Legislative Philanthropy

In order to productively debate, one must understand the thought process, or mind set, of their counterpart. Without this understanding the debate simply devolves into name calling, which only appeals to the lowest common denominator of a constituency and easily identifies the name caller as being intellectually bankrupt. I have long tried to analyze my friends on “The Left” to understand what drives their thought process. My use of the term “friends” is not in any way facetious, as I do not correlate a person’s political philosophy with their character. Quite to the contrary, I have found that many of my friends on the left are drawn to their political view through legitimate altruistic care and concern for others. I merely feel that their care and concern develops into support for misguided policies fraught with unintended consequences.

I have come to this understanding by noticing that most political disagreements usually can be filtered down to a differing of opinion over a concept that I refer to as legislative philanthropy. This is a preference for government provision of assistance through the establishment of taxpayer funded government controlled programs. One’s view of the role of government is the fundamental point of this argument. Where I view the essential role of government as protecting The Constitution and the life, liberty and property of each and every individual, others believe the government’s charge goes beyond that mandate.

At some point in our history, it became accepted that philanthropy was a function of the government, rather than privately funded and operated foundations or entities. What some view as government controlled philanthropy, I view as theft and an abuse of power. Should philanthropy be conducted through private entities that operate under the law using elective private contributions? Should philanthropy be conducted through government entities using mandated taxes for funding and be overseen by politicians who are subsequently subject to the electorate? This raises what are fundamentally the same concerns on both sides of the argument

Although private philanthropy is more effective, efficient and directly accountable to its funding, many fear that distribution of benefits will result in some type of reversion to indentured servitude. In the case of religious organizations, many fear that those receiving benefits will be unduly influenced by the religious philosophy of that body. The fear is that philanthropy is not purely altruistic, or fair, and that there is too great of a potential to exert influence through the provision of charity.

Critics of government philanthropy will state that its bureaucracies are inherently wasteful and inefficient. The fear is that it also has the potential to create obligation or indentured servitude to the political ideology of the benefactor. Many take the position that legislative philanthropy has created our current “Nanny State” that has extended this paternal control and dependence over multiple generations. Even more dangerous is that this ideology has also created a mutually dependent relationship that has changed philanthropy to entitlement, and has by definition changed our governmental and economic systems.

The arguments are very similar. Understanding the basis of each position is fundamental to meaningful debate..

Bill Maher: Making Collectivism Cool

For quite a while I have been bothered bothered by the hypocrisy of Bill Maher. He claims to be a libertarian, yet more recently supports collectivist solutions to societal problems. He seems to be libertarian in social matters, but considerably liberal in economic and fiscal matters. Sure, he is at times humorous, and graduated from Cornell with an English degree. As such, I am sure that as I question the weak foundations upon which he builds many of his economic positions, he could spend a great deal of time correcting my inappropriate use of grammar. Never one to stifle individual expression, I have heard many of his positions and wished that I had the opportunity to systematically call into question the philosophical concepts that drive his opinions. What is lost in his superficially witty repartee is that rarely is there any substance or factual support for his claims.

In a recent interview with Jay Leno, Bill Maher made several comments that displayed common hypocrisies among today's collectivists. Here are a few of the comments and their hypocrisy.

Despite making his living moderating a forum for opposing views, Maher was confused by the fact that while both Michael Moore and Rush Limbaugh were guests on the show, both received roughly the same applause. With both representing different parts of the political spectrum, it should not be shocking to Maher considering President Obama won the election with 52% of the popular vote. Collectivists do not understand why anyone would or should oppose their views.

Maher said, "If you voted for a guy who wouldn't give you health care as opposed to one who would, you should have your head examined." It is the collectivists view that government gives. Government can only give you that which it forcibly takes from someone else. This is why so many of our politicians have such a pitiful record of charitable giving. Many, especially collectivists, view government taxation to be charitable giving as it is the government's responsibility to forcibly redistribute wealth in the name of fairness. This concept is the driving force behind the ever expanding call for government spending.

Maher at one point said that the Democrats should brand their solution to the health care coverage problem as "Medicare for all". Please Mr. Maher, continue. This is exactly why I have always told my students that opposition speech should never be stifled. Just like President Obama stated that the government "option" is a great idea by making an analogy to the nearly bankrupt USPS lagging behind FedEx and UPS, Mr. Maher's position is to tell everyone that they will be steered toward something akin to a currently failing government run single payer option. With philosophical enemies like you, who needs allies. (For a rational solution view my blog Joint Underwriter's Association: The Simple Answer 07/19/09)

Maher then went on the tangent of demonizing those who oppose the estate tax by saying, "This is a tax on rich dead people. These are the perfect people to tax. One, they don't have any need for money on account of that whole being dead thing." Again superficially witty, but devoid of reason. Yes, the collectivist does not believe that one has the right to private property in life. The government may allow them to keep it for a while, but we must punish those who do not spend what they accrue with the intent of bettering their own families' lot in life. It is a means of insuring multi-generational control.

Yet Maher's continued popularity is due to what I refer to as our "Style over Substance" culture. Our culture accepts the words of Hollywood celebrities over that of learned economists. After all, economists are boring as they cite history and the cause/effect of economic principles. Our teachers are being told to be more entertaining, rather than challenging in the classroom. It seems that fewer people take the time to read, research or even question the consistency of adhering to the very concepts of individual freedoms and the corresponding responsibilities that come with these freedoms. In a culture where responsibility is avoided, it is easy, popular and even cool to espouse that it is somehow a government responsibility to take a paternal role in controlling more aspects of citizens' lives. Yet, Bill Maher and Michael Moore have successfully provided services to this market and accumulated great wealth. I don't disparage this. However their hypocrisy shows when they disparage those who have invested time, effort, research and money into education and professional development for profiting from the important services that they provide.

Repackaging Socialism

In business, if your marketing is compelling enough, you will successfully sell even the most useless product. If this were not true, infomercials and the likes of the also recently deceased Billy Mays would not be so prevalent in our society. Style over substance seems to have become the American way. All indications from the last twenty four hours seem to infer that the left is once again going to change their marketing strategy as it relates to their plans for Universal Health Care, I mean Health Care Reform, I mean Health Insurance Reform with an essential "Public" Option, I mean not essential "Public" Option. No, wait it is essential again.

The left has tried to rename and repackage this plan numerous times to make it sound palatable to he American people, but have not substantively changed a single thing about the plan. That is because it is a plan in name only. That is because as with every other government plan, there is no clear estimate as to its cost and no documented source for funding other than you the taxpayer. Now realizing that the President's charm and eloquence are not enough to overcome the plan's lack of substance, and that the shrill nature of Speaker Pelosi and Rep. Frank are not enough to scare away critics, the face of the plan is once again being repackaged. With the death of Sen. Kennedy, the left is attempting to use emotion to overcome rational thought and garner support for their still ideologically and fiscally flawed plan.

I actually agree with Sen. Dodd when he said he hopes Sen. Kennedy's passing will, "cause people to take a breath, step back, and start talking with each other again in -- in more civil tones about what needs to be done, because that's what Teddy would do." That is exactly what many of us opposed to the very premise of the left's plan have been trying to do. Direct and open civil discussion would expose the plan for what it is, a gross expansion of government that serves no purpose other than bringing the majority of the Gross Domestic Product under the control of the federal government. Real solutions that successfully address identical issues in other segments of the insurance industry are ignored for purposes of political power. The anger is a result of the surreptitious manner in which the plan has been moved forward. Average people with an increasingly limited political voice are reduced to anger and frustration at an aristocratic political class that seems intent on holding dominion over the population.

It is truly a shame that someone's death is trivialized in such an infomercial style repackaging of the same plan.

The Deceptive Barney Frank

Barney Frank showed himself to be the consummate politician in his town hall meeting yesterday. His strategy was perfect. First agitate the already charged crowd. Further inflame the audience with insults (the last weapon of the intellectually bankrupt) and sensationalize the event. When emotions take over, you are able to be untruthful while supposedly providing reference material. Finally leave without ever addressing the issue, with the appearance of being forthright.

Case in point, Mr. Frank quoted Title II Subtitle C Sec. 246 of the monstrous HR3200 Bill that simply states that "No federal payments will be made for undocumented aliens medical treatment". What the inflamed audience missed is:
1. "undocumented" is not defined
2. Illegal aliens will still be treated.
3. Someone will have to pay, just not the Government Plan.
4. The hospitals are not just going to take it on the chin.
4. Rates paid by the Government Option for services are fixed by the Government. (Title II Subtitle B Sec. 223)
5. This leaves those who wish to pay for quality health care with private coverage with the burden of carrying the increased costs for those who still don't pay.

In summary, if you wish to pay for quality private insurance, you will still pay for those on the Government Option through your tax dollars. You will still pay for the services provided to illegals and you will still have to pay for your increased premiums for private insurance.

This is much like the government school system. If you send your child to private school, you still pay for the services rendered to all children who attend government schools (both legitimately and illegitimately)through your tax dollars. You then have to pay the tuition for the quality education you desire for your child. The only difference is many have the ability to educate their own children, but few have the education and training that reaches the level of a licensed physician.

For those attending town hall meetings, please bring a written question with references. In fact bring many with references and distribute them to others. In this was someone will be able to ask the real questions. They will not want to answer them. Ask a direct question and ask for a direct answer.

Getting Down to Brass Tacks

The health care reform debate seems to be finally getting down to the two issues that people are most concerned about. The argument over whether premiums are affordable and whether those who are high risk or have preexisting conditions are insurable, are the two major concerns of most Americans.

As I wrote in a previous blog, these very concerns are being addressed in auto insurance and medical malpractice insurance through the use of Joint Underwriters Associations (a.k.a. reinsurance pools). there is no practical reason why such a proven successful model should not be duplicated for health insurance. The question remains, what would be the motivation of politicians who wish to create another large governmental entity when a proven solution that does not require massive infrastructure is right in front of their eyes?

To believe the current administration, the solution is government involvement. The President himself has used the metaphor of UPS/FedEx/United States Postal service and an analogy of the "Public Option" to Medicare and the Veteran's Administration. I cheered the usage of these comparisons, as it almost seemed that the administration wanted to reverse its course. The President admitted that it is the USPS that is struggling more so than UPS or FedEx. This is because a government run agency simply can not be as nimble, or contain costs as easily as UPS and FedEx. Postal rates have consistently risen while services are in effect being rationed through a reduction service. However, poignant the metaphor, I am sure he did not intend to relay the truth as he did. Medicare and the VA have been praised as successful government programs (remember "public" is less threatening synonym for government). However, they are a prime example of cost over runs. The VA despite the dedication of many professionals, simply can't avoid the bureaucracy that comes with anything government run.

The final piece to the puzzle would be an elimination of the employer sponsorship of health care plans. With the issues of high risk/preexisting conditions resolved through JUAs or reinsurance pools, there is no reason that health insurance can not be purchased in the same fashion as every other type of insurance. The question as to why liberals cling to governmental ownership also raises the question as to why conservatives are not quick to get rid of employer sponsorship. Competition, as with the auto insurance industry, is what controls costs and improves service. The answer is right in front of you.

Politicians just have a knack for making the easy appear difficult, rather than making the difficult appear easy.

Cash For Clunkers: Enabling Debt Addicts Nationwide

Before I begin my rant, let me remind you that many politicians of both parties originally thought that this was a good idea. That is what we get for electing lawyers with no background in fundamental economics.

Here is a scenario:
You notice that an acquaintance is obviously shaking. He/she tells you that they are experiencing withdrawal symptoms. They admit to you that the are an alcoholic and that they have just begun the Alcoholics Anonymous program. They have admitted the problem and have taken steps to correct the problem.

Do you
1) Congratulate them and offer to help in a productive way.
or,
2) Pull out your flask (because you too are an addict) and offer them a drink to calm their nerves.

The answer seems simple, but our government has chosen option #2 with the Cash For Clunkers program.

Economists agree that systemic deficit spending, and the subsequent compounding debt, is a major cause of our current economic woes. My issue with the highly publicized program is not its obviously underestimated appeal and underfunding, but I oppose the very premise of the program. As a nation and as a population, we have been a people that have been addicted to debt for several decades. That is why our national debt and annual deficits have grown. It is also why, according to the Bureau of Economic Analysis (BEA), the savings rate of U.S. households has been below 4% since 1994 and went into negative territory in 2005. In 2009, the BEA reported that the U.S. savings rate had risen, but was still far below the 1950 - 1992 average of 8.6% of disposable income. This was a sign that U.S. households had admitted the problem and began to take corrective steps. Then the U.S. Congress passes a Cash for Clunkers plan that offers the recovering addict another drink. Sure, take on more debt. You need a new car. Not because the Congress wants more fuel efficient cars on the road, but because Congress needs the tax revenue generated from your purchase to feed their own spending addiction. Don't worry, we'll subsidize your purchase with money from some fiscally responsible tax payer. How silly of us not to spend every dollar we have (and then some). Keep the party rolling someone else will pay the bills. Right??? What happens when the band stops playing? Who will pay? You again? Remember this when you vote.

The Ever Expanding Role Of The Oval Office

When an issue arises from a police officer's actions or in-actions, it is not unusual for the department's Command Staff or local political figures to make the mistake of publicly denouncing an officer's actions without any substantive knowledge of the incident. It is well known among all in the profession that anyone above the rank of Captain has become more of a political figure than a law enforcement officer. You see, publicly sacrificing an officer is easier than reserving comment for a time when you are informed on the matter. You can always backtrack later with a short statement that makes the public forget the matter, but leaves the officer's career irreparably damaged. If you later find that the officer has violated legal authority, you have already taken swift action against them. It is a win/win situation for the political body. Any officer is replaceable, as long as the political seas are steady. However, it is unusual for the President of the United States to use his office to engage in such practice relative to a local officer.

The President did a grave disservice to every law enforcement officer by making a determination before having substantive knowledge of the incident. First, he once again interjected the federal government into a local jurisdiction's issue. Second, although he would deny doing so, he made a determination as to what happened without knowledge of the incident by stating the police "acted stupidly". He later tried to change history by excusing the comment by saying he "could have calibrated his words differently" and that his friend may have "also overreacted". Words only need to be calibrated differently when they disclose one's true predispositions and biases.

Perhaps even more distressing is the President's invitation for the officer to meet privately with him and his friend for a beer. In Presidential politics, such invitations are usually reserved for the coercion of party members with dissenting positions from the administration. Make no mistake about it, the officer will undoubtedly receive pressure from the local politicos to subject himself to this meeting. Rather than allowing the President to again supersede the role of his own office, my suggestion would be for the officer to agree only to a public meeting. Whatever is wished to be said individually can be said publicly. After all, the officer is the only one to have already been publicly tried. Why would such a meeting now have to be private?

Every officer knows that, with the exception of family and their beat partners, there are very few people who have a legitimate concern for their well being. The oath to protect and serve the law (yes the law) is often a dangerous one that is undertaken willingly. There will always be those with a bias against law enforcement, and admittedly a much smaller number, with a bias in favor of law enforcement. In the case of President Obama's actions and words, I will simply apply the legal term res ipsa loquitur which means "it speaks for itself".

Obama's Speech To African Leaders Was Ironically Right On Target

In a decidedly "Do as I say, not as I do" speech, President Obama delivered a speech to the political leaders of African countries that said what needed to be said. However, it is unfortunate that the President seemingly does not have the ability of introspection. The President domestically proposes and supports programs and policies that are quite similar to the very political norms that he criticizes and identifies as primary reasons for the lack of advancement of the African continent.

Below are some of the quotes from his speech and the hypocrisy that I find in our President making these comments in false piety.

"We must start from the simple premise that Africa's future is up to Africans"
"It is easy to point fingers and to pin the blame for these problems on others"
"But the West is not responsible for the destruction of the Zimbabwean economy over the last decade, or wars in which children are enlisted as combatants."

He calls for accountability and the taking of personal responsibility. Yet, he supports and intends to expand our countries entitlement programs and fund community organizations. For decades these programs have done very little, but ensure dependence by reinforcing that being poor is a societal ill and has nothing to do with past, present and future poor individual decision making.

"No country is going to create wealth if its leaders exploit the economy to enrich themselves"

Let me think for a second, Obama was a recipient of a below market "Friends of Angelo" Countrywide loan among a veritable laundry list of other politicians and government officials.

"No business wants to invest in a place where the government skims 20% off the top"

Yet with the highest marginal corporate income tax rates among industrialized countries (except for Japan) and the Waxman/Markey bill poised to further plunder of domestic profits, we have been chasing industry from domestic production.

The White House described the President's speech as necessary tough love spoken from a position caring. He spoke of what African countries could do to help themselves and show due diligence and good faith that might facilitate foreign aid. I believe that this speech was necessary. However, the audience for the speech could just as well been the President himself, all three branches of government and the American people.

Dependence Day: The Looming New Holiday

How ironic is it that as we prepare to celebrate Independence Day, our elected officials took perhaps the most substantial step towards relegating their constituents to a lives of government dependence. While the founding fathers risked life and limb to insure that they and their families would be insured of their life, liberty and property, American citizens today are apparently willing to give it all back for a cradle to grave life of mediocrity provided by government. My local newspaper covered the House of Representatives vote on the Waxman-Markey bill ON PAGE 4!!! Of course page 1 was filled with coverage of the passing of Michael Jackson and the indiscretions of Gov. Sanford. Undoubtedly newsworthy, but are these events as important as the most recent and largest step toward socialism to date?

Now I consider myself to be a rational conservationist. This bill seems to be nothing more than a modern day version of the Catholic church's selling of indulgences that led to the Protestant revolution. My impression of this bill seems to be justified by the evaluations of this bill by both the EPA and Greenpeace, which were lukewarm at best. Regardless of which side of the climate debate you are on, with the exception of Congress, most people understand that this bill does little to nothing to address the stated goal while effectively chasing production from this country.

There is a general lack of courage among our politicians, as evident by the roll call of the House vote. Those congressmen who abstained from voting on such an important bill did so in order to retain their seat rather than take a stand. The courage of our forefathers is lost on today's politician. Perhaps because the concept of a career politician is a rather recent concept. It is no longer public service, but admission into the aristocracy with Hollywood celebrities and professional athletes.

While you are enjoying your July 4th Independence Day next week, take a moment to contemplate just how many more you will be able to truly celebrate. In fact, take a moment to contemplate just how much you value independence and liberty. If this bill becomes law, it may be the date we will recognize in the future as Dependence Day.

Joint Underwriters Associations: The Simple Answer

I have long been frustrated in listening to the debates regarding a solution to the supposed dilemma regarding health care coverage. Have you ever wondered why other forms of insurance share the same risk exposure to the providers (i.e. flood, automobile, home, medical malpractice, etc.), yet health care coverage is the only form of insurance that has this supposed issue with availability? The difference is that these other forms of insurance are made available despite the risk exposure through Joint Underwriters Associations (JUAs). This is a market based solution that is already being successfully applied in other coverage areas, yet no one (no even those who claim to be in favor of market based solutions) are pushing this issue. I will use automobile insurance as an analogy to make this easily understandable to the average reader.

Let us assume that due to your extraordinary bad driving history, you find it impossible to obtain auto insurance in the regular market. In effect, you are not insurable, or the premium cost to get a policy is not affordable. Rather than have you uninsured, your State Insurance Commissioner has probably created a JUA. This is a collective group of all the insurers who do business in your state. Membership in this group is required if the company is to write policies in your state. You, as a driver who was unable to get insurance, now purchase a policy through the JUA group. Let's say that Insurance Company A has written 25% of all the regular auto policies in your state and Insurance Company B has written 10 % of the policies. Insurance Company A received 25% of the premiums from JUA policy holders and is responsible for 25% of the groups claims. The same is true in proportion for each insurance company in the group. This shared exposure to the unwanted higher risk policies is a cost of doing business, or a type of membership dues for access to the market.

What does this do?
1)It allows the bad risk drivers to obtain insurance at a slightly higher, but attainable, premium rate.
2)It decreases the number of drivers who would otherwise drive up costs for all drivers by choosing to be uninsured.
3)It disperses the risk among the insurance companies in proportion to the amount of business they derive from that state.

Remember, this is ALREADY BEING DONE with other equally risk sensitive policies by the same companies who provide health insurance policies. If this system is adequate to cover the PHYSICIANS' MALPRACTICE POLICIES in this day and age, don't you think it is more than adequate to apply to health care coverage? It does not even have to be administered by the state. A proper self policing association could handle the task (think of how the American Medical Association regulates physicians). Heck, do you think the insurance companies would allow a competitor to cheat this system without blowing the whistle?

But yet we need another trillion dollar expenditure and a soon to be televised town hall pep rally to tell you how "complex" the problem is. Our politicians seem to have a knack for making the easy appear difficult. Will someone in the media, or perhaps at the televised event, PLEASE ask this question?

16 Tons And What Do You Get

Everyone from coal country (like my people up the line in NEPA, heyna? Sorry, it's an inside reference.) are familiar with the lyrics of the Tennessee Ernie Ford song that tells of the indentured servitude created and solidified by the concept of the company store. What most people do not recognize is that our government is in the process of creating a federalized version of the company store today. It is unfortunate that many are too naive, or apathetic, to stand up and acknowledge what is happening.

For those who are not familiar with the concept of a company store, I will provide a brief history. Through the early part of the 1900's, coal companies utilized a company store to provide a one stop shop that sold all the goods and services that a miner would need. Of course, this created a monopolization of the miners' entire lives by regulating their income and recapturing all expenditures. Need tools to do your work? You must buy it at the company store at their price. Want to by a house? Borrow from the company store at their rates. Want your children to be educated? The company runs a school. The examples could go on indefinitely. The shortsighted take on this was that the company was simply trying to make the most profit possible. The more accurate and insidious reason was to gain total control over the miners and insure future generations of trained labor. If the miner's were able to save, and/or become educated in something other than mining and (gasp!) improve their standard of living, they may leave mining. The intent of the company was to create a sort of Stockholm Syndrome in the miners to avoid the troublesome task of maintaining a trained workforce.

This is near fruition in our country today. Want to buy a house? The federal government has controlling interest in the major mortgage lenders and banks. Looking for a car? The federal government is the controlling interest of GM. You don't think they will structure tax credits, manufacturing restrictions and trade subsidies to disrupt competition, do you? Want your children to get a private education? That is fine. You just have to pay for the government school education first, even though your child does not utilize their service. Are you in need of medical care? Soon the government will tell you when, how and what care you will be able to receive at their prices. Of course the promise is that most of this will be "free". Yes, for the mere cost of the your freedom (and that of your future generations)the government will take all that pesky personal responsibility off of your shoulders. As the song goes, you will "owe your soul to the company store".

I am not given to conspiracy theories, as more often than not, they lessen your credibility. I refrain from even assuming that the intentions of socialist are evil. They simply have the arrogance to believe that the political aristocratic class has the responsibility of holding dominion over the masses for their own good. We already know that this socialization is all about gaining and maintaining political power. I sincerely hope that we do not find ourselves confronted by a new version of the Pinkerton Guards. They were members of a private security firm who's actions exceeded any Constitutional authority to enforce the interests of the government and coal companies. President Obama has called for a "civil defense force as well funded as the military". Why would this be of need? We already have local, state and federal law enforcement agencies who are sworn to protect and serve the law, and hence are accountable to it. Much like the coal company used the Pinkerton Guards to put down dissenting miners, it is possible to arrive at a time and place where the government uses similar tactics to maintain the political aristocracy.

What Then Is The Reason For The "Stimulus" Package?

What Then Is The Reason For The "Stimulus" Package?
By: R.J. Fee

Ben Bernanke and other economists have recently been noting the slowing of unemployment, nominal increases in consumer spending and low levels of inventories. These are all leading indicators that this recession is at, or near, its bottom. They also indicate that this recession is, as they have repeatedly stated, a normal cyclical market fluctuation that was made more drastic by the irresponsible activity of several industries enabled by the failure of government regulatory bodies to perform their legal duties.

This enormous taxpayer funded “stimulus” package was supposedly concocted to bring us out of recession. Increased savings rates and the leading economic indicators say that we are naturally taking action that will bring sanity back to the markets. The enormous spending plan has not yet been put into action. Most reputable economists predict that such a large increase in government control and spending will inevitably lead to large scale inflation. This raises very poignant questions. If the stated reason for the stimulus package does not appear necessary and the unintended consequences of rewarding the irresponsible entities with taxpayer money are quite dire, why then would our elected leaders happily continue with such an unnecessary and ill conceived plan? Could it be that the stimulus was never intended to be a stimulus? Could it be that many politicians from both major parties are the scoundrels we originally thought they were? Could assumption of power and influence be the driving force? The American people (you and me) are going to have to be the one’s who apply the brakes. This must be done through the power of the vote.

A Scale Everyone Can Understand

A Scale Everyone Can Understand
By R.J. Fee

I know that the average person is confused by the billion and trillion dollar figures thrown out by our politicians. That is why I have compiled the same ratios to give you an idea of what the United States would look like if it were an American household.

If the U.S.A were a household
Annual Income: $55,000 (2007 U.S. Census report median income approx. $50k)
Annual Spending: $65,560
Total Debt: $220,000
Total Worth: $314,600 (includes median home value of approximately $200,000)

Questions
1. Just how long could your household continue to spend $65,560 while earning $55,000?
2. How long could your household continue to build upon a total debt of $220,000 without facing foreclosure/repossession?
3. Would you lend money to someone with this financial record?

As I detailed in a previous blog, it doesn’t surprise me that individuals have not played by the proverbial rules, because we as a nation have refused to play by the rules of finance for decades.

I arrived at the aforementioned numbers by comparing the following approximate numbers as reported in various government reports:
2008 U.S. revenues $2.5 Trillion
2008 U.S. spending $2.98 Trillion
2008 U.S. Debt $10 Trillion
2008 U.S. Gross Domestic Product $14.3 Trillion

“We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.” Thomas Jefferson 1802

Wait. I Thought Bankruptcy Was Not An Option...

Wait. I Thought Bankruptcy Was Not An Option…
By R.J. Fee

During his recent campaign for his party's presidential nomination, Mitt Romney stated that the best option for the failing car companies was a controlled bankruptcy. This notion was of course scoffed at by those who felt loaning billions of taxpayer money to failing companies with deeply flawed business models would fix the problem. Of course, these companies had no viable way of altering their business model in any appreciable way (without bankruptcy that is), thus insuring that the taxpayer money would be a very short lived benefit to the companies. Today, we find out that after wasting $1.5 billion in taxpayers’ loans, Chrysler is declaring Chapter 11 bankruptcy. Now those who claimed that the $1.5 billion loan was necessary, because “bankruptcy is not an option” are now trying to spin the story again. As if you would just forget that the same could have been done $1.5 billion ago.

Here is the bottom line. No person, company, municipality, state or nation is too big to fail. We must get past those who try to claim that a situation is different because of some nuances that create a unique situation. The ancient Greeks promoted the concept of the macrocosm and microcosm (seeing the same patterns reproduced in all levels of the world around them from the largest scale all the way down to the smallest scale). The world is not difficult to comprehend when you approach it from this angle. When our politicians use complicated and technical terms in an attempt to confuse and deceive the public, simply break it down to a scale that matches your experience. Whether it is loaning money to irresponsible companies, homeowners, cites, or states the concept does not change. They are throwing your good money after bad.

Use the method of the macrocosm and microcosm to cut through the continuous onslaught of garbage spewed by our politicians in an attempt at deception.

Those Facing Foreclosure DID NOT "play by the rules"

Those Facing Foreclosure DID NOT “play by the rules”
By R.J. Fee

I have grown increasingly tired of hearing how taxpayer dollars need to be distributed to those who are in danger of foreclosure despite having “played by the rules”. This is an entirely contradictory statement. Allow me to explain by clearly stating what the historically accepted rules are, and why if one had indeed “played by the rules” they would not be in danger of foreclosure. .

Let me ask the following questions of those who are in danger of foreclosure.
1) Did you purchase the property with at least a 20% down payment?
2) Was the total of the mortgage payment’s Principal, Interest, Taxes and Insurance less than 28% of your gross income?
3) Was the total of all of your debt (including the mortgage) less than 36% of your gross Income?
4) After your home purchase, did you maintain the equivalent of 3 – 6 months of expenses in some form of liquid account for emergency purposes?

If the answer to any of the above questions is no, then you have not played by the most basic rules of the financially responsible. If you were never aware of these generally accepted rules, then you have not “played by the rules”, because playing by the rules means that you understood the rules before investing.

Another important point is that we must accept the fact that purchasing property (even as a primary residence) is by its very nature an investment. By purchasing a property, you have invested in the real estate market. Markets experience both gains and losses. Otherwise it would not be a market. Using leverage (i.e. a mortgage) to purchase property is no different than buying anything else with borrowed money. Shares of stock, vehicles and an endless list of other things are routinely purchased on borrowed funds. The property purchased is security against the loan and the interest rate on the loan should reflect your risk as a borrower. The buyer enters the transaction stating that they fully understand the commitment they are making.

Why do we make exceptions to contract LAW when related to the purchase of a home? Emotions make us all want to help those in trouble. I don’t have a problem with this. I have provided what I can for me and my family, and lives within my means in the process. I have a problem with a government that seizes money from my family to subsidize those who have been irresponsible so that they can continue to live beyond their means. Often those I am subsidizing have a higher standard of living that I will now be subsidizing. But then again they “played by the rules”. I must ask the question: What rules did they play by?

Requiring financially responsible individuals to subsidize the irresponsible, with no chance of return, is inherently wrong.

Government Can Not “Create” Jobs

By R.J. Fee
April 22, 2009

Once again, our illustrious political leaders have demonstrated their ignorance of basic economics by perpetuating this fallacy that a government program can “create” a job. A job exists when a demand for a certain good or service is met by the willing laborer that provides that good or service. This demand and supply occur naturally in society and they are in a constant state of flux due to a variety of influencing factors. A government program can only change that which is already in existence in the private sector and make the market for that good or service much more inefficient due to the many layers of bureaucratic administrative costs.

In order to accept the notion that the government can appropriate tax dollars to “create” jobs, one would have to accept that a market for this good or service does not currently exist and therefore must be artificially created. This would also mean that in order for these jobs to continue, a continuous subsidy of tax dollars must be appropriated for this artificial supply and demand to continue to exist. Hence we arrive at the true reason for this plan of government job creation. The true reason for these programs is to increase the leverage government has over the work force and increase the populous’ overall dependence on government

Is a certain level of industry regulation necessary? Absolutely, from a pure law enforcement standpoint, anarchy would occur without a certain amount of regulation. Are there instances when industry self regulation is not sufficient to provide this regulation? Most assuredly, this is also the case. However, the concept of regulation is just that. The regulating body, be it an industry self regulating body (i.e. The American Medical Association) or a government agency (i.e. the National Highway Traffic Safety Administration), is not in existence to create a market. Doing so would distract the organization from its true job of regulation, which we have found to be the case with organizations such as the Securities and Exchange Commission, as well as Congress and the last several Presidential Administrations.

The only thing more ridiculous than buying into the notion that the government can “create” jobs is the notion that the government is going to spend your money to “save” jobs. As mentioned in a previous blog, it is a brilliant marketing strategy to waste taxpayer money. You will achieve nothing, but yet claim that you have saved jobs knowing that something that never occurs can neither be proven nor disproven.

At its core, the purpose of law and government is to protect the life, liberty and property of each and every individual. Anything more or less than that is a perversion of power.

Tee Ball Economics

Tee Ball Economics
March 2, 2009
By: R.J. Fee

President Richard Nixon was famous for what was referred to as Ping Pong Diplomacy. As always, I find analogous events in everyday life that tend to create a more clear understanding of what appear to be more complex issues. I recently found just such an analogy to explain the current economic path this country is taking.

While watching a young family member’s t-ball game, I noticed that the activity and learning process set forth for these children was a near perfect metaphor for their later life experiences. Out of the approximately twenty total kids on the field (everyone gets to play, whether they want to or not), the breakdown was as follows:

2 – 3 kids actually had some understanding of, and were constructively playing the game (AKA Group A).

Approximately 10 kids had no idea of what was occurring. It was obvious that some had no desire to participate, as they were digging in the field with sticks. Some kids were simply enjoying the bright sunny day. (AKA Group B)

7 – 8 kids sort of knew they were competing, but were not taking much initiative. Their performance and effort were a constant to ebb and flow between the two previously mentioned groups. (AKA Group C)

Now, I am not a proponent of Spartan training techniques with young children. Up to a certain age, you just have to let them have fun. However, two strange events struck a cord with me both during the game and after.

Event #1 - During the game a pop fly was hit to one of the Group A kids. He caught the fly ball and quickly tagged the base runner who was attempting to advance to the next base. The young man who completed the double play became confused when the base runner was allowed to advance to the next base. After all, the young boy did not know the rules and shouldn’t be told that he was out. Every batter was allowed to round the bases and “score”, although no score was being kept. Ironically, the Group A kids quickly became aware of this and were noticeably less motivated. They migrated closer to Group C. Several of Group C began to migrate toward Group B. Group B kids were still content to dig and aimlessly run around the bases. The end result was that none of the kids learned anything about the game, but learned a valuable life lesson. Ignorance of the rules apparently is an excuse and one does not need to learn from their mistakes.

Event #2 – Immediately upon the conclusion of the game (which was somewhat difficult to determine, as there was no structure to be seen), the kids all lined up for ice cream. The Group B kids suddenly sprang to life and flooded to the cooler, like concert goers rushing the stage. The Group A kids noticeably collected their gloves and bats, before venturing over for their ice cream. I then heard one of the Group B kids displeased that there were no vanilla ice cream cones left. Another life lesson was learned. Effort and doing things the right way must be its own reward. Those that refuse to participate will still get their share and most likely before you receive yours.

I found this whole scene somewhat humorous, much like someone attempting to herd cats. That is until reality slapped me in the face. This is not simply a cute juvenile scene. This behavior has apparently transcended adolescence, law school and found its way to all three branches of the federal government. Here we go folks. Get ready for Tee Ball Economics. To which group do you belong?

Marketing Genius II - Transparency and Clarity?

Marketing Genius II – Transparency and Clarity?
By: R.J. Fee
February 27, 2009

Here are two examples of President Obama’s marketing genius and how to cut through the sales pitch to reach the substance for those unwilling to delve further.

The President says his American Recovery and Reinvestment Act will “save or create 3.5 million jobs”.

This is pure marketing genius. It is impossible to prove (or disprove) a negative. Allow me to demonstrate. If each person in the United States would only send me $100, I will go out into the street and perform an ancient Aztec ceremony that will avert an intergalactic calamity that an ancient scroll forecasts to occur this year. If I was to receive a trillion dollars and no intergalactic event occurred, I could proclaim that I saved mankind. Now since the event did not occur, no one could either prove nor disprove that my actions averted the end of mankind. In this way, President Obama has positioned himself to declare his plan a success without “creating” a single job. In a later blog we will get into the fact that government can not actually “create” jobs unless they are taking money and jobs from the private sector where the jobs already exist.

The President says his plan to save people from foreclosure will focus on “those who have played by the rules”.

This is intended to make you feel good about paying for someone else’s mortgage. My question is: Whose rules are they playing by? The common sense rules for personal finance say:
1) Save until you have at least 3 – 6 months worth of expenses in a cash account for UNEXPECTED EVENTS.
2) Don’t carry debt with the exception of your home mortgage, student loan or a SMALL PORTION of a vehicle purchase
3) If you don’t have substantial equity in a purchase of a home or car, YOU CAN’T AFFORD THAT PURCHASE.
4) Don’t carry credit card debt. Know the difference between needs and wants. If you want more, then work more.

By the way, if you have played by the rules, then you are out of luck under the President’s plan. Those whose have not played by the above rules will be eligible for subsidized refinancing at rates that your tax dollars will allow to be artificially lower than rates in the free market. Although you are paying for it, you will not be eligible to lower your rate.

Some will say that it is necessary to bail these people out, because if we do not then the entire economy will suffer. I say rewarding those who have made poor decisions with additional resources will only lead to even worse decisions in the future that will cause even greater problems. This is true whether we are talking about individuals, companies or our own government. Chrysler is a perfect example of this. They were the first car company to need a bailout. After government loans floated them for approximately 25 years, they are back with the same problem. Only this time they brought their cousins, GM and Ford. The bailout didn’t change Chrysler’s behavior the first time. Why should we believe it will work this time? It won’t. It will only delay the crisis for another generation.

The Man is a Marketing Genius

The Man is a Marketing Genius
By: R.J. Fee
February 25, 2009

Anyone can raise the price of a good or service from $100 to $200. Only a true marketing genius can then advertise a 20% sale and make the consumer feel as though they are getting a deal. You may think that you would see right through such a ploy. Yet this is almost exactly what President Obama was able to accomplish with a great portion of the American public on Tuesday night in his speech to the U.S. Congress. On the heels of the single largest expansion of government spending, He admonished the very people with whom he authorized this plundering of the U.S. taxpayer by saying that he intends to root out wasteful spending. If we are to take a look at the American Recovery and Reinvestment Act, we can easily find billions in wasteful spending of the taxpayers’ money. President Obama admits that decades of government’s wasteful spending and irresponsibility greatly contributed to this recession, yet his solution is the greatest increase in government spending that this nation has ever seen. Is government spending the source of the problem, or the solution? I don’t have a problem with someone trying to argue the virtues of Keynesian economics. I can absolutely disagree with them and counter with the economic philosophies of Milton Friedman (who I am sure is doing flips in his grave). However, please don’t acknowledge the bureaucratic inefficiencies of government and then tell me that you are going to rectify the outcome by having government control an even greater percentage of our Gross Domestic Product.

Although it is safe to say that I would rarely agree with a man like Dennis Kucinich, I can hold a certain level of respect for his consistency in his beliefs. Mr. Kucinich is admittedly and proudly at the far left of the Democrat Party. This doesn’t make him evil, or malicious. It simply means that his solutions to problems are often found in more government involvement. His rhetoric matches his voting record. My views are often diametrically opposed to those of Mr. Kucinich. This disparity is very healthy, and I believe this is what has historically made our country strong. That is why the founding fathers developed our electoral system and balance of power. The Democrats have gained the White House and obtained a near super majority in the Senate. They should not hide behind rhetoric that belies their actions. Have the courage to stand tall. Say what you mean, and do what you say. If the votes are there, you will get your bill through. The disparity between what politicians’ words and actions only serves to demonstrate a lack of principled commitment and further erode the trust of politicians among those willing to pay attention between elections. However, most elected officials are lawyers rather than economists. This is a fact that has become all too painfully obvious in recent years.

I don’t often listen to, or watch, these major speeches. I prefer to read the transcript of the speech the following morning. This allows me to look past the style and focus on the substance. President Obama is quite Reagan-like in his delivery. As a former actor, President Reagan delivered his speeches as if he was playing a role. As a former lawyer President Obama delivers his speeches as if he if conducting opening and/or closing remarks. The problems arise when actions and words do not correlate. The essence of marketing is making the consumer believe they are getting a great deal in giving you their money. Make no mistake about it. The intent of this newly passed law is to further federalize our nation. This bailout money is the proverbial bait used to entice poorly run private companies and financially irresponsible individuals. With the promise of security and acceptance of public aid comes the same obligation of an indentured servant. Once the banking, mortgage, health care, energy and automobile industries are effectively federalized, we will have completely redefined our economic system. Winston Churchill once said, “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries.” There is no more slippery slope. We will have completely jumped the fence to the house of cards that is socialism.

What a Bipartisan Stimulus Package Really Means

What A Bipartisan Stimulus Package Really Means
by R.J. Fee
January 29,2009

All right. President Obama met with Republican leadership in an attempt to foster "bipartisanship" over his very Keynesian Economic Stimulus (read HUGE NEW GOVERNMENT SPENDING) package. I have a few questions.
1) Didn't his plan already include how much, where and when the spending would take place?

I don't agree with very much of the man's political philosophy, but he is obviously smart enough to create a plan. I know he wouldn't throw together a plan to spend $800 billion in new spending at the eleventh hour. A great deal of research into the effects of implementing this plan had to be studied at great cost of time and money. Which leads me to the next question...

2) With his plan already intact, what is there to meet about?

The spending plan has been formed. Even relatively small alterations to such a plan would have to be studied for their ripple effect throughout the economy. Unless the plan was structured with billions in slush money incorporated into the plan to persuade (read buy votes and support) of opposing party members. Of course that COULD NOT be the case, because change has come to America. Has it not?

3) Was the plan intact, or not?

The current administration can not have it both ways. Either you have a plan, and you are recklessly accepting input related to altering the plan that you have put so much time and effort into formulating, or you incorporated a great deal of slush and are using the taxpayers money to buy votes and the appearance of support. The funny thing is that, practically speaking, the opposition's votes are not needed to pass this debacle. But it is politics as usual, and the appearance of bipartisan support looks good. Who cares if it continues to waste taxpayer money? This leads to a question for the Republican leadership...

4) Which of you will be conceptually against such government spending until some of this slush money is directed to your home district?

The Republicans can not have both ways either. Either you are against such a move away from Capitalism toward Socialism, or you are not. Herein lies the problem with career politicians. Perhaps Winston Churchill made the point best in the following famously attributed discourse (or pehaps parable):

Churchill: “Madam, would you sleep with me for five million pounds?”

Socialite: “My goodness, Mr. Churchill… Well, I suppose… we would have to discuss terms, of course…”

Churchill: “Would you sleep with me for five pounds?”

Socialite: “Mr. Churchill, what kind of woman do you think I am?!”

Churchill: “Madam, we’ve already established that. Now we are haggling about the price.”

This leads me to a definition of Bipartisanship.

Bipartisanship - Ideally being able to agree conceptually on a matter. When unable to conceptually come to an agreement, it is the price at which the party in power must haggle to persuade the other to abandon their facade of scruples and values.