September, 2012 Political Class Insanity - Part 2: Solyndra Revisited, The Best Jobs In The World Are GSA Jobs, And Lost Money In California

Yesterday, we covered the first set of political class insanity acts that we have uncovered over the past month or so. Unfortunately, as time goes by, it seems we need more and more space just to cover the increasing insanity, idiocy and wasteful ways of our politicians. Thus, today is the carry over from yesterday's first set of the latest shenanigans from Washington and politicians all over:

- Most knowledgeable Americans are aware of the incredibly disastrous Solyndra escapade. In this example, we have reviewed the gory details many times:

• Solyndra, a California solar panel company, was given a Federal government/Department of Energy loan guarantee of over half a billion dollars, a loan guarantee that went south along with the taxpayer funding when Solyndra proved to be incapable of competing in the solar panel market.
• Another investor in Solyndra, with strong ties to the Obama administration, illegally had its investment priority put in front of the American taxpayer's, resulting in taxpayers receiving nothing in return after the bankruptcy proceedings of Solyndra divvied up the remains of the business.
• The biggest advocate for giving Solyndra the loan guarantee was a high ranking employee in the Department of Energy whose wife worked for the law firm that Solyndra used, a clear conflict of interest.
• The loan guarantee was made prematurely from a financial due diligence perspective because the President and his advisers wanted the loan guarantee to conform to his political photo op schedule, not the needed financial review schedule. This premature action resulted in the loss of over a half billion dollars worth of taxpayer wealth.

This is all serious stuff. However, to understand the true insanity of how our politicians cavalierly flushed half a billion dollars down the cronyism drain, consider the insulting quotes that have come to light from the actual emails that were generated as a result of Solyndra:

• The Office Of Budget Management was one of the government organizations that was not allowed to complete its analysis on the wisdom of the Solyndra loan. However, when it finally finished its analysis, an email from one of its analysts, Kelly Coylar, sent out an email with her estimate of what the American taxpayer might lose as a result of the Solyndra financing: "Expected loss: $385 million principle plus deferred interest." Thus, at least someone in the Federal government knew what was going to happen. Unfortunately, Ms. Coylar was not in a position to avoid the loss of hundreds of millions of dollars.
• Another investor in Solyndra, Brad Jones, who was an advisor with Solyndra investor Redpoint Ventures, emailed that the Federal loan guarantee for Solyndra would be a positive move for Redpoint. However, even Mr. Jones knew any government investment in Solyndra was a stupid idea: “I can’t imagine it’s a good way for the government to use taxpayer money.”
• Thomas Baruch, who was the founder of the investment firm CEMA Capital, which was another private investor in Solyndra, is quoted in an email discussing how getting taxpayer money out of Washington was as important as actually succeeding in the marketplace: “Getting business from Uncle Sam is a principal element of Solyndra’s channel strategy.” You know you do not have a viable business model and product when getting free Washington money is critical to your success.
• This importance of Federal government financing was reinforced by an email from Solyndra CEO Chris Gronet that he wrote on October 9, 2009: "The Bank of Washington continues to help us!" What a disgrace that he viewed taxpayer money as a piggy bank for his company. That is how far from reality and success in the marketplace this project had strayed when it took down half a billion dollars of taxpayer wealth.

You can see many other disgraceful, attitudes, quotes, and the actual emails at the following web page:

http://blog.heritage.org/2012/08/03/the-10-most-revealing-solyndra-emails/?utm_source=twitterfeed&utm_medium=twitter

How disgusting that business leaders, political cronies, and politicians can toss around hundreds of millions of dollars of taxpayer wealth as if they were in a nickel/dime poker game.

- Over the past few months we have covered the fiscal collapse and coming insolvency of various levels of California state governments, mostly as a result of wasteful spending over the decades by the California political class:

• A southern California city was rocked by scandal a few years ago when it came to light that the politicians in that city were making hundreds of thousands of dollars a year to perform their duties, payment levels that were orders of magnitude greater than what most other local politicians are paid.
• Two large California cities, Stockton and San Bernadino, and other smaller California towns, have filed for bankruptcy as a result of having paid their current and retired city employees too much in salary and job benefits.
• Another southern California city revealed earlier this year that it sometimes paid it lifeguards over $200,000 a year, more than three times the average U.S. household income and orders of magnitude higher than your average lifeguard around the nation.
• The Associated Press recently reported that Hermosa Beach, a 1.3 square mile California town, was paying the two supervisors of its "meter maids" almost $100,000 a year and paying the rest of its meter maid staff an average salary of $75,000 or so, simply for writing parking tickets.

Thus, it is no surprise that towns, counties, and the state government are in deep, deep financial trouble. But in these times of tight tax revenue and revenue shortfalls, a recent audit of California state government financials found that the state is so poorly operated that the audit uncovered the fact that the state government has pots of unknown money laying about unused:

• $54 million was found in the California’s State Parks Department as the department planned to shut down 70 park facilities and was actively soliciting private donations to keep those same facilities open.
• Another $113 million was located in a bottle recycling program which had previous been reported as broke.
• As a result of these and other embarrassing discoveries of lost money, Governor Jerry Brown has called for a more detailed look into the state’s controller’s office, which is responsible for managing the state's financials.

What a disgrace. As California schools are closed, public servants like police and fire fighters are laid off, as social services are cut, it turns out that California has more money than it thought but just cannot find it. This insanity was neatly summed up by Nicholas Johnson, vice president for state and fiscal policy for the Center on Budget and Policy Priorities, to comment, “When a state’s revenues have been hammered as hard as California’s have during the last few years, the reasonable expectation would be that state officials are finding every last dollar before going after services with a meat cleaver.”

That would certainly be a reasonable expectation for everyone, except those that are in the political class.

- Keeping in mind a previous government spending scandal where General Services Administration (GSA) employees threw themselves a lavish, $832,000 Las Vegas party using taxpayer wealth and the average household income in this country is about $50,000, consider more depressing and despicable spending, again courtesy of the GSA. These findings came about by an investigation by WUSA Channel 9 in D.C. using GSA payroll official records and reported in the Washington Free Beacon on August 6, 2012:

• Although GSA employees make up only 1% of the Federal government workforce, GSA bonuses made up 10%  of Federal government bonuses paid out in 2011.
• A number of 2011 GSA employee bonuses were worth $50,000 or more.
• One GSA employee received an $80,000 bonus, in addition to $180,000 in salary and other compensation.
• The analysis found widespread abuse of GSA overtime pay including one instance where a GSA electrician received an $84,000 salary plus $115,000 in overtime and a $4,600 bonus.
• Two GSA air conditioning mechanics earned total pay of $130,000 and $201,000.
• The director of the Federal Acquisition Service made $257,000 2011, which included more than $63,000 in overtime pay and a $7,100 bonus.
• An environmental specialist at the Federal Acquisition Service received a $3,500 bonus on top a of $117,000 salary.
• Another “greening officer” at the GSA Public Buildings Service (PBS) earned a $150,000 base salary and a $7,500 bonus.
• A “gardener inspector” earned $90,000 in total pay, including more than $15,000 in overtime and a $2,500 bonus. Unbelievable.
• Three painters were paid about $80,000 each, which included bonuses averaging about $2,700 and overtime pay ranging from $12,000 to $16,000.
• One plumber made nearly the equivalent of his base salary ($51,000) in overtime pay ($45,000).
• An electrician earned a base salary of $93,000 and received $87,000 worth of overtime pay, as well as a $3,400 bonus.
• In an ironic twist, in the midst of this disgraceful spending, the GSA “cash control officer” in the GSA office of the chief financial officer earned just $41,000 total pay, including $432 worth of overtime and no bonus.

I had always thought that best job in the world was being a Washington politician. However, based on these payroll records, it might not be too bad of a gig to be a plumber, painter, electrician or just about any employee at the GSA. Ridiculously bad set of payment priorities in the midst of almost 13 million American taxpayers out of work and unemployed.

That is enough political class insanity today. Unfortunately, we will need another day to cover all of the insanity and goofball actions from around the country that occurred this past month. We will do that tomorrow along with providing some suggestions on how to stop the insanity of the American political class, insanity we can no longer afford to finance and insanity we should never be forced to endure in the first place.

We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

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 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/

September, 2012 Edition, Political Class Insanity - Part 1: The Simpsons, Our Do Nothing Congress, Obama's Fake Twitter Followers and More

As most of our readers know, at the beginning of every month we review the latest insanity, idiocy, and head scratching actions that emanate from our politicians at every level of government. If their wasting of our wealth via high taxes and destruction of our democracy and its freedoms were not so horrendous, their actions could actually be classified as comical. However, they do waste both our tax money and our liberties so "funny" rarely is the final summation each month.

As we have gone through time, we have found it necessary to go to more than one post to capture all of the monthly craziness. This month is no exception, our political class has been busy at work on the trivial and unresolved issues of our times, as illustrated below:

- According to an August 21, 2012 article by Bloomberg, the Post Office Inspector General issued a report critical of the Post Office relative to the special edition Simpsons television show stamps the Post Office issued back in 2009 and 2010. Rather than making them "Forever" stamps that could be sold and used indefinitely into the future, the Post Office decided to value them at the current cost of a first class stamp.

The Postal Service paid $1.2 million and ended up printing one billion of the commemorative Simpsons stamps. Unfortunately, according to the Post Office Inspector General analysis, only 318 million of the stamps were sold between 2009 and 2010. Since the remaining 700 million stamps were never sold and became relatively obsolete once the cost of postage was raised, the Post Office ended up destroying 70% of the one billion stamps they had produced. Simple math would compute that since about 70% of the stamps were destroyed and the total run was for $1.2 million, this one Post Office misadventure wasted over $800,000.

The Inspector General report estimated that this type of Post Office waste occurs every year to the tune of about $2 million. These numbers raise the obvious questions:

1. Why are these types of stamps not produced and sold as Forever stamps that can eventually be sold forever and the taxpayer investment never wasted?
2. Why was production of one billion stamps done before the demand for those Simpsons stamps was known? No rational company in the private sector would do their entire production of any product all at once. They would phase it in over time as they gauged demand. Apparently, modern inventory and production processes have not yet penetrated the Post Office.
3. If the Post office wastes $2 million EVERY year with these types of shenanigans, has not anyone learned from this type of mistake at any historical point in time? Have they learned nothing about their business or do they really not care since at some point in time the American taxpayer will always make up for their waste? Insanity.

- Many times and in many ways we have used some very simple math to show how inefficient, ineffective, and how stupid the Obama administration's economic stimulus plan was. The simplest math was to use the administration's own numbers to show that the cost per job of the stimulus was ridiculous:

• The Congressional Budget Office final cost estimate of the stimulus cost was about $830 billion.
• The administration boasts that the stimulus "created" or "saved" 2.7 million jobs.
• If we divide the jobs created estimate into the cost of the stimulus we see that the cost of each job, on average, was over $300,000 each!
• Since the average household income of an average American household is about $50,000, it cost the Federal government six times more to create a job than what an average job would pay in a year, hardly an efficient program.
• And as we have shown many, many times, the estimate of 2.7 million is likely way too high, making the average cost of each job created much more than the already obnoxious average of $300,000 per job.

But the fun with bogus political class math just got updated in the past week or so. Transportation Secretary Ray LaHood was bragging about how effective his Department spent taxpayer money within the overall economic stimulus program:

"Yeah, we spent $48 billion and we put 65,000 people to work in 15,000 projects in two years with no problems. I’m very proud of that. I know that the governors can spend this money because over two years we gave them $48 billion, they created 65,000 jobs in 15,000 projects. This is doable. We’re going to get the money out and get people to work.”

Note: The actual interview and actual words of the Secretary can be viewed at:

http://dailycaller.com/2012/08/20/lahood-im-very-proud-of-dot-stimulus-spending-at-738000-per-job-video/

Let's do the math: $48 billion to put 65,000 people to work comes out to about $738,000 per job, more than twice as expensive than what the unacceptable overall average was for the stimulus program. And he is proud of the fact that it cost three quarters of a million for each job created. How this is not a problem is lost on me.

Now, one could make the claim that at least we ended up with some infrastructure put in place or repaired for the $48 billion. That is probably a true statement to some degree as opposed to much of the rest of the stimulus program where no value added was created.

But we know and have reported on an Associated Press investigative report that of the more than two thousand bridges in this country that were repaired using stimulus money, over one thousand of them were not in need of repair, that is how bad the waste was.

Thus, if we assume that the stimulus program was handled and managed so poorly that half of the money spent was wasted on worthless projects like the bridge repair program, the cost of $738,000 was really double since half of the expense was wasted, bringing the average cost per job to almost $1.5 million for each job created. Pathetic. Note: the details of the Associated Press bridge article can be read at:

http://loathemygovernment.blogspot.com/2010/01/2009-year-end-review-good-bad-and-ugly_02.html

- Many times we have called for the termination/elimination of the Federal Department of Energy because of its inability to provide any tangible benefit for the tens of billions of dollars it receives every year for the past few decades. An Associated Press article from August 18, 2012 did not make their case any stronger for not being shut down for incompetence.

According to the article, the Y-12 National Security Complex is the responsibility of the Department of Energy and is known as the Fort Knox for highly enriched uranium:

• It is the source for nuclear weapons production for the United States. 
• The complex produces the uranium parts for every nuclear warhead in the U.S. nuclear arsenal, takes apart old nuclear weapons and is our primary warehouse for military uranium.
• It is designed to withstand earthquakes, tornado-force winds and the crash impact of an airplane.
• It supposedly could also withstand a ground attack.

Obviously, this is one Federal facility that merits the very best security possible.

Unfortunately, several weeks ago, an anti-nuclear crusading 82-year-old nun and two fellow protesters were somehow able to walk onto the facility grounds and walk around for a while before they were found and apprehended. The three intruders claimed that they did not try to hide what they were doing and actually got a full  half mile into the supposedly secure facility. According to the article, this area contained signs that threatened to shoot intruders.

According to court documents, they used bolt cutters to get through three fences which set off security alarms in the process. During the two hours they wandered about, they were able to spray-paint and throw blood on the walls of the facility.

Obviously, this is a very serious piece of political class insanity. Supposedly secure radioactive materials and weapons and an 82 year nun gets deep into the complex. Unbelievable. Thank goodness painting and blood throwing was the extent of their aggression. How much money to we think the American taxpayer pays every year for this level of shoddy service?

- The website, Bankrupting America, had an interesting analysis earlier in August. They looked at the last week of Congressional activity in August before it was adjourned for a five week recess. They started by estimating how much the last week of the recent Congressional session cost the American taxpayer:

1. During that week they estimated taxpayers spent roughly $100 million on Congress.
2. Speaker of the House: $223,500/52 = $4,299
3. House and Senate Majority and Minority Leaders: ($193,400/52) x 4 = $14,877
4. Other Representatives and Senators: ($174,000/52) x 530 = $1,773,462
5. Average weekly budget for all House offices: ($1,446,009/52) x 435 = $2,096,421
6. Average weekly budget for all Senate offices: ($3,409,093/52) x 100 = $6,555,958
7. Non-salary money allocated for Congress: $4.656 billion/52 = $89,538,462

The website goes onto list out what Congress accomplished, or failed to accomplish that week, a week that is usually pretty productive as our politicians usually try to get things done before rewarding themselves with a lengthy, five week vacation:

•House Of Representatives - Agricultural Disaster Assistance Act of 2012. SAVINGS: $256 million over 10 years compared to current baseline, about $26 million a year.
•House of Representatives - Provide for expedited consideration of a bill providing for comprehensive tax reform. COST: $0
•House of Representatives - Amend title 5, United States Code, to make clear that accounts in the Thrift Savings Fund are subject to certain Federal tax levies. SAVINGS: Recovery of $24 million in unpaid taxes.
•House of Representatives - Federal Employee Tax Accountability Act of 2012. COST: $1 million in 2012
•House Of Representatives - Passed a bill that would extend all of the 2001 and 2003 tax cuts for one year for every American.
•Senate - Reduce the number of executive positions subject to Senate confirmation. COST: $0
•Senate - Passed a bill that would extend some of the 2001 and 2003 tax cuts for some Americans.

Let's sum it up: the American taxpayer paid out $100 million for this pitiful performance, a performance that will not change during the five weeks that Congress and its current set of politicians are out of town. Pathetic value for our money as taxpayers.

- A New York Times article from August 22, 2012, which was cited in an August 244, 2012 USA Today article, reviewed how easy it is to actually purchases fake Twitter followers for your account. Obviously, buying Twitter followers is an easier way to make you look more popular than you actually are. For a penny or so a follower, you can get thousands of new fake/non-existent followers for a minimal charge without doing any hard work to actually earn them.

Let's see, easy to get, fake, no hard work involved, fake build up in prestige, sounds like an American politician's playbook. And it is, since according to the two articles, about 70% of President Obama's 18 million or so Twitter followers are fake, they do not exist, they were bought and paid for. Apparently, there are services out in the market that can scan the followers' list of any Twitter account and weed out those that are legit and those that are fake. And over 12 million of Obama's followers are fake.

And politicians want us to believe them when they promise to do something during their campaigns? I do not think so, especially when they lie about their Twitter accounts. Since Obama lied when he said he would cut the deficit in half, he lied when he said he would shut down Gitmo, he lied when he said middle class people would not see any tax increases, etc., he lied when he said he would provide positive hope and change, he lied when he said he would be bipartisan, etc., it should come as no surprise he lied about Twitter.

Let's review. Politicians lie, they waste our money, they cannot protect our security, they cannot manage a simple stamp inventory project, and they produce nothing of legislative importance. Yep, sounds like a typical month of political class insanity. More idiocy and craziness tomorrow.

We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

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 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/

Economic Policy - Why Truman Got It Right And Obama Got It So Terribly Wrong

If you get past the fancy speeches and the rhetoric of this administration and look at the reality of the economic numbers, there is no doubt that this administration is the worst economic policy and management administration in a long, long time:

• 42 consecutive months of unemployment over 8%, a Presidential record.
• Unemployment and under employment results approaching 15%.
• Weekly first time unemployment benefit applicants averaging about 360,000 for what seems like forever.
• High levels of tax and Washington policy uncertainty which limits economic expansion.
• An idiotic health care reform legislation which introduces unheard of uncertainty into the private sector which limits economic expansion.
• Crony capitalism taken to unheard of levels which has wasted billions and billions of tax dollars (e.g. Solyndra, Fisker Motors, Telsa Motors, General Motors, ENER1, A123,  Beacon, Spectra, EverGreen, Ecotality, and many others), distorted the market, and provided no viable economic or consumer benefit, just economic benefit to political cronies and incumbent politicians.
• Four years of annual TRILLION dollar plus deficits, adding five TRILLION dollars to the national debt while every President before this one added only $10 TRILLION in total.
• Record high numbers of Americans on food stamps and unemployment benefits for record lengths of time.
• Ever escalating trade deficits with the rest of the world.
• Gasoline prices that have doubled in less than four years, straining business and household budgets.
• Overall national economic growth has set records for how weak it is relative to the historical recoveries after every other recession.
• Average household income has dropped about 8% or just over $4,000 since 2009.
• Consumer and business confidence and outlooks at low levels for a long time.
• These tremendous economic failings were accomplished despite spending over $800 billion on a failed economic stimulus program, despite having the Fed inject TRILLIONS of dollars into the financial system and banking system, and despite record low interest rates for a record length of time.
• A President who had all of the power he wanted or could of dreamed of having in his first two years in office relative to his party controlling Congress and his own sky high approval ratings but who insists on blaming everyone and everything else for these economic failings.

A pathetic performance relative to history, reality, and what could have happened. In fact, what could have happened actually did happen over sixty years ago. Harry Truman took the country from a war footing to a peace time growth economy despite challenges that would have overwhelmed lesser men and most politicans in office today.

The following post from a little way ago in this blog shows how Truman actually understood economics and the free market vs. the ignorance that this Presidential administration has displayed over the past three and a half years. The bottom line is that the Truman administration was successful in managing a difficult economy, essentially by trusting our heritage of freedom and minimal government intrusion. The Obama administration has been a utter failure for doing just the opposite.

**************************************

Wednesday, March 7, 2012


Why Obama's Economic Policies Are Dead Wrong - A Real life Example In Pictures


We have talked about the many economic failures, in both strategy and execution, of the Obama administration over the past few years. These failures have resulted in heated and divisive class warfare rhetoric, skyrocketing national debt, high unemployment and underemployment, and abominable failures of economic programs:
 
•Failed economic programs and projects - these include, but are not limited to, Cash For Clunkers, Cash For Caulkers, Cash For Appliances, bank and auto company bailouts, the $800 billion stimulus program, Solyndra, and a number of other failed alternative energy programs.

•Regarding the massive and failed economic stimulus package, this administration claimed that unless it was passed immediately, the unemployment rate in this country could get as high as 8%. The package was passed and employment soared about 25% higher than 8%.

•Divisive class warfare - Obama constantly harps on the need to tax the wealthy in this country even more, blaming them for the skyrocketing annual trillion dollar deficits this administration has incurred. However, we have easily proven that even if you tax these Americans' earnings at 100% or confiscate all of their assets, it will have very little impact on the economic conditions in this country, quite possibly making them even worse while dividing the country along economic lines.

•Under the Obama administration, the recovery in unemployment and under employment after the last recession has been among the most anemic in the economic history of the United States.

•In the wake of of failed economic programs, divisive class warfare, and stubbornly high unemployment, the Obama administration has proceeded to run up the national debt much faster and much more dramatically, with little in return, than any President in the history of the United States.

All very good reasons to conclude that this administration has no clue when it comes to economics. Which is a shame since if you look back in our history, you will find a classic example of how to manage and grow an economy out of a crisis mode with favorable results across all major economic indices.

The example comes from the 1940s, when Harry Truman was President, certainly a time of major crisis where the United States and the rest of the world were involved in World War II fighting. Economies and lives were turned upside down as the country went into a war footing for the first half of the decade and then needed to convert back to a peace time economy in the second half of the decade.

Consider the following graph (you can double click on this and the following graphs to get a larger, more detailed view):

   This is a graph of the size of the Federal government's annual spending volumes in the 1940s and 1950s. As you see, spending had to ramp up in the early 1940s to accommodate the massive war spending the Federal government needed to do to defeat the Axis powers.

However, look what happens when the war ends in 1945 (after the vertical line). Very quickly, Federal government spending drops dramatically (about 60%) as the government terminates its war spending. I do not believe in the history of the country have we seen such a dramatic and speedy reduction in Federal government spending.

If Obama was President in 1945, I doubt this would happen. Today, he and his political supporters refuse to seriously consider reducing government spending, insinuating that it would push the economy back into a recession. They have this misconception that unnecessary and wasteful government spending is necessary to keep the economy going. [Note: recall that our extensive analysis in this blog's past posts has shown that at least $500 billion in Federal spending a year is lost to waste and criminal fraud in government operations such as Social Security, Medicare, etc.]

What happened to the economy in the late 1940s when the Federal government made such drastic reductions in government spending? According to Obama's economic strategy, that would have had catastrophic effects on the economy.

Let's first look at the unemployment rate:

Yes, at the same time that the Federal government dramatically reduced spending, the unemployment rate did kick up a bit. This would seem to add some credence to Obama's theory that government spending needs to stay high and wasteful to keep the economy strong and growing.

In fact, there were some leading economists of the time that urged Truman to keep the war factories humming via government spending, making munitions and weapons for no purpose, just to create busy but useless work for people. This activity would create no viable economic progress since the output of the munitions and weapons factories would never be used, the war was over, but these economists, like Obama today, had this misconception that spending and wasting government money for no reason was good economic policy.

But consider a few facts from the above chart:

•Although unemployment did rise at the end of the war, it did not get above 4% for the immediate years after World War II and probably averaged 4-5% over the ten years after the end of the war, despite an initial, massive slashing of Federal spending.

•In 1945, the U.S. population was only about 139 million and at least 10% of that population was coming back into the civilian workforce after serving in the armed forces. Thus, the economy was able to absorb a very large number of new workers in the face of slashed government spending with an unemployment rate of less 5%, an extraordinary accomplishment.

Was this wonder of employment gains immediately after the war a result of massive government spending? Obama says we cannot reduce spending and have to run up horrendous deficits in order to keep the economy out of a recession. See what happened to deficits in the 1940s:

After the massive deficit spending during the early part of the 1940s that was needed to finance the war effort, Truman's Presidency not only slashed government spending, and the taxes that went with it, Truman also managed to very quickly go from a deficit riddled Federal government to a Federal government that was generally in balance, revenue about equal to spending, actually running a budget surplus in some years.

So far, Truman was able to succeed doing the exact opposite of what Obama is doing: dramatically reducing government spending and taxes, running a balanced Federal budget, and absorbing millions and millions of workers into the civilian part of the economy with minimal increase in unemployment.

One final view: did all of these efforts and results negatively impact the economy health of the country? Consider this last graph:

  This GDP graph is over time, during and after World War II. As you can see, there is a little flatness in economic growth in 1946 as the nation adjusts back to a peace time economy but very shortly begins a strong growth pattern into the 1950s. Thus, dramatically slashing and reducing government spending did not negatively impact the growth and size of the nation's economy. In other words, we do not need a giant Federal government bureaucracy to have a healthy and growing economy.

So let's review:

1.Truman slashed taxes and government spending after the war ended, Obama wants to continue to raise taxes and government spending.

2.Truman ran a balanced Federal government budget after the war ended, with some budget surplus years, Obama runs massive Federal government deficits.

3.Truman's economic policies absorbed well over ten million workers into the economy that was much smaller in a nation with far fewer people, Obama's economic policies have resulted in long term unemployment and under employment for well over ten million workers.

4.Truman's economic policies resulted in strong overall national economic growth, Obama's economic polices have resulted in weak overall economic growth.

5.And most importantly, Truman's economic polices severely reduced the role of government in our lives and economic well being, Obama's policies have dramatically increased the Federal government's involvement in our lives and economic well being, resulting in lost freedom and liberty.

Unfortunately, the Obama administration and his supporters have not looked at this simple pictorial representation of a real life economic success story. It continues to cling to the false hope and faulty economic assumption that government has to be the center of economic activity and growth in this country, an assumption that is becoming increasingly viewed as wrong when you consider our anemic economic growth, failed economic polices of this administration, and long term chronic unemployment.

An old saying goes as follows: "When you are in a hole, stop digging." Obama needs to stop digging with his failed economic policies, programs, and strategies and borrow a ladder from Truman to get us out of our ever widening, ever deepening economic hole. Just look at the pictures.

On final note: as an FYI, all of the underlying data that went into the above graphs comes from official U.S. government sources. At no point were Republican Party, Tea Party, Fox News, or any other data sources used.

We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

httpwww.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

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 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/

Forget Obama, Forget Romney, We Have the Long Term Solutions To Our Economic Malaise

This post was originally posted in early June of this year. It provides a series of strategic, simple-to-understand and much needed steps that must be taken to fix our economy for the long haul. Unlike Obama and Romney's economic plans which have virtually no chance of being successful, our plan can fix what ails us. The reasons for our confidence include the following facts of life:

1. We are not beholden to any political constituencies like the big banks. These constituencies in the past were always able to water down or render toothless past needed reform by constantly contributing to polticians' reelection campaigns of both Democrats and Republicans.
2. We understand that solutions to our economic woes goes beyond vague and ineffective grand strategies like Obama and Romney propose. We need some leadership in Washington that will dig into the nitty-gritty of government functions and organizations and making them leaner, more efficient, and better values for our tax dollars.
3. The first starting point would be to dig into the inner workings of the IRS to find out why it is incapable of collecting more than $380 billion a year in tax evader taxes.
4. We understand that you cannot fix our economic future without fixing housing and you cannot fix housing without fixing, or preferably, terminating both Fannie Mae and Freddie Mac, enabling the housing market to return to the simpler times of financially sound banks lending home mortgage money to financially sound customers with minimal incompetent intervention by the political class.
5. With no desire or chance of a future in Washington politics, our solutions can ignore the trappings of our elitist political class to point out ways to reduce government spending with minimal impact on most Americans, a first step to getting our destructive national debt under control.

Obama has proven over the past three and a half years that he is utterly clueless when it comes to fixing our economy, both in the short term and in the long term. While Romney/Ryan have not proven they cannot fix the economy, as government and political class insiders, their ability to do the heavy lifting of upsetting the Washington apple cart of economic inertia and doing the heavy lifting is doubtful.

Only those solutions that look after the good of the nation rather than the good of a personal political career, a political class party, or political class moneyed interests can fix the American economy. That is what our proposed solution do below, without bending to the will of politicians.

************************************

Thursday, June 7, 2012

Solving Our Economic Malaise - Long Term Solutions

Last Thursday through earlier this week, we plowed through the mountain of bad economic trends, statistics, and expert opinions that more or less prove that we and the rest of the world are headed for some horrible economic times. From skyrocketing national debt, the impending collapse of the Euro, stubbornly high unemployment, political deadlock and incompetence, and more, almost all of the signs are not positive.

However, there are a number of steps that could be taken to avert what could be the second half of the so-called Great Recession. These steps are not something the political class has done before, which is a good thing. If these actions had been done before and we were still in the same deteriorating condition, we would really be in trouble.

Yesterday, we reviewed the short term solutions to our economic malaise that need to be taken as soon as possible. Those solutions went on so long that we postponed the complimentary long term solutions that need to start being executed now. These long term solutions are listed below:

- Let's start with the repeal of the Dodd-Frank financial industry reform legislation that the political class passed, another 2,000 page monstrosity that has introduced a gigantic piece of uncertainty into the marketplace and business owners' minds, much like Obama Care has done. And as we all know, the more uncertainty there is, the less likely businesses are going to gamble on expanding and hiring more employees.

There are any number of excellent reasons for repealing this piece of trash besides the massive amount of new uncertainty it created:

1) The law was supposed to identify large and likely failing companies in the financial industry long before they failed so that proper government intervention could occur to ensure the disruption to financial markets and customers was minimized. After the legislation was passed, MF Global, a major financial investment company, suddenly went bankrupt without any warning, possibly taking over a billion dollars worth of customer wealth with it.

It is quite possible that the billion dollars was lost due to criminal activity. The bankruptcy is currently the eight largest corporate bankruptcy in the history of the country, certainly qualifying it for being under the watch and control of the Dodd-Frank legislation. Unfortunately, the legislation failed miserably to provide the hyped early warning signal to intervene.

2) Several weeks ago, JP Morgan quickly lost $2 billion in the market by making some bad investment calls. Dodd-Frank was supposed to curtail this kind of reckless investment style since similar moves helped lead to the bank bailout fiasco in the midst of the Great Recession. If Dodd-Frank had worked as it was supposed to, some sort of warning bells should have gone off before the bank lost $2 billion almost overnight.

3) Many times in this blog we have proven that the main culprits behind the Great Recession, the organizations that established the groundwork and led the charge into a financial disaster, was Fannie Mae and Freddie Mac, the Federal government's main mortgage entities:

http://www.loathemygovernment.blogspot.com/2012/05/who-really-caused-great-recession-part.html

 Since: A) Dodd-Frank was supposed to ensure another Great Recession never occurred and B) Fannie and Freddie basically caused the Great recession but C) Dodd-Frank did not nothing to change or regulate Freddie and Fannie, what purpose does the legislation serve if it does not address the root causes of its supposed purpose?

So let's review:

•Dodd-Frank did not foresee the implosion of MF Global, something it was supposed to recognize and mitigate.

•Dodd-Frank did not foresee the types of quick and large billion dollar investment losses that JP Morgan recently incurred, something it was supposed to recognize and mitigate.

•Dodd-Frank did not address the root cause of the Great Recession, Fannie and Freddie, so what purpose does it serve if is missed the main drivers of the problem it is supposed to mitigate?

•Dodd-Frank has introduced much more uncertainty into the marketplace, further delaying business expansion and hiring.

•Dodd-Frank called for the implementation of the so-called Volcker Rule that is supposed to guide banks on the amount of capital they need to keep on hand to prevent future financial collapses. Although the rule is supposed to go into effect in July, it appears that the government bureaucracy has not yet written the guidelines for implementing the Volcker Rule and, even worse, according to most news reports, the Federal bureaucracy has no idea how to write the Volcker guidelines. Talk about uncertainty.

Given all of its failures, how much worse off could we be if we just canned the whole effort and let the banks hang themselves out to dry and whither, if need be, from their own bad financial plays/bets and allow businesses to become more comfortable with a reduction in the uncertainty caused by Dodd-Frank?

- Repealing Dodd-Frank cannot be done in a vacuum. A companion action is needed is to finally clean up the whole banking industry the right way, the simple way. That means we need to finally get to a stage where "too big to fail" actually becomes an ancient concept, not a continuing saga.

We have already reported on a recent article in The Week magazine where it was estimated that the largest five banks in this country control about 56% of the banking industry, making them still "too big to fail." Nothing that the political class has done since the Great Recession has mitigated the reason that politicians say the Great Recession occurred, some banks were too big to fail without crashing the whole financial system. Just another Dodd-Frank failure.

But it gets even worse. An article in the May 21, 2012 issue of Business Week, showed how much the big banks control the derivative market in this country, a dangerous type of investment that can lead to high risk and high reward investing behavior:

JP Morgan - 29.5%
Citibank - 21.9%
Bank Of America - 21.0%
Goldman Sachs - 18.6%
Sum of the Above Four Major Banks - 90.4%
Next Ten Banks - 5%
Next 1,604 Banks - 4.6%

Obviously, the big banks are even bigger when it comes to high risk derivative investing.

I am not a financial guru or investment expert. But it seems to me that today's banks do three major things:

1.Make consumer and business loans.

2.Underwrite company stock offerings and IPOs.

3.Manage investment portfolios, somewhat like hedge fund operators do, in a whole host of different and sometimes exotic and risky financial vehicles.

It is my layman's understanding that long ago a law called Glass Steagal, named after its Congressional sponsors back in the Depression, was enacted which placed a firewall between investment and deposit banks, i.e. the politicians of the time wanted to keep the traditional functions of banks, making loans, protected and separate from the speculative part of some banks, dealing with high risk investments.

Specifically, three parts of Glass Steagal addressed this desire to separate:

•Section 20 prohibited any member bank of the Federal Reserve System (whether a state chartered or national bank) from being affiliated with a company that “engaged principally” in “the issue, flotation, underwriting, public sale, or distribution” of securities.

•Section 21 prohibited any company or person from taking deposits if it was in the business of “issuing, underwriting, selling, or distributing” securities.
•Section 32 prohibited any Federal Reserve System member bank from having any officer or director in common with a company “engaged primarily” in the business of “purchasing, selling, or negotiating” securities, unless the Federal Reserve Board granted an exemption.

The modern day political class under the Clinton administration tore down these firewalls and restrictions, leading to the massive, bloated, and dangerous "too big to fail" banks we have today.

Thus, rather than trying to control these Hydras' tentacles, why do we just put Glass Steagal back in place? Under this approach, a financial institution could either be a bank (i.e. make business and consumer loans and maybe do some underwriting) or be a hedge fund/investment house (i.e. do some underwriting and invest the house's money in derivatives and other exotic vehicles), they could not be both.

Under this scenario, Dodd-Frank and its 2,000 pages of uncertainty and bureaucracy go away. The big banks would have to choose what they want to be, banks in the traditional sense or investment operations, and divest themselves of everything else. This breaks up the big banks into smaller chunks, finally blowing away the too big to fail problem. A simple solution vs. Dodd-Frank which was very complicated non-solution.

- Longer term, the tax code has to be revised, simplified and substantially cut down to something that is manageable. We have previously talked in this blog how the U.S. tax code:

•Is about 70,000 pages long and not remotely understandable by most Americans.

•Is so convoluted, a Wall Street Journal article, that was summarized in the April 29, 2011 issue of The Week magazine, estimated that U.S. taxpayers expend about $431 billion a year just to comply with the complexity of the U.S. tax code. This money could be so much better spent on productive expansion of the economy and employment rather than tax paperwork.

•Is so intense that an online article from U.S. News and World Report in April, 2010 reported that:

*Americans spend about 7.6 billion hours a year just preparing
their tax returns.

*This is the equivalent of placing 3.8 million Americans into full
time jobs.

*This is six times larger than the auto making industry in this
country.

*The original Federal tax code from 1913 was 400 pages long, making it about 6% the size of what we deal with today.
•Is so fraud friendly that according to a Business Week article from its Insider report for Spring, 2011, there is a $385 billion gap between what U.S. taxpayers are supposed to pay in Federal taxes and what they actually pay.

•Is so unfair that the effective tax rate on Apple, a traditional American company, is just 9.8% but the effective tax rate for Walmart, a traditional American company, is 24%, according to an article in the May 11, 2012 issue of The Week magazine.

Okay, you get the idea. Our current tax code is expensive, wasteful inefficient, unfair, and takes hundreds of billions of dollars and billions of hours out of the economy, dollars and hours that would go a long way to fixing what ails our economy and nation.

We have already done the heavy analysis work for the political class to simplify our burdensome tax code. That work can be found at:

 http://loathemygovernment.blogspot.com/2012/02/united-states-of-purple-fixing-our.html.

It reduces the 70,000 pages of current tax code down to a few dozen principles of fairness and ease.

- While all of the above is going on, the Federal government needs to go through a thorough spring cleaning, as suggested by Step 1 of "Love My Country, Loathe My Government." Step 1 would reduce spending in EVERY Federal government entity by 10% a year for five years.

This is the rate of annual shrinkage that the Federal government would have to attain just to get to about a balanced budget. At that point, we would have to start paying down the skyrocketing national debt that is rapidly approaching $16 TRILLION.

That 10% a year could be attained any number of ways:

•Reduce the amount of budget dollars lost every year to fraud in the big government social programs such as Medicaid, Medicare, and Social Security. These three programs alone lose over $200 billion a year of taxpayer wealth to fraud and waste.

•Terminate non-essential government programs that have outgrown their usefulness. The government has never had a good spring cleaning. For example, several years ago, headlines were made when the Federal government finally decided to shut down a World War I program that had existed for decades after the war ended. During the war, the government was worried that we would run out of helium gas for our military's dirigible balloons and passed a law that ensured that the U.S. military maintained a back up supply of helium for these balloons, long after that need became extinct.

As another example, a Christopher Columbus-focused government agency which was temporarily created in the early 1990s to celebrate the five hundred year anniversary of Columbus discovering the new world was still being funded, more than fifteen years after it was supposed to be terminated. Spring cleaning time.

•Implement Step 44 from "Love My Country, Loathe My Government," a step that would prohibit the spending of Federal tax dollars on any project or program unless it substantially impacted the lives of a significant number of Americans in at least five states. No more local earmarks and wasteful Federal spending to build a local bike trail, build a local farmers' market, renovate a local theater, etc. Federal money for national projects, local and state money for local and state projects.

•Freeze hiring at all Federal organizations.

•Consolidate redundant Federal agencies and functions, trimming headcount and overhead in the process. According to a recent General Accounting Office Study, the Federal government has 15 different agencies overseeing food safety laws, more than 20 different programs to help the homeless, 80 programs for economic development spread across 4 different Federal agencies, 82 Federal programs to improve teacher quality spread across 10 different Federal agencies, 80 programs to help disadvantaged Americans with their transportation needs, 47 programs addressing job training and employment, 56 programs to help Americans understand finances, 20 programs that support business incubator, 19 different programs that support tourism, 18 programs, which spend a combined $62.5 billion a year, to address food and nutrition aid, 100 different programs across five divisions within the Transportation Department that all fund efforts for highways, rail projects, and safety programs, and there ware 130,000 government military medical professionals, 59 Defense Department hospitals, and hundreds of military medical clinics that could benefit from consolidating their overhead functions and expenses.

- A coherent and detailed approach must be taken to reduce the amount of unnecessary regulation that the Federal government and political class imposes on American businesses, increasing their cost, both time and money, reducing their competitiveness with the rest of the world, and mostly serving no purpose.

A similar target would also be imposed in this area: the number of Federal regulations would be reduced by 10% a year for five years, eliminating all redundant and unnecessary regulations, focusing only on those regulations that concern themselves with necessary citizen safety and necessary, not excessive, environmental protection.

Imagine how much freer and more vibrant the economy would be if we reduced wasteful government spending, streamlined unnecessary regulations, simplified the tax code, dumped the Dodd-Frank monstrosity in favor of a simple solution to the banking problem along the lines of Glass Steagall which seemed to work pretty well for many decades, and got the Federal budget and national debt under control.

These longer term steps, in conjunction with the short term acts we went through yesterday, are the only way to get the economy out of the ditch. Everything that the Obama administration and the political class in general has tried has failed, as witnessed by the dire economic circumstances we reviewed last week and earlier this week.

Doing more of the same, like Obama wants to do, is a continuing recipe for failure and reminds me of an old saying: "When you are stuck in a hole, stop digging." We are definitely in a hole so let's stop digging and start using the steps we have outlined to actually get out of the hole we find ourselves and our economy in.

***************************
Solving our economic problems are not hard as long as 1) you understand the root causes of these economic problems, 2) you tailor your solutions to the root causes identified in the first step, and 3) do not allow politics and selfishness to influence the real solutions. Neither Obama nor Romney have proven they understand any of these three steps.

We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

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 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/