Wednesday, September 18, 2019

Other Perfidious "Assaults on Democracy"

Critics and Democrats claim Republican leaders in the North Carolina General Assembly “assaulted democracy” when they called for two legislative veto override votes early last Wednesday morning when only 64 of the 120 House members were there to vote.
Fifty-five Republicans and nine Democrats were present on the floor. Sixty-one legislators had to be present to constitute a quorum. The Republicans won 55-9. They overrode two of Gov. Roy Cooper’s vetoes by a three-fifths majority: the budget and funds for the Medicaid transformation process now underway in the state.
The Senate has to consider both veto overrides before they can become law.
The only people who are not shocked or surprised by any news about legislative maneuvers that appear to be “underhanded” or “dishonest” are legislators or staff who have been on the receiving end of such “attempts to destroy democracy” in the past.
The main difference is that they usually happen in the dead of night, not in broad daylight for everyone to see.
Until 2011, those receiving the short end of the stick since Reconstruction were Republican legislators in the North Carolina General Assembly.
In 2005, there had been a long and contentious battle over the state lottery in North Carolina ostensibly to help provide more funds for public education in the state. The vote was close but kept falling short of the majority needed to pass the N.C. Senate which blocked passage since the House was in solid Democratic control at the time.
On Aug. 30, in the dead end of the summer, two Republican senators were on excused absences which created the opportunity for a 24-24 tie in the Senate. Democrat Senate leaders Tony Rand and Marc Basnight called senators back to Raleigh because they could count and a 24-24 tie would mean Democratic Lt. Gov. Bev Perdue could cast the deciding vote for the lottery and send it to the House and then to Democratic Gov. Mike Easley for his signature.
Was that “fair” or “foul” play back then? Or was that a shrewd use of parliamentary procedure that everyone knows about once they are sworn in?
The mother of all legislative shenanigans though took place in Congress on Oct. 30, 1987, one week after the largest percentage one-day stock market crash since the Great Depression.
Members of Congress were terrified that they had contributed to the crash by spending too much money, built up too much national debt and needed to at least try to balance the budget. The Democratic-dominated House was considering a $23 billion deficit-reduction package that included $12 billion in tax hikes that 48 Southern Democrats did not want in the bill.
The first attempt failed by a single vote, 205-206. Normally, a bill would have to “layover” for at least one legislative day before reconsideration, but Speaker Jim Wright of Texas was livid and didn’t want to wait until Oct. 31, so he started twisting arms on the floor right away.
Not only did he twist arms, but he also moved heaven, earth and Father Time forward. The Democratic leadership formally adjourned the House to end calendar day Oct. 30 “officially” around noon. They then passed a resolution declaring that a new day had begun so they could “start” the next legislative day that same afternoon, Oct. 30, at 3 p.m. complete with a new “morning” prayer.
It “magically” passed by one vote, 206-205. Fellow Texan and freshman Democrat Congressman Jim Chapman changed his vote from “Nay” to “Aye” to provide Speaker Wright his “assault on democracy” victory, as Republicans and many in the press saw it then.
We were in 401 Cannon House Office Building. The next day, we noticed a lot of painting and refurbishing going on across the hall in a spare storage room.
One week later, three of Jim Chapman’s staff moved into their new “ancillary office.”
Congressman Chapman got a new office space for his staff for changing his vote to raise $12 billion in taxes.
Were these assaults on democracy? You decide for yourself.

(first published in North State Journal 9/18/19)

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Wednesday, September 11, 2019

'The Resistance--- To What Exactly?"

Elderly leaders of “The Resistance” movement — think Bernie Sanders and Elizabeth Warren— grew up in the ’60s protesting the Vietnam War; talking about peace and love; burning bras to support women’s rights and demanding freedom from government oppression.
Back then, they wanted to “Resist the Establishment.” “Fight the Man.” “Question Authority.” Everywhere.
A funny thing though happened over time. These same “resisters” never seemed to want to “Fight the Man” in Washington when power was in the hands of liberal presidents they agreed with such as Bill Clinton and Barack Obama.
They wanted to give them more power, not less. Giving more power to centralized government officials as adult voters went against everything they said was wrong with America as student protesters.
We went to Ocracoke over Labor Day where I bought a T-shirt from the owner behind the counter who seemed to be about my age. She had a “RESIST” sign prominently displayed, so I had to ask if it meant the same thing to her now as during the protests of the ’60s.
“It means I resist President Trump!” she said very nicely.
“Do you resist him personally or specifically on certain policies?” I asked as politely as I could.
“He is just not a very good person,” she said.
“We have had plenty of presidents who were not ‘very good people.’ Neither Bill Clinton nor JFK was a sterling paragon of moral virtue, you know.”
“Trump is a fascist.”
“Many commentators called him Benito Mussolini when he was elected in 2016. There haven’t been any brownshirts in jackboots breaking windows and dragging people off to concentration camps on the news lately.”
“He treated children at the border terribly,” she offered as a rebuttal.
“It is tough to take care of children separately when their parents enter this country illegally. If we don’t have a nation of laws, people around the world would stop wanting to immigrate legally or illegally to America.”
“He wants to make abortion illegal,” she said.
“Abortions are still legal around the country,” I said. “There have been some restrictions on taxpayer funding for abortion, but large majorities of Americans have always opposed taxpayer-funded abortions.”
“Do you think President Trump is racist?” I asked. “Would he restore the Jim Crow laws from the Old South?”
“I think he would if he could,” the shop owner replied.
“President Trump signed a criminal justice bill in December 2018 that would free disproportionately larger numbers of black and Latino prisoners incarcerated for minor drug offenses. Why would a truly racist president ever do that?”
“Can I ask you one final question, ma’am, before I buy this nice T-shirt which I hope you sell at a profit to stay in business?”
“Sure. Go ahead.”
“How has your business been the last couple of years?”
“Despite Hurricanes Matthew and Florence, I have had the highest sales I can remember,” she blithely offered.
“If your business under Trump has been better than it ever was under Obama, why would you want to ‘resist’ that prosperity?”
“President Obama was a good president. He wanted to help people,” she argued.
“We help millions of people when we have a growing economy where everyone can find a job to support themselves and their families. Isn’t that better than having them all on government welfare?
“You are part of ‘The Resistance’ to President Trump which seems more personal in nature,” I said. “I agree with the idealism of our youth — I still don’t trust the concentration of massive amounts of power in the hands of a very few elected or appointed government officials in Washington to tell the rest of us what to do all the time.
“Wouldn’t it be nice if liberals, conservatives and independents could band together to ‘Resist the Establishment’ regardless of who is in power? Try to make our government smaller and quit spending so much money and building so much debt for our children to pay?”
She just smiled and said goodbye.
(first published in North State Journal 9/11/19)

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Wednesday, September 4, 2019

Inverted Yield Curves, Russian Collusion: What Next?

30-year bond yields at historic lows
Liberal cable news outlets that desperately want to get President Donald Trump removed from office any way possible have seized on the “inverted yield curve” as the next best political way to get him out of the White House.
Why use a financial term in electoral politics?
“Russian collusion” didn’t work. Impeachment is a moot point since the 2020 election is already underway. Why not jump on “inverted yield curves” to scare voters to vote against him even if hardly any know what it is?
Put very simply, an inverted yield curve happens in U.S. Treasury bond markets when long-term rates in 30-year bonds are lower than short-term rates of, say, 2-year bonds. When investors get spooked by something negative they see in economic indicators, they want to put their money in the safest possible financial instrument they can find.
When investors bid up the price of the 30-year bond for its safety, the effective stated yield on any issued bond is essentially pushed down. Such a flight to safety usually diminishes the demand for short-term bonds, which then drop in price by comparison and drives their effective interest rates up.
Short-term interest rates going up are not good for the economy either. Higher interest rates mean it costs more for businesses to borrow and invest, hurting their expansion plans or need to hire more workers — although one has to wonder how much of difference it really makes when we are in the lowest overall interest rate environment since the 1960s.
Many economists see inverted yield curves as harbingers of a recession occurring anywhere from 8 to 24 months after inversion.
In the hopeful eyes of MSNBC and CNN commentators, a bad recession will happen right when people go to the polls to vote for President Trump or Elizabeth Warren perhaps in November 2020.
Is it a “definite” indicator of a looming recession?
Ed Yardeni, a noted investment strategist, wrote in a recent newsletter that “an inverted yield curve has predicted 10 of the last 7 recessions.” He went on to say: “Inverted yield curves don’t predict recessions … They’ve tended to predict financial crises, which morphed into economy-wide credit crunches and recessions.”
There have been at least two occasions since 1960 when an inverted yield curve flashed an incorrect prediction for recession, in 1965 and 1998.
If this is a false reading of the inverted yield curve with no financial crisis in the offing, what else could be going on?
Apparently, the whole world is sending money for safekeeping in the U.S. Negative interest rates in Europe will do that to nervous investors as will unrest and tension in the Middle East, Hong Kong and China.
Inverted yield curves might not mean what they used to mean. In 1980, the yield on a 30-year bond was near 15%. In 1990, it was 9%. In times of higher interest rates, inverted yield curves meant more than they do in the flat 2% interest rate, essentially zero inflationary expectations of today.
A real estate investment executive said their investment projects were slowing down some, but not because he thinks a financial bubble-induced recession is imminent. Cost of materials is rising as are the costs of labor due to a shortage of skilled construction workers, but the main thing constricting their new investments is competition from foreign money looking for a safe harbor in America.
His investors typically have demanded 8% returns on their investments. He turned down a recent investment from a Lebanese investor who wanted only a 5% return, an amount that would undercut his longer-term partners which he was unwilling to do.
For now, America is looking like the only place where sophisticated investors the world over are paraphrasing a quote oft-attributed to Will Rogers: “I am more concerned with the return of my money than the return on my money”.
Relying on inverted yield curves as a political tool to get President Trump out of the White House might not work any better than “Russian collusion” did.

(first published in North State Journal 9/4/19)

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Wednesday, August 28, 2019

Looking at Diversity from Another Angle

(first published in North State Journal 8/28/19)

A young person recently brought up a question he heard during an interest meeting about joining a local church.
“What is the church doing to diversify its membership?” another young man asked. “I look around our congregation and … it is pretty white!”
The pastor answered in perhaps the best way he could: “Our church doors are open to anyone who wants to attend. We are a church of peace and spreading the Gospel, and all who want to attend are welcome.”
“Freedom of opportunity,” “freedom of choice” and “diversity” can be congruent ideals but often are very different things in practice. The ideal world is where everyone can join any church; work at any business or live in any neighborhood they choose regardless of race or socio-economic status.
However, that doesn’t mean that everyone actually wants to attend, work or live in the same places, as say, you do. The essential freedom to pursue one’s own course of happiness underlies the very definition of being “American,” regardless of outcome.
In high school, I was invited by a close friend of mine, Ronnie Dowdy, to go to church with him. Ronnie was a huge football star at Durham Jordan High School and was heavily recruited to play at Notre Dame, Ohio State, Southern Cal and Penn State among about 100 other colleges, but he ultimately signed to play for the Tar Heels at Carolina.
Durham was at the forefront of the integration movement in 1968 which is why Ronnie and I were in the first fully integrated seventh grade class in the first place. At age 12, we really didn’t understand what was going on at the time; we thought we were just playing sports, horsing around and going to class with a lot of great people, white and black, whom we grew to respect, admire and love.
I went to his church and was overwhelmed by the energy and the spirit in the worship service. The hymns were sung with abandon and the outpouring of friendship and love at his church was real and genuine.
I asked Ronnie later if he wanted to go with me to my church, a Methodist church in Durham.
“Why would black people want to go to a white church?” Ronnie said with a hearty laugh. “The services are boring; the music isn’t very good and white people just don’t look like they are having any fun in church!” he went on to observe.
He had a good point. He and his family were making their own choice to not attend a white church as were the rest of their congregation.
There are reasons beyond simple appearances or headcounts as to why African American worshipers might not want to attend predominantly white church services that have nothing to do with race. That is why the issue of mandating “diversity” is such a difficult one. No elected official can “mandate” that every facet of everyday life in America has to perfect match the population percentages of each ethnicity in the community because each individual — white, black, latino — has the freedom to make their own choices each day.
If we could mandate perfect integration of the races, then the makeup of every business, church, government office and school in Wake County would adhere to these precise percentages: 72.40% White, 19.72% Black or African American, 5.41% Hispanic or Latino, 3.38% Asian, 2.48% from other races, 1.64% from two or more races, 0.34% Native American, and 0.03% Pacific Islander.
How impossible would that be to implement?
The beauty of America is its ability to allow everyone to have their own freedom of choice regarding which house of worship they attend or what line of work they choose to do. It would be a travesty to allow any elected official to use the coercive power of government to force people to fit into predetermined slots based on race as if they are just different colored M&M’s and not human beings.
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Saturday, August 24, 2019

‘When We Hit The Point Of No Return, It Will Be Too Late’

(first published in North State Journal 8/21/19)

The Treasury Department announced last week that the budget deficit for FY 2019 grew to $866.8 billion in the first 10 months of the fiscal year, up 27% from FY 2018.
Headlines across the news media trumpeted the fact that the national debt was now 106% of GDP as if it spontaneously combusted out of thin air instead of being built up over the past 20 years during the terms of Presidents Bush 43, Obama and now Trump. The blame should be placed around the neck of every Congress and U.S. Senate convened since 2001, not on the executive in the White House.
How dangerous is this 106% of GDP statistic?
Former Federal Reserve Chairman Alan Greenspan testified regularly before the House Budget Committee and the Joint Economic Committee from 1991 to 1994.
Democratic and Republican Members would ask this thorny question as if asking permission to keep spending money or cutting taxes like drunken sailors:
“Dr. Greenspan: What is the point of no return when it comes to how much national debt we can accumulate before things get really bad for the American economy?”
National debt held by the public was 43% of GDP in 1991.
He would always answer in the same dry, matter-of-fact manner. “The monetary policies of the Fed and the fiscal policies of Congress must always be focused on the long-term health of the American economy. The optimal way to reduce deficits and avoid more debt is to restrain the rate of growth in federal spending to at or below the rate of growth in the economy. Raising taxes are not the preferred way to reduce deficits but if they are part of a compromise with serious budget restraint that leads to balanced budgets, the long-term health of the economy would significantly improve instead of deteriorate over time.
“Generally, when a nation’s national debt approaches 100% of their GDP, that is when we have seen nations start to suffer in history. No one really knows what the point of no return is precisely. All I can tell you is that when we hit the point of no return, it will be too late to do anything to avoid the consequences of any fiscal irresponsibility today.”
In FY 2018, tax revenues increased a healthy 3% over 2017 tax receipts. The problem is spending. Total federal spending increased 8% over the same period of time.
Is America at the “point of no return” today with a $22 trillion national debt at 106% of GDP?
The real number to worry about is the debt held by the public, which according to CBO is 78% of GDP. Debt held by the public is “real” debt on which interest had to paid regularly in cash. The rest of the debt is considered “intra-governmental” debt such as the transfers on paper between the so-called Social Security Surplus in the past and the regular budget.
CBO does not consider such intragovernmental debt to have any real economic impact today, which is why they look at the 78% of GDP figure instead of the 106% number. The economic impact that will take place is in the future when younger workers, mostly millennials, will be asked to pay 35% more in payroll taxes to fully fund the benefits boomers will be expecting in retirement. If the millennials rebel, as they most likely will, boomer retirees will be forced to receive lower Social Security and Medicare benefits up to 30% below what they thought they would be receiving.
America may have a full-fledged generational political war before excessive debt tanks the American economy.
Unless we arrest our deficit-spending through serious budgeting restraint and entitlement program reforms, our publicly held national debt will exceed 144% of GDP by 2049 according to CBO.
Which is definitely far beyond the “point of no return” Alan Greenspan warned us about three decades ago.

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Wednesday, August 14, 2019

Stock Market Jitters? Remembering A Stock Market Earthquake

first published in North State Journal 8/14/19)
People have been wringing their hands over the past several weeks about the volatility in the market, especially the day when the stock market fell over 800 points on Aug. 5.

Many attributed it to President Trump trying to force the Chinese to play by fair rules in international commerce. The 3% dip in the stock market was a sign to them that he doesn’t know what he is doing and is just costing a lot of us a lot of money with his incompetence.

The 3% drop last week was a jitter. If you really want to know what a stock market crash looked like, Black Monday, Oct. 19, 1987, was an 8.6 earthquake by comparison.

Early that morning, most of the Republicans in Congress who played golf showed up to play in an annual fundraising event, the Bob Michel golf tournament, to raise money for the next campaign.

We were scheduled to tee off in a shotgun start around 9:40 a.m. Former Congressman Alex McMillan and I were in the same foursome with the chief legislative counsel for the Securities Industry Association, Jack O’Rourke, one the smartest and best lobbyists I ever met in Washington.

Jack met us on the first tee with a somber look on his face. “The stock market opened down 100 points” he said. Congressman McMillan, a former investment banker and chief executive officer for Harris Teeter Supermarkets, tried to calm Jack down and said, “Probably just a temporary dip, Jack.
The market will probably recover by the time we make the turn.”

It didn’t. By the time we made it to the clubhouse after the front nine, we found out the market was down 300 points.

“It will probably recover by the end of the round” everyone at the clubhouse said in unison as they ordered food and drinks for the back nine.

Two jets were flying overhead across a beautiful clear deep powder blue autumn sky as we putted out on the 18th hole.

While we all shook hands after the round, Congressman McMillan ruminated out loud, “Well, Jack, it looks like there are jets still flying out of Dulles Airport and I don’t see a mushroom cloud over Washington, D.C., so it must not have been quite the catastrophe we all were worried about.”

The stock market closed down that day 508 points. It had plummeted 22.61% from the previous day’s close of 2246.74 to 1,738.74 in one day. Counting the 9% loss during the previous week, the market had fallen over 31% in a week.

There was a palpable sense of doom in the clubhouse after the round. No loud bragging about their game, no celebration of the winners. There was more straight whiskey being consumed without mixers or ice cubes than anyone could remember at any event in recent memory.

As horrific as Black Monday was, and despite the fact that from 2008 to 2010, we suffered through the worst recession since the Great Depression; we experienced the largest attack on American soil on Sept. 11, 2001, since Pearl Harbor and a myriad of economic stresses domestically and overseas since 1987, the market is now trading at levels 10 times higher than Black Monday.

If we can keep the socialists from destroying the American dream, the stock market could grow 10 times more to get to the 270,000 level by 2049.

President Trump may be unconventional, but he is addressing serious unfair trade practices by the Chinese government for the past 40 years and trying to help American businesses and workers regain what is rightly theirs.

Suffering through several days of relatively minor stock market volatility by comparison to Black Monday in order to rectify the trade imbalance and injustice with China seems to be a small price to pay.

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Thursday, August 8, 2019

We Need To Learn More From The Civil War, Not Less

(first published in the North State Journal 8/7/19)

At a time when our very real history in America is under siege from those want to expunge any mention of the sins of our past, Ron Chernow’s well-written and researched biography of former Union Army General and 2-term US President Ulysses S. Grant is an important book to read.

Eradicating all mention of slavery in the full context of American history would render our shared life together as “fake history”, not “real” history. There is no way to talk about how great it was that “Lincoln freed the slaves!” without bringing up how Africans were brought to the US in bondage in the first place.

If you listen closely to the abolitionists of our collective US history because slavery existed in the beginning of our Republic, they really want to ban all mention of the so-called ‘peculiar institution” of slavery. The only mention of it presumably would be in footnotes with the comment that “slavery was terrible and perpetuated by a rich, ruling class of entitled white men in the Southern aristocracy”.

Try to imagine what would be lost if we stopped talking about slavery in the South altogether. We would lose perspective on how far America has come since then in terms of racial integration and diversity since 1865.

We would lose the fact that 2 million white Union soldiers fought to preserve the Union and eradicate slavery from the South, 350,000 who died doing so.

Why would leaders such as Abraham Lincoln and white abolitionists in the North sacrifice so many soldiers to the cause of preserving the Union while ending slavery unless it was the right thing to do morally, spiritually and ethically?

If we stop talking about slavery and the Civil War, historians 10,000 years from now would look back on the United States of America as a small blip on the scale of human progress instead of a seminal event where a free society of mostly white people, the Union, prosecuted a war that freed 3 million black people from slavery instead of re-enslaving them as ancient Romans and Greeks regularly did.

Abraham Lincoln and General Grant employed revolutionary enlightened forward-thinking primarily as a tool to expediate the end to the war but later both adopted as the right thing to do as a matter of policy.

Mid-way through the first year of the Civil War, Chernow writes:

“A central aim was to have newly liberated blacks work on abandoned plantations, picking cotton and corn that could be shipped north to assist the war effort. ‘We together fixed the prices to be paid for negro labor”, Grant recalled. “whether rendered to the government or to individuals”.
It was a remarkable moment—the sudden advent of a labor market for former slaves, who could now be rewarded for picking cotton. Grant found himself overseeing a vast social experiment, inducting his black charges into the first stages of citizenship. Taking the proceeds from their labor, he created a fund that was “not only sufficient to feed and clothe all, the old and young, male and female, but to build them comfortable cabins, hospitals for the sick, and to supply them with many new comforts they had never know before.”

Think of it as the first ESOP corporate takeover in American history.

“This brand-new Grant never wavered to his commitment to freed people” Chernow went on to say.

Not as Lieutenant General of the Union forces. Not as President of the United States for 2 terms from 1869-1876 when he mercilessly attacked and severely diminished the Ku Klux Klan throughout the South and implemented Reconstruction along the terms of enlightened racial relations that he knew President Lincoln would have pursued had he survived to serve a second term and possibly more.

We should never forget the lessons of slavery and the Civil War. Perhaps we should try to teach it better to our children.

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Thursday, August 1, 2019

This Is The Worst Budget Deal Ever!

If you love fiscal sanity, prepare to be sorely disappointed this week. Again.

The Committee for A Responsible Federal Budget (CRFB) calls the most recent budget deal expected to be passed by the Senate and signed into law by President Donald Trump this week “The Worst In History.”

That is saying something. There have been plenty of budget deals that were flat-out terrible. All the bad ones increased deficits dramatically and, therefore, our national debt. Only a few — the 1990 Budget Agreement and the 1997 Balanced Budget Act mainly — did anything to arrest the steady inexorable climb to $22 trillion in debt today.

Elected politicians used to at least try to give credence to their claims they were serious about “balancing the budget.”

Now they don’t even try anymore.

According to CRFB:
  • President Trump and Congress will have increased discretionary spending by 21 percent over his first term insuring annual trillion-dollar deficits into law for a long time.
  • President Trump said after signing the 2018 omnibus bill that exploded discretionary spending that he would “never sign another bill like this again.”
  • Republicans used to insist that a dollar of spending had to be cut for every dollar increase in the debt limit.

Before that, in the 1990s, a majority in Congress made up of Republicans and Blue Dog Southern Democrats forced Congress and President Bill Clinton to abide by the following simple rule of PAYGO (pay-as-you-go):
  • For every dollar of increase in new domestic or defense spending, a dollar had to be cut in some other existing program.
  • For every dollar increase in new proposed entitlement spending, a dollar in a new tax had to be raised on someone to pay for it.
  • For every dollar in new tax cuts, a dollar had to be found in savings in entitlement programs through budget reconciliation legislation to make it “budget-neutral.”
The end results of such budget discipline from 1990 to 2001 were four budget surpluses from 1997-2001 and $600 billion of federal debt retired. The national debt owed to the public in 2001 dropped to just over $3 trillion.

The cardinal rule to climb out of any financial hole is to stop digging the hole deeper first. That means stop spending more money on expanding existing programs or starting new ones which Presidents Bush 43, Obama and now Trump, along with complicit members of Congress and Senators have failed to do for the past two decades.

Ross Perot, who recently passed away, ran for president in 1992 and 1996 as an independent. He was famous for two things: “The giant sucking sound you hear is jobs going to Mexico because of NAFTA!” and, essentially, “It is the national debt, stupid!”

He did not win a single electoral vote. He did draw national attention to the dangers of never balancing the federal budget. A Republican Congress worked with President Clinton’s chief of staff, Erskine Bowles of North Carolina, to pass the Balanced Budget Act of 1997 that birthed the only four budget surpluses we have seen in most of our lifetimes.

Perot helped make voters ready to listen to federal spending restraint.

Are we going to wait for another economic calamity such as what we experienced from 2008-10 to get our fiscal house in order? Everyone thought that catastrophe was going to trigger an era of fiscal sanity.

They were wrong; President Obama and the Democratic Congress from 2009-11 went on an orgy of spending that put any real orgy in ancient Rome to shame.

Where are our brave and smart elected members of Congress and senators who understand budgets, economics and who can count? Why don’t they produce a budget that 218 representatives in Congress and 51 senators can support to save us from this colossally stupid build-up of debt, the largest America has ever amassed in peacetime?

Who is going to be the next “Ross Perot” 2020 at either the congressional, Senate or presidential level?

(first published in North State Journal 7/31/19)

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Wednesday, July 24, 2019

A Man Walks Into A $15/hour Minimum Wage Restaurant in Seattle

Washington state in the summer is the place to be if you are from hot, sticky, humid North Carolina. So is Maine. 

The high at Hurricane Ridge in the Olympic National Forest last Friday was a chilly 49 degrees. Seattle never got above 70 while we were there. 

When we travel to moderate climes to escape such uncomfortable heat, we try to find great restaurants that serve simple food made very well. The Walrus and Carpenter in Seattle came highly recommended so we went. 

Seattle is one of the large cities that has mandated a $15/hour minimum wage for everyone who works in Seattle. While it might be a cool place to live in terms of lifestyle, ambiance and temperature, it might not be the coolest place to live if you are running a small business like a family restaurant. 

When the bill came, the following explanation was attached at the bottom about why there was a mandatory 20% service charge included in the bill. 

The Walrus and the Carpenter distributes 58.75% (of the 20% service charge) as a gratuity to employees directly serving guests. 16.25% is distributed to employees not directly serving guests The remainder is retained by the house to provide living wages and benefits to employees. 

Essentially, the city council of Seattle raised everyones restaurant bills by 20% to pay everyone the $15/hour minimum wage. 

On top of that, the fresh oysters cost up to $4 apiece. They were great, but for our money give us a bushel of fresh Harkers Island North Carolina oysters instead. 

A conversation could have ensued between me and the waitstaff person but due to family considerations, such conversations have to be imagined instead: 

So, tell me about this 20% service charge. Do you get it whether you are great at what you do or not? 

We split it between the people who prepare the food and the people who serve it.” 

So you might get $10 from our order tonight? 

Yes, that is about right.” 

If we thought you were great and wanted to give you a 25% tip solely because you were such a great server and give you $25 alone, that would have to be paid on top of the mandatory 20% service charge, right? 


How does that make you feel as a hard worker? 

Do you want another Rainier, sir? 

I got another question. These oysters are pretty danged expensive. I guess they have to be to cover the $15/hour minimum wage here in Seattle, huh? 

I dont get your drift, mister.” 

What happens to the less expensive restaurants where the total bill for dinner comes out to, say, $20 instead of $120? How do they pay the $15 minimum wage when 20% of their bill winds up being only $4? What if they cant sell enough $20 dinners in an hour to be able to pay a waiter or waitress $15 for that hour of work? 

You are losing me, sir. I didnt major in economics in college. 

You dont have to. If a business cant produce over $15/hour in revenue to cover the $15/hour minimum wage for each employee, they wont stay in business.  

How many people are going to be thrown out of work at thousands of Seattle establishments because it costs too much to pay people $15/hour when they can barely afford to pay them $7.25/hour as it is? We just saw a totally automated McDonalds in the Sea-Tac airport. 

It is what it is, sir. 

Not everywhere. We just got back from Kalaloch where the waitress said they dont have a $15 minimum wage. We have great weather, great views and great fish,’ she said. Enjoy it. I do.’” 

Maybe everyone will move to Kalaloch, then, sir. 

Maybe they will have to, maam. Maybe they will have to. 

(first published in North State Journal 7/24/19)

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