, coupled with the unusually large government interventions in just about every aspect of the economy, will show that it actually resulted in prolonging the depth and breadth of this recession .

White House Gives the Go Ahead to Waterboard Bondholders

2009-04-29T08:46:00.005-04:00

If water -boarding of terrorists is torture and as a result criminal , why is it that the financial equivalent of water-boarding is now routinely practiced not by the CIA on terrorists, but by the White House, Treasury and The Fed on bondholders, investors and CEO's.

Water-boarding was part of the enhanced interrogation techniques the CIA used to extract information from enemies of the United States. Enhanced interrogation techniques are performed outside of the normal interrogation process that is used on enemy combatants. When the government chose to restructure the failing automakers outside of the normal process (a bankruptcy proceeding is the normal process when you are insolvent) they did so for a reason, and yesterday that reason became crystal clear.

Keeping the Automakers out of bankruptcy, and thereby removing the necessity that the restructuring move forward based on "The Rule of Law", was paramount if the Unions were to have any hope of securing the payment of their unsecured VEBA health care trust claim. A big win for the Politically savvy and well connected UAW, but a terrible loss for the bondholders and taxpayers who will foot the bill.

Only in the political arena could two unsecured creditors receive vastly different treatment, as have the Bondholders and the Unions. The UAW, whose unsecured VEBA is owed $10 Billion by GM, will receive 39% of the GM stock; the Bondholders, who are owed $28 Billion, will receive 10% of GM stock . Do the math: the Union has received 10 times what the government expects the bondholders to take in this restructuring.

In the Chrysler deal, the Union fared even better, as they were unsecured creditors and the Chrysler bondholders were secured creditors. The bondholders received 28% of the value of their $6.9 billion in bonds in cash; the Union will receive stock worth approximately $4.2 billion, and a note for an additional $4.58 billion, which represents 82% of the value of their claim. Either the government negotiators have dyslexia and have made a terrible mistake in their paperwork, or this is political payoff WRIT LARGE. Is this not the equivalent of financial waterboarding?

And thus we enter a brazen new era of government, when the White House is openly complicit in the theft of, as a matter of fact is directing, the looting of private property from investors. Welcome to the Rule of Man, or as the President calls it, change we can believe in! Where campaign contributions mean everything and the rule of law, not so much.

Exactly what did he mean when the President of the United States said;
"Let me be clear. The United States government has no interest in running GM. We have no intention of running GM." Apparently he meant it's not an interesting job, but we are going to do it anyway!

Back to Prosperity ? Tea Parties Show the Way

2009-04-26T12:04:00.004-04:00

While reporting on the nationwide Tea Party Protest, Larry Kudlow spoke about the idea that the United States should become a tax haven; a country whose tax laws would encourage capital formation and attract investment capital from around the world to fuel not just a recovery but an economic resurgence. This very simple yet very powerful economic idea would produce greater prosperity for everyone, greater than all of the government handout programs enacted to date.

The Tea Party Movement shows the electorate is ready for just such an alternative. The outrage over the bailouts and growing government intervention into every part of our lives has finally touched a nerve. The progressives who are dismissing this movement as nothing more than a fringe group fail to understand that all change takes place at the margin. When Grandmothers and Grandfathers both democratic and republican are demonstrating not for increased benefits but for less spending they are the voters at the margin. What the Tea Party demonstrators instinctively understand is that this "Government Intrusion" is fueled by the ever growing tax burden they must bear.

Their furor grows as Federal, State and Local government spending increases, continue unabated during a recession, funded with a whole host of new taxes on them to pay for it all. The disconnect is striking as they watch the private sector cut jobs and expenses to regain profitability, while the ever expanding public sector continues to hire new workers and increase the pay and benefits of existing employees. Is this responsible government?

The key to capitalizing on this movement is to unite these disparate groups into a coalition of tax payers who have had enough and not fracturing this movement by segmenting them according to which tax they may or may not pay. Does it really matter if it is your income or real estate, or social security tax burden that is too high? Throughout last year's campaign we heard too often about how some people who were not paying income taxes were going to get a tax refund and not often enough about how taxes of all kinds have risen to unacceptable levels. All taxes are a tax on income.

The Democratic argument that we are simply going back to Clinton era tax rates is nothing if not disingenuous. When the top marginal rates were increased in the early 90's real estate, social security and sales taxes were nowhere near the level they are today. Politicians know that by dividing people according to which tax they pay they can turn one group of overburdened taxpayers against another and continue their reckless spending .

High rates of tax on labor (the social security combined rate is 15.6%, up to $106,800 of income), income ( the personal income tax rate is scheduled to return to 40+%) and capital ( divendend and capital gains rates are inceasing) serves only to assure that they remain scarce commodities. What this economy lacks is investors willing to deploy additional capital, to employ additional labor at higher income levels. More people earning more income can better provide for themselves, thus greatly reducing the need for government to provide services. Governments at all levels need to cut spending in order to reduce the tax burden on those who choose to work and invest their money to provide the jobs this economy needs so that individuals will have the resources to support themselves.

When You Shake Hands With the Devil ... Better Count Your Fingers

2009-03-30T10:40:00.015-04:00

It took Ford's CEO Alan Mulally two trips to Washington to figure out that the bailout money the government was dangling in front of him was really a pact with the Devil, fraught with peril, but figure it out he did and so he and Ford survive to live another day. GM and Chrysler however weren't as lucky. They couldn't or wouldn't see the handwriting on the wall, and thus have sealed their own fate.

Chrysler's CEO Robert Nardelli is now forced to negotiate a do or die deal with Fiat, as his partner the devil holds a gun to his head and whispers in his ear "cut a deal in 30 days or you my friend are toast". Rick Wagoner, GM's CEO, has been shown the door, and GM has been given 60 days of operating capital to conclude it's restructuring. All we can say is good luck... you are going to need it!

Is it possible that GM will be able to do in 60 days what it hasn't been able to do in the last 20 years? No! It can't, and won't. If GM wants to survive as a company and not as the host organism for the parasitic UAW, it should make the long over do announcement that it will be seeking bankruptcy protection under Chapter 11 in order to reorganize its business. If it doesn't, it may exist for a brief period of time as a scaled down post office type operation, making tiny eco- friendly cars that won't take you very far, while providing jobs with above market compensation and benefits for a small number of politically connected autoworkers. But its days will be numbered, and when the operating losses become too great, and they will, for the UAW's Democratic allies to continue to provide the necessary political cover they too will cease to exist.

How is it that GM got things so wrong? They seemed to be under the false impression that because the Democratic party was beholden to the UAW's campaign contributions afforded by it's dues paying members, that somehow it was safe to sleep with the enemy. I hope they know now what they should have known then; it is never safe to sleep with your enemy! They failed to realize that they were never going to get a fair shake in the political arena. Without the protection of the bankruptcy laws and the threat of a court imposed settlement, the company will continue to be stuck between a rock and a hard place in it's negotiations with a recalcitrant union that won't budge and bondholders who don't want to be sacrificed to placate the UAW.

There is a lesson here in dealing with a government that disdains the rule of law and thirsts for ever more power and it is a simple one: When you shake hands with the devil, you better count your fingers!

So This is Saving the Economy?

2009-03-09T10:47:00.008-04:00

What is it going to take to discredit the "Economic Fine Tuning Crowd" so that they will take a break from their massive intervention in the not so free markets in order that a recovery might actually get underway? How is it that there are still people who believe in the ability of the government to "Fix" the economy?

If there is anything that we have learned in the past year, it has got to be that the government interventions to save the economy have done anything but save the economy. Saturday, March 14 will mark the one year anniversary of the Shot gun Wedding arranged by the Fed of JP Morgan and Bear Sterns. Bear, the blushing bride, was forced to walk down the aisle with Morgan in order to save the banking system, and sacrificed to save the families reputation, so to speak. That Friday, the DJIA closed at 12,145, the S&P 500 at 1,315 and the NASDAQ at 2263. A year after the start of "Rescue Mania", all three of the major market indexes are at about half of their year-ago values. This is what the government considers a rescue plan?

Perhaps if we examined the other recipients who have benefited from government bailouts, we'd find that they are in much better shape. This might then account for the lingering belief in the ability of the government to rescue troubled companies. Roll call: AIG? CITI? Bank of America? Fannie & Freddie? GM? Chrysler? Nope! The story is pretty much the same. Rather than being the elixir of life, government bailouts seem to be a curse, turning seriously ill companies into zombie-like firms that move aimlessly about consuming increasing amounts of taxpayer dollars, but never recovering from their zombie-like state.

After working their magic rescuing corporations, it seems they are now getting serious about bailing out/rescuing the homeowner with an effort to pass a cram-down law that will legalize theft. Someone borrowed money from a bank to buy a home and will legally not be obligated to pay it back. What else would you call this? The idea that things will improve in the mortgage markets because the government has created significant additional risk to bank capital flies in the face of economic logic. Why don't they just pass a law making it legal to rob banks?

When the result of the rescues are this bad, I think that a legitimate argument can be made, like the one we made in September, that doing nothing would have produced a better outcome. Had we done nothing, could the markets be considerably worse off? One thing we know for sure is that had we done nothing, we would not now be on the hook for the trillions in debt the bailout/rescue/recovery plan will cost us.

The Government rescue plans aren't rescuing! Republican led bailouts didn't work, and the Democrat led bailouts aren't working either. I think what is needed is a "bailout intervention" led by the taxpayer. Maybe that would snap them out of their denial and force them to abandon this reckless behavior.

Part of the problem is that politicians don't want to admit that they don't know what they are doing. With great confidence, they tirelessly repeat a version of what their staffer who spoke to another staffer who heard an economist supporting their plan said, with the version enhanced just a little bit each time it was repeated. The truth is the economist who they claim is supporting their view point is no where near as sure of the outcome as is the politician who doesn't know a thing about economics claims to be. After listening to Pols this last month we all know that government infrastructure spending has a 1.54 multiplier effect. That's good, right? Well it seems that only the politicians are sure of this, and the economists think that this might be the case, but really aren't all that certain. Can you imagine the malpractice suits if the government was held to the same standards that your doctor is?

Actions have consequences, and the consequences of compounding one mistake with another aren't good. Here is my suggestion: the Congress should take an early and extended Spring Break this year. They should go back to their districts or to the beach and just hang out for a while, but before they go they should do us all a favor and ditch the mark to market accounting rules that are choking the banks. This would give the banks and the rest of us in the private sector a little breathing room and some time to get the economy going again.

Our Share The Wealth Charlatans

2009-02-22T17:18:00.001-05:00

I just finished re-reading Henry Hazlitt's "Economics in One Lesson". The book is timeless, and except for the style of writing, one would think that it was written as a commentary on the many problems we face today. Have a look, and you'll find the real solutions to our economic woes aren't the ones that are being offered today.

It exposes our politicians as the "Share the Wealth Charlatans" they truly are. Their latest endeavor to conjure up greater demand in the economy with wasteful spending, under the guise of stimulus, is a prime example. A massive, yet ineffective spending bill produced in haste at a critical point in our economy, when what we truly need are economic policies that are Pro-Growth. Governments don't create jobs, only expanding economies do.

According to the author, politicians don't understand that Supply and Demand are two sides of the same coin, and that it is Supply that creates Demand! The author correctly states, "The supply of the thing they make is all that people have, in fact, to offer in exchange for the things they want".

What our economy needs to do now is expand. In order for that to happen we need to provide incentives for existing businesses to increase production, and for entrepreneurs to start and grow new enterprises. The benefits of Employment always beat unemployment benefits hands down. Sadly, there is next to nothing in this largest ever government plan that could possibly be seen as encouraging business to expand production and hire additional employees. The key to this economic recovery, as all others before it, will only be found on the Supply Side of the equation.

Are we supposed to believe that in a trillion dollar stimulus bill there was no room at all to reduce marginal tax rates on individuals and corporations in order to reward their hard work and efforts? The same folks who scream that wages for the middle class have not risen fail to make the connection that it is greater capital investment driving productivity that allows wages to rise. These class warriors see the capital gains tax as a club with which to pummel the employer class for it's success. Yet it is the very workers they claim to represent who take a beating when investors refuse to risk their capital, because the rules have been stacked against them. Less capital equals lower productivity, stifling both job creation and wage increases. No Pro Growth policies allowed, just isn't a winning slogan!

Another theme developed in the book is the propensity of politicians to speak to only one side of an argument. They speak only of the positive effects their legislation will have on the group that they are currying favor with. Never do they address the effects their program will have on the rest of us. We have been told over and over again how the stimulus package will save jobs for teachers, firemen, police officers and state workers, yet I don't recall the President ever mentioning the CBO's warning that the spending bill would negatively impact the economy and the rest of us for years to come. The cost side is what you never hear about. Yes, we all know what the price of the stimulus bill is, a $1 trillion dollars give or take. There is precious little discussion, however, about the real cost to our economy that diverting this enormous amount of capital, which otherwise would have been allocated towards profitable endeavors by the free market. Instead, it will now be directed by politicians with an eye on reelection.

We now have another new program to bailout people who are not in foreclosure, but who soon might be? The same one- sided scare tactics are being used to help try and sell it. We are now being told that if even one home in your neighborhood goes into foreclosure, it will reduce the value of every other home in that neighborhood. With the failure rate of these types of programs near 60%, what is their point? Better yet, what is the other side of the argument that we are not hearing? Person A lent money to Person B , who freely entered into a transaction to benefit himself. Person B now is unhappy with the outcome of his transaction, and wants to renegotiate. It's a little late, don't ya think? The government wants to enable judges to cram down mortgages, which simply means that person B pays Person A back less than what he borrowed and at a reduced rate of interest. If this wasn't sad it would be funny, because it is being done at the same time banks are being excoriated for not lending! Can you blame them?

A very elementary idea that our politicians have forgotten, or more likely never learned is the following: One occupation can expand only at the expense of all the others! They never reflect on the idea that their government directed spending plans can only occur by denying existing industries and start up enterprises the capital and labor needed for them to expand or begin production.

We have come through a period of time characterized by the love of one's house, but has McMansion mania increased prosperity? Apparently not, or the problems we face today would not be joblessness and foreclosure. Why then does the government continue to direct additional resources to a sector of the economy that has already seen massive over- investment? If "investing" in our houses were truly the path to prosperity, we should be in economic nirvana considering the vast resources that have been poured into creating more and bigger homes over this past decade. I think rather than additional programs to aid housing in the hopes that it will lead us out of this recession, it's time to toss in the towel and admit what a terrible failure the government subsidization of home ownership has been.

The government cannot change the laws of economics. Home prices will continue to fall until they reach a market clearing level, with or without these unworkable government handouts. If we let the market work, we will be out of this mess sooner rather than later, and without the massive amounts of additional debt these programs will entail.

The Heads You Lose Tails They Win Stimulus Plan

2009-02-08T15:24:00.026-05:00

Even the people promoting this Massive Government spending spree don't have anything good to say about it. I watched "This Week with George Stephanopolus", and heard the former Secretary of Labor for the Clinton Administration and a proponent of the "Stimulus Bill", Robert Reich, say the following about the bill after chastising Republicans for their lack of bipartisanship in helping to pass it:

"They [ Republicans] realize in two years even with a Stimulus, even with a Big Bank bailout the economy is very unlikely to be better than it is today. If you don't have a stimulus it's going to be much worse."

My first thought was to wonder why the Democrats wouldn't want all the credit for this masterful legislation that is going to save us from the certain doom that they tell us is surely heading our way? I thought about what he said, and replayed the segment again just to make sure of what I had heard him say. The Democrats are telling us that we must pass the Stimulus, because if we do then things will stay about the same for the next two years and if we don't we are all doomed! So far I wasn't sold on his line of reasoning for passing this boondoggle of a bill. Maybe it would improve. I hoped so.

But then he said:

"We can not underestimate how bad the economy is right now, it is falling off a cliff, I mean if there is ever a time for bi-partisanship, people joining together and saying we don't know if we got the right answer but we got to do something and this looks like the right direction, it is absolutely now. When I said before that by midterm elections we are not going to see an economy that is better than now I mean not that the stimulus program will have failed but that even if the stimulus succeeds it will not actually kick in... it will not get the economy better than it is now... without the stimulus the economy could be far worse than it is now."

So Mr. Reich is saying that after borrowing a Trillion dollars to spend on a series of programs to stimulate the economy, the best we can hope for by the mid term elections in November of 2010 is for the economy to be falling off a cliff. Was that meant to reassure me ?

Here is where he tries to play economist trotting out his best "Keynesian Bond Illusion" speech:

"We know that the real problem right now on the demand side of the equation is that businesses and individual consumers are not buying. That is rational they are not buying because they don't have the money and they don't want to go deeper into debt. But if they don't buy, government is the purchaser of last resort. Now that is old fashioned Keynesianism, but it is correct for today."

Here he is saying that businesses and consumers are being rational by not borrowing money and going further into debt in order to support consumption. Evidently, when people act rationally it is time for the government not to! So now it's the governments turn to act irrationally, borrow money, go deeper into debt and spend it because consumers aren't. I'm still not persuaded by his line of logic . He continues on:

"I'll give you two reasons Because we tried a little bit of that last spring with that tax rebate and it turns out that people rationally paid down their debts and they saved and that's good for the individual but that doesn't get spending out there, that doesn't create jobs."

So again he says when the people are rational, rebates don't work and the government needs to step in and be irrational for them. If Jay Leno said this we'd all know he was joking, but when Robert Reich says this it is serious government policy. I guess it's all in the delivery! To me it sounds as though he is making an argument for removal of the rebates and credits from this bill.

Here is what the guy who is a heartbeat away from the Presidency had this to say about the Stimulus Bill. Notice it is chock full of escape routes in case it fails. I wish he would just go into hiding somewhere, and I'm willing to bet you that Obama wishes the same too! Joe Biden, in a speech the other day, said the following:

" You know if we do everything right, if we do it with absolute certainty, if we stand up there and make really tough decisions, there is still a 30% chance that we are going to get it wrong."

What are the odds that the government is going to get everything right? When do they make any tough decisions? What surprises me the most is that politicians, who are usually so certain about everything, aren't the least bit sure about the effects that over a trillion dollars of additional spending will have on the economy. If they don't do everything right that means the odds that they are going to get it wrong will go up. Maybe there will be a 50-50 shot that they get it right? I think it's way past time for a reality check when our Leaders are telling us they must borrow and spend a $1,000,000,000,000.00, and the odds of them getting it right are only as good as a coin toss or worse. This sounds to me like heads I lose, tails they win !!!

Truer Words Were Never Spoken

2009-02-01T09:28:00.000-05:00

But it Takes More than Rhetoric to Lead a Country!

“Taxes are paid in the sweat of every man who labors because they are a burden on production and are paid through production. If those taxes are excessive, they are reflected in idle factories, in tax sold farms , in hordes of hungry people, tramping the streets and seeking jobs in vain. Our workers may never see a tax bill, but they pay. They pay in deductions from wages, in increased cost of what they buy, or as now in broad unemployment through out the land. There is not an unemployed man, there is not a struggling farmer, whose interest in this subject is not direct and vital. It comes home to everyone of us.”

This guy or gal knew their stuff! They nailed it! They knew that higher taxes act as a wedge, increasing the price of goods and services. They saw that as this wedge increased, it pushed buyers and sellers further apart until transactions that normally would have been concluded, failed. They saw that the solution to unemployment and idle factories was to reduce the burden that government had placed on business by reducing taxes. They saw that this would inure to everyone's benefit.

Who was the great man or woman who spoke these words? Was it Ronald Reagan or Margaret Thatcher? No. You say it had to be someone with a much better grasp of how to solve the economic problems we are encountering. If you are guessing Barack Obama, you're still wrong. I'll give you all the guesses you want and you'll never guess who spoke these words and when, so I might as well tell you. First, lets talk a little bit about the idea behind these words .

This wasn't an original thought on his or her part, it was something he or she had learned from someone before him or her. People knew the burden that taxes and regulations placed on the individual, so who was it that imparted such wisdom on him? Was it the Chinese Philosopher Confucius who lived 2,400 years before him? When confronted with similar problems, Confucius had said nearly the same thing. A US President and a Chinese philosopher on the same economic page? I can't believe it, you say. Here is how Confucius did say it:

Duke Ai asked asked Yu Zo : It has been a year of famine and there are not enough revenues to run the state. What should I do ?

Zo said “ Why can't you use a 10 percent tax?

The Duke answered : I can't even get by on a 20 percent tax, how am I going to do it on 10 percent?

Zo said , “If the people have enough what Prince can be in want? If the people are in want how can the Prince be satisfied”

- Analects of Confucius (12:9)

Maybe it came from the works of the 14th Century Muslim philosopher, scholar and economist IBN-Khaldun, who wrote the following about taxes and regulations:

In the early stages of the state , taxes are light in their incidence , but fetch in a large revenue; in the later stages the incidence of taxation increases while the aggregate revenue falls off. Now where taxes and impost are light, private individuals are encouraged to engage actively in business: enterprise develops, because men feel it worth their while, in view of the small share of their profits which they have to give up in the form of taxation. And as business prospers ... the total yield of taxation grows. From this you must understand that the most important factor making for business prosperity is to lighten as much as possible the burden of taxation

Perhaps the writings of Jean-Baptiste Say,were the origin of his thinking :

A tax is not productive to the public exchequer in the proportion to it's ratio[rate] ... it had become sort of apothegm, that two and two do not make four in the arithmetic of finance. Excessive taxation is a kind of suicide, whether laid upon objects of necessity, or upon those of luxury.

Were it not almost self evident, this principle might be illustrated by abundant examples of the profit the state derives from a moderate scale of taxation, where it is sufficiently awake to it's own interests.

The idea may have been copied from another President, who saw it as a way to increase production after the end of the war. Here is what he said :

An expanding prosperity requires that the largest possible amount of surplus income should be invested in productive enterprise under the direction of the best personal ability. This will not be done if if the rewards of such action are very largely taken away by taxation. If we had a tax whereby on the 1st working day the government took 5 percent of your wages, on the second day 10 percent, on the third day 20 percent, on the fourth day 30 percent, on the fifth day 50 percent, and on the sixth day 60 percent, how many of you would continue to work on the last two days of the week?

No, it wasn't Richard Nixon. He was all about higher taxes and price controls (regulation). I was there and can tell you it didn't work. Those words were spoken by Calvin Coolidge as a way to reinvigorate the economy in 1924.

Okay, it must have been learned from Art Laffer, who along with Robert Mundell and Jude Wanniski resuscitated Classical Economics in the 1970's and provided the intellectual underpinnings of the Reagan Revolution, right? Wrong! Here is a hint: When these words were spoken Art Laffer hadn't been born yet. But here is what Arthur Laffer did say about taxes:

The theory is simply saying that at these higher tax rates (“in the prohibitive range”) there is a disincentive to make more money, which will result in lower revenues from taxes. In the end, it's really all about incentives to work, invest, take risks and earn money.

Sorry for dragging this out, but I wanted to show you what thousands of years of economic history have taught us: low taxes and moderate regulations are what enable economies to thrive. The person who espoused the ideas in the first quote that excessive taxes hurt the economy probably didn't learn them from anyone I have quoted. This idea was self evident worldwide until 1932, when the person who spoke these words betrayed their very ideals and went on to pursue the greatest expansion of government through increased taxation and regulation that this country had ever seen. That fellow, you might now have guessed, was Franklin D Roosevelt, who knew what to do, but didn't!

Only "Card Check" Can Restore Prosperity and Save the Middle Class?

2009-01-28T09:37:00.024-05:00

On Monday, January 26th in the LA Times, Robert Reich the former Secretary of Labor in the Clinton Administration uses a false premise and circular reasoning to support the idea that salvation for the middle class, and thus the economy, can only be achieved by a re-unionization of America. He wants you to believe that only Card Check can make that happen.

Starting an opinion piece with a false premise tends to make one's argument suspect. Using circular reasoning to buttress it simply betrays how weak the argument truly is.The very first line in his article is this question, " Why is this recession so deep, and what can be done to reverse it?".

The answer is, IT'S NOT THAT DEEP, and card Check won't help at all. As a matter of fact, the current recession is no more severe at this point than the average of the 10 post-World War II recessions. Apparently Mr. Reich rightly feels that if he started with the premise that today's recession is not nearly as bad as most, it would get in the way of his solution. No crisis, no dramatic solution needed. After all, he is a politician, and this is right out of the political playbook. In order to offer a "solution" that people don't want, you need to create a crisis to make the situation appear dire, in order to marshal support to advance your agenda. Starting with a false claim makes me wonder about the validity of other claims that he makes in the piece as well.

The needle on my Ludite Detection Device nearly went off the scale when he talked of going back 50 years for the solution: Yes, if only we had more union members. Evidently progress in the eyes of progressives is all about turning back the clock. I would like to join Robert in his trip down memory lane, but it would not be in search of Big Labor's glory days. Instead, I'd be looking fondly for Smaller Government and the time when Social Security tax rates were 2.5% percent, not 15.3%, a time when limited government and personal responsibility were the order of the day.

The Mark Twain in me says I've got to call him out on this next quote where he tells us that the rich got richer at the expense of the middle-class and cites a study.
Figures don't lie, but liars figure. - Samuel Clemens (alias Mark Twain)

Here it is:
"It's no wonder middle-class incomes were dropping even before the recession. As our economy grew between 2001 and the start of 2007, most Americans didn't share in the prosperity. By the time the recession began last year, according to an Economic Policy Institute study, the median income of households headed by those under age 65 was below what it was in 2000."

Above, he tries to use a study on median income by the Economic Policy Institute to to say that middle-class income is down. I suppose this is so he can infer it has happened as a result of the reduction in union membership. and the income loss the middle class has supposedly experienced can only be halted by increased union membership. The problem is the statistics don't back up this premise either. Here is what Terry J. Fitzgerald, Senior Economist with the Federal Reserve, says about median household income in a report from September of 2008 : see the full report here

Average household size declined substantially during the past 30 years, so household income is being spread across fewer people. The mix of household types—married versus single, young versus old—also changed considerably, so the “median household” in 2006 looks quite different from the “median household” in 1976. Finally, the measure of income used by the Census Bureau to compute household income excludes some rapidly growing sources of income. The main finding is that—after adjusting the Census Bureau data for three key factors—inflation-adjusted median household income for most household types increased by roughly 44 percent to 62 percent from 1976 to 2006. The only household types with substantially lower growth were “working-age male householder without spouse present” and “male householder with children but without spouse,” but these types constitute just 10 percent of all households. Household income inequality increased notably over this period; nonetheless, middle American households had substantial income gains."

Here are the factors Fitzgerald cites:

The price index used by the Census Bureau overstates inflation, and thus understates income gains, relative to a preferred price index.
A changing mix of household types leads the overall median increase to understate the median increase of most household types.
The Census Bureau measure of household income understates income growth by excluding some rapidly growing sources of income.

His Conclusion
The claim that the standard of living of middle Americans has stagnated over the past generation is common. An accompanying assertion is that virtually all income growth over the past three decades bypassed middle America and accrued almost entirely to the rich.

The findings reported here—and summarized in Chart 8—refute those claims. Careful analysis shows that the incomes of most types of middle American households have increased substantially over the past three decades. These results are consistent with recent research showing that the largest income increases occurred at the top end of the income distribution. But the outsized gains of the rich do not mean that middle America stagnated.

About the only point I can find agreement with Mr. Reich on is his assertion that tax rebates don't work. He is right about this one issue. He is, however, totally wrong on his support for the "Tax cuts for working families, as President Obama intends, can do more to help because they extend over time." My understanding is that these are not tax cuts, but tax rebates. Rebates do not provide any incentive to work more, and will only apply for the next two years, not permanently.

His idea that only unions can permanently raise wages is patently false. Permanent wage increases can only come about through increases in productivity. Artificially raising wages, through the threat of force, which is what unions do, has a tendency to reduce employment over time. How else can you account for the massive loss of union jobs in the private sector? Employees understand this, and it is the reason that unions are having so much trouble trying to organize workers. It's not as Heir Reich would have you believe: the work of evil employers and their intimidation of the workforce.

He claims there are abundant examples of the power of unions to raise wages, and then trots out two weak examples . Buttressing his claim of the wonders of Unions and their ability to increase wages, he tells of the 12,000 janitors that were organized in New England recently, and how they are now being paid $16 per hour plus benefits. If I were them, I'd be concerned. Have a look at these folks who also won a increase in wages, and see how much better off they are as a result. His other example is of the 65,000 Verizion workers who received an 11% wage increase. That's a big increase. and I was almost buying his power of Unions line until I checked to see that he had forgotten to mention that it was over a three year time frame. That makes it a raise of about 3.5% per year, which is better than a sharp stick in the eye, but not enough to make me run out and join a union today.

Terry Fitzgerald's research shows Middle American households did indeed have substantial income gains, and the opinion piece by Mr. Riech clearly shows the dramatic fall in union membership from a high of over 33% to below 8% in the private sector occurred over the same time frame. I not saying the decline in union membership is the cause of increases in income for the middle class. I'm just saying that both things happening, at the same time, has got to make you wonder just a little bit.

Alarmism in Support of Perpetual Dependence

2009-01-16T12:43:00.023-05:00

Paul Revere's Midnight Ride was not a journey to alert his countrymen that the British were coming in order that they might as a group surrender their freedom in an orderly manner. He risked his life to forewarn like- minded individuals of the advancing British Army and the tyranny they sought to impose. The alarm he sounded was meant to awaken the spirit of rugged individualism, so that free men could rally to defend themselves from those who would deny them their liberty.

It stands in stark contrast to the unending alarms sounded by today's leaders who rally us for reasons that are very different from those of securing our Individual Liberties.They rouse people to the cause of the collective. They ask us to forgo our own self interest in order to advance their agenda of the group. This is very definition of collectivism, see below!

"Collectivism is defined as the theory and practice that makes some sort of group rather than the individual the fundamental unit of political, social, and economic concern. In theory, collectivists insist that the claims of groups, associations, or the state must normally supersede the claims of individuals." -- Stephen Grabill and Gregory M. A. Gronbacher

Their pursuit is for more power and control of the individual. They are practiced in the art of elevating every problem to crisis proportion as a first step in chipping away at what remains of our hard won rights as individuals. The issues they claim as crisis aren't. They can't be, for the duration of a real crisis is not measured in years, decades and generations but in days, weeks and perhaps months. A true crisis, by definition, is one whose impact would be so devastating that "time is of the essence" in dealing with it successfully. I seem to be hearing that phrase more often these days.

That today's problems go unresolved is confirmation that our political leaders, who are very cognizant of their own self interest, are too beholden to the special interest groups they serve to address their real cause. Many of these problems are the result of government dictates and their unintended consequences. Government solutions have a nasty tendency to ultimately cause more of the problem they were intended to resolve.

Social Security is one example of a phony "crisis" that goes unresolved. Politicians can't fix it because they won't address the real cause of the problem. That's right, it's a problem, not a crisis. It's been a problem way too long to be considered a crisis. It's a simple problem of math. Too few employees pay too many retirees. Taking too much from too few to pay too many can't work. The real solution is to make fewer and fewer people dependent upon Social Security for their main source of retirement income. The ever increasing Social Security taxes borne by the employee and employer ensures that employees cannot adequately save, and employers can't offer additional funding of employer sponsored retirement plans, thus perpetuating the government's retirement dependency machine. The real solution is to reform Social Security, but it has a large and very well organized constituency that lobbies viciously to protect the rights of the members of the group.

Another example of alarmism is the now popular sport of magnifying the current economic downturn, and likening it to the Great Depression. Factually it's not true, as is proved by just about every statistical measure you can examine. Here are a number of comparisons you might want to have a look at. It is nothing more than a cynical ploy of the political class to create fear, as a way to garner support for legislation funding the very programs and projects of special interest groups that were not deemed worthy of taxpayers dollars before the recession began. Creating an atmosphere of anxiety, and then promising goodies for all the right groups is the new American Way. The key to it's success is to ingratiate the maximum number of special interest groups, by offering them all a chance to dip their beak in the Stimulus Trough. This is the reason the Stimulus Program needs to be so large. They are even offering goodies to the opposition in the form of rebates and credits dressed up as real tax cuts.

As more and more people scramble aboard the wagon of government dependency, it leaves fewer and fewer of us to pull the load. Group rights and dependence on government handouts are not what have made this nation great. Individual Liberty and freedom, along with a free market through which we are able to act in our own self interest, is responsible for the prosperity we have come to know. A prosperity that would not have been possible without the individual liberties and freedom provided for us long ago by the founding fathers of our country, who fought and died to secure them.

Incentives for Producers The Real Stimulus Plan

2009-01-14T11:03:00.021-05:00

A recession is not a lack of spending, and recoveries are not brought about by the government providing free money to boost consumption. A recession is a reduction of economic activity, a lack of production. Just ask the people who put together the statistics on recessions what they measure. You already know the answer, they measure Gross Domestic Product. When GDP is negative for a quarter or two it's called a recession. That's right, it is all about production, so why is the crowd in D.C. hellbent on stimulating consumption rather than setting the stage for a lasting economic recovery through incentives that foster increased production.

The gargantuan spending bill being cobbled together will do nothing to promote real economic prosperity. It can't, as it does nothing to alter the long term incentives for saving, investing and risk taking that are the underpinnings of economic expansion. It is simply a massive serving of Pork, with a side dish of phony tax cuts, and a steamy hot bowl of state welfare spending stew. A true stimulus would replace this economic sacrifice to the gods of pork with a package of long term incentives that would reward the virtues of saving, investment and entrepreneurial risk taking, instead of the vice of all out consumption. Our current system does too little of this, and that is the problem.

Bolstering consumer spending with government transfer payments does not produce economic prosperity. What makes a nation prosperous is expanding economic production. The proposed tax reduction through credits and rebates on the work you performed last year come after the fact, and can't possibly provide an incentive to produce more this year or in the future. Washington's concurrent warnings that we are not saving and not spending enough belies the fact that they do not have a coherent economic vision, and instead craft fiscal policy with an eye towards accommodating their desired spending plans, not economic growth and opportunity.

Recently Congress was on the warpath looking to take the scalps of the CEO's from Detroit for their role in the mismanagement of their respective companies. How hypocritical it is for Congress to now be rewarding the Governors, the CEO's of state government for their gross mismanagement of state budgets. That Congress is now playing the part of enabler for a growing line of Governors in denial, looking for taxpayer handouts to avoid facing the reality of their profligate spending habits of the last decade is beyond the pale.

If the idea is to create additional private sector jobs an expanding economy is the answer. The relevant question is what policies will promote the greatest expansion of our economy, long term? Is government borrowing on a massive scale from the private sector to promote public sector spending initiatives over the course of the next two years the best answer? Of course not! The real solution is to revitalize American business. Our business sector is the greatest job production machine ever created. We'd all be much better off if the monkeys in congress would stop throwing wrenches into it's economic gears.

The American way to wealth creation has always been through capital accumulation, by saving, investing and risk taking . Denying new capital to the markets by the threat of confiscation is exactly what the tax on capital gains does. It keeps capital locked up in mature companies, and locked out of start up ventures, preventing the formation of new firms and the commercialization of new ideas that are the engines of job creation. These taxes that hinder Americans in their efforts to accumulate and redeploy that capital, in turn starve the economy of an ingredient essential for expansion. Government spending on the scale now envisioned will do the same.The time has come to start treating capital and capitalists better.

That it has become politically correct to demonize entrepreneurs as the greedy idle rich is deplorable. Instead, they should be praised for their industriousness and their role as the true community leaders who risk their own capital to organize businesses, creating opportunities for those who can't or won't. You can't hate employers and love the employees.

Marginal tax rate reductions are the key to revitalizing the economy, as they provide the increased reward for the next unit of production. We should start with a permanent across the board reduction in marginal income tax rates, followed by a complete overhaul of the tax system. This same tax code has been in existence, in pretty much the same form, since it's creation in1913 when it was sold to the American people as a revenue generator that would only tax the rich. In the past 96 years, Economist have accumulated plenty of evidence of the damage high income tax rates cause the economy, even if politicians have come to learn precious little about their disincentive effects.

If creating additional employment opportunity is really job #1, we should permanently reduce the job killing tax on labor that Social Security and Medicare have become. Employers and employees now pay a combined 15.3% tax on each dollar of earned income. Even those who aren't subject to the income tax pay this levy. A reduction in this tax would narrow the gap between what it cost an employer for an hour's worth of labor and what an employee receives, increasing both the employer's return on labor and the employee's take home pay. This tax on employment shares a good measure of the blame for the lag in employment growth over the past decade.

It is amazing to me that in today's competition for a share of the global economic pie, our claim to fame is having the highest corporate income tax rates in the developed world. Aside from reducing our global competitiveness, corporations only pay these taxes indirectly. The folks who actually pay the corporate income tax bill are consumers. Tax costs are figured into the price of all goods and services. The Tax Foundation, a non partisan educational organization, has estimated that the average consumer pays $3190 in corporate taxes that are incorporated in the retail price of goods. How's that for promoting prosperity and economic expansion?

The government's unending quest to spend more money comes at the expense of the vibrancy of the private sector. If after a decade of unbridled spending at all levels of government, including the $3 trillion dollars the federal government currently spends each year isn't getting the economy moving, what makes them think that an extra 500 billion this year and next is going to somehow make a real difference? It's time for Bailout Nation to scale back this entitlement mania. This will give those of us in the private sector a break today, and remove the threat of the oppressive tax burden that is sure to follow this massive government spending boondoggle called the stimulus plan.

The Road to Utopia Isn't Paved with Higher Gasoline Taxes

2009-01-04T08:42:00.010-05:00

Wow, that was quick. It's been all of 3 months since gas prices have fallen below $3 a gallon, giving consumers a much deserved break in their pocket book, and already the calls for a large gas tax are back.

Leading the way is Charles Krauthammer. Writing in the Weekly Standard, he suggests that we increase the tax on gasoline by $1 per gallon, or as much as is needed to reduce the number of miles the average American drives. He never does gets around to telling us just how big of a reduction is needed in order to achieve all the wonderful, societal, and geopolitical benefits that will flow from the further taxation of the already over-taxed American people. These benefits range from stopping global warming (which he admits to not believing in) to taming the evil ambitions of Russia, Iran, Hamas, Hezbollah and Venezuela.

Don't get me wrong. I have a great deal of respect for the man, and I actually like his idea of reducing the out sized income flows pocketed by the non friendlies of the world due to high oil prices, but there is a better way to go about it, and it doesn't include a single dollar of additional tax. Instead, let's stabilize the value of the dollar at, say, $500 per ounce of gold. If we do, we can get back to the steady eddie oil prices and ultra low inflation we enjoyed from the mid1800's right up until we severed the dollars link to gold in 1971. The volatility in the price of oil that has occurred since the US decided to float the dollar is amazing. Have a look at this chart and see for yourself.

The seesaw of higher, then lower oil prices is, to a great extent, caused by changes in the value of the US dollar and it's effect on the supply of oil, which ultimately effects it's price, and to a lesser extent on the ebb and flow of the global economy effecting demand. Oil is priced in dollars. Change the real value of the dollar and you change the nominal price of everything denominated in dollars, including oil. This is what Charles and the folks at the New York Times just don't, or won't understand. It was the rise in the value of the dollar from 1997 through 2001 that set the stage for the oil price increases of the 2006 - 2008.

Producing oil is a long lead-time business, which starts with exploration to find what you think are oil deposits. Then, there are the various permitting processes to acquire the right to drill. Finally, you drill the actual wells to determine if what you thought was oil really is, and if production in commercially viable amounts is possible. Commercial viability is dependent upon the price of oil and the recoverable quantities available. It is the role the dollar plays in both the price of oil, and what amounts can be recovered profitably based upon that price, that makes the oil business such a high stakes gamble.

Let's imagine for a moment that you are the oil company executive in charge of drilling and production. The year is 1999, and you are watching two related events that are shaping your companies' decisions on oil production. These events are the rise in the value of the dollar and fall in the price of a barrel of oil.

Over the last two years you have watched as the US dollar increase in value by about 30%, pulling down the price of a barrel of oil from $21 to $13, causing your revenues to plummet.

Ask yourself this question: Just how many additional drill sights am I going to want to pour millions of dollars of my companies' capital into, looking for new reserves? Short answer, not many. Longer answer, the worldwide rig count average fell from 2128 in 1997 to 1457 in 1999, and the rig count didn't recover to the 1997 levels until 2001. That's a whole lot of oil wells that didn't get drilled.

What do you think happens when oil companies all over the world reduce the number of new wells they drill? That's right, the supply of oil is greatly reduced, and by more than might be obvious at first.

The decreased number of newly drilled oil wells and the reduction of their flush production ( production higher then the sustainable trend), along with the inevitable decline of older producing wells acted as a cut in oil production. This intensified the supply problem caused by the “drilling holiday of 1997-2001”.

This makes for a world oil market in which inventories are extremely tight, and small increases in demand produce disproportionate increases in price. When the central bankers across the globe, led by our Federal Reserve, poured liquidity into the global economy, the resultant boom sent gold and oil prices rocketing skyward, until we reached new all time highs for both of these commodities.

Attacking a supply problem from the demand side, through a high tax on gasoline isn't the right path to start down. It's actually the Left's road to never ending tax increases on gasoline curtailing your freedom to travel. The real problem is an erratic Fed and it's up, no wait, it's down dollar policy, a policy that helped restrained drilling in the 1990's and created the liquidity fueled growth of the 2000's.

Would we be where we are today if the Fed had maintained a stable dollar monetary policy? Is it possible to add too much liquidity, and at the same time maintain a stable dollar? The answers are No an No! Does the price of oil rise or fall dramatically when the goal of monetary policy is to provides a stable dollar? Again, the answer is no! Is inflation a problem when the dollar is stable? You already know that answer, and it is a resounding No! Do we need to increase the gas tax to implement a monetary policy which stabilizes the dollar? Of course we don't, so why haven't we stabilized the dollar? That's a great question. You should ask Uncle Ben.

A Dash of Economic Fine Tuning and Mystery Monetary Policy

2009-01-02T15:19:00.002-05:00

I don't know where you folks stand, but I think that I have had about all the government fine- tuning of the economy that I can stand. What exactly is the Fed's definition of fine tuning the economy anyway? All these years I have been under the impression that fine-tuning usually involved changes performed in minor increments meant to dial in to a precise target . Rarely have I seen fine-tuning operations performed with a sledge hammer or dynamite, I guess that is unless the fine tuning is courtesy of the Fed and the Treasury Department.

The Feds latest round of monetary fine tuning started a year and a half ago with the Fed Funds target rate at 5.25%. The Fed, in order to push the rate down further added liquidity. Recently, enough liquidity was added to move the rate to zero. Pushing the rate to zero is accomplished by the fed creating money in the form of reserves and adding these reserves to the banking system. By supplying excess reserves, (more reserves than the banks will bid for) the cost of these funds, or the "target rate", starts to fall. Once you have reached a point where no bank will bid for additional reserves you have hit bottom, I mean zero. After reaching a zero Fed funds rate, your guidepost has effectively disappeared, and will continue to read zero no matter how many new dollars you create . At this point, without a target rate to guide you , your monetary policy is now called "Quantitative easing". Quantitative easing is simply providing as much liquidity as the Fed wants until they hit what ever their new target is, which only Bernanke knows. Thus we have arrived at the Bernanke Standard, which I will refer to from here on out simply as the BS.

The Fed has lost it's way, and is now making up monetary policy on the fly. Without any guide posts, how will the Fed and markets know when it has reached its monetary destination? Better yet, how does the Fed even know it is on the road to it's destination? Are the dramatic swings in the value of the dollar brought about by the Fed's new monetary policy and the uneasiness it creates really it's desired outcome? Are the markets really crying out for more uncertainty? When Sir Ben has determined we are exactly ( remember this is fine tuning) where we need to be on the BS continuum how will he know? How will we know?

The combination of "Monetary policy by Mystery" along with the incoming administration's "We're not sure what we are going to do, but it's going to be big fiscal policy" serves to maximize the very uncertainty that bloodies the market on a daily basis. Who is going to step forward and risk capital when so much doubt and confusion has been created by our political leaders?

The President Elect's current guiding principal, articulated by Rohm Emmanuel "You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before", is not a message of hope for the American people. It is just touting that now is a great time for politicians to fleece their cowering constituents once again.

The President Elect shouldn't be waiting in the wings for the right page on the calendar to be turned. He should be front and center, reassuring the markets that soon the dollar will be stabilized and prudent fiscal policies, including tax cuts for corporations and individuals to reinvigorate the productive elements of the economy, will play a major role in the new policy mix.

Mr. President Elect, we're waiting to see some of the leadership you promised!

Chrysler & GM Do Not Resuscitate

2008-12-22T09:27:00.005-05:00

The idea that the Tiny Two ( GM & Chrysler) have been saved by the TARP Funds is comical. This is no more true than saying that the brain dead patient on life support is "saved" by the court order not to turn off the respirator. In both cases, neither of them will get up from their deathbed and carry on normal activities. The auto companies and the patient are both dead, it's just that the people who still want them to be around for a variety of reasons are not ready to pull the plug.

This circus will go on for quite some time, as it usually does in cases where only government intervention is keeping someone "alive". The truth is that Chrysler was dead when Daimler Benz sold them to Cerebus. Even Chrysler admitted it when they said, “Cerberus has advised the Treasury that it would contribute its equity in Chrysler automotive to labor and creditors as currency to facilitate the accommodations necessary to effect the restructuring.” Another very revealing statement, “Unless Chrysler’s labor costs can achieve parity with the foreign transplants and without the restructuring of Chrysler’s debt,” Cerberus announced. “Chrysler cannot be restored to long-term health and the government loan will be unlikely to be repaid.” came from Cerebus. This show us that even MBA private equity types make mistakes. The only difference between them and us is that their mistakes turn out to be doosies.

GM's partial restructuring will enable them to limp away from the billions of dollars owed to bondholders, while benefiting from the death of Chrysler. I would grab up the Jeep name plate as it will be available for a song. This will also let them make a claim that they are a much larger company, the same way little lizards puff up their chest to try to intimidate would be attackers. But, they will not have gotten rid of the UAW, which is really killing them.

How long will this GM Mini Series play out? My guess is only until the real recovery starts, or the final payment to the VEBA is made, which ever comes first. Once they have fully funded the VEBA, the UAW will have little reason to keep them around. This is not so much a bailout of GM, as it is a bailout of the UAW. If the economy recovers before then, and other businesses that have not received bailouts are back on their feet, what will GM say is their Raison D'etre?

More of the Same! Won't Fix it This Time!

2008-12-21T10:01:00.011-05:00

When I am advising someone whose efforts are not producing the results they seek, there are several expressions I've picked up along the way that come to mind immediately. The first one goes something like this: "If you want more of what you have, do more of what you are doing". If that doesn't work, the second one is a little sharper, and more to the the point: "Doing the same thing over and over, and expecting different results is the definition of insanity". If they aren't with me after that, this last one is self evident, unless you work in Washington: "When you find yourself in a hole, first stop digging".

Based on what I read and hear today, I've come to some conclusions. Our political class has gone insane. They'd rather enjoy the power that accrues to them in troubled economic times, and they are going to make things much worse on the way to trying to make things better. How else do you explain the way they are acting?

The new administration is putting together the mother of all stimulus plans in order to get our economy back on track again. The big problem with this kind of thinking is that it was this type of thinking that got us into this jam in the first place. The housing fiasco that set off the economic troubles we now enjoy is the result of a huge misallocation of capital brought about by a number of policy decisions, some of them misguided, and there unintended consequences. There are lessons to be learned from the housing debacle , but they are not the ones that seem to be getting all the attention. The lessons are 1.) Misallocating capital always ends badly, which also means that misallocating huge amounts of capital ends even worse. 2.)Eliminating the capital gains tax is a powerful incentive that draws investors to seek the higher profits it affords.

Providing tax relief to homeowners, by eliminating the capital gains tax on the first $500k in profit on the sale of a residence, was probably pretty good tax policy. You shouldn't follow it up with an easy money stance ( the Fed Funds Rate was held below 2% from December of 2001 until November of 2004) as the Fed did, providing artificially low mortgage interest rates and putting pressure on the value of the dollar, that invariably lead to an surge in inflation and a preference for real assets. If you do, you are you are walking down a very dangerous path. On top of that, you push banks to make loans to folks who can't pay them back, and it turns into an all out sprint, sending home prices soaring. The Fed reacted by tightening monetary policy, which started the downward spiral in home prices as the SEC dug in it's heels defending it's mark to market accounting rules that have help to gut the capital base of the banking industry.

The culmination of the unintended consequences of what many people considered to be good public policy has turned into the economic ilk we see all around us today.The question I have for our sages on the hill is this: Where did you get the idea that our economy would be better off if we invested more capital in our homes at the direct expense of investing less capital to make our businesses more productive? In others words, only crazy people say things like, "I might be unemployed but at least I have a big house I can't afford". My followup question is: Why are these same pols now insisting that the government pursue the same bad advice again on an even grander scale?

The lesson was: tax cuts provide powerful incentives to investors. What also should have been apparent is that tilting the playing field has consequences. It leads investors to favor one asset class over another. I propose that we once again level the playing field, by eliminating the tax on all capital gains. This would unlock significant capital from non productive assets, and provide a powerful incentive to the risk takers whose capital facilitates the business productivity increases that drive employment growth and higher wages.

The lesson that wasn't learned is that politicians are incapable of making policies guided only by sound economics. They are too busy providing favors for their political supporters in order to be able to count on them to fund their next run for office. Should I believe that the political class will do things differently this time? I don't think so. They never do. Instead, there will be a massive never ending orgy of pork to pay off the friends of the party in power. In other words, a misallocation of capital on a scale we've never seen before, the same thing that got us here, only several magnitudes larger.

The millions of entrepreneurial minds that together make up the free market are a much better bet to move us forward than the proven record of those whose failed policies have landed us in the soup. They just need a little incentive to get going again. So let's "Ax This Tax" and get on with the economic recovery.

"You Can't Hit Two Targets with One Arrow"

2008-12-18T08:26:00.003-05:00

The above quote is by Dr. Robert Mundell, the 1999 winner of the Nobel Prize in Economics,who correctly forecast that breaking the dollar's link to gold would lead to a severely weakened currency, a corresponding rise in oil prices, and the ensuing inflation of the 1970's.

In this quote he was referring to the Fed Funds Rate and the value of the dollar. Mr. Bernanke thinks the focus should be on the overnight interest rate the Fed charges to member banks. Dr. Mundell thinks Bernake is wrong. Mundell correctly attributes the Feds misguided focus on setting interest rates, as opposed to a policy of maintaining a stable value for the dollar, as the cause of many of the financial problems past and present.

Had Chairman Bernanke and his predecessor, Alan Greenspan, focused on maintaining a stable value for the dollar, the see-saw monetary policy of the last decade would not have happened. There would not have been a tight monetary policy of the late 90's to deflate the dollar, crater commodity prices and end the decade by blowing up and finally collapsing the stock market in 2001. There would not have been a reversal to an overly accommodative monetary stance, which proved to be the precursor of the housing bubble and banking crisis. The chairman would not now be trying to once again inflate our way out of the falling home price debacle.

The Fed's policy blunder on top of policy blunder proves just how erratic this monetary operating mechanism really is, and reveals the plain truth. No one including Mr. Bernanke can run the economy by trying to guess what one interest rate, the Fed Funds Rate, should be set at several times a year.

The Fed needs to get it's focus back on the value of the dollar, People don't transact business in Fed funds rates, but rather they use the dollar. It is the dramatic change in the value of the dollar that is causing this financial chaos, and it's not just a problem in our country. The dollar's troubles are felt around the world. The dollar is the world's reserve currency, it's change in value impacts every transaction priced in dollars, and every transaction done in currencies linked to the dollar.

A weakening dollar will not attract the capital that the US needs for recovery, and the higher interest rates that it will ultimately usher in will be an anchor around the neck of this struggling economy.

A stable dollar, who's value can be counted on by investors, will draw capital to the US and which will provide the low interest rates that Bernanke is trying to artificially engineer with his mountain of liquidity. It will also stabilize commodity prices and and wrest the inflation genie back into it's bottle.

Einstein once said the definition of insanity is doing the same thing over and over again and expecting different results. Who am I to argue with him?

My Recovery Plan

2008-12-16T19:10:00.004-05:00

The first thing President-Elect Obama should do once he is sworn in is to sign into law my proposal, which you can read below. I worked out as many bugs as I could in the shower this morning, so it's a pretty complete plan. Trust me, it will be the fastest way to jump start our economy. It doesn't rely on government spending or tax increases, rather, just a little government coercion. This should eliminate much of the haggling in the Congress so we can get this done. The no-tax increase trick should make it filibuster proof, so we won't have to worry about those Senate Republicans. We all know how much those guys hate tax increases. I must admit I'm a little concerned about the lack of spending and being able to attract enough support from the other side of the aisle.

Our political class knows that only one thing stands between us and a full blown recovery: a trillion or so in additional government spending. Granted, there are a few who haven't gotten with the program yet, but they are mostly the extreme right wingers and libertarian types. You know who I'm talking about, the ones who drone on and on saying you can't spend your way to recovery, and how they earned the money and should be able to keep some of it . Hey, “spread the wealth around” is the slogan du jour on Pennsylvania Avenue. It's kinda of catchy, like the flu. Same headache, but without the runny nose.

Some of our more courageous lawmakers had warned that the three trillion or so in government spending planned for this year wasn't nearly enough. I know they said the same thing last year and the year before, but did we listen? No, and as a result we're in a recession. God forbid if they underspend now. We might even end up in a depression!

The more I think about my plan, the more brilliant I think I am ( Wow, I'm even starting to sound like them). I've even given it one of those fancy names to make it sound good. I call it the SUCER Plan!

Spending Unlimited Cash for Economic Recovery. It's pronounced “Sucker”!

The Sucker Plan is still in it's formative stages, so you need to give it a chance before you start tearing it apart. No haters, please. Hey, they passed that $700 Billion TARP plan and aren't even doing what they said they would do with the money. Besides, like I said, my plan won't cost the government a dime, and they won't have to raise taxes which will leave them with plenty of room to do both, in case my plan doesn't work. But it should work, trust me.

From what I see on the news about the other stimulus plans out there, there seems to be a difference of opinion as to how they work. Some of them say that getting the economy going is like starting a pool filter. You just have to prime the pump a little. Others say it's more of a jump-start thing, like when the battery in my Jeep runs out of juice. The economy needs a jolt. My plan, The SUCkER Plan, functions more like “Pennies from Heaven”. I'm sure this tag is going to offend some of those separation of church and state types, but I'm not using government money, so I think I'm safe.

Anyway, all the plans out there seem to be in agreement that a lot more money needs to be spent in a hurry, and it needs to be spent properly. It turns out that when the rebate checks were sent out this summer, some people had the audacity to pay off bills, and others were so blatantly un-American that they saved the money. Now look where we're at. Go figure.

My plan is based on a combination of sound Keynesian Economics and the ground breaking social work of Robin Hood . We all know it was the Lord Maynard Keynes who saved our butts in the Great Depression. Who can ever know how long the Depression would have lasted without the enormous government spending programs. Without the giant tax increases, it may never have amounted to anything worthy of being called great. Does any one deny the powerful incentive effects of higher taxes and increased government spending!

My plan is a charitable one as everyone, well almost everyone, will be taking from the rich and giving to the poor. This is the Robin Hood part, get it? We should probably exempt the politicians, as they generally aren't very big on using their own money for charitable giving, but rather prefer it's done with other people's money. Besides, they are busy coming up with their own spending plans, which will bring the recovery even sooner.

My plan builds on two economic principals that can't be disputed:

It is a fact that consumers are 70% of all economic activity
It is easier to spend other peoples money, rather than your own .

On to the plan. All stores will have two bowls by the front door. OSHA can determine their size, placement, and markings. I don't want to get bogged down in too many details. When you walk in, you will empty your pockets of all your cash and or gift cards into the first bowl. You'll then put what ever money is in the second bowl back in your pocket and go on to enjoy your shopping experience. The person who enters the store behind you will take all of your money from the first bowl and put all his or her money in the second bowl, and on and on it goes. The genius is in the simplicity.

See, no government spending, and no tax increase. In other words, this is the perfect plan. The reason this is not a tax increase is that it is a total confiscation of one's cash, whereas a tax increase just takes most of one's money. I call it a “Pennies from Heaven” approach, because “Pennies from Rich People” just doesn't sound as good.

Okay, for those of you in the slow group, here is why this works: because you are always spending someone else's money, you are going to spend more, ( just ask congress) and spending more money will get us out of the recession ( this is the Keynesian stimulus spending part). The Robin Hood part of my plan stimulates even more spending by people who have very little money by taking from the rich and giving to the poor. You see, when a poor person goes to the store he or she doesn't have much money, so he or she can't spend a lot, and that is part of the reason we are in this mess. Under my plan, there will always be more money for them to spend. The poorer people will benefit from spending the money of the rich people who enter the store. The rich will have to give up their cash, but they'll still be able to charge things on their credit cards, and they will. It would be a big waste of their time if they went home with nothing! Rich people don't waste their time. That's how they got rich in the first place.

Now, before all of you Einsteins tell me the plan won't work because the second bowl starts off empty, I've taken care of that too! We'll make each store owner put money into the second bowl to prime the pump, so to speak. This makes perfect sense, because they're going to get it back anyway when the customer shops in their store. See, I told you, it was brilliant!

Of course, it's possible there might be a flaw or two in my plan, but that shouldn't stop us. We can work things out as we move along (that's a fairly good imitation of Hank Paulson, don't you think?). What's important is that we do something (this is a pretty good imitation of pick your favorite democrat) and this is as good of an idea as any of the stimulus programs I've seen so far. It makes perfect sense to me. No?

The Laffer Curve Across the Centuries Low Tax Rates = Prosperity

2008-12-15T09:08:00.005-05:00

The Confucious Curve
This Chinese Sage understood the principal of what people today know as the Laffer curve and it's implication for economic expansion and contraction as you can see from the following passage:

Duke Ai asked asked Yu Zo : It has been a year of famine and there are not enough revenues to run the state. What should I do ?
Zo said “ Why can't you use a 10 percent tax?
The Duke answered : I can't even get by on a 20 percent tax, how am I going to do it on 10 percent?
Zo said , “If the people have enough what prince can be in want? If the people are in want how can the Prince be satisfied”

- analects of Confucious (12:9)

The Tao Te Ching Curve
Was written in the fifth century BC it's author also understood the Laffer Curve. Chapter 57 contains the following passage:

Run the Country by doing what's expected.
Win the war by doing the unexpected.
Control the world by doing nothing.
How do I know this?

The more restrictions and prohibitions in the world the poorer the people get.
The more experts a country has the more of a mess it's in .
The more ingenious the skillful are the more monstrous their inventions.
The louder the call for Law and order the more the thieves and con men multiply.

So a wise leader might say:
I practice inaction and the people look after themselves.
I love to be quiet and the people themselves find justice.
I don't do business and the people prosper on their own.
I don't have wants and the people themselves are uncut wood ( naturally virtuous)

The Ibn-Khaldun Curve
The 14th century 's Arab economic genius wrote the following about taxes and regulations

In the early stages of the state , taxes are light in their incidence , but fetch in a large revenue; in the later stages the incidence of taxation increases while the aggregate revenue falls off

Now where taxes and impost are light , private individuals are encourage to engage actively in business: enterprise develops , because men feel it worth their while, in view of the small share of their profits which they have to give up in the form of taxation. And as business prospers ... the total yield of taxation grows.

From this you must understand that the most important factor making for business prosperity is to lighten as much as possible the burden of taxation

The Jean-Bapitise Say Curve had his take on the Laffer curve ( circa 1803).

A tax is not productive to the public exchequer in the proportion to it's ratio[rate] ... it had become sort of apophthegem, that two and two do not make four in the arithmetic of finance. Excessive taxation is a kind of suicide, whether laid upon objects of necessity , or upon those of luxury.
Were it not almost self evident , this principle might be illustrated by abundant examples of the profit the state derives from a moderate scale of taxation, where it is sufficiently awake to it's own interests.

The Calvin Coolidge Curve
From a speech delivered in 1924
An expanding prosperity requires that the largest possible amount of surplus income should be invested in productive enterprise under the direction of the best personal ability. This will not be done if if the rewards of such action are very largely taken away by taxation If we had a tax whereby on the 1st working day the government took 5 percent of your wages , on the second day 10 percent, on the third day 20 percent , on the fourth day 30 percent on the fifth day 50 percent ,and on the sixth day 60 percent, how many of you would continue to work on the last two days of the week?

The Franklin D. Roosevelt Curve
This from a campaign speech in 1932
“Taxes are paid in the sweat of every man who labors because they are a burden on production and are paid through production. If those taxes are excessive , they are reflected in idle factories in tax sold farms , in hordes of hungry people, tramping the streets and seeking jobs in vain. Our workers may never see a tax bill, but they pay. They pay in deductions from wages , in increased cost of what they buy, or as now in broad unemployment through out the land. There is not an unemployed man , there is not a struggling farmer, whose interest in this subject is not direct and vital. It comes home to everyone of us.”

The Laffer Curve
(Circa 1970's)
The theory is simply saying that at theses higher tax rates ( “in the prohibitive range”) there is a disincentive to make more money, which will result in lower revenues from taxes . In the end, it's really all about incentives to work, invest, take risks and earn money.
Here have a look: The Laffer curve

Detroit to Washington " The Sky is Falling"

2008-12-12T08:54:00.001-05:00

As the plight of the Detroit Three & the UAW dominate the news each night, I am amazed at what I see and hear. The Detroit Three's hearings in the Senate and Congress were, with a few exceptions, completely divorced from reality. The politicians aren't making any sense at all, and while you might be able to excuse the pols from Michigan, the rest of them need to get back on their meds! The strange brotherhood act of the CEOs might have some people fooled, but I'm not one of them. The UAW is portrayed as the savior of the middle class. The executives of the Detroit Three are cast as greedy, overpaid jet-setters who have single-handedly caused the ruination of this once proud industry. The media scribbles articles, like the one written by Johnathan Cutler in the LA Times, and presents it a as serious analysis of the auto maker's troubles. His thesis is that the UAW's failure to unionize the transplants are what caused this whole mess . All of this would be very funny if it were a SNL sketch, but it isn't. This is real money, and real peoples livelihoods they are playing with.

Senators and Congressmen spoke of the great benefit the jobs bank was for workers, while scolding the CEOs for arriving at the first hearings in corporate jets. Evidently, only one of these two practices is wasteful. The other is not? They praised the UAW president Ron Getielfinger for the sacrifice he has imposed upon his union members. Does anyone really think that a compensation package rich enough to push your company into bankruptcy is sacrifice? Maxine Waters excoriated the private equity firm Cerebus for not wanting to invest in Chrysler. Earth to Maxine... no one will lend to Chrysler, GM or Ford. Why do you think they are groveling before you? Each politician tried to top the next with their "the sky is falling" and we'll all be unemployed forecast. The last prediction I heard was that 13 million people would lose their jobs if any of the Detroit Three filed Chapter 11.

In it's glory days, the UAW had a veritable army at its command . In the 1970's the UAW had grown to 1,619,000 members, but in the following 20 years their ranks were thinned by almost half. Today the entire UAW membership numbers about 400,000. The guy whose head should be on the chopping block is Ron Geitlefinger, the president of the UAW. Since his election as president of the UAW in 2004, membership has been slashed by more than 1/3. So much for job security. He also seems to be suffering convenient memory syndrome, which allows you to forget key provisions of the contracts you negotiate. Did anyone who watched the hearings really believe that he doesn't know what the jobs bank is? When he reminded me that 40% of his retired UAW workers aren't old enough to qualify for Medicare, I nearly jumped from my seat. Old enough to retire, too young for Medicare. How rich it is that he wants taxpayers to foot the medical bills for his early retiree's medical plans. The idea that he could say this with a straight face shows that he is capable of Oscar-caliber acting! Ron if the union gig doesn't work out, I know a Hollywood agent you can call. Question: which is funnier C-span or SNL ? I think it's a toss up!

Johnathan Cutler, an Associate Professor of Sociology at Wesleyan University, argues in a column in the LA Times that the UAW failure was not due to the union's demands for above-market labor cost and productivity- hampering work rules which helped caused the Detroit three to falter. Rather, he opines that their lack of success in unionizing the transplanted auto companies is the reason the UAW 's membership has declined so dramatically. Nowhere in the article is there any talk of competing with the transplants on pricing style or comfort. This guy really ought to stick to sociology. It's quite obvious that when it comes to economics, he is clueless! What the good professor doesn't understand is that automobiles don't have to be produced in the US at all, and if they don't manufacture automobiles at competitive prices that consumers will buy, there won't be a Detroit Three. It's tough to make the case that all three of them are needed today!
The auto companies that prosper and thrive in the South do so precisely because they are not unionized, and had they been, they would now be suffering the same fate as Detroit. You can't charge more for your product than your competition if you want to stick around. Apparently this is difficult to understand if you are from Michigan, or write for the LA Times.

I hope I'm not the only one who finds it troubling that in a industry as competitive as automobile manufacturing, that the Detroit Three's CEOs have banded together to support each other's need for a bailout. You would think that one of the Big Three going out of business would be cause for celebration by the remaining companies, wouldn't you? Would Google be upset if Yahoo closed shop? Of course not. It means more market share for them.

A dose of reality filled the room when Senator Bob Corker from Tennessee took out his Bowie knife and cut through the crap, exposing why each of them were really there.

It went as follows:
1. Ford doesn't need a bailout, but they would like a low-cost line of credit if they can get it without strings attached .
2. Chrysler needs a new dress so that some other car company will marry her and bailout Cerebus Capital and it's private equity clients.
3. GM has gone off the road and landed in the ditch, sustaining so much damage that it should and would be totaled unless they get a huge cash infusions now.
4. The UAW can't get the billions for it's VEBA unless the taxpayer forks over billions to the Auto makers, they would be the only losers if any of the Detroit Three filed for bankruptcy. The VEBA is classified as an unsecured creditor, affording it the same treatment as the bondholders who might get 30 cents on the dollar.
5. With out a bankruptcy filing, the enormous debt load of the Detroit Three will prohibit them from recovering, no matter how much money they receive.

This whole thing reminded me of a joke I had heard long ago and have revised slightly to fit the times:
Why did Chicken Little cross the road?
To get to the big pile of bailout cash!

" The Road to Economic Recovery Isn't a Road at All."

2008-12-11T13:01:00.004-05:00

Repaving the highway near your house and building a bridge near mine is not an on ramp to economic recovery. It is merely a means of providing jobs for a relative few, while the rest of us wait for the recovery. The idea that we are going to borrow and spend our way to economic health is fiction! The truth is that borrowing additional dollars to ramp up spending on these types of projects is actually counter productive, as it consumes the very capital business need to expand the production of goods and services, which is what drives real job and wage growth.

" Son of Stimulus", the newer, bigger stimulus package won't improve the economy. We've been there, done that, and it didn't work. In May, June and July of this year, millions of us received checks in the mail from the government. These checks, we were told, were to keep us from sliding into a recession. Evidently it didn't work. The forecast for the 4th quarter is for a contraction of 4% in GDP. Now we are told the reason it didn't work was because people didn't buy new things with the money. They instead saved it or used it to pay down debt. Can it be that the only people who don't understand that the consumer is over leveraged is Congress, and that's why they continue to propose additional borrowing for new programs.

Stimulus packages never work, and it's not because the people who got checks from the government didn't spend them. They don't work because they do not create an incentive to increase production. Once the money has been borrowed, allocated and spent, tax rates, availability of finance, regulatory cost and all the other factors that a business considers in their expansion plans will not have changed.. The only increase registered will be the size of the national debt. The incentives for growth in the economy will not have improved one bit. Economic growth, which is what makes a recovery happen, is the result of businesses providing more goods and services in the current month, quarter or year than in the previous period.

What is needed is a growth package, long term incentives to encourage expansion, and an increase the production of goods and services. Here are the top three things needed to return the economy to a growth trajectory:

Reduce the Corporate Income Tax
Economic growth is literally the successful completion of the next transaction., If you want to promote economic expansion, make it easier for businesses to complete their next transactions. The cost of taxes and regulation are passed along to the consumer in the form of higher prices, which act as a wedge, pushing apart buyers and sellers .The larger the wedge, the further it divides the buyer and seller, until ultimately the transaction fails. When enough transactions fail, businesses become unprofitable, and they too fail. Reducing the corporate income tax wedge will make US businesses more competitive in the global market place. This will enable companies to produce additional goods and services at competitive prices and complete more transaction.

Eliminate the Tax on Capital
The capital gains tax is a job killer. Greater economic growth comes only as a result of successful risk taking. To the extent that you limit the ability of successful risk takers to fund the next company, you kill jobs and reduce economic growth. This success tax is only applied to investors who have risked their capital, and in doing so created additional value by growing an enterprise. There is no tax on a loss of capital. To the contrary, there is a deduction a tax break. Why limit the ability of successful investors to grow the economy by confiscating the very capital they use to do so? There are some folks who defend the capital gain tax as a measure of fairness. What's fair about eliminating jobs? These are the people who fund expansions, and you want to slow them down? We can never know how many Microsoft- type enterprises, along with the jobs they produce, died in the lobbies of Venture Capitalist in the 1970's, never making it to the board room and the decision makers as a result of dramatic increases in the capital gains tax.

Stabilize the Dollar
Business owners considering expansion have a tremendous number of variables to consider. If you want to eliminate a great many of these variables, you need to stabilize the dollar. A stable dollar will lead to declining real interest rates, along with a substantial moderation in the price swings of raw materials and energy due to currency fluctuations. With a stable dollar, inflation and deflation will be things of the past. Companies can get back to working on increasing production, instead of formulating complex commodity and currency hedging strategies.

The recovery will begin when the business climate signals entrepreneurs and investors that risks and returns have come back into alignment. You can't force investors to invest, and you can't force businesses to expand. Incentives are what count now!

"Where's My Bailout?"

2008-12-01T13:11:00.001-05:00

Only kidding, I don't need a bailout. I'm not defaulting on my mortgage nor my credit card debt, since I don't have any, and I'm down to the last 7 payments on my automobile loan. I'm not trying to make out that I am some kind of a "Financial Saint". Believe me, I've made my share of financial mistakes . My point is that every time I made a bad decision I paid the price. It's because I paid the price that I learned from my financial mistakes.

The most popular phrase these days seems to be "I need You to save me from myself". None of the folks who have been bailed out or are asking for bailouts were put into their situation by someone else. They all did it to themselves, by making one bad decision after another . The List of bailout wannabes is getting longer by the second. The bailed out include the GSE's Fannie and Freddie, AIG and the Greedy Wall Street Bankers. The wannabes include the Big Three, and several states, including Michigan, California, New York, New Jersey and the City of Detroit are in the que with their hand out. The city of Detroit is asking for $10 billion to hold them over, and that is approximately $11,000 for each resident of Detroit. That's not a bailout. That's a buyout, and the buyer in this deal is getting hosed .

As we warned in our newsletter a while back "There are always takers for government handouts, and when the government lets it be known they are in the bailout business the line is never ending." . Now that they are smack in the middle of the bailout business, who should and shouldn't get bailed out?

My advice: It's time for some tough love. The businesses that are in trouble should hire a turn around specialist. Yeah, I know, it's much easier to ask for a government handout, but that won't solve your problems. These companies need to rethink their business model, not take on more debt. If you are not generating a profit in your business, borrowing money to fund your health care and pension cost doesn't change the fact that you are not making money in your core business. You certainly shouldn't take out a 25 billion dollar loan to start another money- losing division to build expensive little environmentally friendly cars that people won't buy, in enough numbers, to be profitable. It's not a good idea even if Nancy Pelosi thinks it is. You need to look at your cost structure, and if you find your labor cost is 50% more than your industry average, you might want to cut back in that area just a wee bit. A wee bit as in get rid of the 50% premium so you can be profitable. It may not be an easy thing to do, but when you're fighting to survive, it's the only thing to do.

The government needs to decide if the survival of the Big Three is really important. If it is, they need to get rid of the CAFE standards, which are merely government dictates as to what types of autos Detroit needs to build. You can think of it as a kind of "central planning lite". The Free Market will tell GM, Ford and Chrysler what will be profitable to produce without any help from Big Brother. The UAW needs to wake up and smell the coffee. Wage increases can only come from productivity gains, and Union work rules that hamper productivity is why they are now, hat in hand, begging for a bailout.

My advice for state and local government: It's the spending, stupid. State government spending is not merely out of control, the patients are running the asylum .Vallejo, California filed for bankruptcy. It seems they couldn't afford to continue to pay their fire fighters and police officers. With more than 200 of them making between $100,000 -$199,000 in salary per year, and 28 of them making between $200,000-$299,000 per year, is it any wonder? This does not include their pension or health care benefits. These "public servants" are making 2-6 times the median wage in Vallejo. Another California town is going bankrupt because the golf course they bought isn't making money and they are going to default on their nearly $7.5 million dollar bond issue. The golf course they bought, are you kidding me? Golf course = Essential Service? California, New York and New Jersey are three of the highest tax states in the nation, so once again it's not the revenue, it's the spending, stupid. It's time to cut back on spending.

These bailouts cost real money. Money that the government doesn't have. The only way they can spend it is to borrow it from you and me, and then raise our taxes to pay for the loans. Should you and I pay more taxes so that the Federal government can enable the companies, states, and cities that are profligate in their spending on salaries, pensions, and golf courses to continue about business as usual?

"The Power to Tax Is the Power to Destroy "

2008-11-15T14:47:00.001-05:00

These are the words of Chief Justice John Marshall

The Founders of this great nation were very deliberate in enunciating the powers of the Federal and State governments, and gave neither of them the power to tax the income of the people . The reason, as the Congress and State Governments have proven over the last 95 years, was they knew they couldn't be trusted with this much power.

The United States had no income tax until the 16th Amendment to the Constitution was ratified on February 3rd 1913. That meant that each dollar you earned was truly yours, and you got to keep that whole dollar. You weren't forced to surrender any part of it to whom ever the State thought you should. Since its enactment into law, politicians have used the enormous power of the tax code to wreak havoc on it's citizens and the economy, in the name of doing good deeds.

The top marginal rate of the 1913 tax code was 7% on income above $500,000 (equivalent today to approximately $10,000,000 in income). Compare that with today's lowest tax rate, which is 10% on income between $0 and $8,025. We now ask the poorest among us to pay a tax rate greater than what we expected from the wealthiest, and is in a word, disgraceful. Before we move on, it's important to also remember we currently pay 7.65% on every penny of income we earn (up to $106,800 in 2009) in Social Security and Medicare taxes (your employer also pays 7.65% for a combined total of 15.3%) . This combined tax is more than three times what the top marginal rate was when the income tax was introduced. Does anyone really believe that the cumulative effect of this enormous confiscation of wealth from the private sector has been negligible?

Congress, in it's infinite wisdom, decided early on that tax rates needed to go up. Within three years of implementing the nations first income tax, they more than doubled the lowest and highest marginal rates. Not satisfied with the additional revenue, the top rate was pushed up to an astonishing 67% on income in excess of $2,000,000 in 1917. In 1916 there were 206 people with incomes of $1,000,000 or more, and as a result of the increase this number fell to 141 in 1917.The very next year,1918, the top tax rate was raised again to 77%, and the amount of income at which the tax was applied was reduced to $1,000,000. The number of people with incomes in excess of $1,000,000 plunged to 67. By 1921, the number of people with incomes over $1,000,000 had fallen to 21.With the number of people reporting $1,000,000 or more in income rapidly disappearing, the congress did what it always does when trying to soak the rich: they lowered the income threshold where the tax began to $200,000 (the top marginal rate was lowered to 56%). The tax increases had eliminated nearly 90% of the top earners of the era. Was that really the outcome that Congress had in mind? What Congress never learned is that if you attempt to soak the rich through tax increases the rich go away, and then you have to tax those who aren't rich.

There are many examples where the government tax increase are promoted as being a restoration of fairness, but instead produces outcomes that are injurious to the very people they seek to help. The AMT tax was another example of how Congress was once again going to restore fairness to the tax code by making the rich pay their fair share. This tax law, which was passed in 1969, targeted 150 millionaires who paid no tax due to exemptions and deductions that Congress had put into the tax code. Imagine that Congress was upset that people were taking advantage of the deductions and exemptions that congress had put in the tax code. I guess incentives really do matter. What started out as a tax on the rich has now, nearly 40 years later, turned into a tax trap for the middle class. Apparently the best that Congress can do is to offer a temporary one year fix, year after year.

The Capital Gains Tax, pure and simple, is a Tax on Capitalism. Jack Kemp has been rightly saying for years that you can't have capitalism without capital. When you raise the rate on capital gains you choke off the access to capital for America's entrepreneurs (the folks who produce the bulk of the jobs in this country) and you reduce the amount of revenue the government receives in the form of capital gains taxes. Investors aren't stupid. They won't invest their money if they can't get a return. Nixon proved this again in 1969 when he raised the Capital Gains tax rate to 45%. The number of initial public offerings plummeted throughout the decade of the 70's. In 1969, 1298 companies completed initial public offerings. By 1978, that number had dropped to 18. No wonder the 70's didn't produce any new "go go" companies. They didn't produce any new companies. The Dow Jone Average, which started the decade at 744, ended the decade at 806. How much revenue do you think the capital gains tax generated?

Once again, we are hearing that tax rates on the rich need to be raised so that we can spread the wealth around. There is that fairness thing again. Get a firm grip on your wallet because it won't be any different this time! When the the top income earners are once again punished by the tax code, they and their tax revenue will disappear, just like last time and the time before that. The government will once again move further down the income ladder in search of the revenue they desire. The only difference is that this time it will happen faster, because now the rich are not folks who earn $10,000,000. They are folks who earn $250,000 or $200,000 or $150,000or $120,000. They are you and me!