Monday, December 20, 2010

What Christmas Reindeer Antlers Say About America

My wife is from France. In the four years we were on opposite sides of the ocean before we got married I had the good fortune to be able to visit the country a number of times. Much of that time I was working at Outback Steakhouse and always envisioned opening a unit in Paris. (I know, for most people that’s epicurean heresy, but consider the source… my favorite food is McDonalds and M&Ms…) Nonetheless, at Outback the fundamental idea was that we would prepare your food any way you wanted. You could have your salad dressing on the side, your Bloomin’ Onion cooked with flour, or you could have your steak extra well done. Whatever it was, we wanted you to be happy with your meal. When I mentioned the idea to my wife she said it would never fly because the idea of the customer being in charge of anything in France is largely unheard of, particularly as it relates to restaurants. Basically the rule is: Chef’s are trained to know what works with food so you basically get what they give you and you like it.

Not long after that I had another idea that equally befuddled her. Licensed apparel is a multi billion dollar business in the United States and around the world – think NY Yankee hats or Manchester United shirts. One of the biggest sectors of that industry here in the US is NCAA (college) licensed apparel. One day I suggested we think about going into the licensed apparel business and sell shirts, hats etc. for French colleges. She was puzzled. “Why would anyone want to buy a shirt with their college’s name on it?” I tried to explain the whole college rivalry, pride in your school deal to her and it just wasn’t clicking. She told me that such a business would likely not find a market in France because there is largely no such thing as school sports & spirit and French people would never understand the point. (The University of Paris tee shirts that are sold throughout the city are for tourists.) For the French, going to college is expected to be four years of focus and study with very little extracurricular activity of any sort, organized or otherwise. Simply put, it’s all work and very little fun and who wants to wear a shirt reminding them of that?

I thought about these two episodes recently when I saw a car with some reindeer antlers sticking up out of the door of a passing car. In a moment the subject of this column came to me: The beauty of America is the fact that anything and everything is possible here. When you peel back everything else, America is a place of possibilities. Americans by their very nature are a rebellious sort. From breaking with King George to Manifest Destiny to heading to the moon, America has always been a place where big things can and do happen. More importantly however, it’s also a place where everyday, seemingly inconsequential things can happen. What I mean by that is that it is not only the politician, the successful businessman or the wealthy heiress who can set out to pursue some grand design… it’s also the guy next door, the guy at the coffee shop or the guy you knew in 3rd grade who can do something that changes the world, or maybe just his little corner of it.

America is a place where people feel that if they can imagine it, they can make it come true. Although that doesn’t always lead to success, the aggregate impact of all that creativity on the country is tremendous. Think about how many things that you know of that are so fundamentally unimportant from the perspective of surviving in this world but impacted the lives of the people who invented them or used them. Silly Bandz. The Snuggie. College apparel. A dozen flavors of Coke. Personalized M&Ms. Car wrap advertising. Pet manicures. Cheesehead hats. QVC. Having it your way at Burger King. McMansions. The antlers are the perfect example. They’re utterly frivolous, but they let people express the fun side of Christmas and maybe make others smile as well. Not earth changing but certainly a net positive, particularly for whoever created and sells them.

The list goes on and on. And this is not an exercise in navel gazing. Just the opposite actually. It’s recognizing and appreciating the fact that America is a truly unique place and Americans are a unique people. Not because they any better or worse than anyone else, but because they have largely bought into the notion that in America anybody can have an idea and do something with it – although regrettably the system is increasingly suffocating the pervasiveness of that notion. Nonetheless, America has prospered – and much of the rest of the world has benefited – by Americans bounding forth from the darkness to invent things for which there was no demand, to do things that few might have thought possible or necessary and alas, to even stumble more often than not.

Many things that Americans come up with are indeed frivolous, but that’s really the beauty of the country. Just as failure is the foundation upon which success is built, a culture that tolerates and even extols the frivolous fertilizes the garden from which the consequential emerges. For example, while media giants have spent (and continue to spend) billions of dollars trying to figure out how to connect with Americans, something that started out as a way to meet and rate girls has actually accomplished it: Facebook. Yellow Page publishers have lost billions of dollars over the last five years because they can’t seem to figure out how to impact consumer behavior while a company built on the ashes of a website that helped people protest has managed to rapidly impact how and when millions of consumers spend their money: Groupon.

Whether it’s having your steak cooked exactly the way you want, sporting your schools’ mascot on the seat of your pants, or volunteering with Habitat for Humanity, America is more than anything a place where people feel like they are more than just cogs in a machine. They feel like they have the power to make their lives better and impact the world around them. Fundamentally, they are empowered to do things… frivolous or otherwise. That’s real freedom… the ability to decide what you want to make of your life and the opportunity to go out and do it, or even die trying. It’s not the destination that makes life worth living, it’s the journey. The journey in America may be cluttered with kitsch and failed ideas, but it is the dynamic energy fostered by freedom that has created so much of substance and so much abundance. As the year ends and politics takes a back seat to friends and family, we should remember and be thankful for that freedom which we so often take for granted.

Sunday, December 12, 2010

Capitulation & a Pork King... not a good start for the GOP

Voter turnout in the United States is an embarrassment. For a republic that is supposed to be the vanguard of democracy around the world, when 55% of eligible voters casting ballots is considered good, that's rather dismaying. Of course, seeing what happens when the uninformed vote, we may want to consider putting some hurdles in place. Perhaps we should force voters to pass the same test we require of immigrants seeking citizenship.

One reason voter turnout is so low is that many voters feel that regardless of who they vote for, nothing is going to change. Given the amount of time and energy that goes into picking candidates that might seem a bit odd. For federal offices campaigns can start two years before the actual election. Primaries start out sometimes with a dozen or more contenders that frequently represent a wide spectrum of ideas within the party. After months of back and forth voters in each party nominate their standard bearers to face off in the general election. (Sometimes it’s the case that the nominees are almost mirror images of one another, as happened in New York’s 23rd Congressional district in 2009.) The election is then supposed to decide between competing views and the victor heads off to Washington. Despite all of that effort every two years, many people feel like nothing ever changes.

The 2010 election was supposed to be different. Anyone with a pulse could see that 2010 was unusual. The Tea Party movement had taken on a life of its own and became a national story throughout the cycle. The mainstream media and much of the Democratic Party spent most of the cycle telling lies about the Tea Parties and spoofing their members. On the Republican side you had candidates tacking to the right in order to gain the support of various Tea Party groups.

When the dust settled on November 3rd one might have thought that the universe had been turned upside down. The Republicans picked up 63 seats in the House and six seats in the Senate. In the matter of two years the Democrats went from having an overwhelming majority in the House to having the fewest seats they’ve held since 1947. They lost their filibuster proof majority in the Senate in January when the nominally Republican Scott Brown won in Massachusetts and on election day they lost six more seats. Come January 2011 one might imagine that America had actually turned off the Road to Serfdom and decided to pursue prosperity.

Then again maybe not… Unfortunately, if the events of the last week are any indication of what’s coming prosperity may be delayed somewhat. Two events demonstrate that the voters who abstain from voting because it doesn’t matter who’s in power just might be right.

The first involves the hierarchy in the House. On Wednesday the Republican Steering Committee assigned the chairmanship of the single most powerful committee in House: Appropriations. The House Appropriations Committee controls essentially all federal spending. Simply put, it doesn’t matter what Congress or the President say or do, if Congress doesn’t appropriate money for something, it’s not likely to get done, and almost all appropriations must come through the House Appropriations Committee. And so, in this atmosphere of change where voters stood up and demanded fiscal restraint, who did the GOP put in charge of the purse strings of almost 30% of GDP? One of the Young Guns who live and breathe fiscal restraint? No – although none of the three were on the Committee in the first place. A hardened veteran of the House with bonafide spending restraint credentials? No. Rather, John Boehner and the Steering Committee put Hal Rogers in charge. Who’s Hal Rogers? Just a 30 year house veteran known in his home state of Kentucky as the “Prince of Pork” for his success in sending American taxpayers money to the Bluegrass State. Just in the last three years Congressman Rogers secured 135 earmarks worth $246.4 million of your money. (He now claims he has seen the light and is swearing off earmarks…) If this isn’t a case of putting the fox in charge of the henhouse then the phrase has no meaning. In a universe where the government spends trillions of dollars it neither has nor should be spending in the first place, this appointment says much about what the GOP really stands for.

The second wound the GOP inflicted on America last week was the agreement with President Obama to extend the Bush tax cuts. While an extension of the tax cuts was important, the GOP needlessly gave away the farm in order to get it. Having come off a resounding victory where the country clearly voiced its desire for a change in direction and demanded a halt to government spending, there was no need for the GOP to capitulate to Democrat spending demands. Nonetheless, Mitch McConnell and his cronies did so and agreed to extend unemployment benefits for another full year - for a total of 3 years of unemployment benefits. What’s worse, before even making it to the House floor the bill has been loaded with an extension of ethanol credits (AKA subsidies to farmers), subsidies for energy efficient appliances and benefits for mass-transit employees. To an objective observer this is nothing but Washington as usual. The GOP had an opportunity to take a stand and send a clear message to the Democrats, and more importantly to the American people who will be voting in the 2012 elections. Had they demanded a clean vote on a full extension of the tax cuts, the Democrats, who still control both houses, would likely have refused or defeated it. Taxes would have then gone up on January 1st. At that point, with control in the House and a much stronger hand in the Senate, the GOP could have brought a clean bill to the floor and it would have passed. Despite his class warfare rhetoric, President Obama would have likely felt compelled to sign it. Either way, the issue would have brought to the fore a clarifying fight where the GOP would have won the day and eventually the cuts. But alas it seems that is not how things seem to work in Washington …

It’s often said that you don’t get a second chance to make a good first impression. Conservatives can only hope that that is not true for the GOP because if last week’s actions a precursor of two more years of go-along-to-get-along politics as usual, then Barack Obama is going to be a happy man as he is elected to his second term when conservatives stay home after rightfully concluding that there is really little difference between the parties. If such a disaster occurs the GOP should be laid to rest with Abraham Lincoln and America should look for a national Tea Party to help rescue the Republic.

Monday, December 6, 2010

The Democrat's "middle class tax cut" is a populist red herring

I want to make my priorities clear from the start. One: middle class families need permanent tax relief. And two: I believe we can’t afford to borrow and spend another $700 billion on permanent tax cuts for millionaires and billionaires.

That is a line from President Obama’s weekly radio address last week. He’s referring to the coming tax hikes as the Bush Tax Cuts are due to sunset on December 31st. Interestingly, the reason the sunset provision is there in the first place is because Tom Daschle, (the then Democrat leader in the Senate) threatened a filibuster without it. That phrase tells you everything you need to know about President Obama’s sincerity when he talks about putting jobs and the economy first.

On Friday the unemployment numbers came out and the rate had crept back up to 9.8% as employers added a mere 39,000 jobs in October. At the same time President Obama and the Democrats are seeking to extend unemployment benefits beyond the already unprecedented 99 week limit. Ninety-nine weeks! That is two years of receiving a government check for doing nothing. (That doesn’t’ mean that unemployed people are literally doing nothing, but by definition they are not working.) I’m not sure how long it takes to develop a bad habit, but two years is probably a pretty good start. That causes one to wonder what is the bad habit forming effect of a government check on someone who has been receiving welfare for years…

Back to the Democrat red herring. As President Obama’s words demonstrate, the Democrats are seeking to manipulate the conversation using populist rhetoric to demonize the rich. At the core of their “solution” to our financial problems is their effort to raise taxes on the “millionaires and billionaires” while giving the middle class a tax cut. Republicans are fighting this effort, suggesting that doing so will harm job growth. The GOP position is based on the fact that small businesses are the engine of the American economy and create three out of every four new jobs in the country. That’s relevant because most small businesses owners file their taxes using personal income tax returns… and those are where the taxes are going to go up. Here are the numbers for the top two tax brackets:

For those in the second highest bracket – families with income between $171,851 and $373,650 – their tax bill is going to increase by ten percent as the rate moves from 33% to 36%. For those in the highest tax bracket – families with income above $373,650 – they will see their tax bill rise by 13% as the rate jumps from 35% to 39.6%.
Democrats are quick to point out that only 3% of small business filers are subject to the two highest tax brackets. That is true. Most small businesses are sole proprietorships where the business in question is a side venture to supplement income. Think of someone who sells comic books on eBay, dabbles as a real estate agent or designs websites on the side. What is far more important however is that while only 3% of small businesses are subject to the highest tax rates, the businesses that make up that 3% represent 44% of all small business income. Let’s do a little math problem:

IF: Small business represents over 75% of all net new job creation in the Unite States;
AND IF: 3% of small businesses generate 44% of all small business income and a similar number of jobs;
AND IF: Democrats want to raise taxes on the small businesses that fall in that 3%;
THEN: Democrats want to raise taxes on companies that are expected to be responsible for 33% of all new jobs.
That simple problem tells you everything you need to know about President Obama and the Democrats. Despite their rhetoric about wanting to put people back to work, they simply don’t care about actually creating jobs and growing the American economy. If you need even more proof, consider the coming tax hike on dividends. Dividends are currently taxed at 15%. On January 1st the dividend tax rate will skyrocket to 39.6%. (Oh, and don't forget the ObamaCare 1099 fiasco that will hammer small businesses) So, not only do we have Democrats seeking a direct tax increase on the small businesses who are supposed to create one third of all new jobs, at the same time they are discouraging investment in companies that are successful enough to be able to pay dividends at all… many of whom probably have and hire employees.

President Obama and the Democrats, in using the red herring of “middle class tax cuts” to pander to their progressive base are willing to sacrifice jobs and job creation so they can further cripple capitalism and push even more Americans into the fold of government dependency. As the economy slows and jobs evaporate expect Democrats to seek to extend unemployment benefits to 129 weeks then perhaps 159 weeks and then maybe be made permanent. At the end of the day that is exactly what Democrats want… they want to take everything the rich have stolen from the poor and the middle class and simply redistribute it. That of course is a house of cards as the rich have options about where they invest their money and even where they live or start their businesses. At some point when everyone becomes a ward of the state there is no one left on the other side from whom the state can take everything to support itself that house of cards will eventually come crashing down. Hopefully 2012 will usher in some new homebuilders.