Monday, October 29, 2012

Mitt Romney will have to do more than play Ronald Reagan to Barack Obama's Jimmy Carter

Sadly, this summer Andy Griffith died. Growing up in the 1970’s, watching the Andy Griffith show was simply part of our day. Between episodes of Howdy Doody, The Brady Bunch and Gilligan’s Island, the Andy Griffith Show was just another show where life lessons played out on TV. Together these shows were “Americana” incarnate, where stories about honesty, hard work and community were on display daily.

My wife, who was born and raised in France, recently stumbled across Andy Griffith reruns and decided to record them. She finds them quite entertaining and I’m happy to watch them with her as I find great pleasure in explaining the subtleties of life in the United States that one might not pick up if they did not grow up here.

I often find myself thinking about the 1970’s in a very nostalgic way, which is probably not unusual for anyone who spent their early teens growing up then. Of course from the perspective of an adult the memories of the 1970’s are probably a bit less sanguine. New York City almost went bankrupt in 1975, went black in 1977 and its stories of the Son of Sam and the killing of John Lennon shocked the nation. And things weren’t much better in the rest of the country with lines at gas stations winding around city blocks, labor unrest rampant, and smokestack industries choking… the United States was an economic basket case. By the end of the decade the misery index was at a record high (inflation + unemployment) and interest rates were sitting at 15%. To put a bow on it, the decade ended with Love Canal, Three Mile Island, a coming Ice Age and 52 American hostages in Iran scaring Americans into thinking the world was coming apart at the seams. Things looked dark indeed.

Thankfully, in 1980 Americans threw out the dour and clueless Jimmy Carter after he scolded them the year before:
In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we've discovered that owning things and consuming things does not satisfy our longing for meaning....

I'm asking you for your good and for your nation's security to take no unnecessary trips, to use carpools or public transportation whenever you can, to park your car one extra day per week, to obey the speed limit, and to set your thermostats to save fuel....
Carter was right about part of that… for most of the United States’ history Americans have indeed been proud of hard work, strong families and close-knit communities. And a belief in God too. Fundamentally they felt that, in America, anything and everything was possible. Anyone, regardless of their background, could be successful, or could at least work hard and set their children up for success. Why? Because America was, well… free.

In 1981 Ronald Reagan rode in on a white horse and saved the country. More than the tax cuts, more than his building up the military and the breaking the Soviet Union, more than shrinking the rest of government, Reagan made Americans believe again that they could succeed, that they could once again find prosperity and they could once again live in the Shining city on a hill to which he so often referred. Fast forward 30 years and the United States finds itself in a similarly dire situation where the economy is in the midst of an economic malaise, a befuddled president is clueless as to how to successfully direct the nation out of its storms, either domestic or foreign, and a wide swath of the nation feels like the country’s best days may indeed be behind it.

The question is, can Mitt Romney reprise the roll of Ronald Reagan to Barack Obama’s Jimmy Carter? Maybe, but in all reality, Mitt Romney will have to do far more than was ever asked of Ronald Reagan.

Why? Because the borg of government has made success so much more difficult. In 1981 the world was a different place. The EPA had only been in existence for a decade and its budget was $3 billion. Today the EPA has metastasized into a $10 billion octopus that is far more aggressive as it seeks to extend its tentacles to virtually every aspect of the economy from spilled milk to broken light bulbs to the carbon dioxide we exhale. In 1981 our national debt was 35% of GDP and while today it approaches a staggering 110%. In 1981 the federal Department of Education was a mere two years old and played almost no role in education while today it’s a $150 billion a year leviathan that infects schools across the country.

In what is perhaps the most telling illustration of a government out of control, take a look at the laws themselves. In 1981, after 194 years of the Republic, the Code of Federal Regulations (the complete list of federal regulations) was approximately 80,000 pages long. Today, a mere 31 years later Code has more than doubled to 170,000 pages! Every one of those pages, be they focused on employment, school lunches, banking, TV advertising or toys, makes it far more difficult for the nation to pull itself up off of the ground, dust itself off and continue the march to prosperity.

Unfortunately, it’s not just the federal government. States and local governments have grown similarly oppressive, with their obscene union contracts, which land on the shoulders of taxpayers, their onerous regulatory environments, and their abject failure in education combining to handicap Americans in the fight to regain their economic footing. The tentacles of these local leviathans show themselves every day in stories about children’s lemonade stands being shut down, people being arrested for cutting hair illegally, or more painfully, in the students who leave schools poorly equipped to face the challenges ahead.

For most of the country’s history the United States has been one of the freest nations in the world. It was that freedom that helped the United States rescue the world from two world wars, win a Cold War, invent everything from the mechanical reaper to sliced bread to silicon chips, and revolutionize industries from automobiles to spaceships and everything in between. In short, the United States has been the economic engine driving the world’s prosperity for a century. For most of the 80’s the United States was generally considered the third freest country in the world, behind Singapore and Hong Kong. Today, the Frasier Institute ranks it 18, not only behind Hong Kong and Singapore, but also behind such bastions of freedom as Bahrain, the United Arab Emirates, Finland, Chile, Estonia and Denmark.

It was a different world indeed. In 1981 Americans were sufficiently free to shake off the body blows of progressivism and resume that march towards prosperity. By 1984 Ronald Reagan had the economy growing by 7% a year. Today? After experiencing a far less severe recession, Barack Obama has the US economy growing by less than 2% a year. To put that in perspective, growing at 7% a year, it would take you a little over 10 years to double your income. At 2% a year it would take you 36 years. Now expand that to the national economy and you see the difference freedom makes.

The country is certainly a different place than it was when Andy Griffith was keeping the streets of Mayberry safe from pick pockets or settling disputes between feuding clans. It’s also a different place from the one Ronald Reagan inherited in 1981. While Americans may no longer be tethered to a telephone hanging on the wall or stuck getting their news or entertainment from a newspaper or television, those new freedoms and choices pale in comparison to the freedoms and choices lost in terms of their own economic opportunities. At the end of the day it’s great that you can get the latest football scores or watch YouTube videos on your iPhone, but at the same time it’s far more difficult to start a business to pay for it or keep a job to pay for the house you live in.

In order to help lead the country out of the economic abyss that Barack Obama and a quarter century of progressivism has plunged us into, Mitt Romney will not only have to be Ronald Reagan, he will have to be something more as well. He will not only have to reawaken the American spirit of possibilities, he must play the role of Alexander in the face of the Gordian Knot of government regulations. If he can accomplish those twin tasks by the end of his first term, his reelection campaign should be a simple one: “Are you better off today than you were four years ago?” A successful Mitt Romney should be able to hear a resounding, enthusiastic, unambiguous yes from everywhere in the country, including the little town Andy Griffith based Mayberry on, Mount Airy, North Carolina.

Monday, October 22, 2012

How about letting members of the Fortune 500 run America's welfare programs?

Imagine what you could do with a quarter of a trillion dollars. You might buy a new house, maybe a new car and maybe even take a trip to Hawaii or Australia. Nice.

Seriously, what can $750 billion accomplish? Well, that all depends on who’s spending the money.

According to the Congressional Research Service the federal government spent $745 billion in 2011 on welfare payments.

That means that government took 20% of every dollar it extracted from citizen’s wallets (or borrowed on their behalf) and gave it to somebody else. Not in exchange for part of a system they have paid into like Social Security or Medicare, or earned such as veteran’s benefits, but simply because they, the recipients were deemed poor. What’s more, virtually every element of the welfare state has gone up by double digits over the last 3 years: Healthcare up 37%, cash aid up 12%, education (college) assistance up 57%, energy assistance up 67% and who knows how much “Obama phones” have grown. Those numbers are simply staggering. That welfare spending, when combined with the $300 billion states have to pay for federal programs, brings total welfare spending to $1.03 trillion, fully 7.5% of the American economy.

To put that spending in perspective, in 2011 the 500 companies that make up the Fortune 500 list earned a total of $825 billion in profit on revenues of $11.2 trillion for a profit margin of about 7%. (1/3 of that revenue came from outside the US)

It’s interesting to see what, in the right hands, upwards of ¾ of a trillion dollars can do.

Of course in the private sector it’s profits that drive the activity. Entrepreneurs often start companies because they’d like to make a profit doing what they love. Investors invest in companies because they believe the potential for profit outweighs the risk of losing their money. At its core profits are what drive a prosperous society.

So what did those 500 companies do to earn their $825 billion? They directly employed 17 million Americans and indirectly employed tens of millions more both in the United States and around the world. What’s more, they touched the lives of virtually every person in the country in one way or another: Utilities – PG&E and Georgia Power; cable TV – Cablevision and DirectTV; Food – Wal-Mart and McDonalds; Healthcare – HCA and Pfizer; Information – Google and TimeWarner; Entertainment – Disney and CBS; Insurance – State Farm and Aetna; Communication – Apple & ATT; Transportation – Ford and American Airlines.

The US revenue from these 500 companies represents about 50% of our GDP and improved the lives of virtually every man, woman and child in the country in the form of a paycheck or cheaper products or more efficient services or more effective treatments. They are the top performers in an economic system powered by innovation and experimentation and has generated unprecedented prosperity. All driven by $800 billion in profit…

Now contrast that with the government spending $745 billion. From food stamps to cell phones to housing assistance to healthcare, government spending on welfare programs have been growing for decades and have taken off like a rocket ship under the Obama administration. Surely with that much money spent the results must be phenomenal. With $20 trillion spent over the last half decade surely there must be no more poverty anywhere and no more hungry children.

Of course that’s not quite how things have worked out. Today there are 47 million Americans on food stamps, record levels of poverty and the most downtrodden communities are plagued by violence, broken homes, failed schools and double digit unemployment. Not so surprisingly the food stamp program is so well run that earlier this year Congress felt the need to prohibit EBT cards from being in strip clubs and stories of EBT cards being used for everything from liquor, to cigarettes, to porn to casinos are legion.

At the end of the day however, welfare is not supposed to be a profit driven endeavor. (Of course there’s nothing in the Constitution that gives the federal government the power to run a welfare program in the first place, but why quibble about technicalities…) The government created welfare programs were supposed to support those in difficult circumstances until they were able to get back on their feet. It, the welfare state, has been an abject failure for everyone involved, from the people whose money is taken to fund it to the recipients themselves, sometimes generations of them. This failure has been catastrophic, both in terms of the lives lived in misery or those not lived at all, as well as in terms of the loss of human capital in the pursuit of prosperity.

Is it not time to consider a model where the people who bring us everything from iPads to Velcro to overnight delivery to Big Macs are given a shot at solving the problem that government is simply incapable of solving? American private enterprise has driven the improvement of the human condition farther and faster than any economic system in the history of mankind. Is it not time to abandon the failed policies of the welfare state and allow the profit motive to attempt to solve a problem that apparently warrants the spending of a trillion dollars a year of taxpayer’s money on?

If not business per se, then private charities and churches. In his excellent new book “Who’s the Fairest of Them All? – The truth about opportunity, taxes and wealth in America” Stephen Moore discusses a study by Arthur Brooks that shows that private charitable dollars are far more effective in helping the poor than public programs. Moore states
"That is in part because private charity often requires some change in the behavior of the person receiving the aid, such as getting off drugs, working for the aid or helping others. Public charity almost never attaches these conditions".
And that explains why government welfare programs have failed. They don’t require anything from anybody. Private enterprise succeeds because businesses require adapting to circumstances and markets to achieve the goals. Citizens should demand that we harness the innovative power of the private sector to attack a problem that government has been making worse for 50 years. While the country as a whole would benefit from the lower taxes, the bigger benefit would be achieved by those freed from the oppressive yoke of government dependency who would be able to share in the prosperity that has so long escaped them. Now that’s redistribution worth considering.

Monday, October 15, 2012

The Obama victory strategy: lie, cheat & steal...

I would suggest that if Mitt Romney avoids shooting himself in foot he will win this election, and will win by somewhere around 10 points. That’s good news. The bad news however is that he will likely have to win by double digits in order to survive the Obama campaign’s plan to employ a phalanx of lawyers to somehow wrest factory out of the jaws of defeat. Of course employing underhanded tactics are nothing new from this administration.

As we have seen from the recent obfuscation, manipulation and outright lying on everything from Benghazi to Fast and Furious to last month’s unemployment figures, the Obama administration thinks laws and the truth are for other people. Given their indifference to the concept of honesty in governing, it’s not a surprise that their approach to elections is not that much different.

Let’s take Voter ID laws. Democrats in general and the Obama administration in particular oppose them. They suggest laws seeking to ensure that voters are indeed who they say they are are racist – simply the latest version of the notorious “poll tests” that were used to disenfranchise blacks for decades. Nothing could be farther from the truth. Voter ID laws are specifically intended to fight voter fraud and ensure that every voter’s vote actually counts and is not hijacked or canceled out by someone else.

So why would the Democrats and the administration push to fight voter ID laws? Simply put, to cheat. Voter fraud has been around for as long as voters have been going to the polls. From Kennedy carrying Chicago in 1960 to Al Franken stealing Minnesota in 2008, voter fraud has been affecting the American political map for decades, usually (although not exclusively) in favor of Democrats.

Eric Holder’s Justice Department has fought Voter ID laws in Texas, Pennsylvania, South Carolina and other states, claiming that they place an undue burden on minorities and the poor. On its face this claim is simply absurd, particularly as the IDs are free and many jurisdictions offer free rides to pick them up in the first place. It’s also the case that the poor likely already have an ID as they would need one to cash any government checks they might receive.

With a playbook that includes everything from felons or Mickey Mouse or the dead voting to voter impersonation and voting multiple times, Democrat opposition to Voter ID laws is simply an attempt to hijack the electoral process, particularly in close elections. As seen in Texas and Illinois in 1960 and Florida in 2000, close elections can have big consequences.

If fighting against honest elections is not enough to convince you about the abject dishonesty of the Obama administration and Democrats, one need only look to the campaign’s fundraising activities. The Obama campaign raised $181 million in September. It’s not, however, the amount of money that demonstrates their dishonesty, but rather how they raised it.

They did so by raising millions of dollars from foreign sources. That’s something of a problem in that foreign donations to federal elections are prohibited by law. How did they do it? By specifically disabling the most basic, industry-standard, security safeguards for online donations. If you’ve ever bought anything online you’ve probably been asked to enter your billing address and the 3 or 4 digit security code from your card. Legitimate businesses and organizations use that information to verify your identity to protect against theft. Not the Obama campaign.

On, while you are asked for your address, that information is not used by the campaign for verification. Indeed, the only information the campaign verifies is the number and the expiration date. If someone in Beijing simply claims to live at 101 Main St. Anytown, USA the campaign takes the donation. And if you think that might just be an oversight, it’s interesting to note that the campaign has not disabled that feature for purchases of merchandise – as they need to send the stuff to an address – only for donations.

Without that verification, it’s impossible to know the source of donations. Given that 43% of the visitors to come from outside the United States, it’s not much of stretch to imagine that much of the half a billion dollars raised thus far has come from foreign donors. Indeed, until news of its background came to light, (owned by a Shanghai-based Obama campaign bundler) redirected visitors to the donation page on the campaign website. Now it’s just a blank page. Interestingly, 90% of’s traffic came from China.

At the end of the day Barack Obama and the Democrats seek to win and will heavily tilt the scales in order to do so, be it fighting Voter ID laws to soliciting funds from foreigners to manipulating government reports. Thankfully Barack Obama is in the process of destroying his own campaign and will likely take his party down with him. Given that the election is not likely to be close there should be little their army of lawyers can do in court to overthrow the voice of the American voters. Nonetheless, look for an after action review of the 2012 election cycle to suggest that the Obama campaign was one of the most corrupt since at least LBJ. Thank god it will likely be a one term administration.

Monday, October 1, 2012

RIP USA...just another collapsing victim of the cult of liberalism?

A friend of mine posted the above from E.J. Dionne of the Washington Post on Facebook. While the post quickly garnered a number of “Likes” I was incredulous. My response was thus:
What a ridiculous statement. Tax cuts allow the rich and poor alike to keep more of the money they earned rather than give it to nameless, faceless and largely unaccountable bureaucrats to distribute.

Conservatives don't want to give the rich anything. They simply don't want the government taking from those who work or invest to give to others. That's pretty simple. If Dionne has such a good idea, maybe we should forgo paychecks altogether and simply let the government take the fruits of our efforts and then divvy out what they think we need for food, housing, clothes, cars and entertainment.

And that’s the problem with liberals – or at least one of them. They have these wonderful bumper stickers that are intended to make them feel warm and fuzzy about being good people and wanting to help the poor while conservatives want to take food out of their mouths to give to the rich for whatever they might want.
It’s a patently absurd statement. Liberals perceive tax cuts as giving something to the rich. Nothing could be farther from the truth. Tax cuts allow the rich and poor alike to keep more of the money they earned rather than give it to nameless, faceless and largely unaccountable bureaucrats to distribute.

To see how this works, lets imagine that you, despite the demagoguery, still think you’d like to be rich and create a great life for your family. As such, you and your wife decide to start a business. Since you’re a great cook you decide to open a restaurant. Here are just some of the things you’re going to have to do from a business perspective:

You’ll probably have to take out a loan for buying equipment, remodeling your space, signage, recruiting, hiring, training, inventory and of course licenses and permits from a phalanx of government agencies. (Note: Even if you incorporate, as most small businesses loans require personal guarantees even if the business flops, you’ll probably still be on the hook for that loan.)

Then there’s the lease, many of which require a minimum of five year contracts, even before you have a clue how successful your business will be.

Now that you’re prepared to open your restaurant there are just a few other areas you need to focus on: Marketing. Security. Cash handling or electronic security. OSHA inspections. Health inspections. Unemployment insurance. Business insurance.

As entrepreneurs you have to concern yourselves with those and more. Basically you’re risking tens of thousands, if not hundreds of thousands of dollars on a business venture with no guarantee that you’ll even get your money back, never mind make a profit off of it. Then there is the actual work itself. Once you start your business you can look forward to 12 to 16 hour days, probably 6 and maybe 7 days a week for months if not years on end.

Once you’ve made this commitment and to put your money and sweat into your business you hope that things far beyond your control don’t get in your way, from the economy to the local roadwork that could close access to your restaurant to a mad cow or salmonella scare three states away that could upend your menu.

Despite every entrepreneur’s best efforts, half of all small businesses are gone within 3 years. In your case you’re still standing after those three years. You’ve worked more than you’ve ever worked in your life. You’ve had to risk every cent you’re worth as well as whatever you could borrow from friends, family and the bank. It’s all been worth it however because you have a flourishing business doing $3 million a year, employing dozens of people.

Finally, when you sit down to do your taxes, when all is said and done you find that between the salary you and your wife draw you’ve earned $250,000, which is a far cry from virtually nothing during the first two years. Then it comes time to pay Uncle Sam. Of that $250,000 you now have to write the IRS a check for $82,500, fully one third of your income. That leaves you with $167,500 after (federal) taxes. Depending on where you live you might have to write another check for as much as $25,000 to the state.

Then the two of you compare your situation to that of your brother and his wife, both of whom work for the federal government. Together they earn $246,000 in pay and benefits, pay $45,000 in federal taxes and have after tax income (including benefits) of $201,000.

You look at each other and really think about that. You’ve sacrificed so much, you’ve worked so hard, you’ve put so much into your business and at the end of the day you’re earned less than a couple of bureaucrats. You wonder whether it would be better to give up the uncertainty, the risk, the long hours for the comfortable and virtually guaranteed-for-life job of a government apparatchik.

Thankfully, more Americans are still choosing to start businesses and create prosperity for themselves and their communities than become government functionaries. But the tide is turning and with people like E.J. Dionne and President Obama pushing the wealth envy agenda and vilifying the people who build successful businesses, how much longer until that is no longer the case and America becomes just another collapsing victim of the cult of liberalism?