Question re: Political Thinking

Since November we've been hearing on a fairly regular basis how the 2012 campaign has begun, how the potential contenders on one side are jockeying for position and now we're hearing that the current President's administration is focusing on re-election.  The thought is that by diverting a portion of his attention to the campaign now, the President can still, with diminishing attention to the needs of the country and the world, continue to lead throughout the term.  My question is this:  Should a person elected to office spend any of their time while in office campaigning for re-election?  Asked in another way, why can't the fruits of your labor be your best advertisement? 

It reminds me of a story I heard of a man being told that he hadn't gotten the promotion he'd worked so hard to win.  He had wined the right people, dined the right people, played golf with the right people.  All the while, the person who got the promotion was the one who went about his job with dilligence. 

Can our political system work that way?  I fear that it cannot.  Why do politicians campaign so often, pander to special interests and cozy up to lobbyists?  Money.  Money to pay for 30 second sound bites.  Why the 30 second sound bites?  Why not the strength of your accomplishments?  The 30 second sound bite works better.  The general public spends so little time studying political races that name recognition alone can generate a win on election day.  In some locations it's the little letter next to the name that signifies the win.  In others, it's simply the spelling of your last name. So, if we're not going to judge our politicians on the strength of their accomplishments, then we certainly can't expect them to try so hard for them, can we?

The Freedom to "Marry"

As I sit here on the eve of my nuptials I feel quite fortunate.  Not only am I fortunate to be marrying a remarkable woman who amazes me daily with her kindness, grace, intelligence, and warmth, but also for the fact that my marriage is to be allowed, blessed by society, and those rights and privileges granted to unions bestowed upon my own. 

A small percentage of our society is not so fortunate.  They are free to co-habitate, to form their own unions, but the State refuses to recognize it.  Insurance companies recognize it.  Those heartless corporate monstrosities that are the bane of our society (according to the State) grant the same privilege of shared coverage to unions regardless of whether or not the State recognizes them.

What is the problem?  The problem is that a majority of people are unnerved by homosexuality.  They feel it detracts from our society in some way.  It is somehow immoral and permissive in a way that damages the rest of us.  All of this may be true (though I doubt it), but do not forget my first lesson:  Freedom is supreme. 

What harm to you if a homosexual couple can file a joint tax return?  What harm to you if a homosexual couple can file a joint bankruptcy, receive survivor benefits, or simply be recognized for the love and devotion they show each other? 

Perhaps there is a misconception.  No one, at least not that I've heard, is demanding that churches be forced to perform Christian Marriage ceremonies for homosexual couples (though if they did, I do not think God would mind).  All that is asked is that the union be granted the same rights as that of any other civil union in this country. 

Don't get me wrong.  I support your freedom to disagree, I support your freedom to discriminate if that's what you choose to do.  I just hope that our society will visit upon you the consequences such actions deserve. 

This weekend, while out for a drive, I drove by a small protest of sorts.  A group of people had gathered on a street corner holding signs.  Gay marriage is bad.  Marriage = 1 man 1 woman.  Honk if you opposed Senate Bill blah blah blah.  I didn't hear any honks.  I considered honking, but only to draw their attention to my middle finger, but no.  Let them protest, let them express their opinions.  They are free to do as they will.  I pray that we may all be free to live and love as we see fit.

Going into this weekend, I count myself the most fortunate of men.  I am marrying my best friend.  I'm a bundle of nerves and anticipation.  What few doubts there have been are erased at her smile and cease to exist at her touch.  I wish you all the same peace and love and joy that I feel, and of course, the same freedoms that I enjoy and more.

The Misconception of Protection

As this recent budget battle is illustrating, the calls to cut federal funding for certain programs and enforcement of some regulations leads people to cry out that the thin veil of protection we have from all sorts of societal and industrial evils is about to descend on out land once again. 

"If we cut the food safety budget then food will be unsafe!"  "If we cut defense spending the world will fall apart." On and on the cries go lamenting proposed cuts in everything from education funding to farm subsidies, but what if the money does more harm than good?  What if it simply does nothing at all?

There is a perception amongst the populace that absent heavy handed government regulation and oversight, our society would more closely resemble the wild west than an orderly society.  This is simply not true.  The rise of government bureaucracy did not facillitate the rise of a peaceful society.  More likely it was conditions created by the broader economy that settled our lands and actually gave rise to an overly burdensome federal bureaucracy.

Over the past 40 years the pace of per child spending on primary and secondary education has grown at a rate better than twice that of inflation.  Has this produced greater results?  No.  Why not?  Part of the reason is that the money that actually makes it down to the schools has NOT grown at that rate.  Instead, substantial sums are lost in the bureaucracy, spent on pet projects and not on those that are proven to do the most good.  Another chunk of that money has gone to fund the very same unions that have forced destructive tenure and job security rules that protect underperforming teachers at the expense of those who are newer and brighter.

On food safety, there have been several high profile food safety issues over the last few years.  Has the federal government's many programs for food safety prevented these?  No.  Have they helped discourage new problems?  Perhaps, but one factor helps discourage food safety issues more than any other:  litigation.  It is NOT fear of a federal agency shutting their doors that keeps farmers and food processors from cutting safety measures.  More likely it is the threat of expensive litigation stemming from what harm they may cause that creates greater safety in our food supply.

Even when it comes to building and maintaining roads, the government is extraordinarily inefficient.  The question that should be asked with all of these issues is, who can do it better?  If the courts and the private sector can enforce food safety better than the FDA, let them.  If private companies can build better roads and keep them in better shape for less money overall than state, local and federal governments, go for it!  Yes, you're reading me right and I KNOW it's controversial, but if what many consider to be the essential functions of government can be done in a better manner and more efficiently WITHOUT the intervention of a bloated bureaucracy, why isn't this happening?

Quite simply.  Our government no longer exists for our benefit.  It exists to benefit itself.  Like all of the EVIL corporations that are only looking out for their bottom line, the government is only looking out for itself and the people who work for it.  From the regulators who invent new regulation to give themselves more power and therefore sustain their relevance to the elected representatives who fulfill the desires of this special interest group or that in order to get re-elected, our government is no longer FOR the people.  Hey, at least with a public corporation they're responsible to their shareholders.  It must seem easier to replace a member of a corporate board than a government official these days, elected or appointed, it doesn't seem to matter.

Tomorrow:  The Freedom to "Marry"

Collective Bargaining "Rights"

The constitution is being amended before our eyes. 

A dozen times in as many days I've heard of the ASSAULT on worker's constitutionally protected rights to bargain collectively.  I'm a bit lost, I don't recall that from my con law classes or from my readings of the constitution.  Could someone point this one out to me? 

I'm all for supporting your freedom to do as you choose.  If you choose to form an affiliation to bargain collectively with your employer.  Do it.  Go for it.  I support your freedom to do so.  When your boss fires you for doing it.  I support him or her too.

For now, let's get real about this subject.  The constitution does not guarantee any rights to bargain collectively without fear of recrimination from your employer.  In a constitutionally questionable manner, Congress has conveyed this ability to certain classes of workers. In doing so, they have limited the rights of free speech of business owners and the right to conduct their businesses in a profitable manner.  States have further damaged the constitutional rights by making it mandatory to join a union and pay dues to work in certain jobs. 

Let me just say this again, your freedom to unionize should not affect my freedom to stop doing business with you. 

Next week we'll talk about the false perception of safety we get from our government's interference with free enterprise.  Until then...

Life's Lessons Are All Around Us

So, this past week I've been in the Big Easy celebrating Mardi Gras with some of my closest friends.  While down there I was struck by how attending parades seemed to reflect life.

For example, you have 2 basic types of parade-goers, the preparers and those who just show up.  These 2 main groups also have sub-groups.  For those who just show up, you have those who are content to take what they can get, those who bully their way to the front, and those who simply expect the front row to be given unto them.  The preparers also have subgroups.  You have those who go all out with the food, bathrooms, chairs, umbrellas, police tape, etc to mark their turf, and those who just show up early and stand around.  Across both of these you have those who stand their ground to the bullies and the whiners and those who just give up what they've worked for in the face of either aggression or whining.

As with the rest of life in this country, even if you just show up, you can find a good spot.  It might not be on the best stretch of street, it may not be in the front row, but if you look long enough, put in the work, you can find a spot and catch a lot of beads. 

My favorite of all parade-going groups is the kids.  They have fun.

Thanks Michael Moore, I Just Threw Up a Little

No, Michael Moore didn't take off his shirt.  What he did was open his mouth.  Normally, this wouldn't be enough to make me vomit, but today, well, he got to me.  Here's what he said (speaking about wealthy people):

"They're sitting on the money, they're using it for their own -- they're putting it someplace else with no interest in helping you with your life, with that money. We've allowed them to take that. That's not theirs, that's a national resource, that's ours. We all have this -- we all benefit from this or we all suffer as a result of not having it,"

Bad enough?  Nope.

"I think we need to go back to taxing these people at the proper rates. They need to -- we need to see these jobs as something we some, that we collectively own as Americans and you can't just steal our jobs and take them someplace else."

Now that I've stopped sputtering in rage, let's break down these statements.

Wealthy people are sitting on their money and not giving it away for your benefit. 

This is just not true.  Americans give more to charity than any other nation.  We could do more perhaps, but maintaining at least the semblance of private property rights is one of the last bastions of freedom we have left.

We've "allowed" them to take that money, but it's not theirs, it's ours.

The vast majority of weath in this country is EARNED.  In the case of inherited wealth it may have been earned by a prior generation, but it was still earned.  What I earn by the sweat of my brow or through my ingenuity belongs to NO ONE but me. 

<deep breaths>

Ok, I'm calm again, let's continue.

We need to tax people at the right rates. 

Is Michael Moore rational here?  Could he possibly be suggesting a flat tax?  Well, taken in the context of the prior statement, I'd say no.  More likely he's proposing a 100% tax on wealth.  (Just not his I'm sure)  Why not, it's not their money, so why should they keep any of it? 

We collectively own the jobs, you can't steal them and take them someplace else.

I could probably write for 2 days the problems with this statement.  If jobs become a property right in this county we are in for some serious trouble.  Stop and think about it.  Some due process is required to take your property no matter if you don't fully own it.  The constitution requires this, that no person will be deprived of property without due process of law.  This may involve a civil suit, a government action, or a foreclosure proceeding.  As deficient as some of these are, it's still not entirely easy to take your property.  So, let's say you have a job, and that job is your property.  Let's further suppose you're really bad at that job.  You're lazy.  You're on drugs.  Whatever.  Is your boss, the person who built your company, owns your company, etc going to have to get a court order to fire you? 

You'd think this is just one nut job mouthing off.  Unfortunately, you'd be mistaken.  There is actually a decent segment of our society who believes this garbage.  People will not produce when they can't enjoy the fruits of their labor.  Further, you're dealing with a slipperly slope.  Where does the assault on freedom end?  It ends with education.  We must educate ourselves and our families on the importance of freedom, the significance of proper incentives in our lives, and the rewards of hard work. 

Short break coming up for Mardi Gras, where I reward myself for my good behavior and hard work this past year.  I may have some short posts over the weekend, but maybe not.

Have a great weekend.  See you next week!

Jobs v Wages v Taxes v Growth: Part 4 - A Few Hopes

Taxes need to fall so companies will invest more in the US, creating new jobs, with better wages that will grow the economy.
We've talked about incentives before, but now I want to put some of that theory into practical practice.  The basics:  people are motivated to act by an incentive.  You work because you want to get paid or you enjoy your job.  You give to charity for the warm glow and the tax write-off.  This seems to be most telling in the realm of taxation.  A study of economic output over time will show you that productivity grows most after the enactment of a broad based tax cut.  That is a tax cut that equally reduces the tax burden on the producing portions of our economy.  Targeted credits have not had the same effect because they do not reward production in an economic sense.

A more interesting look at tax policy shows us something else.  Regardless of the tax rate, overall taking of revenues as a percent of GDP wavers very slightly.  From the close of World War II to present, with top marginal rate ranging from 25 to 70% the government has only captured between 17% and 19%  of GDP.  What does that mean?  Simply that tax policies force a shift in spending and investment.  Lowering of tax rates on production encourages us to produce more.  Increasing these same rates encourages us to spend more in less taxed areas such as real estate, foreign investments or other (often less productive) capacities. 

We should probably discuss at another time why our government insists on spending 20-25% of GDP. 

But, how do we incentivize people to spend more, invest more, and produce more?  A good start would be lowering taxes across the board to something closer to what people actually pay in taxes.  The so called Debt Commission actually endorsed a tax rate of 23% for all earners meanwhile eliminating many popular tax dodges.  Further, eliminate or significantly reduce taxes for repatriated income. 

Quit subsidizing people for lack of production.  From agricultural subsidies that subsidize empty fields and unproductive farmland to long-term unemployment benefits, if you quit paying people and companies not to produce then you will in fact encourage them TO produce.  In the area of unemployment a real world experiment took place in Denmark.  Denmark paid unemployment benefits for 5 years!  Guess what?  People stayed out of work for 5 years!  When they reduced unemployment benefits to 4 years, people began finding jobs at the 4 year mark!

Finally, reduce federal spending.  But!  Federal spending enters the economy too, won't that reduce the size of the economy?  Absent any other movement in the economy, yes.  If I've said it once I've said it a thousand times, government does not spend money well.  It is extraordinairily inefficient.  Take a look at the recent GAO report that found dozens of duplicative programs costs billions of dollars a year.  Do we really need 82 programs to improve teacher quality?  Really?  82?  The other reason government spending is bad is because our government is OVERSPENDING.  This means that at some point in the future, we will have to increase revenues to make up for the costs we are incurring today. 

We can always hope, right?

Jobs v Wages v Taxes v Growth: Part 3 - Revenge of the Posts

SPEND!!!!

You may recall that we discussed briefly the fact that companies are reportedly sitting on several trillion dollars in profits being held by overseas subsidiaries.  That money could easily be put to use back here to reinvest in new projects, new production and growth.  So, why is it sitting over in other countries?  First we should look at how it got there in the first place, at least at a few reasons.

Companies spend a LOT of money researching, developing and then building new products and services to sell here in the United States.  These products go through what's known as the product life cycle, until, finally it is obsolete.  Well, HERE it's obsolete.  Oftimes overseas what we consider to be last year's hit is tomorrows next best thing.  So, goods are shipped overseas and sold. 

Other companies, such as McDonald's, Wal-Mart, Kentucky Fried Chicken and countless others have established a world-wide branding that allows them to sell their businesses in countries around the world. 

So, now the company is making money overseas.  This money stays there until re-patriated into the US.  A number of countries, ours included taxes revenues from overseas when it is re-patriated.  The difference is that the US taxes that income at 35%.  Most other developed nations tax this revenue at a much lower rate, averaging slightly less than 20%.  So, the company is faced with a decision.  Does it bring that money home and reinvest in the United States or does it reinvest those funds in the other country?  The challenge in bringing that money home is that it has to have a return sufficient to make up for the higher tax rate paid.  It's profit motivation pure and simple.

We could encourage companies to invest in domestic spending and job growth by doing one simple thing:  Lowering our tax rate on repatriated revenues to the international average or below.  The money comes home then gets spent building new facilities, hiring new workers, or paying dividends.  Those dividends are then either reinvested or spent. 

Here's an interesting thought.  If $1 trillion dollars is repatriated at 35% tax rate, then the remaining $650 billion is paid out just in dividends, which the government will tax at a rate between 5 and 15%.  The average is actually closer to 12%.  That's $78 billion additional dollars spent on taxes.  Essentially that 35% tax rate just went up to 42.8%.  If that money was spent on wages then it could go even higher.  With our current policies that money is staying out of the US Economy.  Other countries will continue to reap the benefits of our heavy handed tax policies and our economy will continue to limp along in this "recovery."