Sunday, January 31, 2010

The canaries in Obama's jobs coal mine...

In his State of the Union address last week President Obama stated that jobs would be his number one priority in 2010. Outstanding! However...two recent events give me pause as to whether or not he has the desire or competence to actually achieve something positive in that realm.

The first has to do with the hapless Securities and Exchange Commission, the people who couldn’t figure out Bernie Madoff was a crook despite the fact that people had been telling them so for almost 20 years. At the exact moment when the foundations of the Global Warming / Climate Change fraud are crumbling, President Obama’s SEC Chairman, Mary Schapiro, issues guidance to public companies that they should begin disclosing the risks of global warming on their businesses. That is exactly what American companies need in order to start hiring again, a sop to slip and fall layers and environmental groups who will follow the ACORN model of using threats and government sanctioned intimidation to liberate billions of dollars from corporate coffers. While this recommendation is certainly a jobs bill for lawyers, it will likely be a job killer for everyone else.

The second has to do with the Justice Department’s apparent desire to pursue Utah Republican Orrin Hatch’s ludicrous idea of investigating the Bowl Championship Series. Miffed that their teams never quite measure up when it comes to making it to the National Championship game, Senator Hatch and his friends have used the dubious argument that because BCS member schools receive federal research funds and student loan dollars, they should become toadies and put Utah or TCU into games for which they have not earned a position. Here again, while you could make the case that this effort is a jobs program (because it’s keeping at least some of the Justice Department’s lawyers from harassing employers) there’s more than meets the eye. The problem with this train of thought is that if the Justice Department can use such a tenuous connection to investigate colleges playing a football game, how confident can a business be that at some point they will not be open some sketchy investigation simply because they pay their employees with dollars printed by the Treasury Department, their employees drive to work on public highways, or they have packages delivered by the USPS?

Individually these two issues are little more than a nuisance at this point. What they do accomplish however is demonstrate exactly why President Obama is likely to fail in is pursuit of job creation. The first demonstrates that this administration is willing to burden American corporations with another bureaucratic obstacle, which means diverting resources from R&D, marketing and yes… hiring, just to advance its continued support for a discredited theory. The second demonstrates that he is willing, with Congressional acquiescence or encouragement, to use the thinnest of connections upon which to investigate an organization, which often lays the groundwork for later regulations.

These are the two latest examples of the fact that President Obama has no idea about what creates real jobs and productivity in this economy. From his “spreading the wealth” suggestion to Joe the Plumber to the $787 billion stimulus plan to ObamaCare to tax policy, it is obvious that the President has no understanding of why private sector companies succeed or why they hire employees.

At the most fundamental level, companies are generally in business to make money for their owners, be they shareholders or small business owners. Those businesses hire employees when they believe those employees will help them make more money in either the short term or the long term. Unlike the government, who can simply take money from the citizens whenever they need it, for whatever purposes they might like, businesses have to convince customers to give them money in exchange for a good or service. In order to do that successfully, businesses need to have an understanding of the environment they are operating in.

Big or small, businesses do not need to know the future in order to be successful. Across the country companies successfully navigate detours in their business plans all the time. It’s not a clarity of outcome they need, it’s clarity of rules. In order to put their resources to work most efficiently today, companies have to understand the rules they are playing by, and not just for the next month. Businesses make arrangements to deal with regulations all the time. They can adjust cash flow to minimize the effects of confiscatory tax rates; They can change the design or ingredients of a product as new laws come into existence; They typically implement safety features in the workplace as new threats develop. One thing businesses cannot deal with however is a government that opens them up to litigation and pressure where the onus is on them to prove they are not contributing to something that does not exist in the first place. What might be next? Will corporations be forced to prove they are not harming unicorns? Will small businesses be forced to prove they are not discriminating against ghosts simply because they are corpusclly challenged?

Another thing businesses cannot deal with is helter skelter regulation. Regulation by definition impacts businesses, and they are forced to deal with the facts as they are laid out. A bubble gum manufacturer can expect to deal with regulations pertaining to sugars, food safety or nutrition. (I’m not suggesting those are necessarily appropriate regulations, but simply foreseeable ones…) If the government can dictate who should play in a college football game, who’s to say they could not regulate what color shirts a chewing gum company’s employees must wear, what kinds of cars its executives can drive or even that the company should give money to less successful chewing gum manufacturers. In such an environment we shouldn’t expect employers to stay in business for very long.

In the pantheon of reasons why Barack Obama has no clue about what makes America great or what makes an economy successful, these are two of the smaller issues. From tax rates to government deficits to union intimidation there are far bigger issues facing businesses and employers when they have to decide if they are going to hire or fire workers. Small should not be confused with inconsequential however… canaries in a coal mine are always small, but never inconsequential.

Thursday, January 21, 2010

Lessons never learned...

One of the best books I’ve picked up recently is The Housing Boom and Bust by Thomas Sowell – possibly the smartest man in America. (My words, not his…) The most interesting thing in the book is that everything seemed to come back to the same fundamental point: A disconnect between people making decisions and the negative consequences arising from those decisions. That got me thinking…

Barney Frank, (2005 / 2009) probably the person singly most responsible for the economic malaise we find ourselves in, may be the poster child for this disconnect. After spending decades bullying regulators, threatening financial institutions and forcing banks to sacrifice centuries of good lending practices on his alter of “affordable housing,” he not only still has a job, but in 2006 became the Chairman of the Finance Committee, one of the most powerful positions in all of government. The fact that the voters of the 4th District in Massachusetts are ...gullible (I'm being charitable) enough to continue to send this buffoon to congress and that the Democrats in the House then choose to inflict him on the rest of their constituents is but one example of that disconnect.

Everybody knows that playing the lottery is not an investment grade activity. It might be somewhat exciting for a few moments, but you wouldn’t plan financing your kid’s college with it. The chances of you breaking even if the wrong numbers come up are not particularly good. That is of course unless it was AIG who was running the lottery. AIG had become a very risky company over the last decade, yet hundreds of sophisticated financial institutions from around the world decided to play the lottery with them. When it finally became clear that AIG’s plan for success was crossing both fingers while rubbing its lucky penny, one might think that the institutions that bet on its solvency might get a haircut. Not so much… Actually it was the American taxpayers who received the haircut and a lot more when the government stepped in and poured $170 billion in AIG to keep it from failing. Sure the AIG shareholders lost most of their investment, but the bettors themselves actually made out like bandits. As AIG’s position became clear, the markets hammered the value of its guarantees to a fraction of their face value. In the real world those companies would have felt the billions of dollars of pain as their bets on AIG went south. In the Bizarro world of government however, not only did these financial giants not see their lottery tickets turn to confetti, but the American taxpayer actually gave them their money back and the grand prize winnings as well.

Everyone knows that American public schools are a disaster, yet every year they continue to get more money. There is virtually a zero correlation between educational success and school funding. Governments – at all levels – and unions have created a Chinese wall between student performance and teacher pay. Budgets and bureaucracy continue to grow while test scores continue to languish. Administrators dumb down tests and push students out the door with diplomas they can’t read and unprepared for the competitive world around them. The United States spends more money on education than most countries in the world, yet American students continue to trail badly on test scores. While administrators and bureaucrats see their paychecks, headcounts and budgets grow, it is the ill equipped students upon whose shoulders the consequences of failure fall.

After $2 trillion in taxpayer money and forty years of Great Society programs, the problems of the American underclass are at least as bad off now as they were when The Moynihan Report was published. Welfare budgets and bureaucracies continue to grow while the outcomes of ineffective – nay counterproductive – policies fall on those who they are supposed to help. From out of wedlock pregnancy to unemployment to violence and a failing education system, by virtually any measure, the people who welfare policies are supposed to help are worse off today than they were forty years ago.

The fundamental point here is this, men are imperfect beings, but we (generally) learn from our mistakes. By the government inserting itself and its various bureaucracies and regulators into the action / consequences learning paradigm, it removes the necessity for Americans to learn from our mistakes. It eliminates what is arguably man’s greatest resource, his ability to reflect with dispassionate objectivity on the past and adjust his actions in an attempt to change the outcomes in the future. Tellingly, it’s not a question of aggregation vs. individuals. Large aggregations of people (companies) fail all the time. 2009 alone saw such household names as Linens and Things, Bennigans, Eddie Bauer and Six Flags file for bankruptcy. The difference is that in the private sector the people making the decisions about where to spend the resources are the ones who will benefit or burn as a result of those decisions. The beauty of the private sector system is that failures and bankruptcies free up resources to be utilized in a more efficient way, either inside a restructured company, as part of another organization where the assets will be used more effictivly or with investors who will invest somewhere else. At the end of the day it is the failures in the marketplace that give investors and entrepreneurs the foundation of knowledge and experience necessary to build successful endeavors. Henry Ford once said: “Failure is only the opportunity to begin again more intelligently.”

Not only is such phoenix-like behavior is never present with government, what’s worse is that as a result of government’s power of coercion, much of the non-government sector is forced to expend resources in inefficient and ineffective ways by people who have no stake in the outcomes. Government regulation and intervention are twin yokes around the necks of the American people and a weight on the American spirit. While there are areas where government’s role is appropriate such as immigration, national defense and policing, over the last half century it has become a Borg against which all resistance is futile. The demand for government to recuse itself from the everyday activities of our lives is not a suggestion that America has become a failed state. On the contrary, it is a call for America to become again a country powered by the drive, ingenuity, passion and extraordinary compassion of its citizens, not the playground of disconnected politicians.

Americans by their very nature are risk takers, explorers, builders and achievers. From freeing the world’s population from a life on the farm to introducing the automobile to the masses to winning two world wars to inventing the microchip, American ingenuity has been driving the advance of the human condition for 220 years. Now, at a time where the world is in the midst of a staggering financial tumult and modernity is under attack, there could be no better time for government to rein in its tentacles and let the American people pick up the flag and lead the race towards finding solutions to both. There’s no guarantee that we won’t stumble or fail along the way, but at least we would learn from our lessons and adjust. That's more than we can say about the government over the last 50 years.

Thomas Sowell tells us in very stark terms exactly what went wrong. It’s up to us to take away the right lessons and make the proper adjustments. With Tuesday’s clarion call of an election, it appears as if the people of Massachusetts may have found a Rosetta Stone for translating lessons learned into corrective action. Now let's see how those lessons translate for the other 49 states…

Monday, January 11, 2010

Timely lessons from some Founding Fathers on the losing side...

This weekend I was invited speak about the Constitution to a local 9-12 organization. Following my presentation, one of the participants mentioned that he was a bit frustrated. Having gone to a number of political / Tea Party meetings, he was frustrated that while the participants agreed on 90% of the issues, they spent most of their time arguing over the 10% they didn’t.

That statement is very telling and suggests a lesson to be had at the hands of the Founding Fathers. From September of 1787 through June of 1788 there was a tremendous battle over ratification of the Constitution. Both sides were represented by larger than life patriots. The Federalists included men like James Madison, Alexander Hamilton and John Marshall. The Anti-Federalists included names like Sam Adams, George Mason and John Hancock. Indeed, an argument could be made that the Anti-Federalists were the more eloquent of the lot, not the least of whom was Patrick Henry of “Give me liberty of give me death!” fame.

Nonetheless, despite their substantial oratorical and writing skills, the Anti-Federalists lost. The fact that they lost is not particularly important today. Why they lost, however, is. Simply put, the Anti-Federalists lost because they were unfocused and tried to fight something with nothing.

The United States under the Articles of Confederation was a disaster. The federal government was weak and heavily indebted, state governments carried massive debts, printed money like it was newspaper and imposed confiscatory taxes on their citizens. Inflation raged, veterans went unpaid and farmers across the country were being thrown off of their farms and into jails because of debts and taxes. This was the climate in which the Anti-Federalists were decrying the Constitution. They suggested the federal government would become too powerful, that citizens would lose their freedoms and states would become beholden to it. What they didn’t suggest however was a coherent or compelling alternative. When faced with a choice between the Federalist’s imperfect Constitution and the Anti-Federalist’s nothing, the citizens chose the Constitution.

Today, 223 years later America faces a similar situation. The economy is in disarray, debts are strangling government at all levels and the policies in place are not conducive to liberty, freedom or economic success for citizens individually or the nation as a whole. As such, Americans face a choice in November 2010. The question for conservatives is, will they give citizens something to vote for? It is not enough to say that the Democrats are shredding the Constitution and destroying the fabric of the nation and that therefore the answer is to vote Republican. Many Republicans helped create this situation so the GOP cannot be the default solution. Conservatives mush be very clear about what they want, not just talk about what they don’t want. Fighting something with nothing didn’t work for Patrick Henry and Samuel Adams 223 years ago and it won’t work for conservatives today. One must stand for something. As the last election demonstrated, lukewarm conservatism doesn’t sell. A candidate or a party that doesn’t give citizens a reason to follow them should not be surprised when they don’t.

The Tea Party movement has created an opportunity for conservatives to demonstrate that they stand for concrete ideas, real solutions and something other than “We’re not those guys”. Which brings me back to the 90%-10% problem I mentioned earlier. There is no such thing as a perfect candidate, but I can guarantee voters that a conservative with whom you agree 90% of the time will be a far better steward of government than a progressive with whom you agree 10% of the time. Conservatives must be clear about what they want and be willing to focus on the 90% of the issues they agree upon. And it starts from the bottom.

Grass roots conservatives can start by making a list of their core principals for good governance and using that as a litmus test for their support. I don’t mean virtues like honesty, loyalty or even bravery, but rather ideas related to the business of governing. The difference is important. Every politician believes he or she is honest, and John McCain may be one of the bravest men this country has ever produced. The truth is however, honesty and bravery don’t make for good governance if they are combined with liberal ideas and progressive tendencies. Therefore, conservatives must be clear about what they want and expect from their Congressmen, Senators and President as it relates to the Constitutional office they will hold.

Such a checklist might look something like this:

Support candidates who:

1. Are fiscal conservatives and believe that the federal government should not be involved in every aspect of our lives from cradle to grave.
2. Believe the federal government has exceeded its bounds and are willing to make the tough decisions necessary to return it to a Constitutionally mandated limited government.
3. Understand it is the private sector and capitalism that are the engines of American prosperity, not government.
4. Do not believe it is the job of the federal government to prop up uncompetitive companies or industries.
5. Support harnessing America’s abundant natural energy resources.
6. Are strong on national defense and border security.
7. Understand we are in a war, that war is not a crime and punishment activity and that terrorists should not be treated like household burglars, nor given political stages upon which to air their vitriol.
8. Will fight efforts to impose harmful international laws and agreements on the United States.
9. Believe in freedom of speech, particularly political speech.
10. Support democratic nations and activists as they face threats from totalitarian regimes.

Whatever the list looks like, if conservatives can put forward a spectrum of compelling ideas and embrace the candidates who support them, they can become the beacons that lead the country out of this self inflicted morass.

The Federalists won because they had a plausible plan for solving the country’s problems. The citizenry responded and America has flourished for 223 years. Today conservatives want to put the country back on the path to freedom and prosperity. If they want Americans to step back from this precipice overlooking a socialist hell, if they want the citizenry to turn around and embrace freedom, free enterprise and individual responsibility, if they want voters to race to the exits after one showing of “Yes We Can”, they had better give them something to run towards, give them something that inspires, give them something worth fighting for. If they don’t they’ve got nobody to blame but themselves.

John Hancock, Samuel Adams and Patrick Henry lost the ratification battle, and we are better off for it. Today they have a second chance at success by showing conservatives how to win the fight against the very things they were warning about 223 years ago.

Monday, January 4, 2010

Barack Obama’s Legacy

My undergraduate degree is in Political Science, but like so many others my actual job experience has had little to do with my major. For years I paid scant attention to politics. During the 90’s I remember watching Waco, the Oklahoma City and first WTC bombings and wondering what the hell was going on. I didn’t really pay enough attention to Bill Clinton to have an opinion one way or another. I believed him when spoke directly to me (via that live press conference) and waved his finger saying “I did not have sexual relations with that woman”. Discovering I was a patsy was not enough to get me moving. Other things caught my attention like the FLAN pardons and the 2000 election, but largely I was on political auto-pilot with little direction or concern.

Two events began to change that. September 11th and getting married. There is nothing to focus one’s attention on the things of value in your life as the possibility of losing them. On September 11th the precarious nature of everything came into view. I started reading about politics again as well as an area of the world to which I had not given a great deal of thought up until that point. Everything from Bernard Lewis’s What Went Wrong? to Mona Charen’s Useful Idiots to Dinesh D’Souza’s What’s so Great About America to Philip K. Howard’s The Collapse of the Common Good. I felt like I was getting educated again, despite the obvious and growing danger I still didn’t actually do anything. While energized in mind, I spent my days struggling to get one of my entrepreneurial endeavors off of the ground, rationalizing that if I could build a successful business I could impact more people than I could individually.

Getting married increased the speed at which the mental wheels turned, but again, not so much with action. My wife is from France, and she lived when we decided to get married. I called the USCIS (INS) to see what I needed to do. They said fill out forms A, B & C, do this and that and she should be in the country in 3 months. We were married in June of 2004 and filled out forms A, B & C and did this and that. When nothing happened by the next January, my wife, still living in France, said we get a lawyer or a divorce. We got a lawyer and 3 months later she was here and legal. With that experience my journey towards becoming a diehard conservative with libertarian leanings picked up steam.

Feeling like Russell Crowe’s character in A Beautiful Mind, suddenly everything seemed to come into focus. Where before sat disparate bits of information, now patterns emerged. It was clear, the government was so busy doing so many things for us (and to us) that they didn’t have time to do the things they were supposed to be doing in the first place. They were focused on forcing banks to make bad housing loans when they should have been making tax policy understandable to those who are compelled to obey it. They were busy shoving inflation inducing, environmentally ambiguous ethanol into American gas tanks when they should have been cutting red tape so companies could drill for oil or build new refineries. They were busy expanding the welfare state rather than creating an environment where businesses could create jobs and incomes that would obviate the need for a cradle to grave welfare state in the first place. And there was never the nerve or money to secure the border. Everywhere you looked they were meddling where they had no business and failing at those things the Constitution required of them.

I entered 2009 with a heavy heart. It sank on election night 2008 and remained submerged for months. The reason it sank, and, oddly enough, the reason it’s resurfaced are the same: Barack Obama. I knew going into the election he was a disaster in the making but I foolishly assumed Americans would not put an inexperienced, economically illiterate, statist in the White House. I was wrong.

It turns out however, all may not be lost. It’s said after all that it’s always darkest before the dawn. This President has veered so far to the left that he has had startled the American people out of their collective stupor. He has sewn the seeds for an American redemption. Drunken with hubris from knowing they no longer had to feign bipartisanship, the President and Nancy and Harry and Barney demonstrated in crystal clear terms exactly what they want to do to America. But a funny thing happened on the way to the gulag… Americans remembered that Communism, socialism and statism don’t work and said they want no part of them. I went to the Tax Day Tea Party in Atlanta and the 9-12 Project in DC. In neither case did I see people protesting for government handouts, for government to provide them with protection from this evil or that danger, or for government to take something from their neighbor to give to them. Instead I saw people protesting for the government to get out of their lives, to let them keep the money they earned – or most of it, and to let them live as free men and women. They wanted to be free to pursue happiness rather than have the government’s version of it foisted upon them.

While it may sound preposterous to suggest that one can discern Barack Obama’s legacy in January 2010, I feel confident in doing so. He has provided a face, a symbol for the leftist statist cancer that has been slowly metastasizing through the American body politic for the last fifty years. Much in the way that Pearl Harbor focused America’s attention on the task at hand and resulted in the Greatest Generation winning the War and building Pax Americana, it is possible that Barack Obama is playing the role of Admiral Yamamoto in this battle and that Americas, woken from their lazy stupor, will respond by taking back control of their government and their lives. Only time will tell, but I can say that he and the Democratic cabal that now control the government have sufficiently energized me to stop doing nothing and start doing something. Thus far I’ve started this blog, began talking to people and have begun giving speeches on the Constitution. They are not much, but they are a start. Somehow I think I’m not the only one.