Tuesday, March 20, 2018

"Enforcement of Trade Agreements' or 'Trade Wars'?

(first published in North State Journal 3/21/18)

President Trump’s announcement of tariffs on steel and aluminum set off a spate of comments comparing his actions to the Hawley-Smoot tariff act that many feel precipitated and certainly exacerbated the Great Depression of the 1930s.

Is he starting a ‘trade war’ for no good reason at all? Or is he positioning the US for a much-needed review and rewrite of NAFTA and other bilateral and multilateral trade agreements?

The history of American trade policy has not evolved much since the end of World War II. After the war, the highest priority was placed on establishing GATT (General Agreement on Tariffs and Trade) with devastated countries such as West Germany and Japan to help them develop free market economies that would support freedom and democracy.

Making trade concessions to help export freedom and democracy was far more preferable than fighting another world war against them, this time with nuclear weapons.

GATT morphed into the World Trade Organization (WTO) in 1995 which became the forum to govern international ‘free trade agreements’.  The WTO is currently the only mechanism we have to monitor trade between the US and Japan, the EU and China.

One of the industries that became a sacrificial lamb for trade agreements, sadly for North Carolina, was the textile industry. Textile manufacturing was labor-intensive and required relatively low working skills which was perfectly suited for workers in developing countries such as China and then southeast Asia.

As time went on, successive Administrations and State Departments continued to make trade concessions to help nations develop and create jobs primarily as a foreign policy tool, not as an economic tool to defend and protect American jobs.

The only problem is that China has failed to convert to democracy after all these years. And they are clearly taking advantage of our lax enforcement of existing agreements to become the second largest economic power in the world.

Now should be the time to stop using trade as a foreign policy tool and revert to rewriting trade agreements solely on economic fairness and equity grounds to all parties.

Most trade agreements have provisions that call for ‘countervailing tariffs’ in the event a country subsidizes manufacturing, manipulates currency or steals intellectual property rights that lead to a surge of exports to the US. The US, at the behest of the State Department, has routinely turned a blind eye to such grievances and allowed cheaper imports to flood into the States.

After all, who doesn’t want to buy a dozen T-shirts for $10 from Wal-Mart?

In Senator Elizabeth Dole’s office starting January 2, 2003, we sent weekly textile job loss reports to the Vice-President’s office. By August, the total was 52,000 and we were begging the Bush 43 Administration to invoke the surge protections, or countervailing tariffs, already existing in the textile agreements.

In August of that year, Pillowtex in Kannapolis announced it was laying off 7000 people.

‘What is going on with the NC textile industry?’ asked the Vice-President’s office. After close to 60,000 jobs had been lost to unfair textile importation in 8 months.

President Bush signed an executive order raising tariffs on 3 categories of lingerie from China but by then, the damage was done and the response was too little, too late.

Enforcing trade agreements has been the US problem for decades. It is not a ‘trade war’ to demand our economic allies and partners abide by the rules of fair but free trade and not take advantage of US workers.

Perhaps President Trump is opening a gambit to force trading partners back to the table to get more favorable treatment for American workers and force China, among others, to play fair.

That is not a ‘trade war’. That is ‘insisting on fair play’, ‘demanding enforcement of trade agreements’ and ‘negotiating to win’.

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Wednesday, March 14, 2018

'We Will Have 5% GDP Growth Again In America!'

'Morning in America--Part 2', 2017-2018
(first published in North State Journal 3/14/18)

The great thing about making predictions is that people only remember when it is correct and the vast number of prognosticators were wrong.

Unless the prediction is so out-of-bounds proven wrong that it is never forgotten as one of the greatest bone-headed predictions ever.

Such as when Nobel Prize-winning economics professor Paul Krugman on Election Night, 2016 said: ‘If the question is when markets will recover, a first-pass answer is 'never'".


Economists get ridiculed, deservedly so, for breathlessly predicting '10 of the last 3 recessions!' However, in 2008, before the greatest Crash since the 1930s, hardly any economist was sounding any alarm bells.  Many were caught on tape saying how great everything seemed at the time and smooth sailing was ahead for the American economy ‘for the foreseeable future’.

Ouch again.

One private economic guru has made the following argument against the backdrop of an army of professional economic forecasts predicting an average of 2.5% quarterly and annual GDP growth for the next 3-5 years:

'We will see economic growth rates well in excess of 3% on a quarterly and yearly basis for the foreseeable future!'

His reasons for the extra economic growth are as follows:

  1. Lowering corporate tax rates to 21% down from 35% will raise retained earnings (profits) in American businesses by $2 trillion over the next 10 years according to former Reagan economic advisor Martin Feldstein, now at Harvard.
  2. Adding to that pool of available cash to invest is the immediate expensing of capital equipment in the first year versus depreciating such assets over 3, 5, 7 or 10 years. Depreciation is a complicated concept for non-accounting types but pairing off the cost of buying modern new equipment against current year revenues in 1 year is far better than spreading it out over a number of years.
  3. Cash kept in year one will be much larger due to the tax protection offered by immediate expensing even though new, more efficient machines will be financed over a number of years.
  4. Under old depreciation rules, companies had to account for future tax payments on their balance sheets for several years. With immediate expensing of new equipment, their deferred tax liability goes way down which means they can borrow more money to buy more modern equipment to replace more old inefficient broken-down equipment.
  5. Productivity rates go up across every industry sector that buys new equipment. When productivity goes up, wages go up; people take home more money in real wage growth on top of the $1000-$2000 tax cuts that are perennial in effect now and a vicious cycle starts to feed on itself upwards in a positive manner.
  6. The lower 21% tax rate will repatriate, or bring back, to the US $2-3 trillion in corporate profits corporations have held in Europe for a long time instead of being taxed at the previous high 35% rate.
  7. Large subchapter S corporations will convert to C corporations to take advantage of the new lower corporate tax rate.
  8. Wage growth should exceed 3% later in 2018 when these changes work their way through the economy.
  9. We should see slightly higher rates of inflation but that is a good sign after close to a decade of near zero inflation which reflected the relatively dormant state of the economy from 2008 to 2017.
  10. The capital expenditures of the corporate sector will supercharge companies that build plants and equipment.
'We may see several quarters where economic growth exceeds 5%’ says this expert.

If he is ‘wrong’ and it is ‘only’ 4%, that is far better than any growth rate we have seen since 2000. Young people may finally see what a booming economy looks and feels like.

To their benefit.

Wednesday, March 7, 2018

'The Best Welfare Program Is A Job'

(first published in North State Journal 3/7/18)

The difference between liberal and conservative ideology can best be seen when confronted with numbers such as the following from a recent Joint Legislative Committee hearing in the North Carolina state legislature on Medicaid enrollment:

  • 29 counties in North Carolina have experienced a decline in non-Family Planning enrollment for Medicaid since 6/30/16
  • Another 33 counties have experienced a decline in enrollment since 6/30/17
  • Over 60% of the counties are experiencing non-Family Planning enrollment declines in FY 2017-18 

To what specific factors can these declines be attributed?

Republicans tend to point to the improving economy and lower unemployment rates for much of the declines in Medicaid enrollment across the state. People who get jobs that provide health care coverage typically go off Medicaid eligibility and on to private plans.

The average stay on Medicaid for non-long-term disabled citizens is about 10 months contrary to public opinion where many assume once a person goes on Medicaid, they are there for life.

Democrats tend to focus on other reasons such as availability of information to people eligible for Medicaid but do not know how to enroll; possible flaws in collection of statistical data and fear by illegal aliens living in North Carolina to apply for Medicaid benefits and risk possible deportation.

All play into possible explanations.

What is the main 'correct' answer though?

President Ronald Reagan perhaps explained conservative thought on welfare best when he said the following two statements in different speeches over time:

'The best social program is a productive job for anyone who’s willing to work'.

'Welfare’s purpose should be to eliminate, as far as possible, the need for its own existence'.

To many unfamiliar with the liberal/conservative divide over the past 50 years, President Reagan’s words sound like common sense regardless of which side of that divide you may be on.

There was a time in modern American history where the majority of Republicans and Democrats ascribed to that notion of self-sufficiency and hard work.

However, since the advent of the Great Society programs under LBJ in 1965 and subsequent amendments and welfare programs added to our federal budget since then, many on the left have come to see increases in numbers of people on welfare or entitlement programs as a sign of 'success' of the modern welfare state in America.

Conservatives take an opposing view. They tend to see reductions in enrollment numbers as evidenced in the Medicaid hearing as a sign of great success in economic growth policy since many people who were not on Medicaid since 2016 must have found a job and are now working in a productive capacity to provide for themselves and their families.

Republicans see ‘success’ in welfare programs when the need for or dependency on them is dramatically reduced. Every able-bodied individual who can work should work is their line of thinking. It helps self-worth, self-esteem and keeps families and communities together.

If liberals want to help to achieve such a utopian goal, every effort should be made to allow private businesses to expand and hire as many people as possible. Any effort to hamstring American business with over-regulation, higher taxes and more government debt almost by definition frustrates their ability to hire new workers, many of whom need job training and residual education usually provided by the new employer to leave public welfare for good.

Whenever a liberal politician seeks to punish a rich person who has built a business with higher taxes or regulation, they need to keep in mind that the people they are really hurting are the lower-income people currently surviving on welfare programs who will not be hired if taxes, spending and regulations go up.

What is going to be: more government welfare or more personal work opportunities?

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Wednesday, February 28, 2018

Anatomy of Gun Control Debates in Congress

(first published in North State Journal 2/28/18)

As shocking as the Parkland school shootings were, there have been other school shootings in American history that have been equally as ‘shocking’: the Columbine murders in 1999, the Virginia Tech massacre in 2007 and perhaps the most disturbing school shooting ever, Sandy Hook Elementary School in Newtown, Massachusetts in 2012.

They followed the same pattern: mentally-disturbed individuals somehow gained access to semi-automatic weapons and went to the school to exact revenge for bullying or because ‘demons told them’ to do so.

Sadly, the debate following each massacre usually follows the following script and rhythm:
  1. Anti-gun activists call for more gun control.
  2. Pro-gun groups assert Second Amendment rights.
  3. People call for more early intervention for severely-disturbed psychiatric patients.
  4. Conservatives call for more family values and better parenting.
  5. People start pointing fingers at violent video games to try to stop them.
  6. Congress passes something minor that supposedly closes some gun show loophole.
And then the energy dissipates like a passing thunderstorm. Until the next mass shooting on a school campus.

What can be different this time around?

First of all, some facts might help frame the debate:

  • It is estimated close to 80 million people own a firearm in the United States, perhaps 30% of all adults in the nation.
  • 120 million people live in a household where a gun is present.
  • An estimated 300 million firearms are in someone’s hands in America today.
  • 3% of all adults in America, roughly 7.2 million, own close to 50% of all firearms, roughly 20 per owner, mostly gun collectors and avid hunters.
  • 30,000 deaths per year can be attributed to a firearm. Close to 2/3rds are suicides; the rest are homicides. 
  • 10 million assault rifles may be in circulation in the US today.

When it comes to politics, legislators have to first consider ‘the art of the possible’. Federal government confiscation of 10 million assault rifles or 300 million firearms simply is not a viable solution when one considers the magnitude and danger of such an undertaking.

Those are simply massive numbers.

99.99% of all gun owners do not use guns for violent purposes against another person each year.

Plus they have Second Amendment rights to own a gun. Gun control activists would have a greater chance of repealing the 2nd Amendment than they would confiscating some, part or all of the firearms in America today. Which would be next to zero.

Instead of considering comprehensive legislation which will probably peter out as so many have done before, perhaps there is one issue where all sides could agree to focus legislative attention and see if a small change can yield at least some positive results.

As in no more mass shootings in public schools.

In 1967, California passed the landmark Lanterman-Petris-Short (LPS) Act which made it very difficult for one person to commit another person involuntarily through the judicial system to a psychiatric hospital without evidence of that person harming someone or themselves. The criteria for involuntary admission shifted from proof of the individual’s inability to make ‘responsible choices’ to the ‘presence of dangerousness’ of that person.

We have had a collision of individual personal privacy rights versus protecting the common welfare of our citizens and schools ever since with no clear rectification on the horizon. We can’t sit back and wait to see if another mentally disturbed person kills more school children before committing them to a mental hospital.

Perhaps everyone needs to start looking at this issue through the other end of their telescope and worldview and focus on finding one solution that might work.

Correcting our admittance standards and process for committing seriously mentally-ill people like the shooter in Parkland Florida to a mental institution before they kill dozens of young students is a place to start.

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Wednesday, February 21, 2018

Is Health Care A 'Right'?

(first published in North State Journal 2/21/18)

A young man recently asked this question:

'Is health care a right? Explain'

"'Individual Rights' tend to be free” was the reflexive answer. “Everything else is negotiated between parties and factions in the legislative process about who is going to pay for whatever government program is being proposed'.

The first 10 Bill of Rights amendments concern freedoms that would be guaranteed in the new democratic republic. 

We are free to speak at no monetary cost to anyone. We are free to worship in any religious tradition we choose and no one is forced to pay for our actions. We can print anything in the press as long as we pay for the computers, internet and printers to circulate our thoughts.

Not the government.

The 2nd Amendment guarantees the right for an individual to bear arms. The government does not pay for them.

The 3rd Amendment restricts the quartering of soldiers in our homes. Freedom of privacy in one form in essence.

The 4th Amendment protects us all from unwarranted invasion of our homes for search and seizure of evidence without a warrant based on probable cause. Another defense of our right to privacy essentially.

The 5th Amendment guarantees our right to be considered 'innocent until proven guilty'.  It might cost a lot in legal fees to defend that innocence but not from appropriated tax dollars unless you are indigent and need legal aid.

The 6th Amendment guarantees our right to a speedy and fair trial which might cost money for legal defense but not from appropriated tax dollars.

The 7th Amendment guarantees our right to jury trials in federal civil cases involving amounts of more than $20. 

The 8th Amendment protects us from excessive bail or 'cruel and unusual punishment'. No federal governmental appropriations are involved unless you count the billions of dollars spent each year to house hundreds of thousands of prisoners convicted of felonies, many of whom are in for life sentences instead of receiving the ‘cruel and usual punishment’ of the death penalty.

The 9th Amendment recognizes other fundamental individual rights not enumerated in the Constitution but doesn't say what they are. None of which seem to require federal appropriations.

The 10th Amendment reserves powers not delegated by the Constitution to Washington to the states and to the individuals. Another declaration of reserving powers to the states and the individual.

When it comes to health care, Social Security, Medicare, Medicaid, national defense, interest on the national debt, environmental protection, welfare, education and agricultural subsidies, they are legislative issues that have to be debated, negotiated and voted-upon by our elected representatives in the US Congress and Senate as opposed to being ‘rights’ or even ‘entitlements’ that are conferred upon each person at birth.

In the private world, no one has the right to ‘demand’ another person ‘pay for’ their retirement, housing, education or health care needs. Charitable wealthy people often pay for such services out of the goodness of their hearts through eleemosynary organizations such as churches and non-profits but no one really has to do it unless they choose to do so freely on their own accord.

Providing social safety nets and all government programs require political efforts to coerce others to pay for them through majority vote and democratic republicanism.

One ‘freedom’ which should have been enumerated in the Constitution would have guaranteed the freedom of one generation from having to pay the debts of previous generations. Every generation should be forced to pay for the government services they vote into law, except for perhaps the cost of preserving freedom in world wars.

Not the next generation of unborn children who can’t vote yet.

Maybe it is time for a 28th Amendment to say so.

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Wednesday, February 14, 2018

A Parade of Debt

Excessive Debt Can Lead to Big Problems Down the Road

(first published in North State Journal 2/14/18)

The two 'easiest' things a politician can do while in elective office are the following:

1) Cut Taxes
2) Raise Spending

No Republican is afraid to let voters keep more of their hard-earned money. No Democrat is afraid to spend more tax money on federal domestic programs. Their core constituencies will love them even more for doing so.

On December 22, 2017, President Donald Trump and the Republicans in Congress and the Senate cut taxes without any Democrat votes at all. On February 8, 2018, a substantial bipartisan majority of both Congress and the US Senate passed a massive budget bill that increases domestic spending, which includes military spending, by $1.7 trillion over the next decade.

One can almost hear Congress singing 'I Love A Parade! in unison.

‘A Parade of Debt’, that is.

$2.7 trillion of new debt has been loaded up on the backs of our children, grandchildren and great-to-the-nth degree grandchildren in just the last 6 weeks.

President Donald Trump signed both bills. Republicans are 100% responsible for at least $1.07 trillion in new debt from the tax bill. Democrats and Republicans who voted for the budget deal are now on the hook for an additional $1.7 trillion in new debt.

Both tonnages of debt come on top of the additional debt of $10 trillion that was already-baked-in-cake in the budget baselines before President Trump was even elected in 2016.

Adding $2.7 trillion in new debt on top of what CBO already anticipated to be incurred by 2027 means US debt held by the public will exceed 100% of GDP 10 years from now.

Unless, that is, everything works out absolutely perfectly with higher economic growth and employment with hardly a centimeter to spare in terms of margin of error with respect to inflation and interest rate projections.

In 2016, CBO published a document stating one of their 'rules of thumb' for estimation purposes was that if US economic growth exceeded their current projections by 0.3% per year for a decade, our federal deficits at the time could be essentially reduced to zero by 2026. Assuming no other changes to inflation expectations, interest rate shocks or terrorist attacks on domestic soil.

Now that number might have to be 0.4% excess GDP growth annually. Or 0.5%.

The most direct way to get our fiscal house in order rather than hope and pray for higher-than-expected growth rates is for our President and Congress to control and curtail federal spending at every cost and turn.

President ‘Silent Cal’ Coolidge and Republicans in Congress proved the efficacy of spending cuts, followed by tax cuts, followed by economic growth, followed by reduction in federal debt from 1924-1928 when debt was reduced by 25%.

Maybe history will repeat itself.

But Congress and the President have to want to seriously control spending first.

In 1993, I was part of a team on the Republican side of the House Budget Committee that produced a proposed budget which reduced projected federal spending by $500 billion over 5 years, about 5% in total, from a base budget of $1.38 trillion in FY 1992.

We were about laughed out of Congress by the then-Republican leadership and caucus members plus the Democrats and the national media.

4 years later, the core of that document, 'Cutting Spending First' was passed as the base legislative language of The Balanced Budget Agreement of 1997 which produced the first, and only, 4 balanced budgets since the 1950s.

There were heroic Republicans and Democrats who came together over those 5 years to do something great for this nation at the time which quite honestly, most people thought would last for decades.

The euphoria lasted until September 11. 2001. 9/11.

It is time for another crop of heroic Americans to do the same now.

Who will they be in Washington this time around?

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Wednesday, February 7, 2018

'30 Million Jobs Have Been Created Since President Trump Took Office!'

(first published in the North State Journal 2/7/18)

The headline above could have been written with a straight-face by any media outlet and been technically 'true' about the American economy in the last year since President Trump took office.

The only problem is that the following sub-headline would have to have been published below it stating this other ‘inconvenient truth' about the dynamic American economy:

'27.8 Million Jobs Also Have Been Destroyed Under President Trump, Too!'

The net difference though is a solid increase of over 2.2 million in 'net new jobs' created since Election Day, November 8, 2016. The key to any understanding of employment numbers under any US President or political party controlling Congress and the US Senate is to look at the net difference in jobs created versus jobs lost during any particular term in office.

Presidents get way too much credit for economic job growth when it is good and way too much blame when the numbers are bad. Except for Presidents Herbert Hoover and Martin van Buren, both of whom made perhaps the exact wrong policy decisions at the exact wrong time when faced with economic downturns and only made bad situations devastatingly worse.

The American economy is a thoroughly dynamic jobs machine that sees roughly 10% of all jobs change during any particular quarter of the year. 5% of total employed positions are created and 5% of existing jobs are eliminated.

The potency of the American economy would make the author of the 'creative destruction' theory of employment in 1942, Joseph Schumpeter, blush with pride.

Businesses are either hiring people for new companies or expanding older ones to meet business demand or they are shedding workers because of loss of business and revenue regardless of who is sitting in the White House or on Capitol Hill every day.

Economic cycles come and go. Political leaders, however, can make decisions and set policies that allow recessions to go away rather quickly and enter into another round of growth and economic expansion. Or they can throw wet blankets on the economy such as we saw under President Obama where super excessive numbers of federal regulations were loaded up on business and higher taxes imposed on individuals that essentially forced much of the American business community to go ‘on strike’ for most of his 8 years in office.

The fact that President Obama is the first, and only, President in recorded modern history to have never presided over a single year where GDP annual growth rates exceeded 3% should tell everyone something about his economic policies. The average annual GDP growth rate during his entire 8 years as President was only about 1.6%.

The key thing to remember whenever you see news reports about 'unemployment rates' is that the only true barometer of such things is the absolute number of people who are currently working in a full-time job, not the unemployment rate.

The ‘unemployment rate’ is an easily manipulated and misunderstood statistic that should be retired forever. It is based on the number of people who are ‘actively looking’ for a job which can distort the unemployment rate if people get discouraged and leave the workforce altogether.

The much more meaningful statistic is the absolute number of people who are working full-time which at the end of 2017 was 153,337,000 people as indicated in the chart below. If you follow the monthly reports from the Bureau of Labor Statistics (BLS) and chart it like you would do a baseball game, you would very clearly see the relative health or sickness of the US economy due to the total number of people working full-time.

If the US economy is allowed to function without excessive regulation and taxation, 200,000 or more Americans each month might be able to find that great job that has eluded them for the past decade.

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Thursday, February 1, 2018

President Andrew Jackson Responds to 'The Sanctuary State Nullification Act of California'

'Old Hickory' himself, President Andrew Jackson
Flag of the State of South Carolina

(Note: South Carolina threatened to resist federal tariff acts of 1828 and 1832 and thereby ‘nullify’ federal authority to pass national laws. President Andrew Jackson, a staunch ‘state’s rights’ supporter and patron saint of the modern Democratic Party, nonetheless recognized such efforts would destroy the young nation and issued his ‘Proclamation Regarding Nullification’ on December 10, 1832.

We wondered what President Jackson's response would look like if amended slightly and edited down considerably from his original 8800-word proclamation to respond to the California declaration of being a sanctuary state along with dozens of other cities in the country recently)

(first published in North State Journal 1/31/18)

'The State of California has declared itself to be a Sanctuary State in contradiction of all Federal Law and authority.

The ordinance is founded on the strange position that any one State may not only declare an act of Congress null and void, but prohibit its execution.  California wants to assert that the ‘true’ construction of the Constitution permits a State to retain its place in the Union and be bound by none of its laws other than those it may choose to consider as ‘constitutional’.

It is evident that to give the right of resisting laws in such a manner, coupled with the uncontrolled right to decide what federal laws to follow, is to give each state the power to resist all federal laws.

If California considers federal immigration laws null and void, there would be a clear constitutional objection to enforcement in every state, and no immigration law could be enforced anywhere; for all federal law must be equally applied across the entire nation.

If this doctrine had been established at an earlier day, the Union would have been dissolved in its infancy.

Article XIII of the Articles of Confederation states that "every State shall abide by the determinations of Congress on all questions which by that Confederation should be submitted to them."

The most important objective in the Constitution was "to form a more perfect Union" than that which existed under the Confederation.

Is it possible that our Constitution written and ratified to "form a more perfect Union" could create a national government solely dependent for its existence on the local interest, the party spirit or a prevailing faction in a single State?

The power to annul a law of the United States, assumed by one State, incompatible with the existence of the Union, contradicted expressly by the letter of the Constitution, unauthorized by its spirit, inconsistent with every principle on which It was founded, and destructive of the great object for which it was formed must be negated.

Our Constitution does not contain the absurdity of giving power to Congress to make laws and another power to the States to resist them.

The States ratified the Constitution knowing that a veto on the laws of the United States was not reserved to them to exercise by any application on federal law.

The Constitution gave the right of determining immigration law expressly to Congress, not each individual state. The States have no control over the exercise of this right other than changing congressional representatives through bi-annual elections.

The Constitution gave immigration policy power to the representatives of all the people, checked by the representatives of the States, and by the executive branch. California gives this power to the legislature, or the convention of a single State, where neither the people of the different States, nor the States in their separate capacity, nor the chief magistrate elected by all the people in the Union, have any representation or say in the matter.

Whenever any law of the United States displeased any State, such as regarding abortion, taxation, or environmental protection, and they acted to nullify it as California is doing now on federal immigration law, we would soon cease to be a nation.

The States have not retained their sovereignty. When they joined the Union, they surrendered essential parts of their sovereignty such as the right to make treaties, declare war, levy taxes, exercise exclusive judicial and legislative powers and make national immigration policy. The States are no longer sovereign.

The allegiance of their citizens was transferred to the government of the United States. They became American citizens first and owed primary obedience to the Constitution of the United States and to laws made in conformity with the powers vested in Congress.

Not the States.

The inclination of states such as California to declare themselves ‘Sanctuary States’ and thereby nullify federal immigration law unilaterally must therefore be opposed and reversed'

(Jackson's full Proclamation can be accessed here)

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Wednesday, January 24, 2018

Is This Really An 'Obama Economic Expansion'?

In 2015, Rookie Head Coach Steve Kerr led the Golden State Warriors to
their first NBA Championship in 40 years
(first published in North State Journal, 1/24/18)

Some news media outlets and liberal politicians are claiming that the expanding US economy is 'really due to the wonderful economy and policies President Obama passed on to President Trump!'.


There is only one thing different from an economic standpoint today than before the 2016 election: President Donald Trump is in the White House and President Obama and his preferred successor, Hillary Clinton, are not.

We have the same workers in America now as we did in 2016 before the election. The same level of low interest rates. The same expectations of low inflation amidst international economic competition. The same control of Congress and the Senate.

Yet we now have economic growth projections of up to 4% per year whereas CBO projected 1.9% GDP growth rates for years to come in their 2016 update before the election.

What happened?

President Trump came in and changed economic perceptions and expectations of the US business community right away. He is a businessman; President Obama was not.

He talks about the bright potential of the US economy whereas President Obama only saw the negative side of American businesses. As a result, American businesses and workers have responded to this new freedom from over-regulation and over-taxation in a very positive manner.

Think leadership and freedom don’t make a huge difference?

Consider what happened in San Francisco with the Golden State Warriors. In 2014, Steph Curry was in his 5th year and Klay Thompson was in his 3rd season. They had turned things around modestly from a disastrous string of seasons previously but were not really going anywhere under Coach Mark Jackson who was described as being temperamental, mercurial and ‘heavy-handed’ at times.

The Warriors fired Mark Jackson and brought in Steve Kerr to coach the same players in the same city and in the same stadium with a more up-tempo, free-flowing and from all outside observations, a more fun way of playing basketball at any level.

In 2015, the Warriors won their first NBA title in 40 years. Great talent was unleashed and given the freedom to do what they knew how to do: shoot the ball from everywhere and run the other team ragged.

President Obama's economic policies were 'heavy-handed' as well and government-first centric. Businessmen complained about his use of the heavy coercive hand of the federal government to 'solve' any problem at hand. The over-regulation of Dodd-Frank legislation frustrated financial lending institutions and his $1 trillion in a 'shovel-ready' infrastructure stimulus package didn't stimulate much of anything but more national debt.

And the ACA. If there ever was a poster child for government over-reach, it was Obamacare.

Had any of President Obama’s economic policies worked, we would have seen explosive GDP growth in 2011, 2012, 2013, 2014, 2015 or 2016 up to Election Day, 2016. 8 years of a presidential term is a long time to see if policies work or not.

Nobel Prize winner Paul Krugman said on election night, 2016: 'If the question is when will markets recover (from the Trump election), the answer is NEVER!'

‘DEWEY DEFEATS TRUMAN!’ comes to mind immediately.

Due to the recently-passed tax cuts, 125 million households will start to see up to $200/month more in their paychecks starting in February.

3 million+ employees and counting will receive $1000 bonuses or more from their employers who are passing along the benefits of the lower corporate tax cuts to them this year.

Apple is bringing back $350 billion of profits from overseas to invest in 20,000 new jobs here in America on top of paying $38 billion in corporate taxes from repatriated profits that alone will reduce the federal budget deficit by close to 10% all by itself this year.

We can only hope that this freedom and economic good news continues as long as the Warriors continue winning NBA Championships. It might be awhile.

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Wednesday, January 17, 2018

Ending The Sisyphean Task of Recruiting Car Companies To North Carolina

Senator Lee Overman-NC
1910-1931, Chairman
Senate Appropriations
Committee. Served around
the time there was a
passenger pigeon still alive.
(first published in North State Journal, 1/17/18)

Want to get a major car manufacturing plant to come to North Carolina?

Vote for a US Senator who will get on the Senate Defense Appropriations Subcommittee first. Then a car manufacturing plant may follow sometime in the future.

North Carolina has spent a lot of time, money and effort to get an automobile company to come to North Carolina over the past 25 years with nothing to show for it yet.

North Carolina just lost out to Alabama for the Toyota Mazda plant after losing to South Carolina for the crucial BMW plant long ago and then to Alabama for a Mercedes-Benz operation soon after. Volvo and Volkswagen deals have come and gone to other states along with others over the years.

We might as well save our taxpayer money, time and effort for other projects that have a higher chance of actually coming to North Carolina.

Until we get a US senator on Senate Defense Appropriations, that is.

North Carolina is the only Southern state that does not have a major defense manufacturing facility building military jets, tanks or ships. There is a direct correlation between that fact and the absence of a North Carolina senator sitting on Senate Defense Appropriations.

North Carolina is the only Southern state without a major automobile manufacturing facility such as BMW in South Carolina or VW in Tennessee. There is an indirect but strong correlation between that fact and no defense facilities due to the inconvenient fact that no North Carolina Senator currently is sitting on Senate Defense Appropriations and hasn’t for what seems like an eternity.

It has only been close to a century.

The last time a North Carolina US Senator served on the all-powerful Senate Appropriations Committee for any appreciable length of time was a decade before World War II.  1931. Senator Lee Overman.

He retired 87 years ago.

North Carolina has sent more US Senators to Washington since World War II than perhaps any other state in the South. Perhaps the entire nation, exempting Hawaii and Alaska.

20 North Carolinians have served in the US Senate since WWII. None have served on Senate Defense Appropriations. Not Senators Reynolds, Hoey, Broughton, Graham, Smith, Lennon, Scott, Ervin, Jordan, Helms, Morgan, East, Broyhill, Sanford, Faircloth, Edwards, Dole, Hagan, Burr or Tillis.

Lots of economic and business factors go into the decision-making for any major corporation to move to a new state to set up manufacturing facilities. However, when it comes to defense manufacturing plants and jobs, nothing is more important than having a US Senator on Senate Appropriations to steer investments to their state and support the appropriations necessary to build and sustain the program.

States such as South Carolina, Alabama and Mississippi have elected and kept US senators in office long enough to get on Appropriations and then serve on the Defense Appropriations Subcommittee where all the major defense programs and materiel production are considered every year.

Once a US senator gets on Defense Approps and steers a few defense contracts to their home states, then the level of specialized training for defense workers goes way up in that state and other companies such as automobile companies can come in and poach qualified workers and technicians for their manufacturing facilities.

As one missile defense engineer told me in Senator Dole’s office: ‘Why would we come to North Carolina when we can go to Alabama and throw a rock into Huntsville and hit hundreds of highly-trained and skilled aerospace and metallurgical engineers in their helmets and recruit them to come work for us after the federal government has basically paid for all of their training in these specialized areas?’

Electing a US Senator from North Carolina to serve on the Senate Defense Appropriations Subcommittee would end this Sisyphean effort for good.

(footnote: Cameron Morrison was on the Senate Appropriations Committee for 2 short years from 1931-1933. Lauch Faircloth was the last NC Senator on Senate Appropriations for 2 short years as well from 1997-1999 and served on the District of Columbia subcommittee)

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Thursday, January 11, 2018

#ItsYourMoney #NotTheirs

You 'give' your money to the government to take care of various things.
The government does not 'create wealth' and then give it to you.
(first published in North State Journal 1/10/18)

The Tax Cuts and Jobs Act Bill (TCJA) of 2017 is now law. What next?

The first thing every taxpayer should say out loud is this:

‘It Is My Money First. Not The Government’s!’

Every 30 years or so, the American public gets blinded by the promises of ‘progressive government’ and begin to believe that the government somehow supersedes them when it comes to spending the hard-earned money they earn each and every day.

Before Ronald Reagan routed President Jimmy Carter in 1980, many people had been hoodwinked into believing that the federal government could spend their money better than they could. Many believed their tax refund was a ‘gift’ from the federal government each year for some reason.

The ‘Reagan Revolution’ upset that apple cart for most of the ensuing 30 years. When President Obama took office in 2009, he sought to expand the role of the federal government in virtually every aspect of American life in the aftermath of the Great Crash and Recession and many people believed in the supremacy of government again.

Perhaps things will change now that the average taxpaying family of 4 may save approximately $2400 per year due to the TCJA 2017.

One of the first things any taxpayer should do in January, 2018 is review their expected income for the upcoming year and make the necessary adjustments to their withholding per pay period in their W-4.

If you do not make the necessary adjustments, you may wind up letting the federal government in Washington use it all as an interest-free loan for the entire year before issuing a refund in April 2019.

It would be quite possible that almost all of the tax cuts you expect to receive will not be passed on to you in the form of higher net take-home pay in a regular paycheck.

Instead, your money would be sent to Washington only to be used to spend on other federal programs until a refund is sent back in the spring of 2019, 16 months from now.

On top of making sure you don't preclude yourself from getting immediate monthly tax relief from the TCJA of 2017, every family should take a serious look at their last tax refund from the US government and ask this serious question:

'Why in the world did I give the US government an interest-free loan of $3000 last year?'

The average taxpayer received a refund check from Washington in 2016 for about $3000. 110 million taxpayers received a refund check of about $3000, 2/3rds of all taxpayers who filed returns for the previous taxable year.

None of them received any interest for allowing Washington to use their money all year.

$330 billion in total refunds were sent out by the US government in 2016. That represented a massive $330 billion interest-free loan that funded 97% of the federal share of Medicaid for the entire year.

If the average American taxpaying family adjusted their W-4 exemptions upwards to account for the tax cuts and made sure they would get $1 in a refund check in 2019 instead of $3000, they could expect to see the additional $200/month in tax relief from TCJA 2017 plus another $250 per month from lower withholdings in their monthly take-home pay for a total of $450 more per month in disposable income they could then spend or save as they see fit during the year.

Not the government.

$450 more per month in regular take-home pay for the average American family is $5400 more in their pockets over what was there in 2017. That is $54,000 more in disposable income over 10 years available to spend as you see fit during the year.

Not Washington.

You will be glad you did. Do it for you and your family's sake.

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Wednesday, December 20, 2017

'If Men Were Angels'---Federalist 51 For Modern Eyes and Ears

'Wonder if this American Democratic Republican
Experiment in self-governance will work?
(first published in North State Journal 12/20/17)

“But what is government itself, but the greatest of all reflections on human nature? 

"If men were angels, no government would be necessary. 

If angels were to govern men, neither external nor internal controls on government would be necessary either.

In framing a government which is to be administered by men over men, the great difficulty lies in this: 

You must first enable the government to control the governed; and then oblige it to control itself.”

How do we separate powers among 3 branches of our government? Each branch must have some ability to keep others in their proper place. It is a sad but honest reflection on human nature that such counterbalances are necessary to control abuses of government power.

The will of the people must be the primary control on government. However, human history shows the importance of using opposite and rival interests to frustrate the ill motives of some leaders.

To insure liberty, each branch should have a clear purpose of its own and as little influence on the selection of members of other branches as possible. Members of each branch should not be totally dependent on another branch for remuneration. If the executive or judiciary were not independent of Congress, their independence in every other function would be diminished.

Subordinate distributions of power of government should serve as a check on other departments to protect individual rights. The remedy is to divide the legislature into different branches and force competition among the branches to best govern.

Ambition must be made to counteract ambition.

In republican government, the legislative authority necessarily predominates.

Strong legislative authority requires that it should be divided. The weak constitutional powers of the executive requires that it should be strengthened with veto power over the legislature.  The Senate should have the power to override a President since he may be lacking in courage or spirit or may be a tyrant.

The people should almost always select government officials. In the judiciary, however, we need highly-trained lawyers who should be selected in a way that guarantees we get the best judges possible.

There are two ways to form the United States: a single republic or a compound republic.

In a single republic, all power surrendered by the people is submitted to the administration of a single government as in monarchies.

In our compound republic, the power surrendered by the people is first divided between state and federal governments, and then subdivided among distinct and separate departments. A double security arises to the rights of the people: the different state and federal governments will control each other, and at the same time, each will be controlled by itself.

A republic must guard the people against oppression by its elected leaders. It also must guard the minority interests against injustice from the majority.

If a majority is united by a common interest, the rights of the minority will be insecure. Minority rights can be protected by: 1) creating a separate force outside of government to support the minority; or 2) having so many separate groups of citizens that an unjust majority will never happen.

The first method prevails in monarchies. A power independent of the government might support the rightful interests of the minor party but one day turn to support the oppressive majority party.

The United States will exemplify the federal combined republic.

Civil rights must be the same as that for religious rights. The more interests and sects, the more security will abound for everyone.

If stronger factions can unite and oppress minority factions, anarchy will reign as in a state of nature.

Any government too weak to protect the rights of a minority today will be too weak to protect the rights of the majority tomorrow.

A small state on its own might one day be destroyed by its own internal factions. Without the protection offered the people of that state by their federal rights, they would be defenseless.

As the United States grows over time, a coalition of a majority of the whole society could seldom take place on any other principles than those of justice and the general good, versus narrow sectarian or religious differences. The larger the society, the more duly capable it will be of republican self-government.

This view must particularly recommend a proper federal system to all friends of republican government'

(James Madison's Federalist 51 edited and paraphrased to some extent to match modern sensibilities and tone. 2/3rds of original language reduced to this version; roughly 50% of remaining text is original from Madison's masterpiece)

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Thursday, December 7, 2017

Finding $1 Trillion To 'Pay For' The Tax Bill

(first published in North State Journal 12/6/17)

Here’s a novel idea for every elected US Senator or US Congressional Representative who said they voted against the tax reform bill, in part or in whole, because it would 'explode the national debt' by $1 trillion over 10 years:

‘Pass a Bill to Reduce Federal Spending by $1 Trillion Over 10 Years!’

This includes every Democrat in the Senate and House plus Senator Bob Corker of Tennessee and 13 House Republicans.

Just because a tax bill is scored as 'losing' revenue over 10 years by CBO, that doesn't mean Congress can't take steps to 'pay for' that loss of revenue by cutting spending elsewhere. 

The only people who can't vote to cut spending anywhere in the federal budget are those who love government spending to begin with. Some, except perhaps Senator Corker and the 13 House Republicans, have never voted to cut one dime from any level of spending unless is it in defense or another line item they don't like.

Federal spending is expected to be $4.1 trillion in FY 2018. There are literally 4.1 trillion ways to cut federal spending annually. The number of ways to get to $1 trillion in deficit-neutrality is literally endless.

Here are 4 substantive ways Congress can get to $1 trillion in deficit-neutrality:
  1. Raise the eligibility age for Medicare in graduated steps until it gets to 67. Saves $148 billion over 10 years.
  2. Raise the eligibility age for Social Security in two-month increments to age 70. Saves $120 billion over 10 years.
  3. 'Bend’ the benefits formula for Social Security down to the point where everyone gets the minimum poverty protection benefits and then phase-down the formula to where no benefits are paid above a certain amount- Saves over $36 billion over 10 years.
  4. Reduce employer tax exclusion for medical insurance premiums by roughly 15%. Reduces deficit by approximately $700 billion over the next decade.

There's $1 trillion in offsets needed to make this tax bill completely deficit-neutral. 

We will wait with bated breath to see if those who voted 'nay' because of their stated concern about the deficit will adopt such measures to make this tax bill not add any more to the roughly $31 trillion in national debt we are expected to have in 2027 without this tax package or any other changes. 

Our guess is they probably won't.

If anyone is dead-serious about reducing the amount of debt we are loading up on our children and grandchildren, they will support the 3 entitlement proposals above. Flattening the cost curve in Medicare and SS to under 3% annual growth would almost balance the budget by 2024 without any other spending cuts or tax increases anywhere else in the budget.

CBO estimates that a combination of these entitlement reforms could result in a lowering of future federal budget costs by anywhere from 2% to 4% of annual GDP.

4% of a projected American GDP of $40 trillion in 2040 would mean annual savings of $1.6 trillion in our federal budget.

The reality staring us in the face is that we are operating a government based on policies and  presumptions about health and longevity from 1935 and 1965. It is time to update our programs to reflect the realities of longer life expectations and technological advances in the 21st century, not the 20th century.

If we don’t, our children and grandchildren are going to be saddled with a dreadful amount of debt that many current elected politicians say they are concerned about but never do anything to prevent.

Perhaps they doth protest too much. If they really want to cure our long-term debt problem, they can pass these spending reform proposals. This week.

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Thursday, November 30, 2017

'Not Top 10' Reasons To Not Run For Public Office

There really are not a lot of great reasons for
great people to not run for public office.
(first published in North State Journal 11/29/17)

ESPN ran their ‘Not Top 10’ sports moments for 2017 which showed the bloopers and mistakes made over the past year in the sports world.

Have you ever heard the 'Not Top 10' reasons why people will not run for public office?

I run The Institute for The Public Trust which tries to find, recruit and train great people to run for public office across North Carolina.

We all acknowledge our need for the very best people in our communities and state to run our representative democratic government. It has been that way ever since the founding of our Republic in 1789 with Messrs. Jefferson, Madison, Hamilton, Adams, Washington and Franklin to name a few.

When sane people watch the news and see only the sordid side of politics, most say not only 'No!' when asked to run for city council, state legislature or Congress but an emphatic 'Hell No!'

Why should they? A candidate or incumbent has to raise money all the time; they have to suffer the slings and arrows of outrageous fortune and vicious attacks, sometimes true but many times not; and they basically have to take a vow of poverty to serve the public unless they are independently wealthy.

Want to run for the North Carolina General Assembly? The pay is $13,951 per year, roughly $3 per hour.

 Here are 5 common reasons why good people don’t run for office:
5. 'I am too busy'
Of course you are. You are busy at being great at what you are currently doing in your business, avocation, family and charity work. That is why we want you to take your immense talents and put them to work for the common good as our elective representative. 
Just like Mr. Jefferson, Mr. Madison, Mr. Hamilton et.al. before you.
4. 'I don't like to lose'
Of course you don't. No one does. Does that exempt you from trying to run for public office where you could elevate the public debate and discourse because you actually know what you are talking about and once elected, you can actually do something about the immense problems facing us?
3. 'I don't know the issues well enough'
If you are highly intelligent, talented, educated and experienced and don't understand the big issues facing our state and country, you probably should stay on the sidelines and let someone less qualified take your rightful place in our elective representative government structure.
2. 'I am afraid of the media'
Join the club. Hopefully, if you are as qualified as others think you are, you are not a felon; a miscreant; a liar; a chiseler; a deal-welsher; or a two-faced baboon as opponents called Abraham Lincoln, of all people. 
You should have no problem with the media if you are none of the above.
1. 'I am sure someone else will do it so I won't have to'
Have you been paying any attention at all to what has been going on in our collective elective government over the past 30 years or so? Name the top 10 people who have served in public office that you think were cut out of the same bolt of cloth as Mr. Jefferson, Mr. Madison or Mr. Hamilton long ago.
There are not many most people can name off the top of their head.

We admire and salute everyone who has run for office and those who have been elected and served. It is a very tough job, hands-down one of the toughest 'dirty' jobs anyone can ever undertake.

However, we need our best to serve. Mr. Jefferson considered public service to be the highest calling any person could be called to perform.

Help everyone by finding a good reason ‘to run for office’. Not away from it.

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Wednesday, November 22, 2017

'I'll Take Odd Tax Facts For $2000, Alex!'

(first published in North State Journal 11/22/17)

Since all the attention is on the US Senate now to see if they can pass a tax bill and get it to conference and to the President's desk before the Alabama special Senate election on December 12, consider the following facts about the US tax code in the following couplets:

  1. 45% of all taxpaying household units in America pay no federal income tax in the progressive tax structure.
  2. 100% of all taxpaying household units that reported earned income paid federal payroll taxes in what is essentially a 'flat tax' on everyone.
  3. 70% of all taxpayers choose to use the standard deduction instead of itemizing deductions.
  4. Roughly 2.2 million people who use the standard deduction 'overpay' their tax liability by not itemizing which leads to an overpayment of approximately $1 billion in federal taxes.
  5. The average annual 'tax gap' or the difference between collected taxes and potential tax revenues is about $450 billion/year due to under-reporting of income or flat-out fraud.
  6. 0.86% of all 136 million tax returns were audited by the IRS in 2016.
  7. The income tax was made constitutional by ratification of the 16th Amendment in 1913.
  8. Mandatory withholding of federal income and payroll taxes started in 1943 during World War II.
  9. There is more tax revenue sheltered by deductions, exemptions and credits, roughly $2.2 trillion and not paid to the US Treasury, than the amount of income taxes collected each year,  $1.8 trillion from individuals and $355 billion from corporations.
  10. Corporate income taxes amount to 10% of all tax collection all of which is paid for by customers in the form of higher prices.
Other than winning bar games or perhaps beating Ken Jennings on 'Jeopardy' with 'Odd Tax Facts', what does all of this tax trivia mean today?

There is a vast amount of disinformation out in the public about our tax system.

We have a progressive tax system that really doesn't 'gouge' the rich since the uber-wealthy can afford so many tax shelter unavailable to most taxpayers.

We have a second 'flat tax' system that is completely regressive since it takes 15% (half from the employee/half from the employer; 100% from self-employed) from dollar $1 earned by each and every salary wage-earner in the country, from the poorest laborer to an NBA star, up to $127,500 for Social Security and unlimited in Medicare.

2.2 million people don't know they are paying too much in taxes by choosing the standard deduction instead of itemizing deductions such as mortgage interest, charitable contributions and state and local taxes.

Millions of taxpayers who do use the standard deduction are getting a good deal if they A) rent and don't have a mortgage on which to pay interest; B) don't contribute a lot of money to charity or C) live in a state without an income tax. With the standard deduction going up to $24,000 for married couples and $12,000 for individuals, millions of taxpayers will get the benefit of tax deductions even if they don't do anything specifically to earn them.

99.2% of all taxpayers each year will not be audited by the IRS. The IRS does not have the time, resources or manpower to go after all but the largest discrepancies in the higher income categories. If every person had to pay 1 huge check on April 15 each year, we would have the largest tax revolution since 1776.

We are leaving at least $400 billion per year on the table in uncollected tax revenues. When you factor in the black market and illegal trade in America, it might be triple that number.

This tax reform package needs to be passed this year. But it should not be the last tax reform package we ever see.

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