Wisconsin, Simple Math, Simpleton Politicians

As most of you probably know by now, there have been some rather large demonstrations going on in Madison, Wisconsin by public employee union members who are upset that the new Republican governor and legislature are about to pass a bill that would eliminate collective bargaining for certain public employee unions and require union members to contribute to their pension and medical benefit costs. The reason for this legislative action is that the state is faced with a looming budget deficit of $3.6 billion and the Republican lawmakers believe that this is only way to effectively close that deficit.

Now, I was struck by the idiocy of a lawmaker who was supporting the protesters on the news by saying that that wealthy in Wisconsin should be taxed more and that the unions should not be required to do any givebacks to save the financial solvency of the state. That got me to doing a little math to see if the math was simple in this case or the politician was simple:

• To support a previous post in this blog I went and found out how many Americans earn how much money as reported to the IRS. Thus, these are official Federal government numbers, they are not Fox News numbers, Tea Party numbers, Republican numbers. These are 2008 final, official IRS numbers, the last year which this data was available to this detail
• I also checked out the results of the 2010 Census which showed that Wisconsin was home to 1.82% of the nation's population.
• For 2008 IRS filings, 321,294 households nationwide earned over as million dollars. If you assume that the number of millionaires are spread throughout the country in the same proportion as the population, then we would expect Wisconsin to have about 5,847 millionaire earners in the state, 1.82% of 321,294.
• If this lawmaker wanted the "rich' to pick up the state budget shortfall, then each of those 5,847 state residents would have to pay a whopping $615,700 to eliminate the shortfall ($3.6 billion divided by 5,847 people).
• I would venture a guess that there are even fewer millionaire earners in Wisconsin than the 5,847 estimate above, making the budget reduction burden for Wisconsin millionaire earners even greater. Other, richer  states (New York, California, Texas, New Jersey) probably have more millionaire earners relative to their population than Wisconsin.
• If you ever did such an insane move you can be sure that shortly afterward there would be no millionaires living in Wisconsin.
• Since we know that the average American household spends almost 30% of its annual income on income taxes, sales taxes, Social Security taxes, Medicare taxes, property taxes, gasoline taxes, excise taxes, etc., and Wisconsin is already one of the most heavily taxed states, many of these Wisconsin millionaires would not be able to pay their $615,700 share since after taking more than 30% of their earnings via other taxes and paying for food and other basic necessities, they would not have enough left over to cover their $615,700.

Simple math, simpleton politicians. The government debt burden has gotten so high in this country that even if you confiscate all of the earnings from the richer Wisconsin families, you still might not be able to cover the budget shortfall. Does not the political class understand this simple math fact of reality? You can no longer tax the rich to pay off the bad financial management of the simpleton politicians.

Last year we did a similar analysis for the national debt. Fortune magazine annually publishes its list of the richest Americans along with an estimate of their worth. If you added up the richest 400 Americans from their last analysis, you found that their total net worth was about $2.7 TRILLION. Thus, if you confiscated all that these richest Americans owned, (bonds, cash, boats, houses, cars, furs, property), you would not come close to paying down just the deficit that Obama, Reid, and Pelosi rang up over the past four years. You cannot tax the rich enough, even if you take all that they own, to cover the shortfall. Simple math, simpleton politicians.

Want more examples? Last year, my home state of New Jersey was looking at a state government expense stream of about $30 billion and a revenue stream of about $20 billion, leaving a budget shortfall of about $10 billion. What were half of the New Jersey political class worried about? Was it the $10 billion? No, it was the fact that the governor refused to raise the income tax on the highest earners in the state by 2%.

By the outcries from the state employee unions and the state Democrats, you would have thought that this single action was responsible for the $10 billion shortfall. However, if you did the math, you would have found that raising the income tax 2% for that small percentage of earners would have raised far less than $1 billion, still leaving the state more than NINE billion dollars short. Rather than attack the underlying root causes of the problem, the politicians were intent on arguing and politicking over a nit that would not have made any significant difference in the overall crisis. Simple math, simpleton politicians.

That is what is so disconcerting about the Federal government's skyrocketing national debt. It seems most of the political class do not understand simple, logical math and the simple reality that goes along with it. And even the small percentage of politicians that might get the simple math, they are too busy continually running for office to make a stand for sanity. Let's review the looming financial crisis at the Federal level once again for the simpletons in D.C., I will try to speak s...l...o...w...l...y:

1. We are about to hit a national debt level of $14 TRILLION.
2. With about 115 million households in the country, that comes out to a debt burden of about $122,000 per household.
3. In the best of all economic worlds, if Obama has his way, his budgets will add another $7 TRILLION to the national debt in the next ten years, making the household burden in excess of $182,000. This debt will eventually have to be paid off by us and FUTURE generations of Americans, our kids and our grandkids.
4. Very soon, within the next few years, American taxpayers will pay more on interest on the Federal debt than they do on all other discretionary areas of the Federal budget combined, meaning less money for transportation, education, etc.
5. By paying so much to cover the national debt, Americans will be less free to spend their earnings on things they want such as charities, better schooling for their kids, their own businesses, and their own lives, resulting in a sustained and deep loss of freedom.
6. Speaking of freedom, the Chinese now own almost $1 TRILLION worth of our debt, restricting our freedom in the international arena, i.e. do not tick off one of your largest bond holders regardless of what compromises you have to make on human rights.
7. Smart Americans from across the political spectrum recognize and understand the problem and most have come up with ways to eliminate the problem, with the one exception being the American political class. These partisan and bipartisan Americans include, but are not limited to, the Cato Institute, Obama's own debt reduction comimission, the Concord Coalition, the National Taxpayers Union and the U.S. Public Interest Research Group.

Simple math, simpleton politicians. Simply a travesty. 




Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment

George Orwell, Doublethink and Today's Politicians

I am a big fan of George Orwell's classic Novel, "1984." I think he was a great writer and a better prognosticator since many of the predictions he made on "1984" of how democracies would die are actually unfolding today, throughout the world and throughout America. One of the concepts he talks about is "doublethink" which he defines as the ability "to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them." If a leader can establish doublethink in the minds of his followers, then the credibility of that leader will never be questioned since whatever he says is right, doublethink suppresses free thought and free will.

I was thinking of how proud Orwell would be of our current day political class. Many examples abound of how our politicians and the government they run can implement two contradictory programs and never once stop to consider the incongruity and disconnect between the two programs. Consider:

- One of the leading drivers of escalating health care costs in this country is the poor eating habits and exercise habits of many Americans, leaving them overweight and susceptible to many diseases. In fact, one of the main activities of Michele Obama since coming to Washington has been to work hard to reduce the obesity problem plaguing many, many kids in this country. One of the efforts that both Ms. Obama is pushing, along with other parts of the government, including the Agriculture Department, is to reduce the amount of saturated fat that Americans eat, encouraging us to move towards low fat milk and other low fat dairy products.

This all sounds good. However, consider an organization called Dairy Management, as described in a November 8, 2010 New York Times article. Dairy Management is financed by a government mandated fee on the dairy industry and receives millions of dollars a year directly from the budget of the Agricultural Department. The Agriculture Department sits on Dairy Management's board, approves its marketing campaigns, and interfaces with Congress on its work. But Dairy Management recently worked with Domino's Pizza to develop a new line of pizza offerings. These new pies had 40% more cheese and Dairy Management helped develop and pay for the associated $12 million marketing campaign.

But wait. Each slice of these new pizzas contains as much as two thirds of a person's daily recommended amount of saturated fat, which has been linked to heart disease and other diseases. Thus, our government is telling people to eat better and reduce the amount of unsaturated fat in their diets while they are funding support for private companies to put more saturated fat back into Americans' diets. The particularly ironic part of this Domino's example is that I would assume that kids are high pizza eaters, the same type of Americans that Michele Obama is trying to get healthy. Doublethink in the Agriculture Department - eat healthier but don't eat healthier.

- There has been a lot of hype lately regarding all electric cars, some of which will be available shortly for consumer use, e.g. General Motors' Volt. The hope behind electric cars is that they will not spew out pollutants like the gasoline internal combustion engine, improving the environment, and will help wean us from dependency on foreign energy sources. Our political class is so excited about the future of electric cares that, according to an electric car article that was in the October 9, 2010 issue of The Economist magazine, you can get up to a $7,500 subsidy rebate from the U.S. government if you purchase one.

Sounds like a great deal. Get taxpayer money to buy a new car while helping the environment. But, are these vehicles really helping the environment? While the car itself is less polluting, the energy creation needed to generate the electricity to power these cars will increase. In the United States, we get a lot of our electrical power from coal electric plants, which are not the cleanest producers of electricity from an environmental perspective. Thus, we need to find a way to reduce the amount of coal created electricity if the potential of electric cars is to be fulfilled.

But, according to a Washington Post article from May 14, 2007, the government's National Rural Electric Cooperative Association, another Agriculture Department effort, plans to spend $35 billion over the next decade to help build conventional coal electricity plants. More doublethink in the Agriculture Department - the government hands out taxpayer funds for the purchase of electric cars to clean up the environment but uses other taxpayer money to dirty up the environment with coal electricity plants to power the cleaner electric cars.

- Over the past sixty years, the United States has probably spent hundreds of billions of dollars supporting the security and prosperity of South Korea. We fought on South Korea's side, defending them from North Korean and Chinese troops in the Korean war, we provided aid for the recovery, and have stationed tens of thousands of troops in the country since the end of that war. As a result, the South Korean economy has grown into one of the strongest in the world. Besides providing a security cover for their economy to blossom, we are also an important trading partner and market for their companies.

Recently, our State Department has been working to generate support for economic sanctions against the Iranian government in retaliation for the Iranians supposedly developing a nuclear weapon technology. The State Department strategy is to make life so uncomfortable for the Iranian people and government that they will become less likely to develop a nuclear bomb capability.

So what do the South Korean do relative to Iran? According to an article in the October 9, 2010 issue of The Economist magazine, South Korea still wants to protect its annual $10 billion trade volumes with Iran so it recently signed a deal with Iran so that Korean and Iranian business partners could settle trade accounts via a special facility established in two Korean banks and in Korean currencies. State Department doublethink: South Korea is our ally even though they go out of their way to bypass the very sanctions the State Department wants to impose on Iran.

- For years now, the Federal government has subsidized American corn farmers, recently to the tune of $7 billion a year, enticing them to grow more corn, which is eventually turned into ethanol. The ethanol is then added to our national gasoline supply to theoretically extend our gasoline supplies, reduce our dependency on foreign oil and clean up the environment by burning more ethanol and less gasoline. 

But the inconvenient truth is that none of the benefits never really materialized and additional problems were created. Since ethanol contains significantly less energy potential than gasoline, more gasoline has to be burned to make up for the energy loss when burning ethanol. According to Robert Bryce of the National Review Online, studies have shown that ethanol use as a motor vehicle fuel increases nitrogen oxides and other key pollutants by 7% over gasoline and also corrodes the fuel lines of older cars and other engines.

According to Cornell Professor David Pimentel, as covered in the energy policy section of "Love My Country, Loathe My Government," corn ethanol is a terrible fuel. It diverts corn crops from the food chain to the energy chain, increasing food costs, it takes a terrible toll on the soil environment, and it is a net user of energy, i.e. it uses more energy to produce than it creates.

Sounds horrible: bad fuel economy, air pollution, soil pollution, bad economics, etc. So what is the political class about to do? According to Mr. Bryce, President Obama recently announced that his administration was going to allow the blend of gasoline to ethanol, currently 90/10, to rise to 85/15. He did this as a favor to the corn industry which has more ethanol distillery capacity than it needs. Energy Department doublethink: using ethanol in a 90/10 mixture is a bad thing to do but moving to an 85/25 mixture is a good thing.

- According to a November 8, 2010 Associated Press report, our war effort in Afghanistan faces a dire shortage of 900 trainers and not enough Afghan officers in the race to build up a viable native Afghan fighting force, which would allow NATO and the United States to get its troops out of the country as soon as possible. According to the recent report, the head of the training operation in the country said that if these trainers are not brought on board soon, the July, 2011 pulldown date of American forces is not going to happen.

Training challenges include a high illiteracy rate among Army and police forces (over 90%), high corruption among the officer ranks, and high levels of attrition (which I think is the code word for desertion.) Nine years after we entered Afghanistan, these elementary problems have not been addressed.

Since this situation is critical to successfully ending our occupation and expense of Afghanistan, one would have hoped that every effort and resource would be used to fill this training need. However, a November 4, 2010 article in the St. Petersburg Times reported that the U.S. government will spend over a half a billion taxpayer dollars to expand its embassy in the Afghanistan capital of Kabul. How many trainers do you think $511 million could buy? How many Afghanistan police officers and soldiers could be made semi-literate, enough so that they became good soldiers?

Thus, we have some Obama administration doublethink going on: we want to get out of Afghanistan as quickly as possible, our number one priority, we need a 50% increase in military trainers, 900 additional trainers, to make that happen, but we will lavishly spend resources to expand a single building complex in the capital. This is a major disconnect in logic: if we cannot produce a viable native fighting force via training, who cares how big or how nice the U.S. embassy is? It will eventually be occupied by the Taliban. Fix the root cause of the problem, the Afghan military, don't try to convince yourselves that both the military readiness and a single building are equally important. A non-doublethink approach would devote some of that $511 million to the training issue since that would recognize the vastly different priorities and importance at play here.

I am sure that you can find government and political class doublethink examples all around you. Sometimes doublethink happens because we have allowed the a Federal government to get so large that one part of it does not know what the other parts of the government are doing. One part wants to reduce pollution by promoting electric cars while another part subsidizes coal burning electric plants that dirty up the air. One part of the government wants Americans kids and adults to get healthy by eating low fat foods while another part, in this case within the same Cabinet Department (Agriculture), helps Domino's Pizza get more fatty, cheesy pizza into Americans' diets.

Sometimes doublethink happens because no one in the political class prioritizes needs and importance, e.g. the wasting of millions of dollars dressing up an embassy when military trainers, vital to our military success, go wanting. Other times politicians do doublethink to please their election campaign donors, e.g. corn farmers who get favorable treatment from the political class, even though those in the political class know that the favorable treatment is not good economically or environmentally.

Whatever the reasons underlying the doublethink situation, you can bet that the American taxpayer is footing an unnecessary bill. That is why Step 1 of "Love My Country, Loathe My Government" is so important. The Step itself calls for an annual 10% reduction in the federal government budget for five years. One way to accomplish this reduction, according Step 1, is to do a bottoms up, zero based budget review. Every government program, law, department, expenditure, etc. would be on the table, stripped down to it's core function and mission in order to look for redundancies and doublethink situations, like the Dairy Management situation described above.

Only then can we rationalize what we are paying for, why we are paying for it, should we be paying for it, and not paying for it if not worthwhile. Hopefully, once our politicians had far less government to think about and to track, they could focus much more closely on a smaller set of priorities, identifying wasteful doublethink quicker and more efficiently. Think about that wonderful goal: a quicker and more efficient government run operation. A government that has retired Orwell's concept of doublethink from our world.Our recent book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.



Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://www.realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/

What Does A Paula Poundstone Comedy Skit Have In Common With President Obama's Failed Economic Policies?

As I observe the Obama administration flail away at trying to "fix" the economy, I am reminded of an old Paula Poundstone comedy monologue/skit that she did several years ago. She was discussing that whenever you see a horrid television show, or a very bad movie, or a terrible television commercial, you need to remember that someone, somewhere actually wrote that bad idea down on a piece of paper. In fact, that idea was probably rewritten several times, from first draft to the final, wretched version. Some group of people at the television network, movie studio, or advertising agency thought that this final version was great, prior, of course, to it hitting reality and failing miserably. The original skit and the deriding of a bad Snickers commercial, even though we got the best of a bad idea, can be seen at the following link:

http://www.youtube.com/watch?v=ulM4E08J8Lo&feature=related

The same can be said of Obama's economic revival ideas. Somewhere, someplace, someone actually wrote the following failed ideas down on a piece of paper. As with Ms. Poundstone's observations, these ideas probably went through several iterations until we got to the point where this administration thought they had the very best ideas. Until, of course, these ideas hit reality and failed miserably:

• Cash For Clunkers - did not result in incremental auto sales and just gave away taxpayer money to people that were likely to have purchased an auto anyway, with or without the taxpayer gift.
• Cash For Appliances and Cash for Caulkers - see Cash For Clunkers
• H.A.M.P - This program, which was supposed to help stretched homeowners stay in their homes and avoid foreclosure, was deemed a failure by the watchdog set up to track its results. The watchdog claimed that the program wasted $50 billion in taxpayer funds without making any kind o f significant progress towards its goal. (The Week magazine - September 3, 2010 issue.)
• TARP - unnecessary and a waste of hundreds of billions of dollars. While this program was passed under the Bush administration, Obama and most Democrats supported it.
• Economic Stimulus Program - another waste of hundreds of billions of dollars. Someone in the Obama administration wrote down the threat that if the stimulus was not implemented, unemployment could go to 8%. It was implemented, and unemployment soared past 8% to the 10% range. The stimulus program wasted billions of dollars on programs that had nothing to do with job creation and wasted many more billions of dollars on infrastructure improvement programs that were not in need of improvement. For example, the Associated Press investigated stimulus bridge expenditures in late 2009 to find that about half of the bridges that underwent refurbishment were not in need of refurbishment. Who wrote down that fine idea, fix things that do not need to be fixed?
• Perpetual Extension of Unemployment Benefits - by continually extending unemployment benefits, the national debt gets larger and larger and the incentive to go back to work gets smaller and smaller. Thus, the unemployment rate never changes but the national debt level does. Why go to work if you can get anywhere from $400 to over $500 a week for not working. Why work for $10 an hour to make $400 a week when you can do nothing and still get $400 a week? I understand the need for unemployment benefits, the need to help someone over a tough patch. However, at some point that help has to end. Today I looked for a part time job in the Tampa Bay market on Craigslist. Over a thousand vacant job listings and postings came back. There are jobs out there.
• Bush Tax Cuts - I believe that the Obama administration, at one point in time, wanted to roll back the Bush tax cuts for all Americans. Under political pressure, Obama is now digging in his heels and saying only the rich should get their tax cuts repealed and higher tax rates installed. Great idea, who wrote that one down? Who thought that it would be great to take billions of dollars of disposable income out of the fragile market and economy, disposable income that could have been spent on movie tickets, new cars, restaurant visits, vacations, and other job producing activities?
• New Infrastructure Stimulus Package - the latest idea that this administration has obviously written down is to spend another $20 billion in stimulus funding, this time exclusively on infrastructure improvement. Several problems with this concept. First, we saw from the first stimulus program that funds were spent to fix/refurbish infrastructure that was not in need of fixing. How do we know that this will not occur under this program, resulting in much more wasted taxpayer money? Second, let's assume that the $20 billion is actually authorized and creates many high quality jobs at an annual rate of $50,000 a year? That would result in the one year creation of 400,000 jobs (absolute best case and these jobs would likely disappear after the money ran out after a year), while almost 15 million Americans are out of work. Thus, this idea might reduce the number of unemployed by only 2-3% (400,000/15,000,000).

Paula Poundstone's observation is so true: just because an idea is written down, and rewritten several times, does not make it a good idea, call it the Snickers Effect.

What should be done about the economy? Several good idea come to mind:

1. You must keep as much disposable income as possible in the economy to spur sales and spending, that is what would create jobs. Steps 3 and 4 from "Love My Country, Loathe My Government" covers this area of tax rate reduction as does Step 10 under Social Security reform.
2. You need to remove the uncertainty that the Obama administration has injected into the economy and the way businesses think and plan, uncertainty that includes how much more they will have to pay for health care taxes under Obama Care, how much more they will have to pay in taxes under Obama's inane Cap and Trade carbon program, how much more they will have to pay in taxes if the Bush tax cuts are not renewed, etc. Given all of this uncertainty, businesses and individuals are hunkering down and will continue to do so until there is some clear cut plans, strategic thinking, and leadership coming out of the political class from BOTH parties.
3. You must reduce the size of the Federal government and the outstanding and outrageous debt levels, that this administration is incurring, in order to free up capital and income to grow the economy. This blog has suggested several ways to reduce the size of the Federal government that easily saved $200 - $300 billion a year. These ideas range from bringing home almost all foreign deployed U.S. troops, cleaning up the massive fraud in Medicare and other government programs, and reducing the Federal headcount, a headcount that has grown considerably since Obama came into office. The Cato Institute is currently going through each Federal Cabinet department, one by one, and finding a remarkable amount of budget and waste that can be cut out of the bureaucracy that is the Federal government. The Concord Coalition, a non-partisan organization, is about to embark on a national road show to discuss and identify areas for waste reduction in the Federal government. This coalition is chaired by a former Republican Senator (Rudman) and Democratic Senator (Kerry). Steps 1 and 44 from "Love My Country, Loathe My Government" provide a plan for accomplishing this need.

The current flailings of this administration to come up with just one worthwhile economic idea indicates a lack of an overall strategic plan for fixing the economy. This administration just keeps throwing out tactical programs that do not fit into an overall integrated strategic structure. As a result, they do not understand the root causes of our economic problems and cannot address those root causes. Until the political class starts planning and worrying about America and not their political futures or "energizing their political bases", they will be no better than a Paula Poundstone comedy skit. Unfortunately, for us, the American public, the joke will continue to be on us.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Also visit the following sites for freedom:

http://www.cato.org/
http://www.reason.com/
http://www.robertringer.com/
http://www.realpolichick.blogspot.com/
http://www.flipcongress2010.com/