Love My Country, Loathe My Government: June 2012

Friday, June 29, 2012

The Federal Reserve - Conflict of Interest and Its Conflict With Freedom

“It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.” Henry Ford.

Henry Ford might be right, if America ever gets around to reading a General Accountability Office (GAO) report that was recently published, as mandated by the Dodd-Frank law. The report is extremely critical of the cozy relationship between the banking industry and the Federal Reserve Board and the potential for abuse and greed that this relationship has over the American economy, the potential for wasting taxpayer money, and the potential for massive conflicts of interest that sub-optimize the economy in this country.

The report was made public by Senator Bernie Sanders and includes the following highlights:

The GAO study concluded that since people in the banking industry both elect and serve on the Federal Reserve’s board of directors, there is an obvious "appearance of a conflict of interest" and poses "reputational risks" to the Federal Reserve System.
As a result of the Great Recession, at least 18 current or former bankers who were or had been Federal Reserve Regional bank directors were able to arrange loans and other financial assistance for their banks from the Fed amounting to $4 trillion at near zero interest.
JPMorgan received $391 billion out of the $4 trillion in emergency funds at the same time the bank was used by the Fed as a clearinghouse for emergency lending programs.
In March of 2008, the Fed provided JPMorgan with $29 billion in financing to acquire Bear Stearns. JP Morgan also got the Fed to provide an 18-month exemption from risk-based leverage and capital requirements.
JP Morgan was not done milking the Fed since it also convinced the Fed to remove risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired the troubled investment bank.
In 2008, the New York branch of the Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap loans from the Federal Reserve. At that time, Steve Friedman, a former chairman of the New York Fed's board of directors, sat on the Goldman Sachs board, an obvious potential conflict of interest arrangement.
Friedmnan also owned Goldman stock during his time working for the Fed, something that was prohibited by Federal Reserve conflict of interest regulations. But not to worry, his friends in the banking industry and Fed allowed him to receive a waiver from the Fed's conflict of interest rules, news that was not made public until this report. GAO investment records show that Friedman continued to purchase shares in Goldman from November 2008 through January of 2009.
General Electric CEO Jeffrey Immelt was a New York Fed board member at the same time his company helped create a "Commercial Paper Funding Facility" during the financial crisis. GE later received $16 billion in funding from the Fed under this emergency lending program.

Seems like a very closed, secretive, and almost incestuous relationship between the Fed and the major banks in this country. Not discussed in the article highlighting the GAO findings, but previously reported in this blog, is another banking industry gross conflict of interest issue. When the Fed went through its first two "quantitative easing" efforts, those programs pumped over $2 TRILLION of fake wealth into the economy.

That process was managed through the New York branch of the Fed which was being run by a former member of the Goldman Sachs investment bank, William Dudley. Dudley used Goldman Sachs to facilitate the quantitative easing process of the Federal government taking over bonds and bad assets of the major banks including Goldman Sachs.

A few observations:

At no time in the past few years, as the Fed and the banks were busy taking care of each other with bailouts and staffing, was there any oversight from the Washington political class or the American people on whether or not the people ultimately responsible for the $4 TRILLION, the taxpayers, had any say at all into this process.
The appearance of conflict of interest is just as bad as actual conflict of interest, and when there is a constant revolving door between membership on the Fed' staff and the Fed's boards and employment by the major banks, conflict of interest, real or potential, is a real problem.
Despite all of the machinations of the Fed, its employees, and its ability to devalue the dollar with $4 TRILLION worth of fake wealth, the economy is still in the ditch with hardcore and high unemployment, subdued business growth and bank lending, and TRILLIONS of dollars of cash liquidity sitting around that will eventually ignite some serious inflation. Thus, not only is there massive and inefficient conflicts of interest, the economy and the taxpayers never even got an economic boost from the Fed and the banking industry.
A statement from Senator Sanders' office summarized this previous point more elegantly: “This report reveals the inherent conflicts of interest that exist at the Federal Reserve. At a time when small businesses could not get affordable loans to create jobs, the Fed was providing trillions in secret loans to some of the largest banks and corporations in America that were well represented on the boards of the Federal Reserve Banks.”

You start to understand why people like Ron Paul want to audit the Fed. The above conditions listed above are only the ones we know about. Only a detailed and independent audit will determine if the situation is only as bad as described above or is far worse. If the Fed has nothing else to hide, then submit to an audit and clean the slate.

At the very least, there has to be a way to ensure that the conflict of interest potential is eliminated. A democracy should not be run and manipulated by unelected bureaucrats, bureaucrats that ensure their "home" companies and industry friends always get their mistakes remedied with taxpayer bank bailouts or whose profitability is not driven by their success as business people but by their success in manipulating government functions.

Secrecy and conflict of interest should never be a part of a functioning democracy. Henry Ford recognized long ago, we are mostly ignorant about how the Fed and its banker friends undermine our democracy and our wealth. Unfortunately, nothing has changed since a contemporary of Ford, President Woodrow Wilson, first identified the problem long ago: "The government, that 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."

In this case the special interests are the Fed and its banker friends, an empire that can put the American taxpayer on the hook for $4 TRILLION in the most invisible way possible.

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 our 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/

Thursday, June 28, 2012

If Obama Was In Charge Of Oxygen - An Alternative And Whimsical Trip Through the Obama Presidency

A Facebook post came across my Facebook account recently from a friend who is a supporter of President Obama that read as follows:

If President Obama came out in favor of oxygen, Republicans would suffocate themselves.

From a serious debating of the issues persepctive, this argument probably rates at about the third grade level, more school yard taunt than serious discussion. However, this lack of sophiscation in our political discourse is pretty much par for the course, given the shallowness of the overwhelming number of current politicians in office. What passes for serious dialog is usually no more effective or positive than the "your mother is so fat that..." genre.

So, given this set-up of the insult listed above, let's take it to a much deeper, more satirtical level. Not wanting to embarass the person who put up the above statement, I passed on putting up a "Facebook" comment.

However, if I was to respond to this sentiment, it would probably go as follows, as we take an alternative and whimsical look back at the Obama adminsitration to date and assume that he actually was in charge of the nation's oxygen when he took office back in January, 2009 (warning: it is not a pretty journey that is not going well):

Jim, I agree with your statement but more than just Repubicans would sufocate. If Obama was in charge of oxygen in this country, his EPA would immediately overstep it's legal and Constitutional mandate, stifling oxygen production with burdensome and unnecessary regulations and rules that result in a lessening of our oxygen supply while increasing its cost.

His onerous, and ridiculous, 2,500 page legislation (see Obama Care and Dodd-Frank), which established an Oxygen Cap And Trade bureacracy, would ineptly, inefficiently and fatally misallocate the oxygen supply around the country.

We would have to purchase our oxygen through "oxygen care exchanges" (see Obama Care) which would cause our oxygen to decline in quality while increasing in price.

Oxygen would only be available for limited times every day as his union cronies negotiate and enforce strict and limiting workplace rules and work schedules while getting paid higher than rational wages and receiving higher than rational benefit packages.

He would waste billions and billions of dollars as he redistributed taxpayer wealth to his political cronies in search of alternative oxygen sources (see Solyndra, A123, ENER1, Ecotality, Everygreen Spectra, Tesla, Fisker, etc.), a search that leaves a trail of bankrupt alternative oxygen companies but wealtheir political pals and campaign donors.

He would place an additional tax on the oxygen wealthier Americans use since these wealthier Americans, Republicans, Democrats, and Independents alike, all deserve to pay their "fair share" when it comes to oxygen consumption (see "Buffet Rule.")

Our oxygen would be in scarcer supply due to the President not enforcing current laws as it regards illegal immigration, despite being told to do so by the Supreme court, allowing millions of illegal immigrants to come into this country and stay in this country, using up a lot of our available oxygen.

Unfortunately, our nation's oxygen supply would be endangered as the Obama administration intentionally leaks national security oxygen secrets, strategies, and plans to his selected friends in the main stream media (see recent military and national security leaks via the New York Times) to embellish his record without regard to our oxygen security.

The President never gets around to researching, developing and implementing a national oxygen plan since his extensive, excessive, and usually unnecessary international traveling, his over 100 rounds of golf, his hundreds of campaign funding rasing events, his hobnobbing with Hollywood stars, and his insistence of having a photo op with any conceivable athetlic team takes up too much time to worry about such mundane things as the nation's oxygen supply, strategy, and plans.

If Obama had been charge of our oxygen since 2009, the quality of our oxygen supply would have decreased, the availablity of our oxygen would have also decreased, the price of our oxygen would have gone up substantially, the over regulation of our oxygen market would be stifling production, we would have seen a tremendous drop in the control of our oxygen as political cronies and union cronies control more and more of our wealth and oxygen supply, and we would not have a secure and long term plan for our future oxygen needs.

Those American citizens who disagree with this President's mishandling of his ineffective oxygen policies and programs would immediately be branded as racists while the failures of his oxygen programs would immediately be blamed on the Bush administration, the tsunami in Japan, the proliferation of ATM machines, the Tea Party, the Euro crisis, and, for good measure, the Bush administration.

I am afraid that if the President had been in charge of oxygen, far more than just Republicans would have suffocated.

Thank goodness he has not been in charge of our oxygen. Unfortunately, the above alternative and whimsical journey brings us back to the numerous parts of our lives that he did intrude into, which resulted in:

Wasted taxpayer money wealth on numerous failed alternative energy companies.
The bypassing of Congress and our rights as citizens as he allowed his EPA to exceed its legal mandates and responsibilities.
The continuation of his class warfare rhetroic where he pits rich against poor, pro choice against pro life, women against men, Republican against Democrat, gay vs. straight, etc.
His focus on nonessential activities, e.g. the need to prove his manliness with constant atheltic team photo ops or his addiction to constantly be campaigning rather than governing, resulting in no development of long term plans or leadership for our lost war on drugs, our failing public schools, our lack of a national energy policy and our leaky borders and related illegal immigration problem.
An unemployment rate that has been above 8% for a record setting 40 straight months even though he promised that if his economic stimulus program was passed, unemployment would never even get to 8%.
Almost 13 million Americans are still out of work, not counting the millions that are underemployed or who have stopped looking for work, despite a myriad of expensive and failed economic programs from his administraiton (e.g. Cash For Clunkers).
A constant stream of about 370,000 Americans who file for first time unemployment benefits every week.
A national debt that has grown faster, both on a percentage basis and total dollar basis, since he took office, rapidly approaching $16 TRILLION, with no plan in sight to curtail this fiscal disaster.
A health care reformation law that will cause more people to lose their insurance coverage, will dramtically add to the national debt, will never solve the root causes of our escalating health care costs, and which has already significantly depressed hiring and business expansion.
A finance industry reformation law (Dodd-Frank) that has failed miserably in four areas that were supposed to be addressed by the legislation: 1) it failed as an early warning system when it did not foresee the collapse of MF Global, a major financial institution, 2) it failed to curtail risky trading as witnessed by JP Morgan losing billions of dollar doing....risky trading, 3) it failed to address the cancers known as Fannie Mae and Freddie Mac, the two main culprits and causes of the Great Recession, and 4) failed to prevent banks from becoming "too big to fail" with the five largest banks now larger than they ever were.
A Consitution and rule of law that has been shredded by this President as witnessed by his violation of the Constitution and War Powers Act relative to our military intervention in Libya, his ignoring of a Federal judge relative to his Gulf oil drilling moratorium, his decision to not enforce Federal laws including DOMA and the recent decision to not enforce our illegal immigration laws to spite a Supreme Court decision he did not like, and his disdain for the Constitution and its separation of powers with his blatant misuse of executive privilege relative to a legitmate Congressional inquiry into Fast and Furious, an operation that broke Federal laws and violated international treaties.

There are more than one way to suffocate all of us, Republicans, Democrats, and Independents alike, and this President is trying all of them, short of taking over our oxygen supply (so far).

Note: I wholeheartedly personally support the repeal of DOMA, this type of law should have no place in a democracy. However, it is the current law of the land that this President selectively decides to ignore. He should have repealed it in his first two years in office when his Democratic allies had control of both parts of Congress rather than travel the world and holding athletic team photo ops. Ignoring it now and refusing to enforce it now is a violation of the oath of office he took and sets a dangerous precedent for our democracy and rule of law.

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 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/

Wednesday, June 27, 2012

Retro 21 - United States of Purple - Solving Our Disasterous Public Educaiton Problem

Tuesday, June 26, 2012

Retro 20: The United States of Purple - Solving Both Our Energy and Global Warming Issues With One Plan

Due to family visits and obligations, for the next couple of days we will be reposting some previous posts. These will include some of the major issue positions we had written about in February. These positions laid out how the United States of Purple Presidency would finally get around to resolving some of the major issues facing the country, issues that the exisitng political class has never had the nerve, the intelligence, the means, or desire to resolve.

You can learn more but our movement and how to get involved, including the intitiative to install term limits on all Federal politicians, at:

www.unitedstatesofpurple.com

February 19, 2012

This is the fourth in our series of posts on how the United States of Purple drive for the Presidency would address and resolve the major issues facing the country, issues that have been around for decades. The political class has occasionally attempted to solve some of these issues but their half-hearted attempts have always failed, either because they did not understand the root causes of the problems or because actually solving a problem might alienate a few voters and endanger their much cherished reelection chances.

Without understanding the root causes of our problems, the odds of resolving these issues are minimal. As a result, when the political class actually tries to address the problem, their solutions fall flat on their face. Recent political class attempts to fix our energy dependence problem is a case in point:

- The current administration has given out Federal taxpayer grants, loans, and loan guarantees to various companies in what appears to be a a random manner. Solyndra, the California solar panel manufacturer is the purest example of failure. Shortly after getting a Federal government loan worth well over half a billion dollars, the company went bankrupt and lost the taxpayer wealth with no discernible benefit.

The shallow reason for the failure is that the company and the political class did not anticipate the changing short term market conditions, driven by the drop in foreign manufactured solar panels. The real reason for losing over half a billion dollars is that the political class did not understand the root causes and underlying dynamics of market conditions which led to the failed company.

- This deeper reason carries over to the many other failed alternative energy companies that the political class has thrown money at in a willy-nilly manner such as Beacon Power, Spectra Watt, and Evergreen Solar, all of which went out of business. They do not understand how to solve the energy problem from a root cause understanding perspective and their inability to think strategically. They have no idea how to use leverage to exponentially grow their opportunity for success.

As a result, we end up with very shallow, tactical thinking that just ends up wasting taxpayer wealth on bad investments.

- Every couple of years or so, the political class puts together a show about how they want to raise the average miles per gallon the cars in the country should achieve. These so-called CAFE standards are used for political debate and at the end of the bluster, the average miles per gallon performance standards are raised for some time in the distant, distant future. Then the politicians congratulate themselves for delaying, but not solving, the problem of energy dependence.

Their charade brings to mind an old saying that I believe is attributed to Abraham Lincoln:

Question: If you called a tail a leg, how many legs would a dog have?

Answer: It would still have four legs, just because you called a tail a leg does not make it a leg.

Just because you raised the CAFE standards doesn't mean it will happen, especially if you do not have a strategic plan behind it.

- Speaking of shallow tactical thinking vs. long term strategic thinking, let's talk about Obama's Cash For Clunkers program. Recall that the President gave away thousands of dollars of taxpayer wealth to anyone who bought a new car within a specified period of time. The failed rationale for the program was to increase sales of autos in tough economic times in order to help jump start the economy and replace older, lower mileage cars with newer, higher mileage cars.

We now all know that this tactical thinking approach was a failure. We have previously reviewed a Federal government report and analysis that proved there were no incremental auto sales as a result of this program and thus, no incremental spurring of the economy or substantial increase in national gas mileage. The timing of the sales may have changed, people delayed or moved up their purchase of a car to get the free Federal tax money, but in total, no incremental sales occurred. Bad tactical thinking, small minded energy programs that do no good.

We could go on about the failure of the Federal Energy Department and the Federal political class for a long time relative to their inability to create a strategic, coherent, and effective energy policy and strategy for the country, despite having over thirty years to do so. However, the above examples get the message across, allowing the same people to do the same type of short term and tactical thinking and get the same type of bad results is not the way forward

Complicating the matter today is the rift over global warming. Some citizens and scientists say it is an issue, some citizens and scientists say it is not an issue. As usual, we end up with the typical political gridlock, name calling and inaction, that we get on all other issues in today's political climate.

I, myself, am a global warming doubter. I laid out my reasons in the following post from last week:

http://www.loathemygovernment.blogspot.com/2012/02/i-am-global-warming-doubter-and.html

However, what if I am wrong? What if we really do need to do something about man made emissions? Do we really think that building a massive government bureaucracy called "Cap And Trade" would actually work?

We know now that the massive government bureaucracy known as Obama Care is not working nor will it ever work. With the collapse of MF Global, the 8th largest American bankruptcy ever, and the likely criminal misuse of over a billion dollars of client assets, that the massive government bureaucracy established by the Dodd-Frank financial industry reform legislation is also not working.

Other massive government bureaucracies also are dysfunctional, from Social Security To Medicare to food stamps. There is no reason to believe that a massive government global warming cap and trade program would not be a disaster

But what if you did not need a massive bureaucracy to address both global warming and our energy crisis? What if there was a long term strategic approach to both problems together rather than the failed tactical approaches to either problem? What if you could leverage the force of the market place to solve both problems, real or imagined, and not rely on the limited ability and knowledge of the 600 or so people in the White House and Congress? What if you could solve both problems with a minimal impact on freedom and citizens' wealth?

The following approach would be our best chance to do all of the above, migrating us to energy independence while cleaning up our energy foot print. This approach would involve some very simple principles:

•The approach to co-solving the global warming/energy crisis would be revenue neutral to the Federal political class, i.e. it would not put more of our wealth within the power of the politicians in this country.

•Once the approach was set, it would be hardwired for at least ten years in order to remove market uncertainty and allow businesses and citizens to compute their short term and long term personal energy plans based on a firm belief that the rules would not change midstream. As we have stated earlier this week in this series, the Obama administration has an ugly tendency to inject major uncertainty into all of the major issues of our times (tax codes, tax breaks, health care, energy policy, etc.). Uncertainty breeds fear and we do not need any fear on an endeavor such as this.

•Market forces and the personal choices of Americans would drive/leverage this process, not another massive government bureaucracy. The massive bureaucracy known as the Energy Department has been a bust for over thirty years, there is no reason to believe it or another government bureaucracy will do better going forward the next ten, twenty, or thirty years.

•The plan will be strategic and long term, no more short term failures like Cash For Clunkers, Cash For Appliances, and Cash For Caulkers, all of which not only were non-strategic but also were not successful.

•There will minimal and hopefully no failed government subsides. There should never be another Solyndra, Beacon, or Evergreen. The market, operating under a long term strategy and set of rules, should pick the winners and losers, not politicians and their cronies who have shown a propensity for only rewarding themselves and operating ill fated companies into bankruptcy. For a good review of these failures, track down a New York Times August 18, 2011 article entitled: "Number Of Green Jobs Fails To Live Up To Promises."

So what would this dual solution look like? It would have the following, long term (ten years) components

- A five dollar per barrel of oil tax/fee would be implemented and added onto to previous year's $5 tax every year for ten years, and that cost would be allowed to filter down into the production of heating oil and gasoline. Thus, ten years from now, a barrel of oil would carry an incremental $50 per barrel tax.

If everyone knew that this tax was coming and it was going to increase $5.00 every year, would would happen? People would adapt, the entire market would adapt, creating leverage for less consumption of oil and less creation of emissions that may be causing global warming.

How would they adapt? The next time the bought a car, they would likely give serious consideration to a vehicle that got great gas mileage, considering that in ten years the cost of a gallon of gas might be as much as 50% more expensive. They would likely look to better insulate their homes if the cost of heating oil was likely to be 50% higher within ten years.

They might also consider implementing active or passive solar energy equipment to avoid or minimize the higher cost of electricity and heating. All of these actions would crate more demand for energy efficient products and services, driving the down the costs of such products and services, getting more people and small businesses interested in managing their energy future if costs came down.

Auto manufacturers and heating equipment manufacturers would invest in research and technology that is more energy efficient, knowing that their customers will become more efficient and smarter shoppers in the future. That would further reduce costs and emissions. All of these actions occur because the true costs of energy, loss of freedom due to the dependency on foreign energy sources and environmental impacts, are now fully part of the end price, i.e. the $5 per gallon per year increase represents these environmental and freedom costs.

Innovators would seek out, invent, or refine better energy sources, be it natural gas, wind, solar, tidal, or other energy technologies that do not exist yet. The competitiveness of new energy sources would be enhanced by the $5 tax approach on oil, creating new domestic industries competing on a more equal basis against oil and coal (see below).

But won't that destroy the economy and give our politicians more access to our wealth. Here is the beauty of this plan: the $5 a barrel tax never makes it in the hands of the Treasury or the political class. That money is rebated back to tax payers every year to do with as they see fit. They could use it to go on vacation. They could use it for a new TV.

But many of them would use it for a better gas mileage car, a better heating system, more home insulation, etc. Thus, we have not reduced the amount of wealth in the market, we have not given it to politicians to waste, we have just reallocated it for the good of the country and the environment.

This plan has leverage, it has certainty, and it will affect far more people than anything else the political class has passed off as an energy program. Cash For Clunkers affected about 300,000 people. I would bet Cash For Appliances and Cash For Caulkers affected for fewer. Their results were pitiful. Practically everyone in the country would be affected be this program. The key is not allowing the political class to get their hands on this additional money.

How much money might this get each of the 140,000,000 U.S. personal taxpayers every year? The U.S. uses about 19 million of oil a day. If you go through the math of 19 million, 365 days, $5 a barrel, you would end up sending each of the 140 million taxpayers a check for just under $250 the first year. It doesn't seem like much but the next year that might get twice that much since the tax would be raised another $5, resulting in more money coming in for distribution.

However, if the plan works, there should be less oil consumption the following year. Thus, rather than $250, assume that consumption goes down 10%, resulting in a second year payback/rebate of $250 and $225 (10% less) or $475. If you continue this model for ten years, an additional $5 tax and an additional 10% decrease in consumption, by the tenth year, each American taxpayer is getting over an annual $1,600 credit that they can use for weatherizing their homes, putting in solar equipment, etc.

A simple but elegant solution: less consumption, less emissions, certainty in the market, a leveraging of the entire market structure, no massive and doomed to failure cap and trade bureaucracy, no energy technologies, and our politicians get no more of our money in the process.

However, I cannot take credit for the plan and its elegance. Many of the details and philosophy of such an approach are well laid out in a September 6, 2010 article in Fortune magazine, that was written by Nina Easton and which covered the above plan proposed by two Republican Congressman, Jeff Flake and Bob Inglis.

- But oil is not the only "bad" environmental fuel. What about coal? Different fuel, same approach. All you have to do is come up with a similar tax that is equivalent to the $5 per barrel oil tax discussed in detail above and apply that to every ton of coal that is mined or refined.

By imposing such a tax or fee, utilities and coal companies would be falling all over themselves to improve coal's performance and environmental impacts. One additional facet that could be included in coal is to reduce that fee as the industry meets tighter environmental standards, i.e. clean up your act, reduce your tax. But the coal tax also never makes into the hands of the political class. It is rebated back to utilities and their users in an annual coal tax rebate.

- Two steps from "Love My Country, Loathe My Government," would also go a long way to fixing our energy and environmental problems. Step 24 would establish a national research program to facilitate the cleaning up of coal and its by products. In this country we have a lot of coal. If we could clean it up, it would go a long way to reducing our emissions, reducing our overall energy costs, and make us much more energy independent.

- Step 25 would implement a serious discussion and initiative with China and India, two countries whose use of coal and the dirty after effects it produces is growing very, very quickly. What global warming enthusiasts always fail to appreciate is that even if the U.S. cleans up its act in emissions, it will have no impact on the global environment and global warming if China and India, big and growing coal users and polluters, do not do the same thing.

We would end up knee capping our own economy for no reason if China and India do not clean up their coal act and continue to increase the emissions they throw up into the atmosphere every day. That is why Step 24, cleaning up the bad after effects of coal, needs to be a world community effort, not just a U.S. effort. And the political class needs to start talking to China and India, to name just a few of the emerging economies, to clean up their coal act also and in cooperation with each other.

- But this is a ten year plan, what could be done prior to seeing the benefits of this simple, yet elegant approach to two problems? Two things come to mind. An Associated Press report on January 11, 2012 reported that the EPA had put together its first database of U.S. locations that emit harmful pollutants into the atmosphere.

According to the database, 72% of all U.S. emissions come from U.S. power plants, many of which burn coal to produce the electricity we need everyday to get through life. If one assumes this database is correct, why wouldn't we as a nation look at the top 30 or so plants and work to clean them up, if they are the leading polluters of the 72%.

You probably do not want to shut them down since they are probably also the larger creators of electricity. The local and national and national economies would be hard hit if these facilities were shut down and stopped creating electricity But it does not mean that the best and brightest people we have should not attack these 30 locations and do all they can to fix their emission volumes. This would one short term way of addressing the potential of global warming.

- A second short term way ties into the $5 a barrel tax on oil. If we are really series about weaning ourselves off of foreign energy sources, then one approach is to start taxing those people that insist on buying oversized/low mileage vehicles for no business reason whatsoever. This is a personal prejudice, but I see no reason why anyone needs to own a Hummer. I see no reason why someone needs to buy a large, low mileage pick up truck to go buy milk.

These vehicles serve no personal purpose at all.

Now, I hate to act like a politician here and restrict anyone's right of choice. If the political class is not serious about energy independence and global warming than this should not even be a discussion since it is intrusive into freedom of choice, an act I usually find repulsive.

But if we are serious, than I would start putting a purchase tax on all vehicles, like large Hummers, that do not meet a reasonable gas and emission target. Next year, I would increase that target, the following year I would increase it again. And again and and again.

Americans could still use their freedom of choice to buy a Hummer or a large low mileage pick up truck for personal use (if these vehicles are being used in legitimate business operations, they purchase tax would be waived). This plan would not take that options away from them. They would just have to pay more for this sales choice.

Two things would happen under this plan. First, auto companies would get really serious about improving emissions and gas mileage performance on these types of vehicles. If they did not, their vehicles would become less and less financially attractive over time, given the increase in the purchaser tax.

Second, some customers would start to ask if they really do need a large Hummer to take their kid to the soccer game, a family sedan with better mileage and no purchase tax would be just fine. In both cases, you get leveraged behavior across a large swath of the marketplace that reduces consumption of foreign energy sources and cleaner air.

This would not be a small tax. I would start it at $1000 and increase by $1000 every year for ten years. Within three years you have added $3,000 the cost of the car and should see results. If you do not, increase the amount until you do see positive behavior change.

And the best, most brilliant part of this approach: none of the purchase tax money goes to the political class. It goes into the rebate pot of money we discussed above, back to the 140,000,000 American tax filers each year and back into the economy, not the black hole of waste in Washington.

- While this is a simpler, more leveragable, and more elegant approach than anything our political class could come up with, it is no small task. That is why Step 23 in "Love My Country, Loathe My Government" is so important. Step 23 would put together a panel of smart Americans to operationalize this plan. They would use their vast knowledge and expertise to refine the Hummer purchase tax amount and increase, develop the coal tax we discussed above, determine if $5 dollars a barrel of oil tax increase very year is enough to change behavior, propose ways to fix the emissions on those top 30 emitters of global warming gases, etc.

They would develop and present the plan to Congress and the President, all of whom would vote thumbs up or thumbs down on the plan's entirety. They would not be able to adjust anything since 1) they are politicians, not experts, 2) they would adjust things based on personal political needs and campaign supporters and not the good of the country, and 3) if they start to nit pick the details then nothing would ever get finalized.

Let the expert panel do the hard work, trust their expertise, and let's get on with things. Establish some long term certainty in the market so that businesses, providers, and consumers of power know the ramifications of their own actions and plans, actions and plans that are not held hostage by the whims and uncertainty of the political class.

If the political class votes negative on the overall plan, then it would be pretty obvious that they really do not want to solve the problems of energy independence or global warming. Or they want to solve the problem where they control everything, restricting freedom of choice, building large, ineffective bureaucracies, and collecting and wasting more of our individual wealth.

We know that this approach never works, that is how we got stuck with the Federal Energy Department, Solyndra, and Cash For Clunkers, all of which were clunkers of ill repute and wasters of taxpayer wealth of large disrepute. In the United States of Purple, simple, elegant, long term, leveragable, and strategic is the only efficient and effective way to solve problems.

Political class bureaucracies like their proposed cap and trade lunacy is not the way to go. The political class way leaves us right where we were when we stood in long gas lines in the 1970s, stranded and helpless in the middle of nowhere.

“We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein

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/

Monday, June 25, 2012

Retro 19: United States of Purple - A Plan To Resolve Our National Debt Problem

Due to family visits and obligations, for the next couple of days we will be reposting some previous posts. These will include some of the major issue positions we had written about in February. These positions laid out how the United States of Purple Presidency would finally get around to resolving some of the major issues facing the country, issues that the exisitng political class has never had the nerve, the intelligence, the means, or desire to resolve.

You can learn more about our movement and how to get involved, including the intitiative to install term limits on all Federal politicians, at:

www.unitedstatesofpurple.comWednesday, February 8, 2012

The political class has driven the financial viability of the nation's economy, democracy, and future to the edge of collapse by running up over $15 TRILLION in Federal government debt. This is the equivalent of saddling every American household with over $130,000 of debt.

The Obama administration would like us to think that it can solve this atrocious debt situation by taxing the wealthy more. But how viable is that? Let's look at some different scenarios, using the IRS tax data we used yesterday to see if his idea of taxing the rich is even viable.

- Let's assume that Obama put a 10% surtax on every dollar any American earning over $1,000,000. Using the 2009 tax return data, this would generate about $727 billion over ten years, assuming that these Americans were still motivated enough to continue earning this much money every year. This tactic would result in paying off less than less than 5% of the $15 TRILLION national debt.

- Let's get really crazy and assume that Obama confiscated every dollar those million dollar earners earned in 2009. This would give the Federal government about $549 billion to pay down the national debt (assuming that they actually did use this windfall to pay down debt). This would pay off less than 4% of the national debt.

Unfortunately, you could not replicate this tactic for ten years because no sane person would continue to earn over a million dollars a year through hard work if the government was only going to confiscate all of it.

- Let's next assume that the whole country kicked in extra taxes to pay off the national debt. What if every American tax filer, regardless of earnings, paid an extra 3% in Federal income taxes? Over ten years this would generate about $2.5 TRILLION which would only pay off about 17% of the $15 TRILLION national debt.

- If we jumped that extra tax percentage up to 10%, it would come up with about $8.5 TRILLION and cover just over 50% of the national debt. However, it is doubtful the economy would stay healthy if a full 10% the nation's wealth was annually diverted to the Federal government to pay down debt. This would cause major problems elsewhere in the economy.

And all this assumes the national debt stays at $15 TRILLION. Given the budget plans that have come out of the Obama administration over the past year or so, if nothing changes, the Federal government is likely to add more than $9 TRILLION to the $15 TRILLION current national debt in the next ten years. Thus, you cannot increase taxes fast enough, on any or all Americans, to keep with the excessive spending of the political class, regardless of what Obama says.

But what if we could take more than $9 TRILLION out of the national debt without confiscating any more of Americans' personal wealth? What if you could take out $9 TRILLION without significant adverse effects on most Americans' lives?

The data below comes from a wide range of government and non-government sources, representing some heavy analytical work and research into how to make our Federal government more efficient and effective without causing unnecessary harm or hardship on most American citizens. Sources for the following government budget cuts include:

•U.S. Public Interest Group

•The National Taxpayer Union

•General Accountability Office

•Congressional Budget Office

•Associated Press

•Senate Reports

•The Cato Institute

•Housing And Urban Development

1) Annual taxpayer wealth lost to waste, inefficiencies, and criminal fraud in the following Federal programs:

•Medicare: $60 - $90 billion

•Medicaid: $30 - $40 billion

•Social Security: $70 billion

•One Federal Unemployment Program: $19 billion

•One Federal Food Stamp Program: $2 - $3 billion

•Total: $172 - $222 billion, midpoint = $197 billion

•Savings over ten years if you just eliminated the waste, inefficiencies and fraud - $1,970,000,000,000 ($1.97 TRILLION)

2) Annual uncollected taxes due to the Federal government but not collected from tax evaders: $325 billion.

•Savings over ten years if you just reduce the illegal tax evasion by 50% - $1,625,000,000,000 ($1.625 TRILLION)

3) The U.S. has about 84,000 combat troops unnecessarily stationed in Europe, about 30,000 combat troops unnecessarily stationed in South Korea, and about 25,000 combat troops unnecessarily stationed in Japan, serving defense purposes that were obsoleted decades ago. The Obama administration is about to unnecessarily deploy about 2,500 troops in Australia. If 75% of these troops were brought home, the country would save about about $212,000,000,000 over ten years.

4) If we cancel the production of the V-22 Osprey aircraft because it is over budget, likely to under perform, and has been designated as not critical by the Sustainable Defense Task Force, we would save $6.2 billion over the next five years.

5) If we cancel the production of the F-35 jet fighter which, according to the Sustainable Defense Task Force, "may represent all that is wrong with our acquisition process" and "would provide a capability that is not warranted considering emerging threats," we would save $22.5 billion over the next five years.

6) If we cancel the military Space Tracking and Surveillance System, which can be replaced with lower cost and more reliable options, we would save the Pentagon $5 billion over the next five years.

7) If we cancel the outdated, unreliable, and unneeded Expeditionary Fighting Vehicle, because the General Accountability Office has cited the program's history of cost growth, schedule misses (14 years late), and performance failures as reasons for terminating the program, we would save $16.3 billion over the next five years.

8) The General Accountability Office found that the Army, Navy and Air Force are wasting billions of dollars a year by purchasing items that were either never used or were never required. The GAO identified purchasing reform processes that could save $36.9 billion a year or about $369 billion over ten years.

9) Terminating various unneeded corporate welfare programs would produce substantial savings. These programs include the Overseas Private Investment Corporation, the Market Access Program, trade association subsidies for foreign marketing, subsidies to large agriculture business and wealthy farmers, tax credits for the blending of ethanol, the ultra-deepwater natural gas and petroleum research program, public timber sales subsidies, and Southeastern Power Administration. Just ending these corporate welfare programs would save about $12 billion a year or about $120 billion over ten years.

10) The Federal government owns more than 55,500 buildings that are either not used or are underused. A detailed analysis suggests that if 50% of these buildings were eliminated over the next five years, not an unrealistic target, savings in the area of $48 billion would be realized.

11) According to government audits of Housing and Urban development, the Federal government wastes about $4.5 billion a year due to bad accounting and billing processes. Fix this problem and save about $45 billion over twelve years.

12) Using conservative estimates, annual earmarks, which are usually nothing more than thinly disguised ways for incumbent politicians to fund their re-election campaign with taxpayer money, cost the Federal government about $16 billion a year in unneeded expenses. Eliminating earmarks would save $160 billion over ten years.

13) According to the General Accountability Office:

•The Federal government has 15 different agencies overseeing food safety laws.

•It has more than 20 programs helping the homeless.

•It has 80 programs to help economic development.

•It has 82 agencies working on improving teacher quality, few of which are working if you see how poorly American kids are being educated vs. the rest of the world.

•It has 47 agencies working on job training.

•It has 18 programs working on food and nutrition assistance.

This type of redundancy results in tremendous waste and unneeded overhead, duplicate responsibilities, and inefficient service. A formal Senate report and analysis of the situation, estimates that between $100 billion and $200 billion a year could be saved by consolidating and downsizing these functions. If we take the midrange of the estimates, we end up with $1,500,000,000,000 ($1.5 TRILLION) in savings over ten years.

14) A Congressional Budget Office (CBO) report identified savings in the area of government spending on Science, Space and Technology - savings over ten years - $25.26 billion

15) The CBO found Agriculture savings over ten years - $3.87 billion. This does not include the termination of unneeded ethanol subsidies and other farm support programs that are no longer needed, given how well the American farming industry is dong today.

16) CBO - Natural Resources and Environment savings over ten years - $32.23 billion. These savings are mostly concentrated in programs that support corporations, not endangering basic government environmental programs.

17) CBO -Commerce and Housing savings over ten years - $5.42 billion. This does not include the savings that could be found by cutting back on the widespread fraud and mismanagement in government housing programs.

18) CBO - Transportation savings over ten years - $141.64 billion

19) CBO - Community and Regional Development savings over ten years - $21.94 billion

20) CBO - Education, Training, Employment, and Social Services savings over ten years - $45.42 billion

21) CBO - Income Security savings over ten years - $68.83 billion

22) CBO - Veterans Benefits and Services savings over ten years - $21.50 billion

23) CBO - Allowances savings over ten years - $2.54 billion

24) CBO - Administrative of Justice savings over ten years - $10.26 billion

25) CBO - Social Security savings over ten years - $388.52 billion. Part of these savings are compatible with the recommendation from "Love My Country, Loathe My Government" which was to raise the retirement age to 70.

Not included the $388 billion is another step from "Love My Country, Loathe My Government," which was to uncap the total amount of earnings subject to Social Security tax. The CBO estimates that raising the cap amount the way they want to would provide an additional revenue of $503.4 billion to the Social Security finances over ten years.

This estimate also does not include the final "Love My Country, Loathe My Government" Social Security recommendation which was to terminate Social Security payments to anyone whose net worth is over $3 million in assets, i.e. people like Donald Trump, Warren Buffet, John Kerry, Barack Obama, and Bill Gates who do not need the checks to live comfortably will not get them.

27) CBO - General Government expense savings over ten years - $5.21 billion

28) Since Obama came into office, the Federal payroll has grown by 231,000 civilian employees despite reduced tax receipts, the lingering impacts of the Great Recession, and the overall dire employment situation throughout the country. Since most of us would agree that we have not seen a corresponding rise in the quality of government service since these people have been hired. Getting rid of them, like most efficient businesses would do, would not result in a degradation in Federal government services.

If we conservatively estimate that the weighted taxpayer cost (wages, benefits, and retirement costs) for these newly hired employees is $80,000 a year, than letting them go would result in annual savings of about $18.48 billion a year or $184.8 billion over ten years.

29) In any measure of education attainment, U.S. kids usually fare very poorly when compared to the education received by kids in other countries. Usually the U.S. is bested by a dozen or more countries when it comes to comparing standardized test results. The Department of Education has been around for about thirty years and has done nothing to change this low performance.

Thus, given its nonperformance, the entire department should be eliminated. Cato suggests that this ill performing government entity be terminated at once, its responsibilities becoming the responsibility of the states to educate their own kids and the American taxpayer can save the annual $107 billion cost of the department. I would put a twist to this termination recommendation.

I would phase out the department over a four year period but would send the department's budget as block grants to the states during that four year phase out. The states could use the block grants to improve the teaching ability of their own state's teachers, improve their technology infrastructure, improve their curriculums, and improve their universities' teacher education curriculum.

At the end of four years, the states would be in a much better position to educate our kids, heaven knows the Federal Department of Education has not done anything worthwhile. 10 year savings - $909.5 billion.

30) Much like the Department of Education, the Federal government's Department of Energy has done nothing to get us to a coherent national energy strategy and policy and has not funded any breakthrough energy technologies. Terminate the entity and let the private market research and development new energy technologies. 10 year savings according to Cato - $382.8 billion.

31) Cato has done similar analyses on just about every other Federal organization, some of which we have already touched on. In order to avoid double counting, I will not go into their agriculture subsidy reductions and military spending reductions, given what we have already identified some of them above.

However, they have identified 10 year savings of $21.2 billion from the Commerce Department and if you conservatively accept only half of their Department of Transportation cuts, you get another 10 year savings of $424.4 billion.

These cuts alone would save the Federal government over $9 TRILLION in expenses and costs over the next ten years with minimal impacts on needy Americans and ordinary American citizens. The $9 TRILLION+ does not include additional savings that would come from the following areas:

•More military cuts not listed above.

•Reining in Medicare and Medicaid costs beyond the fraud and waste savings listed above.

•Deny Social Security payments in retirement to any American who had a net wealth of over $3 million.

•Savings from interest payments not paid because the Federal government took $9 TRILLION of debt out of play.

•The repeal of Obama Care which would save the country from expending an additional $300 billion over the next ten years, if you believe the recent analysis from the head actuary of the Medicare and Medicaid programs.

•The termination of the Federal Housing Authority, Fannie Mae and Freddie Mac government agencies and the associated hundreds of billions of dollars in taxpayer subsidies they are likely to consume in the next ten years.

•Elegantly privatize some government functions such as what Canada and other European countries have successfully done with their national air traffic control processes and postal systems and allow private contractors do the TSA screening function at all U.S. airports since we know from experience that they can do a far better job for less budget money than government employed TSA screeners.

People far smarter than me can determine the value of these additional efficiencies in government operations. In fact, Cato has already done all of this work and summarized it at their fabulous website, http://www.downsizinggovernment.com/. Their comprehensive analysis found a way to reduce annual Federal government spending over time by about $1.16 TRILLION a year, creating a ten year debt reduction of $11.6 TRILLION.

This is in the same ball park of our $9 TRILLION in identified savings and the additional unquantified savings in the list above. Two separate analyses, about the same results, indicating that this is doable without raising taxes on any American, rich or poor.

The above cuts are a great start. However, one of the first acts as President in the United States of Purple would be to convene a commission of smart Americans that have already analyzed the need for drastically reduced government spending, put them in a room, and have them work together to overlay their plans together to come out with one overall plan, based on their expertise and past experiences in this area.

Members of this commission would be drawn from at least the following organizations:

1.President Obama's defunct and severely underutilized Deficit Reduction Commission

2.The Cato Institute

3.The Concord Coalition

4.The General Accountability Office

5.The Congressional Budget Office

6.The Urban Institute

7.The National Taxpayer Union

8.The U.S. Public Interest Group

9.Bipartisan Policy Center

10.Others TBD

Most of these cost cuts would have minimal impact on the average American. More importantly, it would reduce government expenses, allowing more Americans to keep more of their personal wealth, it would increase our personal freedom, it would unmuddy the uncertainty that the Obama administration has injected into the economy, and it would keep the social programs that many Americans rely on (e.g. Social Security, Medicare, etc.) viable and fiscally solvent.

That is how life would be in a Purple Presidency. Given the history of the Obama administration and the rest of the political class, this solution is beyond their capabilities and comprehension. Otherwise, they would have done these things already.

“We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein

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/

Love My Country, Loathe My Government