Monday, December 28, 2009

Californication - A horror movie coming to your neighborhood soon...

They say a picture is worth a thousand words. Sometimes a word can be worth a thousand pictures. In this case the word is California. Regardless of who you are or what state you grew up in or where you live today, the name California likely brings about a thousand pictures in your head. The Beach Boys. Gold Rush. Alcatraz. Cary Grant. Earthquakes. Apple Computer. Traffic. Charlie Chaplin. Haight Ashbury. Dragnet. Silicon Valley. Napa Valley. The list no doubt could go on for pages.

For decades California seemed synonymous with the idea of success and the American Dream. From the Hollywood blockbuster that chronicles the unlikely hero who triumphs over the odds to the seemingly endless ingenuity coming out of Silicon Valley to palm trees lining the boulevards to the vineyards covering the rolling hills of the Napa Valley, California seemed to embody the glamour that is success. It seemed to have everything that a state (or a country for that matter) could ever want. Beautiful people, bountiful natural resources, enough food to feed itself with a lot left over to share and a quality of life that seemed to draw people from around the globe.

As we get ready to flip the page to the new year and our national government is about to take an enormous step in a leftward direction, it may be instructive to remove the rose colored glasses of nostalgia and see what the left coast is, what California has become.

Like a glamorous movie house with searchlights crisscrossing the sky as it beckons you into the theater only to disappoint you with a poorly written script, cardboard actors and Ed Wood direction, California is a B movie that is only getting worse with time. The state has for years believed its own movies, that everything always turns out all right in the end, that it’s OK to live every day like there’s no tomorrow, that for some Golden few the pedestrian laws of supply and demand, competition or fiscal responsibility didn’t apply or needn’t be heeded.

California at the end of 2009 is a patient in the hospital after an attempted suicide. While much of the universe recognizes that there are certain rules about how things work, Californians have spent the last three decades acting as if the natural rules of life do not apply to them. The list of self inflicted wounds seem almost endless. Sky high taxes. Environmental regulations. Business regulations. Rent control. Fiscal indiscipline. Welfare Nirvana.

What was once the goose that laid the Golden eggs, California has become an effete shadow of itself that not only cannot attract new citizens, but actually is actively chasing away the most productive amongst them. From poor schools to a suffocating business environment to criminally high taxes, California has done everything right as if it were studying some mythical book called “How to pull defeat out of the jaws of victory in the national and increasingly global competition for residents and resources”.

California seems to think that because it has wonderful weather, beautiful beaches and tremendous natural resources (which you are rarely allowed to touch) that it can put upon its citizens an ever increasing burden of taxes, regulation and inefficient government and that somehow everything will work out in the end. Unfortunately this is not a Hollywood blockbuster but a product of the French cinema where the story is often dark and brutal and happy endings are rare. Below are just a few of the measures which demonstrate the wounds California has inflicted on itself.

Jobs – This may seem obvious, but jobs can not be created out of thin air. Job creation comes mainly when entrepreneurs or small businesses are willing to risk incurring the potential consequences of failure in exchange for the possible rewards of success. Unfortunately for California, at an increasing rate businesses are choosing not to take such risks in the Golden State because the costs and red tape associated with starting, expanding or even maintaining a business have tilted the scales increasingly towards a negative outcome.

Chief Executive Magazine, a national publication that focuses on issues important to senior executives of large corporations listed California as number 50 in its annual listing Best and Worst States for Business. For the fourth year in a row California has won the designation as the least friendly state for business. What’s more, the magazine’s readers are from the largest companies in the country, those who are best able to absorb a state’s crushing regulatory costs. For small businesses, who make up 99% of employers in the state, those regulations are even more crushing because they have fewer resources with which to absorb the costs.

In an October 2009 study commissioned by the Governor’s Office of Planning and Research to look at the impact of regulation on small businesses, the state did not come across with an Oscar winning performance. Some of the findings:

• California regulations cost small businesses $134,122 per year.
• The total loss of gross state output due to regulation is $492.994 billion per year, or 28% of the state’s $1.7 trillion economy.
• Regulatory induced lost output costs the state 3.8 million jobs each year.
• The total regulatory burden translates into a cost of $13,052 per California resident.

These numbers are staggering, but they might be acceptable if everything else was working perfectly. As you might have guessed…not so much.

Welfare – California has amongst the most generous welfare benefits and lax eligibility criteria of any state in the union. As a result, California, with 12% of the population, has fully 30% of the country’s welfare recipients. As of October 2009 there were a total of 1.7 million families receiving welfare in the United States, or approximately 1.7% of all households. Of that total, 525,000 of those families live in California, which translates into a rate of 4.3% of all households, or two and a half times the rate of the rest of the country. Paying for those recipients’ benefits falls directly on the shoulders of the state’s increasingly beleaguered taxpayers.

Taxes – California has the most progressive, stifling tax code in the country. In it’s 2009 report “Rich States, Poor States” the American Legislative Exchange Council evaluates and compares fiscal and economic policies amongst the states. The report ranks California number 43 out of 50 in terms of its economic outlook. Here are some highlights:

Out of 50 states California:

Ranked 50: Personal Income Tax rate.

Ranked 50: Capitol Gains Tax rate.

Ranked 42: Corporate Income Tax rate.

Ranked 43: Corporate Capital Gains Tax rate.

Ranked 43: Most health insurance mandates.

Ranked 45: Electric utility costs.

Ranked 50: Gas taxes.

Ranked 49: Survival rate for small businesses.

Education – That same report notes that California teachers are the highest paid in the entire country with an average salary of $59,825 vs. the national average of $49,026. In return for these record high teacher salaries one might expect that the state’s students would at least perform at the national average. Not quite… According to National Assessment of Education Progress (NAEP) testing, which measures reading, writing and science skills at the 4th and 8th grade levels, California ranks 49th out of 50 states in student performance, following only Mississippi.

Unemployment – Businesses create jobs and hire people when they believe the benefits of doing so outweigh the associated costs. California employers often decide that equation is not coming out in their favor. In October 2009 the US Unemployment Rate was 10.2%. At 12.5% California’s rate was worst than every state except Nevada, a state that has seen its gambling backbone devastated, Michigan, where unions ran employers out of the state, and Rhode Island… the state where I was born, although I don’t mean to suggest there is a cause and effect relationship there.

Fiscal responsibility - As if all of that were not enough, California is on the verge of bankruptcy and can’t even pay its bills. This year it issued IOUs to contractors who provide the state with services, its debt has been downgraded to almost junk levels and earlier this year it foisted $12.5 billion in new taxes on the shoulders of its already beleaguered citizenry. Now it’s facing a $21 billion deficit for the coming year.

And I didn’t even mention the problems of unions, crime or employers and taxpayers fleeing the state…

As President Obama and his fellow statists contemplate burdening American citizens with ObamaCare, Cap & Trade, expanded powers for unions and crushingly high taxes amongst other things, it might be helpful to look at exactly how well those progressive policies have played themselves out in what used to be the symbol of the American Dream. If those policies can strangle a state with California’s advantages, what chance do residents of remaining mere mortal states have?

Monday, December 21, 2009

No milk and honey here...

The number of things with which I agree with President Obama is fairly small. One thing I do agree with him on however is his characterization of the Constitution. Back in 2001 as he was lamenting the failure of the Warren Court to bring about “redistributive change”, he stated “…the Constitution is a charter of negative liberties. Says what the states can’t do to you. Says what the Federal government can’t do to you, but doesn’t say what the Federal government or State government must do on your behalf…” While the negative liberties characterization doesn’t make any sense, at the core about what the Constitution does, he is right.

As the President and Congress prepare to enact what is possibly the most unconstitutional law ever passed, it may be of some value to look at why exactly President Obama is right on the Constitution and wrong on ObamaCare.

Much to President Obama’s chagrin, the Constitution was never intended as a contract laying out what the government could, should or would do for the citizens. It is not a contract amongst the rich against the poor, the native born against the immigrant, the educated against the illiterate. On the contrary, it is a contract amongst citizens whereby everyone has equal rights and it is specifically intended to guard against the tyranny of the majority. While the definition of citizenship has evolved over time, the equality amongst citizens has not.

The Constitution was written the way it was by design. Indeed, it was the product of great effort and much research, both historical and contemporary. Although many statesmen had a hand in the development of the Constitution, foremost amongst them was James Madison, who is sometimes called the Father of the Constitution. In preparation for the Constitutional Convention in Philadelphia, Madison spent a great deal of the spring and summer of 1786 at his home in Montpelier studying governments throughout history, everything from the Amphictyonic confederacy of ancient Greece to the European confederacies of the 15th century, all while reflecting on the infirmaries of the American Articles of Confederation. Those infirmaries were legion: The central government could not levy sufficient taxes to pay its creditors, states fought amongst one another and majorities tyrannized minorities. Fundamentally the United States at that point was far more a collection of strong independent states than a true nation. Allowed to continue the country would likely have splintered into a chaos reminiscent of Europe.

Fundamental to Madison’s idea of government was the recognition that men are human, and as such are prone to many vices. He even put his notes on the subject on paper in the "Vices of the Political System of the United States”. Basically he recognized that left to their own devices, men would split into factions, and, unless insulated from such, eventually a government would devolve into a tyranny of the majority.

The resulting Constitution provides the government with limited and specific powers. The 10th Amendment states explicitly that those powers not delegated to the federal government reside with the states or the people. Power is separated not only between three branches, but the terms and manner of election of the various officeholders are as well. Fundamentally it was written to provide a foundation for organizing society where citizens could maximize their pursuit of happiness and the exercise of their liberties while limiting government action to only those areas the citizens specifically allowed. Their deliberate, clear language has been increasingly twisted over the last century, but we may now be at a tipping point beyond which there can be no turning back. The progressive movement has been seeking to turn the United States into a socialist Nirvana for most of the last 100 years. From Teddy Roosevelt to Woodrow Wilson to FDR to LBJ, the drums have beaten steadily towards this cliff. Although once they utilized the Constitution for their purposes, (the 18th Amendment – Prohibition) typically their successes (sic) have been the result of court rulings (Miranda) or federal legislation (The New Deal or Great Society programs). Slowly, inch by inch, the progressives have moved the federal government into areas where it was never intended to go. The Founding Fathers would never recognize as America a country where the federal government dictated the fundamentals of elementary education, limited the kinds of transportation citizens could have, restricted a citizen’s ability to finance political speech, provided welfare to 10% of the citizenry or imposed draconian and confiscatory taxes at will.

The tipping point we find ourselves at has to do with the fundamental nature of the Constitution and the relationship between the government and the people. With government, once a program has been put into place, it almost immediately creates a cadre of vested interests and is almost impossible to kill.

The point beyond which there may be no return is a simple one. With ObamaCare, for the first time ever, citizens will be forced under the threat of prison to purchase a good, whether they want it or not. Throughout 212 years of our history, a citizen could wake up every morning and for the most part go about their day without being forced to do anything they did not want to do. There are obvious situational exceptions such as the Draft or eminent domain, but for the most part, the citizenry could choose where and when they would interact with the government. ObamaCare’s requirement that citizens purchase healthcare is the straw that will break the proverbial camel’s back. Once this travesty is in place, there are simply no more limits.

One can make the argument that the world of 2009 is different than the world of 1787 and that is indeed true. We have communications, transportation, entertainment and food options that were not even conceived of 200 years ago. What was conceived of then, and what has survived (somewhat intact) thus far, has been the fundamental framework governing the relationship between the citizens and the government. That framework has survived longer than any other written constitution in the world; it has survived a wrenching war between signatories; it has survived assassinations of presidents, the corruption of legislators and the voting of a largely uninformed public. To put this in perspective, in the 212 years of the American Constitution, the enlightened French have blazed through eight different constitutions.

With the passage of ObamaCare, the United States may be passing the point of no return on its downward journey to becoming a middling country, shorn of the sheen and substance of Exceptionalism. It will become but another average player in a United Nations of the World where the rhetorical goal of government is to ensure that everyone has their equal share, where no one ever wants for anything, where everyone lives in perfect harmony. This is not just because the basic elements of the legislation are sufficiently onerous as to cause America to spiral into a third world country, which it is, but rather by unconstitutionally forcing citizens to purchase a “good” in order to retain their liberty, it explicitly elevates the whims of the federal government above the rights of the citizens. Now that police power of the state can be used to force citizens to pay for health care, how long will it be before those same powers are used to force citizens to pay for food that is provided at the direction of the government, to pay for clothing provided at the design of the government, to pay for transportation or leisure activities provided or approved by the government?

Madison and the Founding Fathers understood that man is prone to anger, passion, faction and hubris and that neither the Constitution nor any government could change that. What the Constitution and its resulting government could do however was provide a framework where free men could live together as equals as they pursued their individual notions of happiness and basked in the exercise of their liberties. Once again I agree with President Obama, this time when he suggested we are standing “at the precipice of achievement that's eluded Congresses, presidents for generations”. Indeed we are, although I would replace the word achievement with travesty. He believes that with ObamaCare America will parachute into a land of milk and honey. He’s wrong. There is no parachute, there is no milk and honey and there will be no soft landing. A mirage of rhetoric, fables and lies hide the gritty reality of the soon to be rusted hulk of American enterprise that for two centuries was an engine that drove the advancement of the human condition. That train spent 212 years charging over the horizon, into the great unknown, into a universe of possibilities on the rails of a U.S. Constitution that let free men create and innovate and build a better world. With ObamaCare we will see the removal of those rails and with them the essence of American Exceptionalism. As the engine that has provided so much to so many careens, buckles and lurches forward without the constraints of Madison’s Constitution, we can no doubt expect that the vices for which it was constructed to contain will begin to rear their ugly heads. Alas, it is said that the road to Hell is paved with good intentions. That may be where we are headed, but despite the rhetoric, there are no good intentions involved here.

Monday, December 14, 2009

The Fair Tax: The best idea you've probably never heard of...

Have you ever seen one of those movies where some guy lights a cigar with a $100 bill? Most of the time the character is some arrogant scoundrel who looks down with disdain upon those little people to whom $100 is a lot of money. Such a character does exist in real life, and unfortunately for you and me it’s not his money burning… it’s ours. Every year American citizens are forced under the threat of prison to essentially set fire to $300 Billion. And it’s not some rotund character with a top hat who’s directing the fire, it’s Congress and the 60,000 page IRS Tax Code.

According to the Tax Foundation, (here and here) Americans spend approximately $300 Billion a year complying with the federal Tax Code. That does not include the taxes themselves, nor the costs borne in adjusting their business operations to reduce the negative impact of the Code in the first place. Another part of the Tax Code is the opaque nature of the individual taxes that eventually make it into the price of goods. Harvard economist Dale Jorgenson suggests that 22% of what Americans spend at retail is the cost of aggregated taxes. Now imagine, every one of those taxpayers or retailers has to try and comprehend their piece of that 60,000 page IRS Tax Code… a code that neither our Treasury Secretary, Timothy Geithner, (The guy the IRS works for!) nor Congressman Charlie Rangel (The guy who runs the committee that writes the Tax Code!) are smart enough to figure out... or that's what they claim.

Which brings me to the world’s best idea you may never have heard of… The Fair Tax. What is the Fair Tax? Basically it is a proposal where all current federal taxes: income, Social Security, Medicare, capital gains, etc… would be eliminated and replaced with a 23% tax that is added at the retail level. Below is a very simple demonstration of how the Fair Tax works.

Let’s assume it costs $1.00 for a loaf of bread. According to Jorgenson, $.22 of that $1.00 represents the aggregated federal taxes paid by the baker, the distributor, the retailer and every other person who had a hand in putting that bread on the store shelf. That includes not only their taxes, but also those they withheld from the checks of employees. The bottom line for you as a consumer however is that you pay $1.00 for a loaf of bread. (For ease of discussion, i.e. eliminating taking numbers to six decimal points, throughout this piece I use the Jorgenson’s 22% and the Fair Tax’s 23% interchangeably.) Under the Fair Tax, all of those aggregated taxes would be eliminated. As a result, the cost of the loaf would be 77 cents, a number which includes all of the inputs and profits from the Farmer, Distributor, Retailer etc. When 23 cents of taxes are added to that $.77, the price of the loaf of bread for you is the same, $1.00.

Given the fact that the price of the bread stays the same and all of the players who are involved in putting the bread on the shelves are making the same amount of money, one might ask “What’s the point?” Well, there are actually quite a number of them, not the least of which is the fact that you get to keep 100% of your paycheck. Under the current system, when you earn $100, you get a check for $75. Under the Fair Tax, when you earn $100, you get a check for $100. Below is a list of ten great reasons to implement the Fair Tax:

    1. Keep your Paycheck:
You get to keep 100% of your paycheck – although some states have state income tax, your check would be 100% free of federal government taxes.

    2. Spur Investment in America:
In this difficult time, when unemployment is officially at 10% and is likely much higher, there is no single thing Congress could do that would more effectively spur investment in the United States economy. This change would motivate American corporations and individuals who have trillions of dollars in unrealized profits outside the country to repatriate those dollars. Simultaneously it would induce investors and corporations from around the world to invest in America (and her people) because they would be able to keep more of their profits relative to any other country on the planet.

    3. Spur Entrepreneurship:
Most employment in the United States is driven by small businesses. Most of those small businesses are owned by individuals who report their income on their personal tax forms. By removing that 22% tax liability and allowing the most entrepreneurial amongst us to keep more of the money they earn, the more motivated they are going to be to invest in their businesses and grow their workforces.

    4. Limit Congresses’ Power:
Remove Congress’s ability to manipulate the tax code in order to punish particular industries, give favor to pet projects or to simply increase member’s individual and collective power.

    5. Save Half a Trillion Dollars Per Year:
In possibly the single biggest shot in the arm of the American economy, the Fair Tax would allow individual taxpayers and businesses of all sizes to save the collective $300 billion dollars per year they pay to accountants and consultants in order to comply with the IRS Tax Code.

    6. Focus Financial Decisions:
The Fair Tax would allow consumers and businesses make financial decisions based on what is best for them, their families or employees as measured by objective factors such as cost, aesthetics or efficiency rather than on how it will impact their taxes. This would involve everything from buying large ticket items such as cars or office equipment to deciding what industries to invest in or expand into.

    7. Increased Competition and Innovation:
As efficiency returns to the market and more entrepreneurs are motivated to start businesses, competition will increase, which leads to more innovation and lower prices. For consumers that will mean that not only will they be able to keep more of their money, but eventually that money will go farther due to lower prices and better products.

    8. Collect Taxes from Underground Economy:
Collect taxes from those in the underground economy who currently pay little or no taxes such as drug dealers or employees who are paid in cash.

    9. Eliminate the IRS:
Does this need any elaboration?

    10. Boost for the Poor:
The fair tax provides for every family in the country to receive a monthly stipend equal to the amount of that would be paid by a family living at the poverty level. As a result, every family in America who is living at the poverty level would essentially receive a 22% increase in their income.

The Fair Tax is not a panacea. It will not solve all of America’s problems; it won’t cure cancer or eliminate war or the vagaries of the business cycle. Nor is it without debate, as can be seen by the fact that it has been attacked by players as different as the The Wall Street Journaland the not always so factual

Nonetheless, the FairTax does some important things. First, it put’s the United States on the strongest footing possible to compete on the global stage by spurring productivity across the spectrum of business and society. Second, it frees up individuals and businesses to focus 100% of their attention to starting and expanding their businesses in the most effective and efficient ways possible. In doing so they will drive employment and spur our economy. Thirdly, and perhaps most importantly, it would be the first step in reigning in the imperial federal government. By removing the exigencies forced upon them by the leviathanian Tax Code they created, and eliminating Congresses’ ability to manipulate that code, we would be taking the first step in returning America to its true foundation. That foundation is an understanding that the primary function of government is to guarantee its citizens’ freedoms and give them an opportunity to pursue success and happiness unfettered by the tyranny of an oppressive state. That alone would be make the Fair Tax a worthwhile endeavor.

Monday, December 7, 2009

Disfunction Incarnate - Immigration policy

American immigration policy is nothing short of dysfunctional, and it has been for a very long time. As Congress, the President seek to embark on a path to putting as much of the country as is possible under direct or indirect control of the imperial federal government, a closer look at immigration might cause a few people along the way to stop and reconsider.

Over the last two decades we have essentially opened up our southern border and let 20 million people simply walk into the country. While many of those people obey our laws once they’ve arrived, a significant portion of them do not. One measure of this can be seen by the fact that according to the Government Accounting Office, Arizona, California, Nevada & New York together spend well over $10 billion a year housing criminal aliens in their prisons. Another billion dollars a year is spent by just five local governments housing criminal aliens in their jails: Maricopa County in Arizona, Los Angeles and Orange Counties in California; New York City and Harris County, Texas. Beyond simple crime issues, illegal immigrants cost cities and states billions of dollars a year in various areas such as education, hospitals and social services.

Given the above, it might sound strange that I am an enormous supporter of immigration. Not only that, I believe that many of the 20 million, mostly poor Hispanic, immigrants should be allowed to stay. At the same time, I feel we should build a rock solid brick wall across every inch of our 1700 mile southern border. And I think we should do it tomorrow.

Other things we should do include expelling all of the criminal illegal aliens and requiring those illegal aliens who wish to stay to pay a significant fine in order to be able to do so.

While the influx unskilled laborers from Mexico and Central America is the most talked about aspect of the dysfunctional American immigration policy, it is only half of the story. The other half involves a much different set of immigrants with different skills and from different parts of the world: Scientists, Doctors & High Tech Entrepreneurs.

In what is possibly the most ludicrous element of any immigration policy ever, not only do we allow, but even more, we invite the best and the brightest students from around the world to come to the United States to get their education at some of the finest universities on the planet. That’s not really the problem. The problem is… that as soon as our universities have equipped these students with the best training that money can buy, we force most of them to go home so that they can work for companies or start businesses that compete with us. Not that I’m against competition, because I’m not… quite the contrary actually. I think having competitors around results in a stronger America. My problem is that the vast majority of those students would rather put their new education and skills to work here in the United States, would rather live the American dream. And that’s the point. While I’m confident that having competition from a chip making plant in China or a software developer in India would indirectly make America a better competitor, the truth is, I’d rather America benefit directly by having those newly minted graduates start companies or develop revolutionary technologies here in the United States.

To put this in martial terms, this situation is like West Point and Annapolis training the best and the brightest servicemen from around the world – in the middle of a war – and then after graduation, rather than allowing them to join our Army or the Navy (or Marines) to help protect America, we force them to go home and lead the armies of our foes.

Another ridiculous aspect of our system is the H-1B program, which limits to 65,000 the number of high tech workers that can receive visas to come and work in the United States every year. In addition, because of the program’s draconian characteristics, those employees are virtually indentured servants to the company for which they work, which means that in order to stay in the US they must remain with the employer who brought them into the country in the first place in order to remain here. That 65,000 number is just a fraction of the millions of applications that are received each year. The argument that is always raised against these visas is that they are taking away jobs from Americans. That argument is spurious. Most H-1B visas are issued to high tech companies seeking employees with high tech degrees and skills. A significant reason why those companies seek employees from outside the US is because relatively few American students are equipped with knowledge, skills or education they are looking for in areas such as science, math or technology. The choice is not between hiring more American physicists or electrical engineers vs. hiring employees with H-1B visas. No, the choice companies often face is often between bringing in qualified H1-B employees who would work here in the United States, or simply building their facilities in the places where those qualified employees live, such as India, China or increasingly Eastern Europe.

Why does this even matter? Simple: Google, e-Bay, PayPal, Sun Microsystems and Yahoo! These and thousands of other American companies that were started by immigrants generate billions of dollars a year in revenue and employ hundreds of thousands of Americans.

To see just how strong the correlation is between immigration and economic success all we need to do is look at some numbers. According to a survey by the National Venture Capital Association, although less than 10% of US population is foreign born, 40% of publicly traded U.S. high tech venture-backed companies were started by immigrants. So basically, in one of the strongest growth industries of the world economy over the last three decades, approximately 40% of the companies were founded by immigrants at a time when we have been severely restricting their entrance into the United States. Imagine what the opportunities would be if we actually welcomed them rather than making them feel like the great unwashed who should beg us to deign to allow them to talk to us. Interestingly, most of the immigrants who started those companies did so after starting out working under the H-1B visa program or as students.

To tie this all together, our immigration situation is a mess. We have a virtual open door policy to immigrants who cost taxpayers billions of dollars a year yet for well educated professionals who seek to start businesses that hire Americans and contribute to making the US a success, we slam the door shut. Both are wrong and should be addressed. The ludicrous nature of this system has become increasingly clear at a time when unemployment is in double digits and taxpayer burdens are increasing at every level.

Immigrants of all sorts have historically been good for America, and now is no exception. By stopping the inflow across our southern border and forcing the illegal aliens who are here into some form of legal status, we will benefit from their hard work as they assimilate into the larger community rather than segregate themselves in a shadowy Spanish-only world where they feel comfortable and safe. At the same time, by opening our doors to those highly educated and trained entrepreneurs, doctors and scientists who seek to come here - or stay here, we may find that they have in their minds a seed that will grow into the next Google or the cure for cancer, but are simply waiting for the right soil into which to plant it. America is that soil and capitalism is the fertilizer. By allowing those seeds to be planted here and their fortunes to blossom, we will all benefit from a stronger and more vibrant economy and country. Now if we could only get President Obama and his minions to stop trying to take over our entire lives and focus on fixing the stuff they are responsible for, like… say, immigration, we'd probably all be a lot better off.

Monday, November 30, 2009

Blacks, Democrats & an unwelcome Top 10 List

One day last week I ran across one of those Top 10 lists. The headline was the 10 Most Dangerous Cities and was based upon the CQ Press release of its 2009 City Crime Rate Rankings. The top ten cities were:

1. Camden, NJ
2. St. Louis, MO
3. Oakland, CA
4. Detroit, MI
5. Flint, MI
6. New Orleans, LA
7. Birmingham, AL
8. Cleveland, OH
9. Jackson, MS
10. Memphis, TN

Two things struck me. One: I was pretty sure that all were run by Democrats. Two: I was almost as sure that they were all majority black.

Looking for a correlation somewhere, I started to do a bit of research. Indeed all ten are run by Democrats and have been for a long time... an average of over 40 years, with the shortest being almost 20.

Indeed, blacks make up on average 59% of the population of these cities, and in the two they aren’t a majority, Camden – 48.5% & Oakland – 30.4% they are still the largest group. There was more: These cities’ graduation rates are abysmal, and it’s not because they don’t spend enough money on education. Other than Oakland, every city spends more per capita on education (24% more on average) than their respective states, with New Orleans spending twice what the rest of Louisiana does. Despite this largess, graduation rates are staggering. On average these cities graduate only 44% of their students while their respective states graduate an average of 71%.

As if to add insult to injury, not only are the graduation rates horrific, but those students who do graduate have limited employment opportunities. Other than Jackson, MS, these states have significantly higher unemployment rates than their states: The cities have an average unemployment rate of 14.5% while their respective states average 10.24%. For black teens it can be two, three or four times that.

What is the point of all of this? That much of this damage is self inflicted. How? By allowing the Democratic Party to take black voters for granted. The fact that the Pew Research Center states that 95% of black voters voted for Barack Obama may not be much of a surprise. What might be somewhat surprising is that black voters tend to vote for Democrats 90% of the time across the country. The question is… why? What have the Democrats done for black Americans in the last 40 years besides treat them like children who are not capable of achieving success in school, the workplace or basically in life without the assistance of government? Civil Rights laws… not so much. 80% of the Republicans in Congress voted for the legislation while only 60% of the Democrats did. Between affirmative action, welfare, and putting a stranglehold on the education system, what have they wrought? These ten cities are a perfect example of what is wrong. Democrats run the places and they simply don’t care about making things better for blacks. They don’t need to because for a significant part of the black population, their votes are guaranteed. Blacks in the United States have shackled themselves far more than any overseer ever could. At least in China and Venezuela and Cuba they have an excuse for their misfortune… they didn’t have a choice. When one of their politicians gets 90% of the vote everyone knows that it was delivered at the end of a gun. There is no such excuse in the United States.

The reason why the list above is so important is because it highlights the fact that local politics is where voters can have the most significant impact on their lives and those of their family members, i.e. police departments, land use zoning, business regulations, etc. While a citizen of Memphis may be only one of 3 million voters in Tennessee, they are one in 500,000 in Memphis. Still a big number, but with a few friends those votes can add up. Indeed, in 1991 incumbent mayor Richard Hackett lost by a total of 142 votes out of the half million cast.

Democrats have been taking black voters for granted for too long and I for one (although I’m white…) feel that that should stop now. Fiscally conservative (and sometimes Republican) ideas such as low taxes, small government and rule of law are a recipe for success for all Americans – including blacks, if it were only possible to implement them. Below is an example from someone who is a Republican, who should be the role model for the kind of politicians black Americans should be looking for.

Rudy Giuliani is the former mayor of New York. He was pilloried by the likes of Al Sharpton and the New York Times for being insensitive to black New Yorkers' concerns and presiding over a time of racial strife. The truth is, Rudy Giuliani did far more for black New Yorkers than Al Sharpton ever did. Not even counting the many jobs that were created by his cleaning up of the city and welcoming back businesses, tourists and citizens, he was responsible for saving the lives of 3,400 black men. How? By simply getting back to the basics and bringing law and order to the city. Blacks make up about a quarter of the population of New York, yet represent 56% of its murder victims. In 1993, the year before Giuliani became Mayor, New York City had 2,420 murders. In 2001, his last year in office, there were 960, a decline of over 60%. Given the fact that 56% of murder victims are black, the numbers of potential victims saved by Giuliani’s efforts is staggering.

Over the course of the years 1994-2001 the number of murders in the United States outside of New York City declined by 31.8%. The nearby chart shows the number of murders in NYC and what the numbers would have been if the city had fared only as well as the rest of the country over that period of time. Rather than the actual 9,751 murders there would have been 15,895, a difference of 6,144. Assuming that 56% of the victims would have been black, that means that there were 3,440 fewer black murder victims in New York over his tenure than there might have been. That’s 3,440 families that did not lose a son, a father, a breadwinner, or a role model. 3,440 black men still alive to take care of and support their families… at the end of the day that is a far greater accomplishment than browbeating banks into making bad loans, inciting riots against Jewish shop owners or picketing Don Imus.

By voting almost exclusively for Democrats and their policies, black Americans have created a situation where they may be the most poorly represented population on the planet. They give their votes and get nothing in return but the luxury of being disproportionately represented in the most dangerous cities in the country.

The result of Democrats taking the black vote for granted has been 40 years of failed policies and a disaster for citizens of cities like Camden, Detroit and New Orleans. Al Sharpton, Barack Obama, Barney Frank, Chris Dodd and the rest of the Democrat/Progressive cabal have spent decades focusing on things like redistribution of wealth, taxing corporations out of business or the red herring of “social justice” and basically telling black Americans that they cannot survive without government help. Really? Tell that to Michael Jordan. Tell that to Oprah Winfrey. Tell that to Ken Chenault. Tell that to Tony Dungy. Tell that to Condoleezza Rice or Michael Steele.

The solutions to the problems of black Americans, these cities, and America in general are the same. How does one bring about better schools and education? Competition. How does one spur investment? Cutting taxes. How does one create new jobs? Reduce regulation and create a business friendly environment. How does one reduce crime? Let law abiding citizens arm themselves from the criminals who pay no attention to gun laws in the first place.

Like the rest of the world, America is an imperfect place. Like the rest of the world, (and in contrast to the promises of Democrats & Progressives) there are no guarantees in life, there are no free lunches and life is sometimes unfair. Unlike the rest of the world however, we have the opportunity to work hard, be creative and pursue success and happiness. By blindly giving their votes to the Democrats, to whom the very notions of freedom, individual liberty, private property, limited government and individual responsibility are anathema, 90% of the black community is basically being complicit in their own suffering and misfortune.

There is hope however for the cities listed above. In 1993 Rudy Giuliani received 5% of the black vote while his opponent David Dinkins received more than 90%. Four years later, after his policies had begun to take hold and the city and its citizens began to blossom, Giuliani received approximately 25% of the black vote. If blacks in these ten cities started demanding real solutions in exchange for their votes they just might find themselves off of that list altogether. Now that would be a real emancipation.

Monday, November 23, 2009

A progressive noose around the neck of American Freedom

For most of the first 125 years of its existence the United States had no income tax. The exception being the years between 1861 & 1866 where an income tax was levied to finance the Civil War. Everything changed in 1913 when the 16th Amendment to the Constitution was ratified.

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

As a result of that Amendment, in October of 1913 President Wilson signed the Tariff Act, which instituted a 2% tax on Americans earning over $4,000 a year (about $88,000 today). Almost 100 years later, from those 30 words we have a 30,000,000 word IRS tax code that rounds out at more than 60,000 pages, gives some people tax rebates for taxes they never paid while others are taxed at almost 50% of their income.

To put the effects of this 60,000 page leviathan in perspective, consider this: Americans waste over a half a trillion dollars every year due to inefficiency and trying to comply with the statute’s labyrinthian language. And that doesn’t include the actual taxes themselves! Imagine trying to run a business where, in order to stay out of prison you had to swear that you are complying with the 60,000 pages of the Terms and Conditions notice that come with a credit card. That’s our tax code, only it’s even more confusing.

This post is not a simple attempt to vilify the tax code, although it deserves that and much more. Rather, it is intended to do one thing… Focus attention on the single biggest threat to our freedom that has ever existed… ObamaCare. But not for the reason that one might think. While the legislation itself is sufficiently onerous that anyone with half a functioning brain recognizes that it’s a recipe for disaster, the truth is, ObamaCare is merely a symptom of the problem. The real danger is tangential to the legislation itself. Here’s why…

Speaker of the House Nancy Pelosi, was recently queried by a reporter as to where in the Constitution does it say Congress can force Americans to purchase health insurance. The Speaker responded condescendingly with “Are you serious?” and refused to answer the question.

Steny Hoyer, her second in command was not so evasive. He stated in answer to a similar question: "Well, in promoting the general welfare the Constitution obviously gives broad authority to Congress to effect [a mandate that individuals must buy health insurance]. The end that we're trying to effect is to make health care affordable, so I think clearly this is within our constitutional responsibility." The clause in the Constitution to which he is referring is the “General Welfare Clause”.

Article I - Section 8 - Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

It might not sound like it, but Hoyer’s statement represents the single biggest threat to American freedom we have ever witnessed on our shores. What Rep. Hoyer is saying, in effect, is that the Welfare Clause gives the government the ability to force Americans to do anything he, Speaker Pelosi and President Obama decide “provides for…the general Welfare”.

Rep. Hoyer’s suggestion would come as a great surprise to the people who actually wrote the Constitution. The Father of the Constitution, James Madison, was quite clear when he wrote: "With respect to the two words 'general welfare,' I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators."

Madison is saying that the Welfare Clause is an idea that is to be furthered by the enumerated list of powers that followed it: Borrow money, Establish a patent system, Declare war, etc.

Let’s be clear, what Rep. Hoyer is suggesting is that the there is no limit to what the government can do to us. How many things have you heard of over the last 15 years that have included some special interest group railing about this or that “epidemic” or danger and suggesting the government needs to step in and save us from ourselves? They can tell us to stop eating Big Macs and Oreos because of the obesity epidemic. They can make us stop smoking inside our own houses or in our back yards or anyplace where children might be present. They can force us to buy GM cars so the company can pay the government back. They can tell us who we can listen to on the radio or watch on TV. They can ban Tea Parties because attendees are “extremists”. There are no limits...

If Nancy Pelosi, Harry Reid and Barack Obama are able to twist the Constitution into such a pretzel that it incorporates the most private areas of our lives – our relationship with our doctors – then it doesn’t seem like much of a stretch for them to insert themselves between us and our waiter, us and our lover or spouse, us and our children, us and our friends or us and our priest, our reverend or anyone else with a beating heart.

It took a century for the 30 words of the 16th Amendment to metastasize into a 30 million word hammer that is today wielded by a legion of nameless faceless lobbyists and bureaucrats. How long will it take Nancy Pelosi, Harry Reid and Barack Obama to weave the Welfare Clause into a progressive noose around the neck of American freedom? With the 2,000 pages and 1,000,000 words of ObamaCare and its threat of prison if you don’t comply, they are already well on their way…

Sunday, November 15, 2009

The Gift of Freedom

I have spent most of my adult life as a struggling entrepreneur… Struggling to succeed that is, which I’ve yet to get quite right. I’ve had ideas that I thought were nothing short of brilliant (from a golf grip heater to giving consumers the ability to prepay for gasoline at a fixed price) and others that in retrospect were probably doomed from the start (rigid resume mailers and an Italian version of Boston Chicken). I’ve even written a book that I couldn’t seem to get published and dabbled in modeling and acting – when I still had hair! The truth is, in all of those endeavors, nothing ever really panned out. Either I was too late to the party, the market disappeared, or more often than not I did a bad job of communicating my ideas and convincing investors to take that leap with me.

Regardless of the reason, nothing ever worked as hoped and the setbacks were legion. The funny thing is, however, that if I died tomorrow – which I’m really hoping isn’t going to happen – I would know that I had lived a charmed life. My family and friends are a big part of that, but that’s not quite the reason. As strange as it might sound, it’s because I’m American. Stranger still, might be the fact that I didn’t really begin to recognize that until I went to grad school, almost 20 years ago.

I was raised in a military family and I lived 12 of my first 24 years outside of the US, growing up in Italy and on the base at Guantanamo Bay, down in Cuba. Later I was stationed in Germany for two years. Growing up in a government family where everything from housing to medical care to income was provided by the government, I never really understood how the larger world actually worked. At the same time, I never really learned about free market economics in school. I imagine I must have encountered Adam Smith’s Wealth of Nations at some point in high school or during my undergraduate studies, but somehow I can’t seem to remember doing so.

Strangely enough, it was only when I returned to FSU to pursue my MBA did I begin to understand that Washington was not the center of the universe. I recalled once in high school having called up the Post Office and asked for the number for UPS. The incredulous clerk said “Why in the world would I want to give you the number of one of our competitors?” The truth is, I didn’t know they were not part of the same organization. I don’t want this to sound like I was completely disconnected from the world around me. In the back of my mind somewhere I knew that McDonalds and Coca Cola and Disney and K-Mart were not part of the government, but I never really understood where they came from or how they operated.

Once I started to see world as it really operated, outside of the prism of all encompassing government support, (although I was using the GI Bill & a student loan at the time) I suddenly began to understand and appreciate what America was really all about and what made it so great. It was like I had been in a world of shadows my whole life and suddenly a ray of sunlight shone through and highlighted what made America great… the freedom and opportunity to control your own destiny… to do, to try, to build anything you wanted. There are no guarantees and there are no limits.

Given that world of opportunity, I’ve had to face the fact that I might be the world’s worst entrepreneur. Painful, but true. But the crazy thing is, that’s what makes America so great in the first place. Despite the fact that I’ve spent most of the last two decades being mistaken for Don Quixote, hope springs eternal because I know that every day is a new opportunity to find success. I haven’t found success myself, but I know it exists because I see it every day, I read about it constantly and I know it is possible. As a result, every day I bound out of bed saying to myself “Today is the day!” with an absolute expectation that something good is going to happen. The beauty of America is that regardless of my past lack of success, regardless of what happens today, anything is possible, indeed, as some friends of mine like to say: Everything is Possible. If in the end it’s not to be for me, it will be for someone. Millions of someones. If I don’t end up inventing the next best thing or starting the next Microsoft or Wal-Mart or Papa John’s Pizza I’ll have spent my life pursuing what for me is happiness.

Fundamentally, that is the brilliance of the Founding Fathers. They understood the nature of man. They understood that government could not make a people successful or happy. They understood very well that freedom, (both political and economic) was the fundamental element of a successful nation. They gave us a Constitution that would allow the American people to pursue and achieve happiness, and in the process build a nation that would flourish to become a beacon of light throughout the world. If you don’t believe me, read the words of George Washington: "One day, on the model of the United States of America, a United States of Europe will come into being." Now that was audacious, given the fact that at the time much of the world was divided amongst the British, French and Spanish empires.

The day I had my epiphany I remember telling myself that I wished someone had taught me this stuff when I was 15 rather than when I was 25. As we sit here today, with almost half of the population paying no income taxes, a quarter of the population on the receiving end of a government check and industries from banks to car companies to newspapers seeking government handouts, I wonder how we find our way out of this economic morass. We’re standing in a dark tunnel with bright lights to our left and our right. One is the headlight of the train of socialism heading straight for us, where government decides winners & losers, dictates who does what kind of work and for whom, and guarantees nothing but equality of poverty. The other light is the end of the tunnel, illuminated by the brilliance of the Founding Fathers’ gift to us, one that guarantees us nothing but the freedom of opportunity and the right to enjoy the fruits of our efforts. The question is: Can enough of us differentiate between the two in time to save the country from being flattened by the progressive Obama-Pelosi Express? I know it’s late in the game, but I think we can and will. This is one time I hope I end up being more of a clairvoyant than a Cassandra.

Monday, November 9, 2009

Dereliction of Duty

I’ve asked myself many times over the last decade how is it that Americans could be so cavalier in protecting the gift we’ve been born with, the foundation of the greatest country that has yet existed on the planet: The Constitution of the United States. How is it possible that we went from what was established to be an explicitly limited government to a point where there is practically nothing in our lives that we do that the imperial federal government does not somehow impact or control, from eating our breakfast cereal to driving home from work to what we watch on TV? Now as if to put a cherry on top of a sundae made of molasses, we have Barack Obama and Nancy Pelosi’s nightmare healthcare bill. Where in the Constitution does it say that the government can force Americans to buy health insurance under penalty of prison? I’ve read it many times and I can’t say it jumps out at me.

My answer to the question of how we got from there to here came in the form of a recent epiphany that involved Cyrus McCormick and Neil Boortz, who, like Mao & Mother Theresa, make something of an odd couple. McCormick is the man who invented the first practical reaper – a machine for harvesting grain. In 1831, the year McCormick invented the reaper, farming had not materially changed for 5,000 years. Just as it had been in ancient Egypt, in 1831 a man could harvest approximately 2 acres of grain per day. As a result, between 85 & 90% of the American population of 15 million people were either directly or indirectly involved with farming. To put this in some perspective, in 2009, with a population 20 times as large, 300 million, we actually have fewer people working in farming, both in terms of numbers, 10 million vs. 12 million and percent, 3%, than we did 180 years ago. Despite that, we feed far more people and America has become something of the breadbasket for the world.

Here’s where Boortz comes in. He has a refrain he often uses. He calls the US the United States of Entertainment. What he means by that is that we are so busy with various forms of entertainment, from watching American Idol to reading People Magazine to playing Wii, that we have lost focus on the things that are important.

He is exactly right. Think about this, according to Nobel Prize winning economist Robert Fogel, in 1875 Americans spent 74% of their income on three basic things, food, shelter & clothing. That means that they spent 26% of their income on everything else, entertainment, healthcare and transportation. Shift ahead to 1995 and Fogel suggests that those numbers have basically flipped with Americans spending less than 20% of their income on food, shelter & clothing and 80% on everything else, over 3 times what they did in 1875, despite the fact that we live in much bigger, better furnished homes, eat far more food with much greater variety and we often have wardrobes that would have turned kings and queens of centuries past green with envy.

To see where these pieces fit together, one merely has to step back and look at the big picture. In McCormick’s day, or even a century ago, the overwhelming majority of American daily life was dedicated to taking care of the basics of life, food, shelter etc. People went about their lives actually living, making choices and decisions that were necessary for the safety, security and happiness of their own families. They understood that it was their responsibility to make good choices about how they used their land, how many children they could support, what they wanted to eat or what they needed to do to start a business. They understood this because they understood that the consequences of bad decisions would clearly fall on their shoulders.

What has slowly occurred over the last 100 years (and picked up steam in the last 40 years) is that the connection between choices and consequences has been eliminated and we have hardly noticed it because we’ve been so busy enjoying our various forms of entertainment. According to Neilson, the average American watches 37 hours of television a week! That’s out of a 168 hours in a week, 56 of which we spend sleeping. And that’s just TV. Add to that watching movies, surfing the Internet and going out to dinner there is almost no time at all dedicated to the Constitution.

That probably sounds like a strange segue, but the truth is, that’s the point. The way we found ourselves in this mess is because Americans of all stripes have for the large part contracted out their government to whoever the highest bidder is (i.e. which politician promises to give them the most – which by definition means taking it from someone else) so that they can play some more video games or watch another episode of the Simpsons.

As such, it should be no surprise that by subcontracting out our government to people who promise to steal from someone else to feather our nests, that we now discover that these same people have not only usurped all of our powers, they have abrogated the very document that gave us the Republic in the first place. Decide for ourselves what medicines we’d like to take? No, the FDA gets to decide that for us. Decide for ourselves what companies we want to invest in? No, we’re not smart enough for that, so the SEC gets to decide where we can invest. Decide how much we want to pay our employees? Not a chance, the Department of Labor and the Pay Czar get to decide that. How about listening to our favorite talk show on the radio? Not for long, soon the FCC will be telling us what we can listen to and who can talk. Even if we wanted to do something specifically political like deciding on how much of our own money we can give to a political candidate, do we have a chance to decide for ourselves? Of course not, the FEC and McCain Feingold are there to protect us from ourselves.

Many things in life involve slippery slopes that require vigilance in order to ensure things work as they should. We as a people have been derelict in our responsibility when it comes to the actual foundation upon which this City on a Hill was built, the Constitution and our representative government. Like a crack in a windshield that slowly grows until it threatens the integrity of the window itself, our government has become a leviathan that threatens to strangle the very thing it was established to protect, our freedom and our ability to pursue happiness. We have no one to blame but ourselves, but at this point that is inconsequential. What is very consequential however is that we recognize this Borg we have created and decide that we are going to save ourselves before resistance truly does become futile. As some friends of mine are fond of saying, “The time is Now”. 2010 may indeed be the last opportunity we have to save the Republic. In the world of Xbox and YouTube and ESPN this might sound like so much hyperbole, but the truth is, all of those things and so many more are products of a dynamic free market built by the sacrifice and toil of a free people. If you think I’m off base here, ask yourself where those things and everything from elevators to planes to nuclear power to cell phones to super computers to air conditioning were developed. It’s no coincidence that they were all invented in a country that had at its foundation individual freedom, private property rights and the fundamental freedom to fail. Once those freedoms are gone, so too will follow the Internet, freedom of speech and finally the reality of happiness, nevermind its pursuit.

Obama’s Bizarro World

When I was a kid I was a big fan of DC comic books… Superman, Batman, etc. There was one storyline in those comics I always found nonsensical and not even plausible: Bizarro, an un-Superman who was the wrong to Superman’s right. In a universe where you have to suspend reality to a certain degree in order to enjoy stories about the otherworldly powers of Superman or the superhuman powers of Batman, the writers of the Bizarro World saga wanted readers to suspend the functioning of their actual brains. At least if your goal is to achieve success, you can deal with failure and go on. If your goal is actual failure, success would be a failure which would in turn be a success. It was always too complicated for me to spend much time with because my brain would start hemorrhaging.

To those unfamiliar with the Bizarro World universe, it was focused on a square shaped planet Htrae, (Earth spelled backwards) where everything was the opposite of how things worked on Earth. Essentially, Bizarro World was a universe where everything that was bad on Earth was good there and everything good was bad.

Which brings me to the United States in 2009 and Obama World – and not, unfortunately, to a comic book version of reality. At the end of most days I can’t help but feel like I have somehow been transplanted into a Bizarro World, with our President playing the character of the un-Superman, Bizarro.

There is an old saying that even a blind squirrel trips over a nut every now and then which means that just by walking around randomly even a blind squirrel would trip over a nut on occasion. Apparently this President is not blind. How else could one explain the fact that he has been able to avoid tripping over the right policy at every single possible turn, both domestic and foreign?

Here are just a few examples:

The Obama Justice Department declining to prosecute Black Panther members for intimidating voters in Philadelphia on Election Day. Imagine had the thugs been white sheet wearing Klansman intimidating voters outside polling places in Selma, Alabama or Jackson, Mississippi. Somehow one finds it hard to believe this administration would have felt compelled to dismiss the charges.

This is the same Justice Department that has chosen to consider charging CIA officers and presidential advisors for doing their jobs with the stated objective of protecting the lives of American citizens. In an imperfect universe where there are thousands if not millions of Islamic fanatics who seek to do America harm, logic dictates that a course of action that forces those on the front line of defense to take their eyes off their targets so they can look over their shoulder at potential treats coming from their own side are counter productive. How many people would volunteer for a highly dangerous, stressful and difficult job if they believed that even if they did everything according to the rules, years later someone might come by and throw them in jail, regardless of how successful they were actually doing that job? Now that’s an incentive for attracting the best and the brightest!

Government Motors. In a world where success is forged in the kilns of competition, fired by the mix of entrepreneurship and failure, what makes providing a lifeline to abject failure a good idea? Had General Motors and Chrysler been allowed to fail, the owners and creditors would have been forced to take whatever actions were necessary to wring the greatest value out of the dinosaurs’ carcasses. It’s been the driving force of American economic might for centuries and it’s what Austrian economist Joseph Schumpeter called “Creative Destruction.” Thanks to the Obama administration, the United States is now the largest shareholder in a car company that is really more a retirement plan with a side business of cars than a car company whose job is to make cost efficient, competitive cars consumers want to buy. While the UAW and management have driven the companies into the ground, that government does not escape blame with its CAFÉ standards and market manipulation. Management is gone but the government and the UAW are left, that should give one great confidence in the future of Government Motors.

Beyond the obvious problem with investing the public’s money in places where they don’t want it to go, perhaps even more problematic is the administration’s decision to simply do away with the Rule of Law that has been the foundation for or economic success for centuries. Essentially the administration browbeat and intimidated GM and Chrysler’s secured debtholders into agreeing to abandon their rights and allow the government hand the company over to the United Auto Workers. From this day forward, any time an American company seeks financing and offers to provide its assets as collateral, they will face lenders who are wondering about the government coming in and changing the rules after they’ve put their money into the pot. The result will be that credit will be harder to find and when it is found, it will cost more.

Reading Miranda rights to foreign fighters on the battlefield? Is there anyone with a functioning brain that thinks this is a good idea? One simply needs to look at our own dysfunctional jurisprudence system to recognize that introducing such rights into the middle of a war zone is nothing short of bizarre.

Health care. Eighty-five percent of Americans have health insurance and 100% of the people can get care in an emergency. While the American system is far from perfect, in what kind of universe does it make sense to expand the primary cause of the problem in the first place, government? Make no mistake about it, government is the problem, both federal and state. Regrettably, when given the choice between making a number of changes that might help insure the remaining 15% , the Obama administration chose instead to propose turning the entire system on its head and putting the imperial federal government in charge of almost 20% of our economy, not to mention in the hospital room where you discus the most intimate details of your health with your doctor.

With a plan that only someone who slept through Economics 101 could believe, President Obama promises to expand coverage to every American – and illegal alien, although the plan is to legalize them so they qualify – do so without increasing the deficit, not cutting any benefits and not increasing the burden on taxpayers. Has anyone at this White House picked up a history book and looked at the record of the federal government in running anything – Amtrak , Post Office, Katrina, Social Security, Food Stamps, Medicare? How about Thomas Sowell’s The Housing Boom and Bust? And now they want to put on a lab coat and a stethoscope and help our doctor take care of us?

The President has chosen to gut missile defense for Poland and Czech Republic in an attempt to appease the Russians and seek their support of sanctions on Iran. (The Russians have reciprocated by suggesting that sanctions against Iran would be “counterproductive.” That worked well.) Was anyone in this administration actually awake or sober during the Cold War? After centuries of war and conflict between the various European states and the deaths of well over 100 million soldiers and civilians, 1945 began a period of peace on the continent that is unprecedented in a thousand years. The primary driver of that peace was the understanding to everyone involved that the United States felt it was in their national interests to defend its allies in Western Europe in the face of any threats. Under that umbrella of protection it was possible for the nations of Western Europe to build their socialist paradises. (Had they been forced to pay the true cost of defending themselves from the Russian Bear they could never have afforded to heap on their citizens the array of services they currently enjoy – and pay for in taxes.) Now, with a resurgent Bear to the east that has bared its claws in Georgia, threatened to do so in the Ukraine and cut off gas supplies to Europe, the Obama administration has decided to forego that security blanket for the hope of international cooperation. It was not “international cooperation” that saved Europe from itself for the past 70 years and it will not likely save America and its friends from the nefarious intentions of various tyrants, terrorists or tin pot dictators around the world.

Jobs. One would imagine that in the toughest economy in 30 years, with unemployment approaching double digits, an administration interested in helping the country pick itself up and storm back into economic growth would give individuals and companies a reason to expand their businesses, hire new workers, and risk failure for the potential reward of success. After all, small business is the home to 70% of American jobs and is responsible for 80% of all new jobs created. Inexplicably, instead of cutting taxes and unleashing the American industriousness that was at the economic vanguard of the 20th century, the Obama administration is doing literally the opposite. Increasing taxes, sucking investment capital out of the world markets and using its labyrinthine regulatory power to regulate everything from executive salaries to, tire prices to (soon) the carbon dioxide we exhale thousands of times a day.

Finally, freedom and constitutional democracy. In a normal world the United States would come down on the side of a constitutional democracy where legislators went through the independent judiciary to replace an executive who was seeking to usurp power by abrogating the country’s constitution. In the Bizarro world of the Obama administration, the United States has done just the opposite. When Honduran legislators (of his own party) replaced President Zelaya (with a member from said party) because he was intent on running for a second (constitutionally banned) term in office, rather than cheering a government standing up for democracy, the Obama administration cut off aid, denounced the act as a coup d’état and threatened sanctions. Combine that with the administration’s dithering while Iranian students protested for free elections and were shot in the streets, and freedom seekers around the world are left scratching their heads wondering what happened to that beacon of light that used to be that “Shining city upon a hill?”

In the Bizarro World comic there is some comfort in knowing that it’s easy to understand what is coming. You simply think of what Superman would do and then expect the opposite. In the Obama Bizarro World, with its soaring rhetoric, one sometimes is lulled into the expectation that this president understands what is going on in the world around him and you almost expect that he might accidentally trip over the right course of action. It doesn’t take long however, to figure out that you are not lost in some otherworld adventure or even a Lewis Carrol Wonderland, but rather aboard a slightly damaged vessel whose captain and crew are willingly beguiled by the seemingly incongruous sirens of internationalism, statism and socialism and have set course accordingly and continue to correct back to course despite the chorus of voices shouting danger. The rocks are getting closer with every minute. I hope there are plenty of lifeboats.

An American monument to Osama Bin Laden

The targets of the September 11th attacks were selected with great care. The Pentagon was a symbol of American military strength. The Twin Towers were a symbol of American economic strength and the ill fated Flight 93 is understood to have been headed towards the Capitol or White House as symbols of American political strength.

The damage those planes did to the country went far beyond the physical toll or the lives of the 3,000 Americans who were pawns in Al Qaeda’s monstrous game. While the goal was no doubt to inflict causalities and property damage, the real target was the symbol of American Exceptionalism and American strength and power. On that score, we have helped them succeed to a degree they could never have imagined by demonstrating our own fecklessness.

To understand what I’m talking about, one must go back to 1931, the year that CBS New York began the world’s first 7 day a week television broadcast schedule, Ford produced the last of its Model A cars and the new (current) Waldorf Astoria hotel first opened its doors. Something else happened that year… the Empire State Building was completed. In March 1930, when the United States was heading into the greatest of depressions, construction began on the building that would reign as the world’s tallest for 40 years. (Ironically it was dethroned in 1971 by the Twin Towers.) A little over 400 days after construction was begun, the building was finished and opened to the public. What makes this relevant is that with the technology of 1930, when movies were still silent, radio was the dominant form of entertainment (although only in 50% of the homes) and Zeppelin travel was just beginning to pick up, the Empire State Building was started and completed in just over one year.

Now fast forward to 2009 where we recently celebrated the 40th anniversary of sending men to the moon and safely returning them to Earth, where we have computers that fit in our pockets and even the least expensive car is made out of high tech polymers and can go 50,000 miles without a tune-up. It is in this dynamic technology driven environment that our fecklessness seems most obvious, where eight years after September 11th there is still a gaping hole where the Twin Towers used to stand. There is no doubt that even in his wildest dream would Osama Bin Laden have imagined that the Keystone Kops of American polity would be so dysfunctional that eight years after he sent his 19 terrorists into our midst, a monument to their accomplishment would still be standing… or not, as the case might be.

We have to be fair; construction could not begin on September 12. Bodies had to be recovered and debris had to be cleaned up. On May 30, 2002, a ceremony was held to officially mark the end of the cleanup efforts. So, 8 years is not quite a precise comparison, but 7 ½ certainly is. This couldn’t have been any more of a victory for Bin Laden if we had put an actual monument to him right at Ground Zero. While the onscreen version of the Keystone Kops made us laugh with their running in circles and general dysfunction, the Keystone Kops overseeing the rebuilding in this case leave us scratching our heads with incredulity. While there is no doubt enough blame to go around, from Mayor Bloomberg to the Lower Manhattan Development Corporation to the Port Authority to lawyers for families of victims to Larry Silverstein to neighborhood residents, the fact of the matter is that 8 years after the attacks that brought down the Twin Towers there remains a gaping hole, both in the ground and in the spirit of American Exceptionalism.

All of this can’t help but remind one of the Wollman Rink fiasco in New York 30 years years ago. For those who don’t remember, Manhattan’s Wollman Rink closed in 1980 for a $4.7 million renovation which was supposed to be completed by the end of 1981. Six years and $12 million later the project was still not complete, nor close to it. The city announced that it would cost several million dollars and two more years to complete.

Stupefied, Donald Trump with a letter to Mayor Ed Koch: “I have watched with amazement as New York City repeatedly failed on its promises to complete and open the Wollman Skating Rink.” He offered to take the project on, at his own expense, and in return wanted the profits from the concessions, which he promised would all go to charity. Rather than take him up on his offer, Koch, seeking to embarrass Trump for his hubris (I’m not sure that’s possible…) released the letter to the press. Somewhat surprisingly to him (Koch) the public did not react with the disdain he expected, or at least it was not focused on the target he expected. They had had enough of the Wollman Rink fiasco and were ready to let someone else take a shot. Reacting to City Hall’s suggestion that Murphy’s Law was in play with the Rink, the Daily News editorialized “Not good enough, Murphy’s not running New York – or he shouldn’t be until somebody elects him.” They added that after more than six years and a multimillion dollar debacle, you would think that the city would be jumping for joy. Not so. “City officials seem more interested in thinking up reasons not to go forward than in making a deal.” They said. In the end Trump did get his opportunity and he was indeed as good as his word. He reopened the Rink under budget and ahead of schedule, in less than one year.

This is not an homage to Donald Trump. Rather it is an indictment of what we seem to have become in any arena with even a fraction of public interest. This, like so many other projects is another example of prescience of Voltaire’s insight when he observed that “Perfect is the enemy of the good.” Be it building new power plants for a strained infrastructure, getting water for farmers in the San Joaquin Valley or drilling for oil on a postage stamp parcel in Alaska or replacing a handful of buildings destroyed by terrorists, it seems that it is impossible to accomplish almost anything of consequence. We have become incapable of doing anything in this country without giving every single person or group a say in how things proceed, regardless of how tenuous or tangential the nature of their connection to the project in the first place. There seems to be lacking a basic understanding that difficult decisions almost always leave some people feeling bruised or that lawsuits are not necessarily the most effective instruments through which to channel public policy.

To put this in perspective, Larry Silverstein, the developer who signed a 100 year lease for the World Trade Center only weeks before the September 11th attacks, and one of the cooks in the Ground Zero kitchen, rebuilt 7 World Trade Center, across the street from Ground Zero, in 4 years. Not only did he rebuild the 52 story building, but in a rather challenging economic environment, he leased 85% of it. There could be no starker a contrast to demonstrate what is and is not possible in America any longer. Because it was not part of the political quagmire that is the main WTC site, he needed only the approval of the Port Authority and as a result it was opened and working as a living breathing part of the New York ecosystem within 4 years. All of this while literally across the street sits a hole in the ground that stands as a monument to American fecklessness and gives our enemies another victory each day the sun rises and casts no shadow.

Racism: America’s Original Sin

Imperfect America. There’s no doubt that that appellation can mean different things to different people. I use it in a very specific manner. As the quote from Voltaire might suggest, while I recognize the United States is far from perfect, it is in many ways, perhaps even most, very, very good.

Racism: America’s Original Sin

Racism is a fertile topic of conversation in political circles today and is much in the news as some are suggesting that criticism of President Obama is nothing more than thinly veiled racism. To take some license with Samuel Johnson’s phrase, Racism is the last refuge of scoundrels. Just as Johnson was not impugning Patriotism in the original, but rather false Patriotism, here too there is no suggestion that racism does not exist or should not be called so when it’s seen. Rather, it is to suggest that most of what is currently characterized as Racism is in reality nothing of the sort. Despite what some seem to suggest, the fact that a man of color sits in the White House does not automatically make all criticism of his words and deeds racism.

The subject arises as a convenient segue to an issue that is often a brought up by those who see America through the prism of race, the Constitution. Specifically the issue is Article I, Section 2 of the Constitution. [Representatives and direct Taxes shall be apportioned among the several states which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.] This section is commonly known as “Three Fifths Clause” or “Three Fifths Compromise”. Essentially what this clause did was apportion taxes and representation for the slave owning states in a manner that counted slaves as 3/5 of a person. It was a compromise because the Northerners wanted slaves to count as 4/5 of a person – meaning the state would have more representation but pay more taxes – while the southerners wanted slaves to count as ½ or ¼ of a person, thereby giving them less political power but reducing their tax burden.

It is not uncommon at all today for some people to point to this clause in the founding document of the country to demonstrate that the United States is an inherently racist country because it allowed slavery. Nothing could be farther from the truth. While 222 years later we can recognize that slavery was an abomination, the truth is that in 1787 it was a reality for much of the world, including Africa, the Middle East, South America as well as Europe and Asia. Slavery had gone on for thousands of years and the basis for such could have been anything from a lost battle to an unpaid debt to the color of one’s skin to a parent’s willingness to sell their child into bondage. The truth is, the institution of slavery by itself is not a sign of racism. Amongst the 13 “states” slavery held sway in five; Maryland, Virginia, North Carolina, South Carolina and Georgia. While it was the case that only a minority of the citizens in those states actually owned slaves, the institution had been an ingrained part of their society and culture for decades and in some cases more than a century.

Before we delve into the nature of the Constitution, we must accurately define what racism actually means:

Racist: One who believes that one race is genetically superior to another. Often the holder of this opinion believes themselves to be amongst the superior race. There are other terms that are often used interchangeably with racism, but that is often an incorrect equivalency.

Prejudice: One who pre judges another person based upon one or more criteria, some of which are inherent such as national origin, race, sex, etc. or others which are not, such as dress, manner of speech or a preponderance of tattoos.

Biased: One whose preference or inclination about a group precludes impartial judgment.

One with a strong intolerance or prejudice about members of a group of people, often based upon race, religion, sexual orientation.
The point of the above is that if one seeks to use a word to describe something, it helps to use the language properly.

Some of the founding fathers were most certainly racists in the literal sense of the word. (Indeed, seventy years later even Lincoln would have qualified as today's racist, having uttered the following in a debate with Stephen Douglas in 1858: “I will say in addition to this that there is a physical difference between the white and black races which I believe will forever forbid the two races living together on terms of social and political equality.”)

In 1787 however it was not uncommon, anywhere in the world, for people to believe that persons of different races or colors were genetically inferior to them. Regardless of their individual feelings of the genetic equality of blacks and whites, many of the founding fathers abhorred the institution of slavery. As such, it was the goal of many of them to eradicate the practice from their new nation.

Unfortunately however, they did not live in a vacuum and could not dictate terms with impunity. The eventual result of their living in the real world was the Three Fifths Compromise. While many wanted to eradicate the practice of slavery, they recognized that they simply could not do so immediately and still hope to maintain the Union.

The Three Fifths Compromise existed for one reason only: Without it there would be no Constitution and no United States with all 13 states. The delegates from South Carolina and Georgia stated unequivocally that they would not be a party to a contract that outlawed slavery. The other slave states were sympathetic to their views. While it is possible to try and sit in judgment in 2009 as to what the framers should have done, the reality is that they worked hard into the summer of 1787 to get the Constitution written and for the next 2 years to get it ratified. With 222 years of history to look back on it might almost seem predestined, but the truth is that none of it was and these patriots were literally creating a nation out of thin air. Not only did they have to worry about internal issues from taxation to slavery to the balance of states rights, they simultaneously had to worry about a international creditors, a hostile Britain, and an untamed wilderness to its west. They were worried about surviving and understood that there was strength to be had in numbers.

Had not the Three Fifths Compromise been in place, there was a very real possibility that there would have not been a United States. There would likely have been a country representing the free states of the north and another the slaveholding states of the south, or very possibly anywhere from two to five different countries where slavery was legal.

As it was, the Constitution that emerged was an imperfect document, but one that had within it the potential for change.

For those who want to sit in judgment of the founding fathers 222 years after the creation of our nation, perhaps the question should not be why they signed onto a “racist” document, but rather what would have the outcome been had they decided to go with a “pure” Constitution that did indeed outlaw slavery and was ratified only by those northern states that had already outlawed the practice. Would the slaves in the five southern states have been better off in a country or countries where there were no abolitionists to try and temper the growth of the institution? Would the slaves have been better off if they were in a country that did not ban the import of slaves after 20 years which would have resulted in their becoming expendable due of the ease of replacement? Would the slaves been better off with a free country to their north that utilized its nascent industrialization to expand to the west more quickly than the South and possibly surround it, leading the British to come in on their side (South) if war broke out? The British were loathe to support the South during the Civil War because of slavery, but might they have considered doing so in a war between two countries if they felt threatened by a more dominant Northern rival that might have emerged without the southern states? Indeed, if there were not 13 states that ratified the Constitution there may not have been a Civil War and thus no Emancipation Proclamation and perhaps slavery would have gone on for decades or a century more in the South.

The question in 2009 is not whether or not some of the founding fathers were racists in the literal sense of the word. Rather, the question is did the founding fathers aspire to build a country where men could live free and did they leave us with the documents, tools and institutions to expand that freedom as our society and culture advanced. I would argue that they did just that. The Constitution is not perfect, nor have been the men (and later women) whose job it has been to interpret its words and apply them to the always evolving, often opaque, and yes, sometimes unfair world around them. There is not now, nor has there ever been a Perfect Union. Nonetheless, our founding fathers left us what has proven to be the single most powerful document in the history of man, the United States Constitution. That document, imperfect though it may be, laid the foundation for the emergence of the greatest country in the history of the world. To sit in judgment 222 years later and presume to know what they should have done, to assassinate their character and that of the nation they built tells us far more about the person throwing the stones than the Founders, the Constitution, or the United States itself.