Archive for May 2012

Guessing What To Do Next

May 21, 2012

With back to back meetings, key members of NATO have said what they should, but appear to have little or no heart in what they said.  With the world economy (G-8 meeting) or with Afghanistan (NATO meeting), the leaders are not happy with the current situation, and like less the future prospects.  What is a leader to do?

President Obama positioned his stimulus ideas as the only sensible choice for Europeans to adopt if they wished to restart their economy.  European leaders, some under political pressure to add stimulus back to their fiscal and monetary policies nodded.  Just like President Obama, these leaders and their countries have little room for more borrowing unless it comes from Germany.  German taxpayers, however, do not see that happening.

Most everyone sees Afghanistan as a bad idea which keeps on giving.  There are no brave Afghans upon whom to shine a light and tell citizens, “that’s who we are fighting for”.  Afghanistan, like Iraq, could evaporate and would not change the world’s Islamic radical terrorists problem.  Knock these radicals down and watch the next group arise.

The big questions these leaders are wrestling with are (1) how to restart the world economies, and (2) how to disengage from Afghanistan.

On one level a little stimulus coupled with some “austerity” is a good starting point.  This shows concern for the unemployed.  Longer term, these southern European countries must find ways to put workers in jobs that last.   This work ought to lead to either exports or increased local consumption combined with reduced imports.

For example, Spain could make more toasters, sell them in Spain, and import less from China.  This would increase money in Spain and decrease it in China.

Short term, unfortunately, Spain is more likely to provide more student education assistance or finance the building of public buildings or roads instead of trying to find a longer term solution.

Afghanistan simply shows how shallow Western Governments’ thinking has been.  Invading Afghanistan and toppling the Taliban Government is totally understandable.  What is difficult to understand is why educated leaders would think they could “nation build”, and jump the Afghan society 50 to 100 years ahead?

It is now clear to NATO countries that Afghanistan will remain deeply tied to Poppies and the anti-modernity clans.  Future Afghan leaders will restore women to their “rightful” place covered totally in black garb.  NATO leaders also know that there are many places where terrorist can train, and threats to Western ways will be a constant threat.  Why waste more money and lives?

During the Bush years when the seeds to the current twin problems germinated, the Western world was an optimistic place.  Democracy was producing wealth, risk had been tamed, and US military might could subdue any resistance.  We now know that none of this is or was true.

Backing down from debt driven economies and reestablish fiscal sound ones will take time.  Learning to handle world problems without calling in the sherif will also take time.

In the eyes of these NATO leaders, I saw leaders who want to make positive change, but feel they do no have the luxury of time.  Their eyes are focused only on what can be done quickly and what will produce election winning results.

Unfortunately, that is what got us here in the first place.

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A Magnificent Sight

May 20, 2012

What sights make you stop and take notice?  Sunrises?  Sunsets?  Beautiful gardens?  Or, just fine works of art?

There is no right answer, of course.  And for most, there is not just one vision that brings your mind alive and focuses your attention.  Broadly, however, I bet for some the scene is restful or peaceful, and for others the scene will be pulse quickening and evocative.

Yesterday, there was a horse race.  Horse racing is a sport which time has almost passed by.  In the age where television has polished the edges and shaped the presentation of other sports, horse racing stands out as… what is the word… hmmm, how about “dull”.

In football, there is the long pass.  In baseball there is the giant home run.  Basketball brings the last second three pointer to win.  But what about horse racing?

TV tries to hype the owners or trainers as the hero/heroine.  Sometimes the producers settle on the human interest side of the jockey and play that theme.  But the problem with these presentations is first, that most of us cannot identify with owners, trainers, or jockeys, and second, they do not actually run the race.

On rare occasions, however, the hero shines through, the horse itself.

Yesterday at the Preakness, “I’ll Have Another” beat race favorite “Bodemeister” by a head.  The public had been told all week how great “Bodemeister” was and how lucky “I’ll Have Another” had been two weeks ago in winning The Kentucky Derby.

Yesterday showed something else.  It showed how good a horse “I’ll Have Another” was, and surprisingly, not how wrong experts had been about “Bodemeister”

“Bodemeister” ran a strong race, running away at the finish line from the other horses, save one.  In the stretch, “I’ll Have Another” came from third place and closed in on “Bodemeister” while “Bobemeister” was pulling away from everyone else.  “I’ll Have Another” caught “Bodemeister” at the finish line in a magnificent show of strength.

In terms of life, this was a magnificent picture of two great horses running their best.  Both were highly credible, but one was just better.

Between the two, no one lost.  “I’ll Have Another” just finished first and won.

The Peculiar Case of Roger Clemens

May 19, 2012

Federal District Court in Washington, DC is home to a peculiar criminal case.  The Federal Government is prosecuting former Major League pitcher Roger Clemens for lying to Congress.  What a hoot.  How is it possible to lie to Congress?

Apparently Congress, which cannot balance the budget or even agree on how to pay for what the Country has already borrowed, somehow finds the arena of baseball as more appropriate territory for Congressional debate and advice.  Federal prosecutors charge that Clemens lied to Congress by saying he had never taken steroids.

The facts of the case are almost irrelevant.  Clemens was a great pitcher who was successful years longer than most all other competitors.  Clemens is today a beefy man and certainly looks like he might have taken steroids.  But so what if he did?

The “so what” is really about the broken hearts of all sorts of kids who idolized Clemens in Boston, Toronto, and New York.  Clemens worked hard, threw hard, and fought hard on the mound.  In most respects, Clemens was a role model for hard work.   He was not a warm, fuzzy, likable type of player.  Clemens was in your face.

Steroid use is about Clemens and the memories baseball fans will keep.  If he took steroids and won games because of that, people will cast their own hall of fame vote.

The real travesty here is the government’s prosecution.  Congress where lying (saying something knowingly that is not true, but claiming truth because it cannot be proven false) is an art form, is the last organization who should be pointing a finger.

Like most situations you wished were not taking place, the roots sometimes get forgotten.  Steroids in baseball (or any professional sport) is not a matter for Congress.  If it were, simply passing legislation limiting use would be sufficient.  As in past laws, Congress would have also most likely included exceptions to any bill prohibiting steroids use.  Since steroidal medicines are widely used, the bill would need to be larger than medical text books to adequately carve out all the medical necessary uses.  As you can see, this is not an worthwhile area for Congressional “big spenders”.

It is hard to say what the jury will decide.  Should the jury convict Clemens, I would expect an appeal which focused on exactly what purpose of Congress’s did Clemens testimony hinder?  Congress has passed no steroid regulations which would impact baseball to date, and are highly unlikely to in the future.

This trial, however, might actually be a symbolic shot across the bow for any future person who testifies before Congress.  “Tell the truth or else”.  I bet that will have defense industry and banking executives quaking in their shoes.

Fighting For A Bigger Piece Of A Smaller Pie

May 18, 2012

There is no easy way to explain the Catholic Church’s consistent stand against public figures who support a woman’s right to choose.  The opposition is not limited to anti-abortion advocacy but deals with all aspects planned parenting, contraception, and STD prevention.  The Church’s policies, which they couch as long held theological beliefs, defy science and common sense.

The Church, after all is club, where one pays his dues and gets what’s offered.  The members don’t vote or decide on what will be the beliefs.  And so this is the way if often is in private organizations.

A perplexing situation develops when a church member is an elected or appointed official of the greater public community.  When that person does not toe the dogma line, there is a price to pay.

Secretary of Health and Human Services, Kathleen Sebelius is the latest target.  As head of the organization which crafted the Affordable Care Act, Sebelius has already earned the wrath of her parish’s bishop.  Today she will speak at Georgetown University in Washington, DC, but only after protests and demands to the University to withdraw its invitation.

The protests came from conservatives for example the Cardinal Newman Society and the Archdiocese of Washington and pointed to Sebelius’s role in legislation offering women birth control as part of their healthcare coverage.

These Catholics seem to fail to recognize that (1) Sebelius works for all Americans, (2) she is the mother of Georgetown graduates, and (3) silencing people you don’t agree with is a mark of fascist states, not place of higher learning.  Georgetown cannot continue being a great school if it only allows speakers who have “the approved” slant on life.

To the University’s credit, it refused to “disinvite” Secretary Sebelius.  Possibly the University considered the totality of Secretary Sebelius’s work.  The Affordable Care Act will bring healthcare coverage to millions of poor people and requires no one, catholic or non-catholic to use birth control.

Throwing Mud

May 17, 2012

The Democrats have begun a campaign aimed at painting Mitt Romney as a heartless capitalist who seeks money at the expense of ordinary people.  While the description is catchy, it is totally misleading.  In fact the words “heartless capitalist” are an oxymoron.

Bain Capital, which Romney ran at one time, is (and was) a successful venture capital company.  Bain collected money from investors and in turn used the money to gain control of companies who were in trouble.  Bain ran these companies until such time as they could find other buyers or if unsuccessful, they just shut them down.  In the process, Bain made a lot of money.

Before agreeing that Bain was heartless, one must realize that the target companies were already in a lot of trouble and on a path to bankruptcy and closure.  Unfortunately, no one told the employees that at the time.  Obviously the process caught employees by surprise and has left a very sour taste in their mouths.

But whose fault is that?

The blame should lie first with the former management and owners. It is these people who slept while Rome burned.  It is these people who did not make wise business decisions and allowed the company to grow less competitive.  It was also these people who signed generous contracts with workers and then did not know how to get out of them when they couldn’t afford them.  It was these people who never built the communications bridge to the workers so they could share with workers what was actually happening in the market place and what it was going to take to remain a viable business.

In most of the cases, the union must step forward and accept responsibility for having held firm and offered no concessions (or too little) when the former management team asked for help.  And lastly, the workers themselves had never treated their jobs as if someday they might disappear.  Why change?

Bain’s role was emotionless and very analytical.  Bain cut staff, replaced management, and developed business plans that looked like they could succeed.  Bain borrowed money in the name of the taken over company to invest in inventory or new equipment if the business plan called for it.  And all during this process, Bain extracted fees.

Bain’s big payoff came when it could find new buyers who thought they could make money with the “turned around” business.  If there were no buyers, Bain sold off pieces and made money (less but still money).

So what is a heartless capitalist?

Today in Greece, Greek citizens are viewing the European Union as heartless.  Following a long period of “poor management” where the Greek government accumulated huge debt while not telling the citizens that the social programs they were receiving were unsustainable.  The Greek Government chose not to raise or even enforce the tax code.  And yes, there were the unions who would not budge one inch when it was time to help keep part of their welfare state.

The only criticism Romney deserves is when he says his Bain experience has prepared him to be President.  Romney may be prepared to be President, but it surely is not his Bain experience that accounts for that.  Romney will have to be President for all Americans, not just stock holders.

Democrats may be right that Romney “just doesn’t get it”.  But it clearly is not his experience at Bain that would account for him “no getting it”.

The Bain Capitals of this world fill a need.  They clean up when the rest of us allow our work place to become uncompetitive and non-responsive to change.

Greece Keeps On Teaching

May 16, 2012

The Greek sovereign debt crisis just won’t go away.  Just when we thought that all the dirt has been swept under the rug, the Greeks hold an election and end up dead locked.  With their economy in a steep decline and their efforts to meet the European Union’s demands for fiscal austerity driving the public against the government, Greece is caught in never never land.  Spend and default, or do not spend and default.

The Greek situation is not new.  Greek citizens have for a long time not liked taxes, and have tried in every way to avoid them.  Citizens, however, do like government subsidies, and vote to increase them whenever possible.  Education, early retirement, and lots of public sector employment all together worked to make Greek life comfortable.

So with the outflow of government spending greatly exceeding the inflow of tax revenues, Greeks turned to borrowing to bridge the gap and make a path to a better tomorrow.  Tomorrow has come and there is no more debt to be found.  What next?

Before Greece adopted the Euro, the solution was straight forward.  Simply print more Drachmas and inflate the currency.  With the Euro, that option is off the table.

So what is this teaching moment?

The Greek issue on taxes is about personal greed coupled with a sense of fairness.

The wealthy view the government’s spending as wasteful and want instead to shield as much income as possible from the tax man.  The less wealthy know the wealthy are not paying their taxes and have decided they should not have to pay theirs if the rich do not pay.  Fairness and greed are a mighty combination.

Add to this that the Greek have had to use 100% spending reductions in order to receive EU bailout assistance.  This has taken a large amount of money (in the form of reduced government jobs, support for education, and other public services/works projects) out of the daily economy.

These Greek expenditures were probably unwise in the past and the question might be what’s wrong with stopping them now?

The answer is that the everyday economy is too weak to withstand the shock the loss this amount of money will make.  Without some other stimulus, the Greek economy will slide from recession to depression.

So, one more time, what is the teaching moment?

The US is heading down the same path.

Sure we have a much better compliance record with tax laws, but there is the perception that the Bush tax cuts have distorted the “fairness”.  With US income distribution separating into the very very wealthy and everyone else, lower taxes in the top brackets places the burden on the less wealthy.  This feels unfair.

On top of this, Government expenditures on Defense, healthcare (Medicare/Medicaid), and Social Security have been exceeding the tax revenues since 2002.  How was that possible?

Would you believe we have used sovereign debt?

Here is the teaching point.

If the US decides to use only government spending reductions as a route to finance its daily operations as has been done in Greece, our economy will crash.  Worse the feeling of “fairness” will disappear and the US fiscal mess will be seen only as either too much spending or too little taxes.  This could lead to class warfare-like tax code changes or draconian spending cuts.

We will totally miss the point that what government spends must be paid for by all citizens.  We will miss the point that what government spends money upon is as important as how much we spend.  And, most importantly, we will miss the spirit and power of shared sacrifice.

The Greeks are teaching whoever is listening that unless the tax code is fair, unless the government spends wisely, and unless everyone tightens their belts and shears the load in periods of economic slowness, tough times get worse.

Some may argue that US sovereign debt is still highly sort after.  US default is a long way off if it were to ever occur.  We have no immediate problem and we can just ignore the basics in front of us.

If so, Greece is teaching but we are not learning.

What’s The Point?

May 15, 2012

John Edwards’ campaign finance trial is difficult to understand.  It is not difficult, however, to recognize what a cad and hypocrite Edwards was.  It is simply difficult to understand what laws were violated.  Why John Edwards and not John Ensign?

Edwards gushed about helping the poor and fighting big money interests.  He postured himself as honest and god fearing.  The average person’s man.  He was destined to be the answer to the machine candidates.

Edwards had two big problems.  His wife was smart (maybe even smarter than him) and she had breast cancer.  As a populist candidate, Elizabeth was in the news almost as much as John.  People tended to like her and were very sympathetic to her illness.  So how could he have an affair while she was fighting breast cancer?

The unfortunate truth is, it does not matter.  There are no laws that prohibit sex between consenting adults.  There are also no laws that prohibit gifts from a willing donor to help prevent the affair (and the resulting child) from becoming public knowledge.  So why the trial?

According to the prosecution, the approximate $1 million gift from Bunny Melon was in fact a campaign donation and its purpose was really to advance Edwards’ campaign.  There are no indications that money ever was co-mingled with other campaign funds.  And a former FEC chairman testified that in his opinion the donation did not violate campaign finance laws.  Hmmm.  Was it or wasn’t it?

A few years ago, former Senator John Ensign had an affair with the wife of his chief of staff (what was he thinking?).  To keep this quiet, Ensign got his aide another job and Ensign’s parents gave about $100,000 to the aggrieved couple (to help them through a difficult time).  Ensign’s parents actions were found not to have violated the campaign financing law.  Hmmm.

John Edwards is no prince.  He will have to live with the memory that while his wife was slowly dying, he had time to conduct an affair.  He has been disgraced publicly and his political life is over.  This trial is a waste of money and in the end will only make people question the entire process of campaign financing and the lack of any meaningful regulations. 

A better outcome might be that In the future, when Edwards is seen in public, we will see the large “A” painted on his forehead.  Being an adulterer is not the issue, that was between him, his conscience, and his wife.  The big “A” will be about the hypocrisy surrounding Edwards’ constant self portrayal of himself as god’s best friend.  

Edwards does not need jail time, not do we tax payers need the cost of the trial and possible jail time.  We just need to see the “A”.