Monday, August 31, 2009

The Taxing Carbon Fallacy - Part 2

Yesterday we touched on the first aspect of the fallacy of Obama's cap and trade program for carbon emissions and how dangerous and costly such a large program would be on America, based on some highly debatable assumptions about global warming. Today, we extend the argument of stupidity of this program by looking at some facts, not a strong point of the current political class:
  • According to an article by Newsweek columnist Fareed Zakara on April 16, 2007, China and India will build about eight hundred new coal-based and carbon spewing electric generation plants by 2012. Mr. Zakara wrote that these incremental plants will burn nine hundred million tons of coal every year and dump 2.5 billion tons of carbon dioxide into the atmosphere annually. If all of the countries who signed the Kyoto Accord had fully implemented their commitments (which they have not done), their actions would have reduced their carbon dioxide emissions by 483 million tons, less than 20% of what just these new Indian and Chinese power plants will generate.
  • According to an article in The Week Magazine on June 19, 2009, the IMF estimates by year 2050 there will be 3 billion cars on the road around the world compared to 700 million today. The Tata Group, India's largest corporation, has introduced an inexpensive ($2,500) subcompact car, the Nano, to take advantage of this growth in automobile ownership. The Nano will allow untold millions of people in the emerging middle classes of China and India to possess a car for the first time in their life. According to the Briefing section in The Week magazine's February 27, 2009 edition, the Nano's catalytic converters will only scrub 80 percent of its pollutants and will do absolutely nothing to reduce/eliminate carbon dioxide emissions. The article quotes figures from the Asian Development Bank that estimated that India's carbon dioxide emissions would increase from 219 million tons per year to 1.5 billion tons per year by 2035, largely as a result of these type of Nano vehicles.
  • According to the Population Reference Bureau, the world's population will grow from 6 billion people in 1999 to over 7 billion in 2011. The US Census bureaus extends these population estimates, saying that the world's population will grow 50% from 6 billion in 199 to 9 billion in 2043. The vast majority of this growth will come from developing countries, led by growth in China and India. In other words, there will be a lot more people looking for a set of wheels in the coming decades.
  • At a recent international economic summit, most of the developing world rejected Obama's call for coordinated efforts to reduce emissions, saying that it was their turn for cheap energy and economic growth.
Bottom line is that regardless of what Obama and the political class do relative to cap and trade, emission reduction, taxing usage by American consumers and businesses, etc., it will likely have exactly no discernible impact on the environment, given the simple population, economic, and industrialization trends in the rest of the world. Thus, if global warming is indeed a reality, America acting alone will 1) not be able to overcome the increased emissions from around the world, 2) will unnecessarily penalize American businesses with burdensome fines, taxes and regulations, hurting American competitiveness and increasing unemployment and 3) the increased taxes Americans will pay under cap and trade will reduce any kind of economic recovery and growth. Does not sound like a winning formula to me. Untold pain on America but no halt to global warming.

Simple solution: develop and pass a reasonable and fair cap and trade program and PUT IT ON THE SHELF until the rest of the world agrees to similar constraints, i.e. use it as a club/enticement to get the rest of the world on board. Forcing Americans to reduce their energy usage while the rest of the world continues on their energy and carbon dioxide spree is just plan stupid and illogical.

Tomorrow: Part Three

Sunday, August 30, 2009

The Taxing Carbon Fallacy - Part One

Over the next few days we will take a look at the next political class disaster in waiting after health care reform, namely taxing carbon usage, otherwise known as fixing global warming. As with the health care issue, the political class is running to a solution without identifying and quantifying the problem. They propose a massive new bureaucracy without identifying all of the underlying interdependencies and root causes.

Today's discussion will focus on a very core issue, is global warming a myth or a reality? Consider the following historical publications:

  • "The world's climatologists are agreed" about the need to "prepare for the next ice age." - Published in Science Digest, February, 1973
  • "The earth's climate seems to be cooling down...the trend will reduce agricultural productivity for the rest of the century" - Published in the Newsweek cover story, "The Cooling World" on April 28, 1975
  • "Continued rapid cooling of the earth means that a new ice age must now stand alongside nuclear war as a likely source of wholesale death and misery." - Published in International Wildlife, July, 1975
  • "A major cooling of the widely considered inevitable." Published in the New York Times, May 21, 1975

The same type experts that are today telling us that global warming is inevitable were telling us that a new ice age was imminent just thirty four years ago. Seems like they missed that prediction by a mile. Who is to say they got this prediction right? And do we really want to implement a massive government effort that will significantly increase energy costs to both American consumers and American businesses based on experts that were so wrong so recently?

Furthermore, consider the plight of Alan Carlin, a veteran and senior analyst at the EPA. According to an article for the Wall Street Journal by Kimberley Strassel, summarized in The Week magazine on July 17, 2009, Mr. Carlin co-authored a 98 page study that raised "serious doubts about commonly used climate models, punches holes in apocalyptic scenarios, and notes that, in recent years, global temperatures actually have been on a downward trend." Unfortunately, rather than openingly debating his position in the effort to find truth, Mr. Carlin's boss at the EPA, Al McGarland, has forbidden Carlin from communicating his findings outside of the EPA, according to Ms. Strassel. If the Carlin analysis is not good science or not well done, why suppress his findings and conclusions? Let the scientific community refute it if it needs to be refuted. Combine this suppression with the ice age myth and miscalculations listed above, it really does throw a shadow of a doubt about the validity of global warming.

(Side note: remember how the mainstream press and the Democrats went crazy a few years ago when the Bush administration was accused of suppressing analyses supporting global warming? Why not the same outrage of when the Obama administration does the same thing? A little hypocrisy going on here.)

Finally, from a statistical perspective, people often mistake statistical correlation with causation. Just because two events seem related does not mean that one causes the other. Some global warming advocates would argue that rising planet temperatures are caused by increasing discharge of carbons into the atmosphere (although Mr. Carlin and others would disagree with even this basic assumption) since both are increasing at the same time. Although they are correlated, no one has proven that one causes another, they are just assuming that there is a causation. Assumptions like this can be very dangerous particularly when so much is at stake. A new Federal carbon tax bureaucracy, increased costs on American households and businesses, and a continued reduction of freedom as the political class expands how they dictate more and more how we are to live and spend out wealth, this time in the energy area.

Imagine what would have happened if in the late 1970s we believed the climatologists of the time and had begun to fight against the onset of the next ice age. It would have been a tremendous waste of time, energy, and dollars since they were totally wrong.

Still think that global warming is a reality? Come back tomorrow and see how even if you are right, what the political class is planning will make absolutely no difference.

Saturday, August 29, 2009

435 Fiefdoms

In watching the classic Monty Python classic on TV the other day, "Monty Python And The Holy Grail", it occurred to me that we are currently living many aspects of that King Arthur movie in America today. Consider just a short list of examples of recent wasteful government spending/earmarks/pork programs:
  • Pennsylvania Republican Congressman John Peterson got $500,000 of Federal taxpayer money allocated to his Congressional district to buy 21 train cabooses that were to be converted into a "caboose motel." (source: The Week Magazine, April 25, 2008)
  • South Carolina Democratic Congressman James Clyburn got $3,000,000 of Federal taxpayer money allocated to his Congressional district for an organization called the First Tee whose website says that its mission is to "promote character development and life-enhancing values through the game of golf." (source: The Week Magazine, April 25, 2008)
  • Pennsylvania Democratic Congressman John Murtha has been called the "King Of Pork," most notably for getting at least $150,000,000 of Federal taxpayer money allocated to his home district to build out the local area airport and put his name on it. CNN put the estimate at closer to $200,000,000 and according to numerous sources including, $8,000,000 was spent on a state-of-the-art radar system several years ago that has NEVER been used. One reason it has never been used is that the airport serves about 20 passengers a day on average and handles very few flights. Murtha also got $800,000 allocated from the latest stimulus package to fix the second runway at the airport (why the need a second runway is beyond me and why it needs to be fixed to handle so few passengers and so few flights is way beyond me.) Oh, one more thing, the only flights in and out of the airport are to Washington DC. According to the, the American taxpayer has subsidized every passenger's usage of the airport to the tune of $1,200 per person per flight.
  • According to an AP story on August 26, 2009, a sleepy Montana border checkpoint, that sees about three travelers a day, will get $15,000,000 under Obama's stimulus plan even though it was ranked as marginal on a government border priority list. The town where the checkpoint is has a population of 71 and handled only $63,000 worth of freight traffic in the whole year. It also has an unemployment rate of only 4%, hardly in need of a stimulus. Why? Because the two Montana Democratic Senators persuaded the government to make it a priority even though the Lardeo, Texas checkpoint, which serves more than 55,000 people a day and about 4,200 trucks a day, and which was rated among the government's top priorities, will get no stimulus money.

These types of events repeat themselves thousands of times every year, misallocating hard earned taxpayer money inefficiently and and, in many cases, down right stupidly. Thus, the Monty Python analogy. We no longer live in the United States of America. We live in a loose federati0n of 435 Congressional districts/fiefdoms, each operated by a King Author-like figure (your respective member of Congress), whose seemingly sole purpose in life is too plunder the wealth of other fiefdoms' peasants and bring that plunder back to their own fiefdom to keep their peasants happy (and themselves in power).

Not only do these faux knights waste our money, they also waste a lot of time roaming the country side looking for their plunder. This is time that could be better spent fixing some real problems in this country, failing public schools, drug addiction problem, lack of a national energy strategy, Social Security heading for bankruptcy, etc. "Love My Country, Loathe My Government"'s Step 1 and Step 44 would directly reduce these earmarks and hopefully get the political class more focused on issues that really make a difference in Americans' lives. Words of an unknown author come to mind: "There are always too many Democratic Congressmen and too many Republican Congressmen and never enough United States Congressmen."

Tuesday, August 25, 2009

Finally, Some Good Government News

Okay, I admit, a lot of the recent posts have been a little negative. Today, let me share some good government news, if only a local success story. Today, I received our 2010 property tax statement for our Tampa Bay home. When we lived in New Jersey, this was usually a bad day since every year our New Jersey property taxes seemed to go up hundreds and hundreds of dollars. The good news today was that our tax bill for 2010 will go down at least 13% and possibly more. Consider what has happened to our Florida property taxes since 2005:
  • 2005 - Living in New Jersey, we were paying over $12,000 a year in property taxes or about $4.00 per square foot.
  • 2007 - Moving to Florida, we were paying about $6,600 a year in property taxes or about $3.22 per square foot, about 20% less than in New Jersey.
  • 2009 - By 2009 our property taxes had dropped to about $4,500 or $2.23 per square foot.
  • 2010 - With the arrival of today's tax bill, our property tax bill had dipped under $3,800 or $1.94 per square foot! Our house size and amenities were unchanged during this time frame.

Thus, our Florida property tax bill has dropped about 40% in three years and 13% in the past year. Many factors went into this performance but the bottom line is that we are paying less in taxes and the state of Florida has not imploded or exploded from this trend. Florida public schools still opened today, street lights worked, police were on patrol and the government was still functioning and functional. Bravo to the Florida political class, at least they have taken some positive steps in getting government spending under control. My tax bill proves two things in my eyes:

  1. There is a lot of fat and bloat in every level of government in this country, so much so that the Florida state government was able to reduce my taxes so much and so quickly, and probably many Floridans' taxes, without disastrous effects.
  2. Many steps in the book, "Love My Country, Loathe My Government" are very doable from a budget reduction perspective on the national level if only the DC political class had the brains and fortitude to do it. The Florida political class has proved it in my world at least.

Monday, August 24, 2009

Last Health Care Reform Post For A While

This will be the last post on health care reform at least for a few weeks, I think we all could use a break from it. As you know from previous posts, I believe that the current health care reform debate is fundamentally flawed since no one on either side of the debate is discussing the basic problem: what is the core reason(s) for rising health care costs? Until you can identify and quantify the root causes, than Obama's health care reform plans are nothing more than a trillion dollar plus crap shoot.

Love My Country, Loathe My Government" contains a simple analogy that explains this problem. Let's assume you have a cough. Do you have:
  • A head cold
  • An allergy
  • Laryngitis
  • Strep throat
  • Bronchitis
  • Pneumonia
  • Long Cancer
  • You are a hypochondriac
You decide to go to a doctor for treatment. If he or she is a good doctor, they will analyze the problem using their education, experience, and equipment. They will identify and quantify the root cause of your cough and put a plan together to solve the problem. Illness solved.

Let's assume that your cough is symbolic of rising health care costs in this country. Yes, rising health care costs is the SYMPTOM of an underlying problem or two, they are not the cause of the problem. The root cause of rising health care costs could be any number of factors:
  • Doctors make too much money
  • Malpractice lawyers make too much money
  • Drug companies make too much money
  • Insurance companies make too much money
  • Doctor's order too many unnecessary tests
  • There is too much government interference and red tape in the industry
  • There is too much fraud in the system

Obama and the rest of the political class have not identified the root cause(s) unlike what your doctor did with your cough symptom. In Obama's world, he would remove a lung, assuming lung cancer, prior to being sure it was lung cancer. The operation may be a success, i.e. the lung is successfully removed, but you still have the cough because you had strep throat. Until the political class does their analysis, the whole debate is an exercise in futility and an unlikely solution.

I bring this issue up again because of an article by Catherine Arnst in a July 27, 2009 in Business Week magazine. State level efforts to solve the rising health care costs without understanding the cause have not gone well:

  • Just three years after implementing its universal health care program, Massachusetts wants to end the practice of reimbursing for every medical visit and doctor visit, it was too expensive.
  • The state's universal health care program did not contain rising costs in the state, "wreaking havoc on the state's finances."
  • Health care costs in Massachusetts have risen 42% in the past three years, faster than they did prior to the universal care program was put in place.
  • The state legislature formed a commission to find a way to end the expensive fee-for-services system just three years after it was implemented.
  • In the latest budget the plan is to eliminate health care subsidies for 30,000 legal residents (sounds a little like the "R" word = rationing).
  • The state of Maine instituted its own version of universal health care in 2005 but premiums in its state-financed health care insurance have risen 74% since its inception, hardly cost containment.

Thus, not knowing what the root cause of rising health care costs are has resulted in dire financial problems with the two states with universal health care insurance. The same result is likely on a national level with Obama's plan since his does not have the root cause(s) identified, or if he does, he has not told us.

A quick note on the Cash For Clunkers program. In a previous post I went through my analysis of why the program is a failure on any number of levels. I suggest you go to the website, and look for an article by Kaz Vorpal, "Cash For Clunkers Causes Pollution and Poverty." Mr. Vorpal elegantly yet simply explains more reasons while this program was an utter failure on many levels, levels I had not even considered.

Sunday, August 23, 2009

Big Brother Has Arrived

Today's post is based on the research and subsequent magazine article by Anne Kadet that appeared in the September, 2009 issue "Smart Money". In the article, Ms. Kadet goes through some of the newer steps and technology that the government is looking into to "protect" the traveling American public. While they may be more effective than current travel security measures, a fact yet to be proven, they should send a chill down anyone who is familiar with the Big Brother concept from George Orwell's novel, "1984":

  1. The Transportation Security Agency (TSA) employs over 2000 "behavioral detection officers" who case out airport patrons who may appear stressed or scared, the assumption being that scared or stressed out people are more likely to be terrorists. If you act suspicious, they are empowered to take your aside for questioning.
  2. New scanning machines let TSA personnel see right through clothes.
  3. Other new machines would remotely monitor your pulse, temperature, breathing and facial expressions to reveal signs of "harmful intent".

On the surface, these efforts appear noble and harmless for innocent people. However, consider a few scenarios and facts:

  • Ms. Kadet was questioned in an airport recently by a behavioral detection officer after she wrote in a notebook. The potential for abuse and the invasion of privacy without just cause is very high in a program like this. You could be interrogated for just about anything if writing in your own notebook is enough to draw attention. Do we really want undercover government agents watching our every move while in public?
  • The scanning machines that see through clothes is likely to lead to a whole new set of YouTube channels consisting of bootlegged scans of attractive or funny passenger profiles. Again, the potential for abuse is high.
  • The remote detection of bodily functions and "harmful intent" sounds like a Tom Cruise movie (oh wait, it was a Tom Cruise movie, "Minority Report"). We saw what that kind of freedom-less society leads to when people are monitored and assumed guilty without just cause or a trial.
  • According to Ms. Kadet, the TSA has subjected 192,000 travelers/American citizens to secondary screenings at airports but will not release any information on whether these secondary foiled any terrorists plots. Now the claim could be made by the TSA that just having the secondary screenings reduces terrorist activity but it would be nice to know whether our inconvenience and infringement of rights was worthwhile.
  • One of the saddest things that she reports on is that the "puffer machines" at airport security stations are being retired because they are breakdown prone and generate too many false alarms. Guess who paid for these expensive, yet worthless, machines? The American taxpayer did and given how new they are but how soon they are being retired for not working properly, looks like another monumental government expense that was wasted. Again, the TSA has not revealed how many bomb threats were averted with these machines.
  • The TSA recently told Congress that it will not meets its deadlines for a process to screen cargo laden on passenger flights, its ineffective bureaucracy has spent less than 13% of its budget for bus and train security, and the agency still does not screen all airport workers.
  • The final insult, despite all of their efforts, TSA screeners in many tests still do not spot explosives coming through security.

Several steps in "Love My Country, Loathe My Government" would help address these issues. The three steps that would vigorously review and rework the Patriot Act would have to address these Big Brother-like activities. Step 34 would hold members of Congress accountable for the entire TSA operation and their failures to detect explosives, screen airport workers, inspect passenger plane cargo shipments, and the deployment of expensive but useless puffer machines that do not work anywhere close to their expectations, possibly removing politicians from their committee posts. Step 30, which calls for the recall of most American troops stationed on foreign soil, might help to solve this problem at its root cause. Remember, Bin Laden struck at us because of our troops stationed on Saudi soil. His actions on 9-11 and elsewhere is the direct cause for this heightened security. Removing non-essential troops based overseas might help defuse the resentment throughout the world of the United States. We know what happened when we had troops stationed all over the place, Big Brother eventually made an appearance.

Anne Kadet is a senior writer and at Smart Money and can be reached at

Saturday, August 22, 2009

SEC = Shallow Exposure Capability

Step 34 in "Love My Country, Loathe My Government" is one of the most important steps in the whole book. Given that the political class has rigged the political processes via gerrymandering Congressional districts, opposing term limits, controlling primary processes, and controlling election money sources, it is virtually impossible to defeat an incumbent once they are in office. Step 34 would help stem the tide of incompetence in Congress by removing them from committee and subcommittee posts for failure to do their job to at least minimal standards of performance. For example, under Step 34, all of the politicians sitting on both the House and Senate Intelligence committees would have been replaced after the 9-11 attacks killed almost 3,000 Americans and those committee members failed to protect those 3,000.

The SEC is the title of this post and would almost certainly be affected by Step 34. Anyone sitting on the Congressional committees that oversee and advise the SEC would have been replaced for any number of events in the past 10-15 years. It was the SEC and their Congressional committees that somehow missed some of the biggest corporate frauds in history in the 1990s when they allowed companies such as Worldcom and Enron to perpetuate accounting fraud for years, destroying the careers, pay checks and retirement funds of thousands of Americans.

More recently, it was the SEC and their Congressional committees that somehow missed probably the biggest Ponzi scheme ever, the scheme Bernard Madoff had run for so long. Hundreds of people lost untold millions of savings over a long period of time. Thus, it appears that the SEC has had some pretty "shallow exposure capability" for a long period of time, running at least as far back as the Clinton adminstration for the 1990s accounting scandals through the Bush adminstration and Madoff.

The most frustrating thing about this government incompetence in exposing Madoff's fraud is 1) it went on for so long, 2) it was so far reaching, 3) we paid for this incompetence with our tax dollars and 4) how hard could it have been to expose these schemes? A February 4, 2009 online CNN article (and reported in other news sources) covered the Congressional testimony of Harry Markopolos, an independent financial fraud investigator. According to his testimony, Mr. Markopolos did a detailed Madoff scheme analysis over nine years ago and he "sent detailed memos, listing dozens of red flags, laying out a road map of instructions for SEC investigators to follow, even listing contacts and phone numbers of Wall Street experts whom he said would confirm his findings." In this case the SEC did not even have to do the legwork and analysis, it was already done for them! Unfortunately, the SEC did nothing with his work and the fraud went on for another eight years or so.

The really sad aspect about this case and the ineffectiveness of the SEC is that Mr. Markopolos claimed that it only took him about four hours of analysis work to prove his case of fraud. He did what the entire SEC and at least two Congressional committees could not do. What does that say about the political class sitting on those committees? Under Step 34, they would be the poster kids for getting kicked off their respective committees for incompetence.

Friday, August 21, 2009

The Blame Game = Part 2

Let's expand yesterday's discussion about the political class use of the blame game. First, complete disclosure: I have never voted for a Republican for national office in my life. Thus, as you read the following do not think I come off as a Bush apologist, in my opinion his Presidency was a failure in so many ways.

However, should the Bush administration be blamed for the economic and housing industry meltdown as the Democrats claim and were the Democrats blameless? The following comes from a website called The Gateway Pundit and was published on their website on September 21, 2008. The website definitely has a pro-Republican bent but it documents all of its data sources and if even half of them are right, it is a damning indictment of the Democrats regarding their blame for the economic meltdown. Consider what the Bush administration thought of Freddie Mac and Fannie Mae, the two massive Federal agencies that were involved with trillions of dollars in home mortgages (the incompetency of these two Federal agencies will probably end up costing the taxpayer trillions of dollars and were central causes in the economic turmoil):

  1. April 2001 - Bush administration 2002 budget declares the size of Fannie Mae and Freddie Mac "a potential problem" and "financial trouble of a Government Sponsored Enterprise (Freddie and Fannie are both GSEs) could cause strong repercussions in financial markets, Federally insured entities, and economic activity."
  2. May, 2002 - Bush calls for better disclosure and corporate governance principles to also apply to Freddie Mac and Fannie Mae.
  3. February, 2003 - the Office of Federal Housing Enterprise Oversight releases a report that concludes unexpected problems at a GSE could "immediately spread into financial markets and beyond the housing market."
  4. September, 2003 - Bush Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend a new Federal agency to regulate and supervise the GSEs.
  5. November, 2003 - Bush administration wants the new Federal regulatory agency to have enough power to "reduce systemic risk".
  6. February, 2004 - the 2005 Bush budget reiterates the need for a new regulatory authority for GSEs and highlights the risks posed by their substantial growth.
  7. February, 2004 - Bush cautions Congress about GSEs through Greg Mankiw, chairman of the Council Economic Advisors, calling for Congress to help reduce the risk of the GSEs.
  8. June, 2004 - Deputy Secretary of Treasury Samuel Bodman spotlights the risk of the GSEs and calls for reform, emphasizing that stronger regulatory authority is needed.
  9. April, 2005 - Treasury Secretary John Snow again calls for GSE reform citing risk concerns about the GSEs and the need for reform and warning of risks to the entire financial system.
  10. July, 2007 - President Bush again calls on Congress to pass a reform package.
  11. December, 2007 - Bush again warns Congress about the need to reform the GSEs and stronger oversight.
  12. February, 2008 - Assistant Secretary David Nason reiterates the urgent need to move on reform.
  13. March, 2008 - Bush calls on Congress to move forward on reforms of Fannie and Freddie.
  14. April, 2008 - Bush again calls on Congress to pass the legislation needed to "modernize Fannie Mae and Freddie Mac."
  15. May, 2008 - Bush calls on Congress for reform legislation.
  16. June, 2008 - Bush calls on Congress to pass reform legislation.
  17. July, 2008 - Congress passes reform legislation for Fannie Me and Freddie Mac, seven years after the Bush administration called for action to get the GSEs under control.
  18. Note - in 2005, John McCain partnered with three other Republican Senators to "reform the government's involvement in lending." Their effort was blocked by the Democrats.

Thus, according to this source, there were at least eighteen instances where the Bush administration correctly predicted the problem that would occur from the ineptitude of Fannie Mae and Freddie Mac, insufficient oversight, and the horrible economic consequences. Combine this reality with the fact that Freddie Mac and Fannie Mae were restating financial results and having serious accounting issues during this whole time (2003 - Freddie restates financial results for three years, 2003 - SEC investigates Fannie regarding earnings manipulations, 2003 -Fannie discloses $1.2 billion accounting error.) Thus, the warning signs were all over the place but the political class did NOTHING to remedy or alleviate the situation. The question begs: Why?

Here's one theory: the political class did not WANT to fix anything since the status quo was to their benefit. From 1998 to 2009, the top three receivers of campaign donations from Fannie Mae and Freddie Mac were Democrats:

  1. Democrat Senator Chris Dodd - Received $165,400 in donations from the GSEs
  2. Democrat Senator Barack Obama - Received $126,349 in donations
  3. Democrat Senator John Kerry - Received $111,00 in donations

But hold on! While the Democrats were the top beneficiaries of the GSEs, positions four through six were Republicans:

  1. Bennett - $107,999
  2. Bachus - $103,300
  3. Blunt - $96,550

It all stinks, taxpayer supported Federal agencies using their budget dollars to support the political class. Combine this with the fact (source: that although three top Fannie Mae excutives during this period ended up under investigation for fraud and accounting irregularities, Franklin Raines, Tim Howard and Jim Johnson, they all ended up working in handsomely paid positions for the Obama Presidential campaign. Stinks even more, doesn't it? Were GSE campaign donations traded by GSEs executives for preferential treatment by the recipients of said donations in the political class? Even if there was no quid pro quo, the potential for conflict of interest is extremely high.

Conclusion: most of the meltdown happened on the Bush watch and although his administration correctly identified the problem and the potential for economic disaster, he did not have the smarts or the clout to get what he wanted, beginning in 2001, to avert the problem. He is culprit number one. Culprit number two is the Congressional wing of the political class that either did not know how to fix the problem Bush correctly identified or, more likely, did not want the fixes to occur since it was a source of money for them, both Democrats and Republicans. Thus both Republicans and Democrats are to blame, the problem was staring them right in face seven years ago and they did nothing. But did you expect anything different from them? They have fixed nothing in the past forty years, what is another few trillion dollars of taxpayer wealth down the drain via bailouts as long as they can stay in office?

This is just another example of why Step 39 in the book requiring term limits is so important, entrenched politicians need to continually to get money for their re-election. In this case, their probable desire for GSE campaign donations led them to not fix a problem that is costing us all via our tax doillars.

Addition to yesterday's post: apparently I missed some of the Federal regulatory agencies that are in charge of some facet of the banking and housing market - OFHEO = The Office of Federal Housing Enterprise Oversight, Federal Housing Finance Agency = FHFA and Ginnie Mae. Thus, Howard Dean's statement that we examined in yesterday's blog is even more ridiculous, we have way too much bad and overlapping government regulation and interference in this country today, not too much capitalism.

Thursday, August 20, 2009

The Blame Game - Part 1

Let's look at the blame game that the political class loves to play on the taxpayers. The blame game involves blaming the other political party's members for the woes of the country, absolving themselves of getting anything done. We decide what "team" we want to be on in the blame game, feel good about ourselves that our team was not responsible, and nothing ever gets done since the politicians spend so much time trying to blame others or duck responsibility for their own incompetence:

1) The latest instance of the blame game comes from Howard Dean who somehow always gets press coverage despite losing his bid to run for President and currently holding no elected political office. He recently stated that the free market and capitalism was the cause of the recent economic meltdown and that regulations were needed to avoid future problems. His specific quote was "I think we had quite enough of capitalism." Blaming capitalism may get him points with his left leaning friends but this blame game does not stand up to any logic:

Consider a few Washington agencies: FDIC, SEC, Fannie Mae, Freddie Mac, HUD, House of Representatives committees on housing and banking, Senate committees on housing and banking, Treasury department, Federal Reserve Board and lord knows how many other Federal and state regulatory and oversight political entities exist. Given all of this oversight, no one in the political class had the smarts or the guts to stand up and say we had a banking and housing problem brewing. Howard Dean is wrong, capitalism did not fail and is to blamed, the political class and its associated government bureaucrats failed to see the biggest economic tsunami coming until it hit them in the face, they are to be blamed. We paid dearly for this extensive government oversight as taxpayers and got nothing in return except a deep recession. How Dean can blame the free markets when the markets were not free and were oversaw by everyone, show either a pandering to the left and its socialistic tendencies or just plan stupidity.

2) The market did exactly it was supposed to do so you can not blame capitalism. Over leveraged banks and overpriced real estate is not the blame, it was simply reality. It is a reality that many banking executives ignored. In a new book, "A Colossal Failure Of Common Sense", Lawrence McDonald, a former vice president at Lehman Brothers presents an insider's view to the crisis. According to McDonald, as early as 2005, some experts at Lehman's were sounding the warning about a coming crisis. These experts even correctly identified the companies that were likely to get pummeled when the market correction came. Despite their expertise, they were ignored and some were even fired for speaking up. If this was happening at Lehman, it was also probably occurring throughout the banking industry. Thus, these high paid executive are to be blamed for the horrible wreckage that occurred to their companies, some of which, including Lehman's, went out of business despite being told what was likely to happen. In this version of the blame game, these same idiots that ignored the warning signs, are rewarded with multi-trillion dollars worth of bailout money. Sometimes the blame game is not logical: everyone is pretty aligned with the fact that the bankers and such brought this on themselves and the country, i.e. they are to blame, but many of them are still in the same positions and enjoying their taxpayer fueled bailout.

3) The Democrats love to avoid responsibility for the economic downturn by blaming Bush. Now, I am not defending Bush. The origins of the crisis festered and grew during his time in office. However, let's remember that the Democrats controlled Congress for the two years before the crisis erupted and did nothing to address the pending disaster. The Democrats ran all of the relevant banking and housing committees in Congress and NONE of them saw the problem coming until it exploded in their face. The chairperson of the Senate Banking Committee, Chris Dodd (seems we heard his name in less than flattering circumstances in a previous blog) was the biggest recipient of campaign donations from Freddie Mac. A little conflict of interest here possibly? The very housing entity that he was supposed to oversee was paying him more than $100,000 for his re-election campaign. Despicable. By the way, Obama was the second biggest recipient of campaign funds from a Federal agency that he should have also been overseeing as a Senator.

Do not get caught up in the blame game. In "Love My Country, Loathe My Government". several steps would address all of these blame issues including term limits, campaign finance reform, and a severe streamlining of government since having a lot of government (see the list of failures in point one above) do0es not seem to work. By limiting the government and the political class to a much smaller set of duties and responsibilities, maybe they can get something right for once and avoid a future economic crisis.

Tomorrow: The Blame Game Part 2 - Who Knew What and When Did They Know It?

Tuesday, August 18, 2009

Remember When?

Let's get nostalgic today. Were you alive when the following events occurred:
  • 1955 - Elvis Presley appears on television for the first time.
  • 1959 - Ford discontinues the Edsel.
  • 1962 - The Beatles record their first song.
  • 1963 - President Kennedy is assassinated.
  • 1965 - The second season of the New York World's Fair opens.
  • 1968 - McDonalds introduces the Big Mac
These events occurred a long time ago. Prior to the Internet, iPods, cable television, fax machines, email, hybrid cars, personal computers, Google, microwave ovens, cell phones, disco, death of disco (thank heavens), prior to any terrorist attacks, prior to when we knew there were Kurds/Shiite/Sunnis, and prior to Jon and Kate.

Now consider the following, recent office holding politicians:
  • John Dingell - first elected to the House in 1955 (54 years ago)
  • Robert Byrd - first elected to the Senate in 1959 (50 years ago)
  • Ted Kennedy - first elected to the Senate in 1962 (47 years ago)
  • Daniel Inouye - first elected to the Senate in 1963 (46 years ago)
  • John Conyers - first elected to the House in 1965 (44 years ago)
  • Ted Stevens - first elected to the Senate in 1968 (41 years ago)
I am a great believer that if you are not part of the solution then you must be part of the problem. Given how poorly the country has been run over the past 40 years or so, (we still have a drug problem, we still having failing public education, we still have rising health care costs, we still have no national energy program, we still have Social Security and Medicare heading for bankruptcy, etc.) could it be that these folks and others like them that have long tenures in office are part of the problem? They were elected in totally different eras of world history, eras that are long gone.

Thus, one of the most important steps in "Love My Country, Loathe My Government" is to limit the length of politicians' tenures in both the Senate and House. This step will ensure that 1) fresh ideas, minds, and viewpoints are constantly passing through both chambers since keeping the same minds in office decade after decade does not seem to be working and 2) it would hopefully remove much of the corrupting money that goes into election campaigns since politicians would only get one term, possibly freeing them up to make the tough decisions that benefit America rather than the short term, selfish reelection campaign financing decisions they make today.

Monday, August 17, 2009

Pimp My Ride, Taxpayers

Today's topic centers around an article from the NY Times (not my favorite publication) that ran on May 1, 2008. It tied in nicely to a story I heard recently on the tv news that stated Congressmen and Senators get free gasoline for their cars while in Washington while the rest of us pay not only for the gas but the state and Federal taxes that go with it. The title of the article was, "What Would You Drive if the Taxpayers Paid?" Apparently, members of the House Of Representatives are allowed to lease any car they want while in office and have the American taxpayer pay for the cost of the lease along with the gasoline that they use, a point brought up in the article, verifying the television report I referred to above.

As if this program of greed was not bad enough, you would hope that these United States leaders would at least be frugal in what they leased, would support domestic car manufacturers, and would be mileage conscious to minimize the impact on taxpayers. Not quite the case according to the article:

  • Charles Rangel of New York leases a Cadillac for more than $777 a month (expensive and lousy mileage)
  • Charlie Melancon of Louisiana leases a Chevy Tahoe (lousy mileage)
  • Bobby Rush of Illinois leases a Lincoln Navigator (expensive and lousy mileage)
  • Alcee Hastings of Florida leases an Infiniti M45 (foreign manufacturer and expensive)
  • Maurice Hinchley of New York leases a BMW 530i (foreign manufacturer and expensive)
  • Edolphus Towns of New York leases Lincoln MKX for $715 a month (expensive and lousy mileage)
  • Gregory Meeks of New York leases a Leexus LS 460 for $998 a month (foreign manufacturer and way too expensive)
  • Louise Slaughter of New York leases a Buick Lucerne for $808 a month (too expensive)
According to the article, not only do the taxpayers pay for the lease and gas but they also pay for maintenance, insurance, registration fees, and excess mileage charges. The article states that about 125 members of the House were using this program in mid-2008. If you take the monthly leasing costs of all examples mentioned in the article and multiply that average monthly lease cost by 125 participating House members, you get an annual taxpayer cost of about $1 million, just for the leases. Lord knows how high the costs go when you add in gas and these other perks of the program.

This is just one other example of this elitist mentality that has pervaded the American political class. It is not about solving the nation's problems, it is about taking care of themselves at taxpayers' expense. It is about getting themselves the good life while the nation and its citizens suffer. These are the same people whose $170,000 or so annual salaries put them in the top 5% of wage earners in this country, wage earners who have to pay for all of these car related expenses of their own household besides for these politicians' households. It is programs like this that Steps One and Two in the book would go after and thousands of other similar wasteful programs to get this country's debt levels and spending under control while not degrading the lives of ordinary Americans at all.

In closing, I loved the justification put forth by Congresswoman Slaughter whose lease runs taxpayers over $800 a month. She claims that she has a big district that requires her to drive around a lot in snow covered areas and the Buick along with its GPS system are necessary. However, what the Congresswoman does not mention is that US Senators do not have a similar program to this House giveaway program and seem to get by quite nicely despite having areas that are state wide and larger than Ms. Slaughter's district. These Senators seem to do quite nicely without a taxpayer perk, at least in this area. To them I say thank you.

Sunday, August 16, 2009

Some Things Never Change

Some of the quotes from the book, "Love My Country, Loathe My Government", were from wise people who lived very long ago. Unfortunately, they all apply to the antics of today's political class, indicating that maybe politicians have always been like they are today. It just seems like they get worse over time:

Mark Twain - "Sometimes I wonder whether the world is being run by smart people who are putting us on or imbeciles who really mean it." Although Mark Twain lived 150 years ago, he was very insightful relative to the political class. Given that nothing works any more in this country, lost war on drugs, failing public schools, broken health care market, no strategic energy policy, social programs heading for bankruptcy, corrupt and/or incompetent government oversight, corrupt government officials, etc., I am pretty sure the imbecile option is in effect even today.

Woodrow Wilson - "The government, which was designed for the people, has got into the hands of the bosses and their employees, the special interests. An invisible empire has been set up above the forms of democracy." Although Wilson said these words over eighty years ago, does anyone think that they do not apply today? Consider yesterday's post that reviewed how the major banks donated millions of dollars to both political parties last summer for their conventions and then received billions of dollars several months later as part of the banking bailout. I do not even want to guess how many lobbyists spending how much lobbying dollars currently scurry around DC. Wilson had it right and he had it right long ago: more and more, our democracy has become a charade with power floating up to the political class while our individual freedom and power in our lives is dissipated.

Karl Marx - "The oppressed are allowed once every few years to decide which particular representatives of the oppressing class are to represent them and repress them." Living over a hundred years ago, Marx correctly predicted what would happen in America. How many times have you gone into the voting booth and voted for the lesser of two evils, i.e. both options stink but one reeks a little less than the other. Although there was great interest in the last Presidential election, about 65 million American adults did not bother to vote. Could it be that they agree with Marx, it does not matter since the repression, increasing burden of taxation, and the national problems, will continue regardless of who gets elected. Unfortunately, the lesser of two evils is still evil, something that Marx knew way back when.

Barry Goldwater - "A government big enough to give you everything you need is big enough to take it all away." Obama's last budget was the biggest in both absolute and relative terms the Federal government has ever had. Our government structure has gotten incredibly large at all levels. This has resulted in debilitating debt levels and increasing taxes. Government tentacles touch as all many different ways, usually not touching us in a good way. The quote, "I am from the government and I am here to help you.", is a myth today and was probably always a myth. The only difference is that the government did not turn up on your doorstep, look at your library records, listen to your phone calls, check your Internet activity or tax you as much as they used to. Goldwater saw it coming and we were not able to stop it, government controls everything we do today to the detriment of freedom.

Pretty discouraging when you see how some great thinkers of the past saw where we would end up today. However, that can change starting today. Go to the enrollment page at and prove that what the political class is doing to us today is temporary and reversible.

Saturday, August 15, 2009

I Am Not Conflicted So You Should Not Be Either

Conflict of interest (courtesy of The 'Lectric Law Library Lexicon)= Refers to a situation when someone, such as a lawyer or public official, has competing professional or personal obligations or personal or financial interests that would make it difficult to fulfill his duties fairly.

Note that the definition does not mean that something unethical or illegal actually happened, just that a person's interests would make it difficult. Sometimes it seems that the political class does not even know the definition of conflict of interest or chooses to ignore the part that says you do not have to have something illegal or unethical happen for a conflict to exist. In either case, consider the following short list of examples that fall under this definition and continue to undermine our belief that politicians do put themselves before their constituents and the country:

  • According to an article in the St. Petersburg Times on June 30, 2009, Congresswoman Ginny Brown-Waite was very interested, both professionally and personally, in the massive taxpayer bailout of the banking industry. Not only did she sit on the House committee that oversaw the banking industry, she also personally invested in specific banks she was supposed to be regulating. The day before the bailout of Citigroup, she bought the company's stock. Eleven days later she bought stock in Bank Of America just as the administration announced another massive dose of taxpayer money going to banks like Bank Of America. The Congresswoman denied that there was any conflict of interest. Huh? You are sitting on a BANKING committee and have access to tons of information about specific banks, the industry as a whole, possible government actions, etc. and you are actively trading banking stocks. In the real world, if we did something like that we would probably by liable for insider trading violations. But as long you are a member of the political class, it seems as long as you vow no conflict of interest occurred, none did.
  • On January 4, 2009, the St. Petersburg Times reported that Senator Hillary Clinton was able to get a New York developer special tax treatment and government road funding for his mall development project around the same time that the developer contributed $100,000 to husband Bill Clinton's foundation. When you are an elected official and your husband is getting money and your actions result in good things happening for that donor, it is a conflict of interest even if nothing illegal or unethical happened.
  • The next example is Senator Dodd of Connecticut who, of course, has denied there was any conflict of interest in his dealing with Countrywide Financial. This past week the Senate Ethics Committee, consisting of members of the political class, cleared Dodd of any ethics violations. However, is this not a case of the foxes guarding the hen house? The pessimist in me says that if they had found Dodd violated ethics rules, they themselves might be cut off from similar deals in the future. Just my cynicism shining through I guess. Thus, I will leave it to you to decide if he had any conflicts of interest even if nothing illegal happened (source: Wikipedia):
  1. Dodd is currently the chairman of the Senate Banking committee and thus, has tremendous influence and power in the entire housing and banking industry
  2. In 2003, Dodd received favorable mortgage loans from Countrywide Financial on two properties
  3. In 2008, Dodd proposed a program that would greatly benefit subprime lenders such as Countrywide Financial, the company that gave him the good mortgage deals
  4. Countrywide Financial was bought by Bank Of America
  5. Bank Of America also contributed $70,000 to Dodd's election committee
  6. Dodd also received over $130,000 in campaign donations from Freddie Mac and Fannie Mae even though they are Federal housing programs, i.e. you paid taxes to the government, some of which found its way to these two government housing industry entities that turned around and took some of those dollars and gave it to a member of the political class. Thus, in essence, all of us subsided Dodd's reelection campaign.
  • And one last example from the St. Petersburg Times on December 11, 2008. In mid-2008, many banks gave millions of dollars to both parties of the political class for the expense of their conventions. Several months later, the same political class throws untold billions of taxpayer dollars at this same banks . Coincidence? I do not think so. Just another example where competing obligations arose and the political class chose themselves over the interests of their districts, their states and the country.

These kinds of actions make it very difficult to believe anyone from the political class when they say they are supporting something or doing something for our own good, these examples and many other instances would indicate we are not at the top of their priority list. It undermines the very foundation of this country that the government is looking out for our individual self interests.

There is a very simple solution that would clear all of this up: during you tenure in office and for several years after your tenure ends, you are not allowed to personally deal with that industry or section of the economy that you are involved in through committee work. Sit on the Banking Committee, then you cannot invest or receive campaign donations from the banking industry. Sit on a Congressional energy committee, then you are not allowed to invest in or receive campaign donations form oil companies, electric companies etc. The fact that this simple yet bold rule is not part of our government processes indicates that the political class really does not care about conflicts of interest since it conflicts with their self interest.

Thursday, August 13, 2009

Famous Monty Python/Holy Grail Quote: "I fart in your general direction."

This quote from the famous Monty Python movie, "Monty Python and The Holy Grail," was used when the defenders of a castle were hurling insults at King Arthur. Sort of feels like the way the American political class treats ordinary citizens with contempt and annoyance today, now farting in our direction:

  • Earlier this week, Congresswoman Shelia Jackson of Houston was conducting a town hall type meeting to discuss the health care reform efforts of the Obama administration. A young woman was politely explaining her opposition to health care reform, eloquently describing how she was a cancer survivor and that her own health care plan and doctors were wonderful and saved her live without government interference. In the course of her talking, the Congresswoman answered a call on her cell phone and conducted a brief cell conversation while this constituent was speaking. Nothing says you are unimportant/I fart in your general direction more than answering your cell phone in the middle of a direct conversation with someone, without any explanation or a word of apology.
  • Earlier this year some numbskull in the political class thought it would be a good idea to take Airforce One and a fighter jet on a low level flying excursion over Manhattan to take a picture of Air Force One with the Statue Of Liberty in the background. Two Python contempt moments here. First, let the taxpayers be damned, let's spend over $300,000 of taxpayer money on jet fuel and other expenses to take one picture that could have easily, and for virtually no cost, been created with Photoshop or any other photo editing software. The hidden cost of the flight was likely much higher since people in Manhattan were freaking out, leaving work, getting hysterical in the street, assuming another terrorist attack was imminent given the low flying planes, evoking horrible memories of the 9-11 attacks. Second, several days later at the annual Correspondents Dinner, President Obama thought it would be a good idea to make a joke about the incident even though it had widely reported how widespread and stressful the panic had been: "Sasha and Malia aren't here tonight because they're grounded. You just can't take Air Force One on a joy ride to Manhattan." Hah, hah, very funny. Let's stress out the workers and residents of an entire city for a joke, in the process showing utter contempt for New Yorkers.
  • In late 2008, Senator Majority Leader Harry Reid was widely quoted as saying: "In the summertime... you could literally smell the tourists coming into the Capitol." Talk about contempt. Even though you citizens pay my salary and pay for all the perks that we here in the political class enjoy, I really think you guys all stink and would prefer not to deal with you, especially in the summer. And this is a person who has "leader" in his title. Not the type of leader I would follow into battle.
  • Ex-Governor of Illinois, Rod Blagojevich showed extreme contempt for the citizens of Illinois. Rather than fill President Obama's vacant Senate seat with the most able candidate available to serve Illinois residents, the ex-governor was caught on wiretaps explaining and ranting about how valuable the vacant seat was, that he would not want to just give it away unless he was handsomely rewarded for the appointment.

This list of contemptible political class moments could go one forever but you get the idea. We are nothing more than votes to them and an annoyance whenever they come in contact with us despite their jobs and perks depending on our tax dollars. Now I know how Python's King Arthur must have felt.

Wednesday, August 12, 2009

Would You Like Fries With That Stimulus Package (because that is all it is worth)

Let's take a well deserved break from health care reform and talk about stimulus packages. There is actually talk around DC of having a second stimulus package. Is that a good idea? Me thinks not. In her Reason magazine ( article in the April, 2009 issue, "Stimulating Ourselves To Death", Veronique deRugy does an inventory of stimulus history and analysis:

1) In a published work in 1992, Christina Romer, chair of Obama' s Council of Economic Advisors, and David Romer examined New Deal stimulus spending during the Depression and concluded that stimulus spending did not play any role in ending the Depression.

2) Harvard economist, Robert Barro, in his 2008 book, "Macroeconomics: A Modern Approach" concluded that $1 of government spending in war time produces less than $1.00 ($.80) in GDP growth.

3) Stanford economist Bob Hall and Sand Hill Econometrics chief Susan Woodward found that government spending in wartime did not increase or decrease GDP, i.e. for every $1.00 spent a dollar in GDP resulted.

4) Japan spent over $840 billion in stimulus attempts to restart their economy in the 1990s. This resulted in a massive jump in their debt to GDP ratio, massive corruption scandals and no economic recovery.

5) The Bush administration passed two stimulus packages, one in 2001 and one in 2008. Both failed to stimulate anything.

6) Brian Riedl of the Heritage Foundation analyzed several studies and found that increases in government spending actually reduce the size of the GDP.

Ms. deRugy explains the numerous reasons why stimulus packages and government spending do not increase economic activity but the biggest reason they do not work is also the simplest reason: government cannot inject money into the economy without taking money out of the economy first. They can borrow the money or collect it with more taxes but there is no aggregate growth in market demand. All it is is a redistribution of current or future wealth by the political class who tend to spend these stimulus dollars for pet projects that satisfy their egos and reelection needs.

A final stimulus rebuttal comes from a recent Cato Institute publication ( It cites a January 9, 2009 Obama quote regarding the latest stimulus package, "There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy." Unfortunately, this was not quite a true statement (my gosh, a politician lied?). Cato surveyed many leading economists and found over a hundred that strongly disagreed with that statement, i.e. everybody did not agree. These in disagreement came from leading, major universities including the University of Chicago, Cornell, Northwestern, Columbia, Stanford, NYU, Duke, Carnegie Mellon, USC, UCLA, MIchigan, Ohio State, Auburn, Washington University, Johns Hopkins, University Of Delaware, Rutgers, FSU, University of Texas, and many more.

So, take the fries option because past and future stimulus programs will not get us much more than that.

Tuesday, August 11, 2009

General Motors, Chrysler and Southern California

Matt Welch wrote an interesting article in Reason Magazine ( in July, "Why Long Beach Isn't Detroit." Back when Mr. Welch was growing up, southern California, and especially Long Beach, had a major aerospace and aircraft manufacturing economy. However, almost overnight, the Cold War ended and hundreds of thousands aircraft manufacturing jobs disappeared. The local economy took a significant hit and real estate prices plunged. According to Mr. Welch's memory, the general feeling was that Long Beach would never again regain its glory.

Fortunately, the Federal government did not step in with billions of taxpayer dollars to bailout a faltering industry and faltering companies. Instead, private investors swooped in to buy distressed assets and equipment and significantly began to rebuild and diversify the economy. McDonnell Douglas was allowed to suffer for its many missteps in the market and did not receive any bailouts for its incompetence. The ports went from a focus on war making to serving the global consumer market. Long Beach and LA ports are now the largest commercial ports in the hemisphere. Warehousing, tourism, restaurants, and other industries moved in to replace aircraft manufacturing. The housing market rebounded and Long Beach's population actually grew 7.5% in the 1990s despite this economic upheaval. The free market worked, it worked efficiently, it worked quickly, and it worked without Federal taxpayer money.

Now let's turn to GM and Chrysler. The best estimates I have seen is that the U.S. taxpayer is out $68 billion in bailouts for these two companies. That $68 billion comes down to about $523 per household, i.e. you spend over $500 to unnecessarily bailout these companies. GM is now basically owned by the U.S. government. Given the awful track record of the political class in fixing any problem (see previous posts where we noticed that the political class still has not solved the problems regarding drugs, education, energy strategy, health care costs, etc.,etc., etc.) do we really think that Detroit will rebound like Long Beach did or that it will remain a depressed area forever?

Imagine what would have happened if the Federal government had not spent our money for the bailouts. Factories would have closed, dealerships would have closed, unprofitable assets (e.g. Saturn, Pontiac, Saab, Hummer, etc.) would have been sold off, employees would have been laid off, salaries and benefits would have been trimmed. Other parties would have swept in to buy up assets in the hope they could have utilized them more profitably. The local economy in auto towns and cities would have naturally adjusted much like what happened in Long Beach and southern California. Oh, wait a minute. That is exactly what happened (closings, assets sold off, salaries trimmed) except that it cost the U.S. taxpayer $68 billion and we are left to hope that Obama, Pelosi, Reid and the rest of the Washington gang can run a car company. Given that they cannot run the government effectively and efficiently, I am not hopeful that the southern California turnaround will happen soon in Detroit.

Monday, August 10, 2009

Spending S0 Much To Get So Very Little

I recently came across a short, older article from The Week ( magazine, dated January 23, 2009. The article quoted information from the Baltimore Sun which stated that the United States spends twice the percentage of its gross domestic product, 16%, than just about every other developed country in the world for health care. Similarly, the U.S. spending on higher education is also double most other nations, again as measured as a percentage of GDP.

Given the grossly higher expenditures, one would expect that we have the finest health care and the best education system in the world. Apparently, we are not spending our dollars wisely. Everybody is pretty convinced that we have a broken and costly health care delivery system in this country despite the high expenditures. Unfortunately, Obama, Reid, Pelosi and the rest of the political class gang want to spend even more money (trillions more) without solving the core reasons why the current delivery process is broken.

Public education in this country is no better despite the high amount of money spent on it. According to the recent poll by the Program For International Student Assessment, United States' students finished with a less than average score for science literacy vs. fifty seven other countries score and trailed the scores of 22 other countries. In mathematics, the U.S. finished below the average and trailed thirty one other countries. Some of these countries that score higher included Estonia, Slovenia and Macau. Let's face it, these number are embarrassing given how much we spend to attain them.

"Love My Country, Loathe My Government" would address these two steps directly through Steps 27 and 28. We can no longer wait for the political class to solve these problems. They have proven conclusively they cannot despite trillions of dollars and decades to get it right.

Sunday, August 9, 2009

Our Lost War On Drugs

In the late 1960s, President Nixon declared war on drugs. In the early 1980s President Reagan declared war on marijuana. Today, it appears that neither effort and the less famous efforts of other administrations have had much of an effect on drug usage. Drug usage has gone through cycles but has not diminished much at all. We have a narco nation developing along our southern border and narco ghettos in many of our cities. The political class never got a handle on this problem.

Thus, it was so refreshing to come across a country, Portugal, that has taken a mature and logical approach to curb its drug problem. In the July, 2009 issue of Reason magazine (, an interview with Glenn Greenwald of the Cato Institute ( laid out how Portugal did what the American political class could not. They established a nonpartisan group of experts who took a zero-based approach to answer the basic question: "How can we best limit drug usage and drug addiction?" They studied a range of options and recommended what they believed what was optimal policy. In a nutshell, the decriminalized drug possession (not the same as drug legalization) which enabled the authorities shift more resources from law enforcement activities to treatment activities. The net result was a significant drop in drug usage in the country.

This exact same approach is laid out in Step 26 of "Love My Country, Loathe My Government." Given that the political class is no closer to solving this country's drug problem today than when Nixon declared war, why not follow Portugal's lead from a process perspective? Let some very smart Americans from a variety of fields (law enforcement, medicine, economics, sociology, etc.) get together and come up with a plan. They obviously could not do any worse than what we have gotten out of Washington since the late 1960s.

Saturday, August 8, 2009

Tax Freedom Day

The Tax Foundation ( produces an annual analysis which takes a detailed look at how many days the average American works to pay off the average household tax burden from all government sources. The day where the household stops working to fund the government and starts working for themselves is called Tax Freedom Day.

In March, 2009 the Tax Foundation announced the latest results: the average American household will work until April 13 this year supporting the government's expenses and on April 14 will start working for themselves. This is a little earlier than average for two reasons: 1) the recession has reduced tax collections faster than family income and 2) the stimulus package included some temporary tax cuts that will expire after next year. Thus, an earlier Tax Freedom Day does not mark the beginning of a favorable trend for taxpayers, it may just be an anomaly. Furthermore, according to the Tax Foundation, Americans will pay more in taxes THAN THEY WILL SPEND ON FOOD, CLOTHING AND HOUSING COMBINED. From a freedom perspective, this is just an atrocious statement that we spend more for government than we do for basic living needs.

More bad news. If the Federal deficit effect is taken into account, not just taxes collected which is the basis of Tax Freedom Day, than the April 13 date is actually May 29! According to the Tax Foundation, this is the latest day in the year this deficit-inclusive measure has ever fallen. Try to imagine that date: beginning with January 1st college football games until about the Memorial Day weekend picnic, you are working for the political class and the government. Frightening. And now with the political class wanting to spend trillions of more dollars on health care reform, no end in sight for wasteful pork barrel projects, an escalating Pentagon budget, the need to improve the country's infrastructure, etc., we may get to the point where our pay checks are sent directly to the government and they in turn provide a small stipend back to us each month.

That is why the first three steps in "Love My Country, Loathe My Government" are so important. We must immediately start to reduce the size of government, reduce the deficit and return our wealth back to us, we earned we should keep it.

A final note: according to the Tax Foundation, special condolences should go out to residents of Connecticut (April 30), New Jersey (April 29), New York (April 25) and California (April 20) since these folks have to work the longest to get to their state's Tax Freedom Day. Conversely, Alaska (March 23), Louisiana (March 28) and Mississippi (March 28) get to their Tax Freedom Day the earliest. Still obscene that they have to work almost three months to get there but certainly better than the top four.

More bad news.

Friday, August 7, 2009

Cash For Clunkers Is A Clunker

A lot of the political class are patting themselves on the back with what they assume is a tremendous success - the Cash For Clunkers program. Briefly stated, the political class in Washington has set aside $3,000,000,000 of our money to help consumers buy new cars by providing each one of them a $4,500 rebate. The new car purchasers basically have to be older cars that get poor gas mileage. The politicians point to the fact that the original $1 billion set aside was used up very quickly, causing them to rush out and allocate another $2 billion.

But is this program really such a success? On any number of levels this high level of excitement is really a false sense of accomplishment by the political class, from several perspectives including economic, freedom, environmental and practical:

  • How many of these Cash For Clunker sales are truly incremental sales? In other words, how many of these sales would have occurred anyway, one month, two months or six months down the road? I predict that by the end of the year you will see a significant dip in new car order sales since many of these August sales were really just October, November, etc. sales that were pulled forward by the generous rebates. Thus, the political class cannot claim credit for every one of these sales as being incremental.
  • There have been reports that some of these sales are not pulling current clunkers off of the road, the program is actually causing some people to go to junk yards, buy barely running junkers for a nominal fee, get them registered and then turning them in for the generous rebates. Thus, in these cases the program is actually putting MORE bad mileage cars on the road, if even for a short time. The one personal case that was related to me was a local car dealer who got a clunker that only had a front window, all of the other windows had been removed or smashed.
  • The political class is calling the success of this program a great economic stimulus program which is total nonsense. As calculated in a previous post, if you divide the cost of the program of $3 billion and divide it by the number of US households (130 million), you find that each American household paid $23 into this program. This is money that the average US household cannot now spend on movie tickets, food, iTune songs, medicine, a round of golf, etc. Thus, there is no substantial net increase in economic activity, the program just robbed other consumer categories of sales by forcing us all to pay for this program. Remember the overarching lesson from the book: the government pays for nothing, it only redistributes wealth it takes from its citizens.
  • As a continuation of the previous bullet point, this program, like most other government programs, is an infringement on our freedom. We are forced to pay money into this and similar programs via taxes that the political class thinks is a good idea. We should be able to spend our hard earned money on things that WE think are a good idea.
  • While I have not investigated the minute details of the program, the fact that some Democrats are grousing about the less than stellar mileage of some of the eligible vehicles tells me that the program is falling short from an environmental perspective also. Since the program is probably not an economic success, you would hope that that least the environment could get a little boost by having only high mileage vehicles available in the program. Apparently this is not the case if even Democrats are balking at this facet of the program.
  • And finally, from a socialism point of view, not one of my favorite perspectives this program is also lacking. If you have enough money to buy a new car, even with the $4,500 rebate, you are probably holding down a job or are pretty well off financially. I would expect that not a lot of unemployed, financially strapped citizens are lining up for this program. If the political class is going to take my money, would it have not been a little kinder and smarter to extend some unemployment benefits, beefed up the food stamp program, expanded job retraining programs, etc. and take care of the immediate needs of the unemployed? Given that the program is not a stellar success from economic, marketing, freedom and environmental perspectives, helping out needy folks would have been a much better use of the money.

As always, government interference in the free market place is never a good idea for a whole bunch of reasons.

Thursday, August 6, 2009

Wasteful Foreign Deployments

Let's take on a different topic today and give health care reform a little break with the exception of the closing paragraph below. As you probably know, the Pentagon is always one of the biggest budget items that the Federal government spends our tax dollars on. In fact, I recently read that the United States spends more on defense than the rest of the word combined. In order to attain a 50% decrease in Washington spending, return that unused wealth back to taxpayers and thus, increasing freedom, the Pentagon budget would have to be cut significantly.

A July 3, 2009 article in the Tampa Bay Times, which was a reprint form the Atlanta-Journal Constitution, provided some insights on first steps to getting this spending under control. The article cited the 2007 statistics from the Department Of Defense:

  • The United States had 295,003 military personnel in 150 countries as of the end of 2007
  • This excluded 218,500 personnel in Iraq and 25,240 personnel in Afghanistan
  • There were U.S. 57,080 troops in Germany
  • There were 32,803 troops in Japan
  • There were 27,014 troops in Korea
  • There were 9,925 in Great Britain
  • There were 9,855 in Italy
  • There were 1,594 in Turkey
  • There were 1,286 in Spain

Let's do some math. If we subtract the troop levels above (excluding Iraq and Afghanistan) from the Department of Defense total, we end up with 155,446 troops stationed in 143 countries. This leads to an estimated deployment per country of 1,087. If we assume that none of these 143 countries have more than Spain, the last country listed in the article, then we probably have about 1,000 troops stationed in each of those 143 countries. While some of these troops are undoubtedly stationed in our embassies for embassy protection, I doubt we need a deployment of 1,000 troops per embassy.

Thus, the first step in reducing Pentagon costs is to return almost of these troops to the U.S. Why do we need 57,000 troops in Germany? They serve no strategic need now that the Iron Curtain has fallen and the Cold War is over. 32,000 troops in Japan are not going to deter China's military and do we really think the Japanese will attack Pearl Harbor again? Our troops in South Korea are only a small percentage of the South Korean army, let them defend their own country. Removing our troops might even ease tensions on the Korean peninsula. I cannot imagine what almost 10,000 troops are doing in Great Britain. Stationing thousands of troops in over a hundred countries serves no purpose except to waste our tax dollars.

Returning these troops will not make America any less safe. I doubt that the 57,000 troops in Germany are any kind of terrorist deterrent. Let's save the money and get focused on the real military threats, not worry about having troops in 150 countries. It is a ridiculous, expensive and ineffective military strategy in light of the terrorism threats in the world today. This strategy is embodied by Step 30 in the book, "Love My Country, Loathe My Government".

A short sidebar on health care reform debate as promised. I loved a comment from an American citizen I saw today who was on a tear while discussing Obama's health care reform program with the citizen's Congressman. Basically his statement was that why did Obama take six months to pick out a dog for his kids while he wants to pass a trillion dollar (or more) health care reform program in four weeks? I could not have said it better. See some of my previous posts for a more detailed discussion.

Wednesday, August 5, 2009

Pork Lives On

Although the Federal government is running record deficits in the trillions of dollars and the political class in DC shows no ability to control it, wasteful government programs continue to be identified for implementation by the Federal wing of the political class. On May 30, 2009 the Real Politics website listed out some recent earmarks that had been set aside for pet/local projects by members of the political class, despite the record deficits. These programs and earmarks include, but are certainly not limited, to the following:

  • $238,000 for the Polynesian Voyaging Society (Hawaiian pork)
  • $1,600,000 for a forage animal production research lab (Kentucky pork)
  • $274,000 for animal waste management (Oklahoma pork)
  • $1,791,000 for Swine Odor and Manure Management Research (Iowa pork)
  • $1,900,000 for Hattiesburg 4th Street improvements (Mississippi pork)
  • $800,000 for oyster rehabilitation (Alabama pork)
  • $19,642,000 for support of health projects and economic development activities for the arctic region (Alaska pork)

As you can see, these and most other projects like these affect a very small set of citizens inside a particular state. Thus, the question that begs to be answered is why aren't these state projects paid for by each state's residents? If Alaska wants to develop the arctic region, then let the Alaskans pay for it. If it smells in Iowa, let the good people of Iowa pay for the solution. By allowing the Washington politicians to pay for these local programs and projects, the incumbents can look like they are bringing home the pork, increasing their perceived value and help perpetuate their ability to stay in office, despite forcing citizens from other states to subsidize their local pork projects. "Love My Country, Loathe My Government" and it's Step 46 would greatly help eliminate this waste by not allowing the Federal government fund any project unless it materially affected a large number of Americans in at least five states. If a program did not meet this criterion, then the state's own citizens would have to foot the entire bill.

I strongly believe that if a state had to pay for the entire program, many of these local, wasteful projects would go away, saving untold billions of dollars in taxpayer money. And, as we know from the book, saving taxpayer dollars increases personal freedom. On our website,, visitors can vote on a long list of local Federal government projects such as those listed above. So far, every visitor to the site has voted against every project listed. Thus, there is hope that most Americans are beginning to realize how wasteful these parochial programs are and it is their desire to eliminate them or force the states to pay for them, saving valuable taxpayer dollars.