Wednesday, May 05, 2010

Responding to Facebook Post

Facebook status of a friend --

Please give me your opinion on why the Obama speech "A More Perfect Union" is good/great. I need it for a paper. (Matt Anselmo, this means you)

Alright -- You asked – Here we go ---

Where we should start is the assumption that this speech is good/great. I guess the issue I have always had comes not with the content (I think the content is remarkable) but the timing. I remember quite clearly the context that drove these remarks (and even more problematic for Obama were the comments that came after). This entire speech was a deflection and a political maneuver around Rev. Wright’s salacious comments. Does the context then taint the content?

In this speech, Obama is masterful at playing both sides of the race argument, from society's grind on minorities, to reverse discrimination found in programs like affirmative action. He is amazing at positioning himself somewhere in the middle as you would expect a pragmatist would. His speech intends to unify, not divide, and he delivers the remarks from a vantage point where one would not question his experiences or his positioning.

With that being said he touches very little on the new race that divides our nation, and he focuses on areas that are safe. He ventures very little on the new Brown vs. Board of Education or the segregation developing in politics. The greatest divide we currently face in this nation, is not color or creed, but political affiliation. It’s hard to deny that Obama is a beneficiary of race, or his personal story places him in the persuasive middle of the color argument. This is why the race subject is safe for him. But the destructive forces of political posturing are overcoming this nation and dividing us from within.

Why have we come this far? Why does Obama’s name create sudden divide in the masses? Why do we venture to the point of routing for failure just to be right? Why do we fill the pockets of the egocentric individuals whose sole purpose is to divide this great nation? When will we arrive back to the point in time when compromise was the end solution and not a “my way or the highway” mentality? Obama starts his speech with an illustration concerning the Framers of our Constitution. He elicited memories of the first signing of the Constitution by individuals who were no more philosophically divided then the people are today. The difference? Compromise was sought in all matters. The original patriots were able to lock themselves in a room and work together to arrive at a common outcome. No 24 hour CSPAN to record what today would be perceived as weakness. No media filtration to paint a picture supporting their viewer’s perceptions. No posturing that would not be called out for what it really is. Obama has often said that sunlight is the best disinfectant. But selective sunlight creates flawed arguments and black marks on political discussions.

We all agree that healthcare needs to be fixed. We all agree that illegal immigration is a problem. We all agree that terrorism threatens our moral standards. We all agree that poverty can be corrected. And we agree that greed is overcoming our capitalistic roots. What we disagree on is government’s role regarding solutions to these issues. But disagreement is not foreign to our political dialogue. Do you think the conservative right was aligned with Reagan’s decision to provide amnesty to four million illegal immigrants? Or the liberal left was aligned to Clinton’s Defense of Marriage Act? With 300+ million citizens disagreements will come. The problem we now face is our tolerance with reaching across the aisle to come to a unified agreement.

Obama’s “A More Perfect Union” speech details very little of this national crisis. Part of me believes that he was naive or miscalculated the political divide we now face. He misjudged the alarming influence the media has on steering opinions instead of presenting facts. Case in point: Obama is doing exactly what he said he would do while on the campaign trail. He passed a stimulus bill. He passed healthcare reform. He passed cap and trade legislation. He increased troops to Afghanistan. Yet his popularity has never been lower.

We as Americans have disingenuous dialogue based on differences not similarities. We seek opposition not unification. We are color coded, not by skin color, but by geography and ideology. We seek to stereotype, not by pedigree, but by affiliation.

The hard reality is that we have no one to blame but ourselves. We do not demand the serious conversation needed to repair the divide. We cater to entertainment instead of enlightenment. Our sources of information are limited to 45 second sound bites; hardly enough information needed for compromising and identifying. In Obama’s speech I remember distinctly his awareness of the success this great country afforded him. He stated that no other country could have vaulted a man from his background to the levels he has now ascertained. As fear and anger creep into our discussions I wonder if ideology becomes the new skin color, and party becomes the new religion. If there is one overarching theme I share with Obama’s speech, it’s that reality needs to drive our perceptions, not perceptions driving our reality.

(My favorite speech Obama has ever delivered was right after he lost the New Hampshire primary to Hillary Clinton)

Tuesday, March 23, 2010

Response Written Concerning The Current Healthcare Legislation


That was the most thoughtful response I have seen out of you yet. No attacking, no personal shots, and gives me something to think about. Thank you.

A couple points of response:

If any company takes taxpayer dollars, then by right of being a shareholder, taxpayers should have some say in how the company is operated. I completely agree with you regarding the government's lack of industry expertise, but at the same time if the banking industry is going to benefit from my investment, as a stockholder, I have a right to their profits.

Same with the insurance companies. Medicaid and Medicare pay billions to insurance companies to regulate healthcare. What do we get in return? Larger premiums and poor coverage while the share holders rake in the profits. With government being the largest customer of insurance companies, they have a right to demand better service, lower premiums, and higher quality of care. If an insurance company does not want to deal with the government's request, capitalism steps in. The insurance company needs to drop the government as a customer and the market will pick up the slack. However, insurance companies understand current legislation has been written in their favor. The government has legislated high barriers to entry and strict state to state competition laws. You and I have limited choices in what insurance companies we can purchase from, stifling competition. To make matters worse insurance companies are protected by anti-trust legislation making it harder to pin responsibility on price fixing and collusion.

Similar condition with with drug companies. Drug companies (with the help of Republicans) wrote price fixing laws into the 2003 Medicare bill making it illegal for the government to directly negotiate pricing. As a result the largest buyer of drugs pays the highest price. Capitalism or intervention? Drugs are cheaper in Mexico and Canada for the sheer reason of market forces. Now I wish the best for the pharma industry. I hope they make billions in profits. They should be rewarded for their innovation. But it’s a double edged sword to play the victim of legislation that encourages the use of free market concepts to drive down profits. The drug companies have been sucking the tax dollars from our wallets with no repercussions of the price gauging they have regulated.

Now, "Obamacare" fixes several of these issues. It protects consumers from being dropped when their health takes a turn for the worse. It reinstates the government’s power to negotiate drug prices. It creates an insurance exchange to allow small businesses to band together and negotiate like massive corporations. Several of these concepts are free market principles. Now, I am not sure how I feel about mandating every citizen to buy healthcare. Obviously cutting down on emergency room care would be a huge cost saver, and one of the driving principles of this legislation. I am also not sure if regulating small businesses to provide healthcare is a wise market principle either. However, economics will teach you that there are vast economies of scale as competition increases and demand rises. This is exactly why we can cover more people, using market principles, at a lower cost per individual. Is the healthcare bill perfect? No. But it is definitely better then the legislation we currently have in place. The CBO, a non-partisan organization, has projected the bill will be covered by forecasted costs already in the system (I guess we should thank the Republicans for that – the Medicare 2003 bill was quite an expensive entitlement program!) with some left over to drive down the fiscal deficit.

Thursday, February 18, 2010

Atlas Shrugged Response

(Response challenging my views being opposite the lessons of Atlas Shrugged)

I don't see it that way. I am a pretty pure capitalist. I support Milton Friedman's ideas about school vouchers to maximize privatized education. I never supported Obama’s plan to control CEO pay. In my MBA classes I was one of the few students to oppose CEO pay regulation, as compensation is a market function. Hell, I even work for one of the largest corporations in the world which provides a lesson everyday about supply and demand. I think government subsidies for corporations are anti-capitalistic. I thought that the American car companies should fail. I think unions have outlived their purpose and are the major cause of the auto company’s demise (and airlines). I think minimum wage laws are useless and unnecessary and I disagree when Democrats push regulatory legislation. I think the Federal Reserve is what allowed banks to undertake excessive risk with minimal consequence. If the Philadelphia bank in the 70’s, the Savings and Loan bank in the 80’s, and other large banks in the 90’s were allowed to fail, it would have sent a clearer message to manage risk this past decade, instead of embrace it. I don’t think it’s possible for a company to make too much money. This includes drug companies, as profit drives innovation.

However, there are times when I see conflicts between capitalism and the best interests of society. Healthcare is one example. The interest of shareholders does not align with the interests of the people. I see insurance companies as one of the most wasteful corporate entities, being fed by taxpayer dollars, and supported by legislation to stifle competition, creating a high barrier to entry. Tell me how this plays into a free market belief? I also find it absurd that the largest buyer of drugs pays the highest price driven by legislation making negotiation illegal. Tell me how that is capitalistic? (By the way, I have enormous respect for your brother who bucked party lines to vote against the Republican monstrosity healthcare bill. The Medicare 2003 bill is perhaps one of the most detrimental pieces of legislation to ever come out of Congress. A one trillion dollar entitlement program over ten years?! And the right calls Obama a socialist!)

Remember that Ayn Rand was a Russian immigrant seeing firsthand the problems with communism. It was the Russian Government that taught her how destructive anti-capitalistic models are, and drove her motivation to push ideas on capitalism. I don’t think anyone would question Greenspan’s dedication to free markets, but even he saw a flaw with the current capitalistic model stating that “he had made a “mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that “a flaw in the model that defines how the world works.” This contradicts Adam Smith. This also demonstrates to me that Ayn Rand needs some revision.

Tuesday, February 16, 2010

Education - Capitalist Style

Written in response to a challenge for privatized education and protection:

Public schools would be replaced by private institutions driven by profit. In order to meet the demands of capitalism, the only admitted students would be those who can pay. Obviously the quality of education would be directly tied to the amount one could pay, as the most expensive schools could afford to recruit and pay the very best teachers. Currently, the average costs for K-12 grade is roughly $8500 spent per student per year. Let’s assume that through capitalism greater efficiencies are realized and the cost drops by 30% (this is very generous). This would equal about $5900 per student. Let’s say since education is now privatized we now spend half on property taxes (savings of $800 on a $300,000 home in AZ). This would equal a net cost of $4900 for one student, $10,800 for two students, and $16,700 for three students.

Obviously households would have to be in the upper middle income bracket to afford the average education premiums, and for the best education, they would need to be an upper income household bracket. With half of the American households making less than $50k a year, paying little to no taxes, this incremental cost would solicit very tough choices. You could send you child to a below average school, at a lower cost, with poor quality teachers, shorter hours, and little to no resources. Or you could elect to forgo substantial costs like healthcare for your family which will then be reflected in emergency room costs skyrocketing (not to mention a poorer quality of life). You could also choose to educate from home, if there is a non-working parent willing to make the sacrifice. In any of these scenarios there is a guaranteed certainty that crime will spike given the lack of education and time spend in a productive environment.

Ultimately privatized education will drive increases in poverty, widening social class divides, and the absorption of the middle class. Even more unfortunate you will not see children from broken homes in Arkansas, become Rhode Scholars, and Presidents of the US. There is a reason that every advanced industrialized nation offers education in a socialized, not capitalistic, manner. Even for-profit institutions like The University of Phoenix rely almost exclusively on government subsidized student loans to generate 80% of their revenue (think about that for a second, your tax dollars are going right to the pockets of UOP shareholders).

Now, there is also the subject of vouchers which mixes government capital with private institutions. However, based on our current conversations about governmental spending, I am guessing government funded vouchers are not the ideal scenario.

There would be similar consequences for privatized protection. Imagine getting charged $200 every time you called 911. If you couldn’t afford the premium then calling 911 for help wouldn’t even be an option. Police wouldn’t even respond if you did not have a payment form on file, and those in danger would weigh whether or not the calling risk is worth the cost. Sounds like potential anarchy to me.

Wednesday, March 04, 2009

Wake Up Middle Class!

With Obama’s plan to let the Bush Tax cuts expire in 2010, there has been an onslaught of media attention concerning his budgetary decisions. Phrases like “socialism”, “re-distribution of wealth”, and “tax hikes” are being associated with President Obama’s fiscal policies to discredit his approach. Obama has been open and direct concerning who his tax policies are targeting. The interesting part of the situation? There has never been such an uproar from the middle class fighting for the benefits of the wealthy.

Now to be clear I have little issue with the wealthy, or their personal incomes. Athletes, actors, stock brokers, and executives are all paid based on market conditions. I do believe that the wealthy are the largest benefactors of governmental regulation. We live in a mixed market economy, not a free market. The government regulates trade, blocks monopolies, and protects intellectual property. Almost all of the bailout money went to save the shareholders of large corporations and free up credit markets which have the largest impact on the wealthy.

The richest Americans have been the largest recipients of tax cuts over the past 30 years. Starting with Jimmy Carter’s administration, the highest tax rates have been cut in half to present day levels (70% to 35%). The wealthy have also seen the largest jump in income. From 1992 to 2004 upper class income rose from 111,000 to 154,000 (+39%). Over the same time period median wages only increased from 39,000 to 43,000 (+10%). So, over the past 30 years the wealthy have seen their taxes decrease by 50%, and their incomes increase by 39%. (Inflation adjusted for all above examples)

What many Americans do not realize is the vast redistribution of wealth over this period. Whenever tax rates are cut disproportionately, tax burden shifts among classes. Regarding the 2002 and 2003 tax cuts, families making $60,000 saw their tax payments drop by $1,000. In contrast, the wealthiest 1% saw their annual tax bill drop by $58,000. This resulted in a dramatic swing in tax burden to the middle and lower classes and redistributed wealth to the upper class.

President Obama’s plan is to close the gap on the federal deficit by allowing the Bush tax cuts of 2002 and 2003 to expire. This would increase the tax bracket of the wealthiest (single taxpayer making more then $357,000) from 35% currently, to 39%.*** This would return some of the tax burden back to the wealthy, and redistribute the wealth back to the middle class. Before the middle class rejects Obama's policies, they should remember upper class Americans never asked for the Bush tax cuts, and certainly didn't need them.

***Now, before you drop your jaw regarding these figures remember this is a bracket, and tax brackets can be misleading. A family of four with household income of $365,000 claiming $100,000 in deductions actually pays about 17% in income tax. In comparison, an average family of four with income of 150,000 and deductions of $30,000 falls into a 25% bracket, but only pays about 12% in tax. An average family of four with income of 70,000 and no deductions falls into a 15% bracket, but only pays about 5% in tax.

Monday, February 16, 2009

What Do Republicans Believe?

In the break room at work we have a TV that runs news programs throughout the entire day. Since the office is primarily Republican, I get an earful from Fox News every second away from my desk. Fox News retains 25% of the population’s attention, and appears to have a clear understanding on whom to market their outrage to. Listening to their undertones and self promotion demonstrates one firm conclusion; the Republicans are starving for an identity.

What exactly do Republicans stand for? Under the Eisenhower era military prudence was tied directly to Republicans. In the Regan era conservatism was embraced. Under the Clinton era Newt Gingrich led the Republican New Deal urging smaller government. Over the past several decades, all of these ideals have been forgotten. George W. and his Republican dominated leadership increased the size and scope of government to record levels. The federal budget under his watch jumped 38% as President Bush did very little to control this rise in spending. Yet when I watch Fox news, I am led to believe that the Conservative ideals are alive and well.

To agree with Frank Rich, Fox News and the Republican Party are screaming into an echo chamber. The louder they scream, the more they believe themselves. Take for instance the stimulus bill that just passed congress. To the Republican right an absolute disaster; to 51% of Americans, a step in the right direction. Or how about Obama’s cluster of tax cheats nominated to cabinet positions? To Rush Limbaugh, a strong demonstration of Obama’s inept decision making ability. To 68% of Americans a forgivable offense in which they still offer support for the president.

Besides identity fallout, what hurts the Republican platform is the negligent insistence on tax cuts to solve all economic problems. We tried that in 2002 and 2003. How did we fare? Many on the right will incorrectly point to the tax cuts as the key driver of the four year boom from 2002-2006. The truth is that falling interest rates and leveraged equity were the real contributors. The tax cuts in 02-03 put money back into the pockets of the super wealthy, who then proceeded to watch it disappear in the securities fallout. Many still cling to the supply side theories of Reagan’s policies to bolster their tax cut claims. Two problems with this belief: Jimmy Carter had already started lowering tax rates on the upper class with little success, and two, Reagan was the recipient of Paul Volkner’s rate-slashing Federal Reserve. What has been forgotten by Republicans is that conservatism at its root does not drive tax cuts. Conservatism preaches smaller government, in which tax cuts are a byproduct.

The GOP’s lack of identity and shrinking base impacted the elections of 2006, 2008, and most likely 2010. The extreme big government policies of the last eight years, coupled with an unfavorable war, pushed moderates to the left. However, the biggest problem for the Republicans going forward is their shrinking base, which is wedging out the younger demographic. Fox News and the Republican leadership had a field day teeing off on Howard Dean in the 2004 primaries. But it was Dean who inspired many of the college age kids who turned out in droves in 2006 and 2008 to vote Democrat. The GOP has kept a single eye on big business and the religious right, and has failed to court their future base.

Republicans need to regroup and tell America what they stand for. The American people are ready for extended dialogue and genuine conversation from both sides of the aisle. If the GOP can’t embrace a persuasive identity, and continue to use tax cuts as a substitute for thinking, change will continue. Unfortunately, it’s probably not the change the Republicans desire.

Saturday, July 05, 2008

The Republican Philosophy – One Giant Credit Card

Tax and Spend Liberals. If I had a nickel for every time I heard this phrase, I would be writing this post from an exotic hut with glass bottom floors somewhere in the French Polynesia. This negative connotation has been associated with the Democratic Party for several decades, and will be an effective talking point for elections to come. The irony: I would much rather be a tax and spend liberal, then a free charging conservative.

Recently I had a conversation with a friend whose number one disagreement with the current Democratic candidate was his commitment to let the Bush Tax Cuts expire (one might ask, why were the Bush tax cuts passed with an expiration date?). This, in essence, would be raising taxes. I followed up with a question regarding the consequences of deficit spending; their response, “government needs to be cut.”

There is not one current presidential candidate who shares this conservative ideology. Although Obama’s proposals are beyond McCain’s in cost, McCain’s proposals will increase deficit spending much faster that of Obama ($5.7 trillion to the national debt over the next decade -- source: CBO). Why? McCain is proposing vast tax cuts including voiding the AMT, doubling child credits, and lowering the corporate bill. This would be like cutting my salary by 20%, and not changing my spending habits. Needless to say I would rack up vast amounts of debt forcing me to leverage every asset I could to support my current lifestyle.

Think of the national debt as one giant Black American Express. Where does this limitless credit card come from? This is the scariest question of them all. We are currently expanding our money supply by borrowing from foreign countries. We are allowing Saudi Arabia, Japan, and China to become our shareholders. So, during this Olympic season when you are complaining about China’s human rights violations, just remember they are making our mortgage payments.

Looking at the last four presidents, government spending increased 36% under Reagan, 17.2 % under Bush I (only 4 years – 34% for 8 years), 21.2% under Clinton, and 32.4% under Bush II. What is most interesting from this comparison is that the economy was expanding at the fastest rate under the Clinton administration, providing them with the strongest justification to increase spending (higher tax revenues). Yet it was the tax and spend liberal who balanced the budget and kept the National Debt basically stagnant his final year in office.

Two major consequences of a rapidly expanding money supply (national debt) are declining currency value and inflation. When your two dollar milk now cost three, or the gas prices skyrocket at the pump, thank deficit spending and a weakening dollar. This is exactly why economists call inflation “the hidden tax”. However, we should take comfort that the current administration has passed sizeable tax cuts to off-set these cost to households making more then 250,000 a year.

In the upcoming election when sizing up candidates, don’t be so quick to dismiss the tax and spend liberal. Just remember over the last 30 years it has been the tax and spend liberals who have made the most progress on limiting governmental spending, keeping the national debt in check, and maintaining responsibility with America’s money.