Saturday, October 22, 2016

Like Two Tsunamis Crashing Into Each Other


Six months ago, someone asked if Donald Trump's character and HB2 here in North Carolina were still going to be campaign issues come Election Day, November 8, 2016.

'Yes, of course it will!' I said. Even blind hogs find acorns every now and then, right?

But no one ever thought that in this year of a 'change election' that those would be the ONLY two issues people were concerned about this year. No. One.

The economy is sluggish, if that. We have never come close to a robust recovery coming out of the worst recession since the 1930's. The early years right AFTER a nasty recession are usually the best ones in terms of growth simply because so many of the laid-off workers are usually the first ones hired back once excess inventory is sold off or houses start to get built again, for example.

President Obama will retire on January 20, 2017 as the only President in modern times to have not presided over a US economy that exceeded 3% GDP growth in any quarter of any of his eight years in office. That would be 32 quarters.

That is like a football team scoring maybe a safety or a field goal every other quarter or so over 8 looooong seasons. At least they are 'scoring' every now and then you could say but they are never going to win a lot of games nickel-and-diming it along like that. Ever.

Under President Obama's watch, we have seen the national debt explode 100% to $20 trillion, up from $10 trillion when he took office. The federal deficit today is now half of what it was when he took office in 2009, that is true. However, it was over $1.2 trillion in that first year due to stimulus payments and bailouts and buyouts as we tried to stop the hemorrhaging of the economy so 'cutting' the deficit to $500 billion is nothing to write home about or win any award for achieving.

And by the way, CBO just came out with a report showing the budget deficits going UP this last year under President Obama to $650 billion on his way out of the White House and heading BACK UP to over $1 trillion in the next several years. Mainly because nothing fundamental or structural was done over the last 8 years to do anything constructive or helpful to solve our nation's fiscal deficiencies.

Add in ISIS; deteriorating racial relations; illegal immigration; no comprehensive energy policy; health care costs STILL rising almost exponentially despite the fact that President Obama got everything he wanted in the ACA passed in 2010 and a raft of other pressing issues, and you would have to believe the American people are just going to run to the polls to vote for a 'Big Change' to everything it would seem.

And yet, at this juncture 16 days away from perhaps the most consequential election we will see in a while, this election is boiling down to 2 things, at least here in North Carolina, that is:

  1. Does Donald Trump have the temperament to be in the White House?
  2. Does everyone have the right to choose which bathroom they can use?
It is like two tsunamis, one coming in from the west and one coming in from the east and colliding in the middle, say, over some small isthmus of land and totally covering it up with sea water and foam and detritus of all kinds.

And it is going to take some time to clean up after it all. That is a guarantee.

Let's take a look at how this might play out come Election Day:

For one thing, 'Election' Day has already started. Absentee ballots were requested and many already returned by the time early in-person voting started Thursday, October 20 in North Carolina.

By the time November 8 rolls around, over 50% of all ballots will have already been cast based on past experience. Around 4.5 million people in North Carolina can be expected to vote this year and close to 2.5 million ballots will have been cast before November 8.

You are going to hear both the left and the right crow about how their supporters are 'swamping the polls!' between now and then. Based on the first day of record turnout in Wake County, there is probably cause for jubilation on the left, at least in the larger cities.

However, the same thing could be happening in the smaller towns and more rural counties, many of which are going to be slower to report their turnout based on the resources they have at their disposal.

Add in the fact that many polling places are still underwater in and around the Neuse River down east, not to mention the fact that thousands of houses and homes have been destroyed by the recent floods.

Many of those people could care less about the general election today when they are more concerned about where they are going to live and eat the next day.

Finding a clean place to just go to the bathroom and shower and clean up is more of a concern to them than who has the right to join them right now.

The basic question that remains to be seen is this:

'Who is going to show up to vote this year and will the final electorate look more like the Obama turnout of 2008 and 2012 or will it not look like either of those 2 years?'

A bit of history might be helpful at this point. In 2008, with historic high levels of African-American and young voters voting for the first African-American president in American history, President Obama won North Carolina by 14,000 over a very weak and uninspiring John McCain.

In 2012, with slightly lower turnout levels among African-American and young voters but still way higher than what was considered 'normal' before 2008, President Obama lost North Carolina by 88,000 votes to Mitt Romney, even though Pat McCrory won the gubernatorial race by over 250,000 votes over Walter Dalton.

Many people attribute that drop-off to Mr. Romney's Mormonism. It might be other things factored in as well but it is impossible to believe that it did not play some role in such a disparity in his vote totals in North Carolina in 2012.

You almost never see a down-ballot candidate out-perform the presidential candidate at the top of the ticket in almost any presidential year. Most people want to vote for the President first but then lose interest as they go down the ballot all the way to the district judges and bond referenda before their eyeballs fall out of their head due to lack of interest in such issues or even knowing who, what or why 'judicial temperament' is a good thing for any candidate for a judgeship to possess.

Secretary of Labor Cheri Berry garnered 100,000 more than Mitt Romney did in 2012. Think about that for a minute.

In order for Hillary Clinton to win North Carolina's 15 Electoral Votes, experts say that 22% of the final electorate has to be African-American. That means that close to 1 million votes have to be cast for Hillary Clinton in North Carolina or almost 1/2 of her total votes in the state.

If she does that, she will win hands-down going away all flags flying.

However, she has failed to generate the enthusiasm in the African-American communities and young voting block that President Obama did which stands to reason since he was the first African-American to win the presidency and a cool symbol of progress for many young people and African-Americans nationwide.

What HB2 has done on the left is to energize thousands of progressives in the major cities mostly to turn out and vote against the Republican Governor Pat McCrory and the GOP-led General Assembly which is one reason why we saw long lines on the first day of early voting.

So perhaps that will be enough to offset any drop in African-American or youth voting statewide.

To them, it 'feels' like a tidal wave that is going to sweep out all of the Republicans and the dozen or so Democrats who voted for HB2.

On the other hand, the sheer size of the rallies for Donald Trump at every site large or small in North Carolina this past year gives hope to people on the other side that a tidal wave of conservatism is swelling on their side that is going to prevent Hillary Clinton from winning North Carolina's 15 electoral votes and keep Governor McCrory in the Governor's Mansion and Republicans in solid control of the General Assembly for another two years.

10,000 people showed up for a Trump rally in tiny Kenansville, population 775, this past summer. People don't show up for a political rally in those numbers if they do not intend to vote in large proportions for that candidate, that is for sure.

Based on who you talk with, you could be persuaded that this is going to be a 'wave election' for the Democrats at the state level where they win every Council of State office except Secretary of Agriculture and they at least get Republicans below veto-proof majorities in the NC house and senate.

Others can convince you that Republicans will keep the Governor's Mansion and close to veto-proof margins in the NCGA; Senator Burr and Trump will get the 15 North Carolina electoral votes he needs to have any chance of winning the Presidency simply because they 'know' a 'wave election' is building for Trump and the Republicans much like Reagan in 1980.

One by-product of this nasty and in many ways, desultory presidential campaign, other than its interminable length, might be the surprising numbers of people who have just given up on our democratic process and just choose to stay at home and not vote this year.

Many people say they just can not vote for Hillary Clinton or Donald Trump this year. You might see totals for both of them fall below the votes cast for the gubernatorial candidates on both sides as we saw in 2012 with Mitt Romney which came as a surprise to most observers.

You can hardly blame anyone for not voting this year. It reminds us of the Rolling Stones' song, '(Stuck Between a) Rock and a Hard Place':

But you still need to vote. One way or another. Up and down the ballot in all the races and referenda.

It is the only system of government we have. We will make it through. Somehow. America always has in the past. And this is certainly not as 'scary' of a time as the Civil War, World War I, Great Depression and World War II were for our forebears and ancestors.

We even survived 25+ years of dismal presidential 'leadership' (sic) before the Civil War.  Take a look at that list of presidents. James Buchanan was the last one and he was so awful that historian place him at the absolute bottom of all of our 44 Presidents so far and he won that almost by acclamation.

Mick Jagger is no poet along the lines of now-Nobel Prize winner Bob Dylan (will wonders never cease?) but perhaps we should heed the words to 'Rock and A Hard Place' as we go forward after this election:

'You'd better stop; put on a kind face....We're in the same boat on the same sea and we're sailing south on the same breeze...and our children are playing with loaded dice'

Indeed. Just the 'loaded dice' of the burgeoning national debt at $20 trillion and rising with the attendant potential explosion in interest costs if interest rates just return to 'normal' rates of 5-6% is enough to keep you awake at night.

Hopefully, our next President will lead us in an effort to finally do something about it.

lyrics to 'Rock and a Hard Place'

The fields of Eden

Are full of trash

And if we beg and we borrow and steal
We'll never get it back
People are hungry
They crowd around
And the city gets bigger as the country comes begging to town

Stuck between a rock
And a hard place
Between a rock and a hard place

This talk of freedom
And human rights
Man's bullying and private wars and chucking all the dust into our eyes
And peasant people
Poorer than dirt
Who are caught in the crossfire with nothing to lose but their shirts

Stuck between a rock
And a hard place
Between a rock and a hard place
You'd better stop put on a kind face
Between a rock and a hard place

We're in the same boat
On the same sea
And we're sailing south
On the same breeze
Guiding dream churches
With silver spires
And our rogue children
Are playing loaded dice

Between a rock and a hard place
You'd better stop

Give me truth now
Don't want no sham
I'd be hung drawn and quartered for a sheep just as well as a lamb

Stuck between a rock
And a hard place
Between a rock and a hard place
You'd better stop put on a kind face
Can't you see what you've done to me

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Saturday, October 15, 2016

#Hillary and #Trump May Have Done The Democratic Republic A YUGE Favor

'And so will be the 2016 Presidential Campaign!'
When this presidential election finally and mercifully ends on November 8, hopefully*, America will be ready to remember Gerald Ford's statement after he was inaugurated to succeed Richard Nixon in August, 1974:

'Our long national nightmare is over'

Isn't there anything we can do to adopt some semblance of the British electoral system where elections are called and usually take place 60 days or so thereafter? 1 year is too long. 2 years is insane. If we are looking at 4 years of campaigning by anyone on the losing side this year, we should just all agree to ignore them until October, 2020 and be done with it all.

After the latest revelation of another inappropriate comment by Donald Trump, and Hillary Clinton's drip, drip, drip of damaging Wikileaks emails and memos, it occurred to us that between his comments and Hillary Clinton's almost pathological inability to tell the truth about anything, both may have done something that will actually help the American Republic down the road.

As hard as that is to believed right now.

Think about it. On Election Night, one or the other is likely to get to 270 electoral votes, barring some unforeseen circumstances. Will there be euphoria and fireworks on the winning side? Will hundreds of thousands of people swarm to see the President-Elect give a rousing, positive inclusive speech on the grounds of some historic building where something important happened in the past?

Both candidates combined have the highest aggregate unfavorability ratings of any 2 candidates in American history running at the same time. Out of a total of 200 points, 100 points of unfavorability being the worst for each of them, these two presidential candidates have a grand total of about 140 negative points, around 70% apiece.

They have both earned them fair and square for reasons and incidents that are too numerous for us to share here.

It is highly unlikely that the next President will enter the White House with any sort of positive 'electoral mandate' or have a post-election honeymoon with the Congress and Senate. On what sort of basis would either have an 'electoral mandate' to do anything? Both would claim 'Hey! I am not as bad as that other person!' but that is hardly any sort of galvanizing force to rally the country around.

Neither will enter the White House with anything close to being considered as having the 'moral high ground' on much of anything. How could they possibly look the American public in the eye and say in essence: 'Trust me to do and say the right thing. All the time. No matter what'

The respect either will have with the American public might rival the respect many Americans have for a dishonest used car salesman who somehow stays in business despite cheating and lying to the same customers year after year after year.

That is not good.

However, the silver lining in all of this might be as follows.

We have long been proponents of diffused governmental power. The more checks and balances the better; the less power any one individual has at their disposal the better as well. We are very Jeffersonian in that regard; legend has it that he did not like the concentration of power in a few hands in Congress even if they were members of his own political party and persuasion!

He wrote a lot about the tyranny of power concentrated in a few. Except when he became President for 8 years and found out that having a lot of executive power at his disposal was something he rather enjoyed.

Which brings us to our point:

Perhaps Hillary Clinton and Donald Trump have done us a massive favor. Perhaps this presidential campaign has so damaged the reputation and respect of the Office of President and reduced the aura of that office to the degree that we can return to the ideal that was central to the Founders of our Constitution in Philadelphia in 1787 which was this:

'We Don't Want No King!'

The Founders had absolutely zero interest in setting up a President who could do whatever he pleased, much as the king they despised, King George of Great Britain, had done to set them off on the dangerous and treacherous course of independence from the Crown.

They fully intended to have a government 'of the people, by the people and for the people' as Abraham Lincoln so eloquently put it 76 years later at Gettysburg and that did not include having total indiscriminate powers on anything really.

Every single thing the President was tasked to do in the Constitution is subservient to the US Congress and Senate. The office of the Presidency was the second article, not the first, which dealt with the legislative branch comprised of elected delegates 'of the people'.

The President was tasked to be the Commander-in-Chief of the armed forces. However, no funds could be spent on prosecuting any war without the concurrence of Congress.

The President could nominate people to the Supreme Court (who don't need to be lawyers or judges by the way). However, he could only do so with the 'advice and consent' of the majority of the US Senate on top of their recommendations in many cases of lesser judges in the judicial branch.

If there was anything that the President was seen as doing outside of the specific powers allocated to him in Article 2 of the Constitution, Congress always retained the 'power of the purse' and could either agree to fund something the President advocated or could withhold funding in total.

Of course, Congress retained the ability to impeach a President in the Constitution, not the other way around. A US President could never try to disband Congress as you may see in other lesser republics around the globe; the reaction to such an effort would be immense and hopefully, it would be unanimous and seen across-the-board as antithetical to the American spirit and system of self-governance.

We think that regardless of who is elected this year, either Hillary Clinton or Donald Trump, both are such damaged goods in terms of being viewed by a vast majority of Americans as a 'moral leader' that we might see a golden opportunity for the US Congress and US Senate to reassert both legislative bodies as the 'board of directors' as elected representatives 'for the people' for whom the President works, not the other way around.

Henry Clay and other great leaders in Congress spoke often of 'legislative supremacy' which in its purest form embodies exactly what the Founders had in mind when they decided to give representative democracy a good go in 1787. Many did not think it would last long. Even James Madison, The Father of the Constitution, soon regretted many of the features of the ratified Constitution and thought the young republic would soon fail under the weight of its many pressures.

Ever since FDR, we Americans have somehow become inured to the idea that maybe a great President can all of a sudden become 'Superman!' and save us from all our troubles.

A good friend of ours, Michael Cromartie of the Ethics and Public Policy Center in Washington, DC (yes, such a place does exist...check it out) cautions us all to adopt an 'Augustinian sensibility' when it comes to politics and the ultimate impact it can be expected to have on our lives. Augustine said we are here between the temporary and eternal worlds so we should moderate our expectations for a mere mortal man to lift us up and our depressions when our side doesn't win an election.

Maybe the accumulated foibles of both major political candidates for President this year will finally pop the bubble that 1 person can and will 'solve ALL of our problems and set us free!'

They won't. No matter how great any candidate could possibly be.

No, we think there is a silver lining after all to this truly desultory political campaign. Regardless of who wins, 40% of the country is going to completely ignore his or her legitimacy as our President. A large percentage of people beyond that are not going to respect either one who is elected because neither has seized the high moral ground of leadership and authority by their conduct or by their prosecution of this campaign.

It is a campaign of anger on all sides. And that anger will take a lot of time to subside and heal which usually takes place when great leaders emerge to lead us.

In the meantime, however, knocking down the concentrated power of our Chief Executive to its proper place as envisioned by the writers of the Constitution might not be altogether a 'bad' thing after decades of more and more power accruing to the Executive Branch of our federal government.

#Hillary and #DonaldTrump may have both contributed more to that diminution of power than even they recognize at this point.

If it happens, and more power devolves back to the legislative branch in the US Congress and Senate in the coming years, we might even be able to thank them one day.

As soon as we forget how disgusting this campaign has been.

*(unless something else happens, that is,between now and then to allow Gary Johnson to win New Mexico's 5 electoral votes or something crazy happens in Utah to allow Evan McMullin to win those 6 electoral votes and deny Hillary Clinton or Donald Trump a majority in the electoral college and send it into the House of Representatives for the election of our next president)

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Friday, October 7, 2016

Think Everything Has Been Solved Under President Obama?

Think again.

Most recent forecasts and projections by the Congressional Budget Office (CBO) show that federal spending jumped in 2016 just as tax payments from small business and individuals dropped due to the weak economy.

The scary thing about these projections is that they still project a relatively 'calm' rate of interest on the national debt for the next 10 years, increasing from near zero today to 3%-4% by 2026. If interest rates spike at any time during that period, these projected deficits will increase even faster.

There is not much more we can add to this CBO report (which we urge you to download and read as you hunker down watching Hurricane Matthew this weekend; the summary is only 9 pages) that we haven't already written about before.

For the past 8 years, we have been pointing out the critical importance of having our President and elected US Senators and Representatives come together on some sort of 'Grand Bargain' whereby the major entitlement programs would be thoroughly examined, evaluated and then reformed, especially in the health care programs, Medicare, Medicaid and the military and VA health programs; worthless and wasteful programs in domestic discretionary and defense budgets would be eliminated and, if absolutely necessary to gain a majority to get it passed in Congress, some small tax hikes somewhere to garner the necessary votes for passage and ultimate signature signing ceremony in the Rose Garden by President Obama.

We have put it this way to reluctant conservatives opposed to any tax hikes ever under any circumstance:

'If you could get $10 trillion in spending reductions from the baseline over the next 10 years GUARANTEED and in place BEFORE any taxes take effect, would you agree to a $1/head tax hike on everyone to complete the Grand Bargain'?

Had such a bargain been completed in 2009 instead of President Obama and the Democrats, who had 100% control of the US Senate and Congress at the time, steamrolling the Republican minority in Congress to pass Obamacare which is now coming apart at the seams like a cheap suit (Even Bill Clinton calls it 'The Craziest Thing Ever!'), our national debt would be closer to $12 trillion or maybe just $13 trillion today instead of $20 trillion heading to $21 trillion.

The greatest threat to our future going forward is not higher taxes, although they would tend to mitigate accelerated economic growth. We have proven that somehow we can absorb, or avoid, the higher taxes and regulations of Obamacare over the past 8 years and not completely fall apart as an economy.

The greatest threat to our future going forward is not getting firm control on our exploding federal debt. Anyone who has been in Congress or the US Senate or The White House for the past 8 years and not voted for a legislative package that would have limited spending first and possibly agreed to some small tax increase in return to curb these deficits has, in essence and in results, 'VOTED' FOR HIGHER NATIONAL DEBT!

There is no other way around it. Anyone who was not part of a solution has been part of the problem no matter how loud they cry that they 'Did NOT Vote for Higher Taxes!' or 'Did NOT cut this-or-that program!'

By their own decision to default to inaction, they have willfully and thereby almost intentionally 'voted' to increase the national debt on everyone, especially our sons and daughters and grandsons and granddaughters and their progeny for possibly the next century to come.

Great Britain just made the last payment to the United States recently for debt they incurred during World War ONE which ended close to 100 years ago.So it has happened before.

Everyone who has been elected to go to Washington over the past 8 years had the power to not add $10 trillion to the national debt but they failed in their responsibility and duty as our elected representatives, Senators and President.

No manner of excuses or finger-pointing or name-blaming can exonerate each of them from such a judgment of history. They were there; they didn't do anything about it; others who follow will have to clean it up and clean it up fast or else we will all suffer the consequences for their inaction, carelessness and in many ways, sheer stupidity.

'Here's a great book you might
want to read....'
One thing we can all agree on is that there is some definite finite point where any economy on the face of this earth can incur 'too much debt'.

As Alan Greenspan used to say when testifying about the federal budget and national debt before the House Budget Committee or the Joint Economic Committee (where he and 1 Federal Reserve aide were often the only 2 people at the hearing other than the Chairman and his staff and the congressman I worked for and myself so it was very easy to hear and understand what he was saying):
'I don't know where the line is that crosses us over from 'manageable' amounts of national debt to 'unsustainable' levels of federal debt. But what I can tell you is that if we do recognize it and start to try to do something about it only then, it will be too late at that point in time'.
Why take that chance?

You are going to get your chance to vote for people to go to Washington to fix this crucial public policy problem in about 1 month.

Choose wisely.

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Wednesday, October 5, 2016

How About A 'Stand For The Flag' Constitutional Amendment?

Unless you have been around for awhile, a pretty good long while, you would think the Colin-Kaepernick-kneeling-during-the-National-Anthem controversy was the first of its kind in American history.

It is not.

We remember quite well the controversy nationwide over the so-called 'Flag Burning Amendment' since it was introduced and debated during the time we were serving in the US Congress in the late 1980s/early 1990s.

In 1989, the Supreme Court ruled in a split 5-4 decision that burning the US flag in a protest was protected by the First Amendment.

Justice Anthony Kennedy, writing for the majority, said this at the time:
“The hard fact is that sometimes we must make decisions we do not like. We make them because they are right, right in the sense that the law and the Constitution, as we see them, compel the result...And so great is our commitment to the process that, except in the rare case, we do not pause to express distaste for the result, perhaps for fear of undermining a valued principle that dictates the decision. This is one of those rare cases.
Though symbols often are what we ourselves make of them, the flag is constant in expressing beliefs Americans share, beliefs in law and peace and that freedom which sustains the human spirit. The case here today forces recognition of the costs to which those beliefs commit us. It is poignant but fundamental that the flag protects those who hold it in contempt”
This is a tough issue for many Americans to parse through and grasp.

On the one hand, the flag is a symbol for freedom that millions of Americans have sacrificed their life and limb for over the past 2 centuries so we can enjoy those freedoms today.

For many Americans, especially those who have ever served in the military or have had family members serve and/or die or be wounded while in combat serving our country, kneeling during the national anthem is perceived as being a profound act of disrespect for their sacrifice and honor of duty regardless of what the protester might be saying they are protesting against at the time.

On the other hand, many people hold a 'list of grievances' against things in American life they consider to be 'unfair' or 'unjust' and feel that protesting against the flag is one way they can express their displeasure with the way things are today.

Colin Kaepernick said he felt moved to kneel during the national anthem to show his support for protesters who were protesting shootings of African-Americans by white police officers around the nation. However, when pressed, he did say that he held soldiers and the military in high esteem and this protest was in no way directed towards them.

That is the problem with many protests. You don't really get the chance to parse out the reasons and the targets of a simple act such as kneeling down or burning the flag and then saying later: 'Well, I only meant it to mean what I meant it to mean'

We don't disagree with anyone's right to protest almost anything in the United States of America. If we had not had our inherent right to freedom as enumerated in the Declaration of Independence, which was really an extended 'list of grievances' against the King of England, we wouldn't have fought the War of Independence to gain those freedoms and would have been content to just obey anything the King wanted to throw at us and we'd be sipping tea every afternoon at 3 pm instead of guzzling coffee at Starbucks all the time.

But there are 2 other things that such 'freedom of speech' has guaranteed every American citizen that many seem to have forgotten for some reason:

  1. The right to not listen.
  2. The right to disagree.
If the sight of watching a professional athlete kneeling during the national anthem is offensive to you, you have every right to do two things:

1) Turn off the TV and go for a hike or play a round of golf; or
2) Stop buying expensive tickets to go to a professional football game and throw the ball around the backyard with your kids or grandkids.

Or you can watch the opening ceremonies and either acknowledge that the athlete is expressing some legitimate concerns about American life or just ignore it and get ready for the big game.

Everyone has a lot of freedom when it comes to speech in America, don't they? 100% of the right to speak freely doesn't lie solely with the protester.

We guess there could be a law passed to prevent people from kneeling during the national anthem. Or a constitutional amendment offered to do the same.

But maybe the best course of action to take might be to have people from all sides of any controversial issue meet to discuss the issues with all the facts on the table and try to come up with complicated solutions to very complex matters such as the unrest in many inner cities when it comes to interactions with police.

We might be sounding like a broken record by now but we don't think there is any substitute for rational, enlightened civil discourse and compromise when it comes to living in a diverse democratic republic such as the United States of America.

Maybe that is too much to be asking for in this day of hyper-ventilating TV and radio talk show hosts and super-partisan newspapers and news media outlets. Political parties on both sides and news media outlets are making way too much money over fanning the flames of political discord to be really all that interested in peace and love and harmony.


We have long thought that one of the best things that could happen to any super-partisan news media or talk show personality would be for them to run for any political office and THEN return to their line of work after such an experience.

As one of our sons told us after he came off the field after missing what we thought was an easy shot while playing in a 3rd-grade lacrosse game in snow flurries in late fall in a Northern Virginia off-season game:

'It is not as easy as it looks, Dad!'

So it is with running for public office. It will take real leaders with real leadership abilities and talent who have respect from supporters and opponents alike to lead us out of these contentious situations where partisans on both sides have every reason to not want to seek a solution and make gains at the polls this fall.

Perhaps the 'best protest' you could make as a private citizen would be to throw your hat into the ring and run for political office and show us how mature, sober and serious adult leaders can lead us to concrete solutions in the political arena instead of watching others just protest and inflame things.

You might just win, you know. And a grateful nation would applaud wildly.

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Thursday, September 29, 2016

Want a REAL Topic For The Next Presidential Debate?

'At least we are talking about the critical issue of
Quemoy and Matsu instead of tax returns and
birth certificates!'
How about changing our tax system for the better?

Wouldn't that be a topic you would like to see some moderator have the decency to bring up and ask questions about at the next debate between Hillary Clinton and Donald Trump?

We don't know about you but we are about fed up with the news media that thinks this is some sort of inconsequential reality show or, worse, Jerry Springer or Maury Povich Show whenever they get the chance to host a presidential debate. It is like the moderators huddle in a kindergarten classroom to come up with the most trivial matters that will titillate the other students later in the day.

We want to know a few things about our next President, namely what are they going to do once elected to round up enough votes in the US House and Senate to get things passed on issues that we care about such as:

  • Taxes. Are you going to make us pay more or less of them?
  • Spending. Are you going to spend more or less in Washington?
  • National Defense. Are you going to wipe out ISIS and protect us or not?
  • Health Care. Are you going to repeal Obamacare & make health care more affordable or not?
  • Supreme Court. Are you going to appoint judges who want to be de facto legislators or not?
Coming up with trivial matters just to boost ratings and titillate ardent supporters on either side is really beneath contempt when it comes to moderators of these debates.

People are always bemoaning the loss of true statesmen in the political world.

How about the almost total extinction of 'true journalists' in the news media who would conduct themselves in a fair and balanced manner as in debates of the past?

In 1960, Howard K. Smith of CBS News moderated the JFK/Nixon debate along with panelists Sander Vanocur, NBC News, Charles Warren, Mutual News, Stuart Novins of CBS News and Bob Fleming of ABC News. 

Most people never even knew who the moderators were in those debates. They were like the referees of a football game; no one knows who the referee is unless they really, really, really screw up big-time, right?

Whoever the next moderator is, and we hope we don't know who it is so they won't try to steal the spotlight again from the two candidates, here's a topic we would like to see discussed in total fully:

'Will you lead an effort over the next 4 years to finally fix our sclerotic, confusing and inefficient income tax system?'

We don't think this is a question for 2 minute answers and 1 minute rebuttals. Surely both candidates would try to wiggle off the hook and start to veer into attacks on the other candidate about what they did or didn't do or said or didn't say 30 years ago.

Who cares when we have a sluggish economy, close to 20 million people who are either unemployed or underemployed and a $20 trillion national debt staring us in the face?

We think there should be at least 30 minutes dedicated to this question of true tax reform with an electric shock buzzer attached to both candidates so that if they veer off into not answering the tax reform question, they get shocked back into reality until they actually do answer this question of utmost importance.

Here's some context to get started:

Our income tax system on both the individual and corporate side is so riddled with exemptions, loopholes and exceptions that if it were a house, it would collapse on itself. There is really no overall encompassing principle that binds it all together and makes it seem 'fair' to everyone while bringing in the necessary revenues we need to fund the government.

We can argue about what is 'essentially needed' in our federal budget in the next debate. Which would take maybe 10 hours to complete.

Close to 1/2 of our federal collection is paid for by taxes on individual incomes. Over 1/2 of all taxpayers do not pay any income tax to the support the federal government. The top 1%  of all taxpayers, the highest income earners, pay close to 1/2 of all individual income taxes as it is today.

Lots of 'halfs' going on in our income tax collection nowadays, isn't it?

The corporate income tax accounts for 11% of all tax collection today. During the recession, that fell to 5%. No net income earned, no taxes paid.

Can't pay taxes when you lose money, you know. So you should be cheering for big corporations and businesses to make a profit so they can pay taxes to support your favorite federal program. Just like JFK did when he said the US government and companies were 'business partners' back in 1961.

The 50% of the taxpayers who do not pay any income taxes DO pay payroll taxes on earned income.

Just like everyone else does regardless of income earned and declared all the way up to people earning hundreds of millions of dollars in earned income such as NBA players with guaranteed contracts.*

Know what the payroll tax really is?

It is a 'flat tax' on the incomes of every working American regardless of income, race, age or gender. Everyone pays a 12.4% tax on wages up to the annual threshold for Social Security, which was $118,500 in 2015 with half (6.2%) paid by workers and the other half paid by employers.

Everyone pays a 'flat tax' on their earnings as well that goes into Medicare Part A, or the Hospital/Medical part of Medicare. You pay a 1.45% Medicare tax on your earnings to be matched by your employer at 1.45%. There is no threshold on the Medicare Part A payroll tax so the more money you make in earned income (not capital gains, etc), the more you pay in Part A Medicare taxes.

In addition, there is an additional Medicare 'flat tax' of 0.9% passed under the ACA or 'Obamacare' that you must pay if your income exceeds a certain amount, $250,000 for a married couple filing jointly. This must be matched by your employer as well.

Of course, if you are self-employed as many people are, you are just going to have to pay both sides of the tax, your side and the employer side (although you do get to deduct the employer side, so good for you)

The point of all this is to ask the simple question to Hillary Clinton and Donald Trump the next time they meet on stage:
'Wouldn't it just make sense to abolish the corporate income tax and the 'death tax' (which brings in so little income relative to the effort to collect it, approximately $20 billion in 2014 or less than 1% of all federal tax collections, that it is inconsequential almost as a line-item in the budget) and slowly expand the 'flat tax' concept of payroll taxes to replace them?
At least there would be no tax cheating on payroll taxes. Everyone pays them because they are flat taxes and there are hardly any tax exemptions or exceptions to payroll taxes when compared to the litany of gigantic tax tunnels in the corporate or individual income tax side of things.

Getting rid of the corporate tax exemptions and exposing that income to a flat tax almost is guaranteed to bring in more revenue just as a common rule. We have close to $1.4 trillion in existing tax expenditures as it is today, a lot of it from the corporate side of things.

We think the next step would be to replace the entire income AND payroll tax system with a consumption tax.

But we will save that for the 2020 Presidential election.

Which will start November 9, 2016 about 10 seconds after we know if we are going to have a 'President Hillary Clinton' or a 'President Donald Trump' for the next 4 years.

Won't that be fun?

*by the way, if you just take the total team salaries of the 30 NBA teams, $3 billion or so, and apply the payroll tax to just 500 NBA professional basketball players, that accounts for close to $100 million in just Medicare taxes alone they pay each year or about $160,000 in payroll taxes alone per player - (assist from former NBA Baltimore Bullet All-Star and Duke University All-American Jack Marin for that bit of information)

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Sunday, September 25, 2016

'The Curse of Bigness'

We have been reading a pretty interesting book lately, 'Louis Brandeis: American Prophet' and been struck by many things he wrote in his opinions while on the High Court in Washington, DC but perhaps none more than this:

'Many of his most devoted disciples apparently didn't read all of his decisions or understand the totality of his philosophy towards government' 

It is not all that unusual. John Calvin, in many respects, would not understand what many of his Calvinist followers came to proclaim later in his name nor would Martin Luther agree with many doctrines of the Lutheran Church as the centuries rolled along.

Disciples of almost any belief have an interesting human way of distorting and contorting the words of a leader over time into ways and rituals they like and seek to control for future followers to follow.

Supreme Court Justices Sotomayor and Ginsberg wrote glowing accolades of Justice Brandeis for the cover of this book and called him their 'guiding light' for their judicial philosophy and decision-making processes.

There is no doubt that Brandeis would have considered himself a 'progressive' for his time in the late 19th century and early 20th century. Some of his ideas, such as raising the rates of taxation so high on big corporations in order to force them to stay small entities (somehow) might sound like Bernie Sanders on the campaign trail in 2016.

However, the recurring theme of 'American Prophet' is this:
Justice Brandeis' disdain for and distrust of anything 'big' where a concentration of enforced power could be concentrated in a few people's hands and hurt other people with their capricious behavior.
He talks about it over and over and over again. He overturned several programs of FDR's New Deal because he felt they overstepped the constitutional boundaries of executive power in the US Constitution and violated the aversion to concentrated power, especially in government, first put forth by his hero and guiding light, Thomas Jefferson.

He opposed oligopolies in business where wealthy businessmen could manipulate markets to their own benefit first.

He regularly deferred to the states as 'laboratories of democracy' (a phrase with which Brandeis became well-known for) where state and local government leaders closer to the situation had the freedom to experiment with different alternatives to see what worked best without interference from other judges or bureaucrats outside of the state or locality, especially from far-away Washington, DC with all of their inherent federal powers to regulate, tax and direct.

If you have been concerned or disturbed by executive power over-reach of the Obama Administration over the past 8 years and expansion of federal regulatory power, are you comfortable with Hillary Clinton following the same policies and line of attack when it comes to being President?

If you are not concerned or disturbed by executive power over-reach of the Obama Administration over the past 8 years and expansion of federal regulatory power, are you comfortable with Donald Trump following the same policies and line of attack when it comes to being President?

Either way, Justice Brandeis would have probably stepped in to rein in the executive powers of any 3 of these people as President and admonished the US Congress to exercise its constitutional authority and prerogative by withholding funds for any such expansion of executive power as a critical check on any individual gaining too much power in our constitutional form of democratic republican self-governance.

Here's the question to ponder, especially as we head to vote in the next several weeks for President down to school board:

'What is it about our federal government in Washington, DC that many people seem to think will become more altruistic and noble the larger it gets if those same people think BIG BUSINESS, or big churches or big anything are 'bad' in many ways?'

The way Justice Brandeis puts it in many of his opinions, leaders in virtually every institution, government entity, business or private or non-profit charitable organization are subject to the same human emotions and negative traits such as envy, anger, revenge, ego, power, money, accumulation of wealth and status that can be used to hurt other people in seemingly capricious ways, either unintended or, sadly in most cases, well-intended, thought-out and premeditated.

There is no rational reason to believe that people who run for office and want to be our local, state and federal leaders are more 'saintly' than any other human being, although we hope and wish and pray for our elected leaders to be so.

The larger our federal government becomes, the more tools and powers it accumulates with which to use against people who might be in disagreement with the prevailing political party in the White House or in control of Congress.

So why give anyone the keys to an ever-expanding bureaucracy with which THEY get to control more of your life through the law of this country than absolutely necessary if there is any chance of any or all of them turning to the dark side once elected?

It seems as if the limited government concepts put forth so forcefully by Thomas Jefferson at the beginning of the Republic should be some sort of rallying point for people of all political persuasions to start with and continue some reasoned discussions on what to do about many of our nation's problems.

It really doesn't even matter what your political philosophy is. All of us should be vigilant against electing people who can wind up being just as 'bad' as many people think the barons of Wall Street were in the years that led up to Great Crash of 2008 and wiped out trillions of dollars in savings, investments and equity of millions of American families only to see their federal government bail these same barons out with their tax money and federal backstop through the Federal Reserve.

Here are just a few of Justice Brandeis' pithy observations:

  • 'Curb of bigness is indispensable to true Democracy and Liberty. It is the very foundation also of wisdom in things human....(unless Progressives at the time could see this truth), 'we are apt to get Fascist manifestations...If the Lord had intended things to be big, he would have made man bigger--in brains and character'.
  • 'Those who won our independence believed that the final end of the state was to make men free to develop their faculties, and that in its government the deliberative forces should prevail over the arbitrary.

    They valued liberty both as an ends and a means.

    They believed liberty to be the secret of happiness and courage to be the secret of liberty.

    They believed that freedom to think as you will and to speak as you think are means indispensable to the discovery and spread of political truth; that without free speech and assembly discussion would be futile; that with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people; that public discussion is a political duty; and that this should be a fundamental principle of American government.'
  • 'I don't want money or property most. I want to be free'.
Thomas Jefferson was always in the back of Justice Brandeis' mind as he wrote his many opinions. His words still ring true today:
'We have nothing to fear from the demoralizing reasonings of some, if others are left free to demonstrate their errors and especially when the law stands ready to punish the first criminal act produced by the false reasonings; these are safer corrections than the conscience of the judge' 1)
'If there be any among us who wish to dissolve this union or change its republican form, let them stand undisturbed as monuments of the safety with which error of opinion may be tolerated where reason is left free to combat it' 2)
'American Prophet' is a book that might well be worth your time this campaign season. Before you vote, of course.

1) Jefferson 1801 letter to Elijah Boardman
2) Jefferson First Inaugural Address

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Friday, September 16, 2016

The Tale Of Two Polls

'It All Depends On Who Shows
Up to Play on Election Day!'
Your head must be spinning 360 degrees every day as you watch the news and see the various polls from the various states go up and down and jump all around.

These polls are not 'rigged'. The great ones are not, at least. Any pollster worth his salt will tell you outright they can write a poll question to elicit the answer and result they want for their client anytime they want.

However, they won't be in business long. Mainly because pollsters in political campaigns are like U2 reconnaissance planes over Iraq or J.E.B. Stuart riding around enemy lines for Robert E. Lee to determine the strength and weaknesses and most importantly, the numbers of the opposing forces.

Pollsters give key information to strategists and candidates as to that snapshot in time ONLY. They don't 'predict' or 'divine' who is going to win any more than a football prognosticator can tell you that one team on a particular weekend is going to win that particular football game 'for sure'.

The victor of the game in question depends solely on 'who showed up to play' that day. Most times, the team with overwhelming talent wins easily.

Sometimes, such as when the Appalachian State Mountaineers went into the Big House in Ann Arbor, Michigan on September 1, 2007 before 109,208 totally stunned Michigan fans, a team with lesser talent and resources upsets the favorite, this time defeating the Wolverines, 34-32.

App State showed up to play that day. UM did not. They lost. App State won.

The point of this is not to denigrate political polls. Most of the time they are right. Much as weathermen are 'most of the time' proven right when they say 'It won't rain today' or 'Tomorrow it will be hot'.

They are only 'wrong' if a huge tornado suddenly shows up or a massive thundercloud appears out of nowhere and proceeds to prove them 100% wrong.

It just depends on 'what happens that day'.

Which brings us to 'voter turnout'.

Pollsters are usually pretty good at predicting the presuming the past is prologue, that is. Most of the time, pollsters presume that because the voter turnout was a certain level with particular percentage breakdown of vote by age, sex, race, gender, and socio-economic factors in a previous similar election, say in the 2012 re-election of President Barack Obama,it is more than likely to happen the next time in the next similar election, such as in 2016.

That is why many polls early on seemed to overly favor Hillary Clinton. Many national polls just looked at the turnout and composition of the electorate in 2012, the last available data point for a presidential election in America, and assumed 'it will be just the same in every state in 2016'.

However, voting tendencies tend to change over time, ever so lightly every 2 years and a bit more every 4 years. If they didn't, we would still be voting for the Federalists and Anti-Federalists that erupted in Elections of 1796 and 1800, right?

What really WOULD be simply astounding would be if it was possible to accurately predict the exact percentages of who will actually show up to vote or vote absentee or by mail say 6 months to a year before any election.

It can't be done. Why? Because human beings are mercurial creatures. Sometimes they vote because of common sense and reason. Sometimes they don't.

Sometimes, they just don't like the sound or tone or tenor of a Presidential candidate's voice. Sometimes, people just don't like the way a candidate looks or acts or the way he or she dresses.

Sometimes, a candidate is so boring that millions of people just either 'forget' to show up to vote for him or her or they just plain don't have enough energy or interest to cast their one sole vote for them.

Here's two instances of where polls failed to adequately predict beforehand what the makeup and composition of the actual final voting electorate looked like:

  1. In 2002, we were working on the US Senate campaign for eventual winner, Elizabeth Dole.

    After a very long and very expensive campaign as we gathered together in Salisbury election night, our campaign manager came into a small room and said this to about 30 of us:

    'My advice to to to start drinking heavily. This is going to be a long, long night. We probably will not know the outcome of this Senate race until 4-5 am tomorrow morning. Every poll, both on our side and theirs and nationally predict this will be a race determined a a very few percentage points and maybe less than 25,000 out of over 2.3 million votes to be cast' 

    The polls closed at 8:00 pm.

    75 minutes later at 9:15 pm in the Salisbury depot that was serving as the election night headquarters for the Dole campaign, Candy Crowley or some other CNN reporter turned on her microphone, the camera lights were lit and said this to the world:

    'CNN is now declaring that Elizabeth Dole will win the US Senate seat in North Carolina 56-44%. Back to you, Wolf!' 

    She wound up winning by over 200,000 votes. In a race where EVERY SINGLE REPUTABLE POLL had the race almost exactly even just 3 hours previously.

    Had it been a presidential year, the margin of victory might have approached 500,000 since voting turnout roughly doubles when presidential races head the ticket.

    What happened? More people showed up than expected. Many more of them showed up to vote for Elizabeth Dole instead of her opponent.

    Next question.
  2. In 2014, NC House Speaker Thom Tillis was running against incumbent US Senator Kay Hagan who had knocked off Senator Elizabeth Dole 6 years earlier in 2008. (What goes around, comes around in politics)***

    Most polls, probably including his own internal polls, showed a tight race with Hagan ahead slightly...ASSUMING voter turnout in certain counties such as Wake and Mecklenburg would hit certain target levels, especially among the usually dependable African-American vote for Democrats.

    Senator Hagan came out of Mecklenburg and Wake Counties with over 100,000 more votes than Thom Tillis. However, the vote total margin of victory coming out of Mecklenburg County was 'only' about 56,000 instead of the 70,00+ target the Hagan campaign needed to combine with other margins of victory in the most populous cities and counties in North Carolina  to win re-election.

    Thom Tillis won the rural areas by comfortable margins across the state and won the election by 45,608 votes.
By most evaluations, Elizabeth Dole 'over-performed' with many sectors of the population across the state in 2002 based on election models and Kay Hagan 'under-performed' in 2014, especially with a depressed or 'much lower than hoped for or expected' turnout of the African-American voters in Charlotte/Mecklenburg and other large cities in North Carolina.

What is going to happen in 7 weeks here in North Carolina?

If you can tell us right now how many people will show up and what percent of the vote each voting category will break down into, we could tell you right now who was going to win each election without paying anyone to do an expensive poll for you.

If you think the voter turnout in absolute numbers and percent is going to be exactly what it was in 2008 when Barack Obama was running for President the first time, we would have to say Hillary Clinton would win the state and she might sweep in Roy Cooper for Governor and Deborah Ross for the US Senate.

However, the energy and enthusiasm that was on full display in 2008 (and even in 2012 when Obama lost NC to Mitt Romney by 80,000 votes) is not evident this time around for Hillary Clinton.

If there is a less-than-optimum turnout among African-American voters in the major cities in North Carolina this fall for Hillary Clinton, it is hard to see how she can win the state and become only the second Democratic candidate for President since 1976 (Carter) to win North Carolina's 15 electoral votes.

And if there is any kind of surprising 'surge' perhaps east of I-95 for Donald Trump a la the 2002 Elizabeth Dole landslide victory, then it is hard to see how Hillary Clinton could win the state's 15 electoral votes either.

One rule of thumb that has held true for decades if not most of the last century in North Carolina electoral politics is that if the conservative candidate can somehow make it out of the big cities and counties close to even west of where I-95 cuts south today, then they will roll up big margins of victory in the eastern part of the state and win statewide elections.

No one knows for sure if there will be a less-than-enthusiastic turnout among African-American voters for Hillary Clinton in North Carolina or not yet. Nor does anyone know if a 'surge' is building for Donald Trump in the more rural, agricultural and military-friendly base of eastern North Carolina.

It all depends on who shows up to play on Election Day. Just like when App State beat Michigan.

***(Side note and little known fact: NC has had 22 US Senators in Washington since WWII whereas other states such as South Carolina and Mississippi have had close to 1/3rd as many US Senators during the same time span)

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Friday, September 9, 2016

Changing People's Minds

'You're wrong! We need to raise taxes'
'You're stupid! We just need to cut spending!'

We have spent a lot of time over the past 8 years bemoaning the lack of 'civil discourse', 'comity' and 'compromise' in our national political life together.

'The Three Big C's' you can call them.

Either we recover them with the current incumbents we have (not likely) or we find great new candidates and leaders from the private sector who finally decide to help save us from ourselves and run for public office up-and-down the line....or we don't and suffer some severe consequences for our collective pig-headedness as a nation.

Those 3 concepts are that important to our democratic republican form of government.

We had an interesting discussion last weekend with someone who said he was 'doing his very best' to politely discuss a very sensitive political issue with someone who is on the other side politically and in philosophy towards life in general but they didn't seem to be getting anywhere.

'I just don't think either one of us is changing the other person's mind!' he lamented.

It occurred to us that his experience might be helpful to us as we head into this final 60 days of the presidential election cycle (thankfully!) and as we head into 2017 with a new President in the White House and probable new numbers in the majority in the US House and Senate, if not outright change of control in the Senate.

'Forget changing his mind' was the first thing that came out. 'Just look for common ground you can agree on and go from there'

Isn't that the essence of what our Founders did at Philadelphia when they wrote the US Constitution in that hot summer of 1787 with a group of Americans who may have had a collective IQ higher than any Congress since, with just 55 delegates who attended at least 1 session and 39 delegates who signed it at the end of that grueling process?

They didn't change everyone's mind 100% about slavery. They didn't change everyone's mind 100% about the role of big states versus the small states. They didn't change everyone's minds 100% about the fundamentals of almost any large political issue at the time.

They didn't have to. You never have to change someone's mind 100% to cut some political deal that might not be 100% perfect, but since 'perfection is the enemy of the good', less than perfect is better than no deal at all as we have seen for the past 16 years now.

Somehow, someway the Founders in Philadelphia managed to find a way to come to some common agreement and language that has become the model for constitutions for free nations the world over for the past 229 years without changing anyone's mind 100% at all.

It might make our task far easier if we just accept the cold-hearted fact that we do not have to 'change anyone's mind 100%'  about anything really if we want to get this country and our government back on track to do the things we want Congress and the next President to do for all of us in the public trust.

First of all, it is just too hard to completely change anyone's mind about anything quickly. Over a long period of time, maybe. But in this day of instantaneous news via social media and sideline commentators and activists jumping on every word like it is a fumble in the Super Bowl, it is very, very hard to have even an open and honest debate in public about the issues in a civil adult manner.

We desperately need 'deal-makers' and elected people who are smart enough to recognize 'victory' when they achieve some part of it in any session of Congress; vote to pass it, get it signed by the new President..and then come back the next year to try to get more of their political objectives then.

It could be progress towards balancing the budget. It could be progress towards having and paying for a smaller and more cost-efficient and effective government. It could be progress towards having a solid energy policy in America.

Any time you are making progress towards your stated political goals while in political office, and not retreating away from them, it is a success in any political science playbook.

Know who embodied that enlightened philosophy towards governing?

Republican President Ronald Reagan.

He allowed his team to cut more deals than you can imagine with a US Congress that was overwhelmingly controlled all 8 years of his term by Democrats, first led by Speaker Tip O'Neill of Massachusetts and then by Jim Wright of Texas.

So how would this work in a concrete example?

On the federal budget, something big has got to get done in 2017 or else we are really taking a huge gamble on our future prosperity. Far more than we have done over the past 16 years which has been a truly dismal time for any responsible budget observer or participant.

Republicans do not want to raise taxes. Democrats want to raise taxes. Mostly on the rich, as they say.

Neither side is going to change the other side's minds 100% on that right now. Or all the thousands of lobbyists with vested interests in protecting the status quo right now just as it is. Mainly because changing it in any way will gore their client or their own ox, as in their contractual employment.

We think whether we raise or lower taxes, it will have about as much effect on solving our future budget deficit problems as pouring a thimbleful of water on a gigantic wildfire out west. As we have shown many, many times by now, regardless of who is in the White House or who controls Congress or whether 'The Moon is in the Seventh House and Jupiter Aligns with Mars', revenues to the federal treasury will be about 18.7% of GDP when all is said and done.

Little more, little less over time depending on the economy at the time.

But what if mature adult leadership spontaneously erupts at both ends of Pennsylvania Avenue in Washington somehow starting January 20, 2017 and both sides see the gaping deficits that are due to go back up dramatically in each of the next 4 years absent any strong action by Congress to control spending and they say this:
'Look, Republicans, we know you don't want to raise taxes. Democrats, you want to raise taxes, that is just who you are.

Why don't we just forget spending all that time and energy over raising marginal tax rates on the wealthy when we know it just won't get done and won't raise all that much money anyway? They'll just find ways to hide their money in other tax shelters we don't even know about probably.

Let's focus on closing tax loopholes that mainly benefit very narrow sectors of the economy and are only there because some smart lobbyists got paid a lot of money to insert those tax provisions in tax bills in the past that no one understood then and probably don't understand now'
The chart below shows the impact of just the TOP TEN (10) tax breaks on the US federal budget each and every year. In the year 2014, these 10 tax breaks accounted for over $709 Billion or 50% of ALL of the $1.4 trillion in so-called 'tax expenditures' lost to the federal treasury because they are deductions, exemptions or outright tax credits in the tax code.

$709 billion in non-collected revenue receipts due to these 10 tax breaks is an annual number, not a 10-year estimate. Per. Year.

Assume that all of these 10 most-popular and wide-ranging tax breaks noted above are kept in force in the law and untouched. No need to stir up a hornet's nest and tick off all the businesses who provide health care, homeowners and churches and philanthropists by going anywhere near these top 10 tax breaks.

$709 billion in the rest of the tax expenditures could be freed-up as potential revenue each year which could be the basis for making some pretty important spending reduction deals.

Any spending reduction will be resisted by Democrats in every budget function outside of defense just as much as Republicans will resist cuts inside of defense outside of other budget functions, except in entitlements in both cases which really does make this a very difficult compromise to make given that.

Mainly because the growth of federal health care programs, Medicaid and Medicaid, plus Social Security and Net Interest are going to be the prime components of all the expected increase in federal spending between now and 2024.

One side would not have to convince the other side to change their mind 100% about 'raising taxes'. Both could agree on the need for 'simplifying the tax code' and 'reducing the number of special tax breaks' that are available only to a relatively select few number of taxpayers each year. Not available to all taxpayers.

The task would be then to come up with enough spending reductions, reforms and eliminations to make the relative 'pain' for the Republicans to support these elimination of tax breaks worth the effort and political risk back in their home district because they may be primaried by someone who would call the elimination of these hundreds of lesser known tax breaks as a 'tax hike'.

If we go many more years without some compromise such as this one on tax breaks, we won't have any additional revenue from higher tax rates coming into the Federal Treasury, that is for sure. But it will be 100% GUARANTEED that we will have a budget deficit that is totally out of control; a national debt approaching $30 trillion and financial and market forces starting to make the hard decisions for us in terms of currency valuation, higher interest rates and the vagaries of inflationary pressures to keep paying the national bills.

History should teach any civilized society that it is far better to keep control of the decisions regarding our financial and fiscal arrangements than to let market forces start to determine them for us. Just look at how Greece and other nations have frittered away their financial independence through irresponsible fiscal management on the part of government leaders.

In the past, Republicans typically used a 3-to-1 spending/revenue increase ratio to determine whether a 'Grand Bargain!' was worth voting for or not.

If 100% of the eliminated tax breaks above were paired 3-to-1 with spending restraint in the out-years, that would be a potential maximum of $2.86 trillion in deficit-reduction annually ($709Bx3=$2.127 + $709B+ $2.86T). The 10-year budget impact would be over $25 trillion in net budget deficit reduction/surplus accumulation when compounded and inflated spending is taken into effect.

Talk about reducing the growth in the size of government spending! At that magnitude of budget restraint, federal spending as a percentage of GDP would soon drop to the 18.7% of GDP level tax revenues have been historically and below which would produce surpluses once again.

Those are enormous numbers when you consider that past budget deals have 'only' reduced federal deficits on the order of $50-$100 billion per year. Not $2.86 trillion per year.

But consider this: Reducing our budget deficits by 'only' $100 billion per year would be only 0.5% of our overall GDP. We have budget deficits approaching 3% of GDP today as is today while we are doing absolutely nothing about it.

We need to find budget compromises of about $250 billion per year in the first couple of years and $500 billion+ from years 5-10 just to balance our budget and not even start to pay of what will soon be a $21 or $22 trillion national debt.

The probable outcome of all this?

The businesses and individuals who lose their tax exemptions and special tax breaks will most likely be wealthy enough to pay expensive tax lawyers and accountants a lot of money to find other ways to shelter their income and minimize their tax liability going forward.

Some marginal increase in revenues will be realized, mostly from 'the rich' so the Democrats can declare victory. If the spending reductions are real, we could actually put a bend point in the projections for our deficit and spending and head back into the world of financial and fiscal sanity once again. Hopefully.

The main thing to remember though is that no one's basic assumptions about political philosophy will have been changed 100% by the other side and they would be allowed to continue their political debates forever as they had done before. Republicans can keep hating higher taxes and Democrats can keep crowing about 'the need for the rich to pay more in taxes!' til kingdom come for all we care.

Perhaps the exercise will convince a majority of Congress and Senate that our current tax system is decrepit and sclerotic and needs to be replaced by a national consumption tax but that is another discussion for later.

If the next Congress and President could come together on such a compromise, and do it very early in the next Administration, they will have done something very, very important for the nation as a whole. Big deals such as this seem to happen about once every 20 years or so in American politics.

We are due.

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Saturday, September 3, 2016

Political Promises Are Like Drugs

Most Political Promises Come
From This Train
Over the course of this presidential campaign, we have all been hit with various proposals and promises about how this or that candidate is going to make our lives better.

Most are untrue. Most are physically and fiscally impossible to do.

But they sure sound great, don't they?

Political promises are like the mind-numbing effects of any stimulant drug usually taken illegally: they cause a 'loss of contact with reality, an intense feeling of happiness'....until they wear off, that is, and reality sets back in.

Let's take a look at some of the promises you may have heard and seen over the past year and see if we can't bring you back to reality before you get too giddy:

  1. 'We are going to make the rich pay their fair share!'

    This one sounds so good that almost everyone says it in one form or the other.

    What hardly anyone will tell the public is that the 'rich 1%' already pay 50% of all income taxes collected by the federal treasury. 50% of all Americans who are working do not pay any federal income taxes anymore.

    What is going to happen when the top 1% pay ALL of the federal income taxes each and every year? The battle cry to 'Make The Rich Pay Their Fair Share!' will look more than a little ridiculous, won't it?
  2. 'All We Gotta Do Is Raise More Tax Revenue To Balance The Budget!'

    This sounds so simple and easy to do, doesn't it?

    It will never happen.

    Take a look at this chart showing the historic level of spending and revenues in the federal budget for the past half-century:

    We have raised taxes multiple times over the past 50 years. We have cut taxes multiple times over the past 50 years.

    Any kind of statistical analysis will show you the percentage of GDP the federal government can expect in revenues to collect over time is about 18.7%. And that is just about it.

    Not 20%. Not the average 21.5% of GDP we would need to raise in taxes to cover the expected annual shortfall between spending and revenues currently.

    There is just something in the American taxpayer psyche that is willing to pay about 18.7% of GDP in overall federal tax collection over time. Wealthy taxpayers can avoid paying ANY higher marginal tax rates ANY Congress might want to pass on them simply because they can afford to hire the very best tax lawyers and accountants to find ways to avoid paying those higher levels of taxes.

    Lower-income wage-earners will find ways to avoid paying excessive taxes if passed on them by resorting to cash payments for labor rendered or barter arrangements for transaction purposes.

    Depending on economic conditions, if we experience an economic boom, and we experience an inordinate amount of capital gains being paid such as during the internet boom years of 1995-2000, we may from time-to-time see revenues approach 20% of GDP.

    However, such surges of income should be viewed as one-time events to be used to pay down national debt and NOT to raise the level of federal spending just because it looks like we are entering a new phase of increased federal tax collection levels relative to GDP.

    Like it or not, our national break-even level for budget and deficit-reduction purposes is 18.7% of GDP. Prudent budget-making would demand that our elected representatives, senators and President reduce spending levels to get at or under that 18.7% of GDP level and at least start us on a road to fiscal sanity in Washington.
  3. Massive Economic Growth Will NOT Solve All of Our Budget Problems!

    We had lunch recently with some budget experts from Washington, DC who have long been fighting for fiscal policies that would curb excessive spending and get us on the rational, if somewhat 'boring' path to financial freedom for everyone going forward.

    We say 'financial freedom' simply because the worst thing we can do as a nation is to keep doubling-down on dumb budget and economic policies and expect different results. The past 8 years have produced 1.7% annual GDP growth for the US economy and added on another $10 trillion in national debt that has to be paid off one way or the other.

    We don't need another 8 years of the same result.

    One of the budget experts mentioned a report put out several years ago that we are trying to find and dig out which we will post at a later time once we find it.

    In that report, some economic expert asked the simple question:

    'How long would it take to pay off the federal debt if we had 10% annual economic growth in America?' 

    Remember, mind you, that the average economic growth we had under President Obama was 1.7%. We only experienced average economic growth under President George W. Bush 43 of 2.3% per annum.

    If we had 10% growth for even one year, we should have fireworks and celebrations for the whole month of the following January.

    Anyway, the speculation put forth by this budget expert was that just to pay off the existing $20 trillion national debt, assuming we could freeze it at that point right now, we would need to experience close to 10% annual economic growth for the NEXT 100 YEARS! to meet the higher demands of providing for an aging retiring population and produce enough surplus revenue to pay down the national debt to zero.

    We are not going to experience 10% annual economic growth under any President or any new Congress.

    We are not going to produce any surplus to pay down any debt any time soon. In fact, we are on-schedule to INCREASE federal deficits back up to $1 trillion in the next 5 years absent any radical change in federal budget spending starting January, 2017.

    And if interest rates return to any sort of normalcy and return to 4-5% in the next couple of years, we will be spending $1 trillion per year on existing federal debt pretty soon which will further squeeze any spending priority on any part of the federal budget other than Social Security, Medicare and Medicaid.

    Which means national defense, homeland security, welfare, environmental protection or any other of the hundreds of federal programs you might think is important to maintain.

    So have a Happy Labor Day this year and get ready to elect a President and a US Congress and Senate who fully understands the gravity of the economic, financial and fiscal problems we face as a nation.

    Because we are going to need them.

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