Archive for September 2011

Newt’s New Toot

September 30, 2011

Presidential hopeful Newt Gingrich has proposed a new “Contract with America”.  Undeterred with his low poll numbers, vanishing campaign war chest, or any serious attention being paid his campaign by anyone, Newt has rolled out what could be the platform for any of the other GOP candidates.

There is the usual, like “Repeal ObamaCare” (of course with no explanation of why or details of what would replace it.  Therefore there is no reason to expect Newt’s ideas might have any chance at health care cost control.)   Oh, and don’t forget he is going to free up America’s productive energies and create jobs.  He doesn’t say it but his prose would lead you to believe there will be a job in every pot.

You can pretty much sum up Newts views with his “Jobs and Prosperity” plan.  In this bold promise, Newt promises to do four things.  They are

(1) Reduce the Corporate Tax to 12.5%

(2) Abolish the Capital Gains Tax.

(3) Abolish the Death Tax.

(4) 100% Expensing. (This allows companies to deduct from their taxes the full amount of their annual investment… read lower taxes).

The most favorable light that can be cast upon these proposals is they are the best of supply side economics.  If we make it, people will buy it.  While a little of that idea is always useful, expecting a lot to work even better is like “will you love me in the morning”.

A far more realistic view of Newt’s proposals is to ask, “just who would these benefit the most?”

You can have two choice, “the already wealthy” or “everyone else”.

Corporations are not going to hire more people even if the tax rate was zero.  They would be far more likely run up their profits and take their reward from Wall Street with stock price appreciation.  Then with no capital gains tax (thanks to Newt), share holders and senior executives could say, this is truly a “prosperous” moment.

The “death tax”, of course, has nothing to do with jobs and everything to do with the very wealthy passing their wealth onto their descendants.  While there may be reasonable grounds to discuss the threshold value of where an “estate tax” should kick in, zero is hardly fair to all Americans.

Newt’s new toot may sound alluring to some.  It is however hollow at best and disingenuous at the extreme.  Americans, especially the broad middle class need to recognize there is nothing in this man’s proposals that will narrow the widening gap between the wealthy and everyone else.

Consequently, the American dream will get more and more illusive for you and your children if we follow Newt’s New Toot.

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Two Enigmas

September 29, 2011

Every so often there appears upon the public stage some events that are simply hard to understand.  Mitt Romney and Admiral Mike Mullen represent two puzzling cases.

Mitt Romney is seeking the Presidential nomination from a party that simply does not appear to want him.  Romney keeps plodding along and slowly increasing his straw poll numbers.  Yet, there seems no end to the GOP trying to find another candidate.  Each new face is viewed as the next best thing until a very short test of time dulls voters interest.  There was Newt, Michelle, Tim, and now Rick.  Each was a fresh new voice.  Now the calls are for New Jersey Governor Chris Christie.

Why does Romney persevere when it seems so clear his party does not want him?

The second enigma involves retiring Chairman of the Joint Chiefs, Admiral Mike Mullen.  Mullen seems to have served a distinguished career, capping his career as the top military officer during two land wars.

He is set to retire and in his last weeks in office, he has chosen to speak out about treacherous actions by Pakistan, a US ally.  Mullen claims that elements within Pakistan’s ISI, their CIA, provided help to Muslim extremists.  This is not a new charge since India has claimed that same charge with respect to the Mumbai shootings.

Why has Mullen made these charges, why now?

Mitt Romney is a very determined person.  While his TV personality is at best shades of vanilla, he has a record of success in the private business world.  Making big time business deals takes guts and nerve which should do Romney well if nominated.  But I guess that behind Mitt’s smiles, is a deep contempt and distrust of those GOP supporters who back people like Palin, Bachmann, and Perry.  It might be this contempt that keeps Romney motoring.

Mullen, on the other hand, would appear at the end of his public service.  Why the bomb shell right at the end?  My guess again is that within Defense and State Departments what he said is common knowledge but never said to the public.  Mullen probably thinks the role of the Haqqani network will emerge soon and will make him and his watch appear naive.  History is sometimes a cruel judge, especially when written by others with their own special interests.

Maybe Mullen said he would write the first page his way.

Mitt Romney is still only a hopeful.  It is still early in the nomination process so having the nomination contested is what should be expected.  What is odd is that one after another, but never, Romney is hailed the crowd favorite.  In a few weeks there is a new crowd favorite, again not Romney, and the sequence repeats.  Each time, however, Romney slowly gains ground in the overall polls.  The rank and file GOP might do well to wake up and recognize the forces twisting their party’s selection process.

Admiral Mullen will retire soon and probably write a book and get a position at a University or think tank.  Someday, someone will ask him why did he speak openly about ISI actions, and what was it he was trying to achieve.  I wonder what he will say?

One Term President

September 28, 2011

Whomever is elected President in 2012, he or she will be a one term President.

If it is President Obama, of course, he would be term limited and can only serve one more term.  He and his Democrat Congress members, however, will be swept out.   If it is any of the GOP show business cast, they will last one term and get thrown out too.  Why would that be?

There are two basic reasons, I believe.  (1) Too many Americans are not interested in learning why the US is mired in slow growth.  As a consequence they will expect too much from their candidate.  (2) There is no interest in the private sector, such as large banks, investment houses and corporations (particularly those related to the health care industry) to throttle back their greed and instead do what is good for both the country and their own long term wellbeing.

As a result, the inevitable promises both Presidential candidates will make about fixing the economy and growing jobs will fizzle.  Promises to curb the deficit will either stir domestic discontent or push the economy into recession, or both.  The new President will be forced to equivocate or walk away from promises.  The voters will not treat this repeated behavior kindly.

I think people like Mitch Daniels, John Thune, and Chris Christie know this.  Their preference is to wait until 2016 when conditions might be better.

Just being President is often a compelling enough reason for someone to run.  For others, two terms is the mark of success they seek.  Someone seeking to make his/her mark in history with two terms, unless delusional, would be well served to wait.

Two Mill Stones

September 27, 2011

With all the ridiculous antics by the Congressional GOP members and the off the wall assertions by GOP Presidential hopefuls, why is it not already a slam dunk reelection for President Obama?

Remember, the GOP is the party of George W Bush, on whose watch the budget went from a surplus to a deficit, the national debt doubled, the US got bogged down in two un-winnable wars, and the US reputation amongst other countries plummeted.  How can the President Obama’s approval ratings keep falling?

The answer is straight forward.  The Democrats are doing everything possible to lose the election too, and the President can’t explain anything very well.

During the 2008 election campaign, a majority of Americans came to believe a candidate who said he would change things.  Since then, in the eyes of most Americans, not much has changed unless you count getting worse.

The one seminal piece of legislation, the Affordable Health Care Act, has been explained to the American people as finally getting control of health care costs. The AHCA is seminal not because it lowered health care costs, but because it made illegal what common sense should have already made clearly wrong.  If you wish to be a health insurer, you can not pick and choose your members.  The use of “pre-existing condition” as a basis of service denial is immoral.

What has resulted has been instead a fight over whether Americans can or should be made to carry health insurance.  Why is the President not saying, if the mandate is denied, I will push the public option next?

It is true he would have a very difficult time arguing this point with a GOP controlled Congress.  If he talked, however, about the moral basis for insuring everyone who wanted medical coverage, I think he would win the moral fight.

Health care reform is not the only issue.  With little effort, Republicans have made clear that blind support of the poor (aka the blacks) and unions are similar to the US having to carry two millstones.  (As always, it is not all blacks and it is not all unions. For sound bites, the generational poor and big unions anger and scare voters.)

For sure, the Country, since the days of FDR, has stepped up to the challenge of the poor.  Public assistance and works projects have helped generation of Americans and immigrants enter the mainstream.  Unions have been essential in establishing safe and fair working conditions and bargaining a decent wage.  Why are their questions today?

The most obvious answer is the Country is not growing in a way that includes the middle class, or for that matter, the bottom 98%.  What goes to union workers or the poor takes a larger share out of the discretionary part of Americans wallets.  This is too close to home.

The black community and unions must come to realize they can help themselves too.  For those blacks where one parent homes, children out of marriage, unhealthy dietary habits, and low value for education exists, the greater black community should band together and worked to overcome the quicksand that keep these families trapped in generational poverty.  Government is too removed to really help.  Unions need to see their more productive roles as (1) an ally to management and work to increase corporate productivity and (2) a negotiator for fair wages and benefits based upon the productivity or work standards delivered.

Neither of the “millstones” are responsible for the state of the current economy.  They represent, instead, a drag and a serious distraction.  They also represent the elephant in the room which caters to the public’s fears.

It is time for Democrats and Republicans to demand different behavior from these millstones.  It is also time for the poor and unions to demand different behavior from Democrats and Republicans.

Cain and Abel

September 26, 2011

Over the weekend Herman Cain won a Florida straw poll.  He did not just win, he slew his opponent, Governor Rick “Abel” Perry.

The “slewing” was justified based upon Perry’s overall performance.  It was also justified by Cain’s own clear message and 9-9-9 solution.  Cain’s clarity and uniqueness as the only candidate with a plan anyone can understand, alone justified his victory.

There are reports, however, that say Cain’s victory (37% to 15%) was really a protest vote over Perry’s lack luster debate performance and his determined defense of his Texas policy of educating undocumented children.  No way says the right and the Tea Party.

Common sense tells anyone that education is absolutely necessary to enter the mainstream of American life.  Most sensible religions tell us that the children are not responsible for the crimes of their parents (common sense would tell those not religious that too).  So where does the right find the stomach to look in a mirror after denying education to undocumented children?

It is ironic that on the one issue Perry got right, the base he was pandering, rejected him soundly.

This says a lot about the fix the GOP has gotten itself into.

Take The Money And Run

September 25, 2011

A sideshow, now playing in Washington, stretches the edges of common sense.  Disaster relief funding, along with the funding needed to run all other government operations are being held captive by the GOP demand that the disaster relief be offset by cuts elsewhere.  Now there should be no question that if the objective is too reduce or eliminate the deficit, then sooner or later, government spending in total must be reduced.  But is now, like in today, the right time?

Under existing legislation, a super committee has already been formed and charged with finding a little over $1.5 trillion.  Failing to accomplish that, automatic cuts are ensured by law.  Why does there need to be a fight over the results of Hurricane Irene?

The simple answer is, of course, there is no need.

This is political theater but with serious stakes on the line.

The US is waking up to the realization that borrowing 40 cents of every dollar of government spending can’t go on forever.  This implies huge cuts in government spending.  The question is what will be cut and by how much?

This is a 2012 election battle in September of 2011.  The GOP is fighting to extend their control of the public troth.  This is big business and no issue is too small if it will aid their cause.

Democrats, not so surprisingly, are trying just as hard to thwart the GOP advances and dream of reversing losses in 2010.  Why all this effort?

We are hearing that economy is so weak that deep cuts must be delayed.  We are also hearing that entitlements are on the table or off the table depending upon who is speaking.  Why the confusion?

Cuts mean that some company or some constituency someplace in the US will lose its gravy train.  Whether it is corporate welfare in the form of sweet defense contracts, or generous spending program like Agriculture support or infrastructure repair, money will not be flowing to interests that could otherwise support the Congress member.  This is serious stuff.

The present example, the fight over cutting funds that support energy efficient automobiles as the offset for hurricane relief, lays it out for everyone to see.  The fight is about automotive jobs.  Auto workers tend to vote Democratic.

As any good Congress member would say, “don’t take my money and run!”

The Invisible Hand

September 23, 2011

Adam Smith described the invisible hand and how it moves the economy.  His message was that if left alone, the invisible hand will guide the allocation of resources in the most productive way.  I wonder whether Adam Smith could detect an invisible hand behind today’s Wall Street and other world markets?

The Dow, for example, has been erratic, jumping or dropping several hundred points on the scantiest of information.  The increases in market values seems to reflect good news, like corporate earnings that exceed predictions or unemployment rates that are decreasing.  It is difficult to judge whether the increase seems appropriate to the news but directionally, it seems consistent.

The greater issue is with bad news.  Some of the bad news is like the good news, that is newly released economic data.  The market often drops a few points but no greater than the good news examples.  It is with the macro trends, like the Greek debt issue or the state of US economic growth, which are well known, and we are told, have already been discounted by the market, that I suspect the invisible hand is at work.

If you recall the near implosion of the world’s banking system in 2008, selling the market short was a huge contributor to the sudden collapse of bank liquidity.  In the 2008 situation, it was understandable that markets got spooked and money fled.  Today I wonder whether similar forces are at work.

Are hedge funds and the large investment houses making side bets that the broad market will fall and placing large bets shorting the market.  In principle, the market could rise and these bets would go bust but as we saw in 2008, many of the large financial firms told their retail customers one thing and then trade exactly the opposite with their own money.

Call me paranoid, but I just wonder.