Thursday, July 23, 2015

Freedom of Choice In Public Education and Housing Values

'Why is my house appreciating in value now that
new charter/private school is right next door?
We recently saw an academic research paper that was published by 2 NC State Ph.Ds and a Texas Tech researcher that caught our eye.

Simply titled School Choice: The Impacts on Housing Values* this paper examines various places where school choice has been implemented and comes to the conclusion that school choice leads to an equalization of housing values between poor and rich neighborhoods, mostly by lifting the property values of the poorer neighborhoods since they are no longer locked into low-performing assigned public schools.

The research paper is written as a research paper after all but it is worth reading and noting some important things about how school choice affects local housing values as well as noting some of the differences between public education in many states versus others where school choice is more widely spread than say in North Carolina.

Know how Vermont is always cited as one of the top, if not the top, public school education systems in the nation?

Well, for one thing, Vermont is a very tiny state with not a whole lot of diversity and the challenges larger populations present. If the entire state of Vermont was a congressional district, it would be about the size of the 9th Congressional District in North Carolina around Charlotte. Without the challenges that Charlotte faces today with their growth and wide economic disparities along economic and racial lines.

Did you know that Vermont was one of the first states to adopt school choice and vouchers, mostly as a way to get students from very rural remote areas to a school of any kind so they could get educated? 1869 to be exact. 146 years ago today. That is when Vermont started their school choice options and apparently, have never looked back.
'Vermont operates one of the longest running tuition voucher programs in the United States. Dating back to 1869, the state legislators passed a bill granting residents living in an area without a public school system a way to provide their children with an education. Using tuition vouchers, parents can send their children to any public school at no cost, or to non-religious private schools for a significant discount, with the subsidy coming from the sending town. In the case of an independent (private) school, the amount of the tuition voucher equals the average tuition for the (public) primary (grades: K-6) or secondary schools (grades: 7-12) within Vermont. Unlike many other state tuition voucher programs, Vermont’s system was not established to address a failing inner-city school system.

Instead, it was developed to ensure that the residents had access to an education. 
The tuition voucher program has several unique characteristics. First, the opportunity set of schools is not constrained to the state. Parents can choose a state school, an out-of-state school, and even a school outside the country (notably in Canada!). However, this school choice option only applies to areas (including cities, towns, unincorporated areas and gores) that do not operate traditional public schools. Each district can have either the tuition voucher system or locally operated public schools, but not both. For this reason, the vast majority of towns participating in the voucher system are in rural areas, and subsequently titled “tuition towns.” Lastly, the tuition voucher program does not restrict enrollment based on the resident’s income. The only requirement is that the family lives in a district without an assigned public school.'
Talk about 'freedom of choice' when it comes to public education! A Vermont schoolkid can go to a school in Canada and get public assistance for it. We have trouble in America talking about a schoolkid getting public assistance to go to a private school across the street from where they live!

Any state that can elect a self-avowed socialist as their Senator, and now Democratic Presidential Candidate Bernie Sanders, and allow a robust voucher and school choice plan in their state as Vermont has done, certainly paves the way for the rest of the United States to adopt school choice and voucher programs in their state.

The authors go on to cite places such as Paris, France which we visited last year and came to find out that we were staying right next to one of the most elite 'magnet' or preparatory schools in the Paris public education system where virtually all of their elected and business leaders were trained and educated from the 8th grade on through high school. Paris has a large public education system to be sure, BUT they also provide a strong element of choice and selective placement throughout their system of public and private, mostly religious Catholic, schools.
'The French education system is predominantly administered through public schools, with some private schools. This system is based on a 12-year curriculum where children attend primary school from ages six to ten, middle school from eleven to fourteen, and high school from fifteen to seventeen.
At the primary (secondary) level, public schools educate 86% (79%) of the populace, whereas private schools educate 14% (21%) of the students. For public schools, France utilizes school catchment areas, based on the student’s home address, to allocate both students and resources efficiently.
Municipalities establish the school district boundaries for the primary schools, and the Local Education Authorities (LEAs) determine the boundaries for the secondary schools. For many years, each municipality or LEA would publish a booklet describing the school catchment areas. Beginning in 2000, the information became publicly available online.
While public schools adhere to strict zoning restrictions, private schools follow a geographically open enrollment system. The private schools in France exhibit several interesting characteristics that are not common in the United States. First, the vast majority of the private schools are religious (predominantly Catholic). While religious in nature, admission to the private schools does not necessarily depend on the pupil’s faith or that of the attended primary school. Next, private schools can either be state-supervised or independent. State-supervised private schools deliver the same curriculum as the public schools, whereas the independent schools are permitted to develop their own program of study. Similar to the public schools, the state supervised private schools are publicly funded by the central government, ...The state also regulates the private school market by limiting the number of new teacher positions offered each year, and by restricting the number of new private schools that open each year.
Last, and most important of all, the admission guidelines for public middle schools and private middle schools are significantly different. Middle school may be one of the important periods in a student’s educational development, especially, in France. At the end of the third year of middle school, students that underperform are directed toward vocational studies, while the remaining pupils continue on the path toward graduation. 
More importantly, in Paris, France the admission to a specific high school can depend on the specific middle school the student attended, as well as their academic performance. Paris has slightly different admission rules for entering high school. While middle schools have strict catchment areas, parents have more options when it comes to sending their children to high school. The LEA allows parents to submit applications to a broad set of high schools within a much wider catchment area. Ultimately the admittance into a “good” high school depends on the pupil’s academic performance, as well as the quality of the middle school. Thus, the choice of a middle school is extremely important because the quality of middle school may improve the chances of admission into a “good” high school.
Parents have two outlets for getting around the strict middle school zoning restrictions. First, they can ask the LEA for an exemption to attend a school located outside the current zone. This workaround has a high rejection rate, and only about 8% of the requests are granted each year. A more viable alternative would be to exercise the option to send the pupil to a subsidized private middle school. In France, the subsidies work very similarly to U.S. tuition vouchers. The vast majority of the expenses are paid by the government, and parents will only incur negligible costs. Because private schools are not constrained geographically, the option to send the child to an outside private school offers parents a relatively cheaper alternative compared to having to relocate to a better school district. Not surprisingly, the number of students attending private middle schools is higher than the number of students attending private primary schools and private high schools.
The core of this research paper is focused on identifying the connection between having school choice and rising property values in poor neighborhoods. Here's what they found: 
'...(W)hat is striking is the comparison between the “no vouchers” case and the “full vouchers” case within districts. When vouchers are introduced, on average home values appreciate in the bad district (from 0.5859 to 0.7595), but depreciate in both other districts.
Consistent with the decline in home values in the two higher-priced districts, Exhibit 2 shows that once universal vouchers are introduced, the average income in poor district increases. Incomes are shown in tens of thousands of 1990’s dollars, and they rise from $32,973 to $47,000 in the poor area. 
However, income levels in the other two districts decline. Taken together, the evidence suggests that as private schools begin to open in low-income districts, average income increases in the district due to the migration of middle- and high-income families, who move to the district to take advantage of the relatively cheap housing prices (due to the poor quality of their public school system). As a result, home prices in poor districts are bid up. These migrating families move from the better school districts where house values capitalize the public school quality to the poorer school district to makeuse of the voucher system
Did you notice that? Not only did they find that housing values AND average income increases in the district around the new private or choice school, but housing values AND average income decreases in the more affluent neighborhoods.

Bet that is something you have never heard on the evening news.

That doesn't mean that every poor family all of a sudden experiences a financial windfall in their annual income simply because someone of more means moves in right next to them. But it does mean that their home, if they own it, does increase in value thereby increasing overall family wealth which provides them a means of support to finance further education for themselves or their children or whatever they want to do with their new-found wealth.

Why are so many affluent people so eager to expand school choice and voucher options if it means that their home values will diminish vis-a-vis these other less affluent neighborhoods? Aren't they the ones who should be most offended by such an outcome, as tangential as it might be to the whole serious and emotional issue of public education?

It might have something to do with this core basic American value: We all want everyone to be able to get as great of an education as possible, wherever it may come from and however it may be delivered.

If we were convinced by the data and factual empirical evidence that making kids stand on their heads for 15 minutes every day while reciting the periodic tables and the Gettysburg Address would increase their reading comprehension and math and science retention by 5%, we would be all for it. Whatever it takes to help our next generations get better educated, we should all support.

The fact that housing values and relative incomes tend to equalize out over time in areas with school choice and vouchers is incidental to the critical issue of helping the student receive a better educational experience along their life journey.

But it is one more favorable argument in favor of school choice and voucher reforms that you may not have heard before, yes?

* full text here if you have trouble downloading from the SSRN website for some reason.
**Nechyba study for more in-depth academic research information about the relationship between vouchers, public choice and housing values

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Thursday, July 16, 2015

Obama's Folly?

The Cosmic Gamble of the Iran Nuclear Deal
When you think about it, throughout history the United States has struck some pretty good deals with foreign adversaries.

In fact, some great ones.

Seward's Folly

On March 30, 1867, "U.S. Secretary of State William H. Seward sign(ed) a treaty with Russia for the purchase of Alaska for $7 million. Despite the bargain price of roughly two cents an acre, the Alaskan purchase was ridiculed in Congress and in the press as 'Seward’s folly,' 'Seward’s icebox,' and President Andrew Johnson’s 'polar bear garden."'

Fortunately for Seward, and everyone in the United States, gold was found in Alaska in 1898 and the massive Prudhoe Bay oil reserves were found in 1968. The original investment of 2.5 cents per acre for an area twice the size of Texas now looks like a 'great deal' in retrospect.

Louisiana Purchase

In 1803, President Thomas Jefferson purchased the Louisiana Territory from France for about 3 cents per acre or $15 million thereby doubling the size of the young republic immediately. That has turned out to be a pretty good purchase, yes?

Note that both the Alaska purchase and the Louisiana Purchase came when both the Russian Czar and France under the leadership of Napoleon Bonaparte were suffering cash shortages from other war efforts and government expenditures that extended both treasuries. Countries under financial stress usually make decisions more beneficial to their adversaries than when they are cash-rich and solvent.

Both were also subject to approval by the US Senate under the Constitutional rules of treaty-making: Presidential negotiations subject to Senate 'advice and consent' and subsequent approval by 2/3rds present.*

Purchase of Manhattan Island by the Dutch

In what has to be the most advantageous deal in American history, "(I)n 1626, the settlement’s governor general, Peter Minuit, purchased the much larger Manhattan Island from the natives for 60 guilders in trade goods such as tools, farming equipment, cloth and wampum (shell beads)"

That translated to about $24 at the time. Advantage to America as it formed later, right?

Which begs the question:

'Just what does the United States of America gain by the negotiation of this Iran Nuclear Deal by President Barack Obama?'

President Obama somewhat sanctimoniously stated that '99% of the world agrees with me' that this deal with the militant leaders of Iran was a good one. He must know something we don't know then about how to poll and then discern the attitudes of 7.3 billion people around the globe overnight.

But what exactly did he gain for the United States in this treaty (Iran Deal text here) other than what he has said was the 'avoidance of war' with Iran, which many experts have some serious doubts about in the first place?

We didn't double our land territory as Jefferson did with the Louisiana Purchase in 1803. We didn't add land twice the size of Texas as Secretary of Seward Seward did in 1867. We didn't force the Soviet Union to its knees through the 'peace through strength' posture used so effectively by President Reagan at Reykjavik in staring down Soviet Premier Mikhail Gorbachev.

When 'Nixon went to China', he was the only American statesman who could have been trusted or believed to negotiate a treaty with the Communist Chinese government and that has led to an enduring economic relationship with China far beyond what anyone could have imagined in 1972. Do you honestly believe Iran will abide by the terms of the agreement President Obama and Secretary Kerry negotiated with them and wind up as compliant with the USA in 40 years as even China has done?

We didn't even secure the return of 4 American journalists now held hostage in Iran even though Obama and Kerry agreed to put many of the violent Iran Revolutionary Guard Corps military leaders on the sanctions relief list somewhere along the way.

Here's what we can glean from the various reports about what IRAN would gain from this negotiated treaty:

  1. Iran will get a lifting of economic sanctions, sanctions that by 2013 had driven internal inflation rates to 35% in Iran and dwindled their dollar reserves to $20 billion (according to Wall Street Journal 'Obama's False Iran Choice').
    -It is estimated that the lifting of economic sanctions will allow $150 billion in frozen Iranian assets to be immediately available to Iran plus untold hundreds of billions of dollars in revenues when trade resumes on the world scale.
    -Remember the example of Czarist Russia and France under Napoleon both of which agreed to negotiated deals with the United States under economic duress that were far more favorable to the US than to them in the short- and long-run.
  2. Iran now has the ability to pursue their 'proliferation' of nuclear power and weapons capability whereas US policy before Obama has always been to keep Iran off the nuclear stage in world affairs. Given that Iran has a stated purpose of sponsoring state-supported terrorism plus the fact that there is not one single treaty or international agreement anyone can point to that Iran has fully complied with 100%, US Presidents have always deferred to see positive actions on the part of Iran first as a precondition to any further discussion or negotiations.
  3. For some unknown reason, at the very end, President Obama and Secretary of State John Kerry decided to give Iran, without any renouncement of their state-sponsored terrorism around the globe but especially aimed at American citizens and the elimination and eradication of Israel, the ability to buy and build conventional weapons and intercontinental ballistic missiles which can one day be used to launch the nuclear weapons Iran wants to deploy. **
(For further information, see below from Nightwatch, a daily summary of news)

As far as we can tell, the hope and prayer that President Obama and Secretary of State John Kerry have after negotiating this deal is that the militant mullahs and ayatollahs of Iran will somehow become friends of The Great Satan, as they call America and we will live in peace and harmony and sing kumbaya forever after.

If that happens, we will sing Obama's praises and recommend he receive a Second Nobel Peace Prize, this time deservedly so. We hope this deal threads the needle for the next decade so that the threat of an aggressive militant Iran is diminished to zero.

However, we think David Ignatius has condensed this entire deal into the best line yet when he called it a 'cosmic gamble'. Somehow, someway, President Obama and Secretary Kerry seem to believe this agreement will turn the the militant leaders of Iran into business and political partners of the US, where peace prevails through increased economic ties and cultural exchanges, supposedly along the lines taken by the Soviet Union and now Russia post-Reagan and China post-Nixon.

Given the history of Iran, not only in modern times, but throughout the extent of their history all the way back to ancient Persia, we think the chances of Iran fully complying with this deal makes it one of the most dramatic and dangerous gambits yet taken by any American president without a whole lot of tangible benefits to the US to see.

There is an alternative to this deal and it would be for the US Congress to vote their disapproval of this agreement and then  to override the expected Presidential veto of that disapproval. That would be a far better option than giving Iran the green light under their current militant leadership to become a nuclear power in our lifetime and 'hope' they become a responsible member of the community of nations.

At least President Jefferson and Andrew Johnson (in whose administration Seward served) didn't fully arm France and Russia with the world's most dangerous ultimate weapons, respectively, in return for purchasing Louisiana and Alaska. They would have recognized that as simply a cosmic gamble to do.

* ([The President] shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur, Article II, Section 2, Clause 2)

** See Elliott Abrams 'Iran Got A Far Better Deal Than It Had The Right To Expect'

from Nightwatch:
Iran-US:  Special comment: The Joint Comprehensive Plan of Action (JCPOA).  A number of Readers sent special requests for NightWatch comments on the JCPOA, the title of the nuclear agreement between Iran and six powers. NightWatch is a commentary on foreign threats to the US and its interests. That focus normally excludes most developments involving US negotiators, but not always.

As for the JCPOA, a few obvious points have been missed in most news coverage of this plan of action. The comments that follow are judgments based on the language of the public text, in context.  They are not value judgments.

First, the agreement is not a non-proliferation agreement. It is an agreement that approves limited proliferation of nuclear technology.  This characterization means that the US and others states surrendered or abandoned their longstanding position of banning any Iranian nuclear program, peaceful or not.

It also is not a nuclear containment agreement. At most, it postpones some aspects of Iranian nuclear infrastructure development. In other areas, Iran can continue to develop and modernize to keep up with technology.  At the end of 15 years at most, Iran has no more restrictions on its nuclear program, with the approval of the UN and the other powers, by implication.

This compromise of the longstanding programmatic ban for Iran is curious because that remains the US objective for North Korea. The US insists that North Korea, which already has nuclear weapons, must dismantle its nuclear program, not just its weapons program. That is the premise of the Six Party Talks.

The difference in the negotiating positions is even stranger because the Iranian and North Korean weapons programs appear to be essentially variants of the same program. The North Korean variant is more advanced. Nevertheless, North Korea has assisted Iran’s ballistic missile programs since the Iraq-Iran War.  Iranians have been reported as observers at North Korean missile and nuclear tests. The cooperation continues as does the North Korean program.

The second point is that it is a very one-sided deal. It lacks mutuality. By an overwhelming margin the burden of performance is on the UN, the European Union and the US.  Its economic implications far exceed its nuclear restrictions. From the Iranian viewpoint, the JCPOA is primarily an economic agreement.

In return for some reduction in the Iranian nuclear programs, the UN and the US will remove the entire architecture of sanctions imposed by any party on any Iranian party. In addition, they will allow Iran to buy and sell conventional weapons and they will help Iran get access to trade, technology, finance and energy. According to the text, this is one paragraph in which Iran “agreed” to the actions by the UN and the US.

One of the implications of this is that Iran stands to emerge quickly as a regional economic power. Using Germany as a model, that condition is far more enduring and consequential than a delayed nuclear program. 

Once Iran’s economy starts to rebound, it will be free from the threat of sanctions to ensure compliance.  There is no credible enforcement mechanism.
A third point is that the text is a plan of action, as it is entitled. Significant by their absence in the text are the words “promise” and “agree” which are the cornerstones of enforceable agreements.  

The text uses the formulation that the parties “will” do things. Those could all be done independently or not. There is no bargain evident.

An enforceable agreement is an exchange of promises of performance.  A plan of action implements those promises. The performance of one party is conditioned on the performance by the other party, by the language of the agreement. The terms of the JCPOA are independent.

This plan of action implements no agreement because no such document exists.  An agreement can be implied from the language of the plan, but the language must establish a “meeting of the minds.” 

Fourth, a strong argument can be made that there is “no meeting of the minds,” a classic term of contract law that is the basis for every agreement.  The awkwardness of the structure makes clear that the intentions of the parties are not congruent and the goals are even farther apart.

Fifth, the JCPOA text contains no definition of terms, such as explanations for the various time terms. A plan of action requires some agreed definitions of terms. One plausible theory for a ten year time period, for example, is that Iranian strategists might have concluded that Iran faces no existential threat for at least a decade, as long as Iran did not provoke a regional nuclear arms race.

They also might have judged that after ten years Iran must be prepared for an even more uncertain strategic environment than the present. If this theory is accurate, Iran gave up little in return for a chance to be the regional economic hegemon. The emergence of an economically powerful Iran would alter strategic power relationships.

Finally, the six powers did not include a term requiring Iran to affirm or promise that it possesses or has access to no nuclear weapons now, in Iran or elsewhere. That seems to be a significant omission in crafting. If Iran already has nuclear weapons, the JCPOA would be a strategic victory for Iran.  

Assuming Iran abides by the JCPOA to the letter, the JCPOA will empower Iran economically and that will shift the balance of power in the region, regardless of the nuclear program. The Iranians do well to celebrate.

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Friday, July 10, 2015

How Is Greece Like A NASCAR Driver?

'And the Greek car goes into the stands again....'
'They keep turning left and smashing into walls'.

So goes an old joke about liberals from conservatives.

However, let's face the truth of the matter:

'If the country of Greece was a NASCAR entry, it would have already been smashed to smithereens in the past 10 races and disqualified from ever running again under current management.'

Greece points out the problems of socialism that former Prime Minister Margaret Thatcher of England once opined:

'The problem with socialism is that you eventually run out of other people's money!'

We don't have a problem with people being liberal and wanting to help other people live better lives. We think one of the great strengths of America is the amazing generosity you see every day where people of their own volition put their money and their time into helping those who are less fortunate than many of the rest of us.

Even with that amazing amount of private generosity, however, we recognize that that just isn't enough to take care of the millions of Americans who live below the poverty level or are sick or infirm in any way. That is where the 'social safety net' of America comes in, one that conservatives view as more of a 'trampoline' on which to bounce to get back on your feet so you can provide for yourself and your family, not one that becomes a self-trapping 'safety net' in which many poor people find themselves mired after generations of government dependency.

One of the oddest things to have happened to American politics over the past 2 decades is the extinction of the fiscal conservative/socially conscious 'majority middle' that used to constitute over 30% of Congress. Southern Democrat and so-called 'moderate Republicans' used to be the centrist fulcrum in Congress by which programs were passed to help people BUT were also held to a very simple standard: 'Will it break the budget or can it be done without adding on more federal national debt?'

Nowadays, just like in Greece, liberal Democrats pass bills without any regard to whether they will break the bank or balance the budget (see 'ACA' aka 'Obamacare'). And, just like in Greece where tax avoidance is considered the national pastime, liberal Democrats talk about 'raising taxes on the rich!' as if that will ever bring in enough money to balance the budget (it won't) without understanding the rich are the only ones with the resources necessary to find ways to avoid paying those higher taxes.

For those reasons, we think it would be helpful to the American people, especially the young people now entering the workforce to see what would happen if a country, namely Greece, was allowed to finish their own self-destruction through overspending.

It would be very painful for the Greeks, there is no doubt. But they have had numerous chances to straighten up and fly right and elect mature adults who could lead them to the real solutions that would have avoided this disaster for the past 30 years...and they didn't.

No human society has yet figured out how to repeal the laws of economics and fiscal gravity, as in what happens when a nation can't pay its bills, service its debt or conduct themselves in responsible ways. Greece and the EU might try to delay the ultimate outcome for awhile but they can't fool Mother Nature who also controls the immutable real-world of economics and finance.

Sooner or later, She will get you.

First, some facts that might surprise you:
  1. The GDP of Greece is about 1/2 that of North Carolina: $250 billion to NC's $500 billion.
  2. The GDP of Greece is about the same size as that of Connecticut.
  3. The debt-to-GDP ratio of Greece is close to 175%.
  4. The debt-to-GDP ratio of the United States is 73%.
One big difference between Greece and the US right now: The US dollar is the world's reserve currency where a lot of international finance is denominated, most notably in oil. The main reason why the Fed can make up currency out of thin air as they did during our financial crisis is because the rest of the world believes the US is still the largest and most dependable economy in the world and will be that for a long time to come.

But guess what? At one time in history, the ancient Greek drachma was the 'world's reserve currency' as were the Roman coins with Caesar's face on them as was the British pound sterling. The US dollar will not be the world's reserve currency forever, you know.

Unless steps are taken to support it which means getting our fiscal house in order in Congress and the White House, some other currency could become the world's reserve currency and then we would lose all sorts of flexibility such as the ability to expand the Federal Reserve's balance sheet in times of distress without any tie whatsoever to gold or silver underlying the intrinsic value of the dollar.

This debate is not even about the size of government. It is about the size of indebtedness caused by spending more money than a country takes in each year from tax revenues.

Calvin Coolidge presided over a booming American economy in the 20's when federal spending amounted to about 3% of GDP all the while cutting spending and taxes in each of his 6 years in office and reducing debt by close to 75%.

Bill Clinton presided over a booming American economy in the 1990's where federal spending amounted to about 20% of GDP. The last 4 years of his term in office saw the last balanced budgets we may ever see in our lifetimes.

It is not the 'size' of the government that is so dangerous. It is the 'size' of the indebtedness a country piles up in excess of what they can pay for on an annual budgetary basis that really matters most.

What would be the exact process of the Greek economy melting down if they don't get any more aid from the EU?

It varies from country to country and time in history but generally, once a country has effectively become bankrupt and unable to pay its foreign debt, here's what happens:
  • Their bonds become worthless. Who would buy them if they can't be paid interest or repayment of principle?
  • Credit becomes scarce internally in the country at hand.
  • Commerce becomes next to impossible to transact on a daily basis.
  • Inflation erupts. Competition for scarce goods bids up the price of everything.
  • Interest rates internally sky-rocket.
  • Unemployment explodes. People who can't conduct business can't buy food or pay the rent.
  • The rest of the world views your country as a basket-case.
The truth of the matter is that the rest of the world should be saying to Greece: 'There but for the grace of God go us'

Because it can happen anywhere at any time. And has about 250 times around the globe over the past 200 years or about 1 time per year (see Sovereign Debt and Default)

The young people of this country don't remember the 12% unemployment, the 13.5% annual rates of inflation and the 21% interest rates that beset this country during the Jimmy Carter years. Those are 3 main reasons why the only time most Americans ever hear about former President Carter is when he does something good with his work for Habitat or Humanity or something really off-kilter when he opines on Iran, Israel or Iraq or any other foreign policy matter since he really wasn't very good on foreign policy as President either.

Those years were 1978-1981. That is not ancient history. That was not in Greece. That was in the good old US of A.

The way the US got out of that mess was when Ronald Reagan became President in 1981 with Paul Volcker as Fed Chairman and basically electro-shocked the heart of the economy to start beating again. The 1982 recession was the nastiest one since the Great Depression at the time but it was a 1-year painful fix that ushered in a economic recovery and revival of 4-5% per year which is way above the anemic 2% annual growth we have had in the Obama years by comparison.

Which is why we think it is so important for the Greek Tragedy we are now witnessing to play out on the world stage. It may be painful for the Greek people and economy in the short-term, yes. However, for the long-term, declaring national bankruptcy and going through that painful process might lead to a re-adoption of the drachma outside of the EU, a diminished economic value to its currency and a much higher demand for Greek products in world markets which would bring about economic growth and prosperity to the small businesses that make up 2/3rds of the Greek economy.

Seeing the painful process from afar might awaken younger Americans to more responsible political action. Namely to 'vote for some people who will help fix this fiscal time bomb in America before something crazy to us!'

Maybe Greek NASCAR drivers should start a new sport where they race clockwise around a race track and turn right all the time. Maybe some of it will rub off on their elected leaders and people in the first place so they avoid getting into this dire situation again and again and again.

* for more insight into how the Greek situation is different from the US, here's a good piece from the fine budget group, The Committee for a Responsible Budget that you should bookmark as being a good resource for solid information: 'Greece is Rather Unique'

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Saturday, July 4, 2015

The Fireworks of the Fourth of July Jobs Report

The Best Fireworks Display You Really
Owe It To Yourself and Family To See
The Bureau of Labor Statistics came out this week with their latest jobs report.

President Obama hailed the drop in the official unemployment rate and wants to celebrate it with fireworks.

Conservatives looked at the same data and concluded it was a massive dud or worse, the entire fireworks assembly to be fired on the Washington Mall tonight exploded before being fired.

How can that be? How can the jobs report be so confusing that it can produce such very different conclusions?

First of all, a little history lesson about the Fourth of July in case you may have missed it before.

John Adams, our first Vice-President under George Washington and our 2nd President, wrote a letter to his wife Abigail after the conclusion of the writing of the Declaration of Independence. He dated his letter to her on July 3 and said the following about July 2, the day the delegates to Philadelphia approved the Declaration: 'The Second Day of July 1776, will be the most memorable Epocha, in the History of America'.

He went on to say to Abigail:
I am apt to believe that it will be celebrated, by succeeding Generations, as the great anniversary Festival. It ought to be commemorated, as the Day of Deliverance by solemn Acts of Devotion to God Almighty. It ought to be solemnized with Pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires and Illuminations from one End of this Continent to the other from this Time forward forever more.
Because there was no internet in the day, or CNN or FOX or MSNBC, it took awhile for his letter to get to her. Plus, the Declaration was transposed into its final form and 'July 2' was scribbled out and 'July 4' was printed as the official date it was approved.

Anyway, fireworks have been a part of the American experience since Day 1. They are not expressly talked about in the US Constitution, although there are plenty of 'fireworks' in that document as well as evidenced by some of the Roberts Court decisions in recent times, yes?

Here is the latest jobs report from BLS. Read it for yourself and decide if you think it is a beautiful display of job growth creation success or a dud that blew up on the launching pad. Or neither.

The Obama Administration touts the fall in the official unemployment rate to 5.3%, down from the high of 10% in October of his first year in the White House in 2009. They also hailed the drop in the number of officially 'unemployed' workers by 375,000 to 8.3 million total, down from 11.6 million in January, 2009. Which looks good on the face of it, doesn't it?

His opponents point out that while President Obama was hailing the fact that 223,000 people found jobs in June, 'the civilian labor force declined by 432,000 in June, following an increase of similar magnitude in May. The labor force participation rate declined by 0.3 percentage point to 62.6 percent in June' (from BLS June jobs report)

How can that be a good thing? The labor force declines when people retire or stop looking for work altogether. You can't be counted as 'unemployed' if you are no longer looking for work.

The labor participation rates across the board almost are now at their lowest rates since 1978. Before millions of women started to enter the workforce en masse and create the truly great acronym for the IRS to use to describe those couples who worked, DINK (Double Income, No Kids).

It is so hard to get your mind around these dull data points. So we are borrowing some important and telling charts from Stephen Moore from an article he published in Forbes Magazine in 2014.

Here's the most troubling aspect of this so-called 'recovery' since 2009: There just don't seem to be a lot of great jobs being created out there, does it?

As a result, the first chart tells us that millions of younger Americans are not just not finding a job, they are dropping out of the workforce altogether. Those 16-19 have dropped out the most, right when they really need to find a job, ANY job, to learn the skills and discipline needed to get a better job as they grow up and get more training and education.

Let's face it: in an ever-increasing technological America competing with countries across the globe for business, a young person with no education, training or job experience is going to have a hard time making it on his or her own.

Perhaps the most troubling chart is the second one that either Mr. Moore or some plucky assistant gleaned from the dull BLS reports because government doesn't usually offer their data in such clear and graphic and colorful detail that is pleasing to the eye to see.

The number of new jobs touted by the Obama Administration as having been created under his watch, as of September 2014, was about 6 million new jobs. Not bad on the face of it.

However, the number of people leaving or not entering the workforce, as in the case of the younger folks noted above, has been about 7 million people since September 2014.

That can't be good under any circumstance, can it? People leaving the workforce means less demand for goods and services and the ability to pay for them, right?

Many of these people are aging Boomers. We get that. We are right there in it with them.

But many are not. Many are aging Boomers who want to keep working, or as evidenced by the fact that Boomers are the only age cohort that has seen an increase in the labor participation rate since 2009.

They tell us:

  • 'I can't afford to retire'
  • 'We got wiped out financially in the Great Recession of 2008-2011'
  • 'Social Security is not enough to retire on'
So expect to see Aging Boomers hang onto their jobs as long as they can. Which also frustrates younger workers who would like to see them retire so they can take over their jobs.

So which is it in your eye? Is the latest jobs report a fireworks display of amazing color and celebration of the American spirit....or has it shown that our policies of the past 6 years have exploded on the ground in their cases?

Happy Fourth of July regardless. We still think John Adams go it right.

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Tuesday, June 30, 2015

Want 'Proof' That The 'True Legislative Intent' of Congress Was To Create State Exchanges in 2010?

'I wonder if that young man knows what he is doing'
'Maybe I shoulda run for Congress
where I could really write laws'
Were you confused, shocked, horrified or just plain old confused last week when the Supreme Court handed down its decision on the tax credits for the state exchanges?

Join the club. We have long thought the US Supreme Court should rule on the matter of the law at hand and not try to rewrite or divine the intention of the legislative process with a Ouija board or whatever they used to write their latest ACA proclamation last week.

Last week's decision on the ACA made us really wonder if that was true anymore. There's a very simple reason why which we will explain later in this post.

The latest decision by the Roberts Court on the ACA comes down to this:
'Do you want the US Supreme Court in effect 'writing' legislation as the Roberts Court did last week again on the ACA? Or do you want Congress and the US Senate to do their job and write legislation and leave it up to the Supreme Court to say 'yes' or 'no' as to its constitutionality as written on a piece of paper and leave it at that?'
Without being completely disrespectful of the Supreme Court and trying to honor their intellect, training and education, we have to wonder if it might have been a good idea for Chief Justice Roberts and every other Supreme Court Justice to spend some not insignificant amount of time on Capitol Hill watching the meat-grinder of legislation up close and personal before being appointed to the Highest Bench in America. We know he and the other 8 Justices are supremely qualified and educated and worthy of all respect and praise and honor due them.

Laws being written on Capitol Hill. Or
laws being re-written under judicial review
by SCOTUS.  Take your pick.
However, we think he and the majority missed a key major point on this one, one that even untrained-in-the-law people such as us could have told them to consider had they just asked us. Or anyone else who is familiar with the process and politics of writing legislation on Capitol Hill.

German statesman Otto Von Bismarck is credited with coining the best phrase we have ever heard about legislation:

''If you like laws and sausages, you should never watch either one being made.”

Unless you have seen the process up close and personal, you also may have missed the one little fact as well that seems to have eluded Justice Roberts in the ACA judicial review process. He has now not only once but twice 'saved' the ACA by a rather open-minded, shall we say, interpretation of the 'legislative intent' of the Democrat majorities then in control of the entire machinery of our government from 2009-2011 as opposed to what they actually wrote down on paper in legislation.

Chief Justice Roberts wrote the majority 6-3 decision upholding tax credits for people who sign up for the ACA regardless of whether or not the state in which they live had established their own 'state exchange' versus a 'federal exchange'. In essence, he looked into his crystal ball to look backward in time and decided that Congress conflated the two exchanges and really meant 'federal exchanges established by the states' all along.

Chief Justice Roberts has solidified his view that the Supreme Court has a critical role at identifying precisely what the 'legislative intent' was of Congress at any time in the past. Even though Congress has 435 elected representatives, 100 Senators and hundreds of highly educated, trained and skilled lawyers, attorneys and bill drafters to craft legislation in the first place.

Congress might be clownish at times in their deliberations and public announcements. But they do have extremely well-qualified legal staff to write legislative language exactly as the chairmen, the Speaker, the Majority Leader and the majority of the Members of the US House and US Senate at the time want them to write it.

What struck us first was how this decision clearly overlooked, or at least managed to masticate to death in a very tortured way, the language as written about the state exchanges in the ACA which is about as clear as day according to anyone who has read it. From the Roberts decision (which you should read for yourself):
'The Affordable Care Act addresses tax credits in what is now Section 36B of the Internal Revenue Code. That section provides: “In the case of an applicable taxpayer, there shall be allowed as a credit against the tax imposed by this subtitle . . . an amount equal to the premium assistance credit amount.” 26 U. S. C. §36B(a). Section 36B then defines the term “premium assistance credit amount” as “the sum of the premium assistance amounts determined under paragraph (2) with respect to all coverage months of the taxpayer occurring during the taxable year.” §36B(b)(1) (emphasis added). Section 36B goes on to define the two italicized terms—“premium assistance amount” and “coverage month”—in part by referring to an insurance plan that is enrolled in through “an Exchange established by the State under [42 U. S. C. 18031].” 26 U. S. C. §§36B(b)(2)(A), (c)(2)(A)(i)
Not to belabor the point that we used to work up on Capitol Hill, but we did. Long ago. Back in a time when people were very careful about what they wrote into legislation because the misplaced comma or semi-colon could mean 2 very different things once enacted and signed into law by the President on any bill or piece of legislation that moved through congressional deliberation.

What we don't understand about the Chief Justice of the United States Supreme Court's thinking here is that there is a very simple way for Congress and congressional staff to fix legislation once passed if they find a mistake or a typo or an incongruity or 2 or 3 or 1000 as seems to be the case in the ACA.

That process is called 'technical corrections'.  If a law is found to be askew in any way once passed, another bill is written to correct the typos and incongruities of a law which is called 'The Technical Corrections Bill' to whatever the underlying piece of legislation was that was recently passed.

Think of it as the 'spellchecker' or at least the 'grammar/punctuation/English language clarifier-checker' function of the US Congress to make sure laws are passed as intended and as amended through the normal majority-vote legislative process.

More times than not, it is passed unanimously without a lot of comment or debate because it doesn't change the 'legislative intent' of the Congress that passed the law in the first place.

These technical corrections bills usually are passed within months of passage of the underlying base core text bill.

Let's look at a timeline of the passage of the ACA:
  • March 30, 2010 ACA becomes effective as the law of the land.
  • Democrats controlled the White House (President Obama)
  • Democrats controlled the US Senate by 58-to-60 votes during the entirety of the 111th Congress
  • Democrats controlled the US Congress by 255-180 majority for the entirety of the 111th Congress
  • ACA passed without a single Republican vote in the US Senate or US House
  • ACA was passed by the process of reconciliation despite having 59 Democrat votes in the Senate
In other words, the Democrats controlled everything lock, stock and barrel at the time of passage of the ACA.

Why does this make any difference?

It makes a difference because at any time for the rest of the 111th Congress from March 30, 2010 to December 31, 2010, if there was any ambiguity about what the Democratic Congress meant about any single word or phrase in the ACA, they had 9 WHOLE MONTHS to correct it through a technical corrections bill they could have passed by overwhelming margins and sent to President Obama for his signature.

Right then and there, the whole nation would have found out if by writing 'state exchanges', that Congress actually meant 'federal exchanges set up in the states'. The Democrats in 100% complete control of the US government from 2009-2011 had their chance over 9 long months in 2010 to clear things up and make their legislative intent explicit and not leave it up to Chief Justice Roberts and 5 other non-elected Justices to make those decisions for us as a nation 5 years down the road.

You can not tell us that not one single person on the Democratic staff of any Democratic Senator after the passage of the ACA noticed the 'ambiguity' Chief Justice Roberts points out in his decision between states that specifically had 'state exchanges' as qualifying for the tax credits versus those that did not set up their own exchanges and left it up to the federal government to come in and set one up.

Maybe no one actually ever read this 2000+ page bill in its entirety before it was passed as then-Speaker Nancy Pelosi said. Not even Jonathan Gruber. Not even Constitutional-Scholar-In-The-White House, President Barack Obama.

Republican staff people were already pointing this anomaly out almost immediately upon passage of the ACA. Legal scholars around the nation started preparing arguments for lawsuits almost as fast as the Tea Party exploded onto the scene in the aftermath of the ACA. One of the most prominent points of contention was this very language cited by Chief Justice Roberts as being 'ambiguous'.

From where we stand, this looks like it was a deliberate attempt by the Democrat Majority at the time to write a bill to force states to set up their own state exchanges in order to qualify for the tax credits for the people who enroll in them.

You have to remember that there was another coercive feature of ACA that sought to penalize states that did not expand Medicaid by refusing funds for the entire program which the Roberts Court found to be unconstitutional on June 28, 2012. Presumably on states rights grounds you gotta believe. This provision fits in the same frame of thinking that the Democratic Congress at the time had in mind to coerce and force each state to set up exchanges whether they wanted to or not as well as expand Medicaid under threat of losing federal matching funds for the entire program.

The thinking would go as explained by a fictional majority staffer at the time:
'We need something to force every state to comply with the new law to get everyone covered by insurance. Otherwise the funding for the ACA really doesn't work at all. We need to set up state exchanges with tax credits to entice or force the states to offer such coverage along with banging them in the head to expand Medicaid by threatening to withhold matching funds from them for the entire Medicaid program'

Political staffers think like that. It is part of the game.

Do you really think the conversation between Democrat staffers on House Ways and Means, Senate Finance and the Health Committees in both the House and Senate that had jurisdiction over the bulk of the ACA went like this?
'You know, this language in the ACA really is a mess. We didn't call the 'penalty' a 'tax' in the first place because that would have killed it as one of the biggest tax hikes in American history. We didn't clarify that when we wrote 'state exchanges' 18 times we really meant 'federal exchanges set up in the states'.
Let's just ignore the very simple method of fixing it by using the technical corrections bill and making the state exchange language less ambiguous. Heckfire! Let's just roll the dice and see what the Roberts Supreme Court says about it 5 years from now. He was a George W. Bush 43 appointee to you....I am sure he will see it our way!'
Which he surprisingly did. Twice now.

If this was just a case of 'inartful' legislative drafting as indicated in the Roberts' decision, then the ACA may take its rightful place in the annals of legal history as being one of the most confusing and 'inartful' pieces of legislation to ever have been passed by the US Congress.

To date, there have been at least 51 changes to the ACA either by executive order (in the form of delays mostly, so as to put off the full brunt of the cost of ACA to employers and individuals covered by the mandate until after the 2014 elections first and now the 2016 Presidential Election); legislative changes or judicial review.

This could have been all cleaned up by the Democrat-controlled 111th Congress through a tidy, carefully written and crafted technical corrections bill between March 30, 2010 and the end of the year 9 months later before the Democrats lost control of both the House and the Senate.

But it wasn't fixed. Why not? Could it possibly be that the 'legislative intent' all along by the Democrat Congress was to force states to comply with the new ACA rules in full and expose those states unwilling to set up state exchanges as being cold-hearted and insensitive to the issue of the uninsured who lacked health insurance in their state? The resulting political pressure would have been enormous on anyone in that state's legislature under those terms, don't you think?

Now the Chief Justice of the Supreme Court of the United States of America along with 5 other colleagues have somehow managed to go back in time and 'divined' the legislative intent of our duly-elected Congress of 2010. In effect, for the second time now, (changing the 'penalty' to a 'tax' in the last big ACA decision being the first), Chief Justice Roberts has helped rewrite legislative language on a major bill which is a duty normally reserved for our elective Representatives and Senators.

The Democrat Congress and US Senate and President had 9 whole months to correct this ambiguous language in 2010 and make it explicit that they meant 'federal exchanges set up in the states' through the very simple, basic and elementary technical corrections legislative process.

Chancellor von Bismarck's adage should be set on its ear and amended thusly:

''If you like judicial review at the Supreme Court making law and sausages, you should never watch either one being made”

* Last paragraph of Judge Scalia's scathing dissent:

'Having transformed two 
major parts of the law, the Court today has turned its attention to a third. The Act that Congress passed makes tax credits available only on an “Exchange established by the State.” This Court, however, concludes that this limitation would prevent the rest of the Act from working as well as hoped. So it rewrites the law to make tax credits available everywhere. We should start calling this law SCOTUScare.

Perhaps the Patient Protection and Affordable Care Act will attain the enduring status of the Social Security Act
or the Taft-Hartley Act; perhaps not. But this Court’s two decisions on the Act will surely be remembered through
the years. The somersaults of statutory interpretation they have performed (“penalty” means tax, “further [Medicaid]
payments to the State” means only incremental Medicaid payments to the State, “established by the State”
means not established by the State) will be cited by litigants endlessly, to the confusion of honest jurisprudence.
And the cases will publish forever the discouraging truth that the Supreme Court of the United States favors some
laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.

 I dissent'.

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Sunday, June 21, 2015

Hate To Say We Told You So...

'You keep spending more money than you take in
and you will get in trouble one day, Linus!'
But we told you so.

We grew up in the days of $300 billion annual budget deficits in the early 1980's. That doesn't sound like a lot in these days where $1 trillion deficits were yawned at by the Obama Administration for 4 years after the fiscal crisis was over. They even brag today about 'bringing the deficits down by 1/2!' during his term in office, which still puts them at the $500 billion annual deficit level as if something monumental has been achieved.

Way back when, $300 billion annual deficits were really a big deal. They represented close to 30% of  the annual federal budget which was $808 Billion in total in 1983 if you can believe that or not.

People ran for federal office in the 1980s and 1990s specifically to address the deficit and balance the budget. Adults back then intuitively knew something had to be done about them eventually and, eventually in 1997, the adults in the Clinton White House and the adults in the Republican House and Senate got together and passed the Balanced Budget Act of 1997 and we got 4 successive budget surpluses from 1998-2001.

So it can be done. No doubt about it. It is right there, proof in the history books.

$1 trillion budget deficits in 2009-2012 represented about 30% of annual federal budgets as well. But you know what was different?

Back then, the national debt held by the public and foreign sovereigns was about $1 trillion and represented about 30% of GDP.

Today? Our national debt held by the public has ballooned to over $13 trillion ($18 trillion overall) and represents over 72% of GDP.

(We consider intragovernment debt between the federal government and 'trust funds' (sic) such as in Social Security about as seriously as CBO does which views them as having 'no economic value whatsoever'. Debt between government agencies is ephemeral at best and really comes down to this one day: raising your taxes or cutting spending in other programs to 'pay off' those debts down the road)

CBO has just released their 2015 Long-Term Budget Forecast and in it you will read the following chilling words that no one in the Obama Administration wants you to read, nor will they ever tell you it is all that important for you to read.

But it is. It should shape the way you look at any candidate running for President, Congress or the US Senate for the rest of your life. It should also change the way you look at the Federal Government as the never-ending piggybank that never runs out of money to spend on anything anyone wants in this country.
'How long the nation could sustain such growth in federal debt is impossible to predict with any confidence. At some point, investors would begin to doubt the government’s willingness or ability to meet its debt obligations, requiring it to pay much higher interest costs in order to continue borrowing money.
Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country. Unfortunately, there is no way to predict confidently whether or when such a fiscal crisis might occur in the United States. In particular, as the debt-to-GDP ratio rises, there is no identifiable point indicating that a crisis is likely or imminent.
But all else being equal, the larger a government’s debt, the greater the risk of a fiscal crisis.'
You want to go through 2008-2011 again? How much of a 'fiscal crisis' do you want to go through again? More importantly, how much of an economic crisis do you want to put your children and grandchildren through? Haven't we already caused them enough problems already?

We are not really even out of the last economic retrenchment yet by all indications and reports. The Fed under Janet Yellen announced last week they were not going to raise interest rates from near-zero levels because they are lowering their economic forecast to 1.8% this year down from an already anemic 2.7% from their previous forecast not more than 8 months ago!

Go ahead. Put your feet up sometime this week and stay inside during this hot weather and read this CBO Long-Term Budget Outlook in its entirety. We dare you to do so. It is only 128 pages including charts and footnotes and acknowledgements and, for an otherwise dry subject, economics and federal budget policy, surprisingly well-written and interesting.

If you don't like history or economics but prefer fiction, pretend this is a science fiction novel where some sort of alien DNA has landed in America and is quietly and secretly infecting everything we own and do as a business or hobby or art or science. If we stop feeding the beast via deficit-spending, it will die and go away since deficit-spending is its fuel, its oxygen.

However, if we keep doing what we are now currently doing, overspending in an unbalanced, not optimally productive manner from the federal budget level, one day, without anyone knowing it, it will collapse our financial system and wreak economic havoc on everyone, rich and poor; black, white, Asian and hispanic; the washed and the unwashed.

How exciting would that sci-fi novel be?

Sadly it could happen. It has happened to hundreds of irresponsible governments in the past, even to the vaunted Roman Empire, The British Empire, the Ming Dynasty and the Soviet Union. Even CBO is ratcheting up their trumpets to sound the alarm more whole-heartedly in this report from what they have said in the past.

'Do you really want me to know more
about your country's finances than
you do?'
If you want to take the easy way out and read some of the pertinent highlights, we have copied a few from the report so you can get back to what you are doing and not read this whole report.

However, if you do read the whole report, you will be like that Dos Equis guy who says: 'I don't often read federal budget reports. But when I do, I know more than 99.999999% of all the rest of you American citizens out there'

Be like the Dos Equis guy then.

Excerpts from the CBO report:

  • With deficits projected to remain close to their current percentage of GDP for the next few years, federal debt held by the public would remain at a very high level, between 73 percent and 74 percent of GDP, from 2016 through 2021. Thereafter, the larger deficits would boost debt—to 78 percent of GDP by the end of 2025.
  • At the end of 2008, federal debt held by the public stood at 39 percent of GDP, which was close to its average of the preceding several decades. Since then, large deficits have caused debt held by the public to grow sharply—to 74 percent of GDP in 2014; debt is projected to stay at that level in 2015. Debt has exceeded 70 percent of GDP during only one other period in U.S. history: from 1944 through 1950; it peaked at 106 percent of GDP in 1946 because of the surge in federal spending that occurred during World War II (see Figure 1-1).
  • CBO projects that, under current law, net outlays for interest would jump from 1.3 percent of GDP this year to almost 3 percent 10 years from now. By 2040, interest costs would be 4.3 percent of GDP, bringing total federal spending to over 25 percent of GDP (see Figure 1-4). Federal spending has been larger relative to the size of the economy only during World War II, when it topped 40 percent of GDP for three years.
  • Total national spending on health care services and supplies—that is, by all people and entities in the United States, governmental and nongovernmental—increased from 4.6 percent of gross domestic product (GDP) in calendar year 1960 to 9.5 percent in 1985 and to 16.4 percent, about one-sixth of the economy, in 2013, the most recent year for which such data are available.
  • Federal spending for Medicare (net of certain receipts, termed offsetting receipts, which mostly consist of premiums paid by beneficiaries) and Medicaid rose from 2.0 percent of GDP in 1985 to 4.7 percent in 2014. Underlying those trends is the fact that health care spending per person has grown faster, on average, than the nation’s economic output per capita during the past few decades. The Congressional Budget Office estimates that growth in health care spending per person outpaced growth in potential (or maximum sustainable) GDP per capita by an average of 1.4 percent per year between calendar years 1985 and 2013.
  • Key factors contributing to that faster growth were the emergence and increasing use of new medical technologies, rising personal income, and the declining share of health care costs that people paid out of pocket. Those factors were partly offset by other influences, including the spread of managed care plans in the 1990s, the 2007–2009 recession, and various legislated changes in Medicare’s payment policies.
  • Discretionary Spending A distinct pattern in the federal budget since the 1970s has been the diminishing share of spending that occurs through the annual appropriation process. Between 1965 and 2014, discretionary spending declined from 66 percent of total federal spending to 34 percent. Relative to the size of the economy, that spending decreased from 10.9 percent of GDP to 6.8 percent.
    (editor's note: If you think the federal government should be spending more money on education, roads, research and development, the environment, welfare and any other assorted programs, don't blame the Republicans for this drop, blame the seniors and their lobby, the AARP. Because every time senior lobbying groups such as the AARP stop any discussion about entitlement reform, your favorite discretionary program just keeps getting nibbled to death by ducks as the startling numbers above prove)

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Wednesday, June 17, 2015

'Making History!' Versus 'What Are You Gonna Do As President To Help Make My Life Better?'

'I voted for the First Black President and the First Woman President!
'Way!' Not way!'
In 2008, many Americans faced this choice when they voted for President of these United States:
  • Vote for a perceived third term of George Bush 43 in the form of Republican Presidential candidate John McCain with the attendant baggage of the Iraq War and pending economic implosion; or
  • Vote for a fresh young face in the form of then-Senator Barack Obama who also gave them the chance to 'make history' by voting for 'America's First Black President'.

They chose the latter. Twice.  Even though Bill Clinton still insists that he was the First Black President for some reason.

Many people both young and old knew very little about Barack Obama. We still know very little about him relative to the living autopsies we have been forced to watch when Mitt Romney ran for President or virtually every other major candidate ran for the Nation's Highest Office.

Just watch how the press will dig into Donald Trump's kindergarten records or Marco Rubio's driver's ed class records in high school. We will know more about Carly Fiorina's tutoring of football players at my former high school in Durham, North Carolina than we will ever know about Barack Obama's records in high school, for example.

Not many people knew the depth of his commitment to the government being the primary means of solving problems versus the private sector. Certainly no one understood that when he said he would 'get American troops out of Iraq' that he meant 'for good', regardless of whether the Muslim Brotherhood and The ISIS Empire would raise their ugly heads.

Hardly anyone young we know asked the serious political question everyone should ask themselves before voting in any presidential election:

'What is this Presidential candidate going to do for me if I help get him/her elected by giving them my precious vote?'

Go ahead. You are free to be selfish and think about your own personal circumstances for a moment. There is nothing in the Constitution against you dreaming about fulfilling your own potential and destiny as much and as far as you want. You can share all of your riches and new found wealth down the road with others like Bill Gates has done through his foundations. Or you don't have to if you want to do something else with your money such as save it, invest it or just blow it.

If you are not going to become the next Bill Gates or Steven Jobs, you still have the freedom to vote for people who will not over-burden you and your business with taxes and regulations to the point that the life is choked out of both.

Let's face the truth of the matter: If you knew for sure ahead of time that a certain candidate would NOT be able to help create the political and economic conditions to support a booming economy so you could get a good, high-paying job; help keep gas prices low; keep us safe from invading marauders or make progress on solving the big problems of our times, no matter how 'historic' their election might be, would you vote for that candidate anyway?

Is it so important to you that you would cast a symbolic vote for the first black president or the first woman president or the first rotund president or the first ambidextrous dyslexic ADDHD transgender president just because you wanted to say you were part of 'making history' instead of doing what is right for you and your family?

Today, we are faced with another historical 'first': Hillary Clinton who has declared it is time for Americans to set another 'historical first' in the span of 8 years of American history by electing the 'First Woman President!'

We have had some great transcendent presidents: Lincoln, FDR and Reagan usually come to mind first in such discussions. We have had some close to great presidents, some for what they did before they became president even though the grind of the office tarnished their star some: Jefferson, Madison, Eisenhower come to mind.

We have had more than our fair share of terrible Presidents, that is for sure. The run from 1837 to 1859 was particularly dismal from Martin Van Buren to William Henry Harrison (who died within a month of being inaugurated); John Tyler, James K. Polk, Zachary Taylor, Millard Fillmore, Franklin Pierce and then whom most historians consider to be absolutely the worst President in American history, James Buchanan. All one-termers. For very good reasons.

Mr. Buchanan left a note in the desk in the Oval Office to be opened by the new President, Abraham Lincoln on March 4, 1861 which read: "If you are as happy in entering the White House as I shall feel on returning to Wheatland, you are a happy man."

This from a man who did next to nothing to avert the coming scourge of war, or much of anything else truth be told.

Where will history rank Barack Obama not just as the First American Black President but just as an 'American President'? If Hillary Clinton is elected, will she be remembered pretty much as the 'First American Woman President' or as the 'Successful American President who led us out of this sluggish economy, restored peace through strength throughout the Middle East and the world and led to solutions on the federal budget, deficits, national debt, climate change and everything else that has not been solved over the past 15 years at the very least?'

It makes a profound difference, you know. You either are going to elect someone who can help get this economy turned around so you can find the job of your dreams if you are a young person....or you are not. If you vote for the 'first' of anything and they fail to deliver in terms of helping you get to where you want to be in your life and career, then is voting for 'history's sake' all that it is cracked up to be?

We thought it might be interesting to listen in to the conversation of two 38-year old guys in 2024. Both voted for Barack Obama to be The First Black President in 2008 and then one of them voted for Hillary Clinton to be the First Woman President in 2016.

Assuming that the economy stays as stagnant as it has been for the past 6 years, (The Fed just announced they are not raising interest rates and have lowered growth targets for 2015 to 1.8% down from 2.7%) ; the national federal debt has exploded to $30 trillion and engendered double-digit inflation again, entitlements consume 100% of all incoming revenue of any sort and America is still 'leading from behind' in the Middle East as it is today, their conversation in 2024 might be pretty interesting.

We are assuming, of course, that Hillary Clinton will not run against President Obama's policies in any way. Mostly because she was there for the implementation of all of them from the failed stimulus packages to the 'Cash for Clunkers' program to the withdrawal of troops from Iraq and, of course, the passage of Obamacare that 'promised' to reduce the costs of the average American family by $2500 per year.

She has to agree with all of them or else she will be campaigning against herself in 2016, won't she? Just as John McCain had to lug around the baggage of the Bush 43 White House years, so too will Hillary Clinton have to tote the baggage of the Obama White House years.

Anyway, here's the conversation of these 2 guys in a basement somewhere:

Garth: 'How you doin', man? Scored any new jobs lately?'

Wayne: 'No, not really man. I have had a few interviews but nothing really substantial has turned up yet'.

Garth: 'You've been saying that since you graduated from State Tech in 2008, man! What the heck is going on?'

Wayne: 'Well, you know, as soon as I graduated, that damned Great Recession that George Bush 43 and the Republicans caused wiped out the highly-paid IT job I was supposed to get in one of the major banks in Charlotte. Those Twin Towers of Wachovia and Bank of America melted into the pavement of Tryon Street and with it went my degree and chance to success'

Garth: 'I remember Wachovia. Barely. But that was a long time ago, man! That was 16 years ago! That is almost as long as it took for you to get born and graduate from college!'

Wayne: 'Yes it was, man. But I felt pretty good about voting for Barack Obama, whom you will remember was The First Black American President, you know.'

Garth: 'But his policies didn't work! Look at yourself! You are still living in your parent's basement and you haven't had a job with a company for any length of time so you could get any benefits yet!'

Wayne: 'Yes they did, you moron! It was just that the Republicans had screwed things up so badly under W with their 'trickle-down economics' and giving tax cuts to the rich and bailing out the Big Banks and all that that President Obama's policies didn't have a really good chance to work, you know?'

Garth: 'Well, what did you do after that?'

Wayne: 'Well, my parents were pretty nice to me and let me hang out here in the basement, at least while I was trying to get things settled under my feet you know. I kept interviewing but there just were no really great jobs out there. And then the mean old Republicans cut back on the number of weeks I could receive unemployment which really ticked me off.'

Garth: 'And what did you do then?'

Wayne: 'I went on disability for awhile just to make ends meet, you know, and then I went back to community college to get another degree, this time in solar power mechanics'

Garth: 'That sounds pretty cool, man. How did that work out?'

Wayne: 'Not so well. The Republicans around the country all canceled the solar power tax credits in their states despite Obama pushing for them at the federal level and that industry went kaput just like that'

Garth: 'Well, you live by the sword; you die by the sword, know what I mean? Didja vote for Hillary Clinton in 2016?'

Wayne: 'Of course I did! She became the First American Female President you know!'

Garth: 'Yep, I do know that. How did that work out for ya?'

Wayne: 'Well, she tried to get another stimulus package through, just like Obama did, this time to build high speed monorails all over the country but the mean old Republicans didn't approve of that either so nothing happened on that front. She vetoed every tax cut/job stimulus plan put forth by the Republicans for 8 years so essentially nothing really happened to help me out, bro!'

Garth: 'Did she work with the Republicans in the House or the Senate?'

Wayne: 'What am I, a flipping talking head on EmbedNUrHead TV nowadays? All I know is that she said she would veto every Republican idea that would allow rich people to make more money with tax cuts; the people of the peaceful ISIS Empire in the Middle East needed to be protected against nuclear aggression and proliferation on the part of Israel and she would never change one thing in the 'Grand Society' entitlement programs which used to be 3 programs, Social Security, Medicare and Medicaid.'

Garth: 'Which she didn't! Now 100% of every tax dollar that comes into Washington as income, payroll, corporate, excise, death or internet taxes goes to cover just those 3 programs in the Grand Society: SS, Medicare and Medicaid!'

Wayne: 'Hey, man! You sound like you know what the heck you are talking about! What are you doing nowadays, Garth?'

Garth: 'I became a Republican consultant and lobbyist a long time ago, Wayne. I figured there would be plenty of opportunities to help get Republicans elected running against the policies of Obama and then Hillary and I was right: 45 states now have Republican Governors and Republican control of both houses in the state legislature'

Wayne: 'Do you have a good salary and fringe benefits?'

Garth: 'Wayne, in the real world, you eat what you kill. I have clients all over the place and they pay me to do work for them. I pay more than my share of taxes in my humble opinion but yes, I have a good job with a good income. I bought a house and put away some money for retirement. My first son is going off to college in a couple of years but we set aside a 529 plan for him when he was born and bought some Google stock that will basically pay for his 4 years at a private university.'

Wayne: 'What happened to you, Garth?'

Garth: 'I grew up I guess, Wayne. I guess I just grew up'

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